SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM lO-KSB
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1998
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-1455
OPT-SCIENCES CORPORATION
(Name of small business issuer in its charter)
NEW JERSEY 21-0681502
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Post Office Box 221, 1912 Bannard Street, Riverton, New Jersey 08077
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including Area Code: (609)829-2800
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.25 par value per share
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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 9O days.
YES X NO
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure
will be contained, to the best of registrant's 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)
State issuer's revenues for its most recent fiscal year:
$4,833,657.
The aggregate market value of the 242,839 common shares held by non-affiliates
of the registrant is $1,699,873, computed by reference to the closing bid and
asked prices of such stock as of December 31, 1998.
1
This computation is based on the number of issued and outstanding shares held
by persons other than officers, directors and shareholders of 5% or more of
the registrant's common shares.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. Common Stock, par value of $.25 per
share: 776,115 shares outstanding as of December 31, 1998.
Documents Incorporated by Reference
Notice of the 1999 Annual Meeting of Shareholders to be held on March 23, 1999
and related Information Statement which are to be filed are incorporated by
reference into Items 9 through 12 of Part III; also incorporated by reference
are Exhibits 3 (Articles of Incorporation and By-laws) and 2 (List of
Subsidiaries) from the Form 10KSB filed in January 1998 for fiscal year 1997.
Transitional Small Business Disclosure Format
Yes No X
2
TABLE OF CONTENTS
FORM lO-KSB ANNUAL REPORT -- FISCAL YEAR 1998
OPT-SCIENCES CORPORATION AND SUBSIDIARY
PART I
PAGE
Item 1.Description of Business 4
Item 2.Description of Property 6
Item 3.Legal Proceedings 6
Item 4.Submission of Matters to a Vote of Security
Holders 7
PART II
Item 5.Market for Common Equity and
Related Stockholder Matters 7
Item 6.Management's Discussion and Analysis or Plan of
Operation 7
Item 7.Financial Statements 8
Item 8.Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure 8
PART III
Item 9.Directors, Executive Officers,Promoters and
Control Persons; Compliance with Section 16(a)
of the Exchange Act 8
Item lO.Executive Compensation 8
Item 11.Security Ownership of Certain Beneficial Owners
and Management 8
Item 12.Certain Relationships and Related Transactions 8
PART IV
Item 13.Exhibits and Reports on Form 8-K 9
Signatures 22
3
PART I
Item 1. Description of Business
Business of the Company.
Overview. The Company conducts its business through its wholly owned
subsidiary, O & S Research, Inc. Both companies are New Jersey Corporations.
The principal business of the Company is to provide optical coatings, filters,
face plates and lighting wedges which improve display readability for
electronic instruments used primarily in aircraft. This includes the
application of different types of anti-reflection coatings, transparent
conductive coatings and other optical coatings. The Company additionally
provides full glass cutting, grinding and painting operations which augment its
optical coating capabilities. Most of the Company's products are designed to
enable pilots to read aircraft instruments in direct sunlight or at night or
in covert situations using appropriate night vision filters. This business is
a niche business dependent for its success on the aircraft manufacturing
industry. It requires custom manufacturing of small lots of products to
satisfy component requirements for specific aircraft.
Core Products.
The distinguishing characteristic of the Company's business is its optical thin
film coating capability. All products which the Company offers incorporate an
optical coating of some type. The primary coatings are its anti-reflection
coating used for glare reduction and its transparent conductive coatings used
for electromagnetic interference shielding. Both are applied to different
types of glass which are mounted on the front of liquid crystal displays (LCD),
cathode ray tubes (CRT) and electromechanical displays (EMD).
New Products, Ancillary Products and Services.
In addition to coated glass described above, the Company also offers a full
range of other specialty instrument glass, including night vision filter glass,
circular polarizers, touchpads, glass sandwiches for LCDs as well as other
custom designed specialty glass components and assemblies.
Growth Strategy.
The Company has adopted a fiscally conservative approach to the development of
new business. It continues to identify new customers for its products, to
collaborate with customers in adapting its products to customer requirements,
to price its products competitively but profitably, to maintain high quality,
and to add capital equipment and personnel as required. Since the beginning of
Fiscal Year 1999, Management has observed a decline in the rate at which
customers in the commercial aircraft industry are placing new orders with the
Company, a normal cyclical trend that may continue for several years. In this
business environment, the Company hopes to offset potential sales declines to
existing customers by attempting to sell its product line to customers involved
in the business and military avionics market and to other domestic manufacturers
of high performance instrument panels. To implement this strategy, the Company
will consider employment of senior sales personnel.
4
Marketing and Sales.
The principal sales executive of the Company is the President, who maintains
regular contact with the largest customers and continually seeks to develop new
customers. The Company does not currently employ the services of manufacturers
representatives or sales personnel. The Company and its products are listed in
the Thomas Register. The Company engages in a low cost public relations and
advertising program. Orders are ordinarily placed with the Company by
purchasing personnel of major corporations or governmental agencies, based on
price, delivery terms, satisfaction of technical specifications and quality
control. Purchases by the Company's customers are ordinarily made from vendors
on an approved vendor list. Sales are assisted by creative technical solutions
to customer requirements. The Company is already an approved vendor for major
aircraft programs and this improves product acceptance by new customers.
During Fiscal 1997 and 1998, the Company made deliveries on a contract supplying
anti-glare face-plates for the U.S. space shuttle avionics program. The Company
was also the lead supplier for the anti-glare panels for the flat panel displays
on the Boeing 777, 737-700/800 and the new 717. The Company's customer base is
narrow, with two customers constituting 73.4% of all sales. The Company had a
backlog of orders equal to $1.2 million at the end of Fiscal Year 1998,
approximately the same as the end of the prior year. Since then, there has been
a decline in the flow of new orders. Management attributes this decrease to
planned reductions in the manufacture of new commercial aircraft by Boeing and
to the completion of the avionics upgrade for the U.S. space shuttle program.
As the demand for its products from its existing customers begins to subside,
management intends to diversify its customer and product base. In the course
of this change, the Company may experience reduced profit margins and reduced
sales.
Patents, Trademarks and Proprietary Knowledge.
The Company does not hold any patent or trademark. Part of its competitive
advantage, however, consists of accumulated experience and know-how in
satisfying the instrument glass requirements of its customers.
Manufacturing.
Cathode Ray Tubes and Liquid Crystal Displays are now commonly used for aircraft
instrumentation. Typically, a customer sends such items to the Company for
processing; the Company uses its technology to apply with great precision a
micro thin optical non-glare and/or conductive coating to a face plate, which
is then mounted on the Cathode Ray Tube or Liquid Crystal Display. The face
plate is cut from large pieces of glass which the Company purchases from
multiple domestic sources on a commodity basis. After testing for quality
control, satisfactory products are shipped to the customer.
Glass lenses are manufactured by the Company from raw glass pieces which the
Company purchases in large lots from vendors. The glass is a commodity product
which can be purchased generally from several glass manufacturers. The pieces
are cut, grounded, polished and coated with a micro thin optical coating. They
are shipped to the customer after clearing through quality control.
5
Unique to both processes is the deposit of a thin film surface on the involved
glass by placing the product in a heated vacuum oven with a volatile chemical
composition which evaporates and redeposits itself on the glass product.
Environmental Matters.
The Company believes it is in material compliance with applicable United
States, New Jersey and local laws and regulations relating to the protection
of the environment.
Readiness for Year 2000.
The Company believes that it and its suppliers and customers will not be
materially and adversely affected by the impact of the year 2000 date change.
Management continues to review and monitor all internal processes and to confirm
with its vendors and customers the readiness to deal with computer based
problems related to the date change. Management expects to confirm full
compliance with year 2000 requirements by July 1, 1999.
Competition.
The principal competition the Company faces is from larger optical coating
companies. Competition is based on product quality, price, reputation and
ability to meet delivery deadlines. As pointed out above (see Marketing and
Sales), status as an approved vendor for the product is frequently very
important.
Employees.
As of October 31, 1998, the Company employed 46 full time and 6 part time
individuals, none of whom are union members. This represents a decline of 2
full time and an increase of 6 part time employees from November 1, 1997.
The Company expects to adjust the number of its full time employees, if needed
in order to react to market conditions. The Company believes it has a good
relationship with its employees. The Company is subject to the federal minimum
wage and hour laws and provides various routine employee benefits such as life
and health insurance. The Company recently created a 401K Plan for the benefit
of its employees; it does not have any stock option plan for the benefit of its
executives or employees.
Forward-looking Statements.
Certain of the matters discussed above contain forward-looking statements that
involve risk and uncertainties. Although the Company believes that its
assumptions in making such forward-looking statements are reasonable, the
Company cannot give any assurance that the expected results will occur. A
significant variation between actual results and any of such assumptions may
cause actual results to differ materially from expectations.
Item 2. Description of Property
The Company conducts its operations at the principal office and
manufacturing facility located in the East Riverton Section of
Cinnaminson, New Jersey. The Company's operating subsidiary owns this
property in fee simple, and the property is not encumbered by any lien
or mortgage. The cinderblock and masonry facility contains
approximately 11,000 square feet of manufacturing space. The Company's
operating subsidiary also owns and utilizes a building containing 5,000
square feet of warehouse and 3,000 square feet of manufacturing space on
premises adjacent to the main manufacturing facility. Together, those
facilities meet the Company's current and projected space requirements.
6
Item 3. Legal Proceedings
The Company is not a party to any pending legal proceeding.
Item 4. Submission of Matters to a Vote of Security Holders
The Company did not submit any matter to a vote of security holders
during the fourth quarter of fiscal 1998.
PART II
Item 5. Market for Common Equity and Related Security Holder Matters
The Company has not listed its Common Shares on an established public
trading market, but shareholders do trade the Company's Shares over the
counter. The symbol for the Company's Shares is OPST. Only limited and
sporadic trading occurs. Subject to the foregoing qualification, the
following table sets forth the range of bid and asked quotations, for
the calendar quarter indicated, as recorded by the National Quotation
Bureau, Inc. and reflects inter-dealer prices, without retail mark up,
mark down or commission and may not necessarily represent actual
transactions.
Fiscal 1997 Bid Asked
First Quarter $4 $61/2
Second Quarter 41/4 - 43/4 81/4
Third Quarter 43/4 7
Fourth Quarter 43/4 7
Fiscal 1998 Bid Asked
First Quarter $43/4 - 4 $53/4 - 7
Second Quarter 4 - 6 63/4
Third Quarter 53/4 - 61/4 63/4 -71/4
Fourth Quarter 61/4 73/4
As of December 31, 1998, the closing bid for the Company Shares was $6 1/4 and
the closing ask was $7 3/4 per share.
The Company had 1,205 shareholders of record of its Common Stock as of December
31, 1998.
Distributions
The Company did not declare or pay any dividend on its Common Stock during
Fiscal Year 1998 and does not presently intend to pay dividends on its Common
Stock in the foreseeable future.
7
Item 6. Management's Discussion and Analysis or Plan of Operation.
LIQUIDITY AND CAPITAL RESOURCES.
As a result of the Company's relatively strong cash position, the Company has
sufficient liquidity to fund its contemplated capital and operating activities
through Fiscal 1999. The Company also anticipates earnings in Fiscal 1999 which
will further assure the Company's ability to meet its capital expenditure
requirements.
RESULTS OF OPERATIONS
Fiscal Year 1998
Fiscal 1998 was a record year for the Company. Sales increased by approximately
28% and operating income increased by 64%. Management believes that its success
resulted from a convergence of special opportunities. The strong commercial
aircraft market enabled the Company to become more selective in business it
solicited, concentrating its efforts in higher profit margin products and fully
utilizing its capacity to meet demand. During Fiscal 1998, the Company
significantly increased its sales of anti-glare panels for the flat panel
displays used on the Boeing 777 and 787-700/800. Other sources of income
increased approximately 35%, primarily related to an increase in interest
earning assets.
Fiscal Year 1997
Fiscal 1997 was also a record year for the Company. Sales increased by almost
40% and net operating income increased by 73%. The increase was due in large
part to the previously discussed NASA contract and an expanding aircraft market.
These programs made a significant contribution towards the Company's increased
sales over the preceding year. Other sources of income remained comparable to
Fiscal 1996.
INFLATION
During the three year period that ended on October 31, 1998, inflation did not
have a material effect on the Company's operating results.
Item 7. Financial Statements
The Consolidated Financial Statements, the notes thereto, and the report thereon
by Mayer, Shanzer & Mayer, P.C. dated December 28, 1998, are filed as part of
this report on pages 10 to 21 below.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
There is no information relevant to the Registrant which must be disclosed
under this item.
8
PART III
The information required by Part III (Items 9, 10, 11 and 12) are incorporated
by reference from the Company's definitive Information Statement to be filed
in accordance with 240.14c-101, Schedule 14C.
PART IV
Item 13. Exhibits and Reports on Form 8-KSB
(a) Financial Statements, Schedules and Exhibits
1. Financial Statements and Schedules
See Index to Consolidated Financial Statements
and Schedules on page 10.
2. Exhibits:
3. Articles of Incorporation and By-Laws-
Incorporated by reference to the Form
10-KSB filed by the Registrant with the
SEC for its fiscal year ended November
1, 1997 starting on page 22.
4. List of Subsidiaries - Incorporated by
reference to the Form 10-KSB filed by
the Registrant with the SEC for its
fiscal year ended November 1, 1997
starting on page 54.
9
TABLE OF CONTENTS
PAGE
Independent Auditor's Report 12
Consolidated Balance Sheets 13
Consolidated Statements of Earnings 15
Consolidated Statements of
Stockholders' Equity 16
Consolidated Statements of Cash Flows 17
Notes to Consolidated Financial Statements 19
10
INDEPENDENT AUDITOR'S REPORT
To Stockholders and Board of Directors
OPT-Sciences Corporation
We have audited the accompanying consolidated balance sheets of
OPT-Sciences Corporation and Subsidiary as of October 31, 1998 and
November 1, 1997 and the related consolidated statements of earnings
and stockholders' equity and cash flows for each of the fiscal years in
the two year period ended October 31, 1998 (52 weeks). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of OPT-
Sciences Corporation and Subsidiary as of October 31, 1998 and
November 1, 1997 and the consolidated results of their operations and
their cash flows for each of the fiscal years in the two year period ended
October 31, 1998 in conformity with generally accepted accounting
principles.
MAYER, SHANZER & MAYER, P.C.
A Professional Corporation
December 28, 1998
11
OPT-Sciences Corporation and Subidiary
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these financial statements
ASSETS
October 31, November 1,
1998 1997
CURRENT ASSETS
Cash and cash equivalents $ 4,190,509 $ 2,981,027
Trade accounts receivable 704,822 903,496
Inventories 357,716 322,707
Prepaid expenses 4,573 28,992
Marketable securities 501,884 375,489
Total current assets 5,759,504 4,611,711
PROPERTY AND EQUIPMENT
Land 114,006 114,006
Building and improvements 335,845 335,845
Machinery and equipment 739,007 598,607
Small tools 53,580 53,580
Furniture and fixtures 8,048 8,048
Office equipment 26,709 40,990
Automobile 42,336 42,336
Total property and
equipment 1,319,531 1,193,412
Less: accumulated depreciation 828,382 775,441
Net property and
equipment 491,149 417,971
Total assets $ 6,250,653 $ 5,029,682
12
OPT-Sciences Corporation and Subsidiary
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these financial statements
LIABILITIES AND STOCKHOLDERS' EQUITY
October 31, November 1,
1998 1997
CURRENT LIABILITIES
Accounts payable - trade $ 64,305 $ 76,267
Accrued income taxes 241,599 146,210
Other current liabilities 334,452 283,211
Total current liabilities 640,356 505,688
STOCKHOLDERS' EQUITY
Common capital stock - par value
$.025 per share - authorized
and issued 1,000,000 shares 250,000 250,000
Additional paid in capital 272,695 272,695
Retained earnings 5,254,632 4,155,972
Net unrealized gains on
equity securities 20,188 32,545
Less treasury stock at cost -
224,415 shares (187,218) (187,218)
Total stockholders' equity 5,610,297 4,523,994
Total liabilities and
stockholders' equity $ 6,250,653 $ 5,029,682
13
OPT-Sciences Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF EARNINGS
The accompanying notes are an integral part of these financial statements
Fiscal Year Ended Fiscal Year Ended
October 31,1998 November 1, 1997
(52 Weeks) (52 Weeks)
NET SALES $ 4,628,429 $ 3,618,299
COST OF SALES 2,516,145 2,195,422
Gross profit
on sales 2,112,284 1,422,877
OPERATING EXPENSES
Sales & delivery 32,721 25,574
General and administrative 511,407 443,427
Total operating expenses 544,128 469,001
Operating income 1,568,156 953,876
OTHER INCOME 205,228 152,127
Net income before taxes 1,773,384 1,106,003
FEDERAL AND STATE
INCOME TAXES 674,724 431,670
Net income $ 1,098,660 $ 674,333
EARNINGS PER SHARE OF
COMMON STOCK 1.42 .87
Weighted average
number of shares 775,585 775,625
14
OPT-Sciences Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
The accompanying notes are an integral part of these financial statements
Fiscal Year Ended Fiscal Year Ended
October 31, 1998 November 1, 1997
(52 Weeks) (52 Weeks)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,098,660 $ 674,333
Adjustments to reconcile net income
to netcash provided
by operating activities:
Depreciation 67,783 44,022
(Gain) on sale of securities (22,431) (7,833)
Decrease (increase) in:
Accounts receivable 198,674 (423,318)
Inventories (35,009) (103,101)
Prepaid expenses 24,419 (3,054)
(Decrease) increase in:
Accounts payable (11,962) 32,507
Accrued income taxes 95,389 (4,840)
Other current liabilities 51,241 79,432
Net cash provided
by operating activities 1,466,764 288,148
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (140,961) (68,941)
Purchases of securities (218,424) (125,062)
Sale of securities 102,103 330,461
Net cash (used) provided
by investing activities $ (257,282) $ 136,458
15
OPT-Sciences Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these financial statements
Fiscal Year Ended Fiscal Year Ended
October 31, 1998 November 1, 1997
(52 Weeks) (52 Weeks)
CASH FLOW FROM
FINANCING ACTIVITIES:
Purchases of treasury stock $ -0- $ (830)
Net cash (used) in
financing activities -0- (830)
Increase in cash 1,209,482 423,776
Cash and cash equivalents
at beginning of year 2,981,027 2,557,251
Cash and cash equivalents
at end of year $ 4,190,509 $ 2,981,027
SUPPLEMENTAL DISCLOSURES:
Interest paid $ -0- $ -0-
Income taxes paid $ 579,335 $ 436,448
16
OPT-Sciences Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these financial statements
Reserve for
Net Unrealized
Gains or Losses
Common Paid-in Retained on Equity Treasury Stock
Stock Capital Earnings Securities Cost Shares
Balance -
October 26,
1996 $250,000 $272,695 $3,481,639 $20,451 $(186,388) $223,885
Net income
for the fiscal
year ended
November 1,
1997 $674,333 $12,094
Purchase of
treasury stock $(830) $530
Balance -
November 1,
1997 $250,000 $272,695 $4,155,972 $32,545 $(187,218) $224,415
Net income
for the fiscal
year ended
October 31,
1998 $1,098,660 $(12,357)
Balance -
October 31,
1998 $250,000 $272,695 $5,254,632 $20,188 $(187,218) $224,415
17
OPT-Sciences Corporation and Subsidiary
NOTES TO CONSOLIDATED FINACIAL STATEMENTS
The accompanying notes are an integral part of these financial statements
NOTE 1 - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of OPT-Sciences
Corporation and its wholly owned subsidiary. All significant intercompany
accounts
and transactions have been eliminated. Certain prior year amounts have been
reclassified to conform to the current year's classifications.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents
The Company considers certificates of deposit and debt securities purchased with
a maturity of three months or less to be cash equivalents.
Line of Business and Credit Concentration
The Company, through its wholly owned subsidiary, is engaged in grinding,
polishing, coating and painting of optical glass for the custom fabrication of
precision optical components for aircraft instruments. The Company grants
credit
to companies within the aerospace industry.
Accounts Receivable
Bad debts are charged to operations in the year in which the account is
determined
to be doubtful. If the allowance method for doubtful accounts were used it
would
not have a material effect on the financial statements.
Inventories
Raw materials are stated at the lower of average cost or market. Work in process
and finished goods are stated at accumulated cost of raw material, labor and
overhead, or market, whichever is lower. Market is net realizable value.
18
OPT-Sciences Corporation and Subsidiary
NOTES TO CONSOLIDATED FINACIAL STATEMENTS
The accompanying notes are an integral part of these financial statements
Marketable Securities
Marketable securities consist of debt and equity securities and mutual funds.
Equity securities include both common and preferred stock.
The Company's investment securities are classified as "available-for-sale".
Accordingly, unrealized gains and losses and the related deferred income tax
effects when material, are excluded from earnings and reported in a separate
component of stockholders' equity. Realized gains or losses are computed based
on specific identification of the securities sold.
Property and Equipment
Property and equipment are comprised of land, building and improvements,
machinery and equipment, small tools, furniture and fixtures, office equipment
and
automobiles. These assets are recorded at cost.
Depreciation for financial statement purposes is calculated over estimated
useful
lives of three to twenty-five years, using the straight-line method.
Maintenance and repairs are charged to expense as incurred.
Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between
the carrying amounts of assets and liabilities for financial reporting purposes
and
the amounts used for income tax purposes.
Employee Benefit Plans
On October 1, 1998, the Company implemented a 401(k) profit sharing plan. All
eligible employees at the Company are covered by the Plan. Company
contributions are voluntary and at the discretion of the Board of Directors.
Company contributions for the year ended October 31, 1998 were $5,490.
Earnings per Common Share
Earnings per common share were computed by dividing net income by the
weighted average number of common shares outstanding.
19
OPT-Sciences Corporation and Subsidiary
NOTES TO CONSOLIDATED FINACIAL STATEMENTS
The accompanying notes are an integral part of these financial statements
NOTE 2 - Inventories
Inventories consisted of the following:
October 31, November 1,
1998 1997
Finished goods $ 55,747 $ 57,582
Raw materials and supplies $ 31,852 $ 17,619
Work in progress $ 270,117 $ 247,506
$ 357,716 $ 322,707
NOTE 3 - Marketable Securities
Marketable securities consisted of the following at October 31, 1998 and
November 1, 1997.
1998 1997
Common stock $ 4,706 $ 4,116
Preferred stock $ 452,031 $ 326,280
Corporate bonds $ 45,147 $ 45,092
$ 501,884 $ 375,488
The following is an analysis of marketable securities available for sale at
October 31, 1998 and November 1, 1997.
1998 1997
Amortized cost basis $ 481,696 $ 342,943
Gross unrealized gains $ 20,188 $ 32,545
Gross unrealized losses -0- -0-
$ 501,884 $ 375,488
Sales of securities available for sale during the years ended October 31, 1998
and November 1, 1997 were as follows:
1998 1997
Proceeds from sales $ 102,103 $ 330,461
Gross realized gains $ 22,431 $ 7,833
20
OPT-Sciences Corporation and Subsidiary
NOTES TO CONSOLIDATED FINACIAL STATEMENTS
The accompanying notes are an integral part of these financial statements
NOTE 4 - Income Taxes
The provision for income taxes based on earnings reported in the financial
statements is as follows:
Current Tax Expense October 31, November 1,
1998 1997
Federal $ 522,769 $ 334,309
State $ 151,955 $ 97,361
Total $ 674,724 $ 431,670
The Company has no deferred tax liabilities. The deferred tax asset of $13,200
resulting from capital loss carryforwards of $66,036 was reduced by a valuation
allowance of $13,200. The Company does not believe that it is likely that it
will generate sufficient capital gains within the appropriate time period to
offset those capital losses. Book and tax depreciation differences are not
considered material to these financial statements.
NOTE 5 - Major Customers
Two customers accounted for approximately $3,036,600 and $362,000 of net sales
during the year ended October 31, 1998 and approximately $1,976,100 and
$776,900 of net sales during the year ended November 1, 1997. The amount due
from these customers, included in trade accounts receivable, was approximately
$510,400 for the year ended October 31, 1998 and $724,600 for the year ended
November 1, 1997.
NOTE 6 - Concentration of Credit Risk of Financial Instruments
The Company has various demand and time deposits with financial institutions
where the amount of the deposits exceeds the federal insurance limits of the
institution on such deposits. The maximum amount of accounting loss that would
be incurred if an individual or group that makes up the concentration of the
deposits failed completely to perform according to the terms of the deposit was
$3,830,031 at October 31, 1998 and $2,221,983 at November 1, 1997.
21
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Exchange
Act, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OPT-SCIENCES CORPORATION
By:
Anderson L. McCabe
President
Date: January , 1999
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
President and January , 1999
Anderson L. McCabe Director
Secretary, January , 1999
Arthur J. Kania Treasurer and
Director
Director January , 1999
Arthur J. Kania, Jr.
Chief January , 1999
Harvey Habeck Accountant
