<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 March 31, 1997 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 March 31,
1997 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,
March 30, 1997 and June 30, 1996. 4 and 5
Consolidated condensed Statements of
Operations, six months ended March 30,
1997 and 1996. 6
Consolidated Condensed Statement of
Cash Flows, six months ended
March 30, 1997 and 1996. 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
3/31/97 6/30/96
Current Assets:
Cash $ 47,419 $ 112,215
Trade accounts receivable - net 255,361 207,596
Current portion of due from NYSERDA 31,869 25,768
Due from former subsidiary - net 4,500 9,000
Current portion of deferred tax asset 14,200 14,200
Prepaid expenses and other current assets 18,079 29,519
--------- ---------
371,428 398,298
PROPERTY, PLANT AND EQUIPMENT 924,927 884,157
Less accumulated depreciation (445,190) (375,890)
--------- ---------
479,737 508,267
OTHER ASSETS
Due from NYSERDA, net of current portion 31,295 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 36,919 30,479
--------- ---------
289,130 272,698
--------- ---------
TOTAL ASSETS $1,140,295 $1,179,263
=======================
(4)
<PAGE>
THE METAL ARTS COMPANY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
3/31/97 6/30/96
CURRENT LIABILITIES
Current portion of long-term debt $ 66,679 $ 66,679
Accounts payable - trade 133,185 208,213
Accrued expenses 26,438 9,412
Accrued payroll and related taxes 25,596 19,725
Accrued commissions 33,419 34,492
----------- -----------
285,317 338,521
LONG-TERM LIABILITIES
Long-term debt, net of current portion 348,270 404,946
Other long-term liability 243,222 243,222
Deferred tax liability 12,000 12,000
----------- -----------
603,492 660,168
MINORITY INTEREST IN SUBSIDIARY 141,448 129,898
STOCKHOLDERS' EQUITY
Common stock- $.01 par value, 15,000,000 shares
authorized; issued and outstanding; 7,407,402 at
March 31, 1997 and 7,307,402 at June 30, 1996 74,074 73,074
Paid-in capital in excess of par value 2,407,188 2,358,188
Accumulated deficit (2,371,224) (2,380,586)
----------- -----------
110,038 50,676
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 1,140,295 $ 1,179,263
=========== ===========
(5)
<PAGE>
THE METAL ARTS COMPANY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, DECEMBER 31,
1997 1996 1997 1996
------------- ------------- ------------- ---------
<S> <C> <C> <C> <C>
SALES - NET $ 431,115 $ 412,222 $ 1,212,862 $ 1,250,596
COST OF SALES (350,501) (363,545) (1,006,053) (1,091,504)
------------- ------------- ------------- -----------
GROSS MARGIN 80,614 48,677 206,809 159,092
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (72,975) (86,494) (200,499) (204,643)
RESEARCH AND DEVELOPMENT 4,888 19,094 40,868 36,049
------------- ------------- ------------- -----------
OPERATING INCOME (LOSS) 12,527 (18,723) 47,178 (9,502)
INTEREST EXPENSE (8,945) (13,733) (27,148) (27,217)
INTEREST INCOME 76 728 882 1,974
MINORITY INTEREST IN INCOME
OF SUBSIDIARY (1,434) 335 (11,550) (9,975)
------------- ------------- ------------- -----------
(10,303) (12,670) (37,816) (35,218)
------------- ------------- ------------- -----------
NET INCOME (LOSS)
FOR THE PERIOD $ 2,224 ($ 31,393) $ 9,362 ($ 44,720)
============= ============= ============= ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,407,402 7,307,402 7,357,402 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)
NINE MONTHS ENDED
MARCH 31
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the period $ 9,362 ($ 44,720)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS)
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Rent expense offset against advances to
former subsidiary 4,500 0
Depreciation and amortization 69,300 61,123
Minority interest in income of subsidiary 11,550 9,975
Change in operating accounts:
Accounts receivable (63,858) 44,309
Prepaid expenses and other 5,000 (22,764)
Accounts payable (31,028) 8,254
Accrued expenses 17,026 (3,471)
Accrued payroll and commissions 4,798 554
--------- ---------
26,650 53,260
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (40,770) (54,316)
Advances to former subsidiary 0 (15,000)
--------- ---------
(40,770) (69,316)
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 (56,676) (29,592)
--------- ---------
(50,676) 70,408
--------- ---------
NET INCREASE IN CASH (64,796) 54,352
CASH - BEGINNING 112,215 78,592
--------- ---------
CASH ENDING $ 47,419 132,944
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interst expense $ 27,148 $ 27,217
========= =========
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
========= =========
(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 March 31, 1997 and the results of
operations for the nine months ended March 31, 1997and 1996
2. The results of operations for the nine months ended March
31, 1997 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 March 31, 1997 and 1996. 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 March 31, 1997 the company received a seventh payment
of $25,130 as a part of NYSERDA's funding program. This brings the total
received to date of $263,830.
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 nine 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).
Nine Months Ended
March 31,
1997 1996
----------- -----------
Consolidated Net Sales:
Metal Arts $ 44,000 $ 500
Coating Technology 1,168,900 1,250,000
----------- -----------
$ 1,212,900 $ 1,250,500
=========== ===========
Consolidated Net Income (Loss)
Metal Arts ($ 29,200) ($ 77,700)
Coating Technology 38,500 33,000
----------- -----------
$ 9,300 ($ 44,700)
=========== ===========
The Metal Arts Company, Inc.
- - ----------------------------
The net sales for the Company for the nine (9) months ended March 31, 1997 were
$44,000 compared with $500 in the previous year. The Company showed a loss of
$29,000 versus a loss of $77,700 the previous year.
Coating Technology, Inc.
- - ------------------------
Coating Technology's sales for the nine (9) months ended March 31, 1997 were
$1,168,900 as compared with $1,250,000 in the previous year. The Company showed
a profit of $38,500 as compared with a profit of $33,000 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: May 12, 1997 Stanley J. Dahle
------------ ----------------
Stanley J. Dahle
President
Date: May 12, 1997 Albert A. Cauwels
------------ -----------------
Albert A. Cauwels
Secretary
(11)
<TABLE> <S> <C>
<PAGE>
<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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1997
<CASH> 47,500
<SECURITIES> 0
<RECEIVABLES> 255,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 371,400
<PP&E> 924,000
<DEPRECIATION> 445,000
<TOTAL-ASSETS> 1,140,000
<CURRENT-LIABILITIES> 285,000
<BONDS> 0
<COMMON> 7,400,000
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,140,000
<SALES> 1,213,000
<TOTAL-REVENUES> 1,213,000
<CGS> 1,006,000
<TOTAL-COSTS> 1,247,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,000
<INCOME-PRETAX> 9,300
<INCOME-TAX> 0
<INCOME-CONTINUING> 9,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,300
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
