<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period
ending September 27, 1997 Commission File number 0-21667
PHOTOELECTRON CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
MASSACHUSETTS 04-3035323
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5 FORBES ROAD, LEXINGTON, MASSACHUSETTS 02173
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(Address of Principal Executive Offices) (Zip code)
(781) 861-2069
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(Issuer's Telephone Number, Including Area Code)
____________________
Check Whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act 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 [_]
-
____________________
7,356,751 shares of Common Stock, $.01 par value, were outstanding as of
November 4, 1997
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PHOTOELECTRON CORPORATION
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QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDING SEPTEMBER 27, 1997
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
<S> <C> <C>
PART I - FINANCIAL INFORMATION Page
Item 1 Consolidated Financial Statements 3
CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 27, 1997 AND DECEMBER 28, 1996 3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDING
SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996 AND FOR THE PERIOD FROM
INCEPTION (JANUARY 4, 1989 TO SEPTEMBER 27, 1997) 4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDING
SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996 AND FOR THE PERIOD FROM
INCEPTION (JANUARY 4, 1989 TO SEPTEMBER 27, 1997) 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
PART II - OTHER INFORMATION 11
-----------------
Item 6 Exhibits and Reports on Form 8-K 11
</TABLE>
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<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 27, 1997
(Unaudited) December 28, 1996
------------------ ------------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents................................................ $ 15,472,780 $ 2,537,023
Inventories.............................................................. 365,252 323,714
Prepaid Expenses......................................................... 400,242 992,412
Other current assets..................................................... 487,940 28,871
------------ ------------
Total current assets.................................................. 16,726,214 3,882,020
PROPERTY AND EQUIPMENT:
Computer equipment....................................................... 625,785 311,295
Lab and production equipment............................................. 615,259 438,025
Clinical site equipment.................................................. 757,515 656,395
Furniture and fixtures................................................... 139,059 97,164
Leasehold improvements................................................... 755,715 630,273
------------ ------------
2,893,783 2,133,152
Less-Accumulated depreciation and amortization........................... 1,326,367 898,127
------------ ------------
1,567,416 1,235,025
------------ ------------
Total assets.......................................................... $ 18,293,630 $ 5,117,045
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable......................................................... $ 255,320 $ 307,795
Accrued expenses......................................................... 203,652 247,880
Accrued payroll and benefits............................................. 204,877 32,204
Current portion of convertible subordinated notes........................ -- 454,230
------------ ------------
Total current liabilities............................................. 663,849 1,042,109
------------ ------------
LONG-TERM DEBT:
Convertible subordinated notes, net of current portion................... 1,661,447 1,589,147
------------ ------------
SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value-
Authorized - 7,500,000 shares
Issued and outstanding - none and 2,892,312 at September 27, 1997 and
December 28, 1996, respectively.......................................... --- 28,923
Common Stock, $0.01 par value -
Authorized - 15,000,000 shares
Issued and outstanding - 7,356,751 and 1,597,910 at September 27, 1997
and December 28, 1996, respectively...................................... 73,567 15,979
Capital in excess of par value - preferred stock........................... --- 17,202,463
Capital in excess of par value - common stock.............................. 37,199,057 2,679,724
Subscription receivable.................................................... (32,842) (57,931)
Deficit accumulated during development stage............................... (21,271,448) (17,383,369)
------------ ------------
Total shareholders' equity............................................ 15,968,334 2,485,789
------------ ------------
Total liabilities and shareholders' equity............................ $ 18,293,630 $ 5,117,045
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ending Nine Months Ending Period from
---------------------------- ---------------------------- Inception (January 4,
September 27, September 28, September 27, September 28, 1989 to September 27,
1997 1996 1997 1996 1997)
------------- ------------- ------------- ------------- ---------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues $ 347,725 $ -- $ 725,374 $ -- $ 725,374
Cost of Revenues 171,801 -- 361,536 -- 361,536
----------- ----------- ----------- ----------- -------------
Gross Profit 175,924 -- 363,838 -- 363,838
----------- ----------- ----------- ----------- -------------
Operating Expenses
Research and Development expenses........ 1,019,829 857,147 3,049,979 2,263,316 16,300,247
General and Administrative expenses...... 719,089 459,362 1,704,962 1,167,611 5,328,298
----------- ----------- ----------- ----------- -------------
Total Operating Expenses................... 1,738,918 1,316,509 4,754,941 3,430,927 21,628,545
----------- ----------- ----------- ----------- -------------
Loss from Operations..................... (1,562,994) (1,316,509) (4,391,103) (3,430,927) (21,264,707)
Interest income.......................... 198,655 24,306 585,325 202,095 1,033,463
Interest expense......................... (24,100) (30,100) (82,301) (90,337) (1,040,204)
----------- ----------- ----------- ----------- -------------
Interest income (expense), net........... 174,555 (5,794) 503,024 111,758 ( 6,741)
----------- ----------- ----------- ----------- -------------
Net loss................................... $(1,388,439) $(1,322,303) $(3,888,079) $(3,319,169) $(21,271,448)
=========== =========== =========== =========== =============
Net loss per common and common
equivalent share....................... $(0.19) $(0.82) $(0.60) $(2.06)
=========== =========== =========== ===========
Weighted average number of common and
common equivalent shares outstanding... 7,322,523 1,612,735 6,458,651 1,612,735
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ending Period from
--------------------------------------- Inception (January 4,
September 27, 1997 September 28, 1996 1989 to September 27, 1997)
------------------ ------------------ ---------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss....................................................... $(3,888,079) $(3,319,169) $(21,271,448)
Adjustments to reconcile net loss to net cash used in
operating activities -- Depreciation and amortization........ 428,240 196,199 1,334,958
Noncash interest converted to subordinated notes............... 82,301 73,045 952,896
Noncash salary converted to common stock....................... -- -- 250,000
Noncash research and development expenses converted to
subordinated notes........................................... -- -- 9,000
Noncash salary stock options extension......................... -- -- 1,132,600
Changes in current accounts -
Inventories.................................................... (41,538) 142,300 (364,982)
Prepaid expenses............................................... 119,164 (212,383) (92,042)
Other current assets........................................... (459,069) 38,484 (487,940)
Accounts payable............................................... (52,475) (75,366) 255,320
Accrued expenses............................................... 128,445 27,016 207,581
----------- ----------- ------------
Net cash used in operating activities....................... (3,683,011) (3,129,874) (18,074,057)
----------- ----------- ------------
Cash flows from investing activities:
Purchases of equipment and leasehold improvements.............. (760,631) (685,463) (2,868,937)
Proceeds from the sale of equipment and leasehold improvements. -- -- 9,845
----------- ----------- ------------
Net cash used in investing activities....................... (760,631) (685,463) (2,859,092)
----------- ----------- ------------
Cash flows from financing activities:
Proceeds from issuance of common stock......................... 17,379,399 18,073 17,502,841
Proceeds from issuance of preferred stock...................... -- 611,250 13,385,370
Proceeds from issuance of subordinated convertible notes....... -- -- 5,322,000
Proceeds from issuance of warrants............................. -- -- 236,453
Payment under capital lease obligations........................ -- -- (40,735)
----------- ----------- ------------
Net cash provided by financing activities...................... 17,379,399 629,323 36,405,929
----------- ----------- ------------
Increase (decrease) in cash and cash equivalents................. 12,935,757 (3,186,014) 15,472,780
Cash and cash equivalents, beginning of period................... 2,537,023 7,191,268 --
----------- ----------- ------------
Cash and cash equivalents, end of period......................... $15,472,780 $ 4,005,254 $ 15,472,780
=========== =========== ============
Cash flows from noncash financing activities:....................
Conversion of salary expense to common stock................... $ -- $ -- $ 250,000
=========== =========== ============
Conversion of convertible subordinated notes to common stock... $ 464,231 $ -- $ 4,491,246
=========== =========== ============
Conversion of common stock to preferred stock.................. $ -- $ -- $ 3,846,015
=========== =========== ============
Capital lease obligation incurred for equipment................ $ -- $ -- $ 40,383
=========== =========== ============
Conversion of convertible subordinated notes to warrants....... $ -- $ -- $ 47,000
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
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<PAGE>
PHOTOELECTRON CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. UNAUDITED RESULTS - The interim unaudited consolidated financial statements
contained herein have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
management's opinion, the unaudited information includes all adjustments
(consisting of normal recurring accruals) necessary for a fair presentation
of the financial position, results of operations, and cash flows for the
periods presented. The results of operations for the interim periods shown
on this report are not necessarily indicative of the results expected for
the full year. The interim financial statements should be read in
conjunction with the financial statements and notes for the year ended
December 28, 1996 included in the Company's Form 10-K filing with the
Securities and Exchange Commission.
2. INITIAL PUBLIC OFFERING - During January and February of 1997, the Company
completed its initial public offering of 2,275,000 shares of Common Stock,
including an exercise of the overallotment option. The total proceeds
received by the Company were approximately $17,087,000, after deducting
underwriting discounts and commissions and other expenses.
3. LOSS PER SHARE - Weighted average common and common equivalent shares
outstanding include the weighted average common shares outstanding for the
period and for all periods prior to the period of the initial public
offering include the effect of the assumed conversion of Series C Preferred
Stock issued within one year prior to the Company's initial public
offering.
4. NEW ACCOUNTING PRONOUNCEMENT - In March of 1997, the Financial Accounting
Standards Board issued SFAS 128, "Earnings per Share." SFAS 128 requires
the replacement of primary loss per share with basic loss per share, and
replaces fully diluted loss per share with diluted loss per share. It is
effective for fiscal years ending after December 15, 1997. The Company does
not expect it to have a material effect on previously reported loss per
share amounts, as the only common equivalent shares included in the
determination of those amounts are those included pursuant to certain
Securities and Exchange Commission requirements which remain unchanged.
5. REVENUE RECOGNITION - The Company recognizes revenue upon shipment of its
products or acceptance by the customer, as appropriate. The Company provides
a reserve for its estimate of warranty costs at the time of revenue
recognition.
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<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
Certain statements contained in this Quarterly Report on Form 10-Q,
including, without limitation, statements containing the words "expects,"
"anticipates," "believes" and words of similar import, constitute "forward
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward looking statements are subject to various
risks and uncertainties, including those referred to in the Company's
Registration Statement on Form S-1 (Reg. No. 333-14541) and in the Company's
Form 10-K for the fiscal year ended December 28, 1996, that could cause actual
future results and events to differ materially from those currently anticipated.
Readers are cautioned not to place undue reliance on these forward looking
statements.
The Company is engaged in the design, development and commercialization of
the Photon Radiosurgery System ("PRS"), a proprietary, therapeutic device for
the treatment of cancerous tumors through the application of radiation directly
into a tumor. The Company does not anticipate receiving any significant revenue
from the sale of its products at least until the latter part of 1998. The
Company has an accumulated deficit totaling approximately $21.3 million since
its inception and expects to continue to incur losses until such time as its
commercialization efforts yield offsetting revenues. The Company's research and
development, general and administrative and manufacturing expenses have and will
continue to significantly increase during 1997 as it pursues the
commercialization of the PRS.
Before medical devices such as the PRS can be marketed in the U.S.,
approval by the U.S. Food and Drug Administration ("FDA") is required. Phase II
clinical trials for the treatment of metastatic brain tumors are currently being
performed. Based on the results obtained in these ongoing Phase II trials, on
December 11, 1996 the Company submitted a Section 510(k) application to the FDA
seeking clearance for the current model of the PRS for treatment of metastatic
brain tumors. On June 20, 1997, the Company received clearance from the FDA to
market Model 3 of the PRS for treatment of intracranial tumors. The Company is
currently preparing to submit an application to the FDA under Section 510(k) of
the Federal Food, Drug and Cosmetic Act seeking clearance to commercialize the
current model of the PRS (the "PRS 400") ,which it expects to be its first
commercial system. Locally approved clinical trials for the treatment of brain
tumors are also being performed at sites in Europe and Japan. The Company
currently anticipates that clinical trials to determine the safety of the PRS
for treatment of breast cancer will begin in early 1998 in England, although
there can be no assurance that such trials will begin at that time. Based upon
the clinical trials in England, if favorable, the Company will submit an
application to the FDA to begin human clinical trials in the U.S. The treatment
of topical tumors of the skin with the PRS is being pursued. A program has
begun at a U.S. hospital which the Company expects to
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<PAGE>
lead to human clinical trials with the PRS in treating Kaposi's sarcomas and
other skin malignancies. Upon obtaining all necessary regulatory approvals, the
Company intends to begin commercial sales of the PRS. The Company will consider
the use of the PRS for other potential applications on an ongoing basis. In
order to support such commercialization, the Company will experience significant
working capital and other financing needs.
If all regulatory clearances are obtained, the Company intends to market
and distribute its products through a combination of collaborative relationships
and in-house sales and marketing resources. The Company has developed and will
continue to develop strategic alliances with companies that have established
distribution channels in domestic and international markets. As part of the
manufacturing process, the Company intends to sub-contract the fabrication of
most of its electrical and mechanical components. On September 22, 1997 the
Company received ISO 9001 registration for operating a quality management
system. The Company is in the process of seeking certification to the Medical
Device Directive Annex II, enabling self certification of the European Community
Mark (CE).
On February 4, 1997, the Company completed an initial public offering of
2,000,000 shares of its Common Stock at a price of $8.50 per share. Pursuant to
an option to purchase additional shares of Common Stock to cover over-
allotments, Needham & Company, Inc. and Dain Bosworth Incorporated (the
"Representatives") purchased an additional 275,000 shares of Common Stock on
March 4, 1997. The net proceeds of the offering are being used to (i) increase
the Company's research of cancer treatment applications; (ii) continue to expand
clinical trials for the PRS; (iii) obtain regulatory approvals for the PRS; (iv)
enhance manufacturing and marketing capabilities and (v) provide working
capital, as well as for general corporate purposes.
RESULTS OF OPERATIONS
THREE MONTHS ENDING SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
Revenues increased from $0 in the third quarter of 1996 to $347,725 in the
third quarter of 1997. This change reflects the sale of its second Photon
Radiosurgery System (PRS) in the quarter ending September 27, 1997. Cost of
Goods Sold increased from $0 in the third quarter of 1996 to $171,801 in the
third quarter of 1997 as a result of such sale of a PRS.
Research and development expenses increased by $162,682 from $857,147 in
the third quarter of 1996 to $1,019,829 in the third quarter of 1997. This
change reflects increases in expenses related to clinical programs, continued
regulatory efforts to obtain the CE Mark, and greater expenditures for skin and
breast tumor research and development programs. Substantial research and
development costs are also attributable to continuing development of the PRS
400, and sterilization validation of the applicators to be used in the breast
tumor treatment trials.
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<PAGE>
General and administrative expenses increased by $259,727 from $459,362 in
the third quarter of 1996 to $719,089 in the third quarter of 1997. The
increase reported is, in part, attributable to a growth in personnel from 35 to
39 employees and related costs. Additional increases are attributable to legal
and professional fees related to the Company's ongoing reporting and other
obligations under the Securities Exchange Act of 1934, as amended.
Interest income increased by $174,349 from $ 24,306 in the third quarter of
1996 to $198,655 in the third quarter of 1997. This increase was attributable
to the investment of the net proceeds, received in the Company's initial public
offering on February 4, 1997.
NINE MONTHS ENDING SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
Revenues increased from $0 in the nine months ending September 28, 1996 to
$725,374 in the nine months ending September 27, 1997 due to sales of the PRS
for use in Japanese clinical trials. Cost of Goods Sold increased from $0 in the
nine months ending September 28, 1996 to $361,536 in the nine months ending
September 27, 1997 as a result of such sales of the PRS.
Research and development expenses increased by $786,663 from $2,263,316 in
the nine months ending September 28, 1996 to $3,049,979 in the nine months
ending September 27, 1997. The primary costs in research and development were
attributed to continuing engineering development of the PRS 400 and expenses
associated with seeking CE certification for this product. This change reflects
increases in expenses related to the Company's clinical programs activities,
preparation and submission of additional documentation to the FDA regarding the
510(k) application, and additional expenditures for the Company's breast and
skin tumor research and development programs. Additional costs were incurred in
the sterilization validation of the applicators used in the breast tumor
treatment trials, the formulation of trial protocols, and development of
ancillary equipment.
General and administrative expenses increased by $537,351 from $1,167,611
in the nine months ending September 28, 1996 to $1,704,962 in the nine months
ending September 27, 1997. This increase is attributed to a growth in personnel
from 25 to 39 employees and related costs. Additional increases resulted from
legal and professional fees related to the Company's reporting requirements and
other obligations under the Securities Exchange Act of 1934, as amended.
Interest income increased by $383,230 from $202,095 in the nine months
ending September 28, 1996 to $585,325 in the nine months ending September 27,
1997. This increase was attributable to the investment of the net proceeds
received in the Company's initial public offering, on February 4, 1997.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Prior to the Company's initial public offering, the Company financed its
operations through the issuance of convertible debt and Preferred and Common
Stock in a series of private placements totaling approximately $20.8 million.
On February 4, 1997, the Company completed an initial public offering of
2,000,000 shares of Common Stock at a price of $8.50 per share. Pursuant to an
option to purchase additional shares of Common Stock, the Representatives
purchased an additional 275,000 shares of Common Stock on March 4, 1997. See
"--Overview". As a result of the initial public offering, the Company received
net proceeds of approximately $17.1 million, after deducting underwriting
discounts and commissions and other expenses.
Consolidated working capital was $16.1 million at September 27, 1997,
compared with $2.8 million at December 28, 1996. Included in working capital
are cash and cash equivalents of $15.5 million at September 27, 1997, compared
with $2.5 million at December 28, 1996. The increase in working capital and
cash is a result of the completion of the initial public offering of the
Company's Common Stock. During the nine months ending September 27, 1997, $3.7
million of cash was used for operating activities.
The Company used $760,631 of cash in the nine months ending September 27,
1997 for fixed assets and leasehold improvements.
The Company maintains medical product liability insurance policies with
respect to its clinical trials which the Company believes contain reasonable
deductibles and other ordinary and customary provisions. The Company believes
that these policies cover such risks in such amounts as are reasonable and
prudent under the circumstances, and the Company does not anticipate that claims
under these policies, if any, will have a material adverse impact on the
Company's liquidity or capital resources. Prior to commercial sale of its
products, the Company will be required to obtain product liability insurance
covering the commercial use of its products.
The Company is currently involved in settlement discussion with a physician
and his employer. The Company has been notified that such physician and his
employer believe that they have certain rights with regard to their
understanding of the Company's planned use of the PRS for treatment of tumors in
body cavities. No formal legal proceedings were initiated and the Company
believes it has reached an agreement in principle with the parties as to
settlement of the matter. The Company's management also believes that the
outcome of this matter will not have a material effect on the Company's
financial position or results of operations.
The Company's capital requirements may change depending upon the progress
of the Company's research and development activities, progress of the clinical
trials,
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<PAGE>
progress on new applications for treatment with the PRS and costs involved
with procuring and defending patents.
The Company's business plan calls for various applications of the PRS,
including the treatment of brain tumors, and tumors in the breast and skin. The
Company expects that the capital requirements to complete the commercialization
of the PRS to treat brain tumors will require approximately $6.5 million from
the net proceeds of the Company's initial public offering. Such proceeds are
needed to complete the Section 510(k) clearance of the PRS 400 commercial model,
achieve CE certification for this product, purchases of capital equipment for
assembly and manufacturing of components for the PRS 400 and to support a
marketing and sales organization. At this point, the Company is not able to
estimate the capital requirements of commercializing all applications of the PRS
400.
PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
Copies of the following Exhibits are furnished with this report.
Additional Exhibits are incorporated herein by reference as reflected in the
Exhibit Index.
<TABLE>
<CAPTION>
No. DESCRIPTION
----- -----------
<S> <C>
11.1 Computation of net loss per share.
27.1 Financial Data Schedule.
</TABLE>
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<PAGE>
(B) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter for which this
report is filed.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
PHOTOELECTRON CORPORATION
By: /s/ Peter E. Oettinger
----------------------
Peter E. Oettinger
Vice President, Chief Operating
Officer
By: /s/ Gerald J. Bojas
-------------------
Gerald J. Bojas
Chief Financial Officer
Dated: November 4, 1997
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EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE EXHIBIT NO. DESCRIPTION
- -------- ------------- -----------
<S> <C> <C>
-- **3.1 Articles of Organization of the Company, as amended.
-- **3.2 Forms of Articles of Amendment of the Company.
-- **3.3 By-Laws of the Company, as amended.
-- **4.1 Specimen Certificate representing the Company's Common Stock.
-- **4.2 Subordinated Convertible Note Purchase Agreement among the Company, Thermo
Electron Corporation and Photoelectron Investments Corporation of Liberia
dated as of May 22, 1990, and Exhibits thereto.
-- **4.3 Amendment and Waiver of Subordinated Convertible Note Purchase Agreement
among the Company, Thermo Electron Corporation and Photoelectron Investments
Corporation of Liberia dated as of August 1, 1996, and Exhibits thereto.
-- **4.6 Amended and Restated Convertible Note Purchase Agreement originally dated as
of July 11, 1991, among the Company, PYC Corporation (formerly known as
Photoelectron Investments Corporation of Liberia) and Peter M. Nomikos, and
Exhibits thereto.
-- **4.7 8% Subordinated Convertible Note Due 1998 from the Company to Peter M.
Nomikos in the principal amount of $500,000 dated as of August 8, 1996.
-- **4.8 Convertible Note and Warrant Purchase Agreement between the Company and
Peter M. Nomikos dated as of May 13, 1992, and Exhibits thereto.
-- **4.9 Amendment and Waiver of Convertible Note and Warrant Purchase Agreement
dated as of May 13, 1992 between the Company and Peter M. Nomikos, dated as
of August 1, 1996 and Exhibits thereto.
-- **4.10 Amended and Restated 8% Subordinated Convertible Note Due on Demand from the
Company to Peter M. Nomikos in the principal amount of $705,000 dated as of
August 1, 1996.
-- **10.1 Lease Agreement dated June 12, 1996 between Lexington Development Company
Trust and the Company.
-- **10.2 Cash or Deferred Profit Sharing Plan and Trust dated April 1, 1995,
</TABLE>
1
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<TABLE>
<CAPTION>
<S> <C> <C>
as amended, of the Company.
-- **10.3 Employee Stock Purchase Plan of the Company and form of Subscription
Agreement.
-- **10.4 1989 Employee Stock Option Plan of the Company and forms of Stock Option
Agreements.
-- **10.5 1996 Equity Incentive Plan of the Company.
-- **10.6 Form of Stock Purchase Warrant issued to certain security holders of the
Company and Schedule of Substantially Identical Documents from Exhibits.
-- **10.7 Stock Option Agreements variously dated between certain directors and
officers of the Company and the Company.
-- **10.8 Form of Subscription Agreement between the Company and purchasers of Series
B Preferred Stock.
-- **10.9 Form of Subscription Agreement between the Company and purchasers of Series
C Preferred Stock.
-- **10.10 Series B Subscription Agreement dated 1994 between the Company and Thermo
Electron Corporation.
-- **10.11 Series C Subscription Agreement dated December 16, 1995 between the Company
and Toshiba Medical Systems Co., Ltd.
-- **10.12 Form of Registration Rights Agreement between the Company
and holders of Series C Preferred Stock.
-- **10.13 Registration Rights Agreement dated December 22, 1995 between the
Company and Toshiba Medical Systems Co., Ltd.
-- **10.14 Technology Cross License Agreement dated as of January 4, 1989 between
the Company and Thermo Electron Corporation.
-- **10.15 International Distributor Sales and Service Agreement dated December 13,
1995, as amended, between the Company and Toshiba Medical Systems Co., Ltd.
-- **10.16 Agreement dated as of February 1, 1991, as amended, between the Company
and the General Hospital Corporation.
-- **10.17 Clinical Trial Agreement dated as of August 1, 1992, as amended, between
</TABLE>
2
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<TABLE>
<CAPTION>
<S> <C> <C>
the General Hospital Corporation, Nicholas T. Zervas, M.D. and the Company.
-- **10.18 Investigational Treatment Agreement dated as of September 1, 1994 between
the General Hospital Corporation, Rees G. Cosgrove, M.D. and the Company.
-- **10.19 Clinical Research Agreement dated as of April 1, 1995, as amended, between
the Brigham and Women's Hospital Corporation, Peter Black, M.D. and the
Company.
-- **10.20 Clinical Trial Agreement dated as of January 1, 1995 between the Tokyo
Women's Medical College, Kintomo Takakura, M.D. and the Company.
-- **10.21 Clinical Trial Agreement dated December 13, 1995, as amended, between the
Company and Toshiba Medical Systems Co., Ltd.
-- **10.22 Clinical Research Agreement dated as of November 1, 1995 between The Royal
Free Hampstead (NHS), Felix Senanayake, M.D. and the Company.
-- **10.23 Form of Lock-Up Letter with certain security holders of the Company.
-- **10.24 Forms of Medical Advisory Board Agreements between the Company and members
of its Medical Advisory Board.
E-1 *11.1 Computation of net loss per share.
-- **21.1 Subsidiaries of the Company.
-- **24.1 Power of Attorney (included in signature page to this Form 10-Q).
E-2 *27.1 Financial Data Schedule.
</TABLE>
_______________
*Filed herewith.
**Filed as same numbered exhibit to the Company's Registration Statement on Form
S-1 (Reg. No. 333-14541) and incorporated herein by reference.
3
<PAGE>
Exhibit 11.1
Photoelectron Corporation and Subsidiary
(a Development Stage Company)
Statement of Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Ending Nine Months Ending
----------------------------- -----------------------------
September 27, September 28, September 27, September 28,
------------- ------------- ------------- -------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
COMPUTATION OF PRIMARY NET LOSS PER SHARE
Net Loss $(1,388,439) $(1,322,303) $(3,888,079) $(3,319,169)
SHARES:
Weighted average shares outstanding: 7,322,523 1,579,629 6,455,134 1,579,629
Shares issuable from the assumed conversion of
Series C Preferred Stock issued within one year of
the Company's initial public offering: -- 33,106 3,517 33,106
----------- ----------- ----------- -----------
Weighted average common and common equivalent
shares outstanding: 7,322,523 1,612,735 6,458,651 1,612,735
Primary Net Loss Per Share: $ (0.19) $ (0.82) $ (0.60) $ (2.06)
=========== =========== =========== ===========
COMPUTATION OF FULLY DILUTED NET LOSS PER SHARE:
Net Loss $(1,388,439) $(1,322,303) $(3,888,079) $(3,319,169)
SHARES:
Weighted average shares outstanding 7,322,523 1,579,629 6,455,134 1,579,629
Shares issuable from the assumed conversion of
Series C Preferred Stock issued within one year of
the Company's initial public offering: -- 33,106 3,517 33,106
----------- ----------- ----------- -----------
Weighted average common and common equivalent
shares outstanding: 7,322,523 1,612,735 6,458,651 1,612,735
Fully Diluted Net Loss Per Share: $ (0.19) $ (0.82) $ (0.60) $ (2.06)
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR PERIOD ENDING SEPTEMBER 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> JAN-03-1998 DEC-28-1996
<PERIOD-START> JUN-29-1997 DEC-31-1995
<PERIOD-END> SEP-27-1997 SEP-28-1996
<CASH> 15,472,780 2,537,023
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 365,252 323,714
<CURRENT-ASSETS> 16,726,214 3,882,020
<PP&E> 2,893,783 2,133,152
<DEPRECIATION> 1,326,367 898,127
<TOTAL-ASSETS> 18,293,630 5,117,045
<CURRENT-LIABILITIES> 663,849 1,042,109
<BONDS> 0 0
0 0
0 28,923
<COMMON> 73,567 15,979
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 18,293,630 5,117,045
<SALES> 725,374 0
<TOTAL-REVENUES> 725,374 0
<CGS> 361,536 0
<TOTAL-COSTS> 4,754,941 3,430,927
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 82,301 90,339
<INCOME-PRETAX> (3,888,079) (3,319,169)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,888,079) (3,319,169)
<EPS-PRIMARY> (.60) (2.06)
<EPS-DILUTED> (.60) (2.06)
</TABLE>
