12 February 1998: The US firm Photran Corporation, which develops, manufactures and markets high-performance optical and electrically conducive thin-film coated products for the flat-panel display ind…
12 February 1998: The US firm Photran Corporation, which develops, manufactures and markets high-performance optical and electrically conducive thin-film coated products for the flat-panel display industry, recently published its third-quarter report. Publication was delayed owing to an internal investigation and a lawsuit concerning financial and accounting irregularities in 1995 and 1996. Photran reported net revenues of US$ 1.14 million, an operating loss of US$ 1.62 million and a net loss of US$ 1.6 million for the third quarter, which ended on 30 September 1997. As foreseen, following an exhaustive investigation, the company is also restating financial statements previously issued for 1995, 1996 and the first and second quarters of 1997. Photran“s 1997 third-quarter results compare to revenues of US$ 758,085 (restated), an operating loss of US$ 441,556 (restated) and a net loss of US$ 363,907 (restated) for the third quarter of 1996. Net loss per share was US$ 0.31 for the 1997 third quarter, compared with a net loss of US$ 0.07 per share for the same period a year earlier. Looking at the first nine months of 1997, Photran generated net revenues of US$ 2.57 million, an operating loss of US$ 3.61 million and a net loss of US$ 3.51 million. That compares with revenues of US$ 2.24 million (restated), an operating loss of US$ 783,241 (restated) and a net loss of US$ 1.02 million (restated) for the same period in 1996. The restatements are in line with the expectations which Photran announced last November and do not involve any material adjustments to any previously reported results of operations after 1995. The restatements reduce 1995 revenues, previous years“ capital equipment purchases and shareholders equity. All of the questioned transactions took place before Photran“s initial public offering in May 1996. Photran“s unit production of coated glass products increased 222% from the third quarter of 1996 to the third quarter of 1997, due to productivity improvements on its P-1 manufacturing line and start-up of its P-2 line. The company said that it has used this increased production capacity to attract new Asian, European and US customers. Wintek, Photran“s principal customer, accounted for two-thirds of company sales in the third quarter. In contrast, Wintek represented 82% of revenues in 1996 and 87% of revenues in the first half of 1997. Photran currently has a backlog of approximately US$ 6.8 million in orders, and expects to be profitable in 1998. The company also announced that it had reached a favourable settlement with its former Chinese joint venture partner, the Shenzen-based WABO Group Company Limited. Photran management further said it has obtained a US$ 833,000 transaction-specific export line of credit to meet short-term working capital needs. The 1997 third-quarter results include roughly US$ 700,000 in WABO settlement expenses and an additional US$ 340,000 in professional fees stemming from Photran“s investigation, related lawsuits and a Securities and Exchange Commission investigation. The company has now filed a lawsuit against its former president related to the findings in the recent investigation and the results of an investigation conducted in early 1997. “While we regret the delay in reporting our third-quarter results, our top priority was to complete this very detailed, expansive investigation and obtain a clear, accurate historical financial picture of the company,” said Paul T. Fink, Photran president and chief executive officer. “The investigation is completed, and we consider this matter closed.” The stock of Photran was delisted in January because of the company“s delay in filing its third quarter results. Photran has appealed against the decision and says it is confident that Nasdaq will now relist the company“s common stock.