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, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No.: 0-16035 SONO-TEK CORPORATION (Exact name of registrant as specified in its charter) New York 14-1568099 -------- ---------- (State or other jurisdiction of ( IRS Employer incorporation or organization) Identification No.) 2012 Rt. 9W, Bldg. 3, Milton, NY 12547 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone no., including area code: (914) 795-2020 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO _____ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Outstanding as of Class July 12, 1996 ----- ------------- Common Stock, par value $.01 per share 4,204,913
SONO-TEK CORPORATION INDEX Part I - Financial Information Page Item 1 - Financial Statements: 1 - 3 Balance Sheets - May 31, 1996 (Unaudited) and February 29, 1996 1 Statements of Operations - Three Months Ended May 31, 1996 and 1995 (Unaudited) 2 Statements of Cash Flows - Three Months Ended May 31, 1996 and 1995 (Unaudited) 3 Notes to Financial Statements 4 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 5 - 6 Part II - Other Information 7 Signatures 8
SONO-TEK CORPORATION BALANCE SHEETS <TABLE> <CAPTION> May 31 February 29 1996 1996 ASSETS Unaudited ---------------------------- CURRENT ASSETS: <S> <C> <C> Cash and cash equivalents $ 16,485 $ 69,033 Accounts receivable (net of allowance for doubtful accounts of $26,500 at May 31 and $25,000 at February 29 ) 461,246 462,115 Inventories (Note C) 541,728 477,381 Prepaid expenses and other current assets 20,162 29,834 ----------- ----------- Total Current Assets 1,039,621 1,038,363 Equipment, furnishings and leasehold improvements (less accumulated depreciation and amortization of $381,071 at May 31 and $368,087 at February 29 ) 87,644 95,861 Patents, patents pending and copyrights (less amortization of $116,892 at May 31 and $114,372 at February 29 ) 57,506 59,176 Other assets 6,317 6,317 ----------- ----------- T O T A L $ 1,191,088 $ 1,199,717 =========== =========== LIABILITIES Current maturities of long term debt $ 106,720 $ 128,779 Accounts payable 315,973 233,810 Accrued expenses 278,358 362,963 ----------- ----------- Total Current Liabilities 701,051 725,552 Long term debt, less current maturities 655,366 657,865 Non-current rent payable 7,430 10,217 ----------- ----------- Total Liabilities 1,363,847 1,393,634 ----------- ----------- SHAREHOLDERS' EQUITY ( DEFICIENCY) Common stock - $.01 par value: Authorized - 12,000,000 shares Issued - 4,204,913 share 42,049 42,049 Additional paid-in capital 3,758,128 3,758,128 Deficit (3,972,936) (3,994,094) ----------- ----------- Total Shareholders' Deficiency (172,759) (193,917) ----------- ----------- T O T A L $ 1,191,088 $ 1,199,717 =========== =========== </TABLE> 1
SONO-TEK CORPORATION STATEMENTS OF OPERATIONS <TABLE> <CAPTION> Three Months Ended -------------------------- May 31 Unaudited 1996 1995 ---- ---- <S> <C> <C> NET SALES $ 751,637 $ 735,959 COST OF GOODS SOLD 379,613 331,210 ----------- ----------- Gross Profit 372,024 404,749 ----------- ----------- OPERATING EXPENSES Research and product development costs 87,593 101,006 Marketing and selling expenses 159,174 180,171 General and administrative costs 87,795 112,923 ----------- ----------- Total Operating Expenses 334,563 394,100 ----------- ----------- OPERATING INCOME 37,461 10,648 INTEREST EXPENSE 16,319 16,517 INTEREST AND OTHER INCOME 15 32,895 ----------- ----------- NET INCOME $ 21,157 $ 27,025 ============ =========== INCOME PER COMMON SHARE (NOTE D) $ 0.01 $ 0.01 ============ =========== WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON STOCK USED TO COMPUTE EARNINGS PER SHARE 4,204,913 4,204,913 </TABLE> 2
SONO-TEK CORPORATION Statements of Cash Flows For Three Months Ended May 31 <TABLE> <CAPTION> 1996 1995 Unaudited ------------ ----------- Cash flows from operating activities: <S> <C> <C> Net income $ 21,157 $ 27,025 ------------ ----------- Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 15,504 15,586 Allowance for doubtful accounts 1,500 2,250 (Increase) decrease in: Accounts receivable (631) (35,645) Inventories (64,347) 15,663 Prepaid expenses and other current assets 9,672 31,948 Increase (decrease) in: Accounts payable & accrued expenses (2,441) (9,254) Noncurrent rent payable (2,788) (894) Notes and obligations payable - professional fees (500) (7,500) Notes and obligations payable - lease termination (5,208) (4,809) ------------- ------------ Total adjustments (49,239) 7,345 ------------- ------------ Net cash (used in) provided by operating activities (28,082) 34,370 ------------- ------------ Cash flows from investing activities: Fixed asset, patent and copyright acquisition costs (5,616) (4,414) Cash flows from financing activities: Payments of capitalized leases (1,305) (3,156) Proceeds from sale of common stock 25,000 Repayments of note payable - bank (17,544) (12,595) ------------- ------------ Net cash used in financing activities (18,849) 9,249 ------------- ------------ Net Increase (decrease) in cash and cash equivalents (52,547) 39,205 Cash and cash equivalents: Beginning of period 69,033 67,804 ------------- ------------ End of period $ 16,485 $ 107,009 ============= ============ Supplemental disclosure: Interest paid $ 20,399 $ 8,106 Income taxes paid $ 0 $ 0 </TABLE> 3
SONO-TEK CORPORATION Notes to Financial Statements May 31, 1996 NOTE A: The attached summarized financial information does not include all disclosures required to be included in a complete set of financial statements prepared in conformity with generally accepted accounting principles. Such disclosures were included with the financial statements of the Company at February 29, 1996, included in its report on Form 10-K. Such statements should be read in conjunction with the data herein. NOTE B: The financial information reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods. The results for the interim periods are not necessarily indicative of the results to be expected for the year. NOTE C: Inventory at May 31, 1996 is comprised of: Finished goods $126,223 Work in process 152,767 Raw materials and subassemblies 262,738 ------- Total $541,728 ======== NOTE D: Income per share is based on the weighted average number of shares outstanding during each period. The computation does not include the effect of outstanding stock options or conversion of the subordinated promissory notes since their inclusion would be either not material or anti-dilutive. 4
SONO-TEK CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- The Company's sales increased $15,678 to $751,637 for the three months ended May 31, 1996 as compared to $735,959 for the three months ended May 31, 1995. The increase was a result of increased sales of the SonoFlux product line. Sales of these products increased approximately $29,000 while sales of the Company's Nozzle Systems decreased approximately $13,000. The Company's gross profit decreased $32,725 from $404,749 for the three months ended May 31, 1995 to $372,024 for the three months ended May 31, 1996. The decrease in gross profit resulted from an increase in the raw materials portion of cost of goods sold. This increase is attributed to an increase in the materials cost of the SonoFlux System, a change in product mix within the SonoFlux product line, and higher materials cost associated with the sale of a custom Nozzle System that required several unique components. Research and product development costs decreased $13,413 from $101,006 for the three months ended May 31, 1995 to $87,593 for the three months ended May 31, 1996. These costs were higher during the same period one year ago as a result of consulting costs associated with the development of the SonoFlux 9500. Marketing and selling costs decreased $20,997 from $180,171 for the three months ended May 31, 1995 to $159,174 for the three months ended May 31, 1996. The decrease was primarily a result of a decrease in compensation costs. General and administrative costs decreased $25,128 from $112,923 for the three months ended May 31, 1995 to $87,795 for the three months ended May 31, 1996. The decrease resulted from a decrease in incentive compensation and consulting fees. Interest and other income decreased $32,877 from $32,895 for the three months ended May 31, 1995 to $15 for the three months ended May 31, 1996. Other income was higher during the same period one year ago as a result of funding received from SEMATECH for work done by the Company under the terms of a joint development agreement. SEMATECH is a consortium of U.S. semiconductor manufacturers and had provided the Company with funds for the development of a photoresist coating system, or "Wafer Coating System." For the three months ended May 31, 1996, the Company earned $21,157 or $.01 per share as compared to earnings of $27,025 or $.01 per share for the three months ended May 31, 1995. The decrease in earnings was primarily a result of an increase in cost of goods sold. 5
Liquidity and Capital Resources - ------------------------------- The Company's working capital increased $25,759 to $338,570 at May 31, 1996 as compared to working capital of $312,811 at February 29, 1996. The increase in working capital was primarily a result of profitable operations. Although there can be no assurances, management believes that working capital generated by continuing operations will be sufficient to support the Company's working capital needs for the next twelve months based on anticipated sales levels. On August 15, 1997 the Company's Convertible Secured Subordinated Notes mature. The Company will experience substantial difficulties in meeting these obligations unless the level of profitability improves substantially over the next fifteen months or unless the Noteholders agree to extend the repayment terms of this debt. There can be no assurance that such extensions can be negotiated or that such extensions will be on terms as favorable to the Company as those presently in effect. 6
PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description ----------- ----------- 4(h) Letter of agreement between the Company and the Bank of New York dated June 14, 1996. 27. Financial Data Schedule - EDGAR filing only (b) Reports on Form 8-K None 7
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 12, 1996 SONO-TEK CORPORATION By: /s/: James L. Kehoe ------------------------ James L. Kehoe Chief Executive Officer By: /s/: J. Duncan Urquhart ------------------------ J. Duncan Urquhart Treasurer & Chief Financial Officer 8