SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: May 31, 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 July 12, 2000
Common Stock, par value $.01 per share 8,954,855
<PAGE>
SONO-TEK CORPORATION
INDEX
Part I - Financial Information Page
Item 1 - Consolidated Financial Statements: 1 - 3
Consolidated Balance Sheets - May 31, 2000 (Unaudited) and
February 29, 2000 1
Consolidated Statements of Operations - Three Months Ended
May 31, 2000 and 1999 (Unaudited) 2
Consolidated Statements of Cash Flows - Three Months Ended
May 31, 2000 and 1999 (Unaudited) 3
Notes to Consolidated Financial Statements 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 - 13
Part II - Other Information 13
Signatures 14
<PAGE>
<TABLE>
SONO-TEK CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
May 31, February 29,
2000 2000
<S> <C> <C>
Current Assets Unaudited
Cash and cash equivalents $ 92,097 $ 8,176
Accounts receivable (less allowance of $45,997 and $39,997
at May 31 and February 29, respectively) 820,752 1,619,639
Inventories (Note 4) 957,488 1,224,380
Prepaid expenses and other current assets 94,440 74,308
------ ------
Total current assets 1,964,777 2,926,503
Equipment, furnishings and leasehold improvements (less accumulated
depreciation of $485,236 and $469,011 at May 31 and February 29,
respectively) 314,566 256,994
Intangible assets, net:
Goodwill (Note 1) 1,211,197 1,232,571
Patents and patents pending (Note 1) 30,142 31,642
Deferred financing fees 30,787 32,563
------ ------
Total intangible assets 1,272,126 1,296,776
Long-term equity investment, net (Note 5) 17,916 19,310
Other assets 14,442 14,542
------ ------
TOTAL ASSETS $3,583,827 $4,514,125
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $698,701 $847,135
Deferred revenue 0 725,491
Accrued expenses 749,646 437,342
Revolving Line of Credit 350,000 334,307
Short term loans-related parties (Notes 6 and 10) 113,084 239,084
Current maturities of long term debt (Note 7) 236,925 220,532
Short term convertible loan (Note 8) 0 100,000
- -------- -------
Total current liabilities 2,148,356 2,903,891
Subordinated mezzanine debt 387,496 382,060
Long term debt, less current maturities (Note 7) 223,950 273,544
Subordinated convertible loans-related parties 150,000 150,000
------- -------
Total liabilities 2,909,802 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
8,886,613 shares issued and outstanding at
May 31 and February 29, respectively 89,549 88,666
Additional paid-in capital 5,844,042 5,711,800
Accumulated deficit (5,336,566) (5,072,836)
---------- ----------
Total stockholders' equity 597,025 727,630
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,583,827 $4,514,125
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
SONO-TEK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended May 31,
Unaudited
2000 1999
<S> <C> <C>
Net Sales $1,973,033 $805,329
Cost of Goods Sold 1,227,078 345,571
--------- -------
Gross Profit 745,955 459,758
------- -------
Operating Expenses
Research and product development costs 237,131 111,249
Marketing and selling expenses 403,698 217,105
General and administrative costs 210,543 116,199
------- -------
Total Operating Expenses 851,372 444,553
------- -------
Operating (Loss) Income (105,417) 15,205
Interest Expense (125,245) (112,768)
Interest and Other (Loss) Income (33,066) 6,469
------- -----
Loss Before Income Taxes (263,728) (91,094)
Income Tax Expense 0 0
------- -------
Net Loss ($263,728) ($91,094)
========= ========
Basic Loss Per Share $(0.03) $(0.01)
====== ======
Diluted Loss Per Share $(0.03) $(0.01)
====== ======
Weighted Average Shares - Basic 8,953,156 6,281,667
========= =========
Weighted Average Shares - Diluted 8,953,156 6,281,667
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
SONO-TEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended May 31,
Unaudited
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(263,728) $(91,094)
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
Imputed interest expense on subordinated mezzanine debt 5,436 0
Loss on equity investment 1,394 0
Depreciation and amortization 40,874 10,536
Provision for doubtful accounts 6,000 0
(Increase) decrease in:
Accounts receivable 792,887 (179,280)
Inventories 266,892 (65,051)
Prepaid expenses and other current assets (20,033) (70,596)
Increase (decrease) in:
Accounts payable and accrued expenses 163,870 129,450
Deferred revenue (725,491) 0
Non-current rent payable 0 249
------- -------
Net Cash Provided By (Used In) Operating Activities 343,932 (163,160)
------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of equipment and furnishings (73,797) (638)
Loan receivable 0 (25,000)
------- --------
Net Cash Used In Investing Activities (73,797) (25,638)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit 15,693 51,000
Proceeds from bank loan for production equipment 45,359 0
Proceeds from short term loans-related parties 0 77,000
Proceeds from exercise of warrants 55,692 0
Proceeds from stock options 1,602 0
Repayments of short term loans-related parties (126,000) 0
Repayments of short term borrowings (100,000) 0
Repayments of note payable and equipment loans (78,560) (2,546)
------- ------
Net Cash (Used In) Provided By Financing Activities (186,214) 125,454
-------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 83,921 (63,344)
CASH AND CASH EQUIVALENTS
Beginning of period 8,176 70,051
----- ------
End of period $ 92,097 $ 6,707
========= ========
SUPPLEMENTAL DISCLOSURE:
Interest paid $ 40,554 $ 6,392
========= ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
SONO-TEK CORPORATION
Notes to Consolidated Financial Statements
May 31, 2000 and 1999
NOTE 1: 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.
(formerly known as S&K Products International, Inc.), a New Jersey Corporation
("SCS"), 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 3, 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 reasonably 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 is $81,553 and $80,053 at May 31, 2000
and February 29, 2000, respectively.
Reclassifications - Certain February 29, 2000 balances have been reclassified to
conform with the current period presentation.
NOTE 2: SEGMENT INFORMATION
The Company has two reportable segments: spraying systems and cleaning and
drying systems. The spraying systems 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 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>
Three Months Ended May 31, 2000
Spraying Cleaning/Drying
Systems Systems Total
<S> <C> <C> <C>
Net Sales $967,005 $1,006,028 $1,973,033
Net Loss (36,508) (227,220) (263,728)
Identifiable Assets 204,243 110,323 314,566
Capital Expenditures 73,797 0 73,797
Depreciation and Amortization Expense 16,656 24,219 40,874
</TABLE>
The Company operated in a single reportable segment for the three months ended
May 31, 1999.
NOTE 3: ACQUISITION
On August 3, 1999 the Company purchased all the outstanding stock of S&K
Products International, Inc. ("S&K"), a supplier of cleaning and drying systems
for the semiconductor, disk drive, and precision cleaning industries. In June
2000, the Company renamed S&K to Sono-Tek Cleaning Systems, Inc. ("SCS"). SCS is
a wholly owned subsidiary of the Company.
The following unaudited proforma information presents a summary of the
consolidated results of operations of Sono-Tek and SCS as if the acquisition had
occurred on March 1, 1999.
Proforma Consolidated Statement of Operations
Three month period ended
May 31, 1999
Net Sales $966,834
Cost of Goods Sold 698,635
-------
Gross Profit 268,199
Operating Expenses 837,691
-------
Operating Loss (569,492)
Interest Expense (128,800)
Interest & Misc. Income 88,134
------
Net Loss $(610,158)
=========
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 reorganization. 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: INVENTORIES
Inventories at May 31, 2000 are comprised of:
Finished goods $199,723
Work in process 232,453
Consignment 12,610
Raw materials and subassemblies 696,302
-------
Total 1,141,088
Less: Allowance (183,600)
--------
Net inventories $957,488
========
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%. 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 are 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 $32,610 to PNR America for the three month period ended May
31, 2000 and $13,967 for the period of inception through February 29, 2000.
Balances due from PNR America of $46,577 and $13,967 at May 31, 2000 and
February 29, 2000, respectively, are expected to be repaid out of PNR America's
fiscal year 2000 operating cash flows.
The Company's cumulative equity loss in PNR America at May 31, 2000 was $28,661.
The Company recognized, during the three month period ended May 31, 2000 and the
period from inception to February 29, 2000, $34,004 and $14,257, respectively as
its estimate of the proportionate share of the net loss of PNR America. 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
condensed financial information of PNR America as of May 31, 2000 and for the
three month period ended May 31, 2000 is as follows:
Net loss $(69,396)
========
Total assets - current $50,163
=======
Due to Sono-Tek $46,577
Due to Flowtech 43,739
Accrued Expenses 18,338
------
Liabilities 108,654
Stockholders' deficiency (58,491)
-------
Total liabilities and stockholders' deficiency $50,163
=======
The Company, for financial reporting purposes has netted the cumulative equity
loss in PNR America with the intercompany balances due from PNR America.
NOTE 6: RELATED PARTY TRANSACTIONS
Short term loans - related parties - From time to time the Company has required
short term loans to meet its cash requirements. All of these loans have been
provided by two officers and a director of the Company, at the fixed rate of
prime plus 2% at the date of the loans (9.75% to 10.75% at May 31, 2000). During
the three month period ended May 31, 2000, a total of $126,000 plus interest was
repaid to these individuals. Accrued interest on these short term loans was
$14,149 and $13,165 at May 31, 2000 and February 29, 2000, respectively. During
the three month period ended May 31, 2000 and 1999, interest expense relating to
these loans was $4,766 and $3,750, respectively. A non-cash charge of $11,799
was made to interest expense for the issuance of warrants in March 2000 to a
lender.
NOTE 7. LONG TERM DEBT
On May 11, 2000, the Company entered into a collateralized loan agreement with a
bank to purchase production equipment. The five year loan for $45,359 carries an
interest rate of prime plus 2%, which was 10.75% at the date of inception. The
loan will be repaid in equal monthly installments of $756 plus interest.
NOTE 8: SHORT TERM CONVERTIBLE LOAN
On February 15, 2000, the Company entered into a 90 day $100,000 short term
convertible loan with a non-affiliated individual with an interest rate of 8%.
At the option of the lender, the loan could be (i) converted into common stock
at $1.00 per share or (ii) repaid by the Company, at which time the lender would
be issued a warrant to purchase 50,000 shares of the Company's common stock at
$1.00 per share.
The lender elected for repayment and was issued a warrant that expires May 15,
2002 which resulted in a non-cash charge of $64,033 to interest expense
warrants.
NOTE 9: LOSS PER SHARE
Basic earning per share ("EPS") and loss per share ("LPS") is computed by
dividing net income (loss) by the weighted-average number of common shares
outstanding for the period. Diluted EPS would reflect, if applicable, 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 calculations under the treasury stock method.
The computation of basic and diluted (loss) per share are set forth on the
following table:
<TABLE>
<CAPTION>
Three Months Ended May 31,
2000 1999
<S> <C> <C>
Numerator-
Numerator for basic and diluted
(loss) per share ($263,728) ($91,094)
Denominator:
Denominator for basic loss per
share - weighted average shares 8,953,156 6,281,667
Effects of dilutive securities:
Stock warrants for directors 0* 0*
Stock options for employees
and outside consultants 0* 0*
Denominator for diluted loss
per share 8,953,156** 6,281,667**
</TABLE>
*Stock options and warrants for employees 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 and warrants were not antidilutive as
described in * and **, the denominator for diluted loss per share would be
11,927,030 and 8,280,501 shares at May 31, 2000 and 1999, respectively.
NOTE 10: SUBSEQUENT EVENTS
Short term loans - related parties - During June 2000, an officer and a director
of the Company loaned the Company a total of $110,000 at the fixed rate of prime
plus 2% at the date of the loans.
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 the letter of intent contemplates negotiation
and execution of a definitive stock purchase agreement, closing of the
transaction is subject to numerous conditions, including, but not limited to (i)
due diligence review by the Company with results reasonably satisfactory to the
Company, (ii) receipt by the Company of financing necessary to consummate the
transaction, and (iii) receipt of necessary consents including shareholder and
third party consents. The letter of intent was to remain in effect for thirty
(30) days and was extended for an additional thirty (30) day term. Should either
party decide not to consummate the proposed transaction, in contravention of the
terms and conditions of the letter of intent, a break-up fee of $100,000, plus
out of pockets costs will be payable to the other party.
<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
statement.
Liquidity and Capital Resources
The Company's working capital decreased $220,156 to a working capital deficiency
of ($182,577) at May 31, 2000 from $36,579 at February 29, 2000. The decrease in
working capital was a result of a decrease in accounts receivable and inventory
that was offset by a decrease in deferred revenue. The stockholders' equity
decreased $130,905 to $597,025 on May 31, 2000 from $727,930 on February 29,
2000. The decrease in stockholders' equity was the result of the loss of
$263,729 for the three months ended May 31, 2000 that was offset by an increase
in paid in capital of $132,242 from 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.
During Fiscal Year 2000, the Company entered into a short term loan of $100,000
with an outside non-affiliated individual. The loan and related interest was
repaid in May 2000. As part of the loan agreement, when the loan was repaid, the
lender received a warrant to purchase 50,000 shares of the Company's common
stock at a price of $1.00 per share.
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 May 31, 2000
the outstanding balance was $350,000.
The Company's Convertible Secured Subordinated Promissory Notes that were
scheduled to mature on August 15, 2000 were converted to Common Stock under the
Fourth Note Amendment Agreement dated February 26, 1999. At the same time, the
exercise price of the warrants was reduced from $1.50 per share to $.65 per
share, and the expiration date of the warrants was extended to February 28,
2002. During the three month period ended May 31, 2000, warrants to purchase
85,680 shares of stock were exercised, resulting in $55,692 of new capital.
Due to the losses incurred during Fiscal Years 2000 and 1999, the Company was
required to borrow on a short term basis from two officers and a director.
During the three month period ended May 31, 2000 $126,000 plus interest was
repaid. As of May 31, 2000, the balance owed the officers and director was
$113,084. As an acknowledgement of the loans, 50,000 warrants were issued to an
officer of the Company during the three month period ended May 31, 2000. One of
the warrants for 25,000 shares of the Company's common stock expires August 16,
2004 and has an exercise price of $0.50 per share. The other warrant for 25,000
shares of the Company's common stock expires January 31, 2005 and has an
exercise price of $1.00 per share. The Company recognized a non-cash interest
charge of $11,799 based on the fair market value of the warrants granted.
Subsequent to May 31, 2000, an officer and a director loaned the Company a total
of $110,000 at the fixed rate of prime plus 2% at the date of the loans. As
necessary, the Company plans on funding the operations by using the available
borrowings under its current line of credit, and, if necessary, obtaining
additional loans from officers and directors.
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 May 31, 2000 gives the Company a reason to anticipate increased sales
in Fiscal Year 2001.
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 the letter of intent contemplates negotiation and execution of a
definitive stock purchase agreement, closing of the transaction is subject to
numerous conditions, including, but not limited to (i) due diligence review by
the Company with results reasonably satisfactory to the Company, (ii) receipt by
the Company of financing necessary to consummate the transaction, and (iii)
receipt of necessary consents including shareholder and third party consents.
The letter of intent was to remain in effect for thirty (30) days and was
extended for an additional thirty (30) day term. Should either party decide not
to consummate the proposed transaction, in contravention of the terms and
conditions of the letter of intent, a break-up fee of $100,000, plus out of
pockets costs will be payable to the other party.
Results of Operations
For the three months ended May 31, 2000, the Company's sales increased
$1,167,704 to $1,973,033 as compared to $805,329 for the three months ended May
31, 1999. The increase was a result of new sales of cleaning and drying systems
of $1,006,028 and an increase in the sales of SonoFlux Systems of $154,987.
The Company's gross profit increased $286,197 to $745,955 for the three months
ended May 31, 2000 from $459,758 for the three months ended May 31, 1999. The
increase was primarily a result of increased sales of the Company's products
that were offset by the related material costs and labor. The gross profit
margin was 37% and 57% of sales for the three months ended May 31, 2000 and
1999, respectively. The decrease in the gross profit margin was a result of
lower margins on the sale of newly developed cleaning and drying systems due to
expediting, redesign and additional labor charges associated with the new design
which are not expected to recur for subsequent deliveries.
Research and product development costs increased $125,882 to $237,131 for the
three months ended May 31, 2000 from $111,249 for the three months ended May 31,
1999. The increase was a result of increased compensation resulting from a
larger engineering staff and additional costs associated with SCS.
Marketing and selling costs increased $186,593 to $403,698 for the three months
ended May 31, 2000 from $217,105 for the three months ended May 31, 1999. The
increases were primarily a result of costs for additional trade shows of
$23,315, personnel costs of $84,476 related to SCS and additional commissions of
$93,298 related to increased sales.
General and administrative costs increased $94,344 to $210,543 for the three
months ended May 31, 2000 from $116,199 for the three months ended May 31, 1999.
The increases were primarily a result of increases in personnel costs of
$31,449, professional and consulting fees of $32,083 and goodwill amortization
of $21,374 related to SCS.
Interest expense increased $12,477 to $125,245 for the three months ended May
31, 2000 from $112,768 for the three months ended May 31, 1999. The increase is
primarily due to an increase in interest costs associated with the addition of
the SCS and Norwood loan interest that was offset by a non-recurring, non-cash
charge of $102,626 reflecting the value of warrants issued in the quarter ended
May 31, 1999.
For the three months ended May 31, 2000, the Company had a loss of $(263,729) or
$(0.03) per share as compared to a loss of $(91,094) or $(0.01) per share for
the three months ended May 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 $1,000 for the quarter ended May 31, 2000.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
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
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: July 14, 2000
SONO-TEK CORPORATION
(Registrant)
/s/ James L. Kehoe
By: ____________________________________
James L. Kehoe
Chief Executive Officer
/s/ Kathleen N. Martin
By: ____________________________________
Kathleen N. Martin
Treasurer & Chief Financial Officer
