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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarter ended June 30, 1997.
Commission file number 1-11388
PLC SYSTEMS INC.
(Exact name of registrant as specified in its charter)
BRITISH COLUMBIA, CANADA 04-3153858
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10 FORGE PARK, FRANKLIN, MASSACHUSETTS 02038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 541-8800
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Indicate by check mark whether the registrant (1) 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 (2) has been subject to s uch filing
requirements for the past 90 days.
YES __X__ NO ______.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practical date.
Class Outstanding at August 12, 1997
----- ------------------------------
Common Stock, no par value 16,656,450
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PLC SYSTEMS INC.
Index
Part I.Financial Information:
Item 1.
Condensed Consolidated Balance Sheets . . . . . . . . . . . . . .3
Condensed Consolidated Statements of Operations . . . . . . . . .4
Condensed Consolidated Statements of Cash Flows . . . . . . . . .5
Notes to Condensed Consolidated Financial Statements. . . . . . .6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations . . . . 8-11
Part II. Other Information:
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . 12
Item 2. Changes in Securities. . . . . . . . . . . . . . . . 12
Item 3. Defaults by the Company Upon its Senior Securities . 12
Item 4. Submission of Matters to a Vote of Security Holders. 12
Item 5. Other Information. . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 13
-2-
ITEM 1. FINANCIAL STATEMENTS
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PLC SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents ................................ $ 1,680 $ 3,039
Marketable securities .................................... -- 5,470
Accounts receivable, net ................................. 3,786 2,635
Inventories .............................................. 3,052 2,345
Prepaid expenses and other current assets ................ 589 679
-------- --------
Total current assets .................................... 9,107 14,168
Equipment, furniture and leasehold improvements, net ........ 5,153 4,712
Other assets ................................................ 671 537
-------- --------
Total assets ............................................ $ 14,931 $ 19,417
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................... $ 1,672 $ 867
Accrued clinical costs .................................... 1,070 935
Accrued compensation ...................................... 331 467
Deferred revenue .......................................... 268 339
Other accrued liabilities ................................. 376 315
-------- --------
Total current liabilities ............................... 3,717 2,923
Capital lease obligations ................................... 21 27
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, 25,000 shares authorized,
16,646 and 16,419 shares issued and outstanding at June 30,
1997 and December 31, 1996, respectively ................. 54,639 54,030
Accumulated deficit ......................................... (42,848) (37,129)
Foreign currency translation ................................ (598) (434)
-------- --------
11,193 16,467
-------- --------
Total liabilities and stockholders' equity .................. $ 14,931 $ 19,417
======== ========
The accompanying notes are an integral part
of the condensed consolidated financial statements.
-3-
PLC SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
Revenues:
Product sales ........................ $ 2,525 $ 769 $ 3,296 $ 4,966
Placement and service fees ........... 897 662 1,714 1,294
-------- -------- -------- --------
Total revenues ..................... 3,422 1,431 5,010 6,260
Cost of revenues:
Product sales ........................ 905 174 1,241 1,260
Placement and service fees ........... 565 202 1,059 506
-------- -------- -------- --------
Total cost of revenues ............ 1,470 376 2,300 1,766
Gross profit ........................... 1,952 1,055 2,710 4,494
Operating expenses:
Selling, general and administrative .. 3,518 1,591 6,335 3,042
Research and development ............. 1,146 559 2,217 1,318
-------- -------- -------- --------
Total operating expenses .......... 4,664 2,150 8,552 4,360
-------- -------- -------- --------
Income (loss) from operations .......... (2,712) (1,095) (5,842) 134
Other income:
Interest income, net ................. 42 161 133 299
Gain (loss) from foreign currency, net (27) 16 (10) (55)
-------- -------- -------- --------
15 177 123 244
-------- -------- -------- --------
Income (loss) before income taxes ...... (2,697) (918) (5,719) 378
Provision (benefit) for income taxes ... -- (15) -- 4
-------- -------- -------- --------
Net income (loss) ...................... $ (2,697) $ (903) $ (5,719) $ 374
======== ======== ======== ========
Net income (loss) per share ............ $ (0.16) $ (0.05) $ (0.36) $ 0.02
Shares used to compute net income (loss)
per share ............................ 16,632 16,441 16,021 17,214
The accompanying notes are an integral part
of the condensed consolidated financial statements.
-4-
PLC SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
-----------------
1997 1996
------- ------
Operating activities:
Net income (loss) .................................................... $ (5,719) $ 374
Adjustments to reconcile net income (loss) to net cash provided (used)
for operating activities:
Depreciation and amortization ....................................... 843 524
Change in assets and liabilities:
Accounts receivable ............................................... (1,092) 5,920
Inventory ......................................................... (682) (1,100)
Prepaid expenses and other assets ................................. (41) (654)
Accounts payable .................................................. 790 860
Deferred revenue .................................................. (99) 106
Accrued liabilities ............................................... 60 (538)
-------- --------
Net cash provided (used) for operating activities ..................... (5,940) 5,492
Investing activities:
Purchase of marketable securities ................................... -- (16,442)
Maturities of marketable securities ................................. 5,470 13,501
Purchase of fixed assets ............................................ (1,257) (1,122)
-------- --------
Net cash provided (used) for investing activities ..................... 4,213 (4,063)
Financing activities:
Net proceeds from sales of shares ................................... 609 2,264
Repayment of stockholder notes ...................................... -- 110
Principal payments on capital lease obligations ..................... (6) (4)
-------- --------
Net cash provided by financing activities ............................. 603 2,370
Effect of exchange rate changes on cash and cash equivalents .......... (235) (196)
-------- --------
Net increase (decrease) in cash and cash equivalents .................. (1,359) 3,603
Cash and cash equivalents at beginning of period ...................... 3,039 704
-------- --------
Cash and cash equivalents at end of period ............................ $ 1,680 $ 4,307
======== ========
The accompanying notes are an integral part
of the condensed consolidated financial statements.
-5-
PLC SYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods ended June
30, 1997 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10- K for the year ended December 31, 1996.
2. NET INCOME (LOSS) PER SHARE
Net income per share is calculated using the weighted average number of
shares and share equivalents outstanding during the period which consist of
stock options and stock warrants. The net loss per share is calculated using the
weighted average number of shares outstanding during the period and does not
include share equivalents.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior pe riods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. There is not expected to be a change to the
net income (loss) per share for the three or six months ended June 30, 1997 or
June 30, 1996 as a result of the new requirements.
3. INVENTORY
Inventories consist of the following (in thousands):
June 30, December 31,
1997 1996
-------- ------------
Raw materials . . . . . . . . . . . . . . $1,682 $1,043
Work in process . . . . . . . . . . . . . 616 306
Finished goods. . . . . . . . . . . . . . 754 996
------ ------
$3,052 $2,345
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-6-
PLC SYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. ISSUANCE OF CONVERTIBLE DEBENTURES
In July, 1997, the Company entered into a $20 million financing commitment.
Under the terms of the financing, The Company received $10,075,000 in July 1997
and will receive an additional $10,075,000 in August 1997 from the issuance of
convertible debentures to accredited investors through Smith Barney Inc. as
placement agent. The first tranche of debentures are due July 17, 2002 and the
second tranche of debentures are due August 14, 2002. The debentures are
convertible into common shares under a predetermined formula. The first tranche
of the debentures are convertible into common shares at the lesser of (a)
$25.98, or (b) the market price of the Company's Common Stock at the time of
conversion, with no more than 1,007,500 shares of Common Stock issuable in full
payment of all accrued interest and principal. The second tranche of the
debentures are convertible into common shares at the lesser of (a) $14.60, or
(b) the market price of the Company's Common Stock at the time of conversion,
with no more than 1,507,500 shares of Common Stock issuable in full payment of
all accrued interest and principal.
The Company has further agreed that should the Company 1.) receive a
recommendation of non-approval of its Pre-Market Application for its Heart Laser
System from the Circulatory Systems Advisory Panel of the U.S. Food and Drug
Administration (the "Panel") or 2.) not receive a recommendation of approval
from the Panel or FDA approval of its Pre-Market Application for its Heart Laser
System by August 14, 1998 then the maximum number of shares of Common Stock
which the Company shall be obligated to issue upon conversion of the tranche 2
debentures shall be increased from 1,507,500 to 2,007,500.
The convertible debentures will accrue interest at 5% per annum, payable in
cash or common stock at the Company's option, at the time of conversion. In
connection with the issuance of the first tranche of convertible debentures, the
Company has issued 69,875 redeemable warrants to these accredited investors to
purchase shares of its Common Stock at $27. 81 per share. In connection with the
issuance of the second tranche of convertible debentures, the Company has issued
80,125 redeemable warrants to these accredited investors to purchase shares of
its Common Stock at $15.78 per share. If the average closing sale price of its
Common Stock for any consecutive 30 trading day period commencing January 17,
1999 exceeds the exercise price by more than 50%, the Company has the right,
exercisable at any time upon 30 days notice to the holder to redeem the warrant
at a price of $.10 per warrant share. The warrants issued in connection with the
first tranche expire on July 17, 2002. The warrants issued in connection with
the second tranche expire on August 14, 2002.
The Company has agreed to register the shares of common stock underlying
the debentures and the warrants. As compensation for its services as placement
agent, Smith Barney Inc. receives a placement fee equal to 6 % of the gross
proceeds of all securities sold. The foregoing transaction was exempt from
registration under the Securities Act of 1933, as amended by virtue of Rule 506
promulgated under Regulation D.
5. LEGAL PROCEEDINGS
The Company and certain of its officers have been named as defendants in
eleven purported class action lawsuits each filed in August 1997 in the United
States District Court for the District of Massachusetts. The suits allege
violations of the federal securities laws. The plaintiffs are seeking damages in
connection with such alleged violations. Although the outcome of these suits is
not currently predictable, management believes that the Company has meritorious
defenses, and intends to vigorously defend the suits.
-7-
ITEM 2.
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PLC SYSTEMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company has two marketing strategies for selling the Heart Laser 1 TMR
System and its related components and sterile kits: placement contracts and
product sales. The Company's preferred strategy is to be reimbursed for the use
of the Heart Laser TMR System on a per procedure basis under a contractual
agreement whereby the customer commits to a minimum number of procedures on a
yearly basis. These contracts typically run for a minimum of three to five years
and allow for the customer to exceed the contractual minimums. These contracts,
referred to as placement contracts, are prefe rred to the sale strategy as the
Company believes that over time, the potential revenue stream is greater and
more profitable. Sterile handpieces and other disposables are included in the
per procedure fee. Revenues from these contracts are classified as placement
fees.
In foreign countries where credit risk is high or where health care is not
reimbursed by the government or insurance, the Heart Laser TMR System is sold as
capital equipment and the related sterile handpieces and other disposables are
sold separately for each procedure. The Company sells Hear t Laser TMR Systems
directly and through distributors. These sales are classified as product sales.
RESULTS OF OPERATIONS
Total revenues for the quarter ended June 30, 1997 were $3,422,000, an
increase of 139% when compared to $1,431,000 for the quarter ended June 30,
1996. Product sales for the quarter ended June 30, 1997 were $2,525,000, an
increase of 228% when compared to $769,000 for the quarter ended June 30, 1996.
The major factors in both of these increases are the number of Heart Laser TMR
Systems shipped and the method of sale. For the quarter ended June 30, 1997,
there were eight TMR Systems shipped; five of which were sales as compared with
four TMR Systems shipped in the quarter ended June 30, 1996, one of which was a
sale.
Total revenues for the six month period ended June 30, 1997 were $5,010,000,
a decrease of 20% when compared to $6,260,000 for the six months ended June 30,
1996. Product sales for the six month period ended June 30, 1997 were
$3,296,000, a decrease of 34% when compared to $4,966,000 for the six months
ended June 30, 1996. The major factors in both of these year to date decreases
are the number of TMR Systems sold and the customer mix. For the six months
ended June 30, 1997, the Company sold six Heart Laser TMR Systems to
distributors as compared to the sale of seven Heart Laser TMR S ystems for the
six months ended June 30, 1996 of which
- --------------------
1. The Heart Laser is a trademark of PLC Medical Systems, Inc.
-8-
PLC SYSTEMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
six were sold directly to customers and one was sold to a distributor. Heart
Laser TMR Systems sold directly to customers typically generate higher sales
dollars then those sold to a distributor.
Placement and service fees for the three and six months ended June 30, 1997
were $897,000 and $1,714,000, respectively, an increase of 35% and 32% when
compared with $662,000 and $1,294,000 for the same periods in fiscal 1996. These
increases reflect the continued adoption of the placement co ntract as the
method of sale for the Heart Laser TMR Systems.
Total gross profit for the three and six month periods ended June 30, 1997
approximated 57% and 54%, respectively, down from 74% and 72% for the comparable
periods in fiscal 1996. This decrease resulted from two factors. First, the
total gross margin declined due to unfavorable capacity and manufacturing
variances. These variances resulted from the high level of overhead expenses
associated with the new facility coupled with increased staffing. The Company
anticipates that after PMA approval, of which no assurance can be given,
production will increase to levels which will adequate ly absorb manufacturing
overhead and mitigate these variances. Secondly, as previously discussed, the
Company shipped less units under the sales strategy in 1997 than in 1996 and the
mix was primarily to distributors in 1997 as compared to direct sales in 1996.
Heart Laser TMR Systems sold direct ly to customers typically carry a higher
gross profit then those sold through distributors.
Selling, general and administrative expenditures of $3,518,000 and
$6,335,000 for the three and six month periods ending June 30, 1997 increased
121% and 108% respectively when compared to fiscal 1996 expenditures of
$1,591,000 and $3,042,000. In anticipation of the U.S. launch of the Heart L
aser TMR System, the Company increased its domestic sales and marketing efforts
and its administrative expenses by approximately $1,870,000 and $2,874,000,
respectively for the three and six months ended June 30, 1997 as compared to the
same periods in 1996. The increase is primarily due to increa sed staffing,
increased use of outside consultants, and other expenses.
Research and development expenditures for the three and six months ended
June 30, 1997 was $1,146,000 and $2,217,000, respectively, an increase of 105%
and 68% when compared to research spending of $559,000 and $1,318,000 for the
comparable periods in fiscal 1996. This increase is related to increased
staffing requirements associated with growing demands for clinical study
compilation and the development of new products.
For the three and six month periods ended June 30, 1997, interest income of
$42,000 and $133,000, respectively, decreased when compared to $161,000 and
$299,000 for the comparable periods in fiscal 1996 due to a lower cash balance
in 1997 as compared with the 1996 periods.
-9-
PLC SYSTEMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The Company records transactions in several foreign currencies, which
resulted in currency fluctuation gains of $27,000 and $10,000 for the three and
six months ended June 30, 1997 as compared to a loss of $16,000 for the three
months ended June 30, 1996 and a gain of $55,000 for the six mont hs ended June
30, 1996.
The Company did not record an income tax provision for the three or six
months ended June 30, 1997 due to its net loss of $2,697,000 and $5,719,000,
respectively. The Company believes it has sufficient net operating loss
carryforwards to offset taxable income, if any, for the year ended Decem ber 31,
1997. A provision for income tax was made in the first quarter of 1996 to cover
the tax liability under the alternative minimum tax regulations which cannot be
offset by net operating loss carryforwards. With the $1,095,000 operating loss
incurred in the quarter ended June 30, 1996, this provision was subsequently
adjusted in the quarter ended June 30, 1996.
The net loss of $2,697,000 for the quarter ended June 30, 1997 increased
199% when compared to the net loss of $903,000 for the quarter ended June 30,
1996. For the six month period ended June 30, 1997, the Company had a net loss
of $5,719,000 as compared with a net profit of $374,000 for the six month period
ended June 30, 1996. As previously discussed in more detail, the following
resulted in a higher loss for both the three and six month periods in 1997;
lower mix of sales contracts at distributor pricing, unfavorable capacity and
manufacturing variances, and higher overall expenses.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had cash and cash equivalents of $1,680,000.
On July 17, 1997, the Company entered into a $20 million financing commitment
and received $10 million through the issuance of convertible debentures due July
17, 2002. On August 14, 1997, the remaining $10 million was committed through
the issuance of Convertible debenture due August 14, 2002. See Note 4 in the
accompanying financial statements.
For the six months ended June 30, 1997, the Company incurred a loss of
$5,719,000 which resulted in the use of approximately $5,900,000 to support
operations. Cash provided by investing activities was approximately $4,200,000
principally related to the maturities of marketable securities offs et by
investment in fixed assets of $1,300,000 primarily related to its placement
contract activity. Cash provided by financing activities was approximately
$600,000 from the exercise of stock options and warrants.
In February 1997, the Company's PreMarket Approval application ("PMA") was
filed by the FDA. In anticipation of a possible FDA approval, the Company had
been increasing its overall operating expenses and overhead to be positioned to
further increase its production
-10-
PLC SYSTEMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
capacities. In order to be adequately positioned to meet these demands, the
Company secured financing in July 1997.
On July 28, 1997, an FDA Advisory Panel reviewed the data collected to date
on the Heart Laser TMR System. The Advisory Panel recommended a non-approval
with the requirement of additional data to complete the randomized study. The
Panel did not recommend a new study. The Heart Laser TMR Sy stem remains on the
expedited review path and will continue to be used by its clinical
investigators. The Company intends to meet with the FDA shortly to seek to
finalize a plan for the re-submission, and hopes to submit the data to the FDA
from the completed study later in the fall of 1997.
As a result of the recent FDA Advisory Panel decision, a revised time frame
for possible FDA approval has not been projected. Given this delay, the Company
will monitor its operating expenses closely and will minimize increases to
expenses and overhead during this period. With the $20 millio n financing
commitment secured in July, the Company believes that it has sufficient
resources to meet its working capital demands for a least the next twelve
months.
Unanticipated decreases in operating revenues, increases in expenses, or a
further delay in the expected FDA approval, may adversely impact the Company's
cash position. The Company may seek additional financing through the issuance
and sale of debt or equity securities, bank financing, joint ventures or by
other means. The availability of such financing and the reasonableness of any
related terms in comparison to market conditions cannot be assured.
The Company believes that operating losses are likely until after such time
as the Company receives its PMA from the FDA for the Heart Laser TMR System.
Although the Heart Laser TMR System has been granted "expedited review" status
by the FDA, the Company cannot project when, if at all, such approval will be
granted or that any approval will include desirable claims. Any failure or delay
in receiving any such approval would have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the Company must also convince health care p rofessionals, third party payors
and the general public of the medical and economic benefits of the Heart Laser
TMR System. No assurance can be given that the Company will be successful in
marketing the Heart Laser TMR System or that the Company will be able to operate
profitably on a consistent b asis.
This report contains forward-looking statements regarding anticipated
increases in revenues, marketing of products and proposed products and other
matters. These statements, in addition to statements made in conjunction with
the words "anticipate," "except," "intend," believe," "seek," "estimate" and
similar expressions are forward-looking statements that involve a number of
risks and uncertainties. The following is a list of factors, among others, that
would cause actual results to differ materially from the foward-looking
statements: approval by the U.S. Food and Drug Administration, business
conditions and growth in certain market segments and general economy, an
increase in competition, increased or continued market acceptance of the
Company's products and proposed products, and other risks and uncertainties
indicated from time to time in the Company's filings with the Securities and
Exchange Commission.
-11-
PLC SYSTEMS INC.
Part II Other Information
ITEM 1. LEGAL PROCEEDINGS.
The Company and certain of its officers have been named as defendants in
eleven purported class action lawsuits each filed in August 1997 in the
United States District Court for the District of Massachusetts. The
suits allege violations of the federal securities laws. The plaintiffs
are seeki ng damages in connection with such alleged violations.
Although the outcome of these suits is not currently predictable,
management believes that the Company has meritorious defenses, and
intends to vigorously defend the suits.
ITEM 2. CHANGES IN SECURITIES.
In July, 1997, the Company entered into a $20 million financing
commitment. Under the terms of the financing, The Company received
$10,075,000 in July 1997 and will receive an additional $10,075,000 in
August 1997 from the issuance of convertible debentures to accredited
investors through Smith Barney Inc. as placement agent. The first
tranche of debentures are due July 17, 2002 and the second tranche of
debentures are due August 14, 2002. The debentures are convertible into
common shares under a predetermined formula. The first tranche of the
debentures are convertible into common shares at the lesser of (a)
$25.98, or (b) the market price of the Company's Common Stock at the
time of conversion, with no more than 1,007,500 shares of Common Stock
issuable in full payment of all accrued interest and principal. The
second tranche of the debentures are convertible into common shares at
the lesser of (a) $14.60, or (b) the market price of the Company's
Common Stock at the time of conversion, with no more than 1,507,500
shares of Common Stock issuable in full payment of all accrued interest
and principal.
The Company has further agreed that should the Company 1.) receive a
recommendation of non-approval of its Pre-Market Application for its
Heart Laser System from the Circulatory Systems Advisory Panel of the
U.S. Food and Drug Administration (the "Panel") or 2.) not receive a
recommendation of approval from the Panel or FDA approval of its
Pre-Market Application for its Heart Laser System by August 14, 1998
then the maximum number of shares of Common Stock which the Company
shall be obligated to issue upon conversion of the tranche 2 debentures
shall be increased from 1,507,500 to 2,007,500.
The convertible debentures will accrue interest at 5% per annum, payable
in cash or common stock at the Company's option, at the time of
conversion. In connection with the issuance of the first tranche of
convertible debentures, the Company has issued 69,875 redeemable
warrants to these accredited investors to purchase shares of its Common
Stock at $27. 81 per share. In connection with the issuance of the
second tranche of convertible debentures, the Company has issued 80,125
redeemable warrants to these accredited investors to purchase shares of
its Common Stock at $15.78 per share. If the average closing sale price
of its Common Stock for any consecutive 30 trading day period commencing
January 17, 1999 exceeds the exercise price by more than 50%, the
Company has the right, exercisable at any time upon 30 days notice to
the holder to redeem the warrant at a price of $.10 per warrant share.
The warrants issued in connection with the first tranche expire on July
17, 2002. The warrants issued in connection with the second tranche
expire on August 14, 2002.
The Company has agreed to register the shares of common stock underlying
the debentures and the warrants. As compensation for its services as
placement agent, Smith Barney Inc. receives a placement fee equal to 6 %
of the gross proceeds of all securities sold. The foregoing transaction
was exempt from registration under the Securities Act of 1933, as
amended by virtue of Rule 506 promulgated under Regulation D.
ITEM 3. DEFAULTS BY THE COMPANY UPON ITS SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
On June 30, 1997, the Company held its Annual General Meeting of
Stockholders to vote on the following proposals:
1. To elect two members of the Board of Directors. Nominees for
Director were: (a) Patricia L. Murphy and (b) Kenneth J. Pulkonik
("Proposal No.1");
2. To appoint Ernst & Young LLP as auditors for Fiscal Year 1997 and to
authorize the Directors to fix the remuneration to be paid to the
auditors ("Proposal No. 2");
Of the 16,627,537 shares of the Company's Common Stock of record as of
May 23, 1997 able to be voted at the meeting, a total of approximately
12,295,713 shares were voted, or approximately 73.9% of the Company's issued and
outstanding shares of Common Stock entitled to vote on these matters. Each of
the proposals was adopted, with the vote total as follows:
-12-
PLC SYSTEMS INC. Part
II Other Information - Continued
SHARES SHARES SHARES
PROPOSAL VOTING FOR VOTING AGAINST ABSTAINING
-------- ---------- -------------- ----------
NO. 1
(a) Patricia L. Murphy 12,020,533 0 275,180
(b) Kenneth J. Pulkonik 12,037,637 0 258,076
NO. 2 12,112,130 73,363 110,220
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a.) Exhibits
--------
(I) The following exhibits are filed herewith:
Exhibit
No. Title
------- --------
10a Convertible Debenture Agreement.
10b First Amendment to Convertible Debenture Agreement.
10c Second Amendment to Convertible Debenture Agreement.
10d Form of Convertible Debenture.
10e Form of Redeemable Warrant.
10f Registration Rights Agreement.
11 Statement re computation of per-share earnings.
27 Financial Data Schedule.
b.) Reports on Form 8-K
None
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PLC SYSTEMS INC.
Part II Other Information
(Continued)
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.
PLC SYSTEMS INC.
Registrant
Date: August 14, 1997 /s/ Patricia L. Murphy
------------------------ -------------------------------
Patricia L. Murphy
(Chief Financial Officer)
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