CVD EQUIPMENT CORP — Interim / Quarterly Report 2000

Aug 14, 2000

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

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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