-----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, WBmM/5CSbUpTnUcg1a9X7iZnoiXFS97W6eCUH++E9Jf+7aEha62bRg9e/PpxaCII 4KWYKL9KdlfbNyIgZzE8cA== 0001019687-00-000664.txt : 20000516 0001019687-00-000664.hdr.sgml : 20000516 ACCESSION NUMBER: 0001019687-00-000664 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LASER PHOTONICS INC CENTRAL INDEX KEY: 0000711665 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 592058100 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11635 FILM NUMBER: 636216 BUSINESS ADDRESS: STREET 1: 2431 IMPALA DR CITY: CARLSBAD STATE: CA ZIP: 92008 BUSINESS PHONE: 4072814103 MAIL ADDRESS: STREET 1: 2431 IMPALA DR CITY: CARLSBAD STATE: CA ZIP: 92008 10-Q 1 LASER PHOTONICS, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 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 number: 0-11635 LASER PHOTONICS, INC. --------------------- (Exact name of registrant as specified in its charter) Delaware 59-2058100 -------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) Five Radnor Corporate Center, Suite 470, Radnor, Pennsylvania 19087 ------------------------------------------------------------------- (Address of principal executive offices, including zip code) (610) 971-9292 -------------- (Registrant's telephone number, including area code) 2431 Impala Drive, Carlsbad, California 92008 --------------------------------------------- (Former address since last report) Indicated by check mark whether the registrant: (i) 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 (ii) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of the issuer's Common Stock as of May 15, 2000, was 15,345,323 shares. PART I - FINANCIAL STATEMENTS ITEM 1. FINANCIAL STATEMENTS LASER PHOTONICS, INC. AND SUBSIDIARIES -------------------------------------- CONSOLIDATED BALANCE SHEETS --------------------------- (Unaudited) -----------
March 31, December 31, ASSETS 2000 1999 ------ ------------- ------------- CURRENT ASSETS: Cash and cash equivalents $ 14,855,602 $ 4,535,557 Inventories 1,238,788 1,170,472 Prepaid expenses and other current assets 117,946 34,685 ------------- ------------- Total current assets 16,212,336 5,740,714 PROPERTY AND EQUIPMENT, net 201,486 152,965 PATENT COSTS, net of accumulated amortization of $42,759 and $40,671 42,039 44,127 LICENSE FEE, net of accumulated amortization of $1,166,667 and $1,041,667 2,833,333 2,958,333 OTHER ASSETS 127,447 45,346 NET ASSETS OF DISCONTINUED OPERATIONS 538,668 764,179 ------------- ------------- $ 19,955,309 $ 9,705,664 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Current portion of notes payable and long term debt $ 95,844 $ 353,710 Accounts payable 1,033,558 2,034,371 Accrued payroll and related expenses 140,879 376,967 Other accrued liabilities 463,977 1,372,668 Deferred revenues 250,000 250,000 ------------- ------------- Total current liabilities 1,984,258 4,387,716 ------------- ------------- NOTES PAYABLE AND LONG TERM DEBT 34,087 43,620 ------------- ------------- STOCKHOLDERS' EQUITY: Common Stock, $.01 par value, 25,000,000 shares authorized, 15,112,804 and 13,267,918 shares issued and outstanding as of March 31, 2000 and December 31, 1999, respectively 151,128 132,679 Additional paid in capital 46,513,064 30,759,186 Accumulated deficit (28,727,228) (25,617,537) ------------- ------------- Total stockholders' equity 17,936,964 5,274,328 ------------- ------------- $ 19,955,309 $ 9,705,664 ============= =============
The accompanying notes are an integral part of these statements. 3 LASER PHOTONICS, INC. AND SUBSIDIARIES ------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- (Unaudited) -----------
Three Months Ended March 31, ------------------------------- 2000 1999 -------------- -------------- The accompanying notes are an integral part of these statements. 4 LASER PHOTONICS, INC. --------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (Unaudited) -----------
Three Months Ended March 31 ------------------------------------ 2000 1999 ---------------- ---------------- OPERATING ACTIVITIES: Net loss $ (3,109,691) $ (2,511,196) Adjustments to reconcile net loss to net cash used in operating activities- Depreciation and amortization 154,473 272,138 Stock options issued to consultants for services 190,381 - Acceleration of options issued to employees 47,500 - Acceleration of options issued to consultants 808,766 - Interest related to beneficial conversion feature - 1,512,292 Changes in assets and liabilities- (Increase) decrease in current assets 73,934 (98,255) (Decrease) in current liabilities (2,227,693) (146,796) ---------------- ---------------- Net cash used in operating activities (4,062,330) (971,817) ---------------- ---------------- INVESTING ACTIVITIES: Purchases of property and equipment (75,906) (10,151) ---------------- ---------------- Net cash used in investing activities (75,906) (10,151) ---------------- ---------------- FINANCING ACTIVITIES: Principal payments on debt (267,399) (141,449) Payments on payable to related party - (7,380) Payment for debt and warrant issuance costs - (166,600) Proceeds from exercise of options 166,312 - Proceeds from exercise of warrants 220,627 - Proceeds from issuance of convertible notes payable and warrants - 2,380,000 Proceeds from other notes payable - 159,226 Proceeds from issuance of Common Stock, net 14,338,741 - ---------------- ---------------- Net cash provided by financing activities 14,458,281 2,223,797 ---------------- ---------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 10,320,045 1,241,829 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,535,557 174,468 ---------------- ---------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,855,602 $ 1,416,297 ================ ================
The accompanying notes are an integral part of these statements. 5 LASER PHOTONICS, INC. AND SUBSIDIARIES -------------------------------------- NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ----------------------------------------------------------- THE COMPANY: Background - ---------- Laser Photonics, Inc. and subsidiaries (the "Company") is principally engaged in the development, manufacture and marketing of laser systems and accessories for medical applications and, through its approximately 76.1% owned subsidiary, AccuLase, Inc., is developing excimer laser equipment and techniques directed toward the treatment of coronary heart disease and psoriasis. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Quarterly Financial Information and Results of Operations - --------------------------------------------------------- The financial statements as of March 31, 2000 and for the three months ended March 31, 2000 and 1999, are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position as of March 31, 2000, and the results of operations and cash flows for the three months ended March 31, 2000 and 1999. The results for the three months ended March 31, 2000 are not necessarily indicative of the results to be expected for the entire year. While the Company believes that the disclosures presented are adequate to make the information not misleading, these consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. Principles of Consolidation - --------------------------- The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. 6 Management's Use of Estimates - ----------------------------- The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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. Cash and Cash Equivalents - ------------------------- For the purposes of the consolidated statements of cash flows, the Company considers investment instruments with an original maturity of three months or less to be cash equivalents. Cash equivalents are primarily comprised of investments in various money market funds. Inventories - ----------- Inventories are stated at the lower of cost or market, determined by the first-in, first-out method and consist of the following: March 31, December 31, 2000 1999 ------------- ------------- Raw materials $ 462,642 $ 613,032 Work-in-process 311,390 557,440 Finished goods 464,756 - ------------- ------------- $ 1,238,788 $ 1,170,472 ============= ============= Property and Equipment - ---------------------- Property and equipment are stated at cost. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, which range from 3 to 7 years. Improvements and betterments are capitalized, and maintenance and repair costs are charged to expense as incurred. Upon retirement or disposition, the applicable property amounts are relieved from the accounts and any gain or loss is recorded in the consolidated statement of operations. Intangible Assets - ----------------- Intangible assets consist of patents and license fees which are carried at cost less accumulated amortization. Patents and license fees are amortized on a straight-line basis over the estimated useful lives of the asset, which is 8 to 12 years for patents and eight years for prepaid license fees. The Company evaluates the realizability of intangible assets based on estimates of undiscounted future cash flows over the remaining useful life of the asset. If the amount of such estimated undiscounted future cash flows is less than the net book value of the asset, the asset is written down to its net realizable value. As of March 31, 2000, no such write-down was required. 7 Revenue Recognition - ------------------- Revenues are recognized upon shipment of products to customers. Deferred revenue relates to customer payments received in advance of the delivery of the related products. Loss Per Share - -------------- The Company computes loss per share in accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share. SFAS No. 128 requires dual presentation of basic and diluted earnings (loss) per share for complex capital structures on the face of the statements of operations. According to SFAS No. 128, basic earnings (loss) per share is calculated by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution from the exercise or conversion of securities into common stock, such as stock options. Diluted net loss per share is the same as basic net loss per share as no additional shares for the potential dilution from the exercise of securities into common stock are included in the denominator as the result is anti-dilutive due to the Company's losses. Reclassifications - ----------------- The consolidated financial statements for prior periods have been reclassified to conform with the current period's presentation. New Accounting Pronouncements - ----------------------------- In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contacts and for hedging activities and is effective for all fiscal years beginning after June 15, 2000. Management believes that the adoption of SFAS No. 133 will have no impact on its operating results or financial position. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB No. 101"). SAB No. 101 summarizes certain of the Staff's views in applying generally accepted accounting principles to recognition, presentation and disclosure of revenue in financial statements. Compliance with SAB No. 101 is required no later than the first quarter of the fiscal years beginning after December 15, 1999. The Company has determined that its accounting policies for revenue recognition are in compliance with the provisions of SAB No. 101. 8 2. PRIVATE STOCK OFFERING: ----------------------- In March 2000, the Company completed a private offering of 1,409,092 shares of common stock at $11.00 per share. The Company received net cash proceeds of $14,338,741 from this private offering. 3. DISCONTINUED OPERATIONS: ------------------------ Due to the limited financial resources of the Company, the Company's business strategy changed in 1997 to focus its efforts on excimer laser technology in order to develop excimer laser and excimer laser delivery products for medical applications. To facilitate the Company's focus on excimer laser technology, as of May 4, 2000, the Company has sold its non-excimer laser businesses, which were located at its Orlando, Florida and Wilmington, Massachusetts facilities. The Company closed a transaction with respect to the sale of certain assets, including certain patents related to non-excimer lasers, related to the Company's Florida business operations, to Lastec, for a purchase price of $375,000. Lastec is unaffiliated with the Company. Lastec has paid the Company a deposit of $37,500, and has executed a secured promissory note in the principal amount of $337,500, payable in three (3) installments, as follows: (i) $37,500 due on or before May 20, 2000, (ii) $100,000 due on or before July 14, 2000, and (iii) the balance plus accrued interest due on or before October 6, 2000. The promissory note accrues interest at the rate of 8% per annum. The promissory note is secured by the assets assigned by the Company to Lastec in connection with the transaction, and is personally guaranteed by the principals of Lastec. As of the date of this filing, a significant portion of the debts related to these operations have been paid from the proceeds of the August 9, 1999 private placement and the March 16, 2000 private placement and the sale of certain assets related to the Company's non-excimer laser operations. In March 2000, the Company paid $950,000 in cash to the landlord for the Florida lease in connection with the satisfaction of a judgment and settlement of certain claims against the Company in the aggregate amount of $1,114,000. These amounts were previously accrued. The Company closed the transaction with respect to the sale of certain assets and the grant of an exclusive license for certain patents related to non-excimer lasers related to the Company's Massachusetts business operations to Laser Components, for a purchase price of $213,000. Laser Components is unaffiliated with the Company. In addition, Laser Components assumed the Company's prospective obligations under the Company's Massachusetts office lease. Accordingly, these two operations are being accounted for together as discounted operations with a measurement date of May 4, 2000. The accompanying consolidated financial statements reflect the operating results and balance sheet items of the discontinued operations separately from continuing operations. The Company expects to report a gain on the sale of these discontinued operations in the quarter ending June 30, 2000. Prior periods have been restated. 9 Revenues and loss from discontinued operations on the accompanying consolidated statement of operations were: Three Months Ended March 31, -------------------------------- 2000 1999 ------------- ------------- Revenues $ 180,278 $ 347,010 ============= ============= Loss $ (348,576) $ (177,165) ============= ============= The assets and liabilities of these operations have been reclassified on the accompanying consolidated balance sheets to separately identify them as net assets of discontinued operations. A summary of these net assets is as follows: March 31, December 31, 2000 1999 ------------- ------------- Accounts receivable, net $ 17,934 $ 176,179 Inventories 390,576 428,415 Prepaid expenses and other current assets 15,375 19,800 Property and equipment, net 114,783 139,785 ------------- ------------- $ 538,668 $ 764,179 ============= ============= 10 4. NOTES PAYABLE AND LONG-TERM DEBT: --------------------------------- Notes payable and long-term debt consists of the following:
March 31, December 31, 2000 1999 ------------- ------------- Notes payable - unsecured creditors, interest at prime rate, quarterly interest only payments beginning October 1, 1995, principal due October 1, 1995, unsecured. Settled in March 2000. $ -- $ 165,298 Note payable - creditor, interest at 10%, monthly interest only payments through May 5, 1997, thereafter monthly interest and principal payments of $6,384 through May 1999, unsecured. Settled in March 2000. -- 127,860 Note payable - U.S. Treasury, interest at 9%, payable in monthly principal and interest installments through July 2000. Settled in March 2000. -- 14,873 Notes payable - various creditors, interest at 9%, payable in various monthly principal and interest installments through July 2000. Settled in March 2000. -- 10,101 Note payable - creditor, interest at 9%, payable in monthly principal and interest installments of $1,258 through January 2001, collateralized by personal property of the Company. Settled in March 2000. -- 16,670 Note payable - lessor, interest at 10% payable in monthly principal and interest installments of $1,775 through December 31, 2002, unsecured. 51,037 55,021 Note payable - creditor, interest at 13.5%, payable in monthly principal and interest installments of $1,552 through May 2000. Settled in March 2000. -- 7,507 Note payable - unsecured creditors, interest at 8.3%, payable in monthly principal and interest installments of $9,480 through November 2000. 78,894 - ------------- ------------- 129,931 397,330 Less-current maturities (95,844) (353,710) ------------- ------------- $ 34,087 $ 43,620 ============= =============
11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THIS QUARTERLY REPORT ON FORM 10-Q (THE "REPORT"), INCLUDING THE DISCLOSURES BELOW, CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. WHEN USED HEREIN, THE TERMS "ANTICIPATES," "EXPECTS," "ESTIMATES," "BELIEVES" AND SIMILAR EXPRESSIONS, AS THEY RELATE TO THE COMPANY OR ITS MANAGEMENT, ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS IN THIS REPORT OR HEREAFTER INCLUDED IN OTHER PUBLICLY AVAILABLE DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), REPORTS TO THE STOCKHOLDERS OF LASER PHOTONICS, INC., A DELAWARE CORPORATION (THE "COMPANY") AND OTHER PUBLICLY AVAILABLE STATEMENTS ISSUED OR RELEASED BY THE COMPANY INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE THE COMPANY'S ACTUAL RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS TO DIFFER FROM THE FUTURE RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FUTURE RESULTS ARE BASED UPON MANAGEMENT'S BEST ESTIMATES BASED UPON CURRENT CONDITIONS AND THE MOST RECENT RESULTS OF OPERATIONS. THESE RISKS INCLUDE, BUT ARE NOT LIMITED TO, THE RISKS SET FORTH HEREIN AND IN SUCH OTHER DOCUMENTS FILED WITH THE COMMISSION, EACH OF WHICH COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS AND THE ACCURACY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN. THE COMPANY'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS REPORT. OVERVIEW OF BUSINESS OPERATIONS The Company is engaged in the development, manufacturing and marketing of proprietary excimer laser and fiber optic equipment and techniques directed toward the treatment of psoriasis and cardiovascular and vascular disease. The Company anticipates developing such equipment and technologies to treat other medical problems. However, no assurance to this effect can be given. The Company's former business strategy consisted of the development of a wide range of laser products using different solid-state lasers. Between 1986 and the date of this Report, the Company sold over 1,000 lasers, usually on a private label basis, to other manufacturers. The Company also considered pursuing a strategy of using its excimer laser technology for a photolithography product, which was abandoned. The Company's former strategies proved to be unsuccessful, in the opinion of then current management of the Company. Although the Company generated revenues from the sale of its products, former management believed that the Company would never be able to operate profitably in the markets where the Company was then doing business. The Company currently believes that its excimer laser technology provides the basis for reliable cost-effective systems that will increasingly be used in connection with a variety of applications. Accordingly, the Company has discontinued its business operations related to the Company's former business strategy and is focused solely on excimer laser products for various medical applications. On May 13, 1994, the Company filed a Petition for Reorganization (the "Bankruptcy Proceeding") under Chapter 11 of the Federal Bankruptcy Act on May 13, 1994, Case No. 94-02608-611-Federal Bankruptcy Court-Middle District, Florida (the "Bankruptcy Court"). An order was issued on May 22, 1995, confirming the Company's Third Amended Plan of Reorganization (the "Bankruptcy Reorganization" or the "Plan"). The Company was subsequently authorized to conduct its business operations as a debtor-in-possession subject to the jurisdiction of the Bankruptcy Court. On May 22, 1995, the Company's Plan was confirmed by the Bankruptcy Court. The implementation of the terms of the Plan resulted in the Company's adoption of "fresh start" accounting. The Plan provided, that in exchange for the forgiveness of certain unsecured debt, the Company issued to unsecured creditors shares of the Company's Common Stock such that, following the issuance of all Common Stock to be issued under the Plan, the unsecured creditors owned 1,000,000 shares of the Company's Common Stock, representing 20% of the issued and outstanding Common Stock of the Company. The 7,500,000 shares of Common Stock of the Company's prior existing stockholders were canceled and reissued into 250,000 shares of Common Stock, which represented 5% of the then total issued and outstanding shares of Common Stock. The Plan further provided that Helionetics, Inc. ("Helionetics"), a former principal stockholder of the Company, transfer to the Company 76.1% of the common stock of Acculase, Inc. ("Acculase"), the Company's principal operating subsidiary. Further, during the pendency of the Bankruptcy Proceeding, Helionetics contributed $1,000,000 in cash to the Company, which funds were utilized for cash payments under the Plan, and Helionetics loaned the Company 12 $300,000 to fund the cost of research and development of the Company's excimer lasers, which loan has been repaid. Under the Plan, Helionetics received 3,750,000 shares of Common Stock of the Company, which represented 75% of the then total issued and outstanding shares of Common Stock. During April, 1997, Helionetics filed a voluntary petition of reorganization ("Helionetics Reorganization") with the United States Bankruptcy Court in the Central District of California for protection under Chapter 11 of Title 11 of the United States Bankruptcy Code. As a result, the Company wrote off its $662,775 receivable from Helionetics as of December 31, 1996. In connection with the Helionetics Reorganization (defined below), Helionetics disposed of all of its holdings of the Company's Common Stock. No persons who were stockholders of the Company immediately before the reorganization have at present any controlling interest in the Company. On September 30, 1997, Pennsylvania Merchant Group ("PMG"), the Company's then existing investment banker, purchased from the Helionetics bankruptcy estate, a note payable from Acculase to Helionetics in the amount of $2,159,708, including accrued interest. During October, 1997, PMG sold the note to the Company for 800,000 shares of Common Stock. Acculase was formed in 1985 for the purpose of commercializing products that utilize its proprietary excimer laser and fiber optic technologies. Acculase has focused primarily on the development of medical products for the treatment of coronary heart disease. The Acculase excimer laser power source was developed to perform a variety of material processing applications. The Acculase overall system, designated the pulsed excimer laser, was developed for microsurgical applications. The first medical application of the overall system, designated the excimer laser system, was approved by the United States Food and Drug Administration (the "FDA") under Investigational Device Exemption ("IDE") No. G920163, for use in the treatment of occlusive coronary artery disease, as an adjunct to coronary artery bypass graft ("CABG") surgery. Acculase chose not to pursue completion of such IDE due to the lack of funds to pay the costs of, and to recruit patients into, the necessary studies. In connection with the Company's current business plan, the Company's initial medical applications for its excimer laser technology are intended to be used in the treatment of psoriasis and cardiovascular disease. Between March, 1998 and November, 1999, the Company entered into five (5) clinical trial agreements (collectively, the "Clinical Trial Agreement") with Massachusetts General Hospital ("MGH") to compare the effect of excimer laser light using its excimer laser technology to the current Ultraviolet "B" ("UVB") treatment being used to treat psoriasis and other skin disorders. The Company provided prototype laser equipment for pre-clinical dose response studies. The Company has agreed to support the clinical trials with research grants of approximately $660,000, of which $448,000 has been paid, as of the date of this Report. The final data from the first of these clinical trial agreements was collected in December, 1998, and formed the basis for a 510(k) submission to the FDA on August 4, 1999. The four remaining studies are ongoing and have not been completed as of the date of this Report. On January 27, 2000, FDA issued a 510(k) to the Company, establishing that the Company's excimer laser psoriasis system has been determined to be substantially equivalent to currently marketed devices for the treatment of psoriasis. The Company introduced its psoriasis products for the purposes of commercial application testing in March, 2000, and intends to distribute the psoriasis treatment system for commercial use in July, 2000. As of the date of this Report, the Company has generated no revenues from the psoriasis treatment system. In connection with the cardiovascular and vascular uses of the Company's excimer laser technology, on August 19, 1997, Acculase and Baxter Healthcare Corporation ("Baxter") entered into a strategic alliance (the "Baxter Agreement") for the manufacture and marketing of excimer laser products for an experimental procedure known as Transmyocardial Revasculization ("TMR"). Acculase granted to Baxter an exclusive worldwide right and license to manufacture and sell the Company's excimer laser technology products relating to the treatment of cardiovascular and vascular disease and the disposable products associated therewith (the "TMR System"). The Company agreed to manufacture the TMR System to the specifications of Baxter at a schedule of prices, based upon the volume of TMR Systems purchased by Baxter from the Company. The Company recognized revenue of $1,718,000 from Baxter, which was equal to 23% of gross revenues for the three-year period ended December 31, 1999. No single customer, other than Baxter, accounted for sales in excess of 10% in 1999. 13 DISCONTINUED OPERATIONS To facilitate the Company's focus on excimer laser technology, the Company has sold certain of its non-excimer laser assets, which are related to its business operations at its Orlando, Florida and Wilmington, Massachusetts facilities. As of May 4, 2000, the Company closed the transactions with respect to the sale of certain assets, including certain patents related to non-excimer lasers related to the Company's Florida business operations, to Lastec, Inc. ("Lastec"), for a purchase price of $375,000. Lastec is unaffiliated with the Company. The Company has discontinued its Florida operations. Lastec has paid the Company a deposit of $37,500, and has executed a secured promissory note in the principal amount of $337,500, payable in three (3) installments, as follows: (i) $37,500 due on or before May 20, 2000, (ii) $100,000 due on or before July 14, 2000, and (iii) the balance plus accrued interest due on or before October 6, 2000. The promissory note accrues interest at the rate of 8% per annum. The promissory note is secured by the assets assigned by the Company to Lastec in connection with the transaction, and is guaranteed by John Yorke and Raymond Thompson, who are principals of Lastec. As of April 7, 2000, a significant portion of the debts related to these operations have been paid from the proceeds of a financing completed on August 9, 1999 resulting in gross proceeds of $9,310,374 to the Company and a financing completed on March 16, 2000 (the "March 16, 2000 Financing") resulting in net proceeds of approximately $14,300,000 to the Company and the sale of certain assets related to the Company's non-excimer laser operations. In March 2000, the Company paid $950,000 in cash to the landlord for the Florida lease in connection with the satisfaction of a judgment and settlement of certain claims against the Company in the aggregate amount of $1,114,000. These amounts were previously accrued. Further, the Company closed the transactions with respect to the sale of certain assets and the grant of an exclusive license for certain patents related to non-excimer lasers related to the Company's Massachusetts business operations to Laser Components GmbH ("Laser Components"), for a purchase price of $213,000. Laser Components is unaffiliated with the Company. In addition, Laser Components assumed the Company's prospective obligations under the Company's Massachusetts office lease. The Company has discontinued its Massachusetts operations. Accordingly, the former operations at the Company's Florida and Massachusetts facilities are being accounted in the Company's Consolidated Financial Statements included elsewhere in this Report as "discontinued operations," with a measurement date of May 4, 2000. The Consolidated Financial Statements reflect the operating results and balance sheet items of the discontinued operations separately from continuing operations. The Company expects to report a gain of the sale of these discontinued operations in the quarter ending June 30, 2000. Management's decision to suspend these business operations is consistent with the Company's new business strategy and has resulted in the discontinuance of business operations, which generated approximately 76% of the Company's revenues for 1998 and 1999. Revenues from discontinued operations during the three (3) months ended March 31, 2000 and 1999 were $180,278 and $347,010, respectively. Loss from discontinued operations during the three (3) months ended March 31, 2000 and 1999 were $348,576 and $177,165 respectively. At March 31, 2000 and December 31, 1999, net assets of the discontinued operations were $538,668 and $764,179, respectively. BASIS FOR PREPARATION OF FINANCIAL STATEMENTS The consolidated financial statements filed elsewhere herein have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business, and, where applicable, in conformity with Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code," issued in November, 1990, by the American Institute of Certified Public Accountants ("SOP 90-7"). Under the provisions of SOP 90-7 and in connection with the confirmation of the Bankruptcy Reorganization on May 22, 1995, the Company was required to adopt fresh start reporting as of May 23, 1995, since the reorganization value (approximate fair value at the date of reorganization) was less than the total of all post-petition liabilities and allowed claims, and holders of existing voting shares before May 23, 1995 received less than 50% of the voting shares of the emerging entity. Accordingly, the consolidated statements of operations for the period from January 1, 1995 to May 22, 1995 reflects the effects of the forgiveness of debt resulting from the confirmation of the Bankruptcy Reorganization and the adjustments to restate assets and liabilities to reflect the reorganization value. 14 In adopting fresh start reporting, the Company was required to determine its reorganization value, which represented the fair value of the Company before considering liabilities and the approximate amount a willing buyer would pay for the assets of the Company immediately after the Bankruptcy Reorganization. The reorganization value was based upon the consideration given by Helionetics to acquire a 75% interest in the Company. The purchase price of $1,894,122 was determined based upon cash paid and the carrying value of the 76.1% interest in Acculase previously owned by Helionetics, which was transferred to the Company in connection with the Bankruptcy Reorganization. All assets and liabilities were restated to reflect their reorganization value in accordance with procedures specified in Accounting Principles Board Opinion 16 "Business Combinations," as required by SOP 90-7. The portion of the reorganization value that could not be attributed to specific tangible or identified intangible assets was classified as reorganization value in excess of amounts allocable to identifiable assets ("Reorganization Goodwill") and was being amortized over five years. Because of the magnitude of the Company's losses since emerging from the Bankruptcy Reorganization, the balance of the Reorganization Goodwill was written off as of December 31, 1996. In addition, the accumulated deficit of the Company was eliminated, and its capital structure was recast in conformity with the Bankruptcy Reorganization. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 The Company did not generate any revenues from its continuing operations during the three (3) months ended March 31, 2000 and 1999. Selling, general and administrative expenses during the three (3) months ended March 31, 2000 increased to $2,312,170 from $402,046 during the three (3) months ended March 31, 1999. Included in selling, general and administrative expenses for the three (3) months ended March 31, 2000 were $808,766 related to a charge associated with the acceleration of vesting of certain options granted to the Chairman of the Company's Scientific Advisory Board. Excluding this charge, the increase primarily relates to the Company's building of its infrastructure to enable the Company to implement its business plan to commercialize its psoriasis laser treatment system, which is anticipated to be introduced into the market in July, 2000. Specifically, these increases from 1999 included increases in consulting and professional fees related to marketing expenses with respect to the Company's excimer laser systems, increased salaries and related costs associated with the Company's newly retained executive officers, increased personnel and overhead expenses with respect to the infrastructure, which the Company is building to commercialize its excimer laser operations. Research and development during the three (3) months ended March 31, 2000 increased to $699,697 from $125,427 during the three (3) months ended March 31, 1999. This increase primarily related to the increased amount of funds available for research expenses during 2000. Research and development expenses in the three (3) months ended March 31, 2000 primarily related to the development of the Company's excimer laser systems for its psoriasis and TMR products. Research and development expenses in the three (3) months ended March 31, 1999 primarily related to the development of the Company's psoriasis laser systems and also included expenses related to additional testing to meet CE Mark and Underwriter's Laboratory ("UL") standards for the Company's excimer lasers. Depreciation and amortization during the three (3) months ended March 31, 2000 decreased to $137,840 from $264,569 during the three (3) months ended March 31, 1999. These amounts primarily related to the amortization of the license fee from Baxter and the depreciation of equipment acquired in 1998. The 1999 amount also includes amortization of goodwill from the acquisition of Acculase. Interest income during the three (3) months ended March 31, 2000 was $72,247, as compared to interest expense during the three (3) months ended March 31, 1999 of $1,541,546. Interest income during the three (3) months ended March 31, 2000 primarily related to interest earned on invested cash balances from the proceeds of private placements of the Company's securities. Interest expense during the three (3) months ended March 31, 1999 primarily related to interest charges associated with the recognition of a beneficial conversion feature on certain of its then outstanding convertible notes payable (the "Convertible Notes"). Other income during the three (3) months ended March 31, 2000 was $316,345, as compared to other expense of $443 during the three (3) months ended March 31, 1999. Other income for the three (3) months ended March 31, 2000 primarily related to the forgiveness of certain payables by certain of the Company's creditors. 15 As a result of the foregoing, the Company incurred a net loss of $3,109,691 during the three (3) months ended March 31, 2000, as compared to a net loss of $2,511,196 during the three (3) months ended March 31, 1999. The Company incurred a net loss from continuing operations of $2,761,115 during the three (3) months ended March 31, 2000, as compared to a net loss from continuing operations of $2,334,031 during the three (3) months ended March 31, 1999. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2000, the ratio of current assets to current liabilities was 8.2 to 1.00 compared to 1.3 to 1.00 at December 31, 1999. The Company had $14,228,078 of working capital, as of March 31, 2000. The Company has historically financed its operations through the use of working capital provided from loans and equity and debt financing. Due to the limited financial resources of the Company, the Company's strategy changed in 1997 to focus its efforts on the Company's excimer laser technology and expertise in order to develop a broad base of excimer laser and excimer laser delivery products for both medical and non-medical applications. From September, 1997 through March, 2000, the Company issued certain securities, including shares of Common Stock and other derivative securities convertible or exercisable into shares of Common Stock, in order to finance the Company's business operations. All of the shares of Common Stock and the shares of Common Stock underlying such derivative securities have been registered in a registration statement dated May 12, 2000. As of March 16, 2000, the Company completed the March 16, 2000 Financing to ten (10) institutional investors of an aggregate of 1,409,092 shares of Common Stock at a purchase price of $11.00 per share, resulting in aggregate gross proceeds to the Company of approximately $15,500,000. The market price of the Common Stock on the date that the transaction was negotiated was $13.50 and on the closing date of the transaction was approximately $15.88. The Company paid ING Barings LLC a commission of 6% of the gross proceeds, or approximately $930,000. The Company intends use the proceeds of this financing to pay for the marketing of its products (including its psoriasis treatment products) and research and development expenses, and to use as working capital. Cash and cash equivalents were $14,855,602, as of March 31, 2000, as compared to $4,535,557, as of December 31, 1999. This increase was primarily attributable to the receipt of $14,338,741 in net cash proceeds from the March 16, 2000 Financing. As of March 31, 2000, the Company had total liabilities of $2,018,345 and an accumulated deficit of $28,727,228. As of December 31, 1999, the Company had total debts of $4,431,336 and an accumulated deficit of $25,617,537. As of March 31, 2000, the Company had long-term borrowings in the aggregate amount of $34,087, less the current portion. As of December 31, 1999, the Company had long-term borrowings in the aggregate amount of $43,620, less the current portion. The decrease in long-term borrowings relates to the repayment of long-term obligations from the proceeds of private placements of the Company's securities. In March, 2000, the Company paid $950,000 to the landlord for its Florida facility, and $700,000 to CSC Healthcare Inc., to settle certain disputes between the Company and such other parties. The Company paid these amounts from the proceeds of the March 16, 2000 Financing. Net cash used in operating activities was $4,062,330 and $971,817 for the three (3) months ended March 31, 2000 and 1999, respectively. Net cash used in operating activities during the three (3) months ended March 31, 2000 and 1999 primarily consisted of net losses, decreases in net current liabilities and increases in net current assets (1999 only), offset by depreciation and amortization, increases in interest related to the conversion features of the Convertible Notes (1999 only), the payment in the Company's securities (including Common Stock, options and warrants) of fees for services to consultants (2000 only), and decreases in net current assets (2000 only). Net cash used in investing activities was $75,906 and $10,151 for the three (3) months ended March 31, 2000 and 1999, respectively. In the three (3) months ended March 31, 2000, the Company utilized $75,906 to acquire equipment 16 for the Company's excimer laser business operations. In the three (3) months ended March 31, 1999, the Company utilized $10,151 to purchase equipment for the construction of a laser to be used as a demonstration model. Net cash provided by financing activities was $14,458,121 and $2,223,797 during the three (3) months ended March 31, 2000 and 1999, respectively. In the three (3) months ended March 31, 2000, the Company received $14,338,741 from the net proceeds of the sale of 1,409,092 shares of Common Stock in connection with the March 16, 2000 Financing, $166,312 from the exercise of stock options and $220,627 from the exercise of warrants, which was offset by the utilization of $267,399 for the payment of certain debts. In the three (3) months ended March, 1999, the Company received $2,380,000 in proceeds from the offering of the Convertible Notes, and $159,226 from the proceeds of certain notes payable, which was offset by the utilization of $141,449 for the payment of certain debts, $7,380 for the payment of certain related party notes payable and $166,600 for certain costs related to the issuance of the Convertible Notes and certain other securities. The Company's ability to expand business operations is currently dependent on financing from external sources. There can be no assurance that changes in the Company's manufacturing and marketing research and development plans or other changes affecting the Company's operating expenses and business strategy will not result in the expenditure of such resources before such time or that the Company will be able to develop profitable operations prior to such date, or at all, or that the Company will not require additional financing at or prior to such time in order to continue operations. There can be no assurance that additional capital will be available on terms favorable to the Company, if at all. To the extent that additional capital is raised through the sale of additional equity or convertible debt securities, the issuance of such securities could result in additional dilution to the Company's stockholders. Moreover, the Company's cash requirements may vary materially from those now planned because of results of marketing, product testing, changes in the focus and direction of the Company's marketing programs, competitive and technological advances, the level of working capital required to sustain the Company's planned growth, litigation, operating results, including the extent and duration of operating losses, and other factors. In the event that the Company experiences the need for additional capital, and is not able to generate capital from financing sources or from future operations, management may be required to modify, suspend or discontinue the business plan of the Company. IMPACT OF INFLATION The Company has not operated in a highly inflationary period, and its management does not believe that inflation has had a material effect on sales or expenses. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June, 1998, the Financial Accounting Standards Board ("FASB") recently issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivatives, including certain derivative instruments embedded in other contacts and for hedging activities, and is effective for all fiscal years beginning after June 15, 2000. Management believes that the adoption of SFAS No. 133 will have no impact on the Company's operating results or financial position. In December 1999, the Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB No. 101"). SAB No. 101 summarizes certain of the Staff's views in applying generally accepted accounting principles to recognition, presentation and disclosure of revenue in financial statements. Compliance with SAB No. 101 is required no later than the first quarter of the fiscal years beginning after December 15, 1999. The Company has determined that its accounting policies for revenue recognition are in compliance with the provisions of SAB No. 101. YEAR 2000 One of the major challenges facing any company whose products or services rely on the operation of computers or other equipment containing computer chips is the issue of Year 2000 compliance. Many existing computer programs use only two digits to identify a year in the date field. If not corrected, many computer applications could fail or create erroneous results by or at the Year 2000. 17 During the last eighteen months, the Company has maintained a program to reduce the risk from Year 2000 computer failures by its suppliers. Under this program, all key suppliers were contacted, or supplied or made available their Year 2000 readiness statements. Small vendors offering contract manufacturing services that were unresponsive to the requests for Year 2000 information are in each case one of multiple sources for the given service or product. The Company has inventory for all current orders, as well as orders anticipated in the first quarter of 2000. The Company's production methods require the use of electric power and other municipal provided services, but has been informed that these are Year 2000 compliant. The loss of power or water would not significantly impact scheduled production unless the condition exists for more than a week, although no assurance can be given to that effect. The Company's design and development system relies exclusively on a paper and hardcopy based system. There are documents created by computer aided systems, but all are subject to design control by hardcopy. Management believes that this design method protects the Company against catastrophic failure of any computer system, and although the loss of all of the Company's computer systems would slow the design process, it would not affect current designs, nor would it result in a loss of data, although no assurance can be given to that effect. In some cases, it could be necessary to restore or recreate data in electronic form, which could take several weeks to accomplish. Management believes that, in such a circumstance, the impact on the production of machines and on research and development to be small, although no assurance can be given to that effect. Since January 1, 2000, the Company has not experienced any adverse impact from the transition to the Year 2000, although no assurance can be given that the Company's suppliers or customers have not been affected in a manner that is not yet apparent. In addition, some computer programs may not have been programmed to process the Year 2000 as a leap year, and negative consequences therefrom remain unknown. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On May 4, 2000, the Company terminated its relationship with Hein + Associates LLP, as principal independent accountants for the Company. The decision to terminate Hein + Associates LLP as principal independent accountants for the Company was approved by the Company's Board of Directors on May 4, 2000. In connection with the audits for the three (3) most recent fiscal years ended December 31, 1999, 1998 and 1997 and the subsequent interim period through May 4, 2000, there were no disagreements between Hein + Associates LLP and the Company, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfactions of Hein + Associates LLP would have caused Hein + Associates LLP to make reference in connection with its report for the related periods with respect to the subject matter of the disagreement. The audit reports of Hein + Associates LLP on the consolidated financial statements of the Company, as of and for the fiscal years ended December 31, 1999, 1998 and 1997, did not contain any adverse opinion, or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. The Company is in the process of engaging new principal independent accountants for the Company. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company is not currently exposed to market risks due to changes in interest rates and foreign currency rates and therefore the Company does not use derivative financial instruments to address risk management issues in connection with changes in interest rates and foreign currency rates. PART II- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable. 18 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. PRIVATE PLACEMENT The Company entered into an agreement, dated as of February 2, 2000, with ING Barings LLC for the provision of financial advisory and investment banking services, on an exclusive basis. The term of the agreement is through September 30, 2000. Pursuant to this agreement, ING acted as placement agent in connection with a private offering to 10 institutional investors an aggregate of 1,409,092 shares of the Company's Common Stock at a price of $11.00 per share, for which the Company paid ING customary fees. Sam Navarro, a director of the Company is also the Global Head of Health Care Corporate Finance at ING. At the close of the placement on March 16, 2000, the Company received net proceeds of approximately $14,300,000. In addition, with the exception of Jeffrey F. O'Donnell and Dennis McGrath, all of the executive officers and directors of the Company signed lock-up agreements for a period of 90 days from March 16, 2000, as to all securities of the Company they may own. Messrs. O'Donnell and McGrath reserved the right to sell 65,000 and 35,000 shares, respectively, during such 90-day period. The Company has used and expects to continue to use the proceeds of this financing to pay certain debts, including monies owed to the Company's Orlando, Florida landlord, and for marketing expenses and working capital. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the quarter ended March 31, 2000, the Company's stockholders did not adopt any resolutions at a meeting or by consent. 19 ITEM 5. OTHER INFORMATION. Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. Exhibits -------- 10.1 Asset Purchase Agreement with Laser Components GmbH, dated February 29, 2000 (1) 16.1 Letter re Change in Certifying Accountant (2) 27 Financial Data Schedules - ----------- (1) Previously as part of the Company's Registration Statement on Form S-1, filed with the Commission on January 28, 1998, and as amended. (2) Filed as part of the Company's Current Report on Form 8-K, dated May 9, 2000, and as amended. B. Reports on Form 8-K ------------------- The Company did not file any Current Reports on Form 8-K during the quarter ended March 31, 2000. However, the Company filed a Current Report on Form 8-K, and as amended on May 11, 2000, with respect to a change in its principal independent accountants. DOCUMENTS INCORPORATED BY REFERENCE The Company is currently subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and in accordance therewith files reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information may be inspected and copied at the public reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549; at its New York Regional Office, Suite 1300, 7 World Trade Center, New York, New York 10048; and its Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,and copies of such materials can be obtained from the Public Reference Section of the Commission at its principal office in Washington, D.C., at prescribed rates. In addition, such materials may be accessed electronically at the Commission's site on the World Wide Web, located at http://www.sec.gov. The Company intends to furnish its stockholders with annual reports containing audited financial statements and such other periodic reports as the Company may determine to be appropriate or as may be required by law. Certain documents listed above, as exhibits to this Report on Form 10-Q, are incorporated by reference from other documents previously filed by the Company with the Commission as follows: 20 SIGNATURES Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LASER PHOTONICS, INC. Date: May 15, 2000 By: /s/ Jeffrey F. O'Donnell ------------------------------------- Jeffrey F. O'Donnell President and Chief Executive Officer Date: May 15, 2000 By: /s/ Dennis McGrath ------------------------------------- Dennis McGrath Chief Financial Officer 21 EX-27 2 FINANCIAL DATA SCHEDULE
5 1 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 14,855,602 0 0 0 1,238,788 16,212,336 201,486 0 19,955,309 1,984,258 0 0 0 151,128 17,785,836 19,955,309 0 0 0 3,149,707 0 0 0 (3,109,691) 0 (3,109,691) 0 0 0 (3,109,691) (.23) (.23)
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