Sono-Tek (SOTK) 10-Q 14 Jan 20 2020 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Nov. 30, 2019	Jan. 14, 2020
Document And Entity Information
Entity Registrant Name	SONO TEK CORP
Entity Central Index Key	0000806172
Document Type	10-Q
Document Period End Date	Nov. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--02-28
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Common Stock, Shares Outstanding		15,323,831
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2020
Emerging Growth Company	false
Entity Small Business	true
Interactive Data Current	Yes
Entity Incorporation State or Country	NY
Entity File Number	000-16035

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Nov. 30, 2019	Feb. 28, 2019
Current Assets:
Cash and cash equivalents	$ 2,279,506	$ 3,144,123
Marketable Securities	3,739,935	2,365,706
Accounts receivable (less allowance of $46,000)	1,338,320	1,397,891
Inventories, net	2,978,780	1,658,016
Prepaid expenses and other current assets	193,552	395,005
Total current assets	10,530,093	8,960,741
Land	250,000	250,000
Buildings, net	1,673,275	1,731,547
Equipment, furnishings and building improvements, net	975,835	802,932
Intangible assets, net	110,453	122,941
Deferred tax asset	332,017	332,017
TOTAL ASSETS	13,871,673	12,200,178
Current Liabilities:
Accounts payable	919,455	585,694
Accrued expenses	767,971	632,706
Customer deposits	1,953,826	1,149,558
Current maturities of long term debt	167,929	162,816
Income taxes payable	24,744	6,272
Total current liabilities	3,833,925	2,537,046
Deferred tax liability	370,757	370,757
Long term debt, less current maturities	581,065	707,715
Total liabilities	4,785,747	3,615,518
Stockholders' Equity
Common stock	153,238	151,976
Additional paid-in capital	9,009,979	8,929,607
Accumulated deficit	(77,291)	(496,923)
Total stockholders' equity	9,085,926	8,584,660
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 13,871,673	$ 12,200,178

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Nov. 30, 2019	Feb. 28, 2019
Statement of Financial Position [Abstract]
Allowance for doubtful accounts receivable	$ 46,000	$ 46,000
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized	25,000,000	25,000,000
Common stock, issued shares	15,323,831	15,197,563
Common stock, outstanding shares	15,323,831	15,197,563

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Nov. 30, 2019	Nov. 30, 2018	Nov. 30, 2019	Nov. 30, 2018
Income Statement [Abstract]
Net Sales	$ 3,672,286	$ 3,155,258	$ 9,840,536	$ 8,673,849
Cost of Goods Sold	1,875,606	1,858,970	5,191,929	4,761,919
Gross Profit	1,796,680	1,296,288	4,648,607	3,911,930
Operating Expenses
Research and product development costs	361,429	324,969	1,020,299	978,733
Marketing and selling expenses	849,419	652,664	2,326,115	1,979,365
General and administrative costs	316,218	268,632	935,693	857,832
Total Operating Expenses	1,527,066	1,246,265	4,282,107	3,815,930
Operating Income	269,614	50,023	366,500	96,000
Interest Expense	(8,000)	(9,684)	(25,465)	(30,501)
Interest and Dividend Income	20,513	33,164	77,496	104,686
Realized gain on sale of marketable securities				119,075
Net unrealized loss on marketable securities		(59,359)		(189,016)
Other income	7,527	8,681	24,404	28,196
Income Before Income Taxes	289,654	22,825	442,935	128,440
Income Tax Expense	10,000	2,566	23,303	27,627
Net Income	$ 279,654	$ 20,259	$ 419,632	$ 100,813
Basic Earnings Per Share	$ 0.02	$ 0	$ 0.03	$ 0.01
Diluted Earnings Per Share	$ 0.02	$ 0	$ 0.03	$ 0.01
Weighted Average Shares - Basic	15,306,008	15,164,440	15,291,968	15,078,933
Weighted Average Shares - Diluted	15,371,819	15,386,094	15,354,472	15,284,071

Condensed Consolidated Statem_2

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$ 419,632	$ 100,813
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	290,203	256,519
Stock based compensation expense	81,634	22,777
Inventory reserve	50,000	48,000
Unrealized loss on marketable securities		189,016
Decrease (Increase) in:
Accounts receivable	59,571	(388,538)
Inventories	(1,370,764)	(436,802)
Prepaid expenses and other current assets	201,453	(150,391)
(Decrease) Increase in:
Accounts payable and accrued expenses	469,026	(99,748)
Customer deposits	804,268	620,303
Income taxes payable	18,472	(73,800)
Net Cash Provided by Operating Activities	1,023,495	88,149
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and furnishings	(392,346)	(486,711)
Sale of marketable securities		125,534
(Purchase) of marketable securities	(1,374,229)
Net Cash (Used in) Investing Activities	(1,766,575)	(361,177)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long term debt	(121,537)	(116,555)
Net Cash Used In Financing Activities	(121,537)	(116,555)
NET (DECREASE) IN CASH AND CASH EQUIVALENTS	(864,617)	(389,583)
CASH AND CASH EQUIVALENTS
Beginning of period	3,144,123	2,016,464
End of period	2,279,506	1,626,881
SUPPLEMENTAL DISCLOSURE:
Interest paid	25,465	30,501
Taxes Paid	$ 4,831	$ 101,426

Consolidated Statements of Stoc

Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Total
Beginning balance (shares) at Feb. 28, 2018	14,986,367
Beginning balance at Feb. 28, 2018	$ 149,864	$ 8,901,171	$ 101,605	$ (760,115)	$ 8,392,525
Reclassification of unrealized gain on marketable securities upon adoption of ASU 2016-01			$ (101,605)	101,605
Cashless exercise of stock options (shares)	205,358
Cashless exercise of stock options	$ 2,054	(2,054)
Stock based compensation expense		22,777			22,777
Net Income				100,813	100,813
Ending balance (shares) at Nov. 30, 2018	15,191,725
Ending balance at Nov. 30, 2018	$ 151,918	8,921,894		(557,697)	8,516,115
Beginning balance (shares) at Aug. 31, 2018	15,155,560
Beginning balance at Aug. 31, 2018	$ 151,556	8,915,873		(577,956)	8,489,473
Cashless exercise of stock options (shares)	36,165
Cashless exercise of stock options	$ 362	(362)
Stock based compensation expense		6,383			6,383
Net Income				20,259	20,259
Ending balance (shares) at Nov. 30, 2018	15,191,725
Ending balance at Nov. 30, 2018	$ 151,918	8,921,894		(557,697)	8,516,115
Beginning balance (shares) at Feb. 28, 2019	15,197,563
Beginning balance at Feb. 28, 2019	$ 151,976	8,929,607		(496,923)	$ 8,584,660
Cashless exercise of stock options (shares)	126,268				126,268
Cashless exercise of stock options	$ 1,262	(1,262)
Stock based compensation expense		81,634			$ 81,634
Net Income				419,632	419,632
Ending balance (shares) at Nov. 30, 2019	15,323,831
Ending balance at Nov. 30, 2019	$ 153,238	9,009,979		(77,291)	9,085,926
Beginning balance (shares) at Aug. 31, 2019	15,301,613
Beginning balance at Aug. 31, 2019	$ 153,016	8,972,394		(356,945)	8,768,465
Cashless exercise of stock options (shares)	22,218
Cashless exercise of stock options	$ 222	(222)
Stock based compensation expense		37,807			37,807
Net Income				279,654	279,654
Ending balance (shares) at Nov. 30, 2019	15,323,831
Ending balance at Nov. 30, 2019	$ 153,238	$ 9,009,979		$ (77,291)	$ 9,085,926

Business Description

Business Description	9 Months Ended
	Nov. 30, 2019
Accounting Policies [Abstract]
Business Description	NOTE 1: BUSINESS DESCRIPTION Sono-Tek Corporation (the “Company”, “Sono-Tek”, “We” or “Our”) is the world leader in the design and manufacture of ultrasonic coating systems for applying precise, thin film coatings to protect, strengthen or smooth surfaces on parts and components for the microelectronics/electronics, alternative energy, medical, industrial and emerging research & development/other markets. We design and manufacture custom-engineered ultrasonic coating systems and also provide patented nozzles and generators for manufacturers’ equipment. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Accordingly, the Condensed Consolidated Financial Statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments considered necessary for a fair presentation (consisting of normal recurring adjustments) have been included. The results for the interim periods are not necessarily indicative of what the results will be for the fiscal year. The accompanying Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements as of and for the fiscal year ended February 28, 2019 (“fiscal year 2019”) contained in the Company’s 2019 Annual Report on Form 10-K filed with the SEC. The Company’s current fiscal year ends on February 29, 2020 (“fiscal 2020”).

Significant Accounting Policies

Significant Accounting Policies	9 Months Ended
	Nov. 30, 2019
Notes to Financial Statements
Significant Accounting Policies	NOTE 2: SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents - Consolidation Earnings Per Share - Equipment, Furnishings and Leasehold Improvements Fair Value of Financial Instruments - 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 November 30, 2019 and February 28, 2019, respectively: Quoted Prices in Active Markets (Level 1) November 30, February 28, Marketable Securities $ 3,739,935 $ 2,365,706 Marketable Securities include mutual funds, certificates of deposit and US Treasury securities of $3,739,935 and $2,365,706 that are considered to be highly liquid and easily tradeable as of November 30, 2019, and February 28, 2019, respectively. 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. The Company’s marketable securities are considered to be available-for-sale investments as defined under ASC 320 “Investments – Debt and Equity Securities.” Income Taxes Intangible Assets - Interim Reporting 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. Inventories - Land and Buildings – Long-Lived Assets - Management Estimates - Marketable Securities - New Accounting Pronouncements- In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either operating or financing, with such classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years and interim periods within those years beginning after December 15, 2018, and early adoption is permitted. The adoption of ASU 2016-02 had no material impact on the Company’s financial statements. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220), “ Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income Other than Accounting Standards Update (“ASU”) ASU 2016-02 and ASU 2018-02 discussed above, 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, is not expected to have an impact on the Company. Reclassifications –

Revenue Recognition

Revenue Recognition	9 Months Ended
	Nov. 30, 2019
Notes to Financial Statements
Revenue Recognition	NOTE 3: REVENUE RECOGNITION In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “ Revenue from Contracts with Customers” (Topic 606) The new revenue standard is principle based and interpretation of those principles may vary from company to company based on their unique circumstances. It is possible that interpretation, industry practice, and guidance may evolve as companies and the accounting profession work to implement this new standard. The implementation of the standard did not have a material impact on the financial statements. A majority of the Company’s sales revenue is derived primarily from short term contracts with customers, which, on average, are in effect for less than twelve months. Sales revenue from manufactured equipment transferred at a single point in time accounts for a majority of the Company’s revenue. Sales revenue is recognized when control of the Company’s manufactured equipment is transferred to its customers, in an amount that reflects the consideration the Company expects to receive based upon the agreed transaction price. The Company’s performance obligations are satisfied when its customers take control of the purchased equipment, which is based on the contract terms. Based on prior experience, the Company reasonably estimates its sales returns and warranty reserves. Sales are presented net of discounts and allowances. Discounts and allowances are determined when a sale is negotiated. The Company does not grant its customers or independent representatives, the ability to return equipment nor does it grant price adjustments after a sale is complete. The Company does not capitalize any sales commission costs related to the acquisition of a contract. All commissions related to a performance obligation that are satisfied at a point in time are expensed when the customer takes control of the purchased equipment. At November 30, 2019, the Company had received $1,954,000 in cash deposits, and had issued Letters of Credit in the amount of $659,000 to secure these cash deposits. The Company was utilizing $659,000 of its available credit line to collateralize these letters of credit. The Company’s inventory included approximately $707,000 directly related to servicing these customer contracts.

Inventories

Inventories	9 Months Ended
	Nov. 30, 2019
Notes to Financial Statements
Inventories	NOTE 4: INVENTORIES Inventories consist of the following: November 30, February 28, 2019 2019 Raw materials and subassemblies $ 1,050,183 $ 873,483 Finished goods 598,218 571,640 Contracts in process inventory 706,582 — Work in process 802,077 483,271 Total 3,157,060 1,928,394 Less: Allowance (178,280 ) (270,378 ) Net inventories $ 2,978,780 $ 1,658,016

Stock Options and Warrants

Stock Options and Warrants	9 Months Ended
	Nov. 30, 2019
Equity [Abstract]
Stock Options	NOTE 5: STOCK OPTIONS 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 shares of the Company's common stock. As of November 30, 2019, there were 50,000 options outstanding under the 2003 Plan, under which no additional options may be granted. During the nine months ended November 30, 2019, 228,833 options were exercised on a cashless basis into 126,268 shares of common stock.

Stock Based Compensation

Stock Based Compensation	9 Months Ended
	Nov. 30, 2019
Notes to Financial Statements
Stock Based Compensation	NOTE 6: STOCK BASED COMPENSATION The Company adopted ASC 718, “Share Based Payments.” which requires companies to expense the value of employee stock options and similar awards. During the three months ended November 30, 2019, the Company granted options to acquire 7,500 shares to employees exercisable at $2.10 and options for 100,000 shares to an officer with an exercise price of $2.65. The options granted to employees vest over three years and expire in ten years. The options granted to the officer vested upon grant and expire in ten years. All of the options granted by the Company during the three months ended November 30, 2019 had a combined weighted average grant date fair value of $0.32 per share. During the nine months ended November 30, 2019, the Company granted options to acquire 17,500 shares to employees exercisable at prices ranging from $2.10 to $2.65, options to acquire 20,000 shares to the non-employee members of the board of directors with an exercise price of $2.65 and options for 200,000 shares to an officer and director exercisable at prices of ranging from $2.45 to $2.65. The options granted to employees and directors vest over three years and expire in ten years. The options granted to the officer vested upon grant and expire in ten years. All of the options granted by the Company during the nine months ended November 30, 2019 had a combined weighted average grant date fair value of $0.34 per share. The weighted-average fair value of options are estimated on the date of grant using the Black-Scholes options-pricing model. The weighted-average Black-Scholes assumptions are as follows: Nine Months Ended Expected Life 1-8 years Risk free interest rate 1.58% - 2.05% Expected volatility 27.46% - 32.24% Expected dividend yield 0% 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 three and nine months ended November 30, 2019 and 2018, net income and earnings per share reflect the actual deduction for stock-based compensation expense. The impact of applying ASC 718 approximated $38,000 and $7,000 in additional compensation expense during the three months ended November 30, 2019 and 2018, respectively. The impact of applying ASC 718 approximated $82,000 and $23,000 in additional compensation expense during the nine months ended November 30, 2019 and 2018, 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	9 Months Ended
	Nov. 30, 2019
Notes to Financial Statements
Earnings Per Share	NOTE 7: EARNINGS PER SHARE The denominators for the calculation of diluted earnings per share at November 30, 2019 and 2018 are calculated as follows: Nine Months Ended Three Months Ended November 30, November 30, 2019 2018 2019 2018 Numerator for basic and diluted earnings per share $ 419,632 $ 100,813 $ 279,654 $ 20,259 Denominator for basic earnings per share – weighted average 15,291,968 15,078,933 15,306,008 15,164,440 Effects of dilutive securities Stock options for employees, directors and outside consultants 62,504 205,138 65,811 221,654 Denominator for diluted earnings per share 15,354,472 15,284,071 15,371,819 15,386,094 Basic earnings per share $ 0.03 $ 0.01 $ 0.02 $ 0.00 Diluted earnings per share $ 0.03 $ 0.01 $ 0.02 $ 0.00

Long Term Debt

Long Term Debt	9 Months Ended
	Nov. 30, 2019
Notes to Financial Statements
Long Term Debt	NOTE 8: LONG TERM DEBT Long-term debt consists of the following: November 30, February 28, 2019 2019 Note payable, bank, collateralized by land and buildings, payable in monthly installments of principal and interest of $16,358 through January 2024 with an interest rate of 4.15% and a 10-year term. $ 748,994 $ 870,531 Total long term debt 748,994 870,531 Due within one year 167,929 162,816 Due after one year $ 581,065 $ 707,715

Revolving Line of Credit

Revolving Line of Credit	9 Months Ended
	Nov. 30, 2019
Notes to Financial Statements
Revolving Line of Credit	NOTE 9: REVOLVING LINE OF CREDIT The Company has a $1,500,000 revolving line of credit at prime which was 4.75% at November 30, 2019. The revolving credit line is collateralized by the Company’s accounts receivable and inventory. 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 November 30, 2019, $659,000 of the Company’s credit line was being utilized to collateralize letters of credit issued to customers that have remitted cash deposits to the Company on existing orders. The letters of credit expire in 2020. As of November 30, 2019, there were no outstanding borrowings under the line of credit and the unused portion of the credit line was $841,000 as of November 30, 2019.

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Nov. 30, 2019
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	NOTE 10: COMMITMENTS AND CONTINGENCIES Other than the letters of credit disclosed in Note 9, the Company did not have any material commitments or contingencies as of November 30, 2019.

Subsequent Events

Subsequent Events	9 Months Ended
	Nov. 30, 2019
Notes to Financial Statements
Subsequent Events	NOTE 11: SUBSEQUENT EVENTS The Company has evaluated subsequent events for disclosure purposes.

Significant Accounting Polici_2

Significant Accounting Policies (Policies)	9 Months Ended
	Nov. 30, 2019
Notes to Financial Statements
Cash and Cash Equivalents	Cash and Cash Equivalents -
Consolidation	Consolidation
Earnings Per Share	Earnings Per Share -
Equipment, Furnishings and Leasehold Improvements	Equipment, Furnishings and Leasehold Improvements
Fair Value of Financial Instruments	Fair Value of Financial Instruments - 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 November 30, 2019 and February 28, 2019, respectively: Quoted Prices in Active Markets (Level 1) November 30, February 28, Marketable Securities $ 3,739,935 $ 2,365,706 Marketable Securities include mutual funds, certificates of deposit and US Treasury securities of $3,739,935 and $2,365,706 that are considered to be highly liquid and easily tradeable as of November 30, 2019, and February 28, 2019, respectively. 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. The Company’s marketable securities are considered to be available-for-sale investments as defined under ASC 320 “Investments – Debt and Equity Securities.”
Income Taxes	Income Taxes
Intangible Assets	Intangible Assets -
Interim Reporting	Interim Reporting 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.
Inventories	Inventories -
Land and Buildings	Land and Buildings –
Long-Lived Assets	Long-Lived Assets -
Management Estimates	Management Estimates -
Marketable Securities	Marketable Securities -
New Accounting Pronouncements	New Accounting Pronouncements- In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either operating or financing, with such classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years and interim periods within those years beginning after December 15, 2018, and early adoption is permitted. The adoption of ASU 2016-02 had no material impact on the Company’s financial statements. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220), “ Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income Other than Accounting Standards Update (“ASU”) ASU 2016-02 and ASU 2018-02 discussed above, 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, is not expected to have an impact on the Company.
Reclassifications	Reclassifications –

Significant Accounting Polici_3

Significant Accounting Policies (Tables)	9 Months Ended
	Nov. 30, 2019
Notes to Financial Statements
Fair values of financial assets of the Company	Quoted Prices in Active Markets (Level 1) November 30, February 28, Marketable Securities $ 3,739,935 $ 2,365,706

Inventories (Tables)

Inventories (Tables)	9 Months Ended
	Nov. 30, 2019
Inventories Tables Abstract
Inventories	November 30, February 28, 2019 2019 Raw materials and subassemblies $ 1,050,183 $ 873,483 Finished goods 598,218 571,640 Contracts in process inventory 706,582 — Work in process 802,077 483,271 Total 3,157,060 1,928,394 Less: Allowance (178,280 ) (270,378 ) Net inventories $ 2,978,780 $ 1,658,016

Stock Based Compensation (Table

Stock Based Compensation (Tables)	9 Months Ended
	Nov. 30, 2019
Notes to Financial Statements
Weighted-average Black-Scholes assumptions	Nine Months Ended Expected Life 1-8 years Risk free interest rate 1.58% - 2.05% Expected volatility 27.46% - 32.24% Expected dividend yield 0%

Earnings Per Share (Tables)

Earnings Per Share (Tables)	9 Months Ended
	Nov. 30, 2019
Earnings Per Share - Denominator For Calculation Of Diluted Earnings Per Share
Computation of basic and diluted earnings per share	Nine Months Ended Three Months Ended November 30, November 30, 2019 2018 2019 2018 Numerator for basic and diluted earnings per share $ 419,632 $ 100,813 $ 279,654 $ 20,259 Denominator for basic earnings per share – weighted average 15,291,968 15,078,933 15,306,008 15,164,440 Effects of dilutive securities Stock options for employees, directors and outside consultants 62,504 205,138 65,811 221,654 Denominator for diluted earnings per share 15,354,472 15,284,071 15,371,819 15,386,094 Basic earnings per share $ 0.03 $ 0.01 $ 0.02 $ 0.00 Diluted earnings per share $ 0.03 $ 0.01 $ 0.02 $ 0.00

Long Term Debt (Tables)

Long Term Debt (Tables)	9 Months Ended
	Nov. 30, 2019
Long Term Debt Tables Abstract
Long-term debt	November 30, February 28, 2019 2019 Note payable, bank, collateralized by land and buildings, payable in monthly installments of principal and interest of $16,358 through January 2024 with an interest rate of 4.15% and a 10-year term. $ 748,994 $ 870,531 Total long term debt 748,994 870,531 Due within one year 167,929 162,816 Due after one year $ 581,065 $ 707,715

Significant Accounting Polici_4

Significant Accounting Policies - Fair values of financial assets of the Company (Details) - USD ($)	Nov. 30, 2019	Feb. 28, 2019
Marketable Securities	$ 3,739,935	$ 2,365,706
Quoted Prices in Active Markets (Level 1)
Marketable Securities	$ 3,739,935	$ 2,365,706

Significant Accounting Polici_5

Significant Accounting Policies - Fair values of financial assets of the Company (Details Narrative) - USD ($)	Nov. 30, 2019	Feb. 28, 2019
Notes to Financial Statements
Mutual funds, certificates of deposit and US Treasury securities	$ 3,739,935	$ 2,365,706

Significant Accounting Polici_6

Significant Accounting Policies - Intangible Assets (Details Narrative) - USD ($)	6 Months Ended
	Aug. 31, 2019	Nov. 30, 2019	Feb. 28, 2019
Accumulated amortization of intangible assets		$ 168,516	$ 160,433
Annual Amortization Expense of Intangible Assets For the Next Five Years
Annual amortization expense this year		11,000
Annual amortization expense year two		11,000
Annual amortization expense year three		11,000
Annual amortization expense year four		11,000
Annual amortization expense year five		$ 11,000
Domestic Patents
Useful life of intangible assets	17 years
Foreign Patents
Useful life of intangible assets	12 years

Significant Accounting Polici_7

Significant Accounting Policies - New Accounting Pronouncements (Details Narrative)	9 Months Ended
	Nov. 30, 2019
Accounting Standards Update 2015-17 [Member]
Change in corporate tax rate, description	The Tax Cuts and Jobs Act, among other things, reduced the corporate tax rate from 35% to 21%.

Revenue Recognition (Details Na

Revenue Recognition (Details Narrative) - USD ($)	9 Months Ended
	Nov. 30, 2019	Feb. 28, 2019
Contracts in process inventory	$ 706,582
Letters of Credit
Letters of credit issued	$ 659,000
Letters of credit, collateral description	The Company was utilizing $659,000 of its revolving credit line to collateralize letters of credit issued to customers that have remitted cash deposits on existing orders.
Revenue Recognition
Cash deposits received	$ 1,954,000
Contracts in process inventory	$ 707,000

Inventories (Details)

Inventories (Details) - USD ($)	Nov. 30, 2019	Feb. 28, 2019
Inventories Tables Abstract
Raw materials and subassemblies	$ 1,050,183	$ 873,483
Finished goods	598,218	571,640
Contracts in process inventory	706,582
Work in process	802,077	483,271
Total	3,157,060	1,928,394
Less: Allowance	178,280	270,378
Net inventories	$ 2,978,780	$ 1,658,016

Stock Options (Details Narrativ

Stock Options (Details Narrative)	9 Months Ended
	Nov. 30, 2019shares
Options exercised on a cashless basis	228,833
Shares issued as a result of options exercised	126,268
2013 Stock Incentive Plan
Stock options shares available for purchase	2,500,000
Stock options outstanding	546,667
Years until options expire	10 years
2003 Stock Incentive Plan
Stock options shares available for purchase	1,500,000
Stock options outstanding	50,000

Stock Based Compensation (Detai

Stock Based Compensation (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Nov. 30, 2019	Nov. 30, 2018	Nov. 30, 2019	Nov. 30, 2018
Options granted	65,811	221,654	62,504	205,138
Expected dividend yield			0.00%
Additional stock-based compensation expense as a result of applying ASC 718	$ 38,000	$ 7,000	$ 82,000	$ 23,000
Maximum
Expected life			8 years
Minimum
Expected life			1 year
Employee Stock Options
Options granted	7,500		17,500
Vesting period	3 years		3 years
Exercise price	$ 2.10		$ 2.10
Term of maturity	10 years		10 years
Weighted average grant date fair value	$ 0.32		$ 0.34
Employee Stock Options | Maximum
Exercise price	2.10		2.10
Employee Stock Options | Minimum
Exercise price	$ 2.65		$ 2.65
Officer/Director Stock Option
Options granted	100,000		200,000
Vesting period	0 years		0 years
Term of maturity	10 years		10 years
Weighted average grant date fair value			$ 0.34
Officer/Director Stock Option | Maximum
Exercise price	$ 2.45		2.45
Officer/Director Stock Option | Minimum
Exercise price	2.65		$ 2.65
Non-employee Director Stock Option
Options granted			20,000
Vesting period			3 years
Exercise price	$ 2.65		$ 2.65
Term of maturity			10 years
Weighted average grant date fair value			$ 0.34

Stock-Based Compensation - Weig

Stock-Based Compensation - Weighted-average Black-Scholes assumptions (Details)	9 Months Ended
	Nov. 30, 2019
Risk free interest rate, minimum	1.58%
Risk free interest rate, maximum	2.05%
Expected volatility, minimum	27.46%
Expected volatility, maximum	32.24%
Expected dividend yield	0.00%
Minimum
Expected life (in years)	1 year
Maximum
Expected life (in years)	8 years

Earnings Per Share - The denomi

Earnings Per Share - The denominator for the calculation of diluted earnings per share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Nov. 30, 2019	Nov. 30, 2018	Nov. 30, 2019	Nov. 30, 2018
Earnings Per Share - Denominator For Calculation Of Diluted Earnings Per Share
Numerator for basic and diluted earnings per share	$ 279,654	$ 20,259	$ 419,632	$ 100,813
Denominator for basic earnings per share - weighted average	15,306,008	15,164,440	15,291,968	15,078,933
Effects of dilutive securities:
Stock options for employees, directors and outside consultants	65,811	221,654	62,504	205,138
Denominator for diluted earnings per share	15,371,819	15,386,094	15,354,472	15,284,071
Basic Earnings Per Share	$ 0.02	$ 0	$ 0.03	$ 0.01
Diluted Earnings Per Share	$ 0.02	$ 0	$ 0.03	$ 0.01

Long Term Debt (Details)

Long Term Debt (Details) - USD ($)	Nov. 30, 2019	Feb. 28, 2019
Total long-term debt	$ 748,994	$ 870,531
Due within one year	167,929	162,816
Due after one year	581,065	707,715
Note payable, bank, collateralized by land and buildings, payable in monthly installments of principal and interest of $16,358 through January 2024 with an interest rate of 4.15% and a 10 year term
Total long-term debt	$ 748,994	$ 870,531

Revolving Line of Credit (Detai

Revolving Line of Credit (Details Narrative)	9 Months Ended
	Nov. 30, 2019USD ($)
Letters of Credit
Letters of credit, collateral description	The Company was utilizing $659,000 of its revolving credit line to collateralize letters of credit issued to customers that have remitted cash deposits on existing orders.
Letters of credit, maturity date	Feb. 29, 2020
Revolving Line of Credit
Revolving line of credit amount	$ 1,500,000
Revolving line of credit interest rate	4.75%
Revolving line of credit description	The revolving credit line is collateralized by the Company's accounts receivable and inventory. 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.
Revolving line of credit unused credit line	$ 841,000