Shareholder Sues Premier Laser Systems
A Premier Laser Systems Inc. shareholder has filed a lawsuit accusing the Irvine company of violating securities laws by issuing misleading information about its laser sales in hopes of inflating its stock.
The complaint, filed Friday in U.S. District Court in Santa Ana, contends that Premier improperly booked shipments to a distributor as sales. The company wanted to boost its financial results and its stock price, the lawsuit alleges, so that it could use its stock to pay for a merger with Sacramento-based Ophthalmic Imaging Systems.
Premier said it had not seen a copy of the complaint, but it denied any improper conduct. “The company is saying flatly, vehemently that they are guiltless and plan to launch a very vigorous defense,” said Premier spokesman Owen Daley.
The maker of dental and medical lasers scored a huge coup and gained national fame last year when one of its lasers became the first approved for use directly on teeth. The news was heralded as a breakthrough in dentistry because of the potential for replacing many painful drilling procedures.
But last month, Premier said that a dispute with a major distributor could force it to lower revenue by $7 million for its last six months. The disagreement with Henry Schein Inc. in Melville, N.Y., centers on dental lasers that Premier said it sold to Schein, but which the distributor says it did not order.
The day of the announcement, Premier’s stock tumbled $1.72 a share, or 20%, to $6.97 in Nasdaq trading. The stock closed Tuesday at $6 a share, down 3 cents.
The suit, filed by Premier shareholder Robert Valenti, seeks class-action status on behalf of all purchasers of Premier stock from Feb. 12 to April 15. The suit did not specify the amount of damages being sought.
The complaint states that it was evident the shipments to Schein were not sales because the distributor did not issue purchase orders and Premier did not send invoices for the products. Both are standard practices in the dental products industry, it says.
“Had the company thought that they were selling, there would have been shipping labels and invoices,” said Valenti’s attorney Michael Swick. “There was no purchase order by Schein, no invoice from the company because these were not sales. This was all smoke and mirrors.”
Daly said that Premier is continuing negotiations with Schein to resolve the dispute.
The company has said that its previously reported revenue of $7.2 million for its fiscal third quarter ended Dec. 31 will be revised to $4.7 million after subtracting the disputed orders. Revenue for the fiscal fourth quarter ended March 31 was expected to total more than $10 million, but is now anticipated to be $5.5 million to $6 million, and the company has warned of a “substantial negative effect on net results.”
