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, 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 September 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 September 30, 2000
(un-audited) and December 31, 1999 (audited) F-1
Consolidated Statements of Operations for the three
months ended September 30, 2000 and September 30, 1999
and nine months September 30, 2000 and September 1999 F-2
Consolidated Statements of Cash Flows for the three
months ended September 30, 2000, and 1999 and
nine months September 30, 2000 and 1999 F-3
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
IN THOUSANDS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(Unaudited) (Audited)
--------- ----------
ASSETS
Current Assets
Cash $ 485 $ 578
Accounts Receivables, Net 1,107 348
Marketable Securities 480 -
Inventory 750 837
Other Current Assets 169 20
------- -------
Total Current Assets 2,991 1,783
Property & Equipment, Net 1,633 1,614
Intangibles, Net 128 137
Other Assets 227 27
------- -------
Total Assets $ 4,979 $ 3,561
======= =======
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 244 309
Accrued Expenses 23 23
Current Portion of LT Debt - 156
Loans From Shareholders 25 26
Other Current Liabilities 2 -
------- -------
Total Current Liabilities 294 514
Long-term Liabilities 151 146
------- -------
Total Liabilities 445 660
Stockholders' Equity
Common Stock 1 1
Paid In Capital 6,358 5,110
Accumulated Deficit (1,825) (2,210)
------- -------
Total Stockholders' Equity 4,534 2,901
------- -------
Total Liabilities &
Stockholders' Equity $ 4,979 $ 3,561
======= =======
F-1
<PAGE>
SURGILIGHT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
IN THOUSANDS
<CAPTION>
Three Months Ended Nine Months Ended
Sept, 30 Sept, 30 Sept, 30 Sept, 30
2000 1999 2000 1999
-------- ------- -------- -------
Net Sales $ 1,251 $ 891 $ 3,021 $2,326
Cost of Goods Sold 426 312 1,198 861
-------- ------- -------- -------
Gross Profit 825 579 1,823 1,465
General and Administrative
Expenses 592 484 1,568 1,257
------- ------ -------- -------
Operating Income (Loss) 233 95 255 208
Other Income (Expenses)
Interest Expense - (3) (32) (10)
Investment Income 19 3 26 9
------- ------- -------- -------
Net Income (Loss) $ 252 $ 95 $ 249 $ 207
======= ======= ======== =======
Weighted average No. of
Shares outstanding
F-2
<PAGE>
SURGILIGHT, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
IN THOUSANDS
<CAPTION>
Three Months Nine Months
Ended Sept,30 Ended Sept, 30
2000 1999 2000 1999
----- ----- ----- -----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 252 $ 95 $ 249 $ 207
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation 42 52 127 157
Amortization 3 3 10 12
Increase (Decrease) in:
Receivables (506) (250) (759) (540)
Inventory 82 19 87 (169)
Other Current Assets 9 (19) (143) -
Accounts Payable 67 (45) (65) (28)
Prepaid Expenses (3) - (3) 2
Other Assets (100) - (200) -
------ ----- ------ -----
Net cash provided (used) by
operating activities (154) (145) (697) (359)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of equipment (57) (14) (157) (157)
Purchase of Investment (480) - (480) -
------ ----- ----- -----
Net cash provided (used) by
investing activities (537) (14) (637) (157)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of Long-Term Borrowing - (12) (5) -
Proceeds from Long-Term Borrowing 48 - - 79
Capital Contributions - 16 1,247 497
Repayment of Loans From Shareholders (75) (100) (1) (157)
------ ------ ----- ------
Net cash provided (used) by
financing activities (27) (96) 1,241 419
------ ------ ------ ------
NET INCREASE (DECREASE) IN CASH (718) (255) (93) 97
CASH, beginning of period 1,203 534 578 191
------ ------ ------ ------
CASH, end of period $ 485 $ 279 $ 485 $ 279
====== ====== ====== ======
F-3
<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 two divisions: (1) the Laser Technology and (2)
the Laser Eye Centers. 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 and
dermatology. We also conduct clinical trials outside the U.S. for various
new applications. The Company currently operates 25 Laser Eye and Cosmetic
Centers internationally and owns one Laser Eye Center in Florida.
The Company's strategy is to focus on the recurring revenue and income from
the royalty fees 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 may 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 that has the
in-house technologies to support and/or up-grade the systems used in its
Centers.
The presbyopia worldwide potential procedure income is estimated to be
over $1,500 billion, since over 90% of the worldwide population over the age
of 45 will become presbyopia. This estimation is based upon the
worldwide population of 900 million (15%) who are presbyopic and an average
procedure fee of $2,000 per patient. The US presbyopia population is
approximately 40 million which also represents a potential procedure
income of about $160 million based upon a fee of $2,000 per eye or $4,000
per patient. The current treatments for presbyopia include reading glasses,
implants and diamond-knife incision. These techniques 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. The FDA approved the system made by Sunrise. This method
however can only treat one eye for near view and requires the second un-
treated eye to see far. Strictly speaking the Ho:YAG method is not a
presbyopia correction, it only corrects hyperopia in one eye.
Recently the Company acquired the Ophthalmic Laser Division of Premier Laser
Systems. Pursuant to the terms of the acquisition, SurgiLight will own all
the intellectual and inventory of Premier's ophthalmic laser division. The
intellectual properties include 14 granted patents, 13 pending patents and
numerous Food and Drug (FDA) clearances in Ophthalmology. The granted
patents cover the use of infrared erbium lasers in various applications in
medicine. Premier's FDA clearances cover a broad range of incision,
excision of tissues of the eye. The Company intends to continue clinical
trials involving the use of erbium lasers in ophthalmology.
<PAGE>
The Company's new method of LASA (Laser Sclera Ablation) using a laser for
presbyopia reversal has advantages of a being precise, fast and a
relatively simple procedure. We believe the LASA procedure will be less
complicated, more stable, and may provide less regression than the
mechanical, non-laser methods. The Company is currently conducting clinical
trials in Venezuela and Argentina. The results of 97 patients were presented
at the American Academy of Ophthalmology (Dallas, Texas October 19-15). 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 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.
The Company believes that it is the only company currently owning both
the ultraviolet (UV) and infrared (IR) laser technologies for vision
correction. For vision correction 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 Company believes that IR lasers
will be have less mutagenic effects and are safer than the UV lasers which
may have potential risk of long-term biological complications. However,
prior to the market approval in U.S. the Company's new products will be
limited to international sales. The Company believes that its Infrared (IR)
lasers for vision correction 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 licensing 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 that must be 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
potential. 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 needs the approval from FDA prior to marketing in
the U.S. Our competitors are significantly larger and their financial
condition has allowed several of them to receive FDA approval to perform
LASIK procedures for 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
typically takes 6-12 months, or PMA and IDE approvals which may take a 4-8
years to complete prior to the market approval in the United States. Prior
to these market approvals, the Company's medical products will be limited to
international sales and these products need to be manufactured outside U.S.
The Company believes that its UV-laser for dermatology 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 IDE/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 may leave the
Company if they decide to operate their own Center or join other Centers
offering better terms 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 nine-month ended September 30, 2000 increased 30% to $3.0
million from $2.3 million for the same period of 1999. The nine-month net
income also increased 20% to $249,000 or $0.01 per share, from $207,000 for
the same period of 1999. The growth of revenues and net income are
attributed to the Company's growth in system sales and procedure income from
the Laser Centers.
For the third quarter of 2000, the Company reported an operation income of
$386,000, excluding the facility depreciation of $137,000. The net income
(after the facility depreciation) of the third quarter 2000 is $252,000
compared to a net income of $12,000 of the second quarter 2000. Revenue for
the third quarter 2000 increased 24% to $1,251,000 from $1,009,000 for the
second quarter of 2000, attributed mainly to the growth of system sales and
the income from cosmetic laser centers.
Revenues for the six- and nine-month periods ended June 30, and September
30, 2000 were $1,776,000 and $3,021,000, respectively, compared to
$1,434,000 and 2,326,000, for the same periods in 1999. The total revenue
for the third quarter is attributed to the Company's two divisions: the
Laser Centers and the Technology. In addition, the Company also gained
income from the Cosmetic Laser Centers which was bought back in the third
quarter. In this quarter, the Company had added 4 new international Eye
Laser Centers. The Company currently has a total of 25 Laser Eye Centers and
Cosmetic Centers.
Operating expenses for the six- and nine-month periods ended June 30, and
September 30, 2000 were $976,000 and $1,568,000 respectively. Prior year
comparative periods showed operating expense levels of $774,000 and
$1,257,000 respectively. The increase in operating expenses is proportional
to the total revenue, increased R&D and clinical trial efforts. The nine-
month R&D and clinical trial costs increased from $125,000 in 1999 to
$159,000 in 2000. These costs will continue to increase in 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>
The total assets of the Company increased to $4,979,000 as of September 30,
2000, compared with $3,561,000 of the end of 1999. This increase in assets
is mainly attributed to the additional paid in capital of $1,232,000 from an
accredited investor and the net operational profit. The Company 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 funding to pay a portion of the acquisition of the
Ophthalmic Laser Division of Premier Laser Systems. The total cost of this
acquisition is $3.725 million in cash payable between October, 2000 and
February 28, 2001. The Company is currently negotiating additional funding
of approximate $5 million to be concluded by the end of the year to continue
its on-going new product development, clinical trials and to expand its
international Laser Eye Centers. In particular, these additional funds will
accelerate the worldwide market of our 510K-cleared new products, model EX-
308 for psoriasis treatment and the IR-3000 system acquired from Premier
Laser.
The inventory for the third quarter decreased from $1,193,000 of the second
quarter to $750,000 because the sales of the Scan-195 and IR-3000 models to
international users. Account receivables increase from $700,000 in the
second quarter to $1,107,000 in the third quarter because of the financing
program offered to the international Laser Centers in Korea.
The net cash decreased from $1,353,000 on June 30, 2000 to $965,000 on
September 30, 2000 mainly attributed to the cash deposit for the Premier
Lasers acquisition, the Company's bought-back securities and legal expenses.
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 September 30, 2000 the Company has total outstanding and issued shares
of 21.49 million. The Company expects to issue additional new common shares
of 26,000 for the Cosmetic Laser Centers and escrow preferred shares of
about 1,750,000 and Warrant of 400,000 related to the GEM's investment per
information filed in the SB-2. The Company believes that only approximately
25% of these escrow shares will be converted and counted in the fully
diluted outstanding shares based on its average common stock price of about
$7.50 per share.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The total assets of the Company increased to $4,979,000 as of September 30,
2000, compared with $3,561,000 of the end of 1999. This increase in assets
is mainly attributed to the additional paid in capital of $1,232,000 from an
accredited investor and the net operational profit. The Company 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 funding to pay a portion of the acquisition of the
Ophthalmic Laser Division of Premier Laser Systems. The total cost of this
acquisition is $3.725 million in cash payable between October, 2000 and
February 28, 2001. The Company is currently negotiating additional funding
of approximate $5 million to be concluded by the end of the year to continue
its on-going new product development, clinical trials and to expand its
international Laser Eye Centers. In particular, these additional funds will
accelerate the worldwide market of our 510K-cleared new products, model EX-
308 for psoriasis treatment and the IR-3000 system acquired from Premier
Laser.
The inventory for the third quarter decreased from $1,193,000 of the second
quarter to $750,000 because the sales of the Scan-195 and IR-3000 models to
international users. Account receivables increase from $700,000 in the
second quarter to $1,107,000 in the third quarter because of the financing
program offered to the international Laser Centers in Korea.
The net cash decreased from $1,353,000 on June 30, 2000 to $965,000 on
September 30, 2000 mainly attributed to the cash deposit for the Premier
Lasers acquisition, the Company's bought-back securities and legal expenses.
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 September 30, 2000 the Company has total outstanding and issued shares
of 21.49 million. The Company expects to issue additional new common shares
of 26,000 for the Cosmetic Laser Centers and escrow preferred shares of
about 1,750,000 and Warrant of 400,000 related to the GEM's investment per
information filed in the SB-2. The Company believes that only approximately
25% of these escrow shares will be converted and counted in the fully
diluted outstanding shares based on its average common stock price of about
$7.50 per share.
<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 97 cases)
performed by Drs. Perrasa and Martinez at the Company's Micro-surgical Laser
Center at Caracas, Venezuela, were reported at the American Academy of
Ophthalmology (October 19-25) Dallas, Texas, with follow-up results longer
than 16 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 received FDA clearance to market the EX-308 ultraviolet
laser for the treatment of Psoriasis which affects a worldwide population of
about 2% or 100 million, according to the report by Dr. Spencer at Mt. Sinai
Hospital, NY.
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 is continuing with the Joint Venture with Micra to
assemble certain systems in the United Kingdom. The Company hopes to have
CE certification on one of its products within the next few months.
4. The Company announced that it acquired exclusive worldwide licensing
rights to a multi-wavelength medical laser. The Company believes this
acquisition may accelerate development of future products, including diode
pumped infrared technology. Currently the Company owns or owns the rights
to 15 patents and an additional 18 patents pending covering a broad range of
laser spectra and their medical applications.
5. The Company announced it acquired the Ophthalmic Laser Division of
Premier Laser Systems. Included in this purchase was approximately 150
finished laser systems, and more than 51% in parts to assemble up to 200
more systems, intellectual properties including a number of FDA clearances
in Ophthalmology. This acquisition will allow the Company to begin
marketing these products throughout the world. The Company is currently
negotiating an Agreement with a distributor in the United States.
6. The Company also decided to exercise its option to Buy-back the remaining
55% of shares of Advanced Medical Laser Service, Inc. (AMLSI), a Florida
based cosmetic mobile company. After this acquisition AMLSI will a b wholly
open subsidiary of the Company. Currently ASLMI operates three mobile
centers in Florida, but has plans to expand its area to include the
southeastern United States.
<PAGE>
7. 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.
<PAGE>
Part II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Not Applicable
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: November 14, 2000
By: /s/ J. T. Lin
----------------------------------
J. T. Lin
President, Chief Executive Officer
and Director
[TYPE]EX-27
[ARTICLE] 5
[LEGEND]
This schedule contains summary financial information extracted from the
Balance Sheet on September 30, 2000 (un-audited) and the Statement of
Operations for the 9 months ended September 30, 2000 (un-audited) and
is qualified in its entirety by reference to such financial statements.
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-2000
[PERIOD-END] SEP-30-2000
[CASH] 485,000
[SECURITIES] 0
[RECEIVABLES] 1,107,000
[ALLOWANCES] 0
[INVENTORY] 750,000
[CURRENT-ASSETS] 2,991,000
[PP&E] 1,988,000
[DEPRECIATION] 137,000
[TOTAL-ASSETS] 4,979,000
[CURRENT-LIABILITIES] 244,000
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 5,000,000
[COMMON] 21,490,000
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 4,979,000
[SALES] 3,021,000
[TOTAL-REVENUES] 3,021,000
[CGS] 1,198,000
[TOTAL-COSTS] 1,568,000
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 6,000
[INCOME-PRETAX] 249,000
[INCOME-TAX] 0
[INCOME-CONTINUING] 0
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 252,000
[EPS-BASIC] 0.01
[EPS-DILUTED] 0.01
</TABLE>
