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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-QSB
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(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997.
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-20753
SONICS & MATERIALS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 06-0854713
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4 West Kenosia Avenue
Danbury, CT 06810
(Address of principal executive offices)
Telephone Number (203) 744-4400
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days:
Yes [X] No [ ]
As of November 11, 1997, there were 3,590,100 shares of the Registrant's
Common Stock outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
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PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements *
Consolidated Balance Sheets -
September 30, 1997 and June 30, 1997..................3
Consolidated Statements of Income -
For the Three Months Ended
September 30, 1997 and 1996...........................4
Consolidated Statements of Cash Flows -
For the Three Months Ended
September 30, 1997 and 1996...........................5
Notes to Consolidated Financial Statements...............6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.........................8
Signatures..............................................................9
Index to Exhibits......................................................10
Exhibit 27 - Financial Data Schedule...................................11
* The Balance Sheet at June 30, 1997 has been taken from the audited financial
statements at that date. All other financial statements are unaudited.
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Sonics & Materials, Inc.
CONSOLIDATED BALANCE SHEETS
As of
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
---- ----
(unaudited) *
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 243,347 $ 271,593
Short-term investments 1,665,470 1,665,470
Accounts receivable, net of allowance
for doubtful accounts of $45,000
at June 30, 1997 and $97,000
at September 30, 1997 2,147,896 1,854,118
Inventories 3,874,432 3,718,250
Prepaid income taxes 147,630 150,061
Deferred taxes 80,000 80,000
Other current assets 246,806 137,562
----------- ----------
Total current assets 8,400,145 7,877,054
PROPERTY PLANT & EQUIPMENT - NET 1,776,888 364,354
GOODWILL - NET 1,044,020 -
OTHER ASSETS 581,089 917,709
------------ ----------
$ 11,807,577 $9,159,117
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 1,005,101 $ 500,000
Demand note payable 1,151,488 -
Current maturities of long-term debt 294,614 116,600
Accounts payable 730,711 804,653
Commissions payable 197,019 235,203
Other accrued expenses and sundry liabilities 662,136 278,310
---------- ----------
Total current liabilities 4,041,069 1,934,766
LONG-TERM DEBT, net of current portion 664,156 406,911
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock - par value $.03 per share;
authorized, 10,000,000 shares; issued
and outstanding, 3,590,100 shares at
September 30, 1997, and 3,520,100
shares at June 30, 1997 107,703 105,603
Additional paid in capital 6,766,897 6,539,597
Retained earnings 227,752 172,240
----------- ----------
Total stockholders' equity 7,102,352 6,817,440
----------- ----------
$11,807,577 $9,159,117
============ ==========
</TABLE>
* Taken from the audited financial statements at June 30, 1997.
The accompanying notes are an integral part of these statements.
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Sonics & Materials, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
------------------------
September 30,
-------------
1997 1996
---- ----
<S> <C> <C>
Net sales $3,116,804 $2,536,238
Cost of sales 1,827,658 1,330,404
--------- ---------
Gross profit 1,289,145 1,205,834
Operating expenses
Selling expense 732,173 686,395
General and administrative 307,747 219,987
Research and development 150,502 99,808
--------- ---------
Total operating expenses 1,190,421 1,006,190
Other income (expense)
Interest expense (34,578) (32,549)
Other 7,282 2,250
--------- ---------
(27,296) (30,299)
Income before provision for income taxes 71,428 169,345
Provision for income taxes 15,915 67,738
--------- ---------
Net Income $ 55,513 $ 101,607
========== =========
PRIMARY AND FULLY DILUTED INCOME PER SHARE
Net income per share $.01 $ .02
==== =====
Weighted average number of common and common
equivalent shares outstanding 3,769,393 4,775,870
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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Sonics & Materials, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Three Months Ended September 30,
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net cash used in by operations $ (276,845) $ (450,607)
Net cash used in investing activities (1,382,249) (27,411)
Net cash provided by financing activities 1,630,847 494,000
---------- ----------
Net (decrease) increase in cash for the period (28,246) 15,982
Cash and cash equivalents - at beginning of period 271,593 73,129
---------- ----------
Cash and cash equivalents - at end of period $ 243,347 $ 89,111
========== ==========
Cash paid during the period for:
Interest $ 32,000 $ 31,516
========== ==========
Income taxes $ - $ 20,500
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
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Sonics & Materials, Inc.
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
NOTE 1: Basis of Presentation
The accompanying financial statements for the interim periods are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim periods. These
financial statements should be read in conjunction with the financial statements
and notes thereto, together with the management's discussion and analysis,
contained on Form 10-KSB for the year ended June 30, 1997. The results of
operations for the three months ended September 30, 1997 are not necessarily
indicative of the results for the entire fiscal year ending June 30, 1998.
NOTE 2: Consolidation
The accompanying financial statements for the three months ended September 30,
1997 reflect the consolidated operations of Sonics & Materials, Inc., and its
wholly-owned subsidiary, Tooltex, Inc. All significant intercompany accounts and
transactions have been eliminated in consolidation.
NOTE 3: Net Income Per Share
Net income per share is based on the weighted average number of common and
common equivalent shares (warrants and options) outstanding during the period,
calculated using the treasury stock method.
The weighted average number of shares outstanding for the periods presented is
as follows:
<TABLE>
<CAPTION>
Primary and Fully Diluted
Weighted Shares Outstanding
For the Three Months ended September 30,
------------------------------------------
1997 1996
---- ----
<S> <C> <C>
Weighted average number of common shares
outstanding 3,571,078 3,500,100
Dilution (warrants and options) 198,315 1,275,770
--------- ---------
Weighted average number of common and
common equivalent shares 3,769,393 4,775,870
========= =========
</TABLE>
NOTE 4: Acquisition of Tooltex, Inc.
On July 25, 1997, the Company acquired, through a newly formed wholly-owned
subsidiary, 100% of the stock of Tooltex, Inc. ("Tooltex"). Tooltex is a
manufacturer of automated systems used in the plastics industry. The
shareholders received, in exchange for 100% of the stock of Tooltex, (i) an
aggregate of 70,000 shares of the Company's common stock, par value $.03 per
share, (ii) $70,000 and (iii) options to purchase 10,000 shares of the Company's
common stock. The purchase price was allocated to the assets acquired based on
their estimated fair value. The excess total acquisition costs over the fair
value of the net assets acquired of approximately $1,057,000 is to be amortized
on a straight line bases over 20 years. For the three months ended September 30,
1996, the Company had sales to Tooltex of approximately $28,000. At the time of
the acquisition, the Company had a receivable of approximately $254,000 from
Tooltex. The sales and results of operations of Tooltex for the period from July
1, 1997, to July 25, 1997 were not material.
The following unaudited pro forma consolidation for the three months ended
September 30, 1996, shows the results of operations, assuming that the purchase
had occurred on July 1, 1996. The unaudited pro forma results are not
necessarily indicative of what actually would have occurred if the acquisition
had been in effect for the entire period. In addition, they are not intended to
be a projection of future results.
Revenues 3,231,861
Net Loss from operations 56,365
Net Loss per share $.02
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Sonics & Materials, Inc.
Notes to Consolidated Financial Statements (Continued)
September 30, 1997
(Unaudited)
NOTE 5: Future effect of recently issued accounting pronouncements. In
February 1997, the Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share," which is effective
for financial statements for both interim and annual periods ending after
December 15, 1997. Early adoption of the new standard is not permitted. The new
standard eliminates primary and fully diluted earnings per share and requires
presentation of basic and diluted earnings per share together with disclosure of
how the per share amounts were computed. The pro forma effect of adopting the
new standard would be basic earnings per share of $.01 and $.03 and diluted
earnings per share of $.01 and $.02 for the three months ended September 30,
1997 and 1996 respectively.
NOTE 6: Financing.
On September 19, 1997, the Company entered into three facilities with a bank
(the "Bank"), each of which is secured by a first mortgage lien on property the
Company acquired in Newtown, CT: (i) a Bridge Loan in the original principal
amount of $1,600,000; (ii) a Line of Credit in the original principal amount of
up to $1,500,000; and (iii) a Term Loan in the original principal amount of
$427,000.
The Bridge Loan bears interest at the Bank's base lending rate plus one-half
percent. The principal balance of the Bridge Loan, which at September 30, 1997
was $1,600,000, will mature and be due and payable upon the earliest to occur of
(i) the written demand of the Bank, (ii) the consummation of the IRB Loan, or
(iii) December 31, 1997. Subject to certain terms and conditions, the Bank has
agreed to make an IRB Loan in the aggregate principal amount of up to $2,945,000
to be issued through the Connecticut Development Authority, the proceeds of
which will be used to refinance the Bridge Loan, pay any remaining costs on the
Newtown Property for Sonics' use and occupancy and for purchasing or
manufacturing equipment. Sonics expects to close the IRB Loan on or before
December 31, 1997. The principal of the Bridge Loan may be repaid in whole or in
part, without premium or penalty, at any time.
The Line of Credit is used by the Company for working capital. The Line of
Credit bears interest, at Sonics' option, at the Bank's base lending rate or
LIBOR plus 2.5%. Advances under the Line of Credit are at the Bank's sole
discretion. The entire principal balance of the Line of Credit, which at
September 25, 1997 was $992,000, will mature and be due and payable upon the
demand of the Bank. The borrowings under the Line of Credit may be prepaid in
whole or in part, without premium or penalty, at any time. In the event of the
prepayment of any portion of the Line of Credit during any period in which the
Line of Credit bears interest at a LIBOR rate, Sonics will be obligated to pay
the Bank a breakage fee relating to the LIBOR interest component. The Line of
Credit is also secured by all of the Company's assets.
The proceeds of the Term Loan were used to pay in full a term loan with another
bank with interest and principal totaling $427,000. The term loan with the other
bank bore interest at such bank's loan pricing rate of interest plus one-half
percent. The current outstanding principal amount of the Term Loan is $427,000,
which bears interest, at Sonics' option, at the Bank's base lending rate of
LIBOR plus 2.5%. The principal of the Term Loan must be paid in 36 equal monthly
installments of $11,861.11, commencing on November 1, 1997 and the entire
remaining principal balance will mature and be due and payable on October 1,
2000. The terms and conditions under which Sonics may prepay all or any portion
of the Term Loan are the same as for the Line of Credit discussed above. The
Term Loan is also secured by all of the Company's assets.
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Any statements in this filing that are not statements of historical fact are
forward-looking statements that are subject to a number of uncertainties that
could cause actual results to differ materially. Specifically, any forward
looking statements in this filing related to the Company's objectives of future
growth, profitability and financial returns are subject to a number of risks and
uncertainties, including, but not limited to, risks related to a growing market
demand for Sonics' existing and new products, continued growth in sales and
market share of Sonics and its Ultra Sonic Seal division products, pricing,
market acceptance of existing and new products, a fluctuation in the sales
product mix, general economic conditions, competitive products, and product and
technology development. There can be no assurance that such objectives will be
achieved. The Company's objectives of future growth, profitability and financial
returns are also subject to the uncertainty of Vibra-Surge Corporation being
able to successfully market its ultrasonic surgical device. It is also uncertain
whether a patent will be granted for the Company's ultrasonic surgical device,
or whether any related patent litigation may hinder the Company's ability to
market the device. In addition, the Company's objectives of future growth,
profitability, and financial returns are also subject to the uncertainty of the
growth and profitability of its wholly owned subsidiary, Tooltex. The Company
undertakes no obligation to release date hereof or the reflect the occurrence of
unanticipated events.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
The following information should be read in conjunction with the
unaudited financial statements included herein, see Item 1, and the financial
information contained in the Company's latest annual report on Form 10-KSB for
the year ended June 30, 1997.
RESULTS OF OPERATIONS
Three months ended September 30, 1997 compared to the three months ended
September 30, 1996.
Net sales. Net sales for the quarter ended September 30, 1997 increased
$581,000 or 22.9% over the same period in fiscal 1997. This increase is the
result of the effect of the acquisition and consolidation of Tooltex, Inc.,
combined with slight increased volume in domestic markets for the Company's
ultrasonic welding equipment
Cost of Sales. Cost of sales increased from 52.5% of sales for the three
months ended September 30, 1996 to 58.6% of sales for the three months ended
September 30, 1997. This increase in the cost of sales percentage is partially
attributable to the acquisition and consolidation of Tooltex. In addition, Cost
of Sales for the quarter ended September 30, 1997 was 56.6% of sales, excluding
the effect of Tooltex, compared to 52.5% for the same quarter last year. This
increase is attributable to increased costs associated with the manufacture of
the vibration welder associated with the introduction of the product to the
market recognized in the first quarter combined with the effect of the product
mix in the first quarter.
Selling Expenses. Selling expenses for the first quarter of fiscal 1998
increased $46,000 or 6.7% over the same period in fiscal 1997. As a percentage
of net sales selling expenses decreased from 27.1% to 23.5% over the same
periods. This decrease in selling expenses as a percentage of net sales is a
result of the Company increasing its net sales through the acquisition and
consolidation of Tooltex, with only a slight corresponding increase in selling
expenses. Excluding the effect of Tooltex, expenses also decreased from 27.1% of
sales in the first quarter of fiscal 1997 to 25.7% of sales in the first quarter
of fiscal 1998.
General and Administrative Expenses. General and administrative expenses
for the first quarter of fiscal 1998 increased $88,000 or 39.9% over the first
quarter of fiscal 1997. As a percentage of net sales, these expenses increased
to 9.9% from 8.7% over the same period in fiscal 1997. This increase is
primarily attributable to regular increases in salaries.
Research and Development Expenses. Research and development expenses
increased $51,000 or 50.8% over the same period in fiscal 1997. The increase was
primarily due to that department's increased use of outside consulting services
for several development projects.
Interest Expense. Interest expense for the three months ended September
30, 1997 increased by approximately $2,000 or 6.2% over the three months ended
September 30, 1996. This slight increase is due to slightly higher average
borrowings on the Company's line of credit in the first quarter of fiscal 1998.
The Company expects interest expense to increase in future quarters due to the
new credit facilities discussed in Liquidity and Capital Resources.
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LIQUIDITY AND CAPITAL RESOURCES
Operations of the Company used approximately $277,000 during the three months
ended September 30, 1997 as a result of increasing inventory while paying down
accounts payable balances. During the first quarter of fiscal 1998, the Company
invested approximately $16,000 in new capital equipment and leasehold
improvements and $1,289,000 in land and a building that will be used to
consolidate the Company's manufacturing and office facilities. As of June 30,
1997, the Company's working capital was $5,942,000. As of September 30, 1997,
the Company's working capital had decreased to 4,359,000 representing an
decrease of approximately 26.6%. This decrease is the result of increased short
term debt resulting from increased borrowings under it's line of credit by
approximately $505,000 and a short term bridge loan in the amount of $1,151,000
that will be repaid with proceeds from a bond issue.
The Company's principal credit line is a $1,500,000 bank credit facility.
On September 19, 1997, the Company entered into three facilities with a bank
(the "Bank"), each of which is secured by a first mortgage lien on property the
Company acquired in Newtown, CT: (i) a Bridge Loan in the original principal
amount of $1,600,000; (ii) a Line of Credit in the original principal amount of
up to $1,500,000; and (iii) a Term Loan in the original principal amount of
$427,000.
The Bridge Loan bears interest at the Bank's base lending rate plus one-half
percent. The principal balance of the Bridge Loan, which at September 30, 1997
was $1,600,000, will mature and be due and payable upon the earliest to occur of
(i) the written demand of the Bank, (ii) the consummation of the IRB Loan, or
(iii) December 31, 1997. Subject to certain terms and conditions, the Bank has
agreed to make an IRB Loan in the aggregate principal amount of up to $2,945,000
to be issued through the Connecticut Development Authority, the proceeds of
which will be used to refinance the Bridge Loan, pay any remaining costs on the
Newtown Property for Sonics' use and occupancy and for purchasing or
manufacturing equipment. Sonics expects to close the IRB Loan on or before
December 31, 1997. The principal of the Bridge Loan may be repaid in whole or in
part, without premium or penalty, at any time.
The Line of Credit is used by the Company for working capital. The Line of
Credit bears interest, at Sonics' option, at the Bank's base lending rate or
LIBOR plus 2.5%. Advances under the Line of Credit are at the Bank's sole
discretion. The entire principal balance of the Line of Credit, which at
September 25, 1997 was $992,000, will mature and be due and payable upon the
demand of the Bank. The borrowings under the Line of Credit may be prepaid in
whole or in part, without premium or penalty, at any time. In the event of the
prepayment of any portion of the Line of Credit during any period in which the
Line of Credit bears interest at a LIBOR rate, Sonics will be obligated to pay
the Bank a breakage fee relating to the LIBOR interest component. The Line of
Credit is also secured by all of the Company's assets.
The proceeds of the Term Loan were used to pay in full a term loan with another
bank with interest and principal totaling $427,000. The term loan with the other
bank bore interest at such bank's loan pricing rate of interest plus one-half
percent. The current outstanding principal amount of the Term Loan is $427,000,
which bears interest, at Sonics' option, at the Bank's base lending rate of
LIBOR plus 2.5%. The principal of the Term Loan must be paid in 36 equal monthly
installments of $11,861.11, commencing on November 1, 1997 and the entire
remaining principal balance will mature and be due and payable on October 1,
2000. The terms and conditions under which Sonics may prepay all or any portion
of the Term Loan are the same as for the Line of Credit discussed above. The
Term Loan is also secured by all of the Company's assets.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
<TABLE>
<S> <C>
3(i) Certificate of Incorporation of the Registrant, as amended. (Previously
filed as Exhibit 3.1 of Amendment No. 3 to Registration Statement No.
33-96414)
3(ii) Amended By-laws of the Registrant. (Previously filed as Exhibit 3.2 of
Registration Statement No. 33-96414)
10(i) Form of Employment Agreement between the Registrant and Robert S. Soloff.
(Previously filed as Exhibit 10.1 of Registration Statement No. 33-96414)
10(ii) 1995 Incentive Stock Option Plan and form of Stock Option Agreement.
(Previously filed as Exhibit 10.3 of Registration Statement No. 33-96414)
10(iii) Original Office Lease and Amendments between the Registrant and Nicholas
R. DiNapoli, Jr. DBA DiNapoli Holding Co. (Danbury, CT). (Previously
filed as Exhibit 10.4 of Registration Statement No. 33-96414)
10(iv) Lease between Registrant and Aston Investment Associates (Aston, PA).
(Previously filed as Exhibit 10.5 of Registration Statement No. 33-96414)
10(v) Amended lease between Registrant and Robert Lenert (Naperville, IL).
(Previously filed as Exhibit 10.6 of Amendment No. 4 to Registration
Statement No. 33-96414)
10(vi) Lease between Registrant and Janine Berger (Gland, Switzerland).
(Previously filed as Exhibit 10.7 of Registration Statement No. 33-96414)
10(vii) Form of Sales Representation Agreement. (Previously filed as Exhibit 10.8
of Registration Statement No. 33-96414)
10(viii) Form of Sales Distribution Agreement. (Previously filed as Exhibit 10.9
of Registration Statement No. 33-96414)
10(ix) Consulting Agreement dated October 17, 1995 between the Registrant and
Alan Broadwin. (Previously filed as Exhibit 10.10 of Amendment No. 3 of
Registration Statement No. 33-96414)
10(x) Agreement and Plan of Merger, dated as of July 25, 1997,
among the Registrant, SM Sub, Inc., Tooltex, Inc. and the
persons designated as the shareholders thereon (excluding
schedules and annexes). A list of omitted schedules and
annexes appears on pages iv and v of the Agreement and Plan
of Merger. The Registrant hereby undertakes to furnish
supplementally a copy of any omitted schedule and annex to
the Commission upon request. (incorporated by reference from
Exhibit 2(a) of the Registrant's Form 8-K dated July 25,
1997).
10(xi) Agreement of Merger dated July 25, 1997, among the
Registrant, SM Sub, Inc., and Tooltex, Inc. (incorporated by
reference from Exhibit 2(b) of the Registrant's 8K dated July
25, 1997).
10(xii) Credit Agreement, dated September 19, 1997 between Brown Brothers Harriman
& Co. and Registrant (filed with Registrant's 10KSB dated September 25,
1997).
10(xiii) Term Loan Note of Registrant dated September 19, 1997,
payable to the order of Brown Brothers Harriman & Co. in the
original principal amount of $427,000 (filed with
Registrant's 10KSB dated September 25, 1997).
10(xiv) Line of Credit Note of Registrant dated September 19, 1997,
payable to the order of Brown Brothers Harriman & Co. in the
original principal amount of $1,500,000 (filed with
Registrant's 10KSB dated September 25, 1997).
10(xv) Bridge Loan Note of Registrant dated September 19, 1997,
payable to the order of Brown Brothers Harriman & Co. in the
original principal amount of $1,600,000 (filed with
Registrant's 10KSB dated September 25, 1997).
10(xvi) Open-End Mortgage Deed from Registrant to Brown Brothers Harriman & Co.
dated September 19, 1997 (filed with Registrant's 10KSB dated September
25, 1997).
10(xvii) General Security Agreement from Registrant to Brown Brothers Harriman &
Co. dated September 19, 1997 (filed with Registrant's 10KSB dated
September 25, 1997).
27 Financial Data Schedule. (Filed Herewith)
</TABLE>
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(b) The Company filed a Form 8-K on July 25, 1997, reporting the acquisition of
Tooltex, Inc. The Company filed an amendment to the Form 8-K on October 8,
1997, including in it Audited financial statements for Tooltex, Inc. and
unaudited pro forma consolidated statements for Sonics & Materials, Inc.
and Tooltex, Inc.
(c) On July 25, 2997, the Company acquired Tooltex, Inc., an Ohio corporation
("Tooltex"), through a merger transaction (the "Merger"). Pursuant to an
Agreement and Plan of Merger dated July 25, 1997, (the "Plan of Merger"),
among the Company, SM Sub, Inc., an Ohio corporation and wholly owned
subsidiary of Sonics ("Sonics Sub"), Tooltex, and the shareholders of
Tooltex, (the "Tooltex Shareholders"), Tooltex was merged with and into
Sonics Sub. Under the Plan of Merger, the shareholders of Tooltex received,
in exchange for 100% of the stock of Tooltex, (i) an aggregate of 70,000
shares of Sonics Common Stock, pare value $.03 per share, (the "Common
Stock"), (ii) $70,000 and (iii) options to purchase 10,000 shares of Sonics
Common Stock (the "Options"). There were no underwriters involved in the
transaction and no underwriting commissions were paid. The Tooltex
Shareholders receiving the Sonics' Common Stock and Options were Paul
Spurgeon and Benjamin Egelhoff, both residents of the State of Ohio, the
sole shareholders of Tooltex and the President and Vice-President of
Tooltex, respectively.
In selling the Common Stock and the Options, the Company relied upon
Section 4(2) of the Securities Act of 1933, as amended. In relying upon
such exemption, the Company considered the limited number of offerees and
purchasers of the securities (two), the private nature of the transaction,
the level of negotiation between the parties, the delivery to the Tooltex
Shareholders of all documents filed by the Company under the Securities
Exchange Act of 1934, as amended, the availability of the officers of
Sonics to the Tooltex Shareholders, limitations on transfer placed by the
Company on the Common Stock and Options, and certain investment
representations of the Tooltex Shareholders made in the Plan of Merger.
Each Tooltex Shareholder received an Option to purchase 5,000 share of
Common Stock. Such Options are exercisable commencing two years after the
Merger (and in certain circumstances prior to this date) and terminating 10
years after the Merger at an exercise price equal to the last closing price
of the Company's Common Stock on the date of the Merger as reported on
Nasdaq, or $2.94 per share. Under certain circumstances, these options may
terminate prior to the expiration date.
(d) In connection with the Company's initial public offering, on June 20, 1996,
the Company filed with the Securities and Exchange Commission (the "SEC") a
Form SR reporting the use of proceeds from such offering. Additional Forms
SR were subsequently filed by the Company. There have been no changes to
the information filed in the most recent Form SR
<PAGE>
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SONICS & MATERIALS, INC.
Date: November 14, 1997 By /s/ ROBERT S. SOLOFF
---------------------- ------------------------
Robert S. Soloff
President, Chief Executive Officer,
Chief Financial Officer
<PAGE>
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Location of Exhibit in
No. Description Sequential Numbering System
--- ----------- ----------------------------
<S> <C> <C>
3(i) Certificate of Incorporation of the Registrant, as Previously filed as Exhibit 3.1 of
amended. Amendment No. 3 to Registration
Statement No. 33-96414
3(ii) Amended By-laws of the Registrant. Previously filed as Exhibit 3.2 of
Registration Statement No. 33-96414
10(i) Form of Employment Agreement between the Previously filed as Exhibit 10.1 of
Registrant and Robert S. Soloff. Registration Statement No. 33-96414
10(ii) 1995 Incentive Stock Option Plan and form of Stock Previously filed as Exhibit 10.3 of
Option Agreement. Registration Statement No. 33-96414
10(iii) Original Office Lease and Amendments between the Previously filed as Exhibit 10.4 of
Registrant and Nicholas R. DiNapoli, Jr. DBA Registration Statement No. 33-96414
DiNapoli Holding Co. (Danbury, CT).
10(iv) Lease between Registrant and Aston Investment Previously filed as Exhibit 10.5 of
Associates (Aston, PA). Registration Statement No. 33-96414
10(v) Amended lease between Registrant and Robert Lenert Previously filed as Exhibit 10.6 of
(Naperville, IL). Amendment No. 4 to Registration
Statement No. 33-96414
10(vi) Lease between Registrant and Janine Berger (Gland, Previously filed as Exhibit 10.7 of
Switzerland). Registration Statement No. 33-96414
10(vii) Form of Sales Representation Agreement. Previously filed as Exhibit 10.8 of
Registration Statement No. 33-96414
10(viii) Form of Sales Distribution Agreement. Previously filed as Exhibit 10.9 of
Registration Statement No. 33-96414
10(ix) Consulting Agreement dated October 17, 1995 Previously filed as Exhibit 10.10 of
between the Registrant and Alan Broadwin. Amendment No. 3 of Registration
Statement No. 33-96414
10(x) Agreement and Plan of Merger, dated as of July 25, Incorporated by reference from Exhibit
1997, among the Registrant, SM Sub, Inc., Tooltex, 2(a) of the Registrant's Form 8-K
Inc. and the persons designated as the dated July 25, 1997.
shareholders thereon (excluding schedules and
annexes). A list of omitted schedules and annexes
appears on pages iv and v of the Agreement and
Plan of Merger. The Registrant hereby undertakes
to furnish supplementally a copy of any omitted
schedule and annex to the Commission upon request.
10(xi) Agreement of Merger dated July 25, 1997, among the Incorporated by reference from Exhibit
Registrant, SM Sub, Inc., and Tooltex, Inc. 2(b) of the Registrant's 8K dated July
25, 1997.
10(xii) Credit Agreement, dated September 19, 1997 between Previously filed with Registrant's
Brown Brothers Harriman & Co. and Registrant 10KSB dated September 25, 1997.
10(xiii) Term Loan Note of Registrant dated September 19, Previously filed with Registrant's
payable to the order of Brown Brothers 10KSB dated September 25, 1997.
Harriman & Co. in the original principal amount of
$427,000
10(xiv) Line of Credit Note of Registrant dated September Previously filed with Registrant's
payable to the order of Brown Brothers 10KSB dated September 25, 1997.
Harriman & Co. in the original principal amount of
$1,500,000
10(xv) Bridge Loan Note of Registrant dated September 19, Previously filed with Registrant's
payable to the order of Brown Brothers 10KSB dated September 25, 1997.
Harriman & Co. in the original principal amount of
$1,600,000
10(xvi) Open-End Mortgage Deed from Registrant to Brown Previously filed with Registrant's
Brothers Harriman & Co. dated September 19, 1997 10KSB dated September 25, 1997.
10(xvii) General Security Agreement from Registrant to Previously filed with Registrant's
Brown Brothers Harriman & Co. dated September 19, 10KSB dated September 25, 1997.
1997
27 Financial Data Schedule. Filed Herewith
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AT SEPTEMBER 30, 1997 AND FROM THE INCOME
STATEMENT FOR THE 3 MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 243,347
<SECURITIES> 1,665,470
<RECEIVABLES> 2,147,896
<ALLOWANCES> 97,000
<INVENTORY> 3,874,432
<CURRENT-ASSETS> 8,440,145
<PP&E> 1,776,888
<DEPRECIATION> 0
<TOTAL-ASSETS> 11,807,577
<CURRENT-LIABILITIES> 4,041,069
<BONDS> 0
0
0
<COMMON> 107,703
<OTHER-SE> 6,994,649
<TOTAL-LIABILITY-AND-EQUITY> 11,807,577
<SALES> 3,116,804
<TOTAL-REVENUES> 3,116,804
<CGS> 1,827,658
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,578
<INCOME-PRETAX> 71,428
<INCOME-TAX> 15,915
<INCOME-CONTINUING> 55,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,513
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
