<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 001-11835
The American Materials & Technologies Corporation
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0659916
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5915 Rodeo Road
Los Angeles, CA 92016
--------------------------------------
(Address of principal executive offices)
(310) 841-5200
--------------------------------------
(Registrant's telephone number, including area code)
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 No X
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: Common Stock, $0.01 par
value per share--3,837,908 shares issued and outstanding on August 6, 1996.
Transitional Small Business Disclosure Format (Check one): Yes No X
----- -----
<PAGE> 2
The American Materials & Technologies Corporation
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet at June 30, 1996 3
Condensed Consolidated Statement of Operations -
Three-month and Six-month periods ended June 30, 1996 and 1995 4
Condensed Consolidated Statement of Cash Flows - 5
Six-month periods ended June 30, 1996 and 1995
Condensed Consolidated Pro Forma Balance Sheet at June 30, 1996 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Default upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security-Holders 11
Item 5. Other Matters 11
Item 6. Exhibits and Reports on Form 8K 11
</TABLE>
<PAGE> 3
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets
Cash $ 2,800
Accounts receivable, net of allowance of $81,341 3,658,104
Inventories 1,852,408
Prepaid expenses and other current assets 1,171,207
-----------
Total current assets 6,684,519
-----------
Property and equipment, less accumulated depreciation and amortization of $320,237 4,219,100
Other assets 231,240
-----------
$11,134,859
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $2,188,633
Notes payable-affiliate 3,110,874
Accrued liabilities 2,290,042
Current portion of term loan-bank 112,000
Taxes payable 165,239
-----------
Total current liabilities 7,866,788
-----------
Term loan-bank 392,000
Revolving credit facility - bank 2,455,453
-----------
Total liabilities 10,714,241
-----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.01, authorized 5,000,000 shares; none issued and outstanding
Common stock, par value $0.01 per share, authorized 15,000,000; issued
and outstanding 1,541,908 15,419
Additional paid-in capital 296,917
Retained earnings 108,282
-----------
Total stockholders' equity 420,618
-----------
$11,134,859
===========
</TABLE>
page 3
<PAGE> 4
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-----------------------------------------------------------------
June 30, 1996 June 30,1995 June 30, 1996 June 30,1995
Combined (Note 1) Combined (Note 1)
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $5,417,627 $3,952,979 $10,668,948 $7,970,575
-----------------------------------------------------------------
Costs and expenses
Materials 2,769,312 1,723,782 5,200,694 3,640,439
Fixed and variable manufacturing 1,395,228 1,433,654 2,748,081 2,844,949
Selling, general and administrative 773,474 692,417 1,599,124 1,228,006
Research and development 106,790 81,675 201,100 160,064
-----------------------------------------------------------------
5,044,804 3,931,528 9,748,999 7,873,458
-----------------------------------------------------------------
Income from operations 372,823 21,451 919,949 97,117
Interest expense 182,265 212,795 369,153 424,395
-----------------------------------------------------------------
Income (loss) before income taxes 190,558 (191,344) 550,796 (327,278)
Provision for income taxes 51,312 165,239
-----------------------------------------------------------------
Net income (loss) $139,246 ($191,344) $385,557 ($327,278)
===================================================================================================================
Net income (loss) per common share $0.07 $0.20
Weighted average number of common shares 1,903,879 1,891,379
</TABLE>
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<PAGE> 5
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30, 1996 June 30,1995
Combined (Note 1)
-----------------------------
<S> <C> <C>
Cash used in operations:
Net income (loss) $385,557 ($327,278)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization 277,173 658,047
Non-cash interest expense 39,117 -
(Increase) decrease in current assets:
Accounts receivable (1,230,499) (346,994)
Inventory 116,902 (288,801)
Prepaid expenses and other current assets (859,942) 572,744
Increase (decrease) in current liabilities:
Accounts payable (402,724) (65,696)
Accrued liabilities 734,525 (388,474)
Taxes payable 165,239 -
Decrease in other assets (86,989) -
Net cash used in operating activities: (861,641) (186,452)
-------------------------
Cash used for investing activities:
Capital expenditures (92,833) (107,596)
-------------------------
Net cash used for investing activities (92,833) (107,596)
-------------------------
Cash provided by financing activities:
Borrowings under revolving credit 1,593,280 424,395
Repayments under revolving credit (853,523) (250,133)
Payment of term loan-bank (56,000) -
Proceeds from issuance of common stock 100,000 12,000
-------------------------
Net cash provided by financing activities 783,757 186,262
-------------------------
Net decrease in cash (170,717) (107,786)
Cash at beginning of period 173,517 109,586
-------------------------
Cash at end of period $2,800 $1,800
=========================
Supplementary Information
Cash paid for interest $160,225 $132
Cash paid for taxes $3,200 $800
</TABLE>
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<PAGE> 6
THE AMERICAN MATERIALS & TECHNOLOGIES CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(unaudited)
See Note 4
<TABLE>
<S> <C>
ASSETS
Current assets
Cash $4,503,566
Accounts receivable, net of allowance of $81,341 3,658,104
Inventories 1,852,408
Prepaid expenses and other current assets 721,185
-----------
Total current assets 10,735,263
-----------
Property and equipment, less accumulated depreciation and amortization of $320,237 4,219,100
Other assets 231,240
-----------
$15,185,603
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable 1,991,926
Notes payable-affiliate 0
Accrued liabilities 1,818,384
Current portion of term loan-bank 112,000
Taxes payable 165,239
-----------
Total current liabilities 4,087,549
-----------
Term loan-bank 392,000
Revolving credit facility - bank 0
-----------
Total liabilities 4,479,549
-----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.01, authorized 5,000,000 shares; none issued and outstanding
Common stock, par value $0.01 per share, authorized 15,000,000; issued
and outstanding 3,837,908 38,379
Additional paid-in capital 10,598,518
Retained earnings 69,157
-----------
Total stockholders' equity 10,706,054
-----------
$15,185,603
===========
</TABLE>
page 6
<PAGE> 7
THE AMERICAN MATERIALS AND TECHNOLOGIES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1. BASIS OF PRESENTATION
The information contained in these unaudited consolidated financial
statements is condensed from that which would appear in the Company's annual
consolidated financial statements. Accordingly, the condensed consolidated
financial statements included herein should be reviewed in conjunction with the
consolidated financial statements of December 31, 1995. The unaudited condensed
consolidated financial statements as of June 30, 1996 and 1995 and for the
quarterly and six month periods then ended include all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation.
The results of operations for interim periods are not necessarily indicative of
the results which may be expected for the entire year. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
The results of operations and cash flows for the periods ended June
30, 1995 represent those of Culver City Composites Corporation prior to its
acquisition by the Company combined with the results of the Company during the
same period. There were no intercompany transactions.
2. NET INCOME PER SHARE
Net income per share is computed using the weighted average number of
shares of outstanding common stock and dilutive common stock equivalents from
the assumed exercise of stock options and warrants.
3. SALE OF COMMON STOCK
On July 5, 1996 the Company completed an initial public offering
("IPO") for the sale of 2,000,000 shares of its common stock at $5.50 per share.
Subsequently, on July 26, 1996, the underwriter exercised an IPO related option
to purchase an additional 296,000 shares at $5.50 per share. The proceeds were
used to repay the outstanding loans under the Revolving Facility and repay loans
and interest of $172,000 to an affiliate. The Revolving Facility may be
reborrowed as needed. The remaining funds have been invested in short term
investment grade securities and overnight money market accounts pending their
use to fund potential acquisitions and capital expenditures. The Company's
common stock is traded on both the Nasdaq Small Cap Market (symbol "AMTK") and
the Pacific Stock Exchange (symbol "MTK").
4. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The unaudited pro forma condensed consolidated balance sheet has been
prepared to reflect the sale of common stock as outlined in Note 3 above as if
it occurred June 30, 1996. The pro forma balance sheet reflects the receipt of
the approximate $12.6 million gross proceeds from the sale of common stock, the
Company's repayment of the outstanding loans under the Revolving Facility and
from an affiliate, including accrued interest. The underwriter's discount and
selling expenses, and other expenses related to the sale of common stock (a
total of approximately $2.3 million) were charged to Additional paid-in capital.
The remaining value assigned to the warrant issued to an affiliate
(approximately $39,000) was charged to Retained earnings.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction
with the Condensed Consolidated Financial Statements and Notes thereto.
OVERVIEW
AMT was incorporated in Delaware on March 29, 1995 and operates in the
advanced materials and technologies industries. AMT is a holding company with
one operating subsidiary, Culver City Composites Corporation ("CCC"). AMT's
activities for the period March 29, 1995 (inception) to December 19, 1995
produced no revenue, and were limited to the acquisition of CCC. On December
19, 1995 AMT acquired all the stock of CCC. The following discussion reviews
the financial results of the Company for the three and six month periods ended
June 30, 1996, as compared to the financial results of CCC combined with AMT
for the three and six month periods ended June 30, 1995.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 and June 30, 1995
Sales were $5,418,000 (compared to $3,953,000), an increase of
$1,465,000 or 37% over the corresponding period in 1995. The Company estimates
that volume increases accounted for approximately 80% of the total and price
increases accounted for the remainder.
For the quarter ended June 30, 1996, the Company realized a gross
profit margin of $1,253,000, or 23% of sales (compared to 20% of sales), an
increase of $457,000 or 57% over the corresponding period of 1995. The
improvement was a result of a decrease (to 26% of sales in 1996 compared to 36%
of sales in 1995) in fixed and variable costs of manufacturing which more than
offset an increase in materials (to 51% of sales in 1996 compared to 44% in
1995).
The material cost increase was primarily due to three factors. First
were the effects of the early 1996 8% increase in fiberglass prices. Although
the Company generally was able to pass on the price increase, in the second
quarter 1996 it replaced lower cost fiberglass products with the new higher
priced items. In 1995 fabric material prices were generally constant. Second was
a change in product mix. Products based on fiberglass, which require less
materials as a percentage of sales than do other products, accounted for
approximately 54% of product sales in the 1996 period compared to 60% of sales
in the 1995 period, with carbon and aramid based products accounting for most of
the other sales in each period. Third was the Company's effort to produce new
products for submission to existing and prospective customers which, if
accepted, might lead to new qualifications. Even if such customers qualify the
Company's new products for use there is no assurance that this would lead to
increased sales or profits.
Effective at the end of the second quarter, the Company's major
supplier increased glass prices by 3.8%, on top of an 8% increase in early
1996. There is no assurance that the Company will be able to pass this latest
price increase on to its customers. If it is unable to do so, this price
increase would have a material adverse effect on the Company's gross profit
margins.
Selling, general and administrative expenses increased by $81,000 or
12% to $773,000 as the Company added additional experienced staff in sales,
sales support, and administration. In addition, the Company tripled its
overseas commissioned sales force to better cover the major export markets.
<PAGE> 9
Research and development expenses were $107,000 in the second quarter
of 1996, an increase of $25,000 or 30% over the comparable period of 1995. The
Company intends to expand research and development activities and to that end
it has added additional staff and upgraded equipment.
Interest expense was $182,000 for the second quarter of 1996, a
decrease of $31,000 or 15%. Debt levels in the second quarter of 1996 were
approximately 50% what they were in 1995, although the interest rate was
substantially higher.
Six Months Ended June 30, 1996 and June 30, 1995
Sales were $10,669,000 (compared to $7,971,000), an increase of
$2,698,000 or 34% over the corresponding period in 1995. The Company
estimates that volume increases accounted for approximately two-thirds of
the increase and price increases accounted for the remainder. Boeing and GE
accounted for 26% of sales in the first half of 1996 compared to 30% in the
comparable period in 1995.
For the six months ended June 30, 1996, the Company realized a gross
profit margin of $2,720,000, or 25% of sales (compared to 19% of sales), an
increase of $1,235,000 or 83% over the corresponding period of 1995. The
improvement was a result of a decrease in fixed and variable costs of
manufacturing which more than offset an increase in materials.
Selling, general and administrative expenses increased $371,000 or 30%
to $1,599,000 as the Company bore all the corporate expenses of AMT and added
additional experienced staff in sales, sales support, and administration.
Research and development expenses were $201,000 in the first half of
1996, an increase of $41,000 or 26% over the comparable period of 1995. The
Company intends to expand research and development and to that effect it has
added additional staff and upgraded equipment.
Interest expense was $369,000 for the first half of 1996, a decrease
of $55,000 or 13%. Debt levels in the first half of 1996 were approximately 50%
what they were in 1995, although the interest rate was substantially higher.
As of June 30, 1996, the Company had net operating loss carryforwards
for federal income tax purposes. Due to the change-in-ownership provisions of
Section 382 of the Internal Revenue Code, the amount available to offset future
taxable income of the Company is limited to approximately $320,000 per year for
the next fifteen years.
LIQUIDITY AND CAPITAL RESOURCES
The Company used $5,657,546 to acquire CCC on December 19,1995. The
Company financed the purchase of CCC with loans aggregating $3,150,000 from an
affiliate and borrowings under its Revolving Credit Agreement. The Revolving
Credit Agreement consists of a $560,000 term loan and a $4,440,000 Revolving
Facility, with borrowing levels tied to a formula based on inventory and
accounts receivable. The borrowings under the Revolving Credit Agreement are
secured by all the assets of the Company. The Company paid approximately
$4,900,000 to purchase the shares of CCC and approximately $700,000 with
respect to closing and preclosing expenses.
For the six month period ended June 30, 1996, cash used in operations
was $862,000, as cash generated (including a $117,000 decrease in inventory due
to lower levels of work in process), was not sufficient to fund the increase in
receivables ($1,230,000) resulting from the
<PAGE> 10
increase in sales and a decrease of $402,000 in accounts payable (to bring
suppliers to their credit terms). The $860,000 increase in prepaid expenses and
other current assets consists to a large extent of insurance prepaid at the end
of the second quarter and deferred costs associated with the initial public
offering of the Company's common stock. These items were offset by an increase
of $735,000 in accrued expenses.
The net cash used in operating activities was financed by an increase
in borrowings under the Revolving Facility and a draw down of cash balances from
the year end level. The Company's policy is to use cash received to reduce
outstanding loans under the Revolving Facility and to re-borrow as needed. As a
result, the Company showed $2,800 of cash on hand at June 30, 1996.
On July 5, 1996 the Company completed an initial public offering for
the sale of 2,000,000 shares of its common stock at $5.50 per share.
Subsequently, on July 26, 1996, the underwriter exercised an IPO related option
to purchase an additional 296,000 shares at $5.50 per share. The proceeds were
used to repay the outstanding loans under the Revolving Facility, and repay
loans and interest of $172,000 to an affiliate. The Revolving Facility may be
reborrowed as needed. The remaining funds have been invested in short term
investment grade securities pending their use to fund potential acquisition and
capital expenditures. The Company's common stock is traded on both the Nasdaq
Small Cap Market (symbol "AMTK") and the Pacific Stock Exchange (symbol "MTK").
Capital expenditures were $93,000 for the six months ended June 30,
1996. However, the Company plans to expend approximately $500,000 to install
three new liquid bulk storage tanks, modify its resin mixing facilities, and
purchase additional testing equipment.
In April, 1996 the Company issued 25,000 shares of common stock in
exchange for patent rights covering a resin system developed by a third party.
The backlog at June 30, 1996 was $5.5 million.
The Company believes that existing cash, short term investment
balances, available borrowings under the Company's Revolving Credit Agreement,
and cash flows from operations will be sufficient to meet its working capital
and capital expenditure requirements through fiscal 1996.
FACTORS THAT MAY EFFECT FUTURE RESULTS
Except for the historical material contained herein, the matters
discussed in this report are forward-looking statements under the federal
securities laws. The Company advises readers not to place undue reliance on such
statements, in light of risks and uncertainties to which they are subject. The
reader's attention is particularly drawn to the Risk Factors identified in the
Company's June 27, 1996 Prospectus, incorporated hereto by reference, which
could affect the Company's performance, and could cause actual results to differ
materially from any forward-looking statements with respect to future periods.
<PAGE> 11
PART II
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
None.
ITEM 5. OTHER MATTERS.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit
No. Description Page
- ------- ----------- ----
3.1* Certificate of Incorporation
3.2* By-Laws
4.1* Specimen certificate for the Common Stock of the Company
(b) Reports on Form 8-K
None.
- ---------------
* Incorporated herein by reference to the Exhibits to the Company's
Registration Statement on Form SB-2 (Registration No. 333-3836).
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,800
<SECURITIES> 0
<RECEIVABLES> 3,658,104
<ALLOWANCES> 81,341
<INVENTORY> 1,852,408
<CURRENT-ASSETS> 6,684,519
<PP&E> 4,219,100
<DEPRECIATION> 320,237
<TOTAL-ASSETS> 11,134,859
<CURRENT-LIABILITIES> 7,866,788
<BONDS> 0
0
0
<COMMON> 15,419
<OTHER-SE> 405,199
<TOTAL-LIABILITY-AND-EQUITY> 11,134,859
<SALES> 5,417,627
<TOTAL-REVENUES> 5,417,627
<CGS> 5,044,804
<TOTAL-COSTS> 5,044,804
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 182,265
<INCOME-PRETAX> 190,558
<INCOME-TAX> 51,312
<INCOME-CONTINUING> 139,246
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 139,246
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
