cvv20180411_8ka.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 8-K/A

(Amendment No. 2)

 

CURRENT REPORT Pursuant

to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): October 31, 2017

 

CVD EQUIPMENT CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

 

New York

 

1-16525

 

11-2621692

(State or Other Jurisdiction of Incorporation or Organization)

 

(Commission File Number)

 

(IRS Employer Identification No.)

 

355 South Technology Drive

Central Islip, New York

 

 

11722

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (631) 981-7081

 

Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

EXPLANATORY NOTE

 

 

On November 6, 2017, CVD Equipment Corporation (the “Company”) filed a Current Report on Form 8-K (the “Original 8-K”) disclosing that on October 31, 2017, the Company, acquired substantially all of the operating assets and business (the “Acquisition”) of Mesoscribe Technologies, Inc., a Delaware corporation (“Mesoscribe”) pursuant to an Asset Purchase Agreement (the “Asset Purchase Agreement”), as more particularly described in the Original 8-K.

 

On January 16, 2018, the Company filed a Current Report on Form 8-K/A (“Amendment No. 1”) which amended the Original 8-K to provide the financial statements and pro forma financial information required under Item 9.01 of Form 8-K. The pro forma financial information contained in Amendment No. 1 was derived from the Company’s Statements of Operations and Statements of Cash Flows, for the three and six months ended June 30, 2017 and those of Mesoscribe for the three and nine months ended June 30, 2017.

 

This Current Report on Form 8-K/A (“Amendment No. 2”) amends the Original 8-K and Amendment No. 1 to provide revised pro forma financial information derived from the Statements of Operations and Cash Flows of each of the Company and Mesoscribe for the three and six months ended June 30, 2017. This revised pro forma financial information is being furnished in place of the pro forma financial information contained in Amendment No. 1 as described in the above paragraph in order to provide a more accurate and appropriate basis for evaluation against the unaudited pro forma financial information of the Company. Except as otherwise provided herein, this Amendment No. 2 does not amend or restate the Original 8-K, or Amendment No.1, nor does it modify or update any of the information disclosed in the Original 8-K or Amendment No. 1.

 

 

Item 9.01     Financial Statements and Exhibits

 

 

(a)

The audited financial statements of Mesoscribe as of and for the fiscal years ended September 30, 2016 and 2015, including the notes thereto, are included as Exhibit 99.1 to this Current Report on Form 8-K/A and incorporated herein by reference.

     
   

The unaudited condensed balance sheet of Mesoscribe as of June 30, 2017 and the related Statement of Operations and Statement of Cash Flows for the three and six months ended June 30, 2017, including the notes thereto, are included as Exhibit 99.2 to this Current Report on Form 8-K/A and incorporated herein by reference.

 

 

(b)

Pro Forma Financial Information

     
    The unaudited pro forma combined financial information with respect to the Company’s acquisition of Mesoscribe is included as Exhibit 99.3 to this Current Report on Form 8-K/A and incorporated herein by reference.

 

Item 9.01     Financial Statements and Exhibits

 

 

(a)

Financial Statements of Business Acquired – Audited Financial Statements:

 

 

 

 

Mesoscribe Technologies, Inc.

 

CONTENTS

 

 

 

Report of Independent Certified Public Accountants

 

Financial Statements

 

Balance Sheets

Statements of Operations and Retained Earnings

Statements of Cash Flows

Notes to Financial Statements

 

 

 

 

INDEPENDENT AUDITORS REPORT

 

To the Board of Directors and

Stockholders of Mesoscribe Technologies, Inc.

 

We have audited the accompanying financial statements of Mesoscribe Technologies, Inc. a Delaware Corporation which comprise the balance sheets as of September 30, 2016 and 2015 and the related statements of income, retained earnings, and cash flows for the years then ended, and the related notes to the financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation of these financial statements in accordance with accounting principles generally accepted in the United States of America, this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor Responsibility

 

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Unmodified Opinion

 

In our opinion the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Mesoscribe Technologies, Inc. as of September 30, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

 

/s/ La Sala, CPA, P.C.

La Sala, CPA, P.C.

October 3, 2017

 

 

 

 

Mesoscribe Technologies, Inc.

Balance Sheets

As of September 30,

 

   

2016

   

2015

 

ASSETS

               

Current Assets

               

Cash and cash equivalents

  $ 584,999     $ 945,195  

Accounts receivable, net

    238,101       159,389  

Inventory

    93,435       102,356  

Deferred tax asset

    138,517       4,396  

Prepaid corporate taxes

    82,836       83,667  

Prepaid expenses

    11,461       14,293  

Total Current Assets

    1,149,349       1,309,298  
                 
                 

Property and equipment, net

    113,060       99,617  
                 

Goodwill

    100,000       100,000  

Patents, net

    33,259       39,259  

Security deposit

    36,072       36,072  

Total Assets

  $ 1,431,739     $ 1,584,246  
                 
                 

LIABILITIES AND STOCKHOLDERS’ EQUITY

               

Current Liabilities

               

Accounts payable

  $ 3,996     $ 10,029  

Accrued expenses

    118,584       128,072  

Deferred income

    96,759       9,135  

Deferred income taxes

    11,692       20,470  

Total Current Liabilities

    231,031       167,706  
                 

Shareholder loan

    20,743       20,743  

Total Liabilities

    251,774       188,449  
                 

Stockholders’ Equity:

               

Common stock - $0.01 par value – 20,000,000 shares authorized at September 30, 2016 and September 30, 2015: issued and outstanding 10,500,000 at

               

September 30, 2016 and at September 30, 2015

    10,500       10,500  

Additional paid-in capital

    16,109       16,109  

Retained earnings

    1,153,356       1,369,188  

Total Stockholders’ Equity

    1,179,965       1,395,797  
                 

Total Liabilities and Stockholders’ Equity

  $ 1,431,739     $ 1,584,246  

 

 

 

 

Mesoscribe Technologies, Inc.

Statements of Operations and Retained Earnings

Years ended September 30,

 

   

2016

   

2015

 
                 

Revenue

  $ 856,922     $ 1,387,767  
                 

Cost of revenue

    212,991       423,466  
                 

Gross profit

    643,931       964,301  
                 

General and Administrative expenses

    1,002,036       935,693  
                 

Total General and Administrative Expenses

    1,002,036       935,693  
                 

Operating (loss)/income

    (358,105 )     28,608  
                 

Other income (expense):

               

Interest income

    202       284  

Deferred tax expense

    ---       (9,728 )

Penalties

    ---       (688 )

Total other (expense)/income net

    202       (10,132 )
                 

(Loss)/income before income tax (benefit)/expense

    (357,903 )     18,476  

Income tax (benefit)/expense

    (142,073 )     3,783  
                 

Net (loss)/income

  $ (215,830 )   $ 14,693  
                 

Retained Earnings, Beginning of Year

    1,369,188       1,354,495  
                 

Retained Earnings, End of Year

    1,153,356       1,369,188  

 

 

 

 

Mesoscribe Technologies, Inc.

Statements of Cash Flows

Years ended September 30,

 

   

2016

   

2015

 

Cash flows from operating activities:

               

Net (loss)/income

  $ (215,830 )   $ 14,693  

Adjustments to reconcile net (loss)/income to net cash used in operating activities

               

Depreciation and amortization

    42,854       57,112  

Deferred income tax benefit

    (134,119 )     29,778  

Increase/(decrease) in operating assets

               

Accounts receivable

    (78,712 )     59,512  

Inventories, net

    8,921       (49,581 )

Other current assets

    3,664       17,850  

Increase/(decrease) in operating liabilities

               

Accounts payable

    (8,828 )     (32,033 )

Accrued expenses

    (15,472 )     24,178  

Accrued litigation settlement

    ---          

Deferred revenue

    87,624          

Total adjustments

    (94,068 )     106,816  

Net cash used in operating activities

    (309,898 )     121,509  
                 

Cash flows from investing activities:

               

Capital expenditures

    (50,297 )     ---  

Net cash (used in) investing activities

    (50,297 )     ---  
                 

Cash flows from financing activities

               

Net cash provided by/(used in) financing activities

    ---       ---  
                 

Net (decrease)/increase in cash

    (360,195 )     121,509  
                 

Cash - Beginning of year

    945,195       823,687  
                 

Cash - End of year

  $ 584,999     $ 945,195  
                 

Supplemental disclosure of cash flow information

               

Interest expenses

    (202 )     284  

Income taxes

    824       3,783  

 

 

 

 

Mesoscribe Technologies, Inc.

Notes to Financial Statements

September 30, 2016

 

1.     Description of Business

 

Mesoscribe Technologies (Company) is a Delaware Corporation engaged in manufacturing products used in harsh environments for the commercial, aerospace and defense markets. Antennas, heaters, sensors and wiring are applied directly to customer’s parts. The company is in New York and is registered to do business in New York and California.

 

2.     Summary of Significant Accounting Policies

 

a.     Basis of Accounting

The Company uses the accrual method of accounting for financial statement and income tax purposes. The accompanying statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

 

b.     Use of Estimates

Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenue and expenses. Actual results could differ from these estimates.

 

c.     Accounts Receivable

Accounts receivable are recorded at the amount the company expects to collect on balances outstanding at year-end. Management closely monitors outstanding balances and writes off, as of year-end, all balances that are uncollectible by the time the financial statements are issued. Bad debt expense and allowance for doubtful accounts for the years ended September 30, 2016 and September 30, 2015 are $0 respectively.

 

d.     Revenue Recognition

Sales are recorded when products are shipped to the customers. In instances where products are configured to customer requirements, revenue is recorded upon the successful completion of the Company’s final test procedures and the customer’s acceptance. Customer deposits not earned are included in deferred revenue.

 

e.     Taxes Collected from Customers and Remitted to Government Authorities – Net Basis

 

The Company’s policy is to present taxes collected from customers and remitted to government authorities on a net basis. The Company records the amounts collected as a current liability and relieves such liability upon remittance to the taxing authority without impacting revenues or expenses.

 

 

 

 

Mesoscribe Technologies, Inc.

Notes to Financial Statements

September 30, 2016

 

f.     Property, equipment and Intellectual Assets

 

Property and equipment are stated at cost. Depreciation is provided using the straight-line method and accelerated methods over the useful lives, which are as follows:

 

Equipment & computers

5-7 years

Furniture & fixtures

5-7 years

Leasehold improvements

39 years

Patents

20 years

Goodwill

15 years

 

Depreciation for the years ended September 30, 2016 and 2015 were $37,494 and $50,311 respectively.

 

g.     Inventory

 

Inventory, consisting of products and parts, is stated at cost. The inventory at September 30, 2016 and September 30, 2015 was $93,435 and $102,356 respectively.

 

h.     The Company has a line of credit with Chase Bank with a limit of $250,000. The line of credit is unsecured and bears interest of 4.500 percentage points. No balance on this line of credit was outstanding as of September 30, 2016 and 2015.

 

i.     Advertising

 

The company expenses advertising costs as they are incurred. Advertising expenses for the year ended September 30, 2016 and 2015 was $0.

 

j.     The Company has a SIMPLE IRA plan is a Savings Incentive Match Plan for Employees. Participating employees may elect to contribute, on a tax-deferred basis, a portion of their compensation, in accordance of 401(k) of the internal Revenue Code. The Company’s matching contribution rate is 100% of the employee contribution up to 3% of employee’s compensation. The Company’s matching contribution expense for the year ended September 30, 2016 was $14,433. The Company matching contribution expense for the year ended September 30, 2015 was $12,357.

 

k.     Income Tax

 

The Company accounts for income taxes in accordance with generally accepted accounting principles, whereby deferred taxes are provided on temporary differences arising from assets and liabilities whose bases are different for financial reporting and income tax purposes. Deferred taxes relate to the effects of the following items:

 

Differences in calculating depreciation on fixed assets

Tax loss carryforwards

Charitable contributions carryforwards

 

 

 

 

Mesoscribe Technologies, Inc.

Notes to Financial Statements

September 30, 2016

 

As of September 30, 2016 and 2015. The Company accounts for income taxes in accordance with the reporting used in filing its income tax returns, which is based on interpretations or prevailing tax laws that the Company believes are accurate and justified.

 

Deferred tax assets at September 30, 2016 and 2015 were $138,517 and $4,398 respectively.

 

A valuation allowance has not been established to eliminate the net deferred tax benefit due to uncertainty as to whether the tax benefits would ever be realized. Management is confident that deferred tax assets will be used in the next 20 years before its expiration.

 

As of September 30, 2016 and September 30, 2015, the Company had federal net operating loss carry forwards of $401,798 and $65,103 respectively that can be deducted against future taxable income. The tax carry forward amount of $65,103 expires on September 30, 2030 and $336,692 expires on September 30, 2031.

 

l.      Accrued Vacation Payable

 

Employees of the Company are entitled to paid vacation, paid sick days and personal days off, depending on job classification, length of service, and other factors. Accrued but unused vacation, sick and personal leave in the amount of $63,836 and $66,288 is included in accrued expenses on the balance sheet as of September 30, 2015 and 2016, respectively.

 

3.     Shareholder Loan

 

As of September 30, 2016 and 2015, the Company owed $20,743 to officers of the Company. Management does not expect to repay $20,743 during the year ended September 30, 2017 and the officers have agreed not to demand payment in 2017; therefore it is classified as long-term on the balance sheets.

 

4.     Significant Concentrations

 

a.     Credit Risk

 

The Company maintains its domestic checking and savings account with a financial institution that insures cash balances up to $250,000 through the Federal Deposit Insurance Corporation. At times, these accounts may exceed the insured limit.

 

b.     Major Suppliers

 

The company is dependent on a few major suppliers for all its product and parts available for sale.

 

 

 

 

Mesoscribe Technologies, Inc.

Notes to Financial Statements

September 30, 2016

 

c.    Major Customers

 

The Company provides service primarily to the air space manufacturing industry. In 2016 65% of revenue was received from commercial customers and 35% from grants and government R&D contracts. Any major changes in this industry which lead to reduced staffing and spending could have a material adverse effect on the company. Listing of the major customers is as follows:

 

R&D Grants & Contracts:        
NASA      $  374,990  
Commercial Revenue:        
MHI     $  101,395  
Boeing     $  179,701  


5.     Operating Lease                       

             

a.     On May 20, 2014, the Company signed a lease for corporate office space from Mr. Wei-Chen Chang in the city of Huntington Beach located at 7441 Vincent Circle, CA. The lease commenced on June 1, 2014 and expires on May 31, 2019. Future minimum lease payments at September 30, 2016, are as follows:

 

2015-2016     $172,415  
2016-2017     $177,597  
2017-2018     $182,911  
2018-2019     $188,411  

   

b.     On August 1, 2014, the Company signed a lease for corporate office space from Adriatic Holdings, L.L.C., in the city of Setauket located at 100 North Country Road, NY. The lease commenced on September 1, 2014 and expires on August 31, 2017 with an option to renew the lease for further 3 years. Future minimum lease payments at September 30, 2016, are as follows:

 

2016-2017     $18,456  

   

Rental expense totaled $176,461 for the year ended September 30, 2016 and is recorded in the following expense line item: rent expense.

 

6.    Intangible Assets

 

a.      Patents

 

The Company owns certain patents under agreements that are classified as assets. The cost of the patents is included in the balance sheet as fixed asset and was $102,067 at September 30, 2016. Accumulated amortization for patents is approximately $ 62,807 and amortization expense for the year is $ 6,801.

 

 

 

 

Mesoscribe Technologies, Inc.

Notes to Financial Statements

September 30, 2016

 

b.    Goodwill

 

In May 2013, Mesoscribe Technologies, Inc. acquired assets from Robert Greenlaw through an asset purchase agreement. The cost of the investments was in excess of the underlying fair value of net assets acquired at the date of the purchase and accordingly such additional costs are recorded as goodwill. At September 30, 2016 goodwill was $100,000. Goodwill is assessed annually for impairment. If impaired, goodwill is written down to fair value and a corresponding impairment loss recognized.

 

During 2016, Mesoscribe Technologies Inc., determined, based on future expected cash flows, that the carrying amount of the goodwill associated with its acquisition of the assets did not exceed the current fair value. Therefore, an impairment loss of $0 was recognized during 2016.

 

7.     Subsequent Events

 

The Company has evaluated events from September 30, 2016 through the date the financial statements were issued.

 

a.      In 2017 Mesoscribe Technologies, Inc. was in discussions to sell the assets of the company.

 

b.     Operating lease for corporate office space from Adriatic Holdings, LLC, in the city of Setauket located at 100 N. Country Rd., NY will expire on August 31, 2017 and was not renewed.

 

 

 

 

Mesoscribe Technologies, Inc.

Balance Sheet

As of June 30, 2017

 

   

June 30

 

ASSETS

       

Current Assets

       

     Cash and cash equivalents

  $ 303,684  

     Accounts receivable, net

    70,689  

     Inventory

    95,579  

     Accrued revenue

    94,000  

     Deferred tax asset

    231,660  

     Prepaid corporate taxes

    82,836  

     Prepaid expenses

    30,169  

Total Current Assets

    908,617  
         
         

Property and equipment, net

    92,367  
         

Goodwill

    100,000  

Patents, net

    28,117  

Security deposit

    36,072  

     Total Assets

  $ 1,165,173  
         
         

LIABILITIES AND STOCKHOLDERS’ EQUITY

       

Current Liabilities

       

     Accounts payable

  $ 3,010  

     Accrued expenses

    109,438  

     Deferred income taxes

    4,126  

Total Current Liabilities

    116,574  
         

Shareholder loan

    20,743  

     Total Liabilities

    137,317  
         

Stockholders’ Equity:

       

Common stock - $0.01 par value – 20,000,000 shares authorized at June 30, 2017 and September 30, 2016: issued and outstanding 10,500,000 at

       

June 30, 2017 and at September 30, 2016

    10,500  

Additional paid-in capital

    16,109  

Retained earnings

    1,001,247  

Total Stockholders’ Equity

    1,027,856  
         

Total Liabilities and Stockholders’ Equity

  $ 1,165,173  

 

 

 

 

 

Mesoscribe Technologies, Inc.

Statement of Operations and Retained Earnings

For the Three and Six Months Ended June 30, 2017

 

   

Three months

   

Six months

 
   

Ended June 30

   

Ended June 30

 
                 
                 

Revenue

  $ 181,061     $ 388,236  
                 

Cost of revenue

    73,324       210,440  
                 

Gross profit

    107,737       177,796  
                 

General and Administrative expenses

    213,184       422,148  
                 

Total General and Administrative Expenses

    213,184       422,148  
                 

Operating (loss)

    (105,447 )     (244,352 )
                 

Other income (expense):

               

     Interest income

    45       95  

     Deferred tax income

    42,015       95,795  

     Penalties

    (70 )     (147 )

Total other (expense)/income net

    41,989       97,742  
                 

(Loss) before income tax expense

    (63,459 )     (146,610 )
                 

Income tax expense

    ---       1,100  
                 

Net (loss)

  $ (63,459 )   $ (147,710 )
                 

Retained Earnings, Beginning of period

    1,064,706       1,148,957  
                 

Retained Earnings, End of period

    1,001,247       1,001,247  

 

 

 

 

Mesoscribe Technologies, Inc.

Statements of Cash Flows

For the Three and Six Months ended June 30, 2017

 

   

Three Months

   

Six Months

 
   

Ended June 30,

   

Ended June 30,

 
   

2017

   

2017

 

Cash flows from operating activities:

               

Net (loss)

  $ (63,459 )   $ (147,710 )

Adjustments to reconcile net (loss) to net cash used in operating activities

               

Depreciation and amortization

    7,784       15,569  

Deferred income tax benefit

    (39,437 )     (92,649 )

Increase/(decrease) in operating assets

               

Accounts receivable

    37,984       165,847  

Inventory, net

    (512 )     1,252  

Accrued revenue

    (94,000 )     (94,000 )

Other current assets

    (10,367 )     (24,881 )

Increase/(decrease) in operating liabilities

               

Accounts payable

    72       327  

Accrued expenses

    5,050       3,512  

Deferred revenue

    ---       (96,759 )

Total adjustments

    (93,426 )     (121,782 )

Net cash used in operating activities

    (156,885 )     (269,492 )
                 

Cash flows from investing activities:

               

Net cash provided by/(used in) investing activities

    ---       ----  
                 

Cash flows from financing activities

               

Net cash provided by/(used in) financing activities

    ---       ---  
                 

Net (decrease) in cash and cash equivalents

    (156,885 )     (269,492 )
                 

Cash and cash equivalents – Beginning of year

    460,570       573,176  
                 

Cash and cash equivalents – End of year

  $ 303,684     $ 303,684  
                 

Supplemental disclosure of cash flow information

               

Interest expenses

    ---       ---  

Income taxes

    ---       1,100  

 

 

 

 

CVD EQUIPMENT CORPORATION

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

 

The following unaudited pro forma combined financial statements are provided for informational purposes only and do not purport to represent what the actual combined results of operations or the combined financial position of the combined company would be had the Acquisition (as previously defined) occurred on the dates assumed, nor are they necessarily indicative of future combined results of operations or combined financial position. The unaudited combined financial statements do not reflect any cost savings or synergies which may be realized following the Acquisition.

 

On October 31, 2017 (the “Closing Date”), CVD Mesoscribe Technologies Corporation, a New York corporation (“Buyer”) and newly formed and wholly-owned indirect subsidiary of the Company and Mesoscribe entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”). Pursuant to the Asset Purchase Agreement, among other things, the Company acquired (the “Acquisition”) substantially all of the operating assets and business of Mesoscribe (excluding cash, accounts receivable and other specified excluded assets), as more particularly described in the Asset Purchase Agreement.

 

Pursuant to the Asset Purchase Agreement, the purchase price for the assets acquired in the Acquisition was $800,000, of which $500,000 was paid on the Closing Date and $300,000 may be paid to Mesoscribe as additional contingent consideration based upon the achievement of certain revenue thresholds and other criteria set forth in the Asset Purchase Agreement with respect to each of the two (2) consecutive twelve (12) month measurement periods following the Closing Date.

 

The Asset Purchase Agreement contains usual and customary representations, warranties and covenants of the parties, as well as indemnification provisions.

 

For the year ended December 31, 2016, the unaudited pro forma combined statement of income gives effect to the twelve months ended December 31, 2016 for CVD Equipment Corporation with the twelve months ended September 30, 2016 for Mesoscribe Technologies, Inc.

 

For the year ended December 31, 2016, the unaudited pro forma combined statement of income gives effect to the Acquisition as if it had been consummated at the start of the December 31, 2016 year end.

 

For the period ended June 30, 2017, the unaudited pro forma combined statement of income gives effect to the six month period ended June 30, 2017 for CVD Equipment Corporation and the six month period ended June 30, 2017 for Mesoscribe Technologies, Inc. and gives effect to the Acquisition as if it had been consummated at the start of the period ended June 30, 2017.

 

The unaudited pro forma balance sheet as of June 30, 2017 gives effect to the Acquisition as if it had been consummated on that date.

 

 

 

 

CVD EQUIPMENT CORPORATION

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

JUNE 30, 2017

 

   

CVD

   

Mesoscribe

   

Pro Forma

             
   

Historical

   

Historical

   

Adjustments

   

Notes

 

Pro Forma

 
   

(Unaudited)

   

(Unaudited)

               

(Unaudited)

 

ASSETS

                                   

Current Assets:

                                   

Cash and cash equivalents

  $ 21,477,068     $ 303,684     $ (803,684 )  

(a)

  $ 20,977,068  

Accounts receivable, net

    1,852,047       70,689       (70,689 )  

(a)

    1,852,047  

Costs and estimated earnings in excess of billings on contracts in progress

    3,027,086                           3,027,086  

Inventories, net

    3,101,557       95,579       (70,579 )  

(d)

    3,126,557  

Other current assets

    344,025       207,005       (207,005 )  

(a)

    344,025  

Total Current Assets

    29,801,783       676,957       (1,151,957 )         29,326,783  
                                     

Property, plant and equipment

    14,122,984       92,367       257,633    

(b)

    14,472,984  

Construction in progress

    156,518                           156,518  
                                     

Deferred income taxes

    1,952,296       231,660       (231,660 )  

(a)

    1,952,296  

Other assets

    271,665       36,072       (36,072 )  

(a)

    271,665  

Intangible assets, net

    240,304       128,117       296,883    

(c)

    665,304  
                                     

Total Assets

  $ 46,545,550     $ 1,165,173     $ (865,173 )       $ 46,845,550  
                                     

LIABILITIES AND

                                   

STOCKHOLDERS’ EQUITY

                                   

Current liabilities:

                                   

Accounts payable

  $ 1,173,384     $ 3,010     $ (3,010 )  

(a)

  $ 1,173,384  

Accrued expenses

    2,121,702       113,564       (113,564 )  

(a)

    2,121,702  

Current maturities of long-term debt

    300,000       ---                   300,000  

Billings in excess of costs and

                                   

Estimated earnings on contracts

                                   

In progress

    2,984,621       ---                   2,984,621  

Deferred revenue

    98,509       ---                   98,509  

Total Current Liabilities

    6,678,216       116,574       (116,574 )         6,678,216  
                                     

Long-term debt, net of current portion

    2,815,508       ---                   2,815,508  

Acquisition related contingent payments

                    300,000    

(a)

    300,000  

Loans from shareholders

    ---       20,743       (20,743 )  

(a)

    ---  

Total Liabilities

    9,493,724       137,317       162,683           9,793,724  
                                     

Commitments and contingencies

                                   
                                     

Stockholders’ Equity

                                   

Common stock

    63,812       10,500       (10,500 )  

(a)

    63,812  

Additional paid-in capital

    24,588,783       16,109       (16,109 )  

(a)

    24,588,783  

Retained earnings

    12,399,231       1,001,247       (1,001,247 )  

(a)

    12,399,231  

Total stockholders’ equity

    37,051,826       1,027,173       (1,027,856 )         37,051,826  
                                     

Total Liabilities and Stockholders’

                                   

Equity

  $ 46,545,550     $ 1,165,173     $ (865,173 )       $ 46,845,550  

 

 

 

 

 

CVD EQUIPMENT CORPORATION

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2017 

 

   

CVD

   

Mesoscribe

   

Pro forma

             
   

Historical

   

Historical

   

Adjustments

   

Notes

 

Pro Forma

 
   

(Unaudited)

   

(Unaudited)

               

(Unaudited)

 
                                     

Revenue

  $ 20,480,326     $ 388,236                 $ 20,868,562  
                                     

Cost of revenue

    11,898,737       210,440       14,583    

(e)

    12,123,760  

Gross profit

    8,581,589       177,796       (14,583 )         8,744,802  
                                     

Operating expenses:

                                   

Research and development

    181,300                           181,300  

Selling and shipping

    638,325                           638,325  

General and administrative

    4,214,388       422,148       7,083    

(f)

    4,643,619  

Total operating expenses

    5,034,013       422,148       7,083           5,463,244  
                                     

Operating income.(loss)

    3,547,576       (244,352 )     (21,666 )         3,281,558  
                                     

Other income/(expense):

                                   

Interest income

    26,053       95                   26,148  

Interest expense

    (35,244 )                         (35,244 )

Other income/(expense)

    439       97,647       (97,647 )  

(g)

    439  

Total other (expense)

    (8,752 )     97,742       (97,647 )         (8,657 )
                                     

Income/(loss) before income taxes

    3,538,824       (146,610 )     (119,313 )         3,272,901  
                                     

Income tax

    1,257,915       (1,100 )     1,100    

(g)

    1,257,915  
                                     

Net income/(loss)

  $ 2,280,909     $ (147,710 )   $ (118,213 )       $ 2,014,986  
                                     

Weighted average common shares

                                   

Outstanding

                                   

Basic

    6,370,244                           6,370,244  

Diluted

    6,404,761                           6,404,761  
                                     

Net income per common share

                                   

Basic

    0.36                           0.32  

Diluted

    0.36                           0.31  

 

 

 

 

CVD EQUIPMENT CORPORATION

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2016 AND THE STATEMENT OF

INCOME FOR MESOSCRIBE TECHNOLOGIES, INC. FOR THE TWELVE MONTHS

ENDED SEPTEMBER 30, 2016

 

   

CVD

   

Mesoscribe

   

Pro Forma

       

Pro

 
   

Historical

   

Historical

   

Adjustments

   

Notes

 

Forma

 
   

(Unaudited)

   

(Unaudited)

               

(Unaudited)

 
                                     

Revenue

  $ 20,955,347     $ 856,922                 $ 21,812,269  
                                     

Cost of revenue

    13,850,824       212,991       43,750    

(e)

    14,107,565  

Gross profit

    7,104,523       643,931       (43,750 )         7,704,704  
                                     

Operating expenses:

                                   

Research and development

    433,844                           433,844  

Selling and shipping

    1,097,661                           1,097,661  

General and administrative

    6,926,487       1,002,036       21,250    

(f)

    7,949,773  

Litigation settlement

    (628,905 )                         (628,905 )

Total operating expenses

    7,829,087       1,002,036       21,250           8,852,373  
                                     

Operating (loss)

    (724,564 )     (358,105 )     (65,000 )         (1,147,669 )
                                     

Other income/(expense):

                                   

Interest income

    28,233       202                   28,435  

Interest expense

    (79,861 )                         (79,861 )

Other income/(expense)

    123,006                           123,006  

Total other (expense)

    71,378       202                   71,580  
                                     

Income/(loss) before income taxes

    (653,186 )     (357,903 )     (65,000 )         (1,076,089 )
                                     

Income tax (benefit)

    (504,061 )     (142,073 )                 (646,134 )
                                     

Net (loss)

  $ (149,124 )   $ (215,830 )   $ (65,000 )       $ (429,955 )
                                     

Weighted average common shares

                                   

Outstanding

                                   

Basic

    6,285,815                           6,285,815  

Diluted

    6,281,815                           6,285,815  
                                     

Net income per common share

                                   

Basic

    (0.02 )                         (0.07 )

Diluted

    (0.02 )                         (0.07 )

 

 

 

 

 

Notes to Unaudited Pro forma Combined Financial Statements

 

1.     Purchase Price

 

The unaudited pro forma combined financial statements reflect the acquisition of certain assets by the Company effective October 31, 2017.

 

Cash paid at closing     $428,713  
Net asset adjustment     71,287  
Contingent consideration     300,000  
Total purchase price     $800,000  

 

The Company agreed to make additional payments (“Contingent Consideration”) to Mesoscribe as additional contingent consideration based upon the achievement of certain revenue thresholds and other criteria set forth in the Asset Purchase Agreement with respect to each of the two (2) consecutive twelve (12) month measurement periods following the Closing Date.

 

The Company allocated the purchase price to the acquired assets based on their estimated fair values at the acquisition date as summarized in the following table.

 

Inventory   $ 25,000  
Machinery and equipment      350,000  
Intellectual property     425,000  
Net assets acquired   $ 800,000  

    

2.     The following pro forma adjustments are based upon management’s preliminary estimates. These are subject to finalization.

 

(a)     To eliminate historical Mesoscribe amounts not acquired or assumed.

(b)     To record the preliminary estimate of the increase to property and equipment acquired to estimated fair value.

(c)     The fair values of the identifiable intangible assets are based on current information and are subject to change.

(d)     To adjust inventory to its estimated fair value.

(e)     To reflect additional depreciation resulting from the increase in the fair value of the fixed assets at the date of acquisition over the historical value. Fixed assets are depreciated over periods ranging from 5 to 39.5 years.

(f)     To reflect amortization of estimated identifiable intangible assets, arising from the acquisition.

(g)     To adjust the provision for income taxes to reflect the estimate provision for taxes on a pro forma combined basis.

 

 

 

 

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.

 

Date: April 12, 2018

 

 

 

CVD EQUIPMENT CORPORATION

   
 

By        /s/ Leonard A. Rosenbaum                   

 

Name:  Leonard A. Rosenbaum

 

Title:    Chairman, President and Chief Executive Officer