<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1995 Commission File No. 0-8828
Optelecom, Inc.
(Exact Name of Registrant as
Specified in its Charter)
Delaware 52-1010850
(State of Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
9300 Gaither Road Gaithersburg, MD 20877
(Address of Principal Executive (Zip Code)
Offices)
Registrant's Telephone Number, (301) 840-2121
Including Area Code (Phone Number)
NONE
(Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report)
Indicate by checkmark 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 twelve (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
ninety (90) days.
Yes X No
Common Stock Outstanding
as of September 30, 1995 1,170,153
---------
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OPTELECOM, INC.
FORM 10-Q
CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
Condensed Balance Sheets as of September 30, 1995
(Unaudited) and December 31, 1994
Condensed Statements of Operations for the Three
Months Ended September 30, 1995 and 1994 (Unaudited)
Condensed Statements of Operations for the Months
Ended September 30, 1995 and 1994 (Unaudited)
Statements of Cash Flows for the Nine Months Ended
September 30, 1995 and 1994 (Unaudited)
Notes to Condensed Financial Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
2
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<TABLE>
<CAPTION>
OPTELECOM, INC.
Condensed Balance Sheets
as of September 30, 1995 and December 31, 1994
ASSETS 1995 1994
- ------ ------ -----
(Unaudited)
Current Assets:
<S> <C> <C>
Cash .......................................... $ 8,000 $ 316,183
Accounts Receivable ........................... 1,520,963 1,715,689
Inventory ..................................... 700,285 776,996
Prepaid Expenses .............................. 85,320 68,629
----------- -----------
Total Current Assets .......................... 2,314,568 2,877,497
----------- -----------
Plant and Equipment, at Cost ........................... 1,983,225 1,723,133
Less: Accumulated Depreciation and Amortization (1,155,595) (1,001,332)
----------- -----------
827,630 721,801
Other Assets (Note 2) .................................. 167,715 18,000
----------- -----------
TOTAL ASSETS ........................................... $ 3,309,913 $ 3,617,298
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable .............................. $ 434,891 $ 375,505
Accrued Commissions ........................... 3,119 0
Accrued Payroll ............................... 52,030 100,684
Accrued Annual Leave .......................... 105,193 106,604
Other Current Liabilities ..................... 117,672 391,951
Accrued Income Taxes .......................... 0 45,000
----------- -----------
Total Current Liabilities ..................... 712,905 1,019,744
----------- -----------
Other Long Term Liabilities ............................ 298,285 213,251
----------- -----------
$ 1,011,190 $ 1,232,995
----------- -----------
TOTAL LIABILITIES
Stockholders' Equity
Common Stock - Par Value $.03 Per Share,
Authorized 5,000,000 Shares, Issued and
Outstanding 1,170,153 and 1,166,672 ........... 35,127 35,000
Discount on Common Stock ...................... (11,161) (11,161)
Additional Paid-In Capital .................... 1,893,993 1,885,512
Retained Earnings ............................. 380,764 474,952
----------- -----------
2,298,723 2,384,303
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............. $ 3,309,913 $ 3,617,298
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
3
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OPTELECOM, INC.
Consolidated Condensed Statements of Operations
for the Three Months Ended September 30, 1995 and 1994
(UNAUDITED)
Three Months Three Months
Ended Ended
September 30, September 30,
1995 1994
Revenue .......................................... $ 1,658,467 $ 1,472,832
Direct, Overhead and G&A ......................... 1,547,536 1,448,504
----------- -----------
Operating Income (Loss) .......................... 110,931 24,328
Other (Income) Expenses .......................... (1,634) (53,400)
----------- -----------
Income (Loss) Before Income Taxes ................ 109,297 (29,072)
Provision for Income Taxes ....................... 38,285 53,679
----------- -----------
Net Income (Loss) ................................ 71,012 (82,751)
=========== ===========
Net Earnings (Loss) Per Share .................... $ .06 $ (.07)
Weighted Average Number of Common Shares Used in . 1,170,054 1,160,872
computing Net Earnings (Loss) Per Share
The accompanying notes are an integral part of this statement.
4
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OPTELECOM, INC.
Consolidated Condensed Statements of Operations
for the Nine Months Ended September 30, 1995 and 1994
(UNAUDITED)
Nine Months Nine Months
Ended Ended
September 30, September 30,
1995 1994
Revenue .......................................... $ 4,851,257 $ 4,298,293
Direct Overhead and G&A .......................... 5,123,907 4,442,083
----------- -----------
Operating (Loss) Income .......................... (272,650) 256,210
Other (Income) Expenses .......................... 10,253 (148,190)
----------- -----------
(Loss) Income Before Income Taxes ................ (282,903) 180,020
(Benefit) Provision for Income Taxes ............. (188,715) 92,679
----------- -----------
Net (Loss) Income ................................ (94,188) 15,341
=========== ===========
Net (Loss) Earnings Per Share .................... $ (.08) $ .01
Weighted Average Number of Common Shares Used in . 1,168,413 1,159,953
computing Net Earnings (Loss) Per Share
The accompanying notes are an integral part of this statement.
5
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<TABLE>
<CAPTION>
OPTELECOM, INC.
Statements of Cash Flows
as of September 30, 1995 and December 31, 1994
Nine Months Ended September 30
1995 1994
(Unaudited) (Unaudited)
Operating Activities
<S> <C> <C>
Net (Loss) Income ................................. $ (94,188) $ 15,341
Provision for Depreciation and Amortization ....... 154,263 154,273
Deferred Rent ..................................... 0 41,299
Deferred Income Taxes ............................. (149,715) 0
Decrease (Increase) in Assets: .................... 0 (71,000)
Accounts Receivable ...................... 194,726 267,055
Inventories .............................. 76,711 (57,270)
Prepaid Expenses and Other Receivables ... (16,691) 6,481
Increase (Decrease) in Liabilities:
Accounts Payable .................................. 59,386 207,055
Accrued Payroll ................................... (48,654) (57,271)
Accrued Annual Leave .............................. (1,411) (10,984)
Other Current Liabilities ......................... (274,279) 88,522
Accrued Commission ................................ 3,119
Accrued Income Tax ................................ (45,000) 0
--------- ---------
Net Cash (Used In) Provided by Operating Activities ........ (141,733) 596,212
Investing Activities
Acquisition of Property and Equipment ............. (260,092) (156,806)
Investment in HydraLite ........................... 0 (21,000)
--------- ---------
Net Cash (Used In) Investing Activities ........... (260,092) (177,806)
--------- ---------
Financing Activities
Net Borrowings (Payments) on Note Payable to ...... 85,034 (385,000)
Bank
Proceeds from Stock Options ....................... 8,608 3,966
--------- ---------
Net Cash Provided by (Used In) Financing Activities 93,642 (381,034)
--------- ---------
Net (Decrease) Increase in Cash ................... (308,183) 37,372
Cash - Beginning of Period ................................. 316,183 12,247
- ------------------------------------------------------------ --------- ---------
Cash - End of Period ....................................... 8,000 49,619
- ------------------------------------------------------------ ========= =========
Supplemental Disclosures of Cash Flow Information
---------
Cash Paid During the Period for Interest .......... 3,721 22,444
Cash Paid During the Period for Taxes ............. 0 92,679
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
6
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OPTELECOM, Inc.
Notes to Condensed Financial Statements
1. Basis of Presentation
The financial information for September 30, 1995 and 1994 included
herein is unaudited. In addition, the financial information does not include all
disclosures required under generally accepted accounting principles, in that
certain note information included in the Company's Annual Report has been
omitted; however, such information reflects all adjustments (consisting solely
of normal recurring adjustments) which are, in the opinion of management,
necessary to a fair statement of the results of the interim periods.
The results of operations for the nine month period ended September 30,
1995, are not necessarily indicative of the results to be expected for the full
year.
2. Income Taxes
The primary components of temporary differences which give rise to the
Company's net deferred tax asset is as follows:
September 30, 1995
Depreciation $11,000
Reserves 30,000
Rent 79,000
Accrued Vacation 36,000
General Business Credit 138,715
Other 23,000
--------
SubTotal 317,715
Valuation Allowance (150,000)
---------
Net Deferred Tax Asset $167,715
========
The difference between the income tax provision (benefit) calculated at the
statutory Federal income tax rate and the actual tax provision (benefit) for
each period are as follows:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, 1995 September 30, 1995
<S> <C> <C>
Tax at Statutory Federal Rate ($102,415) $30,585
State Income Tax (6,300) 7,700
Other 6,000 0
State Tax Refunds (26,000) 0
Change in Valuation Allowance (60,000) 0
----------- ----------
Total Tax Benefit ($188,715) $38,285
========== ========
</TABLE>
Note 3 - The Company has a credit agreement with a bank, whereby it may borrow
up to $1,000,000 with interest at the bank's prime rate plus 3/4%. The total
amount of borrowings which may be outstanding at any given time is based upon a
percentage of certain eligible receivables. The amount available under the
credit agreement as of September 30, 1995 is $1,000,000.
7
<PAGE>
Note 4 - Inventory consisted of the following:
As of September As of September
30, 1995 30, 1994
Raw Materials .......................... $429,970 $555,981
WIP .................................... 133,666 155,676
Finished Goods ......................... 136,649 65,339
-------- --------
Total .................................. $700,285 $776,996
======== ========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Set forth below is management's discussion and analysis of the
Company's financial condition and results of operations.
Liquidity
There were positive changes in the Company's financial condition in the
third quarter of 1995. At the end of this quarter the current ratio was 3.24
compared to 2.82 at the end of 1994 and 2.68 at the end of the third quarter of
1994. The overall cash used by operating activities for the first nine months of
1995 was ($141,733) compared to $596,212 for the first nine months of 1994.
Material Changes and Results of Operations
In 1995, third quarter revenues were $1,658,467 with a net income of
$71,012 compared to revenues of $1,472,183 and net loss of $82,751 for the third
quarter of 1994.
Year to date revenues are $4,851,257 with a net loss of ($94,188)
compared to revenues of $4,298,293 and net income of $15,341 for the comparable
period of 1994.
Communication Products Division (CPD) third quarter 1995 revenues were
$1,109,479 compared to $1,089,430 for the same period in 1994. The division
sustained a loss of ($181,972) compared to a loss of ($164,182) for the third
quarter of 1994. Lower margins on sales due to increased competition coupled
with lower revenues due to a decrease in OEM sales and delays in contract awards
for products involving highway traffic systems, contributed to the loss.
Revenues for the R&D Division were $179,172 compared to $177,041 for
the third quarter of 1994. This resulted in a profit of $14,194 for the third
quarter, which was substantially higher than the loss of ($5,220) incurred in
the same quarter of 1994. The higher revenue reflects the impact of the new
contract work on fiber optic gyros. We anticipate improved revenue for the
balance of the year from new contracts in this area.
GLINT Division revenues were $369,816 for the quarter compared to
$206,260 for the equivalent period of 1994; profit was $238,789 compared to a
profit of $86,649 for the same quarter in 1994.
Company backlog at the end of the September 30, 1995 was $621,006.
8
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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
On October 30, 1995, the Company named Deloitte & Touche LLP
as its auditor replacing BDO Seidman.
EXHIBIT 11 - STATEMENT REGARDING COMPUTATION OF NET INCOME (LOSS) PER
SHARE
<TABLE>
Three Months Ended Three Months Ended
September 30, 1995 September 30, 1994
------------------ ------------------
<S> <C> <C>
Average Common Shares Outstanding ........ 1,170,054 1,160,872
========== ==========
Net (Loss) Income ........................ 71,012 (82,751)
Primary Fully Diluted Earnings Per Share . .06 (.07)
</TABLE>
<TABLE>
Nine Months Ending Nine Months Ending
September 30, 1995 September 30, 1995
------------------ ------------------
<S> <C> <C>
Average Common Shares Outstanding ......... 1,168,413 1,159,953
========== ==========
Net (Loss) Income ......................... (94,188) 15,341
Primary Fully Diluted Earnings Per Share .. (.08) .01
</TABLE>
9
<PAGE>
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.
OPTELECOM, INC.
Date:
William H. Culver, Chairman
Edmund D. Ludwig, President and CEO
Robert S. Lalley, Controller
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 8,000
<SECURITIES> 0
<RECEIVABLES> 1,520,963
<ALLOWANCES> 0
<INVENTORY> 700,285
<CURRENT-ASSETS> 2,314,568
<PP&E> 1,983,225
<DEPRECIATION> (1,155,595)
<TOTAL-ASSETS> 3,309,913
<CURRENT-LIABILITIES> 712,905
<BONDS> 0
<COMMON> 35,127
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,309,913
<SALES> 4,851,257
<TOTAL-REVENUES> 4,851,257
<CGS> 5,123,907
<TOTAL-COSTS> 5,123,907
<OTHER-EXPENSES> 10,253
<LOSS-PROVISION> (188,715)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (94,188)
<INCOME-TAX> (94,188)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (94,188)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
