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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 December 31, 1998
OR
|_| Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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:
Yes |X| No |_|
As of February 10, 1999, there were 3,520,100 shares of the Registrant's
Common Stock outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes |_| No |X|
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<PAGE>
PART I - FINANCIAL INFORMATION Page No.
Item 1. Financial Statements *
Consolidated Condensed Balance Sheets -
December 31, 1998 and June 30, 1998.......................3
Consolidated Condensed Statements of Operations -
For the Three and Six Months Ended
December 31, 1998 and 1997................................4
Consolidated Condensed Statements of Cash Flows -
For the Six Months Ended
December 31, 1998 and 1997................................5
Notes to Consolidated Condensed Financial Statements.........6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results 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>
December 31, June 30,
1998 1998
---- ----
(unaudited) *
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 175,202 $ 503,305
Short-term investments, including restricted funds
of $400,000 at June 30, 1998 and December 31, 1998 500,000 750,000
Accounts receivable, net of allowance for doubtful
accounts of $112,000 at June 30, 1998 and
December 31, 1998 2,011,890 2,370,960
Inventories 4,607,854 4,457,841
Other current assets 441,674 129,287
------------ ------------
Total current assets 7,736,620 8,211,393
PROPERTY PLANT & EQUIPMENT - NET 4,293,902 4,409,920
GOODWILL - NET 1,026,797 1,054,547
RESTRICTED CASH FROM INDUSTRIAL REVENUE BOND 224,371 309,371
OTHER ASSETS 743,176 692,584
------------ ------------
$ 14,024,866 $ 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 487,754 1,004,351
Customer Advances 160,078 327,355
Commissions payable 210,845 123,676
Other accrued expenses and sundry liabilities 560,619 600,270
------------ ------------
Total current liabilities 3,331,424 3,875,731
LONG-TERM DEBT, net of current portion 4,116,174 4,345,700
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock - par value $.03 per share; authorized,
10,000,000 shares; issued and outstanding,
3,520,100 shares at December 31, 1998 and
June 30, 1998 105,603 105,603
Additional paid in capital 6,575,010 6,575,010
Accumulated deficit (103,345) (224,229)
------------ ------------
Total stockholders' equity 6,577,268 6,456,384
------------ ------------
$ 14,024,866 $ 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 Six Months Ended
December 31, December 31,
-------------------------- --------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 2,903,197 $ 2,814,963 $ 6,361,378 $ 5,931,767
Cost of sales 1,639,243 1,527,219 3,747,186 3,354,877
----------- ----------- ----------- -----------
Gross profit 1,263,954 1,287,744 2,614,192 2,576,890
Operating expenses
Selling expense 688,967 882,646 1,515,911 1,614,819
General and administrative 349,574 319,490 592,644 627,237
Research and development 77,531 148,751 189,672 299,253
----------- ----------- ----------- -----------
Total operating expenses 1,116,072 1,350,887 2,298,227 2,541,309
Other income (expense)
Interest income 4,339 51,780 29,917 51,780
Interest expense (107,770) (78,605) (219,630) (116,088)
Other 912 65,991 (5,367) 76,178
----------- ----------- ----------- -----------
(102,519) 39,166 (195,080) 11,870
Income (loss) before provision
for income taxes 45,363 (23,977) 120,885 47,451
Provision (benefit) for income
taxes -- (11,996) 3,919
----------- ----------- ----------- -----------
Net Income (loss) $ 45,363 $ (11,981) $ 120,885 $ 43,532
=========== =========== =========== ===========
INCOME PER SHARE - BASIC
Net income per share $ .01 $ -- $ .03 $ .01
=========== =========== =========== ===========
Weighted average number of
shares outstanding 3,520,100 3,590,100 3,520,100 3,580,589
INCOME PER SHARE - DILUTED
Net income per share $ .01 $ -- $ .03 $ .01
=========== =========== =========== ===========
Weighted average number of
shares outstanding 3,526,945 3,590,100 3,529,931 3,760,964
=========== =========== =========== ===========
</TABLE>
4
<PAGE>
Sonics & Materials, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
For the Six Months Ended December 31,
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Net cash used in operations $ (379,920) $ (605,917)
Net cash provided by (used in) investing activities 189,293 (4,018,210)
Net cash provided by (used in) financing activities (137,476) 4,365,443
----------- -----------
Net decrease in cash for the period (328,103) (258,684)
Cash and cash equivalents - at beginning of period 503,305 271,593
----------- -----------
Cash and cash equivalents - at end of period $ 175,202 $ 12,909
=========== ===========
Cash paid during period for:
Interest $ 244,530 $ 32,000
=========== ===========
Income taxes $ -- $ --
=========== ===========
</TABLE>
5
<PAGE>
Sonics & Materials, Inc.
Notes to Consolidated Condensed Financial Statements
December 31, 1998
(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 six months ended December 31, 1998 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., and its wholly owned subsidiary, Tooltex, Inc. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
NOTE 4: Comprehensive Income
As of July 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting comprehensive Income". SFAS No. 130
establishes new rules for the reporting and display of comprehensive income and
its components in the financial statements. The adoption of SFAS No. 130 had no
impact on the Company's net income or stockholders' equity. For the six and
three months ended December 31, 1998 and 1997, there were no items of
comprehensive income to report.
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 ultrasonics 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. 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 December 31, 1998 compared to the three months ended December
31, 1997.
Net sales. Net sales for the quarter ended December 31, 1998 increased
$88,000 or 3.1% over the quarter ended December 31, 1997. This increase is
primarily the result of increased sales generated by the Company's Tooltex
subsidiary ("Tooltex").
Cost of Sales. Cost of sales increased from 54.3% of net sales for the
three months ended December 31, 1997 to 56.5% of sales for the three months
ended December 31, 1998. This increase is primarily the result of increased
sales generated by Tooltex. Tooltex primarily manufactures custom machinery with
a lower profit margin than the machinery manufactured by Sonics.
Selling Expenses. Selling expenses for the second quarter of fiscal 1999
decreased $194,000 or 21.9% over the same period in fiscal 1998. As a percentage
of net sales, selling expenses decreased from 31.4% to 23.7% over the same
periods. This is in large part the result of the cost cutting lay-offs
implemented by the Company in the first quarter of fiscal 1999.
General and Administrative Expenses. General and administrative expenses
for the second quarter of fiscal 1999 increased $30,000 or 9.4% over the second
quarter of fiscal 1998. As a percentage of net sales, these expenses increased
slightly, from 11.3% to 12.0% over the same periods. This increase in primarily
the result of increased professional fees and legal costs.
Research and Development Expenses. Research and development expenses
decreased $71,000 or 47.9% over the same period in fiscal 1998. The decrease was
primarily due to a reduction in labor costs and outside consulting .
Interest Income. Interest income for the second quarter of fiscal 1999
decreased by $47,000 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 increased by $28,000 or 35.8%.
This is due to increased debt carried by the Company in connection with the
purchase of real property in Newtown, Connecticut. The Company also had higher
average borrowings on its line of credit than in the second quarter of fiscal
1998.
Other Income. Other income for the three months ended December 31, 1998
decreased $66,000 or 100.2% compared to the three months ended December 31,
1997. In the second quarter of fiscal 1998, the Company recognized approximately
$62,000 resulting from the forgiveness by Tooltex vendors of debts owed. No such
forgiveness was granted in the current quarter.
Income Taxes. Total income tax expense for the three months ended December
31, 1998 increased $12,000 or 100.0% compared to the three months ended December
31, 1997. The absence of a provision in the second quarter of fiscal 1999 is the
result of a net operating loss carryforward from fiscal 1998.
Six months ended December 31, 1998 compared to the six months ended December 31,
1997.
Net sales. Net sales for the six months ended December 31, 1998 increased
$430,000 or 7.2% over the same period in fiscal 1998. This increase is primarily
the result of increased sales generated by Tooltex.
Cost of Sales. Cost of sales increased from 56.6% of net sales for the six
months ended December 31, 1997 to 58.9% of sales for the six months ended
December 31, 1998. This increase is primarily the result of increased sales
generated by Tooltex.
Selling Expenses. Selling expenses for the first half of fiscal 1999
decreased $99,000 or 6.1% over the same period in fiscal 1998. As a percentage
of net sales, selling expenses decreased from 27.2% to 23.8% over the same
periods. This is in large part the result of the cost cutting lay-offs
implemented by the Company in the first quarter of fiscal 1999.
General and Administrative Expenses. General and administrative expenses
for the first half of fiscal 1999 decreased $35,000 or 5.5% over the first half
of fiscal 1998. As a percentage of net sales, these expenses decreasing from
10.6% to 9.3% over the same periods. This decrease is partially the result of
salary reductions offset by increased professional fees and legal costs.
Research and Development Expenses. Research and development expenses
decreased $110,000 or 36.6% over the same period in fiscal 1998. The decrease
was primarily due to a reduction in labor costs and outside consulting.
Interest Income. Interest income for the first half of fiscal 1999
decreased by $22,000 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 by $103,000 or 88.3%.
This is due to increased debt carried by the Company in connection with the
purchase of real property in Newtown, Connecticut. The Company also had higher
average borrowings on its line of credit than in the first half of fiscal 1998.
Other Income. Other income for the six months ended December 31, 1998
decreased $82,000 or 108.4% compared to the three months ended December 31,
1997. In the second quarter of fiscal 1998, the Company recognized approximately
$62,000 resulting from the forgiveness by Tooltex vendors of debts owed. No such
forgiveness was granted in the current fiscal year.
8
<PAGE>
Income Taxes. Total income tax expense for the six months ended December
31, 1998 increased $4,000 or 100.0% compared to the six months ended December
31, 1997. The absence of a provision in the first half of fiscal 1999 is the
result of a net operating loss carryforward from fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
Operations of the Company used approximately $380,000 during the six months
ended December 31, 1998 as a result of increased inventory accompanied by a
reduction of accounts receivable and accounts payable. During the first half of
fiscal 1999, the Company invested approximately $61,000 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 December 31, 1998). Advances under the Line of
Credit are at the Bank's sole discretion. The entire principal balance of the
Line of Credit, which at December 31, 1998 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 December 31, 1998 is $288,853, which bears interest, as
amended, at the Bank's base lending rate (7.75% at December 31, 1998). 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 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 $2,157,000 of the proceeds for these
purposes through December 31, 1998. 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 December 31, 1998). The Company is to begin to redeem the principal in 228
equal monthly installments of $16,700 beginning January 1999. 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 loan is secured by a first lien on the assets of Tooltex and is
subject to various covenants.
9
<PAGE>
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. Through these staffing cuts and other cost saving measures
implemented by Tooltex in the second quarter of fiscal 1999, the Company expects
to save approximately $643,000 annually. In connection with the cost cutting
measures, the Company incurred a one-time charge of approximately $48,000.
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 February 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 1,519,000
-----------
Total $ 3,281,000
===========
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>
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: February 12, 1999 By /s/ ROBERT S. SOLOFF
-----------------------------------
Robert S. Soloff
President, Chief Executive Officer,
Chief Financial Officer
12
<PAGE>
<TABLE>
<CAPTION>
Exhibit Location of Exhibit in
No. Description Sequential Numbering System
<S> <C> <C>
3(i) Certificate of Incorporation of the Registrant, as Incorporated by reference from Exhibit 3.1 of Amendment No. 3
amended. 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 10.1 of Registration
Registrant and Robert S. Soloff. Statement No. 33-96414
10(ii) 1995 Incentive Stock Option Plan and form of Stock Incorporated by reference from Exhibit 10.3 of Registration
Option Agreement. Statement No. 33-96414
110(iii) Lease between Registrant and Aston Investment Incorporated by reference from Exhibit 10.5 of Registration
Associates (Aston, PA). Statement No. 33-96414
10(iv) Amended lease between Registrant and Robert Lenert Incorporated by reference from Exhibit 10.6 of Amendment No. 4
(Naperville, IL). to Registration Statement No. 33-96414
10(v) Lease between Registrant and Janine Berger (Gland, Incorporated by reference from 10.7 of Registration
Switzerland). 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 2(a) of Registrant's
July 25, 1997, among the Registrant, SM Sub, Inc., Form 8-K dated July 25, 1997
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.
10(ix) Agreement of Merger, dated as of July 25, 1997, Incorporated by reference from Exhibit 2(b) of the
among the Registrant, SM Sub, Inc. and Tooltex, Registrant's Form 8-K dated July 25, 1997).
Inc.
10(x) Credit Agreement, dated September 19, 1997, Incorporated by reference from Exhibit 10 (xii) of the
between Brown Brothers Harriman & Co. and Registrant's Form 10-KSB for the year ended June 30, 1997
Registrant
10(xi) Term Loan Note of Registrant, dated September 19, Incorporated by reference from Exhibit 10 (xiii) of the
1997, payable to the order of Brown Brothers Registrant's Form 10-KSB for the year ended June 30, 1997
Harriman & Co. in the original principal amount of
$427,000.
10(xii) Line of Credit Note of Registrant, dated September Incorporated by reference from Exhibit 10 (xiii) of the
19, 1997, payable to the order of Brown Registrant's Form 10-KSB for the year ended June 30, 1997
Brothers Harriman & Co. in the original principal
amount of $1,500,000.
10(xiii) Intentionally deleted
10(xiv) Open-End Mortgage Deed from Registrant to Brown Incorporated by reference from Exhibit 10 (xiv) of the
Brothers Harriman & Co. dated September 19, 1997. Registrant's Form 10-KSB for the year ended June 30, 1997
10(xv) General Security Agreement from Registrant to Incorporated by reference from Exhibit 10 (xvii) of the
Brown Brothers Harriman & Co. dated September 19, Registrant's Form 10-KSB for the year ended June 30, 1997
1997.
10(xvi) Loan Agreement between Connecticut Development Incorporated by reference from Exhibit 10 (xvi) of the
Authority and Sonics & Materials dated December 1, Registrants Form 10-KSB for the year ended June 30, 1998
1997
10(xvii) Indenture of Trust between Connecticut Development Incorporated by reference from Exhibit 10 (xvii) of the
Authority and Sonics & Materials, Inc. dated Registrants Form 10-KSB for the year ended June 30, 1998
December 1, 1997
10(xviii) Tax Regulatory Agreement between Connecticut Incorporated by reference from Exhibit 10 (xviii) of the
Development Authority and Sonics & Materials, Inc., Registrants Form 10-KSB for the year ended June 30, 1998
and Brown 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>
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AT SEPTEMBER 30, 1998 AND FROM THE INCOME STATEMENT FOR
THE 3 MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 175,202
<SECURITIES> 500,000
<RECEIVABLES> 2,011,890
<ALLOWANCES> 112,000
<INVENTORY> 4,823,199
<CURRENT-ASSETS> 7,951,965
<PP&E> 4,293,902
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,240,210
<CURRENT-LIABILITIES> 3,546,768
<BONDS> 0
0
0
<COMMON> 105,603
<OTHER-SE> 6,471,665
<TOTAL-LIABILITY-AND-EQUITY> 14,240,210
<SALES> 6,361,378
<TOTAL-REVENUES> 6,361,378
<CGS> 3,747,186
<TOTAL-COSTS> 2,298,227
<OTHER-EXPENSES> 5,367
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 189,713
<INCOME-PRETAX> 120,885
<INCOME-TAX> 0
<INCOME-CONTINUING> 120,885
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120,885
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
