Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Aug. 31, 2013 | Oct. 08, 2013 | |
Document And Entity Information | ||
Entity Registrant Name | SONO TEK CORP | |
Entity Central Index Key | 806172 | |
Document Type | 10-Q | |
Document Period End Date | 31-Aug-13 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -26 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 14,508,507 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2014 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Aug. 31, 2013 | Feb. 28, 2013 |
Current Assets: | ||
Cash and cash equivalents | $2,502,412 | $1,940,906 |
Marketable Securities | 945,293 | 975,910 |
Accounts receivable (less allowance of $26,000 and $20,000 at August 31 and February 28, respectively) | 1,265,762 | 941,032 |
Inventories, net | 1,990,450 | 1,829,171 |
Prepaid expenses and other current assets | 131,127 | 79,605 |
Total current assets | 6,835,044 | 5,766,624 |
Land | 250,000 | 250,000 |
Buildings, net | 2,132,088 | 2,170,409 |
Equipment, furnishings and leasehold improvements, net | 549,746 | 683,368 |
Intangible assets, net | 117,795 | 106,022 |
Deferred tax asset | 90,021 | 90,021 |
TOTAL ASSETS | 9,974,694 | 9,066,444 |
Current Liabilities: | ||
Accounts payable | 636,655 | 408,738 |
Accrued expenses | 509,389 | 477,027 |
Customer deposits | 510,457 | 68,846 |
Current portion of long term debt | 127,849 | 125,999 |
Income taxes payable | 86,024 | 6,331 |
Total current liabilities | 1,870,374 | 1,086,941 |
Long term debt, less current maturities | 1,923,007 | 1,987,236 |
Total liabilities | 3,793,381 | 3,074,177 |
Commitments and Contingencies | ||
Stockholders' Equity | ||
Common stock, $.01 par value; 25,000,000 shares authorized, 14,508,507 and 14,503,010 shares issued and outstanding, at August 31 and February 28, respectively | 145,085 | 145,030 |
Additional paid-in capital | 8,719,416 | 8,709,601 |
Accumulated deficit | -2,683,188 | -2,862,364 |
Total stockholders' equity | 6,181,313 | 5,992,267 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $9,974,694 | $9,066,444 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Aug. 31, 2013 | Feb. 28, 2013 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $23,000 | $20,000 |
Common stock, par value | $0.01 | $0.01 |
Common stock, authorized | 25,000,000 | 25,000,000 |
Common stock, issued shares | 14,508,507 | 14,503,010 |
Common stock, outstanding shares | 14,508,507 | 14,503,010 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Income (Unaudited) (USD $) | 3 Months Ended | 6 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2013 | Aug. 31, 2012 | |
Income Statement [Abstract] | ||||
Net Sales | $2,537,378 | $2,391,107 | $4,911,772 | $5,230,809 |
Cost of Goods Sold | 1,295,146 | 1,225,735 | 2,528,126 | 2,715,739 |
Gross Profit | 1,242,232 | 1,165,373 | 2,383,646 | 2,515,070 |
Operating Expenses | ||||
Research and product development costs | 231,642 | 232,717 | 457,236 | 486,787 |
Marketing and selling expenses | 499,616 | 552,811 | 988,625 | 1,205,723 |
General and administrative costs | 253,505 | 315,842 | 522,595 | 674,388 |
Rental operations expense | 35,618 | 28,610 | 70,100 | 57,630 |
Total Operating Expenses | 1,020,381 | 1,129,981 | 2,038,556 | 2,424,528 |
Operating Income | 221,851 | 35,392 | 345,090 | 90,542 |
Interest Expense | -27,649 | -28,678 | -55,244 | -57,648 |
Other (expense) income | -21,865 | 6,234 | -23,573 | -1,705 |
Income Before Income Taxes | 172,337 | 12,948 | 266,273 | 31,189 |
Income tax expense | 66,908 | -46,787 | 87,096 | -39,647 |
Net Income | $105,429 | $59,735 | $179,177 | $70,836 |
Basic Earnings Per Share | $0.01 | $0 | $0.01 | $0 |
Diluted Earnings Per Share | $0.01 | $0 | $0.01 | $0 |
Weighted Average Shares - Basic | 14,503,070 | 14,472,849 | 14,503,040 | 14,466,892 |
Weighted Average Shares - Diluted | 14,604,147 | 14,576,509 | 14,558,306 | 14,582,873 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | 6 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Income | $179,177 | $70,836 |
Depreciation and amortization | 164,421 | 155,634 |
Stock based compensation expense | 9,712 | 21,658 |
Allowance for doubtful accounts | 6,000 | 6,000 |
Inventory reserve | 31,343 | 30,000 |
Decrease (Increase) in: | ||
Accounts receivable | -330,432 | -273,528 |
Inventories | -192,622 | 102,015 |
Prepaid expenses and other current assets | -51,522 | -80,420 |
(Decrease) Increase in: | ||
Accounts payable and accrued expenses | 260,280 | -174,938 |
Customer deposits | 441,611 | -121,380 |
Income taxes payable | 79,693 | |
Net Cash Provided by (Used In) Operating Activities | 597,661 | -264,123 |
CASH FLOW FROM INVESTING ACTIVITIES: | ||
Patent application and other asset costs | -17,621 | -32,218 |
Purchase of equipment and furnishings | -25,461 | -61,277 |
Proceeds from sale of equipment | 38,531 | |
Sale (Purchase) of marketable securities | 30,617 | -704,377 |
Net Cash Provided by (Used in) Investing Activities | 26,066 | -797,872 |
CASH FLOW FROM FINANCING ACTIVITIES: | ||
Proceeds from exercise of options | 158 | 20,346 |
Repayments of notes payable and loans | -62,379 | -59,992 |
Net Cash (Used In) Financing Activities | -62,221 | -39,646 |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 561,506 | -1,101,641 |
CASH AND CASH EQUIVALENTS | ||
Beginning of period | 1,940,906 | 2,531,689 |
End of period | 2,502,412 | 1,430,048 |
SUPPLEMENTAL DISCLOSURE: | ||
Interest paid | 55,244 | 57,648 |
Taxes Paid |
Significant_Accounting_Policie
Significant Accounting Policies | 3 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Notes to Financial Statements | |||||||||
Significant Accounting Policies | NOTE 1: SIGNIFICANT ACCOUNTING POLICIES | ||||||||
Consolidation - The accompanying condensed consolidated financial statements of Sono-Tek Corporation, a New York corporation (the “Company”), include the accounts of the Company and its wholly owned subsidiaries, Sono-Tek Cleaning Systems Inc. and Sono-Tek Industrial Park, LLC. Sono-Tek Cleaning Systems, Inc., a New Jersey Corporation, ceased operations during the Fiscal Year Ended February 28, 2002. Sono-Tek Industrial Park, LLC operates as a real estate holding company for the Company’s real estate operations. | |||||||||
Cash and Cash Equivalents – Cash and cash equivalents consist of money market mutual funds, short term commercial paper and short-term certificates of deposit with original maturities of 90 days or less. | |||||||||
Fair Value of Financial Instruments - The Company adopted the guidance in the Fair Value Measurements and Disclosure Topic of the Accounting Standards Codification for assets and liabilities measured at fair value on a recurring basis. This guidance establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of this guidance did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, the guidance requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below: | |||||||||
Level 1: Quoted prices in active markets. | |||||||||
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. | |||||||||
Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. | |||||||||
The fair values of financial assets of the Company were determined using the following categories at August 31, 2013: | |||||||||
Quoted Prices in Active Markets | |||||||||
(Level 1) | |||||||||
August 31, | February 28, | ||||||||
2013 | 2013 | ||||||||
Marketable Securities | $ | 945,293 | $ | 975,910 | |||||
Marketable Securities include mutual funds of $945,293, that are considered to be highly liquid and easily tradeable as of August 31, 2013. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within the Company’s fair value hierarchy. | |||||||||
Interim Reporting - The attached summary condensed consolidated financial information does not include all disclosures required to be included in a complete set of financial statements prepared in conformity with accounting principles generally accepted in the United States of America. Such disclosures were included with the financial statements of the Company at February 28, 2013, and included in its report on Form 10-K. Such statements should be read in conjunction with the data herein. | |||||||||
The financial information reflects all adjustments, normal and recurring, which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results for such interim periods are not necessarily indicative of the results to be expected for the year. | |||||||||
Intangible Assets – Include cost of patent applications that are deferred and charged to operations over seventeen years for domestic patents and twelve years for foreign patents. The accumulated amortization is $100,827 and $95,634 at August 31, 2013 and February 28, 2013, respectively. Annual amortization expense of such intangible assets is expected to be $9,600 per year for the next five years. | |||||||||
Reclassifications – Certain reclassifications have been made to the prior period to conform to the presentations of the current period. | |||||||||
Impact of New Accounting Pronouncements - All new accounting pronouncements issued but not yet effective have been deemed to be not applicable to the Company. Hence, the adoption of these new accounting pronouncements once effective are not expected to have any impact on the Company. | |||||||||
In July 2013, the FASB issued Accounting Standards Update “ASU” 2013-11 on “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. The amendments in this ASU are to improve the current U.S. GAAP because they are expected to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. |
Inventories
Inventories | 3 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Notes to Financial Statements | |||||||||
Inventories | NOTE 2: INVENTORIES | ||||||||
Inventories consist of the following: | |||||||||
August 31, | February 28, | ||||||||
2013 | 2013 | ||||||||
Finished goods | $ | 585,533 | $ | 561,298 | |||||
Work in process | 490,669 | 385,092 | |||||||
Consignment | 12,405 | 9,728 | |||||||
Raw materials and subassemblies | 1,133,625 | 1,073,492 | |||||||
Total | 2,222,232 | 2,029,610 | |||||||
Less: Allowance | (231,782 | ) | (200,439 | ) | |||||
Net inventories | $ | 1,990,450 | $ | 1,829,171 | |||||
Stock_Options_and_Warrants
Stock Options and Warrants | 3 Months Ended |
Aug. 31, 2013 | |
Equity [Abstract] | |
Stock Options and Warrants | NOTE 3: STOCK OPTIONS AND WARRANTS |
Stock Options - Under the 2003 Stock Incentive Plan, as amended ("2003 Plan"), until May 2013, options were available to be granted to officers, directors, consultants and employees of the Company and its subsidiaries to purchase up to 1,500,000 of the Company's common shares. As of August 31, 2013, there were 1,306,061 options outstanding under the 2003 plan, under which no additional options may be granted. | |
In August 2013, the Company’s shareholders approved the 2013 Stock Incentive Plan under which 2,500,000 options may be granted. No options have been granted to date. |
Stock_Based_Compensation
Stock Based Compensation | 3 Months Ended |
Aug. 31, 2013 | |
Notes to Financial Statements | |
Stock Based Compensation | NOTE 4: STOCK BASED COMPENSATION |
The weighted-average fair value of options has been estimated on the date of grant using the Black-Scholes options-pricing model. For the six months ended August 31, 2013 no options were issued. | |
In computing the impact, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period. | |
For the six months ended August 31, 2013 and 2012, net income and earnings per share reflect the actual deduction for stock-based compensation expense. The impact of applying ASC 718 approximated $9,712 and $21,658 in additional compensation expense during the six months ended August 31, 2013 and 2012, respectively. Such amounts are included in general and administrative expenses on the statement of operations. The expense for stock-based compensation is a non-cash expense item. |
Earnings_Per_Share
Earnings Per Share | 3 Months Ended | ||||||||||||||||
Aug. 31, 2013 | |||||||||||||||||
Notes to Financial Statements | |||||||||||||||||
Earnings Per Share | NOTE 5: EARNINGS PER SHARE | ||||||||||||||||
The denominator for the calculation of diluted earnings per share at August 31, 2013 and 2012 are calculated as follows: | |||||||||||||||||
Six Months Ended August 31, | Three Months Ended August 31, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Denominator for basic earnings per share | 14,503,040 | 14,466,892 | 14,503,070 | 14,472,849 | |||||||||||||
Dilutive effect of stock options | 55,266 | 115,981 | 101,077 | 103,660 | |||||||||||||
Denominator for diluted earnings per share | 14,558,306 | 14,582,873 | 14,604,147 | 14,576,509 |
Long_Term_Debt
Long Term Debt | 3 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Notes to Financial Statements | |||||||||
Long Term Debt | NOTE 6: LONG TERM DEBT | ||||||||
Long-term debt consists of the following: | |||||||||
August 31, | February 28, | ||||||||
2013 | |||||||||
Note payable, individual, collateralized by land and buildings, payable in monthly installments of principal and interest of $14,446 through January 2031. Interest rate 5.5%. 20 year term. | $ | 1,939,815 | $ | 1,972,617 | |||||
Equipment loan, bank, collateralized by related office equipment, payable in monthly installments of principal and interest of $5,154 through June 2015. Interest rate 2.12%. 48 month term. | 111,041 | 140,618 | |||||||
Total long term debt | 2,050,856 | 2,113,235 | |||||||
Due within one year | 127,849 | 125,999 | |||||||
Due after one year | $ | 1,923,007 | $ | 1,987,236 |
Revolving_Line_of_Credit
Revolving Line of Credit | 3 Months Ended |
Aug. 31, 2013 | |
Notes to Financial Statements | |
Revolving Line of Credit | NOTE 7: REVOLVING LINE OF CREDIT |
The Company has a $750,000 revolving line of credit at prime which was 3.25% at August 31, 2013. The loan is collateralized by all of the assets of the Company, except for the land and buildings. The line of credit is payable on demand and must be retired for a 30 day period once annually. If the Company fails to perform the 30 day annual pay down or if the bank elects to terminate the credit line, the bank may at its option convert the outstanding balance to a 36 month term note with payments including interest in 36 equal installments. As of August 31, 2013, the Company’s outstanding balance was $0, and the unused credit line was $750,000. |
Segment_Information
Segment Information | 3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Aug. 31, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | NOTE 8: SEGMENT INFORMATION | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Company operates in two segments: ultrasonic spraying systems and rental real estate operations. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
All inter-company transactions are eliminated in consolidation. For the six and three months ended August 31, 2013 and 2012, segment information is as follows: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Six Months Ended August 31, 2013 | Three Months Ended August 31, 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ultrasonic | Rental Real | Eliminations | Consolidated | Ultrasonic | Rental Real | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Spraying | Estate | Spraying | Estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operations | Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Sales | $ | 4,872,607 | $ | 107,036 | $ | 67,871 | $ | 4,911,772 | $ | 2,518,628 | $ | 52,685 | $ | 33,935 | $ | 2,537,378 | |||||||||||||||||||||||||||||||||||||||||||||||
Rental Expense | $ | 67,871 | $ | 70,099 | $ | (67,871 | ) | $ | 70,099 | $ | 33,935 | $ | 35,618 | $ | (33,935 | ) | $ | 35,618 | |||||||||||||||||||||||||||||||||||||||||||||
Interest Expense | $ | 1,371 | $ | 53,873 | $ | 55,244 | $ | 825 | $ | 26,824 | $ | 27,649 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income (Loss) | $ | 196,113 | $ | (16,936 | ) | $ | 179,177 | $ | 149,120 | $ | (43,691 | ) | $ | 105,429 | |||||||||||||||||||||||||||||||||||||||||||||||||
Assets | $ | 7,514,178 | $ | 2,460,516 | $ | 9,974,694 | $ | 7,514,178 | $ | 2,460,516 | $ | 9,974,694 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | $ | 111,041 | $ | 1,939,815 | $ | 2,050,856 | $ | 111,041 | $ | 1,939,815 | $ | 2,050,856 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Six Months Ended August 31, 2012 | Three Months Ended August 31, 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ultrasonic | Rental Real | Eliminations | Consolidated | Ultrasonic | Rental Real | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Spraying | Estate | Spraying | Estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operations | Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Sales | $ | 5,201,514 | $ | 97,164 | $ | 67,869 | $ | 5,230,809 | $ | 2,382,657 | $ | 42,385 | $ | 33,935 | $ | 2,391,107 | |||||||||||||||||||||||||||||||||||||||||||||||
Rental Expense | $ | 67,869 | $ | 57,630 | $ | (67,869 | ) | $ | 57,630 | $ | 33,935 | $ | 28,610 | $ | (33,935 | ) | $ | 28,610 | |||||||||||||||||||||||||||||||||||||||||||||
Interest Expense | $ | 2,023 | $ | 55,625 | $ | 57,648 | $ | 972 | $ | 27,706 | $ | 28,678 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income (Loss) | $ | 86,926 | $ | (16,090 | ) | $ | 70,836 | $ | 73,666 | $ | (13,931 | ) | $ | 59,735 | |||||||||||||||||||||||||||||||||||||||||||||||||
Assets | $ | 6,725,311 | $ | 2,507,885 | $ | 9,233,196 | $ | 6,725,311 | $ | 2,507,885 | $ | 9,233,196 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | $ | 169,979 | $ | 2,004,529 | $ | 2,174,508 | $ | 169,979 | $ | 2,004,529 | $ | 2,174,508 |
Subsequent_Events
Subsequent Events | 3 Months Ended |
Aug. 31, 2013 | |
Notes to Financial Statements | |
Subsequent Events | NOTE 9: SUBSEQUENT EVENTS |
On September 27, 2013, the Company signed a mortgage commitment letter with a bank to refinance its existing mortgage which is collateralized by the Company’s land and buildings. The proposed mortgage would be for $1,900,000, and would bear interest at 4.34% per annum. The existing mortgage bears interest at 5.5% and has a remaining term of 17.5 years. The term of the loan would be for ten years and would be collateralized by land and buildings. In addition, the mortgage will require a ten year lease between Sono-Tek Corp and Sono-Tek Industrial Park, the Company’s wholly owned subsidiary which holds title to the property. The actual interest rate will be set at closing. Completion of the mortgage is subject to an acceptable appraisal and environmental review. | |
The Company has evaluated all other subsequent events for disclosure purposes. |
Significant_Accounting_Policie1
Significant Accounting Policies (Policies) | 3 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Notes to Financial Statements | |||||||||
Consolidation | Consolidation - The accompanying condensed consolidated financial statements of Sono-Tek Corporation, a New York corporation (the “Company”), include the accounts of the Company and its wholly owned subsidiaries, Sono-Tek Cleaning Systems Inc. and Sono-Tek Industrial Park, LLC. Sono-Tek Cleaning Systems, Inc., a New Jersey Corporation, ceased operations during the Fiscal Year Ended February 28, 2002. Sono-Tek Industrial Park, LLC operates as a real estate holding company for the Company’s real estate operations. | ||||||||
Cash and Cash Equivalents | Cash and Cash Equivalents – Cash and cash equivalents consist of money market mutual funds, short term commercial paper and short-term certificates of deposit with original maturities of 90 days or less. | ||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments - The Company adopted the guidance in the Fair Value Measurements and Disclosure Topic of the Accounting Standards Codification for assets and liabilities measured at fair value on a recurring basis. This guidance establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of this guidance did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures. The guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, the guidance requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below: | ||||||||
Level 1: Quoted prices in active markets. | |||||||||
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. | |||||||||
Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. | |||||||||
The fair values of financial assets of the Company were determined using the following categories at August 31, 2013: | |||||||||
Quoted Prices in Active Markets | |||||||||
(Level 1) | |||||||||
31-Aug-13 | 28-Feb-13 | ||||||||
Marketable Securities | $ | 945,293 | $ | 975,910 | |||||
Marketable Securities include mutual funds of $945,293, that are considered to be highly liquid and easily tradeable as of August 31, 2013. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within the Company’s fair value hierarchy. | |||||||||
Interim Reporting | Interim Reporting - The attached summary condensed consolidated financial information does not include all disclosures required to be included in a complete set of financial statements prepared in conformity with accounting principles generally accepted in the United States of America. Such disclosures were included with the financial statements of the Company at February 28, 2013, and included in its report on Form 10-K. Such statements should be read in conjunction with the data herein. | ||||||||
The financial information reflects all adjustments, normal and recurring, which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results for such interim periods are not necessarily indicative of the results to be expected for the year. | |||||||||
Intangible Assets | Intangible Assets – Include cost of patent applications that are deferred and charged to operations over seventeen years for domestic patents and twelve years for foreign patents. The accumulated amortization is $100,827 and $95,634 at August 31, 2013 and February 28, 2013, respectively. Annual amortization expense of such intangible assets is expected to be $9,600 per year for the next five years. | ||||||||
Reclassifications | Reclassifications – Certain reclassifications have been made to the prior period to conform to the presentations of the current period. | ||||||||
Impact of New Accounting Pronouncements | Impact of New Accounting Pronouncements - All new accounting pronouncements issued but not yet effective have been deemed to be not applicable to the Company. Hence, the adoption of these new accounting pronouncements once effective are not expected to have any impact on the Company. | ||||||||
In July 2013, the FASB issued Accounting Standards Update “ASU” 2013-11 on “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. The amendments in this ASU are to improve the current U.S. GAAP because they are expected to reduce diversity in practice by providing guidance on the presentation of unrecognized tax benefits and will better reflect the manner in which an entity would settle at the reporting date any additional income taxes that would result from the disallowance of a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. |
Significant_Accounting_Policie2
Significant Accounting Policies (Tables) | 3 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Notes to Financial Statements | |||||||||
Fair values of financial assets of the Company | Quoted Prices in Active Markets | ||||||||
(Level 1) | |||||||||
August 31, | February 28, | ||||||||
2013 | 2013 | ||||||||
Marketable Securities | $ | 945,293 | $ | 975,910 |
Inventories_Tables
Inventories (Tables) | 3 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Inventories Tables | |||||||||
Inventories | August 31, | February 28, | |||||||
2013 | 2013 | ||||||||
Finished goods | $ | 585,533 | $ | 561,298 | |||||
Work in process | 490,669 | 385,092 | |||||||
Consignment | 12,405 | 9,728 | |||||||
Raw materials and subassemblies | 1,133,625 | 1,073,492 | |||||||
Total | 2,222,232 | 2,029,610 | |||||||
Less: Allowance | (231,782 | ) | (200,439 | ) | |||||
Net inventories | $ | 1,990,450 | $ | 1,829,171 |
Earnings_Per_Share_Tables
Earnings Per Share (Tables) | 3 Months Ended | ||||||||||||||||
Aug. 31, 2013 | |||||||||||||||||
Earnings Per Share Tables | |||||||||||||||||
Computation of basic and diluted earnings per share | Six Months Ended August 31, | Three Months Ended August 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Denominator for basic earnings per share | 14,503,040 | 14,466,892 | 14,503,070 | 14,472,849 | |||||||||||||
Dilutive effect of stock options | 55,266 | 115,981 | 101,077 | 103,660 | |||||||||||||
Denominator for diluted earnings per share | 14,558,306 | 14,582,873 | 14,604,147 | 14,576,509 |
Long_Term_Debt_Tables
Long Term Debt (Tables) | 3 Months Ended | ||||||||
Aug. 31, 2013 | |||||||||
Long Term Debt Tables | |||||||||
Long-term debt | August 31, | February 28, | |||||||
2013 | |||||||||
Note payable, individual, collateralized by land and buildings, payable in monthly installments of principal and interest of $14,446 through January 2031. Interest rate 5.5%. 20 year term. | $ | 1,939,815 | $ | 1,972,617 | |||||
Equipment loan, bank, collateralized by related office equipment, payable in monthly installments of principal and interest of $5,154 through June 2015. Interest rate 2.12%. 48 month term. | 111,041 | 140,618 | |||||||
Total long term debt | 2,050,856 | 2,113,235 | |||||||
Due within one year | 127,849 | 125,999 | |||||||
Due after one year | $ | 1,923,007 | $ | 1,987,236 |
Segment_Information_Tables
Segment Information (Tables) | 3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
Aug. 31, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information Tables | |||||||||||||||||||||||||||||||||||||||||||||||||
Segment information | Six Months Ended August 31, 2013 | Three Months Ended August 31, 2013 | |||||||||||||||||||||||||||||||||||||||||||||||
Ultrasonic | Rental Real | Eliminations | Consolidated | Ultrasonic | Rental Real | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||||||||||
Spraying | Estate | Spraying | Estate | ||||||||||||||||||||||||||||||||||||||||||||||
Operations | Operations | ||||||||||||||||||||||||||||||||||||||||||||||||
Net Sales | $ | 4,872,607 | $ | 107,036 | $ | 67,871 | $ | 4,911,772 | $ | 2,518,628 | $ | 52,685 | $ | 33,935 | $ | 2,537,378 | |||||||||||||||||||||||||||||||||
Rental Expense | $ | 67,871 | $ | 70,099 | $ | (67,871 | ) | $ | 70,099 | $ | 33,935 | $ | 35,618 | $ | (33,935 | ) | $ | 35,618 | |||||||||||||||||||||||||||||||
Interest Expense | $ | 1,371 | $ | 53,873 | $ | 55,244 | $ | 825 | $ | 26,824 | $ | 27,649 | |||||||||||||||||||||||||||||||||||||
Net Income (Loss) | $ | 196,113 | $ | (16,936 | ) | $ | 179,177 | $ | 149,120 | $ | (43,691 | ) | $ | 105,429 | |||||||||||||||||||||||||||||||||||
Assets | $ | 7,514,178 | $ | 2,460,516 | $ | 9,974,694 | $ | 7,514,178 | $ | 2,460,516 | $ | 9,974,694 | |||||||||||||||||||||||||||||||||||||
Debt | $ | 111,041 | $ | 1,939,815 | $ | 2,050,856 | $ | 111,041 | $ | 1,939,815 | $ | 2,050,856 | |||||||||||||||||||||||||||||||||||||
Six Months Ended August 31, 2012 | Three Months Ended August 31, 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||
Ultrasonic | Rental Real | Eliminations | Consolidated | Ultrasonic | Rental Real | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||||||||||
Spraying | Estate | Spraying | Estate | ||||||||||||||||||||||||||||||||||||||||||||||
Operations | Operations | ||||||||||||||||||||||||||||||||||||||||||||||||
Net Sales | $ | 5,201,514 | $ | 97,164 | $ | 67,869 | $ | 5,230,809 | $ | 2,382,657 | $ | 42,385 | $ | 33,935 | $ | 2,391,107 | |||||||||||||||||||||||||||||||||
Rental Expense | $ | 67,869 | $ | 57,630 | $ | (67,869 | ) | $ | 57,630 | $ | 33,935 | $ | 28,610 | $ | (33,935 | ) | $ | 28,610 | |||||||||||||||||||||||||||||||
Interest Expense | $ | 2,023 | $ | 55,625 | $ | 57,648 | $ | 972 | $ | 27,706 | $ | 28,678 | |||||||||||||||||||||||||||||||||||||
Net Income (Loss) | $ | 86,926 | $ | (16,090 | ) | $ | 70,836 | $ | 73,666 | $ | (13,931 | ) | $ | 59,735 | |||||||||||||||||||||||||||||||||||
Assets | $ | 6,725,311 | $ | 2,507,885 | $ | 9,233,196 | $ | 6,725,311 | $ | 2,507,885 | $ | 9,233,196 | |||||||||||||||||||||||||||||||||||||
Debt | $ | 169,979 | $ | 2,004,529 | $ | 2,174,508 | $ | 169,979 | $ | 2,004,529 | $ | 2,174,508 |
Significant_Accounting_Policie3
Significant Accounting Policies - Fair values of financial assets of the Company (Details) (USD $) | Aug. 31, 2013 | Feb. 28, 2013 |
Marketable Securities | $945,293 | $975,910 |
Quoted Prices in Active Markets (Level 1) | ||
Marketable Securities | $975,910 |
Significant_Accounting_Policie4
Significant Accounting Policies - Fair values of financial assets of the Company (Details Narrative) (USD $) | Aug. 31, 2013 | Feb. 28, 2013 |
Notes to Financial Statements | ||
Mutual funds | $945,293 | $975,910 |
Significant_Accounting_Policie5
Significant Accounting Policies - Intangible Assets (Details Narrative) (USD $) | Aug. 31, 2013 | Feb. 28, 2013 |
Notes to Financial Statements | ||
Accumulated amortization of intangible assets | $100,827 | $95,634 |
Annual Amortization Expense of Intangible Assets For the Next Five Years | ||
Annual amortization expense this year | 9,600 | |
Annual amortization expense year two | 9,600 | |
Annual amortization expense year three | 9,600 | |
Annual amortization expense year four | 9,600 | |
Annual amortization expense year five | $9,600 |
Inventories_Details
Inventories (Details) (USD $) | Aug. 31, 2013 | Feb. 28, 2013 |
Inventories Tables | ||
Finished goods | $585,533 | $1,073,492 |
Work in process | 490,669 | 385,092 |
Consignment | 12,405 | 9,728 |
Raw materials | 1,133,625 | 561,298 |
Total | 2,222,232 | 2,029,610 |
Less: Allowance | 231,782 | 200,439 |
Net inventories | $1,990,450 | $1,829,171 |
Stock_Options_and_Warrants_Det
Stock Options and Warrants (Details Narrative) | 6 Months Ended | 3 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 30, 2013 | Aug. 31, 2013 | |
2003 Stock Incentive Plan | 2013 Stock Incentive Plan | |||
Stock options shares available for purchase | 1,500,000 | 2,500,000 | ||
Stock options outstanding | 1,306,061 | |||
Stock options granted | 0 | 115,981 | 0 |
Stock_Based_Compensation_Detai
Stock Based Compensation (Details Narrative) (USD $) | 6 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | |
Notes to Financial Statements | ||
Stock options issued | 0 | 115,981 |
Additional stock-based compensation expense as a result of applying ASC 718 | $9,712 | $21,658 |
Earnings_Per_Share_The_denomin
Earnings Per Share - The denominator for the calculation of diluted earnings per share (Details) | 3 Months Ended | 6 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2013 | Aug. 31, 2012 | |
Earnings Per Share Tables | ||||
Denominator for basic earnings per share | 14,503,070 | 14,472,849 | 14,503,040 | 14,466,892 |
Dilutive effect of stock options | 101,077 | 103,660 | 55,266 | 115,981 |
Denominator for diluted earnings per share | 14,604,147 | 14,576,509 | 14,558,306 | 14,582,873 |
Long_Term_Debt_Details
Long Term Debt (Details) (USD $) | Aug. 31, 2013 | Feb. 28, 2013 |
Long-term debt | $2,050,856 | $2,113,235 |
Due within one year | 127,849 | 125,999 |
Due after one year | 1,923,007 | 1,987,236 |
Note payable, individual, collateralized by land and buildings, payable by monthly installments of principal and interest of $14,446 through January 2031. Interest rate 5.5%. 20 year term. | ||
Long-term debt | 1,939,815 | 1,972,617 |
Equipment loan, bank, collateralized by related office equipment, payable by monthly installments of principal and interest of $5,158 through June 2015. Interest rate 2.12%. 48 month term. | ||
Long-term debt | $111,041 | $140,618 |
Revolving_Line_of_Credit_Detai
Revolving Line of Credit (Details Narrative) (Revolving Line of Credit, USD $) | 3 Months Ended |
Aug. 31, 2013 | |
Revolving Line of Credit | |
Line of credit description | The Company has a $750,000 revolving line of credit at prime which was 3.25% at August 31, 2013. The line of credit is collateralized by all of the assets of the Company, except for the land and buildings. The line of credit is payable on demand and must be retired for a 30 day period once annually. If the Company fails to perform the 30 day annual pay down or if the bank elects to terminate the credit line, the bank may at its option convert the outstanding balance to a 36 month term note with payments including interest in 36 equal installments. |
Outstanding balance | $0 |
Unused credit line | $750,000 |
Segment_Information_Details
Segment Information (Details) (USD $) | 3 Months Ended | 6 Months Ended | |||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2013 | Aug. 31, 2012 | Feb. 28, 2013 | |
Net Sales | $2,537,378 | $2,391,107 | $4,911,772 | $5,230,809 | |
Rental Expense | 35,618 | 28,610 | 70,100 | 57,630 | |
Interest Expense | 27,649 | 28,678 | 55,244 | 57,648 | |
Net Income (Loss) | 105,429 | 59,735 | 179,177 | 70,836 | |
Assets | 9,974,694 | 9,974,694 | 9,066,444 | ||
Debt | 2,050,856 | 2,050,856 | 2,113,235 | ||
Ultrasonic Spraying | |||||
Net Sales | 2,518,628 | 2,382,657 | 4,872,607 | 5,201,514 | |
Rental Expense | 33,935 | 33,935 | 67,871 | 67,869 | |
Interest Expense | 825 | 972 | 1,371 | 2,023 | |
Net Income (Loss) | 149,120 | 73,666 | 196,113 | 86,926 | |
Assets | 7,514,178 | 6,725,311 | 7,514,178 | 6,725,311 | |
Debt | 111,041 | 169,979 | 111,041 | 169,979 | |
Rental Real Estate Operations | |||||
Net Sales | 52,685 | 42,385 | 107,036 | 97,164 | |
Rental Expense | 35,618 | 28,610 | 70,099 | 57,630 | |
Interest Expense | 26,824 | 27,706 | 53,873 | 55,625 | |
Net Income (Loss) | -43,691 | -13,931 | -16,936 | -16,090 | |
Assets | 2,460,516 | 2,507,885 | 2,460,516 | 2,507,885 | |
Debt | 1,939,815 | 2,004,529 | 1,939,815 | 2,004,529 | |
Eliminations | |||||
Net Sales | 33,935 | 33,935 | 67,871 | 67,869 | |
Rental Expense | -33,935 | -33,935 | -67,871 | -67,869 | |
Consolidated | |||||
Net Sales | 2,537,378 | 2,391,107 | 4,911,772 | 5,230,809 | |
Rental Expense | 35,618 | 28,610 | 70,099 | 57,630 | |
Interest Expense | 27,649 | 28,678 | 55,244 | 57,648 | |
Net Income (Loss) | 105,429 | 59,735 | 179,177 | 70,836 | |
Assets | 9,974,694 | 9,233,196 | 9,974,694 | 9,233,196 | |
Debt | $2,050,856 | $2,174,508 | $2,050,856 | $2,174,508 |
Subsequent_Events_Details_Narr
Subsequent Events (Details Narrative) (Mortgage Refinance) | 3 Months Ended |
Aug. 31, 2013 | |
Mortgage Refinance | |
Subsequent event date | 27-Sep-13 |
Subsequent event | The Company signed a mortgage commitment letter with a bank to refinance its existing mortgage which is collateralized by the Company’s land and buildings. The proposed mortgage would be for $1,900,000, and would bear interest at 4.34% per annum. The existing mortgage bears interest at 5.5% and has a remaining term of 17.5 years. The term of the loan would be for ten years and would be collateralized by land and buildings. In addition, the mortgage will require a ten year lease between Sono-Tek Corp and Sono-Tek Industrial Park, the Company’s wholly owned subsidiary which holds title to the property. The actual interest rate will be set at closing.Completion of the mortgage is subject to an acceptable appraisal and environmental review. |