-----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, GeGxAX8P8H+9/5mPUFITjsUJHZLVOPN1kRgu3ZrCO3n5ZOR6uLFA66FFlOx/gDrZ WZXX+CgQO8qyZdiQ5FPOaA== 0000906768-97-000009.txt : 19970814 0000906768-97-000009.hdr.sgml : 19970814 ACCESSION NUMBER: 0000906768-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MRS TECHNOLOGY INC CENTRAL INDEX KEY: 0000906768 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 042904966 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21908 FILM NUMBER: 97658286 BUSINESS ADDRESS: STREET 1: 10 ELIZABETH DRIVE CITY: CHELMSFORD STATE: MA ZIP: 01824-4112 BUSINESS PHONE: 5082500450 MAIL ADDRESS: STREET 1: 10 ELIZABETH DRIVE CITY: CHELMSFORD STATE: MA ZIP: 01824 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended: June 30, 1997 Commission File Number: 0-21908 MRS Technology, Inc. (Exact name of registrant as specified in its charter.) 10 Elizabeth Drive, Chelmsford, MA 01824-4112 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (508)250-0450 Former name, former address, and former fiscal year, if changed since last report: Not Applicable Indicated 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 twelve 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 ( ) 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 practical date: Outstanding as of Class: August 6, 1997: - ---------------------------- ----------------- Common Stock, par value $.01 6,807,215 MRS Technology, Inc. FORM 10-Q For the three-month period ended June 30, 1997 INDEX PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets at June 30, 1997 (Unaudited) and March 31, 1997 Consolidated Statements of Operations for the Three months ended June 30, 1997 and 1996 (Unaudited) Consolidated Statements of Cash Flows for the Three months ended June 30, 1997 and 1996 (Unaudited) Notes to Consolidated Financial Statements (Unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II OTHER INFORMATION Item 1. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits and Reports on Form 8-K SIGNATURES
Part I Financial Information Item 1. Financial Statements MRS Technology, Inc. Consolidated Balance Sheets Assets June 30, 1997 Current assets (Unaudited) March 31, 1997 Cash and cash equivalents $ 3,170,770 $ 3,290,982 Accounts receivable 651,795 1,978,994 Inventories 7,681,582 7,313,982 Deposits 420,989 169,730 Other current assets 169,483 102,605 - ---------------------------------------------------------------------- Total current assets 12,094,619 12,856,293 Property and equipment, net 424,091 533,244 Other assets, net 36,160 37,979 - ---------------------------------------------------------------------- Total assets $12,554,870 $13,427,516 ====================================================================== Current liabilities Accounts payable $ 276,814 $ 370,644 Accrued expenses 890,494 813,224 Current portion of obligations under capital leases 10,416 11,096 Customer deposits 1,334,889 1,312,389 Other liabilities 301,493 49,746 - ---------------------------------------------------------------------- Total current liabilities 2,814,106 2,557,099 Long-term debt 1,000,000 1,000,000 - ---------------------------------------------------------------------- Total liabilities 3,814,106 3,557,099 Stockholders' equity Common stock, $.01 par value; authorized, 20,000,000 shares; issued and outstanding 6,795,567 and 6,776,355 shares respectively 67,955 67,763 Additional paid-in capital 36,383,966 36,383,258 Accumulated deficit (27,711,157) (26,580,604) - ---------------------------------------------------------------------- Total stockholders' equity 8,740,764 9,870,417 - ---------------------------------------------------------------------- Total liabilities and stockholders' equity $12,554,870 $13,427,516 ===================================================================== The accompanying notes are an integral part of the consolidated financial statements.
MRS Technology, Inc. Consolidated Statements of Operations (Unaudited) Three months ended June 30, 1997 1996 Revenues $ 417,556 $1,710,603 Cost of revenues 544,701 1,494,234 Gross margin (127,145) 216,369 Operating expenses: Research and development (Note 1) 518,024 774,312 Selling, general and administrative 506,202 767,295 ----------- ----------- Loss from operations (1,151,371) (1,325,238) Interest income, net 40,851 45,978 Interest expense 23,154 204 Other income (expense), net 3,121 (816) ---------- ---------- Loss before provision for income taxes (1,130,553) (1,280,280) - ----------------------------------------------------------------------- Net Loss ($1,130,553) ($1,280,280) ======================================================================= Net loss per share ($0.17) ($0.19) Weighted average number of common shares outstanding (000's) 6,787 6,687 The accompanying notes are an integral part of the consolidated financial statements.
MRS Technology, Inc. Consolidated Statements of Cash Flows (Unaudited) Three month period ended June 30, 1997 1996 Cash flows from operating activities Net income (loss) ($1,130,553) ($1,280,280) Adjustments to reconcile net income (loss) to net cash used in operating activities Depreciation 110,727 208,634 Changes in assets and liabilities Accounts receivable 1,327,199 (12,902) Inventories (367,600) (256,647) Deposits and other assets (316,318) (58,243) Accounts payable (93,830) (570,069) Accrued expenses 77,270 (29,338) Customer deposits 22,500 995,015 Other current liabilities 251,747 6,126 - ------------------------------------------------------------------------ Net cash (used in) provided by operating activities (118,858) (997,704) Cash flows from investing activities Capital expenditures (1,574) (8,783) - ------------------------------------------------------------------------ Net cash (used in) investing activities (1,574) (8,783) Cash flows from financing activities Proceeds from stock purchases under employee stock purchase plan 0 32,556 Proceeds from employee stock option exercise 900 8,098 Principal payments under capital lease obligations (680) (919) - ------------------------------------------------------------------------ Net cash provided by financing activities 220 39,735 Net decrease in cash & equivalents (120,212) (966,752) Cash and cash equivalents at beginning of period 3,290,982 4,217,880 Cash and cash equivalents at end of period $3,170,770 $3,251,128 ======================================================================= Supplemental cash flow information Interest paid $23,154 $204 The accompanying notes are an integral part of the consolidated financial statements.
MRS Technology, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) The financial statements for the three month periods ended June 30, 1997 and 1996 are unaudited and include all adjustments which, in the opinion of management, are necessary to present fairly the financial position at June 30, 1997 and the results of operations and cash flows for the periods then ended. All such adjustments are of a normal recurring nature. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K for the fiscal year ended March 31, 1997. Certain information and footnote disclosures normally included in the financial statements, prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, although the Company believes the disclosures in these financial statements are adequate to make the information presented not misleading. The Company's financial position, results of operations and cash flows for any interim period are not necessarily indicative of the results for any other interim period or for a full fiscal year. 1. Research and Development Research and product development costs are expensed as incurred. For the three month periods ended June 30, 1997 and 1996, aggregate research and product development costs were $518,024 and $1,196,093, respectively including $0 and $421,781 of costs recovered under research and development contracts. 2. Inventories Inventories consist of the following as of June 30, 1997 and March 31, 1997:
(In Thousands) June 30, 1997 March 31, 1997 Finished goods $ 750 $ 726 Work in process 6,352 5,647 Purchased parts 580 941 ------- ------- $7,682 $7,314
3. Net Loss Per Common Share Net loss per common share for the three month periods ended June 30, 1997 and 1996 are computed based upon the weighted average number of common shares outstanding. Common equivalent shares are not included in the loss period as their effect would be anti-dilutive. In February 1997, the Financial Accounting Standards Board issued Statement No. 128 ("SFAS 128"), "Earnings per Share," which is effective for fiscal years ending after December 15, 1997, including interim periods. SFAS 128 requires the presentation of basic and diluted earnings per share (EPS). Basic EPS, which replaces primary EPS, excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Diluted EPS is computed similarly to fully diluted EPS under the existing rules. SFAS 128 requires restatement of all prior period earnings per share data presented after the effective date. The Company will adopt SFAS 128 for the fiscal year ending March 31, 1998. If the standard had been adopted in the first quarter there would have been no significant impact. 4. Litigation In July 1996, the Company sold a PanelPrinter to Micron Display Technology, Inc., an Idaho corporation ("MDT"). The first three payments, totaling $1,032 million were made on schedule. Remaining payments due under the sales contract were not made, and after negotiations with MDT proved fruitless, on January 24, 1997, MDT commenced legal proceedings in Idaho alleging defects in the PanelPrinter and seeking damages. On January 30, 1997, the Company commenced proceedings against MDT in Massachusetts seeking damages for breach of contract as well as incidental damages, and multiple damages and attorneys' fees under Massachusetts General Laws chapter 93A. The legal proceedings were consolidated in Idaho, answers to the complaints were filed and discovery was begun. In June 1997, the matter was referred to mediation under the auspices of the United States District Court for the District of Idaho. As a result of the mediation, the litigation was settled in July of 1997 pursuant to a confidential settlement agreement between the parties and the legal proceedings were terminated. The settlement will not result in any significant adverse impact to the Company's financial position, results of operations or cash flows. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Private Securities Litigation Reform Act of 1995 ("the Act") provides a "safe harbor" for forward-looking statements so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statement. The Company desires to take advantage of the "safe harbor" provisions of the Act. Certain information contained herein, particularly the information appearing under the headings "Business Development," "Results of Operations," "Liquidity and Capital Resources" and "Factors Affecting Future Results" are forward-looking. Information regarding certain important factors that could cause actual results of operations or outcomes of other events to differ materially from any such forward-looking statement appear together with such statement, and/or elsewhere herein. The Company assumes no obligation to update the information contained herein. Business Development During fiscal 1997, demand for the Company's products continued to decline due to over capacity in certain active matrix liquid crystal display (AMLCD) markets. The Company still, at the start of fiscal 1997, expected a slight improvement in product sales as the Company had prospects principally in Asia, and to a lesser extent the U.S., that planned to purchase tools for R&D and pilot AMLCD lines. Existing orders were shipped as planned, however, the collapse of the dynamic random access memory (DRAM) prices in the Company's second fiscal quarter of fiscal 1997 resulted in customers and prospects in Asia delaying upgrades and the purchase of new machines. The Company is currently working on several initiatives. The most significant of these is the contract awarded by the United States Display Consortium (USDC). This contract for the development of an advanced large area high-throughput step and repeat imaging tool is budgeted at $9.5 million with the USDC funding $4.5 million and MRS funding the remaining $5.0 million. Demand in the AMLCD market is increasing and the Company has refocused its sales and marketing efforts on the Asian market with a focus on the Korean market. The Company believes that this market offers the most significant opportunities for the Company's products. However, the extent and timing of MRS' penetration of this market are not known. RESULTS OF OPERATIONS TOTAL REVENUES Consolidated revenues for the three month periods ended June 30, 1997 and 1996 were approximately $0.4 million and $1.7 million, respectively, a decrease of $1.3 million. Product revenue decreased $1.2 million from $1.2 million for the quarter ended June 30, 1996 to $0 for the quarter ended June 30, 1997. The decrease in product revenue was due to no systems sales or product related revenue in the quarter ended June 30, 1997. Service revenues increased $0.4 million from $0 to $0.4 million due to the number of machines in the field now off warranty increasing the need for both service contracts and sales of replacement, spare and consumable parts, making this business a growing part of the Company's total revenues. Contract research revenue decreased approximately $0.5 million, from $0.5 million in the first fiscal quarter of 1996 to $0 for the same quarter in the current fiscal year. The decrease in contract revenue quarter to quarter was due to the Defense Advanced Research Projects Agency (DARPA) project ending in fiscal year 1997. GROSS MARGIN Gross margin as a percentage of total revenues was 13% for the quarter ended June 30, 1996 and was (30%) for the quarter ended June 30, 1997 due mainly to the underabsorption of manufacturing costs due to reduced production activity. Service gross margin for the quarter ended June 30, 1997 was 25% and is made up of the service revenue less the service departments expenses, material costs and expenses both locally and in Japan. OPERATING EXPENSES Research and development includes expenses incurred in support of internal development programs and not allocable to customer funded contract research. Research and development expenses for the three month periods ended June 30, 1997 and 1996 were $0.5 million and $0.8 million, respectively. Aggregate research and development spending before allocation to cost of contract research revenue was $0.5 million and $1.2 million for the same quarterly periods. The $0.3 million decrease was primarily a result of headcount reductions taken in January 1997 and associated expenses. Selling, general and administrative expenses were $0.5 million for the three months ended June 30, 1997 and $0.8 million for the three months ended June 30, 1996. This decrease of $0.3 million was primarily attributable to headcount reductions taken in January 1997 and associated expenses. LIQUIDITY AND CAPITAL RESOURCES The Company had cash and cash equivalents at June 30, 1997 of $3.2 million, unchanged from the March 31, 1997 balance. In March 1997, the Company entered into a three year asset-based revolving line of credit agreement which provides for borrowings of up to $4.0 million based on accounts receivable and inventory balances. The line of credit requires a minimum outstanding balance of $1.0 million and as of June 30, 1997 the Company had an outstanding balance of $1.0 million. Under the terms of the Company's sale of its ownership interest in EBETECH, the Company is jointly and severally liable for any claims under an indemnification clause up to a maximum of $729,167. If certain assets of the Company, net of certain liabilities, fall below a minimum amount, the Company is required to place in escrow an amount up to the maximum liability under the indemnification clause. The amount of potential escrow decreases quarterly through the indemnification period which ends in September 1998. In addition, the Company requires significant working capital to support its research and development efforts and to meet its ongoing production, selling and general and administrative costs. Historically, the Company has been able to meet its working capital requirements through its existing cash balances and amounts available under its line of credit; as of July 25, 1997, approximately $1.0 was available under the line of credit. Subsequent to March 31, 1997, the Company obtained approval for funding under a research and development contract. The Company also has a letter of intent from a customer which the Company expects will become a firm order as a result of the successful funding of this project. The Company believes these resources are sufficient to meet its working capital needs and future obligations through fiscal 1998. The Company continues to actively pursue potential customer orders for its existing products. Additionally, the Company is actively seeking strategic relationships with companies which would enhance its ability to commercialize the technology it has developed, strengthen its balance sheet and maximize its long-term success. The specific types of relationships under consideration include joint ventures, research contracts, equipment purchase commitments, or any combination thereof. Factors Affecting Future Results The ability of the Company to attain the financial or other results that may be planned, forecasted or projected from time to time is subject to a number of factors, including the ability to obtain new orders and the timing of recording the related revenue, the ability to develop and manufacture new products, the ability to respond to competitive technology and pricing pressures, adequate availability of major components, and the ability to maintain key employees for hardware, software, motions and imaging technicians. In addition, the Company has historically been dependent upon a limited number of markets and geographic areas to sell its product, the PanelPrinter, therefore the Companys financial position and results of operations may be impacted by economic and market conditions in the markets and regions into which it sells its products. PanelPrinters and optional equipment generally have ranged in price from $1.8 to $2.7 million and any delay in revenue recognition or cancellation of an order would adversely effect the Company's results of operations, cash flows, or both. Fluctuations in product revenues, and consequently quarterly net income or loss, are largely related to revenue recognition on sales of PanelPrinter units. In addition, the process for turning prospects into firm orders, coupled with the production lead time, may result in a lengthy selling process. Historically a significant portion of the Company's revenue was derived from research and development contracts. The most significant funding source has been DARPA. Additionally, a significant portion of the Company's historical research and development efforts and development of new technologies to enhance its products have been funded by these contracts. The Company's ability to continue to develop new technologies is dependent upon the Company's ability to internally fund its research and development efforts or to enter into additional research and development arrangements funded by third parties. New Accounting Pronouncements In February 1997, the Financial Accounting Standards Board issued Statement No. 128 ("SFAS 128"), "Earnings per Share," which is effective for fiscal years ending after December 15, 1997, including interim periods. SFAS 128 requires the presentation of basic and diluted earnings per share (EPS). Basic EPS, which replaces primary EPS, excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Diluted EPS is computed similarly to fully diluted EPS under the existing rules. SFAS 128 requires restatement of all prior period earnings per share data presented after the effective date. The Company will adopt SFAS 128 for the fiscal year ending March 31, 1998. If the standard had been adopted in the first quarter there would have been no significant impact. PART II - OTHER INFORMATION Item 1. Legal Proceedings In July 1996, the Company sold a PanelPrinter to Micron Display Technology, Inc., an Idaho corporation ("MDT"). The first three payments, totaling $1,032 million were made on schedule. Remaining payments due under the sales contract were not made, and after negotiations with MDT proved fruitless, on January 24, 1997, MDT commenced legal proceedings in Idaho alleging defects in the PanelPrinter and seeking damages. On January 30, 1997, the Company commenced proceedings against MDT in Massachusetts seeking damages for breach of contract as well as incidental damages, and multiple damages and attorneys' fees under Massachusetts General Laws chapter 93A. The legal proceedings were consolidated in Idaho, answers to the complaints were filed and discovery was begun. In June 1997, the matter was referred to mediation under the auspices of the United States District Court for the District of Idaho. As a result of the mediation, the litigation was settled in July of 1997 pursuant to a confidential settlement agreement between the parties and the legal proceedings were terminated. Item 4. Submission of Matters to a Vote of Security Holders. Vote of shareholders at MRS Annual meeting held on July 31, 1996. 1. To elect one person to the Board of Directors to serve as a Class I Director for three year term (Carl P. Herrmann). For Nominee: 5,709,512 Withheld from Nominee: 443,620 Directors whose terms continue: Robert Schechter Griffith L. Resor, III Ronald K. Haigh 2. To ratify the appointment of Coopers & Lybrand L.L.P. as auditors for the fiscal year ending March 31, 1998. For: 6,009,852 Against: 7,550 Abstain: 135,730 No Vote: 0 Item 6. Exhibits and Reports on Form 8-K a. Exhibits Exhibit 27. Financial Data Schedule b. Reports on Form 8-K No reports have been filed on Form 8-K during this quarter. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, authorized officers. MRS Technology, Inc. Date: August 12, 1997 /s/Griffith L. Resor, III Griffith L. Resor, III President, CEO and Director (Principal Executive Officer) Date: August 12, 1997 /s/ Patricia F. DiIanni Patricia F. DiIanni Vice President, Treasurer, Chief Financial Officer (Principal Financial Officer) EX-27 2
5 These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K for the fiscal year ended March 31, 1997. 0000906768 MRS TECHNOLOGY, INC. 3-MOS MAR-31-1998 APR-01-1997 JUN-30-1997 3,170,770 0 672,840 21,045 7,681,582 12,094,619 3,909,056 3,484,965 12,554,870 2,814,106 0 0 0 67,955 8,672,809 12,554,870 0 417,556 232,378 544,701 0 0 23,154 (1,130,553) 0 0 0 0 0 (1,130,553) (0.17) (0.17)
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