<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(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, 1998
[ ] 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 or other jurisdiction of incorporation or organization)
77-0102343
(I.R.S. Employer Identification Number)
606 CHARCOT AVENUE
SAN JOSE, CA 95131
(Address of principal executive offices)
Registrant's telephone number, including area code:
(408) 546-5600
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)
4,364,147
(Outstanding at June 30, 1998)
<PAGE>
PHOTONICS CORPORATION
DBA
DTC DATA TECHNOLOGY
FOR THE QUARTER ENDED JUNE 30, 1998
INDEX
Page Number
-----------
INTRODUCTION PHOTONICS CORPORATION
Introduction 2
The Market 2
The Competition 3
The Strategy 3
Products 3
Intellectual Property 3
Employees 4
Sales, Distribution and Customer Service 4
Research & Development 4
Manufacturing 4
Current Developments 5
PART I FINANCIAL INFORMATION 6
ITEM I Interim Financial Statements
Consolidated Balance Sheet as of June 30, 1998 and
December 31, 1997 7
Consolidated Statements of Operation for the three months
and six months ended June 30, 1998 8
Consolidated Statement of Cash Flows 9
Notes to Consolidated Financial Statements 10
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings 13
ITEM 2 Changes in Securities 13
ITEM 3 Defaults Upon Senior Securities 13
ITEM 4 Submission of Matters of a Vote of Security Holders 13
ITEM 5 Other Information 13
ITEM 6 Exhibits and Reports on Form 8-K 13
1
<PAGE>
PHOTONICS CORPORATION
FORM 10-QSB
INTRODUCTION
This report contains forward-looking statements and the Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of numerous factors, including those set forth below and
elsewhere in this report. The industry in which the Company competes is
characterized by extreme rapid changes in technology and frequent new product
introductions. The company believes that its long-term growth will depend
largely on its ability to continue to enhance existing products and to introduce
new products and features that meet the continually changing requirements of
customers. While the Company has invested in new products and processes and
feels confident that it can keep abreast of current technology trends, there can
be no assurance that it can continue to introduce new products and features on a
timely basis or that certain of its products and processes will not be rendered
noncompetitive or obsolete by its competitors.
GENERAL
Photonics dba DTC Data Technology resulted from the merger of Photonics
Corporation and DTC Data Technology Corporation in 1996. Shortly after the
merger, the Company decided to focus on the IDE, SCSI and I/O business of DTC
and ceased activities in the Infrared Wireless LAN business of Photonics.
As DTC has the name recognition and established sales channels, it is the intent
of the Company to eventually rename the company DTC Data Technology Corporation.
Meanwhile, the legal entity is known as Photonics Corporation dba DTC Data
Technology. For brevity sake, the company is herein after referred to as DTC or
the Company.
THE MARKET
DTC dominated the Integrated Device Electronics ("IDE") and Enhanced IDE
("EIDE") controller card market in 1994-1995. During that period DTC developed
comprehensive distribution channels with established name and trademark
recognition. Starting in 1995, the trend was to incorporate the IDE controller
function into a motherboard chipset. Today, the transition from add-on IDE
cards to on-board built-in IDE function is complete. Now, the IDE controller
cards are only used by Original Equipment Manufacturers ("OEM") for inclusion
with IDE CD-ROM, tape and other IDE peripheral devices. System integrators and
Value Added Resellers ("VAR") use IDE Input/Output "(I/O") controllers and I/O
cards for maintaining and upgrading existing systems. Sales have changed from
mainly OEM to VARs and system integrators through distribution and retailers.
The IDE I/O market has settled and stabilized at a much lower level of
approximately $50 million dollars.
The Small Computer System Interface ("SCSI") is the standard by which computers
and their peripherals could interface intelligently. Having the image of high
performance, higher connectivity, and the ability of connecting external
peripherals, SCSI controllers have become the controller of preference for high-
end personal computers, workstations and file servers.
The SCSI host adapter (controller) market has been growing about 40% to 50% per
year for the past 5 years to over $1 billion. The SCSI controller market is
dominated by Adaptec with over 70% of the market and many other small SCSI
vendors. However, the recent trend of inexpensive desk top computers has
impacted the sales of expensive add on cards including SCSI cards.
Compatibility is a key issue for SCSI add on cards. All SCSI products are
vendor unique today. This presents a significant disadvantage for small SCSI
controller vendors. Consequently other SCSI vendors (including DTC) have not
been able to obtain a meaningful market share even at significantly lower price
and margin.
2
<PAGE>
PHOTONICS CORPORATION
FORM 10-QSB
THE COMPETITION
Due to the decline of the market, most of the IDE controller vendors have
dropped out of that business segment. Promise and SIIG remain in the upgrade
and I/O add-on markets that competes with the Company's Ultima, Ultima Pro,
Parallel Express and planned I/O family of products. The Company has broader
sales channels, stronger name recognition, and better access to low cost
manufacturing compared with either of these companies.
In the SCSI market, the Company is offering a family of Adaptec compatible ISA-
SCSI products that offers a superior alternative to Adaptec and other
competitors. The Company plans to expand this product family. While Adaptec has
been growing at 30% or more per year, achieving over a billion dollars in
revenue, none of the other competitors are prospering financially.
THE STRATEGY
The Company's strategy is to develop a complete family of Adaptec compatible
SCSI controller cards with a superior value to the market's current offerings.
DTC has been in the SCSI market since 1990 and has, in the past, developed
several high performance (non-Adaptec compatible) SCSI products. These
products, as with the products of the other competitors have not gained general
market acceptance. There can be no assurances that general market acceptance
can be attained with DTC's Adaptec compatible products. However, the Company
feels strongly that there is a significant market segment for our cost-effective
compatible products and will introduce more products in our Adaptec compatible
SCSI line during the coming year.
The Company is broadening its product offering in the IDE I/O market segment to
order to maintain the sales channels and generate funds for continued
operations. During the first half of 1998, the Company introduced several new
low cost SCSI and I/O products for the upgrade market.
The Company is committed to continuous product improvement and innovation, which
the Company believes is necessary for greater market penetration and
profitability.
PRODUCTS
The Company will continue to market its IDE and I/O product cards as long as
there is a market for these products. Since the first quarter of 1997, the
Company started marketing their low end Adaptec compatible ISA-SCSI product
based on its proprietary DTC50C18 chip. This low end product was, and continues
to be, marketed to Original Equipment Manufacturers ("OEM") and Value Added
Retailers ("VAR") who "bundle" this controller card with their SCSI peripherals
such as scanner or CD-ROMs. This low end market, which represents 10% to 20% of
the overall SCSI market, commands low prices and is much more cost competitive
than the high-end market. The Company has proved it can be cost competitive and
generate a profit with these low end products.
The Company plans to introduce several new products prior to the end of the
current fiscal year.
INTELLECTUAL PROPERTY
The Company has registered the trademark/logo "DTC" in the United States and
several foreign countries and has protected the use of this name by others in
the market place.
The Company has studied the intellectual property issues (and performed patent
searches) related to the SCSI, IDE and I/O products which it intends to market
and is unaware of any patents or intellectual property owned by any other party
which would impede the development or sale of its current or proposed line of
Adaptec compatible SCSI products. However, there can be no absolute assurances
that such legal challenges will not happen.
3
<PAGE>
PHOTONICS CORPORATION
FORM 10-QSB
Software is an important ingredient for success in the controller market. The
Company has a large library of copyrighted IDE and SCSI software drivers and
utilities for various operating systems including DOS, OS/2, UNIX, Novell,
Windows 3.1, and Windows 95. The Company, having designed several SCSI and IDE
ASICs, acquired the design right to the ASIC used in its low end DTC50C18 ISA-
SCSI product, and is in the process of designing a PCI-SCSI ASIC.
EMPLOYEES
As of June 30, 1998 the Company employed 30 individuals on a full time basis, 29
of which were located in the United States and 1 in Hong Kong. Of such
employees 9 were engaged in manufacturing and related operations, 4 in
development and engineering, 11 in sales and marketing, and 6 in general
management and administration. None of the Company's employees are represented
by a labor union and the Company considers its employee relations to be good.
SALES, DISTRIBUTION AND CUSTOMER SERVICE
The Company currently sells its products through domestic and international
independent distributors, computer retailers and OEMs. In the United States and
Canada, the Company sells to most of the top national distributors in the
computer industry including Ingram Micro, Merisel, Tech Data, Southern
Electronics Corporation and D & H Distributing who in turn distribute the
Company's products to retailers, OEMs and VARs. The Company has significantly
increased its presence in the retail market. The Company's current sales
strategy is to increase its sales to OEM's, VARs and resellers.
The Company's customer service and technical support organization is located in
San Jose, California and provides customers with software driver updates,
upgrade programs and warranty service. The technical support personnel assist
end users and distributors via telephone, fax-back facsimile services, a 24-hour
bulletin board service and an Internet Web site. (www.datatechnology.com)
As is common practice in the personal computer industry, the Company frequently
grants distributors limited rights to return unsold inventories of the Company's
products in exchange for new purchases, as well as price protection and
marketing development funds. While the Company reserves funds each month to
cover these programs, there can be no absolute assurances that the Company's
current allowances will be sufficient to not have a material adverse effect on
future operating results.
RESEARCH AND DEVELOPMENT
The Company believes that continued investment in research and development is
critical to successful new product introductions, which address market needs, on
a timely and cost effective basis. The Company's main research and development
focus is to develop a family of Adaptec compatible high end PCI-SCSI products.
The Company has contracted with an outside engineering firm for the design of
the ASIC high end Adaptec compatible PCI-SCSI under the supervision of the
Company's engineers. This will allow the Company to focus on its own SCSI
expertise and leverage the ASIC knowledge of the contracted design firm thereby
reducing the cost and time to market.
MANUFACTURING
Over the years the Company has developed business relationships with various
contract board manufacturers in the Far East, which currently supply the Company
with highly cost competitive finished product. It is the Company's intention to
continue utilizing these sources of production. Not
4
<PAGE>
PHOTONICS CORPORATION
FORM 10-QSB
having to invest in capital equipment and/or purchase sizable raw material
inventories and being able to take advantage of the lower cost of labor and
overhead utilized by such contract manufacturers, the Company believes that it
will be able to conserve its cash position, allow the Company greater
operational flexibility and keep the Company focused on its areas of
expertise. There can, however, be no absolute assurance that these
manufacturing sources will remain available to the Company.
At the present time approximately 80% of the Company's storage controller
requirements are provided by manufacturing facilities operated by Broadsino
Computer Development, Ltd. of Hong Kong. Broadsino is the beneficial owner of
591,412 shares of the Company's common stock and 300,000 shares of the Company's
Preferred A stock. The Managing Director of Broadsino is also a member of the
Company's Board of Directors.
CURRENT DEVELOPMENTS
On July 21, 1998 the Company announced that it had signed a letter of intent and
the Board of Director's had approved the merger of Broadsino Computer
Development Ltd. ("Broadsino"), a privately held company in Hong Kong with DTC
Hong Kong, a wholly owned subsidiary of the Company. Under the terms of the
agreement, the Company will issue one share of the Company's Series A
Convertible Preferred ("Preferred") for each U.S. dollar of net asset of
Broadsino, approximately 6 to 7 million U.S. dollars, for all the shares of
Broadsino. It is the Company's intention to become re-listed on an U.S. stock
exchange after the merger.
The Company also intends to issue up to an additional 2 million shares of the
Company's Series A Convertible Preferred privately for operating funds.
By early July of 1998, the Company completed the relocation of it's principle
executive offices to 606 Charcot Avenue, San Jose, California 95131-2204. The
Company's new phone number is (408) 546-5600.
5
<PAGE>
PHOTONICS CORPORATION
FORM 10-QSB
PART 1 FINANCIAL INFORMATION
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 statement and
the notes thereto included in the Company Annual Report on Form 10-KSB for the
year ended December 31, 1997.
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.
6
<PAGE>
PHOTONICS CORPORATION
FORM 10-QSB
PHOTONICS CORPORATION
Consolidated Balance Sheet
(amounts in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
(unaudited) (audited)
----------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 6 $ 176
Accounts Receivable, net 702 939
Other Receivables 0 448
Inventories, net 1,377 920
Prepaid expenses and other current assets 330 58
-------- --------
Total current assets 2,415 2,541
Furniture and equipment, net 304 252
Other Assets 29 14
-------- --------
Total Assets $ 2,748 $ 2,807
-------- --------
LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIENCY)
Current Liabilities:
Note Payable--AR Credit Line 403 0
Due to Related Parties 1,251 1,582
Accounts payable 1,869 1,426
Accrued liabilities 593 487
-------- --------
Total current liabilities 4,116 3,495
Deferred Taxes 0 0
Total Liabilities 4,116 3,495
Minority interest in subsidiaries 125 125
SHAREHOLDERS' EQUITY (DEFICIENCY):
Common stock 44,093 44,079
Treasury stock 0 0
Capital subscription 2,130 2,117
Accumulated deficit (47,870) (47,163)
Cumulative translation adjustment 154 154
-------- --------
Total shareholders' equity (deficiency) (1,493) (813)
--------
Total liabilities and shareholders' equity $ 2,748 $ 2,807
-------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
7
<PAGE>
PHOTONICS CORPORATION
FORM 10-QSB
PHOTONICS CORPORATION
Consolidated Statements of Operations
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
1998 1997 1998 1997
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Net Product Sales $ 809 $ 1,229 $ 2,542 $ 2,470
Cost of Revenues 575 799 1,484 1,746
---------- ---------- ---------- ----------
Gross Profit 234 430 1,058 724
OPERATING EXPENSES:
Research and development 96 110 196 233
Selling, general and administration 843 597 1,522 1,268
---------- ---------- ---------- ----------
Total operating expense 939 707 1,718 1,501
Income (loss) from operations (705) (277) (660) (777)
OTHER INCOME (EXPENSE):
Interest income 1 0 1 0
Interest expense (60) (1) ( 81) (22)
Other Income 0 120 53 165
Other expense (18) 0 (19) 0
---------- ---------- ---------- ----------
Total other income (expense) (77) 119 (46) 143
Provision for taxes 1 2 1 61
Net income (loss) $ (783) $ (160) $ (707) $ (695)
Net income (loss) per share (.11) (.02) (.10) (.11)
========== ========== ========== ==========
Shares used in per share calculation 6,955,672 6,426,488 6,955,672 6,426,488
========== ========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
8
<PAGE>
PHOTONICS CORPORATION
FORM 10-QSB
PHOTONICS CORPORATION
Consolidated Statement of Cash Flows
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
1998 1997
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(707) $ (695)
Adjustments to reconcile net cash
used in operating activities:
Depreciation 8 72
Changes in operating assets and liabilities:
Accounts Receivable 101 135
Inventories (484) 157
Deposits and prepaid expenses 302 (321)
Accounts payable (141) (175)
Due to Related Parties 275 (878)
Accrued Liabilities 152 (178)
Net Cash Provided by (used for) Operations $(494) $ (1,883)
===== =========
Cash flows from Investing Activities:
Sale (Purchase) of Property and Equipment (60) (68)
Net Cash used in Investing Activities $ (60) $ (68)
===== =========
Cash Flows from Financing Activities:
Proceeds from Capital Stock Subscription 21 2,062
Proceeds resulting from the DTC acquisition 0 0
Net Borrowings (Repayments) under Bank Lines 403 (44)
Borrowing (repayments of other debt), net 0 (30)
Other Equity Transactions, net 6 38
Net Cash provided by (used for) Financing $ 430 $ 2,026
===== =========
Net increase (decr.) in Cash and Cash Equivalents (124) 75
Cash and Cash Equivalents Beginning of Period 130 104
Cash and Cash Equivalents at end of period $ 6 $ 179
===== =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
9
<PAGE>
PHOTONICS CORPORATION
FORM 10-QSB
PHOTONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries after elimination of
intercompany accounts and trans-actions. The minority interest represents
the minority stockholders' proportionate share of the subsidiaries, Qume
Taiwan and Data Technology Hong Kong Ltd., which is 0.6% and 1%,
respectively.
Foreign Currency Translation
----------------------------
Certain entities located outside the United States use the local currency as
their functional currency. Assets and liabilities are translated at exchange
rates in effect at the balance sheet date, while revenues and costs are
translated at monthly average exchange rates. Translation gains and losses
are accumulated as a separate component of stockholder equity.
Cash Equivalents
-----------------
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
2. EARNINGS (LOSS) PER SHARE
Net income (loss) per common share is computed using the weighted average
number of common and dilutive common equivalent shares outstanding for each
accounting period. Common equivalent shares, principally stock options, are
included in the per share Calculation when the effect of their inclusion
would be dilutive. For the period ended June 30, 1997 and 1998 the dilutive
value of The Company's Series A Convertible Preferred Stock was included in
the loss per share calculation. The value of the Preferred Stock is
represented in the equity section under Capital Subscription.
3. INVENTORIES
Inventories are stated at the lower of cost (on a first-in, first-out basis)
or market value (net realizable value), and include material, labor and
attributable overhead.
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
(unaudited) (audited)
----------- ---------
<S> <C> <C>
Raw Materials and Purchased Parts $ 240 $148
Work-in-process 231 190
Finished Goods 906 582
------ ----
$1,377 $920
====== ====
</TABLE>
10
<PAGE>
PHOTONICS CORPORATION
FORM 10-QSB
4. PROPERTY, PLANT, AND EQUIPMENT
Property and equipment are stated at cost and, other than leasehold
improvements, are depreciated on a straight-line basis over their 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, 1998 December 31, 1997
(unaudited) (audited)
----------- ---------
<S> <C> <C>
Machinery and Equipment $2,594 $2,534
Furniture and Fixtures 277 277
Leasehold Improvements 94 94
------ ------
$2,965 $2,905
Less Accumulated depreciation and amortization $2,661 $2,653
------ ------
$ 304 $ 252
====== ======
</TABLE>
11
<PAGE>
PHOTONICS CORPORATION
FORM 10-QSB
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The statements made concerning expected company performance and product
commercialization are forward-looking statements and as such are made pursuant
to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of
1995. The Company's 1995 10-K and 1996 10-KSB contain detailed risk factors
that may contribute to the actual results in future periods which could
materially differ from forward-looking statements made by the Company.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the Financial
Statements and the related notes thereto included in this report. The following
discussion contains forward-looking statements and the Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of numerous factors, including those set forth in the
following discussion and elsewhere in this report.
Net revenues for the current quarter total $809 thousand, a decrease of 34% from
the $1.229 million reported during the second quarter of 1997. The decrease in
revenues can be attributed to a general decline in sales throughout the PC
industry.
The gross margin in the second quarter of fiscal 1998 was approximately 29%
compared to 35% in the second quarter of fiscal 1997. This decrease is due to
lower selling prices of the company's products.
Product development expenses were approximately $96 thousand or 12% of net
revenues during the current quarter compared to approximately $110 thousand or
9% of net revenues during the first quarter of 1997. The Company remains firmly
committed to new product development and does so with efficiency and awareness
of the Company's on going cost control program.
Selling, general and administrative expenses were approximately $843 thousand or
104% of revenues during the second quarter of 1998 compared to $597 thousand
reported in the second quarter of 1997. Approximately $333 thousand of the $843
thousand was due to product promotion costs. The Company does not expect to
incur similar promotion costs for its next product releases.
Overall, this quarter's loss can be mostly attributed to the decrease in
revenues and promotion costs.
LIQUIDITY AND CAPITAL RESOURCES
In April of 1998, the company finalized negotiations with Coast Business Credit
("Coast"), a division of Southern Pacific Bank, that resulted in a revolving
accounts receivable line of credit. The Company is able to borrow 70% of
certain receivables. All customer remittances are routed to Coast and daily
reporting is one of many requirements. Additionally, certain debts of the
Company have been subordinated to Coast.
On May 31 and June 30, 1998, the Company was in default of the Loan and Security
Agreement with Coast Business Credit. Specifically, the Company failed to meet
the minimum Tangible Net Worth requirement. Presently, Coast has not exercised
any of its rights and remedies pursuant to the Loan Documents or pursuant to law
or equity. The Company has requested a formal waiver for this breach of the
contract.
Inflation did not have any significant impact upon the results of operations of
the Company during the reporting period.
12
<PAGE>
PHOTONICS CORPORATION
FORM 10-QSB
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
There were no legal proceedings during the quarter ended June 30, 1998 and there
were none pending.
From time-to-time the Company could be involved in routine litigation as part of
its normal course of business. Management believes the Company carries adequate
product liability insurance and these matters can be resolved without material
adverse effect on the Company's overall financial position, results of
operations and cash flows.
ITEM 2 CHANGES IN SECURITIES
Not Applicable
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company called a Shareholders Meeting which took place on May 22, 1998 at
the then Corporate Office located at 1515 Centre Pointe Drive, Milpitas,
California at 10:00 a.m. The Shareholders were asked to vote on three proposals
and any other matters that could properly come before the meeting.
The Proposals were:
1. To reelect the members of the current Board of Directors to another term.
The nominees were: Robert P. Dilworth, John Miao, James T. Koo, David S. Lee
and K.C. Yeung.
2. To approve a 20% increase in the shares of common stock for issuance under
the 1997 Stock Option Plan.
3. To ratify the selection of Meredith, Cardozo & Lanz LLP as the Company's
independent accountants for fiscal 1998.
These proposals were approved by the shareholders. There were no other matters
brought up for a vote at the meeting.
ITEM 5 OTHER INFORMATION
Not applicable
ITEM 6 EXHIBITS AND REPORTS ON FORM 8K
Exhibit 27 Financial Data Schedule
13
<PAGE>
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
PHOTONICS CORPORATION DBA DTC DATA TECHNOLOGY
DATE: August 14, 1998 BY: /s/ Stephanie J. Forsythe
- ------------------------ ----------------------------------------
Stephanie J. Forsythe
Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> APR-01-1998 APR-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 6,000 5,000
<SECURITIES> 0 171,000
<RECEIVABLES> 851,000 1,166,000
<ALLOWANCES> 149,000 227,000
<INVENTORY> 1,377,000 920,000
<CURRENT-ASSETS> 2,415,000 2,541,000
<PP&E> 2,965,000 2,905,000
<DEPRECIATION> 2,661,000 2,653,000
<TOTAL-ASSETS> 2,748,000 2,807,000
<CURRENT-LIABILITIES> 4,116,000 3,495,000
<BONDS> 0 0
2,130,000 2,117,000
0 0
<COMMON> 44,093,000 44,079,000
<OTHER-SE> 47,870,000 47,163,000
<TOTAL-LIABILITY-AND-EQUITY> 2,748,000 2,807,000
<SALES> 809,000 1,229,000
<TOTAL-REVENUES> 809,000 1,229,000
<CGS> 575,000 799,000
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 939,000 707,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 60,000 1,000
<INCOME-PRETAX> 0 0
<INCOME-TAX> 1,000 2,000
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (783,000) (160,000)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> (.11) (.02)
<FN>
BALANCE SHEET COMPARES TO YEAR END DEC. 31, 1997.
INCOME STATEMENT COMPARES TO JUNE 30, 1997.
</FN>
</TABLE>
