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.
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: 0-19671
LASERSIGHT INCORPORATED
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 65-0273162
(State of Incorporation) (IRS Employer Identification No.)
------------------------ ---------------------------------
3300 University Blvd., Suite 140, Winter Park, Florida 32792
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(407) 678-9900
--------------
(Registrant's telephone number, including area code)
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 the registrant's Common Stock outstanding as of
November 13, 2000 is 22,975,078.
<PAGE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
Except for the historical information contained herein, the discussion in this
report contains forward-looking statements (within the meaning of Section 21E of
the Exchange Act) that involve risks and uncertainties. LaserSight's actual
results could differ materially from those discussed here. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in the sections entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Uncertainties and Other Issues"
in this report and in LaserSight's Annual Report on Form 10-K for the year ended
December 31, 1999. LaserSight undertakes no obligation to update any such
factors or to publicly announce the results of any revisions to any of the
forward-looking statements contained herein to reflect any future events or
developments.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of September 30,
2000 and December 31, 1999
Condensed Consolidated Statements of Operations for the
Three Month Periods and Nine Months Periods Ended September
30, 2000 and 1999
Condensed Consolidated Statements of Cash Flows for the
Nine Months Periods Ended September 30, 2000 and 1999
Notes to Condensed Consolidated Financial Statements
Independent Auditors' Review Report
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Management's Quantitative and Qualitative Disclosures about
Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 2000 1999
------------- ------------
<S> <C> <C>
Current assets: (Unaudited)
Cash and cash equivalents $ 12,042,282 11,247,801
Accounts receivable - trade, net 12,718,904 6,400,980
Notes receivable - current portion, net 4,444,919 4,110,428
Inventories 12,664,172 8,409,823
Deferred tax assets 68,208 68,208
Other current assets 431,810 394,543
------------- ------------
Total Current Assets 42,370,295 30,631,783
Notes receivable, less current portion, net 3,027,244 2,721,229
Property and equipment, net 2,585,665 1,934,618
Patents, net 7,412,869 3,886,448
Pre-market approval application, net 2,072,590 2,754,394
Goodwill, net 5,634,764 6,028,235
Other assets, net 1,855,099 1,422,226
------------- ------------
$ 64,958,526 49,378,933
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,050,505 2,694,494
Accrued expenses 6,026,444 3,757,458
Accrued commissions 2,111,793 1,511,653
Deferred revenue 859,965 1,020,044
------------- ------------
Total Current Liabilities 15,048,707 8,983,649
Accrued expenses, less current portion 360,628 615,942
Deferred royalty revenue, less current portion -- 33,333
Deferred income taxes 68,208 68,208
Long-term obligations 107,330 100,130
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, authorized 10,000,000 shares;
par value $.001 per share
Series C - 2,000,000 issued and outstanding at
September 30, 2000 and December 31, 1999 2,000 2,000
Series D - zero and 2,000,000 issued and outstanding at
September 30, 2000 and December 31, 1999, respectively -- 2,000
Common stock - par value $.001 per share; authorized
100,000,000 shares; 23,120,278 and 18,040,313 shares issued
at September 30, 2000 and December 31, 1999, respectively 23,120 18,040
Additional paid-in capital 101,530,715 82,346,811
Issued shares held in escrow (2,936,250) (2,936,250)
Stock subscription receivable (1,140,000) (1,140,000)
Accumulated deficit (47,563,285) (38,172,283)
Less treasury stock, at cost; 145,200 common shares at
September 30, 2000 and December 31, 1999 (542,647) (542,647)
------------- ------------
49,373,653 39,577,671
------------- ------------
$ 64,958,526 49,378,933
============= ============
See accompanying notes to the condensed consolidated financial statements.
</TABLE>
3
<PAGE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED 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>
Revenues:
Products $ 7,015,856 6,108,109 25,501,779 15,343,959
Royalties 827,768 753,928 2,086,449 1,463,928
Services 165,600 79,530 577,045 283,535
------------ ------------ ------------ ------------
8,009,224 6,941,567 28,165,273 17,091,422
Cost of revenue:
Product Cost 3,407,500 2,764,541 10,968,931 7,091,528
Cost of services 99,264 34,992 303,180 124,755
------------ ------------ ------------ ------------
Gross profit 4,502,460 4,142,034 16,893,162 9,875,139
Research, development and regulatory
expenses 1,095,951 766,514 3,346,181 2,256,684
Other general and administrative expenses 5,443,899 4,349,144 16,025,028 12,147,427
Selling related expenses 2,030,860 1,634,967 5,636,986 3,828,488
Amortization of intangibles 645,672 634,071 1,963,834 1,902,213
------------ ------------ ------------ ------------
8,120,431 6,618,182 23,625,848 17,878,128
------------ ------------ ------------ ------------
Loss from operations (4,713,922) (3,242,662) (10,078,867) (10,259,673)
Other income and expenses
Interest and dividend income 206,798 247,662 709,084 541,832
Interest expense (10,065) (27,500) (21,219) (75,685)
------------ ------------ ------------ ------------
Net loss before income taxes (4,517,189) (3,022,500) (9,391,002) (9,793,526)
Income tax expense -- -- -- --
------------ ------------ ------------ ------------
Net loss $ (4,517,189) (3,022,500) (9,391,002) (9,793,526)
============ ============ ============ ============
Loss per common share
Basic and diluted: $ (0.21) (0.17) (0.46) (0.62)
============ ============ ============ ============
Weighted average number of shares
outstanding
Basic and diluted: 21,689,000 17,455,000 20,420,000 15,691,000
============ ============ ============ ============
See accompanying notes to the condensed consolidated financial statements.
</TABLE>
4
<PAGE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Cash flow from operating activities
Net loss $ (9,391,002) (9,793,526)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 2,748,935 2,430,890
Warrants issued in conjunction with consulting agreement -- 187,192
Changes in assets and liabilities:
Accounts and notes receivable (6,958,430) (1,169,238)
Inventories (4,254,349) 81,701
Accounts payable 3,356,011 592,730
Accrued expenses 2,613,812 651,630
Deferred revenue (193,412) (274,850)
Other (364,688) (434,431)
------------ ------------
Net cash used in operating activities (12,443,123) (7,727,902)
Cash flows from investing activities
Purchases of property and equipment, net (1,435,715) (493,827)
Acquisition of intangible assets (4,513,665) --
------------ ------------
Net cash used in investing activities (5,949,380) (493,827)
Cash flows from financing activities
Proceeds from common stock financing 19,102,451 8,850,000
Proceeds from exercise of stock options and
warrants and ESPP 84,533 9,637,866
Repayment of capital lease obligation -- (19,659)
------------ ------------
Net cash provided by financing activities 19,186,984 18,468,207
------------ ------------
Increase in cash and cash equivalents 794,481 10,246,478
Cash and cash equivalents, beginning of period 11,247,801 4,437,718
------------ ------------
Cash and cash equivalents, end of period $ 12,042,282 14,684,196
============ ============
See accompanying notes to the condensed consolidated financial statements.
</TABLE>
5
<PAGE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Month Periods Ended September 30, 2000 and 1999
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited, condensed consolidated financial
statements of LaserSight Incorporated and subsidiaries (LaserSight) as
of September 30, 2000, and for the three and nine month periods ended
September 30, 2000 and 1999 have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information
and note disclosures required by generally accepted accounting
principles for complete financial statements. These condensed
consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in
LaserSight's annual report on Form 10-K for the year ended December 31,
1999. In the opinion of management, the condensed consolidated
financial statements include all adjustments necessary for a fair
presentation of consolidated financial position and the results of
operations and cash flows for the periods presented. The results of
operations for the three and nine month periods ended September 30,
2000 are not necessarily indicative of the operating results for the
full year. The review report of KPMG LLP, independent auditors,
accompanies the condensed consolidated financial statements included in
Item 1 of Part I.
NOTE 2 PER SHARE INFORMATION
Basicloss per common share is computed using the weighted average
number of common shares and contingently issuable shares (to the extent
that all necessary contingencies have been satisfied). Diluted loss per
common share is computed using the weighted average number of common
shares, contingently issuable shares, and common share equivalents
outstanding during each period. Common share equivalents include
options, warrants to purchase Common Stock, and convertible Preferred
Stock and are included in the computation using the treasury stock
method if they would have a dilutive effect.
NOTE 3 INVENTORIES
Inventories, which consist primarily of excimer and erbium laser
systems and related parts and components, are stated at the lower of
cost or market. Cost is determined using the standard cost method,
which approximates costs determined on the first-in first-out basis.
The components of inventories at September 30, 2000 and December 31,
1999 are summarized as follows:
September 30, 2000 December 31, 1999
------------------ -----------------
Raw materials $ 7,525,977 6,381,980
Work-in-process 1,260,717 630,342
Finished goods 3,395,989 958,387
Test equipment - clinical trials 481,489 439,114
------------ ------------
$ 12,664,172 8,409,823
============ ============
6
<PAGE>
NOTE 4 SEGMENT INFORMATION
The Company operates principally in three operating segments:
refractive products, patent services and health care services.
Refractive product operations primarily involve the development,
manufacture, and sale of ophthalmic lasers and related devices for use
in vision correction procedures. Patent services involve the revenues
and expenses generated from the ownership of certain refractive laser
procedure patents, and health care services provides health and vision
care consulting services to hospitals, managed care companies, and
physicians.
Operating profit is total revenue less operating expenses. In
determining operating profit for operating segments, the following
items have not been considered: general corporate expenses; expenses
attributable to LaserSight Centers Incorporated a developmental stage
company; non-operating income; and the income tax expense. Identifiable
assets by operating segment are those that are used by or applicable to
each operating segment. General corporate assets consist primarily of
cash, marketable equity securities and income tax accounts.
The table below summarizes information about reported segments as of
and for the three months ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
Depreciation
Operating Operating and Capital
Revenues Profit (Loss) Assets Amortization Expenditures
-------- ------------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
2000
----
Operating segments:
Refractive products $ 7,015,856 (4,832,764) 44,244,181 671,600 625,828
Patent services 827,768 697,437 2,877,099 129,330 --
Health care services 165,600 (133,465) 3,448,237 63,571 13,843
General corporate -- (375,956) 12,048,653 2,563 --
Developmental stage
company - LaserSight
Centers -- (69,174) 2,340,356 69,174 --
------------ ------------ ------------ ------------ -----------
Consolidated total $ 8,009,224 (4,713,922) 64,958,526 936,238 639,671
============ ============ ============ ============ ===========
1999
----
Operating segments:
Refractive products $ 6,108,109 (3,074,993) 28,782,268 534,087 * 563,838
Patent services 753,928 623,645 3,432,118 129,330 --
Health care services 79,530 (218,076) 3,711,357 70,731 805
General corporate -- (504,064) 14,944,756 2,227 6,845
Developmental stage
company - LaserSight
Centers -- (69,174) 2,836,349 69,174 --
------------ ------------ ------------ ------------ -----------
Consolidated total $ 6,941,567 (3,242,662) 53,706,848 805,549 571,488
============ ============ ============ ============ ===========
</TABLE>
* Includes $423,264 reclassified from inventory related to laser systems used
for training and other internal activities.
7
<PAGE>
The table below summarizes information about reported segments as of
and for the nine months ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
Depreciation
Operating Operating and Capital
Revenues Profit (Loss) Assets Amortization Expenditures
-------- ------------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
2000
----
Operating segments:
Refractive products $ 25,501,779 (9,754,619) 44,744,181 1,983,767 1,418,129
Patent services 2,086,449 1,697,458 2,877,099 387,990 --
Health care services 577,045 (326,712) 3,448,237 206,929 17,586
General corporate -- (1,487,458) 12,048,653 7,727 --
Developmental stage
company -
LaserSight Centers -- (207,536) 2,340,356 207,522 --
------------ ------------ ------------ ------------ -----------
Consolidated total $ 28,165,273 (10,078,867) 64,958,526 2,748,935 1,435,715
============ ============ ============ ============ ===========
1999
----
Operating segments:
Refractive products $ 15,343,959 (9,099,390) 28,782,268 1,617,364 ** 904,945
Patent services 1,463,928 1,074,985 3,432,118 387,990 --
Health care services 283,535 (486,314) 3,711,357 212,193 805
General corporate -- (1,541,432) 14,944,756 5,821 11,341
Developmental stage
company -
LaserSight Centers -- (207,522) 2,836,349 207,522 --
------------ ------------ ------------ ------------ -----------
Consolidated total $ 17,091,422 (10,259,673) 53,706,848 2,430,890 917,091
============ ============ ============ ============ ===========
</TABLE>
** Includes $423,264 reclassified from inventory related to laser systems used
for training and other internal activities.
NOTE 5 ACQUISITION
Intellectual Property
On March 8, 2000, LaserSight acquired all intellectual property related
to a development project designed to provide front-to-back analysis and
total refractive measurement of the eye from Premier Laser Systems,
Inc. Of the total consideration of $4,050,000 before transaction costs,
$2,825,000 was paid at closing, $500,000 was paid in April 2000 and
$725,000 was paid in May 2000. Assets purchased included U.S. and
foreign patents and pending patent applications and an exclusive
license to nine patents that are intended to be used to complete
development of an integrated refractive diagnostic work station. The
total cost is included in the net costs of Patents and will be
amortized over the life of the patents.
8
<PAGE>
NOTE 6 LICENSE AGREEMENT
On January 18, 2000, the Company entered into a first amendment to a
keratome license and royalty agreement related to certain keratome
related products originally entered into in September 1997. Under the
terms of the amendment, the Company would have been obligated to pay
$7.6 million in cash and issue 555,552 shares of Common Stock to the
licensors. The 555,552 shares of Common Stock were placed in escrow and
are included in common shares issued and outstanding on that date. If
the Company raised equity capital totaling $15 million or more by May
31, 2000, or otherwise elected in its sole discretion to proceed with
the amendment, the shares would have been released from escrow and the
Company would have been obligated to pay the $7.6 million in cash
within the next six months. Otherwise, the shares would be returned to
the Company. In addition, the Company paid the licensors $200,000
upon execution of the amendment and $200,000 on April 1, 2000. The
amendment eliminated the restriction on the Company manufacturing,
marketing and selling other keratomes, but the sale of such other
keratomes is included in the gross profit to be shared with the
licensors. The licensor's share of the gross profit, as defined in the
agreement, would remain at 50% if the amendment was not triggered and
would have been reduced to 10% if the amendment was triggered. Through
May 31, 2000, the Company raised equity capital totaling $13.25 million
and the Company did not elect to proceed with the amendment. Effective
on such date, the shares were returned to the Company and cancelled.
In May 2000, the licensors offered to purchase $1.75 million of
LaserSight Common Stock to enable the Company to reach the target of
$15 million of total equity capital raised. The Company did not accept
such offer and filed a declaratory judgment and injunctive relief
action alleging that the offer of the licensors is an attempt to alter
the terms of the amendment and that the Company is not in breach. See
Part II, Item 1 - Legal Proceedings.
NOTE 7 LINE OF CREDIT
Revolving Credit Agreement
--------------------------
On September 15, 2000, LaserSight established a $5.0 million revolving
line of credit (Credit Agreement) with The Huntington National Bank
(Huntington). Under the Credit Agreement, LaserSight has the option to
borrow amounts at a rate per annum equal to one half of one percent
(1/2%) above the prime rate for short term working capital needs or
such other purposes as may be approved by Huntington. Borrowings are
limited to 50% of qualified accounts receivable related to U.S. sales.
The Credit Agreement requires LaserSight to maintain a specific
liquidity level and minimum tangible net worth. The terms of the Credit
Agreement extend to August 30, 2001. At September 30, 2000, LaserSight
had no outstanding borrowings under the Credit Agreement.
NOTE 8 STOCKHOLDERS' EQUITY
Private Placement
-----------------
On September 8, 2000, the Company closed a transaction for the sale of
1,714,286 shares of Common Stock to a total of two investors in
exchange for the Company receiving $6.0 million in cash. In addition,
the investors received warrants to purchase a total of 600,000 shares
of Common Stock at an exercise price of $3.60 per share.
9
<PAGE>
Independent Auditors' Review Report
The Board of Directors
LaserSight Incorporated:
We have reviewed the condensed consolidated balance sheet of LaserSight
Incorporated and subsidiaries as of September 30, 2000, and the related
condensed consolidated statements of operations and cash flows for the
three-month and nine-month periods ended September 30, 2000 and 1999. These
condensed consolidated financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with accounting principles generally accepted in the
United States of America.
We have previously audited, in accordance with auditing standards generally
accepted in the United States of America, the consolidated balance sheet of
LaserSight Incorporated and subsidiaries as of December 31, 1999, and the
related consolidated statements of operations, comprehensive loss, stockholders'
equity, and cash flows for the year then ended (not presented herein); and in
our report dated February 11, 2000, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 1999,
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
/s/ KPMG LLP
St. Louis, Missouri
October 20, 2000
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LaserSight is principally engaged in the manufacture and supply of
precision beam scanning spot technology excimer laser systems, keratomes,
keratome blades and other related products used to perform procedures that
correct common refractive vision disorders such as nearsightedness,
farsightedness and astigmatism. Since 1994, we have marketed our laser systems
commercially in over 30 countries worldwide and currently have an installed base
of over 325 laser systems, including approximately 150 of our LaserScan LSX(R)
laser systems. In March 2000, we began commercial shipments of our LaserScan LSX
laser system to customers in the U.S.
New Accounting Pronouncement
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No.
101, Revenue Recognition in Financial Statements. SAB No. 101 provides guidance
on applying generally accepted accounting principles to revenue recognition
issues in financial statements. We will adopt SAB No. 101 as required in the
fourth quarter of 2000 and are evaluating the effect, if any, that SAB No. 101
may have on our financial statements.
Results of Operations
The following table sets forth for the periods indicated information
derived from our statements of operations for those periods expressed as a
percentage of net sales, and the percentage change in such items from the
comparable prior year period. Any trends illustrated in the following table are
not necessarily indicative of future results.
<TABLE>
<CAPTION>
As a Percentage of Net Revenues Over Prior Periods
------------------------------- ------------------
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999 2000 vs. 1999 2000 vs. 1999
---- ---- ---- ---- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net Revenues:
Refractive products............ 87.6% 88.0% 90.5% 89.8% 14.9% 66.2%
Patent service................. 10.3 10.9 7.4 8.6 9.8 42.5
Healthcare services............ 2.1 1.1 2.1 1.6 108.2 103.5
----- ----- ----- ----- ----- -----
Net Revenues............... 100.0 100.0 100.0 100.0 15.4 64.8
Cost of Revenue................... 43.8 40.3 40.0 42.2 25.3 56.2
----- ----- ----- ----- ----- -----
Gross Profit (1).................. 56.2 59.7 60.0 57.8 8.7 71.1
Research, development and
regulatory expenses (2)........ 13.7 11.0 11.9 13.2 43.0 48.3
Other general and administrative
expenses....................... 67.9 62.7 56.9 71.1 25.2 31.9
Selling-related expenses (3)...... 25.4 23.6 20.0 22.4 24.2 47.2
Amortization of intangibles....... 8.1 9.1 7.0 11.1 1.8 3.2
----- ----- ----- ----- ----- -----
Loss from operations.............. (58.9) (46.7) (35.8) (60.0) 45.4 (1.8)
---------------
</TABLE>
(1) As a percentage of net revenues, the gross profit for refractive
products only for each of the three months ended September 30, 2000 and
1999, and the nine months ended September 30, 2000 and 1999, were 51%,
55%, 57% and 54%, respectively.
(2) As a percentage of refractive product net sales, research, development
and regulatory expenses for each of the three months ended September
30, 2000 and 1999, and the nine months ended September 30, 2000 and
1999, were 16%, 13%, 13% and 15%, respectively.
(3) As a percentage of refractive product net sales, selling-related
expenses for each of the three months ended September 30, 2000 and
1999, and the nine months ended September 30, 2000 and 1999, were 29%,
27%, 22% and 25%, respectively.
11
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 2000, COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999
Revenues. Net revenues for the nine months ended September 30, 2000
increased by $11.1 million, or 65%, to $28.2 million from $17.1 million for the
comparable period in 1999.
During the nine months ended September 30, 2000, refractive products
revenues increased $10.2 million, or 66%, to $25.5 million from $15.3 million
for the comparable period in 1999. This revenue increase was primarily the
result of increased sales of the LaserScan LSX due to our ability to sell laser
systems in the U.S., the higher price of the LaserScan LSX excimer laser system
and the introduction of our blade and keratome related products. See "Risk
Factors and Uncertainties--Industry and Competitive Risks--We cannot assure you
that our keratome products will achieve market acceptance, and we are
significantly dependent upon our marketing alliance with Becton Dickinson with
respect to the sale of our keratome products." During the nine months ended
September 30, 2000, excimer laser system sales accounted for approximately $22.3
million in revenues compared to $13.9 million in revenues over the same period
in 1999. During the nine months ended September 30, 2000 and 1999, respectively,
LaserScan LSX system sales accounted for 99% and 90%, respectively, of total
excimer laser system sales. During the nine months ended September 30, 2000, 68
laser systems were sold, including 32 in the U.S., compared to 52 laser system
sales over the comparable period in 1999, of which nine were sold in the U.S.
for clinical trials. Of the 68 laser systems sold in the first nine months of
2000, three were discounted sales to existing customers compared to 52 laser
systems sold that included 10 discounted sales to existing customers during the
comparable period in 1999.
Net revenues from patent services for the nine months ended September
30, 2000 increased approximately $0.6 million, or 43%, to $2.1 million from $1.5
million for the comparable period in 1999, due to increased licensing fees.
Net revenues from health care services for the nine months ended
September 30, 2000 increased approximately $0.3 million, or 104%, to $0.6
million from $0.3 million for the comparable period in 1999. This increase
primarily resulted from additional consulting services provided, partially
attributable to the two senior level consultants added during the third quarter
of 1999.
Cost of Revenue; Gross Profits. For the nine months ended September 30,
2000 and 1999, gross profit margins were 60% and 58%, respectively. The gross
margin increase during the nine months ended September 30, 2000 was primarily
attributable to increased sales of the LaserScan LSX excimer laser system and
higher patent and health care services revenues. These increased sales were
partially offset by higher raw material costs relating to the LaserScan LSX
excimer laser system and an increase in our inventory obsolescence reserve of
$0.5 million.
Research, Development and Regulatory Expense. Research, development and
regulatory expenses for the nine months ended September 30, 2000 increased $1.0
million, or 48%, to $3.3 million from $2.3 million for the comparable period in
1999. We continued to develop our keratome systems, excimer laser systems and
continued to pursue expanded FDA approvals for our refractive products. As a
result of a continuation of these efforts plus the development of new
technologies like our AstraMax(TM) diagnostic workstation, we expect research
and development expenses during the remainder of 2000 to approximate the levels
incurred during the third quarter of 2000. Regulatory expenses are expected to
remain constant as a result of our continued pursuit of FDA approvals, protocols
added during 1999 related to the potential use of our laser systems for
treatments utilizing the LASIK procedure, pre-market approval supplements added
during 2000 and the possible development of additional pre-market approval
supplements and future protocols for submission to the FDA.
Other General and Administrative Expenses. Other general and
administrative expenses for the nine months ended September 30, 2000 increased
$3.9 million, or 32%, to $16.0 million from $12.1 million for the comparable
period in 1999. This increase was due to an increase in expenses incurred at our
refractive products subsidiary of approximately $3.9 million over the comparable
period in 1999. These included enhancements primarily to the customer support
and training,sales and marketing departments, including the establishment of a
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U.S. sales department, of $2.3 million, the establishment of our European
operation of $0.4 million, higher depreciation costs of $0.3 million and $0.7
million of legal fees related to patent issues and litigation. See "Risk Factors
and Uncertainties--Financial and Liquidity Risks--If our uncollectible
receivables exceed our reserves we will incur additional unanticipated expenses,
and we may experience difficulty collecting restructured receivables with
extended payment terms."
Selling-Related Expenses. Selling-related expenses consist of those
items directly related to sales activities, including commissions on sales,
royalty or license fees, warranty expenses, and costs of shipping and
installation. Commissions and royalties, in particular, can vary significantly
from sale to sale or period to period depending on the location and terms of
each sale. Selling-related expenses for the nine months ended September 30, 2000
increased $1.8 million, or 47%, to $5.6 million from $3.8 million during the
comparable period in 1999. This increase was primarily attributable to a $0.7
million increase in sales commissions resulting from increased laser system
sales, an increase of $0.6 million in license fees primarily resulting from the
introduction of our keratome products and an increase of $0.6 million of
warranty expense primarily related to increased laser system sales. During the
third quarter of 2000, $0.3 million of keratome-related royalties resulted from
minimum royalty obligations. See "Risk Factors and Uncertainties - Company and
Business Risks - Required minimum payments under our keratome license agreement
may exceed our gross profits from sales of our keratome products."
Amortization of Intangibles. During the nine months ended September 30,
2000, costs relating to the amortization of intangible assets was $2.0 million,
approximately the same as for the comparable period in 1999. Items directly
related to the amortization of intangible assets are acquired technologies,
patents, license agreements and goodwill.
Loss From Operations. The operating loss for the nine months ended
September 30, 2000 was $10.1 million compared to the operating loss of $10.3
million for the same period in 1999. This decrease in the loss from operations
was primarily due to the increase in sales of our LaserScan LSX excimer laser
system and an improvement in the operating gain generated by our patent services
subsidiary, partially offset by an increase in other general and administrative
expenses related to our refractive products operations.
Other Income and Expense. Interest and dividend income for the nine
months ended September 30, 2000 was $0.7 million, an increase of $0.2 million
over the comparable period in 1999. Interest and dividend income was earned from
the investment of cash and cash equivalents and the collection of long-term
receivables related to laser system sales. Interest expense for the nine months
ended September 30, 2000 and 1999 was not material.
Income Taxes. For the nine months ended September 30, 2000 and 1999,
LaserSight had no income tax expense as a result of net losses.
Net Loss. Net loss for the nine months ended September 30, 2000, was
$9.4 million compared to a net loss of $9.8 million for the comparable period in
1999. The decrease in net loss for the nine months ended September 30, 2000 can
be attributed to the increase in sales of our LaserScan LSX excimer laser system
and an improvement in the operating gain generated by our patent services
subsidiary, partially offset by an increase in other general and administrative
expenses related to our refractive products operations.
Loss Per Share. The loss per basic and diluted share was $0.46 for the
nine months ended September 30, 2000 and $0.62 for the comparable period in
1999. During the nine months ended September 30, 2000, the weighted average
shares of common stock outstanding increased primarily due to private placements
of common stock and the exercise of options and warrants.
THREE MONTHS ENDED SEPTEMBER 30, 2000, COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
Revenues. Net revenues for the three months ended September 30, 2000
increased by $1.1 million, or 15%, to $8.0 million from $6.9 million for the
comparable period in 1999.
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During the three months ended September 30, 2000, refractive products
revenues increased $0.9 million, or 15%, to $7.0 million from $6.1 million for
the comparable period in 1999. This revenue increase was primarily the result of
sales of higher priced LaserScan LSX excimer laser system. During the three
months ended September 30, 2000, excimer laser system sales accounted for
approximately $6.3 million in revenues compared to $5.7 million in revenues over
the same period in 1999. During the three months ended September 30, 2000 and
1999, respectively, LaserScan LSX system sales accounted for 95% and 100%,
respectively, of total excimer laser system sales. During the three months ended
September 30, 2000, 19 laser systems were sold, including 9 in the U.S.,
compared to 19 laser system sales over the comparable period in 1999, of which
four were sold in the U.S. for clinical trials. Of the 19 laser systems sold in
the third quarter of 2000, one was a discounted sale to an existing customer
compared to 19 laser systems sold that included three discounted sales to
existing customers over the comparable period in 1999.
Net revenues from patent services for the three months ended September
30, 2000 increased approximately $0.1 million, or 10%, to $0.8 million from $0.7
million for the comparable period in 1999, due to increased licensing fees.
Net revenues from health care services for the three months ended
September 30, 2000 increased approximately $0.1 million, or 108%, to $0.2
million from $0.1 million for the comparable period in 1999. This increase
primarily resulted from additional consulting services provided, partially
attributable to the two senior level consultants added during the third quarter
of 1999.
Cost of Revenue; Gross Profits. For the three months ended September
30, 2000 and 1999, gross profit margins were 56% and 60%, respectively. The
gross margin decrease during the three months ended September 30, 2000 was
primarily attributable to higher raw material costs relating to the LaserScan
LSX excimer laser system.
Research, Development and Regulatory Expense. Research, development and
regulatory expenses for the three months ended September 30, 2000 increased $0.3
million, or 43%, to $1.1 million from $0.8 million for the comparable period in
1999. We continued to develop our keratome systems, excimer laser systems and
continued to pursue expanded FDA approvals for our refractive products. As a
result of a continuation of these efforts plus the development of new
technologies like our AstraMax diagnostic workstation, we expect research and
development expenses during the remainder of 2000 to approximate the levels
incurred during the third quarter of 2000. Regulatory expenses are expected to
remain constant as a result of our continued pursuit of FDA approvals, protocols
added during 1999 related to the potential use of our laser systems for
treatments utilizing the LASIK procedure, pre-market approval supplements added
during 2000 and the possible development of additional pre-market approval
supplements and future protocols for submission to the FDA.
Other General and Administrative Expenses. Other general and
administrative expenses for the three months ended September 30, 2000 increased
$1.1 million, or 25%, to $5.4 million from $4.3 million for the comparable
period in 1999. This increase was due to an increase in expenses incurred at our
refractive products subsidiary of approximately $1.3 million over the comparable
period in 1999. These included enhancements primarily to the customer support
and training, sales and marketing departments, including the establishment of a
U.S. sales department, of $0.9 million, the establishment of our European
operation of $0.2 million, higher depreciation costs of $0.1 million and $0.1
million of legal fees related to patent issues and litigation.
Selling-Related Expenses. Selling-related expenses consist of those
items directly related to sales activities, including commissions on sales,
royalty or license fees, warranty expenses, and costs of shipping and
installation. Commissions and royalties, in particular, can vary significantly
from sale to sale or period to period depending on the location and terms of
each sale. Selling-related expenses for the three months ended September 30,
2000 increased $0.4 million, or 24%, to $2.0 million from $1.6 million during
the comparable period in 1999. This increase was primarily attributable to a
$0.2 million increase in sales commissions resulting from higher sales and an
increase of $0.3 million in license fees primarily resulting from the
introduction of our keratome products. During the third quarter of 2000, $0.3
million of keratome-related royalties resulted from minimum royalty obligations.
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See "Risk Factors and Uncertainties - Company and Business Risks - Required
minimum payments under our keratome license agreement may exceed our gross
profits from sales of our keratome products."
Amortization of Intangibles. During the three months ended September
30, 2000, costs relating to the amortization of intangible assets was $0.6
million, approximately the same as for the comparable period in 1999. Items
directly related to the amortization of intangible assets are acquired
technologies, patents, license agreements and goodwill.
Loss From Operations. The operating loss for the three months ended
September 30, 2000 was $4.7 million compared to the operating loss of $3.2
million for the same period in 1999. This increase in the loss from operations
was primarily due to the increase in other general and administrative expenses
related to our refractive products operations.
Other Income and Expense. Interest and dividend income for the three
months ended September 30, 2000 was $0.2 million, approximately the same as for
the comparable period in 1999. Interest and dividend income was earned from the
investment of cash and cash equivalents and the collection of long-term
receivables related to laser system sales. Interest expense for the three months
ended September 30, 2000 and 1999 was not material.
Income Taxes. For the three months ended September 30, 2000 and 1999,
LaserSight had no income tax expense as a result of net losses.
Net Loss. Net loss for the three months ended September 30, 2000, was
$4.5 million compared to a net loss of $3.0 million for the comparable period in
1999. The increase in net loss for the three months ended September 30, 2000 can
be attributed to an increase in other general and administrative expenses
related to our refractive products operations.
Loss Per Share. The loss per basic and diluted share was $0.21 for the
three months ended September 30, 2000 and $0.17 for the comparable period in
1999. During the three months ended September 30, 2000, the weighted average
shares of common stock outstanding increased primarily due to the private
placements of common stock and the exercise of options and warrants.
Liquidity and Capital Resources
Our principal sources of funds have historically been from sales of
preferred stock and common stock, sales of subsidiaries and patent rights and,
to a lesser extent, our operating cash flows. We issued securities totaling
approximately $14.8 million in 1997, $15.8 million in 1998, $8.9 million in 1999
and $19.1 million to date in 2000, and received proceeds from the exercise of
stock options and warrants and purchases under our Employee Stock Purchase Plan
of approximately $98,000 in 1997, $0.5 million in 1998, $10.4 million in 1999
and $85,000 to date in 2000. In addition, we sold subsidiaries and various
patent rights, resulting in proceeds to us of approximately $10.5 million in
1997 and $12.7 million in 1998. We have principally used these capital resources
to fund operating losses, working capital requirements, capital expenditures,
acquisitions and retirement of debt. At September 30, 2000, we had an
accumulated deficit of $47.6 million.
On September 15, 2000, we established a $5.0 million revolving line of
credit (Credit Agreement) with The Huntington National Bank (Huntington). Under
the Credit Agreement, we have the option to borrow amounts at a rate per annum
equal to one half of one percent (1/2%) above the prime rate for short term
working capital needs or such other purposes as may be approved by Huntington.
Borrowings are limited to 50% of qualified accounts receivable related to U.S.
sales. The Credit Agreement requires us to maintain a specific liquidity level
and minimum tangible net worth. The terms of the credit Agreement extend to
August 30, 2001. At September 30, 2000, we had no outstanding borrowings under
the Credit Agreement.
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Our working capital increased $5.7 million from $21.6 million at
December 31, 1999 to $27.3 million as of September 30, 2000. This increase in
working capital resulted primarily from the private placements of common stock
in January, February and September 2000 and other equity transactions, which
resulted in gross proceeds of $19.2 million, offset primarily by our loss before
depreciation and amortization of $6.6 million and our acquisition of property
and intangible assets for $5.9 million.
Operating activities used net cash of $12.4 million during the nine
months ended, September 30, 2000, compared to $7.7 million of net cash used
during the same period in 1999, and $11.7 million during the year ended December
31, 1999. We expect to incur a loss and a deficit in cash flow from operations
for the fourth quarter of 2000. There can be no assurance that we can regain or
sustain profitability or positive operating cash flow in any subsequent fiscal
period. Net cash used in investing activities of $5.9 million during the nine
months ended September 30, 2000 can be attributed primarily to the purchase of
patents and property and equipment. As of September 30, 2000, we had no material
commitments for capital expenditures. Net cash provided from financing
activities during the nine months ended September 30, 2000 of $19.2 million
resulted primarily from the issuance of 3,060,316 shares of common stock in
private placements to five investors for gross proceeds of $19.3 million
(including $10.0 million from TLC).
We are currently exploring opportunities for additional debt financing
or equity financing through a private placement of our common stock. We believe
that, in addition to our existing balances of cash and cash equivalents and our
cash flows from operations, some form of equity or debt financing will be
necessary to fund our anticipated working capital requirements for the next 12
months in accordance with our current business plan. Our belief regarding future
working capital requirements is based on various factors and assumptions
including: the growth in laser sales resulting from our entrance into the U.S.
market in March 2000 with corresponding increases in accounts receivable and
inventory purchases to date, the uncertain timing of astigmatism and other
supplemental FDA approvals for our LaserScan LSX excimer laser system, which
could continue to impact our sales in the fourth quarter of 2000, the uncertain
timing of the market introduction of our UltraShaper(TM) durable keratomes,
commercial acceptance of our UltraEdge(TM) keratome blades and UniShaper(TM)
single-use keratomes, which we believe is partially dependent upon the
successful introduction of the UltraShaper, the anticipated timely collection of
receivables, and the absence of unanticipated product development and marketing
costs. See "Risk Factors and Uncertainties--Industry and Competitive Risks--We
cannot assure you that our keratome products will achieve market acceptance, and
we are significantly dependent upon our marketing alliance with Becton Dickinson
with respect to the sale of our keratome products." These factors and
assumptions are subject to certain contingencies and uncertainties, some of
which are beyond our control. Similarly, our long-term liquidity will be
dependent on the successful entrance into the U.S. market with our laser
systems, the successful entrance into U.S. and international markets of our
keratome products, and our ability to collect our receivables on a timely basis.
We may seek additional debt or equity financing in the future to implement our
business plan or any changes thereto in response to future developments or
unanticipated contingencies. Other than the $5.0 million credit facility
completed in September 2000 with Huntington, we currently do not have any
commitments for additional financing. There can be no assurance that we can
obtain financing that we believe will be necessary to finance our working
capital requirements for the next 12 months. See "Risk Factors and
Uncertainties--Financial and Liquidity Risks--We could require additional
financing which might not be available if we need it."
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RISK FACTORS AND UNCERTAINTIES
The business, results or operations and financial condition of LaserSight and
the market price of it's Common Stock may be adversely affected by a variety of
factors, including the factors listed below:
INDUSTRY AND COMPETITIVE RISKS
WE CANNOT ASSURE YOU THAT OUR LASERSCAN LSX LASER SYSTEM WILL ACHIEVE
MARKET ACCEPTANCE IN THE U.S., AND OUR BUSINESS MODEL FOR SELLING OUR LASER
SYSTEM IN THE U.S. IS NEW AND UNPROVEN.
We received the Food & Drug Administration approval necessary for the
commercial marketing and sale of our LaserScan LSX(R) excimer laser system in
the U.S. in late 1999 and commercial shipments to customers in the U.S. began in
March 2000. Our previous experience marketing and selling our LaserScan LSX
excimer laser system in the U.S. had been limited to cost-recovery sales to
refractive surgeons participating in our FDA clinical trials.
The required level of per procedure fees payable to us by refractive
surgeons may not be accepted by the marketplace or may exceed those charged by
our competitors. While we believe that gaining access to our recently-approved
scanning narrow beam laser technology justifies the required per procedure fee
levels, we cannot assure you that this business model will be accepted by a
large number of refractive surgeons. If our competitors reduce or do not charge
per procedure fees to users of their systems, we could be forced to reduce or
eliminate the fees charged under this business model, which could significantly
reduce our revenues. For example, Nidek Co., Ltd., one of our competitors, has
publicly stated that it will not charge per procedure fees to users of its laser
systems in the U.S. and internationally.
Successful implementation of this business model is crucial to our
success in selling our LaserScan LSX laser system in the U.S. and may require
the expenditure of significant financial and other resources to create awareness
of the LaserScan LSX laser system and create demand by refractive surgeons. If
our laser system fails to achieve market acceptance in the U.S., we may not be
able to execute our business plan, which would have a material adverse effect on
our business, financial condition and results of operations.
WE CANNOT ASSURE YOU THAT OUR KERATOME PRODUCTS WILL ACHIEVE MARKET
ACCEPTANCE, AND WE ARE SIGNIFICANTLY DEPENDENT UPON OUR MARKETING ALLIANCE WITH
BECTON DICKINSON WITH RESPECT TO THE SALE OF OUR KERATOME PRODUCTS.
Keratomes are surgical devices used to create a corneal flap
immediately prior to LASIK laser vision correction procedures. We began to roll
out our MicroShape(TM) family of keratome products with the commercial launch of
our UltraEdge(TM) keratome blades in July 1999 and of our UniShaper(TM)
single-use keratomes and control consoles in December 1999. We anticipate the
commercial launch of our UltraShaper(TM) durable keratomes during the fourth
quarter of 2000 or first quarter of 2001. We had previously estimated the launch
of this product during the second quarter of 2000. We cannot assure you that
there will not be further unanticipated delays in the launch of our UltraShaper
durable keratome, which has continued a process of engineering refinement and
validity testing prior to commercial release. Our UniShaper single-use keratome
was the first disposable keratome product to be commercially marketed, and we
cannot assure you that refractive surgeons, including in particular refractive
surgeons who perform a large volume of LASIK procedures, will accept our
UniShaper product as either a replacement for or a supplement to the durable
keratomes traditionally used to create corneal flaps. In our recent experience,
many surgeons are reluctant to use a disposable keratome product as their
primary keratome. Also, market acceptance of the UniShaper may be hindered by
surgeons needing to alter their surgical technique in order to achieve the
desired clinical results. Our UltraShaper durable keratome incorporates the
features found in the Automated Corneal Shaper keratome previously marketed by
Bausch & Lomb, Inc. with new enhancements and features. However, Bausch & Lomb
has not aggressively marketed or serviced the ACS since 1997 when we licensed
the rights to commercially market keratomes based on the same technology, and
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has successfully transitioned a large number of refractive surgeons from the ACS
to its Hansatome durable keratome product. We believe that many refractive
surgeons learned to perform the LASIK procedure using the ACS and prefer the
surgical technique required by the ACS, which is also used to operate our
UltraShaper durable keratome, to the surgical technique required to operate the
Hansatome keratome product. However, we cannot assure you that we will be
successful in commercially introducing or achieving broad market acceptance of
our UltraShaper durable keratome or our other keratome products.
Successful implementation of our keratome product sales strategy is
in part dependent upon our marketing and distribution alliance with Becton
Dickinson. Pursuant to our October 1999 agreement, Becton Dickinson is, subject
to limited exceptions, the exclusive distributor of our keratomes and keratome
related products in the U.S., the U.K., Ireland and Japan, and has a
non-exclusive right to distribute kits including keratome products in other
countries. While our agreement with Becton Dickinson has a five-year term, it is
subject to early termination in certain circumstances, including the failure of
Becton Dickinson to achieve minimum sales levels. If we cannot successfully
market and sell our keratome products or if our marketing and distribution
alliance with Becton Dickinson fails to benefit us as expected, we may not be
able to execute our business plan, which would have a material adverse effect on
our business, financial condition and results of operations. See also "--Company
and Business Risks--Required minimum payments under our keratome license
agreement may exceed our gross profits from sales of our keratome products."
THE VISION CORRECTION INDUSTRY CURRENTLY CONSISTS OF A FEW ESTABLISHED
PROVIDERS WITH SIGNIFICANT MARKET SHARES AND WE MAY ENCOUNTER DIFFICULTIES
COMPETING IN THIS HIGHLY COMPETITIVE ENVIRONMENT.
The vision correction industry is subject to intense, increasing
competition, and we do not know if we will be able to compete successfully
against our current and future competitors. Many of our competitors have
established products, distribution capabilities and customer service networks in
the U.S. marketplace, are substantially larger and have greater brand
recognition and greater financial and other resources than we do. Visx
Incorporated, the historical industry leader for excimer laser system sales in
the U.S., sold laser systems which performed a significant majority of the laser
vision correction procedures performed in the U.S. in 1998 and 1999. Similarly,
Bausch & Lomb sold a significant majority of the keratomes used by refractive
surgeons in the U.S. in 1998 and 1999. Two of our other competitors, Summit
Technology, Inc. and Autonomous Technology Corporation merged in April 1999 to
become Summit Autonomous Inc. The merger resulted in a combined entity with
enhanced market presence, technology base and distribution capabilities and
a narrow beam laser technology platform which will compete more directly with
our precision beam scanning spot LaserScan LSX excimer laser system. In
addition, as a result of the merger, the combined entity will be able to sell
narrow beam laser systems under a royalty-free license to certain Visx patents
without incurring the expense and uncertainty associated with intellectual
property litigation with Visx. In June 2000, Alcon Holdings, Inc., a subsidiary
of Nestle SA, acquired substantially all the outstanding stock of Summit
Autonomous Inc. through a tender offer. We anticipate that Alcon will leverage
the sale of Summit's laser systems with its other ophthalmic products.
MANY OF OUR COMPETITORS RECEIVED EARLIER REGULATORY APPROVALS THAN US
AND MAY HAVE A COMPETITIVE ADVANTAGE OVER US DUE TO THE SUBSEQUENT EXPANSION OF
THEIR REGULATORY APPROVALS AND THEIR SUBSTANTIAL EXPERIENCE IN THE U.S. MARKET.
We received the FDA approval necessary for the commercial sale of our
LaserScan LSX excimer laser system in the U.S. in November 1999, and commercial
shipments to customers in the U.S. began in March 2000. Our direct competitors
include large corporations such as Visx and Alcon Summit Autonomous, each of
whom received FDA approval of excimer laser systems more than three years ago
and has substantial experience manufacturing, marketing and servicing laser
systems in the U.S. In addition to Visx and Alcon Summit Autonomous, Nidek and
Bausch & Lomb have also received FDA approval for their laser systems.
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In the U.S., a manufacturer of excimer laser vision correction systems
gains a competitive advantage by having its systems approved by the FDA for a
wider range of treatments. Initial FDA approvals of excimer laser vision
correction systems historically have been limited to PRK treatment of low to
moderate nearsightedness, with additional approvals for other and broader
treatments granted only as a result of subsequent FDA applications and clinical
trials. Our LaserScan LSX is currently approved only for the PRK treatment of
low to moderate nearsightedness (up to -6.0 diopters) without astigmatism. In
August 2000, we received FDA approval to operate our laser systems at a 200 Hz
pulse repetition rate, twice the originally approved rate. Currently, excimer
laser vision correction systems manufactured by Visx, Alcon Summit Autonomous,
Bausch & Lomb and Nidek have been approved for higher levels of nearsightedness
than the LaserScan LSX and are also approved for the treatment of
nearsightedness with astigmatism for which the LaserScan LSX currently does not
have approval. The Visx and Alcon Summit Autonomous excimer laser systems are
also approved for the treatment of moderate farsightedness.
We have submitted an application to the FDA for approval for the
treatment of nearsightedness with astigmatism and have responded to FDA requests
for additional patient data related to our application. We anticipate FDA
approval of this application during the fourth quarter of 2000, though we cannot
ensure when the approval will be received. We have submitted an application to
the FDA to permit our laser systems sold to customers in the U.S. to include our
latest eye tracking technology and anticipate FDA approval for this application
late in the fourth quarter of 2000. In addition, by the end of November 2000, we
expect to submit an application to the FDA to permit our laser systems sold to
customers in the U.S. to utilize LASIK to treat myopic astigmatism, hyperopic
astigmatism, and mixed astigmatism. FDA approval of this application is
anticipated by the second quarter of 2001, though we cannot ensure when the
approval will be received. Our ability to sell our laser systems in the U.S. may
be severely impaired if the FDA does not timely approve our application for our
LaserScan LSX to treat nearsightedness with astigmatism, our application to
permit our laser systems sold to customers in the U.S. to include our latest eye
tracking technology, or our application to permit our laser systems sold to
customers in the U.S. to utilize LASIK to treat myopic astigmatism, hyperopic
astigmatism, and mixed astigmatism.
Alcon Summit Autonomous's Apex Plus and Ladarvision Excimer Laser
Workstations, Visx's Star S2 Excimer Laser System and Nidek's EC-5000 Excimer
Laser System have received FDA approval for the LASIK treatment of myopia
(nearsightedness) with or without astigmatism. The approvals for most of the
systems are for the correction of myopia in the range of 0 diopters to -14.0
diopters and myopia with astigmatism generally in the range of -0.5 diopters to
-5.0 diopters. Bausch & Lomb's Technolas 217 excimer laser has also received FDA
approval for the treatment of myopia up to -7.0 diopters with up to -3.0
diopters of astigmatism. These laser systems are currently the only laser
systems commercially available in the U.S. with FDA approval for use in LASIK. A
physician may decide, as part of the practice of medicine, to use a medical
device outside of its FDA-approved indications for an unapproved or "off-label"
use. Prior to these laser approvals, all LASIK procedures performed in the U.S.
with commercially available lasers were performed as the practice of medicine.
In September 2000, the FDA approved Alcon Summit Autonomous's Ladarvision system
for the correction of farsightedness of up to +6.0 diopters and an astigmatism
range of up to 6.0 diopters. In October 2000, the FDA approved Visx's Star S2
system for the correction of farsightedness of up to +5.0 diopters and an
astigmatism range of up to 4.0 diopters. Competitors' receipt of LASIK-specific
FDA regulatory approvals could give them a significant competitive advantage
which could impede our ability to successfully sell our LaserScan LSX system in
the U.S. or discourage physicians from using our or other manufacturers' lasers
off-label. Our failure to successfully market our product could have a material
adverse effect on our business, financial condition and results of operations.
All of our principal competitors in the keratome business, including
current market leader Bausch & Lomb, received FDA clearance prior to the
commercialization of our keratome products and have substantial experience
marketing their keratome products. The established market presence in the U.S.
of previously-approved laser systems and keratome products, as well as the entry
of new competitors into the market upon receipt of new or expanded regulatory
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approvals, could impede our ability to successfully introduce our LaserScan LSX
system in the U.S. and our keratome products worldwide and may have a material
adverse effect on our business, financial condition and results of operations.
WE DEPEND UPON OUR ABILITY TO ESTABLISH AND MAINTAIN STRATEGIC
RELATIONSHIPS.
We believe that our ability to establish and maintain strategic
relationships will have a significant impact on our ability to meet our business
objectives. These strategic relationships are critical to our future success
because we believe that these relationships will help us to:
o extend the reach of our products to a larger number of refractive
surgeons;
o develop and deploy new products;
o further enhance the LaserSight brand; and
o generate additional revenue.
Entering into strategic relationships is complicated because some of
our current and future strategic partners may decide to compete with us in some
or all of our markets. In addition, we may not be able to establish
relationships with key participants in our industry if they have relationships
with our competitors, or if we have relationships with their competitors.
Moreover, some potential strategic partners have resisted, and may continue to
resist, working with us until our products and services have achieved widespread
market acceptance. Once we have established strategic relationships, we will
depend on our partners' ability to generate increased acceptance and use of our
products and services. To date, we have established only a limited number of
strategic relationships, and many of these relationships are in the early stages
of development. There can be no assurance as to the terms, timing or
consummation of any future strategic relationships. If we lose any of these
strategic relationships or fail to establish additional relationships, or if our
strategic relationships fail to benefit us as expected, we may not be able to
execute our business plan, and our business will suffer.
BECAUSE THE SALE OF OUR PRODUCTS IS DEPENDENT ON THE CONTINUED MARKET
ACCEPTANCE OF LASER-BASED REFRACTIVE EYE SURGERY USING THE LASIK PROCEDURE, THE
LACK OF BROAD MARKET ACCEPTANCE WOULD HURT OUR BUSINESS.
We believe that whether we achieve profitability and growth will
depend, in part, upon the continued acceptance of laser vision correction using
the LASIK procedure in the U.S. and other countries. We cannot be certain that
laser vision correction will continue to be accepted by either the refractive
surgeons or the public at large as an alternative to existing methods of
treating refractive vision disorders. The acceptance of laser vision correction
and, specifically, the LASIK procedure may be adversely affected by:
o possible concerns relating to safety and efficacy, including the
predictability, stability and quality of results;
o the public's general resistance to surgery;
o the effectiveness and lower cost of alternative methods of
correcting refractive vision disorders;
o the lack of long-term follow-up data;
o the possibility of unknown side effects;
o the lack of third-party reimbursement for the procedures;
o the cost of the procedure; and
o possible future unfavorable publicity involving patient outcomes
from the use of laser vision correction.
Unfavorable side effects and potential complications which may result
from the use of laser vision correction systems manufactured by any manufacturer
may broadly affect market acceptance of laser-based vision correction surgery.
Potential patients may not distinguish between our precision beam scanning spot
technology and the laser technology incorporated by our competitors in their
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laser systems, and customers may not differentiate laser systems and procedures
that have not received FDA approval from FDA-approved systems and procedures.
Any adverse consequences resulting from procedures performed with a competitor's
systems or an unapproved laser system could adversely affect consumer acceptance
of laser vision correction in general. In addition, because laser vision
correction is an elective procedure which is not typically covered by insurance
and which involves more significant immediate expense than eyeglasses or contact
lenses, adverse changes in the U.S. or international economy may cause consumers
to reassess their spending choices and to select lower-cost alternatives for
their vision correction needs. Any such shift in spending patterns could reduce
the volume of LASIK procedures performed which would, in turn, reduce our
revenues from per procedure fees and sales of single-use products such as our
UniShaper keratome and our UltraEdge keratome blades.
The failure of laser vision correction to achieve continued market
acceptance could have a material adverse effect on our business prospects. Even
if laser vision correction achieves and sustains market acceptance, sales of our
keratome products could be adversely impacted if a laser procedure which does
not require the creation of a corneal flap were to emerge as the procedure of
choice.
NEW PRODUCTS OR TECHNOLOGIES COULD ERODE DEMAND FOR OUR PRODUCTS OR
MAKE THEM OBSOLETE, AND OUR BUSINESS COULD BE HARMED IF WE CANNOT KEEP PACE WITH
ADVANCES IN TECHNOLOGY.
In addition to competing with eyeglasses and contact lenses, excimer
laser vision correction competes or may compete with newer technologies such as
intraocular lenses, corneal rings and surgical techniques using different or
more advanced types of lasers. Two products that may become competitive within
the near term are implantable contact lenses, which are pending FDA approval,
and corneal rings, which have been approved by the FDA. Both of these products
require procedures with lens implants, and their ultimate market acceptance is
unknown at this time. To the extent that any of these or other new technologies
are perceived to be clinically superior or economically more attractive than
currently marketed excimer laser vision correction procedures or techniques,
they could erode demand for our excimer laser and keratome products, cause a
reduction in selling prices of such products or render such products obsolete.
In addition, if one or more competing technologies achieves broader market
acceptance or render laser vision correction procedures obsolete, it would have
a material adverse effect on our business, financial condition and results of
operations.
As is typical in the case of new and rapidly evolving industries, the
demand and market for recently-introduced products and technologies is
uncertain, and we cannot be certain that our LaserScan LSX laser system,
UniShaper single-use keratome, UltraShaper durable keratome, UltraEdge keratome
blades or future new products and enhancements will be accepted in the
marketplace. In addition, announcements or the anticipation of announcements of
new products, whether for sale in the near future or at some later date, may
cause customers to defer purchasing our existing products.
If we cannot adapt to changing technologies, our products may become
obsolete, and our business could suffer. Our success will depend, in part, on
our ability to continue to enhance our existing products, develop new technology
that addresses the increasingly sophisticated needs of our customers, license
leading technologies and respond to technological advances and emerging industry
standards and practices on a timely and cost-effective basis. The development of
our proprietary technology entails significant technical and business risks. We
may not be successful in using new technologies effectively or adapting our
proprietary technology to evolving customer requirements or emerging industry
standards.
COMPANY AND BUSINESS RISKS
WE ARE SUBJECT TO RISKS AND UNCERTAINTIES RELATING TO LITIGATION.
Visx commenced a lawsuit in November 1999 in the United States District
Court, District of Delaware, against us alleging that our LaserScan LSX laser
system infringes one of Visx's U.S. patents for equipment used in ophthalmic
surgery. The LaserScan LSX is the only laser system we are currently
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marketing and is the only laser system manufactured by us which is approved for
sale to U.S. customers. The suit requests, among other things, injunctive
relief, treble damages and attorneys' fees and expenses. Management does not
believe that our LaserScan LSX laser system infringes the asserted Visx patent.
However, we had agreed to a stay of such litigation to pursue license
negotiations with Visx in an effort to help facilitate commercialization of the
LaserScan LSX in the U.S. market. We withdrew from license negotiations with
Visx in February 2000, and after the stay of the litigation was lifted, we filed
suit against Visx, claiming non-infringement and invalidity of the Visx patent
and asserting that Visx infringes U.S. Patent No. 5,630,810 to which we hold an
exclusive license. We also began to sell and ship our LaserScan LSX laser
systems in the U.S. during March 2000.
We believe that the claims Visx has made against us are without merit
and we intend to vigorously contest them. However, if we are unsuccessful in
defending this lawsuit, we may be enjoined from manufacturing and selling our
LaserScan LSX laser system in the U.S. without a license from Visx. In addition,
we may be subject to damages for past infringement. No assurance can be given as
to whether we will be subject to such damages or, if so, the amount of damages
which we may be required to pay. In addition, such patent litigation could be
time-consuming, cause us to incur substantial expense, divert management's
attention and resources, cause product shipment delays or require us to develop
non-infringing technology or enter into license agreements in order to market
our products. Such license agreements, if required, may not be available on
acceptable terms, or at all. The outcome of patent litigation, particularly in
jury trials, is inherently uncertain, and an unfavorable outcome in the Visx
litigation could have a material adverse effect on our business, financial
condition and results of operations.
In May 2000, we filed a declaratory judgment and injunctive relief
action in the U.S. District Court, Eastern District of Virginia, Alexandria
Division in connection with our 1997 license and royalty agreement with Luis A.
Ruiz, M.D., and Sergio Lenchig. The action relates to the January 2000 amendment
to the license agreement that provided for the royalties payable under the
license agreement to be reduced in exchange for us making certain cash payments
and issuing shares of our common stock. The cash payments and stock issuance
were to be made only if we, using our reasonable best efforts, raised $15
million in capital by May 31, 2000, or if we, at our sole option, decided to
make the payments and issuance despite the fact that the $15 million had not
been raised. Less than $15 million was raised and we elected not to exercise our
option. However, Dr. Ruiz and Mr. Lenchig offered to provide the deficiency
($1.75 million) by purchase of our common stock at $10 per share, and claim that
our failure to accept their offer constitutes a material breach of the
amendment. We allege that the offer of Dr. Ruiz and Mr. Lenchig is an attempt to
alter the terms of the amendment and that we are not in breach. Dr. Ruiz and Mr.
Lenchig have filed a counterclaim alleging breach of contract and requesting
damages of $10 million. Management believes that we have satisfied our
obligations under the license agreement and the amendment and that the outcome
of this litigation will not have a material adverse effect on our business,
financial condition or results from operations. However, the outcome of
litigation is inherently uncertain, and an unfavorable outcome in this
litigation could have a material adverse effect on our business, financial
condition and results of operations. See "--Required minimum payments under our
keratome license agreement may exceed our gross profits from sales of our
keratome products."
WE WILL BE REQUIRED TO SIGNIFICANTLY EXPAND OUR U.S. MANUFACTURING
OPERATIONS TO MEET OUR BUSINESS PLAN AND MUST COMPLY WITH STRINGENT REGULATION
OF OUR MANUFACTURING OPERATIONS.
We manufacture our LaserScan LSX laser systems for sale in the U.S. at
our manufacturing facility in Winter Park, Florida, and continue to manufacture
our laser systems for sale in international markets at our manufacturing
facility in Costa Rica. Our U.S. personnel have limited experience manufacturing
laser systems. We cannot, therefore, assure you that we will not encounter
difficulties in increasing our production capacity for our laser systems at our
Florida facility, including problems involving production delays, quality
control or assurance, component supply and lack of qualified personnel. Any
products manufactured or distributed by us pursuant to FDA clearances or
approvals are subject to extensive regulation by the FDA, including
recordkeeping requirements and reporting of adverse experience with the use of
the product. Our manufacturing facilities are subject to periodic inspection by
the FDA, certain state agencies and international regulatory agencies. We
require that our key suppliers comply with recognized standards as well as our
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own quality standards, and we regularly test the components and sub-assemblies
supplied to us. Any failure by us or our suppliers to comply with applicable
regulatory requirements, including the FDA's quality systems/good manufacturing
practice (QSR/GMP) regulations, could cause production and distribution of our
products to be delayed or prohibited, either of which could have a material
adverse effect on our business, financial condition and results of operations.
REQUIRED MINIMUM PAYMENTS UNDER OUR KERATOME LICENSE AGREEMENT MAY
EXCEED OUR GROSS PROFITS FROM SALES OF OUR KERATOME PRODUCTS.
In addition to the risk that the UniShaper single-use keratome or
UltraShaper durable keratome will not be accepted in the marketplace, we are
required to make certain minimum payments to the licensor under our keratome
limited exclusive license agreement. Under the original agreement, we were
required to provide an excimer laser system and pay a total of $300,000 to the
licensor in two equal installments due six and 12 months after the date of our
receipt of the production molds for the UniShaper product. We provided the laser
system to the licensor during the quarter ended June 30, 1998, and we received
the molds in late 1999. We shipped the first UniShaper single-use keratome in
December 1999 and paid one-half of the $300,000 in July 2000. In addition,
beginning seven months after the first commercial shipment, we are required to
make royalty payments equal to 50% of our defined gross profits from the sale of
our UniShaper and UltraShaper keratomes, with a minimum royalty of $400,000 per
calendar quarter for a period of eight quarters. As a result of our obligations
under this license arrangement, the minimum royalty payments we are required to
make to the licensors may exceed our gross profits from sales of our UniShaper
and UltraShaper keratome products. On January 18, 2000, we entered into a first
amendment to a license and royalty agreement related to certain keratome related
products. Under the terms of the amendment we would have been obligated to pay
$7.6 million in cash and issue 555,552 shares of common stock to the licensors.
The 555,552 shares of common stock were placed in escrow and were included in
common shares issued and outstanding on that date. If we raised equity capital
totaling $15 million from January 18, 2000 to May 31, 2000, or we otherwise
elected in our sole discretion to proceed with the amendment, the shares would
have been released from escrow and we would have been obligated to pay $7.6
million in cash within the next six months. Because we had raised equity capital
totaling only $13.25 million, effective on May 31, 2000, the shares were
returned to us and cancelled. As a result, we believe that certain terms of the
January 2000 amendment to the license agreement was not triggered. In addition,
we paid the licensors $200,000 upon execution of the amendment and $200,000 on
April 1, 2000. The amendment eliminated the restriction on us manufacturing,
marketing and selling other keratomes, but the sale of such other keratomes is
included in the gross profit to be shared with the licensors. The licensor's
share of the gross profit, as defined in the agreement, will remain 50% as
certain provisions of the amendment were not triggered. We agreed to pay the
costs of the UniShaper final production molds.
In May 2000, the licensors offered to purchase $1.75 million of our
common stock to enable us to reach the target of $15 million of total equity
capital raised. We did not accept such offer on grounds that it was an attempt
to alter the terms of the amendment, and litigation between us and the licensors
has commenced. See "--We are subject to risks and uncertainties relating to
litigation."
OUR FAILURE TO TIMELY OBTAIN OR EXPAND REGULATORY APPROVALS FOR OUR
PRODUCTS AND TO COMPLY WITH REGULATORY REQUIREMENTS COULD ADVERSELY AFFECT OUR
BUSINESS.
Our excimer laser systems and keratome products are subject to strict
governmental regulations which materially affect our ability to manufacture and
market these products and directly impact our overall business prospects. FDA
regulations impose design and performance standards, labeling and reporting
requirements, and submission conditions in advance of marketing for all medical
laser products in the U.S. New product introductions, expanded treatment types
and levels for approved products, and significant design or manufacturing
modifications require a premarket clearance or approval by the FDA prior to
commercialization in the U.S. The FDA approval process, which is lengthy and
uncertain, requires supporting clinical studies and substantial commitments of
financial and management resources. Failure to obtain or maintain regulatory
approvals and clearances in the U.S. and other countries, or significant delays
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in obtaining these approvals and clearances, could prevent us from marketing our
products for either approved or expanded indications or treatments, which could
substantially decrease our future revenues. Additionally, product and procedure
labeling and all forms of promotional activities are subject to examination by
the FDA, and current FDA enforcement policy prohibits the marketing by
manufacturers of approved medical devices for unapproved uses. Noncompliance
with these requirements may result in warning letters, fines, injunctions,
recall or seizure of products, suspension of manufacturing, denial or withdrawal
of PMAs, and criminal prosecution. Laser products marketed in foreign countries
are often subject to local laws governing health product development processes,
which may impose additional costs for overseas product development. Future
legislative or administrative requirements, in the U.S. or elsewhere, may
adversely affect our ability to obtain or retain regulatory approval for our
products. The failure to obtain approvals for new or additional uses on a timely
basis could have a material adverse effect on our business, financial condition
and results of operations.
OUR BUSINESS DEPENDS ON OUR INTELLECTUAL PROPERTY RIGHTS, AND IF WE ARE
UNABLE TO PROTECT THEM, OUR COMPETITIVE POSITION MAY BE ADVERSELY AFFECTED.
Our business plan is predicated on our proprietary systems and
technology, including our precision beam scanning spot technology laser systems.
We protect our proprietary rights through a combination of patent, trademark,
trade secret and copyright law, confidentiality agreements and technical
measures. We generally enter into non-disclosure agreements with our employees
and consultants and limit access to our trade secrets and technology. We cannot
assure you that the steps we have taken will prevent misappropriation of our
intellectual property. Misappropriation of our intellectual property would have
a material adverse effect on our competitive position. In addition, we may have
to engage in litigation or other legal proceedings in the future to enforce or
protect our intellectual property rights or to defend against claims of
invalidity. These legal proceedings may consume considerable resources,
including management time and attention, which would be diverted from the
operation of our business, and the outcome of any such legal proceeding is
inherently uncertain.
We are aware that certain competitors are developing products that may
potentially infringe patents owned or licensed exclusively by us. In order to
protect our rights in these patents, we may find it necessary to assert and
pursue infringement claims against such third parties. We could incur
substantial costs and diversion of management resources litigating such
infringement claims and we cannot assure you that we will be successful in
resolving such claims or that the resolution of any such dispute will be on
terms that are favorable to us. See "--We are subject to risks and uncertainties
relating to litigation."
PATENT INFRINGEMENT ALLEGATIONS MAY IMPAIR OUR ABILITY TO MANUFACTURE
AND MARKET OUR PRODUCTS.
There are a number of U.S. and foreign patents covering methods and
apparatus for performing corneal surgery that we do not own or have the right to
use. If we were found to infringe a patent in a particular market, we and our
customers may be enjoined from manufacturing, marketing, selling and using the
infringing product in the market and may be liable for damages for any past
infringement of such rights. In order to continue using such rights, we would be
required to obtain a license, which may require us to make royalty, per
procedure or other fee payments. We cannot be certain if we or our customers
will be successful in securing licenses, or that if we obtain licenses, such
licenses will be available on acceptable terms. Alternatively, we might be
required to redesign the infringing aspects of these products. Any redesign
efforts that we undertake could be expensive and might require regulatory
review. Furthermore, the redesign efforts could delay the reintroduction of
these products into certain markets, or may be so significant as to be
impractical. If redesign efforts were impractical, we could be prevented from
manufacturing and selling the infringing products, which would have a material
adverse effect on our business, financial condition and results of operations.
In 1992, Summit and Visx formed a U.S. partnership, Pillar Point
Partners, to pool certain of their patents related to corneal sculpting
technologies. As part of their agreement to dissolve Pillar Point in June 1998,
Summit and Visx granted each other a worldwide, royalty free cross-license
whereby each party has full rights to license for use with its own systems all
existing patents owned by either company relating to laser vision correction. In
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connection with our March 1996 settlement of litigation with Pillar Point
regarding alleged infringement by our lasers of certain U.S. and foreign
patents, we entered into a license agreement with Visx covering various foreign
patents and patent applications pursuant to which we pay royalties to Visx and
agreed to notify Visx before we began manufacturing and selling our laser
systems in the U.S.
Litigation involving patents is common in our industry. While we do not
believe our laser systems or keratome products infringe any valid and
enforceable patents held by Visx, Alcon Summit Autonomous or any other person,
Visx has asserted that we infringe their intellectual property, and we cannot
assure you that one or more of our other competitors or other persons will not
assert that our products infringe their intellectual property, or that we will
not in the future be deemed to infringe one or more patents owned by them or
some other party. We could incur substantial costs and diversion of management
resources defending any infringement claims. Furthermore, a party making a claim
against us could secure a judgment awarding substantial damages, as well as
injunctive or other equitable relief that could effectively block our ability to
market one or more of our products. In addition, we cannot assure you that
licenses for any intellectual property of third parties that might be required
for our products will be available on commercially reasonable terms, or at all.
See "--We are subject to risks and uncertainties relating to litigation ."
WE ARE SUBJECT TO CERTAIN RISKS ASSOCIATED WITH OUR INTERNATIONAL
SALES.
Our international sales accounted for 41% and 72% of our total revenues
during the nine months and year ended September 30, 2000 and December 31, 1999,
respectively. In the future, we expect that sales to international accounts will
continue to represent a lower percentage of our total sales as a result of our
recent regulatory approval to market our LaserScan LSX laser system in the U.S.,
the anticipated commercial launch of our UltraShaper durable keratome in late
2000 or early 2001, and the recent commercial launch of our UltraEdge keratome
blades and our UniShaper single-use keratome. See "--Industry and Competitive
Risks--We cannot assure you that our keratome products will achieve market
acceptance, and we are significantly dependent upon our marketing alliance with
Becton Dickinson with respect to the sale of our keratome products." The
majority of our international revenues for the nine months ended September 30,
2000 were from customers in Korea, Mexico, and Italy, and for the year ended
December 31, 1999 were from customers in Canada, Mexico, Spain, Italy, Belgium
and France.
International sales of our products may be limited or disrupted by:
o the imposition of government controls;
o export license
requirements;
o economic or political instability;
o trade restrictions;
o difficulties in obtaining or maintaining export licenses;
o changes in tariffs; and
o difficulties in staffing and managing international operations.
Our sales have historically been and are expected to continue to be
denominated in U.S. dollars. The European Economic Union's conversion to a
common currency, the euro, is not expected to have a material impact on our
business. However, due to our significant export sales, we are subject to
exchange rate fluctuations in the U.S. dollar, which could increase the
effective price in local currencies of our products. This could result in
reduced sales, longer payment cycles and greater difficulty in collecting
receivables relating to our international sales.
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OUR SUPPLY OF CERTAIN CRITICAL COMPONENTS AND SYSTEMS MAY BE
INTERRUPTED BECAUSE OF OUR RELIANCE ON A LIMITED NUMBER OF SUPPLIERS.
We currently purchase certain components used in the production,
operation and maintenance of our laser systems and keratome products from a
limited number of suppliers and certain key components are provided by a single
vendor. For example, all of our keratome blades are manufactured exclusively by
Becton Dickinson pursuant to our agreement with them, and all of our UniShaper
single-use keratome products are manufactured exclusively by Frantz Medical
Development Ltd. pursuant to our agreement with them. We do not have written
long-term contracts with providers of some key laser system components,
including TUI Lasertechnik und Laserintegration GmbH, which currently is a
single source supplier for the laser heads used in our LaserScan LSX excimer
laser system. Currently, SensoMotoric Instruments GmbH, Teltow, Germany, is a
single source supplier for the eye tracker boards used in the LaserScan LSX. Any
interruption in the supply of critical laser or keratome components could have a
material adverse effect on our business, financial condition and results of
operations. If any of our key suppliers ceases providing us with products of
acceptable quality and quantity at a competitive price in a timely fashion, we
would have to locate and contract with a substitute supplier and, in some cases,
such substitute supplier would need to be qualified by the FDA. If substitute
suppliers cannot be located and qualified in a timely manner or could not
provide required products on commercially reasonable terms, it would have a
material adverse effect on our business, financial condition and results of
operations.
UNLAWFUL TAMPERING OF OUR SYSTEM CONFIGURATIONS COULD RESULT IN REDUCED
REVENUES.
We include a procedure counting mechanism on LaserScan LSX lasers
manufactured for sale and use in the U.S. Users of our LaserScan LSX excimer
laser system could tamper with the software or hardware configuration of the
system so as to alter or eliminate the procedure counting mechanism that
facilitates the collection of per procedure fees. Unauthorized tampering with
our procedure counting mechanism by users could result in the loss of per
procedure fees.
THE LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS.
Our ability to maintain our competitive position depends in part upon
the continued contributions of our executive officers and other key employees,
especially Michael R. Farris, our president and chief executive officer. A loss
of one or more such officers or key employees could have a material adverse
effect on our business. We do not carry "key person" life insurance on any
officer or key employee.
As we commercially launch our laser system and keratome products in the
U.S., we will need to continue to implement and expand our operational, sales
and marketing, financial and management resources and controls. While to date we
have not experienced problems recruiting or retaining the personnel necessary to
expand our business, we cannot assure you that we will not have such problems in
the future. If we fail to attract and retain qualified individuals for necessary
positions, and if we are unable to effectively manage growth in our domestic or
international operations, it could have a material adverse effect on our
business, financial condition and results of operations.
INADEQUACY OR UNAVAILABILITY OF INSURANCE MAY EXPOSE US TO SUBSTANTIAL
PRODUCT LIABILITY CLAIMS.
Our business exposes us to potential product liability risks and
possible adverse publicity that are inherent in the development, testing,
manufacture, marketing and sale of medical devices for human use. These risks
increase with respect to our products that receive regulatory approval for
commercialization. We have agreed in the past, and we will likely agree in the
future, to indemnify certain medical institutions and personnel who conduct and
participate in our clinical studies. While we maintain product liability
insurance, we cannot be certain that any such liability will be covered by our
insurance or that damages will not exceed the limits of our coverage. Even if a
claim is covered by insurance, the costs of defending a product liability,
malpractice, negligence or other action, and the assessment of damages in excess
of insurance coverage in the event of a successful product liability claim,
could have a material adverse effect on our business, financial condition and
results of operations. Further, product liability insurance may not continue to
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be available, either at existing or increased levels of coverage, on
commercially reasonable terms.
FINANCIAL AND LIQUIDITY RISKS
WE HAVE EXPERIENCED SIGNIFICANT LOSSES AND OPERATING CASH FLOW DEFICITS
AND WE EXPECT THAT OPERATING CASH FLOW DEFICITS WILL CONTINUE THROUGH AT LEAST
THE FOURTH QUARTER OF 2000.
We experienced significant net losses and deficits in cash flow from
operations for the years ended December 31, 1999 and 1998 and the nine months
ended September 30, 2000, as set forth in the following table. We cannot be
certain that we will be able to achieve or sustain profitability or positive
operating cash flow in the future.
<TABLE>
<CAPTION>
Year Ended December 31, Nine Months Ended
1998 1999 September 30, 2000
---- ---- ------------------
<S> <C> <C> <C>
Net Loss................... $11.9 million $14.4 million $ 9.4 million
Deficit in Cash Flow from
Operations.............. $14.3 million $11.7 million $12.4 million
</TABLE>
As of September 30, 2000, we had an accumulated deficit of $47.6
million.
IF OUR UNCOLLECTIBLE RECEIVABLES EXCEED OUR RESERVES WE WILL INCUR
ADDITIONAL UNANTICIPATED EXPENSES, AND WE MAY EXPERIENCE DIFFICULTY COLLECTING
RESTRUCTURED RECEIVABLES WITH EXTENDED PAYMENT terms.
Although we monitor the status of our receivables and maintain a
reserve for estimated losses, we cannot be certain that our reserves for
estimated losses, which were approximately $4.9 million at September 30, 2000,
will be sufficient to cover the amount of our actual write-offs over time. At
September 30, 2000, our net trade accounts and notes receivable totaled
approximately $20.2 million, and accrued commissions, the payment of which
generally depends on the collection of such net trade accounts and notes
receivable, totaled approximately $2.5 million. Actual write-offs that exceed
amounts reserved could have a material adverse effect on our consolidated
financial condition and results of operations. The amount of any loss that we
may have to recognize in connection with our inability to collect receivables is
principally dependent on our customer's ongoing financial condition, their
ability to generate revenues from our laser systems, and our ability to obtain
and enforce legal judgments against delinquent customers.
Our ability to evaluate the financial condition and revenue generating
ability of our prospective customers located outside of the U.S., and our
ability to obtain and enforce legal judgments against customers located outside
of the U.S., is generally more limited than for our customers located in the
U.S. Our agreements with our international customers typically provide that the
contracts are governed by Florida law. We have not determined whether or to what
extent courts or administrative agencies located in foreign countries would
enforce our right to collect such receivables or to recover laser systems from
customers in the event of a customer's payment default. When a customer is not
paying according to established terms, we attempt to communicate and understand
the underlying causes and work with the customer to resolve any issues we can
control or influence. In most cases, we have been able to resolve the customer's
issues and continue to collect our receivable, either on the original schedule
or under restructured terms. If such issues are not resolved, we evaluate our
legal and other alternatives based on existing facts and circumstances. In most
such cases, we have concluded that the account should be written off as
uncollectible.
At September 30, 2000, we had extended the original payment terms of
laser customer accounts totaling approximately $1.0 million by periods ranging
from 12 to 60 months. Such restructured receivables represent approximately 4.1%
of our gross receivables as of that date. Our liquidity and operating cash flow
would be adversely affected if additional extensions become necessary in the
future. In addition, it would be more difficult to collect laser system
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receivables if the payment schedule extends beyond the expected or actual
economic life of the system, which we estimate to be approximately five to seven
years. To date, we do not believe any payment schedule extends beyond the
economic life of the applicable laser system.
WE COULD REQUIRE ADDITIONAL FINANCING WHICH MIGHT NOT BE AVAILABLE IF
WE NEED IT.
During the nine months ended September 30, 2000 and the year ended
December 31, 1999, we experienced deficits in cash flow from operations of $12.4
million and $11.7 million, respectively. We are currently exploring
opportunities for additional debt financing or equity financing through a
private placement of our common stock. We believe that, in addition to our
existing balances of cash and cash equivalents and our cash flows from
operations, some form of equity or debt financing will be necessary to fund our
anticipated working capital requirements for the next 12 months in accordance
with our current business plan. Our belief regarding future working capital
requirements is based on various factors and assumptions including: the growth
in laser sales resulting from our entrance into the U.S. market in March 2000
with corresponding increases in accounts receivable and inventory purchases to
date, the uncertain timing of astigmatism and other supplemental FDA approvals
for our LaserScan LSX excimer laser system, which could continue to impact our
sales in fourth quarter of 2000, the uncertain timing of the market introduction
of our UltraShaper durable keratomes, commercial acceptance of our UltraEdge
keratome blades and UniShaper single-use keratomes, which we believe is
partially dependent upon the successful introduction of the UltraShaper, the
anticipated timely collection of receivables, and the absence of unanticipated
product development and marketing costs. See "--Industry and Competitive
Risks--We cannot assure you that our keratome products will achieve market
acceptance, and we are significantly dependent upon our marketing alliance with
Becton Dickinson with respect to the sale of our keratome products." These
factors and assumptions are subject to certain contingencies and uncertainties,
some of which are beyond our control. If we do not collect a material portion of
current receivables in a timely manner, or experience less market demand for our
products than we anticipate, our liquidity could be materially and adversely
affected.
In September 2000, we entered into a $5.0 million revolving credit
facility with The Huntington National Bank. We may borrow amounts under this
credit facility at an annual rate equal to 0.5% above the prime rate for
short-term working capital needs or for such other purposes as may be approved
by Huntington. Borrowings are limited to 50% of qualified accounts receivable
related to U.S. sales. The credit facility replaces a $2.5 million credit
facility that expired on June 30, 2000. The facility requires us to maintain
both a specified liquidity level and tangible net worth level.
We expect to seek additional debt or equity financing in the future to
implement our business plan or any changes thereto in response to future
developments or unanticipated contingencies. We currently do not have any
commitments for additional financing. We cannot be certain that additional
financing will be available in the future to the extent required or that, if
available, it will be on commercially acceptable terms. If we raise additional
funds by issuing equity or convertible debt securities, the terms of the new
securities could have rights, preferences and privileges senior to those of our
common stock. If we raise additional funds through debt financing, the terms of
the debt could require a substantial portion of our cash flow from operations to
be dedicated to the payment of principal and interest and may render us more
vulnerable to competitive pressures and economic downturns. If we are not able
to obtain financing necessary to meet our working capital needs, it could have a
material adverse effect on our financial condition and results of operations.
COMMON STOCK RISKS
VARIATIONS IN OUR SALES AND OPERATING RESULTS MAY CAUSE OUR STOCK PRICE
TO FLUCTUATE.
Our operating results have fluctuated in the past, and may continue to
fluctuate in the future, as a result of a variety of factors, many of which are
outside of our control. For example, historically a significant portion of our
laser system orders for a particular quarter have been received and shipped near
the end of the quarter. As a result, our operating results for any quarter often
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depend on the timing of the receipt of orders and the subsequent shipment of our
laser systems. Other factors that may cause our operating results to fluctuate
include:
o timing of regulatory approvals and the introduction or delays in
shipment of new products;
o reductions, cancellations or fulfillment of major orders;
o the addition or loss of significant customers;
o the relative mix of our business;
o changes in pricing by us or our competitors;
o costs related to expansion of our business; and
o increased competition.
As a result of these fluctuations, we believe that period-to-period
comparisons of our operating results cannot be relied upon as indicators of
future performance. In some quarters our operating results may fall below the
expectations of securities analysts and investors due to any of the factors
described above or other uncertainties.
THE MARKET PRICE OF OUR COMMON STOCK MAY CONTINUE TO EXPERIENCE EXTREME
FLUCTUATIONS DUE TO MARKET CONDITIONS THAT ARE UNRELATED TO OUR OPERATING
PERFORMANCE.
The stock market, and in particular the securities of technology
companies like us, could experience extreme price and volume fluctuations
unrelated to our operating performance. Our stock price has historically been
volatile. Factors such as announcements of technological innovations or new
products by us or our competitors, changes in domestic or foreign governmental
regulations or regulatory approval processes, developments or disputes relating
to patent or proprietary rights, public concern as to the safety and efficacy of
refractive vision correction procedures, and changes in reports and
recommendations of securities analysts, have and may continue to have a
significant impact on the market price of our common stock.
THE SIGNIFICANT NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE AND DILUTIVE
STOCK ISSUANCES MAY ADVERSELY AFFECT OUR STOCK PRICE.
Sales, or the possibility of sales, of substantial amounts of our
common stock in the public market could adversely affect the market price of our
common stock. Substantially all of our 22,975,078 shares of common stock
outstanding at November 13, 2000 were freely tradable without restriction or
further registration under the Securities Act of 1933, except to the extent such
shares are held by "affiliates" as that term is defined in Rule 144 under the
Securities Act or subject only to the satisfaction of a prospectus delivery
requirement.
Shares of common stock which we may issue in the future in connection
with acquisitions or financings or pursuant to outstanding warrants or
agreements could also adversely affect the market price of our common stock and
cause significant dilution in our earnings per share and net book value per
share. We may be required to issue more than 7,000,000 additional shares of
common stock upon the conversion of outstanding preferred stock, the exercise of
outstanding warrants and stock options, and the satisfaction of certain
contingent contractual obligations.
The anti-dilution provisions of certain of our existing securities and
obligations require us to issue additional shares if we issue shares of common
stock below specified price levels. If a future share issuance triggers these
adjustments, the beneficiaries of such provisions effectively receive some
protection from declines in the market price of our common stock, while our
other stockholders incur additional dilution of their ownership interest. We may
include similar anti-dilution provisions in securities issued in connection with
future financings.
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ANTI-TAKEOVER PROVISIONS UNDER DELAWARE LAW AND IN OUR CERTIFICATE OF
INCORPORATION, BY-LAWS AND STOCKHOLDER RIGHTS PLAN MAY MAKE AN ACQUISITION OF
LASERSIGHT MORE DIFFICULT AND COULD PREVENT YOU FROM RECEIVING A PREMIUM OVER
THE MARKET PRICE OF OUR STOCK.
Certain provisions of our certificate of incorporation, by-laws,
stockholder rights plan and Delaware law could delay or frustrate the removal of
incumbent directors, discourage potential acquisition proposals and delay, defer
or prevent a change in control of us, even if such events could be beneficial,
in the short term, to the economic interests of our stockholders. For example,
our certificate of incorporation allows us to issue preferred stock with rights
senior to those of the common stock without stockholder action, and our by-laws
require advance notice of director nominations or other proposals by
stockholders. We also are subject to provisions of Delaware corporation law that
prohibit a publicly-held Delaware corporation from engaging in a broad range of
business combinations with a person who, together with affiliates and
associates, owns 15% or more of the corporation's common stock (an interested
stockholder) for three years after the person became an interested stockholder,
unless the business combination is approved in a prescribed manner. We also have
adopted a stockholder rights agreement, or "poison pill," and declared a
dividend distribution of one preferred share purchase right for each share of
common stock. The rights would cause substantial dilution to a person or group
that attempts to acquire 15% or more of our common stock on terms not approved
by our board of directors.
ACQUISITION RISKS
PAST AND POSSIBLE FUTURE ACQUISITIONS THAT ARE NOT SUCCESSFULLY
INTEGRATED WITH OUR EXISTING OPERATIONS MAY ADVERSELY AFFECT OUR BUSINESS.
We have made several significant acquisitions since 1994, and we may in
the future selectively pursue strategic acquisitions of, investments in, or
enter into joint ventures or other strategic alliances with, companies whose
business or technology complement our business. We may not be able to identify
suitable candidates to acquire or enter into joint ventures or other
arrangements with entities, and we may not be able to obtain financing on
satisfactory terms for such activities. In addition, we could have difficulty
assimilating the personnel, technology and operations of any acquired companies,
which could prevent us from realizing expected synergies, and may incur
unanticipated liabilities and contingencies. This could disrupt our ongoing
business and distract our management and other resources.
AMORTIZATION AND CHARGES RELATING TO OUR SIGNIFICANT INTANGIBLE ASSETS
COULD ADVERSELY AFFECT OUR STOCK PRICE AND REPORTED NET INCOME OR LOSS.
Of our total assets at September 30, 2000, approximately $16.4 million,
or 25%, were goodwill or other intangible assets. Any reduction in net income or
increase in net loss resulting from the amortization of goodwill and other
intangible assets resulting from future acquisitions by us may have an adverse
impact upon the market price of our common stock. In addition, in the event of a
sale of LaserSight or our assets, we cannot be certain that the value of such
intangible assets would be recovered.
In accordance with SFAS 121, we review intangible assets for impairment
whenever events or changes in circumstances, including a history of operating or
cash flow losses, indicate that the carrying amount of an asset may not be
recoverable. If we determine that an intangible asset is impaired, a non-cash
impairment charge would be recognized. We continue to assess the current results
and future prospects of MRF, Inc., d/b/a The Farris Group (TFG), our subsidiary
which provides health care and vision care consulting services, in view of the
substantial reduction in the subsidiary's operating results in 1997. Though
TFG's operating results improved in 1998 when compared to 1997, operating losses
similar to those incurred during the first half of 1998 continued during 1999.
In 1999, two senior consultants joined who are expected to develop new business
and help lead TFG towards financial improvement during 2000. The first nine
months of 2000 reflected financial improvement over 1999. If TFG is unsuccessful
in continuing to improve its financial performance, some or all of the carrying
amount of goodwill recorded, $3.3 million at September 30, 2000, may be subject
to an impairment adjustment.
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OTHER RISKS
The risks described above are not the only risks facing LaserSight.
There may be additional risks and uncertainties not presently known to us or
that we have deemed immaterial which could also negatively impact our business
operations. If any of the foregoing risks actually occur, it could have a
material adverse effect on our business, financial condition and results of
operations. In that event, the trading price of our common stock could decline,
and you may lose all or part of your investment.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We believe that our exposure to market risk for changes in interest and
currency rates is not significant. Our investments are limited to highly liquid
instruments generally with maturities of three months or less. At September 30,
2000, we had approximately $10.8 million of short-term investments classified as
cash and equivalents. All of our transactions with international customers and
suppliers are denominated in U.S. dollars.
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Certain legal proceedings against LaserSight are described in
Item 3 (Legal Proceedings) of LaserSight's Form 10-K for the year ended
December 31, 1999.
Ruiz & Lenchig. In May 2000, LaserSight filed a declaratory
judgment and injunctive relief action in the U.S. District Court,
Eastern District of Virginia, Alexandria Division in connection with
its 1997 License and Royalty Agreement ("Agreement") with Luis A. Ruiz,
M.D. and Sergio Lenchig. The action relates to the January 2000
Amendment to the Agreement (the "Amendment") that provided for the
royalties payable under the Agreement to be reduced in exchange for
LaserSight making certain cash payments and issuing shares of
LaserSight common stock. The cash payments and stock issuance were to
be made only if LaserSight, using its reasonable best efforts, raised
$15 million in capital by May 31, 2000, or if LaserSight, at its sole
option, decided to make the payments and issuance despite the fact that
the $15 million had not been raised. Less than $15 million was raised
and LaserSight elected not to exercise its option. However, Dr. Ruiz
and Mr. Lenchig offered to provide the deficiency ($1.75 million) by
purchase of LaserSight common stock at $10 per share, and claim that
LaserSight's failure to accept their offer constitutes a material
breach of the Amendment. LaserSight did not accept the offer and filed
for a declaratory judgment on the basis that the offer was an attempt
to alter the terms of the Amendment and that LaserSight is not in
breach. Dr. Ruiz and Mr. Lenchig have filed a counterclaim alleging
breach of contract and requesting damages of $10 million. Management
believes that LaserSight has satisfied its obligations under the
Agreement and the Amendment and that the outcome of this litigation
will not have a material adverse effect on LaserSight's business,
financial condition or results from operations. However, the outcome of
litigation is inherently uncertain, and an unfavorable outcome in this
litigation could have a material adverse effect on LaserSight's
business, financial condition and results of operations. See "Part I,
Item 2--Management's Discussion and Analysis of Financial Condition and
Results of Operations--Risk Factors and Uncertainties--Financial and
Liquidity Risks--We have experienced significant losses and operating
cash flow deficits and we expect that operating cash flow deficits will
continue through at least the fourth quarter of 2000" and "-We could
require additional financing which might not be available if we need
it."
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS
a) Not applicable.
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b) Not applicable.
c) During the third quarter ended September 30, 2000, the Company sold
the following unregistered securities:
In September 2000, LaserSight closed transactions for the sale of
1,714,286 shares of Common Stock to a total of two investors in
exchange for the Company receiving $6.0 million in cash. In
addition, the investors received warrants to purchase a total of
600,000 shares of Common Stock at an exercise price of $3.60 per
share. The warrants may be exercised any time after September 8,
2000 and prior to 5:00 p.m. New York City time September 8, 2003.
Reference is made to the Securities Purchase Agreements and Warrant
Agreements filed as exhibits to LaserSight's Form 8-K filed with the
SEC on September 22, 2000, for more detailed information regarding
these private placements.
The issuance and sale of all such shares was exempt from the
registration and prospectus delivery requirements of the Securities
Act of 1933 by the virtue of Section 4(2) thereof due to, among
other things, (i) the limited number of persons to whom the shares
were issued, (ii) the distribution of disclosure documents to all
investors, (iii) the fact that each such person represented and
warranted to LaserSight, among other things, that such person was
acquiring the shares for investment only and not with a view to the
resale or distribution thereof, and (iv) the fact that certificates
representing the shares were issued with a legend to the effect that
such shares had not been registered under the Securities Act or any
state securities laws and could not be sold or transferred in the
absence of such registration or an exemption therefrom.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 OTHER INFORMATION
Not applicable.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
2.1 See Exhibits 10.1, 10.2, 10.6, 10.7, 10.16, 10.22, 10.25, 10.26, 10.30
and 10.31 and 10.56.
3.1 Certificate of Incorporation, as amended (incorporated by reference to
Exhibit 1 of Form 8-A/A (Amendment No. 5) filed by the Company on
August 1, 2000*).
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3.2 Bylaws, as amended (filed as Exhibit 3.2 to the Company's Form 8-K
filed on December 20, 1999*).
3.3 Rights Agreement, dated as of July 2, 1998, between LaserSight
Incorporated and American Stock Transfer & Trust Company, as Rights
Agent, which includes (i) as Exhibit A thereto the form of Certificate
of Designation of the Series E Junior Participating Preferred Stock,
(ii) as Exhibit B thereto the form of Right Certificate (separate
certificates for the Rights will not be issued until after the
Distribution Date) and (iii) as Exhibit C thereto the Summary of
Stockholder Rights Agreement (incorporated by reference to Exhibit 99.1
to the Form 8-K filed by the Company on July 8, 1998*).
3.4 First Amendment to Rights Agreement, dated as of March 22, 1999,
between LaserSight Incorporated and American Stock Transfer & Trust
Company, as Rights Agent (incorporated by reference to Exhibit 2 to
Form 8-A/A filed by the Company on March 29, 1999*).
3.5 Second Amendment to Rights Agreement, dated as of January 28, 2000,
between LaserSight Incorporated and American Stock Transfer & Trust
Company, as Rights Agent (incorporated by reference to Exhibit 99.6 to
Form 8-K filed by the Company on February 8, 2000*).
4.1 See Exhibits 3.1, 3.2, 3.3, 3.4, 3.5, 10.19, 10.23, 10.28, 10.29,
10.36, 10.37, 10.38, 10.39, 10.46, 10.48, 10.49, 10.50, 10.51, 10.52,
10.53, 10.54 and 10.55.
10.1 Agreement for Purchase and Sale of Stock by and among LaserSight
Centers Incorporated, its stockholders and LaserSight Incorporated
dated January 15, 1993 (filed as Exhibit 2 to the Company's Form 8-K/A
filed on January 25, 1993*).
10.2 Amendment to Agreement for Purchase and Sale of Stock by and among
LaserSight Centers Incorporated, its stockholders, and LaserSight
Incorporated dated April 5, 1993 (filed as Exhibit 2 to the Company's
Form 8-K/A filed on April 19, 1993*).
10.3 Royalty Agreement by and between LaserSight Centers Incorporated and
LaserSight Partners dated January 15, 1993 (filed as Exhibit 10.5 to
the Company's Form 10-K for the year ended December 31, 1995*).
10.4 Exchange Agreement dated January 25, 1993 between LaserSight Centers
Incorporated and Laser Partners (filed as Exhibit 10.6 to the Company's
Form 10-K for the year ended December 31, 1995*).
10.5 Stipulation and Agreement of Compromise, Settlement and Release dated
April 18, 1995 among James Gossin, Francis E. O'Donnell, Jr., J.T. Lin,
Wen S. Dai, Emanuela Dobrin-Charlton, C.H. Huang, W. Douglas Hajjar,
and LaserSight Incorporated (filed as Exhibit 10.7 to the Company's
Form 10-K for the year ended December 31, 1995*).
10.6 Agreement for Purchase and Sale of Stock dated December 31, 1993, among
LaserSight Incorporated, MRF, Inc., and Michael R. Farris (filed as
Exhibit 2 to the Company's Form 8-K filed on December 31, 1993*).
10.7 First Amendment to Agreement for Purchase and Sale of Stock by and
among MRF, Inc., Michael R. Farris and LaserSight Incorporated dated
December 28, 1995 (filed as Exhibit 10.9 to the Company's Form 10-K for
the year ended December 31, 1995*).
10.8 LaserSight Incorporated 1995 Stock Option Plan (filed as Exhibit 10.5
to the Company's Form 10-Q for the quarter ended September 30, 1995*).
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10.9 Modified Promissory Note between LaserSight Incorporated,
EuroPacific Securities Services, GmbH and Co. KG and Wolf Wiese
(filed as Exhibit 10.6 to the Company's Form 10-Q for the quarter
ended September 30, 1995*).
10.10 Patent License Agreement dated December 21, 1995 by and between Francis
E. O'Donnell, Jr. and LaserSight Centers, Inc.(filed as Exhibit 10.21
to the Company's Form 10-K for the year ended December 31, 1995*).
10.11 LaserSight Incorporated Amended and Restated 1996 Equity Incentive
Plan.
10.12 LaserSight Incorporated Amended and Restated Non-Employee Directors
Stock Option Plan.
10.13 Agreement dated September 18, 1996 between David T. Pieroni and
LaserSight Incorporated (filed as Exhibit 10.35 to the Company's Form
10-K for the year ended December 31, 1996*).
10.14 Agreement dated January 1, 1997, between International Business
Machines Corporation and LaserSight Incorporated (filed as Exhibit
10.37 to the Company's Form 10-K for the year ended December 31,
1996*).
10.15 Addendum dated March 7, 1997 to Agreement between International
Business Machines Corporation and LaserSight Incorporated (filed as
Exhibit 10.38 to the Company's Form 10-K for the year ended December
31, 1996*).
10.16 Second Amendment to Agreement for Purchase and Sale of Stock by and
among LaserSight Centers Incorporated, its stockholders and LaserSight
Incorporated dated March 14, 1997 (filed as Exhibit 99.1 to the
Company's Form 8-K filed on March 27, 1997*).
10.17 Amendment to Royalty Agreement by and between LaserSight Centers
Incorporated, Laser Partners and LaserSight Incorporated dated March
14, 1997 (filed as Exhibit 99.2 to the Company's Form 8-K filed on
March 27, 1997*).
10.18 Employment Agreement dated September 16, 1996 by and between LaserSight
Incorporated and Richard L. Stensrud (filed as Exhibit 10.41 to the
Company's Form 10-Q filed on May 9, 1997*).
10.19 Warrant to purchase 500,000 shares of Common Stock dated March 31,
1997 by and between LaserSight Incorporated and Foothill Capital
Corporation (filed as Exhibit 10.44 to the Company's Form 10-Q filed on
August 14, 1997*).
10.20 License Agreement dated May 20, 1997 by and between Visx Incorporated
and LaserSight Incorporated (filed as Exhibit 10.45 to the Company's
Form 10-Q filed on August 14, 1997*).
10.21 Patent Purchase Agreement dated July 15, 1997 by and between LaserSight
Incorporated and Frederic B. Kremer, M.D. (filed as Exhibit 2.(i) to
the Company's Form 8-K filed on August 13, 1997*).
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10.22 Agreement and Plan of Merger dated July 15, 1997 by and among
LaserSight Incorporated, Photomed Acquisition, Inc., Photomed, Inc.,
Frederic B. Kremer, M.D., Linda Kremer, Robert Sataloff, Trustee for
Alan Stewart Kremer and Robert Sataloff, Trustee for Mark Adam Kremer
(filed as Exhibit 2.(ii) to the Company's Form 8-K filed on August 13,
1997*).
10.23 Warrant to purchase 750,000 shares of Common Stock dated August 29,
1997 by and between LaserSight Incorporated and purchasers of Series B
Convertible Participating Preferred Stock of LaserSight Incorporated
(filed as Exhibit 10.39 to the Company's Form 10-Q filed on November
14, 1997*).
10.24 Independent Contractor Agreement by and between Byron Santos, M.D. and
LaserSight Technologies, Inc. (filed as Exhibit 10.42 to the Company's
Form 10-Q filed on November 14, 1997*).
10.25 Stock Purchase Agreement, dated December 30, 1997, by and among
LaserSight Incorporated, LSI Acquisition, Inc., MEC Health Care, Inc.
and Vision Twenty-One, Inc. (filed as Exhibit 2.(i) to the Company's
Form 8-K filed on January 14, 1998*).
10.26 Stock Distribution Agreement, dated December 30, 1997, by and among
LaserSight Incorporated, LSI Acquisition, Inc., MEC Health Care, Inc.
and Vision Twenty-One, Inc. (filed as Exhibit 2.(ii) to the Company's
Form 8-K filed on January 14, 1998*).
10.27 Agreement dated April 1, 1992 between International Business Machines
Corporation and LaserSight Incorporated (filed as Exhibit 10.1 on Form
10-K for the year ended December 31, 1995*).
10.28 Securities Purchase Agreement, dated June 5, 1998, by and between
LaserSight Incorporated and TLC The Laser Center, Inc. (filed as
Exhibit 99.1 to the Company's Form 8-K filed on June 25, 1998*).
10.29 Securities Purchase Agreement, dated June 12, 1998, by and between
LaserSight Incorporated and Pequot Funds (filed as Exhibit 99.5 to the
Company's Form 8-K filed on June 25, 1998*).
10.30 Letter Agreement dated September 11, 1998, amending the
Agreement and Plan of Merger dated July 15, 1997, by and among
LaserSight Incorporated, Photomed Acquisition, Inc., Photomed, Inc.,
Frederic B. Kremer, M.D., Linda Kremer, Robert Sataloff, Trustee for
Alan Stewart Kremer and Robert Sataloff, Trustee for Mark Adam Kremer
(filed as Exhibit 10.31 to the Company's Form 10-Q filed on November
16, 1998*).
10.31 Exclusive License Agreement dated August 20, 1998, by and between
LaserSight Technologies, Inc. and TLC The Laser Center Patents Inc.
(filed as Exhibit 10.32 to the Company's Form 10-Q filed on November
16, 1998*).
10.32 Purchase Agreement, dated June 9, 1997, by and between LaserSight
Technologies, Inc. and TUI Lasertechnik Und Laserintegration GmbH
(filed as Exhibit 10.1 to the Company's Form S-3, Pre-Effective
Amendment No.1 filed on February 1, 1999*).
10.33 License and Royalty Agreement, dated September 10, 1997, by and between
LaserSight Technologies, Inc. and Luis A. Ruiz, M.D. and Sergio Lenchig
(filed as Exhibit 10.2 to the Company's Form S-3, Pre-Effective
Amendment No. 1 filed on February 1, 1999*).
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10.34 Manufacturing Agreement, dated September 10, 1997, by and between
LaserSight Technologies, Inc. and Frantz Medical Development Ltd.
(filed as Exhibit 10.3 to the Company's Form S-3, Pre-Effective
Amendment No. 1 filed on February 1, 1999*).
10.35 Employment Agreement by and between LaserSight Incorporated and Michael
R. Farris dated October 30, 1998 (filed as Exhibit 10.37 to the
Company's Form 10-K filed on March 31, 1999*).
10.36 Securities Purchase Agreement by and between LaserSight Incorporated
and purchasers of Common Stock dated March 22, 1999 (filed as Exhibit
10.38 to the Company's Form 10-K filed on March 31, 1999*).
10.37 Warrant to purchase 225,000 shares of Common Stock dated March 22, 1999
by and between LaserSight Incorporated and purchasers of Common Stock
of LaserSight Incorporated (filed as Exhibit 10.39 to the Company's
Form 10-K filed on March 31, 1999*).
10.38 Warrant to purchase 67,500 shares of Common Stock dated February 22,
1999 by and between LaserSight Incorporated and Guy Numann (filed as
Exhibit 10.40 to the Company's Form 10-Q filed on May 17, 1999*).
10.39 Revolving Credit Agreement, dated September 15, 2000, by and between
LaserSight Incorporated and The Huntington National Bank.
10.40 Manufacturing and Marketing Agreement, and Addendum thereto, dated
May 14, 1999, by and between LaserSight Technologies, Inc. and Becton,
Dickinson and Company (filed as Exhibit 10.40 to the Company's Form
10-Q filed on August 11, 1999*)**.
10.41 First Amendment to Manufacturing and Marketing Agreement, dated October
23, 1999, by and between LaserSight Technologies, Inc. and Becton,
Dickinson and Company (filed as Exhibit 10.1 to the Company's 8-K,
filed on October 27, 1999*)**.
10.42 Distribution Agreement, dated October 23, 1999, by and between
LaserSight Technologies, Inc. and Becton, Dickinson and Company (filed
as Exhibit 10.2 to the Company's 8-K, filed on October 27, 1999*)**.
10.43 Employment Agreement, by and between LaserSight Technologies, Inc. and
J. Richard Crowley, dated as of July 3, 1997 (filed as Exhibit 10.43 to
the Company's Form 10-Q filed on November 15, 1999*).
10.44 Employment Agreement, by and between LaserSight Incorporated and
Michael P. Dayton, dated November 10, 1998 (filed as Exhibit 10.44 to
the Company's Form 10-Q filed on November 15, 1999*).
10.45 Relocation Agreement, by and between LaserSight Incorporated and
Gregory L. Wilson, dated October 13, 1999 (filed as Exhibit 10.45 to
the Company's Form 10-Q filed on November 15, 1999*).
10.46 Technology Development and License Agreement, dated October 23, 1999,
by and between LaserSight Technologies, Inc. and Quadrivium, L.L.C.
(filed as Exhibit 10.46 to the Company's Form 10-Q filed on November
15, 1999*).
10.47 Employment Agreement, by and between LaserSight Technologies, Inc. and
Jack T. Holladay, dated October 27, 1999 (filed as Exhibit 10.47 to the
Company's Form 10-Q filed on November 15, 1999*).
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<PAGE>
10.48 Securities Purchase Agreement by and between LaserSight Incorporated
and TLC Laser Eye Centers Inc. dated January 31, 2000 (filed as Exhibit
99.2 to the Company's Form 8-K filed on February 8, 2000*).
10.49 Registration Rights Agreement dated January 31, 2000 by and between
LaserSight Incorporated and TLC Laser Eye Centers Inc. (filed as
Exhibit 99.3 to the Company's Form 8-K filed on February 8, 2000*).
10.50 Securities Purchase Agreement by and between LaserSight Incorporated,
BayStar Capital, L.P. and BayStar International, Ltd. dated January 31,
2000 (filed as Exhibit 99.4 to the Company's Form 8-K filed on February
8, 2000*).
10.51 Registration Rights Agreement dated January 31, 2000 by and between
LaserSight Incorporated, BayStar Capital, L.P. and BayStar
International, Ltd. (filed as Exhibit 99.5 to the Company's Form 8-K
filed on February 8, 2000*).
10.52 First Amendment to License and Royalty Agreement dated as of January
18, 2000 by and between LaserSight Technologies, Inc., Luis A. Ruiz,
M.D. and Sergio Lenchig (filed as Exhibit 10.52 to the Company's Form
10-K filed on March 30, 2000*).
10.53 Registration Rights Agreement dated as of January 18, 2000 by and
between LaserSight Incorporated, Luis A. Ruiz, M.D. and Sergio Lenchig
(filed as Exhibit 10.53 to the Company's Form 10-K filed on March 30,
2000*).
10.54 Securities Purchase Agreement by and between LaserSight Incorporated,
Engmann Options, Inc. and MDNH Partners, L.P. dated February 18, 2000.
The Company undertakes to provide to the Commission upon its request
the schedules omitted from this exhibit (filed as Exhibit 10.54 to the
Company's Form 10-K filed on March 30, 2000*).
10.55 Registration Rights Agreement dated February 18, 2000 by and between
LaserSight Incorporated, Engmann Options, Inc. and MDNH Partners, L.P.
(filed as Exhibit 10.55 to the Company's Form 10-K filed on March 30,
2000*).
10.56 Technology Purchase Agreement dated as of March 8, 2000 by and between
LaserSight Technologies, Inc., Premier Laser Systems, Inc. and
Eyesys-Premier, Inc. The Company undertakes to provide to the
Commission upon its request the schedules omitted from this exhibit
(filed as Exhibit 10.56 to the Company's Form 10-K filed on March 30,
2000*).
10.57 Employment Agreement, by and between LaserSight Technologies, Inc and
Donald M. Litscher dated February 23, 2000 (filed as Exhibit 10.57 to
the Company's Form 10-Q filed on May 12, 2000*).
10.58 Employment Agreement, by and between LaserSight Technologies, Inc. and
L. Stephen Dalton dated March 6, 2000 (filed as Exhibit 10.58 to the
Company's Form 10-Q filed on May 12, 2000*).
10.59 Securities Purchase Agreement dated September 8, 2000 among
LaserSight Incorporared, BayStar Capital, L.P. and BayStar
International, Ltd. The Company undertakes to provide to the Commission
upon its request the schedules omitted from this exhibit (filed as
Exhibit 99.2 to the Company's Form 8-K filed on September 22, 2000*).
10.60 Warrant agreement dated September 8, 2000 among LaserSight Incorporated
and BayStar Capital, L.P. (filed as Exhibit 99.3 to the Company's Form
8-K filed on September 22, 2000*).
37
<PAGE>
10.61 Warrant agreement dated September 8, 2000 among LaserSight
Incorporated and BayStar International, Ltd. (filed as Exhibit 99.4 to
the Company's Form 8-K filed on September 22, 2000*).
10.62 Registration Rights Agreement dated September 8, 2000 among LaserSight
Incorporated, BayStar Capital, L.P. and BayStar International, Ltd.
(filed as Exhibit 99.5 to the Company's Form 8-K filed on September 22,
2000*).
11 Statement of Computation of Loss Per Share
15 Copy of letter from independent accountants' regarding unaudited
interim financial information
27 Financial Data Schedule
99 Press release dated November 14, 2000
b) Reports on Form 8-K
On September 22, 2000, we filed a Current Report on Form 8-K
including a press release describing our private placement and a
company update.
---------------------------
*Incorporated herein by reference. File No. 0-19671.
**Confidential treatment has been granted for portions of this document. The
redacted material has been filed separately with the commission.
38
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the undersigned have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LaserSight Incorporated
Dated: November 14, 2000 By: /s/ Michael R. Farris
------------------------------
Michael R. Farris,
Chief Executive Officer
Dated: November 14, 2000 By: /s/ Gregory L. Wilson
------------------------------
Gregory L. Wilson,
Chief Financial Officer
39
