<PAGE>
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, 1995 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
December 30, 1995 was 7,307,402.
Page 1 of 12 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,
December 30, 1995 and June 30, 1995. 4 and 5
Consolidated Condensed Statements of
Operations, six months ended
December 30, 1995 and 1994. 6
Consolidated Condensed Statement of
Cash Flows, six months ended
December 30, 1995 and 1994. 7
Notes to Consolidated Condensed
Financial Statements. 9
Management's Discussion and Analysis
of Financial Condition and Results
of Operations. 10
Part II Other Information 11
(2)
<PAGE>
PART I FINANCIAL INFORMATION
(3)
<PAGE>
THE METAL ARTS COMPANY, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
12/31/95 6/30/95
<S> <C> <C>
Current Assets:
Cash $ 152,503 $ 78,592
Trade accounts receivable - net 228,207 230,564
Current portion of due from NYSERDA 32,326 80,730
Due from former subsidiary - net 12,500 0
Current portion of deferred tax asset 7,100 7,100
Prepaid expenses and other current assets 19,544 9,693
----------- ----------
452,180 406,679
Property, Plant and Equipment 865,622 828,150
Less: Accumulated depreciation (327,297) (288,032)
----------- --------
538,325 540,118
Other Assets:
Due from NYSERDA, net of current portion 15,582 8,970
Cash value - life insurance 7,893 7,893
Operating rights - net 19,430 19,430
Debt issuance costs - net 21,243 21,243
Deferred tax asset, net of current portion 180,700 180,700
Other assets 23,245 17,955
----------- ----------
268,093 256,191
----------- ----------
$ 1,258,598 $1,202,988
=========== ==========
</TABLE>
(4)
<PAGE>
THE METAL ARTS COMPANY, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITIED)
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
12/31/95 6/30/95
<S> <C> <C>
Current Liabilities:
Current portion of long-term debt $ 29,497 $ 26,262
Accounts payable - trade 134,597 135,359
Accrued expenses 0 9,528
Accrued payroll and related taxes 16,831 27,717
Accrued commissions 34,364 34,836
----------- ----------
215,289 233,836
Long-term Liabilities:
Long-term debt, net of current portion 462,131 384,958
Other long-term liability 243,222 243,222
Deferred tax liability 18,000 18,000
----------- ----------
723,353 646,180
Minority interest in subsidiary 135,312 125,002
Stockholders' equity:
Common stock - $.01 par value, 15,000,000
shares authorized; issued and outstanding:
7,307,402 at December 31, and June 30, 1995 73,074 73,074
Paid-in capital in excess of par value 2,358,188 2,358,188
Accumulated deficit (2,246,618) (2,233,292)
----------- -----------
184,644 197,970
----------- -----------
$ 1,258,598 $ 1,202,988
=========== ===========
</TABLE>
(5)
<PAGE>
THE METAL ARTS COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales $ 419,648 $ 341,101 $ 838,374 $ 730,192
Cost of goods sold 385,180 320,204 727,959 642,751
----------- ----------- ----------- -----------
Gross margin 34,468 20,897 110,415 87,441
Selling, general and
Administrative Expenses (60,470) (64,754) (118,149) (89,247)
Research and Development 18,640 (15,087) 16,956 (15,087)
----------- ----------- ----------- -----------
Operating income (loss) (7,362) (58,944) 9,222 (16,893)
Other income (expense) 0 981 0 (852)
Interest expense (8,067) (2,882) (13,484) (6,051)
Interest income 1,121 (523) 1,246 0
Minority interest in
Income of subsidiary (78) 2,056 (10,310) (10,544)
----------- ----------- ----------- -----------
(7,024) (368) (22,548) (17,447)
----------- ----------- ----------- -----------
Income (loss) from
continuing operations (14,386) (59,312) (13,326) (34,340)
Income (loss) from
discontinued operations 0 (72,572) 0 (8,837)
----------- ----------- ----------- -----------
Net income (loss) for
the period $ (14,386) $ (131,884) $ (13,326) $ (43,177)
=========== =========== =========== ===========
Weighted average number
of common shares out-
standing 7,307,402 7,280,832 7,307,402 7,280,755
=========== =========== =========== ===========
Earnings per share of common stock:
Income (loss) from
continuing operations $ .00 $ (.01) $ .00 $ (.01)
Income (loss) from
discontinued operations .00 (.01) .00 .00
----------- ----------- ----------- -----------
Net income (loss)
for the period $ .00 $ (.02) $ .00 $ (.01)
=========== =========== =========== ===========
</TABLE>
(6)
<PAGE>
THE METAL ARTS COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
December 31,
1995 1994
Cash flows from operating activities;
Net income (loss) for the period $ (13,326) $ (43,177)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 39,265 13,372
Minority interest in income of subsidiary 10,310 10,544
(Income) loss from discontinued operations 0 8,837
Change in operating accounts:
Accounts receivable 50,761 13,372
Prepaid expenses and other (21,753) (113,458)
Accounts payable (762) 33,972
Accrued expenses (9,528) (8,301)
Accrued payroll and commissions (11,492) 717
---------- ----------
43,475 (62,680)
Cash flows from investing activities:
Advances to former subsidiary (12,500) (8,367)
Capital expenditures (37,472) (82,034)
---------- ----------
(49,972) (90,401)
Cash flows from financing activities:
Exercise of stock warrants 0 13,800
Sale of debentures 0 250,000
Proceeds of long-term debt 100,000 0
Payments on long-term debt (19,592) (16,327)
---------- ----------
80,408 247,473
---------- ----------
Net increase (decrease) in cash 73,911 94,392
Cash at beginning of period 78,592 13,349
---------- ----------
Cash at end of period $ 152,503 $ 107,741
========== ==========
(7)
<PAGE>
December 31,
1995 1994
Supplemental cash flow information:
Cash paid for interest expense $ 8,068 $ 6,051
========= =========
Supplemental schedule of non-cash financing activities:
Sale of debentures $ 0 $ 275,000
Payment of liabilities 0 (25,000)
--------- ---------
Cash received from sale of debentures $ 0 $ 250,000
========= =========
(8)
<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, 1995. 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
Comapany's financial position as of December 30, 1995 and the results of
operations for the six months ended December 30, 1995 and 1994.
2. The results of operations for the six months ended December 30, 1995 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 six months ended December 30, 1995 and
1994. 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.
(9)
<PAGE>
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 NYSERDA'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 December 30, 1995 the company received a second payment
of $27,200 as a part of NYSERDA's funding program. The first payment of $80,700
was received in the first quarter.
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 1995
over 1994 and 1993 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 quarter of fiscal year 1996, Coating Technology operated
profitably with sufficient resources to sustain operations. As part of an
on-going upgrading of operating and laboratory measuring equipment, the Company
increased its working capital line by $100,000.
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.
(10)
<PAGE>
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).
Six Months Ended
December 30,
1995 1994
Consolidated Net Sales:
Metal Arts 500 0
Coating Technology $ 837,900 $ 730,000
Discontinued Operations 0 832,000
----------- -----------
$ 838,400 $ 1,562,000
Consolidated Net Income (Loss)
Metal Arts $ (47,700) $ (69,000)
Coating Technology 34,400 35,000
Discontinued Operations 0 (9,000)
----------- -----------
$ (13,300) $ (43,000)
----------- -----------
The Metal Arts Company, Inc.
The net sales for the Company for the six (6) months ended December 30, 1995
were $500 compared with -0- in the previous year. The Company showed a loss of
$47,700 versus a loss of $69,000 the previous year.
Coating Technology, Inc.
Coating Technology's sales for the six (6) months ended December 30, 1995 were
$837,900 as compared with $730,000 in the previous year. The Company showed a
profit of $34,400 as compared with a profit of $35,000 in the previous year.
(11)
<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: February 10, 1996 Stanley J. Dahle
-----------------
Stanley J. Dahle
President
Date: February 10, 1996 Albert A. Cauwels
-----------------
Albert A. Cauwels
Treasurer
(12)
<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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-30-1995
<CASH> 152,000
<SECURITIES> 0
<RECEIVABLES> 228,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 452,000
<PP&E> 866,000
<DEPRECIATION> 327,000
<TOTAL-ASSETS> 1,259,000
<CURRENT-LIABILITIES> 215,000
<BONDS> 0
<COMMON> 7,300,000
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,259,000
<SALES> 838,000
<TOTAL-REVENUES> 838,000
<CGS> 728,000
<TOTAL-COSTS> 829,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,000
<INCOME-PRETAX> 1,000
<INCOME-TAX> 0
<INCOME-CONTINUING> (13,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
