UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 Date of
Report (Date of earliest event reported):
August 3, 1999
Sono-Tek Corporation
(Exact name of registrant as specified in its charter)
Commission File Number: 0-16035
New York 14-1568099
(State of Incorporation) (I.R.S. Employer ID No.)
2012 Route 9W, Bldg. 3, Milton, New York 12547
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (914) 795-2020
<PAGE>
Item 2. Acquisition or Disposition of Assets.
Pursuant to the terms of a Stock Purchase Agreement, dated as of August 3, 1999,
by and among Sono-Tek Corporation, a New York corporation (the "Company"), S&K
Products International, Inc., a New Jersey corporation ("S&K") and S&K's two
shareholders, Justine Schumacher and Kevin Schumacher, the Company acquired all
of the outstanding stock of S&K. S&K is a specialty equipment manufacturer that
produces cleaning, degreasing and vapor drying systems for the semiconductor,
disk drive, and other high technology industries.
The aggregate consideration paid by the Company in respect of the acquisition
described above was $248,000 which consisted of (i) $5,000 of cash and (ii)
810,000 shares of the Company's common stock with a valuation of $0.30 per
share. In addition and prior to the acquisition, the Company agreed to make
loans to S&K in an amount up to $300,000 for S&K's working capital purposes and
to extend credit for work the Company performed as a vendor to S&K. Of the
$300,000, the Company agreed to forebear on the collection of $100,000 of
accounts receivable owing by S&K to the Company. At the time of the acquisition,
the Company was owed $123,996 in trade payables and $103,000 in short-term notes
payable that were effectively forgiven.
Item 7. Financial Statements, Proforma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired
INDEPENDENT AUDITOR'S REPORT
To the Stockholders of S & K Products International, Inc.
We have audited the accompanying balance sheets of S & K Products International,
Inc. (the "Company") as of August 3, 1999, and September 30, 1998 and 1997, and
the related statements of operations and retained earnings (accumulated
deficit), and cash flows for the short period and the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 3 to the financial statements, a certain error resulting in
understatement of previously reported net loss as of September 30, 1998, was
discovered by management of the Company during the current year. Accordingly,
the 1998 financial statements have been restated and an adjustment has been made
to retained earnings as of September 30, 1998 to correct the error.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of S & K Products International,
Inc. as of August 3, 1999, and September 30, 1998 and 1997, and the results of
its operations and its cash flows for the short period and the years then ended
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 2 on March 11,
1998, the Company filed a voluntary petition for reorganization under Chapter 11
of the Federal Bankruptcy Code and was authorized to continue managing and
operating the business as a debtor in possession subject to the control and
supervision of the Bankruptcy Court. Those conditions raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
On August 3, 1999, the shareholders of the Company agreed to sell 100% of the
outstanding common stock to Sono-Tek Corporation (see Note 12).
O'Connor, Davies & Co., LLP
Paramus, NJ
September 23, 1999
<PAGE>
<TABLE>
S & K PRODUCTS INTERNATIONAL, INC.
BALANCE SHEETS
AUGUST 3, 1999, AND SEPTEMBER 30, 1998 AND 1997
ASSETS
<CAPTION>
1999 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
Current assets
Cash $ 26,648 $ 89,795 $ 42,350
Accounts receivable, net 206,372 432,311 1,119,207
Inventory 75,763 378,168 676,023
Income tax refund receivable 27,757
Other current assets 36,630 11,084
------------ ------------ ----------
Total current assets 345,413 911,358 1,865,337
----------- ----------- ----------
Property and equipment
Furniture and fixtures 128,977 128,977 128,977
Equipment 225,164 224,327 214,979
----------- ----------- -----------
354,141 353,304 343,956
Less: accumulated depreciation 326,694 286,205 231,274
----------- ----------- -----------
Net property and equipment 27,447 67,099 112,682
----------- ------------ -----------
Other assets
Deposits 9,655 16,530 9,755
----------- ------------ -------------
Total other assets 9,655 16,530 9,755
----------- ------------ -------------
Total assets $ 382,515 $ 994,987 $1,987,774
=========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Current maturities of long-term debt and line of credit $ 478,378 $ 771,957 $ 300,000
Unsecured liabilities subject to compromise 0 1,001,836 0
Accounts payable 249,436 208,933 898,699
Accrued expenses 138,369 119,765 457,207
Deferred income 16,000 56,938 146,116
Deferred income taxes 3,000
-------------------------------- -------------
Total current liabilities 882,183 2,159,429 1,805,022
Long-term debt, net of current maturities 312,523 0 0
-------------------------------------------
Total liabilities 1,194,706 2,159,429 1,805,022
---------- ----------- ----------
Stockholders' equity
Common stock, no par value,
2,000 shares authorized,
100 shares issued and outstanding 50,000 50,000 50,000
Additional paid-in capital 3,872 3,872 3,872
Retained earnings (accumulated deficit) (866,063) (1,218,314) 128,880
----------- ----------- -----------
Total stockholders' equity (deficit) (812,191) (1,164,442) 182,752
----------- ----------- -----------
Total liabilities and stockholders' equity (deficit) $ 382,515 $ 994,987 $1,987,774
=========== ============ ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
S & K PRODUCTS INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(ACCUMULATED DEFICIT)
SHORT PERIOD ENDED AUGUST 3, 1999, AND
YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<CAPTION>
1999 1998 * 1997
-------------- ------------- ---------------
<S> <C> <C> <C>
Sales $ 1,063,617 $ 2,933,520 $6,195,343
Cost of sales 714,992 2,233,580 3,657,624
------------ ----------- ----------
Gross profit 348,625 699,940 2,537,719
------------ ------------ ----------
Operating expenses
Selling and marketing 193,205 528,023 694,428
General and administrative 543,948 968,671 1,194,505
Research and development 151,240 334,247 677,815
Depreciation 40,489 54,931 56,174
------------- ------------- ------------
Total operating expenses 928,882 1,885,872 2,622,922
------------ ----------- ----------
Loss from operations (580,257) (1,185,932) (85,203)
Restructuring expenses (90,623) (29,399) 0
Other expenses (7,010) (134,089) (55,026)
------------- ------------ ------------
Loss before benefit from (provision for)income taxes
and extraordinary item (677,890) (1,349,420) (140,229)
Benefit from (provision for) income taxes (580) 2,226 12,566
-------------- ------------- -----------
Loss before extraordinary item (678,470) (1,347,194) (127,663)
Extraordinary item - gain on restructuring of debt
(no applicable income taxes) 1,030,721 0 0
---------------------------- ---------------
Net income (loss) 352,251 (1,347,194) (127,663)
Retained earnings (accumulated deficit),
beginning of year (1,218,314) 128,880 256,543
----------- ------------ -----------
Retained earnings (accumulated deficit), end of year $ (866,063) $(1,218,314) $ 128,880
============ =========== ==========
</TABLE>
* Restated for comparative purposes only.
See accompanying notes to financial statements.
<PAGE>
<TABLE>
S & K PRODUCTS INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
SHORT PERIOD ENDED AUGUST 3, 1999, AND
YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<CAPTION>
1999 1998 1997
---------------- ---------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 352,251 $(1,347,194) $ (127,663)
Adjustments to reconcile net loss to net cash
provided by (used) in operating activities
Depreciation 40,489 54,931 56,174
Extraordinary gain on restructuring of debt (1,030,721)
Deferred income taxes (3,000)
Bad debts and allowance 22,498
(Increase) decrease in
Accounts receivable 225,939 664,398 370,515
Inventory 302,405 297,855 169,424
Income tax refund receivable 27,757 (20,757)
Other assets (18,671) (17,859)
Increase (decrease) in
Accounts payable 138,583 242,875 242,413
Accrued expenses (50,591) (268,247) (488,659)
Deferred income (40,938) (89,178) (71,454)
------------- ------------ ------------
Net cash provided by (used)
in operating activities (81,254) (415,164) 129,993
------------- ----------- ------------
Cash flows from investing activities
Purchase of property and equipment (837) (9,348) (8,072)
--------------- ------------ -------------
Cash flows from financing activities
Proceeds from notes payable 264,000 700,000 1,555,000
Principal payments on note payable (245,056) (228,043) (1,680,000)
------------ ----------- -----------
Net cash provided by (used)
in financing activities 18,944 471,957 (125,000)
------------- ----------- -----------
Increase (decrease) in cash (63,147) 47,445 (3,079)
Cash, beginning of year 89,795 42,350 45,429
------------- ------------ ------------
Cash, end of year $ 26,648 $ 89,795 $ 42,350
============ =========== ============
Supplemental disclosures
Cash paid during the year for
Interest $ 50,542 $ 86,137 $ 35,907
============ ============ ============
Income taxes $ 581 $ 774 $ 13,402
============== ============== ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
S & K PRODUCTS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
1. Nature of Business
The Company develops and sells high technology cleaning and drying
equipment used in the semiconductor, flat panel display, disk drive and
other precision cleaning industries. Its customers are located
throughout the United States, Europe and Asia. Its office is located in
Chestnut Ridge, New York.
2. Summary of Significant Accounting Policies
Reorganization
On March 11, 1998 (the "Filing Date") the Company filed a voluntary
petition under chapter 11 of the United States Bankruptcy Code. On
December 1, 1998, the Company filed the plan of reorganization and
related disclosure statements with the Bankruptcy Court. On February
18, 1999 (the "Approval Date") the Bankruptcy Court approved the plan
of reorganization. From the Filing Date until the Approval Date, the
Company operated its business as a debtor-in-possession subject to the
jurisdiction of the Bankruptcy Court. During such time, all claims
against the Company in existence prior to the Filing Date were stayed
and have been classified as "liabilities subject to compromise" in the
balance sheet.
At September 30, 1998, "unsecured liabilities subject to compromise"
were comprised of the following:
Accounts payable to unsecured creditors $ 932,641
Accrued commissions 69,195
-----------
$1,001,836
As discussed in Note 5, the term loan with Sovereign Bank, was a fully
secured liability subject to compromise.
During the short period ended August 3, 1999, the liabilities of
$1,030,721 were ultimately discharged by the bankruptcy court. Inventory
Inventory is valued at the lower of cost (first in, first out) or
market.
Revenue Recognition
Sales are generally recorded when products are shipped or upon
acceptance if provided for in the sales agreement. Deferred income
represents customer deposits.
2. Summary of Significant Accounting Policies (Continued)
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided
based on estimated useful lives of the assets generally using
accelerated methods. The difference between accelerated and
straight-line methods is not material to these financial statements.
Income Taxes
Deferred taxes relate primarily to differences between the basis of
property and equipment for financial and income tax reporting. The
deferred tax liability represents the future tax return consequences of
those differences.
Research and Development
Research and development costs are expensed as incurred.
Allowance for Bad Debts
At August 3, 1999 and September 30, 1997, the Company considered
accounts receivable to be fully collectible; accordingly, no allowance
for doubtful accounts was required. However, at year end September 30,
1998, $19,277 was reserved.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred. Advertising expense was $5,042, $67,280 and
$103,969 for the short period ended August 3, 1999, and the years ended
September 30, 1998 and 1997, respectively.
Concentration of Credit Risk
In the normal course of business, the Company extends unsecured credit
to customers principally in the United States, Europe and Asia.
3. Prior Period Adjustments
Based upon the information currently available to the Company, a prior
period adjustment is required to reverse the estimate established for a
deferred tax asset relating to net operating losses. This
understatement of the reported net loss in the Company's previously
issued 1998 financial statements, has been corrected in the current
year. This resulted in the following change to retained earnings as of
September 30, 1998 and the related 1998 statement of operations.
<TABLE>
<CAPTION>
Accumulated
Deficit Net Loss
<S> <C> <C>
As previously reported, September 30, 1998 $ (682,089) $ (810,969)
Adjustments:
Overestimate of deferred tax asset relating to
net operating losses (536,225) (536,225)
------------ ------------
As restated, September 30, 1998 $(1,218,314) $(1,347,194)
=========== ===========
</TABLE>
4. Inventory
Inventory at August 3, 1999, and September 30, 1998 and 1997, consists
of the following:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ------------
<S> <C> <C> <C>
Raw materials $41,310 $ 85,088 $ 61,151
Work in process and finished goods 34,453 293,080 614,872
-------- -------- --------
$75,763 $378,168 $676,023
======= ======== ========
</TABLE>
5. Long-Term Debt
The long-term debt consists of the following at August 3, 1999 and
September 30, 1998:
<TABLE>
<CAPTION>
1999 1998
----------- ------------
<S> <C> <C>
Sovereign Bank - term loan converted from line of credit, secured by
all business assets, personally guaranteed by the shareholders,
originally in the amount of $850,000, interest at 9.5%, payable in
monthly installments of $17,852. At September 30, 1998, the loan was
classified as current,
due to the Company operating as a debtor in possession. $487,901 $621,957
Stockholders - demand loan, secured by all business assets
and non-interest bearing $150,000 $150,000
Stockholders - demand loan, secured by all business assets,
originally in the amount of $161,000, interest at 9.75% 50,000 0
Sono-Tek Corporation - demand loan, secured by all business
assets, and bearing 9.75% interest 25,000 0
Sono-Tek Corporation - demand loan, secured by all business
assets, and bearing 5.79% interest 78,000 0
--------- --------------
790,901 771,957
Less: current portion 478,378 771,957
--------- ---------
Long-term debt $312,523 $ 0
======== ================
</TABLE>
Maturities of long-term debt for each of the years succeeding August 3,
1999, are as follows:
Year Ended August 3,
2000 $478,378
2001 312,523
6. Line of Credit
The Company, at September 30, 1997, had a $950,000 line of credit
arrangement with a bank at 1% over the bank's prime rate. The balance
outstanding at September 30, 1997 was $300,000. This line of credit was
converted to a term loan in April 1998. Amounts borrowed under this
agreement were collateralized by all assets of the corporation and were
guaranteed by the Company's major shareholders.
7. Major Customers
During the short period ended August 3, 1999 and year end September 30,
1998, the Company had three major customers aggregating 52% and 57% of
sales, respectively. During the year ended September 30, 1997, the
Company had one major customer aggregating 26% of sales. At August 3,
1999, amounts due from these customers included in accounts receivable
were $143,949.
8. Employee Benefit Plan
The Company is the sponsor of a 401(K) employee benefit plan. The Plan
covers all employees of the Company who are 21 years of age or older,
and have completed six months of employment. An employee may contribute
up to 15% of his gross earnings up to a maximum of $9,500. The Company
matches 100% of the employee's contribution, up to a maximum of 3% of
the employee's gross earnings. Employees in the plan are 100% vested.
The expense for the employee benefit plan amounted to $4,800, $8,545,
and $15,674 for the short period ended August 3, 1999 and the years
ended September 30, 1998 and 1997, respectively.
9. Lease Commitments
The Company leases its facilities from its major shareholder. The lease
term, which was renegotiated on August 3, 1999, ends August 2000, and
requires payment of base rent, plus operating expenses. Rent expense
was $64,958 for the short period ended August 3, 1999 and $129,920 for
the years ended September 30, 1998 and 1997, respectively.
The Company also leases space under various leases with terms expiring
at different dates through March 2000. Rent expense under these leases
was $26,909, $42,596 and $56,000 for the short period ended August 3,
1999, and the years ended September 30, 1998 and 1997, respectively.
The Company has various operating leases for equipment, furniture and
fixtures and automobiles with terms ranging from three to five years.
Rent expense under these operating leases was $51,192, $140,520 and
$113,000 for the short period ended August 3, 1999, and the years ended
September 30, 1998 and 1997, respectively.
Future minimum payments on leases in effect at August 3, 1999 are:
Years Ended Minimum
August 3, Commitments
2000 $121,570
2001 32,792
2002 2,318
10. Income Taxes
At August 3, 1999, the Company has research and development Federal tax
credits of approximately $120,000 available to reduce future income
taxes, expiring in various years through 2012.
A summary of current and deferred income taxes included as benefits
(provisions) in the statements of operations for the short period ended
August 3, 1999, and the years ended September 30, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Current $(580) $ (774) $15,566
Deferred 3,000 (3,000)
-------- ------ --------
Total income tax benefit (provision) $(580) $2,226 $12,566
===== ====== =======
</TABLE>
The Company has available approximately $506,000 in Federal and state
net operating loss carryforwards as of August 3, 1999. These tax
benefits, if not utilized, will expire in 2014 and 2019.
Deferred income taxes are provided for the temporary differences
between the financial reporting basis and the tax basis of the
Company's assets and liabilities. The major temporary differences that
give rise to the deferred tax liabilities and assets are depreciation
and federal and state net operating loss carryovers.
The total deferred tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Deferred tax liabilities $ $ $(3,000)
Deferred tax assets 216,000 536,225
Total valuation allowance recognized
for deferred tax assets (216,000) (536,225) 0
--------- --------- ------------
Deferred tax liability $ -0- $ -0- $(3,000)
============= ============ =======
</TABLE>
11. Other Expenses
Other expenses consist of the following:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
Interest expense $ 50,542 $ 92,137 $36,435
Miscellaneous expense (income) (43,532) 41,952 18,591
-------- --------- --------
Total other expenses $ 7,010 $134,089 $55,026
========= ======== =======
</TABLE>
12. Subsequent Event
At the balance sheet date, the Board of Directors and Stockholders
approved a written consent to sell 100% of the Company's stock to
Sono-Tek Corporation.
<PAGE>
(b) Pro Forma Financial Information.
The following Unaudited Proforma Consolidated Balance Sheet at August 31, 1999,
the Unaudited Proforma Consolidated Statements of Operations for February 28,
1999 and August 31, 1999 are adjusted to give effect to the acquisition of S&K
by Sono-Tek as of March 1, 1998. The proforma financial information is a
presentation of historical results with accounting and other adjustments. The
proforma financial information does not reflect the effect of any of the
anticipated changes to be made by the Company in the operations from the
historical operations.
Proforma adjustments are based upon preliminary estimates, available information
and certain assumptions that management deems appropriate. The Unaudited
Proforma Consolidated Statements presented herein are provided for informational
purposes only and should not be construed to be indicative of the Company's
results of operations had the transactions been consummated on March 1, 1998 and
do not project the Company's results of
operations for any future period.
The Unaudited Proforma Consolidated Financial Statements and accompanying notes
should be read in conjunction with the financial statements and the financial
information pertaining to the Company included in documents filed previously
with the Securities and Exchange Commission by the Company.
<TABLE>
Sono-Tek Corporation
Unaudited Proforma Consolidated Balance Sheet
August 31, 1999
<CAPTION>
Sono-Tek S&K Products(1) Proforma Proforma
Corporation International, Inc Adjustment Consolidated
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents $8,912 $49,185 $0 $58,097
Accounts receivable 844,073 256,315 (123,996) 976,392 (2)
Loan receivable 202,209 0 (202,209) 0 (2)
Inventories 744,723 112,721 0 857,444
Prepaid expenses and
other current assets 44,707 13,231 0 57,938
---------- -------- ------------ ----------
Total current assets 1,844,623 431,452 (316,205) 1,949,871
Equipment and furnishings 116,393 41,372 0 157,765
Investment in subsidiary 407,347 0 (407,347) 0
Goodwill 0 1,240,108 (117,776) 1,122,332 (3)
Patents, patents pending 34,985 0 0 34,985
Other assets 15,917 14,655 0 30,572
------------ ------------ -------------- ------------
Total Assets $2,419,265 $1,727,587 $(851,328) $3,295,525
========== ========== ========== ==========
Current Liabilities
Current maturities-long term debt $10,824 $176,768 $0 $187,592
Short term loans-related parties 215,000 0 0 215,000
Revolving line of credit 299,948 0 0 299,948
Accounts payable 538,152 281,278 (123,996) 695,434 (2)
Accrued expenses 270,877 167,202 (2,209) 435,870 (2)
---------- ------- ----------- ---------
Total current liabilities 1,334,802 625,247 (126,205) 1,833,844
Long term debt, less current maturities 31,877 497,145 (200,000) 329,022 (2)
Long term loans-related parties 0 150,000 0 150,000
Customer deposits 0 47,847 0 47,847
Noncurrent rent payable 9,582 0 0 9,582
----------- -------------- ------------ ------------
Total liabilities 1,376,260 1,320,240 (326,205) 2,370,295
Stockholders' Equity
Common stock 81,390 0 0 81,390
Additional paid in capital 5,391,216 438,345 (438,345) 5,391,216
Accumulated deficit (4,429,601) (30,998) (86,778) (4,547,377) (3)
---------- ------- ------- ----------
Total stockholders equity 1,043,005 407,347 (525,123) 925,230
Total Liabilities and
Stockholders' Equity $2,419,265 $1,727,587 $(851,328) $3,295,525
========== ========== ========== ==========
</TABLE>
<TABLE>
Sono-Tek Corporation
Unaudited Proforma Consolidated Statement of Operations
Twelve Months Ended February 28, 1999
<CAPTION>
Sono-Tek S&K Products(1) Proforma Proforma
Corporation International, Inc Adjustment Consolidated
<S> <C> <C> <C> <C>
Net sales $2,902,951 $2,084,304 $0 $4,987,255
Cost of goods sold 1,616,617 1,429,932 0 3,046,549
--------- --------- ---------- ---------
Gross profit 1,286,334 654,372 0 1,940,706
Operating expenses
Research & product
development costs 487,788 216,605 0 704,393
Marketing & selling expense 707,215 352,341 0 1,059,556 General &
administrative costs 498,517 760,367 83,136 1,342,020 (3)
Restructuring costs 17,000 (17,000) 0 (4)
Noncash charge for warrants 354,280 0 0 354,280
---------- -------------- ---------- -----------
Total operating expenses 2,047,800 1,346,313 66,136 3,460,249
Operating loss (761,466) (691,941) (66,136) (1,519,543)
Interest expense (60,448) (108,854) 0 (169,302)
Interest and other income 11,212 11,272 0 22,484
---------- --------- ----------- -------------
Net loss before extraordinary item (810,702) (789,523) (66,136) (1,666,361)
Extraordinary-gain on debt forgiveness 0 1,030,721 (1,030,721) 0 (4)
------------- --------- ---------- ---------------
Net (loss) income $(810,702) $241,198 $(1,096,857) $(1,666,361) (5)
========= ======== =========== ===========
Basic loss per share ($0.10) ($0.20)
Diluted loss per share ($0.09) ($0.19)
Weighted average shares-basic 8,138,961 8,138,961
Weighted average shares-diluted 8,761,900 8,761,900
</TABLE>
<TABLE>
Sono-Tek Corporation
Unaudited Proforma Consolidated Statement of Operations
Six Months Ended August 31, 1999
<CAPTION>
Sono-Tek S&K Products(1) Proforma Proforma
Corporation International, Inc. Adjustment Consolidated
<S> <C> <C> <C> <C> <C>
Net sales $2,202,063 $761,474 ($115,882) $2,667,655 (2)
Cost of goods sold 967,562 638,391 (115,882) 1,490,071 (2)
---------- ------- --------- ---------
Gross profit 1,054,504 123,083 0 1,177,584
Operating expenses
Research & product
development costs 245,104 93,278 0 338,382
Marketing & selling expense 459,811 118,010 0 577,821
General & administrative costs 231,284 346,127 41,568 618,979 (3)
Restructuring costs 0 103,022 (103,022) 0 (4)
-------------- ------- ------- ------------
Total operating expenses 936,199 660,437 (61,454) 1,535,182
Operating income (loss) 118,302 (537,354) 61,454 (357,598)
Loss from subsidiary (30,998) 0 30,998 0
Interest expense (125,730) (32,183) 2,209 (160,122) (2)(6)
Interest and other income 8,935 86,694 (2,209) 97,838 (2)
---------- ------ -------- ---------
Total Other (147,793) 54,511 30,998 (62,284)
Net loss $(29,491) $(482,843) $92,452 $(419,882) (5)
========= ========= ======= =========
Basic loss per share ($0.00) ($0.05)
Diluted loss per share ($0.00) ($0.04)
Weighted average shares-basic 8,138,961 8,138,961
Weighted average shares-diluted 9,429,276 9,429,276
<FN>
(1) The S&K financial statements as of and for the year ended February 28, 1999
were derived from the audited financial statements for the period from October
1, 1998 to August 3, 1999 and for the year ended September 30, 1998 by deducting
the operating activity from October 1, 1997 to February 28, 1998 and adding the
operating activity for the period from October 1, 1998 to February 28, 1999. The
S&K financial statements as of and for the six months ended August 31, 1999 were
derived from the audited financial statements for the period from October 1,
1998 to August 3, 1999 by deducting the operating activity from October 1, 1998
to February 28, 1999 and adding the unaudited operating activity for the period
from August 3, 1999 to August 31, 1999.
(2) These amounts represent the elimination of intercompany transactions in the
period presented.
(3) These amounts represent the amortization of goodwill during the period
presented. The portion of consideration assigned to goodwill represents the
excess of the cost over the estimated fair value of the net (consolidated)
assets acquired. The Company amortizes goodwill over 15 years. The
recoverability of the unamortized goodwill will be assessed on an ongoing basis
by comparing anticipated undiscounted future cash flows from operations to net
book value. Straightline amortization of goodwill was $83,136 for the year ended
February 28, 1999 and $41,568 for the six month period ended August 31, 1999.
(4) On March 11, 1998 S&K filed a voluntary petition under chapter 11 of the
United States Bankruptcy Code. On December 1, 1998, S&K filed the plan of
reorganization and related disclosure statements with the Bankruptcy Court. On
February 18, 1999 the Bankruptcy Court approved the plan of reorganization.
During the period ended February 28, 1999, the liabilities of $1,030,721 were
ultimately discharged by the bankruptcy court. In conjunction with the
bankruptcy, restructuring costs were incurred and have been adjusted.
(5) The Company has a net operating loss carryforward, therefore no income tax
expense is recorded for the year ended February 28, 1999 and the six month
period ended August 31, 1999.
(6) The interest expense for the six month period ended August 31, 1999 includes
a noncash charge of $102,626 for the issuance of 600,000 warrants.
</FN>
</TABLE>
(c) Exhibits
Exhibit 23.1 Consent of Independent Auditors
October 15, 1999
Sono-Tek Corporation
2012 Route 9W, Bldg.3
Milton, New York 12547
We agree to the inclusion in the Amended Form 8-K to be filed on or about
October 18, 1999 of Sono-Tek Corporation, of our report, dated September 23,
1999, on our audit of the financial statements of S&K Products International as
of August 3, 1999 and for the short period from October 1, 1998 to August 3,
1999 and as of September 30, 1998 and 1997 and for the years then ended.
C'Connor, Davies & Co., LLP
Paramus, NJ
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly cause this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SONO-TEK CORPORATION
By:
James L. Kehoe
Chairman of the Board and Chief Executive Officer
October 18, 1999
