I attended the special stock holders meeting which was held in the Bank of Boston auditorium @ 10:30 on Friday July 19, 1996. Here is a summary of the events:
First ten minutes were spent going over the proposal to increase the amount of stock from 40 million shares to 100 million, offering an ESOP, and the employee retirement plan. The proposals were read and the numbers were tallied. Each proposal passed.
A presentation was made presenting the financial state of the company and future business expectations. PMTI is expected to lose $0.52 /per share on earnings in excess of 22 million for the first half of this year. This is in line with analysts expectations. Earnings report will be issued around August 8. The average trading volume is around 700,000 shares/day on the NASDAQ small cap. The company has applied to move up an could receive approval with in the next three months. The stock is marginable so the move up is not a big deal.
Palomar's objective is to become the dominent cosmetic laser company with applications for skin resurfacing, hair removal, tattoo removal etc.. They are currently positioned number 2 or 3 behind Coherent. They are also looking to exploit substantial specialty medical markets which include: blood clot removal, tonsillectomy, burn diagnostics ( differentiating between second and third degree burns) and psoriasis treatment. Palomar wants to develop and acquire a full suite of lasers to meet a variety of applications. Sales are handled through a distributor network, 12 in the US and 15 international. The lasers for skin resurfacing are sold at a cost 40% less than the competitors and offer better results. There is currently a backlog on the skin resurfacing equipment. The total sales for this year are expected to increase to 30 million this year from 5 million last year. Palomar believes that the future for medical laser application is the diode laser technologies and they are doing more research in this area.
A clip from a channel 4 news cast was shown featuring Dr. Rox Anderson of Mass General using the diode laser for hair removal on a patient. The demonstration was quite impressive with little evidence of damage to the area being treated. The patient was very enthusiatic about the treatments and the length of time that the hair was removed for. One benefit of the procedure is that when the hair grows back in it is not as thick.
The diode laser which was recently approved will be manufactured at Spectum (a Palomar Division) in Massachusetts. The equipment was approved by FDA for skin resurfacing over the full range of settings needed for hair removal. There are orders in place for the equipment and they have heard from dermatoligists that they want the equipment processed eventhough it doesn't have hair removal approval. It was stated that the doctors will use the equipment off label and the company will not promote it for the hair removal use. Units will be shipping out in the third and fourth quarters of this year.
The electronics divisions are expected to gross between 16-18 million this year, half of the company's revenue. The electronics groups were acquired to assist in the development of the laser machines. Dynaco manufactures flexible circuitry which can eliminate the need for cabling. This has allowed for the size of the laser units to be reduced. This technology is now being used by Jaguar, Ford and GM. To meet the demand Palomar has set up off shore licensing agreements. A second division computer memory modules which allow for memory to be placed on both sides of the board. These modules are important in the high end computer graphics applications. Palomar is working with seven computer companies and is expecting to introduce the products in the third and fourth quarters. Given the technology which was already present Palomar bought Nexar computers. They brought in the management team that helped Leading Edge. Nexar manufacturer's upgradeable computers that are priced competively with existing PC manufacturers. The distributors who will be selling these computers will see 50 % increased profits due to the fact that the computer is configured for the processor, hard drive, etc. at the time of the sale. This will eliminate computers becoming obsolete while waiting to be sold. Palomar anticipates that the profit margin on this computer will be greater than that of Dell, Packard Bell etc. A video clip was shown of the Nexar computer from a C/Net Central show. Again it was a well done segment which highlighted the benefits of the computer.
The predictions for earnings this year and next are as follows:
1996 1997
(.15-30) Earnings per Share 1.10-1.85 Earning per Share
Loss Profit
The earnings are based on the introduction and sale of new products in the third and fourth quarters of this year which should carry into next year.
The company feels comfortable with the available cash available due to an introduction of 6 Million dollars from Travelers in preferred stock and an European Bond Issue.
The general emphasis of the entire presentation was extremely positive. The management could not explain the current down turn in the stock price. Palomar is looking to spin off Nexar and there is great interest in this company. They expect to spin it off this year and are talking with investment houses about it. |
