UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Amendment No. 1)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended:August 31, 2012 |
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)
Issuer'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 |_|☐
Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). | |☒ Yes | |☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer |_|☐ Accelerated Filer |_|☐ Smaller reporting company |X☒|
Non Accelerated Filer |_|☐ (Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES |_| NO |X|
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 | |
Common Stock, par value $.01 per share |
EXPLANATORY NOTE
This Amendment No. 1 to Form 10-Q amends our quarterly report on Form 10-Q for the quarter ended August 31, 2012, filed with the Securities and Exchange Commissionon October 11, 2012, to correct the date of the signatures set forth in such report and the dates of the Certifications annexed thereto as exhibits 31.1 – 31.2 and 32.1 – 32.2.
Except as described above, no change has been made to the financial statements or any other portion of the Quarterly Report on Form 10-Q as filed on October 11, 2012. The filing of this Amendment does not, and does not purport to, amend, update or restate the information in any other item of the quarterly report on Form 10-Q as filed on October 11, 2012 or reflect any events that have occurred after such date.
SONO-TEK CORPORATION
INDEX
Part I - Financial Information | Page |
Item 1 – Consolidated Financial Statements: | 1 - 3 |
Consolidated Balance Sheets – August 31, | 1 |
Consolidated Statements of Income – Six Months and Three Months Ended August 31, | 2 |
Consolidated Statements of Cash Flows – Six Months Ended August 31, | 3 |
Notes to Consolidated Financial Statements | 4 - |
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations | |
Item 3 – Quantitative and Qualitative Disclosures about Market Risk | |
Item 4 – Controls and Procedures | |
Part II - Other Information | |
Signatures and Certifications |
SONO-TEK CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS | ||||||||
August 31, | February 28, | |||||||
2010 | 2010 | |||||||
Current Assets: | Unaudited | |||||||
Cash and cash equivalents | $ | 1,803,484 | $ | 1,787,516 | ||||
Accounts receivable (less allowance of $20,000 and $16,000 at August 31 and February 28, respectively) | 948,355 | 974,429 | ||||||
Inventories | 1,899,490 | 1,757,153 | ||||||
Prepaid expenses and other current assets | 118,542 | 57,775 | ||||||
Total current assets | 4,769,871 | 4,576,873 | ||||||
Equipment, furnishings and leasehold improvements (less accumulated depreciation of $1,691,135 and $1,551,532 at August 31 and February 28, respectively) | 434,826 | 514,623 | ||||||
Intangible assets, net | 80,185 | 76,913 | ||||||
Other assets | 7,171 | 7,171 | ||||||
TOTAL ASSETS | $ | 5,292,053 | $ | 5,175,580 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 360,801 | $ | 595,174 | ||||
Accrued expenses | 285,288 | 466,656 | ||||||
Customer Deposits | 368,171 | 73,954 | ||||||
Line of Credit - Bank | 350,000 | 350,000 | ||||||
Current maturities of long term debt | 10,178 | 15,727 | ||||||
Total current liabilities | 1,374,438 | 1,501,511 | ||||||
Long term debt, less current maturities | - | 3,622 | ||||||
Total liabilities | 1,374,438 | 1,505,133 | ||||||
Commitments and Contingencies | - | - | ||||||
Stockholders’ Equity | ||||||||
Common stock, $.01 par value; 25,000,000 shares authorized, 14,437,511 shares issued and outstanding, at August 31 and February 28 | 144,376 | 144,376 | ||||||
Additional paid-in capital | 8,573,452 | 8,546,924 | ||||||
Accumulated deficit | (4,800,213 | ) | (5,020,853 | ) | ||||
Total stockholders’ equity | 3,917,615 | 3,670,447 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 5,292,053 | $ | 5,175,580 |
ASSETS | ||||||||
August 31, | ||||||||
2012 | February 29, | |||||||
Current Assets: | (Unaudited) | 2012 | ||||||
Cash and cash equivalents | $ | 1,430,048 | $ | 2,531,689 | ||||
Marketable Securities | 958,364 | 253,987 | ||||||
Accounts receivable (less allowance of $16,380 and $26,000 at August 31 and February 29, respectively) | 1,034,879 | 754,605 | ||||||
Inventories, net | 2,427,113 | 2,559,128 | ||||||
Prepaid expenses and other current assets | 192,812 | 112,392 | ||||||
Total current assets | 6,043,216 | 6,211,801 | ||||||
Land | 250,000 | 250,000 | ||||||
Buildings, net | 2,192,924 | 2,229,650 | ||||||
Equipment, furnishings and leasehold improvements (less accumulated depreciation of $2,225,636 and $2,156,136 at August 31 and February 29, respectively) | 550,041 | 617,200 | ||||||
Intangible assets, net | 110,848 | 83,455 | ||||||
Deferred tax asset | 86,167 | 86,167 | ||||||
TOTAL ASSETS | $ | 9,233,196 | $ | 9,478,273 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 313,347 | $ | 552,979 | ||||
Accrued expenses | 594,426 | 529,732 | ||||||
Customer deposits | 194,866 | 316,246 | ||||||
Current maturities of long term debt | 123,573 | 120,303 | ||||||
Income taxes payable | 35,642 | 37,250 | ||||||
Total current liabilities | 1,261,854 | 1,556,510 | ||||||
Long term debt, less current maturities | 2,050,935 | 2,114,196 | ||||||
Total liabilities | 3,312,789 | 3,670,706 | ||||||
Commitments and Contingencies | - | - | ||||||
Stockholders’ Equity | ||||||||
Common stock, $.01 par value; 25,000,000 shares authorized, 14,483,010 and 14,455,444 shares issued and outstanding, at August 31 and February 29, respectively | 144,830 | 144,553 | ||||||
Additional paid-in capital | 8,699,356 | 8,657,629 | ||||||
Accumulated deficit | (2,923,779 | ) | (2,994,615 | ) | ||||
Total stockholders’ equity | 5,920,407 | 5,807,567 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 9,233,196 | $ | 9,478,273 |
See notes to consolidated financial statements.
1 |
SONO-TEK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended August 31 | Three Months Ended August 31 | |||||||||||||||
Unaudited | Unaudited | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net Sales | $ | 4,715,788 | $ | 3,148,612 | $ | 2,432,137 | $ | 1,683,883 | ||||||||
Cost of Goods Sold | 2,482,488 | 1,584,089 | 1,315,865 | 776,743 | ||||||||||||
Gross Profit | 2,233,300 | 1,564,522 | 1,116,272 | 907,141 | ||||||||||||
Operating Expenses | ||||||||||||||||
Research and product development costs | 398,349 | 340,550 | 188,803 | 169,519 | ||||||||||||
Marketing and selling expenses | 1,033,254 | 865,824 | 510,833 | 456,528 | ||||||||||||
General and administrative costs | 576,226 | 488,058 | 289,061 | 240,443 | ||||||||||||
Total Operating Expenses | 2,007,829 | 1,694,432 | 988,697 | 866,490 | ||||||||||||
Operating Income (Loss) | 225,471 | (129,910 | ) | 127,575 | 40,651 | |||||||||||
Interest Expense | (5,835 | ) | (5,532 | ) | (2,397 | ) | (3,286 | ) | ||||||||
Interest Income | 1,220 | 1,243 | 760 | 694 | ||||||||||||
Other Income | - | 3,775 | - | 944 | ||||||||||||
Income (Loss) from Operations Before Income Taxes | 220,856 | (130,424 | ) | 125,938 | 39,003 | |||||||||||
Income Tax Expense (Benefit) | 216 | (1,543 | ) | 50 | (1,543 | ) | ||||||||||
Net Income (Loss) | $ | 220,640 | $ | (128,881 | ) | $ | 125,888 | $ | 40,546 | |||||||
Basic Earnings (Loss) Per Share | $ | 0.02 | $ | (0.01 | ) | $ | 0.01 | $ | 0.00 | |||||||
Diluted Earnings (Loss) Per Share | $ | 0.02 | $ | (0.01 | ) | $ | 0.01 | $ | 0.00 | |||||||
Weighted Average Shares - Basic | 14,437,511 | 14,414,728 | 14,437,511 | 14,414,741 | ||||||||||||
Weighted Average Shares - Diluted | 14,594,030 | 14,414,728 | 14,568,332 | 14,476,241 |
Six Months Ended August 31 | Three Months Ended August 31 | |||||||||||||||
Unaudited | Unaudited | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Net Sales | $ | 5,230,809 | $ | 6,139,028 | $ | 2,391,107 | $ | 3,149,960 | ||||||||
Cost of Goods Sold | 2,715,739 | 3,027,484 | 1,225,735 | 1,471,513 | ||||||||||||
Gross Profit | 2,515,070 | 3,111,544 | 1,165,373 | 1,678,447 | ||||||||||||
Operating Expenses | ||||||||||||||||
Research and product development costs | 486,787 | 539,941 | 232,717 | 284,885 | ||||||||||||
Marketing and selling expenses | 1,205,723 | 1,148,253 | 552,811 | 580,617 | ||||||||||||
General and administrative costs | 674,388 | 627,037 | 315,842 | 323,853 | ||||||||||||
Rental operations expense | 57,630 | 63,793 | 28,610 | 23,965 | ||||||||||||
Total Operating Expenses | 2,424,528 | 2,379,024 | 1,129,981 | 1,213,320 | ||||||||||||
Operating Income | 90,542 | 732,520 | 35,392 | 465,127 | ||||||||||||
Interest Expense | (57,648 | ) | (59,367 | ) | (28,678 | ) | (29,594 | ) | ||||||||
Other (expense) income | (1,705 | ) | 3,220 | 6,234 | 2,973 | |||||||||||
Income from Operations Before Income Taxes | 31,189 | 676,373 | 12,948 | 438,506 | ||||||||||||
Income Tax (Benefit) Expense | (39,647 | ) | 253 | (46,787 | ) | 980 | ||||||||||
Net Income | $ | 70,836 | $ | 676,120 | $ | 59,735 | $ | 437,526 | ||||||||
Basic Earnings Per Share | $ | 0.00 | $ | 0.05 | $ | 0.00 | $ | 0.03 | ||||||||
Diluted Earnings Per Share | $ | 0.00 | $ | 0.05 | $ | 0.00 | $ | 0.03 | ||||||||
Weighted Average Shares - Basic | 14,466,892 | 14,441,921 | 14,472,849 | 14,442,211 | ||||||||||||
Weighted Average Shares - Diluted | 14,582,873 | 14,759,663 | 14,576,509 | 14,784,319 |
See notes to consolidated financial statements.
2 |
SONO-TEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended August 31, | ||||||||
Unaudited | ||||||||
2010 | 2009 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Income (Loss) | $ | 220,640 | $ | (128,881 | ) | |||
Adjustments to reconcile net income (loss) to net cash | ||||||||
provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 143,129 | 154,723 | ||||||
Stock based compensation expense | 26,528 | 27,477 | ||||||
Allowance for doubtful accounts | 4,000 | - | ||||||
Decrease (Increase) in: | ||||||||
Accounts receivable | 22,074 | 102,300 | ||||||
Inventories | (142,337 | ) | (10,637 | ) | ||||
Prepaid expenses and other current assets | (60,767 | ) | 41,482 | |||||
(Decrease) Increase in: | ||||||||
Accounts payable and accrued expenses | (415,741 | ) | (93,387 | ) | ||||
Customer Deposits | 294,217 | 20,125 | ||||||
Net Cash Provided by Operating Activities | 91,743 | 113,202 | ||||||
CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||
Patent application costs | (6,797 | ) | (7,983 | ) | ||||
Sale of equipment | - | 53,309 | ||||||
Purchase of equipment and furnishings | (59,807 | ) | (115,069 | ) | ||||
Net Cash (Used In) Investing Activities | (66,604 | ) | (69,743 | ) | ||||
CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from exercise of stock options and warrants | - | 210 | ||||||
Repayments of notes payable and loans | (9,171 | ) | (11,520 | ) | ||||
Net Cash (Used In) Financing Activities | (9,171 | ) | (11,310 | ) | ||||
NET INCREASE IN CASH AND CASH EQUIVALENTS | 15,968 | 32,149 | ||||||
CASH AND CASH EQUIVALENTS | ||||||||
Beginning of period | 1,787,516 | 1,472,054 | ||||||
End of period | $ | 1,803,484 | $ | 1,504,203 | ||||
SUPPLEMENTAL DISCLOSURE: | ||||||||
Interest paid | $ | 5,819 | $ | 4,722 | ||||
Taxes Paid | $ | 216 | $ | 0 |
Six Months Ended August 31, | ||||||||
Unaudited | ||||||||
2012 | 2011 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Income | $ | 70,836 | $ | 676,120 | ||||
Adjustments to reconcile net income to net cash | ||||||||
provided by operating activities: | ||||||||
Depreciation and amortization | 155,634 | 154,420 | ||||||
Stock based compensation expense | 21,658 | 25,829 | ||||||
Allowance for doubtful accounts | 6,000 | 6,000 | ||||||
Inventory reserve | 30,000 | 36,000 | ||||||
Decrease (Increase) in: | ||||||||
Accounts receivable | (273,528 | ) | 30,462 | |||||
Inventories | 102,015 | (835,330 | ) | |||||
Prepaid expenses and other current assets | (80,420 | ) | (40,531 | ) | ||||
(Decrease) Increase in: | ||||||||
Accounts payable and accrued expenses | (174,938 | ) | 81,421 | |||||
Customer Deposits | (121,380 | ) | 168,668 | |||||
Net Cash (Used in) Provided by Operating Activities | (264,123 | ) | 303,059 | |||||
CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||
Patent application costs | (32,218 | ) | (4,760 | ) | ||||
Purchase of equipment and furnishings | (61,277 | ) | (112,563 | ) | ||||
Purchase of marketable securities | (704,377 | ) | - | |||||
Net Cash Used In Investing Activities | (797,872 | ) | (117,323 | ) | ||||
CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from exercise of stock options | 20,346 | 358 | ||||||
Proceeds from equipment financing - bank | - | 237,000 | ||||||
Repayments of notes payable and loans | (59,992 | ) | (41,033 | ) | ||||
Net Cash Provided by (Used In) Financing Activities | (39,646 | ) | 196,325 | |||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (1,101,641 | ) | 382,061 | |||||
CASH AND CASH EQUIVALENTS | ||||||||
Beginning of period | 2,531,689 | 1,683,801 | ||||||
End of period | $ | 1,430,048 | $ | 2,065,862 | ||||
SUPPLEMENTAL DISCLOSURE: | ||||||||
Interest paid | $ | 57,648 | $ | 59,368 | ||||
Taxes Paid | $ | - | $ | 253 |
See notes to consolidated financial statements.
3 |
SONO-TEK CORPORATION
Notes to Consolidated Financial Statements
Six Months Ended August 31, 20102012 and 2009
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
Consolidation
- The accompanying consolidated financial statements of Sono-Tek Corporation, a New YorkCash and Cash Equivalents –
Cash and cash equivalents consist of money market mutual funds, short term commercial paper andFair Value of Financial Instruments -
Level 1: Quoted prices in active markets.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3:Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
The fair values of financial assets of the Company were determined using the following categories at August 31, 2012:
Quoted Prices in Active Markets | ||||||||
(Level 1) | ||||||||
August 31, 2012 | February 29, 2012 | |||||||
Marketable Securities | $ | 958,364 | $ | 253,987 |
Marketable Securitiesinclude mutual funds of $958,364, that are considered to be highly liquid and easily tradeable as of August 31, 2012. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within the Company’s fair value hierarchy.
4 |
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 FebruaryThe financial information reflects all adjustments, normal and recurring, which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results for such interim periods are not necessarily indicative of the results to be expected for the year.
Intangible Assets
– Include cost of patent applications that are deferred and charged to operations over seventeen years for domestic patents and twelve years for foreign patents. The accumulated amortization isReclassifications –
Certain reclassifications have been made to the prior period to conform to the presentations of the current period.Impact of New Accounting Pronouncements
- All new accounting pronouncements issued but not yet effective have been deemed to be not applicable to the Company, hence the adoption of these new accounting pronouncements once effectiveNOTE 2: INVENTORIES
Inventories consist of the following:
August 31, | February 28, | |||||||
2010 | 2010 | |||||||
Finished goods | $ | 869,450 | $ | 951,671 | ||||
Work in process | 664,626 | 527,553 | ||||||
Consignment | 19,725 | 9,042 | ||||||
Raw materials and subassemblies | 572,647 | 477,845 | ||||||
Total | 2,126,448 | 1,966,111 | ||||||
Less: Allowance | (226,958 | ) | (208,958 | ) | ||||
Net inventories | $ | 1,899,490 | $ | 1,757,153 |
August 31, | February 29, | |||||||
2012 | 2012 | |||||||
Finished goods | $ | 847,720 | $ | 905,142 | ||||
Work in process | 629,256 | 544,805 | ||||||
Consignment | 6,191 | 7,127 | ||||||
Raw materials and subassemblies | 1,167,830 | 1,295,938 | ||||||
Total | 2,650,997 | 2,753,012 | ||||||
Less: Allowance | (223,884 | ) | (193,884 | ) | ||||
Net inventories | $ | 2,427,113 | $ | 2,559,128 |
NOTE 3: STOCK OPTIONS AND WARRANTS
Stock Options
- Under the 2003 Stock Incentive Plan, as amended ("2003 Plan"), options can be granted to officers, directors, consultants and employees of the Company and its subsidiaries to purchase up to 1,500,000 of the Company's common shares. The 2003 Plan supplemented and replaced the 1993 Stock Incentive Plan (the “1993 Plan”), under which no further options may be granted. Options granted under the 1993 Plan expire on various dates through 2013. As of August 31,5 |
Under both the 1993 and 2003 Stock Incentive Plans, option prices must be at least 100% of the fair market value of the common stock at time of grant. For qualified employees, except under certain circumstances specified in the plans or unless otherwise specified at the discretion of the Board of Directors, no option may be exercised prior to one year after date of grant, with the balance becoming exercisable in cumulative installments over a three year period during the term of the option, and terminating at a stipulated period of time after an employee's termination of employment.
NOTE 4: STOCK BASED COMPENSATION
The weighted-average fair value of options has been estimated on the date of grant using the Black-Scholes options-pricing model. The weighted-average Black-Scholes assumptions are as follows:
2011 | 2010 | |
Expected life | 4 years | 4 years |
Risk free interest rate | 1.51% - 2.7% | 1.39% - 2.7% |
Expected volatility | 63% - 96% | 66% - 96% |
Expected dividend yield | 0% | 0% |
2013 | 2012 | |
Expected life | 4 years | 4 years |
Risk free interest rate | .29% | .57% - 1.17% |
Expected volatility | 53% | 37% - 53% |
Expected dividend yield | 0% | 0% |
In computing the impact, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’ ;sCompany’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period.
For the six months ended August 31, 20102012 and 2009,2011, net income and earnings per share reflect the actual deduction for stock-based compensation expense. The impact of applying ASC 718 approximated $26,528$21,658 and $27,477$25,829 in additional compensation expense during the six months ended August 31, 20102012 and 2009,2011, respectively. Such amounts are included in general and administrative expenses on the statement of operations. The expense for stock-based compensation is a non-cash expense item.
NOTE 5: EARNINGS PER SHARE
The denominator for the calculation of diluted earnings per share at August 31, 20102012 and 20092011 are calculated as follows:
Six Months Ended August 31, | Three Months Ended August 31, | ||||
2010 | 2009 | 2010 | 2009 | ||
Denominator for basic earnings per share | 14,437,511 | 14,414,728 | 14,437,511 | 14,414,741 | |
Dilutive effect of stock options | 156,519 | - | 130,821 | 61,500 | |
Denominator for diluted earnings per share | 14,594,030 | 14,414,728 | 14,568,332 | 14,476,241 |
Six Months Ended August 31, | Three Months Ended August 31, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Denominator for basic earnings per share | 14,466,892 | 14,441,921 | 14,472,849 | 14,442,211 | ||||||||||||
Dilutive effect of stock options | 115,981 | 317,742 | 103,660 | 342,108 | ||||||||||||
Denominator for diluted earnings per share | 14,582,873 | 14,759,663 | 14,576,509 | 14,784,319 |
NOTE 6: LONG TERM DEBT
Long-term debt consists of the net loss for the six month period ended August 31, 2009, the effect of stock options is not used in the calculation of diluted earnings per share. The inclusion of stock options in the calculation would have an anti-dilutive effect.
August 31, | February 29, | |||||||
2012 | ||||||||
Note payable, individual, collateralized by land and buildings, payable in monthly installments of principal and interest of $14,446 through January 2031. Interest rate 5.5%. 20 year term. | $ | 2,004,529 | $ | 2,035,579 | ||||
Equipment loan, bank, collateralized by related office equipment, payable in monthly installments of principal and interest of $5,154 through June 2015. Interest rate 2.12%. 48 month term. | 169,979 | 198,920 | ||||||
Total long term debt | 2,174,508 | 2,234,499 | ||||||
Due within one year | 123,573 | 120,303 | ||||||
Due after one year | $ | 2,050,935 | $ | 2,114,196 |
NOTE 6:7: REVOLVING LINE OF CREDIT
The Company has a $750,000 revolving line of credit at prime which was 3.25% at August 31, 2010.2012. The loan is collateralized by all of the assets of the Company.Company, except for the land and buildings. The line of credit is payable on demand and must be retired for a 30 day period once annually. If the Company fails to perform the 30 day annual pay down or if the bank elects to terminate the credit line, the bank may at its option convert the outstanding balance to a 36 month term note with payments including interest in 36 equal installments. As of August 31, 2010,2012, the Company’s outstanding balance was $350,000,$0, and the unused credit line was $400,000.$750,000.
7 |
NOTE 7:8: SEGMENT INFORMATION
The company operates in two segments: ultrasonic spraying systems and rental real estate operations.
All inter-company transactions are eliminated in consolidation. For the six and three months ended August 31, 2012 and 2011, segment information is as follows:
Six Months Ended August 31, 2012 | Three Months Ended August 31, 2012 | |||||||||||||||||||||||||||||||
Ultrasonic Spraying | Rental Real Estate Operations | Eliminations | Consolidated | Ultrasonic Spraying | Rental Real Estate Operations | Eliminations | Consolidated | |||||||||||||||||||||||||
Net Sales | $ | 5,201,514 | $ | 97,164 | $ | 67,869 | $ | 5,230,809 | $ | 2,382,657 | $ | 42,385 | $ | 33,935 | $ | 2,391,107 | ||||||||||||||||
Rental Expense | $ | 67,869 | $ | 57,630 | $ | (67,869 | ) | $ | 57,630 | $ | 33,935 | $ | 28,610 | $ | (33,935 | ) | $ | 28,610 | ||||||||||||||
Interest Expense | $ | 2,023 | $ | 55,625 | $ | 57,648 | $ | 972 | $ | 27,706 | $ | 28,678 | ||||||||||||||||||||
Net Income (Loss) | $ | 86,926 | ($ | 16,090 | ) | $ | 70,836 | $ | 73,666 | $ | (13,931 | ) | $ | 59,735 | ||||||||||||||||||
Assets | $ | 6,725,311 | $ | 2,507,885 | $ | 9,233,196 | $ | 6,725,311 | $ | 2,507,885 | $ | 9,233,196 | ||||||||||||||||||||
Debt | $ | 169,979 | $ | 2,004,529 | $ | 2,174,508 | $ | 169,979 | $ | 2,004,529 | $ | 2,174,508 |
Six Months Ended August 31, 2011 | Three Months Ended August 31, 2011 | |||||||||||||||||||||||||||||||
Ultrasonic Spraying | Rental Real Estate Operations | Eliminations | Consolidated | Ultrasonic Spraying | Rental Real Estate Operations | Eliminations | Consolidated | |||||||||||||||||||||||||
Net Sales | $ | 6,094,342 | $ | 112,558 | $ | 67,872 | $ | 6,139,028 | $ | 3,127,614 | $ | 56,279 | $ | 33,933 | $ | 3,149,960 | ||||||||||||||||
Rental Expense | $ | 67,872 | $ | 63,793 | $ | (67,872 | ) | $ | 63,793 | $ | 33,933 | $ | 23,965 | $ | (33,933 | ) | $ | 23,965 | ||||||||||||||
Interest Expense | $ | 2,086 | $ | 57,282 | $ | 59,368 | $ | 1,054 | $ | 28,540 | $ | 29,594 | ||||||||||||||||||||
Net Income (Loss) | $ | 684,637 | $ | (8,517 | ) | $ | 676,120 | $ | 433,749 | $ | 3,777 | $ | 437,526 | |||||||||||||||||||
Assets | $ | 6,550,462 | $ | 2,536,816 | $ | 9,087,278 | $ | 6,550,462 | $ | 2,536,816 | $ | 9,087,278 | ||||||||||||||||||||
Debt | $ | 228,055 | $ | 2,065,788 | $ | 2,293,843 | $ | 228,055 | $ | 2,065,788 | $ | 2,293,843 |
NOTE 9: SUBSEQUENT EVENTS
The Company has evaluated subsequent events for disclosure purposes.
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ITEM 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
We discuss expectations regarding our future performance, such as our business outlook, in our annual and quarterly reports, press releases, and other written and oral statements. These “forward-looking statements” are based on currently available competitive, financial and economic data and our operating plans. They are inherently uncertain, and investors must recognize that events could turn out to be significantly different from our expectations. These factors include, among other considerations, 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 additio ns,additions, the ability to enforce patents and the ability to achieve increased sales volume and continued profitability.
We undertake no obligation to update any forward-looking statement.
Overview
We have developed a unique and proprietary series of ultrasonic atomizing nozzles, which are being used in an increasing variety of electronic,electronics, advanced energy (solar and fuel cells), medical industrial,device, glass, textiles and nanotechnologyfood applications. These nozzles are electrically driven and create a fine, uniform, low velocity spray of atomized liquid particles, in contrast to common pressure nozzles. These characteristics create a series of commercial applications that benefit from the precise, uniform, thin coatings that can be achieved. When combined with significant reductions in liquid waste and less overspray than can be achieved with ordinary pressure nozzle systems, there is lower environmental impact and lower energy use.
Market Diversity
During the past four years we have invested significant time, monies and efforts to enhance our market diversity. Based on our core ultrasonic coating technology, we increased our portfolio of products, the industries we serve and the countries in which our products are marketed and sold.
Today we serve six major industries: electronics, advanced energy (solar and fuel cells), medical device, glass, textiles and food.
Most of our sales now originate outside the United States, and we are geographically present directly and through distributors and trade representatives in North and Latin America, Europe and Asia. The infrastructure upon which this diversified market approach is based, includes a newly equipped process development laboratory, a strengthened sales organization with application engineers, an engineering team with additional talent and the latest, most sophisticated design software tools, as well as an expanded, highly trained installation and service organization.
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The new products which were introduced, the new markets that were penetrated, and the regions in which we now conduct marketing and sales, are a strong foundation for our future sales growth and enhanced profitability.
Products
We have core technology and have developed and market the following products:
1. | SonoFlux 2000F – spray fluxer product – designed for high volume operations with standard width lines requiring low maintenance using a variety of solder fluxes, including rosin flux. It is designed to be used by electronic circuit board manufacturers to apply solder flux to fixed width circuit boards. The major customers for the SonoFlux 2000F are original equipment manufacturers that produce their own electronic circuit boards. |
2. | SonoFlux 2000FP, SonoFlux XL and SonoFlux EZ- spray fluxer product - applies solder flux to electronic printed circuit boards that vary from two inches to up to 24 inches in width in a cost-effective and uniform manner. They are designed to be used by either OEMs or contract manufacturers of electronic circuit assemblies. All SonoFlux products provide substantial benefits in terms of reduced use of fluxing agents, reduced need for maintenance and reduced cost of operations compared to foam fluxers and competitive pressure nozzle fluxing products. |
3. | SonoFlux Servo – a new spray fluxer capable of providing flux to both wide areas of a circuit board as well as selective fluxing. We also sell a selective fluxing apparatus known as Selectaflux. |
4. | MediCoat and MediCoat II for stent coating – table-top and stand alone, fully-contained systems designed to apply thin layers of polymer and drug coatings to arterial stents with high precision. The system incorporates motion control of the stent during the coating process and produces coatings having excellent uniformity. The MediCoat systems use either the Accumist or MicroMist nozzle systems, which are precision nozzle configurations used in applications where precise patterns and coatings are required. These products provide customers the ability to achieve a minimal amount of waste of expensive drug polymer coatings and high uniformity of drug addition from stent to stent. MediCoat II is similar to the MediCoat, but it has higher throughput capabilities more suited for a production environment. We have recently developed additional medical coating platforms to address developing market segments for drug coated balloons, catheters and other implantable devices. |
5. | WideTrack – Wide area modular coating system – One module can cover substrates from 6 inches to 24 inches wide, depending on the application. Much greater widths can be achieved by linking modules together, and these systems have been applied in glass lines of up to four meters wide. A number of systems have been sold over the past four years, and this application holds promise for the future due to cost and environmental savings demonstrated at customer sites. It uses non-clogging ultrasonic atomizing nozzles to produce a low velocity, highly controllable spray. It is designed to be used in applications that require efficient web-coating or wide area spraying capability. The WideTrack System offers significant advantages over conventional pressure-spray methods in a broad range of applications such as non-woven fabrics, float glass, or odd-shaped industrial or consumer products. Since the ultrasonic spray can be easily controlled, it is possible to use fewer chemicals and less water and energy in applying coatings to glass, textiles, food products and packaging materials than with traditional nozzles. This also results in reduced environmental impact due to less overspray |
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6. | Advanced Energy Applications – We now offer a line of equipment for applications involving coatings for fuel cell membranes and solar energy panels. This equipment is offered in bench-top configurations as our Exactacoat product and standalone as our Flexicoat product. These are robotic XYZ platforms that position and move our nozzle systems in a precise application pattern. We have also introduced a new product, the Hypersonic, a high speed reciprocator spraying system for this market. We have seen increasing sales in these growing industries, especially when combined with a novel ultrasonic syringe pump (patent pending) to agitate and suspend the carbon based suspensions needed in fuel cell applications. |
Other Product Offerings
We have an exclusive distribution relationship with EVS International. Ltd. (“EVS”), a well established positionU.K. Company, to distribute EVS’s line of solder recovery systems and spares parts. The territory for this distribution relationship is the United States and Canada. EVS manufactures the EVS6000, EVS3000 and the EVS1000 solder recovery systems which are used to reclaim solder from the dross which accumulates in the wave-solder equipment of circuit board manufacturers. The customer base for distribution of these systems is synergistic with Sono-Tek’s existing customer base for spray fluxer sales in the printed circuit board industry.
Markets
During the past four years we have invested significant time, monies and efforts to enhance our market diversity. Based on our core ultrasonic coating technology, we increased our portfolio of products, the industries we serve and the countries in which we market and sell our products. An outcome of our rapid growth and diversification program, is that we are now capable of offering a unique and superior family of customized products to the six major industries we serve.
All of these systems are based on our core technology of ultrasonic spray coating. Many of these systems have been commercially proven in 24/7 working schedules, under harsh and challenging industrial manufacturing environments, where they provide value in a continuous and reliable fashion.
Today we offer products to six major industries: electronics, advanced energy (solar and fuel cells), medical device, glass, textiles and food.
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1. | Electronics Industry. |
We serve this industry by providing manufacturers of electronic printed circuit boards with state-of-the-art solder fluxers. Our ultrasonic spray fluxers reduce the amount of fluxing chemical needed, enhance the quality of the boards, and provide our customers with a better product at reduced costs of operations, when compared with conventional foam fluxers and pressure assisted fluxers.
We are recognized as a standard setter in the industry, and our systems are incorporated by various original equipment manufacturers (OEM), in their own manufacturing lines for making electronic printed circuit boards. Some examples include: SonoFlux spray fluxing equipment. It saves customers from 40%2000F, SonoFlux 2000FP, SonoFlux XL, SonoFlux EZ and SonoFlux Servo. We also offer the EVS solder recovery systems to the same customer base
2. | Advanced Energy Industry. |
Manufacturers of solar cells and fuel cells share two major technical and business challenges: enhancing the energy efficiency of their products and manufacturing their products in a cost effective way. Extremely uniform, thin layer coatings are at the heart of the solution for these advanced energy systems’ challenges.
Our precision coating systems are now presented in scientific conferences and trade shows around the world for the superior surface uniformity and density they provide, which are directly related to enhanced energy efficiency. Our systems also afford our energy industry clients with the capabilities of saving up to 80% of the liquid flux requiredexpensive catalysts and nano-materials used in these manufacturing processes. Some examples include: ExactaCoat, FlexiCoat, Hypersonic and SonoFlow CSP.
3. | Medical Device Industry. |
Our ultrasonic coating technology is being used by medical device manufacturers worldwide. The leading applications for this industry are coating of arterial stents with precise and uniform micronic layers of polymers and drugs; coating of various implantable devices with lubricous materials and coating of blood collection tubes with anti-coagulants. These applications are typically performed under strict regulatory supervision of governmental agencies in different countries, and the continuing demand for our systems from these customers is indicative of the high quality performance that our systems provide these customers.
Some examples include: MediCoat I; Medicoat II; Medicoat SPI; AccuMist; MicroMist.
4. | Glass Industry. |
The manufacture of float glass occurs under extremely harsh conditions of elevated temperatures. Our ultrasonic coating technology provides this manufacturing process with the means of precise and uniform application of anti-stain, and other specialty chemical agents, on the hot glass. Our customers benefit from an improved quality product, enhanced productivity and significantly reduced expenditures on annual maintenance, often resulting in a return on investment of less than one year. Based on this equipment’s recent successful performance, our systems are now specified by global glass manufacturers as their equipment of choice.
The equipment we offer to solder printed circuit boards over more labor intensive methods,the glass industry is the WideTrack – wide area modular coating system.
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5. | Textiles Industry. |
The textiles industry has yet to recover from the recent economic downturn related to the declines in new housing construction (carpets), automotive and clothing (fabrics).
This industry coats expensive chemicals such as foam fluxing. Less flux equates to lessflame retardant, anti-stain, anti-microbial as well as moisture barriers, which are currently applied using inefficient dip or padding methods, resulting in significant waste of material, cost, fewer chemicals in the workplace,energy and less clean-up. Also, the SonoFlux equipment reduces the number of soldering defects, which reduces the amount of rework.
6. | Food Industry. |
The food industry is traditionally a slow adapter to new technologies. Accordingly, we focus our efforts on a select few global food companies, where our technical advantages and economic benefits could translate into successful market penetration and sales growth. We have introduced our ultrasonic nozzles and MediCoat stent coating systems to large medical device customers. Sono-Tek’s stent coating systems are superior compared to pressure nozzles in their ability to uniformly coat the very small arterial stents without creating webs or gaps in the coatings. We sell a bench-top, fully outfitted stent coating system to a wide range of customer s that are manufacturing stents and/or applying coatings to be used in developmental trials. We have also introduced and sold a production oriented stent coater known as Medicoat II. In addition, we are selling an increasing number of specialized medical implant coating devices now.
Rental Real Estate Operations
In December 2010, we purchased the industrial park where our facilities are located in Milton, NY. The WideTrack is a long-term product and market development effort. Thus far, we have made successful inroads with WideTrack systems into the glass, medical textile (bandages), textiles and food industries. Some of these applications involve nano-technology based liquids. We believe therepark is an excellent fit betweenimproved 3.13 acre parcel of land comprised of five buildings of office/industrial space, with 50,000 square feet of gross leasable floor area. We currently utilize 24,000 square feet of the thin, precise films required in nano-technology coating applicationspark for our operations. We presently lease 16,000 square feet of the park to unrelated third parties and our ultrasonic nozzle systems,10,000 square feet is currently vacant and available for rent.
For financial reporting purposes, we report the results of the park as employed in the WideTrack system.
Liquidity and Capital Resources
Working Capital –
Our working capital increasedStockholders’ Equity –
Stockholder’s Equity increased13 |
Operating Activities –
The increase in our accounts receivable balance during the six months ended August 31, 2012 is due to an increased number of sales in August 2012. In addition, our customer deposits decreased during the six months ended August 31, 2012 which increased our accounts receivable balance and decreased our cash balance.
Our prepaid expenses increased primarily due to a New York State research and development tax credit.
Investing Activities –
During the six months ended August 31,Financing Activities – During the six months ended August 31, 2009,2012, we used $115,000$60,000 for the purchaserepayment of capital equipmentour notes payable and $8,000 for patent application costs, in addition we sold capital equipment for $53,000.
Net Decrease in Cash –For the six months ended August 31, 2010,2012, our cash balance decreased $1,102,000. During the six months ended August 31, 2012, we used $264,000 in our operating activities, $798,000 in our investing activities and $40,000 in our financing activities. It should be noted that we purchased $704,000 of marketable securities during the six months ended August 31, 2012. This purchase is included in the investing activities noted above.
Results of Operations
For the six months ended August 31, 2012, our sales increased $1,567,000decreased $908,000 or 50%15% to $4,716,000$5,231,000 as compared to $3,149,000$6,139,000 for the six months ended August 31, 2009. 2011. During the six month period ended August 31, 2012, we experienced a decrease in sales of our nozzles and generators, fluxers, stent coating units, XYZ units and hypersonic units. We did, however, see an increase in sales of our servo units and a small increase in our widetrack sales.
For the three months ended August 31, 2010,2012, our sales increased $748,000decreased $759,000 to $2,432,000$2,391,000 or 44%24% as compared to $1,684,000$3,150,000 for the three months ended August 31, 2009.2011. During the three month period ended August 31, 2010,2012, we experienced a decrease in sales of our stent coating units, XYZ units, nozzles and generators and EVS systems. The decrease in these sales was offset by an increase in sales in all of our product lines, except for Widetrackfluxer units and Stent Coatingservo units. Noteworthy sales increases took place
During the three months ended August 31, 2012 we have experienced a softening in the markets we serve in Asia and Europe due to the worldwide economic slowdown. We have seen several European governments reduce or eliminate their investments in high tech sectors where our programmable XYZ units during the current quarter.coatings systems are commonly used. Our ultrasonic systems are often directly or indirectly funded by these governmental agencies.
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For the six months ended August 31, 2010,2012, our gross profit increased $669,000decreased $597,000 to $2,233,000$2,515,000 from $1,565,000$3,112,000 for the six months ended August 31, 2009.2011. The gross profit margin was 47%48% of sales for the six months ended August 31, 20102012 and 50%51% of sales for the six months ended August 31, 2009.2011. The decrease in our gross profit margin for the six months ended August 31, 20102012 is due to a decrease in sales of our nozzles and generators, fluxers, stent coater sales, an increase in our programmablecoating units, XYZ units which have a lower profit margin thanand hypersonic units.
For the three months ended August 31, 2012, our stent coaters, an increase in Service personnel and expenses and an increase in freight costs.
Research and product development costs increased $57,000decreased $53,000 to $398,000$487,000 for the six months ended August 31, 20102012 from $341,000$540,000 for the six months ended August 31, 20092011 and $19,000$52,000 to $189,000$233,000 for the three months ended August 31, 20102012 from $170,000$285,000 for the three months ended August 31, 2009.2011. The increasesdecreases were principally due to increases inreduced salary expense due to additional engineering personneland research and development materials in the current periods.
Marketing and selling costsexpenses increased $167,000$58,000 to $1,033,000$1,206,000 for the six months ended August 31, 20102012 from $866,000$1,148,000 for the six months ended August 31, 20092011. During the six months ended August 31, 2012, we experienced an increase in international commission expense which was offset by a decrease in insurance and $54,000depreciation. The increase in international commission expense is due to $511,000four large sales orders that were shipped to Asia during the first quarter of this fiscal year. These Asian sales were subject to a higher commission rate, but the increase is partially offset by a reduction in in-house installation expense.
For the three months ended August 31, 2012, marketing and selling expenses decreased $28,000. During the three months ended August 31, 2012, we experienced decreases in salaries, commissions and depreciation.
General and administrative costs increased $47,000 to $674,000 for the six months ended August 31, 2012 from $627,000 for the six months ended August 31, 2011 and were flat for the three months ended August 31, 2010 from $457,0002012 compared to the three months ended August 31, 2011. The increase for the six months ended August 31, 2012 was due to increased corporate expenses, increased salaries and bonuses and outside consulting fees related to the consideration of strategic opportunities and enhanced growth opportunities.
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Rental Real Estate Operations:
For the six and three months ended August 31, 2012, the results of our rental real estate operations are as follows:
Six months ended | Three months ended | |||||||
August 31, 2012 | ||||||||
Rental Income | $ | 29,295 | $ | 8,450 | ||||
Depreciation | $ | 28,706 | $ | 14,353 | ||||
Insurance | $ | 4,500 | $ | 2,250 | ||||
Grounds and Landscaping | $ | 3,788 | $ | 1,703 | ||||
Property taxes | $ | 20,442 | $ | 10,226 | ||||
Miscellaneous | $ | 194 | $ | 77 | ||||
Loss before Interest | $ | (28,335 | ) | $ | (20,159 | ) | ||
Interest expense | $ | 55,625 | $ | 28,540 | ||||
Net Loss | $ | (83,960 | ) | $ | (48,699 | ) |
Consolidated Results:
We had net income of $71,000 for the six months ended August 31, 2012 as compared to net income of $676,000 for the six months ended August 31, 2011. During the three months ended August 31, 2012 we had net income of $60,000 as compared to net income of $437,000 for the three months ended August 31, 2009.2011. During the six months ended August 31, 2010, we experienced increases in international commission expense, salary expense due to the addition of personnel, travel expense and depreciation related to sales equipment. For the three months ended August 31, 2010, we experienced increases in salary expense, travel expense and depreciation expense.
Critical Accounting Policies
The discussion and analysis of the Company’s financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure on contingent assets and liabilities at the date of the financial statements. Actual results may differ from these estimates under different assumptions and conditions.
Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and may potentially result in materially different results under different assumptions and conditions. The Company believes that critical accounting policies are limited to those described below. For a detailed discussion on the application of these and other accounting policies see Note 2 to the Company’s consolidated financial statements included in Form 10-K for the year ended February 28, 2010.29, 2012.
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Accounting for Income Taxes
As part of the process of preparing the Company’s consolidated financial statements, the Company is required to estimate its income taxes. Management judgment is required in determining the provision for the deferred tax asset. During the fiscal year ended February 28, 2009, the Company increased the valuation reserve for the deferred tax asset. In the event that actual results differ from these estimates, the Company may need to again adjust such valuation reserve.
Stock-Based Compensation
The computation of the expense associated with stock-based compensation requires the use of a valuation model. ASC 718 is a complex accounting standard, the application of which requires significant judgment and the use of estimates, particularly surrounding Black-Scholes assumptions such as stock price volatility, expected option lives, and expected option forfeiture rates, to value equity-based compensation. The Company currently uses a Black-Scholes option pricing model to calculate the fair value of its stock options. The Company primarily uses historical data to determine the assumptions to be used in the Black-Scholes model and has no reason to believe that future data is likely to differ materially from historical data. However, changes in the assumptions to reflect futur efuture stock price volatility and future stock award exercise experience could result in a change in the assumptions used to value awards in the future and may result in a material change to the fair value calculation of stock-based awards. ASC 718 requires the recognition of the fair value of stock compensation in net income. Although every effort is made to ensure the accuracy of ourthe Company’s estimates and assumptions, significant unanticipated changes in those estimates, interpretations and assumptions may result in recording stock option expense that may materially impact our financial statements for each respective reporting period.
Impact of New Accounting Pronouncements
Accounting pronouncements issued but not yet effective have been deemed to be not applicable or the adoption of such accounting pronouncements are not expected to have a material impact on the financial statements of the Company.
ITEM 3 - Quantitative and Qualitative Disclosures about Market Risk
The Company does not issue or invest in financial instruments or derivatives for trading or speculative purposes. Substantially all of the operations of the Company are conducted in the United States, and, as such, are not subject to material foreign currency exchange rate risk. Although the Company's assets included $1,803,000$1,430,000 in cash, the market rate risk associated with changing interest rates in the United States is not material.
ITEM 4 – Controls and Procedures
The Company has established and maintains “disclosure controls and procedures” (as those terms are defined in Rules 13a –15(e) and 15d-15(e) under the Securities and Exchange Act of 1934 (the “Exchange Act’). Christopher L. Coccio, Chief Executive Officer (principal executive) and Stephen J. Bagley, Chief Financial Officer (principal accounting officer) of the Company, have evaluated the Company’s disclosure controls and procedures as of August 31, 2010.2012. Based on this evaluation, they have concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (1) recorded, processed, summarized and reported with inwithin the time periods specified in Securities and Exchange Commission rules and forms, and (2) accumulated and communicated to Management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding timely disclosure.
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In addition, there were no changes in the Company’s internal controls over financial reporting during the second fiscal quarter of 20112013 that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.
PART II - OTHER INFORMATION
Item 1. | Legal Proceedings | |
None | ||
Item 1A. | Risk Factors | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | |
None | ||
Item 3. | Defaults Upon Senior Securities | |
None | ||
Item 4. | ||
None | ||
Item 5. | Other Information | |
None | ||
Item 6. | Exhibits and Reports | |
31.1 – 31.2 | ||
32.1 – 32.2 | ||
101.INS — XBRL Instance Document. | ||
101.SCH — XBRL Taxonomy Extension Schema Document | ||
101.CAL — XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF — XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB — XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE — XBRL Taxonomy Extension Presentation Linkbase Document |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: October 5, 2010
SONO-TEK CORPORATION | ||
(Registrant) | ||
By: | /s/ Christopher L. Coccio | |
Christopher L. Coccio | ||
Chief Executive Officer | ||
By: | /s/ Stephen J. Bagley | |
Stephen J. Bagley | ||
Chief Financial Officer |
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