-----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, M657O/e3rDEl4lDHatTmozOxXiJLG6ysEMgCDQ8luQIZRnG3XTTAKNV4qEzjnPB9 6mONVpsaCwgwbN5AY0MDGg== 0001017062-98-001935.txt : 19980901 0001017062-98-001935.hdr.sgml : 19980901 ACCESSION NUMBER: 0001017062-98-001935 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19980831 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PREMIER LASER SYSTEMS INC CENTRAL INDEX KEY: 0000878543 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 330476284 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 001-14013 FILM NUMBER: 98701843 BUSINESS ADDRESS: STREET 1: 3 MORGAN CITY: IRVINE STATE: CA ZIP: 92618 BUSINESS PHONE: 7148590656 MAIL ADDRESS: STREET 1: 3 MORGAN CITY: IRVINE STATE: CA ZIP: 92677 10-K/A 1 AMEND #2 TO FORM 10-K -- YEAR ENDED MARCH 31, 1997 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------- FORM 10-K/A Amendment No. 2 (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended March 31, 1997. -------------- [_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ____________ to _____________. Commission file number 0-25242 ------------------------------------- PREMIER LASER SYSTEMS, INC. (Exact name of registrant as specified in its charter) California 33-0472684 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3 Morgan, Irvine, California 92618 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code): (714) 859-0656 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock, Class A Warrants, Class B Warrants, Units (each comprised of one share of Class A Common Stock, one Class A Warrant and one Class B Warrant) ----------------------------------------------------------------- (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act or 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[_] Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K/A or any amendment to this Form 10-K/A. [_] The aggregate market value of the registrant's voting stock held by nonaffiliates was approximately $103,504,753 on May 19, 1997, based upon the closing sale price of such stock. Number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: As of May 19, 1997: Class A Common Stock: 9,260,671 Shares Class E-1 Common Stock: 1,257,178 Shares Class E-2 Common Stock: 1,257,178 Shares Documents incorporated by reference. List hereunder the following documents if incorporated by reference, and the part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933: None. The sole purpose of this Amendment No. 2 on Form 10-K/A is to file revised financial information for the Registrant's fiscal year ended March 31, 1997 in Items 6, 7, 8, and 14 hereof. PART II 3 ITEM 6. SELECTED FINANCIAL DATA. SELECTED FINANCIAL DATA (HISTORICAL) The following table contains certain selected consolidated financial data of the Company and is qualified by the more detailed financial statements and notes thereto of the Company included herein. The balance sheet and statement of operations data for the periods ended March 31, 1994, 1995 and 1996, as well as statement of operations data for the nine months ended March 31, 1993, have been derived from the Company's financial statements, audited by Price Waterhouse LLP, independent accountants. The report of Price Waterhouse LLP with respect to such financial statements contains an explanatory paragraph that describes uncertainty as to the ability of the Company to continue as a going concern. The selected financial data for the year ended March 31, 1997 was derived from the Company's financial statements audited by Haskell & White LLP. The following information should be read in conjunction with the Company's financial statements and related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included herein.
NINE MONTHS ENDED MARCH 31, FISCAL YEAR ENDED MARCH 31, --------------- --------------------------------------------------------- 1993(1) 1994 1995 1996 1997 (Restated) --------------- ----------- ----------- ----------- ----------- SELECTED STATEMENT OF OPERATIONS DATA: Net sales...................................... $ 1,527,457 $ 2,079,335 $ 1,249,403 $ 1,704,390 $ 5,090,861 Cost of sales.................................. 1,053,180 1,753,352 1,298,420 3,324,757 3,648,539 ----------- ----------- ----------- ----------- ----------- Gross profit (loss)............................ 474,277 325,983 (49,017) (1,620,367) 1,442,322 Selling and marketing expenses................. 1,261,571 1,087,461 1,035,863 1,308,767 2,415,010 Research and development expenses.............. 647,810 678,279 1,035,705 1,213,471 1,563,228 General and administrative expenses............ 574,676 1,322,888 1,747,090 1,709,327 2,050,184 Write-off of investment in Mattan.............. -- -- -- -- 881,010 Termination of strategic alliance with IBC..... -- -- -- -- 331,740 In-process research and development acquired in the Data.Site acquisition.................. -- -- -- -- 250,000 ----------- ----------- ----------- ----------- ----------- Loss from operations........................... (2,009,780) (2,762,645) (3,867,675) (5,851,932) (6,048,850) Minority interest in loss of consolidated subsidiary....................... -- -- -- -- 60,000 Interest (expense) income...................... (201,697) (434,851) (322,540) 99,037 15,493 ----------- ----------- ----------- ----------- ----------- Loss before extraordinary items................ (2,211,477) (3,197,496) (4,190,215) (5,752,895) (5,973,357) Extraordinary gain from extinguishment of indebtedness.................................. -- -- 381,730 -- -- ----------- ----------- ----------- ----------- ----------- Net loss....................................... $(2,211,477) $(3,197,496) $(3,808,485) $(5,752,895) $(5,973,357) =========== =========== =========== =========== ===========
4
NINE MONTHS ENDED MARCH 31, FISCAL YEAR ENDED MARCH 31, -------------- ---------------------------------------------------- 1997 1993(1) 1994 1995 1996 (Restated) -------------- ---------- ----------- ----------- ----------- SELECTED PER SHARE DATA: Loss per share before extraordinary item(2).................................. -- $ (2.45) $ (1.59) $ (1.26) $ (1.02) Extraordinary gain from extinguishment of indebtedness............................. -- .15 ----------- ---------- ---------- ---------- ---------- Net loss per share........................ -- $ (2.45) $ (1.44) $ (1.26) $ (1.02) =========== ========== ========== ========== ========== Weighted average shares outstanding(3).... -- 1,288,751 2,584,722 4,556,959 5,833,326 AT MARCH 31, -------------------------------------------------------------------- 1993(1) 1994 1995 1996 1997 ------------- ----------- ----------- ----------- ---------- SELECTED BALANCE SHEET DATA: Cash and cash equivalents(4)............. $ 308,764 $ 5,888,237 $ 35,463 $ 173,610 Working capital(4)....................... 1,287,587 6,756,149 5,818,492 7,575,616 Total assets(5).......................... 7,459,161 12,325,029 16,883,975 15,674,568 21,079,336 Long-term debt(5)........................ 1,564,507 4,303,890 -- -- 49,356 Shareholders' equity(4).................. 6,022,174 15,002,260 13,797,046 16,248,710
- ------------------------------ (1) The Company changed its fiscal year end from June 30 to March 31, commencing with the fiscal year ended March 31, 1993. Accordingly, the fiscal year ended March 31, 1993 was a nine-month period. (2) The effect on net loss per common share of the conversion of the Company's debentures was to reduce historical net loss by $37,500 and $67,995 and to increase weighted average shares outstanding by 76,875 shares and 321,099 shares for the fiscal years ended March 31, 1994 and 1995, respectively. Net loss per common share was computed based on the weighted average number of the Company's common shares outstanding during the fiscal years ended March 31, 1995 and 1994 after giving retroactive adjustment for recapitalization and conversion of debentures into Units upon completion of the Company's initial public offering. (3) Does not include shares of Class E-1 or Class E-2 Common Stock, which are subject to cancellation in certain circumstances. (4) These amounts are unavailable at March 31, 1993. (5) Total assets and long-term debt amounts at March 31, 1993 are unaudited. Amounts for long-term debt at March 31, 1994 include $285,000 in mandatorily redeemable warrants. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. The following discussion and analysis should be read in conjunction with the Company's Financial Statements and related notes thereto appearing elsewhere in this Report. This Report contains forward-looking statements including, without limitation, statements concerning future cost of sales, which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in these forward-looking statements. GENERAL The Company develops, manufactures and markets several lines of proprietary medical lasers, fiberoptic delivery systems and associated products for a variety of dental, ophthalmic and surgical applications. The Company commenced operations in August 1991, after acquiring substantially all of the assets of Pfizer Laser Systems ("Pfizer Laser"), a division of Pfizer HPG which is a wholly-owned subsidiary of Pfizer, Inc. The assets acquired by the Company included the proprietary rights to a broad base of laser and fiberoptic technologies developed by Pfizer Laser. This acquisition was led by the Company's current Chief Executive Officer. Since its formation and until its initial public offering in December 1994, the Company principally focused on, and its research and development activities related to, growing markets in dentistry, ophthalmology, cosmetic procedures and certain surgical specialties to be used in surgical centers and medical offices. To implement this strategy, the Company developed the Pegasus Nd:YAG dental laser system from existing technology and introduced this laser to the dental market in February 1992. In June 1993, the Company introduced the Centauri Er:YAG laser for ophthalmology and initiated clinical trials for hard 5 tissue procedures in dentistry. In December 1993, the Company acquired from Proclosure certain technology, assets and proprietary rights relating to a 1.32 Nd:YAG laser system for tissue melding. From its formation in 1991 through its initial public offering, the Company developed and received regulatory approvals for 15 models of lasers and sold certain of those products for soft tissue applications in dentistry and as part of clinical trials conducted by third parties. After the Company's initial public offering in December 1994 (the "IPO"), the Company increased its inventory, acquired the distribution rights to two new dental lasers and, in December 1995, expanded its dental sales force. In September and November 1995, the Company acquired rights to market and distribute the Arago and MOD argon lasers, respectively, for dental applications, and in February 1996, the Company introduced and began shipping its Aurora diode laser for soft tissue dental applications. The Company completed a secondary offering in October 1996. In 1997, it formed a joint venture named "Data.Site," with Kansas City-based Refractive Surgical Services for the purposes of providing ophthalmic data collection and outcomes analysis. In April 1997, the Company entered into an agreement to acquire EyeSys Technologies, Inc., which is a leading developer and supplier of corneal topography (diagnostic imaging) systems with an installed base of more than 3,500 systems worldwide. As of the date of this report, this transaction has not yet been completed. No assurance can be given that the transactions contemplated by such agreement will be consummated. While the Company has received FDA clearance to market laser products covering a variety of medical applications, to date the Company has focused its research, development and marketing efforts on a limited number of products or applications (principally specific dental and more recently, ophthalmic applications). As future resources permit, the Company may introduce certain products for applications for which it already has all necessary approvals or may seek strategic alliances to develop, market and distribute such products. The Company has recorded operating losses in each of the fiscal years since its formation, resulting principally from substantial costs incurred in research and development activities and obtaining regulatory approvals, together with the absence of significant revenues to date and limited commercial sales of its products. RESULTS OF OPERATIONS FISCAL YEAR ENDED MARCH 31, 1997 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1996 The Company's independent auditors unexpectedly resigned during May 1998 and withdrew their opinion on the Company's fiscal year 1997 financial statements. Accordingly, it became necessary to retain new auditors to re-examine the 1997 financial statements. Because of the extended period of time that had passed since the issuance of the prior report, a number of matters were identified of which the Company was not aware when it initially issued the 1997 financial statements. Although the Company believes that the initially issued 1997 financial statements were not materially misstated in terms of net loss, total assets and shareholders' equity, the statements have nonetheless been restated in the interest of full disclosure. The following discussion is based upon the restated amounts. Net sales increased 199% to $5,091,000 for the year ended March 31, 1997 ("fiscal 1997") from $1,704,000 for the year ended March 31, 1996 ("fiscal 1996"). This increase was primarily attributable to an increase in sales to the dental market of the Aurora diode laser and argon lasers which were introduced in the latter half of fiscal 1996. Ophthalmic sales also increased significantly as the Er:YAG laser was purchased by key ophthalmic industry leaders in several countries. Sales during the last two quarters of fiscal 1997 were adversely affected by a disruption in the supply of the Company's Arago argon laser and vendor supply problems with the MOD argon laser. Cost of sales increased 10% to $3,649,000 in fiscal 1997 from $3,325,000 in fiscal 1996, due to an increase in sales, offset by a write-down of $848,000 that was included in the fiscal 1996 amount (see Fiscal Year ended March 31, 1996 Compared to Fiscal Year ended March 31, 1995 below). Cost of sales as a percentage of net sales decreased due to the fiscal 1996 write-down and reduced material costs, manufacturing efficiencies, the ability to spread fixed indirect costs over a larger revenue based, and favorable warranty experience. Selling and marketing expenses increased 85% to $2,415,000 in fiscal 1997 from $1,309,000 in fiscal 1996. This increase was primarily attributable to increased commissions and associated selling expenses, expenses associated with attendance at two ophthalmic shows and from the consolidation of the Company's expenses with those of Data.Site. Research and development expenses increased 29% to $1,563,000 in fiscal 1997 from $1,213,000 in fiscal 1996. This increase resulted primarily from increases in research and development personnel at the Company, partially offset by a $450,000 payment received by the Company under a Small Business 6 Innovative Research ("SBIR") grant. The Company also recognized $190,000 as a research and development expense from the issuance of stock options to clinical evaluators and medical directors. General and administrative expenses increased 20% to $2,050,000 in fiscal 1997 from $1,709,000 in fiscal 1996. This increase was the combined result of higher bad debts expense and additional expenses from the consolidation of Data.Site. Net interest income decreased to $15,000 in fiscal 1997 from $99,000 in fiscal 1996. This reduction reflected the Company's limited cash balances prior to the completion of its secondary offering in October 1996. In fiscal 1997, the Company wrote off its investment in Mattan of $881,000 when the Mattan shares ceased being traded on the public market. In addition, the Company expensed $250,000 of in-process research and development incurred in connection with the formation of Data.Site. During fiscal year 1997 the Company also wrote off $332,000 as a settlement of its joint marketing relationship with International Biolaser Corporation ("IBC") since it is unlikely that IBC will repay its debt to the Company. FISCAL YEAR ENDED MARCH 31, 1996 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1995 Net sales increased 36% to $1,704,000 in fiscal 1996 from $1,249,000 for the year ended March 31, 1995 ("fiscal 1995"). This increase was primarily attributable to an increase of $723,000 in sales to the dental market, related principally to the introduction of three new products in the latter half of fiscal 1996, the Aurora diode laser, the Arago argon laser and the MOD argon laser. This increase was partially offset by a decrease in sales to the surgical market of approximately $200,000, largely due to a decline in the demand for the Company's 10 and 20 watt CO(2) lasers, which are nearing the end of their product life cycle. The Company has recently experienced supply difficulties with its Arago and MOD argon lasers. Cost of sales increased 156% to $3,325,000 in fiscal 1996 from $1,298,000 in fiscal 1995. This increase in the cost of sales was due primarily to (i) a write-down of approximately $848,000 principally attributed to the Company's CO(2) lasers and accessories obtained in the acquisition of Pfizer Laser, and Nd:YAG lasers and accessories, which lasers were developed prior to March 31, 1992 and are nearing the end of their product life cycle, (ii) the underabsorption of manufacturing costs due to low production volumes due in part to the unavailability of certain key components which require long lead-times for delivery, coupled with an increase in the number of manufacturing employees during fiscal 1996 from 12 to 17 employees resulting in an increase in payroll expense of approximately $280,000, and (iii) increased costs associated with higher sales volumes in fiscal 1996. Cost of sales for fiscal 1996 also included a fee of $122,000 to a third party pursuant to the Company's manufacturing arrangement relating to the MOD argon laser. Selling and marketing expenses increased 26% to $1,309,000 in fiscal 1996 from $1,036,000 in fiscal 1995. This increase was primarily attributable to marketing efforts related to the Company's dental products, which included a $219,000 expense related to the appointment of more than 25 new manufacturer's representatives during the third quarter, and associated expenses including training, promotional costs and commissions. Research and development expenses increased 17% to $1,213,000 in fiscal 1996 from $1,036,000 in fiscal 1995. This increase resulted primarily from increases in outside industrial and software design services of approximately $305,000, and expenses of approximately $196,000 associated with the development of new laser products. This increase was partially offset by a $175,000 reduction in clinical studies expense, due to the completion of the Company's dental hard tissue clinical trials and a $250,000 payment received by the Company under a SBIR grant. General and administrative expenses decreased 2% to $1,709,000 in fiscal 1996 from $1,747,000 in fiscal 1995. This decrease was the result of a reduction of legal expenses associated with a supply agreement for optical fibers, partially offset by increases associated with becoming a public company. In 1995, the Company incurred legal expenses of approximately $400,000 in connection with the optical fiber supply agreement. Future legal 7 expenses related to this litigation (not including out-of-pocket expenses) are expected to be limited in accordance with the Company's agreement with its legal counsel, although if the litigation is successful, counsel will be entitled to certain contingency fees. Net interest income increased to $99,000 in fiscal 1996 from net interest expense of $323,000 on fiscal 1995, reflecting the investment of the Company's remaining net proceeds from its IPO and the repayment in December 1994 of a significant portion of the Company's outstanding debt. Net loss increased 51% to $5,753,000 in fiscal 1996 from $3,808,000 in fiscal 1995. This increase was principally attributable to increases in cost of sales, selling and marketing expenses and research and development expenses. LIQUIDITY AND CAPITAL RESOURCES The Company's operations have been financed through the proceeds from the sale of the Company's equity securities, including an initial public offering in December 1994 and a secondary public offering in October 1996, revenues from operations and the proceeds from an SBIR grant. The Company's principal capital requirements include the financing of inventory, accounts receivable, research and development activities, the development of an ophthalmic and a surgical sales force, the development of marketing programs and the acquisition and/or licensing of patents. At March 31, 1997, the Company had unrestricted cash and short-term investments of $4,142,000 and its working capital was $8,018,000. This represents an increase from March 31, 1996, when the Company had a minimal cash balance. The increase in cash and short-term investments was the result of the secondary offering of securities completed in October 1996. At March 31, 1997, the Company's indebtedness consisted of a $800,000 balance on its Silicon Valley Bank line of credit, $57,000 in capital lease obligations and $24,000 in a note payable. The Company's credit facility with Silicon Valley Bank permits borrowings of up to $1,000,000. Borrowings under the Credit Facility are secured by a Certificate of Deposit pledged to Silicon Valley Bank by the Company pursuant to a Pledge Agreement and bear an interest rate equal to the prime rate of interest, as announced by Silicon Valley Bank, and are due and payable in February 1998. As of March 31, 1997, total borrowings under this agreement were $800,000. In connection with the Credit Facility, the Company issued to such lender warrants to purchase up to 9,756 shares of the Company's Class A Common Stock at an exercise price equal to $10.25 per share. At March 31, 1997, the Company had net operating loss carryforwards for federal income tax purposes totaling approximately $18,400,000 which will begin to expire in fiscal 2006. The Tax Reform Act of 1986 includes provisions which may limit the net operating loss carryforwards available for use in any given year if certain events occur, including significant changes in stock ownership. Utilization of the Company's net operating loss carryforwards to offset future income may be limited. From the end of fiscal 1997 through May 22, 1997, the Company has received approximately $19,108,000 from the exercise of approximately 1,401,000 Class A Warrants and approximately 1,251,000 Class B Warrants. As a result of such exercises, the Company has issued an additional 1,401,000 Class B Warrants and 2,652,000 shares of Class A Common Stock. The Company's future capital requirements will depend on many factors, including the progress of the Company's research and development activities, the scope and results of preclinical studies and clinical trials, the costs and timing of regulatory approvals, the rate of technology advances by the Company, competitive conditions within the medical laser industry, the establishment of manufacturing capacity and the establishment of collaborative marketing and other relationships which may either involve cash infusions to the Company, or require additional cash from the Company. The Company's ability to meet its working capital needs will be dependent on its ability to achieve a positive cash flow from operations and profitable operations, in addition to its ability to secure additional debt or equity financing. No assurance 8 can be given that the Company will be able to achieve a positive cash flow from operations, profitable operations or secure financing on acceptable terms. GOVERNMENT GRANTS The Company has been awarded a SBIR grant for approximately $750,000 for the study of laser cataract emulsification. Substantially all of this grant has been drawn for such purposes. The remainder of the grant can be drawn over the next six months upon the achievement of specified criteria. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The Company's financial statements, including notes thereto, at March 31, 1997 and 1996 and for the years ended March 31, 1997, 1996 and 1995 follow. 9 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders Premier Laser Systems, Inc. We have audited the accompanying consolidated balance sheet of Premier Laser Systems, Inc. as of March 31, 1997, and the related consolidated statements of operations, shareholders' equity, and cash flows for the year then ended. Our audit also included the financial statement schedule listed in the index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As discussed in Note 2, the Company has restated it previously issued 1997 consolidated financial statements. In our opinion, the 1997 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Premier Laser Systems, Inc. at March 31, 1997, and the consolidated results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. HASKELL & WHITE LLP Newport Beach, California August 19, 1998 Except for Note 12 as to which the date is August 26, 1998 10 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and the Shareholders of Premier Laser Systems, Inc. In our opinion, the accompanying balance sheet and the related statements of operations, shareholders' equity and cash flows present fairly, in all material respects, the financial position of Premier Laser Systems, Inc. at March 31, 1996, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. PRICE WATERHOUSE LLP Costa Mesa, California May 17, 1996 11 PREMIER LASER SYSTEMS, INC. CONSOLIDATED BALANCE SHEETS
MARCH 31 ---------------------------- 1997 1996 (Restated) ------------ ------------ ASSETS Current assets: Cash and cash equivalents........................................................ $ 173,610 $ 35,463 Short-term investments........................................................... 3,968,288 4,547,377 Restricted cash.................................................................. 1,050,000 -- Accounts receivable, net of an allowance for doubtful accounts of $613,623 and $154,677 in 1997 and 1996, respectively......................................... 1,052,312 508,315 Inventories...................................................................... 3,284,632 2,185,355 Prepaid expenses and other current assets........................................ 774,319 419,504 ------------ ------------ Total current assets.............................................................. 10,303,161 7,696,014 Property and equipment, net....................................................... 780,945 493,942 Intangible assets, net............................................................ 9,988,753 7,353,462 Other assets...................................................................... 6,477 131,150 ------------ ------------ Total assets...................................................................... $ 21,079,336 $ 15,674,568 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable.................................................................. $ 1,305,256 $ 1,208,219 Line of credit.................................................................... 800,000 -- Notes payable to Pfizer........................................................... -- 481,195 Accrued compensation and related costs............................................ 318,000 96,132 Other accrued liabilities......................................................... 272,369 91,976 Note payable and current portion of capital lease obligations..................... 31,920 -- ------------ ------------ Total current liabilities......................................................... 2,727,545 1,877,522 Capital lease obligations, net of current portion................................. 49,356 -- Commitments and contingencies Minority interest................................................................. 2,053,725 -- Shareholders' equity Preferred stock, no par value: Authorized shares--8,850,000 Issued and outstanding shares--none -- -- Common stock, Class A, no par value: Authorized shares--35,600,000 Issued and outstanding shares--7,313,841 at March 31, 1997 and 4,702,203 at March 31, 1996................................................................. 27,320,449 16,317,376 Common stock, Class E-1, no par value: Authorized shares--2,200,000 Issued and outstanding shares--1,257,178 at March 31, 1997 and 1,256,818 at March 31, 1996................................................................. 4,769,878 4,769,878 Common stock, Class E-2, no par value: Authorized shares--2,200,000 Issued and outstanding shares--1,257,178 at March 31, 1997 and 1,256,818 at March 31, 1996................................................................. 4,769,878 4,769,878 Warrants and options............................................................. 3,978,276 2,889,961 Unrealized holding gain on short-term investments................................ -- 3,666,367 Accumulated deficit.............................................................. (24,589,771) (18,616,414) ------------ ------------ Total shareholders' equity........................................................ 16,248,710 13,797,046 ------------ ------------ Total liabilities and shareholders' equity........................................ $ 21,079,336 $ 15,674,568 ============ ============
SEE ACCOMPANYING NOTES. 12 PREMIER LASER SYSTEMS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31 --------------------------------------------- 1997 1996 1995 (Restated) ------------- ------------- ------------- Net sales....................................................... $ 5,090,861 $ 1,704,390 $ 1,249,403 Cost of sales................................................... 3,648,539 3,324,757 1,298,420 ----------- ----------- ----------- Gross profit (loss)............................................. 1,442,322 (1,620,367) (49,017) Selling and marketing expenses.................................. 2,415,010 1,308,767 1,035,863 Research and development expenses............................... 1,563,228 1,213,471 1,035,705 General and administrative expenses............................. 2,050,184 1,709,327 1,747,090 Write off of investment in Mattan Corporation................... 881,010 -- -- Termination of strategic alliance with IBC...................... 331,740 -- -- In-process research and development acquired in the Data.Site acquisition.................................................... 250,000 -- -- ----------- ----------- ----------- Loss from operations............................................ (6,048,850) (5,851,932) (3,867,675) Minority interest in loss of consolidated subsidiary..................................................... 60,000 Interest income (expense), net.................................. 15,493 99,037 (322,540) ----------- ----------- ----------- Loss before extraordinary item.................................. (5,973,357) (5,752,895) (4,190,215) Extraordinary gain from extinguishment of indebtedness.......... -- -- 381,730 ----------- ----------- ----------- Net loss........................................................ $(5,973,357) $(5,752,895) $(3,808,485) =========== =========== ----------- Net loss per share.............................................. $ (1.02) $(1.26) =========== =========== Shares used in the computation of net loss per share............ 5,833,326 4,556,959 =========== =========== Pro forma net loss per share (unaudited): Loss before extraordinary items............................... $ (1.59) Extraordinary gain from extinguishment of indebtedness........ 0.15 ----------- Net loss...................................................... $ (1.44) =========== Shares used in computation of pro forma net loss per share...... 2,584,722 ===========
SEE ACCOMPANYING NOTES. 13 PREMIER LASER SYSTEMS, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995
COMMON STOCK COMMON STOCK COMMON STOCK CLASS A CLASS E-1 CLASS E-2 ------------------------- ----------------------- ----------------------- CLASS A SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT WARRANTS ---------- ------------ ---------- ---------- --------- ---------- ---------- Balance at March 31, 1994............. 1,432,636 $ 5,372,022 1,268,488 $4,756,528 1,268,488 $4,756,528 $ -- Exercise of common stock options..... 4,936 2,848 3,011 1,081 3,011 1,081 -- Common stock issued in lieu of cash payments....................... 1,635 13,046 1,447 11,552 1,447 11,552 -- Common stock forfeited due to cessation of employment............. (7,798) (20,124) (6,905) (17,818) (6,905) (17,818) -- Warrants issued in connection with private placement units........ -- -- -- -- -- -- -- Repurchase of common stock........... (17,681) (6,910) (15,752) (6,119) (15,752) (6,119) -- Initial public offering of units, net proceeds................. 2,400,000 7,633,504 -- -- -- -- 1,622,222 Conversion of warrants............... -- -- -- -- -- -- 186,000 Conversions of certain related party notes and associated accrued interest.................... 7,072 28,448 6,260 24,596 6,260 24,596 -- Conversion of debentures and associated accrued interest......... 321,099 1,284,397 -- -- -- -- 272,934 Exercise of over-allotment option.... 360,000 1,128,947 -- -- -- -- 239,901 Net loss............................. -- -- -- -- -- -- -- --------- ----------- --------- ---------- --------- ---------- ---------- Balance at March 31, 1995............. 4,501,899 15,436,178 1,256,549 4,769,820 1,256,549 4,769,820 2,321,057 Common stock issued for investment in Mattan........................... 200,000 881,010 -- -- -- -- -- Exercise of stock options............ 304 188 269 58 269 58 -- Increase in unrealized holding gain on short-term investments...... -- -- -- -- -- -- -- Net loss............................. -- -- -- -- -- -- -- --------- ----------- --------- ----------- --------- ---------- ---------- Balance at March 31, 1996............. 4,702,203 16,317,376 1,256,818 4,769,878 1,256,818 4,769,878 2,321,057 Common stock and B warrants issued in connection with secondary public offering........... 2,403,500 9,363,298 -- -- -- -- -- Common stock issued in connection with the formation of the Data.Site joint venture....................... 159,787 1,200,000 -- -- -- -- -- Exercise of stock options and warrants............................ 48,351 249,774 360 -- 360 -- (25,729) Stock options issued to Advisory Board members, clinical evaluators and medical directors............... -- 190,001 -- -- -- -- -- Decrease in unrealized holding gain on short-term investments...... -- -- -- -- -- -- -- Net loss............................. -- -- -- -- -- -- -- --------- ----------- --------- ----------- --------- ---------- ---------- Balance at March 31, 1997 (restated).. 7,313,841 $27,320,449 1,257,178 $ 4,769,878 1,257,178 $4,769,878 $2,295,328 ========= =========== ========= =========== ========= ========== ==========
COMMON UNREALIZED CLASS B STOCK HOLDING ACCUMULATED WARRANTS WARRANTS GAIN DEFICIT TOTAL ---------- ----------- ----------- ------------ ------------ Balance at March 31, 1994............. $ -- $ 192,130 $ -- $ (9,055,034) $ 6,022,174 Exercise of common stock options..... -- -- -- -- 5,010 Common stock issued in lieu of cash payments....................... -- -- -- -- 36,150 Common stock forfeited due to cessation of employment............. -- -- -- -- (55,760) Warrants issued in connection with private placement units............. -- 186,000 -- -- 186,000 Repurchase of common stock........... -- -- -- -- (19,148) Initial public offering of units, net proceeds........................ 286,274 -- -- -- 9,542,000 Conversion of warrants............... -- (186,000) -- -- -- Conversions of certain related party notes and associated accrued interest............................ -- -- -- -- 77,640 Conversion of debentures and associated accrued interest......... 48,165 -- -- -- 1,605,496 Exercise of over-allotment option.... 42,335 -- -- -- 1,411,183 Net loss............................. -- -- -- (3,808,485) (3,808,485) ---------- ----------- ----------- ------------ ----------- Balance at March 31, 1995............. 376,774 192,130 -- (12,863,519) 15,002,260 Common stock issued for investment in Mattan........................... -- -- -- -- 881,010 Exercise of stock options............ -- -- -- -- 304 Increase in unrealized holding gain on short-term investments...... -- -- 3,666,367 -- 3,666,367 Net loss............................. -- -- -- (5,752,895) (5,752,895) ---------- ----------- ----------- ------------ ----------- Balance at March 31, 1996............. 376,774 192,130 3,666,367 (18,616,414) 13,797,046 Common stock and B warrants issued in connection with secondary public offering..................... 1,037,514 -- -- -- 10,400,812 Common stock issued in connection with the formation of the Data.Site joint venture............. -- -- -- -- 1,200,000 Exercise of stock options and warrants............................ 76,530 -- -- -- 300,575 Stock options issued to Advisory Board members, clinical evaluators and medical directors............... -- -- -- -- 190,001 Decrease in unrealized holding gain on short-term investments........... -- -- (3,666,367) -- (3,666,367) Net loss (restated).................. -- -- -- (5,973,357) (5,973,357) Balance at March 31, 1997 ---------- ----------- ----------- ------------ ----------- (restated)............................ $1,490,818 $ 192,130 $ -- $(24,589,771) $16,248,710 ========== =========== =========== ============ ===========
SEE ACCOMPANYING NOTES. 14 PREMIER LASER SYSTEMS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31 1997 (Restated) 1996 1995 ------------ ------------ ------------ OPERATING ACTIVITIES Net loss..................................................................... $(5,973,357) $ (5,752,895) $ (3,808,485) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization............................................ 841,467 814,401 812,196 Write off of investment in Mattan Corporation............................ 881,010 -- -- Acquired in-process research and development............................. 250,000 -- -- Minority interest in loss of consolidated subsidiary..................... (60,000) Stock options issued to Advisory Board members........................... 190,001 -- -- Termination of strategic alliance with IBC............................... 125,000 -- -- Issuance of stock and stock options in lieu of payment for services...... -- -- 36,150 Extraordinary gain from extinguishment of debt........................... -- -- (381,730) Amortization of debt discount............................................ -- -- 119,230 Common stock forfeited upon cessation of employment...................... -- -- (55,760) Changes in operating assets and liabilities: Accounts receivable.................................................... (539,045) (244,467) 142,591 Inventories............................................................ (1,099,277) (14,665) (21,880) Prepaid expenses and other current assets.............................. (342,438) (110,565) 137,224 Accounts payable....................................................... (184,769) 594,654 (411,197) Accrued liabilities.................................................... 319,936 (598,847) 28,907 ----------- ------------ ------------ Net cash used in operating activities........................................ (5,591,472) (5,312,384) (3,402,754) ----------- ------------ ------------ INVESTING ACTIVITIES Purchase of short-term investments........................................... (3,968,288) -- -- Patent expenditures.......................................................... (178,139) (195,971) (204,838) Acquisition of Data.Site..................................................... (96,028) -- -- Purchase of property and equipment........................................... (24,477) (219,723) (45,785) Note receivable pursuant to strategic alliance with IBC...................... -- (125,000) -- ----------- ------------ ------------ Net cash used in investing activities........................................ (4,266,932) (540,694) (250,623) ----------- ------------ ------------ FINANCING ACTIVITIES Proceeds from equity offerings.............................................. 10,400,812 -- 10,958,193 Net borrowings under line of credit......................................... 800,000 -- -- Proceeds from exercise of stock options and warrants........................ 300,575 304 -- Principle payments on note payable and capital lease obligations............ (454,836) -- (3,126,195) Increase in restricted cash................................................. (1,050,000) -- -- Proceeds from issuance of notes payable..................................... -- -- 1,519,000 Proceeds from issuance of common stock warrants............................. -- -- 186,000 Repurchase of common stock.................................................. -- -- (19,148) Repurchase of mandatorily redeemable warrants............................... -- -- (285,000) ----------- ------------ ------------ Net cash provided by financing activities................................... 9,996,551 304 9,232,850 ----------- ------------ ------------ Net increase (decrease) in cash and cash equivalents........................ 138,147 (5,852,774) 5,579,473 Cash and cash equivalents at beginning of year.............................. 35,463 5,888,237 308,764 ----------- ------------ ------------ Cash and cash equivalents at end of year.................................... $ 173,610 $ 35,463 $ 5,888,237 =========== ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for interest...................................................... $ 115,283 $ 52,129 $ 550,962
SEE ACCOMPANYING NOTES. 15 PREMIER LASER SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1997 1. ORGANIZATION AND NATURE OF OPERATIONS Premier Laser Systems, Inc. (the Company) was incorporated in July 1991 and commenced operations in August 1991 after acquiring substantially all of the assets and certain liabilities of Pfizer Laser Systems (Pfizer), a division of Pfizer Hospital Products Group, Inc. The Company designs, develops, manufactures and markets several lines of lasers for surgical and other medical purposes, laser waveguides and fiber optic devices, disposables and associated accessory products for the medical and dental market. The accompanying consolidated financial statements include the accounts of the Company and its 51% owned subsidiary Data.Site, LLC which is a joint venture established on January 31, 1997. All intercompany transactions and balances have been eliminated. The Company has suffered recurring losses from operations and may continue to incur losses for the foreseeable future due to the significant costs anticipated to be incurred in connection with manufacturing, marketing and distributing its laser products. In addition, the Company intends to conduct continuing research and development activities, including regulatory submittals and clinical trials to develop additional applications for its laser technology. The Company operates in a highly competitive environment and is subject to all of the risks inherent in a new business enterprise. In October 1996, the Company completed a public offering of its securities which generated net proceeds aggregating $10.4 million. The Company believes that the proceeds of this offering and anticipated proceeds from the exercise of outstanding warrants and options to acquire the Company's Class A common stock will be sufficient to meet its working capital requirements through at least fiscal 1998. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RESTATEMENT OF AMOUNTS PREVIOUSLY REPORTED The Company's independent auditors unexpectedly resigned during May 1998 and withdrew their opinion on the Company's fiscal year 1997 financial statements. Accordingly, it became necessary to retain new auditors to re-examine the 1997 financial statements. Because of the extended period of time that had passed since the initial report was issued, a number of matters were identified of which the Company was not aware when it initially issued the 1997 financial statements. Although the Company believes that the initially issued 1997 financial statements were not materially misstated in terms of net loss, total assets and shareholders' equity, the statements have nonetheless been restated in the interest of full disclosure. The following is a summary of the impact of the restatement on the 1997 consolidated statement of operations: 1. Reduction of previously reported sales, net of related cost of sales $(280,000) 2. Revision to inventory valuation allowances 160,000 3. Additional bad debts expense (314,000) 4. Minority interest in loss of consolidated subsidiary 60,000 5. Other, net (9,000) --------- Net increase in 1997 loss $(383,000) =========
The effects on the Company's previously issued 1997 financial statements are summarized as follows:
Previously Increase Reported (Decrease) Restated ----------- ---------- ----------- Consolidated balance sheet as of March 31, 1997: Current assets $10,658,161 $ (355,000) $10,303,161 Other assets 8,662,450 2,113,725 10,776,175 ----------- ---------- ----------- Total assets $19,320,611 $1,758,725 $21,079,336 =========== ========== =========== Current liabilities $ 2,639,545 $ 88,000 $ 2,727,545 Capital lease obligations, net of current portion 49,536 -- 49,536 Minority interest -- 2,053,725 2,053,725 Net shareholders' equity 16,631,710 (383,000) 16,248,710 ----------- ---------- ----------- Total liabilities and shareholders' equity $19,320,611 $1,758,725 $21,079,336 =========== ========== =========== Consolidated Statement of Operations Net sales $ 5,530,861 $ (440,000) $ 5,090,861 Cost of sales 3,968,539 (320,000) 3,648,539 ----------- ---------- ----------- Gross profit 1,562,322 (120,000) 1,442,322 Selling and marketing expenses 2,406,010 9,000 2,415,010 General and administrative expenses 1,736,184 314,000 2,050,184 All other expenses 3,025,978 -- 3,025,978 ----------- ---------- ----------- Loss from operations (5,605,850) (443,000) (6,048,850) Interest income, net 15,493 -- 15,493 Minority interest in loss of consolidated subsidiary -- 60,000 60,000 ----------- ---------- ----------- Net loss $(5,590,357) $ (383,000) $(5,973,357) =========== ========== =========== Net loss per share $ (0.96) $ (0.07) $ (1.02) =========== ========== ===========
REVENUE RECOGNITION Revenues are recognized when products are shipped to customers. Allowances for returns are provided based upon actual experience and identified risks. SHORT-TERM INVESTMENTS AND RESTRICTED CASH The Company invests excess cash in United States Treasury securities and commercial paper generally with maturities of less than one year. Short-term investments with a maturity of less than three months when purchased are classified as cash equivalents. Investments with maturities in excess of three months are presented as short-term investments in the accompanying financial statements. Pursuant to Statement of Financial Accounting Standards No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, the Company's short-term investments are classified as available-for-sale and are reported at fair market value with unrealized gains and losses reflected as an adjustment to shareholders' equity. There were no material unrealized gains or losses at March 31, 1997. Restricted cash consists of certificates of deposits held to secure borrowings under the Company's line of credit, and is classified as a current asset since it is collateral for a current liability. CONCENTRATION OF CREDIT RISK AND FOREIGN SALES The Company generates revenues principally from sales in the medical field. As a result, the Company's accounts receivable are concentrated primarily in this industry. In addition, sales to one customer represented 10% of the Company's sales in fiscal 1996 and 11% to a different customer in fiscal 1995. Sales in foreign countries accounted for approximately 25%, 40% and 63% of the Company's total sales in fiscal 1997, 1996 and 1995, respectively. These foreign sales related almost entirely to sales in Asia and Europe. 16 PREMIER LASER SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Generally, letters of credit are obtained on international sales. The Company maintains reserves for potential credit losses. LONG LIVED ASSETS In fiscal 1997, the Company adopted Statement of Financial Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF (SFAS No. 121). The adoption of SFAS No. 121 had no impact on the Company's financial position or results of operations. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market, and are comprised of the following at March 31:
1997 1996 ---------- ---------- Raw materials................................. $1,583,460 $ 938,560 Work-in-progress.............................. 101,802 276,998 Finished goods................................ 1,599,370 969,797 ---------- ---------- $3,284,632 $2,185,355 ========== ==========
PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Expenditures for replacements and improvements are capitalized and expenditures for repairs and maintenance are charged to operating expense as incurred. Property and equipment consist of the following at March 31: 1997 1996 ---------- ---------- Machinery, equipment, molds and tooling....... $1,041,574 $1,032,188 Furniture, fixtures and office equipment...... 596,347 433,286 Software...................................... 250,000 -- ---------- ---------- 1,887,921 1,465,474 Less accumulated depreciation................. (1,106,976) (971,532) ---------- ---------- $ 780,945 $ 493,942 ========== ========== Depreciation of furniture, machinery and equipment is calculated on a straight-line basis over the following estimated useful lives: Machinery and equipment....................... 5-10 years Furniture and fixtures........................ 10 years Software...................................... 3 years Leasehold improvements........................ Shorter of estimated useful life or term of lease INTANGIBLE ASSETS Intangible assets consist primarily of patents and technology rights, goodwill and license agreements. The costs assigned to acquired intangible assets, partially based upon independent appraisals, are being amortized on a straight-line basis over the estimated useful lives of the assets ranging from 2 to 15 years. 17 PREMIER LASER SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Intangibles consist of the following at March 31:
1997 1996 ----------- ----------- Patents and technology rights............. $ 9,581,230 $9,413,088 Goodwill.................................. 3,156,004 -- License agreements........................ 265,000 255,000 Other..................................... -- 201,000 ----------- ---------- 13,002,234 9,869,088 Less accumulated amortization............. (3,013,481) (2,515,626) ----------- ---------- $ 9,988,753 $7,353,462 =========== ==========
RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as incurred. A substantial portion of the Company's research and development expense is related to developing new products, improving existing products or processes, and clinical research programs. The Company enters into agreements with certain doctors to exchange a portion of a product's sales price for services related to the completion of certain portions of clinical studies necessary for obtaining product approval from the U.S. Food and Drug Administration. Typically, the amounts consist of a portion of the product sales price which is equal to the cost of the services to be rendered by the doctor. Pursuant to the agreements, in the event the doctor is unable to complete the agreed upon clinical study, the doctor is required to remit a cash payment for the entire amount. The amounts are capitalized as prepaid research and development expense and are amortized upon completion of certain milestones of the clinical study. These studies are generally completed within one year. Clinical testing expenses included in prepaid expenses totaled $405,000 and $204,000 at March 31, 1997 and 1996, respectively. INCOME TAXES The Company accounts for income taxes in accordance with statement of Statement of Financial Accounting Standards No. 109 (SFAS No. 109), ACCOUNTING FOR INCOME TAXES. SFAS 109 requires the liability method of accounting for income taxes. This method mandates the recognition of deferred tax liabilities and assets for expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities. STATEMENTS OF CASH FLOWS The Company invests its excess cash in money market funds. The Company considers all highly liquid investments with an original maturity of three months or less and money market funds to be cash equivalents. Significant noncash investing and financing activities excluded from the accompanying statements of cash flows are as follows: In fiscal 1996, the Company issued 200,000 shares of Class A common stock in connection with the acquisition of 1,150,000 shares of Mattan Corporation's common stock. The value of the Mattan Corporation common stock shares was $881,010 on the date of the transaction. Concurrent with the completion of the Company's initial public offering, certain notes payable to shareholders totaling $66,500 and convertible debentures totaling $1,500,000, plus related accrued 18 PREMIER LASER SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) interest, were converted into 7,072 shares of Class A common stock and 6,260 shares of each Class E-1 and E-2 common stock, and 321,099 Units, respectively. In fiscal 1997, the Company issued 159,787 shares of Class A common stock valued at $1,200,000 in connection with its acquisition of Data.Site. NET LOSS PER SHARE Net loss per share was computed based on the weighted average number of the Company's common shares outstanding during fiscal 1997 and 1996 and excludes all shares of Class E-1 and Class E-2 common stock, outstanding or subject to option, because all such shares of stock are subject to escrow and the conditions for the release of shares from escrow have not been satisfied. Common stock equivalents were not considered in the net loss per share calculation because the effect would be antidilutive. PRO FORMA NET LOSS PER SHARE (UNAUDITED) Pro forma net loss per common share was computed based on the weighted average number of the Company's common shares outstanding during the fiscal year ended March 31, 1995 after giving retroactive adjustment for the recapitalization and the conversion of the Company's debentures into units which occurred upon completion of the Company's initial public offering. The effect on pro forma net loss per common share of the conversion of the Company's debentures was to reduce historical net loss by $67,995 and to increase weighted average shares outstanding by 321,099 shares for fiscal year ended March 31, 1995. Class E-1 and E-2 common stock shares were excluded from the pro forma net loss per share calculation because the conditions for release of shares from escrow have not been satisfied. Other common stock equivalents were not considered in the pro forma net loss per share calculation because the effect on the pro forma net loss per share would be antidilutive. Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No. 83, all stock options and warrants granted and common shares issued within one year of the Company's initial public offering and not in escrow have been included as outstanding for the six months ended September 30, 1994 (the date of the most recent financial statements included in the Company's initial public offering prospectus) using the treasury stock method. EARNINGS PER SHARE In February 1997, Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE was issued and is effective for interim and annual periods ending after December 15, 1997. The statement requires presentation of both basic and diluted earnings per share. As a result of the Company's net loss, basic and diluted loss per share will not differ materially from the per share amounts in the accompanying financial statements. ACCOUNTING FOR STOCK-BASED COMPENSATION The Company has elected to follow Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (APB 25) and related Interpretations in accounting for its employee stock option grants. Options granted to consultants and other non-employees are accounted for under the fair value method in accordance with Statement of Financial Accounting Standards No 123, ACCOUNTING FOR STOCK BASED COMPENSATION. 19 PREMIER LASER SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Significant estimates and assumptions include inventory valuation and the realizability of certain intangible assets. The Company's inventory and intangibles largely relate to technologies which have yet to gain wide spread market acceptance. Management believes no loss will be incurred on the disposition of its inventory and that the remaining economic life of the Company's tangible assets is reasonable. If wide spread market acceptance of the Company's products is not achieved, the carrying amount of inventory and intangible assets could be materially affected. BASIS OF PRESENTATION Certain prior year amounts have been reclassified in order to conform with the current year presentation. 3. STRATEGIC ALLIANCES In December 1995, the Company entered into a strategic marketing alliance with Mattan Corporation (Mattan), a Canadian Corporation, whose stock was publicly traded on the Alberta Stock Exchange. The strategic marketing alliance agreement (the Agreement) stipulates that the Company would supply all laser equipment and associated disposables for any laser surgery centers to be designed and opened by Mattan in Canada and the United States. These surgery centers would be operated under the name of Medical Laser Institute of America (MLIA). In connection with entering into the Agreement, the Company issued 200,000 shares of the Company's Class A common stock with a fair market value of $881,000 for 1,150,000 shares of Mattan's common stock. The Company accounted for this investment as an available-for-sale security pursuant to SFAS No. 115. At March 31, 1996, the fair value of this investment totaled approximately $4,547,377 and the related unrealized holding gain totaled approximately $3,666,367. As a result of the halting of trading of Mattan stock and ongoing reorganization activities, the fair market value of the investment was zero at March 31, 1997 and accordingly, the Company wrote off its investment. In October 1995, the Company entered into a strategic business alliance (Strategic Alliance) with International Biolaser Corporation (IBC). This Strategic Alliance specified that the Company would manufacture IBC's CO2 and argon lasers and that such products would be jointly marketed by the two companies. Pursuant to the agreement, the Company advanced $125,000 to IBC in exchange for a convertible note payable due in October 1997, bearing interest at 10% per annum and secured by substantially all of IBC's intangible assets. This note payable is convertible, at the Company's sole option, into an 80% ownership interest in IBC only after IBC has repaid certain pre-existing indebtedness. IBC and the Company terminated the Strategic Alliance in August 1996. In settlement of the Strategic Alliance, the Company obtained IBC's argon MOD laser proprietary rights, intellectual property and technology in exchange for a guaranty of $201,000 of IBC's outstanding indebtedness. As of March 31, 1997, the Company wrote-off the $331,740 carrying value of its advances and payments made under the guarantee on behalf of IBC due to the uncertainty regarding its realizability. 20 PREMIER LASER SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 4. BUSINESS ACQUISITION Effective January 31, 1997, the Company entered into a joint venture with Refractive Surgical Services, LLC (RSS), a Kansas City based company engaged in the development of certain medical outcomes software. Under this joint venture, the Company and RSS formed Data.Site. LLC, ("Data.Site"). Data.Site acquired and assumed substantially all of the assets and liabilities of RSS. The Company acquired a 51 percent interest in Data.Site, which was accounted for under the purchase method of accounting, and issued 159,787 shares of its Class A common stock to RSS. In connection with the acquisition the Company recorded goodwill in the amount of $2,893,179 and a minority interest of $2,113,725. The Company was obligated to pay an additional $300,000 to the shareholders of RSS in the form of common stock or cash, at the option of the Company, if Data.Site's gross revenues equal or exceed $1,500,000 for the year ending December 31, 1997. Such obligation has been cancelled, since revenues did not exceed $1,500,000. The Company is obligated during the two-year period ending January 31, 1999 to fund Data.Site's operations with up to an additional $1,000,000 in cash or equivalent services. The following unaudited pro forma consolidated results of operations give effect to the Data.Site formation as if it had occurred at the beginning of fiscal 1997:
1997 ----------- Net sales....................... $ 5,482,000 Net loss........................ (6,482,000) Net loss per share.............. $ (1.09)
The unaudited pro forma information is not necessarily indicative of the combined results of operations that would have occurred during the periods presented nor for future results of operations. 5. GRANTS In September 1995, the Company obtained a Small Business Innovative Research Grant totaling approximately $750,000 for the study of laser emulsification. Pursuant to the terms of the grant, the Company is eligible to receive reimbursement for research and development costs incurred in connection with the laser emulsification study up to $750,000 upon the achievement of certain milestones, as defined. During fiscal 1997 and 1996, the Company received approximately $450,000 and $250,000 under the grants, respectively. The amounts received under the grant were offset against research and development costs incurred in the study. 6. LINE OF CREDIT The Company has a line of credit agreement with a bank which provides for borrowings of up to $1,000,000. As of March 31, 1997, total borrowings under this agreement were $800,000, bearing interest at the bank's prime rate (8.50% at March 31, 1997). Borrowings under the agreement are secured by a certificate of deposit. The agreement matures on February 12, 1998. 7. NOTES PAYABLE AND EXTRAORDINARY GAIN Pursuant to an agreement between the Company and Pfizer, the Company paid $1,386,195 of the notes payable to Pfizer immediately subsequent to the closing of the Company's fiscal 1995 initial public offering and Pfizer forgave $650,000 of the total indebtedness. The remaining balance of $481,195, bearing interest at 10% per annum at March 31, 1996, and related accrued interest were payable in quarterly installments. This remaining balance was paid in full upon the closing of the Company's fiscal 1997 public offering. In June 1994, notes payable to third parties of $1,500,000 were converted into convertible debentures. The debentures and related accrued interest were converted into 321,099 Units (see footnote 10) concurrent with the closing of the initial public offering. Also concurrent with the close of the offering, notes payable to shareholders totaling $66,500 plus related accrued interest were converted into 7,072 shares of Class A Common Stock and 6,260 shares each of Class E-1 and E-2 common stock. In August 1994, the Company completed a private placement of debt units, whereby $1,550,000 of notes payable bearing interest at 10% per annum (the Bridge Notes) and warrants to purchase 1,085,000 shares of Class A common stock were issued. In connection with this private placement, the Company incurred placement costs of $201,500 and issued the notes at a discount totaling $186,000. These notes payable were paid in full in December 1994. 21 PREMIER LASER SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) In connection with the debt forgiven by Pfizer and the extinguishment of the bridge notes, the Company recognized a net extraordinary gain on extinguishment of debt totaling $381,730 in fiscal 1995. 8. COMMITMENTS AND CONTINGENCIES COMMITMENTS The Company leases its facilities and certain equipment under noncancellable operating leases. Total rental expense for operating leases was $296,000, $348,000 and $387,000 for the fiscal years ended March 31, 1997, 1996 and 1995, respectively. At March 31, 1997, future minimum lease payments under noncancellable operating leases are as follows: 1998.............................................................. $ 257,000 1999.............................................................. 258,000 2000.............................................................. 249,000 2001.............................................................. 188,000 --------- $ 952,000 ========= Pursuant to the Company's facility lease, effective January 1997, the Company becomes guarantor of a lease agreement between the Company's lessor and a third party lessee. The guaranteed future minimum lease payments relating to the third party are $112,000, and $86,000 for the years ended March 31, 1998 and 1999, respectively. LITIGATION The Company entered into an agreement with Infrared Fiber Systems, Inc. (IFS), as a supplier of certain fiber optics that expires in the fiscal year ending March 31, 2002. The agreement requires the supplier to sell exclusively to the Company fiberoptics for medical and dental applications as long as the Company purchases defined minimum amounts. In March 1994, the Company initiated litigation against IFS. The Company's complaint alleges that IFS and two of its officers misrepresented IFS' ability to supply optical fibers, and that IFS breached its supply agreement and certain warranties. In April 1994, IFS filed a cross-complaint alleging breach of contract and intentional interference with prospective economic advantage, seeking declaratory relief that the contract has been terminated and that IFS is free to market its fiber optics to others. In July 1994, Coherent, Inc., a major shareholder of IFS and a manufacturer of medical lasers which employ IFS optical fibers, joined the lawsuit for the express purpose of defending their rights to the IFS optical fibers. In May 1995, the Company instituted litigation concerning this dispute in Orange County, California Superior Court against Coherent, Westinghouse Electric Corporation ("Westinghouse") and an individual employee of Westinghouse who was an officer of IFS from 1986 to 1993, when the events involved in the federal action against IFS took place and while Westinghouse owned a substantial minority interest in IFS. The complaint charges that Coherent conspired with IFS in the wrongful conduct which is the subject of the federal lawsuit and interfered with the Company's contracts and relations with IFS and with prospective contracts and advantageous economic relations with third parties. The complaint asserts that Westinghouse is liable for its employee's wrongful acts as an IFS executive while acting within the scope of his employment at Westinghouse. The lawsuit seeks injunctive relief and compensatory damages. In October 1995 the federal action was stayed by order of the court in favor of the California state court action, in which the pleadings have been amended to include all claims asserted by the Company in the federal action. In July 1996, the court in the California state court action granted demurrers by Westinghouse and the employee of Westinghouse to all causes of action against them, as well as all but one of the Company's claims against Coherent. As a result, the claims that were the subject of the granted demurrers have been dismissed, subject to the Company's right to appeal. The Company has filed an appeal of these decisions as they relate to Westinghouse and the Westinghouse employee, and briefs have been submitted. No date has been set for a hearing of this appeal. No trial date has been set as to the remaining outstanding causes of action. 22 PREMIER LASER SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. COMMITMENTS AND CONTINGENCIES (CONTINUED) The Company is involved in various disputes and other lawsuits from time to time arising from its normal operations. The litigation process is inherently uncertain and it is possible that the resolution of the IFS litigation, disputes and other lawsuits may adversely affect the Company, however, it is the opinion of management, that the outcome of such matters will not have a material adverse impact on the Company's financial position, results of operations, or cash flows. 9. INCOME TAXES The Company has incurred operating losses since its inception and as a result, no provision for or benefit from income tax has been recorded. Deferred tax assets consist of the following at March 31:
1997 1996 ------------ ------------ Tax operating loss carryforwards.......................... $ 7,116,277 $ 6,033,150 Inventory and receivable reserves and related temporary differences.............................................. 1,115,696 708,404 Depreciation and amortization............................. 705,293 141,077 Research and development credit carryforwards............. 349,494 597,683 Accruals not currently deductible......................... 70,687 105,767 ----------- ----------- Total deferred tax assets................................. 9,357,447 7,586,081 Valuation allowance for deferred tax assets............... (9,357,447) (7,586,081) ----------- ----------- Net deferred taxes........................................ $ -- $ -- =========== ===========
The Company has approximately $20.4 million of federal net operating loss carryforwards at March 31, 1997, which will begin to expire in 2006. A valuation allowance has been established for the entire deferred tax asset. The Tax Reform Act of 1986 contains provisions which could substantially limit the availability of the net operating loss carryforwards if there is a greater than 50% change in ownership during a three year period. As a result of the Company's public offerings the Company experienced an ownership change of more than 50%, resulting in a limitation on the utilization of their net operating loss carryforwards. The limitation is based on the value of the Company on the date that the change in ownership occurred. The ultimate realization of the loss carryforwards is dependent on the future profitability of the Company. 10. SHAREHOLDERS' EQUITY INITIAL AND SECONDARY PUBLIC OFFERINGS On December 7, 1994, the Company completed an initial public offering of 2,400,000 Units of the Company's securities, each unit consisting of one share of Class A common stock, one redeemable Class A warrant and one redeemable Class B warrant (the Units). The Company realized net proceeds of $9,542,000 from this offering. Each Class A warrant consists of the right to purchase one share of Class A common stock and one Class B warrant through November 30, 1999 at an exercise price of $6.50. Each Class B warrant consists of the right to purchase one share of Class A common stock at an exercise price of $8.00. The Company has the right to redeem the Class A and Class B warrants after November 30, 1997 at a price of $.05 per warrant subject to certain conditions regarding the bid price of the Class A common 23 PREMIER LASER SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. SHAREHOLDERS' EQUITY (CONTINUED) stock. On January 12, 1995, the underwriter in the initial public offering exercised its over allotment option to purchase 360,000 Units at the public offering price, resulting in additional net proceeds of $1,411,000. On October 18, 1996, the Company completed a public offering of 11,000 Units of the Company's securities, each Unit consisting of 190 shares of Class A common stock and 95 redeemable Class B warrants (the "Units"). The Company realized net proceeds of $10,402,000 from this offering and the related exercise of the underwriters overallotment option. Each Class B warrant consists of the right to purchase one share of Class A common stock through November 30, 1999 at an exercise price of $8.00. STOCK OPTIONS The Company has adopted several stock option plans that authorize the granting of options to employees, officers and/or consultants to purchase shares of the Company's Class A common stock. The stock option plans are administered by the Board of Directors or a committee appointed by the Board of Directors, which determines the terms of the options, including the exercise price, the number of shares subject to option and the exercisability of the option. The options are generally granted at the fair market value of the shares underlying the options at the date of the grant and expire within ten years of the grant date. In addition to options granted pursuant to the stock option plans, the Company has issued options to purchase shares of the Company's Class A common stock to certain members of the Board of Directors, consultants and former notes payable holders. Effective December 30, 1993, the Company issued warrants under the 1993 Limited Warrant Plan to purchase 50,872 shares of common stock, with an exercise price of $8.85 per share for services rendered by consultants in connection with the acquisition of technology rights. In January 1995, the warrant holders exercised their right to receive a cash payment of $285,000, an amount equal to the liability owed to the consultants on the date of issuance, in exchange for cancellation of the warrants. The Company has elected to follow APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related Interpretations in accounting for its employee stock option grants. Accordingly, no compensation expense has been recognized for its employee stock option awards and its employee stock purchase plan because the exercise price of the Company's stock options equals the market price of the underlying stock on the date of grant. The Company recognized expense related to grants of options to non-employees in accordance with the fair value provision of SFAS No. 123. Such expense was $190,001 and none during fiscal 1997 and 1996, respectively. FASB Statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires pro forma information regarding net income (loss) and net income (loss) per share using compensation that would have been incurred if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value of options granted have been estimated at the date of grant using a Black-Scholes option pricing model using the following assumptions: Risk free interest rate.......................................... 6.0% Stock volatility factor.......................................... 0.580 Weighted average expected option life............................ 4 years Expected dividend yield.......................................... 0% For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's compensation expense used in determining the pro forma 24 PREMIER LASER SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. SHAREHOLDERS' EQUITY (CONTINUED) information ($974,469 and $367,490 for fiscal years 1997 and 1996, respectively) may not be indicative of such expense in future periods as the 1997 and 1996 amounts are based only on option grants after December 15, 1994. Pro forma information is as follows: 1997 1996 -------------- -------------- Pro forma net loss...................... $ (6,947,826) $ (6,135,000) Pro forma net loss per share........... $ (1.19) $ (1.35) A summary of the Company's stock option activity, and related information for the years ended March 31 follows:
1997 1996 1995 -------------------- --------------------- ---------------------- WEIGHTED- WEIGHTED- WEIGHTED- AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE ---------- --------- ---------- --------- --------- --------- Outstanding--beginning of year........... 1,423,949 $ 5.58 788,157 $ 6.14 734,646 $ 9.14 Granted.................................. 1,042,756 6.16 704,700 4.89 621,815 5.01 Exercised................................ (1,899) 1.00 (1,722) 1.00 (3,067) 1.03 Forfeited................................ (156,757) 10.53 (67,186) 4.96 (565,237) 8.81 ---------- ------- ---------- ------- --------- --------- Outstanding--end of year................. 2,308,049 5.51 1,423,949 5.58 788,157 6.14 ========== ======= ========== ======= ========= ========= Exercisable at end of year............... 775,629 $ 5.18 782,999 $ 6.15 758,157 $ 6.19 ========== ======= ========== ======= ========= ========= Weighted-average fair value of options granted during the year................. $ 2.98 $ 2.46 $ 2.53 ======= ======= =========
The weighted average remaining contractual life of options as of March 31, 1997 was as follows:
OUTSTANDING EXERCISABLE ------------------------------------- ------------------------ NUMBER OF WEIGHTED-AVERAGE WEIGHTED AVERAGE SHARES REMAINING CONTRACTUAL AVERAGE SHARES EXERCISE RANGE OF EXERCISE PRICES OUTSTANDING LIFE (YEARS) EXERCISE PRICE EXERCISABLE PRICE - ------------------------ ----------------- --------------------- -------------- ----------- -------- $1.00...................... 28,438 1.7 $ 1.00 28,438 $ 1.00 $4.50 - $8.85.............. 2,255,921 9.0 5.51 723,501 5.16 Greater than $10.00........ 23,690 6.8 10.73 23,690 10.73
CLASS E-1 AND CLASS E-2 COMMON STOCK The Company's Class E-1 and Class E-2 common stock is held in escrow, is not transferable, can be voted and will be converted into Class A common stock only upon the occurrence of specified events. All of the Class E-1 common stock will be automatically converted into Class A common stock in the event that the Company's net income before provision for income taxes, as defined, exceeds certain amounts. These amounts were originally $6,850,000, $8,425,000, $9,900,000 for the fiscal years ending March 31, 1998 through 2000, respectively, but these amounts will be increased in future fiscal years in proportion to increases in the weighted average number of shares of common stock outstanding (as defined) in the relevant year, as compared to the number of shares outstanding immediately after the Company's initial public offering. In addition, the Class E-1 common stock will be converted if the closing price, as defined, of the Company's Class A common stock shall average in excess of $19.25 for any 30 consecutive trading 25 PREMIER LASER SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. SHAREHOLDERS' EQUITY (CONTINUED) days during the period May 1, 1996 to November 30, 1997. If none of the above events occur, the Class E-1 common stock will be canceled on June 30, 2000. All of the Class E-2 common stock will be automatically converted into Class A common stock in the event that: (1) the Company's net income before provision for income taxes, as defined, amounts to at least $14,750,000, $20,475,000 or $26,750,000 for the years ending March 31, 1998 through 2000, respectively, (which amounts shall be adjusted in the same manner as those for the Class E-1 common stock) or (2) the closing price, as defined, of the Company's Class A common stock shall average in excess of $24.00 for any 30 consecutive trading days during the period May 1, 1996 to November 30, 1997. If none of the above events occur, the Class E-2 common stock will be canceled on June 30, 2000. The Company will, in the event of the release of the Class E-1 and Class E-2 common stock, recognize during the period in which the earnings thresholds are met or such minimum bid prices are achieved, a substantial noncash charge to earnings equal to the fair value of such shares on the date of their release, which would have the effect of significantly increasing the Company's loss or reducing or eliminating earnings, if any, at such time. 11. EMPLOYEE BENEFIT PLAN The Company adopted a Defined Contribution 401(k) Profit Sharing Plan, effective January 1, 1997 covering substantially all of its employees. The Plan permits eligible employees to contribute a portion of their compensation to the Plan, on a tax deferred basis. The Company may make matching contributions, in amounts determined by the Company's Board of Directors. The Company's contributions will be in the form of shares of the Company's common stock. During 1997, no amounts were contributed by the Company to the Plan. 12. SUBSEQUENT EVENTS ACQUISITION OF EYESYS TECHNOLOGIES, INC. On September 30, 1997, the Company acquired all of the equity interests of EyeSys Technologies, Inc. (EyeSys), a manufacturer and distributor of a specialized line of diagnostic opthalmic equipment, for approximately $12.5 million, in the form of 1,236,668 shares of the Company's common stock (including 319,684 being held in an escrow account pending the outcome of certain warranties to be determined at the end of 12 and 18 months), and $470,000 in cash. 216,761 of the escrowed shares have been excluded from the determination of the purchase price. If and when they are released, the allocation of the adjusted purchase price will be re-assessed. Options to purchase 210,000 shares of the Company's common stock were also issued in connection with the acquisition. These options were valued in accordance with SFAS 123 and included in the acquisition cost. The acquisition was accounted for as a purchase and the total acquisition cost allocated among net liabilities assumed ($2,183,429), intangibles ($2,600,000), and in process research and development ($9,200,000). Merger related and integration expenses ($2,147,224) were also recorded as of the acquisition date. EyeSys has been consolidated commencing with the acquisition date. Goodwill arising from the acquisition ($2,298,784) was written-off due to uncertainty as to its recoverability. ACQUISITION OF CONTROLLING INTEREST IN OPHTHALMIC IMAGING SYSTEMS, INC. During the final four months of fiscal 1998 the Company acquired a controlling interest in Ophthalmic Imaging Systems ("OIS") for $3.3 million in cash. OIS is engaged in the business of designing, developing, manufacturing and marketing digital imaging systems and image enhancement and analysis software for use by practitioners in the ocular health field. Equity accounting was used during the period in which the Company owned at least 20% but less than 50% of the OIS stock (December 1997 through February 1998). Commencing with the date at which the controlling interest was obtained (late February 1998), OIS has been consolidated with the Company in the accompanying financial statements. The OISI acquisition has been accounted for as a purchase and the total acquisition cost allocated among net liabilities of OIS ($996,835), intangibles ($1,687,407) and in process research and development ($2,600,000). Merger related and integration expenses of $1,687,407 were also recorded as of the date at which the controlling interest was obtained. The Company is in the process of negotiating an agreement for the purchase of the minority interests of OIS. Premier entered into a Stock Purchase Agreement, dated February 25, 1998, pursuant to which it agreed, subject to certain conditions, to commence an exchange offer to acquire all of the outstanding common stock of OIS not owned by Premier. This Stock Purchase Agreement was terminated as of August 21, 1998. In connection with this termination, Premier may be liable to pay OIS a $500,000 break-up fee, which could be satisfied by the reduction of indebtedness of OIS to Premier which arose after March 31, 1998. In addition, in purchasing 51% of OIS' outstanding stock, Premier entered into an agreement with one of OIS' selling shareholders which contemplates that Premier's purchase of approximately 10% of OIS' outstanding shares will be rescinded if Premier does not complete the exchange offer. If the rescission is implemented, Premier will own less than a majority of the outstanding shares of OIS and would no longer include the financial performance of OIS on a consolidated basis. In addition, as part of the rescission, Premier would receive approximately $730,000 in cash. The parties are currently negotiating various issues relating to the termination of the Purchase Agreement and their future business relationship. During fiscal 1998 three other business acquisitions occurred, which were not individually or collectively significant to the financial condition or operating results of the Company. EXERCISE OF OPTIONS AND WARRANTS During fiscal 1998, the Company received approximately $41,735,000 from the exercise of options and warrants. As a result of such exercises, the Company issued an additional 4,176,000 Class B Warrants and 6,270,000 shares of Class A Common Stock. LITIGATION INITIATED AFTER YEAR END The Company and certain of the officers and directors have been named in a number of securities class action lawsuits which allege violations of the Securities Exchange Act or the California Corporations Code. The plaintiffs seek damages on behalf of classes of investors who purchased the Company's stock between May 7, 1997 and April 15, 1998. The complaints allege that the Company misled investors by failing to disclose material information and making material misrepresentations regarding the Company's business operations and projections. The Company has also been named in a shareholder derivative action purportedly filed on its behalf against certain officers and directors arising out of the same alleged facts. Although the Company intends to vigorously defend itself in the actions, the ultimate outcome is uncertain and no provision for any settlement has been reflected in the accompanying financial statements. Any significant adverse resolution of the actions would seriously impact the Company's financial condition. The Company maintains insurance coverage for these types of actions and has filed claims with the carrier. The policy has a limit of $5 million and a $250,000 deductible amount. 26 PREMIER LASER SYSTEMS, INC. SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED MARCH 31, 1997 (RESTATED), 1996 AND 1995
Balance at Deductions/ Balance beginning of Recoveries at end of Description period Additions and Write-offs Other* period - ----------- ------------ ---------- -------------- --------- ---------- 1997 (Restated) Allowance for doubtful accounts receivable...................... $154,677 $403,515 $(119,054) $174,125 $ 613,263 Inventory reserves................ 950,325 292,999 -- -- 1,203,324 1996 Allowance for doubtful accounts receivable...................... $306,428 $254,962 $(406,713) $ -- $ 154,677 Inventory reserves................ 699,269 838,968 (587,912) -- 950,325 1995 Allowance for doubtful accounts receivable...................... $574,106 $220,453 $(488,131) $ -- $ 306,428 Inventory reserves................ 540,987 158,282 -- -- 699,269
- ------------------------ * Allowance for Data.Site 27 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) The following documents are filed as part of this Annual Report on Form 10-K: (1) Report of Haskell & White LLP, Independent Auditors................ 10 Report of Price Waterhouse LLP, Independent Accountants............ 11 Consolidated Balance Sheets at March 31, 1997 (Restated) and 1996.. 12 Consolidated Statements of Operations for the Years Ended March 31, 1997 (Restated), 1996 and 1995.......................... 13 Consolidated Statements of Shareholders' Equity for the years ended March 31, 1997 (Restated), 1996 and 1995.............. 14 Consolidated Statements of Cash Flows for the Years Ended March 31, 1997 (Restated), 1996 and 1995.......................... 15 Notes to Consolidated Financial Statements......................... 16 (2) Financial Statements Schedules Schedule II--Valuation and Qualifying Accounts for the Years Ended March 1997, 1996 and 1995............................. 27 Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. (3) Exhibits (numbered in accordance with Item 601 of Regulation S-K).. 28 - ------------- 3.1 Amended and Restated Articles of Incorporation filed with the California Secretary of State on November 23, 1994. (incorporated herein by this reference to Exhibit 4.8 to the Registrant's Quarterly Report on Form 10-QSB for the Quarter ended December 31, 1994). 3.2 Bylaws (incorporated herein by this reference to Exhibit 3.3 to the Registrant's Registration Statement on Form SB-2, Registration No. 33- 83984). 10.1 Letter Agreement and Patent License Agreement dated August 29, 1991 among the Company, Patlex Corporation and Gordon Gould (incorporated herein by this reference to Exhibit 10.1 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.2 Assignment Agreement dated July 27, 1992 between the Company and Michael Colvard, M.D. (incorporated herein by this reference to Exhibit 10.2 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.3 Gold Catalyst Licensing Agreement dated April 16, 1992 between the Company and Optical Engineering, Inc. (incorporated herein by this reference to Exhibit 10.3 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 28 EXHIBITS - ------------- +10.4 Lead Generation/Distribution Agreement dated March 17, 1994 between the Company and Burkhart Dental Supply Company (incorporated herein by this reference to Exhibit 10.10 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.5 Form of International Distribution Agreement (incorporated herein by this reference to Exhibit 10.12 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.6 Letter of Intent between the Company and Richard Leaderman, D.D.S., together with related Patent Assignments as filed in the U.S. Patent and Trademark Office on February 22, 1994 (incorporated herein by this reference to Exhibit 10.13 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). +10.7 Exclusive Marketing Agreement dated July 26, 1994 between the Company, Proclosure, Inc. and Nippon Shoji Kaisha, Ltd. (incorporated herein by this reference to Exhibit 10.14 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.8 Form of Indemnification Agreement (incorporated herein by this reference to Exhibit 10.23 to the Registrant's Registration Statement on Form SB- 2, Registration No. 33-83984). 10.9 Purchase/Supply Agreement dated January 13, 1987 between Infrared Fiber Systems, Inc. and Pfizer Hospital Products Group, Inc., as amended (incorporated herein by this reference to Exhibit 10.26 to the Registrant's Registration Statement on Form SB-2, Registration No. 33- 83984). 10.10 Form of Warrant Agreement (including forms of Class A and Class B Warrant Certificates) (incorporated herein by this reference to Exhibit 4.1 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.11 Form of Underwriter's Unit Purchase Option (incorporated herein by this reference to Exhibit 4.2 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.12 Form of Finder's Unit Purchase Option (incorporated herein by this reference to Exhibit 4.3 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.13 1992 Stock Option Plan, together with form of Nonstatutory Stock Option Agreement and form of Incentive Stock Option Agreement (incorporated herein by this reference to Exhibit 4.5 to the Registrant's Registration Statement on Form SB-2, Registration No. 33- 83984). 10.14 Employee Bonus Stock Plan, together with form of Bonus Stock Agreement (incorporated herein by this reference to Exhibit 4.6 to the Registrant's Registration Statement on Form SB-2, Registration No. 33- 83984). 10.15 Assignment and Modification Agreement dated July 26, 1991, among the Registrant, Pfizer Hospital Products Group and Medical Laser Technologies Limited (incorporated herein by this reference to Exhibit 10.4 of the Registrant's Registration Statement on Form SB-2, Registration Number 33-83984). 29 EXHIBITS - ------------- 10.16 Letter agreement dated October 13, 1987 between Pfizer Laser Systems, Inc. and Duke University, together with patent assignment as filed in the U.S. Patent and Trademark Office on October 23, 1993 (incorporated herein by this reference to Exhibit 10.8 to the Registrant's Registration Statement on Form SB-2, Registration Number 33-83984). 10.17 Industrial Lease dated December 6, 1995 between the Registrant and Irvine Company (incorporated herein by this reference to Exhibit 10.22 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.18 Use and Cost Sharing Agreement dated December 1, 1995 between the Registrant and Biopsys Medical, Inc. (incorporated herein by this reference to Exhibit 10.23 to the Registrant's Annual Report on Form 10- KSB for the fiscal year ended March 31, 1996). 10.19 Letter of Intent dated October 19, 1995 between the Registrant and International Biolaser Corporation, together with related Promissory Note dated October 19, 1995 payable to Registrant in the original principal amount of $125,000, and Security Agreement dated October 19, 1995 between the Registrant and International Biolaser Corporation (incorporated herein by this reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.20 Share Exchange Agreement dated December 20, 1995 among the Registrant, 658994 Alberta Ltd., 658997 Alberta Ltd. and Mattan Corporation (incorporated herein by this reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended September 30, 1995). 10.21 Purchasing Agreement dated December 20, 1995 between Registrant and Mattan Corporation (incorporated herein by this reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended September 30, 1995). 10.22 Exclusive Licensing Agreement dated June 1, 1992 between the Registrant and Quentin M. Murphy, D.D.S. (incorporated herein by this reference to Exhibit 10.27 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.23 Broker Agreement dated March 13, 1996 among the Registrant, First National Marketing Services, Inc. and William F. Sullivan (incorporated herein by this reference to Exhibit 10.29 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.24 Form of Consulting Agreement (incorporated herein by this reference to Exhibit 10.30 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.25 Radiation Services Agreement dated January 10, 1994 between the Registrant and SteriGenics International (incorporated herein by this reference to Exhibit 10.31 to the Registrant's Annual Report on Form 10- KSB for the fiscal year ended March 31, 1996). 30 EXHIBITS - ------------- 10.26 Form of Nonstatutory Stock Option Agreement between the Registrant and Colette Cozean (granting option to purchase 358,650 shares of Registrant's Common Stock) (incorporated herein by this reference to Exhibit 10.32 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.27 Form of Termination Agreement between the Registrant and certain of the Registrant's Executive Officers (incorporated herein by this reference to Exhibit 10.33 to the Registrant's Annual Report on Form 10- KSB for the fiscal year ended March 31, 1996). 10.28 1995 Employee Stock Option Plan, together with form of Nonqualified Stock Option Agreement and form of Incentive Stock Option Agreement (incorporated herein by this reference to Exhibit 10.34 to the Registrant's Registration Statement on Form SB-2, Registration No. 33- 83984). 10.29 February 1996 Stock Option Plan (incorporated herein by this reference to Exhibit 10.35 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.30 1996 Stock Option Plan (incorporated herein by this reference to Exhibit 10.36 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.31 Loan Agreement dated June 3, 1996 between the Registrant and Silicon Valley Bank, together with Schedule to Loan Agreement dated June 3, 1996 (incorporated herein by this reference to Exhibit 10.36 to the Registrant's Registration Statement on Form SB-2 Registration No. 33- 83984). 10.32 Pledge Agreement dated June 3, 1996 between the Registrant and Silicon Valley Bank (incorporated herein by this reference to Exhibit 10.37 to the Registrant's Registration Statement on Form SB-2 Registration No. 33-83984). 10.33 Warrant to Purchase Stock dated June 3, 1996 issued to Silicon Valley Bank (incorporated herein by this reference to Exhibit 10.38 to the Registrant's Registration Statement on Form SB-2 Registration No. 33- 83984). 10.34 Registration Rights Agreement dated June 3, 1996 between the Registrant and Silicon Valley Bank (incorporated herein by this reference to Exhibit 10.39 to the Registrant's Registration Statement on Form SB-2 Registration No. 33-83984). 10.35 Antidilution Agreement dated June 3, 1996 between the Registrant and Silicon Valley Bank (incorporated herein by this reference to Exhibit 10.40 to the Registrant's Registration Statement on Form SB-2 Registration No. 33-83984). 10.36 Agreement dated August 12, 1996 between the Registrant and Circuit Tree Medical, Inc. (incorporated herein by this reference to Exhibit 10.42 to the Registrant's Registration Statement on Form SB-2 Registration No. 33-83984). 10.37 Amendment to Loan Agreement together with Schedule, dated February 13, 1997, between the Registrant and Silicon Valley Bank.* 10.38 Pledge Agreement dated February 13, 1997 between the Registrant and Silicon Valley Bank.* 10.39 Joint Venture Agreement dated January 31, 1997 between the Registrant, RSS, LLC and Data.Site.* 31 EXHIBITS - ------------- 10.40 Operating Agreement of Data.Site dated January 31, 1997.* 10.41 Agreement and Plan of Merger dated April 24, 1997 between the Registrant, Premier Acquisition of Delaware, Inc. and EyeSys Technologies, Inc.* 27 Financial Data Schedule. - ------------- * Previously filed. + Confidential treatment has been granted with respect to portions of this Exhibit. (b) Reports on Form 8-K. During the last quarter of the period covered by this report, on March 1, 1997, the Company filed a Current Report on Form 8-K, reporting a change in its public accountant. On March 18, 1997, the Company filed an amendment to its Current Report on Form 8-K/A for the purpose of filing a letter by its former accountants confirming the information contained in the Form 8-K. 32 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PREMIER LASER SYSTEMS, INC. August 28, 1998 By: /s/ COLETTE COZEAN ------------------------------------- Colette Cozean, Ph.D., CHIEF EXECUTIVE OFFICER AND PRESIDENT 33 EXHIBIT INDEX EXHIBIT NO. - ----------- 3.1 Amended and Restated Articles of Incorporation filed with the California Secretary of State on November 23, 1994. (incorporated herein by this reference to Exhibit 4.8 to the Registrant's Quarterly Report on Form 10-QSB for the Quarter ended December 31, 1994). 3.2 Bylaws (incorporated herein by this reference to Exhibit 3.3 to the Registrant's Registration Statement on Form SB-2, Registration No. 33- 83984). 10.1 Letter Agreement and Patent License Agreement dated August 29, 1991 among the Company, Patlex Corporation and Gordon Gould (incorporated herein by this reference to Exhibit 10.1 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.2 Assignment Agreement dated July 27, 1992 between the Company and Michael Colvard, M.D. (incorporated herein by this reference to Exhibit 10.2 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.3 Gold Catalyst Licensing Agreement dated April 16, 1992 between the Company and Optical Engineering, Inc. (incorporated herein by this reference to Exhibit 10.3 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). +10.4 Lead Generation/Distribution Agreement dated March 17, 1994 between the Company and Burkhart Dental Supply Company (incorporated herein by this reference to Exhibit 10.10 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.5 Form of International Distribution Agreement (incorporated herein by this reference to Exhibit 10.12 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.6 Letter of Intent between the Company and Richard Leaderman, D.D.S., together with related Patent Assignments as filed in the U.S. Patent and Trademark Office on February 22, 1994 (incorporated herein by this reference to Exhibit 10.13 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). +10.7 Exclusive Marketing Agreement dated July 26, 1994 between the Company, Proclosure, Inc. and Nippon Shoji Kaisha, Ltd. (incorporated herein by this reference to Exhibit 10.14 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.8 Form of Indemnification Agreement (incorporated herein by this reference to Exhibit 10.23 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.9 Purchase/Supply Agreement dated January 13, 1987 between Infrared Fiber Systems, Inc. and Pfizer Hospital Products Group, Inc., as amended (incorporated herein by this reference to Exhibit 10.26 to the Registrant's Registration Statement on Form SB-2, Registration No. 33- 83984). 10.10 Form of Warrant Agreement (including forms of Class A and Class B Warrant Certificates) (incorporated herein by this reference to Exhibit 4.1 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.11 Form of Underwriter's Unit Purchase Option (incorporated herein by this reference to Exhibit 4.2 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 10.12 Form of Finder's Unit Purchase Option (incorporated herein by this reference to Exhibit 4.3 to the Registrant's Registration Statement on Form SB-2, Registration No. 33-83984). 34 EXHIBIT NO. - ----------- 10.13 1992 Stock Option Plan, together with form of Nonstatutory Stock Option Agreement and form of Incentive Stock Option Agreement (incorporated herein by this reference to Exhibit 4.5 to the Registrant's Registration Statement on Form SB-2, Registration No. 33- 83984). 10.14 Employee Bonus Stock Plan, together with form of Bonus Stock Agreement (incorporated herein by this reference to Exhibit 4.6 to the Registrant's Registration Statement on Form SB-2, Registration No. 33- 83984). 10.15 Assignment and Modification Agreement dated July 26, 1991, among the Registrant, Pfizer Hospital Products Group and Medical Laser Technologies Limited (incorporated herein by this reference to Exhibit 10.4 of the Registrant's Registration Statement on Form SB-2, Registration Number 33-83984). 10.16 Letter agreement dated October 13, 1987 between Pfizer Laser Systems, Inc. and Duke University, together with patent assignment as filed in the U.S. Patent and Trademark Office on October 23, 1993 (incorporated herein by this reference to Exhibit 10.8 to the Registrant's Registration Statement on Form SB-2, Registration Number 33-83984). 10.17 Industrial Lease dated December 6, 1995 between the Registrant and Irvine Company (incorporated herein by this reference to Exhibit 10.22 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.18 Use and Cost Sharing Agreement dated December 1, 1995 between the Registrant and Biopsys Medical, Inc. (incorporated herein by this reference to Exhibit 10.23 to the Registrant's Annual Report on Form 10- KSB for the fiscal year ended March 31, 1996). 10.19 Letter of Intent dated October 19, 1995 between the Registrant and International Biolaser Corporation, together with related Promissory Note dated October 19, 1995 payable to Registrant in the original principal amount of $125,000, and Security Agreement dated October 19, 1995 between the Registrant and International Biolaser Corporation (incorporated herein by this reference to Exhibit 10.24 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.20 Share Exchange Agreement dated December 20, 1995 among the Registrant, 658994 Alberta Ltd., 658997 Alberta Ltd. and Mattan Corporation (incorporated herein by this reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended September 30, 1995). 10.21 Purchasing Agreement dated December 20, 1995 between Registrant and Mattan Corporation (incorporated herein by this reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-QSB for the quarter ended September 30, 1995). 10.22 Exclusive Licensing Agreement dated June 1, 1992 between the Registrant and Quentin M. Murphy, D.D.S. (incorporated herein by this reference to Exhibit 10.27 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.23 Broker Agreement dated March 13, 1996 among the Registrant, First National Marketing Services, Inc. and William F. Sullivan (incorporated herein by this reference to Exhibit 10.29 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.24 Form of Consulting Agreement (incorporated herein by this reference to Exhibit 10.30 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.25 Radiation Services Agreement dated January 10, 1994 between the Registrant and SteriGenics International (incorporated herein by this reference to Exhibit 10.31 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 35 EXHIBIT NO. - ----------- 10.26 Form of Nonstatutory Stock Option Agreement between the Registrant and Colette Cozean (granting option to purchase 358,650 shares of Registrant's Common Stock) (incorporated herein by this reference to Exhibit 10.32 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.27 Form of Termination Agreement between the Registrant and certain of the Registrant's Executive Officers (incorporated herein by this reference to Exhibit 10.33 to the Registrant's Annual Report on Form 10- KSB for the fiscal year ended March 31, 1996). 10.28 1995 Employee Stock Option Plan, together with form of Nonqualified Stock Option Agreement and form of Incentive Stock Option Agreement (incorporated herein by this reference to Exhibit 10.34 to the Registrant's Registration Statement on Form SB-2, Registration No. 33- 83984). 10.29 February 1996 Stock Option Plan (incorporated herein by this reference to Exhibit 10.35 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.30 1996 Stock Option Plan (incorporated herein by this reference to Exhibit 10.36 to the Registrant's Annual Report on Form 10-KSB for the fiscal year ended March 31, 1996). 10.31 Loan Agreement dated June 3, 1996 between the Registrant and Silicon Valley Bank, together with Schedule to Loan Agreement dated June 3, 1996 (incorporated herein by this reference to Exhibit 10.36 to the Registrant's Registration Statement on Form SB-2 Registration No. 33- 83984). 10.32 Pledge Agreement dated June 3, 1996 between the Registrant and Silicon Valley Bank (incorporated herein by this reference to Exhibit 10.37 to the Registrant's Registration Statement on Form SB-2 Registration No. 33-83984). 10.33 Warrant to Purchase Stock dated June 3, 1996 issued to Silicon Valley Bank (incorporated herein by this reference to Exhibit 10.38 to the Registrant's Registration Statement on Form SB-2 Registration No. 33- 83984). 10.34 Registration Rights Agreement dated June 3, 1996 between the Registrant and Silicon Valley Bank (incorporated herein by this reference to Exhibit 10.39 to the Registrant's Registration Statement on Form SB-2 Registration No. 33-83984). 10.35 Antidilution Agreement dated June 3, 1996 between the Registrant and Silicon Valley Bank (incorporated herein by this reference to Exhibit 10.40 to the Registrant's Registration Statement on Form SB-2 Registration No. 33-83984). 10.36 Agreement dated August 12, 1996 between the Registrant and Circuit Tree Medical, Inc. (incorporated herein by this reference to Exhibit 10.42 to the Registrant's Registration Statement on Form SB-2 Registration No. 33-83984). 10.37 Amendment to Loan Agreement together with Schedule, dated February 13, 1997, between the Registrant and Silicon Valley Bank.* 10.38 Pledge Agreement dated February 13, 1997 between the Registrant and Silicon Valley Bank.* 10.39 Joint Venture Agreement dated January 31, 1997 between the Registrant, RSS, LLC and Data.Site.* 10.40 Operating Agreement of Data.Site dated January 31, 1997.* 10.41 Agreement and Plan of Merger dated April 24, 1997 between the Registrant, Premier Acquisition of Delaware, Inc. and EyeSys Technologies, Inc.* 27 Financial Data Schedule. 36 EXHIBIT NO. - ----------- - ------------------- + Confidential treatment has been granted with respect to portions of this Exhibit. + Incorporated by reference herein. * Previously filed. 37 EX-27 2 FINANCIAL DATA SCHEDULE -- ARTICLE 5
5 YEAR YEAR MAR-31-1997 MAR-31-1996 APR-01-1996 APR-01-1995 MAR-31-1997 MAR-31-1996 5,191,898 4,582,840 0 0 1,665,935 662,992 (613,623) (154,677) 3,284,632 2,185,355 10,303,161 7,696,014 1,887,921 1,465,474 (1,106,976) (971,532) 21,079,336 15,674,568 2,727,545 1,877,522 0 0 0 0 0 0 36,860,205 25,857,132 (20,611,495) (12,060,086) 21,079,336 15,674,568 5,090,861 1,704,390 5,090,861 1,704,390 3,648,539 3,324,757 11,139,711 7,556,322 (75,493) (99,037) 0 0 0 0 (5,973,357) (5,752,895) 0 0 (5,973,357) (5,752,895) 0 0 0 0 0 0 (5,973,357) (5,752,895) (1.02) (1.26) (1.02) (1.26)
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