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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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COMMISSION FILE NUMBER 1-11642
LASER TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
IDAHO 84-0970494
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
7070 SOUTH TUCSON WAY, ENGLEWOOD, COLORADO 80112
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(303) 649-1000
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
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<S> <C>
Common Stock, $.01 par value American Stock Exchange
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</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
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 [_]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT 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-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]
As of December 20, 1996, the aggregate market value of the registrant's
Common Stock held by non-affiliates of the registrant (using American Stock
Exchange closing prices) was $12,330,338.
At December 20, 1996, 4,999,433 shares of common stock of the registrant
were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: Part III, certain exhibits filed as
part of registrant's S-1 registration statement.
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LASER TECHNOLOGY, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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PAGE NO.
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PART I.
<C> <S> <C>
Item 1. Business................................................... 1
Item 2. Properties................................................. 14
Item 3. Legal Proceedings.......................................... 15
Item 4. Submission of Matters to a Vote of Security Holders........ 15
PART II.
Market for Registrant's Common Equity and Related
Item 5. Stockholder Matters....................................... 16
Item 6. Selected Financial Data.................................... 17
Management's Discussion and Analysis of Financial Condition
Item 7. and Results of Operations................................. 18
Item 8. Financial Statements and Supplementary Data................ 23
Changes in and Disagreements with Accountants on Accounting
Item 9. and Financial Disclosure.................................. 24
PART III.
Item 10. Directors and Executive Officers of the Registrant......... 24
Item 11. Executive Compensation..................................... 25
Security Ownership of Certain Beneficial Owners and
Item 12. Management................................................ 28
Item 13. Certain Relationships and Related Transactions............. 29
PART IV.
Exhibits, Financial Statement Schedules and Reports on Form
Item 14. 8-K....................................................... 29
SIGNATURES........................................................... 31
</TABLE>
<PAGE>
PART I.
ITEM I. BUSINESS
INTRODUCTION
Laser Technology, Inc., an Idaho Corporation, and its wholly-owned
subsidiaries; Laser Communications, Inc., Laser Technology, U.S.V.I., and
International Measurement and Control Company ("the Company"), is engaged in
the business of developing, manufacturing and marketing laser based
measurement instruments using proprietary technology developed by the Company.
The Company was originally organized in September 1950.
The Company's proprietary technology permits a laser to measure to a non-
cooperative, or low reflective surface, using a very low power source. As a
result, the Company's products operate within the requirements of eye safety
as promulgated by the United States Food and Drug Administration (the "FDA").
Despite a very low power source, the Company's laser instruments measure more
rapidly and at longer ranges than corresponding conventional devices. The
Company has also developed proprietary software and circuitry which are
integral to each of the Company's products. The Company's executive offices
are located at 7070 South Tucson Way, Englewood, Colorado 80112, and its
telephone number is (303) 649-1000.
PRINCIPAL PRODUCTS
REVENUES
Historically, the Company's primary product lines have been its Marksman
Laser Speed Detection Systems and Criterion Series of Survey Lasers. During
fiscal 1995 and 1996, The Company has expanded these product lines through new
product development including the introduction of second generation
instrumentation. Because of enhancements to the Company's existing products,
new product developments and expanding markets for the Company's technology,
the Company currently organizes and markets its products in three categories:
Traffic Safety products, Survey and Mapping products, and Ship Docking Aid
Systems.
The following table provides a breakdown of the percentage of net sales of
the Company's product lines. Revenues realized from sales of the Company's
less significant revenue producing products are classified as "Other" for
presentation purposes.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
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1996 1995 1994
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<S> <C> <C> <C>
Traffic Safety............................ 57% 62% 63%
Survey and Mapping........................ 34 36 32
Ship Docking Aid Systems.................. 8 -- --
Other..................................... 1 2 5
</TABLE>
The following table provides a breakdown of domestic and foreign revenues as
a percentage of net sales of the Company's products for the periods presented:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
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1996 1995 1994
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<S> <C> <C> <C>
Domestic................................. 51% 56% 56%
Foreign.................................. 49 44 44
</TABLE>
See Note 6 to the Company's consolidated financial statements for further
discussion on customers, export sales and concentrations of credit risk.
<PAGE>
TRAFFIC SAFETY PRODUCTS
Hand-Held Laser Speed Detection Systems
In 1991, the Company developed and commenced commercial manufacturing and
marketing of the LTI 20-20 laser speed detection system to law enforcement
agencies as a proven method of measuring the speed of motor vehicles. In 1993,
the Company introduced an enhanced version of the LTI 20-20, called the
Marksman, which incorporates increased range capability, an auto triggering
system and, as an optional feature, an in-scope display of speed and distance
data. As does its predecessor, the Marksman has several advantages over radar
speed measurement devices. As distinguished from radar devices, the Marksman
can be aimed directly at a specific vehicle, thereby eliminating the
difficulty associated with radar measurement devices of distinguishing one
vehicle from another. Additionally, the Marksman measures speed in one-third
of a second with a laser beam that spans only three feet wide at a distance of
1,000 feet and disperses after hitting its target vehicle. Radar guns, on the
other hand, are generally required to track vehicle speed for several seconds
in an attempt to positively identify a vehicle.
Radar guns also produce a wider beam width of approximately 200 to 400 feet
at a range of 1,000 feet which can readily be detected by the targeted vehicle
as well as other oncoming vehicles equipped with radar detectors. Conventional
radar detectors, which cannot detect the light beam generated by the Marksman,
have been effective against radar because of the wide beam width produced by
radar devices. This radar beam continues to widen as the distance from the gun
increases and can readily be picked up by a radar detector as much as a mile
away from the radar gun, giving the driver of a vehicle warning time to slow
down and thus avoid receiving a speeding ticket. The Marksman's quicker
ability to measure speed and significantly reduced beam width does not permit
vehicles, other than the targeted vehicle, to detect the Marksman's laser beam
and, in any event, does not provide the targeted vehicle sufficient time to
slow down in advance of being detected.
Consumer laser detection devices exist that will detect the Marksman only
when the vehicle equipped with such a detection device is being targeted.
However, because the measurement period of the Marksman is only one-third of a
second, there is no reaction time for the driver to reduce their speed before
the police officer obtains a positive speed reading. As laser speed
enforcement has become more widely used as an effective means of speed
enforcement, a number of consumer laser jamming devices have also entered the
market. Such laser jammers have limited effectiveness against the Marksman due
to the sophisticated nature of the Marksman's internal targeting software. In
1995, to combat the use of laser jamming devices, the Company developed the
capability within the Marksman to detect when a jamming device is in use. This
feature has proven to be a very useful tool to speed enforcement officials in
certain jurisdictions where the use of jamming devices is prohibited.
Laser DigiCam Photo Laser System
In 1995, the Company completed development and began commercial production
of the Laser DigiCam, an automatic video photo laser system which integrates a
camera and associated equipment with the Marksman. The Laser DigiCam monitors
the speed of each vehicle in a specific lane of traffic. When the Laser
DigiCam system detects a speeding vehicle, it takes a digital picture of the
vehicle, prints the speed, time and date on the picture, and the ticket can
then be mailed to the violator. As an optional feature to this system, the
Company also developed a night illumination system enabling night use of the
Laser DigiCam.
Traffic Data Collection Modules
In addition to measuring speed, the Marksman also measures distance. This
feature enables the Marksman to be used for a variety of applications outside
of speed enforcement. The Marksman's ranging capabilities are used by law
enforcement officials for accident investigation and reconstruction. In 1995,
the Company introduced "QuickMap," a system which enhances the use of the
Marksman for this application. QuickMap is a software module integrated to a
data collector which can be used in conjunction with the Marksman to expedite
the collection and processing of data at accident sites and crime scenes.
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In 1995, the Company introduced "DBC," an optional feature that can be
integrated into the Marksman's firmware capabilities which is used to measure
the distance and/or time between traveling vehicles. In many parts of the
world where the distance between vehicles is monitored closely to improve
traffic safety, local governments have the need to measure the distance and/or
time between vehicles. Management believes that the DBC feature addresses this
application and increases the utility and efficiency of the Marksman.
Traffic engineers and law enforcement officials are also able to conduct and
document traffic speed surveys more efficiently using the Marksman laser speed
detection system than with conventional methods. In 1993, the Company
introduced a statistical compilation software package, "SpeedStat." This
product, when combined with the Marksman, automatically gathers and formats
traffic survey data on a portable computer via a serial cable interface.
Additionally, during fiscal 1996, the Company introduced "SpeedStat DC," a
companion product to Quickmap in its Traffic Data Collection Module series.
Similar to the Company's original SpeedStat product, SpeedStat DC enables more
efficient collection and compilation of traffic engineering statistics.
However, SpeedStat DC incorporates the same hand-held data collector used in
the Company's QuickMap system replacing the need for a laptop computer, which
provides traffic engineers and law enforcement officials with a more portable
and affordable statistical compilation system.
Impulse Accident Investigation Laser
During fiscal 1996, the Company introduced a new generation of lasers for
general distance measurement. The "Impulse" series, while marketed primarily
to the survey and mapping industry, has gained quick acceptance in the
accident investigation segment of the law enforcement community. The Impulse
is smaller in size and weight and lower in cost than the Company's Marksman
laser speed detection system for this application. The Impulse also features
an electronic tilt sensor that provides the operator with more accurate
mapping measurements. Additionally, when linked with the Quickmap traffic data
collection module, the Impulse becomes a fully electronic mapping system.
SharpShot Series of Laser Range Finders
Late in fiscal 1996, the Company began initial marketing of a laser range
finder for tactical operations and S.W.A.T. applications. The "SharpShot" is a
light weight, user friendly range finder developed from the Company's
technology underlying its Impulse survey laser that is able to measure
distances at longer ranges than the Impulse. Additionally, optional tilt
sensor capabilities exist that can provide height and inclination data. While
the Company's SharpShot laser range finder represents a peripheral market of
the Company's Traffic Safety product line, Management believes that sufficient
market potential exists for the SharpShot for use in tactical law enforcement
and military applications.
SURVEY AND MAPPING PRODUCTS
Criterion Series of Hand-Held Survey Lasers
The Criterion was originally developed in collaboration with the United
States Forest Service in 1992 for use by foresters to accurately and quickly
measure certain aspects of trees to determine board feet and to survey roads,
bridges, hiking trails and campgrounds. The Criterion is a small, portable
laser measurement system consisting of a laser range finder, an electronic
compass and an electronic inclinometer providing the capabilities of measuring
distance, azimuth and inclination and, therefore, is capable of calculating
heights and X,Y,Z coordinates. The Criterion can record these measurements in
seconds as compared to several minutes using conventional manual methods. Data
captured by the Criterion is maintained in the system in a form ready for
computer downloading, which eliminates errors associated with manually
transcribing numbers in the field for future manipulation.
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During the Company's first years of commercial production, the primary user
of the Criterion had been the U.S. Forest Service. However, in fiscal 1993,
the Company expanded its Criterion product line to foster new markets by
introducing three new models of survey lasers. The Company's Criterion series
of survey lasers offers a logical progression of measurement capabilities.
This product expansion has attracted new customers within the paper, mapping,
environmental, utility and telecommunication industries.
Criterion Theodolite Mounted Survey Lasers
In fiscal 1994, the Company introduced the Criterion 100TM. Part of the
Company's Criterion Series of Survey Lasers, this system integrates a
Criterion ranging laser with a surveying theodolite. The Criterion 100TM
allows the operator to quickly gather precise distance and angular
measurements to remote targets. The Company currently markets the Criterion
100TM primarily to mining, blasting and aggregate management companies for
gathering rock face profiles and for pile volume measurement applications.
Absent the use of the Criterion 100TM, or comparable measurement equipment,
these measurements involve multiple man crews and often place personnel in
hazardous situations. Since the Criterion 100TM does not require the placement
of a reflector on the object to be measured, it eliminates the need for
multiple personnel and allows measurements to be made more expediently and
safely.
Criterion AutoScan Survey Lasers
During fiscal 1996, the Company introduced, in collaboration with MDL, a
European manufacturer, the "Criterion AutoScan" survey laser. The Criterion
AutoScan surveying system is comprised of a Criterion survey laser mounted to
a motorized, computer controlled theodolite capable of measuring vertical and
horizontal angles. The Criterion AutoScan system is operated remotely via
computer interface allowing areas to be measured and scanned continuously
without human error. Similar to the Company's Criterion 100TM, the Company's
AutoScan surveying system is used by mining, blasting and aggregate management
companies. However, Management believes that the automated operation of the
Criterion Autoscan makes this system attractive for new applications such as
slope stability monitoring, unattended topographic mapping, and surface
modeling.
GeoLaser Hand-Held Mapping Lasers
In fiscal 1996, the Company introduced the "GeoLaser" hand-held mapping
laser. Developed from the technology underlying the Company's Criterion series
of survey lasers, the GeoLaser is marketed as an ideal accessory to Global
Positioning Systems, ("GPS"). The GeoLaser was designed to capitalize on the
maturing market for the Company's Criterion products as well as the growing
demand for GPS offset measuring.
The GeoLaser features an easy-to-learn operating system. The GeoLaser's
range, inclination and azimuth sensors provide the same accuracy and range as
the Company's Criterion Series of Survey Lasers. However, the GeoLaser does
not have the extensive firmware options found in the Company's Criterion,
thus, the GeoLaser has simpler functionality as compared to the Company's
Criterion survey lasers. The GeoLaser's simpler operation allows for a lower
price point which has attracted new customers within the Geographical
Information Systems ("GIS") and GPS mapping industry without deteriorating
market opportunities for the Company's higher accuracy Criterion survey
lasers.
Impulse Series of Hand-Held Survey Lasers
During fiscal 1996, the Company developed its first, second generation
surveying instrument, the "Impulse." The Impulse is approximately one-third
the size and weight of the Company's Criterion series of survey lasers and
also has a lower price point than that of the Company's Criterion survey
lasers. Other survey lasers on the market, including the Company's own
Criterion series, weigh approximately six pounds. The Impulse, weighing
approximately two pounds, can be carried on a belt clip and its ergonomic
design allows full operation of the instrument with only one hand. The
Company's Criterion survey lasers have numerous unique
4
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features that will continue to make the Company's Criterion a viable product
for a number of applications. However, Management believes that the smaller
size and lower price point of the Impulse make the technology more accessible
for an increased number of users and applications in the survey and mapping
industry. The Impulse is also marketed as part of the Company's Traffic Safety
product line for use in accident investigation applications.
Integrated Data Collection Solutions
Many market applications require the Criterion and Impulse series of survey
lasers to be integrated with other hardware and software to provide a complete
turn-key system. To facilitate this integration, the Company began
establishing relationships with manufacturers of complimentary hardware and
software in fiscal 1994. These relationships include the sharing of
distribution channels and new product development. During fiscal 1994, the
Company and a privately held software development firm completed the co-
development of a laser based mapping system, "Laser Walkabout." The Laser
Walkabout system is comprised of a Criterion or Impulse survey laser, a hand
held data collector and comprehensive field and office software. With this
system, the locations and attributes of remote objects can be recorded and
used to generate computerized mapping. The Company believes that the need for
mapping or geographic information systems is increasing as utility companies,
foresters and environmental firms seek more efficient ways to manage their
assets.
Hydro II and LaserCom Surveying Systems
The Hydro II surveying system was the first laser-based measurement system
developed by the Company. The Hydro II is a hydrographic surveying and
positioning system designed to survey and chart the bottom topography of a
body of water in preparation for dredging ship channels and for buoy and pier
settings. In fiscal 1994, the Company introduced the "LaserCom" system, an
enhanced version of its Hydro II hydrographic surveying system. The LaserCom
system is designed to transmit data using pulses of light, thus eliminating
the problems associated with radio frequency communication. As the Company
focuses on its more dominant revenue producing products, sales of the
Company's hydrographic surveying systems are expected to continue to comprise
a very small portion of the Company's overall revenues.
Industrial Laser Distance Measurement Sensors
During the latter half of fiscal 1996, the Company completed development of
a low cost, industrial laser distance measurement sensor. Pursuant to a sales
contract with Telemotive Industrial Controls, Inc., ("Telemotive"), a world
leading manufacturer of radio controls for material handling cranes and
industrial vehicles, the Company developed and manufactures laser sensors for
use in collision avoidance and positioning systems which Telemotive markets
under its brand name. This collision avoidance system allows continuously
generated distance measurement information provided by the Company's laser
sensors to be transmitted to a central processor which integrates the
information with computer controls that slow or stop the crane or vehicle
within pre-determined collision or danger zones. The completion of the
Company's development project pursuant to its agreement with Telemotive has
resulted in a low cost laser sensor that the Company believes has other
applications in the industrial measurement market. The Company's agreement
with Telemotive requires designated minimum purchases of the Company's
industrial laser sensors scheduled to be delivered during the Company's 1997
fiscal year. See "Backlog" for existing customers and product lines.
DAS100 SHIP DOCKING AID SYSTEM
In fiscal 1995, the Company introduced the DAS100 Ship Docking Aid System, a
dock-based measurement system that assists ship captains and pilots in docking
maneuvers by measuring and recording a ship's closing speed and distance and
transmitting this data to the bridge of the ship. During the first half of
fiscal 1995, SeaRiver Maritime, Inc., formerly Exxon Shipping Company,
completed a favorable evaluation of the DAS100. Initial marketing of the
DAS100 during the second half of fiscal 1995 resulted in the Company's first
order to furnish laser sensors for ship docking systems to Martin Marietta
Corporation, ("MMC"), a subsidiary of
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Lockheed Martin. Revenues realized from this order were generated during the
first half of fiscal 1996. Management believes that significant market
potential exists for the DAS100 and intends to continue marketing this product
line through its wholly-owned subsidiary, Laser Communications, Inc.
OTHER
Other market applications exist for the Company's laser-based measurement
technology. In 1992, the National Aeronautics and Space Administration (NASA)
purchased two modified Markmans for use aboard the United States Space Shuttle
to determine target distance and closing speed when the shuttle performs
docking procedures in space. These instruments were first used by NASA when
the "Intelsat" satellite was retrieved and re-launched on the maiden voyage of
the "Endeavour" space shuttle. In fiscal 1993, the Marksman was used in NASA's
mission to repair the Hubble space telescope. During fiscal 1994 and 1995,
NASA used the Marksman on several missions, including the mission involving
docking with the Russian space station MIR. During fiscal 1996, NASA placed an
order for one additional instrument increasing the total number of instruments
to ten for use on all space shuttle missions involving docking procedures.
While NASA is a relatively small customer of the Company, Management believes
that NASA's use of the Company's technology adds to the Company's credibility
as a technology leader in the laser-based measurement industry.
SEASONALITY
Management believes that seasonal effects on sales of its Traffic Safety
products are non existent. Historically, the Company has realized a small
decline in sales of its Survey and Mapping products in areas affected by
colder weather during the winter months. Management believes that the
expansion of the Company's Criterion Product line and penetration into new
markets has mitigated seasonal effects on sales of its Criterion. Although the
Company's Traffic Safety business is not of a seasonal nature, Management
believes that sales of its Traffic Safety products may vary between financial
periods based on the capital procurement processes and fiscal year budgeting
cycles of state and municipal law enforcement agencies.
MANUFACTURING OPERATIONS
The Company's manufacturing operations primarily consist of the assembly,
calibration and testing of its products. Currently, most of the components
used in the manufacture of the Company's products are manufactured by others
to the Company's specifications. The Company is not dependent upon any single
source of supply and has no long-term supply agreements. The Company maintains
certain supply agreements on long lead time items to purchase inventory as
dictated by product sales. Additionally, the Company believes that there are
adequate alternative suppliers for its foreseeable needs. In January 1997,
pursuant to the Company's rights for additional expansion space under its
existing lease arrangement, the Company intends to expand its current
manufacturing facility to meet anticipated production demand. All of the
Company's products carry a one year limited warranty against manufacturing
defects. To date, there have been no material expenditures on warranty claims.
PRODUCT RESEARCH AND DEVELOPMENT
Research and development costs related to the Company's instrumentation and
proprietary technology are expensed as incurred and included in operating
expenses. During fiscal 1996, the Company continued to direct its research and
development activities on improving its current product lines as well as
focusing on new product developments. Research and development costs totalled
approximately $514,000, $363,000 and $273,000 for the fiscal years ended
September 30, 1996, 1995 and 1994, respectively. Year to year increases in
research and development expenditures are primarily related to increased
compensation expense attributable to increased personnel.
In 1993, the Company completed development of the Marksman, an upgraded
version of its former LTI 20-20 laser speed detection system. The Company also
completed the development of a statistical compilation software package,
"SpeedStat," used to collect traffic survey statistics. The Company also
expanded its surveying product line by introducing three new models of its
Criterion survey lasers.
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In 1994, the Company completed development of the Criterion 100TM, an
enhancement to the Criterion product line which integrates a Criterion ranging
laser with a surveying theodolite. Additionally, in conjunction with a
privately held software development firm, the Company completed the co-
development of a laser-based mapping system, "Laser Walkabout." The Laser
Walkabout system is comprised of a Criterion survey laser, a hand-held data
collector and comprehensive field and office software. This system, combined
with a global positioning system ("GPS") receiver, is used to record the
locations and attributes of remote objects for the generation of computerized
mapping. During fiscal 1994, the Company also completed the development of a
technology which provides the ability to transfer data using pulses of light
generated by the Company's laser ranging equipment. This capability has been
integrated into a third generation hydrographic surveying system, the
"LaserCom." Using the ability to transmit data with pulses of light, this
technology eliminates the problems associated with radio frequency
communication.
During fiscal 1995, the Company completed the development of several new
functions and features centered around the Company's Traffic Safety product
line for use within the law enforcement market. These developments include
"QuickMap" for accident reconstruction and investigation, "DBC" for time and
distance measurement between vehicles, and a laser jammer detector built into
the Marksman's software capabilities, as an optional feature provided to law
enforcement agencies to strengthen the Marksman's use in traffic speed and
safety enforcement. In 1995, the Company also completed development of the
Laser DigiCam photo laser system, built around the Company's Marksman speed
detection laser. The Laser DigiCam system targets a specific area on a roadway
and monitors the speed of each vehicle that passes through the beam of the
laser. When the Laser DigiCam detects a speeding vehicle, it takes a picture
of the vehicle and prints the time, date and speed on a video frame and stores
the information digitally on the hard disk of its internal computer. The photo
images can be printed at the site or they can be stored for subsequent
processing. As an optional feature to this system, the Company also completed
development of a night illumination system enabling night use of the Laser
DigiCam. Additionally in 1995, the Company completed the development of the
DAS100 Ship Docking Aid System in cooperation with SeaRiver Maritime, Inc.,
formerly Exxon Shipping Company, and a private engineering firm. The DAS100
assists ship captains and pilots in docking maneuvers by measuring a ship's
closing speed and distance to the dock, and transmitting this data to the
bridge of the ship.
Also in 1995, the Company, in conjunction with Bushnell, formerly the Sports
Optics Division of Bausch and Lomb, completed development of a consumer
related product, the "Lytespeed," which is being marketed by Bushnell to
certain sporting markets, primarily the hunting and golfing industries. In
fiscal 1996, pursuant to an amended agreement with Bushnell, the Company
developed an enhanced version of the LyteSpeed which the Company and Bushnell
believe will increase market penetration within the sporting markets currently
served by Bushnell. The Company retains all ownership of patents and trade
secrets of the technology underlying the development of the Lytespeed.
Additionally, the Company receives running royalties on cumulative net sales
of this product, has received development costs for the initial technology and
retains the right to pursue markets outside the sports technology area. This
product was the first laser range finder introduced in a consumer market with
the ability to measure non-cooperative targets. As of September 30, 1996,
royalty and licensing income earned related to this agreement was
approximately $341,000. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
During fiscal 1996, the Company developed the GeoLaser. The Geolaser is a
hand-held survey laser developed from the technology underlying the Company's
Criterion Series of Survey Lasers. While similar in accuracy, the GeoLaser has
reduced firmware options as compared to the Company's Criterion which allows
the GeoLaser to be sold at a lower price point. As part of the Company's
Traffic Safety product line, the Company also completed development of
SpeedStat DC, a companion product to QuickMap within the Company's Traffic
Data Collection Module Series, and the SharpShot laser ranger finder was
developed from the technology underlying the Company's Impulse for use in
tactical law enforcement applications. Also in 1996, the Company in
conjunction with MDL, a European manufacturer of surveying equipment,
completed development of the Criterion AutoScan survey and mapping system. The
Criterion AutoScan features a Criterion laser mounted on a motorized, computer
controlled surveying theodolite which can automatically scan and measure
vertical and horizontal angles from remote distances.
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In fiscal 1996, the Company also completed development of two new, second
generation laser-based instruments. These second generation instruments have
several characteristics in common including smaller size, lighter weight and
substantially lower manufacturing costs than their predecessors. During the
latter half of fiscal 1996, the Company completed the design and development
of the "Impulse," part of the Company's Survey and Mapping product line. The
Impulse provides range, inclination and height measurements in an instrument
one-third of the weight and size of the Company's Criterion Series of Survey
Lasers. Also, during fiscal 1996, the Company completed development of an
industrial laser sensor for use in collision avoidance and positioning systems
in industrial applications.
MARKETING, DISTRIBUTION AND CUSTOMERS
The Company presently markets its products to three major classes of
customers. For the fiscal year ended September 30, 1996, the Company's foreign
distributors accounted for 47% of sales, of which the Company's Asian and
European distributors comprised 36% collectively. Domestically, state and
local law enforcement agencies comprised approximately 24%. Additionally,
sales to the Company's Domestic Survey and Mapping dealer network comprised
12%. For the fiscal year ended September 30, 1996, one customer, Visi Trading
(m) SDN BHD, accounted for 12% of sales. The Company primarily markets its
products using on-site demonstrations, attendance at trade conferences,
advertising in trade magazines and direct mail. See note 6 to the Company's
consolidated financial statements for further discussion on customers, export
sales and concentrations of credit risk.
Traffic Safety Products
The Company primarily markets its Traffic Safety products domestically to
law enforcement agencies of state and municipal governments. The Company has
historically marketed to this segment of its business domestically through a
combination of direct sales personnel augmented by sales made through
independent manufacturer representative companies representing the Company's
Traffic Safety products. During the latter half of fiscal 1996, Management
elected to increase the number of direct sales representatives marketing the
Company's products in the U.S. This decision was based on the growing line of
products carried by the Company and the need for a specialized sales force to
properly present and support them. As a result of this decision, the Company
has reduced the number of domestic independent manufacturer's representatives
carrying the Company's products through natural attrition and termination of
non-productive firms. As of September 30, 1996, the largest domestic customer
of the Company's Marksman hand-held laser speed detection systems is the state
of Ohio. Other high volume states include Texas, New York, Michigan,
Massachusetts, Wisconsin, Oregon, Washington, and Hawaii.
Internationally, the Company markets its Traffic Safety product line through
its foreign distributors for use by agencies of foreign governments including
local law enforcement agencies and transportation ministries. The Company has
established distribution channels for its Traffic Safety products in most
industrialized countries. To date, the Company's foreign distributors in
Austria, Germany, the United Kingdom, Canada, Korea and Malaysia account for
the highest volume of hand-held Marksman laser speed detection systems and
Laser DigiCam photo-laser systems purchased internationally. As of September
30, 1996, the Company has established distribution in over twenty-eight
international territories.
In 1992, the National Institute of Standards and Technology ("NIST") in
conjunction with the National Highway Traffic Safety Administration ("NHTSA")
began developing a set of national minimum model performance specifications
for police traffic laser speed measurement devices such as the Marksman. The
Company believes that a number of law enforcement agencies throughout the
United States have been hesitant to purchase speed enforcement products which
are not listed on the International Association of Chiefs of Police ("IACP")
Approved Products List. This list is comprised of speed enforcement products
which have passed a national standard established by the NHTSA. This national
standard was completed in January 1995. With the standard completed, the IACP
contracted with the University of California-Davis to establish a laboratory
test site. In October 1995, when the testing facility was complete, the
Company submitted the Marksman for compliance testing in order to be placed on
the IACP Approved Products List. In April 1996, the Marksman was
8
<PAGE>
certified by the IACP to meet the federal standard for laser speed measurement
devices. Upon receiving IACP certification, the Marksman was subsequently
placed on the IACP approved products list. Management anticipates that
placement on the IACP approved products list will allow federal funds from the
United States Department of Transportation to become more assessable for law
enforcement agencies to purchase the Marksman, although there is no assurance
of this.
There are four states within the U.S. that require the passage of state
legislation to enable the use of new technological developments in speed
enforcement. As of September 30, 1996, legislation has been passed approving
the Company's Marksman laser speed detection device as an acceptable means of
speed enforcement in three of the states including Florida, North Carolina and
Virginia. Management anticipates that future state legislation will be passed
in Pennsylvania. However, there is no assurance that such legislation will be
passed.
Various foreign standards have also been established for laser speed
enforcement equipment. The Marksman has been subject to foreign approvals in
certain areas where such standards exist. To date, the Marksman has been
approved in Germany, the United Kingdom, Austria, Switzerland, Sweden, the
Netherlands and France. The Marksman has also been tested and approved for use
by the Royal Canadian Mounted Police in Canada.
Laser DigiCam Photo-Laser System
In fiscal 1995, the Company completed development of the Laser DigiCam
photo-laser system and delivered its first substantial order for this system
to the Royal Malaysian Police. During fiscal 1996, The Royal Malaysian Police
continued to be a significant customer comprising approximately 19% of the
Company's overall Traffic Safety revenues. In the fourth quarter of fiscal
1996, the Royal Malaysian Police negotiated a two-year, renewable contract for
the purchase of the Company's Laser DigiCam systems. The Company's first order
pursuant to this agreement was delivered in September 1996. Management
believes that additional sales will result pursuant to this agreement,
although there is no assurance that the contract will be renewed.
Because of Federal right to privacy laws, Management believes that primary
sales opportunities for the Laser DigiCam will be in international markets.
Management intends to continue marketing the Laser DigiCam system
internationally through its existing network of distributors currently
marketing the Company's Traffic Safety product line, and domestically, through
its direct sales force.
Survey and Mapping Products
The Company's Survey and Mapping products are primarily sold domestically
through its dealer network, and internationally through its foreign
distributors and dealers. As with the Company's Traffic Safety products,
Management continually endeavors to expand its Survey and Mapping products
distribution channels and strategic alliances. As a substantial addition to
its domestic Survey and Mapping distribution network, in 1995, the Company
signed an agreement with the surveying equipment division of Pentax U.S.A.
Pursuant to this agreement, the Company provides private labeled versions of
its Criterion series of survey lasers to Pentax, which are sold through
Pentax's domestic distribution network. For the Company's 1996 fiscal year,
sales to Pentax U.S.A. comprised approximately 13% of the Company's overall
Survey and Mapping revenues derived from the Company's domestic dealer
network.
During fiscal 1996, the Company increased the number of dealers in its
domestic distribution network supporting its Survey and Mapping product line
to approximately seventy, and internationally to approximately thirty-five. As
a result, sales of the Company's Survey and Mapping product line to dealers
comprised approximately 79% of the Company's overall revenues for this segment
of its business during fiscal 1996.
The Criterion was originally developed in collaboration with the U.S. Forest
Service and, as a result, the U.S. Forest Service initially was the primary
user of the Criterion. Even though the Company's contract with the U.S. Forest
Service expired, the U.S. Forest Service has continued to be a significant
customer of the Company, but represented only 6% of the Company's total Survey
and Mapping sales in fiscal 1996, as compared to 90%
9
<PAGE>
in 1993 when the U.S. Forest Service was virtually the only user. In previous
years, Criterion sales to the U.S. Forest Service have primarily been
purchased for use within the timber sales preparation area. Due to the U.S.
federal agency shift in policy to ecosystem management, there has been a
decline in timber sales within the U.S. Forest Service and increased emphasis
on other resource management areas. The Company continues to market to the
U.S. Forest Service and has responded to this change by expanding marketing
efforts into these resource areas including archaeological mapping, road
obliteration and environmental analysis.
Management believes that the introduction of the Impulse Series of Survey
Lasers in fiscal 1996 provides two immediate marketing benefits. First, the
Impulse provides an entry-level, broad use product for the Company's already
identified survey and mapping market segments, at a reduced size and weight,
and lower price point. Secondly, these size, weight, and retail cost
reductions allow the Company to access broad new general measurement markets
that have not previously considered laser measurement a viable option. These
markets include engineering construction, commercial material measurement and
estimation, and landscape design. Sales of the Company's Survey and Mapping
product line to other markets include the paper, mapping, mining,
environmental, telecommunication, and utility industries. Domestically, the
Company currently markets to such industries through a combination of direct
sales representatives and through its domestic dealer network.
To date, the Company's foreign distributors in Japan, Australia, Europe and
Canada account for the highest volume of Survey and Mapping products purchased
internationally. The Company currently markets its Survey and Mapping products
overseas to similar industries through its foreign distribution channels. As
of September 30, 1996, the Company has established distributors for its Survey
and Mapping product line in twenty-seven international territories.
Sales of the Company's hydrographic surveying systems, part of the Company's
Survey and Mapping product line, have become a very small contributor to the
Company's overall revenues due to a change in the marketing focus of the
Company to its Traffic Safety and other surveying product lines and because of
the increased use of global positioning systems in hydrographic surveying
applications. However, Management intends to continue to provide service and
support to its existing customers in this market and to continue to market the
LaserCom surveying system, marketed by the Company's sales force and dealer
network currently representing its survey products. Primary customers for the
Hydro II and LaserCom systems are the United States Army Corps of Engineers
and commercial surveying contractors.
Late in fiscal 1996, the Company completed development of a low cost,
industrial laser distance measurement sensor which it will market for
industrial laser sensor applications. Pursuant to a contract with Telemotive
Industrial Controls, Inc., ("Telemotive"), a world leading manufacturer of
radio controls for material handling cranes and industrial vehicles, laser
sensors developed and manufactured by the Company will be integrated into
systems marketed under the Telemotive brand name. In exchange for minimum
purchase commitments of the Company's laser sensors by Telemotive, Telemotive
has received exclusive rights to sell the Company's industrial laser sensors
within the material handling market.
Development of the Company's first industrial laser sensors related to its
agreement with Telemotive has resulted in a low cost, laser distance
measurement sensor that the Company believes has other applications in the
industrial measurement market.
DAS100 Ship Docking Aid System
The Company currently markets its DAS100 Ship Docking Aid System
domestically through its direct sales force, and internationally through
foreign dealers. The Company is also working toward developing strategic
relationships with key companies in the shipping industry to expand its
distribution of the DAS100. The Company began more aggressively marketing the
DAS100 Ship Docking Aid System during the second half of fiscal 1995 resulting
in the award of a contract to furnish laser sensors for ship docking systems
to Martin Marietta Corporation ("MMC"), a subsidiary of Lockheed Martin.
Pursuant to the terms of the contract, delivery
10
<PAGE>
was made during the Company's first and second quarters of fiscal 1996
contributing 8% to the Company's overall revenues. Management believes that
primary customers for its DAS100 Ship Docking Aid Systems include oil and
liquid natural gas carriers with ocean fleets and other bulk carriers. Because
of the specialized nature of the ship docking industry, the Company has
established a wholly-owned subsidiary, Laser Communications, Inc., to continue
developing this portion of the Company's business.
BACKLOG
As of September 30, 1995, the Company had a backlog in sales of
approximately $800,000 primarily attributable to sales of its DAS100 Ship
Docking Aid System, delivered during the first half of fiscal 1996. As of
September 30, 1996, the Company had a backlog in sales of approximately
$240,000 primarily attributable to orders for its industrial laser sensors
pursuant to the Company's Agreement with Telemotive. The Company intends to
continually evaluate inventory and production demands to fill orders as
received.
COMPETITION
The Company's hand-held Marksman laser speed detection system competes
primarily with hand-held radar speed measurement devices. Although most of the
Company's competitors in the radar industry sell their instrumentation at
prices lower than those of the Marksman, Management believes it competes
primarily because of the greater effectiveness and accuracy of the Marksman
compared to radar speed measurement devices. The Marksman has the ability to
positively identify specific vehicles and is not detectable by conventional
radar detectors. Additionally, consumer laser speed detection devices and
newly introduced laser jamming devices have been proven to be generally
ineffective against the Marksman.
Additionally, the Marksman laser speed detection system is used by law
enforcement agencies for applications beyond those available from radar speed
measurement devices and currently marketed laser speed measurement devices. In
1993, the Company introduced "SpeedStat," a statistical compilation software
package. This product when combined with the Company's Marksman, automatically
gathers and formats traffic survey data on a portable computer allowing
traffic engineers and law enforcement officials to conduct and document
traffic speed surveys more efficiently using the Marksman than with
conventional methods.
The ranging capabilities of the Marksman are also used by law enforcement
agencies to gather measurement information during accident reconstruction and
investigation. In fiscal 1995, the Company introduced "QuickMap," which
enhances the Marksman's use by law enforcement agencies for quickly collecting
and processing information at accident sites and crime scenes. During fiscal
1995, the Company also introduced "DBC," which allows the Company's laser
speed detection systems to measure the distance and time between vehicles.
Additionally, in 1995, the Company incorporated a feature within the Marksman
to detect when a laser jamming device is in use, which has proven valuable to
law enforcement agencies in jurisdictions where the use of laser jamming
devices is prohibited. The Marksman has also been used by SWAT teams to
measure target distances, and in drug interdiction to measure truck trailers
for false compartments.
The Company is aware of three other companies that market laser speed
measurement devices. Kustom Signal, Inc. is marketing a device pursuant to a
license from the developer, Laser Atlanta, Inc. Riegl, an Austrian company,
and Jenoptic, a German company, also market laser speed measurement devices.
Such competition has not, however, had a material impact on the Company's
sales of its Traffic Safety products. The Company presently believes that its
hand-held laser speed detection systems are able to compete within this market
based upon the their accuracy in speed readings, positive vehicle
identification, and the difficulty that motorists have in detecting the laser
beam generated by the Marksman. The Company also believes that its ancillary
Traffic Safety products address applications that provide a competitive
advantage over other laser speed measurement devices.
Management believes that the Laser DigiCam photo laser system competes in
similar markets as photo-radar systems. Because the Laser DigiCam system has a
much narrower beam than to photo-radar systems on the market, the Company
believes that the Laser DigiCam system provides better target identification
and increased
11
<PAGE>
accuracy. Management intends to continue marketing the Laser DigiCam system at
a sales price below that of high-end radar systems. Management believes that
it can compete within this market based upon price and quality of information
derived from the Laser DigiCam system as compared to presently available
photo-radar systems.
Management is aware of a proto-type camera system similar in functionality
to the Company's Laser DigiCam developed by Kustom Signals, Inc. Additionally,
prior to the Company's development of the Laser DigiCam, two of the Company's
international distributors developed laser-based camera systems to address
specific requirements within their predetermined foreign markets currently
served by them, primarily Scandanavia and Australia. The Company and its
distributors have cooperated in development of these systems to encompass
specific customer requirements and to maximize sales of the Company's laser
speed measurement devices which are integral components of these systems.
The Company's Survey and Mapping products compete with traditional
measurement devices, and a laser measurement device developed and marketed by
Laser Atlanta, Inc., which is designed specifically for survey and mapping
applications. Management also believes that it may compete in international
markets with instruments developed and marketed by Riegl, an Austrian company,
and Jena, a German company. The Company competes within this market based upon
the quality of information generated by its Survey and Mapping products and
the time saving features provided by these systems as compared to other
traditional systems. Additionally, Management believes that the newly
introduced Impulse will compete within this market because of its reduced size
and weight and lower price point compared to competing systems.
The Industrial Laser Distance Sensors developed for Telemotive were
developed to replace existing radio frequency ("RF") based distance measuring
devices previously developed and marketed by Telemotive. Telemotive's RF
device has become increasingly subject to outside interference from other
equipment rendering it ineffective. This has led to Telemotive contracting
with the Company to develop and manufacture laser sensors to replace its own
less effective RF counterpart. Pursuant to the terms of the Company's contract
with Telemotive, Telemotive has exclusive rights to the industrial laser
sensors developed under this contract for the material handling market in
return for minimum guaranteed purchases of the Company's laser sensors.
The Company believes that its Industrial Laser Distance Measurement Sensors
will compete with traditional measuring devices including radar and RF based
systems, and in certain international markets, primarily Europe, with laser
distance measurements instruments developed and marketed by Riegl, an Austrian
company. Management intends to compete in these markets based on the unique
measurement capabilities of its industrial laser sensors and because of their
reduced size, weight and lower manufacturing costs.
The Company is aware of several companies that provide other ship docking
aid systems including Marimatech A.S., Koden Electronics Company and Autronica
A.S. Management believes that it can compete within this market based upon the
DAS100's effectiveness and lower cost position as compared to other systems.
Since the Company manufactures the laser sensors integrated into the DAS100,
Management believes that it will maintain lower manufacturing costs as
compared to competing systems.
PATENTS
Certain processes by which the Company is able to produce its products are
largely proprietary. The Company believes that patent protection of its
technology, including the materials or processes it develops and products that
result from the Company's research and development efforts, are important to
the possible commercialization of the Company's technology. The Company
continually attempts to protect its proprietary technology by obtaining patent
application protection and relying on trade secret laws and non-disclosure and
confidentiality agreements with its employees and persons that have access to
its proprietary technology. Additionally, the Company extends most of its
domestic patent filings into foreign applications. To date, no foreign patents
have been issued.
12
<PAGE>
As of September 30, 1996, the Company has filed sixteen patent applications
related to its various product lines with the United States Patent and
Trademark Office in order to protect its current technology. As of September
30, 1996, seven of these patents have been issued. One patent, expiring in
March 2011, relates to the Company's Criterion Series of Survey Lasers
providing coverage of the Criterion in forestry applications that include
height and diameter measurement of trees. The Company has also been issued two
patents expiring in October 2011 and May 2013, on its Traffic Safety laser
speed detection systems. A fourth patent issued expiring in May 2012, relates
to a mechanical interface between one of the Company's Criterion hand-held
survey lasers and an electronic theodolite enabling the instruments to remain
vertically aligned while the instruments are adjusted.
During fiscal 1995, the Company filed additional patent applications related
to protecting technological developments centered around the Company's Traffic
Safety product line. These applications include the capability of detecting a
laser jammer by a laser speed detection device, the ability to measure
distance and time between vehicles with a laser speed detection device, and a
system used to collect data for accident reconstruction and investigation. The
Company also applied for patent protection of certain technological
developments centered around its Laser DigiCam photo laser system.
During fiscal 1996, a fifth patent was issued, expiring in June 2013,
relating to the Company's Survey and Mapping product line which incorporates
the Company's proprietary "Walkabout" software that enables field data
collection in the G.I.S. mapping process. Additionally, the Company was
granted a patent on its technology providing the capability of transmitting
data using pulses of light generated from the Company's laser range-finders.
This patent expires in July 2013.
The Company has filed three patent applications on its proprietary
technology related to consumer instrumentation, primarily related to the
LyteSpeed developed for Bushnell to protect certain technological developments
and production techniques that are centered around this product. As of
September 30, 1996, one of these patent has been issued and will expire
November 2013. Additionally, in 1996, three patent applications have been
filed relating to technological developments centered around the Company's
newly introduced Impulse product line.
PATENT LICENSING AGREEMENTS
In September 1996, the Company agreed to license to a competitor within its
Traffic Safety business, a patent relating to the Company's Marksman hand-held
laser speed detection system (the "Patent"). In fiscal 1996, the Company gave
notice to this competitor that it was likely infringing the Patent by making
and selling laser-based speed measurement devices. Pursuant to a license
agreement, the Company granted the competitor the nonexclusive rights to
manufacture and sell laser-based speed measurement devices. In consideration
for the license under the Patent, the Company received a prepayment of
licensing fees for a predetermined number of devices sold by this competitor
and will receive subsequent license fees for each individual licensed device
sold by them pursuant to this agreement. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Royalty and
Licensing Income."
GOVERNMENT REGULATION
The Company's laser products emit a laser light beam and are regulated by
the FDA and subject to approval by certain foreign governments. FDA
regulations impose eye safety requirements on the Company's products and
governments of some foreign countries have similar regulations. The Marksman
complies with FDA Class 1 eyesafety regulations and has been rated Class 1
eyesafe by laboratories in Austria, Germany and Norway.
Due to FDA involvement in international standardization efforts for laser
products with the International Electrotechnical Commission ("IEC"),
Management is aware of certain changes under consideration by the FDA that may
affect current FDA regulated emission limits of Class 1 pulsed lasers.
Management does not believe that such proposed changes will impact the
Company's sales or results of operations. However, there is no assurance of
this.
13
<PAGE>
In 1995, the National Highway Traffic Safety Administration ("NHTSA")
working in conjunction with the National Institute of Standards and Technology
("NIST"), completed a national standard for performance specifications for
laser speed measurement devices and established a laboratory testing facility
at the University of California-Davis for testing of laser speed measurement
devices. In October 1995, the Company submitted a Marksman unit for testing.
In April 1996, the Marksman was certified by the International Association of
Chiefs of Police ("IACP") to meet the federal standard for laser speed
measurement devices. Upon receiving IACP certification, the Marksman was
subsequently placed on the IACP Approved Products List. This list is comprised
of speed enforcement products which have passed the national standard.
Historically, there were four states within the U.S. that required the
passage of specific state legislation to enable the use of new technological
developments in speed enforcement. As of September 30, 1996, legislation has
been passed approving the use of laser-based speed measurement devices as an
acceptable means of speed enforcement in Florida, North Carolina and Virginia.
Management is currently unable to ascertain when legislation will be passed in
Pennsylvania and there is no assurance that such legislation will be passed.
Management also recognizes that many foreign countries have centralized law
enforcement and purchasing regulations requiring stringent performance and
accuracy standards. Management primarily acknowledges that Western Europe
purchasing authorities adhere to such performance and accuracy standards. The
Marksman is subject to approval by certain foreign governments where
regulatory controls exist for speed enforcement equipment. The Company has
received approval for the Marksman from government agencies in Germany, the
United Kingdom, Austria, Sweden, Switzerland, the Netherlands and France. The
Marksman has also been tested and approved by the Royal Canadian Mounted
police in Canada.
EMPLOYEES
Management considers the relations between the Company and its employees to
be good. As of September 30, 1996, the Company employs sixty-three employees,
consisting of seven management personnel, nineteen employees engaged in the
sales and marketing activities of the Company, nine engineering personnel,
eighteen production related personnel and ten administrative and office
personnel. In addition to its full-time employees, the Company uses the
services of one contractual marketing representative and also uses the
services of two contract engineers providing mechanical design and
documentation services related to the Company's research and development
activities.
ITEM 2. PROPERTIES
In December 1995, the Company exercised its right to acquire additional
expansion space by leasing approximately 8,200 additional square feet adjacent
to the Company's current facilities. Due to increased demand for the Company's
products and increased marketing and administrative activities centered around
the Company's growing product lines, the Company intends to further expand its
office and production facilities in January 1997. In total, the Company's
current and anticipated lease arrangement provides approximately 24,000 square
feet in Englewood, Colorado under a lease agreement that expires in May 2003.
The combined facilities will contain approximately 12,000 square feet of
production space, 3,000 square feet allocated for research and development and
9,000 devoted to marketing and administrative activities. The Company has also
entered into an agreement with a partnership to sub-lease back a portion of a
former facility to continue to house the Company's machine shop facility. The
Company believes that its current and planned facilities are adequate for its
needs over the foreseeable future.
14
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or its
subsidiaries are a party or to which any of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter ended September
30, 1996.
15
<PAGE>
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is listed on the American Stock Exchange ("LSR").
As of September 30, 1996, 4,999,433 common shares were outstanding and the
Company had approximately 641 shareholders of record which figure does not
take into account those shareholders whose certificates are held by nominees.
The following table sets forth the range of high and low sale prices of the
common stock for each calendar quarterly period as reported on the American
Stock Exchange.
STOCK PRICES
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
1996
First Quarter..................................................... $7.62 $5.25
Second Quarter.................................................... 8.44 5.50
Third Quarter..................................................... 6.69 4.12
Fourth Quarter*................................................... 4.56 3.62
1995
First Quarter..................................................... $5.12 $2.56
Second Quarter.................................................... 6.44 4.18
Third Quarter..................................................... 6.25 4.75
Fourth Quarter.................................................... 5.75 3.25
1994
First Quarter..................................................... $6.75 $4.88
Second Quarter.................................................... 4.38 4.13
Third Quarter..................................................... 4.50 3.88
Fourth Quarter.................................................... 3.19 3.00
</TABLE>
- --------
* The 1996 fourth quarter reflects the high and low sale prices of the
Company's common stock reported by the American Stock Exchange through
December 20, 1996.
DIVIDENDS
The Company currently intends to retain earnings to finance its operations,
therefore, the Company has not declared or paid cash dividends in the past,
nor does the Company anticipate that it will distribute cash dividends in the
foreseeable future.
16
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Company should be read in
conjunction with the financial statements and notes thereto and the following
Management's Discussion and Analysis of Financial Condition and Results of
Operations. The financial data set forth below has been derived from the
audited financial statements of the Company.
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------------------
1996 1995 1994 1993 1992 (A)(D)
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............. $9,306,777 $8,225,776 $5,303,299 $4,813,227 $3,880,512
Cost of goods sold.... 4,241,389 3,864,473 2,527,322 2,021,884 1,761,829
Gross profit.......... 5,065,388 4,361,303 2,775,977 2,791,343 2,118,683
Royalty and licensing
income............... 401,121 -- -- -- --
Total operating
income............... 5,466,509 4,361,303 2,775,977 2,791,343 2,118,683
Operating expenses.... 4,058,908 3,431,694 2,766,426 1,794,332 933,220
Income from
operations........... 1,407,601 929,609 9,551 997,011 1,185,463
Interest income
(expense) net........ 235,771 157,523 86,555 (83,765) (152,650)
Litigation settlement
(b).................. -- -- -- -- 1,100,000
Income (loss) before
taxes on income and
extraordinary item... 1,643,372 1,087,132 96,106 913,246 (67,187)
Taxes on income
(benefit)............ 580,000 383,000 37,000 (52,000) 79,000
Income (loss) before
extraordinary........ 1,063,372 704,132 59,106 965,246 (146,187)
Extraordinary item
(c).................. -- -- -- 567,000 --
Net income (loss)..... 1,063,372 704,132 59,106 398,246 (146,187)
Net income (loss) per
common share:
Before extraordinary
item............... .20 .14 .01 .20 (.04)
Extraordinary item.. -- -- -- (.12) --
Net income (loss)... .20 .14 .01 .08 (.04)
Weighted average
number of shares
outstanding........ 5,209,981 4,989,600 5,008,381 4,794,749 3,709,312
</TABLE>
- --------
(a) Effective with the period ended September 30, 1992, the Company elected to
begin utilizing a September 30 fiscal year end. Therefore, the period
ended September 30, 1992 represents a nine month short period as compared
to the twelve month fiscal years ended September 30, 1993, 1994, 1995 and
1996.
(b) The loss for the nine months ended September 30, 1992 includes the effect
of a $1,100,000 charge for the settlement of litigation which reduced
earnings by $.30 per share.
(c) During fiscal 1993, the Company recorded a non-recurring charge of
$567,000 as a loss related to the early extinguishment of debt, net of
applicable income tax benefit of $333,000 which reduced earnings by $.12
per share.
(d) Adjusted to give effect to the 1 for 4 reverse stock split effected
December 22, 1992.
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital....... $ 7,698,674 $ 7,834,363 $ 7,247,133 $ 7,309,987 $ 604,954
Total assets.......... 10,663,459 8,998,295 8,366,463 8,011,845 3,289,372
Short-term debt,
including current
maturities of long-
term debt............ -- -- 59,517 34,481 186,425
Long-term debt less
current maturities... -- -- 150,075 27,379 840,545
Total stockholders'
equity............... 9,692,855 8,589,692 7,885,560 7,761,495 479,128
</TABLE>
17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has recently issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets," and SFAS No. 123, "Accounting for Stock
Based Compensation." SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reported at the lower of the carrying amount or
their estimated recoverable amount. The adoption of this statement by the
Company is not expected to have an impact on the Company's financial
statements. SFAS No. 123 encourages the accounting for stock-based employee
compensation programs to be reported within the financial statements on a fair
value based method. If the fair value based method is not adopted, then the
statement requires pro-forma disclosure of net income and earnings per share
as if the fair value based method had been adopted. The Company has not yet
determined how SFAS No. 123 will be adopted nor its impact on the Company's
financial statements. Both statements are effective for years beginning after
December 15, 1995.
RESULTS OF OPERATIONS
The following table sets forth, for the three most recent fiscal years, the
percentage relationship to net sales of principal items in the Company's
Statement of Operations. It should be noted that percentages discussed
throughout this analysis are stated on an approximate basis.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net sales................................ 100% 100% 100%
Cost of goods sold....................... 46 47 48
--------- --------- ---------
Gross profit............................. 54 53 52
Royalty and licensing income............. 4 -- --
Total operating income................... 58 53 52
Operating expenses....................... 44 42 52
--------- --------- ---------
Income from operations................... 14 11 --
Interest income, net..................... 3 2 2
Taxes on income.......................... 6 4 1
--------- --------- ---------
Net income............................... 11% 9% 1%
========= ========= =========
</TABLE>
The following table provides a breakdown of the net sales and respective
percentages of net sales of the Company's various product lines. Revenues
realized from sales of the Company's less significant revenue producing
products are classified as "Other" for presentation purposes.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
TRAFFIC SAFETY........................ $5,259,346 $5,087,676 $3,341,078
Percentage of revenues................ 57% 62% 63%
SURVEY AND MAPPING.................... 3,175,031 2,991,549 1,697,056
Percentage of revenues................ 34 36 32
DAS100 SHIP DOCKING AID SYSTEM........ 763,930 -- --
Percentage of revenues................ 8
OTHER................................. 108,470 146,551 265,165
Percentage of revenues................ 1 2 5
---------- ---------- ----------
Total Revenues........................ $9,306,777 $8,225,776 $5,303,299
========== ========== ==========
</TABLE>
18
<PAGE>
Fiscal Year Ended September 30, 1996 Compared to Fiscal Year Ended September
30, 1995
Net sales for the fiscal year ended September 30, 1996 ("1996") rose
approximately 13% to $9,306,777 from $8,225,776 for the fiscal year ended
September 30, 1995 ("1995"). Initial sales of the Company's DAS100 Ship
Docking Aid System and increased volume sales of the Company's Traffic Safety
and Survey and Mapping products comprised the majority of the increase in
sales in 1996 as compared to 1995.
As a result of initial revenues realized from sales of the Company's DAS100
Ship Docking Aid Systems in fiscal 1996, sales of the Company's Traffic Safety
products, as a percentage of net sales, were 57% in 1996 as compared to 62% in
1995, and sales of the Company's Survey and Mapping products, as a percentage
of net sales, were 34% in 1996 compared to 36% in 1995. Management anticipates
that sales of its DAS100 will greatly fluctuate between financial periods due
to the specialized nature of the system.
Sales of the Company's Survey and Mapping products increased 6% in 1996 as
compared to 1995, primarily due to the introduction of the Company's Impulse
Series of Survey Lasers during the fourth quarter of fiscal 1996.
Net sales of the Company's Traffic Safety products increased 3% in 1996
compared to 1995. Increased volume sales of the Company's Laser DigiCam photo
laser system internationally offset a decrease in hand-held Marksman sales.
Domestic hand-held Marksman sales declined slightly during the third quarter
of 1996 due to what Management believes is the effect of government purchasing
deferrals related to prolonged delays in the International Association of
Chiefs of Police ("IACP") standardization tests of laser-based technology for
use in speed enforcement.
In April 1996, the Company's hand-held Marksman laser speed detection system
was certified by the IACP to meet the federal standard for laser speed
detection devices. Upon receiving IACP certification, the Marksman was
subsequently placed on the IACP approved products list. This list is comprised
of speed enforcement products which have passed the national standard.
Management anticipates that placement on the IACP Approved Products List will
allow federal funds from the United States Department of Transportation to
become more accessible for law enforcement agencies to purchase the Marksman.
Because the approval occurred so late in the year, Management believes that
law enforcement agencies are deferring purchases of the Company's Marksman
hand-held laser speed detection system until their next budget cycle in order
to purchase them with the aid of federal funding, although there is no
assurance of this.
International sales comprised 49% in 1996 compared to 44% in 1995 due to
increased foreign sales of the Company's Laser DigiCam photo laser system and
Criterion and Impulse survey lasers. Historically, the Company experiences
quarterly fluctuations in it's foreign sales due to the placement of typically
large orders for the Company's Marksman and Laser DigiCam Traffic Safety
products. Management anticipates that foreign sales of its Traffic Safety and
Survey and Mapping product lines will continue to comprise a significant
portion of its revenues. The Company currently requires that all international
sales be paid for with U.S. dollars.
Cost of goods sold increased 10% to $4,241,389 in 1996 from $3,864,473 in
1995 due to increased sales levels. As a percentage of net sales, cost of
goods sold decreased slightly to 46% in 1996 from 47% in 1995, thus improving
the Company's gross profit margin, as a percentage of net sales, to 54% in
1996 compared to 53% in 1995. The increase in gross profit margins in 1996
resulted primarily from higher gross margins on initial sales of the DAS100.
Management recognizes that competitive pressure may affect the Company's gross
profit margins. However, such impact from reduced selling prices is expected
to be offset by reduced manufacturing costs through second generation
instrumentation and a better application of fixed costs as the Company's sales
volumes increase. The Company anticipates that gross profit margins from
international markets will remain consistent with those realized domestically
in most international markets for the Company's current product lines.
However, management believes that gross profit margins on high volume
international sales of its Marksman laser speed detection systems may be less
than those realized domestically due to reduced selling prices on high volume
orders. The Company currently minimizes the effect of currency fluctuations by
requiring payment in U.S. funds.
19
<PAGE>
During fiscal 1996, the Company began receiving royalty income related to
its Agreement with Bushnell Corporation ("Bushnell") from sales of the
Lytespeed laser range finder developed by the Company in cooperation with
Bushnell in 1994. Pursuant to this Agreement, the Company receives running
royalties on designated net sales of the Lytespeed product developed under the
Agreement and received development fees for the initial technology development
as well as supplemental fees related to production engineering of the
Lytespeed. The Company began realizing royalty income pursuant to this
Agreement during the first quarter of fiscal 1996. As of September 30, 1996,
the Company has received royalty income from Bushnell of approximately
$341,000. Management believes that Royalties received pursuant to this
Agreement will continue to have a positive impact on the Company's results of
operations, although there is no assurance of this. See "Royalty and Licensing
Income."
In September 1996, the Company licensed a patent to a competitor within its
Traffic Safety business whereby the Company receives licensing fees on
designated sales on a per unit basis, for each device sold by this competitor.
As of September 30, 1996, the Company has received advanced licensing fees for
an undisclosed number of units pursuant to this agreement in the amount of
$60,000. See "Royalty and Licensing Income, and Business--Patent Licensing
Agreements."
Operating expenses increased 18% to $4,058,908 in 1996 from $3,431,694 in
1995. As a percentage of net sales, 1996 operating expenses rose slightly to
44% compared to 42% in 1995. Increased compensation expense due to increased
personnel requirements primarily within the Company's marketing and research
and development areas, and higher marketing expenses related to increased
sales activities, including higher advertising and travel expenses comprised
the majority of the increase in total operating expenses in 1996 as compared
to 1995. The Company anticipates that operating expenses will continue to
increase to support the Company's continued growth.
As a result of increased sales and the addition of royalty and licensing
income, the Company achieved a 51% increase in income from operations to
$1,407,601 in 1996 compared to operating income of $929,609 for the same
period a year ago. Combined with income earned on investments of $235,771 and
$157,523 in 1996 and 1995, respectively, the Company realized pretax income of
$1,643,372 in 1996 compared to pretax income of $1,087,132 in 1995. After
taxes on income, the Company realized net income of $1,063,372, or $.20 per
share, in 1996, compared to $704,132, or $.14 per share, in 1995.
Fiscal Year Ended September 30, 1995 Compared To Fiscal Year Ended September
30, 1994
Net sales for the fiscal year ended September 30, 1995 ("1995") rose
approximately 55% to $8,225,776 from $5,303,299 for the fiscal year ended
September 30, 1994 ("1994") due to a continued overall increase in sales
volumes of the Company's Traffic Safety and Survey and Mapping product lines
both domestically and internationally. Total Survey and Mapping sales rose 76%
in 1995 as compared to 1994, as a result of the Company's expansion of its
domestic dealer network and international distribution channels. Total Traffic
Safety revenues increased 52% in 1995 over 1994 due to increased sales volume
of the Company's Traffic Safety products both domestically and
internationally, including initial sales of the Company's Laser DigiCam photo
laser system. Due to increased sales growth in all of the Company's product
lines, as a percentage of net sales Criterion sales rose to 36% in 1995 as
compared to 32% in 1994. The Company's Traffic Safety sales, as a percentage
of net sales, remained relatively consistent in both fiscal years comprising
approximately 62% of the Company's overall revenues. International sales of
the Company's products equalled 44% in 1995 and 1994.
As a result of increased sales levels, cost of goods sold increased 53% to
$3,864,473 in 1995 from $2,527,322 in 1994. Cost of goods sold as a percentage
of net sales decreased slightly from 48% in 1994 to 47% in 1995, so the
Company's gross profit margin was 52% in 1994 and 53% in 1995.
20
<PAGE>
Operating expenses increased approximately 24% to $3,431,694 in 1995 from
$2,766,426 in 1994 primarily due to increased compensation expense related to
increased personnel and increased advertising and travel expense related to
increased sales levels. However, as a percentage of net sales, the Company's
overall operating expenses fell approximately 10% to 42% in 1995 from 52% in
1994 due to a better absorption of the Company's fixed costs over a larger
revenue base and the slowing of the Company's marketing expenditures centered
around building the Company's marketing infrastructure in 1995 as compared to
1994.
Income from operations was $929,609 in 1995 compared to income from
operations of $9,551 in 1994, the result of increased sales and a better
application of fixed costs over a larger revenue base. Combined with income
earned on investments net of interest expense of $157,523 in 1995 compared to
$86,555 in 1994, the Company had pretax income of $1,087,132 in 1995 compared
to 1994 pretax income of $96,106. After taxes on income of $383,000 and
$37,000 for 1995 and 1994, respectively, net income rose to $704,132, or $.14
per share, in 1995 from $59,106, or $.01 per share, for the comparable 1994
period.
ROYALTY AND LICENSING INCOME
In 1994, the Company entered into an Agreement with Bushnell Corporation
("Bushnell"), formerly the Sports Optics Division of Bausch and Lomb, whereby
the Company agreed to develop and grant to Bushnell worldwide, exclusive
licensing rights for the manufacture and marketing of a consumer range finder
developed by the Company in cooperation with Bushnell for sporting
applications. The Company retains all ownership of copyrights, patents and
trade secrets of the technology and the right to pursue markets outside of the
sports optics area. Pursuant to the Company's Agreement with Bushnell, the
Company receives a running royalty on designated net sales of each product
developed under this Agreement and has received development fees for the
initial technology development as well as supplemental fees related to
production engineering of this product. The Company retains the right to
terminate the Agreement if the royalties received by the Company do not equal
or exceed certain effective royalty obligations as defined by the Agreement.
As of September 30, 1996, the Company has received $341,000 in royalties
related to this Agreement.
Pursuant to an undisclosed licensing agreement, in September 1996, the
Company agreed to license a patent to a competitor within its Traffic Safety
business, a patent relating to the Company's Marksman hand-held laser speed
detection system (the "Patent"). In fiscal 1996, the Company gave notice to
this competitor that it was likely infringing the Patent by making and selling
laser-based speed measurement devices. Pursuant to this licensing arrangement,
the Company granted this competitor the nonexclusive rights to manufacture and
sell laser-based speed measurement devices. In consideration for the license
under the Patent, the Company agreed to receive a prepayment of licensing fees
for a predetermined number of devices to be sold by the competitor and will
receive subsequent license fees for each individual licensed device sold by
them.
FOREIGN SALES
Foreign sales of the Company's products equalled 44% for both fiscal years
ended September 30, 1994 and 1995. For the year ended September 30, 1996, the
Company's foreign sales comprised 49% due to increased sales of the Company's
Laser DigiCam system, part of the Company's Traffic Safety product line.
Management believes that foreign sales of the Company's products will continue
to comprise a significant portion of its revenues. The Company requires that
all international sales be paid for with U.S. dollars. An increase in the
value of the U.S. dollar relative to other currencies could make the Company's
products less competitive in those markets.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs related to the continual development of the
Company's laser measurement instruments are expensed as incurred and included
in operating expenses. Research and development costs totalled approximately
$514,000, $363,000 and $273,000 for the years ended September 30, 1996, 1995
and 1994, respectively. Year to year increases in research and development
expenditures are primarily attributable to
21
<PAGE>
increased personnel costs related to increased personnel requirements.
Management anticipates continued increases in research and development costs as
the Company seeks to develop new products and enhance existing ones.
INCOME TAXES AND NET OPERATING LOSSES
At September 30, 1994, a deferred tax asset totalling $303,000 was recorded,
relating primarily to operating loss carryforwards. During the fiscal year
ended September 30, 1995, the Company generated taxable income of $1,087,132
which has fully utilized the Company's net operating loss carryforwards. Under
the provisions of SFAS No. 109, the Company's policy is to provide deferred
income taxes related to inventories and other items that result in differences
between the financial reporting and tax basis of assets and liabilities. As a
result, at September 30, 1996, the Company has recorded a deferred tax asset
totalling $52,000. Based upon the Company's recent history of taxable income
and its projections for future earnings, Management believes that it is more
likely than not that sufficient taxable income will be generated in the
foreseeable future to realize the deferred tax asset. See note 4 to the
Company's consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital needs have been satisfied primarily through the
Company's public offering consummated in January 1993 (which provided
$6,313,881 in net proceeds to the Company, after deduction of underwriting
discounts and related offering expenses) and cash flow from operations. The
Company's working capital at September 30, 1996 was $7,698,674 as compared to
working capital of $7,834,363 at September 30, 1995. As of September 30, 1996,
the Company invests in certain non-current investments which reduced the
Company's working capital in 1996 as compared to 1995. The Company's present
working capital is expected to adequately meet the Company's needs for at least
the next twelve months.
For the year Ended September 30, 1996, cash provided by operating activities
was $201,674. Net income of $1,063,372 combined with an increase of $511,465 in
accounts payable and accrued expenses was used to finance an increase in
accounts receivable of $1,106,795 and $284,029 was used to expand inventory.
Cash provided by investing activities of $421,716 was primarily attributable to
proceeds, after reinvestment, from the sale of marketable securities of
$1,169,914 of which $632,437 was used for the purchase of property and
equipment and leasehold improvements related to the Company's facility
expansion in December 1995. Cash flows of $30,328 provided by financing
activities, resulted from proceeds received from the exercise of employee stock
options pursuant to the Company's Equity Incentive Plan of $39,791 less
payments on long-term debt. For the year ended September 30, 1996, cash and
cash equivalents increased $653,718.
For the year ended September 30, 1995, cash provided by operating activities
of $963,739 was primarily attributable to net income for the year of $704,132.
Additionally, the Company realized a decrease in accounts receivable of
$590,934 offset by increased inventory levels of $896,209 needed to meet
anticipated sales demand. During fiscal 1995, cash used in investing activities
of $470,089 related primarily to the reinvestment of unused cash reserves of
$311,622 into marketable securities and $158,467 was used for the purchases of
property and equipment and certain patent costs related to the protection of
the Company's proprietary technology. Cash used in financing activities of
$200,129 was used to extinguish the Company's debt obligations related to the
Company's facility expansion during fiscal 1994. For the year ended September
30, 1995, cash and cash equivalents increased $293,521.
For the year ended September 30, 1994, cash used in operating activities of
$34,676 was used primarily to finance an increase in accounts receivable of
$766,563. During 1994, the Company reduced inventory levels by $254,677 and
received $108,000 in refundable income taxes. Net cash used in investing
activities was $121,708. Of this amount, $208,497 was used for the purchases of
property and equipment for enhancement of the Company's production and
development facilities, which was partially offset by net proceeds on
investments of $127,371. During 1994, the Company expanded its manufacturing
and office facilities. Pursuant to this expansion, the Company completed
$202,360 in leasehold improvements which were financed through a local
22
<PAGE>
commercial lender. During 1994, cash used in financing activities of $54,628
was used primarily to repay a portion of this obligation. For the year ended
September 30, 1994, cash and cash equivalents decreased $211,012.
OTHER
During 1994, the Company exercised its option to expand its facility in order
to relocate its main office facilities adjacent to its manufacturing
operations. In December 1995, pursuant to the Company's rights for additional
expansion space, the Company elected to further expand its facilities to
provide additional office and production space during fiscal 1996 and 1997.
Management believes that the capital invested as a result of the expansion of
its facilities will not have a material impact on the Company's working capital
or results of operations. Additionally, the Company believes that its current
and planned facilities are adequate to meet the Company's needs throughout the
foreseeable future.
In an effort to maintain minimal inventory levels, the Company purchases raw
materials and supplies as dictated by the Company's sales activity enabling the
Company to reserve cash resources and maintain reduced inventories as a
percentage of sales volume. Raw materials and supplies with long purchasing
lead times are carried as inventory on hand to avoid delays in procurement.
Since the majority of the Company's sales are to government agencies, the
Company has historically realized minimal bad debts and maintains approximately
a 30-60 day receivable collection period. In order to reduce the impact of
currency fluctuations, all of the Company's foreign sales are made in U.S.
currency. The Company generally enforces the use of letters of credit and wire
transfers in most of its credit arrangements with foreign distributors to
reduce the risk of uncollected accounts receivable. Since 1992, an allowance
for doubtful accounts of $10,000 has been recorded.
Management believes that the Company's business centered around its Traffic
Safety product line is not seasonal in nature, however, due to fiscal budgeting
practices of state and municipal law enforcement agencies, sales may vary
between financial periods. Historically, the Company has realized a small
decline in its Survey and Mapping products, in areas affected by colder weather
during the winter months. Management believes that the expansion of the
Company's Survey and Mapping product line and penetration into new markets has
mitigated seasonal effects on sales of this business segment.
EFFECT OF INFLATION
The Company believes that it will experience increased costs due to the
effect of inflation on the cost of labor, material and supplies, and equipment
acquisitions. However, such inflationary effects are not expected to have a
material impact on the Company's revenues, gross profit or results of
operations for at least the next twelve months.
RISK FACTORS AND CAUTIONARY STATEMENTS
This report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such as the words or phrases
"believes", "to be", "will depend", "will become" and "plans to" or similar
expressions. The Company wishes to advise readers that the forward-looking
statements in this report are subject to risks and uncertainties that could
cause actual results to differ materially from those expressed in or implied by
the statements, including, but not limited to, the following: the risk that the
Company could be required to recognize a financial statement loss through a
lower of cost or market write down of inventories; potential changes in the
budget of federal and state agencies; and compliance with current and possible
future FDA or environmental regulations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this item is contained in the financial
statements appearing in Item 14 of this report. Such information is
incorporated by reference.
23
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
David Williams.............. 41 President, Chief Executive Officer and Director
Jeremy G. Dunne............. 39 Vice President and Director
Dan N. Grothe............... 59 Secretary and Director
Pamela Sevy................. 31 Treasurer and Chief Financial Officer
William Carr................ 57 Director
F. James Lynch.............. 66 Director
Richard B. Sayford.......... 64 Director
H. DeWorth Williams......... 61 Director
</TABLE>
The Company's directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and qualified.
As of September 30, 1993, the Company had not compensated its directors for
service on the Board of Directors or any committee thereof. In June 1994, the
Company adopted a Stock Option Plan for Non-Employee Directors, (the "Director
Plan"). The Director Plan provides for the grant of options to purchase 30,000
shares of the Company's common stock to each member of the Company's Board of
Directors who is not an employee of the Company, and a grant of options to
purchase 30,000 shares to each non-employee director who is newly elected to
the Board after the effective date of the plan. The exercise price in each case
is the fair market value of the Company's Common Stock at the date of grant,
based on the closing sale price of the Common Stock on the American Stock
Exchange on such date. Pursuant to the Director Plan, as of September 30, 1996,
options to purchase 30,000 shares were granted and are outstanding to each of
four non-employee directors at exercise prices ranging from $3.06 to $4.94 per
share. In addition, the Company reimburses each Director's out of pocket
expenses incurred in connection with their duties as directors.
Each officer of the Company serves at the discretion of the Board of
Directors. As of September 30, 1996, there were two committees of the Board of
Directors: the Audit Committee consisting of Mr. Carr, Mr. Grothe, Mr. Lynch
and Mr. Sayford; and the Compensation Committee consisting of Mr. H. Deworth
Williams, Mr. Lynch and Mr. Carr.
David Williams. Mr. Williams has been employed by the Company since January
1986. He served as Vice President of marketing and finance prior to becoming
President and Chief Executive Officer in December 1986. From 1983 to 1985, Mr.
Williams was a financial consultant with Williams Investments Company, a
financial consulting and venture capital firm. From 1981 to 1983, Mr. Williams
was a financial officer and consultant for Valley Care, Inc., a health care
provider. Mr. Williams is a 1981 graduate from the University of Utah with a
B.S. Degree in Finance.
Jeremy G. Dunne. Mr. Dunne has been employed by the Company since 1986. From
1981 to 1986, Mr. Dunne was a chief engineer for Hydrographic Services,
International in Southbrough Kent, England, a company that performs software
and system design for the hydrographic surveying industry. From 1980 to 1981,
Mr. Dunne was an electrical engineering technician with Plessy Marine, Ltd. in
Ilford Essex, England, a manufacturer of electronic instrumentation. Mr. Dunne
earned a B.A. Degree in Electrical Engineering from the University of
Cambridge, Cambridge, England.
24
<PAGE>
Dan N. Grothe. In May 1993, Mr. Grothe became a full time employee of the
Company directing certain marketing activities focused on improving marketing
to federal and municipal government agencies. From 1989 to May of 1993, Mr.
Grothe was self employed as a financial advisor to corporations doing business
with governmental entities. From 1987 to 1989, Mr. Grothe was a vice president
at Hanifen Imhoff, Inc., Denver, Colorado, working primarily as a tax-exempt
bond underwriter. Mr. Grothe also serves as President of the Company's wholly-
owned subsidiary, Laser Communications, Inc., heading marketing efforts of the
Company's DAS100 Ship Docking Aid Systems.
Pamela Sevy. Ms. Sevy has been employed by the Company since August 1987.
Prior to September 1992, when Ms. Sevy was appointed Chief Financial Officer of
the Company, she held the position of Controller. From 1985 to 1987, Ms. Sevy
conducted accounting operations for E.O.C., a Denver based, four store retail
optical outlet. From 1981 to 1985, Ms. Sevy worked with PTI, an Englewood,
Colorado company specializing in corporate accounting and administrative
assistance.
William Carr. For thirty years and until his retirement in January 1994, Mr.
Carr was with the Northern Region of the United States Forest Service having
responsibility for the region's timber sale valuation and measurement programs.
During the past twenty years, Mr. Carr has chaired national forestry committees
and has been the recipient of the Regional Foresters Management Effectiveness
and Improvements Honor Award, and USDA Award for Distinguished Service. Mr.
Carr holds a M.S. Degree in Forestry from the University of Montana.
F. James Lynch. From 1976 to 1994, Mr. Lynch was Chairman and CEO of
Electromedics, Inc. Electromedics was acquired by Medtronic in April 1994.
Electromedics designed, manufactured and marketed blood management equipment
for use in cardiovascular, orthopedic and other medium/high blood loss
surgeries. In 1995, Mr. Lynch organized FJL Venture Group which works with high
technology start-up companies. Mr. Lynch also serves as Managing Partner of
Kerr Vehicle Resources LLC and is a Board member and Treasurer of St. Joseph
Hospital Foundation located in Denver, Colorado.
Richard B Sayford. Since 1979, Mr. Sayford has been the President of
Strategic Enterprises, Inc., a privately held consulting firm specializing in
consulting with high technology companies and venture firms. Since 1980, Mr.
Sayford has served as a member of the Board of Directors of MCI Communications
Company. Mr. Sayford also serves on the Board of VISX, a manufacturer of laser
vision correction systems in Santa Clara, California and also serves on the
Board of Medtrac Technologies, a medical devices manufacturer in Denver,
Colorado. Mr. Sayford holds an MBA degree from the Harvard Business School.
H. DeWorth Williams. Mr. Williams is the owner of Williams Investment Company
and has been a financial consultant for more than twenty years. During this
time, Mr. Williams has been instrumental in facilitating and completing several
mergers, acquisitions, business consolidations and underwritings. Mr. Williams
is the brother of the Company's President, David Williams.
ITEM 11. EXECUTIVE COMPENSATION
EMPLOYMENT AGREEMENTS
Since July 1992, the Company has had employment agreements with David
Williams and Jeremy Dunne, pursuant to which they receive annual base salaries
subject to increases at the discretion of the Board of Directors. Each
employment agreement prohibits the employee from directly or indirectly
competing with the Company for a period of three years following termination of
their employment.
CASH COMPENSATION
The following table sets forth a summary of cash and non-cash compensation
for each of the last three fiscal periods ended September 30, 1996, 1995 and
1994, with respect to the Company's Chief Executive Officer. No executive
officer of the Company has earned a salary greater than $100,000 annually for
any of the periods depicted.
25
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND PRINCIPAL OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
------------------ ---- ------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
David Williams, 1996 $84,600 $-- $-- $--
President, C.E.O. 1995 75,675 -- -- --
1994 72,000 -- -- --
</TABLE>
The preceding table does not include any amounts for noncash compensation,
including personal benefits, paid to David Williams. The Company believes that
the value of such noncash benefits and compensation paid to David Williams
during the periods presented did not exceed the lesser of $50,000 or 10% of the
cash compensation reported for him.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY
FISCAL YEAR END FISCAL YEAR END
NAME AND PRINCIPAL EXERCISABLE/ EXERCISABLE/
POSITION UNEXERCISABLE UNEXERCISABLE
------------------ ---------------------- ---------------
<S> <C> <C>
David Williams, 45,500 $ 14,105
President, C.E.O. (1) 22,750 $ 7,052
</TABLE>
- --------
(1) On June 3, 1994, the Company granted options to purchase 68,250 shares of
the Company's common stock to David Williams, President and CEO, pursuant
to the Company's Equity Incentive Plan. The options are non-transferable
and vest annually in three equal installments over a three year period.
Equity Incentive Plan
In 1994, the Company terminated its previous incentive stock option plan,
with no options having been granted under the plan, and adopted an Equity
Incentive Plan, (the "Employee Plan"). The Employee Plan provides for the
issuance of options to key employees and consultants of the Company to purchase
up to an aggregate of 530,000 shares of the Company's Common Stock at the fair
market value of the stock at the date of grant, based on the closing sale price
of the Common Stock on the American Stock Exchange on such date. The Employee
Plan also allows for the grant of awards in the form of restricted stock, stock
units or stock appreciation rights, so long as the total number of shares of
Common Stock subject to all awards under the Employee Plan does not exceed
530,000. As of September 30, 1996, options to purchase 506,500 shares of the
Company's common stock were outstanding, at exercise prices ranging from $3.50
to $5.25 per share of which 297,584 options were exercisable at September 30,
1996. The options are non-transferrable and primarily vest annually in three
equal installments over a three year period. The options expire five or ten
years from the date of grant or, if sooner, three months after the holder
ceases to be an employee of the Company (subject to certain exceptions
contained in the Employee Plan).
Non-Employee Director Stock Option Plan
Additionally, in 1994, the Company adopted the Laser Technology, Inc. Stock
Option Plan for Non-Employee Directors (the "Director Plan"). The Director Plan
provides for the grant of options to purchase 30,000 shares of the Company's
Common Stock at the effective date of the plan to each member of the Company's
Board of Directors who is not an employee of the Company, and a grant of
options to purchase 30,000 shares to each non-employee director who is newly
elected to the Board after the effective date of the Director Plan. The maximum
number of shares that may be subject to options issued under the Director Plan
is 120,000. The exercise price in each case is the fair market value of the
Common Stock on the date of grant, determined in the same manner as under the
Employee Plan. As of September 30, 1996, pursuant to the Director
26
<PAGE>
Plan, options to purchase 30,000 shares have been granted to each outside
director at exercise prices ranging from $3.06 to $4.94 per share. Options
granted under the Director Plan vest one-third each year for three years and
expire ten years after the date of grant, or, if sooner, three months after the
holder ceases to be a director of the Company (subject to certain exceptions
contained in the Director Plan). At September 30, 1996, 60,000 options were
exercisable pursuant to the Director Plan.
The total number of shares and type of security subject to these plans and to
any awards under these plans are subject to adjustment in the case of stock
splits, stock dividends and similar actions by the Company.
27
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, to the best knowledge of the
Company, as of December 2, 1996 with respect to each person known by the
Company to beneficially own more than 5% of the Company's outstanding Common
Stock, each director and all directors and officers as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
BENEFICIALLY OWNERSHIP
NAME OWNED (1)
- ---- ------------ ----------
<S> <C> <C>
David Williams (2)...................................... 391,936 7.8%
1501 W. Dry Creek Road
Littleton, Colorado 80120
Jeremy G. Dunne (3)..................................... 390,750 7.7%
2686 E. Otero Place
Littleton, Colorado 80122
Dan N. Grothe (4)....................................... 32,000 .64%
6837 South Elizabeth Street
Littleton, Colorado 80122
William Carr (5)........................................ 24,500 .49%
6195 Gharrett
Missoula, Montana 59803
F. James Lynch (6)...................................... 22,000 .44%
27 Blue Heron Drive
Greenwood Village, Colorado 80121
Richard B. Sayford(7)................................... 14,000 .28%
89 Silver Fox Drive
Greenwood Village, Colorado 80121
H. DeWorth Williams (8)................................. 569,157 11.3%
P.O. Box 2148
Park City, Utah 84060
Directors and officers as a group (8 persons) (9)....... 1,711,343 33.0%
</TABLE>
- --------
(1) Percentage ownership is calculated separately for each person on the basis
of the actual number of outstanding shares as of December 2, 1996 and
assumes the exercise of options held by such person (but not by anyone
else) exercisable within sixty days.
(2) Includes 45,500 shares which may be acquired by Mr. Williams pursuant to
the exercise of stock options exercisable within sixty days.
(3) Includes 45,500 shares which may be acquired by Mr. Dunne pursuant to the
exercise of stock options exercisable within sixty days.
(4) Includes 22,000 shares which may be acquired by Mr. Grothe pursuant to the
exercise of stock options exercisable within sixty days.
(5) Includes 20,000 shares which may be acquired by Mr. Carr pursuant to the
exercise of stock options exercisable within sixty days.
(6) Includes 20,000 shares which may be acquired by Mr. Lynch pursuant to the
exercise of stock options exercisable within sixty days.
(7) Includes 10,000 shares which may be acquired by Mr. Sayford pursuant to
the exercise of stock options exercisable within sixty days.
(8) Includes 20,000 shares which may be acquired by Mr. Williams pursuant to
the exercise of stock options exercisable within sixty days.
(9) Includes 267,000 shares which may be acquired by the Company's officers or
directors within sixty days pursuant to the exercise of stock options at
various prices.
28
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:
1. FINANCIAL STATEMENTS.
The consolidated financial statements included in this item are indexed on
page F-1 "Index to Consolidated Financial Statements."
2. FINANCIAL STATEMENT SCHEDULES AND SUPPLEMENTARY INFORMATION REQUIRED TO
BE SUBMITTED.
<TABLE>
<C> <S> <C>
Schedule II Valuation and Qualifying Accounts...................... S-1
</TABLE>
Schedules other than those listed above are omitted for the reason that they
are not required or are not applicable, or the required information is shown in
the financial statements or notes thereto.
29
<PAGE>
3. EXHIBIT LIST
The following exhibits are filed herewith or are incorporated by reference
to exhibits previously filed with the Securities Exchange Commission. The
Company shall furnish copies of exhibits for a reasonable fee (covering the
expense of furnishing copies) upon request.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT NAME
----------- ------------
<C> <S>
*3.1 Articles of Incorporation and All Amendments Pertaining Thereto
*3.2 By-Laws of Registrant
*4.1 Specimen Common Stock Certificates of Registrant
*10.1 Promissory Note, Secured Note and Warrant Agreement dated as of
February 21, 1991 between Registrant and Plaza Resources Company
*10.2 Amendment to the Promissory Note, Secured Note and Warrant
Agreement dated as of October 24, 1991 between the Registrant and
Plaza Resources Company
*10.3 Letter Agreement dated July 17, 1992 between Registrant and Plaza
Resources Company Including Amendments dated September 23, 1992,
December 1, 1992, December 22, 1992, and January 7, 1993
*10.4 Lease Agreement for Registrant's Principal Place of Business
*10.5 Non-Competition and Secrecy Agreement dated July 15, 1990 between
Registrant and David Williams, President of Registrant
*10.6 Non-Competition and Secrecy Agreement dated July 15, 1990 between
Registrant and Jeremy Dunne, Vice President of Registrant
*10.7 Employment Agreement between Registrant and David Williams
*10.8 Employment Agreement between Registrant and Jeremy Dunne
*10.9 Non-Disclosure/Confidentiality Agreement between Registrant and
Certain Other Key Employees
*10.13 Distribution Agreement with Tele-Traffic A/S (Formerly Tele-Signal
A/S)
**10.14 Amendment to Lease to Include New Facility
***10.15 Employee Stock Option Plan
***10.16 Non-Employee Director Plan
27.1 Financial Data Schedule
</TABLE>
- --------
* Incorporated by reference to the Company's Form S-1 registration statement,
file no. 1-11642.
** Incorporated by reference to the Company's Form 10-K for the fiscal year
ended September 30, 1993.
*** Incorporated by reference to the Company's Form 10-Q for the period ended
June 30, 1994.
(B) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed by the Registrant during the quarter ended
September 30, 1996.
30
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 AND 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.
Laser Technology, Inc.
/s/ David Williams
December 23, 1996 By __________________________________
David Williams
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED:
<TABLE>
<S> <C> <C>
/s/ David Williams President and Chief December 23, 1996
- ------------------------------------ Executive Officer and
David Williams Director
/s/ Jeremy Dunne Vice President and Director December 23, 1996
- ------------------------------------
Jeremy Dunne
/s/ Pamela Sevy Treasurer, Chief Financial December 23, 1996
- ------------------------------------ Officer and Principal
Pamela Sevy Accounting Officer
/s/ Dan N. Grothe Secretary and Director December 23, 1996
- ------------------------------------
Dan N. Grothe
/s/ William Carr Director December 23, 1996
- ------------------------------------
William Carr
/s/ F. James Lynch Director December 23, 1996
- ------------------------------------
F. James Lynch
/s/ Richard B. Sayford Director December 23, 1996
- ------------------------------------
Richard B. Sayford
/s/ H. DeWorth Williams Director December 23, 1996
- ------------------------------------
H. DeWorth Williams
</TABLE>
31
<PAGE>
LASER TECHNOLOGY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants...................... F-2
Consolidated Balance Sheets............................................. F-3
Consolidated Statements of Operations................................... F-4
Consolidated Statements of Stockholders' Equity......................... F-5
Consolidated Statements of Cash Flows................................... F-6
Summary of Accounting Policies.......................................... F-7-F-8
Notes to Consolidated Financial Statements.............................. F-9-F-14
Financial Statement Schedule--
Schedule II--Valuation and Qualifying Accounts........................ S-1
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
Laser Technology, Inc.
Englewood, Colorado
We have audited the accompanying consolidated balance sheets of Laser
Technology, Inc. and subsidiaries as of September 30, 1996 and 1995 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1996. We
have also audited the schedule listed in the accompanying index. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements and schedule based on our audits.
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 and
schedule are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and schedule. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statement and schedule.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Laser
Technology, Inc. and subsidiaries at September 30, 1996 and 1995 and the
results of their operations and their cash flows for each of the three years
in the period ended September 30, 1996 in conformity with generally accepted
accounting principles.
Also, in our opinion, the schedule presents fairly, in all material
respects, the information set forth therein.
BDO Seidman, LLP
Denver, Colorado
November 13, 1996
F-2
<PAGE>
LASER TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1996 1995
ASSETS ----------- -----------
------
<S> <C> <C>
Current:
Cash and cash equivalents.......................... $ 2,247,239 $ 1,593,521
Investments........................................ 600,000 2,381,187
Trade accounts receivable (Note 6), less allowance
of $10,000 for doubtful accounts.................. 2,764,325 1,657,530
Inventories (Note 1)............................... 2,577,635 2,293,606
Deferred income tax benefit (Note 4)............... 52,000 46,000
Prepaids and other current assets.................. 428,079 271,122
----------- -----------
Total current assets............................. 8,669,278 8,242,966
Property and equipment, net of accumulated
depreciation and amortization (Note 2)............ 1,113,274 582,714
Long-term investments.............................. 611,273 --
Other assets....................................... 269,634 172,615
----------- -----------
$10,663,459 $ 8,998,295
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current:
Accounts payable................................... $ 723,178 $ 279,490
Accrued expenses................................... 247,426 129,113
----------- -----------
Total current liabilities........................ 970,604 408,603
----------- -----------
Commitments (Note 5)
Stockholders' equity (Note 3):
Common stock, $.01 par value-shares authorized
25,000,000; shares issued 5,088,201 and 5,078,368. 50,882 50,784
Additional paid-in capital......................... 9,623,980 9,584,287
Treasury stock at cost, 88,768 shares.............. (17,535) (17,535)
Retained earnings (deficit)........................ 35,528 (1,027,844)
----------- -----------
Total stockholders' equity....................... 9,692,855 8,589,692
----------- -----------
$10,663,459 $ 8,998,295
=========== ===========
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-3
<PAGE>
LASER TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net sales (Note 6)............................ $9,306,777 $8,225,776 $5,303,299
Less cost of goods sold....................... 4,241,389 3,864,473 2,527,322
---------- ---------- ----------
Gross profit.................................. 5,065,388 4,361,303 2,775,977
Royalty and licensing income.................. 401,121 -- --
---------- ---------- ----------
Total operating income........................ 5,466,509 4,361,303 2,775,977
Operating expenses.......................... 4,058,908 3,431,694 2,766,426
---------- ---------- ----------
Income from operations........................ 1,407,601 929,609 9,551
Interest income, net.......................... 235,771 157,523 86,555
---------- ---------- ----------
Income before taxes on income................. 1,643,372 1,087,132 96,106
Taxes on income (Note 4)...................... 580,000 383,000 37,000
---------- ---------- ----------
Net income.................................... $1,063,372 $ 704,132 $ 59,106
========== ========== ==========
Income per common share....................... $ 0.20 $ 0.14 $ 0.01
========== ========== ==========
Weighted average shares outstanding........... 5,209,981 4,989,600 5,008,381
========== ========== ==========
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-4
<PAGE>
LASER TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
----------------- PAID-IN TREASURY EARNINGS
SHARES AMOUNT CAPITAL STOCK (DEFICIT) TOTAL
--------- ------- ---------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 1,
1993................... 5,077,650 $50,777 $9,519,489 $ (17,689) $(1,791,082) $7,761,495
Stock issued for
services primarily at
$4.00 per share...... 718 7 64,798 154 -- 64,959
Net income for the
year................. -- -- -- -- 59,106 59,106
--------- ------- ---------- --------- ----------- ----------
Balance, September 30,
1994................... 5,078,368 50,784 9,584,287 (17,535) (1,731,976) 7,885,560
Net income for the
year................. -- -- -- -- 704,132 704,132
--------- ------- ---------- --------- ----------- ----------
Balance, September 30,
1995................... 5,078,368 50,784 9,584,287 (17,535) (1,027,844) 8,589,692
Exercised stock op-
tions................ 9,833 98 39,693 -- -- 39,791
Net income for the
year................. -- -- -- -- 1,063,372 1,063,372
--------- ------- ---------- --------- ----------- ----------
Balance, September 30,
1996................... 5,088,201 $50,882 $9,623,980 $ (17,535) $ 35,528 $9,692,855
========= ======= ========== ========= =========== ==========
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-5
<PAGE>
LASER TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Operating activities:
Net income............................... $1,063,372 $ 704,132 $ 59,106
Adjustments to reconcile net income to
cash provided by (used in) operating ac-
tivities:
Depreciation and amortization........... 184,119 179,620 141,023
Deferred income taxes................... (6,000) 257,000 7,000
Stock issued for services............... -- -- 64,959
Changes in operating assets and liabili-
ties:
Trade accounts receivable.............. (1,106,795) 590,934 (766,563)
Refundable income taxes................ -- -- 108,000
Inventories............................ (284,029) (896,209) 254,677
Other assets........................... (160,458) 433 14,301
Accounts payable and accrued expenses.. 511,465 127,829 82,821
---------- ---------- ----------
Cash provided by (used in) operating
activities................................ 201,674 963,739 (34,676)
---------- ---------- ----------
Investing activities:
Purchases of property and equipment...... (632,437) (74,894) (208,497)
Purchases of investments................. (631,117) (2,370,538) (2,684,144)
Proceeds from sale of investments........ 1,801,031 2,058,916 2,811,515
Patent costs paid........................ (115,761) (83,573) (40,582)
---------- ---------- ----------
Cash provided by (used in) investing activ-
ities..................................... 421,716 (470,089) (121,708)
---------- ---------- ----------
Financing activities:
Payments on long-term debt............... (9,463) (200,129) (54,628)
Proceeds from exercise of stock options.. 39,791 -- --
---------- ---------- ----------
Cash provided by (used in) financing activ-
ities..................................... 30,328 (200,129) (54,628)
---------- ---------- ----------
Increase (decrease) in cash and cash equiv-
alents.................................... 653,718 293,521 (211,012)
Cash and cash equivalents, beginning of
year...................................... 1,593,521 1,300,000 1,511,012
---------- ---------- ----------
Cash and cash equivalents, end of year..... $2,247,239 $1,593,521 $1,300,000
========== ========== ==========
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-6
<PAGE>
LASER TECHNOLOGY, INC.
SUMMARY OF ACCOUNTING POLICIES
PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements presented are those of Laser
Technology, Inc. (the "Company") and its wholly-owned subsidiaries, Laser
Communications, Inc., Laser Technology, U.S.V.I., and International
Measurement and Control Company. All significant intercompany transactions
have been eliminated. Laser Technology, Inc. is engaged in the business of
developing, manufacturing, and marketing laser based measurement instruments.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments including cash and cash
equivalents, investments, trade accounts receivable, accounts payable and
accrued expenses approximated fair value because of the immediate or short-
term maturity of these instruments.
INVESTMENTS
The Company accounts for marketable securities in accordance with Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities". All marketable equity and debt securities have
been categorized as available for sale as the Company does not have the
positive intent to hold to maturity or does not intend to trade actively.
These securities are stated at fair value which approximates cost.
At September 30, 1996 and 1995 investments consisted of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Current:
U.S. Government Obligations...................... $ 600,000 $2,381,187
Non-current:
Municipal Bonds.................................. 611,273 --
---------- ----------
$1,211,273 $2,381,187
========== ==========
</TABLE>
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined by
the first-in, first out (FIFO) method.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using straight-line and accelerated methods over the
estimated useful lives of the related assets, primarily from five to seven
years.
F-7
<PAGE>
LASER TECHNOLOGY, INC.
SUMMARY OF ACCOUNTING POLICIES--CONCLUDED
RESEARCH AND DEVELOPMENT COSTS
Research and development costs related to the Company's laser measurement
instruments are expensed as incurred and included in operating expenses.
Research and development costs totalled $514,000, $363,000 and $273,000 for
the years ended September 30, 1996, 1995 and 1994.
TAXES ON INCOME
Under the provisions of SFAS No. 109, the Company's policy is to provide
deferred income taxes related to property and equipment, inventories and other
items that result in differences between the financial reporting and tax basis
of assets and liabilities.
INCOME PER SHARE
Income per share is computed using the weighted average number of common and
common equivalent shares outstanding during each period. Common stock options
and warrants are included as common stock equivalents when dilutive.
REVENUE RECOGNITION
Revenue is recognized upon shipment of goods to the customer. The Company's
general sales terms allow for a 1% discount in 10 days/net 30 days. Other than
to customers deemed creditworthy, international sales primarily require
immediate payment or a letter of credit (See Note 6). Royalties and licensing
fees are recorded as earned in accordance with specific terms of each license
agreement.
STATEMENT OF CASH FLOWS
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents. At September 30, 1996 and 1995, cash and cash equivalents
included money market and mutual fund accounts of approximately $2,077,000 and
$817,000.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has recently issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets" and SFAS No. 123, "Accounting for Stock Based
Compensation". SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reported at the lower of the carrying amount or
their estimated recoverable amount and the adoption of this statement by the
Company is not expected to have an impact on the financial statements. SFAS
No. 123 encourages the accounting for stock-based employee compensation
programs to be reported within the financial statements on a fair value based
method. If the fair value based method is not adopted, then the statement
requires pro-forma disclosure of net income and earnings per share as if the
fair value based method had been adopted. The Company has not yet determined
how SFAS No. 123 will be adopted nor its impact on the financial statements.
Both statements are effective for fiscal years beginning after December 15,
1995.
F-8
<PAGE>
LASER TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1996 1995
---------- ----------
<S> <C> <C>
Finished goods........................................... $ 710,027 $ 499,976
Work-in-process.......................................... 785,339 822,649
Raw materials and supplies............................... 1,082,269 970,981
---------- ----------
$2,577,635 $2,293,606
========== ==========
</TABLE>
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1996 1995
---------- ---------
<S> <C> <C>
Shop equipment............................................ $ 691,885 $ 612,548
Office equipment.......................................... 479,843 210,371
Leasehold improvements.................................... 335,069 206,791
Automobiles............................................... 214,841 98,509
Furniture/fixtures........................................ 127,504 49,019
---------- ---------
1,849,142 1,177,238
Less accumulated depreciation and amortization............ 735,868 594,524
---------- ---------
$1,113,274 $ 582,714
========== =========
</TABLE>
Depreciation expense was $161,877, $163,610 and $130,831 for the years ended
September 30, 1996, 1995 and 1994.
3. STOCKHOLDERS' EQUITY
PUBLIC OFFERING
During January 1993, the Company completed a public offering consisting of
the sale of 1,552,000 units at an offering price of $5.00 per unit. Each unit
consisted of one share of the Company's common stock and one redeemable
warrant. Each redeemable warrant entitles the holder to purchase one share of
common stock upon the payment of $6.00, subject to adjustment, until January
11, 1998. The redeemable warrants are subject to redemption. The securities
comprising the units are currently separate and transferable.
As part of the public offering, the Company sold to the underwriter
nonredeemable warrants to purchase 138,000 units. Each nonredeemable warrant
allows for purchase of one share of common stock and one redeemable warrant,
upon the payment of $8.25, subject to adjustment, until January 11, 1998. The
redeemable warrants exercisable under these underwriter's warrants are
exercisable at $9.90 per share and are identical to the redeemable warrants
issued with the units under the public offering.
Additionally, in connection with the offering, the Company sold to an
unrelated partnership, 100,000 redeemable warrants at a price of $.10 per
warrant.
F-9
<PAGE>
LASER TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CAPITAL STOCK
At September 30, 1996, the Company had 3,214,250 common shares reserved or
available for issuance as follows:
<TABLE>
<S> <C>
Common Shares:
Equity Incentive Plan............................................... 530,000
Non-Employee Director Stock Option Plan............................. 120,000
Unqualified stock option agreements................................. 120,000
Warrants:
Redeemable warrants................................................. 1,652,000
PRC warrants........................................................ 356,250
Underwriter's nonredeemable warrants................................ 276,000
Laser Partners' warrants............................................ 160,000
---------
3,214,250
=========
</TABLE>
PRC WARRANTS
Under a previously existing loan agreement, the Company granted Plaza
Resources Company ("PRC") the right to purchase specified quantities of
defined products at the Company's cost, as well as granting PRC warrants to
purchase shares of the Company's stock. The warrant agreement grants PRC the
right to purchase a total of 356,250 shares of common stock at $3.00 per share
for a ten year period. See summary of accounting policies for treatment of
warrants in computation of earnings per share.
EQUITY INCENTIVE PLAN
In 1994, the Company terminated its previous Employee Stock Incentive Plan
and adopted an Equity Incentive Plan (the "Employee Plan") for the purpose of
providing key employees and consultants with added incentives to continue in
the service of the Company and to create in such employees and consultants a
more direct interest in the future operations of the Company. The Employee
Plan permits the grant of stock options, restricted stock awards, stock
appreciation rights, stock units and other grants to all of the Company's
eligible employees and consultants.
The Employee Plan is administered by the Compensation Committee of the Board
of Directors. The committee has the authority to determine the employees or
consultants to whom awards will be made, the amount of the awards, and the
other terms and conditions of the awards.
The grant of stock options under the Employee Plan is intended either to
qualify as "incentive stock options" under the Internal Revenue Code or "non-
qualified options" not intended to qualify. Stock options are granted at a
price not less than 100% of the fair market value on the date the option is
granted.
Under the Employee Plan 530,000 shares of the Company's common stock are
reserved for issuance. Options granted to employees vest at the rate of one-
third per year and are fully vested after three years of continuous employment
from the date of grant. During the year ended September 30, 1996, options to
purchase 9,833 shares of common stock were exercised. As of September 30,
1996, options to purchase 506,500 shares of the Company's common stock were
outstanding, at exercise prices ranging from $3.50 to $5.25 per share of which
297,584 options were exercisable at September 30, 1996.
F-10
<PAGE>
LASER TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
In 1994, the Company adopted a Non-Employee Director Stock Option Plan (the
"Director Plan") for the purpose of providing non-employee directors with
added incentives to continue in the service of the Company and a more direct
interest in the future operations of the Company.
Under the terms of the Director Plan, non-employee directors on the
effective date of the Director Plan and each non-employee director elected
thereafter shall receive options to purchase 30,000 shares of common stock.
Stock options are granted at a price not less than 100% of the fair market
value on the date the option is granted.
Under the Director Plan 120,000 shares of the Company's common stock are
reserved for issuance. Such options granted to non-employee directors of the
Company vest at the rate of one-third per year and are fully vested after
three years of continuous service from the date of grant. As of September 30,
1996 options to purchase 120,000 shares of the Company's common stock were
outstanding at exercise prices ranging from $3.06 to $4.94 per share of which
60,000 options were exercisable at September 30, 1996.
UNQUALIFIED STOCK OPTIONS
In April 1992 the Company granted options to purchase an aggregate of
120,000 shares of its common stock to three employees for services rendered.
Under the terms of the options, the employee may exercise his/her options at
the price of $3.00 per share over a three year period beginning April 3, 1994,
provided that he/she remain employed by the Company. If the Company's common
stock is trading at a price greater than $3.00 per share, the Company has the
option to purchase up to 50% of the Common Stock acquired by the employee
exercising his/her options at a price equal to the difference between the
current market price and the exercise price.
The following is a summary of option activity:
<TABLE>
<CAPTION>
NUMBER OPTION PRICE
OF SHARES PER SHARE EXPIRATION
--------- -------------- ----------------------
<S> <C> <C> <C>
Options outstanding at
September 30, 1994............ 696,250 $3.00 to $4.25
Options granted................ 77,250 $3.06 to $4.94 June 2005
Options canceled or expired.... (44,000) $4.25
------- --------------
Options outstanding at
September 30, 1995............ 729,500 $3.00 to $4.94
Options granted................ 37,000 $3.75 to $5.25 Nov. 2005 to Aug 2006
Options exercised.............. (9,833) $3.75 to $4.25
Options canceled or expired.... (10,167) $3.75 to $4.25
------- --------------
Options outstanding at
September 30, 1996 ........... 746,500 $3.00 to $5.25 April 1997 to Aug 2006
======= ==============
Options exercisable at
September 30, 1996............ 477,584 $3.00 to $5.25
======= ==============
</TABLE>
4. TAXES ON INCOME
For the years ended September 30, 1996, 1995 and 1994 the provision for
federal and state income taxes consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Current:
Federal............................................ $541,000 $114,000 $ --
State.............................................. 45,000 12,000 --
Deferred:
Federal............................................ (6,000) 230,000 33,000
State.............................................. -- 27,000 4,000
-------- -------- -------
$580,000 $383,000 $37,000
======== ======== =======
</TABLE>
F-11
<PAGE>
LASER TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company believes that it is more likely than not that it will realize
the deferred tax asset. Therefore, no valuation allowance has been provided.
A reconciliation of income taxes at the federal statutory rate to the
effective tax rate is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Income taxes computed at the federal statutory rate. $559,000 $370,000 $32,000
State income taxes, net of federal benefit.......... 42,000 8,000 3,000
Other............................................... (21,000) 5,000 2,000
-------- -------- -------
Taxes on income..................................... $580,000 $383,000 $37,000
======== ======== =======
</TABLE>
The types of temporary differences between the tax basis of assets and
liabilities that give rise to a significant portion of the deferred tax asset
and their approximate tax effect are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------
1996 1995
------- -------
<S> <C> <C>
Future deductions:
Inventories (Uniform Capitalization Rules)................... $49,000 $31,000
Other........................................................ 3,000 15,000
------- -------
$52,000 $46,000
======= =======
</TABLE>
5. COMMITMENTS
EMPLOYMENT AGREEMENTS
The Company has employee agreements with its President and Vice-President.
The agreements which expire in 1997, provide for base salary and increases at
the discretion of the Board of Directors. Each employment agreement prohibits
the individual from directly or indirectly competing with the Company for a
period of three years following termination of employment.
FACILITY LEASES
The Company has various operating lease agreements for office and
manufacturing facilities that expire through May 31, 2003. Rent expense under
operating lease agreements was $119,000, $93,000 and $66,000 for the years
ended September 30, 1996, 1995 and 1994.
As of September 30, 1996 future minimum lease payments under operating lease
agreements are as follows:
<TABLE>
<S> <C>
1997................................................................. $120,000
1998................................................................. 111,000
1999................................................................. 107,000
2000................................................................. 114,000
2001................................................................. 122,000
Thereafter........................................................... 255,000
--------
$829,000
========
</TABLE>
F-12
<PAGE>
LASER TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. CUSTOMERS, EXPORT SALES AND CONCENTRATIONS OF CREDIT RISK
The Company operates primarily in one industry segment which includes the
manufacturing and marketing of laser speed and distance measurement
instruments.
Financial instruments which potentially subject the Company to concentrations
of credit risk consist primarily of cash and cash equivalents, investments, and
trade accounts receivable.
The Company invests temporary cash in demand deposits, certificates of
deposit, money market accounts and mutual funds with quality financial
institutions and in securities backed by the United States government. Such
deposit accounts at times may exceed federally insured limits. The Company has
not experienced any losses in such accounts.
The Company markets its laser measurement instruments to three major classes
of customers. The Company's trade accounts receivable subject to credit risk
from those customers are as follows at September 30, 1996:
<TABLE>
<S> <C>
Foreign distributors (a)............................................ $1,957,903
State and local municipalities (b).................................. 493,310
U.S. government agencies (c)........................................ 156,169
Other receivables................................................... 166,943
----------
2,774,325
Less allowance for doubtful accounts................................ 10,000
----------
$2,764,325
==========
</TABLE>
- --------
(a) To date, the Company's foreign sales are transacted primarily through
distributors. Generally, foreign sales require immediate payment or
establishment of a letter of credit. As discussed below, sales to two
different foreign distributors individually accounted for 12% of sales in
1996 and 15% of sales in 1994.
(b) The Company's domestic sales of its laser speed instruments have been
primarily to state and local law enforcement agencies. These agencies are
dispersed across geographic areas.
(c) Domestically, the Company's sales of its laser distance measurement systems
have been to U.S. Governmental agencies.
For the year ended September 30, 1996, one customer accounted for 12% of
sales. For the year ended September 30, 1995, no single customer accounted for
more than 10% of sales. For the year ended September 30, 1994, sales to one
customer accounted for 15% of sales.
A summary of the Company's sales by geographic area is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Foreign sales:
Asia........................................ $2,187,000 $1,540,000 $ 329,000
Europe (primarily Austria in 1995 and 1994). 1,233,000 1,171,000 964,000
Canada...................................... 552,000 680,000 683,000
Australia................................... 326,000 124,000 114,000
Other....................................... 292,777 109,776 266,999
---------- ---------- ----------
Total foreign sales........................... 4,590,777 3,624,776 2,356,999
Domestic sales................................ 4,716,000 4,601,000 2,946,300
---------- ---------- ----------
$9,306,777 $8,225,776 $5,303,299
========== ========== ==========
</TABLE>
The Company has no foreign assets.
F-13
<PAGE>
LASER TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Cash paid during the year for:
Interest............................................ $ 860 $13,197 $13,287
Income taxes........................................ 487,161 90,000 1,510
Non-cash investing activities:
Leasehold improvements acquired in exchange for
debt............................................... -- -- 202,360
Non-cash financing activities:
Common stock and treasury stock issued for services. -- -- 64,959
</TABLE>
F-14
<PAGE>
LASER TECHNOLOGY, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE CHARGED TO BALANCE
AT BEGINNING COSTS AND AT END
OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
------------ ---------- ---------- ---------
<S> <C> <C> <C> <C>
Year Ended September 30, 1994...... $10,000 $ -- $ -- $10,000
Year Ended September 30, 1995...... 10,000 17,254 (17,254) 10,000
Year Ended September 30, 1996...... 10,000 -- -- 10,000
</TABLE>
S-1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 2,247,239
<SECURITIES> 600,000
<RECEIVABLES> 2,774,325
<ALLOWANCES> 10,000
<INVENTORY> 2,577,635
<CURRENT-ASSETS> 8,669,278
<PP&E> 1,849,142
<DEPRECIATION> 735,868
<TOTAL-ASSETS> 10,663,459
<CURRENT-LIABILITIES> 970,604
<BONDS> 0
0
0
<COMMON> 5,088,201
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,663,459
<SALES> 9,306,777
<TOTAL-REVENUES> 9,707,898
<CGS> 4,241,389
<TOTAL-COSTS> 6,374,195
<OTHER-EXPENSES> 1,926,102
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,643,372
<INCOME-TAX> 580,000
<INCOME-CONTINUING> 1,063,372
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,063,372
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
