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, 2000
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, Milton, NY 12547
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone no., including area code: (845) 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, 2000
Common Stock, par value $.01 per share 8,954,855
<PAGE>
SONO-TEK CORPORATION
INDEX
Part I - Financial Information Page
Item 1 - Financial Statements:
Consolidated Balance Sheets -
August 31, 2000 (Unaudited) and February 29, 2000 1
Consolidated Statements of Operations - Six Months and Three Months
Ended August 31, 2000 and 1999 (Unaudited) 2
Consolidated Statements of Cash Flows - Six Months Ended
August 31, 2000 and 1999 (Unaudited) 3
Notes to Consolidated Financial Statements (Unaudited) 4 - 9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 12
Item 3 - Quantitative and Qualitative Disclosure About Market Risk 12
Part II - Other Information 12 - 13
Signatures 14
<PAGE>
<TABLE>
SONO-TEK CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS
August 31, February 29,
2000 2000
<S> <C> <C>
Current Assets Unaudited
------------------------------
Cash and cash equivalents $ 92,713 $ 8,176
Accounts receivable (less allowance of $51,997 and $39,997
at August 31 and February 29, respectively) 1,336,501 1,619,639
Inventories (Note 4) 983,057 1,224,380
Prepaid expenses and other current assets 99,645 74,308
---------- ----------
Total current assets 2,511,916 2,926,503
Equipment, furnishings and leasehold improvements (less accumulated
depreciation of $507,041 and $469,011 at August 31 and February 29,
respectively) 322,714 256,994
Intangible assets, net:
Goodwill (Note 1) 1,189,823 1,232,571
Patents and patents pending (Note 1) 28,642 31,642
Deferred financing fees 29,011 32,563
---------- ----------
Total intangible assets 1,247,476 1,296,776
Long-term equity investment (Note 5) 0 19,310
Other assets 11,341 14,542
---------- ----------
TOTAL ASSETS $4,093,447 $4,514,125
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $1,066,224 $847,135
Deferred revenue 22,251 725,491
Accrued expenses 669,182 437,342
Revolving line of credit 350,000 334,307
Short term loans-related parties (Note 6) 248,084 239,084
Current maturities of long term debt (Note 7) 248,564 220,532
Short term convertible loan 0 100,000
---------- ----------
Total current liabilities 2,604,305 2,903,891
Subordinated mezzanine debt 392,932 382,060
Long term debt, less current maturities (Note 7) 187,293 273,544
Subordinated convertible loans-related parties 150,000 150,000
---------- ----------
Total liabilities 3,334,530 3,709,495
---------- ----------
Commitments and Contingencies - -
Put Warrants 77,000 77,000
Stockholders' Equity
Common stock, $.01 par value; 25,000,000 shares authorized, 8,954,855 and
8,886,612 outstanding at August 31 and
February 29, respectively 89,549 88,666
Additional paid-in capital 5,844,042 5,711,800
Accumulated deficit (5,251,674) (5,072,836)
----------- ----------
Total stockholders' equity 681,917 727,630
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,093,447 $4,514,125
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
SONO-TEK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Six Months Ended August 31, Three Months Ended August 31,
Unaudited Unaudited
2000 1999 2000 1999
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Net Sales $4,293,984 $2,108,428 $2,320,951 $1,303,099
Cost of Goods Sold 2,584,325 986,544 1,357,247 640,973
---------- ---------- ---------- ----------
Gross Profit 1,709,659 1,121,884 963,704 662,126
---------- ---------- ---------- ----------
Operating Expenses
Research and product development costs 469,636 259,356 232,504 148,108
Marketing and selling expenses 745,273 484,696 341,575 267,591
General and administrative costs 448,144 290,854 237,601 174,655
---------- ---------- ---------- ---------
Total Operating Expenses 1,663,053 1,034,906 811,680 590,354
---------- ---------- ---------- ---------
Operating Income 46,606 86,978 152,024 71,772
Interest Expense (177,364) (129,037) (52,119) (16,269)
Interest and Other (Loss) Income (48,080) 12,568 (15,013) 6,099
---------- ---------- ---------- ---------
(Loss) Income Before Income Taxes (178,838) (29,491) 84,892 61,602
Income Tax Expense 0 0 0 0
---------- ---------- ---------- ---------
Net (Loss) Income $(178,838) $(29,491) $84,892 $61,602
========== ========== ========== =========
Basic (Loss) Earnings Per Share $(0.02) $(0.00) $0.01 $0.01
======= ======= ===== =====
Diluted (Loss) Earnings Per Share $(0.02) $(0.00) $0.01 $0.01
======= ======= ===== =====
Weighted Average Shares - Basic 8,954,006 6,594,581 8,954,855 6,907,494
========= ========= ========= =========
Weighted Average Shares - Diluted 8,954,006 6,594,581 11,373,814 8,197,809
========= ========= ========== =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
SONO-TEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Six Months Ended August 31,
Unaudited
2000 1999
----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(178,838) $(29,491)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Non-cash charge for issuance of warrants 75,831 102,626
Accrued interest-short term loans-related parties 20,079 9,399
Imputed interest expense on subordinated mezzanine debt 10,872 0
Loss on equity investment 19,310 0
Depreciation and amortization 87,329 34,318
Provision for doubtful accounts 12,000 915
(Increase) decrease in:
Accounts receivable 271,138 (506,718)
Inventories 241,323 14,019
Prepaid expenses and other current assets (22,138) 15,732
Increase (decrease) in:
Accounts payable and accrued expenses 227,604 266,970
Customer deposits203,250 31,847
Deferred revenue (703,240) 0
Non-current rent payable 0 499
--------- --------
Net Cash Provided by (Used in) Operating Activities 264,520 (59,884)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition costs net of cash received 0 (315,518)
Purchase of equipment and furnishings (103,750) (6,469)
--------- --------
Net Cash Used in Investing Activities (103,750) (321,987)
--------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit 15,693 100,000
Proceeds from bank loan for production equipment 78,859 0
Proceeds from short term loans-related party 135,000 127,000
Proceeds from issuance of stock 0 222,000
Proceeds from exercise of warrants 55,692 0
Proceeds from exercise of stock options 1,602 0
Financing costs paid 0 (10,000)
Repayments of short term loans-related party (126,000) (50,000)
Repayments of short term borrowings (100,000) 0
Repayments of note payable and equipment loans (137,079) (19,083)
--------- --------
Net Cash (Used in) Provided by Financing Activities (76,233) 369,917
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 84,537 (11,954)
CASH AND CASH EQUIVALENTS
Beginning of period 8,176 70,051
--------- --------
End of period $92,713 $58,097
========= ========
SUPPLEMENTAL DISCLOSURE:
Interest paid $ 36,019 $ 12,846
========= =========
Non-cash exchange of accrued bonuses
for common stock $0 $ 17,188
== =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
SONO-TEK CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
August 31, 2000 and 1999
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation - The accompanying consolidated financial statements of Sono-Tek
Corporation, a New York Corporation (the "Company"), include the accounts of the
Company and its wholly owned subsidiary, Sono-Tek Cleaning Systems, Inc.
("SCS"), formerly known as S&K Products International, Inc., a New Jersey
Corporation ("S&K"), which the Company acquired on August 3, 1999 (the
"Acquisition"). All significant intercompany accounts and transactions are
eliminated in consolidation. The inclusion of SCS's results since August 23,
1999 has an effect on the comparison of the Company's fiscal year 2001 results
to prior periods.
Interim Reporting - The attached summary consolidated financial information does
not include all disclosures required to be included in a complete set of
financial statements prepared in conformity with accounting principles generally
accepted in the United States of America. Such disclosures were included with
the financial statements of the Company at February 29, 2000, and included in
its report on Form 10-K. Such statements should be read in conjunction with the
data herein.
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 presented. The results for such interim periods are not necessarily
indicative of the results to be expected for the year.
Goodwill - Goodwill is being amortized on a straight-line basis over 15 years.
Patent and Patent Pending Costs - Cost of patent applications are deferred and
charged to operations over seventeen years for domestic patents and twelve years
for foreign patents. However, if it appears that such costs are related to
products which are not expected to be developed for commercial application
within the foreseeable future, or are applicable to geographic areas where the
Company no longer requires patent protection, they are written off to
operations. The accumulated amortization was $83,053 and $80,053 at August 31,
2000 and February 29, 2000, respectively.
Reclassifications - Certain February 29, 2000 balances have been reclassified to
conform with the current period presentation.
Adoption of Financial Accounting Standards - In June 1998, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"). This statement establishes standards for the
accounting and reporting for derivative instruments and for hedging activities
and requires the recognition of all derivatives as assets or liabilities
measured at their fair value. Gains or losses resulting from changes in the fair
value of derivatives would be recognized in earnings in the period of change
unless certain hedging criteria are met. The Company does not expect SFAS 133 to
have a material impact on the consolidated financial statements. The FASB issued
SFAS Nos. 137 and 138, which deferred the effective date of implementation of
SFAS 133 to all fiscal quarters of all fiscal years beginning after June 15,
2000.
Revenue Recognition in Financial Statements - In December 1999, the Securities
and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB
101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain
of the SEC's views in applying generally accepted accounting principals to
revenue recognition in financial statements. On June 26, 2000, the SEC issued
SAB 101B to defer the effective date of implementation of SAB 101 until no later
than the fourth quarter of fiscal years beginning after December 31, 1999. The
Company is required to adopt SAB 101 by February 28, 2001. The Company does not
expect the adoption of SAB 101 to have a material impact on the consolidated
financial statements.
NOTE 2: SEGMENT INFORMATION
The Company has two reportable segments: spraying products and cleaning and
drying systems. The spraying products segment is primarily engaged in the
business of developing, manufacturing, selling, installing and servicing
ultrasonic spray equipment. The cleaning and drying systems segment is engaged
in the business of developing, manufacturing, selling, installing and servicing
cleaning and drying systems for the semiconductor, disk drive and precision
cleaning industries.
Summary financial information concerning the Company's reportable segments is
shown in the following table:
<TABLE>
<CAPTION>
Six Months Ended August 31, 2000
Spraying Cleaning
Products Systems Total
-------- ------- -----
<S> <C> <C> <C>
Sales $2,170,821 $2,123,163 $4,293,984
Net Income (Loss) 137,140 (315,978) (178,838)
Capital Expenditures 98,308 5,442 103,750
Depreciation and Amortization Expense 33,896 53,433 87,329
Identifiable Net Assets at August 31, 2000 267,556 491,361 758,918
Three months Ended August 31, 2000
Spraying Cleaning
Products Systems Total
-------- ------- -----
Sales $1,203,816 $1,117,135 $2,320,951
Net Income (Loss) 173,649 (88,757) 84,892
Capital Expenditures 24,524 5,442 29,966
Depreciation and Amortization Expense 17,240 29,214 46,454
</TABLE>
The Company operated in a single reportable segment for the period from March 1,
1999 through August 3, 1999. Segment information for the period August 4, 1999
to August 31, 1999, as a result of the Acquisition (Note 3) on August 3, 1999,
is not materially different than if the Company only operated in a single
segment and is therefore omitted.
NOTE 3: ACQUISITION
On August 3, 1999 the Company purchased all the outstanding stock of S&K, a
supplier of cleaning and drying systems for the semiconductor, disk drive and
precision cleaning industries. In June 2000, the Company changed S&K's name to
SCS.
The following unaudited proforma information presents a summary of the
consolidated results of operations of Sono-Tek Corporation and SCS as if the
acquisition had occurred on March 1, 1999.
Proforma Consolidated Statement of Operations
Six month period ended
August 31, 1999
Net Sales $2,667,655
Cost of Goods Sold 1,222,607
---------
Gross Profit 1,445,048
Operating Expenses 1,555,081
---------
Net Loss (110,033)
Interest Expense (160,122)
Interest & Misc. Income 28,970
---------
Net Loss $(241,185)
=========
These unaudited pro forma results have been prepared for comparative purposes
only and include certain adjustments, such as additional amortization expense as
a result of goodwill and the elimination of extraordinary items associated with
the SCS acquisition. They do not purport to be indicative of the results of
operations that actually would have resulted had the combination occurred on
March 1, 1999, or of future results of operations of the consolidated entities.
NOTE 4: INVENTORY
Inventories at August 31, 2000 are comprised of:
Finished goods $191,966
Work in process 200,868
Consignment 13,090
Raw materials and subassemblies 766,733
---------
Total 1,172,657
Less: Allowance (189,600)
---------
Net inventories $ 983,057
=========
NOTE 5: LONG-TERM EQUITY INVESTMENT - NET
In January 2000, in connection with the formation of PNR America, LLC, a
Delaware limited liability company ("PNR America"), the Company invested $19,600
in PNR America for a 49% ownership interest. Flowtech Srl, an Italian company
("Flowtech"), a pressure nozzle manufacturer, owns the remaining 51%. In August
2000, the Company and Flowtech pledged an additional investment of $9,800 and
$10,200, respectively in PNR America, thereby maintaining each's proportional
share.
PNR America was formed to market and sell nozzles imported from Flowtech in the
U.S. The PNR America product line compliments the Company's existing business as
there are certain basic nozzle properties common to both product lines and
capitalizes on the Company's existing relationships with its customers. Prior to
the formation of PNR America, the Company had conducted business with Flowtech
as a U.S. distributor.
Certain of the Company's officers and directors are also officers and directors
of PNR America, however, PNR America's board of directors is controlled by
Flowtech. The Company does not control PNR America and it is therefore not
consolidated for reporting purposes.
The Company shares its facilities and personnel with PNR America. The Company
allocated costs of $24,620 and $57,230 to PNR America for the three and six
month periods ended August 31, 2000, respectively, and $13,967 for the period of
inception through February 29, 2000. Balances due from PNR America of $46,684
and $13,967 at August 31, 2000 and February 29, 2000, respectively, are expected
to be repaid out of PNR America's fiscal year 2000 operating cash flows.
PNR America's year end is December 31, however, for financial reporting purposes
the Company will reflect its proportionate share of the operating results of PNR
America on a monthly basis, as the records are compiled by the Company. The
Company's cumulative recorded equity loss in PNR America at August 31, 2000 was
$46,684. The Company recognized, during the six and three month period ended
August 31, 2000 and the period from inception to February 29, 2000, $18,023,
$34,004 and $14,257, respectively as its estimate of the proportionate share of
the net loss of PNR America.
The Company, for financial reporting purposes, has netted the cumulative equity
loss in PNR America with the intercompany balances due from PNR America. The
Company did not record $1,088 of its proportional equity loss in PNR America for
the quarter and six months ended August 31, 2000. At August 31, 2000, the
Company had accumulated unrecorded equity losses in PNR America of $1,088. The
Company will not record equity income from its investment in PNR America until
such time as the accumulated unrecorded losses are recovered.
The condensed financial information of PNR America as of August 31, 2000 and for
the three month period ended August 31, 2000 is as follows:
Net loss-three months ended August 31, 2000 $(39,002)
Net loss-six months ended August 31, 2000 $(108,398)
Total assets - current $37,400
=======
Due to Sono-Tek $46,684
Due to Flowtech 76,017
Accrued Expenses 12,194
-------
Liabilities 134,895
Stockholders' deficiency (97,495)
Total liabilities and stockholders' deficiency $37,400
=======
NOTE 6: SHORT TERM LOANS - RELATED PARTIES
From time to time the Company has required short-term loans to meet its payment
obligations. All of these loans, which are payable on demand, have been provided
by certain officers and directors of the Company at an interest rate of prime
plus 2% at the date of the loan (9.75% to 11.5% at August 31, 2000). As of
August 31, 2000 the amount of these loans outstanding was $248,084. Interest
expense for the six month period ended and three month period ended August 31,
2000 was $9,276 and $4,510, respectively. Accrued interest was $20,079 and
$13,165 at August 31, 2000 and February 29, 2000, respectively.
NOTE 7: LONG TERM DEBT
On June 29, 2000, the Company entered into a collateralized loan agreement with
a bank to purchase production equipment. The five year loan for $33,500 carries
an interest rate of prime plus 2%, which was 11.5% at the date of inception. The
loan will be repaid in equal monthly installments of $558 plus interest.
NOTE 8: EARNINGS PER SHARE
Basic earnings per share ("EPS") and loss per share ("LPS") are computed by
dividing net income (loss) by the weighted-average number of common shares
outstanding for the period. Diluted EPS and LPS reflect the potential dilution
that could occur if securities or other obligations to issue common stock were
exercised or converted into common stock. Stock options granted but not yet
exercised under the Company's stock option plans are included for Diluted EPS
and LPS calculations under the treasury stock method.
The computation of basic and diluted earnings (loss) per share are set forth on
the following table:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
August 31, August 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator-
Numerator for basic and diluted
earnings (loss) per share $(178,838) $(29,491) $84,892 $61,602
========== ========= ======= =======
Denominator:
Denominator for basic earnings (loss)
per share - weighted average shares 8,954,006 6,594,581 8,954,855 6,907,494
Effects of dilutive securities:
Stock warrants 0* 0* 1,932,821 800,000
Stock options for employees, directors
and outside consultants 0* 0* 486,138 490,315
--------- --------- ---------- ---------
Denominator for diluted earnings
(loss) per share 8,954,006** 6,594,581** 11,373,814 8,197,809
========= ========= ========== =========
</TABLE>
*Stock options and warrants for employees, directors and outside
consultants are antidilutive as a result of the net loss and therefore
are not considered in the Diluted LPS calculation.
**The effect of considering the detachable warrants related to the
convertible secured subordinated promissory notes which were converted
on February 26, 1999, are antidilutive and therefore not considered for
the Diluted LPS calculations.
Under the assumption that stock options, warrants and convertible long term
loans were not antidilutive as described in * and **, the denominator for
Diluted LPS would be 11,199,372 and 8,197,809 weighted average shares at August
31, 2000 and 1999 respectively.
NOTE 9: SUBSEQUENT EVENTS
Intellectual property purchase - On September 21, 2000, the Company acquired
certain intellectual property and intangible assets of Serec Corporation, a
Rhode Island company which manufactured and sold solvent based cleaning systems.
In exchange for $100,000 cash the Company received the rights to seven patents,
one registered trademark, purchase orders, engineering designs and various other
intangible assets.
Letter of intent - On May 16, 2000, the Company signed a letter of intent to
purchase all the outstanding stock of a corporation to further expand the
Company's product base. Although this letter of intent has expired by its terms,
the Company is continuing discussions with the selling shareholders to determine
if there is a satisfactory way for this transaction to proceed.
<PAGE>
SONO-TEK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward-Looking Statements
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of the Federal Securities Laws. Such
forward-looking statements include statements regarding the intent, belief or
current expectations of the Company and its management and involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among other things, the
following: general economic and business conditions; political, regulatory,
competitive and technological developments affecting the Company's operations or
the demand for its products; timely development and market acceptance of new
products; adequacy of financing; capacity additions; and ability to enforce
patents.
The Company undertakes no obligation to update publicly any forward-looking
statements.
Liquidity and Capital Resources
The Company's working capital decreased $128,968 to a working capital deficiency
of $(92,389) at August 31, 2000 from $36,579 at February 29, 2000. The decrease
in working capital was primarily a result of an decrease in accounts receivable
and inventories of $524,461 that was offset by an increase in accounts payable
and accrued expenses of $450,929.
The Company's stockholders' equity decreased $45,713 from $727,630 on February
29, 2000 to $681,917 on August 31, 2000. The decrease in stockholders' equity
was the result of the loss of $179,926 for the six months ended August 31, 2000
that was offset by an increase in paid in capital of $132,242 for the exercise
of warrants and options.
During Fiscal Year 2000, the Company entered into an agreement with a Small
Business Investment Corporation, Norwood Venture Corporation ("Norwood"),
pursuant to which the Company obtained a five-year loan in the principal amount
of $450,000. The terms of the loan require interest payments only for the first
two years followed by monthly payments of $12,500 plus interest through
September 30, 2004. The Company also granted Norwood a warrant to purchase
1,100,000 shares of the Company's common stock which can be put to the Company.
Such warrants were valued at $77,000 which is accounted for as a discount and
will be imputed as additional interest expense over the term of the loan.
The Company currently has a $350,000 line of credit with a bank. The loan is
collateralized by accounts receivable, inventory and all other personal property
of the Company and is guaranteed by the CEO of the Company. As of August 31,
2000 the outstanding balance was $350,000.
Due to the losses incurred during Fiscal Years 2000 and 1999, the Company has
borrowed on a short term basis from officers and directors. As of August 31,
2000, the balance owed these officers and directors was $248,084.
Although there can be no assurances, management believes that the continued
sales and expanding markets for its spray products, and the sales of cleaning
and drying equipment will lead to broader markets and increases in sales and
profits. These factors, and the anticipated success of PNR America, should allow
the Company to meet its current obligations as they become due. The consolidated
backlog at August 31, 2000 gives the Company a reason to anticipate increased
sales in Fiscal Year 2001.
Results of Operations
The Company's sales increased $2,185,556 from $2,108,428 for the six months
ended August 31, 1999 to $4,293,984 for the six months ended August 31, 2000.
The increase was a result of sales of cleaning and drying systems of $1,919,506
and an increase in sales of SonoFlux Systems of $445,980 that were offset by a
decrease in MCS Infinity and Accu Mist Systems of $193,770.
The Company's sales increased $1,017,852 from $1,303,099 for the three months
ended August 31, 1999 to $2,320,951 for the three months ended August 31, 2000.
The increase was a result of sales of cleaning and drying systems of $914,464
and an increase in sales of SonoFlux Systems of $302,209 that were offset by a
decrease in MCS Infinity and Accu Mist Systems of $165,251 and a decrease in
nozzle sales of $43,675.
Gross profit increased $587,775 from $1,121,884 for the six month period ended
August 31, 1999 to $1,709,659 for the six month period ended August 31, 2000.
Gross profit increased $274,578 from $662,126 for the three months ended August
31, 1999 to $963,704 for the three months ended August 31, 2000. For both the
three and six month periods the increase was primarily a result of increased
sales of the Company's products that were offset by the related material and
labor costs.
The gross profit margin was 40% and 53% for the six month period ended August
31, 2000 and 1999, respectively. The gross profit margin was 42% and 51% for the
three month period ended August 31, 2000 and 1999, respectively. For both the
three and six month periods the decrease in gross profit margins was a result of
lower margins on the sale of newly developed cleaning and drying systems and the
required startup and commissioning costs of the equipment.
Research and product development costs increased $210,280 from $259,356 for the
six months ended August 31, 1999 to $469,636 for the six months ended August 31,
2000. The increase was a result of increased compensation due to a larger
engineering staff, additional new product development costs and additional costs
associated with SCS.
Research and product development costs increased $84,396 from $148,108 for the
three months ended August 31, 1999 to $232,504 for the three months ended August
31, 2000. The increase was a result higher personnel costs and the additional
costs associated with SCS.
Marketing and selling costs increased $260,577 from $484,696 for the six months
ended August 31, 1999 to $745,273 for the six months ended August 31, 2000.
Marketing and selling costs increased $73,984 from $267,591 for the three months
ended August 31, 1999 to $341,575 for the three months ended August 31, 2000.
The increases were primarily a result of additional commissions related to
increased sales, increased trade show expenses and additional costs associated
with SCS.
General and administrative costs increased $157,290 from $290,854 for the six
month period ended August 31, 1999 to $448,144 for the six month period ended
August 31, 2000. General and administrative costs increased $62,946 from
$174,655 for the three month period ended August 31, 1999 to $237,601 for the
three month period ended August 31, 2000. For both periods the increase is a
result of additional SCS costs.
Interest expense increased $48,327 from $129,037 for the six month period ended
August 31, 1999 to $177,364 for the six months ended August 31, 2000. Interest
expense increased $35,850 from $16,269 for the three month period ended August
31, 1999 to $52,119 for the three months ended August 31, 2000. The increase is
primarily due to an increase in interest costs associated with the addition of
the SCS and Norwood loan interest and new equipment loans from the bank.
For the six months ended August 31, 2000 the Company had a net loss of $178,838
or $(0.02) per share as compared to a net loss of $29,491 or $(0.00) per share
for the six months ended August 31, 1999.
For the three months ended August 31, 2000, the Company had earnings of $84,892
or $0.01 per share as compared to earnings of $61,602 or $.01 per share for the
three months ended August 31, 1999.
SONO-TEK CORPORATION
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk related to changes in interest rates. The
interest rate on the Company's debt is based on fluctuations in the prime rates.
If the prime rate increased by 1 percentage point from the levels at February
29, 2000, the negative effect on the Company's results of operations would
approximate $1,200 for the quarter ended August 31, 2000 and $2,200 for the six
months ended August 31, 2000.
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 24, 2000.
1. The election of three (3) directors of the Company to serve until the
Company's 2002 annual meeting of shareholders.
For Withheld
James L. Kehoe 7,379,159 332,630
Samuel Schwartz 7,379,159 332,630
J. Duncan Urquhart 7,379,159 332,630
2. Ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending February 28, 2001.
For Against Abstained
7,445,689 33,500 307,600
There were no broker non-votes.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
4.1 27. Financial Data Schedule - EDGAR filing only
(b) Reports on Form 8-K
Filed August 13, 1999
<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 16, 2000
SONO-TEK CORPORATION
(Registrant)
By: /s/ James L. Kehoe
James L. Kehoe
Chief Executive Officer
By: /s/ Kathleen N. Martin
Kathleen N. Martin
Chief Financial Officer
