<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 February 29, 1996
[ ] 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 3/31/96
- ----- -------------------------
Common Stock, $0.10 par value 13,652,334
<PAGE> 2
PHOTOCOMM, INC.
INDEX
PART I Financial Information Page No.
--------------------- --------
Item 1. Financial Statements
Balance Sheets - February 29, 1996 and 3
August 31, 1995
Statements of Operations - Three Months ended 4
February 29, 1996 and February 28, 1995 and
Six Months ended February 29, 1996 and
February 28, 1995
Statements of Stockholders' Equity, 5
February 29, 1996 and August 31, 1995
Statements of Cash Flows - Six Months 6
ended February 29, 1996 and
February 28, 1995
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis 8-9
of Financial Condition and Results of
Operations
PART II Other Information
-----------------
Item 4. Submission of Matters to a Vote 10
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE > 3
PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS
PHOTOCOMM, INC. AND SUBSIDIARIES, CONSOLIDATED BALANCE SHEETS
FEBRUARY 29, 1996 and AUGUST 31, 1995 -- UNAUDITED
Assets 2/29/96 8/31/95
Current Assets:
Cash and cash equivalents $ 297,235 $ 520,269
Accounts receivable 2,764,268 2,352,548
Inventories 4,158,426 3,327,625
Other current assets 377,495 252,462
--------- ---------
Total Current Assets 7,597,424 6,452,904
Property and equipment at cost less --------- ---------
accumulated depreciation & amortization 2,549,192 2,063,957
Other assets 2,057,275 308,325
---------- ---------
Total Assets $12,203,891 $8,825,186
Liabilities and Stockholders' Equity
Current Liabilities:
Current installments of long-term debt $ 642,261 $ 135,949
Line of Credit 200,000 200,000
Accounts payable 1,702,684 1,129,156
Other accrued expenses 176,401 242,778
--------- ---------
Total Current Liabilities 2,721,346 1,707,883
--------- ---------
Long-term debt, less current installments 380,594 720,163
--------- ---------
Total Liabilities 3,101,940 2,428,046
Stockholders' Equity: --------- ---------
Preferred stock:$.001 par value,
5,000,000 shares authorized;
Series A 12% convertible preferred stock,
125,000 shares authorized;109,972
shares issued and outstanding 110 110
Series AA 11% convertible preferred stock
200,000 shares authorized; 60,965 and
69,365 shares issued and outstanding,
respectively 61 69
Common stock; $.10 par value,
20,000,000 shares authorized;
14,248,509 and 13,014,160 shares
issued & outstanding, respectively 1,424,851 1,301,416
Additional paid-in capital 12,459,173 10,369,422
Accumulated deficit ($808 restricted for
cost of treasury stock held) (4,781,436) (5,273,069)
Less: Cost of 400 treasury shares (808) (808)
--------- ---------
Total Stockholders' Equity 9,101,951 6,397,140
---------- ---------
Total Liabilities and Stockholders'
Equity $12,203,891 $8,825,186
========== =========
See accompanying notes to consolidated financial statements.
<PAGE> 4
PHOTOCOMM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
2/29/96 2/28/95 2/29/96 2/28/95
------- ------- ------- -------
Sales, net $4,811,007 $5,329,327 $10,092,280 $9,131,630
Cost of sales 3,372,406 4,059,119 7,320,005 6,848,317
--------- --------- --------- ---------
Gross profit 1,438,601 1,270,208 2,772,275 2,283,313
Selling, general and
administrative 1,164,663 987,029 2,270,942 1,861,977
--------- --------- --------- ---------
Income from 273,938 283,179 501,333 421,336
operations
Other income (expense):
Interest expense (19,341) (19,036) (36,965) (36,612)
Other, net 17,255 17,110 27,265 33,449
------- ------- ------- -------
Net income $ 271,852 $ 281,253 $ 491,633 $ 418,173
========= ========= ========= =========
Income per share $ .02 $ 0.02 $ .032 $ 0.03
========= ========= ========= =========
Weighted average
number of common
shares
outstanding 14,905,346 12,287,710 14,667,510 12,257,224
See accompanying notes to consolidated financial statements.
<PAGE> 5
<TABLE>
<CAPTION>
PHOTOCOMM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FEBRUARY 29, 1996 AND AUGUST 31, 1995
(UNAUDITED)
Convertible Preferred Stock
----------------------------
Series A Series AA Common Stock Additional
---------------- -------------- ---------------- 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, 1995 109,972 $110 69,365 $69 13,014,159 $1,301,416 $10,369,421 ($5,273,069) ($808) $6,397,139
Common stock issued upon
exercise of stock options 365,750 36,575 347,109 383,684
Common stock issued as part
of Sunelco purchase agreement 225,000 22,500 377,500 400,000
Common stock issued as part
of Solarjack purchase agreement 560,000 56,000 1,344,000 1,400,000
Common stock issues upon
exercise of warrants 50,000 5,000 85,000 90,000
Preferred stock converted
to common 4 to 1 (8,400) (8) 33,600 3,360 (3,352) (0)
Cash dividends on Series A
and Series AA preferred stock (60,505) (60,505)
Net Income 491,633 491,633
Balance, ------- ---- ------ --- ---------- ---------- ----------- ------------ ----- ----------
February 29, 1996 109,972 $110 60,965 $61 14,248,509 $1,424,851 $12,459,173 ($4,781,436) ($808) $9,101,950
======= ====== ====== === ========== ========== =========== ============ ====== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
PHOTOCOMM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
SIX MONTHS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
(UNAUDITED)
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 491,633 $ 418,173
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization 179,249 161,573
Increase (decrease) in allowances for
doubtful accounts & inventory obsolescence 19,706 (21,540)
Increase in accounts receivable (434,173)(2,036,174)
Increase in inventory (853,722) (204,744)
Increase in accounts payable and
accrued expenses 507,150 1,292,169
Decrease (increase) in other current
assets 104,891 (228,422)
------- -------
Net cash provided by (used in)
operating activities 14,734 (618,965)
------- -------
Cash flows from investing activities:
Purchase of property and equipment (174,157) (85,562)
Acquisition of other assets (393,533) -
------- ------
Net cash used in investing
activities (567,690) (85,562)
------- ------
Cash flows from financing activities:
Repayments of long-term debt (83,257) (60,355)
Proceeds from issuance of debt - 250,000
Proceeds from issuance of common stock 473,684 104,813
Purchase of Treasury stock - (808)
Cash dividends on preferred stock (60,505) (44,500)
------- -------
Net cash provided by (used in)
financing activities 329,922 249,150
------- -------
Net increase (decrease) in cash & cash
equivalents (223,034) (455,377)
Cash and cash equivalents at beginning
of year 520,269 458,224
------- -------
Cash and cash equivalents at end of
six months $ 297,235 $ 2,847
======= =======
See accompanying notes to consolidated financial statements.
<PAGE> 7
PHOTOCOMM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996
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.
Certain reclassifications have been made in the fiscal year 1995 financial
statements to conform to the reclassification used in fiscal 1996.
B. 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.
C. Income Taxes
At February 29, 1996, the Company utilized net operating loss carryforwards
of approximately $491,363 to offset fiscal 1996 income for federal income
tax purposes.
D. Acquisition and Stockholders' Equity
Effective October 3, 1995, Photocomm acquired all of the assets and assumed
the related liabilities of Sunelco, Inc., a distributor of solar electric
products located in Hamilton, Montana. The aggregate consideration paid by
Photocomm in connection with this acquisition was approximately $850,000. The
Company issued 225,000 shares of Photocomm's Common Stock, $0.10 par value,
valued at $400,000 and assumed Sunelco liabilities of approximately $450,000.
The assets purchased principally consisted of certain inventories and other
assets valued by the parties at approximately $450,000; and goodwill and
intangible assets valued by the parties at $400,000.
On February 2, 1996, Photocomm acquired all of the assets, excluding
accounts receivable, of Solarjack, a solar electric pumping products
manufacturer located in Safford, Arizona. The aggregate consideration paid
by Photocomm in connection with this acquisition was approximately
$1,700,000. The Company paid $300,000 in cash and 560,000 shares of its Common
Stock, $0.10 par value, valued at $1,400,000. The assets purchased consisted
of inventories of $224,256; fixed assets of $441,578; and goodwill and
intangible assets valued by the parties at $1,035,000.
<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 six months ended February 29, 1996 vs. three and six
months ended February 28, 1995.
Sales: Sales for the second quarter ended February 29, 1996 and
February 28, 1995 respectively are $4,811,007 versus $5,329,327,
a 9.7% decrease. Sales for the six months ended February 28,
1996 and 1995 are $10,092,280 versus $9,131,630, a 10.5%
increase. The sales revenue decrease for the quarter is
attributed to reduced government sales of $1,470,000 from 1995,
and six months to date reductions of $1,797,635. When government
sales revenues are factored out of 1995 sales, the Company
experienced a 25% increase in sales for the second quarter and
37% increase for the six months ended February 29, 1996, versus
comparable prior year periods. The sales revenue increases for
the quarter and six months are partially attributable to added
sales from the acquisitions of Sunelco, Inc. and Jadco
Manufacturing, Inc., and increased revenues from the Company's
core business accounts in industrial products and systems, and
distribution business in domestic and international markets. In
general, sales revenue increases are due to volume increases,
with little or no effect related to price changes.
Gross Profit: Gross Profit (sales less cost of sales) increased
13.2% and 21.4% for the second quarter and six months ended
February 29, 1996 versus the same period in 1995. Gross profits
were $1,438,601 or 30% for the second quarter and $2,772,275 or
27.5% for the six months ended February 29, 1996 compared to
$1,270,208 or 23.8% for the quarter and $2,283,313 or 25% for the
six months ended February 28, 1995. The 13.2% increase in the
second quarter is attributed to increases in gross profit
percentages from 23.8% in 1995 to 30% in 1996, offsetting sales
reduction for the period of $518,320. The 21.4% increase for six
months ended February 29, 1996 versus 1995 are attributed to
sales revenue increases as well as increased gross profit margins
to 27.5% from 25% for the prior year comparable period.
The gross profit percentage improvement is attributed to higher
profit business associated to industrial products and systems
business in 1996 versus 1995, the addition of retail sales from
the Sunelco acquisition and the reductions of lower margin
government contract business in 1996 versus 1995.
Selling, General and Administrative Expenses (SG&A): SG&A
Expenses in 1996 were $1,164,663 for the second quarter and
$2,270,942 for the six months ended February 29, 1996, compared
<PAGE> 9
to $987,029 and $1,861,977 for the same periods in the prior
year. The 18% and 22% increase from the prior year are
attributed to additional sales and marketing expenses, with most
of the increases associated to additional marketing expenses from
the Sunelco acquisition in October of 1995.
Other Income (Expense): The Company's non-operating income and
expenses consist mainly of interest expense and consulting
income. Interest expense for the quarter was approximately the
same in the second quarter and for the six months compared to the
same periods in the prior year. Other income was also very
comparable for the quarter and six months ended versus the same
periods in the prior year.
Net Income: The Company achieved a net income of $271,852 ($.02
per common share) for the quarter and $491,633 ($.03 per common
share) for the six months ended February 29, 1996, representing
approximately the same income for the quarter and a 17.5%
increase for the six month period ended February 29, 1996 versus
comparable prior year periods.
The net income for the quarter of $271,852 versus $281,253,
approximately the same for the comparable periods, is a result of
lower sales revenues, offset by significantly higher gross profit
margins in the Company's industrial products and retail business,
with corresponding offsets for increases in sales expenses for
retail operations. The 17% increase in net income for the six
month period is attributed to higher sales, improved gross profit
margins and offsetting increases in SG&A expenses compared to the
prior year six months ended February 28, 1995.
Liquidity and Capital Resources: The Company's working capital
position continues to be stable. Working capital increased to
$4,876,078 at February 29, 1996 from $4,745,021 at August 31,
1995. The current ratio is 2.8 at February 29, 1996 versus 3.8
at August 31, 1995 and the debt to equity ratio is .04 at
February 29, 1996 versus .11 at August 31, 1995. The reduction
in current ratio and the reduction in debt to equity ratio is a
result of classifying a long-term mortgage loan of $485,000 which
is due in November of 1996 into current liabilities. The Company
expects to refinance the mortgage loan in the fourth quarter of
1996. The effect of reclassifying this debt back to a long-term
liability causes a .6 increase in the current ratio and .06
increase to the debt to equity ratio, which is consistent with
the first quarter and year end ratios of 1995.
Net cash provided by operating activities for the six months of
$14,734 was primarily due to increases in inventory and accounts
receivable of $1,287,895, with offsetting increases in accounts
payable and decreases in other current assets of $612,041 with
cash contributions from profits and depreciation of $670,822.
<PAGE> 10
Net cash used in financing activities for the six months of
$567,690 was for the purchase of property and equipment, and the
acquisitions of Sunelco and Solarjack. Cash used for purchases
of property and equipment of $174,157 was primarily for
manufacturing equipment, leasehold improvements and computer
equipment. Cash used in the acquisitions of Sunelco and
Solarjack was $393,533.
Cash provided by financing activities of $329,922 was comprised
of repayments of $83,257 of the long-term debt, offset by
proceeds of $473,684 from the issuance of common stock and
payment of dividends of $60,505.
On February 28, 1996, the Company renewed and expanded its
$1,000,000 credit line with First Interstate Bank of Arizona to
$1,200,000. The credit line is a revolving line with an annual
maturity on February 28, 1997. 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 one
half 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 employee stock options, will
provide adequate funding for current obligations, projected
operations and planned expansions for the next twelve months and
the foreseeable future.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At its Annual Meeting of Shareholders on January 19, 1996, the
stockholders of the Company voted to reelect the Board of
Directors of the Company, to approve an amendment to the
Company's Stock Option Plan, and to approve a Non-Employee
Directors Stock Option Plan.
Stockholders of 9,703,149 shares voted to reelect the previous
Directors, amend the Company Stock Option Plan, and approve a
Non-Employee Director Stock Option Plan. -0- shares voted
against the proposals and -0- shares abstained from voting.
<PAGE> 11
Item 6. Exhibits
(a) Exhibits
The following Exhibits are filed as part of this
Report:
Page or
Exhibit No. Description Method of
Filing
10.13 Agreement and Plan of Reorganization
between Photocomm, Inc., Sunelco, Inc.
and Daniel M. Brandborg and Rebeccca
M. Brandborg dated October 3, 1995
(filed as Form 8-K on October 18,
1995, and incorporated herein by
reference).
10.14 Photocomm, Inc. and Sunelco, Inc.
Proforma Consolidated Financial
Statements as of August 31, 1995
dated December 11, 1995 (filed as
Form 8-KSB/A on December 11, 1995
and incorporated herein by reference).
10.15 Agreement and Plan of Reorganization
between Photocomm, Inc., Jadco
Manufacturing, Inc. and James C.
Allen dated January 31, 1996 (filed
as Form 8-K on February 14, 1996
and incorporated herein by reference).
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: April 12, 1996
PHOTOCOMM, INC.
By: /s/ Robert R. Kauffman By: /s/ Thomas C. LaVoy
Robert R. Kauffman Thomas C. LaVoy
Chief Executive Officer Chief Financial Officer
(Duly Authorized Officer
and Principal Financial
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Consolidated Balance Sheets at February 29, 1996 (Unaudited) and the
Consolidated Statement of Operations for the Six Months Ended
February 29, 1996 (Unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 297,235
<SECURITIES> 0
<RECEIVABLES> 2,811,721
<ALLOWANCES> 47,453
<INVENTORY> 4,200,679
<CURRENT-ASSETS> 7,597,424
<PP&E> 3,670,927
<DEPRECIATION> 1,121,735
<TOTAL-ASSETS> 12,203,891
<CURRENT-LIABILITIES> 2,721,346
<BONDS> 0
<COMMON> 1,424,851
0
171
<OTHER-SE> 7,676,929
<TOTAL-LIABILITY-AND-EQUITY> 12,203,891
<SALES> 10,092,280
<TOTAL-REVENUES> 10,092,280
<CGS> 7,320,005
<TOTAL-COSTS> 7,300,005
<OTHER-EXPENSES> 2,270,942
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,965
<INCOME-PRETAX> 491,633
<INCOME-TAX> 0
<INCOME-CONTINUING> 491,633
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 491,633
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
