SONO TEK CORP
For the period ended Aug 31, 2025. Filed Oct 14, 2025.
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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.
Aug 31, 2025 · Filed Oct 14, 2025
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 2025-05-31; filed 2025-07-10.
0001171520-25-000225
Item 2. - Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-08-31; filed 2025-10-14.
0001171520-25-000319
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 65 previous paragraphs and 83 current paragraphs.
33 unchanged; 24 reworded; 24 added; 7 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 8 previous and 10 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 (24)
Current report
In-Line Coating Systems declined 24% in the second quarter of fiscal 2026 compared to the prior year period, primarily due to a customer-requested shipment delay. Despite this quarterly dip, In-Line Coating Systems posted strong growth of 65% during the first half of fiscal 2026, driven by six high ASP solar coating system shipments totaling $4.4 million. Multi-Axis Coating Systems increased modestly by 5% in the second quarter of fiscal 2026 but decreased 41% in the first half of fiscal 2026 following a particularly strong first half of fiscal 2025 that included significant semiconductor-related orders that did not repeat in the current period. OEM Systems rose 92% in the second quarter of fiscal 2026 on strong OEM fluxer demand and new optics-related OEM wins, though first half of fiscal 2026 results were relatively flat. Fluxing Systems improved 39% in the second quarter of fiscal 2026 and 25% for the first half of fiscal 2026 influenced by strong fluxer sales in Asia.
Current report
Medical sales surged 150% in the second quarter of fiscal 2026, led by balloon coating system shipments across the U.S., Europe, and China, with growth of 44% in the first half of fiscal 2026, including both balloon and stent coating systems. Industrial sales declined 68% in the second quarter of fiscal 2026 and 67% in the first half of fiscal 2026, influenced by a large float glass coating order in the first half of fiscal 2025 that did not repeat. Alternative Energy sales were essentially flat in the second quarter of fiscal 2026, though up 19% for the first half of fiscal 2026 on strong solar system shipments. Electronics sales remained relatively steady in the second quarter of fiscal 2026 but declined 21% for the first half of fiscal 2026 due to lower semiconductor demand compared to last year’s elevated levels.
Current report
In the first half of fiscal 2026, approximately 39% of sales originated outside of the United States and Canada compared with 35% in the first half of fiscal 2025.
Current report
In the second quarter of fiscal 2026, approximately 47% of sales originated outside of the United States and Canada compared with 32% in the second quarter of fiscal 2025.
Current report
Asia Pacific sales increased sharply, up 153% in the quarter and 74% year-to-date, led by medical coating device demand in China and alternative energy orders in Japan and South Korea. U.S. and Canada sales declined 22% in the second quarter of fiscal 2026 and 5% for the first half of fiscal 2026, reflecting weaker green energy demand from the US compared to prior year periods. Latin America declined 45% in the second quarter of fiscal 2026 and 46% in the first half of fiscal 2026, reflecting slow activity of PCB fluxing systems in Mexico.
Current report
For the second quarter of fiscal 2026, gross profit increased by $74,000, or 3%, compared with the prior year period. The gross profit percentage was 50.2% compared with 48.7% for the prior year period. The increase in the gross profit percentage was influenced by product mix and favorable warranty expenses in the period.
Current report
In the second quarter and first half of fiscal 2026, commission expense decreased approximately $36,000 and $79,000, respectively. The decline was driven by a higher mix of sales closed directly by our in-house team. Our in-house team earns a consistent commission percentage on all sales; when sales are made through distributors or manufacturer representatives, we also incur their additional commissions (and related channel costs), which increases total selling costs. The shift toward direct sales reduced those third-party costs in the current period.
Current report
In the second quarter of fiscal 2026, operating income increased $135,000, or 47%, to $421,000 compared with $286,000 for the second quarter of fiscal 2025. Operating margin for the quarter increased to 8% compared with 6% in the prior year period. In the second quarter of fiscal 2026, an increase in gross profit, combined with a decrease in operating expenses were key factors in the increase of operating income.
Current report
In the first half of fiscal 2026, operating income increased $381,000, to $905,000, compared with $524,000 for the first half of fiscal 2025. Operating margin for the first half of fiscal 2026 increased to 9% compared with 5% in the prior year period. In the first half of fiscal 2026, an increase in gross profit, combined with a decrease in operating expenses were key factors in the increase of operating income.
Current report
Net unrealized gain decreased $21,000 to $23,000 in the second quarter of fiscal 2026 as compared to $44,000 in the second quarter of fiscal 2025. In the first half of fiscal 2026, unrealized gain decreased $52,000 to $2,000 as compared with $54,000 in the first half of fiscal 2026.
Current report
We recorded income tax expense of $103,000 for the second quarter of fiscal 2026 compared with $74,000 for the second quarter of fiscal 2025. For the first half of fiscal 2026, we recorded income tax expense of $221,000 compared with $134,000 for the first half of fiscal 2025.
Current report
The deferred tax asset decreased approximately $158,000, to $1,367,000 at August 31, 2025 from $1,525,000 at February 28, 2025. Additionally, the deferred tax liability decreased approximately $44,000, to $88,000 at August 31, 2025 from $132,000 at February 28, 2025. The net decrease in the deferred tax asset and liability was approximately $202,000 for the first half of fiscal 2026. This decrease is primarily due to the retroactive expensing of research and development expenses that were capitalized for tax purposes, prior to the enactment of the One Big Beautiful Bill Act (the “Act” or “OBBBA”) on July 4. 2025.
Current report
The Act introduces significant changes to the Internal Revenue Code, including the permanent extension of many provisions of the 2017 Tax Cuts and Jobs Act (“TCJA”) and various new tax incentives and adjustments. The financial reporting implications of the Act were recorded in the income tax provision for the quarter and year to date periods ended August 31, 2025, in accordance with ASC 740, Income Taxes.
Current report
The OBBBA did not change the statutory U.S. federal tax rate. Accordingly, the OBBBA did not compel us to remeasure our deferred tax assets and liabilities solely because of a rate change. However, the various changes in tax law did impact our current and deferred tax calculations.
Current report
The most significant tax provisions impacting us include:
Current report
Bonus Depreciation – The Act permanently restores 100% bonus depreciation for qualified property acquired and placed into service after January 19, 2025. This change will likely lead to a reduction in current tax payable for capital expenditures in fiscal year 2026.
Current report
Research and Development (“R&D) Costs – The Act reinstates the ability for entities to immediately expense domestic R&D costs for tax years beginning after December 31, 2024. Certain small businesses may also retroactively expense R&D costs, which were capitalized under the TCJA during the calendar years 2022 – 2024. The retroactive expensing of these R&D costs may generate tax refunds.
Current report
Net income increased by $237,000 to $909,000 for the first half of fiscal 2026 compared with $672,000 for the first half of fiscal 2025. The increase in net income during the first half of fiscal 2026 is primarily a result of an increase in gross profit combined with a decrease in operating expenses, partially offset by an increase in income tax expense.
Current report
During the past year, we have experienced a shift in customer mix toward larger, more financially stable companies that generally operate under stricter standard payment terms. As a result, customer deposits decreased and accounts receivable increased, reflecting a normalization of payment practices relative to prior years when we secured high upfront deposits.
Current report
On July 4, 2025, the One Big Beautiful Bill Act (the “Act” or “OBBBA”) was signed into law. The Act introduces significant changes to the Internal Revenue Code, including the permanent extension of many provisions of the 2017 Tax Cuts and Jobs Act (“TCJA”) and various new tax incentives and adjustments. The financial reporting implications of the Act were recorded in the income tax provision for the quarter and year to date periods ended August 31, 2025, in accordance with ASC 740, Income Taxes.
Current report
The OBBBA did not change the statutory U.S. federal tax rate. Accordingly, the OBBBA did not compel the Company to remeasure its deferred tax assets and liabilities solely because of a rate change. However, the various changes in tax law did impact the Company’s current and deferred tax calculations.
Current report
The most significant tax provisions impacting the Company include:
Current report
Bonus Depreciation – The Act permanently restores 100% bonus depreciation for qualified property acquired and placed into service after January 19, 2025. This change will likely lead to a reduction in current tax payable for capital expenditures in fiscal year 2026.
Current report
Research and Development (“R&D) Costs – The Act reinstates the ability for entities to immediately expense domestic R&D costs for tax years beginning after December 31, 2024. Certain small businesses may also retroactively expense R&D costs, which were capitalized under the TCJA during the calendar years 2022 – 2024. The retroactive expensing of these R&D costs may generate tax refunds.
Removed paragraphs (7)
Previous report
For the first quarter of fiscal year 2026, Integrated Coating Systems sales increased $2.31 million, or 309%, to $3.05 million, primarily driven by a repeat order totaling $2.95 million for four high ASP systems shipped to the clean energy sector for an advanced solar application. Multi-Axis Coating Systems declined $1.99 million, or 75%, to $677,000 due to decreased North American sales tied to reduced R&D funding in the clean energy sector following shifts in government policy. OEM Systems were down $202,000, or 61%, to $130,000, as several OEM partners targeting the China market experienced lower product demand. Fluxing Systems rose 13%, or $18,000, to $152,000. Spare Parts, Services, and Other remained relatively stable at $1.12 million, down slightly by $34,000, or 3%.
Previous report
Sales to the Alternative Energy/Clean market grew $966,000, or 42%, to $3.25 million, influenced by a $2.95 million repeat order for advanced solar cell applications. Medical market sales were $809,000, down slightly by $48,000 or 6%. Sales to the Electronics/Microelectronics market declined $625,000, or 40%, to $943,000, influenced by a non-recurring $370,000 order in the prior-year quarter for a semiconductor wafer handler system. Industrial sales decreased $194,000, or 62%, to $119,000 which was not especially impactful due to the small dollar amount involved. Emerging R&D and Other remains a negligible portion of sales and is not materially impactful for this period.
Previous report
In the first quarter of fiscal year 2026, approximately 69% of sales were to customers in the U.S. and Canada, up from 61% in the prior-year period. This increase was influenced by a $2.95 million repeat order of high ASP systems shipped to a U.S.-based customer in the clean energy sector. Asia Pacific (APAC) sales grew 16%, or $84,000, to $597,000, driven in part by a $78,000 low-volume stent coating system sold to a customer in China, with a higher-volume follow-on system currently in backlog. EMEA sales declined $348,000, or 28%, to $897,000, reflecting a slowdown in orders from that region during the quarter. Latin America sales decreased $86,000, or 47%, to $96,000 which was not especially impactful due to the small dollar amount involved.
Previous report
Commission expense decreased in the first quarter of fiscal year 2026 due to a majority of the quarter’s sales being generated by our in-house sales team. Our in-house sales team is compensated at a lower commission rate when compared to our external distributors.
Previous report
In the first quarter of fiscal year 2026, our operating income increased $245,000 to $483,000 compared to $238,000 in the first quarter of fiscal year 2025. The increase is due to the current period’s increase in gross profit combined with a decrease in operating expenses.
Previous report
Net unrealized loss increased $32,000 to $22,000 in the first quarter of fiscal year 2026 as compared to an unrealized gain of $10,000 in the first quarter of fiscal year 2025.
Previous report
Due to recently enacted budget legislation, we anticipate that the realization of certain of our deferred tax assets may be accelerated.
Reworded paragraphs (24)
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; the recovery of the Electronics/Microelectronics and Medical markets; rebound of sales to the industrial market in the second quarter of fiscal year 2026; 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 which are sold at higher average selling prices; 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 2026; 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 which are sold at higher average selling prices (“ASP”); and realization of quarterly and annual revenues within the forecasted range of sales guidance.
Previous wording
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. These solutions help some of the world’s most promising companies achieve technological breakthroughs and bring them to market. In anticipation of customer demands, our significant focus on R&D efforts allows us to keep pace with industry trends while continuously innovating. We strategically deliver our 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. This network ensures efficient market reach across diverse sectors around the globe. Approximately 31% of our sales were generated outside the United States and Canada in the first three months of fiscal year 2026.
Current wording
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 help some of the world’s most promising companies achieve technological breakthroughs and bring them to market. In anticipation of customer demands, our significant focus on R&D efforts allows us to keep pace with industry trends while continuously innovating. We strategically deliver our 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 47% of our sales were generated outside the United States and Canada in the first six months of fiscal year 2026.
Previous wording
First Quarter Fiscal 2026 Highlights (compared with the first quarter of fiscal year 2025 unless otherwise noted) We refer to the three-month periods ended May 31, 2025 and 2024 as the first quarter of fiscal year 2026 and fiscal year 2025, respectively.
Current wording
Second Quarter Fiscal 2026 Highlights (compared with the second quarter of fiscal 2025 unless otherwise noted) We refer to the three-month periods ended August 31, 2025 and 2024 as the second quarter of fiscal 2026 and fiscal 2025, respectively.
Previous wording
Gross profit increased $211,000, or 9%, to $2.67 million for the first quarter of fiscal 2026, compared with $2.45 million in the prior-year period. Gross profit percentage improved by 310 basis points, rising to 51.9% from 48.8%. The improvement was influenced by a favorable product mix, including a significant increase in Integrated Coating System sales tied to a repeat high ASP order. Additionally, the system shipped to a U.S.-based customer, where sales typically involve minimal distributor discounts or external commissions, supporting stronger margins.
Current wording
For the first half of fiscal 2026, gross profit increased by $283,000, or 6%, to $5,254,000 compared with $4,971,000 in the first half of fiscal 2025. The gross profit percentage was 51.0% compared with 48.8% for the prior year period. The increase in the gross profit percentage was influenced by product mix and favorable warranty expenses in the period. This included significant sales of In-Line Coating Systems tied to repeat high ASP orders that shipped to a U.S. based customer, where sales typically involve minimal distributor discounts supporting stronger margins.
Previous wording
Research and product development costs decreased in the first quarter of fiscal year 2026 due to a decrease in salary expense associated with the departure of a senior engineer, a decrease in insurance expense and a decrease in other miscellaneous expenses. These decreases were partially offset by additional lab salaries.
Current wording
Research and product development costs decreased in both the second quarter and the first half of fiscal 2026 due to a decrease in salary expense associated with the departure of a senior engineer, research and development materials, supplies and insurance expense. These decreases were partially offset by additional lab salaries.
Previous wording
Marketing and selling expenses decreased in the first quarter of fiscal year 2026 due to a decrease in salary expense related to the departure of a salesperson and a decrease in travel and entertainment. These decreases were partially offset by an increase in salaries related to our sales application lab.
Current wording
Marketing and selling expenses decreased in both the second quarter and the first half of fiscal 2026 due to a decrease in salary expense related to the departure of a salesperson and a decrease in trade show expenses and travel and entertainment expenses. These decreases were partially offset by an increase in salaries related to our sales application lab. Our sales and marketing costs are variable, and a large portion of the costs are dependent upon trade shows and where geographically our sales are generated. We anticipate that our costs will increase in the future as we increase our trade show presence and the potential change in geographic origin of our sales from our in-house sales team to our external distributors.
Previous wording
General and administrative expenses increased in the first quarter of fiscal year 2026 due to increases in corporate investor coverage and other corporate expenses and stock based compensation. These increases were partially offset by decreases in salary expense and legal and accounting fees.
Current wording
General and administrative expenses increased in both the second quarter and first half of fiscal 2026 due to increases in salaries, corporate investor coverage, corporate expenses and stock-based compensation. These increases were partially offset by decreases in legal and accounting fees.
Previous wording
Interest and Dividend Income and Unrealized Loss:
Current wording
Interest, Dividend Income and Unrealized Gain:
Previous wording
Interest and dividend income remained steady at $142,000 in the first quarter of fiscal year 2026 and 2025. Our present investment policy is to invest excess cash in highly liquid, lower risk US Treasury securities. At May 31, 2025, the majority of our holdings are rated at or above investment grade.
Current wording
Interest and dividend income remained steady at $82,000 in the second quarter of fiscal 2026 as compared with $85,000 for the second quarter of fiscal 2025. In the first half of fiscal 2026 interest and dividend income decreased by $4,000 to $224,000 as compared with $228,000 for the first half of fiscal 2025. Our present investment policy is to invest excess cash in highly liquid, lower risk US Treasury securities. At August 31, 2025, the majority of our holdings are rated at or above investment grade.
Previous wording
We recorded an income tax expense of $119,000 for the first quarter of fiscal year 2026 compared with $60,000 for the first quarter of fiscal year 2025. The increase in income tax expense in fiscal 2026 is due to the increase in income before income taxes offset by the application of available research and development tax credits.
Current wording
The increase in income tax expense in the second quarter fiscal 2026 is due to the increase in income before income taxes combined with an increase in permanent timing differences. These increases were partially offset by the reduction of income taxes due to the application of available research and development tax credits from this quarter’s research and development expenditures.
Previous wording
Net income increased by $154,000 to $485,000 in the first quarter of fiscal year 2026 compared with $331,000 in the prior year period. The increase in net income is primarily a result of an increase in operating income partially offset by an increase in income tax expense.
Current wording
Net income increased by $83,000 to $424,000 for the second quarter of fiscal 2026 compared with $341,000 for the second quarter of fiscal 2025. The increase in net income during the second quarter is primarily a result of an increase in gross profit combined with a decrease in operating expenses, partially offset by an increase in income tax expense.
Previous wording
Working Capital – Our working capital increased $439,000 to $13,940,000 at May 31, 2025 from $13,501,000 at February 28, 2025. 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.
Current wording
Working Capital – Our working capital increased $1,219,000 to $14,720,000 at August 31, 2025 from $13,501,000 at February 28, 2025. 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.
Previous 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, 2025 and February 28, 2025, our working capital included:
Current 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 August 31, 2025 and February 28, 2025, our working capital included:
Previous wording
The following table summarizes the accounts and the major reasons for the $1,076,000 decrease in “Cash”:
Current wording
The following table summarizes the accounts and the major reasons for the $1,362,000 decrease in “Cash”:
Previous wording
Stockholders’ Equity – Stockholder’s Equity increased $481,000 from $17,792,000 at February 28, 2025 to $18,273,000 at May 31, 2025. The increase is a result of the current period’s net income of $485,000 and $75,000 in additional equity related to stock-based compensation awards. These increases were partially offset by treasury stock purchases of $79,000. The details of stock-based compensation awards are explained in Note 5 in our financial statements.
Current wording
Stockholders’ Equity – Stockholders’ Equity increased $904,000 from $17,792,000 at February 28, 2025 to $18,696,000 at August 31, 2025. The increase is a result of the current period’s net income of $909,000 and $146,000 in additional equity related to stock-based compensation awards. These increases were partially offset by treasury stock purchases of $151,000. The details of stock-based compensation awards are explained in Note 5 in our financial statements.
Previous wording
Operating Activities – We used $922,000 of cash in our operating activities in the first quarter of fiscal year 2026 compared to them providing $328,000 of cash in the first quarter of fiscal year 2025, a decrease of $1,250,000. The decrease in cash generated by operating activities was the result of increases in accounts receivable and inventories combined with a decrease in income taxes payable and customer deposit balances.
Current wording
Operating Activities – We used $1,099,000 of cash in our operating activities in the first half of fiscal 2026 compared to using $90,000 of cash in the first half fiscal 2025, an increase of $1,009,000. The increase in cash used in our operating activities was the result of an increase in accounts receivable combined with decreases in accounts payable, income taxes payable and customer deposit balances.
Previous wording
In the first quarter of fiscal year 2026, our accounts receivable increased $749,000 when compared to the prior year. The increase in accounts receivable is primarily due to revised payment terms provided to one customer that purchased four units during the first quarter of fiscal year 2026, with a total sales price of $2.9 million. After completion of the first quarter of fiscal year 2026, the customer requested a modification to the timing of one of their scheduled payments due to a shift in their production plans from overseas to the United States. Because we have already collected a significant cash down payment on the order and we anticipate only a modest delay of approximately two months on a portion of the next payment, we accommodated the customer’s request. The customer has indicated that they will return to the originally agreed payment schedule thereafter. Based on our long-standing relationship and ongoing communications we do not currently foresee any collection issues with this customer.
Current wording
In the first half of fiscal year 2026, our accounts receivable increased $1,865,000 when compared to the prior year period. The increase in accounts receivable is primarily due to revised payment terms provided to one customer that purchased six units during the first half of fiscal year 2026, with a total sales price of $4.4 million. After completion of the first quarter of fiscal year 2026, the customer requested a modification to the timing of one of their scheduled payments due to a shift in their production plans from overseas to the United States. Because we have already collected a significant cash down payment on the order and we anticipate only a modest delay of approximately two months on a portion of the next payment, we accommodated the customer’s request. The customer has indicated that they will return to the originally agreed payment schedule thereafter. Based on our long-standing relationship and ongoing communications, we do not currently foresee any collection issues with this customer.
Previous wording
In the first quarter of fiscal year 2026, our inventories increased $374,000 when compared to the prior year. The increase in inventories is due to the number of customer orders in our backlog scheduled for shipment in the remaining part of the year.
Current wording
In the first half of fiscal year 2026, our inventories decreased $255,000 when compared to the prior year. The decrease in inventories is due to the completion of customer orders in the second half of fiscal 2026.
Previous wording
In the first quarter of fiscal year 2026, our income taxes payable decreased $307,000 when compared to the prior year. The decrease in income taxes payable is due to payments on our current year tax returns and required estimated payments.
Current wording
In the second half of fiscal year 2026, our income taxes payable decreased $252,000 when compared to the prior year. The decrease in income taxes payable is due to cash payments on our current year tax returns and required estimated payments.
Previous wording
Investing Activities – For the first quarter of fiscal year 2026, our investing activities provided $662,000 of cash compared with using $61,000 for the first quarter of fiscal 2025. For the first quarters of fiscal years 2026 and 2025, we used $52,000 and $33,000, respectively, for the purchase or manufacture of equipment, furnishings and leasehold improvements.
Current wording
Investing Activities – For the first half of fiscal year 2026, our investing activities used $120,000 of cash compared with providing $3,808,000 for the first half of fiscal 2025. For the first half of fiscal years 2026 and 2025, we used $113,000 and $191,000, respectively, for the purchase or manufacture of equipment, furnishings and leasehold improvements.
Previous wording
In the first quarter of fiscal year 2026, net sales of marketable securities generated $715,000 of cash compared with using $28,000 for the purchase of marketable securities in the prior year period.
Current wording
In the first half of fiscal year 2026, net purchases of marketable securities used $8,000 of cash compared with providing $3,999,000 from the net sales of marketable securities in the prior year period.
Previous wording
***Financing Activities –***In the first quarter of fiscal year 2026, we used $79,000 of cash for the purchase of treasury stock.
Current wording
***Financing Activities –***In the first half of fiscal year 2026, we used $151,000 of cash for the purchase of treasury stock.
Previous wording
Net Decrease in Cash and Cash Equivalents – In the first quarter of fiscal 2026, our cash balance decreased by $339,000 as compared to an increase of $267,000 in the first quarter of fiscal 2025. In the first quarter of fiscal 2026, our operating activities used $922,000 of cash and our marketable securities generated $715,000 of cash. In addition, we used $52,000 for the purchase or manufacture of equipment, furnishings and leasehold improvements and we used $79,000 for the purchase of treasury stock.
Current wording
Net Decrease in Cash and Cash Equivalents – In the first half of fiscal 2026, our cash balance decreased by $1,370,000 as compared to an increase of $3,718,000 in the first half of fiscal 2025. In the first half of fiscal 2026, our operating activities used $1,099,000 of cash and purchases of our marketable securities used $8,000. In addition, we used $113,000 for the purchase or manufacture of equipment, furnishings and leasehold improvements and we used $151,000 for the purchase of treasury stock.
Previous wording
In November 2024, the FASB issued ASU 2024-03 – Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to provide more detailed information about specified about specified categories of expenses (purchases of inventory, employee compensation, depreciation and amortization) included in certain expense captions presented on the consolidated statement of operations. The guidance in this ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.
Current wording
In November 2024, the FASB issued ASU 2024-03 – Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to provide more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation and amortization) included in certain expense captions presented on the consolidated statement of operations. The guidance in this ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
ITEM 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current report — wording carried from elsewhere
First Half Fiscal 2026 Highlights (compared with the first half of fiscal 2025 unless otherwise noted) We refer to the six-month periods ended August 31, 2025 and 2024 as the first half of fiscal 2026 and fiscal 2025, respectively.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
In the first quarter of fiscal year 2026, our accounts receivable increased $749,000 when compared to the prior year. The increase in accounts receivable is primarily due to extended payment terms being offered to one customer that purchased four units during the quarter with a total sales price of $2.9 million.