UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period ended
September 30, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for transition period from
to
Commission file number 1-11064
ION LASER TECHNOLOGY, INC.
(Exact name of small business issuer as specified in its charter)
UTAH 87-0410364
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3828 South Main Street
Salt Lake City, Utah 84115
(Address of principal executive offices) (Zip Code)
(801) 262-5555
(Issuer's telephone number)
Check whether the issuer (1) has 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 [ ]
The number of shares of common stock of the issuer outstanding as of
September 30, 1996 was 5,273,330.
<PAGE>
ION LASER TECHNOLOGY, INC.
INDEX TO FORM 10-QSB
Page
-------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Condensed Balance Sheets
as of September 30, 1996 and March 31, 1996. 1-2
Unaudited Consolidated Condensed Statements
of Operations for the six months and
three months ended September 30, 1996 and
September 30, 1995. 3
Unaudited Consolidated Condensed Statements of
Cash Flows for the six months and three months ended
September 30, 1996 and September 30, 1995. 4
Notes to Unaudited Consolidated Condensed Financial
Statements. 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 6
PART II. OTHER INFORMATION 7
Signature Page 8
<PAGE>
Ion Laser Technology, Inc.
Unaudited Consolidated Condensed Balance Sheets
Assets September 30, March 31,
1996 1996
------------- -------------
Current assets:
Cash and cash equivalents $ 2,954,445 $ 5,081,912
Accounts receivable, less allowance
of $45,277 and $40,000
March 31, 1996 and September 30,
1996 respectively 1,150,971 1,253,458
Inventories 2,390,123 1,348,861
Prepaid expenses 140,767 125,997
Income tax refund receivable 19,138 19,564
------------ -------------
Total current assets 6,655,444 7,829,792
Property, plant and equipment, net 2,303,638 1,617,769
Investment in joint venture 197,917 197,917
Goodwill, net 1,173,929 1,209,051
Patent costs, net 316,494 129,582
Receivable from joint venture 212,805 220,656
Other assets 43,521 44,114
----------- -----------
Total assets $10,903,748 $11,248,881
=========== ============
See accompanying notes.
<PAGE>
Ion Laser Technology, Inc.
Unaudited Consolidated Condensed Balance Sheets (continued)
September 30, March 31,
1996 1996
------------- ------------
Liabilities and shareholders' equity
Current liabilities:
Notes payable $ 1,286 $ 676,340
Accounts payable 562,382 329,037
Accrued expenses 257,724 665,642
Accrued warranty costs 47,402 97,497
Current portion of long-term debt 19,166 16,864
------------- ------------
Total current liabilities 887,960 1,785,380
Long-term debt - less current portion 804,000 819,890
Redeemable common stock; 150,000 shares
issued & outstanding at September 30,
1996 and March 31, 1996 338,540 338,540
Shareholders' Equity:
Common stock, $.001 par value:
Authorized shares 50,000,000 5,123 4,934
Issued and outstanding shares -
September 30, 1996 - 5,273,330
March 31, 1996 - 4,933,630
Additional paid-in capital 8,829,015 8,469,829
Retained earnings (deficit) 89,441 (119,361)
Cumulative translation adjustment (50,331) (50,331)
-------------- -------------
Total shareholders' equity 8,873,248 8,305,071
-------------- -------------
Total liabilities and shareholders'
equity $ 10,903,748 $ 11,248,881
============== =============
See accompanying notes.
<PAGE>
Ion Laser Technology, Inc.
Unaudited Consolidated Condensed Statements of Operations
<TABLE>
<CAPTION>
For Six Months Ended For Three Months Ended
--------------------------------- ---------------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30
1996 1995 1996 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 3,354,010 $ 1,835,651 $ 1,955,518 $ 805,950
Cost of products sold 1,714,612 1,233,349 1,325,736 573,306
Selling and administrative 1,412,647 557,983 536,200 259,414
expenses
Research and development 100,035 51,235 58,653 22,894
expenses -------------- -------------- -------------- -------------
126,716 (6,916) 34,929 (49,664)
Other income (expense) 82,086 (60,901) 39,803 (28,860)
-------------- -------------- -------------- -------------
Income (loss) before income 208,802 (67,817) 74,732 (78,524)
taxes
Income tax (expense) benefit - - - -
-------------- -------------- -------------- -------------
Net income (loss) 208,802 $ (67,817) $74,732 $ (78,524)
============== ============== ============== =============
Earnings (loss) per common
share .04 $ (.02) .02 $ (.02)
============== ============== ============== =============
</TABLE>
See accompanying notes.
<PAGE>
Ion Laser Technology, Inc.
Unaudited Consolidated Condensed Statements of Cash Flows
For the six months ended:
<TABLE>
<CAPTION>
Sept. 30, Sept. 30,
1996 1995
-------------- --------------
<S> <C> <C>
Operating activities
Net income (loss) 208,802 (67,817)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation and amortization 100,972 74,230
Provision for losses on accounts receivable 5,277 5,466
Changes in operating assets and liabilities:
Accounts receivable 105,06 (72,198)
Inventories (1,041,262) (10,530)
Prepaid expenses (14,770) 51,057
Other assets 593 (14,713)
Accounts payable and accrued liabilities (174,573) (71,343)
Accrued warranty costs (50,095) 17,347
Income taxes payable 426 -
-------------- --------------
Net cash provided by (used in) operating activities (859,569) (88,501)
-------------- --------------
Investing activities
Patent costs (188,839) (8,421)
Goodwill 6,696 -
Additions to property, plant and equipment (756,488) (23,450)
------------- --------------
Net cash (used in) investing activities (938,631) (31,871)
------------- --------------
Financing activities
Payments on debt (688,642) (24,893)
Proceeds from sale of common stock 359,375 100,000
------------- --------------
Net cash provided by (used in) financing activities (329,267) 75,107
------------- --------------
Net increase (decrease) in cash and cash equivalents (2,127,467) (45,265)
Cash and cash equivalents at beginning of period 5,081,912 82,440
------------- --------------
Cash and cash equivalents at end of period 2,954,445 $ 37,175
============= ==============
</TABLE>
See accompanying notes.
<PAGE>
Ion Laser Technology, Inc.
Notes to Unaudited Consolidated Condensed Financial Statements
September 30, 1996
1. Accounting Policies
Basis of Presentation
The unaudited, consolidated, condensed financial statements of Ion Laser
Technology, Inc. ("The Company") as of September 30, 1996 and March 31,
1996 and for the six months and three months ended September 30, 1996 and
1995 were prepared by the Company without audit, in accordance with
generally accepted accounting principles for interim financial information
and in accordance with the instructions to Form 10-QSB and Article 10 of
Regulation S-X of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all necessary adjustments to
the financial statements have been made to present fairly the financial
position and results of operations and cash flows of the Company. The
results of operations for the periods presented are not necessarily
indicative of the results for the respective complete years. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-KSB for the year
ended March 31, 1996.
Earnings Per Share
Earnings per share is computed based on the weighted average number of
shares of common stock and common stock equivalent shares outstanding
during each period. Common stock equivalent shares consist primarily of
stock options that have a dilutive effect when applying the treasury stock
method. The weighted average number of shares outstanding was 5,282,660
and 4,021,640 at September 30, 1996 and 1995, respectively.
Reclassifications
Certain reclassifications, none of which affect net income, have been made
to the prior periods' amounts in order to conform to the current period
presentation.
2. Inventories
Inventories consist of the following:
Sept. 30, March 31,
1996 1996
------------- --------------
Raw materials $ 841,644 $ 512,604
Work in progress 833,553 445,726
Finished goods 714,926 390,531
------------- --------------
$ 2,390,123 $1,348,861
============= ==============
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Sales for the six months ended September 30, 1996, exceeded those of
the six months ended September 30, 1995 by $1,518,359 or 83%. Sales for
the quarter ended September 30, 1996, exceeded those of the prior year by
$1,149,568 or 143%. The increase in sales for the quarter and the six
months is largely due to sales of laser tooth whitening products which
accounted for $0 in the prior year, but accounted for $1,838,000 and
$1,252,000 for the six and three month periods ended September 30, 1996
respectively. Laser tooth whitening sales account for 54% and 64% of the
Company's sales for the six and three month periods respectively. The
management of the Company realizes that there are significant growth
opportunities in this and other dental laser markets, and an effort has
been and will continue to be made to use the resources of the Company to
increase its sales in these markets.
Industrial sales declined for the six and three months ended
September 30, 1996 at a rate of 21% and 25% respectively as the Company is
refocusing its resources towards the dental market.
The Company's gross margin percentage rose from 33% to 49% for the
six month period and from 29% to 32% for the quarter. This increase is due
to the increased margins associated with the sale of tooth whitening
products.
Selling and administrative expenses increased $276,786 for the
quarter due to an increase in marketing costs associated with new marketing
campaigns for the laser whitening products. Increased costs in marketing
are expected to continue for several more quarters as the Company's
strategy is to promote its Britesmile laser tooth whitening products as
superior to other competitive products. Marketing campaigns are directed
at both the dental professional and the consumer markets.
The Company had a net profit of $208,802 and $74,732 during the six
months and three months ended September 30, 1996 respectively compared to a
net loss of ($67,817) and ($78,523) for the same periods of the previous
year.
Liquidity and Capital Resources
The Company used $2,127,467 in cash during the six months ended
September 30, 1996. Of this amount, $859,569 was used in operating
activities. Inventory increased $1,041,262. This increase was largely due
to the purchase and manufacture of inventory related to the Company's laser
tooth whitening products. Investing activities used $938,631. Of this
amount, $756,488 was used for the purchase of manufacturing equipment used
to increase manufacturing capacity; computer equipment and software,
including updating workstations and the Company's network system; also the
Company is in the midst of remodeling its facilities in Salt Lake City to
allow for increased production capacity and to include a laser tooth
whitening training center at this facility. Financing activities used
$329,267. Debt of $688,642 was paid off during the period. Much of this
was the pay down of the Company's line of credit.
The Company's working capital (current assets minus current
liabilities) is $5,767,484. Its current ratio (current assets divided by
current liabilities) improved from 4.39 to 7.50 during the six month
period. The Company's quick ratio (cash and accounts receivable divided by
current liabilities) increased from 3.55 to 4.62 during the period.
Part II. Other Information
No material matter occurred during the six months ended September 30, 1996
that requires disclosure in Part II of this filing.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Ion Laser Technology, Inc.
Date: November 13, 1996 /s/ Dean E. Hutchings
-------------------- --------------------------
Dean E. Hutchings
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,954,445
<SECURITIES> 0
<RECEIVABLES> 1,150,971
<ALLOWANCES> 45,277
<INVENTORY> 2,390,123
<CURRENT-ASSETS> 6,655,444
<PP&E> 3,176,437
<DEPRECIATION> (872,799)
<TOTAL-ASSETS> 10,903,748
<CURRENT-LIABILITIES> 887,960
<BONDS> 0
0
0
<COMMON> 5,123
<OTHER-SE> 8,868,125
<TOTAL-LIABILITY-AND-EQUITY> 10,903,748
<SALES> 3,354,010
<TOTAL-REVENUES> 3,354,010
<CGS> 1,714,612
<TOTAL-COSTS> 3,227,294
<OTHER-EXPENSES> 82,086
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,320
<INCOME-PRETAX> 208,802
<INCOME-TAX> 0
<INCOME-CONTINUING> 126,716
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 208,802
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
