-----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, QhJXn4CApUNzydLj29KBu5c8VrWWqKsgSeyR9Olo0yji74ze1Gx3QgtR3rjO3tRv v2T3yE2z+9lpuzaXxWqkWw== 0000906768-98-000002.txt : 19980217 0000906768-98-000002.hdr.sgml : 19980217 ACCESSION NUMBER: 0000906768-98-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980212 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: 98533736 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 nine month period ended: December 31, 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: January 29, 1997: - ---------------------------- ----------------- Common Stock, par value $.01 6,836,552 MRS Technology, Inc. FORM 10-Q For the nine month period ended December 31, 1997 INDEX PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets at December 31, 1997 (Unaudited) and March 31, 1997 Consolidated Statements of Operations for the Three months ended December 31, 1997 and 1996 (Unaudited) Consolidated Statements of Operations for the Nine months ended December 31, 1997 and 1996 (Unaudited) Consolidated Statements of Cash Flows for the Nine months ended December, 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 Dec 31, 1997 Current assets (Unaudited) March 31, 1997 Cash and cash equivalents $ 1,533,451 $ 3,290,982 Accounts receivable, net 1,292,640 1,978,994 Inventories 6,880,177 7,313,982 Deposits 274,989 169,730 Other current assets 86,338 102,605 - -------------------------------------------------------------------- Total current assets 10,067,595 12,856,293 Property and equipment, net 298,935 533,244 Other assets, net 31,135 37,979 - -------------------------------------------------------------------- Total assets $10,397,665 $13,427,516 ==================================================================== Current liabilities Accounts payable $ 201,420 $ 370,644 Accrued expenses 1,076,364 813,224 Current portion of obligations under capital leases 0 11,096 Customer deposits 0 1,312,389 Other liabilities 49,308 49,746 - -------------------------------------------------------------------- Total current liabilities 1,327,092 2,557,099 Long-Term Debt 1,000,000 1,000,000 - -------------------------------------------------------------------- Total liabilities 2,327,092 3,557,099 Stockholders' equity Common stock, $.01 par value; authorized, 68,366 67,763 20,000,000 shares; issued and outstanding 6,836,552 and 6,776,355 shares respectively Additional paid-in capital 36,436,167 36,383,258 Accumulated deficit (28,433,960) (26,580,604) - -------------------------------------------------------------------- Total stockholders' equity 8,070,573 9,870,417 - -------------------------------------------------------------------- Total liabilities and stockholders' equity $10,397,665 $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 Dec 31, Revenues 1997 1996 Product $1,776,595 $ 1,000,000 Service and other 551,835 587,595 --------- --------- Total revenues 2,328,430 1,587,595 Cost of revenues Product 1,432,189 1,438,013 Service and other 276,089 0 --------- --------- Total cost of revenues 1,708,278 1,438,013 Gross margin 620,152 149,582 Operating expenses: Research and development 378,123 832,191 Selling, general and administrative 565,782 715,528 --------- --------- Loss from operations (323,753) (1,398,137) Interest income, net 24,650 24,252 Interest expense 27,875 150 Other (expense), net (12,101) 0 --------- --------- Loss before provision for income taxes (339,079) (1,374,035) Tax Provision 0 0 - --------------------------------------------------------------------- Net loss ($339,079) ($1,374,035) ===================================================================== Net loss per share ($0.05) ($0.20) Weighted average number of common shares outstanding (000's) 6,827 6,675 The accompanying notes are an integral part of the consolidated financial statements.
MRS Technology, Inc. Consolidated Statements of Operations (Unaudited) Nine months ended Dec. 31, Revenues 1997 1996 Product $ 4,370,211 $ 4,427,082 Service 1,590,802 1,780,000 Contract research 0 578,483 --------- --------- Total revenues 5,961,013 6,785,565 Cost of revenues Product 3,899,066 5,054,907 Service 762,636 0 Contract research 0 578,493 --------- --------- Total cost of revenues 4,661,702 5,633,400 Gross margin 1,299,311 1,152,165 Operating expenses: Research and development 1,474,427 2,328,006 Selling, general and administrative 1,676,864 2,170,373 --------- --------- Loss from operations (1,851,980) (3,346,214) Interest income, net 99,407 98,511 Interest expense 78,601 539 Other (expense), net (22,535) (816) ---------- --------- Loss before provision for income taxes (1,853,709) (3,249,058) Tax Provision 0 0 - --------------------------------------------------------------------- Net loss ($1,853,709) ($3,249,058) ===================================================================== Net loss per share ($0.27) ($0.48) Weighted average number of common shares outstanding (000's) 6,806 6,705 The accompanying notes are an integral part of the consolidated financial statements.
MRS Technology, Inc. Consolidated Statements of Cash Flows (Unaudited) Nine month periods ended Dec. 31, 1997 1996 Cash flows from operating activities Net loss ($1,853,709) ($3,249,058) Adjustments to reconcile net loss to net cash used in operating activities Depreciation 277,505 517,645 Amortization 1,674 Changes in assets and liabilities Accounts receivable 686,354 (1,511,371) Inventories 433,805 926,341 Deposits and other assets (82,148) 608,617 Accounts payable (169,224) (1,303,314) Accrued expenses 263,140 351,326 Customer deposits from other (1,312,389) 1,032,515 Other current liabilities (438) 43,633 - ------------------------------------------------------------------------- Net cash used in operating activities (1,757,104) (2,581,992) Cash flows from investing activities Capital expenditures (17,139) (130,481) ------------------------------------------------------------------------- Net cash used in investing activities (17,139) (130,481) Cash flows from financing activities Proceeds from stock purchases under 0 65,332 employee stock purchase plan Proceeds from employee stock option exercise 27,808 65,222 Principal payments under capital lease obligations (11,096) (2,829) ----------------------------------------------------------------------- Net cash provided by financing activities 16,712 127,725 Net decrease in cash & equivalents (1,757,531) (2,584,748) Cash and cash equivalents at beginning of period 3,290,982 4,217,880 Cash and cash equivalents at end of period $ 1,533,451 $ 1,633,132 ========================================================================= Supplemental cash flow information Interest paid $ 78,601 $ 540 The accompanying notes are an integral part of the consolidated financial statements.
MRS Technology, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) In managements opinion all adjustments necessary for a fair presentation are reflected in the interim periods presented. 1. Inventories Inventories consist of the following as of December 31, 1997 and March 31, 1997:
(In Thousands) December 31, 1997 March 31, 1997 Purchased parts $ 802 $ 941 Work in process 6,078 5,647 Finished Goods 0 726 ------ ------ $6,880 $7,314
2. Net Loss Per Common Share Net loss per common share for the three and nine months ended December 31, 1997 and 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 third quarter there would have been no significant impact on earnings per share for the three and nine month periods ended December 31, 1997. 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 1998, demand for the Company's flat panel display (FPD) equipment products remained low, as previously strong interest in such equipment, particularly in Korea, diminished as a result of the financial crisis in Asia in November and December, 1997. While such interest in Taiwan has remained strong, the delay in implementing the Korean portion of the joint US/Korean FPD initiative has created uncertainty about the eventual outcome of that initiative. Existing orders were shipped as planned, but the uncertainties relating to the entire FPD market has made booking orders for new machines difficult. The Company is continuing to pursue Asian FPD customers and strategic relationships. At the same time, the Company has seen significant new interest in advanced electronics packaging applications for its PanelPrinter product. The source of this interest is currently mostly in the United States, instead of mostly in Asia, as is the case for interest in FPD manufacturing. As a result of its success in the R&D market for large- area, step-and-repeat photolithography equipment, the Company has extensive experience in working with many different types of substrates, materials and photoresists, not just those used in AMLCD fabrication. This experience relates directly to the issues being encountered in these advanced packaging applications. The Company is currently quantifying this new opportunity and developing a plan for a fast, focused response to this new opportunity. The Company's common stock is listed on the NASDAQ National Market. Currently, the Company does not meet one or more of the new cirteria required for continued listing on that market. If the Company is unable to meet such criteria, it could be delisted from trading on the NASDAQ National Market. However, the Company expects it would have a period of several months after February 23, 1998, the effective date of the new criteria, within which to meet such criteria, if the Company had a plan for doing so. The Company is developing such a plan. If the Company is unable to meet the requirements for continued listing on the NASDAQ National Market, the Company could apply for listing on a national stock exchange or other established automated over-the-counter trading market, although there can be no assurance that the Company would meet the listing criteria for such exchange or market. The Company is currently working on several initiatives. The most significant of these is the contract awarded to the Company 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. This contract is $9.5 million and is about a 50% cost share between MRS and USDC. The contract period is about 30 months. RESULTS OF OPERATIONS TOTAL REVENUES Total revenue for the three month periods ended December 31, 1997 and 1996 was approximately $2.3 million and $1.6 million, respectively, an increase of $0.7 million. For the nine month period ended December 31, 1997 and 1996 total revenue was $6.0 and $6.8 million, respectively. Total revenue for the first nine months decreased $0.8 million from total revenues for the comparable period in the preceding fiscal year. Product revenue for the three month periods ended December 31, 1997 and 1996 was $1.8 million and $1.0 million, respectively and increase of $0.8 million quarter to quarter. This increase was due to the USDC contract being reported under product revenue in the three month period ended December 31, 1997. Product revenue for the first three quarters of fiscal 1998 and 1997 were flat at $4.4 million. Service revenue for the three month periods ended December 31, 1997 and 1996 was flat at $0.6 million. The revenue for the first nine month periods ended December 31, 1997 and 1996 was $1.6 million and $1.8 million, respectively. This $0.2 million decrease for the nine month period was due to a one time large single customer order for spares in the nine month period ended December 31, 1996. Contract research revenue for fiscal 1997 reflects the winding down of the DARPA Contract on which we reported no revenue in fiscal 1998. GROSS MARGIN Gross margin as a percentage of total revenue was 27% and 9%, respectively for the three month periods ended December 31, 1997 and 1996 and was 22% and 17% for the nine month periods ended December 31, 1997 and 1996. Product related gross margin was 19% and(44%), respectively for the three month periods ended December 31, 1997 and 1996 and was 11% and (14%) for the nine month periods ended December 31, 1997 and 1996. The product gross margins in fiscal 1997 were negative due to the sale of a reconfigured PanelPrinter and underabsorption of overheads while fiscal 1998 brought better gross margins due to the sale of a retrofitted demo machine previously written off. Service gross margins remained relatively flat for all periods. OPERATING EXPENSES Research and development expenses for the three month periods ended December 31, 1997 and 1996 were $0.4 million and $0.8 million, respectively. Aggregate research and development spending before allocation to product revenue was $0.7 million and $0.8 million for the same quarterly periods. This $0.1 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 nine month periods ended December 31, 1997 and 1996 research and development expenses were $1.5 and $2.3 million, respectively. Aggregate research and development spending before allocation to cost of product revenue was $2.1 million and $2.8 million, respectively. The $0.7 million decrease for the nine month period was also attributable to the headcount reductions taken in January 1997. Selling, general and administrative expenses for the three month periods ended December 31, 1997 and 1996 were $0.6 million and $0.7 million, respectively. For the nine month periods ended December 31, 1997 and 1996 expenses were $1.7 million and $2.2 million, respectively. The decrease in both the three and nine 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 December 31, 1997 of $1.5 million, a decrease of $1.8 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 nine months 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 $437,500 at December 31, 1997. The amount of liability 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 December 31, 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 January 28, 1998, 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 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 technologies. 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 Company's 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 Company'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 third quarter there would have been no significant impact on earnings per share for the three and nine month periods ended December 31, 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: February 10, 1998 /Signed/ Griffith L. Resor, III President, CEO and Director (Principal Executive Officer) Date: February 10, 1998 /Signed/ 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. 9-MOS MAR-31-1998 APR-01-1997 DEC-31-1997 1,533,451 0 1,313,685 21,045 6,880,177 10,067,595 3,950,678 3,674,211 10,397,665 1,327,092 0 0 0 68,366 8,002,207 10,397,665 4,370,211 5,961,013 3,899,066 4,661,702 22,535 0 78,601 (1,853,709) 0 0 0 0 0 (1,853,709) (0.27) (0.27)
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