<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 No.
September 30, 1998 0-4671
ISOMET CORPORATION
State of Incorporation IRS Employer Identification No.
New Jersey 22-1591074
Address of Principal Executive Offices
5263 Port Royal Road
Springfield, VA 22151
Registrant's Telephone Number: (703) 321-8301
Common Shares Outstanding on September 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 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.
X Yes _____ No
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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 Nine Months Ended
September 30 September 30
1998 1997 1998 1997
------------------ ----------------- ---------- ----------
<S> <C> <C> <C> <C>
1. Revenues
a. Sales $ 2,095 $ 1,859 $ 6,825 $ 5,962
b. Interest Income 1 1 2 3
c. Other Income 16 4 50 5
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$ 2,112 $ 1,864 $ 6,877 $ 5,970
2. Cost and Expenses
a. Cost of Sales $ 1,435 $ 1,215 $ 4,675 $ 3,893
b. Selling, General & Admin 321 294 901 947
c. Research & Develoment - - - -
d. Interest Expense 20 29 66 91
---------- ---------- ---------- ----------
Total Costs and Expenses $ 1,776 $ 1,538 $ 5,642 $ 4,931
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3. Income Before Taxes on Income $ 336 $ 326 $ 1,235 $ 1,039
4. Provisions for Taxes on Income 121 127 456 405
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5. Net Income $ 215 $ 199 $ 779 $ 634
---------- ---------- ---------- ----------
Basic Net Income Per Share $ .11 $ .10 $ .41 $ .33
Diluted Net Income Per Share $ .11 $ .10 $ .40 $ .32
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6. Weighted Average Number of Shares
Outstanding 1,927,600 1,905,800 1,919,000 1,905,700
7. Weighted Average Number of Shares
and Stock Equivalents Outstanding 1,940,100 1,994,300 1,932,800 1,969,400
8. Dividends Per Share - - - -
</TABLE>
(1) This Financial Statement is unaudited.
(2) The results for iterim 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 opionion of management, all adjustments have been made which are
necessary to reflect a fair statement of the results for the three and nine
months ended September 30, 1998 and September 30, 1997. All such
adjustments are of a normal and recurring nature.
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ISOMET CORPORATION
Financial Statements
B. Consolidated Statements of Comprehensive Income (000 omitted)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
------------------ ------------------ ----- -----
<S> <C> <C> <C> <C>
Net Income $ 215 $ 199 $ 779 $ 634
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Other Comprehensive Income
- --------------------------
Amortization of Deferred Compensation
From Stock Options 8 - 25 36
Foreign Currency Translation Adj. 17 (20) 49 45
----- ----- ----- -----
Other Comprehensive Income $ 25 $ (20) $ 74 $ 81
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Comprehensive Income $ 240 $ 179 $ 853 $ 715
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</TABLE>
<PAGE>
ISOMET CORPORATION
Financial Statements
C. Consolidated Balance Sheet (1) (000 omitted)
<TABLE>
<CAPTION>
September 30 December 31
1998 1997
------------- ------------
<S> <C> <C>
Current Assets
Cash and Equivalent $1,628 $1,534
Accounts Receivable Net 1,660 1,488
Other Current Assets 585 456
Inventories (2) 3,373 3,381
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$7,246 $6,859
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Property and Equipment at Cost $2,609 $2,541
Less Accumulated Depreciation (2,333) (2,264)
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$ 276 $ 277
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Other Assets $ 52 $ 52
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$7,574 $7,188
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts Payable $ 643 $ 316
Accrued Liabilities 256 916
Notes Payable to Banks 322 364
Notes Payable to Others 5 -
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$1,226 $1,596
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Long Term Liabilities $ 511 $ 637
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Minority Interest in Consolidated Subsidiary $ - $ -
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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 (8) (33)
Accumulated Deficit (390) (1,170)
Foreign Exchange Adjustment 75 26
---------------------
5,837 $4,955
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$7,574 $7,188
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(1) Unaudited. Subject to Year-End Adjustments
(2) Inventory Breakdown
Parts and Raw Material $1,426 $ 684
Work in Process 1,353 2,226
Finished Goods 594 471
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$3,373 $3,381
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(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
Nine Months Ended September 30 (000 omitted)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $ 780 $ 634
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
Depreciation and Amortization $ 69 $ 36
Amortization of Deferred Compensation 25 36
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable (172) 627
(Increase) Decrease in Other Current Assets (129) (71)
(Increase) Decrease in Inventories 8 61
Increase (Decrease) in Accounts Payable 327 (343)
Increase (Decrease) in Accrued Liabilities (660) 343
(Increase) Decrease in Deposits - (423)
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Total Adjustments $ (532) $ 266
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Net Cash Provided (Used) by Operating Activities $ 248 $ 900
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Cash Flows from Investing Activities
Proceeds from Disposal of Subsidiary $ - $ -
Purchase of Property and Equipment (68) 5
Proceeds from Sale of Property and Equipment - -
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Net Cash (Used) by Investing Activities $ (68) $ 5
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Cash Flows from Financing Activities
Proceeds of Long-Term Debt and Notes Payables $ (37) $ 16
Proceeds from Exercise of Incentive Stock Options 28 5
Principal Payments Under Long-Term Debt and
Notes Payable (126) (181)
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Net Cash Provided (Used) by Financing Activities $ (135) $(160)
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Effect of Exchange Rate Changes on Cash $ 49 $ 45
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Net Increase (Decrease) in Cash $ 94 $ 790
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Cash at Beginning of Year $1,534 $ 201
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Cash at September 30 $1,628 $ 991
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Supplemental Disclosures of Cash Flow Information
Cash Paid During the Year for:
Interest $ 66 $ 91
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Income Taxes $1,212 $ 4
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</TABLE>
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ISOMET CORPORATION
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Item 2: Management's Analysis of Quarterly Income Statements
------------------------------------------------------------
Revenue for the third quarter of 1998 totaled $2,112,000, an increase of
approximately $250,000 over the same period in 1997. For the nine months ended
September 30, 1998, revenue of $6,877,000 was 13% or approximately $900,000
above the previous years level. Higher shipment quantities of laser plotters
under the Company's ongoing agreement with Polaroid Corporation accounted for
most of the nine month revenue increase.
Net income for the third quarter of 1998 was $215,000 or $.11 per share
(diluted) vs. $199,000 or $.10 per share (diluted) last year. For the first
nine months of this year net income totaled $779,000 or $.40 per share (diluted)
compared to $634,000 or $.32 per share (diluted) last year. The major elements
that accounted for the net income increase of $145,000 are as follows:
Increased Gross Profit $ 81,000
Decreased Period Costs 71,000
Increased Income Tax (51,000)
Increased Interest and Other Income 44,000
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$145,000
New orders totaled $1,356,000 for the quarter and $8,752,000 for the
current nine month period, compared to $2,850,000 and $5,795,000, respectively
last year. Unfilled orders on September 30, 1998 totaled $5,383,000 compared to
$4,260,000 on the same date last year and $3,451,000 on December 31, 1997.
As of September 30, 1998, the Company has no material commitments for
capital expenditures and accordingly, no funds from sources other than
internally generated funds are considered necessary over the next twelve months.
During the period from October 1, 1998 - September 30, 1999 the Company expects
to generate sufficient cash flow from operations to meet its liquidity needs.
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 uising "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
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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
None.
5. Other Information
None.
6. Exhibits and Reports on Form 8K
a. Exhibit 27 Financial Data Schedule for quarter ended September
30, 1998.
<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: November 9, 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> JUL-1-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,628
<SECURITIES> 0
<RECEIVABLES> 1,660
<ALLOWANCES> 0
<INVENTORY> 3,373
<CURRENT-ASSETS> 7,246
<PP&E> 2,609
<DEPRECIATION> 2,333
<TOTAL-ASSETS> 7,574
<CURRENT-LIABILITIES> 1,226
<BONDS> 0
0
0
<COMMON> 1,928
<OTHER-SE> 3,909
<TOTAL-LIABILITY-AND-EQUITY> 7,574
<SALES> 2,095
<TOTAL-REVENUES> 2,112
<CGS> 1,435
<TOTAL-COSTS> 1,776
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20
<INCOME-PRETAX> 336
<INCOME-TAX> 121
<INCOME-CONTINUING> 215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
