SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10QSB
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 1997
OR
[ ] Transition Report Under Section 13 or 15 (d) of the Securities Exchange Act
of 1934
For the transition period from to
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Commission file number 2-28254
Laser Storm, Inc.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-1139159
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(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7808 Cherry Creek South Drive, Unit #301
Denver, Colorado 80231
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(Address of principal executive offices)
Telephone: (303) 751-8545
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(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 Registrant was required to file such reports),
and (2) has been subject to such filing requirements for 90 days.
[X] Yes [ ] 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 August 12, 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
June 30, 1997
INDEX
PART I. Financial Information Page No.
Item 1. Condensed Balance Sheets -
June 30, 1997 and December 31, 1996 3
Condensed Statements of Operations -
Three and six months ended June 30, 1997 and 1996 4
Condensed Statements of Cash Flows -
Six months ended June 30, 1997 and 1996 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis
or Plan of Operation 7-11
PART II. Other Information 12
SIGNATURES 13
EXHIBIT INDEX 14
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<TABLE>
<CAPTION>
LASER STORM, INC.
CONDENSED BALANCE SHEETS
ASSETS (Unaudited)
June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
CURRENTS ASSETS:
Cash .......................................................... $ 93,382 $ 272,633
Receivables - net:
Trade notes, current portion ............................. 269,199 535,256
Trade accounts ........................................... 496,404 433,463
Landlord reimbursement and other ......................... 106,730 132,235
Income taxes ............................................. 56,000 56,000
Inventories ................................................... 556,303 977,896
Prepaid expenses and other .................................... 191,826 97,172
----------- -----------
Total current assets ...................................... 1,769,844 2,504,655
PROPERTY AND EQUIPMENT, net:
Laser game systems and facilities ............................. 1,567,538 1,339,081
Other ......................................................... 452,109 546,805
----------- -----------
2,019,647 1,885,886
----------- -----------
OTHER ASSETS:
Trade notes receivable, less current portion .................. 231,200 514,489
License and design costs, net ................................. 147,636 191,731
Goodwill, net ................................................. -- 172,083
Deposits and other ............................................ 104,871 132,297
----------- -----------
Total other assets ........................................ 483,707 1,010,600
----------- -----------
TOTAL ASSETS ........................................................ $ 4,273,198 $ 5,401,141
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of capital lease obligations ............... $ 103,437 $ 69,034
Accounts payable .............................................. 982,615 783,998
Accrued expenses and other .................................... 548,319 529,352
Customer deposits and deferred revenue ........................ 217,762 171,770
Acquisition costs payable ..................................... 74,557 195,000
----------- -----------
Total current liabilities ................................. 1,926,690 1,749,154
CAPITAL LEASE OBLIGATIONS, less current maturities .................. 178,533 143,885
DEFERRED LEASE INDUCEMENTS .......................................... 166,105 158,143
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 ........................................... (4,236,072) (2,910,040)
----------- -----------
Total stockholders' equity ................................ 2,001,870 3,349,959
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......................... $ 4,273,198 $ 5,401,141
=========== ===========
</TABLE>
See accompanying notes to these condensed financial statements.
3
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<TABLE>
<CAPTION>
LASER STORM, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------------ ------------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
LASER SYSTEMS AND RELATED REVENUE:
Net sales .......................................... $ 720,095 $ 1,831,532 $ 1,743,791 $ 2,801,414
Cost of sales ...................................... 453,306 715,128 985,667 1,133,548
----------- ----------- ----------- -----------
Gross profit .............................. 266,789 1,116,404 758,124 1,667,866
----------- ----------- ----------- -----------
RETAIL OPERATIONS:
Net sales .......................................... 385,072 83,912 762,316 155,531
Cost of sales ...................................... 383,219 35,140 668,029 77,555
----------- ----------- ----------- -----------
Gross profit .............................. 1,853 48,772 94,287 77,976
----------- ----------- ----------- -----------
EXPENSES:
General and administrative .......................... 645,101 615,202 1,260,002 1,195,206
Selling and marketing .............................. 119,738 289,765 279,851 492,146
Severance and termination costs .................... 100,000 -- 100,000 --
Depreciation and amortization ...................... 189,369 61,395 340,404 105,315
Product development ................................ 26,707 52,193 60,287 101,433
----------- ----------- ----------- -----------
Total expenses ............................ 1,080,915 1,018,555 2,040,544 1,894,100
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) ................................ (812,273) 146,621 (1,188,133) (148,258)
OTHER INCOME (EXPENSE):
Interest income (Expense) .......................... (6,908) 35,620 (6,357) 33,014
Loss on disposal of Company-owned facility ........ (131,542) -- (131,542) --
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE TAXES ............................. (950,723) 182,241 (1,326,032) (115,244)
Income tax (expense) benefit ............... -- (67,000) -- 3,000
----------- ----------- ----------- -----------
NET INCOME (LOSS) ...................................... $ (950,723) $ 115,241 $(1,326,032) $ (72,244)
=========== =========== =========== ===========
ACCRUED PREFERRED DIVIDENDS ............................ -- (45,891) -- (45,891)
----------- ----------- ----------- -----------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS ................................... $ (950,723) $ 69,350 $(1,326,032) $ (118,135)
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE APPLICABLE TO
COMMON STOCKHOLDERS ................................... $ (.25) $ .02 $ (.35) $ (.05)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ............. 3,808,000 3,414,000 3,817,000 2,395,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to these consdensed financial statements.
4
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<TABLE>
<CAPTION>
LASER STORM, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months
ended June 30,
--------------------------
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................................ $(1,326,032) $ (72,244)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization .......................... 340,404 105,315
Loss on disposals of equipment ......................... 143,147 --
Notes receivable for sale of Laser Systems ............. -- (620,273)
Provision for bad debts ................................ 81,637 10,000
Provision for inventory obsolescence ................... 49,500 --
Deferred income taxes .................................. -- (43,000)
Changes in operating assets and liabilities:
(Increase) decrease in:
Receivables ............................................ 128,986 (226,513)
Inventories ............................................ 372,093 (13,942)
Prepaid expenses and other ............................. (83,238) (203,792)
Increase (decrease) in:
Accounts payable ....................................... 198,617 (464,799)
Accrued expenses ....................................... 26,929 48,418
Contingent settlements ................................. -- (270,000)
Customer deposits and deferred revenue ................. 45,992 (64,299)
----------- -----------
Net cash used in operating activities .................. (21,965) (1,815,129)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of notes receivable ......................... 203,599 --
Principal payments collected on nets receivable ................ 97,688 --
Capital expenditures for property and equipment ................ (517,624) (251,760)
License and design costs ....................................... (10,000) (25,000)
----------- -----------
Net cash used in investing activities .................. (226,337) (276,760)
----------- -----------
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 ................................................. -- (211,160)
Principal payments on capital lease obligations ................ (60,949) (6,146)
----------- -----------
Net cash provided by financing activities .............. 69,051 5,885,294
----------- -----------
INCREASE (DECREASE) IN CASH ....................................... (179,251) 3,793,405
Cash, at beginning of period ...................................... 272,633 10,473
----------- -----------
Cash at end of period ............................................. $ 93,382 $ 3,803,878
=========== ===========
</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 six months ended June 30, 1997, are not
necessarily indicative of the results to be expected for the full year.
2. Earnings Per Share:
For the quarter and six months ended June 30, 1996, and 1997, common stock
equivalents are excluded from the weighted average shares since they are
anti-dilutive.
6
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LASER STORM, INC.'S
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
Liquidity and Capital Resources
The Company's operations used cash flow of $21,965 for the six months ended June
30, 1997, and used cash flow of $1,815,129 for the same period last year. The
operating losses the Company has endured over the past four quarters have
negatively impacted the Company's liquidity. The Company's working capital has
decreased from $756,000 at December 31, 1996 to a working capital deficit of
$156,846 at June 30, 1997. Likewise the Company's stockholders' equity has
decreased from $3,349,959 at December 31, 1996 to $2,001,870 at June 30, 1997.
The Company has been pursuing financing to assist in meeting its working capital
requirements as well as capital that could be used by the Company to open
additional Company-owned facilities. The Company is currently negotiating with
an investment banking firm, to retain its services to assist in any mergers,
acquisitions or other financing opportunities that may be available. To date the
Company has not been able to obtain closure on any new financing. If significant
additional losses are incurred and if additional financing cannot be obtained,
the Company may be unable to continue future operations.
In 1996 the Company purchased two existing Laser StormR game centers from
unaffiliated 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 is 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
$131,542 write off. The seller of the store in Longmont, Colorado has filed a
lawsuit against the Company in the state of Colorado. The Company has been
granted an extension of time to respond to the complaint in order to raise the
funds necessary to pay the seller the balance of $74,500. In early August 1997,
the Company negotiated a settlement of this obligation. The settlement requires
the Company to provide the original seller a 36 player Laser StormR 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 original seller. In
return the lawsuit will be dismissed with prejudice and the $74,500 debt will be
cancelled.
The Company's accounts payable have increased from $783,998 at December 31, 1996
to $982,615 at June 30, 1997. The increase is primarily the result of
construction costs incurred at the Company's new facility in San Bernardino,
California. The Company has taken actions to reduce its corporate overhead and
operating expenses, however low sales in the second quarter resulted in a
reduction of cash flow and subsequently accounts payable becoming more aged. As
of June 30, 1997, over 61% of the accounts payable balance were over 90 days
past due. 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 has had
lawsuits filed and the threat of lawsuits made against it by some of its vendors
as the payables become older and commitments are not met.
Accrued expenses increased from $529,352 at December 31, 1996 to $548,319 at
June 30, 1997. The increase is the result of a $100,000 severance accrual the
Company incurred 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.
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 credit worthy
notes receivable under this extended terms program. During the first quarter of
7
<PAGE>
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
six months of 1997 the Company collected $97,688 on notes the Company did not
sell to the financial institution. The Company also had to write off to bad debt
approximately $158,000 in notes receivable. Two customers, who had utilized the
Company's extended financing program in the first half of 1996, ceased business
operations during the second quarter of 1997. The Company was able to repossess
its equipment from one of the customers and is aggressively pursuing collection
efforts against the other. As of June 30, 1997, the Company had a principal
amount of $500,399 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 $128,986 and it's inventory
decreased by $372,093 during the six months ended June 30, 1997. The inventories
decreased as a result of system sales to independent operators, the opening of
three Company-owned and operated facilities and the opening of three revenue
participation facilities.
Capital expenditures for the six months ended June 30, 1997, were $517,624
compared to $251,760 for the same period last year. The construction costs and
the costs of the Laser StormR game equipment necessary to open its three
Company-owned and operated facilities and three revenue participation facilities
were the primary components of the capital expenditures for the six months ended
June 30, 1997. The Company opened a single arena facility in Denver, Colorado, a
double arena facility in Hollywood, Florida and a Namco facility in San
Bernardino, California. The Company also entered into revenue participation
arrangements in Cuernavaca, Mexico, Gronton, Connecticut and in St. Louis,
Missouri.
Financing activities provided $69,051 for the six months ended June 30, 1997
compared to $5,885,294 for the six months ended June 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
June 30, 1997 decreased by 61% to $720,095, as compared to $1,831,532 for the
quarter ended June 30, 1996. During the quarter ended June 30, 1997 the Company
sold 63% fewer systems and 40% fewer arenas than were sold during the quarter
ended June 30, 1996. Approximately 50% of the sales during the quarter ended
June 30, 1996 were financed through the Company's internally funded extended
payment plan. As a result of the Company's liquidity problems, the Company has
not been able to offer any financing programs since the end of the third quarter
of 1996. Additionally, the Company's management believes the expansion
experienced within the domestic Family Entertainment Center (FEC) industry
within the past several years has slowed down dramatically. Thereby, the size of
the laser tag market has also been impacted. The Company has expanded its
marketing efforts to include markets outside the FEC market and is continuing to
investigate opportunities in the international markets. There has also been an
increase in the number of competitors within the laser tag industry, and with
that increased pressure on pricing and financing packages. In response to the
competitive pressures of a smaller market and more participants within the
market and with the inability to offer aggressive internally funded financing
options, the Company has reduced its selling prices on its laser tag systems and
themed arenas.
8
<PAGE>
Net sales from laser tag game systems and related revenues for the six months
ended June 30, 1997 decreased 38% to $1,743,791, as compared to $2,801,414 for
the six months ended June 30, 1996. During the six months ended June 30, 1997
the Company sold 37% fewer systems and 7% fewer arenas than were sold during the
six months ended June 30, 1996.
Net sales from retail operations for the quarter ended June 30, 1997 increased
to $385,072 compared to $83,912 for the quarter ended June 30, 1996. These
increases are the result of sales generated by the seven new Company-owned
facilities opened in the past twelve months. The Company had previously
anticipated opening six new Company-owned facilites during the second quarter of
1997. However, as a result of the previously discussed liquidity issues and
construction delays, the Company opened just two new facilites during the second
quarter of 1997. A Namco arena facility in San Bernardino, California opened in
May 1997 and a double arena facility in Hollywood, Florida opened in June 1997.
Two additional facilites, one in Aurora, Colorado and the other in Albuquerque,
New Mexico are under construction and are expected to open early in the third
quarter of 1997. Net sales for the quarter ended June 30, 1997 increased 2% over
the $377,244 reported for the quarter ended March 31, 1997. Sales increased only
2% as a result of the two new facilities opening late in the second quarter and
the transfer of the Coral Springs, Florida facility back to the original owner
on June 16, 1997. Net sales from retail operations for the six months ended June
30, 1997 increased to $762,316 compared to $155,531 for the six months ended
June 30, 1996.
Gross profit from laser tag systems and related revenues for the quarter ended
June 30, 1997 decreased 76% to $266,789 as compared to gross profit of
$1,116,404 for the quarter ended June 30, 1996. Gross profit as a percentage of
net sales decreased by 24% for the quarter ended June 30, 1997 to 37% compared
to 61% for the quarter ended June 30, 1996. The gross profit from laser tag game
systems and related revenue for the six months ended June 30, 1997 decreased 57%
to $758,124 as compared to $1,667,866 for the six months ended June 30, 1996.
Gross profit as a percentage of net sales decreased 16% for the six months ended
June 30, 1997 to 43% compared to 59% for the six months ended June 30, 1996. The
decrease in the gross profit in 1997 compared to the gross profit in 1996 is
primarily the result of lower sales. Also impacting the gross profit was the
previously discussed sales price reductions, increases in material costs, a
$50,000 adjustment to a rework inventory reserve and the Company's fixed
overhead. The increased material costs are the result of upgrading certain
components of the Company's laser tag games. The inventory adjustment was made
as a result of the Company selling its electronic manufacturing and repair
operations to a key vendor. As part of the sale, there were game components that
required rework to be completed in order to get the components in proper working
condition. The vendor, who is located in Colorado Springs, Colorado, has agreed
to purchase the entire inventory associated with the electronics and warranty
repair operations. The expenditures incurred for the Company's production
overhead is mostly fixed in nature, thereby negatively impacting the gross
profit on lower sales.
Gross profit from retail operations for the quarter ended June 30, 1997
decreased to $1,853 compared to $48,772 for the quarter ended June 30, 1996. The
gross profit from retail operations for the six months ended June 30, 1997
increased to $94,287 compared to $77,976 for the six months ended June 30, 1996.
The primary reason for the decrease in gross profit for the second quarter is
the impact of seasonality on the sales performance of the independent stores.
During the summer months families tend to take vacations and, with the mild
weather, outdoor activities are more popular. Gross profit has been negatively
impacted with lower revenues and the fixed expenditures for rent and labor. The
Company is continuing to closely monitor the independent stores financial
performance. To date the sales and operating expense results have been in line
with management's estimates for the facilities. However, 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.
9
<PAGE>
General and administrative expenses ("GA expenses") increased by 5% to $645,101
for the quarter ended June 30, 1997 compared to $615,202 for the quarter ended
June 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 58% for the quarter ended June 30, 1997 compared to 32% for the
quarter ended June 30, 1996. GA expenses during the quarter ended June 30, 1997
were negatively impacted by a $78,000 adjustment to the allowance for bad debts.
Without the impact of the adjustment to bad debts, the GA expenses would have
decreased by 8%. In an effort to return to profitability, at the end of June
1997, the Company further reduced its corporate staff. The Company has decided
outsourcing its manufacturing responsibilities for the electronics and themed
arenas platforms will improve quality and service to the customer, as well as
further reduce the corporate overhead.
GA expenses increased by 5% to $1,260,002 for the six months ended June 30, 1997
compared to $1,195,206 for the six months ended June 30, 1996. GA expenses as a
percent of net revenues increased to 50% for the six months ended June 30, 1997
compared to 40% for the six months ended June 30, 1996. Adjusting the GA expense
for the bad debt adjustment of $78,000, GA expenses for the six months ended
June 30, 1997 would have decreased 1%.
Selling and marketing expenses ("SM expenses") decreased 59% to $119,738 for the
quarter ended June 30, 1997 compared to $289,765 for the quarter ended June 30,
1996. SM expenses as a percentage of net revenues decreased from 15% to 11% for
the quarters ended June 30, 1996 and 1997, respectively. SM expenses decreased
from $492,166 for the six months ended June 30, 1996 to $279,851 for the six
months ended June 30, 1997. SM expenses as a percentage of net revenues
decreased from 17% to 11% for the six month periods ending June 30, 1996 and
1997, respectively. The decreases are the result of cost reduction efforts made
during the past three quarters 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 the second quarter 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 $61,395 for the quarter ended June
30, 1996 to $189,369 for the quarter ended June 30, 1997. Depreciation and
amortization increased from $105,315 for the six months ended June 30, 1996 to
$340,404 for the six months ended June 30, 1997. These increases are primarily
the result of the capital expenditures made related to the opening and
acquisition of the seven Company-owned and operated facilities during the last
twelve months.
Product development costs decreased by 49% to $26,707 for the quarter ended June
30, 1997 compared to $52,193 for the quarter ended June 30,1996. Product
development costs decreased by 41% to $60,287 for the six months ended June 30,
1997 compared to $101,433 for the six months ended June 30, 1996. The decrease
is the result of cost reduction efforts implemented during the past nine months.
The Company is continuing to defer certain development projects until the
Company's liquidity position improves.
The Company recognized an operating loss of $812,273 for the quarter ended June
30, 1997 compared to operating income of $146,621 for the quarter ended June 30,
1996. The Company recognized an operating loss for the six months ended June 30,
1997 of $1,188,133 compared to an operating loss of $148,258 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 were the $100,000 severance accrual and the $78,000 adjustment to the bad
debt reserves.
10
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The Company recognized interest expense of $6,908 and $6,357 for the three
months and six months ended June 30, 1997. The Company recognized interest
income of $35,620 and $33,014 for the three months and six months ended June 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 facilities. The interest income in 1996 is the result of cash generated
in the public offering in April 1996 being invested in interest bearing
accounts.
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 that was entered into in November 1996. The Company has negotiated a
proposed settlement, whereby the Company will transfer its rights, title,
interest and control of the game center back to the seller. In return the seller
will cancel the $142,500 debt owed by the Company.
The Company recognized income tax expense of $67,000 for the quarter ended June
30, 1996 and a $43,000 income tax benefit for the six months ended June 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.
11
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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
12
<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: August 12, 1997 By: /s/ Robert J. Cooney
-------------------------------------
President and Chief Executive Officer
DATE: August 12, 1997 By: /s/ John E. McNutt
-------------------------------------
Chief Financial Officer and
Principal Accounting Officer
13
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EXHIBIT INDEX
Exhibit Description Page No.
- ------- ----------- --------
27 Financial Data Schedule 15
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<ARTICLE> 5
<S> <C>
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