1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended June 28,September 27, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 0-16088
CERAMICS PROCESS SYSTEMS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-2832509
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
111 South Worcester Street, P.O. Box 338,
Chartley, Massachusetts 02712
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (508) 222-0614
Facsimile Number: 508-222-0220, E-Mail Address: info@alsic.com.
Former Name, Former Address and Former Fiscal Year if Changed
since Last Report:
Not Applicable.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period than the registrant was required
to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date. Number of shares of common stock outstanding as of
August 11, 1996: 7,780,766.October 22, 1997: 7,802,582
2
CERAMICS PROCESS SYSTEMS CORPORATION
Form 10-Q
For The Fiscal Quarter Ended June 28,September 27, 1997
Index
PART I: FINANCIAL INFORMATION Page
Item 1: Consolidated Financial Statements 3-8
Consolidated Balance Sheets as of
June 28,September 27, 1997 and December 28, 1996 3-4
Consolidated Statements of Operations
for the fiscal quarters and nine-month
periods ended June 28,September 27, 1997 and
June 29,September 28, 1996 5
Consolidated Statements of Cash Flows
for the fiscal quartersnine-month periods ended June 28,September
27, 1997 and June 29,September 28, 1996 6
Notes to Consolidated Financial
Statements 7-8
Item 2: Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8-9
PART II: OTHER INFORMATION
Items 1-6 10
Signatures 1110
3
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Balance Sheets
June 28, December 28,
1997 1996
ASSETS
Current Assets:
Cash $317,123 $ 113,331
Accounts receivable, trade 228,698 141,035
Inventories 167,657 156,445
Prepaid expenses 7,926 1,340
Other current assets - -
---------- ----------
Total current assets 721,404 412,151
---------- ----------
Property and equipment:
Production equipment 1,220,450 1,145,003
Furniture and office equipment 60,403 60,403
---------- ----------
1,280,853 1,205,406
Less accumulated depreciation (890,161) (824,667)
---------- ----------
Net property and equipment 390,691 380,739
---------- ----------
Deposits 2,237 2,337
---------- ----------
Total Assets $1,114,332CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Balance Sheets
September 27, December 28,
1997 1996
ASSETS
Current Assets:
Cash $464,038 $ 113,331
Accounts receivable 356,990 141,035
Inventories 146,921 156,445
Prepaid expenses 7,442 1,340
Other current assets - -
---------- ----------
Total current assets 975,391 412,151
---------- ----------
Property and equipment:
Production equipment 1,333,441 1,145,003
Furniture and office equipment 67,906 60,403
---------- ----------
1,401,348 1,205,406
Less accumulated depreciation
and amortization (922,909) (824,667)
---------- ----------
Net property and equipment 478,439 380,739
---------- ----------
Deposits 6,843 2,337
---------- ----------
Total Assets $1,460,673 $ 795,227
========== ==========
See accompanying notes to consolidated financial statements.
4
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Balance Sheets (continued)
June 28, December 28,
1997 1996
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 166,416 $ 128,762
Accrued expenses 787,763 789,766
Deferred revenue 217,667 355,987
Notes payable 450,000 450,000
Current portion of convertible
notes payable:
Related parties 260,000 260,000
Other 1,610,000 1,610,000
Current portion of obligations
under capital leases 18,431 17,383
------------ ------------
Total current liabilities 3,510,278 3,611,898
Obligations under capital
leases less current portion 77,059 87,999
------------ ------------
Total Liabilities 3,587,336 3,699,897
------------ ------------
Stockholders' Equity (Deficit)
Common stock, $0.01 par value.
Authorized 15,000,000 shares;
issued 7,782,627 shares at June 28,
1997 and 7,780,766 shares
at December 28, 1996 77,826 77,808
Additional paid-in capital 30,457,693 30,457,384
Accumulated deficit (32,947,688) (33,379,027)
------------ ------------
(2,412,169) (2,843,835)
Less treasury stock, at cost,
22,883 common shares at June 28
1997 and December 28, 1996 (60,835) (60,835)
------------ ------------
Total shareholders' equity
(deficit) (2,473,004) (2,904,670)
------------ ------------
Total Liabilities and
Stockholders' Equity
(Deficit) $ 1,114,332CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Balance Sheets (continued)
September 27, December 28,
1997 1996
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 235,946 $ 128,762
Accrued expenses 571,336 789,766
Deferred revenue 270,333 355,987
Notes payable 309,225 450,000
Current portion of convertible
notes payable:
Related parties 260,000 260,000
Other 1,610,000 1,610,000
Current portion of obligations
under capital leases 29,296 17,383
------------ ------------
Total current liabilities 3,286,136 3,611,898
Notes payable, less current portion 86,111 -
Obligations under capital
leases less current portion 123,285 87,999
------------ ------------
Total Liabilities 3,495,532 3,699,897
------------ ------------
Stockholders' Equity (Deficit)
Common stock, $0.01 par value.
Authorized 15,000,000 shares;
issued 7,802,582 shares at September
27, 1997 and 7,780,766 shares
at December 28, 1996 78,026 77,808
Additional paid-in capital 30,461,093 30,457,384
Accumulated deficit (32,513,143) (33,379,027)
------------ ------------
(1,974,024) (2,843,835)
Less treasury stock, at cost,
22,883 common shares at September
27, 1997 and December 28, 1996 (60,835) (60,835)
------------ ------------
Total shareholders' equity
(deficit) (2,034,859) (2,904,670)
------------ ------------
Total Liabilities and
Stockholders' Equity
(Deficit) $ 1,460,673 $ 795,227
============ ============
See accompanying notes to consolidated financial statements.
5
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Statements of Operations
Fiscal Quarters Ended Six Month Periods Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
Revenue:
Product sales $ 829,477 $ 326,727 $ 1,767,085 $ 713,209
License agreements 155,333 85,000 155,333 85,000
---------- ----------- ---------- ---------
Total revenue 984,810 411,727 1,922,418 798,209
========== =========== ========== ==========
Operating expenses:
Cost of sales 466,435 369,169 1,100,699 779,077
Selling, general, and
administrative 136,649 119,910 266,582 235,415
---------- ----------- ---------- ----------
Total operating expenses 603,084 489,079 1,367,281 1,014,492
---------- ----------- ---------- ---------
Operating income (loss) 381,726 (77,352) 555,137 (216,283)
Other income (exp.), net (58,829) (35,490) (123,797) (94,242)
Net income (loss) $ 322,897 $ (112,842) 431,340 (310,525)
========== =========== ========== ==========
Net income (loss)
per share $ 0.04 $ (0.01) $ 0.05 $ (0.04)
---------- ----------- ---------- ----------
Weighted average number of
common and common
equivalent shares
outstanding 8,088,344 7,917,504 8,088,344 7,837,694CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Statements of Operations
Fiscal Quarters Ended Nine Month Periods Ended
Sept. 27, Sept. 28, Sept. 28, Sept. 29,
1997 1996 1997 1996
Revenue:
Product sales $ 1,084,960 $ 581,109 $ 2,852,046 $ 1,294,317
License agreements 130,333 - 285,667 85,000
---------- ----------- ---------- ---------
Total revenue 1,215,293 581,109 3,137,713 1,379,317
========== =========== ========== ==========
Operating expenses:
Cost of sales 607,137 554,218 1,707,839 1,333,294
Selling, general, and
administrative 121,287 103,853 387,865 339,266
---------- ----------- ---------- ----------
Total operating expenses 728,424 658,071 2,095,704 1,672,560
---------- ----------- ---------- ---------
Operating income (loss) 486,869 (76,962) 1,042,009 (293,243)
Other income (exp.), net (52,328) (54,017) (176,125) (148,258)
Net income (loss) $ 434,541 $ (130,979) 865,884 (441,501)
========== =========== ========== ==========
Net income (loss)
per share $ 0.05 $ (0.02) $ 0.11 $ (0.06)
---------- ----------- ---------- ----------
Weighted average number of
common and common
equivalent shares
outstanding 8,079,585 7,917,504 8,084,907 7,853,656
========== =========== ========== ==========
See accompanying notes to consolidated financial statements.
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CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Statements of Cash Flows
Fiscal Quarters Ended
June 28, June 29,
1997 1996
Cash flows from operating activities:
Net income (loss) $ 431,340 $(310,525)
Adjustments to reconcile net loss to
cash provided by (used in)
operating activities:
Depreciation 52,800 52,800
Amortization 12,695 25,068
Loss (gain) on disposal of equipment (1,550) (24,500)
Loss on investment - -
Changes in assets and liabilities:
Accounts receivable, trade (87,663) 41,579
Inventories (11,212) (10,992)
Prepaid expenses (6,586) (7,071)
Other current assets - 325
Accounts payable 37,654 6,420
Accrued expenses (2,003) 197,881
Deferred revenue (138,320) -
--------- ----------
Net cash used in
operating activities 287,155 (29,015)
--------- ----------
Cash flows from investing activities:
Additions to property and equipment (75,447) (12,893)
Disposal of property and equipment 1,550 24,500
Deposits 100 (375)
--------- ----------
Net cash used in investing
activities (73,797) 11,232
--------- ----------
Cash flows from financing activities:
Principal payments of capital lease
obligations (9,893) -
Proceeds from issuance of notes payable - -
Proceeds from issuance of common stock 327 -
--------- -----------
Net cash provided by (used in)
financing activities (9,566) -
--------- -----------
Net increase (decrease) in cash 203,792 (17,783)
Cash at beginning of quarter 113,331 32,127
--------- ----------
Cash at end of quarter $ 317,123 $ 14,344CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Statements of Cash Flows
Nine-Month Periods Ended
Sept. 27, Sept. 27,
1997 1996
Cash flows from operating activities:
Net income (loss) $ 865,884 $(441,501)
Adjustments to reconcile net income
(loss) to cash provided by (used in)
operating activities:
Depreciation and Amortization 98,242 79,200
Settlement of Interest Obligation - 25,068
Loss (gain) on disposal of equipment (1,610) (27,500)
Loss on investment - -
Changes in assets and liabilities:
Accounts receivable, trade (215,955) (108,577)
Inventories 9,524 -
Prepaid expenses (6,102) (959)
Other current assets - (4,641)
Accounts payable 107,184 (12,664)
Accrued expenses (218,430) 164,531
Deferred revenue (85,654) 426,802
--------- ----------
Net cash used in
operating activities 553,083 99,759
--------- ----------
Cash flows from investing activities:
Additions to property and equipment (195,942) (107,178)
Disposal of property and equipment 1,610 27,500
Deposits (4,506) (375)
--------- ----------
Net cash used in investing
activities (198,838) (80,053)
--------- ----------
Cash flows from financing activities:
Proceeds from capital lease obligations 47,199 -
Principal payments of Notes Payable (54,664)
Proceeds from issuance of common stock 3,927 -
--------- ----------
Net cash provided by (used in)
financing activities (3,538) -
--------- ----------
Net increase (decrease) in cash 350,707 19,706
Cash at beginning of quarter 113,331 32,127
--------- ----------
Cash at end of quarter $ 464,038 $ 51,833
========= ==========
See accompanying notes to consolidated financial statements.
7
CERAMICS PROCESS SYSTEMS CORPORATION
Notes to Consolidated Financial Statement
(Unaudited)
(1) Nature of Business
Ceramics Process Systems Corporation ("CPS" or "the Company"),
incorporated on June 19, 1984, develops, manufactures and markets
advanced metal-matrix composite and ceramic products for packaging
and interconnecting high-density, high-performance microelectronics
for microwave, telecommunications and other applications. The
Company's products are used in applications where thermal management
and/or lightweight are important factors in total system design.
(2) Interim Consolidated Financial Statements
As permitted by the rules of the Securities and Exchange
Commission applicable to quarterly reports on Form 10-Q, these
notes are condensed and do not contain all disclosures required
by generally accepted accounting principles.
The accompanying financial statements for the fiscal quarters
ended June 28,September 27, 1997 and June 29,September 28, 1996 are unaudited. In the
opinion of management, the unaudited consolidated financial statements
of CPS reflect all adjustments necessary to present fairly the
financial position and results of operations for such periods.
The consolidated financial statements include the accounts
of CPS and its wholly-owned subsidiary, CPS Superconductor
Corporation. All significant intercompany balances and
transactions have been eliminated.
The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full
year.
(3) Net Income Per Share and Net Loss Per Share
Net income per share was computed based on the weighted average
number of common shares outstanding during the period plus common stock
equivalents which consist of options with exercise prices less than the
average market price of the Company's common stock during the period.
Net loss per share is computed based on the weighted average number
of common shares outstanding during the period. Common stock equivalents
pertaining to stock options and convertible notes payable were not
considered in the calculations of net loss per share since
their effect would be antidilutive.
8
(4) Inventory
Inventories consist of the following:
June 28,September 27, December 28,
1997 1996
Raw Materials $ 37,424 $ 39,412
Work in process 130,233109,497 85,933
Finished goods - 31,100
--------- ----------
$ 167,657146,921 $ 156,445
========= ==========
(5) Accrued Expenses
Accrued expenses consist of the following:
June 28,September 27, December 28,
1997 1996
Accrued legal and
accounting $ 147,64218,500 $ 161,267
Accrued interest 532,365599,535 445,450
Accrued payroll 98,62465,609 79,170
Accrued rent and utilities 8,2308,992 24,694
Accrued other 902(121,300) 79,185
--------- ----------
$787,763 $789,766$571,336 789,766
========= ========== 9
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking
statements that involve a number of risks and uncertainties.
There are a number of factors that could cause the Company's actual
results to differ materially from those forecasted or projected
in such forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements which
speak only as of the date hereof. The Company undertakes no
obligation to publicly release the results of any revisions to
these forward-looking statements which may be made to reflect
events or changed circumstances after the date hereof or to reflect
the occurrence of unanticipated events.
Financial Condition
- -------------------
The Company earned net income of $323$435 thousand in the secondthird
fiscal quarter of 1997 compared with a net loss of $113$131 thousand
in the secondthird fiscal quarter of 1996. The Company's cash balance
at June 28,September 27, 1997 and at December 28, 1996 was $317$464 thousand and
$113 thousand, respectively. 9
The improvement in the Company's overall financial
performance in the secondthird fiscal quarter of 1997 versus the secondthird
fiscal quarter of 1996 was primarily attributable to 1) increased
shipments of the Company's metal-matrix composites for use in
wireless telecommunication applications.
The Company's entire operations are currently housed in a leased
facility in Chartley, Massachusetts.applications, and 2) licensing revenues
of $130 thousand.
Through the first sixnine months of 1997, the Company financed its
working capital requirements through operations. The Company expects
it will continue to be able to fund its recurring working capital
requirements for the remainder of 1997 through operations.
In 1996 certain notes payable matured. Although the Company
seeks to modify the original terms of these notes, it is unable to
repay the matured balances at this time and there is no assurance
that the notes will be modified on terms acceptable to the Company.
As of June 28,September 27, 1997, the principal amount of convertible
notes payable was $1,870,000, and accrued interest on these convertible
notes payable was $473,611.$420,097. The principal and accrued interest of
convertible notes payable are convertible into the Company's common
stock at $0.50 per share at the option of the note holder.
9holders. The interest
rate on the convertible notes payable is 10% per annum. As of
September 27, 1997, the total principal and accrued interest for
convertible notes payable was convertible into 4,580,194 shares of the
Company's common stock at the option of note holders.
The Company's entire operations are currently housed in a leased
facility in Chartley, Massachusetts.
Results of Operations
- ---------------------
The growth in revenue from the secondthird fiscal quarter of 1996 to
the secondthird fiscal quarter of 1997 was primarily due to 1) increased
shipments of the Company's metal-matrix composites for use in
wireless telecommunication applications. Customer demandapplications, and units2) licensing revenues
of $130 thousand. Unit shipments increased, and while average unit price declined, reduced costs resulted
in improved margins. In the secondthird fiscal quarter of 1997
a
majoritywere 240% higher than unit shipments in the third fiscal quarter of
the Company's revenue was derived from1996, and 43% higher than unit shipments of products
in recurring production, whereas in the second fiscal quarter
of 1996,
a majority of the Company's revenue was derived from shipments of
prototype products which were not in recurring production.1997.
In the secondthird fiscal quarter of 1997 revenue from licensing
agreements $155was $130 thousand compared towith no revenue from licensing
agreements of $85 thousand
in the secondthird fiscal quarter of 1996.
The Company's total revenue in the secondthird fiscal quarter of 1997
was $985 thousand,$1.2 million, a 139%109% increase over secondthird fiscal quarter 1996 revenue
of $412$581 thousand. Total operating expenses in the secondthird fiscal
quarter of 1997 were $603$728 thousand, a 23%11% increase over secondthird fiscal
quarter 1996 operating expenses of $489$658 thousand. 10
Of the $114$70 thousand increase in operating expenses between the
secondthird fiscal quarter of 1996 and the secondthird fiscal quarter of 1997,
$97$53 thousand related to cost of sales and $17 thousand related to
selling, general and administrative expenses. The increase in cost
of sales related primarily to increasedthe significant increase in unit volume. Cost per
unit shipped declined from the third fiscal quarter of 1996 to the third
fiscal quarter of 1997 due to the change in product mix from prototype
shipments to production shipments, as well as fixed costs being spread
over a larger base. Other expense during the quarter consisted almost
exclusively of interest expense.
The cumulative effect of these revenues and costs resulted
in net income of $323$487 thousand, or $0.04$0.05 per share, in the
secondthird fiscal quarter of 1997, versus a net loss of $113$131 thousand,
or $0.01$0.02 loss per share, in the secondthird fiscal quarter of 1996. 10
PART II OTHER INFORMATION
Item 1 through Item 5: None
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Ceramics Process Systems Corporation
(Registrant)
Date: August 12,October 27, 1997 /s/Grant C. Bennett
Grant C. Bennett
President and Treasurer
(Principal Executive
Officer)