LASER WELDING & DRILLING
Employee Ownership of High Technology Business
CONTENTS (Section,Title, Page)
1.0, NOTICE OF INTENTION,1
2.0, SUMMARY, 2
3.0, PROPOSAL TO AMERICAN LASER CORPORATION, 4
3.1, Preliminary Proposal, 4
4.0, BUSINESS GOALS, 8
5.0, PRODUCTS, 10
6.1, General, 12
6.2, Selling Lasers to Industry, 13
6.3, Advantages of Regional Marketing Effort, 15
6.4, Prospective Customers, 17
6.5, Partial List of Glass Laser Customers, 20
6.6, Marketing Plan - First 6 Months, 21
6.7, Marketing Plan - Beyond 6 Months, 23
7.0, COMPETITION, 26
7.1, Other Glass Laser Manufacturers, 26
7.2, Other Types of Lasers, 28
7.3, Other Welding and Drilling Techniques, 28
8.0, ORGANIZATION, 30
8.1, General, 30
8.2, Allocation of Personnel, 30
8.3, Resumes of Personnel, 34
9.0, FINANCIAL, 40
9.1, Equity Positions, 40
9.2, Debt Financing, 40
9.3, Operations Sheet, 40
9.4, Proforma Cash Flow, 44
9.5, Proforma P&L Statements, 46
9.6, Break Even Chart, 47
10.0, ADVANTAGES TO AMERICAN LASER CORPORATION, 48
1.0 NOTICE OF INTENTION
In making this preliminary proposal to ALI, there are many statements of the intentions of Albert D. Castro and William Lock forming a business. It should be noted:
1. This is only a preliminary document, serving as a basis of discussion only. In no way will either Mr. Castro or Mr. Lock be held to any statement, commitment, etc., without their specific signed intention to do so.
2. American Laser Corp. has full knowledge of our intention. However, there is no agreement yet between ALI with either Mr. Lock or Mr. Castro in regards to this business.
3. Estimates of completion in the glass laser field, potential sales volume, marketing plans, etc., are all only those of Mr. Lock and Mr. Castro and although they believe them to be as accurate and reliable as possible, no guarantee to their validity is implied.
We, Albert D. Castro and William H. Lock are making a preliminary proposal to American Laser Corporation that it sell to us its complete glass laser business. For this portion of what was American Laser line of laser equipment, we are offering $85,000. We propose to form a company within the area of Phoenix that will profit from the substantial investment that ALI has made to develop their laser products through continued effort in applications engineering.
We plan our organization to be a small, conservative one (6-7 people for the first six months) but one whose sales growth should be 50% per year. A study of the market for our products and the competition indicates to us that the product line we desire is one characterized by its high quality, its reliability, and its sales appeal. To finance this company, we have been able to raise $25,000 between us, and our proposal to ALI is that we pay them $40,000 cash and that they accept a $45,000, three-year note from us for the rest of the payment. For this consideration, we agree that ALI's note will be the senior debt of our company. We will form our company with Albert D. Castro as president (and a 60% owner) and William H. Lock as vice president (and a 40% owner). Sales projections indicate a sales volume of $203,000 in 1974 and $332,000 in 1975. We expect to "break even" approximately two years after start of business. A preliminary cash-flow analysis indicates to us that we need at least $50,000 from some loaner.
We, Albert D. Castro and William H. Lock, make the following proposal to American Laser Corporation (ALI):
1. That ALI sell to us the complete industrial glass laser business. This business to include, and our offer for it to be as shown below:
PRODUCTS, PROCESSES, and INVENTORY
A) ALI-11's, ALI-14's
B) Laser Welder/Driller (LWD)
C) Microscope Laser
H) Microscopes (Laser)
I) Safety Kit, all other accessories part of glass laser product line
J) All prints, files, fixtures, literature, rights to manufacture these product lines, vendors, advertising material, parts lists, component parts, etc.
Total - $85,000
A) Slo Syn N/C Controller, etc.
B) Clausing Milling Machine, etc.
C) Machines in dept. shop - One drill press, one Do-All saw, one band saw, one milling machine, one belt sander, one lathe, one grinder, one glove box, one clean booth (laminar flow).
D) Applications and electronic labs. Accessories - 8 work benches, 4 file cabinets, 4 work cabinets, 2 optical benches fully equipped, lenses, fixtures and tools.
E) Electronic Instruments - One Brush 2-channel recorder, 1 Tektronix pulse generator, 1 Fluke digital meter, 2 Tektronix oscilloscopes, 1 scope camera, 2 ballistic thermopiles, 2 Keithley meters.
F) Two ALI Microscopes from applications labs.
G) One HeNe laser and educational kit.
H) One drafting table equipped.
I) Four room air conditioners.
Total - $17,300
CUSTOMERS - GOODWILL
We feel that Goodwill - Customers is an intangible asset as it is difficult to predict how much goodwill can be transferred and, indeed, how many pending customers will still buy equipment now that ALI has chosen not to remain in the industrial laser business. We, therefore, offer for this intangible portion of the business, an intangible in return at ALI's option, we offer either a 5% equity position in our new company, or 10% of after-tax profits for the years 1976 and 1977. If, as may well be the case, ALI's potential customers become customers of LWD, Inc., and our firm prospers, the return to ALI of either of these options is seen by us to be full and fair payment for this important portion of ALI's glass laser/accessories business.
LIABILITY, SERVICE, MAINTENANCE
We will honor all agreements, warranties, etc., for these product lines only.
Total - $18,300
Therefore, our offer for the total business as defined above is:
Products, Processes and Inventory $86,000 + Capital Equipment 17,300 = $103,300
-Liability, Service Maintenance 18,300 = $85,000
+Customers and Goodwill Option as above
Total = $85,000 + Option Choice of ALI
2. That all other products, processes, liabilities, capital equipment, inventory, agreements, etc., not outlined in Part 1 are not a part of this proposal. It is understood that ALI does not grant to us any rights to laser glass patents, processes, equipment, etc.
3. That ALI allows us to pay the $85,000 in this manner: $40,000 cash and a $45,000 note. The note should have these terms:
A) Note will be paid off in 12 equal payments made quarterly.
B) The first payment will be due in March, 1974.
C) Interest on the note will be 9% simple interest rate.
D) This debt will be senior to any other contracted by us.
4. That our company be formed effective 18 June 1973.
5. That ALI allow us to retain their name for up to one year.
6. That any orders after that date are ours.
7. That ALI allow us the use of approximately 3,000 sq. ft. in either Bldg. 8 or 9 until November 1, 1973.
8. That ALI sever us from their employment effective immediately, and consider us unemployed, thereby making us eligible for all the benefits of severance per ALI's S.P.I.
4.0 BUSINESS GOALS
It is our plan to form a company which will manufacture, market, and sell, primarily in Western U.S.A., a complete line of glass laser systems and accessories designed for the industrial user. It is recognized by us that a company develops a "personality" just as an individual does.
To develop the desired personality, we want our company to meet the following goals:
Our products are now, and will continue to be, known for their highquality, good service and general reliability. Although we will remain competitive in price, it is not intended that we produce goods to sell for the lowest possible price. We believe that in the long run, a high-quality product that delivers reliable performance is a better economic solution to the customer's problem than a cut-rate system that may be a marginal performer.
Selling glass laser systems to Industry will be our core business. However, we feel that our organization's resources will be applicable to other business opportunities which may meet our standards of desirability. These opportunities in the industrial, scientific, or educational market will not be overlooked as a vehicle to potential growth in the future.
A growth in sales volume of 50% per year for the foreseeable future is our goal. It is intended that our company be a stable growth organization, characterized by conservative increments of growth, rather than a quick rising, volatile company.
Our personnel will be paid as high a wage as their skills merit in the labor market in which they offer their service. An employee-benefit program consistent with the area and our industry will be maintained. Our work force will be increased in an orderly manner consistent with the growth of the business.
LWD, Inc. will begin operation with a complete line of glass industrial lasers as well as a line of complimentary accessories. The pulsed glass laser line represents the latest technology in the field and is the end product of eleven years of intensive research at the American Laser Corp.
This laser line will contain the following standard products:
1. Model 11 - An industrialized laser system capable of performing both welding and drilling tasks at high production rates with minimal maintenance.
2. Model 14 - Similar in design to the Model 11 with twice the average power and the added advantage of a rectangular weld format.
3. Model 6 - The Model 6 has been designed specifically for industrial drilling of small holes in a wide range of materials at production rates.
4. Model 103 - Model 103 is a versatile laser welder/driller designed for research investigations as well as for those customers who desire to investigate a variety of potential applications prior to utilizing lasers on their production lines.
5. Microscope Laser - The microscope laser consists of a small laser integrated to a microscope. The unit is capable of producing spot sizes in the micron region and has been designed for the scientific and analytical laser markets.
6. Unilaser - A small, light-weight, low-cost laser system which has gained acceptance for a variety of uses in the educational, military and scientific communities.
In addition to the laser line, the following line of accessories will also be marketed:
1. Laser protective eyewear and windows.
2. Laser safety sign and interlock package.
3. Optical delivery systems and components.
4. Alignment autocollimator.
The principal market, both short range and long range for pulsed glass lasers, is in the industrial area. Lasers at this point are still in the introduction phase of their product life cycle, and are just now at the doorstep of the growth phase. Pulsed glass lasers have been introduced to production lines and have proven themselves from the standpoint of reliability, cost savings, and the ability to perform the required tasks.
There also exists a wide range of applications where lasers, because of their unique properties, can result in substantial cost savings by the elimination of secondary operations required with conventional welding and drilling devices. The principle competition in this market are widely-utilized welding and drilling devices such as resistance welding, electron beam welding, EDM machining, etc. To approach this market successfully, a great deal of time must be spent with each customer not only performing the required task, but also establishing in him a trust and confidence for a product that in most cases, he doesn't know.
The accessory market is two-fold. The first market is the laser community itself. This market is well developed, knowledgeable, and easily reached by direct advertising in the appropriate technical publications and via direct mailings. The second market is industrial companies. Each time an industrial laser is delivered for an application, the purchase of a complement of the required accessories usually follows. The difficult portions of this market to reach are those industrial concerns currently using other manufacturers' lasersin their plants. With the new O.S.H.A. regulations regarding lasers, a market should develop quite rapidly, greatly increasing the demand for our line of safety accessories.
6.2 SELLING LASERS TO INDUSTRY
American Laser, Inc. Department marketed pulsed glass lasers, CO2 lasers, and accessories since 1970. Customer contact was handled almost exclusively by twelve manufacturers' representative firms spread across the United States. These reps found potential customers and solicited applications. The application would be submitted for consideration. In most cases, samples were sent back to the potential customer for his evaluation. Since the department's inception, nearly 75 percent of the applications' effort was spent in the area of CO2 lasers. It had always been the intent of the department to send more technical people into the field to assist and train the reps; however, for a variety of reasons, this never materialized. Almost without exception, sales made by ALI were made only after deep involvement with technical personnel resulting in mutual learning and trust. Sales totaling over $200,000 to IBM, A. W. Haydon, Dennison, Xerox Corp., and Torrington Company were all handled directly by this type of involvement. It is our contention that the representative-type selling is not the optimum method that one should employ with industrial laser sales. Lasers selling in this portion of their growth curve require technical understanding, customer education and a large time commitment before a sale can be realized.
Representatives by their very nature are in most cases unable to provide the time, trust or technical understanding required to sell industrial lasers. As the market and acceptance of lasers in industry increases, this situation should change as it did for the Electron Beam business.
An additional error was attempting to service too large a geographical area too soon. We had the greatest success in the California area where we were able to provide technical assistance as well as immediate service to the customer. These are important considerations for potential customers, American Laser's rep organization tended to dilute this department's effectiveness in providing reasonable turnaround times for applications as well as greatly increasing the expenditures for advertising, travel, and other selling aids.
Because, for the most part, we really do not have industrial products recognized as such by our customers (that is, as they would other welders or drilling machines) but rather offer the laser systems as a solution to a problem, we have had to demonstrate to customers that what we sell does indeed solve their problems. We believe that this applications work is the key ingredient in our sales/marketing effort. Our experience in making sales calls is that it is relatively common to be presented with several potential laser welding or drilling applications. Those that appear technically feasible and economically justifiable are accepted and laser-machined in our applications lab. It has been ALT's policy, and it would be ours also, that sufficient work be done free of charge to convince us whether or not the proposed job could be feasibly done with our products. This typically takes one day's effort per application. Final optimization on a particular job, or doing a large sample lot for the customer has been done on a charged basis of $300 per day's effort. This rate is fairly standard in the laser industry and is one that we plan to maintain. This work may involve anywhere from a day to several weeks' work. Often in this period, engineers from the customer's plant will work closely with us in the applications lab. It is urged that customers use this method of optimization as our experience indicates it to be the best routine to future sales of laser systems.
6.3 ADVANTAGES OF REGIONAL MARKETING EFFORT
LWD, Inc. would be the only company of any size offering glass laser industrial products in Arizona. In fact, in independent surveys taken byLASER FOCUS magazine, American Laser was considered the top industrial laser supplier in the Western region of U.S.A. We believe that there exists on the part of the prospective laser purchaser a very strong tendency to purchase from a company in his geographical area. We have observed that the reason for this is the customer's concern with equipment maintenance and service. Laser equipment, usually, is equipment that is unknown to him, and therefore he needs assurance that should a breakdown occur, his production line will be back in operation in the shortest possible time. Recognizing this important factor, we will, at least through 1975, concentrate our efforts on getting sales in the Eastern region of the country. That this strategy will not overly limit our potential market in that time should be evident after a study of our competition (Section 7.0), the partial listing of customers to which American Laser has sold equipment (Section 6.5), and the list of potential customers we have in the state of California alone in only three industries of the many that will use lasers (Section 6.4).
The concentration of our efforts to this portion of the country will accomplish the following:
ADVANTAGES OF REGIONAL MARKETING
1. Allow us to build up a concentrated backlog of satisfied customers.
2. Gain an added advertising advantage from these customers both by word of mouth as well as by referring potential customers to these companies.
3. Take advantage of the fact that similar industries tend to be within the same geographical area.
4. Allow us to build strong contacts within certain industry groups.
5. Greatly reduce advertising, promotion and travel cost.
6.4 PROSPECTIVE CUSTOMERS
During the first six months, we anticipate that Bill Lock will spend an average of one day per week with present customers in the California area. Torry Company and Foxboro Company both require this time to insure that they purchase their laser equipment soon. Torry Company has sales potential for 5 units in the next six months with 14 units to follow within the next year. Foxboro Company has immediate plans to purchase one unit with a very high potential to buy a second unit soon. ALI has been working with several other companies investigating the potential use of lasers. These companies will be contacted and the applications efforts will be continued as planned under ALI management. A partial listing of the companies is contained below.
1. Delco Remy, San Francisco, Calif.
2. Eastman Kodak, Los Angeles, Calif.
3. Hale H. Packard, San Francisco, Calif.
4. Ethicon, Palo Alto, Calif.
5. Timex Corp., Los Angeles, Calif.
6. General Electric, Los Angeles, Calif.
7. Burr-Brown, Phoenix, Ariz.
Negotiations with these customers are in varying states of completion. It is estimated that during the first six months of operation, Bob Dusza will be required to spend 15 percent of his time working on applications for these customers. Bill Lock's involvement will total about one week per month or six weeks total including both company visits as well as applications effort. New prospective customers will come from three basic areas:
1. Those submitted by our two reps.
2. Those obtained by promotion.
3. Those obtained by direct sales contract.
Based on previous successes, almost any company in the small parts, electronics or instruments businesses is a prospective customer. If our promotion efforts are unable to generate sufficient volume of new inquiries, we will contact, via direct sales calls, the appropriate industries. The vehicle for approaching these companies will be unsolicited as well as by contacts which we currently have within the field. A partial list of potential sales prospects in the California market area for Laser related industries will be developed.
6.5 PARTIAL LIST OF AO GLASS LASER CUSTOMERS
6.6 MARKETING PLAN - FIRST SIX MONTHS
6.6.1 Direct Selling
Direct selling will be accomplished during the first six months of operation via two manufacturers' rep firms retained from American Laser, Inc. as well as from a 75% selling effort from Bill Lock and 25% selling effort from Al Castro. The firm of Cook & Weil, Inc. will cover all of California and the firm of Robinson Associates will cover upper Oregon and Washington. The two rep firms will be paid on direct commission from sales in their respective areas. Al Castro and Bill Lock will concentrate on the Arizona area with the heaviest concentration in Phoenix. Bill Lock will spend as much time as required with Torry Co., and the Foxboro Co.
News releases will appear in the local Mass. newspapers as well as the appropriate technical publications announcing the formation of our business as well as our goals and products. Al Castro and Bill Lock will actively solicit speaking engagements to California engineering groups and business groups. These talks will strongly stress lasers as a machine tool showing advantages over existing techniques. In addition, speaking engagements at technical shows will be solicited.
Accessories: An ad will appear in Laser Focus under our new company name during September featuring our Safety accessory kit and autocollimator. A follow-up ad will appear in November. Laser Systems: We will place ads in "local" technical-business publications in the West Coast market areas. These will be supplemented by application news releases in the local press.
Robert Dusza will spend 75 percent of his time and Bill Lock 25% of his time actively performing studies on potential applications. Potential customers will be strongly urged to visit the plant and see the equipment in actual operation.
6.6.5 Assistance to Reps
We will provide our two rep firms with support via trips and communication with their potential customers as well as with all the necessary selling aids such as sample applications, literature, an accessory kit and potential leads. Both Al Castro and Bill Lock will schedule trips into the reps' areas on a periodic basis. This will allow our reps to make maximum use of our time when we are in their areas.
For this period of time, we would be selling off the already built inventory, be building back what we sell, and selling for 1974 sales. In this period, we will leave the price structure the same as it was under American Laser, Inc. management. The current gross margin on the Models 11, 14, 6, 103 is approximately 50 percent, but we should attain a greater per-unit contribution margin, in our small company, than could be achieved in the larger company.
6.7 MARKETING PLAN - BEYOND SIX MONTHS
6.7.1 Direct Selling
A direct factory salesman will be added to our organization during March of 1974. The type of individual we will be looking for must have a strong technical background as well as proven sales ability in the area of industrial sales. We anticipate that he will spend his first months both training at the plant as well as visiting existing customers. He will operate on straight salary for his first three months. By June of 1974, he will be ready to go out into the field. His assignment at that time will be somewhat dependent on the effectiveness of our rep organization as well as our feelings toward further geographical expansion. Al Castro and Bill Lock will continue to do some selling, but as time goes on, their time will be increasingly required on internal operations and therefore a smaller percentage of their time will be available for direct selling.
We believe that promotion is by far the most important factor of the marketing mix for our products. It is our plan that approximately 5% of sales be allocated to expenses for promotion. Bill Lock will be responsible for this activity and he plans to continue with speaking engagements, putting out news releases, writing a few technical articles for suitable trade publications, taking movies of our equipment satisfactorily performing to show potential customers in similar industries, etc.
We do not plan to substantially change our expenditures for advertising during the first three years of operation. It is planned that the ads will be designed to reach a particular identified group for each particular product of our company. This will mean that our ads will be appearing in different publications, more direct mailing will result, as well as less "capability or image" advertising than was the case at American Optical.
Robert Dusza will spend 75 percent of his time, as before, doing applications work. Bill Lock will have more time to allot to applications (because of the addition of the direct salesman) and will continue to lead this all-important work in our operation.
6.7.5 Assistance to Reps
As in first six months plan.
We believe that our lasers and a few of our accessories could be priced 15% higher than they currently are and still remain competitive. We plan now to institute this increase in price early in 1974. As we will be strongly influenced in making this decision on our competition's prices at that time, our anticipated sales projections and cash flow calculations shown in the financial section of this proposal do not reflect this anticipated price increase.
7.3 OTHER WELDING AND DRILLING TECHNIQUES
Lasers, by their very output characteristics, offer several advantages over other techniques. This is not to say that lasers offer advantages in every situation, but on some applications one of the advantages listed below will either save the customer money or allow him to do his job at all.
LASER WELDING/DRILLING ADVANTAGES
1. Permits welding of materials that are heat sensitive or adjacent to heat sensitive materials.
2. In most cases, eliminates re-tempering process.
3. Eliminates the need for flux.
4. Eliminates requirement for vacuum or inert gas in most cases.
5. Allows welding of dissimilar materials that cannot be accomplished with existing techniques.
6. Allows non-contact welding and drilling.
7. Ability to reach difficult areas.
8. Vacuum welding can be accomplished.
9. Welding and drilling steel parts.
10. Optical positioning.
11. Ability to produce welds and holes faster than other techniques.
12. Elimination of cleaning process.
13. Easily automated.
14. Low per-shot cost.
15. Small spot sizes easily produced.
16. Low initial cost.
The organization chart of LWD, Inc. as it is expected to be for the first six months, is shown on the next page. Resumes of the key people are given at the end of this section. We have received verbal agreements that:
1. Professor Joseph Mancuso will serve as business advisor to our company.
2. Mr. Joseph Kantorski will serve as a technical consultant on optics and systems design, as needed.
3. Dr. Elias Snitzer will serve as a technical consultant on lasers as required.
4. Mr. George Granitsas will serve as a technical consultant on metallurgy.
5. The Board of Directors members shown will serve the company in that capacity.
It is our intention to get the best possible lawyer and bank for their respective services to our company.
8.2 ALLOCATION OF PERSONNEL
The allocation of the available time of the six people that will probably comprise our company for the first six months of operation is given below. There might exist the concern that the six people shown are adequate to meet the total needs of our company to produce the sales and service for the six months period. In answer to this concern, it should be noted:
1. LWD, Inc. will start operation with an inventory of finished goods, components, and accessories.
2. That the units sold in this period can be produced as shown in the requirements table below.
LWD Organization Chart
1.Board of Directors: Albertt D. Castro, George Granitsas, William H. Lock, Dr. C. G. Young, A. Paul Cravedi
2a. Technical Consultants: Joseph Kantorski, Dr. Elias Snitzer, George Granitsas
2b. Business Advisor: Dr. Joseph Mancuso
3. President: Albert D. Castro
A. Elect. Assembly: Frances N. Fournier
B. Mech/Opt. Assembly: Open
C. Clerk/TTypist: Open
4. Vice President: William H. Lock
A. Applications: Robert J. Dusza
Allocation of Personnel - First Six Months
Manufacturing Requirement to Rebuild Inventory
Sold First Six Months (Table Omitted)
Hours Available Six Months for Manufacturing (1350 hours).
ALBERT D. CASTRO, PRESIDENT
B.S., Electrical Engineering, Worcester Polytechnic Institute 1956
M.S., Electrical Engineering, Northeastern University 1960
Currently entered in Management Science Program
1956-1960 Raytheon Co., Servomechanisms Group Leader, Submarine Signal Division
1960 - President, American Laser, Inc.
1960 - Group Leader, Systems Research Dept.
1964 - Supervising Electronic Engineer, Research Division
1970 - Engineering Manager, Laser Products Dept.
1972 - Production Manager, Laser Products Dept.
C.G. Young, J.W. Kantorski, and A.D. Castro, "A High Power Intermediate Pulse Width Laser," presented at the IEEE Conference on Laser Engineering and Applications, Washington, DC, June 1967.
A.D. Castro and M.A. Ponti, "Laser Welding of Microcircuit Interconnections - Simultaneous Multiple Bonds of Aluminum to Kovar," presented at SAE Microcircuit Packaging Conference, Palo Alto, California, November 1968.
A.D. Castro, J.W. Kantorski, D.A. LaMarre, and D.A. Smith, "Light-Weight Laser Transmitter," presented at Fourth Conference on Laser Technology, San Diego, California, 1969.
Mr. Castro supervised the Engineering, Applications, and Production sections of the Laser Products Dept. and was therefore responsible for all development, design, applications, engineering, and production in that department. He supervised approximately 20 people. While at this position, his group designed and fabricated a number of specialized machines for use in industrial processing. These machines utilize lasers for cutting, welding, slitting, scribing, hole drilling and other industrial processing of a variety of materials. Also, as a part of the general research and development work at American Laser, Inc., he was involved with high speed light detectors, a variety of medical products, inspection equipment, specialized N/C and computer-controlled machining processing, and a variety of military funded programs.
Institute of Electrical and Electronic Engineers.
Associates Degree in Electronic Engineering 1966; Worcester Junior College;
Bachelors Degree in Electrical Engineering 1970, Northeastern University.
Currently enrolled in MBA program at University of Arizona Grad School.
June 1959 to April 1961 - Howard Clothes, Inc., Phoenix, Arizona
Position: Credit Manager
Duties: Credit approval, dunning, bookkeeping, accounts receivable.
Part-time salesman until 1964.
September 1961 to April 1962 - Wyman Gordon Company, Los Angeles, Calif.
Position: Technician, Metallurgy Department.
Duties: Tensile and stress rupture testing for jet engine components.
Training: 6-month, two night per week course in Metallurgy offered at Wyman Gordon.
1962 to 1966 - Research Assistant
Supervisor: D.A. LaMarre, George Grantsa.
Principal Projects: Medical Laser Application, Industrial Laser
Applications. Fiber Optics Damage Studies, Laser Product Development.
1966 to 1970 - Research Engineer
Supervisor: Dr. C.J. Koester
Principal Projects: Active Fiber Lasers, Medical Effects of Lasers, Laser
Eye Protection, Laser Applications.
1970 to Present - Sr. Applications Engineer
Supervisor: Dr. C.G. Young.
Responsibilities: Manager, Industrial Laser Applications; Product Manager,
Solid State Lasers; Member Sr. Staff; Proposal Preparation; Sales Calls;
Equipment Installation and Servicing; Laser and Optical System Design.
W. Lock, E. Snitzer, and R. Woodcock, "Self Q-Switched Nd3+ Glass Laser," Volume 21, Physics Letters, June 1966.
Charles Campbell, Robert Innis, and W. Lock, "Ocular Effects Produced by Experimental Lasers," American Journal of Ophthalmology, Volume 66, October 1968.
Joseph Sataloff, Chester Wilpizeski, Robert Innis, and W. Lock, "Audiometric Effects of Discrete Laser Irradiation of the Squirrel Monkey Inner Ear."
H. Swope, and W.H. Lock, "Fiber Laser Probe," presented at the Gordon Conference, July 5, 1968.
Self Q-Switched Nd3+ Glass Laser
FRANCIS N.J. FOURNIER, ELECTRICAL ASSEMBLY
Air Force Technical School - 1 year
1961-1965 Air Force - Electronic Assembly and Service
1965-1966 SPEDCOR - Electronic Quality Control
1966-Present American Laser, Inc.
Electronics assembly, service, and maintenance. Assists in design of electrical devices. Drafting experience, both electrical and mechanical; layout, design, and art work for printed circuits. Experienced in selecting and ordering electrical and mechanical components.
ROBERT J. DUSZA, APPLICATIONS/MECHANICAL ASSEMBLY
Chabot Junior College, California - 2 years
Additional courses in metallography, plastics, and metallurgical problems at Metals Engineering Institute and San Diego Junior College
1954-1958 Air Force - Supervised machine shop of 8 men.
1958-1968 Lawrence Radiation Lab., Research Assistant. Studies involved with Beta-Gamma irradiation and metallography. Preparation of samples for testing. Experienced in work scheduling, design, fabrication of experimental hardware. Also high temperature furnaces, ultra-high vacuum techniques.
1968-Present American Laser, Inc., Engineering Assistant.
Work in laser applications lab. Experience with equipment design, test set-up, experimental work, sample preparation and tests and evaluation of laser-welded samples in a variety of metals and alloys. Also supervised the mechanical/optical assembly of glass laser devices. Extensive experience with cements, glues, and epoxies.
9.1 EQUITY POSITIONS
Albert Castro will put into the company $15,000 cash and will be a 60% owner of the business. William Lock will put $10,000 cash into the company and will be a 40% owner of the business. There exists the option to American Laser, Inc. that they receive either a 5% equity position in LWD, Inc. or a portion of after-tax profits for the years 1976 and 1977 as a partial payment to them for the business. No other equity positions are contemplated at this time.
9.2 DEBT FINANCING
We have proposed to American Laser Corporation that they allow us to pay them $45,000 of the total we offer as a three-year note which would be senior to all other debt. In addition, a cash-flow analysis of our expected operation indicates a need for at least $50,000 additional cash. No other debt is contemplated at this time.
9.3 OPERATIONS (EXPENSE/SALES) SHEET
To collect sufficient data and assumptions from which proforma cash-flows, a break-even analysis, and P&L Statements could be devised, a proforma operating sheet was made for the period June 18, 1973 to December 31, 1975. We believe, in general, that this sheet, shown in this section, is self explanatory if we present the assumptions we made. Accordingly, they are:
- Assumptions -
1. American Laser, Inc. accepts our proposal as presented;
2. Outside funding group accepts our proposal as presented;
3. That our sales are as shown. That these sales estimates can be established by considering that:
A) Torry Company will order two Model 11's for immediate delivery. Three more will be ordered within the first six months operation. We project six additional units in 1974, and up to eight more in 1975.
B) Foxboro Company will order one Model 14 within the first six months operation. We project one additional unit in 1974, and another in 1975.
C) Xerox will order a laser module within the first six months operation.
D) Past sales of accessories has been approximately $2,000 per month.
E) Applications work with Timex, Ethicon, Eastman Kodak, and Delco should result in some purchases in 1974 and 1975.
4. That no expenses other than those shown in the operations sheet be incurred.
9.4 PROFORMA CASH FLOW
Using data from the Operations Sheet, a proforma cash flow analysis was made and is also given in this section. In making this projection of cash flow, itwas assumed that all bills owed were paid within 30 days, all accounts receivable to us were paid within 30 days, and no cash payouts other than those shown were to be made.
9.5 P&L STATEMENTS - BREAK-EVEN ANALYSIS
These projections are given also in this section.
"Sales by Product - First 6-Month Period"
"Sales by Product - 1974"
"Sales by Product - 1975"
"1973 detail" (salaries/marketing)
"1974 and 1975 detail" (salaries/marketing)
"1973 detail" (cash sources/cash payouts)
"1974 and 1975 detail" (cash sources/cash payouts)
"LWD Proforma P&L Statements July 1973 - December 1975"
"Breakeven Analysis" (graph)
10.0 ADVANTAGES TO ALI OF OUR PROPOSAL
It may be felt that this proposal was made with consideration only being given to our interests. We, however, feel quite strongly that this proposal was carefully considered to benefit not only us, but American Laser Corporation as well. We fully recognize that the company must be concerned with getting the best possible offer that might be forthcoming for this business. We feel that our offer allows ALI to receive maximum benefit from its decision to leave the industrial laser market and wish, in this section, to point out to ALI some of the advantages of accepting this proposal.
10.2 SPLITS UP LASER BUSINESS
The Laser Products Department, up to its last day of operation, really was not in only one business, but rather in two quite different ones glass laser devices and CO2 laser devices. Our proposal asks ALI to recognize the fact that, indeed, these businesses are quite different: the customers are different, the applications are different, the people concerned with the products at AO are different, the advertising/promotional activities of the two are different and the competitive positions relative to products of other companies are completely different.
The glass laser line and accessories business we have discussed quite in length in this proposal. Let us now consider the CO2 part of LVD. What does it consist of? How much is it worth? Who will buy it? We contend that, such as this business is, ALI maximizes its potential return by trying to sell this portion separately. This CO2 line consist of the ALI-45, ALI-55, and now the Ferranti laser. It is our belief that the Ferranti agreement was made to ALI only and that all agreements that ALI has (or had) with them are now broken. We do not believe, therefore, that ALI can pass along to whoever purchases this business the agreement that ALI had. If this indeed is the case, ALI's CO2 line really consists of just the ALI-45 and ALI-55. These products being quite similar, can be considered to be the same for purposes of this discussion. What then do they offer a potential buyer? We contend that the only thing, other than the CO2 laser inventory, that AO has to sell, is its process using starter strips.
The use of these strips results in better laser operation and is really the only unique advantage that ALI's CO2 lasers possess. This being the case, the line could be salable to other CO2 laser manufacturers who would be able to make use of the process in their existing products, or a non-CO2 laser manufacturer wishing to enter the marketplace with a unique product feature. Tying the sale of the glass laser line to the CO2 line to either of the above categories of potential buyers, we feel, decreases the probability that they would be even interested. The advantages to ALI of choosing not to sell this unique process and keeping it for possible exploitation later as its medical laser business grows, should also be seriously considered.
In summary, of the split we contend:
1. ALI has always had two different laser businesses glass and CO2.
2. Different ALI people were concerned with each of the two product lines.
3. By splitting LPD into two pieces, ALI maximizes its potential because the two businesses each have different appeal to different buyers; therefore, ALI gets maximum offer from each.
4. Ferranti Laser agreement really not ALI's to confer.
5. ALI should consider not selling CO2 business, but adding it to Framingham's Medical Laser Group.
We are prepared to present ALI with a check for $10,000 immediately upon their acceptance of this proposal. We contend that it could be months before another suitable buyer could be found. As this time elapses, the business will rapidly decrease in value as potential customers find other solutions to their problems. The buyer then finds that all he has is the inventory glass, metal, etc. not laser systems, just metal, glass, etc. If ALI will accept our proposal with the timing suggested, we can move quickly enough to insure that potential glass laser customers might still purchase lasers from this product line inventory. We have been able to quote the full inventory value to ALI as part of our offer because we believe the inventory can be sold by us. A delay, in which ALI searches for another buyer, cannot benefit anyone. However, a delay in the sale of the CO2 line might be borne without ill effect because there are few near-in sales prospects and few systems in the field. Further, the personnel involved with these CO2 systems are still employed at ALI's Research Center and therefore could be available for servicing equipment as required.
All of the glass laser systems testing, installation and service has been, to date, performed by members of our proposed company only. We propose to continue servicing these systems for ALI. We believe that it is impossible to imagine that any other group could perform this service as well. We know the equipment; we know the customers; we know the customer's applications; we know the history of his equipment, and its performance on the job.
Acceptance of our proposal will allow ALI to leave the laser business with dignity and honor, keeping its accessories line available for sale through LWD, Inc., and having no servicing and warranty worries on this portion of its laser business. If ALI wishes, it could retain an interest in the laser field by acceptance of the option to hold an equity position in our new company.
We have made a sincere effort to propose a viable plan to ALI whereby the Corporation as well as LWD, Inc. might benefit. We urge immediate consideration of this proposal.