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EX-32 - EXHIBIT 32.1 CERTIFICATION - OPT SCIENCES CORPExhibit_32-1_10K_2014.htm
EX-31 - EXHIBIT 31.1 CERTIFICATION - OPT SCIENCES CORPExhibit_31-1_10K_2014.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 November 1, 2014.
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 (April 25, 2014) was $4,791,304 computed by reference to the highest bid price of the stock ($16.30 per share) as quoted by the OTC Markets Group, Inc., in the non-NASDAQ Over-The-Counter Market.

As of January 29, 2015 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 2014


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 65% of sales is represented by two major customers and two subcontractors of one of those customers, 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 2014 backlog of unshipped orders before the end of the first quarter of fiscal 2015. If we do so, we expect first quarter sales to be approximately $1,600,000. Sales for the following quarters are expected to fluctuate based on then current market conditions.

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.

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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.

For Fiscal Year 2015, we expect overall sales to be slightly down from Fiscal Year 2014. 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 2014, we derived approximately 65% of our revenues from two major customers and two subcontractors of one of those customers. 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.

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 an ongoing 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.

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EMPLOYEES. As of November 1, 2014, we employed 46 employees, of which 43 were full time individuals and none of whom are members of organized labor. This represents a reduction of one full time employee from the end of Fiscal 2013. We may make adjustments to our employee levels during the year 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.


ITEM 2. PROPERTIES.

We conduct our operations at our principal office and manufacturing facility located in 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. In 2013, we acquired 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 Cinnaminson, New Jersey on a year to year basis for general warehouse and material storage, we plan to vacate those premises in 2015 and relocate the contents to our new building. We expect the newly acquired 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 2014
Bid Price
  Fiscal 2013
Bid Price
1st Quarter $ 15.57 - $ 16.99   $ 13.00 - $ 14.90
2nd Quarter $ 16.26 - $ 17.00   $ 13.51 - $ 14.65
3rd Quarter $ 15.75 - $ 17.90   $ 14.12 - $ 16.50
4th Quarter $ 15.80 - $ 17.12   $ 14.83 - $ 15.80

As of December 31, 2014 the closing bid for the Common Stock was $16.60. The closing ask price was $17.50. The Company had 316 stockholders of record of its Common Stock as of December 31, 2014. 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 2014.

DISTRIBUTIONS
We did not declare any dividend on our Common Stock during Fiscal Year 2014. Payment of 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 November 1, 2014.

REPURCHASES OF COMMON STOCK
The Company did not repurchase any of its Common Stock during the year ended November 1, 2014.

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 November 1, 2014 contains forward looking statements as defined in Part I hereof and should be read in conjunction with the audited consolidated financial statements and notes thereto set forth in this report.

LIQUIDITY AND CAPITAL RESOURCES.
We have sufficient liquidity and credit to fund our contemplated capital and operating activities through Fiscal 2015. We continue to use our working capital to finance current operations, including equipment purchases, capital improvements, inventory, payroll and accounts payable. Our cash decreased during Fiscal Year 2014 to $3,259,372 from $3,446,819 at the end of Fiscal Year 2013, primarily because of the purchase of securities. Our total current assets increased $1,205,943 to $13,691,431 in Fiscal 2014 from $12,485,488 in Fiscal 2013. This increase was due primarily to operating income and gains in the income securities portfolio. 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 2014

NET SALES. Net sales of $7,073,463 for the Fiscal Year 2014 increased $853,847 or approximately 14% from $6,219,616 in Fiscal 2013. This increase was due to a general increase in demand for certain products from some of our key customers and the addition of some new customers in Fiscal 2014.

COST OF SALES. Cost of sales increased $657,438 or approximately 16% to $4,610,755 for Fiscal 2014 compared to $3,953,317 Fiscal 2013. This increase was primarily due to increased sales, additional engineering expenses and to a higher customer return rate than the previous year. During Fiscal 2014 we increased our raw materials and supplies inventories to serve as a larger buffer against possible disruptions in our supply chain. The reduction in finished goods compared to Fiscal 2013 was primarily a timing issue with shipments. 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.

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OPERATING EXPENSES. Operating expenses for Fiscal 2014 were $1,218,993, an increase of $119,235 or approximately 11% from $1,099,758 in Fiscal 2013. 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, travel expenses, salaries and benefits for executive and administrative personnel, hiring, legal, accounting, and other general corporate expenses.

OPERATING INCOME. Operating income increased $77,174 or approximately 7% to $1,243,715 in Fiscal 2014 from $1,166,541 in Fiscal 2013.

OTHER INCOME. Other income for Fiscal Year 2014 increased $178,862 to $496,856 from $317,994 for Fiscal Year 2013, primarily because of gains recognized on the sale of securities.

PROVISONS FOR INCOME TAX. Income tax expense for Fiscal Year 2014 was $626,492 or approximately 36% of pre-tax income compared to $541,414 and approximately 36% of pre-tax income for Fiscal Year 2013.

NET INCOME. Net income of $1,114,079 or $1.44 per share for Fiscal 2014 increased $179,958 or approximately 18% from $943,121 or $1.22 per share for Fiscal 2013 as a result of the factors described above.

BACKLOG OF ORDERS
Our backlog of unshipped orders stood at $1,954,800 at the end of Fiscal Year 2014, down $157,697 from the end of Fiscal Year 2013 and down $214,258 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 2015.

RESULTS OF OPERATIONS: FISCAL YEAR 2013
Net sales of $6,219,616 for the Fiscal Year 2013 decreased $467,166 or approximately 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. Operating expenses, including selling expenses, were $1,099,758 for Fiscal 2013, an increase of $68,561 or approximately 6.6% from $1,031,197 in Fiscal 2012. Operating income increased $173,930 or approximately 17.5% to $1,166,541 in Fiscal 2013 from $992,611 in Fiscal 2012. 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 2013 and reduced interest and dividend 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.

INFLATION
During the three year period that ended on November 1, 2014, 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 acquisition 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 2014 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 65% of sales during fiscal 2014 arising from two customers and two subcontractors of one of those customers. The loss of one or both of such customers would be a materially adverse development for the Company.

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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.
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 26, 2015, are filed as part of this report starting on page 16 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 November 1, 2014. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

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 November 1, 2014, 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 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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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, 59 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, 83 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., 59 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).

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 $15,000 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 2014.

-10-



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.

Name and Principal
Positions
Fiscal
Year
Salary(1) Bonus All Other
Compensation*
Total
Compensation
 Anderson L. McCabe
 President, CEO, CFO,
 Treasurer & Director
2014 $130,000 $45,000 $18,900 $193,900
2013 $130,000 $35,000 $16,400 $181,400

*Includes an annual retainer as Director of Company of $15,000 for 2014 and $12,500 for 2013 in addition to a 401(k) Contribution of $3,900 for each of 2014 and 2013.

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 2014, 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 2014
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 $15,000 $15,000*
  Arthur J. Kania, Jr. $15,000 $15,000

* 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.

-11-



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 2014, we incurred legal fees of $95,000 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.

-12-



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

Type 2014 2013
Audit Fees: (1) $ 46,165 $ 41,405
Audit Related Fees:(2) -0- -0-
Tax Fees: (3) -0- -0-
Other Fees: (4) -0- -0-
Total Fees $ 46,165 $ 41,405

(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.

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 November 1, 2014 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.

-13-



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 29, 2015
 

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 29, 2015
Anderson L. McCabe    
     
/s/ Arthur J. Kania Secretary & Director January 29, 2015
Arthur J. Kania    
     
/s/ Arthur J. Kania, Jr. Director January 29, 2015
Arthur J. Kania, Jr.    
     
/s/ Lorraine Domask Chief Accountant January 29, 2015
Lorraine Domask    

-14-


OPT-SCIENCES CORPORATION
FINANCIAL STATEMENTS

Years Ended November 1, 2014 and October 26, 2013

TABLE OF CONTENTS

  Page
Report of Independent Registered Public Accounting Firm 16
Consolidated Balance Sheets 17
Consolidated Statements of Operations 19
Consolidated Statements of Stockholders' Equity and Comprehensive Income 20
Consolidated Statements of Cash Flows 21
Notes to Consolidated Financial Statements 22
   

-15-




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 November 01, 2014 and October 26, 2013 and the related consolidated statements of operations and comprehensive income, retained earnings, stockholders' equity, and cash flows for each of the fiscal years in the two year period ended November 01, 2014. 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 November 01, 2014 and October 26, 2013 and the consolidated results of their operations and their cash flows for each of the fiscal years in the two year period ended November 01, 2014 in conformity with U.S. generally accepted accounting principles.

Goff, Backa, Alfera & Company, LLC
Pittsburgh, Pennsylvania
January 26, 2015

-16-



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

ASSETS

    November 1, 2014   October 26, 2013
CURRENT ASSETS                
                 
Cash and cash equivalents   $ 3,259,372     $ 3,446,819  
Marketable securities     8,001,647       6,953,906  
Trade accounts receivable     1,495,707       1,049,651  
Inventories     858,253       954,817  
Prepaid expenses     17,069       17,560  
Loans and exchanges     4,820       7,055  
Accrued interest receivable     54,563       55,680  
                 
Total current assets     13,691,431       12,485,488  
                 
                 
PROPERTY AND EQUIPMENT                
Land     216,406       216,406  
Building and improvements     980,398       935,176  
Machinery and equipment     2,158,957       2,160,803  
Automobiles     43,268       43,268  
                 
Total property and equipment     3,399,029       3,355,653  
Less accumulated depreciation     2,377,080       2,294,403  
                 
Net property and equipment     1,021,949       1,061,250  
                 
OTHER ASSETS                
Deposits     2,837       22,671  
Total assets   $ 14,716,217     $ 13,569,409  
                 

-17-



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

LIABILITIES AND STOCKHOLDERS' EQUITY

    November 1, 2014   October 26, 2013
CURRENT LIABILITIES                
                 
Accounts payable - trade   $ 92,446     $ 90,563  
Accrued income taxes     20,313       54,950  
Accrued salaries and wages     314,657       199,721  
Accrued professional fees     38,357       96,540  
Deferred income taxes     27,380       22,690  
Other current liabilities     50,408       45,376  
                 
Total current liabilities     543,561       509,840  
                 
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     13,755,871       12,641,792  
Accumulated other comprehensive income:                
Unrealized holding gain on marketable securities     81,308       82,300  
Less treasury stock at cost - 224,415 shares     (187,218)       (187,218)  
Total stockholders' equity     14,172,656       13,059,569  
Total liabilities and stockholders' equity   $ 14,716,217     $ 13,569,409  
                 

-18-



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

    Fiscal Year Ended
November 1, 2014
(53 weeks)
  Fiscal Year Ended
October 26,2013
(52 weeks)
                 
NET SALES   $ 7,073,463     $ 6,219,616  
COST OF SALES     4,610,755       3,953,317  
Gross profit on sales     2,462,708       2,266,299  
                 
OPERATING EXPENSES                
Sales & delivery     24,776       42,106  
General & administrative     1,194,217       1,057,652  
Total operating expenses     1,218,993       1,099,758  
Operating income     1,243,715       1,166,541  
                 
OTHER INCOME     496,856       317,994  
Income before taxes     1,740,571       1,484,535  
                 
FEDERAL AND STATE INCOME TAXES     626,492       541,414  
Net income     1,114,079       943,121  
                 
OTHER COMPREHENSIVE INCOME                
Unrealized holding (losses) on                
marketable securities, net of taxes     (992)       (21,473)  
Comprehensive income   $ 1,113,087     $ 921,648  
                 
EARNINGS PER SHARE OF                
COMMON STOCK   $ 1.44     $ 1.22  
                 
Average shares of stock outstanding     775,585       775,585  

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

     
    53 Weeks Ended
November 1, 2014
  52 Weeks Ended
October 26, 2013
                 
RETAINED EARNINGS - beginning of period   $ 12,641,792     $ 12,202,801  
Net income     1,114,079       943,121  
      13,755,871       13,145,922  
                 
Less: Dividends paid     -0-       504,130  
RETAINED EARNINGS - end of period   $ 13,755,871    $ 12,641,792  

-19-



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 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 the 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  
                                                 
Net income for fiscal year ended November 1, 2014                     1,114,079                       1,114,079  
Unrealized holding losses on securities arising during the period, net of tax of $14,316                             (992)               (992)  
BALANCE NOVEMBER 1, 2014   $ 250,000     $ 272,695     $ 13,755,871     $ 81,308     $ (187,218)     $ 14,172,656  
                                                 

-20-



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

    Fiscal Year Ended
November 1, 2014
(53 weeks)
  Fiscal Year Ended
October 26,2013
(52 weeks)
                 
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net income   $ 1,114,079     $ 943,121    
Adjustments to reconcile net income to net                
cash used by operating activities:                
Depreciation     143,544       147,005  
(Gain) loss on sale of securities     (92,728)       67,508  
Deferred income taxes     5,350       (70,145)  
(Increase) decrease in:                
Accounts receivable     (446,056)       298,332  
Inventories     96,564       (302,284)  
Prepaid expenses     491       345  
Loans and exchanges     2,235       1,887  
Accrued interest receivable     1,117       9,435  
Increase (decrease) in:                
Accounts payable     1,883       13,139  
Accrued income taxes     (34,637)       21,600  
Accrued salaries and wages     114,936       (14,079)  
Accrued professional fees     (58,183)       (2,339)  
Other current liabilities     5,032       6,488  
Net cash provided by operating activities     853,627       1,120,013  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchases of fixed assets     (104,243)       (474,196)  
Purchases of securities     (2,251,115)       (4,328,709)  
Proceeds from sale of securities     1,291,497       4,792,517  
Return of security capital     2,954       -0-  
Deposits     19,833       6,950  
Net cash (used) by investing activities     (1,041,074)       (3,438)  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Dividends paid     -0-       (504,130)  
                 
(Decrease) increase in cash     (187,447)       612,445  
                 
Cash and cash equivalents at beginning of period     3,446,819       2,834,374  
                 
Cash and cash equivalents at end of period   $ 3,259,372     $ 3,446,819  
                 
SUPPLEMENTAL DISCLOSURES:                
Income taxes paid   $ 655,779     $ 589,959  
                 

-21-



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.

Comparable Periods

The years ended November 1, 2014 and October 26, 2013 represent fifty-three and fifty-two weeks respectively.

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.

-22-



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 $33,213 and $30,846 for the years ended November 1, 2014 and October 26, 2013, 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 when products are shipped and risk of loss and title has passed to the customer in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 605, Revenue Recognition.

Consideration of Subsequent Events

These financial statements were approved and authorized for issue by the Board of Directors on January 26, 2015 and include review of subsequent events through that date.

-23-



Opt-Sciences Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 -  Inventories

Inventories consisted of the following:

    November 1, 2014   October 26,2013
Raw materials and supplies   $ 441,138     $ 345,494  
Work in progress     285,138       317,971    
Finished goods     131,977       291,352  
Total   $ 858,253     $ 954,817  



NOTE 3 -  Marketable Securities

    Amortized Cost   Gross Unrealized
Gains
  Gross Unrealized
Losses
  Fair Value
November 1, 2014                                
Common stock   $ 208,602     $ 2,898     $ -0-     $ 211,500  
Preferred stock     2,656,848       77,176       -0-       2,734,024  
Corporate notes     1,718,197       29,148       -0-       1,747,345  
High yield bonds     2,050,481       37,746       -0-       2,088,227  
Foreign debt securities     768,535       46,865       -0-       815,400  
Mutual funds     463,470       -0-       (58,319)       405,151  
Total   $ 7,866,133     $ 193,833     $ (58,319)     $ 8,001,647  
                                 
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     768,535       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  


The following is a summary of maturities of debt securities available for sale as of November 1, 2014:

    November 1, 2014   October 26, 2013
One year and under   $ 245,200     $ 254,623  
One to five years     2,962,792       2,978,094    
Five to ten years     1,080,239       1,175,755    
Over ten years     248,982       242,500  
Total   $ 4,537,213     $ 4,650,972  


Sales of securities available for sale during the years ended November 1, 2014 and October 26, 2013 were as follows:

    2014   2013
Proceeds from sales   $ 1,291,497     $ 4,792,517  
Gross realized gains   $ 122,222     $ 72,653    
Gross realized losses   $ 29,494     $ 142,257    



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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)
November 1, 2014                
Common stock  $211,500   $211,500   $-0-   $-0- 
Preferred stock   2,734,024    2,734,024    -0-    -0- 
Corporate notes   1,747,345    1,747,345    -0-    -0- 
High yield bonds   2,088,227    2,088,227    -0-    -0- 
Foreign debt securities   815,400    815,400    -0-    -0-  
Mutual funds    405,151       405,151      -0-      -0-  
Total   $ 8,001,647     $ 8,001,647     $ -0-     $ -0-  
                     
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-  
                     

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Opt-Sciences Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 -   Income Taxes

The income tax expense of the Company consists of the following:

    2014   2013
Current tax expense                
Federal   $ 476,940     $ 478,239    
State     144,202       133,320  
Total     621,142       611,559  
Deferred tax expense                
Federal   $ 2,471     $ (59,659)    
State     2,879       (10,486)  
Total     5,350       (70,145)  
Income tax expense   $ 626,492     $ 541,414  

At November 1, 2014, the Company had a deferred tax asset of $51,829 and a deferred tax liability of $79,209, resulting in a net deferred tax liability of $27,380.

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.

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

At November 1, 2014, the Company had capital loss carry forwards of $72,903 expiring in 2015 through 2019. All of these losses are deemed to be usable before expiration.

All tax returns from fiscal years 2011 to 2014 are subject to potential IRS audit.

NOTE 6 -  Major Customers

Two customers accounted for $3,439,339 of net sales during the year ended November 1, 2014. 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 $1,141,382 during the year ended November 1, 2014. The amount due from all these customers, included in trade accounts receivable, was $1,129,651 on November 1, 2014.

Two customers accounted for $2,898,797 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.

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 $2,714,500 on November 1, 2014.

NOTE 8 -  Related Party Transactions

During fiscal years 2014 and 2013, the Company incurred legal fees of $95,000 and $87,500, 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, $29,375 and $87,500 were included in accounts payable at November 1, 2014 and October 26, 2013, respectively.

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