UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended September 30, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 0-16088
CERAMICS PROCESS SYSTEMS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-2832509
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
111 South Worcester Street, P.O. Box 338,
Chartley, Massachusetts 02712
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
508-222-7282
Former Name, Former Address and Former Fiscal Year if Changed
since Last Report:
Not Applicable.
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 than the registrant was required
to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date. Number of shares of common stock outstanding as of October
19, 1995: 7,757,856.
CERAMICS PROCESS SYSTEMS CORPORATION
Form 10-Q
For The Fiscal Quarter Ended September 30, 1995
Index
PART I: FINANCIAL INFORMATION Page
Item 1: Consolidated Financial Statements 3-8
Consolidated Balance Sheets as of
September 30, 1995 and December 31,
1994 3-4
Consolidated Statements of Operations
for the fiscal quarters and nine-month
periods ended September 30, 1995 and
October 1, 1994 5
Consolidated Statements of Cash Flows
for the nine-month periods ended
September 30, 1995 and October 1, 1994 6
Notes to Consolidated Financial
Statements 7-8
Item 2: Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8-10
PART II: OTHER INFORMATION
Items 1-6 11
Financial Data Schedule 12
Signatures 13
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
<TABLE>
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Balance Sheets
September 30, December 31,
1995 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 33,291 $ 252,503
Accounts receivable, trade 149,262 243,128
Inventories 60,115 56,126
Prepaid expenses 22,108 28,143
Other current assets 250 24,519
Total current assets 265,026 604,419
Property and equipment:
Production equipment 1,023,900 1,077,584
Furniture and office equipment 82,963 72,926
1,106,863 1,150,510
Less accumulated depreciation
and amortization 841,668 825,677
Net property and equipment 265,195 324,833
Deposits 1,053 2,623
Total Assets $ 531,274 $ 931,875
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Balance Sheets
September 30, December 31,
1995 1994
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 120,908 $ 168,623
Accrued expenses 360,865 337,182
Current portion of convertible
notes payable:
Related parties 920,000 125,000
Other 900,000 125,000
Current portion of obligations
under capital leases -- 7,532
Current portion of deferred revenue -- 6,300
Total current liabilities 2,301,773 769,637
Convertible notes payable
less current portion:
Related parties -- 795,000
Other 500,000 825,000
Total Liabilities 2,801,773 2,389,637
Stockholders' equity (deficit)
Common stock, $0.01 par value.
Authorized 15,000,000 shares;
issued 7,780,739 shares at
September 30, 1995 and
7,610,786 at December 31, 1994 77,807 76,108
Preferred stock, $.01 par value.
Authorized 5,000,000 shares;
no shares issued and outstanding -- --
Additional paid-in capital 30,457,520 30,387,166
Accumulated deficit (32,744,991) (31,860,201)
( 2,209,664) ( 1,396,927)
Less treasury stock, at cost,
22,883 common shares ( 60,835) ( 60,835)
Total stockholders' equity (deficit) ( 2,270,499) ( 1,457,762)
Total Liabilities and Stockholders'
Equity (Deficit) $ 531,274 $ 931,875
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Statements of Operations
Fiscal Quarters Ended Nine-Month Periods
Ended
Sept. 30, Oct. 1, Sept. 30, Oct. 1,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue:
Product sales $244,799 $253,877 $ 904,039 $ 758,370
Collaborative development
agreements -- -- -- 29,613
License agreements -- -- 2,000 2,000
Total revenue 244,799 253,877 906,039 789,983
Operating expenses
Cost of product sales 346,812 396,470 1,136,324 1,213,266
Research, development,
and engineering -- 1,873 -- 34,009
Selling, general, and
administrative 116,019 251,976 503,713 643,093
Total operating expenses 462,831 650,319 1,640,037 1,890,368
Operating income (loss) ( 218,032) ( 396,442)( 733,998)( 1,100,385)
Other income (expense),net ( 56,838) 5,443 ( 150,792) 9,305
Net income (loss) ($274,870) ($390,999)($ 884,790)($1,091,080)
Net income (loss) per
share ($0.04) ($0.05) ($0.12) ($0.14)
Weighted average number
of common and common
equivalent shares
outstanding 7,690,613 7,587,903 7,659,800 7,577,548
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Statements of Cash Flows
Nine-Month Periods Ended
September 30, October 1,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($884,790) ($1,091,080)
Adjustments to reconcile net loss
to cash provided by (used in)
operating activities:
Depreciation & amortization 98,917 133,184
Settlement of interest obligation 72,053 --
Gain on sale of property and
equipment -- ( 40,878)
Changes in assets and liabilities:
Accounts receivable, trade 93,866 358,016
Inventories ( 3,989) 15,701
Prepaid expenses 6,035 ( 21,479)
Other current assets 24,269 --
Accounts payable ( 47,715) 17,240
Accrued expenses 23,683 ( 57,237)
Deferred revenue ( 6,300) --
Due to customer -- ( 176,528)
Due to Kilburn Isotronics, Inc. -- 108,614
Net cash used in operating
activities ( 623,971) ( 754,447)
Cash flows from investing activities:
Additions to property and equipment ( 39,279) ( 565,233)
Disposal of property and equipment -- 40,878
Net change in deposits 1,570 20,987
Net cash used in investing
activities ( 37,709) ( 503,368)
Cash flows from financing activities:
Repayment of capital lease obligations ( 7,532) ( 21,306)
Proceeds from issuance of convertible
notes payable 450,000 1,182,000
Proceeds from issuance of common stock -- 10,355
Net cash provided by financing
activities 442,468 1,171,049
Net decrease in cash ( 219,212) ( 86,766)
Cash at beginning of period 252,503 89,333
Cash at end of period $ 33,291 $ 2,567
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
CERAMICS PROCESS SYSTEMS CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
(1) Nature of Business
Ceramics Process Systems Corporation ("CPS" or "the Company"),
incorporated on June 19, 1984, is engaged in the design, development,
and manufacture of advanced ceramic products for the microelectronics
and defense industries.
(2) Interim Consolidated Financial Statements
As permitted by the rules of the Securities and Exchange
Commission applicable to quarterly reports on Form 10-Q, these notes are
condensed and do not contain all disclosures required by generally
accepted accounting principles.
The accompanying financial statements for the fiscal quarters and
nine-month periods ended September 30, 1995 and October 1, 1994 are
unaudited. In the opinion of management, the unaudited consolidated
financial statements of CPS reflect all adjustments necessary to present
fairly the financial position and results of operations for such interim
periods.
The consolidated financial statements include the accounts of CPS
and its wholly-owned subsidiary, CPS Superconductor Corporation. All
significant intercompany balances and transactions have been eliminated.
Certain amounts in the financial statements for the nine-month period
ended October 1, 1994 have been reclassified to conform to the
presentation of the financial statements for the nine-month period ended
September 30, 1995.
The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year.
(3) Net Loss per Share
Net loss per share is computed based on the weighted average
number of common shares outstanding during the period. Common stock
equivalents pertaining to stock options and convertible notes payable
were not considered in the calculations of net loss per share since
their effect would be antidilutive.
<TABLE>
(4) Inventory
Inventories consist of the following:
September 30, December 31,
1995 1994
<S> <C> <C>
Raw materials $ 36,888 $ 8,039
Work in process 9,455 39,642
Finished goods 13,772 8,445
$ 60,115 $ 56,126
(5) Accrued Expenses
Accrued expenses consist of the following:
September 30, December 31,
1995 1994
Accrued legal and accounting $ 132,675 $ 174,428
Accrued interest 161,999 79,311
Accrued payroll 34,328 74,029
Accrued other 31,863 9,414
$ 360,865 $ 337,182
<FN>
</TABLE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The Company incurred a net loss in the third fiscal quarter of
1995 in the amount of $275 thousand, versus a net loss of $391 thousand
in the third fiscal quarter of 1994. The Company's cash balance at
September 30, 1995 and at December 31, 1994 was $33 thousand and $253
thousand, respectively.
The Company's operational performance improved for both the fiscal
quarter and nine-month period ended September 30, 1995, versus similar
time periods in 1994, primarily because its facilities in Chartley,
Massachusetts were fully operational in 1995, whereas the Company was in
the process of relocating to Chartley during most of the first nine
months of 1994. The Company is operating at the Chartley facility as a
tenant at will.
During 1994, the Company received proceeds of $1.9 million from
the issuance of interest bearing debt agreements to existing
shareholders and other investors, convertible to shares of the Company's
Common Stock at a conversion price of $0.50 per share. These
convertible notes are subordinated to all other indebtedness of the
Company. In March, 1995 the Company received proceeds of $250 thousand
through the issuance of a promissory note to Aavid Thermal Technologies,
Inc. ("Aavid"), secured by all of the Company's assets, in connection
with a letter of intent entered into between the Company and Aavid. The
letter of intent expired April 30, 1995. In the third fiscal
quarter of 1995 the Company received a total of $200,000 through the
issuance of interest bearing debt agreements to an investor.
The total interest cost associated with debt instruments in the
third fiscal quarter of 1995 and the nine-month period ended September
30, 1995 amounted to $155 thousand and $56 thousand, respectively.
3,944,936 shares of common stock at September 30, 1995 are reserved for
the conversion of convertible notes and related accrued interest.
In 1994, in connection with the issuance of selected convertible
notes payable, the Company issued warrants with exercise dates ranging
through July 30, 1996, for the purchase of the Company's common stock at
a price of $0.50 per share. Warrants for the purchase of 410,628 shares
of the Company's common stock were outstanding at September 30, 1995.
Although the Company has historically made timely payments to its
trade creditors, in 1995 it expects to continue to require working
capital support for its operations from external financing, and there is
no assurance that adequate funds will be available when needed, or on
terms acceptable to the Company.
Results of Operations
The Company's total revenue remained constant at approximately
$250 thousand in the third fiscal quarters of 1995 and 1994, and
consisted entirely of product sales. Total revenue for the nine-month
period ended September 30, 1995 was $906 thousand, an increase of $116
thousand from total revenue of $790 thousand for the nine-month period
ended October 1, 1994. This increase consisted of a $146 thousand
increase in product sales, from $758 thousand for the nine-month period
ended October 1, 1994 to $904 thousand for the nine-month period ended
September 30, 1995, partially offset by a $30 thousand decrease in
collaborative development revenue, from $30 thousand for the nine-month
period ended October 1, 1994 to no collaborative revenue for the nine-
month period ended September 30, 1995.
The increase in product sales for the nine-month period ended
September 30, 1995 versus the similar 1994 time period was primarily due
to the fact that the Company's facilities in Chartley, Massachusetts
were fully operational in 1995, whereas the Company was in the
process of relocating during most of the first nine months of 1994. The
relocation also resulted in a series of operational and manufacturing
inefficiencies which had a negative effect on the Company's gross margin
on product sales in 1994. The Company's gross margin on product sales
increased $41 thousand, to a negative gross margin of $102 thousand in
the third fiscal quarter of 1995, from a negative $143 thousand gross
margin in the third fiscal quarter of 1994. The Company's gross margin
on product sales increased $223 thousand, to a negative gross margin of
$232 thousand for the nine-month period ended September 30, 1995, from a
negative gross margin of $455 thousand for the nine-month period ended
October 1, 1994.
The Company earned no collaborative development revenue for the
nine-month period ended September 30, 1995, and consequently incurred no
related research, development, and engineering costs for the same time
period. Research development and engineering costs for the fiscal
quarter and nine-month period ended October 1, 1994 were $2 thousand and
$34 thousand, respectively. Selling, general, and administrative
expenses decreased $136 thousand to $116 thousand in the third fiscal
quarter of 1995, from $252 thousand in the third fiscal quarter of 1994,
primarily due to a $65 thousand reduction in the Company's legal and
accounting fees in the third fiscal quarter of 1995 from the similar
time period in 1994, and proceeds of $34 thousand received from a
property insurance settlement in the third fiscal quarter of 1995.
The cumulative effect of these revenues and costs resulted in net
losses of $275 thousand, or $0.04 per share, and $885 thousand, or $0.12
per share, for the fiscal quarter and nine-month period ended September
30, 1995, respectively, and net losses of $391 thousand, or $0.05 per
share, and $1,091 thousand, or $0.14 per share, for the fiscal quarter
and nine-month period ended October 1, 1994, respectively.
PART II OTHER INFORMATION
Item 1 through Item 5: None
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
[TYPE] EX-27
[DESCRIPTION] ART. 5 FDS for 3RD QUARTER 10-Q
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-30-1995
[PERIOD-END] SEPT-30-1995
[CASH] 33,291
[SECURITIES] 0
[RECEIVABLES] 149,262
[ALLOWANCES] 0
[INVENTORY] 60,115
[CURRENT-ASSETS] 265,026
[PP&E] 1,106,863
[DEPRECIATION] 841,668
[TOTAL-ASSETS] 531,274
[CURRENT-LIABILITIES] 2,301,773
[BONDS] 0
[COMMON] 77,807
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] (2,348,306)
[TOTAL-LIABILITY-AND-EQUITY] 531,274
[SALES] 906,039
[TOTAL-REVENUES] 906,039
[CGS] 1,136,324
[TOTAL-COSTS] 1,640,037
[OTHER-EXPENSES] 150,792
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 157,643
[INCOME-PRETAX] ( 884,790)
[INCOME-TAX] 0
[INCOME-CONTINUING] ( 884,790)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] ( 884,790)
[EPS-PRIMARY] ( 0.12)
[EPS-DILUTED] ( 0.12)
</TABLE>
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.
Ceramics Process Systems Corporation
(Registrant)
Date: October 26, 1995 /s/Grant C. Bennett
Grant C. Bennett
President and Director
(Principal Executive
Officer)
Date: October 26, 1995 /s/Peter F. Valentine
Peter F. Valentine
Controller and
Treasurer
(Principal Financial
and Accounting Officer)
