<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-QSB
(Mark one)
[x] Quarterly report under section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarter ended March 31,1996
[ ] Transition Report under section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission File No. 333-754
Semiconductor Laser International Corporation
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
New York 16-1446679
- ------------------------------- -------------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
148 Vestal Parkway East, Vestal, New York 13850
- ----------------------------------------- ---------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code : (607) 754-0112
Check whether the issuer (1) 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 shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [ ] No [x]
As of May 15,1996, there were outstanding 3,298,653 shares of the
issuer's common Stock, par value $.01 per share.
Transitional Small Business Disclosure Format
Yes [ ] No [x]
<PAGE>
Part I. FINANCIAL INFORMATION
Semiconductor Laser International Corporation
(a Development Stage Enterprise)
Balance Sheet
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
(unaudited)
------------ -----------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents ................................ $ 491,971 $ 7,394,612
Restricted cash .......................................... 39,071 25,970
Accounts receivable ...................................... 5,335 18,170
Inventory ................................................ 2,600 3,340
Deposits and other assets ................................ 4,130 4,130
----------- -----------
Total current assets ................................. 543,107 7,446,222
Deferred financing cost .................................. 134,431 --
Equipment, net ........................................... 162,175 182,280
Intangible assets, net ................................... 2,022 1,853
----------- -----------
Total assets ......................................... $ 841,735 $ 7,630,355
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable ......................................... $ 208,940 $ 312,432
Accrued expenses and other liabilities ................... 134,331 198,281
Current portion of long-term debt ........................ 81,787 55,915
----------- -----------
Total current liabilities ............................ 425,058 566,628
Long-term debt ............................................ 19,882 18,851
Accrued royalty payments .................................. 100,000 100,000
----------- -----------
Total liabilities .................................... 544,940 685,479
----------- -----------
Commitments and contingencies (Note 5)
Shareholders' Equity
Common stock, $.01 par value, 20,000,000 shares authorized,
1,393,653 shares issued and outstanding December 31, 1995;
3,243,653 shares issued and outstanding March 31, 1996 ... 13,936 32,437
Additional paid-in capital ................................ 2,035,065 9,340,549
Deficit accumulated during the development stage .......... (1,752,206) (2,428,110)
----------- -----------
Total shareholders' equity ........................... 296,795 6,944,876
----------- -----------
Total liabilities and shareholders' equity ........... $ 841,735 $ 7,630,355
=========== ===========
</TABLE>
See accompanying notes to financial statements
2
<PAGE>
Semiconductor Laser International Corporation
(A Development Stage Enterprise)
Statement of Operations
<TABLE>
<CAPTION>
Three Months Ended
March 31, Cumulative
1995 1996 From Inception
(unaudited) (unaudited) (unaudited)
-----------------------------------------------------
<S> <C> <C> <C>
Operating Expenses:
Research and development expenses $ 24,973 $ 83,320 $ 449,742
General and administrative expenses 74,213 304,470 1,622,969
Royalties -- -- 100,000
-------- ---------- -----------
Loss from operations (99,186) (387,790) (2,172,711)
Interest income 2,029 17,187 49,902
-------- ---------- -----------
Loss before extraordinary item (97,157) (370,603) (2,122,809)
Extraordinary loss on early extinguishment of debt -- (305,301) (305,301)
--------- --------- -----------
Net loss after extraordinary item $(97,157) $(675,904) $(2,428,110)
======== ========== ===========
Net loss per share:
Loss before extraordinary item $ (0.11) $ (0.20) $ (1.16)
Extraordinary item 0.00 (0.17) (0.17)
-------- ---------- -----------
Net loss $ (0.11) $ (0.37) $ (1.33)
======== ========== ===========
Weighted average shares outstanding 909,792 1,831,426 1,831,426
======== ========== ===========
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
Semiconductor Laser International Corporation
(A Development Stage Enterprise)
Statement of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended Cumulative
March 31, From
1995 1996 Inception
(Unaudited) (Unaudited) (Unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (97,157) $ (675,904) $(2,428,110)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 1,585 11,033 39,949
Expenses settled through the issuance of common
shares and options -- -- 400,418
Amortization of debt discount -- 51,585 51,585
Change in assets and liabilities:
Decrease (increase) in accounts receivable 1,010 (12,835) (18,170)
(Increase) in inventory -- (740) (3,340)
(Increase) in deposits and other assets -- -- (4,130)
Decrease in deferred financing cost -- 134,431 --
Increase in accounts payable 1,783 103,492 312,432
Increase in accrued expenses and other liabilities 8,147 63,950 198,281
Increase in accrued royalty payments -- -- 100,000
----------- ----------- -----------
Net cash used in operating activities (84,632) (324,988) (1,351,085)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of equipment (5,684) (30,969) (207,711)
Increase in intangible assets -- -- (3,370)
----------- ----------- -----------
Net cash used in investing activities (5,684) (30,969) (211,081)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from long term debt -- 455,000 556,669
Payments on long-term debt -- (533,488) (533,488)
Issuance of stock, net of expenses 63,676 7,323,985 8,959,567
----------- ----------- -----------
Net cash provided by financing activities 63,676 7,245,497 8,982,748
----------- ----------- -----------
Net (decrease) increase in cash, cash equivalents, and
restricted cash (26,640) 6,889,540 7,420,582
Cash, cash equivalents, and restricted cash at
beginning of period 170,138 531,042 --
----------- ----------- -----------
Cash, cash equivalents, and restricted cash at end of
period $ 143,498 $ 7,420,582 $ 7,420,582
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
Semiconductor Laser International Corporation
(A Development Stage Enterprise)
Notes to Financial Statements
(Information for March 31, 1995 and 1996 is unaudited)
1. Organization
Semiconductor Laser International Corporation (the "Company") was
incorporated in New York on September 21, 1993 (inception) to produce high
power semiconductor diode laser wafers and bars ("HPDL's"), and to market
products worldwide through major sales representative firms. The Company's
fiscal year end is December 31.
The Company's primary activities since incorporation, as a development
stage enterprise, have been research and development, business and
financial planning and raising capital. The Company currently relies
exclusively on the facilities provided through the Wright Cooperative
Research and Development Agreement (CRDA) with the U.S. Air Force for the
development and quality control testing of its HPDL's. The CRDA expires in
September 1996 unless extended for one year by mutual agreement of the
parties. The Company has incurred net losses and a net cash outflow from
operations since inception. The Company expects to complete the
development stage and begin full production of the HPDL's in September
1996. The Company anticipates that it will continue to incur significant
and increasing losses until it is able to manufacture HPDL's in commercial
quantities and generate sales levels sufficient to support operations. The
Company has raised sufficient funds through an initial public offering of
the Company's common stock to fund the establishment of its manufacturing
facility. However, there is no assurance that the Company will be able to
complete the development and commence manufacture of HPDL's. As a result
of the foregoing, there remains substantial doubt as to the Company's
ability to continue as a going concern, unless the manufacturing facility
is on line and operational by the end of 1996. The company has just
entered into a definitive contract to purchase the land for the
manufacturing facility. The accompanying financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
2. Basis of Presentation
The information presented for March 31, 1995 and 1996, and for the
three-month periods then ended, is unaudited, but, in the opinion of the
Company's management, the accompanying unaudited financial statements
contain all adjustments (consisting only of normal recurring adjustments)
which the Company considers necessary for the fair presentation of the
Company's financial position as of March 31, 1996 and the results of its
operations and its cash flows for the three-month periods ended March 31,
1995 and 1996. The financial statements included herein have been prepared
in accordance with generally accepted accounting principles and the
instructions to Form 10-QSB and Rules 10.01 of Regulation S-X.
Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. These
financial statements should be read in conjunction with the Company's
audited financial statements for the year ended December 31, 1995, which
were included as part of the Company's Registration Statement on Form S-1
(Registration No 333-754), as declared effective by the Securities and
Exchange Commission on March 19, 1996.
Results for the interim period are not necessarily indicative of results
that may be expected for the entire year.
5
<PAGE>
3. Summary of Significant Accounting Policies
Net Loss Per Share
Net loss per share is computed using the weighted average number of common
shares outstanding and dilutive common share equivalents. Common shares
issued and options and warrants granted by the Company during the twelve
months preceding the offering date have been included in the calculation
of common and common equivalent shares outstanding as if they were
outstanding for all periods presented using the treasury stock method and
the public offering price of $5.00 per share. Options and warrants granted
prior to the aforementioned twelve-month period have been included in the
calculation of common and common equivalent shares outstanding when
dilutive.
4. Inventories
Inventories at March 31, 1996 and December 31, 1995, consist solely of raw
materials and supplies. Since the Company is in the development stage and
has not commenced commercial production, the cost of prototypes, including
the cost of raw materials and subcontracted labor costs, has been charged
to research and development expenses.
5. Accrued Litigation Expenses
The Company is currently engaged in separate litigations with two
Companies which were engaged to assist the company in raising equity. The
Company contends that these firms are not entitled to any compensation
based upon their failure to successfully raise any equity capital and,
alternatively, on the excessive nature of their billings for services. In
addition, counterclaims have been made for recovery of amounts previously
paid. The aggregate amount claimed by the plaintiffs with respect to both
litigations is approximately $123,000. The Company is vigorously defending
both litigations and believes that recovery, if any, by the plaintiffs
will not be material to the accompanying financial statements; however, it
has accrued $50,000 for these matters at March 31, 1996 and December 31,
1995 to cover potential litigation expenses. Based upon consultations with
legal counsel the Company believes that the amounts accrued should be
sufficient to cover litigation expenses.
6. Common Stock
On January 18, 1996, the Company completed a private offering of fifteen
units (the "Bridge Financing"), each unit consisting of a note (bearing
interest at 9%) in the principle amount of $50,000 and 10,000 shares of
common stock, at a price of $50,000 per unit. The principal amount of the
notes were due and payable on the earlier of the consummation of a public
offering or January 18, 1997. The Company realized net proceeds from the
Bridge Financing of approximately $625,000, which net proceeds were
allocated between the notes and shares included in the Bridge Financing
based on their relative fair values at the date of such Bridge Financing.
The $295,000 portion of the Bridge Financing's gross proceeds which were
allocated to the shares (the "loan discount") and the $75,000 portion of
the Bridge Financing's offering costs which were allocated to the notes
(the "deferred financing costs") were being amortized commencing on
January 18, 1996. Upon early repayment of the notes, the Company
recognized an extraordinary loss of $305,301 representing the unamortized
loan discount and deferred financing costs.
6
<PAGE>
On March 19, 1996 the Company sold 1,700,000 shares of common stock at
$5.00 per share and 1,955,000 warrants to purchase 1,955,000 shares of
common stock at $.10 per warrant through an initial public offering (the
"offering") and realized net proceeds from the offering of $7,078,985, a
portion of which were used to repay the notes from the Bridge Financing.
7. Subsequent Event; Exercise of Underwriters Over-Allotment Option
On April 3, 1996, the Underwriter of the Company's initial public offering
notified the Company of its intent to exercise, in part, its
over-allotment option to purchase shares of the Company's Common Stock. As
a result, the Company issued and sold an additional 55,000 shares of its
Common Stock at the initial public offering price of $5.00 per share. The
net proceeds to the Company, after expenses and underwriting discounts and
commissions, were approximately $239,500. The option lapsed as to its
unexercised portion.
On May 13, 1996 the company entered into a definitive contract to
purchase the land for a manufacturing facility.
7
<PAGE>
Item 2. MANAGEMENT DISCUSSION AND ANALYSIS
The following information should be read in conjunction with the unaudited
financial statements included herein. See Item 1.
OVERVIEW
The Company is in the development stage and has not commenced the
commercialization of any of its proposed products. Products have been produced
and shipped to customers for the purpose of testing and evaluation, however
production in commercial quantities is not expected until the Company's proposed
manufacturing facility is completed in the last quarter of 1996. Until the
facility is operational and the Company generates sufficient revenue, it expects
to operate at losses to support the hiring and training of personnel and fund
the research and development of its products. Also cash resources will be used
to finance the building of the manufacturing facility and it's associated
capital equipment.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and restricted cash was $531,042 and
$7,420,582 on December 31, 1995 and March 31, 1996, respectively, a net increase
of $6,889,540 (a $7,245,497 increase from financing activities partially offset
by a decrease of $324,988 from operations and $30,959 from investing
activities) for the three month period.
The $7,245,497 of proceeds provided by financing activities were derived
from net proceeds of $7,078,985 realized from the Company's initial public
offering, net proceeds of $245,000 from the private placement of bridge shares
(for a total of $7,323,985 in stock sales) and proceeds of $455,000 from the
sale of the bridge notes. These cash inflows were partially offset by the early
repayment of the principal amount of the bridge notes ($455,000) together with
$78,488 associated with the private placement of such notes.
The use of cash from operations of $324,988 was utilized to fund the
operating loss of $675,904 offset by non cash expenses of $62,618 and changes in
working capital of $288,298 for the three months ended March 31, 1996.
The $30,969 cash used in investing activities was utilized to fund the
purchase of equipment for the three months ended March 31, 1996.
RESULTS OF OPERATIONS
Three months ended March 31, 1996, compared to three months ended March 31,
1995.
The Company's operations show no sales or revenues during this period of
development stage operations. Any revenues realized from product shipments are
offset against research & development cost.
8
<PAGE>
Research and development cost were $83,320 compared to $24,973 for the three
month periods ended March 31, 1996 and 1995 respectively. This increase of
$58,347 was due to increased spending on salaries, materials and subcontracting
cost reflecting increased activity in the development of the Company's products.
General and administrative expenses were $304,470 and $74,213 for the three
month periods ending March 31, 1996 and 1995 respectively. The increase of
$230,257 is due to an increase in manning levels (raising the salary and payroll
tax expenses by approximately $57,900); interest expenses incurred in payments
on the bridge notes of approximately $78,900; increases in legal, accounting,
and other professional fees of approximately $50,800; increases in advertising
expenses of approximately $10,700; increases in travel expenses of approximately
$13,500; and increases in depreciation, office expenses, insurance and employee
related expenses of approximately $18,400.
Interest income of $17,187 and $2,029 was recognized for the three month
periods ending March 31, 1996 and 1995 respectively. The increase of
approximately $15,200 was due to the investment of the cash received from the
bridge financing and the Company's initial public offering in the quarter ended
March 31, 1996.
The extraordinary loss of $305,301 recognized for the three month period
ending March 31, 1996, resulted from the early retirement of debt from the notes
of the bridge financing and represents the unamortized loan discount and
deferred financing cost of these notes.
9
<PAGE>
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings.
The company is involved in litigation described in footnote 5 in the
financial statements. This litigation however does not involve more than 10% of
the Company's assets.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
11 Statement re: Computation of weighted average shares outstanding
27 Financial Date Schedule
(b) Reports on Form 8-K.
None.
10
<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 thereto duly authorized.
Semiconductor Laser International Corporation
( Registrant )
Date : By: /s/ Geoffrey T. Burnham
--------------------------------------------
May 15, 1996 Geoffrey T. Burnham
Chairman, President and
Chief Executive Officer
Date : By: /s/ Allen W. Johnson
--------------------------------------------
May 15, 1996 Allen W. Johnson Jr.
Controller, Principal Financial Officer,
Principal Accounting Officer
11
<PAGE>
EXHIBIT 11
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
COMPUTATION OF WEIGHTED AVERAGE SHARES OUTSTANDING
PERIOD ENDED MARCH 31, 1995
"CHEAP STOCK" METHOD
<TABLE>
<CAPTION>
SHARES ISSUED OR SHARES REDEEMED USING
WARRANTS AND OPTIONS PROCEEDS FROM SHARES
DEEMED EXERCISED ISSUED DEEMED EXERCISE WEIGHTED AVERAGE SHARES
OF WARRANTS & OPTIONS OUTSTANDING
<C> <C> <C> <C>
1993 SHARES OUTSTANDING (NOTE 1) 729,003 0 729,003
1994 SHARES OUTSTANDING (NOTE 1) 192,344 0 192,344
SHARES ISSUED IN 1995 (NOTE 1) 19,714 0 19,714
1995 'CHEAP' STOCK 12,807 (5,200) 7,607
1993 OPTIONS 1,971 (246) 1,725
1994 WARRANTS 75,895 (110,055) (34,160)
1995 WARRANTS 22,178 (32,160) (9,982)
1995 'CHEAP' WARRANTS 12,807 (7,541) 5,266
ADD BACK ANTI-DILUTIVE OPTIONS (1,725)
WEIGHTED AVERAGE SHARES OUTSTANDING 909,792
</TABLE>
PERIOD ENDED MARCH 31, 1996
"CHEAP STOCK" METHOD
<TABLE>
<CAPTION>
SHARES ISSUED OR SHARES REDEEMED USING
WARRANTS AND OPTIONS PROCEEDS FROM SHARES
DEEMED EXERCISED ISSUED DEEMED EXERCISE WEIGHTED AVERAGE
OF WARRANTS & OPTIONS SHARES OUTSTANDING
<C> <C> <C> <C>
1993 SHARES OUTSTANDING (NOTE 1) 729,003 0 729,003
1994 SHARES OUTSTANDING (NOTE 1) 192,344 0 192,344
1995 SHARES OUTSTANDING (NOTE 1) 472,306 0 472,306
1996 'CHEAP' STOCK 150,000 (59,000) 91,000
1996 WEIGHTED SHARES ISSUED IN IPO (NOTE 2) 186,813 0 186,813
1993 OPTIONS 1,971 (97) 1,874
1995 OPTIONS 11,000 (11,000) 0
1995 OPTIONS 88,659 (887) 87,772
WARRANTS ISSUED IN 1994 & 1995 (NOTE 1) 42,093 (0) 42,093
1995 WARRANTS 17,732 (10,440) 7,292
1996 WARRANTS ISSUED IN CONNECTION WITH THE IPO (NOTE 2) 1,955,000 (1,895,296) 59,704
1996 BROKER WARRANTS ISSUED IN CONNECTION WITH THE IPO (NOTE 2) 170,000 (164,808) 5,192
ADD BACK ANTI-DILUTIVE OPTIONS & WARRANTS (43,967)
WEIGHTED AVERAGE SHARES OUTSTANDING 1,831,426
</TABLE>
NOTE 1: SHARES AND WARRANTS ISSUED MORE THAN ONE YEAR PRIOR TO INITIAL
PUBLIC OFFERING ("IPO")
NOTE 2: COMPUTED USING THE WEIGHTED AVERAGE METHOD
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 7,420,582
<SECURITIES> 0
<RECEIVABLES> 18,170
<ALLOWANCES> 0
<INVENTORY> 3,340
<CURRENT-ASSETS> 7,446,222
<PP&E> 220,712
<DEPRECIATION> 38,432
<TOTAL-ASSETS> 7,630,355
<CURRENT-LIABILITIES> 566,628
<BONDS> 0
0
0
<COMMON> 32,437
<OTHER-SE> 6,912,439
<TOTAL-LIABILITY-AND-EQUITY> 7,630,355
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 83,320
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78,790
<INCOME-PRETAX> (370,603)
<INCOME-TAX> 0
<INCOME-CONTINUING> (370,603)
<DISCONTINUED> 0
<EXTRAORDINARY> (305,301)
<CHANGES> 0
<NET-INCOME> (675,904)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> (.37)
</TABLE>
