<PAGE>
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 June 30, 1998
-------------
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
-------
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, CA 92121
- ------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 455-7030
--------------
N/A
---
(Former name, former address and former fiscal year, if changed since last
report)
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 June 30, 1998, 9,295,694 shares of Common Stock, par value $.01 per share,
were outstanding.
<PAGE>
<TABLE>
<CAPTION>
INDEX
PAGE
NUMBER
------
<S> <S>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets 3
as of June 30, 1998 and December 31, 1997
Condensed Consolidated Statements of Operations for the 4
Three and Six Months ended June 30, 1998 and 1997
Condensed Consolidated Statements of Cash Flow for the 5
Six Months ended June 30, 1998 and 1997
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
Exhibits and Reports of Form 8-K 8
Signatures 9
</TABLE>
<PAGE>
PART I FINANCIAL INFORMATION
Item 1 FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
Laser Photonics, Inc. and Subsidiaries
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1998 DECEMBER 31 ,1997 *
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 425,530 $ 1,225,932
Accounts receivable, net 128,699 343,465
Inventory 1,009,355 951,209
Prepaid expenses 72,558 91,463
----------- -----------
TOTAL CURRENT ASSETS 1,636,142 2,612,069
PROPERTY AND EQUIPMENT, NET 218,497 141,432
PREPAID LICENSE FEE, net 3,764,990 3,958,333
Other 65,821 100,515
GOODWILL, NET 736,114 995,955
----------- -----------
TOTAL ASSETS $ 6,421,564 $ 7,808,304
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable - Current portion $ 513,965 $ 610,004
Accounts Payable 952,585 859,559
Accrued payroll and related expenses 389,444 400,222
Other Accrued liabilities 633,067 631,808
Customer deposits 255,906 -
Deferred revenue - 95,000
----------- -----------
Total Current Liabilities 2,744,967 2,596,593
NOTES PAYABLE, LESS CURRENT PORTION 282,559 282,559
SHAREHOLDERS' EQUITY:
Common stock 92,957 92,471
Additional paid-in-capital 14,680,829 14,625,564
Accumulated Deficit (11,379,748) (9,788,883)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 3,394,038 4,929,152
----------- -----------
$ 6,421,564 $ 7,808,304
----------- -----------
----------- -----------
</TABLE>
*Condensed from audited financial statements.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
3
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Laser Photonics, Inc. and Subsidiaries
<TABLE>
<CAPTION>
SIX MONTHS ENDED Three months ended
- -------------------------------------------------------------------------------------------------------------------
JUNE 30, 1998 June 30, 1997 JUNE 30, 1998 June 30, 1997
(UNAUDITED) (Unaudited) (UNAUDITED) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES
Sales $ 1,373,268 $1,673,577 $ 368,768 $ 736,209
Other 95,000 - - -
------------------------------------------------------------------
$ 1,468,268 $1,673,577 $ 368,768 $ 736,209
COSTS AND EXPENSES
Cost of Sales 792,617 1,094,451 325,785 445,138
Selling, General & Administrative 1,221,526 682,170 617,908 455,725
Research & Development 433,309 221,849 136,596 89,308
Depreciation and Amortization 537,460 343,677 269,998 169,823
------------------------------------------------------------------
LOSS FROM OPERATIONS (1,516,644) (668,570) (981,519) (423,785)
Interest Expense 87,012 182,922 44,021 89,628
Other expenses (income), net (12,791) 76,600 (4,472) 39,241
------------------------------------------------------------------
NET LOSS ($1,590,865) ($928,092) ($1,021,068) ($552,654)
------------------------------------------------------------------
------------------------------------------------------------------
BASIC & DILUTED LOSS PER SHARE ($0.17) ($0.15) ($0.11) ($0.09)
------------------------------------------------------------------
------------------------------------------------------------------
WEIGHTED AVERAGE SHARES 9,281,631 6,195,405 9,295,694 6,217,968
------------------------------------------------------------------
------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
4
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Laser Photonics, Inc.
<TABLE>
<CAPTION>
Six months ended
- --------------------------------------------------------------------------------
JUNE 30, 1998 June 30, 1997
(UNAUDITED) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($1,590,865) ($928,092)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and Amortization 537,460 343,677
Bad debt expense related to Related
Party receivable - 39,375
Stock issued to pay legal fees 20,000 259,196
Changes in operating assets and liabilities:
Current assets 149,386 (39,410)
Current liabilities 244,413 202,212
---------- ---------
NET CASH USED IN OPERATING ACTIVITIES (639,606) (123,042)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (100,508) (22,226)
Advances from related parties - 145,268
---------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (100,508) 123,042
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on debt (96,039) 0
Proceeds from issuance of common stock 35,751 0
---------- ---------
NET CASH USED IN FINANCING ACTIVITIES (60,288) 0
---------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (800,402) 0
CASH AND CASH EQUIVALENTS, beginning of period 1,225,932 0
---------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 425,530 $ 0
---------- ---------
---------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LASER PHOTONICS, INC. AND SUBSIDIARIES
June 30, 1997
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheets as of June 30, 1998 and December
31, 1997, the related condensed consolidated statements of operations for the
three and six months ended June 30, 1998 and 1997, and cash flows for the six
months ended June 30, 1998 and 1997 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.
and subsidiaries as of June 30, 1998, the results of their operations for the
three and six months ended June 30, 1998 and 1997 and cash flows for the six
months ended June 30, 1998 and 1997. The results of operations for the three
and six months ended June 30, 1998 are not necessarily indicative of the
results to be expected for the entire fiscal year ending December 31, 1998.
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, 1997.
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. INVENTORY
Inventory consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------- -----------
<S> <C> <C>
Raw Materials $ 588,084 $ 435,583
Work in Process 404,095 435,854
Finished Goods 17,176 79,772
---------- ----------
TOTAL INVENTORY $1,009,355 $ 951,209
---------- ----------
---------- ----------
</TABLE>
3. ASSETS HELD FOR SALE
On April 8, 1998, the Company entered into a letter of intent to sell certain
assets, subject to the assumption of certain liabilities, to a third party.
The completion of the transaction is subject to numerous items, including
but not limited to, the final identification of specific assets and
liabilities to be transferred and the execution of a final written agreement.
The proposed sales price is $1,300,000 which would result in an approximate
gain of $300,000 to the Company. Once identified, the Company will make the
appropriate disclosures regarding the specific assets held for sale including
required pro forma financial information.
4. SUBSEQUENT EVENTS
During July and August, 1998, the Company's 76% owned subsidiary, AccuLase,
Inc. issued $1,000,000 in 10% Convertible Promissory Notes. Interest is payable
annually and may be paid in cash or in the
6
<PAGE>
Company's common stock at the Company's option. The entire principal is due
in one payment on or before December 31, 1998. All outstanding balances under
the Notes are guaranteed by the Company. The holders of the Notes may convert
any or all balances outstanding into the Company's common stock at a
conversion price of $2.00 per share at any time. All balances outstanding as
of the maturity date of the Notes, if not paid, automatically convert into
shares of the Company's common stock at a conversion price of $2.00 per
share.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues for the six months ended June 30, 1998 decreased by $300,309 to
$1,373,268 compared to $1,673,577. The decrease was due to a decrease in
sales of scientific and medical lasers from the Company's Florida and
Massachusetts operations offset by the final milestone payment in the amount
of $600,000 pursuant to the Baxter Agreement which included the sale of two
excimer lasers. Revenues for the three months ended June 30, 1998 were
$368,768 compared to $736,209 for the three months ended June 30, 1997. The
decrease was due to a decrease in sales of scientific and medical lasers from
the Company's Florida and Massachusetts operations.
Gross margins were 46% for the six months ended June 30, 1998 compared to 35%
for the six months ended June 30, 1997. The increase in gross margins was due
primarily to the gross margin earned on the sale of two excimer lasers to
Baxter. Gross margins were 12% for the three months ended June 30, 1998
compared to 40% for the three months ended June 30, 1997. The decrease in
gross margins was due to the increase in labor costs as a percentage of sales.
Operating expenses increased by $944,599 for the six months ended June 30,
1998 compared to the six months ended June 30, 1997 and by $309,646 for the
three months ended June 30, 1998 compared to the three months ended June 30,
1997. The increase was due to increases in consulting and professional fees,
D & O insurance, marketing expenses and increased funding of research and
development activities.
Interest expense decreased by $95,910 for the six months ended June 30, 1998
compared to the six months ended June 30, 1997 and by $45,607 for the three
months ended June 30, 1998 compared to the three months ended June 30, 1997
primarily due to the purchase of a subsidiary's note payable through the
issuance of common stock during the year ended December 31, 1997.
Net loss increased to $1,590,865 for the six months ended June 30, 1998 compared
to $928,092 for the six months ended June 30, 1997 and $1,021,068 for the three
months ended June 30, 1998 compared to $552,654 for the three months ended June
30, 1997. The increase in the net loss was due to the increases in operating
expenses and decreases in revenues.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the Company had cash and cash equivalents of $425,530
which is a decrease of $800,402 since December 31, 1997. The Company has
utilized cash generated from the sale of common stock and from the Baxter
agreement during 1997 to fund marketing activities, increased research and
development activities, investments in inventory to support anticipated sales
of excimer lasers to Baxter and to pay off certain liabilities.
Capital expenditures in the six months ended June 30, 1998 of $100,508 related
to purchases of equipment and the construction of a laser to be used as a
demonstration model.
Cash flows used in financing activities for the three months ended June 30, 1998
of $60,288 was due to principal payments on debt offset by proceeds from the
issuance of common stock.
7
<PAGE>
SUBSEQUENT EVENTS
During July and August, 1998, the Company's 76% owned subsidiary, AccuLase,
Inc. issued $1,000,000 in 10% Convertible Promissory Notes. Interest is
payable annually and may be paid in cash or in the Company's common stock at
the Company's option. The entire principal is due in one payment on or before
December 31, 1998. All outstanding balances under the Notes are guaranteed by
the Company. The holders of the Notes may convert any or all balances
outstanding into the Company's common stock at a conversion price of $2.00
per share at any time. All balances outstanding as of the maturity date of
the Notes, if not paid, automatically convert into shares of the Company's
common stock at a conversion price of $2.00 per share.
YEAR 2000
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the
Company's, or its suppliers' and customers' computer programs that have
date-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in system failures or
miscalculations causing disruptions of operations including, among other
things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
The Company has developed plans to address issues related to the impact on
its computer systems of the year 2000. Financial and operational systems have
been assessed and plans have been developed to address systems modification
requirements. The financial impact of making the required systems changes is
not expected to be material to the Company's consolidated financial position,
liquidity or results of operations.
Neither the Company nor its subsidiaries has initiated formal communications
with significant suppliers and large customers to determine the extent to
which those third parties' failure to remedy their own Year 2000 Issues would
materially effect the Company and its subsidiaries. The Company has not
received any indications from its suppliers and large customers that the Year
2000 Issue may materially effect their ability to conduct business and the
Company has no current plans to formally undertake such an assessment.
PART II. OTHER INFORMATION
ITEM 1 Legal Proceedings: See December 31, 1997 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 None
ITEM 6 Exhibits and Reports on Form 8-K
a) Exhibits
27 Financial Data Schedule
b) Reports on Form 8-K None
8
<PAGE>
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: August 14, 1998 By: /s/ Raymond A. Hartman
-------------------------
Raymond A. Hartman
Chief Executive Officer
Date: August 14, 1998 By: /s/ Chaim Markheim
-------------------------
Chaim Markheim
Chief Financial Officer
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 425,530
<SECURITIES> 0
<RECEIVABLES> 200,674
<ALLOWANCES> 71,975
<INVENTORY> 1,009,355
<CURRENT-ASSETS> 1,636,142
<PP&E> 407,740
<DEPRECIATION> 189,243
<TOTAL-ASSETS> 6,421,564
<CURRENT-LIABILITIES> 2,744,967
<BONDS> 0
0
0
<COMMON> 92,957
<OTHER-SE> 3,301,081
<TOTAL-LIABILITY-AND-EQUITY> 6,421,564
<SALES> 1,373,268
<TOTAL-REVENUES> 1,468,268
<CGS> 792,617
<TOTAL-COSTS> 792,617
<OTHER-EXPENSES> 2,192,295
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,012
<INCOME-PRETAX> (1,590,865)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,590,865)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
