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 [FEE REQUIRED]
For the fiscal year ended: June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission file number 1-10013
Larson Davis Incorporated
(Name of small business issuer in its charter)
Nevada 87-0429944
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1681 West 820 North, Provo, Utah 84601
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (801) 375-0177
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 $0.001
(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 pursuant 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. ____
As of October 6, 1995, there were 7,586,726 shares of the Issuer's
common stock, par value $0.001, issued and outstanding. The
aggregate market value of the Issuer's voting stock held by
nonaffiliates of the Issuer was approximately $28,006,852
computed at the closing quotation for the Issuer's common stock
of $6.0625 as of October 6, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g.,
part I, part II, etc.) into which the document is incorporated:
(1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to
rule 424(b) or (c) under the Securities Act of 1933. The list
documents should be clearly described for identification purposes
(e.g., annual report to security holders for fiscal year ended
December 24, 1990). None.
Transitional Small Business Disclosure Format (check one):
Yes ____ No X
Page 1 of ___ consecutively numbered pages,
including exhibits pages ___ through ___.
<PAGE>
TABLE OF CONTENTS
Item Number and Caption Page
PART I
1. Description of Business 3
2. Description of Property 11
3. Legal Proceedings 11
4. Submission of Matters to a Vote of Security Holders 11
PART II
5. Market for Common Equity and Related Stockholder
Matters 12
6. Management's Discussion and Analysis or Plan of
Operation 14
7. Financial Statements 18
8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 18
PART III
9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange
Act 19
10. Executive Compensation 21
11. Security Ownership of Certain Beneficial Owners and
Management 22
12. Certain Relationships and Related Transactions 23
PART IV
13. Exhibits and Reports on Form 8-K 24
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The Registrant is primarily engaged in the development,
manufacture, and marketing of precision measuring instrumentation
and accompanying computer hardware and software technology. The
Registrant sells its measurement instruments to private industry
and governmental agencies for both industrial and military
applications. The Registrant also owns its ANOMS Software which
is used in airport noise and operations monitoring systems.
Subsequent to the year ended June 30, 1995, the Registrant reached
an agreement with Harris Miller Miller & Hanson, Inc. ("HMMH"), to
license the Registrant's ANOMS Software and to transfer the
management and implementation of essentially all of the
Registrant's airport noise monitoring contracts to HMMH. (See
discussion below under "Recent Events.")
The Registrant is comprised of two active wholly-owned subsidiaries:
Larson Davis Laboratories ("LDL"), which conducts the design,
manufacturing, and sales operations of the Registrant, and
Larson Davis, Ltd. ("LTD"), the Registrant's distribution
subsidiary located in the United Kingdom. Unless the context
otherwise requires, when used herein, the term "Registrant" refers
to Larson Davis Incorporated and its operating subsidiaries.
RECENT EVENTS
Airport Noise Monitoring
Effective August 15, 1995, the Registrant entered into an agreement
with HMMH to exclusively license its ANOMS Software for use in the
airport noise and operations monitoring industry to HMMH and to
transfer the management and implementation of its existing airport
noise monitoring contracts and pending bid proposals to HMMH. HMMH
is a consulting firm established in 1981 by experienced acoustical
engineers that has focused its business on consulting in the noise
and vibration market in the transportation industry, including
interpreting airport noise regulations and establishing
specifications for the hardware and software airports need to
monitor sound levels and other environmental occurrences at
airports and in surrounding communities. HMMH established the
specifications for a number of airports at which the Registrant's
systems are being installed and provides consulting work to the
Federal Aviation Administration (the "FAA"). The Registrant
<PAGE>
believes that HMMH has a strong marketing advantage in the airport
industry because of its established reputation, experience, and
long association with airport administrators. Under the terms of
the transaction, the Registrant will receive a guaranteed annual
royalty, a percentage of the gross annual revenues of HMMH from
the airport noise monitoring business, and a commitment from HMMH
to use its best efforts to install the Registrant's instrumentation
at all new airport installations. The Registrant will be
prohibited from competing with HMMH and, consequently, has
accounted for the transaction as a discontinued operation. (See
"ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.")
The Registrant acquired the ANOMS Software from Technology
Integration Incorporated ("TII") during the year ended June 30, 1994.
Certain former key employees of TII that became employees of the
Registrant in connection with this earlier transaction have become
employees of HMMH.
Agreement in Principle
In September 1995, the Registrant entered into an Agreement in
Principle to acquire technology held by Sensar Corporation, a
privately-held Utah corporation ("Sensar"), in exchange for the
issuance of restricted Common Stock, the payment of cash to redeem
certain shares of Sensar, and the assumption or payment of the
liabilities of Sensar.
Sensar holds rights to patented proprietary technology with respect
to a time-of-flight mass spectrometer designed to detect smaller
quantities of impurities in gas vapors than is possible with
competing instruments with a much quicker analysis time. Sensar
has a great deal of expertise in mass spectrometry, which is used
for chemical analysis, chemical separation, isotope identification,
and impurity detection. Sensar has sold a limited number of its
newly-developed analyzers and does not have significant ongoing
revenues. Sensar's instrumentation is currently being used by
Micron and Atmel in connection with the fabrication of
semiconductors, and it is anticipated that future sales of this
product will also be in the semiconductor industry. Sensar also
has conducted research and development with respect to
instrumentation with applications outside the semiconductor
industry, although these technologies have not yet been reduced
to marketable products.
<PAGE>
The technology was developed by Dr. Milton Lee at Brigham Young
University ("BYU"). BYU holds the patent on the mass spectrometry
technology exclusively licensed to Sensar as well as several
related technologies. The transaction with Sensar is conditioned
on the Registrant obtaining license rights to certain related
technologies from BYU.
The closing of the transaction is subject to the completion of a
due diligence review of Sensar, the negotiation and execution of
definitive agreements, and the negotiation of licensing agreements
from BYU with respect to related technology. There can be no
assurance at this time that the transaction contemplated by the
Agreement in Principle will be consummated.
MEASUREMENT INSTRUMENTATION BUSINESS
The hardware products of the Registrant are focused on precision
measuring instruments for use in the acoustics and vibration
industry. Subdivisions of this market in which the Registrant's
instrumentation is currently being utilized are:
Environmental Monitoring provides data used to monitor,
control, or avoid noise (unwanted and/or irritable sound which
has a detrimental effect on living organisms). It includes such
applications as community noise ordinance compliance surveys,
airport noise monitoring, vehicle passby surveys, industrial
complex perimeter monitoring, environmental impact studies, OSHA
(noise in the work place) mandated surveys, military aircraft
sonic boom monitoring, and others.
Product Design and Improvement encompasses the use by
manufacturers to optimize utilization and minimize acoustic
output. For example, the auto and aircraft industries determine
noise dampening properties of materials used in insulation; a
yacht manufacturer studied acoustic spectrums as an aid in
selecting efficient hull designs; and other manufacturers of items
such as lawn mowers, computer printers, office equipment, and
kitchen appliances employ instruments to alter encasement designs
to minimize sound emission.
Structural Dynamics is the study of the motion of materials
to determine characteristics such as fatigue, resonance, material
density, and bonding strengths. A consultant used the Registrant's
instrumentation to determine the resonant frequency of the
vibrations in the Statue of Liberty's arm holding the torch.
Braces were designed and installed which resulted in doubling the
torch bulb life.
<PAGE>
Medical Applications include hardware and software used in
automatic calibration systems for medical equipment. The analysis
and treatment of both hearing and speech problems can be improved
utilizing the Registrant's instrumentation.
Predictive Maintenance is an emerging industry in which
characteristics of rotating or moving machinery are analyzed to
predict failure points. Based on information obtained, planned
service can be performed. Currently, the Registrant's
instrumentation is being used by helicopter manufacturers, power
plant turbine operators, paper producers, and others.
Professional Sound includes both manufacturers and consultants.
The Registrant provides equipment used to certify sound products'
(such as amplifiers, mixers, equalizers, speakers, and microphones)
compliance with published specifications. Field engineers rely on
portable instrumentation to evaluate the acoustic characteristics
of a room or building.
Defense and Government applications range from ship/vehicle
identification based on spectrum analysis to artillery blast noise
studies.
ENVIRONMENTAL NOISE MONITORING BUSINESS
The Registrant utilizes its hardware products and its internally
developed proprietary software ENOMS in the design, bid,
installation, and maintenance of integrated environmental noise
monitoring systems. These systems have been used by manufacturing
plants as parameter monitors, governmental test labs for blast
noise monitoring and analysis, and other environmental and
community noise applications. It is also anticipated that the
ENOMS software will be applied to the data retrieval and
management requirements of the time-of-flight mass spectrometry
technology in the event the transactions with Sensar is completed.
The Registrant has recently granted an exclusive license to its
ANOMS Software to HMMH for use in the airport noise monitoring
systems industry, although the Registrant will continue to supply
hardware to this industry. (See discussion under "Recent Events.")
<PAGE>
MANUFACTURING AND ASSEMBLY
The Registrant is involved in the manufacture of both its hardware
and software products. It utilizes the service of certain
subcontractors to manufacture component parts for its products to
minimize the amount of its capital investment and increase its
flexibility in dealing with changes in the manufacturing processes.
Approximately 30% of manufacturing is performed by subcontractors.
However, all final assembly is done by the Registrant's employees
as part of its quality control program. Manufacturing activities
occupy approximately 12,000 square feet of the Registrant's
facilities.
PRODUCT COMPONENTS
The Registrant utilizes a large number of individual electronic
components in connection with the manufacture of its precision
instrumentation. The Registrant has developed and sells its own
line of high quality transducers so that it is no longer dependent
on suppliers for these component parts. Most of the other
electronic components utilized by the Registrant are available
from a number of manufacturers and the Registrant's decisions with
respect to suppliers are based on availability of the necessary
component, the reliability of the supplier in meeting its
commitments, and pricing.
The Registrant purchases certain supplies from third-parties for
installation in environmental noise monitoring systems. Generally,
these supplies consist of "brand name" computers, printers, and
other peripherals, and are readily available from a variety of
manufacturers or suppliers.
MARKETING AND DISTRIBUTION
Instrumentation
The Registrant markets and distributes its hardware products
primarily through independent manufacturer's representatives.
The efforts of these contracted representatives are supported by
an in-house staff of marketing and technical personnel.
<PAGE>
The Registrant invests in both image building and direct product
advertising. This exposure takes many forms, including
participation on industry standards boards, exhibitions at trade
shows, company sponsored training classes, direct technical
demonstrations, and industry publication ads. The Registrant
has budgeted resources to support its belief that effective and
continued exposure is required to establish greater name
recognition and overall positive market perception.
The total market size of the acoustics and vibration industry
decreased in the past few years, although it has begun to increase
again since June 30, 1994. Management believes this was due in
part to general global economic conditions. The timing of the
purchase of acoustical noise monitoring equipment is often
discretionary and both private industry and governments made
alternative applications of their limited funds. Since June 30,
1994, the Registrant has seen signs of a change in these
conditions. Revenues from continuing operations are up over last
year, product backlog has increased, and inquiries about
instrumentation have strengthened significantly. As resources
allow, the Registrant plans to increase its marketing efforts as
a stimulus to sales efforts. The Registrant has no current plans
to change its basic approach to distribution.
Environmental Monitoring
Environmental monitoring contracts are normally awarded after a
competitive bid process. Such bids are typically awarded based
on the price, specifications of the proposed system, reputation
of the contractor, and recommendations from current users.
CURRENT ORDERS
As of October 6, 1995, the Registrant had an order backlog believed
to be firm of approximately $1,200,000 which is not reflected in
the financial statement included elsewhere herein. The Registrant
anticipates filling this backlog within 60 days. This compares to
a backlog in October of 1994 of $850,000, which took approximately
45 days to fill. This increase is primarily due to a growth in
unit orders for the Registrant's instrumentation.
<PAGE>
RESEARCH AND DEVELOPMENT
General
The Registrant is engaged in a highly technical industry where
constant research and development is required to maintain
competitive products in its sophisticated market. The Registrant
has since its inception committed a significant portion of
operating capital to perform needed development. As compared to
net sales from continuing operations the expenditure for research
and development for the fiscal years ended June 30, 1995 and 1994,
has been 11% and 16%, respectively. During the fiscal year ended
June 30, 1995, research and development spending was $708,679. It
is anticipated that in future years this commitment level to
research and development will continue to be a material portion
of the Registrant's spending.
CrossCheck Technology
In March 1994, the Registrant acquired the exclusive license to a
technology known as "CrossCheck," a proprietary hardware and
process used to determine, in real time, the in situ
characteristics of polymer substances. The technology was
developed at Brigham Young University, and the Registrant gained
its rights through an exclusive licensing agreement with the
University's Technology Transfer Office. Brigham Young University
has recently been granted a United States patent with respect to
this technology.
Originally developed and tested as a means to quantify the cure
and shelf life characteristics of resins used in pre-impregnated
composites (graphite, fiberglass, and boron fibers), CrossCheck
has broad potential application. Polymers are a large category of
chemicals that form "giant" molecules from individual molecules of
the same substance, and include such materials as oils, resins,
plastics, concretes, paints, and adhesives. Under traditional
methods for testing the characteristics of such materials, a sample
portion is used in destructive testing. The CrossCheck technology
monitors the cross-linking chemical qualities of polymers. A real
time, in situ method to determine material quality will potentially
save a great deal of time and money in those industries in which the
chemical composition of polymers is important. In testing,
CrossCheck has been shown to detect changes in polymers with
sensitivity greatly in excess of that of existing testing equipment
costing in excess of $50,000. It is expected the CrossCheck
technology will be able to provide such information economically.
<PAGE>
The Registrant has investigated the potential application of
CrossCheck in a number of industries. Set forth below is a short
summary of certain of these applications.
Composites Industry. Many "space age" composite materials are
cured polymers that provide superior weight to strength ratios. It
is anticipated that CrossCheck will be able to monitor the chemical
reactivity of the polymers from the instant of application through
full cure, providing assurances that the desired characteristics
are achieved.
Lubrication Industry. The Registrant anticipates that
CrossCheck can be used to monitor the lubrication properties of
engine, transmission, and hydraulic oils. Existing technology is
impractical for reasons of cost, size, inability to withstand high
temperatures, or other factors. It is anticipated that the
technology would first be focused on applications in which chemical
changes in the oil can lead to critical failures, but will be
followed by efforts in the automobile industry.
Environmental Monitoring. The CrossCheck technology can
potentially be used to test ground water, lakes, streams, or
storage facilities for potential contaminants.
Manufacturing Industry. Delivering consistent, high-quality
chemical products can be a challenging task. The CrossCheck
technology may allow chemists and engineers involved in the
manufacture of paints, adhesives, foods, medicines, fuels, oils,
and similar products to monitor the chemical properties of the
product during the mixing cycles.
Chemical Inventory Control. The CrossCheck technology could
be used to monitor the quality of stored chemicals to assure
quality at the time of usage.
Electrical Utilities. The CrossCheck technology could be used
to monitor the oil in transformers to minimize or prevent the
unpredicted failure of such transformers due to changes in the
oil composition.
Concrete Industry. CrossCheck technology could be used to
monitor the "curing" of concrete to assure quality, strength, and
hardness. The only current method of obtaining this information is
destructive testing.
<PAGE>
The foregoing applications are currently being explored by the
Registrant. The Registrant anticipates that it will be required
to enter into agreements with established industry partners and to
obtain substantial research and development funding before it will
be able to reduce the CrossCheck technology to marketable products
and exploit one or more of the potential market applications.
Mass Spectrometer Technology
If the acquisition of Sensar technology and the related technology
from BYU is completed, the Registrant will acquire a nest of
related technologies that will require significant research and
development expenditures.
The Registrant will enter into employment agreements with Dr.
Milton Lee and Dr. Edgar Lee in connection with the closing. In
addition, the Registrant will make employment offers to two
additional employees of Sensar.
Dr. Milton L. Lee is a founder and chairman of the board of Sensar.
He is the H. Tracy Hall Professor of Chemistry at Brigham Young
University, where he has taught since 1976. Dr. Lee founded and
is the editor of the Journal of MicroColumn Separations and serves
on the editorial advisory boards of Chromatographia, Journal of
Supercritical Fluids, and Polycyclic Aromatic Compounds. Dr. Lee
is the co-author of two books and over 330 scientific publications.
Dr. Lee has received numerous awards for his contributions in
chemical analysis and is listed as the inventor on nine patents.
Dr. Lee is a member of the American Chemical Society, Sigma Xi, and
the Scientific Organizing Committee of the International Symposia
on Capillary Chromatography. He received his B.A. in Chemistry
from the University of Utah in 1971, and his Ph.D. in Analytical
Chemistry from Indiana University in 1975.
Dr. Edgar D. Lee is a founder and vice-president of research of
Sensar and serves as an adjunct researcher at Brigham Young
University. Dr. Lee has extensive experience in a number of areas
of mass spectrometry and has co-authored 21 published articles and
45 technical papers in this field. Dr. Lee is also the co-holder
of three patents in his areas of expertise. Prior to founding
Sensar in 1990, Dr. Lee was employed at Midwest Research Institute
from December 1988 through August 1990, first as a mass
spectrometrist and later as a senior mass spectrometrist. While
at Midwest Research Institute, Dr. Lee was responsible for
research, development, and implementation of state-of-the-art
mass spectrometric techniques at its Center for Advanced
Instrumentation.
<PAGE>
Dr. Lee is a member of the American Chemical Society and the
American Society for Mass Spectrometry. He pursued undergraduate
chemistry studies at Utah State University and was awarded a B.A.
in Chemistry in 1984 from Brigham Young University. Dr. Lee
received a Ph.D. in Analytical Toxicology, with emphasis in
Analytical Chemistry and Instrumentation Engineering in 1988
from Cornell University.
PATENTS AND TRADEMARKS
The technology owned by the Registrant is proprietary in nature.
In connection with the design and construction of its precision
measurement instrumentation and its proprietary software, the
Registrant primarily relies on confidentiality and nondisclosure
agreements with its employees, appropriate security measures,
copyrights, and the encoding of its software in order to protect
the proprietary nature of its technology rather than patents which
are difficult to obtain in the computer software area, require
public disclosure, and can often be successfully avoided by
sophisticated computer programmers. The CrossCheck technology
held by the Registrant is the subject of a recent United States
patent and several continuations-in-part and international patent
applications. The Registrant has also registered "NOISEBADGE" to
use as a trademark in the marketing of noise level meters with the
United States Office of Patents and Trademarks.
COMPETITION
Instrumentation
The hardware products are positioned in a niche market which caters
to a technically sophisticated user base. For a number of years
this market was dominated by a single competitor, Bruel & Kjaer
("B&K"). B&K has traditionally been the largest supplier of
acoustics and vibration instrumentation in the world. B&K was
purchased by a German company which had no previous ties to the
acoustics and vibration industry in 1992, and currently has a much
reduced presence in the market.
In addition to B&K, there are several smaller companies in direct
competition with the Registrant. None of these other competitors
has available the full line of products offered by the Registrant.
There are also a small number of large companies which produce, in
most cases, a single product which can be adapted to certain
applications in the acoustics industry.
<PAGE>
While many of the companies which compete with the Registrant have
greater financial and managerial resources, management believes
the Registrant can compete effectively based on its ability to:
(1) adapt rapidly to technology changes, (2) technically market
to specialized users, and (3) offer a complete line of solutions
to users' needs.
Environmental Monitoring
The environmental noise monitoring market has several smaller
consulting or value-added companies which compete indirectly with
the Registrant's ENOMS systems. There are no completed noise
monitoring systems which compare with all the features and
capabilities of the software provided by the Registrant.
B&K manufactures instrumentation used in noise monitoring systems.
Many of the competitors to the Registrant use B&K's equipment in
systems. For a time, B&K entertained the idea of permanently
linking their hardware to one of the smaller competitor's software.
Eventually, B&K announced they would supply hardware only, and not
get directly involved with software elements.
MAJOR CUSTOMERS AND FOREIGN SALES
There were no customers which represented more than 10% of the
total revenues for the Registrant during the years ended June 30,
1995, or 1994. In fiscal years ended June 30, 1995 and 1994,
government sales were not significant with sales volumes less than
5% of continuing operations for each of the years.
Export sales of the Registrant for the years ended June 30, 1995
and 1994, are 54% and 45% of revenues from continuing activities,
respectively. The Registrant exported its products into a number
of geographical markets that are more specifically identified in
the notes to the financial statements of the Registrant. (See
"FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.")
PERSONNEL
The Registrant currently has 81 employees, 20 of which are involved
in professional or technical development of products, 36 in
manufacturing, 13 in marketing and sales, and 12 in administrative
and clerical. None of the employees of the Registrant are
represented by a union or subject to a collective bargaining
agreement, and the Registrant considers its relations with its
employees to be favorable.
<PAGE>
ITEM 2. DESCRIPTION OF PROPERTY
The Registrant owns its own administrative and manufacturing
facilities in Provo, Utah, subject to a security lien granted to
a commercial financial institution to secure a purchase money loan.
The facilities include approximately 12,000 square feet of
administrative, engineering, and research and development space
and approximately 12,000 square feet of manufacturing, storage,
and shipping space. Management considers the existing
manufacturing facilities sufficient to accommodate the
anticipated growth of the Registrant over the next three to
five years. (See "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.")
In connection with the operation of its Airports Business, the
Registrant opened an office in Boston, Massachusetts. The lease
covers approximately 4,200 square feet of space with a monthly
rental payment of approximately $4,100. This space is currently
sublet on a month-to-month basis for the amount of the monthly
rental payment plus operating expenses.
In addition, approximately 1,200 square feet of space is being
rented on a month-to-month basis in England for the offices of LTD.
The monthly rental is approximately $425.
ITEM 3. LEGAL PROCEEDINGS
The Registrant is not a party to any material pending legal
proceedings and, to the best of its knowledge, no such proceedings
by or against the Registrant have been threatened. To the knowledge
of management, there are no material proceedings pending or
threatened against any director or executive officer of the
Registrant, whose position in any such proceeding would be adverse
to that of the Registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the Registrant's fiscal quarter ended June 30, 1995, the
Registrant did not hold an annual meeting and no matters were
submitted to a vote of the security holders of the Registrant,
through the solicitation of proxies or otherwise.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The common stock of the Registrant is listed on the National
Association of Securities Dealers, Inc., Automated Quotation
system ("NASDAQ"), under the symbol "LDII."
The following table sets forth the approximate range of high and
low bids for the common stock of the Registrant during the periods
indicated. The quotations presented reflect interdealer prices,
without retail markup, markdown, or commissions, and may not
necessarily represent actual transactions in the common stock.
Quarter Ended High Bid Low Bid
September 30, 1993 $4.75 $2.375
December 31, 1993 $4.50 $3.625
March 31, 1994 $7.50 $3.875
June 30, 1994 $5.875 $3.375
September 30, 1994 $4.875 $2.625
December 31, 1994 $3.38 $2.00
March 31, 1995 $3.00 $2.00
June 30, 1995 $4.1666 $2.25
On October 6, 1995, the closing quotation for the common stock on
NASDAQ was $6.0625. As reflected by the high and low bids on the
foregoing table, the trading volume of the common stock of the
Registrant is limited, creating significant changes in the trading
price of the common stock as a result of relatively minor changes
in the supply and demand. Consequently, potential investors should
be aware that the price of the common stock in the trading market
can change dramatically over short periods as a result of factors
unrelated to the earnings and business activities of the Registrant.
As of October 6, 1995, there were 7,586,726 shares of common stock
issued and outstanding, held by approximately 1,300 beneficial
holders.
<PAGE>
The Registrant has not paid dividends with respect to its common
stock. The Registrant has 1,000,000 shares of its 1995 preferred
stock issued and outstanding which prohibit the payment of dividends
on the common stock if the annual dividend of $0.225 per share of
preferred stock is in arrears. Other than the foregoing, there
are no restrictions on the declaration or payment of dividends
set forth in the articles of incorporation of the Registrant or
any other agreement with its shareholders. Management anticipates
retaining any potential earnings for working capital and investment
in growth and expansion of the business of the Registrant and does
not anticipate paying dividends on the common stock in the
foreseeable future.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CERTAIN FINANCIAL DATA
The following financial data of the Registrant is not covered by an
opinion of independent certified public accountants and should be
read in conjunction with the financial statements and related notes
of the Registrant for the periods indicated included elsewhere herein.
<TABLE>
<CAPTION>
Statement of Operations Data
Year Ended June 30,
1995 1994
<S> <C> <C>
Revenues
Total revenues $ 8,890,527 $ 6,410,155
Sales from discontinued
operations $ 2,374,697 $ 1,272,517
Sales from continuing
operations $ 6,515,830 $ 5,137,638
Net income from continuing
operations $ 458,511 $ (441,236)
Net income (loss) $ (311,617) $(1,868,151)
Balance Sheet Data
June 30, 1995
Total Assets $11,579,667
Long-term debt $ 1,213,331
</TABLE>
<PAGE>
DISCONTINUED OPERATIONS
In conformity to Management's plan to focus its available monetary
and human resources, the Registrant has restructured its business.
During the fiscal year ended June 30, 1993, the Registrant made a
decision to discontinue the development of wholesale and retail
software products not related to its instrumentation business,
and pursued a sale of the technology and related assets. During
the fiscal year ended June 30, 1994, the Registrant elected to
write-down the carrying value of the related net assets to zero
and is no longer actively seeking to sell the related assets.
During the fourth quarter of the fiscal year ended June 30, 1995,
the Registrant made a decision to transfer its technology,
marketing rights, and interests in airport noise monitoring
installation contracts (the "Airports Business") as a method to
maximize financial return from assets purchased from TII and
later enhanced by development. (See "ITEM 1. BUSINESS: Recent
Developments.")
Subsequent to June 30, 1995, the Registrant entered into an
agreement to transfer the Airports Business to HMMH. (See Notes to
Financial Statements, Note 17 - DISCONTINUED OPERATIONS.)
Because of the exclusive marketing rights transferred to HMMH,
"Airports Business" was determined to include contracts assigned
to HMMH and essentially completed contracts retained by the
Registrant. Consequently, the Registrant in the fourth quarter of
the fiscal year ended June 30, 1995, reassessed revenues and
expenses associated with the Airports Business, which contributed
to a greater loss from operations of the discontinued business
segment than earlier anticipated. The Registrant determined in
the fourth quarter that estimated costs to complete existing airport
contracts had increased each interim period. The assets and
results of operations from the Airports Business has been reflected
on the financial statements as a discontinued business segment.
Because a portion of the payment is based on a royalty from gross
sales by HMMH, the Registrant has elected to use the "Cost Recovery"
method to recognize revenues and costs. This means that a dollar
for dollar matching of monies received and costs expensed will be
performed until all costs are expensed, and only after this will
the Registrant realize any gain from the HMMH agreement. As part
of the HMMH agreement, HMMH must use its best efforts to install
the Registrant's instrumentation with all new airport noise
monitoring contracts it obtains. The Registrant will realize its
normal, export level, gross profit on these sales, due to the 25%
discount from list price offered to HMMH.
<PAGE>
Net sales from continuing operations represents sales from the
Registrant's instrumentation business. The Registrant in past
years has pursued a strategy of diversification as a way to enhance
sales and increase profits. After a period of disappointing
results, the Registrant has refocused efforts to develop its
instrumentation business.
Due to the required netting of revenues, costs, and expenses
associated with discontinued operations, the following tables
identify the nature of discontinued operations:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Revenues from discontinued
operations $ 2,374,697 $ 1,272,517
Costs and expenses from
discontinued operations (3,144,825) (1,029,437)
(Loss) on disposal of
operations -- (2,156,987)
$( 770,128) $(1,913,907)
</TABLE>
SIGNIFICANT FINANCIAL CHANGES - STATEMENTS OF INCOME
Total Revenue
Net sales from continuing operations for the fiscal years ended
June 30, 1995 and 1994, is $6,515,830 and $5,137,638, respectively.
The Registrant experienced a decline in sales of its sound and
vibration instrumentation in 1994. This was related in part to a
general global recession. The Registrant was able to maintain its
established market share in a then shrinking market.
In the fiscal year ended June 30, 1995, instrumentation sales
increased by 27% from $5,137,638 in 1994 as compared to $6,515,830
in 1995. Management expects the strengthening of its
instrumentation market to continue.
Foreign sales have been an important part of the Registrant's
business plan for many years. For the fiscal years ended June 30,
1995 and 1994, foreign sales as a portion of continuing operations
account for 54% and 45%, respectively. The increase in 1995 is
partially due to the Registrant's operations in the United Kingdom
through its subsidiary, LTD.
<PAGE>
In the fiscal years ended June 30, 1995 and 1994, government sales
were not significant and represented less than 5% of sales from
continuing operation in each year.
Cost of Sales and Operating Expenses
The Registrant's cost of sales and operating expenses as a
percentage of sales from continuing operations for the years ended
June 30, 1995 and 1994, are 40% and 42%, respectively. The
Registrant believes its efforts to better track costs and control
inventories has contributed to the decrease in cost of sales and
operating expenses between the fiscal years ended June 30, 1995,
and 1994.
Research and Development
Since its inception, the Registrant has dedicated significant
operating funds to research and development. For the years ended
June 30, 1995 and 1994, this commitment represents 11% and 16%,
respectively, of the Registrant's net sales from continuing
operations. The Registrant introduced a number of new products
over the past 12 months which caused the increased spending
reflected in 1994 (the time period when costs were expensed before
sales began), and will continue to offer new instruments to enhance
its product line.
The Registrant is involved in a high-tech industry which demands
constant improvements and development of its instrumentation to
remain technically viable. It is anticipated this aggressive
approach to research and development will continue and the
Registrant will dedicate significant levels of available resources
to this activity.
SIGNIFICANT FINANCIAL CHANGES - BALANCE SHEETS
Trade Accounts Receivable
The Registrant's accounts receivable increased by 32% from June 30,
1994 to 1995, and two factors have contributed to this increase.
First, sales from continuing operations grew 27% for the same
period. Secondly, foreign sales are a larger portion of net sales
from continuing operations (traditionally, foreign billings take
longer to collect). On June 30, 1995, the balance of $2,130,835
represents a receivable aging of 123 days.
<PAGE>
Inventories
Inventories have remained virtually identical to 1995 from 1994 at
$2,152,768 and $2,155,232, respectively. The Registrant has been
able to increase net sales from continuing operations by 27% and
maintain the inventory level unchanged.
Cost and Estimated Earnings in Excess of Related Billings
The Registrant recognizes income on long-term contracts on a
percentage-of-completion method while billings to customers are
made on milestones specified in agreements. With the introduction
of the discontinued operations classification of the balance sheet,
a reclassification of assets related to the Airports Business
occurred. Portions of the costs and estimated earnings in excess
of related billings were reclassed to net assets held for sales.
The $200,318 balance of this account represents actual invoices
which the Registrant will bill in the normal course of its business.
The remainder of this category was transferred to HMMH. (See
Report on Form 8-K dated June 30, 1995.)
Net Assets Held For Sale
Notes to Financial Statements - Note 17 - "Discontinued Operations"
details the effect of the disposal of the Airports Business on the
balance sheet as of June 30, 1995. Net assets held for sale are
reflected at $3,135,776 and will be expensed against revenues
received from HMMH.
Other Assets - Product technology, licenses rights and software
development costs
Notes to Financial Statements - Note 6 - "Product Technology,
License Rights and Software Development Costs" details the effect
of the disposal of the Airports Business on the balance sheet as
of June 30, 1995. The balance at year end is $1,975,699.
Current Liabilities
Current liabilities decreased $991,165 from June 30, 1994, to
June 30, 1995. This decrease is primarily due to reductions in
short-term notes payable of $562,862 and in accounts payable of
$402,977. Other current liability accounts varied as a result of
normal operations. The Registrant utilized proceeds from the
issuance of common stock to reduce liabilities and restructure
debts.
<PAGE>
CAPITAL AND LIQUIDITY
At June 30, 1995, the Registrant had total current assets of
$4,702,603 and total current liabilities of $3,954,816, resulting
in a working capital ratio of 1.2:1. Included in total current
liabilities is approximately $1,920,000 representing the
Registrant's revolving line of credit. The limit on this line of
credit is currently $2,400,000 and is adjusted from time to time
based on ratios of inventories and accounts receivable levels.
The line of credit is also secured by common stock owned by two of
the directors of the Registrant along with personal guarantees from
these same directors. The line of credit is reviewed annually and
the Registrant anticipates it will continue to remain available.
In an agreement effective August 15, 1995, the Registrant
transferred the rights to certain assets to HMMH in return for
guaranteed and variable payments. The Registrant was paid a
one-time fee of $125,000, will receive $150,000 in guaranteed
annual royalties of the lessor of a ten-year period or the term
of the agreement, and will be a varying royalty of 2.5% to 4% on
the gross revenues of HMMH from the sale, installation, upgrade,
and maintenance of airport noise and operations monitoring
systems. HMMH will use its best efforts to include the
Registrant's hardware in its future proposals for airport noise
monitoring systems and the Registrant will provide such equipment
at a 25% discount from its regular pricing structure. HMMH has
the right to purchase all of the Registrant's rights to the
ANOMS software at a predetermined price of $3,000,000,
$2,200,000, $1,700,000, and $875,000, respectively, on the three,
five, seven, and ten year anniversaries of the agreement. HMMH
has the right to terminate the agreement after an initial three-
year period and, at the end of the ten year term, can elect to
extend the agreement for an additional five years during which it
would be obligated to pay a royalty of 3% on its gross revenues
from the airport systems.
The Registrant has eliminated out-of-pocket expenses in connection
with its Airports Business which will benefit overall cash flow.
The funds anticipated from HMMH will be applied to liabilities
associated with the acquisition of assets from TII. The
Registrant's net cash condition should be significantly improved by
this arrangement.
<PAGE>
Subsequent to the fiscal year end of June 30, 1995, the Registrant
has received proceeds from the sale of common stock of
approximately $1,100,000 net. The Registrant has relied on
capital infusion for the past two years to sustain its losses in
discontinued operations and anticipates further sales of common
stock during the upcoming year.
Through its acquisition of Sensar, if completed, the Registrant
would benefit from various state and federal government grant and
development contract funds which have been awarded to Sensar for
development of its technologies. Sensar has made application for
and received in the past funds made available through governmental
agencies such as EPA, the State of Utah, and SBIR research grants.
The Registrant intends to continue the practice of seeking this
type of development funding.
ITEM 7. FINANCIAL STATEMENTS
The financial statements and supplementary data are included
beginning at page ___. See page ___ for the index to the
financial statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Registrant and its auditors have not disagreed on any items
of accounting treatment or financial disclosure.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Set forth below is the name and age of each executive officer and
director of the Registrant, together with all positions and offices
of the Registrant held by each and the term of office and the
period during which each has served:
Director and/or
Position and Executive Officer
Name Age Office Held Since
Brian G. Larson 52 President and Chairman
of the Board September 30, 1987
Larry J. Davis 44 Vice-President and
Director September 30, 1987
Dan J. Johnson 44 Vice-President,
Secretary, Treasurer,
and Director September 30, 1987
Nathan H. West 36 Principal Accounting
Officer, LDL August 10, 1994
Rick Clayton 45 Principal Accounting
Officer, LTD. January 1, 1991
A director's regular term is for a period of three years or until
his successor is duly elected and qualified. The terms of the
board are staggered so that one-third of the board is subject to
election at each annual shareholders' meeting. The current term
of Brian G. Larson expires at the 1996 annual meeting, the current
term of Larry J. Davis expires at the 1997 annual meeting, and the
current term of Dan J. Johnson expires at the 1995 annual meeting.
There is no family relationship among the current directors and
executive officers. The following sets forth brief biographical
information for each director and executive officer of the
Registrant.
<PAGE>
Brian G. Larson, was a founder and has been an executive
officer, director, and principal shareholder of the Registrant
since its inception in 1981. Mr. Larson earned his masters of
business administration from Brigham Young University in 1972 and
a bachelor's degree in electrical engineering from the same
institution in 1971. During the time he was attending Brigham
Young University, Mr. Larson worked as a design engineer in the
medical research laboratory of Brigham Young University.
Larry J. Davis, was a founder and has been an officer,
director, and principal shareholder of the Registrant since its
inception in 1981. Mr. Davis earned his electrical engineering
degree from Brigham Young University in 1974, where he graduated
Magna Cum Laude.
Dan J. Johnson, has served as the vice-president in charge
of administration and financial strategy, asset control, and fiscal
operations of the Registrant since 1984. Prior to that time, he was
a director of finance for Fiber Technology Corporation. Mr. Johnson
has also been previously employed with a public accounting firm.
Nathan H. West, has served as the principal accounting officer
of Larson Davis Laboratories since August 1994. Immediately prior
to his employment by the Registrant, he was assistant controller
for Savage Industries, Inc., a privately-held company, from 1987
through 1994. Mr. West received a bachelor of science degree in
accounting from the University of Utah in 1985.
Rick Clayton, has been an employee of the Registrant since
February 1988 and the principal accounting officer of LD Info.,
Inc., since January 1991. Prior to his employment by the
Registrant, Mr. Clayton was an assistant controller for Zions
Mortgage Company. Mr. Clayton received a bachelor of science in
accounting from Brigham Young University in 1976.
Section 16 Reporting
Laura Huberfeld and Naomi Bodner, principal shareholders of the
Registrant, each filed a report on form 3 in an untimely fashion.
Reports with respect to the foregoing transactions have been filed.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by
the Registrant and its subsidiaries for the fiscal years ended
June 30, 1995, 1994, and 1993 to the chief executive officer of
the Registrant and the other officers of the Registrant who
received compensation in excess of $100,000.
<TABLE>
<CAPTION>
Annual Compensation
Other Annual
Name and Compensation
Principal Position Year Salary($) Bonus($) ($)
<S> <C> <C> <C> <C>
Brian G. Larson, 1995 $181,116 $0 $4,500
President and 1994 $181,116 $0 $4,500
Chairman of the 1993 $157,542 $0 $4,400
Board
Larry J. Davis 1995 $181,116 $0 $4,500
Vice-President 1994 $181,116 $0 $4,500
1993 $157,542 $0 $4,400
Dan J. Johnson 1995 $129,566 $0 $4,500
Vice-President and 1994 $129,566 $0 $4,500
Chief Financial 1993 $111,782 $0 $4,400
Officer
<CAPTION>
Long Term Compensation
Awards Payoffs
Restricted LTIP All Other
Name and Stock Options/ Payouts Compensation
Principal Position Awards SARs(#) ($) ($)
<S> <C> <C> <C> <C>
Brian G. Larson, $0 30,000 $0 $0
President and $0 30,000 $0 $0
Chairman of the $0 30,000 $0 $0
Board
Larry J. Davis $0 30,000 $0 $0
Vice-President $0 30,000 $0 $0
$0 30,000 $0 $0
Dan J. Johnson $0 30,000 $0 $0
Vice-President and $0 30,000 $0 $0
Chief Financial $0 30,000 $0 $0
Officer
</TABLE>
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
(a) (b) (c) (d) (e)
% of Total
Options/
SARs
Options/ Granted to Exercise
SARs Employees or Base
Granted in Fiscal Price Expiration
Name (#) Year ($/Sh) Date
<S> <C> <C> <C> <C>
Brian G. Larson 30,000 33% $3.64 6/30/00
Larry J. Davis 30,000 33% $3.64 6/30/00
Dan J. Johnson 30,000 33% $3.31 6/30/00
<CAPTION>
Potential
Realized Value at Alternative
Assumed Annual to (f) and
Rates of Stock Price (g):
Appreciation Grant Date
for Option Term Value
(a) (f) (g) (f)
Name
<S> <C> <C> <C>
Brian G. Larson -- -- --
Larry J. Davis -- -- --
Dan J. Johnson -- -- --
</TABLE>
Options to acquire 17,570 shares of stock were exercised during
the year ended June 30, 1995.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of October 6, 1995, the number
of shares of the Registrant's common stock, par value $0.001, held
of record or beneficially by each person who held of record or was
known by the Registrant to own beneficially, more than 5% of the
Registrant's common stock, and the name and shareholdings of each
officer and director and of all officers and directors as a group.
<TABLE>
<CAPTION>
Amount and Nature of Ownership
Sole Voting
and Investment Percent of
Name of Person or Group Power(1)(2) Class(3)(4)
Principal Shareholders:
<S> <C> <C> <C>
Brian G. Larson(5) Common Stock 850,019 11.2%
1681 West 1820 North Options 250,000 3.2%
Provo, UT 84601 Total 1,100,019 14.0%
Larry J. Davis(6) Common Stock 837,590 11.0%
10455 North Edinburgh Options 250,000 3.2%
Highland, UT 84003 Total 1,087,590 13.9%
Summit Enterprises, Inc. Common Stock 10,760 0.1%
of Virginia Preferred Stock 200,000 100.0%
1308 Devils Reach Road
Suite 302
Woodbridge, VA 22192
Laura Huberfeld(7) Common Stock 200,104 2.6%
250 Longwood Crossing $4.50 A Warrants 200,104 2.6%
Lawrence, NY 11559 Total 400,208 5.1%
Naomi Bodner(7) Common Stock 175,104 2.3%
16 Grosser Lane $4.50 A Warrants 200,104 2.6%
Munsey, NY 10952 Total 375,208 4.8%
<PAGE>
<CAPTION>
Officers and Directors:
<S> <C> <C> <C>
Brian G. Larson ----------------see above----------------
Larry J. Davis ----------------see above----------------
Dan J. Johnson Common Stock 0 0.0%
Options 279,430 3.6%
Total 279,430 3.6%
Nathan H. West Common Stock 0 0.0%
Rick Clayton Common Stock 0 0.0%
All Officers and Common Stock 1,687,609 22.2%
Directors as a Group Options 779,430 9.3%
(5 Persons) Total 2,467,039 29.5%
</TABLE>
[FN]
(1)Except as otherwise indicated, to the best knowledge of the Registrant,
all stock is owned beneficially and of record, and each shareholder has
sole voting and investment power.
(2)These options have been issued to the executive officers and directors
pursuant to the 1987 Stock Option Plan and the Director Stock Option Plan.
Options to acquire 130,000 shares each issued to Messrs. Larson and Davis
have an exercise price of $2.0625 per share; options to acquire 30,000
shares each have an exercise price of $2.54375 per share; options to
acquire 30,000 shares have an exercise price of $3.30 per share; options
to acquire 30,000 shares have an exercise price of $3.85 per share, and
options to acquire 30,000 shares have an exercise price of $3.64375 per
share. The options held by Mr. Johnson to acquire 159,430 shares have an
exercise price of $2.0625 per share; options to acquire 30,000 shares have
an exercise price of $2.3125 per share; options to acquire 30,000 shares
have an exercise price of $3.00 per share; and options to acquire 30,000
shares have an exercise price of $3.50, and options to acquire 30,000
shares have an exercise price of $3.64375 per share The exercise price
is equal to the fair market value, in the case of Mr. Johnson, and 110%
of fair market value, in the case of Messrs. Larson and Davis, of the
common stock of the Registrant as of the date of grant as determined by
the board of directors based on the trading price of the common stock of
the Registrant in the over-the-counter market. The options are
exercisable for a period of five years from the date of grant. Each of
the directors is restricted from first exercising options with respect to
more than $100,000 worth of stock during the initial years of the term of
the options.
<PAGE>
(3)The percentages shown are based on 7,586,726 shares of common stock of
the Registrant issued and outstanding as of October 6, 1995.
(4)The percentage ownership for the options held by the indicated
individuals is based on an adjusted total of issued and outstanding
shares giving effect only to the exercise of each individual's options.
(5)The number of shares indicated for Mr. Larson includes 793,619 shares
owned jointly with his wife over which he exercises joint investment and
voting control, and 47,400 shares which are held of record by Mr. Larson for
the benefit of his minor children and in which he disclaims direct
economic interest.
(6)The number of shares owned by Mr. Davis includes 745,498 shares held
jointly with his wife over which he exercises joint investment and voting
control and 75,000 shares which are held of record by Mr. Davis for the
benefit of his minor children and in which he disclaims direct economic
interest.
(7)The Registrant entered into an agreement with the holders of its $3.50
and $4.50 A Warrants, including Ms. Huberfeld and Ms. Bodner, pursuant to
which it agreed to issue additional warrants to purchase shares of common
stock at $4.50 (the $4.50 B Warrants") and $5.75 (the "$5.75 Warrants")
if the holders exercised their $3.50 Warrants by October 1, 1995 (which
has occurred) and their $4.50 Warrants by November 1, 1995, or, if later,
30 days after the effectiveness of a registration statement with respect
to the resale by the warrant holders of the common stock underlying the
$4.50 A Warrants. In the event Ms. Huberfeld and Ms. Bodner timely
exercise their $4.50 A Warrants as set forth above, they will each receive
a $4.50 B Warrant to acquire 200,104 shares of common stock and a $5.75
Warrant to acquire 400,208 shares of common stock. The $4.50 B and $5.75
Warrants which might be issued are not reflected on the foregoing table.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GUARANTEES FROM PRINCIPALS
The two founders and principal shareholders of the Registrant have
guaranteed the obligation of the Registrant on its revolving line
of credit that had an outstanding balance of approximately
$1,920,000 at June 30, 1995, and on a short-term obligation in
the principal amount of $301,500. In addition, these principals
have guaranteed the performance of the Registrant with respect to
certain equipment leases and other financial commitments of the
Registrant in the amount of approximately $389,000.
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND SCHEDULES
The following financial statements and schedules are included
immediately following the signatures to this report.
Page
Report of Peterson, Siler & Stevenson, independent public
accountants ___
Consolidated Balance Sheets as of June 30, 1995 ___
Consolidated Statements of Operations for the years ended
June 30, 1995 and 1994 ___
Consolidated Statement of Stockholders' Equity for the
years ended June 30, 1995 and 1994 ___
Statements of Cash Flows for the years ended June 30, 1995
and 1994 ___
Notes to Financial Statements ___
Financial Statement Schedules are omitted because they are not
applicable or because the required information is contained in
the Financial Statements or the Notes thereto.
EXHIBITS
SEC
Exhibit Reference
No. No. Title of Document Location
1 (3) Articles of Incorporation, Exhibit to report
as amended on form 10-K for
November 3, 1987 the year ended
June 30, 1988*
2 (3) Certificate of Amendment Exhibit to report
Articles of Incorporation on form 10-K for
the year ended
June 30, 1989*
3 (3) Designation of Rights, Registration
Privileges, and Preferences Statement filed
of 1995 Series Preferred on form SB-2,
Stock Exhibit 3, SEC
File No.
33-59963*
4 (3) Bylaws Registration
Statement filed
on form S-18,
Exhibit 5, SEC
File No.
33-3365-D*
5 (4) Form of $2.50 Warrant Registration
Agreement Statement filed
on form SB-2,
Exhibit 5, SEC
File No.
33-59963*
6 (4) Form of $3.50 Warrant Registration
Agreement Statement filed
on form SB-2,
Exhibit 6, SEC
File No.
33-59963*
7 (4) Form of $4.50 A Warrant This Filing
Agreement
<PAGE>
8 (4) Agreement between Larson This Filing
Davis Incorporation and
Warrant Holders
Agreements relating to
research and development
work performed by the
Company in 1983 for two
unrelated funding entities
9 (10) (a) Purchase Option Exhibit to report
Agreement between on form 10-K for
Larson Davis, the year ended
Laboratories and LDL June 30, 1988*
Research and Development,
dated August 31, 1983
10 (10) (b) License Option Exhibit to report
Agreement between on form 10-K for
Larson Davis the year ended
Laboratories and LDL June 30, 1988*
Research and Development,
Ltd., dated August 31,
1983
11 (10) (c) Cross License Option Exhibit to report
between Larson Davis on form 10-K for
Laboratories and LDL the year ended
Research and June 30, 1988*
Development II, Ltd.,
dated November 21, 1983
12 (10) (d) Purchase Option between Exhibit to report
Larson-Davis on form 10-K for
Laboratories and LDL the year ended
Research and Development June 30, 1988*
II, Ltd., dated
November 21, 1983
13 (10) 1987 Stock Option Plan Exhibit to report
of Larson Davis on form 10-K for
the year ended
June 30, 1988*
<PAGE>
14 (10) 1991 Employee Stock Exhibit to report
Award Plan of Larson on form 10-K for
Davis Incorporated the year ended
June 30, 1992*
15 (10) 1991 Director Stock Exhibit to report
Option and Stock on form 10-K for
Award Plan of Larson the year ended
Davis Incorporated June 30, 1992*
16 (10) Acquisition Agreement Incorporated by
by and between Larson Reference from
Davis Laboratories and report on form
Technology Integration 8-K dated
Incorporated, dated March 18, 1994*
March 18, 1994
17 (10) First Amendment to Incorporated by
Acquisition Agreement Reference from
dated March 28, 1994 report on form
8-K dated
June 30, 1994*
18 (10) Second Amendment to Incorporated by
Acquisition Agreement Reference from
dated June 16, 1994 report on form
8-K dated
June 30, 1994*
19 (10) Agreement between Registration
Larson Davis Statement Filed
Laboratories and Summit on Form SB-2,
Enterprises, Inc., Exhibit 20, SEC
of Virginia dated File No.
May 24, 1995 33-59963*
20 (10) Technology License, Incorporated by
Assumption, and Reference from
Maintenance Agreement report on form
between Larson Davis 8-K/A dated
Incorporated and Harris June 30, 1995
Miller Miller & Hanson,
Inc., dated August 15,
1995
<PAGE>
21 (21) Subsidiaries of Larson Incorporated by
Davis Incorporated Reference from
report on form
10-KSB dated
June 30, 1994*
22 (23) Consent of Peterson, This Filing
Siler & Stevenson
_____________________
*Incorporated by reference
REPORTS ON FORM 8-K
The Registrant filed a form 8-K dated June 30, 1995, as amended,
with respect to the transaction with Harris Miller Miller & Hanson,
Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has
caused this report to be signed on its behalf by the undersigned,
hereunto duly authorized.
LARSON DAVIS INCORPORATED
Dated: October 12, 1995 By /s/ Brian G. Larson
Brian G. Larson, President
(Principal Executive Officer)
Dated: October 12, 1995 By /s/ Dan J. Johnson
Dan J. Johnson,
Secretary/Treasurer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated:
Dated: October 12, 1995 By /s/ Brian G. Larson
Brian G. Larson, Director
Dated: October 12, 1995 By /s/ Larry J. Davis
Larry J. Davis, Director
Dated: October 12, 1995 By /s/ Dan J. Johnson
Dan J. Johnson, Director
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
FINANCIAL STATEMENTS
JUNE 30, 1995
PETERSON, SILER & STEVENSON, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
PETERSON, SILER & STEVENSON, P.C.
Certified Public Accountants
430 East 400 South
Salt Lake City, Utah 84111
(801) 328-2727
INDEPENDENT AUDITORS' REPORT
Board of Directors
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
Provo, Utah
We have audited the accompanying consolidated balance sheet of Larson-
Davis Incorporated and Subsidiaries at June 30, 1995, and the related
consolidated statements of operations, stockholders' equity and cash
flows for the years ended June 30, 1995 and 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial
statements of Larson-Davis, Ltd., a wholly owned subsidiary, which
statements constitute approximately 4% of total assets and 14% of
total revenues of the related consolidated totals. Those
statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the
amounts included for Larson-Davis, Ltd., is based solely on the
report of the other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit 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, based on our audits and the report of other
auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Larson-Davis Incorporated and Subsidiaries as of June 30,
1995 and the results of their operations and their cash flows for the
years ended June 30, 1995 and 1994 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note
18 to the consolidated financial statements, the Company has suffered
a significant loss from operations and is currently discontinuing
certain of its operations. Management's plans in regard to these
matters is also contained in Note 18.
/s/ PETERSON, SILER & STEVENSON, P.C.
August 4, 1995
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
June 30,
1995
CURRENT ASSETS:
Cash and cash equivalents $ 83,334
Trade accounts receivable, net of
allowance for doubtful accounts of
$15,825 2,130,835
Inventories 2,152,768
Other current assets 135,348
Costs and estimated earnings in excess
of related billings 200,318
Total Current Assets 4,702,603
PROPERTY, PLANT, AND EQUIPMENT,
net of accumulated depreciation of $1,672,979 1,337,574
ASSETS UNDER CAPITAL LEASE OBLIGATIONS,
net of accumulated depreciation of $322,267 303,522
NET ASSETS OF DISCONTINUED OPERATIONS 3,135,776
OTHER ASSETS:
Product technology, license rights
and software development costs
net of amortization of $419,626 1,975,699
Goodwill 124,493
Total Other Assets 6,877,064
$11,579,667
The accompanying notes are an integral part of these financial
statements.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30,
1995
CURRENT LIABILITIES:
Bank overdraft $ 40,039
Short-term notes payable 2,219,187
Accounts payable 886,489
Accrued liabilities:
Salaries and commissions 295,243
Payroll taxes 51,308
Other 122,452
Current maturities of long-term debt 206,409
Current maturities of capital lease obligations 133,719
Total Current Liabilities 3,954,846
LONG - TERM DEBT, less current maturities 958,251
CAPITAL LEASE OBLIGATIONS, less current
maturities 255,080
Total Liabilities 5,168,177
STOCKHOLDERS' EQUITY:
Preferred stock; $.001 par value: 10,000,000
shares authorized, 200,000 shares
issued and outstanding 200
Common stock; $.001 par value, 290,000,000
shares authorized, 6,559,479 shares
issued and outstanding 6,559
Additional paid-in capital 7,406,114
Retained earnings (deficit) (997,362)
Equity adjustment from translation of
foreign currency (4,021)
Total Stockholders' Equity 6,411,490
$11,579,667
The accompanying notes are an integral part of these financial
statements.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years Ended
June 30,
1995 1994
NET SALES $ 6,515,830 $ 5,137,638
COST AND OPERATING EXPENSES:
Costs of sales and operating expenses 2,598,586 2,139,814
Research and development 708,679 834,520
Selling, general and administrative 2,449,765 2,442,029
Total costs and operating expenses 5,757,030 5,416,363
INCOME (LOSS) FROM CONTINUING OPERATIONS 758,800 (278,725)
OTHER INCOME (EXPENSE):
Interest income 7,302 5,625
Interest expense (301,402) (270,383)
Other (6,189) 102,247
Total Other Income (Expense) (300,289) (162,511)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND DISCONTINUED
OPERATIONS 458,511 (441,236)
CURRENT TAX EXPENSE - -
DEFERRED TAX EXPENSE - -
INCOME FROM CONTINUING OPERATIONS
BEFORE DISCONTINUED OPERATIONS 458,511 (441,236)
DISCONTINUED OPERATIONS:
Income (loss) from operations of discontinued
airport installations division (net of
income tax) (770,128) 643,280
Estimated income (loss) on disposal of airport
installations division - -
Loss from discontinued operations of Larson-
Davis Info., Inc. and Advantage Software,
Inc. (net of income taxes) - (400,200)
Loss on disposal of the operations of Larson-
Davis Info., Inc. and Advantage Software,
Inc. (net of income taxes) - (2,156,987)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS (770,128) (1,913,907)
CHANGE IN ACCOUNTING PRINCIPLE - Cumulative
effect on years prior to June 30, 1994, of
application of Statement of Financial
Accounting Standards No. 109, Accounting
for Income Taxes - 486,992
NET INCOME (LOSS) $ (311,617) $(1,868,151)
PRIMARY EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) from continuing operations $ .07 $ (.08)
Income (Loss) from discontinued operations
of airports installation division (.12) .11
Loss from discontinued operations of Larson-
Davis Info., Inc. and Advantage Software,
Inc. - (.07)
Loss on disposal of Larson-Davis Info., Inc.
and Advantage Software Inc. - (.37)
Cumulative effect of change in accounting
principle - .08
PRIMARY EARNINGS (LOSS) PER COMMON SHARE $ (.05) $ (.33)
The accompanying notes are an integral part of these financial
statements.
<TABLE>
<CAPTION>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1995 and 1994
Equity Adjustment
Preferred Stock Common Stock Additional Retained From Foreign
_______________________ __________________ Paid-in Earnings Currency
Shares Amount Shares Amount Capital (Deficit) Translation Total
__________ __________ __________ ________ __________ _________ ________________ __________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, June 30, 1993 - - 5,413,127 5,413 4,719,264 1,182,406 - 5,907,083
Shares issued upon exercise
of options, at $1.50 and
$1.60 per share - - 33,000 33 49,767 - - 49,800
Shares issued in various
private placements from
$2.15 to $3.32 per share,
net of offering costs
of $175,000 - - 381,122 381 894,619 - - 895,000
Equity adjustment for
translation of foreign
currency - - - - - - 3,413 3,413
Net loss for the year
ended June 30, 1994 - - - - - (1,868,151) - (1,868,151)
__________ _______ _________ ______ _________ ___________ ________ ____________
BALANCE, June 30, 1994 - - 5,827,249 5,827 5,663,650 (685,745) 3,413 4,987,145
Shares issued upon
exercise of options,
at $1.60 to $2.56
per share - - 19,325 19 42,896 - - 42,915
Shares issued in various
private placements from
$1.63 to $1.75 per share,
net of offering costs
of $34,767 - - 614,000 614 990,729 - - 991,343
Shares issued for service
rendered from $1.25 to
$2.50 per share - - 98,905 99 209,039 - - 209,138
Preferred shares issued
for partial payment of
a note payable 200,000 200 - - 499,800 - - 500,000
Equity adjustment for
translation of foreign
currency - - - - - - (7,434) (7,434)
Net loss for the year
ended June 30, 1995 - - - - - (311,617) - (311,617)
___________ _______ _________ ______ ________ ___________ ______________ ___________
BALANCE, June 30, 1995 200,000 200 6,559,479 6,559 7,406,114 (997,362) (4,021) 6,411,490
<FN>
The accompanying notes are an integral part of this financial statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
For the years Ended
June 30,
1995 1994
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ (311,617) $ (1,868,151)
Adjustments to reconcile net income
(loss) to net
cash used by operating activities:
Depreciation 329,286 222,020
Amortization 406,452 550,635
Provision for losses on accounts
receivable 875 2,000
Stock issued in lieu of compensation 219,708 -
(Gain) loss on sale of assets 6,189 (102,247)
Estimated loss on disposition - 2,156,986
Changes in assets and liabilities:
Accounts receivable (520,395) 1,060,112
Inventories 2,464 (355,507)
Other current assets (198,022) (40,964)
Due from related party 29,817 47,808
Unbilled contract receivable 431,529 (852,932)
Bank overdraft 40,039 -
Accounts payable (303,477) 459,898
Accrued liabilities (59,205) (59,186)
Deferred taxes - (515,000)
Income taxes payable - (48,185)
Total Adjustments 385,260 2,525,438
Net Cash Provided (Used) by Operating
Activities 73,643 657,287
Cash Flows From Investing Activities:
Purchase of property, plant and equipment,
net of retirements (449,917) (208,194)
Proceeds from sale of assets 59,477 263,787
Payments for software development costs (1,235,229) (2,826,496)
Purchase of capital lease assets (189,747) (100,976)
Purchase of goodwill - (138,721)
Foreign currency translation (7,434) 3,413
Net Cash Provided (Used ) by Investing
Activities (1,822,850) (3,007,187)
Cash Flows From Financing Activities:
Net borrowings under short term debt 277,687 1,291,716
Proceeds from issuance of common stock 1,058,455 1,119,800
Common stock offering costs (34,767) (175,000)
Proceeds from long-term borrowings 56,656 1,115,950
Principal payments on long-term debt (80,293) (696,711)
Principal payments on capital lease
obligations (109,919) (57,905)
Proceeds from capital leases 232,461 79,981
Net Cash Provided (Used) by Financing
Activities 1,400,280 2,677,831
Net Increase in Cash and Cash Equivalents (348,927) 327,931
Cash and Cash Equivalents at Beginning of Year 432,261 104,330
Cash and Cash Equivalents at End of Year $ 83,334 $ 432,261
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the year for:
Interest $ 355,988 $ 270,383
Income taxes $ - $ 78,980
</TABLE>
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
For the year ended June 30, 1995:
The Company issued 43,405 shares of common stock to employees in lieu
of compensation with a computed
value of $108,513.
The Company in connection with the discontinuance of their operations
in the Airport Noise and Operations Monitoring Systems Industry
reclassified the associated assets and liabilities to net assets of
discontinued operations [See Note 17].
The Company issued 200,000 shares of preferred stock in payment of
$500,000 of short term obligations.
The Company converted $300,000 of short-term debt to a long-term note
payable.
The Company issued 30,500 shares of restricted common stock for $26,250
of patent costs and $11,875 of research and development costs expended
on the Company's behalf on acquired technologies.
The Company issued 25,000 shares of common stock valued at $62,500 to
a consultant for services rendered.
The Company issued 5,125 shares of common stock valued at $10,575 to
an officer of the Company for the cancellation of 8,245 stock options.
For the year ended June 30, 1994:
The Company acquired certain software and technology by issuing and
assuming various liabilities, valued at $2,029,047 [See Note 19].
The accompanying notes are an integral part of this financial
statement.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accompanying consolidated financial
statements of Larson-Davis Incorporated include the accounts of
the Company and its wholly-owned subsidiaries, Larson-Davis
Laboratories, Advantage Software, Inc., LD Info., Inc. and Larson
Davis Limited (a Foreign Corporation). All significant
intercompany transactions and accounts have been eliminated in
consolidation.
Inventories - Inventories are valued at the lower of cost (using
average cost method) or market.
Plant and Equipment - Equipment is carried at cost less related
accumulated depreciation. Depreciation, including amortization
of capitalized leases, is computed using the straight-line method
over useful lives ranging from 3 to 7 years. Real property and
improvements are being depreciated over a useful life of 25 years
using the straight-line method.
Earnings Per Share - The computation of earnings per share of
common stock is based on the weighted average number of shares
of common stock and common stock equivalents outstanding during
the period. The weighted average number of shares outstanding
for primary earnings (loss) per share are 6,227,707 and 5,824,345
for the years ending 1995 and 1994, respectively. Fully diluted
earnings per share are not presented as their effect is anti-
dilutive.
Revenue Recognition - The Company recognizes revenue on product
sales and services at the time of product delivery or rendering
services. However, with respect to long-term contracts, the
Company's earning process extends over a much longer time period.
The Company has adopted a percentage-of-completion method for
accruing revenues and expenses related to long term contracts.
Revenues are accrued and a current, non-trade receivable is
created based on progress toward completion of the particular
contract. Progress is determined by comparing actual time
incurred and materials used with expected estimates of total
contract costs. In short, revenues are accrued as they are
earned by the Company. Billings to the customer are made
according to payment terms of the contract. When a billing is
created, the amount of the billing is transferred into the
regular trade receivable account to await receipt of payment
[See Note 3]. Losses on long-term contracts are recognized when
they become apparent.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Continued]
Cash and Cash Equivalents - For purposes of the statement of cash
flows, the Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
Product Technology and License Rights - The Company capitalizes
costs incurred to acquire product technology and license rights.
These costs are being amortized over estimated useful lives
ranging from 10 to 17 years by the straight line method.
Software Development Costs - The Company conducts multiple
software development efforts simultaneously. Each individual
program is reviewed and evaluated on a product-by-product basis.
Pursuant to FASB No. 86, Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed, the Company
capitalizes costs incurred to develop software after technological
feasibility has been established. Where required by FASB
Statement No. 86, amortization of these development costs is
computed either based on the number of contracts initiated during
the current year relative to the anticipated total number of
contracts for that period, or the straight line method over the
expected useful life of 10 years, whichever is greater.
Income Taxes - Effective for the year ended June 30, 1994, the
Company adopted FASB Statement No. 109, Accounting for Income
Taxes. There was a cumulative benefit from the change in
accounting principle of $486,992 [See Note 7]. The Company
previously calculated its tax provision according to FASB
Statement No. 96.
Foreign Currency Translation / Re-measurement - For foreign
subsidiaries whose functional currency is the local foreign
currency, balance sheet accounts are translated at exchange rates
in effect at the end of the year and income statement accounts
are translated at average exchange rates for the year.
Translation gains and losses are included as a separate
component of stockholders' equity. Exchange gains (losses) are
included as a component of general and administrative expense.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - INVENTORIES
The composition of inventories at June 30, 1995, consists of the
following:
<TABLE>
<CAPTION>
1995
<S> <C>
Raw materials $ 669,433
Work in progress 765,617
Finished goods 717,718
$ 2,152,768
</TABLE>
NOTE 3 - CONTRACTS IN PROGRESS
The Company has accrued and recognized revenues on long-term
contracts based on a percentage-of completion method
[See Note 1], which attempts to recognize the income as it is
being earned. The unbilled contract receivable represents
amounts of contract revenues accrued and recognized that have
not yet been billed to the customer. Billings on the contracts
are being made according to payment term stipulations which do
not necessarily coincide with the "earning" process. At June
30, 1995, the Massport contract accounted for $98,750 of cost
and estimated earning in excess of related billings.
Costs to date, estimated earnings, and the related progress
billings to date on other airport contracts in progress are
as follows:
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
June 30,
1995 1994
<S> <C> <C>
Total costs incurred to date $ 2,416,110 $ 886,861
Estimated earnings to date (40,465) 306,457
Revenue Recognized to date 2,375,645 1,193,318
Progress billings to date (1,688,274) (289,168)
Costs and estimated earnings in
excess of related billings on
uncompleted contracts 687,371 904,150
Cost and estimated earnings
reclassified to net assets of
discontinued operations (585,803) -
$ 101,560 $ 904,150
</TABLE>
Subsequent to the year ended June 30, 1995, the Company
discontinued their business operations in the Airport Noise
and Operations Monitoring Systems Industry. The Company has
licensed its proprietary Airport Noise and Operations
Monitoring Software (ANOMS), with the intent to sell, and
transferred management, implementation and future billings
of substantially all of its airport noise monitoring contracts
[See Note 20].
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30, 1995 consists of the
following:
<TABLE>
<CAPTION>
1995
<S> <C>
Land $ 25,000
Building and improvements 946,153
Machinery and equipment 1,827,020
Furniture and fixtures 212,380
3,010,553
Less: accumulated depreciation (1,672,979)
$1,337,574
</TABLE>
Total depreciation expense related to property and equipment
was $217,790 and $222,020 for the years ended June 30, 1995 and
1994, respectively.
NOTE 5 - ASSETS UNDER CAPITAL LEASE OBLIGATIONS
The Company leases certain equipment on 36 to 60 month capital
leases. The leases contain provisions for the Company to acquire
the equipment at the end of the lease term through either payment
of a nominal amount or in other cases the greater of fair market
value or 10% of the original equipment cost.
Equipment under capital lease obligations at June 30, 1995 is as
follows:
<TABLE>
<CAPTION>
1995
<S> <C>
Equipment $ 625,789
Accumulated depreciation (322,267)
$ 303,522
</TABLE>
Total depreciation on equipment under capital lease obligation
was $111,496 and $68,755 for the years ended June 30, 1995 and
1994, respectively.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - ASSETS UNDER CAPITAL LEASE OBLIGATIONS [Continued]
Total future minimum lease payments, executor costs and current
portion of capital lease obligations is as follows:
Future minimum lease payments for the years ended June 30,
<TABLE>
<CAPTION>
Year ending June 30, Lease Payments
<S> <C>
1996 $ 166,376
1997 141,805
1998 71,523
1999 67,597
2000 8,452
Total future minimum lease payments $ 455,753
Less amounts representing
interest and executor costs (66,954)
Present value of the future minimum
lease payments 388,799
Lease current portion (133,719)
Capital lease obligations -
long term $ 255,080
</TABLE>
The Company leases certain office space and equipment under
operating leases expiring in 1997. Minimum future rental
payments under these non-cancelable operating leases as of
June 30, 1995 are as follows:
<TABLE>
<CAPTION>
Year Ending June 30, Amount
<S> <C>
1996 $ 53,701
1997 35,801
Total Minimum Future Rental Payments $ 89,502
</TABLE>
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - PRODUCT TECHNOLOGY, LICENSE RIGHTS AND SOFTWARE DEVELOPMENT
COSTS
The intangible asset balances at June 30, 1995 of $1,975,699
consist of product technology, license rights, patents and
software development costs. These intangible assets are being
amortized using the straight line method over useful lives
ranging from 5 to 17 years. Total amortization expense on
intangible assets was $406,452 and $464,951, for the years
ended June 30, 1995 and 1994.
The long term value of these assets is connected to the
application of these technologies and software costs to viable
products which can be successfully marketed by the Company.
Management believes current and projected sales levels of its
current and planned products will support the carrying costs of
the related software and technologies.
The following is a summary of product technology, license rights
and software development costs at June 30, 1995:
<TABLE>
<CAPTION>
1995
CONTINUING OPERATIONS:
LDL:
<S> <C>
Patents, licenses and acquired technologies $ 517,145
Capitalized software 1,829,117
Accumulated amortization (382,729)
1,963,533
LTD:
Capitalized software 49,063
Accumulated amortization (36,897)
12,166
Net product technology, license rights and
software development costs related to
continuing operations $ 1,975,699
DISCONTINUED OPERATIONS: [See Note 17]
LDL:
Capitalized software (ANOMS) 2,885,447
Accumulated amortization (351,568)
2,533,879
Net purchased software and software
development costs included in net assets
of discontinued operations [See Note 20] (2,533,879)
Total Carrying Value $ 1,975,699
</TABLE>
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTE 6 - PRODUCT TECHNOLOGY, LICENSE RIGHTS AND SOFTWARE DEVELOPMENT
COSTS [Continued]
Some of the technology was purchased from the founders of the
Company, but the largest portion of these rights and technologies
were purchased from unrelated third party entities and by
entering into royalty contracts. The Company paid royalty
expenses included in the statement of income for the years
ended June 30, 1995 and 1994 of $73,937 and $69,536,
respectively.
Subsequent to the year ended June 30, 1995, the Company
discontinued their operation in the Airport Noise and Operations
Monitoring Systems Industry. The Company has licensed its rights
to proprietary Airport Noise and Operations Monitoring Software
(ANOMS) and has reclassified the net capitalized software costs
of $2,533,879 to "Net Assets of Discontinued Operations."
NOTE 7 - INCOME TAXES
The Company adopted Statement of Financial Accounting Standards
No. 109 Accounting for Income Taxes [FASB 109] during Fiscal 1994.
FASB 109 requires the Company to provide a net deferred tax asset
or liability equal to the expected future tax benefit or expense
of temporary reporting differences between book and tax accounting
and any available operating loss or tax credit carryforwards.
The financial statements for years prior to 1994 have not been
restated and there was a cumulative benefit from the change in
accounting principle of $486,992. At June 30, 1995, the total
of all deferred tax assets are $953,677 and the total of the
deferred tax liabilities are $494,570. The amount of and ultimate
realization of the benefits from the deferred tax assets for
income tax purposes is dependent, in part, upon the tax laws in
effect, the Company's future earnings, and other future events,
the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the deferred tax
assets, the Company has established a valuation allowance of
$459,107 as of June 30, 1995, which has been offset against the
deferred tax assets. The net change in the valuation allowance
during the years ended June 30, 1995, was $177,799.
The Company has available at June 30, 1995, unused operating
loss carryforwards of approximately $1,500,000, which may be
applied against future taxable income and which expire in
various years through 2010.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTE 7 - INCOME TAXES [Continued]
The components of income tax expense from continuing operations
for the years ended June 30, 1995 and 1994 consist of the
following:
<TABLE>
<CAPTION>
June 30,
1995 1994
<S> <C> <C>
Current income tax expense:
Federal $ - $ -
State - -
Net current tax expense - -
Deferred tax expense (benefit)
arising from:
Excess of tax over financial
accounting depreciation 13,032 (6,613)
Amortization - technology 490,411 (827,382)
Software development 101,009 55,722
Other (9,908) (3,817)
Net operating loss carryforward (416,745) (58,608)
Valuation allowance (177,799) 840,698
Net deferred tax expense $ - $ -
</TABLE>
Deferred income tax expense results primarily from the reversal
of temporary timing differences between tax and financial
statement income.
A reconciliation of income tax expense at the federal statutory
rate to income tax expense at the Company's effective rate is as
follows:
<TABLE>
<CAPTION>
Year Ended June 30,
1995 1994
<S> <C> <C>
Computed tax at the expected federal
statutory rate 34.00% 34.00%
Excess of tax over financial accounting
depreciation (2.73) (.31)
State income taxes, net of federal
income tax benefits 3.30 3.00
Amortization of software and technology (124.07) 36.06)
Net operating loss carryforward 87.43 (2.74)
Other items 2.07 2.11
Effective income tax rates 0.00% 0.00%
</TABLE>
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - INCOME TAXES [Continued]
The temporary differences gave rise to the following deferred
tax asset (liability) at June 30, 1995:
<TABLE>
<CAPTION>
<S> <C>
Excess of book over tax accounting
depreciation 26,935
Amortization - technology 310,609
Software development (494,570)
Allowance for doubtful accounts 5,855
Accrued vacations 27,847
NOL carryforwards 582,301
Donations 130
</TABLE>
The deferred taxes are reflected in the consolidated balance sheet
at June 30, 1995 as follows:
<TABLE>
<CAPTION>
<S> <C>
Short term asset (liability) $ -
Long term asset (liability) $ -
</TABLE>
NOTE 8 - 401(K) PROFIT SHARING PLAN
During February 1995, the Company adopted a 401(K) profit sharing
plan under which eligible employees may choose to save up to 10%
of salary income on a pre-tax basis, subject to IRS limits. All
employees who have completed 6 months of service are eligible
to enroll in the plan. The Company matches 50% of the
employee's contribution to the plan up to a maximum of 1.5% of
the employees annual salary. For the year ended June 30, 1995,
the Company contributed $15,282 to the plan.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - LONG-TERM NOTES PAYABLE
<TABLE>
<CAPTION>
At June 30, 1995, the Company is indebted for the following notes
payable:
1995
<S> <C>
9.75% and 9.9% installment loans payable,
secured by the automobile which they purchased,
with monthly payments of $515 and $686 56,657
8.25% note payable to bank, payable in monthly
installments of principal and interest of
$8,246.19 secured by real estate; due January 1,
1999. 808,003
9% note payable, payable in monthly installments
of principal and interest of $15,845 due
March 31, 1997. 300,000
Total long-term debt 1,164,660
Less: current maturities (206,409)
Long-term debt, excluding current portion $ 958,251
</TABLE>
Aggregate maturities of long-term debt for the succeeding five
years are as follows:
<TABLE>
<CAPTION>
Year ending June 30,
<S> <C>
1996 $ 206,409
1997 178,852
1998 48,576
1999 53,030
2000 57,894
Thereafter 619,899
$ 1,164,660
</TABLE>
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - PREFERRED STOCK
During the fiscal year ended June 30, 1995 the Company issued
200,000 shares of preferred stock in return for the extinguishment
of $500,000 of short-term debt payable in connection with the
acquisition of ANOMS [See Note 19]. The Company's preferred
stock pays cumulative dividends at a rate of $.225 per share per
annum, payable monthly. As of June 30, 1995, dividends payable
amounted to approximately $5,000. The preferred stock is
convertible into common stock at the option of the holder at a
conversion price of $2.50 per share. The preferred stock holders
are not entitled to voting privileges.
NOTE 11 - SHORT-TERM NOTES PAYABLE
At June 30, 1995, the Company is indebted for the following
short-term notes payable:
<TABLE>
<CAPTION>
1995
<S> <C>
Prime plus 2.75% revolving line-of-credit with
funds available based on accounts receivable
and inventory by which it is secured to a
maximum of $2,500,000 interest payable monthly;
principal due January 31, 1996 $1,920,215
11% and 9.25% at June 30, 1995 and 1994.
Revolving line-of-credit due on bank demand,
or if no demand is made, in one payment on
September 25, 1995; secured by 300,000 shares
of Larson Davis, Inc. stock 298,972
$2,219,187
</TABLE>
As of June 30, 1995, in addition to the above $1,920,215, the
Company had two letters of credit against the line of credit in
the amounts of $400,000 and $7,040. At June 30, 1995 the
maximum allowed based on eligible accounts receivable and
inventory was exceed by draws against the revolving line by
$140,902. However, the overdraft is temporarily approved by the
bank based on a pledge of 200,000 shares of the Company's stock
and the granting in favor of the bank of a 2nd trust deed on the
Company's real estate holdings. Assuming the existence of
eligible accounts receivable and inventory as collateral, the
available line at June 30, 1995 would be $172,745.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTE 11 - SHORT-TERM NOTES PAYABLE [Continued]
The following table presents the average borrowing, the maximum
amount outstanding, and the weighted average interest rate on
short term borrowings:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Average short term borrowing $2,849,918 $1,992,331
Maximum amount outstanding $3,140,399 $2,741,500
Weighted average interest rate -
monthly calculation 11% 10%
</TABLE>
NOTE 12 - COMMON STOCK
During the year ended June 30, 1995 and 1994, the Company
issued 14,200 and 33,000 shares of common stock to certain
officers, directors, shareholders and an employee upon exercise
of common stock options at prices ranging from $1.50 to $2.56
per share. During 1995, the Company also issued 5,125 shares of
common stock valued at $10,575 to an officer of the Company for
the cancellation of 8,245 stock options
The Company issued during the year ended June 30, 1995 and 1994,
614,000 and 381,122 shares of common stock in various private
placements at prices ranging from $1.63 to $3.32 per share. In
one of the private placements, warrants to purchase 500,000
additional shares of common stock at $2.50 and to purchase
500,000 shares of common stock at $3.50 per share were also
issued.
The Company also issued 65,500 shares of common stock valued at
prices ranging from $1.25 to $2.5 per share for services
rendered and in reimbursement of legal fees and research and
development cost.
During the year ended June 30, 1995, pursuant to a discretionary
stock award plan, the Company issued 43,405 shares of previously
unissued common stock to its employees, valued at $2.50 per
share, the market price on the date the Board of Directors
passed the resolution. This transaction resulted in taxable
compensation to the employees and a corresponding deduction to
the Company in the amount of $108,513.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 13 - RELATED PARTY TRANSACTIONS
During 1995 and 1994, officers, directors and shareholders
exercised certain options to acquire shares of common stock
[See Note 12].
During December 1987, the Company loaned an aggregate of $55,000
to three of its officers and directors. In the fiscal year ended
June 30, 1993, one of the loans was eliminated by a compensation
charge of $7,763 to the related individual for the amount of
principal and interest then outstanding. During the fiscal year
ended June 30, 1994 the two remaining notes were reduced through
a $19,308 charge to compensation to the related individuals. One
of the notes was eliminated through the transfer of 6,000 shares,
of the Company's stock held by the individual, in payment of
$33,750 of the Company's obligations. The remaining note was
eliminated through the transfer of 7,100 shares of the Company's
Stock held by the officer in payment of $28,400 of the Company's
obligations and a cash payment of $1,417. Interest accrued on
the loans amounted to $0 and $5,250 at June 30, 1995 and 1994,
respectively. The unpaid balance at June 30, 1995 and 1994 was
$0 and $29,817
NOTE 14 - STOCK OPTIONS / WARRANTS
In July 1991, the board of directors adopted the Employee Stock
Award Plan, which was later approved by shareholders at the
annual meeting in June 1993. Under the provisions of the plan,
the board can award up to 225,000 shares of common stock over
the three year life of the plan to employees of the Larson-Davis
who are not also directors of the Company. A total of 9,705
shares have been awarded to officers who are not also directors
of the Company.
In July 1991, the board of directors also adopted the Director
Stock Option Plan which was approved by the shareholders in June
1992. Under the terms of the plan, options are automatically
awarded on June 30 of each year during the term of the plan, to
the three individuals who are currently directors of the Company.
The options have an exercise price equal to the closing bid price
as reported by NASDAQ for the common stock on June 30, or an
exercise price equal to 110% of that price, if the director is
also a 10% shareholder of the Company. Awards under the plan are
automatic as long as the individual is a director of the Company
as of each June 30 during the term of the plan, which expires
July 1, 1996. A maximum of 450,000 shares can be optioned under
this plan. Effective June 30, 1992, two directors each receive
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 14 - STOCK OPTIONS / WARRANTS [Continued]
options to acquire 30,000 shares at an exercise price of $2.54
per share. The other director received an option to acquire
30,000 shares with an exercise price of $2.31 per share.
Effective June 30, 1993, two directors each received options to
acquire 30,000 shares at an exercise price of $3.30 per share
and the remaining director received an option to acquire 30,000
shares with an exercise price of $3.00 per share. Effective June
30, 1994 two directors received options to acquire 30,000 shares
each at an exercise price of $3.85 per share. The other
director received an option to acquire 30,000 shares with an
exercise price of $3.50 per share. Effective June 30, 1995 two
directors each received options to acquire 30,000 shares at
$3.64 per share. The other director received an option to
acquire 30,000 shares at $3.31 per share. None of the foregoing
options have been exercised by the directors and the options
expire five years from the date the options were granted.
In November 1987, and later revised in December of 1994, the
board of directors of the Company authorized a stock option plan
pursuant to which options to acquire common stock of the Company
can be issued to employees of the Company. The issued options
are intended to qualify as incentive stock options under the
provisions of the Internal Revenue Code. Two directors hold
options at June 30, 1995 which expire in December 1999, under
this plan to acquire 130,000 shares each at $2.27 per share.
As of June 30, 1995 none of the options had been exercised. The
third director holds options at June 30, 1995, which expire in
December 1999, to acquire 177,000 shares at $2.06 per share.
During the year ended June 30, 1995 and 1994 options for 20,570
and 3,000 were exercised at prices ranging from $1.60 to $2.06
per share.
During December 1994, employees of the Company who were not
directors were granted options, expiring in December, 1999, to
purchase 50,000 shares of stock at $2.06 per share. As of
June 30, 1995 none of the options had been exercised.
During March, 1995, employees of the Company who were not
directors were granted options, expiring in March 2000, to
acquire 30,000 shares of stock at $2.56 per share. As of
June 30, 1995, 10,000 options had been exercised by an employee.
Effective June 1989, a former employee was granted options
outside of the plan. 20,000 options were granted, bearing
exercise prices of $2.75 for 15,000 options and $5.00 per
share for 5,000 options. During the year ended June 30, 1994
these options were extended for an additional five years and
options for an additional 6,000 shares at $2.00 per share were
granted to the individual. As of June 30, 1995 none of these
options were exercised.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 14 - STOCK OPTIONS / WARRANTS [Continued]
During the year ended June 30, 1994, 30,000 options were granted
and exercised by an non-related party at $1.66 per share.
During April 1995, in connection with a private placement of
common stock, the Company issued warrants to purchase 500,000
shares of common stock at $2.50 per share expiring in April 1996
and warrants to purchase 500,000 shares of common stock at $3.50
per share expiring in April 1997.
NOTE 15 - LEGAL MATTERS
The Company is from time to time involved in litigation as a
normal part of its ongoing operations. At June 30, 1995, there
were no litigation's which in management's estimate would have
any material impact on the financial condition of the Company.
NOTE 16 - MAJOR CUSTOMER AND EXPORT SALES
For the fiscal year ended June 30, 1995 and 1994, the Company has
no customer whose sales exceed 10% of the continuing sales of
the Company.
Export sales for the fiscal years ending June 30, 1995 and
1994 are broken down as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Asia $ 741,927 $ 218,537
Australia 94,412 156,728
Canada 169,428 140,386
Western Europe 1,740,174 1,332,727
India - -
Middle East 3,071 51,315
Scandinavia 189,828 51,119
Eastern Europe 651,746 330,885
South America 4,291 7,179
TOTALS $3,594,877 $2,288,876
</TABLE>
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 17 - DISCONTINUED OPERATIONS
The accompanying financial statements as of June 30, 1995 and
1994 have been reclassified to reflect management's decision
to discontinue the Company's operations in the Airports Noise
and Operation Monitoring Industry [See Note 20]. The net assets
related to the Airport Industry are included on the Company's June
30, 1995 balance sheet as "net assets of discontinued operations".
The Company's operations in the Airport Industry for the years
ended June 30, 1995 and 1994 are included as Discontinued
Operations in the financial statements of the Company. As of
June 30, 1995, management estimates the proceeds from the
subsequent license/sales of the "Net assets of discontinued
operations" will equal or exceed the carrying value of these
assets. Therefore, no loss on disposal has been recognized.
During the year ended June 30, 1994, with the return of the
minority interest shares in Larson-Davis Info, Inc. ("Info"),
the Board of Directors decided, pursuant to a plan effective
June 30, 1993, to discontinue the operations and pursue the sale
or licensing of the software technologies then owned by Info and
Advantage Software, Inc.. In as much as the Company was unable
to locate a buyer for the technologies, management elected to
reduce the carrying value of the related assets to zero as of
June 30, 1994, resulting in a loss of $2,256,987. As a result,
the balance sheets and statements of operations presented in
these financial statements reflect a separation of the net
assets of these subsidiaries as of June 30, 1994 and operating
results for the fiscal year then ended.
Assets to be disposed of consisted of the following at June 30,
1995:
<TABLE>
<CAPTION>
1995
<S> <C>
Cost and Estimated Earnings in Excess of
Related Billings $ 585,803
Prepaid Contract Cost 115,594
Product Technology and License Costs, Net 2,533,879
(Less) liabilities assumed by licenser
[See Note 20] (99,500)
Totals $ 3,135,776
</TABLE>
Assets are shown at their net book values.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 17 - DISCONTINUED OPERATIONS [Continued]
The following is a condensed, proforma statement of operations
that reflects what the presentation would have been without the
reclassifications required by "discontinued operations"
accounting principles:
<TABLE>
<CAPTION>
Year Ended June 30,
1995 1994
<S> <C> <C>
Net Sales: $ 8,890,527 $ 6,410,155
Cost of Goods Sold: (4,751,581) 2,453,709)
Other Operating Expenses: (4,077,163) (3,928,167)
Other Income (Expense): (373,400) (162,672)
Minority Interest in Loss of
Subsidiary: - -
Provision for Taxes: - -
Net Income (loss): $ (311,617) $ (134,393)
Earnings (loss) per Share: $ (.05) $ (.02)
Net sales related to these discontinued technologies for 1995
and 1994 were $2,374,697 and $1,272,517, respectively. These
amounts are not included in net sales in the accompanying
income statements.
</TABLE>
NOTE 18 - CONTINUING OPERATIONS
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles,
which contemplates continuation of the Company as a going
concern. However, the Company had net losses of $(311,617) and
$(1,868,151) for the years ended June 30, 1995 and 1994. The
overall net loss for fiscal 1995 is a result of operating
revenues and expenses related to discontinued operations.
Further the company has significant intangible assets
(including those held for resale from its discontinued
operations) the realization of which is not assured.
The financial statements do not include any adjustments
relating to the recoverability and classification of recorded
assets that might be necessary in the event the Company cannot
continue in its present form.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 18 - CONTINUING OPERATIONS [Continued]
As highlighted in the statements of operations, the discontinued
operations produced losses of $(770,128) and $(1,913,907) for
years 1995 and 1994, respectively. The effect of the
discontinued operation and subsequent transfer of rights and
assets eliminates substantial amortization expense (a non-cash
expense). This in addition to management's plan and subsequent
actions to reduce labor expenditures should favorably affect
future reporting years. The Company has also subsequently
received proceeds from the sale of common stock which greatly
improves its ability to meet current and future obligations [See
Note 20].
The Company, as of June 30, 1995, had a current ratio of 1.2:1
indicating sufficient current assets to operate; The Company had
significant order backlog for the Company's instrumentation
subsequent to the financial statement date (approximately
$916,000). Management believes the discontinued operations will
not hinder their ability to generate working capital for their
on-going operations. In view of these factors, Management
believes the Company's operating and financial requirements
provide the opportunity for the Company to maintain current
operations.
NOTE 19 - BUSINESS ACQUISITIONS
During the quarter ended March 31, 1994, the Company purchased all
of the outstanding common shares of Industrial & Marine Acoustics,
Ltd. [IMA], a corporation chartered in England, for a cash
payment of 6,000 British pounds (approximately $9,300). IMA was
formerly an independent sales representative of the Company for
Great Britain. As of the date of acquisition, IMA had negative
net assets of approximately $(133,000), giving rise to the
"goodwill" recorded on the company's balance sheet at that time.
This "goodwill" is being amortized over 10 years. The balance
sheet as of March 31, 1994 for this subsidiary has been
consolidated with the rest of the Company, and operations for
the months subsequent to March 1994 have been reflected in the
consolidated statements of operations. Subsequently, management
renamed the British subsidiary Larson-Davis, Ltd. and plans to
develop an expanded service and repair center to serve the
European Community.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 19 - BUSINESS ACQUISITIONS [Continued]
On June 30, 1994, the Company completed the acquisition of
substantially all of the intangible assets of Technology
Integration Incorporated, a privately-held Massachusetts
Corporation ["TII"] as a purchase. The Company acquired TII's
rights and obligations to approximately 25 contracts for the
installation, maintenance, and support of airport noise
monitoring systems. In addition, the Company acquired all
rights to the ANOMS Software developed by TII for use in airport
noise monitoring systems, a principal competitor of the
Company's own proprietary software. The Company also hired 10
former employees of TII who were an integral part of TII's
airport noise monitoring business. The Company intended to
complete existing contracts with ANOMS and then combine ANOMS
and its own proprietary software to produce an enhanced product.
However, subsequent to June 30, 1995, the Company discontinued
their selling, installation and maintenance of airport noise and
operations monitoring systems [See Note 20].
Under the terms of the Acquisition Agreement with TII, as amended,
the cost of the acquired assets were $2,508,541. The Company paid
$100,000 to reduce TII's obligation to its principal bank,
delivered $267,380 in cash to TII at closing, and assumed the
obligation of TII with respect to a promissory note (the "Note")
in the principal amount of $950,000. Principal payments and the
issuance of preferred stock reduced this liability to $300,000 as
of June 30, 1995. The Note bears interest at 9% per annum,
requires monthly principal and interest payments of $15,845 and
is due and payable on or before March, 1997. The note was
acquired by the majority shareholder of TII from TII's principal
bank and represents the remainder of the obligation of TII to
such bank. The company paid this shareholder $20,000 to cover
his expenses in connection with the acquisition of the Note and
granted the shareholder a warrant to purchase, at a purchase
price of $0.001 per share, shares of common stock of the Company
having a fair market value equal to 1% of the unpaid principal
balance of the Note for each month the Note remained outstanding
subsequent to September 30, 1994 (warrants to acquire a total of
16,483 shares were issued and remain outstanding at June 30,
1995). In addition, the Company assumed $471,675 of TII's
accounts payable, $28,771 of other payables, $22,424 of accrued
liabilities of TII, forgave receivables from TII of $306,177 and
issued a note payable of $250,000 to TII bearing interest of 8%
that was payable over an 18 month period. This $250,000
liability was eliminated prior to June 30, 1995.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 19 - BUSINESS ACQUISITIONS [Continued]
The following are the [Unaudited] Condensed Combined Proforma
Statements of Operations that reflect what the presentation
would have been if the purchase of the acquired assets of TII
and the purchase of IMA had occurred at the beginning of the
respective periods and if the operations acquired from TII had
not been subsequently discontinued.
<TABLE>
<CAPTION>
Year Ended June 30,
1994 1993
<S> <C> <C>
Revenue $ 8,178,002 $ 11,437,316
Income from Operations
Before Extraordinary Items $(1,546,500) $ (785,852)
Net Income $(3,616,695) $ (612,862)
Earnings Per Share $ (.66) $ (.11)
</TABLE>
NOTE 20 - SUBSEQUENT EVENTS
The Company entered into a definitive agreement effective
August 15, 1995 with Harris Miller Miller & Hanson, Inc.
("HMMH"), an established consulting firm. Under the terms of
the agreement, the company has licensed its proprietary Airport
Noise and Operations Monitoring Software ("ANOMS") and
transferred management and implementation of substantially all
of its airport noise monitoring contracts to HMMH (Airports
Business). The Company has also agreed to discontinue its
operations in this area and not to compete with HMMH in the
airport noise and operations monitoring systems industry.
<PAGE>
LARSON-DAVIS INCORPORATED AND SUBSIDIARIES
NOTE 20 - SUBSEQUENT EVENTS [Continued]
The Company was paid a one-time fee of $125,000, will receive
$150,000 in guaranteed annual royalties for the lessor of a
ten-year period or the term of the agreement, and will receive a
varying royalty of 2.5% to 4% on the gross revenues of HMMH from
the sale, installation, upgrade, and maintenance of airport
noise and operations monitoring systems. HMMH also assumed
$99,500 of the Company's liabilities related to the A HMMH will
use its best efforts to include the Company's hardware in its
future proposals for airport noise monitoring systems and the
Company will provide such equipment at a 25% discount from its
regular pricing structure. HMMH has the right to purchase all
of the Company's rights to the ANOMS software at a predetermined
price of $3,000,000, $2,200,000, $1,700,000 and $875,000,
respectively, on the three, five, seven and ten year
anniversaries of the agreement. HMMH has the right to terminate
the agreement after an initial three-year period and, at the end
of the ten year term, can elect to extend the agreement for an
additional five years during which it would be obligated to pay
a royalty of 3% on its gross revenues from the airport systems.
Subsequent to June 30, 1995 the Company issued 129,275 shares of
common stock upon exercise of common stock purchase options and
warrants. Total proceeds amounted to $283,371. The Company
also received $1,000,520 proceeds for the sale of 400,208 shares
of common stock in a private placement. The Company also issued
27,679 share of common stock for non-cash consideration.
Subsequent to June 30, 1995, the Company entered into an
Agreement in Principle wherein it would acquire technology held
by Sensar Corporation, a privately-held Utah corporation
("Sensar"), in exchange for the issuance of restricted Common
Stock, the payment of cash to redeem certain shares of Sensar,
and the assumption or payment of the liabilities of Sensar.
Sensar holds rights to patented proprietary technology with
respect to a time-of-flight mass spectrometer designed to detect
smaller quantities of impurities in gas vapors than is possible
with competing instruments with a much quicker analysis time.
The acquisition is subject to the completion of a due diligence
review of Sensar, the negotiation and execution of definitive
agreements and other provisions. There can be no assurance that
the transaction contemplated by the Agreement in Principle will
be consummated.
LARSON-DAVIS INCORPORATED
(a Nevada corporation)
Warrant for the Purchase of
_______ Shares of Common Stock, Par Value $0.001
THIS WARRANT WILL BE VOID
AFTER 11:59 P.M. MOUNTAIN TIME ON AUGUST 31, 1997
This Warrant has not been registered under the Securities Act of
1933, as amended (the "Securities Act"), and is a "restricted
security" within the meaning of Rule 144 promulgated under the
Securities Act. This Warrant has been acquired for investment
and may not be sold or transferred without complying with Rule 144
in the absence of an effective registration or other compliance
under the Securities Act.
This certifies that, for value received, __________ (the "Holder"),
is entitled to subscribe for, purchase, and receive _______ fully
paid and nonassessable shares of common stock, par value $0.001
(the "Warrant Shares"), of Larson-Davis Incorporated, a Nevada
corporation (the "Company"), at the price of $4.50 per Warrant
Share (the "Exercise Price"), at any time or from time to time on
or before 11:59 p.m. mountain time on August 31, 1997 (the
"Exercise Period"), on presentation and surrender of this
Warrant with the purchase form attached hereto, duly executed,
at the principal office of the Company at 1681 West 820 North,
Provo, Utah 84601, and by paying in full and in lawful money of
the United States of America by cash or cashier's check, the
Exercise Price for the Warrant Shares as to which this Warrant is
exercised, on all the terms and conditions hereinafter set forth.
The number of Warrant Shares to be received on exercise of this
Warrant and the Exercise Price may be adjusted on the occurrence
of such events as described herein. If the subscription rights
represented hereby are not exercised by 11:59 p.m. mountain time
on August 31, 1997, this Warrant shall automatically become void
and of no further force or effect, and all rights represented
hereby shall cease and expire.
Subject to the terms set forth herein, this Warrant may be
exercised by the Holder in whole or in part by execution of the
form of exercise attached hereto and payment of the Exercise Price
in the manner described above.
<PAGE>
1. Exercise of Warrants. On the exercise of all or any portion
of this Warrant in the manner provided above, the Holder
exercising the same shall be deemed to have become a holder of
record of the Warrant Shares for all purposes, and certificates
for the securities so purchased shall be delivered to the Holder
within a reasonable time, but in no event longer than ten days
after this Warrant shall have been exercised as set forth above.
If this Warrant shall be exercised in respect to only a part of
the Warrant Shares covered hereby, the Holder shall be entitled
to receive a similar Warrant of like tenor and date covering the
number of Warrant Shares with respect to which this Warrant shall
not have been exercised. On the exercise of all or any portion
of this Warrant, at the instruction of the Holder, the Company
shall offset any amounts due by it to Holder against payment of
the exercise price for the Warrants.
2. Limitation on Transfer. Subject to the restrictions set forth
in paragraph 7 hereof, this Warrant is transferable at the offices
of the Company. In the event this Warrant is assigned in the
manner provided herein, the Company, upon request and upon
surrender of this Warrant by the Holder at the principal office
of the Company accompanied by payment of all transfer taxes, if
any, payable in connection therewith, shall transfer this Warrant
on the books of the Company. If the assignment is in whole, the
Company shall execute and deliver a new Warrant or Warrants of
like tenor to this Warrant to the appropriate assignee expressly
evidencing the right to purchase the aggregate number of shares
of common stock purchasable hereunder; and if the assignment is
in part, the Company shall execute and deliver to the appropriate
assignee a new Warrant or Warrants of like tenor expressly
evidencing the right to purchase the portion of the aggregate
number of Warrant Shares as shall be contemplated by any such
transfer, and shall concurrently execute and deliver to the
Holder a new Warrant of like tenor to this Warrant evidencing
the right to purchase the remaining portion of the Warrant Shares
purchasable hereunder which have not been transferred to the
assignee.
3. Exchange of Warrants. This Warrant is exchangeable, on the
presentation and surrender hereof by the Holder at the office of
the Company, for a new Warrant or Warrants of like tenor
representing in the aggregate the right to subscribe for and
purchase the number of Warrant Shares which may be subscribed
for and purchased hereunder.
<PAGE>
4. Fully Paid Shares. The Company covenants and agrees that
the Warrant Shares which may be issued on the exercise of the
rights represented by this Warrant will be, when issued, fully
paid and nonassessable and free from all taxes, liens, and
charges with respect to the issue thereof. The Company further
covenants and agrees that during the period within which the
rights represented by this Warrant may be exercised, the Company
will have authorized and reserved a sufficient number of shares
of common stock to provide for the exercise of the rights
represented by this Warrant.
5. Antidilution Provisions. The Warrant Price and number of
Warrant Shares purchasable pursuant to this Warrant may be subject
to adjustment from time to time as follows:
(a) If the Company shall take a record of the holders of its
common stock for the purpose of entitling them to receive a
dividend in shares, the Warrant Price in effect immediately prior
to such record date shall be proportionately decreased, such
adjustment to become effective immediately after the opening of
business on the day following such record date.
(b) If the Company shall subdivide the outstanding shares of
common stock into a greater number of shares, combine the
outstanding shares of common stock into a smaller number of shares,
or issue by reclassification any of its shares, the Warrant Price
in effect immediately prior thereto shall be adjusted so that the
Holder of this Warrant thereafter surrendered for exercise shall
be entitled to receive, after the occurrence of any of the events
described, the number of Warrant Shares to which the Holder would
have been entitled had such Warrant been exercised immediately
prior to the occurrence of such event. Such adjustment shall
become effective immediately after the opening of business on
the day following the date on which such subdivision, combination,
or reclassification, as the case may be, becomes effective.
<PAGE>
(c) If any capital reorganization or reclassification of the
Company's common stock, or consolidation or merger of the Company
with another corporation or the sale of all or substantially all
of its assets to another corporation shall be effected in such a
way that holders of common stock shall be entitled to receive
stock, securities, or assets with respect to or in exchange for
common stock, then, as a condition of such reorganization,
reclassification, consolidation, merger, or sale, lawful
adequate provisions shall be made whereby the Holder of this
Warrant shall thereafter have the right to acquire and receive on
exercise hereof such shares of stock, securities, or assets as
would have been issuable or payable (as part of the
reorganization, reclassification, consolidation, merger, or
sale) with respect to or in exchange for such number of
outstanding common shares of the Company as would have been
received on exercise of this Warrant immediately before such
reorganization, reclassification, consolidation, merger, or sale.
In any such case, appropriate provision shall be made with respect
to the rights and interests of the Holder of this Warrant to the
end that the provisions hereof shall thereafter be applicable in
relation to any shares of stock, securities, or assets thereafter
deliverable on the exercise of this Warrant. In the event of a
merger or consolidation of the Company with or into another
corporation or the sale of all or substantially all of its assets
which results in the issuance of a number of shares of common
stock of the surviving or purchasing corporation greater or less
than the number of shares of common stock of the Company
outstanding immediately prior to such merger, consolidation, or
purchase are issuable to holders of common stock of the Company,
then the Warrant Price in effect immediately prior to such merger,
consolidation, or purchase shall be adjusted in the same manner
as though there was a subdivision or combination of the
outstanding shares of common stock of the Company. The Company
will not effect any such consolidation, merger, or sale unless
prior to the consummation thereof the successor corporation
resulting from such consolidation or merger or the corporation
purchasing such assets shall assume by written instrument mailed
or delivered to the Holder hereof at its last address appearing
on the books of the Company, the obligation to deliver to such
Holder such shares of stock, securities, or assets as, in
accordance with the foregoing provisions, such Holder may be
entitled to acquire on exercise of this Warrant.
<PAGE>
(d) If: (i) the Company shall take a record of the holders of
its shares of common stock for the purpose of entitling them to
receive a dividend payable otherwise than in cash, or any other
distribution in respect of the shares of common stock (including
cash), pursuant to, without limitation, any spin-off, split-off,
or distribution of the Company's assets; or (ii) the Company
shall take a record of the holders of its shares of common stock
for the purpose of entitling them to subscribe for or purchase
any shares of any class or to receive any other rights; or (iii)
in the event of any classification, reclassification, or other
reorganization of the shares which the Company is authorized to
issue, consolidation or merger of the Company with or into
another corporation, or conveyance of all or substantially all
of the assets of the Company; or (iv) in the event of the
voluntary or involuntary dissolution, liquidation, or winding up
of the Company; then, and in any such case, the Company shall
mail to the Holder of this Warrant, at least 30 days prior
thereto, a notice stating the date or expected date on which a
record is to be taken for the purpose of such dividend,
distribution or rights, or the date on which such classification,
reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation, or winding up, as the
case may be. Such notice shall also specify the date or expected
date, if any is to be fixed, as of which holders of shares of
common stock of record shall be entitled to participate in such
dividend, distribution, or rights, or shall be entitled to
exchange their shares of common stock for securities or other
property deliverable upon such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution,
liquidation, or winding up, as the case may be.
(e) If the Company, at any time while this Warrant shall remain
unexpired and unexercised, sells shares of common stock to an
affiliate of the Company, excluding shares issued on the exercise
of options issued and outstanding as of the date hereof and
shares issued to officers and directors under stock option plans
of the Company existing as of the date hereof, at a price lower
than the Exercise Price provided herein, as the same may from
time to time be adjusted pursuant to this section 5, then the
Exercise Price of these Warrants shall be reduced automatically
to such lower price at which the Company has sold common stock.
(f) No fraction of a share shall be issued on exercise, but, in
lieu thereof, the Company, notwithstanding any other provision
hereof, may pay therefor in cash at the fair value of any such
fractional share at the time of exercise.
<PAGE>
6. Disposition of Warrants or Warrant Shares. The registered
owner of this Warrant, by acceptance hereof, agrees for himself
and any subsequent owner(s) that, before any disposition is made
of any Warrant Shares, the owner(s) shall give written notice to
the Company describing briefly the manner of any such proposed
disposition. No such disposition shall be made unless and until:
(a) the Company has received an opinion from counsel for the
owner(s) of the Warrant Shares stating that no registration under
the Securities Act is required with respect to such disposition; or
(b) a registration statement or post-effective amendment to a
registration statement under the Securities Act has been filed
by the Company and made effective by the Commission covering such
proposed disposition.
7. Registration of Warrant Shares. The Company shall use its best
efforts to file a registration statement under the Securities Act
as soon as practicable after August 31, 1995, to register the
Warrant Shares issuable on the exercise of this Warrant, shall
utilize its best efforts to cause such registration statement to
become effective as soon as is practicably possible, and shall
maintain the effectiveness of such registration statement for a
period of two years, unless the Company's legal counsel is of the
reasonable opinion that registration is not required in order to
dispose of the Warrant Shares. The Holder(s) shall cooperate with
the Company and shall furnish such information as the Company may
request in connection with any such registration statement
hereunder, on which the Company shall be entitled to rely.
8. Governing Law. This agreement shall be construed under and
be governed by the laws of the state of Nevada.
9. Notices. All notices, demands, requests, or other
communications required or authorized hereunder shall be deemed
given sufficiently if in writing and if personally delivered; if
sent by facsimile transmission, confirmed with a written copy
thereof sent by second day express delivery or registered mail,
return receipt requested and postage prepaid; if sent by
registered mail or certified mail, return receipt requested and
postage prepaid; or if sent by second day express delivery:
If to the Company, to: Larson-Davis Incorporated
Attn: Brian G. Larson, President
1681 West 820 North
Provo, Utah 84601
Facsimile Transmission: (801) 375-0182
Confirmation: (801) 375-0177
<PAGE>
If to the Holder:
Facsimile Transmission: (___) _________
Confirmation: (___) _________
or other such addresses and facsimile numbers as shall be furnished
by any party in the manner for giving notices hereunder, and any
such notice, demand, request, or other communication shall be
deemed to have been given as of the date so delivered or sent by
facsimile transmission, three days after the date so mailed, or
two days after the date so sent by second day delivery.
10. Loss, Theft, Destruction, or Mutilation. Upon receipt by the
Company of reasonable evidence of the ownership of and the loss,
theft, destruction, or mutilation of this Warrant, the Company
will execute and deliver, in lieu thereof, a new Warrant of like
tenor.
11. Taxes. The Company will pay all taxes in respect of the issue
of this Warrant or the Warrant Shares issuable upon exercise
thereof.
DATED this ______ day of August, 1995.
LARSON DAVIS INCORPORATED
By /s/ Brian G. Larson
Brian G. Larson, President
<PAGE>
Form of Assignment
(to be signed only upon assignment of Warrant)
TO: Larson-Davis Incorporated
Attn: President
1681 West 820 North
Provo, Utah 84601
FOR VALUE RECEIVED, _________________ does hereby sell, assign,
and transfer unto ____________________ the right to purchase
___________ shares of common stock of LARSON-DAVIS INCORPORATED
(the "Company"), evidenced by the attached Warrant, and does
hereby irrevocably constitute and appoint _________________
attorney to transfer such right on the books of the Company
with full power of substitution in the premises.
DATED this _____ day of __________, 19___.
Signature:
Signature Guaranteed:
NOTICE: The signature to the form of assignment must correspond
with the name as written upon the face of the within Warrant in
every particular without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank, other than a
savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
<PAGE>
Form Of Purchase
(to be signed only upon exercise of Warrant)
TO: Larson-Davis Incorporated
Attn: President
1681 West 820 North
Provo, Utah 84601
The undersigned, the owner of the attached Warrant, hereby
irrevocably elects to exercise the purchase rights represented
by the Warrant for, and to purchase thereunder, ___________
shares of the common stock of LARSON-DAVIS INCORPORATED and
herewith makes payment of $___________ therefor (at the rate
of $4.50 per share of common stock). Please issue the shares
of common stock as to which this Warrant is exercised in
accordance with the enclosed instructions and, if the Warrant
is being exercised with respect to less than all of the shares
to which it pertains, prepare and deliver a new Warrant of like
tenor for the balance of the shares of common stock purchasable
under the attached Warrant.
DATED this _____ day of __________, 19___.
Signature:
Signature Guaranteed:
AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into this ______ day
of September, 1995, by and among Larson-Davis Incorporated, a
Nevada corporation (the "Company"), and Robert Cohen, Lenore Katz,
Jeffrey Rubin, Shawn Zimberg, Laura Huberfeld, Naomi Bodner,
Jeffrey Cohen and Allyson Cohen (collectively referred to
herein as "Holders"), based on the following premises.
Premises
A. The Company and the Holders entered into a Stock Purchase
Agreement dated April 7, 1995 (the "Stock Purchase Agreement"),
pursuant to which the Company sold to the Holders an aggregate of
370,000 shares of common stock of the Company, par value $0.001
per share (the "Common Stock") and warrants to purchase an
aggregate of 500,000 shares of Common Stock at $2.50 per share at
any time prior to April 7, 1996 (the "$2.50 Warrants"), and
warrants to purchase an aggregate of 500,000 shares of Common
Stock at $3.50 per share at any time prior to April 7, 1997 (the
"$3.50 Warrants").
B. The Company and the Holders subsequently entered into an
Agreement dated August _____, 1995, pursuant to which the Company
agreed to issue warrants to purchase up to 500,000 shares of
Common Stock at $4.50 per share at any time prior to August 31,
1995 (the "$4.50 Warrants"), to those Holders exercising their
$2.50 Warrants prior to August 31, 1995.
C. The Company and the Holders have mutually agreed that in
consideration of the Holders exercising the $3.50 and $4.50
Warrants in accordance with the terms of this Agreement, the
Company will issue additional warrants to the Holders to purchase
up to 500,000 shares of Common Stock at $4.50 per share and
1,000,000 shares of Common Stock at $5.75 per share at any time
prior to November 1, 1997, all on the terms and conditions set
forth in this Agreement.
<PAGE>
Agreement
NOW, THEREFORE, based on the stated premises, which are
incorporated herein by reference, and for and in consideration
of the mutual covenants and agreements hereinafter set forth and
the mutual benefit to the parties to be derived therefrom, and
other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, it is hereby agreed as follows:
Article I
Issuance of Warrants
1.1 Issuance of Warrants. On the terms and subject to the
conditions contained in this Agreement, the Company hereby agrees
to issue warrants to purchase up to 500,000 shares of Common Stock
at an exercise price of $4.50 per share at any time prior to
November 1, 1997 (the "$4.50 B Warrants") and warrants to purchase
up to 1,000,000 shares of Common Stock at an exercise price of
$5.75 per share at any time prior to November 1, 1997 (the "$5.75
Warrants") to those Holders who exercise, on or before October 1,
1995, the $3.50 Warrants held by them and, on or before the later
to occur of (i) November 1, 1995, or (ii) 30 days subsequent to
the effectiveness of a registration statement covering the resale
by the Holders of the Common Stock issuable on exercise of the
$4.50 Warrants, the $4.50 Warrants held by them. Each Holder who
meets the foregoing requirements shall receive a $4.50 B Warrant
to purchase the number of shares equal to the lesser of (i) the
number of shares of Common Stock acquired by the Holder on exercise
of the $3.50 Warrants on or before October 1, 1995, or (ii) the
number of shares of Common Stock acquired by the Holder on the
exercise of the $4.50 Warrants on or before November 1, 1995.
Each Holder entitled to receive $4.50 B Warrants shall also
receive $5.75 Warrants to acquire twice as many shares of Common
Stock as are subject to the $4.50 B Warrants issued to the Holder
in accordance with the preceding sentence. The foregoing
provisions are set forth in tabular form on Exhibit "A" attached
hereto and incorporated herein by this reference.
1.2 Exercise of Warrants. To exercise the $3.50 and $4.50
Warrants in accordance with the terms hereof, the Holders desiring
to exercise shall present and surrender to the Company the $3.50
or $4.50 Warrant, as the case may be, with the purchase form
attached thereto duly executed, and shall pay to the Company the
exercise price for the number of shares being purchased in cash
or immediately available funds by wire transfer, certified or
official bank check, or other means of payment acceptable to the
Company.
<PAGE>
1.3 Delivery of Warrants. The Company will promptly issue to
each Holder meeting the terms of this Agreement $4.50 and $5.75
Warrants for the number of shares to which such Holder is entitled.
Article II
Representations, Covenants, and Warranties of the Company
As an inducement to, and to obtain the reliance of, Holders, the
Company represents and warrants as follows:
2.1 Organization of the Company. The Company is a corporation
duly organized, validly existing, and in good standing under laws
of the state of Nevada, and has the corporate power and is duly
authorized, qualified, franchised, and licensed under all
applicable laws, regulations, ordinances, and orders of public
authorities to own all of its properties and assets and to carry
on its business in all material respects as it is now being
conducted. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated by
this Agreement in accordance with the terms hereof will not,
violate any provision of the Company's certificate of
incorporation or bylaws. The Company has taken all action
required by law, its certificate of incorporation, its bylaws,
or otherwise to authorize the execution and delivery of this
Agreement and the consummation of the transactions herein
contemplated.
2.2 approval of Agreement. The board of directors of the Company
have authorized the execution and delivery of this Agreement by
the Company and has approved the consummation of the transactions
contemplated hereby. This Agreement is the legal, valid, and
binding agreement of the Company enforceable between the parties
in accordance with its terms.
2.3 Financial Information. Each of the financial statements
contained in the information referred to in section 2.4 present
fairly the financial condition of the Company as of the date of
such financial statement and the results of its operations for
the periods indicated. All such audited and unaudited financial
statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout
the periods involved as explained in the notes to such financial
statements and have been presented in accordance with the
requirements of Regulation S-X promulgated by the Securities and
Exchange Commission (the "SEC") regarding the form and content of
and requirements for financial statements to be filed with the SEC.
<PAGE>
2.4 Information. The information concerning the Company set
forth in this Agreement, in the schedules delivered by the
Company pursuant to the Stock Purchase Agreement and this
Agreement, the report on form 8-K filed with the SEC on June 30,
1995, as amended, the report on form 8-K filed with the SEC on
June 30, 1994, as amended, the annual report on form 10-K filed
with the SEC for the year ended June 30, 1994, and all amendments
thereto, and the quarterly reports on form 10-Q for the quarters
ended September 30, and December 31, 1994, and March 31, 1995, is,
as of the date of the respective reports, complete and accurate in
all material respects and did not contain any untrue statement of
a material fact or omit to state a material fact required to make
the statements made, in light of the circumstances under which
they were made, not misleading.
2.5 Third-Party Consents. None of the contracts, agreements,
leases, or other commitments, written or oral, to which the Company
is a party or to which any of its properties or assets are subject
require the consent of any other party in order to consummate the
transactions herein contemplated, except where the failure to
obtain such consent would not have a material adverse effect on
the transactions contemplated herein. Except for the satisfaction
of requirements of federal and state securities and corporation
laws, no authorization, approval, consent, or order of, or
registration, declaration, or filing with, any court or other
governmental body is required in connection with the execution and
delivery by the Company of this Agreement and the consummation by
the Company of the transactions contemplated hereby.
2.6 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by
this Agreement will not result in the breach of any term or
provision of, or constitute an event of default under, any
indenture, mortgage, deed of trust, lease, or other contract,
agreement, or instrument to which the Company is a party or to
which any of its properties or operations are subject and the
breach of which would have a material adverse effect on the Company.
Article III
Representations, Covenants, and Warranties of Holders
As an inducement to, and to obtain the reliance of the Company,
each Holder represents and warrants as follows:
3.1 Binding Agreement. This Agreement is the legal, valid, and
binding obligation of each Holder enforceable in accordance with
its terms.
<PAGE>
3.2 Third-Party Consents. None of the contracts, agreements,
leases, or other commitments, written or oral, to which any Holder
is a party or to which any of its properties or assets are subject
require the consent of any other party in order to consummate the
transactions herein contemplated, except where the failure to
obtain such consent would not have a material adverse effect on
the transactions contemplated herein. No authorization,
approval, consent, or order of, or registration, declaration,
or filing with, any court or other governmental body is required
in connection with the execution and delivery by any Holder of
this Agreement and the consummation by any Holder of the
transactions contemplated hereby.
3.3 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated
hereby, will not result in the breach of any term or provision of,
constitute an event of default under, or require the consent or
approval of any third-party pursuant to, any material contract,
agreement, or instrument to which any Holder is a party or to
which any of their respective properties or operations are subject.
3.5 Information. The information concerning Holders set forth in
this Agreement and in the schedules delivered by Holders pursuant
hereto is complete and accurate in all material respects and does
not contain any untrue statement of a material fact or omit to
state a material fact required to make the statements made, in
light of the circumstances under which they were made, not misleading.
Article IV
Special Covenants
4.1 Indemnification by Holders. Each Holder will indemnify and
hold harmless the Company and its directors and officers, and each
person, if any, who controls the Company within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), from
and against any and all losses, claims, damages, expenses,
liabilities, or actions to which any of them may become subject
under applicable law (including the Securities Act and the
Exchange Act) and will reimburse them for any legal or other
expenses reasonably incurred by them in connection with
investigating or defending any claims or actions, whether or not
resulting in liability, insofar as such losses, claims, damages,
expenses, liabilities, or actions arise out of or are based upon
any untrue statement or alleged untrue statement of a material
fact contained in any application or statement filed with a
governmental body or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to
<PAGE>
be stated therein, or necessary in order to make the statements
therein not misleading, but only insofar as any such statement
or omission was made in reliance upon and in conformity with
information furnished in writing by any Holder expressly for use
therein. Holders agree at any time upon the request of the
Company to furnish to it a written letter or statement confirming
the accuracy of the information with respect to Holders contained
in any report or other application or statement referred to in
this Article IV, or in any draft of any such documents, and
confirming that the information with respect to Holders contained
in such document or draft was furnished by Holders, indicating
the inaccuracies or omissions contained in such document or draft
or indicating the information not furnished by Holders expressly
for use therein. The indemnity agreement contained in this
section 4.1 shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the
Company and shall survive the consummation of the transactions
contemplated by this Agreement.
4.2 Indemnification by the Company. The Company will indemnify
and hold harmless Holders from and against any and all losses,
claims, damages, expenses, liabilities, or actions to which any
of them may become subject under applicable law (including the
Securities Act and the Exchange Act) and will reimburse them for
any legal or other expenses reasonably incurred by them in
connection with investigating or defending any claims or actions,
whether or not resulting in liability, insofar as such losses,
claims, damages, expenses, liabilities, or actions arise out of
or are based upon any breach of this Agreement or any untrue
statement or alleged untrue statement of a material fact contained
in any application or statement filed with a governmental body or
arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein,
or necessary in order to make the statements therein not
misleading, but only insofar as any such statement or omission
was made in reliance upon and in conformity with information
furnished in writing by the Company expressly for use therein.
The Company agrees at any time upon the request of Holders to
furnish to them a written letter or statement confirming the
accuracy of the information with respect to the Company contained
in any report or other application or statement referred to in
this Article IV, or in any draft of any such document, and
confirming that the information with respect to the Company
contained in such document or draft was furnished by the Company,
indicating the inaccuracies or omissions contained in such
document or draft or indicating the information not furnished by
<PAGE>
the Company expressly for use therein. The indemnity agreement
contained in this section 4.2 shall remain operative and in full
force and effect, regardless of any investigation made by or on
behalf of Holders and shall survive the consummation of the
transactions contemplated by this Agreement.
4.3 The Acquisition of Purchased Stock. The consummation of this
Agreement and the issuance of Common Stock to Holders contemplated
herein constitutes the offer and sale of securities as those terms
are defined under the Securities Act and applicable state statutes.
Such transactions shall be consummated in reliance on certain
exemptions from the registration requirements of federal and state
securities laws, which depend, among other items, on the
circumstances under which such securities are acquired.
(a) In order to provide documentation for reliance upon such
exemptions, the Holders make the following representations and
warranties:
(i) Each Holder acknowledges that neither the SEC nor the
securities commission of any state or other federal agency has
made any determination as to the merits of acquiring the Warrants
or the shares of Common Stock issuable on exercise of the Warrants,
and that this transaction involves certain risks.
(ii) Each Holder has received and read this Agreement and
understands the risks related to the consummation of the
transactions herein contemplated.
(iii) Each Holder has such knowledge and experience in business
and financial matters that he or she is capable of evaluating
the Company and its business operations.
(iv) Each Holder has adequate means of providing for his or her
current needs and possible personal contingencies and has no need
now, and anticipates no need in the foreseeable future, to sell any
of the Warrants or the shares of Common Stock issuable on exercise
of the Warrants. Each Holder is able to bear the economic risks of
this investment, and, consequently, without limiting the generality
of the foregoing, is able to hold the Warrants and the shares of
Common Stock issuable on exercise of the Warrants for an indefinite
period of time, and has a sufficient net worth to sustain a loss of
the entire investment, in the event such loss should occur.
<PAGE>
(v) The Holders have been provided with all information contained
in the Company's annual report on form 10-K for the year ended June
30, 1994, and all subsequent interim reports filed by the Company
with the Securities and Exchange Commission. The Holders'
representatives, including their legal counsel, have personally
met with the officers and directors of the Company and have
investigated the intellectual property assets of the Company.
Each Holder and their representatives have been given the
opportunity to meet with and ask questions of the officers and
directors of the Company and to obtain any additional information
they consider material to the acquisition of the Warrants and the
shares of Common Stock issuable on exercise of the Warrants.
(vi) Each Holder is acquiring the Warrants and the shares of
Common Stock issuable on exercise of the Warrants for his or her
own account and not for resale to others.
(vii) Each Holder confirms that he or she is an "accredited
investor" as defined under rule 501 of regulation D promulgated
under the Securities Act. Each Holder confirms that his or her
individual net worth, or joint net worth with that person's spouse,
at the time of his or her purchase exceeds $1,000,000, or he or she
had an individual income in excess of $200,000 in each of the two
most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year.
(viii) The Holder is a resident of the state set forth in the
address below the Holder's name on the signature pages hereto.
(ix) Each Holder understands that none of the Warrants or the
shares of Common Stock issuable on exercise of the Warrants has
been registered, but is being acquired by reason of a specific
exemption under the Securities Act as well as under certain state
statutes for transactions by an issuer not involving any public
offering and that any disposition of the Warrants and the shares
of Common Stock issuable on exercise of the Warrants may, under
certain circumstances, be inconsistent with this exemption and
may make the Holder an "underwriter" within the meaning of the
Securities Act. Each Holder further acknowledges that the
Warrants and the shares of Common Stock issuable on exercise of
the Warrants must be held and may not be sold, transferred, or
otherwise disposed of for value unless it is subsequently
registered under the Securities Act or an exemption from such
registration is available; the Company is under no obligation to
register the Warrants or the shares of Common Stock issuable on
<PAGE>
exercise of the Warrants under the Securities Act or under
section 12 of the Exchange Act, except as provided herein or as
may be expressly agreed to by it in writing; if rule 144 is
available, and no assurance is given that it will be, initially
only routine sales of the Warrants and the shares of Common Stock
issuable on exercise of the Warrants in limited amounts can be
made in reliance on rule 144 in accordance with the terms and
conditions of that rule; the Company is under no obligation to
the undersigned to make rule 144 available, except as may be
expressly agreed to by it in writing; in the event rule 144 is not
available, compliance with regulation A or some other exemption
may be required before any Holder can sell, transfer, or otherwise
dispose of the Warrants or the shares of Common Stock issuable on
exercise of the Warrants without registration under the Securities
Act; the Company's registrar and transfer agent will maintain a
stop transfer order against the registration of transfer of the
Warrants and the shares of Common Stock issuable on exercise of
the Warrants; and the certificate(s) representing the Warrants and
the shares of Common Stock issuable on exercise of the Warrants
will bear a legend in substantially the following form so
restricting the sale of the Warrants and the shares of Common
Stock issuable on exercise of the Warrants:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ARE "RESTRICTED SECURITIES" WITHIN THE
MEANING OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD
OR TRANSFERRED WITHOUT COMPLYING WITH RULE 144 IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE
SECURITIES ACT.
(b) In order to more fully document reliance on the exemptions as
provided herein, each Holder shall execute and deliver to the
Company such further letters of representation, acknowledgment,
suitability, or the like, as the Company and its counsel may
reasonably request in connection with reliance on exemptions
from registration under such securities laws.
(c) The Company and Holders acknowledge that the basis for
relying on exemptions from registration or qualifications are
factual, depending on the conduct of the various parties, and
that no legal opinion or other assurance will be required or
given to the effect that the transactions contemplated hereby
are in fact exempt from registration or qualification.
<PAGE>
Article V
Registration Rights
5.1 Registration Procedures. The Company shall use its best
efforts to prepare and file with the SEC as soon as practicable
after November 1, 1995, a Registration Statement that includes the
shares of Common Stock issuable on exercise of the $4.50 B Warrants
and the $5.75 Warrants and thereafter to use its best efforts to
cause such Registration Statement to become effective as soon as is
practicably possible and remain effective as provided herein. The
Company further agrees to:
(a) Prepare and file with the SEC such amendments and post-
effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for a period
of not less than two (2) years, or such shorter period which will
terminate when all securities covered by such Registration
Statement have been sold or withdrawn; cause the prospectus which is
part of the Registration Statement to be supplemented by any
required prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Securities Act; and comply with the
provisions of the Securities Act applicable to it with respect to
the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the
intended methods of disposition by the sellers thereof set forth
in such Registration Statement or supplement to the prospectus;
(b) Notify Holders at any time when a prospectus relating to
securities of any Selling Shareholder included in a Registration
Statement is required to be delivered under the Securities Act,
when the Company becomes aware of the happening of any event as a
result of which the prospectus included in such Registration
Statement (as then in effect) contains any untrue statement of a
material fact or omits to state a material fact necessary to make
the statements therein (in the case of the prospectus or any
preliminary prospectus, in light of the circumstances under which
they were made) not misleading and, as promptly as practicable
thereafter, prepare and file with the SEC and furnish to Holders
a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such securities, such prospectus
will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading;
<PAGE>
(c) Enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the
disposition of such securities;
(d) Use its best efforts to cause all securities of Holders
included in such Registration Statement to be listed, by the date
of the first sale of securities pursuant to such Registration
Statement, on each securities exchange on which the Company's
securities of the same class are then listed or proposed to be
listed, if any;
(e) On or prior to the date on which the Registration Statement
is declare effective, use its best efforts to register or qualify,
and cooperate with Holders, the underwriter or underwriters, if
any, and their counsel, in connection with the registration or
qualification of, the securities of Holders covered by the
Registration Statement for offer and sale under the securities or
blue sky laws of each state and other jurisdiction of the United
States as Holders or the underwriter reasonably requests in
writing, to use its best efforts to keep each such registration or
qualification effective, including through new filings, or
amendment or renewals, during the period such Registration
Statement is required to be keep effective and to do any and all
other acts or things necessary or advisable to enable the
disposition in all such jurisdictions of the securities of Holders
covered by the Registration Statement; provided that the Company
will not be required to (1) qualify generally to do business in
any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (e), (2) consent to general service
of process in any such jurisdiction, or (3) subject itself to
general taxation in any such jurisdiction;
(f) Cooperate with Holders and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends)
representing securities to be sold by Holders under the
Registration Statement, and enable such securities to be in such
denominations and registered in such names as the managing
underwriter or underwriters, if any, or Holders may request; and
(g) Use it best efforts to cause the securities of Holders covered
by the Registration Statement to be registered with or approved by
such other governmental agencies or authorities within the United
States as may be necessary to enable Holders or the underwriter or
underwriters, if any, to consummate the disposition of such
securities.
<PAGE>
5.2 Cooperation by Holders.
(a) Holders shall furnish to the Company in writing such
information and affidavits as the Company may reasonably require
from Holders in connection with any registration, qualification
or compliance with respect to such securities. It shall be a
condition precedent to the obligations of the Company to take any
action pursuant to this Agreement with respect to the securities
of any selling Holder that such Holder shall furnish to the
Company such information regarding the Holder, the securities to
be registered and other securities in the Company held, and the
intended method of disposition of such securities as shall be
required to effect the registration of such Holder's securities.
(b) By exercising their Warrants, Holders shall be deemed to have
confirmed at the time of such exercise the continuing accuracy of
the information respecting their status as accredited investors and
the suitability of an investment in the Common Stock for them that
is contained herein, all except as such investors may then advise
the Company in writing. The Company may also require, as a
condition precedent to exercise, that the Holder complete and
deliver to the Company a suitability letter containing
representations and warranties regarding suitability of the
investment of like tenor to those contained herein.
(c) Holders, upon receipt of any notice from the Company of the
happening of any event of the kind described in paragraph (b) of
section 5.1, will forthwith discontinue disposition of the
securities until Holders' receipt of the copies of the supplemented
or amended prospectus contemplated by paragraph (b) of section 5.1
or until they are advised in writing (the "Advice") by the Company
that the use of the prospectus may be resumed, and have received
copies of any additional or supplemental filings which are
incorporated by reference in the prospectus, and, if so directed
by the Company, Holders will, or will request the managing
underwriter or underwriters, if any, to, deliver to the Company
all copies, other than permanent file copies then in Holders'
possession, of the prospectus covering such securities current at
the time of receipt of such notice. In the event the Company
shall give any such notice, the time period mentioned in paragraph
(a) of section 5.1 shall be extended by the number of days during
the period from and including the date of the giving of such notice
to and including the date when Holders shall have received the
copies of the supplemented or amended prospectus contemplated by
paragraph (b) of section 5.1 hereof or the Advice.
<PAGE>
(d) At the end of any period during which the Company is obligated
to keep any Registration Statement current and effective as provided
by section 5.1 hereof (and any extensions thereof required by
paragraph (c) of this section 5.2), Holders shall discontinue sales
of securities pursuant to such Registration Statement upon receipt
of notice from the Company of its intention to remove from
registration the securities covered by such Registration Statement
which remain unsold, and Holders shall notify the Company of the
number of securities registered which remain unsold promptly after
receipt of such notice from the Company.
(e) The Holders acknowledge that the registration of the resale of
the securities or the availability of an exemption from registration
in certain states may impose certain limitations and conditions on
the manner and nature of such sales. The Company shall advise the
Holder in writing of such registration or exemption and the related
limitations and conditions from time to time. The Holders shall be
solely responsible for such Holders' own compliance with such
limitations and conditions.
5.3 Holdback Agreement. Holders, if requested by the managing
underwriter or underwriters for any underwritten registration, agree
not to effect any public sale or distribution of securities,
including a sale pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act, during the 15 days prior
to, and during the 90-day period commencing on the effective date
of such registration (except as part of such registration). In the
event Holders are prohibited from effecting a sale of securities
pursuant to this section 5.3, the time period in paragraph (a) of
section 5.1 shall be extended by the number of days Holders are so
prohibited.
5.4 Registration and Selling Expenses. All of the costs and
expenses of registration provided for herein will be borne by the
Company, including the fees and expenses of the counsel and
accountants for the Company (including the expenses of any special
audit and "cold comfort" letters required by or incident to such
performance), and all other costs and expenses of the Company
incident to the preparation, printing, and filing under the
Securities Act of the Registration Statement (and all amendments
and supplements thereto) and furnishing copies thereof and of the
prospectus included therein, and the costs and expenses incurred
by the Company in connection with the qualification of the
Purchased Stock and shares of Common Stock received on exercise
of Warrants under the state securities or blue sky laws of
<PAGE>
various jurisdictions; provided that the Company shall not bear
the costs and expenses of Holders comprising underwriters'
commissions, brokerage fees, transfer taxes, or the fees and
expenses of any counsel, accountant, or other representative
retained by Holders.
5.5 Rule 144. The Company agrees that it will use its best
efforts to file in a timely manner all reports required to be
filed by it pursuant to the Exchange Act and, at any time and upon
request of Holders, will furnish Holders with such information
generated by the Company in the ordinary course of business as
may be reasonably necessary to enable Holders to effect sales of
Common Stock received on exercise of Warrants without registration
pursuant to Rule 144 under the Securities Act. Notwithstanding
the foregoing, the Company may deregister any class of its
securities under section 12 of the Exchange Act or suspend its
duty to file reports with respect to any class of its securities
pursuant to section 15(d) of the Exchange Act if it is then
permitted to do so pursuant to the Exchange Act and the rules and
regulations thereunder.
5.6 Participation in Underwritten Registrations. Holders may not
participate in any underwritten registration hereunder unless
Holders (a) agree to sell shares of Common Stock received on
exercise of Warrants on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve
such arrangements, and (b) complete and execute all
questionnaires, powers of attorney, underwriting agreements and
other documents customarily required under the terms of such
underwriting arrangements.
Article VI
Miscellaneous
6.1 No Brokers. Holders and the Company agree that no third
person has in any way brought the parties together or been
instrumental in the negotiation, execution, or consummation of
this Agreement. Notwithstanding the foregoing, the Company has
agreed to pay a three percent finder's fee to Neil C. Sullivan
and Michael Cunniff who were instrumental in the prior transaction
between the parties. Holders and the Company each agree to
indemnify the other against any claim by any third person for any
commission, brokerage, finder's fee, or other payment with respect
to this Agreement or the transactions contemplated hereby based
upon any alleged agreement or understanding between such party
and such third person, whether expressed or implied, arising from
<PAGE>
the actions of such party. The covenants set forth in this
section 6.1 shall survive the date hereof and the consummation
of the transactions herein contemplated.
6.2 Governing Law. This Agreement shall in all respects,
including all matters of construction, validity, and performance,
be governed by, and construed and enforced in accordance with,
the laws of the state of Utah applicable to contracts entered into
in that state between citizens of that state and to be performed
wholly within that state without reference to any rules governing
conflicts of laws
6.3 Notices. All notices, demands, requests, or other
communications required or authorized hereunder shall be deemed
given sufficiently if in writing and if personally delivered; if
sent by facsimile transmission, confirmed with a written copy
thereof sent by overnight express delivery; if sent by registered
mail or certified mail, return receipt requested and postage
prepaid; or if sent by overnight express delivery:
If to the Company, to: Larson Davis Incorporated
Attn: Brian G. Larson, President
1681 West 820 North
Provo, Utah 84601
Facsimile Transmission: (801) 375-0182
Confirmation: (801) 375-0177
With copies to: Keith L. Pope, Esq.
Kruse, Landa & Maycock, L.L.C.
Eighth Floor, Bank One Tower
50 West Broadway
Salt Lake City, Utah 84101
Facsimile Transmission: (801) 359-3954
Confirmation: (801) 531-7090
If to Holders: At the address set forth below their
respective names on the signature
pages hereto.
With copies to: Michael Solovay, Esq.
Solovay Marshall & Edlin
845 Third Avenue
New York, New York 10022
Facsimile Transmission: (212) 355-4608
Confirmation: (212) 752-1000
<PAGE>
or such other addresses and facsimile numbers as shall be furnished
in writing by any party in the manner for giving notices hereunder,
and any such notice, demand, request, or other communication shall
be deemed to have been given as of the date personally delivered or
on the first business day after a legible copy sent by facsimile
transmission is received, three days after the date mailed by
registered or certified mail, or on the first business day after
the date sent by overnight delivery.
6.4 Attorneys' Fees. In the event that any party institutes and
prevails in any action or suit to enforce this Agreement or to
secure relief from any default hereunder or breach hereof, the
defaulting or breaching party or parties shall reimburse the
nonbreaching party or parties for all costs, including reasonable
attorneys' fees, incurred in connection therewith and in enforcing
or collecting any judgment rendered therein.
6.5 Best Knowledge. Whenever any representation is made to the
"best knowledge" of any party, it shall be deemed to be a
representation that an officer or director of such party, after
reasonable investigation, has any current actual knowledge of such
matters.
6.6 Entire Agreement. This Agreement, together with the documents
to be delivered pursuant hereto, represents the entire agreement
between the parties relating to the subject matter hereof. There
are no other courses of dealing, understanding, agreements,
representations, or warranties, written or oral, except as set
forth herein.
6.7 Survival; Termination. The representations, warranties,
and covenants of the respective parties as set forth in this
Agreement shall survive the closing and consummation of the
transactions contemplated by this Agreement for a period of two
years from the date of this Agreement. The Company's cumulative
liability to Holders for breaches of this Agreement shall not
exceed the Purchase Price.
6.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all
of which taken together shall be but a single instrument.
<PAGE>
6.9 Amendment or Waiver. Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether
conferred herein, at law, or in equity, and may be enforced
concurrently herewith, and no waiver by any party of the
performance of any obligation by the other shall be construed as
a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. This Agreement may be amended
by a writing signed by all parties hereto, with respect to any of
the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance thereof may be
extended by a writing signed by the party or parties for whose
benefit the provision is intended.
6.10 Third-Party Beneficiaries. This Agreement is solely between
the Company and Holders and no director, officer, stockholder,
employee, agent, independent contractor, or any other person or
entity shall be deemed to be a third-party beneficiary of this
Agreement.
6.11 No Public Announcement. None of the parties to this
Agreement shall, without the approval of each other party, make
any press release or other public announcement concerning the
transactions contemplated by this Agreement without first providing
a copy of such press release or public announcement to the other
parties to this Agreement at least five days prior to release.
Nothing contained herein shall prohibit any party from making any
pubic disclosure or announcement which is required by law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the date first above written.
The Company:
Larson-Davis Incorporated
By /s/ Brian G. Larson
Brian G. Larson, President
Holders:
/s/ Robert Cohen
Robert Cohen
Address: 336 Atlantic Avenue
East Rockaway, New York 11518
<PAGE>
/s/ Lenore Katz
Lenore Katz
Address: 336 Atlantic Avenue
East Rockaway, New York 11518
/s/ Jeffrey Rubin
Jeffrey Rubin
Address: 336 Atlantic Avenue
East Rockaway, New York 11518
/s/ Shawn Zimberg
Shawn Zimberg
Address: 336 Atlantic Avenue
East Rockaway, New York 11518
/s/ Laura Huberfeld
Laura Huberfeld
Address: 152 West 57th Street
New York, New York 10019
/s/ Naomi Bodner
Naomi Bodner
Address: 152 West 57th Street
New York, New York 10019
/s/ Jeffrey Cohen
Jeffrey Cohen
Address: 336 Atlantic Avenue
East Rockaway, New York 11518
/s/ Allyson Cohen
Allyson Cohen
Address: 336 Atlantic Avenue
East Rockaway, New York 11518
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEETS AS OF JUNE 30, 1995, AND STATEMENTS OF OPERATIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 1995, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 83,334
<SECURITIES> 0
<RECEIVABLES> 2,146,660
<ALLOWANCES> (15,825)
<INVENTORY> 2,152,768
<CURRENT-ASSETS> 4,702,603
<PP&E> 3,010,553
<DEPRECIATION> (1,672,979)
<TOTAL-ASSETS> 11,579,667
<CURRENT-LIABILITIES> 3,954,846
<BONDS> 0
<COMMON> 6,559
0
200
<OTHER-SE> 6,404,731
<TOTAL-LIABILITY-AND-EQUITY> 11,579,667
<SALES> 6,515,830
<TOTAL-REVENUES> 6,515,830
<CGS> 2,598,586
<TOTAL-COSTS> 5,757,030
<OTHER-EXPENSES> (1,113)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 301,402
<INCOME-PRETAX> 458,511
<INCOME-TAX> 0
<INCOME-CONTINUING> 458,511
<DISCONTINUED> (770,128)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (311,617)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> 0
</TABLE>
