<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
X-QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
OCTOBER 31, 1997
Commission file number 1-10629
LASER VISION CENTERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-1530063
-------- ----------
(State or other jurisdiction of incorporation (I.R.S. Employer identification
or organization) number)
540 Maryville Centre Dr., Suite 200, St. Louis, Missouri 63141
---------------------------------------------------------------
(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 November 28, 1997 - 9,283,070 shares.
Reason for Amendment
The Company has restated its financial statements as of and for the six month
period ended October 31, 1997 to account for the beneficial conversion feature
and the mandatory redemption features of the Series B Convertible Preferred
Stock. See Note 2 to the Financial Statements.
<PAGE> 2
LASER VISION CENTERS, INC.
FORM 10-Q/A FOR QUARTERLY PERIOD ENDED OCTOBER 31, 1997
INDEX
<TABLE>
<CAPTION>
PART OR ITEM PAGE
<S> <C>
Part I. FINANCIAL STATEMENTS
Item 1. Interim Consolidated Financial Statements
Consolidated Balance Sheet - October 31, 1997 and April 30, 1997 ............. 3-4
Consolidated Statement of Operations - Three months and six months
ended October 31, 1997 ........................................................ 5
Consolidated Statement of Cash Flow - Six months
ended October 31, 1997 and 1996 .............................................. 6-7
Consolidated Statement of Changes in Stockholders' Equity - Six months
ended October 31, 1997 ........................................................ 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 ............................................................. 15
Item 6. Reports on Form 8-K ........................................................... 15
</TABLE>
<PAGE> 3
LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- -------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
October 31, April 30,
1997 1997
<S> <C> <C>
CURRENT ASSETS
- --------------
Cash and cash equivalents $ 7,675,000 $ 3,794,000
Restricted cash 411,000 461,000
Receivables, net of allowances of
$469,000 and $360,000, respectively 3,047,000 1,719,000
Prepaid expenses and
other current assets 1,682,000 915,000
----------- -----------
Total Current Assets 12,815,000 6,889,000
EQUIPMENT
- ---------
Laser equipment 13,926,000 12,617,000
Medical Equipment 762,000 750,000
Mobile equipment 2,691,000 1,599,000
Furniture and fixtures 1,381,000 1,316,000
-Accumulated depreciation (5,896,000) (3,799,000)
----------- -----------
Total Equipment, Net 12,864,000 12,483,000
OTHER ASSETS
- ------------
Restricted cash 1,136,000 1,239,000
Goodwill, net 757,000 836,000
Tradename and service mark costs, net 126,000 136,000
Deferred contract rights 1,655,000 1,238,000
Rent deposits and other, net 61,000 49,000
----------- -----------
Total Other Assets 3,735,000 3,498,000
----------- -----------
Total Assets $29,414,000 $22,870,000
=========== ===========
</TABLE>
See notes to interim consolidated financial statements
3
<PAGE> 4
LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- -------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
October 31, April 30,
1997 1997
<S> <C> <C>
CURRENT LIABILITIES (Restated-Note 2)
- -------------------
Current portion of notes payable $ 1,501,000 $ 1,003,000
Current portion of capitalized
lease obligations 783,000 690,000
Accounts payable 3,110,000 2,078,000
Accrued compensation 532,000 616,000
Other accrued liabilities 979,000 848,000
----------- -----------
Total Current Liabilities 6,905,000 5,235,000
NON-CURRENT LIABILITIES
- -----------------------
Notes payable 5,423,000 4,544,000
Capitalized lease obligations 1,157,000 1,589,000
Deferred revenue 91,000 134,000
----------- -----------
Total Non-Current Liabilities 6,671,000 6,267,000
COMMITMENTS AND CONTINGENCIES
COMMON STOCK AND STOCK OPTIONS ISSUED
FOR CONTRACT RIGHTS 1,618,000 1,092,000
SERIES B CONVERTIBLE PREFERRED STOCK
WITH MANDATORY REDEMPTION PROVISIONS (Restated-Note 2) 2,557,000
STOCKHOLDERS' EQUITY
- --------------------
Common stock, par value of $.01 per
share, 50,000,000 shares authorized;
9,282,070 and 8,817,057 shares issued
and outstanding, respectively 93,000 88,000
Warrants and options (Restated-Note 2) 318,000 36,000
Paid-in capital (Restated-Note 2) 42,473,000 38,663,000
Accumulated deficit (31,221,000) (28,511,000)
----------- -----------
Total Stockholders' Equity 11,663,000 10,276,000
----------- -----------
Total Liabilities and Equity $29,414,000 $22,870,000
=========== ===========
</TABLE>
See notes to interim consolidated financial statements
4
<PAGE> 5
LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
- ------------------------------------------------
<TABLE>
<CAPTION>
Three Month Period Six Month Period
Ended October 31, Ended October 31,
1997 1996 1997 1996
(Restated-Note 2)
<S> <C> <C> <C> <C>
REVENUES $ 5,224,000 $ 1,928,000 $ 9,321,000 $ 3,430,000
Cost of revenues, depreciation
and amortization 1,077,000 944,000 2,122,000 1,559,000
Cost of revenues, other 2,871,000 886,000 5,142,000 1,663,000
----------- ----------- ----------- -----------
GROSS PROFIT 1,276,000 98,000 2,057,000 208,000
----------- ----------- ----------- -----------
Operating Expenses:
General and administrative 745,000 785,000 1,533,000 1,892,000
Salaries and related expenses 1,067,000 815,000 1,941,000 1,622,000
Depreciation and amortization 134,000 109,000 250,000 208,000
Selling and marketing expenses 363,000 520,000 716,000 991,000
----------- ----------- ----------- -----------
2,309,000 2,229,000 4,440,000 4,713,000
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (1,033,000) (2,131,000) (2,383,000) (4,505,000)
Other income (expenses)
Interest and other income 89,000 57,000 144,000 163,000
Interest expense (229,000) (117,000) (471,000) (189,000)
Minority interest in net loss
of subsidiary 55,000 103,000
----------- ----------- ----------- -----------
NET LOSS ($1,173,000) ($2,136,000) ($2,710,000) ($4,428,000)
=========== =========== =========== ===========
NET LOSS PER SHARE
(Restated-Note 2) ($0.14) ($0.25) ($0.51) ($0.57)
=========== =========== =========== ===========
Weighted average number of
common shares outstanding 9,044,000 8,537,000 8,933,000 8,035,000
=========== =========== =========== ===========
</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 (UNAUDITED) Ended October 31,
- -----------------------------------------------
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net loss ($2,710,000) ($4,428,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 2,372,000 1,767,000
Compensation paid in common stock,
options or warrants 66,000
Provision for uncollectible accounts 109,000 108,000
Receivables increase (1,437,000) (371,000)
Prepaid expenses and other current asset increase (767,000) (163,000)
Minority interests decrease (103,000)
Accounts payable and accrued
liabilities increase 1,080,000 198,000
Deferred revenue decrease (43,000) (49,000)
----------- -----------
Net cash used in operating activities (1,330,000) (3,041,000)
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Acquisition of equipment (2,553,000) (3,844,000)
Acquisition of goodwill (206,000)
Other, net (14,000) 22,000
----------- -----------
Net cash used in investing activities (2,567,000) (4,028,000)
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Proceeds from private offering, preferred 6,000,000
Private placement offering costs, preferred (513,000)
Return of restricted cash 153,000
Proceeds from exercise of stock options 284,000 60,000
Proceeds from exercise of Class C and
Class E warrants 111,000
Proceeds from exercise of other warrants 706,000
Principal payments under capitalized
lease obligations and notes payable (826,000) (2,109,000)
Proceeds from loan financings 1,863,000 2,573,000
----------- -----------
Net cash provided by financing activities 7,778,000 524,000
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 3,881,000 (6,545,000)
Cash and cash equivalents at beginning of period 3,794,000 12,672,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,675,000 $ 6,127,000
=========== ===========
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
LASER VISION CENTERS, INC. AND SUBSIDIARIES Six Month Period
CONSOLIDATED STATEMENT OF CASH FLOW Ended October 31,
- ------------------------------------------- 1997 1996
<S> <C> <C>
Non-cash investing and financing: (Restated-Note 2)
- ---------------------------------
Conversion of preferred stock to common stock,
(Restated-Note 2) $ 849,000 $14,665,000
Deemed preferred dividends (Restated-Note 2) $1,831,000 126,000
Adjustment of value of common stock and
stock options issued for contract rights 526,000
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
Increase in other liabilities for laser purchase 300,000
Common stock issued to acquire goodwill and
reduce liabilities 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 (UNAUDITED)
- ---------------------------------------------------------------------
(Restated -- Note 2)
<TABLE>
<CAPTION>
COMMON STOCK
$.01 PAR VALUE PAID-IN WARRANTS AND ACCUMULATED TOTAL SHAREHOLDERS'
SHARES AMOUNT CAPITAL OPTIONS DEFICIT EQUITY
<S> <C> <C> <C> <C> <C> <C>
Balance - April 30, 1997 8,817,057 $88,000 $38,663,000 $ 36,000 ($28,511,000) $10,276,000
Issuance of Warrants
and Preferred Stock with
beneficial conversion features
(Restated-Note 2) 3,667,000 245,000 3,912,000
Exercise of incentive options 61,800 1,000 283,000 284,000
Exercise of non-qualified
warrants 140,700 2,000 704,000 706,000
Exercise of Class E and
Class C warrants 24,208 111,000 111,000
Deemed dividends on
convertible preferred stock
(Restated-Note 2) (1,831,000) (1,831,000)
Conversion of preferred stock
(Restated-Note 2) 234,464 2,000 847,000 849,000
Warrants and Options 37,000 37,000
Shares issued to 401(k) plan
for employees 3,841 29,000 29,000
Net loss for the six month
period ending October 31,
1997 (2,710,000) (2,710,000)
--------- ------- ------------ -------- ------------ -----------
Balance - October 31, 1997 9,282,070 $93,000 $ 42,473,000 $318,000 ($31,221,000) $11,663,000
(Restated-Note 2) ========= ======= ============ ======== ============ ===========
</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, 1997
(Unaudited)
Item 1.
1. The information contained in the interim consolidated financial statements
and footnotes is condensed from that which would appear in the annual
consolidated financial statements. Accordingly, the interim consolidated
financial statements included herein should be read in conjunction with the
consolidated financial statements and related notes thereto contained in the
April 30, 1997 Annual Report on Form 10-K filed by Laser Vision Centers, Inc.
(the "Company") with the Securities and Exchange Commission. The unaudited
interim consolidated financial statements as of October 31, 1997 and October
31, 1996, 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,
1997 six month consolidated statements of operations include certain
reclassifications to conform with classifications for the three month period
ended October 31, 1997.
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, 1997 and for the quarter ended October 31, 1997, reflects
$1,831,000 and $66,000, respectively, of deemed dividends on the Series B
Convertible Preferred Stock (See Note 2). 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 the course of a review of a Securities Act filing, the staff of the
Securities and Exchange Commission (the ''Commission''), raised an issue
regarding the existence of a beneficial conversion feature embedded in the
Series B Convertible Preferred Stock (''Series B shares''), which should be
accounted for as deemed dividend to the preferred shareholders. After
consideration, the Company concluded that a beneficial conversion feature does
exist and has quantified the amount as $3,667,000 at the issuance date. In
addition, based on review of the terms of the stock agreement, it has been
determined that the Series B shares have certain mandatory redemption features.
Although the Company believes that the likelihood of redemption occurring is
remote, the carrying value of the Series B shares is required to be presented
as temporary equity, which is outside of stockholders' equity.
The closing of the Series B Convertible Preferred Stock occurred on June 20,
1997 (the ''Issuance Date'') at an aggregate price of $6,000,000. The Company
issued 6,000 shares of preferred stock, having a stated value of $1,000 per
share, together with 100,000 warrants to purchase common stock at $9.39 per
share, and the right to an additional 100,000 warrants to purchase common stock
issuable on June 20, 1998, provided at least $2,000,000 of the preferred shares
remain outstanding at that date. The Series B shares bear no dividends and are
convertible at any time. The warrants are exercisable immediately upon issuance.
In August 1997, the common shares underlying this convertible preferred stock
and warrants were registered with the Securities and Exchange Commission
pursuant to registration rights under the Series B stock purchase agreement.
The Series B shares are convertible into common stock at a conversion price,
which at the Issuance Date, is the lower of (a) 85% of the average of the daily
low sale price for the five consecutive trading days ending two days prior to
the conversion date, or $6.01 at the Issuance date, and (b) $8.05. The number of
common shares into which the preferred stock is convertible is determined by
dividing the stated value of the preferred stock, increased on a daily basis at
a rate of 5% per annum, by the conversion price. As the Series B shares are
automatically convertible on June 20, 2002, the most beneficial conversion ratio
was determined to include the additional common shares attributable to the 5%
adjustment feature for the five-year period ending in 2002. After adjustment for
this additional benefit, the $6.01 conversion price is reduced to $4.81, the
most beneficial conversion price at the Issuance Date.
The Series B shares are subject to mandatory redemption requirements under
certain limited circumstances as defined in the preferred stock agreement.
Those circumstances include, a change in control of the Company in which more
than 50% of the voting power of the company is disposed of, the Company's
failure to maintain its common stock listing on the NASDAQ National Market or
other designated stock exchange, or the Series B shares ceasing to be
convertible as a result of the aggregate number of common shares then issuable
upon conversion equaling 19.99% of the outstanding common stock. Should the
Series B shares become redeemable, the redemption price would be the greater of
(a) 118% of the stated value of the preferred stock, increased on a daily basis
since the Issuance Date at a rate of 5% per annum, or (b) the number of shares
issuable upon conversion multiplied by the closing price of the common stock on
such conversion date.
The Company received $6,000,000 of proceeds, and paid offering costs of
$513,000, resulting in net proceeds of $5,487,000 for the preferred shares and
warrants. The net proceeds are being used for working capital, the acquisition
of equipment and general corporate purposes. The Company accounted for the 5%
adjustment feature as a deemed dividend by charging paid-in capital, as the
Company had an accumulated deficit, and increasing the carrying value of the
preferred stock. For the three and six month periods ended October 31, 1997, the
Company recognized deemed dividends of $66,000 and $99,000, respectively, which
were determined based on the amount of the 5% adjustment feature realizable by
the Series B stockholder during the period.
The Company has restated its financial statements at and for the six month
period ended October 31, 1997 to account for the beneficial conversion feature
and the mandatory redemption features of the Series B shares. In determining the
accounting for the beneficial conversion feature, the Company first allocated
the net proceeds of $5,487,000 to the Series B shares and the warrants based on
their relative fair values at the Issuance Date, resulting in $5,242,000
assigned to the Series B shares and $245,000 assigned to the warrants as of June
20, 1997. The Company then allocated $3,667,000 of the Series B shares net
proceeds to paid-in capital for the beneficial conversion feature resulting in a
reduction in the carrying value of the Series B shares to $1,575,000. The
beneficial conversion feature is being recognized as a deemed dividend to the
preferred shareholders over the minimum period in which the preferred
shareholders can realize that return. Because the Series B shares were
immediately convertible, a $1,732,000 deemed dividend as of the Issuance Date
has been recognized as a charge to paid-in capital and net loss applicable to
common stockholders, and an increase in the carrying value of the preferred
stock. As a result, for the six-month period ended October 31, 1997, $1,831,000
of the beneficial conversion feature has been recognized. The balance of the
beneficial conversion feature related to the outstanding Series B shares is
being recognized through June, 2002.
In September, 1997, 1,500 shares of the Series B shares were converted to
234,464 shares of common stock. The converted Series B shares had a carrying
value, including the beneficial conversion feature recognized through the date
of conversion, of $849,000. As a result of the above, the carrying value of the
Series B shares is $2,557,000 at October 31, 1997.
In addition, due to the mandatory redemption features noted above, the carrying
value of the Series B shares, which were previously presented as a component of
Stockholders' Equity, has been reclassified as temporary equity, outside of
Stockholders' Equity at October 31, 1997.
The restatements of the financial statements at October 31, 1997 and for the
six-month period then ended, for the matters described above had no effect on
the Company's net loss, total assets or total liabilities. The Company's
redeemable equity and total stockholders' equity at October 31, 1977 and net
loss per common share for the six months ended October 31, 1997, as previously
reported and as restated, are as follows:
<TABLE>
<S> <C>
Redeemable Equity - previously reported $ --
Adjustment related to the presentation of the
Series B shares as redeemable 2,557,000
-----------
As restated $ 2,557,000
===========
Stockholders' Equity - previously reported $14,220,000
Adjustment related to the presentation of the
Series B shares as redeemable (2,557,000)
-----------
As restated $11,663,000
===========
Net Loss per Common Share - previously reported ($ .31)
Adjustment related to the recognition of the
beneficial conversion feature as a deemed
preferred dividend (.20)
-----------
As restated ($ .51)
===========
</TABLE>
9
<PAGE> 10
3. In September, 1997 the Company borrowed $1,050,000 at 11.3% with a term of
four years to finance the acquisition of lasers and mobile equipment. The debt
is collateralized by the same equipment.
4. In October, 1997 the Company borrowed $813,000 from the lender which
provided financing in March 1997. Under the March 1997 debt agreement, the
lender had the right to increase the percentage funded by the loan under
similar financial terms. This debt bears interest at 13.6% with a term of four
years.
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 ophthalmologists, loans and leases. At
October 31, 1997, the Company had $7,675,000 of cash and cash equivalents
compared with $3,794,000 at April 30, 1997. At October 31, 1997, the Company
had working capital of $5,910,000 compared with working capital of $1,654,000
at April 30, 1997. The ratio of current assets to current liabilities at
October 31, 1997 was 1.86 to one, compared to 1.32 to one at April 30, 1997.
Cash Flows from Operating Activities
Net cash used for operating activities was $1,330,000 for the six months ended
October 31, 1997 compared to $3,041,000 for the six months ended October 31,
1996. The cash flows used for operating activities during the six months ended
October 31, 1997 and 1996 primarily represent the net loss incurred in this
period less depreciation and amortization plus increases in accounts receivable
and prepaid expenses and other current assets partially offset by net increases
in current liabilities. During the quarter ended October 31, 1997,
depreciation and amortization represented 103% of the net loss for the quarter.
Cash Flows from Investing Activities
Net cash used for investing activities was $2,567,000 and $4,028,000 during the
six months ended October 31, 1997 and 1996, respectively. Cash used for
investing during the six months ended October 31, 1997 and 1996 was used to
acquire equipment for the expanding U.S. market.
10
<PAGE> 11
Cash Flows from Financing Activities
Net cash provided by financing activities was $7,778,000 and $524,000 during
the six months ended October 31, 1997 and 1996, respectively. Cash provided by
financing during the six months ended October 31, 1997 was primarily provided
by a private placement of preferred stock, proceeds from exercise of stock
options and warrants, and proceeds from loan financing, partially offset by
principal payments under capitalized lease obligations and notes payable. Loan
proceeds, offset by lease payments, was the primary source of cash provided by
financing during the six months ended October 31, 1996.
The Company expects to continue to fund future operations and mobile
development costs from existing cash and cash equivalents, revenues received
from providing laser access and market services, the exercise of stock options
and warrants and future financing as required. There can be no assurance that
capital will be available when needed or, if available, that the terms for
obtaining such funds will be favorable to the Company.
As discussed in Note 2, the Company has restated its financial statements to
account for the beneficial conversion feature and the mandatory redemption
features of its Series B Convertible Preferred Stock. The restatement resulted
in the recognition of an additional $1,732,000 deemed dividend at the Issuance
Date, which was reported as a charge to paid-in capital and net loss applicable
to common stockholders, and an increase in the carrying value of the Series B
shares. The recognition of the deemed dividend did not effect the cash flows of
the Company for the period, and subsequent recognition of additional deemed
dividends associated with the beneficial conversion feature will not effect the
Company's future cash flows. However, under certain limited circumstances, as
defined in the preferred stock agreement, the holders of the Series B shares may
be able to require the Company to redeem their shares for cash. While there can
be no assurance that those circumstances will not arise, the Company believes
the likelihood of redemption occurring is remote. Accordingly, the redemption
features of the Series B shares are not expected to adversely impact the
Company's cash flows or liquidity.
(B) RESULTS OF OPERATIONS
QUARTER ENDED OCTOBER 31, 1997 COMPARED TO QUARTER ENDED OCTOBER 31, 1996
The Company has continued to provide excimer laser access to additional sites
throughout the U.S.
Revenues
Total revenues of $5,224,000 for the quarter ended October 31, 1997 increased
by $3,296,000 from $1,928,000 for the quarter ended October 31, 1996, or an
increase of 171%.
Revenues for the LaserVision Centers division increased to $5,106,000 for the
quarter ended October 31, 1997 from $1,617,000 for the quarter ended October
31, 1996. The increase is attributable to higher revenues from U.S. operations
of $3.6 million partially offset by a decrease in Canadian and European
revenues totaling $108,000. The increase in U.S. revenues for the LaserVision
Centers division is attributable to the increased number of lasers in operation
in an increased number of markets. During the quarter ended October 31, 1997
the Company served over 75 U.S. markets.
Revenues for the MarketVision division declined from $310,000 to $118,000 due
to the shift of attention to providing marketing services for the Company's
laser centers for which the Company does not record revenue.
Cost of Revenues/Gross Profit
Cost of revenues increased to $3,948,000 for the quarter ended October 31, 1997
from $1,830,000 for the quarter ended October 31, 1996. Depreciation in cost
of revenue increased to $1,077,000 from
11
<PAGE> 12
$944,000 in these respective periods due to the increased number of lasers and
mobile equipment in the U.S. partially offset by decreases in depreciation on
lasers which were written down to estimated fair market value during the fourth
quarter of fiscal 1997.
Other costs of revenues increased to $2,871,000 for the quarter ended October
31, 1997 from $886,000 for the quarter ended October 31, 1996 due to increased
costs, including Pillar Point royalties of $1,266,000, professional medical
services of $249,000 and mobile laser operator salaries, travel and set-up
related costs of $605,000. These increases were partially offset by decreases
in costs of revenue for MarketVision of $97,000. The net increase, when
combined with the revenue increase, resulted in these other costs of revenues
increasing from 46% of total revenues for the quarter ended October 31, 1996 to
55% of total revenues for the quarter ended October 31, 1997. The increase in
these other costs of revenues as a percentage of revenues is attributable to
the change in the revenue mix to greater U.S. revenues which have greater costs
of revenue, particularly Pillar Point royalties.
Total gross profit improved from $98,000 for the quarter ended October 31, 1996
to a profit of $1,276,000 for the quarter ended October 31, 1997. The
variable gross profit, excluding depreciation, increased to $2,353,000 from
$1,042,000, primarily due to increased procedures in the U.S.
Operating Expenses
General and administrative expenses decreased from $785,000 to $745,000 for the
quarters ended October 31, 1996 and 1997, respectively. The decrease is
primarily attributable to a decrease of $130,000 in legal fees associated with
tradename issues offset by increases in rent, telephone and other office
expenses of $82,000.
Salaries and related expenses increased from $815,000 to $1,067,000 for the
quarters ended October 31, 1996 and 1997, respectively. The increase was due
to an increased number of employees to support operations, salary adjustments
and the related payroll taxes and fringe benefits.
Depreciation and amortization increased from $109,000 to $134,000 for the
quarter ended October 31, 1996 and 1997, respectively. The increase was
primarily due to amortization of goodwill associated with the Harley Street
purchase and increased depreciation for the corporate office.
Selling and marketing expenses decreased from $520,000 to $363,000 for the
quarters ended October 31, 1996 and 1997, respectively. The decrease was
primarily due to decreased media advertising of $92,000 and a decrease of
$39,000 in travel costs.
Other Income (Expenses)
Higher interest expense caused the decline to a net $140,000 in other expenses
during the quarter ended October 31, 1997 from a net $5,000 in other expenses
during the quarter ended October 31, 1996.
12
<PAGE> 13
SIX MONTHS ENDED OCTOBER 31, 1997 COMPARED TO SIX MONTHS ENDED OCTOBER 31, 1996
Revenues
Total revenues of $9,321,000 for the six months ended October 31, 1997
increased by $5,891,000 from $3,430,000 for the six months ended October 31,
1996, or an increase of 172%.
Revenues for the LaserVision Centers division increased to $8,997,000 for the
six months ended October 31, 1997 from $2,759,000 for the six months ended
October 31, 1996. The increase is attributable to higher revenues from
European operations of $39,000 and from U.S. operations of $6.2 million
partially offset by a decrease in Canadian revenues of $46,000. The increase
in U.S. revenues for the LaserVision Centers division is attributable to the
increased number of lasers in operation in an increased number of markets.
Revenues for the MarketVision division declined from $671,000 to $324,000 due
to the shift of attention to providing marketing services for the Company's
laser centers for which the Company does not record revenue.
Cost of Revenues/Gross Profit
Cost of revenues increased to $7,264,000 for the six months ended October 31,
1997 from $3,222,000 for the six months ended October 31, 1996. Depreciation
in cost of revenue increased to $2,122,000 from $1,559,000 in these respective
periods due to the increased lasers and mobile equipment in the U.S. partially
offset by decreases in depreciation on lasers which were written down to
estimated fair market value during the fourth quarter of fiscal 1997.
Other costs of revenues increased to $5,142,000 for the six months ended
October 31, 1997 from $1,663,000 for the six months ended October 31, 1996 due
to increased costs, including Pillar Point royalties of $2,159,000,
professional medical services of $515,000 and mobile laser operator salaries,
travel and set-up related costs of $1,054,000. These increases were partially
offset by decreases in costs of revenue for Market Vision of $178,000. The net
increase, when combined with the revenue increase, resulted in these other
costs of revenues increasing from 48% of total revenues for the six months
ended October 31, 1996 to 55% of total revenues for the six months ended
October 31, 1997. The increase in these other costs of revenues as a
percentage of revenues is attributable to the change in the revenue mix to
greater U.S. revenues which have greater costs of revenue, particularly Pillar
Point royalties.
Total gross profit improved from $208,000 for the six months ended October 31,
1996 to $2,057,000 for the six months ended October 31, 1997. The
variable gross profit, excluding depreciation, increased to $4,179,000 from
$1,767,000, primarily due to increased laser procedures in the U.S.
13
<PAGE> 14
Operating Expenses
General and administrative expenses decreased from $1,892,000 to $1,533,000 for
the six month periods ended October 31, 1996 and 1997, respectively. The
decrease is primarily attributable to a one-time write-off of $260,000 of stock
offering costs in the quarter ended July 31, 1996, a decrease of $200,000 in
legal fees associated with tradename issues, offset by increases in rent,
telephone and other office expenses of $100,000.
Salaries and related expenses increased from $1,622,000 to $1,941,000 for the
six month periods ended October 31, 1996 and 1997, respectively. The increase
was due to an increased number of employees to support operations, salary
adjustments and the related payroll taxes and fringe benefits.
Depreciation and amortization increased from $208,000 to $250,000 for the six
month periods ended October 31, 1996 and 1997, respectively. The increase was
primarily due to an increase in amortization of goodwill associated with
acquisitions of Harley Street and increased depreciation for the home office.
Selling and marketing expenses decreased from $991,000 to $716,000 for the six
month periods ended October 31, 1996 and 1997, respectively. The decrease was
primarily due to decreased marketing programs of $132,000 and decreased travel
costs of $124,000.
Other Income (Expenses)
Higher interest expense caused the decline to a net $327,000 other expenses
during the six months ended October 31, 1997, from a net $77,000 in other
income during the six months ended October 31, 1996.
14
<PAGE> 15
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
There has been no material change in the status of any litigation from
that reported in the Form 10-K for the year ended April 30, 1997, nor has any
other material litigation been initiated.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Reports on Form 8-K during the period covered by this report:
None.
Exhibit 27 - Financial Data Schedule
15
<PAGE> 16
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 April 21, 1999
- ------------------------- -----------------
John J. Klobnak Date
Chairman of the Board and Chief Executive Officer
\s\B. Charles Bono, III April 21, 1999
- ------------------------- ----------------
B. Charles Bono Date Date
Chief Financial Officer
16
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