-----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, CsvCbPSOK79w07fGtsHfNt7ymFuIkWd1m1d4olPH58LdMD5RUkq0aBMrpXwKLkPQ 2MCWnw92RcbIsN/Aiq+XvQ== 0000906768-98-000013.txt : 19980814 0000906768-98-000013.hdr.sgml : 19980814 ACCESSION NUMBER: 0000906768-98-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 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: 98686191 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, 1998 Commission File Number: 0-21908 MRS Technology, Inc. (Exact name of registrant as specified in its charter.) Massachusetts 04-2904966 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 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 (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 11, 1998 - ---------------------------- ---------------- Common Stock, par value $.01 6,858,763 MRS Technology, Inc. FORM 10-Q For the three-month period ended June 30, 1998 INDEX PART I FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets at June 30, 1998 (Unaudited) and March 31, 1998 Consolidated Statements of Operations for the Three months ended June 30, 1998 and 1997 (Unaudited) Consolidated Statements of Cash Flows for the Three months ended June 30, 1998 and 1997 (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 3. Defaults upon Senior Securities 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, 1998 Current assets (Unaudited) March 31, 1998 Cash and cash equivalents $ 129,041 $1,094,636 Accounts receivable 316,228 862,155 Inventories 5,575,890 5,643,432 Deposits 20,989 20,989 Other current assets 111,895 56,076 - ---------------------------------------------------------------------- Total current assets $ 6,154,043 $7,677,288 Property and equipment, net 130,672 176,969 Other assets, net 29,339 29,965 - ---------------------------------------------------------------------- Total assets $ 6,314,054 $7,884,222 ====================================================================== Current liabilities Accounts payable $ 689,325 $ 723,516 Accrued expenses 925,103 1,187,700 Long-term debt 1,025,000 1,000,000 Customer deposits 506,250 - Other liabilities 111,880 140,714 - ---------------------------------------------------------------------- Total current liabilities 3,257,558 3,051,930 - ---------------------------------------------------------------------- Total liabilities $ 3,257,558 $ 3,051,930 Stockholders' equity Common stock, $.01 par value; authorized, 20,000,000 shares; issued and outstanding 6,858,763 and 6,838,165 shares respectively 68,588 68,381 Additional paid-in capital 36,511,203 36,487,455 Accumulated deficit (33,523,295) (31,723,544) - ---------------------------------------------------------------------- Total stockholders' equity 3,056,496 4,832,292 - ---------------------------------------------------------------------- Total liabilities and stockholders' equity $ 6,314,054 $ 7,884,222 ===================================================================== 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, 1998 1997 Revenues $ 389,525 $ 417,556 Cost of revenues 797,467 544,701 Gross margin (407,942) (127,145) Operating expenses: Research and development (Note 1) 680,335 518,024 Selling, general and administrative 681,119 506,202 ----------- ----------- Loss from operations (1,769,396) (1,151,371) Interest income, net 6,782 40,851 Interest expense 32,085 23,154 Other income (expense), net (5,050) 3,121 ---------- ---------- Loss before provision for income taxes (1,799,749) (1,130,553) - ----------------------------------------------------------------------- Net Loss ($1,799,749) ($1,130,553) ======================================================================= Net loss per share ($0.26) ($0.17) Weighted average number of common shares outstanding (000's) 6,851 6,787 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, 1998 1997 Cash flows from operating activities Net income (loss) ($1,799,749) ($1,130,553) Adjustments to reconcile net income (loss) to net cash used in operating activities Depreciation 58,656 110,727 Changes in assets and liabilities Accounts receivable 545,927 1,327,199 Inventories 67,542 (367,600) Deposits and other assets (55,819) (316,318) Accounts payable (34,191) (93,830) Accrued expenses (262,597) 77,270 Customer deposits 506,250 22,500 Other current liabilities (28,834) 251,747 - ------------------------------------------------------------------------ Net cash (used in) provided by operating activities (1,002,815) (118,858) Cash flows from investing activities Capital expenditures (11,735) (1,574) - ------------------------------------------------------------------------ Net cash (used in) investing activities (11,735) (1,574) Net borrowings under line of credit 25,000 0 Cash flows from financing activities Proceeds from stock purchases under employee stock purchase plan 18,996 0 Proceeds from employee stock option exercise 4,959 900 Principal payments under capital lease obligations 0 (680) - ------------------------------------------------------------------------ Net cash provided by financing activities 48,955 220 Net decrease in cash & equivalents (965,595) (120,212) Cash and cash equivalents at beginning of period 1,094,636 3,290,982 Cash and cash equivalents at end of period 129,041 3,170,770 ======================================================================= Supplemental cash flow information Interest paid $ 32,085 $ 23,154 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, 1998 and 1997 are unaudited and include all adjustments which, in the opinion of management, are necessary to present fairly the financial position at June 30, 1998 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, 1998. 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. There were no costs recovered under research and development contracts during either of the quarterly periods ending June 30, 1998 or 1997. 2. Inventories Inventories consist of the following as of June 30, 1998 and March 31, 1998:
(In Thousands) June 30, 1998 March 31, 1998 Work in process $4,036 $4,585 Purchased parts 1,540 1,058 ------- ------- $5,576 $5,643
3. Net Loss Per Common Share
Net loss per share is calculated as follows: Quarter Ended June 30, (In Thousands, except per share amounts) 1998 1997 Net loss ($1,800) ($1,131) Basic and diluted Weighted-average common shares outstanding 6,851 6,787 Net loss per common share ($0.26) (0.17)
4. Litigation On January 24, 1997, Micron Display Technology ("Micron Display") brought suit in Idaho against the Company alleging in five counts breach of contract, breach of implied warranties, and breach of express warranties, in connection with a Model 5200 PanelPrinter (the "PanelPrinter") which the Company alleged Micron Display purchased from the Company in 1996. On January 30, 1997, the Company filed an action in Massachusetts against Micron Display alleging in two counts breach of contract and violation of M.G.L.c.93A, in connection with Micron Display's nonpayment for the PanelPrinter. The parties disputed which documents constituted the contract between them. Further, Micron Display alleged, among other things, that the PanelPrinter failed to meet certain performance specifications contained in what it contended constituted the contract, and that, as a consequence, it was entitled to the return of its $1.0 million deposit and the conversion of the parties' relationship to a lease of the PanelPrinter, or a PanelPrinter of like quality. The Company maintained that other documents constituted the contract, pursuant to which there was no right to convert the relationship to a lease, and further denied that the PanelPrinter failed to meet specifications set forth in the document cited by Micron Display. The Company sought approximately $1.4 million as the balance of the unpaid contract price, and additional remedies under the Massachusetts Unfair Business Practices Act. On July 23, 1997, the parties executed a Settlement Agreement resolving their disputes and releasing all claims against each other. Both lawsuits have now been dismissed. While the specific terms of the Settlement Agreement are confidential, the settlement generally provided for a lump sum payment to be made by Micron Display to the Company at the time the Settlement Agreement was executed, and further monthly installment payments to be made thereafter. These payments, together with Micron Display's initial deposit, constitute payment in full for the PanelPrinter. The Company in turn has agreed to provide Micron Display with an extended warranty with respect to the PanelPrinter, as well as technical assistance and certain modifications to the PanelPrinter. No significant amounts due to or from Micron remain outstanding at June 30, 1998. On July 1, 1998 the Company filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The petition was filed in the U.S. Bankruptcy Court for the District of Massachusetts (Western Division) in Worcester, MA. The case has been assigned to Bankruptcy Judge James F. Queenan, Jr. 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 the first quarter of fiscal 1999 the Company, under the direction of its new chief executive officer, refocused its marketing efforts towards the High Density Interconnect (HDI) business, specifically, for the high density single chip and multi-chip packaging. The Company sought strategic relationships with customers in the new market in order to gain new orders for its products, in the short-term and market acceptance of its technology in the long term. The Company also attempted to obtain funding for its operations and research and development efforts and to renegotiate the terms of its line of credit. The Company was unable to get funding or to negotiate successfully with regard to its line of credit, although it did receive a waiver on complying with certain covenants in the line of credit agreement valid through June 30, 1998. That waiver was not extended and the Company is now in default under its line of credit. On June 30, 1998 the Company laid off approximately 80% of its work force. On July 1, 1998 the Company filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The petition was filed in the U.S. Bankruptcy Court for the District of Massachusetts (Western Division) in Worcester, MA. The case has been assigned to Bankruptcy Judge James F. Queenan, Jr. The Company retained substantially all of its service organization and is continuing to support the installed base. The Company expects that this will be an important source of revenue in the near term. The Company's plan is to conserve cash while attempting to close transactions for the sale of four machines in inventory and develop new products to market to the HDI segment of the Printed Circuit Board (PCB) manufacturing industry.
RESULTS OF OPERATIONS TOTAL REVENUES Revenues (In Thousands) Quarter Ended June 30, 1998 1997 Service & other $390 $418
Revenue for the quarters ending June 30, 1998 and 1997 were approximately the same. There were no system sales in either quarter.
GROSS MARGIN Quarter Ended June 30, Gross Margin (In Thousands) 1998 1997 Product ($429) ($239) As % of revenue - - Service & other 21 112 As % of revenue .5% 26% Total ($408) ($127)
Product gross margin represents the underabsorption of both the materials and manufacturing departments for both quarters end June 30, 1998 and 1997. The materials department underabsorption was significantly higher for the quarter ending June 30, 1998 due to lower purchases. This underabsorption should no longer be an issue due to lay-off of manufacturing and materials personnel. Service Gross margin dropped in the first quarter of June 1998 compared to June 1997 due to the higher travel, salary and fringe and lower gross margin on parts sales due to mix of parts sold.
Research & Development Quarter Ended June 30, (In Thousands) 1998 % Change 1997 Research and development $680 31% $518 As a % of revenue 174% 124%
Research and development expense increased in the quarter ending June 30, 1998 over the same quarter in 1997 due mainly to higher expenses related to consulting and materials for the development of a new product to sell into the HDI market.
Selling, General and Administrative Quarter Ended June 30, (In Thousands) 1998 % Change 1997 Selling, general & administrative $681 35% $506 As a % of revenue 175% 121%
Selling, general and administrative expense increased in the quarter ended June 30, 1998 over the same quarter in 1997 due mainly to the committment fee for the Coast Business Credit credit line, consulting, bankruptcy legal costs, travel, insurance and higher benefit expense related to lay-off of employees. One time charges are approximately $125,000. LIQUIDITY AND CAPITAL RESOURCES The Company had cash and cash equivalents at June 30, 1998 of $129 thousand, a decrease of $1.0 million from March 31, 1998. This decrease was mainly the result of negative cash flows from operations in fiscal 1999 which have resulted from declining sales and, therefore, significant losses from operations. Historically, the Company has required significant working capital to support its research and development efforts and to meet its ongoing production, selling and general and administrative costs. The Company's transition to a new market will require investments to adapt the Company's FPD technology for this new market as well as substantial funding for its ongoing operations until such time as orders from this new market are sufficient to meet its working capital needs. In addition, historically, the Company has funded a substantial portion of its aggregate research and developments costs through contracts with an agency of the U.S. government and other contracts. However, the Company does not expect to continue to funds its research and development efforts through similar contracts in the future. The Company's ability to develop new technologies is dependent upon its ability to fund research and development through working capital and/or other financing alternatives. In the past, the Company has been able to meet its working capital requirements through its existing cash balances and amounts available under its line of credit. However, as a result of its significant net loss in fiscal 1998, the Company was not in compliance with a financially restrictive debt covenant, minimum tangible net worth, as of March 31, 1998. The Company was unable to get funding or to negotiate successfully with regard to its line of credit, although it did receive a waiver on complying with certain covenants in the line of credit agreement valid through June 30, 1998. That waiver was not extended and the Company is now in default under its line of credit. During the first quarter of fiscal 1999 the Company, under the direction of its new chief executive officer, refocused its marketing efforts towards the High Density Interconnect (HDI) business, specifically, for the high density single chip and multi-chip packaging. The Company sought strategic relationships with customers in the new market in order to gain new orders for its products, in the short-term and market acceptance of its technology in the long term. The Company also attempted to obtain funding for its operations and research and development efforts and to renegotiate the terms of its line of credit. On June 30, 1998 the Company laid off approximately 80% of its work force. On July 1, 1998 the Company filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The petition was filed in the U.S. Bankruptcy Court for the District of Massachusetts (Western Division) in Worcester, MA. The case has been assigned to Bankruptcy Judge James F. Queenan, Jr. The Company retained substantially all of its service organization and is continuing to support the installed base. The Company expects that this will be an important source of revenue in the near term. The Company's plan is to conserve cash while attempting to close transactions for the sale of four machines in inventory and develop new products to market to the HDI segment of the Printed Circuit Board (PCB) manufacturing industry. Factors Affecting Future Results In addition to the risks discussed in "Business Developments" and "Liquidity and Capital Resources" above, 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, 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. PanelPrinters and optional equipment generally have ranged in price from $1.1 to $2.7 million. Any delay in revenue recognition or cancellation of an order would adversely affect the Company's results of operations, cash flows, or both. Fluctuations in product revenues, and consequently quarterly and annual net income or loss, are largely related to revenue recognition on sales of PanelPrinter units. In addition, the process for turning prospects into firm purchase commitments and subsequently selling the systems is often lengthy. Year 2000 Computer Systems Compliance Concerns have been widely expressed regarding the inability of certain computer programs to process date information beyond year 1999. These concerns focus on the impact of the Year 2000 problem on business operations and the potential costs associated with identifying and addressing the problem. The Company is in the process of evaluating and taking steps to deal with the potential impact of this problem in areas under its control, in particular its products, its administrative and business systems, and its sources of supply. Based on its review to date, the Company believes that its own products are "Year 2000 compliant". The Company is in the process of upgrading its business systems. The upgrade will enable proper processing of transactions relating to the Year 2000 and beyond. The Company has also undertaken a program to survey suppliers to determine the status and schedule for their Year 2000 compliance. Where it is believed that a particular supplier's situation poses unacceptable risks, the Company plans to identify an alternative source. Costs incurred in the compliance effort will be expensed as incurred. While the Company's Year 2000 compliance evaluation is not yet complete, the Company does not foresee a material impact on its business, operating results or financial position from the Year 2000 problem. The Company cannot, of course, predict the nature or materiality of the impact on its operations or operating results of noncompliance by parties outside its control. PART II - OTHER INFORMATION Item 1. Legal Proceedings On July 1, 1998 the Company filed a petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The petition was filed in the U.S. Bankruptcy Court for the District of Massachusetts (Western Division) in Worcester, MA. The case has been assigned to Bankruptcy Judge James F. Queenan, Jr. Item 3. Default Upon Senior Securities The Company has a line of credit with Coast Business Credit in the amount of $4 million. The Company is in default of its tangible net worth covenent. The amount of principle and interest due as of July 31, 1998 is $1,073,760. Item 6. Exhibits and Reports on Form 8-K a. Exhibits Exhibit 27. Financial Data Schedule b. Reports on Form 8-K Form 8-K. July 1, 1998 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, 1998 /s/Carl P. Herrmann Carl P. Herrmann President, CEO and Director (Principal Executive Officer) Date: August 12, 1998 /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, 1998. 0000906768 MRS TECHNOLOGY, INC. 3-MOS MAR-31-1999 APR-01-1998 JUN-30-1998 129,041 0 337,273 21,045 5,575,890 6,154,043 3,906,242 3,775,570 6,314,054 3,257,558 0 0 0 68,586 2,987,910 6,314,054 0 389,525 0 797,467 0 0 32,085 (1,799,749) 0 0 0 0 0 (1,799,749) (0.26) (0.26)
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