-----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, J9z2b4c+EciSV/ELY6ckRfBDR/SmPPZ9mlu0JVjcAM8F5dWDVFeoWZcoX2zKiKAZ GPWe6hw00gHI7GY2/jka3Q== 0000903893-96-000980.txt : 19961118 0000903893-96-000980.hdr.sgml : 19961118 ACCESSION NUMBER: 0000903893-96-000980 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLC SYSTEMS INC CENTRAL INDEX KEY: 0000879682 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 043153858 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11388 FILM NUMBER: 96666253 BUSINESS ADDRESS: STREET 1: 113 CEDAR ST STE S2 CITY: MILFORD STATE: MA ZIP: 01757 BUSINESS PHONE: 5084785991 10-Q 1 FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarter ended September 30, 1996. Commission file number 1-11388 PLC SYSTEMS INC. (Exact name of registrant as specified in its charter) BRITISH COLUMBIA, CANADA 04-3153858 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 10 FORGE PARK, FRANKLIN, MASSACHUSETTS 02038 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (508) 541-8800 ---------- 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 of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]. APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's class of common stock, as of the latest practical date. Class Outstanding at November 13, 1996 ----- -------------------------------- Common Stock, no par value 16,511,807 ================================================================================ PLC SYSTEMS INC. INDEX Part I. Financial Information: Item 1. Consolidated Condensed Balance Sheets..........................3 Consolidated Condensed Statements of Operations................4 Consolidated Condensed Statements of Cash Flows................5 Notes to Consolidated Condensed Financial Statements...........6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......7-10 Part II. Other Information: Item 1. Legal Proceedings........................................11 Item 2. Changes in Securities....................................11 Item 3. Defaults by the Company Upon its Senior Securities.......11 Item 4. Submission of Matters to a Vote of Security Holders......11 Item 5. Other Information........................................11 Item 6. Exhibits and Reports on Form 8-K..................... 11-12 -2- ITEM 1. FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- PLC SYSTEMS INC. CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands)
September 30, December 31, 1996 1995 ----------- ----------- (Unaudited) ASSETS Current assets: Cash and cash equivalents .......................................... $ 4,169 $ 704 Short-term investments ............................................. 7,472 6,500 Accounts receivable, net ........................................... 863 6,749 Inventories, net ................................................... 3,199 1,789 Prepaid expenses and other current assets .......................... 1,241 488 ------- ------- Total current assets ........................................... 16,944 16,230 Equipment, furniture and leasehold improvements, net ................... 3,382 1,692 Other assets ........................................................... 370 368 ------- ------- Total assets .................................................... $20,696 $18,290 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable .................................................... $ 1,176 $ 546 Accrued clinical costs .............................................. 958 854 Accrued compensation ................................................ 178 777 Deferred revenue .................................................... 96 166 Other accrued liabilities ........................................... 338 346 -------- -------- Total current liabilities ........................................ 2,746 2,689 Deferred revenue ........................................................ 230 61 Capital lease obligations ............................................... 25 32 Commitments and contingencies Stockholders' equity: Common stock, no par value, 25,000 shares authorized, 16,510 and 15,944 shares issued and outstanding in 1996 and 1995, respectively ................................................ 54,004 51,411 Accumulated deficit ..................................................... (35,778) (35,589) Foreign currency translation ............................................ (531) (314) -------- -------- 17,695 15,508 -------- -------- Total liabilities and stockholders' equity .............................. $ 20,696 $ 18,290 ======== ========
The accompanying notes are an integral part of the consolidated condensed financial statements. -3- PLC SYSTEMS INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (In thousands, except per share data)
Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 1996 1995 1996 1995 ---- ---- ---- ---- Revenues: Product sales .............................. $ 1,802 $ 1,174 $ 6,768 $ 5,052 Placement and service fees ................. 691 417 1,985 895 ------------ ------------ ------------ ------------ Total revenues ........................... 2,493 1,591 8,753 5,947 Cost of revenues: Product sales .............................. 676 818 1,936 2,474 Placement and service fees ................. 233 143 739 195 ------------ ------------ ------------ ------------ Total cost of revenues .................. 909 961 2,675 2,669 Gross profit ................................. 1,584 630 6,078 3,278 Operating expenses: Selling, general and administrative ........ 1,555 1,114 4,597 3,241 Research and development ................... 725 458 2,043 1,716 ------------ ------------ ------------ ------------ Total operating expenses ................. 2,280 1,572 6,640 4,957 ------------ ------------ ------------ ------------ Loss from operations ......................... (696) (942) (562) (1,679) Other income: Interest income, net ....................... 123 153 422 475 Gain (loss) from foreign currency, net...... 11 -- (44) -- ------------ ------------ ------------ ------------ 134 153 378 475 ------------ ------------ ------------ ------------ Loss before income taxes ..................... (562) (789) (184) (1,204) Provision for income taxes ................... -- -- 4 -- ------------ ------------ ------------ ------------ Net loss ..................................... $ (562) $ (789) $ (188) $ (1,204) ============ ============ ============ ============ Net loss per share ........................... $ (0.03) $ (0.05) $ (0.01) $ (0.08) Shares used to compute net loss per share .................................. 16,499,000 15,867,000 16,331,000 15,854,000
The accompanying notes are an integral part of the consolidated condensed financial statements. -4- PLC SYSTEMS INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands)
Nine Months Ended September 30, ------------- 1996 1995 ---- ---- Operating activities: Net loss ................................................ $ (188) $ (1,204) Adjustments to reconcile net loss to net cash provided (used) for operating activities: Depreciation and amortization ........................ 854 329 Change in assets and liabilities: Decrease (increase) in accounts receivable ........ 5,886 (531) Increase in inventory ............................. (1,410) (1,014) Increase in prepaid expenses and other assets ..... (777) (301) Increase in accounts payable ...................... 629 346 Increase (decrease) in deferred revenue ........... 100 68 (Decrease) increase in accrued liabilities ........ (504) 419 -------- -------- Net cash provided (used) for operating activities .......... 4,590 (1,888) Investing activities: Purchase of short-term investments ...................... (18,444) (7,000) Maturities of short-term investments ................... 17,472 7,858 Purchase of fixed assets ................................ (2,522) (1,037) -------- -------- Net cash used for investing activities ..................... (3,494) (179) Financing activities: Net proceeds from sales of shares ...................... 2,483 181 Repayment of stockholder notes .......................... 110 56 Principal payments on capital lease obligations ......... (7) (15) -------- -------- Net cash provided by (used) financing activities ........... 2,586 222 Effect of exchange rate changes on cash and cash equivalents (217) 2 -------- -------- Net increase (decrease) in cash and cash equivalents ....... 3,465 (1,843) Cash and cash equivalents at beginning of period ........... 704 3,699 -------- -------- Cash and cash equivalents at end of period ................. $ 4,169 $ 1,856 ======== ========
The accompanying notes are an integral part of the consolidated condensed financial statements. -5- PLC SYSTEMS INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The balance sheet as of September 30, 1996 and the statements of operations and cash flows for the nine months ended September 30, 1996 and 1995 are unaudited and in the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been recorded. Such adjustments consisted only of normal recurring items. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The year-end balance sheet data was derived from audited financial statements, but does not include disclosures required by generally accepted accounting principles. It is suggested that these interim financial statements be read in conjunction with the Company's most recent Form 10-K and Annual Report as of December 31, 1995. 2. NET LOSS PER SHARE The net loss per share is calculated using the weighted average number of shares outstanding during the period and does not include share equivalents as their inclusion would be antidilutive. 3. INVENTORIES Inventories consist of the following (in thousands): September 30, December 31, 1996 1995 ---------- ------------- Raw materials $1,445 $ 644 Work in process 1,038 56 Finished goods 716 1,089 ------ ------ $3,199 $1,789 ====== ====== 4. STOCK WARRANTS On March 8, 1996, the Company's Form S-3 to register the common stock underlying the warrants issued to the Company's 1992 underwriters and 1994 placement agent was declared effective by the Securities and Exchange Commission. The warrant issued to the underwriters provided for the purchase of 145,000 shares at $6.00 per share and 72,500 shares at $4.80 per share. The warrant issued to the placement agent provided for the purchase of 150,000 shares at $3.94 per share. At September 30, 1996, all of the placement agents shares and all but 16,770 of the underwriters shares had been purchased generating approximately $1,660,000 in proceeds. -6- Item 2. - -------------------------------------------------------------------------------- PLC SYSTEMS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company has two marketing strategies for selling the Heart Laser and its related components and sterile kits; placement and sales. In countries where health care is reimbursed by the government or by private insurers, the Company's strategy is to be reimbursed for the use of the Heart Laser on a per procedure basis under a contractual agreement whereby the customer commits to a minimum number of procedures on a yearly basis. These contracts typically run for a minimum of three years and allow for the customer to exceed the contractual minimums. These contracts, referred to as placement contracts, are preferred to the sale strategy as the Company believes that the potential revenue stream is greater and more profitable. Sterile handpieces and other disposables are included in the per procedure fee. Revenues from these contracts are classified as placement fees. In countries where health care is not reimbursed by the government or insurance, or where credit risk is high, the Heart Laser is sold as capital equipment and the related sterile handpieces and other disposables are sold separately for each procedure. The Company sells Heart Lasers directly and through distributors. These sales are classified as product sales. RESULTS OF OPERATIONS Total revenues for the three months ended September 30, 1996 were $2,493,000, an increase of 57% when compared to $1,591,000 for the three months ended September 30, 1995. Product sales for the three months ended September 30, 1996 were $1,802,000, an increase of 53% when compared to $1,174,000 for the three months ended September 30, 1995. Total revenues and product sales increased as the Company recognized revenue on three units in the three months ended September 30, 1996 compared to two units in the period ended September 30, 1996. Total revenues for the nine month period ended September 30, 1996 were $8,753,000, an increase of 47% when compared to $5,947,000 for the nine months ended September 30, 1995. Product sales for the nine month period ended September 30, 1996 were $6,768,000, an increase of 34% when compared to $5,052,000 for the nine months ended September 30, 1995. The major factors in both of these year to date increases are the number of Heart Lasers shipped and the method of sale. In 1996, there were 17 Heart Lasers shipped; nine of which were sales as compared with 14 shipped in 1995, seven of which were sales. Another factor in both the three and nine month increase in total revenues is the increase in placement and service fees. Placement and service fees for the three and nine months ended -7- PLC SYSTEMS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) September 30, 1996 were $691,000 and $1,985,000, respectively, an increase of 66% and 122% when compared with $417,000 and $895,000 for the same periods in fiscal 1995. These significant increases reflect the continued acceptance of the Company's preferred method of sale; the placement contract, which has more than doubled over the past twelve months. Total gross profit for the three and nine months ended September 30, 1996 approximated 64% and 69%, respectively, up from 40% and 55% for the comparable periods in fiscal 1995. These respective increases of 24 and 14 percentage points reflect the higher margins associated with the increased number of direct sales of Heart Lasers in 1996 coupled with the higher margins generated under placement contracts. Selling, general and administrative expenditures were $1,555,000 and $4,597,000 for the three and nine months ending September 30, 1996, respectively, an increase of 40% and 42% when compared to the comparable periods in fiscal 1995 of $1,114,000 and $3,241,000. More than a third of each of these respective increases of $441,000 and $1,356,000 are a reflection of the investment the Company has made in its international sales and marketing efforts in Europe and the Pacific Rim for both the three and nine month periods. The balance of the increases for the three and nine month periods are related to increased domestic staffing and related operating expenses, coupled with increased spending for consultants. Research and development expenditures for the three and nine months ended September 30, 1996 was $725,000 and $2,043,000, respectively, an increase of 58% and 19% when compared to research spending of $458,000 and $1,716,000 for the comparable periods in fiscal 1995. These respective increases of $267,000 and $327,000 reflect the increased staffing requirements associated with growing demands for clinical study compilation and increased spending for consultants related to health care reimbursement of the TMR procedure. For the three and nine months ended September 30, 1996, interest income of $123,000 and $422,000, respectively, decreased slightly when compared to $153,000 and $475,000 for the comparable periods in fiscal 1995. These decreases were related to lower interest rates throughout both the three and nine month periods in 1996 as compared to the comparable periods in 1995. With the establishment of the Company's subsidiary in Germany, currency fluctuations between the German deutschmark and the US dollar, have resulted in a $11,000 gain for the three months ended September 30, 1996 and a year to date loss of $44,000. The Company reported a net loss of $562,000 and $188,000 for the three and nine months ended September 30, 1996, respectively. In addition, the Company believes it has sufficient net operating loss carryforwards to offset taxable income, if any, for the fiscal year ended December 31, 1996. The Company recorded an income tax provision for the three months ended March 31, -8- PLC SYSTEMS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) 1996 to cover the tax liability under the alternative minimum tax regulations which can not be offset by net operating loss carryforwards. The Company believes the provision for the nine months ended September 30, 1996 is adequate, and accordingly, did not record a provision in the three months ended September 30, 1996. The net loss of $562,000 for the three months ended September 30, 1996 decreased 29% when compared to the net loss of $789,000 for the three months ended September 30, 1995. For the nine months ended September 30, 1996, the Company had a net loss of $188,000 as compared with a net loss of $1,204,000 for the nine months ended September 30, 1995. The improvements for both periods are directly related to the increase in Heart Laser sales offset by increased operating expenses as previously discussed. The Company continued to expand its international operations with the incorporation of two wholly-owned subsidiaries, PLC Medical Systems AG in Switzerland and PLC Medical Systems Asia/Pacific Pte Ltd. in Singapore. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1996, the Company had cash and cash equivalents of $4,169,000 and short-term investments of $7,472,000. During the nine months ended September 30, 1996, cash provided by operations approximated $4,600,000 from the collection of $5,900,000 of accounts receivable, principally the $5,700,000 IMATRON Japan contract offset by investment in inventory. The Company received approximately $1,660,000 in proceeds from the exercise of stock warrants coupled with $823,000 in proceeds from the exercise of stock options and $110,000 from the repayment of shareholder loans. The Company used $2,500,000 to acquire capital equipment, principally related to an investment in the placement lasers coupled with leasehold improvements related to the Company's new facility. In addition, the Company invested an additional $1,000,000 in short-term investments. On September 3, 1996, the Company moved into its new facility in Franklin, Massachusetts under a five year operating lease totaling approximately $1,482,000. The Company believes that existing cash balances are sufficient to meet working capital and capital expenditure requirements through fiscal 1997. However, unanticipated decreases in operating revenues or increases in expenses may adversely impact the Company's cash position. In the future, the Company may seek additional financing through issuance and sale of debt or equity securities, bank financing, joint ventures or other means. The availability of such financing and the reasonableness of any related terms in comparison to market conditions cannot be assured. -9- PLC SYSTEMS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) The Company believes that periodic operating losses are possible until after such time as the Company receives its PMA from the FDA for the Heart Laser. The Company submitted its PMA application in April 1995. Although the Heart Laser has been granted "expedited review" status by the Food and Drug Administration ("FDA"), given the current uncertainties of the time required by the FDA to approve a Premarket Approval ("PMA") application, the Company cannot project when, if at all, such approval would be granted. Until PMA approval, future profitability will likely be determined by the number of international shipments and the related mix of sales and placements. In addition, the Company must also successfully obtain approval from the FDA for sale of the Heart Laser in the United States, obtain regulatory approval from and market the Heart Laser in certain additional foreign markets, and convince health care professionals, third party payors and the general public of the medical and economic benefits of the Heart Laser. No assurance can be given that the Company will be successful in marketing the Heart Laser or that the Company will be able to operate profitably on a consistent quarterly basis. -10- PLC SYSTEMS INC. Part II Other Information ITEM 1. LEGAL PROCEEDINGS. In September 1996, as previously reported, CardioGenesis Corporation ("CardioGenesis") filed a civil lawsuit in the United States District Court seeking to have a certain patent of the Company's subsidiary, PLC Medical Systems, Inc. ("PLC Medical") U.S. Patent No. 5,125,926 declared invalid, or, alternatively, asking the court to determine whether CardioGenesis infringes PLC Medical's patent. In October 1996, the Company and PLC Medical filed an answer and counterclaim alleging that CardioGenesis is infringing U.S. Patent No. 5,125,926 issued to PLC Medical. The counterclaim seeks both injunctive relief and monetary damages against CardioGenesis. ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS BY THE COMPANY UPON ITS SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS. None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a.) Exhibits (I) The following exhibits are filed herewith: Exhibit No. Title ------- ----- 11 Statement re computation of per-share earnings. b.) Reports on Form 8-K. The Company filed a Current Report on Form 8-K on September 25, 1996, reporting information contained in the Company's press release -11- with respect to the notification of the Food and Drug Administration allowing the Company to halt the randomization of patients to medical management in multi-center Transmyocardial Revascularization clinical trials. The Company also reported a copy of a Complaint for declaring relief of patent invalidity and non-infringement filed September 10, 1996, CardioGenesis Corporation vs. PLC Systems Inc. -12- PLC SYSTEMS INC. Part II Other Information (Continued) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PLC SYSTEMS INC. Registrant Date: November 14, 1996 /s/ Patricia L. Murphy ------------------------- ------------------------- Patricia L. Murphy (Chief Financial Officer) -13- EXHIBIT 11 PLC SYSTEMS INC. CALCULATION OF NET LOSS PER SHARE
Three Months Ended Nine Months Ended September 30, September 30, ------------------------- ------------------ 1996 1995 1996 1995 ---- ---- ---- ---- Weighted average number of common shares outstanding .. 16,499,000 15,867,000 16,331,000 15,854,000 Common stock equivalents (1) -- -- -- -- ------------ ------------ ------------ ------------ Shares used to compute net loss per share ............. 16,499,000 15,867,000 16,331,000 15,854,000 Net loss ................... $ (562,000) $ (789,000) $ (188,000) $ (1,204,000) Net loss per share ......... $ (0.03) $ (0.05) $ (0.01) $ (0.08)
(1) The net loss per share is calculated using the weighted average number of shares outstanding during the period and does not include common stock equivalents as their inclusion would be antidilutive. EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1996 SEP-30-1996 4,169,000 7,472,000 891,000 (28,000) 3,199,000 16,944,000 5,800,000 (2,418,000) 20,696,000 2,746,000 0 0 0 54,004,000 (36,309,000) 20,696,000 1,802,000 2,493,000 909,000 2,280,000 (11,000) 0 (123,000) (562,000) 0 (562,000) 0 0 0 (562,000) (.03) (.03)
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