<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
(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) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------ -----------
COMMISSION FILE NUMBER 0-11365
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LASER PHOTONICS, INC.
---------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN IT'S CHARTER)
DELAWARE 59-2058100
-------- ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
6865 FLANDERS DRIVE, SUITE G, SAN DIEGO, CALIFORNIA 92121
- --------------------------------------------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (619) 455-7030
--------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
12351 RESEARCH PARKWAY, ORLANDO, FLORIDA 32826
---------------------------------------- -------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL DOCUMENTS AND
REPORTS REQUIRED TO BE FILED BY SECTION 12, 13, OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION
OF SECURITIES UNDER A PLAN CONFIRMED BY A COURT.
YES X NO
--- ---
AS OF SEPTEMBER 30, 1997, 6,846,095 SHARES OF COMMON STOCK,
PAR VALUE $.01 PER SHARE, WERE OUTSTANDING.
<PAGE> 2
INDEX
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<TABLE>
<CAPTION>
Page
Number
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets 3
as of September 30, 1997 and December 31, 1996
Condensed Consolidated Statements of Operations for the 4
Nine Months and Three Months ended September 30, 1997 and 1996
Condensed Consolidated Statements of Cash Flow for the 5
Nine Months and Three Months ended September 30, 1997 and 1996
Notes to Condensed Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis 7
of Financial Condition and Results of Operations
PART II OTHER INFORMATION
Item 5 - Other Information 8
Item 6 - Exhibits and Reports on Form 8-K 8
Signatures 9
</TABLE>
2
<PAGE> 3
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
--------------------
Condensed Consolidated Balance Sheets
Laser Photonics, Inc. and Subsidiaries
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
ASSETS SEPTEMBER 30, December 31 ,1996
1997 *
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash $ 416,101 $ 0
Accounts receivable, net 409,297 383,435
Inventory 834,097 891,011
Prepaid expenses and other assets 16,770 7,722
----------- -----------
TOTAL CURRENT ASSETS 1,676,265 1,282,168
PROPERTY, PLANT AND EQUIPMENT 523,552 684,224
Less accumulated depreciation and amortization (384,020) (389,382)
----------- -----------
NET FIXED ASSETS 139,532 294,842
OTHER ASSETS
Other 120,084 102,333
Goodwill, net 1,125,876 1,515,739
----------- -----------
TOTAL OTHER ASSETS 1,245,960 1,618,072
----------- -----------
TOTAL ASSETS $ 3,061,757 $ 3,195,082
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes Payable - current portion $ 612,367 $ 696,453
Accounts Payable 901,451 698,286
Accrued payroll and related expenses 589,700 670,481
Other accrued liabilities 626,608 945,791
----------- -----------
TOTAL CURRENT LIABILITIES 2,730,126 3,011,011
DUE TO RELATED PARTY 0 1,991,440
DEFERRED REVENUE 363,307 0
NOTES PAYABLE, LESS CURRENT PORTION 2,442,267 282,559
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock 68,471 61,626
Additional paid-in-capital 6,704,341 5,330,228
Accumulated Deficit (9,246,755) (7,481,782)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (2,473,943) (2,089,928)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,061,757 $ 3,195,082
=========== ===========
</TABLE>
*Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 4
Condensed Consolidated Statements of Operations
Laser Photonics, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Nine months ended Three months ended
- ---------------------------------------------------------------------------------------------------------
SEPTEMBER September SEPTEMBER September
30, 1997 30, 1996 30, 1997 30, 1996
(UNAUDITED) (Unaudited) (UNAUDITED) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES
Sales $ 2,340,699 $2,161,608 $ 667,122 $ 779,294
Other 336,693 0 336,693 0
----------- ----------- ----------- -----------
2,677,392 2,161,608 1,003,815 779,294
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Cost of Sales 1,601,569 1,666,027 507,118 651,169
Selling, General & Administrative 1,566,973 1,400,354 884,803 471,957
Research & Development 323,758 273,904 101,909 125,555
Depreciation and Amortization 512,857 925,058 169,180 305,980
Other expenses (income), net 147,663 78,560 71,063 (58,319)
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (1,475,428) (2,182,295) (730,258) (717,048)
Interest Expense 289,804 305,802 106,882 241,881
----------- ----------- ----------- -----------
NET LOSS ($1,765,232) ($2,488,097) ($ 837,140) ($ 958,929)
=========== =========== =========== ===========
LOSS PER SHARE ($ 0.28) ($ 0.46) ($ 0.13) ($ 0.17)
=========== =========== =========== ===========
Weighted Average Shares 6,253,359 5,408,775 6,367,378 5,633,500
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 5
Condensed Consolidated Statements of Cash Flows
Laser Photonics, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Nine months ended
- -----------------------------------------------------------------------------------------------
SEPTEMBER 30, 1997 September 30, 1996
(UNAUDITED) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($1,765,232) ($2,488,097)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and Amortization 512,857 925,058
Stock issued to pay legal fees 95,625 0
Non cash compensation expense 560,958 0
Non cash interest expense 150,000 0
Changes in operating assets and liabilities:
Assets (1,649) (514,409)
Liabilities (280,885) 350,219
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (728,326) (1,727,229)
=========== ===========
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (23,462) (26,034)
Proceeds from sale of asset 61,939 0
Deferred Income 363,307 0
Advances from related parties 18,268 523,874
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 420,052 497,840
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from private placement of stock 724,375 1,229,136
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 724,375 1,229,136
----------- -----------
NET INCREASE (DECREASE) IN CASH 416,101 (253)
CASH AND CASH EQUIVALENTS, beginning of period 0 61,087
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 416,101 $ 60,834
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LASER PHOTONICS, INC. AND SUBSIDIARIES
September 30, 1997
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
The condensed consolidated balance sheets as of September 30, 1997 and December
31, 1996, and the related condensed consolidated statements of operations and
cash flows for the three months and nine months ended September 30, 1997 and
1996 have been prepared by the Company, without audit. In the opinion of
management, the condensed consolidated financial statements contain all
adjustments, consisting of normal recurring accruals, necessary to present
fairly the financial position of Laser Photonics, Inc. ("LPI") and subsidiaries
as of September 30, 1997 and the results of their operations and cash flows for
the three months and nine months ended September 30, 1997 and 1996.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's report on Form
10-K for the year ended December 31, 1996.
Certain reclassifications have been made to the prior year's condensed
consolidated financial statements to conform with the current presentation. Such
reclassifications had no effect on net loss.
2. INVENTORIES
-----------
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------- --------
<S> <C> <C>
Raw Materials $446,292 $310,121
Work in Process $288,764 $456,330
Finished Goods $ 99,041 $124,560
-------- --------
$834,097 $891,011
======== ========
</TABLE>
3. BAXTER AGREEMENT
----------------
On August 19, 1997, the Company's Acculase subsidiary executed a series of
agreements with Baxter Healthcare Corporation. See the Company's report on Form
10-K for the year ended December 31, 1996 for a complete discussion of these
agreements.
4. SUBSEQUENT EVENTS
-----------------
During October 1997, the Company purchased from a third party a note payable of
its subsidiary, Acculase, Inc. in the amount of $2,159,708 for 800,000 shares of
newly issued common stock of LPI. The effect on the Company's financial
statements will be to reduce long-term debt with a corresponding increase in
stockholders' equity in the amount of $2,159,708.
6
<PAGE> 7
Item 2 Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Results of Operations
- ---------------------
Sales for the nine months ended September 30 ,1997 increased by 8% to $2,340,699
over the $2,161,608 reported for the nine months ended September 30, 1996. The
increase in sales was due to increases from the first quarter of 1997. Sales for
the three months ended September 30, 1997 decreased by 14% to $667,122 compared
to $779,294 reported for the three months ended September 30, 1996. During the
three months ended September 30, 1997, the Company recognized $336,693 of income
relating to funds received from Baxter Healthcare Corporation in connection with
the Master Technology Agreement which Acculase entered into during August 1997.
Gross profit for the nine months ended September 30, 1997 increased by $580,242
to $1,075,823 from $495,581 reported for the nine months ended September 30,
1996. Gross profit for the three months ended September 30, 1997 increased by
$368,572 to $496,697 over the $128,125 reported for the three months ended
September 30, 1996. The increase in gross profit was due primarily to the income
recognized from the Master Technology Agreement, the increase in sales as well
as a reduction in labor and other direct costs to better fit the Company's
availability of working capital.
Net loss was reduced to $1,765,232 for the nine months ended September 30, 1997
from $2,488,097 reported for the nine months ended September 30, 1996. The
reduction of $722,865 was primarily due to the recognition of income relating to
the Master Technology Agreement, the reduction in amortization expense of
$325,000 relating to the write-off of reorganization goodwill during 1996 and
the improvements in gross profit.
Liquidity and Capital Resources
- -------------------------------
For the period ending September 30, 1997 the Company had cash and cash
equivalents of $416,101 representing a improvement from December 31, 1996 due to
equity funding in the third quarter. See discussion below.
The Company failed to make timely payments of certain federal and state payroll
and withholding taxes during the periods of 1996 and 1997. During September
1997, all federal taxes except those for the quarters ended June 30, 1996 and
September 30, 1996, were paid in full.
Funding from intercompany balances was primarily due to AccuLase's intercompany
debt to Helionetics. $150,000 of the increased intercompany balance was due to
interest accrued at a 10% annual rate on the Helionetics note.
Bad debt expense of $259,196 represents write-offs of the Company's intercompany
balance with Helionetics. The write-off was due to Helionetics bankruptcy filing
as Helionetics was responsible for funding AccuLase through May 22, 1997.
The Company will continue to have difficulty funding its current debt amounts
from its current cash flow, due to the minimum cash required to purchase the
inventory needed to reduce the sales backlog.
On August 19, 1997, the Company's AccuLase subsidiary executed a series of
agreements with Baxter Healthcare Corporation. See the Company's report on Form
10-K for the year ended December 31, 1996 for a complete discussion of the these
agreements.
In September, 1997, the Company privately sold a total of 579,500 shares of its
common stock in a private placement to 20 accredited investors at a price of
$1.25 per share. These funds were used in part to pay outside auditors in order
to complete the Company's audit, to make partial payments on delinquent Federal
and State taxes outstanding, and to make payments on other outstanding bills.
Additionally, 170,500 shares have been subscribed to, payment to be made upon
the Company's request.
During September 1997, the Company entered into agreements with Pennsylvania
Merchant Group Ltd., an investment banking and venture capital firm, to provide
investment banking advice and to be the Company's exclusive placement agent in
connection with raising $6.0 million to $8.0 million, with closing anticipated
to occur in November 1997.
7
<PAGE> 8
PART II. OTHER INFORMATION
Item 1 Legal Proceedings: See December 31, 1996 10-K
Item 2 Changes in Securities None
Item 3 Defaults Upon Senior Securities None
Item 4 Submission of Matters to Vote of
Security Holders None
Item 5 Other Information
During November 1997, the Company moved its Corporate
headquarters from Orlando, Florida to 6865 Flanders Drive,
Suite G, San Diego, California, 92121. The Company's new
Corporate telephone number is (619) 455-7030.
On October 9, 1997, Mr. Bernard Katz resigned as a director
of the Company. Mr. Katz in his resignation letter did not
cite any disagreements with the Company on any matter
relating to the Company's operations, policies or
practices.
On October 20, 1997, Mr. Raymond Hartman was elected to the
Board of Directors to fill Mr. Katz's position.
Additionally, Mr. Hartman was elected Chief Executive
Officer of the Company and Mr. Steven Qualls, the prior
Chief Executive Officer was appointed Executive Vice
President - East Coast Operations. Additionally, Mr. Chaim
Markheim, a director and Chief Financial Officer was also
appointed Chief Operating Officer.
On October 21, 1997, Mr. Maxwell Malone resigned as a
director of the Company. Mr. Malone in his resignation
letter did not cite any disagreements with the Company on
any matter relating to the Company's operations, policies
or practices.
On October 23, 1997, the Board of Directors approved a
private placement of up to 2,000,000 shares of its common
stock.
On October 23, 1997, the Board of Directors approved the
purchase of a note payable by its subsidiary, Acculase,
Inc. in the amount of $2,159,708 for 800,000 shares of
newly issued common stock.
On October 24, 1997, Mr. Alan Novak was elected to the
Board of Directors to fill Mr. Malone's position.
Item 6 Exhibits and Reports on Form 8-K
a) Exhibits
27 Financial Data Schedule
b) Reports on Form 8-K None
8
<PAGE> 9
Signatures to Form 10-Q
- -----------------------
Pursuant to 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.
LASER PHOTONICS, INC.
---------------------
(Registrant)
Date: November 7, 1997 By: S/Raymond Hartman
------------------
Raymond Hartman
Chief Executive Officer
Date: November 7, 1997 By: S/Chaim Markheim
------------------
Chaim Markheim
Chief Financial Officer
9
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 416,101
<SECURITIES> 0
<RECEIVABLES> 409,297
<ALLOWANCES> 0
<INVENTORY> 834,097
<CURRENT-ASSETS> 1,676,265
<PP&E> 523,552
<DEPRECIATION> 384,020
<TOTAL-ASSETS> 3,061,757
<CURRENT-LIABILITIES> 2,730,126
<BONDS> 0
0
0
<COMMON> 68,471
<OTHER-SE> (2,542,414)
<TOTAL-LIABILITY-AND-EQUITY> 3,061,757
<SALES> 2,340,699
<TOTAL-REVENUES> 2,677,392
<CGS> 1,601,569
<TOTAL-COSTS> 1,601,569
<OTHER-EXPENSES> 2,551,251
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 289,804
<INCOME-PRETAX> (1,765,232)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,765,232)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> 0
</TABLE>
