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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 5, 1997
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PHOTRAN CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Minnesota
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(State or Other Jurisdiction of Incorporation)
000-20731 41-1697628
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(Commission File Number) (I.R.S. Employer Identification No.)
21875 Grenada Avenue, Lakeville, Minnesota 55044
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(Address of Principal Executive Offices) (Zip Code)
(612) 469-4880
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On May 5 1997, the Registrant announced its results for its 1996 fiscal
year and disclosed that it has restated previously reported interim results for
the first, second and third quarters of 1996. The Registrant also announced
that the Securities and Exchange Commission has commenced a formal investigation
of certain financial and accounting irregularities previously identified by the
Registrant.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits. The following exhibit is included with this report on Form 8-K
pursuant to Item 601 of Regulation S-B:
(99) Press Release, dated May 5, 1997, including an announcement of
1996 results and the restatement of interim results for the
first, second and third quarters of 1996. Also including
announcement of formal investigation by Securities and Exchange
Commission.
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 hereunto duly authorized.
PHOTRAN CORPORATION
(Registrant)
Date: May 5, 1997 By: /s/ Paul T. Fink
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Paul T. Fink
Chief Financial Officer
2
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EXHIBIT INDEX
Exhibit 99 Press Release, dated May 5, 1997, including an announcement of
1996 results and the restatement of interim results for the
first, second and third quarters of 1996. Also including
announcement of formal investigation by Securities and Exchange
Commission.
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Contact: Paul T. Fink
Chief Financial Officer
Photran Corporation
(612) 469-4880
(612) 469-4886 (fax)
PHOTRAN REPORTS $2.89 MILLION IN NET SALES,
$5.28 MILLION NET LOSS FOR 1996
RESULTS REFLECT REVENUE DROP AND 1ST, 2ND, 3RD QUARTER RESTATEMENTS;
SEC INVESTIGATES CERTAIN FINANCIAL IRREGULARITIES IDENTIFIED BY THE COMPANY
Minneapolis (May 5, 1997) -- Photran Corporation (NASDAQ: PTRN) today
reported net sales of $2.89 million, an operating loss of $5.13 million and a
net loss of $5.28 million for 1996.
The 1996 results reflect a 15 percent decrease in revenues compared
with 1995, due to a general market-price decline for the TN ITO-coated glass
Photran manufactures and also due to a decision by its major customer to move
to smaller sheets of glass. Photran expects market prices to begin to
recover in the second half of 1997, is pursuing the sale of larger sheets of
glass to increase per-unit revenue, and is taking aggressive steps to reduce
costs and enhance productivity.
As anticipated, the year-end results also include restatements of
interim results for the first, second and third quarters of 1996. Also as
anticipated, Photran reported a net loss for the fourth quarter of 1996,
reflecting writedowns of projects that Photran is canceling to better focus
its operations. Photran had net sales of $665,349, an operating loss of $4.32
million and a net loss of $4.27 million for the quarter ended Dec. 31, 1996.
The company said it has been advised that the Securities and Exchange
Commission has begun a formal investigation of certain financial and
accounting irregularities identified by Photran. To date, Photran has not
received notice of the scope of the investigation.
In March 1997, Photran announced that its board of directors had begun
a thorough internal investigation of certain financial and accounting
irregularities. The board was assisted by its independent accounting firm,
Deloitte & Touche LLP, and Henson & Efron, P.A., a Minneapolis-based law
firm.
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Photran Announces 1996 Results . . . /2
Photran has finished its internal investigation and does not expect
further adjustments to 1996 interim results. Photran has found no evidence
that any funds are missing. The company said it will cooperate fully with
the SEC's inquiry.
"We're obviously extremely disappointed with our results, which don't
reflect either the strengths of our proprietary process technology or the
market for our products," said Steven King, a member of the Photran board of
directors.
"Our process technology positions us well in a strengthening market for
TN grade ITO-coated glass. At the same time, we're aggressively taking steps
to improve cash flow, broaden our customer base and concentrate our resources
on opportunities with the greatest profitable growth potential," King said.
Paul Fink, chief financial officer, added: "Management has three
priorities: Increase production, boost productivity and generate a
sustainable profit.
"Our balance sheet is sound, our business prospects are strong and
we're taking the right actions to make Photran a focused, efficient and
profitable enterprise," he said.
Fink said the company will continue to record losses over the next few
months, before the benefits of productivity initiatives and the start-up of a
second production line are expected to begin generating net income in the
latter half of 1997.
COMPANY ACTING TO IMPROVE PERFORMANCE
Over the past two months, Photran has taken several steps to focus its
operations, with an emphasis on enhancing its core technologies while
boosting manufacturing capacity.
In March, Photran laid off 21 full-time employees, or roughly 20
percent of its work force. The layoffs primarily affected positions in
engineering, machining and research. The company also terminated its lease
on a 15,800-square-foot building that housed most of those employees.
Management also halted or scaled back some internal engineering projects, and
it plans to outsource some of its non-core activities.
Photran has created an executive committee consisting of the vice
president for finance and administration, the vice president for
manufacturing and the vice president for technology. The company also has
hired a corporate controller.
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Photran Announces 1996 Results . . . /3
Photran has increased production of TN grade ITO-coated glass on its
P-1 manufacturing line by almost 100 percent since the beginning of March
1997. In addition, it expects to begin production on the P-2 line in the
second quarter. The company expects to sell this line to Wintek Corporation,
its largest customer, for $2.9 million. Photran expects to operate the
equipment at its Lakeville facility until the end of 1997.
"The new line will increase our production capacity from 50,000 to
150,000 pieces of glass per week, positioning us very well in a market where
demand is outpacing supply," said Fink. "We're already doing some sample
production runs on our P-1 line for new Asian customers."
Additionally, Photran is actively exploring market opportunities in
Europe and the United States. "We're now very cost-competitive, which will
serve us well in seeking out new customers," Fink said.
Once the P-2 line is operational, Photran will finish installing its
P-1000 production machine, which will be able to produce as many as 1 million
pieces of TN grade ITO-coated glass monthly. The line is expected to be
completed by 1997 year-end.
Photran is re-evaluating its R&D activities and plans to focus on
products that build upon its core thin-film glass-coating technologies. Its
1997 efforts will include preparing to produce its ArtGlas-TM-
anti-reflective picture-framing glass. It also will continue to pursue plans
to augment its TN grade glass with STN grade glass, a higher-quality,
higher-margin glass used in flat-panel displays for laptop computers and
other high-quality electronics.
Photran has halted work on, and is reviewing plans for, its
ZeroRay-TM-anti-glare filters for computer screens and televisions, Fink
said.
1996 YEAR-END AND FOURTH-QUARTER SUMMARIES
Photran, which went public last May, reported net sales of $2.89
million in 1996. The company had an operating loss of $5.13 million and a
net loss of $5.28 million, or $1.25 per share, for the year.
For the fourth quarter ended Dec. 31, 1996, Photran reported net sales
of $665,349 and an operating loss of $4.32 million. It had a net loss of
$4.27 million for the three-month period, or $1.00 per share.
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Photran Announces 1996 Results . . . /4
The fourth-quarter results include equipment write-offs of $1.8 million
related to Photran's canceled Chinese joint venture, and an additional
$386,000 of write-offs related to the company's ZeroRay project, involving
equipment that management has determined to be impaired.
RESTATED 1996 FIRST-, SECOND- AND THIRD-QUARTER RESULTS
As a result of its internal investigation, the company has restated
interim financial results for the quarters ended March 31, 1996; June 30,
1996; and Sept. 30, 1996.
Specifically, for the quarter ended March 31, 1996, Photran reduced
revenue by $460,491 to reverse sales transactions that did not meet revenue
recognition criteria. The company corrected an error in its valuation of raw
materials inventory which reduced gross profit by $46,000. In addition, an
error in the computation of capitalized interest charged to construction in
progress increased interest expense by $84,000. As a result of these
adjustments, net income was reduced from $79,029 to a net loss of $217,396,
or $.07 per share.
For the second quarter ended June 30, 1996, the company reversed sales
transactions totaling $417,944 because they did not meet revenue recognition
criteria. Sales credits of $292,491 related to the first-quarter
transactions discussed above also were reversed, while a $166,000 sales
transaction from the first quarter was reclassified to the second quarter.
In addition, equipment sales revenue of $910,000 was reversed as the company
had not met revenue recognition criteria on an equipment sale. Restated
results for this period reduced revenues from $1.65 million to $785,648.
Instead of the previously reported net income of $127,143, restated results
for the 1996 second quarter reflect a net loss of $423,655, or $.11 per share.
For the quarter ended Sept. 30, 1996, the company reversed sales
transactions totaling $590,914 that did not meet revenue recognition
criteria. Credits of $417,944 issued in the third quarter related to
second-quarter sales transactions discussed above also were reversed. In
addition, equipment sales revenue of $1.14 million as originally reported was
reversed to reflect the change to the completed-contract revenue-recognition
method on an equipment sale. Due to the restatement, net sales were reduced
from $2.07 million to $758,085, and net income was reduced from $184,929 to a
net loss of $366,916, or $.07 for the third quarter.
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Photran Announces 1996 Results . . . /5
Photran has amended its quarterly reports on Forms 10-QSB for the
quarters ended June 30, 1996, and Sept. 30, 1996, to reflect all adjustments
affecting those two quarters. The previously issued interim financial
statements for those periods should not be relied upon.
Photran Corporation develops, manufactures and markets high performance
optical and electrically conducive thin film coated products using a
proprietary process technology known as Fuzion-TM- planar magnetron
sputtering. The company produces products for the flat-panel display
industry.
FORWARD-LOOKING STATEMENTS
THIS PRESS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS AS DEFINED IN SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE
FORWARD-LOOKING STATEMENTS INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES,
INCLUDING THE TIMELY COMPLETION OF CONSTRUCTION AND INSTALLATION OF THE
MANUFACTURING EQUIPMENT, THE SELLING PRICE AND MARKET DEMAND FOR THE
COMPANY'S ITO-COATED GLASS AND OTHER FACTORS DISCLOSED THROUGHOUT THE
COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. THE ACTUAL
RESULTS THAT THE COMPANY ACHIEVES MAY DIFFER MATERIALLY FROM ANY
FORWARD-LOOKING STATEMENTS DUE TO SUCH RISKS AND UNCERTAINTIES. THE COMPANY
UNDERTAKES NO OBLIGATION TO REVISE ANY FORWARD-LOOKING STATEMENTS IN ORDER TO
REFLECT EVENTS OR CIRCUMSTANCES THAT MAY ARISE AFTER THE DATE OF THIS PRESS
RELEASE. READERS ARE URGED TO CAREFULLY REVIEW AND CONSIDER THE VARIOUS
DISCLOSURES MADE BY THE COMPANY IN THIS RELEASE, AND IN THE COMPANY'S PAST
AND FUTURE REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, THAT
ATTEMPT TO ADVISE INTERESTED PARTIES OF THE RISKS AND FACTORS THAT MAY AFFECT
THE COMPANY'S BUSINESS AND RESULTS OF OPERATIONS.
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PHOTRAN CORPORATION
STATEMENT OF OPERATIONS:
3 Months ended 12 Months ended
Dec. 31, 1996 Dec. 31, 1996
Revenues 665,349 2,886,541
COS 1,584,365 3,610,288
Gross profit (loss) (919,016) (723,748)
Loss from operations (4,321,360) (5,131,550)
Interest (income) expense (47,422) 78,367
Net income (loss) (4,273,938) (5,281,907)
Net income (loss) per share (1.00) (1.25)
BALANCE SHEET DATA
AS OF DECEMBER 31, 1996
Accounts receivable 606,500
Inventory 754,572
Equipment held for sale 1,547,426
Property & equipment 15,446,311
Customer advances 2,260,420
Accumulated deficit (8,718,768)
STATEMENT OF OPERATIONS:
3 Months ended March 31, 1996
As
Previously As
Reported Restated
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Revenues 1,137,950 677,459
COS 676,782 428,716
Gross profit 461,168 248,743
Income (loss) from operations 139,867 (72,558)
Interest expense 60,838 144,838
Net income (loss) 79,029 (217,396)
Net income (loss) per share 0.02 (0.07)
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BALANCE SHEET DATA
AS OF MARCH 31, 1996
As
Previously As
Reported Restated
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Accounts receivable 648,446 187,955
Inventory 1,347,700 1,486,961
Equipment held for sale 4,193,096 4,151,096
Property & equipment 7,754,304 7,692,304
Accumulated deficit (3,357,832) (3,654,257)
STATEMENT OF OPERATIONS:
3 Months ended June 30, 1996 6 Months ended June 30, 1996
As As
Previously As Previously As
Reported Restated Reported Restated
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Revenues 1,653,101 785,648 2,791,050 1,463,106
COS 1,206,923 741,619 1,912,281 1,198,911
Gross profit 446,178 44,029 878,769 264,195
Income (loss) from operations 109,084 (293,065) 248,950 (365,624)
Interest expense (income) (18,059) 58,600 42,779 203,438
Extraordinary item - loss
on debt extinguishment - 71,990 - 71,990
Net income (loss) 127,143 (423,655) 206,171 (641,052)
Net income (loss) per share 0.03 (0.11) 0.06 (0.19)
BALANCE SHEET DATA
AS OF JUNE 30, 1996
As
Previously As
Reported Restated
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Accounts receivable 1,094,881 676,937
Costs & earnings in excess of billings 410,000
Inventory 1,347,700 1,536,380
Equipment held for sale 4,569,547 5,063,273
Property & equipment 9,332,813 9,196,489
Accounts payable 813,414 878,774
Customer deposits 1,555,435 2,055,435
Accumulated deficit (3,230,690) (4,077,913)
Year to date results include the effects of a restatement of the first and
second quarter interim financial results.
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STATEMENT OF OPERATIONS:
3 Months ended 9 Months ended
Sept. 30, 1996 Sept. 30, 1996
As As
Previously As Previously As
Reported Restated Reported Restated
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Revenues 2,071,055 758,085 4,862,105 2,221,191
COS 1,616,714 855,589 3,528,996 2,054,501
Gross profit (loss) 454,341 (97,504) 1,333,109 166,690
Income (loss) from operations 107,280 (444,565) 356,229 (810,190)
Interest (income) expense (77,649) (77,649) (34,870) (125,789)
Extraordinary item - loss
on debt extinguishment - - - 71,990
Net income (loss) 184,929 (366,916) 391,099 (1,007,969)
Net income (loss) per share 0.03 (0.07) 0.09 (0.25)
BALANCE SHEET DATA
AS OF SEPTEMBER 30, 1996
As
Previously As
Reported Restated
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Accounts receivable 1,085,161 494,247
Costs & earnings in excess of billings 1,543,636
Inventory 1,343,144 1,471,519
Equipment held for sale 4,781,229 6,024,661
Property & equipment 10,626,044 10,489,720
Customer advances 1,555,435 2,055,435
Accumulated deficit (3,045,762) (4,444,830)
Year to date results include the effects of a restatement of the first, second,
and third quarter interim financial results.
