U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 2000
--------------------
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to ________
Commission File Number
0-19627
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BIOLASE TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 87-0442441
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
981 Calle Amanecer, San Clemente, CA 92673
(Address of Principal Executive Offices)
(949) 361-1200
(Registrant's Telephone Number, Including Area Code)
Indicate by check 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 [_]
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.
Common Stock, $.001 par value 19,972,502
- ----------------------------- ----------
Title Class Number of Shares Outstanding
at July 31, 2000
BIOLASE TECHNOLOGY, INC.
Page Number
-----------
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Statements of
Operations 4
Consolidated Condensed Statement of
Stockholders' Equity 5
Consolidated Condensed Statements of Cash
Flows 6
Notes to Consolidated Condensed Financial
Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
ITEM 3. Quantitative and Qualitative Disclosures about
Market Risk 14
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 14
ITEM 2. Changes in Securities 14
ITEM 3. Defaults Upon Senior Securities 14
ITEM 4. Submission of Matters to a Vote of Security
Holders 15
ITEM 5. Other Information 15
ITEM 6. Exhibits and Reports on Form 8-K 15
SIGNATURE PAGE 16
Page 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
- ------------------------------
BIOLASE TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, 2000 December 31,
(Unaudited) 1999
------------- ------------
Assets:
Current assets:
Cash and cash equivalents $ 3,422,430 $ 1,180,982
Accounts receivable, less allowance of $117,745 in 2000 and 1999 1,190,764 330,840
Inventories, net of reserves of $438,417 in 2000 and $309,420
in 1999 938,750 658,462
Prepaid expenses and other current assets 136,417 110,062
------------ ------------
Total current assets 5,688,361 2,280,346
Property and equipment, net 423,401 203,529
Patents, trademarks and licenses, less accumulated amortization of
$162,677 in 2000 and $151,278 in 1999 115,558 126,958
Other assets 50,256 61,480
------------ ------------
Total assets $ 6,277,576 $ 2,672,313
============ ============
Liabilities and Stockholders' Equity (Deficit):
Current liabilities:
Line of credit $ 1,341,925 $ 1,341,925
Note payable 428,000 -
Accounts payable 625,242 792,073
Accrued expenses 1,178,682 997,287
Accrued expenses related to the reacquisition of foreign
distribution rights 14,181 480,300
------------ ------------
Total current liabilities 3,588,030 3,611,585
------------ ------------
Stockholders' equity (deficit):
Preferred stock, par value $.001, 1,000,000 shares authorized:
no shares issued and outstanding in 2000 or 1999 - -
Common stock, par value, $.001, 50,000,000 shares authorized,
issued 19,786,622 in 2000 and 17,583,305 in 1999
(after deducting 182,880 of escrow shares in 2000 and 1999) 19,787 17,583
Additional paid-in capital 47,356,176 41,809,690
Accumulated deficit (44,686,417) (42,766,545)
------------ ------------
Net stockholders' equity (deficit) 2,689,546 (939,272)
------------ ------------
Total liabilities and stockholders' equity (deficit) $ 6,277,576 $ 2,672,313
============ ============
See accompanying notes to consolidated condensed financial statements.
Page 3
Item 1. Financial Statements (continued).
- ------------------------------------------
BIOLASE TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
---- ---- ---- ----
Sales $ 2,258,806 $ 1,406,255 $ 3,785,832 $ 3,192,238
Cost of sales 1,219,753 847,127 2,210,517 1,835,969
----------- ----------- ----------- -----------
Gross profit 1,039,053 559,128 1,575,315 1,356,269
----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing 806,432 612,475 1,444,458 1,146,795
General and administrative 512,182 702,059 913,060 1,137,754
Engineering and development 603,739 488,552 1,117,178 960,067
----------- ----------- ----------- -----------
Total operating expenses 1,922,353 1,803,086 3,474,696 3,244,616
----------- ----------- ----------- -----------
Loss from operations (883,300) (1,243,958) (1,899,381) (1,888,347)
Other income (expense)
Interest income 29,643 20,539 36,889 24,054
Interest expense (34,119) (22,133) (57,380) (51,115)
----------- ----------- ----------- -----------
Net loss $ (887,776) $(1,245,552) $(1,919,872) $(1,915,408)
=========== =========== =========== ===========
Loss per share - basic and diluted $ (0.04) $ (0.07) $ (0.10) $ (0.11)
=========== =========== =========== ===========
Weighted average shares outstanding 19,740,396 17,483,771 18,882,527 16,952,192
=========== =========== =========== ===========
See accompanying notes to consolidated condensed financial statements.
Page 4
Item 1. Financial Statements (continued).
- ------------------------------------------
BIOLASE TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
Preferred Stock Common Stock Additional
---------------- --------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit Total
------ ------ ---------- ------ ------- ------- -----
Balance at January 1,
2000 - $ - 17,583,305 $17,583 $41,809,690 $(42,766,545) $ (939,272)
Private placement of
common stock - - 1,250,000 1,250 2,449,266 - 2,450,516
Exercise of warrants - - 819,150 820 2,878,241 - 2,879,061
Exercise of stock
options - - 134,166 134 218,979 - 219,113
Issuance of shares
for fractional interest
on reverse split - - 1 - - - -
Net loss - - - - - (1,919,872) (1,919,872)
----------------------------------------------------------------------------------------------
Balance at June 30, 2000 - $ - 19,786,622 $19,787 $47,356,176 $(44,686,417) $ 2,689,546
==============================================================================================
See accompanying notes to consolidated condensed financial statements.
Page 5
Item 1. Financial Statements (continued).
- ------------------------------------------
BIOLASE TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
---------------------------
2000 1999
----------- -----------
Cash flows from operating activities:
Net loss $(1,919,872) $(1,915,408)
Adjustments to reconcile net loss to net cash
used by operating activities:
Issuance of common stock for earned services - 176,969
Extension of stock options - 93,731
Depreciation and amortization 56,797 58,629
Provision for bad debts - 496
Provision for inventory excess and obsolescence 44,046 44,000
Changes in operating assets and liabilities:
Accounts receivable (859,924) (191,646)
Inventories (324,334) 333,890
Prepaid expenses and other assets (15,131) (64,697)
Accounts payable (166,831) (106,238)
Accrued expenses 181,395 286,567
Accrued costs related to reaquisition of
foreign distribution rights (38,119) -
----------- -----------
Net cash used by operating activities (3,041,973) (1,283,707)
----------- -----------
Cash flows from investing activities:
Sale of marketable securities - 251,485
Additions to property and equipment (265,269) (38,886)
Additions to patents, trademarks and licenses - (4,904)
----------- -----------
Net cash provided (used) by investing activities (265,269) 207,695
----------- -----------
Cash flows from financing activities:
Payments against line of credit, net - (363,100)
Proceeds from issuance of common stock, net 2,450,516 2,748,000
Proceeds from exercise of stock options and warrants 3,098,174 17,100
----------- -----------
Net cash provided by financing activities 5,548,690 2,402,000
----------- -----------
Increase in cash and cash equivalents 2,241,448 1,325,988
Cash and cash equivalents at beginning of period 1,180,982 424,539
----------- -----------
Cash and cash equivalents at end of period $ 3,422,430 $ 1,750,527
=========== ===========
Supplemental cash flow disclosure:
Cash paid during the period for interest $ 47,802 $ 55,880
=========== ===========
Noncash financing activities:
Conversion of accrued expense to note payable $ 428,000 $ -
=========== ===========
See accompanying notes to consolidated condensed financial statements.
Page 6
BIOLASE TECHNOLOGY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 2000
Note 1
- ------
The accompanying consolidated condensed financial statements of BioLase
Technology, Inc. (the "Company") have been prepared by the Company without audit
and do not include all disclosures required by generally accepted accounting
principles for complete financial statements. The consolidated condensed
balance sheet at December 31, 1999 was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles. In the opinion of management, the consolidated condensed
financial statements include all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the financial condition of the
Company as of June 30, 2000 and the results of operations for the three and six-
month periods then ended.
The Company's consolidated condensed financial statements have been presented
on the basis that the Company will continue as a going-concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company reported net losses of $4,797,137,
$10,346,069 and $2,823,910 for the years ended December 31, 1999, 1998 and 1997,
respectively, and net losses of $887,776 and $1,919,872 for the three and six-
month periods ended June 30, 2000, respectively, and has an accumulated deficit
of $44,686,417 at June 30, 2000. These recurring losses and the need for
continued funding, discussed below, raise substantial doubt about the Company's
ability to continue as a going-concern.
The Company remains dependent upon its ability to obtain outside financing
either through the issuance of additional shares of its common or preferred
stock or through borrowings until it achieves sustained profitability through
increased sales and improved product margins. The Company's business continues
to focus on the manufacturing and marketing of its laser-based technologies
incorporated in its newly introduced products, the Millennium(R) II
WaterLase(TM) and the Twilite(TM) laser system.
Financing the development of laser-based medical and dental devices and
instruments and the operations of the Company has been achieved principally
through the private placements of preferred and common stock and the exercise of
stock options and warrants. During the six months ended June 30, 2000 and the
three years ended December 31, 1999, the Company raised approximately $5,549,000
and $7,061,000, respectively, of net equity funds in this manner.
Based upon the expected increase in sales and the additional funds already
received, the Company believes that it should have sufficient capital resources
to sustain it during the year in relation to its fiscal year 2000 business plan.
Should the Company require further capital resources in fiscal year 2000, it
would most likely address such requirement through a combination of sales of its
products, sales of equity securities through private placements, and/or debt
financing. If circumstances changed, and additional capital was needed, no
assurances can be given that the Company would be able to obtain such additional
capital resources.
If unexpected events occur requiring the Company to obtain additional
capital and it is unable to do so, it then might attempt to preserve its
available resources by deferring the creation or satisfaction of various
commitments, deferring the introduction of various products
Page 7
or entry into various markets, or otherwise scaling back its operations. If the
Company were unable to raise such additional capital or defer certain costs as
described above, such inability would have an adverse effect on the financial
position, results of operations, cash flows and prospects of the Company and
ultimately on its ability to continue as a going-concern. The consolidated
condensed financial statements do not give effect to any adjustments that might
be necessary if the Company were unable to meet its obligations or continue
operations.
Operating results for the three and six-month periods ended June 30, 2000
are not necessarily indicative of the results to be expected for the year ending
December 31, 2000. These statements should be read in conjunction with the
audited consolidated financial statements and notes thereto included in the
Company's Form 10-K for the year ended December 31, 1999.
Note 2
- ------
Inventories, net of reserves, consist of the following:
June 30, 2000 December 31, 1999
(unaudited)
----------- -----------------
Raw materials $ 533,922 $ 434,315
Work-in-process and subassemblies 327,990 151,203
Finished goods 76,838 72,944
----------- -----------
$ 938,750 $ 658,462
=========== ===========
Note 3
- ------
Property and equipment, at cost, consist of the following:
June 30, 2000 December 31, 1999
(unaudited)
------------- -----------------
Building $ 100,000 $ -
Leasehold improvements 171,445 171,445
Equipment and computers 974,712 884,841
Furniture and fixtures 276,205 200,806
Demonstration units 247,354 247,354
----------- -----------
Total cost 1,769,716 1,504,446
Less, accumulated depreciation and
amortization (1,346,315) (1,300,917)
----------- -----------
$ 423,401 $ 203,529
=========== ===========
Page 8
Note 4
- ------
Accrued expenses consist of the following:
June 30, 2000 December 31, 1999
(unaudited)
----------- -----------------
Accrued payroll and benefits $ 442,836 $245,930
Accrued professional fees 75,517 100,742
Accrued legal costs 184,750 132,261
Accrued warranty 225,875 163,175
Other 249,704 355,179
---------- --------
$1,178,682 $997,287
========== ========
Note 5
- ------
Basic and diluted loss per share is based on the weighted average number
of common shares outstanding. Potential common stock, which consists of stock
options and warrants, has been excluded from per share calculations, as the
effect of the assumed exercise of this potential common stock is anti-dilutive
at June 30, 2000 and 1999.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations.
- --------------
Qualifying Statement With Respect To Forward-Looking Information:
The United States Private Securities Litigation Reform Act of 1995 provides
a "safe harbor" for certain forward-looking statements. Such forward-looking
statements are based upon the current expectations of the Company and speak only
as of the date made. These forward-looking statements involve risks,
uncertainties and other factors. The factors discussed below under "Forward-
Looking Statements" and elsewhere in this Quarterly Report on Form 10-Q are
among those factors that in some cases have affected the Company's historic
results and could cause actual results in the future to differ significantly
from the results anticipated in forward-looking statements made in this
Quarterly Report on Form 10-Q, in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases and in oral
statements made by authorized officers of the Company. When used in this
Quarterly Report on Form 10-Q, the words "estimate," "project," "anticipate,"
"expect," "intend," "believe," "hope," "may" and similar expressions, as well as
"will," "shall" and other indications of future tense, are intended to identify
forward-looking statements.
The following discussion should be read in conjunction with the
consolidated condensed financial statements and notes thereto.
Results of Operations - Three-month period ended June 30, 2000 as compared to
the three-month period ended June 30, 1999:
Sales for the three months ended June 30, 2000 increased $852,551, or 61%,
to $2,258,806 from the $1,406,255 reported for the same period in 1999. The
increase was due principally to the Company's overall increased marketing
efforts and new product introductions
Page 9
of its WaterLase(TM) (Millennium(R) II) soft and hard tissue laser system and
its Twilite(TM) dental diode soft tissue laser system. The increased marketing
efforts included increases in the Company's sales and marketing infrastructure,
strengthening of growing alliances with various international distributors and
raising customer and patient awareness of the Company's flagship product, the
WaterLase(TM). 2000 second quarter sales did not include royalty income from the
licensing arrangement of the Company's LazerSmile(TM) tooth whitening technology
to a consumer oriented distributor. The licensing arrangement has expired and
the Company is currently evaluating its alternatives for distribution of its
LazerSmile(TM) product.
Gross profit for the second quarter of 2000 was $1,039,053, or 46% of
sales, compared to $559,128, or 40% of sales, for the second quarter of 1999, an
increase of $479,925, or 86%. The increase in gross profit was due principally
to the increased sales volume combined with improved production efficiencies,
partially offset by increased indirect expenses reflecting the Company's present
growth.
Operating expenses for the three months ended June 30, 2000 were $1,922,353
compared to $1,803,086 for the same period in 1999, a modest increase of
$119,267, or 7%. Sales and marketing expense increased $193,957, or 32%, during
the second quarter of 2000 compared to the same period in 1999 due principally
to increases in (i) variable selling expenses related to higher sales volumes,
(ii) advertising in professional journals and publications, (iii)
design/printing of product sales brochures, and (iv) participation expenses at
trade shows and medical conventions. General and administrative expense
decreased $189,877, or 27%, during the second quarter of 2000 compared to the
second quarter of 1999 due principally to the absence of (i) $171,400 in non-
recurring expense included in 1999 and (ii) $44,000 related to the licensing of
the Company's LazerSmile(TM) technology. The reductions were partially offset by
increases in various professional and administrative costs associated with the
Company's growth. Engineering and development expense increased $115,187, or
24%, due principally to increases in (i) engineering project costs related to
final enhancement and refinement of the Company's Millennium(R) II WaterLase(TM)
and its Twilite(TM) diode soft-tissue laser, and (ii) employee-related expenses
associated with increases to the engineering staff of the Company.
Interest income for the three months ended June 30, 2000 increased $9,104,
or 44%, to $29,643 compared to the $20,539 reported for the same period in 1999,
due principally to increased balances in the Company's interest bearing accounts
from proceeds received from its first quarter 2000 private placement and the
exercise of certain stock options and stock warrants. Interest expense
increased $11,986, or 54%, to $34,119 for the second quarter of 2000 from the
$22,133 reported for the same period in 1999. The increase in interest expense
was due principally to interest related to the $428,000 note payable that
commenced March 1, 2000.
The Company's net loss decreased $357,776 to $887,776, or $0.04 per share,
for the three months ended June 30, 2000 from a net loss of $1,245,552, or $0.07
per share, for the same period in 1999. The reduction in the per share loss for
the second quarter of 2000 was enhanced by a 13% increase in weighted average
shares outstanding.
Page 10
Results of Operations - Six-month period ended June 30, 2000 as compared to the
six-month period ended June 30, 1999:
Sales increased $593,594, or 19%, to $3,785,832 during the six-month period
ended June 30, 2000 from the $3,192,238 reported for the comparable period in
1999. The increase was due principally to the introduction of the Company's
WaterLase(TM) system (Millennium(R) II) and the Twilite(TM) diode laser system.
As the introduction of these products occurred in March, 2000, the six-month
increase was softened by only four months of product shipment. The increase was
further alleviated by reduced pricing of the Company's first generation
Millennium(R) system, primarily in the first quarter of 2000, to prepare for the
launching of the Millennium(R) II WaterLase(TM).
Gross profit for the first half of 2000 was $1,575,315, or 42% of sales,
compared to $1,356,269, or 42% of sales, for the first half of 1999, an increase
of $219,046, or 16%. Gross profit for the first half of 2000 was adversely
affected by a decrease in the average unit selling price of the Company's first
generation Millennium(R), in the first quarter of 2000 compared to the first
quarter of 1999, which has been replaced with the significantly smaller and
lighter Millennium(R) II WaterLase(TM). The gross profit margin was 35% for the
three months ended March 31, 2000 compared to 46% for the three months ended
June 30,2000. The Company does not anticipate any significant effect on third
quarter gross profit margins related to the transition from the first generation
Millennium(R) as remaining inventory levels have reached near depletion.
Operating expenses during the first half of 2000 reflected an increase of
$230,080, or 7%, to $3,474,696 from the $3,244,616 reported for the first half
of 1999. Sales and marketing expense increased $297,663, or 26%, during the
first half of 2000 compared to the same period in 1999 due principally to the
same cause experienced during the second quarter of 2000 as noted above.
General and administrative expense decreased $224,694, or 20%, during the first
half of 2000 compared to the same period in 1999 due principally to the absence
of $190,981 in non-recurring expense and $44,000 related to the licensing of the
Company's LazerSmile(TM) technology included in 1999. These reductions were
partially offset by increased professional and administrative expenses
associated with the Company's growth. Engineering and development expense
increased $157,111, or 16%, during the first half of 2000 compared to the same
period in 1999 due principally to expenses associated with the completion of the
Millennium(R) II and Twilite(TM) products combined with an increase in employee-
related expenses related to increased engineer staffing.
Interest income increased $12,835, or 53%, to $36,889 during the first half
of 2000 from the $24,054 reported during the same period in 1999. The increase
was due principally to higher cash balances in interest-bearing accounts
obtained from the completion of a private placement in the first quarter of 2000
and the exercise of certain stock options and stock warrants during the first
half of 2000. Interest expense was comparable between the first half of 2000
and 1999.
The Company's net loss for the first half of 2000 was $1,919,872, or $0.10
per share, compared to a net loss of $1,915,408, or $0.11 per share, for the
same period in 1999. The reduction in the per share loss for the first half of
2000 was enhanced by an 11% increase in weighted average shares outstanding.
Page 11
Financial Condition
Cash and cash equivalents increased to $3,422,430 at June 30, 2000 from
$1,180,982 at December 31, 1999 due principally to net proceeds of $2,450,516
received from a private placement of Company common stock and stock purchase
warrants in February 2000, and the exercise of certain stock options and stock
purchase warrants generating $3,098,174 in cash proceeds. These increases in
cash and cash equivalents were offset by cash used by operating activities
aggregating $3,041,973 and capital expenditures of $265,269.
Accounts receivable increased $859,924 to $1,190,764 at June 30, 2000 from
the $330,840 reported at December 31, 1999. The significant increase was due
principally to orders shipped during June 2000 for which payments will be
received during the third quarter of 2000.
Inventories at June 30, 2000 were $938,750 compared to $658,462 at December
31, 1999, an increase of $280,288. The increase was due principally to the
Company's increased purchase of components to meet its upcoming production
requirements for both Millennium(R) II and Twilite(TM). The Company believes
that its business does not presently operate in a normalized cycle in which
information regarding inventory turns would be meaningful but that such
information will become meaningful once productions and deliveries of the
Company's products are normalized.
Prepaid expenses and other current assets at June 30, 2000 were $136,417,
reflecting an increase of $26,355 from the $110,062 reported at December 31,
1999. The increase was due principally to deposits placed for booth space at
dental trade shows that are to be held during the second half of 2000 and early
2001.
Current liabilities of $3,588,030 at June 30, 2000 were comparable to the
$3,611,585 reported at December 31, 1999. Accounts payable decreased $166,831
at June 30, 2000 compared to December 31, 1999 due principally to an increase in
the payable turnover reduced by an increased level of purchases associated with
the Company's anticipated production requirements. Accrued expenses increased
by $181,395 reflecting higher levels of operating expenses associated with the
Company's growth. In March 2000, the Company converted $428,000 of the $480,300
accrued expenses related to the reacquisition of foreign distribution rights
reported in the financial statements at December 31, 1999 to a 6-month, 6% note
payable, due September 1, 2000.
Capital expenditures during the first half of 2000 totaled $265,269 related
primarily to a $100,000 deposit for the purchase of the Company's manufacturing
facility (see "Liquidity and Capital Resources" below), a $41,141 deposit for
the purchase of a new sales booth for use at professional trade shows, with the
remaining capital expenditures related to the purchase of personal computers to
accommodate the increase in personnel at the Company. Patents, trademarks and
licenses were comparable to those reported at December 31, 1999, less normal
amortization for the first half of 1999. Other assets were comparable to those
reported at December 31, 1999 as well.
Stockholders' equity/deficit increased $3,628,818 to $2,689,546 at June 30,
2000 from a deficit position of $939,272 at December 31, 1999 due to (i) net
proceeds of $2,450,516 received from a private placement in March 2000, and (ii)
proceeds of $3,098,174 received from the exercise of certain stock options and
stock purchase warrants, both of which were offset by the first half-year net
loss of $1,919,872. The Company executed an agreement with the former
shareholders of Laser Skin Toner, Inc. ("LSTI") whereby 525,000 of the 1,417,120
shares of the Company's common stock issued as consideration for the assets of
LSTI in July
Page 12
1998 are to be returned to the Company for subsequent cancellation in August
2000. The agreement also calls for the cancellation of the 182,880 shares of the
Company's common stock held in escrow for issuance to LSTI based on future
performance of the technology purchased from LSTI.
Liquidity and Capital Resources
The Company remains dependent upon its ability to obtain outside financing
either through the issuance of additional shares of its common or preferred
stock or through borrowings until it achieves sustained profitability through
increased sales and improved product margins. The Company's business continues
to focus on the manufacturing and marketing of its laser-based technologies
incorporated in its newly introduced products, the Millennium(R) II and the
Twilite(TM) laser systems.
Financing the development of laser-based medical and dental devices and
instruments and the operations of the Company has been achieved principally
through the private placements of preferred and common stock and the exercise of
stock options and warrants. During the six months ended June 30, 2000 and the
three years ended December 31, 1999, the Company raised approximately $5,549,000
and $7,061,000, respectively, of net equity funds in this manner.
Based upon the expected increase in sales and the additional funds already
received, the Company believes that it should have sufficient capital resources
to sustain it during the year in relation to its fiscal year 2000 business plan.
Should the Company require further capital resources in fiscal year 2000, it
would most likely address such requirement through a combination of sales of its
products, sales of equity securities through private placements, and/or debt
financing. If circumstances changed, and additional capital was needed, no
assurances can be given that the Company would be able to obtain such additional
capital resources.
If unexpected events occur requiring the Company to obtain additional
capital and it is unable to do so, it then might attempt to preserve its
available resources by deferring the creation or satisfaction of various
commitments, deferring the introduction of various products or entry into
various markets, or otherwise scaling back its operations. If the Company were
unable to raise such additional capital or defer certain costs as described
above, such inability would have an adverse effect on the financial position,
results of operations, cash flows and prospects of the Company and ultimately on
its ability to continue as a going-concern.
At June 30, 2000, the Company had $1,341,925 outstanding under a revolving
credit agreement with a bank. The revolving credit agreement provides for
borrowings of up to $2,500,000 for the financing of inventory and is
collateralized by substantially all of the Company's accounts receivable and
inventories. The interest rate is fixed throughout the term of the credit
agreement and is computed based upon LIBOR plus 0.5% at the time of any
borrowings. At June 30, 2000, the weighted average interest rate on the
outstanding balance was 7.23%. The Company is required to reduce the
outstanding loan balance by an amount equal to the cost of goods sold associated
with sales of inventory upon collection of sales proceeds. The current
revolving credit agreement expires on December 1, 2000 at which point the
Company will be required to either pay any remaining balance of the credit
facility or refinance the credit facility. No assurances can be given that the
Company will be able to refinance the line of credit or that the terms on which
it may be able to refinance the line of credit will be as favorable as the terms
of the existing line. If the Company is unable to
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refinance and is therefore required to repay the line of credit, the diversion
of resources to that purpose may adversely affect the Company's operations and
financial condition.
The Company's lease on its manufacturing facility expires in September
2000. The lessor had notified the Company that it did not intend to renew the
lease with the Company as the building had been listed for sale by the lessor.
In response, the Company researched similar leasing rates in close proximity to
its present location and determined that competitive lease rates on a similar
building in structure and size were dramatically higher than the Company's
current rate. In addition, the cost of relocation to the Company would have
been substantial and could have included, but not have been limited to, business
interruption costs, actual moving costs and large up-front deposits typically
required on new lease potentials. Accordingly, the Company entered into an
agreement to purchase its existing manufacturing facility at a purchase price of
$1,983,000. The Company has received a commitment from a bank to fund
$1,200,000 of the purchase price, secured by a first trust deed. The terms of
the commitment include (i) a variable interest rate of prime plus 0.25%,
adjusted every three years, (ii) a term of 15 years, with a loan amortization
term of 20 years, and (iii) loan origination fees of 1.75% of the loan. The
Company anticipates the closing of escrow on the subject property to occur no
later than August 2000; however, the Company can give no assurance that the
property will be purchased until escrow actually closes.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
- --------------------------------------------------------------------
Not Applicable
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
- ---------------------------
See Item 3 "Legal Proceedings" included within the Company's Annual Report
on Form 10-K for fiscal year ended December 31, 1999 for information regarding
certain pending legal proceedings.
From time to time, the Company is involved in legal proceedings incidental
to its business. It is management's opinion that pending actions, individually
and in the aggregate, will not have a material adverse effect on the Company's
financial condition, and that adequate provision has been made for the
resolution of such actions and proceedings.
Item 2. Changes in Securities.
- -------------------------------
None
Item 3. Defaults Upon Senior Securities.
- -----------------------------------------
None
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Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------
Following are the results of matters submitted to a vote at the Annual
Meeting of Stockholders held May 23, 2000:
(1) The election of the following individuals to the Company's Board of
Directors, to serve until the next Annual Meeting of Stockholders and
until their successors are duly elected and qualified:
Votes For Votes Withheld
--------- --------------
Federico Pignatelli 11,870,461 124,974
George V. d'Arbeloff 11,870,461 124,974
William A. Owens 11,870,461 124,974
Jeffrey W. Jones 11,870,411 125,024
(2) The ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent public accountants for the year ending December 31,
2000. The number of votes cast for were 11,901,243; votes cast against
were 78,319; and 15,873 votes abstained.
Item 5. Other Information.
- ---------------------------
None
Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
(a) Exhibits
27. Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K
None
Page 15
SIGNATURE PAGE
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.
BIOLASE TECHNOLOGY, INC.
a Delaware Corporation
Date: August 14, 2000 /s/ Jeffrey W. Jones
-------------------- ----------------------------------------
Jeffrey W. Jones
President & Chief Executive Officer
Date: August 14, 2000 /s/ Stephen R. Tartamella
-------------------- ----------------------------------------
Stephen R. Tartamella
Vice President & Chief Financial Officer
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