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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 March 31, 1998.
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
--------------------------------
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 such 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 MAY 14, 1998
Common Stock, no par value 18,985,081
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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............9-13
Item 3. Quantitative and Qualitative Disclosures About Market Risk......13
Part II. Other Information:
Item 1. Legal Proceedings.............................................14
Item 2. Changes in Securities.........................................14
Item 3. Not Applicable................................................14
Item 4. Not Applicable................................................14
Item 5. Not Applicable................................................14
Item 6. Exhibits and Reports on Form 8-K..............................14
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Item 1. Financial Statements
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PLC SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
1998 1997
--------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 9,952 $ 3,484
Marketable securities.............................................. 3,005 12,845
Accounts receivable, net........................................... 704 1,337
Inventories ....................................................... 3,032 2,512
Prepaid expenses and other current assets.......................... 433 502
-------- --------
Total current assets........................................... 17,126 20,680
Equipment, furniture and leasehold improvements, net ................. 5,931 5,636
Other assets........................................................... 702 701
-------- --------
Total assets.................................................... $ 23,759 $ 27,017
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 1,385 $ 917
Accrued clinical costs............................................. 1,461 1,292
Accrued compensation............................................... 667 570
Accrued expenses................................................... 857 923
Deferred revenue................................................... 52 70
5% Convertible Debentures......................................... - 3,819
Other accrued liabilities.......................................... 118 296
-------- --------
Total current liabilities....................................... 4,540 7,887
Capital lease obligations.............................................. 103 121
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, 25,000 shares authorized, 18,976 and 16,419
shares issued and outstanding at June 30, 1997 and December 31, 1996,
respectively and 18,368 shares issued and outstanding at March 31, 1998
and December 31, 1997, respectively................................. 75,235 71,115
Accumulated deficit.................................................... (55,469) (51,533)
Foreign currency translation........................................... (650) (573)
--------- ---------
19,116 19,009
--------- ---------
Total liabilities and stockholders' equity............................. $ 23,759 $ 27,017
======= =======
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PLC SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
MARCH 31,
------------------
1998 1997
---- ----
Revenues:
Product sales.............................. $ 365 $ 771
Placement and service fees................. 580 817
-------- --------
Total revenues ......................... 945 1,588
Cost of revenues:
Product sales ............................ 152 336
Placement and service fees.................. 536 494
-------- --------
Total cost of revenues................... 688 830
-------- --------
Gross profit.................................. 257 758
Operating expenses:
Selling, general and administrative ........ 3,053 2,817
Research and development.................... 1,291 1,071
-------- --------
Total operating expenses................ 4,344 3,888
-------- --------
Loss from operations.......................... (4,087) (3,130)
Other income:
Interest income, net........................ 150 91
Gain from foreign currency, net............. 1 17
-------- --------
151 108
-------- --------
Provision for income taxes.................... $ (3,936) $ (3,022)
--------- ---------
Net loss...................................... $ (3,936) $(3,022)
========= =========
Basic and diluted loss per share.............. $ (.21) $ (.18)
Shares used to compute basic and diluted
loss per share.............................. 18,759 16,547
The accompanying notes are an integral part of the condensed
consolidated financial statements.
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PLC SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
MARCH 31,
------------------
1998 1997
---- ----
Operating activities:
Net loss..................................... $(3,936) $(3,022)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization.............. 606 421
Change in assets and liabilities:
Accounts receivable................... 752 1,182
Inventory ........................... (502) (806)
Prepaid expenses and other assets..... 52 154
Accounts payable...................... 464 (355)
Deferred revenue...................... (253) (75)
Accrued liabilities................... 344 219
------- --------
Net cash used for operating activities......... (2,473) (2,282)
Investing activities:
Purchase of marketable securities.......... (999) -
Maturities of marketable securities........ 10,839 4,494
Purchase of fixed assets................... (872) (857)
------- --------
Net cash provided by investing activities...... 8,968 3,637
Financing activities:
Net proceeds from sales of common shares... 196 517
Principal payments on capital lease
obligations................................ (16) (3)
------- --------
Net cash provided by financing activities...... 180 514
Effect of exchange rate changes on cash
and cash equivalents........................... (207) (186)
------- --------
Net increase in cash and cash equivalents...... 6,468 1,683
Cash and cash equivalents at beginning
of period...................................... 3,484 3,039
-------- --------
Cash and cash equivalents at end of period..... $ 9,952 $ 4,722
======= =======
NON-CASH FINANCING ACTIVITIES:
Conversion of Convertible Debentures and
accrued interest into Common Stock.......... $ 3,828 $ -
The accompanying notes are an integral part of the condensed
consolidated financial statements.
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PLC SYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31,1998
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 month period
ended March 31, 1998 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998. 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, 1997.
2. NET LOSS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share" ("Statement 128") which replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All loss per share amounts for all periods have been
presented, and have been restated, to conform to Statement 128.
3. COMPREHENSIVE INCOME
As of January 1,1998 the Company adopted Statement 130, Reporting Comprehensive
Income. Statement 130 establishes new rules for the reporting and display of
comprehensive income and its components:however the adoption of this Statement
had no impact on the Company's net loss or shareholders equity. Statement 130
requires unrealized gains or losses on the Company's available-for-sale
securities and foreign currency translation adjustments, which prior to
adoption were reported separately in shareholders equity to be included in
other comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of Statement 130.
During the first quarter of 1998 and 1997,total comprehensive loss amounted to
$4,013,00 and $3,169,00.
4. INVENTORY
Inventories consist of the following (in thousands):
March 31, December 31,
1998 1997
--------- ------------
Raw materials . . . . . . $1,450 $1,141
Work in process . . . . . 300 10
Finished goods . . . . . . 1,282 1,361
----- -----
$3,032 $2,512
====== ======
5. ISSUANCE OF CONVERTIBLE DEBENTURES
a. Convertible Debentures due July 17, 2002 and August 14, 2002.
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PLC SYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
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 $10,075,000 in August 1997 from the issuance of five-year
convertible debentures to accredited investors through Salomon Smith Barney Inc.
as placement agent. The convertible debentures accrue interest at 5% per annum,
payable in cash or common stock at the Company's option, at the time of
conversion. 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. In September 1997, the entire first tranche of convertible debentures
of $10,075,000 and related accrued interest converted into 890,394 shares of
common stock. 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. In
September 1997, $5,825,000 of the second tranche of convertible debentures and
related accrued interest converted into 512,572 shares of common stock. In
January and February 1998, the remaining $4,250,000 of the second tranche of
convertible debt and related accrued interest converted into 576,606 shares of
common stock.
In connection with the issuance of the first tranche of convertible
debentures, the Company issued 69,875 redeemable warrants 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 issued 80,125 redeemable
warrants 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.
b. Convertible Debentures due April 23, 2003
In April 1998, the Company entered into a $10 million financing
commitment. Under the terms of the financing, the Company received $5 million in
April 1998 from the issuance of non-interest bearing five-year convertible
debentures (the first tranche) to accredited investors through Salomon Smith
Barney Inc. as placement agent. 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) $19.53, or (b) commencing
July 22, 1998, the average of the five lowest consecutive closing bid price
during a look-back period consisting of thirty consecutive trading days prior to
conversion. In connection with the first tranche, the maximum number of the
Company's Common Stock issuable related to the debt conversion is 640,000.
In conjunction with the second tranche,the maximum number of the Company's
Common stock issuable related to the debt would be 671,422.The Company will
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PLC SYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
have the right to force conversion, in whole or in part, so long as the
Company's closing bid prices of its Common Stock has traded at or above $23.44
for a period of thirty day consecutive trading days, with thirty days prior
notice to the holder for cash or stock, at the option of the Company.
In connection with the first tranche, the Company issued 4,864
redeemable warrants to purchase shares of its Common Stock at $19.53 per share.
If the average closing sale price of its Common Stock for any consecutive 30
trading day period commencing April 23, 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 expire on April 23, 2003.
6. LEGAL PROCEEDINGS
In September 1996, CardioGenesis Corporation, ("CardioGenesis") filed a civil
lawsuit in the United States District Court for the Northern District of
California seeking to have the Company's synchronization patent declared
invalid, or, alternatively, asking the court to determine whether CardioGenesis
infringes on this patent. In October 1996, the Company filed an answer and
counterclaim alleging that CardioGenesis infringes on this patent. The
counterclaim seeks both injunctive relief and monetary damages against
CardioGenesis. In October 1997, CardioGenesis filed an amended complaint seeking
to have the Company's synchronization patent declared unenforceable.
CardioGenesis is not seeking monetary damages from the Company.
In January 1997, CardioGenesis Corporation, filed a challenge to the Company's
European synchronization patent in the European Patent Office and in March 1997
the Company filed its response. In addition, in April 1997, the Company filed an
infringement lawsuit against CardioGenesis in the Munich District Courts
alleging infringement of its synchronization patent. An oral hearing has been
scheduled in the Munich District Court on October 1, 1998.
The Company and certain of its officers have been named as defendants in 21
purported class action lawsuits filed between August 1997 and November 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. Nineteen of these complaints
have been consolidated by the court into a single action for pretrial purposes
and the remaining two suits have been consolidated into the one suit for
pretrial purposes . These matters are in the earliest stages of litigation and
the Company has filed motions to dismiss all of these claims. There can be no
assurance that the motions to dismiss these claims will be successful.
Management is unable to make a meaningful estimate of the amount or range of
loss that could result from an unfavorable outcome of these pending litigation
matters. It is possible that the Company's result of operations or cash
flows in a particular quarter or annual period or its financial position
could be materially affected by an ultimate unfavorable outcome of this
pending litigation. The Company believes that it has valid defenses to these
class action litigation matters and intends to vigorously defend itself in
these matters.
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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 both a placement strategy and a direct/distributor sales
strategy for Heart Laser System purchases. The placement program allows the
Company to receive recurring revenues based on the usage of the Heart Laser
System rather than one-time revenues for the sale of each Heart Laser System.
Under the placement model, an installation fee is paid when the Heart Laser
System is installed and the Company then receives a fee per use. Sterile
handpieces and other disposables are included in the per procedure fee. Revenues
from these contracts are classified as placement fees. The cost of the Heart
Laser System is depreciated over the term of the contract. In the near term, it
is expected that placement revenues will continue to be negatively impacted
until the U.S. Food and Drug Administration ("FDA") approval is granted and
medicare reimbursement is granted by the Health Care Financing Administration
(HCFA).
In certain foreign countries where credit risk is high or where health care is
not reimbursed by the government or insurance, the Heart Laser System is sold as
capital equipment and the related sterile handpieces and other disposables are
sold separately for each procedure. The Company sells Heart Laser Systems
directly and through distributors. These sales are classified as product sales.
RESULTS OF OPERATIONS
Total revenues for the quarter ended March 31, 1998 were $945,000, a
decrease of 40% when compared to $1,588,000 for the quarter ended March 31,
1997. Product sales for the quarter ended March 31, 1998 were $365,000, a
decrease of 53% when compared to $771,000 for the quarter ended March 31, 1997.
In 1998, the Company shipped four Heart Laser Systems under the placement
strategy while in 1997, the Company shipped six Heart Laser Systems, of which
one was a sale and five where under the placement strategy. Included in the 1998
sales amount is recognition of deferred revenue from a 1996 sale accounting for
approximately 63% of product sales for the quarter ended March 31,1998.
Placement and service fees for the three months ended March 31, 1998
were $580,000, a decrease of 29% when compared with $817,000 for the same period
in fiscal 1997. Although the Company has increased its placement contract base,
revenue dollars have decreased. The Company generates a revenue stream over
the life of the placement contract. Typically, the revenue generated in the
initial periods of the contract are less than in later periods when PreMarket
Approval ("PMA") is anticipated and minimum contractual billings are increased.
In May 1997, the Health Care Financing Administration (HCFA) instituted a
non-coverage policy for TMR procedures performed on Medicare patients in
the United States. The HCFA announcement coupled with the July 28, 1997 FDA
Advisory Panel recommendation of non-approval caused the Company to
reexamine its requirement of contractual minimum billings prior to FDA approval.
As a result, the Company permitted a slowdown in the contractual minimum
billings to an actual usage billing. On April 24, 1998, an FDA Advisory Panel
unanimously recommended that the Heart Laser System for TMR be approved for
marketing for patients who suffer severe, stable angina. The FDA Panel's
decision is not binding. The Company awaits the FDA's final action on the
application. Until PMA approval and reimbursement, of which no assurance can be
given, the Company expects that future billings
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under placement contracts will be impacted similarly and the effect on future
revenue on existing contracts cannot be predicted.
Total gross profit for the three month period ended March 31, 1998
approximated 27% down from 48% for the comparable period in fiscal 1997. This
decrease resulted from two factors. First, the total gross margin declined due
to unfavorable capacity and manufacturing variances. The Company anticipates
that after PMA approval, of which no assurance can be given, production will
increase to levels which will absorb manufacturing overhead and mitigate these
variances. Secondly, the Company's existing placement contracts are in the
pre-PMA contractual minimum billings period, which are typically lower than
minimums required after PMA approval, of which no assurance can be given, at
which time annual minimums increase. The cost of the laser is charged on a
straight-line basis over the life of the placement contract. The overall
depreciation on Heart Laser Systems under existing placement contracts is
increasing at a faster rate than the corresponding revenue generated due to the
lower pre-PMA minimum billings. This has resulted in a lower gross margin in
1998 as compared to 1997. Until such time that the Company sees an increase to
its minimum billings on existing and future placement contracts, the gross
margin is expected to be negatively impacted.
Selling, general and administrative expenditures of $3,053,000 for the three
period ending March 31, 1998 increased 8% when compared to fiscal 1997
expenditures of $2,817,000. The increase in the quarter ended March 31, 1998
over the 1997 period primarily relates to additional sales and marketing
personnel in anticipation of a possible FDA approval.
Research and development expenditures for the three months ended March
31, 1998 was $1,291,000 an increase of 21% when compared to spending of
$1,071,000 for the comparable period in fiscal 1997. This increase is related to
increased staffing requirements associated with growing demands for clinical
study compilation and data preparation and the development of new products.
Other income of $151,000 for the period ended March 31, 1998 increased
$43,000 or 40% when compared to $108,000 for the comparable period in 1997.
Included in other income is interest income, interest expense and other expense.
Interest income for the three months ended March 31, 1998 was $192,000 when
compared to $92,000 for the comparable period in fiscal 1997. The Company's
average cash balances were higher in the 1998 period. Interest expense for the
three months ended March 31, 1998 was $42,000 when compared to $1,000 for the
comparable period in 1997. In 1998 the Company recorded interest expense on
the outstanding debentures. In the comparable period in 1997, there was no
outstanding debentures. The Company records transactions in several foreign
currencies, which resulted in currency fluctuation income of $1,000 for the
three months ended March 31, 1998 as compared to income of $17,000 for the three
months ended March 31, 1997.
The Company incurred a net loss of $3,936,000 for the quarter ended
March 31, 1998 when
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compared to the net loss of $3,022,000 for the quarter ended March 31, 1997. As
previously discussed in more detail, the following resulted in a higher loss for
the three month period in 1998; lower overall revenues, unfavorable capacity and
manufacturing variances, and higher overall expenses.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had cash and cash equivalents of
$9,952,000 and marketable securities of $3,005,000. In April 1998, the Company
entered into a $10 million financing commitment. Under the terms of the
financing, the Company received approximately $5 million in net proceeds through
the issuance of convertible debentures due April 23, 2003. See Note 5 in the
accompanying condensed consolidated financial statements.
For the three months ended March 31, 1998, the Company incurred a loss
of $3,936,000 which resulted in the use of approximately $2,500,000 to support
operations. Cash provided by investing activities was approximately $9,000,000
related to the net maturities of approximately $10,000,000 of marketable
securities, offset by an investment of approximately $900,000 in fixed assets
primarily related to its placement contract activity. Cash provided by financing
activities was approximately $200,000 from the exercise of stock options.
In February 1997, the Company's PMA was filed by the FDA. In
anticipation of a possible FDA approval, the Company had been increasing its
overall operating expenses to be positioned to increase its production
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
recommended a non-approval pending further patient data. In December 1997, the
Company submitted all of the requested data on the Heart Laser System. Given
this delay, the Company has monitored its operating expenses closely and
minimized increases to expenses and overhead during this period.
On April 24, 1998, an FDA Advisory Panel unanimously recommended that
the Heart Laser System for TMR be approved for marketing for patients who suffer
from severe, stable angina and are not amenable to conventional coronary
revascularization techniques (e.g., bypass surgery and angioplasty). As part
of its recommendation, the Panel described certain labeling conditions and
post-market surveillance obligations for FDA's consideration. The FDA Panel's
decision is not binding. The Company awaits the FDA's final action on the
application. The Company secured a financing commitment up to $10 million from
two institutional investors. On April 23, 1998, the Company received $5 million
from the issuance of convertible debentures due April 23, 2003, with a
commitment to receive up to an additional $5 million at the Company's option.
The Company has secured this additional capital to support a successful market
launch of the Heart Laser System to open-heart centers in the U.S. full FDA
clearance of which no assurance can be given. In addition, this new funding
will allow the Company to conduct further research in the TMR arena, such as an
ongoing study evaluating TMR as an adjunct to bypass surgery, as well as to
develop new products. With the $13 million in cash and marketable securities at
March 31, 1998, along with the $10 million financing commitment of April 23,
1998, the Company believes that it has sufficient resources to meet its working
capital demands for at least the next twelve months.
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The Company and certain of its officers have been named as defendants
in 21 purported class action lawsuits filed between August 1997 and November
1997. See Note 6 in the accompanying condensed consolidated financial statements
for further discussion. The Company has insurance coverage for such legal action
. The maximum deductable under such coverage has been incurred.
The Year 2000 Issue refers to potential problems with computer systems
or any equipment with computer chips or software that uses dates where the date
has been stored as just two digits (e.g., 97 for 1997). On January 1, 2000, any
clock or date recording mechanism incorporating date sensitive software which
uses only two digits to represent the year may recognize a date using 00 as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including, among other things,
a temporary inability to process transactions, send invoices, or engage in
similar business activities. The Company is presently evaluating the impact of
the Year 2000 Issue as it affects business operations, interfaces with customers
and vendors, and contingencies related to products that have been sold that may
need to be modified. To date, the Company is unaware of any situations of
noncompliance that would materially adversely effect its operations or financial
condition. There can be no assurance, however, that instances of noncompliance
which could have a material adverse effect on the Company's operations or
financial condition will not be identified, that the systems of other companies
with which the Company transacts business will be corrected on a timely basis;
or that failure by such entities to correct a Year 2000 problem or a correction
which is incompatible with the Company's information systems would not have a
material adverse effect on the Company's operations and financial condition.
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, if ever , as the Company receives its PMA from the FDA for the Heart Laser
System. Although the Heart Laser 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 professionals, third party
payors and the general public of the medical and economic benefits of the Heart
Laser System. No assurance can be given that the Company will be successful in
marketing the Heart Laser System or that the Company will be able to operate
profitably on a consistent basis.
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," "expect," "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 forward-looking
statements: approval by the U.S. Food and Drug
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Administration, business conditions and growth in certain market segments
and general economy, an increase in competition or other competitive
developments, increased or continued market acceptance of the Company's
products and proposed products by health care professionals and third party
payors, and other risks and uncertainties indicated from time to time in the
Company's annual report, SEC Form 10k for fiscal year ended December 31,1997 and
the Company's other filings with the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
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PLC SYSTEMS INC.
Part II Other Information
ITEM 1. LEGAL PROCEEDINGS.
See Note 6 to Notes to Consolidated Financial Statements filed with
this Form 10-Q.
ITEM 2. CHANGES IN SECURITIES.
See Note 5 to Notes to Consolidated Financial Statements filed with
this Form 10-Q.
ITEM 3. DEFAULTS BY THE COMPANY UPON ITS SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
None
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 Purchase Agreement.
10b Form of Convertible Debenture.
10c Form of Redeemable Warrant
10d Registration Rights Agreement.
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: MAY 15, 1998 By:/s/ PATRICIA L. MURPHY
---------------------- -------------------------
Patricia L. Murphy
(Chief Financial Officer)
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