<PAGE>
===============================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File No. 1-11642
LASER TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-0970494
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
7070 SOUTH TUCSON WAY, ENGLEWOOD, COLORADO 80112
(Address of principal executive offices)
(303) 649-1000
(Registrant's telephone number including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securiti es Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file su ch reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
At June 30, 1999, 4,994,551 shares of common stock of the Registrant were
outstanding.
===============================================================================
<PAGE>
INDEX
PART I: FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Item 1. Financial Statements.................................................................................. 1
Consolidated Balance Sheets.................................................................. 1
Consolidated Statements of Operations........................................................ 3
Consolidated Statements of Cash Flows........................................................ 4
Notes to Consolidated Financial Statements................................................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................................. 9
Results of Operations....................................................................... 9
Liquidity and Capital Resources............................................................. 11
Year 2000 Compliance........................................................................ 11
Risk Factors and Cautionary Statements...................................................... 11
<CAPTION>
PART II: OTHER INFORMATION
<C> <S> <C>
Item 1. Legal Proceedings.................................................................................... 12
Item 2. Changes in Securities................................................................................ 13
Item 3. Defaults upon Senior Securities...................................................................... 13
Item 4. Submission of Matters to a Vote of Security Holders.................................................. 13
Item 5. Other Information.................................................................................... 13
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LASER TECHNOLOGY, INC.
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,052,927 $ 988,586
Investments - 509,807
Trade accounts receivable, less allowance
for doubtful accounts of $50,000 and $10,000
at June 30, 1999 and September 30, 1998, respectively 2,698,244 3,652,944
Royalties receivable 185,089 424,525
Inventories 3,686,306 3,857,963
Deferred income tax benefit 87,000 87,000
Prepaids and other current assets 586,299 225,476
Income tax recoverable and receivable 223,208 -
----------- -----------
Total Current Assets 8,519,073 9,746,301
----------- -----------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 1,640,747 1,517,416
----------- -----------
LONG-TERM INVESTMENTS 686,031 676,294
----------- -----------
OTHER ASSETS 636,988 575,946
----------- -----------
TOTAL ASSETS $11,482,839 $12,515,957
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements
1
<PAGE>
LASER TECHNOLOGY, INC.
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
----------- -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 558,117 $ 752,417
Accrued expenses 500,931 482,617
Current portion of capital lease payable 22,786 -
Current maturities of long-term debt 76,564 76,564
----------- -----------
Total Current Liabilities 1,158,398 1,311,598
----------- -----------
LONG-TERM DEBT
Capital lease payable, less current portion 43,850 -
Long-term debt, less current maturities 102,789 159,549
----------- -----------
Total Long Term Liabilities 146,639 159,549
----------- -----------
Total Liabilities 1,305,037 1,471,147
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value--shares authorized
2,000,000; shares issued--none - -
Common stock, $.01 par value-shares
authorized 25,000,000; shares issued 5,219,201 52,192 52,192
Additional paid-in capital 9,669,420 9,669,420
Treasury stock at cost, 224,650 shares (194,259) (194,259)
Retained earnings 650,449 1,517,457
----------- -----------
Total Stockholders' Equity 10,177,802 11,044,810
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $11,482,839 $12,515,957
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements
2
<PAGE>
LASER TECHNOLOGY, INC.
Consolidated Statements of Operations
For the Three and Nine Months Ended
June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
June 30, June 30,
--------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 8,720,744 $ 8,078,026 $ 3,379,306 $ 3,260,262
LESS COST OF GOODS SOLD 4,226,536 3,608,960 1,570,282 1,444,422
----------- ----------- ----------- -----------
Gross Profit 4,494,208 4,469,066 1,809,024 1,815,840
ROYALTY AND LICENSING INCOME 546,907 844,399 181,040 293,693
----------- ----------- ----------- -----------
TOTAL OPERATING INCOME 5,041,115 5,313,465 1,990,064 2,109,533
OPERATING EXPENSES 6,389,186 4,258,378 2,285,867 1,501,124
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (1,348,071) 1,055,087 (295,803) 608,409
INTEREST INCOME (EXPENSE), NET 9,463 99,421 (5,178) 11,101
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE TAXES ON INCOME (1,338,608) 1,154,508 (300,981) 619,510
TAXES ON INCOME (BENEFIT) (471,600) 416,000 (107,500) 231,000
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (867,008) $ 738,508 $ (193,481) $ 388,510
=========== =========== =========== ===========
BASIC EARNINGS (LOSS) PER
COMMON SHARE $ (.17) $ .15 $ (.04) $ .08
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 4,994,551 4,995,513 4,994,551 4,986,840
=========== =========== =========== ===========
DILUTED EARNINGS (LOSS) PER
COMMON SHARE $ (.17) $ .15 $ (.04) $ .08
=========== =========== =========== ===========
DILUTED AVERAGE SHARES
OUTSTANDING 4,994,551 4,995,513 4,994,551 4,986,840
=========== =========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements
3
<PAGE>
LASER TECHNOLOGY, INC.
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the Nine Months Ended June 30, 1999
and June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
June 30, June 30,
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (867,008) $ 738,508
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 393,965 253,314
Loss on sale of property and equipment 13,377 -
Deferred income taxes - (6,000)
Changes in operating assets and liabilities:
Trade accounts receivable 954,700 83,490
Inventories 171,657 (981,328)
Other assets (344,429) (111,646)
Accounts payable and accrued expenses (175,986) (46,442)
----------- -----------
Net cash provided by (used in) operating activities 146,276 (70,104)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) decrease in investments 500,070 790,500
Proceeds from sale of property and equipment 32,000 -
Patent costs paid (80,956) (114,122)
Purchases of property and equipment (474,565) (198,473)
----------- -----------
Net cash provided by (used in) investing activities (23,451) 477,905
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt and capital leases (58,484) (52,803)
----------- -----------
Net cash used in financing activities (58,484) (52,803)
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 64,341 354,998
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 988,586 951,945
----------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 1,052,927 $ 1,306,943
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements
4
<PAGE>
LASER TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Information for the three and nine months ended June 30, 1999 is unaudited)
NOTE 1 - Summary of Significant Accounting Policies
a. Basis of Presentation
The consolidated financial statements presented are those of Laser
Technology, Inc. and its wholly-owned subsidiaries; Laser Communications, Inc.,
Laser Technology, U.S.V.I., and International Measurement and Control Company.
Laser Technology, Inc. is presently engaged in the business of developing,
manufacturing and marketing laser based measurement instruments.
In the opinion of management, the unaudited financial statements
reflect all adjustments, consisting only of normal recurring accruals necessary
for a fair presentation of (a) the consolidated statements of operations for the
three and nine month periods ended June 30, 1999 and 1998, (b) the consolidated
financial position at June 30, 1999, and (c) the consolidated statements of
cash flows for the nine month periods ended June 30, 1999 and 1998. The
accounting policies followed by the Company are set forth in the Notes to the
Consolidated Financial Statements of the Company for the fiscal year ended
September 30, 1998. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year.
b. Earnings Per Share
Through December 31, 1997, the Company followed the provisions of
Accounting Principles Board Opinion ("APB") 15, "Earnings Per Share." Effective
for the quarter ended June 30, 1998, the Company implemented Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS No.
128 provides for the calculation of "Basic" and "Diluted" earnings per share.
Basic earnings per share includes no dilution and is computed by dividing
income available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share reflects
the potential dilution of securities that could share in the earnings of an
entity that were outstanding for the period, similar to fully diluted earnings
per share. All prior period earnings per share data has been restated to
reflect the requirements of SFAS No. 128.
The following is provided to reconcile the earnings per share
calculation:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
June 30, June 30,
------------------------------------ ------------------------------
1999 1998 1999 1998
--------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Basic Earnings Per Common Share:
Numerator
Net Income (Loss) $ (867,008) $ 738,508 $ (193,481) $ 388,510
Denominator
Weighted Average Shares 4,994,551 4,995,513 4,994,551 4,986,840
-------------- ------------- ------------ ------------
Per Share Amounts
Basic Earnings (Loss) $ (.17) $ .15 $ (.04) $ .08
============== ============= ============ ============
</TABLE>
For the three and nine month periods ended June 30, 1999 and 1998 the
calculation for diluted earnings per common share was the same as presented for
basic earnings per common share.
5
<PAGE>
NOTE 1 - Summary of Significant Accounting Policies (Continued)
c. Operating Segments
The Company's primary operating segments for the three and nine months
ended June 30, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1999
------------------
Traffic Safety Survey/Mapping Other Royalties Total
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales........................................... $ 2,290,547 $ 934,941 $ 153,818 $ 3,379,306
Cost of goods sold.................................. 1,055,290 470,442 44,550 1,570,282
Sales and marketing expenses........................ 457,932 369,631 24,866 852,429
Gross margin (after sales and marketing expenses)... 777,325 94,868 84,402 956,595
Royalty and licensing income........................ 181,040 181,040
Total other operating expenses...................... 1,433,438
Income (loss) from operations....................... (295,803)
Interest income (expense), net...................... (5,178)
Income (loss) before taxes on income................ (300,981)
Taxes on income (benefit)........................... 107,500
Net income (loss)................................... (193,481)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1998
------------------
Traffic Safety Survey/Mapping Other Royalties Total
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales........................................... $ 2,089,094 $ 1,157,260 $ 13,908 $ 3,260,262
Cost of goods sold.................................. 984,431 448,628 11,363 1,444,422
Sales and marketing expenses........................ 437,754 368,715 39,109 845,578
Gross margin (after sales and marketing expenses)... 666,909 339,917 (36,564) 970,262
Royalty and licensing income........................ 293,693 293,693
Total other operating expenses...................... 655,546
Income from operations............................. 608,409
Interest income, net................................ 11,101
Income before taxes on income....................... 619,510
Taxes on income..................................... 231,000
Net income.......................................... $ 388,510
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
June 30, 1999
-----------------
Traffic Safety Survey/Mapping Other Royalties Total
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales........................................... $ 5,422,126 $ 2,961,391 $ 337,227 $ 8,720,744
Cost of goods sold.................................. 2,580,664 1,507,529 138,343 4,226,536
Sales and marketing expenses........................ 1,506,620 1,216,104 75,758 2,798,482
Gross margin (after sales and marketing expenses)... 1,334,842 237,758 123,126 1,695,726
Royalty and licensing income........................ 546,907 546,907
Total other operating expenses...................... 3,590,704
Income (loss) from operations....................... (1,348,071)
Interest income, net................................ 9,463
Income (loss) before taxes on income................ (1,338,608)
Taxes on income (benefit)........................... (471,600)
Net income (loss)................................... $ (867,008)
</TABLE>
6
<PAGE>
NOTE 1 - Summary of Significant Accounting Policies (Continued)
<TABLE>
<CAPTION>
Nine Months Ended
June 30, 1998
-----------------
Traffic Safety Survey/Mapping Other Royalties Total
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales........................................... $ 5,096,359 $ 2,598,944 $ 382,723 $ 8,078,026
Cost of goods sold.................................. 2,310,033 1,140,599 158,328 3,608,960
Sales and marketing expenses........................ 1,200,073 1,010,808 104,075 2,314,956
Gross margin (after sales and marketing expenses)... 586,253 447,537 120,320 2,154,110
Royalty and licensing income........................ 844,399 844,399
Total other operating expenses...................... 1,943,422
Income from operations.............................. 1,055,087
Interest income, net................................ 99,421
Income before taxes on income....................... 1,154,508
Taxes on income..................................... 416,000
Net income.......................................... $ 738,508
</TABLE>
d. Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" and
Statement of Financial Accounting Standards No. 129 "Disclosures of Information
About an Entity's Capital Structure ." SFAS No. 128 provides a different method
of calculating earnings per share than was previously used in accordance with
APB Opinion No. 15, "Earnings Per Share." SFAS No. 128 provides for the
calculation of "Basic" and "Diluted" earnings per share. Basic earnings per
share includes no dilution and is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities that could share in the earnings of an entity, similar to fully
diluted earnings per share. SFAS No. 129 establishes standards for disclosing
information about an entity's capital structure. SFAS No. 128 and SFAS No. 129
are effective for financial statements issued for periods ending after December
15, 1997. In fiscal 1998, the Company adopted SFAS No. 128 and No. 129, neither
of which had a material impact on the Company's financial statements.
The Financial Accounting Standards Board has also issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 130 establishes standards
for reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and distributions to
owners. Among other disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that displays with the
same prominence as other financial statements. SFAS No. 131 supersedes SFAS No.
14 "Financial Reporting for Segments of a Business Enterprise." SFAS No. 131
establishes standards on the way that public companies report financial
information about operating segments in annual financial statements and requires
reporting of selected information on about operating segments in interim
financial statements issued to the public. It also establishes standards for
disclosure regarding products and services, geographic areas and major
customers. SFAS No. 131 defines operating segments as components of a company
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to allocate
resources and in assessing performance. The implementation of SFAS No. 130 and
131 did not have a material effect on the Company's financial statements.
In February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard SFAS No. 132, "Employers'
Disclosures About Pensions and Other Postretirement Benefits" which standardizes
the disclosure requirements for pensions and other Postretirement benefits and
requires additional information on changes in the benefit obligations and fair
values of plan assets that will facilitate financial analysis. SFAS No. 132 is
effective for years beginning after December 15, 1997 and requires comparative
information for earlier years to be restated, unless such information is not
readily available. The implementation of these accounting pronouncements had no
material impact on the Company's financial statements.
7
<PAGE>
NOTE 1 - Summary of Significant Accounting Policies (Concluded)
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires companies to record
derivatives as assets or liabilities, measured at fair market value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hed ge accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving offsetti ng changes
in fair value or cash flows. SFAS No. 133 is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Management believes the adoption
of this statement will have no material impact on the Company's financial
statements.
NOTE 2 - Subsequent Events
In August, 1999 the Company acquired all right, title and interest to
technology which can be used for mounting a laser in to a tank for liquid level
measurement (the Technology). In connection with the acquisition, the Company
formed a wholly owned Canadian corporate subsidiary, Light Solutions Research,
Inc., for the purpose of carrying out engineering research and development
servic es relevant to development and sale of products utilizing the Technology.
8
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Three and Nine Months Ended June 30, 1999 and June
30, 1998
For the three and nine month fiscal periods ended June 30, 1999 and
1998, the following table provides the percentage relationship to net sales of
principal items in the Company's Consolidated Statements of Operations. It
should be noted that percentages discussed throughout this analysis are stated
on an approximate basis.
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
June 30, June 30,
----------------- ------------------
1999 1998 1999 1998
------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales 100% 100% 100% 100%
Cost of goods sold 48 45 46 44
------- -------- -------- --------
Gross profit 52 55 54 56
Royalty and licensing income 6 10 5 9
------- -------- -------- --------
Total operating income 58 65 59 65
Operating expenses 73 52 68 46
------- -------- -------- --------
Income from operations (15) 13 (9) 19
Interest income, net - 1 - -
------- -------- -------- --------
Income before taxes on income (15) 14 (9) 19
Tax benefit (expense) 5 (5) 3 (7)
------- -------- -------- --------
Net income (10)% 9% (6)% 12%
======= ======== ======== ========
</TABLE>
Revenues
The following sales analysis provides information as to the percentage
of net sales of the Company's primary product lines. Revenues realized from
sales of the Company's less significant revenue producing product lines are
classified as "Other" for presentation purposes.
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
June 30, June 30,
------------------------------- -------------------------------
1999 1998 1999 1998
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Traffic Safety Systems $ 5,422,126 $ 5,096,359 $ 2,290,547 $ 2,089,094
Percentage of revenues 62% 63% 68% 64%
Survey and Mapping Systems 2,961,391 2,598,944 934,941 1,157,260
Percentage of revenues 34% 32% 28% 36%
Other 337,227 382,723 153,818 13,908
Percentage of revenues 4% 5% 4% -%
Total Revenues $ 8,720,744 $ 8,078,026 $ 3,379,306 $ 3,260,262
============== =============== ============== ===============
</TABLE>
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Total revenues for the third quarter ended June 30, 1999 ("1999")
increased 4% to $3,379,306 from $3,260,262 realized in the second quarter ended
June 30, 1998 ("1998"). Net sales for the first nine months of 1999 were
$8,720,744 compared to $8,078,026 realized during the first nine months of 1998
representing an 8% increase in revenues from the previous year.
Traffic Safety sales during the 1999 third quarter increased 10% to
$2,290,547 from $2,089,094 realized in the prior year period and increased 6%
during the first nine months of 1999 to $5,422,126 compared to $5,096,359
realized in the first nine months of 1998. Sales of the Company's Survey and
Mapping products decreased approximately 19% to $934,941 as compared to
$1,157,260 realized in the 1998 third quarter. On a year to year basis, the
Company's Survey and Mapping sales have increased 14% to $2,961,391 for the
first nine months of 1999 compared to $2,598,944 realized in the comparable 1998
period. Management believes the improved revenue effects of personnel changes
in its North American sales force will be felt late in 1999 as the transition to
new sales management and territory personnel is completed.
International sales comprised 31% and 39% of net sales for the third
quarter and first nine months of 1999 as compared to 36% and 43% for the
corresponding 1998 periods. Historically, the Company experiences quarterly
fluctuations in foreign sales due to the placement of typically large orders
for the Company's Traffic Safety products. Foreign sales of the Company's
products are expected to continue to comprise a significant portion of the
Company's revenues.
Gross profit as a percentage of net sales was 54% and 52% for the third
quarter and first nine months of 1999 compared to 56% and 55% for the third
quarter and first nine months of 1998. The change in the Company's gross margin
can be attributed primarily to two factors. There were two large second quarter
bulk sales of first generation products (Criterion and Marksman) at lower gross
margins. Management also increased the Company's inventory obsolescence reserve
during the 1999 second quarter to accommodate slower moving first generation
product components. Sales of next generation products at higher gross margins
are expected to strengthen through the remainder of fiscal 1999.
Royalty and licensing income from the Company's licensees was $181,040
in the third quarter of 1999 compared to $293,693 in 1998, representing
approximately a 38% decrease. On a year to year basis, royalties fell 35% to
$546,907 in 1999 from $844,399 realized in 1998. Management believes that the
primary licensee of the Company's technology, Bushnell, experienced competitive
pressure during early 1999 due to competitors exiting the market and depleting
remaining inventories by discounting their sale prices which contributed to a
decline in royalty income during the second and third quarters of fiscal 1999.
Additionally, Bushnell has been transitioning to several new products. The
positive impact of these new products on royalty income is expected to begin
late in fiscal 1999. Management believes that royalty income related to the
Company's licensing agreement with Bushnell, and its various other licensing
agreements, will continue to beneficially impact the Company's operating
results.
Total operating expenses increased approximately 52% to $2,285,867 for
the 1999 third quarter from $1,501,124 for the comparable 1998 period, and 50%
to $6,389,186 for the first nine months of 1999 from $4,258,378 for the first
nine months of 1998. As a percentage of net sales, total operating expenses
increased to 68% for the third quarter of 1999 from 46% for the third quarter
of 1998, and to 73% for the first nine months of 1999 from 52% for the first
nine months of 1998. The increase in operating expenses primarily relates to
accounting and legal fees, in the amount of $259,972 and $807,039 for the third
quarter and nine months ended June 30, 1999, respectively (See Part II, Item 1),
and additional personnel costs largely in engineering and research and
development. The Company also incurred additional increases in health insurance
costs and facility rent.
In May 1999, an operational restructuring was completed reducing
employee count by 8% and refocusing efforts in core market segments. As a part
of this restructuring, the Company ceased marketing efforts of its Ship Docking
Systems product as well as its Automated Traffic Systems products and services.
The Company will continue to participate in these businesses through the sale of
laser devices to other systems and services providers.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Due to increased operating expenses and lower royalty income, the
Company realized a loss from operations of $295,803 compared to income from
operations of $608,409 realized in the second quarter of 1998 and a loss from
operations of $1,348,071 for the first nine months of 1999 compared to income
from operations of $1,055,087 realized in the 1998 period. After tax benefits on
losses, the Company realized a net loss of $193,481 in the third quarter of
1999, or $.04 basic loss per share, compared to net income of $388,510 in 1998,
or $.08 basic earnings per share and a net loss of $867,008 for the first nine
months of 1999, or $.17 basic loss per share, as compared with net income of
$738,508, or $.15 basic earnings per share, for the nine months ended 1998.
Liquidity and Capital Resources
At June 30, 1999, the Company had working capital of $7,360,675. The
Company's present working capital is expected to adequately meet the Company's
needs for at least the next twelve months.
For the nine month period ended June 30, 1999, cash provided by
operating activities was $146,276. A net loss of $867,008 was financed by a
decrease in accounts receivable of $954,700 related to increased collection
efforts. Cash used in investing activities of $23,451 related mainly to
investment maturities of $500,070 of which $474,565 was used for the purchase of
property and equipment and $80,956 for patent related costs. Cash used in
financing activities of $58,484 reduced long-term debt. For the nine month
period ended June 30, 1999, cash and cash equivalents increased by $64,341.
For the nine month period ended June 30, 1998, cash used in operating
activities was $70,104. Net income of $738,508 financed an increase in
inventories of $981,328, primarily related to new product introductions, and
$46,442 was used to reduce accounts payable and accrued expenses. For the
period, the Company realized net cash provided by investing activities of
$477,905 related to investment maturities of $790,500 of which $312,595 was used
for the purchase of property and equipment and patent related costs. For the
nine month period ended June 30, 1998, cash and cash equivalents increased
$354,998.
Year 2000 Compliance
The Company has converted its computer systems to be year 2000
compliant (e.g., to recognize the difference between '99 and '00 as one year
instead of negative 99 years). Management believes that the majority of the
Company's updated computer system is Year 2000 compliant for both information
technology ("IT") and non-IT systems. The Company continues to evaluate Year
2000 compliance and does not anticipate any material expenditures related to the
conversion process.
The Company also continues to evaluate whether it will have Year 2000
issues related to any third parties, with which it has or may have a material
relationship. Management believes that most, if not all third parties with which
the Company has a material relationship, are, or will be Year 2000 compliant.
The Company does not anticipate any material expenditures related to Year 2000
compliance by any third party.
Risk Factors and Cautionary Statements
Forward-looking statements in this report are made pursuant to the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. The Company wishes to advise readers that actual results may differ
substantially from such forward-looking statements. Forward-looking statements
involve risks and uncertainties including but not limited to, continued
acceptance of the Company's products in the marketplace, competitive factors,
potential changes in the budgets of federal and state agencies, compliance with
current and possible future FDA or environmental regulations, and other risks
detailed in the Company's periodic report filings with the Securities and
Exchange Commission.
11
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On February 10, 1999 a securities class action complaint entitled Moshe
Rosenfeld, On Behalf of Himself and All Others Similarly Situated, vs. Laser
Technology, Inc., David Williams, Pamela Sevy, Dan H. Grothe and H. DeWorth
Williams, was filed in the United States District Court, District of Colorado
(Case no. 99-Z-266). The Complaint alleges that the Company and certain of its
officers and directors violated federal securities laws, particularly Sections
10(b) and 20 of the Securities Exchange Act of 1934, as amended (the "1934
Act"). Specifically, the complaint alleges that the Company's financial
statements were false and misleading during the "class period" (February 12,
1996 to December 23, 1998) and that the Company made certain false or misleading
statements regarding the Company's financial statements during this period.
The action appears to have followed and be premised in part on the
resignation of the Company's independent accountant, BDO Seidman, LLP ("BDO"),
on December 21, 1998, and the resignation of the members of the Audit Committee
of the Board of Directors on January 7, 1999. The resigning members of the Audit
Committee comprised the Special Audit Committee (the "Special Committee"). They
resigned from the Board of Directors as a result of disagreements between
management and the Special Committee. BDO also withdrew its opinions on the
previously issued certified financial statements for the fiscal years 1993,
1994, 1995, 1996 and 1997. At the time of BDO's resignation, the Special
Committee was conducting an independent investigation into the Company's
accounting records and alleged irregularities relating to the Company's
accounting records. Following the announcement of the resignation of BDO and
withdrawal of five years of audited financial statements, the American Stock
Exchange suspended trading in the Company's shares on December 23, 1998. Trading
of the Company's shares has since resumed.
On January 7, 1999, a Special Meeting of the Board of Directors (the
"Special Meeting") was held for the purpose of receiving the report and
recommendations from the Special Committee. At the Special Meeting, the Special
Committee made several proposals including, but not limited to, asking for the
resignation of the Company's Chief Executive Officer and Chief Financial
Officer. Following the presentation by the Special Committee of its findings and
proposed actions, those directors not serving on the Special Committee made a
counter proposal. Without responding to the counter-proposal, the individuals on
the Special Committee then informed the Board of Directors of their intent to
resign from the Special Committee and from the Board of Directors.
In its complaint, the plaintiff contends that the resignation of BDO
and the three directors is due to the Company's alleged unreliable and
misleading financial statements. Plaintiff's complaint further alleges
violations of Section 10(b) of the 1934 Act and Rule 10b-5 promulgated
thereunder.
The Company has not yet determined the extent of any possible liability
or material damage to the Company. The Company intends to vigorously defend
against the action.
Five additional securities class actions and one stockholder's
derivative suit have been filed against the Company and certain of its former
and present officers and directors. All cases were filed in the United States
District Court for the District of Colorado and have been consolidated for pre-
trial purposes. The Company believes that the actions parallel the one
described above. The Company intends to vigorously defend against all of the
actions.
An order directing private investigation was issued by the Securities
and Exchange Commission (the "Commission") on January 21, 1999 ("In the Matter
of Laser Technology, Inc. / NY-D-2129). Certain individuals have given
depositions in the matter and the Company has delivered to the Commission
certain requested documents pursuant to a subpoena duces tecum. The Company has
been advised by the Commission that the existence of the Commission's inquiry
should not be construed as an indication by the Commission or its staff that
any violations of law have occurred, or as a reflection on any person, entity or
security. The Company believes that the investigation concerns matters related
to the events which led to the resignation of the Special Committee and the
Company's independent accountant and intends to cooperate completely in the
matter. As of the date hereof, the Company is not able to speculate as to the
outcome or possible effect of the investigation on the Company. To the best
knowledge of the Company, no action has been taken to date by or on behalf of
the Commission against the Company or any of its officers or directors.
12
<PAGE>
PART II.
Item 2. Changes in Securities
This Item is not applicable to the Company.
Item 3. Defaults upon Senior Securities
This Item is not applicable to the Company.
Item 4. Submission of Matters to a Vote of Security Holders
On May 13, 1999, pursuant to proper notice to stockholders, the Company
held its annual meeting of stockholders at the Terrace Gardens Events Center at
13065 E. Briarwood Ave., Englewood, Colorado. At the meeting, the following
directors were elected by the indicated vote to serve as directors until the
next annual meeting of stockholders or until their successors are elected and
qualified:
Nominee For Withheld
------- --- --------
Blair Zykan 4,113,398 52,779
Jeremy Dunne 4,101,218 64,959
H. Deworth Williams 4,058,888 107,289
Brian Abeel 4,115,317 50,860
Edwin Phelps 4,112,417 53,760
Stephen Bamburger 4,112,998 53,179
In addition to the election of directors, stockholders also ratified the
appointment of Jones, Jensen & Company as independent auditors for the Company's
fiscal year ending September 30, 1999 by a vote of 4,116,047 for, 49,660
against, and 470 abstaining.
Item 5. Other Information
Acquisition of Technology
-------------------------
In August, 1999 the Company acquired all right, title and interest to
technology which can be used for mounting a laser into a tank for liquid level
measurement (the Technology). In connection with the acquisition, the Company
formed a wholly owned Canadian corporate subsidiary, Light Solutions Research,
Inc., in Ontario, for the purpose of carrying out engineering research and
development services relevant to development and sale of products utilizing the
Technology.
The Technology utilizes fiber optics and when coupled with the Company's
rangefinding technology allows the Company to target new industrial market
opportunities.
Certain Canadian engineering and marketing personnel have joined the
Company as a result of the transaction.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LASER TECHNOLOGY, INC.
----------------------
7070 South Tucson Way
Englewood, Colorado 80112
Date: August 13, 1999 By /s/ S.M. Parro
----------------- --------------------------------
S.M. Parro
Chief Financial Officer
Date: August 13, 1999 By /s/ Blair J. Zykan
----------------- ---------------------------------
Blair J. Zykan
President and Chief Executive
14
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