<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 _____________6-30-99________________
( ) 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 8-15-99
<PAGE> 2
CVD EQUIPMENT CORPORATION
NOTE TO FINANCIAL STATEMENTS
FOR THE QUARTER ENDING
JUNE 30, 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;
o Internal custom software - all internal software has been upgraded and
is now Year 2000 compliant.
o Computers (hardware) - all hardware is now Year 2000 compliant.
o External standard software - all external software used is now Year
2000 compliant.
o We have no manufacturing equipment with embedded technology (Non-IT),
to cause a Year 2000 problem.
o Manual back-up systems are easily implemented in all areas in the event
of a Year 2000 problem.
o 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.
o 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.
o 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;
o Based upon the company's current evaluation, there should be no
significant additional cost incurred with achieving Year 2000
compliance.
o 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;
o 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;
o 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 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999
REVENUE
An increase in volume resulted in revenue for the second quarter 1999 being
$1,397,614, which was a 41% increase from second quarter 1998 revenues of
$989,626.
COSTS AND EXPENSES
The actual cost of revenue increased to $844,048 in the second quarter of
1999 when compared to $704,050 in the second quarter of 1998. Of this
$139,998 increase, $14,000 is attributed to depreciation expenses, $22,000 to
utility expenses, $9,000 to travel expenses and $78,000 to capitalized labor.
Selling and shipping expense was higher by $138,838 in the second quarter of
1999 compared to the second quarter of 1998. This mainly resulted from an
increase in salaries.
General and Administrative expenses rose by $125,527 in the second quarter of
1999 when compared to the second quarter of 1998. This resulted mainly from
increases in: $9,000 in consulting fees, $11,000 in depreciation expenses,
$13,000 in accounting fees, $6,000 in legal fees and $73,000 in salaries.
Interest expense increased by $11,178 from 1999 to 1998, since the company's
average outstanding debt increased in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position decreased by $303,162 for the second quarter
ending 1999. This was mainly attributed to a $286,625 accounts receivable
payment, which was offset by a $500,000 cash payment to purchase a $1,400,000
facility at 1117 Old Kings Highway, Saugerties, NY 12477. CVD Equipment
Corporation's, Stainless Design Concepts division has been operating out of
the facility since the beginning of January 1999.
Second quarter ending 1999 accounts receivable increased to $390,998 from
$167,680 from the first quarter ending 1999. The increase in receivables is
associated with the timing of accounts receivable payments and shipments.
<PAGE> 6
CVD EQUIPMENT CORPORATION
BALANCE SHEETS
JUNE 30,1999
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1999 1998
(UNAUDITED) (AUDITED)
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 345,571 $ 127,489
ACCOUNTS RECEIVABLE 390,998 347,126
COST IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 507,100 1,180,253
SECURITIES AVAILABLE-FOR-SALE 490,620 1,018,340
INVENTORY 448,202 422,280
PREPAID INCOME TAXES 67,729 60,540
OTHER CURRENT ASSETS 20,362 33,212
------------ ------------
TOTAL CURRENT ASSETS 2,270,582 3,189,240
PROPERTY, PLANT AND EQUIPMENT 2,164,496 832,171
DEFERRED TAX ASSET 140,082 140,082
OTHER ASSETS 177,118 151,713
------------ ------------
TOTAL ASSETS $ 4,752,278 $ 4,313,206
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
SHORT-TERM BORROWINGS $ - $ 300,000
ACCOUNTS PAYABLE 231,477 67,156
ACCRUED EXPENSES 144,573 144,972
BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS - 46,993
DEFERRED TAX LIABILITY - 5,905
CURRENT MATURITIES OF LONG-TERM DEBT 13,319 4,004
------------ ------------
TOTAL CURRENT LIABILITIES 389,369 569,030
LONG-TERM DEBT 904,706 17,137
------------ ------------
1,294,075 586,167
------------ ------------
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 651,315 901,356
ACCUMULATED OTHER COMPREHENSIVE INCOME (6,360) 12,435
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 3,458,203 3,727,039
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 4,752,278 $ 4,313,206
============ ============
</TABLE>
<PAGE> 7
CVD EQUIPMENT CORPORATION
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
JUNE 30,1999
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30
1999 1998
(UNAUDITED) (UNAUDITED)
------------ ------------
<S> <C> <C>
REVENUES
REVENUE ON COMPLETED CONTRACTS $ 1,274,563 $ 137,427
REVENUE ON UNCOMPLETED CONTRACTS 123,051 852,199
------------ ------------
TOTAL REVENUES 1,397,614 989,626
------------ ------------
COSTS OF REVENUES
COST ON COMPLETED CONTRACTS 831,461 252,709
COST ON UNCOMPLETED CONTRACTS 12,587 451,341
------------ ------------
TOTAL COSTS OF REVENUES 844,048 704,050
------------ ------------
GROSS PROFIT 553,566 285,576
------------ ------------
OPERATING EXPENSES
SELLING AND SHIPPING 181,444 42,606
GENERAL AND ADMINISTRATIVE 333,274 207,747
------------ ------------
TOTAL OPERATING EXPENSES 514,718 250,353
------------ ------------
38,848 35,223
------------ ------------
OTHER INCOME (EXPENSE)
INTEREST INCOME 11,625 19,206
INTEREST EXPENSE (11,540) (362)
GAIN ON SALE OF LAND - -
OTHER INCOME 3,315 1,786
------------ ------------
TOTAL OTHER INCOME 3,400 20,630
------------ ------------
INCOME BEFORE TAXES 42,248 55,853
INCOME TAX BENEFIT (PROVISION) 556 (14,804)
------------ ------------
NET INCOME 42,804 41,049
OTHER COMPREHENSIVE INCOME, NET OF TAX
UNREALIZED LOSS ON SECURITIES AVAILABLE FOR SALE (14,984) -
------------ ------------
COMPREHENSIVE INCOME $ 27,820 $ 41,049
============ ============
EARNINGS PER SHARE
BASIC $ 0.01 $ 0.01
DILUTED $ 0.01 $ 0.01
WEIGHTED AVERAGE SHARES
BASIC 2,918,750 2,918,750
DILUTED 2,991,812 3,124,569
</TABLE>
<PAGE> 8
CVD EQUIPMENT CORPORATION
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
JUNE 30,1999
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1999 1998
(UNAUDITED) (UNAUDITED)
------------ ------------
<S> <C> <C>
REVENUES
REVENUE ON COMPLETED CONTRACTS $ 1,581,926 $ 352,889
REVENUE ON UNCOMPLETED CONTRACTS 647,276 1,518,318
------------ ------------
TOTAL REVENUES 2,229,202 1,871,207
------------ ------------
COSTS OF REVENUES
COST ON COMPLETED CONTRACTS 1,292,709 386,328
COST ON UNCOMPLETED CONTRACTS 322,679 924,923
------------ ------------
TOTAL COSTS OF REVENUES 1,615,388 1,311,251
------------ ------------
GROSS PROFIT 613,814 559,956
------------ ------------
OPERATING EXPENSES
SELLING AND SHIPPING 281,359 85,715
GENERAL AND ADMINISTRATIVE 601,471 406,155
------------ ------------
TOTAL OPERATING EXPENSES 882,830 491,870
------------ ------------
(269,016) 68,086
------------ ------------
OTHER INCOME (EXPENSE)
INTEREST INCOME 29,835 34,050
INTEREST EXPENSE (16,521) (613)
GAIN ON SALE OF LAND - 164,442
OTHER INCOME 5,106 2,286
------------ ------------
TOTAL OTHER INCOME 18,420 200,165
------------ ------------
INCOME BEFORE TAXES (250,596) 268,251
INCOME TAX BENEFIT (PROVISION) 556 (68,106)
------------ ------------
NET INCOME (LOSS) (250,040) 200,145
OTHER COMPREHENSIVE INCOME, NET OF TAX
UNREALIZED LOSS ON SECURITIES AVAILABLE FOR SALE (18,795) -
------------ ------------
COMPREHENSIVE INCOME (LOSS) $ (268,835) $ 200,145
============ ============
EARNINGS PER SHARE
BASIC $ (0.09) $ 0.07
DILUTED $ (0.08) $ 0.06
WEIGHTED AVERAGE SHARES
BASIC 2,918,750 2,918,750
DILUTED 2,992,036 3,124,801
</TABLE>
<PAGE> 9
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
JUNE 30,1999
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30
1999 1998
(UNAUDITED) (UNAUDITED)
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 42,804 $ 41,047
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH USED IN OPERATING ACTIVITIES:
DEFERRED TAX PROVISION (BENEFIT) - -
DEPRECIATION AND AMORTIZATION 62,029 28,872
(INCREASE) DECREASE IN:
ACCOUNTS RECEIVABLES (223,318) 50,039
COST IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 121,496 (646,620)
INVENTORY (27,254) 8,995
PREPAID INCOME TAXES (7,188) -
OTHER CURRENT ASSETS 1,278 (3,090)
OTHER ASSETS (7,846) (48,412)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE 94,616 30,105
ACCRUED EXPENSES (84,187) 63,621
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (27,570) (475,443)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
PROCEEDS FROM DISPOSITION OF LAND - -
CAPITAL EXPENSEEQUIPMENT (23,655) 35,140)
CAPITAL EXPENSE... BUILDING (1,400,000) -
SALE OF SECURITIES 250,000 (750,000)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (1,173,655) (785,140)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
PROCEEDS - CURRENT 9,255 90
PROCEEDS (PAYMENT) - LONGTERM 888,808 (1,586)
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 898,063 (1,496)
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (303,162) (1,262,079)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE QUARTER 648,733 2,224,202
------------ ------------
CASH AND CASH EQUIVALENTS AT THE END OF THE QUARTER $ 345,571 $ 962,123
============ ============
</TABLE>
<PAGE> 10
CVD EQUIPMENT CORPORATION AND SUBSIDIARIES
STATEMENT OF CASH FLOWS
JUNE 30,1999
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
1999 1998
(UNAUDITED) (UNAUDITED)
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) $ (250,040) $ 200,144
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 114,420 57,411
GAIN ON DISPOSITION OF LAND - (164,442)
(INCREASE) DECREASE IN:
ACCOUNTS RECEIVABLES (43,872) 117,848
COST IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 673,153 (64,652)
INVENTORY (25,922) 55,757
PREPAID INCOME TAXES (7,188) -
OTHER CURRENT ASSETS 15,873 51,215
OTHER ASSETS (41,015) (61,255)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE 164,321 94,728
ACCRUED EXPENSES (398) 59,808
BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS (46,993) -
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 552,339 346,562
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
PROCEEDS FROM DISPOSITION OF LAND - 715,381
CAPITAL EXPENSEEQUIPMENT (31,140) (121,013)
CAPITAL EXPENSEBUILDING (1,400,000) -
SALE OF SECURITIES 500,000 (750,000)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (931,140) (155,632)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
PAYMENT (PROCEEDS) - CURRENT (290,685) 4,665
PROCEEDS - LONGTERM 887,568 19,164
PROCEEDS FROM OFFICER LOAN RECEIVABLE - 507,888
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 596,883 531,717
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 218,082 722,647
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 127,489 239,476
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 345,571 $ 962,123
============ ============
</TABLE>
<PAGE> 11
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
August 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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 345,571
<SECURITIES> 490,620
<RECEIVABLES> 898,098
<ALLOWANCES> 0
<INVENTORY> 448,202
<CURRENT-ASSETS> 2,270,582
<PP&E> 3,410,144
<DEPRECIATION> 1,245,648
<TOTAL-ASSETS> 4,752,278
<CURRENT-LIABILITIES> 389,369
<BONDS> 0
0
0
<COMMON> 2,813,248
<OTHER-SE> 644,955
<TOTAL-LIABILITY-AND-EQUITY> 4,752,278
<SALES> 1,581,926
<TOTAL-REVENUES> 2,229,202
<CGS> 1,615,388
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 882,830
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,521
<INCOME-PRETAX> (250,596)
<INCOME-TAX> (556)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (250,040)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.08)
</TABLE>
