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: August 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 October 10, 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 - August 31, 1996 (Unaudited) and February 29, 1996 1
Statements of Operations - Six Months and Three Months Ended
August 31, 1996 and 1995 (Unaudited) 2
Statements of Cash Flows - Six Months Ended August 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>
Aug 31 February 29
1996 1996
ASSETS Unaudited
----------------------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 42,750 $ 69,033
Accounts receivable (net of allowance for doubtful accounts
of $28,000 at August 31 and $25,000 at February 29 ) 469,019 462,115
Inventories (Note C) 488,054 477,381
Prepaid expenses and other current assets 22,806 29,834
----------- -----------
Total Current Assets 1,022,629 1,038,363
Equipment, furnishings and leasehold improvements (less
accumulated depreciation and amortization of $394,054
at August 31 and $368,087 at February 29 ) 76,993 95,861
Patents, patents pending and copyrights (less amortization
of $118,476 at August 31 and $114,372 at February 29 ) 55,959 59,176
Other assets 6,317 6,317
----------- -----------
T O T A L $ 1,161,898 $ 1,199,717
=========== ===========
LIABILITIES
Current maturities of long term debt $ 121,487 $ 128,779
Accounts payable 256,058 233,810
Accrued expenses 311,655 362,963
---------- -----------
Total Current Liabilities 689,200 725,552
Long term debt, less current maturities 616,946 657,865
Non-current rent payable 4,643 10,217
---------- -----------
Total Liabilities 1,310,789 1,393,634
---------- -----------
SHAREHOLDERS' EQUITY (DEFICIENCY)
Common stock - $.01 par value:
Authorized - 12,000,000 shares
Issued - 4,204,913 shares 42,049 42,049
Additional paid-in capital 3,758,128 3,758,128
Deficit (3,949,068) (3,994,094)
---------- -----------
Total Shareholders' Deficiency (148,891) (193,917)
---------- -----------
T O T A L $ 1,161,898 $ 1,199,717
========== ===========
</TABLE>
1
<PAGE>
SONO-TEK CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
------------------------------ ----------------------------
August 31 August 31
Unaudited Unaudited
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 1,501,698 $ 1,349,508 $ 750,061 $ 613,549
COST OF GOODS SOLD 739,916 568,018 360,302 236,807
------------- ------------- ------------ ------------
Gross Profit 761,782 781,490 389,759 376,742
------------- ------------- ------------ ------------
OPERATING EXPENSES
Research and product development costs 184,631 196,797 97,038 95,791
Marketing and selling expenses 308,232 326,567 149,057 146,396
General and administrative costs 191,657 192,645 103,862 79,722
------------- ------------- ------------ ------------
Total Operating Expenses 684,520 716,009 349,957 321,909
------------- ------------- ------------ ------------
OPERATING INCOME 77,262 65,481 39,802 54,833
INTEREST EXPENSE 32,257 33,020 15,937 16,503
INTEREST AND OTHER INCOME 19 32,933 3 38
------------- ------------- ------------ ------------
NET INCOME $ 45,024 $ 65,394 $ 23,868 $ 38,368
============= ============= ============ ============
INCOME PER COMMON SHARE (NOTE D) $ 0.01 $ 0.02 $ 0.01 $ 0.01
============= ============= ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK USED TO COMPUTE
EARNINGS PER SHARE 4,204,913 4,204,913 4,204,913 4,204,913
</TABLE>
2
<PAGE>
SONO-TEK CORPORATION
Statements of Cash Flows
For Six Months Ended August 31
<TABLE>
<CAPTION>
1996 1995
Unaudited
----------- -----------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 45,024 $ 65,394
----------- -----------
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 30,072 31,170
Allowance for doubtful accounts 1,500 (23,000)
(Increase) decrease in:
Accounts receivable (9,904) (105,213)
Inventories (10,673) (7,714)
Prepaid expenses and other current assets 7,028 26,742
Increase (decrease) in:
Accounts payable & accrued expenses (29,061) 30,532
Noncurrent rent payable (5,575) (5,574)
Notes and obligations payable - professional fees (500) (1,000)
Notes and obligations payable - lease termination (10,522) (11,297)
----------- -----------
Total adjustments (27,635) (65,354)
----------- -----------
Net cash provided by operating activities 17,389 40
----------- -----------
Cash flows from investing activities:
Fixed asset, patent and copyright acquisition costs (7,986) (9,378)
Cash flows from financing activities:
Payments of capitalized leases (3,485) (3,629)
Proceeds from sale of common stock 0 25,000
Repayments of note payable - bank (32,201) (32,507)
----------- -----------
Net cash used in financing activities (35,686) (11,136)
----------- -----------
Net Increase (decrease) in cash and cash equivalents (26,283) (20,474)
Cash and cash equivalents:
Beginning of period 69,033 67,804
----------- -----------
End of period $ 42,750 $ 47,330
=========== ===========
Supplemental disclosure:
Interest paid $ 25,565 $ 15,616
Income taxes paid $ 0 $ 0
</TABLE>
3
<PAGE>
SONO-TEK CORPORATION
Notes to Financial Statements
August 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 August 31, 1996 is comprised of:
Finished goods $105,428
Work in process 118,106
Raw materials and subassemblies 264,520
--------
Total $488,054
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 $152,190 to $1,501,698 for the six months
ended August 31, 1996 as compared to $1,349,508 for the six months ended August
31, 1995. The increase was primarily a result of increased sales of the
Company's SonoFlux Systems. Sales of this product increased approximately
$157,000, while sales of the Company's Nozzle Systems decreased approximately
$5,000. For the three months ended August 31, 1996 the Company's sales increased
$136,512 to $750,061 as compared to sales of $613,549 for the three months ended
August 31, 1995. During this period sales of the Company's SonoFlux Systems
increased approximately $129,000 and sales of the Company's Nozzle Systems
increased approximately $7,000 as compared to the three month period ended
August 31, 1995. The increase in sales of the Company's SonoFlux Systems is
believed to be the result of increased acceptance by the electronics industry of
the Company's newest version of the SonoFlux, the "9500".
The Company's gross profit decreased $19,708 from $781,490 for the six
month period ended August 31, 1995 to $761,782 for the six month period ended
August 31, 1996, and increased $13,017 from $376,742 for the three months ended
August 31, 1995 to $389,759 for the three months ended August 31, 1996. As a
percent of sales, gross profit decreased from 58% for the six months ended
August 31, 1995 to 51% for the six months ended August 31, 1996, and decreased
from 61% for the three months ended August 31, 1995 to 52% for the three months
ended August 31, 1996. For both the six and three month periods the decrease in
gross profit percentage is attributed to an increase in the cost of materials,
an increase in discounted sales to OEM's and a cumulative reduction of the
reserve for warranty costs taken during both the six and three month periods
ended August 31, 1995 which resulted in an increase in gross profit for those
periods.
Research and product development costs decreased $12,166 from $196,797
for the six months ended August 31, 1995 to $184,631 for the six months ended
August 31, 1996 primarily as a result of decreased consulting costs associated
with the development of the "SonoFlux 9500".
Marketing and selling costs decreased $18,335 from $326,567 for the six
months ended August 31, 1995 to $308,232 for the six months ended August 31,
1996 primarily as a result of a decrease in compensation costs during the three
months ended May 31, 1996.
General and administrative costs increased $24,140 from $79,722 for the
three month period ended August 31, 1995 to $103,862 for the three month period
ended August 31, 1996.
5
<PAGE>
These costs were lower during the three month period ended August 31, 1995 as a
result of a reduction in the Company's bad debt reserve.
Interest and other income decreased $32,914 from $32,933 for the six
month period ended August 31, 1995 to $19 for the six months ended August 31,
1996. During the six month period ended August 31, 1995 the Company had received
funding from SEMATECH for work performed under the terms of a joint development
agreement. SEMATECH is a consortium of U.S. semiconductor manufacturers and has
provided the Company with funds for the development of a photoresist application
system, or "Wafer Coating System".
For the six months ended August 31, 1996 the Company had earnings of
$45,024 or $0.01 per share as compared to earnings of $65,394 or $.02 per share
for the six months ended August 31, 1995. For the three months ended August 31,
1996, the Company had earnings of $23,868 or $.01 per share as compared to
earnings of $38,368 or $.01 per share for the three months ended August 31,
1995. The decrease in earnings for both the six and three month periods resulted
primarily from an increase in materials costs, and a decrease in other income
from SEMATECH.
Liquidity and Capital Resources
- -------------------------------
The Company's working capital increased $20,618 to $333,429 at August
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.
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 twelve 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
The following matters were voted upon at the Company's annual meeting
of shareholders held on August 16, 1996.
1. The election of three (3) directors of the Company to serve until the
Company's 1998 annual meeting of shareholders.
For Withheld Total
--- -------- -----
James L. Kehoe 3,554,687 45,556 3,600,243
Samuel Schwartz 3,554,687 45,556 3,600,243
J. Duncan Urquhart 3,554,687 45,556 3,600,243
2. Ratify the appointment of Anchin, Block & Anchin as the Company's
independant auditors for the fiscal year ending February 28, 1997.
For Against Abstained Total
--- ------- --------- -----
3,557,943 34,700 7,600 3,600,243
There were no broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
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: October 10, 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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> Aug-31-1996
<CASH> 42,750
<SECURITIES> 0
<RECEIVABLES> 469,019
<ALLOWANCES> 28,000
<INVENTORY> 488,054
<CURRENT-ASSETS> 1,022,629
<PP&E> 76,993
<DEPRECIATION> 394,054
<TOTAL-ASSETS> 1,161,898
<CURRENT-LIABILITIES> 689,200
<BONDS> 0
0
0
<COMMON> 42,049
<OTHER-SE> (190,940)
<TOTAL-LIABILITY-AND-EQUITY> 1,161,898
<SALES> 1,501,698
<TOTAL-REVENUES> 1,501,698
<CGS> 739,916
<TOTAL-COSTS> 739,916
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,257
<INCOME-PRETAX> 45,024
<INCOME-TAX> 0
<INCOME-CONTINUING> 45,024
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,024
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
