10-Q 1 d10q.txt FORM 10-Q FOR PERIOD ENDED JUNE 30, 2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 OR (_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File No. 1-11642 LASER TECHNOLOGY, INC. (Exact name of registrant as specified in its charter) DELAWARE 84-0970494 -------- ---------- (State or other jurisdiction of (I.R.S. employer identification number) incorporation or organization)

7070 SOUTH TUCSON WAY, ENGLEWOOD, COLORADO 80112 ------------------------------------------------ (Address of principal executive offices) (303) 649-1000 -------------- (Registrant's telephone number including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____. ------- At June 30, 2001, 5,486,220 shares of common stock of the Registrant were outstanding. INDEX -----

LASER TECHNOLOGY, INC. Consolidated Balance Sheets ASSETS

See accompanying notes to the consolidated financial statements 1 LASER TECHNOLOGY, INC. Consolidated Balance Sheets LIABILITIES AND STOCKHOLDERS' EQUITY

See accompanying notes to the consolidated financial statements 2 LASER TECHNOLOGY, INC. Consolidated Statements of Operations For the Three and Nine Months Ended June 30, 2001 and 2000 (Unaudited)

See accompanying notes to the consolidated financial statements 3 LASER TECHNOLOGY, INC. Consolidated Statements of Cash Flows Increase (Decrease) in Cash and Cash Equivalents For the Nine Months Ended June 30, 2001 and June 30, 2000 (Unaudited)

See accompanying notes to the consolidated financial statements 4 LASER TECHNOLOGY, INC. Notes to Consolidated Financial Statements (Information for the three and nine months ended June 30, 2001 is unaudited) NOTE 1 - Summary of Significant Accounting Policies a. Basis of Presentation The consolidated financial statements presented are those of Laser Technology, Inc. and its wholly-owned subsidiaries; Laser Communications, Inc., Laser Technology, U.S.V.I., Light Solutions Research, Inc. and International Measurement and Control Company. Laser Technology, Inc. is presently engaged in the business of developing, manufacturing and marketing laser based measurement instruments. In the opinion of management, the unaudited financial statements reflect all adjustments, consisting only of normal recurring accruals necessary for a fair presentation of (a) the consolidated statements of operations for the three and nine month periods ended June 30, 2001 and 2000, (b) the consolidated financial position at June 30, 2001, and (c) the consolidated statements of cash flows for the nine month period ended June 30, 2001 and 2000. The accounting policies followed by the Company are set forth in the Notes to the Consolidated Financial Statements of the Company for the fiscal year ended September 30, 2000. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. The unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the footnotes required to be presented for complete financial statements. The accompanying financial statements include all adjustments (consisting only of normal recurring accruals), which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The financial statements and related disclosures have been prepared with the presumption that users of the interim financial information have read or have access to the audited financial statements for the preceding fiscal year. Accordingly, these financial statements should be read in conjunction with the audited financial statements and the related notes thereto included in the Company's 2000 Annual Report on Form 10-K as filed with the Securities and Exchange Commission on January 3, 2001. b. Earnings Per Share SFAS No. 128 provides for the calculation of "Basic" and "Diluted" income per share. Basic income per share includes no dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted income per share reflects the potential dilution of securities that could share in the earnings of an entity that were outstanding for the period. Fully diluted income per share for June 30, 2001 is not materially different from basic income per share because the diluted shares would be antidilutive. The following is provided to reconcile the earnings per share calculation:

c. Operating Segments The Company's primary operating segments for the three and nine months ended June 30, 2001 and 2000 were as follows:

d. Recent Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" which requires companies to record derivatives as assets or liabilities, measured at fair market value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The key criterion for hedge accounting is that the hedging relationship must be highly effective in achieving offsetting changes in fair value or cash flows. SFAS No. 137 amended the effective date of SFAS No. 133 for all fiscal quarters of fiscal years beginning after June 15, 2000. Management believes the adoption of this statement will have no material impact on the Company's financial statements 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations for the Three and Nine Months Ended June 30, 2001 and June 30, 2000 For the three and nine months ended June 30, 2001 and 2000, the following table provides the percentage relationship to net sales of principal items in the Company's Consolidated Statements of Operations. It should be noted that percentages discussed throughout this analysis are stated on an approximate basis.

Revenues The following sales analysis provides information as to the percentage of net sales of the Company's primary product lines. Revenues realized from sales of the Company's less significant revenue producing product lines are classified as "Other" for presentation purposes.

8 Comparison of Three-Months Ended June 30, 2001 and the Three-Months Ended June 30, 2000 Net sales in the third quarter ended June 30, 2001 ("2001") decreased 10% to $3,312,326 from $3,686,079 realized in the third quarter ended June 30, 2000 ("2000"). Traffic Safety sales decreased 19% to $1,950,710 from $2,406,223. Domestic Traffic Safety sales, which increased 23% year over year, were bolstered by improved productivity of new sales people in the Southeast, West Coast and Rocky Mountain regions. However, these gains were more than offset by a decline of 53% in international Traffic Safety sales during the same period. Comparisons were penalized by a significant decline in sales of the older Marksman model speed guns which were not offset by a modest increase in sales of the newer Ultralyte model. International sales were also hurt by a continued strong dollar, which made the prices of foreign products more competitive. Survey and Mapping sales declined 10% to $958,569 in 2001 as compared to $1,064,782 realized in 2000 due primarily to a delay in shipments of the MapStar Compass Module. Overall, international sales accounted for 25% of net sales in the third quarter 2001, down from 42% of net sales in the same quarter a year ago. The third quarter of 2001 ended with a backlog of orders totaling $707,335. Gross Margins narrowed slightly to 56% of sales in the third quarter versus 58% of sales in 2000. The prior year period benefited from a more profitable product mix and lower material costs. Royalty and licensing income from the Company's licensees was $199,075, in the third quarter of 2001 compared to $164,374 in 2000, representing a 21% increase. This increase reflects the success of the Bushnell Yardage Pro Sport, a new product which utilizes the Company's proprietary technology. Total operating expenses decreased approximately 8% to $1,730,165 for the 2001 third quarter from $1,873,499 for the comparable 2000 period, representing a reduction in marketing and research and development expenses. The third quarter of 2001 ended with an operating profit of $314,065 as compared to $420,701 in 2000. Net income after interest and taxes was $240,531 compared to $295,156 a year ago, or a net income of 0.04 per basic share compared 0.06 per basic share the prior year. Comparison of Nine Months Ended June 30, 2001 and the Nine Months Ended June 30, 2000 Net sales for the first nine months of 2001 were $8,782,360, down 6% from $9,327,656 during the first nine months of 2000. Traffic Safety sales decreased 13% during the first nine months of 2001 to $5,363,916 compared to $6,199,897 a year earlier. This was primarily due to lower International Traffic Safety sales, which declined 32% because of more intense price competition in the market place from foreign products due to the strength of the U. S. dollar and lower sales of the Marksman. In contrast, Domestic Traffic Safety sales increased 8% for the first nine months of 2001 reflecting the growing acceptance of the Company's QuickMap products and greater productivity from the revamped regional sales force. Survey and Mapping sales decreased 5% to $2,586,515 for the nine months of 2001 compared to $2,726,367 realized in the comparable 2000 period. This decrease reflects a lag in sales caused by the delay in shipments of product in the first and third quarters. International sales comprised 35% of net sales during the first nine months of 2001 as compared to 43% for the corresponding 2000 period. Foreign sales of the Company's products are expected to continue to comprise a significant portion of the Company's revenues. Gross profit as a percentage of net sales declined modestly to 54% for the first nine months of 2001 compared to 55% for the first nine months of 2000. A more profitable product mix positively impacted gross margins a year ago. On a year to year basis, royalties increased 5% to $588,951 for the first nine months of 2001 from $560,172 realized in 2000. Total operating expenses decreased approximately 3% to $5,132,010 for the first nine months of 2001 from $5,303,513 for the first nine months of 2000. As a percentage of net sales, total operating expenses increased to 58% for the first nine months of 2001 from 57% for the first nine months of 2000. Net income after interest and taxes for the first nine months was $197,437 compared to $244,482 a year ago, or a net profit of 0.04 a basic share compared to 0.05 a basic share the prior year. 9 Liquidity and Capital Resources At June 30, 2001, the Company had working capital of $7,937,487 compared to $6,918,219 at September 30, 2000. Current assets exceeded current liabilities by a ratio of 8.2 to 1. Furthermore, the acid test ratio (ratio of current assets minus inventories and prepaid expenses to liabilities) was in excess of 4 to 1. Thus, the present working capital is expected to adequately meet the Company's needs for at least the next twelve months. Inventory, the largest item that required financing, stood at $4,432,369 at June 30, 2001, up $1,341,507 from September 30, 2000. Inventory expansion reflected stocking of certain outsourced assemblies and an increase in other raw materials. Prepaid insurance, fees and expenses required an additional $90,014 of funding. The operating activities that provided cash were a net income of $197,437, depreciation of $442,530 and a reduction in accounts receivable of $193,713. The only other items that reduced cash were an increase in accounts payable and accrued expenses of $16,327. A net cash increase of $1,913,367 from investing activities was due to the conversion of investment accounts into working capital. After expending $612,045 on operating activities and $77,524 on long term debt and capital leases, there was a net increase in cash and equivalents of $1,223,798. When added to cash on hand at the beginning of the nine month period, total cash and equivalents at June 30, 2001 stood at $1,809,680. Thus, cash and equivalents alone comfortably exceeded total liabilities of $1,107,776 at the end of the period. For the nine month period ended June 30, 2000, cash provided by operating activities was $1,083,421. Cash was increased by net income of $244,482, by depreciation expense of $397,237, by a decrease in accounts receivable of $1,379,051, and other assets by $261,148, offset by an increase in inventory of $235,034, loss on sale of property of $3,174 and reductions of accounts payable and accrued expenses of $964,630. Cash used in investing activities totaled $289,373. Cash used in financing activities of $75,158 reduced long-term debt. For the nine month period ended June 30, 2000, cash and cash equivalents increased by $718,890. Risk Factors and Cautionary Statements Forward-looking statements in this report are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The Company wishes to advise readers that actual results may differ substantially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, continued acceptance of the Company's products in the marketplace, competitive factors, potential changes in the budgets of federal and state agencies, compliance with current and possible future FDA or environmental regulations, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission. 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings On February 10, 1999 a securities class action complaint entitled Moshe Rosenfeld, On Behalf of Himself and All Others Similarly Situated, vs. Laser Technology, Inc., David Williams, Pamela Sevy, Dan H. Grothe, Jeremy Dunne and H. DeWorth Williams, was filed in the United States District Court, District of Colorado (Case no. 99-Z-266). The Complaint alleged that the Company and certain of its officers and directors violated federal securities laws, particularly Sections 10(b) and 20 of the Securities Exchange Act of 1934, as amended (the "1934 Act"). Specifically, the complaint alleged that the Company's financial statements were false and misleading during the "class period" (February 12, 1996 to December 23, 1998) and that the Company made certain false or misleading statements regarding the Company's financial statements during this period. The Company believes the action was premised in part on the resignation of the Company's independent accountant, BDO Seidman, LLP ("BDO"), on December 21, 1998, and the resignation of the members of the Audit Committee of the Board of Directors on January 7, 1999. The resigning members of the Audit Committee comprised the Special Audit Committee (the "Special Committee"). They resigned from the Board of Directors as a result of disagreements between management and the Special Committee. BDO also withdrew its opinions on the previously issued certified financial statements for the fiscal years 1993, 1994, 1995, 1996 and 1997. At the time of BDO's resignation, the Special Committee was conducting an independent investigation into the Company's accounting records and alleged irregularities relating to the Company's accounting records. Following the announcement of the resignation of BDO and withdrawal of five years of audited financial statements, the American Stock Exchange suspended trading in the Company's shares on December 23, 1998. Trading was resumed on March 22, 1999. In its complaint, the plaintiff alleged that the resignation of BDO and the three directors was due to the Company's alleged unreliable and misleading financial statements. Plaintiff's complaint further alleged violations of Section 10(b) of the 1934 Act and Rule 10b-5 promulgated thereunder. Five additional securities class actions and one stockholder's derivative suit were filed against the Company and certain of its former and present officers and directors. All cases were filed in the United States District Court for the District of Colorado and were consolidated. On October 6, 1999, the Company announced that it had entered into an "agreement in principle" for the settlement of all the aforementioned actions. On December 10, 1999, a Stipulation of Settlement was executed by the parties and filed with the Court. On October 13, 2000, the Court issued its Final Judgment and Order of Dismissal With Prejudice in the action. As a provision of the Final Judgment, the Court ordered the Company to issue 475,000 shares of its common stock and ordered payment of $850,000 in the settlement of the action. Following the appropriate hearing, the Court found that the aggregate settlement amount and other terms of the settlement reflected a good faith settlement of the actions. The Company reached an agreement with its insurance carrier whereby $740,000 of the cash portion of the settlement was paid by the carrier into the settlement escrow account. The remaining $110,000 in cash was paid into the settlement escrow account by certain defendants involved in the settlement, including the Company. On November 2, 2000 475,000 shares were also issued and delivered to the settlement escrow account established to facilitate the settlement of the lawsuits. As of June 30, 2001 none of the shares have been distributed to the claimants. These shares are equal to approximately 8.7% of the Company's total shares currently outstanding. Pursuant to the settlement, the 475,000 shares will be distributed at a date to be determined by the plaintiffs and their counsel. One-third of the shares will be available for trading immediately, one-third will be available for trading 60 days after the initial distribution, and the final third will be available for trading 120 days from the initial distribution. As a condition of the settlement, the Company is released from all future claims and actions by the plaintiffs and class members related to such actions. The costs of the settlement together with projected legal expenses involved in completing the settlement have been accrued in the Company's fiscal 1999 financial statements except for $18,430, which was recorded during fiscal 2000. 11 On February 8, 2000, the Company filed a complaint against Nikon, Inc. ("Nikon") in U.S. District Court for the District of Colorado (Civ. No. 00-B-272) for selling and using a product infringing one of the Company's patents. On July 26, 2000, the Company amended the complaint to include allegations that Nikon's conduct infringed a second patent obtained by the Company. On August 9, 2000, Nikon filed an answer and counterclaims, seeking a declaratory judgment that Nikon did not infringe the patents, that the patents are invalid and unenforceable, and that Nikon has been damaged by willful and unfounded assertions of infringement by the Company. The counterclaims do not quantify the damages sought. On September 28, 2000, upon a stipulated motion to withdraw, the Court ordered the dismissal, without prejudice to reassertion, of the counterclaims asserting that the patents-in-suit are invalid and unenforceable. On January 22, 2001, Asia Optical Co., Inc. ("Asia Optical"), the manufacturer of the laser range finders being sold by Nikon, was added to this lawsuit as a defendant. The Company is vigorously prosecuting the lawsuit and defending the counterclaims. The parties have begun formal discovery in this matter. On May 24, 2001, the Court allowed the Company to amend it's Complaint to add allegations that Nikon and Asia Optical are infringing a third patent issued to the Company in May 2001. Item 2. Changes in Securities This Item is not applicable to the Company. Item 3. Defaults upon Senior Securities This Item is not applicable to the Company. Item 4. Submission of Matters to a Vote of Security Holders This Item is not applicable to the Company. Item 5. Other Information This Item is not applicable to the Company. Item 6. Exhibits and Reports on Form 8-K a. Reports on Form 8-K - none 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LASER TECHNOLOGY, INC. ---------------------- 7070 South Tucson Way Englewood, Colorado 80112 Date: August 9, 2001 By /s/ Elizabeth Hearty -------------------- ---------------------------------------- Elizabeth Hearty Controller, Corporate Secretary Date: August 9, 2001 By /s/ Eric A Miller -------------------- ---------------------------------------- Eric A. Miller President and Chief Executive Officer 13

LASER TECHNOLOGY INC 10-Q