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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 ____3-31-03_____
( ) 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)
1860 SMITHTOWN 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:
3,039,100 SHARES OF COMMON STOCK, $.01 PAR VALUE AS OF 5-14-03
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CVD EQUIPMENT CORPORATION
NOTE TO FINANCIAL STATEMENTS
FOR THE QUARTER ENDING
MARCH 31, 2003
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, 2002. 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.
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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.
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CVD EQUIPMENT CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31 DECEMBER 31
2003 2002
(UNAUDITED) (AUDITED)
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 371,708 $ 323,537
Accounts receivable, net 2,500,692 1,852,794
Cost in excess of billings on ucompleted contracts 947,906 783,646
Inventories 1,640,221 2,023,487
Other current assets 232,833 194,232
Total Current Assets 5,693,360 5,177,696
Property, Plant and Equipment, net 5,592,732 5,630,375
Deferred Income Taxes 344,074 344,074
Other Assets 153,043 138,974
Intangible Assets, net 133,038 136,393
Total Assets $11,916,247 $11,427,512
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 1,377,569 $ 938,056
Accrued expenses 497,241 336,702
Billings in excess of costs on uncompleted contracts - 146,387
Short-term notes payable 350,000 350,000
Short-term borrowings 50,000 -
Current maturities of long-term debt 179,907 177,124
Total Current Liabilities 2,454,717 1,948,269
Long-term Debt, net of current portion 3,467,748 3,513,783
Total Liabilities 5,922,465 5,462,052
Commitments and Contingencies
Stockholders' Equity
Common stock - $0.01 par value -10,000,000 shares authorized;
3,039,100 shares issued & outstanding 30,391 30,391
Additional paid-in capital 2,902,149 2,902,149
Retained earnings 3,061,242 3,032,920
Total Stockholders' Equity 5,993,782 5,965,460
Total Liabilities and Stockholders' Equity $11,916,247 $11,427,512
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CVD EQUIPMENT CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
MARCH 31
2003 2002
(UNAUDITED) (AUDITED)
------------ ------------
Revenue
Revenue on completed contracts $ 2,530,781 $ 1,215,023
Revenue on uncompleted contracts 1,096,356 674,896
Total Revenue 3,627,137 1,889,919
Costs of Revenue
Cost on completed contracts 2,130,790 931,667
Cost on uncompleted contracts 523,495 317,649
Total Costs of Revenues 2,654,285 1,249,316
Gross Profit 972,852 640,603
Operating Expenses
Selling and shipping 353,993 175,402
General and administrative 580,498 494,226
Total Operating Expenses 934,491 669,628
Operating Income(Loss) 38,361 (29,025)
Other Income (Expense)
Interest income 124 9,828
Interest expense (62,969) (23,002)
Gain on sale of fixed assets - 2,500
Other income 67,976 16,488
Total Other Income 5,131 5,814
Income(Loss) Before Taxes 43,492 (23,211)
Income Tax Provision(Benefit) (15,170) 9
Net Income(Loss) 28,322 (23,202)
Earnings Per Share
Basic $ 0.01 $ (0.01)
Diluted $ 0.01 $ (0.01)
Weighted Average Shares
Basic 3,039,100 3,032,325
Diluted 3,050,228 3,209,801
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CVD EQUIPMENT CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31
2003 2002
(UNAUDITED) (AUDITED)
------------ ------------
CASH Flows from Operating Activities
Net Income(Loss) $ 28,322 $ (23,202)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 90,221 66,976
Gain on sale of fixed assets - (2,500)
Bad debt provision (3,311) (2,047)
(Increase) decrease in:
Accounts receivable (644,588) (24,140)
Cost in excess of billings on uncompleted contracts (164,260) (31,533)
Inventory 383,266 25,866
Other current assets (38,599) (55,478)
Other assets (24,095) 217,181
Increase (decrease) in:
Accounts payable 439,516 55,557
Accrued expenses 160,537 (93,144)
Billing in excess of costs on uncompleted contracts (146,387) 11,632
Net Cash Provided By Operating Activities 80,622 145,168
Cash Flows from Investing Activities
Capital expenditures (39,200) (602,874)
Proceeds from sale of fixed assets - 2,500
Net Cash Used in Investing Activities (39,200) (600,374)
Cash Flows from Financing Activities
Proceeds from short-term borrowings 50,000 -
Payments of long-term debt (43,251) (16,284)
Net Cash Provided (Used) By Financing Activities 6,749 (16,284)
Net Increase(Decrease) in Cash and cash Equivalents 48,171 (471,490)
Cash and Cash Equivalents at the Beginning of the Quarter 323,537 2,361,150
Cash and Cash Equivalents at the End of the Quarter $ 371,708 $ 1,889,660
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ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2003
REVENUE
An increase in volume resulted in first quarter of 2003 revenue being
$3,627,137, a 92% increase from first quarter of 2002 revenue of
$1,889,919.
COSTS AND EXPENSES
The cost of revenue increased to $2,654,285 in first quarter of 2003 as
compared to $1,249,316 in first quarter of 2002. Of this $1,404,969
increase, approximately $1,070,000 is attributed to material, $9,000 to
freight in, $183,000 to salaries, $24,000 to utilities and $18,000 to real
estate taxes.
Selling and shipping expenses increased to $353,993 in first quarter of 2003
from $175,402 in first quarter of 2002. Of this $178,591 increase,
approximately $155,000 is attributed to commissions and $31,000 to freight
out expense, which is offset by a decrease of $10,000 to advertising
expense.
General and Administrative expenses increased to $580,498 in first quarter
of 2003 from $494,226 in first quarter of 2002. Of this $86,272 increase,
approximately $90,000 to salaries, $5,000 to travel expense and $6,300 to
depreciation, which is offset by a decrease of $7,600 to legal fees and
$9,300 to consulting fees.
Interest expense increased by $39,967 from $23,002 in first quarter of 2002
to $62,969 in first quarter of 2003, because the company's average
outstanding debt increased, as a result of the mortgage on the new building
purchased in March 2002.
Other income increased by $51,488 from first quarter of 2002 to first
quarter of 2003. Of this increase, $64,000 is attributed to collection of
accounts receivable exceeding the $369,000 booked as part of the purchase of
the assets.
LIQUIDITY AND CAPITAL RESOURCES
By the end of the first quarter of 2003, the Company's cash position
increased to $371,708 from $323,537 at the beginning of the year. The
increase in cash is mainly attributed to the daily operating activities.
At the end of the first quarter of 2003, the Company's account receivable
position increased to $2,500,692 from $ 1,852,794 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 2003, the Company's backlog decreased
to approximately $1,827,563 from approximately $3,816,877 at the beginning
of the year. This decrease is mainly attributed to shipments delayed from
the fourth quarter of 2002 to the first quarter of 2003. This delay resulted
from the reduction in productivity of the CVD and Conceptronic divisions due
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to their relocation to the new facility in the fourth quarter of 2002.
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.
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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 May 2003.
CVD EQUIPMENT CORPORATION
By: /s/ Leonard A. Rosenbaum
Leonard A. Rosenbaum
President, Chief Executive Officer and Director
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/ Sharon Canese Chief Financial Officer and Secretary
Sharon Canese
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Certifications Pursuant to Rule 13A-14 or 15D-14 of the Securities exchange
act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
I, Leonard A. Rosenbaum, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of CVD
Equipment Corporation;
2. Based upon my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report.
3. Based upon my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in
which this quarterly report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, the registrant's auditors
and the audit committee of the registrants' board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weakness in internal
controls; and
b. Any Fraud, whether or not material, that involves management or
other employees who have a significant role in the
registrant's internal controls.
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Dated: May 14, 2003
/s/ Leonard A. Rosenbaum
----------------------------------------
President, Chief Executive Officer and Director
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Certifications Pursuant to Rule 13A-14 or 15D-14 of the Securities exchange
act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
I, Sharon Canese, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of CVD
Equipment Corporation;
2. Based upon my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report.
3. Based upon my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in
which this quarterly report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date.
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, the registrant's auditors
and the audit committee of the registrants' board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weakness in internal
controls; and
b. Any Fraud, whether or not material, that involves management or
other employees who have a significant role in the
registrant's internal controls.
6. The registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Dated: May 14, 2003
/s/ Sharon Canese
----------------------------------------
Chief Financial Officer and Secretary