Digital Lightwave Inc. (Nasdaq: DIGL) says it may seek bankruptcy protection if it can't find adequate funding and successfully restructure its outstanding claims, according to the company's filings with the Securities and Exchange Commission (SEC). The filing, released on Monday, also disclosed that the Florida-based test and measurement company has borrowed more money from Optel Capital LLC, a company controlled by Bryan Zwan, Digital Lightwave's chairman and largest shareholder. Digital Lightwave borrowed $665,000 from Optel on February 13; the note matures on July 31 and carries an interest rate of 10 percent per year.

In the past, Zwan raised more than $300 million in "forward sales contracts" of his Digital Lightwave stock (see DIGL Founder: $348M in Insider Sales and Zwan Responds on DIGL Stock Deals ). After those forward sales, Zwan became a lender to the company via Optel. He's been lending money to Digital Lightwave for years (see Digital Lightwave Avoids Eviction and Digital Lightwave Borrows to Pay Bills). "Digital’s total indebtedness to Optel is now approximately $14.6 million, exclusive of accrued interest," the filings state.

The most recent earnings available for Digital Lightwave in its SEC filings are from the nine months ended September 30, 2003. As of that date, the company had about $138,000 in cash and investments, a drop of $2 million from its cash and investments as of December 31, 2002.



Digital Lightwave's net sales for the nine months ended September 30, 2003, were $5.9 million, a drop of 61 percent from the year-ago period, when it booked $15.1 million in net sales. Its net loss for the nine months ended September 30 was $28 million, or 89 cents a share, compared with net loss of $24.7 million, or 79 cents a share, for the year-ago period.

The company reveals that it has settled some of its debts but that there is still more work to do and more layoffs remain a possibility. "In order to alleviate its working capital shortfall, Digital is attempting to reduce its operating costs, voluntarily restructure its outstanding liabilities with certain significant creditors, and raise additional debt and/or equity financing," the filings state.

Since January 29, Digital Lightwave shares have lost about 40 percent of their value. Digital Lightwave shares were down $0.13 (5.80%) to $2.11 in midmorning trading on Tuesday.— Phil Harvey, News Editor, Light Reading