<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X-QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES
--- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
OCTOBER 31, 1996
Commission file number 1-10629
-------
LASER VISION CENTERS, INC.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 43-1530063
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer identification
incorporation or organization) number)
540 Maryville Centre Dr., Suite 200, St. Louis, Missouri 63141
---------------------------------------------------------------
(Address of principal executive offices)
(314)434-6900
-------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock outstanding as of December 11,1996 - 8,805,383 shares.
<PAGE> 2
LASER VISION CENTERS, INC.
FORM 10-Q FOR QUARTERLY PERIOD ENDED OCTOBER 31, 1996
INDEX
<TABLE>
<CAPTION>
PART OR ITEM PAGE
<S> <C> <C>
Part I. FINANCIAL STATEMENTS
Item 1. Interim Consolidated Financial Statements
Consolidated Balance Sheet - October 31, 1996 and April 30, 1996 3-4
Consolidated Statement of Operations - Three months and six months
ended October 31, 1996 and 1995 5
Consolidated Statement of Cash Flow - Six months ended October 31, 1996 and 1995 6-7
Consolidated Statement of Changes in Stockholders' Equity - Six months
ended October 31, 1996 8
Notes to Interim Consolidated Financial Statements 9-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources 10-11
Results of Operations 11-14
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a
Vote of Security Holders 15
Item 5. Other Information. 16
Item 6. Reports on Form 8-K 16
</TABLE>
<PAGE> 3
LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
OCTOBER 31, April 30,
1996 1996
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 6,127,000 $12,672,000
Restricted cash 276,000
Receivables, net of allowances of
$394,000 and $286,000, respectively 1,068,000 805,000
Prepaid expenses and
other current assets 646,000 483,000
Assets held for sale (Note 4) 1,200,000
----------- -----------
Total Current Assets 8,117,000 15,160,000
EQUIPMENT
Laser equipment 16,048,000 9,474,000
Medical Equipment 569,000 352,000
Mobile equipment 1,311,000 892,000
Furniture and fixtures 1,263,000 1,019,000
-Accumulated depreciation (3,005,000) (1,323,000)
----------- -----------
16,186,000 10,414,000
Equipment deposits 272,000 1,765,000
----------- -----------
Total Equipment, Net 16,458,000 12,179,000
OTHER ASSETS
Restricted cash 1,374,000
Goodwill, net of amortization 1,339,000 1,108,000
VCI deposits 229,000 256,000
Tradename and service mark costs, net 146,000 152,000
Rent deposits and other, net 49,000 58,000
----------- -----------
Total Other Assets 3,137,000 1,574,000
----------- -----------
Total Assets $27,712,000 $28,913,000
=========== ===========
</TABLE>
See notes to interim consolidated financial statements
3
<PAGE> 4
LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- -------------------------------------------
<TABLE>
<CAPTION>
OCTOBER 31, April 30,
1996 1996
<S> <C> <C>
CURRENT LIABILITIES
Current portion of notes payable $ 565,000 $ 1,858,000
Current portion of capitalized
lease obligations 569,000 467,000
Accounts payable 1,855,000 870,000
Accrued liabilities 1,076,000 1,963,000
------------ ------------
Total Current Liabilities 4,065,000 5,158,000
NON-CURRENT LIABILITIES
Notes payable 3,663,000
Capitalized lease obligations 1,634,000 1,375,000
Deferred revenue 226,000 275,000
Minority interests 113,000
Other liabilities 300,000
------------ ------------
Total Non-Current Liabilities 5,823,000 1,763,000
COMMITMENTS AND CONTINGENCIES
CONVERTIBLE PREFERRED STOCK WITH MANDATORY
REDEMPTION PROVISION IN 2005,
0 and 141,000 shares outstanding,
respectively 14,539,000
STOCKHOLDERS' EQUITY
Preferred stock - 1,000,000 shares
authorized, 141,000 shares issued
at $100 par value with mandatory
redemption provision
Common stock, par value of $.01 per
share, 50,000,000 shares authorized;
8,805,383 and 6,415,993 shares issued
and outstanding, respectively 88,000 64,000
Paid-in capital 38,606,000 23,831,000
Accumulated deficit (20,870,000) (16,442,000)
------------ ------------
Total Stockholders' Equity 17,824,000 7,453,000
------------ ------------
Total Liabilities and Stockholders' Equity $ 27,712,000 $ 28,913,000
============ ============
</TABLE>
See notes to interim consolidated financial statements
4
<PAGE> 5
LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
- -------------------------------------------
<TABLE>
<CAPTION>
Three Month Period Six Month Period
Ended October 31, Ended October 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES $ 1,928,000 $ 960,000 $ 3,430,000 $ 1,732,000
Cost of revenues, depreciation 944,000 405,000 1,559,000 851,000
Cost of revenues, other 886,000 701,000 1,663,000 1,263,000
----------- ---------- ----------- -----------
GROSS PROFIT (LOSS) 98,000 (146,000) 208,000 (382,000)
----------- ---------- ----------- -----------
Operating Expenses:
General and administrative 785,000 403,000 1,892,000 697,000
Salaries and related expenses 815,000 596,000 1,622,000 936,000
Depreciation and amortization 109,000 78,000 208,000 126,000
Selling and marketing expenses 520,000 267,000 991,000 453,000
----------- ---------- ----------- -----------
2,229,000 1,344,000 4,713,000 2,212,000
----------- ---------- ----------- -----------
LOSS FROM OPERATIONS (2,131,000) (1,490,000) (4,505,000) (2,594,000)
Other income (expenses)
Interest and other income 57,000 37,000 163,000 76,000
Interest expense (117,000) (27,000) (189,000) (33,000)
Imputed interest expense (26,000) (60,000)
Minority interest in net loss
of subsidiary 55,000 50,000 103,000 84,000
----------- ---------- ----------- -----------
NET LOSS ($2,136,000) ($1,456,000) ($4,428,000) ($2,527,000)
=========== =========== =========== ===========
NET LOSS PER SHARE ($0.25) ($0.30) ($0.57) ($0.54)
=========== =========== =========== ===========
Weighted average number of
common shares outstanding 8,537,000 4,820,000 8,035,000 4,696,000
=========== =========== =========== ===========
</TABLE>
See notes to interim consolidated financial statements
5
<PAGE> 6
<TABLE>
<CAPTION>
LASER VISION CENTERS, INC. AND SUBSIDIARIES Six Month Period
CONSOLIDATED STATEMENT OF CASH FLOW Ended October 31,
- -------------------------------------------
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($4,428,000) ($2,527,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,767,000 977,000
Imputed interest 60,000
Provision for uncollectible accounts 108,000 22,000
Receivables increase (371,000) (33,000)
Prepaid expenses and other current asset increase (163,000) (105,000)
Minority interests decrease (103,000) (85,000)
Tradenames/other asset decrease 32,000
Accounts payable and accrued
liabilities increase 198,000 261,000
Deferred revenue decrease (49,000)
----------- -----------
Net cash used in operating activities (3,009,000) (1,430,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of equipment (3,844,000) (1,271,000)
Acquisition of goodwill (206,000) (17,000)
Acquisition of minority interest (10,000)
----------- -----------
Net cash used in investing activities (4,060,000) (1,288,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from private offering, preferred 14,100,000
Private placement offering costs, preferred (1,008,000)
Proceeds from exercise of stock options 60,000 242,000
Principal payments under capitalized
lease obligations and notes payable (2,109,000) (2,007,000)
Proceeds from loan financing 2,573,000
Proceeds from private offerings, common 1,219,000
Private placement offering costs, common (64,000)
Proceeds from exercise of other warrants 342,000
Net proceeds from exercise of Class B and F warrants 1,712,000
----------- -----------
Net cash provided by financing activities 524,000 14,536,000
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (6,545,000) 11,818,000
Cash and cash equivalents at beginning of period 12,672,000 2,126,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,127,000 $13,944,000
=========== ===========
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
LASER VISION CENTERS, INC. AND SUBSIDIARIES Six Month Period
CONSOLIDATED STATEMENT OF CASH FLOW Ended October 31,
- ------------------------------------------- 1996 1995
<S> <C> <C>
Non-cash investing and financing:
Conversion of preferred stock and accrual
of preferred dividends $14,539,000
Equipment deposits and assets held for sale
exchanged for equipment 2,693,000
Restricted cash acquired through financing 1,650,000
Capital lease obligations related to laser purchases 617,000 $1,024,000
Increase in other liabilities for laser purchase 300,000 675,000
Goodwill acquired for restricted common stock 130,000 647,000
Common stock issued to reduce liabilities 70,000
Med-Source purchase accounting
adjustment to goodwill and accruals 30,000
Deposits related to deferred revenue 250,000
Accrued offering costs, private placement 200,000
</TABLE>
See notes to interim consolidated financial statements
7
<PAGE> 8
LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
- -------------------------------------------
<TABLE>
<CAPTION>
Common Stock
$.01 Par Value Total
-------------------- Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
<S> <C> <C> <C> <C> <C>
Balance - April 30, 1996 6,415,993 $64,000 $23,831,000 ($16,442,000) $ 7,453,000
Issuance of restricted
shares of common stock 20,609 - 160,000 - 160,000
Exercise of incentive and
non-qualified options 18,790 - 100,000 - 100,000
Dividends accrued on
convertible preferred
stock - - (126,000) - (126,000)
Conversion of preferred
stock 2,349,991 24,000 14,641,000 - 14,665,000
Net loss for the six month
period ended
October 31, 1996 (4,428,000) (4,428,000)
---------- ------- ----------- ------------ -----------
Balance -
OCTOBER 31, 1996 8,805,383 $88,000 $38,606,000 ($20,870,000) $17,824,000
========== ======= =========== ============ ===========
</TABLE>
See notes to interim consolidated financial statements
8
<PAGE> 9
LASER VISION CENTERS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1996
(Unaudited)
Item 1.
1. The information contained in the interim consolidated financial statements
and footnotes is condensed from that which would appear in the annual
consolidated financial statements. Accordingly, the interim consolidated
financial statements included herein should be read in conjunction with the
consolidated financial statements and related notes thereto contained in the
April 30, 1996 Annual Report on Form 10-KSB filed by LaserVision Centers, Inc.
(the "Company") with the Securities and Exchange Commission. The unaudited
interim consolidated financial statements as of October 31, 1996 and October 31,
1995, and for the quarterly and six month periods then ended, include all normal
recurring adjustments which management considers necessary for a fair
presentation. The results of operations for the interim periods are not
necessarily indicative of the results which may be expected for the entire
fiscal year. The interim consolidated financial statements include the accounts
and transactions of the Company and its subsidiaries. All significant
intercompany transactions and accounts have been eliminated. The October 31,
1996 six month consolidated statements of operations include certain
reclassifications to conform with classifications for the three month period
ended October 31, 1996.
Cash and cash equivalents include short-term (90 day or less) commercial paper
and obligations of the U.S. government and its agencies.
The net loss per share was computed using the weighted average number of common
shares outstanding during each period. Common stock equivalents were excluded
due to their anti-dilutive effect. The loss per common share for the six months
ended October 31, 1996 and for the quarter ended October 31, 1996, reflects
$126,000 and $21,000, respectively, of accrued dividends on Convertible
Preferred Stock with Mandatory Redemption in 2005.
2. In October 1995, the Company received gross proceeds of $14,100,000 from
the sale of 141,000 shares of restricted convertible preferred stock with a
mandatory redemption provision after ten years. During the six months ended
October 31, 1996, all of the shares of restricted convertible preferred stock
were converted to 2,349,991 shares of restricted common stock in accordance with
the terms of the purchase agreement.
3. On October 15, 1996, the Company purchased the entire minority interest in
the Arnott Laser Vision Centre located in London England. The purchase price
of approximately $330,000, including $130,000 of restricted stock (17,000
shares), resulted in the extinguishment of the remaining minority interest of
$3,000 and the remainder was allocated to goodwill.
9
<PAGE> 10
4. During the six months ended October 31, 1996, ten lasers held for sale as
of April 30, 1996 were sold for their net book value of $1,200,000 and four new
lasers were purchased for use in Europe.
5. Eight lasers were purchased for use in the United States during the six
months ended October 31, 1996. Equipment deposits were utilized for a portion
of the laser purchases. In addition, during the quarter ended October 31, 1996
financing was obtained for eight lasers originally purchased with cash. The
four and one-half year loan restricts $1,650,000 of the cash proceeds until
certain payment and financial performance criteria are met. The portion of
restricted cash which will become unrestricted within a year is classified as a
current asset.
6. During the quarter ended July 31, 1996, the Company canceled a proposed
public offering and charged $260,000 of accumulated costs related to the
offering to general and administrative expenses.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2.
(A) LIQUIDITY AND CAPITAL RESOURCES
Since the completion of its initial public offering in April 1991, the
Company's primary sources of liquidity have consisted of financing from the
sale of Common Stock and Convertible Preferred Stock, revenues from marketing
and laser access services provided to ophthalmic physicians and leases. At
October 31, 1996, the Company had $6,127,000 of cash and cash equivalents
compared with $12,672,000 at April 30, 1996. At October 31, 1996, the Company
had working capital of $4,052,000 compared with working capital of $10,002,000
at April 30, 1996. The ratio of current assets to current liabilities at
October 31, 1996 was 2.0 to one, compared to 2.9 to one at April 30, 1996.
Cash Flows from Operating Activities
Net cash used for operating activities was $3,009,000 for the six months ended
October 31, 1996 compared to $1,430,000 for the six months ended October 31,
1995. The cash flows used for operating activities during the six months ended
October 31, 1996 primarily represent the net loss incurred in this period less
depreciation and amortization and an increase in accounts payable and accrued
liabilities partially offset by increases in accounts receivable and prepaid
expenses and other current assets.
Cash Flows from Investing Activities
Net cash used for investing activities was $4,060,000 and $1,288,000 during the
six months ended October 31, 1996 and 1995, respectively. Cash used for
investing during the six months ended October 31, 1996 was used to acquire
equipment for the expanding U.S. market and to purchase the minority interest in
the Harley Street Laser Vision Center.
10
<PAGE> 11
Cash Flows from Financing Activities
Net cash provided by financing activities was $524,000 and $14,536,000 during
the six months ended October 31, 1996 and 1995, respectively. Loan proceeds,
offset by lease payments, was the primary source of cash provided by financing
during the six months ended October 31, 1996.
In the future funds may be received from operating and capital leases of
equipment, the exercise of underwriter and other warrants and/or the exercise
of stock options, and other public or private equity offerings. However, there
is no assurance that the Company will obtain any such funds.
(B) RESULTS OF OPERATIONS
QUARTER ENDED OCTOBER 31, 1996 COMPARED TO QUARTER ENDED OCTOBER 31, 1995
The Company has continued to implement its domestic strategy. As of October
31, 1996, the Company had installed twenty lasers for domestic use. Seventeen
of these lasers were installed in Columbia/HCA Healthcare Corporation
outpatient surgery centers. Two additional lasers have been deployed for use
with testing the Company's mobile strategy. Three lasers have been moved from
their original installation site based upon management's determination that the
market was not in alignment with the Company's strategy.
The reorganization of the Company's international operations has been completed
in accordance with the plan established in the fourth quarter of fiscal 1996.
Revenues
Total revenues of $1,928,000 for the quarter ended October 31, 1996 increased
by $968,000 from $960,000 for the quarter ended October 31, 1996, or an
increase of 101%.
Revenues for the Laser Vision Centers division increased to $1,617,000 for the
quarter ended October 31, 1996 from $562,000 for the quarter ended October 31,
1995. The increase is attributable to higher revenues from the European
centers of $267,000 and new U.S. centers of $809,000 partially offset by a
decrease in Canadian revenues of $21,000. The increase in U.S. revenues for
the LaserVision Centers division is attributable to the increased number of
centers in operation and procedures performed in the U.S. The increased
European revenues is primarily related to increased procedures performed with
the European mobile laser and at the centers acquired in conjunction with the
New Image acquisition. Total Canadian revenues decreased due to increases in
revenues for the Canadian mobile laser offset by a decrease in revenues in the
Vancouver center.
Revenues for the MarketVision division decreased due to a shift of attention to
providing marketing for the U.S. Laser Vision Centers division.
11
<PAGE> 12
Cost of Revenues/Gross Profit (Loss)
Cost of revenues increased to $1,830,000 for the quarter ended October 31, 1996
from $1,106,000 for the quarter ended October 31, 1995. Depreciation in cost
of revenue increased to $944,000 from $405,000 in these respective periods due
to the increased number of U.S. lasers partially offset by decreases in
depreciation on European and Canadian lasers which were written down to
estimated fair market value during the fourth quarter of fiscal 1996.
Other costs of revenues increased to $886,000 for the quarter ended October 31,
1996 from $701,000 for the quarter ended October 31, 1995 due to increased
costs for U.S. operations, including Pillar Point royalties of $252,000 and
gas costs of $36,000. Costs of revenue in Europe also increased $55,000.
These increases were partially offset by decreases in costs of revenue for
Market Vision of $80,000, Canadian professional medical services and laser
optics of $52,000. The net increase, when combined with the revenue increase,
resulted in these other costs of revenues decreasing from 73% of total revenues
for the quarter ended October 31, 1995 to 46% of total revenues for the quarter
ended October 31, 1996.
Total gross profit (loss) improved from a loss of $146,000 for the quarter
ended October 31, 1995 to a profit of $98,000 for the quarter ended October
31, 1996. The variable gross profit, excluding depreciation, increased to
$1,041,000 from $259,000, primarily due to increased procedures in the U.S. and
Europe.
Operating Expenses
General and administrative expenses increased from $403,000 to $785,000 for the
quarters ended October 31, 1995 and 1996, respectively. The increase is
primarily attributable to an increase of $113,000 in legal fees associated with
tradename issues, an increase of $32,000 in travel expenses, an increase of
$94,000 in office expenses associated with the increased U.S. operations,
$38,000 of development costs associated with a new mobile laser concept, an
increase of $71,000 in European office and rent expenses, an increase of
$43,000 for additional liability insurance coverage and an increase of $30,000
in bad debt expense. These increases have been partially offset by a credit of
$38,000 to training expense for physician training fees which were earned in
accordance with agreements and a $50,000 reduction of an accrual related to a
lease assumption which has been finalized.
Salaries and related expenses increased from $596,000 to $815,000 for the
quarters ended October 31, 1995 and 1996, respectively. The increase was due
to an increased number of employees, salary adjustments and the related
payroll taxes and fringe benefits, offset by a decrease in executive incentive
compensation.
Depreciation and amortization increased by $31,000 from $78,000 to $109,000 for
the quarter ended October 31, 1995 and 1996, respectively. The increase was
primarily due to amortization of goodwill associated with acquisitions of
Med-Source and VCI and increased depreciation for the home office.
12
<PAGE> 13
Selling and marketing expenses increased from $267,000 to $520,000 for the
quarters ended October 31, 1995 and 1996, respectively. The increase was
primarily due to $164,000 of promotional costs associated with the new U.S.
market, an increase of $59,000 in international travel costs.
Other Income (Expenses)
Higher interest expense partially offset by higher interest income caused the
net decline in other income (expenses) to $5,000 of other expense during the
quarter ended October 31, 1996 from a net $34,000 in other income during the
quarter ended October 31, 1995.
SIX MONTHS ENDED OCTOBER 31, 1996 COMPARED TO SIX MONTHS ENDED OCTOBER 31, 1995
Revenues
Total revenues of $3,430,000 for the six months ended October 31, 1996
increased by $1,698,000 from $1,732,000 for the six months ended October 31,
1996, or an increase of 98%.
Revenues for the Laser Vision Centers division increased to $2,759,000 for the
six months ended October 31, 1996 from $977,000 for the six months ended
October 31, 1995. The increase is attributable to higher revenues from the
European centers of $581,000 and new U.S. centers of $1,225,000 partially
offset by a decrease in Canadian revenues of $24,000. The increase in U.S.
revenues for the LaserVision Centers division is attributable to the increased
number of centers in operation and procedures performed in the U.S. The
increased European revenues is primarily related to increased procedures
performed with the European mobile laser and at the centers acquired in
conjunction with the New Image acquisition. Total Canadian revenues decreased
due to increases in revenues for the Canadian mobile laser offset by a decrease
in revenues in the Vancouver center.
Revenues for the MarketVision division decreased due to a shift of attention to
providing marketing for the U.S. Laser Vision Centers division partially offset
by new revenues from the Med-Source acquisition.
Cost of Revenues/Gross Profit (Loss)
Cost of revenues increased to $3,222,000 for the six months ended October 31,
1996 from $2,114,000 for the six months ended October 31, 1995. Depreciation
in cost of revenue increased to $1,559,000 from $851,000 in these respective
periods due to the increased number of U.S. lasers partially offset by
decreases in depreciation on European and Canadian lasers which were written
down to estimated fair market value during the fourth quarter of fiscal 1996.
Other costs of revenues increased to $1,663,000 for the six months ended October
31, 1996 from $1,263,000 for the six months ended October 31, 1995 due to
increased costs for U.S. operations, including Pillar Point royalties of
$319,000 and gas costs of $75,000. Costs of revenue in Europe also increased
$107,000. Cost of revenue in Canada increased due to increased costs of $47,000
for the mobile. These increases were partially offset by decreases in costs of
revenue for Market Vision of
13
<PAGE> 14
$99,000, Canadian maintenance, gas, and laser optics of $82,000. The
net increase, when combined with the revenue increase, resulted in these other
costs of revenues decreasing from 73% of total revenues for the six months
ended October 31, 1995 to 48% of total revenues for the six months ended
October 31, 1996.
Total gross profit (loss) improved from a loss of $382,000 for the six months
ended October 31, 1995 to a profit of $208,000 for the six months ended
October 31, 1996. The variable gross profit, excluding depreciation, increased
to $1,767,000 from $469,000, primarily due to increased procedures in the U.S.
and Europe.
Operating Expenses
General and administrative expenses increased from $697,000 to $1,892,000 for
the six month periods ended October 31, 1995 and 1996, respectively. The
increase is primarily attributable to $260,000 of stock offering costs, an
increase of $198,000 in legal fees associated with tradename issues, an
increase of $80,000 in travel expenses, an increase of $216,000 in office
expenses associated with the increased U.S. operations, $83,000 of development
costs associated with a new mobile laser concept, an increase of $155,000 in
European office and rent expenses, an increase of $66,000 for additional
liability insurance coverage, an increase in professional fees of $50,000, an
increase of $40,000 in bad debt expense, and costs of producing various patient
education videos of $33,000. These increases have been partially offset by a
$50,000 reduction of an accrual related to a lease assumption which has been
finalized.
Salaries and related expenses increased from $936,000 to $1,622,000 for the six
month periods ended October 31, 1995 and 1996, respectively. The increase was
due to an increased number of employees, salary adjustments and the related
payroll taxes and fringe benefits, offset by a decrease in executive incentive
compensation.
Depreciation and amortization increased by $82,000 from $126,000 to $208,000
for the six month periods ended October 31, 1995 and 1996, respectively. The
increase was primarily due to an increase in amortization of goodwill
associated with acquisitions of Med-Source and VCI and increased depreciation
for the home office.
Selling and marketing expenses increased from $453,000 to $991,000 for the six
month periods ended October 31, 1995 and 1996, respectively. The increase was
due to $292,000 of promotional costs associated with the new U.S. market, an
increase of $45,000 related to production of patient education videos, an
increase of $48,000 related to Candian marketing, an increase of $83,000 in
international travel.
Other Income (Expenses)
Higher interest income and minority interest in net loss of Harley Street
partially offset by higher interest expense caused the increase in other income
to $77,000 during the six months ended October 31, 1996 from $67,000 in other
income during the six months ended October 31, 1995.
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<PAGE> 15
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
An Italian company's appeal of a judgment in favor of the Company
was denied by the Missouri Court of Appeals on July 23, 1996. The
Italian company filed a motion for rehearing or transfer to the
Missouri Supreme Court which was denied on October 22, 1996.
An agreement in principle was reached to settle the lawsuit between
the Company and 20/20 Laser Centers, Inc. ("20/20"), currently
pending in the U.S. District Court for the District of Maryland. No
payment will be made by either party to the other and 20/20 has
agreed to certain restrictions on its use of the term "Laser vision
correction." A formal settlement agreement is currently being
finalized.
An agreement in principle was reached to settle the lawsuit between
the Company and Laser Vision Centers West, Inc. ("LVCW"), currently
pending in the U.S. District Court for the Southern District of
California, which had been scheduled for trial in December, 1996.
Under the terms of the settlement agreement, the Company will pay a
nominal sum to LVCW and a permanent injunction will be entered
against LVCW restraining it from infringing the Company's service
marks and trade names. A formal settlement agreement is being
finalized.
A lawsuit entitled Lanny S. Odin v. Laser Vision Centers, Inc. and
Medical Care International, Inc., was filed in the Circuit Court of
St. Louis County, Missouri on August 5, 1996. This case involves a
claim for unspecified damages by a former franchisee of the Company
against the Company and Medical Care International, Inc., assignee
of the franchises. The Company intends to vigorously defend the
lawsuit.
Other than as stated above, there has been no significant change in
the status of any litigation from that reported in the April 30,
1996 Form 10-KSB, nor has any other material litigation been
instituted.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
15
<PAGE> 16
Item 5. Other Information
None
Item 6. Reports on Form 8-K during the period covered by this report:
1) September 27, 1996 regarding conversion of Convertible
Preferred Stock of Laser Vision Centers, Inc.
Exhibits - None
Signature
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LASER VISION CENTERS, INC.
\s\John J. Klobnak December 16 , 1996
- ------------------------- -------------------------
John J. Klobnak Date
Chairman of the Board and Chief Executive Officer
\s\B. Charles Bono, III December 16, 1996
- ------------------------- -------------------------
B. Charles Bono Date
Chief Financial Officer
16
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