<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 September 30, 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 75006
Carrollton, Texas (Zip Code)
(Address of principal executive offices)
(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 November 6, 1997: 44,615,289. Shares of
non-voting convertible common stock outstanding on November 6, 1997: 2,249,842.
Transitional Small Business Disclosure Format (Check One); Yes No X
---- ----
<PAGE>
LASERTECHNICS, INC.
INDEX
Page
No.
----
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Consolidated Balance Sheets at September 30, 1997
and December 31, 1996................................... 3
Consolidated Statements of Operations for the nine months
ended September 30, 1997 and 1996....................... 5
Consolidated Statements of Operations for the three
months ended September 30, 1997 and 1996................ 6
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1997 and 1996................ 7
Item 2. Managements's Discussion and Analysis of Financial
Conditions and Results of Operations.................... 13
PART II. OTHER INFORMATION.................................... 21
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 6. Exhibits and Reports on Form 8-K
Signatures........................................................ 26
<PAGE>
PART 1. CONDENSED FINANCIAL INFORMATION
Item 1. Financial Statements
LASERTECHNICS, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 640,107 1,598,744
Accounts receivable - trade, less
allowance for doubtful accounts
of $812,603 in 1997 and $357,136
in 1996 2,879,386 3,196,943
Inventory 5,517,862 6,600,007
Prepaid expenses and other 491,798 998,445
----------- -----------
Total current assets 9,529,153 12,394,139
----------- -----------
Property, plant & equipment, net 3,054,019 3,334,277
Goodwill 110,982 172,510
Other assets 1,593,844 1,760,931
----------- -----------
Total assets $14,287,998 17,661,857
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to stockholders (note 3) $ 3,289,077 -
Notes payable 926,258 775,292
Accounts payable 2,864,549 1,369,818
Accrued payroll and related expenses 300,888 495,112
Customer advances 153,719 436,249
Product warranty reserve 538,453 516,783
Capital lease obligations, current 211,106 225,676
Dividends payable 664,815 356,182
Other accrued liabilities 672,048 1,153,199
----------- -----------
Total current liabilities 9,620,913 5,328,311
----------- -----------
Convertible debentures (note 4) 1,157,224 1,768,965
Capital lease obligations, noncurrent 762,576 927,411
Note payable - long term 1,400,000 1,400,000
Other 4,694 149,387
----------- -----------
Total liabilities $12,945,407 9,574,074
----------- -----------
</TABLE>
(Continued)
See accompanying notes to condensed consolidated
financial statements.
3
<PAGE>
LASERTECHNICS, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ -----------
<S> <C> <C>
Stockholders' equity (notes 3 and 4):
Convertible preferred stock, no par;
7,000,000 shares authorized in 1997 and 1996
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; exchanged for
Series F in 1997, 585 shares outstanding in 1996, - 6,049,314
Series F: $10,000.00 stated value; 239 shares
outstanding in 1997 and none in 1996 2,552,297 -
Common stock, $.01 par value, 56,750,000 shares authorized
in 1997 and 1996; 44,615,289 shares issued
and outstanding in 1997 and 37,133,514 in 1996 446,153 371,335
Nonvoting convertible common stock, $.01 par value
shares authorized in 1997 and 1996; 2,249,842
shares issued and outstanding in 1997 and 1996. Convertible
into common stock on a one share for one share basis 22,499 22,499
Paid-in Capital 53,360,410 47,753,080
Accumulated deficit (59,108,648) (50,178,325)
------------ ------------
Total stockholders' equity 1,342,591 8,087,783
------------ ------------
Total liabilities and stockholders' equity $ 14,287,998 17,661,857
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
LASERTECHNICS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1997 1996
------------ ------------
<S> <C> <C>
Sales $ 9,163,813 14,818,140
Cost of sales 6,032,332 10,490,228
------------ ------------
Gross Profit 3,131,481 4,327,912
Expenses:
Research and development 1,974,518 2,301,910
General and administrative 3,912,620 4,032,894
Selling and marketing 4,669,677 4,073,993
Loss on contract settlement 1,000,000
------------ ------------
Operating expenses 10,556,815 11,408,797
------------ ------------
Loss from operations (7,425,334) (7,080,885)
------------ ------------
Other income (expense):
Interest income 16,300 53,249
Interest expense (1,044,878) (1,192,395)
Other 31,196 142,555
------------ ------------
Other expense, net (997,382) (996,591)
------------ ------------
Net loss (8,422,716) (8,077,476)
Preferred stock dividend requirements (507,607) (417,025)
------------ ------------
Net loss applicable to common stock $ (8,930,323) (8,494,501)
============ ============
Net loss per share $ (0.20) (0.26)
============ ============
Shares of common stock used in computing
net loss per share (note 1) 43,824,795 33,095,445
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
LASERTECHNICS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1997 1996
------------- -------------
<S> <C> <C>
Sales $ 1,982,489 7,252,217
Cost of sales 1,975,327 5,659,352
------------ ------------
Gross Profit 7,162 1,592,865
Expenses:
Research and development 550,609 966,455
General and administrative 1,497,263 1,342,933
Selling and marketing 1,884,723 1,383,586
Loss on contract settlement - -
------------ ------------
Operating expenses 3,932,595 3,692,974
------------ ------------
Loss from operations (3,925,433) (2,100,109)
------------ ------------
Other income (expense):
Interest income 1,982 23,839
Interest expense (652,154) (223,692)
Other 26,274 99,441
------------ ------------
Other expense, net (623,898) (100,412)
------------ ------------
Net loss (4,549,331) (2,200,521)
Preferred stock dividend requirements (153,485) (215,647)
------------ ------------
Net loss applicable to common stock $ (4,702,816) (2,416,168)
============ ============
Net loss per share $ (0.10) (0.07)
============ ============
Shares of common stock used in computing
net loss per share (note 1) 45,010,641 35,010,585
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
LASERTECHNICS INC. CONSOLIDATED
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (8,422,716) $ (8,077,476)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 386,050 448,552
Provision for losses on accounts receivable 529,314 129,966
Provision for product warranty reserve 255,660 317,555
Amortization of financing discount and
issuance costs 259,850 633,519
Accrued interest on convertible debentures 118,890 451,449
Non-cash compensation 40,000 -
(Increase) decrease in:
Accounts receivable (211,757) (2,082,462)
Inventory 1,082,145 (1,328,734)
Prepaid expenses and other 551,082 (180,485)
Other assets 32,722 (24,394)
Increase (decrease) in:
Accounts payable 1,494,731 (110,769)
Customer advances (282,530) 15,661
Accrued payroll and related expenses (194,224) (172,084)
Product warranty reserve (233,990) (262,900)
Other current liabilities (481,151) 474,383
Other liabilities (144,693) 377,790
------------ ------------
Net cash used by operating activities (5,220,617) (9,390,429)
Cash flows from investing activities:
Capital expenditures (44,264) (304,086)
------------ ------------
Cash flows from financing activities:
Borrowings under financing agreements 4,363,477 1,700,000
Principal payments on financing agreements 150,966 (1,900,000)
Proceeds from issuance of convertible debentures 500,000 5,500,000
Redemption of convertible debentures (600,000) -
Convertible debenture issuance costs - (385,000)
Redemption of convertible preferred stock (880,000) -
Principal payments on capital lease obligations (179,405) (168,138)
Net proceeds from issuance of preferred and common stock 951,206 7,691,475
------------ ------------
Net cash provided by financing activities 4,306,244 12,438,337
Net increase (decrease) in cash and
cash equivalents (958,637) 2,743,822
Cash and cash equivalents, beginning of period 1,598,744 1,892,357
------------ ------------
Cash and cash equivalents, end of period $ 640,107 $ 4,636,179
============ ============
</TABLE>
(Continued)
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
LASERTECHNICS INC. CONSOLIDATED
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, September 30,
1997 1996
------------- -------------
<S> <C> <C>
Supplemental information:
Cash paid during the year for interest $ 146,838 112,059
========== ==========
Conversions to stock:
Debentures, net of unamortized discount and expenses 486,866 5,534,873
Accrued interest 163,685 386,201
Accretion attributable to Series D convertible preferred stock $ 198,974 111,638
========== ==========
Conversion feature of debentures issued $ 150,000 1,610,000
========== ==========
Conversion feature, detachable warrants and restricted common
stock issued in connection with notes payable to stockholders $1,074,400 -
========== ==========
Borrowings under capital lease obligations $ - 194,064
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
8
<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"), and
Sandia's wholly owned French subsidiary Sandia Imaging Systems Europe SA
("Sandia Europe"). As used herein, the terms "Company" and "Lasertechnics" refer
to LASX and its consolidated subsidiaries unless the context otherwise requires.
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
audited 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 September 30, 1997 and December 31, 1996,
the Consolidated Statements of Operations for the three and nine month periods
ended September 30, 1997 and 1996, and the Consolidated Statements of Cash Flows
for the nine month periods ended September 30, 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 September 30, 1997, results of
operations for the three and nine month period ended September 30, 1997 and
1996, and changes in cash flow for the nine month periods ended September 30,
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 conversion discounts and dividends recorded for the
Company's preferred stock series A, B, C, D, E and F.
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 September 30, 1997, a total of 1,774,428 shares of
Lasertechnics common stock were issued pursuant to conversions and redemption of
outstanding convertible debentures and preferred stock, and pursuant to the note
purchase agreement described in note 3.
9
<PAGE>
3. 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 Partners
L.P.("Wolfensohn"), the general partner of Wolfensohn Associates L.P., a
significant stockholder. On March 27, 1997, the Company made a $250,000 draw on
this commitment. In the second quarter the Company made additional draws
totaling $750,000 for a total amount payable of $1,000,000 to Wolfensohn under
such bridge loan commitment. These unsecured notes bore interest at 12% per
annum. Interest and principal were due on demand, but if no demand was made,
principal and interest become due and payable on December 31, 1997. In the event
that the Company completed an equity financing of $5,000,000 or more on or
before December 31, 1997, then Wolfensohn had the right to convert the
outstanding principal and interest, or a portion thereof, into either the
Company's voting common stock, par value $0.01 per share (the "Common Stock"),
or non-voting convertible common stock, par value $0.01 per share, at the price
per share paid by the investors in such equity financing.
In June 1997, the Wolfensohn bridge loan of $1,000,000 plus accrued
interest was converted into an advance under the terms of a new bridge loan
financing provided to the Company by Wolfensohn and J.P. Morgan Investment
Corporation ("JPMIC") pursuant to a Note Purchase Agreement dated June 25, 1997
(the "Note Purchase Agreement"). The Note Purchase Agreement provided the
Company with additional bridge financing, to be funded 60% by Wolfensohn and 40%
by JPMIC. Under the Note Purchase Agreement the Company received additional
funding of $2,000,000 during the third quarter ended September 30, 1997. The
Note Purchase Agreement provides for: (i) an interest rate of 10% per annum for
advances by Wolfensohn and 6.64% per annum for advances by JPMIC, with a final
maturity of December 31, 1997 for all advances; (ii) issuance to Wolfensohn and
JPMIC of an aggregate of 298,285 restricted shares of Common Stock; and (iii)
issuance to Wolfensohn and JPMIC of an aggregate of 580,000 Common Stock 3-year
warrants at a $0.70 strike price. The Company recorded a discount to equity of
approximately $816,000 related to the conversion feature of the outstanding
notes payable of $3,000,000 plus accrued interest of $20,223, and to the
warrants and restricted common stock. Such discount is being accreted to
interest expense. Advances under the Note Purchase Agreement are secured by a
pledge of all the capital stock of the Company's LMC subsidiary held by the
Company. There are no prepayment penalties and the Company is obligated to apply
100% of any proceeds from the sale of assets in excess of $1,000,000 to
repayment of any notes issued pursuant to the Note Purchase Agreement. The
Company is also obligated to apply the entire proceeds from the sale of the LMC
headquarters if sold independently of the disposition of LMC. If the Company
does not repay the bridge loan principal and accrued interest by December 31,
1997, the Company will issue Wolfensohn and JPMIC, as a late payment fee, (i)
additional 3-year warrants with an aggregate strike price equal to 5% of the
unpaid principal under the notes and (ii) additional shares of restricted Common
Stock having an aggregate market value on the date of issuance equal to 1% of
such unpaid principal amount. The strike price of any such additional warrants
would be at the current market price at the time such warrants were issued. In
addition, the interest rate will increase by 5% per annum, and the notes will be
payable on demand. This bridge loan is intended to be senior indebtedness of the
Company.
10
<PAGE>
In September the Company entered into a new note purchase agreement with
Wolfensohn to fund the Company's operations until suitable outside financing can
be obtained. The Company's draws under this agreement were $950,000 as of
September 30, 1997. The Company recorded a discount to equity of approximately
$258,400 related to the conversion feature of the outstanding notes payable of
$950,000 and to the warrants and restricted common stock. Such discount is
being accreted to interest expense. The Company had additional draws of
$1,302,000 as of October 31, 1997 for a total of $2,252,000. The new note
purchase agreement has the same terms as the Note Purchase Agreement except the
Company has pledged all Inventory and Accounts Receivable of its Sandia
subsidiary.
4. Preferred Stock and Convertible Debenture Issuance
In May 1997, the Company redeemed $600,000 principal amount of its March
1996 10% Convertible Debentures due March 1999 (the "1996 Debentures") with the
proceeds from the private placement of $500,000 principal amount of Series B 10%
Convertible Debenture due March 1999 (the "Series B Debenture") with
substantially identical terms as the 1996 Debentures and $100,000 in proceeds
from the private placement of $500,000 of Series E Convertible Preferred Stock,
par value $0.01, (the "Series E Preferred Stock"), with substantially identical
terms as the Series D Convertible Preferred Stock, par value $0.01 (the "Series
D Preferred Stock"), outstanding. In June 1997, $400,000 of Series D Preferred
Stock was redeemed by the Company with the remaining proceeds from the issuance
of the Series E Preferred Stock. In connection with the issuance of the Series B
Debenture, the Company recorded a discount to equity of $150,000 related to the
conversion feature of the debt. Such discount is being accreted to interest
expense.
In July 1997, the holders of the 1996 Debentures, Series B Debenture,
Series D Preferred Stock and Series E Preferred Stock (the "Suspended
Securities") agreed to a ninety day suspension of conversion rights on 75% of
their holdings beginning July 14, 1997. From October 14, 1997 and thereafter,
holders of the Suspended Securities can exercise the suspended portion at a
cumulative rate of 20% per month. In exchange for the suspension agreement, the
holders received warrants equal to 25% of the aggregate value of the suspended
amount for an exercise price of $1.00 per share, and a reduction of the maximum
conversion price to $1.00 for the convertible debentures and $1.14 for the
convertible preferred stock, from $2.00 and $2.14 respectively.
The suspension agreement with respect to the Series D and Series E
Convertible Preferred Stock was effected by an exchange of the shares of such
stock, on a one-for-one basis, for shares of a new series of Convertible
Preferred Stock, Series F, $0.01 par value (the "Series F Preferred Stock"). The
terms of the Series F Preferred Stock are substantially identical to the terms
of the Series D and Series E Preferred Stock, except as necessary to reflect the
terms of the suspension agreement described above. Upon the issuance of the
Series F Preferred Stock in the exchange, all of the outstanding shares of
Series D and Series E Preferred Stock were cancelled, and thereafter reverted to
the status of authorized but unissued shares of preferred stock of no particular
designation.
11
<PAGE>
In July 1997, $480,000 principal amount of Series D Preferred Stock was
redeemed by the Company, upon receipt of the holder's notice of conversion, with
the proceeds from the private placement to a single investor of $480,000
principal amount of a Series F Preferred Stock.
5. 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.
6. Sale of Subsidiary
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 such subsidiary. The Company
disengaged Southport Partners as financial advisor in September 1997. The
Company is continuing to explore possible strategic alternatives for LMC, but it
has not entered into a definitive agreement with respect to any such
transaction, and there can be no assurance that any such transaction will be
consummated.
7. Subsequent Events
Proposed Restructuring
On November 10, 1997, the Company announced a proposed restructuring plan.
The plan consists of (i) the proposed acquisition of certain software and
hardware technology from XL Vision ("XLV", an affiliate of Safeguard
Scientifics, Inc., for $10 million in Company common stock, valued at $.50 per
share; (ii) a plan to seek up to $10 million in additional financing, including
a commitment for up to $4 million from an affiliate of an existing investor; and
(iii) the reorganization of the Company's Sandia Imaging Systems subsidiary into
two divisions. The proposed restructuring plan is subject to the negotiation,
execution and delivery of definitive documents with XLV and other parties and
other conditions.
Technology Acquisition. On November 10, 1997, the Company and XLV entered
into a letter of intent with respect to the acquisition by the Company of
certain technology, including a series of temporal and spatial optical butting
techniques and modular 2D digital camera technology. The Company plans to use
such technologies to develop card readers for the corporate security and access
control markets and the like. The Company will issue to XLV up to 20 million
shares of common stock, valued at $.50 per share, to pay for the acquired
technology and certain related rights, subject to achievement of agreed
development milestones and other conditions. The letter of intent is not a
binding acquisition agreement and is subject to the satisfactory completion of
due diligence by each party, the negotiation, execution and delivery of
definitive documents, and the approval of the Company's stockholders.
Proposed Financing. On November 10, 1997, the Company announced that it
expected to require approximately $10 million of additional financing over the
following 12 months. The Company has received a commitment for up to $4 million
of new financing from an affiliate of an existing institutional investor,
subject to definitive documentation and other customary conditions to funding.
The Company is currently in discussions with other existing and potential
corporate and institutional investors, and believes that the Company will be
able to obtain the additional funding required; however, no other commitments
have been received by the Company for such funding, and there can be no
assurances that such funding will be available on terms satisfactory to the
Company, or on any terms. The Company is also planning a rights offering to give
current stockholders an opportunity to participate in the Company's proposed
financing. To the extent subscribed, proceeds from the rights offering would be
applied to the Company's capital requirements and would substitute for other
funding alternatives. The Company currently expects to use the proceeds of such
financing activities to funding its transition to the revised business plans
described herein, to finance projected operating cash flow deficits and, if
sufficient funds are available, to repay existing bridge loans and/or redeem
outstanding convertible securities.
Reorganization of Sandia. The Company has announced that Sandia will organize
and manage its new business plan through two divisions: Systems and Technology.
The Systems Division, to be based in Carrollton, Texas, will provide
overnight delivery of fraud-resistant wallet size ID cards, sell turnkey
security systems to take advantage of biometrics and portable databases on
Sandia-produced and other cards, and resell high-performance card printers, the
original basis for Sandia's business.
The Technology Division, to be based in Sebastian, Florida, will be
responsible for developing and commercializing the new camera and software
technology to be acquired from XLV for use in card readers and other digital
image-acquisition applications. The Company expects that its new card readers
will read a wide range of card-mounted symbologies, including DataGlyphs/TM/, at
high speeds.
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Separate Business Units. The summarized financial data of LMC and Sandia
as of and for the nine-month period ended September 30, 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
Consolidated Marking (LMC) Imaging (Sandia) (LASX)
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Sales $ 5,227,648 3,936,165 9,163,813
Cost of sales 3,135,789 2,896,543 6,032,332
----------- --------- ---------
Gross profit 2,091,859 1,039,622 3,131,481
Gross margin % 40% 26% 34%
Expenses:
Research and development $ 747,377 1,227,141 1,974,518
General and administrative 1,372,282 2,540,338 3,912,620
Selling and marketing 967,552 3,702,125 4,669,677
----------- --------- ----------
Operating expenses 3,087,211 7,469,604 10,556,815
Loss from operations (995,352) (6,429,982) (7,425,334)
Other expense, net (224,333) (773,049) (997,382)
----------- --------- ----------
Net loss before preferred dividends $(1,219,685) (7,203,031) (8,422,716)
=========== ========= ==========
Current assets $ 4,295,753 5,233,400 9,529,153
Non-current assets 2,155,872 2,602,973 4,758,845
----------- --------- ----------
$ 6,451,625 7,836,373 14,287,998
=========== ========= ==========
Current liabilities $ 1,286,381 8,334,532 9,620,913
Inter-co.(receivable) payable 1,229,937 (1,229,937) -
Long-term liabilities 762,576 2,561,918 3,324,494
Stockholders' equity 3,172,731 (1,830,140) 1,342,591
----------- --------- ----------
$ 6,451,625 7,836,373 14,287,998
=========== ========= ==========
</TABLE>
13
<PAGE>
Sales. Consolidated sales for the nine months ended September 30, 1997
were $9,163,813 compared to $14,818,140 for the same period in 1996, a decrease
of $5,654,327 or 38%. Imaging segment sales decreased $3,051,614, or 44%, over
the same period last year primarily due to the completion of the Australian
driver's license project in 1996 and the Company's inability to secure similar
contracts in 1997. Marking segment sales decreased $2,602,714, or 33%, due to a
decrease in foreign sales and after-market sales. In 1996, Marking segment
recorded significant upgrade sales to Anhesuer-Busch, which did not occur in
1997. In addition, Marking segment sales continue to be adversely effected by
the continued delay in the re-introduction of the BlazerJet/TM/ marking system.
The Company's net accounts receivable decreased $317,557 or 10%, at September
30, 1997 compared to December 31, 1996. This decrease is the result of the lower
sales and a $600,000 increase in the allowance for doubtful accounts partially
offset by the delay in the collection of a significant outstanding customer
balance at the Imaging unit. The collection delay is the result of the prime
contractor requiring more time to complete the installation of the card printing
systems. However, the Company has fulfilled substantially all of its obligations
under this contract. The increased allowance for doubtful accounts results from
the recording of a $200,000 reserve related to the collection delay and a
$400,000 reserve relating to a second subcontract at the Imaging unit, which was
terminated by the prime contractor. The Company is disputing the prime
contractor's basis for terminating the subcontract and management estimates that
the outcome of this dispute will not have any additional materially adverse
effect upon its financial position or results of operations.
Cost of Sales. Consolidated cost of sales for the nine months ended
September 30, 1997 was $6,032,332 compared to $10,490,228 for the same period in
1996, a decrease of $4,457,896, or 42%. The decrease results primarily from the
decrease in sales and is partially offset by write-offs of approximately
$500,000 relating to inventory obsolescence at the Imaging segment. Gross margin
was approximately 34% for the nine months ended September 30, 1997 and 29% for
the same period in 1996. The lower margins in the nine months ended September
30, 1996 were primarily due to competitive pricing and increased product costs
of custom applications for plastic card printers in the Imaging business.
Inventory. The Company's inventory decreased $1,082,145 or 16%, from
$6,600,007 at December 31, 1996 to $5,517,862 at September 30, 1997. Marking
segment inventory decreased approximately $254,257 as a result of delivery of
systems on order at December 31, 1996. Imaging segment inventory decreased
$827,888 since December 31, 1996, resulting from delivery of card printer
systems in the first quarter which were in inventory at December 31, 1996 and
the write-off of approximately $500,000 relating to inventory obsolescence.
Research and Development. Consolidated research and development expenses
were $1,974,518 for the nine months ended September 30, 1997 compared to
$2,301,910 for the same period in 1996, a decrease of $327,392 or 14%.
Increases in the Marking segment of $114,684 relating primarily to costs
associated with obtaining CE certification for the BlazerJet( were offset by
lower costs in the Imaging segment, which recorded greater development costs in
1996 related to specific custom products that have since been completed.
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General and Administrative. Consolidated general and administrative
expenses were $3,912,620 for the nine months ended September 30, 1997 compared
to $4,032,894 for the same period in 1996, a net decrease of $120,274 or 3%.
This decrease was primarily due to reductions in personnel costs in the Marking
segment.
Selling and Marketing. Consolidated selling and marketing expenses were
$4,669,677 for the nine months ended September 30, 1997 compared to $4,073,993
for the same period in 1996, an increase of 595,684 or 15%. Imaging segment's
net increase was approximately $988,000 primarily because of higher
DataGlyph/TM/ license fees and marketing expenses of approximately $306,000,
increases in Asia-Pacific marketing efforts of approximately $115,000, an
increase in allowance for doubtful accounts of $600,000, related to two
contracts discussed in Sales above, and increases in other sales and marketing
expenses of approximately $338,000. These increases were partially offset by
decreases in selling expenses and support personnel and related expenses in
Sandia's Europe operation of approximately $371,000. Sales and marketing
expenses in the Marking segment decreased approximately $393,000 primarily due
to lower personnel and related travel and trade show expenses, as management has
delayed the replacement of personnel lost through attrition.
Other Income (Expense). Other expense, consisting primarily of interest
expense, for the nine months ended September 30, 1997 was $997,382 compared to
$996,591 for the same period in 1996. Because of conversions and redemption of
certain convertible debentures, which were sold by the Company in October 1995
and March 1996, the Company has recorded approximately $700,000 less interest
expense and amortization of the related placement fee expenses and debenture
discount in the first nine months of 1997. This decrease was offset by increases
of approximately $473,000 in interest expense and amortization of discounts
associated with the notes payable to shareholders, increases applicable to other
notes payable of approximately $109,000 and decreases in miscellaneous other
income of approximately $118,000.
Net Results. The consolidated net loss for the nine months ended September
30, 1997 was $8,930,323 compared to the $8,494,501 loss incurred in the same
period of 1996 for an increase of $435,822 or 5%. Lower sales and related cost
of sales resulted in lower gross profits of approximately $1,200,000 offset by
lower operating expenses of about $800,000 primarily because of a $1,000,000
contract settlement charge taken in the second quarter of 1996.
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996
Sales. Consolidated sales for the three months ended September 30, 1997
were $1,982,489 compared to $7,252,217 for the same period in 1996, a decrease
of $5,269,728 or 73%. Imaging segment sales decreased $3,451,743, or 88%, from
the same period last year primarily due to the Australian driver's license
project delivered in the third quarter of 1996. Marking segment sales decreased
$1,817,986, or 54%, attributable to delays in the re-introduction of the
BlazerJet/TM/ and a decrease in aftermarket sales and the completion of a
significant upgrade project for a single customer. The Company's net trade
accounts receivable decreased $2,981,205, or 51%, at September 30, 1997 compared
to September 30, 1996, a decrease resulting primarily from lower sales in the
third quarter of 1997 as compared to the same quarter of 1996.
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Cost of Sales. Consolidated cost of sales for the three months ended
September 30, 1997 was $1,975,327 compared to $5,659,352 for the same period in
1996, a decrease of $3,684,025 or 65%. This decrease results from the
significantly lower sales for the quarter and is offset by inventory adjustments
of approximately $500,000 related to write-offs applicable to inventory
obsolescence at the Imaging segment.
Research and Development. Consolidated research and development expenses
were $550,609 for the three months ended September 30, 1997 compared to $966,455
for the same period in 1996, a decrease of $415,846 or 43%. This decrease is
applicable to costs associated with the delivery of the Australian driver's
license contract during the third quarter of 1996 and a reduction in staff and
related expenses at Sandia-Europe.
General and Administrative. Consolidated general and administrative
expenses were $1,497,263 for the three months ended September 30, 1997 compared
to $1,342,933 for the same period in 1996, an increase of $154,330 or 11%. This
change was due primarily to the Marking segment reduction of personnel and
related expenses of approximately $128,000, reduction of personnel and related
expenses at Sandia-Europe of approximately $154,000, offset by slightly higher
personnel and related costs of approximately $215,000 in various areas at the
Sandia headquarters plus legal and consulting costs of approximately $221,000
incurred in strategic positioning of the Marking unit for potential sale or
merger.
Selling and Marketing. Consolidated selling and marketing expenses were
$1,884,723 for the three months ended September 30, 1997 compared to $1,383,586
for the same period in 1996, an increase of $501,137 or 36%. This increase is
primarily due to an increase in the allowance for doubtful accounts of
approximately $600,000 as a reserve against disputed accounts receivable and
accounts on which collections have been delayed beyond normal terms. This
increase is offset by lower personnel and related travel costs and lower sales
commissions as a result of lower sales in the Marking business.
Other Income (Expense). Other expense, consisting primarily of interest
expense, for the three months ended September 30, 1997 was $623,898 compared to
$100,412 for the same period in 1996 for an increase of $523,486. Debenture
interest expense decreased $68,570 from the same quarter in 1996 due to the
lower average total debt outstanding, including convertible debentures, as a
result of debt redemptions and conversions to Common Stock during 1996 and 1997.
Interest on Shareholders notes payable increased approximately $443,000 over the
same period of 1996 and interest on other notes increased $37,000. Miscellaneous
other income decreased approximately $112,000.
Net Results. The consolidated net loss for the three months ended
September 30, 1997 was $4,702,816 compared to the $2,416,168 loss incurred in
the three months ended September 30, 1996. This loss increase reflects the
lower gross margin, higher general and administrative expenses, higher selling
and marketing expenses, and higher other expenses, partially offset by the
decrease in research and development expense as discussed in the related topics
above.
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Liquidity and Capital Resources
Since its 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 $958,637 at September 30, 1997 compared
to December 31, 1996. Financing activities generated net cash of $4,306,244
principally from borrowings under financing agreements. Operating activities
used net cash of $5,220,617 principally to support the loss of $8,422,716,
offset in part by the $1,494,731 increase in accounts payable and $1,082,145
decrease in inventory. Capital expenditures amounted to $44,264 compared to
$304,086 for the same period in 1996. The decrease is the result of the Company
reaching the required level of demonstration equipment needed to support its
sales effort.
The Company's operations in the third quarter of 1997 continued to generate
losses primarily due to operating expenses remaining at a high 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. Although the
Company's actual working capital needs depend upon numerous factors, including
actual expenditures and revenues generated from its operations as compared to
its business plan, the Company does not anticipate that its existing working
capital resources and revenues from operations will be adequate to satisfy its
working capital requirements for the remainder of the year.
The Company announced that it expected to require approximately $10 million
of additional financing over the following 12 months. The Company has received a
commitment for up to $4 million of new financing from an affiliate of an
existing institutional investor, subject to definitive documentation and other
customary conditions to funding. The Company is currently in discussions with
other existing and potential corporate and institutional investors, and believes
that the Company will be able to obtain the additional funding required;
however, no other commitments have been received by the Company for such
funding, and there can be no assurances that such funding will be available on
terms satisfactory to the Company, or on any terms. The Company is also planning
a rights offering to give current stockholders an opportunity to participate in
the Company's proposed financing. To the extent subscribed, proceeds from the
rights offering would be applied to the Company's capital requirements and would
substitute for other funding alternatives. The Company currently expects to use
the proceeds of such financing activities to fund its transition to the revised
business plans described herein, to finance projected operating cash flow
deficits and, if sufficient funds are available, to repay existing bridge loans
and/or redeem outstanding convertible securities.
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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
September 30, 1997 was $973,682. Pursuant to its agreement with the City of
Albuquerque, Lasertechnics is required to maintain a current ratio of at least 1
to 1. At September 30, 1997, Lasertechnics' current ratio was 1 to 1 which is
in compliance with the lease terms.
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 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 SmallCap Market Listing
Lasertechnics' Common Stock is listed on the Nasdaq SmallCap Market, which
requires maintenance of certain quantitative and other standards for continued
listing
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thereon. Lasertechnics' stockholders' equity fell below the minimum standards
required at September 30, 1995, and, as a result, the Nasdaq SmallCap Market
temporarily placed the Common Stock on conditional listing on December 20, 1995
subject to the Company's achieving a minimum of $2,450,000 in stockholders'
equity. The Company was able to achieve such stockholders' equity through the
conversion of an aggregate of $1,045,342 of convertible subordinated debentures
of the Company and the issuance of the Company's Series C Preferred Stock. On
January 2, 1996, the Nasdaq SmallCap Market removed the conditional listing
requirements described above and lowered the stockholders' equity listing
requirement to $1 million. While management believes that in the event of future
losses the Company will be able to obtain additional equity financing to
preserve the listing of the Common Stock on the Nasdaq SmallCap Market, there
can be no assurance that the Company will be able to do so.
On August 22, 1997, the Securities and Exchange Commission ("Commission")
approved certain proposed changes to the continued listing requirements of the
Nasdaq SmallCap Market. One such rule change, which becomes effective February
22, 1998, requires an issuer to maintain a minimum bid price of $1 per share for
its listed securities. Therefore, upon the effectiveness of such rule change the
Company must maintain a $1 minimum bid price for its Common Stock in order to
continue listing such Common Stock on the Nasdaq SmallCap Market. The bid price
for the Common Stock is currently below $1 and there can be no assurance that
the Company will be able to maintain the listing of the Common Stock on the
Nasdaq SmallCap Market.
If the Common Stock were delisted from the Nasdaq SmallCap Market, trading,
if any, would likely be conducted in the over-the-counter market on the National
Association of Securities Dealers' OTC Bulletin Board and/or on the pink sheets
of the National Quotation Bureau. As a result, an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to the price of,
the Common Stock. In addition, the Common Stock would be subject to rules
promulgated under the Securities Exchange Act of 1934, as amended, applicable to
penny stocks. The Commission has adopted regulations that generally define a
"penny stock" to be an equity security that has a market price (as determined
pursuant to regulations adopted by the Commission) 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 Common Stock will be exempt from the
Definition of "penny stock." If, however, the Common stock is removed from the
Nasdaq SmallCap Market, 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 Common Stock and may affect the ability of purchasers
of Common Stock to sell such 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,
warrant holders and holders of convertible securities subsequent to the date
hereof could adversely affect the market price of Lasertechnics' Common Stock.
At September 30, 1997, an aggregate of approximately 29,805,534 shares of Common
Stock were freely
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tradable without restriction under the Securities Act of 1933 (the "Securities
Act"). In addition, up to 15,409,755 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 10,000,000 shares of Common Stock
for issuance upon the exercise of outstanding convertible securities and
warrants. Lasertechnics has also reserved approximately 1,536,950 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, the Company's 10%
Convertible Series B Debenture due March 1, 1999 (the "Series B Debenture"), in
the principal amount of $500,000 and the Company's Series D Convertible
Preferred Stock (the "Series D Preferred Stock"), in the original stated amount
of $8,350,000, and Series E Convertible Preferred Stock, $0.01 par value (the
"Series E Preferred Stock") in the original stated amount of $500,000 became or
will become convertible in full into Common Stock at various times during 1996
and 1997.
In May 1997, 600,000 principal amount of the 1996 Debentures was redeemed
by the Company with (i) the proceeds from the private placement to a single new
investor of the Company's Series B Convertible Debenture, due March 1999 in the
principal amount of $500,000 and (ii) $100,000 in proceeds from the private
placement of $500,000 of Series E Preferred Stock with a single new investor.
The Series E Preferred Stock has substantially identical terms as the Series D
Preferred Stock and the Series B Convertible Debenture has substantially
identical terms as the 1996 Debentures. In June 1997, $400,000 of Series D
Preferred Stock was redeemed by the Company, upon receipt of the holder's notice
of conversion, with the remaining proceeds from the sale of Series E Preferred
Stock. In July 1997, $480,000 principal amount of Series D Preferred Stock were
redeemed by the Company, upon receipt of the holder's notice of conversion, with
the proceeds from the private placement to a single investor of $480,000
principal amount of a new series of preferred stock with substantially identical
terms as the Series D Preferred Stock. An aggregate of 681,817 shares of Common
Stock was issued in satisfaction of accrued interest, dividends and redemption
premium in connection with such redemptions.
In July 1997, the holders of the 1996 Debentures, Series B Debenture,
Series D Preferred Stock and Series E Preferred Stock agreed to a ninety day
suspension of conversion rights on 75% of their respective holdings beginning
July 14, 1997. Thereafter, holders can exercise the suspended portion at the
rate of 20% per month cumulatively. In exchange for the suspension agreement,
the holders received warrants equal to 25% of the suspended amount at a $1.00
strike price, and a reduction of the maximum conversion price to $1.00 for the
convertible debentures and $1.14 for the convertible preferred stock, from $2.00
and $2.1406 respectively. The suspension agreement with respect to the Series D
and Series E Preferred Stock was effected by an exchange of the shares of such
stock, on a one-for-one basis, for shares of a new series of Convertible
Preferred Stock, Series F, $0.01 par value (the "Series F Preferred Stock"). The
terms of the Series F Preferred Stock are substantially identical to the terms
of the
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Series D and Series E Preferred Stock, except as necessary to reflect the terms
of the suspension agreement described above. Upon the issuance of the Series F
Preferred Stock in such exchange, all of the outstanding shares of Series D and
Series E Preferred Stock were cancelled, and thereafter reverted to the status
of authorized but unissued shares of preferred stock of no particular
designation.
As of September 30, 1997, an aggregate of $4,150,000 principal amount of
the 1996 Debentures and $5,940,000 stated amount of Series D Preferred Stock and
$120,000 stated amount of Series E Preferred Stock have been converted since the
issuance of such convertible securities, resulting in the issuance of 11,151,645
shares of Common Stock in the aggregate. The conversion price for the 1996
Debentures and Series B Debenture are equal to the lesser of (i) $1.00 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 F Preferred Stock is
equal to the lesser of (i) $1.1406 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, Series B Debentures and the Series F Preferred Stock 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, Series B Debenture and
Series F Preferred Stock. The governing instruments for both the Series F
Preferred Stock, the 1996 Debentures and Series B Debenture include substantial
penalties in the event that the Company has insufficient authorized or reserved
shares to satisfy the conversion requirements of the Series F Preferred Stock,
the Series B Debenture and the 1996 Debentures.
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 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
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complaint on the grounds that the court in New York lacked personal jurisdiction
over the Company. The court denied the motion to dismiss by order dated June 10,
1997. Subsequently, the Company filed an answer, denying the material
allegations of the complaint and asserting various defenses. The case is
proceeding through discovery. Plaintiffs have been granted permission to move
for partial summary judgment on the question of liability, as to whether or not
the option was assignable. The Company will oppose any such motion. 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 in January 1997 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. At various times throughout the nine months ended September 30, 1997, an
aggregate of 3,816,567, 7,104,827 and 230,251 shares of Common Stock were issued
upon the conversion of the Company's outstanding 1996 Debentures, Series D
Preferred Stock and Series E Preferred Stock, respectively, in accordance with
the terms thereof. The conversion price and related terms of the 1996
Debentures, and Series B 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. 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. In June 1997, the Company issued 50 shares of Series E Preferred Stock, par
value $0.01 per share (the "Series E Preferred Stock") to H. T. Ardinger for an
aggregate purchase price of $500,000 (the "Series E Issuance"). The Series E
Preferred Stock has substantially identical terms as the Company's Series D
Preferred Stock. In connection with the Series E Issuance, the Company redeemed
certain shares of Series D Preferred Stock at a cost of $400,000. The Series E
Issuance was exempt from the registration requirements of the Securities Act by
virtue of Section 4 (2) thereof as a transaction not involving any public
offering.
4. In April 1997, 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. This warrant was
canceled in connection with
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the June 1997 bridge financing provided by Wolfensohn and another stockholder of
the Company. 298,285 shares of Common Stock, and 3-year warrants to purchase a
total of 580,000 shares of Common Stock, were issued to Wolfensohn and JPMIC in
connection with a bridge financing provided by Wolfensohn and JPMIC, pursuant to
a Note Purchase Agreement dated June 25, 1997. The terms of the bridge financing
and the exercise price and related terms of the warrants are described in
footnote 3 to the condensed financial statements of the Company included in Part
1 of this report. These securities were 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
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).
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).
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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.
4.3 (Certificate of Designation of Lasertechnics Series E Preferred Stock.
4.4 (Certificate of Designation of Lasertechnics Series F Preferred Stock
and Certificate of Correction.
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 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.
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.
24
<PAGE>
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.
10.15 --(Note Purchase Agreement, dated June 25, 1997, by and among
Lasertechnics, J.P. Morgan Investment Corporation and Wolfensohn
Associates, L.P.
27 --Financial Data Schedule*
______________
*Filed herewith.
Reports on Form 8-K: None
25
<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: November 12, 1997 By: /s/ Richard C.E. Morgan
-----------------------
Richard C. E. Morgan
Chairman of the Board &
Chief Executive Officer
Date: November 12, 1997 By: /s/ E.A. Milo Mattorano
------------------------
E.A. Milo Mattorano
Vice President and
Chief Financial Officer
26
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