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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
---------------
FORM 10-QSB
---------------
(Mark One)
|X| Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1999
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.)
53 Church Hill Road
Newtown, Connecticut 06470
(Address of principal executive offices)
Telephone Number (203) 270-4600
(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:
|X| Yes |_| No
As of May 11, 1999, there were 3,520,100 shares of the Registrant's common
stock outstanding.
Transitional Small Business Disclosure Format (Check one):
|_| Yes |X| No
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<PAGE>
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements *
Consolidated Condensed Balance Sheets -
March 31, 1999 and June 30, 1998 ............................... 3
Consolidated Condensed Statements of Operations -
For the Three and Nine Months Ended
March 31, 1999 and 1998 ........................................ 4
Consolidated Condensed Statements of Cash Flows -
For the Nine Months Ended
March 31, 1999 and 1998 ........................................ 5
Notes to Consolidated Condensed Financial Statements ............... 6
Item 2. Management's Discussion and Analysis or Plan of Operations ..... 7
PART II - OTHER INFORMATION
Item 2. Change in Securities ........................................... 11
Item 6. Exhibits and Reports on Form 8-K ............................... 11
Signatures ............................................................. 12
Index to Exhibits ...................................................... 13
Exhibit 27 - Financial Data Schedule ................................... 14
* The Balance Sheet at June 30, 1998 has been taken from the audited financial
statements at that date. All other financial statements are unaudited.
<PAGE>
Sonics & Materials, Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
As of
<TABLE>
<CAPTION>
March 31, June 30,
1999 1998
---- ----
(unaudited) *
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 154,296 $ 503,305
Short-term investments, including restricted funds
of $400,000 at June 30, 1998 and March31, 1999 500,000 750,000
Accounts receivable, net of allowance for doubtful accounts
of $112,000 at June 30, 1998 and March 31, 1999 2,164,488 2,370,960
Inventories 4,568,643 4,457,841
Other current assets 470,857 129,287
------------ ------------
Total current assets 7,858,284 8,211,393
PROPERTY PLANT & EQUIPMENT - NET 4,213,528 4,409,920
GOODWILL - NET 1,012,921 1,054,547
RESTRICTED CASH FROM INDUSTRIAL REVENUE BOND 184,891 309,371
OTHER ASSETS 774,751 692,584
------------ ------------
$ 14,044,375 $ 14,677,815
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 1,465,101 $ 1,465,101
Current maturities of long-term debt 447,027 354,978
Accounts payable 691,351 1,004,351
Customer Advances 160,078 327,355
Commissions payable 162,702 123,676
Other accrued expenses and sundry liabilities 433,178 600,270
------------ ------------
Total current liabilities 3,359,437 3,875,731
LONG-TERM DEBT, net of current portion 3,998,097 4,345,700
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock - par value $.07 per share; authorized, 10,000,000 shares;
issued and outstanding, 3,520,100 shares at March 31, 1999
and June 30, 1998 105,603 105,603
Additional paid in capital 6,575,010 6,575,010
Accumulated deficit 6,228 (224,229)
------------ ------------
Total stockholders' equity 6,686,841 6,456,384
------------ ------------
$ 14,044,375 $ 14,677,815
============ ============
</TABLE>
* Taken from the audited financial statements at June 30, 1998.
The accompanying notes are an integral part of these statements
3
<PAGE>
Sonics & Materials, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
-------------------------- -------------------------
1999 1998 1999 1998
----------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Net sales $ 3,323,453 $ 2,990,272 $ 9,684,831 $ 8,922,039
Cost of sales 2,020,665 1,784,302 5,767,851 5,139,179
----------- ----------- ----------- -----------
Gross profit 1,302,788 1,205,970 3,916,980 3,782,860
Operating expenses
Selling expense 686,812 806,612 2,202,724 2,421,431
General and administrative 337,547 382,346 930,191 1,009,583
Research and development 87,005 141,347 276,677 440,600
----------- ----------- ----------- -----------
Total operating expenses 1,111,364 1,330,305 3,409,592 3,871,614
Other income (expense)
Interest income 18,639 70,959 48,556 124,089
Interest expense (95,448) (23,872) (315,078) (138,609)
Other (5,042) (971) (10,409) 72,506
----------- ----------- ----------- -----------
(81,851) 46,116 (276,931) 57,986
Income (loss) before provision for
income taxes 109,573 (78,219) 230,457 (30,768)
Provision (benefit) for income taxes -- (3,918)
----------- ----------- ----------- -----------
Net Income (loss) $ 109,573 $ (74,301) $ 230,457 $ (30,768)
=========== =========== =========== ===========
INCOME (LOSS) PER SHARE - BASIC
Net income (Loss) per share $ .03 $ (.02) $ .07 $.(01)
=========== =========== =========== ===========
Weighted average number of shares
outstanding 3,525,631 3,590,100 3,529,163 3,583,759
=========== =========== =========== ===========
INCOME (LOSS)PER SHARE - DILUTED
Net income (loss) per share $ .03 $ (.02) $ .07 $ (.01)
=========== =========== =========== ===========
Weighted average number of shares
outstanding 3,525,631 3,590,100 3,529,163 3,583,759
=========== =========== =========== ===========
</TABLE>
4
<PAGE>
Sonics & Materials, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
For the Nine Months Ended March 31,
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Net cash used in operations $ (279,780) $ (801,894)
Net cash provided by (used in) investing activities 186,325 (2,707,033)
Net cash provided by (used in) financing activities (255,554) 3,311,842
----------- -----------
Net decrease in cash for the period (349,009) (197,085)
Cash and cash equivalents - at beginning of period 503,305 271,593
----------- -----------
Cash and cash equivalents - at end of period $ 154,296 $ 74,508
=========== ===========
Cash paid during period for:
Interest $ 340,428 $ 134,527
=========== ===========
Income taxes $ -- $ --
=========== ===========
</TABLE>
5
<PAGE>
Sonics & Materials, Inc.
Notes to Consolidated Condensed Financial Statements
March 31, 1999
(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, 1998. The results of
operations for the three and nine months ended March 31, 1999 are not
necessarily indicative of the results for the entire fiscal year ending June 30,
1999.
NOTE 2: Consolidation
The accompanying financial statements reflect the consolidated operations of
Sonics & Materials, Inc., its wholly owned subsidiary, Tooltex, Inc., and Vibra
Surge Inc. All significant intercompany accounts and transactions have been
eliminated in consolidation.
NOTE 3: Income tax
The Company has not accrued a provision for income tax for the nine-months ended
March 31, 1999 due to the offsetting reduction in deferred tax valuation
allowance established in fiscal 1998. For income tax purpose, the Company has
sufficient net operating loss carryforward available to offset taxable income
generated to date.
6
<PAGE>
Any statements in this filing that are not statements of historical fact are
forward-looking statements that are subject to a number of important risks and
uncertainties that could cause actual results to differ materially.
Specifically, any forward looking statements in this filing related to the
Company's objective for 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 USS products,
pricing, market acceptance of existing and new products, a fluctuation in the
sales product mix, general economic conditions, competitive products, and
product 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, specifically
in light of the recent patent litigation settlement between Mentor Corp. and
Misonix, Inc. 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. It is also
uncertain whether the Company's recent cost cutting measures will result in
increased profitability.
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, 1998.
RESULTS OF OPERATIONS
Three months ended March 31, 1999 compared to the three months ended March 31,
1998.
Net sales. Net sales for the quarter ended March 31, 1999 increased
$333,000 or 11.1% over the quarter ended March 31, 1998. This increase is
primarily the result of increased domestic sales generated by Sonics.
Cost of Sales. Cost of sales increased from 59.7% of net sales for the
three months ended March 31, 1998 to 60.8% of sales for the three months ended
March 31, 1999. This increase is primarily the result of increased sales
generated by Vibra~Surge, and Tooltex. Vibra~Surge manufactures ultrasonic
surgical devices and Toolbox primarily manufactures custom machinery, each of
which typically have a lower profit margin than the machinery manufactured by
Sonics.
Selling Expenses. Selling expenses for the third quarter of fiscal 1999
decreased $120,000 or 14.9% over the same period in fiscal 1998. As a percentage
of net sales, selling expenses decreased from 27.0% to 20.7% over the same
periods. This is in large part the result of the cost cutting measures
implemented by the Company in the first quarter of fiscal 1999.
General and Administrative Expenses. General and administrative expenses
for the third quarter of fiscal 1999 decreased $45,000 or 11.7% over the third
quarter of fiscal 1998. As a percentage of net sales, these expenses decreased
slightly, from 12.7% to 10.2% over the same periods. This decrease is primarily
the result of a decrease in professional fees and legal costs.
Research and Development Expenses. Research and development expenses
decreased $54,000 or 38.5% over the same period in fiscal 1998. The decrease was
primarily due to a reduction in outside consulting.
Interest Income. Interest income for the third quarter of fiscal 1999
decreased by $52,000 over the same period in fiscal 1998. In December of 1997,
the Company received the proceeds from the Industrial Revenue Bond issue and
invested those proceeds in short-term investments. The proceeds were eventually
used in the purchase and renovation of the Company's current facilities. (See
Liquidity and Capital Resources.)
7
<PAGE>
Interest Expense. Total interest expense for the third quarter of fiscal
1999 increased by $72,000 or 299.8% over the same period in fiscal 1998. This is
due to increased debt carried by the Company in connection with the purchase of
real property in Newtown, Connecticut.
Other Income. Other income for the three months ended March 31, 1999
decreased $6,000 or 419.3% over the same period in fiscal 1998. This is due to
the expiration of a sublease at a facility no longer being rented by Sonics.
Income Taxes. The absence of a provision in the third quarter of fiscal
1999 resulted from a reduction in the deferred tax valuation allowance
established in fiscal 1998. For income tax purposes the Company has sufficient
net operating loss carryforward available to offset taxable income generated to
date.
Nine months ended March 31, 1999 compared to the nine months ended March 31,
1998.
Net sales. Net sales for the nine months ended March 31, 1999 increased
$763,000 or 8.5% over the same period in fiscal 1998. This increase is primarily
the result of increased domestic sales generated by Sonics and the company's
wholly owned subsidiary, Tooltex, Inc.
Cost of Sales. Cost of sales increased from 57.6% of net sales for the
nine months ended March 31, 1998 to 59.6% of sales for the nine months ended
March 31, 1999. This increase is primarily the result of increased sales
generated by Vibra~surge, and Tooltex.
Selling Expenses. Selling expenses for the first three-quarters of fiscal
1999 decreased $219,000 or 9.0% over the same period in fiscal 1998. As a
percentage of net sales, selling expenses decreased from 27.1% to 22.7% over the
same periods. This is in large part the result of the cost cutting measures
implemented by the Company in the first quarter of fiscal 1999.
General and Administrative Expenses. General and administrative expenses
for the first three-quarters of fiscal 1999 decreased $79,000 or 7.9% over the
first three-quarters of fiscal 1998. As a percentage of net sales, these
expenses decreased from 11.3% to 9.6% over the same periods. This decrease is
partially the result of salary reductions as well as decreased professional fees
and legal costs.
Research and Development Expenses. Research and development expenses
decreased $164,000 or 36.6% over the same period in fiscal 1998. The decrease
was primarily due to a reduction in outside consulting.
Interest Income. Interest income for the first three-quarters of fiscal
1999 decreased by $76,000 over the same period in fiscal 1998. In December of
1997, the Company received the proceeds from the Industrial Revenue Bond issue
and invested those proceeds in short-term investments. The proceeds were
eventually used in the purchase and renovation of the Company's current
facilities. (See Liquidity and Capital Resources.)
Interest Expense. Total interest expense increased for the first
three-quarters of fiscal year 1999 by $176,000 or 127.3%. This is due to
increased debt carried by the Company in connection with the purchase of real
property in Newtown, Connecticut.
Other Income. Other income for the nine months ended March 31, 1999
decreased $83,000 or 114.4% compared to the nine months ended March 31, 1998. In
the second quarter of fiscal 1998 the Company recognized approximately $62,000
resulting in the forgiveness by Tooltex vendors of debts owed. No such
forgiveness was granted in the current fiscal year.
Income Taxes. The absence of a provision in the 9 months ended March 31,
1999 resulted from a reduction in the deferred tax valuation allowance
established
8
<PAGE>
in fiscal 1998. For income tax purposes, the Company has sufficient net
operating loss carryforwards available to offset taxable income generated to
date.
LIQUIDITY AND CAPITAL RESOURCES
Operations of the Company used approximately $280,000 during the nine months
ended March 31, 1999 as a result of increased inventory accompanied by a
reduction of accounts receivable and offset by reduction of accounts payable.
During the first three-quarters of fiscal 1999, the Company invested
approximately $64,000 in new capital equipment. The Company was able to raise
the funds necessary for these expenditures through the sale of certain
short-term investments and the financing activities described below.
On September 19, 1997, the Company entered into a new credit arrangement with a
bank and repaid loans outstanding with its previous lender. The agreement, as
amended on October 13, 1998, provides for four credit facilities, including (i)
a Bridge Loan in the original principal amount of $1,600,000, (ii) a Line of
Credit of up to $1,500,000, (iii) a term loan of $427,000, and (iv) a tax-exempt
industrial development loan in the aggregate amount of $3,810,000. The loans are
secured by substantially all of the assets of the Company, including a first
mortgage lien on the Company's manufacturing facility in Newtown, CT.
The Bridge Loan, which carried interest at the Bank's base lending rate plus
one-half percent, was repaid in full in December 1997.
The Company's principal outside source of working capital is a $1,500,000 bank
credit facility. The Line of Credit bears interest, as amended, at the Bank's
base lending rate (7.75% at March 31, 1999). Advances under the Line of Credit
are at the Bank's sole discretion. The entire principal balance of the Line of
Credit, which at March 31, 1999 was $1,465,101, 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.
The proceeds of the Term Loan refinanced a term loan with another bank with
interest and principal totaling $427,000. The outstanding principal amount of
the Term Loan at March 31, 1999 was $270,015, which bears interest, as amended,
at the Bank's base lending rate (7.75% at March 31, 1999). The remaining balance
is to be paid in monthly installments of $6,279 and the entire remaining
principal balance will mature and be due and payable on October 1, 2002. 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.
In December 1997, the Company issued Industrial Revenue Bonds through the
Connecticut Development Authority in the amount of $3,810,000. The outstanding
principal amount of the Industrial Revenue Bond at March 31, 1999 was
$3,793,289, which bears interest at a rate of 5.81%. The bonds were purchased by
the Company's current lender pursuant to the credit agreement. The proceeds were
used in part to (i) pay in full the outstanding interest and principal due on
the Bridge Loan discussed above (ii) purchase and preparation of the Company's
new facilities, and (iii) to purchase new machinery and equipment. The Company
has used a total of $3,208,000 of the proceeds for these purposes through March
31, 1999. Unapplied funds have been invested in short-term securities and are to
be used to repay interest and principal due under the Industrial Revenue Bond.
The Bonds, held by the Bank, mature in November 2017, and bear interest at 75%
of the Bank's base lending rate (5 4/5% at March 31, 1999). In January 1999, the
Company began to redeem the principal in 228 equal monthly installments of
$16,700. The bondholder, however, may make written demand for redemption of all
or a part of outstanding principal and accrued interest commencing in December
2000. In connection with the IRB loan, the Company maintains a compensating
balance of $400,000 with the Bank. These funds are invested in U. S. Treasury
Bonds.
Tooltex's principal credit facility is a term note in the original principal
amount of $461,000, and is guaranteed by the Company. The loan is payable in
forty-eight monthly installments of $9,604 plus interest at the prime rate plus
1 1/2%. The outstanding principal of the note at March 31, 1999 was $259,000.
The loan is secured by a first lien on the assets of Tooltex and is subject to
various covenants.
The Company instituted cost cutting measures in the form of lay-offs effective
September 25, 1998. In total, the Company reduced staffing by 11 people, or 9%,
through these lay-offs and attrition, primarily in the manufacturing and sales
departments.
9
<PAGE>
Management has initiated a company-wide program to prepare the Company's
computer systems and applications for the year 2000, as well as identify
critical third parties, which the Company relies upon to operate its business to
assess their readiness for the year 2000. Management has determined that the
main computer systems that the Company relies upon to manage its operations are
year 2000 compliant. In addition, since the Company's products do not have an
internal date/clock, the year 2000 bug does not affect them. The Company has not
had the need to incur any material costs in preparation for the year 2000.
Management cannot presently estimate any future costs of this program; however
such costs are not currently expected to be material to the Company's operations
or financial condition. The Company is currently contacting its major vendors to
assess their readiness for the year 2000. Presently, the Company is not aware of
any key vendors or customers, whose potential inability to achieve year 2000
compliance in time would have a material adverse effect to the operations of the
Company. There can be no assurance, however, that the systems of other companies
which the Company's systems rely upon will be timely converted, or that such
failure to convert by another company would not have a material adverse effect
on the Company's systems and results of operations.
10
<PAGE>
PART II - OTHER INFORMATION
Item 2. Change in Securities.
(d) The Company completed its initial public offering of securities pursuant
to a registration statement (No. 33 96414) that was declared effective on
February 26, 1996. As of April 1, 1999, the Company has applied proceeds
from the offering in the following approximate amounts to the following
categories.
Amount of Payments
------------------
Repayment of Indebtedness $1,670,000
Acquisition of other business 92,000
Working capital and corporate use 2,071,000
----------
Total $3,833,000
==========
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3(i) Certificate of Incorporation of the Registrant, as amended
(incorporated by reference from Exhibit 3.1 of Amendment No. 3 to
Registration Statement No. 33-96414).
3(ii) Amended By-laws of the Registrant (incorporated by reference from
Exhibit 3.2 of Registration Statement No. 33-96414).
10(i) Form of Employment Agreement between the Registrant and Robert S.
Soloff (incorporated by reference from Exhibit 10.1 of Registration
Statement No. 33-96414).
10(ii) 1995 Incentive Stock Option Plan and form of Stock Option Agreement
(incorporated by reference from Exhibit 10.3 of Registration
Statement No. 33-96414).
10(iii) Lease between Registrant and Aston Investment Associates (Aston, PA)
(incorporated by reference from Exhibit 10.5 of Registration
Statement No. 33-96414).
10(iv) Amended lease between Registrant and Robert Lenert (Naperville, IL)
(incorporated by reference from Exhibit 10.6 of Amendment No. 4 to
Registration Statement No. 33-96414).
10(v) Lease between Registrant and Janine Berger (Gland, Switzerland)
(incorporated by reference from Exhibit 10.7 of Registration
Statement No. 33-96414).
10(vi) Form of Sales Representation Agreement (incorporated by reference
from Exhibit 10.8 of Registration Statement No. 33-96414).
10(vii) Form of Sales Distribution Agreement (incorporated by reference from
Exhibit 10.9 of Registration Statement No. 33-96414).
10(viii) 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(ix) Agreement of Merger, dated as of July 25, 1997, among the
Registrant, SM Sub, Inc. and Tooltex, Inc. (incorporated by
reference from Exhibit 2(b) of the Registrant's Form 8-K dated July
25, 1997).
10(x) Credit Agreement, dated September 19, 1997, between Brown Brothers
Harriman & Co. and Registrant (incorporated by reference from
Exhibit 10 (xii) of the Registrant's Form 10KSB for the year ended
June 30, 1997).
10(xi) 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 (incorporated by reference from Exhibit 10 (xiii)
of the Registrants Form 10KSB for the year ended June 30, 1997).
10(xii) 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 (incorporated by reference from
Exhibit 10 (xiv) of the Registrants Form 10KSB for the year ended
June 30, 1997).
10(xiii) Intentionally deleted
10(xiv) Open-End Mortgage Deed from Registrant to Brown Brothers Harriman &
Co. dated September 19, 1997 (incorporated by reference from Exhibit
10 (xvi) of the Registrants Form 10KSB for the year ended June 30,
1997).
10(xv) General Security Agreement from Registrant to Brown Brothers
Harriman & Co. dated September 19, 1997 (incorporated by reference
from Exhibit 10 (xvii) of the Registrants Form 10KSB for the year
ended June 30, 1997).
10(xvi) Loan Agreement between Connecticut Development Authority and Sonics
& Materials dated December 1, 1997 (incorporated by reference from
Exhibit 10 (xvi) of the Registrants Form 10KSB for the year ended
June 30, 1998).
10(xvii) Indenture of Trust between Connecticut Development Authority and
Sonics & Materials, Inc. dated December 1, 1997 (incorporated by
reference from Exhibit 10 (xvii) of the Registrants Form 10KSB for
the year ended June 30, 1998).
10(xviii) Tax Regulatory Agreement between Connecticut Development Authority
and Sonics & Materials, Inc., and Brown Brothers Harriman Trust
Company as Trustee dated December 12, 1997 (incorporated by
reference from Exhibit 10 (xvii) of the Registrants Form 10KSB for
the year ended June 30, 1998).
21 Subsidiaries of the Registrant (incorporated by reference from
Exhibit 21 of the Registrants Form 10KSB for the year ended June 30,
1998).
27 Financial Data Schedule (filed herewith).
11
<PAGE>
(b) The Company filed a Form 8-K on April 27, 1999, reporting the Company's
delisting from the Nasdaq SmallCap Market for failure to satisfy the minimum bid
maintenance requirement and the minimum market capitalization maintenance
requirement. The Company also reported its subsequent listing on the Over The
Counter Bulletin Board (OTCBB).
12
<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: May 14, 1999 By /s/ ROBERT S. SOLOFF
---------------------------- -----------------------------------
Robert S. Soloff
President, Chief Executive Officer,
Chief Financial Officer
13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Location of Exhibit in
No. Description Sequential Numbering System
<S> <C> <C>
3(i) Certificate of Incorporation of the Incorporated by reference from Exhibit
Registrant, as amended. 3.1 of Amendment No. 3 to Registration
Statement No. 33-96414
3(ii) Amended By-laws of the Registrant. Incorporated by reference from Exhibit
3.2 of Registration Statement No. 33-96414
10(I) Form of Employment Agreement between the Incorporated by reference from Exhibit
Registrant and Robert S. Soloff. 10.1 of Registration Statement No. 33-96414
10(ii) 1995 Incentive Stock Option Plan and form Incorporated by reference from Exhibit
of Stock Option Agreement. 10.3 of Registration Statement No. 33-96414
10(iii) Lease between Registrant and Aston Incorporated by reference from Exhibit
Investment Associates (Aston, PA). 10.5 of Registration Statement No. 33-96414
10(iv) Amended lease between Registrant and Incorporated by reference from Exhibit
Robert Lenert (Naperville, IL). 10.6 of Amendment No. 4 to Registration
Statement No. 33-96414
10(v) Lease between Registrant and Janine Berger Incorporated by reference from 10.7 of
(Gland, Switzerland). Registration Statement No. 33-96414
10(vi) Form of Sales Representation Agreement. Incorporated by reference from Exhibit
10.8 of Registration Statement No. 33-96414
10(vii) Form of Sales Distribution Agreement. Incorporated by reference from Exhibit
10.9 of Registration Statement No. 33-96414
10(viii) Agreement and Plan of Merger, dated as of Incorporated by reference from Exhibit
July 25, 1997, among the Registrant, SM 2(a) of Registrant's Form 8-K dated July
Sub, Inc., Tooltex, Inc., and the persons 25, 1997
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. .
10(ix) Agreement of Merger, dated as of July 25, Incorporated by reference from Exhibit
1997, among the Registrant, SM Sub, Inc. 2(b) of the Registrant's Form 8-K dated
and Tooltex, Inc. July 25, 1997).
10(x) Credit Agreement, dated September 19, Incorporated by reference from Exhibit
1997, between Brown Brothers Harriman & 10 (xii) of the Registrant's Form 10-KSB
Co. and Registrant for the year ended June 30, 1997
10(xi) Term Loan Note of Registrant, dated Incorporated by reference from Exhibit
September 19, 1997, payable to the order 10 (xiii) of the Registrant's Form
of Brown Brothers Harriman & Co. in the 10-KSB for the year ended June 30, 1997
original principal amount of $427,000.
10(xii) Line of Credit Note of Registrant, dated Incorporated by reference from Exhibit
September 19, 1997, payable to the order 10 (xiii) of the Registrant's Form
of Brown Brothers Harriman & Co. in the 10-KSB for the year ended June 30, 1997
original principal amount of $1,500,000.
10(xiii) Intentionally deleted
10(xiv) Open-End Mortgage Deed from Registrant to Incorporated by reference from Exhibit
Brown Brothers Harriman & Co. dated 10 (xiv) of the Registrant's Form 10-KSB
September 19, 1997. for the year ended June 30, 1997
10(xv) General Security Agreement from Registrant Incorporated by reference from Exhibit
to Brown Brothers Harriman & Co. dated 10 (xvii) of the Registrant's Form
September 19, 1997. 10-KSB for the year ended June 30, 1997
10(xvi) Loan Agreement between Connecticut Incorporated by reference from Exhibit
Development Authority and Sonics & 10 (xvi) of the Registrants Form 10-KSB
Materials dated December 1, 1997 for the year ended June 30, 1998
10(xvii) Indenture of Trust between Connecticut Incorporated by reference from Exhibit
Development Authority and Sonics & 10 (xvii) of the Registrants Form 10-KSB
Materials, Inc. dated December 1, 1997 for the year ended June 30, 1998
10(xviii) Tax Regulatory Agreement between Incorporated by reference from Exhibit
Connecticut Development Authority and 10 (xviii) of the Registrants Form
Sonics & Materials, Inc., and Brown 10-KSB for the year ended June 30, 1998
Brothers Harriman Trust Company as Trustee
dated December 12, 1997
21 Subsidiaries of the Registrant Incorporated by reference from Exhibit
21 of the Registrants Form 10-KSB for
the year ended June 30, 1998
27 Financial Data Schedule. Filed herewith
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AT MARCH 31, 1999 AND FROM THE INCOME STATEMENT FOR THE
3 AND 9 MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1998
<CASH> 154,296
<SECURITIES> 500,000
<RECEIVABLES> 2,164,488
<ALLOWANCES> 112,000
<INVENTORY> 4,568,643
<CURRENT-ASSETS> 7,858,284
<PP&E> 4,213,528
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,044,375
<CURRENT-LIABILITIES> 3,359,437
<BONDS> 0
0
0
<COMMON> 105,603
<OTHER-SE> 6,581,238
<TOTAL-LIABILITY-AND-EQUITY> 14,044,375
<SALES> 9,684,831
<TOTAL-REVENUES> 9,684,831
<CGS> 5,767,851
<TOTAL-COSTS> 3,409,592
<OTHER-EXPENSES> 6,003
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 282,934
<INCOME-PRETAX> 230,457
<INCOME-TAX> 0
<INCOME-CONTINUING> 230,457
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 230,457
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
