THIS DOCUMENT IS THE SUBMISSION OF FORM 10KSB AND CONTAINS THE ANNUAL
REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED DECEMBER 31, 1999.
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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, 1999
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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)
2417 South 3850 West, Salt Lake City, Utah 84120
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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. $ 3,860,576
------------------------------
As of March 16, 2000, 1,580,038 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 $8.00 per share of these shares on March 16, 2000)
was approximately $5,747,248.
Documents Incorporated by Reference:
Proxy Statement for the May 25, 2000 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, 1999. 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 1999, 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. (doing business as A.R.C. Laser Corporation, and
hereafter in this document refer to as "ARC") and American Laser Software, Inc.
("ALS") to develop and market retail medical products. ARC designs and markets
medical laser systems for the dermatological and ophthalmic marketplace. ALS
has been and continued to be inactive during 1999.
The Company's 1999 Annual Meeting of Stockholders was held on May 25, 1999.
At that meeting, the proposed slate of Directors was elected and the Laser
Corporation 1999 Stock Incentive plan was ratified and approved.
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. Thus,
the active medium, operational mode and power determine the particular tasks
lasers are best able to perform.
The Company principally produces laser tubes filled with argon, krypton/
argon or krypton gas for its OEM customers. 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.
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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 for dermatological procedures for the
treatment of vascular and pigmented lesions, and in ophthalmology for use in
retinal and macular photocoagulation and trabeculoplasty.
Company procedures include performing 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. Two 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. At December 31, 1999, the reserve for anticipated warranty expenses for
Company products which had been sold as of that date was $150,000, 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.
Sales and Marketing
-------------------
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 both OEM and medical laser products to over
100 customers worldwide. For the year ended December 31, 1999, two companies
accounted for more than 10% of the Company's sales. Company A accounted for 44%
and Company B accounted for 15% of the Company's 1999 sales. For the year ended
December 31, 1998, two companies accounted for over 10% of the Company's sales.
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Company A and C, accounted for 37%, and 23% respectively, of the 1998 sales.
OEM 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 OEM 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 orders for its laser products and
medical laser systems as of December 31, 1999 was approximately $597,200, as
compared to approximately $807,637 of new product and service orders on December
31, 1998. Based on past experience, the Company anticipates that substantially
all of its unfilled orders for laser products will be delivered in 2000.
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 OEM laser
products and sub- assemblies may continue to 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
45 days after invoice.
Medical Laser Systems
---------------------
During the past year management has continued to expanded the Company's
business into retail medical laser systems for use in ophthalmology and
dermatology. For the year ended December 31, 1999, medical laser system sales
accounted for 25% of the Company's sales as compared to 5% of 1998 sales. The
Company has entered into an agreement with A.R.C. AG, Switzerland, a company
owned and controlled by Reinhardt Thyzel, a director and the majority
shareholder of the Company, pursuant to which the Company and A.R.C. AG will
distribute the products of the other, including the Dodick PhotoLysis System for
removal of cataracts. The Company has submitted a 510(k) premarket notification
to the Food and Drug Administration ("FDA") for clearance to sell the Dodick
Laser PhotoLysis System in the United States. In addition to the use of
advertising in trade publications and attendance at medical conventions, the
Company is now using sales agents, distributors and strategic partners to market
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and sell its medical laser systems. The Company continues the process of
identifying additional qualified sales agents, distributors and strategic
partners in the United States and internationally for its medical laser systems.
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, in 1999 sold a majority of its OEM and medical products to
customers in Europe and other foreign countries. The Company's largest
customers for both its OEM and medical laser products in 1999 was foreign.
Foreign sales to these customers, accounted for approximately 44% and 15%,
respectively, of the Company's sales during 1999. Total sales to all foreign
customers accounted for approximately 71% of the Company's total sales. (See
Note 13 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. Currently, certain components utilized in
the manufacture of the products are available from a limited number of suppliers
or a sole supplier. The Company has experienced problems in obtaining components
required in its OEM laser products due to the bankruptcy of its then sole
supplier for such components. The Company has sourced certain but not all of
such components from an alternative supplier. 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 its suppliers.
The Company relies upon affiliated and unaffiliated suppliers for
components and subassemblies used in the fabrication of its medical laser
systems and for the complete medical systems distributed by the Company. For
many components, subassemblies and medical systems, the Company is dependent
upon on one particular supplier. The Company believes that its operations could
be adversely affected in the event that it is unable to obtain components,
subassemblies and medical systems on a timely basis from these suppliers.
The Company maintains an inventory of laser components and medical laser
components, subassemblies and systems. The Company generally manufactures its
products in response to customer orders.
The Company's raw material inventory at December 31, 1999 was $571,244,
with an allowance of obsolete inventory of $300,000, work in process inventory
was $253,742, and $224,425 in finished goods inventory.
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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 OEM 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
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.
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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.
The Company's medical laser systems, with applications in the fields of
dermatology and ophthalmology, 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 clearance by the FDA prior to domestic 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 premarket 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.
The Company submitted the required Section 510(k) premarket notifications
to the FDA and the CDRH seeking classification of both its argon gas, krypton
gas and diode pumped solid state laser systems for ophthalmic and dermatological
applications and received its 510(k) clearances to market these systems. In
September 1999, a 510(k) premarket notification filing was submitted to the FDA
seeking clearance to market the Dodick Laser PhotoLysis System in the United
States. Since that time the FDA has requested additional information which was
provided. The Company currently is awaiting notice of clearance to market the
PhotoLysis System.
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
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& ISO/DIS 13485). The Company's facilities in the United States are subject to
periodic inspections by the FDA.
Certain of the Company's medical products manufactured and sold in foreign
countries are required to comply with the European Community's Medical Device
Directive ("MDD") (93/42/EEC). In addition, certain non-medical lasers sold in
foreign countries are required to comply with the European Community's
Electromagnetic Compatibility Directive (89/336/EEC) and Low Voltage Directive
(72/23/EEC). 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 have its products
manufactured 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 9001, 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 1999, the Company maintained its narrowed
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 booked expenses of $463,805 in 1999 and $583,602 in 1998 on
research and development activities.
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.
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Employees
---------
On December 31, 1999, the Company had 27 full-time equivalent employees: 3
in general and administrative services, 16 in manufacturing and support
services, 5 in Engineering, and 3 in management and marketing.
ITEM 2. DESCRIPTION OF PROPERTIES
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The Company's administrative offices and assembly facilities for its laser
products are located in a building of approximately 32,300 square feet located
in Salt Lake City, Utah. The Company has a ten year lease, commencing May 1,
1999, with an unrelated party. The annual base rent for this facility is
$239,421. Prior to May 1, 1999 the Company leased its facility from the now
deceased Dr. William H. McMahan, former significant shareholder, Chairman,
President and Chief Executive Officer of the Company.
The Company believes that these 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 was historically, through October 7, 1998,
traded on the NASDAQ Small-Cap Market tier of the NASDAQ Stock Market under the
symbol LSER. Effective with the close of business on October 7, 1998, the
Company's common stock was delisted from the Nasdaq Small-cap Market for failure
to meet the minimum net tangible asset requirement. The Company's common stock
is now traded on the OTC Bulletin Board 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
---- ---
1999 First quarter $ 1.875 $ 1.25
---- Second quarter 3.125 1.375
Third quarter 5.375 2.125
Fourth quarter 4.9375 3.875
1998 First quarter $ 4.60 $ 2.10
---- Second quarter 3.50 1.00
Third quarter 2.50 1.00
Fourth quarter 1.6875 1.0625
As of December 31, 1999 there were approximately 520 beneficial holders of
the Company's Common Stock.
The Company did not pay cash dividends on its common stock in 1999 and it
does not anticipate paying any cash dividends thereon in the foreseeable future.
On October 9, 1998, the Company issued 521,739 shares of its common stock
to Reinhardt Thyzel for the purchase price of $600,000. No underwriters were
engaged to sell the stock and no underwriting discounts or commissions were
paid. The securities were offered pursuant to an exception from registration
under Section 4(2) of the Securities Act of 1933. Mr. Thyzel is a sophisticated
investor who has dealt with the Company for several years. He is also a
resident of Switzerland. In September, 1999, the Company issued 170,000 shares
of its common stock to six European investors for the total aggregate purchase
price of $272,000. In October, 1999, the Company issued 10,000 shares of its
common stock to one investor for the purchase price of $16,000. No underwriters
were engaged to sell the stock and no underwriting discounts or commissions were
paid. The securities were offered pursuant to an exception from registration
under Section 4(2) of the Securities Act of 1933. The proceeds of all the
offerings were used for working capital purposes.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
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This report contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of management as well as
assumptions made by, and information currently available to management. Such
statements reflect the current view of the Company respecting future events and
are subject to certain risks, uncertainties, and assumptions, including the
risks and uncertainties noted throughout the document. Although the Company has
attempted to identify important factors that could cause the actual results to
differ materially, there may be other factors that cause the forward-looking
statements not to come true as anticipated, believed, projected, expected, or
intended. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may differ
materially from those described herein as anticipated, believed, projected,
estimated, expected, or intended.
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, 1999, were $3,798,413 as compared
to $3,310,719 for the same period in 1998, an increase of $487,694 or 15%. This
increase was primarily a result of increases in medical laser system sales and
to increases in laser product and service sales to the Company's largest OEM
customer which were partially offset by decreases in laser product and service
sales to all other OEM customers. Medical laser system sales for the year ended
December 31, 1999, were $960,084 as compared to $176,000 for the same period in
1998, an increase of $784,084 or 446%. Laser product and service sales to the
Company's OEM largest customer for the year ended December 31, 1999, were
$1,658,780 compared to $1,230,521 for the same period in 1998, an increase of
$428,259 or 35%. Laser product and service sales to the Company's other OEM
customers for the year ended December 31, 1999, were $1,179,549 as compared to
$1,904,198 for the same period in 1998, a decrease of $724,649 or 38%.
Cost of products sold for the year ended December 31, 1999 were $3,272,031
as compared to $3,142,826 for the same period in 1998, an increase of $129,205
or 4%, which was primarily due to increased sales. As a percentage of net
sales, cost of products sold was 86% for the year ended December 31, 1999 as
compared to 95% for the same period in 1998. This decrease was due to decreases
in material, labor and factory overhead costs which were the result of the
Company's cost reduction and material recycling efforts.
Selling, general, and administrative expenses for the year ended December
31, 1999 were $1,121,119 as compared to $993,226 for the same period in 1998, an
increase of $127,893 or 13%. This increase was primarily a result of increases
in medical laser system marketing and sales activities and to medical laser
system sales commissions which were partially offset by decreases in other
general and administrative cost and expenses.
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Research and development expenditures for the year ended December 31, 1999
were $463,805 as compared to $583,602 for the same period in 1998, a decrease of
$119,797 or 21%. This decrease was primarily a result of the Company narrowing
its product development focus to that of medical laser systems and to the
product needs of certain of its OEM laser product customers.
Royalty expenses for the year ended December 31, 1999 were $40,297 as
compared to $50,814 for the same period in 1998, a decrease of $10,517 or 21%.
Interest and other revenue for the year ended December 31, 1999 were
$62,163 as compared to $25,386 for the same period in 1998, an increase of
$36,777 or 145%.
The Company recognized a net loss for the year ended December 31, 1999 of
$1,161,505 or $.79 per share as compared to a net loss of $1,710,252 or $1.57
per share for the same period in 1998, a decrease in net loss of $548,747 or
$.78 per share. This improvement was primarily a result of an increase in sales
and a decrease in the cost of products sold, general and administrative
costs and expenses and research and development expenditures which was partially
offset by increases in medical laser system marketing and selling costs and
sales commissions.
On December 31, 1999 the Company had net operating loss carryforwards for
tax purposes of approximately $6,086,000 available to offset future taxable
income. The loss carryforwards will begin to expire in the year 2004.
Liquidity and Capital Resources
-------------------------------
On December 31, 1999, the Company had working capital of $3,948 as compared
to $818,603 at December 31, 1998, a decrease of $814,655 or 99.5%. Cash
equivalents at December 31, 1999 were $113,337 as compared to $531,734 on
December 31, 1998, a decrease of $418,397, or 79%.
The decrease in working capital and cash equivalents were primarily the
result of the net loss experienced during 1999, which were partially offset by
cash proceeds from sales of the Company's common stock. Currently, the Company
is continuing to explore other sources for additional capital but has not
entered into any agreements for additional sources of borrowing or capital other
than that which has already been received through the sale of common stock.
In addition to the operating lease described in Note 7, the Company entered
into two equipment lease agreements. One lease has a term of five years and the
other lease has a three year term. Total commitment for the two leases
including interest at December 31, 1999, was $54,484. The Company has no other
material commitments for capital expenditures.
Year 2000 Issue
---------------
The Company experienced no problems with programming codes in existing
computer systems during the year 2000 change over. Prior to December 31, 1999
the Company had implemented, as planned, a new accounting and material
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management system that was year 2000 compliant. The Company will, however,
continue to monitor its systems for any unexpected problems that may arise.
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, 1999, 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, 1999, 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, 1999, 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, 1999, 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 with amendments
4 (a) - *Specimen Stock Certificate
(b) - *Incentive Stock Option Plan
(c) - *Non-Statutory Stock Option Plan
(d) - *1999 Stock Incentive Plan
10(a) - *Lease Agreement between NP#2, LLC and Registrant
(b) - *Stock Purchase Agreement dated as of August 5, 1998
between Reinhardt Thyzel 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 29, 2000
-------------------------------------- ------------------------------
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 29, 2000
- ---------------------------------------- -------------------------
B. Joyce Wickham
President and Chief Executive Officer
Treasurer and Director
/s/ Mark L. Ballard March 29, 2000
- ---------------------------------------- -------------------------
Mark L. Ballard
Vice President and Director
/s/ Rod O. Julander March 29, 2000
- ---------------------------------------- -------------------------
Rod O. Julander
Secretary and Director
/s/ Reinhardt Thyzel March 29, 2000
- ---------------------------------------- -------------------------
Reinhardt Thyzel
Director
/s/ Reo K. Larsen March 29, 2000
- ---------------------------------------- -------------------------
Reo K. Larsen
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
<PAGE>
================================================================================
AMENDMENT OF THE BYLAWS
OF LASER CORPORATION
Article III, Section 2, Number, Tenure and Qualifications.
- ----------------------------------------------------------
The number of Directors of the Corporation shall be four (4). The number
of Directors may be varied by amending these Bylaws. Each Director shall hold
office until the next annual meeting of shareholders and until his successor
shall have been elected and qualified. Directors need not be residents of the
state of incorporation or shareholders of the Corporation.
The above amendment to the Bylaws of Laser Corporation was duly adopted by
the Board of Directors on May 25, 1999.
/s/ Rod O. Julander
---------------------------------
Rod O. Julander
Secretary
<PAGE>
================================================================================
LASER CORPORATION
Financial Statements
December 31, 1999 and 1998
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Page
----
Independent auditors' report F-2
Consolidated balance sheet F-3
Consolidated statement of operations F-4
Consolidated statement of stockholders'
equity F-5
Consolidated statement of cash flows F-6
Notes to consolidated financial statements F-8
F-1
<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, 1999 and 1998, 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, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 2, the
Company has incurred operating losses and has been unable to generate cash flows
from operations for three consecutive years, which raises substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
TANNER + CO.
Salt Lake City, Utah
March 7, 2000
F-2
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
December 31,
- --------------------------------------------------------------------------------
1999 1998
-----------------------------
Assets
------
Current assets:
Cash and cash equivalents $ 113,337 $ 531,734
Receivables, net 635,417 319,091
Inventories 749,411 967,722
Other current assets 16,887 72,733
---------------------------
Total current assets 1,515,052 1,891,280
Equipment and leasehold improvements, net 284,771 212,801
Other assets 43,068 130,203
---------------------------
$ 1,842,891 $ 2,234,284
===========================
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 1,058,042 $ 756,078
Accrued expenses 291,689 201,599
Accrued warranty expense 150,000 115,000
Current portion capital leases 11,373 -
--------------------------
Total current liabilities 1,511,104 1,072,677
Long-term capital lease 32,050 -
Commitments and contingencies - -
Stockholders' equity:
Common stock, $.05 par value,
10,000,000 shares authorized;
1,590,038 and 1,400,038 shares
issued, respectively 79,503 70,003
Additional paid-in capital 1,617,718 1,327,583
Retained deficit (1,297,484) (135,979)
Treasury stock, at cost (100,000) (100,000)
--------------------------
Total stockholders' equity 299,737 1,161,607
--------------------------
$ 1,842,891 $ 2,234,284
==========================
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-3
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
Years Ended December 31,
- --------------------------------------------------------------------------------
1999 1998
-----------------------------
Revenues:
Net sales $ 3,798,413 $ 3,310,719
Interest and other income 62,163 25,386
----------------------------
3,860,576 3,336,105
----------------------------
Cost and expenses:
Cost of products sold 3,272,031 3,142,826
Selling, general and administrative 1,121,119 993,226
Research and development 463,805 583,602
Write down of investment 119,003 -
Royalties 40,297 50,814
Interest 5,826 -
Write off of inventory - 275,889
----------------------------
5,022,081 5,046,357
----------------------------
Loss before income taxes (1,161,505) (1,710,252)
Benefit for income taxes - -
----------------------------
Net loss $(1,161,505) $(1,710,252)
Loss per share - basic and diluted $ (.79) $ (1.57)
=============================
Weighted average shares - basic and diluted 1,467,000 1,087,000
=============================
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-4
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Years Ended December 31, 1999 and 1998
- --------------------------------------------------------------------------------
Common Stock Additional Retained Treasury Stock
--------------- Paid-In Earnings ----------------
Shares Amount Capital (Deficit) Shares Amount Total
----------------------------------------------------------------------
Balance at
January 1,
1998 867,049 $43,353 $731,022 $1,574,273 12,500 $(100,000) $2,248,648
Issuance
of common
stock for
cash 532,989 26,650 596,561 - - - 623,211
Net loss - - - (1,710,252) - - (1,710,252)
-----------------------------------------------------------------------
Balance at,
December
31,1998 1,400,038 70,003 1,327,583 (135,979 12,500 (100,000) 1,161,607
Issuance
of common
stock for
cash 180,000 9,000 279,000 - - - 288,000
Exercise
of stock
options 10,000 500 11,135 - - - 11,635
Net loss - - - (1,161,505) - - (1,161,505)
----------------------------------------------------------------------
Balance at,
December
31, 1999 1,590,038 $79,503 $1,617,718 $(1,297,484) 12,500 $(100,000) $299,737
======================================================================
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-5
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Years Ended December 31,
- --------------------------------------------------------------------------------
1999 1998
------------------------------
Cash flows from operating activities:
Net loss $(1,161,505) $(1,710,252)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 124,419 138,027
Provision for losses on
accounts receivable - 23,000
Write down of investment 119,003 -
(Increase) decrease in:
Receivables (316,326) 561,015
Inventories 218,311 780,052
Other assets 23,978 (47,882)
Increase (decrease) in:
Accounts payable and accrued expenses 392,054 (401,801)
Accrued warranty expense 35,000 (45,000)
------------------------------
Net cash used in
operating activities (565,066) (702,841)
------------------------------
Cash flows from investing activities:
Purchase of property and equipment (142,820) (87,423)
Proceeds from notes receivable - 534,308
------------------------------
Net cash provided by
investing activities (142,820) 446,885
------------------------------
Cash flows from financing activities:
Payments on capital leases (10,146) -
Proceeds from issuance of common stock 299,635 623,211
------------------------------
Net cash provided by
financing activities 289,489 623,211
------------------------------
Increase (decrease) in cash
and cash equivalents (418,397) 367,255
Cash and cash equivalents,
beginning of year 531,734 164,479
------------------------------
Cash and cash equivalents,
end of year $ 113,337 $ 531,734
==============================
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-6
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Continued
- --------------------------------------------------------------------------------
Supplemental disclosure of noncash transactions:
During the year ended December 31, 1999 the Company purchased $53,569 of
equipment with a capital lease.
Supplemental disclosures of cash flow information:
Years Ended
December 31,
---------------------------
1999 1998
---------------------------
Interest paid $ 5,826 $ -
===========================
Income taxes paid $ - $ -
===========================
- --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-7
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
- --------------------------------------------------------------------------------
1. Organization Organization and Principles of Consolidation
and --------------------------------------------
Summary of The consolidated financial statements include the accounts of
Significant Laser Corporation (Laser) and its wholly-owned subsidiaries,
Accounting American Laser Corporation (American Laser), American Laser
Policies Software, Inc. (ALS), and A.R.C. Laser Corporation (ARC) (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 statement 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-8
<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 shares
Accounting consist of the Company's stock options and are considered to
Policies be antidilutive 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.
- --------------------------------------------------------------------------------
F-9
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
1. Organization Use of Estimates in the Preparation of Financial Statements
and -----------------------------------------------------------
Summary of The preparation of financial statements in conformity with
Significant generally accepted accounting principles requires management
Accounting to make estimates and assumptions that affect the reported
Policies amounts of assets and liabilities and disclosure of contingent
Continued 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.
2. Going The accompanying financial statements have been prepared on a
Concern going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal
course of business. The Company has incurred substantial
losses from operations during the past several years and has
been unable to generate cash flows from operations. These
factors among others may indicate that the Company will be
unable to continue as a going concern for a reasonable period
of time. The Company's continuation as a going concern is
dependent on its ability to generate sufficient income and
cash flow to meet its obligations on a timely basis, to obtain
additional financing as may be required, and ultimately to
attain profitability. The Company is active in the
development of new products that will increase the Company's
versatility in the laser products market and is putting
together a plan to obtain additional capital and financing.
There is no assurance that the Company will be successful.
- --------------------------------------------------------------------------------
F-10
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
3. Detail of December 31,
Certain ------------------------------
Balance 1999 1998
Sheet ------------------------------
Accounts Receivables:
Trade receivables $ 660,417 $ 344,091
Less allowance for
doubtful accounts (25,000) (25,000)
------------------------------
$ 635,417 $ 319,091
==============================
Inventories:
Raw materials $ 571,244 $ 674,851
Work-in-process 253,742 451,356
Finished goods 224,425 52,931
Reserve for obsolescence (300,000) (211,416)
---------------------------
$ 749,411 $ 967,722
===========================
4. Equipment Equipment and leasehold improvements consist of the following:
and
Leasehold December 31,
Improvements --------------------------
1999 1998
--------------------------
Equipment $ 1,701,008 $ 1,591,972
Leasehold improvements 87,353 641,692
--------------------------
1,788,361 2,233,664
Less accumulated depreciation
and amortization (1,503,590) (2,020,863)
--------------------------
$ 284,771 $ 212,801
==========================
- --------------------------------------------------------------------------------
F-11
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
5. Capital The Company leased certain equipment under noncancellable
Leases capital leases during 1999. Assets held under capital
leases were included in and equipment during 1999 as follows
(in thousands):
Office equipment $ 53,569
Accumulated amortization (3,774)
-----------
$ 49,795
===========
Amortization expense on capital leases for the years ended
December 31, 1999 and 1998 were $3,774 and $0, respectively.
Future payments under the capital leases are as follows:
Year
----
2000 $ 16,872
2001 16,872
2002 12,876
2003 6,740
2004 1,124
-----------
Total payments 54,484
Less: amount of interest (11,061)
-----------
Net capital lease principal 43,423
Less: current maturities (11,373)
-----------
Total long-term $32,050
===========
- --------------------------------------------------------------------------------
F-12
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
6. Income The benefit for income taxes differs from the amount computed
Taxes at federal statutory rates as follows:
Years Ended
December 31,
--------------------------
1999 1998
--------------------------
Income tax benefit at
statutory rates $ 395,000 $ 581,000
Change in valuation allowance (395,000) (581,000)
--------------------------
$ - $ -
==========================
Deferred tax assets (liabilities) consist of the following:
December 31,
--------------------------
1999 1998
--------------------------
Net operating loss
carryforwards $ 2,070,000 $ 1,675,000
General business and
AMT credit carryforwards 146,000 176,000
Depreciation (8,000) (8,000)
Inventory reserve 102,000 72,000
Warranty reserve 39,000 39,000
Bad debt reserve 9,000 9,000
---------------------------
2,358,000 1,963,000
Valuation allowance (2,358,000) (1,963,000)
----------------------------
$ - $ -
============================
- --------------------------------------------------------------------------------
F-13
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
6. Income The Company has net operating loss carryforwards for tax
Taxes purposes of approximately $6,086,000 at December 31, 1999
Continued 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.
7. Commitments Operating Leases
and ----------------
Contingencies The Company's administrative offices and primary assembly
facilities for its laser products are located in a 32,300
square foot building in Salt Lake City, Utah. The Company
leases the building pursuant to a lease agreement which
terminates April 2009. Under operating leases, the Company
recognized annual rent expense of approximately $239,000 and
$237,000 in 1999 and 1998, respectively.
- --------------------------------------------------------------------------------
F-14
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
7. Commitments Future minimum payments under the noncancellable operating
and leases are as follows:
Contingencies
Continued Year Amount
---- ------------
2000 $ 239,000
2001 239,000
2002 253,000
2003 257,000
2004 257,000
Thereafter 1,193,000
------------
$ 2,438,000
============
Investment Agreement
--------------------
The Company entered into an 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, 1998, the Company had
performed cumulative services of $129,003, in exchange for
common stock of the investee which is included in other assets
at December 31, 1998. During 1999, management of the Company
determined that based upon the operations of the investment
entity the Company's investment was impaired. The Company
wrote down its carrying value in the investment to $10,000
from $129,003 effective December 31, 1999.
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 $40,297 and $50,814 in
1999 and 1998, respectively.
- --------------------------------------------------------------------------------
F-15
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
7. 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.
8. Stock Option The Company has an incentive stock option plan and a
Plans 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, expired on
June 30, 1998.
The Company has adopted a stock incentive plan whereby 150,000
shares of the Company's common stock have been reserved for
issuance to its employees. The stock option committee of the
Company's Board of Directors has complete discretion to grant
awards pursuant to the terms and provisions of the plan. The
stock incentive plan expires December 31, 2009.
- --------------------------------------------------------------------------------
F-16
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
8. Stock Information regarding the stock option plans are summarized
Option Plans below:
Continued
Number of Option Price
Options Per Share
----------------------------------
Outstanding at
January 1, 1998 108,125 $ 1.43 - 4.10
Granted 10,000 1.13 - 2.02
Exercised (10,750) 1.14 - 3.03
Expired (10,000) 1.50 - 3.03
Forfeited (9,875) 1.30 - 4.10
----------------------------------
Outstanding at
December 31, 1998 87,500 $ 1.13 - 4.10
Granted 31,000 1.69 - 4.59
Exercised (10,000) 1.30
Expired (8,750) 1.14 - 4.10
Forfeited - -
----------------------------------
Outstanding at
December 31, 1999 99,750 $ 1.13 - 4.59
==================================
- --------------------------------------------------------------------------------
F-17
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
9. Stock based The Company has adopted the disclosure-only provisions of
Compensation Statement of Financial Accounting Standards (SFAS) No.123,
Accounting for Stock-Based Compensation. Accordingly, no
compensation cost has been recognized for employees in the
financial statements. Had compensation cost for the
Company's stock options been determined based on the fair
value at the grant date for awards in 1999 and 1998,
consistent with the provisions of SFAS No. 123, the Company's
net earnings and earnings per share would have been reduced
to the pro forma amounts indicated below:
Years Ended
December 31,
--------------------------
1999 1998
--------------------------
Net loss - as reported $ (1,161,505) $ (1,710,252)
Net loss - pro forma $ (1,248,744) $ (1,719,632)
Loss per share - as reported $ (.79) $ (1.57)
Loss per share - pro forma $ (.85) $ (1.58)
--------------------------
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,
--------------------------
1999 1998
--------------------------
Expected dividend yield $ -0- $ -0-
Expected stock
price volatility 121.32% 88.86%
Risk-free interest rate 6.00% 5.00%
Expected life of options 5 years 5 years
--------------------------
The weighted average fair value of options granted during 1999
and 1998 are $2.81 and $.94, respectively.
- --------------------------------------------------------------------------------
F-18
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
9. Stock Based The following table summarizes information about stock options
Compensation outstanding at December 31, 1999:
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 12/31/99 (Years) Price 12/31/99 Price
--------------------------------------------------------------------------
$ 1.13 to 1.30 29,750 3.7 $ 1.42 29,750 $ 1.42
1.90 to 2.40 32,000 1.6 2.09 32,000 2.09
2.90 to 4.59 38,000 3.7 3.92 38,000 3.92
--------------------------------------------------------------------------
$ 1.13 to 4.59 99,750 2.8 $ 2.59 99,750 $ 2.59
==========================================================================
10. Earnings Per Financial accounting standards require companies to present
Share basic earnings per share (EPS) and diluted earnings per
share along with additional informational disclosures.
Information related to earnings per share is as follows:
Year Ended
December 31,
--------------------------
1999 1998
--------------------------
Basic and Diluted EPS
Net loss available to common
stockholders $ (1,161,505) $(1,710,252)
--------------------------
Weighted average common shares 1,467,000 1,087,000
==========================
Net loss per share $ (.79) $ (1.57)
==========================
- --------------------------------------------------------------------------------
F-19
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
11. Profit Sharing American Laser adopted a 401(k) retirement savings and
Plans profit sharing plan. All full-time employees of American
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 1999 and 1998.
12. Related Party The Company had a lease agreement in 1998 and a portion of
Transactions 1999 with Dr. William H. McMahan, a former significant
shareholder, Chairman, President and Chief Executive Officer
of the Company, for its operating facilities. Rent payments
were approximately $79,000 and $237,000 in 1999 and 1998,
respectively.
The Company has employment agreements with its President and
Chief Executive Officer and Vice President as described in
note 7.
During the year ended December 31, 1999 and 1998 the Company
recognized $263,661 and $269,860 of revenue from the sale of
products to entities owned by a director and major
shareholder of the Company. Receivables relating to these
sales total $178,537 and $43,350 at December 31, 1999 and
1998, respectively. The Company also had payables due of
$343,669 at December 31, 1999.
13. Export Sales Export sales to unaffiliated customers were as follows:
and
Major Years Ended
Customers December 31,
----------------------------
1999 1998
----------------------------
Europe $ 1,560,752 $ 2,109,735
Other 890,534 247,800
----------------------------
$ 2,451,286 $ 2,357,535
============================
- --------------------------------------------------------------------------------
F-20
<PAGE>
================================================================================
LASER CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------
13. Export Sales Combined domestic and foreign sales and service of lasers to
and the Company's major customers are as follows:
Major
Customers Years Ended
December 31,
-------------------------
Major customers 1999 1998
-------------------------
Company A $ 1,658,780 $ 1,230,521
Company B $ 552,300 $ -
Company C $ 204,664 $ 755,929
Company D $ 104,311 $ 213,859
14. Fair Value None of the Company's financial instruments are held for
of Financial trading purposes. The Company estimates that the fair value
Instruments of all financial instruments at December 31, 1999, 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.
15. Recent In June 1998, the FASB issued SFAS No. 133, "Accounting for
Accounting Derivative Instruments and Hedging Activities." This
Pronounce- statement establishes accounting and reporting standards for
ments derivative instruments and requires recognition of all
derivatives as assets or liabilities in the statement of
financial position and measurement of those instruments at
fair value. The statement is effective for fiscal years
beginning after June 15, 1999. The Company believes that the
adoption of SFAS 133 will not have any material effect on the
financial statements of the Company.
- --------------------------------------------------------------------------------
F-21
<PAGE>
================================================================================
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LASER
CORPORATION AND SUBSIDIARIES DECEMBER 31, 1999 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-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 113,337
<SECURITIES> 0
<RECEIVABLES> 660,417
<ALLOWANCES> 25,000
<INVENTORY> 749,411
<CURRENT-ASSETS> 1,515,052
<PP&E> 1,788,361
<DEPRECIATION> 1,503,590
<TOTAL-ASSETS> 1,842,891
<CURRENT-LIABILITIES> 1,511,104
<BONDS> 0
0
0
<COMMON> 79,503
<OTHER-SE> 220,234
<TOTAL-LIABILITY-AND-EQUITY> 1,842,891
<SALES> 3,798,413
<TOTAL-REVENUES> 3,860,576
<CGS> 3,272,031
<TOTAL-COSTS> 5,016,255
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,826
<INCOME-PRETAX> (1,161,505)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,161,505)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,161,505)
<EPS-BASIC> (.79)
<EPS-DILUTED> (.79)
</TABLE>
