UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2002
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE EXCHANGE ACT
For the transition period from _______ to ______
Commission File No. 1-11642
LASER TECHNOLOGY, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 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
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 of 15(d) of the Exchange Act during the past 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 January 31, 2003, 5,486,217 shares of common stock of the Registrant were
outstanding.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|.
INDEX
PART I: FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements............................................. 2
Consolidated Balance Sheets................................ 3
Consolidated Statements of Operations...................... 4
Consolidated Statements of Cash Flows...................... 5
Notes to Consolidated Financial Statements................. 6
Item 2. Management's Discussion and Analysis or Plan of Operation 10
Results of Operations...................................... 10
Liquidity and Capital Resources............................ 11
Risk Factors and Cautionary Statements..................... 12
Item 3. Controls and Procedures 12
PART II: OTHER INFORMATION
Item 1. Legal Proceedings................................................ 13
Item 2. Changes in Securities and Uses of Proceeds....................... 13
Item 3. Defaults Upon Senior Securities.................................. 14
Item 4. Submission of Matters to a Vote of Security Holders.............. 14
Item 5. Other Information................................................ 14
Item 6. Exhibits and Reports in Form 8-K................................. 15
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LASER TECHNOLOGY, INC.
Consolidated Balance Sheets
ASSETS
December 31, September 30,
2002 2002
---- ----
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 4,109,450 $ 3,612,637
Trade accounts receivable, less allowance
for doubtful accounts of $29,088 and $25,088
at December 31, 2002 and September 30, 2002, respectively 1,762,212 1,835,641
Royalties receivable 0 475,245
Inventories 2,976,365 2,846,880
Deferred income tax benefit 222,884 236,903
Prepaids and other current assets 113,210 95,210
Income tax prepayment 13,787 13,787
----------- -----------
Total Current Assets 9,197,908 9,116,303
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 482,520 540,085
----------- -----------
OTHER ASSETS 1,030,170 1,037,260
----------- -----------
TOTAL ASSETS $10,710,598 $10,693,648
----------- -----------
See accompanying notes to the consolidated financial statements
2
LASER TECHNOLOGY, INC.
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, September 30,
2002 2002
---- ----
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 626,569 $ 651,996
Accrued expenses 285,531 268,076
------------ ------------
Total Current Liabilities 912,100 920,072
------------ ------------
TOTAL LIABILITIES 912,100 920,072
------------ ------------
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 5,710,867 and 5,486,217 outstanding 57,109 57,109
Additional paid-in capital 10,314,226 10,314,226
Treasury stock at cost, 224,650 shares (194,259) (194,259)
Retained earnings (deficit) (378,578) (403,500)
------------ ------------
Total Stockholders' Equity 9,798,498 9,773,576
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 10,710,598 $ 10,693,648
------------ ------------
See accompanying notes to the consolidated financial statements
3
LASER TECHNOLOGY, INC.
Consolidated Statements of Operations
For the Three Months Ended
December 31, 2002 and 2001
(Unaudited)
Three Months Ended
December 31,
------------
2002 2001
---- ----
NET SALES $2,645,324 $ 2,466,079
LESS COST OF GOODS SOLD 1,241,956 1,188,354
---------- -----------
Gross Profit 1,403,368 1,277,725
ROYALTY AND LICENSING INCOME 192,598 221,710
---------- -----------
TOTAL OPERATING INCOME 1,595,966 1,499,435
OPERATING EXPENSES 1,568,378 1,685,795
---------- -----------
INCOME (LOSS) FROM OPERATIONS 27,588 (186,360)
OTHER INCOME (EXPENSE), NET 11,353 28,487
---------- -----------
INCOME (LOSS) BEFORE CHANGES IN ACCOUNTING ESTIMATE 38,941 (157,873)
CHANGES IN ACCOUNTING ESTIMATE INCOME/(EXPENSE) 0 (14,945)
---------- -----------
INCOME (LOSS) BEFORE TAXES ON INCOME 38,941 (172,818)
TAXES ON INCOME (BENEFIT) 14,019 (62,214)
---------- -----------
NET INCOME (LOSS) $ 24,922 $ (110,604)
========== ===========
BASIC EARNINGS (LOSS) PER
COMMON SHARE $ 0.00 $ (0.02)
========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 5,486,217 5,486,217
========== ===========
DILUTED EARNINGS (LOSS) PER
COMMON SHARE $ 0.00 $ (0.02)
========== ===========
DILUTED AVERAGE SHARES
OUTSTANDING 6,424,717 5,486,217
========== ===========
See accompanying notes to the consolidated financial statements
4
LASER TECHNOLOGY, INC.
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the Three Months Ended December 31, 2002
and December 31, 2001
(Unaudited)
December 31, December 31,
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 24,922 $ (110,604)
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 106,964 132,104
Write down of Patent 0 14,945
Changes in operating assets and liabilities:
Trade accounts and royalty receivable 548,674 670,739
Inventories (129,485) 326,635
Deferred income tax benefit 14,019 0
Other assets (17,999) 70,616
Accounts payable and accrued expenses (7,972) (376,740)
----------- -----------
Net cash provided by (used in) operating activities 539,123 727,695
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Patent costs paid (14,331) (9,088)
Purchases of property and equipment (27,979) (22,249)
----------- -----------
Net cash provided by (used in) investing activities (42,310) (31,337)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt and capital leases 0 (6,056)
----------- -----------
Net cash used in financing activities 0 (6,056)
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 496,813 690,302
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 3,612,637 1,641,586
----------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 4,109,450 $ 2,331,888
=========== ===========
See accompanying notes to the consolidated financial statements
5
LASER TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
(Information for the three months ended December 31, 2002 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., Light Solutions Research, Inc. 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
month periods ended December 31, 2002 and 2001, (b) the consolidated financial
position at December 31, 2002, and (c) the consolidated statements of cash flows
for the three month periods ended December 31, 2002 and 2001. 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,
2002. 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
SFAS No. 128 provides for the calculation of "Basic" and "Diluted" income (loss)
per share. Basic income (loss) 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 income (loss) per share
reflects the potential dilution of securities that could share in the earnings
of an entity that were outstanding for the period. Common stock equivalents are
not included in the computation of Diluted earnings per share for the three
months ended December 31, 2001 because they are antidilutive.
The following is provided to reconcile the earnings per share calculation:
Three Months Ended
December 31,
------------
2002 2001
---- ----
Basic Earnings Per Common Share:
Numerator
Net Income (Loss) $ 24,922 $ (110,604)
Denominator
Weighted Average Shares 5,486,217 5,486,217
---------- -----------
Per Share Amounts
Basic Earnings (Loss) $ 0.00 $ (0.02)
========== ===========
Diluted Earnings Per Common Share:
Numerator
Net Income (Loss) $ 24,922 $ (110,604)
Denominator
Weighted Average Shares 5,486,217 5,486,217
Employee & Non Employee
Stock Options 938,500 0
---------- -----------
6,424,717 5,486,217
Per Share Amounts
Basic Earnings (Loss) $ 0.00 $ (0.02)
========== ===========
6
c. Operating Segments
The Company's primary operating segments for the three months ended
December 31, 2002 and 2001 were as follows:
Three Months Ended
December 31, 2002
Professional
Traffic Safety Measurement Other Royalties Total
-------------- ----------- ----- --------- -----
Net sales ............................................... 1,714,366 685,697 245,261 2,645,324
Cost of goods sold ...................................... 802,656 312,175 127,125 1,241,956
Sales and marketing expenses ............................ 471,226 140,762 26,581 638,569
Gross margin (after sales and marketing expenses)........ 440,484 232,760 91,555 764,799
Royalty and licensing income ............................ 192,598 192,598
Total other operating expenses .......................... 929,809
Income (loss) from operations ........................... 27,588
Other income (expense), net ............................. 11,353
Income (loss) before taxes on income .................... 38,941
Taxes on income (benefit) ............................... 14,019
Net income (loss) ...................................... 24,922
Three Months Ended
December 31, 2001
Professional
Traffic Safety Measurement Other Royalties Total
-------------- ----------- ----- --------- -----
Net sales ............................................... 1,652,523 546,767 266,789 2,466,079
Cost of goods sold ...................................... 808,125 255,716 124,513 1,188,354
Sales and marketing expenses ............................ 491,082 190,487 30,689 712,258
Gross margin (after sales and marketing expenses)........ 353,316 100,564 111,587 565,467
Royalty and licensing income ............................ 221,710 221,710
Total other operating expenses .......................... 973,537
Income (loss) from operations ........................... (186,360)
Other income (expense), net ............................. 28,487
Changes in Accounting Estimates (expense) ............... (14,945)
Income (loss) before taxes on income .................... (172,818)
Taxes on income (benefit) ............................... (62,214)
Net income (loss) ....................................... (110,604)
d. Recent Accounting Pronouncements
On August 16, 2001, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting for
Asset Retirement Obligations," which is effective for fiscal years beginning
after June 15, 2002. It requires that obligations associated with the retirement
of a tangible long-lived asset be recorded as a liability when those obligations
are incurred, with the amount of the liability initially measured at fair value.
Upon initially recognizing an accrued retirement obligation, an entity must
capitalize the cost by recognizing an increase in the carrying amount of the
related long-lived asset. Over time, the liability is accreted to its present
value each period, and the capitalized cost is depreciated over the useful life
of the related asset. Upon settlement of the liability, an entity either settles
the obligation for its recorded amount or incurs a gain or loss upon settlement.
We currently expect that the effect of SFAS No. 143 on our consolidated
financial statements will not be significant.
7
In October 2001, the FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. Although SFAS 144
supersedes SFAS 121, it retains many of the fundamental provisions of SFAS 121.
SFAS 144 also supersedes the accounting and reporting provisions of Accounting
Principles Board Opinion No. 30, Reporting-the Results of Operations-Reporting
the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions, for the disposal of a
segment of a business. However, it retains the requirement in APB 30 to report
separately discontinued operations and extends that reporting to a component of
an entity that either has been disposed of, by sale, abandonment, or in a
distribution to owners, or is classified as held for sale. SFAS 144 is effective
for fiscal years beginning after December 15, 2001 and interim periods within
those fiscal years. We believe SFAS 144 will not have a significant effect on
our consolidated financial statements.
In April 2002, the FASB issued Statement No. 145 "Rescission of FASB Statements
No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical
Corrections" (SFAS 145). SFAS 145 will require gains and losses on
extinguishments of debt to be classified as income or loss from continuing
operations rather than as extraordinary items as previously required under
Statement of Financial Accounting Standards No. 4 (SFAS 4). Extraordinary
treatment will be required for certain extinguishments as provided in APB
Opinion No. 30. SFAS 145 also amends Statement of Financial Accounting Standards
No. 13 to require certain modifications to capital leases be treated as a
sale-leaseback and modifies the accounting for sub-leases when the original
lessee remains a secondary obligor (or guarantor). SFAS 145 is effective for
financial statements issued after May 15, 2002, and with respect to the impact
of the reporting requirements of changes made to SFAS 4 for fiscal years
beginning after May 15, 2002. The adoption of the applicable provisions of SFAS
145 did not have an effect on our financial statements.
In June 2002, the FASB issued Statement No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS 146 nullifies Emerging Issues
Task Force Issue No. 94-3 "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." SFAS 146 applies to costs associated with
an exit activity that does not involve an entity newly acquired in a business
combination or with a disposal activity covered by SFAS 144. SFAS 146 is
effective for exit or disposal activities that are initiated after December 31,
2002, with earlier application encouraged.
In October 2002, the FASB issued Statement No. 147 "Acquisitions of Certain
Financial Institutions - an amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9" (SFAS 147). SFAS 147 removes acquisitions of financial
institutions from the scope of both Statement 72 and Interpretation 9 and
requires that those transactions be accounted for in accordance with FASB
Statements No. 141, Business Combinations, and No. 142, Goodwill and Other
Intangible Assets. Thus, the requirement in paragraph 5 of Statement 72 to
recognize (and subsequently amortize) any excess of the fair value of
liabilities assumed over the fair value of tangible and identifiable intangible
assets acquired as an unidentifiable intangible asset no longer applies to
acquisitions within the scope of this Statement. In addition, this Statement
amends FASB Statement No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, to include in its scope long-term customer-relationship
intangible assets of financial institutions such as depositor- and
borrower-relationship intangible assets and credit cardholder intangible assets.
Consequently, those intangible assets are subject to the same undiscounted cash
flow recoverability test and impairment loss recognition and measurement
provisions that Statement 144 requires for other long-lived assets that are held
and used. SFAS 147 is effective October 1, 2002. The adoption of the applicable
provisions of SFAS 147 did not have an effect on our consolidated financial
statements.
In December 2002, the FASB issued Statement No. 148 "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123" (SFAS 148). SFAS 148 provides alternate methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, this Statement amends the disclosure
requirements of Statement 123 to require
8
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reporting results. SFAS 148 is effective for fiscal years
beginning after December 15, 2003. We are currently reviewing SFAS 148.
NOTE 2 - Subsequent Events
Not applicable.
NOTE 3 - Equity Incentive Plan
In 1994, we adopted an equity incentive plan. This employee plan provides for
the issuance of options to our key employees and consultants to purchase up to
an aggregate of 530,000 shares of our common stock at the fair market value at
the date of grant. Fair market value is based on the closing sale price of the
common stock on the American Stock Exchange on such date. The employee plan also
allows for the grant of stock options, restricted stock awards, stock units,
stock appreciation rights and other grants to all of our eligible employees and
consultants.
On February 24, 1998, stockholders approved a proposal to amend the employee
plan. For each fiscal year beginning October 1, 1997 and through the fiscal year
beginning October 1, 2003 (seven years), a number of shares of stock equal to
two percent of the total number of issued and outstanding shares of stock as of
September 30 of the fiscal year immediately preceding such year, shall become
available for issuance under the plan. In addition, any unused portion of shares
of stock remaining from those reserved as of September 30, 1997 and any unused
portion of the two percent limit for any fiscal year shall be added to the
aggregate number of shares of stock available for issuance in each fiscal year
under the plan. In no event, subject to certain adjustments, will more than
1,000,000 shares of stock be cumulatively available for issuance pursuant to the
exercise of incentive options.
As of December 31, 2002, the total number of shares of common stock subject to
all awards under the employee plan could not exceed 1,000,000.
As of December 31, 2002, options to purchase 788,500 shares of our common stock
were outstanding, at exercise prices ranging from $1.38 to $5.25 per share of
which 704,167 options were exercisable at December 31, 2002. The options are
non-transferable and primarily vest annually in three equal installments over a
three year period. The options expire five or ten years from the date of grant
or, if sooner, three months after the holder ceases to be an employee (subject
to certain exceptions contained in the employee plan).
Non-Employee Director Stock Option Plan
In 1994, we adopted a stock option program for non-employee directors. The
director plan provides for the grant of options to purchase 30,000 shares of our
common stock at the effective date of the plan to each member of our Board of
Directors who is not an employee, and a grant of options to purchase 30,000
shares to each non-employee director who is newly elected to the Board after the
effective date of the plan. The maximum number of shares that may be subject to
options issued under the director plan was initially 120,000. The exercise price
in each case is the fair market value of the common stock on the date of grant,
determined in the same manner as under the employee plan.
On April 21, 2000 the shareholders approved the amendment to the director plan
to increase the number of shares available for issuance under the plan by
120,000 shares. As of December 31, 2002, pursuant to the amended plan, options
to purchase 30,000 shares have been granted to each outside director at exercise
prices ranging from $1.19 to $1.75 per share. Options granted under the director
plan vest one-third each year for three years and expire five or ten years after
the date of grant, or, if sooner, three months after the holder ceases to be a
director (subject to certain exceptions contained in the plan). At December 31,
2002, 150,000 options were outstanding and 100,000 were exercisable pursuant to
the director plan.
9
The total number of shares and type of security subject to these plans and to
any awards under these plans are subject to adjustment in the case of stock
splits, stock dividends and similar actions by us.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations for the Three Months Ended December 31, 2002 and December
31, 2001
For the three-month periods ended December 31, 2002 and 2001, the following
table provides the percentage relationship to net sales of principal items in
our Consolidated Statements of Operations. It should be noted that percentages
discussed throughout this analysis are stated on an approximate basis.
Three Months Ended
December 31,
------------
2002 2001
---- ----
Net sales 100% 100%
Cost of goods sold 47 48
--- ---
Gross profit 53 52
Royalty and licensing income 7 9
--- ---
Total operating income 60 61
Operating expenses 59 68
--- ---
Income from operations 1 (7)
Interest income, net 0 1
--- ---
Income before changes in accounting estimates and taxes 1 (6)
Tax (benefit) expense 0 (3)
--- ---
Net income (loss) 1% (3)%
=== ===
Revenues
The following sales analysis provides information as to the percentage of net
sales of our primary product lines. Revenues realized from sales of less
significant revenue producing product lines are classified as "Other" for
presentation purposes.
Three Months Ended
December 31,
------------
2002 2001
---- ----
Traffic Safety Systems $1,714,366 $1,652,523
Percentage of revenues 65% 67%
Professional Measurement Systems 685,697 546,767
Percentage of revenues 26% 22%
Other 245,261 266,789
Percentage of revenues 9% 11%
Total Revenues $2,645,324 $2,466,079
========== ==========
Total revenues for the first quarter ended December 31, 2002 increased 7% to
$2,645,324 from $2,466,079
10
realized in the first quarter ended December 31, 2001. Increased sales of our
Traffic Safety and Professional Measurement products offset a slight decline of
our other sales.
Traffic Safety sales during the first quarter ended December 31, 2002 increased
4% to $1,714,366 from $1,652,523 realized in the prior year first quarter. North
American sales increased 17% to $1,097,767 from $938,851. Sales of our new
UltraLyte LRB and UltraLyte Compact products released at the end of fiscal 2002
contributed to the gain. International sales of Traffic Safety products declined
14% to $616,599 from $713,672 due to the delay in shipment of a large order
during the quarter.
Sales of our Professional Measurement products increased 25% to $685,697 in the
quarter ended December 31, 2002 compared to $546,767 realized in the like period
a year earlier. North American sales increased 11% to $326,922 from $295,511
reflecting focused sales and marketing efforts in previously under represented
territories. International sales increased 43% to $358,775 from $251,256
reflecting first time sales of Professional Measurement products into regions in
Asia.
International sales comprised 37% of net sales for the quarter ended December
31, 2002 compared to 40% for the corresponding quarter ended December 31, 2001.
Total International sales for the first quarter were $982,874 compared to
$990,035 for the prior year first quarter or less than a 1% decrease.
Gross profit as a percentage of net sales was 53% for the quarter ended December
31, 2002 compared to 52% for the quarter ended December 31, 2001. Consolidating
our office space has decreased our overhead that had a positive impact on gross
profit and offset some lower margin international sales this quarter.
Royalty and licensing income from our licensees decreased 13% to $192,598 in the
quarter ended December 31, 2002 compared to $221,710 in the quarter ended
December 31, 2001. Lower royalties reflected adjustments for product returns to
our licensee during the quarter. Management believes that royalty income related
to our licensing agreements will continue to beneficially impact operating
results.
Total operating expenses decreased 7% to $1,568,378 for the quarter ended
December 31, 2002 from $1,685,795 for the quarter ended December 31, 2001. The
decrease in operating expenses is primarily due to lower legal expenses related
to patent litigation, reduced rent expense, a temporary reduction in sales
personnel and lower marketing expenses. These reductions were partially offset
by additional expenses such as those associated with the formation of the
Special Committee of the Board of Directors, their legal fees, and outside
financial appraisal advice. Total expenses associated with the evaluation of the
proposals received for the quarter were approximately $95,000 and we anticipate
additional expenses in the second quarter until the process is complete. Total
operating expenses as a percentage of net sales decreased to 59% from 68% for
the first quarter.
With an increase in sales, a higher gross profit and a decline in operating
expenses we realized income from operations of $27,588 compared to a loss from
operations of $186,360 for the quarter ended December 31, 2001. After other
income and income tax, we posted a net income of $24,922 in the quarter ended
December 31, 2002, or earnings of $.00 per share, compared to a net loss of
$110,604 in the quarter ended December 31, 2001, or $.02 loss per share.
Liquidity and Capital Resources
Our net working capital at December 31, 2002 was $8,285,808 compared to working
capital of $8,196,231 at September 30, 2002, an increase of $89,577. Current
assets exceeded current liabilities by a ratio of 10 to 1. Furthermore, the acid
test ratio (ratio of current assets minus inventories and prepaid expenses to
liabilities) was in excess of 6 to 1. Thus, the present working capital is
expected to adequately meet our needs for at least the next twelve months.
11
An increase in other assets of $17,999 and inventory of $129,485 were the
largest operating activities requiring financing. A decrease in accounts payable
and accrued expenses required an additional $7,972. Adjustments to reconcile net
income to cash provided by operating activities were depreciation and
amortization of $106,964. The operating activities that provided cash were net
income of $24,922, a reduction in accounts receivables of $548,674 and a
decrease in deferred income tax benefit of $14,019.
For the quarter ended December 31, 2002, cash used in investing activities of
$42,310 was due to the purchase of property and equipment of $27,979 and
capitalized patent costs of $14,331. Cash provided by operating activities of
$539,123, reduced by expenditures on investing activities resulted in a net
increase in cash and equivalents of $496,813. When added to cash on hand at the
beginning of the quarter, total cash and equivalents at December 31, 2002 stood
at $4,109,450. Thus, cash and equivalents alone comfortably exceeded total
liabilities of $912,100 at the end of the period.
Our net working capital at December 31, 2001 was $8,206,521 compared to working
capital of $8,201,411 at September 30, 2001, an increase of $5,110. Current
assets exceeded current liabilities by a ratio of 15.9 to 1. Furthermore, the
acid test ratio was in excess of 8 to 1.
A reduction in accounts payable and accrued expenses of $376,740 and a net loss
of $110,604 were the largest items that required funding. Patent and long-term
debt costs required an additional $15,144 of funding. Adjustments to reconcile
net income to cash provided by operating activities were depreciation and
amortization of $132,104, and a write down of Patents of $14,945. The operating
activities that provided cash were a reduction of inventory of $326,635 and a
reduction in accounts receivables of $670,739. The only other item that
increased cash was a decrease in prepaid expenses of $70,616.
For the quarter ended December 31, 2001, a net cash decrease of $31,337 from
investing activities was due to the purchase of property and equipment of
$22,249 and patent costs of $9,088. After expenditures on investing activities,
long-term debt and capital leases of $37,393, the increase from operating
activities of $727,695 was reduced to reflect a net increase in cash and
equivalents of $690,302. When added to cash on hand at the beginning of the
quarter, total cash and equivalents at December 31, 2001 stood at $2,331,888.
Thus, cash and equivalents alone comfortably exceeded total liabilities of
$552,178 at the end of the period.
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. Readers are
advised 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 our 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 our periodic report filings with the
SEC.
ITEM 3. Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that
information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms. All such information is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate, to allow timely decisions regarding required disclosure based
closely on the definition of "disclosure controls and procedures" in Rule
13a-14(c). In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives. Accordingly, management necessarily was required to
apply its judgement in evaluating the cost-
12
benefit relationship of possible controls and procedures.
Evaluation of Disclosure Controls and Procedures. Based on an evaluation under
the supervision and with the participation of the our management as of a date
within 90 days prior to the filing date of this Quarterly Report on Form 10-QSB,
our principal executive officer and principal financial officer have concluded
that our disclosure controls and procedures (as defined in Rules 13a-14(c) and
15d-14(c) under the Securities Exchange Act of 1934), are effective to ensure
that information required to be disclosed in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in SEC rules and forms.
Changes in Internal Controls. There were no significant changes in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation. There were no significant
deficiencies or material weaknesses, and therefore there were no corrective
actions taken. However, the design of any system of controls is based in part
upon certain assumptions about the likelihood of future events and there is no
certainty that any design will succeed in achieving its stated goal under all
potential future considerations, regardless of how remote.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On February 8, 2000, we filed a complaint against Nikon, Inc. ("Nikon") in U.S.
District Court for the District of Colorado (Civ. No. 00-B-272) for selling and
using a product infringing one of our patents. On July 26, 2000, we amended the
complaint to include allegations that Nikon's conduct infringed a second patent
obtained by us. On August 9, 2000, Nikon filed an answer and counterclaims,
seeking a declaratory judgment that Nikon did not infringe the patents, that the
patents are invalid and unenforceable, and that Nikon has been damaged by
willful and unfounded assertions of infringement by us. The counterclaims do not
quantify the damages sought.
On January 23, 2001, we amended the complaint to add manufacturer Asia Optical
Co., Inc. ("Asia Optical") as a defendant. On May 24, 2001, we amended the
complaint to include allegations that Nikon and Asia Optical infringed a third
patent obtained by the Company.
We are vigorously prosecuting the lawsuit. Discovery has closed in this matter,
and the Court recently construed the patent claims and ruled on motions for
summary judgment. The Court denied motions for summary judgment with respect to
certain claims and granted Defendants summary judgment as to literal
non-infringement on certain claims. Additionally, the Court granted summary
judgment in favor of us with respect to Defendants counterclaims alleging that
the patents in suit are invalid. The case is presently scheduled for trial as to
literal infringement on certain claims and infringement under doctrine of
equivalents as to all claims in April 2003.
In March 2002, Bushnell Performance Optics of Overland Park, Kansas filed a
lawsuit against us in the District Court of Johnson County, Kansas (Case No. 02
CV 1498). The lawsuit alleges breach of contract and unauthorized surcharges on
a certain technical component. Bushnell is asking for $350,000 in damages. We
have filed with the Court an answer containing several counterclaims whereby we
allege, among other claims, a breach of contract by Bushnell, fraud and
defamation, and also ask for an injunction against Bushnell. Although management
believes Bushnell's suit is without merit and that we will prevail, settlement
discussions have been initiated with the possibility of obtaining a business
resolution as an alternative to a lengthy legal proceeding. Notwithstanding the
lawsuit, we continue to conduct business with Bushnell under the terms of our
current contract.
Item 2. Changes in Securities and Use of Proceeds
This Item is not applicable to the Company.
13
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 security holders, through the
solicitation of proxies or otherwise, during the first quarter ended December
31, 2002.
Item 5. Other Information
On September 26, 2002, a Schedule 13D was filed with the SEC by David Williams,
former President of Laser Technology, on behalf of a shareholder group. Included
in the group filing the Schedule 13D are three of our current directors, Jeremy
G. Dunne, H. Deworth Williams and Edward F. Cowle, and Pamela Sevy our former
CFO. In its Schedule 13D, the group states that it is exploring the possibility
of acquiring the operating assets, and assuming the indebtedness, of Laser
Technology, or exploring some other alternative for the acquisition of our
operating business.
On September 27, 2002, the group delivered a proposal to us in the form of a
letter of intent. Under the terms of the proposed transaction, the group
proposes to acquire all of our tangible and intangible assets and our
subsidiaries, except for cash and cash equivalent assets. Subject to certain
adjustments, the group proposes to pay us approximately $3,650,000 in cash and
to assume essentially all of our liabilities and those of our subsidiaries,
except liabilities incurred after the date of the letter of intent, which are
not in the ordinary course of business. As a condition of its offer and
concurrent with its purchase of non-cash assets, the group proposes that we will
pay a cash dividend to our common stockholders of $1.10 per share. The group has
also expressed its intent to continue the day-to-day operations of our business
following consummation of a transaction. At December 31, 2002, we had 5,486,217
common shares outstanding and cash and equivalents totaling $4,109,450.
Our Board of Directors has appointed a Special Committee of nonparticipating
directors to review the proposal and to retain independent legal counsel and
investment advisors as necessary. The Special Committee has retained Andersen,
Weinroth & Co., L.P., a New York based merchant-banker, as its financial advisor
to assist in evaluating the proposal. The advisors will also participate in
examining any other proposals or strategic alternatives to maximize shareholder
value.
The buyer group has indicated that if the proposed acquisition is completed, it
anticipates asking our current President, Eric Miller, to remain as part of the
management group of the acquired business. The group has agreed to extend the
date for acceptance of its letter of intent until such time as the Special
Committee and its financial advisor have completed their evaluation of the terms
of the proposal. If the letter of intent is accepted by us, the parties will
then have 30 days thereafter to execute a definitive agreement
On December 9, 2002 we received a proposal from Decatur Electronics, Inc. for
the purchase of all of our issued and outstanding shares of common stock.
Decatur, a manufacturer and marketer of radar-based measurement systems and
accessories located in Decatur, Illinois, is not related to the previous letter
of intent received from the Williams group.
The Decatur proposal is in the form of a letter of intent and proposes to
acquire all of our issued and outstanding shares of common stock at a tentative
price of $1.20 per share. The purchase of shares would be financed by the
prospective buyer's cash assets and potential bank financing. Decatur gave us
until December 20, 2002 to respond to the proposed letter of intent. The
proposed letter of intent is subject to review by the Special Committee of
nonparticipating directors that is also reviewing the Williams group proposal.
The proposal is also subject to successful completion of adequate due diligence
by the prospective buyer and the purchase price could be subject to adjustment
due to the results of the due diligence by the buyer.
14
The Special Committee has notified both Decatur and the Williams group that the
Committee deems their offers to be inadequate. Both parties have responded back
to the Committee that they are willing to re-evaluate their proposals and
Decatur has indicated that it will continue to work with the committee beyond
the December 20, 2002 deadline set forth in its letter of intent. There can be
no assurance that either proposal will result in a definitive agreement or that
any prospective suitor will be able to secure adequate cash or requisite bank
financing to finalize a purchase or similar transaction. The Special Committee
will incur certain expenses, including legal and investment consultants, in
connection with the evaluation of these proposals.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 99.1 Certification of C.E.O. Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
Exhibit 99.2 Certification of C.F.O. Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
(b) Reports on Form 8-K
On December 20, 2002, a report on Form 8-K was filed with the SEC
reporting certain restated financial information under Item 5.
15
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 TECHNOLOGY, INC.
7070 South Tucson Way
Englewood, Colorado 80112
Date: February 14, 2003 By /s/ Eric A. Miller
- ----------------------- ------------------
Eric A. Miller
Chief Executive Officer, President and Director
Date: February 14, 2003 By /s/ Elizabeth A. Hearty
- ----------------------- ------------------------
Elizabeth A. Hearty
Chief Financial Officer, Treasurer and Secretary
16
Certifications
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Eric A. Miller, Chief Executive Officer of Laser Technology, Inc. (the
"registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Laser
Technology, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and
have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: February 14, 2003
/s/ ERIC A. MILLER
Eric A. Miller
Chief Executive Officer
17
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Elizabeth A. Hearty, Chief Financial Officer of Laser Technology, Inc. (the
"registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Laser Technology,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: February 14, 2003
/s/ ELIZABETH A. HEARTY
Elizabeth A. Hearty
Chief Financial Officer
1