Financial Analysis

NOTE 10: COMMITMENTS AND CONTINGENCIES The Company did not have any material commitments or contingencies as of May 31, 2026. The Company is subject, from time to time, to claims by third parties under various legal disputes. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Companys liquidity, financial condition, and cash flows. As of May 31, 2026, the Company did not have any pending legal actions. …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

Recent Accounting Pronouncements Not Yet Adopted - In November 2024, the FASB issued ASU 2024-03 Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which is intended to provide more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation and amortization) included in certain expense captions presented on the consolidated statement of income. The guidance in this ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements and related disclosures. In March 2025, the FASB issued ASU 2025-05 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which clarifies the measurement of expected credit losses for accounts receivable and contract assets arising from revenue transactions within the scope of Topic 606. The amendments require entities to measure expected credit losses for these financial assets using a methodology consistent with the current expected credit loss model while clarifying the interaction between the guidance in Topic 326 and Topic 606. The guidance in this ASU is effective for fiscal years beginning a …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

NOTE 3: REVENUE RECOGNITION The Companys sales revenue is derived primarily from short term contracts with customers, which are generally 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 Companys revenue. Sales revenue is recognized when control of the Companys 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 Companys 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. The Company applies the practical expedient in paragraph ASC 606-10-50-14 and does not disclose information about remaining performance obligations that have origi …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

NOTE 9: SEGMENT DATA The Company operates in one segment. The chief operating decision maker, who is responsible for allocating resources and assessing performance, has been identified as the Chief Executive Officer (the CODM). The CODM assesses the financial performance of the Company and decides how to allocate resources based on Operating income. The following table presents the Companys segment data (rounded to the nearest thousand): Schedule of segment data Three Months Ended May 31, 2026 2025 Net Sales $ 5,661,000 $ 5,133,000 Direct Cost of Goods Sold Materials & Freight 1,887,000 1,872,000 Production Labor 111,000 76,000 Depreciation 34,000 50,000 Other 133,000 119,000 2,165,000 2,117,000 Service Department Salaries 146,000 138,000 Travel 51,000 37,000 Outside Installations - 11,000 Warranty Costs 35,000 98,000 Other 50,000 67,000 282,000 351,000 Total Cost of Goods & Service $ 2,447,000 $ 2,468,000 Gross Profit 3,214,000 2,665,000 Research & Product Development Salaries 458,000 474,000 Insurance 35,000 35,000 Depreciation 32,000 45,000 R & D Materials 39,000 66,000 Other 53,000 48,000 617,000 668,000 Marketing and Selling Salaries 500,000 437,000 Insurance 61,000 47,000 Commissions 227,000 152,000 Travel & Entertainment 29,000 29,000 Advertising / Trade Show 117,000 108,000 Depreciation 22,000 25,000 Other 69,000 60,000 1,025,000 858,000 General and Administrative Salaries 294,000 272,000 Insurance 56,000 45,000 Professional Fees 105,000 84,000 Cor …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

"NOTE 2: SIGNIFICANT ACCOUNTING POLICIES 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. At May 31, 2026, $ 6,626,383 of the Company's bank deposits exceeded the insured limit provided by the Federal Deposit Insurance Corporation. Consolidation - The accompanying unaudited condensed consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiary, Sono-Tek Industrial Park, LLC (SIP) in conformity with generally accepted accounting principles in the United States (GAAP). SIP operates as a real estate holding company for the Companys real estate operations. All intercompany accounts and transactions have been eliminated in consolidation. Fair Value of Financial Instruments - The Company applies Accounting Standards Codification (ASC) 820, Fair Value Measurement (ASC 820), which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Companys principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and min …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing