SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACTS OF 1934
For the quarterly period ended: May 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACTS OF 1934
Commission File No.: 0-16035
SONO-TEK CORPORATION
(Exact name of small business issuer 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)
Registrant's telephone no., including area code: (845) 795-2020
Indicate by check mark whether the small business issuer (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
small business issuer 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 June 27, 2003
Common Stock, par value $.01 per share 9,200,161
SONO-TEK CORPORATION
INDEX
Part I - Financial Information Page
Item 1 - Consolidated Financial Statements: 1 - 3
Consolidated Balance Sheets - May 31, 2003 (Unaudited) and
February 28, 2003 1
Consolidated Statements of Operations - Three Months Ended
May 31, 2003 and 2002 (Unaudited) 2
Consolidated Statements of Cash Flows - Three Months Ended
May 31, 2003 and 2002 (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 - Controls and Procedures 13
Part II - Other Information 13
Signatures and Certifications 14 - 17
18
SONO-TEK CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
May 31, February 28,
2003 2003
Unaudited Audited
Current Assets --------- -------
Cash and cash equivalents $ 279,925 $ 265,658
Accounts receivable (less
allowance of $14,812 and $13,675
at May 31 and February 28, respectively) 366,914 375,040
Inventories 804,541 794,666
Prepaid expenses and other current assets 34,116 56,023
--------- ---------
Total current assets 1,485,496 1,491,387
--------- ---------
Equipment, furnishings and leasehold
improvements (less accumulated depreciation
of $648,102 and $638,341 at May 31 and
February 28, respectively) 77,425 84,878
Intangible assets, net:
Patents and patents pending 28,291 29,520
Deferred financing fees 9,475 11,251
---------- ----------
Total intangible assets 37,766 40,771
Other assets 6,541 6,541
---------- ----------
TOTAL ASSETS $1,607,228 $1,623,577
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable $117,533 $149,920
Accrued expenses 248,061 244,286
Line of Credit 312,000 312,000
Current maturities of long term
loans-related parties 82,672 63,924
Current maturities of long term debt 9,072 9,072
Current maturities of subordinated
mezzanine debt 212,508 141,672
Current maturities of subordinated loans 58,500 43,428
--------- --------
Total current liabilities 1,040,346 964,302
Subordinated mezzanine debt 633,852 690,722
Long term debt, less current maturities 225,963 250,033
Subordinated loans 78,174 100,674
Other long-term liabilities 69,076 69,076
--------- ---------
Total liabilities 2,047,411 2,074,807
--------- ---------
Commitments and Contingencies - -
Put Warrants 188,223 188,223
Stockholders' Equity
Common stock, $.01 par value;
25,000,000 shares authorized,
9,200,161 shares issued and
outstanding at May 31 and
February 28, respectively 92,002 92,002
Additional paid-in capital 6,037,305 6,037,305
Accumulated deficit (6,757,713) (6,768,760)
----------- -----------
Total stockholders' deficiency (628,406) (639,453)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY $1,607,228 $1,623,577
========== ==========
See notes to consolidated financial statements.
SONO-TEK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended May 31,
Unaudited
2003 2002
---- ----
Net Sales $758,523 $780,858
Cost of Goods Sold 319,518 374,844
-------- ---------
Gross Profit 439,005 406,014
-------- ---------
Operating Expenses
Research and product development costs 93,257 54,242
Marketing and selling expenses 149,258 149,482
General and administrative costs 135,707 135,476
------- -------
Total Operating Expenses 378,222 339,200
------- -------
Operating Income 60,783 66,814
Interest Expense (50,710) (57,968)
Interest and Other Income 974 24,580
------ ------
Income Before Income Taxes 11,047 33,426
Income Tax Expense 0 0
------- -------
Net Income $11,047 $33,426
======= =======
Basic Earnings Per Share
Net Earnings per share $0.00 $0.00
===== =====
Diluted Earnings Per Share
Net Earnings per share $0.00 $0.00
===== =====
Weighted Average Shares - Basic 9,200,161 9,105,422
========= =========
Weighted Average Shares - Diluted 10,137,303 10,819,772
========== ==========
See notes to consolidated financial statements.
SONO-TEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended May 31,
Unaudited
2003 2002
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Profit $11,047 $33,426
Adjustments to reconcile net profit
to net cash provided by (used in)
operating activities:
Imputed interest expense on
subordinated mezzanine debt 13,968 19,163
Depreciation and amortization 12,764 19,106
Provision for doubtful accounts 1,137 7,455
(Increase) decrease in:
Account receivable 6,989 (40,024)
Inventories (9,875) 41,931
Prepaid expenses and
other current assets 21,907 19,384
Decrease in:
Accounts payable and accrued expenses (28,613) (51,125)
------ -------
Net Cash Provided By Continuing Operations 29,324 49,316
Net Cash (Used In) Discontinued Operations 0 (92,772)
------ --------
Net Cash Provided By (Used In)
Operating Activities 29,324 (43,456)
------ --------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of equipment and furnishings (2,309) (6,683)
Patent costs 0 (17,485)
Other 0 1,275
------ -------
Net Cash (Used In) Investing Activities (2,309) (22,893)
------- -------
CASH FLOW FROM FINANCING ACTIVITIES:
Renegotiation of debt repayments 18,748 (32,000)
Repayments of notes payable
and equipment loans (31,496) (27,537)
--------- --------
Net Cash (Used In) Financing Activities (12,748) (59,537)
--------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 14,267 (125,886)
CASH AND CASH EQUIVALENTS
Beginning of period 265,658 453,215
--------- ---------
End of period $279,925 $ 327,329
======== =========
SUPPLEMENTAL DISCLOSURE:
Interest paid $ 34,733 $ 36,855
========= =========
See notes to consolidated financial statements.
SONO-TEK CORPORATION
Notes to Consolidated Financial Statements
Three Months Ended May 31, 2003 and 2002
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., a New
Jersey Corporation ("SCS"), that the Company acquired on August 3, 1999. SCS is
a non-operating entity. All significant intercompany accounts and transactions
are eliminated in consolidation.
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 28, 2003, and included in
its report on Form 10-KSB. 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.
Stock-Based Employee Compensation - The Company accounts for stock-based
compensation plans utilizing the provisions of Accounting Principles Board
Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees" and the
Financial Accounting Statement of Financial Accounting Standards No. 123 and No.
148 (SFAS 123 and SFAS 148), "Accounting for Stock-Based Compensation". Under
SFAS 123, the Company will continue to apply the provisions of APB 25 to its
stock-based employee compensation arrangements, and is only required to
supplement its financial statements with additional pro-forma disclosures. The
Company has elected to provide the related pro-forma disclosures utilizing an
intrinsic value method of accounting for such stock based compensation.
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 that 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 $66,998 and $65,770 at May 31, 2003
and February 28, 2003, respectively.
Accounting for Financial Instruments - In May 2003, the FASB issued Statements
of Financial Accounting Standards No. 150 ("SFAS No. 150") "Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity". SFAS No. 150 established standards for how an issuer classifies and
measures in its statement of financial position certain financial instruments
with characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. This SFAS is effective for financial instruments
entered into or modified after May 31, 2003 and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. It is to be
implemented by reporting the cumulative effect of a change in accounting
principle for financial instruments created before the issuance date of SFAS No.
150 and still existing at the beginning of the interim period of adoption.
Restatement is not permitted. The adoption of SFAS No. 150 will only require the
Company to have additional disclosures regarding the Put Warrants and will not
have a material effect on the financial statements. The Company adopted SFAS No.
150 in the three months ended May 31, 2003.
NOTE 2: INVENTORIES
Inventories at May 31, 2003 are comprised of:
Finished goods $412,669
Work in process 304,361
Consignment 3,342
Raw materials and subassemblies 306,963
---------
Total 1,027,335
Less: Allowance (222,794)
--------
Net inventories $804,541
========
NOTE 3: RELATED PARTY TRANSACTIONS
Short-term loans - related parties - At Fiscal Year End 2002, loans from
directors and former officers in the amount of $286,084 plus accrued interest of
$62,728 were formalized into four-year notes bearing interest at 5% on the
unpaid balance. Repayments of these notes commenced on March 31, 2002. Payments
of $65,274 of principal and interest due in the period from August 31, 2002 to
May 31, 2003 have been deferred in order to maintain the Company's liquidity.
Certain of the Company's directors, an officer and an affiliate are participants
with Norwood in its subordinated mezzanine financing.
NOTE 4: SUBORDINATED MEZZANINE DEBT
On April 30, 2001, the Company and Norwood Ventures Corporation amended the
Norwood Note and Warrant Purchase Agreement to increase the Note to $850,000 and
the Warrant shares to 2,077,777. The monthly principal payments to commence in
October 2001 were $23,612 per month and have been deferred until August 2003.
On September 30, 1999, the Company entered into a 12%, $450,000 Note and Warrant
Purchase Agreement with Norwood Venture Corporation ("Norwood Note") less a
proportionate equity share of the greatest of three different valuations of the
Company upon exercise of the Put Warrants. On December 22, 2000, Norwood amended
the Note and Warrant Purchase Agreement ("Agreement") to increase the note to
$550,000. On April 30, 2001, Norwood amended the Agreement to increase the note
by $300,000 to $850,000 and the warrant shares to 2,077,777. In connection with
this additional loan, $50,000 of advances from certain shareholders and
directors was repaid (See note 20). The Norwood Note, as amended, requires
interest payments through September 2002, followed by monthly principal payments
of $23,612 and interest through September 2005. Certain assets of the Company
collateralize the Norwood Note. The Norwood Note, among other things, restricts
the payment of dividends.
In addition, the original Norwood Note was issued with a detachable stock
purchase warrant (the "Put Warrants") to purchase 1,100,000 shares of the
Company's common stock at an exercise price of $.30, the fair market value of
the Company's common stock on September 30, 1999. The fair market value, as
determined by an independent appraisal, of the Put Warrants was determined to be
$0.07 per share, and is accounted for as a discount to the Norwood Note and will
be amortized over the life of the principal repayment term of the Agreement. In
connection with the amendments, dated December 22, 2000 and April 30, 2001,an
additional 244,444 and 733,333 warrant shares were granted at an exercise price
of $0.30 and $.10 per share, respectively. In connection with an amendment to
the Agreement in October 2001, the exercise price of certain of the warrants was
reduced from $.30 to $.15 per share. This resulted in an increase in the value
of the warrants of $13,445, which is accounted as a discount to the loan and is
being imputed as additional interest over the term of the loan. The unamortized
discount at May 31, 2003 is $3,640. The aggregate exercise price of the Put
Warrants is $275,000 for the purchase of 2,077,777 shares of common stock
The Put Warrant holders may, commencing after the delivery of the February 28,
2006 audited financial statements and terminating one year thereafter, require
the Company to purchase such warrants at a price equal to the result calculated
by subtracting the aggregate exercise of the warrants to the extent remaining
from the product of the greatest of;
a) the fair market value of the Company as determined by an independent
appraiser as at the end of the Company's fiscal year end February 28, 2006 (the
"Company's 2006 Fiscal Year"),
b) five times EBITDA for the Company's 2006 Fiscal Year or, if higher, average
EBITDA for such year and the fiscal year of the Company immediately prior to
such year, or
c) the book value of the Company as at the end of the Company's 2006 Fiscal
Year,
multiplied by the fraction of (the "Put Fraction") the numerator of which is the
total number of shares of common stock, the Put Warrant holders would own upon
such exercise of the warrants and the denominator would be the total number of
common shares outstanding upon the exercise of all equity rights to acquire
common stock.
Depending on the fair value of the Company based on the above computations from
the Company's 2006 Fiscal Year results will depend on if the Company will be
required, if such Put Warrant holders exercise their put warrants, to pay up to
$275,000 for the warrants.
These warrants are exercisable for the purchase of up to 2,077,777 shares of
common stock.
NOTE 5: DEFERRAL OF PAYMENTS
The Company, in order to conserve its cash assets, has deferred payment of
certain of its obligations at May 31, 2003. Such deferrals were:
Current maturities of subordinated mezzanine debt $188,896
Current maturities of long-term loans - related parties 56,236
Current maturities of subordinated loans 40,821
Incentive compensation 25,294
Interest 9,038
-----------
Total $320,285
NOTE 6: STOCK OPTIONS AND WARRANTS
Stock Options - Under the 1993 Stock Incentive Plan, as amended ("1993 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. Options granted under the 1993 Plan expire on various dates through
2012.
Under the 1993 Stock Incentive Plan, 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 1993 plan 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 terminate at a stipulated period of time after an employee's
termination of employment.
During Fiscal Year 2003, the Company granted options for 415,000 shares
exercisable at between $0.15 per share and $0.30 per share to qualified
employees and 40,000 shares exercisable at $0.37 to directors of the Company.
There were no stock options granted in the three month period ended May 31,
2003.
A summary of the 1993 Plan activity for the year ended February 28, 2003 and the
period ended May 31, 2003 is as follows:
Weighted Average
Stock Options Exercise Price
----------------------- -----------------------
Outstanding Exercisable Outstanding Exercisable
----------- ----------- ----------- -----------
Balance - February 28, 2002 840,062 752,187 $.50 $.59
Granted Fiscal Year 2003 445,000 .22
Canceled Fiscal Year 2003 (162,500) (.49)
-------- -----
Balance - February 28, 2003 1,122,562 903,062 $.33 $.35
Granted period
ended May 31, 2003 0 .0
Canceled period
ended May 31, 2003 (15,000) (.25)
--------- -----
Balance - May 31, 2003 1,107,562 896,312 $.33 $.35
========= ===== ====
Information, at date of issuance, regarding stock option grants for the year
ended February 28, 2003 and period ended May 31, 2003
Shares Weighted Weighted
Average Average
Year ended February 28, 2003
Exercise price exceeds market price 275,000 $0.20 $0.15
Exercise price equals market price 170,000 0.16 0.16
Exercise price is less than market price - - -
Period ended May 31, 2003
Exercise price exceeds market price - $- $-
Exercise price equals market price - - -
Exercise price is less than market price - - -
The following table summarizes information about stock options outstanding and
exercisable at May 31, 2003:
Outstanding and Exercisable
Weighted
Number Average Weighted-
Outstanding Remaining Average
Life in Exercise Number
Range of exercise prices: Years Price Exercisable
$.09 to $.20 587,500 8.9 $.18 446,000
$.21 to $.50 371,250 5.8 $.33 295,750
$.51 to $.90 102,562 5.6 $.60 102,562
$1.00 to $1.53 55,000 7.3 $1.43 52,000
The fair value of options granted under the Company's fixed stock option plans
during Fiscal Years 2003 and three month period ended May 31, 2003 were
estimated on the dates of grant using the Black Scholes model with the following
weighted-average assumptions used: expected volatility of approximately 107% in
Fiscal Year 2003 and the three month period ended May 31, 2003, risk-free
interest rate of approximately 3.25% in Fiscal Years 2003 and the three month
period ended May 31, 2003, and expected lives of option grants of approximately
five years.
The estimated fair value of options granted during Fiscal Years 2003 were $.22
per share. The Company applies Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for the 1993 Plan. Had compensation cost
for the Company's stock option plan been determined based on the intrinsic value
at the option grant dates for awards in accordance with the accounting
provisions of SFAS 123, the Company's net income (loss) and basic and diluted
earnings (loss) per share for the three months ended May 31, 2003 and 2002 would
have been changed to the pro forma amounts indicated below:
Three Months Ended May 31,
2003 2002
Net Profit (Loss):
As reported $11,047 $33,426
Deduct: Total stock based
employee compensation under
intrinsic value based method
for all awards, net of
tax effects 0 0
------- -------
Pro forma $11,047 $33,426
======= =======
Basic and diluted earnings (loss) per share:
As reported $0.00 $0.00
Pro forma $0.00 $0.00
Warrants - There were no warrants issued during Fiscal 2004 and 2003. 370,175
warrants issued in 1999 in conjunction with the retirement of subordinated debt
expired in Fiscal 2003.
NOTE 7: EARNINGS PER SHARE
The denominator for the calculation of diluted earnings per share at May 31,
2003 and 2002 are calculated as follows:
May 31, 2003 May 31, 2002
Denominator for basic earnings per share 9,200,161 9,105,422
Dilutive effect of warrants 882,125 1,653,015
Dilutive effect of stock options 55,016 61,334
------- ---------
Denominator for dilutive earnings per share 10,137,303 10,819,772
========== ==========
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:
- - The Company's ability to respond to competition in its markets;
- - General economic conditions in the Company's markets; and
- - Ability to continue to obtain deferral of principal payments from its note
holders.
The Company undertakes no obligation to update publicly any forward-looking
statement.
Liquidity and Capital Resources
The Company's working capital decreased $81,936 from a working capital of
$527,085 at February 28, 2003 to $445,149 at May 31, 2003. The decrease in
working capital was a result of an increase in the current maturities of debt of
$104,000, a decrease in accounts receivable of $8,000, a decrease in prepaid
expenses of $22,000, an increase in accrued expenses of $4,000 that was offset
by increases in cash of $14,000, inventory of $10,000, and a decrease in
accounts payable of $32,000. The stockholders' deficiency decreased $11,047 from
$639,453 at February 28, 2003 to $628,406 at May 31, 2003. The decrease in
stockholders' deficiency was the result of the net profit of $11,047 for the
three months ended May 31, 2003.
Accounts receivable at May 31, 2003 decreased $8,126 or 2% from February 28,
2003 due to lower sales levels in this quarter as compared to the last quarter
of the prior fiscal year.
Inventory increased $9,875 or 1% as the result of lower than anticipated sales
in the current quarter. The increase was principally due to an increase in
finished goods inventory as the result of equipment installed at customer sites
for evaluation purposes.
Accounts payable decreased $32,387 or 22% as compared to February 28, 2003 due
to the reduced purchasing activity and payments made to vendors during the three
months ended May 31, 2003.
The Company currently has a $350,000 line of credit with a bank, in the form of
a demand note. The loan is collateralized by accounts receivable, inventory and
all other personal property of the Company and is guaranteed by the former Chief
Executive Officer of the Company. As of May 31, 2003 and February 28, 2003 the
outstanding balance was $312,000. New borrowings are presently precluded under
this note.
Results of Operations
For the three months ended May 31, 2003, the Company's sales decreased $22,335
to $758,523 as compared to $780,858 for the three months ended May 31, 2002. The
decrease was a result of a decrease in nozzle sales of $21,000, a decrease in
cleaning system spare part sales of $3,000, a decrease in sales of other
products of $6,000, partially offset by an increase in fluxer sales of $9,000.
The Company's gross profit increased $32,992 to $439,005 for the three months
ended May 31, 2003 from $406,013 for the three months ended May 31, 2002 The
gross profit margin was 57.9% of sales for the three months ended May 31, 2003
as compared to 52.0% of sales for the three months ended May 31, 2002. The
change in margin occurred as the result of the changing mix of products in each
period.
Research and product development costs increased $39,016 to $93,257 for the
three months ended May 31, 2003 from $54,242 for the three months ended May 31,
2002. Research and product development costs of $39,000 incurred in the three
months ended May 31, 2002 were used to manufacture saleable inventory items, and
accordingly, were recorded in inventory. During the three months ended May 31,
2003 research and development personnel were not utilized for manufacturing.
Marketing and selling costs and general and administrative costs were unchanged
for the three months ended May 31, 2003 from three the months ended May 31, 2002
Interest expense decreased $7,258 to $50,712 for the three months ended May 31,
2003 from $57,968 for the three months ended May 31, 2002. The decrease is
primarily due to reduced interest and amortization on the Norwood loans of
$5,200 and reduced interest of $2,000 on related party and bank loans.
Interest and other income decreased $23,607 for the three months ended May 31,
2003 as compared to the three months ended May 31, 2002. The decrease is
primarily due to settlements of $17,000 with former vendors and sales
representatives, and a reduction of the accrual for future rent expense of
$6,000 recorded in the prior year's period.
The Company's net income was $11,047 for the three months ended May 31, 2003 as
compared to $33,426 for the three months ended May 31, 2002. Earnings per common
share were $.001 for the three months ended May 31, 2003 as compared to $.003
for the three months ended May 31, 2002.
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 the one
described below. For a detailed discussion on the application of this and other
accounting policies see note 3 to the Company's consolidated financial
statements included in Form 10-KSB for the year ended February 28, 2003.
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 on its deferred tax asset. The
Company recorded a valuation reserve for the full deferred tax asset from the
net operating losses carried forward due to the Company not demonstrating
consistent profitable operations. In the event that actual results differ from
these estimates or the Company adjusts these estimates in future periods, the
Company may need to adjust such valuation reserve recorded.
Impact of New Accounting Pronouncements
In May 2003, the FASB issued Statements of Financial Accounting Standards No.
150 ("SFAS No. 150"), "Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity". SFAS No. 150 established
standards for how an issuer classifies and measures in its statement of
financial position certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances) because that financial instrument embodies an obligation of the
issuer. This SFAS is effective for financial instruments entered into or
modified after May 31, 2003 and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. It is to be implemented by
reporting the cumulative effect of a change in accounting principle for
financial instruments created before the issuance date of SFAS No. 150 and still
existing at the beginning of the interim period of adoption. Restatement is not
permitted. The adoption of SFAS No. 150 will only require the Company to have
additional disclosures regarding the Put Warrants and will not have a material
effect on the financial statements. The Company adopted SFAS No. 150 in the
three months ended May 31, 2003.
SONO-TEK CORPORATION CONTROLS AND PROCEDURES
The Company has established and maintains "disclosure controls and procedures"
(as those terms are defined in Rules 13a -14(c) and 15d- 14(c) under the
Securities and Exchange Act of 1934 (the "Exchange Act'). Christopher L. Coccio,
President and Chief Operating Officer of the Company, and Harvey L. Berger,
Treasurer of the Company have evaluated the Company's disclosure controls and
procedures as of May 31, 2003. Based on their evaluations, Messrs. Coccio and
Berger have concluded that the Company's disclosure controls and procedures are
effective to ensure that the information required to be disclosed by the Company
in reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified by SEC
rules and Forms.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls after May 31, 2003. There
were no significant deficiencies or material weaknesses, and therefore there
were no corrective actions taken.
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
99.1 CEO Certification
99.2 Treasurer Certification
(b) Reports on Form 8-K
None
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: July 8, 2003
SONO-TEK CORPORATION
(Registrant)
/s/ Christopher L. Coccio
By: ____________________________________
Christopher L. Coccio
Chief Executive Officer and President
CERTIFICATIONS
I, Christopher L. Coccio, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Sono-Tek Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstance under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date:
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies in the design or operation of internal controls
which could adversely effect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material; that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: July 8, 2003
/s/ Christopher L. Coccio
Christopher L. Coccio
Chief Executive Officer and President
CERTIFICATION
I, Harvey L. Berger, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Sono-Tek Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstance under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date:
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the equivalent
functions):
c) All significant deficiencies in the design or operation of internal controls
which could adversely effect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
d) Any fraud, whether or not material; that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: July 8, 2003
/s/ Harvey L. Berger
Harvey L. Berger
Treasurer
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Sono-Tek Corporation on Form 10QSB
for the period ended May 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"). I, Christopher L. Coccio, Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The
Report fully complies with the requirements of section 13(a) and 15(d) of the
Securities Exchange Act of 1934; and (2) The information contained in the Report
fairly presents, in all material respects, the financial condition and result of
operations of the Company.
Date: July 8, 2003
/s/ Christopher L. Coccio
Christopher L. Coccio
Chief Executive Officer and President
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Sono-Tek Corporation on Form 10QSB
for the period ended May 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Harvey L. Berger, Treasurer of
the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss.
906 of the Sarbanes-Oxley Act of 2002, that:(1) The Report fully complies with
the requirements of section 13(a) and 15(d) of the Securities Exchange Act of
1934; and (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
Date: July 8, 2003
/s/ Harvey L. Berger
Harvey L. Berger
Treasurer