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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 6-30-00
( ) 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)
631-981-7081
(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:
2,980,750 SHARES OF COMMON STOCK, $.01 PAR VALUE AS OF 08-14-00
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CVD EQUIPMENT CORPORATION
NOTE TO FINANCIAL STATEMENTS
FOR THE QUARTER ENDING
JUNE 30, 2000
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, 1999. 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.
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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.
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<TABLE>
<CAPTION>
CVD EQUIPMENT CORPORATION
BALANCE SHEETS
JUNE 30, 2000
JUNE 30 DECEMBER 31
2000 1999
(UNAUDITED) (AUDITED)
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 293,665 $ 91,714
ACCOUNTS RECEIVABLE 1,508,265 1,019,771
COST IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 473,563 490,214
SECURITIES AVAILABLE-FOR-SALE 306,314 297,000
INVENTORY 436,798 713,762
DEFERRED TAX ASSET 14,416 17,490
PREPAID INCOME TAXES - 12,812
OTHER CURRENT ASSETS 21,399 39,387
------------ ------------
TOTAL CURRENT ASSETS 3,054,420 2,682,150
PROPERTY, PLANT AND EQUIPMENT 2,198,033 2,204,644
DEFERRED TAX ASSET 367,378 348,768
OTHER ASSETS 150,326 177,267
------------ ------------
TOTAL ASSETS $ 5,770,157 $ 5,412,829
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 204,018 $ 171,138
ACCRUED EXPENSES 421,748 284,134
BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS 32,756 67,504
CURRENT MATURITIES OF LONG-TERM DEBT 17,533 16,936
------------ ------------
TOTAL CURRENT LIABILITIES 676,055 539,712
LONG-TERM DEBT 969,196 978,552
------------ ------------
1,645,251 1,518,264
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
COMMON STOCK - $0.01 PAR - SHARES AUTHORIZED 10,000,000;
ISSUED & OUTSTANDING 2,980,750 29,808 29,188
ADDITIONAL PAID-IN CAPITAL 2,846,120 2,838,990
RETAINED EARNINGS 1,278,248 1,061,897
ACCUMULATED OTHER COMPREHENSIVE INCOME (29,270) (35,510)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 4,124,906 3,894,565
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 5,770,157 $ 5,412,829
============ ============
</TABLE>
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<TABLE>
<CAPTION>
CVD EQUIPMENT CORPORATION
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
JUNE 30, 2000
THREE MONTHS ENDED
JUNE 30
2000 1999
(UNAUDITED) (UNAUDITED)
------------ ------------
<S> <C> <C>
REVENUES
REVENUE ON COMPLETED CONTRACTS $ 1,385,539 $ 1,274,563
REVENUE ON UNCOMPLETED CONTRACTS 747,557 123,051
------------ ------------
TOTAL REVENUES 2,133,096 1,397,614
------------ ------------
COSTS OF REVENUES
COST ON COMPLETED CONTRACTS 1,056,318 831,461
COST ON UNCOMPLETED CONTRACTS 354,850 12,587
------------ ------------
TOTAL COSTS OF REVENUES 1,411,168 844,048
------------ ------------
GROSS PROFIT 721,928 553,566
------------ ------------
OPERATING EXPENSES
SELLING AND SHIPPING 123,468 181,444
GENERAL AND ADMINISTRATIVE 388,449 333,274
------------ ------------
TOTAL OPERATING EXPENSES 511,917 514,718
------------ ------------
OPERATING INCOME 210,011 38,848
------------ ------------
OTHER INCOME (EXPENSE)
INTEREST INCOME 13,301 11,625
INTEREST EXPENSE (17,570) (11,540)
OTHER INCOME 10,067 3,315
------------ ------------
TOTAL OTHER INCOME 5,798 3,400
------------ ------------
INCOME BEFORE TAXES 215,809 42,248
INCOME TAX (PROVISION) BENEFIT (75,579) 556
------------ ------------
NET INCOME 140,230 42,804
OTHER COMPREHENSIVE INCOME, NET OF TAX
UNREALIZED GAIN (LOSS) ON SECURITIES AVAILABLE FOR SALE 6,240 (14,984)
------------ ------------
COMPREHENSIVE INCOME $ 146,470 $ 27,820
============ ============
EARNINGS PER SHARE
BASIC $0.05 $0.01
DILUTED $0.04 $0.01
WEIGHTED AVERAGE SHARES
BASIC 2,980,750 2,918,750
DILUTED 3,163,221 2,991,812
</TABLE>
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<TABLE>
<CAPTION>
CVD EQUIPMENT CORPORATION
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
JUNE 30, 2000
SIX MONTHS ENDED
JUNE 30
2000 1999
(UNAUDITED) (UNAUDITED)
------------ ------------
<S> <C> <C>
REVENUES
REVENUE ON COMPLETED CONTRACTS $ 2,707,046 $ 1,581,926
REVENUE ON UNCOMPLETED CONTRACTS 1,201,480 647,276
TOTAL REVENUES 3,908,526 2,229,202
COSTS OF REVENUES
COST ON COMPLETED CONTRACTS 1,991,744 1,292,709
COST ON UNCOMPLETED CONTRACTS 623,335 322,679
TOTAL COSTS OF REVENUES 2,615,079 1,615,388
GROSS PROFIT 1,293,447 613,814
OPERATING EXPENSES
SELLING AND SHIPPING 245,870 281,359
GENERAL AND ADMINISTRATIVE 734,101 601,471
TOTAL OPERATING EXPENSES 979,971 882,830
OPERATING INCOME (LOSS) 313,476 (269,016)
OTHER INCOME (EXPENSE)
INTEREST INCOME 24,099 29,835
INTEREST EXPENSE (35,542) (16,521)
OTHER INCOME 13,147 5,106
TOTAL OTHER INCOME 1,704 18,420
INCOME(LOSS) BEFORE TAXES 315,180 (250,596)
INCOME TAX (PROVISION) BENEFIT (98,831) 556
NET INCOME (LOSS) 216,349 (250,040)
OTHER COMPREHENSIVE INCOME, NET OF TAX
UNREALIZED GAIN (LOSS) ON SECURITIES AVAILABLE FOR SALE 6,240 (18,795)
COMPREHENSIVE INCOME (LOSS) $ 222,589 $ (268,835)
EARNINGS PER SHARE
BASIC $0.07 $(0.09)
DILUTED $0.07 $(0.08)
WEIGHTED AVERAGE SHARES
BASIC 2,980,750 2,918,750
DILUTED 3,164,637 2,992,036
</TABLE>
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<TABLE>
<CAPTION>
CVD EQUIPMENT CORPORATION
STATEMENT OF CASH FLOWS
JUNE 30, 2000
THREE MONTHS ENDED
MARCH 31
2000 1999
(UNAUDITED) (UNAUDITED)
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME $ 140,230 $ 42,804
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH USED IN OPERATING ACTIVITIES:
DEFERRED TAX PROVISION (benefit) (5,815) -
DEPRECIATION AND AMORTIZATION 64,661 62,029
(INCREASE) DECREASE IN:
ACCOUNTS RECEIVABLES (740,273) (223,318)
COST IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 21,128 121,496
INVENTORY 43,851 (27,254)
PREPAID INCOME TAXES - (7,188)
OTHER CURRENT ASSETS 14,507 1,278
OTHER ASSETS (3,203) (7,846)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE 66,089 94,616
ACCRUED EXPENSES 89,832 (84,187)
BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS (93,284) -
NET CASH USED IN OPERATING ACTIVITIES (402,277) (27,570)
CASH FLOWS FROM INVESTING ACTIVITIES
CAPITAL EXPENSE.EQUIPMENT (83,943) (23,655)
CAPITAL EXPENSE.BUILDING - (1,400,000)
SALE OF SECURITIES - 250,000
NET CASH USED IN INVESTING ACTIVITIES (83,943) (1,173,655)
CASH FLOWS FROM FINANCING ACTIVITIES
PROCEEDS - CURRENT 303 9,255
(PAYMENTS) PROCEEDS - LONGTERM (4,721) 888,808
PROCEEDS FROM EXERCISE OF STOCK OPTIONS 6,750 -
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,332 898,063
NET DECREASE IN CASH AND CASH EQUIVALENTS (483,888) (303,162)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE QUARTER 777,553 648,733
CASH AND CASH EQUIVALENTS AT THE END OF THE QUARTER $ 293,665 $ 345,571
</TABLE>
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<TABLE>
<CAPTION>
CVD EQUIPMENT CORPORATION
STATEMENT OF CASH FLOWS
JUNE 30, 2000
SIX MONTHS ENDED
JUNE 30
2000 1999
(UNAUDITED) (UNAUDITED)
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME (LOSS) $ 216,349 $ (250,040)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
DEFERRED TAX PROVISION (benefit) (18,610) -
DEPRECIATION AND AMORTIZATION 126,481 114,420
(INCREASE) DECREASE IN:
ACCOUNTS RECEIVABLES (488,494) (43,872)
COST IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 16,651 673,153
INVENTORY 276,963 (25,922)
PREPAID INCOME TAXES 12,808 (7,188)
OTHER CURRENT ASSETS 17,989 15,873
OTHER ASSETS 3,926 (41,015)
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE 32,881 164,321
ACCRUED EXPENSES 137,617 (398)
BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS (34,748) (46,993)
NET CASH PROVIDED BY OPERATING ACTIVITIES 299,813 552,339
CASH FLOWS FROM INVESTING ACTIVITIES
CAPITAL EXPENSE.EQUIPMENT (96,853) (31,140)
CAPITAL EXPENSE.BUILDING - (1,400,000)
SALE OF SECURITIES - 500,000
NET CASH USED IN INVESTING ACTIVITIES (96,853) (931,140)
CASH FLOWS FROM FINANCING ACTIVITIES
PROCEEDS (PAYMENTS) - CURRENT 597 (290,685)
(PAYMENTS) PROCEEDS - LONGTERM (9,356) 887,568
PROCEEDS FROM EXERCISE OF STOCK OPTIONS 7,750 -
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (1,009) 596,883
NET INCREASE IN CASH AND CASH EQUIVALENTS 201,951 218,082
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 91,714 127,489
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 293,665 $ 345,571
</TABLE>
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ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000
REVENUE
An increase in volume resulted in revenue for the second quarter 2000 being
$2,133,096 which was a 53% increase from second quarter 1999 revenues of
$1,397,614.
COSTS AND EXPENSES
The actual cost of revenue increased to $1,411,168 in the second quarter of
2000 when compared to $844,048 in the second quarter of 1999. Of this
$567,120 increase, $303,000 is attributed to material, $71,000 to work-in-
process completion and $185,000 to salaries.
Selling and shipping expenses decreased to $123,468 in the second quarter of
2000 from $181,444 in the second quarter of 1999. Of this $57,976 decrease,
$81,000 is attributed to salaries, which was offset by an increase of
$19,000 to commissions
and $4,000 to travel expense.
General and Administrative expenses increased to $388,449 in the second
quarter of 2000 from $333,274 in the second quarter of 1999. Of this $55,175
increase, $25,000 is attributed to bad debt, $11,000 to legal fees, and
$25,000 to salaries.
Interest expense increased by $6,030 from second quarter 1999 to second
quarter 2000, because the company's average outstanding debt increased. This
was mainly due to the mortgage on the SDC facility acquired on April 1999.
The increase in Costs and Expenses in the second quarter of 2000 over prior
periods is associated with the startup of our new Engineering Consulting
Services division located at 1117 Kings Highway, Saugerties, NY 12477. The
new division became fully operational during the first quarter of 2000.
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ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
REVENUE
An increase in volume resulted in revenue for six months ending 2000 being
$3,908,526 which was a 75% increase from six month ending 1999 revenues of
$2,229,202.
COSTS AND EXPENSES
The actual cost of revenue increased to $2,615,079 in the six months ending
of 2000 when compared to $1,615,388 in the six months ending of 1999. Of
this $999,691 increase, $494,000 is attributed to material, $303,000 to
work-in-process completion and $175,000 to salaries.
Selling and shipping expenses decreased to $245,870 in the six months ending
of 2000 from $281,359 in the six months ending of 1999. Of this $35,489
decrease, $69,000 is attributed to salaries, which was offset by an increase
of $19,000 to commissions, $8,000 to freight expense and $8,000 to travel
expense.
General and Administrative expenses increased to $734,101 in the six month
ending of 2000 from $601,471 in the six months ending of 1999. Of this
$132,630 increase, $25,000 is attributed to bad debt, $11,000 to
depreciation expense, $21,000 to legal fees, and $74,000 to salaries.
Interest expense increased by $19,021 from six months ending 1999 to six
months ending 2000, because the company's average outstanding debt
increased. This was mainly due to the mortgage on the SDC facility acquired
on April 1999.
The increase in Costs and Expenses in the six months ending of 2000 over
prior periods is associated with the startup of our new Engineering
Consulting Services division located at 1117 Kings Highway, Saugerties, NY
12477. The new division became fully operational during the first quarter of
2000.
LIQUIDITY AND CAPITAL RESOURCES
By six months ending 2000, the Company's cash position increased to $293,665
from $91,714 at the beginning of the year. The increase in cash is largely
attributed to the increase in revenues, which was offset by an increase in
account receivables and an increase in capital expenditures.
At the end of six months of 2000, the Company's account receivable position
increased to $1,508,265 from $ 1,019,771 at the beginning of the year. This
increase was attributable to timing of customer payments and billings.
Capital expenditures increased by $96,853, because the Company purchased a
$75,000 vertical machining center.
At the close of the six months of 2000, the Company's backlog increased to
$2,861,129 from $1,317,522 at the beginning of the year. This increase is
due to an increase on orders.
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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
14th day of August 2000.
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/ Mitchell Drucker Chief Financial Officer
Mitchell Drucker