U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1999.
[ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT.
For the transition period from __________ to __________
Commission file number 0-27610
LCA-Vision Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 11-2882328
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7840 Montgomery Road, Cincinnati, Ohio 45236
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(Address of principal executive offices)
(513) 792-9292
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(Issuer's telephone number)
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(Former name, former address and formal fiscal year, if
changes since last report.)
Check whether then issuer (1) filed all reports required to be
filed by Section 3 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing
requirements for the past 90 days.
Yes __X__ No _____
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
45,355,022 shares as of April 30, 1999.
Transitional Small Business Disclosure Format (check one):
Yes _____ No __X__
<PAGE>
LCA-VISION INC.
INDEX
Page No.
Facing Sheet 1
Index 2
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
March 31, 1999 (unaudited)and at
December 31, 1998 (audited) 3
Unaudited Condensed Consolidated
Statements of Operations for the Three
Months Ended March 31, 1999 and 1998 4
Unaudited Condensed Consolidated Statements
of Cash Flows for the Three Months Ended
March 31, 1999 and 1998 5
Notes to Unaudited Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10
Part II. Other Information 13
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of
Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures 15
LCA-VISION INC.
Condensed Consolidated Balance Sheet
March 31, 1999 (unaudited) and
December 31, 1998 (audited)
in thousands, except
per share data
March 31, December 31,
1999 1998
Assets
Current assets:
Cash and cash equivalents $ 7,199 $ 6,496
Accounts receivable, net 686 1,119
Prepaid expenses, inventory and
other 1,638 1,416
------ --------
Total current assets 9,523 9,031
Property and equipment, net 9,051 9,433
Goodwill, net 8,241 8,304
Obligations due from shareholders, net 343 471
Investment in unconsolidated businesses 886 520
Certificate of deposit 2,100 2,100
Other assets 1,696 1,518
------ --------
Total assets $31,840 $ 31,377
------ --------
------ --------
Liabilities and Shareholders' Investment
Current liabilities
Accounts payable $ 1,810 $ 2,030
Accrued liabilities and other 3,022 2,637
Debt maturing in one year 649 787
------ --------
Total current liabilities 5,481 5,454
Long-term debt 642 2,724
Commitments and contingencies
Shareholders' investment
Preferred stock 2,501 7,687
Common stock ($0.001 par value;
45,282 shares and 40,974 shares
issued) 109 103
Contributed capital 47,485 41,701
Accumulated (deficit) (23,949) (25,664)
Foreign currency translation
adjustment 4 (14)
------ --------
26,150 23,813
Less common stock in treasury
at cost 30 30
Less accrued preferred stock
dividend 403 584
------ --------
25,717 23,199
------ --------
Total liabilities and shareholders'
investment $ 31,840 $ 31,377
------ --------
------ --------
The Notes to Condensed Consolidated Financial Statements are an
integral part of this statement.
<PAGE>
LCA-VISION INC.
Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1999 and 1998
(unaudited)
in thousands, except
per share data
Three Months Ended
March 31,
1999 1998
---- ----
Revenues:
Laser refractive surgery $ 13,389 $ 6,446
Other 478 763
------- --------
Total revenues 13,867 7,209
Operating costs and expenses:
Medical professional and license fees 6,015 2,656
Direct costs of services 2,556 2,819
General and administrative expenses 2,970 2,093
Depreciation and amortization 712 1,055
------- --------
Operating income (loss) 1,614 (1,414)
Equity in earnings from
unconsolidated businesses 323 56
Interest expense (93) (344)
Interest income 147 112
Other income (expense) (277) 25
Income (loss) before taxes on income 1,714 (1,565)
Taxes on income (28)
------- --------
Net income (loss) 1,714 (1,593)
Dividends to preferred shareholders (84) (43)
------- --------
Income (loss) available to common
shareholders $ 1,630 $ (1,636)
Income (loss) per common share
Basic $ 0.04 $ (0.04)
Diluted $ 0.04 $ (0.04)
<PAGE>
Weighted average shares used in
computation
Basic 43,779 36,665
Diluted 47,082 36,665
The Notes to Condensed Consolidated Financial Statements are an
integral part of this statement
<PAGE>
LCA-VISION INC.
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1999 and 1998
(unaudited)
in thousands
Three Months Ended
March 31,
1999 1998
---- ----
Cash flows from operating activities:
Net income (loss) $1,630 $(1,636)
Adjustments to reconcile net income
(loss)to net cash provided by (used in)
operating activities:
Depreciation and amortization 712 1,055
Equity in income of unconsolidated
affiliates (323) (56)
Compensation paid in common stock 325
Changes in working capital:
Accounts receivable 433 (466)
Prepaid expenses, inventory and other (222) 366
Accounts payable (220) 165
Accrued liabilities and other 385 (23)
----- ------
Net cash provided by (used in) operations 2,721 ( 595)
----- ------
Cash flows from investing activities:
Purchase of property and equipment (23) (482)
Other, net (54) (56)
----- ------
Net cash (used) by investing activities (77) (538)
----- ------
Cash flows from financing activities:
Proceeds from bank borrowing 294
Principal payments of long-term notes,
debt and capital lease obligations (2,220) (310)
Exercise of stock options 279
----- ------
Net cash provided (used) by financing
activities (1,941) (16)
----- ------
Increase (decrease) in cash and cash
equivalents 703 (1,149)
<PAGE>
Cash and cash equivalents at beginning
of period 6,496 8,680
----- ------
Cash and cash equivalents at end of
period $ 7,199 $ 7,531
----- ------
----- ------
The Notes to Condensed Consolidated Financial Statements are an
integral part of this statement.<PAGE>
LCA-VISION INC.
Notes to Condensed Consolidated Financial Statements
for the Three Months Ended March 31, 1999 and 1998
(unaudited)
1. Summary of Significant Accounting Policies
The March 31, 1999 and 1998 financial data are unaudited; however,
in the opinion of the Company, such data include all adjustments,
consisting only of normal recurring adjustments, necessary for a
fair statement of the interim periods.
Business
We are a leading developer and operator of free-standing laser
refractive surgery centers. Our laser refractive surgery centers
provide the facilities, equipment and support services for
performing various corrective eye surgeries that employ
state-of-the-art laser technologies. The laser vision correction
surgeries performed in our centers are primarily laser in situ
keratomileusis ("LASIK") and photorefractive keratectomy ("PRK").
The VISX Star S2 laser, which we have in each of our U.S. centers,
treats nearsightedness, myopic astigmatism, and hyperopia. We
also manage multi-specialty laser surgery programs at medical
facilities on a contract basis.
Revenue by source is comprised of:
- Laser refractive surgery - fees for surgeries performed at
our wholly-owned centers.
- Other - management fees for operating laser vision
correction centers of investees; contractual fees for
managing multi-specialty laser surgery programs at
hospitals; marketing and education program fees; and
miscellaneous sources.
Operating costs and expenses are classified as follows:
- Medical professional and license fees include fees collected
by us for the physicians performing laser vision correction
and the license fee of $260 per procedure paid to VISX.
- Direct costs of services include center rent and utilities,
equipment lease and maintenance costs, surgical supplies,
center staff expense, and costs related to other revenue.
- General and administrative include marketing and
advertising, headquarters staff expense, and other overhead
costs.
- Depreciation and amortization include periodic charges to
income for the costs of equipment and intangible assets
recorded in the balance sheet.
Consolidation Policy
We use two different methods to report our investments in our
subsidiaries and other companies - consolidation and the equity
method.
Consolidation
We use consolidation when we own a majority of the voting stock of
the subsidiary. This means the accounts of our subsidiaries are
combined with our accounts. We eliminate intercompany balances and
transactions when we consolidate these accounts.
Equity Method
We use the equity method to report investments in businesses where
we hold a 20% to 50% voting interest, giving us the ability to
exercise significant influence, but not control, over operating
and financial policies. Under the equity method we report:
- our interest in the entity as an investment in our
Consolidated Balance Sheets, and
- our percentage share of the earnings (losses) in our
Consolidated Statements of Operations.
We report our investments in The Baltimore Laser Sight Center,
Ltd. and Silmalaseri Oy under the equity method.
Use of Estimates
Management makes estimates and assumptions when preparing
financial statements under generally accepted accounting
principles. These estimates and assumptions affect various matters
including:
- our reported amounts of assets and liabilities in our
Consolidated Balance Sheets at the dates of the financial
statements,
- our disclosure of contingent assets and liabilities at the
dates of the financial statements, and
- our reported amounts of revenues and expenses in our
Consolidated Statements of Operations during the reporting
periods.
Actual amounts could differ from those estimates.
Reclassifications
We have reclassified certain prior-year amounts for comparative
purposes. These reclassifications did not affect consolidated
financial position, net losses or cash flows for the years
presented.
Per Share Data
Basic per share data is income (loss) applicable to common
shareholders divided by the weighted average common shares
outstanding. Diluted per share data is income (loss) applicable to
common shareholders divided by the weighted average common shares
outstanding plus the potential issuance of common shares if stock
options were exercised or convertible preferred stock were
converted into common stock.
Following is a reconciliation of basic and diluted earnings per
share for the three months ended March 31, 1999 (in thousands,
except per share amounts):
Income Shares Per-Share
Numerator Denominator Amount
--------- ----------- ---------
Net income $1,714
Dividends to
preferred shareholders (84)
-----
Basic EPS
Income available to common
shareholders 1,630 43,779 $0.04
----
----
Effect of Dilutive Securities
Convertible preferred stock 84 2,314
Stock options 989
-----
Diluted EPS
Income available to common
shareholders and assumed
conversions $1,714 47,082 $0.04
----- ------ ----
----- ------ ----
The weighted average shares for the March 31, 1998 diluted
calculation does not assume exercise of any stock options or
conversion of other securities since they would result in a
reduced loss per share.
2. Shareholders' Investment
Common Stock
During the three months ended March 31, 1999, 138,050 shares of
common stock were issued to individuals who exercised stock
options. The average exercise price was $2.02 per share.
6% Series B-1 Convertible Preferred Stock
At December 31, 1998, 5,702 shares of the 6% Series B-1
convertible preferred stock were outstanding. During the three
months ended March 31, 1999, these shares and dividends
totaling $264,000 were converted into 3,994,642 shares of
common stock.
The terms of these shares gave the holders the right to
purchase an additional $5 million of convertible preferred
stock under the same terms and conditions as the 6% Series B-1
Convertible Preferred Stock until May 11, 1999. In March 1999
certain majority holders of these shares agreed to accept
165,076 shares of our common stock in exchange for their
waiving their option to purchase the additional convertible
preferred stock. This agreement resulted in a non-cash charge
of $325,000 recorded as other expense in the Condensed
Consolidated Statement of Operations for the quarter.
3. Debt
At December 31, 1998 we had a term loan borrowing under our credit
facility of $2,053,000. The loan had an interest of 7.45% and
required monthly installments of $12,000 plus interest until June
30, 2000 when the remaining principal balance of $1,705,000 would
become due. In March 1999 we repaid the loan balance of
$2,030,000.
This repayment resulted in increasing the amount of borrowing
capability under the current credit facility to $7,000,000.
4. Obligations Due from Shareholders and Their Affiliates, Net
The following table displays the details of net obligations due to
us as reported in our March 31, 1999 Condensed Consolidated
Balance Sheet:
Due to us:
Receivable from shareholder's
affiliated company $635,000
Accrued interest 105,000
Note receivable shareholders 6,000
Due from us:
Accrued Interim Series B preferred
stock dividend 403,000
-------
Net due us $343,000
-------
-------
Our principal shareholder is the majority stockholder of an
inactive ambulatory surgical center. We have no investment in this
surgery center; however, we did lease a portion of our
headquarters building and provided other administrative services.
During this quarter we acquired computer equipment and software
from the surgery center at their book value of $103,000. The
account receivable was reduced by this amount.
At December 31, 1998 we owed our principal shareholders notes in
the principal amount of $1,500,000 and interest of $568,000. These
shareholders owed us $2,100,000 which was collateralized by our
obligation to them. In March 1999 we repaid the obligations due
shareholders of $2,094,000 by netting the amount against the
advance to shareholders.
<PAGE>
5. Segment Information
We operate in one segment - laser refractive surgery. Following is
a table summarizing the results of our Canadian operations
included in the Condensed Consolidated Statement of Operations for
the three months ended March 31, 1999 and 1998 (in thousands):
1999 1998
---- ----
Revenues $362 $520
Operating profit 16 91
6. Commitments and Contingencies
We are a defendant and counter-claimant in a case entitled Cabrini
Development Council, et al. v. LCA-Vision Inc., et al., which was
commenced in October, 1997 in the Supreme Court of the State of
New York, County of New York and subsequently removed to the
United States District Court for the Southern District of New
York. Also named as co-defendants are various current and former
employees, officers and directors. The case arises out of the
operations of a New York limited liability company (the "LLC")
which had been formed by us, the plaintiffs and a New York
professional corporation (the "PC") owned by certain physicians
for the purpose of opening and operating a Laser Refractive
Surgery center or centers in New York City. Business activities
commenced in 1995, but were unprofitable. After the LLC's
resources were exhausted, we paid its operating costs for a period
of time. In August, 1997, after further losses and after the
parties were unable to come to a final understanding as to their
respective rights and obligations, the operations of the LLC
ceased.
In the complaint, the plaintiffs allege breaches of our
obligations as a member of the LLC, and have demanded both
substantial damages and equitable relief. We have filed an answer
denying the allegations of the complaint, and asserting
counterclaims against the plaintiffs seeking substantial damages,
alleging that the plaintiffs wrongfully failed to match the
capital contributions made by us to the LLC. We believe that the
plaintiffs' claims are without merit and intend to vigorously
defend the action and pursue our counterclaims.
After commencement of the above action, we filed an action against
the PC seeking damages for its failure to pay the capital
contributions required of it to the LLC. The PC has counterclaimed
alleging a right to be indemnified for its losses relating to the
LLC's operations.
The actions, which have been consolidated, are in the discovery
stage.
In the opinion of management neither action will have a material
adverse effect on our financial position or results of operations.
Item 2. Management's Discussion and Analysis or Plan of Operation.
This quarterly report on Form 10-QSB contains forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934.
Actual results could differ materially from those projected in the
forward-looking statements as a result of a number of important
factors. For a discussion of important factors that could affect
our results, refer to the Overview and financial statement line
item discussions set forth in Management's Discussion and Analysis
or Plan of Operation.
"Management's Discussion and Analysis or Plan of Operation" is an
analysis of our operating results for the three months ended March
31, 1999. It explains why our revenues and costs changed, our
overall financial condition, and other matters including the Year
2000 Issue.
Overview (dollars in thousands, except where noted)
We are a leading developer and operator of free-standing laser
refractive surgery centers. Our laser refractive surgery centers
provide the facilities, equipment and support services for
performing various corrective eye surgeries that employ
state-of-the-art laser technologies. The laser vision correction
surgeries performed in our centers primarily include laser in situ
keratomileusis ("LASIK") and photorefractive keratectomy ("PRK").
The VISX Star S2 laser, which we have in each of our U.S. centers,
can be used for correcting nearsightedness, myopic astigmatism,
and hyperopia. We also manage multi-specialty laser surgery
programs at medical facilities on a contract basis.
Our sources of revenue are:
- Laser refractive surgery - fees for surgeries performed at
our wholly-owned centers.
- Other - management fees for operating laser vision
correction centers of investees; contractual fees for
managing multi-specialty laser surgery programs at
hospitals; marketing and education program fees; and
miscellaneous sources.
Our operating costs and expenses are comprised of:
- Medical professional and license fees include fees collected
by us for the physicians performing laser vision correction
and the license fee of $260 per procedure paid to VISX.
- Direct costs of services include center rent and utilities,
equipment lease and maintenance costs, surgical supplies,
center staff expense, and costs related to other revenue.
- General and administrative include marketing and
advertising, headquarters staff expense, and other overhead
costs.
- Depreciation and amortization include periodic charges to
income for the costs of equipment and intangible assets
recorded in the balance sheet.
Results of Operations - Revenues
Laser refractive surgery
Laser refractive surgery revenue generally includes three
components: facility fee, royalty fee, and medical professional
fees. Certain states prohibit us from practicing medicine,
employing physicians to practice medicine on our behalf or
employing optometrists to render optometry services on our behalf.
Revenues and direct costs from centers in such states do not
include the medical professionals fee component. The contribution
from laser refractive surgery procedures for each of the three
months ended March 31, 1999 and 1998 were (dollars in thousands):
1999 1998
Revenue $ 13,389 $ 6,446
Less:
Medical professional and
license fees 6,015 2,656
-------- -------
Contribution $ 7,374 $ 3,790
The following table illustrates the growth of laser vision
correction procedures performed at our centers. Combined
procedures include those performed at investee centers. We record
the results of our investee centers using the equity method.
Wholly-owned Combined
1999 1998 1997 1999 1998 1997
Q1 7,591 3,887 979 9,064 4,450 1,443
Q2 4,891 1,506 5,737 2,078
Q3 5,327 2,375 6,102 2,794
Q4 5,686 2,888 6,791 3,400
Our growth and profitability are predicated on increases in
procedure volume. Industry sources estimate that over 800,000
procedures will be performed in the U.S. in 1999. As more people
have the procedure performed the critical mass for word-of-mouth
referrals is attained and, together with marketing and
advertising, we expect an increase in procedure volume.
Other
Revenue declined because we reduced the extent to which we provide
management services for multi-specialty surgery programs at
hospitals due to the difficult business environment. The renewal
of our contracts with the hospital providers became increasingly
difficult due to price pressures and the lengthening of sales
cycle. Hospital providers and other entities were being driven to
reduce costs and scaleback their operations, sometimes including
the programs that we managed. In addition, budget reductions at
the facilities reduced the marketing and education programs, key
elements to a successful surgery program.
Operating costs and expenses
Medical professional and license fees
The increase of $3,359,000 is a direct result of the increase in
procedures performed at our wholly-owned centers. These costs
comprise a significant portion of the total costs of a laser
vision correction procedure.
Direct costs of services
These costs decrease as a percentage of revenue because they
represent, for the most part, the fixed costs of a laser vision
correction center. These costs decreased in 1999 as compared to
1998 because 1998 includes the costs of the eight centers closed
later in the year.
General and administrative
These costs increased $877,000 yet as a percentage of revenues
decreased approximately seven percentage points to 22%. The
increase is due in part to the increased costs associated with our
patient financing options.
Depreciation and amortization
The decrease results primarily from the write-off of goodwill and
leasehold improvements and the write-down of idled lasers to their
net realizable values announced in the second quarter of 1998.
Non-operating income and expenses
Equity in earnings of unconsolidated affiliates is where our share
of the profits of unconsolidated affiliates is recorded. The
increase of $267,000 is due to this increased profitability of
these affiliates. Interest expense decreased due to the
significant reduction in debt. Interest income increased because
we had cash to invest in overnight cash equivalents. Other expense
in 1999 includes a $325,000 expense associated with the issuance
of 165,076 shares of our common stock to certain majority holders
of our 6% series B-1 convertible preferred stock in exchange for
these holders waiving their option to purchase an additional
$5,000,000 of convertible preferred stock.
Liquidity and Capital Resources
Our primary sources of liquidity for the next year are expected to
be:
- cash generated from operations
- proceeds from the exercise of stock options
- credit facility and lease financing, as necessary
We generated positive cash flow from operations for the quarter
ended March 31, 1999. This was sufficient to finance our capital
expenditures and debt repayment in the quarter.
Our operating income of $1,614,000 for the quarter, together with
non-cash items appearing in the Statement of Operations, resulted
in positive cash flow before working capital items of $2,344,000.
Proceeds from option exercises were $279,000 for the quarter.
Our $8 million credit facility has $7 million available for
borrowing. $1,000,000 of the facility is being used to secure
letters of credit and operating leases with an affiliate of our
lender. We have a cash balance of $7,199,000 at March 31, 1999. We
also have a $2,100,000 certificate of deposit recorded as a long-
term asset that matures on June 30, 2000. It pays interest at a
rate of 5.7% per annum.
During the quarter all of the outstanding shares of our Series B-1
convertible preferred stock and accrued dividends thereon were
converted into shares of our common stock. Beginning April 1,
1999, we shall no longer be accruing dividends for this stock. Our
repayment of the term loan during March 1999 will result in
interest savings approximating $40,000 and principal payments of
$35,000 per quarter.
At December 31, 1998 we had net operating loss carryforwards
("NOL's") for federal and state income tax purposes of $35.3
million which expire in varying amounts from 2012 through 2019.
Approximately $15 million of this amount were acquired when we
bought Refractive Centers International, Inc. in August 1997 and
their use is subject to limitation under Section 382 of the
Internal Revenue Code. These operating losses are available to
offset future taxable income.
Approximately $15 million of our NOL's consist of deferred tax
assets which, because of our operating losses, we could not record
this benefit in our statement of operations and a valuation
allowance was necessary. If our profitability continues, we will
be able to reduce the valuation allowance. A reduction of the
valuation allowance is generally shown in the statement of
operations as a reduction of income tax expense.
Regardless of when the reduction in the valuation reserve is
recognized in the statement of operations, the utilization of the
NOL's will substantially reduce our cash obligation for payment of
income taxes otherwise due over the next several years.
Year 2000 Issue
Generally, application programs have used two-digit fields to
define the applicable year, rather than four-digit fields.
Programs that are time-sensitive may recognize a date using "00"
as the year 1900 rather than the year 2000. This misinterpretation
of the year could result in an incorrect computation or computer
shutdown.
We have completed an assessment of our computer software and
hardware for compliance with Year 2000 and have determined that
all business critical systems are compliant. Business critical
systems include financial reporting systems and all lasers
utilized in our centers. Costs associated with the assessment were
internal costs, were expensed as incurred and were immaterial. We
have not verified or tested compliance with our telemarketing
information system because we are in the process of purchasing a
new telemarketing system that will be Year 2000 compliant and
installed and operational by September 30, 1999. The cost of this
new system will be included in our capital expenditures or leased.
We expect the cost to exceed $200,000.
We have also completed an assessment of external risks associated
with Year 2000. Although management does not believe that such
external risks are significant, the loss of power or other
telecommunication link difficulties could disrupt our operations.
Part II. Other Information
Item 1. Legal Proceedings
Commitments and Contingencies
We are a defendant and counter-claimant in a case
entitled Cabrini Development Council, et al. v. LCA-
Vision Inc., et al., which was commenced in October, 1997
in the Supreme Court of the State of New York, County of
New York and subsequently removed to the United States
District Court for the Southern District of New York.
Also named as co-defendants are various current and
former employees, officers and directors. The case arises
out of the operations of a New York limited liability
company (the "LLC") which had been formed by us, the
plaintiffs and a New York professional corporation (the
"PC") owned by certain physicians for the purpose of
opening and operating a Laser Refractive Surgery center
or centers in New York City. Business activities
commenced in 1995, but were unprofitable. After the LLC's
resources were exhausted, we paid its operating costs for
a period of time. In August, 1997, after further losses
and after the parties were unable to come to a final
understanding as to their respective rights and
obligations, the operations of the LLC ceased.
In the complaint, the plaintiffs allege breaches of our
obligations as a member of the LLC, and have demanded
both substantial damages and equitable relief. We have
filed an answer denying the allegations of the complaint,
and asserting counterclaims against the plaintiffs
seeking substantial damages, alleging that the plaintiffs
wrongfully failed to match the capital contributions made
by us to the LLC. We believe that the plaintiffs' claims
are without merit and intend to vigorously defend the
action and pursue our counterclaims.
After commencement of the above action, we filed an
action against the PC seeking damages for its failure to
pay the capital contributions required of it to the LLC.
The PC has counterclaimed alleging a right to be
indemnified for its losses relating to the LLC's
operations.
The actions, which have been consolidated, are in the
discovery stage.
In the opinion of management neither action will have a
material adverse effect on our financial position or
results of operations.
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
<PAGE>
Part II. Other Information (continued)
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description of Exhibit
-------- ----------------------
27 Financial Data Schedule
(b) Reports on Form 8-K.
1) Form 8-K dated March 11, 1999, announcing a majority
of Series B-1 Convertible Preferred Holders waive
option to purchase additional shares.
2) Form 8-K dated March 26, 1999, announcing the
completion of all conversions into common stock of
its outstanding Series B-1 Convertible Preferred
Stock, and further announcing its payment of certain
debts.
3) Form 8-K dated April 6, 1999, announcing the first
quarter laser eye procedures were performed at a
record level and that the U.S. wholly owned same-
center volume increased by 119%.
4) Form 8-K dated April 7, 1999, announcing an increase
in the volume of laser vision correction procedures
performed by its centers during the first fiscal
quarter of 1999 over the same period in 1998.
5) Form 8-K dated April 30, 1999 announcing net income
of $1,630,000 or $0.04 per basic and diluted share
for the first quarter of 1999.
<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
LCA-VISION INC.
Date May 4, 1999 /s/ Stephen N. Joffe
-------------------- --------------------------------
Stephen N. Joffe
President and Chief Executive
Officer
Date May 4, 1999 /s/ Larry P. Rapp
-------------------- --------------------------------
Larry P. Rapp
Chief Financial Officer
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<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the LCA-Vision Inc.
condensed consolidated balance sheet at March 31, 1999, and the related
condensed consolidated statement of operations for the three months ended March
31, 1999, and is qualified in its entirety by reference to such financial
statement.
</LEGEND>
<CIK> 0001003130
<NAME> LCA-VISION INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 0.00001
<CASH> 7199
<SECURITIES> 0
<RECEIVABLES> 1839
<ALLOWANCES> 1153
<INVENTORY> 63
<CURRENT-ASSETS> 9523
<PP&E> 16933
<DEPRECIATION> 7882
<TOTAL-ASSETS> 31840
<CURRENT-LIABILITIES> 5481
<BONDS> 642
0
2501
<COMMON> 109
<OTHER-SE> 23107
<TOTAL-LIABILITY-AND-EQUITY> 31840
<SALES> 0
<TOTAL-REVENUES> 13867
<CGS> 0
<TOTAL-COSTS> 8571
<OTHER-EXPENSES> 3682
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93
<INCOME-PRETAX> 1714
<INCOME-TAX> 0
<INCOME-CONTINUING> 1630
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1630
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
