<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- - -----
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 30, 1996
Transition report pursuant to Section 13 or 15(d) of the Securities
- - -----
Exchange Act of 1934
For the transition period from to
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Commission file number 0-21074
SUPERCONDUCTOR TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0158076
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
460 WARD DRIVE, SUITE F
SANTA BARBARA, CALIFORNIA 93111-2310
(Address of principal executive offices & zip code)
(805) 683-7646
(Registrant's telephone number including area code)
------------------------------------------------------------------
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 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
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As of April 30, 1996 there were 6,049,701 shares of the Registrant's Common
Stock outstanding.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUPERCONDUCTOR TECHNOLOGIES INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 1, 1995 MARCH 30, 1996
<S> <C> <C>
Net Revenues:
Government contract revenues $ 1,417,000 $ 1,300,000
Commercial product revenues 105,000 58,000
----------- -----------
Total net revenues 1,522,000 1,358,000
----------- -----------
Costs and expenses:
Contract research and development 1,019,000 947,000
Other research and development 634,000 1,023,000
Selling, general and administrative 759,000 690,000
----------- -----------
Total costs and expenses 2,412,000 2,660,000
----------- -----------
Loss from operations (890,000) (1,302,000)
Net Interest income/expense 47,000 31,000
Net loss ($ 843,000) ($1,271,000)
=========== ===========
Net loss per share ($ .14) ($ 0.21)
=========== ===========
Weighted number of shares outstanding 5,970,969 6,036,162
=========== ===========
</TABLE>
(see accompanying notes)
2
<PAGE> 3
SUPERCONDUCTOR TECHNOLOGIES INC.
BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
(Unaudited)
DECEMBER 31, MARCH 30,
1995 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,430,000 $ 2,980,000
Short-term investments 2,814,000 1,436,000
Accounts receivable 1,113,000 560,000
Inventories 228,000 352,000
Prepaid expenses and other current assets 248,000 230,000
------------ ------------
Total current assets 6,833,000 5,558,000
Note receivable from related party 150,000 150,000
Property and equipment, net 2,369,000 2,201,000
Patents and licenses, net of accumulated amortization of $603,000 and 2,280,000 2,236,000
$672,000
Security deposits and Other assets, net of accumulated amortization of
$77,000 and $80,000 46,000 43,000
------------ ------------
Total assets $ 11,678,000 $ 10,188,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 733,000 $ 552,000
Note payable to bank and capitalized lease obligations--current 405,000 405,000
------------ ------------
Total current liabilities 1,138,000 957,000
Long-term portion of note payable and capitalized lease obligations 453,000 396,000
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Total liabilities 1,591,000 1,353,000
------------ ------------
Shareholders' equity:
Common Stock, $.001 par value, 15,000,000 shares authorized,
6,026,065 and 6,049,038 shares issued and outstanding 6,000 6,000
Capital in excess of par value 30,122,000 30,141,000
Deficit accumulated during development stage (20,041,000) (21,312,000)
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Total shareholders' equity 10,087,000 8,835,000
------------ ------------
Total liabilities and stockholders' equity $ 11,678,000 $ 10,188,000
============ ============
</TABLE>
(see accompanying notes)
3
<PAGE> 4
SUPERCONDUCTOR TECHNOLOGIES INC.
STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 1, 1995 MARCH 30, 1996
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($ 843,000) ($1,271,000)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation, and patent/license amortization 285,000 296,000
Compensation expense associated with stock options granted 18,000 4,000
Changes in assets and liabilities:
Accounts receivable (136,000) 553,000
Inventory 21,000 (124,000)
Prepaid expenses and other current assets 26,000 18,000
Patents and licenses (13,000) (25,000)
Other assets (1,000) 0
Security deposits 0 0
Accounts payable and accrued expenses (392,000) (181,000)
----------- -----------
Net cash used for operating activities (1,035,000) (730,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in short-term investments 4,541,000 1,378,000
Purchases of property and equipment (106,000) (56,000)
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Net cash provided by investing activities 4,435,000 1,322,000
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CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in note payable to bank 0 39,000
Principal payments under lease/bank loan obligations (61,000) (95,000)
Proceeds from sale of common stock 43,000 14,000
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Net cash used for financing activities (18,000) (42,000)
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Net increase (decrease)in cash and cash equivalents 3,382,000 550,000
Cash and cash equivalents at beginning of period 2,452,000 2,430,000
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Cash and cash equivalents at end of period $ 5,834,000 $ 2,980,000
=========== ===========
</TABLE>
(see accompanying notes)
4
<PAGE> 5
SUPERCONDUCTOR TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
A. GENERAL
The unaudited financial information furnished herein reflects all adjustments,
consisting only of normal recurring adjustments, which in the opinion of
management, are necessary to fairly state the Company's financial position, the
results of its operations and its cash flows for the period presented.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and the accompanying
notes. Actual results could differ from those estimates and such differences may
be material to the financial statements. This quarterly report on Form 10-Q
should be read in conjunction with the Company's Form 10-K for the year ended
December 31, 1995.
The results of operations for the quarter ended March 30, 1996 are not
necessarily indicative of results for the entire fiscal year ending December 31,
1996.
In fiscal year 1993, the Company adopted a 13-week quarter reporting period
ending on the Saturday nearest the calendar quarter end. The company's fiscal
year-end is December 31.
B. INVENTORIES
Inventories are stated at the lower of cost (first-in, first out) or market and
consist of the following:
<TABLE>
<CAPTION>
December 31, 1995 March 30, 1996
<S> <C> <C>
Raw Materials $134,000 $188,000
Work-in-Progress 84,000 144,000
Finished Goods 10,000 20,000
-------- --------
Total Inventory $228,000 $352,000
======== ========
</TABLE>
C. PER SHARE INFORMATION
Net loss per common share has been computed using the weighted average number of
common and common equivalent shares (when dilutive) outstanding during each
period. The difference between primary and fully diluted net loss per common
share is not significant.
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net revenues for the first quarter of 1996 were $1,358,000, a decrease of 11%
over first fiscal quarter of 1995. This change is due to the decreases in both
government and commercial revenues. Government contract revenues were
$1,300,000, a decrease of 8% from the first fiscal quarter 1995. Such revenues
have historically fluctuated from period to period. This variability is
attributable to government contract budgeting and funding patterns as the
government procurement process is lengthy and may involve competing budget
considerations, making the timing of the Company's revenues difficult to
predict. In the current period, the decrease is a result of the government
shutdowns and budgetary impasses which have delayed some contract funding. The
Company has incurred approximately $250,000 of research and development expenses
which normally are covered by government contracts and whose signing has been
delayed. Although the Company anticipates contracts to cover these expenses, the
Company has classified them as "Other" research and development expenses until
such time as the contract is assured.
The three major contracts which accounted for two-thirds of the government
revenues in the first quarter of 1996 were the HTS Thin-Film Manufacturing
Alliance (HTMA)project, the HTS filter subsystems project and the Cryocooler
development project.
Commercial product revenues were $58,000, a decrease of 45% from first fiscal
quarter 1995. This decrease is a direct result of the Company's decision to
focus on the internal use of thin films versus servicing the external commercial
needs.
The Company's revenues have historically consisted of, and are expected for the
foreseeable future to consist primarily of, government research and development
contract revenues. Funds authorized by the government under any development
contract may be reduced or eliminated at any time, and there can be no assurance
that the Company will receive all or any part of the funds under any of the
Company's existing government contracts. Furthermore, as the Company attempts to
achieve commercialization of products, it could encounter seasonality or other
currently unforeseen factors causing additional variability in its results.
Total costs and expenses increased 10% from the first quarter 1995 to $2,660,000
for the first quarter of 1996 with the increase being attributable to Other
research and development expenses. Contract research and development expenses
decreased 7% from the first fiscal quarter of 1995 to $947,000 as a result of
lower contract revenues which are directly related to contract expenses. As
noted, the Company is dependent upon government funding and a significant loss
of government funding would have a material adverse effect on the Company, as
the Company would be required to expend a greater portion of its cash resources
to fund such research and development. Other research and development expenses
increased 61% from first quarter of 1995 to $1,023,000 for the same period 1996.
This increase is due to research and development expenses which are normally
classified as contract research and development expenses covered by government
contract but whose signing has been delayed. In addition, a portion of the
increases can be attributed to the expanded efforts toward commercialization in
the areas of wireless telephone communications, cryo-cooling and high-speed
computing.
6
<PAGE> 7
Selling, general and administrative expenses decreased 9% over first quarter of
1995 to $690,000 for the first quarter of 1996. The decrease is primarily
attributable to lower expenses related to travel, recruiting, public relations
and general services and supplies.
Interest income decreased 31% from $75,000 in first quarter 1995 to $52,000 for
the same period in 1996. This decrease is due to a decline in the
interest-earning investment balances during this period as these sources have
been utilized to fund operations.
Interest expense decreased 25% from $28,000 in first quarter of 1995 to $21,000
for first quarter of 1996 due to the reduction in the Company's long-term
portion of note payable and capitalized lease obligations.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased 23% over year-end 1995 while short-term
investments decreased 49%. The collective cash position of the Company decreased
$828,000 since December 31, 1995. The decrease is primarily attributable to
funding operating losses.
Working capital changes provided $266,000 of funds primarily due to a
significant reduction in accounts receivable offset by decreases in accounts
payable and accrued expenses and an increase in inventory.
The Company's principal resource commitments at March 30, 1996 consist of
accounts payable and accrued employee compensation of $338,000 and $214,000
respectively and approximately $801,000 of equipment financing commitments.
The Company believes that its existing cash and short-term investments, together
with revenue from operations, should provide sufficient resources to meet its
current anticipated liquidity and capital expenditure requirements for at least
the next 12 months.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended March 30, 1996.
7
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPERCONDUCTOR TECHNOLOGIES INC.
--------------------------------
(Registrant)
Dated: May 9, 1996 /s/ James G. Evans, Jr.
-----------------------
James G. Evans, Jr.
Vice President, Chief Financial Officer
8
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EXHIBIT INDEX
Exhibit 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-30-1996
<CASH> 392,000
<SECURITIES> 4,024,000
<RECEIVABLES> 560,000
<ALLOWANCES> 0
<INVENTORY> 352,000
<CURRENT-ASSETS> 5,558,000
<PP&E> 7,350,000
<DEPRECIATION> 5,149,000
<TOTAL-ASSETS> 10,188,000
<CURRENT-LIABILITIES> 957,000
<BONDS> 0
0
0
<COMMON> 6,000
<OTHER-SE> 30,141,000
<TOTAL-LIABILITY-AND-EQUITY> 10,188,000
<SALES> 0
<TOTAL-REVENUES> 1,358,000
<CGS> 0
<TOTAL-COSTS> 1,637,000
<OTHER-EXPENSES> 1,023,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,000
<INCOME-PRETAX> (1,271,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (21,312,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,271,000)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
