UNITED STATES
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 ACT OF 1934
For the quarterly period ended: November 30, 2007
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
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(Exact name of small business issuer as specified in its charter)
New York 14-1568099
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2012 Rt. 9W, Milton, NY 12547
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(Address of Principal Executive Offices) (Zip Code)
Issuer'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 |_|
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 January 8, 2008
----- ---------------
Common Stock, par value $.01 per share 14,360,541
SONO-TEK CORPORATION
INDEX
Part I - Financial Information Page
Item 1 - Consolidated Financial Statements: 1-3
Consolidated Balance Sheets - November 30, 2007 (Unaudited) and
February 28, 2007 1
Consolidated Statements of Income - Nine Months and Three Months Ended
November 30, 2007 and 2006 (Unaudited) 2
Consolidated Statements of Cash Flows - Nine Months Ended November 30, 2007
and 2006 (Unaudited) 3
Notes to Consolidated Financial Statements 4-7
Item 2 - Management's Discussion and Analysis or Plan of Operations 8-13
Item 3 - Controls and Procedures 14
Part II - Other Information 15
Signatures and Certifications 16-20
SONO-TEK CORPORATION
CONSOLIDATED BALANCE SHEETS
November 30, February 28,
2007 2007
Unaudited
------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,952,627 $ 2,268,976
Accounts receivable (less allowance of $18,500
at November 30 and February 28, respectively) 945,806 946,833
Inventories 1,581,754 1,406,231
Prepaid expenses and other current assets 55,114 69,107
Deferred tax asset 270,000 270,000
------------- -------------
Total current assets 4,805,302 4,961,147
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Equipment, furnishings and leasehold improvements
(less accumulated depreciation of $1,000,249 and
$896,773 at November 30 and February 28, respectively) 338,872 301,360
Intangible assets, net 27,641 30,744
Other assets 7,171 7,171
Deferred tax asset 446,239 411,239
------------- -------------
TOTAL ASSETS $ 5,625,225 $ 5,711,661
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 230,068 $ 209,202
Accrued expenses 305,581 476,140
Current maturities of long term debt 26,585 27,373
Deferred tax liability 16,239 16,239
------------- -------------
Total current liabilities 578,473 728,954
Long term debt, less current maturities 31,852 51,506
Deferred tax liability 80,000 80,000
------------- -------------
Total liabilities 690,325 860,460
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Commitments and Contingencies -- --
Stockholders' Equity
Common stock, $.01 par value; 25,000,000 shares authorized,
14,360,541 shares issued and outstanding
at November 30 and February 28 143,606 143,606
Additional paid-in capital 8,336,368 8,308,301
Accumulated deficit (3,545,074) (3,600,706)
------------- -------------
Total stockholders' equity 4,934,900 4,851,201
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,625,225 $ 5,711,661
============= =============
See notes to consolidated financial statements.
1
SONO-TEK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended November 30, Three Months Ended November 30,
Unaudited Unaudited
2007 2006 2007 2006
------------ ------------ ------------ ------------
Net Sales $ 4,207,724 $ 5,239,698 $ 1,560,558 $ 1,624,015
Cost of Goods Sold 2,256,956 2,624,967 869,071 812,990
------------ ------------ ------------ ------------
Gross Profit 1,950,768 2,614,731 691,487 811,025
------------ ------------ ------------ ------------
Operating Expenses
Research and product development costs 617,652 596,624 184,824 219,289
Marketing and selling expenses 755,662 965,940 261,576 305,604
General and administrative costs 626,881 629,188 241,570 190,393
------------ ------------ ------------ ------------
Total Operating Expenses 2,000,194 2,191,752 687,970 715,286
------------ ------------ ------------ ------------
Operating (Loss) Income (49,426) 422,979 3,517 95,739
Interest Expense (3,394) (4,834) (1,017) (1,526)
Interest Income 66,030 49,254 18,201 20,380
Other Income 8,609 8,692 2,948 2,831
------------ ------------ ------------ ------------
Income from Operations Before Income Taxes 21,819 476,091 23,649 117,424
Income Tax Expense (Benefit) (33,813) 3,281 0 3,281
------------ ------------ ------------ ------------
Net Income $ 55,632 $ 472,810 $ 23,649 $ 114,143
============ ============ ============ ============
Basic Earnings Per Share $ 0.00 $ 0.03 $ 0.00 $ 0.01
============ ============ ============ ============
Diluted Earnings Per Share $ 0.00 $ 0.03 $ 0.00 $ 0.01
============ ============ ============ ============
Weighted Average Shares - Basic 14,360,541 14,359,738 14,360,541 14,204,448
============ ============ ============ ============
Weighted Average Shares - Diluted 14,412,523 14,456,780 14,409,178 14,298,155
============ ============ ============ ============
See notes to consolidated financial statements.
2
SONO-TEK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended November 30,
Unaudited
2007 2006
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 55,632 $ 472,810
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 106,580 85,530
Provision for doubtful accounts -- 5,800
Stock based compensation expense 28,067 49,958
Gain on sale of equipment -- 17,723
Decrease (Increase) in:
Accounts receivable 1,027 80,462
Inventories (175,523) 968
Prepaid expenses and other current assets 13,993 (266)
Deferred tax asset (35,000) --
(Decrease) Increase in:
Accounts payable and accrued expenses (149,694) (74,631)
----------- -----------
Net Cash (Used In) Provided By Operating Activities (154,918) 638,354
----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Patent Application Costs -- (5,021)
Purchase of equipment and furnishings (140,989) (209,690)
----------- -----------
Net Cash (Used In) Investing Activities (140,989) (214,711)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and warrants -- 2,548
Repayments of notes payable and loans (20,442) (19,099)
----------- -----------
Net Cash Provided by (Used In) Financing Activities (20,442) (16,551)
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (316,349) 407,092
CASH AND CASH EQUIVALENTS
Beginning of period 2,268,976 1,740,804
----------- -----------
End of period $ 1,952,627 $ 2,147,896
=========== ===========
SUPPLEMENTAL DISCLOSURE:
Interest paid $ 3,394 $ 4,552
=========== ===========
See notes to consolidated financial statements.
3
SONO-TEK CORPORATION
Notes to Consolidated Financial Statements
Nine Months Ended November 30, 2007 and 2006
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") which the Company acquired on August 3, 1999, whose
operations have been discontinued. There have been no operations of this
subsidiary since Fiscal Year Ended February 28, 2002. All significant
intercompany accounts and transactions are eliminated in consolidation.
Cash and Cash Equivalents - Cash and cash equivalents consist of money market
mutual funds, short term commercial paper and short term certificates of deposit
with original maturities of 90 days or less. The Company occasionally has cash
or cash equivalents on hand in excess of the $100,000 insurable limits at a
given bank.
Fair Value of Financial Instruments - The carrying amounts reported in the
balance sheet for cash, receivables, accounts payable and accrued expenses
approximate fair value based on the short-term maturity of these instruments.
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, 2007, 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, 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 is $57,452 and $54,350 at
November 30, 2007 and February 28, 2007, respectively. Annual amortization
expense of such intangible assets is expected to be $4,272 per year for the next
five years.
4
NOTE 2: INVENTORIES
Inventories at November 30, 2007 are comprised of:
Finished goods $ 769,103
Work in process 459,277
Consignment 9,770
Raw materials and subassemblies 556,802
----------
Total 1,794,952
Less: Allowance (213,198)
----------
Net inventories $1,581,754
==========
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 November
30, 2007, there were 111,500 options outstanding under the 1993 Plan and 904,875
options outstanding under the 2003 plan.
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
On March 1, 2006, the Company adopted SFAS No. 123R, "Share Based Payments."
SFAS No. 123R requires companies to expense the value of employee stock options
and similar awards for periods beginning after December 15, 2005, and applies to
all outstanding and vested stock-based awards at a company's adoption date.
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:
2007 2006
------------- ----------
Expected life 4 years 4 years
Risk free interest rate 4.01% - 5.07% 4% - 4.25%
Expected volatility 39% - 78% 40%
Expected dividend yield 0% 0%
5
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's forfeiture rate, the Company analyzed its
historical forfeiture rate, the remaining lives of unvested options, and the
amount 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 nine months ended November 30, 2007 and 2006, net income and earnings
per share reflect the actual deduction for stock-based compensation expense. The
impact of applying SFAS 123R approximated $28,067 and $49,958 in additional
compensation expense during the nine months ended November 30, 2007 and 2006,
respectively. Such amount is included in general and administrative expenses on
the statement of operations. The expense for stock-based compensation is a
non-cash expense item.
6
NOTE 5: EARNINGS PER SHARE
The denominator for the calculation of diluted earnings per share at November
30, 2007 and 2006 are calculated as follows:
November 30, 2007 November 30, 2006
----------------- -----------------
Denominator for basic earnings per share 14,360,541 14,359,738
Dilutive effect of stock options 51,982 97,042
----------- ----------
Denominator for diluted earnings per share 14,412,523 14,456,780
=========== ==========
NOTE 6: OTHER INCOME
As previously disclosed on Form 8-K, filed on July 5, 2005, the Company
determined that a former employee had misappropriated approximately $250,000 of
the Company's monies, primarily through unauthorized check writing from the
Company's accounts over a period of three calendar years. The Company had
previously expensed substantially all of the misappropriated funds over the
years.
The Company has recovered approximately 70% of these funds to date. The Company
has a note that is being paid down by the former employee. As previously
discussed, the Company can offer no assurances that it will be successful in its
attempts to collect the balance of the remaining restitution.
7
SONO-TEK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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 additions, the
ability to enforce patents and the successful implementation of the business
development program.
We undertake no obligation to update 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.
We have a well established position in the electronics industry with our
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 amount of rework.
In the past three years, we have focused engineering resources on the medical
device market, with emphasis on providing coating solutions for the new
generation of drug coated stents. We have sold a significant number of
specialized 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 also 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. We have also recently introduced and have received our first order for
our Medicoat II multi-stent coating system, the first system of its type in the
industry to our knowledge. With our success in the medical device market, we
have demonstrated that we can grow new markets by developing new applications
with our technology.
8
We have also committed engineering resources to the development of the WideTrack
coating system, a broad based platform for applying a variety of coatings to
moving webs of glass, textiles, plastic, metal, food products and packaging
materials. 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) and solar and fuel cell industries. The WideTrack
system has also recently been extended to cover applications in the food
industry, a new area of focus for the Company. We have submitted a patent
application for this new product application, and have been actively marketing
this product to the food industry. We believe there is an excellent fit between
the food industry and our spraying and coating technology.
Our new product offering, the SonoDry ultrasonic spray dryer, has shown great
potential since its introduction earlier this year. The product has been well
received and we have sold and shipped a number of these units in this new
ultrasonic application field. The SonoDry series of spray dryers is of
particular importance to product and process developers in the following
industries: Pharmaceuticals (e.g. for drug actives and intermediates, enzymes
and low molecular weight proteins), Foods (e.g. for nutriceuticals, herbal
extracts and flavors) and Specialty Chemicals (e.g. for fragrances, cosmetics
ingredients and nano-scale particles).
During the third quarter, the Company experienced an increase in its sales over
the first and second quarters of this year. We believe this improving trend is
related to our new business development program which was implemented this
fiscal year. We continue to use current income for product and market
development, believing it to be well justified for the future growth of the
Company.
Liquidity and Capital Resources
Working Capital - Our working capital decreased $5,000 to $4,227,000 at November
30, 2007 from a working capital of $4,232,000 at February 28, 2007. The
Company's current ratio is 8.3 to 1 at November 30, 2007 as compared to 6.8 to 1
at February 28, 2007.
Stockholders' Equity - Stockholder's Equity increased $84,000 from $4,851,000 at
February 28, 2007 to $4,935,000 at November 30, 2007. The increase is the result
of net income of $56,000 and an adjustment for stock based compensation expense
of $28,000.
Operating Activities - We used $155,000 in our operating activities during the
nine months ended November 30, 2007, a decrease of $793,000 when compared to the
nine months ended November 30, 2006. The decrease is primarily a result of a
decrease in net income for the current period combined with an increase in
inventory and a decrease in accounts payable and accrued expenses.
Investing Activities - We used $141,000 for the purchase of capital equipment
during the nine months ended November 30, 2007 compared to the use of $210,000
during the nine months ended November 30, 2006.
9
Financing Activities - For the nine months ended November 30, 2007, we used
$20,000 for the repayment of our notes payable. For the nine months ended
November 30, 2006, we used $16,500 in financing activities resulting from the
repayment of notes payable of $19,000 and the proceeds of stock option exercises
of $2,500.
Results of Operations
During the nine month period ended November 30, 2007, our sales decreased
$1,032,000 or 20% to $4,208,000 as compared to $5,240,000 for the nine months
ended November 30, 2006. For the three months ended November 30, 2007, our sales
decreased $63,000 or 4% to $1,561,000 as compared to $1,624,000 for the three
months ended November 30, 2006. During the nine month period ended November 30,
2007, we continued to see a decrease in sales of both fluxer units and nozzles
when compared to the nine month period ended November 30, 2006. The decrease in
sales of these units was partially offset by sales of our Spray Dryer units, EVS
Systems used for solder recovery and our programmable XYZ precision coating
units.
Our gross profit decreased $664,000 to $1,951,000 for the nine months ended
November 30, 2007 from $2,615,000 for the nine months ended November 30, 2006.
The gross profit margin was 46% of sales for the nine months ended November 30,
2007 as compared to 50% of sales for the nine months ended November 30, 2006.
Our gross profit decreased $120,000 to $691,000 for the three months ended
November 30, 2007 as compared to $811,000 for the three months ended November
30, 2006. The gross profit margin was 44% of sales for the three months ended
November 30, 2007 as compared to 50% of sales for the three months ended
November 30, 2006. The decrease in the gross profit margin is due to the mix of
products sold in the current quarter.
Research and product development costs increased $21,000 to $618,000 for the
nine months ended November 30, 2007 from $597,000 for the nine months ended
November 30, 2006. The increase during the nine month period is due to increased
engineering personnel and related fringes. For the three months ended November
30, 2007, research and product development costs decreased $34,000 to $185,000
from $219,000 for the three months ended November 30, 2006. The decrease during
the three month period is due to decreased supplies, consulting fees and payroll
expense.
Marketing and selling costs decreased $210,000 to $756,000 for the nine months
ended November 30, 2007 from $966,000 for the nine months ended November 30,
2006 and $44,000 to $262,000 for the three months ended November 30, 2007 from
$306,000 for the three months ended November 30, 2006. The decrease was due to
decreased salaries, commissions and travel expenses.
General and administrative costs decreased $2,000 to $627,000 for the nine
months ended November 30, 2007 from $629,000 for the nine months ended November
30, 2006 and increased $52,000 to $242,000 for the three months ended November
30, 2007 from $190,000 for the three months ended November 30, 2006. The
increase is primarily due to an increase in salaries.
10
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-KSB for the year ended February 28, 2007.
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 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.
Stock-Based Compensation
The computation of the expense associated with stock-based compensation requires
the use of a valuation model. SFAS 123(R) is a new and very 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. We currently use a Black-Scholes option
pricing model to calculate the fair value of stock options. We primarily use
historical data to determine the assumptions to be used in the Black-Scholes
model and have no reason to believe that future data is likely to differ
materially from historical data. However, changes in the assumptions to reflect
future 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.
SFAS 123(R) requires the recognition of the fair value of stock compensation in
net income. Although every effort is made to ensure the accuracy of our
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.
11
Impact of New Accounting Pronouncements
FASB 141 (revised 2007) - Business Combinations
In December 2007, the FASB issued FASB Statement No. 141 (revised 2007),
Business Combinations. This Statement replaces FASB Statement No. 141, Business
Combinations. This Statement retains the fundamental requirements in Statement
141 that the acquisition method of accounting (which Statement 141 called the
purchase method) be used for all business combinations and for an acquirer to be
identified for each business combination. This Statement defines the acquirer as
the entity that obtains control of one or more businesses in the business
combination and establishes the acquisition date as the date that the acquirer
achieves control. This Statement's scope is broader than that of Statement 141,
which applied only to business combinations in which control was obtained by
transferring consideration. By applying the same method of accounting--the
acquisition method--to all transactions and other events in which one entity
obtains control over one or more other businesses, this Statement improves the
comparability of the information about business combinations provided in
financial reports.
This Statement requires an acquirer to recognize the assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree at the
acquisition date, measured at their fair values as of that date, with limited
exceptions specified in the Statement. That replaces Statement 141's
cost-allocation process, which required the cost of an acquisition to be
allocated to the individual assets acquired and liabilities assumed based on
their estimated fair values.
This Statement applies to all transactions or other events in which an entity
(the acquirer) obtains control of one or more businesses (the acquirer),
including those sometimes referred to as "true mergers" or "mergers of equals"
and combinations achieved without the transfer of consideration, for example, by
contract alone or through the lapse of minority veto rights. This Statement
applies to all business entities, including mutual entities that previously used
the pooling-of-interests method of accounting for some business combinations. It
does not apply to: (a) The formation of a joint venture, (b) The acquisition of
an asset or a group of assets that does not constitute a business, (c) A
combination between entities or businesses under common control, (d) A
combination between not-for-profit organizations or the acquisition of a
for-profit business by a not-for-profit organization.
This Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. Management believes this Statement will have no impact on the
financial statements of the Company once adopted.
FASB 160 - Noncontrolling Interests in Consolidated Financial Statements - an
amendment of ARB No. 51
In December 2007, the FASB issued FASB Statement No. 160 - Noncontrolling
Interests in Consolidated Financial Statements - an amendment of ARB No. 51.
This Statement applies to all entities that prepare consolidated financial
statements, except not-for-profit organizations, but will affect only those
entities that have an outstanding noncontrolling interest in one or more
subsidiaries or that deconsolidate a subsidiary. Not-for-profit organizations
should continue to apply the guidance in Accounting Research Bulletin No. 51,
Consolidated Financial Statements, before the amendments made by this Statement,
and any other applicable standards, until the Board issues interpretative
guidance.
12
This Statement amends ARB 51 to establish accounting and reporting standards for
the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Before this Statement was issued,
limited guidance existed for reporting noncontrolling interests. As a result,
considerable diversity in practice existed. So-called minority interests were
reported in the consolidated statement of financial position as liabilities or
in the mezzanine section between liabilities and equity. This Statement improves
comparability by eliminating that diversity.
A noncontrolling interest, sometimes called a minority interest, is the portion
of equity in a subsidiary not attributable, directly or indirectly, to a parent.
The objective of this Statement is to improve the relevance, comparability, and
transparency of the financial information that a reporting entity provides in
its consolidated financial statements by establishing accounting and reporting
standards that require: (a) The ownership interests in subsidiaries held by
parties other than the parent be clearly identified, labeled, and presented in
the consolidated statement of financial position within equity, but separate
from the parent's equity, (b) The amount of consolidated net income attributable
to the parent and to the noncontrolling interest be clearly identified and
presented on the face of the consolidated statement of income, (c) Changes in a
parent's ownership interest while the parent retains its controlling financial
interest in its subsidiary be accounted for consistently. A parent's ownership
interest in a subsidiary changes if the parent purchases additional ownership
interests in its subsidiary or if the parent sells some of its ownership
interests in its subsidiary. It also changes if the subsidiary reacquires some
of its ownership interests or the subsidiary issues additional ownership
interests. All of those transactions are economically similar, and this
Statement requires that they be accounted for similarly, as equity transactions,
(d) When a subsidiary is deconsolidated, any retained noncontrolling equity
investment in the former subsidiary be initially measured at fair value. The
gain or loss on the deconsolidation of the subsidiary is measured using the fair
value of any noncontrolling equity investment rather than the carrying amount of
that retained investment, (e) Entities provide sufficient disclosures that
clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners.
This Statement is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009,
for entities with calendar year-ends). Earlier adoption is prohibited. This
Statement shall be applied prospectively as of the beginning of the fiscal year
in which this Statement is initially applied, except for the presentation and
disclosure requirements. The presentation and disclosure requirements shall be
applied retrospectively for all periods presented. Management believes this
Statement will have no impact on the financial statements of the Company once
adopted.
13
SONO-TEK CORPORATION
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 November 30, 2007. 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 within 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.
In addition, there were no changes in the Company's internal controls over
financial reporting during the third fiscal quarter of 2008 that have materially
affected, or are reasonably likely to materially affect, internal controls over
financial reporting.
14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Unregistered Sales of Equity 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
(a) Exhibits
31.1 - 31.2 - Rule 13a - 14(a)/15d - 14(a) Certification
32.1 - 32.2 - Certification Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.
15
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: January 11, 2008
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
16