0000814676-95-000007.txt : 19950818 0000814676-95-000007.hdr.sgml : 19950818 ACCESSION NUMBER: 0000814676-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950817 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CERAMICS PROCESS SYSTEMS CORP/DE/ CENTRAL INDEX KEY: 0000814676 STANDARD INDUSTRIAL CLASSIFICATION: POTTERY & RELATED PRODUCTS [3260] IRS NUMBER: 042832509 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16088 FILM NUMBER: 95564841 BUSINESS ADDRESS: STREET 1: 111 S WORCESTER ST PO BOX 338 STREET 2: C/O KILBURN ISOTRONICS INC CITY: CHARTLEY STATE: MA ZIP: 02712 BUSINESS PHONE: 5082227282 MAIL ADDRESS: STREET 1: 111 SOUTH WORCESTER STREET STREET 2: PO BOX 338 CITY: CHARTLEY STATE: MA ZIP: 02712 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended July 1, 1995 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 0-16088 CERAMICS PROCESS SYSTEMS CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 04-2832509 (State or Other Jurisdiction (I.R.S. Employer Identification No.) of Incorporation or Organization) 111 South Worcester Street, P.O. Box 338, Chartley, Massachusetts 02712 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code:508-222- 7282 Former Name, Former Address and Former Fiscal Year if Changed since Last Report: Not Applicable Indicate by check mark whether the registrant (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 than the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. [X] Yes [ ] No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of shares of common stock outstanding as of August 10, 1995: 7,690,613. CERAMICS PROCESS SYSTEMS CORPORATION Form 10-Q For The Fiscal Quarter Ended July 1, 1995 Index PART I: FINANCIAL INFORMATION Page Item 1: Consolidated Financial Statements 3-8 Consolidated Balance Sheets as of 3-4 July 1, 1995 and December 31, 1994 Consolidated Statements of Operations 5 for the fiscal quarters ended July 1, 1995 and July 2, 1994 Consolidated Statements of Cash Flows 6 for the fiscal quarters ended July 1, 1995 and July 2, 1994 Notes to Consolidated Financial Statements 7-8 Item 2: Management's Discussion and 8-10 Analysis of Financial Condition and Results of Operations PART II: OTHER INFORMATION Items 1-6 11 Signatures 12 PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Balance Sheets July 1, December 31, 1995 1994 ASSETS Current Assets: Cash $ 54,990 $ 252,503 Accounts receivable, trade 129,815 243,128 Inventories 40,164 56,126 Prepaid expenses 20,048 28,143 Other current assets 425 24,519 Total current assets 245,442 604,419 Property and equipment: Production equipment 1,023,900 1,077,584 Furniture and office equipment 81,389 72,926 1,105,289 1,150,510 Less accumulated depreciation 811,668 825,677 Net property and equipment 293,621 324,833 Deposits 1,533 2,623 Total Assets $ 540,596 $ 931,875 See accompanying notes to consolidated financial statements.
CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Balance Sheets July 1, December 31, 1995 1994 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 118,497 $ 168,623 Accrued expenses 322,795 337,182 Current portion of convertible notes payable: Related parties 920,000 125,000 Other 700,000 125,000 Current portion of obligations under capital leases -- 7,532 Current portion of deferred revenue -- 6,300 Total current liabilities 2,061,292 769,637 Convertible notes payable less current portion: Related parties -- 795,000 Other 500,000 825,000 Total Liabilities 2,561,292 2,389,637 Stockholders' equity (deficit) Common stock, $0.01 par value. Authorized 15,000,000 shares; issued 7,713,496 shares at July 1, 1995 and 7,610,786 at December 31, 1994 77,135 76,108 Preferred stock, $.01 par value. Authorized 5,000,000 shares; no shares issued and outstanding -- -- Additional paid-in capital 30,433,125 30,387,166 Accumulated deficit (32,470,121) (31,860,201) (1,959,861) (1,396,927) Less treasury stock, at cost, 22,883 common shares (60,835) (60,835) Total stockholders' equity (deficit) (2,020,696) (1,457,762) Total Liabilities and Stockholders' Equity (Deficit) $ 540,596 $ 931,875 See accompanying notes to consolidated financial statements.
CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Statements of Operations Fiscal Quarters Ended Six Month Periods Ended July 1, July 2, July 1, July 2, 1995 1994 1995 1994 Revenue: Product sales $ 258,445 $ 157,385 $659,240 $504,493 Collaborative development agreements -- 15,757 -- 29,613 License agreements -- -- 2,000 2,000 Total revenue 258,445 173,142 661,240 536,106 Operating expenses: Cost of product sales 299,420 313,905 729,512 816,796 Research, development, and engineering -- 21,434 -- 32,136 Selling, general and administrative 226,269 201,769 387,694 391,117 Total operating expenses 585,689 537,108 1,177,206 1,240,049 Operating income (loss) (327,244) (363,966) (515,966) (703,943) Other income (expense),net(51,654) (12,042) (93,954) 3,862 Net income (loss) ($378,898)($376,008) ($609,920)($700,081) Net income (loss) per share($0.05) ($0.05) ($0.08) ($0.09) Weighted average number of common shares and equivalents outstanding 7,690,613 7,577,548 7,646,594 7,573,110 See accompanying notes to consolidated financial statements.
CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Statements of Cash Flows Six Month Periods Ended July 1, July 2, 1995 1994 Cash flows from operating activities: Net income (loss) ($609,920) ($700,081) Adjustments to reconcile net loss to cash provided by (used in) operating activities: Depreciation & amortization 68,918 87,496 Settlement of interest obligation 46,986 -- Gain on sale of property and equipment -- (21,884) Changes in assets and liabilities: Accounts receivable, trade 113,313 414,721 Inventories 15,962 58,879 Prepaid expenses 8,095 (16,209) Other current assets 24,094 -- Accounts payable (50,126) (28,928) Accrued expenses (14,387) (124,343) Deferred revenue (6,300) -- Due to customer -- (176,528) Due to Kilburn Isotronics, Inc. -- 147,603 Net cash used in operating activities (403,365) (359,274) Cash flows from investing activities: Additions to property and equipment (37,706) (493,704) Disposal of property and equipment -- 21,884 Net change in deposits 1,090 192 Net cash used in investing activities (36,616) (471,628) Cash flows from financing activities: Repayment of capital lease obligations (7,532) (14,064) Proceeds from issuance of convertible notes payable 250,000 762,371 Proceeds from issuance of common stock -- 10,355 Net cash provided by financing activities 242,468 758,662 Net decrease in cash (197,513) (72,240) Cash at beginning of period 252,503 89,333 Cash at end of period $ 54,990 $ 17,093 See accompanying notes to consolidated financial statements. CERAMICS PROCESS SYSTEMS CORPORATION
Notes to Consolidated Financial Statements (Unaudited) (1) Nature of Business Ceramics Process Systems Corporation ("CPS" or "the Company"), incorporated on June 19, 1984, is engaged in the design, development, and manufacture of advanced ceramic products and composites for the microelectronics and defense industries. (2) Interim Consolidated Financial Statements As permitted by the rules of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, these notes are condensed and do not contain all disclosures required by generally accepted accounting principles. The accompanying financial statements for fiscal quarters and six month periods ended July 1, 1995 and July 2, 1994 are unaudited. In the opinion of management, the unaudited consolidated financial statements of CPS reflect all adjustments necessary to present fairly the financial position and results of operations for such interim periods. The consolidated financial statements include the accounts of CPS and its wholly-owned subsidiary, CPS Superconductor Corporation. All significant intercompany balances and transactions have been eliminated. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. (3) Net Loss per Share Net loss per share is computed based on the weighted average number of common shares outstanding during the period. Common stock equivalents pertaining to stock options and convertible notes payable were not considered in the calculations of net loss per share since their effect would be antidilutive. (4) Inventory Inventories consist of the following: July 1, December 31, 1995 1994 Raw Materials $ 18,832 $ 8,039 Work in process 9,060 39,642 Finished goods 12,272 8,445 $ 40,164 $ 56,126 (5) Accrued Expenses Accrued expenses consist of the following: July 1, December 31, 1995 1994 Accrued legal and accounting $ 128,919 $ 174,428 Accrued interest 131,800 79,311 Accrued payroll 56,327 74,029 Accrued other 5,749 9,414 $ 322,795 $ 337,182
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Condition The Company incurred a net loss in the second fiscal quarter of 1995 in the amount of $379 thousand, which approximated its net loss of $376 incurred in the second fiscal quarter of 1994. The Company's net loss for the six month period ended July 1, 1995 was $610 thousand, versus a net loss of $700 thousand for the six month period ended July 2, 1994. The Company's July 1, 1995 cash balance of $55 thousand reflected a decrease of $198 thousand from its 1994 year end cash balance of $253 thousand. The Company's operational performance improved for both the fiscal quarter and six month period ended July 1, 1995, versus similar time periods in 1994, primarily because its facilities in Chartley, Massachusetts were fully operational in 1995, whereas the Company was in the process of relocating to Chartley during the first six months of 1994. The Company is currently operating at the Chartley facility as a tenant at will. Payments in the amount of $66 thousand made to Metals Process Systems ("MPS"), a joint venture company, to meet MPS' working capital needs, were expensed by the Company in the second fiscal quarter of 1995. During 1994, the Company received proceeds of $1.9 million from the issuance of interest bearing debt agreements to existing shareholders and other investors, convertible to shares of the Company's common stock at a conversion price of $0.50 per share. These convertible notes are subordinated to all other indebtedness of the Company. In March, 1995 the Company received proceeds of $250 thousand through the issuance of a promissory note to Aavid Thermal Technologies, Inc. ("Aavid"), secured by all of the Company's assets, in connection with a letter of intent entered into between the Company and Aavid. The letter of intent expired April 30, 1995. The total interest cost associated with debt instruments in the second fiscal quarter of 1995 and the six month period ended July 1, 1995 amounted to $53 thousand and $100 thousand, respectively. 3,991,408 shares of common stock at July 1, 1995 are reserved for the conversion of convertible notes and related accrued interest. In 1994, in connection with the issuance of selected convertible notes payable, the Company issued warrants with exercise dates ranging from June 30, 1995 through July 31, 1996, for the purchase of 410,628 shares of the Company's common stock at a price of $0.50 per share. Although the Company has historically made timely payments to its trade creditors, in 1995 it expects to continue to require working capital support for its operations from external financing, and there is no assurance that adequate funds will be available when needed, or on terms acceptable to the Company. Results of Operations The Company's total revenue increased $85 thousand, to $258 thousand for the second fiscal quarter of 1995, from total revenue of $173 thousand for the second fiscal quarter of 1994. This increase consisted of a $101 thousand increase in product sales, from $157 thousand for the second fiscal quarter of 1994 to $258 thousand for the second fiscal quarter of 1995, partially offset by a $16 thousand decrease in collaborative development revenue, from $16 thousand for the second fiscal quarter of 1994 to no collaborative development revenue for the second fiscal quarter of 1995. The Company's total revenue increased $125 thousand, to $661 thousand for the six month period ended July 1, 1995, from total revenue of $536 thousand for the six month period ended July 2, 1994. This increase consisted of a $155 thousand increase in product sales, from $504 thousand for the six month period ended July 2, 1994 to $659 thousand for the six month period ended July 1, 1995, partially offset by a $30 thousand decrease in collaborative development revenue, from $30 thousand for the six month period ended July 2, 1994 to no collaborative development revenue for the six month period ended July 1, 1995. The decrease in collaborative development revenue for the fiscal quarter and six month period ended July 1, 1995, versus similar time periods in 1994, resulted from the completion of a funded program in 1994 which comprised the majority of collaborative development revenue during that year. The increase in product sales for the fiscal quarter and six month period ended July 1, 1995, versus similar time periods in 1994, was primarily due to the fact that the Company's facilities in Chartley, Massachusetts were fully operational in 1995, whereas the Company was in the process of relocating during the first six months of 1994. The relocation also resulted in a series of operational and manufacturing inefficiencies which had a negative effect on the Company's gross margin on product sales in 1994. The Company's gross margin on product sales increased $116 thousand, to a negative $41 thousand gross margin for the second fiscal quarter of 1995, from a negative $157 thousand gross margin for the second fiscal quarter of 1994. The Company's gross margin on product sales for the six months ended July 1, 1995 increased $242 thousand, to a negative $70 thousand, from a negative $312 thousand gross margin for the six months ended July 2, 1994. The Company earned no collaborative development revenue for the fiscal quarter and six month period ended July 1, 1995, and consequently incurred no related research, development and engineering costs for the same time period. Research, development, and engineering costs for the fiscal quarter and six month period ended July 2, 1994 were $21 thousand and $32 thousand, respectively. Selling, general and administrative costs increased $24 thousand, from $202 thousand during the second fiscal quarter of 1994 to $226 thousand in the second fiscal quarter of 1995, due to a $66 thousand working capital contribution by the Company to Metals Process Systems ("MPS"), a joint venture company formed in February 1991 by the Company and Sopretac, a Vallourec Group Company. The cumulative effect of these revenues and costs resulted in a net loss of $379 thousand, or $0.05 per share, and $610 thousand, or $0.08 per share, for the fiscal quarter and six month period ended July 1, 1995, respectively, and a net loss of $376 thousand, or $0.05 per share, and $700 thousand, or $0.09 per share, for the fiscal quarter and six month period ended July 2, 1994, respectively. PART II OTHER INFORMATION Item 1 through Item 5: None Item 6: Exhibits and Reports on Form 8-K (a) Exhibits: None (b) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Ceramics Process Systems Corporation (Registrant) Date: August 15, 1995 /s/Grant C. Bennett Grant C. Bennett President and Director (Principal Executive Officer) Date: August 15, 1995 /s/Peter F. Valentine Peter F. Valentine Controller and Treasurer (Principal Financial and Accounting Officer)