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Riesige Umsätze, jetzt schon fast 20 % im Plus...

Form 10QSB for SONO TEK CORP


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12-Oct-2004

Quarterly Report



MANAGEMENT`S DISCUSSION AND ANALYSIS OR PLAN 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.

The Company undertakes no obligation to update publicly any forward-looking statement.

Overview

Sono-Tek has developed a unique and proprietary series of ultrasonic atomization nozzles, which are being used in an increasing variety of electronic, medical, industrial, and nanotechnology 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.

The Company has a well established position in the electronics industry with its SonoFlux spray fluxing equipment. It saves customers from 40% to 80% of the liquid flux required to solder printed circuit boards over more labor intensive methods, such as foam fluxing. Less flux equates to lower material cost, fewer chemicals in the workplace, and less clean-up. Also, the SonoFlux equipment reduces the number of soldering defects, which reduces the level of rework. The Company experienced a significant recovery of this market towards the latter part of Fiscal Year 2004 and to date into Fiscal Year 2005, resulting in increased orders for the Company`s equipment.

In the past two years, the Company has focused engineering resources on the medical device market, with emphasis on providing coating solutions for the new generation of drug coated stents. The Company has sold many specialized ultrasonic nozzles and AccuMist(TM) and Micromist stent coating systems to large pharmaceutical and 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. The

Company has begun to sell a bench-top, fully outfitted stent coating system to a wide range of customers that are manufacturing stents and/or applying coatings to be used in developmental trials. The Company has developed a unique patented vacuum-based ultrasonic system capable of uniformly coating batches of stents with anti-restenosis coatings, and is now offering this technology to selected manufacturers for licensing.

The Company also committed engineering resources to develop a general industrial coating product, the WideTrack coating system, which is finding increasing applications in the glass, food and textile manufacturing industries. The WideTrack is saving customers money by reducing the use of materials and lessening the environmental impact by significantly reducing overspray, which is common with other types of coating systems.

In conclusion, the Company`s sales levels have increased as the result of an improved economy, product development efforts, and related marketing thrusts which have had the effects of improving net income, reducing debt, and bringing shareholders` equity from a deficit position to a positive position.

Liquidity and Capital Resources

The Company`s working capital increased $520,000 from a working capital of $786,000 at February 29, 2004 to $1,306,000 at August 31, 2004. The Company`s current ratio is 2.05 to 1 at May 31, 2004, as compared to 1.59 to 1 at February 29, 2004. The Company`s debt to equity ratio has improved from 3.23 to 1 at February 29, 2004 to 1.72 to 1 at August 31, 2004. The increase in working capital and improvement in the financial ratios was a result of a reduction in the current maturity of subordinated mezzanine debt of $282,000, an increase in inventories of $390,000, an increase in accounts payable and accrued expenses of $199,000 and an increase in cash of $87,000 partially offset by a decrease in prepaid assets of $50,000. Stockholders` equity increased $488,000 from $587,000 at February 29, 2004 to $1,075,000 at August 31, 2004. The increase in stockholders` equity was the result of the net profit of $342,000 for the six months ended August 31, 2004, stock option exercises of $99,000, stock issuance of $26,000 and conversion of debt to equity of $21,000.

Inventory increased $390,000 or 43% from $ 905,000 to $1,296,000 as the result of the large influx of orders received during the six months ended August 31, 2004.

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 August 31, 2004 and February 29, 2004, the outstanding balance was $312,000. New borrowings are presently precluded under this note.

The Company and its mezzanine lender, Norwood Venture Corporation ("Norwood"), reached an agreement during May 2004 whereby principal payments under the $840,000 loan would be deferred until November 2005. At that time, Norwood would be repaid over 20 months at $42,000 per month. As a result of this agreement, $282,000 of current debt was reclassified as long-term. During the six months

ended August 31, 2004, the Company prepaid $220,000 of this loan. Additionally, $20,000 of this loan was converted to 49,000 shares of the Company`s common stock by Norwood on May 28, 2004.

Results of Operations

For the six months ended August 31, 2004, the Company`s sales increased $1,272,000 to $2,721,000 as compared to $1,449,000 for the six months ended August 31, 2003. For the three months ended August 31, 2004, the Company`s sales increased $824,000 to $1,515,000 as compared to $691,000 for the three months ended August 31, 2003. The increases were principally the result of increased fluxer sales, the sale of a large cleaning system, and sales of new products, such as Accumist stent coaters, spray dryers using SonoDry nozzles and WideTrack systems.

The Company`s gross profits increased $651,000 to $1,499,000 for the six months ended August 31, 2004 from $848,000 for the six months ended August 31, 2003. The gross profit margin was 55.1% of sales for the six months ended August 31, 2004 as compared to 58.5% of sales for the six months ended August 31, 2003. The Company`s gross profit increased $422,000 to $831,000 for the three months ended August 31, 2004 from $409,000 for the three months ended August 31, 2003. The gross profit margin was 54.8% of sales for the three months ended August 31, 2004 as compared to 59.2% of sales for the three months ended August 31, 2003. The changes in gross margin occurred as the result of the changing mix of products in each period.

Research and product development costs increased $45,000 to $228,000 for the six months ended August 31, 2004 from $183,000 for the six months ended August 31, 2003 and $42,000 to $132,000 for the three months ended August 31, 2004 from $90,000 for the three months ended August 31, 2003. The increases were principally due to an increase in engineering personnel and increased purchases of research and development materials in the current periods.

Marketing and selling costs increased $218,000 and $133,000 for the respective six and three month periods ended August 31, 2004 as compared to the same periods ended August 31, 2003. The increases were due principally to increased commissions, trade show costs and increased labor and fringe benefit costs.

General and administrative costs increased $94,000 and $55,000 for the respective six and three month periods ended August 31, 2004 as compared to the same periods ended August 31, 2003. The increase was due principally to increased payroll costs, increased legal, consulting and accounting costs

Interest expense decreased $34,000 to $58,000 for the six months ended August 31, 2004 from $92,000 for the six months ended August 31, 2003. Interest expense decreased $15,000 to $27,000 for the three months ended August 31, 2004 from $42,000 for the three months ended August 31, 2003. The decrease is primarily due to reduced interest and amortization on the Norwood loans and reduced interest on related party and bank loans.

The Company`s net income was $342,000 and $207,000 for the six and three month periods ended August 31, 2004 as compared to $17,000 and $6,000 for the six and three month periods ended August 31, 2003.

The Company`s backlog of firm orders increased from $375,000 at February 29, 2004 to $1,007,000 at August 31, 2004. All of these orders are deliverable before the end of the Company`s current fiscal year which is February 28, 2005.

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 2 to the Company`s consolidated financial statements included in Form 10-KSB for the year ended February 29, 2004.

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. During the fourth quarter of the year ended February 29, 2004, the Company reduced the valuation reserve for the deferred tax asset resulting from the net operating losses carried forward due to the Company having demonstrated consistent profitable operations. In the event that actual results differ from these estimates, the Company may need to again adjust such valuation reserve.

Impact of New Accounting Pronouncements

There were no new issuances which affected the Company during this quarter.


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, Chief Executive Officer and President (principal executive and accounting officer) of the Company, has evaluated the Company`s disclosure controls and procedures as of August 31, 2004. Based on his evaluation, Dr. Coccio has 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 August 31, 2004. There were no significant deficiencies or material weaknesses, and therefore there were no corrective actions taken.

[armerstudent]

Gibt es hier -ausser mir- noch jemanden, der die Aktie im Depot hat und dementsprechend eine Meinung hat!?

http://www.sono-tek.com/

[MRASTA]

ja, ich.

Was willste denn wissen ?

cu

[boerse-bild]

Das steigende Volumen und die steigenden Kurse sind richtig interessant!

Vielleicht kommt da ja noch was Schönes zum Ende des Jahres auf uns zu...

Mein Kursziel $ 2,50!

[armerstudent]

Das sieht ja richtig geil aus...

Auf ein neues Hoch folgt zwingend ;-) ein neues Hoch!!!

[armerstudent]

27-Oct-04 DEMAIO, VINCENT
Vice President 19,192 Option Exercise at $0.60 per share. $11,515
27-Oct-04 DEMAIO, VINCENT
Vice President 7,197 Disposition (Non Open Market) at $1.60 per share. $11,515
13-Oct-04 DEMAIO, VINCENT
Vice President 30,808 Option Exercise at $0.15 - $0.6 per share. N/A
13-Oct-04 DEMAIO, VINCENT
Vice President 6,159 Disposition (Non Open Market) at $1.54 per share. $9,484
13-Oct-04 BERGER, HARVEY L.
Officer 45,000 Disposition (Non Open Market) at $0 per share. N/A
13-Oct-04 BERGER, HARVEY L.
Officer 45,000 Acquisition (Non Open Market) at $0 per share. N/A
13-Oct-04 BERGER, HARVEY L.
Officer 500 Acquisition (Non Open Market) at $0 per share. N/A
13-Oct-04 COCCIO, CHRISTOPHER L.
Chief Executive Officer 1,000 Disposition (Non Open Market) at $0 per share. N/A
13-Oct-04 COCCIO, CHRISTOPHER L.
Chief Executive Officer 2,000 Acquisition (Non Open Market) at $0 per share. N/A
7-Sep-04 BERGER, HARVEY L.
Officer 45,000 Option Exercise at $0.38 per share. $17,100
7-Sep-04 BERGER, HARVEY L.
Officer 12,782 Disposition (Non Open Market) at $1.33 per share. $17,000
19-Aug-04 STRASZYNSKI, PHILIP
Director 5,000 Statement of Ownership N/A