<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(MARK ONE)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OR THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-11933
LASERTECHNICS, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 85-0294536
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
3208 COMMANDER DRIVE
CARROLLTON, TEXAS 75006
(Address of principal executive offices) (Zip Code)
(972) 407-6080
(Issuer's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
----- ------
APPLICABLE ONLY TO CORPORATE ISSUERS
Shares of common stock outstanding on May 7, 1997: 40,938,568. Shares of non-
voting convertible common stock outstanding on May 7, 1997: 2,249,842.
Transitional Small Business Disclosure Format (Check One); YES NO X
----- -----
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LASERTECHNICS, INC.
INDEX
Page
No.
----
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Consolidated Balance Sheets at March 31, 1997 and
December 31, 1996.......................................... 3
Consolidated Statements of Operations for the three
months ended March 31, 1997 and 1996....................... 5
Consolidated Statements of Cash Flows for the three
months ended March 31, 1997 and 1996....................... 6
Notes to Condensed Consolidated Financial Statements......... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 9
PART II. OTHER INFORMATION................................................ 14
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signatures................................................................ 19
2
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PART 1. CONDENSED FINANCIAL INFORMATION
Item 1. Financial Statements
LASERTECHNICS, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 594,525 1,598,744
Accounts receivable - trade, less allowance for doubtful
accounts of $266,014 in 1997 and $357,136 in 1996 4,828,891 3,196,943
Inventory 6,109,554 6,600,007
Current portion of deferred license fee 525,000 700,000
Prepaid expenses and other 252,384 298,445
------------- --------------
Total current assets 12,310,354 12,394,139
------------- --------------
Property, plant & equipment, net 3,322,402 3,334,277
Goodwill 152,001 172,510
Deferred license fee 1,400,000 1,400,000
Other assets 274,859 360,931
------------- --------------
Total assets $ 17,459,616 17,661,857
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Convertible notes payable to stockholder (note 3) $ 250,000 -
Notes payable 700,000 775,292
Accounts payable 2,939,463 1,369,818
Accrued liabilities 2,606,514 2,957,525
Capital lease obligations, current 198,327 225,676
------------- --------------
Total current liabilities 6,694,304 5,328,311
------------- --------------
Convertible debentures 1,561,944 1,768,965
Notes payable, long-term 1,400,000 1,400,000
Capital lease obligations, noncurrent 874,304 927,411
Other 139,149 149,387
------------- --------------
Total liabilities $ 10,669,701 9,574,074
------------- --------------
(Continued)
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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LASERTECHNICS, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
Stockholders' equity (note 2): 1997 1996
Convertible preferred stock, no par; --------------- ------------
7,000,000 shares authorized in 1997 and 1996.
<S> <C> <C>
Series A: $1.30 stated value; 1,153,846
shares outstanding in 1997 and 1996. $ 1,500,000 1,500,000
Series B: $1.42 stated value; 1,056,338
shares outstanding in 1997 and 1996. 1,500,000 1,500,000
Series C: $1.51 stated value; 708,530
shares outstanding in 1997 and 1996. 1,069,880 1,069,880
Series D: $10,000.00 stated value; 363 shares
outstanding in 1997 and 585 in 1996. 3,825,915 6,049,314
Common stock, $.01 par value. 56,750,000 shares authorized
in 1997 and 1996; 40,129,004 shares issued and
outstanding in 1997 and 37,133,514 in 1996. 401,290 371,335
Non-voting convertible common stock, $.01 par value. 2,250,000
shares authorized in 1997 and 1996; 2,249,842
shares issued and outstanding in 1997 and 1996. Convertible
into common stock on a share for share basis. 22,499 22,499
Paid-in Capital 50,328,484 47,753,080
Accumulated deficit (51,858,153) (50,178,325)
-------------- -------------
Total stockholders' equity 6,789,915 8,087,783
Total liabilities and stockholders' equity $ 17,459,616 17,661,857
============== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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LASERTECHNICS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Sales $ 4,589,787 4,111,701
Cost of sales 2,662,572 2,692,507
---------------- ------------
Gross Profit 1,927,215 1,419,194
Expenses:
Research and development 753,251 876,422
General and administrative 1,002,501 1,238,815
Selling and marketing 1,468,589 1,054,203
---------------- ------------
Operating expenses 3,224,341 3,169,440
---------------- ------------
Loss from operations (1,297,126) (1,750,246)
---------------- ------------
Other income (expense):
Interest income 11,135 14,539
Interest expense (220,851) (290,985)
Other 16,229 (21,493)
---------------- ------------
Other expense, net (193,487) (297,939)
---------------- ------------
Net loss (1,490,613) (2,048,185)
---------------- ------------
Preferred stock dividend requirements (189,215) (100,183)
Net loss applicable to common stock $ (1,679,828) (2,148,368)
================ ============
Net loss per share $ (0.04) (0.07)
================ ============
Shares of common stock used in computing
net loss per share (note 1) 40,129,004 31,236,321
================ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
LASERTECHNICS INC. CONSOLIDATED
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1997 March 31, 1996
---------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,490,613) (2,048,185)
Adjustments to reconcile net loss to net cash used by
operating activities:
Depreciation and amortization 150,312 454,418
Provision for losses on accounts receivable 2,987 58,651
Provision for product warranty reserve 93,179 116,248
Amortization of financing discount and issuance costs 80,144 -
Accrued interest on convertible debentures 47,644 -
Non-cash compensation 40,000 -
(Increase) decrease in:
Accounts receivable, net (1,580,686) (1,545,268)
Inventory 397,858 (342,361)
Prepaid expenses and other 213,661 (285,284)
Other assets 54,799 (299,391)
Increase (decrease) in:
Accounts payable 1,627,545 593,451
Accrued liabilities (616,939) (111,029)
--------------- -------------
Net cash used by operating activities (980,109) (3,408,750)
Cash flows from investing activities:
Capital expenditures (117,929) (64,598)
Cash flows from financing activities:
Borrowings under financing agreements 250,000 -
Principal payments on financing agreements (75,725) (202,130)
Proceeds from issuance of convertible debentures - 5,500,000
Convertible debenture issuance costs - (385,000)
Principal payments on capital lease obligations (80,456) (35,917)
Net proceeds from issuance of preferred and common stock - 18,077
--------------- -------------
Net cash provided by financing activities 93,819 4,895,030
Net increase (decrease) in cash and cash equivalents (1,004,219) 1,421,682
Cash and cash equivalents, beginning of period 1,598,744 1,892,357
--------------- -------------
Cash and cash equivalents, end of period $ 594,525 3,314,039
=============== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
LASERTECHNICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements are
unaudited and include the accounts of Lasertechnics, Inc. ("LASX"), the holding
company, LASX's wholly owned subsidiary Lasertechnics Marking Corporation
("LMC"), LASX's 96 percent owned subsidiary Sandia Imaging Systems Corporation
("Sandia"), Sandia's wholly owned French subsidiary Sandia Imaging Systems
Europe SA ("Sandia EUR"), and LASX's wholly-owned subsidiary Quantrad
Corporation ("Quantrad") collectively, the "Company" or "Lasertechnics".
Quantrad, an inactive company, is in the process of dissolution. All
significant intercompany accounts and transactions have been eliminated.
Information contained in the Company's condensed consolidated financial
statements and notes thereto, should be read in conjunction with the Company's
consolidated financial statements and notes thereto, contained in Lasertechnics'
Annual Report on Form 10-KSB for the year ended December 31, 1996.
The Consolidated Balance Sheet at March 31, 1997 and December 31,
1996, the Consolidated Statements of Operations for the three month period ended
March 31, 1997 and 1996, and the Consolidated Statements of Cash Flows for the
three month periods ended March 31, 1997 and 1996 have been prepared by the
Company and are unaudited. In the opinion of the Company's management, all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the financial position at March 31, 1997, results of operations
for the three month period ended March 31, 1997 and 1996, and changes in cash
flow for the three month periods ended March 31, 1997 and 1996 have been made.
Net loss per common share is based on weighted average common shares
outstanding and does not give effect to outstanding common stock options,
warrants and convertible debt because their inclusion would be anti-dilutive.
Net loss applicable to common stock is derived by adding to consolidated net
loss the accretion of discounts recorded for the Company's preferred stock
series A, B, C and D.
Certain reclassifications have been made to prior year amounts in
order to present the consolidated financial position and results of operations
on a consistent basis.
2. ISSUANCE OF COMMON STOCK
During the quarter ended March 31, 1997, a total of 2,995,457 shares
of a combination of Lasertechnics registered and unregistered common stock were
issued. Of this amount, 22,989 shares were issued to the Chairman of the Board
as 1996 compensation at a value of $40,000. The remaining shares were issued
pursuant to debenture and preferred stock conversions.
7
<PAGE>
3. CONVERTIBLE NOTES PAYABLE TO STOCKHOLDER
During the first quarter of 1997, the Company obtained a commitment
for a working capital bridge loan of up to $1,000,000 from Wolfensohn Associates
L.P. ("Wolfensohn"), a significant stockholder. On March 27, 1997, the Company
made a $250,000 draw on this commitment. This unsecured note bears interest at
12% per annum. Interest and principal are due on demand, but if no demand is
made, principal and interest become due and payable on December 31, 1997. In
the event that the Company completes an equity financing of $5,000,000 or more
on or before December 31, 1997, then Wolfensohn has the right to convert the
outstanding principal and interest, or a portion thereof, into either the
Company's voting common stock, par value $.01 per share (the "Common Stock"), or
non-voting convertible common stock, par value $.01 per share, at the price per
share paid by the investors in such equity financing.
In connection with the $250,000 note agreement, Wolfensohn also
received a five year warrant to purchase a total of 25,806 shares of the
Company's Common Stock. The warrants may be exercised at a price of $0.96875 or
at an alternate rate dependent upon either of the following events: (i) if the
Company completes an equity financing of $5,000,000 or more on or before
December 31, 1997, the exercise price shall equal the price per share at which
shares of the Common Stock are issued in such financing, or (ii) if such
financing involves convertible or exchangeable securities, the exercise price
shall equal the price at which such securities may be converted into or
exchanged for Common Stock.
4. CONTINGENCIES
The Company is involved in various other claims and legal actions
arising in the ordinary course of business. In the opinion of management of the
Company, after consultation with outside legal counsel, the ultimate disposition
of these matters will not have a material effect on the accompanying condensed
consolidated financial statements. See also Legal Proceedings, Part II, Item I.
5. SUBSEQUENT EVENTS
In April, 1997, the Company retained Southport Partners as financial
advisor to advise on strategic alternatives for LMC, including the possibility
of a disposition or strategic partnership of the subsidiary. The Company has
not, however, entered into any agreement with respect to any such transaction,
and there can be no assurance that any such transaction will be consummated.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996
Separate Business Units. The summarized financial data of LMC and
Sandia as of and for the three-month period ended March 31, 1997, as presented
herein, do not necessarily reflect the financial position or results of
operations of LMC and Sandia if the two entities had no ownership or management
relationships.
<TABLE>
<CAPTION>
CONSOLIDATED
MARKING (LMC) IMAGING (SANDIA) (LASX)
------------- --------------- ----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Sales $ 2,107,295 2,482,492 4,589,787
Cost of sales 1,156,528 1,506,044 2,662,572
------------ ---------- ----------
Gross profit 950,767 976,448 1,927,215
Gross margin % 45% 40% 42%
Expenses:
Research and development $ 245,346 507,905 753,251
General and administrative 387,000 615,501 1,002,501
Selling and marketing 329,458 1,139,131 1,468,589
------------ ---------- ----------
Operating expenses 961,804 2,262,537 3,224,341
Loss from operations (11,037) (1,286,089) (1,297,126)
Other expense, net (62,049) (131,438) (193,487)
------------ ---------- ----------
Net loss before preferred dividends $ (73,086) (1,417,527) (1,490,613)
============ ========== ==========
Current assets $ 5,909,290 6,401,064 12,310,354
Non-current assets 2,353,812 2,795,450 5,149,262
------------ ---------- ----------
$ 8,263,102 9,196,514 17,459,616
============ ========== ==========
Current liabilities $ 3,066,463 3,627,841 6,694,304
Inter-co.(receivable) payable (12,223,397) 12,223,397 -
Long-term liabilities 2,436,248 1,539,149 3,975,397
Stockholders' equity 14,983,788 (8,193,873) 6,789,915
------------ ---------- ----------
$ 8,263,102 9,196,514 17,459,616
============ ========== ==========
</TABLE>
Sales. Consolidated sales for the first three months of 1997 were
$4,589,787 compared to $4,111,701 for the same period in 1996, an increase of
$478,086, or 12%. Imaging segment
9
<PAGE>
sales increased $1,078,000, or 77%, over the same period last year primarily due
to increased sales of plastic card printers and related consumables and parts.
Marking segment sales decreased $600,000, or 22% primarily due to a decrease in
foreign marker sales. The Company's net accounts receivable increased
$1,631,948, or 51%, at March 31, 1997 compared to December 31, 1996, which
reflects that approximately 70% of Sandia's sales for the first quarter were
recorded in the last two weeks of the quarter.
Cost of Sales. Consolidated cost of sales for the first three months of
1997 was $2,662,572 compared to $2,692,507 for the same period in 1996, a
decrease of $29,935, or 1%. Gross margin was approximately 42% for the first
three months of 1997 and 35% for the same period in 1996. The lower margins in
the first quarter of 1996 were primarily due to competitive pricing and
increased product costs of specific applications for plastic card printers in
the Imaging business.
Inventory. The Company's inventory decreased $490,453, or 7%, from
$6,600,007 at December 31, 1996 to $6,109,554 at March 31, 1997. Marking
segment inventory increased approximately $192,000 as a result of purchasing
parts for systems on order. Imaging segment inventory decreased $683,000 since
December 31, 1996, primarily due to a large number of sales recorded in the last
two weeks of the quarter.
Research and Development. Consolidated research and development expenses
were $753,251 for the first three months of 1997 compared to $876,422 for the
same period in 1996, a decrease of 14%. The decrease is primarily attributable
to the Imaging segment, which recorded greater development costs in 1996 related
to specific contracts that have since been completed.
General and Administrative. Consolidated general and administrative
expenses were $1,002,501 for the first three months of 1997 compared to
$1,238,815 for the same period in 1996, a decrease of 19%. This was primarily
due to a decrease of $138,000 in holding company expenses as well as a reduction
in personnel costs in both the Marking segment and the Imaging segment's Europe
office of approximately $22,000 and $63,000, respectively.
Selling and Marketing. Consolidated selling and marketing expenses were
$1,468,589 for the first three months of 1997 compared to $1,054,203 for the
same period in 1996, an increase of 39%. Of this increase, $495,000 was due to
increases in marketing expenses related to DataGlyphs(TM) of $252,000, Asia
marketing efforts of $100,000, and trade show and advertising of $129,000
related to the Imaging business. Selling and marketing expenses in the Marking
business decreased approximately $81,000 due to a reduction in personnel and the
corresponding reduction in travel expenses.
Other Income (Expense). Other expense, consisting of primarily interest
expense, for the first three months of 1997 was $193,487 compared to $297,939
for the same period in 1996. Due to conversions of certain convertible
debentures which were sold by the Company in October 1995 and March 1996, the
Company has recorded less interest expense and less amortization of the related
placement fee expenses and debenture discount in this quarter compared to the
first quarter of 1996.
10
<PAGE>
Net Results. The consolidated net loss for the three months ended March
31, 1997 was $1,490,613 compared to the $2,048,185 loss incurred in the first
three months of 1996. This reflects the improved gross margin and lower
research and development, general and administrative and other expenses,
partially offset by the increase in selling and marketing expense.
LIQUIDITY AND CAPITAL RESOURCES
Since inception the Company has utilized the proceeds from a number of
public and private sales of its equity and debt securities and the exercise of
options and warrants to meet its working capital requirements.
Cash and cash equivalents decreased $1,004,219 at March 31, 1997 compared
to December 31, 1996. Financing activities generated net cash of $133,819
principally from borrowings under financing agreements. Operating activities
used net cash of $1,020,109 principally to support the loss of $1,490,613 and
the increase of $1,580,686 in accounts receivable, offset in part by the
$1,627,545 increase in accounts payable. The accounts receivable increase was
due to approximately $1,700,000 of Imaging sales recorded during the last two
weeks of the quarter. Capital expenditures amounted to $117,929 compared to
$64,598 for the same period in 1996. The increase is the result of an increase
in demonstration equipment necessary for the increased sales effort.
The Company's operations in the first quarter of 1997 continued to generate
losses primarily due to operating expenses remaining at a higher level compared
to the sales volume achieved and lower than expected sales in both the Imaging
and Marking businesses.
The Company's future working capital requirements will depend upon many
factors, including the extent and timing of the Company's product sales, the
Company's operating results and the status of competitive products. The Company
anticipates that its existing working capital resources and revenues from
operations, together with a commitment for bridge financing of up to $1,000,000
from a significant stockholder, will be adequate to satisfy its working capital
requirements through 1997. The Company's actual working capital needs will
depend upon numerous factors, however, including actual expenditures and
revenues generated from its operations as compared to its business plan, none of
which can be predicted with certainty, and there can be no assurance that the
Company will not require additional funding prior to 1998. If the Company's
losses continue, the Company may have to obtain sufficient funds to meet its
cash requirements through strategic or other financial transactions with
compatible entities having the resources to support its programs, the sale of
assets or securities or other financing arrangements, or it will be required to
curtail its programs or seek a merger partner. Any additional funding may be on
terms which are unfavorable to the Company or disadvantageous to existing
stockholders. In addition, no assurance may be given that the Company will be
successful in raising additional funds or entering into business alliances.
Currently, there are no existing commitments for any additional external short-
term or long-term financing.
11
<PAGE>
In 1983, the City of Albuquerque, New Mexico issued 8% tax-exempt
industrial development revenue bonds in connection with a 25-year capital lease
of LMC's headquarters facility. The principal amount outstanding as of March
31, 1997 was $916,363. Pursuant to its agreement with the City of Albuquerque,
Lasertechnics is required to maintain a current ratio of at least 1 to 1. At
March 31, 1997, Lasertechnics' current ratio was 1.84 to 1 which is in
compliance with the lease terms. Previously, the Company was also required to
maintain a debt to equity ratio of not more than 3 to 1. Although the Company's
current ratio was in compliance at December 31, 1995, its debt to equity ratio
was in violation of the agreement. As a result, the full amount of the lease
was classified as a current liability on the Company's balance sheet at December
31, 1995. During the fourth quarter of 1996, the bondholder agreed to waive the
debt to equity ratio requirement. In addition, the bondholder agreed to
permanently waive its right to call the bond for redemption provided the Company
remains in compliance with all other covenants and continues to prepay the lease
by an additional $8,000 per month. All such payments have been made on a timely
basis. Failure of the Company to stay in compliance could result in the
necessity to relocate LMC's headquarters to other facilities, and the associated
disruption of the business, as well as increased difficulty in obtaining
financing and credit, could affect the Company's ability to continue as a going
concern.
OTHER
Inflation has not had nor is expected to have a material impact on the
operations and financial condition of the Company.
CAUTIONARY STATEMENTS
This Report includes "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements involve known
and unknown risks, uncertainties and other factors that could cause the actual
results of the Company to differ materially from the results expressed or
implied by such statements, including general economic and business conditions,
conditions affecting the industries served by the Company and its subsidiaries,
conditions affecting the Company's customers and suppliers, competitor responses
to the Company's products and services, the overall market acceptance of such
products and services, results of competitively bid contracts and other factors
disclosed in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996. Moreover, the Company operates in highly competitive
industry segments, and many of the Company's competitors have significantly
greater resources than the Company. Accordingly, although the Company believes
that the expectations reflected in such forward looking statements are
reasonable, there can be no assurance that such expectations will prove to be
correct, and investors are cautioned not to place undue reliance on such forward
looking statements. The Company disclaims any undertaking to update or correct
any forward looking statements contained herein to reflect events and
circumstances that may occur or become known to the Company after the date of
this filing.
Because of the specialized nature of its businesses, Lasertechnics is
dependent upon the efforts of its current officers, consultants and engineers
and upon its ability to attract and retain
12
<PAGE>
technologically qualified personnel, particularly engineers and software
designers highly qualified in the areas of imaging and laser technology. There
is intense competition for qualified personnel in the imaging and marking
industries, including competition from companies with substantially greater
resources than Lasertechnics. Although the Company has been successful to date
in recruiting adequate numbers of qualified personnel, there can be no assurance
that Lasertechnics will be successful in the future in recruiting or retaining
personnel of the requisite scientific caliber or in the requisite numbers to
enable the Company to compete effectively.
NASDAQ LISTING
Lasertechnics' Common Stock is listed on the Nasdaq SmallCap Market which
requires a minimum stockholders' equity of $1,000,000 and tangible assets of
$2,000,000 for continued listing. Because Lasertechnics' stockholders' equity
fell below this limit at September 30, 1995 Nasdaq temporarily put the Company's
stock on a conditional listing until a new minimum of $2,450,000 in equity was
met on December 30, 1995. This was accomplished through the conversion of an
aggregate of $1,045,342 of convertible subordinated debentures of the Company
and the issuance of Series C Convertible Preferred Stock. On January 2, 1996,
Nasdaq removed the conditional listing and lowered the stockholders' equity
requirement to $1,000,000. While management believes that in the event of
future losses the Company will be able to obtain additional equity financing to
preserve such listing, there can be no assurance that the Company will be able
to do so.
In the event the Common Stock were delisted by Nasdaq, trading, if any,
would be conducted in the over-the-counter market on the NASD's electronic
bulletin board, in what are commonly referred to as the pink sheets. As a
result, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the price of, the Company's securities. In addition,
the Common Stock would be subject to rules promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act") applicable to penny stocks. The
Securities and Exchange Commission (the "Commission") has adopted regulations
that generally define a "penny stock" to be an equity security that has a market
price (as defined) or exercise price of less than $5.00 per share, subject to
certain exceptions. By virtue of being listed on the Nasdaq SmallCap Market,
the Company's Common Stock will be exempt from the definition of "penny stock."
If, however, the Common Stock is removed from Nasdaq, the Company's securities
may become subject to the penny stock rules that impose additional sales
practice requirements on broker-dealers who sell penny stocks to persons other
than established customers and accredited investors. Consequently, the penny
stock rules may affect the ability of broker-dealers to sell the Company's
securities and may affect the ability of purchasers in the offering to sell
their securities in the secondary market.
SHARES ELIGIBLE FOR FUTURE SALE; CONVERTIBLE SECURITIES AND WARRANTS
Future sales of Common Stock in the public market by existing stockholders,
warrantholders and holders of convertible securities could adversely affect the
market price of Lasertechnics' Common Stock. At March 31, 1997, an aggregate of
29,082,604 shares of Common Stock were freely tradable without restriction under
the Securities Act of 1933 (the
13
<PAGE>
"Securities Act"). In addition, up to 11,046,400 shares were eligible for resale
in accordance with the manner of sale and volume limitations of Rule 144
promulgated under the Securities Act.
Lasertechnics has reserved approximately 10,200,000 shares of Common Stock
for issuance upon the exercise of outstanding convertible securities and
warrants. Lasertechnics has also reserved 1,150,000 shares of Common Stock for
issuance to key employees, officers, directors and consultants pursuant to the
Company's benefit plans. The Company's 10% Convertible Debentures due March 1,
1999 (the "1996 Debentures"), in the original principal amount of $5,500,000,
and the Company's Series D Convertible Preferred Stock (the "Series D
Preferred"), in the original stated amount of $8,350,000, became or will become
convertible in full into Common Stock at various times during 1996 and 1997. As
of March 31, 1997, an aggregate of $3,650,000 principal amount of the 1996
Debentures and $4,720,000 stated amount of Series D Preferred have been
converted since the issuance of such convertible securities, resulting in the
issuance of 7,645,462 shares of Common Stock, in the aggregate. The conversion
price for the 1996 Debentures is equal to the lesser of (i) $2.00 or (ii) a
variable conversion rate equal to 85% of the average closing bid price for the
Common Stock for the five trading days prior to conversion (the "Variable
Conversion Rate"). The conversion price for the Series D Preferred is equal to
the lesser of (i) $2.1406 or (ii) a variable conversion rate equal to 85% of
the average closing bid price for the Common Stock for the ten trading days
prior to the conversion date. These variable conversion rates for the 1996
Debentures and the Series D Preferred would result in substantial dilution to
the existing stockholders of the Company if converted at the current trading
price of the Company's Common Stock. This potential dilution may also adversely
affect the Company's ability to raise additional financing on favorable terms in
the future. In addition, because the conversion prices are variable,
Lasertechnics is unable to determine whether the number of shares it has
reserved or its remaining authorized shares of Common Stock will be sufficient
to satisfy all future requirements for the issuance of shares of Common Stock
upon conversion of the 1996 Debentures and Series D Preferred. The governing
instruments for both the Series D Preferred and the 1996 Debentures include
substantial penalties in the event that the Company has insufficient authorized
or reserved shares to satisfy the conversion requirements of the Series D
Preferred and the 1996 Debentures.
In May 1997, $500,000 principal amount of 1996 Debentures was redeemed by
the Company, upon receipt of the holder's notice of conversion, with the
proceeds from the private placement to a single new investor of an equal
principal amount of a new series of convertible debenture with substantially
identical terms as the 1996 Debentures. An aggregate of 275,459 shares of the
Company's Common Stock was issued in satisfaction of accrued interest and a
redemption premium in connection with that transaction.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported, on February 28, 1996, an investor group filed suit
against the Company in the United States District Court for the Southern
District of New York. This lawsuit
14
<PAGE>
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 the Company's Common Stock at
a price of $.495 per share. 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. On May 1, 1996, the Company moved to dismiss the
complaint on the grounds that the court in New York lacks personal jurisdiction
over the Company. A decision on that motion is still pending. The Company
believes the claim is without merit and will vigorously oppose it. During this
reporting period, there have been no material developments regarding this
matter.
Item 2. CHANGES IN SECURITIES.
During the period covered by this report, the Company sold the following
securities without registration under the Securities Act (other than
unregistered sales made in reliance on Regulation S):
1. 22,989 shares of Common Stock were issued to the Chairman of the Board
as 1996 compensation, at an aggregate value of $40,000, as determined by the
Board of Directors of the Company based on the market price of the Common Stock
on the date of grant. These shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act, and an appropriate
restrictive legend was affixed to the certificates representing such shares.
2. An aggregate of 460,868 shares of Common Stock were issued upon the
conversion of the Company's outstanding 10% convertible Debentures due March 1,
1999 (the "1996 Debentures"), in accordance with the terms thereof. The
conversion price and related terms of the 1996 Debentures are described in Part
1 of this report, Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Shares Eligible for Future Sale;
Convertible Securities and Warrants." These shares were issued in reliance on
the exemption from registration provided by Section 4(2) of the Securities Act
and the safe harbor provided by Regulation D of the Securities and Exchange
commission promulgated thereunder. An appropriate restrictive legend was affixed
to the certificates representing such shares, except for shares resold by the
holders thereof pursuant to the Company's effective resale shelf Registration
Statement on Form S-3.
3. A five-year warrant to purchase a total of 25,806 shares of Common
Stock was issued to Wolfensohn Associates, L.P. ("Wolfensohn"). In connection
with a bridge financing provided by Wolfensohn. The terms of the bridge
financing and the exercise price and related terms of the Warrants are described
in footnote 3 to the financial statements of the Company included in Part 1 of
this report. This warrant was issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act, and an appropriate
restrictive legend was affixed to the warrant certificate.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
3.1 --Certificate 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' dated June 6, 1986. Incorporated herein by
reference to Exhibit 3.3 to Lasertechnics' Annual Report on Form
10-KSB for the year ended December 31, 1987.
3.4 --Second Amendment to Certificate of Incorporation of
Lasertechnics, dated May 27, 1987. Incorporated herein by
reference to Exhibit 3.4 to Lasertechnics' Annual Report on Form
10-KSB for the year ended December 31, 1987.
3.5 --Third Amendment to Certificate of Incorporation of
Lasertechnics, dated November 11, 1994. Incorporated herein by
reference to Exhibit 4.4 to Lasertechnics' Registration Statement
on Form S-3 (Registration No. 333-10665).
3.6 --Fourth Amendment to Certificate of Incorporation of
Lasertechnics, dated July 28, 1995. Incorporated herein by
reference to Exhibit 4.5 to Lasertechnics' Registration Statement
on Form S-3 (Registration No. 333-10665).
15
<PAGE>
3.7 --Fifth Amendment to Certificate of Incorporation of
Lasertechnics, dated June 17, 1996. Incorporated herein by
reference to Exhibit 4.6 to Lasertechnics' Registration Statement
on Form S-3 (Registration No. 333-10665).
4.1 --Certificate of Designation of Lasertechnics Series A, B and C
Preferred Stock, dated December 27, 1995. Incorporated herein by
reference to Exhibit 4.7 to Lasertechnics' Registration Statement
on Form S-3 (Registration No. 333-10665).
4.2 --Certificate of Designation of Lasertechnics Series D Preferred
Stock. Incorporated herein by reference to Exhibit 4.1 to
Lasertechnics' Quarterly Report on Form 10-QSB for the period
ended June 30, 1996.
10.1 --License agreement, dated June 30, 1988, between Lasertechnics
and Patlex Corporation. Incorporated herein by reference to
Exhibit 10.17 to Lasertechnics' Annual Report on Form 10-KSB for
the year ended December 31, 1988.
10.2 --Employment agreement dated August 31, 1989, between Louis F.
Bieck, Jr. and Lasertechnics, Inc. as amended. Incorporated
herein by reference to Exhibit 10.17 Lasertechnics' Form 10-KSB
for the year ended December 31, 1990.
10.3 --1991 Incentive Stock Option Plan, dated August 14, 1991.
Incorporated herein by reference to Exhibit 10.10 to
Lasertechnics' Annual Report on Form 10-KSB for the year ended
December 31, 1991.
10.4 --Purchase Agreement between Sandia Europe and Jean-Luc
Poutchnine, Alain Quilleau and Philippe Bonnevie, dated March 4,
1994. Incorporated herein by reference to Exhibit 10.15 to
Lasertechnics' Annual Report on Form 10-KSB for the year ended
December 31, 1994.
10.5 --Letter confirming sale of shares of Lasertechnics Common Stock
to Singapore Precision Industries PTE LTD, dated May 12, 1994.
Incorporated herein by reference to Exhibit 10.16 to
Lasertechnics' Annual Report on Form 10-KSB for the year ended
December 31, 1994.
16
<PAGE>
10.6 --Contract Manufacturing Agreement between Sandia and Singapore
Precision Industries PTE LTD, dated May 13, 1994. Incorporated
herein by reference to Exhibit 10.17 to Lasertechnics' Annual
Report on Form 10-KSB for the year ended December 31, 1994.
10.7 --Advisory and investment banking services agreement between
Lasertechnics and Wolfensohn International, Inc., dated May 19,
1993. Incorporated herein by reference to Exhibit 10.18 to
Lasertechnics' Annual Report on Form 10-KSB for the year ended
December 31, 1994.
10.8 --Purchase of Common Stock and Convertible Note Agreement
between Lasertechnics and J.P. Morgan Investment Corporation,
dated July 8, 1994. Incorporated herein by reference to Exhibit
10.19 to Lasertechnics' Annual Report on Form 10-KSB for the year
ended December 31, 1994.
10.9 --OEM License Agreement between Sandia and Xerox Corporation,
dated January 6, 1995. Incorporated herein by reference to
Exhibit 10.20 to Lasertechnics' Annual Report on Form 10-KSB for
the year ended December 31, 1994.
10.10 --Demand Promissory Note issued to J.P. Morgan Investment
Corporation, dated December 19, 1994. Incorporated herein by
reference to Exhibit 10.21 to Lasertechnics' Annual Report on
Form 10-KSB for the year ended December 31, 1994.
10.11 --Demand Promissory Note issued to J.P. Morgan Investment
Corporation, dated December 31, 1994. Incorporated herein by
reference to Exhibit 10.22 to Lasertechnics' Annual Report on
Form 10-KSB for the year ended December 31, 1994.
10.12 --Amendment to the OEM License Agreement between Sandia and
Xerox Corporation, dated December 27, 1996. Incorporated herein
by reference to Exhibit 10.12 to Lasertechnics' Annual Report on
Form 10-KSB for the year ended December 31, 1996.
10.13 --Demand Promissory Note issued to Wolfensohn Associates L.P.,
dated March 27, 1997.*
10.14 --Warrant to purchase shares of Lasertechnics Common Stock
issued to Wolfensohn Associates L.P., dated March 27, 1997.*
______________
*Filed herewith.
17
<PAGE>
(b) REPORTS ON FORM 8-K.
None.
18
<PAGE>
SIGNATURES
----------
In accordance with the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LASERTECHNICS, INC.
Dated: May 12, 1997 By: /s/ RICHARD C.E. MORGAN
-------------------------------------
Richard C. E. Morgan
Chairman of the Board &
Chief Executive Officer
Date: May 12, 1997 By: /s/ E.A. MILO MATTORANO
-------------------------------------
E.A. Milo Mattorano
Vice President and
Chief Financial Officer
19
<PAGE>
Exhibit 10.13
LASERTECHNICS, INC.
DEMAND PROMISSORY NOTE
$250,000 March 27, 1997
LASERTECHNICS, INC., a Delaware corporation having its principal place of
business in Carrollton, Texas (the "Company"), for value received, hereby
promises to pay to the order of Wolfensohn Associates L.P., a Delaware limited
partnership, or its transferees or assigns (the "Holder"), on demand, the
principal sum of Two Hundred and Fifty Thousand Dollars ($250,000) together
with interest thereon from the date hereof at the rate of twelve percent (12%)
per annum (but in no event to exceed the maximum rate permitted under applicable
provisions of law). Interest shall be calculated on the basis of actual days
elapsed and on a 360-day year, and shall be payable on demand. If any portion
of the principal amount of this Note or any accrued interest thereon remains
outstanding on December 31, 1997, then the entire principal amount of this Note
and all accrued interest thereon shall be and become immediately due and payable
on such date.
The payment of principal and interest shall be made in such coin or currency
of the United States of America as at the time of payment shall be legal tender
for the payment of public and private debts. Principal and interest on this
Note shall be paid by wire transfer of Federal funds in accordance with the
written instructions of the Holder or, in the absence of such instructions, by
check mailed to the Holder at 590 Madison Avenue, 32nd Floor, New York, New York
10022.
The Company hereby waives presentment for payment, demand for payment,
notice of nonpayment, protest and notice of protest.
This Note may be prepaid in whole or in part (in amounts not less than
$50,000) at any time at the option of the Company, without premium or penalty.
If this Note is prepaid on or before December 31, 1997, then the Company shall
grant to the Holder the right and option to acquire, through December 31, 1997,
the Common Stock or other equity securities into which this Note would have been
convertible pursuant to the following paragraph if it had not been prepaid, at
the price per security specified in the following paragraph. All payments on
this Note shall be applied first to interest and the remainder thereof to
principal.
In the event the Company completes an equity financing of Five Million
Dollars ($5,000,000) or more on or before December 31, 1997 then the Holder
shall have the right, at the Holder's option, at any time or from time to time
on or before December 31, 1997, to convert the outstanding principal of and
interest on this Note, or such portion thereof as the Holder may wish, into the
Common Stock or other equity securities issued in such equity financing (or, at
the option of the Holder, equivalent non-voting equity securities), at the price
per security paid by the investors in such equity financing.
<PAGE>
This Note shall be binding upon the Company and its successors and assigns
and shall inure to the benefit of the Holder and its successors, assigns and
transferees.
The Company hereby promises to pay to the Holder all costs and expenses of
collection and enforcement, including without limitation reasonable attorneys'
fees and expenses.
This Note shall be governed by and construed in accordance with the internal
laws of the State of New York (without reference to its rules as to conflicts of
law). Any judicial proceeding brought against the Company to enforce, or
otherwise in connection with, this Note may be brought in any court of competent
jurisdiction in the City of New York, and, by execution and delivery of this
Note, the Company (i) accepts, generally and unconditionally, the nonexclusive
jurisdiction of such courts and any related appellate court and irrevocably
agrees to be bound by any final judgment rendered thereby in connection with
this Note and (ii) irrevocably waives any objection it may now or hereafter have
as to the venue of any such proceeding brought in such a court or that such a
court is an inconvenient forum. THE COMPANY HEREBY UNCONDITIONALLY AND
IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR CROSS
CLAIM ARISING OUT OF OR IN CONNECTION WITH THIS NOTE.
IN WITNESS WHEREOF, the Company has caused this Note to be signed by its
Vice President and has caused its corporate seal to be affixed and attested by
its Secretary.
LASERTECHNICS, INC.
By: /s/ E.A. Milo Mattorano
-----------------------
Name: E.A. Milo Mattorano
Title: Vice President and Chief
Financial Officer
[Corporate Seal]
Attested:
/s/ E.A. Milo Mattorano
- -----------------------
Name: E.A. Milo Mattorano
Title: Secretary
2
<PAGE>
Exhibit 10.14
NEITHER THIS WARRANT NOR ANY SHARES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR UNDER ANY STATE
SECURITIES LAWS. NEITHER THIS WARRANT NOR ANY SUCH SHARES MAY BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM SUCH REGISTRATION.
Warrant No. 35 For the Purchase of 25,806 Shares
-- ------
LASERTECHNICS, INC.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Wolfensohn Associates L.P.
("Wolfensohn") or its successors in interest, assigns or transferees
(collectively, the "Warrant Holder"), is entitled to subscribe for and purchase
from Lasertechnics, Inc., a Delaware corporation (the "Company"), 25,806 shares
------
of the Company's Common Stock (as defined in paragraph 10 hereof) (the "Warrant
Shares") at the "Exercise Price" (as hereinafter defined) per share, as the
number of Warrant Shares and the Exercise Price shall be adjusted and readjusted
or changed from time to time in accordance with paragraph 4 hereof. The Exercise
Price shall be the lesser of (i) $0.96875 or (ii) if the Company completes an
--------
equity financing of Five Million Dollars ($5,000,000) or more, on or before
December 31, 1997, the price per share at which shares of Common Stock are
issued in such financing or if such financing involves convertible or
exchangeable securities, the price at which such securities may be converted
into or exchanged for Common Stock.
This Warrant may be exercised at any time and from time to time on or
prior to December 31, 2002.
1. Exercise of Warrant.
--------------------
The rights represented by this Warrant may be exercised by the Warrant
Holder, in whole or in part, by (a) delivering to the Company a duly executed
notice of exercise in the form of Annex A hereto and (b) at the Warrant Holder's
option, either (i) delivering a check payable to (or wire transfer to the
account of) the Company in an amount equal to the product of (x) the Exercise
Price times (y) the number of Warrant Shares as to which this Warrant is being
exercised (such product, the "Total Exercise Price") or (ii) delivering to the
Company a letter (the "Conversion Letter") requesting conversion or exchange of
a portion of any indebtedness owed by the Company to the Warrant Holder in an
amount equal to the Total Exercise Price or (iii) surrendering to the Company a
portion of this Warrant with a "Value" (as defined below) equal to the Total
Exercise Price. For the purpose of clause (b) (iii) above, "Value" shall mean
the product of (I) the amount by which the average of the closing prices of the
Company's Common Stock on the thirty trading days preceding the date of
exercise, as reported in the Wall Street Journal, exceeds the Exercise Price and
(II) the number of Warrant Shares as to which this
<PAGE>
Warrant is surrendered for the purpose of effecting payment for Warrant Shares.
This Warrant shall be deemed to have been exercised immediately prior to the
close of business on the date of delivery of a duly executed notice of exercise,
together with the amount (in cash or by delivering the Conversion Letter or by
surrender of a portion of this Warrant) payable upon exercise of this Warrant
and, as of such moment, (i) the rights of the Warrant Holder, as such, with
respect to the number of Warrant Shares as to which this Warrant is being
exercised (and, if applicable, surrendered as payment of the Total Exercise
Price) shall cease, and (ii) such Warrant Holder shall be deemed to be the
record holder of the shares of Common Stock issuable upon such exercise. As soon
as practicable after the exercise, in whole or in part, of this Warrant, and in
any event within 5 business days thereafter, the Company at its expense
(including the payment by it of any applicable issuance or stamp taxes) will
cause to be issued in the name of and delivered to the Warrant Holder, or as the
Warrant Holder (upon payment by the Warrant Holder of any applicable transfer
taxes) may direct, a certificate or certificates for the number of fully paid
and nonassessable shares of Common Stock to which the Warrant Holder shall be
entitled upon such exercise. In the event of partial exercise of this Warrant
and, if applicable, partial surrender of this Warrant pursuant to clause (b)
(iii) of this paragraph, the Warrant need not be delivered to the Company
provided that the Warrant Holder agrees to make a notation of such partial
exercise and, if applicable, surrender on the Warrant. If this Warrant is
delivered to the Company, the Company shall issue and deliver to the Warrant
Holder a new Warrant evidencing the rights to purchase the remaining Warrant
Shares, which new Warrant shall in all other respects be identical to this
Warrant.
2. Investment Representation.
--------------------------
The Warrant Holder by accepting this Warrant represents that the Warrant
Holder is acquiring this Warrant for its own account or the account of an
affiliate for investment purposes and not with the view to any offering or
distribution and that the Warrant Holder will not sell or otherwise dispose of
this Warrant or the underlying Warrant Shares in violation of applicable
securities laws. The Warrant Holder acknowledges that the certificates
representing any Warrant Shares will bear a legend indicating that they have not
been registered under the Act, and may not be sold by the Warrant Holder except
pursuant to an effective registration or pursuant to an exemption from
registration. Wolfensohn shall be entitled to include the Warrant Shares in any
demand or piggyback registration to which Wolfensohn is entitled in respect of
Common Stock held by it.
3. Validity of Warrant and Issue of Shares.
----------------------------------------
The Company represents and warrants that this Warrant has been duly
authorized and validly issued and warrants and agrees that all shares of Common
Stock that may be issued upon the exercise of the rights represented by this
Warrant will, when issued upon such exercise, be duly authorized, validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issue thereof. The Company further warrants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company
-2-
<PAGE>
will at all times have authorized and reserved a sufficient number of shares of
Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. Antidilution Provisions.
------------------------
The terms of this Warrant shall be subject to adjustment as follows:
(a) In case the Company shall (i) pay a stock dividend or make a
distribution to holders of Common Stock in shares of its Common Stock, (ii)
subdivide its outstanding shares of Common Stock, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares, or (iv) issue by
reclassification of its shares of Common Stock any shares of capital stock of
the Company, (A) the Exercise Price shall be increased or decreased, as the case
may be, to an amount which shall bear the same relation to the Exercise Price in
effect immediately prior to such action as the total number of shares
outstanding immediately prior to such action shall bear to the total number of
shares outstanding immediately after such action and (B) this Warrant
automatically shall be adjusted so that it shall thereafter evidence the right
to purchase the kind and number of Warrant Shares or other securities which the
Warrant Holder would have owned and would have been entitled to receive after
such action if this Warrant had been exercised immediately prior to such action
or any record date with respect thereto. An adjustment made pursuant to this
subparagraph (a) shall become effective retroactively immediately after the
record date in the case of a dividend or distribution of Common Stock and shall
become effective immediately after the effective date in the case of a
subdivision, combination or reclassification.
(b) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of (i) assets (other than cash dividends or cash
distributions payable out of consolidated net income or retained earnings or
dividends payable in Common Stock), (ii) evidences of indebtedness or other debt
or equity securities of the Company, or of any corporation other than the
Company (except for the Common Stock of the Company) or (iii) subscription
rights, options or warrants to purchase any of the foregoing assets or
securities, whether or not such rights, options or warrants are immediately
exercisable (hereinafter collectively called "Distributions on Common Stock"),
the Company shall make provisions for the Warrant Holder to receive upon
exercise of this Warrant, a proportional amount (depending upon the extent to
which this Warrant is exercised) of such assets, evidences of indebtedness,
securities or such other rights, as if such Warrant Holder had exercised this
Warrant on or before such record date.
(c) In case of any consolidation or merger of the Company with or into
another corporation or the sale of all or substantially all of the assets of the
Company to another corporation, this Warrant thereafter shall be exercisable for
the kind and amount of shares of stock or other securities or property to which
a holder of the number of shares of Common Stock of the Company deliverable upon
exercise of this Warrant would have been entitled upon such consolidation,
merger or sale; and, in such case, appropriate
-3-
<PAGE>
adjustment shall be made in the application of the provisions in this paragraph
4, to the end that the provisions set forth in this paragraph 4 (including
provisions with respect to changes in and adjustments of the exercise price)
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any shares of stock or other securities or property thereafter deliverable upon
the exercise of this Warrant.
(d) If any event shall occur as to which the provisions of this paragraph 4
shall not be strictly applicable, but with respect to which the failure to make
any adjustment to the Exercise Price and the number of Warrant Shares issuable
upon exercise of this Warrant would not fairly protect the purchase rights
represented by this Warrant in accordance with the intent and principles of this
paragraph 4, upon request of the Warrant Holder, the Company shall appoint a
firm of independent public accountants reasonably acceptable to the Warrant
Holder which shall give its opinion upon the adjustments, if any, consistent
with the intent and principles established in this paragraph 4 necessary to
preserve without dilution the purchase rights represented by this Warrant. Upon
receipt of such opinion, the Company will promptly mail a copy thereof to the
Warrant Holder and shall make the adjustments described therein.
(e) Upon the occurrence of each adjustment or readjustment of the exercise
price or any change in the number of Warrant Shares or in the shares of stock or
other securities or property deliverable upon exercise of this Warrant pursuant
to this paragraph 4, the Company at its expense shall promptly compute such
adjustment or readjustment and change in accordance with the terms hereof and
furnish to each holder hereof a certificate signed by the chief financial
officer of the Company, setting forth such adjustment or readjustment and change
and showing in detail the facts upon which such adjustment or readjustment and
change is based. The Company shall, upon the written request at any time of the
Warrant Holder, furnish or cause to be furnished to such Holder, a similar
certificate setting forth (i) such adjustment or readjustment and change, (ii)
the Exercise Price then in effect, and (iii) the number of Warrant Shares and
the amount, if any, of other shares of stock and other securities and property
which would be received upon the exercise of the Warrant.
(f) The Company shall not be required upon the exercise of this Warrant to
issue any fraction of shares, but shall make any adjustment therefor by rounding
the number of shares obtainable upon exercise to the next highest whole number
of shares.
5. Notice to Warrant Holder.
---------------------------
If at any time,
(a) the Company shall take any action which would require an adjustment in
the Exercise Price or in the number of Warrant Shares pursuant to paragraph 4;
or
(b) the Company shall authorize the granting to the holders of its Common
Stock of any Distributions on Common Stock as set forth in paragraph 4(b), and
notice thereof shall be given to holders of Common Stock; or
-4-
<PAGE>
(c) the Company shall issue any additional shares of Common Stock or
declare any dividend (or any other distribution) on its Common Stock (other than
its regular quarterly dividends); or
(d) there shall be any capital reorganization or reclassification of the
Common Stock (other than a change in par value or from par value to no par value
or from no par value to par value of the Common Stock), or any consolidation or
merger to which the Company is a party, or any sale or transfer of all or
substantially all of the assets of the Company; or
(e) there shall be a voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then, in any one or more of said cases, the Company shall give written notice to
the Warrant Holder, not less than 20 days before any record date or other date
set for definitive action, or of the date on which such reorganization,
reclassification, sale, consolidation, merger, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also set
forth such facts as shall indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the current Exercise Price
and the kind and amount of the Warrant Shares and other securities and property
deliverable upon exercise of this Warrant. Such notice shall also specify the
date as of which the holders of the Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be.
6. Transfer of Rights.
-------------------
This Warrant is transferable in whole or in part, at the option of the Warrant
Holder upon delivery of the Warrant Assignment Form annexed as Annex B hereto,
duly executed. The Company shall execute and deliver a new Warrant or Warrants
in the form of this Warrant with appropriate changes to reflect the issuance of
subsequent Warrants, in the name of the assignee or assignees named in such
instrument of assignment and, if the Warrant Holder's entire interest is not
being transferred or assigned, in the name of the Warrant Holder, and this
Warrant shall promptly be cancelled. Any transfer or exchange of this Warrant
shall be without charge to the Warrant Holder and any new Warrant or Warrants
issued shall be dated the date hereof. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or for which it may
be exchanged.
7. Lost, Mutilated or Missing Warrant.
-----------------------------------
Upon receipt by the Company of evidence satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and upon surrender and
cancellation of this Warrant, if mutilated, the Company shall execute and
deliver a new Warrant of like tenor and date.
-5-
<PAGE>
8. Rights of Warrant Holder.
-------------------------
The Warrant Holder shall not, by virtue hereof, be entitled to any voting
or other rights of a shareholder of the Company, either at law or equity, and
the rights of the Warrant Holder are limited to those expressed in this Warrant.
9. Successors.
-----------
All the provisions of this Warrant by or for the benefit of the Company or
the Warrant Holder shall bind and inure to the benefit of their respective
successors and assigns.
10. Miscellaneous.
--------------
(a) As used herein, the term "Common Stock" shall mean and include the
Company's currently authorized common stock, $.01 par value per share (or,
at the election of the Warrant Holder, non-voting common stock, $.01 par
value per share) and stock of any other class or other consideration into
which such currently authorized Common Stock may hereafter have been
changed.
(b) This Warrant shall be construed in accordance with and governed by
the laws of the State of New York without regard to principles of conflicts
and choice of laws.
(c) The caption headings used in this Warrant are for convenience of
reference only and shall not be construed in any way to affect the
interpretation of any provisions of this Warrant.
11. Notices.
--------
Any notice pursuant to this Warrant shall be sufficiently given if sent by
first class mail, postage prepaid, or delivered by facsimile transmission,
addressed as follows:
If to the Company, then to it at:
Lasertechnics, Inc.
3208 Commander Drive
Carrollton, Texas 75006
Attention: E.A. Milo Mattorano Vice President
Facsimile No.: (214) 407-9085
-6-
<PAGE>
(or to such other address as the Company may have furnished in writing
to the Warrant Holder for this purpose);
If to Wolfensohn, then to it at:
Wolfensohn Associates LP.
590 Madison Avenue
New York, New York 10022
Attention: Richard C.E. Morgan
Facsimile No.: (212) 849-8171
If to any other Warrant Holder, then to it at such address as such Warrant
Holder may have furnished in writing to the Company for this purpose.
IN WITNESS WHEREOF, the Company, intending to be legally bound hereby, has
caused this Warrant to be signed by its Vice President, and attested by its
Secretary or Assistant Secretary as of the 27 day of March, 1997.
LASERTECHNICS, INC.
By: /s/ E.A. Milo Mattorano
-----------------------------
Name: E.A. Milo Mattorano
Title: Vice President and CFO
Attest:
/s/ E.A. Milo Mattorano
- -------------------------
Name: E.A. Milo Mattorano
Title: Secretary
-7-
<PAGE>
ANNEX A
-------
COMMON STOCK PURCHASE WARRANT
-----------------------------
NOTICE OF EXERCISE
____________________19___
TO: LASERTECHNICS, INC.
The undersigned, pursuant to the provisions set forth in Warrant No. ____,
hereby irrevocably elects and agrees to purchase _________ shares of the
Company's common stock [or nonvoting common stock] covered by such Warrant, and
makes payment herewith in full therefor of the Total Exercise Price of
$__________ in the following form:
[specify cash payment or conversion of debt or surrender of portion of Warrant]
- -------------------------------------------------------------------------------
_______________________________________________________________________________
The undersigned hereby represents that the undersigned is exercising such
Warrant for its own account or the account of an affiliate for investment
purposes and not with the view to any offering or distribution and that the
Warrant Holder will not sell or otherwise dispose of the underlying Warrant
Shares in violation of applicable securities laws. When applicable: If said
number of shares is less than all of the shares purchasable hereunder the
undersigned requests that a new Warrant evidencing the rights to purchase the
remaining Warrant Shares (which new Warrant shall in all other respects be
identical to the Warrant exercised hereby) be registered in the name of
__________________________________ whose address is:
--------------------------
--------------------------
--------------------------
Signature:
--------------------------
Printed Name:
--------------------------
Address:
--------------------------
--------------------------
--------------------------
-8-
<PAGE>
ANNEX B
-------
ASSIGNMENT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns
and transfers all of its rights as set forth in Warrant No. ___ with respect to
the shares of the Company's Common Stock covered thereby as set forth below
unto:
NAME OF ASSIGNEE(S) ADDRESS(ES) NO. OF SHARES
- --------------------- ---------------------------- -------------
- --------------------- ---------------------------- -------------
All notices to be given by the Company to the Warrant Holder pursuant
to paragraph 5 of Warrant No. ___ shall be sent to the Assignee(s) at the above
listed address(s), and, if the number of shares being hereby assigned is less
than all of the shares covered by Warrant No. ___, then also to the undersigned.
The undersigned requests that the Company execute and deliver, if
necessary to comply with the provisions of paragraph 6 of Warrant No.___, a new
Warrant or, if the number of shares being hereby assigned is less than all of
the shares covered by Warrant No.___, new Warrants in the name of the
undersigned, the assignee and/or the assignees, as is appropriate.
Dated: ______________, 19___
Signature:
-----------------------
Printed Name:
-----------------------
Address:
-----------------------
-----------------------
-----------------------
-9-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 594,525
<SECURITIES> 0
<RECEIVABLES> 4,828,891
<ALLOWANCES> 266,014
<INVENTORY> 6,109,554
<CURRENT-ASSETS> 12,310,354
<PP&E> 3,322,402
<DEPRECIATION> 129,804
<TOTAL-ASSETS> 17,459,616
<CURRENT-LIABILITIES> 6,694,304
<BONDS> 2,634,575
0
7,895,795
<COMMON> 401,290
<OTHER-SE> (1,507,170)
<TOTAL-LIABILITY-AND-EQUITY> 17,459,616
<SALES> 4,589,787
<TOTAL-REVENUES> 4,589,787
<CGS> 2,662,572
<TOTAL-COSTS> 5,886,913
<OTHER-EXPENSES> 16,229
<LOSS-PROVISION> 2,987
<INTEREST-EXPENSE> 220,851
<INCOME-PRETAX> (1,490,613)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,490,613)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,679,828)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0
</TABLE>
