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FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
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: 0-22977
VISION TWENTY-ONE, INC.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-3384581
------------------------------- -----------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
120 WEST FAYETTE STREET - SUITE 700
BALTIMORE, MARYLAND 21201
---------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (410) 752-0121
7360 BRYAN DAIRY ROAD
LARGO, FLORIDA 33777
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
-------------------
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 [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
The registrant had 13,969,260 Shares outstanding as of October 31,
2000.
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PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 2000 1999 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Managed care ......................................................... 14,468,586 12,897,630 42,678,267 39,746,486
Buying group ......................................................... -- -- 19,154,456 --
----------- ----------- ----------- -----------
14,468,586 12,897,630 61,832,723 39,746,486
Operating expenses:
Medical claims ....................................................... 11,016,439 9,257,014 31,736,008 28,779,626
Cost of buying group sales ........................................... -- -- 18,257,963 --
General and administrative ........................................... 5,212,605 3,447,896 17,542,717 15,451,686
Depreciation and amortization ........................................ 750,137 660,272 2,302,293 2,052,439
Restructuring and other charges ...................................... 900,555 -- 900,555 --
Impairment charge .................................................... -- 1,693,000 -- 1,693,000
Start-up and software development .................................... 572,872 -- 1,252,451 --
----------- ----------- ----------- -----------
18,452,608 15,058,182 71,991,987 47,976,751
----------- ----------- ----------- -----------
Loss from operations ................................................... (3,984,022) (2,160,552) (10,159,264) (8,230,265)
Interest expense, net .................................................. 1,399,923 1,798,284 4,200,362 5,411,462
Gain on sale of assets ................................................. -- -- (522,919) --
----------- ----------- ----------- -----------
Loss from continuing operations ........................................ (5,383,945) (3,958,836) (13,836,707) (13,641,727)
Discontinued operations:
Income (loss) from discontinued operations ........................... 404,145 (346,777) 4,581,863 555,389
Income (loss) on disposal of discontinued operations ................. (8,621,571) 1,592,568 (8,621,571) 1,774,864
----------- ----------- ----------- -----------
Loss before extraordinary items ........................................ (13,601,371) (2,713,045) (17,876,415) (11,311,474)
Extraordinary item-costs associated with the previously planned
OptiCare Health Systems, Inc. merger ................................. -- 63,369 -- 1,428,599
Extraordinary item-gain on sale of EyeCare One ....................... (5,796,771) -- (5,796,771) --
Extraordinary item-forgiveness of indebtedness ....................... -- (645,104) -- (645,104)
----------- ----------- ----------- -----------
Net loss ............................................................... (7,804,600) (2,131,310) (12,079,644) (12,094,969)
=========== =========== =========== ===========
Basic and diluted loss per common share:
Loss from continuing operations ...................................... $ (0.35) $ (0.28) $ (0.91) $ (0.97)
Income (loss) from discontinued operations ........................... 0.02 (0.03) 0.30 0.04
Income (loss) on disposal of discontinued operations ................. (0.56) 0.11 (0.57) 0.13
----------- ----------- ----------- -----------
Loss before extraordinary items ........................................ (0.89) (0.20) (1.18) (0.80)
Extraordinary item-costs associated with the previously planned
OptiCare Health Systems, Inc. merger ................................. -- -- -- (0.10)
Extraordinary item-gain on sale of EyeCare One ....................... 0.38 -- 0.38
Extraordinary item-forgiveness of indebtedness ....................... -- 0.05 -- 0.04
----------- ----------- ----------- -----------
Net loss per common share .............................................. $ (0.51) $ (0.15) $ (0.80) $ (0.86)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
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VISION TWENTY-ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
------------- -------------
<S> <C> <C>
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents ....................................................... $ 5,032,399 4,982,515
Accounts receivable due from:
Managed health benefits payors ............................................... 811,520 1,035,443
Other ........................................................................ 24,553 197,048
Prepaid expenses and other current assets ....................................... 811,560 3,362,712
Current assets of discontinued operations ....................................... 22,523,148 2,873,988
------------- -------------
Total current assets ..................................................... 29,203,180 12,451,706
Fixed assets, net ................................................................. 3,781,265 1,718,403
Excess of purchase price over fair values of
net assets acquired, net of accumulated
amortization of $3,322,200 and $4,569,249
at December 31, 1999 and September 30, 2000 respectively ........................ 43,664,394 42,417,345
Other assets ...................................................................... 182,396 1,000,880
Restricted cash ................................................................... 500,000 802,915
Non current assets of discontinued operations ..................................... 7,547,452 5,127,502
------------- -------------
Total assets ............................................................. $ 84,878,687 $ 63,518,751
============= =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable ................................................................ $ 5,183,894 3,019,520
Accrued expenses ................................................................ 1,713,857 1,876,515
Medical claims payable .......................................................... 4,870,837 3,943,979
Accrued compensation ............................................................ 1,504,995 1,506,765
Accrued restructuring charge .................................................... 663,305 590,653
Accrued interest and loan fees .................................................. 2,086,957 6,717,700
Amount due to ECCA .............................................................. 4,031,870 4,031,873
Current portion of long-term debt ............................................... 58,021,668 58,107,186
Current portion of obligations under capital leases ............................. 11,654 53,464
Current liabilities of discontinued operations .................................. 8,222,572 1,447,381
------------- -------------
Total current liabilities ................................................ 86,311,609 81,295,036
Obligations under capital leases, less current portion ............................ 17,438 103,126
Long-term debt, less current portion .............................................. 112,500 --
Long-term liabilities of discontinued operations .................................. 1,187,232 781,144
------------- -------------
Total liabilities ........................................................ 87,628,779 82,179,306
Stockholders' deficit:
Preferred stock, $.001 par value; 10,000,000 shares authorized: no shares issued -- --
Common stock, $.001 par value; 50,000,000 shares authorized; 15,616,854 (1999)
and 13,969,260 (2000) shares issued and outstanding ............................ 15,617 13,969
Additional paid in capital ...................................................... 92,981,946 88,975,965
Deferred compensation ........................................................... (192,135) --
Notes receivable ................................................................ (172,984) (172,984)
Accumulated deficit ............................................................. (95,382,536) (107,477,505)
------------- -------------
Total stockholders' deficit .............................................. (2,750,092) (18,660,555)
------------- -------------
Total liabilities and stockholders' deficit .............................. $ 84,878,687 $ 63,518,751
============= =============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
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VISION TWENTY-ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1999 2000
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss .................................................................. (12,079,644) (12,094,969)
Adjustments to reconcile net loss to net cash used in operating activities:
Income from discontinued operations .................................... (4,581,863) (2,330,253)
Depreciation and amortization .......................................... 2,086,161 2,052,438
Extraordinary items .................................................... -- 783,495
Impairment Charge ...................................................... -- 1,693,000
Non-cash compensation expense .......................................... 487,240 15,618
Other amortization ..................................................... 297,356 316,587
Gain on sale of assets .................................................... (511,063) --
Loss on sale of Retail Optical Chains ..................................... 2,824,800 --
Changes in operating assets and liabilities, net of effects from business
combinations:
Accounts receivable, net ............................................. 722,237 (396,418)
Prepaid expenses and other current assets ............................ 357,054 (19,279)
Other assets and restricted cash ..................................... 676,875 (541,682)
Accounts payable ..................................................... (4,368,791) (2,164,374)
Accrued expenses ..................................................... 2,902,534 162,658
Accrued compensation ................................................. 447,201 1,770
Accrued restructuring charge ......................................... (527,300) (72,652)
Accrued interest and loan fees ....................................... (163,151) 4,630,743
Medical claims payable ............................................... 270,156 (926,858)
------------ ------------
Net cash used in operating activities ........................... (11,160,198) (8,890,176)
INVESTING ACTIVITIES
Payments for fixed assets, net ............................................ (1,271,847) (664,330)
Payment for acquisitions, net of cash acquired ............................ (843,763) --
Payments for capitalized acquisition costs ................................ (138,221) --
Net proceeds from sale of Retail Optical Chains ........................... 32,564,338 --
Net proceeds from sale of Block Buying Group .............................. 4,286,060 --
------------ ------------
Net cash provided by (used in) investing activities ............. 34,596,567 (664,330)
FINANCING ACTIVITIES
Payments on long-term debt and capital lease obligations .................. (42,139,674) (1,749,136)
Proceeds from credit facility ............................................. 9,325,314 2,333,085
Payments for financing fees ............................................... (592,764) --
Proceeds from sale of stock to Directors .................................. 1,062,848 --
Exercise of stock options ................................................. 224,928 --
Proceeds from sale of stock issued under an employee stock purchase plan .. 109,745 --
------------ ------------
Net cash provided by (used in) financing activities ............. (32,009,603) 583,949
------------ ------------
DISCONTINUED OPERATIONS
Operating activities ................................................... 10,645,648 2,133,185
Investing activities ................................................... (3,503,901) 6,879,762
Financing activities ................................................... (220,741) (92,274)
------------ ------------
Cash provided by discontinued operations .................................. 6,921,006 8,920,673
------------ ------------
Increase (decrease) in cash and cash equivalents .......................... (1,652,228) (49,884)
Cash and cash equivalents at beginning of period .......................... 1,500,195 5,032,399
------------ ------------
Cash and cash equivalents at end of period ................................ $ (152,033) $ 4,982,515
============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
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<PAGE> 5
VISION TWENTY-ONE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. 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 accruals) necessary to present fairly the
information set forth therein have been included. The accompanying condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and footnotes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999.
Operating results for the three-month and nine-month periods ended
September 30, 2000 are not necessarily an indication of the results that may be
expected for the year ending December 31, 2000.
RECLASSIFICATION OF FINANCIAL STATEMENTS
During the fourth quarter of 1999, the Company announced its adoption
of a plan to exit from its physician practice management ("PPM") business.
Effective August 31, 1999, the Company consummated the sale of the retail
optical chain segment of its operations. During the third quarter of 2000, the
Company announced its adoption of a plan to exit from its refractive and
ambulatory surgery center businesses. Prior period condensed consolidated
financial statements have been restated to show these divisions as discontinued
operations.
2. LOSS PER SHARE
The following table sets forth the computation of basic and diluted
loss per share for loss from continuing operations:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 2000 1999 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerator for basic and diluted loss per
share-loss available to common
stockholders ............................ $ (5,383,945) $ (3,958,836) $(13,836,707) $(13,641,727)
Denominator for basic and diluted loss per
share - Weighted average shares ......... 15,366,981 13,953,039 15,169,180 14,010,217
------------ ------------ ------------ ------------
Basic and diluted loss per common share . $ (0.35) $ (0.28) $ (0.91) $ (0.97)
============ ============ ============ ============
</TABLE>
There were no dilutive securities included in the computations of loss
per share in the three-month and nine-month periods ended September 30, 2000 and
1999 because the Company incurred a loss from continuing operations in those
periods.
3. RESTRUCTURING PLAN
During the fourth quarter of 1998, management of the Company committed
to and commenced the implementation of a restructuring plan (the "Restructuring
Plan") that was designed to facilitate the transformation of the Company into an
integrated eye care company. The Restructuring Plan initiatives, which were
composed of a number of specific projects, were expected to position the Company
to take full operational and economic advantage of recent acquisitions. The
Restructuring Plan was to enable the Company to complete the consolidation and
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deployment of necessary infrastructure for the future, optimize and integrate
certain assets and exit certain markets. The Restructuring Plan initiatives
resulted in the elimination of over 100 positions throughout the Company and
were completed during 1999. The planned initiatives to be undertaken as part of
the Restructuring Plan included the integration of managed care service centers
and business lines, the consolidation of retail optical back office functions
and the consolidation of certain corporate functions. The Restructuring Plan
resulted in a restructuring charge of approximately $2,796,000 for the year
ended December 31, 1998. The restructuring charge was composed of severance
costs of approximately $1,914,000 and facility and lease termination costs of
approximately $882,000.
The accrued restructuring charge of approximately $663,000 at December 31,
1999 was reduced by approximately $72,000 to $591,000 at September 30, 2000.
The reduction was related entirely to severance payments. The Restructuring Plan
reserve was approximately $2,269,000 at September 30, 1999.
4. MANAGEMENT RESTRUCTURING
During the Company's restructuring, several officers and directors
resigned and the vacancies created by such departures were filled by promoting
its MEC Health Care and Block Vision senior executives; and the addition of a
seasoned financial executive as the Company's Chief Financial Officer.
5. DISCONTINUED OPERATIONS
Effective August 31, 1999, the Company completed the sale of Vision
World, EyeCare One Corp. and The Eye DRx (the "Retail Optical Chains") to Eye
Care Centers of America, Inc. ("ECCA"). ECCA is based in San Antonio, Texas and
operates a national chain of full-service retail optical stores. In connection
with this transaction, the Company received approximately $37,300,000 in cash.
Of the proceeds received by the Company at closing, approximately $30,800,000
was applied as a permanent pay down of its term debt credit facility,
approximately $2,800,000 was paid down under its ongoing $7,500,000 revolving
credit facility, approximately $2,400,000 was used for costs and other
obligations related to the transaction and approximately $1,250,000 was utilized
to fund an escrow arrangement between the parties relative to terms under the
agreement. Based on post-closing adjustments, the final sales price was
approximately $31,800,000, and the Company has recorded a liability of
approximately $4,032,000 to ECCA, net of escrow, with respect to such
post-closing adjustments. In addition, Vision Twenty-One
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has indemnified one of its former managed professional associations for certain
partnership obligations. Accordingly, a charge of $200,000 was recorded to loss
on disposal of discontinued operations in 1999. A net loss of approximately
$3,250,000 was incurred on the transaction for the year ended December 31, 1999.
On October 25, 1999, the Company announced its intent to exit the
business of managing optometry and ophthalmology practices. The details of the
plan were finalized in December 1999. This represented a crucial step in the
Company's strategy of focusing its corporate resources on expanding its managed
care business. The exit of the physician practice management ("PPM") business,
completed in September, 2000 was accomplished through the sale of the practice
assets back to the physicians or their affiliates, the termination of Management
Agreements and the restructuring of certain refractive surgery center facility
access agreements. The terms of each managed practice divestiture were subject
to the prior approval of the banks under the Company's credit facilities as well
as the Company's Board of Directors. Accordingly, in 1999, the Company recorded
a loss of $58,700,000, which was net of an income tax benefit of $1,100,000,
related to the expected sale of practice assets. As of September 30, 2000, the
Company had sold the assets of all of the practices and received consideration
of approximately $9,800,000, in the form of cash, and 1,638,606 shares of the
Company's common stock valued at approximately $3,900,000. In addition, the
Company expects to receive approximately $2,500,000 from ECCA in connection with
the settlement of various disputes between the parties, including the transition
of certain Optometry practices to ECCA for the sale of certain practices to
ECCA. The aggregate consideration was approximately $16,100,000.
The Company received approximately $1.2 million of consideration in
excess of amounts previously estimated as of December 31, 1998. Also, the
Company recognized approximately $.6 million of management fees from certain of
the disposed practices.
During the third quarter of 2000, the Company announced its intent to
exit the business of owning and managing Refractive and Ambulatory Surgery
Centers. As of September 30, 2000, a loss is not expected on the disposal of
this segment and, accordingly no accrual has been recorded.
As a result of the changes occurring in the Company's business,
including, but not limited to the divestiture of large business units, the shift
in operating focus, changes in the Company's managed care business, the
Company's exiting of the PPM and Refractive and Ambulatory Surgery Center
businesses, changes associated with the Company's recently Amended and Restated
Credit Agreement and issues related to the Company's accessibility to future
working capital, the overall results should not necessarily be relied upon as
being indicative of future operating performance.
The operating results of these discontinued operations are summarized as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 2000 1999 2000
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues ...................... $ 34,382,355 $ 3,991,437 $ 109,624,454 $ 11,290,783
Operating expenses ............ 33,978,210 4,338,214 105,042,591 10,735,394
------------- ------------- ------------- -------------
Income (loss) from discontinued 404,145 (346,777) 4,581,863 555,389
operations
Income (loss) on disposal .... (8,621,571) 1,592,568 (8,621,571) 1,774,864
------------- ------------- ------------- -------------
Total income (loss) of
discontinued operations ..... $ (8,217,426) $ 1,245,791 $ (4,039,708) $ 2,330,253
============= ============= ============= =============
</TABLE>
The operating expenses of the discontinued operations for the three
months and nine months ended September 30, 1999 include an allocation of
interest expense of $232,000 and $963,000, respectively. The interest expense
allocated to discontinued operations was based on the net assets attributed to
the operations of the Retail Optical Chains in accordance with the guidance in
EITF 87-24, Allocation of Interest to Discontinued Operations.
The assets and liabilities of the discontinued operations primarily
include cash, patient accounts receivable, fixed assets, accounts payable and
accrued liabilities.
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6. SALE OF BLOCK BUYING GROUP
On June 4, 1999, the Company completed the sale of the Block Buying Group. Net
proceeds of $4,300,000 million received by the Company were primarily used to
repay outstanding borrowings under the Company's credit facility.
7. EXTRAORDINARY ITEMS
As a result of the termination of the merger agreement with OptiCare
Health Systems, Inc. and OC Acquisition Corp., professional fees incurred in
connection with the proposed merger of approximately $63,000 and $1,429,000 for
the three months and nine months ended September 30, 2000, respectively, were
expensed and reported as an extraordinary item.
8. LITIGATION
During the quarter for which this report is filed, there have been no
material developments to previously reported legal proceedings except for the
settlement and dismissal of the CareMark litigation which arose over an alleged
breach by a promissory note and the Company of September 22, 2000 litigation.
Except as previously reported, the Company is not a party to any material
litigation and is not aware of any threatened material litigation.
Management of the Company is unable to determine the impact, if any,
that the resolution of the previously disclosed pending lawsuits will have on
the financial position or results of operations of the Company. However, there
can be no assurance that the resolution of the previously disclosed pending
lawsuits will not have a material adverse effect on the Company and further
contribute to its negative financial operations.
The Company is currently attempting to restructure debt with certain
of its creditors. To the extent it is unsuccessful in achieving the same, the
Company could face material litigation which could have a material adverse
effect on the Company.
9. MANAGED CARE
The Company's Managed Care organization has been notified that certain
of its contracts with third-party health benefits payers will be terminating as
of January 1, 2001. The estimated annual revenues from these terminating
contracts is $8,600,000.
10. DEBT RESTRUCTURING
On November 10, 2000 the Company entered into a new Amended and
Restated Credit Agreement with its Lenders which provides for a restructuring
of its existing $64.2 million in outstanding secured debt obligations inclusive
of accrued and unpaid interest and fees. The new agreement has a three year
term, is composed of a $9.0 million bridge facility, a $3.0 revolving credit
facility, a $45.8 million term loan and a $6.4 million convertible note.
At the time of closing, approximately $8.1 million was outstanding
under the bridge facility while the other facilities were fully drawn. The
Amended and Restated Credit Agreement restructured required amortization on all
of its facilities, modified covenants and provided for the preservation of
liquidity for the continued timely payment of managed care claims.
Interest on the bridge facility, revolving facility and term loan will
be at LIBOR plus 0.25% or Base Rate minus 2.0% for the first two years and base
rate plus 2.0% in the third year, payable monthly. Interest on the Convertible
Note will accrue at 7% until the earlier of conversion into the Company's Common
Stock at $0.18 per share or maturity on October 31, 2003.
Availability under the bridge facility begins to decrease in March 2001
and must be fully repaid by March 2002. Availability under the revolving
facility begins to decrease in December 2002 and must be fully repaid when the
entire credit facility matures on October 31, 2003. Term loan amortization of
$0.5 million per quarter commences on March 31, 2002.
Continued availability under this Amended and Restated Credit Agreement
is contingent upon 1) the Company's shareholders approval of a significant
increase in the number of authorized shares of Common Stock and 2) the
settlement by the Company of all of its claims and antecedent debts with its
creditors in a manner that permits the Company to operate its business and to
satisfy its restructured debts and other obligations.
In connection with the restructuring of its credit facilities, the
Company also issued warrants to acquire Common Stock at a price of $0.18 per
share equal to 6% of the outstanding Common Stock on a fully diluted basis after
taking into consideration the projected issuance of equity and equity related
securities in connection with the financial restructuring efforts currently
underway.
As a result of the implementation of the aforementioned restructuring
of indebtedness by the Company there will be significant and material dilution
to existing shareholders. In addition, there can be no assurance that such
restructuring will be successfully completed.
11. IMPAIRMENT CHARGE
The Company recorded an impairment charge of $1,693,000 in the third
quarter of 2000 with respect to fixed asset located at its former corporate
headquarters in Largo, Florida.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL OVERVIEW
Since its inception, Vision Twenty-One had sought to develop and manage
local area eye care delivery systems ("LADS(SM)"). LADS involved contractual
affiliations with local optometrists and ophthalmologists (the "Affiliated
Providers") to provide primarily vision care and refractive surgery at
independent or company-owned clinics and surgery centers. Additionally, Vision
Twenty-One developed retail distribution channels for its LADS through
affiliating with retail optical chains and developed managed care distribution
channels for its LADS through contracting with local health plans and other
third party payors.
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<PAGE> 9
Vision Twenty-One's LADS operating revenue was primarily derived from a
wide range of service fees earned through strategic affiliations with eye care
clinics and retail optical locations and through ownership interests in
refractive surgery centers ("RSCs"), ambulatory surgery centers ("ASCs") and
retail optical chains. LADS also included the management of practices of
optometry and ophthalmology ("PPM"). The PPM business involved the Company
entering into long-term management agreements ("Management Agreements") with
professional associations or corporations pursuant to which the Company was the
sole provider of comprehensive management, business and administrative services
for the non-professional aspects of the professional practices. The PPM segment
represented a substantial portion of the Company's business in 1999.
Vision Twenty-One also generated significant revenue from its buying
group division that provided benefits to its Affiliated Providers through the
consolidation and management of purchases of optical goods. In addition, the
Company generated significant revenue from its managed care division by entering
into capitated managed care contracts with third-party insurers and payors and
by administering indemnity fee-for-service plans.
During 1999, the Company began implementing a plan of divesting itself
of the PPM, retail optical chains and buying group businesses in order to focus
on consolidating its refractive surgery center, ambulatory surgery center and
managed care businesses. The sales of the buying group division and retail
optical chains were completed in two individual transactions. The PPM
divestiture has required multiple transactions involving the sales of practice
assets, typically back to the doctors or their affiliates, and the termination
of Management Agreements. As of September 30, 2000, all optometry and
ophthalmology locations had been transferred pursuant to the PPM divestiture
plan. In the quarter ended September 30, 2000, the Company announced its
intention to exit the business of managing refractive and ambulatory surgery
centers.
The Company's current plan is to focus its resources on expanding its
managed care business. In addition to the recently completed restructuring of
its credit facilities with its lender Group, the Company must settle all of its
claims and antecedent debts with its creditors in a manner that permits the
Company to operate its business and to satisfy its restructured debt and other
obligations. The Company may divest itself of additional assets in order to
reduce debt and generate liquidity.
In an effort to streamline costs, the Company decided to close its
Largo, FL corporate headquarters and operations at the Boca Raton, Florida
managed care service center and relocate and consolidate these functions into
existing operations in Maryland.
DISPOSITION OF BUSINESSES
The Company has concentrated on developing its LADS since late 1997.
Since, the Company had been analyzing certain business units within such LADS
and assessing the long-term strategic value of each existing component.
Effective August 31, 1999, the Company completed the sale of Vision World, Stein
Optical (a trade name of EyeCare One Corp.), and The Eye DRx (the "Retail
Optical Chains" ) to Eye Care Centers of America, Inc. ("ECCA"). ECCA is based
in San Antonio, Texas and operates a national chain of full-service retail
optical stores. In connection with this transaction, the Company received
approximately $37.3 million in cash. Of the proceeds received by the Company at
closing, approximately $30.8 million was applied as a permanent pay down of its
term debt credit facility, approximately $2.8 million was paid down under its
ongoing $7.5 million revolving credit facility, approximately $2.4 million was
used for costs and other obligations related to the transaction and
approximately $1.3 million was utilized to fund an escrow arrangement between
the parties relative to terms under the agreement. Based on post-closing
adjustments, the final sales price was approximately $31.8 million, and the
Company has recorded a liability of approximately $4.0 million to ECCA, net of
escrow, with respect to such post-closing adjustments. Under the sale agreement,
Vision Twenty-One indemnified one of its former Managed Professional
Associations for certain partnership obligations. Accordingly, a charge of $0.2
million was recorded to loss on disposal of discontinued operations in 1999. A
net loss of approximately $3.2 million was recorded on the transaction. In
September 2000, the Company and ECCA reached a comprehensive resolution of all
disputed matters between the parties which provided for, among other things, the
reduction in the post-closing adjustment liability to ECCA from $4.0 million to
$1.5 million. The Company expects to issue a three-year convertible note to ECCA
which will be convertible into shares of Common Stock at $.18 per share.
Interest will accrue on the note at 7% per annum until the earlier of maturity
or conversion. The liability under the post-closing adjustment will be
considered satisfied upon issuance of the convertible note which was conditioned
upon the recently completed restructuring of the Company's credit facilities.
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<PAGE> 10
On June 4, 1999, the Company completed the sale of its buying group
division (effective April 30, 1999). Net proceeds of $4.3 million received by
the Company were primarily used to repay outstanding borrowings under the
Company's credit facilities.
EXIT FROM PHYSICIAN PRACTICE MANAGEMENT BUSINESS
On October 25, 1999, the Company announced its intent to exit the
business of managing optometry and ophthalmology practices. The details of the
plan were finalized in December 1999. This represented a crucial step in the
Company's strategy of redirecting its corporate resources towards the expansion
of its managed care business. The Company expects the majority of the affected
physicians to continue to be part of the Vision Twenty-One national eye care
delivery network and/or participate in its refractive and ambulatory surgery
center initiatives. The exit of the physician practice management ("PPM")
business was accomplished through the sale of the practice assets back to the
physicians or their affiliates, the termination of Management Agreements and the
restructuring of certain refractive surgery center facility access agreements.
The terms of each managed practice divestiture were subject to the prior
approval of the banks under the Company's credit facilities as well as the
Company's Board of Directors. Accordingly, in 1999, the Company recorded a loss
of $58.7 million, which is net of an income tax benefit of $1.1 million, related
to the expected sale of practice assets. As of September 30, 2000, the Company
had sold the assets related to all of the practices for consideration of
approximately $16.1 million.
As a result of the changes occurring in the Company's business,
including, but not limited to, the divestiture of large business units, the
shift in operating focus, changes in the Company's managed care business, the
Company's exiting of the PPM and Refractive and Ambulatory Surgery Centers
businesses and issues related to the Company's accessibility to future working
capital, the overall results should not necessarily be relied upon as being
indicative of future operating performance.
During the third quarter of 2000, the Company announced its intent to
exit the business of owning and managing Refractive and Ambulatory Surgery
Centers. As of September 30, 2000, a loss is not expected on the disposal of
this segment and, accordingly, no accrual has been recorded.
CONSOLIDATION OF OPERATIONS
The Company decided to consolidate its managed care operations (MEC and
Block) and its Corporate facilities from Boca Raton and Largo respectively to
Baltimore, Maryland during the third and fourth quarters of 2000.
MOVE FROM NASDAQ NATIONAL MARKET SYSTEM TO THE NASD'S OTC - BULLETIN BOARD
SYSTEM
On June 19, 2000 the trading of the Company's Common Stock moved to the
NASD's OTC - Bulletin Board System from the Nasdaq National Market System.
ADDITIONAL OVERVIEW
Managed care revenues are derived principally from fixed payments
received pursuant to its managed care contracts on a capitated or risk-sharing
basis. The Company also receives fees for the provision of certain
administrative services related to its indemnity fee-for-service plans. Pursuant
to its capitated managed care contracts, the Company receives a fixed payment
per-member-per-month for a predetermined benefit level of eye care services as
negotiated between the Company and the payor. Profitability of the Company's
capitated managed care contracts is directly related to the specific terms
negotiated, utilization of eye care services by member patients and the
effectiveness of administering the contracts. The Company receives a percentage
of collected medical billings for administering indemnity fee-for-service plans
for its Affiliated Providers. Although the terms and conditions of the Company's
managed care contracts vary considerably, they typically have one-year terms
with automatic annual renewals unless either party elects to terminate the
contract pursuant to its terms.
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<PAGE> 11
The Company manages risk of capitated managed care contracts by
monitoring utilization of each Affiliated Provider and comparing their
utilization to national averages, expected utilization at the time the contract
was bid, utilization of other providers and historical utilization of the
Affiliated Provider. Abnormal utilization of an Affiliated Provider may result
in a medical chart review by the Company and further counseling on appropriate
clinical protocols. To further manage the risk of capitated managed care
contracts, the Company, in certain instances, enters into agreements to pay
Affiliated Providers a fixed per-member-per-month fee for eye care services
rendered or a pro-rata share of managed care capitated payments received (as
determined by the number of eye care procedures performed relative to other
Affiliated Providers). The Company targets these payments at a range of 75% to
85% of total payments received pursuant to the Company's capitated managed care
contracts.
RESTRUCTURING PLAN
The accrued restructuring charge of $0.7 million at December 31, 1999
was reduced by $0.1 million to $0.6 million at September 30, 2000. The reduction
was related entirely to severance payments. For the nine months ended September
30, 1999, the Company utilized approximately $0.5 million of this charge,
related to severance payments. The reserve for the Restructuring Plan was $2.3
million at September 30, 1999.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of total revenues,
certain items in the Company's statement of operations for the periods
indicated. As a result of the 1999 divestitures of the PPM business, the Company
does not believe that the historical percentage relationships for the three
months and nine months ended September 30, 1999 and 2000 reflect the Company's
expected future operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1999 2000 1999 2000
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Managed care ..................................... 100.0% 100.0% 69.0% 100.0%
Buying group ..................................... -- -- 31.0 --
------ ------ ------ ------
Total revenues ............................ 100.0 100.0 100.0 100.0
------ ------ ------ ------
Operating expenses:
Medical claims ................................... 76.1 71.8 51.3 72.4
Cost of buying group sales ....................... -- -- 29.5 --
General and administrative ....................... 36.0 26.7 28.4 38.9
Depreciation and amortization .................... 5.2 5.1 3.7 5.2
Restructuring and other charges (credits) ....... 6.2 13.1 1.5 4.2
Start-up and software development ................ 4.0 -- 2.0 --
------ ------ ------ ------
Total operating expenses .................. 127.5 116.7 116.4 120.7
------ ------ ------ ------
Loss from operations ............................... (27.5) (16.7) (16.4) (20.7)
Interest expense ................................... 9.7 13.9 6.8 13.6
Gain on sale of assets ............................. -- -- (.8) --
------ ------ ------ ------
Loss from continuing operations .................... (37.2) (30.6) (22.4) (34.3)
Discontinued operations:
Income (loss) from discontinued operations.. 2.8 (2.7) 7.4 1.4
Income (loss) on disposal of discontinued
operations ....................... (59.6) 12.3 (13.9) 4.5
------ ------ ------ ------
Loss before extraordinary items .................... (94.0) (21.0) (28.9) (28.4)
Extraordinary items ....................... (40.1) (4.5) (9.4) 2.0
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
------ ------ ------ ------
Net loss ........................................ (53.9) (16.5) (19.5) (30.4)
====== ====== ====== ======
Medical claims ratio ............................ 76.1% 71.8% 74.4% 72.4%
====== ====== ====== ======
</TABLE>
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<PAGE> 13
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2000 COMPARED TO THREE-MONTH PERIOD ENDED
SEPTEMBER 30, 1999
Revenues.
Revenues decreased 10.9% from $14.5 million for the three months ended
September 30, 1999 to 12.9 million for the three months ended September 30,
2000. This decrease was due primarily to the termination of a large,
unprofitable Managed Care contract.
Medical Claims.
Medical claims expense decreased 16.0% from $11.0 million for the three
months ended September 30, 1999 to $9.3 million for the three months ended
September 30, 2000. The Company's medical claims ratio decreased from 76.1% for
the three months ended September 30, 1999 to 71.8% for the three months ended
September 30, 2000. Medical claims expense consists of payments by the Company
to its Affiliated Providers for vision care wellness services, medical and
surgical eye care services and facility services. These payments are based on
fixed payments received (as determined by the number of eye care procedures
performed relative to other Affiliated Providers) or negotiated fee-for-service
schedules. The decrease in the medical claims ratio is primarily attributable to
the termination of a large unprofitable Managed Care contract in 1999.
Cost of Buying Group Sales.
The cost of buying group sales consists of the costs of various optical
products that are shipped directly to the providers of eye care services. The
Company completed the sale of the buying group division during the second
quarter of 1999.
General and Administrative.
General and administrative expenses decreased 33.9% from $5.2 million
for the three months ended September 30, 1999 to $3.4 million for the three
months ended September 30, 2000. General and administrative expenses consist
mainly of salaries, wages and benefits related to management and administrative
staff located at the Company's corporate headquarters and its managed care
service centers as well as professional fees, advertising, building and
occupancy costs, operating lease expenses and other costs related to the
maintenance of a headquarters operation. While expenses declined in dollar
terms, expenses as a percentage of revenue also declined from 36.0% for the
three months ended September 30, 1999 to 26.7% for the three months ended
September 30, 2000. The decreased percentage is due to the aggressive reduction
of staff and related overhead expenses in an effort to bring overall general and
administrative expenses in line with the current run rate of the continuing
business. Professional fees are expected to remain high in the fourth quarter of
2000 as a result of: 1) the requirements of the Refractive and Ambulatory
Surgery Centers divestiture effort, 2) activities required to resolve various
claims and other antecedent debt and 3) ongoing negotiations with the Company's
lenders 4) consolidation of the Managed Care and Corporate Operation.
Depreciation and Amortization.
Depreciation and amortization expense decreased from $750,000 for the
three months ended September 30, 1999 to $660,000 for the three months ended
September 30, 2000 due to the reduction in intangible assets resulting primarily
from the discontinuation of the PPM business. As a percentage of revenues,
depreciation and amortization expense remained relatively constant at 5.2% for
the three months ended September 30, 1999 and 5.1% for the three months ended
September 30, 2000.
Interest Expense.
Interest expense increased 28.5% from $1.4 million for the three months
ended September 30, 1999 to $1.8 million for the three months ended September
30, 2000. In the third quarter of 1999, approximately $232,000 of
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<PAGE> 14
interest expense was allocated to discontinued operations versus none in the
third quarter of 2000. Although average borrowings were approximately $6.3
million lower in the second quarter of 2000 versus the same period in 1999, the
average interest rate on the Company's borrowings rose significantly in the
third quarter of 2000 due to a general increase in interest rates as well as
higher spreads required by its lenders.
Extraordinary Items.
The extraordinary item of approximately $63,000 represents costs
incurred by the Company in connection with the proposed merger with OptiCare
Health Systems, Inc. The $645,000 forgiveness of indebtedness was related to the
settlement of outstanding litigation resulting in the reduction of debt
obligations.
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2000 COMPARED TO NINE-MONTH PERIOD ENDED
SEPTEMBER 30, 1999
Revenues.
Revenues decreased 35.7% from $61.8 million for the nine months ended
September 30, 1999 to $39.7 million for the nine months ended September 30,
2000. This decrease was primarily due to the Company's sale of the buying group
division. Managed care revenues on a comparable basis decreased 6.9% from 1999
revenues due primarily to the termination of a large, unprofitable contract in
1999.
Medical Claims.
Medical claims expense decreased 9.3% from $31.7 million for the nine
months ended September 30, 1999 to $28.8 million for the nine months ended
September 30, 2000. The Company's medical claims ratio decreased from 74.4% for
the nine months ended September 30, 1999 to 72.4% for the nine months ended
September 30, 2000. Medical claims expense consists of payments by the Company
to its Affiliated Providers for vision care wellness services, medical and
surgical eye care services and facility services. These payments are based on
fixed payments received (as determined by the number of eye care procedures
performed relative to other Affiliated Providers) or negotiated fee-for-service
schedules.
Cost of Buying Group Sales.
The cost of buying group sales consists of the costs of various optical
products that are shipped directly to the providers of eye care services. The
Company completed the sale of the buying group division during the second
quarter of 1999.
General and Administrative.
General and administrative expenses decreased 11.9% from $17.5 million
for the nine months ended September 30,1999 to $15.5 million for the nine months
ended September 30, 2000. General and administrative expenses consist mainly of
salaries, wages and benefits related to management and administrative staff
located at the Company's corporate headquarters and its managed care service
centers as well as professional fees, advertising, building and occupancy costs,
operating lease expenses and other costs related to the maintenance of a
headquarters operation. Although expenses declined in dollar term, expenses as a
percentage of revenue increased dramatically from 28.4% for the nine months
ended September 30, 1999 to 38.9% for the nine months ended September 30, 2000.
The increased percentage is due to lower revenue of the continuing businesses
coupled with significant costs associated with accounting, legal and consulting
professionals offset by reductions in headcount and related expenses. Management
has been aggressively reducing staff and related overhead expenses in an effort
to bring overall general and administrative expenses in line with the current
run rate of the continuing business and is further consolidating these
operations by year end. Professional fees are expected to remain high in the
fourth quarter of 2000 as a result of: 1) the requirements of the Refractive and
Ambulatory Surgery Center divestiture effort, 2) activities required to resolve
various claims and other antecedent debt, 3) ongoing negotiations with the
Company's lenders, and 4) consolidation of the Managed Care and Corporate
Operation.
Depreciation and Amortization.
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<PAGE> 15
Depreciation and amortization expense decreased from $2.3 million for
the nine months ended September 30, 1999 to $2.1 million for the nine months
ended September 30, 2000 due to the reduction in intangible assets resulting
primarily from the discontinuation of the PPM business. As a percentage of
revenues, depreciation and amortization expense increased from 3.7% for the nine
months ended September 30, 1999 to 5.2% for the nine months ended September 30,
2000 due to the reduction of revenues resulting from the sale of the Company's
buying group division.
Interest Expense.
Interest expense increased 28.8% from $4.2 million for the nine months
ended September 30, 1999 to $5.4 million for the nine months ended September 30,
2000. In the first nine months of 1999, approximately $963,000 of interest
expense was allocated to discontinued operations versus none in the first nine
months of 2000. Although average borrowings were approximately $8.5 million
lower in the first nine months of 2000 versus the same period in 1999, the
average interest rate on the Company's borrowings rose significantly in the
first nine months of 2000 due to a general increase in interest rates as well as
higher spreads required by its lenders.
Extraordinary Items.
The extraordinary item of approximately $1.4 million represents costs
incurred by the Company in connection with the proposed merger with OptiCare
Health Systems, Inc. The $645,000 forgiveness of indebtedness was related to the
settlement of outstanding litigation resulting in the reduction of debt
obligations.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its working capital and capital
expenditure requirements primarily through institutional borrowings and private
debt and equity financing. Net cash used in operating activities for the nine
months ended September 30, 2000 was $8.9 million as compared to net cash used in
operating activities of $11.2 million for the nine months ended September 30,
1999.
Net cash used in investing activities for the nine months ended
September 30, 2000 was only $664,000 reflecting an absence of resources
available for investing. Net cash provided by investing activities for the nine
months ended September 30, 1999 was $34.6 million and resulted from the net
proceeds realized from the sale of the Block Buying Group and Retail Optical
Chains, net of payments for medical equipment, office furniture and capitalized
acquisition costs.
Net cash provided by financing activities for the nine months ended
September 30, 2000 of $584,000 were primarily attributable to modest increased
net borrowings under the Company's credit facilities. Net cash used by financing
activities for the nine months ended September 30, 1999 was $32.0 million
resulting from the application of proceeds from the sale of the Buying Group and
Retail Optical Chains to the reduction of the Company's outstanding debt.
On January 30, 1998, the Company entered into a five-year, $50.0
million credit agreement (the "Credit Agreement") with the Bank of Montreal as
agent (the "Agent") for a consortium of banks (the "Banks"). The Credit
Agreement, which was to mature in January 2003, provided the Company with a
revolving credit facility component in an aggregate amount of up to $10.0
million and a term loan component in an aggregate amount of up to $40.0 million.
Borrowings under the Credit Agreement were secured by a pledge of the stock of
substantially all of the Company's subsidiaries as well as the assets of the
Company and certain of its subsidiaries. Obligations under the Credit Agreement
were guaranteed by certain of the Company's subsidiaries. The Credit Agreement
contained negative and affirmative covenants and agreements that placed
restrictions on the Company regarding disposition of assets, capital
expenditures, additional indebtedness, permitted liens and payment of dividends,
as well as required the maintenance of certain financial ratios. The interest
rate on the Credit Agreement was, at the option of the Company, either (i) the
London InterBank Offered Rate plus an applicable margin rate, (ii) the greater
of (a) the Agent's prime commercial rate or (b) the "federal funds" rate plus
0.5%, or (iii) a fixed rate loan as determined by the Agent at each time of
borrowing. At the closing of the Credit Agreement, the Company used
approximately $26.9 million of its available borrowing to repay the outstanding
balance under the Company's bridge credit facility
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<PAGE> 16
with Prudential Credit and related accrued interest and transaction costs. As of
June 30, 1998, the Company had used approximately $48.3 million of its available
borrowings under the Credit Agreement.
On July 1, 1998, the Company entered into a restated $100.0 million
credit agreement (the "Restated Credit Agreement") with the Bank of Montreal as
agent for a consortium of banks. The Restated Credit Agreement was used, in
part, for early extinguishment of the Company's outstanding balance of
approximately $48.3 million under its prior Credit Agreement. The remaining
balance under the Restated Credit Agreement was used for working capital,
acquisitions and general corporate purposes. The Restated Credit Agreement
included a seven-year term loan of $70.0 million and a $30.0 million, five-year
revolving and acquisition facility. Other terms and conditions were
substantially the same as the prior Credit Agreement with a slightly higher
margin spread on the seven-year term portion. At December 31, 1998,
approximately $81.6 million was outstanding under the Restated Credit Agreement.
On February 23, 1999, the Company entered into an amendment to the
Restated Credit Agreement (the "First Amendment"). The First Amendment provided
a $50.0 million term loan maturing in June 2005 with quarterly principal
payments of one percent beginning in June 1999, a $20.0 million term loan
maturing in June 2003 with quarterly principal payments of approximately $1.3
million beginning in September 2000, a $12.5 million term loan which was to be
utilized for acquisitions and capital expenditures maturing in June 2003, and a
$7.5 million revolving credit facility maturing in June 2003. The First
Amendment resulted in a reduction of $10.0 million in the total borrowing
capacity of the Company. The First Amendment also revised certain of the
covenants and included a slightly higher margin spread on the seven-year term
portion. Other terms and conditions were substantially the same as the Restated
Credit Agreement.
On June 11, 1999, the Company entered into a second amendment to the
Restated Credit Agreement (the "Second Amendment" and together with the Restated
Credit Agreement and the First Amendment, the "Amended and Restated Credit
Agreement"). The Second Amendment principally revised certain financial
covenants in connection with the credit facility which the Company was
previously unable to meet, terminated early the Company's unused portion of its
borrowing capacity relative to the acquisition component of the credit facility
which was scheduled to expire June 30, 1999 and waived the Company's
non-compliance with certain obligations under the Amended and Restated Credit
Agreement through the date thereof.
On August 30, 1999, the Company entered into a third amendment to the
Amended and Restated Credit Agreement (the "Third Amendment"). The Third
Amendment provided for the consent to the sale of the Company's Retail Optical
Chains to ECCA by the Banks and Agent as parties to the Amended and Restated
Credit Agreement, revised certain covenants and financial ratios and waived the
Company's non-compliance with certain obligations under the Amended and Restated
Credit Agreement through the date thereof. On August 31, 1999, the sale of the
Company's Retail Optical Chains to ECCA was consummated. Of the proceeds
received by the Company, $30.8 million was used to permanently reduce the
Company's term loan borrowings and $2.8 million was used to reduce the
outstanding balance under the Company's $7.5 million revolving credit facility.
On November 12, 1999, the Company entered into a fourth amendment to
the Amended and Restated Credit Agreement (the "Fourth Amendment"). Pursuant to
the Fourth Amendment, a bridge loan facility of $3.0 million was made available
to the Company that was to mature on November 26, 1999. Waivers were extended on
a short-term basis regarding certain of the Company's violations of loan
covenants and repayment obligations.
On November 24, 1999, the Company entered into a fifth amendment to the
Amended and Restated Credit Agreement (the "Fifth Amendment"). Pursuant to the
Fifth Amendment, the repayment date for the bridge facility was extended, and
waivers with respect to violations of certain covenants including payment of
certain interest and principal amounts currently due were granted until December
10, 1999.
On December 3, 1999, the Company entered into a sixth amendment to the
Amended and Restated Credit Agreement (the "Sixth Amendment"). Pursuant to the
Sixth Amendment, availability under the bridge loan facility was increased from
an aggregate of $3.0 million to an aggregate of $4.4 million, the repayment date
of the bridge loan facility was extended, and waivers for violations of certain
covenants and principal and interest payments due were granted until January 31,
2000.
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<PAGE> 17
On December 10, 1999, the Company entered into a seventh amendment to
the Amended and Restated Credit Agreement (the "Seventh Amendment"). Pursuant to
the Seventh Amendment, availability under the bridge loan facility was increased
to an aggregate of $9.4 million, the repayment date of the bridge loan facility
was extended until March 31, 2000 and waivers regarding violations of certain
covenants and payment obligations currently due were granted until December 31,
1999. Pursuant to the Seventh Amendment, the Company agreed to provide the Banks
with a weekly operating budget and to obtain approval from the Banks for all
significant cash expenditures.
On December 29, 1999, the parties to the Amended and Restated Credit
Agreement executed a waiver letter (the "December Waiver"). The December Waiver
extended the waivers provided by the Seventh Amendment regarding violations of
certain covenants and payment obligations currently due until February 29, 2000
while the Company explored the possibility of the sale of the entire business or
a substantial portion of its assets. The December Waiver granted the Company the
ability to use a portion of the proceeds from the sale of the physician practice
management businesses to meet its "reasonable and necessary" operating expenses
until the sale of the Company was consummated.
On February 29, 2000, the parties to the Amended and Restated Credit
Agreement executed a waiver letter (the "February Waiver"). The February Waiver
related to the Company's announcement that it had entered into a definitive
merger agreement with OptiCare and extended the waivers provided by the Seventh
Amendment until the earlier of March 24, 2000 or the termination of the merger
agreement with OptiCare pursuant to its terms.
On March 24, 2000, the parties to the Amended and Restated Credit
Agreement executed a waiver letter (the "March Waiver"). The March Waiver
extended (i) the waivers provided by the Seventh Amendment and the December and
February Waivers and (ii) the bridge facility due date, until the earlier of
April 14, 2000 or the termination of the merger agreement with OptiCare pursuant
to its terms.
On April 14, 2000, the parties to the Amended and Restated Credit
Agreement executed a waiver letter (the "April Waiver"). The April Waiver
extended (i) the waiver provided by the Seventh Amendment and the December,
February and March Waivers and (ii) the bridge facility due date until the
earlier of May 5, 2000 or the termination of the merger agreement with OptiCare
pursuant to its terms.
On May 5, 2000, the parties to the Amended and Restated Credit
Agreement executed a waiver letter (the "May Waiver"). The May Waiver extended
(i) the waiver provided by the Seventh Amendment and the December, February,
March and April Waivers and (ii) the bridge facility due date until the earlier
of May 19, 2000 or the termination of the merger agreement with OptiCare
pursuant to its terms.
On May 19, 2000, the parties to the Amended and Restated Credit
Agreement executed a waiver letter (the "May 19th Waiver"). The May 19th Waiver
extended (i) the waiver provided by the Seventh Amendment and the December,
February, March, April and May Waivers and (ii) the bridge facility due date
until the earlier of June 2, 2000 or the termination of the merger agreement
with OptiCare pursuant to its terms.
On June 2, 2000, the parties to the Amended and Restated Credit Agreement
executed a waiver letter which extended (i) the waiver provided by the Seventh
Amendment and the previously granted waivers and (ii) the bridge facility due
date, and postponed the due date for certain principal, interest and commitment
fees otherwise due until the earlier of June 9, 2000 or the termination of the
merger agreement with OptiCare pursuant to its terms.
On June 9, 2000, the parties to the Amended and Restated Credit Agreement
executed a waiver letter which extended (i) the waiver provided by the Seventh
Amendment and the previously granted waivers and (ii) the bridge facility due
date, and postponed the due date for certain principal, interest and commitment
fees otherwise due until the earlier of June 16, 2000 or the termination of the
merger agreement with OptiCare pursuant to its terms.
On June 16, 2000, the parties to the Amended and Restated Credit Agreement
executed a waiver letter which extended (i) the waiver provided by the Seventh
Amendment and the previously granted waivers and (ii) the bridge facility due
date, and postponed the due date for certain principal, interest and commitment
fees otherwise due until the earlier of June 29, 2000 or the termination of the
merger agreement with OptiCare pursuant to its terms.
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<PAGE> 18
On June 29, 2000, the parties to the Amended and Restated Credit
Agreement executed a waiver letter which extended (i) the waiver provided by the
Seventh Amendment and the previously granted waivers and (ii) the bridge
facility due date, and postponed the due date for certain principal, interest
and commitment fees otherwise due until July 21, 2000.
On July 21, 2000, the parties to the Amended and Restated Credit
Agreement executed a waiver letter which extended (i) the waiver provided by the
Seventh Amendment and the previously granted waivers and (ii) the bridge
facility due date, and postponed the due date for certain principal, interest
and commitment fees otherwise due until August 11, 2000.
On August 11, 2000, the parties to the Amended and Restated Credit
Agreement executed a waiver letter which extended (i) the waiver provided by the
Seventh Amendment and the previously granted waiver and (ii) the bridge facility
due date, and postponed the due date for certain principal, interest and
commitment fees otherwise due until September 8, 2000.
On September 8, 2000, the parties to the Amended and Restated Credit
Agreement executed a waiver letter which extended (i) the waiver provided by the
Seventh Amendment and the previously granted waiver and (ii) the bridge facility
due date, and postponed the due date for certain principal, interest and
commitment fees otherwise due until September 29, 2000.
On September 29, 2000, the parties to the Amended and Restated Credit
Agreement executed a waiver letter which extended (i) the waiver provided by the
Seventh Amendment and the previously granted waiver and (ii) the bridge facility
due date, and postponed the due date for certain principal, interest and
commitment fees otherwise due until October 13, 2000.
In connection with its previous acquisition of American SurgiSite, the
Company had entered into an agreement at the time of closing relative to
contingent consideration. The sellers of that business have made a claim that
they are entitled to a $3.0 million earn out payment from the Company, 50% of
which is payable in cash and 50% is payable in Common Stock, and have threatened
to seek rescission of the original transaction. The Company disputes the claim
and is in discussions with those individuals regarding their position and
resolution of the matter.
The Company believes the effects of inflation have not had a material
adverse impact on its operations or financial condition to date. Substantial
increases in prices in the future, however, could have a material adverse effect
on the Company's results of operations.
During the fourth quarter of 1999, the Company's liquidity was
adversely impacted by the announced exit from the PPM business as collection of
PPM management fee revenues during the negotiation process declined
significantly. However, during the first nine months of 2000, the Company began
completing the sale of the practice assets back to physicians or affiliates. The
resulting proceeds provided additional resources to fund operations. As of
September 30, 2000, the Company had sold all of the practice assets and received
proceeds of approximately $13.0 million.
Management has been aggressively reducing staff and related overhead
spending, carefully managing business unit operating cash flow and negotiating
for the divestiture of the Refractive and Ambulatory Surgery Center businesses
in an effort to further improve the Company's liquidity position and restore
profitability.
The Company has experienced significant losses and is currently
dependent upon the cooperation, approvals and availability of waivers from the
Banks as parties to its credit facility for operating capital. As indicated, the
Company is in the process of restructuring its bank credit facility, as well as
claims and antecedent debts unrelated to its current business, in order to fund
its future operations. The bank group has indicated that it will be unwilling to
provide anything but a small portion of cash to settle the Company's antecedent
debts and claims for significantly discounted cash amounts. The Company expects
that it will need to use a combination of a small portion of cash and preferred
stock to settle claims and antecedent debts in order for the restructuring
efforts to be successful and permit the Company to continue operations. The
Company does not believe that other sources of capital are available to fund its
operations in the event it is unsuccessful in dealing with its creditors. While
there can be no assurances, the Company is hopeful that upon a successful
restructuring, continued sale of certain assets and integration of remaining
business units, the Company can return to profitability and positive cash flow.
However, in the event the Company's restructuring efforts are not successful,
the Company may need to seek protection under the Federal Bankruptcy Code.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to changes in interest rates primarily as a
result of borrowing activities under its Amended and Restated Credit Agreement,
which is used to maintain liquidity and fund the Company's business operations.
The nature and amount of the Company's debt may vary as a result of future
business requirements, market conditions and other factors. The extent of the
Company's interest rate risk is not quantifiable or predictable
As a result of the implementation of the aforementioned restructuring
of indebtedness by the Company there will be significant and material dilution
to existing shareholders. In addition, there can be no assurance that such
restructuring will be successfully completed.
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<PAGE> 19
because of the variability of future interest rates and business financing
requirements, but the Company does not believe such risk is material. The
Company did not use derivative instruments to adjust the Company's interest rate
risk profile during the nine months ended September 30, 2000.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q and certain information provided periodically in writing
and orally by the Company's designated officers and agents contain certain
statements which constitute "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. The terms "Vision Twenty-One," "Company," "we," "our" and
"us" refer to Vision Twenty-One, Inc. The words "expect," "believe," "goal,"
"plan," "intend," "estimate," and similar expressions and variations thereof are
intended to specifically identify forward-looking statements. Those statements
appear in this Form 10-Q, the Form 10-K and the documents incorporated herein by
reference, particularly "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and include statements regarding the
intent, belief or current expectations of the Company, its directors or officers
with respect to, among other things:
(i) our contemplated restructuring of certain outstanding
indebtedness;
(ii) the issuance and expected issuance of a significant
number of additional shares of Common Stock and securities
convertible into Common Stock;
(iii) the need for shareholder approval of a sufficient increase
in the number of authorized shares of Common Stock to
enable the Company to complete the financial restructuring;
(iv) our financial prospects;
(v) our financing plans including our ability to continue to
obtain appropriate waivers from and/or meet our obligations
under our current credit facility and obtain satisfactory
operating and working capital;
(vi) trends affecting our financial condition or results of
operations including our divestiture of business units;
(vii) our operating strategy including the shift in focus to
managed care business;
(viiii) the impact on us of current and future governmental
regulations;
(ix) our ability to maintain our relationships with Affiliated
Providers;
(x) our ability to effectively manage and operate our
refractive and ambulatory surgery center business through
the date of sale;
(xi) our ability to operate the managed care business
efficiently, profitably and effectively;
(xii) our integration of systems and implementation of cost
reduction plans;
(xiii) our expected savings from the restructuring programs;
(xiv) our current and expected future revenue and the impact of
the consolidation of infrastructure and business
divestitures may have on our future performance;
(xv) our timely filing of Securities and Exchange Act Reports;
and
(xvi) the effect of purported class action complaints and other
litigation and claims involving the Company.
You are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those projected in the forward-looking
statements as a result of various factors. The factors that might cause such
differences include, among others, the following:
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<PAGE> 20
(i) our inability to obtain liquidity from our lenders and/or
utilize business divestitures proceeds to fund our ongoing
operations including severance obligations and contingent
payment obligations;
(ii) our inability to restructure and settle any and all
indebtedness, claims and disputes in a manner that permits
continued operations of the Company;
(iii) our inability to complete our restructuring efforts,
including, but not limited to, obtaining any required
consents or approvals of the shareholders;
(iv) our inability to continue to sell certain business units
and any potential losses arising therefrom;
(v) our changes in, or inability to keep, personnel,
management or directors;
(vi) our inability to enter into acceptable settlement
agreements with parties making claims against us or to
fulfill our obligations pursuant to such settlement
agreements;
(vii) our inability to relocate the Boca Raton, Florida service
center to Baltimore, Maryland without major disruption;
(viii) the continuation of operating and net losses being
experienced by the Company and increases in such losses;
(vix) any material inability to acquire additional sufficient
capital at a reasonable cost to fund our continued
operations or to maintain compliance with our credit
facility;
(x) the inability to maintain our managed care business;
(xi) any adverse changes in our managed care business,
including but not limited to, the inability to renew
existing managed care contracts or obtain future contracts
or maintain and expand our Affiliated Provider network;
(xii) our inability to successfully and profitably operate our
managed care business or for existing managed care
contracts to positively impact gross profit;
(xiii) any adverse change in our medical claims to managed care
revenue ratio;
(xiv) changes in state and/or federal governmental regulations
which could materially affect our ability to operate;
(xv) any adverse governmental or regulatory changes or actions,
including any healthcare regulations and related
enforcement actions;
(xvi) the inability to maintain or obtain required licensure in
the states in which we operate or seek to operate;
(xvii) our stock price;
(xviii) our inability to sell the RSC and ASC business units;
(xix) any adverse changes in our RSC facility access
arrangements with Affiliated Providers;
(xx) consolidation of our competitors, poor operating results
by our competitors, or adverse governmental or judicial
rulings against us or our competitors;
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<PAGE> 21
(xxi) our inability to realize any significant benefits, cost
savings or reductions from our restructuring program;
(xxii) our inability to increase and expand managed care
initiatives;
(xxiii) unexpected cost increases;
(xxiv) our inability to successfully defend against the class
action lawsuits, or any additional litigation that
currently exists or may arise in the future;
(xxv) our inability to timely file our required reports with the
SEC;
(xxvi) in the event the Company becomes a debtor in Bankruptcy
Court; and
(xxvii) other factors including those identified in our filings
from time-to-time with the SEC.
The Company undertakes no obligation to publicly update or revise
forward-looking statements to reflect events or circumstances after the date of
this Form 10-Q to reflect the occurrence of unanticipated events.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
During the quarter for which this report is filed, there have been no
material developments to previously reported litigation except for the dismissal
of the Block Group litigation that sought to enjoin the OptiCare transaction.
Except as previously reported, the Company is not a party to any material
litigation and is not aware of any threatened material litigation:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a.) Exhibits - See Exhibits under attached hereto.
b.) During the quarter ended September 30, 2000 the Company filed reports
on form 8K on July 31, 2000 and September 15, 2000 regarding the
execution of additional waiver letters between the Company and its Bank
lenders as parties to the Company's amended and restated credit
facility.
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<PAGE> 22
SIGNATURE
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, in the city of Baltimore, State of
Maryland on November 14, 2000.
VISION TWENTY-ONE, INC.,
Registrant
By: /s/ RICHARD W. JONES
____________________________________
Richard W. Jones
Chief Financial Officer
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<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBITS DESCRIPTION
------ --------------------
<S> <C>
3.1* Amended and Restated Articles of Incorporation of Vision
Twenty-One, Inc.(1)
3.2* By-laws of Vision Twenty-One, Inc.(1)
4.14* Amended and Restated Credit Agreement dated as of July 1,
1998 among Vision Twenty-One, Inc., and the Bank of
Montreal as Agent for a consortium of banks.(15)
4.15* First Amendment to the Amended and Restated Credit
Agreement dated as of February 23, 1999 among Vision
Twenty-One, Inc., the Banks who are a party thereto and
Bank of Montreal as Agent.(18)
4.16* Second Amendment to the Amended and Restated Credit
Agreement dated as of June 11, 1999 among Vision
Twenty-One, Inc., the Banks who are a party thereto and
Bank of Montreal as Agent. (18)
4.17* Third Amendment to the Amended and Restated Credit
Agreement dated as of August 30, 1999 by and among Vision
Twenty-One, Inc., the Banks who are a party thereto and
Bank of Montreal as Agent.(19)
4.18* Waiver Letter dated October 14, 1999 to the Amended and
Restated Credit Agreement by and among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent.(20)
4.19* Fourth Amendment and Waiver to the Amended and Restated
Credit Agreement dated as of November 12, 1999 by and
among Vision Twenty-One, Inc., the Banks who are a party
thereto and Bank of Montreal as Agent.(21)
4.20* Fifth Amendment to the Amended and Restated Credit
Agreement dated as of November 24, 1999 by and among
Vision Twenty-One, Inc., the Banks who are a party
thereto and Bank of Montreal as Agent.(22)
4.21* Sixth Amendment to the Amended and Restated Credit
Agreement dated as of December 3, 1999 by and among
Vision Twenty-One, Inc., the Banks who are a party
thereto and Bank of Montreal as Agent.(22)
4.22* Seventh Amendment to the Amended and Restated Credit
Agreement dated as of December 10, 1999 by and among
Vision Twenty-One, Inc., the Banks who are a party
thereto and Bank of Montreal as Agent.(22)
4.23* Waiver Letter dated December 29, 1999 to the Amended and
Restated Credit Agreement by and among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent.(23)
4.24* Waiver letter dated February 29, 2000 to the Amended and
Restated Credit Agreement by and among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent.(26)
</TABLE>
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<PAGE> 24
<TABLE>
<S> <C>
4.25* Waiver letter dated March 24, 2000 to the Amended and
Restated Credit Agreement by and among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent.(26)
4.26* Waiver letter dated as of April 14, 2000 to the Amended
and Restated Credit Agreement by and among Vision
Twenty-One, Inc., the Banks who are a party thereto and
Bank of Montreal as Agent.(26)
4.27* Waiver letter dated as of May 5, 2000 to the Amended and
Restated Credit Agreement by and among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent.(26)
4.28* Waiver letter dated as of May 19, 2000 to the Amended and
Restated Credit Agreement by and among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent. (27)
4.29* Waiver letter dated June 1, 2000 to the Amended and
Restated Credit Agreement by and among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent. (27)
4.30* Waiver letter dated June 9, 2000 to the Amended and
Restated Credit Agreement by and among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent. (27)
4.31* Waiver letter dated June 16, 2000 to the Amended and
Restated Credit Agreement by and among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent. (27)
4.32* Waiver letter dated June 29, 2000 to the Amended and
Restated Credit Agreement by and among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent. (27)
4.33* Waiver letter dated July 21, 2000 to the Amended and
Restated Credit Agreement by and among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent. (27)
4.34* Waiver letter dated August 11, 2000 to the Amended and
Restated Credit Agreement by and among Vision
Twenty-One, Inc., the Banks who are a party thereto and
Bank of Montreal as Agent. (28)
4.35* Waiver letter dated September 8, 2000 to the Amended and
Restated Credit Agreement by and among Vision
Twenty-One, Inc., the Banks who are a party thereto and
Bank of Montreal as Agent. (29)
4.36 Waiver letter dated September 29, 2000 to the Amended
and Restated Credit Agreement by and among Vision
Twenty-One, Inc., the Banks who are a party thereto and
Bank of Montreal as Agent.
</TABLE>
(The Company is not filing any instrument with respect
to long-term debt that does not exceed 10% of the total
assets of the Company, and the Company agrees to furnish
a copy of such instrument to the Commission upon
request.)
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<PAGE> 25
<TABLE>
<S> <C>
10.60* Amended and Restated Credit Agreement dated as of July 1,
1998 among Vision Twenty-One, Inc., the Banks who are a
party thereto and Bank of Montreal as Agent.(15)
10.61* First Amendment to the Amended and Restated Credit
Agreement dated as of February 23, 1999 among Vision
Twenty-One, Inc., the Banks who are a party thereto and
Bank of Montreal as Agent.(18)
10.62* Second Amendment to the Amended and Restated Credit
Agreement dated as of June 11, 1999 among Vision
Twenty-One, Inc., the Banks who are a party thereto and
Bank of Montreal as Agent.(18)
10.65* Third Amendment to the Amended and Restated Credit
Agreement dated as of August 30, 1999 by and among Vision
Twenty-One, Inc., the Banks who are a party thereto and
Bank of Montreal as Agent.(19)
10.66* Waiver Letter dated October 14, 1999 to the Amended and
Restated Credit Agreement by and among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent.(20)
10.67* Fourth Amendment and Waiver to the Amended and Restated
Credit Agreement dated as of November 12, 1999 by and
among Vision Twenty-One, Inc., the Banks who are a party
thereto and Bank of Montreal as Agent.(21)
10.72* Fifth Amendment to the Amended and Restated Credit
Agreement dated as of November 27, 1999 among Vision
Twenty-One, Inc., the Banks who are a party thereto and
Bank of Montreal as Agent.(22)
10.73* Sixth Amendment to the Amended and Restated Credit
Agreement dated as of December 3, 1999 among Vision
Twenty-One, Inc., the Banks who are a party thereto and
Bank of Montreal as Agent.(22)
10.74* Seventh Amendment to the Amended and Restated Credit
Agreement dated as of December 10, 1999 among Vision
Twenty-One, Inc., the Banks who are a party thereto and
Bank of Montreal as Agent.(22)
10.75* Waiver letter dated December 29, 1999 to the Amended and
Restated Credit Agreement among Vision Twenty-One, Inc.,
the Banks who are a party thereto and Bank of Montreal as
Agent.(23)
</TABLE>
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<PAGE> 26
<TABLE>
<S> <C>
10.76* Waiver letter dated February 29, 2000 to the Amended and
Restated Credit Agreement among Vision Twenty-One, Inc.,
the Banks who are a party thereto and Bank of Montreal as
Agent.(26)
10.77* Waiver letter dated March 24, 2000 to the Amended and
Restated Credit Agreement by and among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent.(26)
10.81* Agreement and Plan of Merger and Reorganization among
Vision Twenty-One, Inc., OC Acquisition Corp. and
OptiCare Health Systems, Inc.(26)
10.82* Waiver letter dated as of April 14, 2000 to the Amended
and Restated Credit Agreement among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent.(26)
10.83* Waiver letter dated as of May 5, 2000 to the Amended and
Restated Credit Agreement among Vision Twenty-One, Inc.,
the Banks who are a party thereto and Bank of Montreal as
Agent.(26)
10.84* Waiver letter dated as of May 19, 2000 to the Amended and
Restated Credit Agreement among Vision Twenty-One, Inc.,
the Banks who are a party thereto and Bank of Montreal as
Agent. (27)
10.85* Waiver letter dated as of June 1, 2000 to the Amended and
Restated Credit Agreement among Vision Twenty-One, Inc.,
the Banks who are a party thereto and Bank of Montreal as
Agent. (27)
10.86* Waiver letter dated as of June 9, 2000 to the Amended and
Restated Credit Agreement among Vision Twenty-One, Inc.,
the Banks who are a party thereto and Bank of Montreal as
Agent. (27)
10.87* Waiver letter dated as of June 16, 2000 to the Amended
and Restated Credit Agreement among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent. (27)
10.88* Waiver letter dated as of June 29, 2000 to the Amended
and Restated Credit Agreement among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent. (27)
10.89* Waiver letter dated as of July 21, 2000 to the Amended
and Restated Credit Agreement among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent. (27)
10.90* Agreement dated May 5, 2000 by and among Vision Twenty-One,
Inc. and Vision 21 of Southern Arizona, Inc., Vital Sight, P.C.,
Ocusite-ASC, Inc. and Jeffrey I. Katz, M.D. and Barry
Kusman, M.D.(28)
10.91* Waiver letter dated as of August 11, 2000 to the Amended
and Restated Credit Agreement among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent.(28)
</TABLE>
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<PAGE> 27
<TABLE>
<S> <C>
10.92* Waiver letter dated September 8, 2000 to the Amended and
Restated Credit Agreement by and among Vision Twenty-One,
Inc., the Banks who are a party thereto and Bank of
Montreal as Agent.(29)
10.93 Waiver Letter dated September 29, 2000 to the Amended and
Restated Credit Agreement by and among Vision Twenty-One,
Inc., the banks who are a party thereto and Bank of Montreal
as Agent.
10.94 Amended and Restated Employment Agreement dated July 31, 2000
by and between Mark B. Gordon, O.D. and MEC Health Care, Block
Vision, Inc and Vision 21.
10.95 Amended and Restated Employment Agreement dated July 31,
2000 by and between Ellen Gordon and MEC Health Care,
Block Vision, Inc and Vision 21.
10.96 Amended and Restated Employment Agreement dated July 31,
2000 by and between Andrew Alcorn and MEC Health Care,
Block Vision, Inc and Vision 21.
10.97 Employment Agreement dated July 31, 2000 by and between
Richard Jones and MEC Health Care, Block Vision, Inc and
Vision 21.
10.98 Amended and Restated Employment Agreement dated July 31,
2000 by and between Howard Levin, O.D. and MEC Health Care,
Block Vision, Inc and Vision 21.
27.1 Financial Data Schedule for the nine months ended
September 30, 2000 (for SEC use only).
27.2 Restated Financial Data Schedule for the nine months ended
September 30, 1999 (for SEC use only).
* Previously filed as an Exhibit in the Company filing
identified in the footnote following the Exhibit
description and incorporated herein by reference.
(1) Registration Statement on Form S-1 filed on June 13, 1997
(File No. 333-29213).
(15) Form 8-K filed July 10, 1998.
(18) Form 10-K filed June 18, 1999.
(19) Form 8-K filed August 30, 1999.
(20) Form 8-K filed October 14, 1999.
(21) Form 10-Q filed November 14, 1999.
(22) Form 8-K filed December 13, 1999.
(23) Form 8-K filed January 10, 2000.
(26) Form 10-K filed May 5, 2000.
(27) Form 8-K filed July 31, 2000.
(28) Form 10-Q Filed August 14, 2000
(29) Form 8-K filed September 15, 2000
</TABLE>
27
