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 - June 30, 2000
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)
12001 Science Drive, Suite 140, Orlando, Florida 32826
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 482-4555
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 June 30, 2000, the Registrant has outstanding 21,490,000 shares
of Common Stock.
<PAGE>
SurgiLight, Inc.
Except for the historical information contained herein, the discussion in
this Report contains forward-looking statements (within the meaning of
Section 21E of the Exchange Act) that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, but are
not limited to, those discussed in the sections entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Risk Factors and Uncertainties" in this report. SurgiLight undertakes no
obligation to update any such factors or to publicly announce the results of
any revisions to any of the forward-looking statements contained herein to
reflect any future events or developments.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
(1) Financial Statements Page
[S] [C]
Consolidated Balance Sheets at June 30, 2000
(un-audited) and June 30, 1999 F-1
Consolidated Statements of Operations for the three
months ended June 30, 2000, and 1999 and
six months June 30, 2000 and 1999 F-2
Consolidated Statements of Cash Flows for the three
months ended June 30, 2000, and 1999 and
six months June 30, 2000 and 1999 F-3
Consolidated Statements of Changes in Stockholder's
Equity for the months ending June 30, 2000 and
June 30, 1999 F-4
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Item 2. Changes in Securities
ITEM 3. Defaults Upon Senior Securities
ITEM 4. Submission of Matters to a Vote of Security Holders
ITEM 5. Other Information
ITEM 6. Exhibits and Reports on Form 8-K
<PAGE>
ITEM 1 - FINANCIAL STATEMENTS
SURGILIGHT, INC.
BALANCE SHEETS
(Unaudited)
IN THOUSANDS
<TABLE>
<CAPTION>
June, 30 June, 30
2000 1999
-------- --------
ASSETS
Current Assets
Cash $ 1,203 $ 532
Accounts Receivables, Net 700 232
Investments 150 -
Inventory 1,193 948
Other Current Assets 175 -
------- -------
Total Current Assets 3,421 1,712
Property & Equipment, Net 1,052 1,105
Intangibles, Net 127 144
Other Assets 127 203
------- -------
Total Assets $ 4,727 $ 3,164
======= =======
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 296 106
Accrued Expenses 20 20
Other Current Liabilities 105 375
------- -------
Total Current Liabilities 421 501
Long-term Liabilities 66 91
------- -------
Total Liabilities 487 592
Stockholders' Equity
Common Stock 22 9
Paid In Capital 6,334 4,857
Accumulated Deficit (2,116) (2,294)
------- -------
Total Stockholders' Equity 4,240 2,572
------- -------
Total Liabilities &
Stockholders' Equity $ 4,727 $ 3,164
======= =======
F-1
<PAGE>
SURGILIGHT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June, 30 June, 30 June, 30 June, 30
2000 1999 2000 1999
-------- ------- -------- -------
Net Sales $ 1,009 $ 868 $ 1,776 $1,434
Cost of Goods Sold 432 359 772 548
-------- ------- -------- -------
Gross Profit 577 509 1,004 886
General and Administrative
Expenses 551 398 976 774
------- ------ -------- -------
Operating Income (Loss) 26 111 28 112
Other Income (Expenses)
Interest Expense - (5) (32) (6)
Interest Income 13 2 16 6
------- ------- -------- -------
Net Income (Loss) $ 39 $ 108 $ 12 $ 112
======= ======= ======== =======
F-2
<PAGE>
SURGILIGHT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Six Months
Ended Ended
June, 30 June, 30
2000 1999 2000 1999
----- ----- ----- -----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 39 $ 108 $ 12 $ 112
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation 42 52 84 105
Amortization 3 3 7 7
Increase (Decrease) in:
Receivables 31 (26) (209) (65)
Inventory 12 (78) 6 (171)
Loans Receivable (150) 3 (155) 15
Accounts Payable 89 (44) 3 17
------ ----- ------ -----
Net cash provided (used) by
operating activities 66 18 (252) 20
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of equipment (89) - (92) -
Sale of Marketable Securities 600 - - -
Purchase of Investment - - (150) -
----- ----- ----- -----
Net cash provided (used) by
investing activities 511 - (242) -
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long term borrowing - (14) (103) (13)
Capital Contributions (15) 151 1,247 430
Repayment of Loans From Shareholders - (57) (26) (57)
----- ------ ----- ------
Net cash provided (used) by
financing activities (15) 80 1,118 360
----- ------ ------ ------
NET INCREASE (DECREASE) IN CASH 562 98 624 380
CASH, beginning of period 641 434 579 152
----- ------ ------ ------
CASH, end of period $ 1,203 $ 532 $1,203 $ 532
===== ====== ====== ======
F-3
<PAGE>
SURGILIGHT, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<CAPTION>
June, 30 June, 30
2000 1999
--------- ---------
Capital Stock $ 22 $ 10
Additional
Paid In Capital 6,334 4,856
Deficit (2,116) (2,294)
---------- ---------
Total $ 4,240 $ 2,572
========== =========
F-4
<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 two divisions: (1) the Laser Technology and (2) the
Laser Eye Centers. The Company also obtain income from its spun-off two
divisions: the Cosmetic Mobile Laser Centers and 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 20 Laser Eye Centers (LEC) internationally and one Laser
Eye Center in Florida.
The Company's strategy is to focus on the recurring revenue and income from
The royalty fee of new technology and from 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. The Company believes that it is the only company 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 and also own the in-house technologies.
The presbyopia worldwide potential procedure income is estimated to be
over $1,500 billion, 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 FDA approved 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 presbyopia correction but only correct hyperopia in one eye.
<PAGE>
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 Argentina. The results was presented at the Summer
World Refractive Surgery Symposium (Miami, Fl July 21-23). 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 $100 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.
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 outside US. 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.
<PAGE>
However there can be no assurance that the Company will be successful in
obtaining these market approvals as scheduled. The Company has submitted a
510(K) application for its UV-308 laser for the treatment of psoriasis and
expects to obtain the approval shortly.
The Company's Plantation Eye Center currently has over 30 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.
For the IR-3000 model designed for presbyopia correction, the Company
expects to start the clinical trials in Japan within a few weeks and in
Europe and US in a few months.
RESULTS OF OPERATIONS
Revenues for the six month ended June 30, 2000 increased 23.8% to $1.78
million from $1.43 million for the same period of 1999. The Company reported
a six month net income of $12,000 or $0.002 per share, compared to a net
income of $112,000 or $0.01 per share for the same period of 1999. The
growth of revenues are attributed to the Company's growth in system sales
and procedure income from the Laser Centers.
For the second quarter of 2000, the Company reported an operation income of
$84,000, excluding the facility depreciation of $45,000. The net income
(after the facility depreciation) of the second quarter 2000 is $39,000
compared to a net loss of $27,000 of the first quarter 2000. Revenue for
the second quarter 2000 increased 32.6% to $1,009,000 from $761,000 for the
first quarter of 2000, attributed to the growth of Eye Centers and system
sales.
Revenues for the three- and six-month periods ended June 30, 2000 were
$761,000 and $1,776,000, respectively, compared to $566,000 and $1,434,000,
for the same periods in 1999. The total revenue for the second quarter is
attributed to the Company's two divisions: the Laser Eye Centers and the
Technology. In addition, the Company also gained income from the Cosmetic
Laser Centers. In this quarter, the Company had added 2 new international
Eye Laser Centers and one Cosmetic Mobile Laser Center in Venezuela. The
Company currently has a total of 23 Laser Eye Centers and Cosmetic Centers.
Operating expenses for the three- and six-month periods ended June 30, 2000
were $551,000 and $976,000 respectively. Prior year comparative periods
showed operating expense levels of $398,000 and $774,000 respectively. The
increase in operating expenses is proportional to the total revenue and
increased R&D and clinical trial efforts. The six month R&D and clinical
trials costs increased from $90,000 in 1999 to $134,000 in 2000. These costs
will continue to increase in the future quarters to support our focus on the
Company's new infrared lasers and the related on-going clinical trials in
Latin America, Japan, Europe and US.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The total current assets of the Company increased to $3,421,000 as of June
30, 2000, compared with $1,712,000 of the end of June, 1999. This increase
in current assets is mainly attributed to the additional paid in capital of
$1,232,000 from an accredited investor. The Company recently has obtained a
commitment of additional funds of $3.0 million from an investment group
Global Emerging Markets, Inc. (GEM), a United Kingdom-based firm. The
Company will use this addition funding to continue its on-going new products
development, clinical trials and to expand its international Laser Eye
Centers. In particular, these additional funds will accelerate the worldwide
market of our to-be-approved new products.
The inventory for the second quarter increased from $573,000 of the first
quarter to $1,193,000 because of the need to meet the growth of system sales
in the next few quarters and the IR-3000 systems invested for clinical
trials.
Account receivable increase from $601,000 in the first quarter to $700,000
in the second quarter because of the financing program offered to the
Cosmetic Laser Center in Venezuela.
The net cash increased from $1,334,000 on March 31, 1999 to $1,353,000 on
June 30, 2000 mainly from the net operational profits.
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 12-18 months.
As of June 30, 2000 the Company has a total outstanding common shares of
21,490,000 including the reserved shares for employees stock options and
consultants. The Company plans to file an SB2 application to register
additional common shares related to the $3 million investment from the GEM
group.
<PAGE>
OTHER INFORMATION (Clinical Trials and New Products Up-date)
1. The Company is currently conducting clinical trials at Caracas,
Venezuela and Argentina for the treatment of presbyopia patients using the
Company's patent pending technology. The clinical results (for 35 cases)
performed by Drs. Perrasa and Martinez at the Company's Micro-surgical Laser
Center at Caracas, Venezuela, were reported at the Summer World Refractive
Surgery Symposium (July 21-23, Miami, FL), with follow-up longer than 13
months 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 completed the clinical trial at Mt. Sinai Hospital,
New York, using a UV-laser for the treatment of Psoriasis and vitiligo 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 were
submitted for the application of a 510K marketing approval.
3. The Company will continue its R&D for several new products including
the new infrared lasers for microsurgery and vision correction. The models
IR-3000 and IR-5000 will take several years for the U.S. market approval.
International marketing for these new products, however, will start during
The third quarter of year 2000, in addition to our existing UV lasers
market. The Company had signed an Agreement with MicraUS for a joint venture
in UK to obtain the CE-mark approval, manufacture and market its products in
Europe. However there can be no assurance that the Company will be
successful in completing the clinical trials and obtaining necessary
approvals as scheduled.
4. The Company announced the replacement of its Chief Financial Officer.
Ms. Rachel Siu, CPA has accepted the position of part-time, interim Chief
Financial Officer. Ms. Siu became a Certified Public Accountant (CPA) in
1983 and received her M.B.A. from the University of Central Florida in 1985
and has been in private practice since 1985.
5. The Company announced it has appointed Richard Ajayi, Ph.D., to its
Board of Directors. Dr. Ajayi is currently an Associate Professor of
Finance at the University of Central Florida, Orlando, Florida. He received
his Ph.D. in Business Administration majoring in Finance and International
Business, and an M.B.A. in Actuarial Science and Insurance from Temple
University, Philadelphia, Pennsylvania and his B.Sc. (Honors) in Mathematics
from University of Ife, Nigeria. Dr. Ajayi has accepted the position and
will serve as Chairperson of the Corporate Audit committee and oversee
various other Corporate sub-committees.
6. The Company also decided to unwind, and not to move forward with the
acquisition of IR-Vision. The Company was at one time interested in
acquiring IR-Vision, another laser based company in the field of
Ophthalmology. Due to the inability to reach a fair and equitable deal, the
Company decided it was in their best interest to unwind the deal and not
move forward with this acquisition. The Company believes that it would be
more economical to develop an OPO laser based system in-house. If the
Company decides to market this type of system, it would negotiate a license
from a third party to use the system in Ophthalmology.
<PAGE>
7. The Company recently concluded a Joint Venture Agreement to assemble the
MicraLight Escan 2020 (formerly the SurgiLight Scan-195 scanning excimer
laser) in the United Kingdom. The Company believes that this Agreement
should enhance its sales in countries that require the CE mark outside the
Untied States and create opportunities that were not available prior to this
Agreement.
8. The Company announced that the Board of Directors has authorized the
repurchase of up to 100,000 shares of the Company's common stock on the open
market. The timing and amounts of any stock repurchase will depend on many
factors, including the market price of the common stock and overall market
conditions. The repurchase program is expected to continue through the end
of 2000, unless extended by the Board of Directors. At current price
levels, the Company believes the stock is undervalued. The repurchase of
the common stock is in the best interests of our stockholders, and will
provide significant value over the long term. We remain confident in the
underlying strengths of our IR-laser technology for presbyopia and its huge
market potential.
9. The Company announced that it had confirmed a $3 million investment by
the United Kingdom-based firm, Global Emerging Markets, Inc. GEM is an
investment group specializing in private equity investments, has entered
into a commitment with the Company to fund additional capital of $3 million.
GEM sources its investments from its three operating offices based in New
York, London and Beijing and specializes in opportunities offered by
selected emerging technologies and economies on a global basis. GEM's
activities are based on a thorough knowledge and understanding of market
conditions on both the macro and micro level. Since March, 2000 the Company
has raised a total of $4.2 million, which includes $1.2 million from an
accredited investor and the $3 Million from GEM. The Company believes that
these additional funds shall provide sufficient working capital for the next
18-24 months.
10. The Company appointed new members to its Stock Option and Audit
Committees. The Stock Option Committee will be Chaired by Lee Chow, Ph.D.,
and will consist of J. T. Lin, Ph.D., and Timothy J. Shea, and Richard
Ajayi, Ph.D., (Dr. Ajayi will consult on an as needed basis). The Audit
Committee will be Chaired by Richard Ajayi, Ph.D., and will consist of J. S.
Yuan, Ph.D., Robert Clements and Richard Reffner.
<PAGE>
Part II. OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company announced on June 27, 2000 Laser Photonics (now PhotoMedex, Inc.)
filed suite against the Company in Orange County, Florida for
misappropriation and use of trade secrets and other confidential
information. The Company asserts that these allegations are completely
false, have no merit and intends to vigorously challenge the claims.
ITEM 2. Changes in Securities
Not Applicable
ITEM 3. Defaults Upon Senior Securities
Not Applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders in 1999.
ITEM 5. Other Information
ITEM 6. Exhibits and Reports on Form 8-k
No copies filed on 8K
<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: April 16, 2000
By: /s/ J. T. Lin
----------------------------------
J. T. Lin
President, Chief Executive Officer
and Director
<PAGE>
[TYPE]EX-27
[ARTICLE] 5
[LEGEND]
This schedule contains summary financial information extracted from the
Balance Sheet on June 30, 2000 (un-audited) and the Statement of
Operations for the 6 months ended June 30, 2000 (un-audited) and
is qualified in its entirety by reference to such financial
statements.
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-2000
[PERIOD-END] JUN-30-2000
[CASH] 1,203,000
[SECURITIES] 0
[RECEIVABLES] 700,000
[ALLOWANCES] 0
[INVENTORY] 1,193,000
[CURRENT-ASSETS] 3,421,000
[PP&E] 1,306,000
[DEPRECIATION] 91,000
[TOTAL-ASSETS] 4,727,000
[CURRENT-LIABILITIES] 421,000
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 21,490,000
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 4,727,000
[SALES] 1,009,000
[TOTAL-REVENUES] 1,009,000
[CGS] 432,000
[TOTAL-COSTS] 551,000
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] 13,000
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 39,000
[EPS-BASIC] 0
[EPS-DILUTED] 0
</TABLE>
