UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported): October 1, 2003
LASER CORPORATION
----------------------------------------------------
(Exact name of registrant as specified in its Charter)
Utah 0-13316 87-0395567
- -----------------------------------------------------------------------------
State or other Jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File No.) Identification No.)
7050 Union Park Avenue Suite 600, Salt Lake City, UT 848047
-------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(801) 562-2252
-------------------------------------------------------------
(Registrant's telephone number including area code)
1
EXPLANATORY NOTE
On October 1, 2003, Laser Corporation ("Company") completed the
acquisition of BI Acquisitions, Inc., d.b.a. Broadcast International ("BI"),
pursuant to a Stock Exchange Agreement (the "Agreement") among the Company, BI
and the shareholders of BI, dated as of October 1, 2003.
This Amendment No.1 is filed to submit the audited financial statements
as of December 31, 2002 and unaudited financial statements of BI and certain
pro forma information required by Item 7 of Form 8-K.
Item 7. Financial Statements and Exhibits
1) Financial Statements of Business Acquired.
a. Pro Forma Financial Statements
(i) Unaudited Statement of Assumptions and Disclosures 4
(ii) Unaudited Pro Forma Condensed Consolidated
Balance Sheets September 30, 2003 5
(iii) Unaudited Pro Forma Consolidated Condensed
Statement of Operations as of September 30, 2003 6
(iv) Unaudited Pro Forma Consolidated Condensed
Statement of Operations as of December 31, 2002 7
(v) Notes to the Financial Statements 8
b. Audited Financial Statements of BI Acquisitions, Inc. for the
year ended December 31, 2002
(i) Report of Independent Auditors 10
(ii) Audited Balance Sheet as of December 31,2002 and 2001 11
2
(iii) Audited Statement of Operations for the years
Ended December 31, 2002 and 2001 13
(iv) Audited Statement of Stockholders Equity for the
Years ended December 31, 2002 and 2001 14
(v) Statements of Cash Flow for the years ended
December 31, 2002 and 2001 15
(vi) Notes to the Financial Statements 16
3
LASER CORPORATION
Unaudited Statement of Assumptions and Disclosures
The following unaudited condensed combined pro forma financial statements
("the pro forma financial statements") and explanatory notes have been
prepared and give the effect of the stock exchange between BI Acquisitions,
Inc. (BI) and Laser Corporation (Laser) using the purchase method of
accounting for business combinations. This transaction is being accounted for
as a reverse merger, with BI being the acquiring enterprise for accounting
purposes. Prior to the transaction the operating subsidiaries of Laser had
been dissolved, therefore, on a going forward basis all operations will be
provided from the BI entity.
In accordance with Article 11 of Regulation S-X under the Securities Act,
an unaudited condensed combined pro forma balance sheet ("the pro forma
balance sheet") as of September 30, 2003 has been prepared. Additionally,
unaudited condensed combined pro forma statements of operations, ("the pro
forma statements of operations") for the year ending December 31, 2002 and the
nine months ending September 30, 2003, have been prepared to reflect, for
accounting purposes, the acquisition by BI of Laser.
The following pro forma financial statements have been prepared based
upon the historical statements of BI and Laser. The pro forma statements
should be read in conjunction with (a) the historical financial consolidated
statements and related notes thereto of BI as of December 31, 2002, and for
the year ended December 31, 2002, provided herein; and (b) the historical
financial statements and related notes thereto of Laser Corporation as of; (i)
December 31, 2002 and for the years ended December 31, 2002 and (ii) the nine
months ended September 30,2003.
The pro forma balance sheet is presented as though the reverse merger had
occurred on September 30, 2003. The pro forma balance sheet includes the
unaudited condensed combined balance sheet of Laser as of September 30, 2003
and the unaudited condensed combined balance sheet of BI as of September 30,
2003.
The pro forma statement of operations for the year ended December 31,
2002 is presented as though the reverse merger had occurred on January 1,
2002. The pro forma statement of operations for the nine months ended
September 30, 2003 is presented as though the reverse merger had occurred on
January 1, 2003. The pro forma statement of operations for the nine months
ended September 30,2003 include the unaudited historical consolidated
condensed statement of operations data of Laser for the nine months ended
September 30, 2003 and the unaudited historical consolidated condensed
statement of operations data of BI for the nine months ended September 30,
2003.
The pro forma financial statements are provided for illustrative purposes
only, and are not necessarily indicative of the operating results or financial
position that would have occurred if the transaction had been consummated at
the beginning of the periods or on the dates indicated, nor are they
necessarily indicative of any future operating results or financial position.
The pro forma financial statements do not include any adjustments related to
any restructuring charges or one-time charges that may result for the
transaction or the final result of valuations of inventories, property, plant
and equipment, intangible assets, debt, and other obligations.
4
LASER CORPORATION
Unaudited Condensed Combined Pro Forma Balance Sheet
As of September 30, 2003
BI Pro Forma
Acquisitions Increase Combined
Inc. Laser Corp. (Decrease) Pro Forma
-------------- ------------- ------------- --------------
<s> <c> <c> <c> <c>
Assets
Cash and cash equivalents 1,032,598 5,316 - 1,037,914
Trade Accounts receivable (net) 276,603 - - 276,603
Income tax receivable 2,951 - - 2,951
Prepaid expenses 94,459 - - 94,459
Inventory 31,746 - - 31,746
-------------- ------------- ------------- --------------
Total Current Assets 1,438,357 5,316 - 1,443,673
Equipment and leasehold
improvements (net) 1,129,571 - - 1,129,571
Other Assets
Deferred income tax asset 129,340 - - 129,340
Deposits and other assets 60,824 - - 60,824
-------------- ------------- ------------- --------------
Total Assets 2,758,092 5,316 - 2,763,408
============== ============= ============= ==============
Liabilities and Stockholder's Equity
Current liabilities
Trade accounts payable 106,675 - - 106,675
Payroll and related expenses 262,135 - - 262,135
Other accrued expense 51,463 10,342 - 61,805
Unearned revenue 240,764 - - 240,764
Deferred income tax liability 123,780 - - 123,780
Current portion of long-term debt 6,648 - - 6,648
-------------- ------------- ------------- --------------
Total Current Liabilities 791,465 10,342 - 801,807
Long Term Liabilities
Deferred bonus payable 600,000 - - 600,000
-------------- ------------- ------------- --------------
Total Liabilities 1,391,465 10,342 - 1,401,807
Stockholders Equity
Common stock 10,177 374,799 [A] 1,615,024 8,979,933
[B] 6,979,933
Additional paid-in-capital 4,669,679 3,341,341 [A] (1,615,024) -
[B] (6,979,933)
[D] (3,721,166)
[E] 4,305,328
[C] (225)
Accumulated (deficit) (3,313,004) (3,721,166)[D] 3,721,166
[E] (4,305,328) (7,618,332)
Treasury stock, at cost (225) - [C] 225
-------------- ------------- ------------- --------------
Total Equity 1,366,627 (5,026) - 1,361,601
-------------- ------------- ------------- --------------
TOTAL LIABILITIES & EQUITY 2,758,092 5,316 - 2,763,408
============== ============= ============= ==============
5
LASER CORPORATION
BI
Acquisitions Laser Combined
Inc. Corp. Pro forma
as of as of as of
Sept.30, 2003 Sept.30, 2003 Sept.30, 2003
-------------- -------------- --------------
<s> <c> <c> <c>
Net Sales 3,803,074 - 3,803,074
Cost of Sales 3,645,532 - 3,645,532
-------------- -------------- --------------
Gross Profit 157,542 - 157,542
Operating Expense
Administrative and general exp. 706,141 34,287 740,428
Selling and marketing expense 383,404 - 383,404
Production and maintenance expenses 279,357 - 279,357
-------------- -------------- --------------
Total Operating Expenses 1,368,902 34,287 1,403,189
Total Operating Income (1,211,359) (34,287) (1,245,646)
Other Income and (Expense)
Interest Income 3,294 - 3,294
Interest expense (2,318) (22,286) (24,604)
(Loss) from equity investments in
consolidated entities - - -
Other income 4,801 - 4,801
-------------- -------------- --------------
Net Income Before Income Taxes (1,205,582) (56,573) (1,262,155)
Provision for Income Taxes - - -
(Loss) from Investment in Unconsolidated Entity (2,024,956) - (2,024,956)
-------------- -------------- --------------
Net (Loss) Income Before Discontinued operations (3,230,538) (56,573) (3,287,111)
============== ============== ==============
6
LASER CORPORATION
Unaudited Condensed Combined Pro Forma Statement of Operations
BI
Acquisitions Combined
Inc. Laser Corp. Pro Forma Pro Forma
as of as of Increase as of
Dec. 31, 2002 Dec. 31, 2002 (Decrease) Dec. 31, 2002
-------------- ------------- ------------- --------------
<s> <c> <c> <c> <c>
Net Sales 5,031,178 2,061,050 (2,061,050) 5,031,178
Cost of Sales 4,398,548 1,777,243 (1,777,243) 4,398,548
-------------- ------------- ------------- --------------
Gross Profit 632,630 283,807 (283,807) 632,630
Operating Expense
Administrative and general exp. 1,240,697 666,992 (517,821) 1,389,868
Selling and marketing expense 593,676 - - 593,676
Production and maintenance expenses 218,893 - - 218,893
-------------- ------------- ------------- --------------
Total Operating Expenses 2,053,266 - 2,053,266 2,202,437
Total Operating (Loss) Income (1,420,636) (383,185) (1,841,547) (1,569,807)
Other Income and (Expense)
Interest Income 5,661 166 (154) 5,673
Interest expense (20,466) (37,726) 2,726 (55,466)
(Loss) from equity investments
in consolidated entities (29,550) - - (29,550)
Other income 13,363 - - 13,363
-------------- ------------- ------------- --------------
Net Income Before Income
Taxes and Discontinued operations (1,451,628) (420,745) 236,586 (1,635,787)
Benefit for Income Taxes (535,724) - - (535,724)
-------------- ------------- ------------- --------------
Net (Loss) Income Before
Discontinued operations (915,904) (420,745) [F] 236,586 (1,100,063)
============== ============= ============= ==============
7
LASER CORPORATION
Notes to Financial Statements
Note 1 - Organization
Laser Corporation is a Utah Corporation organized on January 12, 1983.
Due to the declines in sales at both operating subsidiaries American Laser,
incorporated in 1970, and American Laser Medical, Inc., incorporated in 1996,
the Company discontinued operations at both during 2003. As of September 30,
2003 both subsidiaries had ultimately been dissolved. On October 1, 2003 the
Company merged with BI Acquisitions, Inc.
BI Acquisitions, Inc. was organized in December 1999 and began operations
in January 2000. The Company provides satellite uplink services and related
equipment service, web hosting services, and video production services
primarily to large retailers, other businesses, and to a third party provider
of in-store music and video.
Note 2 - Stock Exchange
The Pro-forma statements reflect the Company's merger with BI
Acquisitions, Inc. (BI) as a wholly owned subsidiary by issuing 32,504,027
shares ("Initial Issuance") of the Company's authorized common stock to the
shareholders of BI in exchange for their interests in BI on October 1, 2003.
Because the Company's authorized number of shares of common stock is limited
to 40,000,000 shares, the Company was only able to complete the Initial
Issuance on October 1, 2003. Following the Initial Issuance, the former BI
shareholders held 81% of the issued and outstanding shares of the Company. In
addition, the Agreement provides that there will be an additional issuance
("Subsequent Issuance") of Common Stock of the Company to the shareholders of
BI following an amendment to the Articles of Incorporation of the Company to
accommodate such issuance. In anticipation of the consummation of the
Agreement, but not contingent upon the consummation, the Company issued
4,000,000 shares of common stock to two unrelated third parties in exchange
for $75,000 needed to satisfy outstanding payables obligations of the Company.
Including amounts issuable to the two unrelated third parties, the Subsequent
Issuance would consist of 139,598,650 shares. After the Subsequent Issuance,
all shares then owned by the BI shareholders and the unrelated third parties
described above, shall be 176,102,677 aggregating approximately 98% of the
then issued and outstanding shares of the Company and the other shareholders
of the Company on September 30, 2003 shall own 3,495,973 aggregating
approximately 2%.
This acquisition is accounted for as the recapitalization of BI, wherein
BI purchased the assets of Laser and accounted for the transaction as a
reverse acquisition for accounting purposes.
Pro forma adjustments on the financial statements include the following:
[A] To record the acquisition of BI Acquisitions, Inc. (BI) by Laser
Corporation through the issuance of 32,504,027 shares of common stock (Initial
Issuance). The ownership interests of the former owners of BI in the combined
enterprise will be greater than that of the ongoing shareholders of Laser
8
Corporation and accordingly, the management of BI will assume operating
control of the combined enterprise. Consequently, the acquisition is accounted
for as the recapitalization of BI, wherein BI purchased the assets of Laser
Corporation and accounted for the transaction as a "Reverse Acquisition" for
accounting purposes.
[B] To record the acquisition of BI Acquisitions, Inc, (BI) by Laser
Corporation through the issuance of an additional 139,598,650 shares of common
stock (Subsequent Issuance). The ownership interests of the former owners of
BI in the combined enterprise will be greater than that of the ongoing
shareholders of Laser Corporation and, accordingly, the management of BI will
assume operating control of the combined enterprise. Consequently, the
acquisition is accounted for as the recapitalization of BI, wherein BI
purchased the assets of Laser Corporation and accounted for the transaction as
a "Reverse Acquisition" for accounting purposes.
[C] To retire treasury stock held at BI.
[D] To eliminate the accumulated deficit of Laser Corporation at the date
of acquisition to reflect the purchase by BI for accounting purposes.
[E] To reclassify negative additional paid-in-capital as accumulated
deficit. Negative additional paid-in-capital resulted from the
recapitalization adjustments associated with the reverse acquisition.
[F] To reclassify amounts in the December 31, 2002 statement of
operations of Laser Corporation to reflect the discounted operations of its
two operating subsidiaries during 2003 and to conform to the presentation in
the September 30, 2003 statement of operations of Laser Corporation.
9
Haynie & Company
Certified Public Accountants
1785 West Printers Row
Salt Lake City, Ut 84119
(801) 972-4800
Fax: (801) 972-8941
To the Board of Directors and Shareholders:
BI Acquisitions, Inc.
Salt Lake City, Utah
We have audited the accompanying balance sheets of BI Acquisitions, Inc.
(d.b.a. Broadcast International) as of December 31, 2002 and 2001, and the
related statements of operations, changes in stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion of these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
a material respects, and the financial position of BI Acquisitions, Inc., as
of December 31, 2002, and 2001, and the results of its operations, changes in
its stockholders' equity, and its stockholders' equity, and its cash flows for
the years then ended in conformity with accounting principles generally
accepted in the United States of America.
/s/ Haynie & Company
Salt Lake City, Utah
February 5, 2003
(March 20, 2003 as to Note 9 - Subsequent event)
10
BI Acquisitions, Inc.
d.b.a. Broadcast International
BALANCE SHEET
December 31 2002 2001
------------- -------------
ASSETS:
Current Assets
Cash and cash equivalents $ 316,166 $ 859,456
Trade accounts receivable, net 546,052 463,443
Income taxes receivable 521,760 -
Prepaid expense 160,689 145,632
------------- -------------
Total current assets 1,544,667 1,468,531
Property and Equipment
Furniture and fixtures 61,288 40,420
Machinery and equipment 1,749,211 1,165,950
Accumulated depreciation (497,844) (239,416)
------------- -------------
Property and equipment, net 1,312,655 966,954
Other assets
Intangible licensing rights, at cost 1,325,000 -
Investment in Interact Devices, at cost 400,000 -
Deferred income tax asset 129,340 -
Deposits and other assets 60,824 59,989
Equity investment in unconsolidated entities - 162,376
------------- -------------
Total other Assets 1,915,164 222,365
------------- -------------
Total Assets $ 4,772,486 $ 2,657,850
============= =============
11
BI Acquisitions, Inc.
d.b.a. Broadcast International
BALANCE SHEETS
December 31 2002 2001
------------- -------------
LIABILITIES:
Current Liabilities
Accounts payable $ 148,497 $ 144,348
Accrued liabilities:
Payroll and related expenses 234,898 163,061
Other accrued expenses 55,039 70,572
Unearned revenues 363,618 164,943
Income taxes - 83,895
Deferred income tax liability 123,780 53,956
Current portion of long-term obligations 86,548 206,198
------------- -------------
Total current liabilities 1,012,380 886,973
Long-term obligations 4,786 110,981
Deferred income tax liability - 75,650
Deferred bonus payable 480,000 -
------------- -------------
Total Liabilities 1,497,166 1,073,604
------------- -------------
STOCKHOLDERS EQUITY:
Common stock, $.001 par value; 15,000,000
shares authorized, 9,285,000 and 6,702,728
shares issues in 2002 and 2001, respectively 9,285 6,703
Additional paid-in capital 3,348,727 744,328
Retained earnings (deficit) (82,467) 833,437
Treasury stock at cost (225) (222)
------------- -------------
Total stockholders' equity 3,275,320 1,584,246
------------- -------------
Total liabilities and stockholders' equity $ 4,772,486 $ 2,657,850
============= =============
(see the accompanying notes to financial statements)
12
BI Acquisitions, Inc.
d.b.a. Broadcast International
Statement of Operations
For the years ended December 31 2002 2001
------------- -------------
Net Sales $ 5,031,178 $ 5,359,297
Cost of Sales 4,398,548 4,008,663
------------- -------------
Gross profit 632,630 1,350,634
Operating Expenses:
Administrative and general 1,240,697 668,941
Selling and marketing 593,676 274,648
Production and maintenance 218,893 -
------------- -------------
Total Operating Expenses 2,053,266 943,589
------------- -------------
Total operating income (loss) (1,420,636) 407,045
------------- -------------
Other income (expense)
Interest income 5,661 29,606
Interest expense (20,466) (40,857)
(Loss) from equity investments in
unconsolidated entities (29,550) (80,250)
Other income 13,363 69,649
------------- -------------
Income (loss) before income taxes (1,451,628) 385,193
Provision for income taxes
Current tax (benefit) expense (400,558) 242,403
Deferred tax expense (benefit) (135,166) (95,379)
------------- -------------
Total provision for income taxes (535,724) 147,024
------------- -------------
Net income (loss) $ (915,904) $ 238,169
============= =============
(see the accompanying notes to financial statement)
13
BI Acquisitions, Inc.
d.b.a. Broadcast International
Statements of Changes in Stockholders' Equity
For the years ended December 31, 2002 and 2001
Additional Retained Total
Common Common Paid-in Treasury Earnings Stockholders'
Shares Stock Capital Stock (Deficit) Equity
------------ ------------ ----------- ----------- ----------- -------------
<s> <c> <c> <c> <c> <c> <c>
Balance at January 1, 2001 4,000,000 $ 4,000 $ 93,240 $ - $ 595,268 $ 692,508
Common shares issued to
Broadcast International, LTD 874,711 875 652,916 - - 653,791
Purchase of treasury
stock at cost - - - (222) - (222)
Stock split (1.375 shares
for each share outstanding) 1,828,017 1,828 (1,828) - - -
Net Income - - - - 238,169 238,169
------------ ------------ ----------- ----------- ---------- -------------
Balance at December 31, 2001 6,702,728 6,703 744,328 (222) 833,437 1,584,246
Common Shares issued to
Broadcast International, LTD - 2,582 2,604,399 - - 2,606,981
Purchase of treasury
stock at cost - - - (3) - (3)
Net (loss) - - - - (915,904) (915,904)
------------ ------------ ----------- ----------- ----------- -------------
Balance at December 31, 2002 6,702,728 $ 9,285 $3,348,727 $ (225) $ (82,467) $ 3,275,320
============ ============ =========== =========== =========== =============
(See the accompanying notes to financial statements)
14
BI Acquisitions, Inc.
d.b.a. Broadcast International
Statements of Cash Flows
For the years ended December 31 2002 2001
------------- -------------
Cash flows from operating activities:
Net income (loss) $ (915,904) $ 238,169
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation 258,428 181,545
Deferred income tax expense (benefit) (135,166) (95,379)
Loss from equity investments in
unconsolidated entities - 80,250
Deferred bonus payable 480,000 -
(Increase) decrease in operating assets:
Accounts receivable (82,609) 228,160
Other accounts receivable - 4,822
Income taxes receivable (521,760) 87,656
Prepaid expenses (15,057) (15,062)
Other assets (835) -
Increase (decrease) in operating liabilities:
Accounts payable 4,149 (201,048)
Accrued liabilities 56,304 37,840
Unearned revenues 198,675 109,943
Income taxes payable (83,895) 63,574
------------- -------------
Net Cash provided (used) by operations (757,670) 720,470
Cash Flows from investing activities:
Purchase of interest in Interact Devices, Inc. (400,000) -
Purchase of intangible licensing rights (1,325,000) -
Equity investments in unconsolidated entities - (224,126)
Purchase of property and equipment (441,753) (469,162)
------------- -------------
Net Cash (used) by investing activities (2,166,753) (693,288)
Cash flows from financing activities:
Net proceeds from issuance of common stock 2,606,981 533,791
Payments to reduce long-term obligations (225,845) (205,455)
Purchase of treasury stock (3) (222)
------------- -------------
Net cash provided by financing activities 2,381,133 328,114
Net increase (decrease) in cash and equivalents (543,290) 355,296
Cash and equivalents, beginning of year 859,456 504,160
------------- -------------
Cash and equivalents, end of year $ 316,166 $ 859,456
============= =============
Supplemental disclosures of cash flow information:
Interest paid 20,466 40,857
Income taxes paid - 70,851
(see the accompanying notes to financial statements)
15
BI Acquisitions, Inc.
d.b.a. Broadcast International
Notes to Financial Statements
Note 1 - Organization
BI Acquisitions, Inc. (the Company) was organized in December 1999 and began
operations in January 2000. The Company provides satellite uplink services
and related equipment service, web hosting services, and video production
services primarily to large retailers, other businesses, and to a third party
provider of in-store music and video.
On July 31, 2000, the Company purchased certain assets and assumed certain
liabilities of Broadcast International, including the right to use its name,
trademarks, and copyrights from the parent company of Broadcast International,
Data Broadcasting Corporation, in exchange for 400,000 shares of the Company's
common stock. In addition, Data Broadcasting Corporation was granted options
to purchase an additional 110,000 shares pursuant to the Option Plan (see Note
6) of the Company.
Note 2 - Significant accounting policies
Management estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could
differ from those estimates.
Cash and cash equivalents - The Company considers all cash on hand and in
banks, and highly liquid investments with maturity of three months or less to
be cash equivalents. At December 31, 2002 and 2001 the Company had bank
balances in excess of amounts insured by the Federal Deposit Insurance
Corporation totaling $216,166 and $759,456, respectively.
Trade accounts receivable and concentrations - The Company trade accounts
receivable are shown in the accompanying balance sheet net of its allowance
for uncollectable accounts of $42,360 and $36,100 as of December 31, 2002 and
2001, respectively. The Company accounts receivable include two customers
whose combined balances represent approximately 77% of trade receivables, and
who related sales revenues account for approximately 72% of total revenues at
December 31, 2002.
Property and equipment - Property and equipment are stated at cost.
Depreciation is provided using the straight-line method over the estimated
useful lives of the property, generally from three to five years. Repairs and
maintenance costs are expensed as incurred except when such repairs
significantly add to the useful life or productive capacity of the asset, in
which case the repairs are capitalized.
Goodwill and other intangible assets - Goodwill and other intangible assets
are being accounted for in accordance with Statement of Financial Accounting
Standards Statement 142, oodwill and Other Intangible Assets (SFAS 142).
Under SFAS 142, goodwill is not subject to amortization but is tested for
impairment annually. In addition, under SFAS 142 intangible assets are
amortized over their useful lives except where such intangible assets are
determined to have indefinite useful lives
16
and accordingly no amortization is made. The Company accounts for its
investments in licensing rights as intangible assets not subject to
amortization.
Income taxes - The Company accounts for income taxes in accordance with the
asset and liability method of accounting for income taxes prescribed by
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Under the asset and liability method of Statement 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to the taxable income in the years in which those temporary differences
are expected to be recovered or settled.
Advertising expenses - The Company follows the policy of charging the costs of
advertising to expense as incurred. Advertising expense for the years ended
December 31, 2002 and 2001 was $48,727 and $79,745, respectively.
Note 3 - Investment in Interact Devices, Inc., related to intangible assets,
and deferred income
The Company has purchased preferred stock in a privately held company,
Interact Devices, Inc., a California corporation (Interact). There is no
established market value for the preferred shares. Accordingly, Management
does not believe that there is any impairment in the carrying value of the
stock.
Interact has developed state-of-the-art computer processing to continuously
optimize compression and delivery of audio and video media. Interact Devices
technology employs standard industry compression/decompression algorithms
(CODECs), and delivers superior quality video using existing legacy
communications channels. The Company has purchased licensing rights for
$1,325,000 for the technology (hardware and software) for Mexico, Central and
South America, and Asia. Under the terms of the agreement, the Company may
renew its licensing agreements by making minimum renewal payments beginning in
2005. The initial rights will be amortized over a two- year period beginning
with the delivery of the customer ready product anticipated in spring 2003.
Additionally, the Company has entered in a sub-licensing agreement for its
Mexico rights for a period of two years in the amount of $1,000,000. It
received payments totaling $200,000 in November 2002, and has recorded
deferred revenues for the 22 month remaining payments to be made in March and
September 2003, in the amounts of $150,000 and $600,000, respectively.
Future minimum licensing renewal fees to be paid and sub-licensing fees to be
received at December 31, 2002, are as follows:
Licensing Sub-licensing
fees to fees due
Interact Company
(to be paid) (to be received)
------------- ---------------
2005 $ 700,000 $ 500,000
2006 1,050,000 750,000
2007 1,650,000 1,000,000
Thereafter 2,000,000 1,250,000
17
Using the present value of expected future cash flows, Management believes
that its intangible licensing rights fair value exceeds the carrying costs.
The Company will reassess annually its accounting treatment of these
intangible assets. Should it be determined that the useful lives or the fair
value of these intangible assets are impaired, the Company will record an
impairment loss and will amortize the rights over their remaining useful
lives.
Note 4 - Long-term obligations
Long-term obligations arise from the acquisition of the assets and the
assumptions of certain liabilities in the acquisition of Broadcast
International. These obligations primarily include the present value of the
future obligation to provide office and warehouse space to and on behalf of
the seller, Data Broadcasting Corporation as follows:
December 31 2002 2001
------------- -------------
Long-term obligations requiring monthly payments
Totaling approximately $19,500 per month present
Valued at the rate of 9.5% annually $ 91,334 $ 317,179
Less portion considered current 86,548 206,198
------------- -------------
$ 4,786 $ 110,981
Future maturities of long-term obligation are as follows:
December 31
2003 $ 86,548
2004 4,786
2005 -
Note 5 - Income taxes
Income tax expense differs from the amount computed using federal statutory
rates due primarily to the Effects of state income taxes. Deferred income
taxes have been provided for the difference in the use of accelerated
depreciation methods, the use of the cash basis of accounting for income taxes
purposes, deferred bonus compensation, and for the effects of net operating
loss carryforwards. Amounts of tax deferred assets and liabilities are as
follows:
December 31 2002 2001
------------- -------------
Deferred tax assets, non-current $ 313,774 $ -
Deferred tax liabilities:
Current (123,780) (53,956)
Long-term (184,434) (75,650)
------------- -------------
Total deferred income tax assets (liabilities) $ 5,560 $ (129,606)
18
Net operating loss carry forwards of approximately $342,000, which will expire
in 2022, may be used to offset future taxable income. Management has
determined that no valuation allowance related to deferred tax assets is
necessary at December 31, 2002.
Note 6 - Common stock and stock purchase agreement - continued
The Company has one class of common stock. Holders of shares of common stock
are entitled to receive dividends if and when declared and are entitled to one
vote for each share on all matters submitted to a vote of the shareholders.
On December 15, 2001, the Company increased the total authorized shares
outstanding from 11,000,000 shares to 15,000,000 shares, and declared a 1.375
for 1 stock split for shareholders of record on October 31, 2001.
Additionally, the Company's Board of Directors declared that all options
issued, pursuant to the Company's stock option plan, as of October 31, 2001,
would be revalued and included in the 1.375 for 1 stock split and that the
exercise price would be reduced by the 1.375 factor. After the effects of the
above actions at December 31, 2001, the Company had common stock reserved for
issuance pursuant to the stock option plan totaling 1,701,375 shares.
On December 20, 2000, the Company entered into a stock purchase agreement with
Broadcast International, LTD (BI-LTD), a British Virgin Islands corporation,
to purchase 3,337,727 shares of the Company's common stock. As of December 31,
2001 the Company had received $533, 791 net of costs and commissions, pursuant
to the agreement and has issued 1,058,353 shares (after the above split). The
stock purchase agreement was to have expired on December 31, 2001, however,
the Company's Board of Directors agreed to extend the agreement allowing
BI-LTD to purchase 1,514,423 additional shares on or before January 31, 2002,
for $1,050,000, which shares were purchased as agreed. Additionally, the
Company's Board of Directors has amended the stock purchase agreement to allow
BI-LTD to purchase an additional 1,927,244 shares for $2,890,835, subject to a
purchase-funding schedule under which all shares must be funded on or before
December 31, 2002.
The terms of the above agreement provides for a bonus payable to certain
employee/shareholders totaling $600,000. Accordingly, based on the
proportionate amount of funds provided by the agreement, management has
declared a bonus in the amount of $480,000. Management has determined that the
payment of this bonus is to be long-term, and has classified this obligation
accordingly. Should the full amount of the stock purchase agreement be funded,
management may increase the accrued bonus in the remaining amount of $120,000.
Under the terms of the stock purchase agreement, a shareholder voting
agreement has been executed. This agreement requires certain controlling
shareholders to elect seven directors of the Company, three of who shall be
appointed by BI-LTD. The agreement further requires that these shareholders
vote in favor of any transaction brought before the Board of Directors, which
seeks to result in the Company becoming a publicly traded entity except,
should such transaction result in a dilution to the existing shareholders in
excess of 10%. Should BI-LTD fail to fully fund the stock purchase agreement
the shareholder voting agreement shall cease.
Note 7 - Stock Option Plan
The Company sponsors a stock option plan covering certain key employees. In
addition, the Company has granted options to Data Broadcasting Corporation as
discussed in Note 1 and to a third party for services rendered. Options to
purchase
19
shares of the Company's common stock are granted at a price not less than 100%
of the estimated market price on the date granted. Options generally may be
exercised six months after the date granted and expire ten years after being
granted except to stockholders who own greater than 10% of the outstanding
shares of the Company, which options expire 5 years after being granted.
Options granted are vested on a three-year vesting schedule, one-third each
year. Should an employee terminate before the vesting period has ended the
Company has the right to repurchase the non-vested shares. At December 31,
2002 and 2001, the Company had granted 1,815,045 and 1,701,387 options,
respectively, and with weighted average prices per share of $0.154 and $0.095,
respectively.
Weighted
Average
Options Exercise
Outstanding Price
------------- -------------
Outstanding at December 31, 2000 1,526,250 $ 0.042
Shares granted to employees 177,887 0.548
Shares surrendered (2,750) 0.081
Outstanding at December 31, 2001 1,701,387 0.095
Shares granted to employees 225,150 0.906
Shares surrendered (111,492) 0.781
------------- -------------
Outstanding at December, 31, 2002 1,815,045 $ 0.154
Note 8 - Retirement plan
The Company has implemented a 401(k) employee retirement plan. Under the terms
of the plan, participants may elect to contribute a portion of their
compensation, generally up to 60%, to the plan. The Company matches
contributions up to 100% of the first 3% of participant's compensation
contributed to the plan and 50% of the next 2%. Employees are eligible to
participate in the plan after three months of service as defined by the plan.
For the year ended December 31, 2002 and 2001, the Company made matching
contributions totaling $90,823 and $79,745, respectively.
Note 9 - Subsequent event (dated March 20, 2003)
The Company entered into offer to purchase 3,000,000 shares of the outstanding
common stock of Interact Devices, Inc. (Interact see Note 3) on March 20,
2003, for $3,000,000. With the execution of the offer, the Company paid
$40,000 to the sellers with the agreement to pay an additional $260,000 on or
before June 18, 2003, subject to the satisfactory completion of due diligence
by the Company. Upon the satisfactory completion of the due diligence the
Company is to issue promissory notes to the sellers due on or before June 18,
2004, in the amount of $2,700,000. Should the Company not make any payments
when due, the agreement shall expire and all amounts paid will be forfeited.
After completion of the purchase agreement the Company will own approximately
33% of the outstanding voting common stock of Interact. In addition, if the
purchase agreement is completed, the Company will control through a voting
trust approximately 60% of the outstanding voting common stock of Interact
until June 18, 2004, when the voting trust will be dissolved.
20
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
LASER CORPORATION
Date: December 10, 2003 /s/ Rodney M. Tiede
____________________________________
Rodney M. Tiede
Chief Executive Officer, President
and Director
Date: December 10, 2003 /s/ Randy L. Turner
____________________________________
Randy L. Turner
Chief Financial Officer
and Director