Business and Liquidity

6 Months Ended

Jun. 30, 2011

Business and Liquidity

Business and Liquidity

1.             Business and Liquidity

PLC Systems Inc. (“PLC” or the “Company”) is a medical device company specializing in innovative technologies for the cardiac and vascular markets.  Over the past three years, the Company has begun commercialization outside the United States of its newest product, RenalGuard®, which represents the Company’s key strategic growth initiative and primary business focus.  The RenalGuard System consists of a proprietary console and accompanying single-use sets and is designed to reduce the potentially toxic effects that contrast media can have on the kidneys when it is administered to at-risk patients during certain medical imaging procedures. The Company conducts business operations as one operating segment.

Prior to February 1, 2011, including during all of 2010, in addition to advancing its RenalGuard program, the Company also was engaged in the manufacture and marketing of the CO2 Heart Laser System that cardiac surgeons use to perform carbon dioxide (CO2) transmyocardial revascularization, or TMR, to alleviate symptoms of severe angina. On February 1, 2011, the Company sold the assets of its TMR business to Novadaq Corp. (“Novadaq”), a subsidiary of Novadaq Technologies Inc. Novadaq acted as the Company’s exclusive distributor in the United States for the TMR business since being appointed to that role in March 2007.

The asset sale transaction, which was announced in November 2010, was approved by the Company’s shareholders at a special meeting on January 31, 2011 and the transaction closed on February 1, 2011. Novadaq paid $1 million in cash and assumed all TMR service-related obligations, valued at approximately $614,000, in exchange for acquiring substantially all TMR-related assets, including all regulatory approvals for the CO2 Heart Laser System, all manufacturing rights, substantially all product inventories and all equipment, intellectual property, clinical data and documentation related to the TMR business. The TMR business has been accounted for and reflected in the accompanying unaudited condensed consolidated financial statements as discontinued operations for all periods presented (see Note 10).

For the six months ended June 30, 2011, the Company incurred a loss from continuing operations of approximately $5,560,000 and negative cash flows from continuing operations of $2,122,000.  At June 30, 2011, the Company had an accumulated deficit of $97,000,000.  As discussed above, in the first quarter of 2011, the Company sold the assets related to its TMR business to Novadaq for $1,000,000 plus the relief of approximately $614,000 in service contract obligations. In addition, in February 2011, the Company issued $4,000,000 in secured convertible debt (see Note 11).  Management projects that its existing resources will be sufficient to fund operations through at least December 31, 2011.