10QSB 1 qsb02_1a.txt FIRST QUARTER FILING 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 3-31-02 ( ) 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: 3,037,600 SHARES OF COMMON STOCK, $.01 PAR VALUE AS OF 5-13-02 CVD EQUIPMENT CORPORATION NOTE TO FINANCIAL STATEMENTS FOR THE QUARTER ENDING MARCH 31, 2002 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, 2001. 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. 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. REVENUE RECOGNITION CVD recognizes and identifies on its financial statements, revenue on a percent complete methodology for contracts falling under SOP 81-1 and recognizes revenues on a completed contract methodology for contracts falling under SAB 101. CVD feels this is the most accurate and consistent methodology to meet the requirements of the two regulations. ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2002 REVENUE A decrease in volume resulted in first quarter of 2002 revenue being $1,889,919 a 46% decrease from first quarter of 2001 revenue of $3,474,816. COSTS AND EXPENSES The cost of revenue decreased to $1,249,316 in first quarter of 2002 as compared to $2,192,681 in first quarter of 2001. Of this $943,365 decrease, approximately $943,000 is attributed to material, $33,000 to manufacturing supplies, which is offset by an increase of $25,000 to salaries. Selling and shipping expenses decreased to $175,402 in first quarter of 2002 from $186,123 in first quarter of 2001. Of this $10,721 decrease, approximately $32,000 is attributed to commissions , $17,000 to freight expense, which is offset by an increase of $9,000 to salaries, $16,000 to royalties, $9,000 to travel expense and $4,000 to advertising. General and Administrative expenses decreased to $494,226 in first quarter of 2002 from $497,273 in first quarter of 2001. This change of $3,047 represents a 1% decrease from the prior year. Interest expense increased by $5,684 from $17,318 in first quarter of 2001 to $23,002 in first quarter of 2002, because the company's average outstanding debt increased. Interest income increased by $4,602 from $5,226 in first quarter of 2001 to $9,828 in first quarter of 2002, coinciding with the company's increased cash position from March 31st 2001 to March 31st 2002. LIQUIDITY AND CAPITAL RESOURCES By the end of the first quarter of 2002, the Company's cash position decreased to $1,889,660 from $2,361,150 at the beginning of the year. The decrease in cash is largely attributed to the cash layout for the new building, which $345,000 was for the acquisition and $6,800 for the design renovations. However, as part of the building acquisition and the associated mortgage transaction, an escrow account was established. This escrow account was set up to fund the building renovation. This escrow account is not accessible by CVD Equipment Corporation, until the building renovations are complete, the mortgagee inspects the new facility and a new certificate of occupancy is issued. The initial escrow amount was $1,106,250 on March 7, 2002. Interest on this escrow to the end of the quarter was $1,206. Hence, the escrow balance at the end of the first quarter was $1,107,456. At the end of the first quarter of 2002, the Company's account receivable position increased to $1,238,424 from $ 1,212,237 at the beginning of the year. This increase was attributable to timing of customer payments and billings. At the close of the first quarter of 2002, the Company's backlog increased to approximately $1,929,210 from approximately $1,389,004 at the beginning of the year. This increase is attributed to a increase in order levels. The Company believes that its cash and cash equivalents, cash flow from operations and available credit facilities will be sufficient to meet its working capital and investment requirements for the next twelve months. However, future growth, including potential acquisitions, may require additional funding, and from time to time the Company may need to raise capital through additional equity or debt financing.
CVD EQUIPMENT CORPORATION BALANCE SHEETS MARCH 31 DECEMBER 31 2002 2001 (UNAUDITED) (AUDITED) ------------ ------------ ASSETS CURRENT ASSETS CASH AND CASH EQUIVALENTS $ 1,889,660 $ 2,361,150 ACCOUNTS RECEIVABLE, NET 1,238,424 1,212,237 COST IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 389,555 358,022 INVENTORY 803,174 829,040 OTHER CURRENT ASSETS 75,747 20,269 ------------ ------------ TOTAL CURRENT ASSETS 4,396,560 4,780,718 PROPERTY, PLANT AND EQUIPMENT 4,202,757 2,060,502 DEFERRED TAX ASSET 268,623 268,623 OTHER ASSETS 127,700 356,567 INVESTMENT 1,107,456 - INTANGIBLE ASSETS, NET 80,375 82,500 ------------ ------------ TOTAL ASSETS $10,183,471 $ 7,548,910 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES ACCOUNTS PAYABLE $ 208,889 $ 153,332 ACCRUED EXPENSES 285,087 378,231 BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS 11,632 - CURRENT MATURITIES OF LONG-TERM DEBT 473,396 365,790 ------------ ------------ TOTAL CURRENT LIABILITIES 979,004 897,353 LONG-TERM DEBT 3,440,209 864,100 ------------ ------------ TOTAL LIABILITIES 4,419,213 1,761,453 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY COMMON STOCK - $0.01 PAR VALUE -10,000,000 SHARES AUTHORIZED; 3,032,325 AND 3,032,325 SHARES ISSUED & OUTSTANDING 30,323 30,323 ADDITIONAL PAID-IN CAPITAL 2,892,416 2,892,416 RETAINED EARNINGS 2,841,519 2,864,718 ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 5,764,258 5,787,457 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $10,183,471 $ 7,548,910 ============ ============
CVD EQUIPMENT CORPORATION STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31 2002 2001 (UNAUDITED) (UNAUDITED) ------------ ------------ REVENUES REVENUE ON COMPLETED CONTRACTS $ 1,215,023 $ 1,801,188 REVENUE ON UNCOMPLETED CONTRACTS 674,896 1,673,628 ------------ ------------ TOTAL REVENUES 1,889,919 3,474,816 ------------ ------------ COSTS OF REVENUES COST ON COMPLETED CONTRACTS 931,667 1,347,480 COST ON UNCOMPLETED CONTRACTS 317,649 845,201 ------------ ------------ TOTAL COSTS OF REVENUES 1,249,316 2,192,681 ------------ ------------ GROSS PROFIT 640,603 1,282,135 ------------ ------------ OPERATING EXPENSES SELLING AND SHIPPING 175,402 186,123 GENERAL AND ADMINISTRATIVE 494,226 497,273 ------------ ------------ TOTAL OPERATING EXPENSES 669,628 683,396 ------------ ------------ OPERATING (LOSS) INCOME (29,025) 598,739 ------------ ------------ OTHER INCOME (EXPENSE) INTEREST INCOME 9,828 5,226 INTEREST EXPENSE (23,002) (17,318) GAIN ON SALE OF FIXED ASSETS 2,500 - OTHER INCOME 16,488 4,747 ------------ ------------ TOTAL OTHER INCOME (LOSS) 5,814 (7,345) ------------ ------------ (LOSS) INCOME BEFORE TAXES (23,211) 591,394 INCOME TAX PROVISION 9 (202,720) ------------ ------------ NET (LOSS) INCOME (23,202) 388,674 EARNINGS (LOSS) PER SHARE BASIC $ (0.01) $ 0.13 DILUTED $ (0.01) $ 0.12 WEIGHTED AVERAGE SHARES BASIC 3,032,325 3,002,450 DILUTED 3,209,801 3,308,743
CVD EQUIPMENT CORPORATION STATEMENT OF CASH FLOWS THREE MONTHS ENDED MARCH 31 2002 2001 (UNAUDITED) (UNAUDITED) ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES NET (LOSS) INCOME $ (23,202) $ 388,674 Adjustments to reconcile net income to net cash provided by operating activities: DEFERRED TAX BENEFIT (PROVISION) - 68,274 DEPRECIATION AND AMORTIZATION 66,976 66,889 GAIN ON SALE OF FIXED ASSETS (2,500) BAD DEBT PROVISION (2,047) 32,209 (Increase) Decrease In: ACCOUNTS RECEIVABLES (24,140) (444,812) COST IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS (31,533) (40,026) INVENTORY 25,866 (13,033) OTHER CURRENT ASSETS (55,478) 721 OTHER ASSETS 217,181 (7,660) Increase (Decrease) In: ACCOUNTS PAYABLE 55,557 (91,149) ACCRUED EXPENSES (93,144) (200,182) BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS 11,632 (107,365) ------------ ------------ NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 145,168 (347,460) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES CAPITAL EXPENDITURES (2,195,418) (17,664) PROCEEDS FROM SALE OF FIXED ASSETS 2,500 - ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (2,192,918) (17,664) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES PROCEEDS FROM THE EXERCISE OF OPTIONS - 10,948 PROCEEDS OF LONG-TERM DEBT 1,592,544 - PAYMENTS OF LONG-TERM DEBT (16,284) (4,669) ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 1,576,260 6,279 ------------ ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS (471,490) (358,845) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE QUARTER 2,361,150 600,621 ------------ ------------ CASH AND CASH EQUIVALENTS AT THE END OF THE QUARTER $ 1,889,660 $ 241,776 ============ ============
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 13th day of May 2002. 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