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 JUNE 30, 1998.
<PAGE>
================================================================================
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 June 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
-----------------------------------------------------------------
(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
-----------------------------------------------------------------
(Issuer's telephone number, including area code)
Not Applicable
-----------------------------------------------------------------
(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 -- 865,799 shares as of June 30, 1998
<PAGE>
================================================================================
INDEX
LASER CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
- ------- ---------------------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - June 30, 1998 and December 31, 1997.
Consolidated Statements of Operations - Three months ended June 30,
1998 and 1997; Six months ended June 30, 1998 and 1997
Consolidated Statements of Cash Flows - Six months ended June 30,
1998 and 1997.
Notes to Consolidated Financial Statements - June 30, 1998.
Item 2. Management's Discussion and Analysis.
PART II. OTHER INFORMATION
- -------- -----------------
Item 4. Submission of Matters to a Vote of Security Holders
SIGNATURES
- ----------
Page 2 of 13
<PAGE>
================================================================================
PART I. FINANCIAL INFORMATION
Item 1.
LASER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
ASSETS 1998 1997
Unaudited
----------- -----------
CURRENT ASSETS [C] [C]
Cash and cash equivalents $ 324,211 $ 164,479
Receivables:
Trade receivables 462,759 902,781
Less allowance for doubtful
accounts (10,000) (2,000)
Other --- 2,325
----------- -----------
452,759 903,106
Inventories:
Raw materials 792,648 1,041,832
Work in process 404,061 597,356
Finished Goods 221,650 108,586
----------- -----------
1,418,359 1,747,774
Notes Receivable - current portion --- 534,308
Other current assets 45,740 23,055
----------- -----------
Total Current Assets 2,241,069 3,372,722
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment 1,517,596 1,504,549
Leasehold improvements 641,692 641,692
----------- -----------
2,159,288 2,146,241
Less accumulated depreciation
and amortization (1,944,869) (1,882,836)
----------- -----------
214,419 263,405
OTHER ASSETS 131,999 131,999
----------- -----------
$ 2,587,487 $ 3,768,126
=========== ===========
See accompanying notes to consolidated financial statements
Page 3 of 13
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1998 1997
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
----------- -----------
CURRENT LIABILITIES [C] [C]
Trade accounts payable $ 574,629 $1,063,560
Accrued expenses 168,894 295,918
Accrued warranty expense 115,000 160,000
----------- -----------
Total Current Liabilities 858,523 1,519,478
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock, $.05 par value;
Authorized Shares - 10,000,000
Issued Shares - 878,299 shares at
June 30,1998 and 867,049 shares
at December 31, 1997
Outstanding Shares - 865,799 shares
at June 30, 1998 and 854,549 shares
at December 31, 1997 43,915 43,353
Additional paid-in capital 753,670 731,022
Retained earnings 1,031,379 1,574,273
Treasury stock, at cost (100,000) (100,000)
----------- -----------
Total Stockholders' Equity 1,728,964 2,248,648
----------- -----------
$ 2,587,487 $ 3,768,126
=========== ===========
See accompanying notes to consolidated financial statements
Page 4 of 13
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Six months ended
----------------------- -----------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
REVENUES: [C] [C] [C] [C]
Net sales $ 663,015 $1,440,194 $1,521,407 $2,420,585
Interest and other income 6,959 13,521 14,001 29,300
---------- ---------- ---------- ----------
669,974 1,453,715 1,535,408 2,449,885
COSTS AND EXPENSES:
Cost of products sold 610,821 1,049,013 1,413,658 1,829,016
Selling, general
and administrative 162,798 193,602 374,315 382,687
Research and development 160,717 99,143 269,660 269,384
Royalties 9,497 26,462 20,169 43,171
Interest --- 76 --- 76
---------- ---------- ---------- ----------
943,833 1,368,296 2,077,802 2,524,334
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE
INCOME TAXES (273,859) 85,419 (542,394) (74,449)
INCOME TAX BENEFIT
(EXPENSE) - CURRENT (500) (500) (500) (500)
---------- ---------- ---------- ----------
NET INCOME (LOSS) $ (274,359) $ 84,919 $ (542,894) $ (74,949)
=========== ========== ========== ==========
NET INCOME (LOSS) PER SHARE $ (.32) $ .10 $ ( .63) $ (.09)
========== ========== ========== ==========
Average number of shares of
Common Stock outstanding 866,000 853,000 859,000 853,000
========== ========== ========== ==========
See accompanying notes to consolidated financial statements
Page 5 of 13
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
1998 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
[C] [C]
Net income (loss) $ (542,894) $ (74,949)
Adjustments to reconcile net income (loss) to net
cash provided from (used in) operating activities:
Depreciation and amortization 62,033 43,891
(Increase) decrease in assets:
Net receivables 450,347 (191,778)
Inventories 329,415 (299,018)
Other current assets (22,685) (3,743)
Other assets --- (56,296)
Increase (decrease) in liabilities:
Trade accounts payable and accrued expenses (660,955) 261,029
--------- ----------
Net Cash Used in Operating Activities (384,739) (320,864)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (13,047) (14,729)
Payments received on long term notes 534,308 78,019
---------- ----------
Net Cash Provided from Investing Activities 521,261 63,290
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of employee
stock options 23,210 ---
---------- ----------
Net Cash Provided from Financing Activities 23,210 ---
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 159,732 (257,574)
CASH AND CASH EQUIVALENTS, BEG. OF PERIOD 164,479 555,204
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 324,211 $ 297,630
========== ==========
See accompanying notes to consolidated financial statements
Page 6 of 13
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
June 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 month and the six months
ended June 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.
Page 7 of 13
<PAGE>
================================================================================
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 June 30, 1998.
Net sales for the three months ended June 30, 1998 were $663,015 as
compared to $1,440,194 for the same period in 1997, a decrease of $777,179 or
54%. 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 the Company's three principal
customers decreased in the three month period ended June 30, 1998, as compared
to the same period in 1997. Sales to (i) Company A totaled $239,461 and $447,310
in 1998 and 1997, respectively, (ii) Company B totaled $133,430 and $262,593 in
1998 and 1997 respectively, and (iii) Company C totaled $0 and $318,694 in 1998
and 1997, respectively. Laser product and service sales to all other laser
product and service customers for the three month period ending June 30, 1998
were $290,124 as compared to $411,597 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. 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 Court of Salt Lake
County, State of Utah against Company C.
There were no medical laser system sales for the three months ended
June 30, 1998. This was primarily 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 now
been resolved. The Company plans limited beta site testing in the third quarter
of 1998 and thereafter, assuming successful testing, intends to resume
manufacturing and full sales activities.
Page 8 of 13
<PAGE>
================================================================================
Cost of products sold expenditures decreased from $1,049,013 for the
three month period ending June 30, 1997 to $610,821 for the same period in 1998,
a decrease of $438,192 or 42%. However, as a percentage of Company net sales,
cost of products sold were 92% for the three months ended June 30, 1998 as
compared to 73% for the same period in 1997, an increase of 19%. 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.
Selling, general, and administrative expenses for the three months ended
June 30, 1998 were $162,798 as compared to $193,602 for the same period in 1997,
a decrease of $30,804 or 16%. This was primarily the result of bad debt expense
incurred during the three months ending June 30, 1997 while no bad debt occurred
during the same period of 1998.
Research and development expenditures for the three months ended June
30, 1998 were $160,717 as compared to $99,143 for the same period in 1997, an
increase of $61,574 or 62%. This increase was the result of increased efforts to
develop the dermatological and ophthalmic medical systems and to a lesser
extent, to meet increased engineering needs during the period ending June 30,
1998 of certain of its customers.
Royalty expenses decreased from $26,462 for the three months ended June
30, 1997 to $9,497 for the same period in 1998, a decrease of $16,965 or 64%.
This decrease was the result of the decrease in the volume (physical quantity)
of products sold.
Interest income and other revenue decreased from $13,521 for the three
months ended June 30, 1997 to $6,959 for the same period of 1998, a decrease of
$6,562 or 49%.
The Company recognized a net loss for the three months ended June 30,
1998 of $274,359, or $.32 per share compared to a net profit of $84,919 or $.10
per share for the same period in 1997. This difference was primarily a result of
a decrease in the volume of products sold and to a lesser extent to increased
engineering expenses, percentage increases in the cost of products sold
resulting from the decrease in sales and decreases in interest and other
revenue.
Page 9 of 13
<PAGE>
================================================================================
Six months ended June 30, 1998.
Net sales for the six months ended June 30, 1998 were $1,521,407 as
compared to $2,420,585 for the same period in 1997, a decrease of $899,178 or
37%. This decrease was a result of a decrease in demand for the Company's laser
products and services, totaling $949,178 or 39% which was partially offset by
1998 medical laser system sales totaling $50,000.
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 six month period ended June 30, 1998, as compared to
the same period in 1997. Sales to (i) Company A totaled $568,142 and $753,454 in
1998 and 1997, respectively, (ii) Company B totaled $379,941 and $474,361 in
1998 and 1997 respectively, and (iii) Company C totaled $0 and $497,466 in 1998
and 1997, respectively. Laser product and service sales to all other laser
product and service customers for the six month period ending June 30, 1998 were
$573,324 as compared to $695,304 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. 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.
Medical laser system sales for the six months ended June 30, 1998 were
below Company expectations. This was primarily 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
now been resolved. The Company plans limited beta site testing in the third
quarter of 1998 and thereafter, assuming successful testing, intends to resume
manufacturing and full sales activities.
Cost of products sold expenditures decreased from $1,829,016 for the six
month period ending June 30, 1997 to $1,413,658 for the same period in 1998, a
decrease of $415,358 or 23%. However, as a percentage of Company net sales, cost
of products sold were 93% for the six months ended June 30, 1998 as compared to
76% for the same period in 1997, an increase of 17%. 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
Page 10 of 13
<PAGE>
================================================================================
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 six months ended
June 30, 1998 were $374,315 as compared to $382,687 for the same period in 1997,
a decrease of $8,372 or 2%.
Research and development expenditures for the six months ended June 30,
1998 were $269,660 as compared to $269,384 for the same period in 1997, an
increase of $276 or less than 1%.
Royalty expenses decreased from $43,171 for the six months ended June
30, 1997 to $20,169 for the same period in 1998, a decrease of $23,002 or 53%.
This decrease was the result of the decrease in the volume (physical quantity)
of products sold.
Interest income and other revenue decreased from $29,300 for the six
months ended June 30, 1997 to $14,001 for the same period of 1998, a decrease of
$15,299 or 52%.
The Company recognized a net loss for the six months ended June 30, 1998
of $542,894, or $.63 per share compared to a net loss of $74,949 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 and to a lesser extent to percentage
increases in the cost of products sold resulting from the decrease in sales
and decreases in interest and other revenue.
LIQUIDITY AND CAPITAL RESOURCES
On June 30, 1998, the Company had working capital of $1,382,546 as
compared to $1,853,244 at December 31, 1997, a decrease of $470,698 or 25%. This
decrease was primarily a result of the operating losses incurred by the Company
during the first six months of 1998. Essentially all of the Company's working
capital requirements have been financed by internally generated funds.
Cash equivalents at June 30, 1998 were $324,211 compared to $164,479
on December 31, 1997, an increase of $159,732 or 97%. 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,
and to reduced receivables and inventory balances totaling $779,762. These
factors were partially offset by reduced payable and accrued expense balances
amounting to $660,955 as well as the operating loss incurred during the first
six months of 1998.
Page 11 of 13
<PAGE>
================================================================================
PART II. OTHER INFORMATION
- -------- -----------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held May 28, 1998.
Proxies for the meeting were solicited pursuant to Regulation 14A under the
Securities Exchange Act of 1934. At the meeting, the following matters were
submitted to a vote of the Company's shareholders:
(1) Election of four (4) directors
(2) Ratify and approve the Laser Corporation 1998 Stock Incentive Plan.
(3) Approve selection of Tanner + Co. as the independent certified
public accountants of the Company for the fiscal year ending
December 31, 1998.
The votes cast for or withheld, as well as the number of abstentions
and broker non-votes, as to each matter, including a separate tabulation with
respect to each nominee for office, were as follows:
PROPOSAL 1: ELECTION OF DIRECTORS:
Withhold
For Authority Abstention
----- --------- ----------
[C] [C] [C]
B. Joyce Wickham 775,567 --- 1,250
Rod O. Julander 775,567 --- 1,250
Mark L. Ballard 775,567 --- 1,250
Elizabeth A. Whitsett 775,567 --- 1,250
PROPOSAL 2: RATIFY AND APPROVE THE LASER CORPORATION 1998 STOCK
INCENTIVE PLAN
Broker
For Against Abstention Non-Votes
----- ------- ---------- ---------
[C] [C] [C] [C]
319,021 200,774 3,810 280,240
Proposal 2 failed to get the required votes to pass.
PROPOSAL 3: APPROVE SELECTION OF TANNER + CO.:
For Against Abstention
----- ------- ----------
[C] [C] [C]
582,398 25 194,769
Page 12 of 13
<PAGE>
================================================================================
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: August 14, 1998 /s/ B. Joyce Wickham
----------------------------------
B. Joyce Wickham
President, Chief Executive Officer
Treasurer and Director
Date: August 14, 1998 /s/ Reo K Larsen
----------------------------------
Reo K Larsen
General Accounting Manager
Page 13 of 13
<PAGE>
================================================================================
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LASER
CORPORATION AND SUBSIDIARIES JUNE 30, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 324,211
<SECURITIES> 0
<RECEIVABLES> 462,759
<ALLOWANCES> 10,000
<INVENTORY> 1,418,359
<CURRENT-ASSETS> 2,241,069
<PP&E> 2,159,288
<DEPRECIATION> 1,944,869
<TOTAL-ASSETS> 2,587,487
<CURRENT-LIABILITIES> 858,523
<BONDS> 0
0
0
<COMMON> 43,915
<OTHER-SE> 1,685,049
<TOTAL-LIABILITY-AND-EQUITY> 2,587,487
<SALES> 1,521,407
<TOTAL-REVENUES> 1,535,408
<CGS> 1,413,658
<TOTAL-COSTS> 2,077,802
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (542,894)
<INCOME-TAX> 0
<INCOME-CONTINUING> (542,894)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (542,894)
<EPS-PRIMARY> (.63)
<EPS-DILUTED> (.63)
</TABLE>
