<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.
June 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 June 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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<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
1999 1998 1999 1998
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Revenues
a. Sales $ 1,034 $ 2,423 $ 3,605 $ 4,729
b. Interest Income - 1 - 2
c. Other Income 29 17 47 34
---------- ---------- ---------- ----------
$ 1,063 $ 2,441 $ 3,652 $ 4,765
2. Cost and Expenses
a. Cost of Sales $ 641 $ 1,660 $ 2,431 $ 3,240
b. Selling, General & Admin 342 296 647 580
c. Research & Development 88 - 88 -
d. Interest Expense 14 21 29 46
---------- ---------- ---------- ----------
Total Costs and Expenses $ 1,085 $ 1,977 $ 3,195 $ 3,866
---------- ---------- ---------- ----------
3. Income (Loss) Before Taxes on Income
& Extraordinary Items $ (22) $ 464 $ 457 $ 899
4. Provisions for Taxes on Income 5 173 183 334
---------- ---------- ---------- ----------
5. Net Income (Loss) $ (27) $ 291 $ 274 $ 565
---------- ---------- ---------- ----------
Basic Net Income (Loss) Per Share $ (.01) $ .15 $ .14 $ .29
---------- ---------- ---------- ----------
Diluted Net Income (Loss) Per Share $ (.01) $ .15 $ .14 $ .29
Weighted Average Number of ---------- ---------- ---------- ----------
Shares Outstanding 1,927,600 1,920,000 1,927,600 1,914,600
7. Weighted Average Number of Shares and
Stock Equivalents Outstanding 1,934,000 1,934,900 1,936,100 1,929,000
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, 1999 and June 30, 1998. 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
1999 1998 1999 1998
------------------- -----------------
<S> <C> <C> <C> <C>
Net Income (Loss) $ (27) $ 291 $ 274 $ 565
----- ----- ----- -----
Other Comprehensive Income
- --------------------------
Amortization of Deferred Compensation
From Stock Options -0- 8 -0- 16
Foreign Currency Translation Adj. (16) (11) (19) 35
----- ----- ----- -----
Other Comprehensive Income $ (16) $ (3) $ (19) $ 51
----- ----- ----- -----
Comprehensive Income $ (43) $ 288 $ 255 $ 616
----- ----- ----- -----
</TABLE>
<PAGE>
ISOMET CORPORATION
Financial Statements
C. Segment Information Three Months Ended June 30 (000 omitted)
<TABLE>
<CAPTION>
1999
Systems Components Total
--------------------------
<S> <C> <C> <C>
Sales $ 452 $582 $1,034
Cost of Sales 289 353 642
----- ---- ------
Gross Profit $ 163 $229 $ 392
----- ---- ------
General Corporate:
Interest Income and Other Revenue 30
Selling, General and Admin Expenses (342)
Product Development (88)
Interest Expense (14)
------
Net Income (Loss) Before Income Taxes $ (22)
------
</TABLE>
<TABLE>
<CAPTION>
1998
Systems Components Total
--------------------------
<S> <C> <C> <C>
Sales $1,229 $1,194 $2,423
Cost of Sales 1,065 595 1,660
------ ------ ------
Gross Profit $ 164 $ 599 $ 763
------ ------ ------
General Corporate:
Interest Income and Other Revenue 18
Selling, General and Admin Expenses (296)
Product Development -
Interest Expense (21)
------
Net Income Before Income Taxes $ 464
------
</TABLE>
<PAGE>
ISOMET CORPORATION
Financial Statements
C. Segment Information Six Months Ended June 30 (000 omitted)
<TABLE>
<CAPTION>
1999
Systems Components Total
--------------------------
<S> <C> <C> <C>
Sales $2,279 $1,326 $3,605
Cost of Sales 1,669 762 2,431
------ ------ ------
Gross Profit $ 610 $ 564 $1,174
------ ------ ------
General Corporate:
Interest Income and Other Revenue 47
Selling, General and Admin Expenses (647)
Product Development (88)
Interest Expense (29)
------
Net Income Before Income Taxes $ 457
------
</TABLE>
<TABLE>
<CAPTION>
1998
Systems Components Total
--------------------------
<S> <C> <C> <C>
Sales $2,102 $2,627 $4,729
Cost of Sales 1,789 1,450 3,239
------ ------ ------
Gross Profit $ 313 $1,177 $1,490
------ ------ ------
General Corporate:
Interest Income and Other Revenue 36
Selling, General and Admin Expenses (581)
Product Development -
Interest Expense (46)
------
Net Income Before Income Taxes $ 899
------
</TABLE>
<PAGE>
ISOMET CORPORATION
Financial Statements
D. Consolidated Balance Sheet (1) (000 omitted)
<TABLE>
<CAPTION>
June 30 December 31
1999 1998
-------- ------------
<S> <C> <C>
Current Assets
Cash and Equivalent $ 2,970 $ 1,427
Accounts Receivable Net 461 1,838
Other Current Assets 790 671
Inventories (2) 3,171 3,786
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$ 7,392 $ 7,722
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Property and Equipment at Cost $ 2,619 $ 2,626
Less Accumulated Depreciation (2,356) (2,341)
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$ 263 $ 285
------- -------
Other Assets $ 8 $ 7
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$ 7,663 $ 8,014
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts Payable $ 160 $ 814
Accrued Liabilities 458 261
Notes Payable to Banks 290 339
Notes Payable to Others 6 -
------- -------
$ 914 $ 1,414
------- -------
Long Term Liabilities $ 282 $ 388
------- -------
Minority Interest in Consolidated Subsidiary $ - $ -
------- -------
$ 1,196 $ 1,802
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
Retained Earnings 303 29
Foreign Exchange Adjustment 4 23
------- -------
$ 6,467 $ 6,212
------- -------
$ 7,663 $ 8,014
------- -------
(1) Unaudited. Subject to Year-End Adjustments
(2) Inventory Breakdown
Parts and Raw Material $ 934 $ 1,030
Work in Process 1,822 2,263
Finished Goods 415 493
-------- -------
$ 3,171 $ 3,786
-------- -------
(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
</TABLE>
<PAGE>
ISOMET CORPORATION
Financial Statements
E. Consolidated Statement of Cash Flows Six Months Ended June 30 (000 omitted)
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income (Loss) $ 274 $ 565
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided by Operating Activities
Depreciation and Amortization $ 15 $ 39
Amortization of Deferred Compensation - 17
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable 1,377 (548)
(Increase) Decrease in Other Current Assets (119) (82)
(Increase) Decrease in Inventories 615 233
Increase (Decrease) in Accounts Payable (654) 389
Increase (Decrease) in Accrued Liabilities 197 (684)
(Increase) Decrease in Deposits - -
------ ------
Total Adjustments $1,431 $ (636)
------ ------
Net Cash Provided (Used) by Operating Activities $1,705 $ (71)
------ ------
Cash Flows from Investing Activities
Proceeds from Disposal of Subsidiary $ - $ -
Purchase of Property and Equipment 6 (39)
Proceeds from Sale of Property and Equipment - -
------ ------
Net Cash (Used) by Investing Activities $ 6 $ (39)
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Cash Flows from Financing Activities
Proceeds of Long-Term Debt and Notes Payables $ (29) $ (12)
Proceeds from Exercise of Incentive Stock Options - 28
Principal Payments Under Long-Term Debt and
Notes Payable (120) (120)
------ ------
Net Cash Provided (Used) by Financing Activities $ (149) $ (104)
------ ------
Effect of Exchange Rate Changes on Cash $ (19) $ 32
------ ------
Net Increase (Decrease) in Cash $1,543 $ (182)
------ ------
Cash at Beginning of Year $1,427 $1,534
------ ------
Cash at June 30 $2,970 $1,352
------ ------
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Year for:
Interest $ 29 $ 46
------ ------
Income Taxes $ 146 $1,047
------ ------
</TABLE>
<PAGE>
ISOMET CORPORATION
------------------
Item 2: Management's Analysis of Quarterly Income Statements
------------------------------------------------------------
As expected, revenue for the second quarter of 1999 declined substantially
to $1,063,000 from $2,441,000 in 1998. This lower revenue level reflects the
completion April 1, 1999 of the company's contract with Polaroid for supply of
laser plotters. For the six months ended June 30, 1999 revenue decreased to
$3,652,000 from $4,765,000 the previous year.
On the lower revenue level, a net loss of $(27,000) or $(.01) per share was
incurred in the current quarter vs. net income of $291,000 or $.15 per share
(diluted) last year. For the current six month period net income was $274,000
or $.14 per share (diluted), compared to $565,000 or $.29 per share (diluted)
last year. The decrease in net income of $291,000 resulted from the following
factors:
1. Decrease in Gross Profit $(315,000)
2. Increase in Interest and Other Income 11,000
3. Increase in Selling, General and Admin Costs (67,000)
4. Increase in Product Development Costs (88,000)
5. Decrease in Interest Expense 17,000
6. Decrease in Income Tax Charge 151,000
---------
$ 291,000
New orders totaled $838,000 for the quarter and $1,695,000 for the current
six month period, compared to $4,921,000 and $7,396,000, respectively last year.
Unfilled orders on June 30, 1999 totaled $1,370,000, compared to $6,119,000 on
the same date last year and $3,327,000 on December 31, 1998.
On July 20, 1999 the Company announced the receipt of a follow-on contract
from Polaroid for continued manufacture and supply of laser plotters.
Deliveries against this order are scheduled to start in the fourth quarter of
1999 and cover an approximately six month period.
As of June 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 July 1, 1999 - June 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
At the Company's June 3, 1999 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, 1999.
b. There were no 8K filings for the quarter ended June 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: August 10, 1999
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ISOMET CORPORATION 10-QSB, DATED 6/30/99 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-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,970
<SECURITIES> 0
<RECEIVABLES> 461
<ALLOWANCES> 0
<INVENTORY> 3,171
<CURRENT-ASSETS> 7,392
<PP&E> 2,619
<DEPRECIATION> 2,356
<TOTAL-ASSETS> 7,663
<CURRENT-LIABILITIES> 914
<BONDS> 0
0
0
<COMMON> 1,928
<OTHER-SE> 4,539
<TOTAL-LIABILITY-AND-EQUITY> 7,663
<SALES> 1,034
<TOTAL-REVENUES> 1,063
<CGS> 641
<TOTAL-COSTS> 1,085
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> (22)
<INCOME-TAX> 5
<INCOME-CONTINUING> (27)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
