Sono-Tek Corporation is the leading developer and manufacturer of ultrasonic coating systems for applying precise, thin film coatings to protect, strengthen or smooth surfaces on parts and components for the microelectronics/electronics, alternative energy, medical and industrial markets, including specialized glass applications in construction and automotive. MILTON, N.Y., May 20, 2024 (GLOBE NEWSWIRE) -- Sono-Tek Corporation (NASDAQ: SOTK), the leading developer and manufacturer of ultrasonic coating syst ...

Conference Call Dial-in Information To participate, please call 1-844-481-2752 at least 10 minutes prior to the start of the call and ask to join the Sono-Tek call. Webcast Information A simultaneous webcast of the call may be accessed through the Company's website, Events & Presentations | Sono-Tek, or at https://event.choruscall.com/mediaframe/webcast.html?webcastid=Msi7H3Uz MILTON, N.Y., May 20, 2024 (GLOBE NEWSWIRE) -- Sono-Tek Corporation (NASDAQ: SOTK), the leading developer and manufacturer of ultras ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: November 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No.: 000-16035 (Exact name of registrant as specified in its charter) New York 14-1568099 (State or other jurisdiction of (IRS Employer incorporation or organization) Identificatio ...

Financial Data and Key Metrics - Net sales increased 50% YoY to $5.64 million in Q2 FY2024, up from $3.6 million in Q1 FY2024 [23] - Gross profit increased 48% YoY to $2.8 million, with a gross profit margin of 49.7%, slightly down from 50.4% in the prior year due to product mix [24] - Operating expenses increased 30% YoY to $2.2 million, driven by higher R&D, marketing, and administrative costs [25][26][27] - Operating income surged 218% YoY to $566,000, with operating margins improving to 10% from 5% in the prior year [28] - Net income was $541,000 or $0.03 per share, up from $162,000 or $0.01 per share in Q2 FY2023 [29] - Cash, cash equivalents, and marketable securities stood at $12.3 million as of August 31, 2023, with no debt on the balance sheet [30] Business Line Performance - Multi-axis coating systems sales grew 96% YoY to $2.9 million, driven by demand in clean energy and medical device markets [34] - Integrated coating systems sales doubled to $853,000, supported by the new Float Glass Coating platform [36] - Fluxing systems sales dipped due to tough comparisons with the previous year's strong sales of the SonoFlux X2 platform [37] - OEM sales were lower as partners built up excess inventory, but spare parts and service revenue grew 64% [38] - Service and spare parts revenue from large systems could reach 10%-15% of total order value, contributing to high-margin recurring revenue [39] Market Performance - Clean energy market sales grew 161% YoY, driven by large orders for carbon capture, green hydrogen, and fuel cell applications [40] - Medical device sales rebounded strongly with 117% growth, driven by large multinational companies adopting specialty implantable device coating systems [41] - Industrial sales grew 104% due to new generation systems, including a large float glass coating machine delivered to Latin America [41] - U.S. and Canada sales increased 94% YoY, benefiting from onshoring trends and government initiatives like the CHIPS Act and Inflation Reduction Act [42] - Asia-Pacific sales decreased 35%, primarily due to lower sales in China, though other regions in Asia remained strong [43] Strategic Direction and Industry Competition - The company's strategic shift to larger, complex systems has broadened its addressable market and increased average selling prices, with systems now commonly selling for over $300,000 and reaching up to $1 million or more [14][15] - Investments in R&D totaled $1.4 million in the first half of FY2024, up from $1 million in the year-ago period, supporting product expansion and market growth [20] - Headcount increased by approximately 10%, mainly in engineering, R&D, and sales, to support growth and expansion [20] - The company expects at least 25% YoY sales growth for FY2024, driven by shipments of delayed and new orders [22] Management Commentary on Operating Environment and Future Outlook - Management highlighted the early success of the strategy to shift to larger, more complex systems, with multiple and repeat orders driving growth [21] - The company is confident in its outlook, expecting to return to its pre-COVID growth path, supported by strong demand in clean energy, medical devices, and industrial markets [22] - The backlog reached a record high of $10.7 million, up 26% from six months ago, reflecting increasing order activity, particularly in the clean energy sector [16][44][47] Other Important Information - The company's proprietary ultrasonic coating technology remains central to its systems, with ongoing R&D efforts driving innovation and market expansion [19] - Customer deposits reached $3.4 million, reflecting the receipt of several large new orders, with deposits typically 50% or greater for orders over several hundred thousand dollars [48] Q&A Session Summary Question: EBITDA Comparison - EBITDA for Q2 FY2024 was approximately $994,000, calculated by adding back depreciation and amortization to income before taxes [72] Question: Quarterly Earnings Calls - Management is considering transitioning to quarterly earnings calls, as the current semi-annual format may not fully reflect the company's growth and counter-cyclical performance [73][75] Question: Gross Margin Outlook - Gross margins are expected to improve as the company optimizes costs for new products like the NovoCoat platform and benefits from operational leverage [78][82] Question: Capacity Utilization - The company has sufficient capacity to grow revenue to $25-$30 million within its existing facility, with potential to expand to $40-$45 million by relocating tenants [83][84] Question: Clean Energy and Medical Markets - Growth in clean energy and medical markets was driven by both delayed shipments and new orders, with a 50/50 split between the two [124] - Clean energy growth was primarily in fuel cells, carbon capture, and green hydrogen, while medical growth came from complex implantable device systems [125][128] Question: Backlog Composition - The backlog is heavily weighted towards the clean energy sector, with significant orders like the $2.19 million system and other high-value projects [135][138] - The backlog is split approximately 50/50 between shipments expected in FY2024 and FY2025 [140] Question: Solar Market Potential - The solar market has significant potential, with the company expecting revenue to exceed historical highs of $2-$3 million due to the shift to high-volume production systems [147][148]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: August 31, 2023 OR Securities Registered Pursuant to Section 12(b) of the Act: | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | --- | --- | --- | | Common Stock, $0.01 par value per share | SOTK | NASDAQ | Indicate by check mark whether the registrant (1) has filed a ...

For the quarterly period ended: May 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No.: 000-16035 (Exact name of registrant as specified in its charter) (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) New York 14-156809 ...

Sono-Tek Corporation (NASDAQ:SOTK) Q4 2023 Earnings Conference Call May 25, 2023 10:00 AM ET Company Participants Stephanie Prince - PCG Advisory Christopher Coccio - Chairman and CEO Stephen Bagley - CFO Stephen Harshbarger - President and COO Conference Call Participants Bill Nicklin - Circle N Advisors Ted Jackson - Northland Securities Avi Fisher - Long Cast Advisers Operator Good morning, and welcome to the Sono-Tek Fiscal Year End 2023 Earnings Conference Call. All participants will be in a listen-onl ...

Part I [Business](index=4&type=section&id=Item%201.%20Business) Sono-Tek Corporation is a global leader in designing and manufacturing ultrasonic coating systems for various industries, with **55% of fiscal 2023 sales** from outside the U.S. and Canada - Sono-Tek designs and manufactures ultrasonic coating systems for applying precise, thin film coatings across several key industries: microelectronics/electronics, alternative energy, medical, industrial, and R&D[10](index=10&type=chunk)[20](index=20&type=chunk) - The company's strategy focuses on advancing ultrasonic coating technologies, growing globally, increasing earnings through lean manufacturing, and developing new solutions to solve customer problems[25](index=25&type=chunk)[27](index=27&type=chunk) - In fiscal 2023, international sales (outside the U.S. and Canada) accounted for **55% of total net sales**. The company's two largest customers represented **14% of net sales**[24](index=24&type=chunk)[34](index=34&type=chunk) Research and Development Expenses | Fiscal Year | R&D Expense | % of Sales | | :--- | :--- | :--- | | 2023 | $2,149,000 | 14.3% | | 2022 | $1,730,000 | 10.1% | - As of February 28, 2023, the company employed **73 full-time and 11 part-time employees**[35](index=35&type=chunk) [Risk Factors](index=8&type=section&id=Item%201A.%20Risk%20Factors) The company faces operational, financial, and market risks, including supply chain disruptions, customer concentration, and **limited stock trading volume** - The business is exposed to risks from pandemics like COVID-19, which can disrupt operations, supply chains, and customer demand[38](index=38&type=chunk)[40](index=40&type=chunk) - A significant portion of revenue comes from a few major customers. In FY2023, the two largest customers accounted for **14% of net sales, down from 24% in FY2022**[42](index=42&type=chunk) - The company has experienced challenges in procuring electronic components due to global supply chain shortages, which may continue to cause lengthened lead times[29](index=29&type=chunk)[71](index=71&type=chunk) - All products are manufactured and assembled at a single facility in Milton, New York, making operations vulnerable to disruption at this site[69](index=69&type=chunk) - International sales accounted for **55% of total net sales in FY2023**, exposing the company to risks such as regulatory changes, tariffs, and geopolitical instability[73](index=73&type=chunk) - Inflationary pressures are expected to remain elevated, potentially increasing the company's cost structure for labor, shipping, and materials[78](index=78&type=chunk) - The common stock (SOTK) has **limited trading volume**, which could make it difficult for investors to liquidate their positions[86](index=86&type=chunk) [Unresolved Staff Comments](index=23&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[108](index=108&type=chunk) [Properties](index=23&type=section&id=Item%202.%20Properties) Sono-Tek owns a **50,000 square foot industrial park** in Milton, New York, utilizing **37,000 square feet** for its operations - The company owns a **50,000 square foot industrial park** in Milton, New York, using **37,000 square feet** for its own operations[108](index=108&type=chunk) - Approximately **13,000 square feet** of the park is leased or available for lease to third parties[109](index=109&type=chunk) [Legal Proceedings](index=23&type=section&id=Item%203.%20Legal%20Proceedings) The company reports no legal proceedings - None[110](index=110&type=chunk) [Mine Safety Disclosures](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not Applicable[110](index=110&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=24&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on **Nasdaq Capital Market (SOTK)**, with **97 record holders and approximately 1,519 beneficial shareholders**, and no history of cash dividends, retaining earnings for business use - Common stock trades on the **Nasdaq Capital Market (SOTK)**[112](index=112&type=chunk) - As of May 18, 2023, there were **97 record holders and approximately 1,519 beneficial shareholders**[112](index=112&type=chunk) - The company has no history of paying cash dividends and plans to retain future earnings[112](index=112&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2023 net sales decreased **12% to $15.1 million** due to supply chain issues, while gross profit margin improved and backlog increased **60% to $8.5 million**, despite a **64% drop in operating income** Fiscal 2023 Financial Highlights vs. Fiscal 2022 | Metric | Fiscal 2023 | Fiscal 2022 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | **$15.1M** | **$17.1M** | **($2.0M)** | **(12%)** | | Gross Profit Margin | **50.8%** | **50.3%** | **+0.5 p.p.** | N/A | | Operating Income | **$683,000** | **$1.9M** | **($1.2M)** | **(64%)** | | Backlog (Year-End) | **$8.5M** | **$5.3M** | **+$3.2M** | **60%** | | Cash & Marketable Securities | **$11.4M** | **$10.7M** | **+$0.7M** | **7%** | [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Net sales for fiscal 2023 were $15.1 million, a 12% decrease from $17.1 million in fiscal 2022, primarily due to a 32% drop in Multi-Axis Coating Systems sales, leading to a 64% decline in operating income and 75% fall in net income Sales and Gross Profit (Fiscal Year Ended Feb 28) | | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $15,058,000 | $17,133,000 | $(2,075,000) | (12%) | | Gross Profit | $7,652,000 | $8,613,000 | $(961,000) | (11%) | | Gross Profit % | 50.8% | 50.3% | N/A | N/A | Product Sales Breakdown (Fiscal Year Ended Feb 28) | Product Line | 2023 Sales | 2022 Sales | Change (%) | | :--- | :--- | :--- | :--- | | Fluxing Systems | $1,179,000 | $691,000 | 71% | | Integrated Coating Systems | $1,114,000 | $1,182,000 | (6%) | | Multi-Axis Coating Systems | $6,785,000 | $9,912,000 | (32%) | | OEM Systems | $2,144,000 | $2,381,000 | (10%) | | Other | $3,836,000 | $2,967,000 | 29% | Market Sales Breakdown (Fiscal Year Ended Feb 28) | Market | 2023 Sales | 2022 Sales | Change (%) | | :--- | :--- | :--- | :--- | | Electronics/Microelectronics | $5,509,000 | $7,134,000 | (23%) | | Medical | $3,702,000 | $4,338,000 | (15%) | | Alternative Energy | $3,060,000 | $3,688,000 | (17%) | | Industrial | $2,440,000 | $1,055,000 | 131% | | Emerging R&D and Other | $347,000 | $918,000 | (62%) | Geographic Sales Breakdown (Fiscal Year Ended Feb 28) | Region | 2023 Sales | 2022 Sales | Change (%) | | :--- | :--- | :--- | :--- | | U.S. & Canada | $6,804,000 | $5,480,000 | 24% | | Asia Pacific (APAC) | $3,260,000 | $5,301,000 | (39%) | | Europe, Middle East, Asia (EMEA) | $3,448,000 | $5,255,000 | (34%) | | Latin America | $1,546,000 | $1,097,000 | 41% | [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) Working capital increased to $11.1 million and total cash and securities to $11.4 million at fiscal year-end 2023, driven by net income and customer deposits, with $1.3 million cash from operations and an undrawn $1.5 million credit line Working Capital and Cash Position (as of Feb 28) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Working Capital | $11,117,000 | $10,782,000 | | Cash and cash equivalents | $3,355,000 | $4,841,000 | | Marketable securities | $8,090,000 | $5,868,000 | | **Total Cash & Securities** | **$11,445,000** | **$10,709,000** | - **Stockholders' equity increased by $893,000 to $14.6 million**, primarily due to **net income of $636,000 and stock-based compensation of $257,000**[144](index=144&type=chunk) - The company has a **$1.5 million revolving credit line** and a **$750,000 equipment purchase facility**. As of February 28, 2023, there were no outstanding borrowings under the line of credit[148](index=148&type=chunk) [Critical Accounting Policies](index=30&type=section&id=Critical%20Accounting%20Policies) The company's financial statements adhere to U.S. GAAP, with key policies for income taxes, stock-based compensation, and revenue recognition under ASC 606 - The company uses the asset and liability method for income taxes and recognizes a valuation allowance if a deferred tax asset is not likely to be realized[156](index=156&type=chunk) - Stock-based compensation is valued using the Black-Scholes option pricing model, which requires subjective assumptions about stock price volatility and option life[157](index=157&type=chunk) - Revenue is recognized under ASC 606, depicting the transfer of goods or services to customers for the expected consideration[158](index=158&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of February 28, 2023, with no material changes to internal controls reported - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the fiscal year[162](index=162&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of February 28, 2023[163](index=163&type=chunk) Part III [Directors, Executive Officers, and Corporate Governance](index=33&type=section&id=Item%2010.%20Directors,%20Executive%20Officers,%20and%20Corporate%20Governance) The company's Board of Directors operates with **two classes with staggered two-year terms**, supported by **three independent directors** on the Audit and Compensation Committees, and adheres to a Code of Business Conduct and Ethics - The Board of Directors is classified into **two classes with staggered two-year terms**[168](index=168&type=chunk) - The Audit Committee consists of **three independent directors**: Philip A. Strasburg (Chairman), Carol O'Donnell, and Eric Haskell. Mr. Strasburg is designated as the **'audit committee financial expert'**[169](index=169&type=chunk) - The company has adopted a Code of Business Conduct and Ethics, which is available on its website[196](index=196&type=chunk) [Executive Compensation](index=37&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation for fiscal 2023 included base salaries, bonuses, and stock option awards, with severance provisions and non-employee directors receiving meeting fees and option awards Summary Compensation Table (Fiscal 2023) | Name and Principal Position | Salary ($) | Bonus ($) | Option Awards ($) | All Other Comp. ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Christopher L. Coccio (CEO) | 192,200 | 20,200 | 15,000 | 6,373 | 233,773 | | R. Stephen Harshbarger (President) | 249,200 | 23,000 | 15,000 | 8,167 | 295,367 | | Stephen J. Bagley (CFO) | 174,800 | 18,500 | 7,500 | 5,799 | 206,599 | - Executive agreements provide for **severance payments equal to two years of base, commission, and bonus compensation** in the event of termination following a change of control[207](index=207&type=chunk) - Non-employee directors receive **$2,500 for each meeting attended**. In fiscal 2023, each non-employee director also received **option awards valued at $9,900**[210](index=210&type=chunk)[211](index=211&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=40&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of May 23, 2023, executive officers and directors collectively owned **6.53% of the company's common stock**, with Emancipation Management LLC holding **42.11% of the outstanding shares**, and a new 2023 Stock Incentive Plan proposed Security Ownership of >5% Beneficial Owners (as of May 23, 2023) | Name of Beneficial Owner | Amount Beneficially Owned | Percent | | :--- | :--- | :--- | | Emancipation Management LLC, Charles Frumberg, Circle N Advisors, LLC | 6,628,393 | 42.11% | | V. Adah Nicklin | 915,599 | 5.82% | | Richard A. Bayles | 840,536 | 5.34% | | All Executive Officers and Directors as a Group | 1,034,122 | 6.53% | Equity Compensation Plan Information | Plan Category | Securities to be issued upon exercise | Weighted-average exercise price | Securities available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 250,759 | $4.84 | 1,212,793 | - In May 2023, the Board authorized a new 2023 Stock Incentive Plan to grant **up to 2,500,000 options or shares**, intended to replace the 2013 Plan. The 2023 Plan is subject to shareholder approval[224](index=224&type=chunk) [Principal Accountant Fees and Services](index=42&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) For fiscal 2023, the company incurred **approximately $100,000** in audit fees and **approximately $18,000** in tax fees, all pre-approved by the Audit Committee Accountant Fees (Fiscal 2023) | Service | Firm | Fee | | :--- | :--- | :--- | | Audit Fees | Marcum LLP | ~$100,000 | | Audit Fees | Friedman LLP | ~$46,000 | | Tax Fees | RBSM, LLP | ~$18,000 | - The Audit Committee's policy is to pre-approve all audit and non-audit services, and all such services in fiscal 2023 and 2022 were pre-approved[230](index=230&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=43&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed as part of the Form 10-K, including corporate documents, executive agreements, and certifications Financial Statements and Supplementary Data [Consolidated Financial Statements](index=48&type=section&id=Consolidated%20Financial%20Statements) Consolidated financial statements for fiscal 2023 show **decreased net sales to $15.1 million in FY2023 from $17.1 million in FY2022** and **Net income also decreased significantly to $636,000 from $2.5 million**, while **total assets increased to $20.2 million** and **stockholders' equity to $14.6 million**, with **positive operating cash flow of $1.3 million** Consolidated Statement of Income Highlights (Fiscal Year Ended Feb 28) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Sales | $15,058,203 | $17,132,710 | | Gross Profit | $7,652,007 | $8,612,554 | | Operating Income | $682,991 | $1,889,336 | | Net Income | $635,905 | $2,542,573 | | Diluted EPS | $0.04 | $0.16 | Consolidated Balance Sheet Highlights (as of Feb 28) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Total Current Assets | $16,575,422 | $14,497,599 | | Total Assets | $20,174,718 | $17,625,534 | | Total Current Liabilities | $5,457,895 | $3,715,381 | | Total Stockholders' Equity | $14,633,958 | $13,741,313 | Consolidated Statement of Cash Flows Highlights (Fiscal Year Ended Feb 28) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $1,325,039 | $2,319,167 | | Net Cash Used In Investing Activities | ($2,810,996) | ($1,631,462) | | Net (Decrease) Increase in Cash | ($1,485,957) | $756,480 | [Notes to Consolidated Financial Statements](index=52&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, revenue disaggregation showing **Multi-Axis Coating Systems as the largest contributor at 45% of sales in FY2023**, customer concentrations, and ongoing supply chain risks - Revenue is recognized under ASC 606 when control of equipment is transferred to the customer. The company does not capitalize sales commission costs[292](index=292&type=chunk)[298](index=298&type=chunk) Revenue by Product Line (FY 2023) | Product Line | Revenue | % of Total | | :--- | :--- | :--- | | Multi-Axis Coating Systems | $6,785,000 | 45% | | Other | $3,836,000 | 26% | | OEM Systems | $2,144,000 | 14% | | Fluxing Systems | $1,179,000 | 8% | | Integrated Coating Systems | $1,114,000 | 7% | - In fiscal 2023, **two customers accounted for 14% of sales**. Export sales to customers outside the U.S. and Canada were $8.3 million, or **55% of sales were to foreign customers**[325](index=325&type=chunk)[326](index=326&type=chunk) - The company has a **$1.5 million revolving line of credit**, of which **$1.355 million was unused and available** as of February 28, 2023[315](index=315&type=chunk)[316](index=316&type=chunk) - In fiscal 2022, the company recorded a **gain of $1,005,372 from the forgiveness of its PPP loan**[318](index=318&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: November 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No.: 000-16035 (Exact name of registrant as specified in its charter) New York 14-1568099 (State or other jurisdiction of (IRS Employer incorporation or organization) Identificatio ...

Financial Data and Key Metrics - Revenue for Q2 FY2023 decreased by 8% to $3.8 million due to delayed shipments caused by supply chain challenges [17] - Gross profit decreased by 9% to $1.9 million, with a gross profit margin of 50.4% compared to 51% in the prior year period [18][19] - Operating expenses increased by 6% to $1.7 million, driven by higher employee compensation and travel costs [14][20] - Net income for Q2 was $162,000 or $0.01 per share, down from $344,000 or $0.02 per share in Q2 FY2022 [22] - For the first half of FY2023, total sales increased by 1% to $7.8 million, with gross profit up 3% to $4 million [23][24] Business Line Data and Key Metrics - Fluxing sales grew by 241% in Q2 to $399,000, driven by the launch of the SelectFlux X2 product [30] - OEM sales decreased by 10% in Q2 but grew by 12% for the first half, led by shipments to European partners [31] - Multi-Axis Coating Systems sales decreased by 21% in Q2 and 13% for the first half due to supply chain delays [31] - Industrial market sales grew by 77% in Q2 and 118% for the first half, including the first shipment of a roll-to-roll system [32][33] - Medical sector revenue decreased by 27% in Q2 but increased by 36% for the first half, driven by large U.S.-based medical companies [34] Market Data and Key Metrics - Sales outside the U.S. and Canada accounted for 56% of total sales in Q2, down from 62% in the prior year period [18] - APAC sales decreased by 49% in Q2 and 46% for the first half, primarily due to COVID-19 lockdowns in China [35] - Backlog increased by 19% to $5 million at the end of Q2, driven by new orders from the electronics sector [36] Company Strategy and Industry Competition - The company is focusing on opening new markets in microelectronics, clean energy, and medical devices, leveraging its thin film coating technology [10] - A significant $1.1 million order from the clean energy sector validates the company's investment in this market [11] - The company is expanding its roll-to-roll product handling capabilities, which is expected to become an important product line [12][33] Management Commentary on Operating Environment and Future Outlook - Management expects supply chain challenges to continue impacting deliveries in Q3 but anticipates higher year-over-year sales for FY2023 [16][37] - The company is raising prices to reflect increased labor and material costs, though there is a lag in realizing these increases [15] - Management remains confident in growth opportunities, particularly in semiconductors, medical devices, and clean energy [15][16] Other Important Information - The company has no debt and holds $10.7 million in cash, cash equivalents, and short-term investments as of August 31, 2022 [25] - CapEx for the first half of the year was $244,000, focused on upgrading manufacturing facilities [25] Q&A Session Summary Question: Supply Chain Resolution - The company is addressing supply chain issues by purchasing inventory earlier, engineering solutions, and building subsystems in-house [44][45][46] - Once supply chain issues are resolved, a surge in shipments is expected as delayed orders are fulfilled [47] Question: Customer Lab Visits - Customer visits to the development lab are increasing, particularly from the clean energy sector, with a 75% conversion rate to machine purchases [48][50] Question: Hydrogen Market Opportunity - The company sees significant growth potential in the green hydrogen market, driven by government investments and the need for electrolyzers [56][57][59] - The company's technology is well-positioned to benefit from the growing demand for green hydrogen production [60][61] Question: Q3 Revenue Guidance - The company expects Q3 revenue to be similar to Q2, with potential for delayed shipments to shift into Q3 [68] Question: Operating Expenses - Operating expenses have increased due to higher employee compensation, but the company expects this trend to stabilize as pricing adjustments take effect [70][71] Question: Tax Rate - The drop in the tax rate is due to the application of R&D tax credits and a decrease in earnings before taxes [74][75] Question: Receivables and Inventory - The company expects inventory to grow in the second half of the year as it builds up stock to mitigate supply chain issues [89] - Receivables increased due to customer agreements requiring payment upon installation, but the company expects this to normalize [83][85] Question: Roll-to-Roll Technology - Roll-to-roll technology is used in industries like clean energy and medical devices to increase production efficiency [96][97][99] - The company is investing in this technology to meet growing customer demand for high-volume production [98]