by George W. Kromer
Today's Investor Staff

The adage, "The little fish swallowing the big fish," applies to Excel's role in the merger; considering that in fiscal 1991, Excel reported sales of $250,000, compared to $29.1 million reported in fiscal year 1991 by Quantronix.

Dr. Rama Rao commented that he began Excel out of his garage to engage in the design, development, manufacture and marketing of solid state and multi-wavelength laser products. "We have directed most of our efforts toward developing products that utilize laser technology in areas such as the consumer and medical industries. We were not founded to discover laser technology that has a military application," Dr. Rao added. The Company's goals are to permeate three major areas: scientific, medical and consumer.

The area of dentistry is proving to be a major area where laser technology is making strong in-roads. Research and development efforts in laboratories throughout the world confirm the fact that many current dental procedures could be performed with the use of dental laser, often without the discomfort and recovery time associated with major dental surgery.

According to published reports by the American Dental Association, it is estimated that there are approximately 138,000 dentists in the U.S. of which over 100,000 are active. During calendar 1991 the use of laser increased dramatically. To illustrate; American Dental Laser (ADL) introduced in 1990 a commercial pulsed laser for dentistry, resulting in annual sales of $13 million. One year later, sales had jumped to $34 million.

A major breakthrough in Excel occurred in March 1992, when it moved out of a so-called pure R & D company into a revenue generating company, when it announced that it had received 510K approval from the Food and Drug Administration (FDA) to market its ND:YAG dental laser for treating soft tissue. "Data indicates that minimized bleeding, reduced need for anesthesia, decreased danger of infection, less pain and improved effectiveness in treatment of early stage gum disease can be achieved with this type of laser," Dr. Rao says. According to a company spokesperson, industry sources place the laser dental market in the $100-$110 million in annual sales by the year 1995. "We are confident, and our expectations are that Excel will develop a variety of laser-based dental products to serve this market in the future," Dr. Rao added.

Following closely on the first FDA approval, Excel Technology received approval for its HO:YAG dental laser which is also used to treat soft tissue. Management reacted by stating that to the best of their knowledge this is the first approval of such a laser which is particularly useful where great precision is required.

Excel is now in a position to offer flexibility of two complimenting solid state lasers with different wave lengths for efficient cutting and coagulation with minimal trauma to the tissue area. Management's plans include developing a host of related lasers for dentists.

Excel commenced operation in 1986 as a result of receiving a grant under the Small Business Innovation Research program which was followed in 1987 with a contract from the National Aeronautics and Space Administration (NASA).

The use of laser technology remains in its infancy stage and the number of areas where laser can be applied continues to grow. "The essence of the laser beam is so concentrated and powerful that it produces power densities millions of times more intense than those found on the surface of the sun, yet can be so precisely controlled and directed that surgeons can use it to perform microsurgery," Dr. Rao said.

In April 1989, Excel introduced what management believes to be the world's first, and currently only all solid state pump laser, which according to Dr. Rao has a longer usable life and provides higher performance than the gas pump lasers. Currently, Excel is marketing its products for scientific and research applications; including, but not limited to, photochemistry and semiconductor research.

The fastest approach to expansion and recognition in an industry is the acquisition route.

This was Excel's approach when it announced in March 1992, that it had signed a definitive merger agreement relating to the acquisition of Quantronix. The completion of the transaction is subject to the approval of the shareholders of Quantronix as well as other conditions.

According to Excel's management the transaction combines Excel's new product capabilities and its resources to continue to expand great effort into R & D with the established engineering, manufacturing and marketing capabilities of Quantronix. Dr. Rao added that the joint venture in which both companies have a long-term commitment to the laser market will provide both parties with the ability to maximize their potential and dedication to the patients.

The attraction of Quantronix is their excellent and experienced management, manufacturing facility, and strong customer base. The customer base was extremely important because according to a company official, Excel now has the channel to distribute its products as they move from the R & D stage into the approval arena. Currently, the acquisition is in its early stage; but, should all go well, it is expected to be finalized in late summer.

During 1991, the company entered the international market by offering its products for sale through major foreign laser equipment distribution organizations. Currently, Excel has entered into distribution agreements with companies in Japan, the United Kingdom and France. "These distribution agreements coupled with the proposed acquisition of Quantronix (should it be completed) will provide our company with a solid distribution network," Dr. Rao said. Investors considering investing in Excel Technology are purchasing potential, not today's revenues and earnings.

The company's recent 10Q, covering Excel's first quarter ended March 31, 1992, reveals that revenues totaled $52,369 and an accumulated deficit of approximately $1.85 million; resulting in a 13 cent per share loss. However, as a result of the company's public offering in May 1991, at March 31, 1992, working capital stood at $4.1 million, a dramatic increase from the approximately $2.1 million available three months prior. It should be noted that in addition to the public stock offering Excel received $3.0 million from warrant holders who exercised their warrants to purchase 762,675 shares of common stock. The warrants were part of the IPO, with terms of exchange: one warrant for one share of common stock at a price of $4 per share. There are approximately 4 million shares outstanding with insiders controlling 50 percent. Excel has no long-term debt.

The company's future will be substantially strengthened should the expected acquisition come to fruition. The transaction will provide each presently outstanding share of Quantronix common stock to be converted into one-half share of Excel common stock and a warrant to purchase one-quarter share of Excel common stock.

Shares of Excel Technology trade in the over-the-counter market (NASDAQ: XLTC). In recent months the stock has traded ma range of $6.50 - $4.75.

Excel has the potential to become a major participant in an industry that is exploding. Excel's management gives strong indication that it knows how to move its products from R & D to the consumer market. As is the scenario of all young companies engaged in new product development, cash is king.

With the funds received from the IPO, exercise of warrants and the anticipated Quantronix acquisition, management is confident that it will have sufficient capital to meet its cash requirements for the foreseeable future.

For additional information contact: Dr. Rama Rao, Excel Technology, Inc.,
101-2 Colin Drive, Holbrook, NY 11741 (516) 563-7067