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, 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 September 30, 1996 1,175,533
---------
<PAGE>
OPTELECOM, INC.
FORM 10-Q
CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
Condensed Balance Sheets as of September 30, 1996
(Unaudited) and December 31, 1995
Condensed Statements of Operations for the Three Months
Ended September 30, 1996 and 1995 (Unaudited)
Condensed Statements of Operations for the Nine Months
Ended September 30, 1996 and 1995 (Unaudited)
Statements of Cash Flows for the Nine Months Ended
September 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 September 30, 1996 and December 31, 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
(Unaudited) (Audited)
<S> <C>
Current Assets:
Cash $ 78,447 $ 62,436
Accounts Receivable 1,969,983 1,411,209
Inventory 1,440,686 1,080,341
Prepaid Expenses 89,360 108,960
Income Tax Refund Receivable 52,371 215,693
---------- ----------
Total Current Assets 3,630,847 2,878,639
Plant and Equipment, at Cost Less Accumulated
Depreciation and Amortization 739,071 795,365
---------- ----------
TOTAL ASSETS $4,369,918 $3,674,004
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Demand Note Payable to Bank $ 50,000 $ 60,000
Accounts Payable 631,370 800,409
Accrued Payroll 94,948 95,956
Accrued Annual Leave 101,689 89,210
Income Taxes Payable 110,000 0
Current Portion of Notes Payable 8,704 34,819
Other Current Liabilities 393,375 152,962
---------- ----------
Total Current Liabilities 1,390,086 1,233,356
---------- ----------
Long-Term Liabilities
Note Payable 46,426 46,426
Other Long-term Liabilities 196,770 205,445
---------- ----------
Total Long-term Liabilities 243,196 251,871
---------- ----------
TOTAL LIABILITIES $1,633,282 $1,485,227
---------- ----------
Stockholders' Equity
Common Stock - Par Value $.03 Per Share,
Authorized 5,000,000 Shares, Issued and
Outstanding 1,175,533 and 1,171,042 35,266 35,131
Discount on Common Stock (11,161) (11,161)
Additional Paid-In Capital 1,911,670 1,898,239
Retained Earnings 800,861 266,568
---------- ----------
2,736,636 2,188,777
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,369,918 $3,674,004
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
OPTELECOM, INC.
Condensed Statements of Operations
for the Three Months Ended September 30, 1996 and 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, 1996 September 30, 1995
<S> <C>
Revenue $2,382,428 $1,658,467
Direct Costs, Overhead and G&A 1,823,850 1,547,536
---------- ----------
Operating Income 558,578 110,931
Other Expenses (Income) 7,081 1,634
---------- ----------
Income Before Income Taxes 551,497 109,297
Income Tax Expense 219,249 38,285
---------- ----------
Net Income 332,248 71,012
========== ==========
Net Earnings Per Share $ .28 $ .06
Weighted Average Number of Common Shares Used in 1,197,904 1,170,054
Computing Net Earnings Per Share
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
OPTELECOM, INC.
Condensed Statements of Operations
for the Nine Months Ended September 30, 1996 and 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, 1996 September 30, 1995
<S> <C>
Revenue $6,433,078 $4,851,257
Direct Costs, Overhead and G&A 5,525,829 5,123,907
---------- ----------
Operating Income (Loss) 907,249 (272,650)
Other Expenses (Income) 42,907 10,253
---------- ----------
Income (Loss) Before Income Taxes 864,342 (282,903)
Income Tax Expense (Benefit) 330,049 (188,715)
---------- ----------
Net Income (Loss) 534,293 (94,188)
========== ==========
Net Earnings (Loss) Per Share $ .45 $ (.08)
Weighted Average Number of Common Shares Used in 1,175,356 1,168,413
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 September 30, 1996 and September 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September
1996 1995
---------- ---------
<S> <C>
Cash Flows From Operating Activities
Net Income (Loss) $ 534,293 $ (94,188)
Reconciliation of Net Income (Loss) to Net Cash
(Used In) Operating Activities:
Depreciation and Amortization 173,664 154,263
Deferred Rent (8,676) 0
Decrease (Increase) in Assets:
Accounts Receivable (558,774) 194,726
Inventory (360,345) 76,711
Prepaid Expenses 19,600 (16,691)
Income Taxes Receivable 163,322 (149,715)
Increase (Decrease) in Liabilities:
Accounts Payable (169,039) 59,386
Accrued Payroll (1,008) (48,654)
Accrued Annual Leave 12,479 (1,411)
Other Current Liabilities 240,413 (271,160)
Accrued Income Tax 110,000 (45,000)
---------- ----------
Net Cash Provided by (Used In) Operating Activities 155,929 (141,733)
Investing Activities
Acquisition of Property and Equipment (117,366) (260,092)
---------- ----------
Net Cash (Used In) Investing Activities (117,366) (260,092)
Financing Activities
Net (Payments) on Note Payable (26,115)
Net (Repayments) Borrowings on Note Payable to
Bank (10,000) 85,034
Proceeds from Exercise of Stock Options 13,563 8,608
---------- ----------
Net Cash Provided by Financing Activities (22,552) 93,642
Net Increase (Decrease) in Cash 16,011 (308,183)
Cash - Beginning of Period 62,436 316,183
---------- ----------
Cash - End of Period 78,447 8,000
========== ==========
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Period for Interest 19,473 3,721
</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 September 30, 1996 is $950,000 subject to available
receivables.
3. Inventory
Inventory consisted of the following:
Sept. 30, 1996 Sept. 30, 1995
-------------- --------------
Raw Materials $605,683 $429,970
WIP 537,128 133,666
Finished Goods 297,875 136,649
---------- --------
Total $1,440,686 $700,285
========== ========
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 nine months of 1996, revenues were $6,433,078 and net
income was $534,293 compared to revenues of $4,851,257 and a net loss of
($94,188) for the same period of 1995. In 1996, third quarter revenues were
$2,382,428 with a net income of $332,248 compared to revenues of $1,658,467 and
net income of $71,012 for the third quarter of 1995.
Communication Products Division (CPD) third quarter 1996 revenues were
$1,511,605 compared to $1,109,479 for the same period in 1995. The division
achieved net income of $28,675 compared to a net loss of ($181,972) for the
third 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 $133,346 compared to $179,172 for
the third quarter of 1995. The division recorded a loss of ($20,662) for the
third quarter, which was substantially lower than the profit of $14,194 realized
in the same quarter of 1995. The current quarter revenue reflects the impact of
new contract work on fiber optic gyros booked in the beginning of the third
quarter of 1996. We anticipate the same performance for the balance of the year.
Laser Illuminator Division revenues were $737,477 for the quarter
compared to $369,816 for the equivalent period of 1995; net income was $324,235
compared to a net income of $238,790 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 reflect a tax
accrual provision. We anticipate continuing significant revenues for this
segment through the remainder of the year as work continues on our current
contracts.
Increases in Inventory levels were necessary to ensure responsivity to
our marketplace. We anticipate some reduction in these levels through improved
forecasting and modified supplier arrangements.
Company backlog at September 30, 1996 was $1,365,362.
Liquidity and Capital Resources
There were no significant changes in the Company's financial condition
in the third quarter of 1996. At the end of this quarter the current ratio was
2.61 compared to 2.33 at the end of 1995 and 3.24 at the end of the third
quarter of 1995. The overall cash provided by (used in) operating activities for
the nine months of 1996 was $155,929 as compared to (141,733)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 September 30, 1996.
EXHIBIT 11 - STATEMENT REGARDING COMPUTATION OF NET INCOME (LOSS) PER
SHARE
Three Months Ended Three Months Ended
Primary Earnings Per Share September 30, 1996 September 30, 1995
- -------------------------- ------------------ ------------------
Average Common Shares Outstanding 1,197,904 1,170,054
Net Income (Loss) 332,248 71,012
Primary Earnings Per Share .28 .06
Fully Diluted Earnings Per Share
- --------------------------------
Average Common Shares Outstanding 1,210,569 1,170,054
Net Income (Loss) 332,248 71,012
Fully Diluted Earnings Per Share .27 .06
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: 11-11-96 /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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 78,447
<SECURITIES> 0
<RECEIVABLES> 1,969,983
<ALLOWANCES> 0
<INVENTORY> 1,440,686
<CURRENT-ASSETS> 3,630,847
<PP&E> 2,122,376
<DEPRECIATION> 1,383,305
<TOTAL-ASSETS> 4,369,918
<CURRENT-LIABILITIES> 1,390,086
<BONDS> 0
0
0
<COMMON> 35,266
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,369,918
<SALES> 6,433,078
<TOTAL-REVENUES> 6,433,078
<CGS> 5,525,829
<TOTAL-COSTS> 5,525,829
<OTHER-EXPENSES> 42,907
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 864,342
<INCOME-TAX> 330,049
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 534,293
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
