-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ED4aX19ZDkCCigNJhw34dzOb1LrJvW/EEhKZI4NGZdUbR5zyGCbf+TjDQoG0X3ro lt8C9CbY5jl5448QkHYS7Q== 0000896415-97-000006.txt : 19970222 0000896415-97-000006.hdr.sgml : 19970222 ACCESSION NUMBER: 0000896415-97-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970212 SROS: BSE SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRECISION OPTICS CORPORATION INC CENTRAL INDEX KEY: 0000867840 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 042795294 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-10647 FILM NUMBER: 97526641 BUSINESS ADDRESS: STREET 1: 22 EAST BROADWAY CITY: GARDNER STATE: MA ZIP: 01440-3338 BUSINESS PHONE: 5086301800 FORMER COMPANY: FORMER CONFORMED NAME: PRECISION OPTICS CORP INC DATE OF NAME CHANGE: 19600201 10QSB 1 PRECISION OPTICS CORPORATION, INC. FORM 10-QSB U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1996 Commission file number 001-10647 PRECISION OPTICS CORPORATION, INC. (Exact name of small business issuer as specified in its charter) Massachusetts 04-2795294 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 22 East Broadway, Gardner, Massachusetts 01440-3338 (Address of principal executive offices) (Zip Code) (508) 630-1800 (Issuer's telephone number, including area code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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( ) The number of shares outstanding of issuer's common stock, par value $.01 per share, at December 31, 1996 was 5,980,502 shares. Transitional Small Business Disclosure Format (check one): Yes ( ) No (X) PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION: Page Item I Consolidated Financial Statements Consolidated Balance Sheets - 1 December 31, 1996 and June 30, 1996 (unaudited) Consolidated Statements of Operations - 2 Quarter Ended December 31, 1996 and December 31, 1995 (unaudited) Six Months Ended December 31, 1996 and December 31, 1995 (unaudited) Consolidated Statements of Cash Flows - 3 Six Months Ended December 31, 1996 and December 31, 1995 (unaudited) Notes to Consolidated Financial Statements 4 Item 2 Management's Discussion and Analysis of 5-9 Financial Condition and Results of Operations PART II. OTHER INFORMATION Items 1-5 Not Applicable Item 6 Exhibits and Reports on Form 8-K (a) Exhibits - Exhibit 27 (b) Reports on Form 8-K - None
PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) ASSETS December 31, 1996 June 30,1996 CURRENT ASSETS Cash and Cash Equivalents $2,218,930 $2.617,813 Accounts Receivable, Net 1,010,605 1,139,804 Inventories 1,948,460 1,863,694 Deferred Tax Asset 165,896 119,000 Prepaid Expenses 66,089 44,684 Refundable Income Taxes 30,276 30,276 ---------- ---------- Total Current Assets 5,440,256 5,815,271 --------- --------- PROPERTY AND EQUIPMENT 2,856,870 2,617,706 Less: Accumulated Depreciation 1,728,438 1,531,228 --------- --------- Net Property and Equipment 1,128,432 1,086,478 --------- --------- OTHER ASSETS 190,651 180,871 ---------- ---------- TOTAL ASSETS $6,759,339 $7,082,620 ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 248,503 $ 829,428 Accrued Payroll 18,775 81,990 Accrued Professional Services 43,006 49,360 Accrued Profit Sharing and Bonuses 67,464 93,938 Accrued Income Taxes 137,508 35,383 Accrued Vacation 45,967 51,881 Accrued Warranty Expense 50,000 50,000 Current Portion of Capital Lease Obligation 86,037 82,678 Other Accrued Liabilities 28,767 51,638 --------- --------- Total Current Liabilities 726,027 1,326,296 -------- --------- CAPITAL LEASE OBLIGATION 235,073 278,949 -------- ---------- STOCKHOLDERS' EQUITY Common Stock, $.01 par value- Authorized -- 10,000,000 shares Issued and Outstanding -- 5,980,502 shares 59,805 59,805 Additional Paid-in Capital 5,145,655 5,145,655 Retained Earnings 592,779 271,915 --------- --------- Total Stockholders' Equity 5,798,239 5,477,375 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,759,339 $7,082,620 ========= =========
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PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SECOND QUARTER AND SIX MONTHS ENDED DECEMBER 31,1996 AND 1995 -- SECOND QUARTER -- -- SIX MONTHS -- 1996 1995 1996 1995 ---- ---- ---- ---- (UNAUDITED) (UNAUDITED (UNAUDITED) (UNAUDITED) REVENUES $2,155,291 $1,788,168 $4,793,665 $3,781,955 COST OF GOODS SOLD 1,554,917 1,243,575 3,305,939 2,590,770 --------- --------- --------- --------- GROSS PROFIT 600,374 544,593 1,487,726 1,191,185 SELLING, GENERAL and ADMINISTRATIVE EXPENSES 532,078 554,769 1,093,814 1,028,111 ------- ------- --------- --------- OPERATING INCOME (LOSS) 68,296 (10,176) 393,912 163,074 INTEREST EXPENSE (6,791) (1,946) (14,902) (4,022) INTEREST INCOME 21,937 34,225 48,854 68,084 ------ ------ ------ ------ INCOME BEFORE PROVISION FOR INCOME TAXES 83,442 22,103 427,864 227,136 PROVISION FOR INCOME TAXES 21,000 5,600 107,000 55,600 ------ ----- ------- ------ NET INCOME $62,442 $16,503 $320,864 $171,536 ======= ======= ======== ======== INCOME PER COMMON and COMMON EQUIVALENT SHARE $0.01 $0.00 $0.05 $0.03 ===== ===== ===== ===== WEIGHTED AVERAGE COMMON and COMMON EQUIVALENT SHARES OUTSTANDING 6,056,097 6,123,478 6,056,746 6,128,358 ========= ========= ========= =========
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PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED DECEMBER 31,1996 AND 1995 (UNAUDITED) 1996 1995 ---------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $320,864 $171,536 Adjustments to Reconcile Net Income to Net Cash Provided By (Used In) Operating Activities - Depreciation and Amortization 207,266 121,286 Deferred Income Taxes (46,896) (28,400) Changes in Assets and Liabilities- Accounts Receivable 129,199 376,890 Inventories (84,766) (192,943) Prepaid Expenses (21,405) (49,305) Accounts Payable (580,925) 100,959 Accrued Payroll (63,215) (14,393) Accrued Professional Services (6,354) (6,754) Accrued Profit Sharing and Bonuses (26,474) (51,749) Accrued Income Taxes 102,125 1,235 Other Accrued Liabilities (28,785) (15,728) ---------- ---------- Net Cash Provided by (Used In) Operating Activities (99,366) 412,634 CASH FLOWS FROM INVESTING ACTIVITIES: Capital Expenditures (239,164) (196,295) Increase in Other Assets (19,836) (31,860) ---------- ---------- Net Cash Used in Investing Activities (259,000) (228,155) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of Capital Lease Obligation (40,517) (14,077) ---------- ----------- Net Cash Used in Financing Activities (40,517) (14,077) ---------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (398,883) 170,402 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,617,813 2,527,846 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,218,930 $2,698,248 ========== ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash Paid for- Interest $ 14,902 $ 4,022 =========== =========== Income Taxes $ 48,412 $ 85,412 =========== ==========
-3- PRECISION OPTICS CORPORATION, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated financial statements include the accounts of Precision Optics Corporation, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. These financial statements have been prepared by the Company, without audit, and reflect normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the results of the second quarter of the Company's fiscal year 1997. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with footnotes contained in the Company's financial statements for the period ended June 30, 1996 together with the auditors' report filed under cover of the Company's 1996 Annual Report on Form 10-KSB. Income per common and common equivalent share is computed based on the weighted average number of common and common equivalent shares outstanding, where dilutive, during each period. The difference between the average number of shares under the primary and fully diluted calculations is immaterial, and therefore fully diluted earnings per share has not been disclosed in the accompanying financial statements. 2. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market and consists of the following:
December 31, 1996 June 30, 1996 ----------------- ------------- Raw Materials $1,198,614 $1,282,924 Work-In-Process 668,916 502,658 Finished Goods and Components 80,930 78,112 --------- --------- Total Inventories $1,948,460 $1,863,694 ========== ==========
-4- PRECISION OPTICS CORPORATION, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Important Factors Regarding Forward-Looking Statements When used in this discussion, the words "believes", "anticipates", "intends to", and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected. See "Important Factors Regarding Forward-Looking Statements" filed with the Company's Quarterly Report on Form 10-QSB for the period ending March 31, 1996 as Exhibit 99 and incorporated herein by reference. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to publicly release the result of any revision to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Liquidity and Capital Resources For the six months ended December 31, 1996, the Company's cash and cash equivalents decreased by approximately $399,000 to $2,219,000. The decrease in cash and cash equivalents was due to cash used by operating activities of approximately $99,000, capital expenditures of approximately $239,000, increase in other assets of approximately $20,000, and repayment of debt of approximately $41,000. The Company intends to continue devoting significant resources to internally-funded research and development spending on both new products and the improvement of existing products. The Company also intends to devote resources to the marketing and product support of its endoscope product line, and the development of new methods of distribution. These investments may temporarily result in negative cash flow, but the Company anticipates that the results of these efforts will translate into increased revenues and profits. Furthermore, depending upon the market acceptance of the Company's products, the Company believes that it may be obligated to acquire new facilities, add additional manufacturing or research and development equipment, or acquire a business that has complementary products or manufactures or sells to the Company components, materials, supplies, or services used in the manufacture, marketing, distribution, or servicing of the Company's new products, as well as the Company's existing products. The Company continues to maintain a secured line of credit of $500,000 available with a bank at 1/4% over the prime rate. -5- Results of Operations Total revenues for the second quarter and for the six months ended December 31, 1996 increased by $367,123 or 20.5% and $1,011,710 or 26.8%, respectively, over the same period in the prior year. The revenue increase over the prior year for the second quarter was due to higher sales of medical products (up 99%), partially offset by lower sales of non-medical products (down 21%). The revenue increase over the prior year for the six months ended December 31, 1996 was due to higher sales of medical products (up 159%), partially offset by lower sales of non-medical products (down 26%). The increase in sales of medical products was primarily attributable to higher sales of endocouplers which increased by 203% for the six months ending December 31, 1996. The reduction in non-medical sales was due primarily to discontinued sales of industrial lenses to a significant customer. This customer accounted for 16% of the Company's revenues for the six months ended December 31, 1995. Future sales to this customer, if any, are uncertain at this time. Revenues from the Company's two largest customers were approximately 36% and 35% of total revenues for the six months ended December 31, 1996, and approximately 53% and 16% of total revenues for the six months ended December 31, 1995. No other customers accounted for more than 10% of the Company's revenues during those periods. For the six months ended December 31, 1996, approximately 35% of the Company's total revenues were derived from production and development contracts and subcontracts involving the Government and its agencies compared to approximately 50% for the corresponding period of the prior year. During the quarter ending December 31, 1996, a Government cost-plus-fixed-fee night vision development subcontract was partially terminated for convenience of the Government. Revenues for the quarter ending March 31, 1997 will be reduced by approximately $140,000, representing the terminated portion of the subcontract. The Company's remaining Government business is substantially comprised of subcontracts with one customer consisting of night-vision advanced development programs on a cost-plus-fixed-fee basis extending approximately through March 1997, and two fixed-price production subcontracts for night-vision lens systems with deliveries scheduled approximately through September 1997. The Government may terminate a government contract at any time, with or without cause. After expiration of the current subcontracts, there can be no assurance that the Government will award future contracts or subcontracts to the Company or the customers to which it sells. -6- Gross profit expressed as a percentage of revenues decreased from 30.5% to 27.9% for the quarter, and from 31.5% to 31.0% for the six months ended December 31, 1996, compared to the corresponding periods in the prior year. The decrease in the gross profit percentage was due primarily to a lower proportion of relatively high-margin industrial lens shipments. Selling, general and administrative expenses decreased for the second quarter ended December 31, 1996 by $22,691 or 4.1% due primarily to lower spending on research and development in the second quarter. Selling, general and administrative expenses increased for the six months ended December 31, 1996 by $65,703 or 6.4%. The increase was due primarily to higher selling and advertising expenditures targeted at the industrial and thin films marketplace. Interest income decreased for the second quarter and six months ended December 31, 1996 by $12,288 and $19,230, respectively, due to the lower investment base of cash equivalents. Interest expense relates primarily to capital lease obligations incurred in the third quarter of fiscal years 1994 and 1996. The provision for income taxes is based on the Company's estimated effective annual tax rate. This estimated rate is lower than the federal statutory rate primarily due to recognition of available tax credits and future tax deductions not previously benefited. Other Factors That May Affect Future Results The Company expects to aggressively pursue the development of Wavelength Division Multiplexer (WDM) optical filters over the next few quarters, which could adversely affect results during these periods since such costs are recognized as they occur. Filters for 2 and 4 channel WDM's should be produced by the end of this calendar year. WDM's are devices used in optical communications systems. As a result of recent fluctuations in assembly and testing activities and with continued uncertainty in the night vision market throughout the coming year, the Company reduced its production work force in January 1997 by six (6) people and in February 1997 by two (2) people, about 15% of its total workforce. Although the Company has experienced substantial growth in its sales of endocouplers during the six months ending December 31, 1996, these increased sales have been largely dependent upon a relatively new application for these instruments. While the Company believes that prospects for continued success of the new endocoupler application are good, recent demand for endocouplers has softened somewhat. The Company believes this lower demand is due primarily to temporary technical problems in a customers camera system which is used with the Company's endocouplers, and as a result, it is anticipated that third quarter sales of endocouplers will be constrained. -7- PART II. OTHER INFORMATION Items 1-5 Not Applicable. Item 6 Exhibits and Reports on Form 8-K (a) Exhibits - Exhibit 27 (b) Reports on Form 8-K - There were no reports on Form 8-K filed during the period covered by this report. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PRECISION OPTICS CORPORATION, INC. DATE: February 6, 1997 BY: /s/ Jack P. Dreimiller ---------------------- Jack P. Dreimiller Senior Vice President, Finance and Chief Financial Officer -8- EXHIBIT INDEX Exhibit Number Description 27 Financial Data Schedule EX-27 2 PRECISION OPTICS CORPORATION, INC.
5 1 6-MOS JUN-30-1996 DEC-31-1996 2,218,930 0 1,010,605 0 1,948,460 5,440,256 2,856,870 1,728,438 6,759,339 726,027 321,110 0 0 59,805 5,738,434 6,759,339 4,793,665 4,793,665 3,305,939 3,305,939 1,093,814 0 14,902 427,864 107,000 320,864 0 0 0 320,864 .05 .05
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