THIS DOCUMENT IS THE SUBMISSION OF FORM 10-KSB AND CONTAINS THE ANNUAL REPORT
UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1997.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1997
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Commission File No. 0-13316
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LASER CORPORATION
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(Name of small business issuer in its charter)
Utah 87-0395567
- -------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1832 South 3850 West, Salt Lake City, Utah 84104
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (801) 972-1311
---------------------------------
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on
which registered
(None) (None)
- ------------------------------ ------------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.05 per share
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
------- -------
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year. $5,126,308
------------------------------
As of March 16, 1998, 854,549 shares of Common Stock were outstanding. The
aggregate market value of the shares held by non-affiliates of the registrant
(based upon closing price of $3.625 per share of these shares on March 25, 1998)
was approximately $2,070,441.
Documents Incorporated by Reference:
Proxy Statement for May 28, 1998 Annual Meeting of Shareholders which Registrant
intends to file pursuant to Regulation 14(A) by a date no later than 120 days
after December 31, 1997. If such definitive Proxy Statement is not filed in that
120-day period, the information called for by Part III will be filed as an
amendment to this Form 10-KSB not later than the end of the 120-day period (Part
III of this report).
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PART I
ITEM 1. BUSINESS
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During 1997, Laser Corporation was engaged in the business of designing,
manufacturing, marketing and servicing laser products through its wholly-owned
subsidiary, American Laser Corporation and in the business of designing and
marketing medical laser systems through its wholly-owned subsidiary, American
Laser Medical, Inc.
Laser Corporation is a Utah corporation organized on January 12, 1983.
Unless the context indicates otherwise, all references to the "Company" include
Laser Corporation and its subsidiaries.
American Laser Corporation ("American Laser") was incorporated in June 1970
and became a wholly-owned subsidiary of Laser Corporation in August 1984.
American Laser designs, manufactures, markets and services lasers and related
laser systems which are purchased primarily by original equipment manufacturers
("OEM"). These OEMs then manufacture equipment that incorporates the lasers as
component parts.
In June 1996, the Company established two developmental stage subsidiaries,
American Laser Medical, Inc.("ALM") and American Laser Software, Inc. ("ALS")
to develop and market retail medical products. ALM designs and markets medical
laser systems for the dermatological and ophthalmic marketplace. ALS was
established to develop and market SIMULEYES, an ophthalmic educational devise,
and PAIS, a computerized, high resolution digital image patient care file.
Initial premarketing tests of the SIMULEYES and PAIS systems did not generate
the market interest anticipated. Accordingly, the Company is not presently
pursuing further marketing efforts with these products.
The Company's 1997 Annual Meeting of Stockholders was held on May 21, 1997.
At that meeting, the proposed slate of Directors was elected.
Laser Products and Medical Laser Systems
----------------------------------------
The word "laser" is an acronym for Light Amplification by Stimulated
Emission of Radiation. A laser is capable of generating an intense beam of
light at visible, infrared and ultraviolet wavelengths. Lasers are broadly
distinguished by whether their mediums are gas, liquid or solid. The laser's
medium determines the wavelength, power and other characteristics of the optical
radiation emitted. Lasers are also distinguished by their operational mode
(either continuous mode or pulsed mode) and the power of the beam emitted.
"Q-switching" or "mode-locking" allows the output and intensity of the laser to
be modulated to emit short, powerful bursts of laser light of greater energy
density than that emitted during continuous mode operation. Thus, the active
medium, operational mode and power determine the particular tasks lasers are
best able to perform.
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The Company principally produces laser tubes filled with argon,
krypton/argon or krypton gas. A mirror is placed at one end of the tube, and
a partial mirror is placed at the opposite end. An external power supply
activates the gas within the tube and causes the gas to produce light. The
light reflects off the mirror at one end of the tube and exits from the tube
through the partial mirror at the other end.
The Company manufacturers argon, krypton/argon and krypton lasers with a
variety of power outputs and other performance specifications, often customized
to the requirement of the customer's application. The Company's laser products
are used in confocal microscopes, retinal photocoagulators in ophthalmology,
laser printers, dentistry, entertainment and display, research and development,
and other commercial and medical applications. The Company also purchases a
diode pumped solid state laser from an unaffiliated supplier for use in certain
models of its medical laser systems.
During 1997, the Company continued its expansion into the retail medical
marketplace. The Company has developed or is in the process of developing new
medical products including the NuvoLase 640 and NuvoLase 532 medical laser
systems for dermatological procedures for the treatment of vascular and
pigmented lesions, and the NuvoLase 700 series of ophthalmic medical laser
systems for use in retinal and macular photocoagulation and trabeculoplasty.
The Company normally conducts quality tests on its laser products and
medical laser systems prior to their shipment. The Company's "Terms and
Conditions of Sale" offer a standard product warranty against defects in
materials and workmanship for a period of one year from the date of original
shipment, although warranty terms, or the level of warranty coverage and the
warranty period, are subject to negotiation. Currently, the Company also offers
a standard warranty period of two years on one model of its medical laser
systems. Three of the largest OEM customers of the Company have modified
warranty terms and warranty periods. Company A has an operating hour or
calendar warranty period, whichever expires first. The calendar warranty
period exceeds one year on certain models. Company B has a warranty period
which exceeds one year. Company C has warranty periods which vary from "good on
delivery" for component parts to one year for certain laser products. At
December 31, 1997, the reserve for anticipated warranty expenses for Company
products which had been sold as of that date was $160,000, although no assurance
can be given that this reserve will be adequate to cover the actual warranty
expenses. The Company's laser products are generally returned for service or
repair to the Company at its Salt Lake City, Utah, facility, while the Company's
medical laser systems are serviced and repaired either at their point of use, at
the applicable distributor's facility, or at the Company's Salt Lake City, Utah,
facility.
Service sales is a term used internally by the Company for the repair or
refurbishment of customer-owned laser products. Service and repair typically
entails the replacement, repair or refurbishment of component parts comprising
the laser products or sub-assemblies.
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Sales and Marketing
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Laser Products
In the past, essentially all of the Company's sales have been to OEM
customers. OEM customers manufacture equipment of which the Company's laser
products are a component part. As each OEM customer has unique needs and
product requirements, the Company markets its laser products and services
directly by executive personnel, engineering and sales management.
The Company sells or has sold laser products to over 100 customers
worldwide. For the year ended December 31, 1997, three companies accounted for
over 10% of the Company's sales. Company A, B, and C accounted for 29%, 22% and
20%, respectively, of the Company's 1997 sales. For the year ended December 31,
1996, two companies accounted for over 10% of the Company's sales. Company A
and B accounted for 30% and 20%, respectively, of the 1996 sales.
Customers typically fulfill their laser product requirements by placing
purchase orders with the Company which are generally filled and shipped within
the customer's requested delivery schedule. Laser product sales to and purchase
orders received from customers typically can be expected to fluctuate in part
due to (i) changes in the quantity of Company products held in inventory by its
customers, (ii) changes in end user demand for customer products which use or
incorporate the Company's laser products, (iii) the competitiveness, cost and
customer use of alternative products, technologies or suppliers, and (iv) other
factors. The Company's backlog of new product and service orders for its laser
products and medical laser systems as of December 31, 1997 was approximately
$1,680,000, as compared to approximately $683,000 on December 31, 1996. Based
on past experience, the Company anticipates that substantially all of its
unfilled orders for laser products will be delivered in 1998.
For many years, the Company has been and remains substantially dependent
upon a limited number of OEM customers for sales of its laser products and
service sales. The Company believes that future sales of its laser products and
service sales will depend upon its ability to attract and maintain a variety of
volume OEM customers requiring its laser products. However, there can be no
assurance that the Company will be successful in these efforts, or that its
competitors, customers or others will not introduce products or technologies
superior to those of the Company or produce comparable products at lower prices,
in which case the Company's business could be adversely affected. In addition,
rapid technological advances made by competitors, customers, or others could
make the product lines obsolete. Also, overall customer demand for laser
products and sub-assemblies may decrease as a result of their replacement by
superior, alternative, or lower cost products and technologies.
The Company typically invoices its laser product customers upon product
shipment. Payment on approved credit terms is generally due in 30 days after
date of invoice, but such terms can vary, especially in the case of foreign
sales. Collection of trade accounts receivable typically occurs within 30 to 60
days after invoice.
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Medical Laser Systems
Management has recently expanded the Company's business into dermatological
and ophthalmic medical laser systems. The Company commenced the production and
sale of its NuvoLase 532 medical laser system for dermatology in October 1997,
and for the year ended December 31, 1997, such sales accounted for 3.4% of the
Company's sales. The Company is in a pre-market, finish development stage of
its initial ophthalmic products. Working prototypes are being completed, and
the Company has applied for and received classification of its ophthalmic
devices from the Food and Drug Administration ("FDA") of the United States
Department of Health and Human Services which permits the Company to begin
marketing such devices in the ophthalmic marketplace. The Company has begun
attending trade conventions to generate initial interest. The Company
anticipates, but cannot guarantee, that sales of its ophthalmic products will
commence in 1998. In addition to the use of advertising in trade publications,
direct mail advertising and attendance at medical conventions and workshops,
the Company is now using sales agents, distributors and strategic partners to
market and sell its medical laser systems. The Company has qualified its
initial sales agents, distributors and strategic partners for its medical laser
systems and is now in the process of identifying additional qualified sales
agents, distributors and strategic partners in the United States and
internationally.
The Company typically invoices the retail purchaser of its medical laser
systems on a 10% down, balance due on delivery/installation, but such terms can
vary. Payment on approved credit terms to distributors and strategic partners
is generally net 30 days after date of invoice, but such terms can vary.
Collection of trade accounts receivable typically occurs within 30 to 45 days.
Foreign Sales
-------------
The Company sells a majority of its laser products to customers in Europe
and other foreign countries. The Company's two largest customers for laser
products in 1997 were foreign customers. Foreign sales to Customer A and
Customer B accounted for approximately 25% and 22% respectively, of the total
laser products sales during 1997. Total sales to all foreign customers
accounted for approximately 64% of the Company's total laser products sales.
(See Note 12 to Consolidated Financial Statements for further discussion).
Manufacturing and Suppliers
---------------------------
The Company relies upon unaffiliated suppliers for components used in the
fabrication of its laser products. For most components, the Company is not
dependent upon any one particular supplier, and with the exception of certain
deliveries of acceptable optical components on a timely basis, has not
experienced significant delays in obtaining components. Currently, certain
components utilized in the manufacture of the products are available from a
limited number of suppliers. The Company believes that its operations could be
adversely affected in the event that it is unable to obtain components on a
timely basis from these suppliers.
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The Company relies upon unaffiliated suppliers for subassemblies and
components used in the fabrication of its medical laser systems. For many
subassemblies and components, the Company is dependent upon on one particular
supplier. The Company has experienced problems with certain subassemblies
meeting the reliability criteria required for use in the Company's medical laser
systems as well as deliveries on a timely basis. The Company believes that its
operations have been and could in the future be adversely affected in the event
that it is unable to obtain acceptable subassemblies and components on a timely
basis from these suppliers.
The Company maintains an inventory of laser components and medical laser
system subassemblies and components as well as a minimal level of finished
goods. The Company generally manufactures its products in response to customer
orders.
Net of inventory reserves, the Company's raw material inventory at December
31, 1997 was $1,041,832, work in process inventory was $597,356, and the
remaining $108,586 was finished goods inventory.
Competition
-----------
The laser products and medical laser systems markets are complex and
fragmented as a result of the specialized nature of laser products and medical
laser systems and the various applications required by purchasers. Rapid
technological advances and intense competition are characteristic of the laser
products and medical laser systems industries. The Company is subject to the
risk that its competitors or certain of its customers may introduce products or
technologies which are superior to those of the Company or produce products at
lower prices, which could make its products obsolete. The Company is also
subject to the risk that customer products which incorporate its lasers products
may become obsolete or may be redesigned, eliminating the need for its products.
The principal competitive factors for its OEM laser products are technology,
price, service, quality, performance and ability to meet customer
specifications. The principal competitive factors for medical laser systems are
the product's technological capabilities and proven clinical ability, price,
service, quality, and scope of regulatory approval.
Future sales are in a large part dependent on the success of the
introduction of new or improved laser products and medical laser systems and on
the Company's ability to become and remain competitive in the medical
marketplace. In addition, future laser products sales are dependent on the
Company's OEM customers remaining competitive in their marketplace.
There can be no assurance that the Company's competitors, customers or
others will not develop products or technologies which could render the products
of the Company obsolete. If such products or technologies were successfully
developed, continued sales of the existing products could rapidly diminish, in
which case the Company's business, results of operations or ability to maintain
or increase its market share could be adversely affected.
Certain of the Company's current or future competitors have substantially
greater financial, technical, manufacturing, marketing and other resources as
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well as a broader range of products than the Company. There can be no assurance
that competition will not adversely affect the Company's business, results of
operations, or ability to maintain or increase it market share which could be
adversely affected.
Patents, Licenses and Trade Secrets
-----------------------------------
Although the Company owns certain domestic patents relating to laser
technology, the Company believes that the ownership of patents is not essential
to its current OEM laser products operations. However, the Company's future
success may depend, in part, on its ability to operate and introduce new
products without infringing on the rights of third parties.
The Company entered into a license agreement in March 1989 with Patlex
Corporation which requires the Company to pay royalties based on a percentage of
net sales of products covered by certain patents.
The Company believes, but can give no assurance, that the supplier of its
diode pumped solid state laser, which is used in certain of its medical laser
products, is adequately and appropriately licensed to manufacture and sell such
devices.
Government Regulation
---------------------
Laser products manufactured by the Company are subject to the requirements
of the Center for Devices and Radiological Health ("CDRH") of the FDA. The
CDRH is the Federal government body primarily responsible for the regulation and
administration of laser technology and related products. The CDRH has issued
laser radiation safety regulations which require certain laser manufacturers and
end users to file new product and annual reports, to maintain records of sales
and quality control results, conduct proper testing, and to incorporate certain
design and operating features, including warning labels and protective devices
in all lasers sold to end users. The regulations required generally do not
apply to OEM laser products which are incorporated as components in laser-based
end products.
During 1997 the Company introduced new medical laser systems with
applications in the fields of dermatology and ophthalmology. These lasers
manufactured by the Company are regulated as medical devices by the FDA and the
CDRH under the federal Food, Drug and Cosmetic Act. As such, these devices
require premarket approval by the FDA prior to commercialization. The FDA
classifies medical devices in commercial distribution into one of three classes:
Class I, II or III. This classification is based on the control the FDA deems
necessary to reasonably ensure the safety and effectiveness of medical devises.
The Company's laser based medical products are classified as Class II devices.
If a manufacturer of a medical device can establish that a proposed device is
"substantially equivalent" to a legally marketed Class II medical device the
manufacturer may seek FDA clearance for the device by filing a submission of a
premarket notification to the CDRH, Office of Device Evaluation, in accordance
with Section 510(k) of the federal Food, Drug, and Cosmetic Act.
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The Company submitted the required Section 510(k) premarket notification to
the FDA and the CDRH seeking classification of both its argon gas and diode
pumped solid state laser systems for ophthalmic and dermatological applications
and received its 510(k) clearance to market these systems.
The Company and its medical products manufactured pursuant to a 510(k)
premarket clearance notification, are or will be subject to continuing
regulation by the FDA and must comply with all applicable requirements of the
FDA on an ongoing basis. The federal Food, Drug, and Cosmetic Act also requires
the Company to manufacture its products in registered establishments and in
accordance with the Quality System Requirements of the Current Good
Manufacturing Practices (CGMP), 21 CFR 820 (Technical equivalent to the ISO 9001
& ISO/DIS 13485). The Company's facilities in the United States are subject to
periodic inspections by the FDA.
Certain of the Company's products manufactured and sold in foreign
countries are required to comply with the European Community's Medical Device
Directive ("MDD") (93/42/EEC), by June 1998, and the emissions and immunity
requirements (EN 55011, EN 50082, and EN 50082-2, respectively) set forth by the
European Community under the requirements of the Electromagnetic Compatibility
("EMC") Directive (89/336/EEC). In addition, certain manufactured products are
also required to comply with the Electrical Safety Standard, IEC 825-1:93. The
Company has received its applicable certification of compliance on a number of
its products and others are currently in process.
The above Directives also require the Company to manufacture its products
in registered establishments and in accordance with the harmonized quality
system standards (ISO 9000 series). The compliance to such standards is
determined by audit from a "notified" body and through periodic surveillance.
Although the Company believes that it currently complies and will continue
to comply with the applicable regulations, such regulations are always subject
to change. Regulations such as ISO 9000 require a more difficult and time
consuming level of compliance and therefore the Company cannot assure that it
will meet all these regulations in a timely manner. In addition there can be no
assurance that future changes in law, regulations, review guidelines,
administrative interpretations by the FDA, any international governing agency or
other regulatory bodies will not adversely affect the Company.
Product Development
-------------------
The Company continues to be engaged in the development of medical laser
systems and laser products. In 1997, the Company's narrowed its engineering
focus to that of laser-based dermatological and ophthalmic medical systems and
to a lesser extent to the product needs of certain of its OEM laser products
customers.
The Company spent $511,544 in 1997 and $605,585 in 1996 on research and
development activities.
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Insurance
---------
The Company carries product liability insurance on its laser products and
medical laser systems to a maximum of $4,000,000.
Compliance with Environment Laws
--------------------------------
The costs and effects of compliance with environmental laws (federal,
state, and local) to and on the Company have been minimal.
Employees
---------
On December 31, 1997, the Company had 49 full-time equivalent employees: 6
in general and administrative services, 30 in manufacturing and support
services, 9 in Engineering, and 4 in management and marketing.
ITEM 2. DESCRIPTION OF PROPERTIES
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The Company's administrative offices and primary assembly facilities for
its laser products are located in a building of approximately 46,000 square feet
in Salt Lake City, Utah, which is owned by Dr. William H. McMahan, a significant
shareholder and former Chairman, President and Chief Executive Officer of the
Company. The Company leases the building from Dr. McMahan pursuant to a lease
agreement which terminates on April 30, 1999. In 1997, the Company paid annual
base rent of $236,725.
The Company believes that the foregoing facilities are currently more than
adequate for its activities.
Item 3. LEGAL PROCEEDINGS
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There are no pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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Not applicable.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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The Company's common stock trades on the NASDAQ Small-Cap Market tier of
the NASDAQ Stock Market under the symbol LSER. The following table sets forth
the prices for the periods as indicated. The high and low sales price are used
in reporting. Such quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions.
High Low
---- ---
1997 First quarter 3 3/4 2 3/8
---- Second quarter 4 5/8 1 5/16
Third quarter 5 3/4 2 1/4
Fourth quarter 6 11/16 2 7/8
1996 First quarter 2 5/8 2 1/8
---- Second quarter 4 1/2 2 1/4
Third quarter 2 1/2 1 5/8
Fourth quarter 2 3/4 1 3/4
As of December 31, 1997 there were approximately 464 beneficial holders of
the Company's Common Stock.
On December 16, 1997, the Board of Directors declared a five-for-four
stock dividend which was issued on February 18, 1998 to the shareholders of
record as of January 30, 1998.
The Company did not pay cash dividends on its common stock in 1997 and it
does not anticipate paying any cash dividends thereon in the foreseeable future.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere herein.
Results of Operations
---------------------
Net sales for the year ended December 31, 1997, were $5,074,232 as compared
to $3,419,719 for the same period in 1996, an increase of $1,654,513 or 48%.
This increase was primarily a result of increases in laser product and service
sales during 1997 to the Company's two major customers totaling $857,970. In
addition, laser product sales to another major OEM customer increased by
$713,919 during 1997. Laser product and service sales to all other customers
during 1997 increased by $82,624. Medical laser system sales during 1997 were
$172,504.
For many years, fluctuations in laser product and service sales have been
influenced by (i) changes in the quantity of Company products held in inventory
by its OEM customers, (ii) changes in end user demand for OEM customer products
in which the Company's laser products are a component part, (iii) the
competitiveness, cost and customer use of alternative products, technologies or
suppliers and (iv) various other factors. The Company believes, but cannot
guarantee, that the Company's increase in net sales for 1997 was primarily a
result of an upward fluctuation in demand for its laser products and service
sales and to a lesser extent, the Company's commencement of medical laser system
sales. Conversely, the Company may in some future period(s) experience a
downward shift in the demand for its laser products and service sales which
would have a negative impact on net sales. Examples of such recurring
fluctuations from period to period are laser products and service sales to (i)
Company A which totaled $1,472,790, $1,042,748, and $122,636 for 1997, 1996 and
1995, respectively and (ii) Company B which totaled $1,125,519, $697,591, and
$1,654,868 for 1997, 1996 and 1995, respectively. Laser product and service
sales to Company C increased from $275,964 in 1996 to $989,883 in 1997, an
increase of $713,919 or 259%. In December 1997, Company C notified the Company
of its desire to cancel the unfilled portion of a purchase order placed with the
Company in the fourth quarter of 1997, totaling approximately $507,000.
Discussions with Company C are ongoing, although no agreement has been reached,
as regards to their request. As result of such recurring fluctuations, the
Company cannot predict or guarantee that laser product and service sales will
remain at their current levels, or increase, or decrease, materially or
otherwise.
Cost of products sold as a percentage of the Company's net sales decreased
from 83% in 1996 to 77% in 1997, a decrease of 6%. This decrease was primarily
the result of the 48% increase in net sales while labor and overhead costs
increased by only 12%. This was partially offset by certain year end
adjustments to inventories which resulted in an increase in material costs.
Selling, general and administrative costs for the year ended December 31,
1997 were $856,263, or 17% of net sales, as compared to $691,381, or 20% of net
sales, for the same period in 1996, an increase of $164,882, or 24%. This
increase was primarily the result of an increase in marketing, advertising, and
other start-up related costs of the Company's new dermatological and ophthalmic
medical laser systems.
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Research and development expenditures for the year ended December 31, 1997
were $511,544 as compared to $605,585 for the same period in 1996, a decrease of
$94,041 or 16%. This decrease was primarily the result of the Company's decision
to narrow its current engineering focus to that of laser based dermatological
and ophthalmic medical systems and to a lesser extent the product needs of
certain of its OEM customers.
Royalty expenses increased from $58,446 in 1996 to $91,293 during 1997, an
increase of $32,847 or 56%. This increase was the result of the increase in
laser product and service sales during 1997.
Interest income and other revenue for the year ended December 31, 1997 was
$52,076 as compared to $94,544 for the same period in 1996, a decrease of
$42,468 or 45%.
The Company recognized a net loss for the year ended December 31, 1997 of
$254,608 or $.30 per share. This compares to a net loss for the same period of
1996 of $688,024 or $.80 per share, an improvement of $433,416 or $.50 per
share. This improvement was a result of the increase in net sales, a decrease
in research and development expenditures and a decrease in the cost of goods
sold percentage. These factors were partially offset by increased start-up
costs relating to the introduction of the Company's medical laser systems,
certain year end adjustments made to inventories, an increase in royalty
expenses, and to a decrease in interest income and other revenue.
On December 31, 1997 the Company had net operating loss carryforwards for
tax purposes of approximately $3,551,000 available to offset future taxable
income. The loss carryforwards will begin to expire in the year 2004.
Liquidity and Capital Resources
-------------------------------
On December 31, 1997, the Company had working capital of $1,853,244 as
compared to $1,653,962 at December 31, 1996, an increase of $199,282 or 12%.
Cash equivalents at December 31, 1997 were $164,479 as compared to $555,204 on
December 31, 1996, a decrease of $390,725, or 70%. Essentially all of the
Company's working capital requirements have been financed by internally
generated funds.
The increase in working capital was primarily the result of the
reclassification of $534,308 in notes receivable from a classification of long
term assets to current assets on the Company's balance sheet. The notes
receivable balances became due in the first quarter of 1998 and have been paid
in full subsequent to December 31, 1997. This increase was partially offset by
other factors including the 1997 net loss, and to increases in inventories,
accounts receivable, accounts payable and accrued expenses balances.
The decrease in the cash equivalent balance at December 31, 1997 was
primarily the result of the 1997 net loss and to increased inventories levels,
which was due in part to increases in inventories required to produce medical
laser systems.
Currently, the Company has no material commitments for capital
expenditures, and has not entered into any agreements for additional sources of
borrowing or capital.
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ITEM 7. FINANCIAL STATEMENTS
- -----------------------------
The response to this item is submitted in a separate section of this
report. See page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
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FINANCIAL DISCLOSURE
--------------------
There has been no reported disagreement on any matter of accounting
principles or material financial statement disclosures of a kind described in
Item 304 of Regulation S-B.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
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COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
-------------------------------------------------
The information called for by this Item is incorporated by reference from
the Company's definitive Proxy Statement which involves the election of
Directors to be filed pursuant to Regulation 14A and which the Company intends
to file with the Securities and Exchange Commission not later than 120 days
after December 31, 1997, the end of the year covered by this Form 10-KSB. If
such definitive Proxy Statement is not filed with the Securities and Exchange
Commission within the 120-day period, the information called for by this Item
will be filed as an amendment to this Form 10-KSB under cover of Form 8 not
later than the end of the 120-day period.
ITEM 10. EXECUTIVE COMPENSATION
- --------------------------------
The information called for by this Item is incorporated by reference from
the Company's definitive Proxy Statement which involves the election of
Directors to be filed pursuant to Regulation 14A and which the Company intends
to file with the Securities and Exchange Commission not later than 120 days
after December 31, 1997, the end of the year covered by this Form 10-KSB. If
such definitive Proxy Statement is not filed with the Securities and Exchange
Commission within the 120-day period, the information called for by this Item
will be filed as an amendment to this Form 10-KSB under cover of Form 8 not
later than the end of the 120-day period.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The information called for by this Item is incorporated by reference from
the Company's definitive Proxy Statement which involves the election of
Directors to be filed pursuant to Regulation 14A and which the Company intends
to file with the Securities and Exchange Commission not later than 120 days
after December 31, 1997, the end of the year covered by this Form 10-KSB. If
such definitive Proxy Statement is not filed with the Securities and Exchange
Commission within the 120-day period, the information called for by this Item
will be filed as an amendment to this Form 10-KSB under cover of Form 8 not
later than the end of the 120-day period.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The information called for by this Item is incorporated by reference from
the Company's definitive Proxy Statement which involves the election of
Directors to be filed pursuant to Regulation 14A and which the Company intends
to file with the Securities and Exchange Commission not later than 120 days
after December 31, 1997, the end of the year covered by this Form 10-KSB. If
such definitive Proxy Statement is not filed with the Securities and Exchange
Commission within the 120-day period, the information called for by this Item
will be filed as an amendment to this Form 10-KSB under cover of Form 8 not
later than the end of the 120-day period.
Page 14 of 14
<PAGE>
================================================================================
PART IV
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K
- -------------------------------------------
(a) Exhibits
3 (i) - *Articles of Incorporation, as amended
(ii) - *Bylaws, as amended
4 (a) - *Specimen Stock Certificate
(b) - *Incentive Stock Option Plan
(c) - *Non-Statutory Stock Option Plan
(d) - *Lease Agreement between Dr. McMahan and American Laser
(Salt Lake City)
(e) - *Amendment to Lease Agreement between Dr. McMahan and
American Laser (Salt Lake City)
(f) - *Stock Purchase Agreement dated as of January 1, 1995
between Barrie Brewer, Brad Brewer and Jean Brewer and
Registrant.
(g) - *Stock Redemption Agreement dated as of January 1, 1995
between Pro Med Co. and Registrant.
21 - Statement re: Subsidiaries of the Registrant
__________________
* Previously filed and incorporated herein by reference
<PAGE>
================================================================================
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LASER CORPORATION
By: /s/ B. Joyce Wickham Date March 30, 1998
----------------------------------- --------------------------
B. Joyce Wickham
President & Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Date
--------- ----
/s/ B. Joyce Wickham March 30, 1998
- ------------------------------------- -------------------------------
B. Joyce Wickham
President and Chief Executive Officer
Treasurer and Director
/s/ Mark L. Ballard March 30, 1998
- ------------------------------------- -------------------------------
Mark L. Ballard
Vice President and Director
/s/ Rod O. Julander March 30, 1998
- ------------------------------------- -------------------------------
Rod O. Julander
Secretary and Director
/s/ Elizabeth A. Whitsett March 30, 1998
- ------------------------------------- -------------------------------
Elizabeth A. Whitsett
Director
/s/ Reo K. Larsen March 30, 1998
- ------------------------------------- -------------------------------
Reo K. Larsen
General Accounting Manager
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
----------------------------------
EXHIBIT 21 - STATEMENT RE: SUBSIDIARIES OF THE REGISTRANT
---------------------------------------------------------
Subsidiary Place of Incorporation
---------- ----------------------
American Laser Corporation Utah
American Laser Medical, Inc. Utah
American Laser Software, Inc. Utah
================================================================================
LASER CORPORATION
Financial Statements
December 31, 1997 and 1996
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements
----------------------------------------------------------------------
Page
----
Independent auditors' report F-1
Consolidated balance sheet F-2
Consolidated statement of operations F-3
Consolidated statement of stockholders'
equity F-4
Consolidated statement of cash flows F-5
Notes to consolidated financial statements F-7
<PAGE>
================================================================================
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Laser Corporation
We have audited the accompanying consolidated balance sheet of Laser
Corporation and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and
cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Laser
Corporation and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for the years then ended,
in conformity with generally accepted accounting principles.
Salt Lake City, Utah
February 20, 1998
F-1
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
December 31,
- --------------------------------------------------------------------------------
1997 1996
------------------------------
Assets
------ [C] [C]
Current assets:
Cash and cash equivalents $ 164,479 $ 555,204
Receivables, net 903,106 572,138
Inventories 1,747,774 1,289,003
Notes receivable - current portion 534,308 176,284
Other current assets 23,055 34,829
------------------------------
Total current assets 3,372,722 2,627,458
Equipment and leasehold improvements, net 263,405 221,930
Notes receivable - 534,308
Other assets 131,999 62,996
------------------------------
$ 3,768,126 $ 3,446,692
==============================
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities: [C] [C]
Accounts payable $ 1,063,560 $ 696,133
Accrued expenses 295,918 177,363
Accrued warranty expense 160,000 100,000
------------------------------
Total current liabilities 1,519,478 973,496
------------------------------
Commitments and contingencies - -
Stockholders' equity:
Common stock, $.05 par value, 10,000,000
shares authorized; 867,049 and 682,088
shares issued, respectively 43,353 34,105
Additional paid-in capital 731,022 701,537
Retained earnings 1,574,273 1,837,554
Treasury stock, at cost (100,000) (100,000)
------------------------------
Total stockholders' equity 2,248,648 2,473,196
------------------------------
$ 3,768,126 $ 3,446,692
==============================
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-2
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
Years Ended December 31,
- --------------------------------------------------------------------------------
1997 1996
------------------------------
Revenues: [C] [C]
Net sales $ 5,074,232 $ 3,419,719
Interest and other income 52,076 94,544
------------------------------
5,126,308 3,514,263
------------------------------
Cost and expenses:
Cost of products sold 3,921,740 2,844,349
Selling, general and administrative 856,263 691,381
Research and development 511,544 605,585
Royalties 91,293 58,446
Interest 76 2,526
------------------------------
5,380,916 4,202,287
------------------------------
Loss before income taxes (254,608) (688,024)
Benefit for income taxes - -
------------------------------
Net loss $ (254,608) $ (688,024)
==============================
Loss per share $ (.30) $ (.80)
==============================
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-3
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Years Ended December 31, 1997 and 1996
- --------------------------------------------------------------------------------
Common Stock Additional Treasury Stock
---------------- Paid-in Retained --------------
Shares Amount Capital Earnings Shares Amount Total
-----------------------------------------------------------------------
Balance at
January [C] [C] [C] [C] [C] [C] [C]
1, 1996 682,088 $34,105 $701,537 $2,525,578 $10,000 $(100,000) $3,161,220
Net loss - - - (688,024) - - (688,024)
---------------------------------------------------------------------
Balance at
December
31, 1996 682,088 34,105 701,537 1,837,554 10,000 (100,000) 2,473,196
Issuance
of common
stock for
cash 5,500 275 10,285 - - - 10,560
Issuance
of common
stock for
services 6,000 300 19,200 - - - 19,500
Stock
split-up
effected
in the
form of a
dividend 173,461 8,673 - (8,673) 2,500 - -
Net loss - - - (254,608) - - (254,608)
---------------------------------------------------------------------
Balance at
December
31, 1997 867,049 $43,353 $731,022 $1,574,273 12,500 $(100,000) $2,248,648
=====================================================================
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-4
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Years Ended December 31,
- --------------------------------------------------------------------------------
1997 1996
------------------------------
Cash flows from operating activities: [C] [C]
Net loss $ (254,608) $ (688,024)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 103,040 103,058
Provision for losses on accounts receivable (54,000) 54,500
Increase in other assets (69,003) (58,697)
Gain on disposal of asset (69) -
Issuance of common stock for services 19,500 -
(Increase) decrease in:
Accounts receivable (276,968) (82,736)
Inventories (458,771) (102,831)
Other current assets 11,774 (24,804)
Increase (decrease) in:
Trade accounts payable and accrued expenses 485,982 391,058
Accrued warranty expense 60,000 (40,000)
------------------------------
Net cash used in
operating activities (433,123) (448,476)
------------------------------
Cash flows from investing activities:
Purchase of property and equipment (145,270) (63,881)
Proceeds from notes receivable 176,284 154,601
Proceeds from sale of property and equipment 824 -
------------------------------
Net cash provided by
investing activities 31,838 90,720
------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 10,560 -
Payments on capital lease obligations - (23,410)
------------------------------
Net cash provided by (used in)
financing activities 10,560 (23,410)
------------------------------
Decrease in cash and cash equivalents (390,725) (381,166)
------------------------------
Cash and cash equivalents, beginning of year 555,204 936,370
------------------------------
Cash and cash equivalents, end of year $ 164,479 $ 555,204
==============================
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements F-5
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Continued
- --------------------------------------------------------------------------------
Supplemental disclosure of noncash transactions:
The Company recorded an investment of $69,003 and $60,000 in exchange for
services, during the years ended December 31, 1997 and 1996, respectively.
During the year ended December 31, 1997, the Company capitalized retained
earnings of $8,673 due to the issuance of a 25% stock split-up effected in the
form of a dividend.
Supplemental disclosures of cash flow information
Years Ended
December 31,
------------------------------
1997 1996
------------------------------
[C] [C]
Interest paid $ 76 $ 2,526
==============================
Income taxes paid $ - $ -
==============================
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-6
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
1. Organization Organization and Principles of Consolidation
and --------------------------------------------
Summary of The consolidated financial statements include the accounts
Significant of Laser Corporation (Laser) and its wholly-owned
Accounting subsidiaries, American Laser Corporation (American Laser),
Policies American Laser Software, Inc. (ALS), and American Laser
Medical, Inc. (ALM) (the Company) located in Salt Lake City,
Utah. All significant intercompany account balances and
transactions have been eliminated in consolidation.
The Company is engaged in designing, manufacturing,
marketing and servicing of laser products and medical laser
systems.
Cash and Cash Equivalents
-------------------------
For purposes of the statements of cash flows, the Company
considers all highly liquid certificates of deposit with
maturities of three months or less to be cash equivalents.
Inventories
-----------
Inventories are valued at the lower of cost or market, cost
being determined on the first-in, first-out method.
Equipment and Leasehold Improvements
------------------------------------
Equipment and leasehold improvements are recorded at cost,
less accumulated depreciation. Depreciation on equipment
and leasehold improvements is determined using the straight
-line and declining balance methods over the estimated
useful lives of the assets or terms of the lease.
Expenditures for maintenance and repairs are expensed when
incurred and betterments are capitalized. Gains and losses
on sale of equipment and leasehold improvements are
reflected in net income.
Income Taxes
------------
Deferred income taxes are provided for temporary differences
in reporting income for financial statement and tax
purposes, arising primarily from depreciation and accrued
liabilities.
Warranty Costs
--------------
The Company records the estimated cost of warranty
obligations on laser products and medical laser systems at
the time the related products are sold.
- --------------------------------------------------------------------------------
F-7
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
1. Organization Loss Per Common Share
and ---------------------
Summary of Loss per common share is computed using the weighted average
Significant number of common shares outstanding. Common equivalent
Accounting shares consist of the Company's stock options considered to
Policies be dilutive common stock equivalents, determined using the
Continued treasury stock method.
Concentration of Credit Risk
----------------------------
The Company designs, manufactures, markets and provides
service on lasers and related laser systems which are
primarily used by original equipment manufacturers in both
domestic and foreign markets. These laser products are
used in items such as printers, medical instruments,
entertainment products and other applications. The Company
grants credit in these markets without requiring collateral
to substantially all its customers.
Financial instruments which potentially subject the Company
to concentration of credit risk consist primarily of trade
receivables. In the normal course of business, the Company
provides credit terms to its customers. Accordingly, the
Company performs ongoing credit evaluations of its customers
and maintains allowances for possible losses which, when
realized, have been within the range of management's
expectations.
The Company maintains its cash in bank deposit accounts
which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such account. The
Company believes it is not exposed to any significant credit
risk on cash and cash equivalents.
Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Reclassifications
-----------------
Certain reclassifications have been made to the prior
period's financial statements in order to conform them to
the classifications used for the current year.
- --------------------------------------------------------------------------------
F-8
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
2. Detail of December 31,
Certain 1997 1996
Balance ------------------------------
Sheet Receivables: [C] [C]
Accounts Trade receivables $ 902,781 $ 624,819
Less allowance for
doubtful accounts (2,000) (56,000)
Other 2,325 3,319
------------------------------
$ 903,106 $ 572,138
==============================
Inventories:
Raw materials $ 1,186,832 $ 926,930
Work-in-process 597,356 468,573
Finished goods 108,586 63,500
Reserve for obsolescence (145,000) (170,000)
------------------------------
$ 1,747,774 $ 1,289,003
==============================
- --------------------------------------------------------------------------------
F-9
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
3. Notes Notes receivable consist of the following:
Receivable
December 31,
1997 1996
------------------------------
Note receivable from ProMed
in monthly installments of
$16,121, including interest
at 7.5%, secured by common [C] [C]
stock of the debtor $ 372,034 $ 531,045
Noninterest bearing note
receivable from ProMed
secured by common stock
of the debtor 162,274 162,274
Note receivable from an
entity in monthly
installments of $1,696,
including interest at 18%,
unsecured - 17,273
------------------------------
$ 534,308 $ 710,592
==============================
The total balance on both outstanding notes was received
in January and February 1998.
4. Equipment Equipment and leasehold improvements consist of the
and following:
Leasehold December 31,
Improvements 1997 1996
------------------------------
[C] [C]
Equipment $ 1,504,549 $ 1,389,535
Leasehold improvements 641,692 612,260
------------------------------
2,146,241 2,001,795
Less accumulated
depreciation and
amortization (1,882,836) (1,779,865)
------------------------------
$ 263,405 $ 221,930
==============================
- --------------------------------------------------------------------------------
F-10
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
5. Income Taxes The benefit for income taxes differs from the amount
computed at federal statutory rates as follows:
Years Ended
December 31,
1997 1996
------------------------------
Income tax benefit at [C] [C]
statutory rates $ 83,000 $ 234,000
Change in valuation
allowance (83,000) (234,000)
------------------------------
$ -0- $ -0-
==============================
Deferred tax assets (liabilities) consist of the following:
December 31,
1997 1996
------------------------------
Net operating loss [C] [C]
carryforward $ 1,286,000 $ 1,222,000
Excess tax depreciation
over book depreciation (8,000) (34,000)
Inventory reserve 49,000 58,000
Warranty reserve 54,000 34,000
Bad debt reserve 1,000 19,000
------------------------------
1,382,000 1,299,000
Valuation allowance (1,382,000) (1,299,000)
------------------------------
$ -0- $ -0-
==============================
The Company has net operating loss carryforwards for tax
purposes of approximately $3,551,000 at December 31, 1997
available to offset future taxable income which begins to
expire in 2004. Should a change of more than 50 percent
in the Company's ownership occur, any future benefits from
such carryforwards may be substantially lost. A valuation
allowance has been established for the net deferred tax
asset due to the uncertainty of realization.
- --------------------------------------------------------------------------------
F-11
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
6. Commitments Operating Leases
and ----------------
Contingencies The Company's administrative offices and primary assembly
facilities for its laser products are located in a 46,000
square foot building in Salt Lake City, Utah. The Company
leases the building from a significant shareholder, pursuant
to a lease agreement which terminates on April 30, 1999.
Under this lease, the Company recognized annual rent expense
of $236,725 in 1997 and 1996.
Future minimum payments under the noncancellable operating
lease is as follows:
Year Amount
---- -----------
[C]
1998 $ 236,725
1999 78,908
-----------
$ 315,633
===========
Investment Agreement
--------------------
In November 1996, the Company entered into a 12 month
investment agreement with another corporate entity (the
investee). The agreement provided that the Company would
invest cash and/or services in exchange for the investee's
stock. At December 31, 1997 and 1996, the Company had
performed services of $69,003 and $60,000, respectively, in
exchange for common stock of the investee. The investment
of $129,003 has been included in other assets.
Effective September 30, 1997, the agreement expired as
certain requirements were not met by the investee according
to the terms of the agreement. The investment of $129,003
represents a 3.2% ownership in the investee.
Royalty Agreement
-----------------
The Company is party to an agreement with Patlex Corporation
which requires the Company to pay royalties based on a
percentage of net sales of products covered by certain
patents. Total royalty expense was $91,293 and $58,446 in
1997 and 1996, respectively.
- --------------------------------------------------------------------------------
F-12
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
6. Commitments Employment Agreements
and ---------------------
Contingencies The Company has employment agreements with its President and
Continued Chief Executive Officer and with its Vice President. These
agreements have a three year term with automatic renewals
for additional terms of equal length unless terminated by
either party. The agreements also provide for severance
benefits at the time of termination unless termination is
for cause, lack of performance, resignation, or by reason
of death.
7. Stock The Company has adopted a stock bonus plan whereby 62,500
Option shares of the Company's common stock have been reserved for
Plans ultimate issuance to qualified employees. The Company's
Board of Directors has complete discretion as to which
employees qualify, the number of shares to be granted,
and any restrictions to be placed upon such shares. No more
than 1,000 shares may be granted to any one employee during
any fiscal year.
The Company has an incentive stock option plan and a
non-qualified stock option plan whereby an aggregate of
125,000 shares, or 62,500 shares for each plan, of the
Company's unissued and restricted common stock was reserved
for ultimate issuance to selected employees. The stock
option committee of the Board of Directors administers both
plans and has discretion to determine the terms of options
granted under each plan. Such terms include the exercise
price of each option, the number of shares subject to each
option, and the exercisability of such options. Options
under the incentive plan must be granted at the fair market
value on the date of grant except that the option price must
be one hundred ten percent (110%) of such fair market value
if the optionee owns more than ten percent (10%) of the
outstanding common stock. The aggregate fair market value
of the shares issuable on exercise of options granted to any
employee in a calendar year may not exceed $20,000 plus
certain carry over allowances. Options under the
non-qualified plan must be granted at a price equal to at
least the fair market value of the shares on the date of
grant. For either plan, no more than 20 percent of the
shares under option may be exercised during the first year
following the date of grant, and options expire five years
from the date of grant. The incentive plan and the
non-qualified plan, as amended on May 21, 1993, expires on
June 30, 1998.
- --------------------------------------------------------------------------------
F-13
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
7. Stock The Board of Directors have reinstated a non-employee
Option director option plan whereby an aggregate total of 75,000
Plans shares of the Company's unissued or reacquired common stock
Continued may be issued to outside directors effective May 29, 1992.
Beginning June 1, 1992, outside directors were granted a
five-year option to purchase 2,000 shares of common stock at
the end of each six months of service. On June 1, 1993, the
plan was amended to change the method of calculating the
exercise price to that of the employee's incentive stock
option plan.
Information regarding the stock option plans are summarized
below:
Number of Option Price
Options Per Share
------------------------------
Outstanding at [C] [C]
January 1, 1996 72,500 $ 1.14-4.10
Granted 23,750 2.00-2.40
------------------------------
Outstanding at
December 31, 1996 96,250 1.14-4.10
Granted 26,250 1.30-3.73
Exercised (6,875) 1.92-2.00
Expired (7,500) 2.19-3.03
------------------------------
Outstanding at
December 31, 1997 108,125 $ 1.43-4.10
==============================
Options exercisable and shares available for future
grants are as follows:
December 31,
------------------------------
1997 1996
------------------------------
[C] [C]
Options exercisable 108,125 96,250
Shares available for grant 91,875 103,750
- --------------------------------------------------------------------------------
F-14
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
8. Stock Based The Financial Accounting Standards Board has issued
Compensation Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123) which
established financial accounting and reporting standards for
stock-based compensation. The new standard defines a fair
value method of accounting for an employee stock option or
similar equity instrument. This statement gives entities
the choice between adopting the fair value method or
continuing to use the intrinsic value method under
Accounting Principles Board (APB) Opinion No. 25 with
footnote disclosures of the pro forma effects if the fair
value method had been adopted. The Corporation has opted
for the latter approach. Accordingly, no compensation
expense has been recognized for the stock option plans.
Had compensation expense for the Corporation's stock option
plans been determined based on the fair value at the grant
date for awards in 1997 and 1996 consistent with the
provisions of SFAS No. 123, the Corporation's results of
operations would have been reduced to the pro forma amounts
indicated below:
Years Ended
December 31,
------------------------------
1997 1996
------------------------------
[C] [C]
Net loss - as reported $ (254,608) $ (688,024)
Net loss - pro forma $ (292,539) $ (715,455)
Loss per share -
as reported $ (.30) $ (.80)
Loss per share -
pro forma $ (.34) (.84)
==============================
The fair value of each option grant is estimated in the date
of grant using the Black-Scholes option pricing model with
the following assumptions:
December 31,
------------------------------
1997 1996
------------------------------
[C] [C]
Expected dividend yield $ -0- $ -0-
Expected stock price
volatility 61.10% 53.29%
Risk-free interest rate 5.71% 5.50%
Expected life of options 5 years 5 years
==============================
The weighted average fair value of options granted during
1997 and 1996 are $1.45 and $1.16, respectively.
- --------------------------------------------------------------------------------
F-15
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
8. Stock Based The following table summarizes information about stock
Compensation options outstanding at December 31, 1997:
Continued
Options Outstanding Options Exercisable
----------------------------------------------------------------
Weighted
Average
Number Remaining Weighted Number Weighted
Range of Outstanding Contractual Average Exercisable Average
Exercise at Life Exercise at Exercise
Prices 12/31/97 (Years) Price 12/31/97 Price
----------------------------------------------------------------
[C] [C] [C] [C] [C] [C]
$ 1.14
to 1.30 30,625 2.6 $ 1.23 30,625 $ 1.23
1.90
to 2.42 42,500 2.9 2.15 42,500 2.15
2.90
to 4.10 35,000 3.2 3.56 35,000 3.56
----------------------------------------------------------------
$ 1.14
to 4.10 108,125 2.9 $ 2.34 108,125 $ 2.34
9. Earnings In February 1997, the Financial Accounting Standards Board
Per issued Statement of Financial Accounting Standards No. 128
Share (SFAS 128) "Earnings Per Share," which requires companies to
present basic earnings per share (EPS) and diluted earnings
per share, instead of the primary and fully diluted EPS as
previously required. The new standard also requires
additional informational disclosures, and makes certain
modifications to the previously applicable EPS calculations
defined in Accounting Principles Board No. 15. The new
standard is required to be adopted by all public companies
for reporting periods ending after December 15, 1997, and
requires restatement of EPS for all prior periods reported.
During the year ended December 31, 1997, the Company adopted
this standard.
- --------------------------------------------------------------------------------
F-16
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
9. Earnings Earnings per share information in accordance with SFAS 128
Per is as follows:
Share Year Ended December 31, 1997
Continued -----------------------------------------
Loss Shares Per-Share
(Numerator) (Denominator) Amount
-----------------------------------------
[C] [C] [C]
Net loss $ (254,608)
Less preferred
stock dividends -
-----------
Basic EPS
Loss available
to common
stockholders (254,608) 861,000 $ (.30
Effect of ===========
Dilutive
Securities
Stock options - -
------------------------
Diluted EPS
Loss available
to common
stockholders
plus assumed
conversions $ (254,608) 861,000 $ (.30)
=======================================
Year Ended December 31, 1996
---------------------------------------
Loss Shares Per Share
(Numerator) (Denominator) Amount
---------------------------------------
Net loss $ (688,024)
Less preferred
stock dividends -
-----------
Basic EPS
Loss available
to common
stockholders (688,024) 856,000 $ (.80)
Effect of
Dilutive
Securities
Stock options - -
-------------------------
Diluted EPS
Loss available
to common
stockholders
plus assumed
conversions $ (688,024) 856,000 $ (.80)
==========================================
- --------------------------------------------------------------------------------
F-17
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
10. Profit American Laser adopted a 401(k) retirement savings and
Sharing profit sharing plan. All full-time employees of American
Plans Laser who are at least 21 years of age and have a minimum of
three months of service with American Laser are eligible
to participate. The plan contains a matching contribution
which is at American Laser's discretion and is limited to
two percent of the applicable employee's salary. No
matching contributions were made during 1997 and 1996.
11. Related The Company has a lease agreement with Dr. William H.
Party McMahan, a significant shareholder and former Chairman,
Transactions President and Chief Executive Officer of the Company, which
is described in note 6.
The Company has employment agreements with its President and
Chief Executive Officer and Vice President as described in
note 6.
12. Export Sales Export sales to unaffiliated customers were as follows:
and
Major Years Ended
Customers December 31,
------------------------------
1997 1996
------------------------------
[C] [C]
Europe $ 2,903,634 $ 2,199,169
Other 341,781 66,864
------------------------------
$ 3,245,415 $ 2,266,033
==============================
Combined domestic and foreign sales and service of lasers to
the Company's major customers are as follows:
Years Ended
December 31,
------------------------------
Major customers 1997 1996
--------------- ------------------------------
[C] [C]
Company A $ 1,472,790 $ 1,042,748
Company B $ 1,125,519 $ 697,591
Company C $ 989,883 $ 275,964
- --------------------------------------------------------------------------------
F-18
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
13. Fair Value of None of the Company's financial instruments are held for
Financial trading purposes. The Company estimates that the fair value
Instruments of all financial instruments at December 31, 1997, does not
differ materially from the aggregate carrying values of its
financial instruments recorded in the accompanying balance
sheet. The estimated fair value amounts have been
determined by the Company using available market information
and appropriate valuation methodologies. Considerable
judgement is necessarily required in interpreting market
data to develop the estimates of fair value, and,
accordingly, the estimates are not necessarily indicative of
the amount that the Company could realize in a current
market exchange.
14. Subsequent On December 16, 1997, the Company declared a 25% stock
Event split-up effected in the form of a dividend, to all
shareholders of record as of January 30, 1998. On February
18, 1998, the Company issued 173,461 shares of common stock
in conjunction with the stock split-up. Accordingly,
amounts equal to the par value of the shares issued have
been charged to retained earnings and credited to common
stock.
Earnings per common share and weighted average shares
outstanding have been restated retroactively to reflect the
stock split-up.
- --------------------------------------------------------------------------------
F-19
<PAGE>
================================================================================
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LASER
CORPORATION AND SUBSIDIARIES DECEMBER 31, 1997 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000740726
<NAME> LASER CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 164,479
<SECURITIES> 0
<RECEIVABLES> 1,439,414
<ALLOWANCES> 2,000
<INVENTORY> 1,747,774
<CURRENT-ASSETS> 3,372,722
<PP&E> 2,146,241
<DEPRECIATION> 1,882,836
<TOTAL-ASSETS> 3,768,126
<CURRENT-LIABILITIES> 1,519,478
<BONDS> 0
0
0
<COMMON> 43,353
<OTHER-SE> 2,205,295
<TOTAL-LIABILITY-AND-EQUITY> 3,768,126
<SALES> 5,074,232
<TOTAL-REVENUES> 5,126,308
<CGS> 3,921,740
<TOTAL-COSTS> 5,380,840
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76
<INCOME-PRETAX> (254,608)
<INCOME-TAX> 0
<INCOME-CONTINUING> (254,608)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (254,608)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
