<PAGE> 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 quarterly period ended APRIL 3, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1984
For the transition period from _______________________ to ______________________
Commission file number 0-28062
CERION TECHNOLOGIES INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 02-0485458
------------------------ ---------------------------------------
(State of incorporation) (I.R.S. Employer Identification Number)
1401 Interstate Drive
Champaign, Illinois
- ---------------------------------------- ----------
(Address of principal executive offices) 61821-1090
(Zip Code)
Registrant's telephone number, including area code (217) 359-3700
--------------
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 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding As Of April 3, 1998
- ---------------------------- -------------------------------
Common Stock, par value $.01 7,043,747 shares
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PART 1-FINANCIAL INFORMATION
ITEM 1-FINANCIAL STATEMENTS
CERION TECHNOLOGIES INC.
BALANCE SHEETS
(dollars in thousands except share and per share data)
<TABLE>
<CAPTION>
April 3, December 31,
1998 1997
-------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,499 $ 4,588
Accounts receivable, net of allowances for
doubtful accounts and customer
returns of $309 and $385, respectively 7,218 10,271
Inventories 1,687 726
Prepaid expenses and other assets 301 208
Deferred income taxes 637 637
------- -------
Total current assets 12,342 16,430
Property, plant and equipment, net 8,718 8,769
Other assets 56 66
------- -------
$21,116 $25,265
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,197 $ 4,666
------- -------
Total current liabilities 1,197 4,666
Deferred income taxes 366 366
Commitments and contingencies
Stockholders' Equity:
Preferred Stock, par value $.01 per share, 100,000
shares authorized, none issued - -
Common Stock, par value $.01 per share, 20,000,000 shares authorized;
7,043,747 and 7,028,337 shares issued and outstanding, respectively 70 70
Additional paid-in capital 18,709 18,679
Retained earnings 774 1,484
------- -------
Total stockholders' equity 19,553 20,233
------- -------
$21,116 $25,265
======= =======
</TABLE>
The notes are an integral part of the financial statements.
1
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CERION TECHNOLOGIES INC.
STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
(unaudited)
April 3, March 28,
1998 1997
-------- ---------
<S> <C> <C>
Net sales $ 2,874 $8,266
Cost of sales 3,251 7,262
------- ------
Gross profit (377) 1,004
Selling, general and administrative expenses 873 982
------- ------
Operating income (loss) (1,250) 22
Interest income 67 88
------- ------
Income (loss) before provision (benefit)
for income taxes (1,183) 110
Provision (benefit) for income taxes (473) 44
------- ------
Net income (loss) $ (710) $ 66
======= ======
Net income (loss) per share, basic and diluted $ (0.10) $ 0.01
======= ======
Average common shares outstanding 7,034 7,018
</TABLE>
The notes are an integral part of the financial statements.
2
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CERION TECHNOLOGIES INC.
STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
---------------------
(unaudited)
April 3, March 28,
1998 1997
-------- ---------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income (loss) $ (710) $ 66
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Depreciation 523 643
Loss on disposal of property, plant and equipment (50) -
Changes in operating assets and liabilities:
Accounts receivable 3,053 (2,737)
Inventories (961) 298
Prepaid expenses and other assets (93) 108
Accounts payable and accrued expenses (3,469) 66
------- -------
Net cash used in operating activities (1,707) (1,556)
------- -------
Cash flows provided by (used in) investing activities:
Additions to property, plant and equipment (462) (150)
Proceeds from sale of property, plant and equipment 50 -
Purchase of short-term investments - (4,750)
------- -------
Cash flows used in investing activities (412) (4,900)
------- -------
Cash flows provided by (used in) financing activities:
Debt issuance costs - (100)
Proceeds from shares issued 30 10
------- -------
Cash flows provided by (used in) financing activities 30 (90)
------- -------
Decrease in cash (2,089) (6,546)
Cash at beginning of period 4,588 9,300
------- -------
Cash at end of period $ 2,499 $ 2,754
======= =======
Supplemental disclosure of cash flow information:
Interest paid $ - $ -
Income taxes paid $ 476 $ -
</TABLE>
The notes are an integral part of the financial statements.
3
<PAGE> 5
CERION TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
1. EARNINGS PER COMMON AND COMMON SHARE EQUIVALENTS
Earnings per common and common share equivalents are computed based on the
weighted average number of common shares and, as applicable, the weighted
average number of common share equivalents outstanding during the periods
presented.
Three Months Ended
------------------------
April 3, March 28,
1998 1997
--------- ---------
Common shares outstanding 7,033,881 7,018,406
Common share equivalents None None
2. REVOLVING CREDIT FACILITY
The Company secured on March 7, 1997 a $7.5 million revolving credit facility
("facility") that matures March 7, 2000. The facility is collateralized by all
the Company's assets and the Company may borrow against the facility based upon
prescribed advance rates applied to certain of the Company's accounts receivable
and inventories. Availability under the facility as of April 3, 1998 totaled
zero. No amounts were outstanding under the facility as of April 3, 1998.
The facility bears interest at the bank's prime rate plus 1/4 percent. The
facility's terms include a fee for the unused portion of the credit facility
equal to 3/8 percent per annum, payable monthly. The facility contains certain
covenants including the maintenance of certain financial ratios.
In connection with obtaining the facility, the Company paid a commitment fee
equal to 100 basis points of the total facility and other costs totaling
approximately $90,000 in 1997. These costs are being amortized over the term of
the facility.
3. LIQUIDITY MATTERS
During the second half of 1996, throughout 1997 and continuing into the first
quarter of 1998, industry market supply exceeded demand, resulting in
significant pricing and volume reductions and net losses for each of the last
two quarters of 1996, close to break-even performance for the first three
quarters of 1997 and a net loss in the first quarter of 1998. No assurance can
be given that further backwards integration by thin-film media manufacturers or
other industry factors will not result in canceled orders or further volume
reductions beyond levels experienced in the second half of 1996, 1997 and
through the first quarter of 1998. Additionally, the Company does not believe
current market conditions will support any price increases in the foreseeable
future. Unless the Company achieves substantial cost improvements, increased
demand and no further price reductions that exceed cost reductions beyond
year-end levels, the Company could incur net operating losses and negative cash
flows from operating activities. Without such cost improvements and increased
demand, at present cost levels and planned capital expenditures that may exceed
approximately $2.0 million annually, the Company over an extended period of time
may exhaust all or substantially all of its cash resources and borrowing
availability under its credit facility (See the "Revolving Credit Facility" note
for a description of the borrowing limitations under the Company's credit
4
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facility). In such event, the Company would be required to pursue other
alternatives to improve liquidity, including further cost reductions, sales of
assets, the deferral of certain capital expenditures and obtaining additional
sources of funds. Furthermore, any significant default by customers on the
payment of outstanding amounts due to the Company could cause a significant
reduction in liquidity and may exhaust the Company's cash resources sooner than
would otherwise happen. No assurances can be given that the Company will be able
to pursue such alternatives successfully.
During the first quarter of 1998, one of the Company's significant customers
became delinquent in the payment of outstanding accounts receivable totaling
$4.1 million. This delinquency occurred because of the customer experiencing
significant operating losses and negative cash flow from operations that
strained the customer's liquidity. Future payment of this amount by the customer
is expected to be structured payments over a time frame not to exceed one year.
The customer has made payments of $0.3 million against its obligations to the
Company since the customer became delinquent, leaving a balance of $3.8 million.
The anticipated structuring of future payments will reduce the Company's
liquidity and financial flexibility. Furthermore, in the event that this
customer's financial position worsens during the payment period, the risk of
default increases.
4. OTHER
The financial statements for the three month periods ended April 3, 1998 and
March 28, 1997 are prepared in accordance with generally accepted accounting
principles ("GAAP") for interim financial statements and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial position and
operating results for the interim periods. These financial statements should be
read in conjunction with the financial statements and notes thereto, together
with management's discussion and analysis of financial condition and results of
operations, contained in the Company's Form 10-K filed on March 27, 1998. The
results of operations for the three months ended April 3, 1998 are not
necessarily indicative of the results that may be expected for the entire fiscal
year ending December 31, 1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD - LOOKING STATEMENTS -- SAFE HARBOR
This Report contains certain "forward-looking" statements, including, but not
limited to the statements regarding the possible impact of cancellation of
orders by a major customer and backwards integration within the industry towards
the manufacture of aluminum disk substrates. Moreover, from time to time in both
written releases and reports and oral statements, the Company and its senior
management may express expectations regarding future performance of the Company.
All of these "forward-looking" statements are inherently uncertain, and
investors must recognize that actual events could cause actual results to differ
materially from senior management's expectations. Key risk factors that could,
in particular, have an adverse impact on current and future performance include
the Company's dependence on a small number of customers, a trend toward
backwards integration among thin-film disk manufacturers that may continue to
reduce demand for the Company's products, dependence on the intensely
competitive and cyclical hard disk drive industry, absence of long-term purchase
commitments from the Company's customers and risk of excess industry capacity.
See "Matters Affecting Future Results" included in the Company's Form 10-K dated
March 27, 1998 for a more detailed discussion of factors that could affect the
Company's performance and the value of its Common Stock.
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With respect to "forward-looking" statements contained herein, we urge our
shareholders to read Cerion's Form 10-K filed with the Securities and Exchange
Commission.
THREE MONTHS ENDED APRIL 3, 1998 AND MARCH 28, 1997
Net Sales. Net sales decreased $5.4 million, or 65.2%, to $2.9 million in
the three months ended April 3, 1998 from $8.3 million in the three months ended
March 28, 1997. The decrease in net sales for the three months resulted from the
Company's two largest customers decreasing their orders. The largest customer,
constituting 33% of revenues in the first quarter of 1997, purchased in the
fourth quarter of 1997 substrate manufacturing capacity to cover their
requirements. The second largest customer, constituting 25% of revenues in the
first quarter of 1997, had excess inventory in stock, thereby reducing their
requirements for substrates in the first quarter of 1998.
In addition, average sales prices decreased significantly between the first
quarter of 1998 and 1997, resulting in an average sales price in the first
quarter of 1998 that was approximately 8% lower than the first quarter of 1997.
Gross Profit. Gross profit decreased to $(377,000) in the three months
ended April 3, 1998 from $1.0 million in the three months ended March 28, 1997.
Gross profit as a percentage of net sales decreased to a negative 13.1% in the
first quarter of 1998 as compared to 12.1% in the first quarter of 1997. The
decrease in gross profit in the three months ended April 3, 1998 compared to the
three months ended March 28, 1997 is attributable to the 62% decrease in unit
sales combined with the 8% decrease in average sales price.
Selling, General & Administrative Expenses. Selling, general and
administrative expenses decreased $109,000, or 11.1%, to $873,000 in the three
months ended April 3, 1998 from $982,000 in the three months ended March 28,
1997. The reduction in absolute spending results from lower shipping costs
attributable to lower sales volume, and no profit sharing or bonuses in 1998 due
to the Company not achieving its operating targets. Selling, general and
administrative expenses as a percentage of net sales increased to 30.4% in the
first quarter of 1998 compared to 11.9% in the first quarter of 1997. The
increase in the percentage resulted from lower net sales.
Interest Income. Interest income consists of interest income from
short-term investments.
Provision (Benefit) for Income Taxes. Benefit for income taxes was
$473,000 for the three months ended April 3, 1998 as compared to a provision for
income taxes of $44,000 for the three months ended March 28, 1997. The Company's
effective tax rate was 40% in the first quarter of 1998 and 1997.
Quarterly Results. The Company's revenues and earnings may fluctuate
significantly from quarter to quarter based on a variety of factors, including
(i) the timing and size of new and recurring orders from customers, (ii) the
introduction and marketing of new products by the Company and its competitors,
(iii) changes in demand for the Company's products, (iv) general economic
conditions within the data storage industry, (v) timing of significant orders,
changes in pricing by the Company or its competitors, (vi) order cancellations,
modifications, quantity adjustments and shipment rescheduling, and (vii) changes
in product mix, and (viii) manufacturing yields and the level of utilization of
the Company's production capacity. The impact of these and other factors on the
Company's expense levels are based, in part, on its expectations as to future
sales. Because the Company's sales are generally made pursuant to purchase
orders that are
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subject to cancellation, modification, quantity reduction or rescheduling
generally without penalty, the Company's backlog as of any particular date may
not be indicative of sales for any future period, and changes to purchase orders
could cause the Company's net sales to fall below expected levels. If sales
levels are below expectations, operating results are likely to be materially
adversely affected. Furthermore, net income may be disproportionately affected
by a reduction in net sales because a proportionately smaller amount of the
Company's expenses varies with its sales.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements in 1997 were to fund working
capital needs and capital expenditures related to manufacturing process
automation. The Company's principal capital requirements in 1998 have been to
fund working capital needs and capital expenditures related to a pollution
control and recycling system. During the periods presented, these capital
requirements generally were satisfied by cash flows from operations and
supplemented from the proceeds of the Company's initial public offering that
occurred in 1996.
Net cash used in operating activities was $1.7 and $1.6 million in the three
months ended April 3, 1998 and March 28, 1997, respectively. The increase in
cash used in operating activities from the first three months of 1997 to the
first three months of 1998 was primarily due to the decrease in net income in
the first quarter of 1998 and higher accounts receivable balance at April 3,
1998. This was offset by the decrease in accounts payable from December 31, 1997
to April 3, 1998 which resulted from the lower level of sales in the first
quarter of 1998.
Net cash used in investing activities was $412,000 and $4.9 million in the first
three months of 1998 and 1997, respectively. Cash used in investing activities
in 1997 was primarily for the purchase of short-term investments. In 1998, the
primary investing activity was the purchase of a new pollution control and
recycling system which will reduce manufacturing costs through recycling of
supplies. The Company's short-term investments are comprised of investment grade
commercial paper.
Net cash provided by financing activities was $30,000 in the first three months
of 1998 and was related to the issuance of common stock in lieu of cash payment
of Board of Directors fees. In the first three months of 1997, net cash used by
financing activities was $90,000 and primarily related to costs of obtaining the
revolving credit facility.
The Company's future capital requirements will be to fund working capital needs
and equipment purchases aimed at reducing manufacturing costs through changes to
the manufacturing process. The Company's total expected capital expenditures for
1998 may exceed $2.0 million. Future additional capital expenditures will be
required to increase automation within the Company's manufacturing processes.
Based upon anticipated cash flows from operating activities, remaining proceeds
from the initial public offering completed in 1996 and credit availability, the
Company believes that it has the liquidity and capital
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resources needed to meet its financial commitments through 1998. Unless the
Company achieves substantial cost improvements, increased demand and no further
price reductions that exceed cost reductions beyond year-end levels, the Company
could incur net operating losses and negative cash flows from operating
activities. Without such cost improvements and increased demand, at present cost
levels and planned capital expenditures that may exceed approximately
$2.0 million annually, the Company over an extended period of time may exhaust
all or substantially all of its cash resources and borrowing availability under
its credit facility. In such event, the Company would be required to pursue
other alternatives to improve liquidity, including further cost reductions,
sales of assets, the deferral of certain capital expenditures and obtaining
additional sources of funds. Furthermore, any significant default by customers
on the payment of outstanding amounts due to the Company could cause a
significant reduction in liquidity and may exhaust the Company's cash resources
sooner than would otherwise happen. No assurances can be given that the Company
will be able to pursue such alternatives successfully.
During the first quarter of 1998, one of the Company's significant customers
became delinquent in the payment of outstanding accounts receivable totaling
$4.1 million. This delinquency occurred because of the customer experiencing
significant operating losses and negative cash flow from operations that
strained the customer's liquidity. Future payment of this amount by the customer
is expected to be structured payments over a time frame not to exceed one year.
The customer has made payments of $0.3 million against its obligations to the
Company since the customer became delinquent, leaving a balance of $3.8 million.
The anticipated structuring of future payments will reduce the Company's
liquidity and financial flexibility. Furthermore, in the event that this
customer's financial position worsens during the payment period, the risk of
default increases.
OUTLOOK
Cerion does not provide forecasts of future financial performance. The
statements contained in this Outlook are based upon current expectations. These
statements are "forward-looking"; actual events could cause actual results to
differ materially.
Adverse industry conditions during the second half of 1996, throughout 1997 and
continuing in the first half of 1998, in which available market supply exceeded
demand and significant pricing reductions caused the Company to incur net losses
in each of the last two quarters of 1996, operate at essentially breakeven
performance for the first three quarters of 1997 and incur a net loss in the
first quarter of 1998 are worsening in 1998. Despite the Company's profitability
in the fourth quarter of 1997, Cerion expects that a combination of factors
affecting the industry, including the acquisition of aluminum substrate
capabilities by certain of the Company's customers and an oversupply of aluminum
disk substrates in the market, could significantly and adversely affect the
Company's performance in the second quarter of 1998 and potentially throughout
the remainder of 1998. There can be no assurance that these or other factors
will not continue to negatively impact the Company's performance in subsequent
quarters. Such losses and breakeven performance have and will impair the
Company's liquidity and available sources of liquidity and may continue to
affect the Company adversely until significant product cost improvements are
achieved, combined with increased sales volumes to return to sustainable
profitability. See "Liquidity and Capital Resources."
The Company does not believe current market conditions will support any price
increases. Thus, any improvement in operating performance will require cost
improvements and/or order volume increases to occur. Unless the Company achieves
substantial cost improvements, increased demand and no further price reductions
that exceed cost reductions beyond year-end levels, the Company could incur net
operating losses and negative cash flows from operating activities. Without such
cost improvements and increased
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demand, at present cost levels and planned capital expenditures that could
exceed approximately $2.0 million annually, the Company over an extended period
of time may exhaust all or substantially all of its cash resources and borrowing
availability under its credit facility. In such event, the Company would be
required to pursue other alternatives to improve liquidity, including further
cost reductions, sales of assets, the deferral of certain capital expenditures
and obtaining additional sources of funds. Furthermore, any significant default
by customers on the payment of outstanding amounts due to the Company could
cause a significant reduction in liquidity and may exhaust the Company's cash
resources sooner than would otherwise happen. No assurances can be given that
the Company will be able to pursue such alternatives successfully.
During the first quarter of 1998, one of the Company's significant customers
became delinquent in the payment of outstanding accounts receivable totaling
$4.1 million. This delinquency occurred because of the customer experiencing
significant operating losses and negative cash flow from operations that
strained the customer's liquidity. Future payment of this amount by the customer
is expected to be structured payments over a time frame not to exceed one year.
The customer has made payments of $0.3 million against its obligations to the
Company since the customer became delinquent, leaving a balance of $3.8 million.
The anticipated structuring of future payments will reduce the Company's
liquidity and financial flexibility. Furthermore, in the event that this
customer's financial position worsens during the payment period, the risk of
default increases.
The Company's gross margin percentage is largely a function of product mix sold
in any period. Various other factors, including unit volumes, costs and yield
issues associated with initiating production on new processes also will continue
to affect the amount of cost of sales and the variability of the gross margin
percentage in future quarters. Additionally, increased depreciation resulting
from the significant capital spending in 1995 through 1997 and planned capital
spending in 1998, will negatively impact gross margins in future periods. The
planned 1998 capital spending is focused in the area of manufacturing process
changes to reduce product cost.
Reduction in demand from either a reduction in market requirements, further
backwards integration by thin-film media manufacturers or a sudden loss of one
or more customers will significantly impact the Company's operating performance.
Volatility in demand for the Company's products will have a substantial impact
on the Company's operating performance because of the fixed cost element of the
Company's manufacturing costs relative to total costs.
FINANCIAL ACCOUNTING STANDARDS NO. 128
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). The
adoption of SFAS 128 had no impact on the calculation of net income per share
for the periods presented. Net income per share for the periods presented is
determined by dividing the applicable net income by the weighted average number
of common shares outstanding during the period. Options to purchase shares were
outstanding during the quarters ended April 3, 1998 and March 28, 1997 but were
not included in the diluted earnings per share computation because the exercise
price exceeded the average market price for the period.
FINANCIAL ACCOUNTING STANDARDS NO. 130
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). SFAS 130 requires the presentation of comprehensive income, which
represents the change in equity of the Company from
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transactions and other events and circumstances from nonowner sources.
Comprehensive income includes all changes in equity except those resulting from
investments by owners and distributions to owners. SFAS 130 is effective for
financial statements issued for periods beginning after December 15, 1997 and
requires restatement of all prior-period financial statements presented. The
adoption of SFAS 130 had no impact on the Company's net income (loss) as
presented on the Statements of Operations.
INFLATION
In the opinion of management, inflation has not had a material effect on the
operations of the Company.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 8, 1996, an individual plaintiff, Joshua Teitelbaum, initiated a
lawsuit against Cerion Technologies Inc. ("Cerion" or the "Company"), Nashua
Corporation ("Nashua"), William Blair & Co. ("Blair") and certain Cerion
directors and officers in the Circuit Court of Cook County, Illinois. On
September 4, 1996, a second individual plaintiff, Philippe Olczyk, initiated a
similar lawsuit against the Company, Nashua, Blair and certain Cerion directors
in the Circuit Court of Cook County, Illinois. Both lawsuits purport to be
brought on behalf of a class consisting of all persons (other than the
defendants) who purchased the common stock of Cerion between May 24, 1996 and
July 9, 1996.
These two cases were consolidated before the same judge. On March 24, 1997,
Teitelbaum and Olcyzk, joined by a third plaintiff, Robert K. Pickup, filed a
Consolidated Amended Class Action Complaint ("Consolidated Complaint") against
the Company, Nashua, Blair, and certain Cerion directors and officers. The
Consolidated Complaint supersedes the prior complaints and also purports to be
on behalf of a class consisting of all persons (other than the defendants) who
purchased the common stock of Cerion between May 24, 1996 and July 9, 1996. The
Consolidated Complaint alleges that, in connection with the Cerion initial
public offering, the defendants issued certain materially false and misleading
statements and omitted the disclosure of material facts regarding, in
particular, certain significant customer relationships. The Consolidated
Complaint alleges that the defendants violated sections 11, 12(a)(2), and 15 of
the 1933 Securities Act, section 13 of the Illinois Blue Sky Law, and the
Illinois Consumer Fraud and Deceptive Practices Act. The Consolidated Complaint
seeks a declaration that the case may proceed as a class action, damages and
rescission of the sale of Cerion common stock by Cerion and Nashua, to the
extent purchasers still hold Cerion shares, or rescissory damages, if they sold
their Cerion stock; attorneys fees and costs; and other relief.
On October 9, 1997, the Circuit Court of Cook County, Illinois dismissed the
class action lawsuit filed against all defendants providing the Plaintiffs with
the option to file an amended complaint in which they may attempt to state a
claim against the Company and the other defendants. On December 5, 1997, the
Plaintiffs filed an amended complaint against the same defendants with
substantially similar alleged claims. On May 6, 1998, the Circuit Court of Cook
County, Illinois dismissed the amended class action lawsuit with prejudice.
Under Illinois law, the plaintiffs have 30 days in which to file a notice of
appeal of the Court's ruling. The Company believes the Amended Consolidated
Complaint to be without merit and will continue to defend vigorously against the
complaint if it is appealed.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
There has been no change in the information required by paragraphs (f)(2)
through (f)(4) of Item 701 of Regulation S-K from that previously reported by
the Company on Form S-R, except as follows with respect to the Company's use of
net offering proceeds to the Company from its initial public offering after
deducting previously reported expenses, as of April 3, 1998.
11
<PAGE> 13
The proceeds of $19,525,350 from the initial public offering were utilized as
follows as of April 3, 1998:
Construction of plant, building and facilities $ 1,163,209
Purchase and installation of machinery and equipment 4,888,994
Purchase of real estate 75,000
Repayment of indebtedness - First Nashua Note 1,156,429
Repayment of indebtedness - Second Nashua Note 10,184,973
Working capital, including cash and cash equivalents 2,056,745
Cash and cash equivalents included in working capital will continue to be used
for general corporate purposes.
In the Company's Prospectus, dated May 24, 1996, the Company stated that it
planned to use approximately $9.0 to $12.0 million of the proceeds of the
offering to build, purchase or lease a new facility and related equipment. As a
result of a change in market conditions during the second half of 1996, the
Company canceled its capacity expansion plans, which included the new facility.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
None.
B. Reports on Form 8-K
None.
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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.
CERION TECHNOLOGIES INC.
--------------------------------------------------
(Registrant)
Date: MAY 15, 1998 BY: /s/ Richard A. Clark
----------------------------------------------
Richard A. Clark
Vice President-Finance,
Chief Financial Officer and Treasurer
(principal financial and duly authorized officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> APR-03-1998
<EXCHANGE-RATE> 1
<CASH> 2,499
<SECURITIES> 0
<RECEIVABLES> 7,527
<ALLOWANCES> 309
<INVENTORY> 1,687
<CURRENT-ASSETS> 12,342
<PP&E> 15,738
<DEPRECIATION> 7,020
<TOTAL-ASSETS> 21,116
<CURRENT-LIABILITIES> 1,197
<BONDS> 0
0
0
<COMMON> 70
<OTHER-SE> 19,483
<TOTAL-LIABILITY-AND-EQUITY> 21,116
<SALES> 2,874
<TOTAL-REVENUES> 2,874
<CGS> 3,251
<TOTAL-COSTS> 3,251
<OTHER-EXPENSES> 873
<LOSS-PROVISION> 0
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