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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended March 31, 2001 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from _______________
to _______________.
COMMISSION FILE NO. 0-10428
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0148208
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3400 W. WARREN AVENUE, FREMONT, CALIFORNIA 94538
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (510) 623-9001
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 [ ]
Common Stock, $0.001 Par Value - 51,431,546 shares outstanding as of May 3,
2001.
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INDEX
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Operations-- Three months ended
March 31, 2001 and 2000 1
Condensed Consolidated Balance Sheets-- March 31, 2001 and December
31, 2000 2
Condensed Consolidated Statements of Cash Flows-- Three months ended
March 31, 2001 and 2000 3
Notes to Condensed Consolidated Financial Statements--March 31, 2001 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 6
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 9
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE PROCEEDS 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
2001 2000
-------- --------
Revenues:
Equipment $ 5,140 $ --
Procedures 202 --
Service and other 375 18
-------- --------
Total revenues 5,717 18
-------- --------
Cost of revenues:
Equipment 3,613 --
Service and other 288 719
-------- --------
Total cost of revenues 3,901 719
-------- --------
Gross margin (loss) 1,816 (701)
-------- --------
Operating expenses:
Research and development 951 1,018
Sales, marketing and regulatory 2,388 2,581
General and administrative 1,424 1,432
Restructuring 704 --
-------- --------
Total operating expenses 5,467 5,031
-------- --------
Loss from operations (3,651) (5,732)
Interest income 23 244
Interest expense (1,083) (10,545)
Other income 700 --
-------- --------
Net loss $ (4,011) $(16,033)
======== ========
Net loss per share, basic and diluted $ (0.08) $ (0.35)
======== ========
Shares used in calculation of basic
and diluted net loss per share 51,015 46,406
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
(Unaudited)
MARCH 31, DECEMBER 31,
2001 2000
--------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 168 $ 975
Accounts receivable, net 4,377 3,268
Inventories, net 10,180 11,981
Other current assets 211 405
--------- ---------
Total current assets 14,936 16,629
Property and equipment, net 2,339 2,528
Intangibles, net 7,858 7,995
Other non-current assets 3,897 1,374
--------- ---------
Total assets $ 29,030 $ 28,526
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under a line of credit $ 6,663 $ 3,034
Current portion of long-term debt 319 307
Accounts payable 1,983 3,162
Accrued liabilities 1,597 1,564
Deferred revenue 2,493 1,047
Deposits 659 1,183
--------- ---------
Total current liabilities 13,714 10,297
Long-term debt, net of current portion 7,453 7,175
Capital lease obligations, net of current portion 423 479
Deferred revenue, net of current portion 939 1,077
Other long-term liabilities 142 136
--------- ---------
Total liabilities 22,671 19,164
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $0.001 par value, 2,000,000 shares
authorized, none issued or outstanding -- --
Common Stock, $0.001 par value, 75,000,000 shares
authorized, 51,163,880 and 50,867,848 shares
issued and outstanding at March 31, 2001 and
December 31, 2000, respectively 51 51
Additional paid-in capital 129,901 129,116
Deferred compensation (507) (730)
Accumulated deficit (123,086) (119,075)
--------- ---------
Total stockholders' equity 6,359 9,362
--------- ---------
Total liabilities and stockholders' equity $ 29,030 $ 28,526
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
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SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
2001 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,011) $(16,033)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 443 149
Amortization of deferred compensation 226 80
Amortization of debt issuance costs 351 1
Warrant accretion and interest on beneficial
conversion features 278 10,247
Issuance of warrants and stock options 156 --
Conversion of accrued interest on notes payable 181 --
Non-cash restructuring charge 704 --
Inventory valuation reserve (267) --
Changes in assets and liabilities:
Accounts receivable (1,109) (139)
Inventories 2,068 (2,449)
Other current assets 112 (978)
Non-current assets (350) --
Accounts payable (1,179) 1,333
Deferred revenue and deposits 784 --
Accrued liabilities (318) (670)
Other long-term liabilities 6 308
-------- --------
Net cash used in operating activities (1,925) (8,151)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (117) (320)
Investment in common stock (2,400) --
-------- --------
Net cash used in investing activities (2,517) (320)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 79 171
Proceeds from convertible notes, net of
issuance costs -- 11,217
Proceeds from line of credit 3,600 --
Proceeds from issuance of debt obligations -- 126
Repayments of debt obligations (44) (40)
-------- --------
Net cash provided by financing activities 3,635 11,474
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (807) 3,003
Cash and cash equivalents at beginning of period 975 10,643
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 168 $ 13,646
======== ========
NONCASH FINANCING ACTIVITIES:
Issuance of warrants to guarantor $ 174 $ --
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
MARCH 31, 2001
1. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary after elimination of all inter-company
balances and transactions. Certain reclassifications have been made to prior
year amounts in order to conform to the current presentation.
The condensed consolidated financial data for the periods ended March 31,
2001 and 2000 are unaudited, but include all adjustments (consisting only of
normal recurring adjustments) that management of the Company believes to be
necessary for fair presentation of the financial position and results of
operations for the periods presented. Interim results are not necessarily
indicative of results for the full year. The financial statements should be read
in conjunction with the audited financial statements for the year ended December
31, 2000 included in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
The Company has incurred significant losses for the last several years and
at March 31, 2001 has an accumulated deficit of $123,086,000. In order to
continue its operations, the Company must achieve profitable operations or
obtain additional funds through equity or debt financing, collaborative or other
arrangements with other companies, bank financing, and other sources. Management
believes that its existing cash balances and other potential financing
alternatives, if realized, will be sufficient to meet the Company's near-term
capital and operating requirements. However, at March 31, 2001 $6,600,000 had
been drawn down on the Company's one-year revolving line of credit with a
commercial lender, with no additional moneys available, and will be repayable at
June 29, 2001. The Company is in discussions with this lender to extend this
line of credit for another year. The lender has advised the Company that no
additional borrowings under this line of credit may be made, and has asked for a
repayment of the borrowed amounts. The lender has also indicated that it may be
willing to consider an extension of the line of credit at a significantly
reduced level. Discussions with the lender and the Company's guarantor are at an
early stage. The Company is also engaged in preliminary discussions with
alternative financing sources, including potential bridge and/or equity
financings. Funds from these alternative sources could be utilized to repay all
or a portion of the Company's current line of credit. Consummation of these
alternative financings may or may not result in a reduction in the conversion
prices of debentures and the exercise price of warrants issued by the Company in
January 2000 (see Part II, Item 5 of this Report on SEC Form 10-Q). There can be
no assurance that the Company and its guarantor will reach agreement with its
lender on the extension of its line of credit, or that the Company will be able
to successfully complete alternative financings. The Company's independent
accountants have issued a "going" concern opinion on the Company's financial
statements at December 31, 2000 stating that recurring losses and negative cash
flows from operations raise substantial doubt about the Company's ability to
continue as a going concern.
2. NET LOSS PER SHARE
Basic Earnings Per Share ("EPS") is computed as net income (loss) divided by
the weighted average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur from common shares issuable
through stock options, warrants and other convertible securities. Common
equivalent shares are excluded from the computation of net loss per share if
their effect is anti-dilutive. 11,189,538 and 6,251,196 common equivalent shares
as of March 31, 2001 and 2000 respectively, have been excluded from the shares
used to calculate diluted EPS, as their effect is anti-dilutive.
3. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market
value and consisted of the following on the dates indicated:
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MARCH 31, DECEMBER 31,
2001 2000
--------- ------------
(In thousands)
Raw materials $ 5,987 $ 7,019
Work-in-process 1,931 1,510
Finished goods 2,262 3,452
--------- ---------
Inventories, net $ 10,180 $ 11,981
========= =========
4. DISTRIBUTION AND STOCK PURCHASE AGREEMENT AND RELATED PARTY TRANSACTIONS
On December 28, 2000, the Company signed a Distribution and Stock Purchase
Agreement with U.S. Medical, Inc., a Colorado Corporation. Under the terms of
the Distribution Agreement the Company appointed U.S. Medical as its exclusive
distributor of its products in the Territory as defined within the Agreement.
U.S. Medical committed to purchase thirty-five units within the 2001 calendar
year. At March 31, 2001, equipment revenue sold to customers through U.S.
Medical was $3,787,000. Under the terms of the Stock Purchase Agreement, the
Company committed to purchase 480,000 shares of common stock of U.S. Medical at
a price of $5.00 per share that equates to 4% of their outstanding common
shares. The Company accounts for this investment under the cost method. On
January 31, 2001, the Company completed the transfer of funds to U.S. Medical
and received a stock certificate for the amount of shares purchased.
5. REDUCTION IN FORCE ("RIF")
On January 3, March 15, and April 6, 2001 the Company completed a "reduction
in force" (RIF) covering a total of 41 employees. Of the employees, 27 were in
production, 2 in research and development, 6 in sales and marketing, and 6 in
general and administrative. Each employee was entitled to receive a severance
payment as follows: hourly employees - 2 weeks plus a total of 2 weeks for every
year worked, salary employees - four weeks plus a total of 2 weeks for ever year
worked, managers - 12 weeks plus a total of 2 weeks for every year worked, and
directors - 20 weeks plus a total of 2 weeks for every year worked. In full
payment of the severance awards the Company granted 365,156 shares out of the
Supplemental Employee Stock Plan in lieu of cash. The total cost of the RIF, all
severance related, was $704,000 and was recorded on the Company's books and
records as a restructuring charge during the first quarter of 2001. Also
included in the total amount was $132,000 of employee receivables that were
forgiven by the Company. All amounts were properly accrued for the April RIF as
all employees had been properly notified prior to quarter end and management's
plans had been properly approved. The remaining liability at quarter end was
$351,000, which was subsequently paid through a non-cash stock transaction.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
All statements contained herein that are not historical facts including, but
not limited to, statements regarding the Company's plans for future development
and operation of its business, are based on current expectations. These
statements are forward-looking in nature and involve a number of risks and
uncertainties. Actual results may differ materially. Among the factors that
could cause actual results to differ materially are the following: a lack of
sufficient capital to finance the Company's business plan on terms satisfactory
to the Company; changes in labor, equipment and capital costs; any restrictions
or revocations that the Food and Drug Administration ("FDA") may impose on our
holmium laser corneal shaping product or process known as the HYPERION(TM) Laser
Thermal Keratoplasty (the "HYPERION(TM) LTK System") that had received the FDA's
pre-market approval; competitive factors, such as the introduction of new
technologies and competitors into the ophthalmic laser business; general
business and economic conditions; and the other risk factors described from time
to time in the Company's reports filed with the Securities and Exchange
Commission ("SEC"). The Company wishes to
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caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made.
The Company develops, manufactures and markets laser systems for
applications in ophthalmology. Substantially all of our business activities,
including engineering and development, manufacturing, assembly and testing take
place at our facility in Fremont, California.
The Company's working capital is seriously depleted due to our substantial
losses in the past eight years. The Company has been able to raise additional
working capital for all aspects of our business through the private placements
of our common stock and convertible notes with warrants. The Company raised
approximately $3,700,000 in the form of promissory notes with warrants in
February and March 1997 (the "1997 Notes Placement"). We raised approximately
$9,300,000, net of offering costs, in the form of promissory notes with warrants
in January 1998 (the "1998 Notes Placement"), and approximately $11,800,000, net
of offering costs, from the sale of common stock in December 1998 (the "1998
Equity Offering"). In January 1999, the Company raised $10,000,000, net of
offering costs, in the form of promissory notes with warrants (the "1999 Notes
Placement"). In January 2000, the Company raised $11,217,000, net of offering
costs, in a private placement in the form of convertible debentures and warrants
(the "2000 Notes Placement"). In addition, in June 2000, the Company secured a
$10,000,000 revolving line of credit with a commercial banking company
guaranteed by certain of the Company's assets and the assets of one of the
Company's investors. As of March 31, 2001, $6,600,000 had been drawn down on the
line of credit with no additional moneys available to the Company.
The Company's first quarter's operations were cash flow negative, further
straining our working capital resources. At our current rate of cash
expenditures, we need to raise additional working capital during 2001 to fund
operations if sales of our product do not provide sufficient cash resources. No
assurance can be given that additional financing will be available, or if
available, that it will be available on terms favorable to our stockholders and
us. If funds are not available to finance the Company's operations and bridge
its working capital needs until revenues and profits are achieved, we may need
to scale back expenditures and limit our operational capacity until such
financing or other alternative business solutions are implemented. The Company
has incurred significant losses for the last several years and at March 31, 2001
has an accumulated deficit of $123,086,000. In order to continue its operations,
the Company must achieve profitable operations and obtain additional funds
through equity or debt financing, collaborative or other arrangements with other
companies, bank financing, and other sources. Management believes that its
existing cash balances and other potential financing alternatives, if realized,
will be sufficient to meet the Company's near-term capital and operating
requirements. However, at March 31, 2001 $6,600,000 had been drawn down on the
Company's one-year revolving line of credit with a commercial lender, with no
additional moneys available, and will be repayable at June 29, 2001. The Company
is in discussions with this lender to extend this line of credit for another
year. The lender has advised the Company that no additional borrowings under
this line of credit may be made, and has asked for a repayment of the borrowed
amounts. The lender has also indicated that it may be willing to consider an
extension of the line of credit at a significantly reduced level. Discussions
with the lender and the Company's guarantor are at an early stage. The Company
is also engaged in preliminary discussions with alternative financing sources,
including potential bridge and/or equity financings. Funds from these
alternative sources could be utilized to repay all or a portion of the Company's
current line of credit. Consummation of these alternative financings may or may
not result in a reduction in the conversion prices of debentures and the
exercise price of warrants issued by the Company in January 2000 (see Part II,
Item 5 of this Report on SEC Form 10-Q). There can be no assurance that the
Company and its guarantor will reach agreement with its lender on the extension
of its line of credit, or that the Company will be able to successfully complete
alternative financings. The Company's independent accountants have issued a
"going" concern opinion on the Company's financial statements at December 31,
2000 stating that recurring losses and negative cash flows from operations raise
substantial doubt about the Company's ability to continue as a going concern.
FINANCIAL CONDITION
As of March 31, 2001, the Company had $168,000 in cash and cash equivalents.
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Cash used for operating activities was $1,925,000 for the three months ended
March 31, 2001 as compared to $8,151,000 for the same period in 2000. The
majority of the cash used for operating activities was used to fund the net loss
of $4,011,000 partially offset by depreciation and amortization and non-cash
interest and compensation expense of $2,339,000. Operating cash was also
realized in the decrease of inventory, other current assets, as well as
increases in deferred revenue and deposits, and other accrued and long-term
liabilities totaling $2,970,000. Operating cash was utilized by the increase of
accounts receivable, other non-current assets, and the decrease in account
payable totaling $2,956,000.
Cash used for investing activities was $2,517,000 for the three-months ended
March 31, 2001 for purchase of capital expenditures and the investment in common
stock of U.S. Medical. Capital expenditures generally had been comprised of
purchases of computer hardware and software as well as leasehold improvements
related to leased facilities.
Cash provided by the financing activities was $3,635,000 for the
three-months ended March 31, 2001 comprised primarily of the net proceeds from
the draw down of the line of credit.
The Company's first quarter's operations were cash flow negative, limiting
the Company's working capital resources. Working capital at March 31, 2001
amounted to approximately $1,222,000. At December 31, 2000, working capital
amounted to approximately $6,332,000.
RESULTS OF OPERATIONS
Revenues from the sale of equipment for the three-month period ended March
31, 2001 were $5,140,000 to customers in the United States and South Korea.
Procedure revenue totaled $202,000 for the three-month period ended March 31,
2001. Service and other revenues were $375,000 for the three-month period ended
March 31, 2001. Total revenues of $5,717,000 represent an increase of $5,699,000
from revenues of $18,000 for the same period in 2000. Procedure revenues are
comprised of revenues from enablement fees. Service and other revenues are
comprised of revenues from the recognition of first-year service revenues and
other miscellaneous revenues. Revenues from a related party, U.S. Medical,
totaled $3,787,000 during the first quarter of 2001.
Cost of revenue for equipment sales totaled $3,613,000 for the three-month
period ended March 31, 2001. Cost of revenue for service and other revenues
totaled $288,000 for the three-month period ended March 31, 2001. Gross margins
totaled $1,816,000 for the three-month periods ended March 31, 2001. Costs of
revenue for equipment sales reflect charges for production costs inclusive of
manufacturing labor and overhead and unabsorbed overheads. Cost of revenue for
service and other revenues include costs of the company's technical and service
department and other direct costs associated with miscellaneous revenues. Costs
of revenues and the resulting negative margin for the three-month period ended
March 31, 2000 reflect charges of unabsorbed manufacturing labor and overhead.
Research and development expenses totaled $951,000 for the quarter ended
March 31, 2001, compared to $1,018,000 for the same period in 2000. Research and
development expenses consist primarily of payroll and related expenses incurred
for enhancement to and maintenance of the HYPERION(TM) LTK System, amortization
of patent costs, expenditures related to the development of other refractive
applications of the HYPERION(TM) LTK System and other operating costs. Included
in the research and development expenses for the quarter ended March 31, 2001
was non-cash charges of $5,000 related to the fair market value of warrants and
non-qualified stock options issued to consultants and employees in lieu of cash.
The 7% reduction for the quarter in research and development expenses compared
to those of 2000 was primarily due to the completion of the initial development
for the LTK System in 2000 and the reduction in force that took place in the
first quarter of 2001.
Sales, marketing and regulatory expenses were $2,388,000 for the first
quarter ended March 31, 2001, compared to $2,581,000 for the same period in
2000. Included in the sales, marketing and regulatory expenses for the quarter
2001 was $95,000 of non-cash charges related to the fair market value of
warrants and non-qualified stock options issued to consultants and employees in
lieu of cash. Sales and marketing expenses consist primarily of advertising and
other marketing expenses, compensation and employee related expenses, sales
commissions, and travel costs. The 7% reduction in sales, marketing and
regulatory expenses in 2001 as compared to 2000 respectively, was due to the
decrease in marketing efforts in preparation and market launch of
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the HYPERION(TM) LTK System that was launched in July 2000 and the reduction in
force that took place in the first quarter of 2001.
General and administrative expenses were $1,424,000 for the first quarter
ended March 31, 2001, compared to $1,432,000 for the same period of 2000.
Included in the general and administrative expenses for the quarter 2001 was
$126,000 of non-cash charges related to the issuance of non-qualified stock
options issued to employees in lieu of cash. General and administrative expenses
consist primarily of employee-related expenses, legal fees and compensation and
fees for professional services. The 1% decrease in general and administrative
expenses for 2001 was due to the reduction in force that took place during the
first quarter of 2001.
Restructuring expense of $704,000 represent the cost of the severance awards
given to employees who were terminated as a reduction in force that took place
during the first quarter and in the first week of April, 2001. On January 3,
March 15, and April 6, 2001 the Company completed a "reduction in force" (RIF)
of 41 employees. Of these, 27 was in production, 2, in research and development,
6 in sales and marketing, and 6 in general and administrative. Each employee was
entitled to receive a severance payment as follows: hourly employees - 2 weeks
plus a total of 2 weeks for every year worked, salary employees - four weeks
plus a total of 2 weeks for ever year worked, managers - 12 weeks plus a total
of 2 weeks for every year worked, and directors - 20 weeks plus a total of 2
weeks for every year worked. In full payment of the severance awards the Company
granted 365,156 shares out of the Supplemental Employee Stock Plan in lieu of
cash. The total cost of the RIF, all severance related, was $704,000 and was
recorded on the Company's books and records as restructuring charge during the
first quarter of 2001. Also included in the total amount was $132,000 of
employee receivables that were forgiven by the Company. All amounts were
properly accrued for the April RIF as all employees had been properly notified
prior to quarter end and management's plans had been properly approved. The
remaining liability at quarter end was $351,000, which was subsequently paid
through a non-cash stock transaction.
Interest expense for the quarter ended March 31, 2001 of $1,083,000
represent primarily cash and non-cash interest charges pursuant to the 2000
Notes Placements, the Silicon Valley Bank line-of-credit guarantee and related
warrants, as compared to $ 10,545,000 for the first quarter of 2000. For the
quarter ending March 31, 2001, approximately $791,000 or 73% of the Company's
net interest expense were due to non-cash charges incurred in connection with
the 2000 Notes Placement and the Silicon Valley line-of-credit guarantee as
compared with $10,248,000 or 97% for 2000.
Other income of $700,000 represents amounts received from a settlement
agreement with Lares Research on the payment of an outstanding debt. Under the
Settlement Agreement, Lares paid the Company $700,000 in full redemption of an
outstanding note obligation owing to the Company in the principal amount of
$1,500,000. This note has been in default and had been fully reserved at
December 31, 2000.
For the quarter ended March 31, 2001 the Company incurred a net loss of
$4,011,000 compared to $16,033,000 for the first quarter of 2000. Included in
the loss for the first quarter of 2001 was $ 1,017,000 attributable to non-cash
compensation and interest charges as compared with $10,329,000 for the first
quarter of 2000. The Company's Hyperion(TM) LTK System was approved by the FDA
for marketing and sales in the United States in late June 2000. Consequently,
the Company had no significant revenues to offset our expenses during the first
quarter of the last year.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to financial market risks due primarily to changes in
interest rates. The Company does not use derivatives to alter the interest
characteristics of its investment securities or its debt instruments. The
Company has no holdings of derivative or commodity instruments and does not
transact business in foreign currencies.
The fair value of the Company's cash and cash equivalents or related income
would not be significantly impacted by changes in interest rates since the
investment maturities are short and the interest rates are primarily fixed.
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It is not possible to anticipate the level of interest and the rates past
2001. Changes in interest rates would impact the revolving line of credit since
the rate of interest of that facility is at the prime rate. The 2000 Notes,
however bear a fixed interest rate of 7%.
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 5: OTHER INFORMATION
On April 16, 2001, the Company filed Amendment No. 1 to its Form S-3
Registration Statement under the Securities Act of 1933, which was declared
effective by the Securities and Exchange Commission on April 19, 2001. The Form
S-3 registered 2,800,000 shares of the Company's common stock for issuance in
the future. As of April 30, 2001, no shares have been issued out of the shelf
registration. In January 2000 the Company issued its 7% Convertible Debenture in
the amount of $11,700,000. With certain exceptions which do not include new
financings of the type for which these shares may be utilized, if the Company
issues additional shares of its common stock below the conversion price of $5.92
per share, the conversion price applicable to the Convertible Debenture and the
exercise price of the related warrants will be reduced to the price at which
such additional securities are sold.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
None
----------------------
B. REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the first quarter of 2001.
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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.
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
Date: May 4, 2001 By: /s/ C. RUSSELL TRENARY, III
-----------------------------------------
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 4, 2001 By: /s/ THOMAS LA ROSE
-----------------------------------------
Vice President, Finance and Acting Chief
Financial Officer (Principal Financial
Officer)
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