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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X-QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
JULY 31, 1996
Commission file number 1-10629
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LASER VISION CENTERS, INC.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 43-1530063
-------- ----------
(State or other jurisdiction of incorporation (I.R.S. Employer identification
or organization) number)
540 Maryville Centre Dr., Suite 200, St. Louis, Missouri 63141
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(Address of principal executive offices)
(314)434-6900
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock outstanding as of August 29,1996 - 8,297,818 shares.
LASER VISION CENTERS, INC.
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LASER VISION CENTERS, INC.
FORM 10-Q FOR QUARTERLY PERIOD ENDED JULY 31, 1996
INDEX
PART OR ITEM PAGE
Part I. FINANCIAL STATEMENTS
Item 1. Interim Consolidated Financial Statements
Consolidated Balance Sheet - July 31, 1996 and April 30,1996...................................................... 3-4
Consolidated Statement of Operations - Three months
ended July 31, 1996 and 1995..........................................................................................5
Consolidated Statement of Cash Flow - Three months ended July 31, 1996 and 1995.....................................6-7
Consolidated Statement of Changes in Stockholders' Equity - Three months
ended July 31, 1996...................................................................................................8
Notes to Interim Consolidated Financial Statements....................................................................9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources.....................................................................................10
Results of Operations............................................................................................11-12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings....................................................................................................13
Item 2. Changes in Securities................................................................................................13
Item 3. Defaults upon Senior Securities......................................................................................13
Item 4. Submission of Matters to a
Vote of Security Holders.............................................................................................13
Item 5. Other Information....................................................................................................13
Item 6. Reports on Form
8-K..........................................................................................................................13
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LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JULY 31, April 30,
1996 1996
CURRENT ASSETS
Cash and cash equivalents $5,387,000 $12,672,000
Receivables, net of allowances of
$334,000 and $286,000, respectively 1,045,000 805,000
Prepaid expenses and
other current assets 622,000 483,000
Assets held for sale (Note 3) 600,000 1,200,000
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Total Current Assets 7,654,000 15,160,000
EQUIPMENT
Laser equipment 14,716,000 9,474,000
Medical Equipment 429,000 352,000
Mobile equipment 907,000 892,000
Furniture and fixtures 1,212,000 1,019,000
-Accumulated depreciation (1,995,000) (1,323,000)
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15,269,000 10,414,000
Equipment deposits 501,000 1,765,000
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Total Equipment, Net 15,770,000 12,179,000
OTHER ASSETS
Goodwill, net 1,082,000 1,108,000
VCI deposits in escrow 233,000 256,000
Tradename and service mark costs, net 147,000 152,000
Rent deposits and other, net 49,000 58,000
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Total Other Assets 1,511,000 1,574,000
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Total Assets $24,935,000 $28,913,000
=========== ===========
See notes to interim consolidated financial statements
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LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JULY 31, April 30,
1996 1996
CURRENT LIABILITIES
Current portion of notes payable $8,000 $1,858,000
Current portion of capitalized
lease obligations 425,000 467,000
Accounts payable 1,507,000 870,000
Accrued liabilities 1,283,000 1,963,000
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Total Current Liabilities 3,223,000 5,158,000
NON-CURRENT LIABILITIES
Capitalized lease obligations 1,293,000 1,375,000
Deferred revenue 231,000 275,000
Minority interests 58,000 113,000
Other liabilities 300,000
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Total Non-Current Liabilities 1,882,000 1,763,000
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COMMITTMENTS AND CONTINGENCIES
CONVERTIBLE PREFERRED STOCK WITH MANDATORY
REDEMPTION PROVISION IN 2005, 141,000
SHARES ISSUED, 29,434 AND 141,000 SHARES
OUTSTANDING, RESPECTIVELY 3,076,000 14,539,000
STOCKHOLDERS' EQUITY
Preferred stock - 1,000,000 shares
authorized, 141,000 shares issued
at $100 par value with mandatory
redemption provision
Common stock, par value of $.01 per
share, 50,000,000 shares authorized;
8,297,818 and 6,415,993 shares issued
and outstanding, respectively 83,000 64,000
Paid-in capital 35,405,000 23,831,000
Accumulated deficit (18,734,000) (16,442,000)
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Total Stockholders' Equity 16,754,000 7,453,000
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Total Liabilities and Stockholders' Equity $24,935,000 $28,913,000
=========== ============
See notes to interim consolidated financial statements
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LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Three Month Period
Ended July 31,
1996 1995
REVENUES $1,502,000 $772,000
Cost of revenues, depreciation 615,000 446,000
Cost of revenues, other 724,000 562,000
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GROSS PROFIT (LOSS) 163,000 (236,000)
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Operating Expenses:
General and administrative 1,191,000 294,000
Salaries and related expenses 807,000 340,000
Depreciation and amortization 98,000 48,000
Selling and marketing expenses 449,000 186,000
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2,545,000 868,000
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LOSS FROM OPERATIONS (2,382,000) (1,104,000)
Other income (expenses)
Interest and other income 106,000 39,000
Interest expense (71,000) (6,000)
Imputed interest expense (34,000)
Minority interest in net loss
of subsidiary 55,000 34,000
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NET LOSS ($2,292,000) ($1,071,000)
============ ============
NET LOSS PER SHARE ($0.32) ($0.23)
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Weighted average number of
common shares outstanding 7,542,000 4,573,000
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See notes to interim consolidated financial statements
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LASER VISION CENTERS, INC. AND SUBSIDIARIES Three Month Period
CONSOLIDATED STATEMENT OF CASH FLOW Ended July 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($2,292,000) ($1,071,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 713,000 494,000
Imputed interest - 34,000
Provision for uncollectible accounts 48,000 5,000
Receivables (increase) decrease (288,000) 111,000
Prepaid expenses and other current asset increase (139,000) (21,000)
Minority interests decrease (55,000) (37,000)
Tradenames/other asset increase 32,000
Accounts payable and accrued
liabilities increase (decrease) 27,000 (329,000)
Deferred revenue decrease (44,000)
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Net cash used in operating activities (1,998,000) (814,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of equipment (3,363,000) (145,000)
Acquisition of goodwill (10,000) -
----------- ----------
Net cash used in investing activities (3,373,000) (145,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 60,000 18,000
Principal payments under capitalized
lease obligations and notes payable (1,974,000) (1,044,000)
Proceeds from private offerings, common 1,001,000
Private placement offering costs, common (63,000)
Proceeds from exercise of Class A, B and F warrants 12,000
Deferred offering costs (31,000)
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Net cash used by financing activities (1,914,000) (107,000)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (7,285,000) (1,066,000)
Cash and cash equivalents at beginning of period 12,672,000 2,126,000
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,387,000 $1,060,000
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LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW (CONTINUED)
Three Month Period
Ended July 31,
1996 1995
Non-cash investing and financing:
Increase in other liabilities for laser purchase 300,000
Common stock issued to reduce liabilities 70,000
Conversion of preferred stock and accrual
of preferred dividends 11,463,000
Equipment deposits and assets held for sale
exchanged for equipment 1,864,000
Notes payable issued for
laser purchases 675,000
See notes to interim consolidated financial statements
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LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
Common Stock
$.01 Par Value
---------------- Total
Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
Balance - April 30, 1996 6,415,993 $64,000 $23,831,000 ($16,442,000) $7,453,000
Issuance of restricted
shares of common stock 3,609 - 30,000 - 30,000
Exercise of incentive and
non-qualified options 11,833 - 60,000 - 60,000
Exercise of non-qualified
options for shares of
common stock 6,957 - 40,000 - 40,000
Dividends accrued on
convertible preferred
stock - - (104,000) - (104,000)
Conversation of preferred
stock 1,859,426 19,000 11,548,000 - 11,567,000
Net loss for the three month
period ended July 31, 1996 --------- ------- ---------- (2,292,000) (2,292,000)
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Balance -
JULY 31, 1996 8,297,818 $83,000 $35,405,000 ($18,734,000) $16,754,000
========= ======= ========== =========== ===========
See notes to interim consolidated financial statements
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LASER VISION CENTERS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1996
(Unaudited)
Item 1.
1. The information contained in the interim consolidated financial statements
and footnotes is condensed from that which would appear in the annual
consolidated financial statements. Accordingly, the interim consolidated
financial statements included herein should be read in conjunction with the
consolidated financial statements and related notes thereto contained in the
April 30, 1996 Annual Report on Form 10-KSB filed by LaserVision Centers, Inc.
(the "Company") with the Securities and Exchange Commission. The unaudited
interim consolidated financial statements as of July 31, 1996 and July 31,
1995, and for the quarterly period then ended, include all normal recurring
adjustments which management considers necessary for a fair presentation. The
results of operations for the interim periods are not necessarily indicative of
the results which may be expected for the entire fiscal year. The interim
consolidated financial statements include the accounts and transactions of the
Company and its subsidiaries. All significant intercompany transactions and
accounts have been eliminated.
Cash and cash equivalents include short-term (90 day or less) commercial paper
and obligations of the U.S. government and its agencies.
The net loss per share was computed using the weighted average number of common
shares outstanding during each period. Common stock equivalents were excluded
due to their anti-dilutive effect. The loss per common share for the three
months ended July 31, 1996, reflects $104,000 of accrued dividends on
Convertible Preferred Stock with Mandatory Redemption in 2005.
2. In October 1995, the Company received $14,100,000 from the sale of 141,000
shares of restricted convertible preferred stock with a mandatory redemption
provision after ten years. During the quarter ended July 31, 1996, 111,566
shares of restricted convertible preferred stock were converted to 1,859,426
shares of restricted common stock in accordance with the terms of the purchase
agreement. At July 31, 1996, 29,434 shares of convertible preferred stock
remain outstanding and can be converted into 490,565 shares of common stock.
3. During the quarter ended July 31, 1996, five of the ten lasers held for sale
as of April 30, 1996 were sold for their net book value of $600,000, two new
lasers were purchased for use in Europe, and eight lasers were purchased for
use in the United States. Equipment deposits were utilized for a portion of
the laser purchases.
4. During the quarter ended July 31, 1996, the Company canceled a proposed
public offering and charged $260,000 of accumulated costs related to the
offering to general and administrative expenses.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2.
(A) LIQUIDITY AND CAPITAL RESOURCES
Since the completion of its initial public offering in April 1991, the
Company's primary sources of liquidity have consisted of financing from the
sale of Common Stock and Convertible Preferred Stock, revenues from marketing
and laser access services provided to ophthalmic physicians and leases. At
July 31, 1996, the Company had $5,387,000 of cash and cash equivalents compared
with $12,672,000 at April 30, 1996. At July 31, 1996, the Company had working
capital of $4,431,000 compared with working capital of $10,002,000 at April 30,
1996. The ratio of current assets to current liabilities at July 31, 1996 was
2.37 to one, compared to 2.94 to one at April 30, 1996.
Cash Flows from Operating Activities
Net cash used for operating activities was $1,998,000 for the quarter ended
July 31, 1996 compared to $814,000 for the quarter ended July 31, 1995. The
cash flows used for operating activities during the quarter ended July 31, 1996
primarily represent the net loss incurred in this period less depreciation and
amortization partially offset by increases in accounts receivable and prepaid
expenses and other current assets.
Cash Flows from Investing Activities
Net cash used for investing activities was $3,373,000 and $145,000 during the
quarters ended July 31, 1996 and 1995, respectively. Cash used for investing
during the quarter ended July 31, 1996 was primarily used to acquire equipment
for the expanding U.S. market.
Cash Flows from Financing Activities
Net cash used by financing activities was $1,914,000 and $107,000 during the
quarters ended July 31, 1996 and 1995, respectively. Cash used for financing
during the quarter ended July 31, 1996 was used for principal payments under
capital leases and notes payable.
In the future funds may be received from operating and capital leases of
equipment, the exercise of underwriter and other warrants and/or the exercise
of stock options, and other public or private equity offerings. However, there
is no assurance that the Company will obtain any such funds.
(B) RESULTS OF OPERATIONS
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QUARTER ENDED JULY 31, 1996 COMPARED TO QUARTER ENDED JULY 31, 1995
The Company has continued to open excimer laser centers for PRK in the U.S. As
of July 31, 1996, the Company had installed twenty lasers for domestic use.
Seventeen of these lasers were installed in Columbia/HCA Healthcare
Corporation outpatient surgery centers.
Reorganization of the Company's international operations is continuing in
accordance with the plan established in the fourth quarter of 1996.
Revenues
Total revenues of $1,502,000 for the quarter ended July 31, 1996 increased by
$730,000 from $772,000 for the quarter ended July 31, 1996, or an increase of
95%.
Revenues for the Laser Vision Centers division increased to $1,142,000 for the
quarter ended July 31, 1996 from $414,000 for the quarter ended July 31, 1995.
The increase is attributable to higher revenues from the European centers of
$313,000 and new U.S. centers of $416,000. The increase in U.S. revenues for
the LaserVision Centers division is attributable to the increased number of
centers in operation and procedures performed in the U.S. The increased
European revenues is primarily related to increased procedures performed with
the European mobile laser, at the Harley Street facility and at the centers
acquired in conjunction with the New Image acquisition. Total Canadian
revenues remained at a consistent level due to increases in revenues for the
Canadian mobile laser and Montreal center offset by decreases in revenues in
the Vancouver center.
Revenues for the MarketVision division remained consistent due to new revenues
from the Med-Source acquisition of $70,000 which offset decreases in the
revenues from other MarketVision clients.
Cost of Revenues/Gross Profit (Loss)
Cost of revenues increased to $1,339,000 for the quarter ended July 31, 1996
from $1,008,000 for the quarter ended July 31, 1995. Depreciation in cost of
revenue increased to $615,000 from $446,000 in these respective periods due to
the increased number of U.S. lasers partially offset by decreases in
depreciation on European and Canadian lasers which were written down to
estimated fair market value during the fourth quarter of fiscal 1996 as well as
a reduction attributable to the lasers held for sale during the first quarter
of 1996.
Other costs of revenues increased to $724,000 for the quarter ended July 31,
1996 from $562,000 for the quarter ended July 31, 1995 primarily due to
increased costs for U.S. operations, including Pillar Point royalties of
$67,000 and gas costs of $39,000. Costs of mobile laser operations in Canada
and Europe also increased $74,000. The increase in other costs of revenues,
when combined with the revenue increase, resulted in these other costs of
revenues decreasing from 73% of total revenues for the
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quarter ended July 31, 1995 to 48% of total revenues for the quarter ended July
31, 1996.
Total gross profit (loss) improved from a loss of $236,000 for the quarter
ended July 31, 1995 to a profit of $163,000 for the quarter ended July 31,
1996. The variable gross profit, excluding depreciation, increased to $778,000
from $210,000, primarily due to increased procedures in the U.S. and Europe.
Operating Expenses
General and administrative expenses increased from $294,000 to $1,191,000 for
the quarters ended July 31, 1995 and 1996, respectively. The increase is
primarily attributable to $260,000 of stock offering costs, an increase of
$164,000 in legal and professional fees associated with tradename issues, an
increase of $52,000 in travel expenses, $55,000 of new costs associated with
training physicians to perform procedures, an increase of $99,000 in office
expenses associated with the increased U.S. operations, $44,000 of development
costs associated with a new mobile laser concept, an increase of $68,000 in
European office and rent expenses and an increase of $23,000 for additional
liability insurance coverage.
Salaries and related expenses increased from $340,000 to $807,000 for the
quarters ended July 31, 1995 and 1996, respectively. The increase was due to
an increased number of employees, the executive incentive compensation program,
salary adjustments and the related payroll taxes and fringe benefits.
Depreciation and amortization increased from $48,000 to $98,000 for the quarter
ended July 31, 1995 and 1996, respectively. The increase was primarily due to
amortization of goodwill associated with acquisitions of Med-Source and VCI
totaling $32,000 and increased depreciation from the Harley Street center of
$12,000.
Selling and marketing expenses increased from $186,000 to $449,000 for the
quarters ended July 31, 1995 and 1996, respectively. The increase was primarily
due to $210,000 of promotional costs associated with the new U.S. market, an
increase of $28,000 in promotional costs for the Canadian market, and an
increase of $22,000 related to trade shows.
Other Income (Expenses)
Higher interest income caused the improvement to a net $90,000 in other income
during the quarter ended July 31, 1996 from a net $33,000 in other income
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PART II-OTHER INFORMATION
Item 1. Legal Proceedings
An Italian company's appeal of a judgment in favor of the Company
was denied by the Missouri Court of Appeals on July 23, 1996. In
August, the Italian company filed a motion for a rehearing or for
transfer to the Supreme Court of Missouri.
Other than as stated above, there has been no significant change in
the status of any litigation from that reported in the April 30,
1996 Form 10-KSB, nor has any other material litigation been
initiated.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Reports on Form 8-K during the period covered by this report:
None
Exhibits - None
Signature
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused
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this report to be signed on its behalf by the undersigned thereunto duly
authorized.
LASER VISION CENTERS, INC.
\s\John J. Klobnak September 13, 1996
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John J. Klobnak Date
Chairman of the Board and Chief Executive Officer
\s\B. Charles Bono, III September 13, 1996
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B. Charles Bono Date Date
Chief Financial Officer
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