8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  March 9, 2006

PLC Systems Inc.

(Exact Name of Registrant as Specified in Charter)

Yukon Territory, Canada	1-11388	04-3153858
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

10 Forge Park, Franklin, Massachusetts	02038
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (508) 541-8800

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement

On March 9, 2006, PLC Systems Inc. (the “Registrant”) and Edwards Lifesciences LLC (“Edwards”) agreed to terminate that certain Distribution Agreement, dated as of February 24, 2004, by and among the Registrant, PLC Medical Systems, Inc., a wholly owned subsidiary of the Registrant (“PLC Medical”), and Edwards and that certain Contribution, Development and Manufacturing Agreement, dated as of February 24, 2004, by and among the Registrant, PLC Medical and Edwards (collectively, the “Previous Agreements”), both of which relate to the development and manufacture of the Optiwave 980 system. In connection with the termination of the Previous Agreements, the Registrant will sell to Edwards the right to develop and manufacture Optiwave 980 disposable handpieces, in return for which Edwards will pay the Registrant an amount equal to $1.5 million. In addition, Edwards has agreed to pay the Registrant up to $1.7 million in royalties based on future sales of Optiwave 980 disposable handpieces.

In addition, on March 9, 2006, the Registrant, PLC Medical and Edwards entered into a Supply Agreement that provides that the Registrant will remain the exclusive manufacturer for the current generation of Optiwave 980 laser and will have a right of first refusal with respect to the development and manufacture of the next generation of Optiwave 980 laser.

The full text of the press release issued in connection with agreements discussed above is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference

Item 1.02. Termination of a Material Definitive Agreement

The information contained above in Item 1.01 regarding the termination of the Previous Agreements is incorporated herein by reference.

Item 2.02. Results of Operations and Financial Condition

On March 15, 2006, the Registrant announced its financial results for the quarter and year ended December 31, 2005. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.2 to this Current Report on Form 8-K.

The information in this Form 8-K (including Exhibit 99.2) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits

(d)           Exhibits

See Exhibit Index attached hereto. Exhibit 99.2 relating to Item 2.02 shall be deemed to be furnished, and not filed.

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SIGNATURE

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 hereunto duly authorized.

	PLC SYSTEMS INC.
Date: March 15, 2006	By:	/s/ James G. Thomasch
		James G. Thomasch, Senior Vice President,
		Finance and Administration and Chief
		Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description
99.1	Press release issued by the Registrant on March 15, 2006 entitled “PLC Systems and Edwards Lifesciences Modify Business Agreement for the Optiwave 980 Cardiac Laser Ablation System”
99.2	Press release issued by the Registrant on March 15, 2006 entitled “PLC Systems Reports Fourth Quarter Financial Results”

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EX-99.1

Exhibit 99.1

Contact: John Jordan

Director of Investor Relations

508-541-8800, ext. 145

PLC SYSTEMS AND EDWARDS LIFESCIENCES MODIFY BUSINESS AGREEMENT FOR THE
OPTIWAVE 980 CARDIAC LASER ABLATION SYSTEM

— PLC To Receive Up To $3.2 Million Consisting of $1.5 Million For Transfering To Edwards
Manufacturing Rights for the Optiwave 980 Handpieces and
Up to $1.7 Million in Future Royalty Payments —

Franklin, MA, March 15, 2006 – PLC Systems Inc. (AMEX: PLC), a worldwide leader in cardiac laser technologies, today announced that PLC Systems and Edwards Lifesciences (NYSE:EW) have agreed to a modification of the original Optiwave 980 contract, which was announced in February 2004. As a result of the new agreement, PLC will receive $1.5 million in consideration for transferring to Edwards the Optiwave 980 disposable handpiece manufacturing and development rights and will also receive a royalty on future Optiwave 980 disposable handpiece revenue to a maximum of $1.7 million. PLC remains the exclusive manufacturer for the current generation of Optiwave 980 lasers and has the right of first refusal to develop and manufacture the next generation technology.

“Restructuring the business terms of this agreement provides benefits for both parties, as it enables each company to focus its efforts and energies on their respective core competencies,” stated Mark R. Tauscher, president and CEO of PLC Systems. “We believe the immediate financial return offered to us through the upfront $1.5 million payment, coupled with the upside potential that we have retained through the new royalty arrangement, provides us a better overall economic result. In addition, this new arrangement eliminates the need for us to ramp-up and devote substantial manufacturing and engineering resources for Optiwave 980 disposables, which allows us to focus our critical resources on our new strategic growth initiative. This was a significant consideration for us, since we believe our new strategic initiative will provide a better overall growth opportunity for PLC.”

PLC Systems is a medical technology company specializing in innovative technologies for the cardiac and vascular markets. Headquartered in Franklin, Mass., PLC pioneered the CO₂ Heart Laser System, sold and marketed by Edwards Lifesciences, that cardiac surgeons use to perform CO₂ transmyocardial revascularization (TMR) to alleviate symptoms of severe angina. Additional company information can be found at www.plcmed.com.

This press release contains “forward-looking” statements. For this purpose, any statements contained in this press release that relate to prospective events or developments are deemed to be forward-looking statements. Words such as “believes,” “anticipates,” “plans,” “expects,” “will” and similar expressions are intended to identify forward-looking statements. Our statements of our objectives are also forward looking statements. While we may elect to update forward-looking statements in the future, we specifically disclaim any obligation to do so, even if our estimates change, and you should not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release. Actual results could differ materially from those indicated by such forward-looking statements as a result of a variety of important factors, including we may not earn royalties under the modified business agreement with Edwards, our new strategic growth initiative may not result in saleable products, we may be unable to successfully develop or manufacture products under our agreements with Edwards; Edwards may decide not to pursue or continue the sales and marketing activities for these products; Edwards may be unsuccessful in selling these products,  operational changes, competitive developments may affect the market for our products, regulatory approval requirements may affect the market for our products, we may be unable to convince health care professionals and third party payers of the medical and economic benefits of the CO₂ Heart Lasers, and there can be no assurance that all payers will reimburse health care providers who perform TMR procedures or that reimbursement, if provided,

will be adequate, and additional risk factors described in our Report on Form 10-K for the year ended December 31, 2004, and our other SEC reports.

PLC Systems, PLC Medical Systems, PLC and CO₂ Heart Laser are trademarks of PLC Systems Inc.

Edwards Lifesciences, Edwards, and Optiwave 980 are trademarks of Edwards Lifesciences Corporation.

EX-99.2

Exhibit 99.2

Contact: John Jordan

Director of Investor Relations

508-541-8800, ext. 145

PLC SYSTEMS REPORTS FOURTH QUARTER FINANCIAL RESULTS

— 18 Percent Increase in Domestic TMR Disposable Kit Shipments —

Franklin, MA, March 15, 2006 – PLC Systems Inc. (AMEX: PLC), a worldwide leader in cardiac laser techonologies, today reported financial results for the three months and year ended December 31, 2005.

Total revenues for the fourth quarter of 2005 were $1,811,000 compared with $2,262,000 for the fourth quarter of 2004. The net loss for the quarter ended December 31, 2005 was $397,000, or $0.01 per share, compared to net income of $204,000, or $0.01 per share, for the quarter ended December 31, 2004. Fourth quarter 2004 results were positively impacted by the initial shipments of the Optiwave 980 cardiac lasers to Edwards Lifesciences (NYSE:EW) as well as a $56,000 reduction in accrued liabilities for past clinical trial obligations no longer deemed necessary.

Total revenues for the year ended December 31, 2005 were $7,636,000 compared to total revenues of $7,573,000 for the year ended December 31, 2004. The net loss for 2005 was $1,268,000, or $.04 per share, compared to a net loss of $833,000, or $.03 per share, for the year ended December 31, 2004. During 2005, PLC increased research and development expenditures related to its new strategic growth initiative, which contributed to an increased net loss for the Company year over year.

“We continue to see steady growth in TMR kit shipments,” stated Mark R. Tauscher, president and chief executive officer of PLC Systems. “In fact, there was an 18 percent increase in U.S. TMR kit shipments in this year’s fourth quarter when compared to last year’s fourth quarter. The fourth quarter 2005 was the third consecutive quarter of 500 or greater kits shipped by Edwards to U.S. hospitals.”

During the fourth quarter of 2005, a total of 555 disposable kits were shipped to hospitals worldwide, which is an increase of 15 percent over worldwide disposable kit shipments in the fourth quarter of 2004. Edwards Lifesciences delivered 538 of these disposable kits to United States hospitals and PLC shipped an additional 17 disposable kits to international hospitals. A total of 483 disposable kits were delivered worldwide during the fourth quarter of 2004.

During the fourth quarter of 2005, four new and four redeployed CO₂ Heart Lasers 2 (HL2) were delivered to United States hospitals through Edwards. PLC ended the fourth quarter of 2005 with 183 CO₂ Heart Lasers located at heart centers throughout the U.S., comprised of 141 HL2 customers and 42 HL1 customers.

In a separate news release PLC Systems announced today that it had reached agreement with Edwards Lifesciences to modify the original Optiwave 980 cardiac laser ablation system contract. As a result of the new agreement, PLC will receive $1.5 million in consideration for transferring to Edwards the Optiwave 980 disposable handpiece manufacturing and development rights and will also receive a royalty on future Optiwave 980 disposable handpiece revenue to a maximum of $1.7 million.

In conjunction with announcing its fourth quarter results, PLC Systems will be hosting a conference call today, March 15, at 11:00 a.m. Eastern Time. The call may be joined via telephone by dialing (866) 700-7101 at least five minutes prior to the start of the call. The passcode is: 49364083. A live Webcast of the call will be available and accessible at the investor relations section of the Company’s website at www.plcmed.com. A recording of the conference call will be available for the next month on PLC’s website.

This press release contains “forward-looking” statements. For this purpose, any statements contained in this press release that relate to prospective events or developments are deemed to be forward-looking statements. Words such as “believes,” “anticipates,” “plans,” “expects,” “will” and similar expressions are intended to identify forward-looking statements. Our statements of our objectives are also forward looking statements.

While we may elect to update forward-looking statements in the future, we specifically disclaim any obligation to do so, even if our estimates change, and you should not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release. Actual results could differ materially from those indicated by such forward-looking statements as a result of a variety of important factors, including we may not earn royalties under the modified business agreement with Edwards, our new strategic growth initiative may not result in saleable products, we may be unable to successfully develop or manufacture products under our agreements with Edwards; Edwards may decide not to pursue or continue the sales and marketing activities for these products; Edwards may be unsuccessful in selling these products,  operational changes, competitive developments may affect the market for our products, regulatory approval requirements may affect the market for our products, we may be unable to convince health care professionals and third party payers of the medical and economic benefits of the CO₂ Heart Lasers, and there can be no assurance that all payers will reimburse health care providers who perform TMR procedures or that reimbursement, if provided, will be adequate, and additional risk factors described in our Report on Form 10-K for the year ended December 31, 2004, and our other SEC reports.

PLC Systems, PLC Medical Systems, PLC and CO₂ Heart Laser are trademarks of PLC Systems Inc.

Edwards Lifesciences, Edwards, and Optiwave 980 are trademarks of Edwards Lifesciences Corporation.

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PLC SYSTEMS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Three Months Ended December 31,					Year Ended December 31,
	2005			2004		2005			2004
Revenues:
Product sales – Edwards	$	1,278		$	1,720	$	5,476		$	5,328
Product sales – other	159			156		621			654
Service fees – Edwards	327			317		1,311			1,322
Service fees – other	47			69		228			269
Total revenues	1,811			2,262		7,636			7,573
Cost of revenues:
Product sales – Edwards	485			703		2,064			1,987
Product sales – other	48			99		252			359
Service fees – Edwards	142			130		577			556
Service fees – other	58			74		173			167
Total cost of revenues	733			1,006		3,066			3,069
Gross profit	1,078			1,256		4,570			4,504
Operating expenses:
Selling, general and administrative	820			587		3,336			3,329
Research and development	720			469		2,750			2,130
Total operating expenses	1,540			1,056		6,086			5,459
Income (loss) from operations	(462		)	200		(1,516		)	(955		)
Other income, net	65			37		248			175
Income (loss) before income taxes	(397		)	237		(1,268		)	(780		)
Provision for income taxes	—			33		—			53
Net income (loss)	$	(397	)	$	204	$	(1,268	)	$	(833	)
Basic and diluted income (loss) per share	$	(0.01	)	$	0.01	$	(0.04	)	$	(0.03	)
Average shares outstanding:
Basic	30,079			30,062		30,074			30,025
Diluted	30,079			30,802		30,074			30,025

CONDENSED BALANCE SHEET

	December 31, 2005		December 31, 2004
Cash and short-term investments	$	9,460	$	9,678
Total current assets	12,008		12,787
Total assets	12,467		13,327
Total current liabilities	3,044		2,129
Shareholders’ equity	5,543		6,829

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