UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended: June 30, 1996
Commission File Number: 0-21908
MRS Technology, Inc.
(Exact name of registrant as specified in its charter.)
10 Elizabeth Drive, Chelmsford, MA 01824-4112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508)250-0450
Former name, former address, and former fiscal year, if changed since last
report: Not Applicable
Indicated 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 twelve months (or for such shorter period
that the registrant was required to file such reports), and 92) has been
subject to such filing requirements for the past 90 days.
YES (X) 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 practical date:
Outstanding as of
Class: August 7, 1996:
- ---------------------------- -----------------
Common Stock, par value $.01 6,721,035
<PAGE>
MRS Technology, Inc.
FORM 10-Q
For the three month period ended June 30, 1996
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at
June 30, 1996 (Unaudited) and March 31, 1996
Consolidated Statements of Operations for the
Three months ended June 30, 1996 and 1995 (Unaudited)
Consolidated Statements of Cash Flows for the
Three months ended June 30, 1996 and 1995 (Unaudited)
Notes to Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
<TABLE>
<CAPTION>
Part I Financial Information
Item 1. Financial Statements MRS Technology, Inc.
Consolidated Balance Sheets
Assets June 30, 1996
Current assets (Unaudited) March 31, 1996
<S> <C> <C>
Cash and cash equivalents $ 3,251,128 $ 4,217,880
Accounts receivable, net 1,129,883 1,116,981
Inventories 8,349,661 8,093,014
Deposits 1,044,266 1,024,551
Other current assets 134,164 95,634
- ----------------------------------------------------------------------
Total current assets 13,909,102 14,548,060
Property and equipment, net 874,242 1,017,266
Assets held for lease, net 636,757 696,808
Other assets, net 38,946 38,948
- ----------------------------------------------------------------------
Total assets $15,459,047 $16,301,082
======================================================================
<CAPTION>
Current liabilities
<S> <C> <C>
Accounts payable $ 1,297,687 $ 1,867,756
Accrued expenses 1,427,637 1,456,975
Current portion of obligations
under capital leases 3,945 3,839
Customer deposits 995,015 0
Other liabilities 103,650 97,524
- ----------------------------------------------------------------------
Total current liabilities 3,827,934 3,426,094
Long-term portion of obligations
under capital leases 10,140 11,165
- ----------------------------------------------------------------------
Total liabilities 3,838,074 3,437,259
Stockholders' equity
Common stock, $.01 par value; authorized,
20,000,000 shares; issued and outstanding
6,695,537 and 6,674,320 shares
respectively 66,955 66,743
Additional paid-in capital 36,284,108 36,246,889
Accumulated deficit (24,730,090) (23,449,809)
- ----------------------------------------------------------------------
Total stockholders' equity 11,620,973 12,863,823
- ----------------------------------------------------------------------
Total liabilities and
stockholders' equity $15,459,047 $16,301,082
======================================================================
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MRS Technology, Inc.
Consolidated Statements of Operations
(Unaudited)
Three months ended June 30,
Revenues 1996 1995
<S> <C> <C>
Product $1,210,098 $4,641,783
Contract research 500,505 631,262
--------- ---------
Total revenues 1,710,603 5,273,045
Cost of revenues
Product 993,729 2,785,331
Contract research 500,505 631,262
--------- ---------
Total cost of revenues 1,494,234 3,416,593
Gross profit 216,369 1,856,452
Operating expenses:
Research and development (Note 1) 774,312 538,408
Selling, general and administrative 767,295 1,086,210
--------- ---------
Income (loss) from operations (1,325,238) 231,834
Interest income, net 45,978 110,621
Interest expense 204 7,831
Other income (expense), net (816) 0
--------- ---------
Income (loss) before provision for
income taxes (1,280,280) 334,624
Provision for income taxes 0 0
- ---------------------------------------------------------------------
Net income (loss) ($1,280,280) $334,624
=====================================================================
Net income (loss) per share ($0.19) $0.05
Weighted average number of common
shares outstanding (000's) 6,687 6,850
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MRS Technology, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Three month period ended June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities
Net income (loss) ($1,280,280) $ 334,624
Adjustments to reconcile net income (loss)
to net cash used in operating activities
Depreciation 208,634 147,810
Amortization 0 45,667
Changes in assets and liabilities
Accounts receivable (12,902) 1,118,887
Inventories (256,647) (785,145)
Deposits and other assets (58,243) 195,836
Accounts payable (570,069) (162,565)
Accrued expenses (29,338) 47,555
Customer deposits from other 995,015 (840,000)
Other current liabilities 6,126 0
- -----------------------------------------------------------------------
Net cash (used in) provided by
operating activities (997,704) 102,669
Cash flows from investing activities
Capital expenditures (8,783) (137,791)
- -----------------------------------------------------------------------
Net cash (used in) investing activities (8,783) (137,791)
Cash flows from financing activities
Proceeds from stock purchases under
employee stock purchase plan 32,556 54,985
Proceeds from employee stock option
exercise 8,098 19,929
Principal payments under capital
lease obligations (919) (1,713)
- ------------------------------------------------------------------------
Net cash provided by financing activities 39,735 73,201
Net decrease increase in cash & equivalents (966,752) 38,079
Cash and cash equivalents at beginning
of period 4,217,880 8,340,166
Cash and cash equivalents at end
of period $3,251,128 $8,378,245
=======================================================================
Supplemental cash flow information
Interest paid $204 $7,831
Income taxes paid $0 $23,800
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
MRS Technology, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The financial statements for the three month periods ended June 30, 1996
and 1995 are unaudited and include all adjustments which, in the opinion
of management, are necessary to present fairly the financial position at
June 30, 1996 and the results of operations and cash flows for the periods
then ended. All such adjustments are of a normal recurring nature. These
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K for the
fiscal year ended March 31, 1996.
Certain information and footnote disclosures normally included in the
financial statements, prepared in accordance with generally accepted
accounting principles, have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission applicable
to quarterly reports on Form 10-Q, although the Company believes the
disclosures in these financial statements are adequate to make the
information presented not misleading.
The results of the Company's operations for any interim period are not
necessarily indicative of the results of the Company's operations for any
other interim period or for a full fiscal year.
1. Research and Development
Research and product development costs are expensed as incurred. For the
three month periods ended June 30, 1996 and 1995, aggregate research and
product development costs were $1,196,093 and $1,303,895, respectively
including $421,781 and $765,487 of costs recovered under research and
development contracts.
2. Inventories
<TABLE>
<CAPTION>
Inventories consist of the following as of June 30, 1996 and March 31,
1996:
(In Thousands) June 30, 1996 March 31, 1996
<S> <C> <C>
Work in process $ 8,051 $ 7,622
Purchased parts 299 471
------- -------
$ 8,350 $ 8,093
</TABLE>
3. Net Income (Loss) Per Common Share
Net loss per common share for the three month period ended June 30, 1996
is computed based upon the weighted average number of common shares. Net
income per common share for the three months ended June 30, 1995 is
computed based upon the weighted average number of common and common
equivalent shares outstanding, in accordance with the treasury stock
method. Common equivalent shares are not included in the loss period as
their effect would be anti-dilutive.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 ("the Act") provides a
new "safe harbor" for forward-looking statements so long as those
statements are identified as forward-looking and are accompanied by
meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those discussed in the
statement. The Company desires to take advantage of the new "safe harbor"
provisions of the Act. Certain information contained herein, particularly
the information appearing under the headings "Business," "Results of
Operations," "Financial Condition" and "Factors Affecting Future Results"
are forward-looking. Information regarding certain important factors that
could cause actual results of operations or outcomes of other events to
differ materially from any such forward-looking statement appear together
with such statement, and/or elsewhere herein.
Overview
The Company's ability to obtain product orders and subsequent revenue and
profitability is not certain. If the company is not successful in its
efforts to obtain product orders, more aggressive cash management actions
will be instituted in order to maintain liquidity. These actions may
include further work force reductions and decrease in discretionary
spending.
Additionally, the Company continues to seek strategic relationships with
companies which would enhance its ability to commercialize the technology
it has developed, strengthen its balance sheet and maximize its long-term
success. The specific types of transactions under consideration include
equity investments (minority or controlling), debt facilities, research
contracts, equipment purchase commitments, or any combination of these
transactions. The Company is committed to pursuing a strategy which would
maximize its long-term success and increase shareholder value.
There is no assurance that either the strategic relationship or actions
taken to manage existing cash flows will be successful. If such efforts
are not successful liquidity would be adversely affected.
RESULTS OF OPERATIONS
TOTAL REVENUES
Consolidated revenues for the three month periods ended June 30, 1996 and
1995 were approximately $1.7 million and $5.3 million, respectively, a
decrease of $3.6 million. Product revenue decreased $3.4 million from
$4.6 million for the quarter ended June 30, 1995 to $1.2 million for the
quarter ended June 30, 1996. The decrease in product revenue was due to
the quarter ended June 30, 1995 having two systems sales and the quarter
ended June 30, 1996 having none.
Contract research revenue decreased approximately $0.1 million, from $0.6
million in the first fiscal quarter of 1995 to $0.5 million for the same
quarter in the current fiscal year. The decrease in contract revenue
quarter to quarter was due to the reduced efforts on the Defense Advanced
Research Projects Agency (DARPA) project as the contract comes to an end.
<PAGE>
GROSS PROFIT
Gross profit as a percentage of total revenues was 13% and 35% for the
quarter ended June 30, 1996 and 1995, respectively. Product margins
decreased 22% for the quarter ended June 30, 1996. This decrease in
product gross margin for the three month period was due to under
absorption of manufacturing costs due to reduced production activity in
the quarter ended June 30, 1996. Contract research margins for the
quarters ending June 30, 1996 and 1995 were both 0%. Under the current
modification to the Company's DARPA contract the contract was changed to a
fixed price contract with no additional fee to be billed.
OPERATING EXPENSES
Research and development includes expenses incurred in support of internal
development programs and not allocable to customer funded contract
research.
Research and development expenses for the three month periods ended June
30, 1996 and 1995 were $0.8 million and $0.5 million, respectively.
Aggregate research and development spending before allocation to cost of
contract research revenue was $1.2 million and $1.3 million for the same
quarterly periods. This $0.3 million increase in spending was primarily a
result of relatively constant aggregate costs with lower amounts allocable
to the DARPA contract in the quarter ended June 30, 1996 compared to the
quarter ended June 30, 1995.
Selling, general and administrative expenses were $0.8 million for the
three months ended June 30, 1996 and $1.1 million for the three months
ended June 30, 1995. This decrease of $0.3 million was primarily
attributable to an unfavorable DARPA rate adjustment in the quarter ending
June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents at June 30, 1996 of $3.3
million, a decrease of $0.9 million from the March 31, 1996 balance of
$4.2 million. The decrease in cash is primarily due to the loss from
operations in the quarter ended June 30, 1996.
The Company presently has available from a venture leasing company a $1.0
million lease line, which is collateralized by the equipment leased. As
of June 30, 1996, this line remains unused.
On October 21, 1994 the Company amended its working capital line of credit
from Fleet Bank by increasing the amount of the line to $7,500,000 from
$5,000,000. Under the current line any advances are at the discretion of
the bank, and will be made or not made, in light of the circumstances at
the time of the borrower's request for the loan. There are currently no
amounts outstanding under this line.
Development efforts under the DARPA contact required increases in certain
resource levels as activity peaked at various phases of that project. To
the extent possible, the Company used temporary and contract resources to
meet these peak efforts. It is unlikely that any substantial follow-on
funding will be available from DARPA for fully commercializing the
technology developed under the DARPA contract. The Company is seeking
industrial partners who, through beta-site purchases, contract research
funding, minority equity investments, or any combination of these, would
provide the funding for this technology to reach its full commercial
<PAGE>
potential as a product used extensively in high-volume manufacturing
applications. To the extent such funding is not obtained, the commercial
potential of this technology is considerably more limited, and the result
could be products focused more on R&D applications, manufacturing process
development and certain OEM subsystem opportunities.
The Company's ability to obtain product orders and subsequent revenue and
profitability is not certain. If the Company is not successful in its
efforts to obtain product orders, more aggressive cash management actions
will be instituted in order to maintain liquidity. These actions may
include further work force reductions and decreases in discretionary
spending.
Additionally, the Company is actively seeking strategic relationships with
companies which would enhance its ability to commercialize the technology
it has developed, strengthen its balance sheet and maximize its long-term
success. The specific types of transactions under active consideration
include minority equity investments, research contracts, equipment
purchase commitments, or any combination of these transactions.
There is no assurance that either the strategic relationship or actions
taken to manage existing cash flows will be successful. If such efforts
are not successful liquidity would be adversely affected.
SIGNIFICANT RISKS AND UNCERTAINTIES
The ability of the Company to attain the financial or other results that
may be planned, forecasted or projected from time to time is subject to a
number or risk factors, including the ability to obtain new orders and
subsequent revenue, the ability to develop and make new products, the
ability to respond to competitive technology and pricing pressures,
adequate availability of major components, the ability to maintain key
employees for hardware, software, motions and imaging technicians,
economic conditions in both the United States and international markets,
delays in revenue recognition or contract performance or the inability to
obtain new research and development contracts to cover the current level
of expenses after completion of the current DARPA contract. The Company
may fail to meet any such planned, forecasted or projected results for
other reasons than those set forth above.
Product Revenue. PanelPrinters and optional equipment generally have
ranged in price from $1.8 to $3.0 million and any delay in revenue
recognition or cancellation of an order would adversely affect the
Company's results of operations, cash flows, or both. Fluctuations in
product revenues and consequently quarterly net income or loss, are
largely related to revenue recognition on sales of PanelPrinter units.
The Company continues to see an increasing number or prospects, but the
process for turning these into firm purchasing commitments which can be
disclosed is often lengthy.
Contract Research. A significant portion of the Company's revenue is
derived from research and development contracts with governmental, and in
prior years, commercial entities. The most significant of these research
funding sources has been DARPA. During fiscal 1996, the Company funded
approximately 54% of its aggregate research costs through the government
research contract. The Company intends to continue to fund part of its
research and development efforts through such contracts. However, there
are no assurances that the Company will be successful in obtaining such
contracts. The current DARPA contract should be completed in October,
<PAGE>
1996. The revenue recognized in the first quarter of fiscal 1997 is
substantially all the revenue to be recognized in fiscal 1997 on the DARPA
contract.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
Vote of shareholders at MRS Annual meeting held on July 31, 1996.
1. To elect one person to the Board of Directors to serve as a Class I
Director for three year term (Robert P. Schechter).
For Nominee: 5,161,966
Withheld from Nominee: 73,354
Directors whose terms continue:
S. Russel Craig
Bennett F. Moore
Griffith L. Resor, III
Ronald K. Haigh
2. To ratify the appointment of Coopers & Lybrand L.L.P. as auditors for
the fiscal year ending March 31, 1997.
For: 5,171,391
Against: 50,446
Abstain: 13,483
No Vote: 0
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
No reports have been filed on Form 8-K during this quarter.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned, authorized officers.
MRS Technology, Inc.
Date: August 12, 1996 /s/Griffith L. Resor, III
Griffith L. Resor, III
President, CEO and Director
(Principal Executive Officer)
Date: August 12, 1996 /s/ Patricia F. DiIanni
Patricia F. DiIanni
Treasurer, Chief Financial Officer
(Principal Financial Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
These financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K for the
fiscal year ended March 31, 1996.
</LEGEND>
<CIK> 0000906768
<NAME> MRS TECHNOLOGY, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3251128
<SECURITIES> 0
<RECEIVABLES> 1154883
<ALLOWANCES> 0
<INVENTORY> 8349661
<CURRENT-ASSETS> 13909102
<PP&E> 4804607
<DEPRECIATION> 3293608
<TOTAL-ASSETS> 15459047
<CURRENT-LIABILITIES> 3827934
<BONDS> 0
0
0
<COMMON> 66955
<OTHER-SE> 11554018
<TOTAL-LIABILITY-AND-EQUITY> 15459047
<SALES> 1210098
<TOTAL-REVENUES> 1710603
<CGS> 993729
<TOTAL-COSTS> 1494234
<OTHER-EXPENSES> 816
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 204
<INCOME-PRETAX> (1280280)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1280280)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1280280)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
</TABLE>
