What changed in this filing

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Item 1. Business

2024-05-23 compared with 2023-05-25 · 84 added, 132 removed, 801 unchanged (21% of the section changed)

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in September 1998 and have been recertified annually since then.

Our fiscal year ends on February 28.

We refer to the fiscal year ended

February 28, 2023 as “fiscal 2023” and use similar protocol for previous fiscal years.

Our fiscal year ends on February 28, except in leap years when it

ends on February 29.

We refer to the fiscal year ended February 29, 2024 as “fiscal 2024” and use similar protocol for previous

fiscal years.

Our Products, Markets and Customers

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Systems provide complete fully integrated solutions for our customers, while we created the Universal Align to offer our customers subsystems

that integrate our nozzles and generators that they can then incorporate into their original equipment.

that integrate our nozzles and generators for incorporation into their original equipment.

We have built our brand and reputation on providing high quality,

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Printed circuit boards:

Ultrasonic flux application removes oxidation and is more efficient than standard, historic processes

Ultrasonic flux application that removes oxidation and is more efficient than standard, historic processes

Semiconductors:

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Our systems provide coatings of chemicals and other materials that act as catalysts, barriers, facilitators of symbiosis or other interactions between surfaces.

Carbon Capture

Green Hydrogen

Emerging Research and Development / Other Markets

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of raw materials or components used in the manufacture of our products.

However, since the onset of the COVID-19 pandemic, we have encountered

challenges in procuring supplies of various materials and components, and electronic components in particular, due to well-documented

shortages and constraints in the global supply chain.

Lead times for ordered components may vary significantly, and some components used

to manufacture our products are provided by a limited number of sources.

We have experienced lengthened lead times throughout our supply

chain as a result of supply chain constraints and material shortages that have occurred through fiscal year 2023.

Generally, except in instances of pandemic related supply chain issues,

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and Canada accounted for approximately $8,822,000, or 45% of total net sales, and $8,254,000, or 55% of total net sales, respectively.

Our two largest customers accounted for 14% of net sales in fiscal

As of February 29, 2024, we employed 82 full-time and 12 part-time

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On our site, we

provide copies of our Forms 8-K, 10-K, 10-Q, Proxy and Annual Report as soon as reasonably practicable after filing electronically

such material with the SEC.

provide copies of our Forms 8-K, 10-K, 10-Q, Proxy and Annual Report 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.

RISKS RELATED TO OUR BUSINESS AND OPERATIONS

Ongoing impacts from COVID-19 or another

pandemic, epidemic or outbreak of an infectious disease may materially and adversely impact our business, prospects, financial condition

and operating results.

The COVID-19 pandemic has adversely impacted our

business, and it, as well as other possible health pandemics, epidemics or outbreaks, may materially and adversely impact our business,

prospects, financial condition and operating results in the future.

Our engineering and product development operations, among others,

cannot all be conducted in a remote working structure and often require on-site access to materials and equipment.

We have customers with

international operations in varying industries.

We also depend on suppliers and manufacturers worldwide.

We are currently experiencing

disruptions and delays in our supply chain.

Depending upon the duration of the ongoing effects of the COVID-19 pandemic, which may linger

for some time even if significant health risks abate, our customers, suppliers, manufacturers and partners may suspend or delay their

engagement with us or take other actions or experience their own negative impacts, any of which could result in a material adverse effect

on our financial condition and ability to meet current timelines.

The COVID-19 pandemic has adversely affected and may continue to adversely

affect our ability to recruit skilled employees to join our team and to meet our product development timelines.

Our response to the ongoing

COVID-19 pandemic and its ongoing impacts on our supply chain and business activities may prove to be inadequate, and we may be unable

to operate in the manner necessary to avoid interruptions, reputational harm and delays in our product development and shipments, any

of which could have a material adverse effect on our business, prospects, financial condition and operating results.

In addition, pre-COVID-19

supply chain, economic and business conditions may not ever return.

To the extent COVID-19 continues to impact our

business, financial position and results of operations, it may also have the effect of heightening certain of the other risks described

in this Annual Report on Form 10-K, such as those relating to our international operations and global strategies and our dependence on

third-party suppliers.

We do not have long-term commitments for significant revenues

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such procedures will effectively limit our credit risk and avoid losses.

We will need to raise additional funds to develop our business,

We may need to raise additional funds to develop our business,

which may adversely affect our future growth.

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expect to continue to derive a substantial portion of sales from outside the U.S.

The uncertain macroeconomic environment caused by the

outbreak of COVID-19 may adversely affect our results and could have a negative impact on demand for our products.

In addition, we are

currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical

instability due to the ongoing military conflict between Russia and Ukraine.

Our business, financial condition and results of operations

could be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in

Ukraine or any other geopolitical tensions.

In addition, we are currently operating in a period

of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing

military conflict between Russia and Ukraine.

Our business, financial condition and results of operations could be materially adversely

affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical

tensions such as regional instability from the conflict between Israel and Hamas.

Customers or suppliers may experience cash flow

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disruptions due to labor shortages to date, we have observed an overall tightening and increasingly competitive labor market.

labor shortage or increased turnover rates within our employee base, whether caused by COVID-19 or as a result of general macroeconomic

factors, could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees,

and could negatively affect our ability to complete our projects according to the required schedule or otherwise efficiently operate our

If we are unable to hire and retain employees capable of performing at a high level, or if mitigation measures we may take to

respond to a decrease in labor availability, such as overtime and third-party outsourcing, have unintended negative effects, our business

could be adversely affected.

An overall labor shortage, lack of skilled labor, increased turnover or labor inflation, caused by COVID-19

or as a result of general macroeconomic factors, could have a material adverse impact on our operations, results of operations, liquidity

or cash flows.

labor shortage or increased turnover rates within our employee base as a result of general macroeconomic factors, could lead to increased

costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees, and could negatively affect

our ability to complete our projects according to the required schedule or otherwise efficiently operate our business.

If we are unable

to hire and retain employees capable of performing at a high level, or if mitigation measures we may take to respond to a decrease in

labor availability, such as overtime and third-party outsourcing, have unintended negative effects, our business could be adversely affected.

An overall labor shortage, lack of skilled labor, increased turnover or labor inflation, caused by COVID-19 or as a result of general

macroeconomic factors, could have a material adverse impact on our operations, results of operations, liquidity or cash flows.

If we are unable to manage our expected growth, our business

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We expect to expand our operations, including

by expanding our internal resources, making acquisitions and entering into new markets, and we intend to continue to focus on rapid growth,

including organic growth and possibly acquisitions.

The growth of our business could place significant strain on our management, operational

and financial resources.

To manage our future growth, we could be required to improve existing or implement new operational or financial

systems, procedures and controls or expand, train and manage a growing employee base.

Our failure to accomplish any of these tasks could

materially and adversely affect our business.

Even if we are successful in integrating future acquisitions into our existing operations,

we may not derive the benefits, such as operational or administrative synergies, that we expected from such acquisitions, which may result

in the investment of our capital resources without realizing the expected returns on such investment.

by expanding our internal resources, making possible acquisitions and entering into new markets, and we intend to continue to focus on

rapid growth, including organic growth and possibly acquisitions.

The growth of our business could place significant strain on our management,

operational and financial resources.

To manage our future growth, we could be required to improve existing or implement new operational

or financial systems, procedures and controls or expand, train and manage a growing employee base.

Our failure to accomplish any of these

tasks could materially and adversely affect our business.

Even if we are successful in integrating future acquisitions into our existing

operations, we may not derive the benefits, such as operational or administrative synergies, that we expected from such acquisitions,

which may result in the investment of our capital resources without realizing the expected returns on such investment.

Our inability to protect our intellectual property rights could

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render our products, systems, and technology uncompetitive or obsolete.

Even if we do successfully respond to technological advances, the

integration of new technology may require substantial time and expense, and we cannot assure you that we will succeed in adapting our

products, systems and technology in a timely and cost-effective manner.

Even if we do successfully respond to technological advances,

the integration of new technology may require substantial time and expense, and we cannot assure you that we will succeed in adapting

our products, systems and technology in a timely and cost-effective manner.

If we are unable to continue to develop new and enhanced products

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The successful development and market acceptance of our products and systems, depends on a number of factors, including:

the impact of the COVID-19 pandemic on the global markets;

the changing requirements and preferences of the potential customers in our markets;

the accurate prediction of market requirements, including regulatory issues;

the accurate prediction of market requirements, including any regulatory issues;

the timely completion and introduction of new products and systems to avoid obsolescence;

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Any prolonged disruption in the operations of our manufacturing and assembly facility,

whether due to the COVID-19 pandemic, equipment or information technology infrastructure failure, labor difficulties, destruction of or

whether equipment or information technology infrastructure failure, labor difficulties, prolonged health emergencies, destruction of or

damage to this facility as a result of a hurricane, earthquake, fire, flood, other catastrophes, and other operational problems would

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are provided by a limited number of sources.

We have experienced lengthened lead times throughout our supply chain as a result of supply

chain constraints and material shortages that have occurred in the recent months, and may continue through fiscal year 2024.

We may rely on sub-contractors to meet current demand for our

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and the failure to manage these risks could harm our business.

In addition to our net sales to customers within the U.S.

and Canada, we may become increasingly

dependent on net sales to customers outside the U.S.

and Canada as we pursue expanding our business with customers worldwide.

In the fiscal

years ended February 28, 2023 and 2022, our net sales outside of the U.S.

and Canada accounted for approximately 55% and 68%, respectively,

of our total net sales.

We continue to expect that a significant portion of our future revenues will be from international sales.

result, the occurrence of any international, political, economic, or geographic event could result in a significant decline in revenue.

There are significant risks associated with conducting operations internationally, requiring significant financial commitments to support

such operations.

These numerous and sometimes conflicting laws and regulations include internal control and disclosure rules, data privacy

and filtering requirements, anti-corruption laws, such as the Foreign Corrupt Practices Act, and other local laws prohibiting corrupt

payments to governmental officials, and anti-competition regulations, among others.

In addition to our net sales to customers within

and Canada, we may become increasingly dependent on net sales to customers outside the U.S.

and Canada as we pursue expanding

our business with customers worldwide.

In the fiscal years ended February 29, 2024 and February 28, 2023, our net sales outside of the

and Canada accounted for approximately 45% and 55%, respectively, of our total net sales.

We continue to expect that a significant

portion of our future revenues will be from international sales.

As a result, the occurrence of any international, political, economic,

or geographic event could result in a significant decline in revenue.

There are significant risks associated with conducting operations

internationally, requiring significant financial commitments to support such operations.

These numerous and sometimes conflicting laws

and regulations include internal control and disclosure rules, data privacy and filtering requirements, anti-corruption laws, such as

the Foreign Corrupt Practices Act, and other local laws prohibiting corrupt payments to governmental officials, and anti-competition regulations,

among others.

Violations of these laws and regulations could

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or agents will not violate our policies.

Some of the risks and challenges of

conducting business internationally include:

the impact of COVID-19 on the global markets;

Some of the risks and challenges of conducting

business internationally include:

requirements or preferences for domestic products or solutions, which could reduce demand for our products;

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Inflation rose sharply beginning in late 2021

and continued rising through 2022 at levels not seen for over 40 years.

Although the Federal Reserve has significantly increased interest

rates in response to rising inflation, inflationary pressures are currently expected to remain elevated throughout 2023.

Small to medium-sized

businesses may be impacted more during periods of high inflation as they are not as able to leverage economics of scale to mitigate cost

pressures compared to larger businesses.

Inflation has the potential to adversely affect our liquidity, business, financial condition

and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in

the prices we charge our customers.

The existence of inflation in the economy has resulted in, and may continue to result in, higher interest

rates and capital costs, shipping costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects.

and continued rising through 2022, leveling off in 2023 at rates not seen for over 40 years.

Although the Federal Reserve has significantly

increased interest rates in response to rising inflation, inflationary pressures are currently expected to remain elevated throughout

Small to medium-sized businesses may be impacted more during periods of high inflation as they are not as able to leverage economics

of scale to mitigate cost pressures compared to larger businesses.

Inflation has the potential to adversely affect our liquidity, business,

financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate

increases in the prices we charge our customers.

The existence of inflation in the economy has resulted in, and may continue to result

in, higher interest rates and capital costs, shipping costs, supply shortages, increased costs of labor, weakening exchange rates and

other similar effects.

As a result of inflation, we have experienced and may continue to experience, cost increases.

Although we may take measures to mitigate

the impact of this inflation, if these measures are not effective our business, financial condition, results of operations and liquidity

could be materially adversely affected.

Even if such measures are effective, there could be a difference between the timing of when these

beneficial actions impact our results of operations and when the cost inflation is incurred.

Although we may take

measures to mitigate the impact of this inflation, if these measures are not effective our business, financial condition, results of operations

and liquidity could be materially adversely affected.

Even if such measures are effective, there could be a difference between the timing

of when these beneficial actions impact our results of operations and when the cost inflation is incurred.

We could become liable for damages resulting from our manufacturing

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Our board of directors has the power to issue

additional shares of common without stockholder approval.

additional shares of common stock without stockholder approval.

Additional shares are subject to issuance through various equity compensation

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our quarterly operating and financial results;

litigation or public concern about the safety of our products;

litigation or public concern about the safety of our systems or products;

the impact of inflation;

war in Ukraine;

the effect of COVID-19.

wars in Ukraine or Gaza;

The realization of any of these risks and other

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In particular:

· We may be unable to access funds in our investment

portfolio, deposit accounts and clearing accounts on a timely basis to settle our payments or to make money transfers.

Any resulting need

to access other sources of liquidity or short-term borrowing would increase our costs.

Any delay or inability to settle our payments or

to make money transfers could adversely impact our business, financial condition and results of operations.

· In the event of a major bank failure, we could

face major risks to the recovery of our bank deposits used for the purpose of settling our payments and to the recovery of a significant

portion of our investment portfolio.

A substantial portion of our cash, cash equivalents and interest-bearing deposits are either held

at financial institutions that are not subject to insurance protection against loss or exceed the deposit insurance limit.

· We may be unable to borrow from financial institutions

or institutional investors on favorable terms, which could adversely impact our ability to pursue our growth strategy and fund key strategic

We may be unable to access funds in our investment portfolio, deposit accounts and clearing accounts on a timely basis to settle our payments or to make money transfers.

Any resulting need to access other sources of liquidity or short-term borrowing would increase our costs.

Any delay or inability to settle our payments or to make money transfers could adversely impact our business, financial condition and results of operations.

In the event of a major bank failure, we could face major risks to the recovery of our bank deposits used for the purpose of settling our payments and to the recovery of a significant portion of our investment portfolio.

A substantial portion of our cash, cash equivalents and interest-bearing deposits are either held at financial institutions that are not subject to insurance protection against loss or exceed the deposit insurance limit.

We may be unable to borrow from financial institutions or institutional investors on favorable terms, which could adversely impact our ability to pursue our growth strategy and fund key strategic initiatives.

If financial liquidity deteriorates, there can

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business