<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
{X} Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Period Ended July 30, 1995
-------------
or
{_} Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Transition Period from _________________ to ________________
Commission File Number 0-8567
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Datametrics Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-3545701
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification Number)
21135 Erwin St.
Woodland Hills, California 91367
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(Address of principal executive offices) (Zip Code)
(818)598-6200
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(Registrant's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No________
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Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court.
Yes _________ No _________
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock. $.01 Par Value--11,998,451 shares as of August 15, 1995
<PAGE>
STATEMENTS OF OPERATIONS Datametrics Corporation
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months For The Nine Months
Ended Ended
----------------------------- ----------------------------
July 30, July 31, July 30, July 31,
(In thousands, except per share data) 1995 1994 1995 1994
====================================================== ================== ================== ================== ==================
<S> <C> <C> <C> <C>
SALES $4,790 $5,873 $12,138 $18,240
Cost of sales 3,876 3,947 9,933 12,237
------------------ ------------------ ------------------ ------------------
Gross profit 914 1,926 2,205 6,003
OPERATING EXPENSES:
Research & development 1,688 605 4,334 1,580
Selling, general & administrative 1,455 1,376 4,261 4,904
------------------ ------------------ ------------------ ------------------
3,143 1,981 8,595 6,484
------------------ ------------------ ------------------ ------------------
Loss from operations (2,229) (55) (6,390) (481)
INTEREST (INCOME) EXPENSE (4) (36) 35 22
AMORTIZATION OF EXCESS OF ACQUIRED NET ASSETS OVER COST (77) (76) (229) (217)
------------------ ------------------ ------------------ ------------------
Income (loss) before provision for income taxes (2,148) 57 (6,196) (286)
PROVISION (BENEFIT) FOR INCOME TAXES 18 30 20 (100)
------------------ ------------------ ------------------ ------------------
NET INCOME (Loss) (2,166) 27 (6,216) (186)
Preferred stock dividends or accretion (16) (15) (48) (45)
------------------ ------------------ ------------------ ------------------
NET INCOME (Loss) applicable to common stockholders ($2,182) $12 ($6,264) ($231)
================== ================== ================== ==================
EARNINGS (loss) per share of common stock:
Primary:
NET INCOME (Loss) ($0.20) - ($0.60) ($0.03)
================== ================== ================== ==================
Fully diluted:
NET INCOME (Loss) ($0.20) - ($0.60) ($0.03)
================== ================== ================== ==================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Primary 11,137 9,720 10,444 8,420
Fully diluted 11,137 9,720 10,444 8,420
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS Datametrics Corporation
(unaudited)
July 30, October 30,
(In thousands, except for share data) 1995 1994
=============================================================== ================== ==================
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $14,759 $988
Accounts receivable 4,617 8,730
Inventory 6,680 6,038
Income taxes receivable - 325
Prepaid expenses 319 267
Deferred tax asset 439 571
------------------ ------------------
Total current assets 26,814 16,919
------------------ ------------------
Property and Equipment, At Cost:
Machinery and equipment 4,765 3,710
Furniture, fixtures & computer equipment 2,474 2,172
Leasehold improvements 374 363
------------------ ------------------
7,613 6,245
Accumulated depreciation and amortization (4,558) (3,970)
------------------ ------------------
Net property and equipment 3,055 2,275
Deferred Tax Assets 64 64
Other Assets 782 692
------------------ ------------------
$30,715 $19,950
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable to bank - $600
Accounts payable $1,771 1,917
Accrued commissions and payroll 567 845
Accrued warranty 127 182
Other accrued liabilities 432 368
Advance payments and progress payments on contracts 93 538
Current portion of capital lease and loan obligations 489 108
------------------ ------------------
Total current liabilities 3,479 4,558
CAPITAL LEASE OBLIGATIONS 99 32
LONG TERM DEBT DUE AFTER ONE YEAR 756 -
OTHER LONG-TERM LIABILITIES 209 150
DEFERRED TAX LIABILITY 76 76
EXCESS OF ACQUIRED NET ASSETS OVER COST 305 533
SERIES B REDEEMABLE PREFERRED STOCK 955 940
545,950 shares authorized, issued and outstanding (liquidation
preference and redemption price $955)
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value--15,000,000 shares
authorized; 11,998,451 shares issued and
outstanding in 1995 (9,258,452 in 1994) 120 93
Additional paid-in capital 32,020 14,608
Accumulated deficit (7,304) (1,040)
------------------ ------------------
Total stockholders' equity 24,836 13,661
------------------ ------------------
$30,715 $19,950
================== ==================
</TABLE>
See accompanying notes
<PAGE>
<TABLE>
<CAPTION>
Cash Flows Statement Datametrics Corporation
(Unaudited)
For The Nine Month Period
Ended
-------------------------------------
July 30, July 31,
(In thousands)(Brackets denote cash) 1995 1994
======================================================= ================== ==================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITES:
Net loss ($6,216) ($186)
Adjustments:
Amortization of excess of acquired net assets (228) (217)
Depreciation 646 412
Changes in balance sheet items:
Accounts receivable 4,113 2,721
Inventory (642) (1,265)
Prepaid expenses (52) (14)
Accounts payable (146) (1,341)
Accrued commissions and payroll (278) (350)
Advance and progress payments from customers (445) 520
Other accrued liabilities 64 90
Income taxes 325 --
Other 11 (418)
================== ==================
Net cash used in operating activities (2,848) (48)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment (1,226) (308)
------------------ ------------------
Net cash used in investing activities (1,226) (308)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable to bank 1,950 3,500
Payments on notes payable to bank (2,550) (4,650)
Proceeds from the issuance of common stock 17,439 5,209
Borrowings of long-term debt 1,841 --
Payments on long-term debt (714) --
Payments on capital lease obligations (121) (95)
------------------ ------------------
Net cash provided by financing activities 17,845 3,964
Net increase in cash and cash equivalents 13,771 3,608
Cash and cash equivalents at the beginning of the period 988 199
------------------ ------------------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $14,759 $3,807
================== ==================
Cash paid during the period for:
Interest $136 $15
Income Taxes(refund) $20 ($47)
Noncash investing and financing activities:
Accretion on preferred stock 48 45
Issuance of capital lease obligations 199 --
</TABLE>
See accompanying notes.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
July 30, 1995
(Unaudited)
1. The financial statements include the accounts of Datametrics Corporation.
Financial statements included herein have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the statements and
notes thereto included in the Company's latest Annual Report on Form 10-K filed
with the Securities and Exchange Commission.
The information reflects all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of Management, necessary to present a
fair statement of the results of operations for the interim periods. Much of
the Company's business is longer term and involves varying development,
production, and delivery schedules. Accordingly, results of a particular quarter
or quarter-to-quarter comparisons of recorded sales and profits may not be
indicative of future operating results or results for the fiscal year ending
October 29, 1995.
From our latest Annual Report on Form 10-K for which the following notes have
been omitted;note (1) pertains to summary of significant accounting policies
with respect to line of business,revenue recognition, change in accounting
principle, accounts receivable, inventories, major customers, cash and cash
equivalents, property and equipment and net income per share; note (2) pertains
to an acquisition; note (3) pertains to accounts receivable; note (4) pertains
to inventory; note (5) pertains to income taxes; note (7) pertains to leases;
note (8) pertains to preferred stock; note (9) pertains to stock option plans;
note (10) pertains to contingencies; note (11) pertains to employee benefit
plans; and note (12) pertains to quarterly financial data.
INVENTORY Stockroom inventory is stated at the lower of cost (first-in, first-
out) or market. The Company evaluates at least annually its stockroom inventory
for potential obsolescence or excessive levels
<PAGE>
based upon backlog and forecasted usage. Contract inventory costs include
purchased materials, direct labor and manufacturing overhead. General and
administrative costs are expenses in the period incurred. Inventories as of July
30, 1995 are as follows:
Raw Material $4,982,000
Work-in Process 1,698,000
---------------
$6,680,000
2. Debt
The Company has entered into a revolving line of credit agreement (the"Credit
Agreement") with a bank. The advance rate is eighty percent(80%) of eligible
accounts receivable, plus eighty percent(80%) of eligible progress billings
receivabls, to a maximum of the progress billing receivables sublimit, which
will not exceed the lesser of ten percent(10%) of eligible receivables or
$500,000. The lending facility is capped at $7,000,000 and expires on March 4,
1996. The interest rate is prime plus .25%. The loan is secured by
substantially all the Company's assets. There was no outstanding balance at
July 30,1995. The maximum amount available under the line at July 30, 1995 was
$2,122,000.
The Credit Agreement requires the Company to maintain certain financial ratios
and restricts or limits the Company's ability to (i) create certain liens,(ii)
convey, transfer, or sell assets, (iii) incur additional indebtedness, (iv)
redeem or repurchase any class of stock, and (v) pay dividends on its preferred
or common stock. The Company is in compliance with all its covenants.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Nine Month Period Ended July 30, 1995 Compared
- ----------------------------------------------
To The Nine Month Period Ended July 31, 1994
- --------------------------------------------
The Company's operating cycle is long term and involves various types of
production contracts and varying production delivery schedules. Management
believes that inflation and changing prices have not had a material effect on
the Company's results of operations for the periods covered by the financial
statements included herein. The contract process in which products are offered
for sale is generally set before costs are incurred and the prices are based on
estimates of these costs which include the anticipated impact of inflation.
Accordingly, results of a particular quarter, or quarter-to-quarter comparisons
of recorded sales and profits, may not be indicative of future operating
results. The following comparative analysis should be viewed in this context.
Sales for the nine month period ended July 30, 1995 were $12,138,000, a decrease
of $6,102,000 or 33% compared to $18,240,000 for the same period the prior year.
Sales from printer and workstation contracts relating to the MILSTAR program,
which should be completed during fiscal 1995, declined $7,381,000 while other
defense related workstation sales increased $1,947,000; other defense related
printer sales decreased $460,000 and sales to other customers declined
$208,000. The decline in MILSTAR program sales during the first nine months of
fiscal 1995 is expected to continue for the remainder of fiscal 1995 and there
can be no assurance that other sales will replace the MILSTAR-related declines.
Gross profits for the nine month period ended July 30, 1995 were $2,205,000 (18%
of sales), a decrease of $3,798,000 or 63% compared to $6,003,000 (33% of
sales) for the same period the prior year. Gross profits as a percentage of
sales were impacted by the Company's product mix shifting to lower margin
ruggedized products from higher margin full mil-spec products, lower defense
related production levels without a corresponding reduction in overhead expenses
and start-up expenses related to the commercial business unit.
Research and development expenses were $4,334,000 for the nine month period
ended July 30, 1995, an increase of $2,754,000 or 274%, compared with $1,580,000
for the same period the prior year. Approximately 80%
<PAGE>
of the fiscal 1995 R & D expenditures relate to the development of the Company's
high-speed color digital printer product.
Selling, general, and administrative expenses for the nine month period ended
July 30, 1995 were $4,261,000 (35% of sales), a decrease of $643,000 or 18%
compared with $4,904,000 (27% of sales) for the same period the prior year.
This decrease is attributable to lower military sales and marketing expenses,
consisting primarily of reduced commissions and payroll, partially offset by
increased marketing expenses for the Company's high-speed color digital printer.
Interest expense amounted to $35,000 ($136,000 of interest expense offset by
$101,000 of interest income) for the nine month period ended July 30, 1995, a
net increase of $13,000 compared with $22,000 of net interest expense for the
same period the prior year. This increase was due to increased capital leases
and equipment loans. Amortization of excess of acquired net assets over cost
was $229,000 for the nine month period ended July 30, 1995 compared to $217,000
for the same period last year. The amortization is a result of the acquisition
of Rugged Digital in August 1993.
The net loss for the nine months ended July 30, 1995 amounted to $6,216,000,
compared with a net loss of $186,000 for the same period in the prior year. The
increased net loss is due to a decrease in gross profit of $3,798,000, an
increase in research and development costs of $2,754,000, an increase in
interest expense of $13,000, an increase in amortization of excess of acquired
net assets over costs of $12,000 and an increase in taxes of $120,000, partially
offset by a decrease in selling, general, and administrative expenses of
$643,000.
Reduced military sales during fiscal 1995, along with increased competition in
the ruggedized peripheral market, increased research and development costs, and
higher interest expense due to capital leases and loans are expected to cause a
substantial loss for the Company in fiscal 1995.
Three Month Period Ended July 30, 1995 Compared
- -----------------------------------------------
To The Three Month Period Ended July 31, 1994
- ---------------------------------------------
Sales for the three month period ended July 30, 1995 were $4,790,000, a decrease
of $1,083,000 or 18% compared to $5,873,000 for the same period the prior year.
Sales from printer and workstation contracts relating to the MILSTAR program,
which should be completed during fiscal 1995, declined $2,596,000 while other
defense related workstation sales increased $1,982,000, other defense related
printer
<PAGE>
sales decreased $646,000 and sales to other customers increased $177,000.
<PAGE>
Gross profits for the three month period ended July 30, 1995 were $914,000 (19%
of sales), a decrease of $1,012,000 or 53% compared to $1,926,000 (33% of sales)
for the same period the prior year. Gross profits as a percentage of sales were
impacted by the Company's product mix shifting to lower margin ruggedized
products from higher margin full mil-spec products, lower defense related
production levels without a corresponding reduction in overhead expenses and
start-up expenses related to the commercial business unit.
Research and development expenses were $1,688,000 for the three month period
ended July 30, 1995, an increase of $1,083,000 or 279%, compared with $605,000
for the same period the prior year. Approximately 80% of the fiscal 1995 R & D
expenditures relate to the development of the Company's high-speed color digital
printer product.
Selling, general, and administrative expenses for the three month period ended
July 30, 1995 were $1,455,000 (30% of sales), an increase of $79,000 or 6%
compared with $1,376,000 (23% of sales) for the same period the prior year. This
increase is attributable to higher marketing expenses for the Company's high-
speed digital color printer.
Interest income amounted to $4,000 ($66,000 interest expense offset by $70,000
of interest income) for the three month period ended April 30, 1995, a net
decrease of $32,000 compared with $36,000 of net interest income for the same
period the prior year. This decrease is due to higher borrowings, increased
capital leases and equipment loans. Amortization of excess of acquired net
assets over cost of was $77,000 for the three month period ended July 30, 1995
compared to $76,000 for the same period last year. The amortization is a result
of the acquisition of Rugged Digital in August 1993.
The net loss for the three months ended July 30, 1995 amounted to $2,166,000,
compared with a net income of $27,000 for the same period in the prior year. The
loss is due to a decrease in gross profit of $1,012,000, an increase in research
and development costs of $1,083,000,an increase in selling, general, and
administrative expenses of $79,000, an increase in net interest expense of
$32,000, an increase in amortization of excess of acquired net assets over costs
of $1,000 and a decrease in taxes of $12,000.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
During the month of June the Company received $535,000 from the exercise of
170,000 warrants by Cruttenden Roth Inc. and net proceeds of $16,526,000 from a
public offering of 2,300,000 shares of common stock.
The Company has entered into a revolving line of credit agreement (the "Credit
Agreement") with a new bank. The advance rate is eighty percent(80%) of
eligible accounts receivable, plus eighty percent(80%) of eligible progress
billings receivables, to a maximum of the progress billing receivables sublimit,
which will not exceed the lesser of ten percent(10%) of eligible receivables or
$500,000. The lending facility is capped at $7,000,000 and expires on March 4,
1996. The interest rate is prime plus .25%. The loan is secured by
substantially all the Company's assets. There was no outstanding balance at July
30, 1995. The maximum amount available under the line at July 30, 1995 was
$2,122,000.
The Credit Agreement requires the Company to maintain certain financial ratios
and restricts or limits the Company's ability to (i) create certain liens, (ii)
convey, transfer, or sell assets, (iii) incur additional indebtedness, (iv)
redeem or repurchase any class of stock, and (v) pay dividends on its preferred
or common stock. The Company is in compliance with all its covenants.
From time to time the Company receives advance payments on certain contracts.
These funds may be used for working capital requirements and other general
corporate purposes until needed to complete the contracts. At July 30, 1995,
the Company had no advance payments in excess of costs.
The Company's working capital and current ratios at the end of fiscal years
1992, 1993, 1994 and the period ending July 30, 1995 were $4,856,000,
$8,708,000, $12,361,000 and $23,335,000 and 2.4, 2.6, 3.7 and 7.7, respectively.
Due to the Company's high level of research and development costs and the
reduced sales and margins in its military business, the Company has experienced
negative cash flow from operations of $2,848,000 for the first nine months of
fiscal year 1995. This situation is expected to continue for the full fiscal
year 1995. The Company will fund its continued investment in the color printer
and its military business from the proceeds of its June public offering and the
existing line of credit.
<PAGE>
The Company expects to purchase approximately $1,700,000 of capital equipment
(including capitalized leases) during all of fiscal 1995, of which $1,425,000 of
such equipment had been purchased as of July 30, 1995. The Company's other
principal commitments for fiscal 1995 are lease obligations for the Company's
facility, operating leases, principal and interest due on equipment borrowings,
and redemption of the Series B Preferred Stock.
Management expects to finance the capital expenditure requirements and other
commitments from working capital, borrowings under the new bank line of credit
and capital leases.
BUSINESS ENVIRONMENT
As part of its diversification strategy, the Company has continued to invest
substantial resources in developing its commercial business. Results for 1995
are expected to be impacted by continued heavy investment in the Company's
CYMax high-speed color digital printer program, during which time the Company
expects to introduce products to the market for field evaluation. During the
fourth quarter of calendar 1995, the Company expects to make initial customer
deliveries and to slowly increase production, which the Company anticipates will
begin generating incremental commercial revenues.
Companies engaged in supplying equipment and services to U.S. government
defense programs are subject to special risks including dependence on government
appropriations, contract termination without cause, contract renegotiation, and
the intense competition for the available defense business. Over the past
several years, the Company has been significantly impacted by market changes in
the U.S. Department of Defense. Department of Defense budget forecasts indicate
that overall funding will continue to decrease for the foreseable future, and
accordingly, the Company anticipates that the results of its military business
operations will be adversely affected as well.
Reduced military sales during fiscal 1995, along with increased competition in
the ruggedized peripheral market, increased research and development costs, and
higher interest expense due to capital leases and loans are expected to cause a
subtantial loss for the Company in fiscal 1995.
Because of the foregoing, as well as other factors affecting the Company's
operating results, past financial performance should not be considered to be a
reliable indicator of future performance.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-k
(a) List of Exhibits:
----------------
Exhibit
Numbers Description of Exhibits
------- -----------------------
27.1 Financial Data Schedule.
(b) Reports on form 8-k.
--------------------
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this Form 10-Q to be signed on its behalf by its duly
authorized representatives.
DATAMETRICS CORPORATION
-----------------------
(Registrant)
Dated: August 22, 1995 /s/ SIDNEY E. WING
--------------- ------------------------------------
Sidney E. Wing
President and Chief
Executive Officer
Dated: August 22, 1995 /s/ JOHN J. VAN BUREN
--------------- ------------------------------------
John J. Van Buren
Sr. Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-29-1995
<PERIOD-END> JUL-30-1995
<CASH> 14,759
<SECURITIES> 0
<RECEIVABLES> 4,622
<ALLOWANCES> 5
<INVENTORY> 6,680
<CURRENT-ASSETS> 26,814
<PP&E> 7,613
<DEPRECIATION> 4,558
<TOTAL-ASSETS> 30,715
<CURRENT-LIABILITIES> 3,479
<BONDS> 0
<COMMON> 120
0
955
<OTHER-SE> 32,020
<TOTAL-LIABILITY-AND-EQUITY> 30,715
<SALES> 12,138
<TOTAL-REVENUES> 12,138
<CGS> 9,933
<TOTAL-COSTS> 9,933
<OTHER-EXPENSES> 8,595
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> (6,196)
<INCOME-TAX> 20
<INCOME-CONTINUING> (6,216)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,216)
<EPS-PRIMARY> (0.60)
<EPS-DILUTED> (0.60)
</TABLE>
