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 September 30, 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 November 9, 1998
----- -------------------------------
Common Stock, no par value 19,729,647
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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. Other Information........................................15
Item 6. Exhibits and Reports on Form 8-K.........................15
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Item 1. Financial Statements
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PLC SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30, December 31,
1998 1997
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 8,265 $ 3,484
Marketable securities.............................................. - 12,845
Accounts receivable, net........................................... 1,126 1,337
Inventories ....................................................... 3,859 2,512
Prepaid expenses and other current assets.......................... 429 502
-------- ---------
Total current assets........................................... 13,679 20,680
Equipment, furniture and leasehold improvements, net ................. 5,419 5,636
Other assets........................................................... 652 701
-------- ---------
Total assets.................................................... $19,750 $27,017
-------- ---------
-------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 1,083 $ 917
Accrued clinical costs............................................. 1,337 1,292
Accrued compensation............................................... 1,167 570
Accrued expenses................................................... 1,144 923
Deferred revenue................................................... 18 70
Convertible Debentures............................................. 2,779 -
5% Convertible Debentures.......................................... - 3,819
Other accrued liabilities.......................................... 69 296
-------- ---------
Total current liabilities....................................... 7,597 7,887
Long Term Liabilities:
Convertible Debentures............................................ 930 -
Capital lease obligations......................................... 69 121
-------- ---------
Total Long Term Liabilities 999 121
Commitments and contingencies
Stockholders' equity:
Preferred stock, no par value, 5,000 shares authorized................. - -
Common stock, no par value, 50,000 shares authorized, 19,285
and 18,368 shares issued and outstanding at September 30,
1998 and December 31, 1997, respectively............................ 76,623 71,115
Accumulated deficit.................................................... (64,877) (51,533)
Foreign currency translation........................................... (592) (573)
-------- ---------
11,154 19,009
-------- ---------
Total liabilities and stockholders' equity............................. $19,750 $27,017
-------- ---------
-------- ---------
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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PLC SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
Product sales........................... $ 1,036 $1,110 $ 1,561 $ 4,406
Placement and service fees.............. 579 775 1,679 2,489
-------- -------- --------- --------
Total revenues ........................ 1,615 1,885 3,240 6,895
Cost of revenues:
Product sales ......................... 519 654 1,035 1,895
Placement and service fees............... 776 565 1,979 1,624
-------- -------- --------- --------
Total cost of revenues................ 1,295 1,219 3,014 3,519
Gross profit............................... 320 666 226 3,376
Operating expenses:
Selling, general and administrative ..... 3,324 3,076 10,321 9,411
Research and development................. 1,028 1,180 3,593 3,397
-------- ------- --------- --------
Total operating expenses............... 4,352 4,256 13,914 12,808
-------- ------- --------- -------
Loss from operations....................... (4,032) (3,590) (13,688) (9,432)
Other income:
Interest income, net..................... 3 41 333 174
Income (loss) from foreign currency, net 23 (13) 11 (23)
--------- -------- ----------- ---------
26 28 344 151
--------- -------- ---------- ---------
Net loss................................... $(4,006) $(3,562) $(13,344) $(9,281)
--------- -------- ---------- ---------
--------- -------- ---------- ---------
Basic and diluted loss per share........... $ (0.21) $ (0.21) $ (0.70) $ (0.56)
Shares used to compute basic and diluted
loss per share............................. 19,074 16,836 19,019 16,673
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)
Nine Months Ended
September 30,
------------------
1998 1997
---- ----
Operating activities:
Net loss........................................................... $(13,344) $(9,281)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization.................................... 1,787 1,272
Change in assets and liabilities:
Accounts receivable......................................... 166 1,384
Inventories ............................................... (1,381) (803)
Prepaid expenses and other assets........................... 114 (71)
Accounts payable............................................ 178 198
Deferred revenue............................................ (35) (107)
Accrued liabilities......................................... 746 552
---------- ---------
Net cash used for operating activities................................. (11,769) (6,856)
Investing activities:
Purchase of marketable securities................................. (1,986) (14,817)
Maturities of marketable securities............................... 14,831 5,470
Purchase of fixed assets.......................................... (1,529) (1,917)
--------- --------
Net cash provided by investing activities.............................. 11,316 (11,264)
Financing activities:
Issuance of Convertible Debentures, net of issuance costs........ 4,659 18,784
Net proceeds from sales of common shares.......................... 586 724
Principal payments on capital lease obligations................... (49) (8)
---------- ----------
Net cash provided by financing activities.............................. 5,196 19,500
Effect of exchange rate changes on cash and cash equivalents........... 38 (268)
----------- ---------
Net increase in cash and cash equivalents.............................. 4,781 1,112
Cash and cash equivalents at beginning of period....................... 3,484 3,039
--------- --------
Cash and cash equivalents at end of period............................. $ 8,265 $ 4,151
--------- --------
--------- --------
NON-CASH FINANCING ACTIVITIES:
Conversion of Convertible Debentures and accrued
interest into Common Stock..................................... $ 4,872 $15,088
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
June 30, 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 and nine month
periods ended September 30, 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"). Statement 130 establishes new rules for
the reporting and display of comprehensive income and its components; however,
the adoption of Statement 130 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.
Total comprehensive loss for the three and nine months ended September
30, 1998 amounted to $3,907,000 and $13,362,000, as compared to $3,590,000 and
$9,473,000 for the three and nine months ended September 30, 1997.
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PLC SYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. Inventories
Inventories consist of the following (in thousands):
September 30, December 31,
1998 1997
------------- ------------
Raw materials . . . . . . . . . . . . . . . . . . $1,294 $1,141
Work in process . . . . . . . . . . . . . . . . 580 10
Finished goods . . . . . . . . . . . . . . . . . 1,985 1,361
------- ------
$3,859 $2,512
------- ------
------- ------
5. Issuance of Convertible Debentures
a. Convertible Debentures due July 17, 2002 and August 14, 2002.
In January and February 1998, the face amount outstanding as of
December 31, 1997 and related accrued interest converted into 576,606 shares of
common stock.
b. Convertible Debentures due April 23, 2003
In April 1998, the Company obtained a $10 million financing commitment
from three institutional investors. Pursuant to the terms of the financing, the
Company received approximately $5 million in April 1998 ("the First Tranche")
from the issuance of non-interest bearing, five-year convertible debentures
("Debentures"). The Debentures are convertible into Common Stock under a
predetermined formula subject to certain restrictions defined in the agreement.
The First Tranche of the Debentures is convertible into common shares at the
lesser of (a) $19.53, or (b) the average of the five lowest consecutive closing
bid prices during a look-back period consisting of thirty consecutive trading
days prior to conversion. The maximum number of shares of the Company's Common
Stock issuable in connection with conversion of the First Tranche is 816,327.
The Company will have the right to force conversion, in whole or in part for
cash or stock, at the option of the Company, if the closing bid price of its
Common Stock is at or above $23.44 for a period of thirty day consecutive
trading days.
As of September 30, 1998, $1,000,000 of the notes outstanding converted
into 208,648 shares of the Company's Common Stock. In October 1998, an
additional $3,000,000 of the notes outstanding converted into 444,413 shares of
the Company's Common Stock.
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
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PLC SYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Common Stock for any consecutive thirty 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. 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 from
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 synchronization patent in the European Patent Office and, in March
1997, the Company filed its response. In addition, in April 1997, the Company
filed a lawsuit against CardioGenesis in the Munich District Court alleging
infringement of its synchronization patent.
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 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; however,
plaintiffs in the latter action have voluntarily agreed to the Company's motion
to dismiss.
The Company and certain of its employees have been named as defendants
in a suit filed in September 1998 in Massachusetts Superior Court alleging
common law fraud and negligent misrepresentation and seeking damages therefor.
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 results of operations in a
particular quarter or annual period or its financial position could be
materially affected by an ultimate unfavorable outcome of these pending
litigation matters. The Company believes that it has valid defenses to these
litigation matters and intends to vigorously defend itself.
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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
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. Such statements are based on management's current
expectations and are subject to a number of risks and uncertainties that could
cause actual results to differ materially from these forward-looking statements.
Such factors and uncertainties include, but are not limited to, business
conditions and growth in certain market segments and the general economy, the
ability of the Company to secure any required additional financing, an increase
in competition or other competitive developments, the lack of market acceptance
of the Company's products and proposed products by healthcare professionals and
third party payers, the lack of reimbursement by third party payers, the
development of alternative treatments or procedures for the treatment of heart
disease and other risks and uncertainties indicated from time to time in the
Company's annual report on Form 10-K for the fiscal year ended December 31, 1997
and the Company's other filings with the Securities and Exchange Commission. The
Company undertakes no obligation to revise any forward-looking statements to
reflect events or circumstances that may arise after the date of this report.
Overview
On August 20, 1998, the Company received a Pre-Market Approval ("PMA")
from the U.S. Food and Drug Administration (FDA) for commercial use of The Heart
Laser-TM- System(1) for TMR (Transmyocardial Revascularization).
PLC is the first company to receive a PMA from the FDA to commercialize
a product for TMR, which is a new surgical procedure used to treat patients
suffering from severe coronary artery disease. The Heart Laser System can now be
marketed throughout the U.S. for the treatment of the estimated 80,000 domestic
patients each year who suffer from severe coronary artery disease (CAD) but
cannot be treated with conventional coronary revascularization techniques such
as bypass surgery or angioplasty.
The Company offers placement, purchase and leasing alternatives to
customers interested in acquiring The 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 procedure fee per use. Typically, customers commit
to pay for a minimum number of procedures during the term of the agreement.
Sterile handpieces and other disposables are included in the procedure fee.
Revenues
- ------------------------------------
(1) The Heart Laser is a trademark of PLC Medical Systems, Inc.
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from these contracts are classified as placement fees. The cost of the installed
Heart Laser System, which is owned by the Company, is depreciated over the term
of the contract.
The Heart Laser System is also sold to customers, 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.
In September 1998, the Company entered into an exclusive agreement with
GE Capital Trans Leasing ("GE Capital") to provide a broad array of financing
alternatives not only to U.S. hospitals interested in acquiring PLC's Heart
LaserTM System but also to the Company. The lease financing alternatives
available through GE Capital will complement the Company's traditional placement
and sales strategies. In addition, GE Capital agreed to monetize prospective
placement agreements by providing funding to the Company in an amount equal to
the present value of minimum procedure payments contained in such agreements.
Results of Operations
Total revenues for the three months ended September 30, 1998 were
$1,615,000, a decrease of 14% when compared to $1,885,000 for the three months
ended September 30, 1997. Product sales for the three months ended September 30,
1998 were $1,036,000, a decrease of 7% when compared to $1,110,000 for the three
months ended September 30, 1997. In the three months ended September 30, 1998,
the Company sold one Heart Laser System and shipped a second system pursuant to
a new placement contract. In addition, revenue of $210,000 was recognized in the
third quarter of 1998 pursuant to a previous shipment. In the 1997 period, the
Company shipped five Heart Laser Systems, two of which were sales and three of
which were shipped pursuant to new placement contracts.
Total revenues for the nine months ended September 30, 1998 were
$3,240,000, a decrease of 53% when compared to $6,895,000 for the nine months
ended September 30, 1997. Product sales for the nine months ended September 30,
1998 were $1,561,000, a decrease of 65% when compared to $4,406,000 for the nine
months ended September 30, 1997. During the first nine months of 1998, the
Company shipped eight Heart Laser Systems, seven of which were pursuant to the
placement strategy and one of which was sold. In addition, revenue of $210,000
was recognized in the third quarter of 1998 pursuant to a previous shipment. In
1997, the Company shipped nineteen Heart Laser Systems, of which eight were
sales and eleven were shipped pursuant to placement contracts.
Placement and service fees for the three months and nine months ended
September 30, 1998 were $579,000 and $1,679,000, decreases of 25% and 33% when
compared with $775,000 and $2,489,000 for the same periods in fiscal 1997.
Although the Company has increased its placement contract base, placement
revenue dollars have decreased. 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 examine its requirement of contractual
minimum billings prior to FDA approval and to amend substantially all of its
placement contracts, temporarily replacing contractual minimal billings with
actual usage
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billings. Following receipt of the PMA from the FDA on August 20, 1998,
placement contracts that specify post-FDA-approval minimum billing have been
reinstated as of September 1998, and the Company is renegotiating those
placement agreements that do not specify post-FDA-approval minimum billings. In
May 1998, HCFA published proposed medical reimbursement codes for TMR in the
Federal Register, although the non-coverage policy discussed previously is still
in place.
Total gross margin for the three and nine month periods ended September
30, 1998 approximated 20% and 7% of revenues, down from gross margins of 35% and
49% for the comparable periods in fiscal 1997. This decrease has resulted from
two factors. First, the Company experienced unfavorable manufacturing variances
that are expected to continue until production increases to levels which will
absorb manufacturing overhead and mitigate these variances. Second, most of the
Company's existing placement contracts were in the pre-PMA contractual minimum
billing periods, which typically required lower minimums than after PMA or no
minimums in some instances. In addition, the cost of the laser is depreciated on
a straight-line basis over the life of the placement contract; therefore, the
overall depreciation on Heart Laser Systems under existing placement contracts
had been greater than the corresponding revenue generated due to the pre-PMA
minimum billings.
Selling, general and administrative expenditures of $3,324,000 and
$10,321,000 for the three and nine month periods ending September 30, 1998
increased 8% and 10% when compared to fiscal 1997 expenditures of $3,076,000 and
$9,411,000. The increases in the 1998 periods over the 1997 periods primarily
relate to additional sales and marketing expenses incurred in anticipation of
the receipt of the PMA.
Research and development expenditures for the three and nine months
ended September 30, 1998 were $1,028,000 and $3,593,000, a decrease of 13% and
an increase of 6% when compared to spending of $1,180,000 and $3,397,000 for the
comparable periods in fiscal 1997. The decrease in the three-month period of
1998 from the comparable period in 1997 reflects the reduced demands for
clinical study compilation and data preparation following receipt of the PMA,
offset in part by higher costs associated with the development of new products.
Interest income, net for the three and nine months ended September 30,
1998 was $3,000 and $333,000 when compared to $41,000 and $174,000 for the
comparable periods in fiscal 1997. Interest income is net of interest expense.
The Company records transactions in several foreign currencies, which resulted
in currency profits of $23,000 and $11,000 for the three and nine months ended
September 30, 1998 as compared to losses of $13,000 and $23,000 for the three
and nine months ended September 30, 1997.
The Company incurred net losses of $4,006,000 and $13,344,000 for the
three and nine months ended September 30, 1998 when compared to net losses of
$2,697,000 and $5,719,000 for the comparable 1997 periods.
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Liquidity and Capital Resources
At September 30, 1998, the Company had cash and cash equivalents of
$8,265,000. In April 1998, the Company obtained a $10 million financing
commitment. Pursuant to the terms of the financing, the Company received
approximately $4.7 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 nine months ended September 30, 1998, the Company incurred a
loss of $13,344,000 which resulted in the use of $11,769,000 to support
operations. Cash provided by investing activities was $11,316,000, including net
maturities of $12,845,000 of marketable securities, offset by an investment of
$1,529,000 in fixed assets primarily related to placement contract activity.
Cash provided by financing activities was $5,196,000, including $4,659,000 in
net proceeds from the issuance of convertible debt and $586,000 from the
exercise of stock options.
In anticipation of FDA approval, the Company increased its overall
operating expenses to be positioned to increase both its sales activity and
production capacity. In order to be adequately positioned to meet these
demands, the Company secured a financing commitment from three institutional
investors. The Company secured this additional capital to support a
successful market launch of the Heart Laser System to open-heart centers in
the U.S. In addition, this new funding will enable the Company to conduct
further research in TMR, such as an ongoing study evaluating TMR as an
adjunct to bypass surgery, as well as to develop new products. The Company
expects that it will require additional funding in the future, which it may
seek through public or private equity offerings, debt financings, strategic
alliances or licensing arrangements. To the extent the Company raises
additional capital by issuing equity or convertible securities, ownership
dilution to stockholders will result.
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 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 and that
may need to be modified. To date, the Company is unaware of any situations of
noncompliance that would materially adversely affect 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
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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 or increases in expenses
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 prior to such
time, if ever, as third party payers agree to reimburse health care providers
for use of The Heart Laser System. The Company must also convince health care
professionals, third party payers 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.
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
At the Company's last Board of Directors meeting held on October 30,
1998, Dr. Rudko announced his resignation as Chairman of the Board. Dr. Rudko
will remain a director of the Company and continue to work on special projects
for the Company. Edward H. Pendergast, the Company's lead outside director,
was appointed Chairman of the Board.
In connection with the Company's annual meeting for fiscal 1999, any
shareholder proposal for inclusion in the Proxy Statement must be received on or
before March 31, 1999 to the attention of Jennifer Miller, General Counsel, 10
Forge Park, Franklin, MA 02038.
Item 6. Exhibits and Reports on Form 8-K
a.) Exhibits
--------
(I) The following exhibits are filed herewith:
Exhibit
No. Title
-------- -----
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: November 13, 1998 By: /s/ Robert Svikhart
--------------------------- ---------------------
Robert Svikhart
(Chief Financial Officer)
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