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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, 1997
Commission file number 1-10629
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
--- ---
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 September 8,1997 - 8,848,057 shares.
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LASER VISION CENTERS, INC.
FORM 10-Q FOR QUARTERLY PERIOD ENDED JULY 31, 1997
INDEX
PART OR ITEM PAGE
Part I. FINANCIAL STATEMENTS
Item 1. Interim Consolidated Financial Statements
Consolidated Balance Sheet - July 31, 1997 and April 30, 1997....................................3-4
Consolidated Statement of Operations - Three months ended July 31, 1997 and 1996....................5
Consolidated Statement of Cash Flow - Three months ended July 31, 1997 and 1996...................6-7
Consolidated Statement of Changes in Stockholders' Equity - Three months
ended July 31, 1997..................................................................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.................................................................10-11
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,
1997 1997
CURRENT ASSETS
Cash and cash equivalents $ 7,187,000 $ 3,794,000
Restricted cash 521,000 461,000
Receivables, net of allowances of
$369,000 and $360,000, respectively 2,452,000 1,719,000
Prepaid expenses and
other current assets 1,248,000 915,000
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Total Current Assets 11,408,000 6,889,000
EQUIPMENT
Laser equipment 12,617,000 12,617,000
Medical Equipment 763,000 750,000
Mobile equipment 2,369,000 1,599,000
Furniture and fixtures 1,376,000 1,316,000
-Accumulated depreciation (4,859,000) (3,799,000)
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Total Equipment, Net 12,266,000 12,483,000
OTHER ASSETS
Goodwill, net 796,000 836,000
Tradename and service mark costs, net 131,000 136,000
Deferred contract rights 1,537,000 1,238,000
Restricted cash 1,259,000 1,239,000
Rent deposits and other, net 50,000 49,000
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Total Other Assets 3,773,000 3,498,000
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Total Assets $27,447,000 $22,870,000
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See notes to interim consolidated financial statements
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LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JULY 31, April 30,
1997 1997
CURRENT LIABILITIES
Current portion of notes payable $ 1,078,000 $ 1,003,000
Current portion of capitalized
lease obligations 753,000 690,000
Accounts payable 2,481,000 2,078,000
Accrued compensation 295,000 616,000
Other accrued liabilities 1,317,000 848,000
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Total Current Liabilities 5,924,000 5,235,000
NON-CURRENT LIABILITIES
Notes payable 4,259,000 4,544,000
Capitalized lease obligations 1,377,000 1,589,000
Deferred revenue and other 134,000 134,000
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Total Non-Current Liabilities 5,770,000 6,267,000
COMMITMENTS AND CONTINGENCIES
COMMON STOCK AND STOCK OPTIONS ISSUED
FOR CONTRACT RIGHTS 1,444,000 1,092,000
STOCKHOLDERS' EQUITY
Preferred stock - 6,000 shares
issued at $1,000 par value, Series B 5,154,000
Common stock, par value of $.01 per
share, 50,000,000 shares authorized;
8,838,057 and 8,817,057 shares issued
and outstanding, respectively 88,000 88,000
Warrants and options 409,000 36,000
Paid-in capital 38,706,000 38,663,000
Accumulated deficit (30,048,000) (28,511,000)
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Total Stockholders' Equity 14,309,000 10,276,000
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Total Liabilities and Stockholders' Equity $27,447,000 $22,870,000
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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,
1997 1996
REVENUES $ 4,098,000 $ 1,502,000
Cost of revenues, depreciation 993,000 615,000
Cost of revenues, other 2,271,000 724,000
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GROSS PROFIT 834,000 163,000
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Operating Expenses:
General and administrative 788,000 1,191,000
Salaries and related expenses 875,000 807,000
Depreciation and amortization 168,000 98,000
Selling and marketing expenses 353,000 449,000
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2,184,000 2,545,000
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LOSS FROM OPERATIONS (1,350,000) (2,382,000)
Other income (expenses)
Interest and other income 55,000 106,000
Interest expense (242,000) (71,000)
Minority interest in net loss
of subsidiary 55,000
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NET LOSS ($1,537,000) ($2,292,000)
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NET LOSS PER SHARE ($0.18) ($0.32)
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Weighted average number of
common shares outstanding 8,821,000 7,542,000
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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,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($1,537,000) ($2,292,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,162,000 713,000
Compensation paid in common stock,
options or warrants 11,000
Provision for uncollectible accounts receivable 9,000 48,000
Increase in accounts receivables (742,000) (288,000)
Increase in prepaid expenses and other
current assets (337,000) (139,000)
Increase in accounts payable 404,000 637,000
Increase (decrease) in accrued liabilities 148,000 (610,000)
Other, net (99,000)
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Net cash used in operating activities (882,000) (2,030,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of equipment (843,000) (3,363,000)
Other, net (1,000) 22,000
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Net cash used in investing activities (844,000) (3,341,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from private offering, preferred 6,000,000
Private placement offering costs, preferred (517,000)
Proceeds from exercise of stock options 76,000 60,000
Principal payments under capitalized
lease obligations and notes payable (360,000) (1,974,000)
Deposits on financing contracts (80,000)
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Net cash provided by (used in) financing activities 5,119,000 (1,914,000)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,393,000 (7,285,000)
Cash and cash equivalents at beginning of period 3,794,000 12,672,000
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $7,187,000 $5,387,000
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LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW (CONTINUED)
Three Month Period
Ended July 31,
1997 1996
Non-cash investing and financing:
Adjustment of value of common stock
and stock options issued for contract rights 352,000
Conversion of preferred stock, accrual of
preferred dividends, and value assigned
to warrants 395,000 11,463,000
Equipment deposits and assets held for sale
exchanged for equipment 1,864,000
Increase in other liabilities for laser purchase 300,000
Common stock issued to reduce liabilities 70,000
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
Warrants Total
Paid-in and Accumulated Stockholders'
Preferred Stock Shares Amount Capital Options Deficit Equity
Balance-
April 30, 1997 $ - 8,817,057 $88,000 $38,663,000 $ 36,000 ($28,511,000) $10,276,000
Issuance of
Preferred Stock 5,154,000 362,000 5,516,000
Exercise of
incentive options 21,000 76,000 76,000
Dividends accrued
on convertible
preferred stock (33,000) (33,000)
Warrants and
Options 11,000 11,000
Net loss for the
three month period
ended July 31, 1997 (1,537,000) (1,537,000)
---------- --------- ------- ----------- -------- ------------ -----------
Balance -
July 31, 1997 $5,154,000 8,838,057 $88,000 $38,706,000 $409,000 ($30,048,000) $14,309,000
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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, 1997
(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, 1997 Annual Report on Form 10-K filed by LaserVision Centers, Inc.
(the "Company") with the Securities and Exchange Commission. The unaudited
interim consolidated financial statements as of July 31, 1997 and July 31,
1996, 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.
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, 1997, reflects $33,000 of accrued dividends on the Series
B Convertible Preferred Stock. The loss per common share for the three months
ended July 31, 1996, reflects $104,000 of accrued dividends on the Series A
Convertible Preferred Stock which was subsequently converted to common stock.
2. In June 1997, the Company completed a $6 million private placement, before
expenses, of 6,000 shares of Series B Convertible Preferred Stock with $1,000
stated value per share, and 100,000 vested warrants with an exercise price of
$9.39 per warrant, 130% of the average market price. An additional 100,000
warrants may be issued in June 1998 at 130% of the then current market price if
at least $2 million of Series B Preferred remains outstanding. The Series B
shares accrue a 5% non-cash dividend equivalent in preferred stock per year,
convert (within a range) to common stock at a discount to the market price of
the common stock, must be converted to common stock within five years. In
August 1997, the common shares underlying this convertible preferred stock and
warrants were registered with the Securities and Exchange Commission pursuant
to registration rights under the Series B stock purchase agreement. The $5.5
million net proceeds after fees is being used for working capital, the
acquisition of equipment and general corporate purposes. The market value of
the warrants associated with this transaction have been recorded as Warrants and
Options in the equity section of the balance sheet.
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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 and
notes payable. At July 31, 1997, the Company had $7,187,000 of cash and cash
equivalents compared with $3,794,000 at April 30, 1997. At July 31, 1997, the
Company had working capital of $5,484,000 compared with working capital of
$1,654,000 at April 30, 1997. The ratio of current assets to current
liabilities at July 31, 1997 was 1.93 to one, compared to 1.32 to one at April
30, 1997.
Cash Flows from Operating Activities
Net cash used for operating activities was $882,000 for the quarter ended July
31, 1997 compared to $2,030,000 for the quarter ended July 31, 1996. The cash
flows used for operating activities during the quarter ended July 31, 1997 and
1996 primarily represent the net loss incurred in this period less depreciation
and amortization, plus increases in accounts receivable and prepaid expenses
and other current assets partially offset by net increases in current
liabilities.
Cash Flows from Investing Activities
Net cash used for investing activities was $844,000 and $3,341,000 during the
quarters ended July 31, 1997 and 1996, respectively. Cash used for investing
during the quarter ended July 31, 1997 was primarily used to acquire mobile
equipment for the expanding U.S. market. During the quarter ended July 31,
1996, cash was primarily used to purchase laser equipment.
Cash Flows from Financing Activities
Net cash provided by financing activities was $5,119,000 during the quarter
ended July 31, 1997. Net cash used in financing activities was $1,914,000
during the quarter ended July 31, 1996. Cash provided by financing during the
quarter ended July 31, 1997 was primarily provided by a private placement of
preferred stock partially offset by expenses related to the private offering
and principal payments under capitalized lease obligations and notes payable.
During the quarter ended July 31, 1996, cash was primarily used for principal
payments under capitalized lease obligations and notes payable.
The Company expects to continue to fund future operations and mobile
development costs from existing cash and cash equivalents, revenues received
from providing laser access and market services, the exercise of stock options
and warrants and future financing as required. There can
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be no assurance that capital will be available when needed or, if available,
that the terms for obtaining such funds will be favorable to the Company.
(B) RESULTS OF OPERATIONS
QUARTER ENDED JULY 31, 1997 COMPARED TO QUARTER ENDED JULY 31, 1996
The Company has continued to provide excimer laser access to additional sites
throughout the U.S.
Revenues
Total revenues of $4,098,000 for the quarter ended July 31, 1997 increased by
$2,596,000 from $1,502,000 for the quarter ended July 31, 1996, or an increase
of 173%.
Revenues for the Laser Vision Centers division increased to $3,891,000 for the
quarter ended July 31, 1997 from $1,139,000 for the quarter ended July 31,
1996. The increase is attributable to higher revenues from U.S. operations of
$2,646,000, European operations of $63,000, and Canadian operations of $43,000.
The increase in U.S. revenues for the LaserVision Centers division is
attributable to the increased number of lasers in operation in an increased
number of markets. During the quarter ended July 31, 1997, the Company
served over 50 U.S. markets. The increased European revenues are primarily
related to increased procedures performed with the European mobile laser and at
the Harley Street facility. Canadian revenues increased due to the increased
procedures performed with the Canadian MobilExcimer.
Revenues for the MarketVision division declined from $363,000 to $207,000 due
to the shift of attention to providing marketing services for the Company's
laser centers for which the Company does not record revenue.
Cost of Revenues/Gross Profit (Loss)
Cost of revenues increased to $3,264,000 for the quarter ended July 31, 1997
from $1,339,000 for the quarter ended July 31, 1996. Depreciation in cost of
revenue increased to $993,000 from $615,000 in these respective periods due to
the increased number of U.S. lasers and mobile equipment partially offset by
decreases in depreciation on lasers which were written down to estimated fair
market value during the fourth quarter of fiscal 1997.
Other costs of revenues increased to $2,271,000 for the quarter ended July 31,
1997 from $724,000 for the quarter ended July 31, 1996 primarily due to
increased costs for U.S. operations, including increased Pillar Point
royalties of $892,000, professional medical services of $261,000 and mobile
laser operator salaries, travel and set-up related costs of $440,000. This
increase, when combined with the revenue increase, resulted in these other
costs of revenues
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increasing from 48% of total revenues for the quarter ended July 31, 1996 to
55% of total revenues for the quarter ended July 31, 1997. The increase in
these other costs of revenues as a percentage of revenues is attributable to
the change in the revenue mix to greater U.S. revenues which have greater costs
of revenue, particularly Pillar Point royalties.
Total gross profit improved from $163,000 for the quarter ended July 31, 1996
to a profit of $834,000 for the quarter ended July 31, 1997. The variable
gross profit, excluding depreciation, increased to $1,827,000 from $778,000,
primarily due to increased procedures in the U.S.
Operating Expenses
General and administrative expenses decreased by $403,000 from $1,191,000 to
$788,000 for the quarters ended July 31, 1996 and 1997, respectively. The
decrease is primarily attributable to a one-time write-off of $260,000 of stock
offering costs in the quarter ended July 31, 1996, decreased legal fees of
$78,000, decreased professional fees of $57,000, decreased training expenses of
$41,000, partially offset by an increase of $28,000 in travel related expenses.
Salaries and related expenses increased from $807,000 to $875,000 for the
quarters ended July 31, 1996 and 1997, respectively. The increase was due to
an increased number of employees to support operations, salary adjustments and
the related payroll taxes and fringe benefits.
Depreciation and amortization increased from $98,000 to $168,000 for the
quarter ended July 31, 1996 and 1997, respectively. The increase was primarily
due to amortization of the managment service contract of $53,000.
Selling and marketing expenses decreased from $449,000 to $353,000 for the
quarters ended July 31, 1996 and 1997, respectively. The decrease was primarily
due to a decrease of $51,000 in travel related expenses, a decrease
of $16,000 in trade show expenses, and a decrease of $10,000 in promotional
costs for the Canadian market.
Other Income (Expenses)
Higher interest expense caused the decline to a net $187,000 in other expenses
during the quarter ended July 31, 1997 from a net $90,000 in other income
during the quarter ended July 31, 1996.
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PART II-OTHER INFORMATION
Item 1. Legal Proceedings
There has been no material change in the status of any
litigation from that reported in the Form 10-K for the year ended April 30,
1997, nor has any other material litigation been initiated.
Item 2. Changes in Securities
On June 20, 1997, the Company received $6 million, before
expenses, as a result of a private placement of the Company's Series B
Convertible Preferred Stock with RGC International Investors, LDC. The
Preferred Stock is convertible into an indeterminate number of shares of the
Company's Common Stock, based upon the future market price of the Common Stock.
At the closing, the purchaser also received 100,000 5 year warrants exercisable
at $9.3925 per share. If at least $2,000,000 of Preferred Stock remains
outstanding on June 20, 1998, the purchaser will receive an additional 100,000
warrants exercisable at 130% of the market price at that time. These
additional warrants are redeemable after eighteen (18) months of issuance under
certain circumstances. The Company filed a registration statement for the
shares of Common Stock underlying the Preferred Stock and warrants on Form S-3
and the Registration Statement was declared effective on August 12, 1997. The
Preferred Stock is non-voting (except in regard to issues directly affecting
the Preferred Stock as a class). The foregoing is qualified in its entirety by
the provisions of the agreements between the Company and RGC International
Investors, LDC, which were filed as Exhibits to the Company's report on Form
8-K referred to in Item 6, below, which are incorporated herein by reference.
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:
On July 1, 1997 the Company filed a Form 8-K related to the issuance
of Series B Convertible Preferred Stock set forth in Item 2, above.
Exhibits - None
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Signature
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LASER VISION CENTERS, INC.
\s\John J. Klobnak September 12 , 1997
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John J. Klobnak Date
Chairman of the Board and Chief Executive Officer
\s\B. Charles Bono, III September 12, 1997
- ------------------------------------ -------------------
B. Charles Bono Date
Chief Financial Officer
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