10QSB 1 0001.txt CVD EQUIPMENT CORPORATION 1 US SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended 6-30-00 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE EXCHANGE ACT For the transition period from _____________to______________ Commission file number_______2-97210-NY____________________ CVD EQUIPMENT CORPORATION (Exact name of small business issuer as specified in its charter) NEW YORK (State or other jurisdiction of incorporation or organization) 11-2621692 (IRS Employer Identification Number) 1881 LAKELAND AVENUE, RONKONKOMA, NY 11779 (Address of principal executive offices) 631-981-7081 (Issuers Telephone Number) (Former name, former address, and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter periods 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 APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes No APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 2,980,750 SHARES OF COMMON STOCK, $.01 PAR VALUE AS OF 08-14-00 2 CVD EQUIPMENT CORPORATION NOTE TO FINANCIAL STATEMENTS FOR THE QUARTER ENDING JUNE 30, 2000 BASIS OF FINANCIAL STATEMENTS The financial data is subject to year end audit and does not claim to be a complete presentation since note disclosure under generally accepted accounting procedures is not included. Note disclosures required under generally accepted accounting procedures are included in the Company's audited financial statements filed as part of Form 10-KSB for the year ended December 31, 1999. Form 10-QSB should be read in conjunction with these financial statements. The results of operations for the three months are not necessarily indicative of those for the full year. In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to fairly present the financial position and the results of operation for the periods indicated. 3 MANAGEMENT'S DISCUSSION INTRODUCTION Statements contained in this Report on Form 10-QSB that are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including without limitation, statements regarding industry trends, strategic business development, pursuit of new markets, competition, results from operations, and are subject to the safe harbor provisions created by that statute. A forward-looking statement may contain words such as "intends", "plans", "anticipates", "believes", "expect to", or words of similar import. Management cautions that forward-looking statements are subject to risks and uncertainties that could cause the Company's actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, marketing success, product development, production, technological difficulties, manufacturing costs, and changes in economic conditions in the markets the Company serves. The Company undertakes no obligation to release revisions to forward-looking statements to reflect subsequent events, changed circumstances, or the occurrence of unanticipated events. FORWARD LOOKING STATEMENTS Certain statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward looking statements. These forward looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward looking statements. Important assumptions and other factors that could cause actual results to differ materially from those in the forward looking statements, include, but are not limited to: competition in the Company's existing and potential future product lines of business; the Company's ability to obtain financing on acceptable terms if and when needed; uncertainty as to the Company's future profitability, uncertainty as to the future profitability of acquired businesses or product lines, uncertainty as to any future expansion of the company. Other factors and assumptions not identified above were also involved in the derivation of these forward looking statements, and the failure of such assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. The Company assumes no obligation to update these forward looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward looking statements. 4
CVD EQUIPMENT CORPORATION BALANCE SHEETS JUNE 30, 2000 JUNE 30 DECEMBER 31 2000 1999 (UNAUDITED) (AUDITED) ------------ ------------ ASSETS CURRENT ASSETS CASH AND CASH EQUIVALENTS $ 293,665 $ 91,714 ACCOUNTS RECEIVABLE 1,508,265 1,019,771 COST IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 473,563 490,214 SECURITIES AVAILABLE-FOR-SALE 306,314 297,000 INVENTORY 436,798 713,762 DEFERRED TAX ASSET 14,416 17,490 PREPAID INCOME TAXES - 12,812 OTHER CURRENT ASSETS 21,399 39,387 ------------ ------------ TOTAL CURRENT ASSETS 3,054,420 2,682,150 PROPERTY, PLANT AND EQUIPMENT 2,198,033 2,204,644 DEFERRED TAX ASSET 367,378 348,768 OTHER ASSETS 150,326 177,267 ------------ ------------ TOTAL ASSETS $ 5,770,157 $ 5,412,829 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES ACCOUNTS PAYABLE $ 204,018 $ 171,138 ACCRUED EXPENSES 421,748 284,134 BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS 32,756 67,504 CURRENT MATURITIES OF LONG-TERM DEBT 17,533 16,936 ------------ ------------ TOTAL CURRENT LIABILITIES 676,055 539,712 LONG-TERM DEBT 969,196 978,552 ------------ ------------ 1,645,251 1,518,264 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY COMMON STOCK - $0.01 PAR - SHARES AUTHORIZED 10,000,000; ISSUED & OUTSTANDING 2,980,750 29,808 29,188 ADDITIONAL PAID-IN CAPITAL 2,846,120 2,838,990 RETAINED EARNINGS 1,278,248 1,061,897 ACCUMULATED OTHER COMPREHENSIVE INCOME (29,270) (35,510) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 4,124,906 3,894,565 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 5,770,157 $ 5,412,829 ============ ============
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CVD EQUIPMENT CORPORATION STATEMENTS OF INCOME AND COMPREHENSIVE INCOME JUNE 30, 2000 THREE MONTHS ENDED JUNE 30 2000 1999 (UNAUDITED) (UNAUDITED) ------------ ------------ REVENUES REVENUE ON COMPLETED CONTRACTS $ 1,385,539 $ 1,274,563 REVENUE ON UNCOMPLETED CONTRACTS 747,557 123,051 ------------ ------------ TOTAL REVENUES 2,133,096 1,397,614 ------------ ------------ COSTS OF REVENUES COST ON COMPLETED CONTRACTS 1,056,318 831,461 COST ON UNCOMPLETED CONTRACTS 354,850 12,587 ------------ ------------ TOTAL COSTS OF REVENUES 1,411,168 844,048 ------------ ------------ GROSS PROFIT 721,928 553,566 ------------ ------------ OPERATING EXPENSES SELLING AND SHIPPING 123,468 181,444 GENERAL AND ADMINISTRATIVE 388,449 333,274 ------------ ------------ TOTAL OPERATING EXPENSES 511,917 514,718 ------------ ------------ OPERATING INCOME 210,011 38,848 ------------ ------------ OTHER INCOME (EXPENSE) INTEREST INCOME 13,301 11,625 INTEREST EXPENSE (17,570) (11,540) OTHER INCOME 10,067 3,315 ------------ ------------ TOTAL OTHER INCOME 5,798 3,400 ------------ ------------ INCOME BEFORE TAXES 215,809 42,248 INCOME TAX (PROVISION) BENEFIT (75,579) 556 ------------ ------------ NET INCOME 140,230 42,804 OTHER COMPREHENSIVE INCOME, NET OF TAX UNREALIZED GAIN (LOSS) ON SECURITIES AVAILABLE FOR SALE 6,240 (14,984) ------------ ------------ COMPREHENSIVE INCOME $ 146,470 $ 27,820 ============ ============ EARNINGS PER SHARE BASIC $0.05 $0.01 DILUTED $0.04 $0.01 WEIGHTED AVERAGE SHARES BASIC 2,980,750 2,918,750 DILUTED 3,163,221 2,991,812
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CVD EQUIPMENT CORPORATION STATEMENTS OF INCOME AND COMPREHENSIVE INCOME JUNE 30, 2000 SIX MONTHS ENDED JUNE 30 2000 1999 (UNAUDITED) (UNAUDITED) ------------ ------------ REVENUES REVENUE ON COMPLETED CONTRACTS $ 2,707,046 $ 1,581,926 REVENUE ON UNCOMPLETED CONTRACTS 1,201,480 647,276 TOTAL REVENUES 3,908,526 2,229,202 COSTS OF REVENUES COST ON COMPLETED CONTRACTS 1,991,744 1,292,709 COST ON UNCOMPLETED CONTRACTS 623,335 322,679 TOTAL COSTS OF REVENUES 2,615,079 1,615,388 GROSS PROFIT 1,293,447 613,814 OPERATING EXPENSES SELLING AND SHIPPING 245,870 281,359 GENERAL AND ADMINISTRATIVE 734,101 601,471 TOTAL OPERATING EXPENSES 979,971 882,830 OPERATING INCOME (LOSS) 313,476 (269,016) OTHER INCOME (EXPENSE) INTEREST INCOME 24,099 29,835 INTEREST EXPENSE (35,542) (16,521) OTHER INCOME 13,147 5,106 TOTAL OTHER INCOME 1,704 18,420 INCOME(LOSS) BEFORE TAXES 315,180 (250,596) INCOME TAX (PROVISION) BENEFIT (98,831) 556 NET INCOME (LOSS) 216,349 (250,040) OTHER COMPREHENSIVE INCOME, NET OF TAX UNREALIZED GAIN (LOSS) ON SECURITIES AVAILABLE FOR SALE 6,240 (18,795) COMPREHENSIVE INCOME (LOSS) $ 222,589 $ (268,835) EARNINGS PER SHARE BASIC $0.07 $(0.09) DILUTED $0.07 $(0.08) WEIGHTED AVERAGE SHARES BASIC 2,980,750 2,918,750 DILUTED 3,164,637 2,992,036
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CVD EQUIPMENT CORPORATION STATEMENT OF CASH FLOWS JUNE 30, 2000 THREE MONTHS ENDED MARCH 31 2000 1999 (UNAUDITED) (UNAUDITED) ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME $ 140,230 $ 42,804 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH USED IN OPERATING ACTIVITIES: DEFERRED TAX PROVISION (benefit) (5,815) - DEPRECIATION AND AMORTIZATION 64,661 62,029 (INCREASE) DECREASE IN: ACCOUNTS RECEIVABLES (740,273) (223,318) COST IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 21,128 121,496 INVENTORY 43,851 (27,254) PREPAID INCOME TAXES - (7,188) OTHER CURRENT ASSETS 14,507 1,278 OTHER ASSETS (3,203) (7,846) INCREASE (DECREASE) IN: ACCOUNTS PAYABLE 66,089 94,616 ACCRUED EXPENSES 89,832 (84,187) BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS (93,284) - NET CASH USED IN OPERATING ACTIVITIES (402,277) (27,570) CASH FLOWS FROM INVESTING ACTIVITIES CAPITAL EXPENSE.EQUIPMENT (83,943) (23,655) CAPITAL EXPENSE.BUILDING - (1,400,000) SALE OF SECURITIES - 250,000 NET CASH USED IN INVESTING ACTIVITIES (83,943) (1,173,655) CASH FLOWS FROM FINANCING ACTIVITIES PROCEEDS - CURRENT 303 9,255 (PAYMENTS) PROCEEDS - LONGTERM (4,721) 888,808 PROCEEDS FROM EXERCISE OF STOCK OPTIONS 6,750 - NET CASH PROVIDED BY FINANCING ACTIVITIES 2,332 898,063 NET DECREASE IN CASH AND CASH EQUIVALENTS (483,888) (303,162) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE QUARTER 777,553 648,733 CASH AND CASH EQUIVALENTS AT THE END OF THE QUARTER $ 293,665 $ 345,571
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CVD EQUIPMENT CORPORATION STATEMENT OF CASH FLOWS JUNE 30, 2000 SIX MONTHS ENDED JUNE 30 2000 1999 (UNAUDITED) (UNAUDITED) ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME (LOSS) $ 216,349 $ (250,040) ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: DEFERRED TAX PROVISION (benefit) (18,610) - DEPRECIATION AND AMORTIZATION 126,481 114,420 (INCREASE) DECREASE IN: ACCOUNTS RECEIVABLES (488,494) (43,872) COST IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 16,651 673,153 INVENTORY 276,963 (25,922) PREPAID INCOME TAXES 12,808 (7,188) OTHER CURRENT ASSETS 17,989 15,873 OTHER ASSETS 3,926 (41,015) INCREASE (DECREASE) IN: ACCOUNTS PAYABLE 32,881 164,321 ACCRUED EXPENSES 137,617 (398) BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS (34,748) (46,993) NET CASH PROVIDED BY OPERATING ACTIVITIES 299,813 552,339 CASH FLOWS FROM INVESTING ACTIVITIES CAPITAL EXPENSE.EQUIPMENT (96,853) (31,140) CAPITAL EXPENSE.BUILDING - (1,400,000) SALE OF SECURITIES - 500,000 NET CASH USED IN INVESTING ACTIVITIES (96,853) (931,140) CASH FLOWS FROM FINANCING ACTIVITIES PROCEEDS (PAYMENTS) - CURRENT 597 (290,685) (PAYMENTS) PROCEEDS - LONGTERM (9,356) 887,568 PROCEEDS FROM EXERCISE OF STOCK OPTIONS 7,750 - NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (1,009) 596,883 NET INCREASE IN CASH AND CASH EQUIVALENTS 201,951 218,082 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 91,714 127,489 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 293,665 $ 345,571
9 ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2000 REVENUE An increase in volume resulted in revenue for the second quarter 2000 being $2,133,096 which was a 53% increase from second quarter 1999 revenues of $1,397,614. COSTS AND EXPENSES The actual cost of revenue increased to $1,411,168 in the second quarter of 2000 when compared to $844,048 in the second quarter of 1999. Of this $567,120 increase, $303,000 is attributed to material, $71,000 to work-in- process completion and $185,000 to salaries. Selling and shipping expenses decreased to $123,468 in the second quarter of 2000 from $181,444 in the second quarter of 1999. Of this $57,976 decrease, $81,000 is attributed to salaries, which was offset by an increase of $19,000 to commissions and $4,000 to travel expense. General and Administrative expenses increased to $388,449 in the second quarter of 2000 from $333,274 in the second quarter of 1999. Of this $55,175 increase, $25,000 is attributed to bad debt, $11,000 to legal fees, and $25,000 to salaries. Interest expense increased by $6,030 from second quarter 1999 to second quarter 2000, because the company's average outstanding debt increased. This was mainly due to the mortgage on the SDC facility acquired on April 1999. The increase in Costs and Expenses in the second quarter of 2000 over prior periods is associated with the startup of our new Engineering Consulting Services division located at 1117 Kings Highway, Saugerties, NY 12477. The new division became fully operational during the first quarter of 2000. 10 ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2000 REVENUE An increase in volume resulted in revenue for six months ending 2000 being $3,908,526 which was a 75% increase from six month ending 1999 revenues of $2,229,202. COSTS AND EXPENSES The actual cost of revenue increased to $2,615,079 in the six months ending of 2000 when compared to $1,615,388 in the six months ending of 1999. Of this $999,691 increase, $494,000 is attributed to material, $303,000 to work-in-process completion and $175,000 to salaries. Selling and shipping expenses decreased to $245,870 in the six months ending of 2000 from $281,359 in the six months ending of 1999. Of this $35,489 decrease, $69,000 is attributed to salaries, which was offset by an increase of $19,000 to commissions, $8,000 to freight expense and $8,000 to travel expense. General and Administrative expenses increased to $734,101 in the six month ending of 2000 from $601,471 in the six months ending of 1999. Of this $132,630 increase, $25,000 is attributed to bad debt, $11,000 to depreciation expense, $21,000 to legal fees, and $74,000 to salaries. Interest expense increased by $19,021 from six months ending 1999 to six months ending 2000, because the company's average outstanding debt increased. This was mainly due to the mortgage on the SDC facility acquired on April 1999. The increase in Costs and Expenses in the six months ending of 2000 over prior periods is associated with the startup of our new Engineering Consulting Services division located at 1117 Kings Highway, Saugerties, NY 12477. The new division became fully operational during the first quarter of 2000. LIQUIDITY AND CAPITAL RESOURCES By six months ending 2000, the Company's cash position increased to $293,665 from $91,714 at the beginning of the year. The increase in cash is largely attributed to the increase in revenues, which was offset by an increase in account receivables and an increase in capital expenditures. At the end of six months of 2000, the Company's account receivable position increased to $1,508,265 from $ 1,019,771 at the beginning of the year. This increase was attributable to timing of customer payments and billings. Capital expenditures increased by $96,853, because the Company purchased a $75,000 vertical machining center. At the close of the six months of 2000, the Company's backlog increased to $2,861,129 from $1,317,522 at the beginning of the year. This increase is due to an increase on orders. 11 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) 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, this 14th day of August 2000. CVD EQUIPMENT CORPORATION By: /s/ Leonard A. Rosenbaum Leonard A. Rosenbaum President and Chief Executive Officer Pursuant to the requirements of the Securities and Exchange Act of 1934, this report signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Leonard A. Rosenbaum President, Chief Executive Officer and Director Leonard A. Rosenbaum /s/ Mitchell Drucker Chief Financial Officer Mitchell Drucker