-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HpXFd8MQlyxOSVGBS1gIEeon70l+exbSHS0fFvLrTOkmtsPPLvAaLghDDR4BHIB6 ilXzlz0n60DRJYIN/I1CKw== 0000096313-01-500011.txt : 20010402 0000096313-01-500011.hdr.sgml : 20010402 ACCESSION NUMBER: 0000096313-01-500011 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LASER CORP CENTRAL INDEX KEY: 0000740726 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 870395567 STATE OF INCORPORATION: UT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-13316 FILM NUMBER: 1586642 BUSINESS ADDRESS: STREET 1: 2417 SOUTH 3850 WEST CITY: SALT LAKE CITY STATE: UT ZIP: 84120 BUSINESS PHONE: 8019721311 MAIL ADDRESS: STREET 1: 1832 SOUTH 3850 WEST CITY: SALT LAKE CITY STATE: UT ZIP: 84104 10KSB 1 laser10ksb.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-KSB (Mark One) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2000 ----------------------------------------------------- Commission File No. 0-13316 ------------------------------------------------------------ LASER CORPORATION - -------------------------------------------------------------------------------- (Name of small business issuer in its charter) Utah 87-0395567 - -------------------------------- --------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 2417 South 3850 West, Salt Lake City, Utah 84120 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: (801) 972-1311 --------------------------- Securities registered under Section 12(b) of the Exchange Act: Title of each class Name of each exchange on which registered (None) (None) - ----------------------------------- ---------------------------------- Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $.05 per share - ------------------------------------------------------------------------------- (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 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 Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] Issuer's revenues for its most recent fiscal year. $4,091,833 ------------- As of March 9, 2001, 1,630,107 shares of Common Stock were outstanding. The aggregate market value of the shares held by non-affiliates of the registrant (based upon closing price of $4.75 per share of these shares on March 9, 2001) was approximately $3,769,581. Documents Incorporated by Reference: Proxy Statement for the May 17, 2001 Annual Meeting of Shareholders which Registrant intends to file pursuant to Regulation 14(A) by a date no later than 120 days after December 31, 2000. If such definitive Proxy Statement is not filed in that 120-day period, the information called for by Part III will be filed as an amendment to this Form 10-KSB not later than the end of the 120-day period (Part III of this report). PART I ITEM 1. BUSINESS - ---------------- During 2000, Laser Corporation was engaged in the business of designing, manufacturing, marketing and servicing laser products through its wholly-owned subsidiary, American Laser Corporation and in the business of designing and marketing medical laser systems through its wholly-owned subsidiary, American Laser Medical, Inc. Laser Corporation is a Utah corporation organized on January 12, 1983. Unless the context indicates otherwise, all references to the "Company" include Laser Corporation and its subsidiaries. American Laser Corporation ("American Laser") was incorporated in June 1970 and became a wholly-owned subsidiary of Laser Corporation in August 1984. American Laser designs, manufactures, markets and services lasers and related laser systems which are purchased primarily by original equipment manufacturers ("OEM"). These OEMs then manufacture equipment that incorporates the lasers as component parts. In June 1996, the Company established its medical subsidiary, American Laser Medical, Inc. (doing business as A.R.C. Laser Corporation, and hereafter in this document refer to as "ARC"). ARC designs and markets retail medical laser systems for the ophthalmic and dermatological marketplace. American Laser Software, Inc., the Company's developmental stage subsidiary established in June 1996, has been inactive since 1998. The Company's 2000 Annual Meeting of Stockholders was held on May 25, 2000. At that meeting, the proposed slate of Directors was elected. Medical Laser Systems and Laser Products ---------------------------------------- The Company produces or purchases for resale from both affiliated and unaffiliated suppliers a range of medical laser systems and disposable products. The Company's ophthalmic medical laser systems include the Dodick Laser PhotoLysis System for use in cataract removal, for which the Company has exclusive distribution rights for certain markets, a photodisruptor system which is used to perform posterior capsulotomies and other microsurgeries and a photocoagulator system used in the treatment of diabetic retinopathy. Additionally, the Company offers a line of Dodick Laser PhotoLysis accessories and disposable products. The Company's diode pumped solid state laser based cutaneous system is used in dermatology for removal of vascular and pigmented lesions. The Company also produces commercial laser systems, laser sub-systems and laser tubes for its OEM customers. These laser tubes are typically filled with argon, krypton/argon or krypton gas for its OEM customers. Such products are often customized in order to meet the power output and performance specifications required by the customer's application. The Company's laser products are now or have been used in confocal microscopes, ophthalmic photocoagulators, laser based printers, dentistry, entertainment and other commercial, scientific and medical applications. The Company also provides repair and refurbishment services to customer owned laser products. Such "service sales" typically entail the replacement or repair of component parts comprising the laser products or its sub-assemblies. Page 2 of 14 Company procedures include performing quality tests on its medical laser systems and laser products prior to their shipment. The Company's "Terms and Conditions of Sale" offer a standard product warranty against defects in materials and workmanship for a period of one year from the date of original shipment, although warranty terms, or the level of warranty coverage and the warranty period, are subject to negotiation. Currently, the Company's largest customer, company A, has modified warranty terms and warranty periods. At December 31, 2000, the reserve for anticipated warranty expenses for Company products which had been sold as of that date was $140,000, although no assurance can be given that this reserve will be adequate to cover the actual warranty expenses. The Company's medical laser systems are serviced and repaired either at their point of use, at the Company's Salt Lake City, Utah facility, or at the manufacturers facility, when applicable. The Company's laser products are generally returned for service or repair to the Salt Lake City, Utah facility. Sales and Marketing ------------------- Medical Laser Systems During the past year management has continued to expanded the Company's business into retail medical laser systems for use in ophthalmology and dermatology. For the year ended December 31, 2000, medical sales accounted for 39% of the Company's sales as compared to 25% of 1999 sales. The Company has agreements, both verbal and written, with A.R.C. Laser GmbH, Eckental Forth, Germany and A.R.C. Laser AG, Jona, Switzerland, companies owned and controlled by Reinhardt Thyzel, a director and the majority shareholder of the Company and/or his family, wherein the Company and A.R.C. Laser GmbH and A.R.C. Laser AG will offer for sale the products of the other. The Dodick Laser PhotoLysis System is owned by A.R.C. Laser AG, and the Company through agreement has exclusive distribution rights to sell the System and its associated products in the United States, Canada, Brazil and Mexico. Clearance from the Food and Drug Administration ("FDA") was received on June 29, 2000, to market the Dodick Laser PhotoLysis System in the United States. In addition to exhibiting its products at major conventions and advertising in trade publications, the Company offers its medical products though independent sales agents and distributors. The Company will continue the process of expanding its sales efforts if and when additional sales agents, distributors, or strategic partners are identified and qualified. The Company typically invoices the retail purchaser of its medical laser systems on a 10% down, balance due on installation and in-service training, but such terms can vary. Payment on approved credit terms to distributors and others is generally net 30 days after date of invoice, but such terms can vary. Payment on approved credit terms to purchasers of Dodick Laser PhotoLysis accessories and disposable products is generally net 30 days after date of invoice, but such terms can vary. Collection of trade accounts receivable typically occurs within 30 to 45 days. Laser Products In the past, essentially all of the Company's sales have been to OEM customers. OEM customers manufacture equipment of which the Company's laser products are a component part. As each OEM customer has unique needs and product Page 3 of 14 requirements, the Company markets its laser products and services directly by executive, sales, and engineering management. For many years, the Company has been and remains substantially dependent upon a limited number of OEM customers for sales of its laser products and service sales. The Company believes that future sales of its laser products and service sales will depend upon its ability to attract and maintain a variety of volume OEM customers which require its laser products. However, there can be no assurance that the Company will be successful in these efforts, or that its competitors, customers or others will not introduce products or technologies superior to those of the Company or produce comparable products at lower prices, in which case the Company's business could be adversely affected. In addition, rapid technological advances made by competitors, customers, or others could make the product lines obsolete. Also, overall customer demand for OEM laser products may continue to decrease as a result of their replacement by superior, alternative, or lower cost products and technologies. OEM customers typically fulfill their laser product requirements by placing purchase orders with the Company. OEM customer purchase orders and laser product sales can be expected to fluctuate in part due to (i) changes in the quantity of Company products held in inventory by its customers, (ii) changes in end user demand for customer products which use the Company's laser products, (iii) the competitiveness, cost and customer use of alternative products, technologies or suppliers, and (iv) other factors. The Company typically invoices its laser product customers upon product shipment. Payment on approved credit terms is generally due in 30 days after date of invoice, but such terms can vary, especially in the case of foreign sales. Collection of trade accounts receivable typically occurs within 30 to 45 days after invoice. For the year ended December 31, 2000, two companies accounted for more than 10% of the Company's sales. Company A accounted for 39% and Company B accounted for 17% of the Company's 2000 sales. For the year ended December 31, 1999, Company A accounted for 44% and Company B accounted for 7% of the Company's 1999 sales. The Company's order backlog of medical systems and new laser product orders as of December 31, 2000 was approximately $832,105, as compared to approximately $597,200 on December 31, 1999. Foreign Sales ------------- For the year 2000, the Company sold a majority of its OEM and medical products to customers in Europe and other foreign countries. The Company's largest customers for both its OEM and medical laser products in 2000 were foreign. Foreign sales to these customers, accounted for approximately 39% and 17%, respectively, of the Company's sales during 2000. Total sales to all foreign customers accounted for approximately 57% of the Company's total sales. (See Note 14 to Consolidated Financial Statements for further discussion). Manufacturing and Suppliers --------------------------- The Company relies upon affiliated and unaffiliated suppliers for systems, sub-systems, accessories, disposable products and components used in its laser and medical products. Currently, certain items are available from a limited number of suppliers or a sole supplier. The Company has experienced Page 4 of 14 problems in obtaining certain required components and products. The Company believes that its operations could be adversely affected in the event that it is unable to obtain the required products or components on a timely basis from its suppliers. The Company maintains an inventory of laser components and medical components, subassemblies and systems. The Company generally produces or purchases its products in response to customer orders. The Company's raw material inventory at December 31, 2000 was $509,851, with an allowance of obsolete inventory of $350,000, work in process inventory was $300,428, and $167,785 in finished goods inventory. Competition ----------- The laser products and medical laser systems markets are complex and fragmented as a result of the specialized nature of laser products and medical laser systems and the various applications required by purchasers. Rapid technological advances and intense competition are characteristic of the laser products and medical laser systems industries. The Company is subject to the risk that its competitors or certain of its customers may introduce products or technologies which are superior to those of the Company or produce products at lower prices, which could make its products obsolete. The Company is also subject to the risk that customer products which incorporate its OEM lasers products may become obsolete or may be redesigned, eliminating the need for its products. The principal competitive factors for its OEM laser products are technology, price, service, quality, performance and ability to meet customer specifications. The principal competitive factors for medical laser systems are the product's technological capabilities and proven clinical ability, price, service, quality, and scope of regulatory approval. Future sales are in a large part dependent on the success of the introduction of new or improved laser products and medical laser systems and on the Company's ability to become and remain competitive in the medical marketplace. In addition, future laser products sales are dependent on the Company's OEM customers remaining competitive in their marketplace. There can be no assurance that the Company's competitors, customers or others will not develop products or technologies which could render the products of the Company obsolete. If such products or technologies were successfully developed, continued sales of the existing products could rapidly diminish, in which case the Company's business, results of operations or ability to maintain or increase its market share could be adversely affected. Certain of the Company's current or future competitors have substantially greater financial, technical, manufacturing, marketing and other resources as well as a broader range of products than the Company. There can be no assurance that competition will not adversely affect the Company's business, results of operations, or ability to maintain or increase it market share which could be adversely affected. Patents, Licenses and Trade Secrets ----------------------------------- Although the Company owns certain domestic patents relating to laser technology, the Company believes that the ownership of patents is not essential Page 5 of 14 to its current OEM laser products operations. However, the Company's future success may depend, in part, on its ability to operate and introduce new products without infringing on the rights of third parties. The Company entered into a license agreement in March 1989 with Patlex Corporation which requires the Company to pay royalties based on a percentage of net sales of laser products covered by certain patents. The Company believes, but can give no assurance, that the suppliers of its diode pumped solid state lasers, which is used in certain of its medical laser products, is adequately and appropriately licensed to manufacture and sell such devices. Government Regulation --------------------- Laser products manufactured by the Company are subject to the requirements of the Center for Devices and Radiological Health ("CDRH") of the FDA. The CDRH is the Federal government body primarily responsible for the regulation and administration of laser technology and related products. The CDRH has issued laser radiation safety regulations which require certain laser manufacturers and end users to file new product and annual reports, to maintain records of sales and quality control results, conduct proper testing, and to incorporate certain design and operating features, including warning labels and protective devices in all lasers sold to end users. The regulations required generally do not apply to OEM laser products which are incorporated as components in laser-based end products. The Company's medical laser systems, with applications in the fields of dermatology and ophthalmology, are regulated as medical devices by the FDA and the CDRH under the federal Food, Drug and Cosmetic Act. As such, these devices require premarket clearance by the FDA prior to domestic commercialization. The FDA classifies medical devices in commercial distribution into one of three classes: Class I, II or III. This classification is based on the control the FDA deems necessary to reasonably ensure the safety and effectiveness of medical devises. The Company's laser based medical products are classified as Class II devices. If a manufacturer of a medical device can establish that a proposed device is "substantially equivalent" to a legally marketed Class II medical device, the manufacturer may seek FDA premarket clearance for the device by filing a submission of a premarket notification to the CDRH, Office of Device Evaluation, in accordance with Section 510(k) of the federal Food, Drug, and Cosmetic Act. The Company submitted the required Section 510(k) premarket notifications to the FDA and the CDRH seeking classification of both its argon gas, krypton gas and diode pumped solid state laser systems for ophthalmic and dermatological applications and received its 510(k) clearances to market these systems. On June 29, 2001, clearance to market the Dodick Laser PhotoLysis System in the United States was received from the FDA. The Company and its medical products manufactured pursuant to a 510(k) premarket clearance notification are, or will, be subject to continuing regulation by the FDA and must comply with all applicable requirements of the FDA on an ongoing basis. The federal Food, Drug, and Cosmetic Act also requires the Company to manufacture its products in registered establishments and in accordance with the Quality System Requirements of the Current Good Manufacturing Practices (CGMP), 21 CFR 820 (Technical equivalent to the ISO 9001 & ISO/DIS 13485). The Company's facilities in the United States are subject to periodic inspections by the FDA. Page 6 of 14 Certain of the Company's medical products manufactured and sold in foreign countries are required to comply with the European Community's Medical Device Directive ("MDD") (93/42/EEC). In addition, certain non-medical lasers sold in foreign countries are required to comply with the European Community's Electromagnetic Compatibility Directive (89/336/EEC) and Low Voltage Directive (72/23/EEC). The Company has received its applicable certification of compliance on a number of its products and others are currently in process. The above Directives also require the Company to have its products manufactured in registered establishments and in accordance with the harmonized quality system standards (ISO 9000 series). The compliance to such standards is determined by audit from a "notified" body and through periodic surveillance. Although the Company believes that it currently complies and will continue to comply with the applicable regulations, such regulations are always subject to change. Regulations, such as ISO 9001, require a more difficult and time consuming level of compliance and therefore the Company cannot assure that it will meet all these regulations in a timely manner. In addition there can be no assurance that future changes in law, regulations, review guidelines, administrative interpretations by the FDA, any international governing agency or other regulatory bodies will not adversely affect the Company. Product Development ------------------- The Company continues to be engaged in the development of medical laser systems and laser products. In 2000, the Company maintained its narrowed engineering focus to that of laser-based ophthalmic and dermatological medical systems and to a lesser extent to the product needs of certain of its OEM laser products customers. The Company booked expenses of $261,368 in 2000 and $463,805 in 1999 on research and development activities. Insurance --------- The Company carries product liability insurance on its laser products and medical laser systems to a maximum of $4,000,000. Compliance with Environment Laws -------------------------------- The costs and effects of compliance with environmental laws (federal, state, and local) to and on the Company have been minimal. Employees --------- On December 31, 2000, the Company had 29 full-time equivalent employees: 2 in general and administrative services, 19 in manufacturing and support services, 4 in Engineering, and 4 in management and marketing. Page 7 of 14 ITEM 2. DESCRIPTION OF PROPERTIES - ---------------------------------- The Company's administrative offices and assembly facilities for its laser products are located in a building of approximately 32,300 square feet located in Salt Lake City, Utah. The Company has a ten year lease, commencing May 1, 1999, with an unrelated party. The annual base rent for this facility is $239,421. The Company believes that these facilities are currently more than adequate for its activities. Item 3. LEGAL PROCEEDINGS - -------------------------- There are no pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ Not applicable. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - ----------------------------------------------------------------- The Company's common stock is traded on the OTC Bulletin Board under the symbol LSER. The following table sets forth the prices for the periods as indicated. The high and low sales price are used in reporting. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. High Low ---- --- 2000 First quarter $ 11.50 $ 4.875 ---- Second quarter 8.00 5.625 Third quarter 10.25 7.00 Fourth quarter 9.25 6.00 1999 First quarter $ 1.875 $ 1.25 ---- Second quarter 3.125 1.375 Third quarter 5.375 2.125 Fourth quarter 4.9375 3.875 As of December 31, 2000 there were approximately 500 beneficial holders of the Company's Common Stock. The Company did not pay cash dividends on its common stock in 2000 and it does not anticipate paying any cash dividends thereon in the foreseeable future. On October 9, 1998, the Company issued 521,739 shares of its common stock to Reinhardt Thyzel for the purchase price of $600,000. No underwriters were engaged to sell the stock and no underwriting discounts or commissions were paid. The securities were offered pursuant to an exception from registration under Section 4(2) of the Securities Act of 1933. Mr. Thyzel is a sophisticated investor who has dealt with the Company for several years. He is also a resident Page 8 of 14 of Switzerland. In September, 1999, the Company issued 170,000 shares of its common stock to six European investors for the total aggregate purchase price of $272,000. In October, 1999, the Company issued 10,000 shares of its common stock to one investor for the purchase price of $16,000. During March and April 2000, the Company issued 10,750 shares of its common stock to six European investors for the total aggregate purchase price of $80,517. No underwriters were engaged to sell the stock and no underwriting discounts or commissions were paid. The securities were offered pursuant to an exception from registration under Section 4(2) of the Securities Act of 1933. The proceeds of all the offerings were used for working capital purposes. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. - ------------------------------------------------------------------- This report contains certain forward-looking statements and information relating to the Company that are based on the beliefs of management as well as assumptions made by, and information currently available to management. Such statements reflect the current view of the Company respecting future events and are subject to certain risks, uncertainties, and assumptions, including the risks and uncertainties noted throughout the document. Although the Company has attempted to identify important factors that could cause the actual results to differ materially, there may be other factors that cause the forward-looking statements not to come true as anticipated, believed, projected, expected, or intended. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those described herein as anticipated, believed, projected, estimated, expected, or intended. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere herein. Results of Operations --------------------- Net sales for the year ended December 31, 2000, were $4,036,071 as compared to $3,798,413 for the same period in 1999, an increase of $237,658 or 6%. This increase was the result of an increase in medical product sales during the year ended December 31, 2000. Medical product sales for the year ended December 31, 2000, were $1,569,163 as compared to $960,084 for the same period in 1999, an increase of $609,079 or 63%. The increase in medical product sales was partially offset by decreases in laser product and service sales during the same period. Laser product and service sales decreased from $2,838,328 during 1999 to $2,466,908 for the period ending December 31, 2000, a decrease of $371,420 or 13%. Cost of products sold for the year ended December 31, 2000 were $3,298,302 as compared to $3,272,031 for the same period in 1999, an increase of $26,271 or 1%, which was primarily due to increased sales. As a percentage of net sales, cost of products sold was 82% for the year ended December 31, 2000 as Page 9 of 14 compared to 86% for the same period in 1999. This decrease as a percentage was primarily the result of the increased medical product sales and its effect on product mix, and to increases in the sales price of select OEM laser products. Selling, general, and administrative expenses for the year ended December 31, 2000 were $1,123,473 as compared to $1,121,119 for the same period in 1999, an increase of $2,354 or less than 1%. This slight increase was primarily a result of increases in medical products marketing and sales activities and to sales commissions which were offset by decreases in other general and administrative cost and expenses. Research and development expenditures for the year ended December 31, 2000 were $261,368 as compared to $463,805 for the same period in 1999, a decrease of $202,437 or 44%. This decrease was primarily a result of the Company narrowing its product development focus to that of medical laser systems and to the product needs of certain of its OEM laser product customers. Royalty expenses for the year ended December 31, 2000 were $31,127 as compared to $40,297 for the same period in 1999, a decrease of $9,170 or 23%. Interest and other revenue for the year ended December 31, 2000 was $55,762 as compared to $62,163 for the same period in 1999, a decrease of $6,401 or 10%. Interest expenses increased from $5,826 for the period ending December 31, 1999 to $23,221 for the same period ending December 31, 2000, an increase of $17,395 or $299%. This increase was primarily the result of interest expenses accrued on two convertible notes payable that the Company entered into during the year 2000. The Company recorded a one time non-recurring beneficial conversion feature interest expense of $162,500 on the two convertible notes payable entered into during 2000. The Company recognized a net loss for the year ended December 31, 2000 of $808,158 or $.50 per share as compared to a net loss of $1,161,505 or $.79 per share for the same period in 1999, an improvement of $353,347 or $.29 per share. This improvement was primarily a result of increased medical product sales, reduced research and development expenditures, sales price increases on select OEM laser products, and to the non-recurring write down of a Company investment during 1999. These improvements were partially offset by the one time non-recurring beneficial conversion feature interest expense of $162,500 on the two convertible notes payable that the Company entered into during the year ended December 31, 2000. On December 31, 2000 the Company had net operating loss carryforwards for tax purposes of approximately $6,680,000 available to offset future taxable income. The loss carryforwards will begin to expire in the year 2004. Liquidity and Capital Resources ------------------------------- On December 31, 2000, the Company had working capital of $72,663 as compared to $3,948 at December 31, 1999, an increase of $68,715. This increase in working capital was primarily the result of cash proceeds received from two Page 10 of 14 convertible notes payable totaling $500,000 and by the issuance and sale of the Company's common stock. The increase in working capital was partially offset by the Company's net loss from operations during the year ending December 31, 2000. Cash equivalents at December 31, 2000 were $38,600 as compared to $113,337 on December 31, 1999, a decrease of $74,737, or 66%. This decrease in cash equivalents was primarily the result of the Company's net loss from operations for the year 2000, which were partially offset by the cash proceeds received from the two convertible notes payable and by the issuance and sale of the Company's common stock. The Company is continuing to explore other sources for additional capital but has not entered into any agreements for additional sources of borrowing or capital other than that which has already been received through the convertible notes and the sale of the Company's common stock. ITEM 7. FINANCIAL STATEMENTS -------------------- The response to this item is submitted in a separate section of this report. See page F-1. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND - ------------------------------------------------------------------------ FINANCIAL DISCLOSURE -------------------- There has been no reported disagreement on any matter of accounting principles or material financial statement disclosures of a kind described in Item 304 of Regulation S-B. Page 11 of 14 PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE - -------------------------------------------------------------------------------- WITH SECTION 16(a) OF THE EXCHANGE ACT -------------------------------------- The information called for by this Item is incorporated by reference from the Company's definitive Proxy Statement which involves the election of Directors to be filed pursuant to Regulation 14A and which the Company intends to file with the Securities and Exchange Commission not later than 120 days after December 31, 2000, the end of the year covered by this Form 10-KSB. If such definitive Proxy Statement is not filed with the Securities and Exchange Commission within the 120-day period, the information called for by this Item will be filed as an amendment to this Form 10-KSB under cover of Form 8 not later than the end of the 120-day period. ITEM 10. EXECUTIVE COMPENSATION - -------------------------------- The information called for by this Item is incorporated by reference from the Company's definitive Proxy Statement which involves the election of Directors to be filed pursuant to Regulation 14A and which the Company intends to file with the Securities and Exchange Commission not later than 120 days after December 31, 2000, the end of the year covered by this Form 10-KSB. If such definitive Proxy Statement is not filed with the Securities and Exchange Commission within the 120-day period, the information called for by this Item will be filed as an amendment to this Form 10-KSB under cover of Form 8 not later than the end of the 120-day period. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------------------ The information called for by this Item is incorporated by reference from the Company's definitive Proxy Statement which involves the election of Directors to be filed pursuant to Regulation 14A and which the Company intends to file with the Securities and Exchange Commission not later than 120 days after December 31, 2000, the end of the year covered by this Form 10-KSB. If such definitive Proxy Statement is not filed with the Securities and Exchange Commission within the 120-day period, the information called for by this Item will be filed as an amendment to this Form 10-KSB under cover of Form 8 not later than the end of the 120-day period. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------------------------------------------------------- The information called for by this Item is incorporated by reference from the Company's definitive Proxy Statement which involves the election of Directors to be filed pursuant to Regulation 14A and which the Company intends to file with the Securities and Exchange Commission not later than 120 days after December 31, 2000, the end of the year covered by this Form 10-KSB. If such definitive Proxy Statement is not filed with the Securities and Exchange Commission within the 120-day period, the information called for by this Item will be filed as an amendment to this Form 10-KSB under cover of Form 8 not later than the end of the 120-day period. Page 12 of 14 PART IV ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K - ------------------------------------------- (a) Exhibits 3 (i) - *Articles of Incorporation, as amended (ii) - *Bylaws with amendments 4 (a) - *Specimen Stock Certificate (b) - *Convertible Promissory Note, payable to Reinhardt Thyzel, by the Company (c) - *Convertible Promissory Note, payable to Dr. Jack Dodick, by the Company 10(a) - *Lease Agreement between NP#2, LLC and Registrant (b) - *Stock Purchase Agreement dated as of August 5, 1998 between Reinhardt Thyzel and Registrant. (c) - *Incentive Stock Option Plan (d) - *Non-Statutory Stock Option Plan (e) - *1999 Stock Incentive Plan 21 - Statement re: Subsidiaries of the Registrant - ------------------ * Previously filed and incorporated herein by reference Page 13 of 14 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LASER CORPORATION By: /s/ B. Joyce Wickham Date March 29, 2001 ----------------------------------- ---------------------------- B. Joyce Wickham President & Chief Executive Officer In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Date --------- ---- /s/ B. Joyce Wickham March 29, 2001 - ---------------------------------------- ---------------------- B. Joyce Wickham President and Chief Executive Officer Treasurer and Director /s/ Mark L. Ballard March 29, 2001 - ---------------------------------------- ---------------------- Mark L. Ballard Vice President and Director /s/ Rod O. Julander March 29, 2001 - ---------------------------------------- ---------------------- Rod O. Julander Secretary and Director /s/ Reinhardt Thyzel March 29, 2001 - ----------------------------------- ---------------------- Reinhardt Thyzel Director /s/ Reo K. Larsen March 29, 2001 - -------------------------------- ---------------------- Reo K. Larsen Accounting Manager Page 14 of 14 LASER CORPORATION (use cover) Financial Statements December 31, 2000 and 1999 LASER CORPORATION AND SUBSIDIARIES Index to Consolidated Financial Statements - -------------------------------------------------------------------------------- Page ---- Independent auditors' report F-2 Consolidated balance sheet F-3 Consolidated statement of operations F-4 Consolidated statement of stockholders' equity F-5 Consolidated statement of cash flows F-6 Notes to consolidated financial statements F-8 F-1 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Laser Corporation We have audited the accompanying consolidated balance sheet of Laser Corporation and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Laser Corporation and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for the years then ended, in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 2, the Company incurred operating losses and has been unable to generate cash flows from operations for the years ended December 31, 2000 and 1999. In addition, the Company has a deficit in equity as of December 31, 2000. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. TANNER + CO. Salt Lake City, Utah February 16, 2001 F-2
LASER CORPORATION AND SUBSIDIARIES Consolidated Balance Sheet December 31, - ---------------------------------------------------------------------------------------------------------- 2000 1999 ----------------------------------- Assets ------ Current assets: Cash and cash equivalents $ 38,600 $ 113,337 Receivables, net 705,527 635,417 Inventories 628,064 749,411 Other current assets 40,681 16,887 ----------------------------------- Total current assets 1,412,872 1,515,052 Equipment and leasehold improvements, net 242,260 284,771 Other assets 37,656 43,068 ----------------------------------- $ 1,692,788 $ 1,842,891 ----------------------------------- - ---------------------------------------------------------------------------------------------------------- Liabilities and Stockholders' (Deficit) Equity ---------------------------------------------- Current liabilities: Accounts payable $ 912,101 $ 1,058,042 Accrued expenses 274,846 291,689 Accrued warranty expense 140,000 150,000 Current portion of long-term debt 13,262 11,373 ----------------------------------- Total current liabilities 1,340,209 1,511,104 ----------------------------------- Long-term debt 518,788 32,050 Commitments and contingencies - - Stockholders' (deficit) equity: Common stock, $.05 par value, 10,000,000 shares authorized; 1,624,859 and 1,590,038 shares issued, respectively 81,243 79,503 Additional paid-in capital 1,943,861 1,617,718 Accumulated deficit (2,191,313) (1,297,484) Treasury stock, at cost - (100,000) ----------------------------------- Total stockholders' (deficit) equity (166,209) 299,737 ----------------------------------- $ 1,692,788 $ 1,842,891 ----------------------------------- - ---------------------------------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. F-3
LASER CORPORATION AND SUBSIDIARIES Consolidated Statement of Operations Years Ended December 31, - ---------------------------------------------------------------------------------------------------------- 2000 1999 ----------------------------------- Revenues: Net sales $ 4,036,071 $ 3,798,413 Interest and other income 55,762 62,163 ----------------------------------- 4,091,833 3,860,576 ----------------------------------- Cost and expenses: Cost of products sold 3,298,302 3,272,031 Selling, general and administrative 1,123,473 1,121,119 Research and development 261,368 463,805 Write down of investment - 119,003 Royalties 31,127 40,297 Interest 23,221 5,826 Interest - beneficial conversion feature 162,500 - ----------------------------------- 4,899,991 5,022,081 ----------------------------------- Loss before income taxes (808,158) (1,161,505) Provision for income taxes - - ----------------------------------- Net loss $ (808,158) $ (1,161,505) ----------------------------------- Loss per share - basic and diluted $ (.50) $ (.79) ----------------------------------- Weighted average shares - basic and diluted 1,617,000 1,467,000 ----------------------------------- - ---------------------------------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. F-4
LASER CORPORATION AND SUBSIDIARIES Consolidated Statement of Stockholders' Equity (deficit) Years Ended December 31, 2000 and 1999 - ---------------------------------------------------------------------------------------------------------- Common Stock Additional Retained Treasury Stock ------------------------ Paid-In Earnings ---------------------- Shares Amount Capital (Deficit) Shares Amount Total ----------------------------------------------------------------------------------------- Balance at January 1, 1999 1,400,038 $ 70,003 $ 1,327,583 $ (135,979) 12,500 $ (100,000 $ 1,161,607 Issuance of common stock for cash 180,000 9,000 279,000 - - - 288,000 Exercise of stock options 10,000 500 11,135 - - - 11,635 Net loss - - - (1,161,505) - - (1,161,505) ----------------------------------------------------------------------------------------- Balance at December 31, 1999 1,590,038 79,503 1,617,718 (1,297,484) 12,500 (100,000) 299,737 Issuance of common stock for cash 10,750 537 79,980 - - - 80,517 Issuance of common stock payment of accrued expenses 11,155 558 38,492 - - - 39,050 Exercise of stock options 25,416 1,270 58,875 - - - 60,145 Beneficial conversion feature on convertible debt - - 162,500 - - - 162,500 Retirement of treasury stock (12,500) (625) (13,704) (85,671) (12,500) 100,000 - Net loss - - - (808,158) - - (808,158) ----------------------------------------------------------------------------------------- Balance at December 31, 2000 1,624,859 $ 81,243 $ 1,943,861 $ (2,191,313) - $ - $ (166,209) ----------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. F-5
LASER CORPORATION AND SUBSIDIARIES Consolidated Statement of Cash Flows Years Ended December 31, - ---------------------------------------------------------------------------------------------------------- 2000 1999 ----------------------------------- Cash flows from operating activities: Net loss $ (808,158) $ (1,161,505) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 74,916 124,419 Interest on beneficial conversion feature 162,500 - Provision for losses on accounts receivable 50,000 - Increase in reserve for inventory obsolescence 50,000 88,584 Write down of investment - 119,003 (Increase) decrease in: Receivables (120,110) (316,326) Inventories 71,347 129,727 Other assets (18,382) 23,978 Increase (decrease) in: Accounts payable and accrued expenses (123,734) 392,054 Accrued warranty expense (10,000) 35,000 ----------------------------------- Net cash used in operating activities (671,621) (565,066) ----------------------------------- Cash flows from investing activities- purchase of property and equipment (32,405) (142,820) ----------------------------------- Cash flows from financing activities: Payments on capital leases (11,373) (10,146) Proceeds from convertible notes payable 500,000 - Proceeds from issuance of common stock 140,662 299,635 ----------------------------------- Net cash provided by financing activities 629,289 289,489 ----------------------------------- Decrease in cash and cash equivalents (74,737) (418,397) Cash and cash equivalents, beginning of year 113,337 531,734 ----------------------------------- Cash and cash equivalents, end of year $ 38,600 $ 113,337 ----------------------------------- - ---------------------------------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. F-6
LASER CORPORATION AND SUBSIDIARIES Consolidated Statement of Cash Flows Continued - -------------------------------------------------------------------------------- Supplemental disclosure of noncash transactions: During the year ended December 31, 2000, the Company paid $39,050 of accrued directors fees and accrued vacation through the issuance of stock. During the year ended December 31, 1999 the Company purchased $53,569 of equipment with a capital lease. Supplemental disclosures of cash flow information: Years Ended December 31, ----------------------------------- 2000 1999 ----------------------------------- Interest paid $ 5,721 $ 5,826 ----------------------------------- Income taxes paid $ - $ - ----------------------------------- - -------------------------------------------------------------------------------- See accompanying notes to consolidated financial statements. F-7 LASER CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2000 and 1999 - -------------------------------------------------------------------------------- 1. Organization Organization and Principles of Consolidation and The consolidated financial statements include the Summary of accounts of Laser Corporation (Laser) and its Significant wholly-owned subsidiaries, American Laser Corporation Accounting (American Laser), American Laser Software, Inc. (ALS), Policies and American Laser Medical, Inc. dba A.R.C. Laser Corporation (ARC) (collectively the Company) located in Salt Lake City, Utah. All significant intercompany account balances and transactions have been eliminated in consolidation. The Company is engaged in designing, manufacturing, marketing and servicing of laser products and medical laser systems. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments with maturities of three months or less to be cash equivalents. Inventories Inventories are valued at the lower of cost or market, cost being determined on the first-in, first-out method. Equipment and Leasehold Improvements Equipment and leasehold improvements are recorded at cost, less accumulated depreciation. Depreciation on equipment and leasehold improvements is determined using the straight-line and declining balance methods over the estimated useful lives of the assets or terms of the lease. Expenditures for maintenance and repairs are expensed when incurred and betterments are capitalized. Gains and losses on sales of equipment and leasehold improvements are reflected in net income. Income Taxes Deferred income taxes are provided for temporary differences in reporting income for financial statement and tax purposes, arising primarily from depreciation and accrued liabilities. Warranty Costs The Company records the estimated cost of warranty obligations on laser products and medical laser systems at the time the related products are sold. - -------------------------------------------------------------------------------- F-8 LASER CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Continued - -------------------------------------------------------------------------------- 1. Organization Loss Per Common Share and The computation of basic loss per common share is based Summary of on the weighted average number of shares outstanding Significant during each year. Accounting Policies The computation of diluted earnings per common share is Continued based on the weighted average number of shares outstanding during the year, plus the common stock equivalents that would arise from the exercise of stock options and warrants outstanding, using the treasury stock method and the average market price per share during the year. Options to purchase 78,834 and 99,750 shares of common stock at prices ranging from $1.13 to $6.06 per share were outstanding at December 31, 2000 and 1999, respectively, but were not included in the diluted earnings (loss) per share calculation because the effect would have been antidilutive. Concentration of Credit Risk The Company designs, manufactures, markets and provides service on lasers and related laser systems which are primarily used by original equipment manufacturers in both domestic and foreign markets. These laser products are used in items such as printers, medical instruments, entertainment products and other applications. The Company grants credit in these markets without requiring collateral to substantially all its customers. Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of trade receivables. In the normal course of business, the Company provides credit terms to its customers. Accordingly, the Company performs ongoing credit evaluations of its customers and maintains allowances for possible losses which, when realized, have been within the range of management's expectations. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such account. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents. Revenue Recognition Revenue is recognized when the product is shipped. - -------------------------------------------------------------------------------- F-9 LASER CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Continued - -------------------------------------------------------------------------------- 1. Organization Use of Estimates in the Preparation of Financial and Statements Summary of The preparation of financial statements in conformity Significant with generally accepted accounting principles requires Accounting management to make estimates and assumptions that Policies affect the reported amounts of assets and liabilities Continued and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to the prior year's financial statements in order to conform them to the classifications used for the current year. 2. Going The accompanying consolidated financial statements have Concern been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred substantial losses from operations during the past several years and has been unable to generate cash flows from operations. In addition, as of December 31, 2000, the Company has a deficit in stockholders' equity. These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time. The Company's continuation as a going concern is dependent on its ability to generate sufficient income and cash flow to meet its obligations on a timely basis, to obtain additional financing as may be required, and ultimately to attain profitability. The Company is active in the development of new products that will increase the Company's versatility in the laser products market and is putting together a plan to obtain additional capital and financing. There is no assurance that the Company will be successful in its efforts. - -------------------------------------------------------------------------------- F-10 LASER CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Continued - -------------------------------------------------------------------------------- 3. Detail of Certain Balance Sheet Accounts December 31, ----------------------------------- 2000 1999 ----------------------------------- Receivables: Trade receivables $ 780,527 $ 660,417 Less allowance for doubtful accounts (75,000) (25,000) ----------------------------------- $ 705,527 $ 635,417 ----------------------------------- Inventories: Raw materials $ 509,851 $ 571,244 Work-in-process 300,428 253,742 Finished goods 167,785 224,425 Reserve for obsolescence (350,000) (300,000) ----------------------------------- $ 628,064 $ 749,411 ----------------------------------- 4. Equipment Equipment and leasehold improvements consist of the and following: Leasehold Improvements December 31, ----------------------------------- 2000 1999 ----------------------------------- Equipment $ 1,724,228 $ 1,701,008 Leasehold improvements 96,538 87,353 ----------------------------------- 1,820,766 1,788,361 Less accumulated depreciation and amortization (1,578,506) (1,503,590) ----------------------------------- $ 242,260 $ 284,771 ----------------------------------- - -------------------------------------------------------------------------------- F-11 LASER CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Continued - -------------------------------------------------------------------------------- 5. Long-Term Long-term debt consists of the following at December Debt 31: 2000 1999 ---------------------------- Convertible notes payable (see note 6) $ 500,000 $ - Capital lease obligations (see note 7) 32,050 43,423 ---------------------------- Total long-term debt 532,050 43,423 Less current portion 13,262 11,373 ---------------------------- $ 518,788 $ 32,050 ---------------------------- Future maturities of long-term debt are as follows: Year Ended Amount ---------- ----------------- 2001 $ 13,262 2002 511,427 2003 6,252 2004 1,109 ----------------- $ 532,050 ----------------- 6. Convertible On March 27, 2000, the Company issued a convertible Notes Payable note payable to a director and a stockholder of $250,000. On May 18, 2000, the Company issued a convertible note payable to an individual of $250,000. The notes are convertible at $5.00 per share and are due March 27, 2002 and May 18, 2002, respectively. The notes are convertible at any time until the due date. The Company allocated $87,500 and $75,000, respectively, as a beneficial conversion feature related to the conversion price of $5.00 per share. Since the notes are immediately convertible, the full amount of the beneficial conversion feature interest expense was recognized immediately. - -------------------------------------------------------------------------------- F-12 LASER CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Continued - -------------------------------------------------------------------------------- 7. Capital The Company leases certain equipment under Leases noncancellable capital leases. Assets held under capital leases were included in equipment as follows: December 31, ----------------------------------- 2000 1999 ----------------------------------- Office equipment 56,609 $ 56,609 Accumulated amortization (9,435) (3,774) ----------------------------------- 47,174 $ 52,835 ----------------------------------- Amortization expense on capital leases for the years ended December 31, 2000 and 1999 were $5,661 and $3,774, respectively. Future payments under the capital leases are as follows: Year ---- 2001 $ 16,872 2002 12,876 2003 6,740 2004 1,124 ----------------- Total payments 37,612 Less: amount of interest (5,562) ----------------- Net capital lease principal 32,050 Less: current maturities (13,262) ----------------- Total long-term $ 18,788 ----------------- - -------------------------------------------------------------------------------- F-13 LASER CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Continued - -------------------------------------------------------------------------------- 8. Income Taxes The benefit for income taxes differs from the amount computed at federal statutory rates as follows: Years Ended December 31, ----------------------------------- 2000 1999 ----------------------------------- Income tax benefit at statutory rates $ 283,000 $ 395,000 Beneficial conversion feature (55,000) - Other 20,000 - Change in valuation allowance (248,000) (395,000) ----------------------------------- $ - $ - ----------------------------------- Deferred tax assets (liabilities) consist of the following: December 31, ----------------------------------- 2000 1999 ----------------------------------- Net operating loss carryforwards $ 2,271,000 $ 2,090,000 General business and AMT credit carryforwards 225,000 205,000 Depreciation (4,000) (8,000) Inventory reserve 119,000 102,000 Warranty reserve 48,000 39,000 Bad debt reserve 26,000 9,000 ----------------------------------- 2,685,000 2,437,000 Valuation allowance (2,685,000) (2,437,000) ----------------------------------- $ - $ - ----------------------------------- The Company has net operating loss carryforwards for tax purposes of approximately $6,680,000 at December 31, 2000 available to offset future taxable income which begin to expire in 2004. Should a change of more than 50 percent in the Company's ownership occur, any future benefits from such carryforwards may be substantially lost. A valuation allowance has been established for the net deferred tax asset due to the uncertainty of realization. - -------------------------------------------------------------------------------- F-14 LASER CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Continued - -------------------------------------------------------------------------------- 9. Commitments Operating Leases and The Company's administrative offices and primary Contingencies assembly facilities for its laser products are located in a 32,300 square foot building in Salt Lake City, Utah. The Company leases the building pursuant to a lease agreement which terminates April 2009. The Company recognized annual rent expense of approximately $239,000 in 2000 and 1999. Future minimum payments under the noncancellable operating lease are as follows: Year Amount ---- ------------------ 2001 $ 239,000 2002 253,000 2003 257,000 2004 257,000 2005 272,000 Thereafter 921,000 ------------------ $ 2,199,000 ------------------ Investment Agreement The Company entered into an agreement with another corporate entity (the investee). The agreement provided that the Company would invest cash and/or services in exchange for the investee's stock. The Company performed cumulative services of $129,003, in exchange for common stock of the investee which was included in other assets. During 1999, management of the Company determined that based upon the operations of the investment entity the Company's investment was impaired. The Company wrote down its carrying value in the investment to $10,000 effective December 31, 1999. Royalty Agreement The Company is party to an agreement with another entity which requires the Company to pay royalties based on a percentage of net sales of products covered by certain patents. Total royalty expense was $31,127 and $40,297 in 2000 and 1999, respectively. - -------------------------------------------------------------------------------- F-15 LASER CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Continued - -------------------------------------------------------------------------------- 9. Commitments Employment Agreements and The Company has employment agreements with its Contingencies President and Chief Executive Officer and with its Vice Continued President which expire December 31, 2001. The agreements have a three year term with automatic renewals for additional terms of equal length unless terminated by either party. The agreements provide for base salaries, bonuses and certain other incentives. The agreements also provide for severance benefits at the time of termination unless termination is for cause, lack of performance, resignation, or by reason of death. 10. Stock Option The Company has a stock incentive plan whereby 150,000 Plans shares of the Company's common stock have been reserved for issuance to its employees. The stock option committee of the Company's Board of Directors has complete discretion to grant awards pursuant to the terms and provisions of the plan. The stock incentive plan expires January 1, 2009. The Company also has a stock option plan for non-employee directors, whereby each outside director is granted options to purchase 2000 shares of the Company's stock at the end of each six months of service as a director. This plan expires in September 2007. Information regarding stock option plans is summarized below: Number of Option Price Options Per Share --------------------------------- Outstanding at January 1, 1999 87,500 $ 1.13 - 4.10 Granted 31,000 1.69 - 4.59 Exercised (10,000) 1.30 Expired (8,750) 1.14 - 4.10 Forfeited - - --------------------------------- Outstanding at December 31, 1999 99,750 $ 1.13 - 4.59 Granted 8,000 6.00 - 6.06 Exercised (25,416) 2.90 Expired (2,500) 1.69 Forfeited (1,000) - --------------------------------- Outstanding at December 31, 2000 78,834 $ 1.13 - 6.06 --------------------------------- - -------------------------------------------------------------------------------- F-16 LASER CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Continued - -------------------------------------------------------------------------------- 11. Stock Based The Company has adopted the disclosure-only provisions Compensation of Statement of Financial Accounting Standards (SFAS) No.123, Accounting for Stock-Based Compensation. Accordingly, no compensation cost has been recognized for employees in the financial statements. Had compensation cost for the Company's stock options been determined based on the fair value at the grant date for awards in 2000 and 1999, consistent with the provisions of SFAS No. 123, the Company's net earnings and earnings per share would have been reduced to the pro forma amounts indicated below: Years Ended December 31, ----------------------------------- 2000 1999 ----------------------------------- Net loss - as reported $ (808,158) $ (1,161,505) Net loss - pro forma $ (848,246) $ (1,248,744) Loss per share - as reported $ (.50) $ (.79) Loss per share - pro forma $ (.52) $ (.85) ----------------------------------- The fair value of each option granted is estimated at the date of grant using the Black-Scholes option pricing model with the following assumptions: December 31, ----------------------------------- 2000 1999 ----------------------------------- Expected dividend yield $ -0- $ -0- Expected stock price volatility 115.41% 121.32% Risk-free interest rate 6.00% 6.00% Expected life of options 5 - 10 years 5 - 10 years ----------------------------------- The weighted average fair value of options granted during 2000 and 1999 is $5.01 and $2.81, respectively. - -------------------------------------------------------------------------------- F-17 LASER CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Continued - -------------------------------------------------------------------------------- 11. Stock Based The following table summarizes information about stock Compensation options outstanding at December 31, 2000: Continued Options Outstanding Options Exercisable ------------------------------------------------------------------ Weighted Average Number Remaining Weighted Number Weighted Range of Outstanding Contractual Average Exercisable Average Exercise at Life Exercise at Exercise Prices 12/31/00 (Years) Price 12/31/00 Price - -------------------------------------------------------------------------------- $ 1.13 to 1.69 24,417 2.6 $ 1.41 24,417 $ 1.41 2.00 to 2.40 20,750 0.8 2.19 20,750 2.19 3.79 to 4.59 25,667 5.8 4.25 25,667 4.25 6.00 to 6.06 8,000 4.7 6.03 8,000 6.03 - -------------------------------------------------------------------------------- $ 1.13 to 6.06 78,834 3.4 $ 3.02 78,834 $ 3.01 - -------------------------------------------------------------------------------- 12. Retirement American Laser adopted a 401(k) retirement savings and Plan profit sharing plan. All full-time employees of American Laser who are at least 21 years of age and have a minimum of three months of service with American Laser are eligible to participate. The plan contains a matching contribution which is at American Laser's discretion and is limited to two percent of the applicable employee's salary. No matching contributions were made during 2000 and 1999. 13. Related Party The Company had a lease agreement in a portion of 1999 Transactions with Dr. William H. McMahan, a former significant shareholder, Chairman, President and Chief Executive Officer of the Company, for its operating facilities. Rent payments were approximately $79,000 in 1999. The Company has employment agreements with its President and Chief Executive Officer and Vice President as described in note 9. - -------------------------------------------------------------------------------- F-18 LASER CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Continued - -------------------------------------------------------------------------------- 13. Related Party During the years ended December 31, 2000 and 1999 the Transactions Company recognized $678,245 and $263,661, respectively, Continued of revenue from the sales of products to entities owned by a director and major shareholder of the Company. The Company also purchased product from these entities during the years ended December 31, 2000 and 1999 in the amount of $496,435 and $480,791, respectively. Receivables relating to sales to these entities total $269,643 and $178,537 at December 31, 2000 and 1999, respectively. The Company also had payables due of $447,948 and $343,669 at December 31, 2000 and 1999, respectively. At December 31, 2000, the Company had a convertible note payable to a director and shareholder of $250,000 with interest at 7%, the interest and principle are due and payable on March 27, 2002 (see notes 5 and 6). 14. Export Sales Export sales to unaffiliated customers were as follows: and Major Customers Years Ended December 31, ----------------------------------- 2000 1999 ----------------------------------- Europe $ 2,040,107 $ 1,560,752 Other 265,938 890,534 ----------------------------------- $ 2,306,045 $ 2,451,286 ----------------------------------- Combined domestic and foreign sales and service of lasers to the Company's major customers are as follows: Years Ended December 31, ----------------------------------- Major customers 2000 1999 - --------------- ----------------------------------- Company A $ 1,590,790 $ 1,658,780 Company B $ 678,245 $ 263,661 Company C $ - $ 552,300 - -------------------------------------------------------------------------------- F-19 LASER CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Continued - -------------------------------------------------------------------------------- 15. Fair Value of None of the Company's financial instruments are held Financial for trading purposes. The Company estimates that the Instruments fair value of all financial instruments at December 31, 2000, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying consolidated balance sheet. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgement is necessarily required in interpreting market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amount that the Company could realize in a current market exchange. 16. Recent SFAS No. 133, Accounting for Derivative Instruments and Accounting Hedging Activities, was issued in June 1998 and amended Pronounce- by SFAS No. 138, issued in June 2000. The requirements ments of SFAS No. 133, as amended, will be effective for the Company in the first quarter of the fiscal year beginning January 1, 2001. The standard establishes accounting and reporting standards for derivative instruments embedded in other contracts and for hedging activities. Under the standard, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. The Company has determined SFAS 133 to have no impact on the Company's financial position and results of operations because the Company has no derivative activity. SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, was issued in September 2000. SFAS No. 140 is a replacement of SFAS No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. Most of the provisions of SFAS No. 125 were carried forward to SFAS No. 140 without reconsideration by the Financial Accounting Standards Board (FASB), and some were changed only in minor ways. In issuing SFAS No. 140, the FASB included issues and decisions that had been addressed and determined since the original publication of SFAS No. 125. SFAS No. 140 is effective for transfers after March 31, 2001. Management does not expect the adoption of SFAS No. 140 to have a significant impact on the financial position or results of operations of the Company. - -------------------------------------------------------------------------------- F-20 EX-21 2 laserexh.txt LASER CORPORATION AND SUBSIDIARIES EXHIBIT 21 - STATEMENT RE: SUBSIDIARIES OF THE REGISTRANT Subsidiary Place of Incorporation ---------- ---------------------- American Laser Corporation Utah American Laser Medical, Inc. Utah -----END PRIVACY-ENHANCED MESSAGE-----