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 March 31, 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 March 31, 1996 1,171,042
---------
<PAGE>
OPTELECOM, INC.
FORM 10-Q
CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
Condensed Balance Sheets as of March 31, 1996
(Unaudited) and December 31, 1995
Condensed Statements of Operations for the Three Months
Ended March 31, 1996 and 1995 (Unaudited)
Statements of Cash Flows for the Three months Ended
March 31, 1996 and 1995 (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
<PAGE>
OPTELECOM, INC.
Condensed Balance Sheets
as of March 31, 1996 and December 31, 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
(Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash $ 180,124 $ 62,436
Accounts Receivable 1,495,790 1,411,209
Inventory 1,016,466 1,080,341
Prepaid Expenses 80,787 108,960
Income Tax Refund Receivable 215,693 215,693
---------- -----------
Total Current Assets 2,988,860 2,878,639
Plant and Equipment, at Cost 779,395 795,365
----------- -----------
TOTAL ASSETS $3,768,255 $3,674,004
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Demand Note Payable to Bank 400,000 $60,000
Accounts Payable 587,491 800,409
Accrued Payroll 53,235 95,956
Accrued Annual Leave 103,884 89,210
Other Current Liabilities 192,038 152,962
Current Portion of Notes Payable 26,116 34,819
----------- -----------
Total Current Liabilities 1,362,764 1,233,356
---------- ----------
Other Long Term Liabilities
Note Payable 46,426 46,426
Other Long-term Liabilities 202,554 205,445
----------- ----------
Total Long-term Liabilities 248,980 251,871
----------- ----------
TOTAL LIABILITIES $1,611,744 $1,485,227
---------- ----------
Stockholders' Equity
Common Stock - Par Value $.03 Per Share,
Authorized 5,000,000 Shares, Issued and
Outstanding 1,171,042 and 1,166,672 35,131 35,131
Discount on Common Stock (11,161) (11,161)
Additional Paid-In Capital 1,898,239 1,898,239
Retained Earnings 234,302 266,568
----------- -----------
2,156,511 2,188,777
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,768,255 $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 March 31, 1996 and 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Revenue $1,744,421 $1,786,712
Direct Costs, Overhead and G&A 1,753,321 1,946,711
---------- -----------
Operating Income (Loss) (8,900) (159,999)
Other (Income) Expenses (23,368) (6,101)
------------ -------------
Income (Loss) Before Income Taxes (32,268) (166,100)
Benefit for Income Taxes --- 137,592
------------- -----------
Net Income (Loss) (32,268) (28,508)
============ =============
Net Earnings (Loss) Per Share $ (.03) $ (.02)
Weighted Average Number of Common Shares Used in 1,177,066 1,159,333
computing Net Earnings (Loss) Per Share
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
OPTELECOM, INC.
Statements of Cash Flows
as of March 31, 1996 and December 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31
1996 1995
<S> <C> <C>
Operating Activities
Net (Loss) Income $(32,269) $ (28,508)
Reconciliation of Net Loss to Net Cash (Used In)
Provided by Operating Activities:
Depreciation and Amortization 56,924 47,291
Deferred Rent (2,889) (1,483)
Deferred Income Taxes --- (100,000)
Decrease (Increase) in Assets:
Accounts Receivable (84,581) (120,646)
Inventories 63,875 (59,360)
Prepaid Expenses and Other
Receivables 28,172 (9,284)
Increase (Decrease) in Liabilities:
Accounts Payable (212,918) 474,612
Accrued Payroll (42,721) 13,694
Accrued Annual Leave 14,674 12,763
Other Current Liabilities 39,076 (196,839)
Accrued Commission --- 13,122
Accrued Income Tax --- (45,000)
----------- ----------
Net Cash (Used In) Provided by Operating Activities (172,657) 362
Investing Activities
Acquisition of Property and Equipment (40,956) (81,624)
------------ ----------
Net Cash (Used In) Investing Activities (40,956) (81,624)
Financing Activities
Net Borrowings (Payments) on Note Payable to
Bank 340,000 ---
Proceeds from Stock Options --- 7,401
Payment on Long Term Debt (8,699) ---
------------- ------------
Net Cash Provided by (Used In) Financing Activities 331,301 7,401
Net (Decrease) Increase in Cash 117,688 (73,861)
Cash - Beginning of Period 62,436 316,183
- - -------------------------- ----------- -----------
Cash - End of Period 180,124 242,322
- - -------------------- =========== ===========
Supplemental Disclosures of Cash Flow Information
- - -------------------------------------------------
Cash Paid During the Period for Interest 5,592 ---
</TABLE>
The accompanying notes are an integral part of this statement.
5
<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 normally 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 March 31, 1996 is $378,810.
3. Inventory
Inventory consisted of the following:
March 31, 1996 March 31, 1995
-------------- --------------
Raw Materials 402,036 $532,067
WIP 272,448 168,661
Finished Goods 341,982 135,628
------------ -------
Total $1,016,466 $836,356
========== ========
6
<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
In 1996, first quarter revenues were $1,744,421 with a net loss of
$(32,268) compared to revenues of $1,786,712 and net loss of ($28,508) for the
first quarter of 1995.
Communication Products Division (CPD) first quarter 1996 revenues were
$1,444,131 compared to $1,566,321 for the same period in 1995. The division had
a loss of $(24,884) compared to a loss of ($129,839) for the first quarter of
1995. A reserve of $88,000 was established for sales returns and allowances and
the reserve for inventory obsolescence was increased by $12,000 to a total of
$108,000. These reserves reflect our perception that a portion of our current
product shipments may occasionally be returned due to the complexity of
specifying the exact product for specific customer applications. We are working
to more closely examine customer requirements through additional engineering
involvement in the sales process to minimize these occurrences.
Revenues for the R&D Division were $135,381 compared to $75,816 for the
first quarter of 1995. The division realized a loss of $(41,347) for the first
quarter, which was substantially lower than the loss of ($82,779) 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 first quarter of 1996. We
anticipate improved revenue for the balance of the year from new contracts in
this area.
GLINT Division revenues were $164,908 for the quarter compared to
$144,574 for the equivalent period of 1995; profit was $33,963 compared to a
profit of $63,516 for the same quarter in 1995. We anticipate significantly
revenues for this segment throughout the remainder of the year as work load
increases on our current contracts.
Company backlog at the end of the March 31, 1996 was $2,280,588.
Liquidity and Capital Resources
There were no changes in the Company's financial condition in the first
quarter of 1996. At the end of this quarter the current ratio was 2.2 compared
to 2.3 at the end of 1995 and 2.3 at the end of the first quarter of 1995. The
overall cash used by operating activities for the first three months of 1996 was
$(172,657) compared to $362 the first three months of 1995.
7
<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 March 31, 1996.
EXHIBIT 11 - STATEMENT REGARDING COMPUTATION OF NET INCOME (LOSS) PER
SHARE
Three Months Ended Three Months Ended
March 31, 1996 March 31, 1995
------------------ --------------
Average Common Shares Outstanding 1,180,616 1,159,333
Net (Loss) Income (32,268) (28,508)
Primary Fully Diluted Earnings Per Share (.03) (.02)
8
<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, Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 180,124
<SECURITIES> 0
<RECEIVABLES> 1,495,790
<ALLOWANCES> 0
<INVENTORY> 1,016,466
<CURRENT-ASSETS> 2,988,860
<PP&E> 779,395
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,768,255
<CURRENT-LIABILITIES> 1,362,764
<BONDS> 0
0
0
<COMMON> 35,131
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,768,255
<SALES> 1,744,421
<TOTAL-REVENUES> 1,744,421
<CGS> 1,776,689
<TOTAL-COSTS> 1,776,689
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (32,268)
<INCOME-TAX> (32,268)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,268)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
