<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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: November 30, 1995
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 January 11, 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 - November 30, 1995 (Unaudited) and February 28, 1995 1
Statements of Operations - Nine Months and Three Months Ended
November 30, 1995 and 1994 (Unaudited) 2
Statements of Cash Flows - Nine Months Ended November 30, 1995
and 1994 (Unaudited) 3
Notes to Financial Statements 4 - 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 6 - 8
Part II - Other Information 9
Signatures 10
<PAGE>
SONO-TEK CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
November 30 February 28
1995 1995
ASSETS Unaudited
---------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 106,920 $ 67,804
Accounts receivable (net of allowance for doubtful accounts
of $42,250 at November 30 and $63,000 at February 28 ) 403,762 350,185
Receivable for common stock issued 0 25,000
Inventories (Note C) 492,876 490,571
Prepaid expenses and other current assets 16,528 44,819
--------------- --------------
Total Current Assets 1,020,086 978,379
Equipment, furnishings and leasehold improvements (less
accumulated depreciation and amortization of $341,073
at November 30 and $301,113 at February 28 ) 116,961 151,873
Patents, patents pending and copyrights (less amortization
of $127,745 at November 30 and $120,951 at February 28 ) 73,802 74,992
Other assets 6,317 5,917
--------------- --------------
T O T A L $ 1,217,166 $ 1,211,161
=============== ==============
LIABILITIES
Current liabilities:
Current maturities of long term debt $ 72,919 $ 127,145
Accounts payable 227,350 335,242
Accrued expenses 395,026 321,953
--------------- --------------
Total Current Liabilities 695,295 784,340
Long term debt, less current maturities 738,261 754,449
Non-current rent payable 13,005 21,367
--------------- --------------
Total Liabilities 1,446,561 1,560,156
--------------- --------------
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 (4,029,572) (4,149,172)
--------------- --------------
Total Shareholders' Deficiency (229,395) (348,995)
--------------- --------------
T O T A L $ 1,217,166 $ 1,211,161
=============== ==============
</TABLE>
1.
<PAGE>
SONO-TEK CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
---------------------------------- --------------------------------
November 30 November 30
Unaudited Unaudited
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET SALES $ 2,086,235 $ 1,991,699 $ 736,727 $ 593,018
COST OF GOODS SOLD 890,991 1,077,100 322,973 322,702
------------- ------------ ------------- ------------
Gross Profit 1,195,244 914,600 413,754 270,316
------------- ------------ ------------- ------------
OPERATING EXPENSES
Research and product development costs 294,951 221,639 98,154 76,568
Marketing and selling expenses 476,256 561,261 149,689 190,866
General and administrative costs 286,800 386,700 94,155 128,530
------------- ------------ ------------- ------------
Total Operating Expenses 1,058,007 1,169,600 341,998 395,964
------------- ------------ ------------- ------------
OPERATING INCOME (LOSS) 137,237 (255,001) 71,756 (125,648)
INTEREST EXPENSE 50,670 47,040 17,650 16,905
INTEREST AND OTHER INCOME 33,032 221 99 114
------------- ------------ ------------- ------------
NET INCOME (LOSS) (NOTE D) $ 119,599 $ (301,821) $ 54,205 $ (142,439)
============= ============ ============= ============
INCOME (LOSS) PER COMMON SHARE (NOTE E) $ 0.03 $ (0.08) $ 0.01 $ (0.04)
============= ============ ============= ============
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK USED TO COMPUTE
EARNINGS (LOSS) PER SHARE 4,205,000 3,872,000 4,205,000 3,872,000
</TABLE>
2.
<PAGE>
SONO-TEK CORPORATION
Statements of Cash Flows
For Nine Months Ended November 30
<TABLE>
<CAPTION>
1995 1994
Unaudited
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 119,599 $ (301,821)
-------------- ---------------
Adjustments to reconcile the results of operations
to the net cash provided by operating activities:
Loss on abandonment of foreign patents 23,000
Depreciation and amortization 46,755 69,478
Accounts receivable (53,577) 284,382
Inventories (2,305) (92,309)
Prepaid expenses 28,291 33,794
Other assets (400) (2,000)
Accounts payable & accrued expenses (34,820) 76,284
Noncurrent rent payable (8,362) (2,679)
-------------- ---------------
Total adjustments (24,418) 389,950
-------------- ---------------
Net cash provided by operating activities 95,181 88,129
-------------- ---------------
Cash flows from investing activities:
Fixed asset, patent and copyright acquisition costs (10,653) (24,767)
Cash flows from financing activities:
Payments of capitalized leases (5,429) (3,156)
Proceeds from sale of common stock 25,000 0
Repayments of notes payable (64,983) (110,888)
-------------- ---------------
Net cash used in financing activities (45,412) (114,044)
-------------- ---------------
Net Increase (decrease) in cash and cash equivalents 39,116 (50,680)
Cash and cash equivalents:
Beginning of period 67,804 70,871
-------------- ---------------
End of period $ 106,920 $ 20,191
============== ===============
Supplemental disclosure:
Interest paid $ 22,525 $ 14,856
Income taxes paid $ 0 $ 5,338
</TABLE>
3.
<PAGE>
SONO-TEK CORPORATION
Notes to Financial Statements
November 30, 1995
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 28, 1995, 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 November 30, 1995 is comprised of:
Finished goods $ 98,283
Work in process 134,258
Raw materials and subassemblies 260,335
--------
Total $492,876
NOTE D: The Company has adopted FASB Statement no. 109 which
became effective for the Fiscal Year Ended February 28,
1994. Accordingly, under the provision of Statement 109,
the income tax benefit of the loss for the nine months
ended November 30, 1994 was offset by an increase in the
valuation allowance.
NOTE E: Income (loss) 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.
NOTE F: The financial statements for fiscal 1995 have been
prepared under the assumption that the Company will
continue as a going concern. During the year ended February
1995 the Company incurred a significant loss from
operations.
At February 28, 1995 the Company had a net capital
deficiency of $348,995. The lack of sufficient working
capital has hampered the Company's ability to produce and
market its products efficiently and to make payments to its
vendors and certain noteholders in a timely fashion. Some
vendors have placed the Company's account for collection
with a collection agency.
4.
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Note F: These factors raise substantial doubt as to the Company's
Cont'd ability to continue as a going concern.
The financial statements do not contain any adjustments
that might be necessary if the Company is unable to
continue as a going concern.
5.
<PAGE>
SONO-TEK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Sales increased $94,536 to $2,086,235 for the nine months ended
November 30, 1995 as compared to $1,991,699 for the nine months ended November
30, 1994. The increase was primarily a result of an increase of $352,000 in
sales of Nozzle Systems, while sales of SonoFlux Systems decreased approximately
$257,000. For the three months ended November 30, 1995 sales increased $143,709
to $736,727 as compared to sales of $593,018 for the three months ended November
30, 1994. Sales of Nozzle Systems inreased approximately $150,000 and sales of
SonoFlux Systems decreased approximately $6,000 as compared to the three month
period ended November 30, 1994. The decrease in sales of SonoFlux Systems is
believed to be the result of a decline in export sales as well as an increase in
competitive pressures. In response to the increase in competition the Company
introduced its newest version of SonoFlux System, the "9500". This new model has
a lower manufacturing cost, a lower selling price, and is designed to be more
"user friendly" through computer controled operation. Although there can be no
assurances, the Company anticipates that this new model will appeal to a broader
segment of the market, and lead to increased sales of this product line.
Gross profit increased $280,644 from $914,600 for the nine month
period ended November 30, 1994 to $1,195,244 for the nine month period ended
November 30, 1995, and increased $143,438 from $270,316 for the three months
ended November 30, 1994 to $413,754 for the three months ended November 30,
1995. As a percent of sales, gross profit increased from 46% for the nine months
ended November 30, 1994 to 57% for the nine months ended November 30, 1995, and
increased from 46% for the three months ended November 30, 1994 to 56% for the
three months ended November 30, 1995. For both the nine and three month periods
the increase in gross profit was primarily a result of a change in product mix
and a reduction in production overhead costs. Sales of Nozzle Systems, which
realize a higher gross margin as compared to sales of SonoFlux Systems,
comprised 39% and 40% of sales for the nine and three month periods ended
November 30, 1995 as compared to 24% of sales for both the nine and three month
periods ended November 30, 1994. The Company's production overhead costs
decreased as a result of reduced warranty and labor costs.
Research and product development costs increased $73,312 from
$221,639 for the nine months ended November 30, 1994 to $294,951 for the nine
months ended November 30, 1995 and increased $21,586 from $76,568 for the three
months ended November 30, 1994 to $98,154 for the three months ended November
30, 1995 The increase was primarily a result of increased labor and consulting
costs associated with the development of the SonoFlux 9500.
Marketing and selling costs decreased $85,005 from $561,261 for the
nine months ended November 30, 1994 to $476,256 for the nine months ended
November 30, 1995 and decreased
6.
<PAGE>
$41,177 from $190,866 for the three months ended November 30, 1994 to $149,689
for the three months ended November 30, 1995. The decrease was primarily as a
result of a decrease in travel costs. During the first nine months of Fiscal
1996 the Company has concentrated its selling efforts to focus on North American
markets, thereby reducing the necessity for costly Far East and European travel.
General and administrative costs decreased $99,900 from $386,700 for
the nine month period ended November 30, 1994 to $286,800 for the nine months
ended November 30, 1995 and decreased $34,375 from $128,530 for the three months
ended November 30, 1994 to $94,155 for the three months ended November 30, 1995.
For the nine months ended November 30, 1995 the decrease resulted primarily from
a reduction in the Company's reserve for doubtful accounts and a decrease in
professional fees. During the three months ended November 30, 1994 the Company
incurred costs of $23,000 as a result of its abandonment of certain foreign
patents.
Interest and other income increased $32,811 from $221 for the nine
months ended November 30, 1994 to $33,032 for the nine months ended November 30,
1995. The increase is a result of funding received during the three months ended
May 31, 1995 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 has provided the Company with funds for the development of a
photoresist application system, or "Wafer Coating System".
For the nine months ended November 30, 1995 the Company earned
$119,599 or $.03 per share as compared to a net loss of $301,821 or $.08 per
share for the nine months ended November 30, 1994. For the three months ended
November 30, 1995, the Company had earnings of $54,205 or $.01 per share as
compared to a net loss of $142,439 or $.04 per share for the three months ended
November 30, 1994. The increase in earnings for both the nine and three month
periods resulted primarily from an increase in sales of the Company's Nozzle
Systems, a decrease in general and administrative costs, a decrease in marketing
and selling costs, and an increase in other income.
Liquidity and Capital Resources
- -------------------------------
Working capital increased $92,718 to $286,757 at November 30, 1995 as
compared to working capital of $194,039 at February 28, 1995. The increase in
working capital was primarily a result of profitable operations.
The Company's lack of working capital has hampered its ability to
efficiently produce and market its products, and has impeded progress in the
development of new products. At times, the Company has been unable to make
payments to its vendors and certain note holders in a timely fashion. Some
vendors have placed the Company's account for collection with a collection
agency. During Fiscal 1995 the Company failed to make three of four scheduled
interest payments to holders of the convertible secured subordinated promissory
notes issued in November 1993. The failure to make such payments constitutes an
act of default in accordance with the terms of the note. In March 1995 the
Company and each noteholder agreed to an amendment whereby, among other things,
the holder agreed to waive the right of default and
7.
<PAGE>
remedies based on the Company's failure to make interest payments due on August
15, 1994 and thereafter through and including February 15, 1996.
The Company's Chairman, who is entitled to receive consulting
compensation from the Company at the rate of $26,000 per year has agreed that
payments to him could be deferred commencing June 1993. The amount of such
deferral at November 30, 1995 was $63,557.
These factors raise serious doubt as to the Company's ability to
continue as a going concern.
During Fiscal 1995 the Company incurred a significant loss from operations.
During this period of time the Company devoted significant resources, including
working capital to the development of two new products. The first is a new
generation of the SonoFlux System that is used in the electronics industry for
the application of flux to printed circuit boards during their manufacture. The
Company began shipping this new system to customers during the three months
ended May 31, 1995. The second new product is a Wafer Coating System to be used
in the semiconductor industry for the application of photoresist to
semiconductor wafers. The Company anticipates that functional qualification of
the Wafer Coating System will commence during the fourth quarter of Fiscal 1996.
Management believes that these new products will lead to broader markets and
increased sales and profits quickly enough to improve its working capital
position in the short term and to restore its equity in the long term, although
there can be no assurances that these goals will be achieved.
In order to generate additional working capital, 333,333 shares of
common stock were sold to the Company's Chairman and a Noteholder for the fair
market value of $100,000 in February 1995.
As the long term debt of the Company to the bank matures on November
1, 1996 and the Convertible Secured Subordinated Notes mature on August 15,
1997, the Company will experience substantial difficulties in meeting these
obligations unless the level of profitability improves over the next several
years or unless the bank and 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, if negotiated, will be on terms as favorable to the
Company as those presently in effect.
8.
<PAGE>
PART II - OTHER INFORMATIO
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Item 27. Financial Data Schedule - Edgar filing only
(b) Reports on Form 8-K
None
9.
<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: January 11, 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
10.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> NOV-30-1995
<CASH> 106,920
<SECURITIES> 0
<RECEIVABLES> 403,762
<ALLOWANCES> 42,250
<INVENTORY> 492,876
<CURRENT-ASSETS> 1,020,086
<PP&E> 116,961
<DEPRECIATION> 341,073
<TOTAL-ASSETS> 1,217,166
<CURRENT-LIABILITIES> 733,329
<BONDS> 0
<COMMON> 42,049
0
0
<OTHER-SE> 271,444
<TOTAL-LIABILITY-AND-EQUITY> 1,217,166
<SALES> 2,086,235
<TOTAL-REVENUES> 2,086,235
<CGS> 890,991
<TOTAL-COSTS> 890,991
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,670
<INCOME-PRETAX> 137,237
<INCOME-TAX> 0
<INCOME-CONTINUING> 137,237
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 137,237
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
