<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 January 28, 1996
----------------
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
------
DATAMETRICS CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-3545701
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(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
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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
---- ----
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--12,162,574 shares as of February 21, 1996
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BALANCE SHEETS Datametrics Corporation
(unaudited)
<TABLE>
<CAPTION>
January 28, October 29,
(In thousands, except for share data) 1996 1995
===================================== =========== ===========
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,619 $ 9,601
Accounts receivable 5,408 6,578
Inventory 8,876 6,647
Income taxes receivable 145 145
Prepaid expenses 226 442
Deferred tax assets 223 223
-------- --------
Total current assets 20,497 23,636
Property and Equipment, At Cost:
Machinery and equipment 4,678 4,160
Furniture, fixtures & computer equipment 2,605 2,549
Leasehold improvements 475 449
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7,758 7,158
Accumulated depreciation and amortization (4,508) (4,205)
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Net property and equipment 3,250 2,953
Deferred Tax Assets 59 59
Other Assets 1,165 823
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$ 24,971 $ 27,471
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,747 $2,111
Accrued commissions and payroll 719 817
Accrued warranty 125 125
Other accrued liabilities 557 349
Redeemed Series B Preferred Stock Payable 470 470
Current portion of capital lease and
loan obligations 515 512
-------- --------
Total current liabilities 4,133 4,384
CAPITAL LEASE OBLIGATIONS 56 79
LONG TERM DEBT DUE AFTER ONE YEAR 494 609
OTHER LONG-TERM LIABILITIES 253 231
EXCESS OF ACQUIRED NET ASSETS OVER COST 152 229
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value--15,000,000 shares
authorized; 12,159,826 shares issued and
outstanding in 1996 (11,998,451 in 1995) 122 120
Additional paid-in capital 32,327 32,120
Accumulated deficit (12,566) (10,301)
-------- --------
Total stockholders' equity 19,883 21,939
-------- --------
$ 24,971 $ 27,471
======== ========
</TABLE>
See accompanying notes
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STATEMENTS OF OPERATIONS Datametrics Corporation
(Unaudited)
<TABLE>
<CAPTION>
For The Three Months
Ended
-----------------------
January 28, January 29,
(In thousands, except per share data) 1996 1995
===================================== =========== ===========
<S> <C> <C>
SALES $ 3,651 $ 3,451
Cost of sales 2,785 2,703
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Gross profit 866 748
OPERATING EXPENSES:
Research & development 1,429 1,035
Selling, general & administrative 1,820 1,356
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3,249 2,391
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Loss from operations (2,383) (1,643)
INTEREST (INCOME) EXPENSE (47) 8
AMORTIZATION OF EXCESS OF ACQUIRED
NET ASSETS OVER COST (76) (76)
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Loss before provision for
income taxes (2,260) (1,575)
PROVISION FOR INCOME TAXES 5 --
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NET LOSS (2,265) (1,575)
Preferred stock dividends or
accretion -- (16)
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LOSS applicable to common
stockholders ($2,265) ($1,591)
======= =======
LOSS per share of common stock:
Primary:
NET LOSS ($0.18) ($0.16)
======= =======
Fully diluted:
LOSS ($0.18) ($0.16)
======= =======
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING:
Primary 12,743 10,118
Fully diluted 12,743 10,118
</TABLE>
See accompanying notes.
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Cash Flows Statement Datametrics Corporation
(Unaudited)
<TABLE>
<CAPTION>
For The Three Month Period
Ended
--------------------------
January 28, January 29,
(In thousands)(Brackets denote cash outflows) 1996 1995
- --------------------------------------------- ----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITES:
Net loss ($2,265) ($1,575)
Adjustments:
Amortization of excess of acquired net assets (76) (76)
Depreciation and amortization 308 174
Changes in balance sheet items:
Accounts receivable 1,170 3,509
Inventory (2,229) (72)
Prepaid expenses 216 (124)
Accounts payable (364) (969)
Accrued commissions and payroll (98) (315)
Other accrued liabilities 208 (218)
Other (320) (88)
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Net cash generated(used) in operating activities (3,450) 246
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment (606) (570)
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Net cash used in investing activities (606) (570)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable to bank -- 750
Payments on notes payable to bank -- (1,350)
Proceeds from the issuance of common stock 209 70
Borrowings of long-term debt -- 933
Payments on long-term debt (101) (16)
Payments on capital lease obligations (34) (37)
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Net cash provided by financing activities 74 350
Net increase(decrease) in cash and cash equivalents (3,982) 26
Cash and cash equivalents at the beginning of the period 9,601 988
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CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 5,619 $ 1,014
======= =======
Cash paid during the period for:
Interest $ 37 $ 8
Income Taxes 5 --
Noncash investing and financing activities:
Accretion on preferred stock -- 16
Issuance of capital lease obligations -- 199
</TABLE>
See accompanying notes.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
January 28, 1996
(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 27, 1996.
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 (6) pertains to debt; 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 based upon backlog and forecasted
usage. Contract inventory costs
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include purchased materials, direct labor and manufacturing overhead. General
and administrative costs are expenses in the period incurred. Inventories as of
January 28, 1996 are as follows:
<TABLE>
<S> <C>
Raw Material $4,982,000
Work-in Process 1,698,000
Finished Goods 148,000
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$8,876,000
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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Three Month Period Ended January 28, 1996 Compared
- --------------------------------------------------
To The Three Month Period Ended January 29, 1995
- ------------------------------------------------
Sales for the three month period ended January 28, 1996 were $3,651,000, an
increase of $200,000 or 6% compared to $3,451,000 for the same period the prior
year. Sales from defense related printers declined $241,000 and sales from
workstations increased $396,000.
Gross profits for defense products during the three month period ended January
28, 1996 were $1,174,000 (33% of sales), an increase of $388,000 or 49%
compared to $786,000 (23% of sales) for the same period the prior year. Gross
profits as a percentage of sales were impacted by the Company's product mix.
Expenses related to start up of commercial production amounted to approximately
$300,000.
Research and development expenses were $1,429,000 for the three month period
ended January 28, 1996, an increase of $394,000 or 38%, compared with $1,035,000
for the same period the prior year. Approximately 84% of the first quarter
fiscal 1996 R & D expenditures related to the development of the Company's high-
speed color digital printer products.
Selling, general, and administrative expenses for the three month period ended
January 28, 1996 were $1,820,000 (50% of sales), an increase of $464,000 or 29%
compared with $1,356,000 (39% 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 $47,000 ($84,000 of interest income offset by
$37,000 interest expense) for the three month period ended January 28, 1996, a
net increase of $55,000 compared with $8,000 of net interest expense for the
same period the prior year. This increase is due to higher interest income.
Amortization of excess of acquired net assets over cost of was $76,000 for the
three month period ended January 28, 1996 compared to $76,000 for the same
period last year. The amortization is a result of the acquisition of Rugged
Digital in August 1993.
<PAGE>
The net loss for the three months ended January 28, 1996 amounted to
$2,265,000, compared with a net loss of $1,575,000 for the same period in the
prior year. The loss is due primarily to continued heavy spending on research
and development for the Company's high speed digital color printers, which
increased $394,000 compared to the period the prior year, an increase in
selling, general, and administrative expenses of $464,000, and an increase in
taxes of $5,000, partially offset by an increase in gross profit of $118,000 and
a decrease in net interest expense of $55,000.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
In June 1995 the Company received $535,000 from the exercise of 170,000 warrants
by Cruttenden Roth Inc. and net proceeds of $16,555,000 from a public offering
of 2,300,000 shares of common stock. The Company is using the net proceeds of
the offering for the continued development, manufacture and marketing of
products based upon its high-speed color printer technology.
The Company has 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 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 Company is
currently in negotiations for renewal of the Credit Agreement, but there are no
assurances that the line of credit will be renewed, or if renewed, that the
terms and conditions will remain unchanged. The interest rate is prime plus
.25%. The loan is secured by substantially all the Company's assets. There was
no outstanding balance at January 28, 1996.
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
<PAGE>
contracts. At January 28, 1996, the Company had advance payments of $29,000 in
excess of costs.
The Company's working capital and current ratios at the end of fiscal years
1993, 1994, 1995 and the period ending January 28, 1996 were $8,708,000,
$12,361,000, $19,252,000 and $16,364,000 and 2.6, 3.7, 5.4 and 5.0,
respectively. Due to the Company's high level of research and development costs,
marketing costs and inventory investment, the Company has experienced negative
cash flow from operations of $3,450,000 for the first three months of fiscal
year 1996. This situation is expected to continue for the full fiscal year
1996. The Company expects to fund its continued investment in the color printer
and its military business from the proceeds of its June 1995 public offering and
a bank line of credit.
The Company expects to purchase approximately $1,800,000 of capital equipment
(including capitalized leases) during all of fiscal 1996, of which $606,000 of
such equipment had been purchased as of January 28, 1996. The Company's other
principal commitments for fiscal 1996 are lease obligations for the Company's
facility, operating leases, principal and interest due on equipment borrowings,
payment for the untendered Series B Preferred Stock and interest due on bank
borrowings.
Management expects to finance the capital expenditure requirements and other
commitments from working capital, borrowings from a bank line of credit, capital
loans and capital leases.
<PAGE>
BUSINESS ENVIRONMENT AND OTHER CONSIDERATIONS
As part of its diversification strategy, the Company has continued to invest
substantial resources in developing its commercial business. Results for 1996
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 ramp up production. The Company's future success depends in large part on the
timely and successful development and marketing in commercial markets of the
CYMax series of high-speed color digital printers. Mass commercial
implementation of the CYMax printers remains uncertain and is subject to a
number of factors including, without limitation, timely completion of the
Company's product offerings, the timing of development of competing color
printing technologies, the availability of adequate, cost effective
manufacturing capacity and the availability of adequate working capital to
finance the development, manufacture and marketing of the products. The
Company's exclusive distribution agreement with the A.B. Dick Company has been
terminated, and the Company is pursuing a joint venture and other OEM
relationships to penetrate the markets previously restricted under the
exclusive agreement with A.B. Dick. If the Company is unable to complete any of
these efforts in a timely manner, such failure could have a material adverse
effect on the timely introduction and sales of the CYMax printers and the
Company's business, financial condition and results of operations.
Competition in commercial color printing markets is intense. Many of the
Company's competitors have far greater name recognition and financial,
technical, marketing and customer service resources than the Company. The
commercial color printing market is characterized by rapid technological
advances and downward price pressure as competing technologies mature. In
addition, the Company's CYMax series of printers is a new product entry into the
commercial color printing market, and there can be no assurance that there will
be broad acceptance of the products in the marketplace.
<PAGE>
The Company relies to a substantial extent on sole suppliers to manufacture
several key components for use in the CYMax printers, including controllers,
print heads and color printer ribbons. Because the manufacture of these
components is specialized and requires long lead times, there can be no
assurance that delays in the timely completion of production orders will not be
caused by component vendors. Any inability to obtain adequate deliveries, or
any other circumstance that would require the Company to seek alternative
sources of component supply, could delay shipment of the Company's products,
increase its cost of goods sold and have a material adverse effect on the
Company's business, financial condition and results of operations.
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 foreseeable future, and
accordingly, the Company anticipates that the results of its military business
operations will continue to be adversely affected by such decreases.
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
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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: February 29, 1996 /s/ SIDNEY E. WING
--------------------------- --------------------------------------
Sidney E. Wing
President and Chief
Executive Officer
Dated: February 29, 1996 /s/ JOHN J. VAN BUREN
--------------------------- --------------------------------------
John J. Van Buren
Sr. Vice President and
Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF DATAMETRICS
CORPORATION AS OF AND FOR THE THREE MONTH PERIOD ENDING JANUARY 28, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-27-1996
<PERIOD-END> JAN-28-1996
<CASH> 5,619
<SECURITIES> 0
<RECEIVABLES> 5,454
<ALLOWANCES> 46
<INVENTORY> 8,876
<CURRENT-ASSETS> 20,497
<PP&E> 7,758
<DEPRECIATION> 4,508
<TOTAL-ASSETS> 24,971
<CURRENT-LIABILITIES> 4,133
<BONDS> 0
0
0
<COMMON> 122
<OTHER-SE> 32,327
<TOTAL-LIABILITY-AND-EQUITY> 24,971
<SALES> 3,651
<TOTAL-REVENUES> 3,651
<CGS> 2,785
<TOTAL-COSTS> 2,785
<OTHER-EXPENSES> 3,173
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47
<INCOME-PRETAX> (2,260)
<INCOME-TAX> 5
<INCOME-CONTINUING> (2,265)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,265)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
