<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 , 1999 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, 1999: 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
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
1. Revenues
a. Sales $ 1,057 $ 2,095 $ 4,662 $ 6,825
b. Interest Income -- 1 -- 2
c. Other Income 33 16 80 50
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$ 1,090 $ 2,112 $ 4,742 $ 6,877
2. Cost and Expenses
a. Cost of Sales $ 585 $ 1,435 $ 3,016 $ 4,675
b. Selling, General & Admin 293 321 940 901
c. Research & Development 48 -- 137 --
d. Interest Expense 12 20 41 66
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Total Costs and Expenses $ 938 $ 1,776 $ 4,134 $ 5,642
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3. Income Before Taxes on Income $ 152 $ 336 $ 608 $ 1,235
4. Provisions for Taxes on Income 66 121 248 456
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5. Net Income $ 86 $ 215 $ 360 $ 779
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Basic Net Income Per Share $ .05 $ .11 $ .19 $ .41
Diluted Net Income Per Share $ .04 $ .11 $ .18 $ .40
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6. Weighted Average Number of Shares
Outstanding 1,927,600 1,927,600 1,927,600 1,919,000
7. Weighted Average Number of Shares
and Stock Equivalents Outstanding 1,946,200 1,940,100 1,962,700 1,932,800
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 nine
months ended September 30, 1999 and September 30, 1998. 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)
Three Months Ended Nine Months Ended
September 30 September 30
1999 1998 1999 1998
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Net Income $ 86 $215 $360 $779
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Other Comprehensive Income
- --------------------------
Amortization of Deferred Compensation
From Stock Options -- 8 -- 25
Foreign Currency Translation Adj 9 17 (10) 50
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Other Comprehensive Income $ 9 $ 25 $ (10) $ 75
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Comprehensive Income $ 95 $ 240 $ 350 $ 854
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ISOMET CORPORATION
Financial Statements
C. Segment Information Nine Months Ended September 30 (000 omitted)
1999
Systems Components Total
----------------------------
Sales $ 2,453 $ 2,209 $ 4,662
Cost of Sales 1,772 1,245 3,017
------- ------- -------
Gross Profit $ 681 $ 964 $ 1,645
------- ------- -------
General Corporate:
Interest Income and Other Revenue 81
Selling, General and Admin Expenses (940)
Product Development (137)
Interest Expense (41)
-------
Net Income Before Income Taxes $ 608
-------
1998
Systems Components Total
----------------------------
Sales $ 3,246 $ 3,579 $ 6,825
Cost of Sales 2,532 2,143 4,675
------- ------- -------
Gross Profit $ 714 $ 1,436 $ 2,150
------- ------- -------
General Corporate:
Interest Income and Other Revenue 52
Selling, General and Admin Expenses (901)
Product Development --
Interest Expense (66)
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Net Income Before Income Taxes $1,235
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ISOMET CORPORATION
Financial Statements
C. Segment Information Three Months Ended September 30 (000 omitted)
1999
Systems Components Total
----------------------------
Sales $ 173 $ 884 $ 1,057
Cost of Sales 102 483 585
------- ------- -------
Gross Profit $ 71 $ 401 $ 472
------- ------- -------
General Corporate:
Interest Income and Other Revenue 33
Selling, General and Admin Expenses (293)
Product Development (48)
Interest Expense (12)
-------
Net Income Before Income Taxes $ 152
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1998
Systems Components Total
----------------------------
Sales $ 1,144 $ 952 $ 2,096
Cost of Sales 743 693 1,436
------- ------- -------
Gross Profit $ 401 $ 259 $ 660
------- ------- -------
General Corporate:
Interest Income and Other Revenue 17
Selling, General and Admin Expenses (321)
Product Development --
Interest Expense (20)
-------
Net Income Before Income Taxes $ 336
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ISOMET CORPORATION
Financial Statements
D. Consolidated Balance Sheet (1) (000 omitted)
September 30 December 31
1999 1998
-------------------------
Current Assets
Cash and Equivalent $ 2,711 $ 1,427
Accounts Receivable Net 683 1,838
Other Current Assets 666 671
Inventories (2) 3,746 3,786
----------------------
$ 7,806 $ 7,722
----------------------
Property and Equipment at Cost $ 2,655 $ 2,626
Less Accumulated Depreciation (2,386) (2,341)
----------------------
$ 269 $ 285
----------------------
Other Assets $ 7 $ 7
----------------------
$ 8,082 $ 8,014
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts Payable $ 513 $ 814
Accrued Liabilities 474 261
Notes Payable to Banks 282 339
Notes Payable to Others 5 --
----------------------
$ 1,274 $ 1,414
----------------------
Long Term Liabilities $ 246 $ 388
----------------------
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 $ 1,928
Capital Contributed in Excess of Par Value 4,232 4,232
Unamortized Deferred Compensation -- --
Retained Earnings 389 29
Foreign Exchange Adjustment 13 23
----------------------
$ 6,562 $ 6,212
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$ 8,082 $ 8,014
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(1) Unaudited. Subject to Year-End Adjustments
(2) Inventory Breakdown
Parts and Raw Material $ 1,260 $ 1,030
Work in Process 2,166 2,263
Finished Goods 320 493
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$ 3,746 $ 3,786
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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: 253,000 253,000
<PAGE>
ISOMET CORPORATION
Financial Statements
E. Consolidated Statement of Cash Flows
Nine Months Ended September 30 (000 omitted)
<TABLE>
<CAPTION>
1999 1998
------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $ 360 $ 780
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
Depreciation and Amortization $ 45 $ 69
Amortization of Deferred Compensation -- 25
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable 1,155 (172)
(Increase) Decrease in Other Current Assets 5 (129)
(Increase) Decrease in Inventories 40 8
Increase (Decrease) in Accounts Payable (301) 327
Increase (Decrease) in Accrued Liabilities 213 (660)
(Increase) Decrease in Deposits -- --
------------------
Total Adjustments $ 1,157 $ (532)
------------------
Net Cash Provided (Used) by Operating Activities $ 1,517 $ 248
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Cash Flows from Investing Activities
Proceeds from Disposal of Subsidiary $ -- $ --
Purchase of Property and Equipment (29) (68)
Proceeds from Sale of Property and Equipment -- --
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Net Cash (Used) by Investing Activities $ (29) $ (68)
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Cash Flows from Financing Activities
Proceeds of Long-Term Debt and Notes Payables $ -- $ (37)
Proceeds from Exercise of Incentive Stock Options -- 28
Principal Payments Under Long-Term Debt and
Notes Payable (194) (126)
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Net Cash Provided (Used) by Financing Activities $ (194) $ (135)
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Effect of Exchange Rate Changes on Cash $ (10) $ 49
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Net Increase (Decrease) in Cash $ 1,284 $ 94
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Cash at Beginning of Year $ 1,427 $ 1,534
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Cash at September 30 $ 2,711 $ 1,628
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Supplemental Disclosures of Cash Flow Information
Cash Paid During the Year for:
Interest $ 41 $ 66
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Income Taxes $ 165 $ 1,212
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</TABLE>
<PAGE>
ISOMET CORPORATION
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Item 2: Management's Analysis of Quarterly Income Statements
------------------------------------------------------------
Revenue for the third quarter of 1999 decreased to $1,090,000 from
$2,112,000 in 1998. This lower revenue level was expected and is the result of
substantially lower shipments of laser plotters to Polaroid. The plotter program
was renewed in July 1999 and will result in significant revenue for the Company
starting in the fourth quarter of 1999 and continuing through March 31, 2000, at
a minimum. For the nine months ended September 30, 1999 revenue decreased to
$4,742,000 from $6,877,000 the previous year.
On the lower revenue level, the Company's net income was $86,000 or
$.04 per share (diluted) vs. $215,000 or $.11 per share (diluted) last year. For
the current nine month period net income was $360,000 or $.18 per share
(diluted), compared to $779,000 or $.40 per share (diluted) last year. The
decrease in net income of $419,000 resulted from the following factors:
1. Decrease in Gross Profit $(504,000)
2. Increase in Interest and Other Income 28,000
3. Increase in Selling, G & A Expenses (39,000)
4. Increase in Product Development Costs (137,000)
5. Decrease in Interest Expense 25,000
6. Decrease in Income Tax Charge 208,000
-----------
$(419,000)
New orders totaled $2,634,000 for the quarter and $4,329,000 for the
current nine month period, compared to $1,356,000 and $8,752,000, respectively
last year. Unfilled orders on September 30, 1999 totaled $2,970,000, compared to
$5,383,000 on the same date last year and $3,327,000 on December 31, 1998.
As of September 30, 1999 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, 1999 - September 30, 2000, 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 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
None
5. Other Information
None
6. Exhibits and Reports on Form 8K
a. Exhibit 27 Financial Data Schedule for quarter ended September 30,
1999.
<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, 1999
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ISOMET CORP.
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 2,711
<SECURITIES> 0
<RECEIVABLES> 683
<ALLOWANCES> 0
<INVENTORY> 3,746
<CURRENT-ASSETS> 7,806
<PP&E> 2,655
<DEPRECIATION> 2,386
<TOTAL-ASSETS> 8,082
<CURRENT-LIABILITIES> 1,274
<BONDS> 0
0
0
<COMMON> 1,928
<OTHER-SE> 4,634
<TOTAL-LIABILITY-AND-EQUITY> 8,082
<SALES> 1,057
<TOTAL-REVENUES> 1,090
<CGS> 585
<TOTAL-COSTS> 938
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12
<INCOME-PRETAX> 152
<INCOME-TAX> 66
<INCOME-CONTINUING> 86
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86
<EPS-BASIC> .05
<EPS-DILUTED> .04
</TABLE>
