<PAGE> 1
UNITED STATES
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 June 30,1998 or
[ ] 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 0-18053
LASERSCOPE
(Exact name of Registrant as specified in its charter)
CALIFORNIA 77-0049527
(State of Incorporation) (I.R.S. Employer Identification No.)
3052 ORCHARD DRIVE, SAN JOSE, CALIFORNIA 95134-2011
(Address of principal executive offices)
Registrant's telephone number: (408) 943-0636
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 [ ]
The number of shares of Registrant's common stock issued and outstanding as of
July 31, 1998 was 12,400,655.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION......................................................... 3
Item 1. Condensed Consolidated Balance Sheets..................................... 3
Condensed Consolidated Statements of Operations........................... 4
Condensed Consolidated Statements of Cash Flows........................... 5
Notes to Condensed Consolidated Financial Statements...................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................. 8
Results of Operations..................................................... 9
Liquidity and Capital Resources........................................... 12
Item 3. Qualitative and Quantitative Disclosures About Market Risk................ 13
PART II. OTHER INFORMATION........................................................... 14
Item 1. Legal Proceedings........................................................ 14
Item 2. Changes in Securities.................................................... 14
Item 3. Defaults upon Senior Securities.......................................... 14
Item 4. Submission of Matters to a Vote of Security Holders...................... 14
Item 5. Other Items.............................................................. 15
Item 6. Exhibits and Reports on Form 8-K........................................ 16
SIGNATURES ........................................................................ 16
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
LASERSCOPE
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
(thousands) 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,639 $ 2,465
Accounts receivable, net 13,398 13,960
Inventories 18,194 18,656
Other current assets 875 1,017
-------- --------
Total current assets 34,106 36,098
Property and equipment, net 5,454 5,183
Developed technology and other intangibles, net 4,883 5,339
Other assets 642 686
-------- --------
Total assets $ 45,085 $ 47,306
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,693 $ 6,071
Accrued compensation 1,811 1,710
Short-term bank loans 4,445 3,107
Other current liabilities 4,177 4,897
-------- --------
Total current liabilities 15,126 15,785
Long-term liabilities:
Obligations under capital leases 783 274
Mortgages and other long term loans 2,962 2,970
-------- --------
Total long-term liabilities: 3,745 3,244
Commitments and contingencies
Minority interest 248 160
Shareholders' equity:
Common stock 51,019 50,939
Accumulated deficit (24,038) (21,831)
Accumulated other comprehensive income (640) (616)
Notes receivable from shareholders (375) (375)
-------- --------
Total shareholders' equity 25,966 28,117
-------- --------
Total liabilities and shareholders' equity $ 45,085 $ 47,306
======== ========
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE> 4
LASERSCOPE
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
(thousands except per share amounts) 1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues ................................ $ 13,133 $ 15,207 $ 26,724 $ 30,970
Cost of sales ............................... 7,621 8,178 14,642 16,865
-------- -------- -------- --------
Gross margin ................................ 5,512 7,029 12,082 14,105
Operating expenses:
Research and development ................ 1,352 695 2,683 1,365
Selling, general and administrative ..... 5,723 5,277 11,068 10,678
-------- -------- -------- --------
7,075 5,972 13,751 12,043
Operating income (loss) ..................... (1,563) 1,057 (1,669) 2,062
Interest income (expense) and other, net .... (356) 2 (316) (24)
-------- -------- -------- --------
Income (loss) before income
taxes and minority interest ............. (1,919) 1,059 (1,985) 2,038
Provision for income taxes .................. 24 229 133 327
-------- -------- -------- --------
Income (loss) before minority interest ...... (1,943) 830 (2,118) 1,711
Minority interest ........................... 34 74 89 74
-------- -------- -------- --------
Net income (loss) ........................... $ (1,977) $ 756 $ (2,207) $ 1,637
======== ======== ======== ========
Basic and diluted net income (loss) per share $ (0.16) $ 0.06 $ (0.18) $ 0.13
======== ======== ======== ========
Shares used in basic per share calculations . 12,387 12,174 12,372 12,068
======== ======== ======== ========
Shares used in diluted per share calculations 12,387 12,994 12,372 13,017
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE> 5
LASERSCOPE
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
(thousands) 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(2,207) $ 1,637
Adjustments to reconcile net income (loss) to
cash used by operating activities:
Depreciation and amortization 1,446 1,023
Increase (decrease) from changes in:
Accounts receivable 562 (2,425)
Inventories 462 (769)
Other current assets 142 173
Accounts payable (1,378) (2,077)
Accrued compensation 101 (977)
Other current liabilities (720) 243
Minority interest 88 --
------- -------
Cash used by operating activities (1,504) (3,172)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (651) (2,049)
Cash paid for NWL acquisition, net of cash received -- (954)
Other (24) (184)
------- -------
Cash used by investing activities (675) (3,187)
------- -------
CASH USED BY FINANCING ACTIVITIES:
Payments on obligations under capital leases (57) (23)
Proceeds from the sale of common stock under stock plans 80 1,702
Proceeds from bank loans 1,397 3,900
Repayment of bank loans (67) (1,300)
------- -------
Cash provided by financing activities 1,353 4,279
------- -------
Decrease in cash and cash equivalents (826) (2,080)
Cash and cash equivalents, beginning of period 2,465 3,917
------- -------
Cash and cash equivalents, end of period $ 1,639 $ 1,837
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 172 $ 132
Income taxes $ 13 $ 56
Non-cash financing activities:
Equipment leases $ 566 $ --
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
1. The accompanying condensed consolidated financial statements include
Laserscope (the "Company") and its wholly and majority-owned
subsidiaries. All intercompany transactions and balances have been
eliminated. While the financial information in this report is unaudited,
in the opinion of management, all adjustments (which included only
normal recurring adjustments) necessary to present fairly the financial
position and results of operations as of and for the periods indicated
have been recorded. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial
statements and the notes thereto for the year ended December 31, 1997
included in the Company's annual report on Form 10-K for the year ended
December 31, 1997. The results of operations for the three and six month
periods ended June 30, 1998 are not necessarily indicative of the
results expected for the full year.
2. Inventory was comprised of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------------------
<S> <C> <C>
Sub-assemblies and purchased parts $13,290 $13,098
Finished goods 4,904 5,558
------- -------
$18,194 $18,656
======= =======
</TABLE>
3. Basic net income (loss) per share is calculated using the weighted
average of common stock outstanding. Diluted net income per share is
calculated using the weighted average of common stock outstanding plus
dilutive common equivalent shares from stock options (820,000 shares and
949,000 shares for the quarter and six months ended June 30, 1997,
respectively). All per share amounts for all periods presented have been
restated to conform to SFAS 128 requirements.
4. The Company considers cash equivalents to be short-term financial
instruments that are readily convertible to cash, subject to no more
than insignificant interest rate risk and that have original maturities
of three months or less.
At June 30, 1998 and December 31, 1997 the Company's cash equivalents
were in the form of institutional money market accounts and totaled $0.2
million and $1.3 million, respectively.
At June 30, 1998 and December 31, 1997 the Company had no investments in
debt or equity securities.
5. As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130). SFAS 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of the
Statement had no impact the Company's net income or shareholders'
equity. SFAS 130 requires foreign currency translation adjustments,
which prior to adoption were reported separately in shareholders'
equity, to be included in other comprehensive income. Prior year
financial statements have been reclassified to conform to the
requirements of SFAS 130.
6
<PAGE> 7
Total comprehensive income (loss) for the quarters ended June 30, 1998
and 1997 was $(2,026,000) and $726,000, respectively. Total
comprehensive income (loss) for the six month periods ended June 30,
1998 and 1997 was $(2,231,000) and $1,504,000, respectively.
6. As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No.131 "Disclosures about Segments of an Enterprise
and Related Information" (SFAS 131). SFAS 131 will change the way
companies report selected segment information in annual financial
statements and requires those companies to report selected segment
information in interim financial reports to shareholders. The Company
has not reached a conclusion as to the appropriate segments, if any, it
will be required to report to comply with SFAS 131.
7. In June 1997 the Company completed the acquisition of a majority
interest in NWL Laser-Technologie GmbH ("NWL"). The Company accounted
for the acquisition as a purchase. Accordingly, the operating results of
NWL are included in the Company's consolidated results of operations for
the quarter and six month periods ended June 30, 1998. The minority
interest reported in the financial statements represents minority
shareholders' proportional interest in the net assets and operating
results of the NWL subsidiary.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
Except for the historical information contained in this Quarterly
Report on Form 10-Q, the matters discussed herein are forward-looking statements
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Investors are cautioned that all forward-looking statements
are subject to certain risks and uncertainties that could cause the actual
results to differ materially from those projected. Factors that could cause
actual results to differ materially include, but are not limited to, the risks
associated with the acquisitions of Heraeus Surgical, Inc. ("HSI") and NWL
Laser-Technologie, GmbH ("NWL"), including the integration of the operations and
assets acquired and the assumption of the liabilities assumed by Laserscope, the
timing of orders and shipments, the Company's ability to balance its inventory
and production schedules, the timely development, clearance by the F.D.A. and
other regulatory agencies and market acceptance of new products and
surgical/therapeutic procedures, the impact of competitive products and pricing,
the Company's ability to raise capital on terms acceptable to the Company, or at
all, the Company's ability to expand further into international markets, and
public policy relating to health care reform in the United States and other
countries.
The Company desires to continue expansion of its operations outside of the
United States and to enter additional international markets, requiring
significant management attention and financial resources and further subjecting
the Company to the risks of operating internationally. These risks include
unexpected changes in regulatory requirements, delays resulting from difficulty
in obtaining export licenses for certain technology, customs, tariffs and other
barriers and restrictions, and the burdens of complying with a variety of
foreign laws. While only seven percent of the Company's revenues were
attributable to sales in Asia during the six months ended June 30, 1998 compared
to ten percent during the year ended December 31, 1997, the recent economic
instability in certain Asian countries could adversely affect the Company's
business, financial condition and operating results. The Company is also subject
to general geopolitical risks in connection with its international operations,
such as political and economic instability and changes in diplomatic and trade
relationships. The Company cannot predict whether quotas, duties, taxes or other
charges or restrictions will be imposed by the United States, Japan, countries
in the European Union or other countries upon the import or export of the
Company's products in the future, or what effect any such actions would have on
its business, financial condition or results of operations. In addition,
fluctuations in currency exchange rates may negatively impact the Company's
ability to compete in terms of price against products denominated in local
currencies. In addition, there can be no assurance that regulatory, geopolitical
and other factors will not adversely impact the Company's operations in the
future or require the Company to modify its current business practices.
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date field. Beginning in the year 2000,
these date fields need to accept four digit entries to distinguish 21st century
dates from 20th century dates. As a result, in less than two years, computer
systems and/or software used by many companies may need to be upgraded to comply
with such "Year 2000" requirements. Significant uncertainty exists concerning
the potential effects associated with such compliance. Any Year 2000 compliance
problem to either the Company, its suppliers, its service providers or its
customers could result in a material adverse effect on the Company's financial
condition and operating results.
8
<PAGE> 9
Other risks are detailed from time to time in the Company's press releases and
other public disclosure filings with the U.S. Securities and Exchange Commission
(SEC), copies of which are available upon request from the Company. The
forward-looking statements included herein speak only as of the date hereof. The
Company assumes no obligation to update any forward-looking statements included
herein.
RESULTS OF OPERATIONS:
The following discussion should be read in conjunction with the unaudited
consolidated financial statements and notes thereto included in Part I -- Item 1
of this Quarterly Report and the audited financial statements and notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations for the year ended December 31, 1997 contained in the Company's
Annual Report on Form 10-K.
The following table contains selected income statement information which serves
as the basis of the discussion of the Company's results of operations for the
quarter and six months ended June 30, 199 (in thousands except for percentages):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1997 % JUNE 30,1998 JUNE 30, 1997 %
AMOUNT %(a) AMOUNT %(a) CHANGE AMOUNT %(a) AMOUNT %(a) CHANGE
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues from sales of:
Lasers $ 7,298 56% $ 6,997 46% 4 % $13,937 52% $13,904 45% - %
Ascent medical systems 1,080 8% 2,662 17% (59)% 3,053 12% 5,538 18% (45)%
Instruments & supplies 3,032 23% 3,599 24% (16)% 6,190 23% 7,655 25% (19)%
Service 1,723 13% 1,949 13% (12)% 3,544 13% 3,873 12% (8)%
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total net revenues $13,133 100% $15,207 100% (14)% $26,724 100% $30,970 100% (14)%
Gross margin $ 5,512 42% $ 7,029 46% (22)% $12,082 45% $14,105 46% (14)%
Research & development $ 1,352 10% $ 695 5% 95% $ 2,683 10% $ 1,365 4% 97%
Selling, general & admin $ 5,723 44% $ 5,277 35% 8% $11,068 41% $10,678 34% 4%
</TABLE>
(a) expressed as a percentage of total net revenues.
Net revenues decreased during the three and six months ended June 30, 1998
relative to the corresponding periods of 1997 as a combined result of lower
shipments of Ascent medical system ("AMS") products, lower shipments of
instrumentation and supplies and lower sales of services. These decreases were
offset partially by revenues from shipments of products and sales of services
acquired in the acquisition of a majority position in NWL in June 1997 (the "NWL
acquisition").
Revenues from the sales of laser systems increased during the quarter and six
month periods ended June 30, 1998 relative to the same periods in 1997. This was
due to a combination of lower unit shipments and higher average unit prices. The
lower unit shipments are the net result of decreased shipments of the Company's
KTP Surgical Laser Systems and CO2 laser systems partially offset by shipments
of laser products acquired in the NWL acquisition. The higher average unit
prices are the combined result of higher shipments of PDT laser systems to
hospitals and lower shipments of Aura office laser units in the United States
and decreased shipments to independent international distributors in Asia. The
Company believes that the lower demand for its office laser products and CO2
laser systems in the United States and the economic downturn in Asia may
continue to impact negatively its revenues in these regions for the next several
quarters.
9
<PAGE> 10
Revenues from the sales of the Company's Ascent Medical System ("AMS") products
declined during the quarter and six month periods ended June 30, 1998 relative
to the same periods in 1997. The Company believes that the decrease is partially
attributable to its withdrawal from the operating room table business in late
1997. Shipments of operating room tables contributed approximately $0.7 million
to revenues during the six months ended June 30, 1997. Additionally, the Company
believes that lower orders of AMS products and delays in construction projects
in which the AMS products have been ordered negatively impacted shipments of
these products during the quarter and six months ended June 30, 1998 relative to
the corresponding periods in 1997. The Company believes that sales of AMS
products during 1998 will be lower than in 1997 due to the Company's withdrawal
from the operating room table market. Additionally, the Company believes that
construction schedules will continue to affect orders and shipments of AMS
products during 1998, and as a result, revenues will vary from quarter to
quarter.
Revenues from the sales of instrumentation, disposable supplies and services
during the quarter and six months ended June 30, 1998 decreased compared to the
corresponding periods in 1997. The decreases are due to the combination of
decreased shipments of scanning devices sold as accessories to the Aura office
laser system, lower shipments of disposable supplies and lower sales of
services. The Company expects that revenues from sales of disposable supplies,
instrumentation and service will depend principally upon the Company's ability
to increase its installed base of systems and to promote and develop surgical
procedures which use its laser systems, instrumentation and disposable supplies.
The Company believes that acceptance of lasers in aesthetic surgery,
dermatology, urology, and ear, nose and throat surgery will continue to be
important to its business. In addition, the adoption of photodynamic therapy by
medical practitioners will be important. The Company continues to invest in
developing new instrumentation for emerging surgical applications and in
educating surgeons in the United States and internationally to encourage the
adoption of such new applications. Penetration of the international market,
although generally increasing, has been limited and the Company continues to
view expansion of international sales as important to the Company's success.
During the six months ended June 30, 1998, international revenues accounted for
38% of total net revenues compared to 29% of total net revenues during the
corresponding period in 1997. Finally, the acceptance of AMS equipment by
hospitals will be critical to the success of this product line.
Gross margin as a percentage of revenues during the quarter and six months ended
June 30, 1998 declined relative to the corresponding periods of 1997. This is
due principally to decreased production levels without corresponding reductions
in fixed manufacturing costs. The declines in production levels are the combined
result of lower shipment levels in the 1998 periods compared to 1997 periods as
well as the Company's efforts to reduce inventory levels. The Company expects
that gross margin as a percentage of revenues for the remainder of 1998 will
vary from quarter to quarter as it continues to balance production volumes and
inventory levels with product demand and as product and distribution mix varies.
Research and development expenses are the result of activities related to the
development of new laser, instrumentation and disposable products and the
enhancement of the Company's existing products. The increases in research and
development spending during the quarter and six month period ended June 30, 1998
relative to the corresponding periods in 1997 is due to a combination of
increased spending in product development and incremental research and
development spending by NWL. The Company expects that amounts spent in research
and development to remain at similar levels during the remainder of 1998.
10
<PAGE> 11
The increase in selling, general and administrative expenses during the quarter
and six months ended June 30, 1998 primarily results from new personnel acquired
by the Company as a result of the NWL acquisition. The Company expects these
amounts to remain at similar levels during the remainder of 1997 as the Company
continues to invest in international expansion, marketing programs and
educational support.
Net interest expense and other non-operating expenses increased $0.3 million
during the six month period ended June 30, 1998 compared to the corresponding
period in 1997. This was due to the combination of increased interest expense
from NWL and domestic bank lines and the recording of the settlement of a
dispute relating to the termination of a Heraeus domestic distributor.
During the six months ended June 30, 1998, the Company recorded income tax
provisions of $0.1 million due to profits reported by NWL in Germany. During the
same period in 1997 the Company recorded an income tax provision representing an
effective tax rate of 22% which is below the combined federal and state
statutory rates due to the utilization of available net operating loss
carryforwards.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES:
The following table contains selected balance sheet information that serves as
the basis of the discussion of the Company's liquidity and capital resources at
June 30, 1998 and for the six months then ended (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------------------
<S> <C> <C>
Cash and cash equivalents $ 1,639 $ 2,465
Total assets $45,085 $47,306
Net working capital $18,980 $20,313
</TABLE>
The net decrease in cash and cash equivalents was due principally to cash used
by operating activities of $1.5 million partially offset by increased short-term
bank borrowings of $1.4 million.
Cash used by operating activities was the combined result of a net loss of $2.2
million, and decreases in accounts payable and other current liabilities of $1.4
million and $0.7 million, respectively. Partially offsetting these uses were
depreciation and amortization of $1.5 million, a reduction in accounts
receivable of $0.6 million, a decrease in inventories of $0.5 million, and
combined decreases in accrued compensation and other current assets of $0.2
million.
Cash used by investing activities primarily consisted of capital expenditures of
$0.7 million.
Cash provided by financing activities primarily consisted of net increases in
bank loans of $1.4 million.
The Company has in place a $5.0 million revolving bank line of credit that
expires in November 1998. At June 30, 1998, the collateral provisions allowed
for approximately $3.0 million in borrowings and $3.3 million in borrowings were
outstanding. Subsequent to June 30, 1998, the Company reduced outstanding
borrowings to $3.0 million, however, the loss reported by the Company during the
quarter ended June 30, 1998 violated the profitability and minimum net worth
covenants of the loan agreement. The Company currently expects to renegotiate
the terms of this line, however, there can be no assurance that management will
be able to accomplish this in a timely manner, on acceptable terms, or at all.
In addition, NWL has in place various bank lines totaling approximately $3.0
million that expire in 1999 and under which $2.8 million in borrowings were
outstanding at June 30, 1998.
The Company anticipates that future changes in cash and working capital will be
dependent on a number of factors including management's ability to manage
effectively non-cash assets such as inventory and accounts receivable. At June
30, 1998, the Company's inventories consisted of $18.2 million comprised of
$13.3 million of sub-assemblies and purchased parts and $4.9 million of finished
goods. This represents a 3% decrease from inventories at December 31, 1997 which
consisted of $18.7 million, comprised of $13.1 million of sub-assemblies and
purchased parts and $5.6 million of finished goods. The Company competes in a
competitive industry where technological changes and acceptance of new and
alternative procedures by its customers is rapid. Management's ability to
anticipate and adapt to these changes will significantly affect the Company's
investment in inventory and the potential for inventory valuation adjustments.
In addition, the level of profitability of the Company will have a significant
impact on cash resources.
12
<PAGE> 13
From time to time, the Company may also consider the acquisition of, or evaluate
investments in, certain products and businesses complementary to the Company's
business. Any such acquisition or investment may require additional capital
resources. The Company has historically financed acquisitions using its existing
cash resources. While the Company believes its remaining cash resources will be
sufficient to fund its operating needs for the next twelve months, additional
financing either through its bank lines of credit or otherwise will be required
for the Company's currently envisioned long term needs. There can be no
assurance that such additional financing will be available on terms acceptable
to the Company, or at all.
YEAR 2000
The Company has developed a plan to modify its information technology to
recognize the year 2000 and has begun converting critical data processing
systems. The Company currently expects the project to be substantially complete
by early 1999 and to cost approximately $250,000. This estimate includes
internal costs, but excludes the costs to upgrade and replace systems in the
normal course of business. The Company currently does not expect this project to
have a significant effect on operations and continues to implement systems with
strategic value though some projects may be delayed due to resource constraints.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to a number of legal proceedings arising
in the ordinary course of business. While it is not feasible to
predict or determine the outcome of the actions brought against
it, the Company believes that the ultimate resolution of these
claims will not ultimately have a material adverse effect on its
financial position or results of operations.
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
(a) The annual meeting of shareholders was held on June 23, 1998.
(b) The first matter voted upon at the meeting was the election of
directors and the results of that vote were as follows:
<TABLE>
<CAPTION>
Present but
For Withheld Abstained Not Voting
--- -------- --------- ----------
<S> <C> <C> <C> <C>
Benjamin L. Holmes 6,541,863 713,669 0 0
E. Walter Lange 6,553,712 701,820 0 0
Robert V. McCormick 6,548,200 707,332 0 0
Rodney Perkins, M.D 6,551,447 704,085 0 0
Robert J. Pressley, Ph.D 6,553,112 702,420 0 0
</TABLE>
(c) The second matter voted upon at the meeting and the results of
that vote were as follows:
<TABLE>
<CAPTION>
Present but
For Withheld Abstained Not Voting
--- -------- --------- ----------
<S> <C> <C> <C> <C>
To authorize an 5,637,627 1,294,233 323,671 1
amendment to the
Company's 1994 Stock
Option Plan to increase the
number of shares for issuance
thereunder by 450,000 shares to
an aggregate of 2,550,000 shares.
</TABLE>
14
<PAGE> 15
(d) The third matter voted upon at the meeting and the results of
that vote were as follows:
<TABLE>
<CAPTION>
Present but
For Withheld Abstained Not Voting
--- -------- --------- ----------
<S> <C> <C> <C> <C>
To authorize an 6,452,725 481,933 320,873 1
amendment to the
Company's 1989 Stock
Purchase Plan to increase the
number of shares for issuance
thereunder by 150,000 shares to
an aggregate of 750,000 shares.
</TABLE>
(e) The fourth matter voted upon at the meeting and the results of
that vote were as follows:
<TABLE>
<CAPTION>
Present but
For Withheld Abstained Not Voting
--- -------- --------- ----------
<S> <C> <C> <C> <C>
To ratify the appointment 7,182,644 36,650 36,238 0
of Ernst & Young LLP as the
independent auditors for
the Company for the
fiscal year ending
December 31, 1998.
</TABLE>
ITEM 5. OTHER INFORMATION
Pursuant to recent amendments to the rules relating to proxy statements
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
shareholders of the Company are hereby notified that any shareholder proposal
not included in the Company's proxy materials for its 1999 Annual Meeting of
Shareholders (the "Annual Meeting") in accordance with Rule 14a-8 under the
Exchange Act will be considered untimely for the purposes of Rules 14a-4 and
14a-5 under the Exchange Act if notice thereof is received by the Company after
April 6, 1999. Management proxies will be authorized to exercise discretionary
voting authority with respect to any shareholder proposal not included in the
Company's proxy materials for the Annual Meeting unless (a) the Company receives
notice of such proposal by April 6, 1999, and (b) the conditions set forth in
Rule 14a-4(c)(2)-(iii) under the Exchange Act are met.
15
<PAGE> 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: Report on Form 8-K (the "Form 8-K") dated
May 7, 1998. The Form 8-K announced the sale and private placement of the
remaining shares of Company stock held by Heraeus Med GmbH.
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.
LASERSCOPE
Registrant
/s/ Dennis LaLumandiere
----------------------------------------------
Dennis LaLumandiere
Vice President of Finance
and Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: August 12, 1998
16
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,639
<SECURITIES> 0
<RECEIVABLES> 14,198
<ALLOWANCES> 800
<INVENTORY> 18,194
<CURRENT-ASSETS> 34,106
<PP&E> 17,293
<DEPRECIATION> 11,839
<TOTAL-ASSETS> 45,085
<CURRENT-LIABILITIES> 15,126
<BONDS> 0
0
0
<COMMON> 51,019
<OTHER-SE> (25,053)
<TOTAL-LIABILITY-AND-EQUITY> 45,085
<SALES> 26,724
<TOTAL-REVENUES> 26,724
<CGS> 14,642
<TOTAL-COSTS> 14,642
<OTHER-EXPENSES> 13,751
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (316)
<INCOME-PRETAX> (1,985)
<INCOME-TAX> 133
<INCOME-CONTINUING> (2,207)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,207)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
