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EX-32 - EXHIBIT 32.1 CERTIFICATION - OPT SCIENCES CORPExhibit_32-1_10K_2013.htm
EX-31 - EXHIBIT 31.1 CERTIFICATION - OPT SCIENCES CORPExhibit_31-1_10K_2013.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

(Mark One)
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 26, 2013.
or
o 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: 0-1455

OPT-SCIENCES CORPORATION

(Exact name of registrant as specified in its charter)


NEW JERSEY 21-0681502
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

1912 BANNARD STREET, CINNAMINSON, NEW JERSEY 08077
(Address of principal executive offices) (zip code)

(856) 829-2800

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.25 par value per share         None      
 (Title of Class)  (Name of each exchange on which registered)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES o NO þ

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 þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES þ NO o

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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o
Non-accelerated filer o Smaller reporting company þ
(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO þ

The aggregate market value of the 293,945 common shares held by non-affiliates (i.e., excluding shares held by officers, directors and each person owning 5% or more of the outstanding stock) as of the end of the last business day of the registrant's most recently completed second fiscal quarter business day (April 26, 2013) was $ 4,150,503 computed by reference to the highest bid price of the stock ($ 14.12 per share) as quoted by the OTC Markets Group, Inc., in the non-NASDAQ Over-The-Counter Market.

As of January 23, 2014 the registrant had outstanding 775,585 shares of its common stock, par value of $0.25 per share.

DOCUMENTS INCORPORATED BY REFERENCE

None.





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OPT-SCIENCES CORPORATION
FORM 10-K ANNUAL REPORT - FISCAL YEAR 2013


TABLE OF CONTENTS

    Page
  PART I  
Item 1. Business. 4
Item 1A. Risk Factors. 6
Item 1B. Unresolved Staff Comments. 6
Item 2. Properties. 7
Item 3. Legal Proceedings. 7
Item 4. Mine Safety Disclosures 7
     
  PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 7
Item 6. Selected Financial Data. 8
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 8
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 11
Item 8. Financial Statements and Supplementary Data. 11
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. 11
Item 9A. Controls and Procedures. 11
Item 9B. Other Information. 12
     
  PART III  
Item 10. Directors, Executive Officers and Corporate Governance. 12
Item 11. Executive Compensation. 13
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 15
Item 13. Certain Relationships and Related Transactions, and Director Independence 15
Item 14. Principal Accounting Fees and Services. 16
     
  PART IV  
Item 15. Exhibits, Financial Statement Schedules. 17
  Signatures. 17
     

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PART I

Special Note Regarding Forward Looking Statements

Certain sections of this Annual Report contain forward-looking statements. These statements relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause the Company's or its industry's actual results, levels of activity, performance or achievements to be materially different from the future results, levels of activity, performance or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by words such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or the negative of these terms or other comparable words. These statements are only predictions. Actual events or results may differ materially.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements Readers are cautioned not to place undue reliance on these forward looking statements which speak only as of the date of this Report. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revision to the forward looking statements or to report unanticipated events which vary from the forward looking statements.

ITEM 1. BUSINESS.

BUSINESS OF THE COMPANY.


OVERVIEW. Opt-Sciences Corporation, formed in 1956, conducts its business through its wholly owned subsidiary, O and S Research, Inc. Both companies are New Jersey corporations. As used in this Form 10-K, the terms "Company", "we" or "our" refer to the combined operations of Opt-Sciences Corporation and O and S Research, Inc.

We deposit anti-glare and/or transparent conductive optical coatings on glass used primarily to cover instrument panels in aircraft cockpits. We also provide full glass cutting, grinding and painting operations which augment our optical coating capabilities. Most of our products are designed to enable pilots to read aircraft instruments in direct sunlight or at night or in covert situations using appropriate night vision filters or to protect the instruments from electromagnetic interference. This is a niche business primarily dependent on the needs of new and used aircraft for initially installed parts, spare parts, replacements and upgrades. It requires custom manufacturing of small lots of products to satisfy specific requirements identified by our customers.

Our business is highly dependent on a robust commercial, business, and regional aircraft market and to a lesser degree the military aircraft market. We generally have a four to twelve week delivery cycle depending on product complexity, available plant capacity and required lead time for specialty raw materials such as polarizers or filter glass. Our sales tend to fluctuate from quarter to quarter because we generally schedule shipments based on a customer's requested delivery date and not on our ability to make shipments. All orders are custom manufactured. Since approximately 59% of sales is represented by two major customers and two of of their subcontractors, any significant change in the requirements of either of those customers has a direct impact on our revenue for any given quarter. When one of these customers accelerates or defers a sizable order, sales for the following quarters may be adjusted as the customer reevaluates its needs. Based on our understanding of the industry and the needs of our customers, we expect to complete and ship approximately 50% of the Fiscal Year 2013 backlog of unshipped orders before the end of the first quarter of fiscal 2014. If we do so, we expect first quarter sales to be approximately $ 1,500,000. Sales for the following quarters are expected to fluctuate based on then current market conditions.

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CORE PRODUCTS. The distinguishing characteristic of our business is our optical thin film coating capability. Almost all products which we offer incorporate an optical coating of some type. Our primary coatings are for aircraft cockpit display applications and consist of our anti-reflection coating used for glare reduction and our transparent conductive coating used for electromagnetic interference shielding. We apply either or both coatings to different types of glass face plates which are usually mounted on the front of liquid crystal displays (LCDs), cathode ray tubes (CRTs), light emitting diode displays (LEDs) and electromechanical displays (EMDs).

ANCILLARY PRODUCTS AND SERVICES. In addition to coated glass described above, we also offer a full range of other specialty instrument glass, including night vision filter glass, circular polarizers, touchpads, glass sandwiches for LCDs as well as other custom designed specialty glass components and assemblies.

STRATEGY FOR THE FUTURE. We continue to re-evaluate and adjust our growth strategy pertaining to sales and marketing, taking into account our production facilities and our staffing methods to maximize the value of our financial and human resources. With the acquisition of an adjacent industrial facility during Fiscal Year 2013 , we now have additional space to reorganize our production layout and accommodate the future growth of our business. See "Properties" below.

In Fiscal Year 2013, we increased our work force by 3 employees to adjust to our anticipated production and staffing needs during the course of the year. For Fiscal Year 2014, we expect overall sales to be similar to Fiscal Year 2013, with fluctuations from quarter to quarter based on market conditions. We continue to see potential for growth in our conductive coating business which is used primarily, but not exclusively, on military platforms. We expect the anti-reflective coating market to remain at current levels. We believe our future success is contingent on the timely increase of our capacity to provide conductive coatings, satisfying the needs of our current customers, securing new customers, developing new products and providing adequate staff and facilities to meet our requirements.

MARKETING AND SALES. Our principal sales executive is our President, who maintains regular contact with the largest customers and continually seeks to develop new customers. We do not currently employ the services of manufacturer's representatives or sales personnel. O and S Research, Inc. and our products are listed in the Thomas Register. We also maintain sales websites at osresearch.com and optsciences.com. We engage in a low cost public relations and advertising program. Purchasing personnel of corporations or governmental agencies place orders with us, based on price, delivery terms, satisfaction of technical specifications and quality of product. Procurement departments of customers ordinarily purchase products from us because we are on an approved vendor list. We enhance sales prospects by providing creative technical solutions to customer requirements. We are currently an approved vendor for major aircraft programs. We continue to be a major supplier for the antiglare face plates covering the flat panel displays on the Boeing 777 and the 737 Next Generation models of commercial aircraft and the long range Gulfstream and Dassault Falcon business jets. We are also an approved vendor for instrument glass used on several military aircraft platforms including the C5 Galaxy and the C130. In Fiscal 2013, we derived approximately 59% of our revenues from two major customers and two of their subcontractors. The loss or permanent curtailment of business with either of these companies would have a negative impact on our operating results.

PATENTS, TRADEMARKS AND PROPRIETARY KNOWLEDGE. We do not hold patents or have registered trademarks. However, our customers do rely on our accumulated experience, history of quality products and know-how in satisfying their instrument glass requirements.

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MANUFACTURING. Our customers commonly use LCDs for aircraft cockpit instrumentation. Typically, a customer sends glass component drawings to us for manufacturing. We generally cut the glass components from larger pieces of glass which we purchase from multiple domestic sources, some on a custom basis and some on a commodity basis. The two largest suppliers of such glass to us are Europtec and Corning. We use our technology to apply a micro thin optical non-glare and/or conductive coating to the glass. Both processes utilize the deposit of a thin film of metal or metal oxide on the surface of the glass. The process takes place in a heated vacuum chamber. We heat the deposited material to over 1800 degrees Centigrade causing it to evaporate. When the metal vapor contacts the glass, it condenses forming a very thin film as durable as the original metal being evaporated. The thin films range in thickness from 250 angstroms to 1500 angstroms. After quality control tests, we ship the inspected products to our customers.

We also manufacture wedge glass lenses for electro-mechanical displays. These lenses are manufactured from large glass sheets. The raw glass is a commodity product which we can purchase from several glass manufacturers. The largest supplier of such glass to us is Schott in Germany. We cut, grind and polish the glass lenses and coat them with a micro-thin optical coating. We then ship the lenses to the customer after clearance through quality control.

ENVIRONMENTAL MATTERS. We believe we are in material compliance with applicable United States, New Jersey and local laws and regulations relating to the protection of the environment, and we do not devote material resources to such matters.

COMPETITION. Competition is based on product quality, price, reputation and ability to meet delivery deadlines. The market for our products is very competitive. The type and amount of instrument glass consumed is subject to changes in display technology and in on going reduction in the number of displays used on both new aircraft and retrofitted aircraft. Our major competitors include JDSU, Dontech, Schott Glass, Quantum, TFD and Hoya Optics. Some of our competitors generally have significantly more financial, technical and human resources than we do. Because of this, some of our competitors have the capacity to respond more quickly to emerging technologies and customer preferences and may devote greater resources to development, promotion and sale of their products than we can. This competition could result, and in the past has resulted, in price reductions, reduced margins and lower market share.

EMPLOYEES. As of October 26, 2013, we employed 46 employees, of which 44 were full time individuals and none of whom are members of organized labor. This represents an increase of 3 employees from the end of Fiscal 2012. We expect to make further adjustments to our employee levels based on changes in the market and our specific efforts to improve efficiencies and customer service. We believe we have a good relationship with our employees. We are subject to the federal minimum wage and hour laws and provide various routine employee benefits such as life and health insurance. We also provide a 401(k) Plan for the benefit of all our employees; we do not have a stock option plan. The Company's 401(k) Plan currently includes a matching contribution from us representing $0.50 for each $1.00 an employee contributes up to 6% of the employee's base wages.

AVAILABLE INFORMATION. We maintain a website, optsciences.com, where you may find additional information about our Company. Company filings are also available at the Securities & Exchange Commission's website, sec.gov. On our website, optsciences.com, we provide links to our SEC filings, to the SEC itself, to Yahoo for the latest stock quotations, to our transfer agent, Broadridge, and to our manufacturing subsidiary, O and S Research, Inc.

ITEM 1A. RISK FACTORS. Smaller reporting companies are not required to provide the information required by this item.

ITEM 1B. UNRESOLVED STAFF COMMENTS. None.


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ITEM 2. PROPERTIES.

We conduct our operations at our principal office and manufacturing facility located in the East Riverton section of Cinnaminson, New Jersey. We own this 1.4 acre property in fee simple, and the property is not encumbered by any lien or mortgage. The cinderblock and masonry facility contains approximately 11,000 square feet of manufacturing space and approximately 1,200 square feet of office space. We also own and utilize a building containing 500 square feet of warehouse and 7,500 square feet of manufacturing space on premises adjacent to the main manufacturing facility. We recently completed purchase of another building located near our current facility. It represents approximately 14,000 square feet of additional potential manufacturing, warehouse and office space when renovations are complete. Although we currently lease 5,000 square feet in Riverton, New Jersey on a year to year basis for general warehouse and material storage, we plan to vacate those premises in 2014 and relocate the contents to our new building. We expect the new building to satisfy our current goals for additional space and to improve operational efficiency.

ITEM 3. LEGAL PROCEEDINGS.

We are subject from time to time to certain claims and litigation in the ordinary course of business. It is the opinion of management that the outcome of such matters will not have a material adverse effect on our combined financial position or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our Common Shares are not listed on an established public trading market, but are quoted by the OTC Markets Group, Inc., in the OTCQB marketplace of the over the counter market. The symbol for our shares is OPST. Only limited and sporadic trading occurs. Subject to the foregoing qualification, the following table sets forth the range of bid quotations, for the fiscal quarters indicated, as quoted by OTC Markets Group, Inc., and reflects inter-dealer prices, without retail mark up, mark down or commission and may not necessarily represent actual transactions.

Fiscal 2013 Bid Price Fiscal 2012 Bid Price
1st Quarter $13.00 - $14.90 1st Quarter $11.55 - $12.50
2nd Quarter $13.51 - $14.65 2nd Quarter $11.80 - $13.75
3rd Quarter $14.12 - $16.50 3rd Quarter $12.21 - $12.75
4th Quarter $14.83 - $15.80 4th Quarter $12.27 - $14.90

As of December 31, 2013 the closing bid for the Common Stock was $15.87. The closing ask price was $17.49. The Company had 341 stockholders of record of its Common Stock as of December 31, 2013. This does not include the additional beneficial owners of our common stock who held their shares in street name as of that date.

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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The Company does not have any equity compensation plan in place and did not issue any equity securities to any person during Fiscal Year 2013.

DISTRIBUTIONS

We declared a special dividend on our Common Stock during the first quarter of Fiscal Year 2013 equal to $0.65 per share. Payment of any future dividends will be at the discretion of our Board of Directors after taking into account various relevant factors, including but not limited to results of operations, financial condition and capital expenditure plans.

RECENT SALES OF UNREGISTERED SECURITIES

We did not sell unregistered securities during the three fiscal years ended October 26, 2013.

REPURCHASES OF COMMON STOCK

The Company did not repurchase any of its common stock during the year ended October 26, 2013.

ITEM 6. SELECTED FINANCIAL DATA.

We are not required to provide the information prescribed by this item because we are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's discussion and analysis of financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Specifically, inventory is estimated quarterly and reconciled at the end of the fiscal year when a detailed audit is conducted (also see Consolidated Financial Statements, Note 1. Summary of Significant Accounting Policies and Note 2. Inventories).

GENERAL

This Management's Discussion and Analysis as of October 26, 2013 should be read in conjunction with the audited consolidated financial statements and notes thereto set forth in this report. It also contains forward looking statements as defined in Part I hereof.

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LIQUIDITY AND CAPITAL RESOURCES.

We have sufficient liquidity and credit to fund our contemplated capital and operating activities through Fiscal 2014.

We continue to use our working capital to finance current operations, including equipment purchases, capital improvements, inventory, payroll and accounts receivable.

Our cash increased during Fiscal Year 2013 to $3,446,819 from $2,834,374 at the end of Fiscal Year 2012, primarily because of earnings and the sale of securities. Other income decreased from the prior year primarily due to recognition of losses on sale of securities from the Company's portfolio of income securities. Our total current assets increased $37,625 to $12,485,480 in Fiscal 2013 from $12,447,863 in Fiscal 2012. This relatively small increase was due primarily to use of cash for the purchase of a new building and for a one time cash dividend to stockholders in the first quarter of 2013. It may be necessary to make future investments in new equipment and processes to compete successfully in the aerospace and commercial display markets.

RESULTS OF OPERATIONS: FISCAL YEAR 2013

NET SALES

Net sales of $6,219,616 for the Fiscal Year 2013 decreased $467,166 or about 7.0% from $6,686,782 in Fiscal 2012. This decrease was due to a general reduction in demand for certain products in Fiscal 2013.

COST OF SALES

Cost of sales decreased $709,657 or 15.2% to $3,953,317 for Fiscal 2013 compared to $4,662,974 Fiscal 2012. This decrease was due not only to reduced sales, but also to a more efficient use of raw materials resulting in lower scrap and rework costs and to a reduction in overtime labor costs and associated overhead costs. During Fiscal 2013 we increased our work in progress and finished goods inventories in an effort to better serve our customers' short term, just-in-time material requirements.Cost of sales consists of costs to manufacture the products we sell and is comprised of raw materials, manufacturing direct labor and overhead expenses. The overhead portion of cost of sales is primarily comprised of salaries, medical and dental benefits, building expenses, production supplies, and costs related to our production, inventory control and quality departments.

OPERATING EXPENSES

Operating expenses for Fiscal 2013 were $1,099,758, an increase of $68,561 or approximately 6.6% from $1,031,197 in Fiscal 2012. Operating expenses include both general and administrative expenses and sales and delivery expenses. Our general and administrative expenses consist of marketing and business development expenses, professional expenses, salaries and benefits for executive and administrative personnel, hiring, legal, accounting, and other general corporate expenses.

OPERATING INCOME

Operating income increased $173,930 or approximately 17.5% to $1,166,541 in Fiscal 2013 from $992,611 in Fiscal 2012. The increase from Fiscal 2012 is in part due to the non-recurring 2012 expenses of $39,300 incurred in the resolution of an OSHA claim and associated professional expenses.

OTHER INCOME

Other income for Fiscal Year 2013 decreased $175,006 to $317,994 from $493,000 for Fiscal Year 2012, primarily because of our recognition of losses on the sale of income securities during Fiscal Year and reduced interest and dividend income.

PROVISONS FOR INCOME TAX

Income tax expense for Fiscal Year 2013 was $541,414 or 36.5% of pre-tax income compared to $546,971 and 36.8% of pre-tax income for Fiscal Year 2012.

NET INCOME

Net income of $943,121 or $1.22 per share for Fiscal 2013 increased approximately 0.5% from $938,640 or $1.21 per share for Fiscal 2012 as a result of the factors described above.

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BACKLOG OF ORDERS

Our backlog of unshipped orders stood at $2,112,500 at the end of Fiscal Year 2013, up $113,900 from the end of Fiscal Year 2012 and down $59,600 from the end of the third quarter. Of the backlog of orders existing at year end, we expect to deliver 50% within the first quarter of Fiscal Year 2014.

RESULTS OF OPERATIONS: FISCAL YEAR 2012

Fiscal 2012 ended with net sales of $6,686,782 an increase of $766,885 or 13% over Fiscal 2011. This was due to a general improvement in demand for our products. Operating expenses, including selling expenses, were $1,031,197 for Fiscal 2012, an increase of $134,496 or 15% from Fiscal 2011. Operating income decreased $68,745 or 6% to $992,611 in Fiscal 2012 from $1,061,356 in 2011. Other income was $493,000 compared to $261,430 for Fiscal 2011 primarily as a result of increased dividends and interest from the Company's portfolio of income securities. Net income after taxes of $938,640 or $1.21 per share for Fiscal 2012 increased 9% from $862,660 for Fiscal 2011.

INFLATION

During the three year period that ended on October 26, 2013, inflation did not have a material effect on our operating results.

OFF BALANCE SHEET ARRANGEMENTS

We do not currently have any off balance sheet arrangements.

COMPANY RISK FACTORS

An investment in our common stock involves investment risks. A prospective investor should evaluate all information about us and the risk factors discussed below in relation to his financial circumstances before investing in us.

1. The market price of our common stock may fluctuate significantly. In addition, since our common stock has been thinly traded, it is difficult for our shareholders to sell shares of our common stock at a predictable price.

2. Any continuation of weakness in the global economy may have negative implications for our Company. Since our products are incorporated into very expensive new and retrofitted aircraft, the lack of a strong global economy and orderly capital markets may result in reduced demand for our products.

3. Our acquisition of an additional facility, together with planned aquisition of new manufacturing equipment, may not be supported by increases in profitable orders for our products. Significant quarterly fluctuations in backlog and orders challenge the Company to adjust the scale of its activities to the demand for its products; the larger the fluctuations, the more difficult it is to have efficient operations.

4. Our product offerings are concentrated. During Fiscal 2013 we derived approximately 95% of our revenues from instrument glass used for avionics and related aerospace products.

5. Our revenues come from a limited number of customers, with approximately 59% of sales during fiscal 2013 arising from two customers. The loss of one or both of such customers would be a materially adverse development for the Company.

6. For a major portion of our business, we rely on raw materials manufactured in foreign countries. An interruption of such supplies would have a significant impact on sales and our ability to support our customers.

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7. Our success depends on the efforts and expertise of our President, Anderson L. McCabe. He is our chief executive officer, our chief financial officer and our principal marketing officer. His death, disability or termination of employment would adversely affect the future of our Company. We do not have employment contracts with Mr. McCabe or other management personnel. We do not maintain key man life insurance on Mr. McCabe or other key personnel.

8. The market for our products is very competitive.

9. In order to increase income on our liquid assets, we invested a very substantial portion of our cash assets in a managed investment portfolio, which is subject to valuation decline in the event of a market downturn for all or any of the income securities in that portfolio.

10. Purchase orders and specifications from our customers may include extensive product warranties and contractual undertakings. Accordingly, future claims by our customers may have an adverse effect on our future operating results.

11. Our industry is also subject to significant risk from outside influences, such as terrorist attacks (9/11) and biological epidemics (SARs and Avian flu outbreaks in Asia). Other factors that may in the future influence our industry are inflation, changes in diplomatic and trade relations with other countries, tariffs, trade barriers and other regulatory barriers.

12. We are controlled by our major stockholder, the Arthur John Kania Trust. The Arthur John Kania Trust beneficially owns approximately 66% of our outstanding common stock. Such concentrated control of the Company may adversely affect the price of our common stock. Because of the high percentage of beneficial ownership, the Trustee of that Trust is able to control matters requiring the vote of stockholders, including the election of our board of directors and certain other significant corporate actions. This control could delay, defer or prevent others from initiating a potential merger, takeover or other change in our control, even if these actions would benefit our other stockholders and the Company. This control could adversely affect the voting and other rights of our other stockholders and could depress the market price of our common stock. If you acquire common stock, you may have no effective voice in the management of the Company.

ITEM 7A. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company, we are not required to supply information on this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Consolidated Financial Statements, the notes thereto, and the reports thereon by Goff Backa, Alfera & Company, LLC. dated January 22, 2014, are filed as part of this report starting on page 19 below.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

Under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, our management carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as such term is defined in Rule 13a- 15(e) under the Securities Exchange Act of 1934, as amended) as of October 26, 2013. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

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Management's Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Under the supervision of our Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Using that evaluation, our management concluded that, as of October 26, 2013, our internal control over financial reporting was effective.

This Annual Report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit smaller reporting companies such as the Company to provide only Management's report in this Annual Report.

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting occurred during the fourth quarter of Fiscal Year 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Our Directors serve until the next annual meeting of stockholders, or until their successors have been elected. Our officers serve at the pleasure of the Board of Directors.

Anderson L. McCabe, 58 years old, is our President, Chief Executive Officer and Chief Financial Officer. He graduated from the University of South Carolina in 1977 and received a B.S. in Chemical Engineering. From 1977 to 1985, he was employed by United Engineers and Constructors, Inc., a subsidiary of Raytheon Corporation as a Process Engineer with managerial responsibilities. In 1986 he became our president. He has been a director of the Company since 1987.

Arthur J. Kania, 82 years old, is our Secretary. He is not active in our day-to-day operations. Mr. Kania's principal occupations during the past five years have been as Principal of Trikan Associates (real estate ownership and management - investment firm); and as a partner of the law firm of Kania, Lindner, Lasak and Feeney. He has been a director of the Company since 1977.

Arthur J. Kania, Jr., 58 years old, has been a director of the Company since 1987. He is not active in our day-to-day operations. He is a principal of Trikan Associates (real estate ownership and management- investment firm) and vice-president of Newtown Street Road Associates (real estate ownership and management).

12



BOARD MEETINGS AND COMMITTEES

Audit Committee and Audit Committee Financial Expert

Our Board of Directors functions as an audit committee and performs some of the same functions as an audit committee including: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; and (3) engaging outside advisors. We are not a "listed company" under SEC rules and are therefore not required to have an audit committee with independent directors. Our Board of Directors does not have an independent director. Our Board of Directors has determined that each of its members is able to read and understand fundamental financial statements and has substantial relevant business and accounting experience. Accordingly, the Board of Directors believes that each of its members has sufficient knowledge and experience necessary to fulfill the duties and obligations that an audit committee would have in a company such as ours.

Board Meetings; Nominating and Compensation Committees

Given the small size of the Company and its limited staff and operations, its directors frequently make determinations informally by telephone calls or by written consent. The Board met before and after the Annual Shareholders Meeting, and at one additional time during the Fiscal Year. Each Meeting was attended by all directors. We pay each of our Directors a fixed annual stipend for acting as Director. No such payment shall preclude any director from serving us in any other capacity and receiving compensation therefor. A total of $12,500 has been paid to each director for services as director during the last fiscal year.

We are not a "listed company" under SEC rules and are therefore not required to have a compensation committee or a nominating committee. We do not currently have a compensation committee. Our Board of Directors is currently comprised of only three members, one of whom acts as Chief Executive Officer and Chief Financial Officer.

We do not have a policy regarding the consideration of any director candidate which may be recommended by our shareholders, including the minimum qualification for director candidates, nor has our Board of Directors established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our shareholders, including the procedures to be followed. Because our largest shareholder holds a majority of all issued stock, we do not solicit proxies for the election of directors, since that shareholder has the full power by its vote to elect all directors.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the Company's officers, directors and any person owning ten percent or more of the Company's common stock, to file in their personal capacities initial statements of beneficial ownership, statements of change in beneficial ownership and annual statements of beneficial ownership with the Securities and Exchange Commission (the "SEC"). Persons filing such beneficial ownership arrangements are required by SEC regulation to furnish to the Company copies of all such statements filed with the SEC. The rules of the SEC regarding the filing of such statements require that "late filings" of such statements be disclosed in the Company's information statement. Based solely on the Company's review of copies of such statements received by, and on representations from, the Company's existing directors and officers that no annual statements of beneficial ownership were required to be filed in 2013.

ITEM 11. EXECUTIVE COMPENSATION.

The following table sets forth certain summary information concerning compensation paid or accrued to its sole executive officer during the past two fiscal years. He did not receive any awards, stock awards, option compensation, non equity incentive plan earnings or non-qualified deferred compensation.

13



Name and Principal
Positions
Fiscal
Year
Salary(1) Bonus All Other
Compensation*
Total
Compensation
 Anderson L. McCabe
 President, CEO, CFO,
 Treasurer & Director
2013 $130,000 $35,000 $16,400 $181,400
2012 $130,000 $50,000 $16,400 $196,400

*Includes an annual retainer as Director of Company of $12,500 for 2013 and $12,500 for 2012 in addition to a 401(k) Contribution of $3,900 for each of 2013 and 2012.

EMPLOYMENT AGREEMENTS AND NARRATIVE REGARDING EXECUTIVE COMPENSATION

Mr. McCabe, who has served as our CEO since 1986, is not a party to an employment agreement. The non-employee directors meet on an annual basis to review his base compensation and to consider the granting of a bonus. They take into account the scope of his duties and responsibilities in the Company, the challenges the Company faced during the preceding year and his contribution to the profitability of the Company. The base salary and bonus are in the judgment of those directors fair to the Company when taking the above factors into account. Those directors did not consult with any experts or other third parties in determining the amount of Mr. McCabe's compensation, but based their determinations upon their overall respective business experiences.

OPTION/SAR GRANTS; DEFERRED EXECUTIVE COMPENSATION PLAN; EQUITY COMPENSATION PLAN

The Company did not grant restricted stock awards, stock options or stock appreciation rights during Fiscal Year 2013, nor does it have any of such awards, options or rights outstanding from prior years. The Company does not have any deferred executive compensation plan. The Company does not have any securities authorized for issuance under an equity compensation plan.

DIRECTOR COMPENSATION TABLE FOR FISCAL YEAR 2013

We do not have a standard compensation arrangement for our directors, and the compensation payable to each individual for service rendered is determined by our Board of Directors based upon the amount of time expended on behalf of the Company and also, to a limited extent, the success of the Company in the prior year. The Directors do not receive any compensation other than cash compensation. They do not receive stock awards, option awards, non-equity incentive plan compensation or non-qualified deferred compensation.

The following table sets forth the compensation of our non-employee directors. Our employee director, Anderson L. McCabe, receives the same compensation as the other directors for his services as director. His director fees are included in his total compensation in the Summary Compensation Table above.

Name Cash Retainer Total Compensation
  Arthur J. Kania $12,500 $12,500*
  Arthur J. Kania, Jr. $12,500 $12,500

* Excludes payments for legal services to law firm of which Mr. Kania is a partner. See Certain Transactions and Relationships below.

CODE OF ETHICS

The Company's Code of Ethics is posted at its website at optsciences.com. It applies to all employees, including the CEO, CFO, principal accounting officer and persons performing similar functions.

14



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. The following table sets forth common stock ownership information as of the record date with respect to (i) each person known to us to be the beneficial owner of more than 5% of our issued and outstanding common stock; and (ii) each of our directors and executive officers.

Name and Address of Beneficial Owner Amount and Nature of Beneficial Owner Percent of Class
Arthur John Kania Trust 3/30/67
Rose Sayen, Trustee
560 E. Lancaster Avenue, Suite 108
St. Davids, PA
510,853 66%
Security Ownership of Directors and Officers  
Name & Address of Beneficial Owner Amount and Nature of
Beneficial Owner
Percent of Class
Anderson L. McCabe
P.O. Box 221
1912 Bannard Street
Riverton, NJ 08077
1,064(1) *
     
Arthur J. Kania
560 E. Lancaster Avenue, Suite 108
St. Davids, PA  19087-5049
23,723(1) 3%
     
Arthur J. Kania, Jr.
560 E. Lancaster Avenue, Suite 108
St. Davids, PA  19087-5049
0(1) *
Directors and Officers as a Group 24,787(1) 3%
     
* Less than 1% of outstanding stock.    

1. Excludes 510,853 shares (66% of the outstanding shares) owned by a trust for the benefit of Arthur J. Kania's children and a total of 10,000 shares (1.3% of the outstanding shares) owned by separate trusts for the benefit of each of Arthur J. Kania's grandchildren. Mr. Kania has no voting power or investment power with respect to such securities and disclaims beneficial ownership in all such shares. Mr. McCabe, husband of a beneficiary of the first aforementioned trust, disclaims beneficial ownership in all such shares. Arthur J. Kania, Jr., a son of Arthur J. Kania, is a beneficiary of the first aforementioned trust and father of beneficiaries of the second aforementioned trusts, but has no voting power and no investment power over such shares in said trusts and is not a beneficial owner under the applicable rules.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Arthur J. Kania is the father of Arthur J. Kania, Jr. and the father-in-law of Anderson L. McCabe. Those individuals constitute the Board of Directors. Anderson L. McCabe is the sole executive officer. Rose Sayen, an employee of Arthur J. Kania, is the Trustee of the Arthur J. Kania Trust, which is the principal shareholder of the Company.

During Fiscal Year 2013, we incurred legal fees of $87,500 to the firm of Kania, Lindner, Lasak and Feeney, of which Arthur J. Kania is the senior partner. Mr. Kania does not share or participate in fees generated from the Company.

15



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

Type 2013 2012
  Audit Fees: (1) $ 41,405 $ 42,458
  Audit Related Fees:(2) -0- -0-
  Tax Fees: (3) -0- -0-
  Other Fees: (4) -0- -0-
    Total Fees $ 41,405 $ 42,458

(1) AUDIT FEES
This category includes the aggregate fees billed or accrued for each of the last two fiscal years for professional services rendered by the independent auditors for the audit of the Company's annual financial statements and review of financial statements included in the Company's Annual and Quarterly Reports filed with the SEC or services that are normally provided by the accountant in connection with other statutory and regulatory filings or engagements for those fiscal years.

(2) AUDIT-RELATED FEES
This category includes the aggregate fees billed in each of the last two fiscal years for services by the independent auditors that are reasonably related to the performance of the audits of the financial statements and are not reported above under "Audit Fees".

(3) TAX FEES
This category includes the aggregate fees billed in each of the last two years for professional services rendered by the independent auditors for tax compliance, tax planning and tax advice.

(4) ALL OTHER FEES
This category includes the aggregate fees billed in each of the last two fiscal years for products and services by the independent auditors that are not reported under "Audit Fees", "Audit Related Fees" or "Tax Fees".

RE-APPROVAL POLICIES AND PROCEDURES

Before the accountant is engaged by the issuer to render audit or non-audit services, the engagement is approved by the Company's Board of Directors acting as the audit committee.

16



PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

The following exhibits are incorporated by reference or included as part of this report:

  3.1; 3.2 Articles of Incorporation and By-Laws incorporated by reference to the Form 10-KSB filed by the registrant with the SEC on February 10, 1998 for its fiscal year ended November 1, 1997 starting on page 22.
  21. List of Subsidiaries incorporated by reference to the Form 10-KSB filed by the registrant with the SEC on February 10, 1998 for its fiscal year ended November 1, 1997 starting on page 54.
  31.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  101. Financial statements from the Annual Report of Form 10-K of Opt-Sciences Corporation for the year ending October 26, 2013 as interactive data files formatted in XBRL: (i) The Consolidated Balance Sheet, (ii) the Consolidated Statement of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to the Consolidated Financial Statements.
  101.INS XBRL Instance Document.
  101.SCH XBRL Taxonomy Extension Schema Document.
  101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
  101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
  101.LAB XBRL Taxonomy Extension Label Linkbase Document.
  101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Opt-Sciences Corporation
 
/s/ Anderson L. McCabe      
Anderson L. McCabe
Chief Executive Officer &
Chief Financial Officer
January 23, 2014
 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date
/s/ Anderson L. McCabe President, CEO, CFO & Director January 23, 2014
Anderson L. McCabe
     
/s/ Arthur J. Kania Secretary & Director January 23, 2014
Arthur J. Kania    
     
/s/ Arthur J. Kania, Jr. Director January 23, 2014
Arthur J. Kania, Jr.    
     
/s/ Lorraine Domask Chief Accountant January 23, 2014
Lorraine Domask    

17



OPT-SCIENCES CORPORATION
FINANCIAL STATEMENTS

Years Ended October 26, 2013 and October 27, 2012

TABLE OF CONTENTS

  Page
Report of Independent Registered Public Accounting Firm 19
Consolidated Balance Sheets 20
Consolidated Statements of Operations 22
Consolidated Statements of Stockholders' Equity 23
Consolidated Statements of Cash Flows 24
Notes to Consolidated Financial Statements 25
   

18





Report of Independent Registered Public Accounting Firm



To: Stockholders and Board of Directors
      Opt-Sciences Corporation

We have audited the accompanying consolidated balance sheets of Opt-Sciences Corporation and Subsidiary as of October 26, 2013 and October 27, 2012 and the related consolidated statements of operations, stockholders' equity and comprehensive income and cash flows for each of the fiscal years in the two year period ended October 26, 2013. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Opt-Sciences Corporation and Subsidiary as of October 26, 2013 and October 27, 2012 and the consolidated results of their operations and their cash flows for each of the fiscal years in the two year period ended October 26, 2013 in conformity with U.S. generally accepted accounting principles.


Goff, Backa, Alfera & Company, LLC
Pittsburgh, Pennsylvania
January 22, 2014

19



Opt-Sciences Corporation
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these financial statements

ASSETS

October 26, 2013 October 27, 2012
CURRENT ASSETS    
     
Cash and cash equivalents $   3,446,819 $   2,834,374
Trade accounts receivable 1,049,651 1,347,983
Inventories 954,817 652,533
Prepaid expenses 17,560 17,905
Loans and exchanges 7,055 8,942
Accrued interest receivable 55,680 65,115
Marketable securities

6,953,906

7,521,011

     
Total current assets

12,485,488

12,447,863

     
PROPERTY AND EQUIPMENT    
Land 216,406 114,006
Building and improvements 935,176 578,553
Furniture and equipment 2,160,803 2,152,018
Automobiles

43,268

43,268

     
Total property and equipment 3,355,653 2,887,845
Less accumulated depreciation

2,294,403

2,153,786

     
Net property and equipment

1,061,250

734,059

     
OTHER ASSETS    
Deposits

22,671

29,621

Total assets

$  13,569,409

$  13,211,543

20



Opt-Sciences Corporation
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these financial statements

LIABILITIES AND STOCKHOLDERS' EQUITY

October 26, 2013 October 27, 2012
     
CURRENT LIABILITIES
Accounts payable - trade $          90,563 $          77,424
Accrued income taxes 54,950 33,350
Accrued salaries and wages 199,721 213,800
Accrued professional fees 96,540 98,879
Deferred income taxes 22,690 107,151
Other current liabilities

45,376

38,888

     
Total current liabilities

509,840

569,492

     
STOCKHOLDERS' EQUITY    
     
Common capital stock -par value $0.25 per share -    
authorized and issued 1,000,000 shares 250,000 250,000
Additional paid in capital 272,695 272,695
Retained earnings 12,641,792 12,202,801
Accumulated other comprehensive income:    
Unrealized holding gain on marketable securities 82,300 103,773
     
Less treasury stock at cost - 224,415 shares

(187,218)

(187,218)

     
Total stockholders' equity

13,059,569

12,642,051

     
Total liabilities and stockholders' equity

$   13,569,409

$   13,211,543

21



Opt-Sciences Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
The accompanying notes are an integral part of these financial statements

Fiscal Year Ended
October 26, 2013
     (52 weeks)    
Fiscal Year Ended
October 27, 2012
     (52 weeks)    
     
NET SALES $  6,219,616 $  6,686,782
COST OF SALES

3,953,317

4,662,974

Gross profit on sales

2,266,299

2,023,808

     
OPERATING EXPENSES    
Sales and delivery 42,106 25,829
General and administrative

1,057,652

1,005,368

Total operating expenses

1,099,758

1,031,197

Operating income 1,166,541 992,611
     
OTHER INCOME

317,994

493,000

Income before taxes 1,484,535 1,485,611
     
FEDERAL AND STATE INCOME TAXES

541,414

546,971

Net income

943,121

938,640

     
OTHER COMPREHENSIVE INCOME    
Unrealized holding (losses) gains on    
marketable securities, net of taxes

(21,473)

216,883

Comprehensive income

$    921,648

$ 1,155,523

     
EARNINGS PER SHARE OF COMMON STOCK

$         1.22

$         1.21

     
Weighted average number of shares

775,585

775,585

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

     
    52 Weeks Ended
October 26,2013
  52 Weeks Ended
October 27, 2012
RETAINED EARNINGS - beginning of period   $ 12,202,801     $ 11,264,161  
Net income     943,121       938,640  
      13,145,922       12,202,801  
                 
Less: Dividends paid     504,130       -0-  
RETAINED EARNINGS - end of period   $ 12,641,792    $ 12,202,801  

22



Opt-Sciences Corporation
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
The accompanying notes are an integral part of these financial statements

Common
    Stock   
  Paid-in  
   Capital  
Retained
    Earnings   
Accumulated
Other
Comprehensive
     Income      
Treasury
     Cost      
     Total     
BALANCE OCTOBER 29, 2011 $  250,000 $  272,695 $ 11,264,161 $  (113,110) $  (187,218) $ 11,486,528
             
Net income for fiscal year            
ended October 27, 2012     938,640     938,640
             
Unrealized holding (losses) on            
securities arising during period            
net of tax of $155,050       216,883   216,883
             
BALANCE OCTOBER 27, 2012 250,000 272,695 12,202,801 103,773 (187,218) 12,642,051
             
Net income for fiscal year            
ended October 26,2013     943,121     943,121
             
Less: dividends paid     (504,130)     (504,130)
             
Unrealized holding losses on            
securities arising during period            
net of tax of $14,316       (21,473)   (21,473)
             
BALANCE OCTOBER 26, 2013 $  250,000 $  272,695 $ 12,641,792 $    82,300 $   (187,218) $ 13,059,569

23



Opt-Sciences Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these financial statements

Fiscal Year Ended
October 26, 2013
     (52 weeks)     
Fiscal Year Ended
October 27, 2012
     (52 weeks)     
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $      943,121 $      938,640
     
Adjustments to reconcile net income to net    
cash provided by operating activities:    
Depreciation 147,005 143,212
Loss (gain) on sale of securities 67,508 (77,830)
Deferred income taxes (70,145) (4,597)
     
Decrease (increase) in:    
Accounts receivable 298,332 (440,407)
Inventories (302,284) 104,188
Prepaid expenses 345 6,110
Loans and exchanges 1,887 4,946
Accrued interest receivable 9,435 22,367
     
Increase (decrease) in:    
Accounts payable 13,139 (21,860)
Accrued income taxes 21,600 (138,660)
Accrued salaries and wages (14,079) 36,570
Accrued professional fees (2,339) 12,954
Other current liabilities

6,488

35,694

Net cash provided by operating activities

1,120,013

621,327

     
CASH FLOWS FROM INVESTING ACTIVITIES    
     
Purchases of property and equipment (474,196) (60,317)
Purchases of securities (4,328,709) (2,382,781)
Proceeds from sale of securities          4,792,517          2,931,440
Deposits

6,950

(26,784)

Net cash (used) provided by investing activities

(3,438)

461,558

     
CASH FLOWS FROM FINANCING ACTIVITIES    
     
Dividends paid

(504,130)

-0-

     
Increase in cash 612,445 1,082,885
     
Cash and cash equivalents at beginning of period 2,834,374 1,751,489
     
Cash and cash equivalents at end of period

$   3,446,819

$   2,834,374

     
SUPPLEMENTAL DISCLOSURES:    
     
Income taxes paid

$      589,959

$      690,228

24



Opt-Sciences Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -  Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of OPT-Sciences Corporation and its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers certificates of deposit and debt securities purchased with a maturity of three months or less to be cash equivalents.

Line of Business and Credit Concentration

The Company, through its wholly owned subsidiary, is engaged in the business of applying anti-reflective, conductive and/or other coatings to the faceplates of instruments for aircraft cockpits. The Company grants credit to companies within the aerospace industry.

Accounts Receivable

Bad debts are charged to operations in the year in which the account is determined to be uncollectible. If the allowance method for doubtful accounts were used it would not have a material effect on the financial statements.

Inventories

Raw materials are stated at the lower of average cost or market. Work in process and finished goods are stated at accumulated cost of raw material, labor and overhead, or market, whichever is lower. Market is net realizable value.

Marketable Securities

Marketable securities consist of debt and equity securities and mutual funds. Equity securities include both common and preferred stock. The Company's investment securities are classified as "available-for-sale". Accordingly, unrealized gains and losses and the related deferred income tax effects when material, are excluded from earnings and reported as a separate component of stockholders' equity as accumulated other comprehensive income. Realized gains or losses are computed based on specific identification of the securities sold.

25



Opt-Sciences Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment

Property and equipment are comprised of land, building and improvements, machinery and equipment, small tools, furniture and fixtures, office equipment and automobiles. These assets are recorded at cost.

Depreciation for financial statement purposes is calculated over estimated useful lives of three to twenty-five years, using the straight-line method.

Maintenance and repairs are charged to expense as incurred.

Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Employee Benefit Plans

On October 1, 1998, the Company implemented a 401(k) profit sharing plan. All eligible employees of the Company are covered by the Plan. Company matching contributions are voluntary and at the discretion of the Board of Directors. Company contributions were $ 30,846 and $30,362 for the years ended October 26, 2013 and October 27, 2012, respectively.

Earnings per Common Share

Earnings per common share were computed by dividing net income by the weighted average number of common shares outstanding.

Revenue Recognition

The Company recognizes revenue from product sales in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 605, Revenue Recognition when products are shipped and risk of loss and title has passed to the customer.

Consideration of Subsequent Events

These financial statements were approved and authorized for issue by the Board of Directors on January 23, 2014 and include review of subsequent events through that date.

26



Opt-Sciences Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 -  Inventories

Inventories consisted of the following:   
   October 26,2013  October 27, 2012
Raw materials and supplies  $345,494   $340,694 
Work in progress   317,971    127,260 
Finished goods   291,352    184,579 
Total  $954,817   $652,533 



NOTE 3 -  Marketable Securities

   Amortized
Cost
  Gross
Unrealized
Gains
  Gross
Unrealized
Losses
  Fair
Value
October 26, 2013            
Common stock  $128,389   $27,170   $-0-   $155,559 
Preferred stock   1,138,485    11,359    -0-    1,149,844 
Corporate notes   1,783,334    34,458    -0-    1,817,792 
High yield bonds   2,406,531    24,944    -0-    2,431,475 
Foreign debt securities   786,535    50,093    -0-    818,628 
Mutual funds   591,466    -0-    (10,858)   580,608 
Total  $6,816,740   $148,024   $(10,858)  $6,953,906 
                     
October 27, 2012                    
Common stock  $28,578   $5,225   $-0-   $33,803 
Preferred stock   1,318,418    40,045    -0-    1,358,463 
Corporate notes   2,469,827    116,905    -0-    2,586,732 
Corporate bonds   288,195    12,383    -0-    300,578 
High yield bonds   1,713,685    -0-    (30,361)   1,683,324 
Foreign debt securities   1,038,378    78,530    -0-    1,116,908 
Mutual funds   490,975    -0-    (49,772)   441,203 
Total  $7,348,056   $253,088   $(80,133)  $7,521,011 


The following is a summary of maturities of debt securities available for sale as of October 26, 2013:

    Cost   Fair Market Value
One Year and Under  $ 523,695    $ 514,285  
One to Five Years   2,589,371    2,631,254 
Five to Ten Years   1,590,834    1,668,656 
Over Ten Years   254,500    253,700 
Total  $4,958,400   $5,067,895 


Sales of securities available for sale during the years ended October 26, 2013 and October 27, 2012 were as follows:

   2013  2012
Proceeds from sales  $4,792,517   $2,931,440 
Gross realized gains  $72,653   $147,318 
Gross realized losses  $142,257   $69,488 


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Opt-Sciences Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 -  Fair Value Measurements


Effective January 1, 2008, the Company adopted FASB ASC Topic 820, Fair Value Measurements and Disclosures, which, among other things, requires enhanced disclosures about assets and liabilities carried at fair value. FASB ASC Topic 820 establishes a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. There are three broad levels defined by FASB ASC Topic 820 hierarchy. The Company only has assets and liabilities falling under level I, which quoted prices are available in active markets for identical assets or liabilities as of the reported date. See Note 3 above. The following table illustrates the classification of the Company's financial instruments within the fair value hierarchy:

  Fair Value at Reporting Date Using
 
   Total  Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
  Significant
Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
October 26, 2013            
Common stock  $155,559   $155,559   $-0-   $-0- 
Preferred stock   1,149,844    1,149,844    -0-    -0- 
Corporate notes   1,817,792    1,817,792    -0-    -0- 
High yield bonds   2,431,475    2,431,475    -0-    -0- 
Foreign debt securities   818,628    818,628    -0-    -0-  
Mutual funds    580,608       580,608      -0-      -0-  
Total   $ 6,953,906     $ 6,953,906     $ -0-     $ -0-  
                     
October 27, 2012                    
Common stock  $33,803   $33,803   $-0-   $-0- 
Preferred stock   1,358,463    1,358,463    -0-    -0- 
Corporate notes   2,586,732    2,586,732    -0-    -0- 
Corporate bonds   300,578    300,578    -0-    -0- 
High yield bonds   1,683,324    1,683,324    -0-    -0- 
Foreign debt securities   1,116,908    1,116,908    -0-    -0- 
Mutual funds   441,203    441,203    -0-    -0- 
Total  $7,521,011   $7,521,011   $-0-   $-0- 

28



Opt-Sciences Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 -   Income Taxes

The income tax expense of the Company consists of the following:
2013 2012
Current tax expense:          
Federal  $478,239   $432,233 
State   133,320    119,335 
Total   611,559    551,568 
           
Deferred tax expense:          
Federal   (59,659)   (3,989)
State   (10,486)   (608)
Total   (70,145)   (4,597)
Total Income tax effect:  $541,414   $546,971 

At October 26, 2013, the Company had a deferred tax asset of $78,296 and a deferred tax liability of $100,986, resulting in a net deferred tax liability of $22,690.

At October 27, 2012, the Company had a deferred tax asset of $49,267 and a deferred tax liability of $156,418, resulting in a net deferred tax liability of $107,151.

Deferred income taxes result from significant temporary differences between income for financial reporting purposes and taxable income. These differences arose principally from the use of accelerated tax depreciation and the carry forward of capital losses.

At October 26, 2013, the Company had capital loss carry forwards of $182,082 expiring in 2014 through 2018. All of these losses are deemed to be usable before expiration.

All tax returns from fiscal years 2010 to 2013 are subject to potential IRS audit.

NOTE 6 -  Major Customers


Two customers accounted for $2,898,799 of net sales during the year ended October 26, 2013. In addition, two other customers were actually subcontractors for, and received products manufactured for, one of the large customers. Total sales to these subcontractors were $779,633 during the year ended October 26, 2013. The amount due from all these customers, included in trade accounts receivable, was $814,189 on October 26, 2013.

Two customers accounted for $4,369,506 of net sales during the year ended October 27, 2012. In addition, two other customers were actually subcontractors for, and received products manufactured for, one of the large customers. Total sales to these subcontractors were $629,815 during the year ended October 27, 2012. The amount due from these customers, included in trade accounts receivable, was $687,785 on October 27, 2012.

NOTE 7 -  Concentration of Credit Risk of Financial Instruments


The Company has various demand and time deposits with financial institutions where the amount of the deposits exceeds the federal insurance limits of the institution on such deposits. The maximum amount of accounting loss that would be incurred if an individual or group that makes up the concentration of the deposits failed completely to perform according to the terms of the deposit was approximately $2,915,600 on October 26, 2013.

NOTE 8 -  Related Party Transactions


During fiscal years 2013 and 2012, the Company incurred legal fees of $87,500 and $90,000, respectively to the firm of Kania, Lindner, Lasak and Feeney, of which Mr. Arthur Kania, a shareholder and director, is senior partner. Of the legal fees, $87,500 and $90,000 were included in accounts payable at October 26, 2013 and October 27, 2012, respectively.

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