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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 September 30, 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
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(State of Incorporation) (I.R.S. Employer
Identification No.)
1832 South 3850 West
Salt Lake City, UT 84104
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(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.
The number of shares outstanding of Registrant's Common Stock, par
value $0.05 as of November 13, 1998 was 1,387,538 shares.
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LASER CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1998 and
December 31, 1997.
Consolidated Statements of Operations - Three months ended
September 30, 1998 and 1997; Nine months ended September 30,
1998 and 1997.
Consolidated Statements of Cash Flows - Nine months ended
September 30, 1998 and 1997.
Notes to Consolidated Financial Statements - September 30, 1998.
Item 2. Management's Discussion and Analysis.
PART II. OTHER INFORMATION
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Item 2. Changes in Securities
SIGNATURES
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PART I. FINANCIAL INFORMATION
Item 1.
LASER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
ASSETS 1998 1997
Unaudited
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CURRENT ASSETS
Cash and cash equivalents $ 150,985 $ 164,479
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Receivables:
Trade receivables 445,062 902,781
Less allowance for doubtful
accounts (15,653) (2,000)
Other --- 2,325
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429,409 903,106
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Inventories:
Raw materials 626,018 1,041,832
Work in process 470,399 597,356
Finished Goods 253,919 108,586
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1,350,336 1,747,774
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Notes Receivable - current portion --- 534,308
Other current assets 71,146 23,055
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Total Current Assets 2,001,876 3,372,722
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EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment 1,543,146 1,504,549
Leasehold improvements 641,692 641,692
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2,184,838 2,146,241
Less accumulated depreciation
and amortization (1,977,598) (1,882,836)
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207,240 263,405
OTHER ASSETS 131,999 131,999
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$ 2,341,115 $3,768,126
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See accompanying notes to consolidated financial statements
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LASER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1998 1997
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY -------------- ------------
CURRENT LIABILITIES
Trade accounts payable $ 536,158 $1,063,560
Accrued expenses 202,565 295,918
Accrued warranty expense 115,000 160,000
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Total Current Liabilities 853,723 1,519,478
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock, $.05 par value;
Issued & Outstanding - 878,299 shares
at September 30, 1998 and 867,049 shares
at December 31, 1997 43,915 43,353
Additional paid-in capital 753,670 731,022
Retained earnings 789,807 1,574,273
Treasury stock, at cost (100,000) (100,000)
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Total Stockholders' Equity 1,487,392 2,248,648
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$2,341,115 $3,768,126
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See accompanying notes to consolidated financial statements
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LASER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Nine months ended
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September 30, September 30, September 30, September 30,
1998 1997 1998 1997
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REVENUES:
Net sales $ 847,083 $1,261,847 $2,368,491 $3,682,432
Interest and other inc 3,800 12,092 17,800 41,392
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850,883 1,273,939 2,386,291 3,723,824
COSTS AND EXPENSES:
Cost of products sold 721,585 942,430 2,135,243 2,771,446
Selling, general
and administrative 249,919 181,604 624,234 564,291
Research and developmt 106,689 104,103 376,349 373,487
Royalties 14,262 29,561 34,431 72,732
Interest --- --- --- 76
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1,092,455 1,257,698 3,170,257 3,782,032
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INCOME (LOSS) BEFORE
INCOME TAXES (241,572) 16,241 (783,966) (58,208)
INCOME TAX BENEFIT
(EXPENSE) - CURRENT --- --- (500) (500)
------------- ----------- -------------- -----------
NET INCOME (LOSS) $ (241,572) $ 16,241 $ (784,466) $ (58,708)
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NET INCOME (LOSS) PER SHR $ (.28) $ .02 $ ( .90) $ (.09)
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Ave. number of shares of
Common Stock outstanding 878,299 710,000 870,840 682,000
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See accompanying notes to consolidated financial statements
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LASER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED September 30, 1998 AND 1997
(Unaudited)
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (784,466) $ (58,708)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 94,762 67,717
(Increase) decrease in assets:
Net receivables 473,697 (72,137)
Inventories 397,438 (295,741)
Other current assets (48,091) (3,073)
Other assets --- (69,065)
Increase (decrease) in liabilities:
Trade accounts payable and accrued expenses (665,755) 81,936
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Net Cash Used in Operating Activities (532,415) (349,071)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (38,597) (65,244)
Payments received on long term notes 534,308 118,137
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Net Cash Provided from Investing Activities 495,711 52,893
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CASH FLOWS FROM FINANCING ACTIVITIES-
Proceeds from exercise of employee
stock options 23,210 ---
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,494) (298,178)
CASH AND CASH EQUIVALENTS, BEG. OF PERIOD 164,479 555,204
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CASH AND CASH EQUIVALENTS, END OF PERIOD $150,985 $259,026
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See accompanying notes to consolidated financial statements
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LASER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
September 30, 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 and the nine months ended September
30, 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.
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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
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Three months ended September 30, 1998.
Net sales for the three months ended September 30, 1998 were
$847,083 as compared to $1,261,847 for the same period in 1997, a decrease
of $414,764 or 33%. This decrease was a result of a decrease in demand
for the Company's laser products and services.
Historically, the Company has experienced fluctuations in the
demand for its laser product and service sales due in part to (i) changes
in the quantity of Company products held in inventory by its customers,
(ii) changes in demand for customer products which use the Company's
products as a component part, (iii) the competitiveness, cost and customer
use of alternative products, technologies or suppliers, and (iv) other
factors.
Laser product and service sales to two of the Company's three
principal customers decreased in the three month period ended September
30, 1998, as compared to the same period in 1997. Sales to (i) Company
A totaled $266,446 and $265,067 in 1998 and 1997, respectively, (ii)
Company B totaled $204,130 and $270,589 in 1998 and 1997 respectively, and
(iii) Company C totaled $70,966 and $414,446 in 1998 and 1997,
respectively. Laser product and service sales to all other laser product
and service customers for the three month period ending September 30, 1998
were $211,541 as compared to $311,744 for the same period in 1997.
In April 1998 and May 1998, Company A and Company B, respectively,
notified the Company that they had excess inventories of the Company's
products and that future product deliveries would be reduced or delayed.
The Company believes, but can give no assurance, that the inventory
positions of Company A and Company B are only temporary. These reductions
or delays will 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 the unfilled
portion of a purchase order placed with the Company in the fourth quarter
of 1997, totaling approximately $507,000. On May 27, 1998, the Company
filed a complaint in the Third Judicial District Court of Salt Lake
County, State of Utah against Company C. Subsequently, Laser Corporation
and Company C came to an agreement wherein Company C would purchase laser
systems totaling approximately $325,000 scheduled for delivery from August
1998 through March 1999.
Medical laser system sales for the three months ended September
30, 1998 total $94,000. Medical sales were hindered primarily as a result
of the Company's supplier of the diode pumped solid state ("DPSS") laser
to deliver a usable laser. The Company has now received from its supplier
an improved DPSS laser and believes, but can give no assurance, that the
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useability issues have been resolved. The company is continuing its beta
site testing and, assuming successful testing, intends to resume
manufacturing and full sales activities.
Cost of products sold decreased from $942,430 for the three month
period ending September 30, 1997 to $721,585 for the same period in 1998,
a decrease of $220,845 or 23%. However, as a percentage of Company net
sales, cost of products sold were 85% for the three months ended September
30, 1998 as compared to 75% for the same period in 1997, an increase of
10%. This increase in the percent of sales was primarily the result of
the decrease in the volume of products sold which resulted in increases
in labor and overhead cost percentages. Another factor was increased
product material costs which resulted primarily from differences in the
mix of products manufactured in 1998 as compared to the same period in
1997.
Selling, general, and administrative expenses for the three months
ended September 30, 1998 were $249,919 as compared to $181,604 for the
same period in 1997, an increase of $68,315 or 38%. This was primarily the
result of increased marketing activities relating to medical laser systems
and increased legal fees relating to NASDAQ delisting during the three
months ended September 30, 1998 as compared to the same period in 1997.
Research and development expenditures for the three months ended
September 30, 1998 were $106,689 as compared to $104,103 for the same
period in 1997, an increase of $2,586 or 2%. This increase was the result
of the company's continuing focus on medical product development.
Royalty expenses decreased from $29,561 for the three months ended
September 30, 1997 to $14,262 for the same period in 1998, a decrease of
$15,299 or 52%. This decrease was primarily the result of the decrease
in the volume (physical quantity) of products sold.
Interest income and other revenue decreased from $12,092 for the
three months ended September 30, 1997 to $3,800 for the same period of
1998, a decrease of $8,292 or 69%. This decrease was primarily a result
of a decrease in miscellaneous income.
The Company recognized a net loss for the three months ended
September 30, 1998 of $241,572, or $.28 per share compared to a net profit
of $16,241 or $.02 per share for the same period in 1997. This difference
was primarily a result of a decrease in the volume of products sold
causing increases in the labor and overhead portions of the cost of
products sold and to a lesser extent increased selling, general and
administrative expenses and decreased interest and other income.
Nine months ended September 30, 1998.
Net sales for the nine months ended September 30, 1998 were
$2,368,491 as compared to $3,682,432 for the same period in 1997, a
decrease of $1,313,941 or 36%. This decrease was a result of a decrease
in demand for the Company's laser products and services, totaling $1,457,941
or 39% which was partially offset by 1998 medical laser system sales
totaling $144,000.
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Historically, the Company has experienced fluctuations in the
demand for its laser product and service sales due in part to (i) changes
in the quantity of Company products held in inventory by its customers,
(ii) changes in demand for customer products which use the Company's
products as a component part, (iii) the competitiveness, cost and customer
use of alternative products, technologies or suppliers, and (iv) other
factors.
Laser product and service sales to the Company's three principal
customers decreased in the nine month period ended September 30, 1998, as
compared to the same period in 1997. Sales to (i) Company A totaled
$834,608 and $1,018,521 in 1998 and 1997, respectively, (ii) Company B
totaled $584,071 and $744,950 in 1998 and 1997 respectively, and (iii)
Company C totaled $70,966 and $911,120 in 1998 and 1997, respectively.
Laser product and service sales to all other laser product and service
customers for the nine month period ending September 30, 1998 were
$878,865 as compared to $1,007,048 for the same period in 1997.
In April 1998 and May 1998, Company A and Company B, respectively,
notified the Company that they had excess inventories of the Company's
products and that future product deliveries would be reduced or delayed.
The Company believes, but can give no assurance, that the inventory
positions of Company A and Company B are only temporary. However, these
reductions or delays will have an adverse impact on laser product and
service sales totals for 1998. Sales to Company A and Company B in the
nine month period ending September 30, 1998 were consistent, but lower
than in past quarters.
In December 1997, Company C, as previously reported in the Company's
1997 10-KSB, 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. On May 27, 1998, the Company
filed a complaint in the Third Judicial District Court of Salt Lake
County, State of Utah against Company C. Subsequently, Laser Corporation
and Company C came to an agreement wherein Company C would purchase laser
systems totaling approximately $325,000 scheduled for delivery from August
1998 through March 1999.
Medical laser system sales for the nine months ended September
30, 1998 total $144,000. Medical sales were hindered as a result of the
inability of the Company's supplier of the diode pumped solid state
("DPSS") laser to deliver a usable laser. The Company has now received
from its supplier an improved DPSS laser and believes, but can give no
assurance, that the useability issues have been resolved. The Company is
continuing its beta site testing and, assuming successful testing, intends
to resume manufacturing and full sales activities.
Cost of products sold decreased from $2,771,446 for the nine month
period ending September 30, 1997 to $2,135,243 for the same period in
1998, a decrease of $636,203 or 23%. However, as a percentage of Company
net sales, cost of products sold were 90% for the nine months ended
September 30, 1998 as compared to 75% for the same period in 1997, an
increase of 15%. This increase was primarily the result of the decrease
in the volume of products sold which resulted in increases in labor and
overhead cost percentages. Another factor was increased product material
costs which resulted primarily from differences in the mix of products
manufactured in 1998 as compared to the same period in 1997.
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Selling, general, and administrative expenses for the nine months
ended September 30, 1998 were $624,234 as compared to $564,291 for the
same period in 1997, an increase of $59,943 or 11%. This was primarily the
result of increased marketing activities relating to medical laser systems
and increased legal fees relating to NASDAQ delisting during the nine
months ended September 30, 1998 as compared to the same period in 1997.
Research and development expenditures for the nine months ended
September 30, 1998 were $376,349 as compared to $373,487 for the same
period in 1997, an increase of $2,862 or less than 1%.
Royalty expenses decreased from $72,732 for the nine months ended
September 30, 1997 to $34,431 for the same period in 1998, a decrease of
$38,301 or 53%. This decrease was the primarily a result of the decrease
in the volume (physical quantity) of products sold.
Interest income and other revenue decreased from $41,392 for the
nine months ended September 30, 1997 to $17,800 for the same period of
1998, a decrease of $23,592 or 57%. This decrease was primarily a result
of a decrease in miscellaneous income.
The Company recognized a net loss for the nine months ended
September 30, 1998 of $784,466, or $.91 per share compared to a net loss
of $58,208 or $.09 per share for the same period in 1997. This difference
was primarily a result of a decrease in the volume of products sold
causing increases in the labor and overhead portions of the cost of
products sold and to a lesser extent increased selling, general and
administrative expenses and decreased interest and other income.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1998, the Company had working capital of
$1,148,153 as compared to $1,853,244 at December 31, 1997, a decrease of
$705,093 or 38%. This decrease was primarily a result of the operating
losses incurred by the Company during the first nine months of 1998.
Essentially all of the Company's working capital requirements have been
financed by internally generated funds.
Net cash used in operating activities totaled $532,415 for the nine
months ended September 30, 1998. Net cash provided by investing
activities amounted to $495,711 for the nine months ended September 30,
1998. The majority of this was provided by receipts from a long-term
note. Net cash provided by financing activities was $23,210 from
proceeds from the exercise of employee stock options. Cash equivalents
at September 30, 1998 were $150,985 compared to $164,479 on December 31,
1997, a decrease of $13,494 or 8%.
YEAR 2000 ISSUE
The Company is aware of the issues associated with programming codes
in existing computer systems as the millennium (year 2000) approaches.
The Company has completed the upgrading of its design engineering software
and believes, but can give no assurance, that this software is Year 2000
compliant. However, the accounting and material management system is not
compliant. The company has only conducted preliminary research into a
replacement accounting and material management system. The Company plans
to conduct detailed analyses and evaluations of alternative Year 2000
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compliant systems which will replace the current system beginning in
December 1998. The company plans to acquire and implement a new system
within the first six months of 1999. Until the new accounting and
material management system is implemented, however, the Company could be
adversely affected beginning in the year 2000 since many computer
applications could fail.
Beginning in December 1998 the Company will require confirmations
from the Company's primary vendors and customers stating whether their
systems are year 2000 compliant or what plans are being developed to
address the issue. Management has not yet fully assessed the year 2000
compliance expense and related potential effect on the Company's earnings.
PART II. OTHER INFORMATION
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ITEM 2. CHANGES IN SECURITIES
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On October 9, 1998 the Company filed form 8-K with the Securities
and Exchange Commission. The Company issued 521,739 shares of its common
stock for a total offering price of $600,000. No underwriting discount
or commission was paid. The company issued the shares in reliance on
exemptions from registration provided by Rule 506 of Regulation D and
Section 4(a) of the Securities Act of 1933, as amended. The sale was made
to one accredited investor who had a prior existing relationship with the
Company. No other offers were made.
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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: November 13, 1988 /s/ B. Joyce Wickham
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B. Joyce Wickham
President, Chief Executive Officer
Treasurer and Director
Date: November 13, 1988 /s/ Todd G. Loosle
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Todd G. Loosle
Controller
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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: November 13, 1998
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B. Joyce Wickham
President and Chief Executive Officer
Treasurer and Director
Date: November 13, 1998
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Todd G. Loosle
Controller
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