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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: March 27, 2000 Commission File No. 1-11388
(Date of earliest event reported)
PLC SYSTEMS INC.
(Exact name of Registrant as specified in its Charter)
Yukon Territory, Canada 04-3153858
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
10 Forge Park, Franklin, Massachusetts 02038
(Address of principal executive offices) (Zip Code)
(508) 541-8800
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
The Risk Factors filed with this Current Report on Form 8-K as Exhibit
99.1 are incorporated herein by reference.
ITEM 7. EXHIBITS
99.1 Risk Factors dated March 27, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 27, 2000 PLC SYSTEMS INC.
/s/ James G. Thomasch
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James G. Thomasch
Senior Vice President, Finance and
Administration
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INDEX TO EXHIBITS
Exhibit
No. Description
- -------- ------------
99.1 Risk Factors dated March 27, 2000.
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EXHIBIT 99.1
PLC SYSTEMS INC.
RISK FACTORS
MARCH 27, 2000
The conduct of our business involves a number of risks and
uncertainties, including without limitation the risks set forth below and the
other risks identified in our filings with the Securities and Exchange
Commission. Certain of the statements set forth below may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. We may be making forward looking statements when
we make statements that include the words "believes," "expects," "anticipates"
or similar expressions. You should read these statements with caution, because
our actual results could differ materially from the forward-looking statements.
These differences could result from many factors, including those set forth
below. We make no commitment to disclose any revisions to forward-looking
statements, or of any facts, events or circumstances that may occur after the
date of these Risk Factors that may have an impact on our forward-looking
statements.
OUR COMPANY HAS A LIMITED OPERATING HISTORY AND A HISTORY OF LOSSES
PLC Systems Inc. was founded in 1987. We have incurred operating losses
in every year of our existence except 1995. We have incurred net losses of
$6,555,000 for the year ended December 31, 1999, $16,603,000 for the year ended
December 31, 1998 and $14,404,000 for the year ended December 31, 1997. As of
December 31, 1999, we had an accumulated deficit of $74,691,000. We have not
achieved profitability and expect to continue to incur net losses for at least
the next fiscal year. Moreover, although our business is not seasonal in nature,
our revenues tend to vary significantly from fiscal quarter to fiscal quarter.
OUR COMPANY IS DEPENDENT ON ONE PRINCIPAL PRODUCT
We develop and market one principal product: a patented high-powered
carbon dioxide laser system known as The Heart Laser System. Approximately 89%
of our revenue in the fiscal year ended December 31, 1999 and 90% in the fiscal
year ended December 31, 1998 was derived from The Heart Laser System.
OUR COMPANY MAY BE UNABLE TO RAISE NEEDED FUNDS
As of December 31, 1999, we had cash and cash equivalents totaling
$4,467,000, a decrease of $379,000 from the balance of $4,846,000 we had as
of December 31, 1998. Based on our current operating plan, we anticipate that
our existing capital resources, together with cash from operations, should be
sufficient to meet our working capital requirements over the next twelve
months. If our business does not progress in accordance with our current
business plan, we may need to raise additional funds. We are currently
exploring a number of alternatives to raise additional capital. We may not be
able to raise additional capital upon satisfactory terms or at all, and our
business, financial condition and results of operations could be materially
and adversely affected. To the extent that we raise additional capital by
issuing equity or convertible securities, ownership dilution to our
stockholders will result.
IN ORDER TO COMPETE EFFECTIVELY, THE HEART LASER SYSTEM NEEDS TO GAIN COMMERCIAL
ACCEPTANCE
The Heart Laser System is designed for use in the treatment of coronary
artery disease in a surgical laser procedure we pioneered known as
transmyocardial revascularization. Transmyocardial revascularization is commonly
referred to in our industry as "TMR." TMR is a new technology that is only
recently becoming known. We may never achieve widespread commercial acceptance.
To be successful, we
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need to:
- - demonstrate to the medical community in general, and to heart surgeons
and cardiologists in particular, that TMR procedures and The Heart
Laser System are effective, relatively safe and cost effective;
- - train heart surgeons to perform TMR procedures using The Heart Laser
System; and
- - obtain widespread insurance reimbursement for the TMR procedure.
To date, we have trained only a limited number of heart surgeons and will need
to expand our marketing and training capabilities.
Although The Heart Laser System has received FDA approval and the CE
Mark, it has not yet received widespread commercial acceptance. If we are unable
to maintain regulatory approvals or to achieve widespread commercial acceptance
of The Heart Laser System, our business, financial condition and results of
operations will be materially and adversely affected.
RESULTS OF LONG-TERM CLINICAL STUDIES MAY ADVERSELY AFFECT OUR BUSINESS
Patients have only been treated with The Heart Laser System since
January 1990, and, as a result, there have been few long-term follow-up studies.
If patients suffer harmful, long-term consequences from The Heart Laser System,
our business, financial condition and results of operations will be materially
and adversely affected.
RAPID TECHNOLOGICAL CHANGES IN OUR INDUSTRY COULD MAKE THE HEART LASER SYSTEM
OBSOLETE
Our industry is characterized by rapid technological change and intense
competition. New technologies and products and new industry standards will
develop at a rapid pace. They could make The Heart Laser System obsolete. The
advent of new devices and procedures and advances in new drugs and genetic
engineering are especially threatening. Our future success will depend upon our
ability to develop and introduce product enhancements to address the needs of
our customers. Material delays in introducing product enhancements may cause
customers to forego purchases of our product and purchase those of our
competitors.
Many of our competitors have substantially greater financial
resources and are in a better financial position to exploit marketing and
research and development opportunities. Our competitors' products use
different types of lasers than we use in The Heart Laser System, including
holmium and excimer lasers that may gain more widespread market acceptance
than The Heart Laser System. In addition, we believe that several companies
are attempting to develop less invasive methods of performing TMR procedures.
These new methods may eliminate the need to make an incision in the patient's
chest, reducing costs and speeding recovery. These new technologies and
methods may erode the potential TMR market, which could have a material
adverse effect on our business, financial condition and results of operations.
WE MUST RECEIVE AND MAINTAIN GOVERNMENT APPROVAL IN ORDER TO MARKET OUR PRODUCT
GENERAL
The Heart Laser System and our manufacturing activities are subject to
extensive, rigorous and changing federal and state regulation in the United
States and to similar regulatory requirements in other
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major markets, including the European Community and Japan. To date, we have
received regulatory approval in the United States and the European Community
(excluding France), but not in Japan. Without regulatory approval, we cannot
market The Heart Laser System in Japan. Even if granted, regulations may
significantly restrict the use of The Heart Laser System. The process of
obtaining and maintaining required regulatory approval is lengthy, expensive and
uncertain.
UNITED STATES -- ALTHOUGH WE HAVE RECEIVED FDA APPROVAL, THE FDA HAS
RESTRICTED THE USE OF THE HEART LASER SYSTEM AND COULd REVERSE ITS APPROVAL AT
ANY TIME
In August 1998, we received FDA approval to market a laser system for
TMR procedures. However, the FDA:
- - has not allowed us to market The Heart Laser System to treat patients
whose condition is amenable to conventional treatments, such as heart
bypass surgery and angioplasty; and
- - could reverse its ruling and prohibit use of The Heart Laser System at
any time.
EUROPE -- ALTHOUGH WE HAVE THE ABILITY TO MARKET OUR PRODUCT IN THE
EUROPEAN COMMUNITY, MEMBERS OF THE EUROPEAN COMMUNITY COULD, AND FRANCE HAS,
PROHIBITED COMMERCIAL USE OF THE HEART LASER SYSTEM
The Heart Laser System received the CE Mark from the European
Community in 1995. However:
- - the European Community could reverse its ruling and prohibit use of The
Heart Laser System at any time;
- - we cannot market The Heart Laser System in France; and
- - other European Community countries could prohibit or restrict use of
The Heart Laser System.
Despite receiving the CE Mark, The French Ministry of Health instituted a
commercial moratorium on TMR procedures in October 1997. In its opinion, the
procedure is considered to be experimental and should only be performed within
the context of a clinical study. An evaluation of the safety of The Heart Laser
System is currently under review by a panel of French experts. There can be no
assurance that this moratorium will be lifted on a timely basis or at all.
ASIA -- WE CANNOT MARKET OUR PRODUCT IN MAJOR ASIAN MARKETS UNTIL WE
RECEIVE GOVERNMENT APPROVAl
We believe that Japan represents the largest potential market for The
Heart Laser System in Asia. Prior to marketing The Heart Laser System in Japan,
we must receive approval from the Japanese Government. This approval requires a
clinical study in Japan with at least 60 patients. This study was completed in
1998. Although the results of this study have been submitted to the Japanese
Government, we do not know whether the clinical study will be sufficient or
when, if ever, we will receive approval to sell The Heart Laser System in Japan.
Additional regulatory applications are pending in Taiwan. We cannot be
sure when, if at all, we will obtain regulatory approval in any particular
country.
ASSERTING AND DEFENDING INTELLECTUAL PROPERTY RIGHTS MAY IMPACT OUR RESULTS OF
OPERATIONS
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In our industry, competitors often assert intellectual property
infringement claims against one another. The success of our business depends on
our ability to successfully defend our intellectual property. Future litigation
may have a material impact on our financial condition even if we are successful
in marketing The Heart Laser System. We may not be successful in defending or
asserting our intellectual property rights.
An adverse outcome in any litigation or interference proceeding could
subject us to significant liabilities to third parties and require us to cease
using the technology that is at issue or to license the technology from third
parties. In addition, a finding that any of our intellectual property is invalid
could allow our competitors to more easily and cost-effectively compete with us.
Thus, an unfavorable outcome in any patent litigation or interference proceeding
could have a material adverse effect on our business, financial condition or
results of operations.
The cost to us of any patent litigation or interference proceeding
could be substantial. Uncertainties resulting from the initiation and
continuation of patent litigation or interference proceedings could have a
material adverse effect on our ability to compete in the marketplace. Patent
litigation and interference proceedings may also absorb significant management
time.
WE MAY BE SUBJECT TO PRODUCT LIABILITY LAWSUITS; OUR INSURANCE MAY NOT BE
SUFFICIENT TO COVER DAMAGES
We may be subject to product liability claims. The United States
Supreme Court has stated that compliance with FDA regulations will not shield a
company from common-law negligent design claims or manufacturing and labeling
claims based on state rules. Such claims may absorb significant management time
and could degrade the reputation of PLC and the marketability of The Heart Laser
System. If product liability claims are made with respect to our products, we
may need to recall the implicated product which could have a material adverse
effect on our business, financial condition and results of operations. In
addition, although we maintain product liability insurance with a per claim and
yearly aggregate maximum of $10 million, subject to a $50,000 per occurrence and
$250,000 aggregate self-insured deductible, we cannot be sure that our insurance
will be adequate to cover potential product liability lawsuits. Our insurance is
expensive and in the future may not be available on acceptable terms, if at all.
If a successful product liability claim or series of claims exceeded our
insurance coverage, it could have a material adverse effect on our business,
financial condition and results of operations.
WE ARE DEPENDENT ON CERTAIN SUPPLIERS
We believe that some of the components for our laser systems, most notably
the laser head, may only be available from one or a limited number of
suppliers. Any interruption in supply from these suppliers could prevent us
from meeting commercial demands for The Heart Laser System, which could have
a material adverse effect on our business, financial condition and results of
operations.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
A portion of our product sales are generated from operations outside of the
United States. Establishing and expanding international sales can be
expensive. Managing and overseeing foreign operations may be difficult and
products may not receive market acceptance. Risks of doing business outside
the U.S. include the following: agreements may be difficult to enforce and
receivables difficult to collect through a foreign country's legal system;
foreign customers may have longer payment cycles; foreign countries may
impose additional withholding taxes or otherwise tax PLC's foreign income,
impose tariffs or adopt other restrictions on foreign trade; U.S. export
licenses may be difficult to obtain;
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and the protection of intellectual property in foreign countries may be more
difficult to enforce. There can be no assurance that our international business
will grow or that any of the foregoing risks will not result in a material
adverse effect on PLC.
WE HAVE BEEN SUED FOR ALLEGED VIOLATIONS OF SECURITIES LAW
In July 1997, an FDA advisory panel recommended against approval of our
application to market The Heart Laser System. Following this recommendation, we
were named as defendant in 21 purported class action lawsuits filed between
August 1997 and November 1997 in the United States District Court for the
District of Massachusetts. The lawsuits seek an unspecified amount of damages in
connection with alleged violations of the federal securities laws based on our
failure to obtain a favorable FDA panel recommendation in 1997. Nineteen of
these complaints have been consolidated by the court into a single action for
pretrial purposes and two suits were voluntarily dismissed. The Company moved to
dismiss all of the remaining claims. On March 26, 1999, the court issued an
order dismissing some, but not all of the remaining claims. The parties both
filed motions for reconsideration and on October 12, 1999, the court dismissed
additional, but not all remaining claims. We cannot make a meaningful estimate
of the amount or range of loss that could result from an unfavorable outcome of
these lawsuits. We may not be able to pay the amount of any judgment against us.
An unfavorable outcome in this litigation could have a material adverse effect
on our business, financial position and results of operations.
BECAUSE WE ARE INCORPORATED IN CANADA, YOU MAY NOT BE ABLE TO ENFORCE JUDGMENTS
AGAINST US AND OUR CANADIAN DIRECTORS
Under Canadian law, you may not be able to enforce a judgment issued by
courts in the United States against us or our Canadian directors. The status of
the law in Canada is unclear as to whether a U.S. citizen can enforce a judgment
from a U.S. court in Canada for violations of U.S. securities laws. A separate
suit may need to be brought directly in Canada.
ANTITAKEOVER PROVISIONS MAY PREVENT YOU FROM REALIZING A PREMIUM RETURN
Provisions of Canadian law could make it more difficult for a third
party to acquire us, even if the acquisition would be beneficial to you.
Specifically, Canadian law requires any person who makes a tender offer that
would increase the person's stock ownership to more than 20% of our outstanding
common stock to make a tender offer for all of our common stock. These
provisions could prevent you from realizing the premium return that stockholders
may realize in conjunction with corporate takeovers.
In addition, the Company has three classes of directors, with
approximately one-third elected each year for a three-year term. These
provisions may have the effect of delaying or preventing a corporate takeover or
a change in our management. This could adversely affect the market price of your
common stock.
THE MARKET PRICE OF OUR STOCK MAY FALL IF OTHER STOCKHOLDERS SELL THEIR STOCK
If our stockholders sell substantial amounts of our common stock in the
public market, the market price of our common stock could fall. Such sales also
might make it more difficult for us to sell equity or equity-related securities
in the future at a price we deem appropriate.
THE VALUE OF YOUR COMMON STOCK MAY DECREASE IF OTHER SECURITY HOLDERS EXERCISE
THEIR OPTIONS AND WARRANTS
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As shown in the table below, we have reserved an additional 3,023,026
shares of common stock for future issuance upon exercise or conversion of
outstanding options and redeemable warrants.
<TABLE>
<CAPTION>
Range of Exercise/ Weighted Average Shares Reserved
Conversion Prices Exercise/ for Future
----------------- Conversion Price Issuance
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<S> <C> <C> <C>
Options $2.00 - $8.88 $3.84 2,868,162
Redeemable Warrants $15.78 - $27.81 $21.33 154,864
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Total 3,023,026
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We may issue additional options and warrants in the future. If any of these
securities are exercised, you may experience significant dilution in the market
value and earnings per share of your common stock.
WE HAVE NO INTENTION TO PAY DIVIDENDS
We have never paid any cash dividends on our common stock. We currently
intend to retain all future earnings, if any, for use in our business and do not
expect to pay any dividends in the foreseeable future.
OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN
FORWARD-LOOKING STATEMENTS
This annual report and information incorporated by reference contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements deal with our current plans and expectations and
involve known and unknown risks and uncertainties. Statements containing terms
such as:
- - believes,
- - does not believe,
- - plans,
- - expects,
- - intends,
- - estimates,
- - anticipates,
and other phrases of similar meaning are considered to contain uncertainty and
are forward-looking statements. No forward-looking statement is a guarantee of
future performance. Our actual results could differ materially from those
anticipated in these forward-looking statements. You should not place undue
reliance on any forward-looking statement.
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