-----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, L7uNDE2DtB+vVpPZUbCG3IeW5sBKoYhratDQ74t2M2PYAE9PmZOBltamAWuus9Bz OJa+tc0IrEL3qn43M1PYcQ== 0000950110-96-000075.txt : 19960207 0000950110-96-000075.hdr.sgml : 19960207 ACCESSION NUMBER: 0000950110-96-000075 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950705 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960206 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIAGNOSTIC RETRIEVAL SYSTEMS INC CENTRAL INDEX KEY: 0000028630 STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [3812] IRS NUMBER: 132632319 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-08533 FILM NUMBER: 96511865 BUSINESS ADDRESS: STREET 1: 16 THORNTON RD CITY: OAKLAND STATE: NJ ZIP: 07436 BUSINESS PHONE: 2013373800 MAIL ADDRESS: STREET 1: 16 THORNTON RD CITY: OAKLAND STATE: NJ ZIP: 07436 8-K/A 1 AMENDMENT NO. 2 TO FORM 8-K File No. 1-8533 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K AMENDMENT TO APPLICATION OR REPORT Filed pursuant to Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. ---------------------------------- (Exact name of registrant as specified in charter) AMENDMENT NO. 2 The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its Current Report, dated July 5, 1995, on Form 8-K as set forth in the pages attached hereto: (List all such items, financial statements, exhibits or other portions amended) Item 7. Financial Statements, Pro Forma Financial Information and Exhibits ------------------------------------------------------------------ (a) Financial Statements Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. --------------------------------- (Registrant) By /s/ NANCY R. PITEK ------------------------------ Nancy R. Pitek Controller, Treasurer and Secretary Date: February 6, 1996 The Current Report on Form 8-K, dated July 5, 1995, of Diagnostic/Retrieval Systems, Inc. (Commission File No. 1-8533) is hereby amended as follows: Item 7. Financial Statements, Pro Forma Financial Information and Exhibits ------------------------------------------------------------------ (a) Financial Statements: --------------------- 1. Consolidated balance sheets of Opto Mechanik, Inc. and subsidiary as of June 30, 1994 and 1993 and consolidated statements of operations, shareholders' equity and cash flows for the fiscal years ended June 30, 1994, 1993 and 1992. A legend has been added to the Independent Auditors' Report dated September 30, 1994, which appears on page 1 of the aforementioned financial statements. Item 7(a) Financial Statements OPTO MECHANIK, INC. CONSOLIDATED FINANCIAL STATEMENTS FISCAL YEARS ENDED JUNE 30, 1994, 1993 AND 1992 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE ---- INDEPENDENT AUDITORS' REPORT .............................................. 1 FINANCIAL STATEMENTS: Consolidated Balance Sheets, June 30, 1994 and 1993 ............................................. 2 Consolidated Statements of Operations, Years Ended June 30, 1994, 1993 and 1992 ....................................... 4 Consolidated Statements of Shareholders' Equity, Years Ended June 30, 1994, 1993 and 1992 ....................................... 5 Consolidated Statements of Cash Flows, Years Ended June 30, 1994, 1993 and 1992 ....................................... 6 Notes to Consolidated Financial Statements ........................... 8 LEGEND TO INDEPENDENT AUDITORS' REPORT DATED SEPTEMBER 30, 1994 This is a reproduction of the Independent Auditors' Report that appeared in the previously filed Form 10-K of Opto Mechanik, Inc. dated October 11, 1994. The independent auditors' report has not been manually signed in connection with the inclusion of such report in this Form 8-K. As such, the financial statements covered by the audit report should be deemed to be unaudited. INDEPENDENT AUDITORS' REPORT Board of Directors Opto Mechanik, Inc.: We have audited the accompanying consolidated balance sheets of Opto Mechanik, Inc. and subsidiary (the "Company") as of June 30, 1994 and 1993 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended June 30, 1994. Our audits also included the financial statement schedules listed in the index at item 14(A)(2). These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules 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, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 1994 and 1993 and the results of its operations and its cash flows for each of the three years in the period ended June 30, 1994, in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. The accompanying consolidated financial statements for the year ended June 30, 1994 have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company was not in compliance with certain covenants of its long-term loan agreements. The Company is attempting to renegotiate the terms and covenants of its loan agreements and is also seeking other sources of long-term financing. The Company's loan agreement covenant noncompliance, its substantial loss from operations and its working capital deficiency discussed in Note 2, raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. DELOITTE & TOUCHE LLP Orlando, Florida September 30, 1994 1 OPTO MECHANIK, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS JUNE 30, 1994 AND 1993 ASSETS 1994 1993 ----------- ----------- Current Assets: Cash ............................................ $ 132,508 $ 150,516 Contract receivables (Notes 8 and 9) ............ 3,877,226 2,394,172 Costs and estimated earnings in excess of billings on uncompleted contracts (Notes 1 and 5) .............................. 9,930,322 13,396,777 Inventories (Notes 1, 3, 8 and 9) ............... 1,875,171 1,797,584 Other current assets ............................ 43,222 ----------- ----------- Total current assets ........................ 15,815,227 17,782,271 ----------- ----------- Property, plant and equipment (Notes 1, 6, 8 and 9) ........................................ 18,770,340 16,411,130 Less accumulated depreciation ..................... (9,149,488) (7,834,859) ----------- ----------- Property, plant and equipment--net .......... 9,620,852 8,576,271 ----------- ----------- Other assets ...................................... 555,292 286,379 ----------- ----------- Total assets ...................................... $25,991,371 $26,644,921 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. 2 OPTO MECHANIK, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS JUNE 30, 1994 AND 1993 LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993 ----------- ----------- Current liabilities: Accounts payable ................................. $ 3,676,194 $ 2,379,951 Billings in excess of costs and estimated earnings on uncompleted contracts (Notes 1 and 5) ....... 199,737 Notes payable--current (Note ..................... 13,785,549 146,058 Revolving line of credit (Note 8) ................ 1,487,495 1,226,804 Accrued liabilities (Note 7) ..................... 2,629,461 877,616 Estimated losses on uncompleted contracts (Notes 1 and 5) ................................ 356,569 9,066 Deferred compensation (Note 13) .................. 19,812 106,343 Income taxes payable (Note 11) ................... 188,000 ----------- ----------- Total current liabilities .................... 22,154,817 4,933,838 ----------- ----------- Long-term liabilities: Deferred income taxes (Notes 1 and 11) ........... 898,767 Deferred compensation (Note 13) .................. 56,166 156,074 Notes payable--noncurrent (Note 9) ............... 229,832 9,177,940 ----------- ----------- Total long-term liabilities .................. 285,998 10,232,781 ----------- ----------- Commitments and Contingency (Notes 13 and 14) Shareholders' equity (Note 10): Common Stock--$.10 par value; 5,000,000 shares authorized; 2,189,102 shares issued and outstanding ......................... 218,910 218,910 Additional paid-in capital ....................... 5,670,362 5,670,362 Retained earnings (deficit) ...................... (2,338,716) 5,589,030 ----------- ----------- Total shareholders' equity ................... 3,550,556 11,478,302 ----------- ----------- Total liabilities and shareholders' equity ......... $25,991,371 $26,644,921 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. 3 OPTO MECHANIK, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED JUNE 30, 1994, 1993 AND 1992 1994 1993 1992 ----------- ----------- ----------- Operating revenues (Note 1) .......... $18,923,323 $37,198,808 $32,621,687 ----------- ----------- ----------- Cost of sales (Note 1) ............. 21,252,962 30,858,826 27,836,735 General and administrative expenses ......................... 6,064,743 3,922,264 3,143,707 ----------- ----------- ----------- Total costs and expenses ....... 27,317,705 34,781,090 30,980,442 ----------- ----------- ----------- Income (loss) from operations ...... (8,394,382) 2,417,718 1,641,245 ----------- ----------- ----------- Other income (expense): Miscellaneous income ............. 539,276 12,150 14,968 Other income (expense), net (Note 9) ........................ (971,407) (856,550) (642,768) ----------- ----------- ----------- Other expense, net ............. (432,131) (844,400) (627,800) ----------- ----------- ----------- Income (loss) before income taxes .. (8,826,513) 1,573,318 1,013,445 Provision (benefit) for income taxes (Notes 1 and 11) ........... (898,767) 535,497 293,899 ----------- ----------- ----------- Net income (loss) .................. $(7,927,746) $ 1,037,821 $ 719,546 =========== =========== =========== Earnings (loss) per Common Share (Note 1) ........................... $ (3.62) $ .47 $ .33 =========== =========== =========== Weighted average shares outstanding (Note 1) ........................... 2,189,102 2,189,102 2,189,102 =========== =========== =========== The accompanying notes are an integral part of these consolidated financial statements. 4 OPTO MECHANIK, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED JUNE 30, 1994, 1993 AND 1992 Number Common Additional Retained of Stock Paid-in Earnings Shares At Par Capital (Deficit) --------- -------- ---------- ----------- Balance, June 30, 1991 ......... 2,189,102 $218,910 $5,670,362 $ 3,831,663 Net income ................... 719,546 --------- -------- ---------- ----------- Balance, June 30, 1992 ......... 2,189,102 218,910 5,670,362 4,551,209 Net income ................... 1,037,821 --------- -------- ---------- ----------- Balance, June 30, 1993 ......... 2,189,102 218,910 5,670,362 5,589,030 Net loss ..................... (7,927,746) --------- -------- ---------- ----------- Balance, June 30, 1994 ......... 2,189,102 $218,910 $5,670,362 $(2,338,716) ========= ======== ========== =========== The accompanying notes are an integral part of these consolidated financial statements. 5 OPTO MECHANIK, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 1994, 1993 AND 1992
1994 1993 1992 ------------ ----------- ----------- S> CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ....................................... $ (7,927,746) $ 1,037,821 $ 719,546 Adjustments to reconcile net income (loss) to net cash provided from (used by) operating activities: Depreciation .......................................... 1,314,629 1,162,505 895,391 (Gain) loss on sale of assets ......................... 450 (Decrease) increase in deferred income taxes .......... (898,767) 347,497 274,398 (Decrease) increase in deferred compensation .......... (186,439) 164,784 97,633 Changes in assets and liabilities--net of effect of business acquired: Decrease (increase): Contracts receivable .............................. (1,483,054) 1,971,875 (990,860) Costs and estimated earnings in excess of billings on uncompleted contracts ............... 3,466,455 (2,531,546) (2,646,544) Inventories ....................................... (77,587) (169,522) 653,197 Other current assets .............................. 43,222 2,562 45,352 Other assets ...................................... (68,913) (259,855) 30,000 Increase (decrease): Accounts payable .................................. 1,296,243 (1,010,770) (473,264) Billings in excess of costs and estimated earnings on uncompleted contracts ............... 199,737 (1,973) Accrued liabilities ............................... 1,751,845 96,318 (113,422) Income taxes payable .............................. (188,000) 188,000 19,501 Estimated losses on uncompleted contracts ....................................... 347,503 9,066 (2,599) ------------ ----------- ----------- Net cash provided from (used by) operating activities ............................. (2,410,872) 1,008,735 (1,493,194) ------------ ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Payment for business acquired--net of cash acquired .... (196,625) Capital expenditures ................................... (2,359,210) (2,213,213) (357,713) Proceeds from sale of machinery ........................ 470 ------------ ----------- ----------- Net cash used by investing activities ............ (2,359,210) (2,409,368) (357,713) ------------ ----------- -----------
6 OPTO MECHANIK, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 1994, 1993 AND 1992
1994 1993 1992 ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in revolving line of credit ....... $ 260,691 $ 1,226,804 Proceeds from borrowings on notes payable ...... 18,782,451 18,397,140 $20,663,110 Repayments of borrowings on notes payable ...... (14,291,068) (18,095,961) (18,718,743) Payment of long-term debt assumed in acquisition .................................. (256,904) ----------- ----------- ----------- Net cash provided from financing activities 4,752,074 1,271,079 1,944,367 ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH .................. (l8,008) (129,554) 93,460 CASH AT BEGINNING OF YEAR ........................ 150,516 280,070 186,610 ----------- ----------- ----------- CASH AT END OF YEAR .............................. $ 132,508 $ 150,516 $ 280,070 =========== =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest ................................... $ 923,000 $ 777,000 $ 741,000 =========== =========== =========== Income taxes ............................... $ 104,000 $ -- $ -- =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: In connection with the Company's acquisition of Universal Vision Systems, Inc. on July 1, 1992 (see Note 1), the Company entered into a note payable with the former owners for $250,000. In connection with the Company's purchase of a competing product line from another company in fiscal 1994, the Company entered into a note payable with this company for $200,000 and recorded other assets of $200,000. The accompanying notes are an integral part of these consolidated financial statements. 7 OPTO MECHANIK, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 1994, 1993 AND 1992 1. Summary of Business and Significant Accounting Policies Business: Opto Mechanik, Inc. ("OMI") is primarily engaged in the development, manufacture and sale of sophisticated sighting systems designed for military application as part of the fire control system on tanks and howitzers, and through its subsidiary, Defense Marketing and Trading, Inc. ("DMT"), was a consultant and sales representative to companies selling to foreign governments. The Company began phasing out the operations of DMT during the fiscal year ended June 30, 1993 and dissolved DMT on July 1, 1993. On July 1, 1992, the Company purchased all of the outstanding stock of Universal Vision Systems, Inc. ("UVS"), of Alliance, Ohio for $450,000 (consisting of cash of $200,000 and a note payable of $250,000 [see Note 9]) and the assumption of UVS' outstanding debt of approximately $225,000. UVS is engaged in the manufacture and sale of day vision periscopes used in multiples on tracked and wheeled vehicles by the military. The Company's consolidated financial statements for the fiscal years ended June 30, 1994 and 1993 include the results of operations of UVS. Pro forma results of operations for the fiscal year ended June 30, 1992 are not included because prior to the Company's acquisition, UVS was a start-up company and had not commenced full production under its contracts. The Company's primary customers are the United States military and the armed forces of several foreign governments. During the fiscal years ended June 30, 1994, 1993 and 1992, approximately 86%, 93% and 78%, respectively, of the Company's revenues were derived directly or indirectly from contracts with United States Government agencies. Principles of consolidation: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Revenues, uncompleted contracts: Revenues on contracts are recognized using the percentage of completion method based on the ratio of costs incurred and work performed to date on the contracts to total estimated contract costs. Estimates of the effects of changes in total estimated contract costs are recognized in the period determined. Losses, if any, are recognized fully when identified. Revenues recognized in excess of amounts billed are classified under current assets as costs and estimated earnings in excess of billings on uncompleted contracts. Amounts billed in excess of revenues recognized to date are classified under current liabilities as billings in excess of costs and estimated earnings on uncompleted contracts. 8 1. Summary of Business and Significant Accounting Policies (continued) Inventories: Inventories are valued at the lower of cost or market. Cost is determined generally on a first-in, first-out (FIFO) basis. Research and development: Research and development costs are charged to operations when incurred and included in operating expenses. Such costs totaled approximately $298,000, $20,000 and $29,000 for the years ended June 30, 1994, 1993 and 1992, respectively. Depreciation: The Company provides depreciation on the straight-line method over the following estimated useful lives of the various classes of depreciable assets: Leasehold improvements ..................................... 20 years Machinery and equipment .................................... 10 years Tooling .................................................... 10 years Office furniture and equipment ............................. 10 years Automobiles and trucks ..................................... 3 years Income taxes: Effective July 1, 1992, the Company adopted Statement of Financial Accounting Standards No. 109 ("FAS 109"), "Accounting for Income Taxes." Under FAS 109, the Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the financial statements. The principal differences result from the use of accelerated depreciation methods for tax purposes and the effect of purchase accounting adjustments related to the acquisition of UVS. FAS 109 requires the current recognition of the benefit of future utilization of net operating loss and minimum tax credit carryforwards. The benefit is subject to the recording of a valuation allowance to the extent that realization of the carryforwards does not meet the standard of "more likely than not." The adoption of FAS 109 had no effect on the fiscal 1993 consolidated financial statements. Earnings (loss) per common share: The computation of earnings (loss) per common share is based on the weighted average number of shares outstanding during the year. Shares which were issuable upon the exercise of stock options have not been included in the per share computation at June 30, 1994, 1993 and 1992 because the effect of their inclusion would be anti-dilutive. 9 2. Going Concern Considerations The accompanying consolidated financial statements for the year ended June 30, 1994, have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the consolidated financial statements during the year ended June 30, 1994, the Company incurred a loss from operations of $8,394,382, a net loss of $7,927,746 and the Company's current liabilities (as a result of the factors discussed below) exceeded its current assets by $6,339,590. These factors among others indicate that the Company may be unable to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. As described in Notes 8 and 9, the Company is not in compliance with various provisions of its loan agreements and, because the lenders have not waived these provisions, the balance of such outstanding debt has been classified as a current liability. Further, such outstanding debt is subject to demand for repayment at anytime. In the event demand for repayment is made by the lenders, the Company does not currently have the ability to repay such debt. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to comply with the terms and covenants of its financing agreements, to obtain additional financing or refinancing as may be required, and ultimately to attain profitable operations. Management is continuing its efforts to obtain funds through either additional or refinanced debt, subordinated debt, equity, or a combination thereof so that the Company can meet its obligations and sustain its operations. 3. Inventories Inventories consist of spare parts and supplies and are valued at $1,875,171 and $1,797,584 at June 30, 1994 and 1993 respectively. 4. Contract Claims Two contract claims were filed on completed contracts in fiscal 1981 which were comprised of costs which the Company incurred and expected to recover from the U.S. Government. On June 27, 1990, the Company received notice that the claims were denied by the Armed Forces Board of Contract Appeals. The Company had suspended action against a supplier, pending the outcome of the suit against the Army. Immediately upon receipt of the denial of the claims against the Army, the Company reactivated the suit against the supplier. During the fiscal year ended June 30, 1993, the Company collected $100,000 from the supplier in full settlement of the claims. 10 5. Contracts in Process Comparative information with respect to uncompleted contracts is as follows: 1994 1993 ----------- ----------- Expenditures on uncompleted contracts ........... $53,953,449 $46,485,628 Estimated earnings thereon ...................... 6,167,679 10,809,059 ----------- ----------- Total of costs and estimated earnings ........... 60,121,128 57,294,687 Less applicable billings ........................ 50,390,543 43,897,910 ----------- ----------- Total ....................................... $ 9,730,585 $13,396,777 =========== =========== These amounts are included in the accompanying balance sheet under the following captions: 1994 1993 ---------- ----------- Costs and estimated earnings in excess of billings on uncompleted contracts .............. $9,930,322 $13,396,777 Billings in excess of costs and estimated earnings on uncompleted contracts .............. 199,737 ---------- ----------- $9,730,585 $13,396,777 ========== =========== The Company has provided for estimated losses on uncompleted contracts in the following amounts: 1994 1993 1992 ----------- -------- -------- Estimated losses ....... $ 356,569 $ 9,066 $ -- Contract value ......... $14,890,961 $348,908 $ -- The balances billed, but not paid by customers are due upon completion of performance tests or contract milestones. All balances billed are due upon receipt by the customer, as the Company invoices upon reaching these milestones. There are no unpaid billed balances under retainage provisions. Costs and estimated earnings in excess of billings on uncompleted contracts comprise principally amounts of revenue recognized on contracts for which billings had not been presented to the contract owners because the amounts were not billable at the balance sheet date. It is anticipated that such unbilled amounts receivable at June 30, 1994 will be billed over the next 150 days as units are delivered or upon completion of contract milestones or performance tests. 11 6. Property, Plant and Equipment Property, plant and equipment are stated at cost and include the following: 1994 1993 ----------- ----------- Land .................................... $ 382,000 $ 382,000 Leasehold improvements .................. 2,795,563 2,581,904 Machinery and equipment ................. 8,918,114 7,578,731 Tooling ................................. 5,095,859 4,504,592 Office furniture and equipment .......... 1,512,202 1,297,301 Leased equipment ........................ 15,845 15,845 Automobiles and trucks .................. 50,757 50,757 ----------- ----------- Total Cost .......................... $18,770,340 $16,411,130 =========== =========== Depreciation expense for the years ended June 30, 1994, 1993 and 1992 was $1,314,629, $1,162,505 and $895,391, respectively. 7. Accrued Liabilities Accrued liabilities are as follows: 1994 1993 ---------- -------- Payroll ................................. $ 325,492 $299,815 Vacation pay ............................ 262,399 254,829 Interest ................................ 107,752 59,842 Payroll taxes ........................... 25,545 63,592 Property taxes .......................... 97,610 113,646 Advance deposits ........................ 1,095,904 Other ................................... 714,759 85,892 ---------- -------- $2,629,461 $877,616 ========== ======== 8. Revolving Line of Credit The Company's subsidiary, UVS, has a revolving line of credit with a banking institution. Borrowings under the revolving line of credit are due on demand, interest is payable monthly at the prime rate (7.25% at June 30, 1994) plus 2.25%. The agreement provides for maximum borrowings of $1,500,000. At June 30, 1994, credit available under the line was $12,505. The line of credit is collateralized by substantially all assets of UVS and is guaranteed by OMI. As of June 30, 1994, the Company is not in compliance with various covenants, including required tangible net worth and ratio of debt to net worth, of the revolving line of credit agreement. See further discussion in Note 2. 12 9. Notes Payable Notes payable are as follows: 1994 1993 ----------- ----------- Revolving line of credit/term loan facility with a bank, interest only payable quarterly at the prime rate (7.25% at June 30, 1994) plus 2%, maximum borrowings allowed of $10,000,000, principal due October 1995 ................... $ 8,363,955 $ 8,999,170 Note payable to a finance company, interest at 6.9%, payable in 84 monthly principal and interest installments of $45,131 through November 2000 ................................ 2,801,501 Note payable to a finance company, interest at 6.96%, payable in 60 monthly principal and interest installments of $9,037 through December 1998 ................................ 417,924 Note payable to a bank, interest at the bank's prime rate (7.25% at June 30, 1994), interest payable monthly, principal payable over a term of 33 months as per the agreement, guaranteed by a director of the Company ...... 1,026,809 Revolving line of credit with a bank, interest only payable monthly at the prime rate (7.25% at June 30, 1994) plus 1.75%, maximum borrowings allowed of $1,000,000, principal due in October 1995, collateralized by an irrevocable standby letter of credit from another bank which was provided by a director of the Company ............................... 930,000 Note payable to two individuals, interest at 6.5%, payable in 12 quarterly principal and interest installments of $18,479 through November 1996 ........................ 169,294 Note payable to former owners of UVS, interest at 6%, payable in two annual principal installments of $125,000 plus accrued interest, matures June 1996 ............................ 125,000 250,000 Other notes payable .......................... 180,898 74,828 ----------- ----------- Total ........................................ 14,015,381 9,323,998 Less current portion ......................... 13,785,549 146,058 ----------- ----------- Long-term portion ............................ $ 229,832 $ 9,177,940 =========== =========== 13 9. Notes Payable (continued) Notes payable mature as follows: 1995 ................ $13,785,549 1996 ................ 193,756 1997 ................ 36,076 ----------- $14,015,381 =========== The revolving line of credit/term loan facility is collateralized by contract receivables, inventory, substantially all equipment and a first mortgage on real property. The notes payable to a finance company are collateralized by specific equipment. Interest expense was $971,407, $733,718 and $642,768 for the three years ended June 30, 1994, 1993, and 1992, respectively. The revolving line of credit/term loan facility and the revolving line of credit with a bank require compliance with certain covenants. The Company was not in compliance with various of these covenants, including required tangible net worth and ratio of debt to net worth, as of June 30, 1994. The notes payable to a finance company and the note payable to a bank are cross-defaulted with the Company's other loan agreements. The lenders have not waived the events of default and, accordingly, all such notes payable have been classified as current liabilities as of June 30, 1994. See further discussion in Note 2. 10. Stock Options The Company has various stock option plans which provide for grants of options for up to ten years, exercisable one year from the date of grant, for key officers and employees upon approval by the shareholders. Exercise prices range from $2.75 to $4.50 per share, the fair market value of the stock at the date of grant. A summary of the option transactions for the years ended June 30, 1994, 1993 and 1992 is as follows: 1994 1993 1992 ------- ------- ------- Options outstanding, beginning of year ..... 355,800 436,000 443,000 Options issued ............................. 25,000 Options cancelled .......................... (143,800) (39,200) (3,000) Options forfeited, subject to reissuance ... (79,157) (41,000) (4,000) ------- ------- ------- Options outstanding at end of year, 132,843 of which were exercisable at June 30, 1994 ......................... 157,843 355,800 436,000 ======= ======= ======= l1. Income Taxes The components of the provision (benefit) for income taxes are as follows: 1994 1993 1992 --------- -------- -------- Currently payable: State .............................. $ 38,000 $ 19,501 Federal ............................ 150,000 Deferred ............................. $(898,767) 347,497 274,398 --------- -------- -------- $(898,767) $535,497 $293,899 ========= ======== ======== 14 11. Income Taxes (continued) The Company's effective tax rate differs from the statutory federal income tax rate for the following reasons: 1994 1993 1992 ---------- --------- -------- Computed statutory amount ............. $(3,001,014) $ 542,691 $344,571 Increase (decreases): State income tax, net of federal income tax benefit ................ (369,546) 25,799 18,708 Valuation allowances ................ 2,365,330 Nondeductible expenses .............. 8,206 4,301 5,011 Utilization of net operating loss carryforward ...................... 999 35,687 Benefit of graduated income tax rate structure (101,018) Other, net .......................... 98,257 (38,293) (9,060) ---------- --------- -------- $ (898,767) $ 535,497 $293,899 ========== ========= ======== Effective rate ........................ (10)% 34% 29% ========== ========= ======== The principal items in deferred tax expenses (benefits) are as follows: 1994 1993 1992 ---------- --------- -------- Excess of tax over book depreciation .. $ 3,235 $(232,755) $ 10,150 Effect of purchase accounting adjustment .......................... (22,372) 223,720 Effect of tax losses used (carried forward) ............................ (930,669) 428,250 345,100 Estimated losses on uncompleted contracts ........................... (121,233) Deferred compensation ................. 63,389 (56,027) (28,314) Other, net ............................ 108,883 (15,691) (52,538) ---------- --------- -------- $ (898,767) $ 347,497 $274,398 ========== ========= ======== Net deferred tax liabilities are comprised of the following: 1994 1993 ---------- -------- Noncurrent assets: Net operating loss carryforwards and alternative minimum tax credits ................................. $3,555,518 $259,519 Estimated losses on uncompleted contracts ................................... 121,233 Deferred compensation ......................... 25,833 89,222 Other ......................................... 74,093 183,044 ---------- -------- Total noncurrent assets ......................... $3,776,677 $531,785 ---------- -------- 15 11. Income Taxes (continued) 1994 1993 ----------- ----------- Noncurrent liabilities: Depreciation ................................ $(1,210,067) $(1,206,832) Purchase accounting adjustments ............. (201,280) (223,720) ----------- ----------- Total noncurrent liabilities .................. (1,411,347) (1,430,552) ----------- ----------- Noncurrent deferred tax assets (liabilities), net .......................... 2,365,330 (898,767) ----------- ----------- Valuation allowance ........................... (2,365,330) ----------- ----------- Total ......................................... $ 0 $ (898,767) =========== =========== The Company has approximately $8,626,000 of federal and $5,743,000 of state net operating loss carryforwards and approximately $253,000 of alternative minimum tax credits remaining at June 30, 1994, which give rise to a deferred tax asset. Utilization of the net operating loss carryforwards and alternative minimum tax credits to offset future taxable income within the carryforward period under existing tax laws and regulations is not considered likely. Therefore, a valuation allowance against the deferred tax asset is necessary at June 30, 1994. The net operating loss carryforwards expire in 2007. The alternative minimum tax credits do not expire. 12. Supplemental Profit and Loss Information Included in costs and expenses are the following: 1994 1993 1992 -------- -------- -------- Taxes, other than payroll taxes (principally property taxes) .......... $508,992 $358,191 $344,220 Research and development ................ $297,507 $ 20,317 $ 28,700 Advertising and maintenance and repairs are less than 1% of revenues for all periods presented. 13. Retirement Plan The Company has a defined contribution 401(k) retirement plan for all employees who have been employed for a minimum of six months. Under the terms of the plan, the Company, at the discretion of the Board of Directors, contributes up to 50% of the employees' voluntary contributions which are limited to 6% of gross salaries. The Company's matching contributions to the plan for the years ended June 30, 1994, 1993 and 1992 were $147,000, $143,000 and $94,000, respectively. During 1992, the Company entered into employment and consulting agreements with its four senior officers, which provide for post-employment deferred compensation benefits and consulting fees upon expiration of the employment term for periods ranging from 4 to 7-1/2 years. The Company is accruing the deferred compensation element of the contracts over the employment periods. Costs charged to operations for the years ended June 30, 1994, 1993 and 1992 were $19,458, $164,784 and $97,633, respectively. The Company is not presently funding this liability. 16 13. Retirement Plan (continued) As of June 30, 1994, three of the officers have retired. Two of the officers are presently receiving payments under the employment and consulting agreements totaling approximately $18,000 per month. The third officer received a lump sum settlement of his employment and consulting agreement of $125,000 in May 1994. If the employment periods are not extended at the end of their terms, the aggregate commitments under the agreements are as follows for subsequent years ended June 30: 1995 .................. $ 238,914 1996 .................. 282,816 1997 .................. 251,196 1998 .................. 153,690 1999 .................. 87,804 Thereafter ............ 263,412 ---------- Total ................. $1,277,832 ========== 14. Commitments and Contingency Leases: - ------- The Company leases its current office and manufacturing facility in Melbourne, Florida under a 20-year operating lease agreement at an annual rent of approximately $982,000 at June 30, 1994. The agreement contains renewal options and a provision for annual rental increases contingent on increases in the Consumer Price Index. The Alliance, Ohio facility is under a 5-year operating lease agreement at an annual rent of approximately $150,000 at June 30, 1994. The agreement also contains renewal options. Rent expense for the years ended June 30, 1994, 1993 and 1992 was approximately $1,171,000, 1,066,000 and $951,000, respectively. Contingency: - ------------ UVS is the subject of a U.S. Government investigation of certain business and reporting practices from which civil, criminal or administrative proceedings could result. Those proceedings, if pursued, could involve claims by the Government for damages as well as fines and penalties. Based upon Government procurement regulations, a contractor can be suspended or debarred from Government contracts if proceedings result from such investigation. The Company is not able to determine, at this early stage of the investigation, whether the outcome of the Govemment's investigation will have a materially adverse effect on its consolidated financial statements. 17 I5. Business Segments and Geographic Region Information Opto Mechanik, Inc. and Universal Vision Systems, Inc. are engaged in the development, manufacture and sale of sophisticated sighting systems and day vision periscopes designed for military application and use. Defense Marketing and Trading, Inc. was a consulting and sales representative to companies desirous of making sales of products and services to foreign governments. All significant intercompany accounts and transactions have been eliminated. Identifiable assets include primarily accounts receivable, inventories, and property and equipment. Amounts shown as operating income of the various industry segments reflect allocations of corporate general and administrative expenses. Opto Mechanik, Inc. and Universal Vision Systems, Inc. [in 1994 and 1993} - ------------------------------------------------- 1994 1993 1992 ----------- ----------- ----------- Revenues .............................. $18,923,323 $35,315,784 $25,647,049 Operating income (loss) ............... $(8,394,382) $ 2,486,614 $ 1,404,263 Depreciation .......................... $ 1,314,629 $ 1,162,505 $ 895,391 Capital expenditures .................. $ 2,359,210 $ 2,213,213 $ 357,713 Identifiable assets (excluding intercompany payable/receivable) .... $25,991,371 $26,631,532 $21,347,741 Defense Marketing and Trading, Inc. (dissolved in 1994} - --------------------------------- Revenues ........................................... $ 1,883,024 $ 6,974,638 Operating income (loss) ............................ $ (68,896) $ 236,982 Depreciation ....................................... $ -- $ -- Capital expenditures ............................... $ -- $ -- Identifiable assets (excluding intercompany payable/receivable) ................. $ 13,389 $ 2,293,053 The risks of doing business outside the United States, which management believes are minimal, included expropriation and restrictive action by local governments. 18 15. Business Segments and Geographic Region Information (continued) Revenues and gross profit by geographic region for the years ended June 30, are as follows: 1994 1993 1992 ----------- ----------- ----------- Sales: United States ................... $13,987,593 $34,766,549 $25,557,567 Middle East ..................... 3,614,388 2,295,528 7,003,671 Canada .......................... 32,269 47,374 8,869 Europe .......................... 876,972 89,357 51,580 Asia ............................ 412,101 ----------- ----------- ----------- TOTAL ......................... $18,923,323 $37,198,808 $32,621,687 =========== =========== =========== Gross profit (loss): United States ................... $(3,437,445) $ 6,371,225 $ 4,339,233 Middle East ..................... 784,945 (90,415) 435,655 Canada .......................... 14,669 19,442 5,897 Europe .......................... 166,081 39,730 4,167 Asia ............................ 142,111 ----------- ----------- ----------- TOTAL ......................... $(2,329,639) $ 6,339,982 $ 4,784,952 =========== =========== =========== 19 16. Quarterly Data (Unaudited)
June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Sept. 30, 1994 1994 1993 1993 1993 1993 1992 1992 (3) (2) (1) ---------- ----------- ----------- ----------- ----------- ---------- ---------- ---------- Operating revenues $6,171,146 $4,078,160 $3,784,709 $4,889,308 $10,122,365 $9,902,894 $9,219,347 $7,954,202 Cost and Expenses 6,861,792 5,107,825 8,126,476 7,221,612 9,160,658 9,347,675 8,732,763 7,539,994 ---------- ----------- ----------- ----------- ----------- ---------- ---------- ---------- Income (loss) from operations ............. (690,646) (1,029,665) (4,341,767) (2,332,304) 961,707 555,219 486,584 414,208 ---------- ----------- ----------- ----------- ----------- ---------- ---------- ---------- Other income (expense) .... 537,958 1,318 (120,102) 1,000 7,510 910 Interest expense ......... (241,528) (173,880) (316,759) (239,240) (191,454) (184,469) (180,140) (177,655) ---------- ----------- ----------- ----------- ----------- ---------- ---------- ---------- Other income (expense)-- net .................... 296,430 (173,880) (315,441) (239,240) (311,556) (183,469) (172,630) (176,745) ---------- ----------- ----------- ----------- ----------- ---------- ---------- ---------- Income (loss) before income taxes ........... (394,216) (1,203,545) (4,657,208) (2,571,544) 650,151 371,750 313,954 237,463 Provision for income taxes (tax benefit) .... (178,767) (720,000) 241,434 106,581 109,119 78,363 ---------- ----------- ----------- ----------- ----------- ---------- ---------- ---------- Net income (loss) ........ $ (394,216) $(1,203,545) $(4,478,441) $(1,851,544) $ 408,717 $ 265,169 $ 204,835 $ 159,100 ========== =========== =========== =========== =========== ========== ========== ========== Earnings (loss) per common share ........... $ (.18) $ (.55) $ (2.04) $ (.85) $ .19 $ .12 $ .09 $ .07 ========== =========== =========== =========== =========== ========== ========== ========== Average weighted shares outstanding ............ 2,189,102 2,189,102 2,189,102 2,189,102 2,189,102 2,189,102 2,189,102 2,189,102 ========== =========== =========== =========== =========== ========== ========== ========== - ----------- (1) Operating revenues for the September 30, 1993 quarter have been reduced by approximately $516,000 from the amount previously reported on Form 10-Q to correct errors in revenue recognition. The September 30, 1993 Form 10-Q will be amended to correct these errors. (2) Operating revenues for the December 31, 1993 quarter have been reduced by approximately $1,412,000 from the amount previously reported on Form 10-Q to correct errors in revenue recognition. Tax benefit for this quarter has been increased by approximately $151,000 from the amount previously reported on Form 10-Q to correct errors in the computation of the tax benefit. The December 31, 1993 Form 10-Q will be amended to correct these errors. (3) Operating revenues for the March 31, 1994 quarter have been reduced by approximately $1,293,000 from the amount previously reported on Form 10-Q to correct errors in revenue recognition. The March 31, 1994 Form 10-Q will be amended to correct these errors.
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