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 28, 1996
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:
508-222-0614
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
November 1, 1996: 7,917,504.
CERAMICS PROCESS SYSTEMS CORPORATION
Form 10-Q
For The Fiscal Quarter Ended September 28, 1996
Index
PART I: FINANCIAL INFORMATION Page
Item 1: Consolidated Financial Statements 3-8
Consolidated Balance Sheets as of
September 28, 1996 and December 30,
1995 3-4
Consolidated Statements of Operations
for the fiscal quarters and nine-month
periods ended September 28, 1996 and
September 30, 1995 5
Consolidated Statements of Cash Flows
for the nine-month periods ended
September 28, 1996 and September 30,
1995 6
Notes to Consolidated Financial
Statements 7-8
Item 2: Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8-9
PART II: OTHER INFORMATION
Items 1-6 10
Signatures 12
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
<TABLE>
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Balance Sheets
September 28, December 30,
1996 1995
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 51,833 $ 32,127
Accounts receivable, trade 320,152 211,575
Inventories 29,026 29,026
Prepaid expenses 11,783 10,824
Other current assets 5,116 475
Total current assets 417,910 284,027
Property and equipment:
Production equipment 999,032 941,512
Furniture and office equipment 66,967 65,529
1,065,999 1,007,041
Less accumulated depreciation
and amortization ( 796,615) ( 765,635)
Net property and equipment 269,384 241,406
Deposits 1,328 953
Total Assets $ 688,622 $ 526,386
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Balance Sheets (Continued)
September 28, December 30,
1996 1995
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 163,830 $ 176,494
Accrued expenses 687,788 523,257
Deferred revenue 426,802 --
Current portion of notes
payable:
Related parties 920,000 920,000
Other 900,000 900,000
Total current liabilities 3,098,420 2,519,751
Notes payable less
current portion:
Related parties -- --
Other 500,000 500,000
Total Liabilities 3,598,420 3,019,751
Stockholders' equity (deficit):
Common stock, $0.01 par value.
Authorized 15,000,000 shares;
issued 7,940,387 shares at
September 28, 1996 and
7,780,766 at December 30, 1995 79,404 77,808
Preferred stock, $.01 par value.
Authorized 5,000,000 shares;
no shares issued and outstanding -- --
Additional paid-in capital 30,480,856 30,457,384
Accumulated deficit (33,409,223) ( 32,967,722)
( 2,848,963) ( 2,432,530)
Less treasury stock, at cost,
22,883 common shares ( 60,835) ( 60,835)
Total stockholders' equity (deficit) ( 2,909,798) ( 2,493,365)
Total Liabilities and Stockholders'
Equity (Deficit) $ 688,622 $ 526,386
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Statements of Operations
Nine-Month Periods
Fiscal Quarters Ended Ended
Sept. 28, Sept. 30, Sept. 28, Sept. 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Product sales $ 581,108 $ 244,799 $ 1,294,31 $ 904,039
License agreements -- -- 85,000 2,000
Total revenue 581,108 244,799 1,379,317 906,039
Operating expenses:
Cost of product sales 554,217 346,812 1,333,294 1,136,324
Selling, general, and
administrative 103,851 116,019 339,266 503,713
Total operating expenses 658,068 462,831 1,672,560 1,640,037
Operating income (loss) ( 76,960)( 218,032)( 293,243)( 733,998)
Other income (expense),net( 54,016)( 56,838)( 148,258)( 150,792)
Net income (loss) ($ 130,976)($ 274,870)($ 441,501)($ 884,790)
Net income (loss) per
share ($0.02) ($0.04) ($0.06) ($0.12)
Weighted average number
of common and common
equivalent shares
outstanding 7,917,504 7,690,613 7,853,656 7,659,800
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Statements of Cash Flows
Nine-Month Periods Ended
September 28, September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($ 441,501) ($ 884,790)
Adjustments to reconcile net loss
to cash provided by (used in)
operating activities:
Depreciation & amortization 79,200 98,917
Settlement of interest obligation 25,068 72,053
Gain on sale of property and
equipment ( 27,500) --
Changes in assets and liabilities:
Accounts receivable, trade ( 108,577) 93,866
Inventories -- ( 3,989)
Prepaid expenses ( 959) 6,035
Other current assets ( 4,641) 24,269
Accounts payable ( 12,664) ( 47,715)
Accrued expenses 426,802 ( 6,300)
Deferred revenue 164,531 23,683
Net cash provided by (used in)
operating activities 99,759 ( 623,971)
Cash flows from investing activities:
Additions to property and equipment ( 107,178) ( 39,279)
Disposal of property and equipment 27,500 --
Net change in deposits ( 375) 1,570
Net cash used in investing
activities ( 80,053) ( 37,709)
Cash flows from financing activities:
Repayment of capital lease obligations -- ( 7,532)
Proceeds from issuance of notes
payable -- 450,000
Net cash provided by financing
activities -- 442,468
Net increase (decrease) in cash 19,706 ( 219,212)
Cash at beginning of period 32,127 252,503
Cash at end of period $ 51,833 $ 33,291
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 ("the Company"), incorporated
on June 19, 1984, is engaged in the design, development, and manufacture
of advanced ceramic and composite products for the electronics 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 28, 1996 and September 30, 1995 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 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.
<TABLE>
(4) Inventory
Inventories consist of the following at September 28, 1996 and
December 30, 1995:
<S> <C>
Raw materials $ 7,399
Work in process 8,970
Finished goods 12,657
$ 29,026
</TABLE>
<TABLE>
(5) Accrued Expenses
Accrued expenses consist of the following:
September 28, December 30,
1996 1995
<S> <C> <C>
Accrued legal and accounting $ 182,766 $ 150,549
Accrued interest 363,294 219,839
Accrued payroll 58,969 67,364
Due to Kilburn Isotronics 22,043 57,713
Accrued material and equipment
costs 60,716 27,792
$ 687,788 $ 523,257
</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
1996 in the amount of $131 thousand, versus a net loss of $275 thousand
in the third fiscal quarter of 1995. The Company's cash balance at
September 28, 1996 and December 30, 1995 was $52 thousand and $32
thousand, respectively.
The Company's financial performance improved in the fiscal
quarter ended September 28, 1996, versus the fiscal quarter ended
September 30, 1995, due to a $336 thousand increase in product
shipments, partially offset by a corresponding $207 thousand increase in
associated cost of sales during this same time period. Additionally,
selling, general, and administrative expenses decreased $12 thousand in
the third fiscal quarter of 1996 versus the third fiscal quarter of
1995.
The Company's entire operations are currently housed in a leased
facility in Chartley, Massachusetts. The Company is operating in the
Chartley facility as a tenant at will.
Through the first nine months of 1996, the Company has financed
its working capital requirements through sales of its products and cash
received in the second and third fiscal quarters of 1996 from a license
agreement entered into by the Company and a customer. The Company
expects that for the remainder of 1996 it will continue to be able to
fund its recurring working capital requirements through operations.
During the year certain notes payable have matured. Although the
Company seeks to modify the original terms of these notes, it is unable
to repay the matured balances at this time and there is no assurance
that the notes will be modified on terms acceptable to the Company.
Results of Operations
The Company's total revenue was $581 thousand and $1,379 thousand
for the fiscal quarter and nine-month period ended September 28, 1996,
respectively, while total revenue for the fiscal quarter and nine-month
period ended September 30, 1995 was $245 thousand and $906 thousand,
respectively. Revenue recognized in the fiscal quarters ended September
28, 1996 and September 30, 1995 was derived solely from product sales.
The increase in product sales in the third fiscal quarter of 1996 versus
the similar 1995 time period amounted to $336 thousand and resulted from
increased customer demand in 1996. The increase in total revenue for
the first nine months of 1996 versus the first nine months of 1995, in
the amount of $473 thousand, resulted from a $390 thousand increase in
product sales, from $904 thousand for the first nine months of 1995, to
$1,294 thousand for the first nine months of 1996, and an $83 thousand
increase in license revenue for the first nine months of 1996 versus the
first nine months of 1995, from $2 thousand for the first nine months of
1995, to $85 thousand for the first nine months of 1996. The increase
in license revenue for the nine-month period ended September 28, 1996
versus the nine-month period ended September 30, 1995 was due to the
receipt of $85 thousand in revenue from a license agreement entered into
by the Company and a customer in the second fiscal quarter of 1996.
The Company's gross margin on product sales was a positive gross
margin of $27 thousand and a negative gross margin of $39 thousand for
the fiscal quarter and nine-month period ended September 28, 1996,
respectively, versus negative gross margins of $102 thousand and $232
thousand for the fiscal quarter and nine-month periods ended September
30, 1995, respectively. The improvement in gross margins resulted from
increased sales volume and sales of higher margin products in 1996.
Selling, general, and administrative expenses were $104 thousand
and $339 thousand for the fiscal quarter and nine-month period ended
September 28, 1996, respectively, versus selling, general, and
administrative expenses of $116 thousand and $504 thousand for the
fiscal quarter and nine-month period ended September 30, 1995,
respectively. The decrease in selling, general, and administrative
expenses in 1996 versus similar time periods in 1995 was due to
personnel reductions made in the third fiscal quarter of 1995 and
tighter controls over administrative costs in 1996.
Other income (expense) principally consisted of interest expense
accrued on the Company's outstanding notes payable. Total interest
expense for the fiscal quarter and nine-month period ended September 28,
1996 amounted to $59 thousand and $178 thousand, respectively. Total
interest expense for the fiscal quarter and nine-month period ended
September 30, 1995 amounted to $58 thousand and $158 thousand,
respectively.
The cumulative effect of these revenues and costs resulted in net
losses of $131 thousand, or $0.02 per share, and $442 thousand, or $0.06
per share, for the fiscal quarter and nine-month period ended September
28, 1996, respectively, and 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.
PART II OTHER INFORMATION
Item 1 through Item 2: None
Item 3: Defaults upon Senior Securities
Certain notes payable held by the Company
matured in 1996. The Company defaulted on
payment of principal and interest of these
notes payable at their maturity dates.
Although the Company seeks to modify the
original maturity dates of these notes
payable with the respective noteholders,
there is no assurance that the notes will
be modified on terms acceptable to the
Company. The default of these notes
payable at September 28, 1996, is
summarized as follows:
<TABLE>
Accrued
Principal Interest
<S> <C> <C>
Related Parties $ 920,000 $ 189,300
Other $ 700,000 $ 131,844
</TABLE>
Item 4 through Item 5: None
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
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: May 1, 1997 /s/Grant C. Bennett
Grant C. Bennett
President and Director
(Principal Executive
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIALS STATEMENTS OF CERAMICS PROCESS SYSTEMS CORPORATION AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10Q FOR PERIOD ENDING
SEPTEMBER-28-1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 51,833
<SECURITIES> 0
<RECEIVABLES> 320,152
<ALLOWANCES> 0
<INVENTORY> 29,026
<CURRENT-ASSETS> 417,910
<PP&E> 1,065,999
<DEPRECIATION> 795,615
<TOTAL-ASSETS> 688,622
<CURRENT-LIABILITIES> 3,098,420
<BONDS> 0
0
0
<COMMON> 79,404
<OTHER-SE> (2,989,202)
<TOTAL-LIABILITY-AND-EQUITY> 688,622
<SALES> 1,379,317
<TOTAL-REVENUES> 1,379,317
<CGS> 1,333,294
<TOTAL-COSTS> 1,672,560
<OTHER-EXPENSES> 148,258
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 177,886
<INCOME-PRETAX> (441,501)
<INCOME-TAX> 0
<INCOME-CONTINUING> (441,501)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (441,501)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
