UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended - September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission file number 0-24897
SurgiLight, Inc.
(Name of Small Business Issuer in its charter)
Delaware 35-1990562
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
7055 University Blvd, Winter Park, Florida 32792
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 657-6500
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, $.001 par value per share
(Title or 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
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 [ ]
As of September 30, 1999, the Registrant has outstanding 11,400,000 shares
of Common Stock.
<PAGE>
SurgiLight, Inc.
Form 10-QSB
Quarterly Report
September 30, 1999
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
<CAPTION>
(1) Financial Statements Page
<S> <C>
Balance Sheets for the three months ended September 30,
1998 and 1999, and nine months ended September 30, 1999
and 1998 (unaudited) F-1
Statements of Operations for the three months ended
September 30, 1999 and 1998, and nine months ended
September 30, 1999 and 1998 (unaudited) F-2
Statements of Cash Flows for the three months
ended September 30,1999 and 1998, and nine months ended
September 30, 1999 and 1998 (unaudited) F-3
Statements of Changes in Stockholder's
Equity for the three months ended September 30, 1999 and
1998 and for the nine months ended
September 30, 1999 and 1998 (unaudited) F-4
Notes to Unaudited Financial Statements F-5
</TABLE>
<PAGE>
SURGILIGHT, INC.
FINANCIAL STATEMENTS
(Unaudited)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
<PAGE>
Rachel L. Siu
Certified Public Accountant
5100 Old Howell Branch Road
Winter Park, FL 32792
SurgiLight, Inc.
7055 University Blvd.
Winter Park, FL 32792
We have compiled the accompanying Balance Sheets of SurgiLight, Inc. as of
September 30, 1999 and 1998 and related Statements of Operations for the
three months and nine months ended September 30, 1999 and September 30,
1998, in accordance with statements on standards for accounting and review
services issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited
or reviewed the accompanying financial statements and, accordingly, do not
express and opinion or any other form of assurance on them.
Management has elected to omit substantially all the disclosures ordinarily
included in the financial statements. If the omitted disclosures were
included in the financial statements, they might influence the user's
conclusions about the company's financial position, results of operations,
and cash flows. Accordingly, these financial statements are not designed
for those who are not informed about such matters.
Rachel L. Siu
Winter Park, Florida
November 5, 1999
<PAGE>
SURGILIGHT, INC.
BALANCE SHEETS
(Unaudited)
IN THOUSANDS
<TABLE>
<CAPTION>
9/30/99 9/30/98
------- -------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 280 $ 148
Accounts Receivables, Net 598 140
Inventory 944 1,387
------- -------
Total Current Assets 1,822 1,675
Property & Equipment, Net 1,083 500
Intangibles, Net 137 153
Other Assets 129 3
------- -------
Total Assets $ 3,171 $ 2,331
======= =======
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 92 61
Accrued Expenses 20 53
Other Current Liabilities 277 90
------- -------
Total Current Liabilities 389 204
Long-term Liabilities 78 103
------- -------
Total Liabilities 467 307
Stockholders' Equity
Common Stock 4,258 4,243
Paid In Capital 572 -
Accumulated Deficit (2,126) (2,219)
------- -------
Total Stockholders' Equity 2,704 2,024
------- -------
Total Liabilities &
Stockholders' Equity $ 3,171 $ 2,331
======= =======
</TABLE>
<PAGE>
SURGILIGHT, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
IN THOUSANDS (EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
9/30/99 9/30/98 9/30/99 9/30/98
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Net Revenue $ 891 $ 204 $ 2,326 $ 724
Cost of Revenue 312 15 861 120
-------- ------- -------- -------
Gross Profit 579 189 1,465 604
Total Operating
Expenses 484 237 1,257 704
------- ------ ------- -------
Operating Income(Loss) 95 (48) 208 (100)
Other Income (Expenses)
Interest Expense (3) - (10) -
Interest Income 3 1 9 3
----- ------- ------- ------
Net Income (Loss) $ 95 $ (47) $ 207 $ (97)
====== ======= ======= ======
Net Income (Loss) $0.01 $ (0.47) $0.02 $(0.97)
Per share ======= ======= ======= ======
Weighted Average 11,436 100 10,057 100
Share outstanding ======= ======= ======= ======
</TABLE>
<PAGE>
SURGILIGHT, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
IN THOUSANDS
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
9/30/99 9/30/98 9/30/99 9/30/98
------- ------- ------- -------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 95 $ (47) $ 207 $ (97)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation 52 33 157 96
Amortization 3 3 12 10
Increase (Decrease) in:
Receivables (343) (115) (442) (140)
Inventory (19) (49) (169) (192)
Accounts Payable (45) 61 (50) (15)
Prepaid Expenses - - 2 -
------ ----- ------ ------
Net cash provided (used) by
operating activities (145) (114) (215) (338)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of equipment (14) (82) (157) (82)
------ ----- ----- ------
Net cash provided (used) by
investing activities (14) (82) (157) (82)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowing - - 79 -
Repayment of long-term borrowing (12) - - -
Capital Contributions 16 167 547 1,345
Proceeds of Short-Term Borrowing - 90 - 90
Repayment of Short-Term Borrowing (100) - 157 (948)
------ ------ ----- ------
Net cash provided (used) by
financing activities 96 257 469 487
------ ------ ----- ------
NET INCREASE (DECREASE) IN CASH (255) (61) 97 67
CASH, beginning of period 534 87 191 81
------ ------ ------ ------
CASH, end of period $ 279 $ 148 $ 279 $ 148
====== ====== ====== ======
</TABLE>
<PAGE>
SURGILIGHT, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
IN THOUSANDS
<TABLE>
<CAPTION>
9/30/99 9/30/98
---------- ----------
<S> <C> <C>
Capital Stock $ 4,258 $ 4,243
Additional
Paid In Capital 572 -
Deficit (2,126) (2,219)
---------- ----------
Total $ 2,704 $ 2,025
========== ==========
</TABLE>
<PAGE>
NOTES FOR THIRD QUARTER FINANCIAL STATEMENTS
1. The weighted average number of diluted shares is 11,435,869 shares for
the third quarter 1999, compared with 10,129,330 shares for the second
quarter 1999. The increase of the weighted average shares is attributed
to the acquisitions of the laser technology, laser centers and the thermal
imaging technology. Details of the terms of acquisitions were reported in
the Schedule 14f-1. As of September 30, 1999 the Company has a total
outstanding of 11,400,000 shares of common stock which is 100,000 shares
less than that of the end of June 30, 1999 due to the cancellation of
100,000 shares issued to a joint venture Agreement with Laser Analytic
(referred to first quarter report for greater detail). The Company had
decided to close this Agreement and will consider an OEM facility for
system assembling which will be more cost effective and less risk than
the joint venture arrangement. The Company, however, will continue to
explore partner which has GMP facility for medical system manufacturing.
F-5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITIONS.
In our Management's Discussion and Analysis of Financial Condition
and Results of Operations we review our past performance and, where
appropriate, state our expectations about future activity in forward-looking
statements. Our future results may differ from our expectations.
OVERVIEW
The Company currently has four divisions: (1) the Laser Technology,
(2) the Laser Eye Centers, (3) the Cosmetic Mobile Laser Centers and (4) the
Thermal Infrared Technology. In the Laser Technology division, we develop and
conduct research for lasers in the ultraviolet (UV) and infrared (IR) spectra
for applications including vision correction and microsurgery. We also conduct
clinical trials outside the U.S. for various new applications. The Company
currently operates 18 Laser Eye Centers (LEC) internationally and one Laser
Eye Center and two Cosmetic Mobile Laser Center (CMLC) in Florida. For the
thermal infrared technology, we develop and market thermal infrared systems
used in search, security and law enforcement. These technologies may also apply
for medical uses in thermal imaging of tissues and patient body.
The Company's strategy is to focus on the recurring revenue and income
from the laser centers operation. The Company, however, will continue to
develop new products for new markets mainly outside the U.S. These new
products shall include diode lasers for microsurgery, UV laser for skin
treatments, infrared lasers for vision correction and the Company's patent
pending new technology for presbyopia correction. There are several public
companies currently operating Laser Centers for vision corrections which are
much bigger than the Company, including TLC Laser Center, Laser Vision Center
Inc. (LCVI), LCA Vision Center, Nova Eyecare, and Omega Healthcare. The
Company has no connection or affiliation with any of the competitors mentioned
above.
The Company believes that it is the only company operating Laser Centers
for both vision corrections and cosmetic/dermatology applications and has the
in-house technologies to support and/or up-grade the systems used in its
Centers. The Company's start-up system cost for its international Laser
Centers, in which systems were made by the Company, is only 30% of that of its
competitors which purchase systems from others. However, there can be no
assurance that the Company will be successful in operating these Laser Centers
without suffering future competitions from those that may also operate Centers
in both areas and also own the in-house technologies.
The presbyopia worldwide potential procedure income is estimated to be
over $1,800 billions, since almost 100% of the worldwide population for ages
older than 45 will become presbyopia. This estimation is based upon the
worldwide population of 900 million (15%) who are presbyopia and an average
procedure fee of $2,000 per patient. The US presbyopia population is
approximately 40 million which also representing a potential procedure income
of about $160 million based upon a fee of $2,000 per eye. The current
treatments for presbyopia including implants and diamond-knife incision which
have drawbacks of being a complex surgical procedure and require a lot of the
surgeon's experience. Another method is to use a Ho:YAG laser for monovision
correction, a clinical trial system made by Sunrise Technology. This method
however can only treat one eye for near view and requires the second eye
un-treated to see far. Strictly speaking the Ho:YAG method is not a prebybyopia
correction but only correct hyperopia in one eye.
The Company's new method of LASA (Laser Sclera Ablation) using laser
for presbyopia reversal has advantages of a being precise, fast and simple
procedure which does not require surgeon's experience. The LASA procedure will
be less complications and more stable , less regression than the mechanical,
non-laser methods. The Company is currently conducting clinical trials in
Venezuela and the results was presented at the 1999 Fall World Refractive
Surgery Symposium (Orlando, Oct. 24-26, 1999). The Company believes that it is
the first and the only company offering LASA which is now limited to the
international market prior to the US approval. The Company currently has three
pending patents relating to the LASA and new IR-laser technologies. However,
there can be no assurance that the Company will be successful in protecting its
proprietary technologies or in completing its market approval in the U.S. on
schedule. (See ITEM 5 of Part II in this filing for greater details).
The Company believes that it is the only company currently owning both
the ultraviolet (UV) and infrared (IR) laser technologies for vision
corrections. For vision corrections using UV lasers, there are several existing
patents which may prohibit our sales of the UV lasers without obtaining a
license. The Company has three pending patents for the use of IR lasers which
has the potential of replacing the existing UV lasers currently used by most
of its competitors including Visx, Summit, Bausch & Lomb, LaserSight, Nidek,
Schwind and Meditec. The IR lasers, the Company believes, will be have less
mutagenic effects and safer than the UV lasers which may have potential risk of
long-term biological complications. However, prior to the market approval in US
the Company's new products will be limited to international sales. The Company
believes that its Infrared (IR) lasers for vision corrections will be protected
by its proprietary technology and its pending patents. In addition, the users
of the Company's IR lasers will not have to pay the license fee or royalty
fee which are required for the use of UV lasers. Currently, the UV laser
royalty fee in the U.S. is about $250 per case paid to the patent owners Visx
and Summit. The UV laser manufacturers also need to pay the IBM-patent fee
of about 3%-7% of their sale price. Without paying these fees, the Company
believes that its IR lasers will have advantages in both profit margin and the
market competitions. However, there can be no assurance that the Company will
be successful in protecting its proprietary and pending patents to avoid these
license and or royalty fees. (See ITEM 5 of Part II in this filing for greater
details).
The medical laser industry is new and needs the approval from FDA
prior to marketing in the U.S. Our competitors are significantly larger in
their financial condition and several of them have now received FDA approval
in vision correction using excimer lasers. We will also face increased
competition from manufacturers of vision correction lasers and from companies
operating laser centers in the U.S. and internationally. The Company's medical
lasers will need either 510(K) approval, which takes only 6-12 months, or PMA
and IDE approvals which may take a few years to complete prior to the market
approval in the U.S. Prior to these market approvals, the Company's medical
products will be limited to international sales and these products need to be
manufactured at our Panama facility. The Company believes that its UV-laser
for dermatology uses and the waterjet system (made by VisiJet and marketed by
the Company in certain countries) will only need 510(K) approval. The other
new products of the Company will require PMA approval. However there can be
no assurance that the Company will be successful in obtaining these market
approvals as scheduled. The Company has recently submitted a 510(K)
application for its UV-308 laser for the treatment of skin diseases including
psoriasis and vitiligo.
To increase the Center revenue, the Company has developed promotion
marketing programs for our existing centers and plans to increase the number
of centers by either establishing new centers or acquiring existing centers.
These marketing programs include: direct mailing to high incomes, bonuses
offered to employees of big firms, and advertisements in media. The Company's
Plantation Eye Center currently has over 20 surgeons using the excimer laser
facility. These existing surgeons however may leave the Company if they decide
to operate their own Center or join other Centers offering a better term than
the Company. All of these factors may influence our systems sales and income
from laser centers. Accordingly, our past results may not be useful in
predicting our future results.
RESULTS OF OPERATIONS
Revenues for the nine month ended September 30, 1999 increased 221% to
$2.3 million from $734,000 for the same period of 1998. The Company reported
a nine month net income of $207,000 or $0.02 per share, compared to a net loss
of $97,000 or $0.97 per share for the same period of 1998. The growth of
revenues and net incomes are attributed to the Company's growth in system
sales and procedure income from the Laser Centers.
For the third quarter 1999, the Company reported an operation income of
$150,000, excluding the facility depreciation of $55,000. The net income (after
the facility depreciation) of the third quarter 1999 is $95,000 compared to a
net loss of $47,000 for the same period of 1998.
Revenues for the three- and nine-month periods ended September 30, 1999
were $891,000 and $2,326,000, respectively, compared to $204,000 and $724,000,
for the same periods in 1998. The total revenue for the third quarter is
attributed to the Company's four Divisions. Laser Technology (for sales of
laser systems and infrared thermal imagers), two Cosmetic Mobile Centers in
Florida, and the Laser Eye Centers in US and international. For the third
quarter, the Laser Eye Centers have a gross revenue of $561,000, or 63% of the
total quarterly revenue. Laser Technology and Infrared Thermal Imaging Division
have a gross revenue of $261,000, or 29%and Cosmetic Centers have a gross
revenue of $73,000, or 8% of the total quarterly revenue. International sales
of eye laser systems were responsible for the 14% increase over the second
quarter 1999 system sales. During the third quarter, the Company has added 3
more new Laser Eye Centers internationally.
Operating expenses for the three- and nine-month periods ended September
30, 1999 were $484,000 and $1,257,000 respectively. Prior year comparative
periods showed operating expense levels of $237,000 and $704,000 respectively.
The increase in operating expenses is proportional to the total revenue and
increased sales effort.
The inventory for the third quarter remains about the same as that of
the third quarter. Account receivable increase from $232,000 in second quarter
to $598,000 in the third quarter because of the financing program offered to
one User in Korea and the deposits from two Eye Centers in China, where
payments are due system installation. The current assets on September 30, 1999
increases about $100,000 compared to the second quarter end because of the net
income.
R&D costs and clinical trials costs will continue to increase in future
to support our focus on the Company's new infrared lasers and the related
ongoing clinical trials in Venezuela and Mt. Sinai Hospital in New York City.
The Company's strategy is to focus on the recurring revenue and income from the
laser centers operation. The Company, however, will continue to develop new
products for new markets mainly outside the U.S. These new products shall
include diode lasers for microsurgery, infrared laser for vision correction
and the Company's patent pending new technology for presbyopia correction.
The Company's clinical trials shall include two infrared laser systems for
microsurgery and presbyopia and one UV laser for skin treatment, where clinical
trials will be conducted both in the US and internationally. The Company has
on-going clinical trials at Caracas, Venezuela for laser presbyopia reversal
and at Mt. Sinai Hospital, New York, for UV-laser skin treatments. The Company
plans to start more clinical sites in US and internationally within the next
few months. (See also Part II, ITEM 5, for greater details). The revenue from
system sales is not expected to grow as fast as revenue from the centers until
new products are developed or approved for marketing.
The Company expects to keep the fast growth rate in revenue and profit
in future quarters based on the expected new centers and sales of new products.
However there can be no assurance that the Company will be successful in
maintaining its current growth rate.
LIQUIDITY AND CAPITAL RESOURCES
The net cash increased from $532,000 on June 30 to $280,000 on September
30 mainly due to the increase of account receivable of $598,000 in this quarter.
The Company anticipates that its current cash, cash equivalents, as well as
anticipated cash flows from operations and additional capital contribution from
private placements, will be sufficient to meet its working capital and capital
equipment needs at least through the next twelve months. The Company expects to
raise additional funds via private placements during the fourth quarter 1999.
<PAGE>
Part II. OTHER INFORMATION (Clinical Trials and New Products Up-date)
1. The Company is currently conducting clinical trials at Caracas,
Venezuela for the treatment of presbyopia patients using the Company's patent
pending technology. Laser presbyopia correction has a worldwide potential
procedure revenue of about $1,800 billion. This estimation is based upon the
worldwide population of 900 million (15%) who are presbyopia and an average
procedure fee of $2,000 per patient. The US presbyopia population is
approximately 40 million which also representing a potential procedure income
of about $160 million based upon a fee of $2,000 per eye. The Company believes
that it is the first Company to have successfully developed the technology and
the only Company that began clinical trial treatment using laser for
presbyopia. The clinical results performed by Drs. Perrasa and Martinez at the
Company's Microsurgical Laser Center at Caracas, Venezuela, were reported at
the 1999 Fall World Refractive Surgery Symposium (October 21-23, Orlando, FL).
More than 15 cases of 9 presbyopia patients age between 44 to 65 were reported
for follow-up of 1 to 4 months. Improvement of diopter +1.5 to +3.0 were
achieved after the LASA using the Company's Scanning Laser integrated with a
new device. The Company plans to open several more Laser Centers in Latin
America countries for the LASA procedure using its patent pending device.
2. The Company has another on-going clinical trial at Mt. Sinai
Hospital, New York, using a UV-laser for the treatment of Psoriasis and
vitiligo (one kind of skin cancer) which affect a worldwide population of
about 2% or 100 million, according to the report by Dr. Spencer at Mt.
Sinai Hospital, NY. Clinical results will be reported by Dr. Spencer in
the 2000 Conference of Dermatology.
3. The Company has recently developed and reported a new method of
topography linked computer simulation using the "mesh-point method" (MPM) at
the Summer and Fall World Refractive Surgery .The Company believes that its
MPM technology is the first and the only true topolink software and will
offer customized corneal reshaping using a scanning laser. The Company's
competitors, such as LaserSight, Visx, Summit and Bausch & Lomb, are
currently using the "average-methods" which the Company believes, are not
accurate and can only apply to a limited small market, whereas our MPM will
apply to most cases for a much bigger market without limitations. However
there can be no assurance that the Company will be successful in completing
its final development for clinical trials.
The Company will continue its R&D for several new products including
the UV-laser for skin treatment (market approval is expected in 2000, if a
510K approval can be completed) and the new infrared lasers for microsurgery
and vision correction, the models IR-3000 , IR-3001 and IR-2000 which will
take several years for the U.S. market approval. International marketing for
these new products, however, will start during the early part of year 2000,
in addition to our existing UV lasers market. However there can be no
assurance that the Company will be successful in completing the clinical
trials and obtaining necessary approvals as scheduled.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter
ended September 30, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SurgiLight, Inc.
Date: Nov. 8, 1999
By: /s/ J. T. Lin
----------------------------------
President, Chief Executive Officer
and Director
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheet at September 30, 1999 (unaudited) and the Statement of
Operations for the nine months ended September 30, 1999 (unaudited) and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 280,000
<SECURITIES> 0
<RECEIVABLES> 598,000
<ALLOWANCES> 0
<INVENTORY> 944,000
<CURRENT-ASSETS> 1,822,000
<PP&E> 1,083,000
<DEPRECIATION> 55,000
<TOTAL-ASSETS> 3,171,000
<CURRENT-LIABILITIES> 467,000
<BONDS> 0
0
0
<COMMON> 11,400,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,171,000
<SALES> 2,326,000
<TOTAL-REVENUES> 2,326,000
<CGS> 861,000
<TOTAL-COSTS> 1,257,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,000)
<INCOME-PRETAX> 207,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 207,000
<EPS-BASIC> 0,02
<EPS-DILUTED> 0.02
</TABLE>
