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 MARCH 31, 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 1,557,699
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CONSUMAT SYSTEMS, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION:
Item 1:
Consolidated Condensed Balance Sheets . . . . . . . . . 4
Consolidated Condensed Statements of Income . . . . . . 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
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CONSUMAT SYSTEMS, INC.
PART I. FINANCIAL INFORMATION
ITEM 1.
<PAGE>
CONSUMAT SYSTEMS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
March 31,
1995 December 31,
(Unaudited) 1994
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 173,124 $ 59,183
Accounts receivable (net of allowance for
doubtful accounts of $10,000 at March 31,
1995 and December 31, 1994) 223,039 244,320
Inventories 206,376 226,716
Prepaid expenses and other 74,541 104,968
Total current assets 677,080 635,187
Property, plant and equipment, at cost,
net of accumulated depreciation and amortization 721,376 761,444
Note receivable from officer 38,000 38,000
$ 1,436,456 $ 1,424,631
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 106,559 145,902
Accounts/note payable 107,713 299,787
Customer deposits 85,999 50,719
Accrued contract and warranty expense 658,688 404,971
Accrued interest 29,467 23,006
Other accrued expenses 151,805 201,455
Total current liabilities 1,424,279 1,409,888
Long-term debt 100,692 100,692
Capitalized lease obligation 621,121 641,362
Stockholders' Equity (deficit):
Common stock, $3 par value: authorized 3,333,333 shares:
issued 1,557,699 shares at March 31, 1995 and
December 31, 1994 4,673,097 4,673,097
Capital in excess of par value 5,227,958 5,227,958
Retained earnings (deficit) (10,610,691) (10,618,366)
Total stockholders' equity (deficit) (709,636) (717,311)
$ 1,436,456 $ 1,434,631
</TABLE>
See accompanying notes.
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CONSUMAT SYSTEMS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Month Period Ended
March 31,
1995 1994
Revenues:
Manufacturing $1,015,333 $ 796,769
1,015,333 796,769
Costs of Operations:
Cost of goods sold 767,731 713,212
767,731 713,212
Gross profit 247,602 83,557
Selling, general and
administrative expenses 246,167 242,942
Operating income (loss) 1,435 (159,385)
Other income (expense):
Investment income 1,834 200
Interest expense (24,294) (100,883)
Other 28,700 27,966
6,240 (72,717)
Income (loss) from continuing operations 7,675 (232,102)
Income from discontinued operations - 154,156
Net income (loss) $ 7,675 $ (77,946)
Earnings per common share:
Income (loss) from continuing operations $0.01 $(0.15)
Income from discontinued operations - $0.10
Net income (loss) $0.01 $(0.05)
See accompanying notes.
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CONSUMAT SYSTEMS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
Three Month Period Ended
March 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) from continuing operations $ 7,675 $ (232,102)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 40,068 43,205
Non cash compensation costs 2,250
Changes in operating assets and liabilities
net of non-cash transactions:
Accounts and retainage receivable 21,281 383,686
Inventories 20,340 18,661
Other current assets 30,427 37,862
Accounts payable (192,074) (48,092)
Customer deposits 35,280
Accrued contract and warranty expenses 253,717 (344,609)
Accrued interest 6,461 77,511
Other accrued expenses (49,650) 53,943
Net cash provided by operating activities of
continuing operations 173,525 (7,685)
Income from discontinued operations 154,156
Net cash provided by total operating activities 173,525 146,471
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 (154,156)
Net cash provided by (used in)
total investing activities (154,156)
Cash flows from financing activities:
Repayments on borrowings 42,357 53,815
Payments on capital lease obligation 17,227 10,846
Net cash provided by (used in) financing activities
of continuing operations (59,584) (64,661)
Net increase (decrease) in cash and cash equivalents 113,941 (72,346)
Cash and cash equivalents at beginning of period 59,183 45,638
Cash and cash equivalents (deficit) at end of period $ 173,124 $ (26,708)
</TABLE>
See accompanying notes.
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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 month period ended March 31, 1994 have
been reclassified and presented as discontinued operations.
The cash flow statement for the three month period ended March 31,
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 1,557,699 and 1,547,982, respectively, in the three
month periods ended March 31, 1995 and 1994. Shares outstanding and
earnings per share amounts for the period ended March 31, 1994 have
been restated to include the 450,793 shares previously subject to
rescission.
4. The Company incurred interest expense of $24,294 and $100,883 during
the three month periods ended March 31,1995 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 March 31, 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
1ST QUARTER 1995 - RESULTS OF OPERATIONS
The Company earned $7,675 on revenues of $1,015,333 from continuing
operations in the first quarter of 1995. In the first quarter of 1994 the
Company lost $232,102 on revenues of $796,769 from continuing operations.
Restricted working capital continued to hurt the Company's operations
in the first quarter of 1995 and adversely affected its ability to generate
additional revenues. Management believes that the current backlog is
adequate to support operations but the lack of sufficient working capital
impaired the Company's ability to generate additional revenues.
LIQUIDITY AND CAPITAL
Liquidity of the Company is of critical concern at the end of the
first quarter of 1995. At March 31, 1995, the Company had a working capital
deficiency of $747,199 and a net capital deficiency of $709,636.
The Company continues to have discussions with a number of potential
investors in an effort 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 $3,110,000 and $3,225,000 at March 31, 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.
RESULTS OF OPERATION 3/31/95
COMPARED WITH 3/31/94
Total 1995 first quarter revenues from continuing operations increased
by $218,000 or 28.4%. Total cost of operations increased by approximately
$55,000 for the first quarter of 1995. This resulted in a gross margin for
the first three months of 1995 of 24.4% compared to 10.5% for the same
period in 1994. Selling, general and administrative expenses increased by
approximately $3,000.
BALANCE SHEET
Total assets increased $1,825 from December 31, 1994. An increase in
cash at March 31, 1995 was offset by decreases in accounts receivable,
inventory, prepaid expenses and property, plant and equipment.
Total liabilities decreased $5,850 from December 31, 1994. Decreases
in accounts payable, other accrued expenses and capital lease obligations
at March 31, 1995 were offset by increases in customer deposits and 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 March 31,
1995 was previously reported in the Company's report on Form 10-K for the
year ended December 31, 1994.
ITEM 5 - OTHER INFORMATION
None
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 there unto duly authorized.
CONSUMAT SYSTEMS, INC.
(Registrant)
Date: May 10, 1995 /S/ROBERT L. MASSEY
Robert L. Massey
Chief Executive Officer
Date: May 10, 1995 /S/MARK E. HILLS
Mark E. Hills
Chief Accounting Officer
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 173
<SECURITIES> 0
<RECEIVABLES> 233
<ALLOWANCES> 10
<INVENTORY> 206
<CURRENT-ASSETS> 677
<PP&E> 3,912
<DEPRECIATION> 3,191
<TOTAL-ASSETS> 1,436
<CURRENT-LIABILITIES> 1,424
<BONDS> 0
<COMMON> 4,673
0
0
<OTHER-SE> (5,383)
<TOTAL-LIABILITY-AND-EQUITY> 1,436
<SALES> 1,015
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<CGS> 768
<TOTAL-COSTS> 216
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 24
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<EPS-PRIMARY> $0.01
<EPS-DILUTED> $0.01
</TABLE>
