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, 1996 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, 1996 1,175,179
---------
<PAGE>
OPTELECOM, INC.
FORM 10-Q
CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
Condensed Balance Sheets as of June 30, 1996 (Unaudited)
and December 31, 1995
Condensed Statements of Operations for the Three Months
Ended June 30, 1996 and 1995 (Unaudited)
Condensed Statements of Operations for the Six Months Ended
June 30, 1996 and 1995 (Unaudited)
Statements of Cash Flows for the Six Months Ended June
30, 1996 and 1995 (Unaudited)
Notes to Condensed Financial Statements (Unaudited)
ITEM 2. MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
2
<PAGE>
OPTELECOM, INC.
Condensed Balance Sheets
as of June 30, 1996 and December 31, 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
(Unaudited) (Audited)
<S> <C>
Current Assets:
Cash $ 188,774 $ 62,436
Accounts Receivable 1,888,532 1,411,209
Inventory 1,177,664 1,080,341
Prepaid Expenses 148,190 108,960
Income Tax Refund Receivable 175,000 215,693
----------- -----------
Total Current Assets 3,578,160 2,878,639
Plant and Equipment, at Cost Less Accumulated 745,639 795,365
----------- -----------
Depreciation and Amortization
TOTAL ASSETS $4,323,799 $3,674,004
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Demand Note Payable to Bank $310,000 $60,000
Accounts Payable 813,878 800,409
Accrued Payroll 106,764 95,956
Accrued Annual Leave 102,285 89,210
Other Current Liabilities 328,732 152,962
Current Portion of Notes Payable 17,413 34,819
------------ -----------
Total Current Liabilities 1,679,072 1,233,356
----------- ----------
Long-Term Liabilities
Note Payable 46,427 46,426
Other Long-term Liabilities 199,663 205,445
----------- ----------
Total Long-term Liabilities 246,090 251,871
----------- ----------
TOTAL LIABILITIES $1,925,162 $1,485,227
---------- ----------
Stockholders' Equity
Common Stock - Par Value $.03 Per Share,
Authorized 5,000,000 Shares, Issued and
Outstanding 1,175,179 and 1,171,042 35,206 35,131
Discount on Common Stock (11,161) (11,161)
Additional Paid-In Capital 1,905,982 1,898,239
Retained Earnings 468,610 266,568
----------- -----------
2,398,637 2,188,777
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,323,799 $3,674,004
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
OPTELECOM, INC.
Consolidated Condensed Statements of Operations
for the Three Months Ended June 30, 1996 and 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
June 30, 1996 June 30, 1995
------------- -------------
<S> <C>
Revenue $2,306,225 $1,406,078
Direct Costs, Overhead and G&A 1,948,657 1,629,660
----------- -----------
Operating Income (Loss) 357,568 (223,582)
Other Expenses (Income) 13,257 (2,109)
------------ -------------
Income (Loss) Before Income Taxes 344,311 (225,691)
Income Tax Expense (Benefit) 110,000 (89,000)
----------- -------------
Net Income (Loss) 234,311 (136,691)
=========== ============
Net Earnings (Loss) Per Share $ .20 $ (.12)
Weighted Average Number of Common Shares Used in 1,192,828 1,172,189
Computing Net Earnings (Loss) Per Share
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
OPTELECOM, INC.
Consolidated Condensed Statements of Operations
for the Six Months Ended June 30, 1996 and 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1996 June 30, 1995
------------- -------------
<S> <C>
Revenue $4,050,647 $3,192,790
Direct Costs, Overhead and G&A 3,701,979 3,576,371
---------- -----------
Operating Income (Loss) 348,668 (383,581)
Other Expenses (Income) 36,626 (8,619)
----------- -----------
Income (Loss) Before Income Taxes 312,042 (392,200)
Income Tax Expense (Benefit) 110,000 (227,000)
----------- -----------
Net Income (Loss) 202,042 (165,200)
=========== ===========
Net Earnings (Loss) Per Share $ .17 $ (.14)
Weighted Average Number of Common Shares Used in 1,187,015 1,175,641
Computing Net Earnings (Loss) Per Share
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE>
OPTELECOM, INC.
Statements of Cash Flows
as of June 30, 1996 and June 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30
1996 1995
<S> <C>
Cash Flows From Operating Activities
Net Income (Loss) $ 202,042 $(165,200)
Reconciliation of Net Income (Loss) to Net Cash
(Used In) Operating Activities:
Depreciation and Amortization 115,001 99,419
Deferred Rent (5,782) (2,965)
Deferred Income Taxes 40,693 (188,000)
Decrease (Increase) in Assets:
Accounts Receivable (477,323) 247,160
Inventories (97,323) 40,199
Prepaid Expenses and Other
Receivables (39,231) (7,507)
Increase (Decrease) in Liabilities:
Accounts Payable 13,469 194,546
Accrued Payroll 10,809 (10,495)
Accrued Annual Leave 13,075 14,073
Other Current Liabilities 58,164 (284,020)
Accrued Commission 7,613 9,807
Accrued Income Tax 110,000 (45,000)
----------- -----------
Net Cash (Used In) Operating Activities (48,793) (97,983)
Investing Activities
Acquisition of Property and Equipment (65,274) (224,218)
----------- -----------
Net Cash (Used In) Investing Activities (65,274) (224,218)
Financing Activities
Net (Payments) on Note Payable (17,413)
Net Borrowings on Note Payable to Bank 250,000 98,655
Proceeds from Stock Options 7,818 4,501
----------- -----------
Net Cash Provided by Financing Activities 240,405 103,156
Net Increase (Decrease) in Cash 126,338 (219,045)
Cash - Beginning of Period 62,436 316,183
- -------------------------- ----------- -----------
Cash - End of Period 188,774 97,138
- -------------------- =========== ===========
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
Cash Paid During the Period for Interest 15,860 1,362
</TABLE>
The accompanying notes are an integral part of this statement.
6
<PAGE>
OPTELECOM, Inc.
Notes to Condensed Financial Statements
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures included in the annual financial
statements, prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading.
In the opinion of management, the unaudited accompanying financial
statements reflect all necessary adjustments and reclassifications (all of which
are of a normal, recurring nature) that are necessary for fair presentation for
the periods presented. It is suggested that these financial statements be read
in conjunction with the financial statements and the notes thereto included in
the Company's latest annual report to the Securities and Exchange Commission on
Form 10-K for the year ended December 31, 1995.
2. Line of Credit
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, 1996 is $690,000 subject to available
receivables.
3. Inventory
Inventory consisted of the following:
June 30, 1996 June 30, 1995
------------- -------------
Raw Materials $486,153 $480,892
WIP 405,379 146,232
Finished Goods 286,132 109,673
----------- -------
Total $1,177,664 $736,797
========== ========
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.
Results of Operations
For the first six months of 1996, revenues were $4,050,647 and net
income was $202,042 as compared to revenues of $3,192,790 and a net loss of
($165,200) for the same period of 1995. In 1996, second quarter revenues were
$2,306,225 with a net income of $234,310 compared to revenues of $1,406,078 and
net loss of ($136,691) for the second quarter of 1995.
Communication Products Division (CPD) second quarter 1996 revenues were
$1,716,515 compared to $1,161,330 for the same period in 1995. The division
achieved net income of $129,148 compared to a net loss of ($197,167) for the
second quarter of 1995. These results reflected higher levels of OEM (Original
Equipment Manufacturers - sales of products to be included in a customer's
product) sales and generally higher margins on product sales.
Revenues for the R&D Division were $165,193 compared to $56,511 for the
second quarter of 1995. The division realized a loss of ($9,179) for the second
quarter, which was substantially lower than the loss of ($109,092) incurred in
the same quarter of 1995. The higher revenue reflects the impact of the new
contract work on fiber optic gyros booked in the beginning of the second quarter
of 1996. We anticipate continuation of these improved revenue levels for the
balance of the year from new contracts in this area.
Laser Illuminator Division revenues were $424,516 for the quarter
compared to $188,235 for the equivalent period of 1995; net income was $114,342
compared to a net income of $178,540 for the same quarter in 1995. The anomalous
increase in this division's net income in 1995 was due to recognition of tax
benefits amounting to $98,000. The 1996 net income figure does not reflect any
tax carryback provision. We anticipate continuing significant revenues for this
segment throughout the remainder of the year as the work load increases on our
current contracts.
Company backlog at June 30, 1996 was $1,371,582.
Liquidity and Capital Resources
There were no significant changes in the Company's financial condition
in the second quarter of 1996. At the end of this quarter the current ratio was
2.1 compared to 2.3 at the end of 1995 and 2.1 at the end of the second quarter
of 1995. The overall cash used by operating activities for the six months of
1996 was ($48,793) as compared to ($97,903) for the same period of 1995.
8
<PAGE>
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
The Company did not file any reports on Form 8-K during the
three months ending June 30, 1996.
EXHIBIT 11 - STATEMENT REGARDING COMPUTATION OF NET INCOME (LOSS) PER
SHARE
Three Months Ended Three Months Ended
Primary Earnings Per Share June 30, 1996 June 30, 1995
- -------------------------- ----------------- -------------
Average Common Shares Outstanding 1,192,828 1,182,189
Net Income (Loss) 234,311 (136,691)
Primary Earnings Per Share .20 (.12)
Fully Diluted Earnings Per Share
- --------------------------------
Average Common Shares Outstanding 1,193,353 1,177,198
Net Income (Loss) 234,311 (136,691)
Fully Diluted Earnings Per Share .20 (.12)
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: 8/13/96 /s/ William H. Culver
William H. Culver, Chairman and Treasurer
/s/ Edmund D. Ludwig
Edmund D. Ludwig, President and CEO
/s/ Robert S. Lalley
Robert S. Lalley, Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 188,774
<SECURITIES> 0
<RECEIVABLES> 1,888,532
<ALLOWANCES> 0
<INVENTORY> 1,177,664
<CURRENT-ASSETS> 3,578,160
<PP&E> 745,639
<DEPRECIATION> 115,001
<TOTAL-ASSETS> 4,323,799
<CURRENT-LIABILITIES> 1,679,072
<BONDS> 0
0
0
<COMMON> 35,206
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,323,799
<SALES> 4,050,647
<TOTAL-REVENUES> 4,050,647
<CGS> 3,738,605
<TOTAL-COSTS> 3,738,605
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 312,042
<INCOME-TAX> 110,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 202,042
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
