<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
Amendment Number 1 to Form 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For Fiscal Year Ended Commission File Number
December 31, 1994 0-4671
ISOMET CORPORATION
------------------
State of Incorporation IRS Employer Identification
New Jersey No. 22-1591074
Address of Principal Executive Offices
5263 Port Royal Road
Springfield, Virginia 22151
Company's Telephone Number: (703) 321-8301
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock
Par Value $1.00
1,905,590 Shares Were
Outstanding on January 31, 1995
Indicate by check mark whether the Company (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 12 months (or for such shorter period
that the Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes x No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of regulations SB is not contained herein, and will not be
contained, to the best of registrant knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. [x]
On January 31, 1995, the approximate aggregate market value of the
voting stock held by non-affiliates of the Company was $1,965,060.
<PAGE>
- 2 -
The Company hereby amends the following portion of the Company's Form 10-
KSB for the fiscal year ended December 31, 1994:
PART II
ITEM VII MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Revenue
-------
Net revenue in 1994 totaled $5.7 million, just slightly below $5.8 million
in 1993. However, in 1994 more of the total was generated from sales of
components. These sales totaled $3.8 million in 1994 compared to $3.2 million
in 1993. Scanner systems sales for 1994 decreased to $1.9 million from $2.5
million in 1993. Foreign sales accounted for 54.2% of total revenue in 1994
compared to 65.9% in 1993.
COST AND EXPENSES
- -----------------
After non-recurring charges of $248,000, primarily related to the sale of
our Japanese subsidiary in the first quarter of the year, consolidated net
earnings for 1994 were $23,000, or $.01 per share. This compares to a net loss
in 1993 of $(1,645,000), or $(.86) per share after non-recurring charges, mainly
inventory write-off of $1,157,000. The 1993 non-recurring charges include an
adjustment totaling $250,000 to reflect a correction in the amount of inventory
written off.
1. Our overall cost of sales percentage increased to 65.0% in 1994 from
56.9% in 1993. On approximately the same level of sales in 1994 compared to
1993, gross profit decreased by $470,000. This decrease is, in large part, the
result of lower margins on sales of component products in 1994 vs. 1993, due to
lower average unit selling prices in this product line. Also, the average unit
selling prices and corresponding gross profit contribution from scanner systems
sales declined in 1994 as more of our sales came from the lower priced Model 405
scanner. In addition, the current year's cost of sales includes approximately
$108,000 for engineering cost related to specific systems installations.
2. Selling and G&A expenses decreased by approximately $1.2 million in
1994. This significant reduction is the result of our cost reduction program
implementation in 1992 and 1993 and also from the disposal of our Japanese
subsidiary in the first quarter of 1994.
3. Interest expense continued to decline in 1994 as we reduced bank debt.
Total interest decreased by $36,000 in the current year from a total of $237,000
in 1993.
<PAGE>
- 3 -
4. Product development and improvement expenses decreased by $108,000 to
a total of $272,000 compared to $380,000 in 1993. This decrease is primarily
the result of engineering effort on systems contracts, the cost of which is
reflected in cost of sales.
5. For the two years ended December 31, 1994, the company's revenue and
cost of sales were not significantly impacted by the effects of inflation. In
addition, the company's sales and cost have not been materially affected by
changing prices due to inflation. Lower unit prices, however, have been
experienced due to competitive pressures.
Liquidity and Capital Resources
-------------------------------
Unrestricted cash balances on December 31, 1994 declined to $293,000 from
$343,000 the previous year. Net cash provided by operating activities increased
substantially in 1994 to $645,000 from $260,000 in 1993. The major components
of this increase are as follows:
1. Net income, plus depreciation and amortization in 1994 of $114,000
compared to a net loss, plus depreciation and amortization in 1993 of
$(1,523,000).
2. A decrease in inventory in 1994 of $457,000 vs. a decrease of $957,000
in 1993.
3. Accounts payable and accrued liabilities decreased in 1994 by
$418,000, compared to an increase in 1993 of $54,000.
The Company has no material commitment for capital expenditures as of
December 31, 1994 and accordingly, no funds from sources other than internally
generated funds are considered necessary.
A summary of working capital and backlog over the Company's fiscal year by
quarterly period is as follows (000's omitted):
<TABLE>
<CAPTION>
12/31/94 9/30/94 6/30/94 3/31/94
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Current assets $ 4,796 $ 5,135 $ 5,320 $ 5,519
Current liabilities 972 2,594 2,793 3,079
--------- -------- -------- --------
Working capital $ 3,824 $ 2,541 $ 2,527 $ 2,440
--------- -------- -------- --------
Backlog $ 943 $ 1,297 $ 1,127 $ 1,079
--------- -------- -------- --------
</TABLE>
The quarterly increases in working capital are a direct result of our cost
reduction program during the year. Revenues for 1994 were consistent with those
of 1993 while 1994 expenses, excluding income taxes, were reduced by
approximately $1.8 million. The cash savings were used to reduce bank debt and
other types of current liabilities. Most of the costs to service the backlog
has been incurred as inventory by the end of each quarter. Accordingly, we
believe that the Company's resources are sufficient to meet the challenges of
1995.
<PAGE>
- 4 -
Bank Arrangements
-----------------
Pursuant to the loan agreement entered into with Maryland National Bank
(now Nations Bank) in September 1993, the Company paid approximately $430,000 of
principal in 1994. In addition, the Company was in compliance with all other
terms, conditions and operating ratios called for under the agreement.
Effective January 8, 1995, the loan agreement was renewed for another year with
essentially the same terms and conditions and with a fixed principal repayment
schedule of $20,000 per month for 1995.
Working Capital
---------------
In 1995, additional working capital, if required, is expected to be
generated from operations.
PART III
ITEM X DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
-----------------------------------------------
The following table sets forth certain information regarding each
director and nominee.
<TABLE>
<CAPTION>
POSITION WITH
NOMINEE AGE THE CORPORATION SINCE
- ------- --- --------------- -----
<S> <C> <C> <C>
Leon Bademian 63 Executive Vice President 1981
Operations and Director
Lee R. Marks 59 Secretary, Director 1987
Thomas P. Meloy, Jr., Ph.D. 69 Director 1977
Jerry W. Rayburn 54 Executive Vice President 1977
Finance, Treasurer and
Director
Henry Zenzie 65 President, Director 1968
</TABLE>
Business Experience
- -------------------
The principal occupation of each director and nominee for the last five
years and directorship held by each such person is as follows:
<PAGE>
- 5 -
Leon Bademian is Executive Vice President, Operations and Technical
Director of the Corporation.
Lee R. Marks is a member of the law firm of Ginsburg, Feldman and Bress,
Chartered.
Thomas P. Meloy, Jr., Ph.D. is Benedum Professor, West Virginia University.
Jerry W. Rayburn is Executive Vice President, Finance and Treasurer of the
Corporation.
Henry Zenzie is President of the Corporation. He is also a private
investor in Henry Zenzie & Company, Princeton, NJ. Prior to joining the
Corporation as President in 1981, Mr. Zenzie was Senior Vice President of
Prescott, Ball and Turben, New York, NY from 1978.
There are no family relationships between any director, executive officer
or director nominee.
Certain Relationships and Related Transactions
- ----------------------------------------------
The law firm of Ginsburg, Feldman and Bress, Chartered, of which Lee R.
Marks, a Director and Nominee Director of the Corporation, is a member, received
fees in fiscal 1994 for legal services rendered to the Corporation. It is
anticipated that Ginsburg, Feldman and Bress will continue to provide legal
services to the Corporation, to be billed at the law firm's usual hourly rates,
in 1995.
Meetings and Committees of the Board of Directors
- -------------------------------------------------
The Board of Directors held three meetings in the fiscal year ended
December 31, 1994. One Director, Dr. Meloy, did not attend two of the meetings.
The Board of Directors has no standing audit, nominating, compensation or
similar committee.
<PAGE>
- 6 -
ITEM XI MANAGEMENT/RENUMERATION
-----------------------
(a) The following information is furnished with respect to the President of the
Corporation and the other five executive officers of the Corporation. The
executive officers of the Corporation are the highest paid employees of the
Corporation for the fiscal year ended December 31, 1994.
(b) Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
----------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Annual Restricted Securities Other
Name and Compen- Stock Underlying LTIP Compen-
Principal Salary Bonus/(1)/ sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Henry Zenzie 1994 76,588 -0- -0- -0- -0- -0- -0-
President 1993 78,177 -0- -0- -0- -0- -0- -0-
1992 84,021 -0- -0- -0- -0- -0- -0-
Jerry Rayburn 1994 124,048 2,481 -0- -0- -0- -0- -0-
Executive Vice 1993 132,264 2,645 -0- -0- 15,000 -0- -0-
President of 1992 151,347 3,027 -0- -0- -0- -0- -0-
Finance and
Treasurer
Leon Bademian 1994 124,048 2,481 -0- -0- -0- -0- -0-
Executive Vice 1993 132,264 2,645 -0- -0- 15,000 -0- -0-
President of 1992 151,347 3,027 -0- -0- -0- -0- -0-
Operations
Robert Bonner 1994 73,853 1,477 -0- -0- -0- -0- -0-
Vice President 1993 76,934 1,539 -0- -0- 3,500 -0- -0-
1992 85,105 1,702 -0- -0- -0- -0- -0-
Frank Hamby 1994 73,853 730 -0- -0- -0- -0- -0-
Vice President 1993 76,934 1,539 -0- -0- 3,500 -0- -0-
1992 85,105 1,702 -0- -0- -0- -0- -0-
Delmar Radar 1994 73,853 1,477 -0- -0- -0- -0- -0-
Vice President 1993 76,934 1,539 -0- -0- 3,500 -0- -0-
1992 85,105 1,702 -0- -0- -0- -0- -0-
</TABLE>
/(1)/ This amount represents Corporation's annual contribution to 401(k) plan.
<PAGE>
- 7 -
(c) Option/SAR Grants in Last Fiscal Year Table
There were no Option/SAR in the last fiscal year.
(d) Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Value Table:
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs
FY-End (#) at FY-End
Shares ($)/(1)/
Acquired Value
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Henry Zenzie -0- -0- ---/30,000/(2)/ -0-/-0-
Jerry W. Rayburn -0- -0- 10,000/35,000/(2)(3)/ -0-/-0-
Leon Bademian -0- -0- 10,000/35,000/(2)(3)/ -0-/-0-
Robert Bonner -0- -0- 2,333/1,674/(4)/ -0-/-0-
Frank Hamby -0- -0- 2,333/1,674/(4)/ -0-/-0-
Delmar R. Rader -0- -0- 2,333/1,674/(4)/ -0-/-0-
</TABLE>
/(1)/ Closing price on December 31, 1994 was less than the exercise price for
both exercisable and unexercisable option shares and therefore no
"in-the-money" value resulted on these option shares.
/(2)/ 30,000 of these option shares may be exercised in whole or in part at any
time only (i) following the death of the director, or (ii) if the
director ceases for any reason to be a member of the Corporation's Board
of Directors, or (iii) if the Corporation's Board of Directors for good
cause permits such exercise; or (iv) there is a change of ownership or
effective control in the Corporation within the meaning of Section 280G
of the United States Internal Revenue Code.
/(3)/ 5,000 of these option shares may be exercised on January 12, 1996.
/(4)/ 1,167 of these option shares may be exercised on January 12, 1996.
<PAGE>
- 8 -
(e) Long-Term Incentive Plans - Awards in Last Fiscal Year
None. The Corporation does not maintain any long-term incentive plan.
(f) Defined Benefit or Actuarial Plan Disclosure - Pension Plan Table
Not applicable.
(g) Compensation of Directors
Standard Arrangements: The Corporation does not pay director's fees.
Other Arrangements: On January 11, 1993, the Board of Directors approved
the grant of incentive stock options under the 1992 Isomet Corporation
Incentive Stock Option Plan to certain employees of the Corporation. The
directors receiving such options under this grant were as follows: (i) Leon
Bademian, 15,000 option shares; (ii) Jerry W. Rayburn, 15,000 option
shares; (iii) Frank Hamby, 3,500 option shares; (iv) Robert Bonner, 3,500
option shares; and (v) Delmar R. Rader, 3,500 option shares. The option
exercise price for these qualified shares is $1.52 per share (the fair
market value of the shares on the date of grant). The options expire on
January 12, 2003 and are exercisable according to the following formula: 33
1/3% of the shares may be exercised on January 12, 1994; 66 2/3% of the
shares may be exercised on January 12, 1995; and 100% of the shares may be
exercised on January 12, 1996.
(h) Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Employment Contracts: None. The Corporation has no employment contracts.
Termination of Employment Arrangements: Effective as of June 1, 1994, the
Corporation entered into severance agreements, identical in their terms and
conditions, with two of its executive vice presidents, Leon Bademian and
Jerry W. Rayburn. The terms of each severance agreement provide that in the
event the Corporation terminates the executive's employment with the
Corporation for any reason, the executive shall be entitled to receive
severance pay equal to twelve months' compensation based upon his then
annual base salary only (i.e., exclusive of any bonus or other
compensation), but in no event shall the severance pay be less than the
total amount of $123,573, his annual base salary in effect as of the
effective date of the severance agreement(s). Based upon the foregoing, the
executive will not be entitled to severance in the event he voluntarily
terminates his employment with the Corporation (which by way of
illustration, but not limitation, includes death, disability, retirement or
resignation). The severance agreements provide that the severance pay shall
be paid in twelve equal monthly installments commencing one month after the
Corporation terminates the executive's employment with the Corporation,
provided, however, the Corporation can within its sole
<PAGE>
- 9 -
discretion prepay all or any part of such severance pay. The severance
agreements also contain covenants restricting each executive from engaging
in competing businesses or certain conduct with the Corporation's vendors;
requiring the executive to return all Corporation-owned materials and
equipment; prohibiting the disclosure of confidential information of the
Corporation; and requiring the executive to assist the Corporation in
acquiring intellectual property rights in any invention the executive may
have made or conceived while employed by the Corporation. The severance
agreements also provide for injunctive relief as well as other remedies for
breach.
Change-in-Control Arrangements: On June 2, 1988, the Corporation's Board
of Directors approved the grant of non-qualified stock options to purchase
common stock to certain officers and directors of the Corporation as
follows: (i) Henry Zenzie, 30,000 option shares; (ii) Leon Bademian 30,000
option shares; (iii) Jerry W. Rayburn, 30,000 option shares; and (iv) Lee
Marks, 7,500 option shares. The exercise price for all options granted was
$1.75 per share. These non-qualified stock option shares terminate ten
years from the date of grant and may be exercised in whole or in part at
any time only (i) following the death of the director, or (ii) if the
director ceases for any reason to be a member of the Corporation's Board of
Directors, or (iii) if the Corporation's Board of Directors for good cause
permits such exercise; or (iv) there is a change of ownership or effective
control in the Corporation within the meaning of Section 280G of the United
States Internal Revenue Code.
(i) Report on Repricing of Options/SARs
None. The Corporation did not adjust or amend the exercise price of stock
options or SARs previously awarded to any of the named executive officers
during the last fiscal year.
(j) Additional Information with Respect to Compensation Committee Interlock and
Insider Participation in Compensation Decisions
In 1994, four of the Corporation's directors participated in deliberations
and decisions regarding executive officer compensation. They were Mr.
Zenzie, Mr. Bademian, Mr. Rayburn and Mr. Marks.
(k) Board Compensation Committee Report on Executive Compensation
Not applicable.
(i) Performance Graph
Not applicable.
<PAGE>
- 10 -
ITEM XII SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK
------------
NAME OF AMOUNT AND NATURE PERCENT
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP/1/ OF CLASS/2/
- ---------------- -------------------------- -----------
<S> <C> <C>
Leon Bademian
Officer, Director
and Nominee 11,050/3/ .58
Jerry W. Rayburn
Officer, Director
and Nominee 10,000/4/ .52
Lee R. Marks
Officer, Director
and Nominee 2,333 .12
Thomas P. Meloy, Jr.
Director and Nominee
413 Jefferson Street
Morgantown, WV 26505 131,103 6.88
Henry Zenzie
Officer, Director
and Nominee 538,088/5/ 28.24
All directors and officers
as a group (8 persons) 705,673 36.51
</TABLE>
- ----------------------------
/1/ Unless otherwise indicated, each person has sole voting and investment power
with respect to the shares beneficially owned.
/2/ Calculated on the basis of 1,905,590 shares of Common Stock outstanding at
April 15, 1995, plus, in the case of the individual option holder, additional
shares of Common Stock deemed to be outstanding because such shares may be
acquired within 60 days of that date through the exercise of outstanding
options.
/3/ Includes 10,000 shares that Mr. Bademian has an option to acquire within 60
days of April 15, 1995.
/4/ Includes 10,000 shares that Mr. Rayburn has an option to acquire within 60
days of April 15, 1995.
/5/ Includes 93,060 shares as to which Mr. Zenzie, as Nominee under certain
Nominee and Option Agreements dated as of March 9, 1993, shares investment power
for a maximum term of ten (10) years, but holds no voting powers hereto.
Pursuant to these agreements, Mr. Zenzie also has an option to immediately
acquire 18,612 of such shares.
<PAGE>
- 11 -
ITEM XIII CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
None other than set forth above.
SIGNATURES
----------
Pursuant to the requirement of The Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment Number 1 to Form 10-KSB for the fiscal
year ended December 31, 1994 to be signed on its behalf by the undersigned,
thereunto duly authorized.
---------------------------------------
ISOMET CORPORATION
(Registrant)
Date: October , 1995 By:
--- -----------------------------------
Jerry W. Rayburn
Executive Vice President
Finance and Treasurer and Director
