U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 0-22514
PHOTONICS CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA
(State of other jurisdiction of incorporation or organization)
77-0102343
(I.R.S. Employer Identification Number)
1515 CENTRE POINTE DRIVE
MILPITAS, CA 95035
(Address of principal executive offices)
Registrant's telephone number:, including area code:
(408) 942-4000
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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 [ ].
The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
COMMON STOCK, $0.001 PAR VALUE
(Class)
4,328,984
(Outstanding at August 12, 1996)
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(THIS PAGE INTENTIONALLY LEFT BLANK)111PHOTONICS CORPORATION
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FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
PAGE NUMBER
PART I FINANCIAL INFORMATION
ITEM 1 Consolidated Interim Financial Statements . . 2
Consolidated Balance Sheet as of June 30, 1996
and December 31 1995 . . . . . . . . . . . . 3
Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 1996and 1995 . . 4
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1996 and 1995 . . . 5
Notes to Consolidated Financial Statements . . 6
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . 8
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings . . . . . . . . . . . . . 10
ITEM 2 Changes in Securities . . . . . . . . . . . . 10
ITEM 3 Defaults Upon Senior Securities . . . . . . 10
ITEM 4 Submission of Matters of a Vote of Security
Holders . . . . . . . . . . . . . . . . . . 10
ITEM 5 Other Information . . . . . . . . . . . . . . 10
ITEM 6 Exhibits and Reports on Form 8-K . . . . . . 10
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PHOTONICS CORPORATION
FORM 10-QSB
PART I FINANCIAL INFORMATION
ITEM 1 CONSOLIDATED INTERIM FINANCIAL STATEMENTS
The condensed consolidated interim 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 disclosures 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 made are adequate to make the information presented not
misleading. It is suggested that the condensed consolidated interim financial
statements be read in conjunction with the consolidated financial statements
and the notes thereto included in the Company's Annual Report on Form 10-KSB/A
for the year ended December 31, 1995 and the DTC Data Technology Corporation
Annual Report on Form 10-K.
The year-end balance sheet data was derived from audited financial statements,
but does not include all disclosures required by generally accepted accounting
principles.
The accompanying consolidated interim financial statements have been prepared,
in all material respects, in conformity with the standards of accounting
measurements set forth in Accounting Principles Board Opinion No. 28 and
reflect, in the opinion of management, all adjustments, which are of a normal
recurring nature, necessary to summarize fairly the financial position and
results of operations for such periods. The results of operations for such
interim periods are not necessarily indicative of the results to be expected
for the full year.
<TABLE>
<CAPTION>
PHOTONICS CORPORATION
Consolidated Balance Sheet
(amounts in thousands, except share data and par value)
<S> <C> <C> <C> <C>
June 30,1996
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents 121
Accounts receivable 1554
Inventories 1061
Prepaid expenses and other current assets 309
Total current assets 3045
Furniture and equipment 192
Other assets 14
Total assets 3251
LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Notes payable 312
Current portion of long term liabilities 0
Accounts payable 2611
Accrued liabilities 2285
Total current liabilities 5208
Long term liabilities 0
Deferred foreign taxes 1800
Total liabilities 7008
Minority interest in subsidiaries 125
SHAREHOLDERS' EQUITY (DEFICIENCY):
Common stock 4
Additional paid in capital 44098
Treasury stock 0
Capital stock subscribed 0
Accumulated deficit -48138
Total shareholders' equity (deficiency) 154
Total shareholders' equity (deficiency) -3882
Total liabilities and shareholders' equity 3251
</TABLE>
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS
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<TABLE>
<CAPTION>
PHOTONICS CORPORATION
Consolidated Statements of Operations
(amounts in thousands, except per share data)
(unaudited)
<S> <C> <C> <C> <C> <C>
Six months ended
June 30,
1996 1995
Revenues:
Product sales 4225 8716
Costs and expenses:
Cost of Revenue 3194 6908
Research and development 344 419
Selling, general and administrative 1563 1392
Loss on disposal of assets and divestiture of 0 242
business unit
Income (loss) from operations -876 -245
Interest income (expense) and other, net -10 24
Profit (loss) before taxes -886 -221
Provision for taxes 1 1
Net Income (loss) -887 -222
Net income (loss) per share -0.23 -0.09
Shares used in per share calculation Shares used
in per share
calculation
3890467 2573066
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS
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<TABLE>
<CAPTION>
PHOTONICS CORPORATION
Consolidated Statements of Cash Flows
(amounts in thousands)
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Six Months Ended
June 30,
1996 1995
Cash flows from operating activities:
Net income (loss) -887 -222
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 66 56
Loss on disposal of QPI
Loss on disposal of fixed assets
Changes in operating assets and liabilities:
Accounts receivable 88 467
Inventories -287 -845
Deposits and prepaid expenses -154 1296
Notes payable - current portion 312 -1903
Accounts payable 34 77
Accrued liabilities -288 -184
Net cash used in operating activities -1116 -1258
Cash flows from investing activities:
Acquisition of furniture and equipment -213 -85
Sale or redemption of short-term investments
Net cash used in investing activities -213 -85
Cash flows from financing activities:
Proceeds from capital stock subscriptions and private 100 1246
placement
Proceeds resulting from the DTC acquisition 1347
Repurchase of treasury stock -42
Other equity transactions
Borrowings (repayments) of other debt
Borrowings (repayments) of notes payable and bank borrowings -28 -86
Borrowings (repayments) of bank borrowings
Net cash provided by financing activities 1419 1118
Net decrease (increase) in cash and cash equivalents 90 -225
Cash and cash equivalents at beginning of year 31 239
Cash and cash equivalents at end of period 121 14
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
CONSOLIDATED FINANCIAL STATEMENTS
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PHOTONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
1. Summary of Significant Accounting
Policies
Effective March 5, 1996, Photonics Corporation,
the Company, acquired all the assets and
certain liabilities of DTC Data Technology
Corporation (DTC) in exchange for the issuance
to DTC of shares and rights to shares of common
stock representing 77.5% of the Company's
outstanding stock. The transaction was treated
as a purchase for accounting purposes and DTC
is considered the acquirer. Accordingly, the
financial statements and accounting policies
presented here are those of DTC and should be
read in conjunction with DTC's Form 10-K for
the year ended February 28, 1996. Although, DTC
is considered the acquirer, the Company is the
registrant and therefore the Company retains
its December 31 year end. Accordingly, the
Consolidated Balance Sheet for June 30, 1996 is
that of the combined company and the
Consolidated Balance Sheet for December 31,
1995 is that of DTC. The Consolidated Statement
of Operations for the Six Months Ended June 30,
1996 contains two months of operations of DTC
prior to the acquisition and four months of the
combined Company and is compared with the
Consolidated Statement of Operations for the
Six Months Ended June 30, 1995 which contains
six months of operations for DTC only. The
Consolidated Statement of Cash Flows for the
Six Months Ended June 30, 1996 contains two
months of operations of DTC prior to the
acquisition and four months of the combined
Company and is compared with the Consolidated
Statement of Cash Flows for the Six Months
Ended June 30, 1995 which contains six months
of operations for DTC only.
2. Loss per Share
For the six months ended June 30,1996, the loss
per share has been computed based on the
weighted average number of shares outstanding
after reflecting the effect of the 1 for 5
reverse split of the Company's common stock
which became effective February 12, 1996. For
the six months ended June 30, 1995, loss per
share was computed based on the weighted
average number of shares outstanding after
reflecting the effect of the exchange of
.147853 shares of the Company for DTC shares.
3. Inventories
Inventories are stated at the lower of cost (on
a first-in, first-out basis) or market, and
include material, labor and attributable
overhead.
Inventories consist of the following (in
thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1996
(unaudited) (unaudited)
<S> <C> <C> <C>
Raw materials and purchased parts 304 95
Work-in-process 168 247
Finished Goods 589 432
1061 774
</TABLE>
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PHOTONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
4. Property and Equipment
Property and equipment are stated at cost
and, other than leasehold improvements, are
depreciated on a straight-line basis over
their estimated useful lives. Leasehold
improvements are amortized on a
straight-line basis over the lesser of
their useful life or remaining term of the
related lease.
Property and equipment consisted of the
following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31, 1996
1996 (unaudited)
(unaudited)
<S> <C> <C> <C>
Machinery and Equipment 2483 2174
Furniture and fixtures 979 471
Leasehold Improvements 144 94
Total 3606 2739
Less accumulated depreciation and amortization 3414 2694
192 45
</TABLE>
PHOTONICS CORPORATION
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FORM 10-QSB
ITEM 2 MANAGEMENT'S DISCUSSION AND
ANALYSIS
RESULTS OF OPERATIONS
Net revenues for the six months ended June
30, 1996 total $4,225,000, a decrease of
approximately $4,491,000 or 52% reduction
from the $8,716,000 reported for the six
months ended June 30, 1995. The decline in
revenues can be attributed to i) a change
in standards for high end PC's which placed
the IDE controller on the motherboard
obviating the need for DTC's IDE controller
card and ii) a shortage of working capital
which has slowed the delivery of backlogged
product.
The gross margin for the six months ended
June 30, 1996 was approximately 24%
compared with approximately 21% for the six
months ended June 30, 1995.
Product development expenses were
approximately $344,000, or 8% of net
revenues for the six months ended June 30,
1996 compared to approximately $419,000, or
5% of net revenues or the six months ended
June 30, 1995.
Selling, general and administrative
expenses were approximately $1,563,000 or
37% of net revenues for the six months
ended June 30, 1996 compared to $1,392,000
or 16% of net revenues reported for the six
months ended June 30, 1995.
There was no gain or loss on disposal of
assets and divestiture of business unit for
the six months ended June 30, 1996 compared
to a loss of $242,000 reported for the six
months ended June 30, 1995.
The Company reported a loss from operations
of approximately $876,000 for the six
months ended June 30, 1996 versus a loss
from operations of approximately $221,000
for the six months ended June 30, 1995. The
decline in revenue and the corresponding
decline in gross margin is primarily
responsible for the difference between the
results of the for the six months ended
June 30, 1996 and 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased from
$31,000 as of December 31, 1995 to $121,000
as of June 30, 1996. This increase was due
primarily to positive cash flows from
financing activities less cash used in
operating activities.
On November 14, 1994, DTC arranged a
private line of credit for $300,000 from
CMC/TOPAZ Industries, Inc. This line of
credit has subsequently been increased to
$700,000. The terms of this line of credit
are 2 points on each draw down plus 12% per
annum. Each draw down matures at the end of
a 60 day period. As of December 31 1995
there was no outstanding balance. As of
June 30, 1996 the outstanding balance was
$513,000.
At December 31, 1995, DTC owed $1,728,000
to DTC Technology Corporation. This debt
was collateralized by a secured interest in
receivables and inventories. At the end of
fiscal 1995, this interest rate was 9.5%
which was 0.5% over prime. As of March 31,
1996, this debt had been converted to
equity as provided in the Credit Assignment
and Liquidation Agreement between the two
parties.
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PHOTONICS CORPORATION
FORM 10-QSB
On August 31, 1995, the Company, together
with DTC, announced that they had executed
an agreement under which the Company would
acquire all the assets and certain
liabilities of DTC in exchange for the
issuance to DTC of shares and/or rights to
shares of common stock representing 77.5%
of Photonics outstanding common stock (the
"Acquisition"). The Acquisition became
effective March 5, 1996. The transaction
was treated as a purchase for accounting
purposes and DTC is considered the
acquirer. Accordingly, the assets and
liabilities of Photonics Corporation were
recorded at fair value, and the historical
results of operations of the combined
entity are those of DTC.
On June 14, 1996, the Company signed an
agreement with National Business Finance,
Inc., of Denver, Colorado ("NBFI") which
would allow the Company to factor
receivables acceptable to NBFI. In the
agreement, NBFI will advance 80% of
qualified receivables and will discount the
invoice 1% for the first 10 days.
Thereafter the carrying charge for the
advance is calculated at 1/15% per day on
outstanding balances. This equates to an
effective rate for the typical Photonics
receivable of <plus-minus> 28% per annum.
As of June 30, 1996, the Company's
outstanding balance to NBFI was $160,340.
PHOTONICS CORPORATION
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FORM 10-QSB
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings -
Not Applicable
ITEM 2 Changes in Securities -
Not Applicable
ITEM 3 Defaults Upon Senior
Securities -
Not Applicable
ITEM 4 Submission of Matters of a
Vote of Security Holders -
Not Applicable
ITEM 5 Other Information -
Not Applicable
ITEM 6 Exhibits and Reports on Form
8-K -
Not Applicable
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PHOTONICS CORPORATION
FORM 10-QSB
SIGNATURE
Pursuant to the requirements of Section 3
or 15(d) 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.
DTC DATA TECHNOLOGY CORPORATION
Date: __________________________
By:______________________________
W. MORRIS CHUBB
CHIEF FINANCIAL OFFICER
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