SONO TEK CORP
For the period ended May 31, 2026. Filed Jul 8, 2026.
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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.
May 31, 2026 · Filed Jul 8, 2026
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 2025-11-30; filed 2026-01-13.
0001171520-26-000004
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-05-31; filed 2026-07-08.
0001171520-26-000167
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 92 previous paragraphs and 61 current paragraphs.
32 unchanged; 19 reworded; 10 added; 40 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 13 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 (10)
Current report
For the first quarter of fiscal year 2027, In-Line Coating Systems sales decreased $895,000, or 29%, to $2.16 million, impacted by a significant decrease in sales to the clean energy sector for a solar coating customer in the first quarter of fiscal year 2026 that did not repeat in the current quarter. Multi-Axis Coating Systems increased $1.39 million, or 206%, to $2.08 million. OEM Systems increased $101,000, or 78%, to $231,000, driven by strong sales to our fluxer OEM partners, and strong sales to a China-based OEM partners in the semiconductor market. Fluxing Systems decreased 39%, or $60,000, to $92,000. Spare Parts, Services, and Other remained relatively stable at $1.1 million.
Current report
Sales to the Alternative Energy/Clean market decreased $2.93 million, or 90%, to $319,000, impacted by reduced electrolysis demand following government policy shifts, and no solar shipments. Medical market sales increased $3.14 million, or 388%, to $3.95 million led by strong specialty stent coating in the US, and DEB coating system sales in the US, China and Europe. Sales to the Electronics/Microelectronics market declined $80,000, or 8%, to $863,000. Industrial sales increased $411,000, or 345%, to $530,000 influenced by some significant rework orders on older machines that needed upgrades, and an R&D textile coating machine for nano-coatings.
Current report
In the first quarter of fiscal year 2027, sales to customers in the U.S. and Canada were $3,530,000, essentially flat compared to sales of $3,543,000 in the prior year period. Asia Pacific (APAC) sales grew 24%, or $141,000, to $738,000, influenced by increased sales to China in the medical sector for DEB coating. EMEA sales increased $34,000, or 4%, to $930,000, and Latin America sales increased $367,000, or 382%, to $463,000, influenced by a $242,000 shipment to Costa Rica for a specialty medical device coating application used in advanced cardiac procedures, requiring precise deposition of a functional coating onto complex device geometries.
Current report
Gross profit increased $549,000, or 21%, to $3.21 million for the first quarter of fiscal 2027, compared with $2.67 million in the prior-year period. Gross profit percentage improved by 500 basis points, rising to 57% from 52%. The strong gross margin performance during the quarter benefited from an especially favorable product mix, including increased shipments of high-value medical device coating systems, particularly stent coating and Drug-Eluting Balloon coating platforms. Our improved gross margin achieved during the current quarter may vary going forward from quarter to quarter because of changing product mix, which may influence future gross margin performance. In addition, a concentration of shipments to U.S.-based customers resulted in lower distributor discounts and commission expenses, supporting stronger margin performance.
Current report
In the first quarter of fiscal 2027, we expended approximately $227,000 for commissions as compared with $152,000 in the prior year period, an increase of $75,000. The increase in commission expense during the current period is due to the increase in sales during the period and to increased commission rates for salesmen who had temporarily agreed to lower rates in the prior year period because of higher sales volumes associated with one customer.
Current report
We expect our marketing and sales expenses to increase in fiscal 2027 as we invest in additional sales personnel, forward deployed engineering personnel, and programming talent to support new business opportunities, particularly those associated with production systems that have high average sales prices to drive future growth.
Current report
In the first quarter of fiscal year 2027, our operating income increased $414,000 to $897,000 compared to $483,000 in the first quarter of fiscal year 2026. The increase is primarily due to the current period’s increase in gross profit.
Current report
Operating Activities – We generated $1,941,000 of cash in our operating activities in the first quarter of fiscal year 2027 compared with using $922,000 in the prior year period, an increase of $2,863,000. The increase in cash generated by operating activities was the result of a decrease in accounts receivable in the current period, partially offset by a decrease in customer deposits.
Current report
In March 2025, the FASB issued ASU 2025-05 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which clarifies the measurement of expected credit losses for accounts receivable and contract assets arising from revenue transactions within the scope of Topic 606. The amendments require entities to measure expected credit losses for these financial assets using a methodology consistent with the current expected credit loss model while clarifying the interaction between the guidance in Topic 326 and Topic 606. The guidance in this ASU is effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. The amendments should be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal years of adoption. The Company is currently evaluating the impact that the adoption of ASU 2025-05 will have on its consolidated financial statements and disclosures.
Current report
In December 2025, the FASB issued ASU 2025-11 - Interim Reporting (Topic 270): Improvements to Interim Reporting Guidance, which is intended to improve the clarity and organization of the interim reporting guidance in Topic 270. The amendments clarify the scope and presentation requirements for interim financial statements and introduce a general disclosure principle requiring entities to disclose events or transactions occurring since the end of the last annual reporting period that have a material impact on the entity. The guidance also incorporates certain interim disclosure requirements from other Topics into Topic 270 to improve accessibility of the interim reporting guidance. The amendments in this ASU are effective for interim reporting periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2025-11 will have on its consolidated financial statements and disclosures.
Removed paragraphs (40)
Previous report
As of November 30, 2025, the Company had no outstanding debt and had cash, cash equivalents and marketable securities totaling $12,262,000.
Previous report
Total sales for the first nine months of fiscal 2026 were essentially flat, decreasing by 1%, while total sales for the third quarter of fiscal 2026 decreased by 4%. The decrease in revenue for the first nine months of fiscal 2026 is the result of a 46% decrease in Multi Axis Coating Systems revenue partially offset by a 126% increase in In-Line Coating Systems revenue. For the third quarter of fiscal 2026, sales of our Multi Axis Coating Systems decreased by 53%, but this decrease was mostly offset by a 2177% increase in In-Line Coating Systems revenue.
Previous report
OEM Systems revenue for the third quarter and first nine months of fiscal 2026 increased by 64% and 18%, respectively. The increase was driven by higher demand from both fluxing-related OEM customers and medical device OEM partners, reflecting continued adoption of our ultrasonic coating technology within customer-integrated production platforms and expanding OEM relationships in medical and industrial applications.
Previous report
Fluxing Systems revenue for the third quarter and first nine months of fiscal 2026 increased by 213% and 80%, respectively. The increase was driven primarily by stronger demand in Asia, outside of China, from PCB manufacturing companies.
Previous report
The Other revenue category decreased by 30% in the third quarter of fiscal 2026 and 8% for the first nine months of fiscal 2026, reflecting the timing of service-related activities and spare parts sales that occurred in the prior-year periods.
Previous report
During the third quarter of fiscal 2026, sales performance varied across end markets. Medical, electronics, and industrial markets all increased year over year, while alternative energy declined. Medical market growth was driven by strong demand for stent coating systems, balloon catheter coating platforms, and emerging diagnostic device applications. Electronics market growth reflected increased demand for fluxing systems and the shipment of a semiconductor coating system to a customer in South Korea. Industrial market sales increased due to the shipment of a large textile coating platform to a United States government customer. The decline in alternative energy sales during the quarter was primarily attributable to reduced demand for electrolysis-related applications following shifts in U.S. government policy incentives affecting carbon capture and fuel cell projects.
Previous report
For the first nine months of fiscal 2026, medical market sales increased 37% year over year, driven by shipments of balloon catheter coating systems to customers in the United States, Europe, and China, continued stent coating activity, and expanding medical applications. Medical-related order activity and backlog continued to strengthen during the period. Alternative energy sales for the first nine months of fiscal 2026 were essentially flat, as strong shipments of high-ASP in-line coating systems to the solar industry offset lower demand for electrolysis-related applications in the United States. Electronics and industrial market sales declined year over year, primarily due to strong prior-year comparisons and customer timing, including the non-recurrence of a large European glass coating order in the industrial market. Emerging research and development market sales remained relatively flat as projects continued to transition into established production markets.
Previous report
In the first nine months of fiscal 2026, approximately 37% of sales originated outside of the United States and Canada compared with 39% in the first nine months of fiscal 2025.
Previous report
In the third quarter of fiscal 2026, approximately 32% of sales originated outside of the United States and Canada compared with 46% in the third quarter of fiscal 2025.
Previous report
Sales in the United States and Canada remained strong during the current periods, influenced in part by shipments of high-ASP in-line coating systems to a significant solar customer.
Previous report
Asia sales declined in the third quarter primarily due to timing following a strong prior year quarter, but increased for the first nine months of fiscal 2026, driven by medical activity in China and alternative energy demand in Japan and South Korea.
Previous report
Latin America sales declined in both the third quarter and first nine months of fiscal 2026, reflecting the non-recurrence of an orthopedic system shipment in the prior-year third quarter and slower fluxing activity in Mexico during the current year.
Previous report
For the third quarter of fiscal 2026, gross profit increased $169,000, or 7%, compared with the third quarter of fiscal 2025. For the third quarter of fiscal 2026, the gross profit percentage was 50% compared with 45% for the prior year period. The increase in the gross profit percentage was influenced by product mix, including a favorable mix of mature high ASP systems with reduced manufacturing costs and favorable warranty expenses in the current period. In addition, sales to the United States were strong, which typically carry less distributor discounting.
Previous report
Gross profit increased $452,000, or 6%, to $7,766,000 for the first nine months of fiscal 2026 compared with $7,314,000 in the first nine months of fiscal 2025. The gross profit percentage was 51% compared with 48% for the prior year period. The increase in the gross profit percentage was influenced by product mix, including a favorable mix of mature high ASP systems with reduced manufacturing costs and favorable warranty expenses in the current period. In addition, sales to the United States were strong, which typically carry less distributor discounting.
Previous report
Research and product development costs increased in the third quarter of fiscal 2026 due to an increase in lab salaries. This increase was partially offset by decreases in research and development materials, supplies, salaries and travel expenses. These decreases were partially offset by additional lab salaries.
Previous report
In the third quarter and the first nine months of fiscal 2026, commission expense decreased approximately $73,000 and $153,000, 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 increase total selling costs. The shift toward direct sales reduced those third-party costs in the current period.
Previous report
General and administrative expenses increased in the third quarter of fiscal 2026 due to increased salaries, legal and audit fees, corporate expenses and stock-based compensation. These increases were partially offset by decreases in travel and entertainment and other expenses.
Previous report
In the third quarter of fiscal 2026, operating income increased $121,000, or 61%, to $319,000 compared with $198,000 for the third quarter of fiscal 2025. Operating margin for the third quarter of fiscal 2026 was 6% compared with 4% in the prior year period. In the third quarter of fiscal 2026, an increase in gross profit was the key factor in the increase in operating income.
Previous report
In the first nine months of fiscal 2026, operating income increased $501,000, or 69%, to $1,223,000 compared with $722,000 for the first nine months of fiscal 2025. Operating margin for the first nine months of fiscal 2026 was 8% compared with 5% in the prior year period. In the first nine months of fiscal 2026, an increase in gross profit was the key factor in the increase in operating income.
Previous report
Net unrealized gain decreased to a $15,000 net unrealized loss in the third quarter of fiscal 2025 compared to a gain of $20,000 in the prior year period. In the first nine months of fiscal 2025, net unrealized gain increased $8,000 to $39,000 compared with $31,000 in the prior year period.
Previous report
We recorded income tax expense of $87,000 for the third quarter of fiscal 2026 compared with $40,000 for the third quarter of fiscal 2025. For the first nine months of fiscal 2026 we recorded income tax expense of $308,000 compared with $174,000 for the first nine months of fiscal 2025.
Previous report
The deferred tax asset decreased approximately $258,000, to $1,267,000 at November 30, 2025 from $1,525,000 at February 28, 2025. Additionally, the deferred tax liability decreased approximately $73,000, to $59,000 at November 30, 2025 from $132,000 at February 28, 2025. The net decrease in the deferred tax asset and liability was approximately $331,000 for the first nine months 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.
Previous 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.
Previous 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.
Previous report
The most significant tax provisions impacting us include:
Previous 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.
Previous 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.
Previous report
Net income increased by $303,000 or 32% to $1,249,000 for the first nine months of fiscal 2026 compared with $946,000 for the first nine months of fiscal 2025. The increase in net income in the first nine months of fiscal 2026 is primarily the result of an increase in gross profit partially offset by an increase in income tax expense.
Previous report
Operating Activities – Our operating activities provided $110,000 of cash in the first nine months of fiscal 2026 compared to providing $1,199,000 of cash in the first nine months of fiscal 2025, a decrease of $1,089,000. The decrease in cash provided by our operating activities was the result of an increase in accounts receivable and prepaid expenses combined with decreases in accounts payable, income taxes payable and customer deposit balances.
Previous 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.
Previous report
In the first nine months of fiscal 2026, our accounts receivable increased $2,064,000 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 eight units during the first nine months of fiscal 2026, with a total sales price of $5.9 million. After completion of the first quarter of fiscal 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 had already collected a significant cash down payment on the order and we anticipated only a modest delay of approximately two months on a portion of the next payment, we accommodated the customer’s request. The customer has since returned to the originally agreed upon payment schedule. Based on our long-standing relationship and ongoing communications, we do not currently foresee any collection issues with this customer.
Previous report
In the first nine months of fiscal 2026, our inventories decreased $772,000 when compared to the prior year. The decrease in inventories is due to the completion of customer orders in the first nine months of fiscal 2026.
Previous report
In the first nine months of fiscal 2026, our income taxes payable decreased $453,000 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 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 November 30, 2025, in accordance with ASC 740, Income Taxes.
Previous 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.
Previous report
The most significant tax provisions impacting the Company include:
Previous 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.
Previous report
Research and Development Costs – The Act reinstates the ability for entities to immediately expense domestic research and development costs for tax years beginning after December 31, 2024. Certain small businesses may also retroactively expense research and development costs, which were capitalized under the TCJA during the calendar years 2022 – 2024.
Previous 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.
Previous report
In July 2025, the FASB issued ASU 2025-05,Financial Instruments – Credit Losses. This ASU provides entities the ability to use a practical expedient when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606,Revenue from Contracts with Customers. The purpose of this ASU is to simplify the estimation of credit losses on current accounts receivable and current contract assets accounted for ASC 606. This ASU is effective for annual periods beginning after December 15, 2025, 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.
Reworded paragraphs (19)
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 fourth quarter of fiscal year 2026; continued depletion of excess inventory created by our OEM Partners; continued positive impact of recent distributor changes on Printed Circuit Board revenues; 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.
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 2027; 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.
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, ensure 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 37% of our sales were generated outside the United States and Canada in the first nine 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. 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 38% of our sales were generated outside the United States and Canada in the first three months of fiscal year 2027.
Previous wording
Third Quarter Fiscal 2026 Highlights (compared with the third quarter of fiscal 2025 unless otherwise noted) We refer to the three-month periods ended November 30, 2025 and 2024 as the third quarter of fiscal 2026 and fiscal 2025, respectively.
Current wording
First Quarter Fiscal Year 2027 Highlights (compared with the first quarter of fiscal year 2026 unless otherwise noted) We refer to the three-month periods ended May 31, 2026 and 2025 as the first quarter of fiscal year 2027 and fiscal year 2026, respectively.
Previous wording
Research and product development costs decreased in the first nine months of fiscal 2026 due to a decrease in salary expense associated with the departure of a senior engineer, research and development materials, supplies, insurance expense and travel expenses. These decreases were partially offset by additional lab salaries.
Current wording
Research and product development costs decreased in the first quarter of fiscal year 2027 due to a decrease in salary expense, a decrease in research and development materials and a decrease in supplies. These decreases were partially offset by an increase in miscellaneous expenses.
Previous wording
Marketing and selling expenses decreased slightly in both the third quarter and the first nine months of fiscal 2026 due to a decrease in salary expense related to the departure of a salesperson and a decrease in travel and entertainment expenses. These decreases were partially offset by an increase in salaries related to our sales application lab and increased trade show expenses. 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.
Current wording
Marketing and selling expenses increased in the first quarter of fiscal year 2027 due to an increase in salary expense related to our sales application lab, an increase in insurance expense, an increase in trade show expenses and an increase in other miscellaneous expenses. 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
In the first nine months of fiscal 2026 general and administrative expenses increased due to increases in salaries, corporate expenses and stock-based compensation. These increases were partially offset by decreases in legal and audit fees and travel and entertainment expenses.
Current wording
General and administrative expenses increased in the first quarter of fiscal 2027 due to increases in salary expense, insurance, professional fees and stock-based compensation. These increases were partially offset by a decrease in other corporate expenses.
Previous wording
Interest, Dividend Income and Unrealized Gain/(Loss):
Current wording
Interest and Dividend Income and Unrealized Loss:
Previous wording
Interest and dividend income decreased by $23,000 to $108,000 in the third quarter of fiscal 2025 as compared with $132,000 for the third quarter of fiscal 2024, reflecting a minor reduction in interest rates earned on our cash balances in the third quarter of fiscal 2025. In the first nine months of fiscal 2025, interest and dividend income decreased by $27,000 to $332,000 as compared with $359,000 for the first nine months of fiscal 2024. Our present investment policy is to invest excess cash in highly liquid, low risk US Treasury securities. At November 30, 2025, the majority of our holdings were rated at or above investment grade.
Current wording
Interest and dividend income decreased $27,000 to $115,000 in the first quarter of fiscal year 2027 as compared with $142,000 in the prior year period, due to a slight reduction in interest rates. Our present investment policy is to invest excess cash in highly liquid, lower risk US Treasury securities. At May 31, 2026, 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 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 research and development expenditures.
Current wording
We recorded an income tax expense of $244,000 for the first quarter of fiscal year 2027 compared with $119,000 for the first quarter of fiscal year 2026. The increase in income tax expense in the current period 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 $66,000 or 24% to $340,000 for the third quarter of fiscal 2026 compared with $274,000 for the third quarter of fiscal 2025. The increase in net income during the third quarter is primarily the result of an increase in gross profit partially offset by an increase in operating expenses and income tax expense.
Current wording
Net income increased by $256,000 to $741,000 in the first quarter of fiscal year 2027 compared with $485,000 in the prior year period. The increase in net income is primarily a result of an increase in gross profit partially offset by an increase in operating expenses and income tax expense.
Previous wording
Working Capital – Our working capital increased $1,854,000 to $15,355,000 at November 30, 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 and treasury stock.
Current wording
Working Capital – Our working capital increased $1,226,000 to $17,461,000 at May 31, 2026 from $16,236,000 at February 28, 2026. The increase in working capital was primarily the result of the current period's net income and non-cash 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, 2025 and February 28, 2025, 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, 2026 and February 28, 2026, our working capital included:
Previous wording
The following table summarizes the accounts and the major reasons for the $211,000 decrease in “Cash”:
Current wording
The following table summarizes the accounts and the major reasons for the $1,843,000 increase in “Cash”:
Previous wording
Stockholders’ Equity – Stockholders’ Equity increased $1,340,000 from $17,792,000 at February 28, 2025 to $19,132,000 at November 30, 2025. The increase is a result of the current period’s net income of $1,249,000, proceeds from exercise of stock options of $10,000, and $232,000 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.
Current wording
Stockholders’ Equity – Stockholder’s Equity increased $837,000 from $19,774,000 at February 28, 2026 to $20,611,000 at May 31, 2026. The increase is a result of the current period’s net income of $741,000, proceeds from exercise of stock options of $10,000, and $86,000 in additional equity related to stock-based compensation awards. The details of stock-based compensation awards are explained in Note 5 in our financial statements.
Previous wording
Investing Activities – For the first nine months of fiscal 2026, our investing activities provided $224,000 of cash compared with providing $4,765,000 for the first nine months of fiscal 2025. For the first nine months of fiscal 2026 and 2025, we used $180,000 and $403,000 of cash, respectively, for the purchase or manufacture of equipment, furnishings and leasehold improvements.
Current wording
Investing Activities – For the first quarter of fiscal year 2027, our investing activities used $308,000 of cash compared with them providing $662,000 for the first quarter of fiscal 2026. For the first quarters of fiscal years 2027 and 2026, we used $82,000 and $52,000, respectively, for the purchase or manufacture of equipment, furnishings and leasehold improvements.
Previous wording
In the first nine months of fiscal 2026, net sales of marketable securities provided $405,000 of cash compared with providing $5,167,000 from the net sales of marketable securities in the prior year period.
Current wording
In the first quarter of fiscal year 2027, net purchases of marketable securities used $226,000 of cash compared to net sales of marketable securities generating $715,000 of cash in the prior year period.
Previous wording
***Financing Activities –***In the first nine months of fiscal 2026, we used $151,000 of cash for the purchase of treasury stock.
Current wording
***Financing Activities –***In the first quarter of fiscal year 2027, we received $10,000 for the exercise of stock options. In the first quarter of fiscal year 2026, we used $79,000 of cash for the purchase of treasury stock.
Previous wording
Net Increase in Cash and Cash Equivalents – In the first nine months of fiscal 2026, our cash balance increased by $193,000 compared to an increase of $5,964,000 in the first nine months of fiscal 2025. In the first nine months of fiscal 2026, our operating activities provided $110,000 of cash and net sales of our marketable securities provided $405,000. In addition, we used $181,000 for the purchase or manufacture of equipment, furnishings and leasehold improvements and we used $151,000 for the purchase of treasury stock.
Current wording
Net Increase in Cash and Cash Equivalents – In the first quarter of fiscal 2027, our cash balance increased $1,643,000 as compared to a decrease of $339,000 in the first quarter of fiscal 2026. In the first quarter of fiscal 2027, our operating activities generated $1,941,000 of cash and our marketable securities used $226,000 of cash. In addition, we used $82,000 for the purchase or manufacture of equipment, furnishings and leasehold improvements and we received $10,000 for the exercise of stock options.
Previous wording
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 wording
Management’s estimates and judgments are continually evaluated and are based on historical experience and expectations regarding future events that are believed to be reasonable under the specific circumstances.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Nine Month Fiscal 2026 Highlights (compared with the first nine months of fiscal 2025 unless otherwise noted) We refer to the nine-month periods ended November 30, 2025 and 2024 as the first nine-months of fiscal 2026 and fiscal 2025, respectively.