UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,June 30, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-11668
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INRAD, Inc.
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(Exact name of registrant as specified in its charter)
New Jersey 22-2003247
--------------------------------- ---------------------------- --------------------------------------------- -----------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
of incorporation
or organization) Identification Number)
INRAD, Inc. 181 Legrand Avenue, Northvale, NJ 07647
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(Address of principal executive offices)
(Zip Code)
(201) 767-1910
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(Registrant's telephone number, including area code)
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(Former name, former address and formal fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
---- --------- ------
Common shares of stock outstanding as of May 1,July 15, 1996:
2,109,271 sharesSHARES
INRAD, Inc.
INDEX
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Page Number
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Part I. FINANCIAL INFORMATION .............................................1. . . . . . . . . . . . . . . . . . . . 1
Item 1. Financial Statements:
Consolidated Balance Sheet as of March 31,June 30, 1996
and December 31, 1995 (unaudited) ...............................1. . . . . . . . . 1
Consolidated Statement of Operations for the
Three and Six Months Ended March 31,June 30, 1996
and 1995 (unaudited) .....................................................2. . . . . . . . . . . . . . . . 2
Consolidated Statement of Cash Flows for the
ThreeSix Months Ended March 31,June 30, 1996
and 1995 (unaudited) ................................................3. . . . . . . . . . . . . . . . 3
Notes to Consolidated Financial Statements ......................4Statements. . . . . 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .........................................7. . . 7
Part II. OTHER INFORMATION ................................................10. . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K ........................108-K. . . . . . . . . 10
Signatures ................................................................11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
INRAD, Inc.
-----------
Consolidated Balance Sheet
--------------------------
(Unaudited)
March 31, December 31,
1996 1995
---- ----
Assets
- ------
Current assets:
Cash and cash equivalents $ 262,801 $ 37,981
Certificate of Deposit 70,000 70,000
Accounts receivable, net 709,326 804,834
Inventories 1,675,483 1,671,673
Unbilled contract costs 137,620 151,649
Assets held for sale -- 279,111
Other current assets 83,819 61,699
----------- -----------
Total current assets 2,939,049 3,076,947
Plant and equipment, net 1,715,452 1,788,080
Precious metals 280,001 280,001
Other assets 152,095 151,016
----------- -----------
Total assets $ 5,086,597 $ 5,296,044
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Note payable - Bank $ 75,000 $ 60,000
Current obligations under capital leases 99,152 190,754
Accounts payable and accrued liabilities 740,232 708,403
Advances from customers 167,158 116,205
Other current liabilities 38,300 53,084
----------- -----------
Total current liabilities 1,119,842 1,128,446
Note payable - Bank 290,000 320,000
Obligations under capital leases 63,443 75,088
Secured Promissory Notes 250,000 250,000
Subordinated Convertible Notes 1,113,158 1,080,623
Unsecured Demand Convertible Note 100,000 100,000
Note payable - Shareowner 541,577 533,420
----------- -----------
Total liabilities 3,478,020 3,487,577
----------- -----------
Commitments (Note 10)
Shareholders' equity:
Common stock: $.01 par value; 2,121,571 shares issued 21,216 21,216
Capital in excess of par value 6,051,791 6,067,991
Accumulated deficit (4,412,630) (4,212,740)
----------- -----------
1,660,377 1,876,467
Less - Common stock in treasury,
at cost (12,300 shares at March 31, 1996;
15,000 shares at December 31, 1995) (51,800) (68,000)
----------- -----------
Total shareholders' equity 1,608,577 1,808,467
----------- -----------
Total liabilities and shareholders' equity $ 5,086,597 $ 5,296,044
=========== ===========
INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
June 30, December 31,
1996 1995
---- ----
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 236,427 $ 37,981
Certificate of Deposit 70,000 70,000
Accounts receivable, net 826,664 804,834
Inventories 1,568,861 1,671,673
Unbilled contract costs 68,231 151,649
Assets held for sale - 279,111
Other current assets 51,544 61,699
--------- ---------
TOTAL CURRENT ASSETS 2,821,727 3,076,947
PLANT AND EQUIPMENT, NET 1,644,300 1,788,080
PRECIOUS METALS 280,001 280,001
OTHER ASSETS 150,820 151,016
--------- ---------
TOTAL ASSETS $4,896,848 $5,296,044
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable - Bank $ 90,000 $ 60,000
Current obligations under capital leases 94,757 190,754
Accounts payable and accrued liabilities 750,933 708,403
Advances from customers 83,625 116,205
Other current liabilities 23,498 53,084
--------- ---------
TOTAL CURRENT LIABILITIES 1,042,813 1,128,446
NOTE PAYABLE - BANK 260,000 320,000
OBLIGATIONS UNDER CAPITAL LEASES 39,635 75,088
SECURED PROMISSORY NOTES 250,000 250,000
SUBORDINATED CONVERTIBLE NOTES 1,145,692 1,080,623
UNSECURED DEMAND CONVERTIBLE NOTE 100,000 100,000
NOTE PAYABLE - SHAREOWNER 549,735 533,420
--------- ---------
TOTAL LIABILITIES 3,387,875 3,487,577
--------- ---------
COMMITMENTS
SHAREHOLDERS' EQUITY:
Common stock: $.01 par value;
2,121,571 shares issued 21,216 21,216
Capital in excess of par value 6,051,791 6,067,991
Accumulated deficit (4,512,234) (4,212,740)
--------- ---------
1,560,773 1,876,467
Less - Common stock in treasury,
at cost (12,300 shares at June 30, 1996;
15,000 shares at December 31, 1995) (51,800) (68,000)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 1,508,973 1,808,467
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $4,896,848 $5,296,044
--------- ---------
--------- ---------
See Notes to Consolidated Financial Statements.
1
INRAD, Inc.
-----------
Consolidated Statement of Operations
------------------------------------
(Unaudited)INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31,
----------------------------June 30, Six Months Ended June 30,
--------------------------- -------------------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues:
REVENUES:
Net product sales $ 1,149,229 $ 983,156$1,415,070 $1,055,508 $2,564,299 $2,038,664
Contract research and development 130,808 286,995
----------- -----------
1,280,037 1,270,151
----------- -----------
Costs and expenses:196,835 376,404 327,643 663,399
--------- --------- --------- ---------
1,611,905 1,431,912 2,891,942 2,702,063
--------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of goods sold 961,905 840,6071,063,891 902,451 2,025,796 1,743,058
Contract research and development expenses 132,670 281,710194,127 366,751 326,797 648,461
Selling, general and administrative expenses 295,682 259,199344,357 230,773 640,039 489,972
Internal research and development expenses 25,693 100,313
----------- -----------
1,415,950 1,481,829
----------- -----------
Operating profit (loss) (135,913) (211,678)42,182 91,111 67,875 191,424
--------- --------- --------- ---------
1,644,557 1,591,086 3,060,507 3,072,915
--------- --------- --------- ---------
OPERATING PROFIT (LOSS) (32,652) (159,174) (168,565) (370,852)
Other income (expense):
Interest expense (74,801) (75,707)(69,767) (72,277) (144,568) (147,984)
Interest and other income, net 10,824 6,588
----------- -----------
Net income (loss) (199,890) (280,797)
Accumulated deficit, beginning of period2,815 162 13,639 6,750
--------- --------- --------- ---------
NET INCOME (LOSS) (99,604) (231,289) (299,494) (512,086)
ACCUMULATED DEFICIT, BEGINNING OF PERIOD (4,412,630) (3,524,659) (4,212,740) (3,243,862)
----------- -----------
Accumulated deficit, end of period $(4,412,630) $(3,524,659)
=========== ===========
Net income (loss) per share $ (0.09) $ (0.13)
=========== ===========
Weighted average shares outstanding 2,108,737--------- --------- --------- ---------
ACCUMULATED DEFICIT, END OF PERIOD $(4,512,234) $(3,755,948) $(4,512,234) $(3,755,948)
--------- --------- --------- ---------
--------- --------- --------- ---------
NET INCOME (LOSS) PER SHARE $(0.05) $(0.11) $(0.14) $(0.24)
------ ------ ------ ------
------ ------ ------ ------
WEIGHTED AVERAGE SHARES OUTSTANDING 2,109,271 2,106,571 =========== ===========
See Notes to Consolidated Financial Statements.
2
INRAD, Inc.
-----------
Consolidated Statement of Cash Flows
------------------------------------
(Unaudited)
Three Months Ended March 31,2,109,004 2,106,571
--------- --------- --------- ---------
--------- --------- --------- ---------
See Notes to Consolidated Financial Statements.
2
INRAD, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
-------------------------
1996 1995
Cash flows from operating activities:
Net income (loss) $(199,890) $(280,797)---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(299,494) $(512,086)
--------- ---------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS)
TO CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 279,064 376,288
Noncash interest 81,384 66,470
Gain on sale of equipment (8,621) -
CHANGES IN ASSETS AND LIABILITIES:
Accounts receivable (21,830) (164,566)
Inventories 102,812 77,766
Unbilled contract costs 83,418 (72,000)
Other current assets 10,154 (9,886)
Precious metals - 30
Other assets (14,893) (29,743)
Accounts payable and accrued liabilities 42,532 206,168
Advances from customers (32,580) 88,170
Other current liabilities (29,585) (21,595)
--------- ---------
Total adjustments 491,855 517,102
--------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 192,361 5,016
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (131,645) (123,672)
Proceeds from sale of equipment 299,180 -
--------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 167,535 (123,672)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of note
payable - Bank (30,000) (90,000)
Principal payments of capital
lease obligations (131,450) (107,767)
Advance from shareowner - 225,000
--------- ---------
NET CASH (USED IN) PROVIDED
BY FINANCING ACTIVITIES (161,450) 27,233
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 198,446 (91,423)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 37,981 119,718
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $236,427 $28,295
--------- ---------
--------- ---------
Adjustments to reconcile net income
(loss) to cash provided by (used in)
operating activities:
Depreciation and amortization 139,531 188,144
Noncash interest 40,692 33,233
Gain on sale of equipment (8,621) --
Changes in assets and liabilities:
Accounts receivable 95,508 (50,618)
Inventories (3,810) --
Unbilled contract costs 14,029 (65,785)
Other current assets (22,120) (29,896)
Precious metals -- (3,113)
Other assets (14,346) (4,777)
Accounts payable and accrued liabilities 31,829 179,777
Advances from customers 50,953 95,369
Other current liabilities (14,784) 17,210
--------- ---------
Total adjustments 308,861 359,544
--------- ---------
Net cash provided by operating activities 108,971 78,747
--------- ---------
Cash flows from investing activities:
Capital expenditures (65,084) (55,288)
Proceeds from sale of equipment 299,180 --
--------- ---------
Net cash provided by (used in) investing activities 234,096 (55,288)
--------- ---------
Cash flows from financing activities:
Principal payments of note payable - Bank (15,000) (45,000)
Principal payments of capital lease obligations (103,247) (76,378)
--------- ---------
Net cash (used in) financing activities (118,247) (121,378)
--------- ---------
Net increase (decrease) in cash and cash equivalents 224,820 (97,919)
Cash and cash equivalents at beginning of period 37,981 189,718
--------- ---------
Cash and cash equivalents at end of period $ 262,801 $ 91,799
========= =========
See Notes to Consolidated Financial Statements.
3
INRAD, Inc.
Notes to Consolidated Financial Statements
(Unaudited)INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
- ----------------------------------------
Basis of PresentationBASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements of INRAD,
Inc. (the "Company") reflect all adjustments, which are of a normal recurring
nature, and disclosures which, in the opinion of management, are necessary for a
fair statement of results for the interim periods. It is suggested that these
consolidated financial statements be read in conjunction with the audited
consolidated financial statements as of December 31, 1995 and 1994 and for the
years then ended and notes thereto included in the Registrant's Annual Report on
Form 10-K, filed with the Securities and Exchange Commission.
Inventory ValuationINVENTORY VALUATION
Interim inventories as well as cost of goods sold are computed by using the
gross profit method of interim inventory valuation and applying an estimated
gross profit percentage based on the actual values for the preceding fiscal
year, unless the company believes that a different gross profit percentage may
more accurately reflect its current year's cost of goods sold and gross profit.
Income TaxesINCOME TAXES
The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. Deferred tax assets and liabilities are
determined based on the difference between the financial statement carrying
amounts and the tax bases of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse.
Net Income (Loss) Per ShareNET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number of
common shares outstanding. The effect of common stock equivalents has been
excluded from the computation because their effect is antidilutive.
4
NOTE 2 - INVENTORIES AND COST OF GOODS SOLD
- -------------------------------------------
CostFor the six month period ended June 30, 1996, the Company used 79% as its
estimated cost of goods sold for the three months ended March 31, 1996 was computed based
onpercentage. For the previous year'syear, 1995, the
actual cost of goods sold percentage was 83.7%. The Company believes 79% better
approximates the expected 1996 annual cost of goods sold percentage (83.7%). The
percentage used may or may not be indicativebased on
estimated profitability of actual sales through June 30, 1996 and the
actualanticipated annual 1996 costlevel of goods sold percentage, which will be determined when the Company performs its
annual physical inventory.product shipments and related costs.
For the threesix month period ended March 31,June 30, 1995, the Company used 85.5% as its
estimated cost of goods sold percentage.
NOTE 3 - INCOME TAXES
Deferred tax assets (liabilities) comprise the following:
March 31,June 30, December 31,
1996 1995
---- ----
Deferred tax assetsDEFERRED TAX ASSETS
Inventory capitalization
adjustment $ 60,000 $ 60,000
Inventory reserves 10,000 10,000
Vacation liabilities 62,000 62,000
Other 8,00020,000 12,000
Loss carryforwards 2,351,0002,383,000 2,279,000
----------- --------------------- ----------
Gross deferred tax assets 2,491,0002,535,000 2,423,000
----------- -----------
Deferred tax liabilities---------- ----------
DEFERRED TAX LIABILITIES
Depreciation (238,000)(234,000) (242,000)
----------- --------------------- ----------
Gross deferred tax
liabilities (238,000)(234,000) (242,000)
----------- -----------
2,253,000---------- ----------
2,301,000 2,181,000
Valuation allowance (2,253,000)(2,301,000) (2,181,000)
----------- --------------------- ----------
Net deferred tax assets $ 0 $ 0
=========== ===========---------- ----------
---------- ----------
5
NOTE 4 - DEBT
Note PayableNOTE PAYABLE - ShareownerSHAREOWNER
By mutual informal agreement, the Company has deferred certain interest payments
to its principal shareowner. At March 31,During the six month period ended June 30, 1996,
the Company made onetwo quarterly interest payment. The Company expects to continue to make the required quarterly
interest payments in 1996 and, subjectpayments. Subject to adequate cash
flow, any deferred
payments.the Company may continue to make interest payments to its principal
shareowner.
Although by its terms the indebtedness to the shareowner is due on December 31,
1996, it cannot be repaid until the Chemical Bank debt has been repaid in full.
The shareowner loan has been classified as noncurrent in the accompanying
balance sheet because the shareowner has agreed not to demand payment prior to
March 31,June 30, 1997.
Unsecured Demand Convertible NoteUNSECURED DEMAND CONVERTIBLE NOTE
Although by its terms the Note is due on demand, it cannot be repaid until the
Chemical Bank debt has been repaid in full. The Demand Note has been classified
as noncurrent in the accompanying balance sheet because the Note holder has
agreed not to demand payment prior to March 31,June 30, 1997.
NOTE 5 - TREASURY STOCK
- -----------------------
During the quarter ended March 31, 1996, the Company issued 2,700 shares of
Common Stock previously held in treasury. The difference between the cost of
the treasury shares and the proceeds received was charged to capital in excess
of par value.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS -----------------------------------------------------------------------
OF OPERATIONS
-------------
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's unaudited consolidated financial statements presented elsewhere
herein. The discussion of results should not be construed to imply any
conclusion that such results will necessarily continue in the future.
Net Product SalesNET PRODUCT SALES
Net sales for the firstsecond quarter of 1996 increased $166,000,$360,000, or 17%34%, from the
comparable quarter in 1995.1995, and net sales for the six months ended June 30, 1996
increased $526,000, or 26%, from the comparable 1995 period. International
shipments in the first threesix months of 1996 were $162,000 (14%$477,000 (19% of total shipments)
compared to $184,000$389,000 (19%) for the first threesix months of 1995. Product sales during the first quarter of 1995 were
poor because the backlog at December 31, 1994 was low and because bookings which
could be shipped on a short-term basis were not adequate. The shipments for
the quarter and six months ended March 31,June 30, 1996 were higher than the comparable
quarterperiods in 1995 because of a higher backlog and an improved rate of orders which
could be shipped on a short-term basis. The Company's sales and marketing
program, implemented in 1996, has resulted in an increased order rate in the six
months ended June 30, 1996.
The backlog of unfilled product orders was $2,367,000$2,000,000 at March 31,June 30, 1996, compared
with $1,470,000 at December 31, 1995 and $1,428,000$1,506,000 at March 31,June 30, 1995.
CostCOST OF GOODS SOLD
For the six month period ended June 30, 1996, the Company used 79% as its
estimated cost of Goods Sold
Cost of Goods Sold for the three months ended March 31, 1996 was computed based
ongoods sold percentage. For the previous year'syear, 1995, the
actual cost of goods sold percentage was 83.7%. The Company believes 79% better
approximates the expected 1996 annual cost of goods sold percentage (83.7%). The
percentage used may or may not be indicativebased on
estimated profitability of actual sales through June 30, 1996 and the
actualanticipated annual 1996 costlevel of goods sold percentage, which will be determined when the Company performs its
annual physical inventory.product shipments and related costs.
For the threesix month period ended March 31,June 30, 1995, the Company used 85.5% as its
estimated cost of goods sold percentage.
Contract Research and DevelopmentCONTRACT RESEARCH AND DEVELOPMENT
Contract research and development revenues were $131,000 for the threesecond quarter of 1996
decreased $180,000, or 48%, from the comparable quarter in 1995, and revenues
for the six months ended March 31,June 30, 1996 compared to $287,000 for the three months ended March 31,
1995.and 1995 were $328,000 and $663,000,
respectively. Related contract research and development expenditures, including
allocated indirect costs, for the quarter ended March 31,June 30, 1996 were $133,000$194,000
compared to $282,000$367,000 for the comparable 1995 quarter.quarter; expenses for the six month
period ended June 30, 1996 and 1995 were $327,000 and $648,000, respectively.
Revenues decreased from 1995 to 1996 due to a lower backlog of contracts. The
Company intendsexpects to continue to focus its future funded efforts on funded programs
closely aligned with its core business. This is likely to result in lower
bookings of funded research programs and lower contract revenues and expenses in
1996.
The Company's backlog of contract R&D was $357,000$162,000 at March 31,June 30, 1996, compared
with $413,000 at December 31, 1995 and $1,153,000$876,000 at March 31,June 30, 1995.
7
Selling, General and Administrative ExpensesSELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $36,000,$114,000, or 14%49%, in the
firstsecond quarter of 1996.1996 and $150,000, or 31%, for the six months ended June 30,
1996 compared to the same period in 1995. The increase is due primarily to
higher selling expenses, including sales salaries, advertising, commissions on
higher international sales, and a lower allocation of general and administrative
overhead to contract research and development. Subject to availability of
resources, the Company expects to continue to increase certain selling costs in
1996, including additional sales staff and advertising.
Internal Research and Development ExpensesINTERNAL RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the quarter ended March 31,June 30, 1996 were
$26,000$42,000 compared to $100,000$91,000 for the quarter ended March 31,June 30, 1995. Expenses for
the six months ended June 30, 1996 were $68,000 compared to $191,000 for the
comparable 1995 period. The Company expects to increaseis focusing its efforts in 1996 on sales
and marketing of existing products rather than development of new products.
This emphasis on existing products resulted in lower R&D expenses in the first
quartersix months of 1996, and is expected to continue in succeeding quarters in 1996.
Interest ExpenseINTEREST EXPENSE
Interest expense was $75,000 and $76,000$70,000 for the quartersquarter ended March 31,June 30, 1996 compared to
$72,000 for the quarter ended June 30, 1995, and $145,000 and $148,000 for the
six months ended June 30, 1996 and 1995, respectively. The Company's total
borrowings were at similar levels at March 31,June 30, 1996 and 1995, which resulted in a
comparable amount of interest expense.
InflationINFLATION
The Company's policy is to periodically review its pricing of standard products
to keep pace with current costs. As to special and long term contracts,
management endeavors to take potential inflation into account in pricing
decisions. The impact of inflation on the Company's business has not been
material to date.
8
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended March 31, 1996, the Company sold equipment, from which
the proceeds to the Company were approximately $299,000. The Company utilized a
portion of these proceeds to repay in full certain lease obligations. Repayment
of these lease obligations reduced the Company's monthly payment requirements by
approximately $7,000. Renegotiation of the payment terms of certain leases in
1995 and repayment of others in 1996 has resulted in a reduction of the total
monthly lease payments of approximately $18,000.$19,000. Certain leases by their
original terms mature in 1996, which will further reduce the Company's cash
requirements. The Company's cash flow requirements will increase beginning in
1997 because of (1) the monthly principal payment requirement to the bank increases
from $5,000 to $10,000, and (2) the Company must begin making cash interest
payments ($110,000 annually) on its Subordinated Convertible Notes issued in
1993. During the six month period ended June 30, 1996, the Company made two
quarterly interest payments to its principal shareowner. Subject to adequate
cash flow, the Company also expectsmay continue to resumemake interest payments to its principal shareowner, including both the scheduled quarterly
payment and any deferred payments. At March 31, 1996, the Company made one
quarterly interest payment to the
shareowner.
Capital expenditures, including internal labor and overhead charges, for the threesix
months ended March 31,June 30, 1996 and 1995 were $65,000$132,000 and $55,000,$124,000, respectively.
Until the Company is generating satisfactory amounts of cash flow from its
operations, it is expected that future capital expenditures will be kept to a
minimum. Management believes that in the short term, this limitation will not
have a material effect on operations.
During the first quartersix month period ended March 31,June 30, 1996 and for each of the three years
in the period ended December 31, 1995, the Company has suffered recurring losses
from operations. Cash outflows during these periods have been funded on the
basis of borrowings from, and issuance of common stock and warrants to
shareowners, including the principal shareowner, as further described in the
Company's Annual Report on Form 10-K. Management expects that cash flow from
operations, in addition to cash generated from the assets sold during the first
quarter, will provide adequate liquidity for the Company's operations in 1996.
This will substantially depend, however, on the Company's ability to improve
operating results and thereby generate adequate cash flow from operations.
Because of the uncertainty relating to the Company's ability to improve
operating results and cash flows, there is substantial doubt about the Company's
ability to continue as a going concern.
9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(A) Exhibits:
11. An exhibit showing the computation of per-share earnings is omitted
because the computation can be clearly determined from the material
contained in this Quarterly Report on Form 10-Q.
27. Financial Data Schedule.
(B) Reports on Form 8-K:
None.
10
SIGNATURES
----------
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.
INRAD, Inc.INC.
By: /s/ Warren Ruderman
---------------------------------------
Warren Ruderman
President and Chief Executive Officer-----------------------------------
WARREN RUDERMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
By: /s/ Ronald Tassello
---------------------------------------
Ronald Tassello
Vice President, Finance-----------------------------------
RONALD TASSELLO
VICE PRESIDENT, FINANCE
(Chief Accounting Officer)
Date: May 9,July 24, 1996
See Notes to Consolidated Financial Statements.11