SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the Quarterly Period Ended September 30, 1997
OR ------------------
[ ] Transition report Under Section 13 or 15(d) of the Exchange Act
For the transition period from to
--------------- ----------------
Commission file number: 0-28254
-------------------------------
LASER STORM, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-1139159
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
7808 Cherry Creek South Drive, Unit # 301
Denver, Colorado 80231
(Address of principal executive offices)
Telephone: (303) 751-8545
(Issuer's telephone number)
NA
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Outstanding at
Class November 11, 1997
----- --------------
Common Stock, $.001 par value 3,771,711
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
LASER STORM, INC.
FORM 10-QSB
September 30, 1997
INDEX
Page No.
PART I. Financial Information
Item 1. Condensed Balance Sheets -
September 30, 1997 and December 31, 1996 3
Condensed Statements of Operations -
Three and nine months ended September 30, 1997 and 1996 4
Condensed Statements of Cash Flows -
Nine months ended September 30, 1997 and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis
or Plan of Operation 7-10
PART II. Other Information 11
SIGNATURES 12
EXHIBIT INDEX 13
2
<PAGE>
<TABLE>
<CAPTION>
LASER STORM, INC.
CONDENSED BALANCE SHEETS
ASSETS (UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------ -----------
<S> <C> <C>
CURRENT ASSETS:
Cash ................................................................ $ 12,276 $ 272,633
Receivables - net :
Trade notes, current portion ............................... 261,574 535,256
Trade accounts ............................................. 402,177 433,463
Landlord reimbursement and other ........................... 234,287 132,235
Income taxes ............................................... 56,000 56,000
Inventories ......................................................... 42,659 977,896
Prepaid expenses and other .......................................... 208,927 97,172
---------- ----------
Total current assets .............................. 1,217,900 2,504,655
---------- ----------
Property and Equipment, net:
Laser game systems and facilities ................................... 1,655,439 1,339,081
Other ............................................................... 396,643 546,805
---------- ----------
2,052,082 1,885,886
---------- ----------
Other Assets:
Trade notes receivable, less current portion ........................ 171,254 514,489
License and design costs, net ....................................... 112,367 191,731
Goodwill, net ....................................................... -- 172,083
Deposits and other .................................................. 101,359 132,297
---------- ----------
Total other assets ................................ 384,980 1,010,600
---------- ----------
Total Assets ................................................................. $ 3,654,962 $ 5,401,141
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of capital lease obligations ..................... $ 95,832 $ 69,034
Accounts payable .................................................... 1,091,654 783,998
Accrued expenses and other .......................................... 487,724 529,352
Customer deposits and deferred revenue .............................. 70,769 171,770
Acquisition costs payable ........................................... 74,557 195,000
---------- ----------
Total current liabilities ......................... 1,820,536 1,749,154
CAPITAL LEASE OBLIGATIONS, less current maturities ........................... 158,709 143,885
DEFERRED LEASE INDUCEMENTS ................................................... 324,972 158,143
Stockholders' Equity:
Preferred stock, $.001 par value; 2,000,000 shares
authorized, no shares issued .................................. -- --
Common stock, $.001 par value; 20,000,000 shares
authorized; 3,771,711 shares issued and outstanding ........... 3,772 3,825
Additional paid in capital .......................................... 6,234,170 6,256,174
Accumulated deficit ................................................. (4,887,197) (2,910,040)
---------- ----------
Total stockholders' equity ........................ 1,350,745 3,349,959
---------- ----------
Total Liabilities and Stockholders' Equity ................................... $ 3,654,962 $ 5,401,141
========== ==========
</TABLE>
See accompanying notes to these condensed financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
LASER STORM, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------- ---------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Laser Systems and Related Revenue:
Net sales ......................................... $ 695,703 $ 2,160,777 $ 2,439,494 $ 4,962,191
Cost of sales ..................................... 379,655 936,659 1,365,322 2,070,207
---------- ---------- ---------- ----------
Gross profit ............................. 316,048 1,224,118 1,074,172 2,891,984
---------- ---------- ---------- ----------
Retail Operations:
Net sales ......................................... 355,590 124,792 1,115,470 280,323
Cost of sales ..................................... 377,839 118,253 1,043,431 195,810
---------- ---------- ---------- ----------
Gross profit (loss) ...................... (22,249) 6,539 72,039 84,513
---------- ---------- ---------- ----------
Expenses:
General and administrative ........................ 519,522 845,708 1,779,524 2,040,914
Selling and marketing ............................. 65,300 348,033 345,151 840,179
Severance and termination costs ................... -- -- 100,000 --
Depreciation and amortization ..................... 187,509 66,642 527,913 171,955
Product development ............................... 36,300 73,583 96,587 175,016
---------- ---------- ---------- ----------
Total expenses ........................... 808,631 1,333,966 2,849,175 3,228,064
---------- ---------- ---------- ----------
Operating Loss ............................................ (514,832) (103,309) (1,702,964) (251,567)
OTHER EXPENSE:
Interest expense .................................. (6,411) 24,914 (12,767) 57,929
Loss on disposal of Company-owned facility ........ (129,884) -- (261,427) --
---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAXES ................................... (651,127) (78,395) (1,977,158) (193,638)
Income tax expense benefit ............... -- 29,000 -- 72,000
---------- ---------- ---------- ----------
Net Loss ................................................... (651,127) (49,395) (1,997,158) (121,638)
---------- ---------- ---------- ----------
ACCRUED PREFERRED DIVIDENDS ................................ -- -- -- (45,891)
---------- ---------- ---------- ----------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS ................. $ (651,127) $ (49,395) $(1,977,158) $ (167,529)
========== ========== ========== ==========
NET LOSS) PER SHARE APPLICABLE TO
COMMON STOCKHOLDERS ...................................... $ (.17) $ (.01) $ (.52) $ (.06)
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ................. 3,757,000 3,762,000 3,801,000 2,906,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to these condensed financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
LASER STORM, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months
Ended September 30,
------------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................................. $ (1,977,158) $ (121,638)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization ........................................ 527,913 171,955
Loss on disposals of equipment ....................................... 378,123 --
Notes receivable for sale of Laser Systems ........................... -- (1,558,069)
Provision for bad debts .............................................. 156,841 22,000
Provision for inventory obsolescence ................................. 91,605 --
Deferred income taxes ................................................ -- (79,833)
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables ..................................................... 44,457 (339,697)
Inventories ..................................................... 843,632 (220,083)
Prepaid expenses and other ...................................... (104,831) (359,658)
Increase (decrease) in:
Accounts payable ................................................ 307,656 (224,739)
Accrued expenses ................................................ 125,201 35,828
Contingent settlements .......................................... -- (270,000)
Customer deposits and deferred revenue .......................... (101,001) (126,703)
---------- ----------
Net cash provided operating activities .......................... 292,438 (3,070,637)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of notes receivable ................................... 203,599 --
Principal payments collected on notes receivable ......................... 141,254 17,361
Capital expenditures for property and equipment .......................... (929,270) (700,377)
License and design costs ................................................. (10,000) (85,000)
---------- ----------
Net cash used in investing activities ........................... (594,417) (768,016)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of 12% Convertible Cumulative Preferred Stock ......... -- 900,000
Proceeds from public offering of 1,495,000 units ......................... -- 5,202,600
Proceeds from capital lease .............................................. 130,000 --
Offering costs ........................................................... -- (226,021)
Principal payments on capital lease obligations .......................... (88,378) (14,425)
---------- ----------
Net cash provided by financing activities ........................ 41,622 5,862,154
---------- ----------
INCREASE (DECREASE) IN CASH ......................................................... (260,357) 2,023,501
CASH, at beginning of period ........................................................ 272,633 10,473
---------- ----------
Cash, at end of period .............................................................. $ 12,276 $ 2,033,974
========== ==========
</TABLE>
See accompanying notes to these condensed financial statements.
5
<PAGE>
LASER STORM, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Interim Financial Statements:
In the opinion of management of the Company, the accompanying unaudited
financial statements include all adjustments necessary, all of which were of a
normal recurring nature, to make the financial statements not misleading.
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 the rules and regulations of the
Securities and Exchange Commission. These condensed financial statements should
be read in conjunction with the financial statements and related notes for the
fiscal year ended December 31, 1996 contained in the Company's annual report on
Form 10-KSB for the year ended December 31, 1996.
The results of operations for the nine months ended September 30, 1997, are not
necessarily indicative of the results to be expected for the full year.
2. Earnings Per Share:
For the quarter and nine months ended September 30, 1996 and 1997, common stock
equivalents are excluded from the weighted average shares since they are
anti-dilutive.
3. Nasdaq Listing:
As a result of continued losses the Company's shareholder equity has been
reduced below the minimum requirements of the Nasdaq Stock Exchange ("Nasdaq").
In addition, the Company's stock does not presently meet the one dollar bid
price or the alternative bid requirement of a one million dollar float
valuation. As a result of these events the Company has been notified by Nasdaq
that its stock will be delisted from the Nasdaq SmallCap Market. The Company has
submitted an extension request to Nasdaq and is in the process of requesting a
hearing to stay the decision of the Nasdaq Listing Qualifications committee.
6
<PAGE>
LASER STORM, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
Liquidity and Capital Resources
The Company's operations provided cash flow of $292,438 for the nine months
ended September 30, 1997, and used cash flow of $3,070,637 for the same period
last year. The operating losses the Company has experienced over the past five
quarters have negatively impacted the Company's liquidity. The Company's working
capital has decreased from $755,501 at December 31, 1996 to a working capital
deficit of $602,636 at September 30, 1997. Likewise the Company's stockholders'
equity has decreased from $3,349,959 at December 31, 1996 to $1,350,745 at
September 30, 1997. The Company is currently negotiating with investment banking
firms to assist in any mergers, acquisitions or other financing opportunities
that may be available. During 1997 the Company has not been able to obtain
closure on any new financing, although it is carrying on discussion with several
companies regarding some form of business combination. The Company is taking
steps to eliminate as many expense items as possible while maintaining its
operational status and is pursuing business combinations which would best take
advantage of its existing assets. If additional financing cannot be obtained,
the Company may be unable to continue future operations.
In 1996 the Company purchased two existing Laser Storm(R) game centers from
unaffilitaed persons in Coral Springs, Florida and Longmont, Colorado. Pursuant
to the terms of the purchase agreements, the Company was obligated to pay the
two sellers a total of $217,000 by June 7, 1997. As a result of the Company not
making the payments when they were due, the Company was in default under both
purchase agreements. The Company has negotiated a proposed settlement with the
seller in Coral Springs, Florida, whereby the Company has transferred its
rights, title, interest and control of the game center back to the seller. In
return, the seller has cancelled $142,500 in debt owed by the Company. The
transfer was effective on June 16, 1997 at which time the Company recorded a
loss of $131,542 due to the write off of the property, equipment and goodwill.
The former owner of the store in Longmont, Colorado has filed a lawsuit against
the Company in the state of Colorado. In early August 1997, the Company
negotiated a settlement for this obligation. The settlement requires the Company
to provide the original former owner a 36 player Laser Storm game system and a
2,500 square foot Galactic Marauders arena. Additionally, the rights to the Fort
Collins, Colorado territory will be granted to the former owner. In return the
lawsuit will be dismissed with prejudice and the $74,500 debt will be cancelled.
During the third quarter of 1997 Laser Storm also sold two existing
company-owned stores to Namco Cybertainment, Inc. These stores, located in
Cincinnati, Ohio and San Bernardino, California, were opened under an agreement
between Laser Storm and Namco in which up to 13 Laser Storm company-owned stores
were to be developed. Initial sales volumes of these two stores were well below
the Company's expectations. The Company and Namco both agreed that since store
development between the two companies had not progressed as initially planned,
it was more beneficial for Namco to operate these stores. Operating these
low-volume facilities in remote locations was economically burdensome for the
Company. The terms of the sale of these two stores resulted in a reduction of
approximately $100,000 of accounts payable in association with the build-out of
the San Bernardino, California store. The company realized a loss of $129,884 in
the third quarter as a result of the sale of these stores.
The Company's accounts payable have increased from $783,998 at December 31, 1996
to $1,091,654 at September 30, 1997. The Company has taken actions to reduce its
corporate overhead and operating expenses, however continuing low sales in the
third quarter resulted in a reduction of cash flow and subsequently accounts
payable becoming more aged. A large percentage of the Company's accounts payable
balance continues to be over 90 days outstanding. The Company has been
attempting to negotiate extended payment plans with its vendors, however the
unpredictable sales performance and subsequent cash receipts has made it
difficult to meet the commitments. The Company continues to negotiate with its
vendors to reach satisfactory resolutions including disposition of certain
corporate assets and offer stock in lieu of cash.
7
<PAGE>
Accrued expenses decreased from $529,352 at December 31, 1996 to $487,724 at
September 30, 1997. During the second quarter of 1997 the Company made a
$100,000 severance accrual as a result of the termination without cause of its
President and Chief Operating Officer. The President was under an employment
agreement which required the Company to continue his salary for seven months
after termination of employment. The Company is scheduled to pay the severance
in its entirety by December 31, 1997.
During 1996 the Company funded approximately $1,400,000 in sales made through an
extended term financing program. In October 1996, the Company entered into an
agreement with a financial institution which purchased certain notes receivable
under this extended terms program. During the first quarter of 1997, the Company
sold $293,916 of these notes to this financial institution, realizing $203,599.
The financial institution held back approximately $90,000 as a condition of
buying these notes. The hold back will be collected by the Company upon
satisfactory payment performance on these notes. During the first nine months of
1997 the Company collected $141,254 on notes the Company did not sell to the
financial institution. The Company also had to write off to bad debt
approximately $157,000 in notes receivable. Two customers, who had utilized the
Company's extended financing program in the first half of 1996 ceased business
operation during the second quarter of 1997. The Company was able to repossess
its equipment from one of the customers and is agressively pursuing collection
efforts against the other. As of September 30, 1997, the Company had a principal
amount of $432,828 of these notes that remain unsold. The Company does not have
the working capital to internally finance future sales through this type of
financing, but has been able to establish alliances with external financial
institutions in order to make financing options available to its customers.
The Company's trade receivables decreased by $31,286 and its inventory decreased
by $935,237 during the nine months ended September 30, 1997. The inventories
decreased primarily as a result of the Company selling its warranty division to
a key vendor. The inventories also decreased as a result of system sales to
independent operators, the opening of Company-owned and operated facilities and
the opening of revenue participation facilities.
Capital expenditures for the nine months ended September 30, 1997, were $929,270
compared to $700,377 for the same period last year. The construction costs and
the costs of the Laser Storm(R) game equipment necessary to open its five
Company-owned and operated facilities and two revenue participation facilities
were the primary components of the capital expenditures for the nine months
ended September 30, 1997. During the third quarter of 1997 the Company opened
two corporate stores, one in Albuquerque, New Mexico and a second in Aurora,
Colorado. The Company also sold two stores to Namco Cybertainment which were
economically burdensome to the Company. The Company currently has seven stores
in operation under corporate management in addition to four revenue shares
operated by other companies.
Financing activities provided $41,622 for the nine months ended September 30,
1997 compared to $5,862,154 for the nine months ended September 30, 1996. In
January, 1997, the Company entered into a $130,000 capital lease arrangement to
assist in the financing of its new Denver metropolitan area Company-owned and
operated facility. In February 1996, the Company completed the sale of 200,000
shares of Series B 12% Convertible Cumulative Preferred Stock and received
proceeds of $900,000. In April 1996, the Company completed a public offering of
1,495,000 units at a price of $4.00 per unit and received net proceeds of
$5,202,600.
Results of Operations
Net sales from laser tag game systems and related revenues for the quarter ended
September 30, 1997 decreased by 68% to $695,703, as compared to $2,160,777 for
the quarter ended September 30, 1996. During the quarter ended September 30,
1997 the Company sold 56% fewer systems and 53% fewer arenas than were sold
during the quarter ended September 30, 1996. Increased competition, increased
8
<PAGE>
pressures on pricing and financing packages coupled with the Company's inability
to spend adequate amounts of capital on sales and marketing efforts have all
negatively impacted recent sales trends.
Net sales from laser tag game systems and related revenues for the nine months
ended September 30, 1997 decreased 51% to $2,439,494, as compared to $4,962,191
for the nine months ended September 30, 1996. During the nine months ended
September 30, 1997 the Company sold 44% fewer systems and 30% fewer arenas than
were sold during the nine months ended September 30, 1996. As a result of
increased competitive pressures on sales prices, the average unit selling prices
of laser tag game systems and themed arenas for the nine months ended September
30, 1997 decreased 20 % and 56%, respectively, when compared to selling prices
for the same period in 1996.
Net sales from retail operations for the quarter ended September 30, 1997
increased to $355,590 compared to $124,792 for the quarter ended September 30,
1996. These increases are the result of sales generated by the Company-owned
facilities opened in the past twelve months. As a result of the previously
discussed liquidity issues and construction delays, the Company opened just two
new facilities during the third quarter of 1997 and sold two facilities
previously operated by the Company. Net sales from retail operations for the
nine months ended September 30, 1997 increased to $1,115,470 compared to
$280,323 for the nine months ended September 30, 1996.
Gross profit from laser tag systems and related revenues for the quarter ended
September 30, 1997 decreased 74% to $316,048 as compared to gross profit of
$1,224,118 for the quarter ended September 30, 1996. Gross profit as a
percentage of net sales decreased 12% for the quarter ended September 30, 1997
to 45% compared to 57 % for the quarter ended September 30, 1996. The gross
profit from laser tag game systems and related revenue for the nine months ended
September 30, 1997 decreased 63% to $1.074,172 as compared to $2,891,984 for the
nine months ended September 30, 1996. Gross profit as a percentage of net sales
decreased 14% for the nine months ended September 30, 1997 to 44% compared to
58% for the nine months ended September 30, 1996. The decrease in the gross
profit in 1997 compared to the gross profit in 1996 is primarily the result of
lower sales.
Gross profit from retail operations for the quarter ended September 30, 1997
decreased to a loss of $22,249 compared to a profit of $6,539 for the quarter
ended September 30, 1996. The gross profit from retail operations for the nine
months ended September 30, 1997 decreased to $72,039 compared to $84,513 for the
nine months ended September 30, 1996. Gross profit has been negatively impacted
with lower revenues and the fixed expenditures for rent and labor. The largest
expenditures incurred while operating the laser tag facilities are the facility
rental expenses and labor. The Company is currently evaluating the type of
locations which can be effectively supported by a laser tag game location, with
fixed and expensive rent structures making it very difficult for a facility to
operate profitably. The Company's labor costs at the independent facilites
continue to be in line with management's expectations The Company is realizing
that operating expenses have tended to be higher during the first six months of
operations as a result of start up costs, such as grand openings and advertising
expenses. Historically, store revenues are the lowest during the third quarter
of the year.
General and administrative expenses ("GA expenses") decreased by 39% to $519,522
for the quarter ended September 30, 1997 compared to $845,708 for the quarter
ended September 30, 1996. GA expenses as a percentage of net revenues (net sales
from laser tag game systems and related revenues plus net sales from retail
operations), increased to 49% for the quarter ended September 30, 1997 compared
to 37% for the quarter ended September 30, 1996. In an effort to return to
profitability, at the end of September 1997, the Company further reduced its
9
<PAGE>
corporate staff and has outsourced its manufacturing responsibities for the
electronics and themed arenas platforms which will improve quality and service
to the customer, as well as reduce the corporate overhead.
GA expenses decreased by 13% to $1,779,524 for the nine months ended September
30, 1997 compared to $2,040,914 for the nine months ended September 30, 1996. GA
expenses as a percent of net revenues increased to 50% for the nine months ended
September 30, 1997 compared to 39% for the nine months ended September 30, 1996.
Selling and marketing expenses ("SM expenses") decreased 81% to $65,300 for the
quarter ended September 30, 1997 compared to $348,033 for the quarter ended
September 30, 1996. SM expenses as a percentage of net revenues decreased from
15% to 6% for the quarters ended September 30, 1996 and 1997, respectively. SM
expenses decreased from $840,179 for the nine months ended September 30, 1996 to
$345,151 for the nine months ended September 30, 1997. SM expenses as a
percentage of net revenues decreased from 16% to 10% for the nine month periods
ending September 30, 1996 and 1997, respectively. The decreases are the result
of cost reduction efforts made during the past year and lower commissions as the
result of lower sales of laser tag game systems.
As a result of the unpredictable sales performance during the past twelve
months, the Company has been restructuring its corporate overhead. During that
time period, there have been several work force reductions. The decline in sales
during 1997 mandated an additional reduction in the Company's workforce. The
latest moves included the termination of the employment contract with the
Company's President and Chief Operating Officer. The President and Chief
Operating Officer's employment contract allowed for a seven month severance
package. The Company accrued $100,000 of severance and termination costs during
the quarter ended June 30, 1997.
Depreciation and amortization increased from $66,642 for the quarter ended
September 30, 1996 to $187,509 for the quarter ended September 30, 1997.
Depreciation and amortization increased from $171,955 for the nine months ended
September 30, 1996 to $527,913 for the nine months ended September 30, 1997.
These increases are primarily the result of the capital expenditures made
related to the opening and acquisition of Company-owned and operated facilites
during the last twelve months.
Product development costs decreased by 51% to $36,300 for the quarter ended
September 30, 1997 compared to $73,583 for the quarter ended September 30, 1996.
Product development costs decreased by 45% to $96,587 for the nine months ended
September 30, 1997 compared to $175,016 for the nine months ended September 30,
1996. The decrease is the result of cost reduction efforts implemented during
the past year. The Company is continuing to defer certain development projects
until the Company's liquidity position improves.
The Company recognized an operating loss of $514,832 for the quarter ended
September 30, 1997 compared to an operating loss of $103,309 for the quarter
ended September 30, 1996. The Company recognized an operating loss for the nine
months ended September 30, 1997 of $1,702,964 compared to an operating loss of
$251,567 for the same period in 1996. The losses recognized in 1997 are
primarily the result of lower sales of laser tag game systems. Also negatively
impacting the operating losses in 1997 was a $100,000 severance accrual, a
$156,841 adjustment to the bad debt reserves and a $91,605 adjustment to
inventory reserves.
The Company recognized interest expense of $6,411 and $12,767 for the three
months and nine months ended September 30, 1997. The Company recognized interest
income of $24,914 and $57,929 for the three months and nine months ended
September 30, 1996. The interest expense in 1997 is the result of the Company
entering into capital leases to finance the costs of opening two of the
Company-owned and operated facilites. The interest income in 1996 is the result
of cash generated in the public offering in April 1996 being invested in
interest bearing accounts.
10
<PAGE>
The Company recognized a loss of $131,542 during the quarter ended June 30, 1997
on the disposal of a Laser Storm facility located in Coral Springs, Florida. The
Company was unable to make the final payment of $142,500 under the purchase
agreement entered into in November 1996. The Company has negotiated a proposed
settlement, whereby the Company has transferred it's rights, title, interest and
control of the game center back to the seller. In return the Seller has
cancelled the $142,500 debt owed by the Company. The Company also recognized a
loss of $129,884 during the quarter ended September 30, 1997 on the disposal of
two Namco related Company-owned facilities located in Cincinnati, Ohio and San
Bernardino, California. The Company negotiated the sale of these two facilities
in order to eliminate approximately $100,000 of debt associated with the
construction of the San Bernardino store and to reduce the number of outlying
stores which had created an economic burden on the Company.
The Company recognized an income tax benefit of $29,000 for the quarter ended
September 30, 1996 and $72,000 for the nine months ended September 30, 1996. The
Company was unable to record any income tax benefit in 1997 due to a valuation
allowance for the Company's net operating loss carry forward.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LASER STORM, INC.
DATE: November 19, 1997
By: \s\ Robert J. Cooney
----------------------------------
Robert J. Cooney
President, Chief Executive Officer and
Chief Financial Officer
12
<PAGE>
EXHIBIT INDEX
Exhibit Description Page No.
- ------- ----------- -------
27 Financial Data Schedule 14
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 12,276
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0
0
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</TABLE>
