FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 0-17919
SURGICAL LASER TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 31-1093148
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
147 Keystone Drive
Montgomeryville, PA 18936
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(Address of principal executive offices)
(Zip Code)
(215) 619-3600
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed
since last report)
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 ( )
On November 2, 2001 the registrant had outstanding 2,327,965 shares of
Common Stock, $.0l par value.
SURGICAL LASER TECHNOLOGIES, INC.
AND SUBSIDIARIES
INDEX
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PART I. FINANCIAL INFORMATION: PAGE
- ------------------------------ ----
ITEM 1. Financial Statements:
a. Condensed Consolidated Balance Sheets
September 30, 2001 (unaudited) and December 31, 2000 3
b. Condensed Consolidated Statements of Operations and Other
Comprehensive Income (unaudited) for the quarters ended September 30,
2001 and October 1, 2000 4
c. Condensed Consolidated Statements of Operations and Other
Comprehensive Income (Loss) (unaudited) for the nine months ended
September 30, 2001 and October 1, 2000 5
d. Condensed Consolidated Statements of Cash Flows (unaudited) for the
nine months ended September 30, 2001 and October 1, 2000 6
e. Notes to Condensed Consolidated Financial Statements (unaudited) 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION:
- ----------------------------
ITEM 4. Submission of Matters to a Vote of Security Holders 13
ITEM 5. Other Information 13
SIGNATURES 14
2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
SURGICAL LASER TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
Sept. 30, 2001 Dec. 31, 2000
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $219 $702
Short-term investments 1,848 1,698
Accounts receivable, net of allowance for doubtful
accounts of $422 and $487 2,128 1,825
Inventories 3,014 2,182
Other 295 230
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Total current assets 7,504 6,637
Property and equipment, net 3,099 3,186
Patents and licensed technology, net 364 433
Goodwill, net 607 632
Other assets 65 45
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Total assets $11,639 $10,933
==================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $148 $58
Accounts payable 809 376
Accrued liabilities 241 516
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Total current liabilities 1,198 950
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Long-term debt 2,945 2,300
Stockholders' equity:
Common stock, $.01 par value, 30,000 shares authorized,
2,328 shares issued and outstanding 23 23
Additional paid-in capital 33,716 33,716
Accumulated deficit (26,257) (26,080)
Accumulated other comprehensive income 14 24
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Total stockholders' equity 7,496 7,683
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Total liabilities and stockholders' equity $11,639 $10,933
==================================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
SURGICAL LASER TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
For the Quarter Ended:
Sept. 30, 2001 Oct. 1, 2000
Net sales $2,795 $2,513
Cost of sales 1,471 1,088
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Gross profit 1,324 1,425
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Operating expenses:
Selling, general and administrative 1,151 1,168
Product development 141 186
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1,292 1,354
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Operating income 32 71
Interest expense 43 51
Interest income (13) (41)
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Net income $2 $61
==================================
Basic and diluted net income per share $0.00 $0.03
==================================
Shares used in calculating basic net income per share 2,328 2,328
Shares used in calculating diluted net income per share 2,328 2,354
==================================
SURGICAL LASER TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OTHER COMPREHENSIVE INCOME (UNAUDITED)
(In thousands)
For the Quarter Ended:
Sept. 30, 2001 Oct. 1, 2000
Net income $2 $61
Other comprehensive income:
Unrealized securities gains arising during period 8 --
Less: reclassification for gains included in net income (7) --
----------------------------------
Increase in accumulated other comprehensive income 1 --
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Total comprehensive income $3 $61
==================================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
SURGICAL LASER TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
For the Nine Months Ended:
Sept. 30, 2001 Oct. 1, 2000
Net sales $7,751 $6,372
Cost of sales 3,913 2,819
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Gross profit 3,838 3,553
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Operating expenses:
Selling, general and administrative 3,534 2,932
Product development 444 496
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3,978 3,428
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Operating income (loss) (140) 125
Interest expense 136 78
Interest income (99) (143)
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Net income (loss) ($177) $190
==================================
Basic and diluted net income (loss) per share ($0.08) $0.09
==================================
Shares used in calculating basic net income (loss) per share 2,328 2,135
Shares used in calculating diluted net income (loss) per share 2,328 2,185
==================================
SURGICAL LASER TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OTHER COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(In thousands)
For the Nine Months Ended:
Sept. 30, 2001 Oct. 1, 2000
Net income (loss) ($177) $190
Other comprehensive income:
Unrealized securities gains arising during period 16 --
Less: reclassification for gains included in net income (loss) (26) --
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Decrease in accumulated other comprehensive income (10) --
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Total comprehensive income (loss) ($187) $190
==================================
5
The accompanying notes are an integral part of these condensed consolidated
financial statements.
SURGICAL LASER TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
For the Nine Months Ended:
Sept. 30, 2001 Oct. 1, 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($177) $190
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 656 495
Provision for bad debts (65) (26)
(Increase) decrease in assets, net of acquisition:
Accounts receivable (238) (80)
Inventories (909) (211)
Other current assets (69) (112)
Other assets (33) 14
Increase (decrease) in liabilities, net of acquisition:
Accounts payable 433 (362)
Accrued liabilities (275) (299)
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Net cash used in operating activities (677) (391)
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CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchases) sales of short-term investments, net (159) 1,733
Purchases of property and equipment (141) (212)
Patent costs (9) (5)
Acquisition costs -- (340)
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Net cash provided by (used in) investing activities (309) 1,176
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (96) (364)
Net advances on line of credit 599 --
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Net cash provided by (used in) financing activities 503 (364)
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Net increase (decrease) in cash and cash equivalents (483) 421
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 702 277
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CASH AND CASH EQUIVALENTS, END OF PERIOD $219 $698
==================================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
6
SURGICAL LASER TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation:
The condensed consolidated financial statements of the Company for the quarter
and nine-month periods ended September 30, 2001 and October 1, 2000 have been
prepared by the Company without audit by the Company's independent auditors. In
the opinion of the Company's management, all adjustments necessary to present
fairly the financial position, results of operations, and cash flows of the
Company as of September 30, 2001 and October 1, 2000 and for the periods then
ended have been made. Those adjustments consist only of normal and recurring
adjustments. The condensed consolidated balance sheet of the Company as of
December 31, 2000 has been derived from the audited consolidated balance sheet
of the Company as of that date.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with accounting principles
generally accepted in United States of America have been condensed or omitted.
These condensed consolidated financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Form
10-K annual report for 2000 filed with the Securities and Exchange Commission.
Interim Financial Information:
While the Company believes that the disclosures presented are adequate to
prevent misleading information, it is suggested that the unaudited condensed
consolidated financial statements be read in conjunction with the audited
consolidated financial statements and notes included in the Company's Form 10-K
report for the fiscal year ended December 31, 2000, as filed with the Securities
and Exchange Commission. Interim results for the quarter ended September 30,
2001 are not necessarily indicative of the results to be expected for the full
year.
2. Supplemental Cash Flow Information:
There were no material income taxes paid for the nine months ended September 30,
2001 and October 1, 2000. Interest paid for the nine months ended September 30,
2001 and October 1, 2000 was $126,000 and $78,000, respectively. For the nine
months ended September 30, 2001, non-cash investing and financing activities
consisted of the reclassification of lasers to capital lease agreements for
$149,000 and the purchase of vehicles in exchange for capital lease agreements
for $81,000.
In June 2000, the Company acquired the assets of Surgical Innovations &
Services, Inc. ("SIS") for $300,000 cash and 350,000 shares of the Company's
common stock. In conjunction with the acquisition, liabilities were assumed as
follows (in thousands of dollars):
Fair value of assets acquired $3,809
Cash payment to SIS shareholders (300)
Other cash payments for acquisition costs (40)
Common stock issued (686)
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Liabilities assumed $2,783
===========
3. Inventories:
Inventories are stated at the lower of cost (first-in, first-out basis) or
market. Cost is determined at the latest cost for raw materials and at
production cost (materials, labor and indirect manufacturing cost) for
work-in-process and finished goods.
7
Inventories at September 30, 2001 and December 31, 2000 were as follows (in
thousands of dollars)
Sept. 30, 2001 Dec. 31, 2000
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Raw material and work-in-process $2,084 $1,300
Finished goods 930 882
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$3,014 $2,182
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4. Basic and Diluted Income (Loss) Per Share:
Basic and diluted income (loss) per share have been computed under the
guidelines of Statement of Financial Accounting Standards ("SFAS") No. 128
"Earnings per Share" as follows (in thousands except for per share amounts):
For the Quarter Ended For the Nine Months Ended
Sept. 30, 2001 Oct. 1, 2000 Sept. 30, 2001 Oct. 1, 2000
-------------- ------------ -------------- ------------
Basic EPS Calculation
Net income (loss) $2 $61 ($177) $190
Denominator:
Common Stock Outstanding 2,328 2,328 2,328 2,135
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Basic EPS $0.00 $0.03 ($0.08) $0.09
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Diluted EPS Calculation
Net income (loss) $2 $61 ($177) $190
Denominator:
Common Stock Outstanding 2,328 2,328 2,328 2,135
Common Stock Options -- 26 -- 50
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Total Shares 2,328 2,354 2,328 2,185
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Diluted EPS $0.00 $0.03 ($0.08) $0.09
================================================================================
For the quarter and nine months ended September 30, 2001, the Company had common
stock options and warrants outstanding of 613,790. The common stock options and
warrants outstanding were excluded from the calculation of diluted earnings per
share because either those options' and warrants' exercise prices were greater
than the average market price of the common stock or their inclusion would have
had an anti-dilutive effect on earnings per share. For the quarter and the nine
months ended October 1, 2000, the Company had common stock options and warrants
outstanding of 518,000, of which 26,000 and 50,000 options were included in the
calculation of diluted earnings per share, respectively. The remainder of the
common stock options and warrants outstanding were excluded from the calculation
of diluted earnings per share because those options' and warrants' exercise
prices were greater than the average market price of the common stock.
5. Bank Borrowings:
Concurrent with the acquisition of SIS, SLT obtained a $3 million credit
facility from a bank to replace the term debt of SIS. The credit facility has a
commitment term of three years expiring June 2003, permits deferment of
principal payments until the end of the commitment term, and is secured by SLT's
business assets, including collateralization of $2 million of SLT's cash and
cash equivalents and short-term investments. The credit facility has an interest
rate of either the 30, 60, 90, or 180 day LIBOR plus 2.25% and is subject to
certain covenants which the Company was in compliance with during all periods
presented. At. September 30, 2001, the rate on the credit facility was 5.28%. At
September 30, 2001, SLT had $2,799,000 in outstanding obligations and $201,000
remaining available under the credit facility.
8
6. Income Taxes:
In accordance with Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes", SLT has recorded no current provision for income
taxes due to the availability of net operating loss carryforwards in the quarter
ended September 30, 2001 and due to the loss incurred for the nine months ended
September 30, 2001. SLT has recorded no benefit from the net loss inasmuch as
any such benefit has been fully reserved due to uncertainties as to the
realizability of such benefit based on SLT's historical results and the general
market conditions which SLT continues to experience.
In the quarter and nine months ended October 1, 2000, SLT recorded no current
provision due to the fact that the income for financial accounting purposes in
the quarter was negated by favorable temporary differences realized in the same
period. Changes in the deferred tax asset account were completely offset by
changes in the tax valuation allowance.
7. Business Segment and Geographic Data:
The Company is engaged primarily in one business segment: the design,
development and manufacture of laser products and the marketing of those laser
products as well as other instruments for medical applications. The Company
markets its offering through traditional sales efforts as well as through the
provision of fee-based surgical services. The Company's customers are primarily
hospitals and surgery centers. For the quarters and nine months ended September
30, 2001 and October 1, 2000, the Company did not have material net sales to any
individual customer.
The Company reported net sales in the following categories (in thousands of
dollars):
For the Quarter Ended: For the Nine Months Ended:
Sept. 30, 2001 Oct. 1, 2000 Sept. 30, 2001 Oct. 1, 2000
-------------- ------------ -------------- ------------
Disposables and accessories $1,186 $1,287 $3,696 $4,007
Laser system sales and related maintenance 617 393 1,114 957
Surgical services 992 833 2,941 1,408
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Total net sales $2,795 $2,513 $7,751 $6,372
==========================================================================================================================
For the quarters and nine months ended September 30, 2001 and October 1, 2000,
there were no material net sales attributed to an individual foreign country.
Net sales by geographic area were as follows (in thousands of dollars):
For the Quarter Ended: For the Nine Months Ended:
Sept. 30, 2001 Oct. 1, 2000 Sept. 30, 2001 Oct. 1, 2000
-------------- ------------ -------------- ------------
Domestic $2,415 $2,212 $6,598 $5,637
Foreign 380 301 1,153 735
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$2,795 $2,513 $7,751 $6,372
======================================================================================================================
8. Recent Accounting Pronouncements:
On July 20, 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Intangible
Assets". SFAS No. 141 is effective for all business combinations completed after
June 30, 2001. SFAS No. 142 is effective for fiscal years beginning after
December 15, 2001; however, certain provisions of this Statement apply to
goodwill and other intangible assets acquired between July 1, 2001 and the
effective date of SFAS No. 142. Major provisions of these Statements and their
effective dates for the Company are as follows:
o all business combinations initiated after June 30, 2001 must use the
purchase method of accounting. The pooling of interest method of accounting
is prohibited except for transactions initiated before July 1, 2001.
9
o intangible assets acquired in a business combination must be recorded
separately from goodwill if they arise from contractual or other legal
rights or are separable from the acquired entity and can be sold,
transferred, licensed, rented or exchanged, either individually or as part
of a related contract, asset or liability.
o goodwill, as well as intangible assets with indefinite lives, acquired
after June 30, 2001, will not be amortized. Effective January 1, 2002, all
previously recognized goodwill and intangible assets with indefinite lives
will no longer be subject to amortization.
o effective January 1, 2002, goodwill and intangible assets with indefinite
lives will be tested for impairment annually and whenever there is an
impairment indicator.
o all acquired goodwill must be assigned to reporting units for purposes of
impairment testing and segment reporting.
The Company will continue to amortize goodwill recognized prior to July 1, 2001,
under its current method until January 1, 2002, at which time annual and
quarterly goodwill amortization of $32,352 and $8,088 will no longer be
recognized. By December 31, 2002 the Company will have completed a transitional,
fair-value-based impairment test of goodwill as of January 1, 2002. Impairment
losses, if any, resulting from the transitional testing will be recognized in
2002, as a cumulative effect of a change in accounting principle.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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OVERVIEW
The Company is engaged in the development, manufacture and sale of proprietary
laser systems for both contact and non-contact surgery, and in the delivery of
turn-key surgical services which include the provision of technicians, capital
equipment and disposable and reusable products for specific surgical procedures.
The Company's surgical services are performed under contractual agreements with
its customers, or under a non-contracted arrangement. All of the Company's
surgical services customers are charged for the services provided on a
per-procedure basis. The Company supplements its sales of laser systems and
surgical services with certain non-laser product offerings.
The Company's growth strategy includes a continued emphasis on identifying
surgical procedures that benefit from the precision and hemostatic capabilities
of the Company's proprietary technology coupled with the development and
sourcing of products that provide the opportunity to expand the Company's
surgical service offerings.
The Company expanded its surgical service offerings in June 2000 through the
acquisition of SIS. SIS provides surgical services utilizing a variety of laser
technologies to its customer base located mainly in the southeastern United
States.
RESULTS OF OPERATIONS
The Company's net sales are generated primarily by three sources: sales of
Contact Laser Delivery Systems and related accessories; sales of Nd:YAG and CTH
holmium laser systems and related maintenance; and the provision of surgical
services. The U.S. market is serviced predominantly by a direct sales force,
while sales outside the United States are derived through a network of
distributors. Net sales for the quarter ended September 30, 2001 of $2,795,000
increased $282,000 or 11% from the comparable period in 2000. Net sales for the
nine months ended September 30, 2001 of $7,751,000 increased $1,379,000 or 22%
from the comparable period in 2000.
Net sales of Contact Laser Delivery Systems and related accessories were
$1,186,000 or 42% of total net sales for the quarter ended September 30, 2001.
This represented a decrease of $101,000 or 8% compared to net sales of Contact
Laser Delivery Systems and related accessories of $1,287,000 for the quarter
ended October 1, 2000. Net
10
sales of Contact Laser Delivery Systems and related accessories were $3,696,000
or 48% of total net sales for the nine months ended September 30, 2001. This
represented a decrease of $311,000 or 8% compared to net sales of Contact Laser
Delivery Systems and related accessories of $4,007,000 for the nine months ended
October 1, 2000. These decreases were due to a decline in sales of non-laser
disposable products and the lower level of Contact Laser Delivery System sales
in the U.S. markets, offset in part by higher sales in international markets.
Net sales of laser systems and related maintenance, which comprised 22% of total
net sales for the quarter ended September 30, 2001, increased $224,000 or 57%
from the quarter ended October 1, 2000. Net sales of laser systems and related
maintenance, which comprised 14% of total net sales for the nine months ended
September 30, 2001, increased $157,000 or 16% from the nine months ended October
1, 2000. These increases were attributable to an increase in the average selling
price for both domestic and international sales and to the June 2001
introduction of the CTH Holmium laser systems which led to an overall increase
in the number of laser system sales.
The Company provides per-procedure surgical services for customers which include
access to laser systems and related disposables as well as a technician. Prior
to the acquisition of SIS in June 2000, the Company offered the use of its
proprietary Nd:YAG laser system in the provision of surgical services. With the
acquisition of SIS, the Company now has access to several different types of
lasers, significantly expanding the types of surgical procedures that can be
performed through its services. Surgical services revenue was $992,000 in the
third quarter of 2001 or 35% of total net sales. This represented an increase of
$159,000 or 19% compared to the third quarter of 2000. This increase was due to
an increase in new surgical service contracts. Surgical services revenue was
$2,941,000 for the nine months ended September 30, 2001 or 38% of total net
sales. This represented an increase of $1,533,000 or 109% compared to the nine
months ended October 1, 2000. This increase was the result of the acquisition of
SIS in June 2000, with only four months' revenue for SIS included in the nine
months ended October 1, 2000.
Gross profit of $1,324,000 for the quarter ended September 30, 2001 decreased
$101,000 or 7% from the third quarter of 2000. As a percentage of net sales,
gross profit was 47% in the quarter ended September 30, 2001 and 57% in the
quarter ended October 1, 2000. Gross profit of $3,838,000 for the nine months
ended September 30, 2001 increased $285,000 or 8% from the nine months ended
October 1, 2000. As a percentage of net sales, gross profit of 50% for the nine
months ended September 30, 2001 declined 6% when compared to a gross profit
percentage for the nine months ended October 1, 2000 of 56%. These declines were
attributable to two main factors. A change in sales mix, which had an
unfavorable impact in both the quarter and nine months ended September 30, 2001
and to an increase in surgical service expenses due to geographic expansion.
Operating expenses for the third quarter of 2001 of $1,292,000 decreased by
$62,000 or 5% from the third quarter of 2000. Operating expenses for the first
nine months of 2001 of $3,978,000 increased by $550,000 or 16% from the first
nine months of 2000. This increase was primarily attributable to the addition of
the operating expenses of SIS as a result of the acquisition in June 2000.
Selling, general and administrative expenses of $1,151,000 in the third quarter
of 2001 were relatively consistent with the comparable prior year period of
$1,168,000. Selling, general and administrative expenses of $3,534,000 for the
nine months ended September 30, 2001 increased by $602,000 or 21% from the
comparable prior year period. This increase was primarily attributable to
selling expenses of the acquired SIS business. Also included in the selling,
general and administrative expenses for the quarter and nine months ended
September 30, 2001 was a recovery of bad debt of $40,000 and $125,000,
respectively, related to notes receivable from former customers. A similar
recovery of bad debt was recorded for the quarter and nine months ended October
1, 2000 of $80,000 and $110,000, respectively.
Product development expenses of $141,000 in the third quarter of 2001 decreased
$45,000 or 24% from the third quarter of 2000. Product development expenses of
$444,000 for the nine months ended September 30, 2001 decreased $52,000 or 11%
from the nine months ended October 1, 2000. This decline was attributable to
lower outside consulting costs for new product development.
Interest expense of $43,000 for the third quarter of 2001 was $8,000 or 16%
lower than in the third quarter of 2000. This decrease was due to decreasing
interest rates. Interest expense of $136,000 for the nine months ended
11
September 30, 2001 was $58,000 or 74% higher than the comparable prior year
period. This increase was due to interest expense on the Company's outstanding
credit facility obligations, entered into concurrent with the acquisition of SIS
in June 2000.
Interest income of $13,000 and $99,000 for the quarter and nine months ended
September 30, 2001 declined $28,000 and $44,000, respectively, from the quarter
and nine months ended October 1, 2000 due to the lower levels of cash, cash
equivalents and short-term investments and due to declining interest rates
earned on investments.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and short-term investments at September 30, 2001 were
$2,067,000, a decrease of $333,000 from the December 31, 2000 balance of
$2,400,000. The Company invests its excess cash in high-quality, liquid,
short-term investments.
Concurrent with the SIS acquisition, SLT obtained a $3 million credit facility
from a bank to replace the term debt of SIS. The credit facility has a
commitment term of three years expiring June 2003, permits deferment of
principal payments until the end of the commitment term, and is secured by SLT's
business assets, including collateralization of $2 million of SLT's cash, cash
equivalents and short-term investments. The credit facility has an interest rate
of either the 30, 60, 90, or 180 day LIBOR plus 2.25% and is subject to certain
covenants. At September 30, 2001, the rate on the credit facility was 5.25%. At
September 30, 2001, SLT had $2,799,000 in outstanding obligations and $201,000
remaining available under the credit facility.
Net cash used in operating activities was $677,000 for the first nine months of
2001 compared to cash used in operating activities of $391,000 in the comparable
period in 2000. The comparative increase in cash used in operating activities
was due primarily to an increase in inventory of $909,000 resulting primarily
from the laser inventory build that followed development of the Company's
LaserPro CTH holmium laser, partially offset by an increase in accounts payable
of $433,000 related to those inventory purchases.
Net cash used in investing activities was $309,000 for the first nine months of
2001, compared to cash provided by investing activities of $1,176,000 for the
nine months of 2000. The decrease in cash provided by investing activities was
due principally to the purchase of short-term investments of $159,000 for the
first nine months of 2001 as compared to sales of short-term investments of
$1,733,000 for the first nine months of 2000. The sales of short-term
investments in 2000 were offset, in part, by SIS acquisition costs of $340,000.
Net cash provided by financing activities was $503,000 for the first nine months
of 2001 compared to cash used in financing activities of $364,000 for the first
nine months of 2000. The increase was due to net advances on the line of credit
for the first nine months of 2001 of $599,000.
Management believes the Company's current cash position and cash flows from
operations and availability under its credit facility will be sufficient to fund
operations and meet commitments for long-term debt, other commitments and
contingencies and capital expenditures.
Management believes that inflation has not had a material effect on operations
for the periods presented.
RISK FACTORS
For information regarding certain risk factors that could cause actual results
to differ materially from those suggested in forward-looking statements
contained herein or otherwise made from time to time by the Company, reference
is made to the Company's Form 10-K, Item 7, "Risk Factors," for the fiscal year
ended December 31, 2000, which is incorporated herein by reference. The risk
factors described in such report continue to be applicable at September 30,
2001.
12
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Stockholders on July 17, 2001. Sheldon M.
Bonovitz, Richard J. DePiano, Jay L. Federman, James Lee Stafford and Michael R.
Stewart, the director nominees set forth in the Notice of Annual Meeting, were
elected to serve as directors. The following table provides the details of the
votes cast for each director nominee.
Nominee Votes For Withhold Authority
- ------- --------- ------------------
Sheldon M. Bonovitz 1,643,849 255,088
Richard J. DePiano 1,643,889 255,048
Jay L. Federman 1,643,889 255,048
James Lee Stafford 1,643,829 255,108
Michael R. Stewart 1,643,889 255,048
The stockholders ratified the appointment of Grant Thornton LLP to serve as the
Company's independent accountants for the fiscal year ending December 30, 2001,
with 1,879,616 votes favoring ratification, 8,144 votes opposing and 11,177
votes abstaining.
ITEM 5. Other Information
Proposals of stockholders of the Company which are intended to be presented by
such stockholders at the 2002 Annual Meeting of Stockholders, which is scheduled
for July 16, 2002, must be received by the Company no later than February 14,
2002 in order that they may be included, subject to compliance with applicable
federal securities laws and regulations, in the proxy statement and form of
proxy relating to that meeting.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
SURGICAL LASER TECHNOLOGIES, INC.
Date: November 12, 2001 By: /s/ Davis Woodward
--------------------
Davis Woodward
Vice President, Finance and
Chief Financial Officer
Signing on behalf of the Company
and as principal financial officer.
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