<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 November 30, 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 12-31-96
--------------------------
Common Stock, $0.10 par value 16,151,444
<PAGE> 2
PHOTOCOMM, INC.
INDEX
PART I Financial Information Page Number
Item 1. Financial Statements
Balance Sheets - November 30, 1996 and 3
August 31, 1996
Statements of Operations - Three Months ended 4
November 30, 1996 and 1995
Statements of Stockholders' Equity, 5
November 30, 1996 and August 31, 1996
Statements of Cash Flows - Three Months 6
ended November 30, 1996 and 1995
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis 7
of Financial Condition and Results of
Operations
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K 10
<PAGE>
<PAGE> 3
PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS
PHOTOCOMM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1996 and AUGUST 31, 1996 (UNAUDITED)
Assets 11/30/96 8/31/96
Current Assets:
Cash and cash equivalents $1,548,159 $ 200,105
Accounts receivable, net 4,593,977 5,599,356
Inventories 4,669,635 4,704,878
Other current assets 373,989 429,512
--------- ---------
Total Current Assets 11,185,760 10,933,851
---------- ----------
Property and equipment, net 2,567,361 2,517,806
Deferred tax asset 440,000 350,000
Other assets, net 1,779,646 1,784,318
---------- ----------
Total Assets $15,972,767 $15,585,975
Liabilities and Stockholders' Equity
Current Liabilities:
Current installments of long-term debt $ 549,381 $ 82,096
Line of Credit 0 1,399,099
Accounts payable 1,794,854 3,654,464
Other accrued expenses 45,773 78,635
--------- ---------
Total Current Liabilities 2,390,008 5,214,294
--------- ---------
Long-term debt, less current installments 146,911 638,388
--------- ---------
Total Liabilities 2,536,919 5,852,682
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; 52,565
shares issued and outstanding 53 53
Common stock: $.10 par value, 25,000,000
shares authorized; 15,868,944 and
14,307,444 shares issued and
outstanding, respectively 1,586,894 1,430,744
Additional paid-in capital 15,521,391 12,428,128
Accumulated deficit (3,672,600) (4,125,742)
---------- ----------
Total Stockholders' Equity 13,435,848 9,733,293
Total Liabilities and Stockholders' ---------- ----------
Equity $15,972,767 $15,585,975
See accompanying notes to consolidated financial statements.
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PHOTOCOMM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
November 30
------------------
1996 1995
---- ----
Sales, net $ 7,556,692 $ 5,281,273
Cost of sales 5,400,841 3,947,599
--------- ---------
Gross profit 2,155,851 1,333,673
Selling, general and 1,750,328 1,106,279
administrative expenses --------- ---------
Income from operations 405,523 227,394
Other income (expenses):
Interest expense (48,844) (17,624)
Other, net 6,463 10,010
--------- --------
Income before income taxes 363,142 219,780
--------- --------
Income tax benefit 90,000 0
--------- --------
Net income $ 453,142 $ 219,780
========= ========
Preferred stock dividends $ 46,135 $ 26,273
========= ========
Net income applicable to common
stockholders $ 407,007 $ 193,507
========= ========
Net income per common and common
equivalent shares $ .03 $ .01
========= ========
Weighted average number of common
shares and common equivalent shares 14,631,021 13,984,881
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE> 5
<TABLE>
<CAPTION>
PHOTOCOMM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NOVEMBER 30, 1996 AND AUGUST 31, 1996
(UNAUDITED)
Convertible Preferred Stock
------------------------------
Series A Series AA Common Stock Additional
--------- ----------------- ---------------- Paid-In Accumulated
Shares Amount Shares Amount Shares Amount Capital Deficit Total
------- ------ ------ ------ ---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, August 31, 1996 109,972 $110 52,565 $53 14,307,444 $1,430,744 $12,428,127 ($4,125,742) $9,733,292
Common stock issued upon
exercise of stock options 561,500 56,150 584,762 640,912
Common stock issued as part
of GTC agreement 1,000,000 100,000 2,554,637 2,654,637
Cash dividends on Series A
and Series AA preferred stock (46,135) (46,135)
Net Income 453,142 453,142
------- ------ ------- ------ ---------- ----------- ----------- ----------- -----------
Balance, November 30, 1996 109,972 $110 52,565 $53 15,868,944 $1,586,894 $15,521,391 ($3,672,600) $13,435,84
======= ====== ======= ====== ========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 6
PHOTOCOMM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED NOVEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 453,142 $ 219,780
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 108,393 83,425
(Decrease) increase in allowances for
doubtful accounts & inventory obsolescence (25,029) 9,809
Decrease (increase) in accounts receivable 993,982 (318,646)
Decrease (increase) in inventories 71,669 (383,726)
(Decrease) increase in accounts payable
and accrued expenses (1,892,472) 624,872
Increase in deferred tax asset (90,000) -
Decrease in other current assets 55,523 22,492
Net cash (used in) provided --------- --------
by operating activities (324,792) 258,006
--------- --------
Cash flows from investing activities:
Purchase of property and equipment (140,764) (47,844)
Purchase of patents, trademarks and
other assets (12,512) (8,935)
Net cash used in investing -------- --------
activities (153,276) (56,779)
-------- --------
Cash flows from financing activities:
Repayments of debt (1,423,292) (241,304)
Proceeds from issuance of common stock 3,295,549 328,258
Cash dividends on preferred stock (46,135) (26,273)
Net cash provided by financing --------- --------
activities 1,826,122 60,681
Net increase (decrease) in cash and cash --------- --------
equivalents 1,348,054 261,908
Cash and cash equivalents at beginning
of year 200,105 520,269
--------- --------
Cash and cash equivalents at end of quarter $1,548,159 $ 782,177
========= =========
See accompanying notes to consolidated financial statements.
<PAGE> 7
PHOTOCOMM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 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 1997
financial statements to conform to the classifications 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
The Company's tax benefit of $90,000 in the first quarter of fiscal 1997
results from the continued adjustment in the deferred tax asset through
adjustment in the valuation allowance. The decrease in the valuation
allowance results primarily from the utilization of net operating loss
carryforwards and release of certain valuation allowances based upon the
Company's re-evaluation of the realizability of the remaining net
operating loss carryforwards. Based upon the level of historical tax
income and projections for future taxable income over the periods which
the deferred tax assets are deductible, management believes it is more
likely than not that the Company will realize the benefits, net of the
valuation allowance.
D. Equity
On November 21, 1996, the Company entered into a new financial and
strategic agreement with Golden Technologies Company, Inc. ("GTC"). In
connection with the agreement, GTC acquired from the Company 1,000,000
shares of unregistered common stock for $2.75 a share resulting in
proceeds to the Company of $2,750,000. In conjunction with the stock
purchase agreement, GTC acquired 550,000 shares of unregistered common
stock from certain officers of the Company. All of the officers
exercised vested stock option shares which were purchased from the
Company for $633,000.
<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 months ended November 30, 1996 vs. three months ended November 30,
1995.
Sales: Sales for the first quarter of fiscal 1997 were $7,556,692, a
43% increase over sales of $5,281,273 for the first quarter of fiscal
1996. First quarter revenue included $2.2 million representing
completion of shipments to Motorola Indonesia for 789 solar systems for
rain forest radio monitoring stations.
The major sales revenue increase is attributed to the Motorola shipments
while system sales for wireless communications, distribution sales and
international sales all increased approximately 10% during the first
quarter of fiscal 1997 versus the same period in fiscal 1996. In
general, sales revenue increases are due to volume increases with little
or no effect related to price changes.
Gross Profit: (Sales less cost of sales) increased 62% from $1,333,673
in the first quarter of fiscal 1996 to $2,155,851 in the first quarter
of fiscal 1997. Gross profit margins increased from 25.2% in the first
quarter of 1996 to 28.5% in the first quarter of 1997. The significant
increase in gross profits is primarily due to increased sales, with the
3% improvement in gross profit percentage attributable to sales mix of
higher profit manufactured products and industrial systems, versus lower
margin distribution and international sales. The Company sales mix in
1996 was approximately 60% industrial products and 40% distribution
sales. During the first quarter of 1997, the sales mix was 70%
industrial products and 30% distribution sales. The shift was largely
a result of increases attributed to fiscal 1997 Motorola sales for
industrial systems.
Selling, General and Administrative Expenses (SG&A): SG&A expenses
increased 58% from $1,106,279 in the first quarter of fiscal 1996 to
$1,750,328 in the first quarter of fiscal 1997. The increase in SG&A
expenses are primarily attributed to increases in employment costs of
approximately $350,000 and variable sales expenses of $250,000. The
employment costs include approximately $210,000 in bonus and benefit
awards based upon record operating performance. Other increases
in employment costs are a result of new employees added in the second,
third and fourth quarters of fiscal 1996 and the addition of
personnel from its recent Australia subsidiary start-up in October of
1997. The increase in sales and marketing expenses are attributed to
increased levels of promotion for its new solar water pumping division
and retail mail order catalog business. The Company expects SG&A
expenses to increase in fiscal 1997 by approximately 30% from fiscal
1996.
<PAGE> 9
Other Income (Expense): The Company's non-operating income and expense
is primarily comprised of interest expense and consulting income.
Interest expense has increased in the first quarter of fiscal 1997
versus 1996 due to additional outstanding indebtedness for 1997
throughout the quarter versus 1996. The Company paid off bank-lines of
credit after the GTC closing on or about November 21, 1996. Interest
expenses should be reduced significantly for the remainder of the year
due to reduced debt requirements. Other income was comparable for the
first quarter of 1997 and 1996.
Income Tax: The Company recognized $90,000 benefit from its tax loss
carryforward in the first quarter of fiscal 1997 and 0 for the
comparable period in 1996. The Company established its 1996 valuation
allowance at the end of fiscal 1996 after the Company recorded three
consecutive years of profitability, and anticipates recognizing on a
quarterly basis in the future. The adjustment will be re-evaluated on
an ongoing basis based upon generation of future taxable income.
Net Income: The Company achieved a net income of $453,135 ($.03 per
common share) for the first quarter of 1997 versus $219,780 ($.01 per
common share) for the first quarter of 1996. The net income increase of
106% for the first quarter of 1997 is attributable to higher sales and
gross profits, recognition of benefit from net operating loss
carryforwards, with offsetting increases in SG&A expenses.
Liquidity and Capital Resources: On November 21, 1996, the Company
entered into a new financial and strategic agreement with GTC. In
connection with the agreement, the Company sold 1,000,000 shares of
unregistered common stock, and certain officers sold 550,000 shares of
unregistered common stock. All of the officers of the Company exercised
vested stock options from the Company. The total proceeds for the
Company from the transaction was $3,383,000.
The Company's working capital position has improved significantly.
Working capital increased to $8,795,752 at November 30, 1996 from
$5,719,557 at August 31, 1996. The current ratio is 4.7 at November 30,
1996 versus 2.1 at August 31, 1996, and the debt to equity ratio is .01
at November 30, 1996 versus .06 at August 31, 1996.
Net cash used in operating activities for the first quarter of fiscal
1997 was $324,792. The Company operating cash uses included reductions
of accounts payables of $1,892,472 with offsetting reductions in
accounts receivables of $993,982, and operating cash provided from net
income and non-cash deductions of $561,535.
Cash used for purchases of property and equipment of $140,764 was
primarily for a hybrid CellPak demonstration system to be utilized in
promoting the Company's wireless power systems. The system is located
in Scottsdale, Arizona.
Cash provided by financing activities of $1,826,122 was comprised of
proceeds from the GTC stock purchase agreement of $3,295,549, offset by
reductions of bank lines and other debt of $1,423,292.
<PAGE> 10
Although no assurances are possible, the Company believes that its
future operating cash flows, available bank lines of credit, and ability
to access additional equity, 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:
Page or
Exhibit No. Description Method of Filing
11 Computation of Primary Net Income 11
per Common Share
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: January 14, 1997
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)
<PAGE> 11
EXHIBIT 11
PHOTOCOMM, INC.
COMPUTATION OF PRIMARY NET INCOME PER COMMON SHARE
(In thousands, except per share amounts)
Quarter ended Quarter ended
November 30, 1996 November 30, 1995
----------------- -----------------
Net income $ 453,142 $ 219,780
Preferred stock dividends (46,135) (26,273)
Reduction of interest expense N/A N/A
Interest revenue on assumed N/A N/A
purchase of the U.S. government
securities
-------- --------
Net income applicable to common $ 407,007 $ 193,507
stockholders ========== ==========
Weighted average shares:
Common shares outstanding 14,481,263 13,290,845
Common equivalent shares 149,758 694,036
issuable upon exercise of
stock options (1)
Shares issuable upon conversion N/A N/A
of preferred stock
---------- ---------
Total weighted average shares,
as adjusted 14,631,021 13,984,881
Earnings per share $.03 $.01
(1) Amount calculated using the treasury stock method under the 20% rule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Consolidated Balance Sheets as of November 30, 1996 (Unaudited) and the
Consolidated Statement of Operations for the Three Months ended November
30, 1996 (Unaudited) and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 1,548,159
<SECURITIES> 0
<RECEIVABLES> 4,631,374
<ALLOWANCES> 37,397
<INVENTORY> 4,669,635
<CURRENT-ASSETS> 11,185,760
<PP&E> 3,955,307
<DEPRECIATION> 1,387,946
<TOTAL-ASSETS> 15,972,767
<CURRENT-LIABILITIES> 2,390,008
<BONDS> 0
<COMMON> 1,586,894
0
163
<OTHER-SE> 11,848,791
<TOTAL-LIABILITY-AND-EQUITY> 15,972,767
<SALES> 7,556,692
<TOTAL-REVENUES> 7,556,692
<CGS> 5,400,841
<TOTAL-COSTS> 5,400,841
<OTHER-EXPENSES> 1,750,328
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,844
<INCOME-PRETAX> 363,142
<INCOME-TAX> (90,000)
<INCOME-CONTINUING> 453,142
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 453,142
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
