SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 27, 1999
Palomar Medical Technologies, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
Delaware 0-22340 04-3128178
- -----------------------------------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
</TABLE>
45 Hartwell Avenue, Lexington, Massachusetts 02421-3102
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 781-676-7300
- --------------------------------------------------------------------------------
Not Applicable
------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On April 27, 1999, Palomar Medical Technologies, Inc. ("Palomar") sold
its majority-owned subsidiary Star Medical Technologies, Inc., a California
corporation ("Star"), to Coherent, Inc. pursuant to an Agreement and Plan of
Reorganization among Star, Coherent, three other shareholders of Star and
Palomar (the "Agreement"). Coherent's wholly-owned subsidiary, Medical
Technologies Acquisition, Inc., was merged with and into Star, with Star
remaining as the surviving corporation.
The total purchase price for all of the issued and outstanding capital
stock of Star was $65 million, paid in cash. The purchase price was paid to
shareholders of Star in proportion to their holdings of the capital stock of
Star. On the date of the sale Palomar owned 82.46% of Star. Palomar received
gross proceeds of $49,686,070, of which $3,254,908 will be held in escrow for
one year as security for any claims which Coherent may have under the Agreement.
The information that is set forth in Palomar's press release dated
April 27, 1999, which is attached to this Current Report as an exhibit, is
incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(a) Pro Forma Financial Information.
Index
<TABLE>
<S> <C> <C>
Introduction 2
Pro Forma Consolidated Condensed Balance Sheet as of December 31, 1998 3
Pro Forma Consolidated Condensed Statement of Operations for the year ended
December 31, 1998 4
Notes to Pro Forma Consolidated Condensed Balance Sheet as of December 31, 1998
and Pro Forma Consolidated Condensed Statement of Operations for the
year ended December 31, 1998 5
</TABLE>
1
<PAGE>
INTRODUCTION TO PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1998
AND
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR
THE YEAR ENDED DECEMBER 31, 1998
On December 7, 1998, Palomar Medical Technologies, Inc. ("Palomar" or
the "Company") entered into an Agreement and Plan of Reorganization to sell all
of the issued and outstanding shares of common stock of its majority-owned Star
subsidiary to Coherent for $65,000,000 in cash. On the date of the sale,
following the exercise of outstanding options to purchase 625,507 shares of
Star's common stock at exercise prices ranging from $2.50 per share to $19.00
per share, Palomar's ownership percentage of Star was 82.46%. The stockholders
of Palomar approved the sale on April 21, 1999 and on April 27, 1999 the Company
completed the sale of Star to Coherent and received proceeds of approximately
$49,600,000.
The accompanying pro forma consolidated condensed balance sheet as of
December 31, 1998 assumes that Palomar sold Star to Coherent on the last
reported balance sheet date, December 31, 1998. The accompanying pro forma
consolidated condensed Statement of Operations for the year ended December 31,
1998 assumes the sale of Star took place on January 1, 1998, the beginning of
Palomar's fiscal year ended December 31, 1998. The pro forma consolidated
condensed statement of operations do not include the effect of the gain from
Palomar's sale of Star to Coherent.
The accompanying pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the financial position or
results of operations which would actually have been reported had the sale of
Star occurred during the periods presented, or which may be reported in the
future.
The accompanying pro forma consolidated condensed financial statements
should be read in conjunction with the historical financial statements and
related notes thereto for Palomar.
2
<PAGE>
PALOMAR MEDICAL TECHNOLOGIES, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
As of December 31, 1998
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Historical Pro Forma
Consolidated Star Other Adjustments Pro Forma
------------- -------------- ---------------------------- --------------
Current Assets:
Cash and cash equivalents $ 1,874,718 $(310,088) (b) $ 46,431,162 $ - 47,995,792
Accounts receivable, net 9,938,121 (9,339,566) - - 598,555
Inventories, net 5,416,342 (3,072,843) - - 2,343,499
Escrow amount due from Coherent, Inc. - - (c) 3,254,908 - 3,254,908
Other current assets 1,056,388 (500,016) - - 556,372
-------------- -------------- ------------- ------------- --------------
Total current assets 18,285,569 (13,222,513) 49,686,070 - 54,749,126
-------------- -------------- ------------- ------------- --------------
Property and Equipment, at Cost, Net
3,314,087 (933,050) - - 2,381,037
-------------- -------------- ------------- ------------- --------------
Other Assets:
Cost in excess of net assets acquired, net 1,699,983 (816,537) - - 883,446
Deferred financing costs 58,923 - - - 58,923
Other non-current assets 167,352 (40,420) - - 126,932
-------------- -------------- ------------- ------------- --------------
Total other assets
1,926,258 (856,957) - - 1,069,301
-------------- -------------- ------------- ------------- -------------
$ 23,525,914 $(15,012,520) $ 49,686,070 - $58,199,464
-------------- -------------- ------------- ------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 6,290,041 (4,000,000) $ - - 2,290,041
Accounts payable 6,553,745 (5,244,694) - - 1,309,051
Accrued expenses 10,301,624 (3,080,371) - (d) 2,500,000 9,721,253
Current portion of deferred revenue 1,143,796 - - - 1,143,796
-------------- -------------- -------------- ------------- --------------
24,289,206 (12,325,065) - 2,500,000 14,464,141
============== ============== ============== ============= ==============
Net Liabilities of Discontinued Operations 1,680,171 - - - 1,680,171
-------------- -------------- -------------- ------------- --------------
Long-Term Debt, Net of Current Portion 3,150,000 - - - 3,150,000
-------------- -------------- -------------- ------------- --------------
Deferred Revenue, Net of Current Portion 870,000 - - - 870,000
-------------- -------------- ------------- ------------- --------------
Intercompany Payable - (12,885,893) - (e) 12,885,893 -
-------------- -------------- ------------- ------------- --------------
Stockholders' Equity (Deficit):
Preferred stock, $.01 par value- 69 - - - 69
Common stock, $.01 par value- 705,240 (2,488,800) - (e) 2,488,800 705,240
Additional paid-in capital 160,733,433 (1,874,823) - (e) 1,874,823 160,733,433
Accumulated deficit (166,263,346) 14,562,061 (e) 17,249,516 (e) 47,186,070 (121,764,731)
Less: Treasury stock-
(345,000 shares at cost) (1,638,859) - - - (1,638,859)
-------------- -------------- ------------- ------------- --------------
Total stockholders' equity (deficit) (6,463,463) 10,198,438 17,249,516 51,549,693 38,035,152
-------------- -------------- ------------- ------------- --------------
$ 23,525,914 $(15,012,520) $ 17,249,516 $ 66,935,586 $ 58,199,464
============== ============== ============= ============= ==============
</TABLE>
3
<PAGE>
PALOMAR MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
For The Year Ended December 31, 1998
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Historical Pro Forma
Consolidated Star Other Pro Forma
Adjustments
-------------- --------------- -------------- ----------------
(f)
Revenues $ 44,514,057 $ (35,581,717) $ - $ 8,932,340
Cost of Revenues 23,050,834 (12,733,833) - 10,317,001
-------------- --------------- -------------- ------------------
Gross margin 21,463,223 (22,847,884) - (1,384,661)
-------------- --------------- -------------- ------------------
Operating Expenses
Research and development 7,029,348 (3,869,088) (g) 1,333,333 4,493,593
Sales and marketing 15,132,595 (13,872,735) (i) 1,333,333 2,593,193
Restructuring and asset write-off (131,310) (131,310)
General and administrative 8,866,530 (5,748,432) (i) 4,000,000 7,118,098
-------------- --------------- -------------- ------------------
Total operating expenses 30,897,163 (23,490,255) 6,666,666 14,073,574
-------------- --------------- -------------- ------------------
Loss from operations (9,433,940) 642,371 (6,666,666) (15,458,235)
-------------- --------------- -------------- ------------------
Interest Expense, net (1,257,825) 1,030,065 (h) (225,535) (453,295)
Other Income 724,522 - - 724,522
-------------- --------------- -------------- ------------------
Net Loss From Continuing Operations $ (9,967,243) $ 1,672,436 $ (6,892,201) $ (15,187,008)
============== =============== ============== ==================
Basic and Diluted Net Loss Per Common Share From:
Continuing Operations $(0.18) $(0.26)
============== ==================
Weighted Average Number of
Common Shares Outstanding 62,868,696 62,868,696
============== ==================
</TABLE>
4
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1998
AND
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR
THE YEAR ENDED DECEMBER 31, 1998
(Unaudited)
Note (1) Pro Forma Balance Sheet Adjustments
The following pro forma adjustments are required to reflect the
Company's sale of its majority-owned subsidiary, Star, to Coherent as of
December 31, 1998 (the balance sheet date). Such allocations may be revised to
reflect the actual costs of this transaction as of the closing date.
(a) To eliminate Star's assets, liabilities and equity.
<TABLE>
<S> <C> <C> <C>
Other Pro Forma Adjustments Net Amount
--------------------------- ----------
(b) To account for Palomar's net cash received from the
sale of Star to Coherent. $46,431,162
(c) To account for the amount due from Coherent for the
escrow related to the sale of Star. $3,254,908
(d) To record income taxes due related to the sale of $2,500,000
Star.
(e) To reflect the gain, net of related income taxes, on the sale of
Star as follows: Net proceeds to be received by
Palomar from Coherent
$48,688,619
Less: Assumed Star deficit at
April 27, 1999 (1,502,549) $47,186,070
----------- ===========
</TABLE>
5
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1998
AND
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR
THE YEAR ENDED DECEMBER 31, 1998
(Unaudited)
Note (2) Pro Forma Statement of Operations Adjustments
The following pro forma adjustments are required to reflect the pro
forma consolidated condensed statements of operations as a result of the
Company's anticipated sale of its majority-owned subsidiary, Star, to Coherent
as of December 31, 1997. For purposes of the pro forma statement of operations,
it is assumed that the sale of Star and resulting gain of approximately $47.1
million occurred on December 31, 1997 so that the statement of operations would
only include results from continuing operations.
(f) To eliminate the effects of Star's operations on the consolidated
statements of operations for the year ended December 31, 1998.
<TABLE>
<S> <C> <C>
Other Pro Forma Adjustments December 31, 1998
--------------------------- -----------------
(g) Represents the elimination of research and development
expense allocated to Star by Palomar. $1,333,333
==========
(h) Total interest expense reduction for Palomar due to the
sale of Star to Coherent. $804,530
Less: 10% interest expense charged to Star by
Palomar based on the weighted average
outstanding intercompany balances and
reflected on the historical statements of Star (1,030,065)
-----------
Net pro forma adjustment interest expense
increase $(225,535)
===========
(i) To eliminate expenses allocated to Star by Palomar as follows:
General and Administrative $4,000,000
Selling and Marketing $1,333,333
</TABLE>
6
<PAGE>
(b) Exhibits.
---------
2.1 Agreement and Plan of Reorganization by and among Coherent,
Inc., Medical Technologies Acquisition, Inc., Palomar Medical
Technologies, Inc., Star Medical Technologies, Inc., Robert E.
Grove, James Z. Holtz and David C. Mundinger dated as of
December 7, 1998. (Previously filed as an exhibit to Palomar's
Proxy Statement for its 1999 Special Meeting of Shareholders
filed on March 12, 1999.)
99.1 Text of press release dated April 27, 1999.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PALOMAR MEDICAL TECHNOLOGIES, INC.
A Delaware Corporation
Dated: May 10, 1999 By: /s/
-------------------------------
Louis P. Valente
Chief Executive Officer
and President
8
<PAGE>
EXHIBIT INDEX
One of the exhibits required to be filed herewith is incorporated by
reference to one of Palomar's previous filings, as indicated below.
Exhibit Number Description of Exhibit
- -------------- ----------------------
2.1 Agreement and Plan of Reorganization by and among Coherent,
Inc., Medical Technologies Acquisition, Inc., Palomar Medical
Technologies, Inc., Star Medical Technologies, Inc., Robert E.
Grove, James Z. Holtz and David C. Mundinger dated as of
December 7, 1998. (Previously filed as an exhibit to Palomar's
Proxy Statement for its 1999 Special Meeting of Shareholders
filed on March 12, 1999.)
99.1 Text of press release dated April 27, 1999.
NEWS RELEASE
FOR IMMEDIATE RELEASE
Contacts:
John Ingoldsby or Joseph Caruso
Director of Investor Relations Chief Financial Officer
Palomar Medical Technologies, Inc. Palomar Medical Technologies, Inc.
781-402-2411 781-676-7300
Palomar Completes $65 Million Sale
Of Star Subsidiary to Coherent, Inc.
LEXINGTON, Mass., April 27, 1999 - Palomar Medical Technologies, Inc. (NASDAQ:
PMTI), the technology leader in laser hair removal, today announced that it
closed the sale of its Star Medical Technologies, Inc. subsidiary to Coherent,
Inc. (NASDAQ: COHR) for $65 million in cash and an ongoing 7.5% royalty. Palomar
owned 82% of Star, and received a substantially tax-free gain of approximately
$49 million.
"We are quite pleased to finalize this transaction, and believe that Palomar is
now financially poised to further strengthen its technology leadership position
in the cosmetic laser industry," said Louis P. (Dan) Valente, chairman and chief
executive officer of Palomar. "We had a fruitful partnership with Coherent
during the past 18 months, and look forward to a strong relationship in the
future. Palomar is now financially stable and clearly focused on the
fast-growing cosmetic laser business. We intend to expand our product
development to capture the massive applications."
Valente added, "We believe Palomar's stock is currently undervalued, and
accordingly we plan to use part of the proceeds to buy back Palomar stock as our
Board deems appropriate. Other short-term uses of some of the proceeds include
expanding and accelerating product development to bring revolutionary new lasers
to market in early 2000, aggressively enforcing our intellectual property
position, resolving the Swiss Franc case, and paying off debt. For the long
term, we have established a relationship with Lehman Brothers for cash
management for the substantial remainder of the proceeds."
Palomar will continue to operate in Massachusetts, where the company was founded
in 1987. Palomar's Massachusetts facility serves as the location for research &
development, manufacturing, engineering, and other associated departments,
including corporate headquarters. This is also where the company produces its
new Palomar E2000 Ruby Laser system for hair removal.
(more)
PALOMAR / 2
Additionally, Palomar has exclusive agreements with Massachusetts General
Hospital (MGH) and the Institute of Fine Mechanics and Optics Laser Center in
St. Petersburg, Russia. Palomar will continue to leverage these partnerships to
capitalize on new products and new business opportunities.
Palomar Medical Technologies, Inc. is a leading developer and supplier of
proprietary laser systems for hair removal and other cosmetic laser treatments.
Hundreds of Palomar laser hair removal systems have been installed worldwide,
and hundreds of thousands of treatments have been performed.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act With
the exception of the historical information contained in this release, the
matters described herein contain forward-looking statements, including
statements related to product development or the relationship with Coherent, and
the use of proceeds of the Star sale, that involve risk and uncertainties that
may individually or mutually impact the matters herein, and cause actual
results, events and performance to differ materially. These risk factors
include, but are not limited to, technological difficulties, lack of product
demand and market acceptance, the effect of economic conditions, the impact of
competitive products and pricing, governmental regulations of medical devices,
the ultimate tax treatment of the sale proceeds, and/or other factors outside
the control of the company, which are detailed from time to time in the
company's SEC filings, including the report on Form 10-K for the year ended
December 31, 1998. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The company
undertakes no obligation to release publicly the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
#####
Palomar news releases are available through PR Newswire Company News on-Call by
fax at 800-758-5804, Extension 107555, or http://www.prnewswire.com/(PMTI). For
more information, visit our home page at http://www.palmed.com
