SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(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, 1995 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 No 0-9253
CONSUMAT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-0720128
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Post Office Box 9379, Richmond, Virginia
23227
(Address of principal executive offices)
(Zip Code)
(804) 746-4120
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
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 close of the period covered by this report.
Class Number of Shares
Common Stock, par value $3.00 1,559,699
<PAGE>
CONSUMAT SYSTEMS, INC.
INDEX
Page No.
Part I. Financial Information:
Item 1:
Consolidated Condensed Balance Sheets. . . . . . . . . . . . . . . . . 4
Consolidated Condensed Statements of Operations. . . . . . . . . . . . 5
Consolidated Condensed Statements of Cash Flows. . . . . . . . . . . . 6
Notes to Consolidated Condensed Financial Statements . . . . . . . . . 7
Item 2:
Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations. . . . . . . . . . . . 8
Part II. Other Information
Item 1:
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 6:
Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
CONSUMAT SYSTEMS, INC.
PART I. FINANCIAL INFORMATION
ITEM 1.
<PAGE>
CONSUMAT SYSTEMS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 312,974 $ 59,183
Accounts receivable (net of allowance for
doubtful accounts of $10,000 at June 30,
1995 and December 31, 1994) 258,376 244,320
Inventories 233,506 226,716
Prepaid expenses and other 60,290 104,968
Total current assets 865,146 635,187
Property, plant and equipment, at cost,
net of accumulated depreciation and amortization 681,088 761,444
Note receivable from officer 38,000 38,000
$ 1,584,234 $ 1,434,631
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to stockholder $ 110,000 $ 110,000
Note payable to related party 174,048 174,048
Current maturities of long-term debt 109,991 145,902
Accounts/note payable 288,348 299,787
Customer deposits 50,719 50,719
Accrued contract and warranty expense 633,165 404,971
Accrued interest 36,000 23,006
Other accrued expenses 163,003 201,455
Total current liabilities 1,565,274 1,409,888
Long-term debt 87,917 100,692
Capitalized lease obligation 605,198 641,362
Stockholders' Equity (deficit):
Common stock, $3 par value: authorized 3,333,333 shares:
issued 1,559,699 and 1,557,699 shares at June 30,
1995 and December 31, 1994, respectively 4,679,097 4,673,097
Capital in excess of par value 5,222,708 5,227,958
Retained earnings (deficit) (10,575,960) (10,618,366)
Total stockholders' equity (deficit) (674,155) (717,311)
$ 1,584,234 $ 1,434,631
</TABLE>
See accompanying notes.
<PAGE>
CONSUMAT SYSTEMS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Month Period Ended Six Month Period Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Manufacturing $1,252,765 $ 877,268 $2,268,098 $1,674,037
1,252,765 877,268 2,268,098 1,674,037
Costs of Operations:
Cost of goods sold 968,361 690,886 1,736,092 1,404,098
968,361 690,886 1,736,092 1,404,098
Gross profit 284,404 186,382 532,006 269,939
Selling, general and
administrative expenses 225,883 310,296 472,050 553,241
Operating income (loss) 58,521 (123,914) 59,956 (283,302)
Other Income (Expense):
Investment income 1,707 750 3,542 951
Interest expense (26,214) (107,174) (50,509) (208,057)
Other 717 565 29,417 28,533
(23,790) (105,859) (17,550) (178,573)
Income (loss) from
continuing operations 34,731 (229,773) 42,406 (461,875)
Income from discontinued
operations 210,747 347,118
Net income (loss) $ 34,731 $ (19,026) $ 42,406 $ (114,757)
Earnings per common share:
Income (loss) from
continuing operations $0.02 $(0.15) $0.03 $(0.29)
Income from discontinued
operations - $ .14 - $ 0.22
Net income (loss) $0.02 $(0.01) $ 0.03 $(0.07)
</TABLE>
See accompanying notes.
<PAGE>
CONSUMAT SYSTEMS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Month Period Ended
June 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) from continuing operations $ 42,406 $ (461,875)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 80,356 86,410
Non cash compensation costs 750 2,250
Changes in operating assets and liabilities
net of non-cash transactions:
Accounts and retainage receivable (14,056) 518,665
Inventories (6,790) 22,262
Other current assets 44,678 (29,910)
Accounts payable (11,439) (185,200)
Accrued contract and warranty expenses 228,194 54,247
Accrued interest 12,994 155,625
Other accrued expenses (38,452) 112,476
Net cash provided by operating activities of
continuing operations 338,641 274,950
Income from discontinued operations 347,118
Net cash provided by total operating activities 338,641 622,068
Cash flows from investing activities:
Purchase of property,plant and equipment
Net cash provided by (used in) investing activities
of continuing operations
Decrease (increase) in net assets of
discontinued operations (347,118)
Net cash provided by (used in)
total investing activities (347,118)
Cash flows from financing activities:
Repayments on borrowings (54,036) (61,287)
Payments on capital lease obligation (30,814) (26,012)
Net cash provided by (used in) financing activities
of continuing operations (84,850) (87,299)
Net increase (decrease) in cash and cash equivalents 253,791 187,651
Cash and cash equivalents at beginning of period 59,183 45,638
Cash and cash equivalents (deficit) at end of period $ 312,974 $ 233,289
</TABLE>
See accompanying notes.
<PAGE>
CONSUMAT SYSTEMS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated condensed financial statements
have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The Company believes that the
disclosures made herein are adequate and that the information presented is
not misleading. In the opinion of management, all adjustments necessary
for a fair statement of the results of operations and financial position
for the periods presented have been made (and any 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 Annual Report on Form 10-K for the year ended December 31,
1994 filed with the Securities and Exchange Commission.
2. Discontinued Operations - Management sold the landfill operations,
Consumat Sanco, Inc., in July 1994.
Operating results for the three and six month period ended June 30, 1994
have been reclassified and presented as discontinued operations.
The cash flow statement for the six month period ended June 30,, 1994 has
also been reclassified and presented to reflect the discontinued
operations.
3. Earnings (loss) per share are computed on the weighted average number of
common and common equivalent shares outstanding during the period to the
extent the equivalents have a dilutive effect on earnings per common
share. The number of shares used in computing earnings (loss) per share
was 1,558,732 and 1,558,218, respectively, in the three and six month
periods ended June 30, 1995. The number of shares used in computing
earnings (loss) per share was 1,549,832 and 1,548,912, respectively, in
the three and six month periods ended June 30, 1994. Shares outstanding
and earnings per share amounts for the period ended June 30, 1994 have
been restated to include the 450,793 shares previously subject to
rescission.
4. The Company incurred interest expense of $50,509 and $208,057 during the
six month periods ended June 30,1995 and 1994, respectively.
5. Effective January 1, 1993, the Company adopted FASB Statement No. 109,
"Accounting for Income Taxes," which requires the liability method of
accounting similar to the method previously used by the Company under FASB
Statement No. 96. The components of the deferred tax asset at January 1,
1995 relate primarily to certain financial statement reserves and the
Company's net operating loss carryforward. The valuation allowance
provided by the Company has resulted in no deferred tax asset being
reflected in the June 30, 1995 balance sheet.
<PAGE>
CONSUMAT SYSTEMS, INC.
PART I. FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF UNAUDITED CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2ND QUARTER 1995 - RESULTS OF OPERATIONS
The Company earned $34,731 on revenues of $1,252,765 from continuing
operations in the second quarter of 1995. In the second quarter of 1994 the
Company lost $229,773 on revenues of $877,268 from continuing operations.
Restricted working capital continued to hurt the Company's operations in
the first half of 1995 and adversely affected its ability to generate additional
revenues.
LIQUIDITY AND CAPITAL
Liquidity of the Company is of critical concern at the end of the first
half of 1995. At June 30, 1995, the Company had a working capital deficiency of
$700,128 and a net capital deficiency of $674,155.
The Company continues its efforts to obtain debt or equity financing for
the Company. Management believes that such additional financing is still
critical to the Company's long-term operations. Such financing, if obtained
would enable the Company to improve operations, to obtain more favorable
purchasing arrangements with vendors and to strengthen its financial credibility
with potential customers.
Backlog was $2,065,000 and $3,225,000 at June 30, 1995 and December 31,
1994. Presently, the Company's available cash is not sufficient to support
operations through the end of 1995 without additional orders. This liquidity
problem will be relieved to the extent that the Company is able to make
arrangements for new capital.
<PAGE>
RESULTS OF OPERATION 6/30/95 COMPARED WITH 6/30/94
Total 1995 first half revenues from continuing operations increased by
$594,000 or 35.5%. Total cost of operations increased by approximately $332,000
for the first half of 1995. This resulted in a gross margin for the first six
months of 1995 of 23.5% compared to 16.2% for the same period in 1994. Selling,
general and administrative expenses decreased by approximately $81,000.
BALANCE SHEET
Total assets increased approximately $160,000 from December 31, 1994. An
increase in cash at June 30, 1995 was partially offset by decreases in prepaid
expenses and property, plant and equipment. Total liabilities increased
approximately $106,000 from December 31, 1994. Decreases in accrued expenses,
long- term debt and capital lease obligations at June 30, 1995 were more than
offset by an increase in accrued contract and warranty costs.
GENERAL COMMENTS
Other items cited in the 1994 Form 10-K are incorporated by reference.
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
A description of legal proceedings for the quarter ended June 30, 1995 was
previously reported in the Company's report on Form 10-K for the year ended
December 31, 1994.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
As of July 18,1995, the Company is in default on two notes. A note payable
for $110,000, plus accrued interest of $8,800, was due to a stockholder on July
13, 1995 and has not been paid. In addition, certain installments of principal
and interest, on a $174,048 note to a related party, totalling $145,644 are past
due. As of this date, no action has been taken by either noteholder relative to
the defaults on these notes.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of Consumat Systems, Inc. was held on
June 14, 1995, for the purpose of electing a board of directors, ratifying the
selection of auditors and voting on the proposal described below. Proxies for
the meeting were solicited pursuant to Section 14(a) of the Securities Exchange
Act of 1934.
All of management's nominees for directors as listed in the proxy
statement were elected with the following vote:
Shares Shares
Voted Shares Not
"For" "Withheld" Voted
Neil F. Vierson, III 1,062,567 4,504 490,558
Howard P. Harper 1,062,567 4,504 490,558
Robert L. Massey 1,062,999 4,072 490,558
The selection of Parham, P.C. as independent auditors was ratified by the
following vote:
Shares Shares Shares
Voted Voted Shares Not
"For" "Against "Abstaining" Voted
496,665 3,757 566,649 490,558
The proposal to amend Article III.A of the Articles of Incorporation to
increase the authorized capital stock of the Company to 10,000,000 shares was
not approved. The proposal required a favorable vote from a majority of the
total shares outstanding. The vote was as follows:
Shares Shares Shares
Voted Voted Shares Not
"For" "Against "Abstaining" Voted
492,153 5,686 569,232 490,558
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None
<PAGE>
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 there unto duly authorized.
CONSUMAT SYSTEMS, INC.
(Registrant)
Date: July 18, 1995 /s/ Robert L. Massey
Robert L. Massey
Chief Executive Officer
Date: July 18, 1995 /s/ Mark E. Hills
Mark E. Hills
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 313
<SECURITIES> 0
<RECEIVABLES> 258
<ALLOWANCES> 10
<INVENTORY> 234
<CURRENT-ASSETS> 865
<PP&E> 3,912
<DEPRECIATION> 3,231
<TOTAL-ASSETS> 1,584
<CURRENT-LIABILITIES> 1,565
<BONDS> 0
<COMMON> 4,679
0
0
<OTHER-SE> (5,353)
<TOTAL-LIABILITY-AND-EQUITY> 1,584
<SALES> 2,268
<TOTAL-REVENUES> 2,268
<CGS> 1,736
<TOTAL-COSTS> 1,736
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51
<INCOME-PRETAX> 42
<INCOME-TAX> 0
<INCOME-CONTINUING> 42
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
