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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
COMMISSION FILE NUMBER 0-21667
PHOTOELECTRON CORPORATION
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(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 02421
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(Address of Principal Executive Offices) (Zip code)
(781) 861-2069
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(Registrant's Telephone Number, Including Area Code)
____________________
Indicate by check mark whether the registrant: (1) has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No
____________________
7,843,454 shares of Common Stock, $.01 par value, were outstanding as of April
20, 2000.
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PHOTOELECTRON CORPORATION
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QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED APRIL 1, 2000
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION Page
--------------------- ----
Item 1 Consolidated Financial Statements 3
Consolidated Balance Sheets at April 1,
2000 and January 1, 2000 3
Consolidated Statements of Operations for
the Three Months Ended
April 1, 2000 and April 3, 1999 4
Consolidated Statements of Cash Flows for
the Three Months Ended
April 1, 2000 and April 3, 1999 5
Notes to Unaudited Consolidated Financial
Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II - OTHER INFORMATION
-----------------
Item 5 Other Information 11
Item 6 Exhibits and Reports on Form 8-K 12
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PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
April 1, January 1,
2000 2000
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ............................................ $ 676,899 $ 134,104
Accounts receivable .................................................. 66,180 87,500
Inventories .......................................................... 1,473,833 1,437,557
Prepaid expenses ..................................................... 340,694 146,799
Other current assets ................................................. 15,295 32,272
------------ ------------
Total current assets ............................................ 2,572,901 1,838,232
------------ ------------
PROPERTY AND EQUIPMENT
Computer equipment ................................................... 943,381 960,324
Lab and production equipment ......................................... 977,278 975,408
Clinical site equipment .............................................. 858,573 978,898
Sales demo equipment ................................................. 148,450 --
Furniture and fixtures ............................................... 177,883 177,883
Leasehold improvements ............................................... 819,613 805,886
------------ ------------
PROPERTY, PLANT, EQUIPMENT AND LEASEHOLD IMPROVEMENT, Less ................ 3,925,178 3,898,399
ACCUMULATED DEPRECIATION AND AMORTIZATION ................................. 3,026,989 2,872,636
------------ ------------
898,189 1,025,763
------------ ------------
Total assets .................................................... $ 3,471,090 $ 2,863,995
============ ============
LIABILITIES AND SHAREHOLDERS (DEFICIT) EQUITY
CURRENT LIABILITIES
Accounts payable ..................................................... $ 435,139 $ 256,982
Accrued expenses ..................................................... 344,756 364,495
Accrued payroll and benefits ......................................... 86,932 75,690
Accrued warranty expense ............................................. 278,000 266,000
Convertible subordinated notes ....................................... 775,870 761,770
Convertible notes payable ............................................ 2,032,489 804,311
Deferred revenue ..................................................... 370,000 87,500
------------ ------------
Total current liabilities ....................................... 4,323,186 2,616,748
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock, $0.01 par value
Authorized 7,500,000
Issued and outstanding none at April 1, 2000 and
January 1, 2000, respectively................................... -- --
Common stock, $0.01 par value -
Authorized 15,000,000
Issued and outstanding 7,843,454 and 7,768,754 at
April 1, 2000 and January 1, 2000, respectively ................. 78,435 77,688
Capital in excess of par value preferred stock ....................... -- --
Capital in excess of par value common stock .......................... 39,036,414 38,641,184
Deferred compensation ................................................ (9,986) (9,986)
Deficit accumulated during development stage ......................... (39,956,959) (38,461,639)
------------ ------------
Total shareholders' equity ...................................... (852,096) 247,247
------------ ------------
Total liabilities and shareholders' equity ..................... $ 3,471,090 $ 2,863,995
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
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PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------
April 1, 2000 April 3, 1999
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(Unaudited) (Unaudited)
<S> <C> <C>
Revenues ...................................................... $ 422,549 $ 272,134
Cost of Goods Sold ............................................ 109,967 124,420
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Gross Margin .................................................. 312,582 147,714
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Operating Expenses
Research and Development expenses ................... $ 764,968 $ 938,738
Sales, general and administrative expenses .......... 747,853 1,329,835
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Total operating expenses ............................ 1,512,821 2,268,573
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Operating loss ...................................... (1,200,239) (2,120,859)
Interest income ..................................... 23,948 65,224
Interest expense .................................... (319,029) (14,570)
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Interest (expense) income, net ...................... (295,081) 50,654
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Net loss ............................................ $(1,495,320) $(2,070,205)
=========== ===========
Basic and diluted net loss per share ................ $ (0.19) $ (0.27)
=========== ===========
Weighted average basic and diluted shares ........... 7,787,428 7,735,258
</TABLE>
The accompanying notes are an integral part of these financial statements.
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PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Three Months Ended
------------------
April 1, 2000 April 3, 1999
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(Unaudited) (Unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net loss ................................................................. $(1,495,320) $(2,070,205)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization ....................................... 154,353 158,887
Noncash interest converted to subordinated notes ......................... 42,278 --
Noncash interest expense on bridge financing ............................. 276,751 --
Changes in current accounts Inventories .................................. (36,276)
(299,019)
Accounts receivable ...................................................... 21,320 189,504
Prepaid expenses ......................................................... (193,895)
70,143
Other current assets ..................................................... 16,977 106,514
Accounts payable ......................................................... 178,157
(172,297)
Accrued expenses ......................................................... 3,503
252,851
Accrued expenses ......................................................... 282,500 --
----------- -----------
Net cash used in operating activities .................................. (749,652) (1,763,622)
----------- -----------
Cash flows from investing activities:
(Purchases) Maturation of held to maturity investments ................... -- 1,993,056
(Purchases) of equipment and leasehold improvements ...................... (26,779) (156,216)
----------- -----------
Net cash provided by (used in) investing activities .................... (26,779) 1,836,840
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock ................................... 119,226 235,075
Proceeds from issuance of convertible notes .............................. 1,200,000 --
Payments of subordinated notes ........................................... -- 156
----------- -----------
Net cash provided by (used in) financing activities .................. 1,319,226 235,231
----------- -----------
Increase (decrease) in cash and cash equivalents .............................. 542,795 308,449
Cash and cash equivalents, beginning of period ................................ 134,104 3,686,457
----------- -----------
Cash and cash equivalents, end of period ...................................... $ 676,899 $ 3,994,906
----------- -----------
</TABLE>
The fair value of warrants issued, in the amount of $276,751, has been
recognized as non cash interest expense from the $2.25 million bridge financing
from PYC Corporation.
The accompanying notes are an integral part of these financial statements.
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PHOTOELECTRON CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED 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
January 1, 2000 included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission.
2. NET LOSS PER SHARE - During the first quarter of 2000 and 1999, basic and
diluted net loss per share were calculated as follows:
April 1, 2000 April 3, 1999
------------- -------------
Basic and Diluted:
Net loss $(1,495,320) $(2,070,205)
Weighted average shares 7,787,428 7,735,258
Basic net loss per share $ (0.19) $ (0.27)
The computation of diluted earnings per share for April 1, 2000 and April 3,
1999 excludes the effect of assuming the exercise of certain outstanding
stock options and the conversion of convertible securities because the effect
would be anti-dilutive, due to the Company's net loss during the year. As of
April 1, 2000, there were 836,517 of such options outstanding, with exercise
prices ranging from $0.40 - $9.75 per share.
3. COMPREHENSIVE INCOME - During the first quarter of 1998, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." This pronouncement sets forth requirements for
disclosure of the Company's comprehensive income and accumulated other
comprehensive income. There were no items of other comprehensive income
therefore comprehensive income equals net income.
4. SUBSEQUENT EVENT -
The Company has initiated a private placement to "accredited investors" (as
defined in Regulation D under the Securities Act of 1933) of a minimum of
$5,000,000 and a maximum of $10,000,000 of 10% senior convertible debentures.
The Company intends to use the net proceeds of the private placement for
general administrative expenses and for general corporate purposes,
including, without limitation, to support the accelerated testing and
marketing of the Company's new products. In addition, the Company intends to
use the net proceeds of the private placement to repay the principal sum
outstanding, if any, under the bridge loan (described below) that may be made
to the Company by KSH Strategic Investment Fund I, LP ("KSH Fund"), an
affiliate of the placement agent for the offering .
The holders of the debentures will be entitled to receive interest payments
at the rate of 10% per annum on the outstanding principal amount of the
debentures. The principal amount of the debentures, together with all accrued
and unpaid interest, will be due and payable on May 1, 2005. The holders of
the
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debentures will have the option, at any time prior to May 1, 2005, to convert
the debentures, in whole or in part, into shares of the Company's common
stock at the lesser of (i) the average closing bid price per share of the
Company's common stock, as reported on the American Stock Exchange, on the
five trading days preceding May 5, 2000 ($4.00) or (ii) the average closing
bid price per share of the Company's common stock, as reported on the
American Stock Exchange, on the five trading days preceding the first closing
of the offering (the "Conversion Price").
The placement agent for the offering will receive a cash commission equal to
6% of the aggregate purchase price of the debentures sold and a non-
accountable expense allowance equal to 1% of the aggregate purchase price of
the debentures sold, plus the reasonable fees and the actual disbursements of
counsel to the placement agent. In addition, the Company will issue to the
placement agent such number of warrants to purchase the Company's common
stock, each entitling the placement agent to purchase one share of the
Company's common stock, as will be equal to 10% of the number of shares of
the Company's common stock into which the aggregate principal amount of the
debentures sold at a closing is initially convertible. The warrants issued to
the placement agent will be exercisable at any time for five years from the
final closing of the offering at an exercise price per share of the Company's
common stock equal to the weighted average Conversion Price of the debentures
sold at each closing.
The securities that will be sold in the offering have not been registered
under the Securities Act or the securities laws of any state. The offering is
being made in reliance upon the exemptions from the registration provisions
afforded by Section 4(2) of the Securities Act and Rule 506 of Regulation D
thereunder. The Company has agreed to use its best efforts to file with the
Securities and Exchange Commission, within sixty days following the final
closing of the offering, a registration statement on Form S-3 (or such other
form as applicable) with respect to the resale of shares of the Company's
common stock issuable upon conversion of the debentures, as well as the
shares of the Company's common stock issuable upon the exercise of the
warrants issued to the placement agent.
In connection with the offering, the KSH Fund has committed to make a bridge
loan to the Company of up to a maximum principal sum of $500,000, without
interest, against receipt of the proceeds of the offering. As consideration
for the KSH Fund's making the commitment for the bridge loan, the Company
issued to the KSH Fund warrants to purchase 11,000 shares of the Company's
common stock. In addition, if the bridge loan is made by the KSH Fund to the
Company, the Company will issue to the KSH Fund, on the date the bridge loan
is made, up to an additional 44,000 warrants on the basis of 11,000 warrants
for every $100,000 loaned, or a prorated portion thereof. The warrants issued
for the commitment and any such additional warrants will have an exercise
price equal to the average closing bid price of the Company's common stock,
as reported on the American Stock Exchange, on the five trading days
immediately preceding the date the warrants are issued, and will be
exercisable for a period of five years following the final closing of the
offering.
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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 Annual Report on Form 10-K for the
fiscal year ended January 1, 2000, 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 does not expect to be able to generate sufficient revenue in the
near future for it to be able to continue operations without raising additional
capital. Should the necessary funds not be available to the Company on
acceptable terms, there is substantial doubt that the Company will be able to
continue as a going concern.
The Company was founded in 1989 and soon after focused its development efforts
using photon radiosurgery technology. From this technology, the Company
developed its PRS(TM) system. The Company's latest commercial version of the PRS
system is the PRS400(TM) system. The key component of the PRS400 system is a
miniature x-ray source, designed to be placed inside a tumor or the residual
surgical cavity after tumor removal. The x-ray source generates x-rays at the
tip of a long, needle-like probe that can be placed directly into the target
area. The PRS400 system produces low energy photons that are rapidly absorbed in
the tissue immediately surrounding the probe, minimizing irradiation of
surrounding healthy body tissue. The PRS400 system is protected by thirteen U.S.
patents, with an additional nine patents pending. During 1999, the PRS400
system was integrated into new treatment systems designed to address an
expanding range of clinical applications. These new products, known as the
ACCUBEAM(TM) system and the INTRABEAM(TM) system, have been developed in
collaboration with Carl Zeiss Oberkochen ("Carl Zeiss"), the Company's strategic
partner. To date, the Company has not received any significant revenue from the
sale of the PRS400 system.
The Company has experienced significant operating losses in each year since its
inception, due primarily to substantial research and development expenditures.
As of April 1, 2000, the Company had an accumulated deficit of approximately
$40.0 million and expects to continue to incur losses until such time as its
commercialization efforts yield offsetting revenues. There can be no assurance
that the PRS400 system will ever gain commercial acceptance, or that the Company
will ever generate significant revenues or achieve profitability. The Company's
ability to achieve profitable operations will be dependent in a large part on
whether it can successfully commercialize the PRS, ACCUBEAM and INTRABEAM
systems and make the transition to a manufacturing and marketing company. The
Company anticipates that its sales and marketing efforts with Carl Zeiss will
begin to generate sales of the PRS, ACCUBEAM and INTRABEAM systems in the
upcoming year. The Company anticipates that its research and development, sales
and general and administrative expenses will increase minimally during 2000.
On July 27, 1998, the Company obtained a Section 510(k) marketing clearance for
the PRS400 system which the Company developed for introduction as its first
commercial product. Simultaneous with completion of PRS400 system product
development, the Company completed the implementation of programs designed to
ensure compliance with the FDA's cGMP standards. The Company also completed the
process of seeking certification to the Medical Device Directive Annex II,
enabling self-certification of the European Community Mark (CE). On December 18,
1998, the Company initiated commercial distribution of the PRS system. In
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September 1999, the Company obtained a Section 510(k) marketing clearance from
the FDA to market the system for radiotherapy treatments, regardless of
treatment site.
In August 1999, the Company entered into a strategic alliance with Carl Zeiss,
an international technology leader whose medical systems division specializes in
high technology equipment such as surgical microscopes for various medical
disciplines and state-of-the-art image-guided surgery equipment. The Company
appointed Carl Zeiss as its exclusive distributor for the PRS400 system
throughout the world (except for Japan where Toshiba Medical Systems is the
Company's distributor of the PRS400 system) for intracranial applications and
spinal radiotherapy and as its non-exclusive distributor for the PRS400 system
in the same territory for all other clinical applications. In addition, Carl
Zeiss agreed to assist the Company in the development of new intraoperative
radiotherapy products and to provide service and support for the Company's
products. The alliance with Carl Zeiss gives the Company access to a global
sales force with an established record of sales of high technology equipment
within the medical field.
In November 1999, the Company announced the launch of two products jointly
developed with Carl Zeiss: (i) the ACCUBEAM system, a device for the treatment
of brain tumors that combines the Company's miniature x-ray source with Carl
Zeiss's stereotactic guided, motorized MKM surgical microscope system; and (ii)
the INTRABEAM system, a multi-purpose system for intraoperative radiotherapy
that combines the Company's miniature x-ray source with an articulated support
stand from Carl Zeiss.
In addition to establishing its strategic alliance with Carl Zeiss, the Company
joined the SNN, a consortium of medical equipment companies that has established
a shared, open-standard, image-based software system to support their products.
By participating in the SNN consortium and utilizing its software system, the
Company can integrate its miniature x-ray source with the products of other SNN
members, including Philips, Agfa IMPAX, Aesculap and XLTEK. In addition, the SNN
participants agree to promote each other's products on a non-exclusive basis,
thus enhancing the Company's distribution capabilities. The software used by SNN
is written and supported by SNS. SNS is currently working to integrate the
Company's technology into the software platform shared by the other SNN member
companies.
In November 1999, the Company entered into a $2.25 million line of credit bridge
financing with PYC Corporation. As of April 1, 2000, the Company had borrowed
$2.0 million under the line of credit.
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 1, 2000 AND APRIL 3, 1999
Revenue. The Company had revenues of $422,549 in the first three months of 2000,
as compared with $272,134 in the first three months of 1999. The 2000 revenue is
primarily the result of a sale of a PRS system to Children Memorial Hospital in
Chicago, Illinois.
Research and development expenses. The Company's research and development
expenses decreased by $173,770 from $938,738 in the first three months of 1999
to $764,968 in the first three months of 2000. The decrease primarily represents
the Company's shift towards focusing on manufacturing and marketing efforts for
the PRS400, ACCUBEAM and INTRABEAM systems. Additionally, the other factor
contributing to the reduction was the reorganization of the Company in 1999.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased by $581,982 from $1,329,835 in the first three
months of 1999 to $747,853 in the first three months of 2000. The principal
reduction in costs can be attributable to the Company not having to incur costs
of approximately $367,500, which is associated with the resignation of the
former Vice-President and Chief Operating Officer of the Company. In addition,
the Company realized cost savings from its reorganization in May 1999.
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Interest income. Interest income decreased by $41,276 from $65,224 in the first
three months of 1999 to $23,948 in the first three months of 2000. The decrease
resulted from the continued expenditure of the Company's funds.
Interest expense. Interest expense increased by $304,459 from $14,570 in the
first three months of 1999 to $319,029 in the first three months of 2000.
Interest expense of $276,751 can be attributable to the fair value of the
warrants issued to PYC Corporation in November 1999. It should be noted that
this increase did not impact the cash flow of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company has expended substantial funds to research and develop the PRS,
ACCUBEAM and INTRABEAM systems and other potential products, conduct clinical
trials, pursue regulatory approvals, establish commercial scale manufacturing in
its own facilities or in the facilities of others, and market the PRS, ACCUBEAM
and INTRABEAM systems. The Company anticipates it will continue to expend
substantial funds in the future on such activities as such funds become
available.
Consolidated working capital was $(1,750,285) at April 1, 2000, compared with
$(778,516) at January 1, 2000. Included in working capital are cash and cash
equivalents of $676,899 at April 1, 2000, compared with $134,104 at January 1,
2000. During the first three months of 2000, the Company used $749,652 of cash
for operating activities.
The Company used $26,779 of cash in the first three months of 2000 for fixed
assets and leasehold improvements associated with its facility.
The Company received $119,226 of cash in the first three months of 2000 from the
exercise of stock options to purchase Common Stock. The Company also received
$1,200,000 of cash in the first three months of 2000 in the form of convertible
debt from the bridge financing from PYC Corporation.
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
obtained product liability insurance covering the commercial use of its
products.
The Company's future capital requirements will depend on a variety of factors,
including the time and costs involved in obtaining FDA and other regulatory
approvals, the results of the Company's ongoing clinical trials, the market
acceptance of the PRS, ACCUBEAM and INTRABEAM systems and any other Company
products, the expense and results of the Company's continued scientific research
and development programs, the time and costs expended in filing, prosecuting and
enforcing patent claims, and the development of competing technologies. As of
April 1, 2000, the Company estimates that its available cash and cash
equivalents, remaining proceeds from the $2.25 million bridge loan from PYC
Corporation and revenues earned in early 2000 from product sales will allow the
Company to continue operations for approximately two to three months.
The Company is in the process of seeking additional debt or equity financing.
There is no assurance that the Company will be able to obtain such financing on
acceptable terms or at all. If the Company raises additional funds through the
issuance of equity securities or securities convertible into equity securities,
dilution to existing shareholders will occur. No assurance can be given that the
necessary funds will be available to the
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Company on acceptable terms, if at all. Should the Company be unable to raise
additional capital on acceptable terms, there is substantial doubt that the
Company will be able to continue as a going concern.
PART II: OTHER INFORMATION
Item 5: OTHER INFORMATION
SUBSEQUENT EVENT
The Company has initiated a private placement to "accredited investors" (as
defined in Regulation D under the Securities Act of 1933) of a minimum of
$5,000,000 and a maximum of $10,000,000 of 10% senior convertible debentures.
The Company intends to use the net proceeds of the private placement for general
administrative expenses and for general corporate purposes, including, without
limitation, to support the accelerated testing and marketing of the Company's
new products. In addition, the Company intends to use the net proceeds of the
private placement to repay the principal sum outstanding, if any, under the
bridge loan (described below) that may be made to the Company by KSH Strategic
Investment Fund I, LP ("KSH Fund"), an affiliate of the placement agent for the
offering.
The holders of the debentures will be entitled to receive interest payments at
the rate of 10% per annum on the outstanding principal amount of the debentures.
The principal amount of the debentures, together with all accrued and unpaid
interest, will be due and payable on May 1, 2005. The holders of the debentures
will have the option, at any time prior to May 1, 2005, to convert the
debentures, in whole or in part, into shares of the Company's common stock at
the lesser of (i) the average closing bid price per share of the Company's
common stock, as reported on the American Stock Exchange, on the five trading
days preceding May 5, 2000 ($4.00) or (ii) the average closing bid price per
share of the Company's common stock, as reported on the American Stock Exchange,
on the five trading days preceding the first closing of the offering (the
"Conversion Price").
The placement agent for the offering will receive a cash commission equal to 6%
of the aggregate purchase price of the debentures sold and a non-accountable
expense allowance equal to 1% of the aggregate purchase price of the debentures
sold, plus the reasonable fees and the actual disbursements of counsel to the
placement agent. In addition, the Company will issue to the placement agent such
number of warrants to purchase the Company's common stock, each entitling the
placement agent to purchase one share of the Company's common stock, as will be
equal to 10% of the number of shares of the Company's common stock into which
the aggregate principal amount of the debentures sold at a closing is initially
convertible. The warrants issued to the placement agent will be exercisable at
any time for five years from the final closing of the offering at an exercise
price per share of the Company's common stock equal to the weighted average
Conversion Price of the debentures sold at each closing.
The securities that will be sold in the offering have not been registered under
the Securities Act or the securities laws of any state. The offering is being
made in reliance upon the exemptions from the registration provisions afforded
by Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder.
The Company has agreed to use its best efforts to file with the Securities and
Exchange Commission, within sixty days following the final closing of the
offering, a registration statement on Form S-3 (or such other form as
applicable) with respect to the resale of shares of the Company's common stock
issuable upon conversion of the debentures, as well as the shares of the
Company's common stock issuable upon the exercise of the warrants issued to the
placement agent.
In connection with the offering, the KSH Fund has committed to make a bridge
loan to the Company of up to a maximum principal sum of $500,000, without
interest, against receipt of the proceeds of the offering. As consideration for
the KSH Fund's making the commitment for the bridge loan, the Company issued to
the KSH
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Fund warrants to purchase 11,000 shares of the Company's common stock. In
addition, if the bridge loan is made by the KSH Fund to the Company, the Company
will issue to the KSH Fund, on the date the bridge loan is made, up to an
additional 44,000 warrants on the basis of 11,000 warrants for every $100,000
loaned, or a prorated portion thereof. The warrants issued for the commitment
and any such additional warrants will have an exercise price equal to the
average closing bid price of the Company's common stock, as reported on the
American Stock Exchange, on the five trading days immediately preceding the date
the warrants are issued, and will be exercisable for a period of five years
following the final closing of the offering.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
No. DESCRIPTION
--- -----------
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter for which this
report is filed.
-12-
<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 thereunto duly authorized.
PHOTOELECTRON CORPORATION
By: /s/ Euan S. Thomson
--------------------
Euan S. Thomson
President and
Chief Operating Officer
By: /s/ Gerald J. Bojas
-------------------
Gerald J. Bojas
Chief Financial Officer and
Treasurer
Dated: May 12, 2000
-13-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10Q FOR
PERIOD ENDING APRIL 1, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-30-2000 JAN-01-2000
<PERIOD-START> JAN-02-2000 JAN-02-1999
<PERIOD-END> APR-01-2000 APR-03-1999
<CASH> 676,899 3,994,906
<SECURITIES> 0 0
<RECEIVABLES> 66,180 70,496
<ALLOWANCES> 0 0
<INVENTORY> 1,473,833 1,753,725
<CURRENT-ASSETS> 2,572,901 6,094,560
<PP&E> 3,925,178 3,753,779
<DEPRECIATION> 3,026,989 2,467,570
<TOTAL-ASSETS> 3,471,090 7,380,769
<CURRENT-LIABILITIES> 4,323,186 1,736,232
<BONDS> 0 0
0 0
0 0
<COMMON> 78,435 77,402
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 3,471,090 7,380,769
<SALES> 0 0
<TOTAL-REVENUES> 422,549 272,134
<CGS> 109,967 124,420
<TOTAL-COSTS> 1,512,821 2,268,573
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 319,029 14,570
<INCOME-PRETAX> (1,495,320) (2,070,205)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,495,320) (2,070,205)
<EPS-BASIC> (0.19) (0.27)
<EPS-DILUTED> (0.19) (0.27)
</TABLE>
