<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-12807
PHOTOCOMM, INC.
Incorporated in the State of Arizona IRS No. 86-0411983
7681 East Gray Road
Scottsdale, Arizona 85260
(602)948-8003
Check whether the Registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Exchange
Act during the past 12 months (or 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 ( )
Check whether the Registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by
court. Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding as of 6/30/95
- - - ----- -------------------------
Common Stock, $0.10 par value 12,353,109
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PHOTOCOMM, INC.
INDEX
PART I Financial Information Page No.
--------------------- --------
Item 1. Financial Statements
Balance Sheets - May 31, 1995 and 3
August 31, 1994
Statements of Operations - Three Months 4
ended May 31, 1995 and 1994 and Nine
Months ended May 31, 1995 and 1994
Statements of Stockholders' Equity, 5
May 31, 1995 and August 31, 1994
Statements of Cash Flows - Nine Months 6
ended May 31, 1995 and 1994
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis 8-10
of Financial Condition and Results of
Operations
PART II Other Information
-----------------
Item 6. Exhibits 10
<PAGE> 3
PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS
PHOTOCOMM, INC. AND SUBSIDIARIES, CONSOLIDATED BALANCE SHEETS
MAY 31, 1995 and AUGUST 31, 1994
(UNAUDITED)
Assets 5/31/95 8/31/94
Current Assets:
Cash and cash equivalents $ 145,693 $ 458,224
Accounts receivable 3,556,742 1,482,276
Inventories 3,243,667 2,654,910
Other current assets 247,833 181,994
--------- ---------
Total Current Assets 7,193,935 4,777,404
Property and equipment at cost less
accumulated depreciation and amortization 2,098,699 2,209,711
Other assets 308,949 339,408
--------- ---------
Total Assets $9,601,583 $7,326,523
Liabilities and Stockholders' Equity
Current Liabilities:
Current installments of long-term debt $ 133,686 $ 123,108
Note Payable 550,000 -
Accounts payable 2,292,392 1,196,143
Other accrued expenses 252,146 205,111
--------- ---------
Total Current Liabilities 3,228,224 1,524,362
--------- ---------
Long-term debt, less current installments 742,024 844,019
--------- ---------
Total Liabilities 3,970,248 2,368,381
Stockholders' Equity:
Preferred stock:$.001 par value,
5,000,000 shares authorized;
Series A 12% convertible preferred stock, 110 110
125,000 shares authorized;109,972 shares
issued and outstanding
Series AA 11% convertible preferred stock 95 93
200,000 shares authorized;94,565 and
92,965 shares issued and outstanding,
respectively
Common stock;$.10 par value, 20,000,000 1,234,211 1,224,076
shares authorized;12,342,109 and
12,240,759 shares issued and
outstanding, respectively
Additional paid-in capital 9,905,587 9,910,906
Accumulated deficit ($808 restricted for
cost of treasury stock held) (5,507,860) (6,177,043)
Less: Cost of 400 treasury shares (808) -
--------- ---------
Total Stockholders' Equity 5,631,335 4,958,142
Total Liabilities and Stockholders' --------- ---------
Equity $9,601,583 $7,326,523
See accompanying notes to consolidated financial statements.
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PHOTOCOMM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
May 31 May 31
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
Sales, net $6,292,979 $3,834,887 $15,424,609 $10,409,906
Cost of sales 4,943,283 2,930,661 11,791,600 7,837,566
--------- --------- ---------- ----------
Gross profit 1,349,696 904,226 3,633,009 2,572,340
Selling, general,
administrative 1,091,043 863,289 2,953,199 2,410,115
--------- -------- --------- ---------
Income (loss)
from operations 258,652 40,937 679,810 162,225
Other income
(expense):
Interest expense (28,549) (25,862) (65,161) (105,619)
Other, net 21,085 26,147 54,534 90,117
-------- -------- -------- --------
Net income(loss) $ 251,188 $ 41,222 $ 669,183 $ 146,723
======== ======== ======== ========
Income (loss) per
share $ .02 $ .001 $ .05 $ .002
======== ======== ======= ========
Weighted average
number of common
shares outstanding 12,337,987 11,862,353 12,285,953 11,050,037
See accompanying notes to consolidated financial statements.
<PAGE> 5
<TABLE>
<CAPTION>
PHOTOCOMM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
MAY 31, 1995 AND AUGUST 31, 1994
Convertible Preferred Stock
----------------------------------
Series A Series AA Common Stock Additional Cost of
---------------- ---------------- -------- ----------- Paid-In Accumulated Treasury
Shares Amount Shares Amount Shares Amount Capital Deficit Shares Total
------ ------ ------ ------ ------ ------ -------- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, August 31, 1994 109,972 $110 92,965 $93 12,240,759 $1,224,076 $9,910,906 ($6,177,043) --- $4,958,142
Common stock issued upon
exercise of stock options 67,750 6,775 57,163 $63,938
Series AA convertible
preferred stock issued to
private investor 10,000 10 49,990 $50,000
Cash dividends on Series A
and Series AA preferred stock (94,218) ($94,218)
Cost of 400 treasury shares (808) ($808)
Series AA convertible
preferred stock converted
to common stock 4 to 1 (8,400) (8) 33,600 3,360 (3,352) $0
Cost of S-3 Resigtration (14,902) ($14,902)
Net income 669,183 $669,183
------- ------ ------- ------ ---------- --------- --------- ----------- -------- ----------
Balance, February 28, 1995 109,972 $110 94,565 $95 12,342,109 $1,234,211 $9,905,587 ($5,507,860) ($808) $5,631,335
======= ====== ======= ====== ========== ========= ========= ========== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
PHOTOCOMM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
NINE MONTHS ENDED MAY 31, 1995 AND 1994
(UNAUDITED)
1995 1994
Cash flows from operating activities:
Net income (loss) $ 669,183 $ 146,723
Adjustments to reconcile net income (loss)
to net cash (used) provided by operating
activities:
Depreciation and amortization 242,399 196,120
Increase in allowances for doubtful
accounts and inventory obsolescence 9,810 14,277
(Increase)decrease in accounts receivable (2,072,886) 128,773
(Increase) in inventory (600,147) (375,864)
Increase(Decrease) in accounts payable
and accrued expenses 1,143,284 (1,143,841)
(Increase) in other current assets (65,839) (149,226)
--------- ---------
Net cash (used) provided by
operating activities (674,196)(1,183,038)
--------- ---------
Cash flows from investing activities:
Purchase of property, equipment
and other assets (100,928) (202,681)
--------- --------
Net cash used in investing
activities (100,928) (202,681)
--------- --------
Cash flows from financing activities:
Repayments of long-term debt (91,417) (367,398)
Proceeds from issuance of debt 550,000 -
Proceeds from issuance of common
stock 52,396 2,006,228
Proceeds from issuance of preferred
stock 46,640 -
Cash dividends on preferred stock (94,218) (74,802)
Purchase of Treasury Shares (808) -
--------- ---------
Net cash provided by financing
activities 462,593 1,564,028
--------- ---------
Net (decrease)in cash and cash equivalents (312,531) 178,309
Cash and cash equivalents at beginning
of year 458,224 112,987
Cash and cash equivalents at end of --------- --------
nine months $ 145,693 $ 291,296
========= ========
See accompanying notes to consolidated financial statements.
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PHOTOCOMM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1995
A. Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for presentation of interim financial information. They
do not include all information and presentation of footnotes
required by generally accepted accounting principles for
presentation of complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included.
B. Accounts Receivable
Accounts receivable consisted of:
5-31-95 8-31-94
------- -------
Trade Accounts $2,310,707 $1,507,276
U.S. Government 1,269,455 -
--------- ---------
3,580,162 1,507,276
Less Allowance for
Doubtful Accounts (23,420) (25,000)
--------- ---------
$3,556,742 $1,482,276
========= =========
C. Note Payable
On March 15, 1995, the Company secured a $1,000,000 credit line
with First Interstate Bank of Arizona. The credit line is a
revolving line with an annual maturity on February 28, 1996. It
has certain operating covenants, and is secured by the Company's
inventory and accounts receivable. Interest on the line is
calculated at prime plus three quarters of a point per annum, with
interest-only payments payable monthly. The Note Payable as of May
31, 1995 was $550,000.
D. Income Taxes
At May 31, 1995, the Company utilized net operating loss
carryforwards of approximately $670,000 to offset fiscal 1995
income for federal income tax purposes.
E. Seasonal Nature of the Business
Revenues of the Company are generally greater in its third and
fourth quarters (March through August) due to seasonal factors.
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
This discussion and analysis should be read in conjunction with the
consolidated financial statements and the related notes thereto
included elsewhere in this report.
Results of Operations
Three and nine months ended May 31, 1995 vs. three and nine months
ended May 31, 1994.
Sales: Sales for the third quarter ended 1995 and 1994
respectively are $6,292,979 versus $3,834,887, a 64% increase.
Sales for the nine months ended May 31, 1995 and 1994 are
$15,424,609 versus $10,409,906, a 48% increase. The sales revenue
increases for the quarter and the nine months are partially
attributed to $3,155,000 in shipments related to U.S. Government
accounts, and also increases in industrial products and systems,
and increases in the distribution and international divisions. In
general, sales revenue increases are due to volume increases with
little or no effect related to price changes.
Gross Profits: Gross Profits (sales less cost of sales) increased
49% and 41% for the third quarter and nine months ended May 31,
1995 versus the same period for 1994. Gross profits were
$1,349,696 or 21.5% for the third quarter and $3,633,009 or 23.5%
for the nine months ended May 31, 1995 compared to $904,226 or
23.5% and $2,572,340 or 24.7% for the nine months ended May 31,
1994.
The 49% and 41% increase in overall gross profits are attributed
to sales revenue gains recorded in the third quarter and nine month
year-to-date results. The gross profit percentages were reduced
in the third quarter and nine months ended May 31, 1995 from 23.5%
to 21.5% and 24.7% to 23.5%, respectively. The gross profit
reduction is attributed to the Company's lower margins on the U.S.
Government revenues from its China Lake project which began
shipping in the second quarter of fiscal 1995.
Selling, General and Administrative Expenses (SG&A): SG&A Expenses
in 1995 were $1,091,043 for the third quarter and $2,953,199 for
the nine months ended May 31, 1995 compared to $863,289 and
$2,410,115 for the same periods of the prior year. The 26.4% and
22.5% increases from the prior year are attributed to additional
sales and marketing expenses. The Company expects SG&A to increase
commensurately with future sales growth.
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Other Income (Expense): The Company's non-operating income and
expenses consist mainly of interest expense and consulting income.
Interest expense was increased to $28,549 from $25,862 for the
third quarter and reduced to $65,161 from $105,619 for the nine
months compared to the same periods in the prior year. The
increase was a result of the Company obtaining its bank line in the
third quarter of 1995, while the decrease is a result of lower debt
levels through the first two quarters of the year versus the prior
year.
Other income was reduced to $21,085 from $26,147 for the third
quarter and reduced to $54,334 from $90,117 for the nine months
compared to the same periods in the prior year. The reduction is
primarily attributed to the reclassification of energy sales from
other income in 1994 into regular sales in fiscal 1995.
Net Income: The Company's net income of $251,188 for the quarter
and $669,362 for the nine months ended May 31, 1995, representing
over a 400% and 300% increase for the quarter and year-to-date net
income. The net income increases are attributed to higher sales
and gross profits, a decrease in interest expense, with offsetting
increases in SG&A expenses.
Liquidity and Capital Resources: The Company's working capital
position continues to be stable. Working capital increased to
$3,965,711 at May 31, 1995 from $3,253,042 at August 31, 1994. The
current ratio is 2.23 at May 31, 1995 versus 3.13 at August 31,
1994, and the long-term debt to equity ratio is .13 at May 31, 1995
versus .17 at August 31, 1994.
Net cash used in operating activities for the nine months of
$674,196 was primarily due to increases in accounts receivables,
inventory and other assets of $2,738,872, with offsetting increases
in accounts payable of $1,143,284, with cash contributions from
profits and depreciation of $911,582. The Company's significant
use of cash in the first nine months is primarily attributed to the
increase in U.S. Government receivables of $1,269,455 related to
contracts awarded in fiscal 1995. Additionally, general accounts
receivable have increased proportionately to sales revenue growth.
The Company anticipates that accounts receivables and inventories
will be maintained or reduced slightly throughout the remainder of
fiscal 1995 to support the Company's sales growth.
Cash used for purchases of property and equipment of $100,928 was
primarily for manufacturing equipment.
Cash provided by financing activities included a bank line advance
of $550,000 from First Interstate Bank, proceeds from the issuance
of common and preferred stock of $99,036, with offsetting uses for
repayments of long-term debt, and cash dividends paid for preferred
stock of $185,635.
<PAGE> 10
On March 15, 1995, the Company secured a $1,000,000 credit line
with First Interstate Bank of Arizona. The credit line is a
revolving line with an annual maturity on February 28, 1996. It
has certain operating covenants, and is secured by the Company's
inventory and accounts receivable. Interest on the line is
calculated at prime plus three quarters of a point per annum, with
interest-only payments payable monthly.
Although no assurances are possible, the Company believes that its
future operating cash flows, access to increased bank lines of
credit, and ability to access additional equity such as the
exercise of present outstanding New World Power and employee stock
options, will provide adequate funding for current obligations,
projected operations and planned expansion for the next twelve
months and the foreseeable future.
PART II. OTHER INFORMATION
Item 6. Exhibits
(a) Exhibits
The following Exhibits are filed as part of this Report:
Exhibit No. Description Page
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: July 13, 1995
PHOTOCOMM, INC.
By: By:
Robert R. Kauffman Thomas C. LaVoy
Chief Executive Officer Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)
