-----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, WkLtW/EZlDM+W08p3I1j9LN33dtfNCvYAYA5IoisHXDNINtQvBcMfaMO8/uN1xKw DES8iFrhlEdsTJVikuSLrg== 0000912057-96-015297.txt : 19960725 0000912057-96-015297.hdr.sgml : 19960725 ACCESSION NUMBER: 0000912057-96-015297 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960724 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INRAD INC CENTRAL INDEX KEY: 0000719494 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 222003247 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11668 FILM NUMBER: 96598221 BUSINESS ADDRESS: STREET 1: 181 LEGRAND AVE CITY: NORTHVALE STATE: NJ ZIP: 07647 BUSINESS PHONE: 2017671910 MAIL ADDRESS: STREET 2: 181 LEGRAND AVE CITY: NORTHVALE STATE: NJ ZIP: 07647 FORMER COMPANY: FORMER CONFORMED NAME: INTERACTIVE RADIATION INC DATE OF NAME CHANGE: 19880804 10-Q 1 FORM 10-Q 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 June 30, 1996 ------------------------------------------ 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 0-11668 ---------------------------------------------------- INRAD, Inc. ---------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New Jersey 22-2003247 - --------------------------------------------- ----------------------- (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification Number) INRAD, Inc. 181 Legrand Avenue, Northvale, NJ 07647 -------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (201) 767-1910 -------------------------------------------------------------------------- (Registrant's telephone number, including area code) -------------------------------------------------------------------------- (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 July 15, 1996: 2,109,271 SHARES INRAD, Inc. INDEX Page Number ----------- Part I. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . 1 Item 1. Financial Statements: Consolidated Balance Sheet as of June 30, 1996 and December 31, 1995 (unaudited) . . . . . . . . . 1 Consolidated Statement of Operations for the Three and Six Months Ended June 30, 1996 and 1995 (unaudited). . . . . . . . . . . . . . . . 2 Consolidated Statement of Cash Flows for the Six Months Ended June 30, 1996 and 1995 (unaudited). . . . . . . . . . . . . . . . 3 Notes to Consolidated Financial Statements. . . . . 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . 7 Part II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 10 Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . 10 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INRAD, 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)
Three Months Ended June 30, Six Months Ended June 30, --------------------------- ------------------------- 1996 1995 1996 1995 ---- ---- ---- ---- REVENUES: Net product sales $1,415,070 $1,055,508 $2,564,299 $2,038,664 Contract research and development 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 1,063,891 902,451 2,025,796 1,743,058 Contract research and development expenses 194,127 366,751 326,797 648,461 Selling, general and administrative expenses 344,357 230,773 640,039 489,972 Internal research and development expenses 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 (69,767) (72,277) (144,568) (147,984) Interest and other income, net 2,815 162 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 $(4,512,234) $(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 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) $(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 --------- --------- --------- --------- See Notes to Consolidated Financial Statements. 3 INRAD, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - SUMMARY OF ACCOUNTING POLICIES BASIS 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 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 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 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 For the six month period ended June 30, 1996, the Company used 79% as its estimated cost of goods sold percentage. For the previous year, 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 based on estimated profitability of actual sales through June 30, 1996 and the anticipated annual level of product shipments and related costs. For the six month period ended 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: June 30, December 31, 1996 1995 ---- ---- DEFERRED TAX ASSETS Inventory capitalization adjustment $ 60,000 $ 60,000 Inventory reserves 10,000 10,000 Vacation liabilities 62,000 62,000 Other 20,000 12,000 Loss carryforwards 2,383,000 2,279,000 ---------- ---------- Gross deferred tax assets 2,535,000 2,423,000 ---------- ---------- DEFERRED TAX LIABILITIES Depreciation (234,000) (242,000) ---------- ---------- Gross deferred tax liabilities (234,000) (242,000) ---------- ---------- 2,301,000 2,181,000 Valuation allowance (2,301,000) (2,181,000) ---------- ---------- Net deferred tax assets $ 0 $ 0 ---------- ---------- ---------- ---------- 5 NOTE 4 - DEBT NOTE PAYABLE - SHAREOWNER By mutual informal agreement, the Company has deferred certain interest payments to its principal shareowner. During the six month period ended June 30, 1996, the Company made two quarterly interest payments. Subject to adequate cash flow, 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 June 30, 1997. UNSECURED 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 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 SALES Net sales for the second quarter of 1996 increased $360,000, or 34%, from the comparable quarter in 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 six months of 1996 were $477,000 (19% of total shipments) compared to $389,000 (19%) for the first six months of 1995. The shipments for the quarter and six months ended June 30, 1996 were higher than the comparable periods 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 $2,000,000 at June 30, 1996, compared with $1,470,000 at December 31, 1995 and $1,506,000 at June 30, 1995. COST OF GOODS SOLD For the six month period ended June 30, 1996, the Company used 79% as its estimated cost of goods sold percentage. For the previous year, 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 based on estimated profitability of actual sales through June 30, 1996 and the anticipated annual level of product shipments and related costs. For the six month period ended June 30, 1995, the Company used 85.5% as its estimated cost of goods sold percentage. CONTRACT RESEARCH AND DEVELOPMENT Contract research and development revenues for the second quarter of 1996 decreased $180,000, or 48%, from the comparable quarter in 1995, and revenues for the six months ended June 30, 1996 and 1995 were $328,000 and $663,000, respectively. Related contract research and development expenditures, including allocated indirect costs, for the quarter ended June 30, 1996 were $194,000 compared to $367,000 for the comparable 1995 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 expects to continue to focus its future 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 $162,000 at June 30, 1996, compared with $413,000 at December 31, 1995 and $876,000 at June 30, 1995. 7 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increased $114,000, or 49%, in the second quarter of 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 EXPENSES Research and development expenses for the quarter ended June 30, 1996 were $42,000 compared to $91,000 for the quarter ended 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 is 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 six months of 1996, and is expected to continue in succeeding quarters in 1996. INTEREST EXPENSE Interest expense was $70,000 for the quarter ended 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 June 30, 1996 and 1995, which resulted in a comparable amount of interest expense. INFLATION 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 $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 (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 may continue to make interest payments to its principal shareowner. Capital expenditures, including internal labor and overhead charges, for the six months ended June 30, 1996 and 1995 were $132,000 and $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 six month period ended 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. By: /s/ Warren Ruderman ----------------------------------- WARREN RUDERMAN PRESIDENT AND CHIEF EXECUTIVE OFFICER By: /s/ Ronald Tassello ----------------------------------- RONALD TASSELLO VICE PRESIDENT, FINANCE (Chief Accounting Officer) Date: July 24, 1996 11 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS FOUND ON PAGES TWO AND THREE OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1996 JUN-30-1996 236,427 0 831,664 5,000 1,568,861 2,821,727 7,978,643 6,334,343 4,896,848 1,042,813 2,345,062 0 0 21,216 1,487,757 4,896,848 2,891,942 2,891,942 2,352,593 2,352,593 67,875 0 144,568 (299,494) 0 (299,494) 0 0 0 (299,494) (0.14) 0
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