EVERCEL INC - 10-Q Quarterly Report

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

5 POND PARK ROAD
HINGHAM, MASSACHUSETTS 02043
(Address, Including Zip Code, of Registrant's Principal Executive Offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) 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 []

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The number of shares outstanding of the Registrant's Common Stock, par value $.01, as of November 10, 2003 was 10,469,344.

EVERCEL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
(Unaudited)

	September 30,	December 31,
ASSETS	2003	2002
Current assets:
Cash and cash equivalents	$ 5,414	$ 10,377
Accounts receivable	96	172
Inventories	689	728
Other current assets	515	520
Total current assets	6,714	11,797

Property, plant and equipment, net	1,151	1,312
Other assets, net	2,733	2,977
Goodwill	342	-

TOTAL ASSETS	$ 10,940	$ 16,086

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$ 139		$ 142
Accrued liabilities	173		470
Total current liabilities	312		612


Other non-current liabilities	74		44
Note payable	2,380
Minority interest	-		5,005
Total liabilities	2,766		5,661

Shareholders' equity:

Preferred Stock ($0.01 par value); 1,000,000 shares authorized: 209,573 and 210,029 issued and outstanding at September 30, 2003 and December 31, 2002, respectively (with cumulative dividends at 8%).	2		2
Common Stock ($0.01 par value); 30,000,000 shares authorized: 10,469,344 and 10,422,156 issued and outstanding at September 30, 2003 and December 31, 2002, respectively.	105		104
Additional paid-in-capital	58,224		58,225
Accumulated other comprehensive income	1		-
Accumulated deficit	(50,158)		(47,906)
Total shareholders' equity	8,174		10,425

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 10,940		$ 16,086

EVERCEL, INC. AND SUBSIDIARY
STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)

	Three Months Ended
	September 30,	September 30,
	2003	2002

Revenues	$ 59	$ 81
Cost and expenses:
Cost of revenues	193	160
Administrative and selling expenses	597	582
Research and development	27	46
Total operating costs and expenses	817	788

Loss from operations	(758)	(707)

Interest income (expense), net	(5)	42
Other income (expense), net	(13)	9
Minority interest	-	90

Loss before income taxes	(776)	(566)

Income tax expense (benefit)	-	-

Net loss	(776)	(566)

Preferred stock dividends	(103)	(95)

Net loss - common shareholders	$ (879)	$ (661)

Basic and diluted loss per share	$ (.08)	$ (.06)

Basic and diluted shares outstanding	10,446	10,404

	Nine Months Ended
	September 30,	September 30,
	2003	2002

Revenues	$ 207	$ 252
Cost and expenses:
Cost of revenues	590	409
Administrative and selling expenses	1,782	1,807
Research and development	85	164
Total operating costs and expenses	2,457	2,380

Loss from operations	(2,250)	(2,128)

Interest income, net	23	153
Other income (expense), net	(25)	46
Loss attributable to minority interest	-	224

Loss before income taxes	(2,252)	(1,705)

Income tax expense (benefit)	-	-

Net loss	(2,252)	(1,705)

Preferred stock dividends	(313)	(286)

Net loss - common shareholders	$ (2,565)	$ (1,991)

Basic and diluted loss per share	$ (0.25)	$ (0.19)

Basic and diluted shares outstanding	10,434	10,400

	Nine Months Ended
	September 30,	September 30,
	2003	2002

Cash flows from operating activities:
Net loss	$ (2,252)	$ (1,705)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	386	294
Minority interest	-	(224)
(Increase) decrease in operating assets:
Accounts receivable	76	(131)
Inventories	39	(760)
Other current assets	6	(117)
Increase (decrease) in operating liabilities:
Accounts payable	(4)	95
Accrued liabilities	(297)	(2,124)
Other long term assets and liabilities	150	94
Net cash used in operating activities	(1,896)	(4,578)

Cash flows from investing activities:
Capital expenditures	(67)	(339)
Acquisition of minority interest in JV	(3,000)	-
Net cash used in investing activities	(3,067)	(339)

Cash flows from financing activities:
Net proceeds from common stock issued	-	21
Net cash provided by financing activities	-	21

Net decrease in cash and cash equivalents	(4,963)	(4,896)
Cash and cash equivalents - beginning of period	10,377	16,199
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DELAWARE		06-1528142
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

PART 1 -	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Unaudited Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002

	Unaudited Consolidated Statements of Operations for the three months ended September 30, 2003 and September 30, 2002

	Unaudited Consolidated Statements of Operations for the nine months ended September 30, 2003 and September 30, 2002

	Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2003 and September 30, 2002

	Condensed Notes to Unaudited Consolidated Financial Statements

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Item 4.	Controls and Procedures

PART II -	OTHER INFORMATION

Item 6.	Exhibits and Reports on Form 8-K

	Signatures