SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: May 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No.: 0-16035
SONO-TEK CORPORATION
(Exact name of registrant as specified in its charter)
New York 14-1568099
-------- ----------
(State or other jurisdiction of ( IRS Employer
incorporation or organization) Identification No.)
2012 Rt. 9W, Bldg. 3, Milton, NY 12547
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone no., including area code: (914) 795-2020
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Outstanding as of
Class July 12, 1996
----- -------------
Common Stock, par value $.01 per share 4,204,913
<PAGE>
SONO-TEK CORPORATION
INDEX
Part I - Financial Information Page
Item 1 - Financial Statements: 1 - 3
Balance Sheets - May 31, 1996 (Unaudited) and February 29, 1996 1
Statements of Operations - Three Months Ended May 31, 1996
and 1995 (Unaudited) 2
Statements of Cash Flows - Three Months Ended May 31, 1996
and 1995 (Unaudited) 3
Notes to Financial Statements 4
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 5 - 6
Part II - Other Information 7
Signatures 8
<PAGE>
SONO-TEK CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
May 31 February 29
1996 1996
ASSETS Unaudited
----------------------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 16,485 $ 69,033
Accounts receivable (net of allowance for doubtful accounts
of $26,500 at May 31 and $25,000 at February 29 ) 461,246 462,115
Inventories (Note C) 541,728 477,381
Prepaid expenses and other current assets 20,162 29,834
----------- -----------
Total Current Assets 1,039,621 1,038,363
Equipment, furnishings and leasehold improvements (less
accumulated depreciation and amortization of $381,071
at May 31 and $368,087 at February 29 ) 87,644 95,861
Patents, patents pending and copyrights (less amortization
of $116,892 at May 31 and $114,372 at February 29 ) 57,506 59,176
Other assets 6,317 6,317
----------- -----------
T O T A L $ 1,191,088 $ 1,199,717
=========== ===========
LIABILITIES
Current maturities of long term debt $ 106,720 $ 128,779
Accounts payable 315,973 233,810
Accrued expenses 278,358 362,963
----------- -----------
Total Current Liabilities 701,051 725,552
Long term debt, less current maturities 655,366 657,865
Non-current rent payable 7,430 10,217
----------- -----------
Total Liabilities 1,363,847 1,393,634
----------- -----------
SHAREHOLDERS' EQUITY ( DEFICIENCY)
Common stock - $.01 par value:
Authorized - 12,000,000 shares
Issued - 4,204,913 share 42,049 42,049
Additional paid-in capital 3,758,128 3,758,128
Deficit (3,972,936) (3,994,094)
----------- -----------
Total Shareholders' Deficiency (172,759) (193,917)
----------- -----------
T O T A L $ 1,191,088 $ 1,199,717
=========== ===========
</TABLE>
1
<PAGE>
SONO-TEK CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
May 31
Unaudited
1996 1995
---- ----
<S> <C> <C>
NET SALES $ 751,637 $ 735,959
COST OF GOODS SOLD 379,613 331,210
----------- -----------
Gross Profit 372,024 404,749
----------- -----------
OPERATING EXPENSES
Research and product development costs 87,593 101,006
Marketing and selling expenses 159,174 180,171
General and administrative costs 87,795 112,923
----------- -----------
Total Operating Expenses 334,563 394,100
----------- -----------
OPERATING INCOME 37,461 10,648
INTEREST EXPENSE 16,319 16,517
INTEREST AND OTHER INCOME 15 32,895
----------- -----------
NET INCOME $ 21,157 $ 27,025
============ ===========
INCOME PER COMMON SHARE (NOTE D) $ 0.01 $ 0.01
============ ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK USED TO COMPUTE
EARNINGS PER SHARE 4,204,913 4,204,913
</TABLE>
2
<PAGE>
SONO-TEK CORPORATION
Statements of Cash Flows
For Three Months Ended May 31
<TABLE>
<CAPTION>
1996 1995
Unaudited
------------ -----------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 21,157 $ 27,025
------------ -----------
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 15,504 15,586
Allowance for doubtful accounts 1,500 2,250
(Increase) decrease in:
Accounts receivable (631) (35,645)
Inventories (64,347) 15,663
Prepaid expenses and other current assets 9,672 31,948
Increase (decrease) in:
Accounts payable & accrued expenses (2,441) (9,254)
Noncurrent rent payable (2,788) (894)
Notes and obligations payable - professional fees (500) (7,500)
Notes and obligations payable - lease termination (5,208) (4,809)
------------- ------------
Total adjustments (49,239) 7,345
------------- ------------
Net cash (used in) provided by operating activities (28,082) 34,370
------------- ------------
Cash flows from investing activities:
Fixed asset, patent and copyright acquisition costs (5,616) (4,414)
Cash flows from financing activities:
Payments of capitalized leases (1,305) (3,156)
Proceeds from sale of common stock 25,000
Repayments of note payable - bank (17,544) (12,595)
------------- ------------
Net cash used in financing activities (18,849) 9,249
------------- ------------
Net Increase (decrease) in cash and cash equivalents (52,547) 39,205
Cash and cash equivalents:
Beginning of period 69,033 67,804
------------- ------------
End of period $ 16,485 $ 107,009
============= ============
Supplemental disclosure:
Interest paid $ 20,399 $ 8,106
Income taxes paid $ 0 $ 0
</TABLE>
3
<PAGE>
SONO-TEK CORPORATION
Notes to Financial Statements
May 31, 1996
NOTE A: The attached summarized financial information does not include all
disclosures required to be included in a complete set of financial
statements prepared in conformity with generally accepted accounting
principles. Such disclosures were included with the financial
statements of the Company at February 29, 1996, included in its report
on Form 10-K. Such statements should be read in conjunction with the
data herein.
NOTE B: The financial information reflects all adjustments which, in the
opinion of management, are necessary for a fair presentation of the
results for the interim periods. The results for the interim periods
are not necessarily indicative of the results to be expected for the
year.
NOTE C: Inventory at May 31, 1996 is comprised of:
Finished goods $126,223
Work in process 152,767
Raw materials and subassemblies 262,738
-------
Total $541,728
========
NOTE D: Income per share is based on the weighted average number of shares
outstanding during each period. The computation does not include the
effect of outstanding stock options or conversion of the subordinated
promissory notes since their inclusion would be either not material or
anti-dilutive.
4
<PAGE>
SONO-TEK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
The Company's sales increased $15,678 to $751,637 for the three months
ended May 31, 1996 as compared to $735,959 for the three months ended May 31,
1995. The increase was a result of increased sales of the SonoFlux product line.
Sales of these products increased approximately $29,000 while sales of the
Company's Nozzle Systems decreased approximately $13,000.
The Company's gross profit decreased $32,725 from $404,749 for the three
months ended May 31, 1995 to $372,024 for the three months ended May 31, 1996.
The decrease in gross profit resulted from an increase in the raw materials
portion of cost of goods sold. This increase is attributed to an increase in the
materials cost of the SonoFlux System, a change in product mix within the
SonoFlux product line, and higher materials cost associated with the sale of a
custom Nozzle System that required several unique components.
Research and product development costs decreased $13,413 from $101,006 for
the three months ended May 31, 1995 to $87,593 for the three months ended May
31, 1996. These costs were higher during the same period one year ago as a
result of consulting costs associated with the development of the SonoFlux 9500.
Marketing and selling costs decreased $20,997 from $180,171 for the three
months ended May 31, 1995 to $159,174 for the three months ended May 31, 1996.
The decrease was primarily a result of a decrease in compensation costs.
General and administrative costs decreased $25,128 from $112,923 for the
three months ended May 31, 1995 to $87,795 for the three months ended May 31,
1996. The decrease resulted from a decrease in incentive compensation and
consulting fees.
Interest and other income decreased $32,877 from $32,895 for the three
months ended May 31, 1995 to $15 for the three months ended May 31, 1996. Other
income was higher during the same period one year ago as a result of funding
received from SEMATECH for work done by the Company under the terms of a joint
development agreement. SEMATECH is a consortium of U.S. semiconductor
manufacturers and had provided the Company with funds for the development of a
photoresist coating system, or "Wafer Coating System."
For the three months ended May 31, 1996, the Company earned $21,157 or
$.01 per share as compared to earnings of $27,025 or $.01 per share for the
three months ended May 31, 1995. The decrease in earnings was primarily a result
of an increase in cost of goods sold.
5
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The Company's working capital increased $25,759 to $338,570 at May 31,
1996 as compared to working capital of $312,811 at February 29, 1996. The
increase in working capital was primarily a result of profitable operations.
Although there can be no assurances, management believes that working
capital generated by continuing operations will be sufficient to support the
Company's working capital needs for the next twelve months based on anticipated
sales levels.
On August 15, 1997 the Company's Convertible Secured Subordinated Notes
mature. The Company will experience substantial difficulties in meeting these
obligations unless the level of profitability improves substantially over the
next fifteen months or unless the Noteholders agree to extend the repayment
terms of this debt. There can be no assurance that such extensions can be
negotiated or that such extensions will be on terms as favorable to the Company
as those presently in effect.
6
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
4(h) Letter of agreement between the Company and the
Bank of New York dated June 14, 1996.
27. Financial Data Schedule - EDGAR filing only
(b) Reports on Form 8-K
None
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: July 12, 1996
SONO-TEK CORPORATION
By: /s/: James L. Kehoe
------------------------
James L. Kehoe
Chief Executive Officer
By: /s/: J. Duncan Urquhart
------------------------
J. Duncan Urquhart
Treasurer & Chief Financial Officer
8
THE BANK OF NEW YORK
285 Main Mall, Poughkeepsie, New York 12601
June 14, 1996
Sono-Tek Corporation
Building #3
2012 Route 9W
Milton, New York 12547
Gentlemen:
We refer to the promissory note, dated October 23, 1991, made by Sono-Tek
Corporation (the "Company") to the order of The Bank of New York (the "Bank") in
the original principal amount of $300,000 as amended by the letter agreement,
dated October 5, 1993 (the "Letter Agreement"), between the Bank and the Company
(as so amended, the "Note"). As of the date hereof the principal amount
outstanding under the Note is $175,915.28.
The Note is hereby modified by amending the Letter Agreement as follows: the
phrase "1st of November 1996" in clause (a) of the Letter Agreement is deleted
and in its place the phrase "1st of August 1998" is inserted.
All other terms and provisions of the Note (including, without limitation, the
other terms and provisions of the Letter Agreement) shall remain in full force
and effect.
Please indicate your agreement to the foregoing by executing this letter
agreement on the line provided below and returning an original copy thereof to
the Bank.
Very truly yours,
/s/ Dianne F. Davis
Dianne F. Davis
Assistant Vice President
Commercial Lending
Accepted and Agreed to:
SONO-TEK CORPORATION
By: /s/ J. D. Urquhart
Name: J. Duncan Urquhart
Title: Controller and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> MAY-31-1996
<CASH> 16,485
<SECURITIES> 0
<RECEIVABLES> 461,246
<ALLOWANCES> 26,500
<INVENTORY> 541,728
<CURRENT-ASSETS> 1,039,621
<PP&E> 87,644
<DEPRECIATION> 381,071
<TOTAL-ASSETS> 1,191,088
<CURRENT-LIABILITIES> 701,051
<BONDS> 0
0
0
<COMMON> 42,049
<OTHER-SE> 214,808
<TOTAL-LIABILITY-AND-EQUITY> 1,191,088
<SALES> 751,637
<TOTAL-REVENUES> 751,637
<CGS> 379,613
<TOTAL-COSTS> 379,613
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,319
<INCOME-PRETAX> 21,157
<INCOME-TAX> 0
<INCOME-CONTINUING> 21,157
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,157
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
