<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended AUGUST 31, 1996
----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
ACT OF 1934
For the transition period from ________________________________ to
____________________________
For Quarter Ended AUGUST 31, 1996 Commission File No. 0-18515
THERAPY LASERS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA NO. 93-0960302
------ --------------
(State or other jurisdiction I.R.S. Employer Identification No.)
of incorporation or organization)
10850 RICHMOND AVE., STE 216,
HOUSTON, TEXAS 77042
- ---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 783-0443
------------------
NOT APPLICABLE
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 No X
---. ---.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Title of Each Class Outstanding at May 31 1995
------------------- --------------------------
Common 9,735,592 Shares
1
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PART I
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Balance Sheets as of August 31, 1996 (Unaudited) 3
Statements of Loss for the Periods Ended August 31, 1996 and 1995 (Unaudited) 4
Statements of Stockholders' Equity for the Periods Ended August 31, 1996
and 1995 (Unaudited) 5
Statements of Cash Flows for the Periods Ended August 31, 1996 and
1995 (Unaudited) 6
Notes to Financial Statements (Unaudited) 7
</TABLE>
2
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THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
AUGUST 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash $ 8,534
---------
Total current assets 8,534
---------
Property and equipment, net of accumulated
depreciation of $309 691
---------
Total assets $ 9,225
=========
LIABILITIES
Current liabilities:
Current portion of long term debt $ 6,918
Accounts payable 15,000
Accrued expenses 26,725
Account payable, related party 290
Note payable, related party 5,000
---------
Total current liabilities 53,933
Noncurrent liabilities:
Long term debt 22,676
--------
Total noncurrent liabilities 22,676
--------
Total liabilities 76,609
--------
Commitments and contingencies (Note 6) -
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 100,000,000
shares authorized,
9,735,592 issued and outstanding 9,736
Capital in excess of par value 4,507,714
Accumulated deficit:
Prior operating accumulated deficit (4,452,105)
Accumulated during the development stage (132,729)
----------
Total stockholders' equity (67,384)
----------
Total liabilities and stockholders' equity $9,225
==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THERE STATEMENTS. 3
<PAGE>
THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF LOSS FOR THE PERIODS ENDED
AUGUST 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
MARCH 1,
1995
THROUGH QUARTER ENDED SIX MONTHS ENDED
AUGUST 31, AUGUST 31, AUGUST 31,
-------------------- ----------------------
1996 1996 1995 1996 1995
---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Developmental stage expenses:
Personnel and consulting costs 75,202 $ 7,413 $ 15,300 $ 15,702 $ 31,200
Rent and occupancy 9,257 2,520 1,838 4,807 3,660
Legal and professional fees 25,292 10,894 2,489 20,777 3,593
Depreciation and amortization 309 83 88 166 169
Other general and administrative 13,482 925 3,108 3,941 5,855
Interest 9,187 502 704 1,496 1,518
--------- -------- --------- ---------
Development stage loss from operations (132,729) (22,337) (23,527) (46,889) (45,995)
Write-down of investments - - - - -
-------- --------- -------- -------- --------
Development stage loss before taxes on income (132,729) (22,337) (23,527) (46,889) (45,995)
Provision for income taxes - - - - -
-------- --------- -------- -------- --------
Development stage loss from continuing
operations (132,729) (22,337) (23,527) (46,889) (45,995)
-------- --------- -------- -------- --------
Discontinued operations applicable to operating
period prior to entering development stage:
Gain (loss) from discontinued operations 39,571 - 32,743 - 40,230
Loss on disposal of segment - - - - -
-------- -------- -------- -------- --------
Total gain (loss) from discontinued operations 39,571 - 32,743 - 40,230
-------- -------- -------- -------- --------
Net loss (93,158) $ (22,337) $ 9,216 $ (46,889) $ (5,765)
======== ========= ======== ======== ========
Net loss per common share (Note 4):
Development stage loss from operations
before write-down of investments $ (0.0024) $ (0.0079) $ (0.0052) $ (0.0166)
Write-down of investments - - - -
Discontinued operations - 0.0109 - 0.0145
--------- -------- -------- --------
$ (0.0024) $ 0.0030 $ (0.0052) $ (0.0021)
========= ======== ======== ========
Weighted average number of shares outstanding 9,233,152 2,991,084 9,086,752 2,771,200
========= ========= ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 4
<PAGE>
THERAPY LASER, INC
(DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE PERIODS ENDED
AUGUST 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
DEFICIT
PRIOR ACCUMULATED
ADDITIONAL OPERATING DURING THE
COMMON STOCK PAID IN ACCUMULATED DEVELOPMENT
SHARES AMOUNT CAPITAL DEFICIT STAGE TOTAL
------ ------ ------- ----------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Balances, February 28, 1995 2,486,316 $2,486 $4,380,575 $(3,803,681) $(687,995) $(108,615)
Sales of stock for cash 629,535 $ 630 $ 21,845 - - $ 22,475
Stock issued for services 250,000 250 24,750 - - 25,000
Development stage loss (5,765) (5,765)
--------- ------ ---------- ----------- --------- ---------
Balances, August 31, 1995 3,365,851 $3,366 $4,427,170 $(3,803,681) $(693,760) $ (66,905)
========= ====== ========== =========== ========= =========
Balance, February 29, 1996 3,592,816 $3,593 $4,460,843 $(4,452,105) $ (85,840) $ (73,509)
Stock issued to acquire
subsidiary, LaserCare, Inc. 5,750,776 5,751 17,767 23,518
Sales of stock for cash 136,000 136 14,064 14,200
Stock issued for services 256,000 256 15,040 - - 15,296
Development stage loss - - - - (46,889) (46,889)
--------- ------ ---------- ----------- --------- ---------
Balances, August 31, 1996 9,735,592 $9,736 $4,507,714 $(4,452,105) $(132,729) $ (67,384)
========= ====== ========== =========== ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 5
<PAGE>
THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED
AUGUST 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
MARCH 1,
1995
THROUGH QUARTER ENDED SIX MONTHS ENDED
AUGUST 31, AUGUST 31, AUGUST 31,
--------------------- ---------------------
1996 1996 1995 1996 1995
----------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net Loss $ (93,158) $ (22,337) $ 9,216 $ (46,889) $ (5,765)
Adjustments to reconcile net income to cash
provided (used) by developmental stage activities:
Discontinued operations income and expenses - - - - -
Depreciation and amortization 309 83 88 166 169
Stock issued for services 64,196 7,296 12,000 15,296 25,000
Write-down of investments - - - - -
Decrease in accounts receivable - - - - -
Increase (decrease) in accounts payable (44,931) 2,763 (42,811) 3,051 (41,997)
Increase (decrease in accrued expenses 4,000 - - - -
Other increases, net 6,000 - - - -
----------- ----------- -------- --------- ---------
Net cash provided (used) by operating
activities (63,584) (12,195) (21,507) (28,376) (22,593)
----------- ----------- -------- --------- ---------
Cash flows from investing activities:
Acquisition of equipment - - - - (766)
----------- ----------- -------- --------- ---------
Cash flows from financing activities:
Proceeds from sale of common stock 46,675 14,200 22,474 14,200 22,474
Stock issued to acquire subsidiary, net of
reduction in payable to subsidiary 17,518 5,000 - 17,518 -
Net change in short term debt - - (7) - (7)
Proceeds from note payable, related party 5,000 - - 5,000 -
Net change in due from affiliate - - - -
----------- ----------- -------- --------- ---------
Net cash provided (used) by financing activities 69,193 19,200 22,467 36,718 22,467
----------- ----------- -------- --------- ---------
Net increase (decrease) in cash and equivalents 5,609 7,005 960 8,342 (892)
Cash and equivalents, beginning of period 3,117 1,529 1,073 192 2,925
----------- ------------ --------- --------- ---------
Cash and equivalents, end of period $ 8,726 $ 8,534 $ 2,033 $ 8,534 $ 2,033
========== ============ ========= ========= =========
Supplemental cash flow disclosures:
Cash paid for:
Interest $ 5,187 $ 502 $ 704 $ 1,496 $ 1,518
Non-cash financing and investing activities:
Stock issued to acquire subsidiary 12,518 - - 12,518 -
Stock issued to settle debt - - - - -
Stock cancelled - - - - -
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS. 6
<PAGE>
THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1996
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION:
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and, therefore, do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. Except as disclosed herein, there has been no
material change in the information disclosed in the notes to consolidated
financial statements included in the Company's Annual Report on Form 10-KSB for
the year ended February 28, 1996. In the opinion of Management, all adjustments
considered necessary for a fair presentation have been included. Operating
results for the six month period ended August 31, 1996 are not necessarily
indicative of the results that may be expected for the year ending
February 28, 1997.
NOTE 2 - PRINCIPLES OF CONSOLIDATION:
The accompanying financial statements include the accounts of the Company and
its wholly-owned subsidiary, LaserCare, Inc., a development stage enterprise,
which was acquired on March 12, 1996. All significant intercompany transactions
have been eliminated.
NOTE 3 - ACQUISITION:
On March 12, 1996, the Company acquired 100% of the stock of LaserCare, Inc. in
exchange for 5,750,776 shares of its common stock. A summary balance sheet of
LaserCare, a development stage enterprise, at February 29, 1996 follows:
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash $17,807
Advances receivable, Therapy Lasers Inc. 6,000
-------
Total assets $23,807
=======
LIABILITIES
Account payable, affiliated company $ 290
-------
STOCKHOLDERS' EQUITY
Common stock 1,000
Capital in excess of par value 26,000
Deficit accumulated during the development stage (3,483)
-------
Total stockholders' equity 23,517
-------
Total liabilities and stockholders' equity $23,807
=======
</TABLE>
As a result of this transaction, one individual now controls 70% of Therapy
Lasers, Inc.'s outstanding common stock. The transaction has been accounted for
as a purchase, and was recorded at the net underlying assets of LaserCare. All
significant intercompany accounts have been eliminated upon consolidation.
All significant transactions of LaserCare, Inc. are included in the accompanying
financial statements for the period ended August 31, 1996. If the transaction
had been completed on March 1, 1995, proforma results of operations for the
period ended August 31, 1995 would be as follows (including operations of
LaserCare, Inc. from its inception, March 28, 1995, through August 31,1995):
7
<PAGE>
THERAPY LASERS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
THERAPY LASERCARE, COMBINED
LASERS, INC. INC. (PROFORMA)
---------------------------------------
<S> <C> <C> <C>
Developmental stage expenses:
Personnel and consulting costs $ 31,200 $ 31,200
Rent and occupancy 3,660 3,660
Legal and professional fees 3,593 3,593
Depreciation and amortization 169 169
Other general and administrative 5,855 $ 16 5,871
Interest 1,518 1,518
---------------------------------------
Development stage loss from (45,995) (16) (46,011)
operations
Discontinued operations applicable to
operating period prior
to entering development stage: 40,230 40,230
Gain from discontinued operations ---------------------------------------
Net loss ($5,765) ($16) ($5,781)
=======================================
</TABLE>
In addition to the completed transaction described above, the Company is
continually evaluating additional possible opportunities for acquisitions.
NOTE 4 - LONG TERM DEBT:
The Company is obligated on a promissory note payable to a local bank providing
for payment of interest only at 10% per annum until August 1, 1996. Thereafter,
monthly principal and interest payments of $753 begin. The note is
collateralized by all assets of the corporation. Maturities of long term are as
follows.
<TABLE>
<CAPTION>
<S> <C>
FISCAL YEAR ENDING FEBRUARY 28,
1998 $ 6,739
1999 7,445
2000 8,224
2001 3,554
-------
Total $25,962
=======
</TABLE>
NOTE 5 - FEDERAL TAX LIEN:
The accompanying financial statements reflect a liability of $26,725, which is
included in accrued expenses, which represents a lien by the Internal Revenue
Service for unpaid employee trust funds incurred by the Company's former
retail/rental subsidiary, THS Wellness Centers, Inc.
NOTE 6 - NONQUALIFIED STOCK OPTIONS:
On March 24, 1995 the Company granted nonqualified stock options to its three
directors to purchase an aggregate of 200,000 shares of its "restricted" common
stock at an option price of $.05 per share. Options for 60,000 shares lapsed on
August 3, 1995 upon the resignation of one of the directors. The option price
approximated market price of the stock at the date of grant. The remaining
options, for 160,000 shares, become vested at the rate of 40,000 shares per
quarter, and must be exercised before March 24, 1998.
8
<PAGE>
NOTE 7 - COMPENSATION PAID IN STOCK:
The Company compensates certain officers by the issuance of stock for their
services, in lieu of cash. Stock issued in lieu of cash was as follows:
<TABLE>
<CAPTION>
PRICE
NUMBER OF PER
DATES ISSUED SHARES SHARE AMOUNT
<S> <C> <C> <C>
QUARTER ENDED MAY 31, 1995: 130,000 $.10 $13,000
May 31, 1995
QUARTER ENDED MAY 31, 1996: 80,000 .05 4,000
May 31, 1996
QUARTER ENDED AUGUST 31, 1995: 120,000 $.10 $12,000
August 31, 1995
QUARTER ENDED AUGUST 31, 1996: 96,000 .076 7,296
August 31, 1996
</TABLE>
9
<PAGE>
PART I.
(continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
---------------------
COMPARISON OF THE SIX MONTHS ENDED AUGUST 31, 1996
TO THE SIX MONTHS ENDED AUGUST 31, 1996
Due to the disposal of the Company's THS Wellness Centers, Inc. subsidiary in
the fourth quarter of the fiscal year ended February 28, 1995, the Company had
no revenues during the six months ended August 31, 1996 or August 31, 1995 and
continues to be a development stage enterprise. Operating expenses increased to
$46,889, an increase of 2% from the operating expenses for the six months ended
August 31, 1995. The net loss for the six months ended August 31, 1996 was
$46,889 as compared to a net loss of $45,995 for the six months ended August 31,
1995, which benefited from a gain related to discontinued operations of $40,230
resulting from the settlement or renegotiation of liabilities related to the
discontinued business.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Negative working capital of $(45,399) at August 31, 1996 decreased $66,883 from
the negative working capital of $(112,282) at February 28, 1995 due primarily to
the settlement of liabilities related to the discontinued business for less than
recorded amounts.
The Company is currently seeking funding through the sale of its stock, mergers
and/or joint venture arrangements with prospective partners. As of May 31,
1996, no capital has been obtained from the SE funding efforts.
For the next twelve months, the Company plans to continue its efforts to market
its laser medical devices, primarily in Canada and Mexico. The devices are not
approved for sale in the United States. The Company also plans to continue its
efforts to obtain Federal Drug Administration approval for the products, but no
significant progress on that activity is expected to be completed during the
next fiscal year. The Company is negotiating with a large Mexican drug
manufacturer and distributor to establish markets in Mexico.
10
<PAGE>
PART II
OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5 - OTHER INFORMATION
None
11
<PAGE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
(1) February 20, 1996 - Resignation of C. Williams & Associates, P.C.
as independent certifying accountant.
(2) March 14, 1996 - Acquisition of all the outstanding stock of
LaserCare, Inc., resignation of Philip H. Salchli, CPA as the
Company's independent certifying accountant, and election of
Bateman, Blomstrom & Co. as the Company's new independent
certifying accountant.
(3) July 08, 1996 - Amended Form 8K regarding the aquisition of
LaserCare, Inc., resignation of Philip H. Salchli, CPA, and
election of Bateman, Blomstrom & Co.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THERAPY LASERS, INC.
Date October 17, 1996 /s/ LEON HOGG
__________________________ ______________________
Leon Hogg
Chief Executive Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 8,534
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,534
<PP&E> 0
<DEPRECIATION> 309
<TOTAL-ASSETS> 9,225
<CURRENT-LIABILITIES> 53,933
<BONDS> 0
0
0
<COMMON> 9,736
<OTHER-SE> (77,120)
<TOTAL-LIABILITY-AND-EQUITY> 9,225
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 21,835
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 502
<INCOME-PRETAX> (22,337)
<INCOME-TAX> 0
<INCOME-CONTINUING> (22,337)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,337)
<EPS-PRIMARY> (.002)
<EPS-DILUTED> (.002)
</TABLE>
