The following is an analysis of our product gross profit and margins:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in thousands
|
|
Three Months
Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
2018
|
|
|
July 1,
2017
|
|
|
June 30,
2018
|
|
|
July 1,
2017
|
|
Commercial product sales
|
|
$
|
0
|
|
|
$
|
8
|
|
|
$
|
0
|
|
|
$
|
9
|
|
Cost of commercial product sales
|
|
|
368
|
|
|
|
769
|
|
|
|
1,007
|
|
|
|
1,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross loss
|
|
$
|
(368
|
)
|
|
$
|
(761
|
)
|
|
$
|
(1,007
|
)
|
|
$
|
(1,622
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We had a gross loss of $368,000 in the second quarter of 2018 from the sale of our commercial products
compared to a gross loss of $761,000 in the second quarter of 2017. We experienced a gross loss in the three and six months ended June 30, 2018 due to: our preproduction manufacturing efforts to bring our Conductus wire to market and; our sales
being insufficient to cover our overhead. For the three and six months ended June 30, 2018, our gross loss was reduced by sharing of our production equipment with a new government contract. As we emphasize improving manufacturing processes and
increasing our yields at lower than optimal capacity, we expect gross losses to continue through 2018.
In June 2017, we finalized
negotiations on a $4.5 million DOE contract and have begun work on this government contract. Our first year goals under this contract were to focus on increasing current carrying capacity and reducing costs of our Conductus wire. Our government
contract revenues for the three and six months ended June 30, 2018 were $793,000 and $1,039,000, respectively, and cost of government contract revenues were $551,000 and 734,000, respectively.
Research and development expenses relate to development of new Conductus wire products and new wire products manufacturing processes. These
expenses totaled $0.4 million and $1.0 million, respectively, in the three and six months ended June 30, 2018 compared to $0.7 million and $1.3 million, respectively, in the three and six month period ended July 1,
2017. These expenses were lower in the current three and six month period compared to the same three and six month period in 2017 as a result of our efforts moving from research and development to manufacturing of our new Conductus wire products.
Selling, general and administrative expenses totaled $1.0 million, and $2.0 million, respectively, in the three and six months
ended June 30, 2018 compared to $1.1 million and $2.2 million in the three and six months ended July 1, 2017. Lower,
non-cash
stock award expenses in 2018 were the principal cause of this
decrease.
We had a gain from the adjustment to the fair value of our warrant derivatives of $16,000 and $49,000, respectively, in the
three months and six months ended June 30, 2018 and a gain of $11,000 and $8,000, respectively, in the three and six months ended July 1, 2017. These fair value adjustments are due to multiple factors including our stock price, warrant
exercises, as well as our financing activities affecting the warrant exercise price. This warrant liability is adjusted to fair value each reporting period, and any change in value is recognized in the statement of operations.
Our first quarter 2018 sale of common stock, common stock equivalents and warrants resulted in a $24,000 price adjustment expense for of our
warrants. See Note 3Stockholders Equity:
Warrants
.
Other income of $7,000 and $11,000 in the second quarters of 2018
and 2017, respectively, and other income of $14,000 and $16,000 for the six months ended June 30, 2018 and July 1, 2017, respectively, was from interest income.
We had a net loss of $1.5 million for the quarter ended June 30, 2018, compared to a net loss of $2.5 million in the second
quarter of 2017 and for the six months ended June 30, 2018 our loss totaled $3.7 million compared to a net loss of $5.2 million for the six months ended July 1, 2017. The net loss available to common stockholders totaled $1.24
per common share in the quarter ended June 30, 2018, compared to a net loss of $2.37 per common share in the same period of 2017. The net loss available to common stockholders totaled $3.17 per common share in the first half of 2018, compared
to $5.00 per common share in the first half of 2017. For the three and six months ended June 30, 2018, the decrease in net loss per common share available to common stockholders is due to the increase in the number of common shares outstanding
and increased government contract revenues.
Liquidity and Capital Resources
Cash Flow Analysis
As of June 30,
2018, we had working capital of $1.1 million, including $1.0 million in cash and cash equivalents, compared to working capital of $2.6 million at December 31, 2017, which included $3.1 million in cash and cash equivalents.
We currently invest our excess cash in short-term, investment-grade, money-market instruments with maturities of three months or less.
Cash and cash equivalents decreased by $2.1 million from $3.1 million at December 31, 2017 to $1.0 million at
June 30, 2018. In the first six months of 2018, cash was used principally in operations.
18