Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Aug. 31, 2020 | Oct. 12, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | SONO TEK CORP | |
Entity Central Index Key | 0000806172 | |
Document Type | 10-Q | |
Document Period End Date | Aug. 31, 2020 | |
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 | 15,439,660 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2021 | |
Emerging Growth Company | false | |
Entity Small Business | true | |
Shell Company | false | |
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 ($) | Aug. 31, 2020 | Feb. 29, 2020 |
Current Assets: | ||
Cash and cash equivalents | $ 3,971,611 | $ 3,659,551 |
Marketable Securities | 3,852,601 | 4,219,240 |
Accounts receivable | 1,348,648 | 929,701 |
Inventories, net | 2,462,048 | 2,381,891 |
Prepaid expenses and other current assets | 94,835 | 153,698 |
Total current assets | 11,729,743 | 11,344,081 |
Land | 250,000 | 250,000 |
Buildings, net | 1,614,391 | 1,654,061 |
Equipment, furnishings and building improvements, net | 1,236,607 | 1,212,578 |
Intangible assets, net | 97,999 | 106,291 |
Deferred tax asset | 176,314 | 176,314 |
TOTAL ASSETS | 15,105,054 | 14,743,325 |
Current Liabilities: | ||
Accounts payable | 712,704 | 668,721 |
Accrued expenses | 1,319,327 | 1,613,409 |
Customer deposits | 988,102 | 1,648,690 |
Current maturities of long term debt | 725,743 | 169,716 |
Income taxes payable | 63,743 | 70,621 |
Total current liabilities | 3,809,619 | 4,171,157 |
Deferred tax liability | 251,761 | 251,761 |
Long term debt, less current maturities | 899,573 | 538,000 |
Total liabilities | 4,960,953 | 4,960,918 |
Stockholders' Equity | ||
Common stock | 154,360 | 153,482 |
Additional paid-in capital | 9,033,531 | 9,018,406 |
Accumulated earnings | 956,210 | 610,519 |
Total stockholders' equity | 10,144,101 | 9,782,407 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 15,105,054 | $ 14,743,325 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) | Aug. 31, 2020 | Feb. 29, 2020 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 71,000 | $ 71,000 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized | 25,000,000 | 25,000,000 |
Common stock, issued shares | 15,435,935 | 15,348,180 |
Common stock, outstanding shares | 15,435,935 | 15,348,180 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Aug. 31, 2020 | Aug. 31, 2019 | Aug. 31, 2020 | Aug. 31, 2019 | |
Income Statement [Abstract] | ||||
Net Sales | $ 3,480,641 | $ 3,345,822 | $ 6,909,185 | $ 6,168,250 |
Cost of Goods Sold | 1,859,675 | 1,798,830 | 3,727,486 | 3,316,323 |
Gross Profit | 1,620,966 | 1,546,992 | 3,181,699 | 2,851,927 |
Operating Expenses | ||||
Research and product development costs | 423,516 | 321,697 | 834,940 | 658,870 |
Marketing and selling expenses | 682,270 | 799,284 | 1,388,987 | 1,476,696 |
General and administrative costs | 313,852 | 333,662 | 572,254 | 619,475 |
Total Operating Expenses | 1,419,638 | 1,454,643 | 2,796,181 | 2,755,041 |
Operating Income | 201,328 | 92,349 | 385,518 | 96,886 |
Interest Expense | (9,287) | (8,518) | (17,704) | (17,465) |
Interest and Dividend Income | 2,837 | 25,812 | 25,483 | 56,983 |
Other income | 8,084 | 12,122 | 19,519 | 16,877 |
Income Before Income Taxes | 202,962 | 121,765 | 412,816 | 153,281 |
Income Tax Expense | 25,199 | 7,000 | 67,125 | 13,303 |
Net Income | $ 177,763 | $ 114,765 | $ 345,691 | $ 139,978 |
Basic Earnings Per Share | $ 0.01 | $ 0.01 | $ 0.02 | $ 0.01 |
Diluted Earnings Per Share | $ 0.01 | $ 0.01 | $ 0.02 | $ 0.01 |
Weighted Average Shares - Basic | 15,424,126 | 15,301,613 | 15,410,952 | 15,285,024 |
Weighted Average Shares - Diluted | 15,533,010 | 15,399,163 | 15,530,910 | 15,376,906 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
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) | 104,050 | |||
Cashless exercise of stock options | $ 1,040 | (1,040) | ||
Stock based compensation expense | 43,827 | 43,827 | ||
Net Income | 139,978 | 139,978 | ||
Ending balance (shares) at Aug. 31, 2019 | 15,301,613 | |||
Ending balance at Aug. 31, 2019 | $ 153,016 | 8,972,394 | (356,945) | 8,768,465 |
Beginning balance (shares) at May. 31, 2019 | 15,301,613 | |||
Beginning balance at May. 31, 2019 | $ 153,016 | 8,939,877 | (471,710) | 8,621,183 |
Stock based compensation expense | 32,517 | 32,517 | ||
Net Income | 114,765 | 114,765 | ||
Ending balance (shares) at Aug. 31, 2019 | 15,301,613 | |||
Ending balance at Aug. 31, 2019 | $ 153,016 | 8,972,394 | (356,945) | 8,768,465 |
Beginning balance (shares) at Feb. 29, 2020 | 15,348,180 | |||
Beginning balance at Feb. 29, 2020 | $ 153,482 | 9,018,406 | 610,519 | $ 9,782,407 |
Cashless exercise of stock options (shares) | 87,755 | 87,755 | ||
Cashless exercise of stock options | $ 878 | (878) | ||
Stock based compensation expense | 16,003 | $ 16,003 | ||
Net Income | 345,691 | 345,691 | ||
Ending balance (shares) at Aug. 31, 2020 | 15,435,935 | |||
Ending balance at Aug. 31, 2020 | $ 154,360 | 9,033,531 | 956,210 | 10,144,101 |
Beginning balance (shares) at May. 31, 2020 | 15,422,985 | |||
Beginning balance at May. 31, 2020 | $ 154,230 | 9,025,755 | 778,447 | $ 9,958,432 |
Cashless exercise of stock options (shares) | 12,950 | 12,950 | ||
Cashless exercise of stock options | $ 130 | (130) | ||
Stock based compensation expense | 7,906 | $ 7,906 | ||
Net Income | 177,763 | 177,763 | ||
Ending balance (shares) at Aug. 31, 2020 | 15,435,935 | |||
Ending balance at Aug. 31, 2020 | $ 154,360 | $ 9,033,531 | $ 956,210 | $ 10,144,101 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Aug. 31, 2020 | Aug. 31, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Income | $ 345,691 | $ 139,978 |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||
Depreciation and amortization | 214,280 | 191,977 |
Stock based compensation expense | 16,003 | 43,827 |
Inventory reserve | 36,000 | 32,000 |
Decrease (Increase) in: | ||
Accounts receivable | (418,947) | 125,491 |
Inventories | (116,157) | (952,898) |
Prepaid expenses and other current assets | 58,863 | 212,642 |
(Decrease) Increase in: | ||
Accounts payable and accrued expenses | (250,099) | 352,124 |
Customer deposits | (660,588) | 434,894 |
Income taxes payable | (6,878) | 8,472 |
Net Cash (Used in) Provided by Operating Activities | (781,832) | 588,507 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of equipment and furnishings | (290,347) | (319,055) |
Capital expenditure grant proceeds | 100,000 | |
Sale of marketable securities | 366,639 | |
(Purchase) of marketable securities | (1,051,898) | |
Net Cash Provided by (Used in) Investing Activities | 176,292 | (1,370,953) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from note payable - bank | 1,001,640 | |
Repayment of long term debt | (84,040) | (80,696) |
Net Cash Provided by (Used in) Financing Activities | 917,600 | (80,696) |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 312,060 | (863,142) |
CASH AND CASH EQUIVALENTS | ||
Beginning of period | 3,659,551 | 3,144,123 |
End of period | 3,971,611 | 2,280,981 |
SUPPLEMENTAL DISCLOSURE: | ||
Interest paid | 13,972 | 17,465 |
Taxes Paid | $ 74,004 | $ 4,831 |
Business Description
Business Description | 6 Months Ended |
Aug. 31, 2020 | |
Accounting Policies [Abstract] | |
Business Description | NOTE 1: BUSINESS DESCRIPTION Sono-Tek Corporation (the “Company”, “Sono-Tek”, “We” or “Our”) was incorporated in New York on March 21, 1975. We are 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 29, 2020 (“fiscal year 2020”) contained in the Company’s 2020 Annual Report on Form 10-K filed with the SEC. The Company’s current fiscal year ends on February 28, 2021 (“fiscal 2021”). |
Significant Accounting Policies
Significant Accounting Policies | 6 Months Ended |
Aug. 31, 2020 | |
Notes to Financial Statements | |
Significant Accounting Policies | NOTE 2: SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents - Concentration of Credit Risk – Financial instruments and related items, which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limit. At August 31, 2020, deposits in excess of the FDIC limits were $6,534,000. 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 August 31, 2020 and February 29, 2020, respectively: Level 1 Level 2 Level 3 Total Marketable Securities – August 31, 2020 $ 3,401,677 $ 450,924 $ — $ 3,852,601 Marketable Securities – February 29, 2020 $ 3,565,629 653,611 $ — $ 4,219,240 Marketable Securities include mutual funds, certificates of deposit and US Treasury securities, totaling $3,852,601 and $4,219,240 that are considered to be highly liquid and easily tradeable as of August 31, 2020 and February 29, 2020, respectively. Mutual funds & US Treasury securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 and certificates of deposit are classified as Level 2 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.” Grant Proceeds – The Company has concluded that this grant is not within the scope of ASC 606, as it does not meet the definition of a contract with a “customer”. The Company has further concluded that Subtopic 958-605, Not-for-Profit-Entities-Revenue Recognition also does not apply, as the Company is a business entity and the grant is from a public utility. Grants and related receivables are recognized when there is reasonable assurance that the grant will be received, and all attaching conditions will be complied with. The Company has applied the grant proceeds against the cost of the capitalized improvements applicable to the grant, reducing the carrying value and the related depreciation expense going forward. 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 December 2019, the FASB issued ASU 2019-12, “ Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes Other than ASU 2019-12 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 – Research and Product Development Expenses - Shipping and Handling Costs – |
Revenue Recognition
Revenue Recognition | 6 Months Ended |
Aug. 31, 2020 | |
Notes to Financial Statements | |
Revenue Recognition | NOTE 3: REVENUE RECOGNITION A majority of the Company’s sales revenue is derived 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, as defined by the contract terms. Based on prior experience, the Company reasonably estimates its 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. The Company receives cash deposits for customer orders based upon contract terms. Upon receipt, customer deposits are recorded as a short-term liability. Cash deposits received from customers may not always equal 100% of the contracted revenue for a given contract. In addition to cash deposits, the Company will accept irrevocable standby letters of credit from customers based upon contract terms. The Company also provides negotiated payment terms to its customers. At February 29, 2020, the Company had received $1,649,000 in cash deposits from customers. During the six months ended August 31, 2020, the Company applied 100% of these deposits against customer accounts receivable when the Company's performance obligations were met. At August 31, 2020, the Company had received $988,000 in cash deposits for customer orders and had issued Letters of Credit in the amount of $1,271,000 to secure some of these cash deposits. Subsequent to August 31, 2020, the Company received an additional $618,000 in cash deposits that is secured by the outstanding Letters of Credit. |
Inventories
Inventories | 6 Months Ended |
Aug. 31, 2020 | |
Notes to Financial Statements | |
Inventories | NOTE 4: INVENTORIES Inventories consist of the following: August 31, February 29, 2020 2020 Raw materials and subassemblies $ 1,035,721 $ 967,089 Finished goods 690,835 752,999 Work in process 964,772 855,083 Total 2,691,328 2,575,171 Less: Allowance (229,280 ) (193,280 ) Net inventories $ 2,462,048 $ 2,381,891 |
Stock Options and Warrants
Stock Options and Warrants | 6 Months Ended |
Aug. 31, 2020 | |
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 August 31, 2020, there were 47,500 options outstanding under the 2003 Plan, under which no additional options may be granted. During the six months ended August 31, 2020, 136,458 options were exercised on a cashless basis into 87,755 shares of common stock. |
Stock Based Compensation
Stock Based Compensation | 6 Months Ended |
Aug. 31, 2020 | |
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 and six months ended August 31, 2020, the Company granted options to acquire 22,500 shares to employees exercisable at $3.70. The options granted to employees vest over three years and expire in ten years. The options had a weighted average grant date fair value of $1.25 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: Six Months Ended Expected Life 8 years Risk free interest rate 0.46% Expected volatility 33.55% 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 six months ended August 31, 2020 and 2019, net income and earnings per share reflect the actual deduction for stock-based compensation expense. The impact of applying ASC 718 approximated $8,000 and $33,000 in additional compensation expense during the three months ended August 31, 2020 and 2019, respectively. The impact of applying ASC 718 approximated $16,000 and $44,000 in additional compensation expense during the six months ended August 31, 2020 and 2019, 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 | 6 Months Ended |
Aug. 31, 2020 | |
Notes to Financial Statements | |
Earnings Per Share | NOTE 7: EARNINGS PER SHARE The denominators for the calculation of diluted earnings per share at August 31, 2020 and 2019 are calculated as follows: Six Months Ended Three Months Ended 2020 2019 2020 2019 Numerator for basic and diluted earnings per share $ 345,691 $ 139,978 $ 177,763 $ 114,765 Denominator for basic earnings per share – weighted average 15,410,952 15,285,024 15,424,126 15,301,613 Effects of dilutive securities Stock options for employees, directors and outside consultants 119,958 91,882 108,884 97,550 Denominator for diluted earnings per share 15,530,910 15,376,906 15,533,010 15,399,163 Basic earnings per share $ 0.02 $ 0.01 $ 0.01 $ 0.01 Diluted earnings per share $ 0.02 $ 0.01 $ 0.01 $ 0.01 |
Long Term Debt
Long Term Debt | 6 Months Ended |
Aug. 31, 2020 | |
Notes to Financial Statements | |
Long Term Debt | NOTE 8: LONG TERM DEBT Long-term debt consists of the following: August 31, February 28, 2020 2020 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. $ 623,676 $ 707,716 Note Payable, bank, unsecured, Paycheck Protection Program funding, payable in monthly installments of principal and interest of $56,370 through April 2022. Interest rate 1%. 2-year term, no repayments required for the first six months. Under the terms of the CARE Act, forgiveness for all or a portion of the loan may be granted based upon use of the loan proceeds for eligible payroll and related payroll costs and other qualified expenses. 1,001,640 — Total long-term debt 1,625,316 707,716 Due within one year 725,743 169,716 Due after one year $ 899,573 $ 538,000 |
Revolving Line of Credit
Revolving Line of Credit | 6 Months Ended |
Aug. 31, 2020 | |
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 3.25% at August 31, 2020. 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 August 31, 2020, $1,271,000 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 at various times in the fiscal years ending February 28, 2021 and 2022. As of August 31, 2020, there were no outstanding borrowings under the line of credit and the unused portion of the credit line was $229,000 as of August 31, 2020. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Aug. 31, 2020 | |
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 August 31, 2020. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Aug. 31, 2020 | |
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) | 6 Months Ended |
Aug. 31, 2020 | |
Notes to Financial Statements | |
Cash and Cash Equivalents | Cash and Cash Equivalents - |
Concentration of Credit Risk | Concentration of Credit Risk – Financial instruments and related items, which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and temporary cash investments with credit quality institutions. At times, such amounts may be in excess of the FDIC insurance limit. At August 31, 2020, deposits in excess of the FDIC limits were $6,534,000. |
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 August 31, 2020 and February 29, 2020, respectively: Level 1 Level 2 Level 3 Total Marketable Securities – August 31, 2020 $ 3,401,677 $ 450,924 $ — $ 3,852,601 Marketable Securities – February 29, 2020 $ 3,565,629 653,611 $ — $ 4,219,240 Marketable Securities include mutual funds, certificates of deposit and US Treasury securities, totaling $3,852,601 and $4,219,240 that are considered to be highly liquid and easily tradeable as of August 31, 2020 and February 29, 2020, respectively. Mutual funds & US Treasury securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 and certificates of deposit are classified as Level 2 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.” |
Grant Proceeds | Grant Proceeds – The Company has concluded that this grant is not within the scope of ASC 606, as it does not meet the definition of a contract with a “customer”. The Company has further concluded that Subtopic 958-605, Not-for-Profit-Entities-Revenue Recognition also does not apply, as the Company is a business entity and the grant is from a public utility. Grants and related receivables are recognized when there is reasonable assurance that the grant will be received, and all attaching conditions will be complied with. The Company has applied the grant proceeds against the cost of the capitalized improvements applicable to the grant, reducing the carrying value and the related depreciation expense going forward. |
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 December 2019, the FASB issued ASU 2019-12, “ Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes Other than ASU 2019-12 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 – |
Research and Product Development Expenses | Research and Product Development Expenses - |
Shipping and Handling Costs | Shipping and Handling Costs – |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 6 Months Ended |
Aug. 31, 2020 | |
Notes to Financial Statements | |
Fair values of financial assets of the Company | Level 1 Level 2 Level 3 Total Marketable Securities – August 31, 2020 $ 3,401,677 $ 450,924 $ — $ 3,852,601 Marketable Securities – February 29, 2020 $ 3,565,629 653,611 $ — $ 4,219,240 |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Aug. 31, 2020 | |
Inventories Tables Abstract | |
Inventories | August 31, February 29, 2020 2020 Raw materials and subassemblies $ 1,035,721 $ 967,089 Finished goods 690,835 752,999 Work in process 964,772 855,083 Total 2,691,328 2,575,171 Less: Allowance (229,280 ) (193,280 ) Net inventories $ 2,462,048 $ 2,381,891 |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 6 Months Ended |
Aug. 31, 2020 | |
Notes to Financial Statements | |
Weighted-average Black-Scholes assumptions | Six Months Ended Expected Life 8 years Risk free interest rate 0.46% Expected volatility 33.55% Expected dividend yield 0% |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Aug. 31, 2020 | |
Earnings Per Share - Denominator For Calculation Of Diluted Earnings Per Share | |
Computation of basic and diluted earnings per share | Six Months Ended Three Months Ended 2020 2019 2020 2019 Numerator for basic and diluted earnings per share $ 345,691 $ 139,978 $ 177,763 $ 114,765 Denominator for basic earnings per share – weighted average 15,410,952 15,285,024 15,424,126 15,301,613 Effects of dilutive securities Stock options for employees, directors and outside consultants 119,958 91,882 108,884 97,550 Denominator for diluted earnings per share 15,530,910 15,376,906 15,533,010 15,399,163 Basic earnings per share $ 0.02 $ 0.01 $ 0.01 $ 0.01 Diluted earnings per share $ 0.02 $ 0.01 $ 0.01 $ 0.01 |
Long Term Debt (Tables)
Long Term Debt (Tables) | 6 Months Ended |
Aug. 31, 2020 | |
Long Term Debt Tables Abstract | |
Long-term debt | August 31, February 28, 2020 2020 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. $ 623,676 $ 707,716 Note Payable, bank, unsecured, Paycheck Protection Program funding, payable in monthly installments of principal and interest of $56,370 through April 2022. Interest rate 1%. 2-year term, no repayments required for the first six months. Under the terms of the CARE Act, forgiveness for all or a portion of the loan may be granted based upon use of the loan proceeds for eligible payroll and related payroll costs and other qualified expenses. 1,001,640 — Total long-term debt 1,625,316 707,716 Due within one year 725,743 169,716 Due after one year $ 899,573 $ 538,000 |
Significant Accounting Polici_4
Significant Accounting Policies - Fair values of financial assets of the Company (Details) - USD ($) | Aug. 31, 2020 | Feb. 29, 2020 |
Marketable Securities | $ 3,852,601 | $ 4,219,240 |
Quoted Prices in Active Markets (Level 1) | ||
Marketable Securities | 3,401,677 | 3,565,629 |
Fair Value Inputs (Level 2) | ||
Marketable Securities | 450,924 | 653,611 |
Fair Value Inputs (Level 3) | ||
Marketable Securities |
Significant Accounting Polici_5
Significant Accounting Policies - Fair values of financial assets of the Company (Details Narrative) - USD ($) | Aug. 31, 2020 | Feb. 29, 2020 |
Notes to Financial Statements | ||
Highly liquid and easily tradeable mutual funds, certificates of deposit and US Treasury securities | $ 3,852,601 | $ 4,219,240 |
Significant Accounting Polici_6
Significant Accounting Policies - Grant proceeds (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended |
Aug. 31, 2020 | Feb. 29, 2020 | |
Notes to Financial Statements | ||
Grant proceeds, description | The Company was awarded a $100,000 Wired Innovations Center grant in June 2019 from the utility that provides its electricity service. Proceeds of the grant was conditioned upon the Company’s successful completion of certain energy efficiency related improvements. In addition, the grant was subject to certain other requirements and was provided on a reimbursement basis only. | |
Cost of capitalized improvements | $ 580,000 | |
Proceeds received for capital improvements | $ 100,000 |
Significant Accounting Polici_7
Significant Accounting Policies - Intangible Assets (Details Narrative) - USD ($) | 6 Months Ended | |
Aug. 31, 2020 | Feb. 29, 2020 | |
Accumulated amortization of intangible assets | $ 176,566 | $ 171,210 |
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 |
Revenue Recognition (Details Na
Revenue Recognition (Details Narrative) - USD ($) | 6 Months Ended | ||||
Aug. 31, 2020 | Sep. 30, 2020 | Feb. 29, 2020 | |||
Subsequent Event | |||||
Cash deposits received | [1] | $ 618,000 | |||
Letters of Credit | |||||
Letters of credit issued | $ 1,271,000 | ||||
Revenue Recognition | |||||
Cash deposits received | $ 988,000 | [2] | $ 1,649,000 | ||
Customer deposits applied against accounts receivable, percent | 100.00% | ||||
[1] | Cash deposits are secured by the outstanding Letters of Credit. | ||||
[2] | The Company issued Letters of Credit to secure the cash deposits. |
Inventories (Details)
Inventories (Details) - USD ($) | Aug. 31, 2020 | Feb. 29, 2020 |
Inventories Tables Abstract | ||
Raw materials and subassemblies | $ 1,035,721 | $ 967,089 |
Finished goods | 690,835 | 752,999 |
Work in process | 964,772 | 855,083 |
Total | 2,691,328 | 2,575,171 |
Less: Allowance | (229,280) | (193,280) |
Net inventories | $ 2,462,048 | $ 2,381,891 |
Stock Options (Details Narrativ
Stock Options (Details Narrative) | 3 Months Ended | 6 Months Ended |
Aug. 31, 2020shares | Aug. 31, 2020shares | |
Options exercised on a cashless basis | 136,458 | |
Shares issued as a result of options exercised | 12,950 | 87,755 |
2013 Stock Incentive Plan | ||
Stock options shares available for purchase | 2,500,000 | 2,500,000 |
Stock options outstanding | 427,709 | 427,709 |
Years until options expire | 10 years | |
2003 Stock Incentive Plan | ||
Stock options shares available for purchase | 1,500,000 | 1,500,000 |
Stock options outstanding | 47,500 | 47,500 |
Stock-Based Compensation - Weig
Stock-Based Compensation - Weighted-average Black-Scholes assumptions (Details) | 6 Months Ended |
Aug. 31, 2020 | |
Expected life (in years) | 8 years |
Risk free interest rate | 0.46% |
Expected volatility | 33.55% |
Expected dividend yield | 0.00% |
Stock Based Compensation (Detai
Stock Based Compensation (Details Narrative) - Employee Stock Option - USD ($) | 3 Months Ended | 6 Months Ended | |||
Aug. 31, 2020 | Aug. 31, 2019 | Aug. 31, 2020 | Aug. 31, 2019 | ||
Options granted | 22,500 | 22,500 | |||
Vesting period | 3 years | 3 years | |||
Exercise price | $ 3.70 | $ 3.70 | |||
Term of maturity | 10 years | 10 years | |||
Grant date fair value | $ 1.25 | $ 1.25 | |||
Additional stock-based compensation expense as a result of applying ASC 718 | [1] | $ 8,000 | $ 33,000 | $ 16,000 | $ 44,000 |
[1] | Included in general and administrative expenses on the statement of operations. |
Earnings Per Share - The denomi
Earnings Per Share - The denominator for the calculation of diluted earnings per share (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Aug. 31, 2020 | Aug. 31, 2019 | Aug. 31, 2020 | Aug. 31, 2019 | |
Earnings Per Share - Denominator For Calculation Of Diluted Earnings Per Share | ||||
Numerator for basic and diluted earnings per share | $ 177,763 | $ 114,765 | $ 345,691 | $ 139,978 |
Denominator for basic earnings per share - weighted average | 15,424,126 | 15,301,613 | 15,410,952 | 15,285,024 |
Effects of dilutive securities: | ||||
Stock options for employees, directors and outside consultants | 108,884 | 97,550 | 119,958 | 91,882 |
Denominator for diluted earnings per share | 15,533,010 | 15,399,163 | 15,530,910 | 15,376,906 |
Basic Earnings Per Share | $ 0.01 | $ 0.01 | $ 0.02 | $ 0.01 |
Diluted Earnings Per Share | $ 0.01 | $ 0.01 | $ 0.02 | $ 0.01 |
Long Term Debt (Details)
Long Term Debt (Details) - USD ($) | Aug. 31, 2020 | Feb. 29, 2020 |
Total long-term debt | $ 1,625,316 | $ 707,716 |
Due within one year | 725,743 | 169,716 |
Due after one year | 899,573 | 538,000 |
Note payable, bank, collateralized by land and buildings, payable in monthly installments of principal and interest of $16,358 through January 2024. Interest rate of 4.15%. 10 year term | ||
Total long-term debt | 623,676 | 707,716 |
Note Payable, bank, unsecured, Paycheck Protection Program funding, payable in monthly installments of principal and interest of $56,370 through April 2022. Interest rate 1%. 2-year term, no repayments required for the first six months. | ||
Total long-term debt | $ 1,001,640 |
Revolving Line of Credit (Detai
Revolving Line of Credit (Details Narrative) | 6 Months Ended | |
Aug. 31, 2020USD ($) | ||
Letters of Credit | ||
Line of credit amount | $ 1,271,000 | [1] |
Line of credit unused credit line | 229,000 | |
Revolving Line of Credit | ||
Line of credit amount | $ 1,500,000 | |
Line of credit interest rate | 3.25% | |
Line of credit description | The revolving credit line is collateralized by the Company's accounts receivable and inventory. The revolving credit line 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. | |
[1] | The letters of credit expire at various times in the fiscal years ending February 28, 2021 and 2022. |