THIS DOCUMENT IS A COPY OF THE 10-KSB FILED ON 4/1/96 PURSUANT TO A RULE 201
TEMPORARY HARDSHIP.
U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
(Mark One) For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to
Commission file number 0-11933
LASERTECHNICS, INC.
(Name of small business issuer in its charter)
Delaware 85-0294536
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
5500 Wilshire Avenue, N.E., ALBUQUERQUE, NEW MEXICO 87113
(Address of principal executive
offices) (Zip Code)
Issuer's telephone number. (505) 822-1123
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which
registered
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock. Par Value $.01 Per Share
(Title of class)
The Company's securities are registered with NASDAQ.
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 the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Issuer's revenue for the year ended December 31, 1995 was
$13,429,731. The aggregate market value of the issuer's voting
stock held by non-affiliates on March 18, 1996, calculated using
the last transaction price was $22,742,325. The number of
shareholders on March 18, 1996 was 1,547.
(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has 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 REGISTRANTS)
State the number of shares outstanding of each of the issurer's
classes of common equity, as of the latest practicable date.
At March 18, 1996, there were 29,603,157 shares of voting Common
Stock and 2,249,842 shares of non-voting Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement pursuant
to Regulation 14A, which statement will be filed not later than
120 days after the end of the fiscal year covered by this Report,
or incorporated by reference in Part III hereof.
Transitional Small Business Disclosure Format (Check one):
Yes ; No X
Table of Contents
PART I Page
Item 1. Business.................................... 4
Item 2. Properties................................... 10
Item 3. Legal Proceedings............................ 11
Item 4. Submission of Matters to a Vote of
Security Holders............................. 11
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters.............. 11
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 12
Item 7. Financial Statements and Supplementary Data.. 19
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure....... 19
PART III
Item 9. Directors and Executive Officers of the
Registrant................................... 20
Item 10. Executive Compensation....................... 22
Item 11. Security Ownership of Certain Beneficial
Owners and Management........................ 22
Item 12. Certain Relationships and Related
Transactions................................. 12
Item 13. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.......................... 22
SIGNATURES.................................................. 26
Part I
Item 1. Business
General Development
Lasertechnics, Inc., a Delaware corporation, was formed in
October 1981. Lasertechnics, Inc., together with its wholly-owned
inactive subsidiary, Quantrad Corporation ("Quantrad"),its 100%
owned subsidiary created in 1995. Lasertechnics Marking
Corporation ("LMC"), and its 92% owned subsidiary, Sandia Imaging
Systems Corp. ("SIS"), all Delaware corporations, is hereinafter
referred to as the "Company," unless the context otherwise
requires. Quantrad is currently in the process of dissolution.
In early 1995, the Company became a holding company with two
independent operating units. This was accomplished by placing
the Company's marking business into LMC.
SIS, formed in August 1993, distributes, integrates and sells
multi-station card printers and computer software systems for
identification cards. SIS has awarded options to directors and
employees that, if and when vested and exercised, will reduce the
Company's ownership to approximately 85%. SIS also has a 100%
French subsidiary, Sandia Imaging Systems Europe, S.A. ("SISE").
Printis S.A.R.L., a wholly owned subsidiary of SISE, was merged
into SISE in June 1995.
LMC is engaged in the design, manufacture and sale of laser
marking systems for use in marking a variety of products and
containers. The Company expects to hold over 80% of the equity
of LMC after granting its management the ability to own a
significant stake in their business, as has been granted
management of SIS, and believes the ownership by the management
will further strengthen the focus of each team.
The Company accounts for its two businesses as separate business
segments.
Current Product Lines
Marking
Laser marking products, instruments and related service accounted
for approximately 77% of 1995's consolidated sales.
Laser Markers. LMC designs, manufactures and markets laser
marking systems that are used by manufacturers to place lot
numbers, expiration dates and other information on diverse
products and packages. Since inception LMC has steadily moved
toward providing CO2 (carbon dioxide) gas laser markers that are
easily integrated into a wide range of sophisticated and
demanding high speed product packaging facilities. The Blazer
6000tm is a water cooled CO2 pulsed gas lasers used in the
on-line
marking of industrial and consumer products. In 1995, LMC
introduced the BlazerJettm dot-matrix coders. BlazerJettm offers
a
higher degree of programmability to solve a greater number of
packaging problems. A large number of codes can be stored and
called up for use with a few simple key strokes. BlazerJettm
units were shipped in the third quarter of 1995 and LMC expects
to make shipments of production version BlazerJetstm throughout
1996. LMC's marking systems, typically, solve problems related to
four main product identification needs:
Perishables. Perishables such as food, dairy and beverage
products require a variety of date information to provide
accurate product freshness information. These products are
manufactured in facilities that demand impeccable cleanliness and
are characterized by extremes in temperatures and stringent wash-
down requirements. LMC's products can tolerate a wide range of
temperature conditions. Further, they are enclosed in a rugged
stainless steel enclosure with smooth, easily cleaned surfaces,
allowing them to handle the harshest demands of wash-down
routines. Date information is dependably provided with simple,
manually changed stencil systems, automated programmable datecode
changers and special software.
Traceability. Product traceability concerns, especially in the
medical and pharmaceutical industries, require variable batch
information to meet ever-increasing government regulations,
thereby enhancing the producer's ability to limit and defend its
liability in consumer product liability claims. In such
packaging environments, reliability of the marker products is
especially important. Product identification marking in the form
of batch numbers, serialized part numbers, logos or corporate
names are easily handled by LMC's products. In addition, laser
marks are permanent because they burn the mark into a thin
surface layer of the product or package.
High Throughput. High speed packaging lines cannot use the
slower contact methods for identifying products. The Company's
Blazer 6000tm can operate at speeds exceeding 1800 marks per
minute
and easily provide legible information on fragile and/or thin
materials with irregular surfaces or limited space. The Blazer
marks so fast (about one-millionth of a second per mark) that it
has proved possible to mark at the highest speeds required by
packaging equipment manufacturers with which the Company has
integrated the Blazer system. High line speeds are accommodated
by the Blazer's simple computer-based controller that interfaces
easily with the most modern packaging line control equipment.
Low speed lines are more ideal for the company's BlazerJettm
product.
Environmental Concerns. Packagers seeking a product
identification system that must eliminate the problems inherent
with expensive and hazardous inks and solvents are increasingly
using lasers. The solvents used in many industrial ink jet
coders are potentially harmful to the environment as well as the
health of personnel who handle them. In addition, many inks used
in marking contain solvents which are classified as hazardous
substances by the EPA and, as such, are becoming more and more
expensive to handle as government regulations become more
stringent. The Company's products neither use nor produce
hazardous waste substances as they consumes nothing but
electricity, water and non-toxic laser gas. Thus the Blazer and
BlazerJettm offer a safe, environmentally clean and highly
reliable product marking alternative to ink jet coding.
The Company believes that a worldwide move by packagers to laser
marking places it in a unique position to leverage its position
as the largest U.S. manufacturer of high speed, laser-based
product coding equipment.
Dependence on Sales. In 1994, the Company sold $7,296,000 of
Blazer products and service to Anheuser-Busch as a result of a
single large order received in 1993. While the Company continues
to provide parts and service to Anheuser-Busch, the completion of
this major order in the first quarter of 1995 resulted in a
decrease of approximately $5,125,000 in overall sales to
Anheuser-Busch of laser marking products for the year 1995.
Imaging
Photo Quality Plastic Card Printers. SIS offers a family of
plastic card printers. During 1995, SIS added four-, five-, six-
and seven-station models to its line of Mono and Multi-station
plastic card printer line. SIS has the ability to offer
customized printers for identification and credit card
applications. In the fourth quarter of 1993 SIS shipped the
first production product in the plastic card printer family.
Plastic card products accounted for approximately 55% and 80% of
SIS's sales in 1994 and 1995 respectively. These sales occurred
in over 18 countries around the world. These printers were sold
to organizations that need to instantly generate or batch process
photographically-customized ID/security and credit cards, such as
health care providers, credit card companies, banks, government
agencies and immigration authorities. The plastic card printers
accommodate cards of any size and shape defined by the ISO
(International Standards Organization) card standard. These can
be any kind of PVC-based card available today, including plain,
magnetic striped, smart (i.e., with on-card microprocessors) or
optical storage.
DataGlyphs. The newest product offering from SIS is DataGlyphs.
SIS has the sole worldwide rights granted by Xerox Corporation
for the sale of DataGlyphs, a portable database symbology that
can be used on pocket sized media, including identification
cards. SIS has developed a total card security system called the
"Chipless"tm Smart Card Verification System, that combines
DataGlyph encryption and encoding technology together with
Biometric verification software (the BioGlyph software system),
which the company offers through re-seller arrangements. SIS has
also developed a customized DataGlyph reader called GlyphScantm
to
serve as the scanning device for DataGlyph applications. The
DataGlyph system sold together with the plastic card printer
family, form a unique total solution for the printing, encoding,
securing and verifying functions of card identification
applications. The "Chipless"tm Smart Card Verification System
can
address a variety of applications for financial, immigration and
customs, visas, passports, drivers licenses, national
identification programs, government entitlement programs, health-
care industry and other ID badge applications.
Digital Image Recorder (DIR). The DIR is a high resolution laser
based, gray-scaled printer. During 1994 and 1995 the markets for
DIR were not materializing as the Company expected. As a result,
sales of DIR printers decreased substantially from approximately
$825,000 in 1993 to $194,000 in 1994. There were no significant
DIR printer sales in 1995. At the end of 1994 SIS determined
that the DIR printer had reached the end of its product life
cycle and wrote down the value of DIR inventory at December 31,
1994 by approximately $552,000. In November 1995 the Company
sold the DIR line of printers for $325,000 and a 10% royalty for
two years. The 10% royalty will extend an additional year if the
total royalty received during the two-year period is less than
$200,000.
SNAPSHOT. SnapShot is a multi-function software package for IBM
PCs which supports reception, transmission storage and
manipulation of photographic-quality images. During 1994 the
market for SnapShot did not materialize as expected by SIS. As a
result, SIS wrote down the value of capitalized software costs
and inventory by approximately $587,000 at the end of 1994. In
1995 there were no sales of this product line and as a result,
SIS informed all of its customers in the fourth quarter of 1995
that it will no longer support this product line.
Product Development
Marking. In October 1993 the Company's distribution agreement
with Lumonics Hull terminated. Under the terms of the contract,
LMC was free to develop products that might replace those
formerly purchased from Lumonics hull. LMC developed the
BlazerJettm to replace the Xymark laser marking system. This new
marker emulates the action of an ink jet system by forming dot
matrix characters on moving product. BlazerJettm utilizes
technology licensed from United Technology Optical Systems and
DeMaria Electropic Systems and is the first single-laser system
of this type to bring the laser tube to the mark point. LMC
introduced a prototype of its new BlazerJettm laser marking
system
in November 1994. The initial shipments of BlazerJettm began to
select customers in the fourth quarter of 1995.
Imaging. SIS made several technological enhancements of its
current generation plastic card printer, which increased
functionality and reduced manufacturing costs. Because of the
specialized requirement of two significant customers, SIS has
delayed development of its new generation of plastic card
printers. The development efforts employed on these two major
contracts will be incorporated into its new generation. SIS will
continue the development of its new generation in the second
quarter of 1996 which will further enhance the Company's position
as an innovator in this emerging market. In addition, the
Company will continue to develop the DataGlyph product line which
complements the plastic card printer line.
Research and Development Expenditures
Research and development expenditures were $2,910,346,
$3,577,209, and $844,339 for the years 1995, 1994, and 1993
respectively.
Competition
Laser Marking. The laser marking business is very competitive
because LMC's laser marking products compete with conventional
ink and embossing marking equipment. Many of LMC's competitors
(both laser and ink jet companies) have considerably greater
financial, technical and marketing resources than the Company.
LMC's competitors include Videojet Systems Int'l., Alltec GmbH,
Image, Domino, Willett and Lumonics, among others.
Imaging. SIS competes with a number of large hardware and
software companies. The plastic card printers compete with
similar products from DataCard, Atlantek, Toppan, Dai Nippon
Printing and others.
Competition is expected to intensify in both the laser marking
and imaging industries as technological advances in both
industries are made and become more widely known.
Manufacturing and Suppliers
Approximately one-half of the LMC employees are engaged in
manufacturing activities. Both companies depend upon a number of
outside suppliers for components for their products.
In the second half of 1994 SIS signed a manufacturing agreement
with Singapore Precision Industries, PTE. LTD (SPI). During 1995
SPI manufactured several plastic card printers and print modules.
However, because of a market shift from Mono stations to Multi-
stations, SIS discontinued all production in Singapore in the
third quarter of 1995 and SIS is in negotiations with SPI to
terminate the manufacturing agreement. All manufacturing is
currently done by PolyPrint in Besancon, France.
Marketing
Laser Marking: LMC derives the major portion of its revenues
from the sale of laser marking systems. LMC currently markets
its products in the Americas, Western Europe, and the Pacific Rim
countries through independent sales representatives, who are paid
on a commission basis, and distributors who have OEM pricing
arrangements. LMC advertises its products by direct mailings of
sales brochures, advertising in trade journals, and
demonstrations at trade shows and conventions.
Imaging: SIS markets in several parts of the world. In addition
to the normal marketing channels through the use of OEMs, Value
Added Resellers (VARs) and systems integrators, SIS is also
marketing directly to the high volume card printing market. SIS
believes it has a competitive advantage in the Multi-station high
volume card printing market.
Export Sales
Refer to Note 15 of the Notes to the Consolidated Financial
Statements of December 1995, 1994, and 1993.
Backlog
The company had the following backlog of firm orders:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year End Year End Year End
1995 1994 1993
Total $3,442,000 $3,886,000 $8,094,000
</TABLE>
The booked backlog at year-end 1995 will be liquidated during
1996.
Patents
The Company is licensed under certain patents related to the
lasers used by it in its markers. These patents expire at
various dates through 2005. The Company also owns and has the
worldwide distribution rights to three French patents covering
the mechanical parts and assembly of the plastic card printer
family of dye sublimation photo-ID printers. In 1995 the Company
registered the trade names "Chipless"tm Smart Card and
"GlyphScan"tm. "The Clean Ones"tm and "Inkless InkJet"tm were
registered in 1994. None of the Company products, however, is
covered by exclusive controlling patent rights so as to preclude
the manufacture of competitive products by others.
Executive Officers, Directors and Other Personnel
As of December 31, 1995, the Company employed 108 people. SIS
employed 27, SIS-Europe employed 17, LMC employed 62 and the
holding company employed 2. For information with respect to the
executive officers and directors of Lasertechnics, reference is
made to Item 9 herein.
Because of the specialized nature of their businesses, both LMC
and SIS are dependent upon the efforts of their current officers
and key employees and upon their ability to attract and retain
technologically qualified personnel, particularly highly
qualified engineers in the areas of laser and imaging technology.
There is intense competition for qualified personnel in the laser
marking and imaging industries, including competition from
companies with substantially greater resources than the Company.
There can be no assurance that LMC and SIS will be successful in
recruiting or retaining personnel of the requisite caliber or in
the requisite numbers to enable them to conduct their businesses
as proposed. To do so, LMC and SIS may have to pay such
personnel higher salaries or provide more lucrative incentives
than their competitors.
Government Regulation
All laser manufacturers in the United States, including LMC are
subject to the Laser Radiation Safety Regulations of the Center
for Devices and Radiological Health ("CDRH") of the United States
Food and Drug Administration. These regulations have not had, nor
are they expected to have, a material effect on the Company's
financial condition, results of operations or competitive
position.
Environmental Factors
There has been, and it is anticipated that there will continue to
be, no material effect upon the capital expenditures, earnings,
or competitive position of LMC or SIS due to compliance with
existing provisions of federal, state and local law regulating
the discharge of material into, or otherwise relating to the
protection of, the environment.
Item 2. Properties
LMC manufactures laser markers in a 20,000 square foot facility
in Albuquerque, New Mexico, which it occupies under a long-term
capital-lease agreement. For further information with respect to
commitments on the properties of the Company, reference is made
to Notes 5 and 6 to the Consolidated Financial Statements
contained in Item 7 herein. LMC manufactured DIR printers for
SIS in a 2,100 square foot facility in Albuquerque, New Mexico
which it occupied under a rental agreement, which ended in April,
1995.
SIS leases a 14,508 square foot facility in Carrollton, Texas
used for administrative, engineering and sales offices. This
facility is rented under a three year agreement. In addition,
SIS rents two facilities in Paris, France and sales offices in
Singapore, and Oxford, England. The approximately 2,700 square
feet of French facilities under two and three year agreements,
are used to house the administrative, engineering and sales
functions of SIS-Europe. The Singapore and Oxford, England
sales offices are each a single office with shared support
services such as secretarial, telephones and conferencing. These
offices are under short term (six month or less) rental
agreements.
Item 3. Legal Proceedings
Refer to Note 12 of the Notes to the Consolidated Financial
Statements of December 1995, 1994, and 1993.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held a special meeting of stockholders at its office
at 5500 Wilshire Avenue, NE, Albuquerque, New Mexico on July 28,
1995. The purpose of the meeting was to amend the Company's
Certificate of Incorporation so as to (i) authorize the issuance
of up to 10,000,000 shares of preferred stock, convertible to
Common Stock on a one-share to one-share basis, with such
designations, preferences, rights and limitations as are
permitted in the amendment and as are approved, from time to
time, by the Board of Directors, and (ii) to increase the number
of authorized shares of Non-Voting Common Stock from 5,000,000 to
8,500,000 and (iii) to decrease the number of authorized shares
of voting Common Stock from 45,000,000 to 41,500,000. The
amendment was approved. Also see Note 17 of the Notes to the
Consolidated Financial Statements of December 1995, 1994, and
1993.
Part II
Item 5. Market for Lasertechnics Common Equity and Related
Stockholder Matters.
The table below sets forth high and low bid prices for the Common
Stock during each of the periods indicated, as reported by the
National Association of Securities Dealer Automated Quotation
System. Such quotations reflect inter-dealer prices, without
retail mark-up, markdown, or commission, and may not necessarily
represent actual transactions. The Company's stock trades under
the symbol LASX.
<TABLE>
<CAPTION>
<S> <C> <C>
1994 Bid Prices 1995 Bid Prices
<S> <C> <C> <C> <C>
Calendar Period Low High Low High
First Quarter $ 31/32 1-17/32 31/32 1-5/8
Second Quarter $ 15/16 2-17/32 1-1/16 1-5/8
Third Quarter $ 1-3/8 2-5/8 1-13/16 2-3/8
Fourth Quarter $ 1-1/8 2-1/32 1-9/16 1-7/8
</TABLE>
The Company has not paid any dividends on its Common Stock.
While there are no explicit restrictions in debt instruments or
otherwise on the Company's ability to declare dividends, the
Company's obligation to repay interest on and principal of
indebtedness limits the cash available to pay dividends. See
"Liabilities and Stockholders' Equity" section in the
Consolidated Financial Statements Consolidated Balance Sheets.
In addition, the payment of dividends is also limited by certain
financial covenants by the Company contained in bonds issued in
connection with the 25 year capital lease of the Company's
headquarters, which requires the Company to maintain a current
ratio of at least 1 to 1 and a debt-to-equity ratio of less than
3 to 1. The Company failed to meet the debt-to-equity ratio at
December 31, 1995 and is not now in compliance with this ratio.
The payment of any dividends would further reduce the Company's
ability to comply with such ratios. For the foreseeable future,
it is anticipated that cash dividends will not be paid to holders
of Common Stock.
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
OVERVIEW
Separate Business Units. Late in 1993 the Company announced that
it would try to be in a position to arrange for the initial
public offering of its imaging business segment, Sandia Imaging
Systems Corp. (SIS) during the second half of 1994. While it is
still the Company's intention to separate the two businesses, the
timing will be dictated by the operating and financial
performance of the two units. It is expected that the separation
should be possible within the next 12 to 24 months. The
summarized financial data for the two businesses appears in Note
17 of the Notes to the Consolidated Financial Statements as of
December 31, 1995, 1994, and 1993.
Net Results
The consolidated net loss for 1995 was $9,094,503 a 24.8%
increase over the 1994 consolidated net loss of $7,286,956. The
1994 net loss was an increase of $5,241,886 over the 1993 net
loss of $2,045,070. Sales decreased from $15,856,209 in 1994 to
$13,429,731 in 1995. In 1993 sales totalled $8,028,010. The
gross profit percentage decreased to 31.8% in 1995 from 32.7% in
1994 and 35.2% in 1993.
The loss from operations increased from $2,109,769 in 1993, to
$7,192,809 in 1994 and $8,130,213 in 1995. Other income
(expense) declined from a net income of $64,699 in 1993 to a net
expense of $94,147 in 1994 and $964,290 in 1995.
The increase in the net loss for 1995 resulted from a reduction
in sales and gross profit amounts. Expenses in 1995 remained
essentially unchanged from the 1994 expenses; however, 1994
expenses included a $1,148,275 restructuring charge.
The net loss of $7,286,956 for 1994 increased $5,241,886 from the
net loss of $2,045,070 reported in 1993. This increased loss
resulted from a $7,439,483 increase in expenses, including the
1994 restructuring charge, compared to the 1993 expense level,
partially offset by an increase in the gross profit of
$2,356,443.
Expense figures for the 12 months ended December 31, 1995 include
for the Lasertechnics Marking Corporation $270,000 of allocated
corporate expenses, and for SIS $630,000 of allocated corporate
expenses.
At the end of 1994, the Company recorded a restructuring charge
totalling $1,148,275 to reflect adjustments to the DIR, SnapShot
and plastic card printer inventories. In November 1995 the
Company sold the DIR product line.
At December 31, 1995 the Company's backlog was $3,442,000, a
12.9% decrease from year end 1994.
SEGMENT RESULTS
MARKING
The segment operating loss improved 53% in 1995 to $195,374
compared to the operating loss of $416,016 in 1994. The 1994
operating loss reflected a 41% improvement from the 1993
operating loss of $710,029.
Segment sales of $10,308,154 in 1995 declined 14% or $1,655,245
from 1994 sales. This reduction was primarily due to a decrease
in the domestic systems sales due to the completion of the $7.5
million order from Anheuser-Busch.
Marking sales in 1994 surpassed 1993 sales by 94% due to a
significant number of shipments made on the large Anheuser-Busch
order.
In 1995 the marking segment gross profit dollars decreased from
1994 by 8% while the gross profit percentage increased from 34%
in 1994 to 37% in 1995. The gross profit changes resulted
primarily from the completion of a significant lower margin
system order in 1994 and an increase in the higher margin service
sales in 1995.
In 1994 the marking segment gross profit increased by 86% from
1993, while the gross profit percentage declined from 36% to 34%.
Accounting for these changes was the shipment during 1994 a large
lower margin single order, the significant reduction in the low
margin Xymark sales and recall costs related to the Anheuser-
Busch order.
Segment operating expenses totalled $3,979,055, $4,540,085 and
$2,925,597 in 1995, 1994 and 1993 respectively.
The 12% decrease in operating expenses from 1994 to 1995 resulted
from the reduction in commissions due to the lower sales and from
the completion in the prior year of the major research and
development efforts on the new BlazerJetTM system.
The significant prototype development costs of the BlazerJetTM
laser marking system combined with the commissions paid on the
significantly higher sales of laser markers, the increase in
international sales efforts for the entire year and the costs for
the implementation of a Total Quality Management Program,
increased the total segment operating expenses by $1,614,488 in
1994 over the 1993 expense of $2,925,597.
IMAGING
The imaging segment loss from operations increased 17% to
$7,934,839 in 1995, following a $5,376,909 increase in the
operating loss in 1994 compared to 1993. These changes are a
result of a 54% decrease in the gross profit level in 1995 and
more importantly, a significant increase in the amount of
operating expenses from 1994 to 1995 and from 1993 to 1994.
Imaging segment sales decreased 20% in 1995 compared to 1994
primarily because of the discontinuation of production of Digital
Imaging Recorder (DIR) printers at the end of 1994. An increase
in the plastic card printer sales partially offset the effects
of the DIR sales reduction.
The imaging sales increased $2,041,141 in 1994 over sales of
imaging products in 1993 due to the availability of the dye
sublimation plastic card printers for the full 1994 year.
The imaging segment gross profit decreased from 27% in 1994 to
16% in 1995 due to the larger than expected OEM sales of plastic
card printers which carry a lower selling price, and also because
of the sale of specific designed plastic card printers which have
a higher cost than standard models.
The gross profit percentage for the imaging segment declined from
33% in 1993 to 27% in 1994 because of lower sales prices on DIR's
as a result of competitive pricing and also due to a larger
portion of plastic card printer sales being made to OEMs, which
carry a lower selling price.
Segment operating expense increased 26% in 1995 to $8,444,511
from the $6,690,461 operating expense in 1994. This increase of
$1,754,050 was the result of the continuing support of the
expanded sales and marketing efforts, which included the opening
of several offices, the establishment of a customer service
department, and the absorption of a portion of the costs to form
and operate the Lasertechnics holding company structure.
Research and development expenses declined 5% from the 1994
level. Additional R & D costs were incurred in 1995 for overall
manufacturing development efforts and for specific customer
applications relating to plastic card printer sales. These
increased R & D costs however, were more than offset by the
termination of the development for the SnapShot and DIR product
lines.
Imaging operating expenses increased 232% in 1994 compared the
1993. The increased expenses were due to the full year effect in
1994 of the creation of SIS Europe compared to three months of
1993 and the full year effect of the imaging G & A expenses
compared to five months of 1993. Increased expenses also
resulted from the establishment of sales offices in Singapore,
England and the U.S. and the addition of personnel related to the
new sales offices. Research and development expense increased in
1994 due to the ongoing development activities for the plastic
card printers and the write-off of the SnapShot capitalized
software development costs. Printis development activity was
also included for nine months of 1994 when it became a 100% owned
subsidiary.
Other Income and Expense
Other income/(expense) was $64,699 in 1993, ($94,147) in 1994,
and ($964,290) in 1995. There was virtually no interest expense
in 1993 due to the existing debt being converted to equity.
Other expense in 1994 was comprised of interest expense and a
nominal amount of interest income. Expenses related to the sale
of debentures and short term debt account for the majority of
other expenses in 1995.
Liquidity and Capital Resources
Since inception, the Company has utilized the proceeds from a
number of public and private sales of its equity securities, the
exercise of options and warrants and more recently, convertible
debt from shareholders to meet its working capital requirements.
An increase of $465,299 in the cash and cash equivalents at
December 31, 1995 from December 31,1994 was the result of the
sale of preferred stock and the sale of convertible debentures.
The majority of the $12,879,323 proceeds from financing
activities was raised from the sale of $7,000,000 in debentures
and other private borrowings. Operating activities used net cash
of $10,898,506 primarily for the increase in inventory,
amortization of financing discount and issuance costs, and
prepaid expenses. The increase in accounts receivable at December
31, 1995 compared to December 31, 1994 is due to a disputed
balance with a customer and heavy shipments during the last month
of 1995. Inventory at December 31, 1995 increased by $1,149,528
from December 31, 1994 due to a buildup in the new BlazerJetTM
inventory for LMC plus SIS inventory for planned sales increase
in 1996. Investing activities used net cash of $995,518 for
capital expenditures.
The Company's operations in 1995 continued to generate losses as
the result of continued research and development. Looking for
long-term growth and profitability, the Company has either sold
or discontinued certain product lines which were not profitable.
The Company's business plan for 1996 is based principally upon
significant increases in existing imaging products and the
successful introduction of new products in both of its business
segments, significant manufacturing cost reductions and
reductions in research and development expenditures, and an
improvement in gross margin. Because of the anticipated timing
of new product introductions and manufacturing cost reductions,
together with the necessity to prepay all or a portion of the
balance of, and achieve compliance with, the covenants included
in its lease obligation financing, the Company will require
additional external financing to meet its 1996 requirements. The
Company's 1996 business plan forecasts cash needs in excess of
results from operations for 1996. The Company projects a
positive cash flow after the first quarter of 1996 due to an
increase in sales. Such forecast is predicated on a number of
assumptions and decisions that are subject to continuing review
by management, and may change at any time.
As of March 22, 1996, management has raised cash from the sale of
$5.5 million in 10% convertible debentures. These debentures are
convertible into common stock at $2.00 per share, or at 85% of
the average 5 day closing bid price for the five trading days
immediately prior to the conversion date. Debentures are placed
in denominations of at least $50,000 and integral multiples of at
least $50,000 in excess thereof. Debenture coupon accrues at a
rate of 10% per annum and is payable in stock upon conversion.
Debentures can be converted into common stock in increments of
1/4, 1/4/, 1/4, and 1/4 beginning the 60th, 90th, 120th and 150th
days after the final closing. At the end or 3 years from the
closing date, all debentures will automatically be converted into
common stock. Debenture holders shall receive warrants equal to
20% of position held in shares at a strike price of $2.00, 5 year
term.
Lasertechnics may force conversion of any or all of the
debentures at a price that would give the investor the same
return as it would have received had it converted on the day the
redemption occurs or may call any or all of the debentures in
increments of no less than $1.5 million at the following prices
and times:
130% of stated value 12 months & 1 day to 18 months
125% of stated value 18 months & 1 day to 24 months
120% of stated value 24 months & 1 day to 30 months
115% of stated value 30 months & 1 day to 36 months
The shares of common stock issuable upon their conversion have
not been registered under the Securities Act of 1933 as amended
and may not be offered or sold in the United States during the
restricted period.
Based on cash flow projections, the money will allow the Company
to operate through the first quarter when sales are expected to
increase. If the Company's performance over the next 12 months
is significantly below management's business plan, it may be
necessary to either reduce or stop certain product development
programs, reduce its sales and marketing efforts, dispose of
assets or undertake other actions as may be appropriate. The
existence of such uncertainties creates substantial doubt about
the Company's ability to continue as a going concern.
In 1983, the City of Albuquerque issued 8% tax-exempt industrial
development revenue bonds in connection with a 25-year capital
lease of the Company's headquarters facility. The principal
amount outstanding as of December 31, 1995 was $1,113,768 which
is shown as a current liability. Pursuant to its agreement with
the City of Albuquerque, Lasertechnics is required to maintain a
current ratio of at least 1 to 1 and a debt to equity ratio of
not more than 3 to 1. At December 31, 1995, the Company's
current ratio was 1.5 to 1, and its debt to equity ratio was 4.0
to 1 which put the Company in violation of the agreement. The
Company is not now in compliance with such requirements and
management believes that absent an additional equity investment,
it will not be able to come into compliance. The Company has a
prepayment agreement with the bondholder whereby the bondholder
agreed to waive its right to call the bond for redemption through
April 1, 1996, provided the leasee timely pays the base
prepayment and an additional prepayment amount of $8000 per
month. All such payments were made on a timely basis. The
leasee has met with the bondholder and anticipates an extension
or similar agreement for a future period. If the Company is not
able to come into compliance, it will be necessary to obtain
additional equity financing or refinance the capital lease
obligation amounting to $1,113,768 as of December 31,1995.
While management believes that if required it will be able to
obtain such refinancing, there can be no assurances that the
Company will be able to do so. Failure to comply with such
requirements could result in relocating to other facilities and
the associated disruption of the business, as well as increased
difficulty in obtaining financing and credit, and could affect
the Company's ability to continue as a going concern. (See note
6 to the Consolidated Financial Statements.)
NASDAQ LISTING: Lasertechnics' Common Stock is listed on the
NASDAQ small-capitalization over-the-counter market, which
requires a minimum $1,000,000 net capital and surplus for
continued listing. Because Lasertechnics' net capital and
surplus fell below this limit at September 30, 1995, NASDAQ
temporarily put the Company on a "conditional" listing until a
new minimum of $2,450,000 in equity was met on December 31,
1995. This was accomplished by debenture owners converting
$1,045,342, which includes accrued interest, of debt into common
stock and the sale of Series C convertible preferred stock. On
January 2, 1996, NASDAQ removed the conditional listing of
Lasertechnics' Common Stock and lowered the equity requirement
back to $1,000,000. Manageent forecasts that net capital and
surplus will remain in excess of $1,000,000 for 1996.
Restructuring Charge.
At the end of 1994, the Company's imaging business, SIS,
evaluated their product lines with an eye towards focusing on the
long term revenue and profit potential of each one. As a result
of that evaluation, it was determined that the DIR was at the end
of its product life cycle and that the niche markets SIS had
attempted to exploit to extend the product's life did not
materialize. Conditionally, SIS was unable to develop the
expected market for the SnapShot product, and there were
significant components of the initial plastic card printer
product that were made obsolete by technological enhancements.
The end result of the evaluation was a restructuring charge
totalling $1,148,275 made up of inventory adjustments to the
various product lines. Finally, capitalized software development
costs for the SnapShot product line of approximately $553,000
were charged to research and development expense. The DIR was
sold in 1995. The SnapShot product line was discontinued.
Other
Inflation has not had nor is expected to have a material impact
on the operations and financial condition of the Company.
In March 1995, FASB issued SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." SFAS 121 requires that long-lived assets and
certain intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable.
In October 1995, FASB issued SFAS 123, "Accounting for Stock-
Based Compensation." SFAS 123 permits companies to retain the
current approach set forth in APB Opinion 25, "Accounting for
Stock Issued to Employees," for recognizing stock-based
compensation. However, companies are encouraged to adopt a new
accounting method based on estimated fair values. Companies that
do not follow the new fair value based method will be required to
provide expanded disclosures in their 1996 financial statements.
Management believes that adopting SFAS 121 and SFAS 123 in 1996
will not have a material effect on the Company's consolidated
financial position or results of operations.
Item 7. Financial Statements and Supplementary Data.
Page
Consolidated Financial Statements:
Independent Auditors' Report
F-1
Consolidated Balance Sheets - December 31, 1995
and 1994
F-2
Consolidated Statements of Operations - Years Ended
December 31, 1995, 1994 and 1993
F-3
Consolidated Statements of Stockholders' Equity -
Years Ended December 31, 1995, 1994 and 1993
F-4
Consolidated Statements of Cash Flows
Years Ended December 31, 1995, 1994 and 1993
F-5
Notes to Consolidated Financial Statements -
December 31, 1995, 1994 and 1993
F-7
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
Part III
Item 9. Directors and Executive Officers of the Registrant.
Information with respect to directors and with respect
to compliance with Section 16 (a) of the Securities Exchange Act
of 1934 is hereby incorporated by reference to Lasertechnics'
definitive proxy statement pursuant to Regulation 14A, which
statement will be filed not later than 120 days after the end of
the fiscal year covered by this Report. The names and ages of
the executive officers of Lasertechnics and the year of
commencement of their positions with Lasertechnics are as
follows:
Positions and Offices
with Lasertechnics and when
Name Age Term of Office Commenced
Richard C. E. Morgan ... 51 Chairman of the Board
(1994)and Chief Executive
Officer (1994) Chairman of the
Board (LMC 1995 & SIS 1993)
Ronald Bencke .......... 56 Vice President and Chief
Financial Officer (1994)
Vice President and Chief
Financial Officer (LMC 1995)
Eugene A. Bourque ...... 50 Director(1993)President & CEO
(LMC 1995)
Jean-Pierre Arnuado..... 51 Director(1995) President & CEO
(SIS 1995)
E.A. Milo Mattorano..... 50 Vice President and Chief
Financial Officer &
Controller(SIS 1995)
The following is a brief description of the business experience
and occupations for the officers of Lasertechnics, for at least
the last five years:
Richard C. E. Morgan, 51, joined the Board in 1985 and
was elected Chairman and CEO in December 1994. Since 1986 he has
been a General Partner of Wolfensohn Partners L.P. (the managing
general partner of Wolfensohn Associates L.P., a venture capital
partnership). Between 1984 and 1986 he was a Partner of James D.
Wolfensohn, Inc. (an investment banking and advisory firm).
Prior to joining Wolfensohn, Mr. Morgan was a Director of J.
Henry Schroder Wagg & Co. Ltd. (a British merchant bank) and was
the former President of the Schroder Strategy Group (a strategic
consulting group) and former Chairman of the Investment Committee
of J. Henry Schroder Wagg. Mr. Morgan is Chairman and a Director
of MediSense Inc. (a supplier of biosensor blood glucose
measurement devices to people with diabetes),Chairman and
Director of Quidel Corporation (a supplier of a wide range of
rapid diagnostic tests to physicians and consumers), a Director
of Celgene Corporation and SEQUUS Pharmaceuticals, Inc.
(companies developing and marketing pharmaceutical products).
Mr. Morgan is also the Chairman of ONTOS, Inc., a company
developing advanced object oriented software. During the last
fifteen years Mr. Morgan has been closely involved in the
development of several high technology and medical technology
companies, including Authorware Inc., a predecessor company to
Macromedia Inc., now a public company and one of the leading
companies in the multi-media software tools business. Mr. Morgan
also was a founder and until it was sold to Eastman Kodak, the
Chairman of Vortech Data Inc., a leading systems company in the
medical image management field. Mr. Morgan was awarded a BE in
Engineering Science (First Class Honors) from the University of
Auckland, New Zealand and has completed the Advanced Management
Program at the Harvard Business School.
Eugene Bourque, 50, was named President and Chief Executive
Officer of LMC in May 1995. Prior to his appointment as President
of Lasertechnics, Inc. in January, 1993, Mr. Bourque served as
Vice President and Chief Financial Officer of Lasertechnics since
1988. Before joining Lasertechnics, Mr. Bourque was the
financial and business service manager for the Cynara Co. from
1985 to 1987, a partnership owned largely by The Dow Chemical
Co., that operated natural gas processing plants. Prior to that,
he spent 5 years as Treasurer of Production Operators, Inc., an
oil field service company. Mr. Bourque holds a B.B.A degree in
General Business from The University of Texas at El Paso and a
M.B.A degree in finance from The University of Chicago.
Ronald Bencke, 56, was named Vice President and Chief Financial
Officer of Lasertechnics, Inc. in September 1994. He was also
appointed Vice President and Chief Financial Officer of LMC in
May 1995. He served as Chief Financial Officer for QED
Communications, a large public broadcasting television station in
Pittsburgh, Pennsylvania from 1992 to mid-1994. Prior to that
assignment, Mr. Bencke spent 23 years with Westinghouse Electric
Corporation in a variety of progressively responsible financial
and executive positions including President of Westinghouse
Evaluation Services Group and Chief Financial Officer of
Westinghouse Financial Services, Inc. prior to his retirement
from Westinghouse in 1992. Mr. Bencke is a graduate of the
Executive Program for Management Development at the Harvard
Graduate School of Business and holds a B.A. degree in Economics
from Wartburg College.
Jean-Pierre Arnaudo, 51, was named President and Chief Executive
Officer of Sandia Imaging Systems in June 1995. Prior to his
appointment as President, Jean-Pierre Arnaudo served as the
President and General Manager of Sandia Imaging Systems Europe,
S. A. since 1993. Before joining Sandia Imaging Systems, Mr.
Arnaudo was General Manager of Terminal Computer Systems from
1990 to 1992, a distribution company for communication equipment
for mainframe computers. Prior to that, he spent 12 years as
President of Jacquard Systems and Director of AM International
France, an office automation and corporate publication company.
Mr. Arnaudo holds a Ph.D. in Electronics from the French Naval
Academy and studied management at the Ecole d'Administration des
Enterpreises from Lausanne.
E.A. Milo Mattorano, 50, was named Controller of Sandia Imaging
Systems in January 1995. Before joining Sandia Imaging Systems,
Mr. Mattorano was the Vice President of Finance of Insilco
Corporation from 1988 to 1994, a manufacturing company crossing
several industries in high-tech, heavy metals and consumer
products. Prior to that, he spent 7 years as Vice President and
Controller of Coseka Resources and Ensource Inc., oil and gas
exploration and production companies. Mr. Mattorano spent 6
years with Deloitte & Touche, a public accounting firm and holds
a BS degree in Accounting from Adams State College.
Item 10. Executive Compensation.
Information with respect to executive compensation is hereby
incorporated by reference to the Lasertechnics' definitive proxy
statement pursuant to Regulation 14A, which statement will be
filed not later than 120 days after the end of the fiscal year
covered by this Report.
Item 11. Security Ownership of Certain
Beneficial Owners and Management.
Information with respect to security ownership is hereby
incorporated by reference to Lasertechnics' definitive proxy
statement pursuant to Regulation 14A, which statement will be
filed not later than 120 days after the end of the fiscal year
covered by this Report.
Item 12. Certain Relationships and Related Transactions.
Information with respect to certain relationships and related
transactions is hereby incorporated by reference to
Lasertechnics' definitive proxy statement pursuant to Regulation
14A, which statement will be filed not later than 120 days after
the end of the fiscal year covered by this Report.
Item 13. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
Page
(a) (1) Consolidated Financial Statements:
Independent Auditors' Report
F-1
Consolidated Balance Sheets - December 31, 1995
and 1994
F-2
Consolidated Statements of Operations - Years
Ended December 31, 1995, 1994 and 1993
F-3
Consolidated Statements of Stockholders' Equity -
Years Ended December 31, 1995, 1994 and 1993
F-4
Consolidated Statements of Cash Flows -
Years Ended December 31, 1995, 1994 and 1993
F-5
Notes to Consolidated Financial Statements -
December 31, 1995, 1994 and 1993
F-7
(2) Financial Statement Schedules:
Independent Auditors' Report on Financial Statement Schedule
S-1
(3) Exhibits:
3.1 -- Articles of Incorporation of Lasertechnics.
Incorporated herein by reference to Exhibit
3.1 to Lasertechnics' Registration Statement
on Form S-1 (Registration No. 2-80946).
3.2 -- By-laws of Lasertechnics. Incorporated
herein by reference to Exhibit 3.2 to
Lasertechnics' Registration Statement on Form
S-1 (Registration No. 2-80946).
3.3 -- First Amendment to Certificate of
Incorporation of Lasertechnics, Inc. dated
June 6, 1986. Incorporated herein by
reference to Exhibit 3.3 to Lasertechnics'
Form 10-K for the year ended December 31,
1987.
3.4 -- Second Amendment to Certificate of
Incorporation of Lasertechnics, Inc. dated
May 27, 1987. Incorporated herein by
reference to Exhibit 3.4 to Lasertechnics'
Form 10-K for the year ended December 31,
1987.
10.1 -- License Agreement, dated November 10, 1981,
between Lasertechnics and National Technical
Information Service. Incorporated herein by
reference to Exhibit 10.10 to Lasertechnics'
Registration Statement on Form S-1 (Registra-
tion No. 2-80946).
10.2 -- Registration Agreement among Lasertechnics
and certain shareholders. Incorporated
herein by reference to Exhibit 10.12 to
Lasertechnics' Registration Statement on Form
S-1 (Registration No. 2-80946).
10.3 -- Land Purchase Agreement. Incorporated herein
by reference to Exhibit 10.21 to
Lasertechnics' Registration Statement on Form
S-1 (Registration Statement No. 2-80946).
10.4 -- Guaranty Agreement, dated as of October 1,
1983, between Security Trust Company, as
trustee, and Lasertechnics. Incorporated
herein by reference to Exhibit 10.20 to
Lasertechnics' Registration Statement No. 2-
90117).
10.5 -- License agreement, dated June 30, 1988,
between Lasertechnics and Patlex Corporation.
Incorporated herein by reference to Exhibit
10.17 to Lasertechnics' Form 10-K for the
year ended December 31, 1988.
10.6 -- Employment agreement dated August 31, 1989,
between Louis F. Bieck, Jr. and
Lasertechnics, Inc. as amended. Incorporated
herein by reference to Exhibit 10.17 to
Lasertechnics' Form 10-K for the year ended
December 31, 1990.
10.7 -- Agreement, dated June 28, 1991 between
Applied Electron Corporation, Quantrad
Corporation, Lasertechnics, Inc. and
Wolfensohn Associates L.P.. Incorporated
herein by reference to Exhibit 10.9 to
Lasertechnics' Form 10-K for the year ended
December 31, 1991.
10.8 -- 1991 Incentive Stock Option Plan, dated
August 14, 1991. Incorporated herein by
reference to Exhibit 10.10 to Lasertechnics'
Form 10-K for the year ended December 31,
1991.
10.9 -- Termination agreement effective September 22,
1992 between Louis F. Bieck, Jr. and
Lasertechnics, Inc.. Incorporated herein by
reference to Exhibit 10.11 to Lasertechnics'
Form 10-K for the year ended December 31,
1992.
10.10 -- Distributor Agreement, dated November 16,
1990, between Lasertechnics and Coherent-
Hull, Ltd. Incorporated herein by reference
to Exhibit 10.17 to Lasertechnics' Form SB-2,
Post-Effective Amendment No. 2, dated
December 14, 1993.
10.11 -- Amendments to Distributor Agreements between
Lasertechnics, Lumonics, Inc. and Lumonics
Hull Ltd.. Incorporated herein by reference
to Exhibit 10.18 to Lasertechnics' Form SB-2,
Post Effective Amendment No. 2, dated
December 14, 1993.
10.12 -- Asset Purchase Agreement between Sandia
Imaging Systems Corporation and Media Imaging
Technologies Corporation dated as of August
1, 1993. Incorporated herein by reference to
Exhibit 10.21 to Lasertechnics' Form SB-2,
Post-Effective Amendment No.2, dated December
14, 1993.
10.13 -- Note Cancellation and Stock Purchase
Agreement between Lasertechnics and D. Blech
& Company, Inc. dated as of October 28, 1993.
Incorporated herein by reference to Exhibit
10.13 to Lasertechnics' Form 10-KSB for the
year ended December 31, 1993.
10.14 -- Note Cancellation and Stock Purchase
Agreement between Lasertechnics and
Wolfensohn Associates, L.P. dated as of
October 28, 1993. Incorporated herein by
reference to Exhibit 10.14 to Lasertechnics'
Form 10-KSB for the year ended December 31,
1993.
10.15 -- Purchase Agreement between Sandia Imaging
Systems Europe SA and Jean-Luc Poutchnine,
Alain Quilleau and Philippe Bonnevie dated
March 4, 1994.
10.16 -- Letter confirming sale of Lasertechnics, Inc.
Common Stock shares to Singapore Precision
Industries PTE. LTD. dated May 12, 1994.
10.17 -- Contract Manufacturing Agreement between
Sandia Imaging Systems Corporation and
Singapore Precision Industries PTE LTD dated
May 13, 1994.
10.18 -- Advisory and investment banking services
agreement between Lasertechnics, Inc. and
Wolfensohn International dated May 19, 1993.
10.19 -- Purchase of Common Stock and Convertible Note
Agreement between Lasertechnics, Inc. and J.
P. Morgan Investment Corporation dated July
8, 1994.
10.20 -- OEM License Agreement between Sandia Imaging
Systems Corporation and Xerox Corporation
dated January 6, 1995.
10.21 -- Demand Promissory Note issued to J. P. Morgan
Investment Corporation dated December 19,
1994.
10.22 -- Demand Promissory Note issued to J. P. Morgan
Investment Corporation dated December 31,
1994.
21.1 -- Subsidiaries of Lasertechnics.
23.1 -- Consent of KPMG Peat Marwick.
b) Reports on Form 8K
Filed 10/19/95, 12/15/95,1/2/96.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
The Securities Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: 3/29/96
LASERTECHNICS, INC
By: /s/Richard C. E. Morgan
Richard C. E. Morgan
Chairman of the Board &
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
By: /s/Richard C. E. Morgan By: /s/Paul J. Coleman,
Jr.
Richard C. E. Morgan Paul J. Coleman, Jr
Chairman of the Board and Director
Chief Executive Officer
By: /s/Ronald Bencke By: /s/C. Seth Cunningham
Ronald Bencke C. Seth Cunningham
Vice President, Chief Financial Director
Officer and Principal Account-
ing Officer
By: /s/Jean-Pierre Arnaudo By: /s/Theodore F.Patlovich
Jean-Pierre Arnaudo Theodore F.Patlovich
Director Director
By:/s/ E. A. Bourque By: /s/Alfred E. Paulekas
E. A. Bourque Alfred E. Paulekas
Director Director
By: /s/Richard M. Clarke
Richard M. Clarke
Director
SEC10KSB
LASERTECHNICS, INC. AND SUBSIDIARIES
Consolidated Financial Statements and Schedule
December 31, 1995 and 1994
(With Independent Auditors Report Thereon)
Independent Auditors Report
The Board of Directors and Stockholders
Lasertechnics, Inc.:
We have audited the consolidated balance sheets of
Lasertechnics, Inc. and subsidiaries (the Company) as of
December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders equity and cash
flows for each of the years in the three-year period
ended December 31, 1995. These consolidated financial
statements are the responsibility of the Company s
management. Our responsibility is to express an opinion
on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material
respects, the financial position of Lasertechnics, Inc.
and subsidiaries as of December 31, 1995 and 1994, and
the results of their operations and their cash flows for
each of the years in the three-year period ended December
31, 1995, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have
been prepared assuming that the Company will continue as
a going concern. As discussed in note 2 to the
consolidated financial statements, the Company s
recurring losses from operations and resulting continued
dependence upon access to additional external financing
together with the default on a capital lease obligation
raise substantial doubt about its ability to continue as
a going concern. Management s plans in regard to these
matters are also described in note 2. The consolidated
financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
KPMG PEAT MARWICK LLP
Albuquerque, New Mexico
March 8, 1996, except as to the
the last paragraph of note 12
and note 19 which are as of
March 15, 1996
F-1
LASERTECHNICS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets 1995 1994
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,892,357 1,427,058
Accounts receivable - trade, less allowance for doubtful
accounts of $278,263 in 1995 and $170,010 in 1994
4,040,247 2,990,145
Inventory:
Raw materials 2,514,746 1,714,433
Work-in process 329,700 196,543
Finished goods 1,144,904 992,694
3,989,350 2,903,670
Inventory deposit (note 3) 591,630 136,334
Prepaid expenses 155,859 265,136
Other 102,459 40,005
Total current assets 10,771,902 7,762,348
Property, plant and equipment, at cost, net (notes 5 and 6)
3,000,241 2,357,181
Goodwill (note 16) 254,546 417,076
Other assets, at cost 615,913 173,851
$ 14,642,602 10,710,456
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity 1995 1994
<S> <C> <C>
Current liabilities:
Payable to stockholder:
Convertible notes payable (notes 7 and 10)
$ 0 1,940,000
Notes payable 200,000 0
Accounts payable 3,485,328 3,546,229
Notes payable 402,945 488,302
Customer advances 426,978 688,246
Commissions payable 192,548 301,123
Product warranty reserve 256,003 261,138
Accrued payroll and payroll taxes 299,096 435,467
Accrued vacation 205,541 212,226
Capital lease obligations in default (note 6)
1,113,768 1,248,278
Current portion of capital lease obligations (note 6)
28,944 16,518
Other 478,396 347,335
Total current liabilities 7,089,547 9,484,862
Convertible debtentures (note 8) 4,405,095 0
Capital lease obligations (note 6) 35,328 13,050
Other 183,046 219,957
11,713,016 9,717,869
Stockholders' equity (notes 7, 8, 9, 10, 11 and 18):
Convertible preferred stock, no par; 10,000,000 shares
authorized;
Series A: $1.30 stated value; 1,153,846 shares outstanding
in 1995 and none in 1994 1,473,394 0
Series B: $1.42 stated value; 1,056,338 shares outstanding
in 1995 and none in 1994 1,473,394 0
Series C: $1.51 stated value; 708,530 shares outstanding
in 1995 and none in 1994 1,069,880 0
Common stock, $.01 par value. Authorized 41,500,000
shares in 1995 and 45,000,000 shares in 1994; issued and
outstanding 28,280,798 shares in 1995 and 25,078,779
shares in 1994 282,808 250,788
Nonvoting convertible common stock, $.01 par value. Authorized
8,500,000 shares in 1995 and 5,000,000 shares in 1994; issued
and outstanding 2,249,842 shares in 1995 and 377,684 shares
in 1994. Convertible into voting common stock on a one
share for one share basis 22,499 3,777
Paid-in capital 37,339,799 30,302,473
Accumulated deficit (38,482,188)(29,314,451)
3,179,586 1,242,587
Less treasury stock, 200,000 common shares, at cost
(250,000) (250,000)
Total stockholders' equity 2,929,586 992,587
Commitments, contingencies and subsequent events
(notes 2, 6, 12 and 19)
$15,990,648 10,710,456
</TABLE>
LASERTECHNICS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1995, 1994 and 1993
<TABLE>
1995 1994 1993
<CAPTION>
<S> <C> <C> <C>
Sales (notes 4 and 15) $ 13,429,731 15,856,209 8,028,010
Cost of sales 9,159,393 10,670,197 5,198,441
Gross profit 4,270,338 5,186,012 2,829,569
Expenses:
Research & development 2,910,346 3,577,209 844,339
General & administrative 4,036,271 2,755,063 1,976,735
Selling & marketing 5,453,934 4,898,274 2,118,264
Restructuring charge
(note 13) - 1,148,275 -
Loss from operations (8,130,213) (7,192,809) (2,109,769)
Other income (expense):
Interest income 32,182 44,387 15,641
Interest expense (968,790) (160,071) (136,895)
Other (27,682) 21,537 185,953
(964,290) (94,147) 64,699
Loss before income taxes (9,094,503) (7,286,956) (2,045,070)
Income taxes (note 14) - - -
Net loss $ (9,094,503) (7,286,956) (2,045,070)
Preferred stock dividend requirements
(73,234) - -
Net loss applicable to common stock
$ (9,167,737) (7,286,956) (2,045,070)
Net loss per common share
$ (.33) (.33) (.12)
Weighted average shares of common stock
outstanding during the year
27,511,489 21,997,410 16,842,380
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
LASERTECHNICS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Convertible
preferred stock Common stock
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Balances at December 31, 1992 0 $0 15,739,089 $157,391
Common stock issued for debt (note 7) 0 0 454,545 4,545
Issuance of common stock, net of
issuance expenses (note 18) 0 0 2,769,757 27,698
Common stock issued for expenses 0 0 30,748 308
Exercise of common stock options
(note 11) 0 0 20,032 200
Net loss 0 0 0 0
Balances at December 31, 1993 0 0 19,014,171 190,142
Exercise of common stock options
(note 11) 0 0 65,830 658
Issuance of common stock, net of issuance
expenses (note 18) 0 0 5,998,778 59,988
Translation adjustment 0 0 0 0
Nonvoting convertible common stock issued
for debt (note 18) 0 0 0 0
Detachable warrants issued in conjunction
with convertible debt (notes 7 &10) 0 0 0 0
Net loss 0 0 0 0
Balances at December 31, 1994 0 0 25,078,779 250,788
Exercise of common stock options
(note 11) 0 0 625,712 6,257
Detachable warrants issued in conjunction
with convertible debt (notes 7 &10) 0 0 0 0
Stock issued for debt, net of unamortized
discount and expenses (note 7) 2,521,363 3,469,880 1,383,632 13,836
Increasing rate preferred stock discount 0 (126,446) 0 0
Discount accretion 0 73,234 0 0
Conversion feature of debentures issued
(note 8) 0 0 0 0
Debentures converted, net of unamortized
discount and expenses (note 8) 0 0 658,570 6,586
Issuance of convertible preferred stock
(note 18) 397,351 600,000 0 0
Exercise of detachable warrants (note 7) 0 0 534,105 5,341
Foreign currency translation adjustment 0 0 0 0
Net loss 0 0 0 0
Balances at December 31, 1995 2,918,714 $4,016,668 28,280,798 282,808
Nonvoting
convertible Accumu-
common stock Paid-in lated
Shares Amount capital deficit
Balances at December 31, 1992 0 $0 21,549,040 (19,982,425)
Common stock issued for debt (note 7 0 0 495,455 0
Issuance of common stock, net of
issuance expenses (note 18) 0 0 2,159,175 0
Common stock issued for expenses 0 0 50,501 0
Exercise of common stock options
(note 11) 0 0 15,541 0
Net loss 0 0 0 (2,045,070)
Balances at December 31, 1993 0 0 24,269,712 (22,027,495)
Exercise of common stock options
(note 11) 0 0 59,401 0
Issuance of common stock, net of issuance
expenses (note 18) 0 0 5,531,232 0
Translation adjustment 0 0 27,105 0
Nonvoting convertible common stock issued
for debt (note 18) 377,684 3,777 355,023 0
Detachable warrants issued in conjunction
with convertible debt (notes 7 &10) 0 0 60,000 0
Net loss 0 0 0 (7,286,956)
Balances at December 31, 1994 377,684 3,777 30,302,473 (29,314,451)
Exercise of common stock options
(note 11) 0 0 450,593 0
Detachable warrants issued in conjunction
with convertible debt (notes 7 &10) 0 0 207,000 0
Stock issued for debt, net of unamortized
discount and expenses (note 7) 1,872,158 18,722 2,804,215 0
Increasing rate preferred stock discount 0 0 126,446 0
Discount accretion 0 0 0 (73,234)
Conversion feature of debentures issued
(note 8) 0 0 2,200,000 0
Debentures converted, net of unamortized
discount and expenses (note 8) 0 0 673,661 0
Issuance of convertible preferred stock
(note 18) 0 0 0 0
Exercise of detachable warrants (note 7) 0 0 684,659 0
Foreign currency translation adjustment 0 0 (109,248) 0
Net loss 0 0 0 (9,094,503)
Balances at December 31, 1995 2,249,842 22,499 37,339,799 (38,482,188)
Treasury
stock Total
Balances at December 31, 1992 (250,000) 1,474,006
Common stock issued for debt (note 7 0 500,000
Issuance of common stock, net of
issuance expenses (note 18) 0 2,186,873
Common stock issued for expenses 0 50,809
Exercise of common stock options
(note 11) 0 15,741
Net loss 0 (2,045,070)
Balances at December 31, 1993 (250,000) 2,182,359
Exercise of common stock options
(note 11) 0 60,059
Issuance of common stock, net of issuance
expenses (note 18) 0 5,591,220
Translation adjustment 0 27,105
Nonvoting convertible common stock issued
for debt (note 18) 0 358,800
Detachable warrants issued in conjunction
with convertible debt (notes 7 &10) 0 60,000
Net loss 0 (7,286,956)
Balances at December 31, 1994 (250,000) 992,587
Exercise of common stock options
(note 11) 0 456,850
Detachable warrants issued in conjunction
with convertible debt (notes 7 &10) 0 207,000
Stock issued for debt, net of unamortized
discount and expenses (note 7) 0 6,306,653
Increasing rate preferred stock discount 0 0
Discount accretion 0 0
Conversion feature of debentures issued
(note 8) 0 2,200,000
Debentures converted, net of unamortized
discount and expenses (note 8) 0 680,247
Issuance of convertible preferred stock
(note 18) 0 600,000
Exercise of detachable warrants (note 7) 0 690,000
Foreign currency translation adjustment 0 (109,248)
Net loss 0 (9,094,503)
Balances at December 31, 1995 (250,000) 2,929,586
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
LASERTECHNICS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
Cash flows from operating activities:
Net loss $ (9,094,503) (7,286,956) (2,045,070)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization
514,988 410,231 185,317
Provision for losses on accounts receivable
115,375 65,169 21,008
Provision for product warranty reserve
338,250 687,591 116,553
Amortization of financing discount and
issuance costs 674,232 0 0
Restructuring charges 0 1,148,275 0
Write-off of software development costs
0 552,989 0
(Increase) decrease in:
Accounts receivable, trade
(1,165,875) (1,652,944) (564,795)
Inventory (1,149,528) (1,357,558) (814,120)
Inventory deposit (467,031) 133,666 (270,000)
Prepaid expenses 104,779 (101,952) (28,301)
Other 163,769 (99,577) (150,137)
Increase (decrease) in:
Accounts & notes payable (42,450) 1,799,923 769,455
Customer advances (278,721) (571,644) 1,246,999
Commissions payable (108,575) 196,417 22,557
Product warranty reserve(348,956) (523,867) (145,159)
Accrued payroll and payroll taxes
(147,575) 197,485 (62,734)
Accrued vacation (6,685) 66,298 38,588
Net cash used by operating
activities (10,898,506) (6,336,454) (1,679,839)
Cash flows from investing activities:
Capital expenditures (995,518) (790,409) (292,939)
Business acquisitions 0 (100,000) (50,000)
Software development 0 (119,251) (72,439)
Net cash used by investing
activities (995,518) (1,009,660) (415,378)
F-5
(Continued)
LASERTECHNICS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
1995 1994 1993
Cash flows from financing activities:
Borrowings under financing agreements
$ 7,329,906 3,936,828 0
Principal payments on financing agreements
(2,969,452) (1,770,136) 0
Proceeds from issuance of convertible debentures
7,000,000 0 0
Convertible debenture issuance costs
(520,000) 0 0
Principal payments under capital lease obligations
(164,860) (160,613) (89,941)
Net proceeds from issuance of preferred and
common stock
1,683,729 6,355,268 1,850,374
Net cash provided by financing activities
12,359,323 8,361,347 1,760,433
Net increase (decrease) in
cash and cash equivalents 465,299 1,015,233 (334,784)
Cash and cash equivalents at beginning of year
1,427,058 411,825 746,609
Cash and cash equivalents at end of year
$ 1,892,357 1,427,058 411,825
Supplemental information:
Cash paid during the year for interest
$ 173,619 146,271 136,895
Conversions to stock (notes 7 and 8):
Debentures, net of unamortized discount and
expenses
$ 659,905 0 0
Notes payable, net of unamortized discount and
expenses 5,953,773 345,000 500,000
Accrued interest 373,222 0 0
Detachable warrants issued in conjunction with
convertible debt (note 7)
$ 207,000 60,000 0
Conversion feature of debentures issued (note 8)
$ 2,200,000 0 0
Receivable from sale of common stock (note 18)
$ 0 0 350,000
Business assets acquired (note 16):
Fair value of net assets acquired
0 779,296 444,144
Cash paid 0 (100,000) (50,000)
Issuance of note payable 0 0 (150,000)
Issuance of common stock of subsidiary
0 (500) (2,240)
Assumption of liabilities0 (881,918) (241,904)
Minimum guaranteed royalty
0 (281,610) 0
See accompanying notes to consolidated financial statements.
F-6
LASERTECHNICS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(1) Summary of Significant Accounting Policies
1.
(a) Company Organization and Basis of Presentation
The accompanying consolidated financial statements include
the accounts of Lasertechnics, Inc. and its wholly owned
subsidiaries Lasertechnics Marking Corp. (LMC) and Quantrad, Inc.,
its 92 percent owned subsidiary Sandia Imaging Systems Corporation
(SIS U.S.), SIS U.S.'s wholly owned French subsidiary Sandia
Imaging Systems SA(SIS Europe) (collectively, the Company). All
significant intercompany accounts and transactions have been
eliminated in consolidation.
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(b) Statements of Cash Flows
The Company considers all highly liquid debt instruments
with original maturities of three months or less to be
cash equivalents.
(c) Inventory
Inventory is valued at the lower of cost or market using
the first-in, first-out method.
(d) Depreciation and Amortization
Depreciation on property and equipment is calculated using
the straight-line method over the estimated useful lives
of the respective assets. Assets utilized under capital
leases are amortized over the lesser of the term of the
lease or the estimated useful life of the asset using the
straight-line method.
(e) Goodwill
Goodwill represents the excess of cost over net assets
acquired in the 1994 acquisition of Printis SARL, (note
16) and is amortized on a straight-line basis over the
expected periods to be benefited (five years). The
Company assesses the recoverability of this intangible
asset by determining whether the amortization of the
goodwill balance over its remaining life can be recovered
through projected undiscounted future results. The
amount of goodwill impairment, if any, is measured based
on projected, discounted future results using a discount
rate equal to prime rate. Amortization expense for the
years ended December 31, 1995 and 1994 was $162,530 and
$70,837, respectively. Accumulated amortization was
$233,367 and $70,837 at December 31, 1995 and 1994,
respectively.
F-7
(Continued)
(f) Fair Value of Financial Instruments
Cash and cash equivalents, accounts receivable, inventory
deposit, payable to stockholder, accounts payable, notes
payable, customer advances, commissions payable and
accrued liabilities are reflected in the financial
statements at fair value because of the short-term
maturity of these instruments.
The fair value of the convertible debentures approximates
recorded value because the fair value of the debt and
equity components of the financial instrument were valued
at the October 1995 issuance date and market conditions
have not changed significantly since that date.
It is not practical to estimate the fair value of capital
lease obligations in default since expected cash flows
and maturities on this instrument are undeterminable. In
addition, the Company may not be able to obtain debt with
similar terms in the current market, so an appropriate
interest rate could not be estimated.
(g) Income Taxes
Effective January 1, 1993, the Company adopted Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards No. 109, Accounting for Income
Taxes. The effect of adopting Statement 109 was
immaterial to the consolidated financial statements.
Under the asset and liability method of Statement 109,
deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences
between the financial statement carrying amounts of
existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences
are expected to be recovered or settled. Under Statement
109, the effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the
period that includes the enactment date.
(h) Net Loss Per Common Share
Net loss per common share is based on the weighted average
shares of common stock and, if dilutive, common
equivalent shares (options, warrants, convertible
preferred stock and convertible debt) outstanding during
the period. None of the common stock equivalents were
dilutive during the periods presented.
(i) Revenue Recognition
The Company recognizes revenue on sales of its products
either when the products are shipped from the plant or
received by the customer, depending on shipping terms.
(j) Warranty Costs
The Company warrants its products against defects in
material and workmanship for periods ranging from 30 days
to two years from the date of installation. The warranty
reserve is reviewed quarterly and adjusted based upon the
Company s actual historical warranty costs and its
estimate of future costs.
F-8
(Continued)
(k) Research and Development Costs
Research and development costs are expensed as incurred.
(l) Advertising Costs
Advertising costs, all of which are nondirect response
advertising, are expensed as incurred. Advertising
expense was $317,617, $232,625 and $200,907 for the years
ended December 31, 1995, 1994 and 1993. The Company
markets its products in both domestic and international
markets. Currently, approximately 65 to 75 percent of
the Company s sales are in the United States.
(2) Operations, Liquidity and Going Concern
The Company s operations in 1995 continued to generate
losses. The loss in 1995 significantly exceeded losses in
either 1994 or 1993. Although, during 1995, the Company raised
approximately $13 million through equity and debt transactions,
operations, capital expenditures and debt service requirements
utilized all such proceeds by the end of February 1996. In
addition, at December 31, 1995 the Company is in default of
covenants in its capital lease agreement (note 6).
The Company s business plan for 1996 is predicated
principally upon significant increases in sales for existing
SIS products, the successful introduction of new products in
both of its business segments, significant improvements in
gross margins and reductions in research and development
expenditures. Because of the anticipated timing of new product
introductions and manufacturing cost reductions, together with
the necessity to prepay all or a portion of the balance of its
lease obligation financing, the Company will require additional
external financing to meet its 1996 requirements. Management
believes that it will be able to access external financing
sufficient to fund such requirements (note 19). However,
there can be no assurance that sufficient additional external
financing could be obtained to fund any increases in financing
requirements resulting from delays in or inability to
significantly increase sales of existing SIS products,
successfully introduce planned new products, or achieve gross
margin improvements. If the Company is unable to obtain such
additional funds, it may be necessary to either reduce or stop
certain product development programs, reduce its sales and
marketing efforts, dispose of assets or undertake other actions
as may be appropriate.
(3) Termination of Manufacturing Agreement
In 1993, the Company engaged Wolfensohn International,Inc.,
a subsidiary of James D. Wolfensohn, Inc., which is an
affiliate of a significant stockholder, Wolfensohn Associates, L.P.
(Wolfensohn), to provide advisory and investment
banking services with respect to a possible strategic alliance
with a third-party to develop and manufacture the Company s
products. On May 13, 1994, SIS U.S. and Singapore Precision
Industries (SPI), a unit of Singapore Technology Industrial
Corporation, the technology manufacturing arm of the Singapore
government, entered into a contract manufacturing agreementand
a distribution agreement whereby SPI is a licensed distributor
of SIS products. Concurrently, SPI purchased 826,447 shares of
the Company s common stock for $1,000,000 (note 18). Pursuant
to the agreement with Wolfensohn the Company paid Wolfensohn
$50,000 during 1994 based upon the $1,000,000 SPI stock
purchase transaction. The Company does not anticipate that any
additional fees will be paid to Wolfensohn International, Inc.
pursuant to this agreement.
F-9
(Continued)
The manufacturing agreement is scheduled to expire on
December 31, 1998 and contains cancellation provisions by
either party. In the third quarter of 1995 the Company
instructed SPI to discontinue production, and subsequently
began negotiations with SPI to terminate the manufacturing
agreement pursuant to the cancellation provisions of the
contract. The cancellation provisions of the contract provide
that the Company is required to purchase from SPI, subject to
inspection and acceptance by the Company, all inventories owned
by SPI in connection with the contract. SPI has asserted that
it is due approximately $1,810,000 for inventories previously
produced or acquired in connection with the contract, but has
not yet permitted the Company to inspect or verify such
inventory. At December 31, 1995, the Company has not reflected
in the accompanying financial statements either the inventory
or obligation as asserted by SPI. The Company, through
December 31, 1995, has however, paid $465,000 to SPI as a
deposit against the ultimate liability. In addition, the
Company expects, based upon negotiations to date, that the
ultimate settlement with SPI will also resolve amounts due
from, and to, SPI consisting of trade accounts receivable of
$720,000 and trade accounts payable of $809,000 (which amounts
are reflected in the accompanying balance sheet at December 31,
1995). If negotiations to terminate the manufacturing
agreement are completed, the Company estimates that the
inventory to be acquired from SPI will require rework
aggregating approximately $500,000, which is not expected to
result in the total cost of the inventory exceeding its net
realizable value.
Based upon the progress of negotiations with SPI to date, the
Company currently believes that the ultimate outcome of the
negotiated termination will not result in losses to the
Company, and accordingly, the Company has made no provision for
any loss as of December 31, 1995. Neither the final outcome of
the negotiations, nor a litigated outcome, in the event a
settlement is not reached, can be predicted. Accordingly, the
Company s current estimates could change.
(4) Significant Customers
One customer accounted for 16 percent and 46 percent of
consolidated revenues in 1995 and 1994, respectively. Another
customer accounted for 16 percent of consolidated revenuesin
1993.
(5) Property, Plant and Equipment
Property, plant and equipment consists of the following:
Amortization
period 1995 1994
Property, plant and equipment under capital
leases:
2. Land $ 336,396 336,396
Building lease term 1,235,505 1,235,505
Machinery and equipment
lease term 127,411 65,899
Research equipment
lease term 21,339 21,339
Furniture and fixtures
lease term 363,022 363,022
2,083,673 2,022,161
F-10
(Continued)
Amortization
period 1995 1994
Accumulated amortization $(805,930) (731,761)
Property, plant and
equipment under
capital leases, net 1,277,743 1,290,400
Other property, plant and equipment:
Building 14 to 45 years 181,079 95,127
Leasehold improvements
lease term 328,985 327,019
Machinery and equipment
5 to 8 years 1,179,217 987,436
Demonstration equipment
2 to 3 years 480,226
Research equipment 3 years 139,536 92,194
Furniture and fixtures
5 years 717,684 590,955
3,026,727 2,092,731
Accumulated depreciation
(1,304,229) (1,025,950)
Other property, plant
and equipment, net 1,722,498 1,066,781
Property, plant and
equipment, net $ 3,000,241 2,357,181
(6) Lease Obligations
In 1983, the Company entered into a long-term capital lease
agreement with the City of Albuquerque, New Mexico for office,
manufacturing and warehouse facilities and equipment. In
connection with the transaction, the City of Albuquerque issued
industrial development revenue bonds. The leased assets will
revert to the Company upon retirement of the lease obligations
and payment of a nominal amount.
Pursuant to the original agreement, the bondholder has the
right to call the bonds starting in November 1993 and in each
November thereafter. On October 1, 1993, the Company and
bondholder entered into an agreement whereby the Company
increased the monthly lease payment by $8,000. This additional
prepayment amount started in April 1994 and will be made for a
24 month period. In exchange for the Company s agreement to
make these prepayments, the bondholder agreed to waive its
right to call the bonds during this 24 month period provided
that the Company makes its monthly payments on a timely basis
and remains in compliance with the agreement s debt covenants,
which require the Company to maintain a current ratio of not
less than 1 to 1 and a debt to equity ratio of not more than
3 to 1.
At December 31, 1995 and 1994, the Company's current ratio
was 1.5 to 1 and .82 to 1, respectively, and the debt to equity
ratio was 4.0 to 1 and 9.8 to 1, respectively. Accordingly, the
Company has classified the entire outstanding balance as a
current liability in the accompanying consolidated balance
sheet at December 31, 1995 and 1994. In addition to the
covenants mentioned previously, the agreement includes a
provision whereby the debt can be called anytime the
bondholder reasonably believes itself to be insecure.
F-11
(Continued)
Capital lease obligations are as follows:
1995 1994
City of Albuquerque, New Mexico, due monthly
($21,177 from January 1995 to March 1996, $13,177
from April 1996 to maturity) including interest at
75% of the prime rate of Chase Manhattan Bank
(6.4% at December 31, 1995) but not less than 8%
nor more than 14%, maturing September 2008; in
default at December 31, 1995
$1,113,768 1,248,278
Other capital leases, due $4,201 monthly, with maturity
dates through August 1998, including interest ranging
from 15.15% to 19.4% 64,272 29,568
Total capital lease obligations 1,178,040 1,277,846
Less:
Capital lease obligation in default classified as
current 1,113,768 1,248,278
Current portion of capital leases 28,944 16,518
$ 35,328 13,050
The annual aggregate lease payments under capital leases are as
follows:
Year ending December 31
1996 $ 1,149,418
1997 26,011
1998 15,743
1,191,172
Less amount representing interest (13,132)
$ 1,178,040
(7) Convertible Notes Payable to Stockholders
In December 1994, the Company entered into agreements to
borrow a total of $2,000,000 from J.P. Morgan Investment
Corporation (JPMIC), a significant stockholder. During 1995,
the Company borrowed an additional $6,900,000 from another
significant shareholder, Wolfensohn. These borrowings from
shareholders were evidenced by unsecured notes bearing interest
at 12 percent per annum. Interest and principal were due on demand,
but if no demand was made, principal and interest become due and payable
at various dates from February 1, 1996 through September 15,
1996. In the event that the Company completed an equity
financing of $5,000,000 or more, then JPMIC and Wolfensohn had
the right to convert the outstanding principal and interest,
or a portion thereof, into voting or nonvoting common stock of
the Company at the price per share paid by the investors in the
equity financing. In connection with these note agreements,
JPMIC and Wolfensohn also received warrants to purchase the
Company s common stock (see note 10).
F-12
(Continued)
Although the Company did not complete an equity financing of
$5,000,000, the Company agreed to convert $6,210,000 of the
debt plus accrued interest of approximately $353,000 held by
the shareholders above into a combination of common stock,
nonvoting common stock and preferred stock evidenced by debt to
equity conversion agreements. In addition, the Company paid
Wolfensohn $2,000,000 of principal out of the proceeds of the
convertible debenture private placement (note 8). The
remaining outstanding debt to Wolfensohn was repaid when
Wolfensohn exercised 534,105 warrants to purchase common stock
(note 10) resulting in total proceeds of $690,000. The
following table summarizes the 1995 convertible note payable
conversion activity:
Conver-
sion
price Shares of
Amount per stock
Date Noteholder converted share Class of stock received
May 1995 JPMIC $ 314,450 0.95 Voting common 331,000
May 1995 JPMIC 1,778,550 0.95 Nonvoting common 1,872,158
May 1995 Wolfensohn 1,000,000 0.95 Voting common 1,052,632
Aug.1995 Wolfensohn 1,500,000 1.30 Series A preferred1,153,846
Sept.1995Wolfensohn 1,500,000 1.42 Series B preferred1,056,338
Dec.1995Wolfensohn 469,879 1.51 Series C preferred 311,180
$ 6,562,879
During 1992, the Company entered into an agreement to borrow
$750,000 from three stockholders. The loans were secured by
certain inventory, accounts receivable and common stock of the
Company, and were due on December 31, 1993. Interest which was
payable at maturity, accrued at a rate equal to the prime rate.
The stockholders had the option to be repaid in the Company s
unregistered common stock based upon 80 percent of the average
publicly traded price during the 30 days prior to conversion. One
stockholder converted his $250,000 note plus $6,500 of accrued
interest into common stock during 1992. In March 1993, and as part
of a separate private placement transaction (see note 18), the
remaining two stockholders converted their notes into 454,545
shares of common stock based upon an adjusted price per share equal
to 73 percent of the average publicly traded price of the stock
during the 30 days prior to conversion.
(8) Convertible Debentures
In October 1995, the Company completed a $7,000,000 private
placement of 10 percent convertible debentures maturing in
October 1998. The debentures plus accrued interest are
convertible by the holder into unregistered common stock of the
Company as follows: (a) between October 11, 1995 and November
25, 1995 at an exercise price of $2.34375, (b) between
November 26, 1995 and December 25, 1995, one-half of the
debentures can be converted at the lesser of $2.34375 or 85
percent of the average five day closing bid price of the
Company s stock prior to conversion, and (c) after December 25,
1995, and during the term of the debentures, all debentures can
be converted by the holder under the same terms described in
(b). The Company has the right to force conversion under the
following conditions: (a) after October 2, 1996, the Company
can force conversion to common stock at the lesser of $2.34375
or 85 percent of the average 5-day closing bid
F-13
(Continued)
price of the Company s common stock prior to conversion,
and (b) anytime the Company s stock trades at $3.80 per share
or better for 10 consecutive days, the Company may require
debenture holders to convert each debenture at the lesser of
$2.34375 or 80 percent of the closing bid price of the
Company s stock on the day that the Company provides notice of
conversion to the holders. The common stock has registration
rights under certain circumstances. The Company assigned a
value of $2,200,000 to the conversion feature of the debentures
which will be amortized ratably as an interest rate adjustment
over the life of the debentures resulting in a 25 percent
effective yield. During 1995, $1,025,000 face amount of
debentures plus $20,342 of accrued interest were converted into
658,570 shares of common stock.
(9) Preferred Stock
The Company has three classes of preferred stock, Series A,
B and C. The preferred stock ranks as senior to the Company s
common stock as to dividend and liquidation rights. Each share
is convertible at the option of the holder into voting common
stock on a one share for one share basis and is entitled to
vote as if converted into voting common stock. The Company may
redeem the preferred stock at anytime at stated value plus
accrued dividends.
The Series A and B preferred stock accrue dividends at the
following rates: 0 percent through December 31, 1995; 5
percent January 1, 1996 through March 31, 1996; 7.5 percent
April 1, 1996 through June 30, 1996 and 10 percent thereafter.
Series C preferred stock accrues dividends at 0 percent through
December 31, 1995 and 10 percent thereafter. Dividends are
payable within 15 days following each calendar quarter in cash
or in additional shares of preferred stock at the option only
of the Company through June 30, 1996 (September 30, 1996 for
Series C). After June 30, 1996 (September 30, 1996 for Series
C), dividends are payable in cash or additional shares of
preferred stock at the option only of the stockholder. There
were no dividends in arrears at December 31, 1995.
A discount has been recorded equal to the present value of
the difference between the actual dividends that will be paid
and the 10 percent perpetual dividend amount, calculated over
the increasing dividend rate period. The discount will be
amortized to provide a constant effective dividend rate. The
1995 discount amortization was $73,234.
(10) Common Stock Warrants
During 1995, the Company agreed to issue an unrelated third-
party up to 65,000 warrants to purchase the Company's voting
common stock at $2.00 per share in connection with an investor
relations agreement. The issuance of the 65,000 warrants is
conditioned upon an increase in the Company s stock price to
specified levels, none of which had been reached as of
December 31, 1995. This agreement expires in September 1996
and any warrants issued will expire in 5 years after the
issuance. In addition, the Company issued unrelated employees
of the investor relations firm 100,000 warrants to purchase its
voting common stock at $1.50 per share and 75,000 warrant to
purchase its voting common stock at $2.50 per share.
F-14(Continued)
In connection with a 1994 investor relations agreement, the
Company agreed to issue an unrelated third party up to 110,000
warrants to purchase its voting common stock at $1.22 per
share. Warrants for the purchase of 20,000 shares of voting
common stock were issued upon execution of the agreement,
February 15, 1994. Issuance of the other 90,000 warrants was
conditioned upon an increase in the Company's stock price to
specified levels to be measured at three points in time.
Although the first target price level was not achieved under
the original terms of the agreement, the Company's stock rose
to the targeted level soon thereafter. The Company amended the
original agreement and the first 30,000 conditional warrants
were issued. However, the other target stock prices set out in
the agreement were not met so the final 60,000 conditional
warrants were not issued. The 50,000 issued warrants expire
February 15, 1999.
During 1995 and 1994, the Company entered into several
convertible notes payable agreements with JPMIC and Wolfensohn
(note 7). In conjunction with these agreements JPMIC received
detachable warrants to purchase 58,824 (December 14, 1994) and
66,225 shares of the Company s common stock. The exercise
price of the warrants is the lesser of (i) $1.70 per share
(December 14, 1994) or $1.51 per share (December 29, 1994) or
(ii) the price per share realized in an equity financing
completed prior to December 31, 1995. No such financing was
completed. The warrants have not been exercised and they
expire in December 1999. The value allocated to the warrants,
$60,000, was reflected as a discount on the convertible
promissory notes and was being amortized ratably over the one
year stated term of the notes. JPMIC converted their debt
during 1995 and the unamortized portion of this discount was
netted against additional paid-in capital as of the date of
conversion (note 7).
In conjunction with the Wolfensohn convertible notes payable
agreements, the noteholder received detachable warrants to
purchase 534,105 shares of the Company s common stock. The
warrants were fully exercised in 1995 at an aggregate price of
$690,000, and an exercise range of $1.01 to $1.76 per share.
The value allocated to the warrants, $207,000, was reflected as
a discount on the convertible promissory notes and was being
amortized ratably over the one year stated term of the notes.
Wolfensohn converted their debt during 1995 and the unamortized
portion of the discount was netted against additional paid-in
capital as of the date of conversion (note 7).
In connection with the convertible debenture private
placement (note 8), a five year warrant to
purchase 222,222 shares of the Company s common stock, priced
at 20 percent above the $2.34375 closing price, or $2.81 per
share, was issued to the placement agent as part of the
placement fee.
A summary of the warrants activity is as follows:
Warrants Price per
outstanding share
December 31, 1993
Warrants issued 175,049 1.22 - 1.70
December 31, 1994 175,049
Warrants issued 756,327 1.01 - 2.81
Warrants exercised (534,105) 1.01 - 1.76
December 31, 1995 397,271 1.22 - 2.81
F-15
(Continued)
(11) Stock Options
The Company had a key employee stock option plan (the 1981
Plan) that terminated on November 29, 1991. Under the 1981
Plan, 113,388 shares of the Company s common stock have been
reserved for the outstanding options, all of which are
exercisable at a price of $.66 per share through December 21,
2000, at which time they expire.
The following information is a summary of the stock options under
the 1981 Plan:
Options
outstanding
December 31, 1992, all exercisable 154,945
Options exercised (16,032)
Options expired (714)
December 31, 1993, all exercisable 138,199
Options exercised (19,955)
December 31, 1994, all exercisable 118,244
Options expired (4,856)
December 31, 1995, all exercisable 113,388
On May 29, 1991, the Company s stockholders approved a key
employee stock option plan (the 1991 Plan) that is authorized
to issue 1,000,000 shares of the Company s common stock which
have been reserved. The 1991 Plan will terminate on May 28,
2001, or on such earlier date as the Board of Directors may
determine.
The following information is a summary of the stock options
under the 1991 Plan:
Options Price
outstanding per share
December 31, 1992 90,000 $ .82 1.29
Options exercised (4,000) 1.29
Options expired (1,000) 1.29
Options issued 226,000 1.00 1.75
December 31, 1993 311,000 .82 1.75
Options exercised (5,875) 1.00 1.29
Options expired (18,500) 1.00 1.75
Options issued 30,000 1.75
December 31, 1994 316,625 .82 1.75
Options exercised (55,875) 1.00 1.29
Options expired (14,600) .82 1.00
Options issued 50,000 1.58
December 31, 1995 296,150 $ 1.00 1.75
At December 31, 1995, 203,525 of the above options are
exercisable.
F-16
(Continued)
In addition to stock options issued under the key employee
stock option plans, the Company has issued stock options to
various members of the Board of Directors, officers and
employees of the Company and to unrelated individuals and
companies in exchange for services. The options are
exercisable at various prices and dates, have various vesting
requirements and expire at various times through December 7,
2000. The following information is a summary of the stock
options available, all of which have common shares reserved,
under these plans:
Options Price
outstanding per
share
December 31, 1992, all exercisable 2,222,250 $ .50 2.00
Options expired (240,000) .60 2.00
Options issued 115,000 1.22 1.74
December 31, 1993, all exercisable 2,097,250 .50 1.74
Options expired (65,000) .80 1.22
Options issued 157,624 1.28 1.34
December 31, 1994, all exercisable 2,189,874 .50 1.74
Options exercised (569,837) .60 1.45
Options expired (note 12) (1,400,000) .50
Options issued 77,587 1.24 1.45
December 31, 1994, all exercisable 297,624 $ 1.22 1.74
At December 31, 1995, 235,124 of the above options are
exercisable.
SIS U.S. has issued stock options to various members of the
Board of Directors, officers and employees of SIS U.S. and SIS
Europe to purchase SIS U.S. common stock. The options have
various vesting requirements and expire at various times
through November 16, 2004. The following is a summary of the
SIS U.S. stock options available:
Options Price
outstanding per share
December 31, 1992 - $ -
Options issued 190,000 .01
Options exercised (10,000) .01
December 31, 1993 180,000 .01
Options exercised (5,000) .01
Options expired (17,500) .01
Options issued 70,000 .01 .50
December 31, 1994 227,500 .01 .50
Options exercised (45,000) .01
Options expired (45,000) .01 .50
Options issued 40,000 .50
December 31, 1995 177,500 $ .01 .50
F-17
(Continued)
At December 31, 1995, 95,208 of the above options, all of
which have common shares reserved, were exercisable according
to the various vesting requirements.
(12) Commitments and Contingencies
The Company has entered into license agreements that provide
for royalty payments based on various percentages of certain
product sales. Royalty expenses under these agreements for the
years ended December 31, 1995, 1994 and 1993 were approximately
$151,000, $248,000 and $63,000, respectively.
On February 28, 1996, an investor group filed suit against the
Company. This lawsuit arises out of the Company s refusal to
recognize the investor group s attempt to exercise an option to
purchase 1,400,000 shares of Lasertechnics common stock at
$.495 per share (note 11). The option had been granted to the
Company s former President and CEO who attempted to transfer
his option to the investor group on the last day of the option
term in September of 1995. On that same day the investor group
attempted to exercise the option. The Company refused to
recognize the attempted transfer of the option to the investor
group on the primary grounds that the option was granted
personally to the Company s former President and CEO and was
not transferable to third-parties. The lawsuit seeks issuance
and registration of the 1,400,000 shares upon payment of the
exercise price, or in the alternative, monetary damages which
the investor group alleges to be not less than $2,800,000.
Lasertechnics believes the claim is without merit and will
vigorously oppose it. At December 31, 1995, management
estimates that the ultimate outcome will not have a materially
adverse effect upon the Company s financial condition or
results of operations. Management s estimates could change
depending on how the lawsuit progresses.
On March 15, 1996, LMC was notified about a potential future
patent infringement claim by a competitor relating to LMC s
electronic code changing device. LMC does not believe that its
product infringes on the identified patent, but it is in the
process of employing special patent counsel to investigate the
merits of the potential claim. Management currently estimates
that the ultimate outcome of this claim will not have a
materially adverse effect upon the Company s financial position
or results of operations. Management s evaluation may change
depending upon the results of its investigation.
(13) Restructuring Charge
During the fourth quarter of 1994, SIS U.S. and SIS Europe
recorded restructuring charges of $1,148,275 to adjust the net
carrying value of certain inventory to its estimated net
realizable value. The provision was principally necessitated
by the planned discontinuance of the digital image recorder
product line and the introduction of a new generation plastic
card printer product. The provision was estimated by
management based on a review of the market for its products and
the anticipated net revenues, less disposal costs, to be
received from the sale of this inventory.
F-18
(Continued)
(14) Income Taxes
Due to the Company s losses, no income tax expense was
recorded for the years ended December 31, 1995, 1994 and 1993.
At December 31, 1995, the Company had a net operating loss
carryforward of approximately $22,000,000 for U.S. federal
income tax purposes, which will begin expiring in 1997. Of
this federal net operating loss carryforward approximately
$11,000,000 is available for state income tax purposes. The
tax benefit (approximately $7,500,000) of the net operating
loss carryforward has been fully offset by a valuation
allowance, since the Company cannot currently conclude that it
is more likely than not that the benefit will be realized. The
valuation allowance increased by approximately $3,000,000
during 1995. Because of expected conversions of existing
convertible debt, a change in ownership, as defined for
purposes of the Internal Revenue Code, could occur in 1996 that
would limit the annual utilization of the U.S. federal net
operating loss carryforward under applicable Internal Revenue
Service regulations. Additionally, the Company had
approximately $400,000 and $40,000, respectively, of research
and development and investment tax credit carryforwards. The
carryforwards expire beginning from 1997 to 2006. In addition,
the Company has available a capital loss carryforward of
$1,950,000 which fully expires in 1996.
(15) Export Sales
Export sales totaled approximately $4,991,000, $4,191,000 and
$2,038,000 in 1995, 1994 and 1993, respectively.
(16) Acquisitions
Printis, SARL
On February 19, 1992, the Company purchased a 43 percent
equity interest in Printis, SARL (Printis) of Paris, France for
approximately $279,000. In April 1994, SIS Europe purchased
the remaining 57 percent equity interest in Printis for
$100,000 cash, 50,000 shares of SIS U.S. common stock and
minimum royalties totaling approximately $282,000 through 1999.
This acquisition was accounted for using the purchase method of
accounting and resulted in goodwill of approximately $485,000.
During 1995 Printis was merged into SIS Europe.
Media Imaging Technology Corp.
On October 29, 1993, SIS U.S. acquired the assets and certain
liabilities of Texas-based Media Imaging Technology Corp.
(MITC) for $50,000 cash, a $150,000 note payable over a twelve-
month period, a minority stock interest in SIS U.S. and the
assumption of $241,904 of MITC liabilities. The acquisition
has been accounted for using the purchase method of accounting.
MITC is a producer of imaging software and photographic image
transmitters. Approximately $394,000 of the acquisition price
was allocated to purchased software and capitalized as an asset
on SIS s balance sheet. During 1994 and 1993 SIS U.S.
capitalized costs to modify the software. However, in the
fourth quarter of 1994 SIS U.S. determined that the market for
the product was not viable and all marketing and sales efforts
ceased. As a result, SIS U.S. wrote-off the unamortized
balance of purchased and internally developed software costs of
$375,000 during 1994. The write-off is classified as research
and development expense in the accompanying financial
statements.
F-19
(Continued)
(17) Segment Information
Business Segments
The Company operates with its product groups organized into
two business segments; marking and imaging. Operations in
marking involve the production and sale of laser systems which
mark products with a serial number, logo or bar code. Imaging
operations involve the sale of plastic card printers.
Operating results and other financial data are presented in
the information which follows for the principal business
segments of the Company for the years ended December 31, 1995,
1994 and 1993. General corporate assets and expenses are
allocated to the respective business segments.
Marking Imaging Consolidated
1995:
Sales $ 10,308,154 (a)3,121,577 13,429,731
Loss from operations (195,374) (7,934,839) (8,130,213)
Identifiable assets (c)8,797,832 5,844,770 14,642,602
Capital expenditures 354,990 640,528 995,518
Depreciation 218,466 133,991 352,457
1994:
Sales $ 11,963,399 (a)3,892,810 15,856,209
Loss from operations (416,160) (6,776,649) (7,192,809)
Identifiable assets (c)6,497,792 4,212,664 10,710,456
Capital expenditures 417,992 372,417 790,409
Depreciation 174,116 139,860 313,976
1993:
Sales $ 6,176,341 (a)1,851,669 8,028,010
Loss from operations (710,029) (1,399,740) (2,109,769)
Identifiable assets (c)5,869,861 1,800,942 7,670,803
Capital expenditures 161,108 131,831(b) 292,939
Depreciation 149,547 2,925(b) 152,472
(a) Sales of marking products to single customers were
$2,171,000, $7,296,000 and $1,300,000 in 1995, 1994 and
1993 which represents, 21, 61 and 21 percent of marking
sales, respectively.
(b) Prior to July 31, 1993, the marking and imaging business
segments operated in the same physical location. Through
that date the marking segment made all capital
expenditures for both business segments and then allocated
a portion of depreciation expense to the imaging division
through the Company s normal expense allocation process.
Consequently, the segment data presented only reflects
imaging capital expenditures and depreciation for activity
occurring subsequent to July 31, 1993.
(c) Identifiable assets by business segment are those assets
used in the Company s operations in each segment.
F-20 (Continued)
Geographic Segments
The Company operates primarily in the United States and
France. Operating results and other financial data are
presented in the information which follows for the principal
geographic segments of the Company.
United Intercompany
States (g) France Activity (f) Consolidated
1995:
Sales $ 11,730,377 2,549,943 (850,589)(d) 13,429,731
Loss from operations
(6,565,747) (1,557,388) (7,078) (8,130,213)
Identifiable assets (e)
16,157,790 2,520,500 (4,035,688) 14,642,602
1994:
Sales $ 13,722,594 2,831,014 (697,399)(d) 15,856,209
Loss from operations
(5,644,499) (1,511,232) (37,078) (7,192,809)
Identifiable assets (e)
10,371,137 3,639,280 (3,299,961) 10,710,456
1993:
Sales $ 7,953,267 74,743 8,028,010
Loss from operations
(1,962,740) (147,029) (2,109,769)
Identifiable assets (e)
7,631,346 495,813 (456,356) 7,670,803
(d) Sales between geographic regions are recorded at amounts
above cost in accordance with the rules and regulations of
the governing tax authorities.
(e) Identifiable assets by geographic segment are those assets
used in the Company s operations in each segment.
(f) Intercompany activity is eliminated in consolidation.
(g) All corporate activity and assets are included in the United
States geographic segment.
(18) Stock Issuances
At the annual meeting of the Board of Directors on July 28,
1995, the Board authorized the issuance of up to 10 million
shares of convertible preferred stock, increased the number of
authorized shares of nonvoting stock from 5,000,000 to
8,500,000 and decreased the number of authorized shares of
voting common stock from 45,000,000 to 41,500,000. During the
year, the Company s Board established three classes of
convertible preferred stock, Series A, B and C, with each class
being convertible into one share of the Company s voting common
stock.
On December 27, 1995, the Company issued 198,676 shares of
convertible preferred stock to Wolfensohn for cash totaling
$300,000 and an additional 198,675 shares of convertible
preferred stock to an affiliate of Wolfensohn for cash totaling
$300,000.
In January 1994, the Company issued 272,331 shares of its
unregistered common stock to Wolfensohn at a per share price of
approximately $.73. The $200,000 proceeds from this sale were
principally utilized by SIS U.S. in its acquisition of Printis
(note 16).
F-21
(Continued)
In June 1994, the Company issued 826,447 shares of its
unregistered common stock at $1.21 per share (total of
$1,000,000) to SPI. Under the terms of the agreement, a
nonvoting representative of SPI is entitled to attend
Lasertechnics, Inc., board meetings. Concurrently with SPI's
purchase of common stock, SIS U.S. entered into a contract
manufacturing agreement and a distribution agreement with SPI
(see note 3).
In July 1994, the Company issued 4,900,000 shares of its
unregistered common stock to JPMIC at $.95 per share (total of
$4,655,000). The Company also issued a $345,000 convertible
note payable bearing interest at 10 percent and convertible at
$.95 per share into nonvoting convertible common stock of the
Company. The nonvoting convertible common stock is convertible
into voting common stock on a one share for one share basis.
On November 29, 1994, the convertible note payable plus
interest was converted into 377,684 shares of the Company s
nonvoting convertible common stock. Under the terms of the
stock purchase agreement JPMIC is entitled to one seat on the
Board of Directors.
On March 29, 1993, and in conjunction with a private
placement transaction, the Company issued 727,273 shares of its
common stock to three stockholders for $800,000 cash and also
issued 454,545 shares of its common stock for the conversion of
$500,000 of convertible debt (see note 7).
On October 28, 1993, the Company issued 2,042,484 shares of
common stock to two stockholders for cash totaling $1,500,000.
At December 31, 1993, $350,000 of cash proceeds still owed to
the Company from this issuance was recorded as a receivable
from the sale of common stock in the accompanying consolidated
balance sheet. The $350,000 was received by the Company in
January 1994.
(19) Subsequent Event
On March 15, 1996, the Company completed a $5,500,000
private placement of 10 percent convertible subordinated
debentures maturing March 1, 1999. The debentures are
convertible into the Company s common stock at the option of
the holder at the lesser of $2.00 per share or 85 percent of
the average 5-day closing bid price of the Company's stock
prior to conversion, subject to certain holding requirements.
The Company has the right to force conversion at any time after
March 1, 1997 utilizing the formula described above. The
Company also has the right to redeem the debentures for cash
upon notice of conversion by a holder or at anytime after
March 1, 1997. All outstanding debentures shall automatically
be converted into the Company s common stock at maturity.
F-22
Independent Auditors Report on
Financial Statement Schedule
The Board of Directors and Stockholders
Lasertechnics, Inc.:
Under date of March 8, 1996, except as to the last
paragraph of note 12 and note 19 which are as of March
15, 1996, we reported on the consolidated balance sheets
of Lasertechnics, Inc. and subsidiaries as of December
31, 1995 and 1994, and the related consolidated
statements of operations, stockholders equity and cash
flows for each of the years in the three-year period
ended December 31, 1995. In connection with our audits
of the aforementioned consolidated financial statements,
we also audited the related financial statement Schedule
II. This financial statement schedule is the
responsibility of the Company s management. Our
responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly,
in all material respects, the information set forth
therein.
The audit report on the consolidated financial statements
of Lasertechnics, Inc. and subsidiaries referred to above
contains an explanatory paragraph that states that the
Company s recurring losses from operations, and resulting
continued dependence upon access to additional external
financing, raise substantial doubt about the Company s
ability to continue as a going concern. This financial
statement schedule does not include any adjustments that
might result from the outcome of this uncertainty.
KPMG PEAT MARWICK LLP
Albuquerque, New Mexico
March 8, 1996, except as to
the last paragraph of note 12
and note 19 to the consolidated
financial statements, which are as of
March 15, 1996
S-1
Schedule II
LASERTECHNICS, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1995, 1994 and 1993
Additions
Balance charged
at to Balance
beginning costs at end
of and of
Description period expenses Deductions period
For the year ended December 31, 1995:
Reserves and allowances deducted from
asset accounts - allowance for
doubtful accounts
$ 170,010 115,375 (7,122)(a) 278,263
Product warranty reserve
$ 261,138 338,250 (343,385)(b) 256,003
For the year ended December 31, 1994:
Reserves and allowances deducted from
asset accounts - allowance for
doubtful accounts
$ 104,841 65,169 170,010
Product warranty reserve
$ 97,415 687,591 (523,868)
(b)261,138
For the year ended December 31, 1993:
Reserves and allowances deducted from
asset accounts - allowance for
doubtful accounts
$ 222,535 21,008 (138,702)(a) 104,841
Product warranty reserve
$ 126,021 116,553 (145,159)(b) 97,415
(a) Charge-offs.
(b) Actual costs incurred.
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors
Lasertechnics, Inc.:
We consent to incorporation by reference in the registration
statements No. 33-42214 and 33-98160 on Form S-8 of
Lasertechnics, Inc. and subsidiaries of our report dated March 8,
1996, except as to the last paragraph of footnote 12 and footnote
19 which are as of March 15, 1996, relating to the consolidated
balance sheets of Lasertechnics, Inc. and subsidiaries as of
December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity and cash flows and
related financial statement schedule for each of the years in the
three-year period ended December 31, 1995, which reports appear
in the December 31, 1995 annual report on For 10-KSB of
Lasertechnics, Inc.
Our report dated March 8, 1996, except as to the last paragraph
of footnote 12 and footnote 19 which are as of March 15,1996,
contains an explanatory paragraph that states that the Company's
recurring losses from operations and resulting continued
dependence upon access to additional external financing together
with the default on a capital lease obligation raise consolidated
financial statements and financial statement schedule do not
include any adjustments that might result from the outcome of
this uncertainty.
KPMG PEAT MARWICK LLP
Albuquerque, New Mexico
March 29, 1996
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-END] SEP-30-1995
[CASH] 453
[SECURITIES] 000
[RECEIVABLES] 3515
[ALLOWANCES] 506
[INVENTORY] 4628
[CURRENT-ASSETS] 8964
[PP&E] 228
[DEPRECIATION] 132
[TOTAL-ASSETS] 12306
[CURRENT-LIABILITIES] 11237
[BONDS] 00
[PREFERRED-MANDATORY] 000
[PREFERRED] 3000
[COMMON] 290
[OTHER-SE] -2191
[TOTAL-LIABILITY-AND-EQUITY] 12306
[SALES] 9944
[TOTAL-REVENUES] 9944
[CGS] 6288
[TOTAL-COSTS] 9234
[OTHER-EXPENSES] -16
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 654
[INCOME-PRETAX] -6217
[INCOME-TAX] 1
[INCOME-CONTINUING] 1
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] -6217
[EPS-PRIMARY] -.23
[EPS-DILUTED] -.23
</TABLE>
