10QSB 1 laser10qsb.txt United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark one) X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES --- EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2003 or TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES --- EXCHANGE ACT OF 1934 For the transition period from -------- to ---------- Commission File Number 0-13316 LASER CORPORATION ----------------- (Exact name of small business issuer as specified in its charter) Utah 87-0395567 ----------------------- ------------------ (State of Incorporation) (I.R.S. Employer Identification No.) 2500 South Decker Lake Blvd. #6 Salt Lake City, UT 84119 ------------------------------- ---------- (Address of principal (Zip Code) executive office) (801) 972-1311 -------------- (Issuer's telephone number, including area code) Not Applicable -------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 ----- ----- State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, .05 Par Value -- 1,643,073 shares as of August 11, 2003 INDEX LASER CORPORATION AND SUBSIDIARIES PART I. FINANCIAL INFORMATION ------------------------------ Item 1. Financial Statements (Unaudited) Consolidated Condensed Balance Sheets - June 30, 2003. (Unaudited) Consolidated Condensed Statements of Operations - Three months ended June 30, 2003 and 2002; Six months ended June 30, 2003 and 2002. (Unaudited) Consolidated Condensed Statements of Cash Flows - Six months ended June 30, 2003 and 2002. (Unaudited) Notes to Consolidated Condensed Financial Statements - June 30, 2003. Item 2. Management's Discussion and Analysis. Item 3. Controls and Procedures PART II. OTHER INFORMATION -------------------------- Item 1. Legal Proceedings Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES ---------- CERTIFICATION ------------- EXHIBITS -------- 2 PART I. FINANCIAL INFORMATION Item 1. LASER CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS June 30, ASSETS 2003 ------ (Unaudited) ----------- CURRENT ASSETS Cash and cash equivalents $ 5,960 Receivables, net 18,050 Inventories 25,123 Assets from discontinued operations 58,025 ----------- Total Current Assets 107,158 ----------- NON-CURRENT ASSETS Equipment and leasehold improvements, net 24,088 $ 131,246 =========== LIABILITIES AND --------------- STOCKHOLDERS' DEFICIT --------------------- CURRENT LIABILITIES Accounts payable $ 536,998 Accrued expenses 180,931 Accrued warranty expense 50,000 Liabilities from discontinued operations 624,883 Current notes payable 500,000 ----------- Total Current Liabilities 1,892,812 ----------- LONG-TERM DEBT -- ----------- Total Liabilities $ 1,892,812 ----------- COMMITMENTS AND CONTINGENCIES -- STOCKHOLDERS' DEFICIT Preferred Stock, no par value, 10,000,000 shares authorized; no shares issued -- Common Stock, $.05 par value, 40,000,000 shares authorized; 1,643,073 shares issued and outstanding 82,154 Additional paid-in capital 2,168,350 Deferred Compensation (136,800) Accumulated deficit (3,875,270) ----------- Total Stockholders' Deficit (1,761,566) ----------- $ 131,246 =========== See accompanying notes to consolidated financial statements 3 LASER CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
Three months ended Six months ended ---------------------------- --------------------------- June 30, June 30, June 30, June 30, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ REVENUES: Net sales $ 40,346 $ 35,764 $ 77,543 $ 224,455 Interest and other income -- 3 -- 5 ------------ ------------ ------------ ------------ 40,346 35,767 77,543 224,460 COSTS AND EXPENSES: Cost of sales 38,563 53,102 100,349 237,430 Selling, general and administrative 58,070 95,335 97,342 194,633 Research and development -- -- -- -- Royalties -- -- -- -- Interest 9,155 8,750 17,911 17,500 ------------ ------------ ------------ ------------ Total Operating Expenses 105,788 157,187 215,602 449,563 ------------ ------------ ------------ ------------ LOSS FROM OPERATIONS BEFORE INCOME TAXES (65,442) (121,420) (138,059) (225,103) Income Tax Benefit -- -- -- -- ------------ ------------ ------------ ------------ LOSS FROM CONTINUING OPERATIONS (65,442) (121,420) (138,059) (225,103) (LOSS) INCOME FROM DISCONTINUED OPERATIONS, Net of Income Taxes (336,971) 50,237 (483,441) 72,352 ------------ ------------ ------------ ------------ NET LOSS $ (402,413) $ (71,183) $ (621,500) $ (152,751) ============ ============ ============ ============ Loss Per Share from Continuing Operations - Basic and Diluted $ ( .04) $ ( .07) $ ( .08) $ ( .14) (Loss) Income Per Share from Discontinued Operations - Basic and Diluted $ ( .20) $ .03 $ ( .30) $ .05 ------------ ------------ ------------ ------------ TOTAL NET LOSS PER SHARE - Basic and Diluted $ ( .24) $ ( .04) $ ( .38) $ ( .09) ============ ============ ============= ============ Weighted average number of shares of Common Stock outstanding - Basic and Diluted 1,643,000 1,643,000 1,643,000 1,641,000 ============ ============ ============ ============
See accompanying notes to consolidated financial statements 4 LASER CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (Unaudited)
2003 2002 ------------ ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (621,500) $ (152,751) Adjustments to reconcile net loss to net cash (used in) provided from operating activities: Depreciation and amortization 14,844 29,605 Provision for losses on accounts receivable 308 4,977 Gain on sale of assets (12,946) -- Impairment of assets from discontinued operations 140,053 -- (Increase) decrease in: Receivables (378) (202,766) Inventories 95,031 164,147 Other assets 31,416 (3,527) Increase (decrease) in: Accounts payable and accrued expenses 331,840 178,419 ------------ ------------- Net cash (used in) provided by operating activities (21,332) 18,104 ------------ ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of property and equipment 26,926 -- ------------ ------------- Net cash provided by investing activities 26,926 -- ------------ ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on Capital Leases (3,172) (5,825) ------------ ------------- Net Cash (used in) financing activities (3,172) (5,825) ------------ ------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 2,422 12,279 CASH AND CASH EQUIVALENTS, BEG. OF PERIOD 14,592 26,837 Cash and cash equivalents allocated to discontinued operations (11,054) (25,339) ------------ ------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,960 $ 13,777 ============ =============
See accompanying notes to consolidated financial statements 5 LASER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) June 30, 2003 NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-QSB and Rule 310 of Regulation S-B. Accordingly, they do not include all of the information and footnote disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months and the six months ended June 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2002 included in the Company's Annual Report on Form 10-KSB (file number 0-13316). NOTE B - GOING CONCERN The accompanying financial statements have been prepared under the assumption that the Company will continue as a going concern. Such assumption contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the six-month period ended June 30, 2003, and the years ended December 31, 2002 and 2001, the Company incurred losses of ($621,500), ($420,745) and ($641,712), respectively. For the six month period ended June 30, 2003, and for the years ended December 31, 2002, and 2001, the Company has also experienced net cash inflows (outflows) from operating activities of ($21,332), ($1,309) and $16,389. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing as may be required, and ultimately to attain profitability. Potential sources of cash include external debt and the sale of new shares of company stock or alternative methods such as mergers or sale transactions. No assurances can be given, however, that the Company will be able to obtain any of these potential sources of cash. NOTE C - RECLASSIFICATIONS Certain 2002 financial statement amounts have been reclassified to conform to 2003 presentations. 6 NOTE D - ACCRUED EXPENSES Other accrued expenses consist of the following at June 30, 2003: Accrued interest $ 111,616 Trade Show fees 39,507 Accounting fees 13,717 Directors fees 10,000 Other 6,091 --------- $ 180,931 ========= NOTE E - WEIGHTED AVERAGE SHARES The computation of basic loss per common share is based on the weighted average number of shares outstanding during each year. The computation of diluted earnings per common share is based on the weighted average number of common 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 186,000 and 290,084 shares of common stock at prices ranging from $.10 to $6.06 per share were outstanding at June 30, 2003 and 2002, respectively, but were not included in the diluted loss per share calculation because the effect would have been antidilutive. NOTE F - STOCK COMPENSATION The Company accounts for stock-based compensation under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income (loss), as all options vested had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant. No options were issued or vested during the three or six months ended June 30, 2003 and 2002, therefore, there would be no effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation. NOTE G - SUPPLEMENTAL CASH FLOW INFORMATION During the six months ended June 30, 2003, the Company returned inventory to a supplier in the amount of $72,200 and recorded a corresponding reduction in accounts payable. The Company also exercised its right of offset with certain accounts receivable and accounts payable to related parties, which reduced accounts receivable and accounts payable by $438,272. During the quarter ended June 30, 2002, the Company issued 11,716 shares of common stock to two board members in exchange for $20,000 of accrued director's fees. 7 Actual cash paid for interest and income taxes are as follows: Six Months Ended June 30, 2003 2002 ---- ---- Interest 327 2,304 --- ----- Income Taxes -- -- --- ----- NOTE H - DISCONTINUED OPERATIONS Due to the lack of orders for the Company's laser products and the resulting lack of income and cash flow, on April 7, 2003, the Company suspended the operations of its subsidiary, American Laser Corporation. Subsequent to that date the Board of Directors decided to permanently discontinue the operations of American Laser Corporation and sell its assets. The assets, liabilities, and condensed discontinued operations are as follows: June 30, 2003 --------------- Assets: Cash $ 11,054 Accounts receivable, net 6,583 Inventories 2,000 Equipment and leasehold improvements, net 38,388 --------------- Total assets of discontinued operations $ 58,025 --------------- Liabilities: Accounts payable and accrued expenses $ 620,202 Current capital lease obligation 4,681 --------------- Total liabilities of discontinued operations $ 624,883 --------------- 8
Three Months Ended Six Months Ended June 30, June 30, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ Revenues: Net sales $ 61,786 $ 478,346 $ 236,049 $ 995,361 Interest and other income 13,350 53 13,379 88 ------------ ------------ ------------ ------------ Total revenue and other income 75,136 478,399 249,428 995,449 Costs and expenses: Cost of products sold 132,718 347,797 366,245 747,987 Selling, general and administrative 137,027 61,437 215,064 131,317 Research and development 1,412 12,105 8,810 28,452 Royalties -- 6,105 1,187 13,037 Interest 897 718 1,510 2,304 Asset impairment expense 140,053 -- 140,053 -- ------------ ------------ ------------ ------------ Total costs and expenses 412,107 428,162 732,869 923,097 ------------ ------------ ------------ ------------ (Loss) income before income taxes (336,971) 50,237 (483,441) 72,352 Income tax (expense) benefit -- -- -- -- ------------ ------------ ------------ ------------ Net (loss) income $ (336,971) $ 50,237 $ (483,441) $ 72,352 ------------ ------------ ------------ ------------
NOTE I - ASSET IMPAIRMENTS During the three months ended June 30, 2003, the Company determined to discontinue the operations of its subsidiary, American Laser Corporation, as noted in Note H above. As a result of the Company's inability to generate future income and cash flows, and its decision to sell the assets of American Laser Corporation, the Company has recorded asset impairment charges during the quarter ended June 30, 2003 as follows: Inventory $ 76,544 Equipment and leasehold improvements 53,509 Other assets 10,000 -------------- Total impairment of assets from discontinued operations $ 140,053 -------------- 9 NOTE J - SUBSEQUENT EVENTS Due to the lack of orders for the Company's medical laser products and the resulting lack of income and cash flow, on July 31, 2003 the Board of Directors decided to permanently discontinue the operations of American Laser Medical, Inc. dba A.R.C. Laser Corporation and sell its assets. Its operations have ceased and management is currently in the process of winding up its affairs. On August 11, 2003, the Company entered into a stock subscription agreement with an entity, whereby the Company will sell a number of shares equal to approximately sixty-five percent of its issued and outstanding stock, at a yet to be determined date, for $75,000. ITEM 2. 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 in the Company's Annual Report on Form 10-KSB (file number 0-13316). RESULTS OF OPERATIONS --------------------- Three months ended June 30, 2003. Net sales from continuing operations, for the three months ended June 30, 2003 were $40,346 as compared to $35,764 for the same period in 2002 an increase of $4,582. 10 Cost of products sold for the three months ended June 30, 2003 were $38,563 as compared to $53,102 for the same period in 2002, a decrease of $14, 539 or 27 %, which was primarily due to a decrease in labor and overhead costs. As a percentage of net sales, cost of products sold was 96% for the three months ended June 30, 2003 as compared to 148% for the same period in 2002. Selling, general, and administrative expenses for the three months ended June 30, 2003 were $58,070 as compared to $95,335 for the same period in 2002, a decrease of $37,265 or 39%. This decrease in selling, general, and administrative expenses was the result of decreased activity and personnel in continuing operations. Interest expenses for the three month period ended June 30, 2003 were $9,155 as compared to $8,750 during the same period of 2002. Interest expenses are primarily the result of the interest accrued on two convertible notes payable. The Company recognized a net loss from continuing operations for the three months ended June 30, 2003 of $65,442, or $.04 per share compared to a net loss of $121,420, or $.07 per share for the same period in 2002, a decrease of $55,978, or $.03 per share. This decrease in the net loss is primarily the result of decreased activity and personnel in continuing operations. The Company recognized a net loss from the discontinued operations of $336,971, for the three months ending June 30, 2003, compared to net income of $50,237 for the same period during 2002. Inclusive of the discontinued operations, the Company experienced a net loss for the three months ending June 30, 2003 of $402,413, or $.24 per share compared to a net loss of $71,183 or $.04 per share for the same period in 2002. On April 7, 2003, the Company suspended the operations of its subsidiary, American Laser Corporation, and its operations are presented in discontinued operations. Subsequent to June 30, 2003, the Board of Directors decided to permanently discontinue the operations of American Laser Medical, Inc. dba, A.R.C. Laser Corporation and sell its assets. As of the date of this filing, the Company has ceased all active operations and is winding up the affairs of its subsidiaries, which have been dissolved. Six months ended June 30, 2003. Net sales from continuing operations, for the six months ended June 30, 2003 were $77,543 as compared to $224,455 for the same period in 2002 a decrease of $146,912 or 65%. This decrease was the result of decreased sales of the Company's medical laser equipment. Cost of products sold for the six months ended June 30, 2003 were $100,349 as compared to $237,430 for the same period in 2002, a decrease of $137,081 or 58 %, which was primarily due to the decrease in sales. As a percentage of net sales, cost of products sold was 129% for the six months ended June 30, 2003 as compared to 106% for the same period in 2002. This percentage increase in the cost of products sold was primarily the result of a larger percentage decrease in sales compared to the percentage decrease in cost of sales, including certain fixed costs. 11 Selling, general, and administrative expenses for the six months ended June 30, 2003 were $97,342 as compared to $194,633 for the same period in 2002, a decrease of $97,291 or 50%. This decrease in selling, general, and administrative expenses was primarily the result of reduced marketing and sales costs and decreased activity and personnel in continuing operations. Interest expenses for the six month period ended June 30, 2003 were $17,911 as compared to $17,500 of interest expense during the same period of 2002. Interest expenses are primarily the result of the interest accrued on two convertible notes payable. The Company recognized a net loss from continuing operations for the six months ended June 30, 2003 of $138,059, or $.08 per share compared to a net loss of $225,103, or $.14 per share for the same period in 2002, a decrease of $87,044, or $.06 per share. This decrease in the net loss is primarily the result of decreased marketing and sales costs and decreased activity and personnel in continuing operations. The Company recognized a net loss from the discontinued operations of $409,130, for the six months ending June 30, 2003, compared to net income of $72,352 for the same period during 2002. Inclusive of the discontinued operations, the Company experienced a net loss for the six months ending June 30, 2003 of $621,500, or $.38 per share, compared to a net loss of $152,751 or $.09 per share for the same period in 2002. On April 7, 2003, the Company suspended the operation's of its subsidiary, American Laser Corporation, and its operations are presented in discontinued operations. Subsequent to June 30, 2003, the Board of Directors decided to permanently discontinue the operations of American Laser Medical, Inc. dba, A.R.C. Laser Corporation and sell its assets. As of the date of this filing, the Company has ceased all active operations and is winding up the affairs of its subsidiaries, which have been dissolved. LIQUIDITY AND CAPITAL RESOURCES On June 30, 2003, the Company's continuing operations had a deficit in working capital of $1,785,654 as compared to a deficit in working capital of $1,069,427 at December 31, 2002, an increase in working capital deficit of $716,227. This decrease in working capital was primarily the result of the Company's net loss, the discontinued operation and sale of assets. 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. The Company has ceased active operations and therefore is unable to generate any income or cash flow from operations. No assurances can be given that the Company will be able to continue as a going concern. 11 ITEM 3. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures Based on their evaluations as of June 30, 2003, the principal executive officer and principal financial officer of the Company have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) under the Securities Exchange Act) are effective to ensure that information required to be disclosed by the Company in reports that the Company files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. (b) Changes in internal controls There were no significant changes in the Company's internal controls or in other factors that could significantly affect these internal controls subsequent to the date of their most recent evaluation. The Company did not need to implement any corrective actions with regard to significant deficiencies and material weaknesses in its internal controls. PART II. OTHER INFORMATION ----------------- Item 1. LEGAL PROCEEDINGS In May 2002, Leon Cohn, M.D. filed an action in Florida against the Company for breach of contract on a purchase agreement entered into for a Dodick Laser PhotoLysis System. Dr. Cohn is seeking to obtain a refund of the approximately $100,000 purchase price and return the system. The Company disputes the right of Dr. Cohn to return the System and obtain a refund. Discovery in this action was commenced and the Company filed an answer on October 1, 2002 but since then the Plaintiff has done nothing to move the case forward. During 2002, two unrelated parties which had entered into agreements with the Company to purchase Dodick Laser PhotoLysis Systems claimed a right to terminate their purchase agreements. To resolve the dispute, the Company agreed to accept return of the systems and to repay the purchase price in monthly payments. The Company has been unable to make the monthly payment obligations. These parties have threatened to commence legal action, but to our knowledge have not yet done so. The Company in involved in certain additional legal actions which it considers generally routine to its business activities or which involved claims which, if decided adversely to the company, would not materially affect the consolidated financial statements of the Company. ITEM 5. OTHER INFORMATION Due to the lack of orders for the Company's laser products and the resulting lack of income and cash flow, on April 7, 2003, the Company suspended the operation of its subsidiary, American Laser Corporation. Subsequent to that date the Board of Directors decided to permanently discontinue the operations of American Laser Corporation and sell its assets. On July 28, 2003 American Laser Corporation was dissolved. 12 On July 31, 2003, American Laser Medical, Inc., dba A.R.C. Laser Corporation, was also dissolved due to lack of sales. Its operations have ceased and management is currently in the process of closing this operation and winding up its affairs. The Company had fallen behind in the payment of its facility rental obligations and the landlord notified the Company of default and requested that the Company vacate the premises. The Company has temporarily leased a much smaller facility and relocated. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 1. Exhibits Exhibit 31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 32 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 2. Reports on Form 8-K. No reports on Form 8-K have been filed during the quarter ended June 30, 2003. 13 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LASER CORPORATION Date: August 19, 2003 /s/ B. Joyce Wickham ---------------- ---------------------------------- B. Joyce Wickham President, Chief Executive Officer and Director Date: August 19, 2003 /s/ Mark L. Ballard ----------------- ---------------------------------- Mark L. Ballard Vice President, Treasurer, Assistant Secretary and Director 14