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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-QSB
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(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
COMMISSION FILE NUMBER: 0-20753
SONICS & MATERIALS, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 06-0854713
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
53 CHURCH HILL ROAD
NEWTOWN, CONNECTICUT 06470
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(Address of principal executive offices)
TELEPHONE NUMBER (203)270-4600
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(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
As of May 14, 2002, there were 3,520,100 shares of the Registrant's
Common Stock outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
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PART I - FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements *
Consolidated Condensed Balance Sheets -
March 31, 2002 and June 30, 2001..................... 3
Consolidated Condensed Statements of Operations -
For the Three and Nine Months Ended March 31,
2002 and 2001........................................ 4
Consolidated Condensed Statements of Cash Flows -
For the Nine Months Ended March 31, 2002 and 2001.... 5
Notes to Consolidated Condensed Financial Statements..... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................... 9
SIGNATURES................................................................. 10
INDEX TO EXHIBITS.......................................................... 11
* The Balance Sheet at June 30, 2001 has been taken from the audited financial
statements at that date. All other financial statements are unaudited.
SONICS & MATERIALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
AS OF
MARCH 31, JUNE 30,
2002 2001
------------ ------------
(Unaudited) *
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,193,706 $ 820,835
Accounts receivable, net of allowance for doubtful
accounts of $35,793 at March 31, 2002 and $53,470
at June 30, 2001 1,301,502 1,335,861
Inventories 3,601,062 3,961,383
Other current assets 98,497 65,788
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Total current assets 6,194,767 6,183,867
PROPERTY PLANT & EQUIPMENT - NET 439,625 3,754,724
OTHER ASSETS 221,761 618,925
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Total Assets $ 6,856,153 $ 10,557,516
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable - bank $ 390,000 $ 1,190,000
Current maturities of long-term debt 88,896 186,781
Accounts payable 396,584 347,580
Customer advances 137,274 147,535
Commissions payable 70,030 76,903
Accrued expenses 338,297 452,734
------------ ------------
Total current liabilities 1,421,081 2,401,533
LONG-TERM DEBT 71,823 3,381,460
DEFERRED GAIN ON SALE OF REAL ESTATE 311,480 --
------------ ------------
Total liabilities 1,804,384 5,782,993
STOCKHOLDERS' EQUITY
Common stock - par value $.03 per share; authorized,
10,000,000 shares; issued and outstanding, 3,520,100
shares at March 31, 2002 and June 30, 2001 105,603 105,603
Additional paid in capital 6,575,010 6,575,010
Retained earnings (accumulated deficit) (1,628,844) (1,906,090)
------------ ------------
Total stockholders' equity 5,051,769 4,774,523
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Total liabilities and stockholders' equity $ 6,856,153 $ 10,557,516
============ ============
* Taken from the audited financial statements at June 30, 2001.
The accompanying notes are an integral part of these statements.
3
SONICS & MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------------- -------------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net sales $ 2,310,081 $ 2,791,109 $ 7,035,275 $ 8,521,052
Cost of sales 1,380,118 1,689,529 4,275,178 5,295,735
------------ ------------ ------------ ------------
Gross profit 929,963 1,101,580 2,760,097 3,225,317
------------ ------------ ------------ ------------
Operating expenses
Selling expense 515,790 534,784 1,367,168 1,977,973
General and administrative 265,601 335,281 694,051 949,931
Research and development 105,824 98,168 305,483 289,253
------------ ------------ ------------ ------------
Total operating expenses 887,215 968,233 2,366,702 3,217,157
------------ ------------ ------------ ------------
Operating income (loss) 42,748 133,347 393,395 8,160
------------ ------------ ------------ ------------
Other income (expense)
Gain on sale of real estate 8,418 -- 25,255 --
Interest expense (5,967) (87,936) (103,724) (285,225)
Other income (expense) 1,584 5,711 13,252 2,988
------------ ------------ ------------ ------------
4,035 (82,225) (65,217) (282,237)
------------ ------------ ------------ ------------
Income (loss) before provision for income taxes 46,783 51,122 328,178 (274,077)
Provision for income taxes 22,000 35,777 50,933 35,664
------------ ------------ ------------ ------------
Net income (loss) $ 24,783 $ 15,345 $ 277,245 ($ 309,741)
============ ============ ============ ============
BASIC AND DILUTED INCOME (LOSS) PER SHARE
Net income (loss) per share $ 0.01 $ 0.004 $ 0.08 ($ 0.09)
Weighted average number of shares outstanding 3,520,100 3,520,100 3,520,100 3,520,100
4
SONICS & MATERIALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
FOR THE NINE MONTHS ENDED MARCH 31,
----------------------------------
2002 2001
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Net cash provided by operations $ 586,260 $ 186,172
Net cash provided by (used in) investing activities 3,968,484 (55,128)
Net cash used in financing activities (4,181,873) (163,556)
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Net increase (decrease) in cash for the period 372,871 (32,512)
Cash and cash equivalents - at beginning of period 820,835 728,994
------------ ------------
Cash and cash equivalents - at end of period $ 1,193,706 $ 696,482
============ ============
Cash paid during period for:
Interest $ 72,140 $ 312,481
Income taxes $ 26,408 $ 0
5
SONICS & MATERIALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The accompanying financial statements for the interim periods are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim periods. These
financial statements should be read in conjunction with the financial statements
and notes thereto, together with the management's discussion and analysis,
contained on Form 10-KSB for the year ended June 30, 2001. The results of
operations for the three and nine months ended March 31, 2002 are not
necessarily indicative of the results for the entire fiscal year ending June 30,
2002.
The accompanying financial statements reflect the consolidated operations of
Sonics & Materials, Inc. and its wholly-owned subsidiary, Tooltex, Inc. through
the date of the sale of 90% of the common stock of Tooltex, Inc. on August 21,
2001. All significant intercompany accounts and transactions have been
eliminated in consolidation.
NOTE 2: SALE OF TOOLTEX, INC. STOCK
On August 21, 2001, the Company sold a 90% interest in the stock of Tooltex to
PK Spur Co. (PK), an Ohio corporation owned by the president of Tooltex, and his
wife. In consideration, PK issued a $125,000 promissory note, payable in 23
installments of $2,000 including interest at 7% per annum commencing in October
2001, with a final balloon payment of outstanding principal and accrued
interest. The note is guaranteed by the president of Tooltex, and is secured by
a security interest in certain Tooltex assets. In conjunction with the sale, the
Company and Tooltex entered into a representation and distribution agreement
pursuant to which Tooltex will sell and distribute the Company's products.
The Company changed the accounting for its investment in Tooltex from the
consolidation to the cost method, effective on the date of sale. Tooltex
reported sales of approximately $90,000 and a net loss of approximately $25,000
in the quarter ended September 30, 2001.
NOTE 3: SALE OF COMPANY FACILITY
On August 31, 2001, the Company sold to Acme Realty (Acme), a New York general
partnership, its manufacturing facility located in Newtown, Connecticut for
$4,000,000 in cash, less expenses of $244,000. The Company used the proceeds to
pay outstanding Industrial Revenue Bond principal and accrued interest totaling
$3,289,000, and to increase working capital. In conjunction with the sale, the
Company entered into a triple net lease with Acme for an initial term of ten
years plus two five-year renewal options. The Company recorded a deferred gain
on the sale of $337,000, which will be amortized over the lease term.
Following is a schedule of minimum lease payments due under the operating lease
for the property:
Years ending June 30,
2002 $ 328,292
2003 323,185
2004 316,813
2005 326,522
2006 336,304
Thereafter 1,903,843
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$3,534,959
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NOTE 4: NET INCOME PER SHARE
Net income per share is based on the weighted average number of common and
common equivalent shares outstanding during the period, calculated using the
treasury stock method. Stock options of which approximately 346,000 are
currently outstanding, are antidilutive for all periods and accordingly, are not
included in the per share computations.
6
NOTE 5: INCOME TAXES
The effective tax rate for the nine months ended March 31, 2002 was 15.5% due to
the utilization of regular net operating loss carryovers of $168,000 and federal
tax credits of $6,000. These tax benefits had previously been subject to
deferred tax valuation allowances. The Company also has available capital loss
carryovers to offset the entire capital gain income recognized on the sale of
real estate in August 2001. The gain is being amortized for financial
reporting purposes over the term of the related lease, but will be recognized in
full as of the transaction date for income tax purposes.
Any statements in this filing that are not statements of historical fact are
forward-looking statements that are subject to a number of important risks and
uncertainties that could cause actual results to differ materially.
Specifically, any forward looking statements in this filing related to the
Company's objective for future growth, profitability and financial returns are
subject to a number of risks and uncertainties, including, but not limited to,
risks related to a growing market demand for Sonics' existing and new products,
continued growth in sales and market share of Sonics and its USS products,
pricing, market acceptance of existing and new products, a fluctuation in the
sales product mix, general economic conditions, competitive products, and
product technology development. There can be no assurance that such objectives
will be achieved.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following information should be read in conjunction with the unaudited
financial statements included herein, see Item 1, and the financial information
contained in the Company's latest annual report on Form 10-KSB for the year
ended June 30, 2001.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2001.
NET SALES. Net sales for the quarter ended March 31, 2002 decreased $481,000 or
17.2% compared with the same quarter in fiscal year 2001. This decrease, which
resulted from the elimination of Tooltex, Inc. revenues (Tooltex, Inc. was sold
in August 2001), was partially offset by an increase in plastics assembly
product sales.
COST OF SALES AND GROSS PROFITS. Cost of sales decreased from 60.5% in the three
months ended March 31, 2001 to 59.7% for the three months ended March 31, 2002.
While the overall cost of sales percentage change was not material, current
quarter margins were improved as a result of the elimination of lower-margin
Tooltex products.
SELLING EXPENSES. Selling expenses for the third quarter of fiscal 2002
decreased $19,000 or 3.6% compared with the same quarter in fiscal 2001. After
removing the effect of Tooltex, Inc. activity in the quarter ended March 31,
2001, selling expenses increased by $49,000 in the current quarter. The increase
was caused principally by rent expenses associated with the sale and leaseback
of the Company's manufacturing facility. These costs were partially offset by
lower tradeshow expenses.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the
third quarter of fiscal 2002 decreased $80,000 or 23.8% compared with the third
quarter of the prior fiscal year. Virtually all of this decrease resulted from
the sale of Tooltex, Inc. in August 2001.
INTEREST EXPENSE. Interest expense decreased by $82,000 compared with the same
period in fiscal year 2001. The savings in interest resulted from the
elimination of Industrial Revenue Bond indebtedness resulting from the sale of
real estate in August 2001, as well as lower borrowing levels and a significant
decline in interest rates which reduced interest costs associated with the
Company's line of credit facility.
INCOME TAXES.
The effective tax rate for the three months ended March 31, 2002 was 38.7% due
to the computation of federal and state tax expense at regular statutory rates
without the benefit of federal loss carryforwards and tax credits that were
applied in full against earnings in the first six months of fiscal 2002. The
Company has available capital loss carryovers to offset the entire capital gain
income recognized on the sale of real estate in August 2001. The gain is being
amortized for financial reporting purposes over the term of the related lease,
but will be recognized in full as of the transaction date for income tax
purposes.
Future taxable income in fiscal 2002 will be subject to an effective tax rate in
the range of 40%-45%.
7
NINE MONTHS ENDED MARCH 31, 2002 COMPARED TO THEN NINE MONTHS ENDED MARCH 31,
2001.
NET SALES. Net sales for nine months ended March 31, 2002 decreased $1,486,000
or 17.4% compared to the prior comparable period. The decline resulted from the
elimination of Tooltex, Inc. revenues as a result of the sale of that subsidiary
in August 2001.
COST OF SALES AND GROSS PROFITS. Cost of sales decreased from 62.1% for the nine
months ended March 31, 2001 to 60.8% for the nine months ended March 31, 2002.
Accordingly, gross margins improved from 37.9% to 39.2%. The elimination of the
lower-margin Tooltex product line as well as savings from the full realization
of cost cutting measures begun in the second quarter of fiscal year 2001
accounted for this improvement.
SELLING EXPENSES. Selling expenses decreased $611,000 or 30.9% compared with the
same period of the prior year. This decrease took place in the areas of payroll,
commissions, advertising and promotional costs as well as a result of the sale
of Tooltex, Inc. in August, 2001. Partially offsetting these decreases were rent
expenses associated with the sale and leaseback of the Company's manufacturing
facility.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for the
nine months ended March 31, 2002 decreased $256,000 or 26.9% compared with the
comparable period of the prior fiscal year. The principal reason for this
decline was the elimination of Tooltex, Inc. general and administrative costs.
INTEREST EXPENSE. Interest expense decreased $182,000 in the nine months ended
March 31, 2002. The savings in interest resulted from the elimination of
Industrial Revenue Bond indebtedness as a result of the sale of real estate in
August 2001 as well as lower borrowing levels and a significant decline in
interest rates which reduced interest costs associated with the Company's line
of credit facility.
INCOME TAXES.
The effective tax rate for the nine months ended March 31, 2002 was 15.5% due to
the utilization of regular net operating loss carryovers of $168,000 and federal
tax credits of $6,000. These tax benefits had previously been subject to
deferred tax valuation allowances. The Company also has available capital loss
carryovers to offset the entire capital gain income recognized on the sale of
real estate in August 2001. The gain is being amortized for financial reporting
purposes over the term of the related lease, but will be recognized in full as
of the transaction date for income tax purposes.
Future taxable income in fiscal 2002 will be subject to an effective tax rate in
the range of 40%-45%.
The Company did not provide for the tax benefit of net operating losses incurred
during the comparable 2000 period due to uncertainty as to their realization.
LIQUIDITY AND CAPITAL RESOURCES
The Company's balance sheet continued to strengthen during the current period.
Contributing to the improved balance sheet is the Company's return to
profitability which is in part, due to the cost cutting measures taken beginning
in the second quarter of fiscal year 2001, the sale of the Company's
manufacturing facility in Newtown, CT, and the sale of Tooltex, Inc.
Working capital increased by $983,000 between June 30, 2001 and March 31, 2002.
Cash amounted to $1,194,000 at March 31, 2002, an increase of $373,000 over the
fiscal year end close. The note payable to the Company's bank was reduced by
$800,000 during this same period of time.
The Company's debt/equity ratio, during the nine months ended March 31, 2002
also improved, declining from 1.2 times to 0.4 times.
The Company's principal outside source of working capital is a $1,500,000 bank
credit facility (the "Line of Credit"). The Line of Credit bears interest at the
bank's base lending rate (4.75% at March 31, 2002). Advances under the Line of
Credit are at the bank's sole discretion. The entire principal balance of the
Line of Credit, which at March 31, 2002 was $390,000, is due and payable upon
8
the demand of the bank. The borrowings under the Line of Credit may be prepaid
in whole or in part, without premium or penalty, at any time. Indebtedness under
the Company's Line of Credit and the term loan are secured by substantially all
of the assets of the Company. The credit agreement also subjects the Company to
various covenants, including restrictions on future borrowings and encumbrances,
and the maintenance of minimum tangible net worth, leverage and fixed charge
coverage ratios, as defined. The Company met its covenants as of March 31, 2002.
IMPACT OF INFLATION
The Company does not believe that inflation significantly affected its results
of operations for the current fiscal quarter.
MARKET RISK
The Company does not hold or trade derivative instruments. Financial instruments
subject to changes in interest rates consist primarily of floating rate debt.
Due to the repayment in August 2001 of its Industrial Development Bonds, the
Company's exposure to interest rate fluctuations is not material. The Company's
transactions are generally conducted and its accounts are denominated in U.S.
dollars. Consequently, exposure to foreign risk is not significant.
RECENTLY ISSUED PRONOUNCEMENTS
In June 2001, the FASB issued SFAS No. 141, Business Combinations, which
addressed the initial recognition and measurement of goodwill and other
intangible assets acquired in a business combination. SFAS No. 141 requires the
purchase method of accounting to be used for business combinations initiated
after June 30, 2001 and eliminates the pooling of interest method. The adoption
of this statement is not expected to have a material impact on the Company's
financial position or results of operations.
In June 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets, which addressed the recognition and measurement of goodwill and other
intangible assets subsequent to their acquisition. SFAS No. 142 also addressed
the initial recognition and measurement of intangible assets acquired outside of
a business combination whether acquired individually or with a group of other
assets. SFAS No. 142 provides that intangible assets with finite useful lives be
amortized and that intangible assets with indefinite lives and goodwill will not
be amortized, but will rather be tested at least annually for impairment.
Although SFAS No. 142 is not required to be adopted by the Company until fiscal
2003, its provisions must be applied to goodwill and other intangible assets
acquired after June 30, 2001. As of December 31, 2001, the Company does not have
any goodwill or other intangible assets relating to business combinations that
were accounted for under APB Opinion No. 16. Accordingly, the adoption of SFAS
No. 142 is not expected to have a material impact on the Company's financial
position or results of operations.
Item 6. Exhibits and Reports on Form 8K.
(a) Exhibits.
3(i) Certificate of Incorporation of the Registrant, as amended
(incorporated by reference from Exhibit 3.1 of Amendment No. 3 to
Registration Statement No. 33-96414).
3(ii) Amended By-laws of the Registrant (incorporated by reference from
Exhibit 3.2 of Registration Statement No. 33-96414).
10(i) Form of Employment Agreement between the Registrant and Robert S.
Soloff (incorporated by reference from Exhibit 10.1 of Registration
Statement No. 33-96414).
10(ii) 1995 Incentive Stock Option Plan and form of Stock Option Agreement
(incorporated by reference from Exhibit 10.3 of Registration Statement
No. 33-96414).
10(iii) Lease between Registrant and Aston Investment Associates (Aston, PA)
(incorporated by reference from Exhibit 10.5 of Registration Statement
No. 33-96414).
10(iv) Lease between Registrant and Janine Berger (Gland, Switzerland)
(incorporated by reference from Exhibit 10.7 of Registration Statement
No. 33-96414).
10(v) Form of Sales Representation Agreement (incorporated by reference from
Exhibit 10.8 of Registration Statement No. 33-96414).
9
10(vi) Form of Sales Distribution Agreement (incorporated by reference from
Exhibit 10.9 of Registration Statement No. 33-96414).
10(vii) Credit Agreement, dated September 19, 1997, between Brown Brothers
Harriman & Co. and Registrant ( incorporated by reference from Exhibit
10(xii) of the Registrant's Form 10KSB for the year ended June 30,
1997).
10(viii) Term Loan Note of Registrant, dated September 19, 1997; payable to the
order of Brown Brothers Harriman & Co. in the original principal amount
of $427,000 (incorporated by reference from Exhibit 10(xiii) of the
Registrants Form 10KSB for the year ended June 30, 1997).
10(ix) Line of Credit Note of Registrant, dated September 19, 1997, payable to
the order of Brown Brothers Harriman & Co. in the original principal
amount of $1,500,000 (incorporated by reference from Exhibit 10(xiv) of
the Registrants Form 10KSB for the year ended June 30, 1997).
10(x) General Security Agreement from Registrant to Brown Brothers Harriman &
Co. dated September 19, 1997 (incorporated by reference from Exhibit
10(xvii) of the Registrants Form 10KSB for the year ended June 30,
1997).
10(xi) Lease between Registrant and Acme Realty, dated August 30,
2001(incorporated by reference from Registrant's Form 10-KSB for the
year ended June 30, 2001).
10(xii) Stock Purchase Agreement by and between PK Spur Co., and Sonics &
Materials, Inc., with Respect to 90% of the Issued and Outstanding
Shares of Common Stock of Tooltex, Inc., dated August 21,
2001(incorporated by reference from Registrant's Form 10KSB for the
year ended June 30, 2001).
(b)
On August 27, 2001, the Company filed a Current Report on Form 8-K
announcing the sale of 90% of the Common Stock of Tooltex to PK Spur, Co.
On August 31, 2001, the Company filed a Current Report on Form 8-K
announcing the Sale-Leaseback of the Company's Newtown, Connecticut
Manufacturing Facility.
On September 14, 2001, the Company filed a Current Report on Form 8-K
disclosing the disposition of its facility in Newtown, Connecticut.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SONICS & MATERIALS, INC.
Date: May 14, 2002 By /s/ Robert S. Soloff
------------ --------------------
Robert S. Soloff,
President
10
EXHIBIT INDEX
LOCATION OF EXHIBIT IN
EXHIBIT NO. DESCRIPTION SEQUENTIAL NUMBERING SYSTEM
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3(i) Certificate of Incorporation of the Registrant, as amended. Incorporated by reference from Exhibit 3.1 of
Amendment No. 3 to Registration Statement No. 33-96414
3(ii) Amended By-laws of the Registrant. Incorporated by reference from Exhibit 3.2 of
Registration Statement No. 33-96414
10(i) Form of Employment Agreement between the Registrant and Incorporated by reference from Exhibit 10.1 of
Robert S. Soloff. Registration Statement No. 33-96414
10(ii) 1995 Incentive Stock Option Plan and form of Stock Option Incorporated by reference from Exhibit 10.3 of
Agreement. Registration Statement No. 33-96414
10(iii) Lease between Registrant and Aston Investment Associates Incorporated by reference from Exhibit 10.5 of
(Aston, PA). Registration Statement No. 33-96414
10(iv) Lease between Registrant and Janine Berger (Gland, Incorporated by reference from 10.7 of
Switzerland). Registration Statement No. 33-96414
10(v) Form of Sales Representation Agreement. Incorporated by reference from Exhibit 10.8 of
Registration Statement No. 33-96414
10(vi) Form of Sales Distribution Agreement. Incorporated by reference from Exhibit 10.9 of
Registration Statement No. 33-96414
10(vii) Credit Agreement, dated September 19, 1997, between Brown Incorporated by reference from Exhibit 10(xii) of the
Brothers Harriman & Co. and Registrant Registrant's Form 10-KSB for the year ended
June 30, 1997
10(viii) Term Loan Note of Registrant, dated September 19, 1997, Incorporated by reference from Exhibit 10(xiii) of the
payable to the order of Brown Brothers Harriman & Co. in the Registrant's Form 10-KSB for the year ended
original principal amount of $427,000. June 30, 1997
10(ix) Line of Credit Note of Registrant, dated September 19, 1997, Incorporated by reference from Exhibit 10(xiii) of the
payable to the order of Brown Brothers Harriman & Co. in the Registrant's Form 10-KSB for the year ended
original principal amount of $1,500,000. June 30, 1997
10(x) General Security Agreement from Registrant to Brown Incorporated by reference from Exhibit 10(xvii) of the
year ended Harriman & Co. dated September 19, 1997. Registrant's Form 10-KSB for the year ended
June 30, 1997
10(xi) Lease between Registrant and Acme Realty dated August 30, Incorporated by reference from Registrant's
2001. Form 10-KSB for the year ended June 30, 2001.
10(xii) Stock Purchase Agreement by and between PK Spur co., and Incorporated by reference from Registrant's
Sonics & Materials, Inc., with Respect to 90% of the Issued Form 10-KSB for the year ended June 30, 2001.
and Outstanding Shares of Common Stock of Tooltex, Inc.,
dated August 21, 2001
11