UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-17020
Larson Davis Incorporated
(Exact name of registrant as specified 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)
(801) 375-0177
(Registrant's telephone number, including area code)
N/A
(Former name, former address, and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by court.
Yes / / No / /
APPLICABLE ONLY TO CORPORATE ISSUERS
As of April 22, 1998, the Issuer had 12,547,636 shares of its common stock,
par value $0.001 per share, issued and outstanding.
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Larson Davis Incorporated (the "Company") has included the consolidated
balance sheets of the Company and its subsidiaries as of March 31, 1998
(unaudited), and December 31, 1997 (the end of the Company's most recently
completed fiscal year), and unaudited consolidated statements of operations and
cash flows for the three months ended March 31, 1998 and 1997, together with
unaudited condensed notes thereto. In the opinion of management of the Company,
the financial statements reflect all adjustments, all of which are normal
recurring adjustments, necessary to fairly present the financial condition,
results of operations, and cash flows of the Company for the interim periods
presented. The financial statements included in this report on Form 10-Q should
be read in conjunction with the audited financial statements of the Company and
the notes thereto included in the annual report of the Company on Form 10-K for
the year ended December 31, 1997.
LARSONoDAVIS INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
-------------- --------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,042,205 $ 1,212,473
Trade accounts receivable, net of allowance for
doubtful accounts 1,830,491 2,215,945
Inventories 2,668,358 2,631,562
Other current assets 331,764 100,460
-------------- --------------
Total current assets 7,872,818 6,160,440
Property and equipment, net of accumulated
depreciation and amortization 2,078,387 2,165,467
Assets under capital lease obligations, net of
accumulated amortization 626,731 681,576
Long-term contractual arrangement, net of
accumulated cost recoveries 50,000 87,500
Intangible assets, net of accumulated amortization 3,013,421 3,100,447
-------------- --------------
$ 13,641,357 $ 12,195,430
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 809,252 $ 1,198,766
Accounts payable 419,634 1,080,624
Accrued liabilities 1,325,427 1,518,147
Current maturities of long-term debt 730,182 50,729
Current maturities of capital lease obligations 233,801 218,649
-------------- --------------
Total current liabilities 3,518,296 4,066,915
Long-term debt, less current maturities 24,132 716,697
Capital lease obligations, less current maturities 479,437 558,815
-------------- --------------
Total liabilities 4,021,865 5,342,427
-------------- --------------
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, $0.001 par value; authorized
10,000,000 shares; issued and outstanding 3,500
shares at March 31, 1998, and zero shares at
December 31, 1997 4 -
Common stock, $0.001 par value; authorized
290,000,000 shares; issued and outstanding
12,524,589 shares at March 31, 1998, and
12,125,393 shares at December 31, 1997 12,525 12,125
Additional paid-in capital 30,644,546 26,097,332
Accumulated deficit (20,315,866) (19,251,591)
Notes receivable from exercise of options (795,565) (69,375)
Cumulative foreign currency translation adjustment 73,848 64,512
-------------- --------------
Total stockholders' equity 9,619,492 6,853,003
-------------- --------------
$ 13,641,357 $ 12,195,430
============== ==============
</TABLE>
The accompanying notes are in integral part of these financial statements.
LARSON DAVIS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
------------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Net sales $ 2,356,138 $ 2,204,697
-------------- --------------
Costs and operating expenses:
Cost of sales 1,320,998 1,208,367
Research and development 858,779 947,211
Selling, general, and administrative 1,128,537 1,362,026
-------------- --------------
3,308,314 3,517,604
-------------- --------------
Operating loss (952,176) (1,312,907)
-------------- --------------
Other income (expense):
Interest income 34,100 43,999
Interest expense (66,652) (74,732)
Other, net (61,269) 559
-------------- --------------
(93,821) (30,174)
-------------- --------------
Loss before income taxes (1,045,997) (1,343,081)
Income tax expense - -
-------------- --------------
Net loss $ (1,045,997) $ (1,343,081)
============== ==============
Loss per common share:
Basic $ (0.08) $ (0.12)
Diluted $ (0.08) $ (0.12)
Weighted average common and common equivalent
shares:
Basic 12,524,589 11,114,125
Diluted 12,524,589 11,114,125
</TABLE>
The accompanying notes are in integral part of these financial statements.
LARSON DAVIS INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
------------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities
Net loss $ (1,045,997) $ (1,343,081)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation 138,839 81,835
Amortization 129,297 159,208
Stock issued in payment of compensation 148,313 43,698
Gain on sale of property and equipment (3,106) (559)
Changes in assets and liabilities:
Trade accounts receivable 385,454 325,570
Inventories (36,796) (31,047)
Other current assets (231,304) (59,195)
Accounts payable (660,990) (236,445)
Accrued liabilities (210,998) (43,660)
-------------- --------------
Net cash used in operating activities (1,387,288) (1,103,676)
-------------- --------------
Cash flows from investing activities
Purchase of property and equipment (57,395) (481,481)
Proceeds from sale of assets 21,316 35,074
Proceeds from long-term contractual arrangement 37,500 77,730
-------------- --------------
Net cash provided by (used in) investing activities 1,421 (368,677)
-------------- --------------
Cash flows from financing activities
Net change in line of credit (389,514) (369,303)
Proceeds from long-term obligations - 25,486
Principal payments of long-term debt (13,112) (74,678)
Net proceeds from issuance of stock and
exercise of options and warrants 3,673,115 4,059,393
Principal payments on capital lease obligations (64,226) (72,883)
Preferred dividend payments - (11,250)
-------------- --------------
Net cash provided by financing activities 3,206,263 3,556,765
-------------- --------------
Effect of exchange rates on cash 9,336 (52,782)
-------------- --------------
Net increase in cash and cash equivalents 1,829,732 2,031,630
Cash and cash equivalents at beginning of period 1,212,473 2,696,542
-------------- --------------
Cash and cash equivalents at end of period $ 3,042,205 $ 4,728,172
============== ==============
</TABLE>
The accompanying notes are in integral part of these financial statements.
LARSON DAVIS INCORPORATED AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(A) Basis of Presentation
The accompanying unaudited consolidated financial statements of LarsonoDavis
Incorporated and Subsidiaries (the "Company") have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, these financial statements do not include all of the information
and footnote disclosures required by generally accepted accounting principles
for complete financial statements. These financial statements and footnote
disclosures should be read in conjunction with the audited consolidated
financial statements and the notes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1997. In the opinion of
management, the accompanying unaudited consolidated financial statements contain
all adjustments (consisting of only normal recurring adjustments) necessary to
fairly present the Company's consolidated financial position as of March 31,
1998, and its consolidated results of operations and cash flows for the three
months ended March 31, 1998 and 1997. The results of operations for the three
months ended March 31, 1998, may not be indicative of the results that may be
expected for the year ending December 31, 1998.
(B) Earnings (Loss) Per Common Share
Basic earnings (loss) per common share is computed by dividing net earnings
(loss) available to common shareholders by the weighted average number of common
shares outstanding during each period. Diluted earnings (loss) per common share
are similarly calculated, except that the weighted average number of common
shares outstanding includes common shares that may be issued subject to existing
rights with dilutive potential.
(C) Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
Raw materials $ 1,415,539 $ 1,127,335
Work in process 668,381 700,055
Finished goods 584,438 804,172
------------- -------------
$ 2,668,358 $ 2,631,562
============= =============
</TABLE>
(D) Stock Options and Warrants
In February 1998, the Company granted options to a newly hired chief operating
officer to purchase 300,000 shares of common stock at $2.9875 per share. The
options vest 25% on the grant date and 25% per year for each of the three years
following the grant and expire five years after vesting. The vesting of 112,500
shares over the next three years is subject to the achievement of certain
performance objectives.
Also in February 1998, certain former executive officers of the Company
exercised their remaining options to acquire 276,365 shares of common stock, at
prices ranging from $2.06 to $3.64 per share, by delivering to the Company notes
in the aggregate amount of $726,190. The notes bear interest at 8.5% and are
payable in three equal annual installments.
In March 1998, the Company also granted options to existing employees and a
current director to purchase 367,500 shares of common stock, principally at
$3.1375 per share. The options vest in varying percentages over the next three
years and expire five years after vesting. Concurrently with the granting of
these options, the Company canceled existing options previously granted to
certain employees and the director to purchase 382,000 shares of common stock at
prices ranging from $4.69 to $10.50 per share.
As of December 31, 1997, warrants to purchase 2,100,167 shares of common stock
at prices ranging from $5.30 to $8.75 were outstanding. During January 1998,
warrants to purchase 74,084 shares of common stock were exercised for $5.30 per
share, resulting in aggregate proceeds to the Company of $392,177. On exercise,
warrants to acquire the same number of shares at $8.75 per share were issued to
the exercising holders.
(E) Private Placement
In February 1998, the Company completed the private placement of 100 Units, each
Unit consisting of 35 shares of 1998 Series A Preferred Stock (the "Preferred
Stock") and 7,000 Warrants (the "Warrants") to purchase common stock, at a
purchase price of $35,000 per Unit, or an aggregate gross sales price of
$3,500,000. The Preferred Stock is convertible, at the election of the holder,
at any time subsequent to 90 days after the closing of the offering into that
number of shares of common stock calculated by dividing $1,000, plus any accrued
but unpaid dividends, by the lower of (i) $3.60 or (ii) 85% of the average
closing price of the common stock for the ten trading days preceding the notice
of conversion as reported by the Nasdaq National Market System on which the
Company's common stock is traded. Until conversion, the Preferred Stock bears
an annual dividend of 4%, or $40 per share per annum. If not previously
converted, the Preferred Stock will automatically convert into shares of common
stock as of December 31, 1999. In addition, the Company can require the
conversion of the Preferred Stock if it makes a public offering of its common
stock at any time subsequent to February 1, 1999. The Company paid a finder's
fee of 6%, or an aggregate of $210,000, and had other costs associated with the
offering of approximately $35,000.
Each Warrant gives the holder the right to purchase one share of common stock at
an exercise price of $4.50 per share. If not earlier exercised, the Warrants
expire July 30, 2000. The Company can provide 30 days written notice to the
holders of the Warrants at any time that the closing price of the Company's
common stock equals or exceeds $6.50 per share for 20 consecutive trading days
as reported on the Nasdaq National Market System. If the holders do not
exercise the Warrants by the end of the 30 day period, the Warrants would then
expire.
(F) Related-Party Receivable
As part of the restructuring of its executive management team, the Company
entered into termination agreements with the former executives. Those
termination agreements provided for, among other things, the issuance of an
aggregate of 200,000 shares of common stock to certain of the executives. In
connection with this arrangement, the Company made trust fund deposits for
personal income taxes, social security, and Medicare taxes in the total amount
of $247,766 on behalf of these executives with the Internal Revenue Service and
with the Utah State Tax Commission. These former executives have agreed to
reimburse the Company for these trust fund deposits, which are included in other
current assets on the balance sheet at March 31, 1998. The Company withheld
delivery of 68,352 shares of common stock to secure this obligation.
(G) Subsequent Event
As a result of high interest and other charges associated with the loan and
restrictive loan provisions, in March 1998, the Company notified the provider of
its line of credit of the Company's intent to terminate the line. In April
1998, the Company paid the line of credit and associated termination fees in the
total amount of $809,252 from available cash and cash equivalents.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with the
consolidated financial statements and related notes contained herein and in
conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" and the audited consolidated financial statements
included in the Company's report on Form 10-K for the year ended December 31,
1997.
This report and other information made publicly available by the Company
from time to time may contain certain forward looking statements and other
information relating to the Company and its business that are based on the
beliefs of management of the Company and assumptions made concerning information
then currently available to management. Such statements reflect the views of
management of the Company at the time they are made and are not intended to be
accurate descriptions of the future. The discussion of the future business
prospects of the Company is subject to a number of risks and assumptions,
including the completion of commercial products within projected time frames,
the market acceptance of products to be developed, the ability of the Company to
successfully address technical and manufacturing problems in producing new
products, the ability of the Company to enter into strategic alliances, joint
ventures, or other collaborative arrangements with established industry
partners, the success of the marketing efforts of the Company and the entities
with which it has agreements, and the ability of the Company to obtain the
necessary financing to successfully complete its goals. Should one or more of
these or other risks materialize or if the underlying assumptions of management
prove incorrect, actual results of the Company may vary materially from those
described in the forward looking statements. The Company does not intend to
update these forward looking statements, except as may occur in the regular
course of its periodic reporting obligations.
The Company has historically been engaged in designing and manufacturing
precision acoustical and vibration instrumentation. Over the course of the last
four years, the Company has acquired the rights to a number of technologies from
Brigham Young University ("BYU"), either directly from BYU or indirectly through
the Company's acquisition of Sensar. The Company has also entered into a
license agreement with Lucent Technologies, Inc. (formerly Bell Labs), in which
it acquired the sole rights to technology developed by Lucent. These
technologies have placed the Company in a position to develop a number of
sophisticated analytical instruments in addition to its historical acoustical
and vibration based business.
In order to accomplish its goals, the Company initiated research and
development plans designed to convert the underlying technologies into
commercial products. The Company currently has one commercial product available
based on these acquired technologies, its time of flight mass spectrometer
("TOF2000") and has just introduced and shipped beta models of its Jaguar mass
spectrometer ("Jaguar") and its Supercritical Fluid Chromatography ("SFC")
instrument. In addition, the Company continues to introduce acoustic and
vibration products and has made significant advances toward additional products.
However, there have been unanticipated delays in the finalization of many of
these products. Certain recently introduced acoustical products and the Jaguar
product were originally scheduled for the first quarter of 1997. The recently
introduced acoustical products have been primarily responsible for an
approximately 8% increase in acoustic and vibration sales, but the Company does
not anticipate that there will be a significant impact on its revenues until
after the introduction and market acceptance of the new Sensar products. While
management of the Company continues to believe in, and is committed to, the
development of a range of superior products designed to meet the needs of
significant markets, the products currently being developed and marketed by the
Company are designed for sophisticated applications, and there can be no
assurance that the Company will be successful in its development and marketing
efforts or that alternative technologies may not be developed by some other
entity that provide a more advantageous solution to the needs of the various
industries targeted by the Company.
In November 1997, the board of directors appointed Andrew C. Bebbington as
the new chief executive officer of the Company. In connection with the
appointment of Mr. Bebbington, three former members of the executive management
team resigned. Mr. Bebbington, with the strong endorsement of the outside board
members, immediately undertook an evaluation of all aspects of the Company's
operations, research and development projects, sales and marketing approaches,
product offerings, personnel and management, contractual arrangements, and
overall cost structure. As a result, the new chief executive officer
recommended and the board of directors approved in December 1997 additional
restructuring steps and certain changes in the strategic direction of the
Company. This resulted in a reduction of personnel, the cessation of certain
peripheral business activities, a renewed focus on certain research and
development projects, and a de-emphasis or abandonment of other projects.
The Company is presently unable to fund its increased research,
development, and other activities from operations and has sought and obtained
equity financing, primarily from private placements to a small number of private
investors, in order to meet these costs. This capital has been and is currently
being used for various purposes, including further research and development
activities, costs associated with the market introduction of new key products,
and general operations. The most recent equity placement by the Company
resulted in gross proceeds of $3.5 million and was completed in February 1998.
Assuming that the Company can successfully launch its new products and that they
are sufficiently accepted in the market to permit a substantial increase in the
Company's revenues during 1998, the Company would anticipate that the proceeds
from this private placement will provide adequate capital to meet its projected
requirements through the end of fiscal 1998. In the event that such products do
not produce significant increases in revenues during 1998, the Company will
continue to be reliant on obtaining outside financing to fund its operations in
1998. If this is the case, there can be no assurance as to the Company's
ability to obtain such financing or, if available, that such financing can be
obtained on terms favorable to the Company.
RESULTS OF OPERATIONS
Comparison of Three Months ended March 31, 1998 and 1997
Net Sales
Net sales for the three months ended March 31, 1998 and 1997, were
$2,356,138 and $2,204,697, respectively. This represents an overall increase of
$151,441, or 6.9%, for 1998 as compared to 1997. The overall increase consists
of an increase of $133,687, or 8.4% for acoustical and vibration sales and an
increase of $17,754, or 2.9% for the Sensar division. The Company's new Model
824 commenced volume shipments in the quarter ended March 31, 1998, and
represent the principal reason for the increase in acoustical and vibration
sales. For the Sensar division, sales in the quarter ended March 31, 1998,
include beta shipments of the Company's new Jaguar and SFC instruments.
Cost of Sales
Cost of sales for the three months ended March 31, 1998, were $1,320,998,
or 56.1% of net sales, compared to $1,208,367, or 54.8% of net sales, for the
three months ended March 31, 1997. The increase in cost of sales as a
percentage of net sales during the quarter ended March 31, 1998, compared to the
corresponding quarter of 1997 principally relates to certain Sensar sales of
beta instruments for which the gross margin was less than normal margins on
commercial instruments. The Company anticipates that as the manufacturing
process of its new products becomes standardized and as its new products are
sold in volume quantities, cost of goods sold as a percentage of net sales will
decline. However, such a result will depend on the Company's ability to
standardize the manufacturing process and control costs, as well as sufficient
market acceptance to create volume sales of the Company's new products, for
which no assurance can be given.
Selling, General, and Administrative
Selling, general, and administrative expenses decreased to $1,128,537, or
47.9% of net sales, for the three months ended March 31, 1998, compared to
$1,362,026, or 61.8% of net sales, for the three months ended March 31, 1997.
The decrease in costs relate principally to the recent implementation of certain
cost control procedures, reduced overhead, and restructured operations to reduce
nonessential spending. The Company anticipates that selling, general, and
administrative expenses will continue to decline as a percentage of net sales as
newly-introduced products receive commercial acceptance. However, it is not
anticipated that selling, general, and administrative expenses can be reduced to
an acceptable percentage of net sales unless and until sales increase
substantially. Such increase is dependent on the successful introduction of new
products and increased product demand for both new and existing products, which
is the Company's highest priority. However, there can be no assurance that the
Company will be successful in accomplishing such goals.
Research and Development
For the three months ended March 31, 1998, research and development costs
were $858,779, or 36.4% of net sales, compared to $947,211, or 43.0% of net
sales, for the three months ended March 31, 1997. As described above for
selling, general, and administrative expenses, the decrease in costs relates
principally to the recent implementation of certain cost control procedures,
reduced overhead, and restructured operations to reduce nonessential spending.
The Company anticipates that research and development expenses will continue to
decline as a percentage of net sales as newly-introduced products receive
commercial acceptance. However, it is anticipated that research and development
expenses will continue to exceed general historical levels as a percentage of
net sales until the development of new products is completed and/or until
significant sales levels of the new products are achieved. Historical levels of
research and development costs as a percentage of net sales for the fiscal years
ended June 30, 1991 to 1995, averaged approximately 11% of net sales.
LIQUIDITY AND CAPITAL RESOURCES
In recent years, the Company has relied on the sale of common and preferred
stock as the primary method to fund its working capital needs, operational
losses, and research and development efforts. During the three months ended
March 31, 1998, the Company used $1,387,288 in its operating activities. The
Company's current goal is to increase revenues and control costs so that it is
no longer reliant on equity funding in the short term. However, this will
require sufficient market acceptance of new products to substantially increase
revenues. If the Company is unable to internally generate the necessary funds,
it will continue to seek equity financing which may or may not be available on
terms favorable to the Company.
During the three months ended March 31, 1998, the Company received gross
proceeds from the exercise of warrants of approximately $400,000 and gross
proceeds of $3,500,000 from the private placement of preferred stock and
warrants. The warrants issued in the most recent private placement give the
holders the right to purchase 700,000 shares of common stock at $4.50 per share.
Additionally, the Company has outstanding warrants to acquire 2,100,167 shares
of common stock at prices ranging from $5.30 to $8.75 per share. There is no
obligation of the holders of these warrants to exercise them and the exercise
will largely depend on the price of the Company's common stock in the public
trading market, as to which no assurance can be given. The Company does not
anticipate that the outstanding warrants will be exercised unless the trading
price of the Company's common stock exceeds the exercise price of the warrants
at some time in the future.
At March 31, 1998, the Company had total current assets of $7,872,818 and
total current liabilities of $3,518,296, resulting in working capital of
$5,038,753 and a working capital ratio of 2.2:1. Included in total current
liabilities as of March 31, 1998, was the Company's revolving line of credit
with a balance of $809,252. As a result of high interest and other costs and
restrictive loan provisions, the Company elected to terminate this line of
credit in April 1998 and paid off the balance from available cash and cash
equivalents. Also included in current liabilities is the balance of a real
property loan secured by the Company's headquarters that has a balloon payment
due in January 1999. The Company anticipates seeking to refinance or extend
this loan prior to the due date.
The Company had intangible assets totaling $3,013,421 principally related
to product technology acquisition costs. Periodically, the Company reviews the
recoverability of these assets by comparing the carrying value of individual
identifiable intangible assets to the undiscounted estimated future net cash
flows from current and anticipated products associated with each of these
assets. Estimates of future cash flows are based on current demand for existing
products; the progress toward commercialization of future products; and
anticipated demand for existing and future products based on the Company's
market analyses and evaluations with current and potential strategic marketing
partners. Management's estimates of future manufacturing costs and development
and marketing expenses are based on historical levels and/or industry norms.
Although management believes its current estimates of recoverability of
intangible assets are reasonable, there is no assurance that actual future
results will not differ from current expectations. In the event of a change in
expectations, the carrying value or amortization period of the long-term asset
would be adjusted which would affect the Company's results of operations in the
period in which such adjustment occurred.
The Company's primary use of cash for the three months ended March 31,
1998, was funds used in operations as discussed above. Management expects that
in the short-term, the primary use of cash will continue to be operations due to
the continued research and development activities. However, as explained above,
the Company used approximately $800,000 in April 1998 to terminate its line of
credit. Management's goal is for the current cash balances to provide the
Company with sufficient capital to fund its operations and development plans for
the 1998 calendar year. However, the Company's ability to meet this goal will
depend on the successful introduction of new products so as to substantially
increase the Company's revenues during 1998. As conditions permit, the Company
intends to seek to establish a reasonably priced line of credit with a financial
institution. As new products are developed and commercialized and product
demand is achieved, management believes that its long-term operating and capital
requirements will be funded principally through cash generated from operations,
supplemented as necessary from equity or long-term debt financing.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
The following exhibits are included as part of this report:
<TABLE>
<CAPTION>
SEC
Exhibit Reference
Number Number Title of Document
- ------- --------- -----------------------
<S> <C> <C>
1 (27) Financial Data Schedule
</TABLE>
REPORTS ON FORM 8-K
During the quarter ended March 31, 1998, the Company filed a report on Form
8-K dated January 7, 1998, reporting a series of measures to restructure the
operations of the Company. The Company also filed a report on Form 8-K dated
February 13, 1998, reporting the successful completion of the private placement
of 100 Units, each Unit consisting of 35 shares of 1998 Series A Preferred Stock
and warrants to purchase 7,000 shares of common stock.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Larson Davis Incorporated
Dated: April 24, 1998 By /s/ Andrew Bebbington
Andrew Bebbington, President
(Duly Authorized Officer)
Dated: April 24, 1998 By /s/ Craig Allen
Craig Allen
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1998, AND CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,042,205
<SECURITIES> 0
<RECEIVABLES> 1,917,230
<ALLOWANCES> (86,739)
<INVENTORY> 2,668,358
<CURRENT-ASSETS> 7,872,818
<PP&E> 3,498,285
<DEPRECIATION> (1,419,898)
<TOTAL-ASSETS> 13,641,357
<CURRENT-LIABILITIES> 3,518,296
<BONDS> 0
<COMMON> 12,525
0
4
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,641,357
<SALES> 2,356,138
<TOTAL-REVENUES> 2,356,138
<CGS> 1,320,998
<TOTAL-COSTS> 3,308,314
<OTHER-EXPENSES> 61,269
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66,652
<INCOME-PRETAX> (1,045,997)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,045,997)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,045,997)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
