<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 2000
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
_____________
Commission File Number
0-19627
BIOLASE TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 87-0442441
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
981 Calle Amanecer, San Clemente, CA 92673
(Address of Principal Executive Offices)
(949) 361-1200
(Registrant's Telephone Number, Including Area Code)
Indicate by check 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 [_]
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date.
Common Stock, $.001 par value 19,835,222
----------------------------- -----------------------------
Title Class Number of Shares Outstanding
at November 13, 2000
<PAGE>
BIOLASE TECHNOLOGY, INC.
Page Number
-----------
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Statements
of Operations 4
Consolidated Condensed Statement
of Stockholders' Equity 5
Consolidated Condensed Statements
of Cash Flows 6
Notes to Consolidated Condensed
Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
ITEM 3. Quantitative and Qualitative
Disclosures about Market Risk 14
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 14
ITEM 2. Changes in Securities 15
ITEM 3. Defaults Upon Senior Securities 15
ITEM 4. Submission of Matters to a Vote of Security
Holders 15
ITEM 5. Other Information 15
ITEM 6. Exhibits and Reports on Form 8-K 15
SIGNATURE PAGE 16
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
------------------------------
BIOLASE TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(Unaudited)
------------- ------------
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 1,316,067 $ 1,180,982
Accounts receivable, less allowance of
$147,745 in 2000 and $117,745 in 1999 1,249,005 330,840
Inventories, net of reserves of $457,518 in 2000
and $309,420 in 1999 1,352,535 658,462
Prepaid expenses and other current assets 176,974 110,062
------------ ------------
Total current assets 4,094,581 2,280,346
Property, plant and equipment, net 2,382,245 203,529
Patents, trademarks and licenses, less accumulated
amortization of $168,379 in 2000 and $151,278 in 1999 109,858 126,958
Other assets 12,704 61,480
------------ ------------
Total assets $ 6,599,388 $ 2,672,313
============ ============
Liabilities and Stockholders' Equity (Deficit):
Current liabilities:
Current portion of long-term debt $ 20,486 $ --
Line of credit 1,791,925 1,341,925
Accounts payable 837,280 792,073
Accrued expenses 1,201,620 997,287
Accrued expenses related to the reacquisition of
foreign distribution rights 14,181 480,300
------------ ------------
Total current liabilities 3,865,492 3,611,585
Long-term debt, net of current portion 1,179,514 --
------------ ------------
Total liabilities 5,045,006 3,611,585
------------ ------------
Stockholders' equity (deficit):
Preferred stock, par value $.001, 1,000,000 shares authorized;
no shares issued and outstanding in 2000 or 1999 -- --
Common stock, par value, $.001, 50,000,000 shares
authorized, issued 19,281,322 in 2000 and 17,583,305 in 1999 19,281 17,583
Additional paid-in capital 47,386,232 41,809,690
Accumulated deficit (45,851,131) (42,766,545)
------------ ------------
Net stockholders' equity (deficit) 1,554,382 (939,272)
------------ ------------
Total liabilities and stockholders' equity (deficit) $ 6,599,388 $ 2,672,313
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
Page 3
<PAGE>
Item 1. Financial Statements (continued).
-----------------------------------------
BIOLASE TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 2,187,168 $ 2,012,824 $ 5,973,000 $ 5,205,062
Cost of sales 1,185,303 1,196,822 3,395,820 3,032,791
------------ ------------ ------------ ------------
Gross profit 1,001,865 816,002 2,577,180 2,172,271
------------ ------------ ------------ ------------
Operating expenses:
Sales and marketing 1,150,616 723,915 2,595,074 1,870,710
General and administrative 424,067 409,140 1,337,127 1,546,894
Engineering and development 575,615 548,355 1,692,793 1,508,422
------------ ------------ ------------ ------------
Total operating expenses 2,150,298 1,681,410 5,624,994 4,926,026
------------ ------------ ------------ ------------
Loss from operations (1,148,433) (865,408) (3,047,814) (2,753,755)
Other income (expense)
Interest income 20,641 12,157 57,530 36,211
Interest expense (36,922) (20,228) (94,302) (71,343)
------------ ------------ ------------ ------------
Net loss $ (1,164,714) $ (873,479) $ (3,084,586) $ (2,788,887)
============ ============ ============ ============
Loss per share - basic and diluted $ (0.06) $ (0.05) $ (0.16) $ (0.16)
============ ============ ============ ============
Weighted average shares outstanding 19,781,014 17,539,808 19,115,295 17,150,216
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
Page 4
<PAGE>
Item 1. Financial Statements (continued).
------------------------------------------
BIOLASE TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Additional
Preferred Stock Common Stock Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit Total
--------- ---------- ------------ ------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 2000 -- $ -- 17,583,305 $17,583 $41,809,690 $(42,766,545) $ (939,272)
Private placement of common stock -- -- 1,250,000 1,250 2,449,266 -- 2,450,516
Exercise of warrants -- -- 819,150 819 2,878,242 -- 2,879,061
Exercise of stock options -- -- 153,866 154 248,509 -- 248,663
Cancellation of shares -- -- (525,000) (525) 525 -- --
Issuance of shares for fractional
interest on reverse split -- -- 1 -- -- -- --
Net loss -- -- -- -- -- (3,084,586) (3,084,586)
--------- ---------- ------------ ------- ----------- ------------ ------------
Balance at September 30, 2000 -- $ -- 19,281,322 $19,281 $47,386,232 $(45,851,131) $ 1,554,382
========= ========== ============ ======= =========== ============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
Page 5
<PAGE>
Item 1. Financial Statements (continued).
-----------------------------------------
BIOLASE TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,084,586) $(2,788,887)
Adjustments to reconcile net loss to net cash used by
operating activities:
Issuance of common stock for earned services -- 176,969
Extension of stock options -- 93,731
Depreciation and amortization 105,234 83,766
Provision for bad debts 30,000 496
Provision for inventory excess and obsolescence 148,098 48,179
Changes in operating assets and liabilities:
Accounts receivable (948,165) (250,146)
Inventories (842,171) 896,739
Prepaid expenses and other assets (18,136) (11,945)
Accounts payable 45,207 (332,954)
Accrued expenses 204,333 354,321
Accrued costs related to reacquisition of foreign
distribution rights (38,119) --
----------- -----------
Net cash used by operating activities (4,398,305) (1,729,731)
----------- -----------
Cash flows from investing activities:
Sale of marketable securities -- 251,485
Additions to property, plant and equipment (1,066,850) (38,856)
Additions to patents, trademarks and licenses -- (1,724)
----------- -----------
Net cash provided (used) by investing activities (1,066,850) 210,905
----------- -----------
Cash flows from financing activities:
Borrowings (payments) under the line of credit, net 450,000 (363,100)
Payment of note payable (428,000)
Proceeds from issuance of common stock, net 2,450,516 2,748,000
Proceeds from exercise of stock options and warrants 3,127,724 85,313
----------- -----------
Net cash provided by financing activities 5,600,240 2,470,213
----------- -----------
Increase in cash and cash equivalents 135,085 951,387
Cash and cash equivalents at beginning of period 1,180,982 424,539
----------- -----------
Cash and cash equivalents at end of period $ 1,316,067 $ 1,375,926
=========== ===========
Supplemental cash flow disclosure:
Cash paid during the period for interest $ 91,656 $ 75,334
=========== ===========
Noncash financing activities:
Conversion of accrued costs to note payable $ 428,000 $ --
Issuance of long-term debt in connection with purchase
of manufacturing facility 1,200,000 --
----------- -----------
$ 1,628,000 $ --
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
Page 6
<PAGE>
BIOLASE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 2000
Note 1
------
The accompanying consolidated condensed financial statements of BioLase
Technology, Inc. (the "Company") have been prepared by the Company without audit
and do not include all disclosures required by generally accepted accounting
principles for complete financial statements. The consolidated condensed balance
sheet at December 31, 1999 was derived from audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles. In the opinion of management, the consolidated condensed financial
statements include all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the financial condition of the Company as
of September 30, 2000 and the results of operations for the three and nine-month
periods then ended.
The Company's consolidated condensed financial statements have been
presented on the basis that the Company will continue as a going-concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company reported net losses of $4,797,137,
$10,346,069 and $2,823,910 for the years ended December 31, 1999, 1998 and 1997,
respectively, and net losses of $1,164,714 and $3,084,586 for the three and
nine-month periods ended September 30, 2000, respectively, and has an
accumulated deficit of $45,851,131 at September 30, 2000. These recurring losses
and the need for continued funding, discussed below, raise substantial doubt
about the Company's ability to continue as a going-concern. Although management
believes the Company is continually strengthening, there is no assurance that it
will continue as a going concern.
The Company remains dependent upon its ability to obtain outside financing
either through the issuance of additional shares of its common or preferred
stock or through borrowings until it achieves sustained profitability through
increased sales and improved product margins. The Company's business continues
to focus on the manufacturing and marketing of its laser-based technologies
incorporated in its newly introduced products, the Millennium(R) II
WaterLase(TM) and the Twilite(TM) laser system.
Financing the development of laser-based medical and dental devices and
instruments and the operations of the Company has been achieved principally
through the private placements of preferred and common stock and the exercise of
stock options and warrants. During the nine months ended September 30, 2000 and
the three years ended December 31, 1999, the Company raised approximately
$5,578,000 and $7,061,000, respectively, of net equity funds in this manner.
Based upon the expected increase in sales and the additional funds already
received, the Company believes that it should have sufficient capital resources
to sustain it during the year in relation to its fiscal year 2000 and 2001
business plans. Should the Company require further capital resources in fiscal
year 2000 or 2001, it would most likely address such requirement through a
combination of sales of its products, sales of equity securities through private
placements, and/or debt financing. If circumstances changed, and additional
capital was needed, no assurances can be given that the Company would be able to
obtain such additional capital resources.
If unexpected events occur requiring the Company to obtain additional
capital and it is unable to do so, it then might attempt to preserve its
available resources by deferring the
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creation or satisfaction of various commitments, deferring the introduction of
various products or entry into various markets, or otherwise scaling back its
operations. If the Company were unable to raise such additional capital or defer
certain costs as described above, such inability would have an adverse effect on
the financial position, results of operations, cash flows and prospects of the
Company and ultimately on its ability to continue as a going-concern. The
consolidated condensed financial statements do not give effect to any
adjustments that might be necessary if the Company were unable to meet its
obligations or continue operations.
Operating results for the three and nine-month periods ended September 30,
2000 are not necessarily indicative of the results to be expected for the year
ending December 31, 2000. These statements should be read in conjunction with
the audited consolidated financial statements and notes thereto included in the
Company's Form 10-K for the year ended December 31, 1999.
Note 2
------
Inventories, net of reserves, consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(unaudited)
------------ ------------
<S> <C> <C>
Raw materials $ 739,596 $ 434,315
Work-in-process and subassemblies 573,969 151,203
Finished goods 38,970 72,944
---------- ----------
$1,352,535 $ 658,462
========== ==========
</TABLE>
Note 3
------
Property, plant and equipment, at cost, consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
(unaudited)
------------ ------------
<S> <C> <C>
Land and building $ 2,004,148 $ --
Leasehold improvements -- 171,445
Equipment and computers 1,031,669 884,841
Furniture and fixtures 316,679 200,806
Demonstration units 247,354 247,354
----------- -----------
Total cost 3,599,850 1,504,446
Less, accumulated depreciation and amortization (1,217,605) (1,300,917)
----------- -----------
$ 2,382,245 $ 203,529
=========== ===========
</TABLE>
Page 8
<PAGE>
Note 4
------
Accrued expenses consist of the following:
September 30, December 31,
2000 1999
(unaudited)
------------ ------------
Accrued payroll and benefits $ 463,585 $ 245,930
Accrued professional fees 88,407 100,742
Accrued legal costs 102,593 132,261
Accrued warranty 270,175 163,175
Other 276,860 355,179
---------- ----------
$1,201,620 $ 997,287
========== ==========
Note 5
------
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30,
2000
(unaudited)
------------
<S> <C>
Mortgage, prime interest rate plus 0.25%
(currently 9.75%), fixed rate for three
years, twenty-year amortization with minimum monthly
installments of $11,382 with a final payment of
$550,205 due September 1, 2015, collaterlized
by a first trust deed on land and building $1,200,000
Less current portion (20,486)
----------
$1,179,514
==========
</TABLE>
Note 6
------
Basic and diluted loss per share is based on the weighted average number of
common shares outstanding. Potential common stock, which consists of stock
options and warrants, has been excluded from per share calculations, as the
effect of the assumed exercise of this potential common stock is anti-dilutive
at September 30, 2000 and 1999.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations.
---------------------
Qualifying Statement With Respect To Forward-Looking Information:
The United States Private Securities Litigation Reform Act of 1995 provides
a "safe harbor" for certain forward-looking statements. Such forward-looking
statements are based upon the current expectations of the Company and speak only
as of the date made. These forward-looking statements involve risks,
uncertainties and other factors. The factors discussed below under
"Forward-Looking Statements" and elsewhere in this Quarterly Report on Form 10-Q
are among those factors that in some cases have affected the Company's historic
results and
Page 9
<PAGE>
could cause actual results in the future to differ significantly from the
results anticipated in forward-looking statements made in this Quarterly Report
on Form 10-Q, in future filings by the Company with the Securities and Exchange
Commission, in the Company's press releases and in oral statements made by
authorized officers of the Company. When used in this Quarterly Report on Form
10-Q, the words "estimate," "project," "anticipate," "expect," "intend,"
"believe," "hope," "may" and similar expressions, as well as "will," "shall" and
other indications of future tense, are intended to identify forward-looking
statements.
The following discussion should be read in conjunction with the
consolidated condensed financial statements and notes thereto.
Results of Operations -- Three-month period ended September 30, 2000 as compared
to the three-month period ended September 30, 1999:
Sales for the three months ended September 30, 2000 increased $174,344, or
9%, to $2,187,168 from the $2,012,824 reported for the same period in 1999. The
increase was due principally to the Company's overall increased marketing
efforts and new product introductions of its WaterLase(TM) (Millennium(R) II)
soft and hard tissue laser system and its Twilite(TM) dental diode soft tissue
laser system. The increased marketing efforts included increases in the
Company's sales and marketing infrastructure, strengthening of growing alliances
with various international distributors and raising customer and patient
awareness of the Company's flagship product, the WaterLase(TM).
Gross profit for the third quarter of 2000 improved to $1,001,865, or 46%
of sales, compared to $816,002, or 41% of sales, for the third quarter of 1999,
an increase of $185,863, or 23%. The increase in gross profit was due
principally to the increased sales volume allowing for a greater absorption of
fixed manufacturing costs combined with engineering advancements of the
Company's product line.
Operating expenses for the three months ended September 30, 2000 were
$2,150,298 compared to $1,681,410 for the same period in 1999, an increase of
$468,888, or 28%. Sales and marketing expense increased $426,701, or 59%, during
the third quarter of 2000 compared to the same period in 1999 due principally to
the Company's expansion of its domestic sales force, its marketing
infrastructure, its advertising through professional journals and media
modalities, and participation in highly recognized dental conventions and trade
shows. General and administrative expense was $424,067 for the third quarter of
2000 compared to $409,140 for the same period in 1999, a modest increase of
$14,927, or 4%. The nominal increase was due principally to modest increases in
various professional and administrative expenses associated with the Company's
present growth. Engineering and development expense was $575,615 for the third
quarter of 2000 compared to $548,355 for the same period in 1999, an increase of
$27,260, or 5%. The modest increase was due principally to the completion of the
Company's CE certification of its Twilite(TM) diode laser system allowing import
of the product to the member states of the European community.
Interest income for the three months ended September 30, 2000 increased
$8,484, or 70%, to $20,641 compared to $12,157 reported for the same period in
1999, due principally to increased cash balances in the Company's interest
bearing accounts from proceeds received from its first quarter 2000 private
placement and the exercise of certain stock options and stock warrants. Interest
expense increased $16,694, or 83%, to $36,922 for the third quarter of 2000 from
$20,228 reported for the same period in 1999. The increase in interest expense
was due principally to the Company's $1,200,000 note related to the purchase of
its manufacturing facility in August 2000.
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<PAGE>
The Company's net loss for the third quarter of 2000 was $1,164,714, or
$0.06 per share, compared to $873,479, or $0.05 per share, for the same period
in 1999. The increase in the per share loss for the third quarter of 2000 was
offset partially by a 13% increase in weighted average shares outstanding.
Results of Operations -- Nine-month period ended September 30, 2000 as compared
to the nine-month period ended September 30, 1999:
Sales increased $767,938, or 15%, to $5,973,000 during the nine-month
period ended September 30, 2000 from $5,205,062 reported for the comparable
period in 1999. The increase was due principally to the introduction of the
Company's WaterLase(TM) system (Millennium(R) II) and the Twilite(TM) diode
laser system. As the introduction of these products occurred in March, 2000, the
nine-month increase was softened by only seven months of product shipment. The
increase was further alleviated by reduced pricing of the Company's first
generation Millennium(R) system, primarily in the first quarter of 2000, to
prepare for the launching of the Millennium(R) II WaterLase(TM).
Gross profit for the first nine months of 2000 was $2,577,180, or 43% of
sales, compared to $2,172,271, or 42% of sales, for the first nine-months of
1999, an increase of $404,909, or 19%. Gross profit for the first nine months of
2000 was adversely affected by a decrease in the average unit selling price of
the Company's first generation Millennium(R), principally in the first quarter
of 2000 compared to the first quarter of 1999, which has been replaced with the
higher margined, significantly smaller and lighter Millennium(R) II
WaterLase(TM).
Operating expenses during the first nine months of 2000 reflected an
increase of $698,968, or 14%, to $5,624,994 from the $4,926,026 reported for the
same period in 1999. Sales and marketing expense increased $724,364, or 39%,
during the first nine months of 2000 compared to the same period in 1999 due
principally to the Company's expansion of its domestic sales force, marketing
infrastructure, participation in dental conventions and trade shows advertising
though various media, and higher variable sales expenses related to the upsurge
in sales volume. General and administrative expense decreased $209,767, or 14%,
during the first nine months of 2000 compared to the same period in 1999 due
principally to the absence of $190,981 in non-recurring expense included in
1999. Engineering and development expense increased $184,371, or 12%, to
$1,692,793 during the first nine months of 2000 compared to 1,508,422 reported
the same period in 1999 due principally to expenses associated with enhancements
to the Millennium(R) II and Twilite(TM) products coupled with an increase in
employee-related expenses related to increased engineer staffing.
Interest income increased $21,319, or 59%, to $57,530 during the first nine
months of 2000 from the $36,211 reported during the same period in 1999. The
increase was due principally to higher cash balances in interest-bearing
accounts obtained from the completion of a private placement in the first
quarter of 2000 and the exercise of certain stock options and stock warrants
during the first half of 2000. Interest expense increased $22,959, or 32%, to
$94,302 for the first nine months of 2000 compared to $71,343 for the same nine-
month period in 1999. The increase was due principally to the Company's
$1,200,000 note related to the purchase of its manufacturing facility in August
2000 and interest associated with a $428,000 note paid in September 2000.
The Company's net loss for the first nine months of 2000 was $3,084,586, or
$0.16 per share, compared to a net loss of $2,788,887, or $0.16 per share, for
the same nine-month
Page 11
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period in 1999. The per share loss for the first nine months of 2000 was reduced
by an 11% increase in weighted average shares outstanding.
Financial Condition
Cash and cash equivalents increased to $1,316,067 at September 30, 2000
from $1,180,982 at December 31, 1999 due principally to (i) net proceeds of
$2,450,516 received from a private placement of Company common stock and stock
purchase warrants in February 2000, and (ii) the exercise of certain stock
options and stock purchase warrants generating an aggregate $3,127,724 in cash
proceeds, offset by cash used by operating activities aggregating $4,398,305 and
capital expenditures of $1,066,850 (principally the purchase of the Company's
manufacturing facility).
Accounts receivable increased $918,165 to $1,249,005 at September 30, 2000
from the $330,840 reported at December 31, 1999. The significant increase was
due principally to orders shipped during September 2000 for which payments will
be received during the fourth quarter of 2000.
Inventories, net, at September 30, 2000 were $1,352,535 compared to
$658,462 at December 31, 1999, an increase of $694,073. The increase was due
principally to the Company's increased purchase of components to meet its
anticipated fourth quarter production requirements for both Millennium(R) II and
Twilite(TM). The Company believes that its business does not presently operate
in a normalized cycle in which information regarding inventory turns would be
meaningful but that such information will become meaningful once productions and
deliveries of the Company's products are normalized.
Prepaid expenses and other current assets at September 30, 2000 were
$176,974, reflecting an increase of $66,912 from the $110,062 reported at
December 31, 1999. The increase was due principally to deposits placed for booth
space at dental trade shows that are to be held during the fourth quarter of
2000 and first half of 2001.
Current liabilities increased to $3,865,492 at September 30, 2000 from the
$3,611,585 reported at December 31, 1999. Current portion of long-term debt
increased $20,486 due to the Company's $1,200,000 financing of its manufacturing
facility in August 2000. The Company increased its borrowings against its line
of credit by $450,000 to bring the balance to $1,791,925 at September 30, 2000
from the $1,341,925 reported at December 30, 1999. Accounts payable increased
$45,207 at September 30, 2000 compared to December 31, 1999 due principally to
the increased level of purchases associated with the Company's anticipated
production requirements. Accrued expenses increased by $204,333 reflecting
higher levels of operating expenses associated with the Company's growth. In
March 2000, the Company converted $428,000 of the $480,300 accrued expenses
related to the reacquisition of foreign distribution rights reported in the
financial statements at December 31, 1999 to a 6-month, 6% note payable, paid in
September 2000.
Capital expenditures during the first nine months of 2000 totaled
$1,066,850 related primarily to the purchase of the Company's manufacturing
facility (see "Liquidity and Capital Resources" below), a $114,906 purchase of a
new sales booth and related components for use at professional trade shows, with
the remaining capital expenditures related primarily to the purchase of personal
computers to accommodate the increase in personnel at the Company. Patents,
trademarks and licenses were comparable to those reported at December 31, 1999,
Page 12
<PAGE>
less normal amortization for the first nine months of 2000.
Stockholders' equity/deficit increased $2,493,654 to $1,554,382 at
September 30, 2000 from a deficit position of $939,272 at December 31, 1999 due
to (i) net proceeds of $2,450,516 received from a private placement in March
2000, and (ii) proceeds of $3,127,724 received from the exercise of certain
stock options and stock purchase warrants, both of which were offset by the
year-to-date net loss of $3,084,586. The Company executed an agreement with the
former shareholders of Laser Skin Toner, Inc. ("LSTI") whereby 525,000 of the
1,417,120 shares of the Company's common stock issued as consideration for the
assets of LSTI in July 1998 were returned to the Company and canceled in
September 2000. The agreement also called for the cancellation of the 182,880
shares of the Company's common stock held in escrow for issuance to LSTI based
on future performance of the technology purchased from LSTI.
Liquidity and Capital Resources
The Company remains dependent upon its ability to obtain outside financing
either through the issuance of additional shares of its common or preferred
stock or through borrowings until it achieves sustained profitability through
increased sales and improved product margins. The Company's business continues
to focus on the manufacturing and marketing of its laser-based technologies
incorporated in its newly introduced products, the Millennium(R) II and the
Twilite(TM) laser systems.
Financing the development of laser-based medical and dental devices and
instruments and the operations of the Company has been achieved principally
through the private placements of preferred and common stock and the exercise of
stock options and warrants. During the nine months ended September 30, 2000 and
the three years ended December 31, 1999, the Company raised approximately
$5,578,000 and $7,061,000, respectively, of net equity funds in this manner.
Based upon the expected increase in sales and the additional funds already
received, the Company believes that it should have sufficient capital resources
to sustain it during the year in relation to its fiscal 2000 and 2001 business
plans. Should the Company require further capital resources in fiscal 2000 or
2001, it would most likely address such requirement through a combination of
sales of its products, sales of equity securities through private placements,
and/or debt financing. If circumstances changed, and additional capital was
needed, no assurances can be given that the Company would be able to obtain such
additional capital resources.
If unexpected events occur requiring the Company to obtain additional
capital and it is unable to do so, it then might attempt to preserve its
available resources by deferring the creation or satisfaction of various
commitments, deferring the introduction of various products or entry into
various markets, or otherwise scaling back its operations. If the Company were
unable to raise such additional capital or defer certain costs as described
above, such inability would have an adverse effect on the financial position,
results of operations, cash flows and prospects of the Company and ultimately on
its ability to continue as a going-concern.
At September 30, 2000, the Company had $1,791,925 outstanding under a
revolving credit agreement with a bank. The revolving credit agreement provides
for borrowings of up to $2,500,000 for the financing of inventory and is
collateralized by substantially all of the Company's accounts receivable and
inventories. The interest rate is fixed throughout the term
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of the credit agreement and is computed based upon LIBOR plus 0.5% at the time
of any borrowings. At September 30, 2000, the weighted average interest rate on
the outstanding balance was 7.18%. The Company is required to reduce the
outstanding loan balance by an amount equal to the cost of goods sold associated
with sales of inventory upon collection of sales proceeds. The current revolving
credit agreement expires on December 1, 2000 at which point the Company will be
required to either pay any remaining balance of the credit facility or refinance
the credit facility. The Company has received notice that the guarantor intends
to renew the line of credit by December 1, 2000, however, terms and conditions
related to such renewal are under negotiation. Should negotiations with the
existing guarantor fail, no assurances can be given that the Company will be
able to refinance the line of credit or that the terms on which it may be able
to refinance the line of credit will be as favorable as the terms of the
existing line. If the Company is unable to refinance and is therefore required
to repay the line of credit, the diversion of resources to that purpose may
adversely affect the Company's operations and financial condition.
The Company's lease on its manufacturing facility expired in September
2000. The lessor had notified the Company that it did not intend to renew the
lease with the Company as the building had been listed for sale by the lessor.
In response, the Company researched similar leasing rates in close proximity to
its present location and determined that competitive lease rates on a similar
building in structure and size were dramatically higher than the Company's
current rate. In addition, the cost of relocation to the Company would have been
substantial and could have included, but not have been limited to, business
interruption costs, actual moving costs and large up-front deposits typically
required on new lease potentials. Accordingly, the Company entered into an
agreement to purchase its existing manufacturing facility with escrow closing in
August 2000 at a purchase price of $2,004,148, inclusive of direct expenses of
$21,148. The Company paid $804,148 in cash and financed the remaining purchase
with a $1,200,000 first trust deed mortgage. The terms of the commitment include
(i) a variable interest rate of prime plus 0.25%, adjusted every three years
(currently 9.75%), (ii) a term of 15 years (matures September 1, 2015), and
(iii) a loan amortization term of 20 years.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
-------------------------------------------------------------------
Not Applicable
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
--------------------------
See Item 3 "Legal Proceedings" included within the Company's Annual Report
on Form 10-K for fiscal year ended December 31, 1999 for information regarding
certain pending legal proceedings.
From time to time, the Company is involved in legal proceedings incidental
to its business. It is management's opinion that pending actions, individually
and in the aggregate, will not have a material adverse effect on the Company's
financial condition, and that adequate provision has been made for the
resolution of such actions and proceedings.
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Item 2. Changes in Securities.
------------------------------
None
Item 3. Defaults Upon Senior Securities.
----------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders.
------------------------------------------------------------
None
Item 5. Other Information.
--------------------------
None
Item 6. Exhibits and Reports on Form 8-K.
-----------------------------------------
(a) Exhibits
27. Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K
None
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SIGNATURE PAGE
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 thereunto duly authorized.
BIOLASE TECHNOLOGY, INC.
a Delaware Corporation
Date: November 14, 2000 /s/ Jeffrey W. Jones
---------------------- -------------------------------------
Jeffrey W. Jones
President & Chief Executive Officer
Date: November 14, 2000 /s/ Stephen R. Tartamella
---------------------- -------------------------------------
Stephen R. Tartamella
Vice President & Chief Financial
Officer
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