SEC Info - Optical Cable Corp - ‘S-1’ on 6/22/01

SEC Info℠

Home

Help

Please Sign In

Optical Cable Corp – ‘S-1’ on 6/22/01

On: Friday, 6/22/01, at 5:21pm ET · Accession #: 916641-1-500604 · File #: 333-63710

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 6/22/01  Optical Cable Corp                S-1                    4:264K                                   Donnelly Financial/FA

Registration Statement (General Form) — Form S-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-1         Form S-1 Registration Statement                       80    403K 
 2: EX-3.1      Amended and Restated Articles of Incorporation         4     18K 
 3: EX-5.1      Opinion of McGuirewoods                                1      8K 
 4: EX-23.1     Consent of Independent Auditors                        1      4K

S-1 — Form S-1 Registration Statement
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) ABN AMRO Rothschild LLC Additional Information Balance Sheets Business Capitalization Description of Capital Stock Dividend Policy Exhibits Experts Financial Statement Schedules Forward-Looking Statements Gross profit Income from operations Income (loss) before income tax expense Income tax expense Indemnification of Directors and Officers Independent Auditors' Report Index to Financial Statements Legal Matters Legal Proceedings Management Management's Discussion and Analysis of Results of Operations and Financial Condition Net income Net income (loss) Net sales Notes to Financial Statements Offering, The Other Expenses of Issuance and Distribution Other income (expense), net Price Range of Our Common Stock Principal and Selling Shareholders Prospectus Summary Recent Sales of Unregistered Securities Risk Factors Selected Financial Information Selling, general and administrative expenses Statements of Cash Flows Statements of Income (Loss) Statements of Stockholders' Equity The Offering Undertakings Underwriting Use of Proceeds
1	1st Page - Filing Submission
2	ABN AMRO Rothschild LLC
4	Prospectus Summary
6	The Offering
9	Risk Factors
15	Forward-Looking Statements
16	Use of Proceeds
"	Price Range of Our Common Stock
"	Dividend Policy
17	Capitalization
18	Selected Financial Information
20	Management's Discussion and Analysis of Results of Operations and Financial Condition
22	Net sales
"	Gross profit
"	Selling, general and administrative expenses
"	Income from operations
"	Other income (expense), net
23	Income (loss) before income tax expense
"	Income tax expense
"	Net income (loss)
24	Net income
29	Business
41	Legal Proceedings
43	Management
49	Principal and Selling Shareholders
50	Description of Capital Stock
53	Underwriting
54	Legal Matters
"	Experts
55	Additional Information
56	Index to Financial Statements
57	Independent Auditors' Report
58	Balance Sheets
59	Statements of Income (Loss)
60	Statements of Stockholders' Equity
61	Statements of Cash Flows
62	Notes to Financial Statements
77	Item 13. Other Expenses of Issuance and Distribution
"	Item 14. Indemnification of Directors and Officers
"	Item 15. Recent Sales of Unregistered Securities
"	Item 16(a). Exhibits
78	Item 16(b). Financial Statement Schedules
"	Item 17. Undertakings

S-1 1st Page of 80 TOC ↑Top Previous Next ↓Bottom Just 1st
As filed with the Securities and Exchange Commission on June 22, 2001
Registration Statement No. 333-
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------
Optical Cable Corporation
(Exact Name of Registrant as Specified in Its Charter)

[Download Table]

Virginia 3357 54-1237042
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification Number)
Incorporation or Classification Code
Organization) Number)

5290 Concourse Drive
Roanoke, Virginia 24019
(540) 265-0690
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
----------------
Robert Kopstein
President
Optical Cable Corporation
5290 Concourse Drive
Roanoke, Virginia 24019
(540) 265-0690
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
----------------
Copies to:

[Download Table]

Leslie A. Grandis Alan Dean
McGuireWoods LLP Davis Polk & Wardwell
One James Center 450 Lexington Avenue
901 East Cary Street New York, New York 10017
Richmond, Virginia 23219

----------------
Approximate date of commencement of proposed sale to the public: As soon as
possible after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

----------------
CALCULATION OF REGISTRATION FEE

[Download Table]
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

Proposed
Maximum
Aggregate Amount of
Title of each Class of Offering Registration
Securities to be Registered Price(1)(2) Fee
-------------------------------------------------------------------------------

Common Stock, no par value........................... $90,000,000 $22,500
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

(1) Includes $11,739,130 of common stock that the underwriters will have the
option to purchase from the registrant solely to cover over-allotments, if
any.
(2) Estimated pursuant to Rule 457(o) solely for the purpose of determining
the amount of the registration fee.
----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

S-1 2nd Page of 80 TOC 1st Previous Next ↓Bottom Just 2nd
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

PROSPECTUS

Subject to Completion, Dated June 22, 2001

[OPTICAL CABLE LOGO]

Common Stock

-----------

Of the shares of common stock offered, Optical Cable is offering
shares and the selling shareholder is offering shares. Optical
Cable will not receive any of the proceeds from the sale of the shares offered
by the selling shareholder.

-----------

Investing in our common stock involves risks. See "Risk Factors" beginning on
page 8.

Our common stock is quoted on the Nasdaq National Market under the symbol
"OCCF". On June 21, 2001, the last reported sale price of the common stock was
$10.11 per share. See "Price Range of Common Stock" on page 15.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

[Download Table]

Public Proceeds to
Offering Underwriting Proceeds to Selling
Price Discounts Optical Cable Shareholder
-------- ------------ ------------- -----------

Per Share....................... $ $ $ $
Total........................... $ $ $ $

We have granted the underwriters an option to purchase up to an additional
shares to cover over-allotments, if any.

We expect that certificates for the shares will be ready for delivery in New
York, New York on or about , 2001.

-----------

ABN AMRO Rothschild LLC

, 2001.

S-1 3rd Page of 80 TOC 1st Previous Next ↓Bottom Just 3rd
----------------

TABLE OF CONTENTS

[Download Table]

Page
----

Prospectus Summary.................... 3
Risk Factors.......................... 8
Forward-Looking Statements............ 14
Use of Proceeds....................... 15
Price Range of Our Common Stock....... 15
Dividend Policy....................... 15
Capitalization........................ 16
Selected Financial Information........ 17
Management's Discussion and Analysis
of Results of Operations and
Financial Condition.................. 19
[Download Table]

Page
----

Business.............................. 28
Management............................ 42
Principal and Selling Shareholders.... 48
Description of Capital Stock.......... 49
Underwriting.......................... 52
Legal Matters......................... 53
Experts............................... 53
Additional Information................ 54
Index to Financial Statements.........F-1

----------------

You should rely only on the information contained in this prospectus. We
have not, the underwriters have not and the selling shareholder has not
authorized any other person to provide you with additional or different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. We are not, the underwriters are not and the selling
shareholder is not making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the
information appearing in this prospectus is accurate as of its date only and
our business, financial condition, results of operations and prospects may have
changed since that date.

----------------

This prospectus contains trademarks, service marks and registered marks of
Optical Cable Corporation. Kevlar(TM) is a registered trademark of E.I. duPont
de Nemours & Company.

S-1 4th Page of 80 TOC 1st Previous Next ↓Bottom Just 4th
PROSPECTUS SUMMARY

The following summary highlights information we present more fully elsewhere
in this prospectus. This prospectus contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially
from those anticipated in the forward-looking statements as a result of factors
described under the heading "Risk Factors" and elsewhere in this prospectus.

OPTICAL CABLE CORPORATION

We are a leading manufacturer of fiber optic cables for high bandwidth
transmission of data, video and voice communications over moderate distances of
up to 10 miles. Our products directly address the needs of the growing market
for fiber optic cables in metropolitan, access and enterprise networks. Our
products utilize a proprietary tight buffer coating and process that protects
the optical fiber and a fiber optic cable design that achieves superior
mechanical and environmental performance required by those markets. We have a
global customer base, including distributors, original equipment manufacturers,
system integrators, electrical contractors, value added resellers and end-
users. In fiscal year 2000, we sold our products directly to approximately
1,200 customers.

The number of communications networks and the quantity of information
transmitted over them have increased substantially in recent years due to the
rapid growth of data intensive applications, such as Internet access and e-
commerce, e-mail, video conferencing, multimedia file transfers and the
movement of large blocks of stored data across networks. Network service
providers have focused on improving the transmission capacity, or bandwidth and
performance of their networks to keep pace with the increase in traffic.

Optical networks are comprised of a variety of networking equipment and
components required to transmit, process, change, amplify and receive light
that carries data, video and voice communications over fiber optic cables from
one location to another. Improvements in performance and reductions in the cost
of optical networking equipment have made it economically feasible to deploy
optical networks in moderate distance applications such as enterprise networks.
We believe that optical fiber installations in metropolitan and access networks
will also experience significant growth as a result of the above factors. To
bring the bandwidth and performance of optical networks to metropolitan markets
and end-users, moderate distance fiber optic cabling infrastructure must be
deployed in cities and enterprises.

We believe that we are well positioned to capitalize on the growing
worldwide demand for tight-buffered fiber optic cables for use in the rapidly
growing metropolitan, access and enterprise markets. We have a unique
technology base that provides significant advantages in addressing the tight-
buffered fiber optic cable market. We have developed considerable expertise in
fiber optic cable design, manufacturing and production processes that enables
us to produce high performance fiber optic cables cost effectively and at high
yields. Our product line is diverse and versatile, in keeping with continually
evolving application needs of customers in the moderate distance market. Our
fiber optic cables can be used both indoors and outdoors, are easy and
economical to install, provide a high degree of reliability and offer industry
leading performance characteristics.

S-1 5th Page of 80 TOC 1st Previous Next ↓Bottom Just 5th
Our objective is to be the leading manufacturer and supplier of
indoor/outdoor tight-buffered fiber optic cables for metropolitan, access and
enterprise networks. We intend to expand our business by producing fiber optic
cables that are versatile, reliable, cost effective and responsive to evolving
market requirements. The key elements of our strategy are to:

. focus on the tight-buffered indoor/outdoor fiber optic cable market;

. develop high performance products and offer a broad product line;

. capitalize on our proprietary, automated manufacturing processes;

. leverage our close customer relationships;

. expand our sales and marketing effort; and

. pursue strategic alliances and acquisitions.

We were incorporated in Virginia in 1983. Our executive offices are located
at 5290 Concourse Drive, Roanoke, Virginia 24019, and our telephone number is
(540) 265-0690. Our website is located at www.occfiber.com. Information
contained on our website is not part of this prospectus. We have included our
website address only as an inactive textual reference and do not intend it to
be an active link to our website.

S-1 6th Page of 80 TOC 1st Previous Next ↓Bottom Just 6th
THE OFFERING

[Download Table]

Common stock offered:
By us.................................... shares
By the selling shareholder............... shares
---------
Total.................................. shares
=========

Common stock to be outstanding after the
offering.................................. shares

Selling shareholder................. Robert Kopstein, our chief executive
officer and largest shareholder, is the
selling shareholder.

Use of proceeds..................... Our net proceeds from the offering will
be approximately $ million. We intend
to use $ million of the net proceeds
to repay our outstanding short-term
borrowings and the rest for general
corporate purposes including working
capital, potential expansion of
manufacturing capabilities and possible
strategic alliances and acquisitions. We
will not receive any proceeds from the
sale of our common stock by the selling
shareholder.

Nasdaq National Market symbol....... OCCF

The number of shares of common stock that will be outstanding after this
offering excludes:

. 784,313 shares issuable upon the exercise of options outstanding as of
April 30, 2001 at a weighted-average exercise price of $8.84 per share,
and

. 5,215,687 additional shares reserved for issuance under our 1996 Stock
Incentive Plan.

S-1 7th Page of 80 TOC 1st Previous Next ↓Bottom Just 7th
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

[Enlarge/Download Table]

Six Months
Ended
Years Ended October 31, April 30,
---------------------------------------- --------------------
1996 1997 1998 1999 2000 2000 2001
------- ------- ------- ------- ------- ------- ------------
(unaudited)
(in thousands, except per share data)

Statement of Income
(Loss) Information:
Net sales.............. $45,152 $52,189 $50,589 $50,699 $58,219 $24,374 $34,373
Cost of goods sold..... 24,907 30,613 29,330 27,547 30,878 13,260 18,666
Gross profit........... 20,245 21,576 21,259 23,152 27,341 11,114 15,707
Income from
operations............ 11,829 12,004 11,320 12,353 12,317 5,383 8,033
Other income (expense),
net (1)............... 198 (47) 57 166 417 1,919 (9,363)
Net income (loss)...... 9,221 7,807 7,270 8,305 8,255 4,731 (3,772)
Pro forma income data
(2):
Net income, as
reported.............. $ 9,221
Pro forma income tax
provision............. 1,747
-------
Pro forma net income... $ 7,474
=======
Net income (loss) per
share:
Basic (pro forma for
1996) (2) (3)......... $ 0.13 $ 0.14 $ 0.13 $ 0.15 $ 0.15 $ 0.08 $ (0.07)
======= ======= ======= ======= ======= ======= =======
Diluted (pro forma for
1996) (2) (3)......... $ 0.13 $ 0.13 $ 0.13 $ 0.15 $ 0.15 $ 0.08 $ (0.07)
======= ======= ======= ======= ======= ======= =======
Weighted average
shares:
Basic (pro forma for
1996) (3)............ 59,041 58,013 57,431 56,504 56,307 56,244 56,318
======= ======= ======= ======= ======= ======= =======
Diluted (pro forma for
1996) (3)............ 59,412 58,526 57,863 56,865 56,758 56,701 56,650
======= ======= ======= ======= ======= ======= =======

April 30, 2001
--------------------
As
Actual Adjusted (4)
------- ------------
(unaudited)
(in thousands)

Balance Sheet Information:
Cash and cash equivalents....................................... $ 1,329 $
Trading securities.............................................. 5,030
Working capital................................................. 26,298
Total assets.................................................... 44,297
Short-term borrowings........................................... 1,108
Total stockholders' equity...................................... 38,514

S-1 8th Page of 80 TOC 1st Previous Next ↓Bottom Just 8th
includes income taxes from April 1, 1996, and for informational purposes,
the statement of income information for the year ended October 31, 1996,
includes a pro forma adjustment for income taxes which would have been
recorded if we had been subject to income taxes for the entire fiscal year
presented.
(3) On August 31, 2000, our Board of Directors approved a 3-for-2 stock split
effected in the form of a stock dividend of one share paid on September
28, 2000, upon each two shares held by shareholders of record at the close
of business on September 8, 2000. Our stock began trading ex-dividend on
September 29, 2000. All references to share and per share data, except for
references to authorized shares, contained elsewhere in this prospectus
have been retroactively adjusted to reflect the impact of the approved
stock dividend.
(4) The as adjusted amounts above give effect to our sale of shares of common
stock in this offering at an assumed offering price of $ per share,
less estimated underwriting discounts and commissions and estimated
offering expenses, and the application of the proceeds of the offering to
repay our outstanding short-term borrowings.

S-1 9th Page of 80 TOC 1st Previous Next ↓Bottom Just 9th
RISK FACTORS

Investing in our common stock involves a high degree of risk. You should
carefully consider the following risk factors and all other information
contained in this prospectus before investing in our common stock. The trading
price of our common stock could decline due to any of these risks and you may
lose all or part of your investment.

Risks Related to Our Industry

Any decline in the demand for tight-buffered fiber optic cable will cause
our net sales to fall.

Tight-buffered fiber optic cable accounts for substantially all of our net
sales. As a result, any decline in the demand for tight-buffered fiber optic
cable will cause our net sales to fall and adversely affect our growth
prospects and stock price.

Our future growth depends on the rate at which optical networks are
deployed in the metropolitan, access and enterprise markets.

We focus on producing tight-buffered fiber optic cable that is used to
connect optical networking equipment in the metropolitan, access and
enterprise markets. Our future growth depends on the rate at which optical
networking and related optical cabling are deployed in these markets. Tight-
buffered fiber optic cable is not suitable for use in the long-haul networking
market due to cost inefficiencies and size considerations. We cannot be
certain that organizations in metropolitan, access and enterprise markets will
continue to deploy fiber optic cabling to extend the reach of their fiber
optic networks. Moreover, we cannot be certain of the growing use of optical
networks by organizations in the metropolitan, access and enterprise markets.
The desire of organizations to deploy fiber optic cabling will depend on end-
user demand for the increased bandwidth made possible by optical networks. The
recent economic downturn may dampen capital spending on fiber optic networking
and fiber optic cables.

The optical networking market is new and if the markets for our products do
not develop and expand as we anticipate, demand for our products may
decline, which would negatively impact our financial performance.

The optical networking market is new and characterized by rapid
technological change, changes in customer requirements, evolving industry
standards and frequent new product introductions. Because the market is new,
it is difficult to predict its potential size or future growth rate. Our
success will, to a significant degree, depend on our ability to develop and
introduce in a timely fashion new products that address our customers' diverse
needs, incorporate new technologies, conform to industry standards and achieve
market acceptance. Fiber optic cabling also competes with alternative
broadband delivery technologies such as wireless and coaxial cable. If
alternative broadband technologies succeed, demand for fiber optic cables may
decline.

Risks Related to Our Business

Our ability to remain competitive in the fiber optic cable market is
crucial to our continued success.

The market for fiber optic cables, including the moderate distance market
in which our products are concentrated, is highly competitive. We compete with
large, integrated fiber optic cable manufacturers such as Alcatel, Corning and
Lucent. Some of our competitors, including these and others, are more
established, benefit from greater market recognition and have much greater
financial, research and development, production and marketing resources than
we do. Competition could increase if new companies enter the market or if
existing competitors expand their product lines. Additionally, fiber optic
cable competes with copper wire cable and other alternative transmission media
including wireless and satellite communications. An increase in competition
could have a material adverse effect on our business and operating results
because of price reductions and loss of market share. There can be no
assurance that we will be able to maintain our competitive position.

S-1 10th Page of 80 TOC 1st Previous Next ↓Bottom Just 10th
We expect our quarterly results to fluctuate and the price of our common
stock will likely fall if our quarterly results are lower than the
expectations of securities analysts.

We expect our net sales and net income to fluctuate. In future quarters,
our operating results may be below the expectations of securities analysts. If
this occurs, the price of our common stock is likely to fall and you may lose
all or part of your investment. A number of factors, many of which are
discussed in more detail in other risk factors, may cause variations in the
results of our operations, including:

. the proportion of our net sales made through distributors;

. the proportion of large to small orders;

. our product mix;

. the timing of orders that we receive from our customers;

. changes in the cost and availability of our raw materials;

. our manufacturing capacity and yield;

. capital spending for fiber optic cabling in the metropolitan, access and
enterprise markets; and

. changes in the value of the Nasdaq 100 stock index, which will directly
affect the value of our investment in the Nasdaq 100 Trust and our net
income.

A significant percentage of our expenses, including those relating to
manufacturing, sales and marketing and general and administrative functions,
are relatively fixed in the short term. As a result, if we experience delays
in generating or recognizing revenue, our quarterly operating results would be
disproportionately affected. You should not rely on our results for one
quarter as any indication of our future performance. Our results of operations
also reflect some seasonality. Our net sales for our first quarter ending in
January are generally lower than in the immediately preceding fourth quarter
ending in October. We believe this pattern is due to seasonality in the
construction industry and the September 30 federal government fiscal year end.

We have recently suffered significant net losses as a result of our
investment in the Nasdaq 100 Trust and we will continue to suffer non-
operating losses if the Nasdaq 100 stock index continues to decline.

During the six months ended April 30, 2001, we reported a net loss of $3.8
million. This loss resulted from our investment and active trading in the
Nasdaq 100 Trust, which is designed to closely track the price and yield
performance of the Nasdaq 100 stock index. For accounting purposes, we
categorize our investment in the Nasdaq 100 Trust as trading securities and we
record the investment on our balance sheet at fair value, which is based on
quoted market prices. As of April 30, 2001, we had a $5.0 million investment
in the Nasdaq 100 Trust and outstanding margin borrowings of $1.1 million to
finance our position. We mark our investment to market on each balance sheet
date. Any decline in fair value from the previous balance sheet date is
recorded as an unrealized loss while any increase in fair value is recorded as
an unrealized gain. Our sales of the Nasdaq 100 Trust resulted in realized
gains and losses on our investment. Realized gains and losses are determined
on the first in, first out basis. We include realized and unrealized gains and
losses on trading securities in other income (expense), net. As the Nasdaq 100
stock index has declined, we have incurred significant trading losses. In
addition, we have been required from time to time to sell a portion of our
position to meet margin calls on our margin borrowings. We incurred
approximately $9.2 million of realized and unrealized losses on our investment
in the Nasdaq 100 Trust during the first six months of fiscal year 2001. Our
active trading in the Nasdaq 100 Trust continued through May 14, 2001. Our
Board of Directors has adopted an Investment Objectives and Guidelines policy,
in which we state that we will make no additional cash investments in the
Nasdaq 100 Trust or in stocks of other companies, and that any margin calls
relating to our margin borrowings will be met solely through the sale of
securities purchased on margin and not by further cash contributions. If the
Nasdaq 100 stock index continues to decline, we will recognize additional
unrealized losses and may suffer realized losses on sales.

S-1 11th Page of 80 TOC 1st Previous Next ↓Bottom Just 11th
Some of our optical fiber suppliers are also competitors and if our supply
relationship with them deteriorates, it could harm our business.

Some of our suppliers of optical fiber are both our source for optical
fiber and major competitors in the market for fiber optic cables. For example,
we buy some of our optical fiber from Alcatel, Corning and Lucent, each of
which offers their own fiber optic cables that compete with our fiber optic
cables. Our business, financial condition and results of operations could be
harmed if these suppliers reduced the amount of optical fiber available to us,
increased their prices, lengthened the lead time for orders or otherwise
adversely affected our ability to secure optical fiber on competitive terms.

If our supplier relationships are disrupted, our operating results may
suffer.

We currently rely on a limited number of suppliers for our supply of
optical fiber and KevlarTM and other aramid yarns. We do not have any long-
term agreements with these suppliers. These raw materials are critical to our
production of fiber optic cables, and any disruption in the supply of raw
materials could adversely affect our fiber optic cable production capability
and adversely affect our operating results. There can be no assurance that our
suppliers will continue to meet our optical fiber and KevlarTM and other
aramid yarn requirements or meet these requirements on competitive terms.

Over 40% of our net sales are made to distributors. If one or more of our
distributors do not continue to purchase our products in significant
quantities, our net sales and profitability may materially decline.

During fiscal year 2000 and the six months ended April 30, 2001, over 40%
of our net sales were made to distributors. As a result, we depend on the
selling efforts of our distributors. Our distributors carry the products of
our competitors and are not contractually committed to carry our products or
purchase any minimum quantities. If any one of our distributors decides to
purchase significantly less of our products or terminate its relationship with
us, our net sales and profitability may materially decline. We could lose our
key distributors because of factors beyond our control, such as a significant
disruption in our distributors' businesses generally or in a specific product
line. In addition, if any of our distributors merge, we may experience lower
overall sales. We are also exposed to the creditworthiness of our
distributors. Our largest distributor in fiscal year 2000, accounting for
15.5% of our net sales, filed for liquidation under the bankruptcy laws in
January 2001.

We rely on our proprietary manufacturing processes, and if our competitors
develop similar processes or third parties infringe upon those processes,
our ability to compete may be harmed.

Our success and ability to compete is dependent in part on our proprietary
manufacturing technology. None of our current manufacturing processes or
products is protected by patents. We rely on a combination of trade secrets
and technical measures to establish and protect our rights pertaining to our
production technology. This protection may not deter misappropriation or
preclude competitors from developing production processes, techniques or
equipment with features identical, similar or superior to ours, which could
harm our ability to compete. We believe that none of our products, trademarks
or other proprietary rights infringes on the proprietary rights of others.
However, third parties may assert infringement claims against us in the future
with respect to our present or future products that may require us to enter
into license agreements or result in protracted and costly litigation,
regardless of the merits of these claims.

If we fail to retain our key employees, our business may be harmed.

Our success has been largely dependent on the skills, experience and
efforts of our key employees, and the loss of the services of any of our
executive officers or other key employees could have an adverse effect on us.
In particular, since our inception, we have been led by Robert Kopstein, who
serves as our Chairman of the Board, President and Chief Executive Officer.
Our success is dependent to a significant degree on the efforts of Mr.
Kopstein. The loss or unavailability of Mr. Kopstein could have a material
adverse effect on us. We have a $5 million key man life insurance policy on
the life of Mr. Kopstein, naming us as sole beneficiary. Our future

S-1 12th Page of 80 TOC 1st Previous Next ↓Bottom Just 12th
success will also depend in part upon our continuing ability to attract and
retain highly qualified personnel, who are in great demand.

As a growing enterprise, our ability to manage our growth successfully is
crucial to our future prospects.

We are subject to a variety of risks associated with a growing business. Our
ability to operate successfully in the future will depend on our ability to
manage the effects of growth on manufacturing, distribution, marketing,
customer service, engineering, product development, quality control,
administration and financial condition. Our failure to manage growth
effectively could have a material adverse effect on our business or results of
operations.

International sales are important to us and may put our future revenues at
the risk of currency, political, economic and regulatory fluctuations.

In fiscal years 1998, 1999, 2000 and the six months ended April 30, 2001,
export sales represented approximately 21.7%, 19.7%, 21.2% and 23.5% of our net
sales, and we expect that international business will continue to account for a
significant portion of our sales. Our international business subjects us to
added burdens and risks. These burdens and risks include currency fluctuations,
greater uncertainty in political and economic conditions, unexpected changes in
regulatory and tariff requirements and added complexity in complying with legal
requirements.

Foreign regulatory bodies often establish standards different from those in
the United States. Our products are designed generally to meet U.S. standards.
Although our quality management system is certified to the internationally
recognized ISO 9001 quality standard, and although some of our products are
designed to meet the requirements of various European and Far Eastern markets,
any inability by us to maintain our ISO 9001 quality standard certification or
to design products in compliance with foreign standards could have a material
adverse effect on our operating results.

There can be no assurance that we will be able to comply with any trade or
other policies of foreign countries. Although most of our international sales
are denominated in U.S. dollars, our international business may be affected by
changes in demand resulting from fluctuations in currency exchange rates as
well as by risks such as tariff regulations.

Our common stock is largely held by one shareholder, therefore our Board of
Directors and the future success of our business may be controlled by the
decisions of one person.

After the completion of this offering, Robert Kopstein, our Chairman of the
Board, President and Chief Executive Officer, will own more than % of our
common stock. Because Mr. Kopstein's interests may differ from ours, actions
Mr. Kopstein takes with respect to us, as our controlling shareholder, may not
be favorable to us.

Mr. Kopstein's interests may not be the same as, or may conflict with, the
interests of our other shareholders. Mr. Kopstein will be able to control,
directly or indirectly and subject to applicable law, all matters affecting us,
including:

. any determination with respect to our business direction and policies,
including the appointment and removal of directors and officers;

. any determinations with respect to mergers, business combinations or
disposition of assets, our financing, compensation, option programs and
other human resources policy decisions;

. changes to agreements that may adversely affect us; and

. the payment of dividends on our common stock.

S-1 13th Page of 80 TOC 1st Previous Next ↓Bottom Just 13th
Mr. Kopstein is not prohibited from selling a controlling interest in us to
a third party. Because Mr. Kopstein's investment in our common stock was made
at per share levels considerably lower than other investors, a sale of our
company that is profitable for him may not be profitable for you.

The unfair employment practice claims brought against us could cause us to
incur substantial costs in defending ourselves, subject us to damages and
divert the attention of our management away from our operations.

On September 27, 2000, the Equal Employment Opportunity Commission,
referred to as the EEOC, filed a lawsuit against us. The EEOC's complaint
alleged a pattern or practice of discrimination on the bases of gender and
race. Four additional complaints have been filed with the EEOC against us. As
a result of these claims or future claims, we could be subject to damages that
may be substantial and that could have a material adverse effect on our
results of operations or liquidity. In addition, defending ourselves from
these claims may result in substantial cost and could divert the attention of
our management away from our operations.

Potential strategic alliances may not achieve their objectives.

We may enter into various strategic alliances. Among other matters, we
intend to explore strategic alliances designed to increase our manufacturing
capacity, to increase distribution of our products and to secure supplies of
raw materials. We may not be successful in developing any strategic alliances.
Moreover, alliances that we do develop may not achieve their strategic
objectives, and parties to our strategic alliances may not perform as
contemplated.

The forecasts of market growth by marketing research firms included in this
prospectus have not been recently updated and you should not rely on these
forecasts to project our growth.

In this prospectus, we have included forecasts of market growth from
reports of market research firms. Some of these growth forecasts have not been
updated since June 2000 and may not be realized within the time frame
forecasted. Moreover, even if markets grow as forecasted in the reports, we
may not succeed in increasing our sales to participate in the growth. As a
result, you should not rely upon these forecasts to project our growth. These
reports were prepared in June 2000 and November 2000 and we assume that these
forecasts were based in part on then prevailing general expectations of the
growth in the build-out of communications and Internet companies and on the
announced capital expenditure plans of companies in these industries.
Subsequent to the publication of these reports, there has been a significant
change in the general perception of communications and Internet companies and
many companies have announced significant reductions in the timing and amount
of their expected capital expenditures in the near and intermediate term.
Accordingly, the market growth projected in these reports may not occur within
the time frame forecasted.

If a disaster struck our primary business facility, our business, results
of operations and financial condition may be harmed.

We believe that our success to date has been, and future results of
operations will be, dependent in large part upon our ability to provide prompt
and efficient service to our customers. As a result, any disruption of our
day-to-day operations could have a material adverse effect upon us. Our
manufacturing operations, marketing, management information systems, customer
service and distribution functions are housed in a single facility in Roanoke,
Virginia. There can be no assurance that a fire, flood, earthquake or other
disaster affecting our facility would not disable these functions. Any
significant damage to this facility would have a material adverse effect on
our business, results of operations and financial condition.

Our future growth could be slowed if we are unable to expand our
manufacturing facilities on a timely basis.

Our manufacturing facilities are adequate for our current level of
production. If our net sales were to grow, we will need to increase our
manufacturing capacity. If we are unable to expand our manufacturing capacity
on

S-1 14th Page of 80 TOC 1st Previous Next ↓Bottom Just 14th
a timely basis, we may lose sales opportunities and not be able to realize our
growth potential. Our ability to expand our manufacturing capacity at our
current facilities will depend on a number of factors, including timely
delivery and installation of equipment, the availability of labor and the
hiring and training of new personnel. If we continue to grow, we may also need
to construct additional manufacturing facilities which will expose us to
construction delays, cost overruns and other risks of new construction.

Provisions of our charter documents and Virginia law may have anti-takeover
effects that could prevent a change of control, which may cause our stock
price to decline.

Each of the Virginia Stock Corporation Act, our Amended and Restated
Articles of Incorporation and our Bylaws contains provisions that may
discourage acquisition offers, if any, for us. One provision in the Articles
of Incorporation authorizes the Board of Directors to issue up to 1,000,000
shares of preferred stock in series, with the terms of each series to be fixed
by the Board of Directors. These provisions may have the effect of delaying,
deferring or preventing a change in control of us and could limit the price
that investors might be willing to pay in the future for shares of our common
stock.

Risks Related to the Offering

Management will have discretion in the use of proceeds from this offering.

Approximately $ million of the estimated net proceeds to us from the sale
of common stock in this offering has been allocated to general corporate
purposes, including working capital, potential expansion of manufacturing
capabilities and possible acquisitions. Accordingly, our management will have
discretion in allocating a significant portion of the net proceeds from our
sale of common stock. The net proceeds may be used for corporate purposes that
do not increase our profitability or our market value.

There may be sales of a substantial amount of our common stock after this
offering that could cause our stock price to fall.

Sales of a substantial number of shares of our common stock by our
executive officers or directors after this offering could cause our stock
price to fall. In addition, the sale of these shares could impair our ability
to raise capital through the sale of additional stock or other equity
securities. Our executive officers and directors own an aggregate of
54,075,968 shares of our common stock as of April 30, 2001, of which
54,000,000 shares are owned by our chief executive officer. After the
expiration of the 180 day lock-up to which our executive officers and
directors have agreed, all of these shares will be available for sale. Sales
of these shares or the perception that sales will occur could cause our stock
price to fall.

The volatility of the stock market may have a harmful effect on the price
of our common stock and our ability to raise capital.

The market price of our common stock could be subject to significant
fluctuations in response to variations in anticipated or actual operating
results and other events or factors such as announcements of technological
innovations or new products by us or by our competitors, government
regulations and developments in patent or other proprietary rights.

In addition, the market prices for stock of companies in the optical
networking sector have recently experienced significant price fluctuations.
These fluctuations often have been unrelated to the operating performance of
the specific companies whose stocks are traded. Broad market fluctuations, as
well as general economic conditions, in the United States or internationally,
may adversely affect the market price of our common stock. There can be no
assurance that the market price of the common stock will not decline below the
price at which shares are initially sold to the public in this offering.

S-1 15th Page of 80 TOC 1st Previous Next ↓Bottom Just 15th
FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking information within the meaning of
the federal securities laws. The forward-looking information may include, among
other information, statements concerning our outlook for the future; statements
of belief; future plans, strategies or anticipated events; and similar
information and statements concerning matters that are not historical facts.

The forward-looking information is subject to risks and uncertainties that
may cause actual events to differ materially from our expectations.

Factors that could cause or contribute to these differences include, but are
not limited to:

. the level of sales to key customers;

. the economic conditions affecting network service providers;

. the slowdown in corporate spending on information technology;

. actions by competitors;

. fluctuations in the price of raw materials, including optical fiber;

. our dependence on a single manufacturing facility;

. our ability to protect our proprietary manufacturing technology;

. our dependence on a limited number of suppliers;

. an adverse price change in trading securities we hold;

. an adverse outcome in litigation, claims and other actions against us;

. technological changes and introductions of new competing products; and

. changes in market demand, exchange rates, productivity, weather and
market and economic conditions in the areas of the world in which we
operate and market our products.

S-1 16th Page of 80 TOC 1st Previous Next ↓Bottom Just 16th
USE OF PROCEEDS

We expect to receive net proceeds from the offering of approximately $
million, assuming an offering price of $ per share and after deducting
underwriting discounts and commissions and estimated offering expenses. We
intend to use $ million of the net proceeds to repay short-term borrowings
and the rest for general corporate purposes, including working capital,
potential expansion of manufacturing capabilities and possible strategic
alliances and acquisitions. We are not presently negotiating any possible
acquisitions. Pending these uses, we will invest the net proceeds in U.S.
dollar denominated, short-term, interest-bearing, investment-grade securities.

PRICE RANGE OF OUR COMMON STOCK

Our common stock is traded on the Nasdaq National Market under the symbol
"OCCF". On June 21, 2001, our common stock closed at a price of $10.11 per
share.

The following table sets forth for the fiscal periods indicated the high and
low bid prices of the common stock, as reported on the Nasdaq National Market,
during the two most recent fiscal years and the current fiscal year adjusted
for the 3-for-2 stock split effected in the form of a stock dividend paid on
September 28, 2000:

[Download Table]

Range of Bid Prices
-------------------
High Low
---- ---

Fiscal Year Ended October 31, 1999
First Quarter.......................................... $11.33 $ 6.83
Second Quarter......................................... $ 9.00 $ 5.67
Third Quarter.......................................... $ 8.67 $ 6.75
Fourth Quarter......................................... $ 8.33 $ 6.08

Fiscal Year Ended October 31, 2000
First Quarter.......................................... $32.15 $ 7.08
Second Quarter......................................... $44.92 $12.92
Third Quarter.......................................... $25.67 $12.50
Fourth Quarter......................................... $24.88 $11.14

Fiscal Year Ending October 31, 2001
First Quarter.......................................... $17.94 $ 8.50
Second Quarter......................................... $14.25 $ 9.06
Third Quarter (through June 21, 2001).................. $14.05 $ 9.55

Although our common stock is traded on the Nasdaq National Market, the
trading market for our common stock has been relatively illiquid. As of April
30, 2001, we had 56,356,879 shares of common stock outstanding of which
54,000,000 shares of common stock were owned by our chief executive officer. If
a more active and liquid trading market for our common stock develops after
this offering, the trading prices for our shares may vary substantially from
historic levels.

As of April 30, 2001, there were approximately 399 shareholders of record.

DIVIDEND POLICY

We have not paid or declared any cash dividends on our common stock since
our initial public offering in April 1996 and do not expect to pay any cash
dividends in the foreseeable future. We currently intend to retain any future
earnings, if any, to finance the expansion of our business.

S-1 17th Page of 80 TOC 1st Previous Next ↓Bottom Just 17th
CAPITALIZATION

The following table sets forth our capitalization as of April 30, 2001:

. on an actual basis; and

. on an as adjusted basis reflecting our receipt of the net proceeds from
the sale of the shares of common stock by us in this offering at an
offering price of $ per share, after deducting underwriting
discounts and commissions and estimated offering expenses and applying
a portion of the net proceeds to repay outstanding short-term
borrowings.

You should read this table in conjunction with our financial statements and the
accompanying notes to our financial statements, "Selected Financial
Information" and "Management's Discussion and Analysis of Results of Operations
and Financial Condition" included elsewhere in this prospectus.

[Download Table]

April 30, 2001
-------------------
Actual As Adjusted
------- -----------
(unaudited)
(in thousands)

Short-term borrowings...................................... $ 1,108 $
Long-term debt, less current portion....................... --
Stockholders' equity:
Preferred stock, no par value, authorized 1,000,000
shares; none issued and outstanding actual and as
adjusted................................................ --
Common stock, no par value, authorized 100,000,000
shares;
issued and outstanding 56,356,879 shares actual;
issued and outstanding shares as adjusted.......... 3,889
Paid-in capital............................................ 1,783
Retained earnings.......................................... 32,842
------- ---
Total stockholders' equity............................. $38,514 $
======= ===
Total capitalization................................... $39,622 $
======= ===

The total number of outstanding shares of our common stock as of April 30, 2001
is 56,356,879, excluding:

. 784,313 shares issuable upon exercise of outstanding stock options with
a weighted-average exercise price of $8.84 per share, and

. 5,215,687 additional shares reserved for future issuance under our 1996
Stock Incentive Plan.

S-1 18th Page of 80 TOC 1st Previous Next ↓Bottom Just 18th
SELECTED FINANCIAL INFORMATION

You should read the selected financial information set forth below in
conjunction with "Management's Discussion and Analysis of Results of Operations
and Financial Condition" and our financial statements and related notes
included elsewhere in this prospectus. The statement of operations information
for the fiscal years ended October 31, 1998, 1999 and 2000 and the balance
sheet information as of October 31, 1999 and 2000 are derived from, and are
qualified by reference to, our audited financial statements and notes thereto
included elsewhere in this prospectus. The statement of operations information
for the fiscal years ended October 1996 and 1997, and the balance sheet
information as of October 31, 1996, 1997 and 1998 are derived from, and are
qualified by reference to, audited financial statements not appearing in this
prospectus. The statement of operations information for the six months ended
April 30, 2000 and April 30, 2001 and the balance sheet information as of April
30, 2001 are unaudited. In the opinion of management, all necessary
adjustments, consisting only of normal recurring adjustments, have been
included to present fairly the unaudited quarterly results when read in
conjunction with the audited financial statements and notes thereto appearing
elsewhere in this prospectus. Historical results are not necessarily indicative
of results that may be expected for any future period. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition."

[Download Table]

Six Months
Years Ended October 31, Ended April 30,
---------------------------------------- ---------------
1996 1997 1998 1999 2000 2000 2001
------- ------- ------- ------- ------- ------- -------
(unaudited)
(in thousands, except per share data)

Statement of Income
(Loss) Information:
Net sales.............. $45,152 $52,189 $50,589 $50,699 $58,219 $24,374 $34,373
Cost of goods sold..... 24,907 30,613 29,330 27,547 30,878 13,260 18,666
------- ------- ------- ------- ------- ------- -------
Gross profit .......... 20,245 21,576 21,259 23,152 27,341 11,114 15,707
Selling, general and
administrative
expenses ............. 8,416 9,572 9,939 10,799 15,024 5,731 7,674
------- ------- ------- ------- ------- ------- -------
Income from
operations............ 11,829 12,004 11,320 12,353 12,317 5,383 8,033
Other income (expense),
net (1)............... 198 (47) 57 166 417 1,919 (9,363)
------- ------- ------- ------- ------- ------- -------
Income (loss) before
income tax expense ... 12,027 11,957 11,377 12,519 12,734 7,302 (1,330)
Income tax expense
(2)................... 2,806 4,150 4,107 4,214 4,479 2,571 2,442
------- ------- ------- ------- ------- ------- -------
Net income (loss)...... $ 9,221 $ 7,807 $ 7,270 $ 8,305 $ 8,255 $ 4,731 $(3,772)
======= ======= ======= ======= ======= ======= =======
Pro forma income data
(2):
Net income, as
reported.............. $ 9,221
Pro forma income tax
provision............. 1,747
-------
Pro forma net income .. $ 7,474
=======
Net income (loss) per
share:
Basic (pro forma for
1996) (2) (3)......... $ 0.13 $ 0.14 $ 0.13 $ 0.15 $ 0.15 $ 0.08 $ (0.07)
======= ======= ======= ======= ======= ======= =======
Diluted (pro forma for
1996) (2) (3)......... $ 0.13 $ 0.13 $ 0.13 $ 0.15 $ 0.15 $ 0.08 $ (0.07)
======= ======= ======= ======= ======= ======= =======
Weighted average
shares:
Basic (pro forma for
1996) (3)............ 59,041 58,013 57,431 56,504 56,307 56,244 56,318
======= ======= ======= ======= ======= ======= =======
Diluted (pro forma for
1996) (3)............ 59,412 58,526 57,863 56,865 56,758 56,701 56,650
======= ======= ======= ======= ======= ======= =======

S-1 19th Page of 80 TOC 1st Previous Next ↓Bottom Just 19th
[Download Table]

October 31,
---------------------------------------
April 30,
1996 1997 1998 1999 2000 2001
------- ------- ------- ------- ------- -----------
(unaudited)
(in thousands)

Balance Sheet
Information:
Cash and cash
equivalents .......... $ 1,678 $ 986 $ 1,122 $ 6,817 $ 1,459 $ 1,329
Trading securities..... -- -- -- -- 17,983 5,030
Working capital ....... 14,377 19,912 18,991 21,980 31,986 26,298
Total assets .......... 31,127 35,214 32,829 37,512 52,688 44,297
Short-term borrowings.. 1,103 -- -- -- 5,659 1,108
Total stockholders'
equity................ 23,572 31,379 29,991 32,847 43,508 38,514

--------
(1) Other income (expense), net includes interest income, interest expense and
gains and losses on trading securities. In January 2000, we began investing
our excess cash in the Nasdaq 100 Trust, which is designed to closely track
the price and yield performance of the Nasdaq 100 stock index. For
accounting purposes, we categorize our investment in the Nasdaq 100 Trust
as trading securities and we record the investment on our balance sheet at
fair value, which is based on quoted market prices. Realized and unrealized
net gains or losses are included in other income (expense), net. In fiscal
year 2000 and for the six months ended April 30, 2000, we recognized gains
on trading securities, net of $289,000 and $1.7 million, and for the six
months ended April 30, 2001, we recognized losses on trading securities,
net, of $9.2 million.
(2) Through March 31, 1996, we were not subject to federal and state income
taxes since we elected, under provisions of the Internal Revenue Code, to
be taxed as an S corporation. On April 1, 1996, we completed a public
offering of 4,013,124 shares of our common stock from which we received net
proceeds of approximately $5.5 million. In connection with the closing of
our initial public offering on April 1, 1996, we terminated our status as
an S corporation effective March 31, 1996, and became subject to federal
and state income taxes. Accordingly, the statement of income information
for the year ended October 31, 1996, includes income taxes from April 1,
1996, and for informational purposes, the statement of income information
for the year ended October 31, 1996, includes a pro forma adjustment for
income taxes which would have been recorded if we had been subject to
income taxes for the entire fiscal year presented.
(3) On August 31, 2000, our Board of Directors approved a 3-for-2 stock split
effected in the form of a stock dividend of one share paid on September 28,
2000, upon each two shares held by shareholders of record at the close of
business on September 8, 2000. Our stock began trading ex-dividend on
September 29, 2000. All references to share and per share data, except for
references to authorized shares, contained elsewhere in this prospectus
have been retroactively adjusted to reflect the impact of the approved
stock dividend.

S-1 20th Page of 80 TOC 1st Previous Next ↓Bottom Just 20th
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION

You should read the following discussion in conjunction with our financial
statements and the notes thereto included elsewhere in this prospectus. This
discussion and analysis contains forward-looking statements within the meaning
of the federal securities laws. These forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ materially
from historical results or our predictions. Please see "Risk Factors" and
"Forward-Looking Statements" for a discussion of the uncertainties, risks and
assumptions associated with these statements. Amounts presented in the
following discussion have been rounded to the nearest hundred thousand, unless
the amounts are less than one million, in which case the amounts have been
rounded to the nearest thousand.

Overview

We are a leading manufacturer of a broad range of fiber optic cables for use
both indoors and outdoors. Our tight-buffered fiber optic cables are well
suited for use in moderate distance applications to connect metropolitan,
access and enterprise networks. Our tight-buffered fiber optic cables are
derived from technology originally developed for military applications
requiring rugged, flexible and compact fiber optic cables. Our tight-buffered
fiber optic cables can be used both indoors and outdoors, are easy and
economical to install, provide a high degree of reliability and offer industry
leading performance characteristics. We have designed and implemented an
efficient and highly automated manufacturing process based on proprietary
technologies. This enables us to produce high quality indoor/outdoor tight-
buffered fiber optic cable rapidly and cost efficiently.

We sell our products through our sales force to original equipment
manufacturers and to major distributors, regional distributors and various
smaller distributors. In fiscal years 1998, 1999 and 2000 and for the six
months ended April 30, 2000 and 2001, 62.5%, 63.2%, 58.0%, 59.6% and 43.3% of
our net sales were from sales to our distributors. International net sales were
21.7%, 19.7%, 21.2%, 22.0% and 23.5% in fiscal years 1998, 1999 and 2000 and
for the six months ended April 30, 2000 and 2001. Substantially all of our
international sales are denominated in U.S. dollars.

Net sales consist of gross sales of products, less discounts, refunds and
returns. Revenue is recognized at the time of product shipment or delivery to
the customer, based on shipping terms. We typically give greater discounts on
large orders and on sales to distributors than on sales to the rest of our
customer base, including original equipment manufacturers. In fiscal years
1998, 1999 and 2000 and for the six months ended April 30, 2000 and 2001,
27.3%, 30.6%, 28.0%, 27.8% and 11.0% of our net sales were attributable to two
domestic distributors. In fiscal years 1998, 1999 and 2000 and for the six
months ended April 30, 2000 and 2001, 13.2%, 15.8%, 12.5%, 11.9% and 9.7% of
our net sales were attributable to one of these distributors. Another
distributor accounted for 14.1%, 14.8% and 15.5% of net sales in fiscal years
1998, 1999 and 2000, and 15.9% and 1.3% of net sales for the six months ended
April 30, 2000 and 2001. This distributor filed for liquidation under the
bankruptcy laws in January 2001. As of October 31, 2000, we reserved
approximately $1.8 million for estimated uncollectible accounts receivable from
this distributor. As of January 31, 2001, we wrote off that $1.8 million
reserve as well as an additional $419,000, for a total write-off of $2.2
million for estimated uncollectible accounts receivable from this distributor.
Other than these two distributors, no single customer accounted for more than
5.0% of our net sales in fiscal years 1998, 1999 or 2000 or for the six months
ended April 30, 2000 or 2001.

A significant percentage of the selling price of our fiber optic cable is
based on the cost of raw materials used. Because single-mode fiber is less
expensive than multimode fiber, single-mode fiber optic cables have a lower per
unit selling price than comparable multimode fiber optic cables. We believe
that the metropolitan and access markets are predominantly users of single-mode
fiber optic cable. To the extent that our sales mix shifts toward the
metropolitan and access markets and our product mix shifts toward single-mode
cables, we will have to increase the volume of our sales to maintain our
current level of net sales. Increased volume may require us to expand our
manufacturing capacity more rapidly.

S-1 21st Page of 80 TOC 1st Previous Next ↓Bottom Just 21st
Cost of goods sold consists of the cost of materials, compensation costs and
overhead related to our manufacturing operations. The largest percentage of
costs included in cost of goods sold is attributable to costs of materials
which are variable as opposed to fixed costs. As a result, cost of goods sold
typically changes in proportion to increases and decreases in net sales.

Selling, general and administrative expenses consist of the compensation
costs for sales and marketing personnel, shipping costs, travel expenses,
customer support expenses, trade show expenses, advertising, bad debt expense,
the compensation cost for administration, finance and general management
personnel, as well as legal and accounting fees.

Other income (expense), net consists primarily of realized and unrealized
net gains (losses) on trading securities, interest income and interest expense.
In January 2000, with a view to obtaining a better investment return on our
excess cash, we began actively buying and selling shares in the Nasdaq 100
Trust, which is designed to closely track the price and yield performance of
the Nasdaq 100 stock index. These trading securities are recorded at fair
value, which is based on quoted market prices. Purchases and sales of trading
securities are recognized on a trade-date basis, the date the order to buy or
sell is executed. Net realized gains or losses are determined on the first-in,
first-out cost method. We mark our investment to market on each balance sheet
date. Any decline in fair value is recorded as an unrealized loss, while any
increase in fair value is recorded as an unrealized gain. Unrealized holding
gains and losses for trading securities are included in other income (expense),
net.

In fiscal year 2000, we recognized realized and unrealized net gains of
$289,000 in other income, net and continued to hold approximately $18.0 million
of these trading securities as of October 31, 2000. The amount of net
unrealized holding loss included in other income, net in fiscal year 2000 was
$500,000. We utilized short-term margin borrowings payable to an investment
broker to finance our position. As of October 31, 2000, the outstanding margin
borrowings totaled $5.7 million. We incurred interest expense of $57,000 on the
margin borrowings in fiscal year 2000. Our margin borrowings are collateralized
by the trading securities and are subject to margin provisions, which may
result in the sale of some or all of the trading securities to meet margin
calls.

Subsequent to October 31, 2000, we continued to purchase and sell shares in
the Nasdaq 100 Trust and during this period the fair value of those shares
continued to decline substantially. During the three months ended January 31,
2001, we recognized realized and unrealized net losses of $4.0 million, and
during the three months ended April 30, 2001, we recognized an additional
realized and unrealized net loss of $5.2 million, for a total realized and
unrealized net loss of $9.2 million included in other expense, net for the six
months ended April 30, 2001. As of April 30, 2001, our trading securities
totaled $5.0 million and the outstanding margin borrowings totaled $1.1
million. For the six months ended April 30, 2001, we incurred interest expense
of $248,000 on the margin borrowings. The amount of net unrealized holding
gains included in other expense, net for the six months ended April 30, 2001
was $183,000.

Subsequent to April 30, 2001, we purchased additional shares in the Nasdaq
100 Trust totaling $1.4 million. These purchases were financed by additional
margin borrowings. Our last purchase of shares in the Nasdaq 100 Trust was on
May 14, 2001. As of May 31, 2001, our trading securities totaled $6.2 million
and the outstanding margin borrowings totaled $2.5 million. For the month of
May 2001, we recognized unrealized losses on trading securities of $183,000 and
incurred interest expense of $10,000 on the margin borrowings. Subsequent to
May 31, 2001 through June 19, 2001, the value of our trading securities held as
of May 31, 2001 decreased by $414,000. It is possible that the price of our
trading securities could continue to experience an adverse change in the near
term.

Our active trading in the Nasdaq 100 Trust continued through May 14, 2001.
Our Board of Directors has adopted an Investment Objectives and Guidelines
policy, in which we state that we will make no additional cash investments in
the above-mentioned Nasdaq 100 Trust or in stocks of other companies, and that
any margin calls relating to the above-mentioned margin borrowings will be met
solely through the sale of securities purchased on margin and not by further
cash contributions. In addition, our Investment Objectives and Guidelines
policy states that any future investments will be in U.S. dollar denominated,
short-term, interest-bearing, investment-grade securities.

S-1 22nd Page of 80 TOC 1st Previous Next ↓Bottom Just 22nd
Results of Operations

The following table sets forth selected line items from our statements of
operations as a percentage of net sales for the periods indicated:

[Download Table]

Years Ended Six Months Ended
October 31, April 30,
------------------- ------------------
1998 1999 2000 2000 2001
----- ----- ----- -------- --------

Net sales........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.................. 58.0 54.3 53.0 54.4 54.3
----- ----- ----- -------- --------
Gross profit ..................... 42.0 45.7 47.0 45.6 45.7
Selling, general and administrative
expenses........................... 19.6 21.3 25.8 23.5 22.3
----- ----- ----- -------- --------
Income from operations............ 22.4 24.4 21.2 22.1 23.4
Other income (expense), net......... 0.1 0.3 0.7 7.8 (27.2)
----- ----- ----- -------- --------
Income (loss) before income tax
expense ......................... 22.5 24.7 21.9 29.9 (3.8)
Income tax expense ................. 8.1 8.3 7.7 10.5 7.1
----- ----- ----- -------- --------
Net income (loss)................. 14.4% 16.4% 14.2% 19.4% (10.9)%
===== ===== ===== ======== ========

Six Months Ended April 30, 2000 and 2001

Net Sales. Net sales increased 41.0% from $24.4 million for the six months
ended April 30, 2000 to $34.4 million for the six months ended April 30, 2001.
This increase was attributable to increased sales volume. Total fiber meters
shipped increased 43.8% from 82.9 million fiber meters shipped in the six
months ended April 30, 2000, to 119.1 fiber meters shipped in the six months
ended April 30, 2001. This increase in fiber meters shipped was a result of a
12.4 million increase in multimode fiber meters shipped and a 23.8 million
increase in single-mode fiber meters shipped.

Gross Profit. Gross profit increased 41.3% from $11.1 million for the six
months ended April 30, 2000 to $15.7 million for the six months ended April 30,
2001. Gross margin, or gross profit as a percentage of net sales, was 45.6% for
the six months ended April 30, 2000 compared to 45.7% for the six months ended
April 30, 2001. This slight increase in gross margin was attributable to an
increase in the proportion of sales to original equipment manufacturers
compared to distributors and was partially offset by an increase in the ratio
of sales from large orders which are typically at lower gross margins. Net
sales to distributors were 59.5% of net sales for the six months ended April
30, 2000 compared to 43.3% for the six months ended April 30, 2001.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 33.9% from $5.7 million for the six months
ended April 30, 2000 to $7.7 million for the six months ended April 30, 2001.
Selling, general and administrative expenses as a percentage of net sales were
23.5% for the six months ended April 30, 2000 compared to 22.3% for the six
months ended April 30, 2001. This increase was primarily a result of increased
marketing efforts and the increase in bad debt expense in the amount of
$419,000 related to one of our distributors that filed for liquidation under
the bankruptcy laws in January 2001.

Income from Operations. Income from operations increased 49.2% from $5.4
million for the six months ended April 30, 2000 to $8.0 million for the six
months ended April 30, 2001. This increase was due to the $4.6 million increase
in gross profit, partially offset by the $1.9 million increase in selling,
general and administrative expenses.

Other Income (Expense), Net. Other income, net decreased from $1.9 million
for the six months ended April 30, 2000 to other expense, net of $9.4 million
for the six months ended April 30, 2001. This decrease was primarily due to
losses on our trading securities. We recorded gains on trading securities, net
of $1.7 million for the six months ended April 30, 2000 compared to losses on
trading securities, net of $9.2 million for the six months ended April 30,
2001. In addition, for the six months ended April 30, 2001, we incurred
interest expense of $248,000 on short-term margin borrowings related to our
trading securities.

S-1 23rd Page of 80 TOC 1st Previous Next ↓Bottom Just 23rd
Income (Loss) Before Income Tax Expense. Income before income tax expense
decreased from $7.3 million for the six months ended April 30, 2000 to a loss
before income tax expense of $1.3 million for the six months ended April 30,
2001. This decrease was primarily due to the $9.2 million losses on trading
securities, net and the $1.9 million increase in selling, general and
administrative expenses, partially offset by increases in sales volume and
gross profit.

Income Tax Expense. Income tax expense decreased 5.0% from $2.6 million for
the six months ended April 30, 2000 to $2.4 million for the six months ended
April 30, 2001. Our reported income tax expense for the six months ended April
30, 2001 differed from the expected income tax benefit, computed based on an
expected effective tax rate of 35.0%, due primarily to the establishment of a
valuation allowance for deferred tax assets in the amount of $3.1 million. As
of April 30, 2001, we have assessed the realizability of our deferred tax
assets relating to the capital loss carryforward and unrealized net loss from
our trading securities and have determined that it is more likely than not that
these deferred tax assets will not be realized. In order to fully realize these
deferred tax assets, we will need to generate future capital gains of
approximately $8.4 million prior to the expiration of the capital loss
carryforward in 2006. For the six months ended April 30, 2000, our effective
tax rate was 35.2%.

Net Income (Loss). Net income decreased from $4.7 million for the six months
ended April 30, 2000 to a net loss of $3.8 million for the six months ended
April 30, 2001. This decrease was due to the $8.6 million decrease in income
(loss) before income tax expense, partially offset by the $129,000 decrease in
income tax expense.

Fiscal Years Ended October 31, 1998, 1999 and 2000

Net Sales. Net sales increased 0.2% from $50.6 million in fiscal year 1998
to $50.7 million in fiscal year 1999. This slight increase was primarily
attributable to a change in product mix, partially offset by reduced selling
prices. Total fiber meters shipped increased 7.5% from 156.5 million during
fiscal year 1998 to 168.2 million fiber meters shipped for the same period in
1999. This increase in fiber meters shipped was a result of a 3.3 million
increase in multimode fiber meters shipped and an 8.4 million increase in
single-mode fiber meters shipped. Net sales increased 14.8% from $50.7 million
in fiscal year 1999 to $58.2 million in fiscal year 2000. This increase was
attributable to increased sales volume. Total fiber meters shipped increased
18.5% from 168.2 million during fiscal year 1999 to 199.3 million shipped for
the same period in 2000. This increase in fiber meters shipped was a result of
a 13.8 million increase in multimode fiber meters shipped and a 17.3 million
increase in single-mode fiber meters shipped.

Gross Profit. Gross profit increased 8.9% from $21.3 million in fiscal year
1998 to $23.2 million in fiscal year 1999. Gross margin was 42.0% in fiscal
year 1998 compared to 45.7% in fiscal year 1999. This increase was due to
reduced raw fiber prices, partially offset by an increase in the ratio of net
sales attributable to our distributors from fiscal year 1998 to fiscal year
1999. Net sales to distributors were 62.5% of total net sales in fiscal year
1998 compared to 63.2% in fiscal year 1999. Gross profit increased 18.1% from
$23.2 million in fiscal year 1999 to $27.3 million in fiscal year 2000. Gross
margin was 45.7% in fiscal year 1999 compared to 47.0% in fiscal year 2000.
This slight increase was due to the impact of the decrease in the ratio of
large orders, the decrease in the ratio of net sales attributable to our
distributors and reduced raw fiber prices during the year. Net sales to
distributors were 63.2% of total net sales in fiscal year 1999 compared to
58.0% in fiscal year 2000.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased 8.6% from $9.9 million in fiscal year 1998 to
$10.8 million in fiscal year 1999. Selling, general and administrative expenses
as a percentage of net sales were 19.6% in fiscal year 1998 compared to 21.3%
in fiscal year 1999. This increase was primarily due to an increase in
marketing efforts. Selling, general and administrative expenses increased 39.1%
from $10.8 million in fiscal year 1999 to $15.0 million in fiscal year 2000.
Selling, general and administrative expenses as a percentage of net sales were
21.3% in fiscal year 1999 compared to 25.8% in fiscal year 2000. This increase
was primarily the result of an increase in the allowance for doubtful accounts
of $1.6 million. This increase in the allowance for doubtful accounts is
attributable to a

S-1 24th Page of 80 TOC 1st Previous Next ↓Bottom Just 24th
$1.8 million specific reserve for estimated uncollectible accounts receivable
from one of our distributors that filed for liquidation under the bankruptcy
laws in January 2001. Other factors that contributed to the increase in
selling, general and administrative expenses in fiscal year 2000 include an
increase in our sales force, the continued expansion of marketing efforts and
an increase in legal fees associated with a lawsuit filed against us by the
EEOC and four other complaints that have been filed against us with the EEOC.

Income from Operations. Income from operations increased 9.1% from $11.3
million in fiscal year 1998 to $12.4 million in fiscal year 1999. This increase
was due to the $1.9 million increase in gross profit, partially offset by the
$859,000 increase in selling, general and administrative expenses. Income from
operations decreased 0.3% from $12.4 million in fiscal year 1999 to $12.3
million in fiscal year 2000. This slight decrease was due to the $4.2 million
increase in gross profit, offset by the $4.2 million increase in selling,
general and administrative expenses.

Other Income (Expense), Net. Other income, net increased 187.6% from $58,000
in fiscal year 1998 to $166,000 in fiscal year 1999. This increase was
primarily due to an increase in interest income from our cash and cash
equivalents. Other income, net increased 151.3% from $166,000 in fiscal year
1999 to $417,000 in fiscal year 2000. We began investing in trading securities
and recognized related gains on trading securities, net of $289,000 in other
income, net for fiscal year 2000. The increase in other income, net resulting
from gains on trading securities, net was partially offset by interest expense
of $57,000 on short-term margin borrowings related to the trading securities.

Income Before Income Tax Expense. Income before income tax expense increased
10.0% from $11.4 million in fiscal year 1998 to $12.5 million in fiscal year
1999. This increase was primarily due to the increase in gross profit,
partially offset by the $859,000 increase in selling, general and
administrative expenses. Income before income tax expense increased 1.7% from
$12.5 million in fiscal year 1999 to $12.7 million in fiscal year 2000. This
increase was primarily due to increases in sales volume, gross profit and other
income, net, partially offset by the $4.2 million increase in selling, general
and administrative expenses.

Income Tax Expense. Income tax expense increased 2.6% from $4.1 million in
fiscal year 1998 to $4.2 million in fiscal year 1999. Our effective tax rate
was 36.1% in fiscal year 1998 compared to 33.7% in fiscal year 1999. Income tax
expense increased 6.3% from $4.2 million in fiscal year 1999 to $4.5 million in
fiscal year 2000. Our effective tax rate was 33.7% in fiscal year 1999 compared
to 35.2% in fiscal year 2000. Fluctuations in our effective tax rates are due
primarily to the amount and timing of the tax benefit related to our foreign
sales corporation which exempts from federal income taxation a portion of the
net profit realized from sales outside of the United States of products
manufactured in the United States.

Net Income. Net income increased 14.2% million from $7.3 million in fiscal
year 1998 to $8.3 million in fiscal year 1999. This increase was due to the
increase in gross margin, partially offset by the increase in selling, general
and administrative expenses and the $107,000 increase in income tax expense.
Net income decreased $50,000 from fiscal year 1999 to $8.3 million in fiscal
year 2000. This slight decrease was due to the increase in selling, general and
administrative expenses and the $265,000 increase in income tax expense,
partially offset by the increases in sales volume, gross margin and other
income, net.

S-1 25th Page of 80 TOC 1st Previous Next ↓Bottom Just 25th
Quarterly Results of Operations

The following tables set forth quarterly operating information for our most
recent ten fiscal quarters in dollars and as a percentage of net sales. This
quarterly information has been prepared on a basis consistent with our audited
financial statements. We believe this quarterly information includes all normal
recurring adjustments necessary for a fair presentation of the information
shown. The operating results for any quarter are not necessarily indicative of
results for any future period.

[Enlarge/Download Table]

Quarters Ended
-----------------------------------------------------------------------------------------------------------
July July
January 31, April 30, 31, October 31, January 31, April 30, 31, October 31, January 31, April 30,
1999 1999 1999 1999 2000 2000 2000 2000 2001 2001
----------- --------- ------- ----------- ----------- --------- ------- ----------- ----------- ---------
(unaudited)
(in thousands, except per share amounts)

Net sales........ $10,842 $12,434 $12,603 $14,820 $11,346 $13,028 $16,651 $17,194 $16,996 $17,377
Cost of goods
sold............ 6,120 6,724 7,179 7,524 6,141 7,119 8,999 8,619 9,118 9,548
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit.... 4,722 5,710 5,424 7,296 5,205 5,909 7,652 8,575 7,878 7,829
Selling, general
and
administrative
expenses........ 2,510 2,697 2,535 3,057 2,599 3,132 3,546 5,747 3,928 3,746
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from
operations..... 2,212 3,013 2,889 4,239 2,606 2,777 4,106 2,828 3,950 4,083
Other income
(expense), net.. 40 44 10 72 532 1,386 (403) (1,098) (4,126) (5,237)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss)
before income
tax expense
(benefit)...... 2,252 3,057 2,899 4,311 3,138 4,163 3,703 1,730 (176) (1,154)
Income tax
expense
(benefit)....... 804 1,094 1,082 1,234 1,105 1,466 1,303 605 (61) 2,503
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net income
(loss)......... $ 1,448 $ 1,963 $ 1,817 $ 3,077 $ 2,033 $ 2,697 $ 2,400 $ 1,125 $ (115) $(3,657)
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Basic and diluted
net income
(loss) per
share........... $ 0.03 $ 0.04 $ 0.03 $ 0.06 $ 0.04 $ 0.05 $ 0.04 $ 0.02 $ 0.00 $ (0.06)
======= ======= ======= ======= ======= ======= ======= ======= ======= =======

Net sales........ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods
sold............ 56.5 54.1 57.0 50.8 54.1 54.7 54.0 50.1 53.6 54.9
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit.... 43.5 45.9 43.0 49.2 45.9 45.3 46.0 49.9 46.4 45.1
Selling, general
and
administrative
expenses........ 23.1 21.7 20.1 20.6 22.9 24.0 21.3 33.4 23.1 21.6
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from
operations..... 20.4 24.2 22.9 28.6 23.0 21.3 24.7 16.5 23.3 23.5
Other income
(expense), net.. 0.4 0.4 0.1 0.5 4.7 10.6 (2.5) (6.4) (24.3) (30.1)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss)
before income
tax expense
(benefit)...... 20.8 24.6 23.0 29.1 27.7 31.9 22.2 10.1 (1.0) (6.6)
Income tax
expense
(benefit)....... 7.4 8.8 8.6 8.3 9.8 11.2 7.8 3.6 (0.3) 14.4
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net income
(loss)......... 13.4% 15.8% 14.4% 20.8% 17.9% 20.7% 14.4% 6.5% (0.7)% (21.0)%
======= ======= ======= ======= ======= ======= ======= ======= ======= =======

S-1 26th Page of 80 TOC 1st Previous Next ↓Bottom Just 26th
Net sales increased quarter over quarter in seven of the ten quarters ended
April 30, 2001. The increase in net sales is attributable to increased sales
volume. Our quarterly sales ranged from $10.8 million for the quarter ended
January 31, 1999 to $17.4 million for the quarter ended April 30, 2001. We
believe the increased sales volume beginning in the third quarter of fiscal
year 2000 and continuing into fiscal year 2001, compared to the same quarter in
the prior fiscal year was due to an accelerated pace of deployment of the type
of fiber optic cable sold by us. Our net sales for our first quarter ending in
January are generally lower than in the immediately preceding fourth quarter
ending in October. We believe this pattern is due to seasonality in the
construction industry and the September 30 federal government fiscal year end.

Gross margin ranged from 43.0% to 49.9% during the ten quarters ended
April 30, 2001. The volatility is caused by quarterly fluctuations in the ratio
of net sales to distributors and the ratio of net sales from large orders.
Discounts on large orders and on sales to distributors are generally greater
than for sales to the rest of our customer base, including original equipment
manufacturers.

Selling, general and administrative expenses as a percentage of net sales
during the ten quarters ended April 30, 2001 were comparable with the exception
of the quarter ended October 31, 2000, which was 33.4%. In the quarter ended
October 31, 2000, we recorded a $1.8 million specific reserve for uncollectible
accounts receivable from one of our distributors that filed for liquidation
under the bankruptcy laws in January 2001. Also during the quarter ended
October 31, 2000, we experienced increased legal fees associated with a lawsuit
filed against us by the EEOC and with four other complaints that have been
filed against us with the EEOC.

Other income, net for the quarterly periods through October 31, 1999 was
minimal and primarily represented interest income earned on our cash and cash
equivalents. However, commencing in January 2000, we began investing our excess
cash in trading securities. As a result, we recognized gains on trading
securities, net of $450,000 and $1.3 million, which is included in other
income, net for the quarters ended January 31, 2000 and April 30, 2000, and
incurred losses on trading securities, net of $417,000, $1.0 million, $4.0
million and $5.2 million, which is included in other expense, net for the
quarters ended July 31, 2000, October 31, 2000, January 31, 2001 and April 30,
2001. In addition, for the quarters ended July 31, 2000, October 31, 2000,
January 31, 2001 and April 30, 2001, we incurred interest expense on our margin
borrowings related to the trading securities of $3,000, $54,000, $150,000 and
$98,000, which is included in other expense, net.

Liquidity and Capital Resources

Our primary capital needs have been to fund working capital requirements and
capital expenditures. Our primary source of capital has been cash provided from
operations. Our bank lines of credit described below provide us with an
additional source of liquidity. There was no balance outstanding under the
lines of credit as of the end of fiscal years 1999 and 2000, or as of April 30,
2001.

Our cash and cash equivalents totaled $1.3 million as of April 30, 2001, a
decrease of $130,000, compared to $1.5 million as of October 31, 2000. The cash
and cash equivalents decrease for the six months ended April 30, 2001 was
primarily due to the purchase of property and equipment totaling $1.2 million
and the repurchase of common stock totaling $1.6 million related to our common
stock repurchase program, partially offset by net cash provided by operating
activities of $2.4 million.

On April 30, 2001, we had working capital of $26.3 million, compared to
$32.0 million as of October 31, 2000, a decrease of $5.7 million. The ratio of
current assets to current liabilities as of April 30, 2001 was 5.7 to 1,
compared to 4.6 to 1 as of October 31, 2000. The change in working capital was
primarily caused by a decrease in trading securities of $13.0 million,
partially offset by an increase in trade accounts receivable, net of $4.6
million, an increase in inventories of $1.2 million and a decrease in payable
to investment broker of $4.6 million.

Net cash provided by operating activities was $9.6 million and $11.9 million
for fiscal years 1998 and 1999. Net cash used in operating activities was $5.0
million for fiscal year 2000 and $6.7 million for the six months ended April
30, 2000. Net cash provided by operating activities was approximately $2.4
million for the six months ended April 30, 2001. Net cash provided by operating
activities in fiscal year 1998 was primarily

S-1 27th Page of 80 TOC 1st Previous Next ↓Bottom Just 27th
provided by operating income and a decrease in inventory of $2.1 million. In
1998, we reduced our inventory of optical fiber due to anticipated continued
reductions in raw fiber prices. Net cash provided by operating activities in
fiscal year 1999 was primarily provided by operating income, a decrease in
inventory of $1.2 million and an increase in accounts payable and accrued
expenses of $1.3 million. For fiscal year 2000, net cash used in operating
activities was primarily due to the purchase of approximately $18.5 million in
trading securities, an increase in trade accounts receivable of $3.0 million,
and a decrease in accounts payable and accrued expenses of $1.1 million,
partially offset by cash provided by operating income, realized net gains on
trading securities of $788,000, a decrease in inventories of $1.2 million and
an increase in payable to investment broker of $5.7 million. For the six months
ended April 30, 2000, net cash used in operating activities was due to the
purchase of approximately $13.6 million in trading securities, partially offset
by cash provided by operating income, realized net gains on trading securities
of $2.9 million and an increase in payable to investment broker of $592,000.
Net cash provided by operating activities for the six months ended April 30,
2001 was primarily provided by a decrease in trading securities of $13.1
million, a decrease in income taxes refundable of $1.2 million and an increase
in accounts payable and accrued expenses of $878,000, partially offset by an
increase in trade accounts receivable of $5.1 million, an increase in
inventories of $1.2 million and a decrease in payable to investment broker of
$4.6 million.

Net cash used in investing activities totaled $622,000, $553,000 and $1.4
million for fiscal years 1998, 1999 and 2000 and $795,000 and $1.2 million for
the six months ended April 30, 2000 and 2001. Net cash used in investing
activities was mainly for expenditures related to facilities and equipment for
fiscal years 1998, 1999 and 2000 and for the six months ended April 30, 2000
and 2001. In October 2000, we entered into agreements to purchase machinery and
equipment totaling approximately $872,000. The machinery and equipment is
expected to be delivered and installed by the end of July 2001. Total remaining
commitments under the machinery and equipment purchase agreements as of
April 30, 2001 approximated $520,000. There are no other material commitments
for capital expenditures as of April 30, 2001.

Net cash used in financing activities was $8.8 million and $5.7 million for
fiscal years 1998 and 1999 and $1.3 million for the six months ended April 30,
2001. Net cash provided by financing activities was $1.0 million for fiscal
year 2000 and $1.1 million for the six months ended April 30, 2000. Net cash
used in financing activities for fiscal years 1998 and 1999 and for the six
months ended April 30, 2001 was primarily related to the repurchase of shares
of our common stock. Net cash provided by financing activities for fiscal year
2000 and for the six months ended April 30, 2000 was primarily related to
proceeds received from the exercise of employee stock options.

On September 27, 2000, the EEOC filed a lawsuit under Title VII of the Civil
Rights Act against us in the United States District Court for the Western
District of Virginia. The lawsuit alleges a pattern or practice of
discrimination on the bases of gender and race. The lawsuit seeks injunctive
and other relief and damages in an unspecified amount. We intend to vigorously
defend the EEOC's lawsuit on its merits. We may incur substantial costs in
defending ourselves against this claim, regardless of its merit or outcome. At
this early stage in the lawsuit, we cannot make a reasonable estimate of the
monetary amount of its resolution or estimate a range of reasonably possible
loss. If we are unsuccessful, we could be subject to damages that may be
substantial and that could have a material adverse effect on our results of
operations or liquidity.

Commencing in October 1997, our Board of Directors authorized the repurchase
of our common stock in the open market or in privately negotiated transactions.
Through April 30, 2001, we had repurchased 2.3 million shares of our common
stock for $16.4 million. The repurchases have been funded through cash flows
from operations. We have no current intention to make any further repurchases
of our shares.

Under a loan agreement with our bank dated March 10, 1999, we have a $5.0
million secured revolving line of credit available for general corporate
purposes and a $10.0 million secured revolving line of credit available to fund
potential acquisitions, mergers and joint ventures. The lines of credit bear
interest at 1.5% above the monthly LIBOR rate and are equally and ratably
secured by our accounts receivable, contract rights, inventory, furniture and
fixtures, machinery and equipment and general intangibles. The lines of credit
will expire on March 31, 2002, unless they are further renewed or extended. As
of April 30, 2001, we also had

S-1 28th Page of 80 TOC 1st Previous Next ↓Bottom Just 28th
margin borrowings outstanding of $1.1 million related to our trading securities
in the Nasdaq 100 Trust. If there are further declines in the fair value of the
Nasdaq 100 Trust, we may be required to liquidate our position in the Nasdaq
100 Trust to meet margin calls. We believe that our cash flow from operations,
liquidation of trading securities and available lines of credit will be
adequate to fund our operations for at least the next twelve months.

Quantitative and Qualitative Disclosures About Market Risk

We do not engage in transactions in derivative financial instruments or
derivative commodity instruments. As of October 31, 2000 and April 30, 2001,
our financial instruments were not exposed to significant market risk due to
interest rate risk, foreign currency exchange risk or commodity price risk.
However, as of October 31, 2000 and April 30, 2001, our trading securities,
which consist of shares in the Nasdaq 100 Trust, are exposed to equity price
risk. The Nasdaq 100 Trust is designed to track closely the price and yield
performance of the Nasdaq 100 stock index. As of October 31, 2000 and April 30,
2001, our trading securities, valued at approximately $18.0 million and $5.0
million, have experienced a 2.7% and 6.3% decline in value since the date of
purchase. Subsequent to April 30, 2001 through June 19, 2001, the value of our
trading securities held as of April 30, 2001 decreased by approximately 9.5%,
or approximately $480,000.

The price of these trading securities could continue to experience a further
adverse change in the near term. For illustration purposes, assuming a 30.0%
further adverse change in the market price of the Nasdaq 100 Trust subsequent
to April 30, 2001, our trading securities would decrease in value by an
additional $1.5 million, based on the value of our portfolio of approximately
$5.0 million as of April 30, 2001. This assumption is not necessarily
indicative of future performance and actual results may differ materially.

New Accounting Standards

In June 1998, the Financial Accounting Standards Board, also known as the
FASB, issued Statement of Financial Accounting Standards, referred to as SFAS,
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts, and
for hedging activities. In June 1999, the FASB issued SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities--Deferral of the Effective
Date of FASB Statement No. 133." SFAS No. 137 defers the effective date of SFAS
No. 133 to apply to all fiscal quarters of all fiscal years beginning after
June 15, 2000. In June 2000, the FASB issued SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities, an amendment of
FASB Statement No. 133." SFAS No. 138 amends SFAS No. 133 for a limited number
of issues that have caused application difficulties. The adoption of SFAS No.
133, as amended, as of November 1, 2000, did not have any effect on our
financial position, results of operations or liquidity.

SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities, a replacement of FASB Statement No. 125,"
supercedes and replaces the guidance in SFAS No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No.
140 revises the standards for accounting for securitizations and other
transfers of financial assets and collateral and requires certain disclosures,
but it carries over most of the provisions of SFAS No. 125 without
reconsideration. SFAS No. 140 is effective for transfers and servicing of
financial assets and extinguishments of liabilities that occur after March 31,
2001 and for recognition and reclassification of collateral and for disclosures
relating to securitization transactions and collateral for fiscal years ending
after December 15, 2000. Disclosures about securitization and collateral
accepted need not be reported for periods ending on or before December 15,
2000, for which financial statements are presented for comparative purposes.
The adoption of SFAS No. 140 did not have any effect on our financial
statements.

We also adopted Staff Accounting Bulletin, or SAB, No. 101, "Revenue
Recognition In Financial Statements," issued by the SEC staff. Given the nature
of our business, the adoption of SAB 101 did not have any effect on our
financial position, results of operations or liquidity.

As of April 30, 2001, there are no other new accounting standards issued,
but not yet adopted by us, which are expected to be applicable to our financial
position, operating results or financial statement disclosures.

S-1 29th Page of 80 TOC 1st Previous Next ↓Bottom Just 29th
BUSINESS

Overview

We believe that we produce the widest array of tight-buffered fiber optic
cables that address moderate distance communications applications. Our fiber
optic cables can be used both indoors and outdoors, are easy and economical to
install, provide a high degree of reliability and offer industry leading
performance characteristics. We have designed and implemented an efficient and
highly automated manufacturing process based on proprietary technologies. This
enables us to produce high quality indoor/outdoor fiber optic cable rapidly and
cost efficiently.

Industry Background

Increased Demand for Bandwidth

The number of communications networks and the quantity of information
transmitted over them have increased substantially in recent years due to the
rapid growth of data intensive applications, such as Internet access and e-
commerce, e-mail, video conferencing, multimedia file transfers, and the
movement of large blocks of stored data across networks. For example, in
November 2000, RHK, a leading market research and consulting firm, reported
that Internet traffic transmitted through communications networks is forecast
to increase at a compound annual growth rate of approximately 200% between 2000
and 2004.

Network service providers have focused on improving the transmission
capacity, or bandwidth, and performance of their networks to keep pace with the
increase in traffic. At the same time, the bandwidth of enterprise networks
continues to increase with innovations in networking equipment. These
improvements have resulted in additional bandwidth intensive applications,
further increasing the demand for bandwidth. We believe that these ongoing
improvements will continue to generate growth in data, video and voice
communications over networks.

Deployment of Optical Networks

To meet the demand for more bandwidth and better network performance,
optical networks are being deployed and replacing traditional copper wire
networks because they provide substantially higher data transmission rates,
significantly increased bandwidth and improved reliability. Compared to copper
wire, optical fiber has thousands of times the information carrying capacity,
occupies much less space and operates more reliably over greater distances.
Optical fiber is immune to the electromagnetic interference that causes static
in copper wire transmission, as well as to electrical surges. Optical fiber is
also a safer choice in environments where flammability is an issue because it
does not carry electricity. In addition, communications over optical fiber
networks are more secure than communications over copper wire networks because
tapping into fiber optic cable without detection is very difficult.

Optical networks are comprised of a variety of networking equipment and
components required to transmit, process, change, amplify and receive light
that carries data, video and voice communications over fiber optic cables from
one location to another. Optical networks were originally deployed to serve the
needs of large network service providers to carry communications traffic over
long distances between cities and across continents. Improvements in
performance and reductions in the cost of optical networking equipment have
made it economically feasible to deploy optical networks in moderate distance
applications such as enterprise networks.

S-1 30th Page of 80 TOC 1st Previous Next ↓Bottom Just 30th
To bring the bandwidth and performance of optical networks to metropolitan
markets and end-users, moderate distance fiber optic cabling infrastructure
must be deployed in cities and enterprises and connected to the long-haul fiber
optic infrastructure.

Optical fiber is deployed in four primary types of communications networks:
long-haul, enterprise, metropolitan and access.

Long-haul Networks. Long-haul networks are long distance, inter-continental
and inter-city communications systems that typically employ high fiber count
fiber optic cables and advanced, expensive fiber optic networking equipment for
the purpose of transmitting large quantities of data, video and voice
communications over long distances. This segment has historically experienced
strong growth as network providers have sought to improve network
infrastructure and support the increased demand for new services and greater
traffic volumes. According to a June 2000 KMI Corporation report, worldwide
demand for long-haul network fiber optic cable is expected to grow from 28.1
million fiber kilometers in 1999 to 72.8 million fiber kilometers in 2004,
which represents a compound annual growth rate of 21.0%.

Enterprise Networks. Enterprise networks, often referred to as local area
networks or LANs, are communications systems used to transport data, video and
voice communications within organizations such as businesses, government
agencies and educational institutions. Enterprise networks connect computer
users within an organization and allow users to share computer resources. As
demand for bandwidth has increased, enterprise networks have increasingly
utilized fiber optic technology. Optical fiber was first deployed in the major
data routes or backbones of enterprise networks and is increasingly deployed to
the end-user's desktop for high performance applications.

Metropolitan Networks. Metropolitan networks are communications systems used
to transport data, video and voice communications between major distribution
points in metropolitan areas. These networks connect long-haul networks to
access networks. They are generally rings of optical fiber that circle
metropolitan areas, with branches of optical fiber that transmit information
from the ring to co-location centers, data centers or other major distribution
points located throughout the metropolitan area. These major distribution
points are connected to access networks which in turn connect end-users to a
communications network. Service providers, including telephone companies and
cable television operators, continue to invest in the metropolitan fiber optic
infrastructure to reduce capacity constraints resulting from the increase in
data, video and voice communications and demand for enhanced services.
According to a June 2000 KMI Corporation report, worldwide demand for optical
fiber for local and feeder networks, including cable television is expected to
grow from 27.9 million fiber kilometers in 1999 to 143.4 million fiber
kilometers in 2004, which represents a compound annual growth rate of 38.8%.

Access Networks. Access networks are communications systems that connect
metropolitan networks to end-users such as businesses, residences and
governmental agencies. Historically, access networks have been built using
copper wire systems due to significant cost advantages over competing
technologies, including fiber optic networks. However, copper wire systems are
becoming increasingly insufficient to meet end-users' demand for new services
that require high bandwidth and fast transmission speeds. Therefore, fiber
optic technology is being increasingly deployed in access networks. This has
only recently become economically feasible due to technological improvements in
information transmission technologies and significant cost reductions in
optical networking equipment and components. We believe that additional
technological improvements and equipment cost reductions will accelerate the
deployment of optical fiber to the end-user.

Historically, the vast majority of optical fiber has been installed in long-
haul networks. The deployment of optical fiber in long-haul networks is
expected to continue to experience significant growth. We believe that optical
fiber installations in metropolitan, access and enterprise networks will also
experience significant growth as a result of several factors, including the
increasing demand for bandwidth by commercial and residential end-users,
improvements in information transmission technologies and significant cost
reductions in

S-1 31st Page of 80 TOC 1st Previous Next ↓Bottom Just 31st
optical networking equipment and components. These technological improvements
and cost reductions are accelerating the build-out of optical networks in the
metropolitan, access and enterprise markets which, due to the multitude of end-
users in these markets, require a large quantity of low cost optical networking
equipment.

According to a June 2000 KMI Corporation report, 34.0 million fiber
kilometers were expected to be installed in the United States in 2000,
consisting of 13.9 million fiber kilometers, or 40.7%, in local and feeder
applications, including cable television, with the balance primarily installed
in long-haul fiber optic networks. Local and feeder applications, including
cable television, are deployed in metropolitan and access networks. Further,
KMI Corporation estimated that by the year 2004, the optical fiber installed in
local and feeder applications, including cable television, will grow to 55.5
million fiber kilometers out of a total market of 99.2 million fiber
kilometers, representing 56.0% of the total optical fiber installations in the
United States. This represents a compound annual growth rate of 41.5% from the
years 2000 through 2004 for optical fiber installed in local and feeder
applications, including cable television. In addition, according to KMI
Corporation, 40.6 million fiber kilometers were installed outside of the United
States in 1999, including 18.4 million fiber kilometers or 45.4% in local and
feeder applications, including cable television. KMI Corporation estimates that
by 2004, optical fiber installed outside of the United States in the local and
feeder applications, including cable television, will grow to 87.9 million
fiber kilometers, representing a compound annual growth rate of 36.9%.

Fiber Optic Cables

Optical fiber must be processed into fiber optic cables before it can be
installed in a fiber optic network. Fiber optic cables serve several critical
purposes. Fiber optic cable aggregates multiple strands of optical fiber into a
single, easy to handle package and protects the optical fiber from damage
during installation and from damage that can be caused by a wide variety of
environmental factors after installation. A typical fiber optic cable begins
with one or more optical fibers that are each coated with a very thin layer of
plastic material called a buffer. Groups of buffered optical fiber are further
protected by secondary buffers or grouped into plastic tubes that are stranded
together with aramid yarns, such as Kevlar(TM), which protect the optical
fibers from damage that can occur when the fiber optic cable is pulled and
stretched during installation. This combination of elements is then covered
with one or more layers of plastic or steel that serves as a protective outer
jacket, resulting in a fiber optic cable.

Fiber optic cable designs can be grouped into three primary categories:
loose tube, indoor tight-buffered, and indoor/outdoor tight-buffered.

Loose Tube Fiber Optic Cable. A typical loose tube fiber optic cable
consists of optical fibers that have a thin primary buffer coating and are
grouped into one or more thin, rigid tubes that are flooded with gel to provide
moisture protection to the optical fiber. The tubes are stranded around a
strength element, such as a central strand of fiberglass or steel. This
combination of elements is again flooded with gel and covered with one or more
layers of plastic or steel that serves as a protective outer jacket, resulting
in a loose tube fiber optic cable. A single loose tube fiber optic cable often
contains hundreds of optical fibers, with groups of twelve or more optical
fibers contained in the individual tubes within the fiber optic cable. This
type of fiber optic cable is relatively stiff and is primarily used for long,
relatively straight outdoor runs, such as in long-haul networks and in parts of
metropolitan networks. One major drawback to the typical design of loose tube
fiber optic cable is that it is difficult to terminate. Termination is the
point where the optical fiber is either connected to another optical fiber or
to communications equipment. Termination of a loose tube fiber optic cable
requires extensive cleaning of the gel filling and preparation of the fiber
ends. This is a messy, time consuming and expensive process, which translates
into higher installation and maintenance costs. As a result, loose tube fiber
optic cables are generally unsuitable for shorter distance applications and for
applications that have a large number of termination points. Also, under
various environmental conditions, loose tube fiber optic cables may experience
problems with water penetration and chemical interaction of the gel with fiber
buffers that can cause the optical fiber to become weak and brittle over time.
Furthermore, most loose tube fiber optic cables are not suited for indoor use
because they are flammable.

S-1 32nd Page of 80 TOC 1st Previous Next ↓Bottom Just 32nd
Tight-Buffered (Indoor) Fiber Optic Cable. Tight-buffered fiber optic cable
consists of optical fibers that have a primary buffer coating and an
additional, heavier secondary tight buffer coating that is placed on each
individual optical fiber for added protection. This combined buffer coating is
typically three times thicker than the buffer used in loose tube fiber optic
cables, providing much greater mechanical and environmental protection for each
individual optical fiber. To form the fiber optic cable, groups of buffered
optical fibers are combined with strength elements and covered with an outer
protective jacket. Since these fiber optic cables are designed for indoor use,
there is no need for gel or other fillings to protect against moisture. Tight-
buffered fiber optic cable addresses many of the shortfalls presented by loose
tube cable. It is significantly easier and faster to terminate because, without
the messy gel, it requires no cleaning and little preparation. It is also
designed to be flexible and rugged enough to withstand long pulling distances
through conduits with a variety of bends and corners. However, due to the
amount of buffer material used in tight-buffered fiber optic cable, it can be
too unwieldy and costly for long-haul, high fiber count applications.
Furthermore, standard indoor tight-buffered fiber optic cable is not designed
to withstand the additional environmental challenges presented by outdoor use.

Tight-Buffered (Indoor/Outdoor) Fiber Optic Cable. In many fiber optic cable
installations, loose tube fiber optic cables are terminated at building
entrances and spliced to standard indoor tight-buffered fiber optic cable,
which is run indoors. This installation method is not optimal due to the
considerable time and expense associated with these multiple terminations and
the potential for ongoing fiber failures and optical signal loss at the
termination points. The introduction of indoor/outdoor tight-buffered fiber
optic cable alleviated these issues. Indoor/outdoor tight-buffered fiber optic
cable enjoys all of the benefits of standard tight-buffered fiber optic cable,
but its design, fabrication techniques and materials enable it to survive the
range of conditions presented by outdoor installations. These conditions
include exposure to moisture, ultra-violet radiation and a variety of
microorganisms, animals and insects.

Indoor/outdoor tight-buffered fiber optic cable can be run directly into
buildings without the need for costly and time-consuming transitions from loose
tube fiber optic cable at building entrances. As a result, indoor/outdoor
tight-buffered fiber optic cable is ideal for use in short and moderate
distance applications in metropolitan, access and enterprise networks which
require a strong, flexible cable and have numerous termination points. This
type of fiber optic cable is being increasingly installed in universities,
corporate campuses, industrial and office complexes, and in a variety of other
applications where multiple buildings are interconnected. Due to the
significant advantages in moderate distance applications with numerous
termination points, we believe that the market for indoor/outdoor tight-
buffered fiber optic cable is poised for substantial growth as fiber optic
technology is increasingly deployed in metropolitan and access networks.

Our Key Strengths

We manufacture and market a broad range of indoor/outdoor tight-buffered
fiber optic cables for use in a variety of moderate distance applications. We
believe that our business has the potential for significant long-term growth as
a result of the following key strengths.

Leadership Position in the Indoor/Outdoor Tight Buffer Market

We are a leading manufacturer of indoor/outdoor tight-buffered fiber optic
cables. We believe that we are well positioned to capitalize on the growing
worldwide demand for indoor/outdoor tight-buffered fiber optic cables for use
in the rapidly growing metropolitan, access and enterprise markets. Our
leadership position in this market is the result of the knowledge gained from
many years of experience. Our founders performed government-funded fiber optic
cable development work at International Telephone and Telegraph Corporation
during the 1970's and early 1980's when International Telephone and Telegraph
Corporation performed nearly all of the government-funded research and
development programs for lightweight, rugged fiber optic cables for military
tactical field use. Tight-buffered fiber optic cable technology resulted from
that research. We have applied the results of that research, the technology,
and the manufacturing methods to the development of our indoor/outdoor tight-
buffered fiber optic cable product line.

S-1 33rd Page of 80 TOC 1st Previous Next ↓Bottom Just 33rd
We believe our indoor/outdoor tight-buffered fiber optic cables provide
significant advantages to distributors, installers, systems integrators and
most importantly, end-users. Distributors are able to stock fewer varieties of
fiber optic cables in a larger quantity because our fiber optic cables serve
multiple purposes. Installers and systems integrators find that the
multipurpose feature of our fiber optic cables can significantly reduce
installation costs by eliminating the need to transition from outdoor fiber
optic cable to indoor fiber optic cable at a building entrance. Our products
also enhance network reliability by eliminating splices and reducing potential
stress on optical fibers that could lead to breakage. The simplified
installation, lower cost and enhanced reliability of our products are valued by
the end-user because a long lasting, trouble-free fiber optic cable minimizes
down time and maximizes system availability.

Technological Superiority

As a result of our extensive experience developing tight-buffered fiber
optic cables, in particular to meet the stringent requirements for military
applications, we believe we have a unique technology base that provides
significant advantages in addressing the tight-buffered fiber optic cable
market. We have developed considerable expertise in fiber optic cable design,
manufacturing and production processes that enable us to produce high
performance fiber optic cables cost effectively and at high yields. We believe
that this creates significant barriers to entry.

Our indoor/outdoor tight-buffered fiber optic cables are designed to provide
superior protection against exposure to moisture, ultra-violet radiation and a
variety of microorganisms, animals and insects. It is also designed to
withstand the widest temperature range and has the smallest bend radius of any
product in the industry. For example, ordinary fiber optic cables have a rated
temperature operating range of approximately -20(degrees)C to +80(degrees)C,
whereas our fiber optic cables exceed that range by 25%, from -40(degrees)C to
+85(degrees)C. We believe that functional temperature range is becoming an
increasingly important differentiating factor in our industry as fiber optic
cable is deployed in new environments and geographical areas that experience
extreme temperatures.

One of our key technological advantages is a proprietary manufacturing
process that extrudes a fiber optic cable jacket directly over and pressed into
the fiber optic cable core elements. Our Core-Locked(TM) jackets allow the
fiber optic cable to operate as a single mechanical unit with very high tensile
strength and lateral stress resistance. This protects the optical fiber against
mishandling and abuse during installation and can result in significant time
and cost savings both during and after the installation process. Following is a
picture of one of our Core-Locked(TM) jackets compared to a standard tubed-on
tight-buffered fiber optic cable jacket, which illustrates the result of our
proprietary pressure extrusion manufacturing process.

Core-LockedTM Standard
[GRAPHIC] [GRAPHIC]

Innovative, Automated Manufacturing Capabilities

We have designed and developed proprietary manufacturing software and
hardware that provides us with highly automated and technically precise
manufacturing capabilities. The substantial automation of our manufacturing
process has provided us with a number of important benefits. The most important
benefit is that

S-1 34th Page of 80 TOC 1st Previous Next ↓Bottom Just 34th
it allows us to produce a more uniform, high-quality fiber optic cable with
higher yields and at a low cost. Another important benefit is that we are able
to rapidly design and manufacture new products. This enables us to respond
rapidly to customer requests for additional or unique products. We believe we
have the quickest response time in our industry. Finally, many of our important
technological advances result from our ability to closely monitor, modify and
refine our production process.

Customer Focus

We focus on supporting our customers to enhance their business, and we work
closely with our customers to identify and define their unique requirements.
This often requires us to create custom fiber optic cables for a variety of
special applications and environments. We believe that our level of
responsiveness to unique customer requirements is unsurpassed in our industry.
We have established close design, development and support relationships with
our customers. We believe these close relationships allow us to better
understand our customers' specific needs early in the project development
process and to deliver more responsive solutions and support. By becoming
involved early in our customers' network design process, we often have the
opportunity to have our products specified as the fiber optic cables for the
customer's network.

Broad Product Offering

We manufacture a comprehensive, state-of-the-art line of tight-buffered
fiber optic cables. We produce what we believe to be the industry's widest
array of indoor/outdoor tight-buffered fiber optic cables with features and
performance characteristics to address the needs of the metropolitan, access
and enterprise markets. Our fiber optic cables range from small single fiber
cables for patch cords to large high fiber count fiber optic cables for major
network trunks and from fiber optic cables used in computer facilities to those
used in underground installations. We also offer aerial self-supporting fiber
optic cables for easy installation on pole lines, military tactical fiber optic
cables, and specialty fiber optic cables for special markets. This wide range
of products makes us attractive as a one-stop source for customers with unique
as well as standard fiber optic cable requirements.

Our Strategy

Our objective is to be the leading manufacturer and supplier of
indoor/outdoor tight-buffered fiber optic cables for metropolitan, access and
enterprise networks. We intend to expand our business by providing fiber optic
cables that are versatile, reliable, cost effective and responsive to evolving
market requirements. The key elements of our strategy are described below.

Focus on Tight-Buffered Indoor/Outdoor Fiber Optic Cable Market

We intend to continue to focus solely on the manufacture and sale of the
highest quality indoor/outdoor tight-buffered fiber optic cables for use in the
rapidly growing metropolitan, access and enterprise markets. As fiber optic
cable installations in the long-haul market are built-out, we believe that
sales of fiber optic cables into these moderate distance markets will continue
to accelerate and eventually comprise the majority of sales for fiber optic
cable. Our focus on indoor/outdoor tight-buffered fiber optic cable also allows
us to meet the special needs of our customers for customized fiber optic cable
solutions and rapidly deliver these products for use in these high growth
markets.

Develop High Performance Products and Offer a Broad Product Line

We intend to continue to build on our product and technology leadership by
designing and manufacturing additional tight-buffered fiber optic cables that
are rugged, easy to install, versatile, highly reliable, and competitively
priced for the moderate distance market. We believe our focus on providing a
broad range of high performance products provides significant advantages to
distributors, installers and systems integrators, and most importantly, end-
users in the rapidly growing metropolitan, access and enterprise networks.

S-1 35th Page of 80 TOC 1st Previous Next ↓Bottom Just 35th
Capitalize on Proprietary, Automated Manufacturing Processes

We have developed proprietary process control systems to ensure product
consistency and uniformity at high manufacturing throughput rates. We plan to
continue to improve these process control systems, including our hardware and
software, to increase the productivity of our manufacturing process and the
quality of our products and to introduce new products to the market.

Leverage Close Customer Relationships

We intend to continue to work closely with our customers early in their
project development cycles to customize our products and create new products
for their unique applications. We intend to continue to leverage our close
customer relationships to obtain new customers with similar requirements and to
develop new products which can be sold to the broader market.

Expand Sales and Marketing Effort

We currently have a growing network of sales staff and worldwide
distribution channels. Approximately three-quarters of our sales are domestic,
and one-quarter of our sales are international, with customers in over 65
countries. We intend to expand both our sales staff and our distribution
channels around the world to better serve our existing customers and to attract
new customers. We also intend to expand our marketing efforts in order to
increase our domestic and international customer base. In addition, while we
have no current commitments with respect to any future international expansion,
we intend to seek to identify, and possibly pursue, opportunities to increase
our sales and marketing efforts in China.

Pursue Strategic Alliances and Acquisitions

We intend to explore strategic alliances and acquisitions that will enable
us to increase our manufacturing capabilities, broaden the distribution of our
products and secure supplies of raw materials. We believe that these
opportunities can be an important element of our competitive position and can
further complement our overall business strategy.

Products

We manufacture and market a broad array of fiber optic cables that provide
high bandwidth transmission of data, video and voice communications over
moderate distances. Our product line is diverse and versatile, in keeping with
continually evolving application needs of customers within the moderate
distance market. Our tight-buffered fiber optic cables address the needs of the
metropolitan, access and enterprise networks.

S-1 36th Page of 80 TOC 1st Previous Next ↓Bottom Just 36th
The following table summarizes the various types of fiber optic cables we
produce and their attributes:

[Enlarge/Download Table]

SERIES CABLE TYPE FEATURES APPLICATIONS

. Available with one or two optical . Routing connections in patching
A Assembly fibers systems
. Short patch cord cable links
. Compatible with all standard between electronic equipment and
optical fiber connectors main fiber optic cables
. Contain Kevlar(TM) or other
aramid yarns . Jumpers and pigtails
. Flexible and resilient
thermoplastic outer jacket . General indoor use
. Flame retardant
--------------------------------------------------------------------------------------------------
B Breakout . 2 to 156 optical fibers . Vertically in building risers
. High performance tight buffer without concern for stretching
coating on each optical fiber for the optical fiber
environmental and mechanical . Suitable for indoor and outdoor
protection use
. Core-Locked(TM) elastomeric . Short and moderate distance links
subcable jacket between buildings or within a
. Core-Locked(TM) outer jacket building, where multiple
termination points are needed
. Rugged and flame retardant . For installations where ease of
. Ultraviolet, moisture and fungus termination and termination costs
resistant are important factors
--------------------------------------------------------------------------------------------------
D Distribution . 2 to 156 optical fibers . Designed for use in limited
.Tight buffer coating on each conduit space and tight bends in
optical fiber long fiber optic cable pulls
. Smaller, lighter and less .Buried and overhead installations
expensive than the B-Series fiber .Suitable for indoor and outdoor use
optic cables, but without the
separate subcable jacket
.Core-Locked(TM) outer jacket . Installations where long lengths
.High strength to weight ratio of fiber optic cables must be
.Compact size pulled through duct systems and
.Flexible, rugged and flame where size, weight and fiber optic
retardant cable costs are more significant
than termination considerations
. Ultraviolet, moisture and fungus
resistant
--------------------------------------------------------------------------------------------------
G Subgrouping . Up to 864 optical fibers in . Multiple locations needing high
various fiber counts, such as in wiring
subgroup sizes racks or wiring closets
. High performance tight buffer .Very high fiber count fiber optic
coating cables
on multifiber subcables .Direct burial and aerial
applications
. Core-Locked(TM) outer jacket . Suitable for indoor and outdoor
use
. Rugged and flame retardant
. Moisture and fungus resistant
--------------------------------------------------------------------------------------------------

A-Series Assembly Fiber Optic Cables. Our A-Series fiber optic cables
contain one or two optical fiber units. A-Series fiber optic cables contain
tight-buffered optical fibers which are surrounded by a layer of Kevlar(TM) or
other aramid yarn strength members to prevent the optical fiber from being
stretched if there is tension on the fiber optic cable. A flexible and
resilient thermoplastic outer jacket is then applied to further strengthen and
protect the optical fiber. These fiber optic cables are used for jumpers, which
are short length patch cords, and for pigtails, which are short lengths of
fiber optic cable with a connector on one end. Various outer jacket materials
are offered to provide flammability ratings and handling characteristics
tailored to customers' needs. These fiber optic cables are often privately
labeled and sold to original equipment manufacturers that produce the fiber
optic cable assemblies.

[GRAPHIC]

S-1 37th Page of 80 TOC 1st Previous Next ↓Bottom Just 37th
B-Series Breakout Fiber Optic Cables. Our B-Series fiber optic cables
consist of a number of subcables, each consisting of a single optical fiber,
Kevlar(TM) or other aramid yarn strength members and a subcable jacket. These
subcables are tightbound in a pressure extruded, high performance Core-
Locked(TM) PVC outer jacket to form the finished multifiber fiber optic cables.
Like the A-Series fiber optic cables, the subcables are intended to be
terminated directly with connectors. This direct termination feature makes this
fiber optic cable type particularly well suited for shorter distance
installations, where there are many terminations and termination costs are more
significant. The materials and construction of the fiber optic cable permit its
use both indoors and outdoors. These features make the fiber optic cables cost
effective for use in campus and industrial complex installations and between
and within buildings since there is no need to splice outdoor fiber optic
cables to indoor fiber optic cables at the building entrance.

[GRAPHIC]

D-Series Distribution Fiber Optic Cables. Our D-Series fiber optic cables
are made with the same tight-buffered optical fiber and high performance Core-
Locked(TM) PVC outer jacket as the B-Series fiber optic cables. Unlike the B-
Series fiber optic cables, however, each tight-buffered optical fiber in a D-
Series fiber optic cable is not covered with a separate subcable jacket. D-
Series fiber optic cables are intended for longer distance applications, where
termination considerations are less important and often traded off for size,
weight and cost. The tight-buffered optical fiber and Core-Locked(TM) PVC outer
jacket make D-Series fiber optic cables rugged and survivable, with a small,
lightweight configuration. They can also be armored for additional protection
for use in buried and overhead installations. The high strength to weight ratio
of these fiber optic cables makes them well suited for installations where long
lengths of fiber optic cables must be pulled through duct systems. D-Series
fiber optic cables are used in relatively longer length segments of
installations, such as trunking, LAN and distribution applications, optical
fiber in the loop, optical fiber to the curb and drop cables.

[GRAPHIC]

S-1 38th Page of 80 TOC 1st Previous Next ↓Bottom Just 38th
G-Series Subgrouping Fiber Optic Cables. Our G-Series fiber optic cables
combine a number of multifiber subcables, each similar to a D-Series fiber
optic cable. Each multifiber subcable is tightbound with an elastomeric jacket,
providing excellent mechanical and environmental performance. These subcables
are contained in a pressure extruded, high performance Core-Locked(TM) PVC
outer jacket to form the finished fiber optic cable. This design permits the
construction of very high fiber count fiber optic cables. These fiber optic
cables may be used where groups of optical fibers are routed to different
locations. We have developed a subgroup fiber optic cable containing over 1,000
optical fibers intended for high density, moderate length routes such as urban
telephone distribution systems.

[GRAPHIC]

Other Fiber Optic Cable Types. We produce many variations on the basic fiber
optic cable styles discussed above for more specialized installations. For
outdoor applications, we can armor both the B-Series and D-Series fiber optic
cables with corrugated steel tape for further protection in underground or
overhead installations. For overhead installations on utility poles, we offer
several self-supporting versions of the D-Series fiber optic cables, with
higher performance outer jackets. Our fiber optic cables are available in
several flammability ratings, including plenum for use in moving air spaces in
buildings, and riser for less critical flame-retardant requirements. Zero
halogen versions of the B-Series and D-Series fiber optic cables are available
for use in enclosed spaces where there is concern over release of toxic gases
during fire. We offer composite fiber optic cables combining optical fiber and
copper wires to facilitate the transition from copper wire to optical fiber-
based systems without further installation of fiber optic cables. We also offer
specialty fiber optic cables, including military tactical, mining and shipboard
fiber optic cables.

Customers

We have a global customer base, including distributors, original equipment
manufacturers, system integrators, electrical contractors, value added
resellers and end-users. In fiscal year 2000, we sold our products directly to
approximately 1,200 customers. Our top 10 customers in fiscal year 2000, based
on revenue, accounted for 48.2% of our net sales. The following is a list of
representative types of end-users of our fiber optic cables:

. Cable Television System Operators. Cable television system operators
continue to upgrade their networks to add optical fiber to their
networks. Similar to other build-outs in the access network, we are
supplying lower fiber count, moderate distance fiber optic cables to
these applications.

. Educational Institutions. Colleges, universities, high schools and grade
schools are continually upgrading and improving their networks, with
existing LANs being expanded and upgraded for higher data transmission
speeds, optical fiber to the dorm and other applications. These systems
link personal computers with central file servers. As interactive
learning systems require increased transmission speeds, optical fiber
becomes a logical medium.

. Financial Institutions, Insurance Companies and Other Large
Businesses. Banks, stock trading companies, insurance companies, and
other large businesses often need to distribute time critical data among
a large number of workstations. Businesses are increasingly using fiber
optic backbones to cable their enterprise networks to meet these needs.

S-1 39th Page of 80 TOC 1st Previous Next ↓Bottom Just 39th
. Government Agencies. Government agencies tend to have large buildings or
complexes, many people, and the need to access and process large
quantities of data. Like commercial institutions, these routinely
include high performance LANs with fiber optic segments in the backbone.
Security may also be desired, and therefore, optical fiber to the desk
or workstation may be implemented.

. Industrial and Manufacturing Facilities. Industrial and manufacturing
facilities typically have a more severe environment than other types of
businesses with heavy electrical equipment. Fiber optic cable in this
environment offers: immunity to electrical noise, ruggedness, high
information carrying capacity and greater distance capability. Our
products are installed in automotive assembly plants, steel plants,
chemical and drug facilities, petrochemical facilities and petroleum
refineries, mines and other similar environments.

. Original Equipment Manufacturers. Original equipment manufacturers
typically manufacture fiber optic cable assemblies, which are short
lengths of fiber optic cable pre-terminated with connectors. Supporting
virtually all segments of the market, these manufacturers consume large
quantities of fiber optic cables, which are often privately labeled.

. Military. Our core technologies enable us to develop and efficiently
produce fiber optic cables for military tactical applications that
survive extreme mechanical and environmental conditions. Our fiber optic
cables were used in Desert Storm and are in use by many military
organizations ranging from the U.S. Army to the Israeli Defense Force.

. Telephone Companies. We have worked with several regional bell operating
companies and competitive local exchange carriers to help them meet
their business customers' requirements. As high bandwidth services of
the information highway are brought closer to more homes and businesses,
the bandwidth provided by optical fiber becomes more important, and our
tight buffer, rugged designs become the most appropriate fiber optic
cable for applications.

. Internet Infrastructure Companies. Fiber optic cables are favored in
many Internet infrastructure applications, including storage area
networks and riser management systems that feed data to multiple clients
in a facility by means of a fiber optic network. Distribution of high
bandwidth to support growing clusters of DSL users and high speed fiber
optic cable modems require fiber optic cables.

Our extensive technology base and versatile manufacturing processes enable
us to respond quickly to diverse customer needs.

Sales and Marketing

We use a combination of employee sales staff, dedicated sales
representatives, multi-line sales representatives and distributors to serve and
attract customers both domestically and in over 65 countries. We believe it is
important to maintain customer diversity in order to avoid dependence on any
particular segment of the economy or area of the world. Our international net
sales in fiscal years 1998, 1999 and 2000 and the first six months of fiscal
year 2001 were $11.0 million, $10.0 million, $12.3 million and $8.1 million,
respectively, or 21.7%, 19.7%, 21.2% and 23.5% of our net sales. International
sales are made primarily through foreign distributors, system integrators and
value-added resellers.

The decision to purchase our products may be made by end-users,
distributors, electrical contractors, system integrators, or specialized
installers and influenced by architects, engineers and consultants. We strive
to reach and influence decision-makers by advertising in fiber optic trade
journals and other communications magazines. We also participate in numerous
domestic and international trade shows attended by customers and prospective
customers.

Selling sophisticated and technologically advanced products requires on-
going interaction with customers and a focused effort by the sales and
marketing group during the product selection process. Our field sales force
consists of employees and dedicated and multi-line sales representatives
located in various geographic areas. For more in-depth technical support, the
sales group has access to engineering, quality control and management personnel
with extensive fiber optic cable expertise and industry experience.

S-1 40th Page of 80 TOC 1st Previous Next ↓Bottom Just 40th
Manufacturing and Suppliers

We have developed considerable expertise in fiber optic cable design,
manufacturing and production processes that enable us to produce high
performance fiber optic cables cost effectively and at high yields. Our
proprietary manufacturing software and hardware provides us with highly
automated and technically precise manufacturing capabilities which enable us to
rapidly respond to customer requests for additional or unique products.
Furthermore, we believe we have the quickest response time in our industry.
Many of our important technological advances result from our ability to closely
monitor, modify and refine our production process.

Our manufacturing operations consist of applying a variety of raw plastic
materials to optical fibers. The key raw material in the manufacture of our
products is optical fiber, which we currently purchase from five manufacturers.
We work closely with our vendors to ensure a continuous supply. We have two
sources for aramid yarns and several suppliers of plastic coating materials.

We maintain a consistent relationship with our suppliers to secure a high
level of quality and ensure that emergency deliveries will be met. An important
factor in our success is our ability to deliver product on time. To date, we
have been able to obtain adequate supplies of raw materials in a timely manner
from existing or, when necessary, alternate sources. Any disruption in the
supply of raw materials could adversely affect our fiber optic cable production
capability and our operating results. Some of our suppliers of optical fiber
are also our competitors. We believe that we carry a sufficient supply of raw
materials and finished goods inventory to deal with short-term disruptions in
supply of raw materials and to meet customer orders promptly.

Our quality control procedures have been instrumental in achieving high
performance and reliability in our products. We produce fiber optic cables
using the quality control procedures of MIL-I-45208, which is the primary
standard applicable to most government purchasers of fiber optic cables. Since
January 1994, our quality management system has been certified to the
internationally recognized ISO 9001 quality standard. ISO 9000 is a series of
standards agreed to by the International Organization for Standardization. ISO
9001 is the highest level of accreditation and includes an assessment of 20
elements covering various aspects of design, development, distribution and
production of fiber optic cables. We must continue to comply with these
standards to maintain our certification.

Competition

The market for fiber optic cable is highly competitive. There are
approximately five leading producers of fiber optic cables in the United
States. In general, these companies primarily supply loose tube fiber optic
cables and, to a lesser extent, produce tight-buffered fiber optic cables.
Corning and Lucent are the dominant producers of fiber optic cables for the
long-haul market and are principal suppliers of optical fiber worldwide. In the
market for tight-buffered fiber optic cables supplying the moderate distance
market, we compete with the same U.S. manufacturers, as well as major
international companies such as Alcatel, Draka, General Cable and Pirelli.

We also compete with producers of copper wire cable on the basis of cost and
performance tradeoffs. The cost of the electro-optical interfaces required for
the fiber optic networks and higher speed electronics generally associated with
high performance fiber optic networks can make them less desirable for use in
applications where the advantages of fiber optic cables are not required. We
also compete with producers of other alternative transmission media, including
wireless and satellite communications. As fiber optic components continue to
improve in performance while costs decrease, fiber optic networks become a more
cost effective solution, especially with the increasing demand for higher
transmission speeds or bandwidth.

We believe that we compete successfully against our competitors on the basis
of:

. breadth of product features;

. quality;

. ability to meet delivery schedules;

S-1 41st Page of 80 TOC 1st Previous Next ↓Bottom Just 41st
. technical support and service;

. breadth of distribution channels; and

. total cost of installation and ownership.

Maintaining these competitive advantages requires continued investment in
product development and sales and marketing. There can be no assurance that we
will have sufficient resources to make these investments or that we will be
able to make the technological advances necessary to maintain our competitive
position. An increase in competition could have a material adverse effect on
our business and operating results because of price reductions and loss of
market share. Competition could increase if new companies enter the market or
if existing competitors expand their product lines.

Many of our competitors have substantially greater financial, marketing,
technical, human and other resources than us, and greater brand recognition and
market share which may give them competitive advantages, including the ability
to negotiate lower prices on raw materials than those available to us. We
cannot assure you that we will be able to compete successfully with existing or
future competitors or that competitive pressures will not seriously harm our
business, operating results and financial condition.

Intellectual Property

Our current manufacturing processes and products are not protected by
patents. We rely on a combination of trade secret, trademark law and technical
measures to establish and protect our production technology rights. This
protection may not deter misappropriation or stop competitors from developing
production techniques or equipment with features identical, similar, or even
superior to us.

We consider our proprietary knowledge of the development and manufacture of
fiber optic cables to be a valuable asset. This expertise enables us to
formulate new fiber optic cable compositions, develop special coatings and
coating methods, develop and implement manufacturing improvements and quality
control techniques, and design and construct manufacturing and quality control
equipment. We restrict access to our manufacturing facility and engineering
documentation to maintain security.

We believe that none of our products, trademarks or other proprietary rights
infringes upon the proprietary rights of others. There can be no assurance,
however, that third parties will not assert infringement claims against us in
the future with respect to our present or future products, which may require us
to enter into license agreements or result in protracted and costly litigation,
regardless of the merits of these claims.

Employees

As of April 30, 2001, we employed a total of 225 persons on a full-time
basis, including 38 in sales, marketing and customer service, 23 in
engineering, product development and quality control, 141 in manufacturing, and
23 in finance and administration. None of our employees is represented by a
labor union. We have experienced no work stoppages and believe our employee
relations are good.

Facilities

Our principal administration, marketing, manufacturing, and product
development facilities are located in a 148,000 square foot building adjacent
to the Roanoke, Virginia airport and major trucking company facilities. We also
lease a 385 square foot sales office in Fort Wayne, Indiana.

Legal Proceedings

On September 27, 2000, the Equal Employment Opportunity Commission filed a
lawsuit under Title VII of the Civil Rights Act against us in the United States
District Court for the Western District of Virginia. The

S-1 42nd Page of 80 TOC 1st Previous Next ↓Bottom Just 42nd
lawsuit alleged a pattern or practice of discrimination on the bases of gender
and race. The lawsuit seeks injunctive and other relief and damages in an
unspecified amount.

At this early stage in the lawsuit, we cannot make a reasonable estimate of
the monetary amount of its resolution or estimate a range of reasonably
possible loss. If we are unsuccessful, we could be subject to damages that may
be substantial and that could have a material adverse effect on our results of
operations or liquidity.

In addition, four charges of discrimination were filed with the EEOC in May
and November of 2000, by three of our former employees and an applicant for
employment, alleging age and race related claims under the Age Discrimination
in Employment Act and Title VII of the Civil Rights Act of 1964. On each of
these matters, we filed with the EEOC a statement of our position denying the
allegations. The EEOC has yet to issue a determination on any of these charges.
No litigation has been filed against us in connection with any of these
charges.

S-1 43rd Page of 80 TOC 1st Previous Next ↓Bottom Just 43rd
MANAGEMENT

Our Directors, Executive Officers and Other Key Employees

Our directors, executive officers and other key employees are as follows:

[Download Table]

Name Age Position
---- --- --------

Directors and Executive
Officers

Robert Kopstein......... 51 Chairman of the Board, President, Chief Executive
Officer and Director
Luke J. Huybrechts...... 57 Senior Vice President of Sales and Director
Kenneth W. Harber....... 50 Vice President of Finance, Treasurer, Secretary
and Director
Randall H. Frazier...... 49 Director
John M. Holland......... 55 Director

Key Employees

Ted Leonard............. 49 Vice President of Sales, Western Region
James Enochs............ 40 Vice President of Sales, Southeastern Region
Paul Oh................. 58 Vice President of Sales, Far East
Susan Adams............. 40 Vice President of Marketing

Robert Kopstein has been President and a Director of Optical Cable since
1983 and Chairman of the Board and Chief Executive Officer since 1989. From
1981 to 1983, Mr. Kopstein worked at Phalo Corporation, a cable manufacturing
company, as the Plant Manager for its Fiber Optic Cable Division, from 1979 to
1981 he worked at International Telephone & Telegraph Corporation's Electro-
Optical Products Division as a Project Engineer on fiber optic cable
development projects for the United States military, and from 1977 to 1979, he
worked at Rochester Corporation, a cable manufacturing company, as a Product
Engineer on the development of fiber optic cables for military-oriented
applications.

Luke J. Huybrechts was elected a Director of Optical Cable in August 1995
and has been Senior Vice President of Sales since joining us in 1986.
Previously, Mr. Huybrechts worked at International Telephone & Telegraph
Corporation's Electro-Optical Products Division for 10 years in marketing,
sales and research and development. Mr. Huybrechts has served on the Board of
Directors of Cybermotion Inc., a robotics company, since 1998.

Kenneth W. Harber was elected a Director of Optical Cable in August 1995 and
has been Vice President of Finance, Treasurer and Secretary of Optical Cable
since 1989. Prior to joining us as an accounting manager in 1986, Mr. Harber
was an accounting supervisor at an architecture and engineering firm.

Randall H. Frazier was elected a Director of Optical Cable in April of 1996.
Mr. Frazier is President of R. Frazier, Inc., a computer refurbishing company
founded in 1988. Mr. Frazier was self-employed in various chemical and
engineering businesses prior to the founding of R. Frazier, Inc.

John M. Holland was elected a Director of Optical Cable in April of 1996.
Mr. Holland is currently President of Cybermotion Inc., a robotics company he
co-founded in 1984. Mr. Holland also currently serves as the Chairman of the
International Service Robot Association. Mr. Holland's previous employment
experience includes the Electro-Optics Product Division of International
Telephone & Telegraph Corporation where he was responsible for the design of
the earliest fiber optic systems and the development of automated manufacturing
systems for optical fiber.

Ted Leonard has been Vice President of Sales, Western Region since 1992.
Before joining us, Mr. Leonard worked in engineering management at Alcatel
Telecommunications Cable. Prior to that he worked at International Telephone &
Telegraph Corporation's Electro-Optical Products Division.

S-1 44th Page of 80 TOC 1st Previous Next ↓Bottom Just 44th
James Enochs has been Vice President of Sales, Southeastern Region since
1992. Before that he was Distribution Sales Manager from 1990 to 1992 and
Inside Sales Manager from 1988 to 1990.

Dr. Paul Oh has been Vice President of Sales, Far East since 1989. Before
joining us, Dr. Oh worked at Samsung Electronics Co. as the Technical/Managing
Director of fiber optic products. Prior to that he worked at International
Telephone & Telegraph Corporation's Electro-Optical Products Division.

Susan Adams has been Vice President of Marketing since 1992. Ms. Adams
worked as Marketing Services Coordinator from 1984 to 1987 and Director of
Marketing from 1987 to 1992.

Board of Directors

Our Board of Directors currently consists of five members. Our Board of
Directors is elected annually, and each director holds office until the next
annual meeting of shareholders, his death, resignation, removal, or until his
successor has been elected. In order to comply with Nasdaq requirements, we
intend to appoint an additional independent member to our board of directors by
July 31, 2001.

Our Board of Directors elect our chairman, president, secretary and
treasurer on an annual basis to serve until their successors are elected,
unless they are removed. There are no family relationships among our Board of
Directors or officers.

Director Compensation

Each non-employee director is paid $500 for each meeting that he attends,
including committee meetings. In addition, we reimburse the non-employee
directors for their reasonable out-of-pocket expenses related to attending
meetings of the Board of Directors or any of our committees. Management
directors do not receive any compensation for their services as directors other
than the compensation they receive as our officers.

Board Committees

Our Board of Directors established two standing committees: the Compensation
Committee and the Audit Committee. The Compensation Committee reviews and
approves annual salaries and bonuses for all officers and carries out
responsibilities required by the rules of the Securities and Exchange
Commission. The Compensation Committee is comprised of Messrs. Kopstein,
Frazier and Holland. In addition, our Board of Directors established a Stock
Option Plan Subcommittee of the Compensation Committee. The Stock Option Plan
Subcommittee is responsible for administering the Optical Cable Corporation
1996 Stock Incentive Plan Committee and is comprised of Messrs. Frazier and
Holland. The Audit Committee recommends annually to the Board of Directors the
appointment of our independent public accountants, reviews our internal
accounting procedures and consults with and reviews the services provided by
our independent accountants. The Audit Committee consists of Messrs. Frazier
and Holland. When we appoint an additional independent member to our board of
directors, he or she will also be appointed as a member of the Audit Committee.

Compensation Committee Interlocks and Insider Participation

Mr. Kopstein, our Chairman, Chief Executive Officer and President, serves on
the Compensation Committee of the Board of Directors.

S-1 45th Page of 80 TOC 1st Previous Next ↓Bottom Just 45th
Executive Compensation

The following table sets forth information concerning compensation we paid
to our chief executive officer and to all of our other executive officers whose
total salary and bonus exceeded $100,000 for the year ended October 31, 2000.

Summary Compensation Table

[Enlarge/Download Table]

Long-Term
Annual Compensation Compensation Awards
Name and Fiscal -------------------- ------------------- All Other
Principal Position Years Salary ($) Bonus ($) Options Granted (#) Compensation ($) (1)
------------------ ------ ---------- --------- ------------------- --------------------

Robert Kopstein......... 2000 506,988 79,993 -- 12,188
Chairman, President and 1999 505,889 34,108 -- 13,567
Chief Executive Officer 1998 521,889 29,370 -- 17,373

Luke J. Huybrechts...... 2000 108,172 82,673 -- 14,845
Senior Vice President 1999 105,182 64,870 1,500(2) 13,948
of Sales 1998 102,700 57,730 -- 17,259

Kenneth W. Harber....... 2000 102,118 83,158 -- 14,213
Vice President of
Finance, 1999 99,069 65,357 -- 13,296
Treasurer and Secretary 1998 96,800 58,084 3,446(2) 13,129

--------
(1) These amounts are our matching contributions to our 401(k) retirement
savings plan on behalf of the individual executive officers.
(2) Represents the number of replacement stock options granted during the
fiscal year indicated, as described below.

Stock Option Grants

No new stock options were granted to the executive officers named in the
Summary Compensation Table above during the fiscal year ended October 31, 2000.

Stock option grants to participants in our Stock Option Plan are generally
granted with a replacement feature, so that the participant automatically
receives a replacement option to purchase additional shares of our common stock
equal to the number of shares surrendered, if any, to us by the participant in
payment of the exercise price with respect to stock options exercised.

S-1 46th Page of 80 TOC 1st Previous Next ↓Bottom Just 46th
Aggregated Option Exercises in the Last Fiscal Year and Fiscal Year-End Option
Values

The following table sets forth information concerning stock options
exercised during the fiscal year ended October 31, 2000 by executive officers
named in the Summary Compensation Table above and the value of unexercised
options held by the executive officers as of October 31, 2000.

[Enlarge/Download Table]

Number of Value of
Underlying Unexercised Unexercised
Shares Options at Fiscal In-the-Money Options
Acquired on Year-End (#) at October 31, 2000 (2)
Exercise Value ------------------------- -------------------------
(#) Realized (1) Exercisable Unexercisable Exercisable Unexercisable
Name ----------- ------------ ----------- ------------- ----------- -------------

Luke J. Huybrechts...... 16,125 $507,668 3,750 19,125 $ 31,941 245,095
Kenneth W. Harber....... 0 0 38,586 21,862 $501,596 272,606

--------
(1) Represents the difference between the exercise price of the outstanding
options and the closing price of the common stock on the date the option
was exercised.
(2) Represents the difference between the exercise price of the outstanding
options and the closing price of the common stock on October 31, 2000,
which was $15.9375 per share.

Employment Agreements

Mr. Kopstein has an employment arrangement that provides for Mr. Kopstein to
receive a base salary equal to 1% of the previous fiscal year's net sales and a
sales commission or incentive bonus of 1% of any increase between the current
fiscal year's net sales and the prior fiscal year's net sales.

We calculate and pay Mr. Kopstein's incentive bonus on a monthly basis by
comparing the prior month's net sales with the net sales for the corresponding
month in the prior fiscal year. These calculations are not cumulative, so that,
depending on monthly net sales fluctuations during any given fiscal year, Mr.
Kopstein might receive monthly incentive bonuses with respect to net sales
increases in some months even though annual cumulative net sales decreased when
compared to the prior fiscal year. Compensation to Mr. Kopstein under this
arrangement amounted to $586,981 during the period from November 1, 1999 to
October 31, 2000.

Mr. Kopstein's employment arrangement, in place since February 1, 1995, is
governed by employment agreements that generally expire after one year. Mr.
Kopstein and Optical Cable had entered into an employment agreement dated as of
November 1, 1999, which expired October 31, 2000. Prior to the expiration of
this employment agreement, Mr. Kopstein and Optical Cable entered into another
employment agreement, dated as of November 1, 2000, to renew Mr. Kopstein's
employment arrangement through October 31, 2001. Under the terms of his
employment agreement dated as of November 1, 2000, which are substantially
similar to those of his prior employment agreements, we employ Mr. Kopstein as
President and Chief Executive Officer under the following terms:

. has an annual base salary equal to 1% of net sales for fiscal year
2000;

. is paid a sales commission monthly of 1% of the positive difference
between the net sales of the prior month and the corresponding month in
fiscal year 2000;

. agrees not to compete with us within 12 months of the termination of
his employment; and

. receives other benefits that are provided to comparable employees.

In addition to the compensation Mr. Kopstein receives under his employment
agreement, we make matching contributions to our 401(k) retirement savings plan
for the benefit of Mr. Kopstein. In fiscal year 2000, this additional
compensation to Mr. Kopstein totaled $12,188.

S-1 47th Page of 80 TOC 1st Previous Next ↓Bottom Just 47th
Incentive Bonuses

Each year the executive officers are eligible for discretionary bonuses
granted by the Compensation Committee. The amount of bonuses to be paid to the
executive officers is determined by the Compensation Committee, taking into
account the amount of other compensation received by the executive officer.
Additionally, the executive officers, other than the chief executive officer,
are also included in a monthly and lump-sum bonus plan which is based on a
percentage of the previous month's sales.

Long-Term Incentive Compensation

We adopted the Optical Cable Corporation 1996 Stock Incentive Plan on March
1, 1996, which is referred to as the Plan. All of the executive officers
participate in the Plan except the chief executive officer. Additionally, many
of our employees participate in the Plan. The Plan is administered by our Stock
Option Plan Subcommittee. All grants under the Plan are approved by the full
Board of Directors. The chief executive officer does not participate in the
Plan because his large holdings of our common stock already properly align his
interests with those of the shareholders.

We have reserved 6,000,000 shares of common stock for issuance in connection
with incentive awards granted under the Plan. Under the Plan, qualified
incentive stock options are granted at not less than fair market value on the
date of grant. The options vest:

. 25% after two years;

. 50% after three years;

. 75% after four years; and

. 100% after five years.

The Stock Option Plan Subcommittee receives recommendations from the
Compensation Committee for each employee, and considers individual and company
performance in awarding long-term compensation pursuant to the Plan. The chief
executive officer, who is also a member of the Compensation Committee, does not
receive compensation under the Plan and does not vote on grants pursuant to the
Plan.

401(k) Retirement Savings Plan

Effective January 1, 1994, we adopted a 401(k) retirement savings plan. To
become eligible for the 401(k) retirement savings plan, an employee must
complete six months of service and be at least 21 years of age. The 401(k)
retirement savings plan allows participants to contribute through salary
reduction up to 7.0 percent of their annual compensation on a pretax basis. Our
matching contributions are two dollars for every one dollar contributed by an
employee up to 4.0 percent of the employees' annual compensation. We made
matching contributions to the 401(k) retirement savings plan of $353,096,
$365,887 and $406,934 for the years ended October 31, 1998, 1999 and 2000.

1998 Employee Stock Purchase Plan

Our 1998 Employee Stock Purchase Plan permits eligible employees to purchase
shares of our common stock through payroll deductions. Amounts withheld from a
participant's compensation are transferred to the plan administrator who
purchases shares of our common stock and transfers the shares to the
participant's account.

S-1 48th Page of 80 TOC 1st Previous Next ↓Bottom Just 48th
Our 1998 Employee Stock Purchase Plan permits participants to purchase our
common stock through payroll deductions of no less than $20 and up to 10% of
the participant's compensation. Compensation is defined as the participant's
regular salary or regular gross earnings excluding bonuses, back pay, lump sum
and severance paid to the employee prior to income or employment taxes or by
other withholding. A participant may decrease, increase or cancel his payroll
deduction at any time.

Amounts deducted from the participant's compensation are used to purchase
shares of common stock as soon as practical after these amounts are transferred
to the administrator. The price of common stock purchased under our 1998
Employee Stock Purchase Plan is the market price of the common stock prevailing
on the Nasdaq National Market on the date the shares are purchased, and we pay
any commission in connection with that purchase.

A participant may direct the administrator to sell the common stock held in
his account and distribute cash proceeds to the participant or his designee
and/or withdraw shares of common stock in his account. There is no minimum
amount for any type of distribution and no restriction on the number of times a
participant may make a withdrawal from his plan account.

S-1 49th Page of 80 TOC 1st Previous Next ↓Bottom Just 49th
PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth information known to us as of April 30, 2001
regarding the beneficial ownership of our common stock and as adjusted to
reflect the sale of common stock by the following:

. each person known to us to be the beneficial owner, within the meaning
of Section 13(d) of the Exchange Act of more than 5% of the outstanding
shares of common stock;

. each of our directors;

. each of our executive officers named in the Summary Compensation Table
on page 44;

. each selling shareholder; and

. all of our executive officers and directors and nominees as a group.

Unless otherwise indicated, the address of each named beneficial owner is
c/o Optical Cable Corporation, 5290 Concourse Drive, Roanoke, Virginia 24019.
Except to the extent indicated in the footnotes, each of the beneficial owners
named below has sole voting and investment power with respect to the shares
listed.

[Download Table]

Shares
Beneficially Shares Beneficially
Owned Before Owned After
the Offering Number of The Offering
------------------ Shares Being ----------------------
Name of Beneficial Owner Number Percent Offered Number Percent
------------------------ ---------- ------- ------------ --------- ----------

Robert Kopstein (1)..... 54,000,000 95.8%
Luke J. Huybrechts (2).. 21,125 *
Kenneth W. Harber....... 54,843 *
Randall H. Frazier...... -- --
John M. Holland......... -- --
All directors and
executive officers as a
group (5 persons)...... 54,075,968 95.8%

--------
* Less than 1.0%
(1) Mr. Kopstein, our Chairman, President and Chief Executive Officer, is the
selling shareholder.
(2) Includes 4,125 shares that Mr. Huybrechts may acquire through the
exercise of stock options.

S-1 50th Page of 80 TOC 1st Previous Next ↓Bottom Just 50th
DESCRIPTION OF CAPITAL STOCK

The following brief description of our capital stock does not purport to be
complete and is subject in all respects to applicable Virginia law and to the
provisions of our Amended and Restated Articles of Incorporation and Bylaws,
copies of which have been filed with the Securities and Exchange Commission.

Common Stock

We have authorized 100,000,000 shares of common stock, no par value. Upon
consummation of the offering, there will be shares of common stock
outstanding. Holders of the common stock are entitled to one vote per share on
all matters to be voted upon by the shareholders. Holders of common stock do
not have cumulative voting rights, and therefore holders of a majority of the
shares voting for the election of directors can elect all directors.

Holders of the common stock are entitled to receive dividends as may be
declared from time to time by the Board of Directors out of funds legally
available, after payment of dividends required to be paid on outstanding
preferred stock, if any.

In the event of our liquidation, dissolution or winding up, the holders of
common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to prior distribution rights of preferred stock
then outstanding, if any.

Our common stock has no preemptive, conversion, or redemption rights and is
not subject to further calls or assessments. Immediately upon consummation of
the offering, all of the outstanding shares of common stock will be validly
issued, fully paid and nonassessable.

Preferred Stock

We have authorized 1,000,000 shares of preferred stock, no par value. There
are no shares of preferred stock outstanding. Our Board of Directors, without
further action by the shareholders, is authorized to designate and issue in
series preferred stock and to fix as to any series:

. the dividend rate;

. redemption rights;

. preferences on dissolution, liquidation or winding up;

. conversion rights;

. voting rights; and

. any other preferences or special rights and qualifications.

Other preferences or special rights and qualifications that our Board of
Directors may designate as to any series of preferred shares include a right
that no transaction of a specified nature shall be consummated while any shares
of the series remain outstanding except upon the assent of all or a specified
portion of those shares.

Shares of common stock would be subject to the preferences, rights and
powers of any of the shares of preferred stock as described in our Articles of
Incorporation and the resolutions establishing one or more series of preferred
stock.

Holders of the preferred stock, if and when issued, will be entitled to vote
as required under applicable Virginia law. Virginia law includes provisions for
the voting of the preferred stock in the case of any amendment to the Articles
of Incorporation, as amended, affecting the rights of holders of the preferred
stock, the payment of some stock dividends, merger or consolidation, sale of
all or substantially all of our assets and dissolution.

S-1 51st Page of 80 TOC 1st Previous Next ↓Bottom Just 51st
There are no agreements or understandings for the designation of any series of
preferred stock or the issuance of shares.

Virginia Stock Corporation Act; Anti-takeover Effects

The Virginia Stock Corporation Act contains provisions governing what are
referred to as affiliated transactions. These provisions, with several
exceptions discussed below, apply to Virginia corporations having more than
300 shareholders of record and require approval of some material transactions
between a Virginia corporation and any beneficial owner of more than 10.0% of
any class of its outstanding voting shares, referred to as an interested
shareholder, if the transaction occurs within three years after the
shareholder becomes an interested shareholder. Approval of these material
transactions with an interested shareholder must be by a majority, but not
less than two of the disinterested directors and by the holders of at least
two-thirds of the voting shares other than shares beneficially owned by the
interested shareholder.

Affiliated transactions subject to this approval requirement include:

. mergers;

. share exchanges;

. material dispositions of corporate assets not in the ordinary course of
business;

. guarantees of indebtedness in excess of 5% of the corporation's net
worth;

. any dissolution of the corporation proposed by or on behalf of an
interested shareholder;

. sales or dispositions of voting securities in excess of 5% of the full
market value of all outstanding voting shares; or

. any reclassification.

Reclassifications include reverse stock splits, or a recapitalization, or a
merger of the corporation with any of its subsidiaries or a distribution or
other transaction, which directly or indirectly increases the percentage of
voting shares owned beneficially by an interested shareholder by more than 5%.

A disinterested director means, with respect to a particular interested
shareholder, a member of the board of directors of the corporation who was:

. a member on the date on which an interested shareholder became an
interested shareholder, or

. recommended for election by, or was elected to fill a vacancy and
received the affirmative vote of, a majority of the disinterested
directors then on the board of directors.

The principal exceptions to the special voting requirements apply to
transactions proposed after the three-year period has expired and require
either that the transaction be approved by a majority of our disinterested
directors or that the transaction satisfy the fair-price requirements of the
statute. In general, the fair-price requirement provides that in a two-step
acquisition transaction, the interested shareholder must pay the shareholders
in the second step either the same amount of cash or the same amount and type
of consideration paid to acquire our shares in the first step.

These provisions are designed to deter some types of takeovers of Virginia
corporations. The statute provides that, by affirmative vote of a majority of
the voting shares other than shares owned by any interested shareholder, a
corporation can adopt an amendment to our articles of incorporation or bylaws
providing that the affiliated transactions provisions shall not apply to the
corporation. We have not elected to opt out of the affiliated transactions
provisions.

S-1 52nd Page of 80 TOC 1st Previous Next ↓Bottom Just 52nd
Virginia law also provides that, with respect to Virginia corporations
having 300 or more shareholders of record, shares acquired in a transaction
that would cause the acquiring person's voting strength to meet or exceed any
of the following three thresholds:

. 20%,

. 33 1/3%, or

. 50%,

have no voting rights with respect to these shares unless granted by a majority
vote of shares not owned by the acquiring person or any officer or employee-
director of the corporation. This provision empowers an acquiring person to
require the Virginia corporation to hold a special meeting of shareholders to
consider the matter within 50 days of its request. The Board of Directors of a
Virginia corporation can opt out of this provision at any time before four days
after receipt of a control share acquisition notice.

Transfer Agent and Registrar

First Union National Bank of North Carolina serves as transfer agent and
registrar for our common stock. First Union National Bank of Virginia, an
affiliate of First Union National Bank of North Carolina, has extended credit
facilities in the aggregate amount of $15 million to us.

S-1 53rd Page of 80 TOC 1st Previous Next ↓Bottom Just 53rd
UNDERWRITING

We and the selling shareholder have entered into an underwriting agreement
with the underwriters named below, for whom ABN AMRO Rothschild LLC is acting
as representative.

The underwriting agreement provides for each underwriter to purchase the
number of shares of common stock shown opposite its name below, subject to the
terms and conditions of the underwriting agreement.

The underwriters' obligations are several, which means that each
underwriter is required to purchase the specified number of shares, but is not
responsible for the commitment of any other underwriter to purchase shares.

[Download Table]

Underwriter Number of Shares
----------- ----------------

ABN AMRO Rothschild LLC........................................
-----
Total......................................................
=====

This is a firm commitment underwriting, which means that the underwriters
have agreed to purchase all of the shares offered by this prospectus if they
purchase any shares, other than those covered by the over-allotment option
described below.

The underwriters advised us that they propose to offer shares directly to
the public at the public offering price that appears on the cover page of this
prospectus. In addition, the underwriters may offer some of the shares to
selected securities dealers at the public offering price less a concession of
$ per share. The underwriters may also allow, and these dealers may
reallow, a concession not in excess of $ per share to other dealers. After
the shares are released for sale to the public, the underwriters may change
the offering price and other selling terms at various times.

We have granted the underwriters an over-allotment option. This option,
which is exercisable for up to 30 days after the date of this prospectus,
permits the underwriters to purchase a maximum of additional shares from
us to cover over-allotments. If the underwriters exercise all or part of this
option, they will purchase shares covered by the option at the public offering
price that appears on the cover page of this prospectus, less the underwriting
discount. The underwriters have severally agreed that, to the extent the over-
allotment option is exercised, they will each purchase a number of additional
shares proportionate to each underwriter's initial commitment reflected in the
table above.

The following table shows the underwriting fees to be paid to the
underwriters by us and the selling shareholder in connection with this
offering. The fees to be paid by us and the selling shareholder are shown
assuming both no exercise and full exercise of the underwriters' over-
allotment option:

[Download Table]

Underwriting fees
Paid by the
Paid by us selling shareholder
------------------------- -------------------------
No exercise Full exercise No exercise Full exercise
----------- ------------- ----------- -------------

Per Share................... $ $ $ $
Total....................... $ $ $ $

We and the selling shareholder will pay the offering expenses, estimated to
be approximately $ .

The selling shareholder and our executive officers and directors have
agreed to a 180-day lock-up with respect to the shares of our common stock and
any other of our securities that they beneficially own or have the right to
acquire upon exercise of options. We have agreed to a 180-day lock-up with
respect to previously unissued or treasury shares. This means that, with some
exceptions, during the lock-up periods, we, the selling shareholder and these
officers and directors, may not offer, sell, pledge or otherwise dispose of
our common stock or other securities without the prior written consent of ABN
AMRO Rothschild LLC.

S-1 54th Page of 80 TOC 1st Previous Next ↓Bottom Just 54th
The rules of the Securities and Exchange Commission may limit the ability of
the underwriters to bid for or purchase shares before the distribution of the
shares is completed. However, the underwriters may engage in the following
activities under the rules:

. Stabilizing transactions--The underwriters may bid for, and purchase,
shares of our common stock in the open market to stabilize the price of
the common stock.

. Over-allotment and syndicate covering transactions--The underwriters may
sell more shares than they are obligated to purchase under the
underwriting agreement, creating a short position. A short sale is
covered if the short position is no greater than the number of shares
available for purchase by the underwriters under the over-allotment
option. The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing shares in the open
market. In determining the source of shares to close out a covered short
sale, the underwriters will consider, among other things, the open
market price of shares compared to the price available under the over-
allotment option. The underwriters may also sell shares in excess of the
over-allotment option, creating a naked short position. The underwriters
must close out any naked short position by purchasing shares in the open
market. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the
price of the common stock in the open market after pricing that could
adversely affect investors who purchase in the offering.

. Reclaiming selling concessions--The underwriting syndicate may also
reclaim selling concessions allowed to an underwriter or a dealer for
distributing our common stock in the offering, if the syndicate
repurchases previously distributed common stock to cover its short
positions or to stabilize the price of the common stock.

. Passive market-making activities--The underwriters and dealers may
engage in passive market making transactions in our common stock in
accordance with Rule 103 of Regulation M promulgated by the Securities
and Exchange Commission. In general, a passive market maker may not bid
for, or purchase, the common stock at a price that exceeds the highest
independent bid. In addition, the net daily purchases made by any
passive market maker generally may not exceed 30% of its average daily
trading volume in the common stock during a specified two month prior
period, or 200 shares, whichever is greater. A passive market maker must
identify passive market making bids as such on the Nasdaq electronic
inter-dealer reporting system.

Any of these activities may raise or maintain the market price of the common
stock above independent market levels or prevent or retard a decline in the
market price of our common stock. Underwriters and dealers are not required to
engage in any of these activities. As a result, the underwriters and dealers
may never initiate any of these activities and may end any of these activities
at any time.

We and the selling shareholders have agreed to indemnify the underwriters
against, or to contribute to payments that the underwriters may be required to
make regarding some liabilities, including liabilities under the Securities
Act.

LEGAL MATTERS

McGuireWoods LLP, Richmond, Virginia, our counsel, will issue an opinion
with respect to the validity of the shares of common stock offered in this
prospectus. Davis Polk & Wardwell, New York, New York, is acting as counsel for
the underwriters in connection with the offering.

EXPERTS

Our financial statements as of October 31, 1999 and 2000, and for each of
the years in the three-year period ended October 31, 2000, have been included
herein and elsewhere in the registration statement in reliance upon the report
of KPMG LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.

S-1 55th Page of 80 TOC 1st Previous Next ↓Bottom Just 55th
ADDITIONAL INFORMATION

We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and file reports, proxy statements and other
information with the Securities and Exchange Commission. These reports, proxy
statements and other information may be inspected and copied at:

. the principal office of the Securities and Exchange Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and

. the Securities and Exchange Commission's Regional Offices at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and 7 World Trade Center, Suite 1300, New York, New York 10048.

Copies of these materials can also be obtained by mail from the Public
Reference Section of the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Securities and Exchange Commission maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Securities and Exchange Commission.

We have filed a registration statement on Form S-1 under the Securities Act
of 1933, as amended, with the Securities and Exchange Commission with respect
to the shares of common stock offered in this prospectus. This prospectus,
which constitutes a part of the registration statement, does not contain all
the information set forth in the registration statement, items of which are
contained in schedules and exhibits to the registration statement as permitted
by the rules and regulations of the Securities and Exchange Commission. For
further information with respect to us and the common stock being offered,
reference is made to the Form S-1 registration statement and the exhibits and
schedules.

Statements contained in this prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each contract, agreement or other document filed as an exhibit to
the registration statement, you should refer to the exhibit for a more complete
description of the matter involved.

S-1 56th Page of 80 TOC 1st Previous Next ↓Bottom Just 56th
OPTICAL CABLE CORPORATION

INDEX TO FINANCIAL STATEMENTS

[Download Table]

Page
----

Independent Auditors' Report............................................... F-2
Balance Sheets............................................................. F-3
Statements of Income (Loss)................................................ F-4
Statements of Stockholders' Equity......................................... F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7

F-1

S-1 57th Page of 80 TOC 1st Previous Next ↓Bottom Just 57th
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Optical Cable Corporation:

We have audited the accompanying balance sheets of Optical Cable Corporation
as of October 31, 1999 and 2000, and the related statements of income,
stockholders' equity, and cash flows for each of the years in the three-year
period ended October 31, 2000. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Optical Cable Corporation
as of October 31, 1999 and 2000, and the results of its operations and its cash
flows for each of the years in the three-year period ended October 31, 2000, in
conformity with accounting principles generally accepted in the United States
of America.

/s/ KPMG LLP
Roanoke, Virginia
December 8, 2000

F-2

S-1 58th Page of 80 TOC 1st Previous Next ↓Bottom Just 58th
OPTICAL CABLE CORPORATION

Balance Sheets

October 31, 1999 and 2000 and April 30, 2001

[Download Table]

October 31,
----------------------- April 30,
1999 2000 2001
----------- ----------- -----------
Assets (unaudited)

Current assets:
Cash and cash equivalents................ $ 6,816,678 $ 1,458,896 $ 1,328,860
Trading securities....................... -- 17,982,830 5,030,350
Trade accounts receivable, net of
allowance for doubtful accounts of
$316,000 in 1999, $1,909,069 in 2000 and
$213,150 (unaudited) at April 30, 2001.. 10,230,717 11,357,522 15,927,918
Income taxes refundable.................. -- 1,162,118 --
Other receivables........................ 280,219 362,000 384,001
Due from employees....................... 8,100 2,890 1,915
Note receivable.......................... 61,100 -- --
Inventories.............................. 8,754,423 7,572,153 8,817,544
Prepaid expenses......................... 106,536 112,794 134,577
Deferred income taxes.................... 206,652 959,665 260,790
----------- ----------- -----------
Total current assets................... 26,464,425 40,970,868 31,885,955
Note receivable, noncurrent................ 32,505 -- --
Other assets, net.......................... 188,328 261,937 316,022
Property and equipment, net................ 10,826,331 11,455,372 12,094,942
----------- ----------- -----------
Total assets........................... $37,511,589 $52,688,177 $44,296,919
=========== =========== ===========

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses.... $ 3,370,244 $ 2,479,116 $ 3,289,668
Accrued compensation and payroll taxes... 692,678 847,572 746,367
Payable to investment broker............. -- 5,658,574 1,108,299
Income taxes payable..................... 421,803 -- 444,071
----------- ----------- -----------
Total current liabilities.............. 4,484,725 8,985,262 5,588,405
Deferred income taxes...................... 179,789 195,085 194,771
----------- ----------- -----------
Total liabilities...................... 4,664,514 9,180,347 5,783,176
----------- ----------- -----------
Stockholders' equity:
Preferred stock, no par value, authorized
1,000,000 shares; none issued and
outstanding............................. -- -- --
Common stock, no par value, authorized
100,000,000 shares; issued and
outstanding 56,121,407 shares in 1999,
56,391,993 shares in 2000 and 56,356,879
(unaudited) shares at April 30, 2001.... 4,128,316 5,179,295 3,889,364
Paid-in capital.......................... 359,566 1,714,284 1,782,669
Retained earnings........................ 28,359,193 36,614,251 32,841,710
----------- ----------- -----------
Total stockholders' equity............. 32,847,075 43,507,830 38,513,743
Commitments and contingencies
----------- ----------- -----------
Total liabilities and stockholders'
equity................................ $37,511,589 $52,688,177 $44,296,919
=========== =========== ===========

See accompanying notes to financial statements.

F-3

S-1 59th Page of 80 TOC 1st Previous Next ↓Bottom Just 59th
OPTICAL CABLE CORPORATION

Statements of Income (Loss)

Years Ended October 31, 1998, 1999 and 2000 and
Six Months Ended April 30, 2000 and 2001

[Enlarge/Download Table]

Six Months Ended April
Years Ended October 31, 30,
------------------------------------- -----------------------
1998 1999 2000 2000 2001
----------- ----------- ----------- ----------- -----------
(unaudited)

Net sales............... $50,588,893 $50,698,637 $58,218,994 $24,374,545 $34,372,805
Cost of goods sold...... 29,329,822 27,547,022 30,877,688 13,260,338 18,666,063
----------- ----------- ----------- ----------- -----------
Gross profit........ 21,259,071 23,151,615 27,341,306 11,114,207 15,706,742
Selling, general and
administrative
expenses............... 9,939,258 10,798,643 15,024,198 5,731,487 7,674,120
----------- ----------- ----------- ----------- -----------
Income from
operations......... 11,319,813 12,352,972 12,317,108 5,382,720 8,032,622
Other income (expense):
Gains (losses) on
trading securities,
net.................. -- -- 288,667 1,747,732 (9,155,256)
Interest income....... 56,260 201,708 230,038 163,881 24,830
Interest expense...... (505) -- (57,084) -- (248,083)
Other, net............ 1,891 (35,944) (45,015) 7,081 15,296
----------- ----------- ----------- ----------- -----------
Other income
(expense), net..... 57,646 165,764 416,606 1,918,694 (9,363,213)
----------- ----------- ----------- ----------- -----------
Income (loss) before
income tax
expense............ 11,377,459 12,518,736 12,733,714 7,301,414 (1,330,591)
Income tax expense...... 4,107,495 4,214,096 4,478,656 2,570,852 2,441,950
----------- ----------- ----------- ----------- -----------
Net income (loss)..... $ 7,269,964 $ 8,304,640 $ 8,255,058 $ 4,730,562 $(3,772,541)
=========== =========== =========== =========== ===========
Net income (loss) per
share:
Basic and diluted net
income (loss)
per share............ $ 0.13 $ 0.15 $ 0.15 $ 0.08 $ (0.07)
=========== =========== =========== =========== ===========

See accompanying notes to financial statements.

F-4

S-1 60th Page of 80 TOC 1st Previous Next ↓Bottom Just 60th
OPTICAL CABLE CORPORATION

Statements of Stockholders' Equity

Years Ended October 31, 1998, 1999 and 2000 and
Six Months Ended April 30, 2001

[Enlarge/Download Table]

Common Stock Total
----------------------- Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
---------- ----------- ---------- ----------- -------------

Balances at October 31,
1997................... 58,013,124 $18,594,116 $ -- $12,784,589 $31,378,705

Exercise of employee
stock options ($1.67
per share)............. 119,025 198,375 -- -- 198,375
Tax benefit of
disqualifying
disposition of stock
options exercised...... -- -- 150,359 -- 150,359
Repurchase of common
stock (at cost)........ (1,313,595) (9,006,210) -- -- (9,006,210)
Net income.............. -- -- -- 7,269,964 7,269,964
---------- ----------- ---------- ----------- -----------
Balances at October 31,
1998................... 56,818,554 9,786,281 150,359 20,054,553 29,991,193

Exercise of employee
stock options ($1.67
per share)............. 119,700 199,500 -- -- 199,500
Tax benefit of
disqualifying
disposition of stock
options exercised...... -- -- 209,207 -- 209,207
Repurchase of common
stock (at cost)........ (816,847) (5,857,465) -- -- (5,857,465)
Net income.............. -- -- -- 8,304,640 8,304,640
---------- ----------- ---------- ----------- -----------
Balances at October 31,
1999................... 56,121,407 4,128,316 359,566 28,359,193 32,847,075
Exercise of employee
stock options ($3.86
per share)............. 268,336 1,036,916 -- -- 1,036,916
Restricted stock award
($6.25 per share)...... 2,250 14,063 -- -- 14,063
Tax benefit of
disqualifying
disposition of stock
options exercised...... -- -- 1,354,718 -- 1,354,718
Net income.............. -- -- -- 8,255,058 8,255,058
---------- ----------- ---------- ----------- -----------
Balances at October 31,
2000................... 56,391,993 5,179,295 1,714,284 36,614,251 43,507,830

Exercise of employee
stock options ($2.09
per share)
(unaudited)............ 138,186 288,178 -- -- 288,178
Repurchase of common
stock (at cost)
(unaudited)............ (173,300) (1,578,109) -- -- (1,578,109)
Stock-based compensation
(unaudited)............ -- -- 68,385 -- 68,385
Net loss (unaudited).... -- -- -- (3,772,541) (3,772,541)
---------- ----------- ---------- ----------- -----------
Balances at April 30,
2001 (unaudited)....... 56,356,879 $ 3,889,364 $1,782,669 $32,841,710 $38,513,743
========== =========== ========== =========== ===========

See accompanying notes to financial statements.

F-5

S-1 61st Page of 80 TOC 1st Previous Next ↓Bottom Just 61st
OPTICAL CABLE CORPORATION

Statements of Cash Flows

Years Ended October 31, 1998, 1999 and 2000 and
Six Months Ended April 30, 2000 and 2001

[Enlarge/Download Table]

Six Months Ended
Years Ended October 31, April 30,
-------------------------------------- -------------------------
1998 1999 2000 2000 2001
----------- ----------- ------------ ------------ -----------
(unaudited)

Cash flows from
operating activities:
Net income (loss)..... $ 7,269,964 $ 8,304,640 $ 8,255,058 $ 4,730,562 $(3,772,541)
Adjustments to
reconcile net income
(loss) to net cash
provided by (used in)
operating activities:
Depreciation and
amortization......... 787,674 764,652 841,646 377,501 475,861
Bad debt expense
(recovery)........... 88,005 87,490 2,018,128 (38,926) 494,203
Deferred income tax
expense (benefit).... (77,515) 67,754 (737,717) 14,982 698,561
Loss on disposal of
property and
equipment............ 2,669 -- 7,807 -- --
Tax benefit of
disqualifying
disposition of stock
options exercised.... 150,359 209,207 1,354,718 1,270,325 --
Stock-based
compensation
expense.............. -- -- 14,063 14,063 68,385
Unrealized (gain)
loss on trading
securities, net...... -- -- 499,755 1,141,036 (183,191)
(Increase) decrease
in:
Trading securities... -- -- (18,482,585) (13,551,148) 13,135,671
Trade accounts
receivable.......... (169,428) (417,913) (3,051,328) (203,584) (5,064,599)
Income taxes
refundable.......... -- -- (1,162,118) (558,947) 1,162,118
Other receivables.... 244,903 14,980 (81,781) (22,545) (22,001)
Due from employees... (2,055) (2,511) 5,210 5,853 975
Inventories.......... 2,052,431 1,212,589 1,182,270 (81,984) (1,245,391)
Prepaid expenses..... 25,280 (10,770) (6,258) (47,425) (21,783)
Increase (decrease)
in:
Accounts payable and
accrued expenses.... (395,330) 1,328,540 (1,053,960) 203,115 878,292
Accrued compensation
and payroll taxes... 43,292 36,650 154,894 (159,940) (101,205)
Payable to
investment broker... -- -- 5,658,574 591,818 (4,550,275)
Income taxes
payable............. (453,550) 310,354 (421,803) (421,803) 444,071
----------- ----------- ------------ ------------ -----------
Net cash provided
by (used in)
operating
activities....... 9,566,699 11,905,662 (5,005,427) (6,737,047) 2,397,151
----------- ----------- ------------ ------------ -----------
Cash flows from
investing activities:
Purchase of property
and equipment........ (622,394) (400,714) (1,298,717) (757,976) (1,183,171)
Cash surrender value
of life insurance.... -- (171,382) (90,554) (37,356) (54,085)
Collection from note
receivable........... -- 18,800 -- -- --
----------- ----------- ------------ ------------ -----------
Net cash used in
investing
activities....... (622,394) (553,296) (1,389,271) (795,332) (1,237,256)
----------- ----------- ------------ ------------ -----------
Cash flows from
financing activities:
Repurchase of common
stock................ (9,006,210) (5,857,465) -- -- (1,578,109)
Proceeds from notes
payable, net......... -- -- -- 494,174 --
Proceeds from exercise
of employee stock
options.............. 198,375 199,500 1,036,916 613,020 288,178
----------- ----------- ------------ ------------ -----------
Net cash provided
by (used in)
financing
activities....... (8,807,835) (5,657,965) 1,036,916 1,107,194 (1,289,931)
----------- ----------- ------------ ------------ -----------
Net increase (decrease)
in cash and cash
equivalents........... 136,470 5,694,401 (5,357,782) (6,425,185) (130,036)
Cash and cash
equivalents at
beginning of period... 985,807 1,122,277 6,816,678 6,816,678 1,458,896
----------- ----------- ------------ ------------ -----------
Cash and cash
equivalents at end of
period................ $ 1,122,277 $ 6,816,678 $ 1,458,896 $ 391,493 $ 1,328,860
=========== =========== ============ ============ ===========
Supplemental disclosure
of cash flow
information:
Cash payments for
interest............. $ 505 $ -- $ 57,084 $ -- $ 248,083
=========== =========== ============ ============ ===========
Income taxes paid..... $ 4,488,201 $ 3,615,300 $ 5,445,576 $ 2,266,295 $ 137,200
=========== =========== ============ ============ ===========
Noncash investing and
financing activities:
Capital expenditures
accrued in accounts
payable.............. $ -- $ 89,344 $ 162,832 $ 2,023 $ 95,092
=========== =========== ============ ============ ===========
Trade accounts
receivable financed
as note receivable... $ -- $ 112,405 $ -- $ -- $ --
=========== =========== ============ ============ ===========

See accompanying notes to financial statements.

F-6

S-1 62nd Page of 80 TOC 1st Previous Next ↓Bottom Just 62nd
OPTICAL CABLE CORPORATION

Notes to Financial Statements

Years Ended October 31, 1998, 1999 and 2000 and
Six Months Ended April 30, 2000 and 2001

(Information as of April 30, 2001 and for the six months
ended April 30, 2000 and 2001 is unaudited)

(1) Description of Business and Summary of Significant Accounting Policies

(a) Description of Business

Optical Cable Corporation (the "Company") manufactures and markets a broad
range of fiber optic cables for high bandwidth transmission of data, video and
audio communications over moderate distances. The Company's fiber optic cables
are sold nationwide and in over 65 foreign countries (also see note 9).

(b) Cash Equivalents

As of October 31, 1999 and 2000, cash equivalents consisted of $6,755,814
and $1,171,777, respectively, of overnight repurchase agreements and money
market mutual funds. For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.

Trading securities are recorded at fair value, which is based on quoted
market prices. Purchases and sales of trading securities are recognized on a
trade-date basis, the date the order to buy or sell is executed. The Company's
trading securities are bought and held principally for the purpose of selling
them in the near term. Unrealized holding gains and losses for trading
securities are included in the determination of net income or net loss. The
amount of net unrealized holding loss that has been included in net income for
the year ended October 31, 2000 was $499,755. Net realized gains or losses are
determined on the first-in, first-out cost method. As of October 31, 2000 and
April 30, 2001, the Company's trading securities consist of shares in the
Nasdaq 100 Trust, which is designed to closely track the price and yield
performance of the Nasdaq 100 stock index.

As of October 31, 2000, the Company's trading securities have experienced a
2.7% decline in value since the date of purchase. In addition, subsequent to
October 31, 2000 through December 8, 2000, the market value of the Company's
trading securities held as of October 31, 2000, has declined approximately 17%,
or approximately $3.0 million. It is possible that the price of these trading
securities, valued at $17,982,830 as of October 31, 2000, could continue to
experience an adverse change in the near term.

As of October 31, 2000, the Company had short-term margin borrowings of
$5,658,574 payable to an investment broker related to the trading securities.
The margin account incurs interest at rates ranging from the Call Money rate
plus 0.25% to the Call Money rate plus 2.5%, depending on the outstanding
balance of margin borrowings (8.5% as of October 31, 2000). Obligations of the
Company to the investment broker are collateralized by the trading securities
and are subject to margin provisions, which may result in the sale of some or
all of the trading securities to meet margin calls.

Subsequent to October 31, 2000, the Company continued to purchase and sell
shares in the Nasdaq 100 Trust and during this period the fair value of those
shares continued to decline substantially. During the three months ended
January 31, 2001, the Company recognized realized and unrealized net losses of
$3,991,181 (unaudited), and during the three months ended April 30, 2001, the
Company recognized additional realized and unrealized net losses of $5,164,075
(unaudited), for a total realized and unrealized net loss of $9,155,256
(unaudited) included in other expense, net for the six months ended April 30,
2001. As of April 30, 2001, the

F-7

S-1 63rd Page of 80 TOC 1st Previous Next ↓Bottom Just 63rd
OPTICAL CABLE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

Company's trading securities totaled $5,030,350 (unaudited) and the outstanding
margin borrowings payable to investment broker totaled $1,108,299 (unaudited).
For the six months ended April 30, 2001, the Company incurred interest expense
of $248,083 (unaudited) on the margin borrowings. The amount of net unrealized
holding gain included in other expense, net for the six months ended April 30,
2001 was $183,191 (unaudited).

As of April 30, 2001, the Company's trading securities, valued at $5,030,350
(unaudited), have experienced a 6.3% (unaudited) decline in value since the
date of purchase. Subsequent to April 30, 2001 through June 19, 2001, the value
of the Company's trading securities held as of April 30, 2001 decreased by
approximately 9.5% (unaudited), or approximately $480,000 (unaudited). It is
possible that the price of the Company's trading securities could continue to
experience an adverse change in the near term.

(d) Inventories

Inventories of raw materials and production supplies are stated at the lower
of cost (specific identification for optical fibers and first-in, first-out for
other raw materials and production supplies) or market. Inventories of work in
process and finished goods are stated at average cost, which includes raw
materials, direct labor and manufacturing overhead.

(e) Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are
provided for using both straight-line and declining balance methods over the
estimated useful lives of the assets. Estimated useful lives are thirty-nine
years for buildings and improvements and five to seven years for machinery and
equipment and furniture and fixtures.

(f) Revenue Recognition

Revenue is recognized at the time of product shipment or delivery to the
customer, based on shipping terms.

(g) Shipping and Handling Costs

Shipping and handling costs include the costs incurred to physically move
finished goods from the Company's warehouse to the customers designated
location and the costs to store, move and prepare the finished goods for
shipment. All amounts billed to a customer in a sale transaction related to
shipping and handling is classified as sales revenue. Shipping and handling
costs of approximately $1,195,000, $1,425,000 and $1,948,000 are included in
selling, general and administrative expenses for the years ended October 31,
1998, 1999 and 2000, respectively.

(h) Income Taxes

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

F-8

S-1 64th Page of 80 TOC 1st Previous Next ↓Bottom Just 64th
OPTICAL CABLE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

(i) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

The Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future undiscounted net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceed the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.

(j) Stock Option Plan

Prior to November 1, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense would be recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. On November 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation,
which permits entities to recognize as expense over the vesting period the fair
value of all stock-based awards on the date of grant. Alternatively, SFAS No.
123 also allows entities to continue to apply the provisions of APB Opinion No.
25 and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years as
if the fair-value-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No. 25
and provide the pro forma disclosure provisions of SFAS No. 123.

(k) Net Income (Loss) Per Share

Basic net income (loss) per share excludes dilution and is computed by
dividing net income (loss) available to common stockholders by the weighted-
average number of common shares outstanding for the period. Diluted net income
(loss) per share reflects the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or converted into
common stock or resulted in the issuance of common stock that then shared in
the net income (loss) of the Company.

(l) Comprehensive Income

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its components in a full set
of financial statements. SFAS No. 130 was issued to address concerns over the
practice of reporting elements of comprehensive income directly in equity. This
Statement requires all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed in equal prominence with the other
financial statements. It does not require a specific format for that financial
statement but requires that an enterprise display an amount representing total
comprehensive income for the period in that financial statement.

SFAS No. 130 is applicable to all entities that provide a full set of
financial statements. Enterprises that have no items of other comprehensive
income in any period presented are excluded from the scope of this Statement.
SFAS No. 130 does not have any effect on current or prior period financial
statement displays presented by the Company since the Company has no items of
other comprehensive income in any period presented.

F-9

S-1 65th Page of 80 TOC 1st Previous Next ↓Bottom Just 65th
OPTICAL CABLE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

(m) Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the 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 these estimates.

(n) Reclassifications

Certain reclassifications have been made to the prior year's financial
statements to place them on a basis comparable with the current year's
financial statements.

(o) Interim Financial Information (Unaudited)

The condensed financial information as of April 30, 2001, and for the six
months ended April 30, 2000 and 2001, is unaudited. In the opinion of
management, such information contains all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of financial
position, results of operations and cash flows. Results for the six months
ended April 30, 2001, are not necessarily indicative of the results to be
expected for the full year ending October 31, 2001, or any other future period.

(2) Allowance for Doubtful Accounts Receivable

A summary of changes in the allowance for doubtful accounts receivable for
the years ended October 31, 1998, 1999 and 2000, and the six months ended April
30, 2001, follows (see also note 9):

[Download Table]

Years Ended October 31, Six Months
------------------------------ Ended
1998 1999 2000 April 30, 2001
-------- -------- ---------- --------------
(unaudited)

Balance at beginning of
year....................... $307,400 $311,500 $ 316,000 $ 1,909,069
Bad debt expense............ 88,005 87,490 2,018,128 494,203
Losses charged to
allowance.................. (90,147) (84,633) (453,049) (2,191,105)
Recoveries added to
allowance.................. 6,242 1,643 27,990 983
-------- -------- ---------- -----------
Balance at end of year...... $311,500 $316,000 $1,909,069 $ 213,150
======== ======== ========== ===========

(3) Inventories

Inventories as of October 31, 1999 and 2000, and April 30, 2001, consist of
the following:

[Download Table]

October 31,
--------------------- April 30,
1999 2000 2001
---------- ---------- -----------
(unaudited)

Finished goods............................. $2,976,426 $ 808,271 $1,587,285
Work in process............................ 2,306,209 3,487,611 4,323,194
Raw materials.............................. 3,416,046 3,194,393 2,823,236
Production supplies........................ 55,742 81,878 83,829
---------- ---------- ----------
$8,754,423 $7,572,153 $8,817,544
========== ========== ==========

F-10

S-1 66th Page of 80 TOC 1st Previous Next ↓Bottom Just 66th
OPTICAL CABLE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

(4) Property and Equipment

Property and equipment as of October 31, 1999 and 2000, consists of the
following:

[Download Table]

October 31,
------------------------
1999 2000
----------- -----------

Land.............................................. $ 2,745,327 $ 2,745,327
Building and improvements......................... 6,893,642 6,896,842
Machinery and equipment........................... 5,424,594 6,676,960
Furniture and fixtures............................ 734,404 735,052
Construction in progress.......................... 131,008 236,071
----------- -----------
Total property and equipment, at cost......... 15,928,975 17,290,252
Less accumulated depreciation and amortization.... (5,102,644) (5,834,880)
----------- -----------
Property and equipment, net................... $10,826,331 $11,455,372
=========== ===========

In October 2000, the Company entered into agreements to purchase certain
machinery and equipment totaling approximately $872,000. The machinery and
equipment is expected to be delivered and installed by the end of July 2001.
Total remaining commitments under the machinery and equipment purchase
agreements as of October 31, 2000 approximated $712,000.

(5) Notes Payable

Under a loan agreement with its bank dated March 10, 1999, the Company has a
$5.0 million secured revolving line of credit and a $10.0 million secured
revolving line of credit. The Company's intention is that the $5.0 million line
of credit be available to fund general corporate purposes and that the $10.0
million line of credit be available to fund potential acquisitions and joint
ventures. The lines of credit bear interest at 1.5% above the monthly LIBOR
rate (8.1% as of October 31, 2000 and 5.9% (unaudited) as of April 30, 2001)
and are equally and ratably secured by the Company's accounts receivable,
contract rights, inventory, furniture and fixtures, machinery and equipment and
general intangibles. The lines of credit will expire on February 28, 2001,
unless renewed or extended. While the lines of credit do not require a
compensating balance that legally restricts the use of cash amounts, at the
bank's request, the Company has agreed to maintain an unrestricted target cash
balance of $125,000.

The lines of credit referred to above were extended by the bank on February
23, 2001, and will expire on March 31, 2002, unless further renewed or extended
(unaudited).

(6) Leases

In August 1994, the Company entered into a four-year operating lease for
computerized mailing and shipping equipment with an unrelated party. Rent
expense under this lease amounted to $21,527 for the year ended October 31,
1998.

(7) Related Party Agreements

Since February 1, 1995, the Company has entered into employment agreements
with the individual who is the Company's Chairman, President and Chief
Executive Officer and its previously sole stockholder which typically have a
term of less than two years. Annual compensation under the agreements consists
of salary payments equal to 1.0% of the previous fiscal year's net sales and
provides for sales commissions equal to 1.0% of the positive difference between
the current fiscal year's net sales and the prior fiscal year's net sales.
Compensation under this agreement amounted to $521,889, $506,986 and $582,190
for the years ended October 31, 1998, 1999 and 2000, respectively.

F-11

S-1 67th Page of 80 TOC 1st Previous Next ↓Bottom Just 67th
OPTICAL CABLE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

(8) Employee Benefits

The Company's independently administered self-insurance program provides
health insurance coverage for employees and their dependents on a cost-
reimbursement basis. Under the program, the Company is obligated for claims
payments. A stop loss insurance contract executed with an insurance carrier
covers claims in excess of $35,000 per covered individual and $813,716 in the
aggregate per year. During the years ended October 31, 1998, 1999 and 2000,
total claims expense of $725,535, $837,488 and $925,347, respectively, was
incurred, which represents claims processed and an estimate for claims incurred
but not reported. Effective January 1, 2001, the Company will no longer
independently administer the health insurance coverage, but will contract for
insurance coverage with a third-party administrator.

Effective January 1, 1994, the Company adopted a 401(k) retirement savings
plan. To become eligible for the plan, an employee must complete six months of
service and be at least 21 years of age. The plan allows participants to
contribute through salary reduction up to 7.0% of their annual compensation on
a pretax basis. Company matching contributions are two dollars for every one
dollar contributed by an employee up to 4.0% of the employees' annual
compensation. The Company made matching contributions to the plan of $353,096,
$365,887 and $406,934 for the years ended October 31, 1998, 1999 and 2000,
respectively.

The Company and its previously sole stockholder adopted on March 1, 1996 a
stock incentive plan which is called the Optical Cable Corporation 1996 Stock
Incentive Plan (the "Plan"). The Plan is intended to provide a means for
employees to increase their personal financial interest in the Company, thereby
stimulating the efforts of these employees and strengthening their desire to
remain with the Company through the use of stock incentives. The Company has
reserved 6,000,000 shares of common stock for issuance pursuant to incentive
awards under the Plan. As of October 31, 2000, there were 5,571,001 additional
shares available for grant under the Plan. Although not required under the Plan
stock options granted to date have been granted at not less than fair market
value on the date of grant.

The options have terms ranging from 8.75 to 10 years and vest 25.0% after
two years, 50.0% after three years, 75.0% after four years and 100.0% after
five years.

The per share weighted-average estimated fair value of stock options granted
during 1996 and 1997 was $1.45 and $6.25, respectively, on the date of grant
using the Black-Scholes option-pricing model with the following weighted-
average assumptions: 1996--expected cash dividend yield of 0.0%, risk-free
interest rate of 6.3%, expected volatility of 85.5% and an expected life of 10
years; 1997--expected cash dividend yield of 0.0%, risk-free interest rate of
6.1%, expected volatility of 85.5% and an expected life of 8.75 years.

F-12

S-1 68th Page of 80 TOC 1st Previous Next ↓Bottom Just 68th
OPTICAL CABLE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options in
the financial statements. Had compensation cost for the Company's Plan been
determined consistent with SFAS No. 123, the Company's net income and net
income per share would have been reduced to the SFAS No. 123 pro forma amounts
indicated below:

[Download Table]

Years Ended October 31,
--------------------------------
1998 1999 2000
---------- ---------- ----------

Net income:
As reported.............................. $7,269,964 $8,304,640 $8,255,058
========== ========== ==========
Pro forma................................ $6,926,736 $7,961,412 $7,911,830
========== ========== ==========
Net income per share:
Basic net income per share:
As reported............................. $ 0.13 $ 0.15 $ 0.15
========== ========== ==========
Pro forma............................... $ 0.12 $ 0.14 $ 0.14
========== ========== ==========
Diluted net income per share:
As reported............................. $ 0.13 $ 0.15 $ 0.15
========== ========== ==========
Pro forma............................... $ 0.12 $ 0.14 $ 0.14
========== ========== ==========

Stock option activity during the periods indicated was as follows:

[Download Table]

Number
of Weighted-Average
Shares Exercise Price
-------- ----------------

Balance at October 31, 1997..................... 995,250 $ 3.74
Exercised...................................... (119,025) 1.67
Forfeited...................................... (22,500) 6.27
--------
Balance at October 31, 1998..................... 853,725 3.97
Replacement options issued..................... 3,449 7.25
Exercised...................................... (119,700) 1.67
Forfeited...................................... (26,250) 5.94
--------
Balance at October 31, 1999..................... 711,224 4.28
Replacement options issued..................... 1,500 7.25
Exercised...................................... (268,336) 3.86
Forfeited...................................... (15,389) 6.02
--------
Balance at October 31, 2000, (124,499 options
exercisable; 215,550 options at exercise price
of $1.67 per share with remaining contractual
life of 5.5 years, and 213,449 options at
exercise price of $7.42 per share with
remaining contractual life of 5.5 years)....... 428,999 4.53
Granted (unaudited)............................ 500,000 10.69
Exercised (unaudited).......................... (138,186) 2.09
Forfeited (unaudited).......................... (6,500) 10.69
--------
Balance at April 30, 2001 (unaudited)........... 784,313 $ 8.84
========

No new stock options were granted during the fiscal years ended October 31,
1998, 1999 and 2000. However, prior stock options granted have a replacement
feature, whereby the participant automatically receives a replacement option to
purchase additional shares of the Company's common stock equal to the

F-13

S-1 69th Page of 80 TOC 1st Previous Next ↓Bottom Just 69th
OPTICAL CABLE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

number of shares surrendered, if any, to the Company by the participant in
payment of the exercise price with respect to stock options exercised.
Replacement options were issued under this replacement feature during the
fiscal years ended October 31, 1998 and 1999.

On November 30, 2000, the Board of Directors approved grants of stock
options for a total of 500,000 shares effective December 1, 2000 under the
Company's 1996 Stock Incentive Plan. The per share exercise price of $10.69
associated with these stock options was equal to the fair market value of the
Company's common stock on the date of grant.

(9) Business and Credit Concentrations, Major Customers and Geographic
Information

On November 1, 1998, the Company adopted SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. SFAS No. 131 establishes
standards for the way public business enterprises are to report information
about operating segments in annual financial statements and requires those
enterprises to report selected information about operating segments in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers.

The Company has a single reportable segment for purposes of segment
reporting pursuant to SFAS No. 131. In addition, the Company's fiber optic
cable products are similar in nature. Therefore, the Company has disclosed
enterprise-wide information about geographic areas and major customers below in
accordance with the provisions of SFAS No. 131.

The Company provides credit, in the normal course of business, to various
commercial enterprises, governmental entities and not-for-profit organizations.
Concentration of credit risk with respect to trade receivables is limited due
to the Company's large number of customers. The Company also manages exposure
to credit risk through credit approvals, credit limits and monitoring
procedures. Management believes that credit risks as of October 31, 1999 and
2000 have been adequately provided for in the financial statements. As of
October 31, 1999 and 2000, there were no significant amounts receivable from
any one customer other than those described below.

For the year ended October 31, 1998, 27.3% or approximately $13,817,000 of
net sales were attributable to two major domestic distributors (13.2% or
approximately $6,698,000 to one of these major distributors and 14.1% or
approximately $7,119,000 to the other major distributor that filed for
liquidation under the bankruptcy laws subsequent to October 31, 2000). The
combined trade accounts receivable for these distributors at October 31, 1998
totaled approximately $2,989,000. No single customer or other distributor
accounted for more than 5.0% of net sales for the year ended October 31, 1998.

For the year ended October 31, 1999, 30.6% or approximately $15,513,000 of
net sales were attributable to two major domestic distributors (15.8% or
approximately $8,002,000 to one of these major distributors and 14.8% or
approximately $7,511,000 to the other major distributor that filed for
liquidation under the bankruptcy laws subsequent to October 31, 2000). The
combined related trade accounts receivable for these distributors as of
October 31, 1999 totaled approximately $3,294,000. No single customer or other
distributor accounted for more than 5.0% of net sales for the year ended
October 31, 1999. As of October 31, 1999, no single customer or other
distributor had an outstanding balance payable to the Company in excess of 5.0%
of total stockholders' equity.

For the year ended October 31, 2000, 28.0% or approximately $16,241,000 of
net sales were attributable to two major domestic distributors (12.5 % or
approximately $7,246,000 to one of these major distributors and 15.5% or
approximately $8,995,000 to the other major distributor that filed for
liquidation under the bankruptcy laws subsequent to October 31, 2000). The
combined related trade accounts receivable for these distributors as

F-14

S-1 70th Page of 80 TOC 1st Previous Next ↓Bottom Just 70th
OPTICAL CABLE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

of October 31, 2000 totaled approximately $3,468,000. The Company has
specifically reserved $1,772,000 for estimated uncollectible accounts
receivable from one of these major distributors that filed for liquidation
under the bankruptcy laws subsequent to October 31, 2000. Bad debt expense
related to this distributor has been included in selling, general and
administrative expenses on the statement of income for the year ended October
31, 2000. No single customer or other distributor accounted for more than 5.0%
of net sales for the year ended October 31, 2000. As of October 31, 2000, no
single customer or other distributor had an outstanding balance payable to the
Company in excess of 5.0% of total stockholders' equity.

For the years ended October 31, 1998, 1999 and 2000, approximately 78.3%,
80.3% and 78.8%, respectively, of net sales were from customers located in the
United States, while approximately 21.7%, 19.7% and 21.2%, respectively, were
from international customers. Net sales attributable to the United States and
other foreign countries for the years ended October 31, 1998, 1999 and 2000
were as follows:

[Download Table]

Years Ended October 31,
-------------------------------------
1998 1999 2000
----------- ----------- -----------

United States....................... $39,621,544 $40,687,466 $45,878,300
Australia........................... 1,570,536 702,780 801,641
Canada.............................. 889,702 1,756,928 1,808,469
England............................. 987,154 694,680 1,163,587
Other foreign countries............. 7,519,957 6,856,783 8,566,997
----------- ----------- -----------
Net sales..................... $50,588,893 $50,698,637 $58,218,994
=========== =========== ===========

None of the Company's long-lived assets are located outside the United
States.

(10) Income Taxes

Total income taxes for the years ended October 31, 1998, 1999 and 2000 were
allocated as follows:

Years Ended October 31,
-------------------------------------
1998 1999 2000
----------- ----------- -----------

Income from operations.............. $ 4,107,495 $ 4,214,096 $ 4,478,656
Stockholders' equity, for
disqualifying disposition of stock
options exercised.................. (150,359) (209,207) (1,354,718)
----------- ----------- -----------
$ 3,957,136 $ 4,004,889 $ 3,123,938
=========== =========== ===========

F-15

S-1 71st Page of 80 TOC 1st Previous Next ↓Bottom Just 71st
OPTICAL CABLE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

Income tax expense (benefit) attributable to income from operations for the
years ended October 31, 1998, 1999 and 2000, consisted of:

[Download Table]

Current Deferred Total
---------- ---------- ----------

Year Ended October 31, 1998
U.S. Federal........................... $3,733,231 $ (69,192) $3,664,039
State.................................. 451,779 (8,323) 443,456
---------- ---------- ----------
Totals........................... $4,185,010 $ (77,515) $4,107,495
========== ========== ==========

Current Deferred Total
---------- ---------- ----------

Year Ended October 31, 1999
U.S. Federal........................... $3,729,606 $ 60,479 $3,790,085
State.................................. 416,736 7,275 424,011
---------- ---------- ----------
Totals........................... $4,146,342 $ 67,754 $4,214,096
========== ========== ==========

Current Deferred Total
---------- ---------- ----------

Year Ended October 31, 2000
U.S. Federal........................... $4,667,627 $ (658,506) $4,009,121
State.................................. 548,746 (79,211) 469,535
---------- ---------- ----------
Totals........................... $5,216,373 $ (737,717) $4,478,656
========== ========== ==========

Reported income tax expense for the years ended October 31, 1998, 1999 and
2000 differs from the "expected" tax expense, computed by applying the U.S.
Federal statutory income tax rate of 35.0% to income before income tax expense,
as follows:

Years Ended October 31,
----------------------------------
1998 1999 2000
---------- ---------- ----------

"Expected" tax expense................. $3,982,111 $4,381,558 $4,456,800
Increase (reduction) in income tax
expense resulting from:
Foreign Sales Corporation benefit.... (122,282) (326,662) (201,098)
State income taxes, net of federal
benefits............................ 288,822 254,359 295,853
Other differences, net............... (41,156) (95,159) (72,899)
---------- ---------- ----------
Reported income tax expense...... $4,107,495 $4,214,096 $4,478,656
========== ========== ==========

F-16

S-1 72nd Page of 80 TOC 1st Previous Next ↓Bottom Just 72nd
OPTICAL CABLE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

The tax effects of temporary differences that give rise to significant
portions of the Company's net deferred tax asset as of October 31, 1999 and
2000 are presented below:

[Download Table]

October 31,
---------------------
1999 2000
--------- ----------

Deferred tax assets:
Accounts receivable, due to allowance for doubtful
accounts........................................... $ 118,911 $ 718,312
Inventories, due to additional costs inventoried for
tax purposes pursuant to the Tax Reform Act of
1986............................................... 71,564 66,070
Self-insured health care costs, due to accrual for
financial reporting purposes....................... 58,739 44,780
Compensated absences due to accrual for financial
reporting purposes................................. 48,812 49,594
Unrealized loss on trading securities, net.......... -- 187,368
Other............................................... -- 4,205
--------- ----------
Total gross deferred tax assets................ 298,026 1,070,329
Less valuation allowance............................ -- --
--------- ----------
Net deferred tax assets........................ 298,026 1,070,329
Deferred tax liabilities:
Plant and equipment, due to differences in
depreciation and capital gain recognition.......... (179,789) (195,085)
Other receivables, due to accrual for financial
reporting purposes................................. (91,374) (110,664)
--------- ----------
Total gross deferred tax liabilities........... (271,163) (305,749)
--------- ----------
Net deferred tax asset......................... $ 26,863 $ 764,580
========= ==========

Based on the Company's historical and current pretax earnings, management
believes that it is more likely than not that the recorded deferred tax assets
as of October 31, 1999 and 2000, will be realized.

As of April 30, 2001, the Company has assessed the realizability of its
deferred tax assets relating to the capital loss carryforward and unrealized
net loss generated by the Company's trading securities during the six months
ended April 30, 2001. As a result, the Company has determined that it is more
likely than not that these deferred tax assets totaling approximately
$3,148,000 (unaudited) as of April 30, 2001, will not be realized. Accordingly,
the Company has established a valuation allowance for deferred tax assets in
the amount of approximately $3,148,000 (unaudited) as of April 30, 2001, which
is included in income tax expense for the six months ended April 30, 2001. In
order to fully realize these deferred tax assets, the Company will need to
generate future capital gains of approximately $8.4 million (unaudited) prior
to the expiration of the capital loss carryforward in 2006.

(11) Fair Value of Financial Instruments

The carrying amounts reported in the balance sheet for cash, cash
equivalents, trade accounts receivable, other receivables, accounts payable and
accrued expenses approximate fair value because of the short maturity of these
instruments. For trading securities, fair value is based on quoted market
prices.

As of October 31, 1999, the carrying amount and fair value of the Company's
note receivable were $93,605 and $86,250, respectively. The fair value of the
note receivable was estimated by discounting the future cash flows of the
instrument at an estimated interest rate for loans of similar terms to
companies with comparable credit risk.

F-17

S-1 73rd Page of 80 TOC 1st Previous Next ↓Bottom Just 73rd
OPTICAL CABLE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

(12) Net Income (Loss) Per Share

The following is a reconciliation of the numerators and denominators of the
net income (loss) per share computations for the periods presented:

[Download Table]

Net Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------

Year Ended October 31, 1998
Basic net income per share............ $ 7,269,964 57,430,907 $ 0.13
======
Effect of dilutive stock options...... -- 432,370
----------- ----------
Diluted net income per share.......... $ 7,269,964 57,863,277 $ 0.13
=========== ========== ======

Net Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------

Year Ended October 31, 1999
Basic net income per share............ $ 8,304,640 56,503,964 $ 0.15
======
Effect of dilutive stock options...... -- 360,933
----------- ----------
Diluted net income per share.......... $ 8,304,640 56,864,897 $ 0.15
=========== ========== ======

Net Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------

Year Ended October 31, 2000
Basic net income per share............ $ 8,255,058 56,306,679 $ 0.15
======
Effect of dilutive stock options...... -- 451,503
----------- ----------
Diluted net income per share.......... $ 8,255,058 56,758,182 $ 0.15
=========== ========== ======

Net Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------

Six Months Ended April 30, 2000
(unaudited)
Basic net income per share............ $ 4,730,562 56,244,123 $ 0.08
======
Effect of dilutive stock options...... -- 457,041
----------- ----------
Diluted net income per share.......... $ 4,730,562 56,701,164 $ 0.08
=========== ========== ======

Net Loss Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------

Six Months Ended April 30, 2001
(unaudited)
Basic net loss per share.............. $(3,772,541) 56,317,635 $(0.07)
======
Effect of dilutive stock options...... -- 332,458
----------- ----------
Diluted net loss per share............ $(3,772,541) 56,650,093 $(0.07)
=========== ========== ======

Stock options that could potentially dilute net income per share in the
future that were not included in the computation of diluted net income per
share because to do so would have been antidilutive totaled 341,250 for the
year ended October 31, 1998. No such antidilutive stock options existed with
respect to diluted net income per share calculation for the years ended October
31, 1999 and 2000. See note 8 for discussion of stock options granted
subsequent to October 31, 2000.

F-18

S-1 74th Page of 80 TOC 1st Previous Next ↓Bottom Just 74th
OPTICAL CABLE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

(13) Stockholders' Equity

On August 31, 2000, the Company's Board of Directors approved a 3-for-2
stock split effected in the form of a stock dividend of one share paid on
September 28, 2000, upon each two shares held by stockholders of record at the
close of business on September 8, 2000. The Company's stock began trading ex-
dividend on September 29, 2000. All references to share and per share data,
except for references to authorized shares, contained elsewhere in this annual
report have been retroactively adjusted to reflect the impact of the approved
stock dividend.

The Company's Board of Directors has authorized the repurchase of up to $20
million of the Company's common stock in the open market or in privately
negotiated transactions. Through October 31, 2000, the Company has repurchased
2,130,443 shares of its common stock for $14,863,675 in such transactions since
the inception of the Company's share repurchase program in October 1997. For
the period from November 1, 2000 through April 30, 2001, the Company has
purchased 173,300 (unaudited) additional shares of its common stock for
$1,578,109 (unaudited) in such transactions.

(14) Contingencies

On September 27, 2000, the Equal Employment Opportunity Commission (EEOC)
filed a lawsuit under Title VII of the Civil Rights Act against the Company in
the United States District Court for the Western District of Virginia alleging
a pattern or practice of discrimination on the bases of gender and race. The
lawsuit seeks injunctive and other relief and damages in an unspecified amount.
Management intends to vigorously defend the lawsuit on the merits. While the
ultimate resolution of this lawsuit cannot be determined, management does not
expect that its resolution will have a material adverse effect on the financial
condition or business of the Company.

See also the "Legal Proceedings" section included elsewhere in the
prospectus.

From time to time, the Company is involved in various other claims and legal
actions arising in the ordinary course of business. In the opinion of
management, the ultimate disposition of these matters will not have a material
adverse effect on the Company's financial position, results of operations or
liquidity.

F-19

S-1 75th Page of 80 TOC 1st Previous Next ↓Bottom Just 75th
OPTICAL CABLE CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

(15) Quarterly Results of Operations (Unaudited)

The following is a summary of the unaudited quarterly results of operations
for the years ended October 31, 1999 and 2000:

[Download Table]

Quarter Ended
------------------------------------------------
January 31 April 30 July 31 October 31
----------- ----------- ----------- -----------

Year Ended October 31,
1999
Net sales................ $10,841,939 $12,434,733 $12,602,659 $14,819,306
Gross profit............. 4,722,187 5,710,552 5,424,127 7,294,749
Income before income
taxes................... 2,252,663 3,057,265 2,899,109 4,309,639
Net income............... 1,448,235 1,963,327 1,816,583 3,076,495
Basic and diluted net
income per share........ 0.03 0.04 0.03 0.06

Quarter Ended
------------------------------------------------
January 31 April 30 July 31 October 31
----------- ----------- ----------- -----------

Year Ended October 31,
2000
Net sales................ $11,346,235 $13,028,310 $16,650,975 $17,193,474
Gross profit............. 5,205,115 5,909,092 7,652,197 8,574,902
Other income (expense),
net..................... 532,545 1,386,149 (403,252) (1,098,836)
Income before income
taxes................... 3,138,397 4,163,017 3,702,629 1,729,671
Net income............... 2,033,120 2,697,442 2,400,129 1,124,367
Basic and diluted net
income per share........ 0.04 0.05 0.04 0.02

F-20

S-1 76th Page of 80 TOC 1st Previous Next ↓Bottom Just 76th
Shares

----------------

PROSPECTUS
June , 2001

----------------

ABN AMRO Rothschild LLC

S-1 77th Page of 80 TOC 1st Previous Next ↓Bottom Just 77th
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The table below sets forth the expenses to be incurred by us in connection
with the issuance and distribution of the shares registered for offer and sale
hereby, other than underwriting discounts and commissions. All amounts shown
represent estimates except the Securities Act of 1933 registration fee and the
NASD filing fee.

[Download Table]

Registration fee under the Securities Act.............................. $22,500
NASD filing fee........................................................ 9,500
Printing expenses...................................................... *
Registrar and Transfer Agent's fees and expenses....................... *
Accountants' fees and expenses......................................... *
Legal fees and expenses, not including Blue Sky........................ *
Blue Sky fees and expenses............................................. *
Miscellaneous.......................................................... *
-------
Total.............................................................. $ *

--------
* To be completed by amendment.

Item 14. Indemnification of Directors and Officers.

Article 10 of the Virginia Stock Corporation Act allows, in general, for
indemnification, in certain circumstances, by a corporation of any person
threatened with or made a party to any action, suit, or proceeding by reason of
the fact that he or she is, or was, a director, officer, employee, or agent of
the corporation. Indemnification is also authorized with respect to a criminal
action or proceeding where the person had no reasonable cause to believe that
his conduct was unlawful. Article 9 of the Virginia Stock Corporation Act
provides limitations on damages payable by officers and directors, except in
cases of willful misconduct or knowing violation of criminal law or any federal
or state securities law.

Our Articles of Incorporation provide for mandatory indemnification of our
directors and officers against liability incurred by them in proceedings
instituted or threatened against them by third parties, or by or on behalf of
Optical Cable itself, relating to the manner in which they performed their
duties unless they have been guilty of willful misconduct or a knowing
violation of the criminal law.

In the Underwriting Agreement, a proposed form of which will be filed by
amendment as Exhibit 1.1 to this registration statement, the underwriters will
agree to indemnify, under certain conditions, our officers, directors and
controlling persons against certain liabilities, including liabilities under
the Securities Act of 1933.

Item 15. Recent Sales of Unregistered Securities.

None.

Item 16(a). Exhibits.

[Download Table]

1.1 Proposed form of Underwriting Agreement (1).

3.1 Amended and Restated Articles of Incorporation of Optical Cable
Corporation.

3.2 Bylaws of Optical Cable Corporation, as amended (incorporated by reference
to Exhibit 3.2 to the Registrant's Registration Statement on Form S-1 No.
33-96476).

4.1 Form of certificate representing common stock (incorporated by reference
to Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 No.
33-96476).

II-1

S-1 78th Page of 80 TOC 1st Previous Next ↓Bottom Just 78th
[Download Table]

5.1 Opinion of McGuireWoods LLP as to the validity of the offered shares.

10.1 Employment Agreement by and between Optical Cable Corporation and Robert
Kopstein, effective November 1, 2000 (filed as Exhibit 10.3 to the
Registrant's Annual Report on Form 10-K for the year ended October 31,
2000 (file number 0-27022), and incorporated herein by reference).

10.2 Loan Agreement, dated March 10, 1999, by and between Optical Cable
Corporation and First Union National Bank (filed as Exhibit 10.6 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
January 31, 1999 (file number 0-27022), and incorporated herein by
reference).

10.3 Security Agreement, dated April 25, 1997, by and between Optical Cable
Corporation and First Union National Bank of Virginia (filed as Exhibit
10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1997 (file number 0-27022), and incorporated herein by
reference).

10.4 Promissory Note, dated March 10, 1999, issued by Optical Cable
Corporation to First Union National Bank in the amount of $5,000,000 and
the Promissory Note, dated March 10, 1999, issued by Optical Cable
Corporation to First Union National Bank in the amount of $10,000,000
(filed as Exhibit 10.8 to the Registrant's Quarterly Report on form 10-Q
for the fiscal quarter ended January 31, 1999 (file number 0-27022), and
incorporated herein by reference).

10.5 Optical Cable Corporation Employee Stock Purchase Plan (filed as Exhibit
10.9 to the Registrant's Quarterly Report on Form10-Q for the fiscal
quarter ended July 31, 1998 (file number 0-27022), and incorporated
herein by reference).

10.6 Renewal Agreement by and between First Union National Bank and Optical
Cable Corporation dated February 23, 2001 (filed as Exhibit 10.10 to the
Registrant's Quarterly Report on Form10-Q for the fiscal quarter ended
January 31, 2001 (file number 0-27022), and incorporated herein by
reference).

10.7 Renewal Agreement by and between First Union National Bank and Optical
Cable Corporation dated February 23, 2001 (filed as Exhibit 10.11 to the
Registrant's Quarterly Report on Form10-Q for the fiscal quarter ended
January 31, 2001 (file number 0-27022), and incorporated herein by
reference).

10.8 Optical Cable Corporation 1996 Stock Incentive Plan (incorporated by
reference to Exhibit 28.1 to the Registrant's Registration Statement on
Form S-8 No. 333-09433).

21.1 Optical Cable Foreign Sales Corporation, a Virgin Islands corporation.

23.1 Consent of KPMG LLP.

Consent of McGuireWoods LLP (included in their opinion filed as Exhibit
23.2 5.1).

--------
(1) To be filed by amendment.

Item 16(b). Financial Statement Schedules.

None.

Item 17. Undertakings.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suite or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

II-2

S-1 79th Page of 80 TOC 1st Previous Next ↓Bottom Just 79th
The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3

S-1 Last Page of 80 TOC 1st Previous Next ↓Bottom Just 80th
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Roanoke, Commonwealth of
Virginia, on June 19, 2001.

Optical Cable Corporation

/s/ Robert Kopstein
By: _________________________________
Robert Kopstein
Chairman of the Board, President
and Chief Executive Officer

POWER OF ATTORNEY

Know All Men By These Present that each individual whose signature appears
below constitutes and appoints Robert Kopstein and Kenneth W. Harber, and each
of them, his true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign and file: (i) any and all amendments, including
post-effective amendments, to this Registration Statement, with all exhibits,
and all documents in connection therewith, and (ii) a Registration Statement,
and any and all amendments, relating to the offering covered hereby filed
pursuant to Rule 462(b) under the Securities Act of 1933, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary or desirable to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their substitutes or his substitute, may lawfully
do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on June 19, 2001.

[Download Table]

Signature Title Date
--------- ----- ----

/s/ Robert Kopstein Chairman of the Board, June 19, 2001
______________________________________ President Chief Executive
Robert Kopstein Officer and Director
(Principal Executive
Officer)

/s/ Luke J. Huybrechts Senior Vice President of June 19, 2001
______________________________________ Sales and Director
Luke J. Huybrechts

/s/ Kenneth W. Harber Vice President of Finance, June 19, 2001
______________________________________ Treasurer, Secretary and
Kenneth W. Harber Director (Principal
Financial and Accounting
Officer)

/s/ Randall H. Frazier Director June 19, 2001
______________________________________
Randall H. Frazier

/s/ John M. Holland Director June 19, 2001
______________________________________
John M. Holland

II-4

S-1	1st Page of 80	TOC	↑Top	Previous	Next	↓Bottom	Just 1st

S-1	2nd Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 2nd

S-1	3rd Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 3rd

S-1	4th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 4th

S-1	5th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 5th

S-1	6th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 6th

S-1	7th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 7th

S-1	8th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 8th

S-1	9th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 9th

S-1	10th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 10th

S-1	11th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 11th

S-1	12th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 12th

S-1	13th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 13th

S-1	14th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 14th

S-1	15th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 15th

S-1	16th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 16th

S-1	17th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 17th

S-1	18th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 18th

S-1	19th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 19th

S-1	20th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 20th

S-1	21st Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 21st

S-1	22nd Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 22nd

S-1	23rd Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 23rd

S-1	24th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 24th

S-1	25th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 25th

S-1	26th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 26th

S-1	27th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 27th

S-1	28th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 28th

S-1	29th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 29th

S-1	30th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 30th

S-1	31st Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 31st

S-1	32nd Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 32nd

S-1	33rd Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 33rd

S-1	34th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 34th

S-1	35th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 35th

S-1	36th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 36th

S-1	37th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 37th

S-1	38th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 38th

S-1	39th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 39th

S-1	40th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 40th

S-1	41st Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 41st

S-1	42nd Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 42nd

S-1	43rd Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 43rd

S-1	44th Page of 80	TOC	1st	Previous	Next	↓Bottom	Just 44th

Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘S-1’ Filing	Date	First	Last	Other Filings

	3/31/02	27	66
	10/31/01	16	65	10-K
	7/31/01	44		10-Q
Filed on:	6/22/01	1	2
	6/21/01	2	16
	6/19/01	21	80
	5/31/01	21
	5/14/01	10	21
	4/30/01	6	74	10-Q
	3/31/01	28
	2/28/01	66
	2/23/01	66	78
	1/31/01	20	78	10-Q
	1/1/01	67
	12/15/00	28
	12/8/00	57	62
	12/1/00	69
	11/30/00	69
	11/1/00	28	78
	10/31/00	16	78	10-K405
	9/29/00	8	74
	9/28/00	8	74
	9/27/00	13	74	8-K
	9/8/00	8	74	8-K
	8/31/00	8	74
	7/31/00	26		10-Q
	6/15/00	28
	4/30/00	7	73	10-Q
	1/31/00	26		10-Q
	11/1/99	46
	10/31/99	16	75	10-K
	3/10/99	27	78
	1/31/99	26	78	10-Q
	11/1/98	69
	10/31/98	18	73	10-K
	7/31/98	78		10-Q
	10/31/97	18	78	10-K
	4/25/97	78
	11/1/96	64
	10/31/96	7	19	10-K
	4/1/96	7	19
	3/31/96	7	19
	3/1/96	47	67
	2/1/95	46	66
	1/1/94	47	67
				List all Filings

↑Top

Filing Submission 0000916641-01-500604 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Optical Cable Corp – ‘S-1’ on 6/22/01

On: Friday, 6/22/01, at 5:21pm ET · Accession #: 916641-1-500604 · File #: 333-63710

Registration Statement (General Form) — Form S-1Filing Table of Contents

S-1 — Form S-1 Registration StatementDocument Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Registration Statement (General Form) — Form S-1
Filing Table of Contents

S-1 — Form S-1 Registration Statement
Document Table of Contents