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
For Quarter Ended September 30, 1996 Commission File Number 0-9998
THE METAL ARTS COMPANY, INC.
(Exact name of registrant as specified in its charter)
New York 06-0945588
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1 American Center, Geneva, New York 14456-1188
(Address of principal executive offices) (Zip 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 X No ___
The number of shares of common stock, $.01 par value, outstanding at September
30, 1996 was 7,307,402.
Page 1 of 11 Pages
Exhibit Index is on Page 2
<PAGE>
THE METAL ARTS COMPANY, INC.
I N D E X
Part I Financial Information:
Consolidated Condensed Balance Sheets,
September 30, 1996 and June 30, 1996. 4 and 5
Consolidated Condensed Statements of
Operations, three months ended September 30,
1996 and 1995 6
Consolidated Condensed Statement of
Cash Flows, three months ended
September 30, 1996 and 1995. 7
Notes to Consolidated Condensed
Financial Statements. 8
Management's Discussion and Analysis
of Financial Condition and Results
of Operations. 9
Part II Other Information 10
(2)
<PAGE>
PART I FINANCIAL INFORMATION
-------------------------------------------------------------------
(3)
<PAGE>
THE METAL ARTS COMPANY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
ASSETS
9/30/96 6/30/96
------- --------
Current Assets:
Cash $104,225 $112,215
Trade accounts receivable - net 217,106 207,596
Current portion of due from NYSERDA 32,921 25,768
Due from former subsidiary - net 7,500 9,000
Current portion of deferred tax asset 14,200 14,200
Prepaid expenses and other current assets 30,290 29,519
---------- ---------
406,242 398,298
Property, Plant and Equipment 892,574 884,157
Less: Accumulated depreciation (398,990) (375,890)
-------- --------
493,584 508,267
Other Assets:
Due from NYSERDA, net of current portion 24,961 21,303
Cash value of like insurance 7,893 7,893
Operating rights - net 18,090 18,090
Debt issuance costs - net 15,933 15,933
Deferred tax asset, net of current portion 179,000 179,000
Other assets 25,248 30,479
--------- ---------
271,125 272,698
$ 1,170,951 $ 1,179,263
--------- ---------
(4)
<PAGE>
THE METAL ARTS COMPANY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
9/30/96 6/30/96
------- -------
Current Liabilities:
Current portion of long-term debt $ 66,679 $ 66,679
Accounts payable - trade 187,090 208,213
Accrued expenses 19,017 9,412
Accrued payroll and related taxes 18,636 19,725
Accrued commissions 33,900 34,492
---------- ----------
325,322 338,521
Long-term Liabilities:
Long-term debt, net of current portion 394,942 404,946
Other long-term liability 243,222 243,222
Deferred tax liability 12,000 12,000
---------- ----------
650,164 660,168
Minority interest in subsidiary 139,834 129,898
Stockholders' equity:
Common stock - $.01 par value, 15,000,000
shares authorized; issued and outstanding:
7,307,402 at September 30, and June 30, 1996 73,074 73,074
Paid-in capital in excess of par value 2,358,188 2,358,188
Accumulated deficit (2,375,631) (2,380,586)
--------- ---------
55,631 50,676
$ 1,170,951 $ 1,179,263
--------- ---------
(5)
<PAGE>
THE METAL ARTS COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
September 30,
1996 1995
---- ----
Net sales $ 407,276 $ 418,726
Cost of goods sold 336,037 342,779
---------- ----------
Gross Profit 71,239 75,947
Selling, general and
administrative expenses 59,748 57,679
Research and development (12,517) 1.684
---------- ----------
47,231 59,363
---------- ----------
Operating income (loss) 24,008 16,584
Interest expense (9,658) (5,417)
Interest income 541 125
Minority interest in (income)
loss of subsidiary (9,936) (10,232)
(19,053) (15,524)
---------- ----------
Net income (loss) for the period $ 4,955 $ 1,060
---------- ----------
Weighted average number
of common shares out-
standing 7,307,402 7,307,402
---------- ----------
Earnings per share of common stock:
Net income (loss) for the period $ .00 $ .00
---------- ----------
(6)
<PAGE>
THE METAL ARTS COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
September 30,
1996 1995
---- ----
Cash flows from operating activities:
Net income (loss) for the period $ 4,955 $ 1,060
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Rent expense offset against advances
to former subsidiary 1,500 0
Depreciation and amortization 23,100 17,407
Minority interest in income of subsidiary 9,936 10,232
Change in operating accounts:
Accounts receivable (20,321) (120)
Prepaid expenses and other 4,460 54,437
Accounts payable (21,123) 19,610
Accrued expenses 9,605 (6,254)
Accrued payroll and commission (1,681) (696)
--------- ---------
10,431 95,696
Cash flows from investing activities:
Capital expenditures (8,417) (32,802)
--------- ---------
Cash flows from financing activities:
Payments on long-term debt (10,004) (8,128)
--------- ---------
Net increase (decrease) in cash (7,990) 54,746
Cash at beginning of period 112,215 78,592
--------- ---------
Cash at end of period $ 104,225 $ 133,338
--------- ---------
Supplemental disclosure of cash flow information:
Cash paid for interest expense $ 9,658 $ 5,417
--------- ---------
(7)
<PAGE>
THE METAL ARTS COMPANY, INC.
Notes to Consolidated Condensed Financial Statements
1. These statements should be read in conjunction with the audited financial
statements and the notes thereto and with Management's Discussion and Analysis
of Financial Condition and Results of Operations included in the Company's Form
10-K for the fiscal year ended June 30, 1996. In the opinion of management, the
accompanying consolidated condensed financial statements contain all
adjustments of a normal recurring nature necessary for the fair presentation of
the Company's financial position as of September 30, 1996 and the results of
operations for the three months ended September 30, 1996 and 1995.
2. The results of operations for the three months ended September 30, 1996 are
not necessarily indicative of the results to be expected for the full year.
3. Earnings (loss) per share of common stock is computed on the weighted
average number of shares outstanding during the three months ended September
30, 1996 and 1995. The weighted average number of shares outstanding at the end
of each period is determined by totaling the number of shares outstanding at
the end of each month in the period and dividing the sum by the number of
months in the period.
(8)
THE METAL ARTS COMPANY, INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operation
Liquidity and Capital Resources
Private Placement of Debentures
The company sold, as of September 30, 1994, eleven debentures for a total of
$275,000. The purpose of the private placement was to acquire the technology
for plating electroless nickel on aluminum, conduct research, development and
test trials with potential customers leading up to commercialization in the
computer disk market.
New York State Energy Research and Development Authority Funding
The company signed an agreement with the New York State Energy Research and
Development Authority (NYSERDA) dated June 22, 1995 for funding of $325,000 for
its new technology. This was done as a part of NYSERD's Industrial Waste
Minimization Program. The purpose of the funding is to provide money for the
completion of research and development, test trials, commercial demonstrations
and commercialization of the technology.
During the quarter ended September 30, 1996 the company received a fourth
payment of $25,800 as a part of NYSERDA's funding program. This brings the
total received to date of $190,000.
Operating Activities
Over the past three fiscal years Coating Technology has shown steady growth in
sales and earnings. Cash flow was adequate to provide for the acquisition of
capital equipment and provide the working capital necessary to run the
business. There was a significant increase in cash generated during the fiscal
year 1996 over 1995 and 1994 as well as the cash balance at the end of the
year. In addition, all relevant measures relating to: Debt to Equity; current
ratio; working capital; and net worth increased substantially.
Through the first three months of fiscal year 1997, Coating Technology operated
profitably with sufficient resources to sustain operations.
If Metal Arts is successful in commercializing its new technology it will be
necessary to raise additional capital. The amount of capital required will
depend on how rapidly market acceptance might occur. If this does occur it
could result in growth in the company's sales and earnings over the next few
years. The company will seek, if commercial sales commence, to raise additional
capital in the form of receivables financing, warrant conversion or other
investment mechanisms to sustain operations.
(9)
The Metal Arts Company, Inc.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
B. RESULTS OF OPERATIONS:
The following table illustrates the major components of consolidated net sales
and net income (loss).
Three Months Ended
September 30,
1996 1995
---- ----
Consolidated Net Sales:
Coating Technology $ 408,000 $ 419,000
------- --------
Consolidated Net Income (Loss)
Metal Arts $ (28,000) $ (33,000)
Coating Technology 33,000 34,000
------ ------
5,000 1,000
------- -------
The Metal Arts Company, Inc.
The net sales for the Company for the three (3) months ended September 30, 1996
were -0- compared with -0- in the previous year. The Company showed a loss of
$28,000 versus a loss of $33,000 the previous year.
Coating Technology, inc.
Coating Technology's sales for the three (3) months ended September 30, 1996
were $408,000 as compared with $419,000 in the previous year. The Company
showed a profit of $33,000 as compared with a profit of $34,000 in the previous
year.
(10)
<PAGE>
THE METAL ARTS COMPANY, INC.
Part II - Other Information:
Item 6 - Exhibits and Reports on Form 8-K
A. Exhibits - None
B. Reports on Form 8 - K - None
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.
THE METAL ARTS COMPANY, INC.
Date: November 9, 1996 Stanley J. Dahle
---------------- ----------------
Stanley J. Dahle
President
Date: November 9, 1996 Albert A.Cauwels
---------------- -----------------
Albert A.Cauwels
Secretary
(11)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 104,000
<SECURITIES> 0
<RECEIVABLES> 250,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 406,000
<PP&E> 893,000
<DEPRECIATION> 399,000
<TOTAL-ASSETS> 1,171,000
<CURRENT-LIABILITIES> 325,000
<BONDS> 0
<COMMON> 7,300,000
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,171,000
<SALES> 407,000
<TOTAL-REVENUES> 407,000
<CGS> 336,000
<TOTAL-COSTS> 383,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,700
<INCOME-PRETAX> 5,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
