<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File Number
June 30, 1998 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
Registrant's Telephone Number: (703) 321-8301
Common Shares Outstanding on June 30, 1998: 1,927,590
Indicate by check mark whether the registrant has (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceeding 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.
X Yes No
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<PAGE>
ISOMET CORPORATION
Part 1: Financial Information
Item 1: Financial Statements
A. Consolidated Statements of Income (1) (2) (3) (000 omitted)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Revenues
a. Sales $2,423 $2,401 $4,729 $4,104
b. Interest Income 1 1 2 2
c. Other Income 17 - 34 -
-----------------------------------------------------------
$2,441 $2,402 $4,765 $4,106
2. Cost and Expenses
a. Cost of Sales $1,660 $1,594 $3,240 $2,679
b. Selling, General & Admin 296 343 580 653
c. Research & Development - - - -
d. Interest Expense 21 29 46 62
-----------------------------------------------------------
Total Costs and Expenses $1,977 $1,966 $3,866 $3,394
-----------------------------------------------------------
3. Income Before Taxes on Income
& Extraordinary Items $ 464 $ 436 $ 899 $ 712
4. Provisions for Taxes on Income 173 169 334 278
-----------------------------------------------------------
5. Net Income $ 291 $ 267 $ 565 $ 434
-----------------------------------------------------------
Basic Net Income Per Share $ .15 $ .14 $ .29 $ .23
-----------------------------------------------------------
Diluted Net Income Per Share $ .15 $ .14 $ .29 $ .22
-----------------------------------------------------------
6. Weighted Average Number of
Shares Outstanding 1,920,000 1,905,600 1,914,600 1,905,600
7. Weighted Average Number of Shares and
Stock Equivalents Outstanding 1,934,900 1,962,700 1,929,000 1,945,700
8. Dividends Per Share -- -- -- --
</TABLE>
(1) This Financial Statement is unaudited.
(2) The results for interim periods are not necessarily indicative of
results to be expected for the year due to:
a. Fluctuations in order receipt and customer delivery.
b. Fluctuations in yield in manufacturing processes may cause
fluctuations in operating results for interim periods.
(3) In the opinion of management, all adjustments have been made which are
necessary to reflect a fair statement of the results for the three and
six months ended June 30, 1998 and June 30, 1997. All such adjustments
are of a normal and recurring nature.
<PAGE>
ISOMET CORPORATION
Financial Statements
B. Consolidated Statements of Comprehensive Income (000 omitted)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
---------------------------------------------------------
<S> <C> <C> <C> <C>
Net Income $291 $267 $565 $434
---------------------------------------------------------
Other Comprehensive Income
- --------------------------
Amortization of Deferred Compensation from
Stock Options 8 27 16 36
Foreign Currency Translation Adjustment (11) (7) 35 65
---------------------------------------------------------
Other Comprehensive Income $ (3) $ 20 $ 51 $101
---------------------------------------------------------
Comprehensive Income $288 $287 $616 $535
---------------------------------------------------------
</TABLE>
<PAGE>
ISOMET CORPORATION
Financial Statements
C. Consolidated Balance Sheet (1) (000 omitted)
<TABLE>
<CAPTION>
June 30 December 31
1998 1997
--------------------------------
Current Assets
<S> <C> <C>
Cash and Equivalent $1,352 $1,534
Accounts Receivable Net 2,036 1,488
Other Current Assets 538 456
Inventories (2) 3,148 3,381
--------------------------------
$7,074 $6,859
--------------------------------
Property and Equipment at Cost $2,580 $2,541
Less Accumulated Depreciation (2,303) (2,264)
--------------------------------
$ 277 $ 277
--------------------------------
Other Assets $ 52 $ 52
--------------------------------
$7,403 $7,188
--------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts Payable $ 705 $ 316
Accrued Liabilities 232 916
Notes Payable to Banks 349 364
Notes Payable to Others 5 -
--------------------------------
$1,291 $1,596
--------------------------------
Long Term Liabilities $ 515 $ 637
--------------------------------
Minority Interest in Consolidated Subsidiary $ - $ -
--------------------------------
Stockholders' Equity (Deficit (3))
Common Stock Par Value $1 Per Share:
Authorized 2,500,000 Shares; Issued
and Outstanding: $1,928 $1,909
Capital Contributed in Excess of Par Value 4,232 4,223
Unamortized Deferred Compensation (16) (33)
Accumulated Deficit (605) (1,170)
Foreign Exchange Adjustment 58 26
--------------------------------
$5,597 $4,955
--------------------------------
$7,403 $7,188
--------------------------------
(1) Unaudited. Subject to Year-End Adjustments
(2) Inventory Breakdown
Parts and Raw Material $1,183 $ 684
Work in Process 1,329 2,226
Finished Goods 636 471
--------------------------------
$3,148 $3,381
--------------------------------
(3) The number of shares of common stock
reserved for issuance upon the exercise of
options granted or to be granted: 253,000 271,500
</TABLE>
<PAGE>
ISOMET CORPORATION
Financial Statements
D. Consolidated Statement of Cash Flows
Six Months Ended June 30
(000 omitted)
<TABLE>
<CAPTION>
1998 1997
-----------------------------
<S> <C> <C>
Cash Flows From Operating Activities
Net Income (Loss) $565 $ 435
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided by Operating Activities
Depreciation and Amortization $ 39 $ 34
Amortization of Deferred Compensation 17 36
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable (548) (50)
(Increase) Decrease in Other Current Assets (82) (61)
(Increase) Decrease in Inventories 233 110
Increase (Decrease) in Accounts Payable 389 (183)
Increase (Decrease) in Accrued Liabilities (684) 210
(Increase) Decrease in Deposits - (399)
-------------------------------
Total Adjustments $(636) $(303)
-------------------------------
Net Cash Provided (Used) by Operating Activities $ (71) $ 132
-------------------------------
Cash Flows from Investing Activities
Proceeds from Disposal of Subsidiary $ - $ -
Purchase of Property and Equipment (39) 3
Proceeds from Sale of Property and Equipment - -
-------------------------------
Net Cash (Used) by Investing Activities $ (39) $ 3
-------------------------------
Cash Flows From Financing Activities
Proceeds of Long-Term Debt and Notes Payable $ (12) $ 3
Proceeds from Exercise of Incentive Stock Options 28 -
Principal Payments Under Long Term Debt and
Notes Payable (120) (60)
-------------------------------
Net Cash Provided (Used) by Financing Activities $(104) $ (57)
-------------------------------
Effect of Exchange Rate Changes on Cash $ 32 $ 59
-------------------------------
Net Increase (Decrease) in Cash $(182) $ 137
-------------------------------
Cash at Beginning of Year $1,534 $ 201
-------------------------------
Cash at June 30 $1,352 $ 338
-------------------------------
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Year for:
Interest $ 46 $ 62
-------------------------------
Income Taxes $1,047 $ 4
-------------------------------
</TABLE>
<PAGE>
ISOMET CORPORATION
------------------
Item 2: Management's Analysis of Quarterly Income Statements
-------------------------------------------------------------
Revenue for the second quarter of 1998 totaled $2,441,000, which is
approximately the same level as $2,402,000 in the same period of 1997. For the
six months ended June 30, 1998, revenue increased to $4,765,000 from $4,106,000
last year. This increase of approximately $660,000 is due primarily to higher
shipment quantities of laser plotters under the Company's supply agreement with
Polaroid Corporation.
Net income for the current quarter of $291,000 or $.15 per share (diluted)
exceeded last years net income of $267,000 or $.14 per share (diluted). For the
six months ended June 30, 1998, net income totaled $565,000 or $.29 per share
(diluted) vs. $434,000 or $.22 per share (diluted) last year. The major
elements that contributed to the net income increase of $131,000 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Increased Gross Profit $ 64,000
Decreased Period Costs 89,000
Increased Income Tax (56,000)
Increased Interest and Other Income 34,000
--------
$131,000
</TABLE>
New orders totaled $4,921,000 for the quarter and $7,396,000 for the
current six month period, compared to $1,383,000 and $2,945,000, respectively,
last year. Unfilled orders on June 30, 1998 totaled $6,119,000, compared to
$3,294,000 on the same date last year and $3,451,000 on December 31, 1997.
Effective April 1, 1998, the Company entered into a new loan agreement with
NationsBank. The two notes pursuant to this agreement totaling $804,000 provide
for principal repayments of $20,000 per month through May 1, 2000 and $12,000
per month from June 1, 2000 - June 1, 2002. The interest rate over this period
will be the prime rate, plus 0.50%. The agreement also provides for a new line
of credit up to $750,000. To date, this line has not been used. During the
period from July 1, 1998 - June 30, 1999, the Company expects to generate
sufficient cash flow from operations to meet its liquidity needs.
As of June 30, 1998 the Company has no material committments for capital
expenditures and accordingly, no funds from sources other than internally
generated funds are considered necessary over the next twelve months.
<PAGE>
The Company is in the process of assessing the potential impact of the year
2000 on the ability of the Company's computerized information systems to
accurately process information that may be date-sensitive. The purpose of this
assessment is to determine whether any of the Company's programs that recognize
a date using "00" as the year 1900 rather than the year 2000 could result in
errors or system failures, since the Company utilizes a number of computer
programs in its operations. The Company has not completed its assessment, but
currently believes that costs of addressing this issue will not have a material
adverse impact on the Company's financial position. However, if third parties
upon which the Company relies are unable to address this issue in a timely
manner, it could result in a material financial risk to the Company.
<PAGE>
ISOMET CORPORATION
------------------
Part 11: Other Information
1. Legal Proceedings
None
2. Change in Securities
None
3. Defaults Upon Senior Securities
None
4. Submission of Matters to a Vote of Security Holders
At the Company's May 28, 1998 Annual Meeting of Shareholders,
the following directors were elected:
Leon Bademian
Lee R. Marks
Thomas P. Meloy
Jerry W. Rayburn
Henry Zenzie
5. Other Information
None
6. Exhibits and Reports on Form 8K
a. Exhibits - 27 - Financial Data Schedule for quarter
ended June 30, 1998.
b. Reference is made to the Registrant's 8K filing dated
May 26, 1998. The subject of this report was a new
agreement entered into by the Registrant with Polaroid
Corporation for the manufacture and sale of laser
plotters.
<PAGE>
ISOMET CORPORATION
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned thereunto duly authorized.
ISOMET CORPORATION
--------------------
Registrant
By:/s/ Jerry W. Rayburn
--------------------
Jerry W. Rayburn
Executive Vice President
Finance and Treasurer
Date: August 11, 1998
------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (IDENTIFY
SPECIFIC FINANCIAL STATEMENTS) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,352
<SECURITIES> 0
<RECEIVABLES> 2,036
<ALLOWANCES> 0
<INVENTORY> 3,148
<CURRENT-ASSETS> 7,074
<PP&E> 2,580
<DEPRECIATION> 2,303
<TOTAL-ASSETS> 7,403
<CURRENT-LIABILITIES> 1,291
<BONDS> 0
0
0
<COMMON> 1,928
<OTHER-SE> 3,669
<TOTAL-LIABILITY-AND-EQUITY> 7,403
<SALES> 2,423
<TOTAL-REVENUES> 2,441
<CGS> 1,660
<TOTAL-COSTS> 1,977
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21
<INCOME-PRETAX> 464
<INCOME-TAX> 173
<INCOME-CONTINUING> 291
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 291
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
