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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, 1996
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)
IDAHO 84-0970494
- ------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
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 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
----- -----.
At August 9, 1996, 4,999,433 shares of common stock of the Registrant were
outstanding.
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INDEX
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PART I: FINANCIAL INFORMATION
PAGE
----
Item 1. FINANCIAL STATEMENTS .................................. 1
Consolidated Balance Sheets ......................... 1
Consolidated Statements of Operations ............... 3
Consolidated Statements of Cash Flows ............... 4
Consolidated Statements of Stockholders' Equity ..... 5
Notes to Consolidated Financial Statements .......... 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ................... 7
Results of Operations ............................... 7
Liquidity and Capital Resources ..................... 9
PART II: OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS ..................................... 10
Item 2. CHANGES IN SECURITIES ................................. 10
Item 3. DEFAULTS UPON SENIOR SECURITIES ....................... 10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ... 10
Item 5. OTHER INFORMATION ..................................... 10
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LASER TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30, SEPTEMBER 30,
1996 1995
------------ -------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 2,297,746 $1,593,521
Short-term investments 1,200,811 2,381,187
Trade accounts receivable, less allowance
of $10,000 for doubtful accounts 1,520,815 1,657,530
Inventories 2,813,212 2,293,606
Deferred income tax benefit 45,474 46,000
Prepaids and other current assets 495,564 271,122
---------- ----------
Total Current Assets 8,373,622 8,242,966
---------- ----------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 866,103 582,714
---------- ----------
LONG-TERM INVESTMENTS (Note 1) 604,995 --
---------- ----------
OTHER ASSETS 224,780 172,615
---------- ----------
TOTAL ASSETS $10,069,500 $8,998,295
========== ==========
See accompanying notes to the consolidated financial statements
1
LASER TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
JUNE 30, SEPTEMBER 30,
1996 1995
------------ --------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 667,160 $ 279,490
Accrued expenses 132,758 129,113
----------- -----------
Total Current Liabilities 799,918 408,603
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value-shares
authorized 25,000,000; shares issued
5,088,201 and 5,078,368, (Note 2) 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)
Accumulated deficit (387,745) (1,027,844)
----------- -----------
Total Stockholders' Equity 9,269,582 8,589,692
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $10,069,500 $ 8,998,295
=========== ===========
See accompanying notes to the consolidated financial statements
2
LASER TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
JUNE 30, 1996 AND 1995
(Unaudited)
NINE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
NET SALES $6,396,571 $6,114,824 $1,645,724 $2,226,049
LESS COST OF GOODS SOLD 2,789,545 2,866,597 748,170 1,045,348
---------- ---------- ---------- ----------
Gross Profit 3,607,026 3,248,227 897,554 1,180,701
ROYALTY AND LICENSING INCOME 213,929 -- 101,853 --
---------- ---------- ---------- ----------
TOTAL OPERATING INCOME 3,820,955 3,248,227 999,407 1,180,701
OPERATING EXPENSES 2,957,152 2,458,629 1,001,129 890,796
---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS 863,803 789,598 (1,722) 289,905
INTEREST INCOME, NET 169,296 104,707 50,674 37,705
---------- ---------- ---------- ----------
INCOME BEFORE TAXES ON INCOME 1,033,099 894,305 48,952 327,610
TAXES ON INCOME 393,000 338,430 13,000 124,000
---------- ---------- ---------- ----------
NET INCOME $ 640,099 $ 555,875 $ 35,952 $ 203,610
========== ========== ========== ==========
INCOME PER COMMON SHARE $.12 $.11 $.01 $.04
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 5,172,795 4,989,600 5,347,854 4,989,600
========== ========== ========== ==========
See accompanying notes to the consolidated financial statements
5
LASER TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE NINE MONTHS ENDED JUNE 30, 1996
AND JUNE 30, 1995
(Unaudited)
JUNE 30, JUNE 30,
1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 640,099 $ 555,875
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 145,858 128,240
Deferred income taxes 526 303,000
Changes in operating assets and liabilities:
Trade accounts receivable 136,715 140,261
Inventories (519,606) (691,981)
Purchase of long-term investments (604,995) --
Other assets (224,442) (162,037)
Accounts payable and accrued expenses 391,315 133,264
---------- -----------
Net cash provided by (used in ) operating activities (34,530) 406,622
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of investments 1,286,245 1,920,571
Purchases of short-term investments (105,869) (2,396,001)
Patent costs paid (69,878) (62,387)
Purchases of property and equipment (411,534) (50,865)
---------- -----------
Net cash provided by (used in) investing activities 698,964 (588,682)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt -- (55,304)
Exercise of stock options 39,791 --
---------- -----------
Net cash provided by (used in) financing activities 39,791 (55,304)
---------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 704,225 (237,364)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,593,521 1,300,000
---------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $2,297,746 $ 1,062,636
========== ===========
See accompanying notes to the consolidated financial statements
4
LASER TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 30, 1996
(Information for the nine months ended June 30, 1996 is unaudited)
COMMON STOCK ADDITIONAL
------------------- PAID-IN TREASURY ACCUMULATED
SHARES AMOUNT CAPITAL STOCK DEFICIT TOTAL
--------- -------- ---------- ---------- ------------ -----------
Balance, September 30, 1995 5,078,368 $50,784 $9,584,287 $(17,535) $(1,027,844) $8,589,692
Exercise of stock options 9,833 98 39,693 -- -- 39,791
Net income for the period -- -- -- -- 640,099 640,099
--------- ------- ---------- --------- ----------- ----------
Balance, June 30, 1996 5,088,201 $50,882 $9,623,980 $(17,535) $ (387,745) $9,269,582
========= ======= ========== ========= =========== ==========
See accompanying notes to the consolidated financial statements
5
LASER TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for the nine months ended June 30, 1996 is unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements presented are those of Laser
Technology, Inc. and its wholly-owned subsidiaries. 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 results of operations for the three
and nine month periods ended June 30, 1996 and 1995, (b) the consolidated
financial position at June 30, 1996 and September 30, 1995, and (c) the
consolidated statement of cash flows for the nine month periods ended June 30,
1996 and 1995. 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, 1995. The results of operations for interim periods
are not necessarily indicative of the results to be expected for the full year.
LONG-TERM INVESTMENTS
Long-term investments consist of municipal debt securities. Such trading
securities are held for resale in anticipation of short-term market movements
and are stated at fair market value. Gains and losses, both realized and
unrealized, are included in investment income when incurred. All dividends,
interest and discount or premium amortization is included in interest income as
earned. For the three and nine month periods ended June 30, 1996, net
unrealized holding gains and losses on trading securities were not significant.
For the consolidated statement of cash flows the purchase and sale of trading
securities is classified as cash flows from operating activities.
NOTE 2 - STOCKHOLDERS' EQUITY
EQUITY INCENTIVE PLAN
In 1994, the Company 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. During the year ended September 30, 1995, options to
purchase 17,250 shares of common stock were issued to certain employees under
the Employee Plan. During the year ended September 30, 1994, options to
purchase 486,250 shares of common stock were issued to employees and consultants
under the Employee Plan. Such options granted to employees of the Company 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 nine month period
ended June 30, 1996, options to purchase 15,750 shares of common stock have been
granted and 9,833 shares of common stock were issued upon the exercise of
Employee Plan options providing total proceeds of $39,791.
6
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, 1996 AND JUNE
30, 1995
The following table sets forth, for the three and nine month fiscal periods
ended June 30, 1996 and 1995, 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.
NINE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
Net sales 100% 100% 100% 100%
Cost of goods sold 44 47 45 47
---- ---- ---- ----
Gross profit 56 53 55 53
Royalty and licensing income 3 -- 6 --
---- ---- ---- ----
Total operating income 59 53 61 53
Operating expenses 46 40 61 40
---- ---- ---- ----
Income (loss) from operations 13 13 (1) 13
Interest income, net 3 2 3 2
---- ---- ---- ----
Income before taxes on income 16 15 3 15
Taxes on income 6 6 1 6
---- ---- ---- ----
Net income 10% 9% 2% 9%
==== ==== ==== ====
REVENUES
The following table provides a breakdown of the percentage of 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
product lines are classified as "Other" for presentation purposes.
NINE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ -----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
MARKSMAN SPEED DETECTION SYSTEMS $3,174,098 $3,880,189 $ 820,397 $1,226,090
Percentage of revenues 49% 63% 50% 55%
CRITERION SERIES OF SURVEY LASERS 2,362,578 2,234,635 804,782 999,959
Percentage of revenues 37% 37% 49% 45%
DAS100 SHIP DOCKING AID SYSTEMS 763,930 -- -- --
Percentage of revenues 12%
OTHER 95,965 -- 20,545 --
Percentage of revenues 2% 1%
Total Revenues $6,396,571 $6,114,824 $1,645,724 $2,226,049
========== ========== ========== ==========
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Net sales for the third quarter ended June 30, 1996 ("1996") decreased 26%
to $1,645,724 from $2,226,049 for the quarter ended June 30, 1995 ("1995"),
primarily resulting from slower volume domestic Marksman sales. Domestic
Marksman sales declined during the 1996 third quarter due to what Management
believes is the effect of government purchasing deferrals related to prolonged
delays in the International Association of Chiefs of Police standardization
tests of laser-based technology for use in speed enforcement.
In April 1996, the Marksman was certified by the International Association
of Chiefs of Police ("IACP") to meet the federal standard for laser speed
detection systems. 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.
Despite the recent federal approval, 1996 third quarter domestic Marksman sales
declined 38% as compared to the same period a year ago. Because the approval
occurred so late in the year, Management believes that law enforcement agencies
are deferring purchases of the Company's Marksman until their next budget cycle
in order to purchase the Marksman with federal funds.
Net sales for the first nine months of 1996 rose to $6,396,571 from
$6,114,824 for the first nine months of 1995 representing a 5% increase in
revenues from the previous year due to initial sales of the DAS100 realized in
the 1996 second quarter. During the 1996 second quarter the Company realized
significant sales of it's DAS100 ship docking sensors pursuant to the completion
of its contract with Lockheed Martin. Management expects that sales of it's
DAS100 will greatly fluctuate between financial periods due to the specialized
nature of the system.
International sales comprised 49% and 42% of net sales for the third quarter
and first nine months of 1996 as compared to 35% and 45% for the third quarter
and first nine months of 1995. Increased foreign sales of the Company's Laser
DigiCam system (part of the Company's Marksman product line) and Criterion
comprised the majority of the increase during the 1996 third quarter.
Historically, the Company experiences quarterly fluctuations in it's foreign
sales due to the placement of typically large orders for the Company's Marksman.
Management anticipates that foreign sales of its Marksman and Criterion product
lines will continue to comprise a significant portion of its revenues.
Gross profit as a percentage of net sales was 55% and 56% for the third
quarter and first nine months of 1996, compared to 53% for the third quarter and
first nine months of 1995. The Company's gross profit margin for the first nine
months of 1995 was slightly affected by volume price reductions on certain
international sales of the Marksman during the first half of 1995. Improved
gross profit margins for the nine months ended 1996 resulted from higher gross
margins on sales of the DAS100 primarily realized during the 1996 second
quarter. The Company continues to minimize the effect of currency fluctuations
by requiring payment in U.S. funds.
Total operating expenses increased approximately 12% to $1,001,129 for the
third quarter of 1996 from $890,796 for the comparable 1995 period, and
approximately 20% to $2,957,152 for the first nine months of 1996 compared to
$2,458,629 for the first nine months of 1995. As a percentage of net sales,
total operating expenses rose from 40% for the third quarter of 1995 to 61% for
the third quarter of 1996, resulting primarily from lower 1996 third quarter
sales, and from 40% for the first nine months of 1995 to 46% for the first nine
months of 1996. Increased compensation expense due to increased personnel
requirements and higher marketing expenses related to increased sales activities
contributed to the majority of the increase in total operating expenses in 1996
as compared to the 1995 periods. The Company anticipates that operating
expenses will continue to increase to support the Company's continued growth.
Royalty income of $101,853 related to the Company's Agreement with Bushnell
was realized during the 1996 third quarter, increasing total royalty income
earned as of June 30, 1996 to $213,929. Income from operations was $289,905 for
the third quarter of 1995 as compared to a $1,722 loss from operations for the
1996 third quarter. The loss for the third quarter of 1996 was the effect of
lower sales in the 1996 period. However, the Company realized a 9% increase in
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
income from operations to $863,803 for the first nine months of 1996 from
$789,598 for the first nine months of 1995. Combined with income earned on
investments, the Company realized income before taxes on income of $48,952 for
the 1996 third quarter compared to income before taxes on income of $327,610 for
the comparable 1995 period. After taxes on income, the Company realized net
income of $35,952, or break even per share, for the 1996 third quarter, compared
to $203,610, or $.04 per share, for the 1995 third quarter. When combined with
net income of $604,147 from the first half of 1996, the Company realized net
income of $640,099 for the first nine months of 1996, or $.12 per share, as
compared with net income of $555,878, or $.11 per share, for the first nine
months of 1995.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had working capital of $7,573,704. 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, 1996, cash used in operating
activities was $34,530. Net income of $640,099 combined with a decrease of
$136,715 in trade accounts receivable and an increase of $391,315 in accounts
payable and accrued expenses was used primarily to expand inventory by $519,606.
Additional cash of $604,995 was used to purchase long-term trading investments
and $224,442 was used to finance an increase in other assets. Cash provided by
investing activities of $698,964 resulted from proceeds from the sale of
marketable securities of which $411,534 was used for the purchase of property
and equipment and leasehold improvements related to expansion of the Company's
facilities. Cash provided by financing activities of $39,971 resulted from
proceeds received from the exercise of employee options pursuant to the
Company's Equity Incentive Plan. Cash and cash equivalents increased $704,225
for the 1996 period.
For the nine month period ended June 30, 1995, cash provided by operating
activities of $406,622 was primarily attributable to net income of $555,875 for
the period combined with a decrease of $140,261 in accounts receivable and an
increase in accounts payable and accrued expenses of $133,264. Additionally,
non-cash expense items included a $303,000 deferred income tax benefit utilized
during the first nine months of fiscal 1995. Inventory levels were increased by
$691,981 to meet anticipated sales demand. Cash used in financing activities of
$55,304 reduced the Company's long-term debt. Cash used in investing activities
of $588,682 related to the reinvestment of unused cash reserves of $475,430 into
marketable securities and $113,352 was used for the purchase of property and
equipment and patent costs relating to the protection of the Company's
proprietary technology. Cash and cash equivalents decreased $237,364 for the
nine month period ended June 30, 1995.
OTHER
The Company recently completed development of a low-cost industrial laser
sensor which Management believes will penetrate a new market segment within the
industrial laser sensor market. Pursuant to an Agreement with Telemotive
Industrial Controls ("Telemotive"), a division of Maxtec International
Corporation, the Company has agreed to supply laser sensors to Telemotive as
part of Telemotive's collision avoidance system for tracked vehicles and
overhead cranes. Revenues generated from this Agreement are expected to be
approximately $250,000 during fiscal 1997. Sales of these industrial laser
sensors to other customers are also expected to increase sales in future
periods, although there is no assurance of this.
In 1994, the Company entered into an Agreement with 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 manufacture and
marketing of a consumer range finder developed by the Company for sporting
applications. The Company completed development of the range finder in January
1995. The Company retains all ownership of copyrights, patents and trade
secrets of the technology and the right to pursue markets outside the sports
optics area. Pursuant to the Agreement, the Company receives a running royalty
on designated net sales of each product developed under this Agreement and
receives supplemental fees related to production engineering services. As of
June 30, 1996, the Company has realized royalties in the amount of $213,929
related to this Agreement. Management anticipates that royalties received under
this agreement will continue to have a positive impact on the Company's results
of operations.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONCLUDED)
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
anticipates that the capital invested as a result of this expansion will not
have a material impact on the Company's current working capital or results of
operations.
Management believes that seasonal effects on sales of the Marksman are non
existent. Historically, the Company has realized a small decline in its
Criterion Series of Survey Lasers, 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.
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 will not have a material
impact on the Company's operations or financial condition in the foreseeable
future.
PART II.
ITEM 1. LEGAL PROCEEDINGS
This Item is not applicable to the Company.
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
No matters were submitted to a vote of the Company's security holders
during the three months ended June 30, 1996.
ITEM 5. OTHER INFORMATION
This Item is not applicable to the Company.
10