Medical:Our systems are used in the manufacturing process of PCBsthis industry to apply flux, which removes oxidation and prepares the PCB for the process of soldering components onto it.

Our ultrasonic spray fluxers reduce the amount of fluxing chemical needed, enhance the quality of the boards, and provide our customers with a better product at reduced costs of operations, when compared with conventional foam fluxers and pressure assisted fluxers.

We are recognized as a standard setter in the industry and our systems are incorporated by various original equipment manufacturers (OEM) in their manufacturing lines for the production of electronic printed circuit boards. Some examples of products that we market to the electronics industry include: SonoFlux 2000F, SelectaFlux, SonoFlux EZ and SonoFlux Servo.

Pursuant to an exclusive distribution agreement with EVS International Ltd (“EVS”) for the territories of the United States and Canada, we offer the EVS solder recovery system to our PCB customer base.

We also have a significant established customer base in the semiconductor industry. The semi-conductor industry utilizes our ultrasonic atomizing nozzles and robotic XYZ coating platforms for the application and deposition of photo-resist onto semiconductor wafers. Certain of our semi-conductor manufacturing industry customers engaged in the production of micro-electro-mechanical systems, “MEMS”, have proven the ability of our technology to apply micron thick coatings to these complex wafers.

2.       Advanced Energy Industry.

Manufacturers of solar cells and fuel cells share two major technical and business challenges: enhancing the energy efficiency of their products and manufacturing their products in a cost effective way. Extremely uniform, thin layer coatings are at the heart of the solution for these advanced energy systems’ challenges.

Our precision coating systems provide superior surface uniformity and density, which are directly related to enhanced energy efficiency, compared to conventional systems. Our systems also afford our energy industry clients with the capabilities of saving up to 80% of the expensive catalysts and nano-materials used in these manufacturing processes. Some examples of our products marketed to the advanced energy industry include: ExactaCoat FC & SC, Sonic Syringe, VersiCoat, and FlexiCoat FC & SC, and SonoFlow Fusion.

3.       Medical Device Industry.

Our ultrasonic coating technology is used by medical device manufacturers worldwide. The leading applications for this industry are coating of arterial stents and balloon catheters with precise and uniform micron layers of polymers and drugs; coating of various implantable devices with biomedical materials and coating of blood collection tubes with anti-coagulants. These applications are typically performed under strict regulatory supervision of governmental agencies in different countries, and the continuing demand for our systems from these customers is indicative of the high quality performance that our systems provide these customers. Some examples of our products marketed to the medical device industry include: MediCoat I; Medicoat II; Medicoat PSI; MedXT; MediCoat BCC and ExactaCoat MD.

4.       Glass Industry.

The manufacture of float glass occurs under extremely harsh conditions of elevated temperatures. Our ultrasonic coating technology provides this manufacturing process with the means to precisely and uniformly apply anti-stain, and other specialty chemical agents, on the hot glass. Our customers benefit from an improved quality product, enhanced productivity and significantly reduced expenditures on annual maintenance, often resulting in a return on investment of less than one year. Based on this equipment’s recent successful performance, our systems are now specified by many global glass manufacturers as their equipment of choice.

The equipment we offer to the glass industry is the WideTrack – wide area modular coating system.

5.       Advanced Textiles Industry.

The textiles industry is expanding the introduction of high performance value adding coatings onto fabrics, such as anti-microbial, anti-stain, flame retardant and moisture barriers. The current manufacturing process for applying these expensive coatings creates significant waste of material, energy and water. We are working with this industry to incorporate our ultrasonic technology, often in combination with unique pre and post treatments of the coating materials, to reduce the effective material and energy usage by as much as 90%.

6.       Food Safety and Food Coatings Industry.

The food industry is evolving in response to greater demands for reduction of food borne illnesses. We have successfully introduced an anti-microbial coating system for sliced packaged meats, and we are focusing efforts on those global food companies that will need this technology to meet the new demands. We have also introduced our systems to other segments of the food industry for the coating of flavors, ingredients and other additives of interest. Most of our food industry equipment is designed on the WideTrack platform.

Products

We have core technology and have developed and market the following products:

1.o

SonoFlux 2000F – spray fluxer product – designed for high volume operations with standard width lines requiring low maintenance using a variety of solder fluxes, including rosin flux. It is designed to be used by electronic circuit board manufacturers to apply solder flux to fixed width circuit boards. The primary customers for the SonoFlux 2000F are original equipment manufacturers that produce their own electronic circuit boards.Implanted medical devices such as:

2.▪

SonoFlux EZ- spray fluxer product - applies solder flux to electronic printed circuit boards that vary from two inches to up to 18 inches in width in a cost-effectiveStents and uniform manner. They are designed to be used by either OEMs or contract manufacturers of electronic circuit assemblies. This is an economically priced system which sells effectively to smaller manufacturers.balloons

3.▪

SonoFlux Servo – a higher end spray fluxer capable of providing flux to both wide areas of a circuit board as well as selective fluxing. We also sell a selective fluxing apparatus known as Selectaflux.Artificial joints

4.o

MediCoatBlood collection tubes

o

Diagnostic devices

o

Bandages/protective wraps

o

Lenses

o

Flat (“float”) glass used for windows in buildings and MediCoat II for stent coating – table-top and stand alone, fully-contained systems designed to apply thin layers of polymer and drug coatings to arterial stents with high precision. The system incorporates motion control of the stent during the coating process and produces coatings having excellent uniformity. The MediCoat systems use either the AccuMist or MicroMist nozzle systems, which are precision nozzle configurations used in applications where precise patterns and coatings are required. These products minimize waste of expensive drug polymer coatings and provide high uniformity of drug addition from stent to stent. MediCoat II is similar to the MediCoat, but it has higher throughput capabilities more suited for a production environment. We also have additional medical coating platforms to address developing market segments for drug coated balloons, catheters and other implantable devices.vehicles

5.o

WideTrack – Wide area modular coating system – designed to be used in applications that require efficient web-coating or wide area spraying capability. One module can cover substrates from six inches to 24 inches wide, depending on the application. Much greater widths can be achieved by linking modules together, and these systems have been applied in glass lines of up to 13 feet wide. A large number of systems have been sold over the past six years, and this application holds promise for the future due to cost and environmental savings demonstrated at customer sites. It uses non-clogging ultrasonic atomizing nozzles to produce a low velocity, highly controllable spray. The WideTrack System offers significant advantages over conventional pressure-spray methods in a broad range of applicationsTextiles: high performance value adding coatings such as non-woven fabrics, float glass, or odd-shaped industrial or consumer products. Since the ultrasonic spray can be easily controlled, it is possible to use fewer chemicalsanti-microbial, anti-stain, flame retardant and less water and energy in applying coatings to glass, textiles, food products and packaging materials than with traditional nozzles. This also results in reduced environmental impact due to less overspray.moisture barriers

6.o

Exactacoat/Flexicoat – We offerFood packaging and food safety: anti-microbial coatings

o

Food: coatings of flavors, ingredients and other additives

o

Fuel cells

o

Solar cells

o

Batteries

o

Research and development efforts at universities, research institutions and government agencies that are not part of already established Sono-Tek markets

o

A variety of other small industries using Sono-Tek coating technology, that have not yet matured into a line of robotic XYZdeveloped marketplace for our ultrasonic coating equipment for applications involving coatings for fuel cell membranes, solar energy panels and specialty lens products. This equipment is offered in bench-top configurations as our ExactaCoat product and standalone as our FlexiCoat product. These platforms position and move our nozzle systems in a precise three dimensional application pattern. These coaters are extremely efficient especially when combined with our patented ultrasonic syringe pump, and patented sonic syringe to agitate and suspend nano-particles, which are often used in many of our applications.machines

Our principal customers include original equipment manufacturers, distributors and end users of our products in the industries that we serve.

Other Product Offerings – EVS Solder Recovery System

Our products are sold primarily through select independent distributors and sales representatives around the world that are trained on our technologies and products. Our distributors are typically experts in their industries and recognize the significant value our technology provides their customers. We provide extensive training and on-site support with our direct sales force and application engineers, who also respond to leads generated by our web site and the trade shows in which we participate. To grow sales, we have strengthened our applications engineering team, expanding our presence in Singapore. We also expanded our worldwide process development laboratories with additional ultrasonic coating equipment. We sponsor various technical training and during fiscal 2019, our distribution network in Asia participated in a technical program on Sono-Tek ultrasonic coating solutions at our Guangzhou, China laboratory. Distributors that attended the program represented six countries in Asia, including two new organizations from Malaysia and Thailand.

 

We have an exclusive distribution relationship with EVSalso provide application consulting services enabling our customers to distribute EVS’s line of solder recovery systemsrely on our surface coating expertise and spare partsspecific customer process optimization. We offer these services both in our application process development laboratory and at our customers’ sites where we can assist in the United Statesdesign and Canada. EVS manufactures the EVS 10K and EVS 8K solder recovery systems which are used to reclaim solder from the dross which accumulates in the wave-solder equipmentdevelopment of circuit board manufacturers. The customer base for distribution of these systems is synergistic with our existing customer base for spray fluxer sales in the printed circuit board industry.

Manufacturingcustomized coating systems.

 

We purchase circuit board assembliesare a global business and sheet metal componentsour geographical sales mix can vary from year to year depending on the timing of orders from customers. In fiscal 2019, 65% of our sales were from outside suppliers. Thesethe U.S.

Our Strengths

Our core strengths and capabilities include:

Our Strategy

Our strategy is to further advance the use of ultrasonic coating technologies for the microscopic coating of surfaces in a broader array of applications which enable better outcomes for our customers’ products and processes. We believe product superiority is imperative and that it is attained through the extensive experience we have in the coatings industry, our proprietary manufacturing know-how and skills, and our unique work force we have built over the years.

We intend to leverage our innovative technologies, proprietary know-how, unique talent and experience, and global reach to:

To accomplish these objectives, we believe we must judiciously deploy our monetary and human capital, in order to expand our presence in our targeted markets and create a broader offering for our customers.

Availability of Raw Materials and Working Capital Practices

Historically, we have not been adversely impacted by the availability of raw materials are available from a wide rangeor components used in the manufacture of suppliers throughout the world.our products. All raw materials used in our products are readily available from many different domestic suppliers. We also purchase certain systemscircuit board assemblies and subsystems to supplement our in-house manufacturing. These items are integrated with our ultrasonic system technology to meet specific applications.sheet metal components from a wide range of suppliers throughout the world.

 

We carefully manage our inventory using lean manufacturing processes. We provide a limited warranty on all of our products coveringthat covers parts and labor for a period of one year from the date of sale.

We own an industrial park in Milton, New York. The park has 50,000 square feet of leasable area and we use more than half the space for manufacturing.

We have a business and quality control system that meets the qualifications of ISO 9001. We were ISO registered in September 1998 and we have been recertified annually since then.

Research and Development

 

We believe that our long-term growth and stability are linked tois dependent upon the development and releasecommercialization of products that provide solutionsultrasonic coating technologies to customer needssolve customers’ high value problems across a wide spectrum of applications in various industries, while also advancing the utility of our core technology. We expended approximately $1,268,000During fiscal 2019 and $1,016,000 for Fiscal Years 2016fiscal 2018, we spent $1,325,000 and 2015,$1,280,000, respectively, on research and development activities related to new engineeringproducts and product development.services and the ongoing improvement of existing products and services. As a percentage of sales, research and development expenses were 11.4% and 11.6% in fiscal 2019 and 2018, respectively.

 

Patents and LicensesIntellectual Property

 

Our business is based in part on the technology covered by our United StatesU.S. patents. We also rely on unpatented know-how in the design and production of our nozzle systems.systems, subsystems and complete solutions. We have executed non-disclosure and non-compete agreements with all of our employees to safeguard our intellectual property. We execute reciprocal non-disclosure agreements with our key customers to safeguard any jointly developed intellectual property.

 

In recent years we have made significant progress on building our intellectual property portfolio. We have a patent covering a new design for our entire line of nozzle systems. During the fiscal year ended February 29, 2016, we were granted three new patents relating to:

·

Sono-Tek’s flagship ECHO Multiband Ultrasonic Generator.

·

A continuation in part for the unique Sonic Syringe.

·

An ultrasonic spray process for applying coatings directly onto food products.

Marketing and Distribution

Our products are marketed and distributed through independent distributors, sales representatives, or sales representative companies, OEMs, and through an in-house direct sales force. Many of our sales leads are generated from our Internet web site and from attendance at major industry trade shows. In addition, we have retained an external marketing firm to expand awareness of our products in our targeted industries, and to make use of the Internet with our web page and other techniques.

Competition

 

We operate in competitive markets in many of our industry segments. We compete against alternative coating technologies, as well as global and regional manufacturers of nozzles and other products based on price, quality, product features, application engineering and follow up service. We maintain our competitive position by providing highly effective solutions that meet our customers’ requirements and needs. In several emerging markets, we encounter less competition compared to more established markets based on the uniqueness of our ultrasonic technology in these applications.

Significant CustomersInformation Regarding Sales Outside the United States

 

We have significant geographicDuring fiscal 2019 and market diversification. Our largest customerfiscal 2018, sales to customers outside the U.S. accounted for approximately 7%$7,559,000, or 65% of our sales for the Fiscal Year ended February 29, 2016.total revenue, and $6,193,000, or 56% of total revenue, respectively.

 

Foreign and Export Sales

During Fiscal Years 2016 and 2015, sales to foreign customers accounted for approximately $6,577,000 and $5,018,000, or 56% and 47% respectively, of total revenues.

Employees

 

As of February 29, 2016,28, 2019, we employed 5861 full-time employees and one7 part-time employee.employees. We believe that relations with our employees are generally good.

 

Available Information

 

We have filedare subject to the informational requirements of the Securities Exchange Act of 1934, as amended. Therefore, we file reports, proxy statements and other information with the Securities and Exchange Commission. Copies of ourCommission (“SEC”). The SEC maintains a website at www.sec.gov that contains the reports, proxy statements and other information for registrants that file electronically, as we do. Additionally, these reports may be inspectedread and copied at the public reference facilities maintained byPublic Reference Room of the SEC at SEC, Public Reference Section, 100 F Street, N.E., Washington, DC 20549. The public may obtain information on the operation ofInformation regarding the SEC’s public reference facilitiesPublic Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains

We maintain a website that contains reports, proxy statements and other information regarding us. The address of the SEC website isat http://www.sec.gov. We will alsowww.sono-tek.com. On our site, we provide copies of our Forms 8-K, 10-K, 10-Q, Proxy and Annual Report at no charge available through our website at http://www.sono-tek.com as soon as reasonably practicable after filing electronically such material with the SEC. Copies are also available, without charge, from Sono-Tek Corporation, 2012 Route 9W, Milton, NY 12547.

 

ITEM 1A

RISK FACTORS – Not Required for Smaller Reporting Companies.

 

ITEM 1B

UNRESOLVED STAFF COMMENTS - None.

 

ITEM 22

DESCRIPTION OF PROPERTIES

 

We own an industrial park located in Milton, New York.York that is subject to a ten-year mortgage, of which five years remain. The industrial park consists of approximately 50,000 square feet of office and warehouse space. Approximately 21,000 square feet of the park is leased or available for lease at any given time. The property is subject to a ten year mortgage, of which eight years remain.

Our offices, product development, manufacturing and assembly facilities are located in the industrial park. We presently utilize a 13,000 square foot building and 16,00033,000 square feet or 66% of additional office and storage space in an adjacent building. Our current manufacturing areas consist of (i) a machine shop, (ii) a nozzle assembly/test area, (iii) an electronics assembly area, (iv) an areathe park for assembling and testing final products and systems and (v) a receiving and shipping area.our operations. We believe our facilities will be adequate for the foreseeable future.future and the ownership of the industrial park provides us opportunity to expand as we grow.

 

We presently maintain a sales and service office in Hong Kong and an equipment demonstration room in Shenzhen, China. The office and demonstration room are located onApproximately 17,000 square feet of the premises of one of our product distributors.park is leased or available for lease to unrelated third parties at any given time.

ITEM 33

LEGAL PROCEEDINGS – None

 

ITEM 44

MINE SAFETY DISCLOSURES – Not Applicable

 

PART II

 

ITEM 55

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Our common stock currently trades on the OTCQX U.S. Premier tier of the OTC Marketsexchange under the ticker symbol “SOTK”. The following table sets forth the range of high and low closing bid quotations for our Common Stock for the periods indicated.

		Years Ended
		February 29, 2016								February 28, 2015
		HIGH				LOW				HIGH				LOW
First Quarter		$	1.16			$	1.01			$	1.20			$	1.04
Second Quarter			1.25				1.03				1.29				1.06
Third Quarter			1.19				1.08				1.30				1.05
Fourth Quarter			1.15				1.02				1.24				1.05

The above quotations are believed to represent inter-dealer quotations without retail markups, markdowns or commissions and may not represent actual transactions.

 

As of February 29, 2016,28, 2019, there were 165119 shareholders of record of our Common Stock, according to our stock transfer agent. We estimate that we have between 1,000 and 1,400 beneficial shareholders of our common stock. The difference between the shareholders of record and the total shareholders is due to stock being held in street names at our transfer agent.Stock.

 

We have not paid any cash dividends on our Common Stock since inception. We intend to retain earnings, if any, for use in our business and for other corporate purposes.

 

ITEM 66

SELECTED FINANCIAL DATA – Not Required for Smaller Reporting Companies.

 

ITEM 77

MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

We discuss expectations regarding our future performance, such as our business outlook, in our annual and quarterly reports, press releases, and other written and oral statements. These “forward-looking statements” are based on currently available competitive, financial and economic data and our operating plans. They are inherently uncertain, and investors must recognize that events could turn out to be significantly different from our expectations.These factors include, among other considerations, general economic and business conditions; political, regulatory, competitive, technological and technologicaltrade barrier developments affecting our operations or the demand for our products; timely development and market acceptance of new products; adequacy of financing; capacity additions,additions; the ability to enforce patentspatents; completion of backlog during the current fiscal year and the ability to achieve increased sales volume at projected levels and continued profitability.

 

We undertake no obligation to update any forward-looking statement.

 

Overview

Founded in 1975, Sono-Tek Corporation designs and manufactures ultrasonic coating systems that apply precise, thin film coatings to a multitude of products for the microelectronics/electronics, alternative energy, medical and industrial markets, including specialized glass applications in construction and automotive. We also sell our products to emerging research and development and other markets. We have developedinvested significant resources to enhance our market diversity by leveraging our core ultrasonic coating technology. As a uniqueresult, we have increased our portfolio of products, the industries we serve and proprietary series ofthe countries in which we sell our products.

Our ultrasonic atomizing nozzles andnozzle systems which are being used in an increasing variety of electronics, advanced energy (solar and fuel cells), medical device, glass, textiles and food applications. These nozzles are electrically driven and create a fine, uniform, low velocity spray of atomized liquid particles, in contrast to common pressure nozzles. These characteristics create a series of commercial applicationsuse high frequency, ultrasonic vibrations that benefit from the precise, uniform, thin coatingsatomize liquids into minute drops that can be achieved. When combined with significantapplied to surfaces at low velocity providing thin layers of protective materials over a surface such as glass or metals. Our solutions are environmentally-friendly, efficient and highly reliable. They enable dramatic reductions in liquid wasteoverspray, savings in raw material, water and energy usage and provide improved process repeatability, transfer efficiency, high uniformity and reduced emissions.

We believe product superiority is imperative and that it is attained through the extensive experience we have in the coatings industry, our proprietary manufacturing know-how and skills and our unique work force we have built over the years. Our growth strategy is to leverage our innovative technologies, proprietary know-how, unique talent and experience, and global reach to further advance the use of ultrasonic coating technologies for the microscopic coating of surfaces in a broader array of applications that enable better outcomes for our customers’ products and processes.

We are a global business with approximately 65% of our sales generated from outside the United States and Canada. Our direct sales team and our distributor and sales representative network is located in North America, Latin America, Europe and Asia. Over the last few years, we have expanded our sales capabilities by increasing the size of our direct sales force, adding new distributors and sales representatives (”reps”). In addition, we have established testing labs at our distribution partner sites in China, Taiwan, Germany, Turkey, Korea and Japan, while also expanding our first testing lab that is co-located with our manufacturing facilities in New York. These labs provide significant value for demonstrating to prospective customers the capabilities of our equipment and enabling us to develop custom solutions to meet their needs.

Over the last decade, we have shifted our business from primarily selling our ultrasonic nozzles and components to a more complex business providing complete machine solutions and higher value subsystems to original equipment manufacturers (“OEMs”). The range for our average unit selling price has broadened as a result from less overspray than $8,000 for a nozzle and generator package to a range of $50 thousand per unit to over $240 thousand per unit. As a result of this transition, we have broadened our addressable market and we believe that we can be achieved with ordinary pressure nozzle systems, there is lower environmental impactgrow sales on a larger scale and lower energy use.we expect that we will experience wide variations in both order flow and shipments from quarter to quarter.

 

Highlights

Highlights for fiscal 2019 include:

•

Cash and cash equivalents and short-term investments at February 28, 2019 were $5,510,000 compared with $6,422,000 as of February 28, 2019, a decrease of $912,000. Capital expenditures in fiscal 2019 were $547,000, up from $189,000 in the prior fiscal year, primarily as a result of the $337,000 purchase of CNC machine tools for expanding production capacity and capabilities. The equipment provides the needed precision machining required for our latest generation of proprietary ultrasonic nozzles. Cash used in operating activities was related to higher receivables and inventories, reflecting the growth in demand.

Market and Geographic Diversity

 

During the past five years weWe have invested significant time, monies and effortsresources to enhance our market diversity. Based onLeveraging our core ultrasonic coating technology, we increasedexpanded our portfolio of products, the industries we serve, and the countries in which we sell our products.

 

Today, we serve six majorfive industries: microelectronics/electronics, advancedmedical, alternative energy, (solaremerging research and fuel cells), medical device, glass, textilesdevelopment and food.other, as well as the industrial markets.

 

In recent years,We are a substantial portion of our sales originated outside the United States, and we are geographically presentdiverse company with a presence directly and through distributors and trade representatives, in Norththe United States and Canada , EMEA (Europe, Middle East and Africa), APAC (Asia Pacific) and Latin America Europe(including Mexico). In fiscal 2019, approximately 65% of sales originated outside of the United States and Asia. TheCanada. We established an infrastructure upon which this diversified market approach is based, includesto drive our geographic diversity including a newly equipped, application process development laboratory in APAC, a strengthened sales organization withof application engineers, anexpanded talent on our engineering team, with additional talent and the latest, most sophisticated design software tools, as well as an expanded, highly trained installation and service organization.

 

TheWe believe that the new products which we have introduced, the new markets that we have penetrated, and the regions in which we now sell our products, are a strong foundation for our future sales growth and enhanced profitability.

Liquidity and Capital Resources

Working Capital -Our working capital increased $343,000 from a working capital of $5,512,000 at February 28, 2015 to $5,855,000 at February 29, 2016. The increase in working capital is due to: net income of $548,000, offset by cash expenditures of $17,000 for patent and other asset costs, $465,000 for the purchase of equipment and furnishings and $158,000 for the repayment of notes payable. In addition, we incurred non-cash expenses for depreciation and amortization expense of $477,000, stock based compensation expense of $43,000 and a decrease in our current deferred tax asset of $86,000. The Company’s current ratio was 4.5 to 1 at February 29, 2016 as compared to 3.6 to 1 at February 28, 2015.

At February 29, 2016, our working capital includes $2,388,000 of cash and $1,696,000 of marketable securities as compared to $2,563,000 of cash and $1,652,000 of marketable securities at February 28, 2015.

Stockholders’ Equity - Stockholders' equity increased $524,000 from $7,144,000 at February 28, 2015 to $7,668,000 at February 29, 2016. The increase in stockholders’ equity is the result of the current year’s net income of $548,000, stock based compensation of $43,000 and stock option proceeds of $3,000 offset by the current year’s comprehensive loss valuation of $70,000.

Operating Activities –Our operating activities provided $629,000 of cash for the year ended February 29, 2016 as compared to providing $924,000 for the year ended February 28, 2015. For the year ended February 29, 2016, we had net income of $548,000, accounts receivable increased $188,000, inventories decreased $234,000, prepaid expenses and other assets increased $15,000, accounts payable and accrued expenses decreased $56,000, customer deposits decreased $261,000 and income taxes payable decreased $142,000. In addition, we incurred non-cash expenses of $477,000 for depreciation and amortization, $43,000 for stock based compensation expense, $3,000 for our accounts receivable reserve, an increase of $107,000 in our deferred tax expense and a decrease in our inventory reserve of $120,000.

Investing Activities -For the year ended February 29, 2016, we used $648,000 of cash in our investing activities as compared to using $1,401,000 for the year ended February 28, 2015. In 2016 and 2015, we used $465,000 and $357,000, respectively, for the purchase or manufacture of equipment, furnishings and leasehold improvements. In 2016 and 2015, we used $17,000 and $22,000, respectively, for patent application and other asset costs. In 2016 and 2015, we used $165,000 and $1,022,000, respectively, for the purchase of marketable securities .

Financing Activities –For the year ended February 29, 2016, we used $155,000 of cash in our financing activities as compared to using $193,000 for the year ended February 28, 2015. In 2016 and 2015, we used $158,000 and $193,000, respectively, for the repayments of notes payable. In 2016 we received $3,000 for the exercise of stock options.

Net Decrease in Cash –For the year ended February 29, 2016, our cash balance decreased by $174,000as compared to a decrease of $669,000 for the year ended February 28, 2015. During the year ended February 29, 2016, our operations provided $629,000 of cash, we used $648,000 in our investing activities and used $155,000 in our financing activities.

Bank Credit Facilities:

We currently have a revolving credit line of $750,000 and a $250,000 equipment purchase facility, both of which are with a bank. The revolving credit line 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. As of February 29, 2016, there were no outstanding borrowings under the line of credit.

We had outstanding borrowings under a note payable of $1,320,000 at February 29, 2016. The note is payable over eight years and accrues interest at 4.15%. The note payable is secured by a mortgage on our land and buildings.

 

Results of Operations

 

Ultrasonic Spraying – Sales:

		Fiscal Year Ended
		February 28,								Change
		2019				2018				$				%
Net Sales		$	11,610,000			$	11,008,000			$	602,000				5%
Cost of Goods Sold			6,361,000				5,712,000				649,000				11%
Gross Profit		$	5,249,000			$	5,296,000			$	(47,000	)			(1%	)
Gross Profit %			45.2%				48.1%

The combination of strong market conditions in alternative energy and medical markets, the introduction of our new ultrasonic coating solutions for the electronics/microelectronics industry and the continued expansion of our global sales effort, drove sales up 5% to $11,610,000 in fiscal 2019 compared with the prior fiscal year. Increased sales from the Asian Pacific region, primarily driven by shipments to China for the fuel cell and medical markets, partially offset somewhat softer sales to the U.S. medical market. The softness in the U.S. medical market was primarily due to timing of orders from a stent manufacturer that purchased a large number of systems in fiscal 2018.

Product Sales:

		Twelve Months Ended
		February 28,														Change
		2019				% of total			2018				% of total			$				%
Fluxing Systems		$	1,176,000			10%			$	1,196,000			11%			$	(20,000	)		(2%	)
Integrated Coating Systems			1,449,000			13%				2,398,000			22%				(949,000	)		(40%	)
Multi-Axis Coating Systems			4,906,000			42%				4,175,000			38%				731,000			18%
OEM Systems			1,891,000			16%				1,034,000			9%				857,000			83%
Other			2,188,000			19%				2,205,000			20%				(17,000	)		(1%	)
TOTAL		$	11,610,000						$	11,008,000						$	602,000			5%

Sales growth was driven by demand for more complex, highly-engineered and Gross Profit:higher value multi-axis coating machines primarily for the Alternative Energy and Medical markets in fiscal 2019. This equipment’s average selling price can range from $100 thousand to over $240 thousand per unit and is typically ordered in one-or two-unit volumes. Our ability to provide subsystems and components including our custom designed Align system, which OEMs integrate into their equipment, drove the increase in sales for the OEM systems product category. Growth in these product categories more than offset the decline in integrated coating systems, which primarily are for more mature applications in the Medical market and can be highly variable in order volume.

Market Sales:

		Twelve Months Ended
		February 29,				February 28,				Increase (Decrease)
		2016				2015				$				%
Net Sales		$	11,739,000			$	10,758,000			$	981,000				9%
Cost of Goods Sold			6,196,000				5,634,000				562,000				10%
Gross Profit		$	5,543,000			$	5,124,000			$	419,000				8%
Gross Profit %			47%				48%

		Twelve Months Ended
		February 28,														Change
		2019				% of total			2018				% of total			$				%
Electronics/Microelectronics		$	4,328,000			37%			$	4,088,000			37%			$	240,000			6%
Medical			3,173,000			28%				3,073,000			28%				100,000			3%
Alternative Energy			2,111,000			18%				1,808,000			17%				303,000			17%
Emerging R&D and Other			1,295,000			11%				1,149,000			10%				146,000			13%
Industrial			703,000			6%				890,000			8%				(187,000	)		(21%	)
TOTAL		$	11,610,000						$	11,008,000						$	602,000			5%

 

ForUse of our application process development laboratory by customers reached record levels in FY2019, which we believe demonstrates the year ended February 29, 2016,success of our sales increasedstrategy to provide excellent application engineering expertise as well as paid coating services to prospects and customers to validate the capabilities of our coating technologies for their uses. These service-based customers are guided by $981,000our applications engineering team, to $11,739,000 as compareddevelop successful coating processes for their unique needs. Upon achieving coating results that meet the application requirements, the customer's next step is typically to $10,758,000 forpurchase the year ended February 28, 2015, an increasenewly defined coating solution. We believe a high percentage of 9%. Duringthe year ended February 29, 2016, we experienced an increaseprospects and customers that use our lab services to develop their products results in sales of our widetrack units, fluxersultrasonic coating solutions.

As expected, the Alternative Energy market continued to grow as applications and related spares, servo unitsnew requirements for fuel cell manufacturing equipment increased. Asia, specifically China, has been driving demand for fuel cells because of the investments being made by the Chinese government. Our equipment is used to produce highly durable, uniform, pinhole-free coatings of carbon-based catalyst inks onto fuel cell proton exchange membranes, reducing waste and spray dryer units. We did, however, seeimproving functionality. Over the long term, demand from this market is poised for substantial growth as the industry continues to scale up from R&D prototype production to low rate production.

The industrial market showed a decreasesmall decline in sales due to reduced orders in the float glass industry, which is typical due to variations in demand and applications from period to period.

Geographic Sales:

		Twelve Months Ended
		February 28,								Change
		2019				2018				$				%
U.S. & Canada		$	4,050,000			$	4,815,000			$	(765,000	)			(16%	)
Asia Pacific (APAC)			3,659,000				2,464,000				1,195,000				48%
Europe, Middle East, Asia (EMEA)			2,729,000				2,617,000				112,000				4%
Latin America			1,172,000				1,112,000				60,000				5%
TOTAL		$	11,610,000			$	11,008,000			$	602,000				5%

In fiscal 2019, approximately 65% of oursales originated outside of the United States and Canada. This compares with 56% in fiscal 2018. Sales to APAC grew substantially, primarily from China in the Alternative Energy and Medical markets, which offset slower U.S. sales due to the timing of demand in the Medical market from a stent manufacturer for ultrasonic coating units, XYZ units and nozzles and generators.equipment.

 

Gross Profit:

Our grossGross profit increased $419,000,decreased $47,000, or 1%, to $5,543,000$5,249,000 for fiscal 2019 from $5,296,000 in the year ended February 29, 2016 from $5,124,000 for the year ended February 28, 2015. Our grossprior fiscal year. Gross profit margin percentage was 47%decreased by 290 basis points to 45.2% for the year ended February 29, 2016 compared to 48% for the year ended February 28, 2015.fiscal 2019. The decrease reflects the Company’s strategy for establishing a leading market position in the current year’s gross profit marginfuel cell market in China, which is dueexpected to decreases in salesbe a large addressable market. The Company believes that as the market more fully develops, that costs associated with the manufacturing of our higher gross margin stent coaters, XYZ units and nozzles and generators.

Export Sales:

		Twelve Months Ended
		February 29,				February 28,				Change
		2016				2015				$				%
Western Europe		$	2,789,000			$	2,069,000			$	720,000				35%
Far East			2,981,000				2,147,000				834,000				39%
Other			807,000				802,000				5,000				—
Total Export Sales		$	6,577,000			$	5,018,000			$	1,559,000				31%
Percentage of Total Sales			56%				47%

Forequipment at production-level scale will be reduced, enabling margins to expand. Margin compression also reflects the year ended February 29, 2016, saleschange in product mix to customers located in European countries increased by $720,000 or 35%, sales to customers located in Asian countries increased by $834,000 or 39% and sales to other non-based US customers were steady.more complex ultrasonic coating solutions that require more outsourced content.

 

Operating Expenses:

		Twelve Months Ended
		February 29,				February 28,				Change
		2016				2015				$				%
Research and product development		$	1,268,000			$	1,016,000			$	252,000				25%
Marketing and selling		$	2,371,000			$	2,153,000			$	218,000				10%
General and administrative		$	1,100,000			$	1,033,000			$	67,000				6%

		Twelve Months Ended
		February 28,								Change
		2019				2018				$				%
Research and product development		$	1,325,000			$	1,280,000			$	45,000				4%
Marketing and selling		$	2,686,000			$	2,516,000			$	170,000				7%
General and administrative		$	1,155,000			$	1,118,000			$	37,000				3%
Total Operating Expenses		$	5,166,000			$	4,914,000			$	252,000				5%

Research and Product Development:

Research and product development costs increased $252,000$45,000 to $1,268,000$1,325,000 for fiscal 2019 as compared with $1,280,000 for the year ended February 29, 2016 as compared to $1,016,000 for the year ended February 28, 2015. For the year ended February 29, 2016 we experienced increases in engineering salaries, engineering materials and depreciation.

During the year ended February 29, 2016, we expended approximately $787,000 for engineering personnel as compared to $589,000 for the year ended February 28, 2015. The increase in salaries is a result of the start of our New Product Development team, which has recently completed two new products; the VersiCoat and SonoBraze. During the year ended February 29, 2016, we expended approximately $187,000 for additionalprior fiscal year. Higher research materials and product development as comparedcosts for fiscal 2019 were due to $172,000 for the year ended February 28, 2015. During the year ended February 29, 2016 we incurred approximately $133,000 forincreased engineering salaries and health insurance premiums. These increases were partially offset by decreased depreciation expense as compared to $120,000 for the year ended February 28, 2015.expense.

 

Marketing and Selling:

Marketing and selling costs increased $218,000$170,000 to $2,371,000$2,686,000 for fiscal 2019 as compared with $2,516,000 for the year ended February 29, 2016 as comparedprior fiscal year. Higher marketing and selling costs for fiscal 2019 were due to $2,153,000 forincreased health insurance premiums, salaries related to the year ended February 28, 2015. Foraddition of new technical sales personnel, travel expenses related to train the year ended February 29, 2016, we experiencednew personnel and international distributor training. These increases were partially offset by decreases in international commission expense advertising and trade show expenses and sales salaries. In addition we experienced a decrease in travel and entertainment expense.

 

During the year ended February 29, 2016,fiscal 2019, we expended approximately $590,000$457,000 for commissions as compared to $502,000with $530,000 for the prior fiscal year, ended February 28, 2015,a decrease of $73,000. The decrease in commissions is due to an increase of $88,000.equipment sales that did not have external distributor involvement and the associated commission expense.

 

During the year ended February 29, 2016,fiscal 2019, we expended approximately $228,000$247,000 for advertising and trade show expense compared to $169,000with $280,000 for the prior fiscal year, ended February 28, 2015, an increase of $59,000.

During the year ended February 29, 2016, salary expense was $1,119,000 as compared to $1,061,000 for the year ended February 28, 2015, an increase of $58,000.

During the year ended February 29, 2016, we expended approximately $113,000 for travel and entertainment as compared to $157,000 for the year ended February 28, 2015, a decrease of $44,000.$33,000.

General and Administrative:

General and administrative costs increased $67,000$37,000 to $1,100,000$1,155,000 for fiscal 2019 as compared with $1,118,000, for the year ended February 29, 2016 as comparedprior fiscal year. Higher general and administrative costs for fiscal 2019 were due to $1,033,000, forincreased health insurance premiums, legal and professional fees, bank fees and fees related to an investor relations firm. Fees related to the year ended February 28, 2015. Forinvestor relations firm began in the year ended February 28, 2016, we experienced increases in insurance expense, depreciation expense, and corporate and other miscellaneous expenses.second quarter of fiscal 2019. These increases were partially offset by a decreasedecreases in bad debtsalary expense and stock based compensation expense.

 

Operating Income – Ultrasonic Spraying:Income:

OurOperating income decreased to $82,000 in fiscal 2019 compared with $382,000 for the prior fiscal year. We continued to invest in new product development and increased our sales and marketing efforts in fiscal 2019 as we address market expansion opportunities. The decrease in operating income for the year ended February 29, 2016 was $804,000 as compared to $922,000 for the year ended February 28, 2015,is a decreaseresult of $118,000 or 13%. During the current year, our gross profit increaseddecreasing by $419,000 when compared to the prior year. The increase in gross profit was offset by$48,000 combined with an increase in Research and Development costs, Marketing and Sellingoperating expenses and General and Administrativeof $252,000, resulting in a net decrease of $300,000 in operating income. However, as a percentage of net sales, operating expenses which collectively increased by $537,000 whenwere down 20 basis points to 44.5% in fiscal 2019 compared with 44.7% in fiscal 2018.

Interest Expense:

Interest expense decreased to $40,000 for fiscal 2019 as compared with $46,000 for the prior fiscal year.

 

Rental Real Estate Operations:Interest and Dividend Income:

For the year ended February 29, 2016, our real estate operations generated $95,000 in rentalInterest and dividend income from unrelated third partiesincreased to $137,000 for fiscal 2019 as compared to $92,000 for the year ended February 28, 2015. Our real estate operations incurred $108,000 in operating expenses compared to $114,000with $91,000 for the prior year period, real estate taxes of $51,000 compared to $49,000 for the prior year period and $58,000 in interest expense compared to $63,000 for the prior year period. For the year ended February 29, 2016, our real estate operations reported a net loss of $122,000 compared to a net loss of $134,000 for the prior year period. The reported losses exclude any inter-company rent.

A summary of our real estate operations is as follows:

		Twelve Months Ended
		February 29,				February 28,				Change
		2016				2015				$				%
Statements of Operations
Rental Income		$	95,000			$	92,000			$	3,000				3%
Real Estate Taxes			51,000				49,000				2,000				4%
Interest Expense			58,000				63,000				(5,000	)			(8)%
Operating Expenses			108,000				114,000				(6,000	)			(5)%
Net Loss From Real Estate Operations		$	(122,000	)		$	(134,000	)		$	(12,000	)			(9)%
Per Square Foot Cost Based on 50,000 sq. feet		$	2.44			$	2.68			($	0.24	)			(9)%

		February 29,				February 28,
		2016				2015
Statements of Cash Flows
Net Loss		$	(122,000	)		$	(134,000	)
Adjustment to reconcile net loss
to net cash used in real estate operations:
Depreciation			73,000				69,000
Capital Improvements			—				(72,000	)
Repayment of long term debt			(138,000	)			(132,000	)
Net Cash (Used) in Real Estate Operations		$	(187,000	)		$	(269,000	)
Cash Used Per Square Foot Based on 50,000 sq. feet		$	3.74			$	5.38

For the years ended February 29, 2016 and February 28, 2015, net cash outflows related to the industrial park were $187,000 and $269,000, respectively. These cash outflows are net of rental income and depreciation expense and include the principal payments on the industrial park’s mortgage and the costs of capital improvements. Prior to purchasing the industrial park in December 2010, our annual rental expense was approximately $136,000 or $7.14 per square foot. If we are able to lease additional vacant space, it will provide positive cash flow for the industrial park when compared to our prior rental payments of $136,000.

Our rental income was approximately $6.00 per square foot, based on 15,600 square feet leased to third parties for the years ended February 29, 2016 and February 28, 2015.

Interest Income, Interest Expense and Income Taxes:

Interest income increased to $55,000 for the year ended February 29, 2016 as compared to $33,000 for the year ended February 28, 2015.fiscal year. Our present investment policy is to invest excess cash in highly liquid, mutual funds. Ourlower risk US Treasury securities. At February 28, 2019, the majority of our holdings are rated at or above investment grade.

Other Income:

Included in other income is the net revenue related to the rental of the Company’s real estate. For fiscal 2019, the Company’s rental revenue was $84,000, expenses were $61,000 and the net profit was $23,000.

 

Interest expense decreased to $58,000 forFor fiscal 2018, the year ended February 29, 2016 as compared to $65,000 forCompany’s rental revenue was $78,000, expenses were $59,000 and the year ended February 28, 2015.net profit was $19,000.

 

Income Tax Expense:

We recorded income tax expense of $195,000$20,000 for fiscal 2019 compared with $92,000 for the year ended February 29, 2016 as compared to $219,000 for the year ended February 28, 2015.prior fiscal year. The details of the current year’s tax expense isare explained in Note 1211 in our financial statements.

 

Net Income:

For the year ended February 29, 2016, we had netNet income of $548,000 asdecreased to $162,000 in fiscal 2019 compared to $606,000with $368,000 for the year ended February 28, 2015.prior fiscal year. The decrease reflects $300,000 in ourlower operating profit and a $37,000 net income is due to anloss on marketable securities ($63,000 increase in operating expenses which wasrealized gain offset by an$100,000 unrealized loss), partially offset by $52,000 net increase in gross profit.interest and dividend income and interest expense, $7,000 increase in other income and lower income tax expense of $72,000.

 

For the years ended February 29, 2016fiscal 2019 and February 28, 2015,2018, we do not believe that our sales revenue or net income has been adversely affected by the impact of inflation or changing prices.

 

Other Comprehensive LossFiscal Year 2020 Outlook

 

Net unrealized loss on marketable securities:

AsWe expect that all of our record backlog of $3,038,000 as of February 28, 2019 to ship during the fiscal year ending February 29, 2016, certain2020, supporting our expectation that current fiscal year sales will grow in the range of 15% to 20%. Furthermore, we expect that this increased sales volume will expand margins and drive stronger earnings. Part of our anticipated growth is due to a $1,650,000 order for a newly introduced Robotic Coating Platform. This new platform will allow us to pursue additional prospects for six axis robotic coating which is an opportunity for ongoing growth.

Liquidity and Capital Resources

Working Capital – Our working capital decreased $136,000 to $6,424,000 at February 28, 2019 from $6,560,000 at February 28, 2018. The decrease in working capital was mostly the result of purchases of equipment and repayment of long-term debt partially offset by the current period's net income and noncash charges.

The Company aggregates cash and cash equivalents and marketable securities in managing its balance sheet and liquidity. For purposes of the following analysis, the total is referred to as “Cash.” At February 28, 2019 and 2018, our working capital included:

		February 28, 2019				February 28, 2018				Cash Decrease
Cash and cash equivalents		$	3,144,000			$	2,016,000			$	1,128,000
Marketable securities			2,366,000				4,406,000				(2,040,000	)
Total		$	5,510,000			$	6,422,000			($	912,000	)

The following table summarizes the accounts and the major reasons for the $912,000 decrease in “Cash”:

		Impact on Cash				Reason
Accounts receivable increase		$	(623,000	)		58% of current quarters shipments occurred in February 2019.
Inventories increase			(370,000	)		Required to support backlog.
Prepaid expenses			(256,000	)		Deposits on purchases
Equipment purchases			(547,000	)		Equipment upgrade for productivity.
Customer deposits increase			805,000			Received for new orders.
Other - net			79,000			Timing of disbursements.
Net decrease in cash		$	(912,000	)

Stockholders’ Equity - Stockholders' equity increased $192,000 from $8,392,000 at February 28, 2018 to $8,584,000 at February 28, 2019. The increase was a result of the current year’s net income of $162,000 and stock-based compensation expense of $30,000.

Operating Activities – We used $109,000 of cash in our operating activities in fiscal 2019 compared with generating $1,802,000 in fiscal 2018. The reduction in cash generated by operating activities was mostly the result of lower net income and increased inventories, prepaid expenses and accounts receivable as well as a reduction in accounts payable and accrued expenses. These uses of cash were partially offset by an increase in customer deposits.

Investing Activities – In fiscal 2019, cash generated by investing activities was $1,393,000 compared with using $2,194,000 of cash in fiscal 2018. Capital spending in fiscal 2019 was $547,000 for the purchase or manufacture of equipment, furnishings and leasehold improvements, which included $337,000 of cash to upgrade our CNC machinery. This compares with $189,000 for the purchase of equipment and furnishings in fiscal 2018.

In fiscal 2019 sales of our marketable securities wereprovided $1,940,000 of cash compared with using $2,004,000 for purchases in an unrealized loss position. Unrealized losses are principally due to changesfiscal 2018.

Financing Activities –In fiscal years 2019 and 2018, we used $156,000 and $150,000 in fair value of the investments held as available-for-sale. Because we have the ability and intent to hold the securities until maturity, orcash, respectively, for the foreseeable futureprincipal payments on our mortgage.

Net Increase (Decrease) in Cash and Cash Equivalents –In fiscal 2019 our cash balance increased by $1,128,000 as classified as available-for-sale,compared with a decrease of $541,000 in fiscal 2018. During fiscal 2019, we do not deemused $109,000 of cash in our operating activities. In addition, we received $1,940,000 from the decline tosale of marketable securities, we used $548,000 for the purchase or manufacture of equipment, furnishings and leasehold improvements and used $156,000 for the repayment of our note payable.

Bank Credit Facilities:

We currently have a revolving credit line of $1,500,000 and a $750,000 equipment purchase facility, both of which are with a bank. The revolving credit line is collateralized by the Company’s accounts receivable and inventory. The revolving line of credit is payable on demand and must be other-than-temporary.retired for a 30-day period, once annually. As of February 28, 2019, there were no outstanding borrowings under the line of credit.

 

As of February 29, 2016,28, 2019, $808,000 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 unused portion of the credit line was $692,000 as of February 28, 2019. The letters of credit expire in 2020.

We had outstanding borrowings under a note payable of $871,000 at February 28, 2019. The note is payable over five years and accrues interest at 4.15% per year. The note payable is secured by a mortgage on our unrealized loss on available-for-sale securities was $70,140.land and buildings.

Off - Balance Sheet Arrangements

 

We do not have any Off - Balance Sheet Arrangements as of February 29, 2016.28, 2019.

 

Critical Accounting Policies

 

The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure on contingent assets and liabilities at the date of the financial statements. Actual results may differ from these estimates under different assumptions and conditions.

 

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and may potentially result in materially different results under different assumptions and conditions. As of February 29, 2016,28, 2019, management believes there are no critical accounting policies applicable to the Company that are reflective of significant judgments and or uncertainties.

 

Stock-Based Compensation

The computation of the expense associated with stock-based compensation requires the use of a valuation model. ASC 718 is a complex accounting standard, the application of which requires significant judgment and the use of estimates, particularly surrounding Black-Scholes assumptions such as stock price volatility, expected option lives, and expected option forfeiture rates, to value equity-based compensation. We currently use a Black-Scholes option pricing model to calculate the fair value of stock options. We primarily use historical data to determine the assumptions to be used in the Black-Scholes model and have no reason to believe that future data is likely to differ materially from historical data. However, changes in the assumptions to reflect future stock price volatility and future stock award exercise experience could result in a change in the assumptions used to value awards in the future and may result in a material change to the fair value calculation of stock-based awards. ASC 718 requires the recognition of the fair value of stock compensation in net income. Although every effort is made to ensure the accuracy of our estimates and assumptions, significant unanticipated changes in those estimates, interpretations and assumptions may result in recording stock option expense that may materially impact our financial statements for each respective reporting period.

Impact of New Accounting Pronouncements

 

AllIn January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU 2016-01 is effective for all entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company has evaluated the potential impact this standard may have on the consolidated financial statements, the fair value of the securities from the prior year has been reclassified to Retained Earnings from Other Accumulated Comprehensive Income.

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 will have 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”. ASU 2018-02 was issued to allow the reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effect resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017. The Tax Cuts and Jobs Act, among other things, reduced the corporate tax rate from 35% to 21%, which required the re-evaluation of any deferred tax assets and liabilities at the lowered tax rate which potentially could leave a disproportionate tax effect in accumulated other comprehensive income. ASU 2018-02 allows for the election to reclassify these stranded tax effects to retained earnings. ASU 2018-02 is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for public business entities for reporting periods for which financials statements have not yet been issued. The adoption of ASU 2018-02 will have no material impact on the Company’s financial statements.

Other than, Accounting Standards Update (“ASU”) No. ASU 2016-01, 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 orto the Company. Hence, the adoption of suchthese new accounting pronouncementpronouncements, once effective, is not expected to have a materialan impact on the financials.

Company.

ITEM 7A7A

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK – Not Required for Smaller Reporting Companies.

 

ITEM 88

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Our financial statements are presented on pages 32 to 4849 of this Report.

 

ITEM 99

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE – None.

 

ITEM 9A9A

CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Act”)) as of the end of the period covered by this annual report on Form 10-K.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of such date, at a reasonable level of assurance, in ensuring that the information required to be disclosed by us in the reports we file or submit under the Act is (i) accumulated and communicated to our management (including the Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

 

Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our Chairman & CEO (principal executive officer) and Chief Financial Officer (principal accounting officer), we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, management has concluded that our internal control over financial reporting was effective as of February 29, 2016.28, 2019. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Changes in Internal Control Over Financial Reporting

 

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B9B

OTHER INFORMATION - None.

PART III

 

ITEM 1010

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

 

(a)       Identification of Directors

 

Name	Age	Position with the Company
Christopher L. Coccio	7578	Chief Executive Officer, Chairman and a Director
Edward J. Handler, Esq.	79	Director*
R. Stephen Harshbarger	4851	President and Director
Eric Haskell, CPA	6972	Director*
Donald F. Mowbray	7881	Director
Carol O’Donnell	62	Director*
Joseph Riemer	6770	Vice President and Director
Samuel Schwartz	9699	Chairman Emeritus and Director
Philip A. Strasburg, CPA	7780	Director*

 

* Member of the Audit Committee.

 

The Board of Directors is divided into two classes. The directors in each class serve for a term of two years. The terms of the classes are staggered so that only one class of directors is elected at each annual meeting of the Company. The terms of Drs. Coccio and Riemer and Messrs. Strasburg and Harshbarger and Ms. O’Donnell run until the annual meeting to be held in 2019, and in each case until their respective successors are duly elected and qualified. The terms of Dr. Mowbray and Messrs. Handler, Haskell and Schwartz run until the annual meeting to be held in 2016. The terms of Drs. Coccio and Riemer and Messrs. Strasburg and Harshbarger run until the annual meeting to be held in 2017, and in each case until their respective successors are duly elected and qualified.2020.

 

Audit Committee

 

The Company’s Board of Directors has an Audit Committee composed of Edward J. Handler,“independent directors”, Carol O’Donnell, Eric Haskell, CPA and Philip A. Strasburg, CPA, as Chairman. The “audit committee financial expert” designated by the Board is Philip A. Strasburg. The Company considers Mr. Strasburg to be an “independent director”.

 

The Audit Committee is responsible for (i) selecting an independent public accountant for ratification by the stockholders, (ii) reviewing material accounting items affecting the consolidated financial statements of the Company, and (iii) reporting its findings to the Board of Directors.

 

Nominating Committee

 

There have been no changes to the procedures by which shareholders may recommend nominees to the Board of Directors.

(b)

Identification of Executive Officers

 

Name	Age	Position with the Company
Stephen J. Bagley, CPA	5356	Chief Financial Officer
Bennett D. Bruntil	38	Vice President
Christopher L. Coccio	7578	Chief Executive Officer, Chairman and a Director
Robb W. Engle	4548	Vice President
R. Stephen Harshbarger	4851	President and Director
Joseph Riemer	67	Vice President and Director

 

The foregoing officers are appointed for terms of one year or until their successors are duly elected and qualified or until terminated by the action of the Board of Directors. There are no arrangements or understandings between any executive officer and any other persons(s) pursuant to which he was or is to be selected as an officer.

 

Business Experience

 

STEPHEN J. BAGLEY, CPA was appointed Chief Financial Officer in June 2005. From 1987 to 1991 he worked in public accounting in various capacities. From 1992 to 2005, he held various leadership positions as Controller, Chief Financial Officer and Vice President of Finance for companies with up to $45,000,000 in revenues. Mr. Bagley earned a Bachelor of Science degree from The State University of NY – College at Oneonta and an MBA from Marist College. He was licensed as a CPA in 1990. Mr. Bagley is a member of the 2019 OTCQX Issuer Advisory Council. Mr. Bagley is a past President of the Board of Education for the New Paltz Central School District and a past Chairman of the Audit and Finance Committee for the District.

BENNET D. BRUNTIL was appointed Vice President in March 2018. Mr. Bruntil joined Sono-Tek in 2007 as a Regional Sales Manager and has served as Marketing Brand Manager and Director of the Electronics and Advanced Energy Division. Mr. Bruntil has experience in branding and product development and has successfully implemented sales strategies, launched new products and management of a diverse product line. Prior to joining Sono-Tek, Mr. Bruntil was a branch manager in the retail banking industry. He is a graduate of Central Connecticut State University with a major in psychology and a concentration in sociology.

 

DR. CHRISTOPHER L. COCCIO was appointed President and Chief Executive Officer of Sono-Tek on April 30, 2001, has been a Director of the Company since June 1998, and was appointed Chairman in August 2007. From 1964 to 1996, he held various engineering, sales, marketing and management positions at General Electric Company, with P&L responsibilities for up to $100 million in sales and 500 people throughout the United States. He also won an ASME Congressional Fellowship and served with the Senate Energy Committee in 1976. His business experience includes both domestic and international markets and customers. He founded a management consulting business in 1996, and was appointed a legislative Fellow on the New York State Assembly’s Legislative Commission on Science and Technology from 1996 to 1998. From 1998 to 2001, he worked with Accumetrics Associates, Inc., a manufacturer of digital wireless telemetry systems, as Vice President of Business Development and member of the Board of Advisors. Dr. Coccio received a B.S.M.E. from Stevens Institute of Technology, an M.S.M.E. from the University of Colorado, and a Ph.D. from Rensselaer Polytechnic Institute in Chemical Engineering.

Key attributes, Experience and Skills: Dr. Coccio brings his strategicvisionstrategic vision for our Company to the Board together with his leadership, business experience and investor relations skills. Dr. Coccio has an immense knowledge of our Company and its related applications which is beneficial to the Board. Dr. Coccio’s service as Chairman and CEO bridges a critical gap between the Company’s management and the Board, enabling the Board to benefit from management’s perspective on the Company’s business while the Board performs its oversight function.

ROBB W. ENGLEjoined Sono-Tek in 2000 as a Field Service Technician and became Vice President of Engineering in January 2013. Mr. Engle created the Sono-Tek Service Department and led the development of key products in his leadership role of our engineering resources. As Vice President of Engineering, he directs the engineering department, service department, IT and Sono-Tek laboratory services. Mr. Engle was formally trained and certified by the U.S. Navy as a Nuclear Operator where he was recognized with an induction into the Navy League Memorial for meritorious service and the advancement of training techniques. He also served with honors on board a submarine and earned the prestigious Sub-Surface Warfare (E) Insignia.

 

EDWARD J. HANDLER, III, Esq., is a retired partner from Kenyon & Kenyon, a law firm that provided intellectual property advice to the Company. Mr. Handler became a Director of the Company on October 1, 2004, coincident with his retirement from his law firm. Mr. Handler has 40 years of experience in all aspects of intellectual property, including patents, trade secrets, trademarks and copyrights, including litigation and other adversarial proceedings. Mr. Handler is Chairman and CEO of The Bronx Project, Inc., a private Delaware corporation active in the area of therapeutics for acute (CNS) inflammatory conditions. Mr. Handler is past President of the West Point Society of New York and a past Trustee of the Association of Graduates, U.S. Military Academy. He holds a J.D. degree from the University of Virginia Law School and a B.S. in Engineering Science from the United States Military Academy.

Key attributes, Experience and Skills: Mr. Handler’s extensive experience as an attorney enables him to bring valuable strategic insights to the Board. Mr. Handler’s past experience as the Company’s intellectual property attorney provides him with an in depth knowledge of the Company and its related market applications. Mr. Handler also brings leadership and oversight experience to the Board.

R. STEPHEN HARSHBARGERjoined Sono-Tek in 1993. He was appointed President of the Company in 2012 and became a Director in August 2013. As President, he directs the Company’s Sales, Marketing, Engineering, Service, and Manufacturing Operations. Prior to assuming his present position, Mr. Harshbarger served as Sales Engineer, World Wide Sales and Marketing Manager, Vice President & Director of Electronics and Advanced Energy (E&AE) and Executive Vice President. In his years managing the sales organization, he established a worldwide distribution and representative network in more than 40 countries consisting of more than 300 persons, with revenue growth of greater than 300%. He has over 20 years of experience in ultrasonic coating equipment for the electronics, medical device and advanced energy industries. Prior to joining Sono-Tek, Mr. Harshbarger was the Sales and Marketing Manager for Plasmaco Inc., a world leader in the development of flat panel displays. In that position, he established their distribution network, participated in venture capital funding, and introduced the first flat panel technology to Wall Street trading floors.  He is a graduate of Bentley University, with a major in Finance and a minor in Marketing.

 

Key attributes, Experience and Skills: Mr. Harshbarger is among a small handful of ultrasonic coating experts in the world. He has a proven track record of identifying, developing and implementing the technology for new markets and applications. His expertise in ultrasonic coating brings specific product application insights to the Board. Mr. Harshbarger also brings leadership and oversight experience to the Board.

ERIC HASKELL, CPA has been a Director since August 2009. He has over 3040 years of experience in senior financial positions at several public and private companies.  He has significant expertise in the areas of acquisitions and divestitures, strategic planning and investor relations.  From December 2005 through March 2008, Mr. Haskell served as the Executive Vice President and Chief Financial Officer of SunCom Wireless Holdings, Inc., a company providing digital wireless communications services which was publicly traded until its merger with a wholly-owned subsidiary of T-Mobile USA, Inc. in February 2008.  He also served as a member of SunCom’s Board of Directors from November 2003 through May 2007.  From 1989 until April 2004, Mr. Haskell served as the Chief Financial Officer of Systems & Computer Technology Corp., a NASDAQ listed software and services corporation.  Mr. Haskell received his Bachelors Degree in Business Administration from Adelphi University in 1969.

Key attributes, Experience and Skills: Mr. Haskell’s training and extensive experience in financial management at both public and private companies provide the Board with valuable insights. Mr. Haskell’s significant experience in acquisitions and divestitures and investor relations bring strategic judgment and experience to the Board. Mr. Haskell’s strong operational and business background complement his accounting and finance experience and are valuable resources to the Board as it exercises its oversight duties and support of the Company’s growth strategies.

 

DR. DONALD F. MOWBRAY has been a Director since August 2003. He has been an independent consultant since August 1997. From September 1992 to August 1997, he was the Manager of the General Electric Company’s Corporate Research and Development Mechanical Engineering Laboratory. From 1962 to 1992 he worked for the General Electric Company in a variety of engineering and managerial positions. Dr. Mowbray received a B.S. in Aeronautical Engineering from the University of Minnesota in 1960, a Master of Science in Engineering Mechanics from the University of Minnesota in 1962 and a Ph.D. from Rensselaer Polytechnic Institute in Engineering Mechanics in 1968.

 

Key attributes, Experience and Skills: Dr. Mowbray’s extensive research and managerial experience enables him to bring valuable insights to the Board. His knowledge of the Company’s products and the materials sciences technology underlying them has enabled him to contribute to the Company’s advanced products development and designs. Dr. Mowbray also brings leadership and oversight experience to the Board from his GE management background.

 

CAROL O’DONNELL has been a Director since November 2018. Ms. O’Donnell joined Protégé Partners, an industry leading firm investing in and seeding smaller and emerging hedge fund managers in 2016 and has served as Chief Executive Officer since 2018. She was a key member of the Protégé executive team that launched an affiliate business, MOV37, for which she also serves as Chief Executive Officer. Prior to joining Protégé Partners, Ms. O’Donnell was the Director of Legal and Compliance with DARA Capital US, Inc., a Swiss-owned boutique registered investment advisory and wealth management firm from 2013 to 2016.  She also worked at Permal Group as General Counsel and Chief Compliance Officer and was COO and General Counsel of Framework Investment Group.  Ms. O’Donnell is qualified to practice law in the States of New York and Connecticut.

Key attributes, Experience and Skills: Ms. O’Donnell’s extensive experience as an attorney enables her to bring valuable strategic insights to the Board. Ms. O’Donnell also brings leadership and oversight experience to the Board.

DR. JOSEPH RIEMER joined the Company in January 2007 as Vice President of Engineering and has been a Director since August 2007. Dr. Riemer served as President from September 2007 until August 2012 when he became Vice President of Food Business Development.Development, which position he held until June 2016. Dr. Riemer holds a Ph.D. in Food Science and Technology from the Massachusetts Institute of Technology (MIT), focusing on food technology, food chemistry, biochemical analysis, and food microbiology. His experience includes seven years with Pfizer in its Adams Confectionary Division, where he was Director, Global Operations Development. Dr. Riemer has also held leading positions with several food, food ingredients, and personal care products companies. He has served in the capacities of research and development, operations, and general management. Prior to joining the Company, he was a management consultant serving clients in the food, biotech and pharmaceutical industries.

Key attributes, Experience and Skills: Dr. Riemer’s extensive research and management experience enables him to bring valuable insights to the Board. His considerable experience in the biotech, food and pharmaceutical industries bring specific product application insights to the Board. Dr. Riemer’s previous service as Vice President of Food Business Development helps to provide focus to the Board on this important marketing area. Dr. Riemer also brings leadership and oversight experience to the Board.

SAMUEL SCHWARTZ has been a Director of the Company since August 1987, and was Chairman of the Board from February 1993 to May 1999 and August 2001 to August 2007. From 1959 to 1992, he was the Chairman and Chief Executive Officer of Krystinel Corporation, a manufacturer of ceramic magnetic components used in electronic circuitry. He received a B.Ch.E. from Rensselaer Polytechnic Institute in 1941 and an M.Ch.E. from New York University in 1948.

 

Key attributes, Experience and Skills: Mr. Schwartz’s long-time experience as a businessman and manufacturer enables him to bring valuable operational insights to the Board. Mr. Schwartz’s experience as former Chairman of the Board enable him to bring operational insights to the Board. Mr. Schwartz also brings leadership and oversight experience to the Board.

 

PHILIP STRASBURG, CPA, has been a Director since August 2004. He is a retired partner from the firm of Anchin Block and Anchin, LLP and has 40 years of experience in auditing. He has served as Audit Committee Chairman since 2005. He was the lead partner on the Sono-Tek account from Fiscalfiscal 1994 to Fiscalfiscal 1996. Mr. Strasburg is a certified public accountant in New York State. He has a Master of Science in economics from The London School of Economics and Political Science and a Bachelors of Science degree from Lehigh University, where he majored in business administration.

 

Key attributes, Experience and Skills: Mr. Strasburg’s training and extensive experience in auditing provide the Board with valuable insights and skills necessary to lead the Audit Committee. Mr. Strasburg’s strong operational and business background complement his accounting and finance experience, and are valuable resources to the Board as it exercises its oversight duties and support of the Company’s growth strategies.

 

(c)       Identification of Certain Significant Employees

 

Not applicable.

 

(d)       Family Relationships

 

None.

 

(e)       Involvement in certain legal proceedings

 

None.

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's Directors, executive officers and persons who own more than ten percent of the Company's common stock to file with the Securities and Exchange Commission initial reports of beneficial ownership and reports of changes of beneficial ownership of common stock.  Such persons are also required by Securities and Exchange Commission regulations to furnish the Company with copies of all such reports.  Based solely on a review of such filings, during the year ended February 29, 2016,28, 2019, all of the Company's Directors and executive officers and holders of more than ten percent of the Company’s stock have made timely filings of such reports.

Code of Ethics

 

The Company has adopted a Code of Ethics for senior executives and financial officers. The Board intends that this Code satisfy the requirements of the Securities and Exchange Commission rules for a Code of Ethics that applies to senior management. A copy of the Company's Code of Ethics is posted on the "information for investors" web page located athttp:at http://www.sono-tek.com/code-of-ethics/ and is available in print to any shareholder who requests a copy.

 

ITEM 1111

EXECUTIVE COMPENSATION

 

The following table sets forth the aggregate remuneration paid or accrued by the Company for the Fiscal Years ended February 29, 2016fiscal 2019 and February 28, 2015fiscal 2018 for each named officer of the Company.

 

Summary Compensation Table

 

 

All Other Compensation represents Company contributions to the Company’s 401K plan.

 

Option awards in the above table are calculated using the Black-Scholes options pricing model which is further discussed in Note 4 – Stock Based Compensation, in the Company’s financial statements.

 

Officer Compensation Arrangements

 

During the year ended February 29, 2016,fiscal 2019, Dr. Coccio was compensated at a rate of $150,000 per annum.

 

During the year ended February 29, 2016,fiscal 2019, Mr. Harshbarger was compensated at a rate of $200,000$220,000 per annum.

During the year ended February 29, 2016,fiscal 2019, Mr. Bagley was compensated at a rate of $140,000$155,000 per annum.

In addition, each named officer earned bonus compensation based on the achievement of certain operating objectives.

Outstanding Equity Awards Atat Fiscal Year End

 

Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($)	Option Expiration Date
R. Stephen Harshbarger	28,800	7,2001	1.05	02/20/2024
	19,440	23,7602	1.19	02/19/2025

Name		Number of Securities Underlying Unexercised Options (#) Exercisable			Number of Securities Underlying Unexercised Options (#) Unexercisable			Option Exercise Price ($)				Option Expiration Date
Christopher L. Coccio		—			—				—			—
CEO, Chairman and Director
R. Stephen Harshbarger President					101,0001				0.91			07/20/2026
					110,0002				1.06			05/18/2027
Stephen J. Bagley Chief Financial Officer		—			70,0003				0.91			07/20/2026

 

¹7,20067,000 of these options vested on March 15, 2019 and have been exercised and 34,000 of these options will vest on 02/20/2017.March 15, 2020.

² 15,12036,667 of these options vested on March 15, 2019, 36,667 of these options will vest on February 20, 2017March 15, 2020 and 8,64036,666 of these options will vest on February 20, 2018.March 15, 2021.

³33,333 of these options vested on March 15, 2019 and have been exercised, 23,333 of these options will vest on March 15, 2020 and 13,334 of these options will vest on March 15, 2021.

 

Estimated Payments and Benefits Upon Termination or Change in Control

 

On September 1, 2007, the Company entered into identical Executive Agreements with Stephen J. Bagley, Chief Financial Officer and Christopher L. Coccio, Chief Executive Officer. The Company also entered into an Executive Agreement with R. Stephen Harshbarger, President, on March 5, 2008. The agreements, as subsequently amended, provide that in the event of a change of control of the Company followed by a termination of the executives’ employment under certain circumstances, the officers shall receive severance payments equal to two years of the executive’s annual base, commissions and bonus compensation paid by the Company for the previous calendar year. 

 

Based on last year’s salary arrangements, if the rights of the foregoing officers were to be triggered following a change of control, they would be entitled to the following payments from the Company: Stephen J. Bagley $309,000,$358,000, Christopher L. Coccio $358,000$372,000 and R. Stephen Harshbarger $410,000.$508,000.

 

Severance Agreements

On October 20, 2017, the Company entered into identical Executive Agreements with Stephen J. Bagley, Chief Financial Officer, Christopher L. Coccio, Chief Executive Officer and R. Stephen Harshbarger, President. The agreements provide that in the event of termination of the executive’s employment, other than for the cause, the officers shall receive severance payments equal to two weeks of compensation for each full year employed by the Company.

Compensation of Directors

 

Each non-employee director receives $1,000 for each meeting attended. Directors who are employees of the Company receive no additional compensation for serving as directors. For the year ended February 29, 2016,28, 2019, director compensation was as follows:

20162019 Director Compensation

 

 

ITEM 1212

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following information is furnished as of May 19, 201624, 2019 to indicate beneficial ownership of the Company's Common Stock by each Director, by each named executive officer, by all Directors and executive officers as a group, and by each person known to the Company to be the beneficial owner of more than 5% of the Company's outstanding Common Stock. Such information has been furnished to the Company by the indicated owners. Unless otherwise indicated, the named person has sole voting and investment power.

		Amount
Name (and address if more than 5%) of		Beneficially
Beneficial owner		Owned		Percent
Directors and Officers
*Stephen J. Bagley		18,181		**
*Christopher L. Coccio		645,3381		4.32%
*Edward J. Handler		127,5082		**
*R. Stephen Harshbarger		116,7963		**
*Eric Haskell		20,000 4		**
*Donald F. Mowbray		65,0005		**
*Joseph Riemer		287,889		1.92%
*Samuel Schwartz		1,545,1476		10.31%
*Philip A. Strasburg		85,0007		**
All Executive Officers and Directors as a Group		2,957,8358		19.48%
Additional 5% owners
Herbert Spiegel		756,931		5.06%
425 East 58th Street
New York, NY  10022
Emancipation Management LLC		2,227,324		14.89%
825 Third Avenue
New York, NY 10022

		Amount
		Beneficially
Name (and address if more than 5%) of Beneficial owner		Owned				Percent
Directors and Officers
*Stephen J. Bagley			41,281				**
*Christopher L. Coccio			390,241	1			2.57%
*R. Stephen Harshbarger			251,805	2			1.65%
*Eric Haskell			15,000	3			**
*Donald F. Mowbray			59,190				**
*Carol O’Donnell			0	4			**
*Joseph Riemer			120,045				**
*Samuel Schwartz			1,352,547	5			8.9%
*Philip A. Strasburg			70,012	6			**
All Executive Officers and Directors as a Group			2,367,101	7			15.56%
Additional 5% owner
Emancipation Management LLC9 Charles Frumberg9 Circle N Advisors, LLC10			7,674,216	8			50.50%

The above ownership percentages are based on 14,955,40015,197,563 shares outstanding as of April 29, 2016.May 24, 2019.

*c/o Sono-Tek Corporation, 2012 Route 9W, Milton, NY 12547.

** Less than 1%

¹ Includes 2,000 shares held in the name of Dr. Coccio’s wife.

² Includes 61,579 shares owned jointly with Mr. Handler’s wife, 35,929 shares in the name of Mr. Handler’s wife and 30,00036,667 options currently exercisable issued under the Company’s Stock Incentive Plans.

³Includes 48,240Represents 15,000 options currently exercisable issued under the Company’s Stock Incentive Plans.

⁴ RepresentsDoes not reflect 20,000 options currentlywhich first become exercisable issued under the Company’s Stock Incentive Plans.in November 2019.

⁵Includes 20,000 options currently exercisable issued under the Company’s Stock Incentive Plans.

⁶Includes 30,000 options currently exercisable issued under the Company’s Stock Incentive Plans

⁷⁶Includes 10,000 shares in the name of Mr. Strasburg’s wife and 40,000 options currently exercisable issued under the Company’s Stock Incentive Plans.wife.

⁸⁷The group total includes 225,32081,667 options currently exercisable issued under the Company’s Stock Incentive Plans. The group total does not include 180,667 options that are currently unexercisable. The group total includes 9,89659,487 shares and 37,080 exercisable options held by Robb Engle, .a Vice President of Engineering and 7,493 shares held by Bennett Bruntil, a Vice President.

⁹The address of this person is 825 Third Avenue, New York, NY 10022.

¹⁰The address of this person is 200 Westage Business Center Dr., Fishkill, NY 12524.

Securities Authorized for Issuance Under Equity Compensation Plans:

 

EQUITY COMPENSATION PLAN INFORMATION

 

 

Description of Equity Compensation Plans:

 

2013 Stock Incentive Plan

 

Under the 2013 Stock Incentive Plan, as amended ("2013(the "2013 Plan"), options can be granted to officers, directors, consultants and employees of the Company and its subsidiaries to purchase up to 2,500,000 shares of the Company's common stock. Under the 2013 Plan options expire ten years after the date of grant. As of February 29, 2016,28, 2019, there were 246,600488,000 options outstanding under the 2013 plan.

 

Under the 2013 Stock Incentive Plan, option prices must be at least 100% of the fair market value of the common stock at time of grant. For qualified employees, except under certain circumstances specified in the plan or unless otherwise specified at the discretion of the Board of Directors, no option may be exercised prior to one year after date of grant, with the balance becoming exercisable in cumulative installments over a three year period during the term of the option, and terminating at a stipulated period of time after an employee's termination of employment.

2003 Stock Incentive Plan

Under the 2003 Stock Incentive Plan, as amended ("2003(the "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 February 29, 2016,28, 2019, there were 217,500100,000 options outstanding under the 2003 Plan, under which no additional options may be granted.

 

ITEM 1313

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Transactions Withwith Related Persons – None

 

Independence of Directors

The Company’s Board of Directors is comprised of five “independent directors”, as that term is defined under NASDAQ rules, and three directors who are not “independent directors”. The Company’s “independent directors” are Samuel Schwartz, Donald Mowbray, Edward Handler, Eric Haskell, Carol O’Donnell and Philip Strasburg. Christopher L. Coccio Joseph Riemer and R. Stephen Harshbarger are current employees of the Company and Joseph Riemer was an employee of the Company during the past three years, and therefore each are therefore not considered independent.

 

ITEM 1414

PRINCIPAL ACCOUNTING FEES AND SERVICES

 

Audit Fees

 

For theeach of fiscal years ended February 29, 20162019 and February 28, 2015,fiscal 2018, the Company paid or accrued fees of approximately $46,500 for services rendered by Liggett & Webb, P.A., its independent auditors. These fees included audit and review services.

 

Audit Related Fees - None

 

Tax Fees

 

For theeach of fiscal years ended February 29, 20162019 and February 28, 2015,fiscal 2018, the Company paid or accrued tax preparation fees of approximately $5,500 and $6,700, respectively, for services rendered by Liggett & Webb, P.A., its independent auditors.

 

All Other Fees – None

 

Pre-Approval Policies and Procedures

 

The Audit Committee’s current policy is to pre-approve all audit and non-audit services that are to be performed and fees to be charged by the Company’s independent auditor to assure that the provision of these services does not impair the independence of the auditor. The Audit Committee pre-approved all audit and non-audit services rendered by the Company’s principal accountants in 2016fiscal 2019 and 2015.

fiscal 2018.

PART IV

ITEM 1515

EXHIBITS

 

Ex. No.	Description
3(a)1	Certificate of Incorporation of the Company and all amendments thereto.
3(b)2	By-laws of the Company as amended.
10(a)1	Sono-Tek Corporation 2003 Stock Incentive Plan.
10(b)3	Equipment Line Credit Agreement between Sono-Tek Corporation and M&T Bank, dated March 24, 2005.
10(c)3	General Security Agreement between Sono-Tek Corporation and M&T Bank, dated December 21, 2004.
10(d)4	Executive Agreement between Sono-Tek Corporation and Stephen J. Bagley dated September 1, 2007.
10(e)4	Executive Agreement between Sono-Tek Corporation and Christopher L. Coccio dated September 1, 2007.
10(f)4	Executive Agreement between Sono-Tek Corporation and Joseph Riemer dated September 1, 2007.
10(g)5	Executive Agreement between Sono-Tek Corporation and R. Stephen Harshbarger dated March 5, 2008.
10(k)10(h)6	Amended Executive Agreement between Sono-Tek Corporation and R. Stephen Harshbarger dated March 8, 2012.
10(l)10(i)6	Equipment Term Note between Sono-Tek Corporation and M&T Bank dated June 17, 2011.
10(m)10(j)7	Sono-Tek Corporation 2013 Stock Incentive Plan.
10(n)10(k)7	Form of Amended and Restated Mortgage dated December 16, 2013, between Sono-Tek Industrial Park LLC and M&T Bank.
10 (o)(l)8	Form of Amended and Restated Term Note dated December 16, 2013, between Sono-Tek Industrial Park LLC and M&T Bank.
10(p)10(m)8	Form of Assignment of Rents dated December 16, 2013, between Sono-Tek Industrial Park LLC and M&T Bank.
10(q)10(n)8	Form of Environmental Compliance and Indemnification Agreement dated December 16, 2013, between Sono-Tek Industrial Park LLC and M&T Bank.
10(r)10(o)8	Form of Modification and Extension Agreement dated December 16, 2013, between Sono-Tek Industrial Park LLC and M&T Bank.
10(s)10(p)9	Amended Executive Agreement between Sono-Tek Corporation and Christopher L. Coccio dated August 24, 2014.
10(t)10(q)9	Amended Executive Agreement between Sono-Tek Corporation and R. Stephen Harshbarger dated August 24, 2014.
10(u)10(r)10	Amended Executive Agreement between Sono-Tek Corporation and Stephen J. Bagley dated May 21, 2015.
10(s)11	Amended Executive Agreement between Sono-Tek Corporation and Christopher L. Coccio dated November 17, 2016.
10(t)11	Amended Executive Agreement between Sono-Tek Corporation and R. Stephen Harshbarger dated November 17, 2016.
10(u)11	Amended Executive Agreement between Sono-Tek Corporation and Stephen J. Bagley dated November 17, 2016.
10(v)12	Letter Agreement between Sono-Tek Corporation and Christopher L. Coccio dated October 20, 2017.
10(w)12	Letter Agreement between Sono-Tek Corporation and R. Stephen Harshbarger dated October 20, 2017.
10(x)12	Letter Agreement between Sono-Tek Corporation and Stephen J. Bagley dated October 20, 2017.
10(y)13	Amended and Restated Loan Agreement between Sono-Tek Corporation and M&T Bank dated January 17, 2019.

10(z)13	Addendum to Loan Agreement (Flexline) between Sono-Tek Corporation and M&T Bank dated January 17, 2019.
10(aa)13	Addendum to Loan Agreement (Loan Limit) between Sono-Tek Corporation and M&T Bank dated January 17, 2019.
10(bb)13	Loan Agreement between Sono-Tek Corporation and M&T Bank dated January 17, 2019.
10(cc)13	Amended and Restated Revolving Demand Note between Sono-Tek Corporation and M&T Bank dated January 17, 2019 .
10(dd)13	Security Agreement between Sono-Tek Corporation and M&T Bank dated January 17, 2019.
141114	Code of Ethics.
211013	Subsidiaries of Issuer.
23.11013	Consent of Liggett & Webb, P.A.
31.11013	Rule 13a-14/15d – 14(a) Certification.
31.21013	Rule 13a-14/15d – 14(a) Certification.
32.11013	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.21013	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS913	XBRL Instance Document.
101.SCH913	XBRL Taxonomy Extension Schema Document.
101.CAL913	XBRL Taxonomy Calculation Linkbase Document.
101.DEF913	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB913	XBRL Extension Label Linkbase Document.
101.PRE913	XBRL Taxonomy Extension Presentation Linkbase Document.

 

1	Incorporated herein by reference to the Company’s Registration Statement No. 333-11913 on Form S-8 filed on February 18, 2004.
2	Incorporated herein by reference to the Company'sCompany’s Current Report on Form 8-K dated May 19, 2016March 7, 2019 and filed with the Securities and Exchange Commission on May 24, 2016.March 13, 2019.
3	Incorporated herein by reference to the Company’s Form 10-KSB for the year ended February 28, 2005.
4	Incorporated herein by reference to the Company’s Form 10-QSB for the quarter ended August 31, 2007
5	Incorporated herein by reference to the Company’s Form 10-Q for the quarter ended May 31, 2008.
6	Incorporated herein by reference to the Company’s Form 10-K for the year ended February 29, 2012.
7	Incorporated herein by reference to Exhibit A to the Company’s definitive proxy statement filed with the Securities and Exchange Commission on July 25, 2013.
8	Incorporated herein by reference to the Company’s Form 10-K for the year ended February 29, 2014.
9	Incorporated herein by reference to the Company’s Form 10-K for the year ended February 29, 2015.
10	Incorporated herein by reference to the Company’s Form 10-K for the year ended February 29, 2016.
11	Incorporated herein by reference to the Company’s Form 10-K for the year ended February 28, 2017.
12	Incorporated herein by reference to the Company’s Form 10-K for the year ended February 28, 2018.
13	Filed herewith.
1114	Incorporated herein by reference to the Company’s Form 10-KSB for the year ended February 29, 2004.

SONO-TEK CORPORATION

 

FORM 10-K

 

ITEM 7

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

 

FOR THE YEARS ENDED FEBRUARY 29, 201628, 2019 and FEBRUARY 28, 20152018

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

CONSOLIDATED FINANCIAL STATEMENTS:

 

Consolidated Balance Sheets at February 29, 201628, 2019 and February 28, 20152018

 

Consolidated Statements of Operations and Comprehensive Income

For the Years Ended February 29, 201628, 2019 and February 28, 20152018

 

Consolidated Statements of Stockholders' Equity

For the Years Ended February 29, 201628, 2019 and February 28, 20152018

 

Consolidated Statements of Cash Flows

For the Years Ended February 29, 201628, 2019 and February 28, 20152018

 

Notes to the Consolidated Financial Statements

Report of Independent Registered Public Accounting FirmREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

Sono-Tek Corporation

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Sono-Tek Corporation (the "Company") as of February 29, 201628, 2019 and February 28, 2015 and2018, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the years then ended. These financial statements areended, and the responsibility ofrelated notes (collectively referred to as the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States)"financial statements"). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 29, 201628, 2019 and February 28, 2015,2018, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted accounting principles in the United States.States of America.

 

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion in accordance with the standards of the PCAOB.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Liggett & Webb P.A.

LIGGETT & WEBB, P.A.

Certified Public Accountants

 

We have served as the Company’s auditor since 2012.

New York, New YorkNY

May 25, 2016

28, 2019

SONO-TEK CORPORATION

CONSOLIDATED BALANCE SHEETS

 

 

See notes to consolidated financial statements.

SONO-TEK CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

 

 

See notes to consolidated financial statements.

SONO-TEK CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

YEARS ENDED FEBRUARY 29, 201628, 2019 AND FEBRUARY 28, 20152018

 

 

See notes to consolidated financial statements.

SONO-TEK CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Fiscal Year Ended
		February 29,				February 28,
		2016				2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income		$	547,729			$	606,133
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization			476,528				407,795
Stock based compensation expense			43,402				42,523
Inventory reserve			(119,924	)			99,535
Allowance for doubtful accounts			2,953				11,047
Deferred tax expense			106,826				—
(Increase) Decrease in:
Accounts receivable			(188,416	)			(180,001	)
Inventories			233,718				(483,897	)
Prepaid expenses and other assets			(15,467	)			65,886
(Decrease) Increase in:
Accounts payable and accrued expenses			(55,568	)			155,585
Customer deposits			(260,690	)			99,322
Income taxes payable			(142,267	)			100,529
Net Cash Provided by Operating Activities			628,824				924,457
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment, furnishings and leasehold improvements			(465,427	)			(357,050	)
(Purchase) of marketable securities			(164,825	)			(1,021,691	)
Patent application and other asset costs			(17,700	)			(22,352	)
Net Cash (Used In) Investing Activities			(647,952	)			(1,401,093	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of options			2,885				—
Repayment of long term debt			(158,184	)			(192,603	)
Net Cash (Used In) Financing Activities			(155,299	)			(192,603	)
NET (DECREASE) IN CASH AND CASH EQUIVALENTS			(174,427	)			(669,239	)
CASH AND CASH EQUIVALENTS:
Beginning of year			2,562,782				3,232,021
End of year		$	2,388,355			$	2,562,782
Supplemental Cash Flow Disclosure :
Interest Paid		$	58,447			$	64,527
Income Taxes Paid		$	230,289			$	127,046

		Fiscal Year Ended
		February 28,
		2019				2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income		$	161,587			$	368,207
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization			332,147				399,526
Stock based compensation expense			30,548				41,728
Inventory reserve			66,000				104,601
Unrealized loss on marketable securities			100,184				—
Deferred tax expense			49,743				(33,558	)
(Increase) Decrease in:
Accounts receivable			(623,113	)			376,023
Inventories			(369,933	)			(118,000	)
Prepaid expenses and other assets			(255,599	)			(12,130	)
(Decrease) Increase in:
Accounts payable and accrued expenses			(327,655	)			340,739
Customer deposits			805,460				265,196
Income taxes payable			(78,349	)			70,002
Net Cash (Used In) Provided by Operating Activities			(108,980	)			1,802,334
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment, furnishings and leasehold improvements			(547,251	)			(189,245	)
Sale (purchase) of marketable securities			1,940,010				(2,004,360	)
Net Cash Provided By (Used In) Investing Activities			1,392,759				(2,193,605	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of options			—				210
Repayment of long-term debt			(156,120	)			(149,698	)
Net Cash (Used In) Financing Activities			(156,120	)			(149,488	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			1,127,659				(540,759	)
CASH AND CASH EQUIVALENTS:
Beginning of year			2,016,464				2,557,223
End of year		$	3,144,123			$	2,016,464
Supplemental Cash Flow Disclosure:
Interest Paid		$	39,977			$	46,117
Income Taxes Paid		$	28,178			$	59,494

 

See notes to consolidated financial statements.

SONO-TEK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED FEBRUARY 29, 201628, 2019 AND FEBRUARY 28, 20152018

 

NOTE 1: BUSINESS DESCRIPTION

 

The CompanySono-Tek Corporation (the “Company”, “Sono-Tek”, “We” or “Our”) was incorporated in New York on March 21, 19751975. 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 purpose of engaging in the development,microelectronics/electronics, alternative energy, medical, industrial and emerging research & development/other markets. We design and manufacture and sale of ultrasonic liquid atomizing nozzles, which are sold world-wide. Ultrasonic nozzle systems atomize low to medium viscosity liquids by converting electrical energy into mechanical motion in the form of high frequency ultrasonic vibrations that break liquids into minute drops that can be applied to surfaces at low velocity.

Based on its core technology of ultrasonic liquid atomizing nozzles, the Company has developed intellectual property in the area of precision spray coating of liquids. The Company is presently engaged in the development, manufacture, sales, installation and servicing of diversecustom-engineered ultrasonic coating equipmentsystems and also provide patented nozzles and generators for various manufacturing industries worldwide.manufacturers’ equipment.

 

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

 

Advertising Expenses -The Company expenses the cost of advertising in the period in which the advertising takes place. Advertising expense for the years ended February 29, 2016fiscal 2019 and February 28, 2015fiscal 2018 was $227,825$246,681 and $168,090,$280,348, respectively.

 

Allowance for doubtful accounts -The Company records a bad debt expense/allowance based on management’s estimate of uncollectible accounts. All outstanding accounts receivable accounts are reviewed for collectability on an individual basis. The bad debt expense recorded for the years ended February 29, 2016fiscal 2019 and February 28, 2015fiscal 2018 was approximately $3,000 and $17,000, respectively.$0.

 

Available-For-Sale Investments –The Company’s available for sale investments are carried at fair value with the unrealized gains or losses, net of tax, included as a component of accumulated other comprehensive income (loss) in stockholders’ equity. Realized losses and declines in value below cost judged to be other than temporary, if any, are included as a component of asset impairments expense in the consolidated statement of operations. The fair value of the available-for-sale investments are based on quoted market prices. The Company’s fair value determination method is discussed below in “Fair Value of Financial Instruments.”

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.

 

Concentration of Credit Risk -The Company does not believe that it is subject to any unusual or significant risks, in the normal course of business. The Company had one customer, which accounted for 7%14% of sales during the year ended February 29, 2016. Fourfiscal 2019. Two customers accounted for 40%41% of the outstanding accounts receivables at February 29, 2016.28, 2019.

The Company had one customer, which accounted for 7%8% of sales during the year ended February 28, 2015.fiscal 2018. Two customers accounted for 25%22% of the outstanding accounts receivables at February 28, 2015.2018.

Consolidation- The accompanying consolidated financial statements of Sono-Tek Corporation, a New York corporation (the “Company”),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 (“SCS”), ceased operations during the Fiscal Year Ended February 28, 2002.subsidiary, Sono-Tek Industrial Park, LLC (“SIP”),. SIP operates as a real estate holding company for the Company’s real estate operations.

 

Earnings Per Share -Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

Equipment, Furnishings and Leasehold Improvements – Equipment, furnishings and leasehold improvements are stated at cost. Depreciation of equipment and furnishings is computed by use of the straight-line method based on the estimated useful lives of the assets, which range from three to five years.

 

Fair Value of Financial Instruments - The Company follows 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 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 February 29, 201628, 2019 and February 28, 2015,2018, respectively:

 

		Quoted Prices in Active Markets
		(Level 1)
		February 29,				February 28,
		2016				2015
Marketable Securities		$	1,695,689			$	1,652,485

		Quoted Prices in Active Markets
		(Level 1)
		February 28,
		2019				2018
Marketable Securities		$	2,365,706			$	4,405,900

 

Marketable Securities include mutual funds, certificates of $1,695,689deposit and $1,652,485,US Treasury securities, totaling $2,365,706 and $4,405,900 that are considered to be highly liquid and easily tradeable as of February 29, 201628, 2019 and February 28, 2015,2018, 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.”

 

As of February 28, 2019, certain of the Company’s marketable securities were in an unrealized gain position. Unrealized gains and losses are principally due to changes in the fair value of the Company’s investments held as available-for-sale. Because the Company has the ability and intent to hold the securities for the foreseeable future as classified as available-for-sale, the Company does not deem these unrealized gains or losses to be other than temporary. Net unrealized gains at February 28, 2019 are $1,422.

Income Taxes- The Company accounts for income taxes under the asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.

 

Intangible Assets -IncludecostsInclude costs of patent applications which are deferred and charged to operations over seventeen years for domestic patents and twelve years for foreign patents. The accumulated amortization of patents is $127,900$160,433 and $116,804$149,654 at February 29, 201628, 2019 and February 28, 2015,2018, respectively. Annual amortization expense of such intangible assets is expected to be approximately $11,000 per year for the next five years.

 

Inventories-Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method for raw materials, subassemblies and work-in-progress and the specific identification method for finished goods.

 

Land and Buildings –Land and buildings are stated at cost. Buildings are being depreciated by use of the straight-line method based on an estimated useful life of forty years.

 

Long-Lived Assets -The Company periodically evaluates the carrying value of long-lived assets, including intangible assets, when events and circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved.

 

Management Estimates -The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

 

Marketable Securities - The Company adopted ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The Company has evaluated the potential impact this standard may have on the consolidated financial statements and the fair value allowance of the securities from the prior year has been reclassified to Retained Earnings from Other Accumulated Comprehensive Income. The unrealized loss on the marketable securities during the year ended February 28, 2019 has been disclosed as a separate line item on the Income Statement.

New Accounting Pronouncements-PronouncementsAll-

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU 2016-01 is effective for all entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company has evaluated the potential impact this standard may have on the consolidated financial statements, the fair value of the securities from the prior year has been reclassified to Retained Earnings from Other Accumulated Comprehensive Income.

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 will have 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”. ASU 2018-02 was issued to allow the reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effect resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017. The Tax Cuts and Jobs Act, among other things, reduced the corporate tax rate from 35% to 21%, which required the re-evaluation of any deferred tax assets and liabilities at the lowered tax rate which potentially could leave a disproportionate tax effect in accumulated other comprehensive income. ASU 2018-02 allows for the election to reclassify these stranded tax effects to retained earnings. ASU 2018-02 is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for public business entities for reporting periods for which financials statements have not yet been issued. The adoption of ASU 2018-02 will have no material impact on the Company’s financial statements.

Other than ASU No. ASU 2016-01, 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, areis not expected to have an impact on the Company.

 

Product Warranty - Expected future product warranty expense is recorded when the product is sold.

 

Reclassifications – Where appropriate, prior year’s financial statements reflect reclassifications to conform to the current year’s presentation.

RecognitionResearch and Product Development Expenses -Research and product development expenses represent engineering and other expenditures incurred for developing new products, for refining the Company's existing products and for developing systems to meet unique customer specifications for potential orders or for new industry applications and are expensed as incurred.

Shipping and Handling Costs –Shipping and handling costs are included in cost of sales in the accompanying consolidated statements of operations.

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) – Sales are recorded, to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods or services and is recognized at an amount that reflects the time title passesconsideration expected to be received in exchange for such goods or services. In addition, ASU 2014-09 requires disclosure of the customer, which,nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The ASU is effective for fiscal years beginning after December 15, 2017.

The new revenue standard is principle based and interpretation of those principles may vary from company to company based on shipping terms, generally occurstheir 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 productCompany’s manufactured equipment is shippedtransferred to its customers, in an amount that reflects the customer.consideration the Company expects to receive based upon the agreed transaction price. The Company’s performance obligations are satisfied when it’s 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.

Research and Product Development Expenses -Research and product development expenses represent engineering and other expenditures incurred for developing new products, for refining the Company's existing products and for developing systems to meet unique customer specifications for potential orders or for new industry applications and are expensed as incurred.

Shipping and Handling Costs –Shipping and handling costs are included in cost of sales in the accompanying consolidated statements of operations.

NOTE 3: SEGMENT INFORMATION

 

The Company operatesdoes 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 two segments: ultrasonic spray coating systems, which istime are expensed when the businesscustomer takes control of developing, manufacturing, selling, installing and servicing ultrasonic spray coating equipment; and real estate operations, which is the business of owning and operating the Sono-Tek Industrial Park.purchased equipment.

 

All inter-company transactions are eliminatedAt February 28, 2019, the Company had received $1,150,000 in consolidation. Segment information is as follows:cash deposits, and had issued Letters of Credit in the amount of $808,000 to secure these cash deposits. The Company was utilizing $808,000 of its available credit line to collateralize these letters of credit.

		Fiscal Year Ended February 29, 2016																Fiscal Year Ended February 28, 2015
		Ultrasonic Spraying				Rental Real Estate Operations				Eliminations				Consolidated				Ultrasonic Spraying				Rental Real Estate Operations				Eliminations				Consolidated
Net Sales		$	11,738,982			$	291,046			$	196,298			$	11,833,730			$	10,757,825			$	287,948			$	196,298			$	10,849,475
Rental Expense		$	196,298			$	158,629			$	(196,298	)		$	158,629			$	196,298			$	162,522			$	(196,298	)		$	162,522
Interest Expense		$	83			$	58,364							$	58,447			$	1,223			$	63,304							$	64,527
Net Income (Loss)		$	669,974			$	(122,245	)						$	547,729			$	740,309			$	(134,176	)						$	606,133
Assets		$	8,214,873			$	2,454,664							$	10,669,537			$	8,227,705			$	2,513,924							$	10,741,969
Debt		$	—			$	1,319,737							$	1,319,737			$	20,542			$	1,457,379							$	1,477,921

NOTE 4: 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 fiscal 2019, the Company granted options to acquire 35,000 shares to employees exercisable at prices from $2.47 to $2.55 and options for 20,000 shares to a member of the board of directors with an exercise price of $3.00. The options vest annually over three years and expire in ten years. The fiscal 2019 options had a weighted average grant date fair value of $0.90 per share.

During fiscal 2018, the Company granted options to acquire 110,000 shares to an officer, at an exercise price of $1.06 and options for 20,000 shares exercisable at prices from $1.15 to $1.67 to employees of the Company. The fiscal 2018 options had a weighted average grant date fair value of $0.18 per share.

 

The weighted-average fair value of options has been estimated on the date of grant using the Black-Scholes options-pricing model. The weighted-average Black-Scholes assumptions are as follows:

 

		Fiscal Year Ended
		February 29, 2016				February 28, 2015
Expected life			8 years				8 years
Risk free interest rate			.91% -1.03%				.7% - .97%
Expected volatility			18.73% - 23.72%				23.09% - 53.92%
Expected dividend yield			0%				0%

		Fiscal Year Ended February 28,
		2019			2018
Expected life		8 years			2-8 years
Risk free interest rate		2.47% - 2.98%			1.79% - 2.32%
Expected volatility		24.82% - 28.24%			12.65% - 22.24%
Expected dividend yield		0%			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 freerisk-free interest rate, volatilityrate; 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 years ended February 29, 201628, 2019 and February 28, 2015,2018, net income and earnings per share reflect the actual deduction for stock-based compensation expense. The impact of applying ASC 718 approximated $43,402$30,548 and $42,523$41,728 in additional compensation expense for the years then ended, respectively. Such amount is included in general and administrative expenses on the statement of operations. The expense for stock-based compensation is a non-cash expense item.

 

NOTE 5: INVENTORIES

 

Inventories consist of the following:

 

 

NOTE 6: BUILDINGS, EQUIPMENT, FURNISHINGS AND LEASEHOLD IMPROVEMENTS

 

Equipment, furnishings and leasehold improvements consist of the following:

 

 

Depreciation expense for the years ended February 29, 201628, 2019 and February 28, 20152018 was $465,432$324,381 and $396,576,$382,777, respectively.

 

NOTE 7: ACCRUED EXPENSES

 

Accrued expenses consist of the following:

 

NOTE 8: REVOLVING LINE OF CREDIT

 

The Company has a $750,000$1,500,000 revolving line of credit at prime which was 3.50% at February 29, 2016 and 3.25%5.50% at February 28, 2015.2019 and 4.50% at February 28, 2018. The revolving credit line of credit is collateralized by all of the assets of the Company, except for the landCompany’s accounts receivable and buildings.inventory. The revolving credit line of credit is payable on demand and must be retired for a 30 day30-day period, once annually. If the Company fails to perform the 30 day30-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 month36-month term note with payments including interest in 36 equal installments.

As of February 29, 2016 and28, 2019, $808,000 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 February 28, 2015,2019, there were no outstanding borrowings under the Company’s outstanding balance was $0,line of credit and the unused portion of the credit line was $750,000.$692,000 as of February 28, 2019.

 

NOTE 9: LONG-TERM DEBT

 

Long-term debt consists of the following:

 

		February 29,				February 28,
		2016				2015
Equipment loan, bank, collateralized by related production equipment, payable in monthly installments of principal and interest of $5,158 through June 2015.  Interest rate 2.12%. 48 month term.			—				20,542
Note payable, bank, collateralized by land and buildings, payable in monthly installments of principal and interest of $16,358 through January 2024.  Interest rate 4.15%.  10 year term.			1,319,737				1,457,379
Total long term debt			1,319,737				1,477,921
Due within one year			143,388				158,184
Due after one year		$	1,176,349			$	1,319,737

		February 28,
		2019				2018
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.			870,531				1,026,651
Total long-term debt			870,531				1,026,651
Due within one year			162,816				156,119
Due after one year		$	707,715			$	870,532

 

Long-term debt is payable as follows:

 

Fiscal Year ending February 28,
2017		$	143,388
2018			149,698
2019			156,119
2020			162,817
2021			169,715
Thereafter			538,000
		$	1,319,737

NOTE 10: BANK GUARANTEES

As of February 29, 2016, $72,446 of the Company’s cash on deposit with a foreign bank was being utilized to collateralize guarantees issued by the bank in favor of international customers of the Company to secure cash deposits on orders that have been remitted to the Company. The customers may exercise the guarantees, subject to certain performance requirements being met by the Company. The guarantees expire at various dates in 2016 and 2017.

Fiscal Year ending February 28,
2020			162,816
2021			169,716
2022			177,081
2023			184,677
2024			176,241
		$	870,531

 

NOTE 11:10: COMMITMENTS AND CONTINGENCIES

 

The Company did not have any material commitments or contingencies as of February 29, 2016.28, 2019.

NOTE 11: INCOME TAXES

 

NOTE 12: INCOME TAXES

The annual provision (benefit) for income taxes differs from amounts computed by applying the maximum U.S. Federal income tax rate of 34%21% to pre-tax income as follows:

 

 

The deferred tax asset and liability are comprised of the following:

 

 

At February 29, 201628, 2019 and February 28, 2015,2018, the Company has $102,000 and $51,000had $208,000 of research and development tax credits respectively, being carried forward.

Deferred income taxes have been provided by temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. To the extent allowed by GAAP, the Company provides a valuation allowance against the deferred tax assets for amounts when the realization is uncertain.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act (the “Tax Act”). The Tax Act establishes new tax laws that affects 2018 and future years, including a reduction in the U.S. federal corporate tax rate to 21%, effective March 1, 2018. Tax returns for the prior three years are subject to examination by the IRS.

NOTE 13:12: STOCKHOLDERS’ EQUITY

 

Stock Options– Under the 2013 Stock Incentive Plan, as amended ("2013(the "2013 Plan"), options can be granted to officers, directors, consultants and employees of the Company and its subsidiaries to purchase up to 2,500,000 shares of the Company's common stock. Under the 2013 Plan options expire ten years after the date of grant. As of February 29, 2016,28, 2019, there were 246,600488,000 options outstanding under the 2013 plan.

 

Under the 2003 Stock Incentive Plan, as amended ("2003(the "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 February 29, 2016,28, 2019, there were 217,500100,000 options outstanding under the 2003 Plan, under which no additional options may be granted.

 

Under the 2013 Stock Incentive Plan, option prices must be at least 100% of the fair market value of the common stock at time of grant. For qualified employees, except under certain circumstances specified in the plan or unless otherwise specified at the discretion of the Board of Directors, no option may be exercised prior to one year after date of grant, with the balance becoming exercisable in cumulative installments over a three yearthree-year period during the term of the option, and terminating at a stipulated period of time after an employee's termination of employment.

 

During Fiscal Year 2016,fiscal 2019, the Company granted options to acquire 35,000 shares to employees exercisable at prices from $2.47 to $2.55 and options for 73,50020,000 shares to a member of the board of directors with an exercise price of $3.00. The options vest annually over three years and expire in ten years.

During fiscal 2018, the Company granted options to acquire 110,000 shares to an officer, at an exercise price of $1.06 and options for 20,000 shares exercisable at prices from $1.07$1.15 to $1.17$1.67 to employees of the Company.

During Fiscal Year 2015, the Company granted options for 57,600 shares to officers at an exercise price of $1.19 and options for 10,000 shares exercisable at $1.26 to an employee of the Company.

 

A summary of the activity of both plans for the years ended February 29, 2016fiscal 2019 and February 28, 2015fiscal 2018 is as follows:

 

 

The intrinsic value of the Company’s options exercised during the years ended February 29, 2016fiscal 2019 and February 28, 2015fiscal 2018 was $12,479$111,218 and $110,985,$19,250, respectively.

Information, at date of issuance, regarding stock option grants for the years ended February 29, 2016:fiscal 2019:

 

 

The aggregate intrinsic value of the Company’s outstanding options at February 29, 201628, 2019 and February 28, 20152018 was $176,348$169,608 and $191,542,$233,776, respectively.

 

The following table summarizes information about stock options outstanding and exercisable at February 29, 2016:28, 2019:

 

						Weighted Average
		Number				Remaining Life				Exercise				Number
		Outstanding				in Years				Price				Exercisable
Range of exercise prices:
$.42 to $.50			24,000				6.38			$	0.47				24,000
$.51 to $1.00			171,500				6.22			$	0.63				171,500
$1.01 to $1.40			268,600				8.08			$	1.13				154,320
Total Options:			464,100												349,820

						Weighted Average
			Number			Remaining Life			Exercise				Number
			Outstanding			in Years			Price				Exercisable
Range of exercise prices:
$0.61			95,000			3.69			$	0.61			95,000
$0.91 to $0.97			243,500			7.34			$	0.91			2,500
$1.05			26,000			4.98			$	1.05			26,000
$1.06			110,000			8.22			$	1.06			—
$1.07 to $1.67			58,500			7.08			$	1.27			47,500
$2.47 to $2.55			35,000			9.80			$	2.50			—
$3.00			20,000			9.71			$	3.00			—
Total Options:			588,000										171,000

 

NOTE 14:13: EARNINGS PER SHARE

 

The following table sets forth the computation of basic and diluted earnings per share:

 

NOTE 14: OTHER COMPREHENSIVE INCOME (LOSS)

 

For fiscal 2019, the net unrealized loss on the Company’s available-for-sale marketable securities was approximately $100,000.

As of February 28, 2019, the unrealized gain on the Company’s available-for-sale marketable securities was approximately $1,000.

NOTE 15: OTHER INCOME

Included in other income is the net revenue related to the rental of the Company’s real estate. For fiscal 2019, the Company’s rental revenue was $84,000, expenses were $61,000 and the net profit was $23,000.

For fiscal 2018, the Company’s rental revenue was $78,000, expenses were $59,000 and the net profit was $19,000.

NOTE 15:16: SIGNIFICANT CUSTOMERS AND FOREIGN SALES

 

Export sales to customers located outside the United States were approximately as follows:

 

		February 29,				February 28,
		2016				2015
Western Europe		$	2,789,000			$	2,069,000
Far East			2,981,000				2,147,000
Other			807,000				802,000
		$	6,577,000			$	5,018,000

		February 28,
		2019				2018
Asia Pacific (APAC)			3,659,000				2,464,000
Europe, Middle East, Asia (EMEA)			2,729,000				2,617,000
Latin America			1,172,000				1,112,000
		$	7,560,000			$	6,193,000

 

During Fiscal Years 2016fiscal 2019 and 2015,fiscal 2018, sales to foreign customers accounted for approximately $6,577,000$7,560,000 and $5,018,000,$6,193,000, or 56%65% and 47%56% respectively, of total revenues.

 

One customer accounted for 7%14% of the Company’s sales for Fiscal Year ended February 29, 2016.fiscal 2019.

 

NOTE 16:17: SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events for disclosure purposes.

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: May 25, 201628, 2019

Sono-Tek Corporation

(Registrant)

 

By:/s/ Dr. Christopher L. Coccio

Dr. Christopher L. Coccio,

Chief Executive Officer and Chairman

 

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

/s/ Dr. Christopher L Coccio	May 25, 201628, 2019	/s/ Samuel Schwartz	May 25, 201628, 2019
Christopher L. Coccio		Samuel Schwartz
Chief Executive Officer, Chairman and Director		Director
/s/ Stephen J. Bagley	May 25, 201628, 2019	/s/ Dr. Joseph Riemer	May 25, 201628, 2019
Stephen J. Bagley		Dr. Joseph Riemer
Chief Financial Officer		Vice President and Director
/s/ Edward J. Handler, IIICarol O’Donnell	May 25, 201628, 2019	/s/ Philip A. Strasburg	May 25, 201628, 2019
Edward J. Handler, IIICarol O’Donnell		Philip A. Strasburg
Director		Director
/s/ R. Stephen Harshbarger	May 25, 201628, 2019	/s/ Dr. Donald F. Mowbray	May 25, 201628, 2019
R. Stephen Harshbarger		Donald F. Mowbray
President and Director		Director
/s/ Eric Haskell	May 25, 201628, 2019
Eric Haskell
Director