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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 period ended DECEMBER 31, 1995
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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 --------------------
Commission file number 0-15198
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Osmic, Inc.
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(Exact name of registrant as specified in its charter)
DELAWARE 38-2640630
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1788 NORTHWOOD, TROY, MICHIGAN 48084
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (810) 362-1290
----------------------------
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Former name, former address and former 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 . No X .
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As of January 31, 1996 there were 1,970,894 shares of Common Stock
outstanding.
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Osmic, Inc.
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
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1995 1994 1995 1994
---- ---- ---- ----
Net product sales $ 790,655 $ 572,230 $1,396,005 $ 873,810
Cost of products sold 246,202 180,549 475,027 271,009
--------- ---------- ---------- ---------
Gross profit 544,453 391,681 920,978 602,801
Other operating revenue:
Revenue from business
agreements 21,092 54,000 21,092 81,565
Other revenue 325 18,624 14,625 43,917
--------- ---------- ---------- ---------
Total other operating
revenue 21,417 72,624 35,717 125,482
Operating expenses:
Cost of revenues from
business agreements 12,534 35,970 12,534 63,535
Direct product development
and research 74,298 147,902 161,870 282,684
Patent fees and expenses 16,380 13,376 28,645 24,370
Selling, general &
administrative 163,579 196,743 319,161 314,305
--------- ---------- ---------- ---------
Total operating expenses 266,791 393,991 522,210 684,894
--------- ---------- ---------- ---------
Operating income 299,079 70,314 434,485 43,389
Interest income 10,342 - 19,297 -
--------- ---------- ---------- ---------
Income before income taxes 309,421 70,314 453,782 43,389
Provision for income taxes 124,000 14,750 182,000 14,750
--------- ---------- ---------- ---------
Net income $ 185,421 $ 55,564 $ 271,782 $ 28,639
========= ========== ========== =========
Net income per common share $ 0.09 $ 0.03 $ 0.14 $ 0.01
========= ========== ========== =========
See notes to financial statements.
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Osmic, Inc.
BALANCE SHEETS
December 31, June 30,
1995 1995
------------ ----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $1,071,352 $ 879,922
Accounts receivable 637,121 355,275
Inventories 182,116 163,153
Prepaid expenses and other current assets 4,639 3,150
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Total current assets 1,895,228 1,401,500
Net property and equipment 234,566 86,310
Other assets 49,999 60,000
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$2,179,793 $1,547,810
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 339,373 $ 243,311
Accrued compensation 77,341 134,846
Deferred revenue 261,644 -
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Total current liabilities 678,358 378,157
Stockholders' equity:
Preferred stock, no par value - -
Common stock, par value $.01 per share 19,709 19,709
Additional paid-in capital 755,632 755,632
Retained earnings 726,094 394,312
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Total stockholders' equity
1,501,435 1,169,653
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$2,179,793 $1,547,810
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See notes to financial statements.
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Osmic, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended December 31,
-----------------------------
1995 1994
---- ----
Operating activities:
Net income $271,782 $ 28,639
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 26,874 44,481
Gain on sale of capital equipment (14,300) --
Changes in working capital other than debt:
Accounts receivable (281,846) 83,293
Inventories (18,963) 28,608
Prepaid expenses and other current assets (1,489) (3,037)
Accounts payable 96,062 (66,214)
Accrued compensation (57,505) 66,938
Deferred revenue 261,644 --
---------- ----------
Net cash provided by operations 282,259 182,708
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Investing activities:
Purchases of capital equipment (165,129) --
Proceeds from sales of capital equipment 14,300 --
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Net cash (used in) investing activities (150,829) --
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Financing activities:
Tax benefit of net operating loss carryforward 60,000 14,750
Preferred stock exchange -- (14,875,353)
Common stock issued -- 5,509
Additional paid-in-capital reduction -- (8,434,999)
Accumulated deficit reclassification,
pursuant to quasi-reorganization -- 23,304,843
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Net cash provided by financing activities 60,000 14,750
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Increase in cash and cash equivalents 191,430 197,458
Cash and cash equivalents at beginning of period 879,922 304,332
---------- ----------
Cash and cash equivalents at end of period $1,071,352 $ 501,790
========== ==========
Supplemental disclosures of cash flow information:
Cash equivalents - Cash equivalents consists of investments in short-term,
highly-liquid securities having a maturity of three months or less from
date of acquisition.
See notes to financial statements.
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NOTES TO FINANCIAL STATEMENTS - DECEMBER 31, 1995
NOTE A - Basis of Presentation
Information for the three and six months ended December 31, 1995 and 1994
is unaudited but includes all adjustments which Osmic, Inc. ("Osmic")
considers necessary for a fair presentation of financial condition, cash flows
and results of operations.
In accordance with the instructions for the completion of the Quarterly
Report on Form 10-Q, certain information and footnotes necessary to comply with
generally accepted accounting principles have been condensed or omitted. These
financial statements should be read in conjunction with Osmic's 1995 Annual
Report on Form 10-K which contains a summary of Osmic's accounting principles
and other footnote information.
Revenue Recognition
Revenues from product sales are recognized upon shipment of the product.
Revenues from business agreements which are on a cost-plus basis are recognized
in accordance with the terms of the agreement. Revenues from other business
agreements are accounted for on a percentage of completion basis; if there are
losses, Osmic records losses at the time such losses become apparent. All
costs incurred by Osmic in connection with its performance under these
agreements are recorded in Osmic's financial statements as cost of revenues
from business agreements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
As of December 31, 1995, Osmic had working capital of approximately
$1,217,000 including cash and cash investments of approximately $1,071,000.
Deferred revenue as of December 31, 1995 of approximately $262,000 consists
primarily of advance payments received from customers for product scheduled to
be delivered during March 1996.
The Company has signed a preliminary memorandum agreement with a third
party for the commercialization of its permanent magnet technology. This
agreement if finalized and effectuated, would provide the Company with a net
upfront payment of $500,000 over two years and a continuous presence in the
permanent magnet industry. However, no assurance can be given that such a
final agreement will be effectuated.
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Results of Operations
Three Months Ended December 31, 1995 Compared to Three Months Ended December
31, 1994
The increase in net income for the three months ended December 31, 1994
compared to the three months ended December 31, 1995, $55,564 and $185,421
respectively, was primarily a result of increased product sales.
The increase in product sales from $572,230 in the three months ended
December 31, 1994 to $790,655 in the three months ended December 31, 1995 was
due to an increase in the number of units of X-ray dispersive mirrors sold to
original equipment manufacturers.
Revenue from business agreements decreased from $54,000 during the three
months ended December 31, 1994 to $21,082 for the three months ended December
31, 1995 principally as a result of completing a SBIR Phase I contract with the
Department of Commerce in fiscal year 1995 as compared to commencing work in
fiscal year 1996 on the Phase II contract also with the Department of Commerce.
The increase in cost of product sales from $180,549 in the three months
ended December 31, 1994 to $246,202 in the three months ended December 31, 1995
was the result of increased X-Ray product sales. Gross profit as a percentage
of sales remained steady at 68% and 69% for the respective periods.
The cost of revenue from business agreements decreased from $35,970 for
the three months ended December 31, 1994 to $12,534 for the three months ended
December 31, 1995 as a result of reduced revenues from business agreements.
The decrease in direct product development and research expense from
$147,902 in the three months ended December 31, 1994 to $74,298 in the three
months ended December 31, 1995 was due to the suspension of the magnet
development program in fiscal year 1995 coupled with more time and effort
expended to fulfill current and future order requirements versus research.
The decrease in selling, general and administrative expenses from $196,743
in the three months ended December 31, 1994 to $163,579 in the three months
ended December 31, 1995 was principally due to a reduction in the expense
associated with the Company's non-employee directors stock plan.
The income tax provision of $14,750 and $124,000 for the respective
periods is a result of increased profitability and utilizing the effective
federal and state income tax rates. The tax benefit associated with utilizing
the Company's net operating loss carryforwards are reflected in the balance
sheet as an increase in retained earnings.
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Six Months Ended December 31, 1995 Compared to Six Months Ended December 31,
1994
The increase in net income for the six months ended December 31, 1994
compared to the six months ended December 31, 1995, $28,639 and $271,782
respectively, was primarily a result of increased product sales.
The increase in product sales from $873,810 in the six months ended
December 31, 1994 to $1,396,005 in the six months ended December 31, 1995 was
due to an increase in the number of units of X-ray dispersive mirrors sold to
original equipment manufacturers and an approximate $116,000 increase in custom
project sales.
Revenue from business agreements decreased from $81,565 for the six months
ended December 31, 1994 to $21,082 for the six months ended December 31, 1995
as a result of completing an agreement for the development of the magnet
technology and a SBIR Phase I contract in fiscal year 1995 compared to
commending work on a SBIR Phase II contract in fiscal year 1996.
The increase in cost of product sales from $271,009 in the six months
ended December 31, 1994 to $475,027 in the six months ended December 31, 1995
was the result of increased X-Ray product sales. The decrease in gross profit
percentage from 69% to 66% for the respective periods is a result of increased
custom product sales as a percentage of total product sales.
The cost of revenue from business agreements decreased from $63,535 for
the six months ended December 31, 1994 to $12,534 for the six months ended
December 31, 1995 as a result of reduced revenue from business agreements.
The decrease in direct product development and research expense from
$282,684 in the six months ended December 31, 1994 to $161,870 in the six
months ended December 31, 1995 was due to the suspension of the magnet
development program in fiscal year 1995 coupled with more time and effort
allocated to complete current and future order requirements versus research.
Selling, general and administrative expenses remained virtually unchanged
with $314,305 in expenses for the six months ended December 31, 1994 and
$319,161 in expenses for the six months ended December 31, 1995.
The income tax provision of $14,750 and $182,000 for the respective
periods is a result of increased profitability and utilizing the effective
federal and state income tax rates. The tax benefit associated with utilizing
the Company's net operating loss carryforwards are reflected in the balance
sheet as an increase in retained earnings.
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Stockholders
Following is a tabulation of the proposal submitted to security holders
for a vote at a Special Meeting of Stockholders held on December 21, 1995.
Proposal - Election of Directors
Nominee For Against Abstain
Joseph Ben-Gal 1,811,214.46 0 0
Joel Domino 1,811,214.46 0 0
Emil Strumban 1,811,214.46 0 0
Item 6. Exhibits and Reports on Form 8-K
A. EXHIBITS
Exhibit Number 27 - Financial Data Schedule is filed with this report.
B. REPORTS ON FORM 8-K
None.
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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.
Osmic, Inc.
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(Registrant)
Date: February 1, 1996 By: /s/ Joseph Ben-Gal
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Joseph Ben-Gal
Chairman of Board
By: /s/ Wes L. Hardenburg
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Wes L. Hardenburg
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
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27 Financial Data Schedule