-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UGQ2t4A3IsDuZbrxCTV55MwrRoI+ALop+wRIA80QnrKvoamXnZcAdwoboJ4Zjbh+ oYHjfA5HlBD6yjXEM0PHyQ== 0001171520-05-000354.txt : 20051012 0001171520-05-000354.hdr.sgml : 20051012 20051012160225 ACCESSION NUMBER: 0001171520-05-000354 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050831 FILED AS OF DATE: 20051012 DATE AS OF CHANGE: 20051012 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SONO TEK CORP CENTRAL INDEX KEY: 0000806172 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 141568099 STATE OF INCORPORATION: NY FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-16035 FILM NUMBER: 051135102 BUSINESS ADDRESS: STREET 1: 2012 RT 9W BLDG 3 CITY: MILTON STATE: NY ZIP: 12547 BUSINESS PHONE: 8457952020 MAIL ADDRESS: STREET 1: 2012 RT. 9W, BLDG. 3, CITY: MILTON STATE: NY ZIP: 12547 10QSB 1 eps1911.txt SONO-TEK CORPORATION 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: August 31, 2005 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 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) (Zip Code) Issuer's telephone no., including area code: (845) 795-2020 Check whether the 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 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 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 October 6, 2005 ----- --------------- Common Stock, par value $.01 per share 14,292,846 SONO-TEK CORPORATION INDEX Part I - Financial Information Page Item 1 - Consolidated Financial Statements: 1 - 3 Consolidated Balance Sheets - August 31, 2005 (Unaudited) and February 28, 2005 1 Consolidated Statements of Operations - Six Months and Three Months Ended August 31, 2005 and 2004 (Unaudited) 2 Consolidated Statements of Cash Flows - Six Months Ended August 31, 2005 and 2004 (Unaudited) 3 Notes to Consolidated Financial Statements 4 - 7 Item 2 - Management's Discussion and Analysis or Plan of Operations 8 - 12 Item 3 - Controls and Procedures 13 Part II - Other Information 14 Signatures and Certifications 15 - 20 SONO-TEK CORPORATION CONSOLIDATED BALANCE SHEETS ASSETS
August 31, February 28, 2005 2005 Unaudited Audited ----------- ----------- Current Assets Cash and cash equivalents $ 785,641 $ 421,043 Accounts receivable (less allowance of $25,442 and $18,123 At August 31 and February 28, respectively) 867,924 813,703 Inventories 1,408,786 1,338,410 Prepaid expenses and other current assets 29,147 111,714 Deferred tax asset 270,000 117,000 ----------- ----------- Total current assets 3,361,498 2,801,870 ----------- ----------- Equipment, furnishings and leasehold improvements (less accumulated depreciation of $752,194 and $720,384 at August 31 and February 28, respectively) 212,965 140,133 Intangible assets, net 20,716 22,894 Other assets 7,171 7,171 Deferred tax asset 315,000 468,000 ----------- ----------- TOTAL ASSETS $ 3,917,350 $ 3,440,068 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 108,405 $ 292,729 Accrued expenses 455,555 491,828 Line of Credit -- 350,000 Current maturities of long term debt 7,442 ----------- ----------- Total liabilities 571,403 1,134,557 Long term debt, less current maturities 31,937 -- ----------- ----------- Total liabilities 603,339 1,134,557 ----------- ----------- Commitments and Contingencies -- -- Stockholders' Equity Common stock, $.01 par value; 25,000,000 shares authorized, 14,200,997 and 13,825,640 shares issued and outstanding at August 31 and February 28, respectively 142,011 138,257 Additional paid-in capital 7,989,804 7,371,233 Stock Subscription Receivable (15,750) (15,750) Accumulated deficit (4,802,054) (5,188,229) ----------- ----------- Total stockholders' equity 3,314,011 2,305,511 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,917,350 $ 3,440,068 =========== ===========
See notes to consolidated financial statements. 1 SONO-TEK CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended August 31, Three Months Ended August 31, --------------------------- ----------------------------- Unaudited Unaudited 2005 2004 2005 2004 -------------------------- -------------------------- Net Sales $3,412,144 $2,721,369 $1,579,779 $1,514,937 Cost of Goods Sold 1,743,107 1,205,427 798,829 675,931 ---------- ---------- ---------- ---------- Gross Profit 1,669,037 1,515,942 780,950 839,006 ---------- ---------- ---------- ---------- Operating Expenses Research and product development costs 294,894 227,848 149,121 131,712 Marketing and selling expenses 578,795 505,808 267,237 271,455 General and administrative costs 412,373 386,035 213,080 202,159 ---------- ---------- ---------- ---------- Total Operating Expenses 1,286,062 1,119,691 629,438 605,326 ---------- ---------- ---------- ---------- Operating Income 382,975 396,251 151,512 233,680 Interest Expense (3,430) (58,332) (668) (26,971) Interest Income 3,880 3,805 2,933 405 Other Income 3,000 -- 3,000 -- ---------- ---------- ---------- ---------- Income from Operations Before Income Taxes 386,425 341,724 156,777 207,114 Income Tax Expense 250 0 0 0 ---------- ---------- ---------- ---------- Net Income $386,175 $341,724 $156,777 $207,114 ========== ========== ========== ========== Basic Earnings Per Share $0.03 $0.03 $0.01 $0.02 ========== ========== ========== ========== Diluted Earnings Per Share $0.03 $0.03 $0.01 $0.02 ========== ========== ========== ========== Weighted Average Shares - Basic 14,066,199 11,014,757 14,179,910 11,176,044 ========== ========== ========== ========== Weighted Average Shares - Diluted 14,397,528 13,064,644 14,449,440 13,151,455 ========== ========== ========== ==========
See notes to consolidated financial statements. 2 SONO-TEK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended August 31, --------------------------- Unaudited 2005 2004 ---------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $386,175 $341,724 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 33,988 20,239 Provision for doubtful accounts 7,319 6,000 Decrease (Increase) in: Accounts receivable (61,540) (17,114) Inventories (70,376) (390,207) Prepaid expenses and other current assets 82,567 50,282 Decrease in: Accounts payable and accrued expenses (220,597) 199,385 --------- --------- Net Cash Provided By (Used In) Operating Activities 157,536 210,309 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Patent Application Costs -- (346) Purchase of equipment and furnishings (104,642) (15,246) Other (630) --------- --------- Net Cash (Used In) Investing Activities (104,642) (16,222) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Line of Credit Repayment (350,000) -- Proceeds from exercise of stock options and warrants 300,598 99,236 Proceeds from issuance of stock 321,727 26,064 Conversion of debt to equity -- 20,636 Loan payments/exchanges (20,636) Repayments of notes payable and loans (3,027) (233,314) Proceeds of Notes Payable 42,406 -- --------- --------- Net Cash Provided by (Used In) Financing Activities 311,704 (108,014) --------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS: 364,598 86,073 CASH AND CASH EQUIVALENTS Beginning of period 421,043 189,987 --------- --------- End of period $785,641 $276,060 ========= ========= SUPPLEMENTAL DISCLOSURE: Interest paid $3,430 $59,910 ========= =========
See notes to consolidated financial statements. 3 SONO-TEK CORPORATION Notes to Consolidated Financial Statements Six Months Ended August 31, 2005 and 2004 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, 2005, 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. The estimated fair value of options granted during Fiscal Year 2005 was $1.64 per share and the estimated fair value of options granted during the six months ended August 31, 2005 was $2.34 per share. The Company applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for the 2003 and 1993 Plans. 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 and basic and diluted earnings per share for the three and six month periods ended August 31, 2005 and 2004 would have been changed to the pro forma amounts indicated below: 4 Six Months Ended Three Months Ended August 31, August 31, 2005 2004 2005 2004 ---- ---- ---- ---- Net Income: As reported $386,175 $341,724 $156,777 $207,114 Deduct: Total stock based employee compensation under intrinsic value based method for all awards, net of tax effects 19,213 18,720 9,241 9,360 -------- -------- -------- -------- Pro forma $366,962 $323,004 $147,536 $197,754 ======== ======== ======== ======== Basic and diluted earnings per share: As reported $0.03 $0.03 $0.01 $0.02 Pro forma $0.03 $0.02 $0.01 $0.02 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 $47,665 and $45,488 at August 31, 2005 and February 28, 2005, respectively. Reclassifications - Certain reclassifications have been made to the prior period to conform to the presentations of the current period. New Accounting Pronouncements - In May 2005, the FASB issued FASB Statement No. 154, which replaces APB Opinion No.20 and FASB No. 3. This Statement provides guidance on the reporting of accounting changes and error corrections. It established, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements to a newly adopted accounting principle. The Statement also provides guidance when the retrospective application for reporting of a change in accounting principle is impracticable. The reporting of a correction of an error by restating previously issued financial statements is also addressed by this Statement. This Statement is effective for financial statements for fiscal years beginning after December 15, 2005. Earlier application is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date of this Statement is issued. Management believes this Statement will have no impact on the financial statements of the Company once adopted. 5 NOTE 2: INVENTORIES Inventories at August 31, 2005 are comprised of: Finished goods $ 486,807 Work in process 497,828 Consignment 9,305 Raw materials and subassemblies 680,140 ---------- Total 1,674,080 Less: Allowance (265,294) ---------- Net inventories $1,408,786 ========== 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. During the six months ended August 31, 2005, the Board of Directors approved the issuance of 50,000 options. The 50,000 options were issued at the then exercisable market price, hence, no compensation expense has been recorded. As of August 31, 2005, there were 132,062 options outstanding under the 1993 Plan and 761,500 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 terminate at a stipulated period of time after an employee's termination of employment. Warrants - On May 11, 2005, a warrant for 142,857 shares of the Company's common stock was exercised at $1.75 per share by Empire State Development Corporation, Small Business Technology Investment Fund. 6 NOTE 4: EARNINGS PER SHARE The denominator for the calculation of diluted earnings per share at August 31, 2005 and 2004 are calculated as follows: August 31, 2005 August 31, 2004 --------------- --------------- Denominator for basic earnings per share 14,066,199 11,014,757 Dilutive effect of warrants 51,518 1,847,222 Dilutive effect of stock options 279,812 202,665 ---------- ---------- Denominator for dilutive earnings per share 14,397,528 13,064,644 ========== ========== NOTE 5: OTHER 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 has previously expensed substantially all of the misappropriated funds over the years. The Company is pursuing appropriate remedies to recover the majority of the misappropriated funds and is continuing to do so. The Company recovered $3,000 during the three month period ended August 31, 2005; this amount is recorded as Other Income. The Company recovered $51,000 in September 2005 which will be recorded in the third fiscal quarter. As previously discussed, the Company can offer no assurances that it will be successful in its attempt to collect the balance of the remaining restitution. 7 SONO-TEK CORPORATION 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 electronics industry market appears to be in a stable to moderate growth period. 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 sells 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 8 in developmental trials. The Company is licensed to use a unique patented vacuum-based ultrasonic system capable of uniformly coating batches of stents with anti-restenosis coatings, and has offered this technology to selected manufacturers. 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 $1,122,782 from a working capital of $1,667,313 at February 28, 2005 to $2,790,095 at August 31, 2005. The Company's current ratio is 5.88 to 1 at August 31, 2005, as compared to 2.47 to 1 at February 28, 2005. The increase in working capital was the result of the Company's net income, cash proceeds from the issuance of stock and the exercise of stock options and warrants, the repayment of the outstanding Line of Credit, an increase in the current Deferred Tax Asset and a decrease in accounts payable. Stockholders' equity increased $1,009,000 from $2,305,500 at February 28, 2005 to $3,314,000 at August 31, 2005. The increase in stockholders' equity was the result of the net profit of $386,000 for the six months ended August 31, 2005, stock option and warrant exercises of $301,000 and stock issuance of $322,000. Inventory increased $71,000 from $1,338,000 to $1,409,000 as the result of diversification of the Company's product lines. The Company currently has a $500,000 revolving credit line with M&T Bank. The Company had no outstanding borrowings under this line as of August 31, 2005. 9 Results of Operations For the six months ended August 31, 2005, the Company's sales increased $691,000 to $3,412,000 as compared to $2,721,000 for the six months ended August 31, 2004. For the three months ended August 31, 2005, the Company's sales increased $65,000 to $1,580,000 as compared to $1,515,000 for the three months ended August 31, 2004. The increases were principally the result of sales of stent coaters, nozzles and EVS Systems. The Company's gross profits increased $153,000 to $1,669,000 for the six months ended August 31, 2005 from $1,516,000 for the six months ended August 31, 2004. The gross profit margin was 48.9% of sales for the six months ended August 31, 2005 as compared to 55.7% of sales for the six months ended August 31, 2004. The Company's gross profit decreased $58,000 to $781,000 for the three months ended August 31, 2005 from $839,000 for the three months ended August 31, 2004. The gross profit margin was 48.4% of sales for the three months ended August 31, 2005 as compared to 55.4% of sales for the three months ended August 31, 2004. The changes in gross margin occurred as the result of the changing mix of products in each period and increases in both internal and external costs. Research and product development costs increased $67,000 to $295,000 for the six months ended August 31, 2005 from $228,000 for the six months ended August 31, 2004. Research and product development costs increased $17,000 to $149,000 for the three months ended August 31, 2005 from $132,000 for the three months ended August 31, 2004. 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 expenses increased $73,000 to $579,000 for the six months ended August 31, 2005 from $506,000 for the six months ended August 31, 2004 and decreased $4,000 to $267,000 for the three month period ended August 31, 2005 from $271,000 for the three month period ended August 31, 2004. The increase was due principally to increased commissions, trade show costs and increased labor and fringe benefit costs. The changes are net of the effects of the employee misappropriation which is discussed below. General and administrative costs increased $26,000 and $11,000 for the respective six and three month periods ended August 31, 2005 as compared to the same periods ended August 31, 2004. The increase was due principally to increased payroll costs, increased legal, consulting and accounting costs. The changes are net of the effects of the employee misappropriation which is discussed below. Interest expense decreased $55,000 to $3,000 for the six months ended August 31, 2005 from $58,000 for the six months ended August 31, 2004. Interest expense decreased $26,000 to $1,000 for the three months ended August 31, 2005 from $27,000 for the three months ended August 31, 2004. The decrease is primarily due to reduced interest and amortization on related party and bank loans. 10 The Company's net income was $386,000 and $157,000 for the six and three month periods ended August 31, 2005 as compared to $342,000 and $207,000 for the six and three month periods ended August 31, 2004. The Company's backlog of firm orders was $484,000 at August 31, 2005. All of these orders are deliverable before the end of the Company's current fiscal year, which is February 28, 2006. As previously disclosed on Form 8-K, filed on July 5, 2005, the Company determined that a former employee had misappropriated Company monies, primarily through unauthorized check writing from Company accounts over a period of three calendar years. The Company is pursuing appropriate remedies to recover the majority of the misappropriated funds and is continuing to do so. The Company recovered $3,000 during the three month period ended August 31, 2005; this is recorded as Other Income. The Company recovered $51,000 in September 2005 which will be recorded in the third fiscal quarter. As previously discussed, the Company can offer no assurances that it will be successful in its attempt to collect the balance of the remaining restitution. 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 28, 2005. 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. 11 Impact of New Accounting Pronouncements FASB 154 - Accounting Changes and Error Corrections In May 2005, the FASB issued FASB Statement No. 154, which replaces APB Opinion No.20 and FASB No. 3. This Statement provides guidance on the reporting of accounting changes and error corrections. It established, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements to a newly adopted accounting principle. The Statement also provides guidance when the retrospective application for reporting of a change in accounting principle is impracticable. The reporting of a correction of an error by restating previously issued financial statements is also addressed by this Statement. This Statement is effective for financial statements for fiscal years beginning after December 15, 2005. Earlier application is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date of this Statement is issued. Management believes this Statement will have no impact on the financial statements of the Company once adopted. 12 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 officer) 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, 2005. Based on this evaluation, they 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 August 31, 2005. There were no significant deficiencies or material weaknesses, and therefore there were no corrective actions taken. 13 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 The following matters were voted upon at the Company's annual meeting of shareholders held on August 18, 2005. 1. The election of one (1) director of the Company to serve until the Company's 2006 annual meeting of shareholders. For Against --- ------- Edward J. Handler III 10,981,119 4,825 There were no broker non-votes. 2. The election of three (3) directors of the Company to serve until the Company's 2007 annual meeting of shareholders. For Against --- ------- Harvey L. Berger 10,914,777 71,167 Christopher L. Coccio 10,886,388 99,556 Philip Strasburg 10,914,777 71,167 There were no broker non-votes. Samuel Schwartz and Donald F. Mowbry, who were not standing for re-election, continued to serve as Directors following the annual meeting. 3. The ratification of the appointment of Sherb & Co. as the Company's independent auditors for the fiscal year ending February 28, 2006. For 10,779,109; Against 163,201; Abstained 43,634 There were no broker non-votes. Item 5. Other Information - None Item 6. Exhibits and Reports (a) Exhibits 31.1 - Rule 13a - 14(a)/15d - 14(a) Certification 31.2 - Rule 13a - 14(a)/15d - 14(a) Certification 32.1 - Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002. 32.2 - Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002. 14 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 12, 2005 SONO-TEK CORPORATION (Registrant) By: /s/ Christopher L. Coccio --------------------------------- Christopher L. Coccio Chief Executive Officer and President By: /s/ Stephen J. Bagley --------------------------------- Stephen J. Bagley Chief Financial Officer 15 EX-31.1 2 ex31-1.txt Exhibit 31.1 RULE 13a-14/15d - 14(a) CERTIFICATION I, Christopher L. Coccio, Chief Executive Officer and President, 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 small business issuer as of, and for the periods presented in this quarterly report; 4. Sono-Tek Corporation's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d - 15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the small business issuer and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 16 5. Sono-Tek Corporation's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors: a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal controls over financial reporting. Date: October 12, 2005 /s/ Christopher L. Coccio - ------------------------- Christopher L. Coccio Chief Executive Officer and President 17 EX-31.2 3 ex31-2.txt Exhibit 31.2 RULE 13a-14/15d - 14(a) CERTIFICATION I, Stephen J. Bagley, Chief Financial Officer, 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 small business issuer as of, and for the periods presented in this quarterly report; 4. Sono-Tek Corporation's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d - 15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the small business issuer and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 18 5. Sono-Tek Corporation's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors: a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal controls over financial reporting. Date: October 12, 2005 /s/ Stephen J. Bagley - --------------------- Stephen J. Bagley Chief Financial Officer 19 EX-32.1 4 ex32-1.txt Exhibit 32.1 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 (the "Company") on Form 10QSB for the period ended August 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"). I, Christopher L. Coccio, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 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: October 12, 2005 /s/ Christopher L. Coccio - ------------------------- Christopher L. Coccio Chief Executive Officer and President 20 EX-32.2 5 ex32-2.txt Exhibit 32.2 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 (the "Company") on Form 10QSB for the period ended August 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"). I, Stephen J. Bagley, Chief Financial Officer, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 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: October 12, 2005 /s/ Stephen J. Bagley - --------------------- Stephen J. Bagley Chief Financial Officer 21 -----END PRIVACY-ENHANCED MESSAGE-----