10QSB 1 CONCEPTRONICS, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB Quarterly Report under Section 13 or 15 (d) of the Securities Exchange Act of 1934 For Quarter ended: March 31, 1996 Commission File Number: 0-19589 -------- ------- CONCEPTRONIC, INC. -------------------------------------------------------- (Exact name of Registrant as specified in its Charter) Delaware 02-0413153 ---------------------------- ---------------------------- (State of other jurisdiction of (I.R.S. Employer Identification incorporation of organization) Number) 6 Post Road, Portsmouth, New Hampshire 03801 --------------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: 603-431-6262 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15 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: ----- ----- As of March 31, 1996, there were 1,700,000 shares of Common Stock of the Registrant outstanding. THIS DOCUMENT IS A COPY OF THE FORM 10-QSB FILED ON MAY 16, 1996 PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION. 2 CONCEPTRONIC, INC. INDEX Part I - Financial Statements: Item 1 - Financial Statements Condensed Balance Sheets - March 31, 1996 (Unaudited) and December 31, 1995 3 Condensed Statements of Operations (Unaudited) - Three Months Ended March 31, 1996 and April 2, 1995 4 Condensed Statements of Cash Flows (Unaudited)- Three Months Ended March 31, 1996 and April 2, 1995 5 Notes to Condensed Financial Statements (unaudited) 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II - Other Information Items 1 through 6 9 Signatures 10 2 3 CONCEPTRONIC, INC. Condensed Balance Sheets
March 31, 1996 Dec. 31, 1995* -------------- ------------- Assets (Unaudited) Current assets: Cash $ 9,944 $ 10,101 Accounts receivable, net 2,434,127 2,830,146 Inventories 4,395,933 3,240,066 Other assets, current 225,777 135,950 ----------- ----------- Total current assets 7,065,781 6,216,263 Property, plant and equipment, net 1,507,067 1,521,915 Purchased software costs and other assets 57,626 76,611 ----------- ----------- $ 8,630,474 $ 7,814,789 =========== =========== Liabilities and Stockholders' Equity Current liabilities: Current portion long-term debt $ 45,000 $ 43,000 Short-term borrowings 961,715 844,605 Accounts payable 1,817,038 1,167,875 Accrued expenses and other liabilities 907,691 906,569 ---------- ---------- Total current liabilities 3,731,444 2,962,049 ----------- ----------- Long-term debt, excluding current portion 1,074,345 1,086,850 ----------- ----------- Stockholders' equity: Common stock $.01 par value 17,000 17,000 Additional paid-in capital 5,199,747 5,199,747 Retained earnings (accumulated deficit) (1,392,062) (1,450,857) ----------- ----------- Total stockholders' equity 3,824,685 3,765,890 ----------- ----------- $ 8,630,474 $ 7,814,789 =========== =========== * Condensed from audited financial statements.
The accompanying notes are an integral part of these financial statements. 3 4 CONCEPTRONIC, INC. Condensed Statements of Operations (Unaudited)
Three Months Ended March 31, 1996 April 2, 1995 -------------- ------------- Net sales $3,930,676 $3,255,832 Cost of goods sold 2,799,754 2,331,625 ---------- ---------- Gross profit 1,130,922 924,207 Selling, general and administrative expenses 915,262 713,008 Research and development expenses 61,712 68,069 ---------- ---------- Income from operations 153,948 143,130 Other expense: Legal costs 50,104 68,029 Interest expense, net 45,049 22,811 ---------- ---------- Income before income tax expense 58,795 52,290 Income tax expense - - ---------- ---------- Net income $ 58,795 $ 52,290 ========== ========== Income per share $ .03 $ .03 ========== ========== Weighted average number of shares outstanding 1,729,921 1,700,000 ========== ==========
The accompanying notes are an integral part of these financial statements. 5 CONCEPTRONIC, INC. Condensed Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 1996 April 2, 1995 -------------- ------------- Cash flows from operating activities: Net income $ 58,795 $ 52,290 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 82,949 88,517 Changes in assets and liabilities: Accounts receivable 396,019 315,896 Inventories (1,155,867) (374,463) Refundable income taxes and other assets (89,827) (52,050) Accounts payable 649,163 135,782 Accrued expenses and other liabilities 1,122 (162,164) ----------- --------- Net cash provided by (used for) operating activities (57,646) (3,808) ----------- --------- Cash flows used for investing activities: Additions to property, plant and equipment (49,116) (1,945) ----------- --------- Cash flows used for financing activities: Proceeds from line of credit, net 117,110 - Net repayments of current note payable (10,505) (9,713) ----------- --------- Net cash provided by (used for) financing activities 106,605 (9,713) Net decrease in cash (157) (7,850) Cash at beginning of period 10,101 73,062 ----------- --------- Cash at end of period $ 9,944 $ 65,212 =========== =========
The accompanying notes are an integral part of these financial statements. 5 6 CONCEPTRONIC, INC. Notes to Financial Statements (Unaudited) A) Name of Business ---------------- Conceptronic, Inc. (the "Company") manufactures and sells equipment used in the assembly and repair of printed circuit boards. B) Basis for Presentation ---------------------- As permitted by the rules of the Securities and Exchange Commission (the "Commission") applicable to quarterly reports on Form 10-QSB, these notes are condensed and do not contain all disclosures required by generally accepted accounting principles. Reference should be made to the financial statements and related notes included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1995, filed with the Commission on March 29, 1996. At December 31, 1995, operating loss carry forwards of approximately $719,000 were available to offset future taxable income for income tax purposes. In the opinion of management of Conceptronic, Inc. (the "Company"), the accompanying unaudited financial statements contain all adjustments considered necessary to present fairly the financial position of the Company as of March 31, 1996 and the results of operations and cash flows for the periods presented. The Company prepares its interim financial information using the same accounting principles as it does for its annual financial statements. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. C) Earnings per Share ------------------ Earnings per share is computed based on the weighted average number of common shares outstanding adjusted, when dilutive, for the number of shares issuable upon assumed exercise of stock options after the assumed repurchase of shares with the related proceeds. D) Litigation ---------- On December 13, 1991, the Company was served with a complaint from Vitronics Corporation ("Vitronics"), one of the Company's competitors, alleging patent infringement involving its reflow soldering ovens. Vitronics stated that it sought an injunction, together with unspecified damages and costs. The claim was filed in the United States Federal District Court, District of New Hampshire. In August 1995, the presiding U.S. District Court judge issued a directed verdict of non-infringement in Conceptronic's favor regarding method patent #4,654,502. Additionally, a favorable decision was reached on the apparatus patent #4,833,301 by a jury which found non-infringement on all past and current Conceptronic ovens. Vitronic's has appealed the non-infringement finding of patent #4,654,502. In the opinion of counsel, the ultimate outcome of this litigation cannot presently be determined; however, management of the Company believes the claim is without merit and that the Company will prevail. Accordingly, no provision has been made in the accompanying financial statements for any potential liability that might result. 6 7 CONCEPTRONIC, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED APRIL 2, 1995. The Company had a net profit of approximately $59,000 for the three months ended March 31, 1996 compared to $52,000 for the three months ended April 2, 1995. Profits remained constant, with higher first quarter 1996 gross profits offset by higher selling costs. Net sales in the first quarter of 1996 were approximately $3,931,000 compared to approximately $3,256,000 for the first quarter of 1995, an increase of approximately 21%. The increase is primarily due to sales of the Company's new Freedom HGR 2000 series rework station and reflow oven sales to US Robotics, a large computer modem manufacturer. Bookings in the first quarter of 1996 were approximately $4,190,000, compared to approximately $2,818,000 in the first quarter of 1995, an increase of approximately 49%. Increasing demand for the Freedom HGR 2000 rework station and the Company's reflow oven products accounts for the bookings increase. Backlog as of March 31, 1996 was approximately $1,632,000 compared to approximately $1,810,000 as of April 2, 1995. Gross profit margin was 29% of sales in the first quarter of 1996 compared to 28% for the first quarter of 1995. Profit margins remain constant, however, the Company is experiencing increasingly competitive pressures and price erosion in the Company's oven reflow products. Selling, general and administrative expenses for the first quarter of 1996 were $915,000 compared to $713,000 for the first quarter of 1995. The increase was largely due to product promotion expenditures and the expension of the Company's sales and service organization. Research and development expenditures for the first quarter of 1996 were $62,000 compared to $68,000 in the first quarter of 1995. The Company continues to spend the majority of its development dollars on it's reflow solder oven line and Freedom series rework stations. Legal costs for the first quarter of 1996 were $50,000 compared to $68,000 for the same period in 1995. These costs were incurred in the Company's defense of the pending patent infringement appeal by Vitronics. Net interest expense for the first quarter of 1996 was $45,000 compared to interest expense for the first quarter of 1995 of $23,000. The interest expense represents the mortgage interest on the Company's manufacturing and office facility and the Company's credit line. The increase in expense for the first quarter 1996 compared to 1995 is attributed to increased amounts outstanding under the credit line due to the need to fund working capital requirements. This release contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. The factors that could cause actual results to differ materially include the following: general economic conditions and growth rates in the SMT circuit manufacturing industry and related industries, including but not limited to the printed circuit board industry; competitive factors and pricing pressures; changes in product mix; changes in the seasonality of demand patterns; the timely development and acceptance of new products; inventory risks due to shifts in market demand; component constraints and shortages; risks of nonpayment of accounts receivable; ramp up and expansion of manufacturing capacity; and the risks described from time to time in the Company's SEC reports. 7 8 LIQUIDITY AND CAPITAL RESOURCES Net cash used for operations for the three months ended March 31, 1996 was $58,000 compared to net cash provided by operations of $4,000 in the first quarter of 1995. The change in cash from operations is due to the an increase in inventories to support on-time reflow oven deliveries and an increasing bookings rate for the Freedom HGR 2000 rework station. This use of cash flows was offset by higher vendor trade payables. Net cash used for investing activities in the first quarter of 1996 was $49,000 compared to $2,000 in the first quarter of 1995, for equipment additions Net cash flows provided by financing activities was $107,000 for the three months ended March 31, 1996 compared to net cash flows used in financing activities of $10,000 for the same period in 1995. The increase reflects proceeds of approximately $117,000 from the Company's working capital credit line. The Company has a $1,000,000 demand line of credit with the First National Bank of Boston of which $962,000 was drawn down as of March 31, 1996. The Company believes it has sufficient cash flows from operations, cash on hand, and its credit line to finance its business for the balance of the fiscal year. 8 9 CONCEPTRONIC, INC. PART II Other Information Item 1: Legal Proceedings. The Company is involved in the following action: 1. VITRONICS CORPORATION V. CONCEPTRONIC, INC. On December 13, 1991, the Company was served with a complaint from Vitronics Corporation ("Vitronics"), one of the Company's competitors, alleging patent infringement involving its reflow soldering ovens. Vitronics stated that it sought an injunction, together with unspecified damages and costs. The claim was filed in the United States Federal District Court, District of New Hampshire. In August 1995, the presiding U.S. District Court judge issued a directed verdict of non-infringement in Conceptronic's favor regarding method patent #4,654,502. Additionally, a favorable decision was reached on the apparatus patent #4,833,301 by a jury which found non-infringement on all past and current Conceptronic ovens. Vitronic's has appealed the non-infringement finding of patent #4,654,502. In the opinion of counsel, the ultimate outcome of this litigation cannot presently be determined; however, management of the Company believes the claim is without merit and that the Company will prevail. Accordingly, no provision has been made in the accompanying financial statements for any potential liability that might result. Items 2 through 5: Not Applicable Item 6: Exhibits and Reports on form 8-K (a) 11a Statement Regarding Computation of Per Share Earnings (b) Reports on Form 8-K none 9 10 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. Conceptronic, Inc. May 15, 1996 By: \\ Garry A. Prime --------------------------- Garry A. Prime Chief Executive Officer May 15, 1996 By: \\ William D. Gray --------------------------- William D. Gray Chief Financial Officer 10 EX-11.A 2 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 a CONCEPTRONIC, INC. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months Ended March 31, 1996 April 2, 1995 NET INCOME $ 58,795 $ 52,290 ---------- ---------- PRIMARY EARNINGS PER SHARE WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,700,000 1,700,000 STOCK OPTIONS 29,921 - OTHER - - ---------- ---------- 1,729,921 1,700,000 NET INCOME PER SHARE $ .03 $ .03 ---------- ---------- FULLY DILUTED EARNINGS PER SHARE: WEIGHTED AVERAGED COMMON SHARES 1,700,000 1,700,000 OUTSTANDING STOCK OPTIONS 29,921 - - - OTHER - - ---------- ---------- 1,729,921 1,700,000 NET INCOME PER SHARE $ .03 $ .03 ---------- ----------
11 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS DOCUMENT IS A COPY OF THE FORM 10-QSB FILED ON MAY 16, 1996 PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION. 1 U.S. DOLLARS 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 1 9,944 0 2,434,127 0 4,395,933 7,065,781 1,507,067 0 8,630,474 3,731,444 0 17,000 0 0 0 8,630,474 3,930,676 3,930,676 2,799,754 976,974 50,104 0 45,049 58,795 0 0 0 0 0 58,795 .03 .03