SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-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 30, 1999
[ ] 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: (856) 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 90 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:
$4,194,824.
The aggregate market value of the 240,499 common shares held by
non-affiliates of the registrant is $1,397,900, computed by reference to the
closing bid and asked prices of such stock as of December 31, 1999.
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: 775,575 Shares outstanding as of December 31, 1999.
Documents Incorporated by Reference
Notice of the 2000 Annual Meeting of Shareholders to be held on March
15, 2000 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 21(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 10-KSB ANNUAL REPORT -- FISCAL YEAR 1999
OPT-SCIENCES CORPORATION AND SUBSIDIARY
PART I
PAGE
Item 1.Description of Business 4
Item 2.Description of Property 7
Item 3.Legal Proceedings 7
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 8
Item 7.Financial Statements 9
Item 8.Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure 9
PART III
Item 9.Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a)
of the Exchange Act 9
Item 10. Executive Compensation 9
Item 11.Security Ownership of Certain Beneficial Owners
and Management 9
Item 12.Certain Relationships and Related
Transactions 9
PART IV
Item 13.Exhibits and Reports on Form 8-K 9
Signatures 10
3
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business of the Company. Overview. The Company, formed in 1956,
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, faceplates 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. Either or both coatings are applied to different types of glass
face plates which are mounted on the front of liquid crystal displays
(LCDs), cathode ray tubes (CRTs) and electromechanical displays (EMDs).
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 2000, 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.
Marketing and Sales. The principal sales executive of the Company is
The President, who maintains regular contact with the largest customers and
4
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 for
Supplying anti-glare face-plates for the U.S. space shuttle avionics program.
The Company continues to be the lead supplier for the anti-glare panels for the
flat panel displays on the Boeing 777, 737-800 and the new 717. The
Company's customer base is narrow, with three customers constituting 79.1%
Of all sales. The Company had a backlog of orders equal to $1.0 million at the
end of Fiscal Year 1999, approximately 20% lower than at the end of the
prior year. The Company continues to see a decline in the flow of new orders.
Management attributes this decrease to reductions in the manufacture of new
commercial aircraft by Boeing and to a reduction in the number of new
avionics upgrades to LCD displays. 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 a further erosion of profit margins as a result of more
aggressive pricing of its products and, in the event of reduced sales, a
decrease in the economy of scale for its manufacturing operation as a whole.
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, and it does not
spend material sums of money for those purposes.
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.
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 30, 1999, the Company employed 45 full time
and 7 part time individuals, none of whom are union members. This
represents a decrease of one full time employee and an increase of one part
time employee from the end of fiscal 1998. 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 provides a 401K Plan for the benefit of all its
employees; it does not have any stock option plan.
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.
The SEC maintains an Internet site that contains reports and information
statements and other information regarding the Company. The URL address of
that site is http://www.sec.gov.
6
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.
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 1999.
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 1998 Bid Ask
First Quarter $4 3/4 - 4 7/8 $5 3/4 - 7
Second Quarter 4 7/8 - 6 6 3/4
Third Quarter 5 3/4 - 6 1/4 6 3/4 -7 1/4
Fourth Quarter 6 1/4 7 3/4
Fiscal 1999 Bid Ask
First Quarter $6.25 $7 - 7.75
Second Quarter 5.75 - 6.25 6.25 - 7.50
Third Quarter 5 - 5.75 5.50 - 6.25
Fourth Quarter 5 6 - 6.25
7
As of December 31, 1999, the closing bid for the Common Stock was $4.125
and the closing ask was $7.50 per share.
The Company had 993 shareholders of record of its Common Stock as of
December 31, 1999.
Distributions
The Company did not declare or pay any dividend on its Common Stock
during Fiscal Year 1999 and does not presently intend to pay dividends on
its Common Stock in the foreseeable future.
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 2000. The Company also anticipates earnings in
Fiscal 2000 which will further assure the Company's ability to meet its
capital expenditure requirements.
RESULTS OF OPERATIONS
Fiscal Year 1999
As expected, results from Fiscal 1999 were down from the prior year. Sales
decreased by 20% and operating income decreased by approximately 38%. The
commercial avionics market softened causing the decline in sales. The demand
for anti-glare faceplates stabilized during the year at a level
significantly below the production rates set the prior year. Although the
business aircraft market is doing very well, the amount of orders in the
business aircraft market and in the military avionics market were not enough to
offset the decline in the Company's primary market. Other sources of income
increased approximately 29%, primarily related to an increase in interest
earning assets.
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
787-800. Other sources of income increased approximately 35%, primarily
related to an increase in interest earning assets.
INFLATION
During the three year period that ended on October 30, 1999, inflation
did not have a material effect on the Company's operating results.
8
Item 7. Financial Statements
The Consolidated Financial Statements, the notes thereto, and the report
thereon by Mayer, Shanzer & Mayer, P.C. dated December 23, 1999, are filed
as part of this report on pages 12 to 24 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.
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 12.
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.
21. 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
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 , 2000
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
_________________________
Anderson L. McCabe President January , 2000
And Director
_________________________
Arthur J. Kania Secretary, January , 2000
Treasurer and
Director
_________________________
Arthur J. Kania, Jr. Director January , 2000
_________________________
Harvey Habeck Chief January , 2000
Accountant
10
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
11
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 30, 1999 and October
31, 1998 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 30, 1999 (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 30, 1999 and
October 31, 1998 and the consolidated results of their operations and
their cash flows for each of the fiscal years in the two year period
ended October 30, 1999 in conformity with generally accepted accounting
principles.
MAYER, SHANZER & MAYER, P.C.
A Professional Corporation
December 23, 1999
12
OPT-Sciences Corporation and Subsidiary
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these financial statements
ASSETS
October 30, October 31,
1999 1998
CURRENT ASSETS
Cash and cash equivalents $ 4,308,767 $ 4,190,509
Trade accounts receivable 573,215 704,822
Inventories 487,793 357,716
Prepaid expenses 25,111 4,573
Prepaid income tax 184,106 -0-
Marketable securities 497,184 507,198
Total current assets 6,076,176 5,764,818
PROPERTY AND EQUIPMENT
Land 114,006 114,006
Building and improvements 346,571 335,845
Machinery and equipment 830,027 739,007
Small tools 53,580 53,580
Furniture and fixtures 8,048 8,048
Office equipment 38,265 26,709
Automobile 42,336 42,336
Total property and equipment 1,432,833 1,319,531
Less: accumulated depreciation 875,156 828,382
Net property and equipment 557,677 491,149
Total assets $ 6,633,853 $ 6,255,967
13
OPT-Sciences Corporation and Subsidiary
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these financial statements
LIABILITIES AND STOCKHOLDERS' EQUITY
October 30, October 31,
1999 1998
CURRENT LIABILITIES
Accounts payable - trade $ 42,048 $ 64,305
Accrued income taxes -0- 241,599
Other current liabilities 261,209 334,452
Total current liabilities 303,257 640,356
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 6,004,651 5,254,632
Accumulated other comprehensive income:
Unrealized holding loss (gain)
on marketable securities (9,512) 25,502
Less treasury stock at cost -
224,425 and 224,415 shares (187,238) (187,218)
Total stockholders' equity 6,330,596 5,615,611
Total liabilities and
stockholders' equity $ 6,633,853 $ 6,255,967
14
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 30, 1999 October 31, 1998
(52 Weeks) (52 Weeks)
NET SALES $ 3,929,887 $ 4,628,429
COST OF SALES 2,301,982 2,516,145
Gross profit on sales 1,627,905 2,112,284
OPERATING EXPENSES
Sales & delivery 32,074 32,721
General and administrative 574,647 511,407
Total operating expenses 606,721 544,128
Operating income 1,021,184 1,568,156
OTHER INCOME 217,937 205,228
Net income before taxes 1,239,121 1,773,384
FEDERAL AND STATE
INCOME TAXES 489,102 674,724
Net income $ 750,019 $ 1,098,660
EARNINGS PER SHARE OF
COMMON STOCK 0.97 1.42
Weighted average
number of shares 775,585 775,585
15
OPT-Sciences Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
The accompanying notes are an integral part of these financial statements
Accum
Other
Common Paid-in Retained Comp Treas
Stock Capital Earnings Income Cost Total
BALANCE -
NOVEMBER 1, 1997 $250,000 $272,695 $4,155,972 $32,545 $(187,218) $4,523,994
COMPREHENSIVE INCOME
Net income for the
fiscal year ended
October 31, 1998 1,098,660 1,098,660
Other comprehensive income, net of tax:
Unrealized holding losses
on securities arising during
period, net of tax of $5,314 (7,043) (7,043)
TOTAL COMPREHENSIVE
INCOME 1,091,617
BALANCE -
OCTOBER 31, 1998 250,000 272,695 5,254,632 25,502 (187,218) 5,615,611
COMPREHENSIVE INCOME
Net income for the fiscal
year ended October 30, 1999 750,019 750,019
Other comprehensive income, net of tax:
Unrealized holding losses
on securities arising
during period, net of tax of $15,856 (21,020) (21,020)
Less: reclassification of
beginning balance tax effects (13,994) (13,994)
TOTAL COMPREHENSIVE INCOME 715,005
PURCHASE OF TREASURY STOCK (20) (20)
BALANCE -
OCTOBER 30, 1999 $250,000 $272,695 $6,004,651 $(9,512) $(187,238)$6,330,596
16
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 30, 1999 October 31, 1998
(52 Weeks) (52 Weeks)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income $ 750,019 $ 1,098,660
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 7 4,861 67,783
(Gain) on sale of securities -0- (22,431)
Decrease (increase) in:
Accounts receivable 131,607 198,674
Inventories (130,077) (35,009)
Prepaid expenses (20,538) 24,419
Prepaid income taxes (184,106) -0-
(Decrease) increase in:
Accounts payable (22,257) (11,962)
Accrued income taxes (241,599) 95,389
Other current liabilities (73,243) 51,241
Net cash provided
by operating activities 284,667 1,466,764
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (141,389) (140,961)
Purchases of securities (25,000) (218,424)
Sale of securities -0- 102,103
Net cash (used)
by investing activities $ (166,389) $ (257,282)
17
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 30, 1999 October 31, 1998
(52 Weeks) (52 Weeks)
CASH FLOWS FROM
FINANCING ACTIVITIES
Purchases of treasury stock $ (20) $ -0-
Net cash (used) by
financing activities (20) -0-
Increase in cash 118,258 1,209,482
Cash and cash equivalents
at beginning of year 4,190,509 2,981,027
Cash and cash equivalents
at end of year $ 4,308,767 $ 4,190,509
SUPPLEMENTAL DISCLOSURES:
Interest paid $ -0- $ -0-
Income taxes paid $ 915,705 $ 579,335
18
OPT-Sciences Corporation and Subsidiary
NOTES TO CONSOLIDATED 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.
19
OPT-Sciences Corporation and Subsidiary
NOTES TO CONSOLIDATED 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 were $27,515 and $5,490 for the years ended October 30,
1999 and October 31, 1998, respectively.
Earnings per Common Share
Earnings per common share were computed by dividing net income by the weighted
average number of common shares outstanding.
20
OPT-Sciences Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - Inventories
Inventories consisted of the following:
October 30, 1999 October 31, 1998
Finished goods $ 180,998 $ 55,747
Raw materials and supplies 26,031 31,852
Work in progress 280,764 270,117
$ 487,793 $ 357,716
NOTE 3 - Marketable Securities
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
October 30, 1999
Common stock $ 3,244 $ 775 $ $ 4,019
Preferred stock 478,097 (12,118) 465,979
Corporate bonds 6,949 156 7,105
Publicly traded partnerships 18,406 1,675 20,081
$ 506,696 $ 2,606 $(12,118) $497,184
October 31, 1998
Common stock $ 3,244 $ 1,208 $ 4,452
Preferred stock 471,503 23,723 495,226
Corporate bonds 6,949 571 7,520
$ 481,696 $ 25,502 $ 507,198
Sales of securities available for sale during the years ended October 30, 1999
and October 31, 1998 were as follows:
1999 1998
Proceeds from sales $ -0- $ 102,103
Gross realized gains $ -0- $ 22,431
21
OPT-Sciences Corporation and Subsidiary
NOTES TO CONSOLIDATED 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 30, 1999 October 31, 1998
Federal $ 378,570 $ 522,769
State 110,532 151,955
Total $ 489,102 $ 674,724
The Company has no deferred tax liabilities. Book and tax depreciation
differences are not considered material to these financial statements.
NOTE 5 - Major Customer
One customer accounted for approximately $2,679,000 of net sales during the
year ended October 30, 1999 and approximately $3,036,600 of net sales during
the year ended October 31, 1998. The amount due from this customer, included
in trade accounts receivable, was approximately $334,821 on October 30, 1999
and $466,947 on October 31, 1998.
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 $3,190,509 on October 30, 1999 and $3,830,031 on October 31, 1998.
22
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-30-1999
<PERIOD-END> OCT-30-1999
<CASH> 4309
<SECURITIES> 497
<RECEIVABLES> 573
<ALLOWANCES> 0
<INVENTORY> 487
<CURRENT-ASSETS> 6076
<PP&E> 1433
<DEPRECIATION> 875
<TOTAL-ASSETS> 6634
<CURRENT-LIABILITIES> 303
<BONDS> 0
<COMMON> 250
0
0
<OTHER-SE> 6384
<TOTAL-LIABILITY-AND-EQUITY> 6634
<SALES> 3930
<TOTAL-REVENUES> 3930
<CGS> 2302
<TOTAL-COSTS> 2302
<OTHER-EXPENSES> 607
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1239
<INCOME-TAX> 489
<INCOME-CONTINUING> 750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 750
<EPS-BASIC> .97
<EPS-DILUTED> .97
</TABLE>
