SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------------------
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarter ended March 31, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (no fee required) for the transition period
from _______________ to _______________.
Commission File No. 0-17816
Sunrise Technologies International, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 77-0148208
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number)
47257 Fremont Boulevard, Fremont, California 94538
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 623-9001
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
---- ----
There were 25,356,510 of the Registrant's Common Stock issued and outstanding on
April 22, 1996.
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INDEX
<TABLE>
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Statements of Operations--Three months ended March 31, 1996 and 1995 1
Consolidated Balance Sheets--March 31, 1996 and December 31, 1995 2
Consolidated Statements of Cash Flows--Three months ended March 31, 1996 and 1995 3
Notes to consolidated financial statements--March 31, 1996 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
SIGNATURES 8
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i
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
Consolidated Statements of Operations
(unaudited)
<CAPTION>
Three months ended March 31,
1996 1995
--------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C>
Net revenues $1,521 $2,139
Cost of revenues 1,139 1,209
--------------------------------------------------
Gross profit 382 930
Other costs and expenses:
Engineering and development 175 116
Sales, marketing and regulatory 1,114 901
General and administrative 567 462
Total other costs and expenses 1,856 1,479
--------------------------------------------------
Loss from operations (1,474) (549)
Interest income 31 --
--------------------------------------------------
Net loss $(1,443) $(549)
==================================================
Net loss per share $(0.06) $(0.05)
==================================================
Shares used in calculation of
net loss per share 25,315 10,184
==================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
1
<PAGE>
<TABLE>
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
Consolidated Balance Sheets
<CAPTION>
March 31, December 31,
1996 1995
----------------------------------
(unaudited) (note)
(In thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $1,452 $3,514
Accounts receivable, net of allowance 1,246 1,048
Inventories 2,633 1,666
Prepaid expenses 240 257
----------------------------------
Total current assets 5,571 6,485
Property and equipment, net 189 204
----------------------------------
Total assets $5,760 $6,689
==================================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $1,518 $1,097
Accrued payroll and related expenses 210 181
Accrued warranty 324 324
Other accrued expenses 332 342
----------------------------------
Total current liabilities 2,384 1,944
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 2,000,000 shares
authorized, none issued or outstanding.
Common stock, $0.001 par value, 40,000,000 shares
authorized, 25,356,510 and 25,280,056 shares issued
and outstanding at March 31, 1996 and
December 31, 1995 respectively. 25 25
Additional paid-in-capital 29,270 29,196
Accumulated deficit (25,919) (24,476)
----------------------------------
Total stockholders' equity 3,376 4,745
----------------------------------
Total liabilities and stockholders' equity $5,760 $6,689
==================================
<FN>
NOTE: The consolidated balance sheet at December 31, 1995 has been derived from
the audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See accompanying notes.
</FN>
</TABLE>
2
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<TABLE>
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
Increase(decrease) in cash and cash equivalents
(unaudited)
<CAPTION>
Three months ended March 31,
1996 1995
----------------------------------------------
(In thousands)
<S> <C> <C>
Cash flows from operating activities
Net loss $(1,443) $(549)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 20 37
Changes in assets and liabilities:
Accounts receivable (198) (337)
Inventories (967) 293
Prepaid expenses 17 33
Accounts payable 421 318
Accrued payroll and related expenses 29 (40)
Accrued warranty -- --
----------------------------------------------
Other accrued expenses (10) 129
Total adjustments (688) 433
----------------------------------------------
Net cash used in operating activities (2,131) (116)
----------------------------------------------
Cash flows from investing activities
Purchase of property and equipment (5) (8)
Purchase of short-term investments -- --
----------------------------------------------
Net cash used in investing activities (5) (8)
-- --
----------------------------------------------
Cash flows from financing activities
Payment on capital lease obligations -- (4)
Issuance of common stock, net of offering costs 74 --
Net cash provided by (used in) financing activities 74 (4)
----------------------------------------------
Net increase (decrease) in cash and equivalents (2,062) (128)
Cash and cash equivalents at beginning of period 3,514 55
----------------------------------------------
Cash and cash equivalents at end of period $1,452 $431
==============================================
<FN>
See accompanying notes.
</FN>
</TABLE>
3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
March 31, 1996
1. Basis of Presentation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries after elimination of all material intercompany
balances and transactions.
The consolidated financial data for the quarters ended March 31, 1996 and
1995 are unaudited, but include all adjustments (consisting only of normal
recurring adjustments) that the management of Sunrise Technologies
International, Inc. believes to be necessary for fair presentation of the
periods presented. Interim results are not necessarily indicative of results
for the full year. The financial statements should be read in conjunction
with the audited financial statements for the year ended December 31, 1995
included in the Company's annual report on Form 10-K filed with the
Securities and Exchange Commission.
The Company has incurred significant losses for the last several years and
at March 31, 1996 has an accumulated deficit of approximately $25,919,000.
The accompanying condensed financial statements have been prepared assuming
the Company will continue as a going concern. The Company's long term ability
to continue as a going concern is dependent upon returning to profitable
operations. Management's plans include increasing sales through expanded
marketing efforts on existing products and pursuing timely regulatory
approval for certain products under development. Management also recognizes
the need for infusion of cash during the fiscal year 1996 and is actively
pursuing various options including securing additional equity financing and
disposing of certain assets. If the Company is unable to obtain additional
working capital resources from the placement of debt or equity instruments,
or the sale of some of its assets, it will be necessary for the Company to
curtail or suspend operations.
2. Net Loss Per Share
Net loss per share for the three months ended March 31, 1996 and 1995 is
based solely on weighted average shares of common stock outstanding during
the period. Common equivalent shares have not been considered in the
computation since their inclusion would have an antidilutive effect.
3. Revenue Recognition
Revenues are recognized at time of shipment. A provision for the estimated
future cost of warranty is made at the time a sale is recorded.
4. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and consisted of the following on the dates indicated:
March 31, December 31,
1996 1995
-------------------------------------
(In thousands)
Raw materials $1,557 $909
Work-in-process 298 237
Finished goods 778 520
-------------------------------------
$2,633 $1,666
=====================================
4
<PAGE>
5. Income Taxes
Due to the Company's losses from operations, all deferred tax assets, which
primarily result from net operating loss carry forwards, have been offset in
full by a valuation allowance in accordance with SFAS No. 109.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Financial Condition
As of March 31, 1996 the Company had $1,452,000 in cash and cash
equivalents. The Company's operating activities used $2,131,000 in the three
months ended March 31, 1996 and used $4,495,000 in cash during fiscal 1995. A
substantial portion of the 1995 and 1996 losses were funded by the $7.5
million net proceeds received from the completion of private placements of
15,100,000 shares of the Company's common stock at prices ranging from $0.50
to $0.625 per share in June and September 1995.
Working capital amounted to $4,541,000 at December 31, 1995 and decreased
to $3,187,000 at March 31, 1996. Working capital, including the proceeds from
the 1995 private placements, was used to fund the Company's 1995 and 1996
losses.
The Company's current operations continue to be cash flow negative, further
straining the Company's limited working capital resources. The level of
current product sales is not sufficient to provide enough cash to pursue the
dental business and support ongoing development and regulatory approval of
the LTK system. In order to continue its current level of operations, it will
be necessary for the Company to obtain additional working capital resources,
whether from debt or equity sources. If the Company is unable to obtain
additional working capital resources from the placement of debt or equity
instruments, or the sale of some of its assets, it will be necessary for the
Company to curtail or suspend operations.
Results of Operations
Revenues of $1,521,000 for the three months ended March 31, 1996 represent
a 29% decrease from revenues of $2,139,000 for the same period in 1995.
MicroPrep, the Company's air abrasive cavity preparation system, which was
introduced in June 1994, continues to exhibit strong customer acceptance and
accounted for approximately 64% of the Company's revenues for the three
months ended March 31, 1996. Offsetting the MicroPrep revenues the Company
experienced a decrease, internationally, in dental laser sales in the first
quarter.
Gross profit decreased as a percentage of revenues from approximately 43%
for the three months ended March 31, 1995 to 25% for the same period in 1996.
This decline is due to lower margins associated with the MicroPrep product
line vis a vis the dental laser product line and lower overhead absorption
due to the reduced level of sales.
Engineering and development expenses totaled $175,000 for the three months
ended March 31, 1996 as compared to $116,000 for the same period in 1995.
Sales, marketing and regulatory costs were $1,114,000 for the three months
ended March 31, 1996, compared to $901,000 for the same period in 1995. The
increase of $213,000 reflects the costs associated with a direct sales
organization and increased spending on marketing programs.
General and administrative expenses were $567,000 for the three months
ended March 31, 1996, compared to $462,000 for the same period in 1995.
Increases in the principal components of general and administrative costs of
legal expenses, director and officer insurance and salaries and related
expenses account for the change from 1995.
The Company reported a net loss for the three months ended March 31, 1996
of $1,443,000, compared to a net loss of $549,000 for the same period in
1995. This decline is a result of decreased revenues which resulted in lower
overhead absorption, thus lower gross margin contribution and higher
operating expenses.
5
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS AND FORM 8-K.
A. Exhibits
None
B. Report on Form 8-K
None
6
<PAGE>
Signatures
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.
Date: April 22, 1996 By: /s/ David W. Light
--------------------------------------------
President and Chief Executive Officer
Date: April 22, 1996 By: /s/ Martin D. Meeker
--------------------------------------------
Vice President, Finance and
Chief Financial Officer
7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,452
<SECURITIES> 0
<RECEIVABLES> 1,246
<ALLOWANCES> 0
<INVENTORY> 2,633
<CURRENT-ASSETS> 5,571
<PP&E> 2,390
<DEPRECIATION> (2,201)
<TOTAL-ASSETS> 5,760
<CURRENT-LIABILITIES> 2,384
<BONDS> 0
<COMMON> 29,295
0
0
<OTHER-SE> (25,919)
<TOTAL-LIABILITY-AND-EQUITY> 5,760
<SALES> 1,521
<TOTAL-REVENUES> 1,521
<CGS> 1,139
<TOTAL-COSTS> 1,856
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (31)
<INCOME-PRETAX> (1,443)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,443)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> 0.00
</TABLE>
