<PAGE> 1
US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended 3-31-99
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE EXCHANGE ACT
For the transition period from _____________to______________
Commission file number_______2-97210-NY____________________
CVD EQUIPMENT CORPORATION
(Exact name of small business issuer as specified in its charter)
NEW YORK
(State or other jurisdiction of incorporation or organization)
11-2621692
(IRS Employer Identification Number)
1881 LAKELAND AVENUE, RONKONKOMA, NY 11779
(Address of principal executive offices)
516-981-7081
(Issuers Telephone Number)
(Former name, former address, and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be
filed by section 13 or 15 (d) of the Exchange Act during the past
12 months (or for such shorter periods 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15 (d) of the Exchange
Act after the distribution of securities under a plan confirmed
by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
2,918,750 SHARES OF COMMON STOCK, $.01 PAR VALUE AS OF 04-12-99
<PAGE> 2
CVD EQUIPMENT CORPORATION
NOTE TO FINANCIAL STATEMENTS
MARCH 31, 1999
BASIS OF FINANCIAL STATEMENTS
The financial data is subject to year end audit and does not claim to be
a complete presentation since note disclosure under generally accepted
accounting procedures is not included. Note disclosures required under
generally accepted accounting procedures are included in the Company's
audited financial statements filed as part of Form 10-KSB for the year
ended December 31, 1998. Form 10-QSB should be read in conjunction with
these financial statements.
The results of operations for the three months are not necessarily
indicative of those for the full year. In the opinion of management,
the accompanying unaudited financial statements contain all adjustments
necessary to fairly present the financial position and the results of
operation for the periods indicated.
<PAGE> 3
MANAGEMENT'S DISCUSSION
INTRODUCTION
Statements contained in this Report on Form 10-QSB that are not historical
facts are forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended, including without
limitation, statements regarding industry trends, strategic business
development, pursuit of new markets, competition, results from operations,
and are subject to the safe harbor provisions created by that statute. A
forward-looking statement may contain words such as "intends", "plans",
"anticipates", "believes", "expect to", or words of similar import.
Management cautions that forward-looking statements are subject to risks
and uncertainties that could cause the Company's actual results to differ
materially from those projected. These risks and uncertainties include,
but are not limited to, marketing success, product development, production,
technological difficulties, manufacturing costs, and changes in economic
conditions in the markets the Company serves. The Company undertakes no
obligation to release revisions to forward-looking statements to reflect
subsequent events, changed circumstances, or the occurrence of unanticipated
events.
FORWARD LOOKING STATEMENTS
Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations constitute "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance, or achievements of the Company to be materially different from
any future results, performance, or achievements expressed or implied by
such forward looking statements. These forward looking statements were
based on various factors and were derived utilizing numerous important
assumptions and other important factors that could cause actual results to
differ materially from those in the forward looking statements. Important
assumptions and other factors that could cause actual results to differ
materially from those in the forward looking statements, include, but are
not limited to: competition in the Company's existing and potential future
product lines of business; the Company's ability to obtain financing on
acceptable terms if and when needed; uncertainty as to the Company's future
profitability, uncertainty as to the future profitability of acquired
businesses or product lines, uncertainty as to any future expansion of the
company. Other factors and assumptions not identified above were also
involved in the derivation of these forward looking statements, and the
failure of such assumptions to be realized as well as other factors may also
cause actual results to differ materially from those projected. The Company
assumes no obligation to update these forward looking statements to reflect
actual results, changes in assumptions or changes in other factors affecting
such forward looking statements.
<PAGE> 4
YEAR 2000
The "Year 2000" issue is a result of computer systems that were programmed
in prior years using a two digit representation for the year. Consequently,
in the Year 2000, date sensitive computer programs may interpret the date
"00" as 1900 rather than 2000. The Company has completed an assessment of
its systems and those of our new Stainless Design Concepts division affected
by the Year 2000 issue and made the following determinations:
1. Readiness;
* Internal custom software - all internal software has been upgraded
and is now Year 2000 compliant.
* Computers (hardware) - all hardware is now Year 2000 compliant.
* External standard software - all external software used is now Year
2000 compliant.
* We have no manufacturing equipment with embedded technology (Non-IT),
to cause a Year 2000 problem.
* Manual back-up systems are easily implemented in all areas in the
event of a Year 2000 problem.
* The Company relies on third party service providers for services such
as telecommunications, Internet service and utilities. Interruption
of these services due to Year 2000 issues could affect the Company's
operations.
* A review of our significant component suppliers to determine the
extent to which the Company is Year 2000 vulnerable has determined
that sufficient alternate suppliers are available.
* A review of our customer base does not indicate that a Year 2000
issue should significantly adversely affect new order levels.
2. The costs to address the company's Year 2000 issues;
* Based upon the company's current evaluation, there should be no
significant additional cost incurred with achieving Year 2000
compliance.
* Costs for software and hardware to achieve Year 2000 compliance at
the new Stainless Design Concepts division has not been significant.
By using the same internal and external software as the parent
company we have been able to achieve Year 2000 compliance rapidly
and at minimum cost.
3. The risks of the company's Year 2000 issues;
* At this point in time, the company believes that it has minimum or no
exposure to Year 2000 problems.
4. The company's contingency plans;
* All systems can be manually backed up and the company can change
suppliers if required for purchases.
The conclusions herein are forward-looking statements and are based on
management's best estimates of future events. Risks of having a Year 2000
problem include the ability to discover and correct potential Year 2000
sensitive problems and the ability of third party service providers to bring
their systems into Year 2000 compliance.
<PAGE> 5
ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
REVENUE
A reduction in volume resulted in revenue for the first quarter 1999 being
$831,588, which was a 6% decrease from the first quarter 1998 revenues of
$881,581.
COSTS AND EXPENSES
The actual cost of revenue increased from $771,340 in the first quarter of
1999 when compared to $607,201 to the first quarter of 1998. Of this
$164,139 increase, $14,000 is attributed to depreciation expense, $28,000
to purchase of material, $15,000 to building rent, $90,000 to salaries and
$18,000 to utility expense.
Selling and shipping expense was higher by $56,806 in the first quarter of
1999 compared to the first quarter of 1998. This mainly resulted from a
$63,000 increase in salaries.
General and Administrative expenses rose by $69,789 in the first quarter of
1999 when compared to the first quarter of 1998. This resulted mainly from
increases in: salaries ($45,000) consulting fees ($4,000), building
maintenance ($5,000), legal fees ($9,000), building rent ($2,000), telephone
expense ($7,000), utility expense ($3,000), which was offset by a decrease
in shareholder's expense ($9,000).
Interest expense increased by $4,730 from 1999 to 1998, since the company's
average outstanding debt increased in 1999.
The significant increase in Costs and Expenses in the first quarter of 1999
over prior periods is associated with the startup of our new Stainless
Design Concepts division located at 1117 Old Kings Highway, Saugerties, NY
12477. The new division should be fully operational during the second
quarter of 1999 and contribute to an increase in corporate revenues.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position increased to $521,244 for the first quarter
ending 1999. This was mainly attributed to $959,355 accounts receivable
payment, which was offset by a $300,000 payment to outstanding debt which
is now paid in full.
First quarter ending 1999 accounts receivable decreased to $167,680 from
$347,126 from the beginning of the year. The decrease in receivables is
associated with the timing of accounts receivable payments and shipments.
EXHIBITS AND REPORTS ON FORM 8-K
CVD Equipment Corporation filed on April 29, 1999, a Form 8-K associated
with the purchase of the facility at 1117 Old Kings Highway, Saugerties,
NY 12477. CVD Equipment Corporation's, Stainless Design Concept division
has been operating out of the facility since the beginning of January 1999.
<PAGE> 6
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31,1999
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1999 1998
(UNAUDITED) (AUDITED)
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 648,733 $ 127,489
ACCOUNTS RECEIVABLE 167,680 347,126
COST IN ESTIMATED EARNINGS IN EXCESS
OF BILLINGS ON UNCOMPLETED CONTRACTS 628,596 1,180,253
SECURITIES AVAILABLE-FOR-SALE 762,720 1,018,340
INVENTORY 420,947 422,280
PREPAID INCOME TAXES 60,540 60,540
OTHER CURRENT ASSETS 18,620 33,212
------------ ------------
TOTAL CURRENT ASSETS 2,707,836 3,189,240
PROPERTY, PLANT AND EQUIPMENT 795,069 832,171
DEFERRED TAX ASSET 140,082 140,082
OTHER ASSETS 177,076 151,713
------------ ------------
TOTAL ASSETS $ 3,820,063 $ 4,313,206
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
SHORT-TERM BORROWINGS $ - $ 300,000
ACCOUNTS PAYABLE 136,860 67,156
ACCRUED EXPENSES 228,761 144,972
BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS - 46,993
DEFERRED TAX LIABILITY 4,096 5,905
CURRENT MATURITIES OF LONG-TERM DEBT 4,063 4,004
------------ ------------
TOTAL CURRENT LIABILITIES 373,780 569,030
LONG-TERM DEBT 15,898 17,137
------------ ------------
389,678 586,167
============ ============
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
COMMON STOCK - $0.01 PAR - SHARES AUTHORIZED 10,000,000;
ISSUED & OUTSTANDING 2,918,750 29,188 29,188
ADDITIONAL PAID-IN CAPITAL 2,784,060 2,784,060
RETAINED EARNINGS 608,513 901,356
ACCUMULATED OTHER COMPREHENSIVE INCOME 8,624 12,435
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 3,430,385 3,727,039
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 3,820,063 $ 4,313,206
============ ============
</TABLE>
<PAGE> 7
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
MARCH 31,1999
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1999 1998
(UNAUDITED) (AUDITED)
------------ ------------
<S> <C> <C>
REVENUES
REVENUE ON COMPLETED CONTRACTS $ 307,363 $ 215,462
REVENUE ON UNCOMPLETED CONTRACTS 524,225 666,119
------------ ------------
TOTAL REVENUES 831,588 881,581
------------ ------------
COSTS OF REVENUES
COST ON COMPLETED CONTRACTS 461,248 133,619
COST ON UNCOMPLETED CONTRACTS 310,092 473,582
------------ ------------
TOTAL COSTS OF REVENUES 771,340 607,201
------------ ------------
GROSS PROFIT 60,248 274,380
------------ ------------
OPERATING EXPENSES
SELLING AND SHIPPING 99,915 43,109
GENERAL AND ADMINISTRATIVE 268,197 198,408
------------ ------------
TOTAL OPERATING EXPENSES 368,112 241,517
------------ ------------
(307,864) 32,863
------------ ------------
OTHER INCOME (EXPENSE)
INTEREST INCOME 18,210 14,844
INTEREST EXPENSE (4,981) (251)
GAIN ON SALE OF LAND - 164,442
OTHER INCOME 1,791 500
------------ ------------
TOTAL OTHER INCOME 15,020 179,535
------------ ------------
INCOME BEFORE TAXES (292,844) 212,398
INCOME TAX BENEFIT (PROVISION) - (53,302)
------------ ------------
NET INCOME (292,844) 159,096
OTHER COMPREHENSIVE INCOME, NET OF TAX
UNREALIZED GAINS ON SECURITIES 8,624 -
------------ ------------
COMPREHENSIVE INCOME $(284,220) $159,096
============ ============
EARNINGS PER SHARE
BASIC $(0.10) $0.05
DILUTED $(0.10) $0.05
WEIGHTED AVERAGE SHARES
BASIC 2,918,750 2,918,750
DILUTED 2,992,144 2,996,019
</TABLE>
<PAGE> 8
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
MARCH 31,1999
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1999 1998
(UNAUDITED) (AUDITED)
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ (292,844) $ 159,096
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
DEFERRED TAX PROVISION (BENEFIT) - -
DEPRECIATION AND AMORTIZATION 52,391 36,133
GAIN ON DISPOSITION OF LAND - (164,442)
(INCREASE) DECREASE IN:
ACCOUNTS RECEIVABLES 179,445 67,809
COST AND ESTIMATED EARNINGS
IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 551,657 581,969
INVENTORY 1,332 46,762
PREPAID INCOME TAXES - 47,412
OTHER CURRENT ASSETS 14,595 15,627
OTHER ASSETS (33,165) (20,438)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE 69,704 64,623
ACCRUED EXPENSES 83,788 37,154
DEPOSIT ON A CONTRACT FOR THE SALE OF THE LAND - (40,000)
INCOME AND OTHER TAXES PAYABLE - (966)
BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS (46,993) -
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 579,910 830,739
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
PROCEEDS FROM DISPOSITION OF LAND - 720,000
CAPITAL EXPENDITURES (7,485) (90,491)
PURCHASE OF SECURITIES AVAILABLE-FOR-SALE 250,000 -
------------ ------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 242,515 629,509
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
PROCEEDS FROM SHORT-TERM BORROWING - -
PAYMENTS ON SHORT-TERM BORROWINGS (300,000) -
PROCEEDS FROM AUTOMOBILE LOAN - 25,693
PAYMENTS ON AUTOMOBILE LOAN (1,181) (369)
PROCEEDS FROM OFFICER LOAN RECEIVABLE - 499,154
------------ ------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (301,181) 524,478
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 521,244 1,984,726
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 127,489 239,476
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 648,733 $ 2,224,202
============ ============
</TABLE>
<PAGE> 9
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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, this
15th day of May 1999.
CVD EQUIPMENT CORPORATION
By: /s/ Leonard A. Rosenbaum
Leonard A. Rosenbaum
President and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Leonard A. Rosenbaum President, Chief Executive Officer and Director
Leonard A. Rosenbaum
/s/ Sharon Canese Chief Financial Officer
Sharon Canese
Date: May 17, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 648,733
<SECURITIES> 762,720
<RECEIVABLES> 796,276
<ALLOWANCES> 0
<INVENTORY> 420,947
<CURRENT-ASSETS> 2,707,836
<PP&E> 1,986,491
<DEPRECIATION> 1,191,422
<TOTAL-ASSETS> 3,820,063
<CURRENT-LIABILITIES> 373,780
<BONDS> 0
0
0
<COMMON> 2,813,248
<OTHER-SE> 617,137
<TOTAL-LIABILITY-AND-EQUITY> 3,820,063
<SALES> 307,363
<TOTAL-REVENUES> 831,588
<CGS> 785,046
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 370,531
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,981
<INCOME-PRETAX> (292,844)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (292,844)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
