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, 1997 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 Offices) (Zip Code)
(301) 840-2121
Registrant's Telephone Number, --------------
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, 1997 1,213,624
---------
<PAGE>
OPTELECOM, INC.
FORM 10-Q
CONTENTS
--------
PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
Condensed Balance Sheets as of March 31, 1997
(Unaudited) and December 31, 1996 (Audited)
Condensed Statements of Operations for the Three
Months Ended March 31, 1997 and 1996 (Unaudited)
Statements of Cash Flows for the Three months Ended
March 31, 1997 and 1996 (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 March 31, 1997 and December 31, 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
------ ----------- -----------
(Unaudited) (Audited)
<S> <C>
Current Assets:
Cash and cash equivalents ......................... $ 228,632 $ 266,575
Accounts receivable ............................... 1,640,956 1,463,426
Inventory ......................................... 1,648,730 1,504,968
Prepaid expenses and other assets ................. 400,541 306,620
Deferred tax asset ................................ 66,145 66,145
----------- -----------
Total current assets .............................. 3,985,004 3,607,734
Property and Equipment, at cost less accumulated
depreciated and amortization ............................. 861,744 779,053
Deferred Tax Asset ......................................... 79,676 79,676
----------- -----------
TOTAL ASSETS ............................................... 4,926,424 4,466,463
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable .................................. 923,473 591,682
Accrued payroll ................................... 79,435 127,172
Accrued annual leave .............................. 126,333 104,788
Other current liabilities ......................... 373,719 362,808
Current portion of notes payable .................. -- 34,819
----------- -----------
Total current liabilities ......................... 1,502,960 1,221,269
----------- -----------
Long Term Liabilities:
Note payable ...................................... -- 11,607
Deferred rent liability ........................... 187,618 191,956
----------- -----------
Total long-term liabilities ....................... 187,618 203,563
----------- -----------
TOTAL LIABILITIES .......................................... 1,690,578 1,424,832
----------- -----------
Stockholders' Equity
Common Stock - par value $.03 per share,
Authorized 5,000,000 shares, issued and outstanding
1,213,624 and 1,207,574 ......................... 36,409 36,227
Discount on common stock .......................... (11,161) (11,161)
Additional paid-in capital ........................ 2,054,090 2,027,916
Retained earnings ................................. 1,156,508 988,649
----------- -----------
Total stockholders' equity ........................ 3,235,846 3,041,631
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................. $ 4,926,424 $ 4,466,463
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE>
OPTELECOM, INC.
Condensed Statements of Operations
for the Three Months Ended March 31, 1997 and 1996
(UNAUDITED)
Three Months Three Months
Ended Ended
March 31, 1997 March 31, 1996
-------------- --------------
Revenue ........................................ $2,678,211 $ 1,744,421
Direct Costs, Overhead and G&A ................. 2,384,910 1,753,321
---------- -----------
Operating Income (Loss) ........................ 293,301 (8,900)
Other Expenses ................................. 2,242 23,368
---------- -----------
Income (Loss) Before Income Taxes .............. 291,059 (32,268)
Provision for Income Taxes ..................... 123,200 --
---------- -----------
Net Income (Loss) .............................. 167,859 (32,268)
========== ===========
Net Earnings (Loss) Per Share .................. $ 0.13 $ (0.03)
Weighted Average Number of Common Shares and
Common Share Equivalents Outstanding ........... 1,285,888 1,177,066
The accompanying notes are an integral part of this statement.
4
<PAGE>
OPTELECOM, INC.
Statements of Cash Flows
as of March 31, 1997 and 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31
1997 1996
---- ----
<S> <C>
Operating Activities
Net Income (loss) .................................. $ 167,859 $ (32,268)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization ............. 65,311 56,923
Gain on sale of equipment ................. (15,357) --
Deferred rent ............................. (4,338) (2,889)
Common stock for services ................. 8,200 --
(Increase) decrease in assets:
Accounts receivable ....................... (177,530) (84,581)
Inventories ............................... (143,762) 63,875
Prepaid expenses and other assets ......... (93,921) 28,172
Increase (decrease) in liabilities:
Accounts payable .......................... 331,791 (212,918)
Accrued payroll ........................... (47,737) (42,721)
Accrued annual leave ...................... 21,545 14,674
Other current liabilities ................. 10,911 39,076
--------- ---------
Net cash provided by (used in) operating activities ......... 122,972 (172,657)
Investing Activities
Proceeds from sale of equipment .................... 22,000 --
Capital expenditures ............................... (154,645) (40,956)
--------- ---------
Net cash (used in) investing activities ............ (132,645) (40,956)
Financing Activities
Net borrowings on note payable to bank ............. -- 340,000
Proceeds from stock options ........................ 18,156 --
Payment on long term debt .......................... (46,426) (8,699)
--------- ---------
Net cash (used in) provided by financing activities (28,270) 331,301
Net (decrease) increase in cash and cash equivalents (37,943) 117,688
Cash and cash equivalents - beginning of period ............. 266,575 62,436
--------- ---------
Cash and cash equivalents - end of period ................... $ 228,632 180,124
========= =========
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Period for Interest ........... 1,360 5,592
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE>
OPTELECOM, Inc.
Notes to Condensed Financial Statements (Unaudited)
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, 1996.
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, 1997 is $1,000,000.
3. Inventory
---------
Inventory consisted of the following:
March 31, 1997 March 31, 1996
-------------- --------------
Raw materials ........................ 618,961 $ 402,036
WIP .................................. 490,234 272,448
Finished goods ....................... 539,535 341,982
---------- ----------
Total ................................ $1,648,730 $1,016,466
========== ==========
4. New Accounting Pronouncements
-----------------------------
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings
Per Share," was recently issued by the Financial Accounting Standards
Board. SFAS No. 128 is effective for periods ending after December 15,
1997 and early adoption is not permitted.
SFAS No. 128 requires the company to compute and present a basic and
diluted earnings per share. Had the company computed earnings per share
in accordance with SFAS No. 128 the results would have been as follows:
March 31, 1997 March 31, 1996
-------------- --------------
Basic earnings per share ................ $0.14 $(0.03)
Diluted earnings per share .............. $0.13 $(0.03)
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 1997, first quarter revenues were $2,678,211 with a net income of
$167,859 compared to same-period revenues of $1,744,421 and net loss of
($32,268) in 1996.
Communication Products Division (CPD) first quarter 1997 revenues were
$2,183,853 compared to $1,444,132 for the same period in 1996. The group had an
operating income of $145,448 compared to a loss of ($24,884) for the first
quarter of 1996. The increase in revenues is due to higher-than-normal sales to
our OEM accounts and other system integrators.
Revenues for the Electro-Optics Technology Group were $155,866 for the
first quarter of 1997 compared to $135,381 for the first quarter of 1996. The
group realized an operating loss of $(1,664) for the first quarter, which was
substantially lower than the loss of ($41,347) incurred in the same quarter of
1996. The higher revenue reflects the impact of a higher level of contract work
for winding fiber optic gyro coils booked in the first quarter of 1996. We
anticipate improved revenue for the balance of the year from new contracts in
this area.
Laser Illuminator Group revenues were $338,492 for the quarter compared
to $164,908 for the equivalent period of 1996; operating profit was $149,517
compared to a profit of $33,963 for the same quarter in 1996. We anticipate
continued significant revenue levels for this segment through the remainder of
the year, with a stable work load on our current contracts, and a backlog of
approximately $836,000.
Company backlog at the end of the March 31, 1997 was $2,593,267.
Liquidity and Capital Resources
-------------------------------
There were moderate changes in the Company's financial condition in the
first quarter of 1997. At the end of this quarter the current ratio was 2.7
compared to 3.0 at the end of 1996 and 2.2 at the end of the first quarter of
1996. The overall cash provided by operating activities for the first three
months of 1997 was $122,972 compared to $(172,657) the first three months of
1996.
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, 1997.
EXHIBIT 11 - STATEMENT REGARDING COMPUTATION OF NET INCOME (LOSS) PER
SHARE
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
------------------ ------------------
Average common shares and common ....... 1,295,735 1,180,616
share equivalents outstanding
Net income (loss) ...................... $167,859 $(32,268)
Fully diluted earnings per share ....... $ 0.13 $ (0.03)
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: April 21, 1997 _________________________________________
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-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 228,632
<SECURITIES> 0
<RECEIVABLES> 1,640,956
<ALLOWANCES> 0
<INVENTORY> 1,648,730
<CURRENT-ASSETS> 3,985,004
<PP&E> 861,744
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,926,424
<CURRENT-LIABILITIES> 1,502,960
<BONDS> 0
0
0
<COMMON> 36,409
<OTHER-SE> 3,199,437
<TOTAL-LIABILITY-AND-EQUITY> 4,926,424
<SALES> 2,678,211
<TOTAL-REVENUES> 2,678,211
<CGS> 2,384,910
<TOTAL-COSTS> 2,384,910
<OTHER-EXPENSES> 2,242
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 291,059
<INCOME-TAX> 123,200
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 167,859
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
