THIS DOCUMENT IS THE SUBMISSION OF FORM 10QSB AND CONTAINS THE QUARTERLY
REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998.
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United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
--- ACT OF 1934
For the quarterly period ended March 31, 1998
or
--- TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-13316
LASER CORPORATION
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(Exact name of small business issuer as specified in its charter)
Utah 87-0395567
------------------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
1832 South 3850 West
Salt Lake City, UT 84104
------------------------------------ ------------------------------------
(Address of principal (Zip Code)
executive office)
(801) 972-1311
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(Issuer's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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
----- -----
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practical date.
Common Stock, .05 Par Value -- 854,549 shares as of March 31, 1998
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INDEX
LASER CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
- ------- -----------------------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - March 31, 1998 and December 31, 1997.
Consolidated Statements of Operations - Three months ended March 31,
1998 and 1997.
Consolidated Statements of Cash Flows - Three months ended March 31,
1998 and 1997.
Notes to Consolidated Financial Statements - March 31, 1998.
Item 2. Management's Discussion and Analysis.
PART II. OTHER INFORMATION
- -------- -----------------
SIGNATURES
- ----------
Page 2 of 11
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PART I. FINANCIAL INFORMATION
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Item 1.
LASER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
ASSETS 1998 1997
Unaudited
----------- -----------
CURRENT ASSETS [C] [C]
Cash and cash equivalents $ 584,706 $ 164,479
----------- -----------
Receivables:
Trade receivables 405,892 902,781
Less allowance for doubtful
accounts (8,063) (2,000)
Other --- 2,325
----------- -----------
397,829 903,106
----------- -----------
Inventories:
Raw materials 949,170 1,041,832
Work in process 662,189 597,356
Finished Goods 14,356 108,586
----------- -----------
1,625,715 1,747,774
----------- -----------
Notes Receivable - current portion --- 534,308
Other current assets 8,492 23,055
----------- -----------
Total Current Assets 2,616,742 3,372,722
----------- -----------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment 1,507,893 1,504,549
Leasehold improvements 641,692 641,692
----------- -----------
2,149,585 2,146,241
Less accumulated depreciation
and amortization (1,913,993) (1,882,836)
----------- -----------
235,592 263,405
----------- -----------
OTHER ASSETS 131,999 131,999
----------- -----------
$ 2,984,333 $ 3,768,126
=========== ===========
See accompanying notes to consolidated financial statements
Page 3 of 11
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LASER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1998 1997
Unaudited
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES [C] [C]
Trade accounts payable $ 649,019 $ 1,063,560
Accrued expenses 185,200 295,918
Accrued warranty expense 170,000 160,000
----------- -----------
Total Current Liabilities 1,004,219 1,519,478
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock, $.05 par value;
Authorized Shares - 10,000,000
Issued Shares - 867,049
Outstanding Shares - 854,549 43,353 43,353
Additional paid-in capital 731,022 731,022
Retained earnings 1,305,739 1,574,273
Treasury stock, at cost (100,000) (100,000)
----------- -----------
Total Stockholders' Equity 1,980,114 2,248,648
----------- -----------
$ 2,984,333 $ 3,768,126
=========== ===========
See accompanying notes to consolidated financial statements
Page 4 of 11
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LASER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
---------------------------
March 31, March 31,
1998 1997
----------- -----------
REVENUES: [C] [C]
Net sales $ 858,393 $ 980,391
Interest and other income 7,041 15,779
----------- -----------
865,434 996,170
----------- -----------
COSTS AND EXPENSES:
Cost of products sold 802,838 780,002
Selling, general and administrative 211,516 189,085
Research and development 108,942 170,242
Royalties 10,672 16,709
Interest --- ---
----------- -----------
1,133,968 1,156,038
----------- -----------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (268,534) (159,868)
INCOME TAX BENEFIT (EXPENSE) - CURRENT --- ---
----------- -----------
NET LOSS $ (268,534) $ (159,868)
=========== ===========
NET LOSS PER SHARE $ ( .31) $ ( .18)
=========== ===========
Average number of shares of
Common Stock outstanding 867,000 867,000
=========== ===========
See accompanying notes to consolidated financial statements
Page 5 of 11
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LASER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
[C] [C]
Net loss $ (268,534) $ (159,868)
Adjustments to reconcile net income (loss)
to net cash provided from (used in)
operating activities:
Depreciation and amortization 31,157 22,064
(Increase) decrease in assets:
Receivables 505,277 91,421
Inventories 122,059 (170,539)
Other current assets 14,563 4,182
Increase (decrease) in liabilities:
Trade accounts payable and
accrued expenses (515,259) (179,618)
----------- -----------
Net Cash Used in Operating Activities (110,737) (392,358)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,344) (6,876)
Payments received on long term notes 534,308 38,645
----------- -----------
Net Cash Provided from Investing Activities 530,964 31,769
CASH FLOWS FROM FINANCING ACTIVITIES - --- ---
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 420,227 (360,589)
CASH AND CASH EQUIVALENTS, BEG. OF PERIOD 164,479 555,204
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 584,706 $ 194,615
=========== ===========
See accompanying notes to consolidated financial statements
Page 6 of 11
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LASER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 1998
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-QSB and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three months ended March 31, 1998
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended December 31, 1997
included in the Company's Annual Report on Form 10-KSB (file number 0-13316).
NOTE B - RECLASSIFICATIONS
Certain 1997 financial statement amounts have been reclassified to
conform to 1998 presentations. These amounts were not material
reclassifications.
Page 7 of 11
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ITEM 2. 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
- ---------------------
Three months ended March 31, 1998.
Net sales for the three months ended March 31, 1998 were $858,393 as
compared to $980,391 for the same period in 1997, a decrease of $121,998 or 12%.
This decrease was primarily a result of a decrease in laser product and service
sales totaling $171,998 or 18% which was partially offset by medical laser
system sales for the three months ended March 31, 1998 totaling $50,000.
Customer orders are based in part on the end-user demand for customer
products which use or incorporate the Company's products and services. For many
years the Company has experienced fluctuations in its laser sales and service
levels primarily due to (i) changes in the quantity of Company's products held
in inventory by its original equipment manufacturers ("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. During the current period ending March 31, 1998, the
Company experienced such recurring fluctuations in its sales to three of its
principal customers. Net sales to (i) Company A totaled $328,681 and $306,144
for the three months ended March 31, 1998 and 1997, respectively, (ii) Company B
totaled $246,511 and $211,768 for the three months ended March 31, 1998 and
1997, respectively, and (iii) Company C totaled $0 and $178,772 for the three
months ended March 31, 1998 and 1997, respectively. Net sales to all other
customers were $233,201 and $283,707 respectively, for the three months ended
March 31, 1998 and 1997. In April 1998 and May 1998, Companies A and B,
respectively, notified the Company that they currently have excess inventories
on hand and therefore have temporarily delayed or reduced deliveries. The
Company believes, but can give no assurance, that their current inventory
positions are only temporary. The Company has experienced a reduction in
product and service demand from Company A and B which will in turn have an
adverse impact on laser product and service sales totals for 1998. In December
1997, Company C, as previously reported in the Company's 1997 10-KSB, notified
the Company of its desire to cancel, due to excessive inventory levels, 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 regarding its request. As
a result of such recurring fluctuations, the Company cannot predict or guarantee
that total laser product and service sales will remain at their current levels,
or increase, or decrease, materially or otherwise.
Page 8 of 11
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Medical laser system sales for the three months ended March 31, 1998
were $50,000, which was significantly below Company expectations. These less
than expected medical laser system sales were primarily a result of the
inability of the Company's supplier of the diode pumped solid state laser to
deliver a usable laser. This solid state laser is used as a component part of
the Company's medical laser system. The Company is currently working with its
supplier to resolve these usability issues. The Company believes, but can give
no assurance, that such usability issues will be satisfactorily resolved.
Cost of products sold as a percent of Company net sales were 94% for the
three months ended March 31, 1998 as compared to 80% for the same period in
1997, an increase of 14%. This increase was the result of increases in labor
and overhead costs percentages due primarily to the decrease in net sales and
to a lesser extent increased material costs which resulted primarily from period
to period "product and service sales" mix fluctuations.
Selling, general, and administrative expenses for the three months ended
March 31, 1998 were $211,516 or 25% of net sales as compared to $189,085, or 19%
of net sales for the same period in 1997, an increase of $22,431 or 12%. This
increase was primarily the result of adjustments made to bad debt expenses in
1997, and to medical laser selling, general and administrative costs.
Research and development expenditures for the three months ended March
31, 1998 were $108,942 as compared to $170,242 for the same period in 1997, a
decrease of $61,300 or 36%. 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 decreased from $16,709 for the three months ended
March 1997 to $10,672 for the same period in 1998, a decrease of $6,037 or 36%.
This decrease was the result of the decrease in net sales.
Interest income and other revenue decreased from $15,779 for the three
months ended March 31, 1997 to $7,041 for the same period of 1998, a decrease
of $8,738 or 55%.
The Company recognized a net loss for the three months ended March 31,
1998 of $268,534, or $.31 per share compared to a net loss for the same period
in 1997 of $159,868 or $.18 per share. This increase was primarily a result of
the decrease in net sales and to a lesser extent to increases in product costs
and selling, general and administrative costs, decreases in interest and other
revenue, and to the continuing start-up costs relating to the introduction of
the Company's medical laser systems. These factors were partially offset by
decreases in research and development expenditures and royalty expenses.
Page 9 of 11
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LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
On March 31, 1998, the Company had working capital of $1,612,523 as
compared to $1,853,244 at December 31, 1997, a decrease of $240,721 or 13%.
This decrease was primarily a result of the operating losses incurred by the
Company during the first quarter of 1998. Essentially all of the Company's
working capital requirements have been financed by internally generated funds.
Cash equivalents at March 31, 1998 were $584,706 compared to $164,479
on December 31, 1997, an increase of $420,227 or 255%. This increase in the
cash equivalent balance was primarily the result of the receipt of payments
totaling $534,308 on notes receivable which became due during the first quarter
of 1998.
PART II. OTHER INFORMATION
- -------- -----------------
No material matter occurred during the quarter ended March 31, 1998
that requires disclosure in Part II of the Quarterly Report on Form 10-QSB.
Page 10 of 11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LASER CORPORATION
Date: May 14, 1998 /s/ B. Joyce Wickham
-------------------- ----------------------------------
B. Joyce Wickham
President, Chief Executive Officer
Treasurer and Director
Date: May 14, 1998 /s/ Reo K Larsen
-------------------- ----------------------------------
Reo K Larsen
General Accounting Manager
Page 11 of 11
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LASER
CORPORATION AND SUBSIDIARIES MARCH 31, 1998 FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000740726
<NAME> LASER CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 584,706
<SECURITIES> 0
<RECEIVABLES> 405,892
<ALLOWANCES> 8,063
<INVENTORY> 1,625,715
<CURRENT-ASSETS> 2,616,742
<PP&E> 2,149,585
<DEPRECIATION> 1,913,993
<TOTAL-ASSETS> 2,984,333
<CURRENT-LIABILITIES> 1,004,219
<BONDS> 0
0
0
<COMMON> 43,353
<OTHER-SE> 1,936,761
<TOTAL-LIABILITY-AND-EQUITY> 2,984,333
<SALES> 858,393
<TOTAL-REVENUES> 865,434
<CGS> 802,838
<TOTAL-COSTS> 1,133,968
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (268,534)
<INCOME-TAX> 0
<INCOME-CONTINUING> (268,534)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (268,534)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> (.31)
</TABLE>
