UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM 10-QSB/A
---------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES ACT OF 1934
For the transition period from __________________ to ______________
Commission File Number 33-49972
LASERMEDICS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0335587
(State or other jurisdiction of (IRS Employer Identification No.)
(incorporation or organization)
120 Industrial Boulevard, Sugar Land, Texas 77478
(Address of principal executive offices, including zip code)
713-276-7000
(Registrant's telephone number, including area code)
Securities Registered Pursuant To Section 12(b) or (g) Of The Act:
None
Indicate by check mark whether the Registrant (i) 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 (ii) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
As of May 14, 1996 Lasermedics, Inc. had 1,482,225 shares of Common
Stock outstanding.
1
LASERMEDICS, INC.
FORM 10-QSB/A FOR THE QUARTER ENDED MARCH 31, 1996.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS..................... 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................ 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS......................... 14
ITEM 5. OTHER INFORMATION......................... 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.......... 14
SIGNATURES................................ 15
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying financial statements are amended from the original
filing in order to reclassify as "restricted cash" the amount previously
reported as "cash and cash equivalents"; see Note 2 to the financial statements
below. This reclassification of the amount previously reported has no effect on
earnings, cash flow, or statement of financial position.
The information required hereunder is included in this report as set
forth in the "Index to Financial Statements."
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Balance Sheet ...................................................... 4
Statement of Operations ............................................ 5
Statement of Cash Flows ............................................ 6
Notes to Financial Statements ...................................... 7-10
3
LASERMEDICS, INC.
(a development stage company)
BALANCE SHEET
- --------------------------------------------------------------------------------
(Unaudited)
March 31, December 31,
1996 1995
- --------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents ...................... -- $ 203,364
Accounts receivable - trade .................... $ 23,565 32,669
Inventory ...................................... 44,376 114,732
Other current assets ........................... 100,000 100,000
Restricted cash ................................ 296,792 --
----------- -----------
Total current assets .................... 464,733 450,765
Property and equipment, net ...................... 49,615 51,074
License agreement ................................ 101,850 101,850
Intangible assets, net ........................... -- 482
----------- -----------
TOTAL ASSETS ............................ $ 616,198 $ 604,171
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Accounts payable:
Trade ........................................ $ 421,833 $ 382,894
Related party ................................ 76,381 56,747
Accrued interest expense ....................... 53,500 38,875
Accrued liabilities ............................ 74,455 56,689
Refundable subscriptions ....................... 356,405 --
Customer deposits .............................. 73,418 89,100
----------- -----------
TOTAL CURRENT LIABILITIES ............... 1,055,992 624,305
Notes Payable, net of unamortized discount of
$135,417 and $151,667, respectively ........... 352,082 335,833
----------- -----------
TOTAL LIABILITIES ....................... 1,408,074 960,138
----------- -----------
Stockholders' Deficiency:
Common stock - $.01 par value; authorized
10,000,000 shares; issued 1,761,225
shares at March 31, 1996, and
December 31, 1995 ............................ 17,612 17,612
Additional paid-in-capital ..................... 7,240,691 7,232,691
Deficit accumulated during the development
stage ........................................ (7,822,379) (7,378,470)
----------- -----------
(564,076) (128,167)
Treasury stock, at cost, 279,000 common
shares ....................................... (227,800) (227,800)
----------- -----------
Stockholders' deficiency ................. (791,876) (355,967)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY ............................... $ 616,198 $ 604,171
=========== ===========
The accompanying notes should be read in conjunction
with the financial statements.
4
LASERMEDICS, INC.
(a development stage company)
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Period from
January 1, 1991
(inception)
through
March 31,
Three months ended March 31, 1996 1995 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Laser sales ................................................................ $ 147,747 $ 70,822 $ 1,454,711
Seminar fees ............................................................... 348,223
----------- ----------- -----------
Total revenue ................................................................ 147,747 70,822 1,802,934
----------- ----------- -----------
Cost of sales
Cost of goods sold ......................................................... 97,795 41,502 848,978
Cost of seminars ........................................................... 229,253
----------- ----------- -----------
Total cost of sales .......................................................... 97,795 41,502 1,078,231
----------- ----------- -----------
Gross profit ................................................................. 49,952 29,320 724,703
Selling, general and administrative expenses ................................. 463,887 577,112 8,464,156
----------- ----------- -----------
Loss from operations ......................................................... (413,935) (547,792) (7,739,453)
Other income ................................................................. 901 3,059 31,728
Interest expense ............................................................. (30,875) (114,654)
----------- ----------- -----------
Net loss applicable to common stock .......................................... (443,909) (544,733) (7,822,379)
----------- ----------- -----------
Net loss per common share .................................................... $ (0.30) $ (0.38)
=========== =========== ===========
Weighted average common shares outstanding ................................... 1,481,324 1,418,594
=========== =========== ===========
</TABLE>
The accompanying notes should be read in conjunction
with the financial statements.
5
LASERMEDICS, INC.
(a development stage company)
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Period from
January 1, 1991
(inception)
through
March 31,
Three months ended March 31, 1996 1995 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ........................................................................ $(443,909) $ (544,733) $(7,822,379)
--------- ----------- -----------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense ........................................ 1,941 2,161 30,046
Amortization of discount on notes payable .................................... 16,250 59,583
Bad debt expense ............................................................. 3,934 12,377 40,002
Write-off of deferred offering costs ......................................... 33,947
Write-off of investment in joint ventures .................................... 25,500
Compensation related to stock options and
warrants issued ............................................................. -- 137,330 2,667,650
Shares issued for marketing agreement ........................................ 179,160
Shares issued for public relations agreement ................................. 8,000 201,125
Shares issued for clinical research studies .................................. -- 90,000 390,000
Shares issued for services ................................................... 4,164
Changes in operating assets and liabilities:
Accounts receivable - trade ................................................ 5,169 70,100 (63,568)
Inventory .................................................................. 70,356 31,328 (44,376)
Other current assets and other assets ...................................... -- (25,000) (99,960)
Restricted cash ............................................................ (296,792) -- (296,792)
Accounts payable ........................................................... 58,573 99,718 500,071
Accrued liabilities ........................................................ 32,391 26,109 127,955
Customer deposits .......................................................... (15,682) (2,645) 73,418
--------- ----------- -----------
Total adjustments ................................................... (115,860) 441,478 3,827,925
--------- ----------- -----------
Net cash used in operating activities ............................... (559,769) (103,255) (3,994,454)
--------- ----------- -----------
Cash flows from investing activities:
Capital expenditures ............................................................ (58,337)
Payment for organizational costs ................................................ (12,125)
License agreement ............................................................... (101,850)
Investment in joint ventures .................................................... (25,500)
--------- ----------- -----------
Net cash used in investing activities ........................................ -- -- (197,812)
--------- ----------- -----------
Cash flows from financing activities:
Net proceeds from issuance of common stock ...................................... 5,000 2,992,367
Subscriptions received on common stock .......................................... 356,405 1,154,405
Subscriptions refunded on common stock .......................................... (6,000) (46,000)
Issuance of Series A preferred stock ............................................ 150,000
Issuance of Series B preferred stock ............................................ 205,000
Capital contributions ........................................................... 16,543
Purchase of treasury stock ...................................................... (183,000)
Issuance of notes ............................................................... 555,500
Payment of notes ................................................................ (68,000)
Deferred offering costs ......................................................... (584,549)
--------- ----------- -----------
Net cash provided by (used in) financing activities ......................... 356,405 (1,000) $ 4,192,266
--------- ----------- -----------
Net increase (decrease) in cash and cash equivalents .............................. (203,364) (104,255) --
Cash and cash equivalents at beginning of period .................................. $ 203,364 310,742
--------- ----------- -----------
Cash and cash equivalents at end of period ........................................ -- $ 206,487 --
========= =========== ===========
</TABLE>
The accompanying notes should be read in conjunction
with the financial statements.
6
LASERMEDICS, INC.
(a development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited interim financial statements of Lasermedics,
Inc., a Texas corporation (the "Company"), have been prepared in
accordance with generally accepted accounting principles and the rules
of the Securities and Exchange Commission (the "SEC"), and should be
read in conjunction with the audited financial statements and notes
thereto contained in the Company's latest Annual Report filed with the
SEC on Form 10-KSB. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair
presentation of financial position and the results of operations for
the interim periods presented have been reflected herein. The results
of operations for interim periods are not necessarily indicative of the
results to be expected for the full year. Notes to the financial
statements which would substantially duplicate the disclosure contained
in the audited financial statements for the most recent fiscal year,
1995, as reported in the Form 10-KSB, have been omitted.
2. RESTRICTED CASH:
Restricted cash represents cash proceeds from subscriptions received in
the Company's private offering commenced December 28, 1995 for which
the offering had not been consummated. At March 31, 1996 the Company
had received gross proceeds from subscriptions in the amount of
$356,405, and used $59,613 in current operations prior to the
consummation of the offering leaving the balance of $296,792 which is
reflected as current restricted cash. Each investor whose funds were
used prior to closing was subsequently given the rights to revoke
his/her subscription and receive a full refund, none of which rights
were exercised. (See Notes 6 & 8 below.)
3. OTHER CURRENT ASSETS:
At March 31, 1996, the Company had a stand-by Letter of Credit (the
"LOC") for the benefit of the Company's Danish supplier, in the amount
of $100,000, which expired April 30, 1996. (See Note 8 - Subsequent
Events below.) The LOC is collateralized by a certificate of deposit
for $100,000 included in other current assets.
4. NOTES PAYABLE DISCOUNT:
Notes payable discount represents the cost associated with the
Company's issuance of its convertible, unsecured, non-negotiable
promissory notes (the "Bridge Notes") in the aggregate principal amount
of $487,500 and 39,000 shares of common stock valued at $195,000. The
discount is being amortized by the straight-line method over the term
of the Bridge Notes. Accumulated amortization was $59,583 at March 31,
1996. (See Note 8 - Subsequent Events below.)
5. RELATED PARTY TRANSACTIONS:
At March 31, 1996, fees of $15,000 and expenses of $4,634 related to a
consulting agreement with one of the directors of the Company were
expensed and included in accounts payable; an additional $40,000 of
such fees and expenses of $16,747 included in accounts payable at
December 31, 1995 remained unpaid at March 31, 1996.
7
6. STOCKHOLDERS' EQUITY:
In connection with an agreement it entered into (in December 1995) with
a public relations firm, the Company issued to the firm, in February
1996, 2,000 shares of its treasury common stock as compensation for
services. The Company has recognized $8,000 in related compensation
expense based on the market price of the common stock of $4.00 per
share on the date of the agreement.
During March 1996, the Company amended the terms of the private
offering of its securities commenced in December 1995 (the "Offering")
by extending the Offering from January 31, 1996 to June 21, 1996,
increasing the size of the Offering up to 1,000,000 units and modifying
the provisions of certain common stock registration rights granted in
the Offering. Through March 31, 1996, the Company had received $356,405
from investors in connection with the Offering. This amount has been
recorded as a current liability in the accompanying balance sheet. (See
Note 8 - Subsequent Events below.)
7. STOCK OPTIONS & WARRANTS:
Effective January 15, 1996, the Board of Directors of the Company
adopted, subject to approval by the Company's stockholders, a 1996
Incentive Stock Option Plan covering 1,200,000 shares of the Company's
common stock and a 1996 Non-employee Directors Stock Option Plan (the
"Outside Director Plan") covering 250,000 shares of the Company's
common stock.
In connection with their election to the Company's Board of Directors
in January 1996, two directors were each granted stock options under
the Outside Director Plan to purchase a total of 25,000 shares of the
Company's common stock at a price of $5.50 per share. These options are
subject to stockholder approval of the Outside Director Plan.
In February 1996, the Company extended the expiration date from
February 16, 1997 to February 1, 1999 of an immediately exercisable
option to purchase 75,000 shares of the Company's common stock at a
price of $4.25 per share granted in connection with an agreement
entered into with a consultant of the Company in February 1994.
In March 1996, the Company extended the expiration date from July 15,
1996 to March 12, 1998 of an immediately exercisable option to purchase
20,000 shares of the Company's common stock at a price of $4.00 per
share granted in connection with an agreement entered into with a
financial public relations firm in December 1995.
8. SUBSEQUENT EVENTS:
Effective April 30, 1996, the Company amended the stand-by LOC, in the
amount of $100,000, under which the Company's Danish supplier is the
beneficiary, by extending the expiration date from April 30, 1996 to
October 31, 1996. (See Note 2 - Other Current Assets above.) The LOC is
collateralized by a certificate of deposit for $100,000 included in
other current assets.
On April 30, 1996 the Company entered into an agreement with Maxxim
Medical, Inc., a Delaware corporation ("Maxxim"), whereby the Company
purchased certain assets of (and
8
assumed certain liabilities associated with) the Henley Healthcare
Division ("Henley") of Maxxim for an estimated purchase price of
approximately $13 million. This purchase price (i) was determined by
adding $1.0 million to the estimated net book value of the Henley
assets as of April 30, 1996 and (ii) is subject to adjustment based on
a final determination of the net book value of the Henley assets
following the closing. The assets acquired consist of real property;
tangible personal property including machinery, equipment, furniture
and fixtures; general intangibles; contracts; business licenses;
accounts receivable; inventory; and prepaid expenses. The purchase
price was paid by the issuance of the Company's convertible
subordinated promissory note in the principal amount of $7,000,000 (the
"Note") with the balance of the purchase price being paid in cash. The
Company obtained the cash portion of the purchase price pursuant to a
loan agreement entered into with Comerica Bank - Texas, a Texas banking
corporation ("Comerica"), which loan is secured by substantially all of
the assets of the Company including the Henley assets acquired from
Maxxim.
The Note is due and payable on March 1, 2003 with interest payable
semi-annually on November 1 and May 1 of each calendar year and
calculated at a rate equal to 2% per annum and increasing annually 2%
per annum. The Company may redeem all or any portion of the outstanding
principal amount of the Note at redemption prices ranging from 104% to
110% of the principal amount being redeemed, depending on when the
redemption occurs as set forth in the Note. In addition, the Note is
subject to mandatory redemption in annual installments of $1.4 million
commencing on March 1, 1999 at premiums starting at 7% and decreasing
1% each year. The Company is also required to redeem 40% of the Note
upon the completion of a public offering. The Note is convertible into
common stock at an initial conversion price of $3 per share, provided
that upon the occurrence of any default under the Note, the conversion
price will be automatically adjusted to an amount equal to the lesser
of the conversion price then in effect or 80% of the average market
price for the Company's common stock for the 30 trading days
immediately preceding the event of default. The conversion price is
also subject to adjustment upon the occurrence of certain events
(including certain issuances of common stock for less than the
conversion price) to provide anti-dilution protection. The common stock
issuable on conversion of the Note is subject to the terms of a
registration rights agreement entered into by the Company and Maxxim
whereby Maxxim (and certain subsequent holders) shall retain certain
demand and piggyback registration rights with respect to those shares
of common stock.
The loan agreement with Comerica provides for a revolving loan, which
permits borrowings up to $4,000,000 pursuant to a borrowing base
calculation derived from the Company's accounts receivable and
inventory. The $4,000,000 revolving loan also includes a $250,000
letter of credit facility. In addition, the Company received two term
loans in the amount of $893,000 and $1,616,000, respectively. The
revolving loan's maturity date is two years from the date of the loan
agreement while the maturity dates of the $893,000 and $1,616,000 term
loans are five years and fifteen years, respectively, from the date of
the loan agreement, except that Comerica may call the $1,616,000 term
loan beginning on the fifth anniversary of the loan agreement. All of
the borrowings from Comerica are secured by substantially all of the
assets of the Company including the Henley assets acquired from Maxxim.
The loan agreement also contains a number of affirmative covenants,
negative covenants and financial covenants with which the Company
9
must comply including a minimum tangible net worth, leverage ratio,
working capital ratio, fixed charge ratio and interest coverage ratio.
The Company is also limited in the amount of its capital expenditures
and research and development expenditures, and all future acquisitions
and major corporate transactions require approval of Comerica, as do
offerings of securities by the Company.
Also, on April 30, 1996 the Company amended the Offering (see Note 6 -
Stockholders' Equity above) by changing the expiration date from June
21, 1996 to April 30, 1996, and consummated the Offering. Pursuant to
such consummation the Company received an aggregate of approximately
$1,300,000 from investors and committed to issue to such investors in
exchange therefor, 433,333 shares of the Company's common stock and
four-year warrants to purchase an aggregate of 433,333 shares of the
Company's common stock at an exercise price of $6.00 per share.
Additionally, on April 30, 1996 the holders of all of the Bridge Notes
converted the amounts due thereunder into an aggregate of 176,773
shares of the Company's common stock and four-year warrants to purchase
an aggregate of 176,773 shares of the Company's common stock at an
exercise price of $6.00 per share.
9. CONTINUING OPERATIONS:
The Company is in its development stage as it has a limited operating
history, has not generated significant revenue, and has an accumulated
deficit. The Company has devoted substantially all of its efforts to
financial planning, raising capital, developing markets and obtaining
U. S. Food and Drug Administration ("FDA") approval to sell its
products commercially. As of March 31, 1996, the Company's efforts had
consisted principally of (i) entering into an agreement with a Danish
company pursuant to which the Company obtains sole and exclusive
world-wide manufacturing, marketing, and distribution rights, subject
to the payment to the Danish company of the sums of $150,000 by
December 31, 1996 and $125,000 by June 30, 1997, respectively, for all
low-energy laser devices currently manufactured by the Danish company
including its initial product, the MicroLight 830(TM), a low-level,
non-surgical laser intended to be used to treat carpal tunnel syndrome
in humans and muscular problems in veterinary applications, (ii)
pursuing the approval of the FDA to commercially market and sell the
MicroLight 830(TM) and other low-energy laser devices in the United
States and (iii) establishing a division to train doctors, clinicians
and other medical professionals in the use of lasers.
The FDA has historically granted approval to commercialize certain
devices based on an approved Premarket Approval ("PMA") application or
the fact that a similar device exists that is in use and has FDA
approval for sale in the United States, or a similar device exists that
was in use prior to the Federal Food, Drug and Cosmetic Act of 1976
(the "FDCA"). The latter type of approval is known as Section "510(k)."
The Company submitted documentation to the FDA in September 1993, in
order to obtain approval for U.S. sales of the Microlight 830(TM) under
Section 510(k). In November 1994, the FDA notified the Company that it
had determined that the Microlight 830(TM) is not substantially
equivalent to a predicate medical device marketed in interstate
commerce, but is rather classified by statute under Section 513(f) of
the FDCA as a
10
Class III medical device and must therefore have an approved PMA before
it can be legally marketed in interstate commerce in the U.S. In March
1995, the Company submitted to the FDA its PMA application, approval of
which would allow the Company to sell the Microlight 830(TM) in
commercial quantities in the U.S. for use on humans. In July 1995, in
response to the Company's submission, the FDA requested the Company to
provide additional information and some clarification of certain data
submitted in the PMA application and notified the Company that the PMA
was not considered to be formally filed. On April 9, 1996, in response
to the FDA's request, the Company submitted its PMA supplement to the
FDA.
However, there can be no assurance that the Company's submission will
satisfy the FDA's requirements or that the FDA will grant PMA approval
on a timely basis, if at all. The Company will be unable to sell the
product in commercial quantities for human application in the U.S.
market until it obtains FDA approval.
The Company's financial statements have been prepared on the assumption
that the Company will continue as a going concern. As discussed above,
the Company completed during April 1996, the acquisition of Henley.
Management believes this acquisition will allow the Company to continue
as a going concern. It is contemplated the operations of Henley will
enable the Company ultimately to arrange and secure the capital
resources necessary to meet the obligations incurred in connection with
the acquisition of the worldwide manufacturing, marketing and
distribution rights for the laser devices described above, pursue the
approval of the FDA for the Microlight 830(TM) and establish its
training division. Accordingly, the financial statements do not include
any adjustments necessary if the Company becomes unable to continue
operations for any reason.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Operating deficit for the quarter ended March 31, 1996 decreased
approximately 19% to $443,909 compared to operating deficit of $544,733 for the
same period in 1995. The decrease in operating deficit reflects less expenses
recognized during the first quarter of 1996 in connection with stock or stock
options/warrants issued for compensation or under certain agreements which the
Company entered into.
Product sales revenue of $147,747 for the quarter ended March 31, 1996
represents an increase of $76,925 or approximately 109% over the amount reported
for the same period in 1995. This increase results primarily from increased
sales in the IDE research study program as the number of clinical research sites
expands. The Company continues to sell in the veterinarian market, but has
focused its efforts to providing products to the clinical researchers in its
research program for the purpose of gathering enough data to support the PMA
application. The Company continues to seek FDA approval for the commercial
marketing of the human model of the Microlight 830(TM).
There were no seminar fees for the quarter ended March 31, 1996 as was
the case for the same period in 1995. The Company has temporarily ceased
operations of its training division in order to shift its sales efforts from the
seminars market to the clinicians in the research study program for the
Microlight 830(TM). Factors such as intense competition in the medical seminars
market, the shortage of new techniques and applications in surgical laser
technology and the critical need to support the PMA filing contributed to the
Company's decision to re-direct its sales efforts. Although there can be no
assurances, the Company anticipates resuming operations of its training division
in the near future and particularly in the international market when it has
fulfilled its financial obligation under the CBS Agreement. This statement may
prove to be inaccurate if the factors described above as causing the cessation
of training operations continue to exist.
Product gross margin as a percentage of sales for the quarter ended
March 31, 1996 decreased to approximately 34% from approximately 41% for the
same period in 1995. This decrease resulted primarily from certain incentive
pricing undertaken by the Company as it continues efforts to expand and complete
the research program for the Microlight 830(TM).
Selling, general and administrative expenses for the quarter ended
March 31, 1996 decreased $113,225 or approximately 20% compared to the same
period in 1995. This results primarily from the effect of less expense
recognized aggregating approximately $219,000 related to stock or stock
options/warrants issued for compensation, offset by expenses related to the
Company's efforts to obtain FDA approval for the commercial distribution of the
Microlight 830(TM) for human use.
For the quarter ended March 31, 1996 the Company had other expense of
$30,875 consisting of interest expense on notes payable. For the three-month
periods ended March 31, 1996 and 1995 the Company had other income of $901 and
$3,059, respectively, consisting of interest income from certificates of
deposit.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996 the Company had current restricted cash in the amount
of $296,792 which represented part of the gross proceeds of $356,405 received as
of that date in the Company's private offering commenced December 28, 1995 for
which the offering had not been consummated. A portion of the gross proceeds
(restricted cash) was used in current operations prior to the ultimate
consummation of the offering. Each investor whose funds were used prior to the
closing was
12
subsequently given the rights to revoke his/her subscription and receive a full
refund, none of which rights were exercised.
The Company had cash and cash equivalents of $203,364 at December 31,
1995. Also, at March 31, 1996, the Company had $100,000 of stand-by letter of
credit expiring October 31, 1996 under which CBS is the beneficiary. The letter
of credit is collateralized by a certificate of deposit for $100,000 classified
as other current assets in the financial statements.
The Company's current sources of liquidity consist primarily of (i)
funds held at the end of fiscal year 1995, (ii) proceeds received from the
Offering and (iii) the amounts, if any, available under the revolving loan from
Comerica (the "Revolver".) As of April 30, 1996 the Company consummated the
Offering and in connection therewith received an aggregate of approximately
$1,300,000 and removed the approximately $356,000 previously received in
connection with the Offering from its recorded liabilities. As of April 30, 1996
the Company had approximately $3,481,000 available for borrowing pursuant to the
Revolver, which amount the Company borrowed to pay part of the cash portion of
the purchase price of the assets acquired from Maxxim. The total amount
available for borrowing under the Revolver is the lesser of (i) $4,000,000 and
(ii) a variable borrowing base calculated based on the amount and type of
outstanding accounts receivable and the value of certain items of inventory.
The Company's on-going efforts to obtain FDA approval for its product
continues to be a major source of depletion of capital resources. If the
Company's operating cash flow from the recently acquired Henley assets is not
adequate, the Company may require new sources of liquidity to (i) fund future
activities required to obtain FDA approval of the Microlight 830(TM), (ii) make
the required payments under the Note and term loans with Comerica, (iii) make
the payments required to obtain the exclusive manufacturing and marketing rights
to the Microlight 830(TM), (iv) expand the Henley operations, (v) begin
full-scale manufacturing of the Microlight 830(TM) and (vi) pursue additional
acquisitions. The Company believes that its success in obtaining the necessary
financing will depend on, among other factors, (i) obtaining approval from the
FDA to commercially distribute the Microlight 830(TM) in U.S. markets for human
application, (ii) successfully operating the recently-acquired Henley business,
(iii) successfully marketing the Microlight 830(TM) and (iv) the availability of
competing products. The failure to accomplish any of the foregoing could have a
significant adverse impact on the Company's business and financial condition.
Sources of additional financing may include additional bank debt or public or
private sale of equity or debt securities. There can be no assurance that the
Company will be successful in arranging such financing on terms commercially
acceptable to the Company.
13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company was named as one of several defendants named in a lawsuit
filed in February 1995 in the Federal Court for the Southern District of New
York. On March 29, 1996, the United States District Judge for the Southern
District of New York issued an order dismissing the lawsuit.
The plaintiff, the President of LaserMedics Sales Corporation, a New
York corporation in which the Company has a 20% equity ownership, had alleged,
among other things, that a contract existed between the plaintiff, and the
Company pursuant to which the plaintiff was to act as the Company's financial
consultant and advisor. The complaint further asserted that the plaintiff was
later wrongfully and/or fraudulently replaced by another consultant. The
plaintiff sought compensatory damages of $3.0 million and punitive damages of
$5.0 million. The Company believed that the lawsuit was without merit and filed
a motion for dismissal.
The Company is a plaintiff in one lawsuit and has been named as
defendant in a related lawsuit arising in the ordinary course of business. The
Company believes that the ultimate resolution of these matters will not have a
material adverse effect on its financial condition or results of operations.
ITEM 5. OTHER INFORMATION
On April 9, 1996 the Company submitted its PMA supplement to the FDA in
response to the FDA's request for additional information and some clarification
of certain data submitted in the Company's original PMA application. (See Note 8
to Financial Statements - Continuing Operations.) However, there can be no
assurance that the Company's submission will satisfy the FDA's requirements or
that the FDA will grant PMA approval on a timely basis, if at all. The Company
will be unable to sell the Microlight 830(TM) in commercial quantities for human
application in the U.S. market until it obtains FDA approval.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
See "Index of Exhibits" on page 16 which lists the documents
required to be filed as exhibits to this Form 10-QSB/A by Item 601 of Regulation
S-B.
(b) REPORTS ON FORM 8-K
None.
14
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.
LASERMEDICS, INC.
(Registrant)
By : MICHAEL M. BARBOUR
Date: JULY 12, 1996 Michael M. Barbour
(President and Chief
Executive Officer)
By : CHIKE J. OGBOENYIYA
Date: JULY 12, 1996 Chike J. Ogboenyiya
(Vice President and
Chief Financial Officer)
15
LASERMEDICS, INC.
EXHIBITS TO FORM 10-QSB/A
for the quarter ended March 31, 1996
INDEX OF EXHIBITS
Exhibits incorporated by reference to a prior filing are designated
by an asterisk (*); all exhibits not so designated are documents required to be
filed as exhibits to this Form 10-QSB/A.
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ------- ----------- ------------ ------------ ---------
3.1* Amendment to Form 10-KSB for
By-Laws year ended
December 31, 1995 33-49972 3(D)
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM BALANCE SHEET, STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 23,565
<ALLOWANCES> 0
<INVENTORY> 44,376
<CURRENT-ASSETS> 464,733
<PP&E> 49,615
<DEPRECIATION> 0
<TOTAL-ASSETS> 616,198
<CURRENT-LIABILITIES> 1,055,992
<BONDS> 0
0
0
<COMMON> 17,612
<OTHER-SE> (809,488)
<TOTAL-LIABILITY-AND-EQUITY> 616,198
<SALES> 147,747
<TOTAL-REVENUES> 147,747
<CGS> 97,795
<TOTAL-COSTS> 97,795
<OTHER-EXPENSES> 463,887
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (30,875)
<INCOME-PRETAX> (443,909)
<INCOME-TAX> 0
<INCOME-CONTINUING> (443,909)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (443,909)
<EPS-PRIMARY> (0.30)
<EPS-DILUTED> (0.30)
</TABLE>
