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 July 1, 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
Identification No.)
of Incorporation or Organization)
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 August
10, 1995: 7,690,613.
CERAMICS PROCESS SYSTEMS CORPORATION
Form 10-Q
For The Fiscal Quarter Ended July 1, 1995
Index
PART I: FINANCIAL INFORMATION Page
Item 1: Consolidated Financial
Statements 3-8
Consolidated Balance Sheets as of 3-4
July 1, 1995 and December 31, 1994
Consolidated Statements of Operations 5
for the fiscal quarters ended
July 1, 1995 and July 2, 1994
Consolidated Statements of Cash Flows 6
for the fiscal quarters ended July 1,
1995 and July 2, 1994
Notes to Consolidated Financial
Statements 7-8
Item 2: Management's Discussion and 8-10
Analysis of Financial Condition
and Results of Operations
PART II: OTHER INFORMATION
Items 1-6 11
Signatures 12
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
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CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Balance Sheets
July 1, December 31,
1995 1994
<S> <C>
<C>
ASSETS
Current Assets:
Cash $ 54,990 $ 252,503
Accounts receivable, trade 129,815 243,128
Inventories 40,164 56,126
Prepaid expenses 20,048 28,143
Other current assets 425 24,519
Total current assets 245,442 604,419
Property and equipment:
Production equipment 1,023,900 1,077,584
Furniture and office equipment 81,389 72,926
1,105,289 1,150,510
Less accumulated depreciation 811,668 825,677
Net property and equipment 293,621 324,833
Deposits 1,533 2,623
Total Assets $ 540,596 $ 931,875
<FN>
See accompanying notes to consolidated financial statements.
<PAGE>
</TABLE>
<TABLE>
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Balance Sheets
July 1, December 31,
1995 1994
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 118,497 $ 168,623
Accrued expenses 322,795 337,182
Current portion of convertible
notes payable:
Related parties 920,000 125,000
Other 700,000 125,000
Current portion of obligations
under capital leases -- 7,532
Current portion of deferred revenue -- 6,300
Total current liabilities 2,061,292 769,637
Convertible notes payable less current
portion:
Related parties -- 795,000
Other 500,000 825,000
Total Liabilities 2,561,292 2,389,637
Stockholders' equity (deficit)
Common stock, $0.01 par value.
Authorized 15,000,000 shares;
issued 7,713,496 shares at
July 1, 1995 and 7,610,786
at December 31, 1994 77,135 76,108
Preferred stock, $.01 par value.
Authorized 5,000,000 shares;
no shares issued and outstanding -- --
Additional paid-in capital 30,433,125 30,387,166
Accumulated deficit (32,470,121) (31,860,201)
(1,959,861) (1,396,927)
Less treasury stock, at cost,
22,883 common shares (60,835) (60,835)
Total stockholders' equity
(deficit) (2,020,696) (1,457,762)
Total Liabilities and
Stockholders' Equity
(Deficit) $ 540,596 $ 931,875
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Statements of Operations
Fiscal Quarters Ended Six Month Periods Ended
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
<S> <C>
<C>
Revenue:
Product sales $ 258,445 $ 157,385 $659,240 $504,493
Collaborative development
agreements -- 15,757 -- 29,613
License agreements -- -- 2,000 2,000
Total revenue 258,445 173,142 661,240 536,106
Operating expenses:
Cost of product sales 299,420 313,905 729,512 816,796
Research, development,
and engineering -- 21,434 -- 32,136
Selling, general
and administrative 226,269 201,769 387,694 391,117
Total operating expenses 585,689 537,108 1,177,206 1,240,049
Operating income (loss) (327,244) (363,966) (515,966) (703,943)
Other income (expense),net(51,654) (12,042) (93,954) 3,862
Net income (loss) ($378,898)($376,008) ($609,920)($700,081)
Net income (loss) per share($0.05) ($0.05) ($0.08) ($0.09)
Weighted average number of
common shares and equivalents
outstanding 7,690,613 7,577,548 7,646,594 7,573,110
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Statements of Cash Flows
Six Month Periods Ended
July 1, July 2,
1995 1994
<S> <C>
<C>
Cash flows from operating activities:
Net income (loss) ($609,920) ($700,081)
Adjustments to reconcile net loss to
cash provided by (used in)
operating activities:
Depreciation & amortization 68,918 87,496
Settlement of interest obligation 46,986 --
Gain on sale of property and equipment -- (21,884)
Changes in assets and liabilities:
Accounts receivable, trade 113,313 414,721
Inventories 15,962 58,879
Prepaid expenses 8,095 (16,209)
Other current assets 24,094 --
Accounts payable (50,126) (28,928)
Accrued expenses (14,387) (124,343)
Deferred revenue (6,300) --
Due to customer -- (176,528)
Due to Kilburn Isotronics, Inc. -- 147,603
Net cash used in
operating activities (403,365) (359,274)
Cash flows from investing activities:
Additions to property and equipment (37,706) (493,704)
Disposal of property and equipment -- 21,884
Net change in deposits 1,090 192
Net cash used in investing
activities (36,616) (471,628)
Cash flows from financing activities:
Repayment of capital lease obligations (7,532) (14,064)
Proceeds from issuance of convertible
notes payable 250,000 762,371
Proceeds from issuance of common stock -- 10,355
Net cash provided by
financing activities 242,468 758,662
Net decrease in cash (197,513) (72,240)
Cash at beginning of period 252,503 89,333
Cash at end of period $ 54,990 $ 17,093
<FN>
See accompanying notes to consolidated financial statements.<PAGE>
CERAMICS PROCESS SYSTEMS CORPORATION
</TABLE>
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
and composites 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 fiscal quarters
and six month periods ended July 1, 1995 and July 2, 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.
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.
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(4) Inventory
Inventories consist of the following:
July 1, December 31,
1995 1994
<S> <C> <C>
Raw Materials $ 18,832 $ 8,039
Work in process 9,060 39,642
Finished goods 12,272 8,445
$ 40,164 $ 56,126
(5) Accrued Expenses
Accrued expenses consist of the following:
July 1, December 31,
1995 1994
Accrued legal and
accounting $ 128,919 $ 174,428
Accrued interest 131,800 79,311
Accrued payroll 56,327 74,029
Accrued other 5,749 9,414
$ 322,795 $ 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 second fiscal quarter
of 1995 in the amount of $379 thousand, which approximated its
net loss of $376 incurred in the second fiscal quarter of 1994.
The Company's net loss for the six month period ended July 1,
1995 was $610 thousand, versus a net loss of $700 thousand for
the six month period ended July 2, 1994. The Company's July 1,
1995 cash balance of $55 thousand reflected a decrease of $198
thousand from its 1994 year end cash balance of $253 thousand.
The Company's operational performance improved for both the
fiscal quarter and six month period ended July 1, 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
the first six months of 1994. The Company is currently operating
at the Chartley facility as a tenant at will. Payments in the
amount of $66 thousand made to Metals Process Systems ("MPS"), a
joint venture company, to meet MPS' working capital needs, were
expensed by the Company in the second fiscal quarter of 1995.
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.
The total interest cost associated with debt instruments in
the second fiscal quarter of 1995 and the six month period ended
July 1, 1995 amounted to $53 thousand and $100 thousand,
respectively. 3,991,408 shares of common stock at July 1, 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 from June 30, 1995 through July 31, 1996,
for the purchase of 410,628 shares of the Company's common stock
at a price of $0.50 per share.
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 increased $85 thousand, to $258
thousand for the second fiscal quarter of 1995, from total
revenue of $173 thousand for the second fiscal quarter of 1994.
This increase consisted of a $101 thousand increase in product
sales, from $157 thousand for the second fiscal quarter of 1994
to $258 thousand for the second fiscal quarter of 1995, partially
offset by a $16 thousand decrease in collaborative development
revenue, from $16 thousand for the second fiscal quarter of 1994
to no collaborative development revenue for the second fiscal
quarter of 1995.
The Company's total revenue increased $125 thousand, to $661
thousand for the six month period ended July 1, 1995, from total
revenue of $536 thousand for the six month period ended July 2,
1994. This increase consisted of a $155 thousand increase in
product sales, from $504 thousand for the six month period ended
July 2, 1994 to $659 thousand for the six month period ended July
1, 1995, partially offset by a $30 thousand decrease in
collaborative development revenue, from $30 thousand for the six
month period ended July 2, 1994 to no collaborative development
revenue for the six month period ended July 1, 1995.
The decrease in collaborative development revenue for the
fiscal quarter and six month period ended July 1, 1995, versus
similar time periods in 1994, resulted from the completion of a
funded program in 1994 which comprised the majority of
collaborative development revenue during that year.
The increase in product sales for the fiscal quarter and six
month period ended July 1, 1995, versus similar time periods in
1994, 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 the
first six 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
$116 thousand, to a negative $41 thousand gross margin for the
second fiscal quarter of 1995, from a negative $157 thousand
gross margin for the second fiscal quarter of 1994. The
Company's gross margin on product sales for the six months ended
July 1, 1995 increased $242 thousand, to a negative $70 thousand,
from a negative $312 thousand gross margin for the six months
ended July 2, 1994.
The Company earned no collaborative development revenue for
the fiscal quarter and six month period ended July 1, 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 six
month period ended July 2, 1994 were $21 thousand and $32
thousand, respectively. Selling, general and administrative
costs increased $24 thousand, from $202 thousand during the
second fiscal quarter of 1994 to $226 thousand in the second
fiscal quarter of 1995, due to a $66 thousand working capital
contribution by the Company to Metals Process Systems ("MPS"), a
joint venture company formed in February 1991 by the Company and
Sopretac, a Vallourec Group Company.
The cumulative effect of these revenues and costs resulted
in a net loss of $379 thousand, or $0.05 per share, and $610
thousand, or $0.08 per share, for the fiscal quarter and six
month period ended July 1, 1995, respectively, and a net loss of
$376 thousand, or $0.05 per share, and $700 thousand, or $0.09
per share, for the fiscal quarter and six month period ended July
2, 1994, respectively.
<PAGE>
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
<PAGE>
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: August 15, 1995 /s/Grant C. Bennett
Grant C. Bennett
President and Director
(Principal Executive
Officer)
Date: August 15, 1995 /s/Peter F. Valentine
Peter F. Valentine
Controller and Treasurer
(Principal Financial and
Accounting Officer)
