-----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, NFbQyzCASfSSDTVj0FI1jCShuyIE8YK1UC5j+y+4GduX9/TcJpIihRi7pHpQiDte zahq2rFXJJN1/Qesktq2PQ== 0000906768-97-000011.txt : 19971114 0000906768-97-000011.hdr.sgml : 19971114 ACCESSION NUMBER: 0000906768-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 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: SEC FILE NUMBER: 000-21908 FILM NUMBER: 97712983 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 six month period ended: September 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: (978)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 92) 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: November 10, 1997: - ---------------------------- ----------------- Common Stock, par value $.01 6,836,552 MRS Technology, Inc. FORM 10-Q For the six month period ended September 30, 1997 INDEX PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets at September 30, 1997 (Unaudited) and March 31, 1997 Consolidated Statements of Operations for the Three months ended September 30, 1997 and 1996 (Unaudited) Consolidated Statements of Operations for the Six months ended September 30, 1997 and 1996 (Unaudited) Consolidated Statements of Cash Flows for the Six months ended September 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 5. Other Information 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 Sept 30, 1997 Current assets (Unaudited) March 31, 1997 Cash and cash equivalents $2,070,500 $3,290,982 Accounts receivable, net 1,831,083 1,978,994 Inventories 7,526,374 7,313,982 Deposits 245,989 169,730 Other current assets 196,123 102,605 - -------------------------------------------------------------------- Total current assets 11,870,069 12,856,293 Property and equipment, net 367,850 533,244 Other assets, net 31,934 37,979 - -------------------------------------------------------------------- Total assets $12,269,853 $13,427,516 ==================================================================== Current liabilities Accounts payable $1,323,027 $ 370,644 Accrued expenses 881,446 813,224 Current portion of obligations under capital leases 9,649 11,096 Customer deposits 479,874 1,312,389 Other liabilities 193,371 49,746 - -------------------------------------------------------------------- Total current liabilities 2,887,367 2,557,099 Long-Term Debt 1,000,000 1,000,000 Long-term portion of obligations under capital leases 0 0 - -------------------------------------------------------------------- Total liabilities 3,887,367 3,557,099 Stockholders' equity Common stock, $.01 par value; authorized, 20,000,000 shares; issued and outstanding 6,808,165 and 6,776,355 shares respectively 68,082 67,763 Additional paid-in capital 36,409,284 36,383,258 Accumulated deficit (28,094,880) (26,580,604) - -------------------------------------------------------------------- Total stockholders' equity 8,382,486 9,870,417 - -------------------------------------------------------------------- Total liabilities and stockholders' equity $12,269,853 $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 Sept. 30, Revenue 1997 1996 Product $2,593,116 $3,231,735 Service and other 621,912 255,632 --------- --------- Total revenue 3,215,028 3,487,367 Cost of revenue Product 2,181,723 2,260,536 Service and other 227,000 440,617 --------- --------- Total cost of revenue 2,408,723 2,701,153 Gross margin 806,305 786,214 Operating expenses: Research and development 578,280 721,503 Selling, general and administrative 604,880 687,550 --------- --------- Loss from operations (376,855) (622,839) Interest income, net 33,906 28,281 Interest expense 27,572 185 Other (expense), net (13,201) 0 --------- --------- Loss before provision for income taxes (383,722) (594,743) - --------------------------------------------------------------------- Net loss ($383,722) ($594,743) ===================================================================== Net loss per share ($0.06) ($0.09) Weighted average number of common shares outstanding (000's) 6,805 6,718 The accompanying notes are an integral part of the consolidated financial statements.
MRS Technology, Inc. Consolidated Statements of Operations (Unaudited) Six months ended Sept. 30, Revenue 1997 1996 Product $2,593,116 $ 4,106,884 Service 1,039,468 512,603 Contract research 0 578,483 --------- --------- Total revenue 3,632,584 5,197,970 Cost of revenue Product 2,414,224 2,884,484 Service 539,200 732,410 Contract research 0 578,493 --------- --------- Total cost of revenue 2,953,424 4,195,387 Gross margin 679,160 1,002,583 Operating expenses: Research and development 1,096,304 1,495,815 Selling, general and administrative 1,111,082 1,454,845 --------- --------- Loss from operations (1,528,226) (1,948,077) Interest income, net 74,757 74,259 Interest expense 50,726 389 Other (expense), net (10,080) (816) ---------- --------- Loss before provision for income taxes (1,514,275) (1,875,023) - --------------------------------------------------------------------- Net loss ($1,514,275) ($1,875,023) ===================================================================== Net loss per share ($0.22) ($0.28) Weighted average number of common shares outstanding (000's) 6,781 6,702 The accompanying notes are an integral part of the consolidated financial statements.
MRS Technology, Inc. Consolidated Statements of Cash Flows (Unaudited) Six month periods ended Sept. 30, 1997 1996 Cash flows from operating activities Net loss ($1,514,628) ($1,875,023) Adjustments to reconcile net loss to net cash used in operating activities Depreciation 200,040 375,720 Amortization 0 1,116 Changes in assets and liabilities Accounts receivable 147,911 (1,483,273) Inventories (212,392) 1,152,172 Deposits and other assets (169,777) (113,428) Accounts payable 952,383 (1,068,022) Accrued expenses 68,222 (179,036) Customer deposits from other (832,515) 1,032,515 Other current liabilities 143,625 9,054 - ------------------------------------------------------------------------- Net cash used in operating activities (1,217,131) (2,148,205) Cash flows from investing activities Capital expenditures (28,566) (40,070) - ------------------------------------------------------------------------- Net cash used in investing activities (28,566) (40,070) Cash flows from financing activities Proceeds from stock purchases under employee stock purchase plan 0 32,556 Proceeds from employee stock option exercise 26,662 43,925 Principal payments under capital lease obligations (1,447) (484) ----------------------------------------------------------------------- Net cash provided by financing activities 25,215 75,997 Net decrease in cash & equivalents (1,220,482) (2,112,278) Cash and cash equivalents at beginning of period 3,290,982 4,217,880 Cash and cash equivalents at end of period $ 2,070,500 $ 2,105,602 ========================================================================= Supplemental cash flow information Interest paid $50,726 $389 The accompanying notes are an integral part of the consolidated financial statements.
MRS Technology, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Inventories Inventories consist of the following as of September 30, 1997 and March 31, 1997:
(In Thousands) September 30, 1997 March 31, 1997 Purchased parts $ 986 $ 941 Work in process 6,540 5,647 Finished Goods 0 726 ------ ------ $7,526 $7,314
2. Net Loss Per Common Share Net loss per common share for the three and six months ended September 30, 1997 and September 30, 1996 are computed based upon the weighted average number of common shares outstanding. Common equivalent shares are not included in loss periods as their effect would be antidilutive. 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 second quarter there would have been no significant impact on earnings per share for the three and six month periods ended September 30, 1997. 3. 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 alleging defects in the PanelPrinter and seeking damages. 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 did 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. 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. 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 is for the development of an advanced large area high-throughput step and repeat imaging tool. RESULTS OF OPERATIONS TOTAL REVENUE Total revenue for the three month periods ended September 30, 1997 and 1996 was approximately $3.2 million and $3.5 million, respectively, a decrease of $0.3 million. For the six month periods ended September 30, 1997 and 1996 total revenue was $3.6 and $5.2 million, respectively. Total revenue for the first half decreased $1.6 million. Product revenue for the three month periods ended September 30, 1997 and 1996, was $2.6 million and $3.2 million, respectively a decrease of $0.6 million quarter to quarter. Product revenue for the first half of fiscal 1998 decreased by $1.5 million from $4.1 million during the first half of fiscal 1997 to $2.6 million. This decrease is due to configuration differences on PanelPrinters sold in each period and the final settlement of litigation surrounding the sale of a PanelPrinter in the second quarter of fiscal 1998 at a settlement price below normal product pricing (See Note 3 to Notes to Consolidated Financial Statements). The decrease was offset by revenue generated from a contract entered into with the United States Display Consortium ("USDC") in fiscal 1998. This contract was entered into for the research, development and manufacture of an advanced large area high-throughput step and repeat imaging tool. Under the contract, MRS and USDC will share in the cost of the new imaging tool, which will be delivered to a customer of the USDC at the end of the contract. Service revenue for the three month periods ended September 30, 1997 and 1996 was $0.6 million and $0.2 million, respectively. The revenue for the first six month periods ended September 30, 1997 and 1996 was $1.0 million and $0.5 million, respectively. This $0.4 million increase for the three month period and the $0.5 million increase for the six month period were due to the growing parts and service contract business as customer machines have come off warranty. GROSS MARGIN Gross margin as a percentage of total revenue was 25% and 23% for the three month periods ended September 30, 1997 and 1996, respectively and was 19% for the six month periods ended September 30, 1997 and 1996. The increase in gross margin for the three month period was primarily due to increased service revenue which brings a higher gross margin than product revenue. OPERATING EXPENSES Research and development expenses for the three month periods ended September 30, 1997 and 1996 were $0.6 million and $0.7 million, respectively. Aggregate research and development spending before allocation to product revenue was $0.9 million and $0.7 million for the same quarterly periods. This $0.2 million decrease in spending for the three month period was primarily due to lower level of consultants and payroll, a result of the headcount reductions taken in January 1997. For the six month periods ended September 30, 1997 and 1996 research and development expenses were $1.1 and $1.5 million, respectively. Aggregate research and development spending before allocation to cost of product revenue was $1.4 million and $2.0 million, respectively. The $0.4 million decrease for the six month period was also attributable to the headcount reductions taken in January 1997. Selling, general and administrative expenses for the three month periods ended September 30, 1997 and 1996 were $0.6 million and $0.7 million, respectively. For the six month periods ended September 30, 1997 and 1996 expenses were $1.1 million and $1.5 million, respectively. The decrease in both the three and six month periods is attributable to the reallocation of resources in the Company's Japan operations from sales and marketing to service in fiscal 1998 to support the Company's increased service business as well as the headcount reductions taken in January 1997. LIQUIDITY AND CAPITAL RESOURCES The Company had cash and cash equivalents at September 30, 1997 of $2.1 million, a decrease of $1.2 million from the March 31, 1997 balance of $3.3 million. The decrease in cash is primarily due to the loss from operations in the first half of fiscal 1997. 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 $583,333 at September 30, 1997. 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. 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 September 30, 1997 the Company had an outstanding balance of $1.0 million. 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 November 6, 1997, approximately $1.0 million was available under the line of credit. 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 maximaze 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 cancellations 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 Comany's revenue was derived from research and development contracts. The most 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 second quarter there would have been no significant impacton earnings per share for the three and six month periods ended September 30, 1997. PART II - OTHER INFORMATION Item 5. Other Information None 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: November 10, 1997 /s/Griffith L. Resor, III Griffith L. Resor, III President, CEO and Director (Principal Executive Officer) Date: November 10, 1997 /s/ Patricia F. DiIanni Patricia F. DiIanni Vice President, Treasurer and 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. 6-MOS MAR-31-1998 APR-01-1997 SEP-30-1997 2,070,500 0 1,852,128 21,045 7,526,374 11,870,069 3,942,129 3,574,278 12,269,853 2,887,367 0 0 0 68,082 8,314,404 12,269,853 2,593,116 3,632,584 2,414,224 2,953,424 10,080 0 50,726 (1,514,275) 0 0 0 0 0 (1,514,275) (0.22) (0.22)
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