UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF
THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c)/ Section
240.14a-12
Photonics Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required [_] Fee computed on table below per
Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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PHOTONICS CORPORATION
1222 ALDERWOOD
SUNNYVALE, CALIFORNIA 94089
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
July 31, 2000
INFORMATION CONCERNING SOLICITATION AND VOTING
Dear Shareholder:
The enclosed proxy is solicited on behalf of shareholders representing
over 10% of the current outstanding shares of Photonics Corporation, a
California corporation (the "Company"), for use at the Annual Meeting of
Shareholders to be held on Monday, July 31, 2000, at 10:00 a.m. local
time (the "Annual Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice
of Annual Meeting. The Annual Meeting will be held at the Company's
principal executive office located at 1222 Alderwood, Sunnyvale,
California 94089. A majority of the shareholders intends to mail this
proxy statement and accompanying proxy card on or about July 20, 2000, to
all shareholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies
including preparation, assembly, printing and mailing of this proxy
statement, the proxy and any additional information furnished
to shareholders. Copies of solicitation materials will be furnished to
banks, brokerage houses, fiduciaries and custodians holding
in their names shares of Common Stock beneficially owned by others to
forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone,
telegram or personal solicitation by directors, officers
or other regular employees of the Company, or, at the Company's request,
Proxy Services. No additional compensation will be paid to directors,
officers or other regular employees for such services, but Proxy Services
will be paid its customary fee, estimated to be about $600, if it renders
solicitation services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on June
1, 2000 (the "Record Date") will be entitled to notice of and to vote at
the Annual meeting. At the Record Date, the Company had outstanding and
entitled to vote 6,765,496 shares of Common Stock. Each holder of
record of Common Stock on such date will be entitled to one vote for
each share held on all matters to be voted upon at the Annual Meeting.
With respect to the election of directors, shareholders may exercise
cumulative voting rights. Under cumulative voting, each holder of Common
Stock will be entitled to four votes for each share held. Each
shareholder may give one candidate all the votes such shareholder is
<PAGE>
entitled to cast or may distribute such votes among as many candidates as
such shareholder chooses. However, no shareholder will be entitled to
cumulative votes unless the candidate's name has been placed in
nomination prior to the voting and at least one shareholder has given
notice at the meeting, prior to the voting, of his or her intention to
cumulate votes. Unless the proxy holders are otherwise instructed,
shareholders, by means of the accompanying proxy, will grant the proxy
holders' discretionary authority to cumulative votes.
All votes will be tabulated by the inspector(s) of election appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing
with the Secretary of the Company at the Company's principal
executive office located at 1222 Alderwood, Sunnyvale, CA 94089, a
written notice of revocation or a duly executed proxy bearing a later
date, or it may be revoked by attending the meeting and voting in person.
Attendance at the meeting will not, by itself, revoke a proxy.
SHAREHOLDER PROPOSALS
Proposals of shareholders that are intended to be presented at the
Company's 2000 Annual Meeting of Shareholders must be received by the
Company not later than July 20, 2000 in order to be included
in the proxy statement and proxy relating to that Annual Meeting.
Sincerely,
James T. Koo
Managing Consultant for
Photonics Corporation
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PHOTONICS CORPORATION
1222 Alderwood
SUNNYVALE, CALIFORNIA 94089
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Photonics Corporation, a California corporation (the "Company"), will be
held on Monday, July 31, 2000 at 10:00 a.m. local time at the Company's
offices at 1222 Alderwood, Sunnyvale, California, 94089 for the following
purposes:
Proposal #1: To consider and vote upon a proposal to authorize
an increase in the number of authorized common shares of the Company to
200,000,000 shares , and Preferred Shares to 50,000,000 share for the
purpose of facilitating the acquisition of REP-T, Inc., a Texas
corporation and for future acquisitions.
Proposal #2: To consider and vote upon a proposal to ratify
the Conversion of approximately $ 3.5 million of corporate indebtedness
into common stock of Photonics.
Proposal #3: To consider and vote upon a proposal as set out
in the Stock Purchase Agreement dated as of June 30, 2000 between
Photonics Corporation (the "Company"), REpipeline.com, Inc., a Delaware
corporation and a wholly owned subsidiary of the Company ("REP-D"},
REpipeline.com, Inc., a Texas corporation ("REP-T") and the selling
shareholders of REP-T (the "Agreement") and to authorize the acquisition
of REP-T, Inc. by REP-D of Photonics, through the issuance of a majority
of the shares of Common Stock of Photonics and to ratify the actions of
James T. Koo and indemnify James T. Koo relating to the actions that he
has taken in preparing and consummating the transactions set out in
the Agreement.
Proposal #4: To consider and vote upon a proposal to ratify
the incorporation of Sunnyvale Technology Corporation as a subsidiary of
Photonics Corporation, Inc., the transfer of the assets and business of
DTC Data Technology, a division of Photonics, to Sunnyvale Technology
Corporation, the sale of 90% of the shares of Sunnyvale Technology
Corporation to James T. Koo and the approval of a stock dividend,
consisting of the remaining 10% shares of Sunnyvale Technology
Corporation, to all Record Date holders of shares of the Company.
Proposal #5: To consider and vote upon a proposal to amend the
Bylaws of Photonics Corporation to provide for a minimum four members of
the Board of Directors and to elect four Board of Directors to serve
until the next annual meeting of the shareholders. Nominees: T. James
Vaughn, G. Thomas Bailey, Joseph F. Langston and James T. Koo.
Proposal #6: To consider and vote upon a proposal to
approve a Stock Option Plan.
Proposal #7: To consider and vote upon a proposal to ratify
the employment of new Auditors, Turner Stone & Company of Dallas, Texas.
Proposal #8: To transact such other business as may
properly come before the meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record of Photonics at the close of business on June
1, 2000 are entitled to notice of, and will be entitled to vote at, the
Annual Meeting or any adjournment thereof. Approval of the Agreement and
the transactions contemplated thereby along with the other proposals set
out above will require the affirmative vote of the holders of a majority
of the issued and outstanding shares of Photonics Common Stock as of the
Record Date.
Due to a lack of any Directors, I, James T. Koo, the Managing Consultant
of the Company have set the close of business on June 1, 2000, as the
Record Date for the determination of shareholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
/s/James T. Koo
_________________________
James T. Koo
Managing Consultant for
Photonics, Inc.
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PHOTONICS CORPORATION
PROXY STATEMENT/PROSPECTUS
This Proxy statement/Prospectus is being furnished to the shareholders of
Photonics Corporation, a California corporation (the "Company", "PHOX" or
"Photonics"), in connection with the solicitation of proxies by James
T. Koo, former Director of the Company, acting as representative of the
Board of Directors pursuant to a consulting contract dated June 21, 1999,
for use at the Annual Meeting of Photonics stockholders (the "Annual
Meeting") to be held at 10:00 A.M. on July 31, 2000 at the offices of the
Company, 1222 Alderwood, Sunnyvale, California 94089 and at any
adjournments or postponements of the Annual Meeting.
This Proxy Statement/Prospectus constitutes the Prospectus of Photonics
for use in connection with the offer and issuance of shares of Common
Stock of Photonics, $.001 par value per share ("PHOX Common Stock")
pursuant to a Stock Purchase Agreement (the "Agreement") dated as of June
30, 2000 by and between Photonics and REpipeline.com, Inc. ("REP-T"), a
Texas corporation. In accordance with the terms of the Agreement,
REpipeline.com, Inc., a Delaware corporation and a subsidiary of PHOX,
will acquire all of the outstanding shares of stock of REP-T in exchange
for the issuance of new shares of PHOX which will result in the
shareholders of REP-T owning approximately 85% of all of the shares
of common stock of PHOX.
On July 7, 2000, the last trading day prior to the announcement of the
preliminary agreement with REpipeline.com, Inc., the high and low closing
bid for the Company's stock was listed as $ 9/16 ($.5625) as reported in
the over-the-counter market. This Proxy Statement/Prospectus and the
accompanying exhibits along with the forms of proxy are being mailed to
shareholders of Photonics on or about July 20, 2000.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS PROXY
STATEMENT/PROSPECTUS. THE TRANSACTIONS CONTEMPLATED BY THE AGREEMENT
ARE COMPLEX. SHAREHOLDERS ARE STRONGLY URGED TO READ AND CONSIDER
CAREFULLY THIS PROXY STATEMENT/PROSPECTUS IN IT'S ENTIRETY INCLUDING THE
ITEMS SET OUT UNDER THE HEADING "RISK FACTORS".
THE SECURITIES TO BE ISSUED PURSUANT TO THE AGREEMENT HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is July 20, 2000.
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NO PERSON HAS BEEN AUTHORIZED BY PHOTONICS TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF
SECURITIES MADE HEREBY AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
PHOTONICS. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED BY
THIS PROXY STATEMENT/PROSPECTUS OR A SOLICITATION OF A PROXY IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT WOULD BE UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF THE SECURITIES TO WHICH THIS PROXY STATEMENT/PROSPECTUS
RELATES SHALL, UNDER ANDY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE INFORMATION CONTAINED HEREIN SINCE THE DATE
HEREOF.
AVAILABLE INFORMATION
Photonics Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). These
materials can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices at
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, New York. New York 10048. Copies
of these materials can also be obtained from the Commission at prescribed
rates by writing to the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20459.
Under the rules and regulations of the Commission, the solicitation of
proxies from the shareholders of Photonics to approve and adopt the
Agreement and transactions contemplated thereby constitutes an offering
of the Photonics Common Stock to be issued in connection with the
Agreement and transactions contemplated thereby. This Proxy Statement/
Prospectus constitutes the prospectus of Photonics. Statements made in
this Proxy Statement/ Prospectus concerning the contents of any contract
or other document are not necessarily complete. With respect to each
contract or other document filed as an exhibit or appendix to the
Registration Statement. reference is hereby made to that exhibit for a
more complete description of the matter involved, and each such statement
is hereby qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Photonics incorporates herein by reference Photonics Annual Report on
Form 10-K for the fiscal year ended December 31, 1998, the Annual Report
on Form 10-K and 10-K/A for fiscal year ended December 31, 1999, and the
Quarterly Reports on Form 10-Q for the quarter ended March 31, 2000.
This Proxy Statement/ Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. A copy of any
<PAGE>
or all documents incorporated by reference herein (excluding exhibits
unless such exhibits are specifically incorporated by reference herein)
will be provided without charge to each person, including any beneficial
owner, to whom a Proxy Statement/Prospectus is delivered, upon oral or
written request of any such person. Requests should be directed to
Corporate Secretary, Photonics Corporation, 1222 Alderwood, Sunnyvale,
California 94089. In order to ensure timely delivery of the documents in
advance of the Annual Meeting to which this Proxy Statement/ Prospectus
relates, any such request should be made by July 22, 2000.
All reports and definitive proxy or information statements filed by
Photonics pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Proxy Statement/
Prospectus and prior to the date of the Photonics Annual Meeting of
Shareholders shall be deemed to be incorporated by reference
into this Proxy Statement/ Prospectus from the date of filing of such
documents. Any statement contained in a document incorporated or deemed
to be incorporated herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/ Prospectus to the extent that a
statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement/ Prospectus.
Note: Statements in this offering that are not historical in nature may
be deemed to be forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Although we believe the
expectations reflected in any forward-looking statements are based on
reasonable assumptions, Photonics can give no assurance that its
expectations will be attained. Factors that could cause actual results to
differ materially from our expectations include completion of pending
acquisitions, continued availability of acquisitions, continued
availability of debt and equity on favorable terms, foreign exchange
fluctuations, performance of operations, financial performance, real
estate conditions, market valuations of its stock, changes in local or
national economic conditions and other risks detailed from time to time
in the Company's SEC reports, including quarterly reports on Form 10-Q,
reports on Form 8-K and annual reports on Form 10-K.
MATERIALS DELIVERED WITH PROXY STATEMENT/PROSPECTUS
This Proxy Statement/ Prospectus is accompanied by a copy of Photonics'
most recent Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1999, as well as a copy of Photonics' most recent Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2000.
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TABLE OF CONTENTS
Page
AVAILABLE INFORMATION ............................... 8
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ......... 8
MATERIALS DELIVERED WITH PROXY STATEMENT/PROSPECTUS .... 9
SUMMARY.................................................. 12
The Company ....................................... 12
REP-T ............................................. 12
Business .......................................... 12
Meeting of the Shareholders ........................ 12
Agenda of the Annual Meeting ....................... 12
Shares Outstanding .................................. 13
Record Date, Shares Entitled to Vote ................ 13
Quorum, Broker Non-Votes ............................ 13
Vote Required ....................................... 14
Risk Factors.......................................... 14
Stock Purchase Agreement ............................. 14
Board of Directors and Management .....................14
Representations and Warranties ....................... 14
Conditions to Closing ................................ 14
Termination or Amendment ............................. 15
Federal Income Tax Matters.. ..........................15
Accounting Treatment ................................. 15
Dissenters Rights .................................... 15
Regulatory Matters ................................... 15
Change in Shareholders' Rights ....................... 16
Reason for Acquisition ............................... 16
SUMMARY FINANCIAL INFORMATION............................... 17
Market Data .......................................... 17
Selected Historical and Pro Forma Financial Data and
Comparative Per Share Data ........................... 18
RISK FACTORS ............................................... 19
Future Operating Results Subject to Fluctuation. ......... 19
Certain Risks Associated With Mergers and Acquisitions... ...19
Dependence on Key Personnel. ......................... .. 20
Intellectual Property Protection and Disputes. ............. 20
Natural Disasters. ......................................... 20
Volatility of Stock Price. .......................... . . . 20
Funding of the Company .......................... . . . . 21
Systems Collapse ............................. . . . . . . 21
Competition ................................ . . . . . . . 21
Various Government Regulations ....................... . .. 21
Legal Proceedings ............................. . . . . . .. 21
Dilution and Possible Future Dilution ..................... 22
Unidentified Risks ............................. . . . . ...22
PHOTONICS ANNUAL MEETING.......................... . . . .. 22
Date Time and Place of Meeting ......................... . 22
Record Date and Outstanding Shares ........................ 22
Voting of Proxies ............................... . . .. .. 23
Vote Required ................................. . . . . . 23
Quorum; Broker Non-votes ............................ . . . 23
Solicitation of Proxies and Expenses ..................... 23
The proposals that will be presented at the
Annual Meeting as part of the Acquisition .. . . . . . .. 24
THE ACQUISITION AND RELATED TRANSACTIONS................ . 29
Acquisition Discussion .......................... .. 29
Recent Events ................................. . . . . . . 30
Proposed Acquisition of RealEstate4Sale.com / REP-T ...... 30
Explanation of REP-T ............................ . .. . . 31
The Internet .................................. . . . . . . 33
Business Strategies ............................ . .. 34
Marketing Strategies .......................... ..... 34
Technology Strategies ............................. 35
An In-depth Approach .............................. 35
Competing Commercial Real Estate Internet Sites . . . 35
LoopNet .................................. . . . . .. 36
CoStar ................................ . . . . . .. 36
Small Commercial Property Listing Sites ................... 36
Management of REP-T that will become the management of
Photonics after the Acquisition .. . . . . . . . . . . . . 37
EXECUTIVE COMPENSATION OF OFFICERS AND DIRECTORS OF REP-T
THAT WILL BE ASSUMED BY PHOTONICS CORPORATION ............ 38
Remuneration of Officers and the approval of
a Stock Option Plan . . . . . . . . . . ............ 38
Outside Director Stock Option Plan ................. 39
Employment Agreements ....................... 39
Compensation of the Executive Officers ............... 39
Compensation Philosophy ............................. 40
SECURITIES OWNERSHIP OF PRINCIPAL SHAREHOLDERS
AND MANAGEMENT AFTER COMPLETION 0F THE ACQUISITION ......... 41
Section 16(A) Beneficial Ownership Reporting
Compliance ............ . . . . . . . . . . . . . .. 42
COMPARISON OF SHAREHOLDER RIGHTS UNDER TEXAS AND
CALIFORNIA LAW . . . . . . . . . . . . . . . . . . . . .... 42
EXPERTS ................................... . . . . . . .. 47
REASONS FOR THE ACQUISITION ........................... . 47
FINANCIAL STATEMENT PRESENTATION ....................... 48
REPRESENTATIONS AND COVENANTS ........................ . . 49
CONDITIONS TO CLOSING ............................ . . ... 49
TERMINATION OR AMENDMENT .......................... . . ... 49
DISSENTERS' RIGHTS............................... . . . . .. 49
REGULATORY MATTERS .............................. . . . . . 51
EXPENSES AND FEES ............................. . . . . ... 51
UNAUDITED FINANCIAL STATEMENTS OF REP-T ................... 52
UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS.............53
Combined Balance Sheet ............................... 53
LEGAL MATTERS .................................. . . . .. 54
EXHIBITS AND ATTACHMENTS.......................... . . ... 54
You should rely only on the information contained in this offering
memorandum. We have not authorized anyone to provide you with
information or to make any representation to you that is not
contained in this offering memorandum. This offering memorandum is not
an offer to sell these securities in any jurisdiction where the offer or
sale is not permitted. You should not under any circumstances assume
that the information in this offering memorandum is correct on any date
after the date of this offering memorandum.
<PAGE>
THE FOLLOWING SUMMARY OF THIS OFFERING IS QUALIFIED IN ITS ENTIRETY BY
THE DETAILED INFORMATION APPEARING IN THE FILINGS WHICH THE COMPANY HAS
MADE WITH THE SEC.
COMPANY ..............................PHOTONICS CORPORATION, 1222
Alderwood,
Sunnyvale, California 94089;
Telephone 408-745-9320.
REP-T .............REpipeline.com, Inc., a Texas corporation,, 12377
Merit
Drive, Dallas, Texas 75251;
Telephone 972-726-7473
REP-D ...........REpipeline.com, Inc., a Delaware corporation and a
wholly owned subsidiary of the Company. It's address is care of the
Company.
BUSINESS .............................. Upon the completion of the
acquisition, the Company will change its focus from the manufacturing and
sale of computer components and software to a revised mission
statement to market and develop an ASP, Application Service Provider, for
the commercial real estate business community based on the Internet that
markets services on its site in order to connect, via the Internet, the
business partners and clients in a real estate transaction with
information, content and marketing services. Currently there are some
competitors that are focused on niche market opportunities
such as listings and market intelligence data but there is not a
competitor the company is aware of that is marketing it's services as the
"AOL" America on Line for the commercial real estate business community.
The company plans to market a portfolio of services with the first
building block being the commercial property listings on the
Internet. The Company also intends to pursue technology development and
strategic acquisitions that fit the company business model.
MEETING OF THE SHAREHOLDERS ...... The Annual Meeting of the
shareholders of the Company will be held on July 31, 2000 at 100:00 A.M.,
Pacific Time, at the headquarters of the Company as listed above.
AGENDA OF THE MEETING .........
Proposal #1: To consider and vote upon a proposal to authorize an
increase in the number of authorized common shares of the Company to
200,000,000 shares for the purpose of facilitating the acquisition of
REP-T, Inc., a Texas corporation and for
future acquisitions.
Proposal #2: To consider and vote upon a proposal to ratify the
Conversion of approximately $ 3.5 million of corporate indebtedness into
common stock of Photonics.
Proposal #3: To consider and vote upon a proposal as set out in the
Stock Purchase Agreement dated as of June 30, 2000 between Photonics
Corporation, REpipeline.com, Inc., a Delaware corporation ("REP-D"},
<PAGE>
REpipeline.com, Inc., a Texas corporation ("REP-T") and the selling
shareholders of REP-T (the "Agreement") and to authorize the acquisition
of REP-T, Inc. by REP-D of Photonics, through the issuance of a majority
of the shares of Common Stock of Photonics and to ratify the actions of
James T. Koo and indemnify James T. Koo relating to the actions that he
has taken in preparing and consummating the transactions set out
in the Agreement.
Proposal #4: To consider and vote upon a proposal to ratify the
incorporation of Sunnyvale Technology Corporation as a subsidiary of
Photonics, the transfer of the assets and business of DTC Data
Technology, a division of Photonics, to Sunnyvale Technology Corporation,
the sale of 90% of the shares of Sunnyvale Technology
Corporation to James T. Koo and the approval of a stock dividend,
consisting of the remaining 10% shares of Sunnyvale Technology
corporation, to all record owners as of the date of this Shareholder's
meeting.
Proposal #5: To consider and vote upon a proposal to amend the
Bylaws of the Company to provide for a minimum of four members to
constitute a Board of Directors and to elect 4 Board of Directors to
serve. Nominees: T. James Vaughn, G. Thomas Bailey, Joseph F. Langston
and James T Koo.
Proposal #6: To consider and vote upon a proposal to approve a Stock
Option Plan
Proposal #7: To consider and vote upon a proposal to ratify the
employment of new Auditors, Turner Stone & Company of Dallas, Texas.
Proposal #8: To transact such other business as may properly come
before the meeting.
SHARES OUTSTANDING .. Currently, the Company has no shares of Preferred
Series A and 6,765,496 shares of Common Stock outstanding on a fully
diluted basis. The Company anticipates issuing approximately 1,519,090
shares of Common Stock to the creditors of the Company in exchange for
the forgiveness of debt. If all creditors convert their debt to
shares of Common Stock, the approximate total outstanding number of
Common Shares will be 8,284,586. Based on this number of existing
shares, the Company anticipates issuing approximately 49,724,455 shares
of Common stock to the shareholders of REP-T in order to complete the
acquisition.
Present After Acquisition
Common (fully diluted) 6,765,496 58,569,503
Preferred A 0 0
Total (1) 6,765,496 58,569,503
1. REP-T shareholders will own approximately 85% of the Common
Shares.
RECORD DATE, SHARES
ENTITLED TO VOTE ......Shareholders of record of Photonics Common Stock
<PAGE>
on June 1, 2000 (the "Record Date") are entitled to notice of and to vote
at the Photonics Annual Meeting. Each share will be entitled to one vote
on each matter to be acted upon except that as to election of members to
the Board of Directors, cumulative voting is permitted. On the
Record Date, the number of shares of PHOX Common Stock held by recent
former directors, officers and their affiliates as a group was
approximately 40.1% of the outstanding shares.
QUORUM; BROKER NON-VOTES .........The required quorum for the transaction
of business at the Annual Meeting is a majority of the shares of Common
Stock issued and outstanding on the Record Date. With respect to the
proposals presented at the Annual Meeting, shares that are voted
"FOR" ,"AGAINST", "WITHHELD" or "ABSTAIN" relating to a matter are
treated as being present for the purposes of establishing a quorum and
are treated as votes eligible to be cast by the Common Stock present or
represented by proxy at the Annual meeting and treated as "entitled to
vote on the subject matter" with respect to such matter. Broker non-
votes will be counted for purposes of determining a quorum but will not
be considered as votes cast and will not affect the determination
as to whether the requisite majority of votes cast has been
obtained with respect to a particular matter. On all other matters to
be acted upon at the Annual Meeting, abstentions and broker non-votes
will be counted as votes against each of the proposals.
VOTES REQUIRED .... .In accordance with Article 2.6 of the Bylaws of
Photonics Corporation, approval and adoption or ratification, as
appropriate, of each of the proposals set forth at the Annual
Meeting will require an affirmative vote of the holders of a majority of
the shares issued and outstanding as of the Record Date.
RISK FACTORS.......................This Offering involves substantial
risks associated with the illiquidity of the investment and various other
business factors. This Prospectus should be read completely and
thoroughly.
STOCK PURCHASE AGREEMENT .........The Agreement provides for the
acquisition by REpipeline.com, a Delaware corporation (a wholly owned
subsidiary of Photonics, "REP-D") of all of the outstanding stock of
REpipeline.com, Inc., a Texas corporation ("REP-T") including all of it's
assets and liabilities in exchange for approximately 85% of all of
the issued and outstanding shares of PHOX, as adjusted at the closing of
the acquisition. REP-D will assume all liabilities of REP-T, except
certain contingent liabilities of REP-T, if any, arising from claims
that may be made as a result of the purchase of certain assets
and liabilities by REP-T from RealEstate4Sale.com, Inc., a Texas
corporation prior to the purchase of REP-T by REP-D. (the "Excluded
Liabilities"). This type of an acquisition is known in the industry as a
triangular transaction. Photonics will issue to the shareholders of
REP-T (the "Selling Shareholders") a sufficient number of shares of
Photonics Common Stock (the "Shares") such that, following the
consummation of the Acquisition, the number of Shares issued to the
Selling Shareholders will equal approximately 85% of all outstanding
shares of Photonics Common Stock. The transactions contemplated by the
Agreement will be consummated promptly after shareholder approval of
Photonics and REP-T and the satisfaction or waiver of the other
conditions to consummation.
<PAGE>
BOARD OF DIRECTORS AND MANAGEMENT OF PHOTONICS ........ Upon consummation
of the Acquisition, the minimum authorized number of members
of Photonics Board of Directors will be reduced from seven to four, a new
slate of Board of Directors of Photonics will be proposed and elected at
the Annual Meeting. Currently, there are no members of the Board of
directors of Photonics, all members having resigned. The newly
constituted Board of Directors will appoint new officers of the Company.
REPRESENTATIONS AND WARRANTIES ........ In the Agreement, Photonics
and REP-T have each made a number of representations regarding their
respective capital structures, operations, financial condition and other
matters, including their authority to enter into the Agreement. Each
party has agreed that, until the consummation of the Agreement and the
transactions contemplated thereby or the termination of the Agreement, it
will maintain its business, not take certain actions outside the
ordinary course without the other's consent and use its
best efforts to consummate the Agreement and the transactions
contemplated.
CONDITIONS TO CLOSING ......... In addition to the requirement that the
approval by the Photonics and REP-T shareholders be received,
consummation of the Acquisition thereby is subject to a number of other
conditions that, if not satisfied or waived, may cause the Agreement
not to be consummated. Each party's obligation to consummate the
Acquisition is conditioned on, among other things, the accuracy of the
other party's representations and satisfaction of its warranties and
covenants, the other party's performance of its covenants, the absence of
a material adverse change with respect to the other party, favorable
legal opinions (including an opinion to the effect that the Acquisition
will be treated for federal income tax purposes as a tax-free
reorganization), and the absence of any restraining order, injunction or
other legally binding order, statute, rule or regulation preventing
consummation of the Acquisition.
TERMINATION OR AMENDMENT ........ The Agreement may be amended only with
the mutual consent of Photonics and REP-T. At any time prior to the
closing of the Acquisition, the Agreement may be terminated by mutual
consent of the representatives of Photonics and REP-T or if any
of the conditions to that party's obligation to consummate the
Acquisition is not fulfilled by that date.
FEDERAL INCOME TAX MATTERS ........ The transactions contemplated by the
Agreement are intended to qualify as a tax-free reorganization for
federal income tax purposes, so that no gain or loss will be recognized
by either of the parties. It is a condition to REP-T's and Photonics'
obligations to consummate the Acquisition that they should each have
received opinions from their respective counsel that the Acquisition will
qualify as a tax-free reorganization under Section 368 of the Internal
Revenue Code. REP-T stockholders are urged to consult their own tax
advisors regarding such tax consequences.
ACCOUNTING TREATMENT ......... The Acquisition is intended to be treated
as a "purchase" by Photonic's subsidiary, REP-D, for accounting purposes.
Since REP-T stockholders will own a majority of the shares of the parent
<PAGE>
company, Photonics, and will also gain management and board control of
Photonics, the Acquisition will be accounted for as though REP-T
were the acquirer. The assets and liabilities of REP-T will be recorded
at fair value and the historical results of operations of the combined
company will be those of REP-T.
DISSENTERS RIGHTS .... If the Acquisition is approved by the required
vote of Photonics shareholders and is not abandoned or terminated,
holders of Photonics Common Stock who did not vote in favor of the
Acquisition and who notify Photonics in writing of their intent
to demand payment of their shares if the Acquisition is consummated, may,
by complying with Sections 1300 through 1312 of the California Law, a
copy of which is attached hereto as Exhibit C, be entitled to dissenters'
rights as described therein. Photonics shareholders must notify
Photonics of their intent to dissent within 30 days of the date that the
notice of approval of the Acquisition by Photonics shareholders is
mailed to all Photonics shareholders who did not vote in favor of the
Acquisition.
REGULATORY MATTERS ... Photonics and REP-T are not aware of any
governmental or regulatory approvals required for consummation of the
Acquisition other than compliance with the federal securities laws and
applicable securities and "blue sky" laws of the various States.
CHANGE IN SHAREHOLDER
RIGHTS .......... Since Photonics is a California corporation, REP-T
stockholders, as shareholders of a Texas corporation, have different
rights, privileges and preferences following the completion of the
Acquisition. The following is a brief summary of some of the
important differences in rights between holders of Photonics and REP-T
Common Stock. Photonics shareholders enjoy cumulative voting in
the election of directors while REP-T holders do not. Photonics
shareholders can authorize a dissolution of Photonics on only a 50% vote
without Board approval whereas Board approval of a dissolution of REP-T
is required even if a majority of the voting power of REP-T
votes to approve dissolution. Photonics shareholders can take action by
written consent, while REP-T's charter documents have eliminated the
ability of stockholders to take action; by written consent. Under
California law, Photonics shareholders have a right to vote on any
amendment to the Articles of Incorporation if the amendment
would create a new class of shares which have prior rights to the
outstanding shares. Additionally, California and Texas law differ
slightly with respect to enforceability of transactions involving
officers or directors, limitation of director liability and
indemnification.
REASON FOR THE ACQUISITION ....... During late January and into the first
few days of February 2000, days before the Company planed to file Chapter
11, the Company was contacted by and reached an initial, non-binding
agreement to acquire RealEstate4Sale.com(RE4S). Since this acquisition
agreement is superior to the filing of a bankruptcy proceeding, the
Company has deferred the Chapter 11 filing; and has been actively
pursuing the acquisition of RE4S and it successor, REP-T. However, no
assurance can be given that the acquisition will complete. Failure to
consummate this acquisition, the only alternative for the Company will be
<PAGE>
filing Chapter 7 for liquidation. The Company estimates after paying off
the priority employee payroll and vacation debt, the unsecured debt
holder will receive less than two cents ($0.02) for every dollar
of debt. No assurance can be given that there will be funds generated to
pay any person. Registrant does not expect its shareholders to obtain
any monies if it is required to file liquidation.
The initial, non-binding agreement to acquire RE4S was terminated
as of May 31, 2000. The Agreement, executed as of the date stated
herein, was executed with a majority of the same group of principals who
represented RE4S but with their newly formed company REP-T.
<PAGE>
Summary Financial Information
The summary unaudited financial information set forth below has been
derived from the financial statements of the Company. This information
should be read in conjunction with the 10K Annual Report , 10Q Quarterly
Reports and financial statements and notes thereto set forth.
Market Price Data
The following table sets forth the range of high and low closing sales
prices for Photonics Common Stock for the periods indicated:
High Low
Fiscal- Year Ended December 31, 1997
Fourth Quarter . . . . . . . . . . . . . $0.312 $0.312
Fiscal Year Ended December 31, 1998
First Quarter .. . . . . . . . $0.50 $0.50
Second Quarter . . . . . . . . $0.625 $0.625
Third Quarter . . . . . . . . . . $0.343 $0.343
Fourth Quarter . . . . . . . . . . $0.312 $0.312
Fiscal Year Ending December 31, 1999
First Quarter . . ...... . .. . . $0.218 $0.218
Second Quarter . . . . . . . . . .. $0.187 $0.187
Third Quarter. . . . . . . . . . .. $0.20 $0.20
Fourth Quarter . . . . . . . . . ..$0.25 $0.218
Fiscal Year Ending December 31, 2000
First Quarter ......................$1.00 $0.75
Second Quarter . . . . . . . . . . .$0.50 $0.50
Trading prices reflect prices quoted on the over-the-counter market.
The following table sets forth the averages of bid and ask prices per
share of Photonics Common Stock over-the-counter trading as of July 7,
2000, the last trading day before announcement of the preliminary
agreement with RealEstate4Sale.com, Inc., the per share price for
Photonics Common Stock was:
High Low
Photonics Common Stock $0.5625 $0.5625
Selected Historical and Pro Forma Financial Data and Comparative Per
Share Data
The following selected historical financial information of Photonics has
been derived from it's historical financial statements and should be read
in conjunction with such financial statements and notes thereto
incorporated by reference or included elsewhere in this Proxy Statement/
Prospectus. The Photonics historical financial statement data as of and
for the three months ended March 31, 2000 is unaudited but has been
prepared on the same basis as the audited financial statements and, in
the opinion of management, contain all adjustments, consisting only of
normal recurring accruals, necessary for the fair presentation of the
results of operations for such period. The selected unaudited pro forma
condensed combined financial data give effect to the transaction
contemplated by the Agreement and should be read in conjunction with the
pro forma condensed combining financial statements and notes thereto that
are included elsewhere in this Proxy Statement/ Prospectus. The pro forma
condensed combined statements of operations combine Photonics' results
of operations for the year ended December 31, 2000 and the three months
ended March 31, 2000 with REP-T's, as a continuing business from the
combination with RealEstate4Sale.com, Inc., results of operations
for the year ended December 31, 2000 and the three months ended March
31, 2000, respectively, giving effect to the transaction contemplated by
the Agreement. The unaudited pro forma condensed combined balance sheet
data combines Photonics' balance sheet as of March 31, 2000 with REP-T's
balance sheet as of March 31, 2000, giving effect to the transaction
contemplated by the Agreement as if it had occurred on March 31, 2000.
The pro-forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results or financial
position that would have occurred had the transaction contemplated by the
Agreement been consummated at the beginning of the periods presented, nor
is it necessarily indicative of future operating results or financial
position.
<TABLE>
[LEGEND]
Selected Historical Financial Information
(in thousands, except per share amounts)
Years Ended December 31, Three Months Ended
March 31,
1997 1998 1999 2000
(unaudited)
<LEGEND/>
<S> <C> <C> <C> <C>
PHOTONICS
Historical Statement of
Operations Data:
Net revenues . . . . . . $5,662 $3,484 $ 724
$ 0
Loss from operations (399) (2,705) (964) (159)
Net loss (459) (2,708) (1,416) (159)
Net loss per share $( .11) $(0.62) $(0.32) $ (.04)
Weighted average shares
Outstanding .. . . .. 4,173 4,336 4,336 4,765
</TABLE>
<TABLE>
Years Ended December 31, Three Months Ended
March 31,
1997 1998 1999
2000
(unaudited)
<S> <C> <C> <C> <C>
PHOTONICS
Historical Balance
Sheet Data:
Cash and cash equivalents. $ 5 $ 42 $ 75 $ 73
Total assets . . . . . . . 2,807 852 75 73
Current liabilities . . . . 3,018 4,018 3,970 3,970
Total shareholders'
equity (deficiency) (813) (3,291) (3,895)
(3,897)
</TABLE>
RISK FACTORS
The acquisition of a non-related company and issuance of stock for such
acquisition involves a high degree of risk. You should carefully consider
the following factors as part of the acquisition transaction. The risks
described below are not the only ones that we face. Additional risks that
generally apply to publicly traded companies, that are not yet identified
or that we currently think are immaterial, may also adversely affect our
company.
This prospectus contains forward-looking statements that involve risks
And uncertainties. We use words such as "anticipates," "believes,"
"plans," "expects," future," "intends" and similar expressions to
identify forward- looking statements. Our actual results could differ
materially from those anticipated in the forward-looking statements as a
result of certain factors, including the risks described below and
elsewhere in this offering memorandum. For example, Management's
Discussion and Analysis of Results of Operations and Financial
Condition which is incorporated by reference from the Company's Annual
Report includes statements relating to expected sales, anticipated
operating expenditures, anticipated capital expenditures and anticipated
results relating to the REP-T acquisition. The statements contained in
this document that are not purely historical are forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, including
without limitation statements regarding the Company's expectations,
beliefs, intentions or strategies regarding the future. All forward-
looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements. In evaluating
the Company's business, prospective investors should consider carefully
the following factors in addition to the other information set forth in
this document.
Future Operating Results Subject to Fluctuation.
During fiscal 1999, the Company's operating results were adversely
affected by shifts in corporate and retail buying patterns, lack of
adequate financing, increased competition, economic instability in Asia
and turbulence in the computer industry. In the future, the Company
intends to refocus it direction, change it's products to services
relating to an Internet site and change it's officers and directors. The
Company's operating results may fluctuate as a result of these factors
and as a result of a wide variety of other factors, including, but not
limited to, competition in the Internet service business, general market
perception of the value of such businesses, valuation of such
<PAGE>
businesses by the financial industry and general worldwide economic and
computer industry fluctuations. In addition, fluctuations may be caused
by future accounting pronouncements, changes in accounting policies, and
the timing of acquisitions of other business products and technologies
and any associated charges to earnings. The volume and timing of
business to be generated during any quarter are difficult to forecast
with exacting precision.
The Company will, from time to time, encounter uncertain and changing
demand for it's products and services.. If demand falls below the
forecasts that the Company has made, the operating results will suffer.
The Company is entering into a new field of business so it's prior
history of operations has little or no value towards forecasting the
success of the Company or its annual revenues. Because much of the
Company's operating budget is relatively fixed in the short term, if
revenues do not meet the Company's expectations, the Company's operating
income and net income may be disproportionately affected. Operating
results in any particular quarter which do not meet the expectations of
securities analysts are likely to cause volatility in the price of the
Company's Common Stock.
Projections are based upon assumptions made regarding future events.
There is no assurance that actual events will correspond precisely with
assumptions. Actual results for any period may or may not approximate
results shown for any such period in the projections. In fact, actual
results will almost certainly differ from projections and such
differences could be material.
Certain Risks Associated With Mergers and Acquisitions.
Following the issuance of common shares of Photonics Corporation, REP-D
will complete its acquisition of REP-T. As part of its overall
strategy, the Company plans, when appropriate, to continue
to acquire or invest in complementary companies, products, or
technologies and to enter into joint ventures and strategic alliances
with other companies. Risks commonly encountered in such transactions
include the difficulty of assimilating the operations and personnel of
the combined companies, the potential disruption of the Company's ongoing
business, the inability to retain key technical and managerial personnel,
the inability of management to maximize the financial and strategic
position of the Company through the successful integration of acquired
businesses, additional expenses associated with amortization of acquired
intangible assets, dilution of existing equity holders, the maintenance
of uniform standards, controls, procedures, and policies, and the
impairment of relationships with employees and customers as a result of
any integration of new personnel. There can be no assurance that the
Company will be successful in overcoming these risks or any other
problems encountered in connection with such business combinations,
investments, or joint ventures, or that such transactions will not
materially adversely affect the Company's business, financial condition,
or operating results.
Dependence on Key Personnel.
The Company's future success depends in large part on the continued
<PAGE>
service of its key technical, marketing, and management personnel, and on
its ability to continue to attract and retain qualified employees,
particularly those highly skilled design, process, and test engineers
involved in the design enhancements and maintenance of the REP-T web
pages and the development of new products and processes. The competition
for such personnel is intense, and the loss of key employees could have a
material adverse effect on the Company's business or operating results.
The Corporate Board of Directors and Advisory Board play important
developmental, support and oversight roles. Since considerable financial
and personal investment have gone into the design, development and launch
of this Company, these key personnel are expected to remain active with
the Company indefinitely. But the unexpected loss of more than one of
these principal personnel could have an adverse effect upon the
operations of the Company until suitable replacement if ever is found.
The Company will seek to obtain substantial key-man insurance, to the
benefit of the Company.
Intellectual Property Protection and Disputes.
The Company will devote significant resources to research and development
and believes that the intellectual property derived from such research
and development is a valuable asset that will be important to the success
of the Company's business. Although the Company actively maintains and
defends its intellectual property rights, no assurance can be given
that the steps taken by the Company will be adequate to protect its
proprietary rights.
From time to time, third parties may assert exclusive patent, copyright,
and other intellectual property rights to technologies that are important
to the Company. There can be no assurance that third parties will not
assert infringement claims against the Company in the future, that
assertions by third parties will not result in costly litigation or that
the Company would prevail in such litigation or be able to license any
valid and infringed patents from third parties on commercially reasonable
terms. Litigation, regardless of its outcome, could result in substantial
cost and diversion of resources of the Company. Any infringement claim or
other litigation against or by the Company could materially adversely
affect the Company's business or operating results.
Natural Disasters.
The Company's corporate headquarters are located in Sunnyvale, California
in an area which has historically been subjected to earthquakes. Any
damage to the Company's information systems or computers caused as a
result of an earthquake, fire, floods or any other natural disasters
could have a material adverse effect on the Company's business,
results of operations and financial condition.
Volatility of Stock Price.
The stock market in general, and the market for shares of technology
companies in particular, have from time to time experienced extreme price
fluctuations, which have often been unrelated to the operating
performance of the affected companies. In addition, factors such as
technological innovations or new product introductions by the Company,
<PAGE>
its competitors, or its customers may have a significant impact on the
market price of the Company's Common Stock. In addition, the Company's
stock price may be affected by general market conditions and
international macroeconomic factors unrelated to the Company's
performance such as those recently evidenced by the financial turmoil in
Asia. These conditions, as well as factors that generally affect the
market for stocks of high technology companies, could cause the
price of the Company's Common Stock to fluctuate substantially over short
periods.
Funding of the Company
Following the completion of the acquisition, the Company intends to
prepare a public offering of stock in order to raise additional capital
for the Company. Such additional capital will be used to fund the
operations of the Company as well as for the acquisition of additional
companies that are considered to by strategic partners critical to the
growth of the Company. Without the funding of the secondary offering,
the future growth of the combined companies will be severely limited.
Systems Collapse
Most computer systems are fragile (consider the number of instances that
banking systems or credit-clearance systems slow down or crash: "the
system is down, please call back later."). The press has been reporting
crashes and freezes on such well-known Internet sites as eBay, eTrade,
and Amazon.com. These are now winning Internet companies with material
investments in systems, system controls, backup capabilities, technology
talents and the like. REpipeline.com is a new company with a starting
system base. It is much more likely that some system breakdown may occur
with the Company than with established, more robust Internet operating
companies, possessing large budgets including substantial technology
structures (equipment, software, network linkages and personnel). The
Company is conscious of these system frailties and has engaged PandesicT
to be both its foundation system structure and its system "general
contractor." Pandesic has in place extensive, dedicated system
foundations to support the Company's Internet operations, e-commerce,
service and electronic support. Though sureties of system robustness
cannot be made, the Company is confident that its overall approach and
its "strategic partner" relationship with Pandesic will prove to lessen
system errors.
Competition
The Company operates in a highly competitive world market and an Internet
market in which new competition is being launched at an extraordinary
pace. There are hundreds of auction sites already operating, dozens of
business-to-business focused auction houses, specialized Internet
companies whose capabilities and interests overlap with the Company and
an established base of physical/traditional close-out/clearance jobbers,
distributors and Discounters who have well-established bases of
operations and relationships and no interest to see these disappear. All
of this competition is material and some of it could prove to be
extremely significant to the Company, and short cut or slow down its
potential.
<PAGE>
Various Government Regulations
There can be no assurance that changes in various country federal, state
and local laws and regulations in the future, or in the interpretation or
enforcement of existing regulations, might not have a material adverse
effect on the Company's business.
Legal Proceedings
Though the Company will not take ownership possession of any inventories
owned by Buyers or Sellers on its Internet site, it is possible that some
party may try to hold the Company responsible for the condition of
inventory, its satisfactory shipment to a recipient location, an aspect
of financing involved in any transaction, or some other dimension of
auction trading. The Company is preparing liability-reducing wording for
its "contracts" that each Seller and Buyer must agree to in order to
conduct transactions through the Company's site. However, there is
no surety that some party may not still try to hold the Company
responsible for some transactional element and commence legal action. At
this time, the Company is not involved in any litigation.
Dilution and Possible Future Dilution
Purchasers of the Common Stock offered hereby will suffer dilution in net
tangible book value of the Company by virtue of the costs associated with
raising future capital. Additional dilution could take place from future
offerings or conversion of stock options or other authorized
transactions.
Unidentified Risks
Although the Company has endeavored to identify many of the material
risks particularly associated with an investment in its Common Stock,
risks could exist which have not been identified herein.
PHOTONICS ANNUAL MEETING
Date Time and Place of Meeting
The Annual Meeting of Shareholders will be held on Monday July 31, 2000,
at 10:00 a.m. local time (the "Annual Meeting"), or at any adjournment or
postponement thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting. The Annual Meeting will be held at
the Company's principal executive office located at 1222 Alderwood,
Sunnyvale, California 94089.
Record Date and Outstanding Shares
Currently, the Company has no shares of Preferred Series A and 6,765,496
shares of Common Stock outstanding on a fully diluted basis. The Company
anticipates issuing approximately 1,519,090 shares of Common Stock to the
creditors of the Company in exchange for the forgiveness of debt. If all
creditors convert their debt to shares of Common Stock, the approximate
total outstanding number of Common Shares will be 8,284,586. Based
<PAGE>
on this number of existing shares, the Company anticipates issuing
approximately 49,724,455 shares of Common stock to the shareholders of
REP-T in order to complete the acquisition.
<TABLE>
Present After
Acquisition
<S> <C> <C>
Common (fully diluted) 6,765,496 58,569,503
Preferred A 0 0
Total (1) 6,765,496 58,569,503
</TABLE>
1. REP-T shareholders will own approximately 85% of the Common Shares.
Only holders of record of Common Stock at the close of business on June
1, 2000
(the "Record Date") will be entitled to
notice of and to vote at the Annual meeting.
Each holder of record of Common Stock on such date will be entitled to
one vote for each share held on all matters to be voted upon at the
Annual Meeting. With respect to the election of directors,
shareholders may exercise cumulative voting rights. Under cumulative
voting, each holder of Common Stock will be entitled to four votes for
each share held. Each shareholder may give one candidate all the votes
such shareholder is entitled to cast or may distribute such votes among
as many candidates as such shareholder chooses. However, no shareholder
will be entitled to cumulative votes unless the candidate's name has been
placed in nomination prior to the voting and at least one shareholder has
given notice at the meeting, prior to the voting, of his or her intention
to cumulate votes. Unless the proxy holders are otherwise instructed,
shareholders, by means of the accompanying proxy, will grant the proxy
holders' discretionary authority to cumulative votes.
All votes will be tabulated by the inspector(s) of election appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes.
Voting of Proxies
The Photonics proxy accompanying this Proxy Statement/ Prospectus is
solicited on behalf of shareholders representing over 10% of the current
outstanding shares of Photonics Corporation for use at the Photonics
Annual Meeting. Shareholders are requested to complete, date and sign the
accompanying proxy and promptly return it in the accompanying envelope or
otherwise mail it to Photonics. All proxies that are properly executed
and returned, and that are not revoked, will be voted at the Photonics
Annual Meeting in accordance with the instructions indicated on the
proxies or, if no direction is indicated, to approve the Agreement and
the Acquisition and other specific proposals that are recommended by the
solicitors of the Proxy as indicated herein. A Photonics shareholder
<PAGE>
who has given a proxy may revoke it at any time before it is exercised at
the Photonics Annual Meeting, by (i) delivering to the Secretary of
Photonics (by any means, including facsimile) a written notice. bearing a
date later than the proxy, stating that the proxy is revoked.
(ii) signing and so delivering a proxy relating to the same shares and
bearing a later date prior to the vote at the Photonics Annual Meeting or
(iii) attending the Photonics Annual Meeting and voting in person
(although attendance at the Photonics Annual Meeting will not, by itself,
revoke a proxy).
Vote Required
Approval by Photonics' shareholders of the Acquisition, the other
proposals and the Photonics Bylaws Amendment each requires the
affirmative vote of the holders of not less than a majority of the
shares of Photonics Common Stock issued and outstanding on the Record
Date. For purposes of these proposals, shares will be voted as follows:
Shares represented by proxies cast "for" a proposal will be voted in
favor of the proposal. Shares represented by proxies cast "against" a
proposal or "abstain" will be treated as votes against the proposal.
Broker non-votes will be counted as votes against a proposal. As of the
Record Date, all former executive officers and directors of Photonics and
their affiliates as a group beneficially owned approximately 2,710,228
shares of Photonics Common Stock (approximately 40.1% of the shares of
the fully diluted Photonics Common Stock then outstanding). Each of the
executive officers and directors has advised Photonics that he or she
intends to vote or direct the vote of all shares of Photonics Common
Stock over which he or she has voting control, subject to and consistent
with any fiduciary obligations in the case of shares held as a fiduciary,
for approval of the Agreement, the other proposals and the Photonic's
Bylaws Amendment and the transactions contemplated thereby.
Quorum; Broker Non-votes
The required quorum for the transaction of business at the Photonics
Annual Meeting is a majority of the shares of Common Stock issued and
outstanding on the Record Date. Abstentions and broker non-votes each
will be included in determining whether a quorum is present for the
transaction of business. With respect to proxies that are executed by the
record holders of shares of Photonics Common Stock but are not marked to
indicate how the holder is voting, such proxies will be voted in favor of
all of the items being considered at the Photonics Annual Meeting.
Solicitation of Proxies and Expenses
The shareholders who are soliciting the Proxy will bear the cost of the
solicitation of proxies in the enclosed form from the shareholders of
Photonics. In addition to solicitation by mail, they may solicit proxies
from shareholders by telephone, telegram, letter or in person. Following
the original mailing of the proxies and other soliciting materials,
Photonics will request brokers, custodians, nominees and other record
holders to forward copies of the proxy and other soliciting materials to
persons for whom they hold shares of Photonics Common Stock and to
request authority for the exercise of proxies. In such cases, the Proxy
solicitors, upon the request of the record holders, will reimburse such
holders for their reasonable expenses.
<PAGE>
The proposals that will be presented at the Annual Meeting as part of the
Acquisition
PROPOSAL 1
Increase in the number of Authorized Common and Preferred Shares
Current amount of Stock authorized, issued and Outstanding:
Preferred stock, $1.00 par and liquidation value, 6,000,000 shares
authorized. There were 2,248,136 shares issued as of December 31, 1998
and 2,018,009 shares issued as of December 31, 1997. All preferred
shares were converted to common shares as of June 1, 2000. There are no
issued and outstanding preferred shares.
There remain dividends in arrears of $201,801 for fiscal year 1998,
dividends in arrears of $224,814 for fiscal year 1999 and dividends in
arrears of $63,703 for the first two quarters of 2000; Common stock,
$.001 par value, 20,000,000 shares authorized. There are 6,765,496
issued and outstanding as of June 1, 2000.
The Company was incorporated in the State of California on March 18, 1985
and its articles of incorporation have been twice amended and such second
amended and restated Articles of Incorporation filed February 9, 1996
stipulate the number of shares of common stock to be authorized for
issuance by the Board of Directors is 20,000,000 shares, and the
number of shares of preferred stock authorized to be issued by the Board
of Directors is 6,000,000 shares.
To accomplish the proposed acquisition of the common stock of REP-T,
pursuant to the terms and conditions as previously described, and to
provide sufficient available shares for future acquisitions, the Company
must increase it number of authorized shares of common stock allowed to
be issued by the Board of Directors.
Management recommends that the authorized number of common shares be
increased to 200 million shares with a par value of $.001 per share and
the authorized number of preferred shares with a par value of $.001 be
increased to 50 million shares.
PROPOSAL 2
Conversion of Debt to Convertible Common
Photonics Corporation and its subsidiaries have an estimated debt of $3.5
MM. (Face amount, not including all accrued interest, penalties or legal
expenses) and this debt is past due, in default with no visible means of
repayment, the Board of Directors has had discussions with legal counsel
concerning the alternative of filing for protection under bankruptcy.
However, as part of the acquisition of REP-T, a majority of the debt
holders have agreed to convert such debt to equity. The Company feels
that the conversion of this debt to equity in the newly capitalized
Company will provide the Company with the ability to avoid a bankruptcy
filing.
<PAGE>
This approximate $ 3.5 million in debt will be given .45 shares of common
stock for every $1.00 of debt. Once the conversion of debt to equity is
completed, the debt holders will hold approximately 1,519,090 shares of
common stock or approximately 2.6% ownership of common stock of the post
acquisition Company.
The former insiders of PHOX and their survivors represent approximately
$2 million of the $3.6 million of total debt.
Management recommends that the conversion of debt to common shares be
ratified by the shareholders of the Company.
PROPOSAL 3
Acquisition of REP-T
To consider and vote upon a proposal as set out in the Stock Purchase
Agreement dated as of June 30, 2000 between Photonics Corporation,
REpipeline.com, Inc., a Delaware corporation ("REP-D"}, REpipeline.com,
Inc., a Texas corporation ("REP-T") and the selling shareholders of REP-T
(the "Agreement") and to authorize the acquisition of REP-T, Inc. by REP-
D of Photonics, through the issuance of a majority of the shares
of Common Stock of Photonics and to ratify the actions of James T. Koo
and indemnify James T. Koo relating to the actions that he has taken in
preparing and consummating the transactions set out in the Agreement.
The Company has entered into an agreement, subject to shareholder
approval, to acquire all of the shares of REpipeline.com, Inc., Texas
corporation, headquartered in Dallas, Texas, into a newly created wholly
owned subsidiary of the Company, REP-D, Inc., a Delaware corporation. The
acquisition will be accomplished through an exchange of stock. There
will be no cash paid as part of the acquisition. The rate of exchange of
stock is one (1) share of REP-T, Inc. for each 9.11 shares of the
Company. (such exact conversion to be determined by Board of Directors
based on approximately 85% of PHOX shares being issued to REpipeline on a
fully diluted basis of PHOX for 100% of REP-T). The Company required and
received the agreement that a minimum of 95% of all shareholders of REP-T
to accept the terms of the acquisition prior to signing a definitive
agreement to acquire the REP-T shares. This requirement has been
met to the satisfaction of the Company.
1. The Shareholders of Photonics Corporation acknowledge that the
shareholders of REP-T shall be, upon approval of the reorganization and
acquisition by the shareholders of the Company, issued sufficient shares
of PHOX, to own approximately 85% of the fully diluted shares
of PHOX. This issuance of shares of PHOX to the shareholders of REP-T
will have the effect of greatly diluting the interest of the current
shareholders of PHOX.
2. The Company must authorize the issuance of sufficient shares to
provide REP-T shareholders with approximately 85% of the outstanding,
fully diluted shares of PHOX in exchange for the acquisition of 100% of
REP-T by REP-D.
Management recommends that the shareholders approve the acquisition of
REpipeline.com, Inc, a Texas corporation by the Photonics subsidiary,
REpipeline.com, Inc., a Delaware corporation.
<PAGE>
PROPOSAL 4
Ratification of the DTC Data Technology Transfer
DTC Data Technology (DTC) was an operating division of Photonics, that
was operating at a loss and was no longer pursuing R&D efforts and had no
cash to procure needed inventory to satisfy customer demands, it was
losing customers and operating in a declining market by selling older
computer technology which would eventually cease to provide any
revenues, REP-T has no interest in this business segment and conditioned
the acquisition transaction on the disposal of DTC and the use of the
proceeds from the sale thereof to defray the legal and accounting costs
of the acquisition.
The management recommends ratification of the formation of Sunnyvale
Technology Corporation, a Texas corporation as a subsidiary of Photonics,
the transfer of the assets and certain liabilities of DTC Data Technology
to Sunnyvale Technology Corporation, the sale of 90% of the shares of
Sunnyvale Technology Corporation to James T. Koo for a cash payment of
$75,000 plus the assumption of certain liabilities of approximately
$60,000 relating to the prior DTC operating division. Further, management
seeks shareholder approval of its plan to distribute, in the form of a
stock dividend, the remaining 10% interest in Sunnyvale Technology
Corporation, to the shareholders of record as of June 1, 2000, plus debt
holders who subsequently converted into common shares of Photonics.
PROPOSAL 5
Election of Directors and Amendment of Bylaws
The Company currently has no Directors. The former Directors resigned in
mid-1999, due the anticipated bankruptcy of the Company and the failure
of the Company to provide adequate director's liability insurance.
Management is proposing to change the Bylaws of the Company to reflect a
minimum number of directors that will comprise the Board of Directors
to be four (4) with the maximum remaining at seven (7). There are four
nominees being presented for the seven available Board positions
presently authorized in the Company's Bylaws. Each director to
be elected will hold office for the period from election until the next
annual meeting of the shareholders or until the earlier of his death,
resignation or removal and a successor is duly appointed by the Board of
Directors and/or elected by the shareholders.
VOTE REQUIRED
The change to the Bylaws of the Company, under California law, requires a
vote of the majority of the holders of the common stock of the Company as
of the record date. Regarding the election of the directors, the four
nominees receiving the highest number of affirmative votes, of the shares
entitled to be voted, shall be elected as directors of the Company.
Shares represented by executed proxies will be voted, if the authority to
do so is not withheld, for the election of the four nominees named below.
Votes withheld from any director are counted for purposes of determining
the presence or absence of a quorum, but have no legal effect under
California law. While there is no definitive statutory or case law
authority in California as to the proper treatment of abstentions and
<PAGE>
broker non-votes in the election of directors, the Company believes that
both abstentions and broker non-votes should be counted solely for
purposes of determining whether a quorum is present at the Annual
Meeting. In the absence of controlling precedent to the contrary, the
Company intends to treat abstentions and broker non-votes with respect to
the election of directors in this manner.
Under California law, with respect to the election of directors,
shareholders may exercise cumulative voting rights. Under cumulative
voting, each holder of Common Stock will be entitled to four votes
for each share held. Each shareholder may give one candidate all the
votes such shareholder is entitled to cast or may distribute such votes
among as many candidates as such shareholder chooses. However, no
shareholder will be entitled to cumulative votes unless the candidate's
name has been placed in nomination prior to the voting and at least
one shareholder has given notice at the meeting, prior to the voting, of
his or her intention to cumulate votes. Unless the proxy holders are
otherwise instructed, shareholders, by means of the accompanying proxy,
will grant the proxy holders' discretionary authority to cumulative
votes.
Unless otherwise directed, the proxy holders will vote the proxies
received by them for the four nominees named below. In the event that any
nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose. Each person nominated for election has
agreed to serve if elected and management has no reason to believe that
any nominee will be unable to serve.
NOMINEES
The names of the nominees and certain information about them are set
Forth below:
NAME TERM AGE POSITION WITH THE COMPANY
T. James Vaughn 3 Yrs 56 Chairman of the Board, Director
G. Thomas Bailey 3 Yrs 51 President, CEO, Director
Joseph F. Langston 3 Yrs 47 VP, Chief Financial Office, Director
James T. Koo 3 Yrs 59 Director
T. James Vaughn - Chairman of the Board/Director, is 56 years of age. Mr.
Vaughan has 30 years of experience in retailing and consulting. Most
recently, Mr. Vaughan has been the owner of J. Vaughan Consulting LLC. A
boutique consulting agent dealing with one major National account and
several start up companies in the B2B Internet area. Prior to that Mr.
Vaughan was Vice President of development for a division of Tandy Corp.
Mr. Vaughan was National Vice President of stores for Computer City a
110-store chain with revenues in excess of $2,000,000,000. Mr. Vaughan
was co-founder and Sr. Vice president of Pace Membership Warehouse, a
$3,000,000,000 warehouse club. Mr. Vaughan was founder, President and
C.E.O. of Med-club a retailer of medical devices and products to medical
professionals and consumers. Mr. Vaughan is experienced in start up
companies and has successfully raised the capital to bring two of his
own to market as well as assisting in several others. His knowledge of
venture funding, IPO's and capital markets is extensive.
<PAGE>
George Thomas Bailey - President, CEO/Director is 51 years of age. Mr.
Bailey has 30 years of experience in the consumer products, technology,
distribution and healthcare Industries. His consumer product career was
with Fortune 500 companies, General Foods, Sara Lee and PepsiCo in Senior
Management, General Management and Marketing Positions. He held the
position of Vice President of Strategic Planning for FoxMeyer Health
Corp. a $6 Billion Health Care Distribution and Technology Company. He
was the President and Chief Operating Officer for Health Streams
Technology a publicly traded start up technology company that developed
and marketed software applications, wide area networking services,
outsourcing and integration services to the healthcare vertical segment.
He held the position of President and CEO for NECCO, a rollup and
consolidation of environmental companies.
Earlier in his career, he was a real estate broker and building
contractor in the state of Florida. Most recently, he was a
consultant that advised companies on strategic planning, operations
planning, technology, business process reengineering and e-commerce.
Mr. Bailey's experiences and skills are in brand management classical
marketing, software development, mergers and acquisitions, business
restructuring, start up and rapid growth companies and general
management.
He earned his undergraduate degree from Florida State University and a
MBA from the University of Florida. Upon graduation from Florida State
University Mr. Bailey was a professional athlete with the Philadelphia
Eagles in the National Football league for five years.
Joseph F. Langston Jr. - Chief Financial Officer/Director, is 47 years of
age. Mr. Langston has over 20 years experience as a Chief Finance
Officer for various public companies, including Trans-Western Exploration
and Search Exploration. The last three and one-half years Mr. Langston
has worked with mall and medium companies overseeing securities
filings, registration documents and raising capital. He is experienced
in all aspects of the requirements to become a public entity, as well as
lead in raising capital through the public markets and institutional
investors.
James T. Koo - Director, is 59 years of age. Mr. Koo has over 30+ years
in the electronics industry, most recently has been an unpaid consultant
to the Company from June 23, 1999 to present for overseeing selling of
the Company. He served as the President and member of the Board of DTC
since 1994, CEO, President and member of the Board of Photonics Corp.
since 1996. From 1992 to 1994 he was a Vice President of Qume
Corporation and General Manager of DTC Data Technology Corporation, then
a wholly owned subsidiary of Qume Corporation. Prior to joining DTC,
from 1984 until April 1992, Mr. Koo was with Mosel-Vitelic, a developer
and manufacturer of memory integrated circuits. There he held several
positions including Senior Vice President of Engineering, Operations,
Marketing, Marketing and Sales of Taiwan Operations, and other management
positions.
BOARD COMMITTEES AND MEETINGS
The Board has an Audit Committee and a Compensation Committee. The Audit
<PAGE>
Committee meets with the Company's independent auditors at least annually
to review the results of the annual audit and discuss the financial
statements; recommends to the Board the independent auditors to be
retained; and receives and considers the accountants' comments
as to controls, adequacy of staff and management performance and
procedures in connection with audit and financial controls.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants
under the Company's stock option plans and otherwise determines
compensation levels and performs such other functions regarding
compensation as the Board may delegate.
The Board of Directors will receive reimbursement of expenses for their
direct out of pocket expenses incurred in fulfilling their duties and
responsibilities, as well as stock opinions pursuant to Proposal 6.
The Company recommends a vote in favor of each named nominee and the
creation of the Compensation Committee.
PROPOSAL 6
Remuneration of Officers and the approval of a Stock Option Plan
The 2000 Incentive Stock Option (ISO) plan provides options to purchase
common stock, may be granted only to employees of the company and its
subsidiaries. It is described in detail hereinbelow.
Outside Director Stock Option Plan
The Outside Director Stock Option Plan provides for the issuance of stock
options to the outside directors of the company. It is described in
detail hereinbelow.
Employment Agreements
Effective as June 30, 2000, the REP-T entered into an employment
agreement with Mr. Thomas Bailey, the President and Chief Executive
Officer of the REP-T. Following the completion of the acquisition, REP-D
will assume the employment agreement. The terms of the agreement are
described in detail hereinbelow.
Management recommends that the shareholders approve the foregoing
proposal 6.
PROPOSAL 7
Ratification and selection of Auditors
Hein and Associates, LLC was hired as the Company's independent public
accountants for the fiscal year ending December 31, 1999, by James Koo,
as consultant to the Company, due to cost reasons. Such placement of
Hein and Associates typically is done by Director approval, however there
are no current Directors serving on the Company's Board of Directors and
an auditor is needed immediately to ensure the Company's required SEC
filings are maintained timely.
<PAGE>
Subsequent to the hiring of Hein and Associates, LLC, management
determined that the auditors were not performing in a timely manner.
Their lack of timely response caused the Company to not be able
to file audited financial statements with the 10K annual reports. As a
result, the Company's listing on NASDAQ has been moved to the pink sheets
for share price quotations. In order to remedy this situation, the
Company hired Turner Stone and Associates, LLC who has completed the
audit and filed an amended annual report. The Company is in the
process of re-applying for listing on the over-the-counter reporting
status.
Shareholder ratification of the selection of Turner Stone and Associates
LLC as the Company's independent public accountants is not required by
the Company's Bylaws or otherwise. However, the Board is submitting the
selection of Turner Stone and Associates to the shareholders for
ratification as a matter of good corporate practice due to the lack of a
Board of Directors. If the shareholders fail to ratify the selection, the
new Audit Committee and the new Board will reconsider whether or not to
retain that firm. Even if the selection is ratified, the new Audit
Committee and the new Board, at their discretion may direct the
appointment of different independent accounting firm at any time during
the year if they determine that such a change would be in the best
interests of the Company and its shareholders.
The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and voting at the Annual Meeting will
be required to ratify the selection of Turner Stone and Associates, LLC.
Management recommends that the shareholders approve the foregoing
proposal 7.
PROPOSAL 8
Transactions of other such business as may properly come before the
meeting
To be recognized as such when properly presented by shareholders.
THE ACQUISITION AND RELATED TRANSACTIONS
Acquisition Discussion
Historical Activities of the Company:
On June 21, 1999, the Company's board of directors voted to lay off all
employees except those essential to an orderly shutdown of the business.
The Board, prior to their resignation, hired James T. Koo, formally the
Company's CEO and President, as a consultant with no pay, to attempt to
find a buyer for the Company or sell all possible assets and then to
shut down the business.
Effective June 23, 1999, the Company followed the procedures outlined
above, rather than seek protection under the bankruptcy, in hopes of
maximizing value to both the creditors and shareholders of the Company.
Initially most creditors agreed to suspend any legal actions against the
Company, to provide the Company time to seek a buyer or pursue
<PAGE>
liquidation.
In July 1999, a potential buyer of the Company was identified conditioned
on the creditors accepting $ 0.15 for every dollar owed. However, the
Company was not able to obtain an affirmative answer from a major
creditor, CompUSA. After months of delays and waiting for a response from
CompUSA, two creditors recommenced legal claims against the Company.
On August 1, 1999, the Company reduced operating expenses by moving into
headquarters at 1222 Alderwood Avenue, Sunnyvale, CA. 94089.
Since July 1999, Coast Business Credit, the Company's secured lender, has
requested customers of the Company to send payments directly to them. It
then advanced needed operating expenses to the Company. At the beginning
of November of 1999, Coast Business Credit determined that the Company
would not be able to pay back the debt that was owed to Coast based on
income stream of the accounts receivables of the Company, and thereafter
decided to stop advances to the Company unless a personal guarantee was
in place. At that time, James T. Koo, consultant to the Company,
provided a personal guarantee for the amount of $15,000 that was
advanced by Coast. The Company paid off the loan at the end of
December 1999.
Without a merger, the proceeds from a sale of the Company, if such sale
could be arranged, and after deducting necessary legal expenses would be
minimal. The Company expects that it could pay the priority employee
payroll, vacation due, then pay unsecured debt holders approximately one
cent ($0.01) for every dollar owed. However, there can be no assurances
that a sale could be arranged or that there would be any funds
available to pay any person. The Company does not expect that any
shareholders would receive any distribution from such a sale.
Recent Events
On May 22, 2000 the Company's listing on the NASDAQ over-the-counter
bulletin board market was deleted by NASDAQ. The reason for the
delisting was the failure of the Company to file audited financial
statements along with the Company's 10K annual report. The Company has
engaged a new auditing firm that has completed the required audit.
The Company has filed it's 10Q quarterly report with the SEC on a timely
basis. However, the quarterly report does not require audited financial
statements. The Company has filed an amended 10K, known as a 10K/A,
that includes the audited financial statements. The Company is in the
process of applying for relisting on the NASDAQ over-the-counter
bulletin board market. However, no assurance can be given NASDAQ will
re-list the shares of the Company.
Proposed Acquisition of RealEstate4Sale.com / REP-T
On February 3, 2000 Photonics Corporation, agreed to and announced the
principal terms of the Company's pending acquisition of
RealEstate4Sale.com, Inc., a Dallas, Texas based, privately held
Colorado Internet company that was developing a listing information
database of commercial/investment properties for sale and lease, within
the United States along with the development of planned access to
application services within that industry. On May 31, 2000, Photonics
<PAGE>
Corporation and RealEsate4Sale.com, Inc. terminated the agreement with
RealEstate4Sale.com pursuant to the terms and conditions of the February
3, 2000 agreement.
On July 10, 2000 but dated effective a of June 30, 2000, Photonics
Corporation entered into and announced a definitive
agreement (the "Agreement") to merge with the successor company to
RealEstate4Sale.com, Inc., REpipeline.com, Inc. ("REP-T") subject to the
fulfillment of the following conditions:
(i) Photonics must have has received confirmation from eighty-five
percent (85%) of the debt holders of record as of December 31, 1999 to
convert their respective debt into common stock of Photonics at a ratio
of .45 shares of Photonics common stock for each $1.00 of debt, such
debt to be a negotiated amount with each creditor, with any exceptions
requiring approval of an authorized representative of REP-T. This
condition has been fulfilled by the Company. A representative of REP-T
has accepted these approvals and exceptions, as noted in Exhibit A
attached to the Agreement. As part of this condition, there exists an
understanding between the parties that any non-converted debt of
Photonics, including any litigation resulting therefrom will be borne by
the Trust Account as further described in the Agreement.
(ii) All Photonics Preferred Stock has converted into common stock of
Photonics on a 1 to 1 ratio. This condition has also been fulfilled by
the Company. The dividends that remain unpaid for the fiscal year ends
of 1998 and 1999 will be paid in the form of common stock of the Company
at a price of $1 per share of Photonics common stock.
(iii) The Company will set up a trust account (the "Trust Account") for
the purpose of indemnifying the combined company against creditors of
Photonics that had unpaid debt as of December 31, 1999. The Trust
Account will have a term of three years and will be funded with Photonics
shares issued at the Closing. During the term of the Trust Account, the
shares in the Trust Account can be sold pursuant to instructions by the
Company; but no distributions can be made out of the account until
released or approved by the Board of REP-D.
(iv) James T. Koo will set up a trust account (the "Koo Trust") for the
purpose of indemnifying the combined Company against any fraud, errors or
omissions that might have been committed by James T. Koo in the
corporation's representation and warranties section of the Purchase
Agreement. The Koo Trust will have a term of one year and will be funded
with his current holdings of Photonics shares. During the term of the Koo
Trust, the shares in the Koo Trust can be sold pursuant to instructions
by both Mr. James T Koo, or his designated agent; but no distributions
can be made out of the account until released or approved by the
Board of the combined Company.
(v) Photonics shareholders must ratify the transfer of the assets and
business of the division of Photonics, DTC Data Technology and a wholly
owned subsidiary DTC Hong Kong, to Sunnyvale Technology Corporation and
the subsequent sale of 90% of Sunnyvale Technology Corporation to James
T. Koo for $75,000 plus certain assumed liabilities as of December 31,
1999.
<PAGE>
(vi) Photonics issue a sufficient number of newly issued common shares
to provide such issuance (approximately 85% of total issued shares after
full dilution) for the acquisition of all outstanding shares of REP-T,
Inc.
(vii) Both parties agree to abide by all local, state and federal
securities laws in relationship to the pending acquisition.
(viii) REP-T will provide all required legal and securities work to
effect such acquisition and meet all state, federal and securities filing
requirements.
(ix) Photonics will provide a copy of the last audit of financials and
other necessary documents and expenses of this merger at their expense.
(x) Photonics will initiate required filings, documents and notices to
hold a shareholders' meeting to elect Directors, of which Photonics will
recommend 3 Directors to be specified by REP-T, Inc.
(xi) The proxy notice of shareholder meeting shall be sent within 5 days
of the SEC approving such proxy statement.
(xii) The effective date of acquisition shall be the date of the
shareholders meeting, subject to shareholder approval of such
acquisition.
(xiii) REP-T is authorized to handle all public statements as same
are to be approved by the President or Chief Financial Officer or
Attorney or duly authorized person of each respective company. All
news releases are to conform to all local, state, federal and securities
guidelines.
(xiv) REP-T will incorporate REpipeline Acquisition and Finance
Corporation, a Texas corporation, that will hold 4,100,000 shares of
Photonics stock for the indemnification of any liability that
arises from the succession of REP-T from RE4S.
Explanation of REP-T
RealEstate4Sale.com, Inc. (RE4S) is a Colorado corporation incorporated
in August 1999. RE4S was formed to provide services to commercial real
estate brokers and other participants in the real estate transaction with
Internet based services that improve the workflow for the real estate
transaction and the marketing of services for the real estate industry.
On May 31, 2000, REP-T, a Texas corporation, purchased from RE4S certain
assets and assumed certain liabilities and shareholders' equity of RE4S.
On July 10, 2000 but dated effective as of June 30, 2000, REP-T entered
into a definitive agreement with Photonics, as previously described.
The Company has identified a void for the current Internet market
offerings and will position REP-T as the "One Stop" shopping Internet
site for business services, marketing services and hosted software
applications that are tailored to the commercial real estate business
community. The Hubs the company will participate in are the commercial
<PAGE>
Real Estate Broker services, enterprise document management for the real
estate transaction; Internet based tenant services, closing and
settlement and property management technology solutions.
The Company's business model consists of building the company through
internal technology development, strategic partnerships and acquisitions.
The core them to the business model is to become the applications
platform for the participants in the Commercial Real Estate transaction
much like Microsoft Office has become for integrating multiple
application into one user-friendly portal. The Company will have a
proprietary applications platform for integrating the portfolio of
products and services. The Company's business model products and
service strategy consists of building the company through internal
technology development, strategic partnerships and acquisitions.
The first building block for the Company is the commercial property
Internet listings site. The commercial property listing site is
operational today and has approximately 500 listings. The Company
is in the process of completing the technology development to provide the
portfolio of services from on Internet site.
Our marketing research has presented a major opportunity for REP-T to
become the technology conduit to link the major participants in the
commercial real estate through a seamless flow of information via the
Internet, improve work flow processes and capitalize on a new marketing
channel, the Internet, to market the products and services of REP-T.
The Company's market is commercial / investment property owners, owners
of real state brokerage firms, REO departments and real estate trustees.
The company's services will also appeal to title insurance companies,
lawyers, contractors, space planners and other firms in the commercial
real estate transaction and value chain. The annual market revenue for
three key major segments of the commercial real estate industry are
large in scale. The annual revenue for commercial real estate property
sales is $222 billion, commercial property leasing is $200 Billion, there
is approximately 5.33 to 6.86 billion square feet of rentable of
commercial property for lease and $546 Billion projected in new
commercial property construction. The company's business model is
positioning the company to participate in the rapid growing
Business-to-Business (B2B) on the Internet.
The commercial real estate industry has historically treated information
as confidential and a means of gaining competitive advantage. This has
fostered a closed environment and the Internet is opening up this
environment. The commercial real estate brokerage business has been
primarily localized in the market that they operate. There are firms
such as Trammel Crow that have national trademark recognition but by in
large the real estate brokerage business is a local business with local
trademark recognition. The Internet is changing the value chain and
transaction process for the commercial real estate industry. It will
open up new marketing channels for marketing a real estate brokerage firm
services and property listings on a local, national and international
basis. The commercial real estate transaction is a very manual and labor
intense process. A research firm, Market Connections, conducted research
that asked real estate brokers what percent of their time was spent
<PAGE>
collecting information to support transactions and the answer was 33%.
The Internet can provide tools to reengineer the work flow process,
however the real estate broker is now faced with multiple choices
and Internet sites that will add time to the already time intense real
estate transaction. REpipeline.com can provide a portfolio of services
that can be accessed through offices, home and wireless connectivity to
one Internet site that will provide the Real Estate business community
with business solutions that improve the marketing of their services,
reengineer the work flow process for a real estate transaction with
technology and keep them ahead of the rapidly changing Internet and
technology environment.
The Company has recruited Senior Management that have skills and
experience in technology, start-ups and rapid growth Companies, general
management from Fortune 500 Companies, commercial real estate, consumer
products marketing, public Companies and connecting an industry business
community with technology experiences.
The Internet
The Internet is quickly proving to be a transformational medium, not
merely another distribution or communication channel. Early e-commerce
development is showing that the Internet (more accurately the World Wide
Web, the graphical and text common-protocol exchange across widely
divergent network computer stations) represents a whole new way to
work, conduct trades and transactions, communicate, research, and improve
operational efficiencies around the world.
The Gartner Group has forecasted the business to business (B2B) Internet
business will grow from $145 Billion in 1999 to $7.29 Trillion in 2004.
In addition the Gartner Group is forecasting that the "Marketplaces"
segment which is Internet sites that bring buyers and sellers together in
a particular industry, affinity or geographic region will account for 37%
of the B2B space by 2004.
IDC, a nationally recognized Internet research group, stated small
businesses with fewer than 100 employees will take off as a key online
community. The Internet will equalize the playing field for
small to mid size companies to compete in the market place. The
technology trends for the new Internet will be personalized
and customization and will be the "ante" for a successful commercial
Internet site. The commercial real estate business community is
primarily made up of businesses with fewer than 100 employees.
REpipeline.com will capitalize on this market trend by offering Internet
based services and solutions to small and mid size companies that provide
them the technology tools to compete in the new environment.
An Internet market that will have a major impact on the industry is the
applications service provider (ASP). The market for hosting clients'
office applications and other software applications and technology is
projected to grow from $889 million in 1998 to $22.7 billion in 2003
according to the Gartner Group research. The outsourcing and management
of application software and other technology is especially true for the
small and mid size companies like a commercial real estate brokerage
firm. Advantages for businesses conducting business on the
<PAGE>
Internet with a company like REpipeline.com.
- Opens up new marketing channels for marketing goods and services to
national and international audiences and customers.
- Connects trading partners in a business transaction via the
Internet that allow them to exchange information and documents in a more
efficient manner.
- Personalize and improved efficiency for the business communication
with video conferencing and group computer conferencing capabilities with
clients and trading partners.
- Improves efficiency in the supply chain for goods and services
through communication transmission of data with one language protocol
that all companies can use for the procurement of materials, supplies and
products.
- Provides an electronic market place where buyers and sellers can
purchase and sell goods and services through an e-market maker.
- The Internet allows with e-mail capabilities and collection of
current and potential customer information to take targeted marketing to
a new level and sophistication.
- Research and the ability to source industry, market and customer
information on the Internet is providing businesses with sources that
they were not able to get before.
- Levels the playing field for companies that do not have the capital
to invest into an Intranet or private wide area network to compete with
large well-funded companies.
- The Internet is a free network that will allow companies to out
source their software applications and technology and access it through
the Internet to company such as an application service provider (ASP)
that will allow them to keep pace with the changing technology markets
and not invest substantial capital.
- Wireless and computer remote site access such as a lap top computer
and palm held devices to a company's software and REpipelines.com
Internet site and its portfolio of services will use the Internet
technology as its backbone for the communication platform.
The U.S. government's FY 1999 budget includes $850 million for high-
performance computing and communications, a part of which is for the
"Next Generation Internet Initiative," creating a network that is 100 to
1,000 times faster than today's Internet, including faster networks that
support new applications such as telemedicine, distance learning, and
real-time collaboration.
Business Strategies
- Provide the commercial real estate business community with
<PAGE>
technology services that provide Internet marketing tools for the sale &
purchase, and leasing of commercial property.
- Provide technology tools to the commercial real estate broker and
owner that will improve the work flow process and efficiency for the real
estate transaction.
- Develop, acquire and license technology that establishes the
company on the leading edge for Business-to-Business (B2B) companies.
- Build the company through internal technology development;
development of a highly efficient marketing and sales organization and
acquisitions and consolidation of Internet based commercial real
estate services companies.
- Establish a "One stop shopping" comprehensive Internet site for
market information, industry research such as tenant information, other
business services, and information exchange with companies involved with
the real estate transaction.
There can be no assurance such business strategies will lead to financial
success of the Company.
Marketing Strategies
- Create value with the customer through an integrated service
portfolio via the Internet for the commercial real estate transaction.
- Build awareness for the company's services through a targeted
marketing and media campaign.
- Build organic revenue streams by tapping into acquired companies
customer base to introduce the portfolio of services marketed by the
Company.
- Utilize a bundle-pricing plan for its services and products and
leverage big event marketing tactics.
- Build the internal sales force through acquisitions and external
hires.
There can be no assurance such marketing strategies will lead to
financial success of the Company.
Technology Strategies
- Architecture
- Secure maximum Internet bandwidth and partner with tier one ISP
partners with redundant communications capability and expandability.
- The operating systems will be Unix based and storage capacity for
relational databases will be with industry leaders like Oracle or
Microsoft's SQL.
- Applications will be proprietary and licensed with HTML and ASP
<PAGE>
script language capability.
- The applications will have XML data transfer and communications
capability.
- All applications will be 24/7, redundant and easily expandable.
There can be no assurance such technical strategies will lead to
financial success of the Company.
An In-depth Approach
The Company is very conscious that the Internet has been around now
for essentially five years, has a number of new "winners," is very
topical but also raises skepticism from some in the media, sectors of the
investment community, and still some business leaders, as it becomes hard
to separate substance from hype, strategic-value companies from
promotional emphasis.
The Company has taken and is taking the following steps to raise
the probability that REpipeline.com, Inc.'s service is highly successful:
- Engagement of a seasoned, high-level Board of Directors and
Advisory Board, to provide cross-checks on business building, networks to
high level strategic partners and potential customers, and provide
insights on specific areas of the commercial real estate transaction.
- A focused business model and business strategies that will provide
the road map and the priority of company initiatives to create market
place value.
- Careful selection of the Senior Management team with emphasis on
experience and skills in start up and rapid growth companies, technology
and wide area network, mergers and acquisition experience, positioning
and development of a new business concepts, execution for the company
business model, general management, classical consumer products
marketing skills and change management.
There can be no guarantee that the business will be successful.
However, the Company's Management team and Board of Directors are drawing
on their decades of considerable experience to raise the probability that
REpipeline.com becomes a successful Internet company.
Competing Commercial Real Estate Internet Sites
There are a number of Commercial Real Estate Sites on the Internet. The
business models for theses companies have focused on the "niche"
solutions and have been primarily in the marketing of commercial
property. REP-T's business model is an umbrella for a portfolio of
services and the primary thrust is in improving workflow processes and
the second thrust is marketing of services and commercial property.
The commercial real estate applications service provider (ASP) market is
<PAGE>
highly under developed and to our knowledge there are two to three ASP's
Internet sites that offer niche application software on the Internet and
currently there is not an Internet site that offers the products and
services REpipeline will be introducing to the market.
The market for the portfolio of product and services that REP-T will be
offering with "One stop shopping" at its Internet site is virtually an
untapped market. It is the Company's opinion that competition will try
and enter this space on the Internet however the company feels its
strategies, execution plan and management team will be successful in
capitalizing on the untapped market opportunity.
The Company believes it is the only commercial real estate business and
marketing services company that will offer an Integrated portfolio of
services at one web site. There are single service providers in the
commercial property listing market and companies who offer market
information in the leasing and tenant market. Examples of these types of
single service companies are LoopNet, CoStar Group and small commercial
property Internet listing sites.
LoopNet
LoopNet is the largest Internet commercial listing site and has
approximately 90,000 listings and does not charge for this service. It
is the leading Internet commercial real estate listing site.
The company's investors include Trammel Crow, one of the United States
leading commercial real estate services companies and Grubb & Ellis. The
company offers commercial property listings, access to mortgages and
industry news.
LoopNet's market positioning and REpipeline.com advantage:
LoopNet's service offering is limited in scope and they are not currently
charging for posting a commercial property listing on the Internet. The
market needs and benefits that the commercial real estate broker is
seeking are well beyond LoopNet's service offering. It is the company's
opinion that with LoopNet being financially backed by two large
commercial real estate firms that this could conflict with other
commercial real estate companies using their services in the event that
they want to charge a fee for listing commercial property.
CoStar
The largest company in the Internet commercial real estate market
intelligence is CoStar. CoStar provides information on office and
industrial space for the leasing commercial real estate industry.
Through its software products, the company's clients can access its
database of office space, analyze leasing options, market conditions and
competitive property. CoStar charges clients a monthly subscription fee
for this commercial property leasing information. CoStar has been
acquiring local research companies and expanding their geographic
U.S. coverage. CoStar provides the commercial real estate brokers with
market information on tenants who are leasing property so they can
prospect for new clients.
<PAGE>
CoStar market positioning and REpipeline.com advantage:
CoStar is a research information source for commercial property listings.
The way the data is gathered for the research is very labor intensive.
CoStar does not offer a portfolio of services and its acquisitions do not
appear to achieve a high level of operating cost reductions or operating
efficiency.
Small Commercial Property Listing Sites
There are 100's of commercial property listing sites on the Internet. In
doing a search on American on Line 7,000 sites came up for commercial
real estate listing sites. In order to enter the Internet commercial
listing site business very little capital is required. The listing sites
focus on a local geography and local relationships. These companies are
being considered as acquisition candidates by REpipeline.com to expand
its geographic coverage for a commercial real estate portfolio of
services. In addition local commercial real estate brokerage firms have
Internet sites for their own property and the number of sites to their
site is limited due to the limited number of listings and site visits.
Small Commercial Property market positioning and REpipeline.com
advantage:
The small commercial property listings sites in general do not meet the
market needs with a one-service product offering. The market wants a
portfolio of services from one Internet site. In addition these
companies have limited capital for expansion and should be consolidated
into a larger Internet based company with a portfolio of services.
However, competition can change and new competitive companies can form
and can be a barrier to the success of the Company.
Management of REP-T that will become the management of Photonics after
the Acquisition
The Company's senior management team and directorial oversight are
in place. Core management's expertise in general business development,
advanced technology applications, systems design and structuring,
strategic planning, marketing, financing, human resources, global trade,
and knowledge of specific industry requirements, is supplemented by a
range of specialized skills and experience of Board members (both
Directors and Advisors) and the team now being assembled.
Founding Directors will hold office until the next annual stockholders
meeting, at which time their successors will be chosen. Directors will
continue until their successors have been elected or qualified, or until
their death, resignation, retirement, removal, or disqualification.
Vacancies on the board will be filled by a majority vote of the remaining
directors. Officers of the Company serve at the discretion of the Board
of Directors. The Company's core team comprises:
James Vaughn, 56 Chairman of the Board of Directors
February/2000
Thomas Bailey, 51 President, CEO and Director
February/2000
<PAGE>
Michael Craven, 39 Vice President Sales and Business Development
March/2000
Chip Langston, 47 Chief Financial Officer and Director
July/1999
Each director is elected for a period of one year at the Company's annual
meeting of stockholders and serves until his successor is duly elected by
a majority of stockholders. Officers are elected by and serve at the
discretion of the Board of Directors. Each Director currently receives no
cash compensation in connection with attending meetings of the Board of
Directors.
The following is a brief summary of the background of each Director and
Executive Officer of the Company:
James Vaughan - Chairman of the Board of Directors, is 56 years of age.
Mr. Vaughan has 30 years of experience in retailing and consulting. Most
recently Mr. Vaughan has been the owner of J. Vaughan Consulting LLC. A
boutique consulting agent dealing with one major National account and
several start up companies in the B2B Internet area. Prior to that Mr.
Vaughan was Vice President of development for a division of Tandy Corp.
Mr. Vaughan was National Vice President of stores for Computer City a
110-store chain with revenues in excess of $2 billion Mr. Vaughan was
co-founder and Sr. Vice president of Pace Membership Warehouse, a $3
billion warehouse club. Mr. Vaughan was founder, President and CEO of
Med-club a retailer of medical devices and products to medical
professionals and consumers. Mr. Vaughan is experienced in start up
companies and has successfully raised the capital to bring two of his own
to market as well as assisting in several others. His knowledge of
venture funding, I.P.O's, and the capital markets are extensive.
George Thomas Bailey - President and CEO/Director is 51 years of age.
Mr. Bailey has 30 years of experience in the consumer products,
technology, distribution and healthcare Industries. His consumer product
career was with Fortune 500 companies, General Foods, Sara Lee and
PepsiCo in Senior Management, General Management and Marketing Positions.
He held the position of Vice President of Strategic Planning for
FoxMeyer Health Corp. a $6 Billion Health Care Distribution and
Technology Company. He was the President and Chief Operating Officer for
Health Streams Technology a publicly traded start up technology company
that developed and marketed software applications, wide area networking
services, outsourcing and integration services to the healthcare vertical
segment. He held the position of President and CEO for NECCO, a rollup
and consolidation of environmental companies.
Earlier in his career he was a real estate broker and building contractor
in the state of Florida. Most recently he was a consultant that advised
companies on strategic planning, operations planning, technology,
business process reengineering and e-commerce. Mr. Bailey's experiences
and skills are in brand management classical marketing, software
development, mergers and acquisitions, business restructuring, start up
and rapid growth companies and general management.
He earned his undergraduate degree from Florida State University and a
<PAGE>
MBA from the University of Florida. Upon graduation from Florida State
University Mr. Bailey was a professional athlete with the Philadelphia
Eagles in the National Football league for five years.
Michael Craven - Vice President of Sales & Business Development, is 39
years of age. Mr. Craven has over 15 years of experience in sales,
marketing and business management. Mr. Craven was most recently the
President & CEO of Hebel SouthCentral; a U.S. subsidiary of the worldwide
German based Hebel AG. Mr. Craven was responsible for all aspects of
this start-up company involved in the introduction and development of a
new structural system for use in the U.S. commercial design and
construction industry. The company ultimately merged with Matrix, a
division of J.A. Jones, Inc. Prior to that Mr. Craven was the Executive
Vice President of Materials Marketing Corporation responsible for all
U.S. commercial sales and operations. Mr. Craven not only has experience
with start-up operations but also with the sales and marketing
development of a completely new technology and industry. Mr. Craven
has extensive experience in the area of developing and managing high
performance sales organizations particularly within complex selling
environments. Mr. Craven is a veteran of the U.S. Navy where he earned
numerous awards and commendations for his outstanding leadership skills.
Chip Langston - Chief Financial Officer/Director, is 47 years of age. Mr.
Langston has over 20 years experience as a Chief Finance Officer for
various public companies, including Trans-Western Exploration and Search
Exploration. The last three and one-half years Mr. Langston has worked
with small and medium companies overseeing securities filings,
registration documents and raising capital. He is experienced in all
aspects of the requirements to become a public entity, as well as led in
raising capital through the public markets and institutional investors.
EXECUTIVE COMPENSATION OF OFFICERS AND DIRECTORS OF REP-T THAT WILL BE
ASSUMED BY PHOTONICS CORPORATION
Remuneration of Officers and the approval of a Stock Option Plan
The 2000 Incentive Stock Option (ISO) plan provides options to purchase
common stock, may be granted only to employees of the company and its
subsidiaries. Subject to any adjustment as provided by the ISO plan, the
aggregated number of shares, which have been authorized and reversed for
issuance under the plan, subject to adjustments to reflect changes in the
company's capitalization resulting from stock splits, stock dividends and
other similar events be issued and sold, cannot exceed 3,000,000 shares
of the combined company.
The plan is administered by the Compensation Committee. The Committee
has the sole authority to interpret the plan, to determine the persons to
whom the options will be granted, to determine the basis upon which the
options will be granted, and to determine the exercise price, duration
and other terms of the options to be granted under the plan. The maximum
period for exercise of an option may not be more than ten years from the
date of grant and the exercise price may not be less than the fair market
value of the shares underlying the options on the date of the grant.
Options granted become execrable at dates determined by the Stock Option
Committee of the Board of Directors. The Board of Directors may
amend without stockholder approval, in any respect other than any
<PAGE>
amendment that requires stockholder approval by law, and may modify any
outstanding option, including the repricing of non-qualifying options
with the consent of the option holder. There are currently six employees
who are eligible for the plan and due to the planned growth rate for the
Company, the Company is estimating that 150 employees would be eligible
to participate in the plan during the next 24 months.
The Incentive Stock Options have a term of ten years (10) and an exercise
price equal to the market price of the common stock on the day of the
grant. The Incentive Stock Options will vest at the rate of thirty-three
and a third percent (33 1/3%) on an annual basis for three years.
Outside Director Stock Option Plan
The Outside Director Stock Option Plan provides for the issuance of stock
options to the outside directors of the company. A total of 250,000
shares has been authorized and reversed for issuance under the plan,
subject to adjustments to reflect changes in the company's capitalization
resulting for stock splits, stock dividends and similar events. Outside
Directors are those Directors of the Company who are not Executive
officers or regular salaried employees of the Company as of the date the
option is granted. Under the plan, an option for 15,000 shares Common
Stock will be granted to each person who qualified as an outside director
each year that such person is elected as a director of the Company. The
exercise price of each option granted under the plan will be the fair
market value (as reported by the Nasdaq national market) of the Common
stock at the time the option is granted. Each option will be exercisable
immediately, and will expire ten years from the date of grant.
The options granted during 2000 have a term of ten (10) years and an
exercise price of $1.00.
Employment Agreements
Effective as January 26, 2000, the REP-T entered into an employment
agreement with Mr. Thomas Bailey, the President and Chief Executive
Officer of the REP-T. Following the completion of the acquisition, REP-D
will assume the employment agreement. The agreement provides for the
Company to employ Mr. Bailey for a base salary of $225,000.
The agreement provides for annual bonus payments as determined by the
Board of directors and severance payment for termination without cause in
an amount of equal to twelve (12) months of salary and any bonus paid for
during the previous twelve (12) months. In the event in a change of
ownership by virtue of a merger or acquisition, where by the net
effect is a change in Bailey's title, responsibility or pay structure,
Bailey would have the option to accept such change or elect to exercise
the severance option for termination with out cause. The employment
agreement provides for a 20% equity position in the company that will be
rewarded based on certain performance targets.
Compensation of the Executive Officers
The following table sets forth information regarding compensation for the
Company's Chief Executive Officer and other executive officers of the
Company.
<PAGE>
Name and Annual Compensation
Principal Position Year Salary Bonus
Mr. Thomas Bailey 2000 $225,000 ----
President and Chief
Executive Officer
Mr. Chip Langston 2000 $165,000 ----
Chief Financial
Officer
Mr. Michael Craven 2000 $135,000 ----
Vice President Sales
& Business Development
(1) Salaries are annualized for a full year and annual bonus will be
determined by the Board of Directors. The CEO position annual bonus
potential is 100% of salary, the CFO is 60% of salary and
the Vice President of Sales and Business Development is 50% of salary.
(2) Mr. Langston and Mr. Craven's long term compensation will be
determined by the Board of Directors during the year 2000.
The following table sets forth certain information regarding stock
options granted during 2000 to the named executive of the Company.
Number of
Securities
Underlying Exercise Price Grant Date
Options
Name
Mr. Thomas Bailey----------- 500,000 $1.00 June 1, 2000
Compensation Philosophy
The Company operates in a highly competitive and rapidly changing high
technology industry. The goals of the compensation program are to align
compensation with the company's newly revised business objectives and the
performances of the employees, to enable the Company to attract, retain
and reward executive officers and other key personnel who contribute to
the long-term success of the Company, and to motivate them to enhance
long-term shareholder value. Key elements of this philosophy are:
1. Total compensation should be sufficiently competitive with other
companies in similar or related industries so that the Company can
attract and retain qualified personnel.
2. The Company desires to maintain annual incentive opportunities
sufficient to provide motivation to achieve specific operating goals and
to generate rewards that bring total compensation to competitive levels.
3. The Company desires to provide significant equity-based incentives for
<PAGE>
executives and other key employees to ensure that they are motivated over
the long-term to respond to the Company's business challenges and
opportunities as owners and not just as employees.
Base Salary. The Committee annually reviews each executive officer's base
salary. When reviewing base salaries, the Committee considers individual
and corporate performance, levels of responsibility, prior experience,
breadth of knowledge and competitive pay practices.
Long-Term Incentives. The Company's long-term incentive program consists
of the Stock Option Plans set out hereinabove, as amended from time to
time. The stock option program utilizes vesting periods (generally three
to four years) to encourage key employees to continue in the employ of
the Company. Through option grants, executives receive equity incentives
to build long-term shareholder value. Grants are made at 100% of fair
market value on the date of the grant. Executives receive value from
these grants only if the Company's common stock appreciates in the long
term. The size of option grants is determined by the Company's philosophy
of linking executive compensation with shareholder interests.
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the shares of the Company's Common Stock
beneficially owned at December 31, 1999, by (i) each person who is known
by the Company to be the beneficial owner of more than five percent of
the Common Stock, (ii) by each of the former directors, (iii) by each of
the former executive officers listed in the Summary Compensation
Table for 1998, and (iv) by all former directors and officers as a group.
The options, warrants and common and preferred stock represented in this
table reflect the 1 for 5 reverse split of Photonics stock with became
effective February 9, 1996 prior to the finalization of the merger with
DTC.
Shares
Beneficially Note #
Percent
Beneficial Owner Owned (1) Owned
(2)
David S. Lee 1,106,521
16.4%
Chairman of the Board
c/o Photonics
1222 Alderwood Ave.
Sunnyvale, CA 94089
Broadsino Computer 891,412
13.2%
Development, Ltd.
K.C. Yeung
Room 1101, 1103 and
1104 Star Center
443-451 Castle Peak Road
Kwai Chung NT, Hong Kong
Domex Technology 779,612 11.5%
<PAGE>
Corporation
No. 2, Technology Rd. 1,
Science-Based
Industrial Park
Hsinchu, Taiwan, ROC
James T. Koo 536,761 8.1%
President
c/o Photonics
1222 Alderwood Ave.
Sunnyvale, CA 94089
Robert P. Dilworth 15,491 *
Director
John Miao, Director 155,000 2.2%
C/o Photonics
1222 Alderwood Ave
Sunnyvale, CA 94089
All Officers and 2,710,288 (5 persons) 40.1%
Directors as a group
* Denotes less than 1%
1. Beneficial Ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power
with respect to all shares of Common and Preferred Stock and options or
warrants to purchase stock.
2. Percentage calculations are based upon December 31, 1999 figures of
4,517,362 shares of Common Stock, 2,248,136 shares of Preferred stock,
which since that date has all been converted to common stock, and no
options to purchase stock. All options have expired as of Dec. 31, 1999.
No new options have been granted.
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 as amended (the
"Exchange Act") requires the Company's officers (as defined in Rule 16a-
1(f), directors and persons who own more than ten percent of a registered
class of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC").
Such persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
COMPARISON OF RIGHTS OF SHAREHOLDERS OF PHOTONICS AND REP-T
The rights of Photonics' stockholders are governed by its Articles of
Incorporation. its By-laws ("Photonics Bylaws") and the laws of the State
of California. The rights of REP-T's stockholders are governed by its
Certificate of Incorporation, its Bylaws ("REP-T Bylaws") and the laws of
the State of Texas.
Following receipt of the Photonics' shares to be distributed to them when
REP-D acquires all of the stock of REP-T, the rights of REP-T
stockholders who become Photonics shareholders will be governed
by the Photonics Articles of Incorporation, Photonics Bylaws and the laws
of the State of California. In most respects, the rights of Photonics
shareholders and REP-T stockholders are similar.
The following is a summary comparison of certain differences between the
rights of REP-T stockholders under the Texas Law and its Certificate of
Incorporation, as amended, and Bylaws and the rights of Photonics
shareholders under the California Law and the Photonics Articles and
Bylaws.
Cumulative Voting. In an election of directors under cumulative voting,
each share of stock normally having one vote is entitled to a number of
votes equal to the number of directors to be elected. A stockholder may
then cast all such votes for a single candidate or may allocate them
among as many candidates as the stockholder may choose (up to the number
of directors to be elected). Without cumulative voting, the holders of a
majority of the shares present at an annual meeting or any annual meeting
held to elect directors would have the power to elect all the directors
to be elected at that meeting, and no person could be elected without the
support of holders of a majority of the shares voting at such meeting.
Under the Texas Law, cumulative voting in the election of directors in
not permitted unless the shareholder who wishes to cumulate his votes
give notice to the secretary of the corporation on or before the day
preceding the election . Under the California Law, cumulative voting in
the election of directors is a right available to all shareholders of
California corporations unless a corporation is "listed" for trading and
that corporation's articles of incorporation specifically eliminate
cumulative voting. The Photonics Articles do not eliminate cumulative
voting.
Shareholder Power to Call Annual Shareholders Meeting. Under the Texas
Law, a special meeting of stockholders may be called by the president;
board of directors; by the holders of at least ten (10) percent of all
the shares entitled to vote at the proposed special meeting, unless the
articles of incorporation provide for a number of shares greater than or
less than ten (10) percent, in which event special meetings of the
shareholders may be called by the holders of at least the percentage of
shares so specified in the articles of incorporation (but in no
event shall the articles of incorporation provide for a number of shares
greater than fifty (50) percent); or any other person authorized to do so
in the corporation's certificate of incorporation or bylaws.
Under the California Law, a annual meeting of shareholders may be called
by the board of directors, the chairman of the board, the president, the
holders of shares entitled to cast not less than 10% of the votes at such
meeting and such persons authorized to do so in the articles of
incorporation or bylaws.
Dissolution. Under the Texas Law, a dissolution must be approved by
stockholders holding 100% of the total voting power or the dissolution
must be initiated by the board of directors and approved by the holders
of a two-thirds majority of the outstanding voting shares of the
corporation.
<PAGE>
Under the California Law, shareholders holding 50% or more of the total
voting power may authorize a corporation's dissolution and this right may
be modified by its articles of incorporation.
Size of Board of Directors. The Texas Law permits the board of directors
of a Texas corporation to consist of one or more persons and permits the
board to change the authorized number of directors by amendment to the
corporation's bylaws or in the manner provided in the bylaws unless the
number of directors is fixed in the corporation's certificate of
incorporation. in which case a change in the number of directors may be
made only by amendment to the certificate of incorporation.
Under the California Law, although changes in number of directors must in
general be approved by the shareholders, the board of directors of a
California corporation may fix the exact number of directors within a
stated range set forth in the corporation's articles of incorporation or
bylaws, if the stated range has been approved by the shareholders.
The Photonics By-laws currently provide, and such provision is proposed
to be changed pursuant to Proposal number five of this Proxy, that the
number of directors shall be established from time to time by resolution
of the Photonics Board or the shareholders, provided that the authorized
number shall not be fewer than five nor more than seven.
Classified Board of Directors. A classified board is one with respect to
which a certain number of the directors, but not necessarily all, are
elected on a rotating basis each year. The Texas Law permits,. but does
not require, a Texas corporation to provide in its bylaws for a
classified board of directors, pursuant to which the directors can be
divided into up to three classes of directors with staggered terms of
office, with only one class of directors to be elected each year for a
maximum term of three years.
Under the California Law, generally directors must be elected annually
unless the corporation is "listed" and specifically provides in it's by-
laws for terms other than one year. Under the California Law, a listed
corporation may have a classified board of no fewer than six directors
divided into two classes of directors or a classified board of no fewer
than nine directors divided into three classes. The Photonics charter
documents do not provide for a classified board.
Removal of Directors. Under the Texas Law, any director or the entire
board of directors may be removed with or without cause by a vote of the
majority of the shareholders of the corporation however, no director may
be removed (unless the entire board is removed) if the number of shares
voted against the removal would be sufficient to elect the director under
cumulative voting.
Under the California Law, any director or the entire board of directors
may be removed, with or without cause, with the approval of a majority of
the outstanding shares entitled to vote; however, no director may be
removed (unless the entire board is removed) if the number of shares
voted against the removal would be sufficient to elect the director under
cumulative voting.
Actions by Written Consent of Stockholders. Under the Texas Law,
<PAGE>
stockholders may execute an action by written consent in lieu of a
meeting of stockholders. The Texas Law permits a corporation
to eliminate such actions by written consent in its certificate of
incorporation or in it's bylaws.
Under the California Law, unless otherwise provided in the articles of
incorporation, any action that may be taken at any annual or annual
meeting of shareholders may be taken without a meeting by written consent
of shareholders having the requisite number of votes, subject to the
requirement that ten days' advance notice of such shareholder approval of
certain types of transactions and matters be given where all
shareholders' consents are not solicited. The Photonics Articles do not
limit the rights of shareholders to act by written consent.
Advance Notice Requirement for Shareholder Proposal and Director
Nominations
Photonics' Bylaws do not require advance notice of proposal or director
nominations intended to be presented by a shareholder at an annual
meeting.
Voting Requirements. Unless otherwise specified in a Texas corporation's
certificate of incorporation, an amendment to the certificate of
incorporation requires the affirmative vote of a two-thirds majority of
the outstanding stock entitled to vote thereon. Furthermore, under the
Texas Law, the holders of the outstanding shares of a class are entitled
to vote as a class upon any proposed amendment to the certificate of
incorporation, whether or not entitled to vote thereon by the
provisions of the corporation's certificate of incorporation, if the
amendment would increase or decrease the aggregate number of authorized
shares of such class, increase or decrease the par value of the shares of
such class, or alter or change the powers, preferences or specific rights
of the shares of such class so as to adversely affect them.
Unless otherwise specified in a California corporation's articles of
incorporation, an amendment to the articles of incorporation requires the
affirmative vote of a majority of the outstanding shares entitled to vote
thereon. Under the California Law, the holders of the outstanding shares
of a class are entitled to vote as a class if the proposed amendment
would (i) increase or decrease the aggregate number of authorized shares
of such class, (ii) effect an exchange, reclassification or cancellation
of all or part of the shares of such class, other than a stock split,
(iii) effect an exchange, or create a right of exchange, of all or part
of the shares of another class into the shares of such class, (iv) change
the rights, preferences, privileges or restrictions of the shares of such
class, (v) create a new class of shares having rights, preferences
or privileges prior to the shares of such class, or increase the rights,
preferences or privileges or the number of authorized shares having
rights, preferences or privileges prior to the shares of such
class, (vi) in the case of preferred shares, divide the shares of any
class into series having different rights, preferences, privileges or
restrictions or authorize the board of directors to do so, or (vii)
cancel or otherwise affect dividends on the shares of such class which
have accrued but have not been paid.
<PAGE>
Under Texas Law, any merger, consolidation or sale of all or
substantially all of a corporation's assets must be approved by the
corporation's board of directors and a two-thirds majority of the
outstanding shares entitled to vote unless the board of directors
requires a higher percentage of votes in it's presentation of the
merger proposal.
Under California Law, with certain exceptions, any merger, consolidation
or sale of all or substantially all of a corporation's assets must be
approved by the corporation's board of directors and a majority of the
outstanding shares entitled to vote. In addition, the California Law
requires such transactions, among others, to be approved by a majority of
the outstanding shares of each class of stock without regard to
limitations on voting rights.
Rights of Dissenting Stockholders. Generally, stockholders of a Texas
corporation have a right to dissent from a merger or consolidation of the
corporation for which a stockholders' vote is required. There are,
however, generally no statutory rights of dissent with respect to
stockholders of a Texas corporation merger in which there is a single
surviving or new domestic or foreign corporation, or from any plan of
exchange whose shares of stock on the record date were either (i)
listed on a national securities exchange or designated as a national
market system security on an inter-dealer quotation system by the
National Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 stockholders where such stockholders receive
only shares of stock of the corporation surviving or resulting from the
merger or consolidation (or cash in lieu of fractional interests
therein).
Generally, shareholders of a California corporation who dissent from a
merger or consolidation of the corporation are entitled to dissenters'
rights.
Inspection of Stockholders List. Both the Texas Law and the California
Law allow any stockholder to inspect the stockholders list for a purpose
reasonably related to such person's interest as a stockholder.
Additionally, the California Law provides for an absolute right to
inspect and copy the corporation's shareholders list by a person or
persons holding at least 5% in the aggregate of the corporation's
outstanding voting shares.
Dividends. Subject to any restrictions contained in a corporation's
certificate of incorporation, the Texas Law generally provides that a
corporation may declare and pay dividends at the direction of the board
of directors except that a share dividend payable in authorized but
unissued shares may not be paid by a corporation if the surplus of the
corporation is less than the amount required by the Texas Business
corporation Act to be transferred to stated capital at the time that
share dividend is paid.
The California Law provides that a corporation may make a distribution to
its shareholders if: (i) the retained earnings of the corporation
immediately prior to the distribution equal or exceed the amount
<PAGE>
of the proposed distribution: or (ii) immediately after giving effect to
the distribution, (a) the sum of the assets of the corporation (exclusive
of goodwill, capitalized research and development expenses and deferred
charges) would be at least equal to 1'/4 times its liabilities (not
including deferred taxes, deferred income and other deferred credits),
and (b) the current assets of the corporation would be at least equal to
its current liabilities or. if the average of the earnings of the
corporation before taxes on income and before interest expense for the
two preceding fiscal years was less than the average of the interest
expense of the corporation for such fiscal years, at least equal to 11/4
times its current liabilities. In addition, the corporation making the
distribution must not be, and must not as a result of the distribution
become, likely to be unable to meet its liabilities (except those whose
payment is otherwise adequately provided for) as they mature. Neither the
Photonics Articles nor its Bylaws contain any presently applicable
restrictions on the declaration or payment of dividends.
By-laws Under the Texas Law, the authority to adopt, amend, or repeal
the bylaws of a Texas corporation is held by either the board of
directors or by the stockholders unless such authority is conferred
differently in the corporation's certificate of incorporation. A bylaw
adopted by the shareholders may restrict or eliminate the power of the
Board to adopt, amend or repeal the bylaws.
Under the California Law, a corporation's bylaws may be adopted, amended
or repealed either by the board of directors or the shareholders of the
corporation. Photonics' Bylaws provide that the Bylaws may be changed
either by the vote of the holders of a majority of the outstanding shares
entitled to vote or by the board of directors; provided. however, that
the Board may not amend the Bylaws in order to change a fixed number of
directors (except to alter the authorized number of directors within the
existing range of a minimum of five and a maximum of seven directors). A
bylaw adopted by the shareholders may restrict or eliminate the power of
the Board to adopt, amend or repeal the bylaws.
Preemptive Rights. Stockholders of a Texas corporation generally have
preemptive rights except as may be limited by statute or as may be
limited in the company's certificate of incorporation.
Shareholders of a California corporation have such preemptive rights as
may be provided in the corporation's articles of incorporation. The
Photonics Articles do not grant any preemptive rights to Photonics
shareholders. However, case law in California has created a doctrine of
"quasi-preemptive" rights in appropriate circumstances, even when no such
rights exist in the corporation's articles of incorporation.
Transactions Involving Officers or Directors. A Texas corporation may
lend money to, or guarantee any obligation incurred by, its officers or
directors if, in the judgment of the board of directors, such loan or
guarantee may reasonably be expected to benefit the corporation. With
respect to any other contract or transaction between the corporation and
one or more of its directors or officers, such transactions are neither
void nor voidable if either (i) the director's or officers interest is
made known to the disinterested directors or the stockholders of the
<PAGE>
corporation. who thereafter approve the transaction in good faith, or
(ii) the contract or transaction is fair to the corporation as of the
time it is approved or ratified by either the board of directors, a
committee thereof, or the stockholders.
Under the California Law, any loan or guarantee to or for the benefit of
a director or officer of the corporation or its subsidiaries requires
approval of the shareholders unless such loan or guarantee is provided
for under a plan approved by shareholders owning a majority of the
outstanding shares of the corporation. In addition, the California Law
permits shareholders to approve a bylaw authorizing the board of
directors alone to approve a loan or guarantee to or on behalf of
an officer (whether or not a director) if the board of directors
determines that such a loan or guarantee may reasonably be
expected to benefit the corporation, which bylaw may be utilized to
authorize officer loans and guarantees if the corporation has 100 or more
shareholders of record. The shareholders of Photonics have not approved
such a bylaw provision.
The California Law similarly states that contracts or transactions
between a corporation and (i) any of its directors or (ii) a
second corporation of which a director is also a director are not void or
voidable if the material facts as to the transaction and as to the
director's interest are fully disclosed and the disinterested directors
or a majority of the disinterested shareholders represented and voting at
a duly held meeting approve or ratify the transaction in good faith, or
the person asserting the validity of the contract or transaction sustains
the burden of proving that the contract or transaction was just and
reasonable as to the corporation at the time it was authorized, approved
or ratified.
Filling Vacancies on the Board of Directors. Under the Texas Law,
vacancies on the board of directors and newly created directorships may
be filled by a special meeting of the shareholders or a majority of the
directors then in office (even though less than a quorum) unless
otherwise provided in the certificate of incorporation or bylaws of the
corporation.
Under the California Law, any vacancy on the board of directors other
than one created by removal of a director may be filled by the board of
directors. If the number of directors is less than a quorum, a vacancy
may be filled by the unanimous written consent of the directors then in
office, by the affirmative vote of a majority of the directors at a
meeting held pursuant to notice or waivers of notice or by a sole
remaining director. A vacancy created by removal of a director may be
filled by the board of directors only if so authorized by a corporation's
articles of incorporation or by a bylaw approved by the corporation's
shareholders. Photonics' Articles and Bylaws do not authorize the Board
to fill such a vacancy.
Limitation of Liability of Directors and Indemnification. Under the Texas
Law, a corporation may include in its certificate of incorporation a
provision which would, subject to the limitations described below,
eliminate or limit directors' liability for monetary damages for breaches
of their fiduciary duty of care. Under the Texas Law, a director's
<PAGE>
liability cannot be eliminated or limited (i) for breaches of the duty of
loyalty, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for the
payment of unlawful dividends or expenditure of funds for unlawful stock
purchases or redemptions, or (iv) for transactions from which such
director derived an improper personal benefit.
Under the California Law, a corporation is permitted to adopt a provision
in its articles of incorporation eliminating the liability of a director
to the corporation or its shareholders for monetary damages for breach of
the director's fiduciary duty of care, provided such liability does not
arise from certain proscribed conduct, including intentional misconduct
and transactions pursuant to which the director received an improper
personal benefit. In addition, under the California Law, (i) a
corporation has the power to indemnify a director against expenses,
judgments, fines and settlements if that person acts in good faith and in
a manner the person reasonably believed to be in the best interests of
the corporation and, in the case of a criminal proceeding. had no
reasonable cause to believe the conduct of the person was unlawful, and
(ii) a corporation has the power to indemnify, with certain exceptions,
any person who is a party to any action by or in the right of the
corporation, against expenses actually and reasonably incurred by
that person in connection with the defense or settlement of the action if
the person acted in good faith and in a manner the person believed to be
in the best interests of the corporation and its shareholders.
The indemnification authorized by the California Law is not exclusive,
and a corporation may grant its directors, officers, employees or other
agents certain additional rights to indemnification. The Photonics
Articles and Bylaws provide for indemnification of its agents (as defined
under the California Law) to the fullest extent permissible under the
California Law, which may be in excess of the indemnification expressly
permitted by Section 317 of the California Law. Photonics also has
indemnification agreements with its officers and directors.
Shareholder Derivative Suits. Under the Texas case law, a stockholder may
only bring a derivative action on behalf of the corporation if the
stockholder was a stockholder of the corporation at the time of the
transaction in .question or his or her stock thereafter devolved upon him
or her by operation of law.
The California Law provides that a shareholder bringing a derivative
action on behalf of the corporation need not have been a shareholder at
the time of the transaction in question, provided that certain tests are
met. The California Law also provides that the corporation or the
defendant in a derivative suit may make a motion to the court for an
order requiring the plaintiff shareholder to furnish a security bond.
EXPERTS
The financial statements of Photonics as of December 31, 1999 included in
the Photonic's Annual Report on Form 10-K/A for the year ended December
31, 1999 have been incorporated by reference herein in reliance upon the
report of Turner Stone & Company, Dallas, Texas, independent certified
public accountants.
<PAGE>
The report of Turner Stone & Company covering the December 31, 1999
financial statements contains an explanatory paragraph that states that
the Company's recurring losses from operations and accumulated deficit
raise substantial doubt about the entity's ability to continue as a going
concern. The financial statements do not include any adjustments that
might result from the outcome of that uncertainty. Such financial
statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
REASONS FOR THE ACQUISITION
Photonics Reasons
The Board of Directors of Photonics also believes that the following are
additional reasons for shareholders of Photonics to vote FOR approval of
the .Acquisition:
Because of its constrained capital resources, Photonic's management
has been forced to end its operations, lay off its employees and
liquidate its product inventories. Due to the fact that Photonics'
ability to survive as an independent entity is in doubt, the acquisition
of REP-T is an alternative to dissolution and liquidation.
The Acquisition allows Photonics an opportunity to enter into both a new
business and new markets and better utilize its technology and resources.
Because Photonics has thus far focused on a single market niche (the
personal computer I/O market). Photonics' performance has been
exclusively dependent on a market which has failed to expand in line with
expectations.
Photonics believes that the combined company will be able to obtain
equity and/or debt financing. At present, Photonics is unable to procure
any equity or debt financing. Such additional financing is needed to
rebuild Photonics' management, development, marketing and customer
support operations.
The Acquisition allows Photonics to leverage REP-T's established
Business operations.
In the course of its deliberations, the Company and its advisors received
presentations from, and reviewed a number of additional factors relevant
to the .Acquisition including the alternatives to the Acquisition such as
possible financing, merger with other entities and dissolution and
liquidation. Ultimately, the Board determined that their were no viable
merger partners other than REP-T. The principal factors considered in
connection with the determination of the consideration for the
acquisition were the trading prices of shares of Photonics Common Stock
over the past several months, the companies' historical and projected
revenue, the accounts payable and other financial and technical assets
of the two companies.. The Company also specifically considered the
advisability of a liquidation of Photonics as opposed to the proposed
Acquisition. The Company believes the benefits to Photonics'
shareholders from the Acquisition will enhance value to Photonics'
shareholders in the future. Based on the structure of the proposed
Acquisition, the Company evaluated the combined company on a going
forward basis. Additionally, the Company considered the fact that
<PAGE>
Photonics' liquidation value after payment of the accounts payable would
be at or close to zero. The dissolution of Photonics would be less
favorable to Photonics' shareholders due to potentially high liquidation
costs which would adversely affect the value of a distribution to
Photonics' shareholders. The Company understands, as should each
shareholder, that no assurances can be given that the combined company
will realize the long term benefits of Acquisition. A number of
potentially negative factors concerning the Acquisition were
also discussed including the risk that the trading prices of Photonics'
Common Stock could be adversely affected by announcement of the
Acquisition, the risk that the benefits sought to be achieved by the
Acquisition will not be realized, potential adverse tax consequences of
the Acquisition and the difficulty of combining two separate operations
with disparate geographic locations, as well as the other risks described
above under "Risk Factors."
REP-T Reasons
The Board of Directors of REP-T believes that the following are
additional reasons for stockholders of the Company and REP-T to vote FOR
approval of the Acquisition.
REP-T believes the Acquisition will allow the combined company to
increase its sales revenues and enhance the market penetration of its
products by potentially gaining access to new distribution channels and
marketing relationships.
The Acquisition may enhance the combined company's access to debt
and equity markets and allow it to fund its operations at more favorable
terms because the combined company's balance sheet may be viewed more
favorably by potential lenders and investors than REP-T's current balance
sheet.
The legal structure of the Acquisition would permit the exclusion of
certain liabilities from being liabilities of the combined company
through the conversion of such liabilities into common stock and the
indemnification of the Company against liabilities through the Photonics
Trust (as set out in the STOCK PURCHASE AGREEMENT AND PLAN OF
REORGANIZATION that is attached hereto as an Exhibit).
In the course of its deliberations, the Board of Directors of REP-T
reviewed with REP-Ts management a number of other factors relevant to the
Acquisition. In particular, the REP-T Board considered, among other
things: (i) information concerning REP-T's and Photonics' respective
businesses, prospects, financial performances, financial conditions and
operations; (ii) the public stock market price of Photonics Common Stock
in the recent past; (iii) exchange ratios in other selected similar
transactions of merger and acquisition; (iv) an analysis of the
respective contributions to revenues and operating results of the
combined company; (v) compatibility of the managements of REP-T and
Photonics; (vi) alternatives for growth in the markets served by REP-T;
and (vi) the sizable loss carry-forward held by Photonics.
The Board of Directors of REP-T also considered a variety of potentially
negative factors in its deliberations concerning the Acquisition,
including: (i) the operating losses and recent curtailment of
<PAGE>
business activity of Photonics: (ii) the risk that the combined company
might not realize the expected advantages of the Acquisition: (iii) the
charges expected to be incurred in connection with the Acquisition
including the transaction costs and costs of integrating the businesses
of the companies; (iv) the risk that the combined company's ability to
increase or maintain revenues might be diminished by intensified
competition among suppliers of similar or related products; (v) the
risk that. despite the efforts of the combined company, the services of
key persons might not be retained: (vi) the risk of potentially adverse
tax consequences of the Acquisition; and (vii) other risks described
above under "Risk Factors."
After considering the foregoing factors, the Board of Directors of
Photonics determined that the Acquisition was in the best interest of
Photonics and its shareholders. and the Board of Directors of
REP-T determined that the Acquisition was in the best interest of REP-T
and its stockholders. Accordingly. the Boards of Directors of both
companies approved the Acquisition. In view of the wide variety of
factors considered. both positive and negative. Photonics" and REP-T's
Boards of Directors did not find it practicable to and did not quantify
or otherwise assign relative weights to the specific factors considered.
FINANCIAL STATEMENT PRESENTATION
While the Agreement provides that the Photonics Trust shall indemnify the
Purchaser as to certain liabilities, under purchase accounting. the pro
forma financial statements included in this Proxy Statement/ Prospectus
include the complete liabilities on the balance sheet of the combined
company. The combined company will include such liabilities in its
financial statements with an entry for the offsetting indemnity until
such time as the liabilities are settled. The combined company intends to
record appropriate adjustments relating to the liabilities upon
settlement thereof.
The Company believes that the acquisition is fair to and in the best
interests of Photonics Corporation and it's shareholders and therefore
recommends a vote for approval of the acquisition.
The board of directors of REP-T believes that the acquisition is fair to
and in the best interests of REP-T and it's stockholders and therefore
recommends a vote for approval and adoption of the acquisition.
REPRESENTATIONS AND COVENANTS
Under the Agreement, Photonics and REP-T made a number of representations
regarding their respective capital structures. operations, financial
condition and other matters, including their authority to enter into the
Agreement and consummate the Acquisition. Each party covenanted that,
until the consummation of the acquisition or the termination of the
Agreement, it will maintain its business, and it will not take certain
actions outside the ordinary course of business. Photonics agreed that
following consummation of the Acquisition, it will undertake all
necessary steps to distribute it's shares of Sunnyvale Technology
Corporation to the stockholders.
<PAGE>
CONDITIONS TO THE CLOSING
In addition to the approvals of the shareholders of REP-T and Photonics
sought hereby, the obligations of Photonics and REP-T to consummate the
Acquisition will be subject to the satisfaction of a number of other
conditions, including the absence of any proceedings, order, decree or
ruling by any court or governmental agency or any other legal restraint
or action that would prohibit or render illegal the transactions
contemplated by the Agreement.
Each party's obligations under the Agreement will also be conditioned
upon the accuracy in all material respects of the representations and
warranties made by the other party; the performance in all material
respects by the other party of its covenants; the absence of material
adverse changes in the financial condition, results of operations or
assets and liabilities of the other party; the receipt of certain legal
opinions. The receipt of any required third party consents to the
Acquisition, and the receipt of certain other documents.
At any time on or prior to the closing of the Acquisition, to the extent
legally allowed, Photonics or REP-T, without approval of the shareholders
of such respective company, may waive compliance with any of the
agreements or conditions contained in the Agreement for the benefit of
that company.
TERMINATION OR AMENDMENT
The Agreement may be terminated by both parties at any time prior to the
closing of the Acquisition by mutual consent or by either party if such
party's conditions to closing as specified in the Agreement have not been
satisfied as of the closing of the Agreement. The terms of the Agreement
may be amended at any time by mutual consent of both parties, except
that, after shareholder approval of the Agreement.
DISSENTER'S RIGHTS
If the Acquisition is approved by the required vote of Photonics
shareholders and is not abandoned or terminated, holders of Photonics
capital stock who did not vote in favor of the Acquisition may be
entitled, by complying with Sections 1300 through 1312 of the California
Law, to dissenters' rights as described therein.
The record holders of the shares of Photonics Common Stock that are
eligible to, and do, exercise their dissenters' rights with respect to
the Acquisition are referred to herein as "Dissenting Shareholders'' and
the shares of stock with respect to which they exercise dissenters'
rights are referred to herein as "Dissenting Shares." If a Photonics
shareholder has a beneficial interest in shares of Photonics Common Stock
that are held of record in the name of another person, such as a broker
or nominee, and such shareholder desires to perfect whatever dissenters'
rights such beneficial shareholder may have, such beneficial shareholder
must act promptly to cause the holder of record timely and properly
to follow the steps summarized below.
The following discussion is not a complete statement of the California
Law relating to dissenters' rights, and is qualified in its entirety by
reference to Sections 1300 through 1312 of the California Law
<PAGE>
attached to this Proxy Statement/ Prospectus and incorporated herein by
reference. This discussion and Sections 1300 through 1312 of the
California Law should be reviewed carefully by any holder who wishes to
exercise statutory dissenters' rights or wishes to preserve the right to
do so, since failure to comply with the required procedures will result
in the loss of such rights.
Shares of Photonics Common Stock must satisfy each of the following
requirements to qualify as Dissenting Shares under the California Law:
(i) the share of Photonics Common Stock must have been outstanding on the
Record Date; (ii) the shares of Photonics Common Stock must not have been
voted in favor of the Acquisition; (iii) the holder of such shares of
Photonics Common Stock must make a written demand that Photonics
repurchase shares of Photonics Common Stock for cash at fair market value
assuming approval of the Acquisition by shareholders (as described
below); and (iv) the holder of such shares of Photonics Common Stock must
submit certificates for endorsement (as described below). A vote by
proxy or in person against the Acquisition does not in and of itself
constitute a demand for appraisal under the California Law.
Pursuant to Sections 1300 through 1312 of the California Law, holders of
Dissenting Shares may require the issuer to repurchase their Dissenting
Shares for cash at a price equal to the fair market value of such shares
determined as of the day before the first announcement of the terms of
the Acquisition, excluding any appreciation or depreciation as a
consequence of the proposed Acquisition, but adjusted for any stock
split, reverse stock split or stock dividend that becomes effective
thereafter.
Within ten days following approval of the Acquisition by Photonics
shareholders, Photonics is required to mail to each of its shareholders
who has not voted in favor of the Acquisition a notice of the approval of
the Acquisition, a statement of the price determined by Photonics, as the
case may be, to present the fair market value of Dissenting Shares (which
shall constitute an offer by Photonics to purchase such Dissenting Shares
at such stated price), and a description of the procedures for such
holders to exercise their rights as Dissenting Shareholders.
Within 30 days after the date on which the notice of the approval of the
Acquisition by the outstanding shares is mailed to Dissenting
Shareholders, a Dissenting Shareholder must demand that Photonics
repurchase such shareholder's Dissenting Shares in a statement setting
forth the number of Dissenting Shares held of record by such Dissenting
Shareholder that the Dissenting Shareholder demands that the issuer
purchase, and a statement of what the Dissenting Shareholder claims to be
the fair market value of the Dissenting Shares as of the day before the
announcement of the proposed Acquisition. The statement of fair market
value in such demand by the Dissenting Shareholder constitutes an offer
by the Dissenting Shareholder to sell the Dissenting Shares at such price
within such 30-day period. Such holder must also submit to the issuer or
its transfer agent certificates representing any Dissenting Shares that
the Dissenting Shareholder demands the issuer purchase, so that such
Dissenting Shares may be either be stamped or endorsed with the statement
that the shares are Dissenting Shares or exchanged for certificates of
appropriate denomination so stamped or endorsed.
<PAGE>
If upon the Dissenting Shareholder's surrender of the certificates
representing the Dissenting Shares Photonics and a Dissenting Shareholder
agree upon the price to be paid for the Dissenting Shares and agree that
such shares are Dissenting Shares, then the agreed price is required by
law to be paid to the Dissenting Shareholder within the later of 30 days
after the date of such agreement or 30 days after any statutory or
contractual conditions to the consummation of the Acquisition are
satisfied or waived.
If Photonics and a Dissenting Shareholder disagree as to the price for
such Dissenting Shares or disagrees as to whether such shares are
entitled to be classified as Dissenting Shares, such holder has the right
to bring an action in California Superior Court, within six months after
the date on which the notice of the approval of the .acquisition by the
shareholders is mailed, to resolve such dispute. In such action, the
court will determine whether the shares of Photonics Common Stock held by
such shareholder are Dissenting Shares, the fair market value of such
shares of Photonics Common Stock, or both. California Law provides,
among other things, that a Dissenting Shareholder may not withdraw the
demand for payment of the fair market value of Dissenting Shares unless
the issuer consents to such request for withdrawal.
REGULATORY MATTERS
Photonics and REP-T are not aware of any governmental or regulatory
approvals required for consummation of the Acquisition other than
compliance with the federal securities laws and applicable securities and
"blue sky" laws of the various states.
EXPENSES AND FEES
In the event that the Acquisition is consummated, all legal, accounting,
tax, investment advisory and other fees incurred by Photonics and REP-T
in connection with the Acquisition that are not paid out of the escrow
account that has been established from the proceeds of the sale of
Sunnyvale Technology Corporation will be assumed by Photonics. In the
event that the Acquisition is not consummated, to the extent that the
costs exceed the amount in the escrow account that has been established
from the proceeds of the sale of Sunnyvale Technology Corporation, REP-T
will bear the remainder of the costs and expenses in connection with the
Agreement and the transactions provided for therein. Transaction cost,
and other direct costs associated with such transactions are anticipated
to total approximately $75,000, consisting primarily of transaction costs
and legal and accounting expenses.
UNAUDITED FINANCIAL STATEMENTS FOR REP-T
The balance sheet set out hereinafter reflects the condition of REP-T
immediately after it's acquisition of the all of the assets and
liabilities of RealEstat4Sale.com on June 30, 2000.
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UNAUDITED BALANCE SHEET OF REP-T
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . 72,250
Accounts Receivable .. . . . . . . . . . . . . . . . .86,250
Other current assets ............. -
Total current assets . . . . . . . . . . . . . . 158,500
Acquisition Finance Subsidiary .......... 37,455
Property and equipment, net . . . . . . 26,350
Capitalized Programming .............. 135,250
TOTAL ASSETS $357,555
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable . ............... 19,000
Accrued liabilities . . . . . . -
Other liabilities ................ -
Total current liabilities . . . . 19,000
Long-term lease liabilities .... .. . 26,650
Long-term Debt . . . . . . . . . . . . . . -
Stockholders' equity (deficiency):
Preferred Stock ................. -
Common stock .. . . . . . . . . . . 15,343
Paid in capital, net, .... 641,826
Retained earnings . (345,264)
Total stockholders' equity(deficiency) . 311,905
Total Liability and Equity .......... $ 357,555
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The pro forma condensed combined financial statements reflect certain
assumptions deemed probable by management regarding the proposed
acquisition. No adjustments to the pro forma condensed combined financial
information have been made to account for different possible results in
connection with the foregoing, as management believes the impact on
such information of the varying outcomes individually or in the aggregate
would not be material.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results or financial
position that would have occurred had the transaction contemplated by the
Agreement been consummated at the beginning of the periods presented, nor
is it necessarily indicative of future operating results or financial
position.
UNAUDITED PRO FORMA FORECASTED CONDENSED COMBINED BALANCE SHEET
Photonics and REP-T
Combined at Closing
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ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . ..$ 76,250
Accounts Receivable .. . . . . . . . . . . . . . . 86,250
Other current assets ............................ -
Total current assets . . . . . . . . . . . . . . . 162,500
Acquisition & Finance Subsidiary .................. 41,500
Property & Equipment .............................. 26,350
Capitalized Programming ........................... 135,250
TOTAL ASSETS.......................................$ 365,600
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable ...............................$ 19,000
Accrued liabilities .............................. -
Other liabilities ............................ -
Total current liabilities ......................... 19,000
Long-term lease liabilities ...................... 26,650
Long-term Debt .................................. -
Stockholders' equity (deficiency):
Preferred Stock .................................. -
Common stock .................................. 58,499
Paid in capital, net ........................... 47,061,566
Retained earnings...............................(46,800,115)
Total stockholders' equity(deficiency) ............ 319,950
Total Liability and Equity ........................ 365,600
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LEGAL MATTERS
The validity of the shares of common stock issued pursuant to the terms
of the Agreement will be passed upon for Photonics by Richard J. Hockert,
Esq., Dallas, Texas.
EXHIBITS AND ATTACHMENTS
The following exhibits and attachments are attached to this proxy for
reference:
1. Attachment A: Proxy Form
2. Attachment B: Notice to Shareholders of Right to Dissent.
3. Exhibit A: 10K/A filed electronically by the Company on June 16,
2000 and
incorporated by reference;
4. Exhibit B: 10Q filed electronically by the Company on May 15, 2000
and
incorporated by reference;
5. Exhibit C: The Stock Purchase agreement between PHOX and REP-T
filed
electronically by the company on
July 10, 2000 as Exhibit 99.2 to the 8-K Current Report of the same date.
6. Exhibit D: Sections 1300-1312 of the California Corporations Code
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