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 June 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 June 30, 1995 1,169,955
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OPTELECOM, INC.
FORM 10Q
CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
Condensed Balance Sheet as of June 30, 1995
(Unaudited) and December 31, 1994
Condensed Statement of Operations for the Three Months
Ended June 30, 1995 and 1994 (Unaudited)
Condensed Statement of Operations for the Six Months
Ended June 30, 1995 and 1994 (Unaudited)
Statement of Cash Flows for the Six Months Ended June
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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OPTELECOM, INC.
Condensed Balance Sheet
as of June 30, 1995 and December 31, 1994
ASSETS 1995 1994
Current Assets: (UNAUDITED)
Cash $ 97,138 $ 316,183
Accounts Receivable 1,468,529 1,715,689
Inventory 736,797 776,996
Prepaid Expenses 76,136 68,629
Total Current Assets 2,378,600 2,877,497
Plant and Equipment, at Cost 1,947,351 1,723,133
Less: Accumulated Depreciation and
Amortization (1,100,751) (1,001,332)
846,600 721,801
Other Assets (Note 2) 206,000 18,000
TOTAL ASSETS $3,431,200 $3,617,298
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 570,051 $ 375,505
Accrued Commissions 9,807 0
Accrued Payroll 90,189 100,684
Accrued Annual Leave 120,677 106,604
Other Current Liabilities 107,931 391,951
Accrued Income Taxes 0 45,000
Total Current Liabilities 898,655 1,019,744
Other Long Term Liabilities 308,941 213,251
TOTAL LIABILITIES $1,207,596 $1,232,995
Stockholders' Equity
Common Stock - Par Value $.03 Per Share,
Authorized 5,000,000 Shares, Issued and
Outstanding 1,166,672 and 1,169,955 35,090 35,000
Discount on Common Stock (11,161) (11,161)
Additional Paid-In Capital 1,889,923 1,885,512
Retained Earnings 309,752 474,952
2,223,604 2,384,303
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,431,200 $3,617,298
The accompanying notes are an integral part of this statement.
3
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OPTELECOM, INC.
Consolidated Condensed Statement of Operations
for the Three Months Ended June 30, 1995 and 1994
(UNAUDITED)
Three Months Three Months
Ended Ended
June 30, 1995 June 30, 1994
Revenue $1,406,078 $1,626,162
Direct Overhead and G&A 1,629,660 1,388,749
Operating Income (Loss) (223,582) 237,413
Other Income (Expenses) (2,109) (48,426)
(Loss) Income Before Income Taxes (225,691) 188,987
(Benefit) Provision for Income Taxes (89,000) 39,000
Net (Loss) Income (136,691) 149,987
(Loss) Earnings Per Share $ (.12) $ .13
Weighted Average Number
of Common Shares 1,169,775 1,160,100
The accompanying notes are an integral part of this statement.
4
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OPTELECOM, INC.
Consolidated Condensed Statement of Operations
for the Six Months Ended June 30, 1995 and 1994
(UNAUDITED)
Six Months Six Months
Ended Ended
June 30, 1995 June 30, 1994
Revenue $3,192,790 $3,225,461
Direct Overhead and G&A 3,576,371 2,993,579
Operating Income (Loss) (383,581) 231,882
Other Income (Expenses) (8,619) (94,788)
(Loss) Income Before Taxes (392,200) 137,094
(Benefit) Provision for Income Taxes (227,000) 39,000
Net (Loss) Income (165,200) 98,094
(Loss) Earnings Per Share $ (.14) $ .08
Weighted Average Number
of Common Shares 1,169,775 1,161,278
The accompanying notes are an integral part of this statement.
5
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OPTELECOM, INC.
Consolidated Condensed Statements of Cash Flows
for the Six Months Ended June 30, 1995 and 1994
Six Months Ended June 30
1995 1994
(UNAUDITED)
Operating Activities
Net Income (Loss) $ (165,200) $ 98,094
Provision for Depreciation and
Amortization 99,419 104,785
Deferred Rent (2,965) 41,871
Deferred Income Taxes (188,000) 0
Reversal of Reserve for HydraLite 0 (71,000)
Decrease (Increase) in Assets:
Accounts Receivables 247,160 (131,917)
Inventories 40,199 63,906
Prepaid Expenses and Other Receivables (7,507) 21,577
Increase (Decrease) in Liabilities:
Accounts Payable 194,546 95,681
Accrued Payroll (10,495) (18,030)
Accrued Annual Leave 14,073 10,174
Other Current Liabilities (284,020) (37,452)
Accrued Commission 9,807 5,239
Accrued Income Tax (45,000) 0
Net Cash (Used In) Provided by
Operating Activities (97,983) 182,928
Investing Activities
Acquisition of Property and Equipment $ (224,218) $ (77,581)
Investment in HydraLite 0 (21,000)
Net Cash (Used In) Investing Activities (224,218) (98,581)
Financing Activities
Net (Payments) Borrowings on Note
Payable to Bank 98,655 (35,000)
Proceeds from Stock Options 4,501 1,904
Net Cash Provided by (Used In)
Financing Activities 103,156 (33,096)
Net (Decrease) Increase in Cash (219,045) 51,251
Cash - Beginning of Period 316,183 12,247
Cash - End of Period 97,138 63,498
Supplemental Disclosures of Cash Flow
Information
Cash Paid During the Period for Interest 1,362 14,689
Cash Paid During the Period for Taxes 0 65,840
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 June 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 six month period ended June 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:
June 30, 1995
Depreciation $ 11,000
Reserves 30,000
Rent 79,000
Accrued Vacation 36,000
General Business Credit 177,000
Other 23,000
SubTotal 356,000
Valuation Allowance (150,000)
Net Deferred Tax Asset $206,000
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:
Six Months Ended Three Months Ended
June 30, 1995 June 30, 1995
Tax at Statutory Federal Rate ($133,000) ($77,000)
State Income Tax (14,000) (8,000)
Other 6,000 (4,000)
State Tax Refunds (26,000) 0
Change in Valuation Allowance (60,000) 0
Total Tax Benefit ($227,000) ($89,000)
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 June 30, 1995 is $1,000,000.
7
<PAGE>
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 small negative changes in the Company's financial condition in
the second quarter of 1995. At the end of this quarter the current ratio was
2.64 compared to 2.82 at the end of 1994 and 2.52 at the end of the second
quarter of 1994. The overall cash provided by operating activities for the
first six months of 1995 was ($97,983) compared to $182,928 for the first six
months of 1994.
Material Changes and Results of Operations
In 1995, second quarter revenues were $1,406,078 with a loss of ($136,691)
compared to revenues of $1,626,162 and profit of $149,987 for the second quarter
of 1994.
Year to date revenues are $3,192,790 with a loss of ($165,200) compared to
revenues of $3,225,461 and profit of $98,094 for the comparable period of 1994.
Communication Products Division (CPD) second quarter 1995 revenues were
$1,161,330 compared to $1,300,317 for the same period in 1994. The division
sustained a loss of ($197,167) compared to a profit of $105,433 for the second
quarter of 1994. Lower margins on sales due to increased competition, and a one
time charge of $71,000 for an inventory write-off, 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 $56,511 compared to $145,033 for the
second quarter of 1994. This resulted in a loss of ($109,092) for the second
quarter, which was substantially higher than the loss of ($25,917) incurred in
the same quarter of 1994. The lower revenue reflects the impact of the
cancellation of a contract with Litton for work on fiber optic gyros. We
anticipate improved revenue for the balance of the year from new contracts in
this area.
GLINT (Laser Illuminator) Division revenues were $188,235 for the quarter
compared to $180,810 for the equivalent period of 1994; profit was $178,540
compared to a profit of $70,471 for the same quarter in 1994. The anomalous
increase in this division's profit was due to recognition of tax benefits
amounting to $98,000.
Company backlog at the end of the June 30, 1995 was $940,532.
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
At the Annual Meeting held May 17, 1995 stockholders elected the
following person to serve as a member of the Board of Directors for
a three year term to expire in 1998.
William H. Culver:
For: 843,876
Authority Withheld: 24,147
Directors whose terms continued after the Annual Meeting are Dr.
John A. Jamieson, Mr. Dominique Gignoux, Mr. Joseph H. Sharlitt and
Mr. Edmund D. Ludwig.
Two other matters approved by the stockholders at the Annual
Meeting:
1. Stockholders approved an amendment to 1991 Stock Option Plan
Votes Cast For: 391,576
Votes Cast Against: 32,062
2. Stockholders approved the adoption of the 1996 Directors Stock
Option Plan.
Votes Cast for: 371,894
Votes Cast Against: 51,880
ITEM 5 - OTHER INFORMATION
None
9
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ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
On May 3, 1995, the Company filed a Form 8-K with the Securities and
Exchange Commission disclosing that it had terminated its
relationship with its accounting firm, BDO Seidman. No successor
auditor has been named at this time.
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, President and CEO
Robert S. Lalley, Controller
10
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 97,138
<SECURITIES> 0
<RECEIVABLES> 1,468,529
<ALLOWANCES> 0
<INVENTORY> 736,797
<CURRENT-ASSETS> 2,378,600
<PP&E> 1,947,351
<DEPRECIATION> (1,100,751)
<TOTAL-ASSETS> 3,431,200
<CURRENT-LIABILITIES> 898,655
<BONDS> 0
<COMMON> 35,090
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,431,200
<SALES> 3,192,790
<TOTAL-REVENUES> 3,192,790
<CGS> 3,576,371
<TOTAL-COSTS> 3,576,371
<OTHER-EXPENSES> (8,619)
<LOSS-PROVISION> (227,000)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (165,200)
<INCOME-TAX> (165,200)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (165,200)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
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