James,
You have offered Palomar's Epilaser web site as a source of information
for techies. Well I'm a techie, and I have already shown that it is
filled with false and misleading claims, that go far beyond what FDA
allowed them, when it cleared the Epilaser to market. As I have stated
many times already, FDA does not allow ANY laser device to claim
"permanent", "long-term" or "painless" results. Ask Mr. Richard Felten,
of the FDA's CDRH, (Center for Device and Radiological Health) - he
clears many of the lasers, and is totally familiar with the issues.
Folks, after you visit the Epilaser web site, I suggest you take a look
at message #391, in which I dissected its most egregious falsehoods. It
is only a matter of time before the FDA or FTC forces Palomar to take
down those web pages. You may recall that Palomar received a warning
from FDA last October, and what that did to the share price.
James, the financial data on the StockSmart web site is mostly out of
date - by one year or more. For example, they claim a market cap of
$67 million on 21 Apr 97. That is ridiculous! Given the closing price
of $4.438, there would have to be only about 15.1 million shares
outstanding. That was the case back about Nov'95, but as of 14 April 1997,
the shares outstanding was 32.3 million and growing rapidly!
So the current market cap is about $143 million - so much for their PE
ratio estimates. Those are bogus anyway, considering that earnings
have always been negative. In any case, broad comparisons against
industry averages are at best a rough guide - they are no subsitute
for doing your homework. I have dowloaded and read through all of the
Palomar's SEC filings on EDGAR. I find their business practices scary.
Take a look at this table of shares outstanding and reserved:
Date Outstnd Reserved Total
14 Apr 97 32,269,724 21,966,142 54,235,866
21 Feb 97 30,996,283 20,061,274 51,057,557
31 Dec 96 30,596,812 20,467,819 51,064,631
16 Dec 96 29,474,776 17,518,130 46,992,906
13 Aug 96 28,061,662 19,951,091 48,012,753
24 Jun 96 26,610,797 10,654,320 37,265,117
29 May 96 26,243,761 10,977,910 37,221,671
26 Mar 96 24,414,907 11,397,996 35,812,903
31 Dec 95 20,135,406 12,531,799 32,667,205
31 Dec 94 9,464,963 6,275,367 15,740,330
Notice that it does not take very long for Palomar's reserved shares to
become outstanding shares. For example, 15 months ago, at 31 Dec 95,
outstanding + reserved was 32.7 million. Today, the outstanding alone
is 32.3 million! And look at the reserved - 22 million shares - almost
equal to what was outstanding a little over 12 months ago! Now perhaps
you can see why Palomar's directors asked for permission last June to
raise the company's outstanding shares ceiling from 40 million to
100 million - which was granted!
Palomar's defcit grew from $26 million on 31 Dec 1995, to $65 million
on 31 Dec 96. This warning has appeared is many of Palomar's SEC filings
since 23 Aug 96:
"SIGNIFICANT OUTSTANDING INDEBTEDNESS; SUBORDINATION OF DEBENTURES.
The Company has incurred substantial indebtedness in relation to its equity
capital and will be subject to all of the risks associated with substantial
leverage, including the risk that available cash may not be adequate to make
required payments to the holders of the Debentures. The Company's ability to
satisfy its obligations under the Debentures from cash flow will be dependent
pon the Company's future performance and will be subject to financial,
usiness and other factors affecting the operation of the Company, many of
which may be beyond the Company's control. In the event the Company does
not have sufficient cash resources to satisfy quarterly interest or other
repayment obligations to the holders of the Debentures, the Company will
be in default under the Debentures, which would have a material adverse
effect on the Company. To the extent that the Company is required to use cash
resources to satisfy interest payments to the holders of the Debentures, it will
have less resources available for other purposes. Inability of the Company to
repay the Debentures upon maturity would have a material adverse effect on
the Company, which could result in a reduction of the price of the Company's
Shares."
"The Debentures will be unsecured and subordinate in right of payment to all
Senior Indebtedness of the Company. The Debentures do not restrict the
Company's ability to incur additional Senior Indebtedness and most other
indebtedness. The terms of Senior Indebtedness now existing or incurred in the
future could affect the Company's ability to make payments of principal
and/or interest to the holders of Debentures. See "Item 5. Market for
Common Equity and Related Stockholder Matters.""
Palomar is burning money fast, and what have you got to show for it?
Spectrum has never designed, built and sold a laser of its *own* since it
began operations 8 years ago. And the Epilaser is just a minor modification
of its old RD-1200 ruby laser, which it originally tried to source from
Lasermetrics in 1989, and then bought from Laser Photonics in 1990, when
the latter went bankrupt.
There is plently of solid evidence that Epilaser is not competitive
with other temporary methods that like waxing, which have treatment
costs 10 to 20 times lower than laser. Yet Palomar would have investors
believe that Epilaser is the key to its future success. I believe they are
wrong.
Ted Molczan |
