Business Context and Reporting Period
Company: Optical Cable Corporation (OCC)
Filing Type: Form 8-K (Current Report)
Date of Report: April 30, 2009
Reporting Period: Event date April 30, 2009; Signed May 6, 2009
OCC is a Virginia corporation specializing in fiber optic cable products. This filing reports an extension of a loan and warrant agreement with Applied Optical Systems, Inc. (AOS), a start-up connector company.
Key Financial Metrics
This filing does not report consolidated revenue, profit, cash flow, margins, or general debt levels for OCC. Specific financial terms related to the AOS transaction include:
- Warrant Exercise Price: $1.5 million
- Equity Interest: Right to acquire up to 56% of AOS
- Loan Origin: April 22, 2005
Material Changes
On April 30, 2009, OCC and AOS agreed to extend the following dates from May 1, 2009, to May 31, 2009:
- The maturity date of OCC's loan to AOS.
- The exercise date of the warrant issued by AOS to OCC.
OCC is currently in negotiations with AOS regarding the potential restructuring of the loan and warrant terms. Discussions include the possibility of exercising the warrant and accelerating the purchase of the remaining equity of AOS.
Outlook, Risks, and Management Commentary
Strategic Rationale: The loan and related transactions are part of OCC's strategy to preserve options for:
- Expansion of its product line offering.
- Additional channels to market for military and harsh environment fiber optic cable products.
- Responding to changes in strategic partnerships and the competitive landscape.
Future Actions: OCC may seek to acquire all of the capital stock of AOS at the time of the warrant exercise. Further details on the loan are referenced in Note 5 of the condensed consolidated financial statements for the three months ended January 31, 2009.
Investor Verification Checklist
- Verify the status of negotiations regarding the restructuring of the AOS loan and warrant.
- Confirm whether OCC intends to exercise the warrant to acquire the remaining equity of AOS by the new May 31, 2009 deadline.
- Review Note 5 of the financial statements for the quarter ended January 31, 2009, for detailed loan terms and valuation.
- Assess the impact of the AOS relationship on OCC's military and harsh environment product lines.