<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1997
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-13966
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Premier Laser Systems, Inc.
---------------------------
(Exact name of registrant as specified in its charter)
California 33-0476284
---------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3 Morgan, Irvine, California, 92618
-----------------------------------
(Address of principal executive offices)
(714) 859-0656
--------------
(Registrant's telephone number, including area code)
---------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 [_]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [_] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date [August 12, 1997]:
Class A Common Stock: 10,761,323 Shares
__________
Class E-1 Common Stock: 1,257,499 Shares
----------
Class E-2 Common Stock: 1,257,499 Shares
----------
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
---------------------
PREMIER LASER SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1997
------------- --------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 15,224,931 $ 173,610
Short-term investments 9,775,235 3,968,288
Restricted cash 1,050,000 1,050,000
Accounts receivable, net of allowance for doubtful accounts of
$382,198 at June 30, 1997 and $387,263 at March 31, 1997 2,655,799 1,718,312
Inventories 3,226,121 2,964,632
Prepaid expenses and other current assets 1,084,935 783,319
------------ ------------
Total current assets 33,017,021 10,658,161
Property and equipment, net 802,854 780,945
Intangibles, net 7,703,245 7,875,028
Other assets 6,477 6,477
------------ ------------
Total assets $ 41,529,597 $ 19,320,611
============ ============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 957,154 $ 1,217,256
Line of credit - 800,000
Accrued compensation and related costs 293,346 318,000
Other accrued liabilities 351,872 272,369
Notes payable and current portion of capital lease obligations 20,451 31,920
------------ ------------
Total current liabilities 1,622,823 2,639,545
Capital lease obligations, net of current portion 34,449 49,356
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value:
Authorized shares--8,850,000
Issued and outstanding shares--none - -
Common stock, Class A, no par value:
Authorized shares--35,600,000
Issued and outstanding shares--10,719,823 at June 30, 1997
and 7,313,841 at March 31, 1997 51,273,340 27,320,449
Common stock, Class E-1, no par value:
Authorized shares--2,200,000
Issued and outstanding shares--1,257,499 at June 30, 1997
and 1,257,178 at March 31, 1997 4,769,878 4,769,878
Common stock, Class E-2, no par value:
Authorized shares--2,200,000
Issued and outstanding shares--1,257,499 at June 30, 1997
and 1,257,178 at March 31, 1997 4,769,878 4,769,878
Warrants and options 3,979,255 3,978,276
Accumulated deficit (24,920,026) (24,206,771)
------------ ------------
Total shareholders' equity 39,872,325 16,631,710
------------ ------------
$ 41,529,597 $ 19,320,611
============ ============
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
PREMIER LASER SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------- ----------
1997 1996
---------- ----------
<S> <C> <C>
Net sales $2,105,447 $1,254,082
Cost of sales 1,295,980 1,028,611
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Gross profit 809,467 225,471
Selling and marketing expenses 815,023 461,772
Research and development expenses 513,499 126,779
General and administrative expenses 363,986 326,786
---------- ----------
Loss from operations (883,041) (689,866)
Interest income (expense), net 169,786 (7,194)
---------- ----------
Net loss $ (713,255) $ (697,060)
========== ==========
Net loss per share $ (0.08) $ (0.15)
========== ==========
Shares used in the computation of net
loss per share 8,749,508 4,719,923
========== ==========
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
PREMIER LASER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
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1997 1996
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<S> <C> <C>
Operating Activities
Net Loss $ (713,255) $ (697,060)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 255,562 302,892
Exchange of product for clinical studies - (28,468)
Provision of allowance for doubtful accounts receivable (5,065) (28,450)
Changes in operating assets and liabilities:
Accounts receivable (932,421) (577,435)
Inventories (261,489) (281,484)
Prepaid expenses and other current assets (301,615) (453,393)
Other assets - 45,000
Accounts payable (260,102) 1,104,649
Accrued liabilities 39,849 64,039
----------- ----------
Net cash used in operating activities (2,178,536) (549,710)
Investing activities
Purchase of short-term investments (5,806,947) -
Purchase of property and equipment (68,681) (17,666)
Patent expenditures (18,833) (31,404)
Other (3,175) -
----------- ----------
Net cash used in investing activities (5,897,636) (49,070)
Financing activities
Proceeds from exercise of stock options and warrants 23,953,869 299,198
Increase (decrease) in line of credit borrowings (800,000) 400,000
Principle payments on note payable and capital lease
obligations (26,376) -
----------- ----------
Net cash provided by financing activities 23,127,493 699,198
----------- ----------
Net increase in cash and cash equivalents 15,051,321 100,418
Cash and cash equivalents at beginning of period 173,610 35,463
----------- ----------
Cash and cash equivalents at end of period $15,224,931 $ 135,881
=========== ==========
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
PREMIER LASER SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1: General
In the opinion of the Company's management, the accompanying unaudited
statements include all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation of the financial position of the
Company at June 30, 1997 and the results of operations and cash flows for the
three months ended June 30, 1997. Although the Company believes that the
disclosures in these financial statements are adequate to make the information
presented not misleading, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. Results of operations for
interim periods are not necessarily indicative of results of operations to be
expected for the full year.
The financial information in this quarterly report should be read in
conjunction with the March 31, 1997 financial statements and notes thereto
included in the Company's annual report filed on Form 10-K, as amended, for the
fiscal year ending March 31, 1997.
The Company has suffered recurring losses from operations and may continue
to incur losses for the foreseeable future due to the significant costs
anticipated to be incurred in connection with manufacturing, marketing and
distributing its laser products. In addition, the Company intends to conduct
continuing research and development activities, including regulatory submittals
and clinical trials to develop additional applications for its laser technology.
The Company operates in a highly competitive environment and is subject to all
of the risks inherent in new business enterprises. The Company believes the
proceeds from the exercise of its outstanding warrants and options to acquire
the Company's securities will be sufficient to meet its working capital
requirements through at least fiscal 1998.
NOTE 2: Joint Venture
The accompanying condensed consolidated financial statements include the
accounts of the Company and its 51% owned subsidiary Data.Site, LLC, which is a
joint venture established on January 31, 1997. All intercompany transactions and
balances have been eliminated.
<PAGE>
NOTE 3: Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
June 30, 1997 March 31, 1997
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<S> <C> <C>
Raw materials $1,456,274 $1,583,460
Work-in-process 235,372 101,802
Finished goods 1,534,475 1,279,370
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$3,226,121 $2,964,632
========== ==========
</TABLE>
NOTE 4: Litigation
The Company entered into an agreement with Infrared Fiber Systems, Inc.
(IFS), as a supplier of certain fiber optics that expires in the fiscal year
ending March 31, 2002. The agreement requires the supplier to sell exclusively
to the Company fiber optics for medical and dental applications as long as the
Company purchases defined minimum amounts.
In March 1994, the Company initiated litigation against IFS. The Company's
complaint alleges that IFS and two of its officers misrepresented IFS' ability
to supply optical fibers , and the IFS breached it s supply agreement and
certain warranties. In April 1994, IFS filed a cross-complaint alleging breach
of contract and intentional interference with prospective economic advantage,
seeking declaratory relief that the contract has been terminated and that IFS is
free to market its fiber optics to others. In July 1994, Coherent, Inc., a
major shareholder of IFS and a manufacturer of medical lasers which employ IFS
optical fibers, joined the lawsuit for the express purpose of defending their
rights to the IFS optical fibers. In May 1995, the Company instituted
litigation concerning this dispute in Orange County, California Superior Court
against IFS took place and while Westinghouse owned a substantial minority
interest in IFS. The complaint charges that Coherent conspired with IFS in the
wrongful conduct which is the subject of the federal lawsuit and interfered with
the Company's contracts and relations with IFS and with prospective contracts
and advantageous economic relations with third parties. The complaint asserts
that Westinghouse is liable for its employee's wrongful acts as an IFS executive
while acting within the scope of his employment at Westinghouse. The lawsuit
seeks injunctive relief and compensatory damages. In October 1995, the federal
action was stayed by order of the court in favor of the California state court
action, in which the pleadings have been amended to include all claims asserted
by the Company in the federal action. No trial date has been set.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
The Company's net sales for the quarter ended June 30, 1997 (the "1997"
Quarter") increased by 68% to $2,105,000 from $1,254,000 for the quarter ended
June 30, 1996 (the "1996 Quarter"). The increase is primarily attributable to
continued growth in sales in the dental market, and sales from the Company's 51%
owned subsidiary Data.Site, LLC ("Data.Site), offset in part by a decrease in
sales of surgical and ophthalmic products.
The year-to-year increase in sales to the dental market was predominantly
from increased demand for Argon and Diode lasers. Sales of these systems are
continuing to grow even though their growth has not been as well publicized as
the Company's receipt of clearance to market its Centauri Er:YAG laser system
for hard tissue dental procedures. Because of the timing of receipt of FDA
clearance to market the Centauri system in mid-May 1997, and the need to train
dentists prior to shipment of systems, the actual number of Centauri hard tissue
dental systems shipped to customers during the June 1997 quarter was nine.
Seven additional systems were manufacutured during the period for use as
demonstration units.
Cost of sales increased 26% to $1,296,000 in the 1997 Quarter from
$1,029,000 in the 1996 Quarter. This increase is directly attributable to the
increase in sales, and as a percentage of net sales has decreased to 61% in the
1997 Quarter from 81% in the 1996 Quarter. The increased cost of sales included
increased hiring of direct and indirect personnel for the production of the
Er:YAG dental laser for hard tissue, and by increased expenses for training of
dentists and service personnel for the hard tissue laser.
Selling and marketing expenses increased 76% to $815,000 in the 1997
Quarter from $462,000 for the 1996 Quarter. The increase was primarily
attributable to marketing and sales efforts related to the Company's dental
products and included increases in sales commissions, costs associated with the
marketing introduction of the Er:YAG laser for hard tissue, increases
in staffing in customer service and dental sales, and marketing expenses from
Data.Site.
Research and development expenses increased 304% to $513,000 in the 1997
Quarter from $127,000 in the 1996 Quarter. This net increase resulted from a
$398,000 cash reimbursement to the Company in the 1996 Quarter from a Small
Business Innovative Research Grant (SBIR) which was credited to research and
development. Without this reimbursement, research and development expenses would
have been $524,000 in the 1996 Quarter, resulting in a decrease of 2% in the
1997 Quarter. Research and development expenses relate primarily to programs
for the development of enhancements to existing products and to the development
of new products.
<PAGE>
General and administrative expenses increased 11% to $364,000 in the 1997
Quarter from $327,000 in the 1996 Quarter. The increase is primarily
attributable to expenses from Data.Site.
Net interest income increased to $170,000 in the 1997 Quarter from net
interest expense of $7,000 in the 1996 Quarter, reflecting the increased cash
available for the Company to invest, primarily from cash receipts due to the
voluntary exercise of warrants and stock options.
Net loss increased 2% to $713,000 in the 1997 Quarter from $697,000 in the
1996 Quarter. The increase was primarily attributable to the increase in sales
and marketing expenses, research and development expenses, increases in cost of
sales, and general and administrative expenses, offset in part by an increase in
interest income.
The Company's backlog of orders at June 30, 1997 stood at approximately
$3.4 million, of which $2.6 million was for Centauri hard tissue dental laser
systems. The Centauri backlog amounts include only firm orders accompanied by a
substantial cash deposit. Since commencing training classes in June 1997, the
Company has trained more than 100 dentists in hands-on in-office training
classes at five locations around the United States. In the fall, the company
plans to train up to 500 dentists per month in major cities across the United
States and Europe.
Liquidity and Capital Resources
The Company's operations have been financed through the proceeds from the
sale of the Company's equity securities, including an initial public offering in
December 1994, a secondary public offering in October 1996, the exercise of
publicly traded warrants and stock options, revenues from operations, and
proceeds from an SBIR grant. The Company's principal capital requirements
include the financing of inventory, accounts receivable, research and
development activities, the development of an ophthalmic and a surgical sales
force, the development of marketing programs and the acquisition and/or
licensing of patents.
At June 30, 1997, the Company had cash and short-term investments of
$26,050,000 and its working capital was $31,394,000. The increase in cash and
short-term investments was primarily the result of the voluntary exercise of
Class A and Class B Warrants and stock options. For the period May 12, 1997 to
June 30, 1997, the company has received approximately $23,681,000 from the
exercise of approximately 2,046,000 Class A Warrants and approximately 1,298,000
Class B Warrants. As a result of such exercises, the Company has issued
approximately an additional 2,046,000 Class B Warrants and 3,344,000 shares of
Class A Common Stock.
The Company's credit facility with Silicon Valley Bank permits borrowings
of up to $1,000,000. Borrowings under the credit facility are secured by a
Certificate of Deposit pledged to Silicon Valley Bank by the Company pursuant to
a Pledge Agreement and bear interest at prime. The line expires in February
1998. As of June 30, 1997, there were no borrowings outstanding under this
agreement.
<PAGE>
At March 31, 1997, the Company had net operating loss carryforwards for
federal income tax purposes totaling approximately $20,400,000 which will begin
to expire in fiscal 2006. The Tax Reform Act of 1986 includes provisions which
may limit the net operating loss carryforwards available for use in any given
year if certain events occur, including significant changes in stock ownership.
Utilization of the Company's net operating loss carryforwards to offset future
income may be limited.
The company's future capital requirements will depend on many factors,
including the progress of the Company's research and development activities, the
scope and results of preclinical studies and clinical trials, the costs and
timing of regulatory approvals, the rate of technology advances by the Company,
competitive conditions within the medical laser industry, the establishment of
manufacturing capacity and the establishment of collaborative marketing and
other relationships which may either involve cash infusions to the Company, or
require additional cash from the Company. The Company's ability to meet its
working capital needs will be dependent on its ability to achieve a positive
cash flow from operations and profitable operations. No assurance can be given
that the Company will be able to achieve profitable operations or a positive
cash flow from operations.
Seasonality
To date, the Company's revenues have typically been significantly higher in
the second and fourth calendar quarters. This seasonality reflects the timing
of major medical and dental industry trade shows in these quarters,
significantly reduced sales during the summer and the effect of year end tax
planning influencing the purchasing of capital equipment for depreciation during
the fourth calendar quarter. Although revenues during the summer of 1996 did
not follow this historical pattern, the Company expects this seasonality will
continue indefinitely.
Pending Acquisition of EysSys Technologies, Inc.
The Company's acquisition of Houston based EyeSys Technologies, Inc.,
announced April 24, 1997, is still pending, subject to receipt of regulatory
approvals. Subject to satisfaction of these conditions, the Company anticipates
that the acquisition will close in September 1997. The Company anticipates that
it will write off a significant portion of the purchase price as in-process
research and development. That write off is expected to be reported in the
quarter ending September 30, 1997.
Government Grants
The Company has been awarded a SBIR grant for approximately $750,000 for
the study of laser cataract emulsification. Substantially all of this grant has
been drawn for such purposes. The remainder of the grant can be drawn over the
next six months upon the achievement of specified criteria.
<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.
---------------------------------------------------
During the quarter ended June 30, 1997 the Company did not submit any
matters to a vote of the Company's shareholders.
Item 5. Other Information.
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits.
27 Financial Data Schedule
(b) Reports on Form 8-K: None
-10-
<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.
PREMIER LASER SYSTEMS, INC.
Dated: August 14, 1997 By:/s/ MICHAEL HIEBERT
-------------------
Michael Hiebert, Chief Financial Officer
(duly authorized officer)
Dated: August 14, 1997 By:/s/ MICHAEL HIEBERT
-------------------
Michael Hiebert, Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer)
-11-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 16,274,931
<SECURITIES> 9,775,235
<RECEIVABLES> 3,037,997
<ALLOWANCES> 382,198
<INVENTORY> 3,226,121
<CURRENT-ASSETS> 33,017,021
<PP&E> 1,963,773
<DEPRECIATION> 1,160,919
<TOTAL-ASSETS> 41,529,597
<CURRENT-LIABILITIES> 1,622,823
<BONDS> 0
0
0
<COMMON> 60,813,096
<OTHER-SE> 3,979,255
<TOTAL-LIABILITY-AND-EQUITY> 41,529,597
<SALES> 2,105,447
<TOTAL-REVENUES> 2,105,447
<CGS> 1,295,980
<TOTAL-COSTS> 1,692,508
<OTHER-EXPENSES> (169,786)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (713,255)
<INCOME-TAX> 0
<INCOME-CONTINUING> (713,255)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (713,255)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> 0
</TABLE>
