Lasermed Corp. Seeks Chapter 11 Protection

Lasermed Corp., a Costa Mesa surgical equipment company unable to slow its losses or raise needed funds in recent months, has filed for protection of the court under Chapter 11 of the U.S. Bankruptcy Code.

The petition, filed Wednesday in Federal Bankruptcy Court in Santa Ana, will allow the 3-year-old company to continue operating while it restructures its operations and comes up with a plan to pay off its debt.

Company officials said Thursday that a combination of several factors caused Lasermed’s problems, including a shortage of cash and a marketplace that was a lot tougher and competitive than anticipated. Lasermed President John Baldridge, 52, said he has 120 days to come up with a plan to save his ophthalmic laser firm.

“We are trying to find someone in the drug part of the ophthalmic business that wants to get into the surgical area,” Baldridge said. He conceded, however, that finding a merger partner would not be easy.

“I don’t know if we will survive or not,” Baldridge said. “We think we have a chance or we wouldn’t be filing the Chapter 11.”

Deal Fell Through

Earlier this year, Lasermed was counting on a $500,000 financing arrangement with Staar Surgical Co. Inc. of Monrovia to help the company survive. But the deal fell through, and by the end of June, Lasermed found itself with a negative net worth of $635,000 and had laid off half of its 23 employees.

Moreover, the National Assn. of Securities Dealers told Lasermed that the company no longer met the capital requirements for inclusion in the NASD’S automated stock quotations listing, and no longer lists it.

Lasermed posted a net loss of $234,701 on revenues of $251,596 for the second quarter of 1985, following a net loss of 458,926 on revenues of $101,966 for the first calendar quarter. The company has assets of $857,000--including $526,000 worth of laser devices and disposable surgical packs. It has liabilities of almost $1.5 million.

“Word was getting around that we were just starting up and it was questionable as to whether we would have the staying power to stay behind our capital equipment,” said James Ashby, Lasermed’s vice president of finance, referring to the costly argon-krypton and YAG lasers used for eye surgery.

Analyst Not Surprised

Larry Haimovitch, a medical technology analyst with the New York-based investment house of Swergold, Chefitz & Sinsabaugh, said he was not surprised to learn of Lasermed’s Chapter 11 filing given the competition in the ophthalmic laser business.

“They entered a very crowded field rather late in the game,” said Haimovitch, who noted that there are more than a dozen similar companies across the country already established. “Many competitors were already selling argon lasers, and other competitors were ahead of them from a regulatory standpoint in selling YAG lasers.”

The argon-krypton laser is used to treat diseases of the eye, typically related to diabetes, and the YAG laser is used for secondary cataract removals. The laser units cost about $30,000 and $60,000 respectively. The laser devices must first be approved by the Federal Drug Administration before they can be sold. It’s a tough field to get into and create a credible effort,” Haimovitch said. He was pessimistic about the company’s chances of successfully reorganizing.

“I think they will just die . . . The laser business is glamorous, it’s sexy,” he said, “but historically it has not been a particularly good business to be in from a profit standpoint.” Among Lasermed’s 20 largest creditors listed in the Chapter 11 filing are: Wells Fargo Bank in Newport Beach for $120,000; Sunwest Bank for $60,000; Call, Clayton & Jensen, Newport Beach attorneys, for $28,400, and the New Jersey venture capital firm of Unicorn Ventures for $155,000.