0000814676-95-000006.txt : 19950818 0000814676-95-000006.hdr.sgml : 19950818 ACCESSION NUMBER: 0000814676-95-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950401 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: 95564838 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 April 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 May 1, 1995: 7,690,613. CERAMICS PROCESS SYSTEMS CORPORATION Form 10-Q For The Fiscal Quarter Ended April 1, 1995 Index PART I: FINANCIAL INFORMATION Page Item 1: Consolidated Financial Statements 3-6 Consolidated Balance Sheets as of 3-4 April 1, 1995 and April 2, 1994 Consolidated Statements of Operations 5 for the fiscal quarters ended April 1, 1995 and April 2, 1994 Consolidated Statements of Cash Flows 6 for the fiscal quarters ended April 1, 1995 and April 2, 1994 Notes to Consolidated Financial Statements 7-8 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 PART II: OTHER INFORMATION Items 1-6 10 Signatures 11 PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Balance Sheets April 1, December 31, 1995 1994 ASSETS Current Assets: Cash $ 259,244 $ 252,503 Accounts receivable, trade 233,192 243,128 Inventories 55,447 56,126 Prepaid expenses 28,702 28,143 Other current assets 16,000 24,519 Total current assets 592,585 604,419 Property and equipment: Production equipment 1,007,096 1,077,584 Furniture and office equipment 76,946 72,926 1,084,042 1,150,510 Less accumulated depreciation 782,318 825,677 Net property and equipment 301,724 324,833 Deposits 1,533 2,623 Total Assets $ 895,842 $ 931,875 See accompanying notes to consolidated financial statements.
CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Balance Sheets April 1, December 31, 1995 1994 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 122,562 $ 168,623 Accrued expenses 295,078 337,182 Current portion of convertible notes payable: Related parties 245,000 125,000 Other 375,000 125,000 Current portion of obligations under capital leases -- 7,532 Current portion of deferred revenue -- 6,300 Total current liabilities 1,037,640 769,637 Convertible notes payable less current portion: Related parties 675,000 795,000 Other 825,000 825,000 Total Liabilities 2,537,640 2,389,637 Stockholders' Equity (Deficit) Common stock, $0.01 par value. Authorized 15,000,000 shares; issued 7,713,469 shares at April 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 (32,091,223) (31,860,201) (1,580,963) (1,396,927) Less treasury stock, at cost, 22,883 common shares (60,835) (60,835) Total stockholders' equity (deficit) (1,641,798) (1,457,762) Total Liabilities and Stockholders' Equity (Deficit) $ 895,842 $ 931,875 See accompanying notes to consolidated financial statements.
CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Statements of Operations Fiscal Quarters Ended April 1, April 2, 1995 1994 Revenue: Product sales $ 400,795 $ 347,108 Collaborative development agreements -- 13,856 License agreements 2,000 2,000 Total revenue 402,795 362,964 Operating expenses: Cost of product sales 430,092 502,891 Research, development, and engineering -- 10,702 Selling, general, and administrative 161,425 189,348 Total operating expenses 591,517 702,941 Operating income (loss) (188,722) (339,977) Other income (expense), net (42,300) 15,904 Net income (loss) ($231,022) $ (324,073) Net income (loss) per share ($0.03) ($0.04) Weighted average number of common and common equivalent shares outstanding 7,587,903 7,567,193 See accompanying notes to consolidated financial statements.
CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Statements of Cash Flows Fiscal Quarters Ended April 1, April 2, 1995 1994 Cash flows from operating activities: Net income (loss) ($231,022) ($324,073) Adjustments to reconcile net loss to cash provided by (used in) operating activities: Depreciation & amortization 39,568 47,461 Settlement of interest obligation 46,986 -- Gain on sale of property and equipment -- (17,994) Changes in assets and liabilities: Accounts receivable, trade 9,936 272,279 Inventories 679 59,345 Prepaid expenses (559) (7,581) Other current assets 8,519 -- Accounts payable (46,061) 32,106 Accrued expenses (42,104) (157,594) Deferred revenue (6,300) -- Due to customer -- (51,919) Due to Kilburn Isotronics, Inc. -- 116,682 Net cash used in operating activities (220,358) (31,288) Cash flows from investing activities: Additions to property and equipment (16,459) (284,481) Disposal of property and equipment -- 17,994 Net change in deposits 1,090 (58) Net cash used in investing activities (15,369) (266,545) Cash flows from financing activities: Repayment of capital lease obligations (7,532) (6,963) Proceeds from issuance of convertible notes payable 250,000 230,200 Net cash provided by financing activities 242,468 223,237 Net increase (decrease) in cash 6,741 (74,596) Cash at beginning of quarter 252,503 89,333 Cash at end of quarter $ 259,244 $14,737 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 electronics 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 ended April 1, 1995 and April 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: April 1, December 31, 1995 1994 Raw Materials $ 11,070 $ 8,039 Work in process 35,192 39,642 Finished goods 9,185 8,445 $ 55,447 $ 56,126 (5) Accrued Expenses Accrued expenses consist of the following: April 1, December 31, 1995 1994 Accrued legal and accounting $ 162,978 $ 174,428 Accrued interest 78,946 79,311 Accrued payroll 37,860 74,029 Accrued other 15,294 9,414 $ 295,078 $ 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 first fiscal quarter of 1995 in the amount of $0.2 million, versus a net loss of $0.3 million in the first fiscal quarter of 1994. The Company's cash balance at April 1, 1995 and at December 31, 1994 was $0.3 million. The improvement in the Company's financial performance in the first fiscal quarter of 1995 versus the first fiscal quarter of 1994 was primarily attributable to the fact that the Company's facilities in Chartley, Massachusetts were fully operational inthe first quarter of 1995, whereas the Company was in the process of relocating in the first quarter 1994. The Company is operating at the Chartley facility as a tenant at will. During 1993, the Company entered into a five-year lease agreement for a facility in Hopkinton, Massachusetts. In 1994, this facility was used for storage and warehousing, and in 1995, the Company reached an agreement with the lessor to terminate the lease effective January 31, 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. The convertible notes are subordinated to all other indebtedness of the Company. In March, 1995 the Company entered into a letter of intent with Aavid Thermal Technologies, Inc. ('Aavid'), whereby subject to certain terms and conditions, the Company will receive proceeds of up to $2.0 million from Aavid through March 31, 1996, in exchange for a combination of shares of the Company's Common Stock and debt agreements with conversion privileges for shares of the Company's Common Stock, the cumulative effect of which would allow Aavid to purchase up to four million shares of the Company's Common Stock. Through May 1, 1995 the Company received proceeds of $250 thousand from Aavid. The total interest cost associated with debt instruments in the first fiscal quarter of 1995 amounted to $47 thousand. 4,397,892 shares of Common Stock at April 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 exercisable as of the date of the notes payable, for the purchase of shares of the Company's Common Stock at a price of $0.50 per share. Warrants for the purchase of 410,628 shares of the Company's were outstanding at April 1, 1995. 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 or on terms acceptable to the Company. Results of Operations The Company's total revenue increased $40 thousand, to $403 thousand in the first fiscal quarter of 1995, from total revenue of $363 in the first fiscal quarter of 1994. This increase consisted of a $54 thousand increase in product sales, from $347 thousand in the first fiscal quarter of 1994 to $401 thousand in the first fiscal quarter of 1995, partially offset by a $14 thousand decrease in collaborative development revenue, from $14 thousand in the first fiscal quarter of 1994, to no collaborative development revenue in the first fiscal quarter of 1995. The increase in product sales in the first fiscal quarter of 1995 versus the first fiscal quarter of 1994 was primarily due to the fact that the Company's facilities in Chartley, Massachusetts were fully operational in the first quarter 1995, whereas the Company was in the process of relocating in the first quarter 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 $126 thousand, to a negative gross margin of $29 thousand in the first fiscal quarter of 1995, from a negative $155 thousand gross margin in the first fiscal quarter of 1994. The decline in collaborative development and license revenue in the first fiscal quarter of 1995 from the first fiscal quarter of 1994 resulted from the completion of a funded program in thefirst quarter of 1994, which comprised all of the collaborative development revenue in that quarter. Research, development, and engineering costs decreased $11 thousand, from $11 thousand in the first fiscal quarter of 1994, to no research, development, and engineering costs in the first fiscal quarter of 1995, the result of a decline in collaborative development revenue. Selling, general, and administrative costs decreased $28 thousand, from $189 thousand in the first fiscal quarter of 1994, to $161 thousand in the first fiscal quarter of 1995, reflecting a continued emphasis on administrative cost controls. The cumulative effect of these revenues and costs resulted in a net loss of $231 thousand, or $0.03 loss per share, in the first fiscal quarter of 1995, versus a net loss of $324 thousand, or $0.04 loss per share, in the first fiscal quarter of 1994. 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: May 22, 1995 /s/Grant C. Bennett Grant C. Bennett President and Director (Principal Executive Officer) Date: May 22, 1995 /s/Peter F. Valentine Peter F. Valentine Controller and Treasurer (Principal Financial and Accounting Officer)