FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Six Month period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __ to __. Commission file number ____
PHOTONICS CORPORATION
(Exact name of Small Business Issuer as specified in its charter)
California 77-0102343
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1222 Alderwood Avenue (408) 745-9320
Sunnyvale, California 94089
(Address of Principal Executive Offices) Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
Past 12 months (or for such shorter period that the Company was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares outstanding of the issuer's Common Stock, $.001 par
value, as of June 30, 2000 was 6,765,496 shares.
<PAGE>
PHOTONICS CORPORATION
For the quarter ended June 30, 2000
INDEX
Page Number
PART I FINANCIAL INFORMATION 4
ITEM I Interim Financial Statements
Consolidated Balance Sheet as of
June 30, 2000 and June 30, 1999 5
Consolidated Statements of Operation
For the Three months and Six months
ending June 30, 2000 and June 30, 1999 6
Consolidated Statement of Cash Flows
For the Six months ending March 31, 2000 and June 30, 1999 7
Notes to Consolidated Financial Statements 8
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings 10
ITEM 2 Changes in Securities 10
ITEM 3 Defaults Upon Senior Securities 10
ITEM 4 Submission of Matters of a Vote of Security Holders 10
ITEM 5 Other Information 10
ITEM 6 Exhibits and Reports on Form 8-K 10
SIGNATURE 10
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<PAGE>
PART 1 FINANCIAL INFORMATION
The condensed consolidated interim financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures made are
adequate to make the information disclosed not misleading. It is
suggested that the condensed consolidated interim financial statements be
read in conjunction with the consolidated financial statement and the
notes thereto included in the Company Annual Report on Form 10-K for the
year ended December 31, 1999.
The accompanying consolidated interim financial statements have been
prepared, in all material respects, in conformity with the standards of
accounting measurements set forth in Accounting Principles Board Opinion
No. 28 and reflect, in the opinion of management, all adjustments, which
are of a normal recurring nature, necessary to summarize fairly the
financial position and results of operations for such periods. The
results of operations for such interim periods are not necessarily
indicative of the results to be expected for a full year.
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<PAGE>
PHOTONICS CORPORATION
Consolidated Balance Sheet
(Amounts in thousands)
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
(Unaudited) (Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents 16 6
Accounts Receivable less reserves 0 427
Other Receivables 0 0
Inventories, net 0 327
Prepaid expenses and other current assets 0 47
Total current assets 16 807
Furniture and equipment, net 0 18
Other Assets 0 15
Total Assets 16 840
Liabilities and shareholders equity (deficiency)
Current Liabilities:
Accounts payable 1,780 1,669
Accrued liabilities 362 328
Note Payable - AR Credit Line 0 125
Due to Related Parties 2,071 2,075
Other 0 0
Total current liabilities 4,213 4,197
Deferred Taxes 0 0
Total Liabilities 4,213 4,197
Minority interest in subsidiaries 125
Shareholders' equity (deficiency):
Common stock 46,344 44,096
Treasury stock 0 0
Capital subscription 0 2,339
Accumulated deficit (50,541) (50,070)
Cumulative translation adjustment 0 154
Total shareholders' equity (deficiency) (4,197) (3,481)
Total liabilities and shareholders' equity $ 16 $ 840
</TABLE>
The accompanying notes are an integral part of these consolidated
Financial statements.
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<PAGE>
PHOTONICS CORPORATION
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Net Product Sales $ 0 $ 0 $ 691 $ 691
Cost of Revenues 0 0 152 152
---------- ------- ---------- ----------
Gross Profit 0 0 539 539
OPERATING EXPENSES:
Research and
development 0 104 0 116
Selling, general and
administration 57 396 59 424
------ ------- ---------- ----------
Total operating
expense 57 500 59 540
Income (loss) from
operations (57) (89) (59) (1)
OTHER INCOME (EXPENSE):
Interest income 0 0 0 0
Interest expense 0 (106) (53) (131)
Other Income 0 54 0 48
Other expense (54) (197) (110) (203)
----- ---------- ---------- ----------
Total other
income (expense) (54) (338) (222) (285)
Provision for taxes 0 0 0 0
Net income (loss)$(111) $ (338) $ (222) $ (285)
Net income (loss) per
share (.02) (.05) (.03) (.04)
===== ========= ========== ==========
Shares used in
per share calculation 6,765,496 6,800,272 6,765,496 6,80,272
======= ========== ========== ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL
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PHOTONICS CORPORATION
FORM 10-QSB
PHOTONICS CORPORATION
Consolidated Statement of Cash Flows
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30,
2000 1999
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (111) $ (201)
Adjustments to reconcile net cash
used in operating activities:
Depreciation 0 3
Changes in operating assets and liabilities:
Accounts Receivable 0 (62)
Inventories 0 23
Deposits and prepaid expenses 0 12
Accounts payable 54 219
Due to Related Parties 0 26
Accrued Liabilities 0 (44)
Other 0 0
Net Cash Provided by (used for) Operations $ (57) $ (24)
======= =========
Cash flows from Investing Activities:
Sale (Purchase) of Property
and Equipment ( 0) (0)
Net Cash used in Investing Activities $ ( 0) $ (0)
======= =========
Cash Flows from Financing Activities:
Proceeds from Capital Stock Subscription 0 0
Net Borrowings (Repayments) under Bank Lines 0 (22)
Borrowing (repayments of other debt ), net 0 0
Other Equity Transactions, net 0 0
Net Cash provided by (used for) Financing 0 $ (22)
===== =========
Net increase (decr.) in Cash and Cash
Equivalents (57) (46)
Cash and Cash Equivalents Beginning of
Period 73 76
Cash and Cash Equivalents at end of
Period $ 16 $ 6
====== =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL
STATEMENTS.
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<PAGE>
PHOTONICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
1. Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of the Company and its majority-owned subsidiaries after elimination of
intercompany accounts and transactions. The minority interest represents
the minority stockholders' proportionate share of Sunnyvale Technology
Corporation, Qume Taiwan and Data Technology Hong Kong Ltd., which is
0.6% and 1%, respectively.
Foreign Currency Translation
Certain entities located outside the United States use the local currency
as their functional currency. Assets and liabilities are translated at
exchange rates in effect at the balance sheet date, while revenues and
costs are translated at monthly average exchange rates. Translation gains
and losses are accumulated as a separate component of stockholder equity.
Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
2. Earnings (loss) per share
Conforming to SFAS No. 128, the Company has changed its method of
computing earnings per share and restated all prior periods. Under the
new requirements for calculating earnings per share, the dilutive effect
of stock options has been excluded.
3. Inventories
Inventories are stated at the lower of cost (on a first-in, first-out
basis) or market value (net realizable value), and include material,
labor and attributable overhead.
5. Due to Related Parties
All of the directors and officers of the Company have resigned as of June
30, 2000. For comparison purpose, the amount owed to the past directors
and officers or surviving parties are shown here.
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<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The statements made concerning expected company performance and product
commercialization are forward-looking statements and as such are made
pursuant to the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995. The Company's 1995 10-K and 1996 10-KSB
contain detailed risk factors that may contribute to the actual results
in future periods which could materially differ from forward-looking
statements made by the Company.
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the
Financial Statements and the related notes thereto included in this
report. The following discussion contains forward-looking statements and
the Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of numerous
factors, including those set forth in the following discussion and
elsewhere in this report.
The Company failed to file the 10K annual report for the period ending
December 31, 1999 with audited financials in a timely manner and was
delisted from the Bulletin Board during the quarter. The Company changed
the auditor to Turner, Stone & Company and filed an amended 10-K with
audited financial on June 21, 2000. The Company plans to have its stock
re-listed on the Bulletin Board. However there is no assurance the
Company will succeed to have its stock re-listed.
During the quarter, the Company terminated the merger/acquisition
agreement with Realestate4sale.com and signed a similar agreement with
its successor Repipeline.com, Texas (REP-T) with essentially the same
terms and conditions. The Company also formed a wholly owned subsidiary
Repipeline.com, Delaware (REP-D), for this merger/acquisition purpose.
Without the merger with REP-T, the only choice of the Company is filing
bankruptcy with less than $0.01 per dollar for all creditors, and debt
holders, and no money for shareholders. Therefore the Company has put
all its energy for the pending merger acquisition.
The Company has all preferred shareholders converted their preferred
shares to common shares and obtaining the consent of 85% of the Company's
creditors and debt holders to settlements agreements that are acceptable
to REP-T. Therefore the Company has met the financial terms set by REP-T
for the pending merger/acquisition, and will seek shareholders approval
in the coming shareholders meeting planned for July 2000. However,
government agencies can disapprove this merger/acquisition, and they
often do, either party of a merger/acquisition can withdraw and they
often do, shareholders or board of directors of either of the companies
can disapprove the pending merger/ acquisition, and they often do, there
are no assurance the pending merger acquisition will consummate.
Year 2000
To the Company's best knowledge, the Company has suffered no adverse
effect of Y2K problems. There can be no assurance, however, that there
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<PAGE>
will not be a delay in, or increased costs associated with, the
implementation of any changes, and the Company's inability to implement
such changes could have an adverse effect on future results of operations
or financial condition.
Liquidity and Capital Resources
Liquidity and capital resources of the Company continue to decrease
during the quarter mainly due to legal and auditing expenses associated
with the pending merger/acquisition. The Company negotiated such that
REP-T will pay the legal expenses associated with the merger/acquisition
when Company's money, $16,000 at the end of the quarter, is exhausted.
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings
No new legal claims were filed against the Company during this quarter.
ACI Electronics, Bay Alarm, Danka Financial Services, Danka Office Image,
Insight Electronics, and Innovative Vanguard, all creditors of the
Company, have filed claims against the Company. All these claims have
been acceptable by REP, and has been or will be negotiated by the current
or future officers of the Company.
Two former employees of the company filed complains against the Company
for paying the vacation pays a month after they were laid off June 1969.
One of the two employees, a female, also filed sexual bias and harassment
complains against the Company. The Company has settled both the vacation
pay and sexual bias/harassment claims by paying the penalty of a month of
salary to both employees.
ITEM 2 Changes in Securities
Cooley Godward has cancelled their subscription of 80,000 preferred per
agreement with the Company due to failure of the Company to pay the
balance owed to them. All other Preferred shares (2,248,134) have been
converted to common as of June 30, 2000.
ITEM 3 Defaults Upon Senior Securities
None
ITEM 4 Submission of Matters to a Vote of Security Holders
The Company has filed the Proxy Statement with SEC on July 14, 2000 for
the coming shareholders' meeting planned for July 31, 2000 for approving
the pending merger/acquisition, issuance of additional stocks for
acquiring REP-T, conversion of approximately $3.5MM debt to equity, sale
of Sunnyvale Technology, election of the new board of directors, approval
of stock options, approval of new auditors, and other issues may come to
the attention of the Company.
ITEM 5 Other Information
Not applicable
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ITEM 6 Exhibits and Reports on Form 8k
Exhibit 27.1 Financial Data Schedule
The Company filed a Form PRE 14A, a Preliminary Proxy Statement for the
annual shareholders meeting.
The Company filed a Form 8-K on July 11, 2000 reporting a change in
Auditors, Sale of Sunnyvale Technologies and change of location for The
corporate headquarters.
The Company filed a Form 8-K on June 5, 2000 for change auditor
containing the consent letter from the former auditor.
The Company filed a Form 8-K/A on April 20, 2000 containing the consent
letter from the former Auditors.
SIGNATURE
Pursuant to the requirements of Section 3 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PHOTONICS CORPORATION
DATE: August 1, 2000
BY: /s/ James T. Koo
Acting Chief Financial Officer
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