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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 0-28132
LANVISION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1455414
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Financial Way, Suite 400
Cincinnati, Ohio 45242-5859
(Address of principal executive offices) (Zip Code)
(513) 794-7100
(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
----- ------
Number of shares of Registrant's Common Stock ($.01 par value per
share) issued and outstanding, as of December 9, 1996: 8,896,500.
This report consists of 20 pages and the index to exhibits appears on page 17.
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TABLE OF CONTENTS
<TABLE>
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Page
Part I. FINANCIAL INFORMATION
<S> <C>
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at October 31, 1996 and January 31, 1996 . . . . . . . . . . 3
Condensed Consolidated Statements of Operations for the three & nine months ended
October 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows for the nine months ended
October 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
LANVISION SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Assets
(Unaudited) (Audited)
October 31, January 31,
1996 1996
------------------ -----------------
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Current assets:
Cash $ 1,290,686 $ -
Cash equivalents, at cost plus accrued interest
which approximates market 27,968,903 -
Accounts receivable net of allowance for doubtful accounts
of $185,000 and $75,000, respectively 2,740,747 1,871,099
Unbilled receivables 1,580,340 677,620
Other 470,792 164,182
------------------ ------------------
Total current assets 34,051,468 2,712,901
Property and equipment:
Computer equipment 1,268,975 356,914
Computer software 131,947 98,225
Office furniture, fixtures & equipment 689,033 40,237
Leasehold improvements 262,958 -
------------------ -----------------
2,352,913 495,376
Accumulated depreciation and amortization (466,312) (314,380)
------------------ -----------------
1,886,601 180,996
Capitalized software development, net of accumulated amortization of
$512,563 and $455,563, respectively 220,366 152,366
================== =================
$ 36,158,435 $ 3,046,263
================== =================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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<TABLE>
<CAPTION>
LANVISION SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Liabilities, Convertible Redeemable Preferred Stock and Stockholders' Equity (Deficit)
(Unaudited) (Audited)
October 31, January 31,
1996 1996
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<S> <C> <C>
Current liabilities:
Notes payable $ - $ 600,000
Accounts payable 1,867,983 1,185,157
Accrued compensation 551,650 194,436
Accrued other expenses 819,602 16,291
Deferred revenues 508,365 846,104
------------------ -----------------
Total current liabilities 3,747,600 2,841,988
Convertible redeemable preferred stock, $.01 par value per share, 8,500 shares
authorized, issued and outstanding (aggregate liquidation preference of $850,000) - 850,000
Stockholders' equity (deficit):
Preferred stock, $.01 par value per share, 5,000,000 shares authorized,
8,500 shares issued and outstanding (see above) - -
Common stock, $.01 par value per share, 25,000,000 shares
authorized, 8,896,500 shares issued and outstanding at
October 31, 1996; 4,488,000 shares of no par value issued
and outstanding at January 31, 1996 88,965 45,000
Capital in excess of par value 35,110,817 -
Accumulated deficit (2,788,947) (690,725)
------------------ -----------------
Total stockholders' equity (deficit) 32,410,835 (645,725)
------------------ -----------------
$ 36,158,435 $ 3,046,263
================== =================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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LANVISION SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine Months Ended October 31,
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------------- ---------------------------------
1996 1995 1996 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Systems sales $ 1,588,253 $ 313,559 $ 6,032,012 $ 1,248,694
Service, maintenance and support 1,447,043 353,712 2,486,914 1,002,261
--------------- --------------- --------------- ---------------
Total revenues 3,035,296 667,271 8,518,926 2,250,955
Operating expenses:
Cost of systems sales 986,867 186,250 3,500,029 753,437
Cost of service, maintenance and support 1,373,306 326,273 2,622,354 896,290
Selling, general and administrative 1,888,878 282,639 4,342,548 851,464
Product research and development 421,974 158,961 999,155 510,479
--------------- --------------- --------------- ---------------
Total operating expenses 4,671,025 954,123 11,464,086 3,011,670
--------------- --------------- --------------- ---------------
Operating (loss) (1,635,729) (286,852) (2,945,160) (760,715)
Interest income 456,269 2,695 926,622 -
Interest expense - - (79,684) (9,216)
--------------- --------------- --------------- ---------------
Net (loss) $ (1,179,460) $ (284,157) $ (2,098,222) $ (769,931)
=============== =============== =============== ===============
(Loss) per common share $ (.13) $ (.05) $ (.26) $ (.12)
=============== =============== =============== ===============
Number of shares used in per common share computation 8,896,500 6,190,325 8,078,024 6,190,325
=============== =============== =============== ===============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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LANVISION SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended October 31,
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
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Operating activities:
Net (loss) $ (2,098,222) $ (769,931)
Adjustments to reconcile net (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization 208,932 121,552
Deferred compensation - 12,000
Cash provided by (used for) current assets and liabilities:
Accounts and unbilled receivables (1,772,368) 31,769
Other assets (306,610) (236,502)
Accounts payable and accrued expenses 1,843,351 (238,482)
Deferred revenue (337,739) 480,445
------------------ ------------------
Net cash provided by (used for) operating activities (2,462,656) (599,149)
Investing activities:
Purchases of property and equipment (1,857,537) (58,954)
Capitalization of software development costs (125,000) (95,307)
------------------ ------------------
Net cash (used for) investing activities (1,982,537) (154,261)
Financing activities:
(Decrease) increase in notes payable, net (600,000) 140,000
Issuance of common stock 34,304,782 -
------------------ ------------------
Net cash provided by financing activities 33,704,782 140,000
------------------ ------------------
Increase (decrease) in cash and cash equivalents 29,259,589 (613,410)
Cash at beginning of period - 618,157
------------------ ------------------
Cash and short term cash equivalents at end of period $ 29,259,589 $ 4,747
================== ==================
Supplemental cash flow disclosures:
Income taxes paid $ - $ -
Interest paid $ 79,684 $ 9,216
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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LANVISION SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements have been
prepared by the Company without audit in accordance with generally accepted
accounting principles for interim financial information pursuant to the rules
and regulations applicable to quarterly reports on Form 10-Q of the Securities
and Exchange Commission. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation of
the Condensed Consolidated Financial Statements have been included. These
Condensed Consolidated Financial Statements should be read in conjunction with
the financial statements and notes thereto included in the LanVision Systems,
Inc. Registration Statement on Form S-1, Registration Number 333-01494.
Operating results for the three and nine months ended October 31, 1996, are not
necessarily indicative of the results that may be expected for the fiscal year
ending January 31, 1997.
Note 2 - CASH EQUIVALENTS
Short-term cash equivalents at October 31, 1996, consisted of investments in a
money market fund (which invests in U.S. Treasury Securities) and U.S. Treasury
Securities. For purposes of the Condensed Consolidated Statements of Cash Flows,
the Company considers all U.S. Treasury Securities and related money market
funds to be highly liquid debt instruments. The Company's investment in
securities are classified under Statement of Financial Accounting Standards No.
115, Accounting for Certain Investments in Debt and Equity Securities as
"available-for-sale", and accordingly, are carried at cost, plus accrued
interest which approximates fair market value.
Note 3 - PUBLIC OFFERING OF COMMON STOCK
On April 18, 1996, the Company issued 2,912,500 Shares of Common Stock in an
Initial Public Offering. The net proceeds to the Company, before expenses, was
$35,211,147.
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Note 4 - CHANGES IN ACCOUNT BALANCES
Interest income consists of interest on the cash and cash equivalents accounts,
primarily resulting from the investment of the net proceeds of the Initial
Public Offering - see Note 3.
Interest expense consists primarily of interest on outstanding indebtedness
during the first quarter. The indebtedness was repaid after the Initial Public
Offering - see Note 3.
Revenue recognized prior to progress billings to customers is recorded as
unbilled receivables. The increase in unbilled receivables since the end of the
prior fiscal year reflects the increased revenues recognized during the periods.
Other current assets at January 31, 1996, consisted primarily of costs related
to the Company's Initial Public Offering, which were subsequently offset against
the net proceeds from the stock offering - see Note 3. At October 31, 1996,
other current assets consists primarily of prepaid insurance, and prepaid
expenses related to future revenues.
The increase in property and equipment reflects new equipment etc. required for
58 additional employees hired since January 31, 1996.
The increase in accounts payable relates primarily to increased purchases of
hardware and third party software for installation at customer sites as well as
for equipment for additional employees and furniture and equipment for the
expanded offices.
The increase in accrued compensation reflects increased levels of employment and
increased commissions on increased revenues.
The increase in accrued other expenses results primarily from increases in
warranty, franchise taxes, professional fees, etc. as the Company expands its
operations.
Progress billings to customers issued prior to the recognition of the related
revenue are classified as deferred revenues in the balance sheet. The decline in
deferred revenues results primarily from the performance of services related to
prior progress billings.
Note 5 - EARNINGS PER SHARE
On April 18, 1996, the Company issued 2,912,500 shares of Common Stock in an
Initial Public Offering and issued 1,496,000 common shares upon conversion of
the Company's Convertible Redeemable Preferred Stock - see Note 3.
The loss per common share for the three and nine months ended October 31, 1996
is calculated using the weighted average number of common shares outstanding
during the periods, assuming
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the conversion of the Convertible Redeemable Preferred Stock to 1,496,000 shares
of Common Stock, on an if converted basis as of the beginning of the fiscal
year, and the issuance of 2,912,500 common shares on April 18, 1996, the date of
the Initial Public Offering.
The loss per common share calculation, excludes the effect of the common stock
equivalents (stock options) as the inclusion thereof would be antidilutive.
In accordance with the Staff Accounting Bulletin (SAB) 83 of the Securities and
Exchange Commission, the weighted average number of shares used in the
computation of the loss per share for the three and nine months ended October
31, 1995, was calculated assuming all common share equivalents issued at prices
below the Initial Public Offering price, during a one year period before the
filing of the Initial Public Offering, were outstanding, even though the effect
was antidilutive. Also, the computation of common and common equivalent shares
includes the 1,496,000 shares of common stock issued upon the automatic
conversion of the convertible redeemable preferred stock. Accordingly, the
weighted average shares outstanding for this calculation is 6,190,325 shares -
see Exhibit 11, page 18.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
In addition to historical information contained herein, this Discussion and
Analysis contains forward-looking statements. The forward-looking statements
contained herein are subject to certain risks and uncertainties that could cause
actual results to differ materially from those reflected in the forward-looking
statements, including those discussed below. Readers are cautioned not to place
undue reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. The Company undertakes no obligation to
publicly release the results of any revision to these forward-looking statements
which may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
RESULTS OF OPERATIONS:
GENERAL
LanVision is a leading provider of healthcare information access systems that
enable hospitals and integrated healthcare networks to capture, manage,
retrieve, process and store vast amounts of clinical and financial patient
information. The Company's systems deliver on-line enterprise-wide access to
fully-updated patient information which historically was maintained on a variety
of media, including paper, magnetic disk, optical disk, x-ray film, video, audio
and microfilm. LanVision's systems, which incorporate data management, document
imaging and workflow technologies, consolidate patient information into a single
repository and provide fast and efficient access to patient information from
universal workstations located throughout the enterprise,
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including the point of patient care. The systems are specifically designed to
meet the needs of physicians and other medical and administrative personnel and
can accommodate multiple users requiring simultaneous access to patient
information, thereby eliminating file contention. By providing access to all
forms of patient information, the Company believes that its healthcare
information access systems are essential components of the computer-based
patient record.
The Company's systems are sold directly to end users as well as through
third-party distribution partner(s), currently Lanier Healthcare, and revenues
are derived from: the licensing and sale of systems comprised of internally
developed software, third party software and hardware; and from professional
services, maintenance and support services. Professional services include
implementation, training, project management and custom software development and
currently are provided only to the Company's customers with installed systems or
who are in the process of installing systems. Revenues from professional
services, maintenance and support services typically are expected to increase as
the number of installed systems increases, although the margins on these
revenues are expected to fluctuate based upon the negotiated terms of the
agreement with each customer and the Company's ability to fully utilize its
professional services, maintenance and support services staff. The highest
margin on systems sales is on proprietary software with lower margins on third
party hardware and software. Systems sales to any given customer may include
differing proportions of software and hardware, resulting in varying margins
among contracts.
The decision by a healthcare provider to replace, substantially modify or
upgrade its information systems is a strategic decision and often involves a
large capital commitment requiring an extended approval process. The sales cycle
for the Company's systems is typically six to eighteen months from initial
contact to the execution of a master sales agreement. As a result, the sales
cycle causes variations in quarter to quarter results. These master sales
agreements cover the entire implementation of the systems and specify the
implementation schedule, which typically takes place in one or more phases. The
agreements generally provide for the licensing of the Company's software and
third party software with a one-time perpetual license fee that is adjusted
depending on the number of workstations using the software. Third party hardware
is usually sold outright, with a one-time fee charged for installation and
training. Some specific customization, interfaces to existing customer systems
and other consulting services are sold on a fixed fee or a time and expenses
basis.
LanVision enters into master sales agreements with its customers to specify: the
scope of the systems to be installed and services to be provided by LanVision,
the agreed upon aggregate price, and the preliminary timetable for
implementation. The master sales agreements typically provide that the Company
will deliver the systems in phases pursuant to the customer's purchase orders,
thereby allowing the customer flexibility in the timing of its receipt of
systems and to make adjustments that may arise upon changes in technology or
changes in customer needs. The Company's master sales agreements generally
provide that the customer may terminate its agreement upon a material breach by
the Company, may delay certain aspects of the installation and may terminate the
agreement at the customer's discretion without penalty and without regard
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to the Company's performance. The master sales agreements also allow the
customer to request additional components as the installation progresses, which
additions are then separately negotiated as to price and terms. Historically,
customers have ultimately purchased systems and services in addition to those
originally contemplated by the master sales agreements, although there can be no
assurance that this trend will continue in the future. Because the timing of the
signing of agreements and the subsequent installation and implementation is
dictated by the customer's needs and timetables, and because installations and
implementations normally are completed over an extended period of time, the
Company is unable to accurately predict the amount of revenues it expects to
record in any particular period. Although the third-party distribution agreement
with Lanier Healthcare is relatively new, the Company expects that sales to and
through Lanier and other healthcare information systems distribution partners
which the Company is actively recruiting, will increase in the future.
Revenue from systems sales is recognized when an agreement is signed and
products are shipped. Revenue recognition related to routine installation,
integration and other insignificant obligations is deferred until the work is
performed. If an agreement requires the Company to perform services and
modifications that are deemed significant to system acceptance, revenue related
to the delivered hardware and software components is deferred until such
obligations are deemed insignificant. Revenue from consulting, training and
implementation services is recognized as the services are performed. Revenue
from short-term support and maintenance agreements is recognized ratably over
the term of the agreements. Billings to customers recorded prior to the
recognition of the revenue are classified as deferred revenues. Revenue
recognized prior to progress billings to customers is recorded as unbilled
receivables.
UNEVEN PATTERNS OF QUARTERLY OPERATING RESULTS
The Company's systems sales revenues may vary significantly from quarter to
quarter as a result of a number of other factors, many of which are outside the
Company's control. These factors include the relatively large size of customer
agreements, unpredictability in the number and timing of systems sales, length
of the sales cycle, delays in the installation process and changes in the
customer's financial condition or budget. Professional services revenues also
fluctuate from quarter to quarter as a result of the timing of the installation
of software and hardware, project management and customized programming.
Revenues from maintenance services do not fluctuate significantly from quarter
to quarter, but have been increasing as the number of customers increase.
Because a significant percentage of the Company's operating costs are expensed
as incurred, a variation in the timing of systems sales and installations and
the resulting revenue recognition can cause significant variations in operating
results from quarter to quarter. Accordingly, the Company believes that
quarter-to-quarter comparisons of its revenues and operating results vis-a-vis
the above factors, and the significant expansion of operations discussed below,
may not necessarily be meaningful and should not be relied upon as indicators of
future performance.
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REVENUES
Revenues for the third fiscal quarter ended October 31, 1996, were $3,035,296
compared with $667,271 in the comparable quarter of 1995. Revenues for the nine
months ended October 31, 1996, were $8,518,926 compared with $2,250,955 in the
comparable nine month period of 1995. The increase in revenues is the result of
installation and/or expansion of systems within the current installed base of
customers and additional revenues related to two new master sales agreements
signed in the second and third quarters with ProMedica Health System, Inc. (The
Toledo and Flower Hospitals of Toledo, Ohio) and St. Francis Hospital and
Medical Center of Hartford, Connecticut, LanVision's first installation through
its strategic alliance with Lanier Healthcare. New systems sales in the third
quarter were less than expected due to the protracted negotiations with several
new prospective customers. As previously discussed, after a master sales
agreement is executed, LanVision does not record revenues until it ships the
hardware and software or performs the agreed upon services. The commencement of
revenue recognition varies depending on the size and complexity of the system
and the scheduling of the implementation, training, interface development and
other services requested by the customer. Three customers accounted for
approximately 52% and 94% of revenues for the first nine months of fiscal 1996
and 1995, respectively.
OPERATING EXPENSES
Cost of Systems Sales
The cost of systems sales includes amortization of capitalized software
development costs, royalties and the cost of third party software and hardware.
Cost of systems sales as a percentage of systems sales may vary from period to
period depending on the hardware and software system configuration of the
systems sold. The cost of systems sales as a percentage of systems sales for the
third quarter of fiscal 1996 and 1995 were 62% and 59%, respectively, and for
the first nine months of fiscal 1996 and 1995 were 58% and 60%, respectively.
The decrease in gross margin is due primarily to the mix of hardware revenues
(with lower gross margins) versus software revenues (with higher gross margins)
to total systems sales. The greater percentage of hardware revenues is partially
due to add on hardware within the current installed base and less software
revenues due to the limited number of systems sales.
Cost of Service, Maintenance and Support
The cost of service, maintenance and support includes compensation and benefits
for support and professional services personnel and the cost of third party
maintenance contracts. As a percentage of service, maintenance and support
revenues, the cost of such service, maintenance and support was 95% and 92% for
the third quarter; respectively, and 105% and 89% for the first nine months of
fiscal 1996 and 1995, respectively.
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The professional services, maintenance and support staff was increased by five
persons in the first quarter, seven additional persons in the second quarter,
and one additional person in the third quarter of fiscal 1996. The negative
margin related to services during the nine months ended October 31, 1996, was
due to an increase in non-billable time associated with the expansion of the
professional services and support staff in anticipation of new systems sales.
New personnel require training and product orientation, leaving less time
available for billable hours. Additionally, systems sales for the third quarter
were less than expected resulting in a higher level of non-billable hours than
planned. The professional services and software support group was increased in
anticipation of expected revenue growth. Future increases in service,
maintenance and support revenues should not require a proportionate increase in
expenses.
Selling, General and Administrative
Selling, General and Administrative expenses consist primarily of salaries,
commissions, benefits and reimbursable travel and living expenses related to the
Company's sales, marketing and administrative personnel as well as general
corporate expenses. During the third quarter, selling, general and
administrative expenses increased to $1,888,878 compared with $282,639 in the
comparable prior quarter. For the nine months, expenses were $4,342,548 compared
with $851,464 in the prior comparable period. The Company continued to expand
operations, including the infrastructure necessary to support its anticipated
future operations, in order to position the Company to take advantage of the
growth market opportunities in the healthcare information systems market. The
selling, general and administrative staff was increased by three, fifteen and
seventeen persons, respectively, during the first three quarters. During the
next quarter, the Company intends to continue to expand its operations.
Accordingly, management expects operating expenses to continue to increase as
the Company employs additional personnel.
Product Research and Development
Product research and development expenses consist primarily of compensation and
related benefits, external consultants and an allocated portion of general
overhead costs. During the first nine months of fiscal 1996, the product
research and development staff was increased by ten persons. The majority of
product research and development expenses for the current quarter and nine
months relate to the continued enhancement of ChartVision(R) version 3.0, the
development of On-Line Chart Completion(TM) and MultiView(TM) and additional
software products under development. The Company capitalized, in accordance with
the Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 86, $45,000 and $33,653 of product research and development costs
in the third quarter of fiscal 1996 and 1995, respectively. For the first nine
months of fiscal 1996 and 1995 the Company capitalized $125,000, and $95,307,
respectively.
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NET LOSS
The net loss for the third fiscal quarter of fiscal 1996 was $1,179,460 ($0.13)
compared with a net loss of $284,157 ($0.05) in the third quarter of fiscal
1995. The net loss for the nine months was $2,098,222 ($0.26) compared with a
net loss of $769,931 ($0.12) in the comparable prior period of 1995.
Since commencing operations in 1989, the Company has, from time to time,
incurred operating losses. Although the Company achieved profitability in fiscal
years 1992 and 1993, the Company incurred a net loss in fiscal years 1994 and
1995. In view of the Company's prior operating history, there can be no
assurance that the Company will be able to achieve consistent profitability on a
quarterly or annual basis or that it will be able to sustain or increase its
revenue growth in future periods.
SIGNED AGREEMENTS - BACKLOG
At October 31, 1996, the Company's customers had entered into master sales
agreements for systems and services (excluding maintenance) which had not yet
been delivered, installed and accepted, and which, if fully performed, would
generate sales of approximately $7,800,000. The systems and services related to
the master sales agreements are expected to be delivered or performed over the
next two to three years. Of the backlog at October 31, 1996, the Company has
received purchase orders for approximately $4,900,000 of systems and services
(excluding maintenance).
In addition, the Company's master sales agreements also generally provide for an
initial maintenance period and give the customer the right to subscribe for
maintenance services on a monthly, quarterly or annual basis.
LIQUIDITY AND CAPITAL RESOURCES
On April 18, 1996, the Company, in its Initial Public Offering, issued 2,912,500
Shares of Common Stock, with net proceeds to the Company, before expenses, of
$35,211,147. In 1996, the Company entered into a five year lease for office
facilities with annual rental of approximately $400,000. The Company has no
other significant obligations for capital resources. It is expected that
existing cash, cash equivalents and the availability of borrowings under the
credit line will be sufficient to meet anticipated cash requirements, including
the planned expansion of staff.
The Company's customers typically have been well-established hospitals or
medical facilities with good credit histories, and payments have been received
within normal time frames for the industry. Master sales agreements with
customers often involve significant amounts, and contract terms typically
require customers to make progress payments. At October 31, 1996, accounts and
unbilled receivables, net, were $1,772,368 greater than the comparable
receivables at January 31, 1996. This increase is primarily due to the increased
revenues recorded during the first nine
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months. At October 31, 1996, accounts payable, and accrued current liabilities
were $1,843,351 greater than accounts payable and accrued current liabilities at
January 31, 1996. The increase is due to the increase in purchases of hardware
and third party software during the first nine months to support increased
sales, increased purchase of equipment and furniture for expanded staff and
facilities and increases in accrued compensation, warranty and other reserves,
based on increased headcount and expanding sales and maintenance agreements.
LanVision maintains a revolving line of credit with The Huntington National Bank
allowing the Company to borrow up to $1,000,000, bearing interest at the bank's
prime commercial rate plus three-quarters of one percent per annum. Under the
terms of the loan agreement, the Company is able to borrow money based on a
percentage of its eligible receivables. The Company currently has no outstanding
indebtedness under this line of credit. The line of credit declines $100,000
each month until it expires in February, 1997.
Part II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(11) Computation of Earnings (Loss) Per Common Share
(27) Financial Data Schedule
(b) Reports on Form 8-K
None
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<PAGE> 16
SIGNATURES
Pursuant to the requirements 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.
LANVISION SYSTEMS, INC.
DATE: December 11, 1996 By: /s/ J. BRIAN PATSY
--------------------------- -----------------------------------
J. Brian Patsy
Chief Executive Officer,
President and Treasurer
DATE: December 11, 1996 By: /s/ THOMAS E. PERAZZO
--------------------------- -----------------------------------
Thomas E. Perazzo
Chief Financial Officer
16
<PAGE> 17
INDEX TO EXHIBITS
Sequential
Exhibit No. Exhibit description Page No.
- - ----------- ------------------- ----------
11 Computation of Earnings (Loss) Per Common Share . . . . . 18
27 Financial Data Schedule. . . . . . . . . . . . . . . . . 19
17
<PAGE> 1
Exhibit 11
LANVISION SYSTEMS, INC.
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
------------------------------------ ------------------------------------
1996 1995 1996 1995
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net (loss) $ (1,179,460) $ (284,157) $ (2,098,222) $ (769,931)
================= ================= ================= =================
Average shares outstanding 8,896,500 4,488,000 6,582,024 4,488,000
Stock options:
Total options - 586,858 - 586,858
Assumed treasury stock buyback - (380,533) - (380,533)
Convertible redeemable preferred
stock assumed converted - 1,496,000 1,496,000 1,496,000
----------------- ----------------- ----------------- -----------------
Number of shares used in per common
share computation 8,896,500 6,190,325 8,078,024 6,190,325
================= ================= ================= =================
Net (loss) per share of common stock $ (.13) $ (.05) $ (.26) $ (.12)
================= ================= ================= =================
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE
COMPANY'S FORM 10-Q FOR THE PERIOD(S) ENDED OCTOBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 1,290,686
<SECURITIES> 27,968,903
<RECEIVABLES> 4,506,087
<ALLOWANCES> 185,000
<INVENTORY> 0
<CURRENT-ASSETS> 34,051,468
<PP&E> 2,352,913
<DEPRECIATION> 466,312
<TOTAL-ASSETS> 36,158,435
<CURRENT-LIABILITIES> 3,747,600
<BONDS> 0
<COMMON> 88,965
0
0
<OTHER-SE> 32,321,870
<TOTAL-LIABILITY-AND-EQUITY> 36,158,435
<SALES> 8,518,926
<TOTAL-REVENUES> 8,518,926
<CGS> 6,122,383
<TOTAL-COSTS> 11,464,086
<OTHER-EXPENSES> 79,684
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,098,222)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,098,222)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,098,222)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> 0
</TABLE>
