<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 December 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 December
30, 1996 was 7,407,402.
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,
December 30, 1996 and June 30, 1996. 4 and 5
Consolidated condensed Statements of
Operations, six months ended December 30,
1996 and 1995. 6
Consolidated Condensed Statement of
Cash Flows, six months ended
December 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)
<TABLE>
<CAPTION>
ASSETS
12/31/96 6/30/96
----------- -----------
<S> <C> <C>
Current Assets:
Cash $ 82,177 $ 112,215
Trade accounts receivable - net 212,217 207,596
Current portion of due from NYSERDA 27,742 25,768
Due from former subsidiary - net 6,000 9,000
Current portion of deferred tax asset 14,200 14,200
Prepaid expenses and other current assets 25,419 29,519
----------- -----------
367,755 398,298
PROPERTY, PLANT AND EQUIPMENT 924,302 884,157
Less accumulated depreciation (422,090) (375,890)
----------- -----------
502,212 508,267
OTHER ASSETS
Due from NYSERDA, net of current portion 28,044 21,303
Cash value of life 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 35,305 30,479
----------- -----------
284,265 272,698
----------- -----------
TOTAL ASSETS $ 1,154,232 $ 1,179,263
=========== ===========
</TABLE>
(4)
<PAGE>
THE METAL ARTS COMPANY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
12/31/96 6/30/96
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 66,679 $ 66,679
Accounts payable - trade 131,684 208,213
Accrued expenses 19,312 9,412
Accrued payroll and related taxes 14,731 19,725
Accrued commissions 33,837 34,492
----------- -----------
266,243 338,521
LONG-TERM LIABILITIES
Long-term debt, net of current portion 384,939 404,946
Other long-term liability 243,222 243,222
Deferred tax liability 12,000 12,000
----------- -----------
640,161 660,168
MINORITY INTEREST IN SUBSIDIARY 140,014 129,898
STOCKHOLDERS' EQUITY
Common stock- $.01 par value, 15,000,000 shares
authorized; issued and outstanding; 7,407,402 at
December 31, 1996 and 7,307,402 at June 30, 1996 74,071 73,074
Paid-in capital in excess of par value 2,407,188 2,358,188
Accumulated deficit (2,373,118) (2,380,586)
----------- -----------
107,814 50,676
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 1,154,232 $ 1,179,263
=========== ===========
</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,
---------------------------- ----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SALES - NET $ 374,471 $ 419,648 $ 781,747 $ 838,374
COST OF SALES (319,515) (385,180) (655,552) (727,959)
GROSS MARGIN 54,956 34,468 126,195 110,415
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (67,775) (60,470) (127,524) (118,149)
RESEARCH AND DEVELOPMENT 23,463 18,640 35,980 16,956
OPERATING INCOME (LOSS) 10,644 (7,362) 34,651 9,222
INTEREST EXPENSE (8,545) (8,067) (18,203) (13,484)
INTEREST INCOME 264 1,121 806 1,246
MINORITY INTEREST IN INCOME
OF SUBSIDIARY (180) (78) (10,116) (10,310)
----------- ----------- ----------- -----------
(8,461) (7,024) (27,513) (22,548)
----------- ----------- ----------- -----------
NET INCOME (LOSS)
FOR THE PERIOD $ 2,183 ($ 14,386) $ 7,138 ($ 13,326)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING 7,357,402 7,307,402 7,332,402 7,307,402
=========== =========== =========== ===========
EARNINGS PER SHARE OF
COMMON STOCK:
Net income (loss) for the period $ 0.00 $ 0.00 $ 0.00 $ 0.00
=========== =========== =========== ===========
</TABLE>
(6)
<PAGE>
THE METAL ARTS COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
------------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the period $ 7,138 ($ 13,326)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS)
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Rent expense offset against advances to former subsidiary 3,000 0
Depreciation and amortization 46,200 39,265
Minority interest in income of subsidiary 10,116 10,310
Change in operating accounts:
Accounts receivable (13,336) 50,761
Prepaid expenses and other (726) (21,753)
Accounts payable (32,529) (762)
Accrued expenses 9,900 (9,528)
Accrued payroll and commissions (5,649) (11,492)
--------- ---------
24,114 43,475
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (40,145) (37,472)
Advances to former subsidiary 0 (12,500)
--------- ---------
(40,145) (49,972)
CASH FLOWS FINANCING ACTIVITIES
Proceeds from issuance of common stock 6,000 0
Proceeds of long-term debt 0 100,000
Payments on long-term debt (20,007) (19,592)
--------- ---------
(14,007) 80,408
NET INCREASE IN CASH (30,038) 73,911
CASH - BEGINNING 112,215 78,592
--------- ---------
CASH ENDING $ 82,177 152,503
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interst expense $ 18,203 $ 13,484
========= =========
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Accounts payable-trade satisfied $ 44,000 $ 0
Common stock issued (44,000) 0
--------- ---------
Cash paid $ 0 $ 0
========= =========
</TABLE>
(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 June30, 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 December 31, 1996 and the results of
operations for the six months ended December 31, 1996 and 1995.
2. The results of operations for the six months ended December 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 December 31,
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)
<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 31, 1996 the company received a fifth payment
of $48,700 as a part of NYSERDA's funding program. This brings the total
received to date of $238,700.
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 tun 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 six 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)
<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 31,
-----------------------------
1996 1995
--------- ---------
Consolidated Net Sales:
Metal Arts $ 9,800 $ 500
Coating Technology 772,000 837,900
--------- ---------
$ 781,800 $ 838,400
========= =========
Consolidated Net Income (Loss)
Metal Arts ($ 26,600) ($ 47,700)
Coating Technology 33,700 34,400
--------- ---------
$ 7,100 ($ 13,300)
========= =========
The Metal Arts Company, Inc.
The net sales for the Company for the six (6) months ended December 31, 1996
were $9,800 compared with $500 in the previous year. The Company showed a loss
of $26,000 versus a loss of $47,700 the previous year.
Coating Technology, Inc.
Coating Technology's sales for the six (6) months ended December 31, 1996 were
$772,000 as compared with $837,900 in the previous year. The Company showed a
profit of $33,700 as compared with a profit of $34,400 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: February 7, 1997 /s/ Stanley J. Dahle
-------------------------------
Stanley J. Dahle
President
Date: February 7, 1997 /s/ 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1996
<CASH> 82,000
<SECURITIES> 0
<RECEIVABLES> 212,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 368,000
<PP&E> 924,000
<DEPRECIATION> 422,000
<TOTAL-ASSETS> 1,154,000
<CURRENT-LIABILITIES> 266,000
<BONDS> 0
7,400,000
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,154,000
<SALES> 782,000
<TOTAL-REVENUES> 782,000
<CGS> 655,000
<TOTAL-COSTS> 747,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,000
<INCOME-PRETAX> 7,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
