<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
JANUARY 31, 1998
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 February 27, 1998 - 9,536,895 shares.
Reason for Amendment
The Company has restated its financial statements as of and for the nine month
period ended January 31, 1998 to account for the beneficial conversion features
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 JANUARY 31, 1998
INDEX
PART OR ITEM PAGE
Part I. FINANCIAL STATEMENTS
Item 1. Interim Consolidated Financial Statements
Consolidated Balance Sheet - January 31, 1998 and
April 30, 1997....................................................3-4
Consolidated Statement of Operations - Three month and
nine month periods ended January 31, 1998 and 1997..................5
Consolidated Statement of Cash Flow - Nine month period
ended January 31, 1998 and 1997...................................6-7
Consolidated Statement of Changes in Stockholders'
Equity - Nine month period ended January 31, 1998...................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
<PAGE> 3
LASER VISION CENTERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- -------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
JANUARY 31, April 30,
1998 1997
CURRENT ASSETS
- --------------
<S> <C> <C>
Cash and cash equivalents $ 7,203,000 $ 3,794,000
Restricted cash 438,000 461,000
Receivables, net of allowances of
$475,000 and $360,000, respectively 3,369,000 1,719,000
Prepaid expenses and
other current assets 1,584,000 915,000
------------ ------------
Total Current Assets 12,594,000 6,889,000
EQUIPMENT
- ---------
Laser equipment 14,855,000 12,617,000
Medical Equipment 757,000 750,000
Mobile equipment 3,071,000 1,599,000
Furniture and fixtures 1,346,000 1,316,000
-Accumulated depreciation (6,968,000) (3,799,000)
------------ ------------
Total Equipment, Net 13,061,000 12,483,000
OTHER ASSETS
- ------------
Restricted cash 1,136,000 1,239,000
Goodwill, net 717,000 836,000
Tradename and service mark costs, net 125,000 136,000
Deferred contract rights 1,300,000 1,238,000
Rent deposits and other, net 60,000 49,000
------------ ------------
Total Other Assets 3,338,000 3,498,000
------------ ------------
Total Assets $ 28,993,000 $ 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)
JANUARY 31, April 30,
1998 1997
(Restated - Note 2)
CURRENT LIABILITIES
<S> <C> <C>
Current portion of notes payable $ 1,929,000 $ 1,003,000
Current portion of capitalized
lease obligations 810,000 690,000
Accounts payable 2,647,000 2,078,000
Accrued compensation 839,000 616,000
Other accrued liabilities 1,162,000 848,000
------------ ------------
Total Current Liabilities 7,387,000 5,235,000
NON-CURRENT LIABILITIES
Notes payable 5,553,000 4,544,000
Capitalized lease obligations 944,000 1,589,000
Deferred revenue 91,000 134,000
------------ ------------
Total Non-Current Liabilities 6,588,000 6,267,000
COMMITMENTS AND CONTINGENCIES
COMMON STOCK AND STOCK OPTIONS ISSUED
FOR CONTRACT RIGHTS 1,310,000 1,092,000
SERIES B CONVERTIBLE PREFERRED STOCK WITH MANDATORY
REDEMPTION PROVISIONS (Restated - Note 2) 2,613,000 --
STOCKHOLDERS' EQUITY
Common stock, par value of $.01 per
share, 50,000,000 shares authorized;
9,326,058 and 8,817,057 shares issued
and outstanding, respectively 93,000 88,000
Warrants and options (Restated - Note 2) 486,000 36,000
Paid-in capital (Restated - Note 2) 42,650,000 38,663,000
Accumulated deficit (32,134,000) (28,511,000)
------------ ------------
Total Stockholders' Equity 11,095,000 10,276,000
------------ ------------
Total Liabilities and Equity $ 28,993,000 $ 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 Nine Month Period
Ended January 31, Ended January 31,
1998 1997 1998 1997
(Restated - Note 2)
<S> <C> <C> <C> <C>
REVENUES $ 6,345,000 $ 2,009,000 $ 15,666,000 $ 5,439,000
Cost of revenues, depreciation
and amortization 1,102,000 932,000 3,224,000 2,491,000
Cost of revenues, other 3,366,000 959,000 8,508,000 2,622,000
----------- ----------- ------------ -----------
GROSS PROFIT 1,877,000 118,000 3,934,000 326,000
----------- ----------- ------------ -----------
Operating Expenses:
General and administrative 1,009,000 1,052,000 2,542,000 2,944,000
Salaries and related expenses 1,192,000 791,000 3,133,000 2,413,000
Depreciation and amortization 126,000 113,000 376,000 321,000
Selling and marketing expenses 311,000 365,000 1,027,000 1,356,000
----------- ----------- ------------ -----------
2,638,000 2,321,000 7,078,000 7,034,000
----------- ----------- ------------ -----------
LOSS FROM OPERATIONS (761,000) (2,203,000) (3,144,000) (6,708,000)
Other income (expenses)
Interest and other income 113,000 64,000 257,000 227,000
Interest expense (265,000) (194,000) (736,000) (383,000)
Minority interest in net loss
of subsidiary
103,000
----------- ----------- ------------ -----------
NET LOSS ($913,000) ($2,333,000) ($3,623,000) ($6,761,000)
=========== =========== ============ ===========
BASIC AND DILUTED NET LOSS PER SHARE
(Restated - Note 2) ($0.10) ($0.26) ($0.61) ($0.83)
=========== =========== ============ ===========
Weighted average number of
common shares outstanding -
basic and diluted 9,301,000 8,811,000 9,055,000 8,294,000
=========== =========== ============ ===========
</TABLE>
See notes to interim consolidated financial statements
5
<PAGE> 6
<TABLE>
<CAPTION>
LASER VISION CENTERS, INC. AND SUBSIDIARIES Nine Month Period
CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED) Ended January 31,
- ----------------------------------------------- 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
<S> <C> <C>
Net loss ($3,623,000) ($6,761,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 3,600,000 2,812,000
Compensation paid in common stock,
options or warrants 249,000
Provision for uncollectible accounts 115,000 (23,000)
Receivables increase (1,765,000) (572,000)
Prepaid expenses and other current asset increase (669,000) (253,000)
Minority interests decrease (103,000)
Accounts payable and accrued
liabilities increase (decrease) 1,107,000 (186,000)
Deferred revenue decrease (43,000) (64,000)
----------- ------------
Net cash used in operating activities (1,029,000) (5,150,000)
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Acquisition of equipment (2,960,000) (3,291,000)
Acquisition of goodwill (206,000)
Other (18,000) (169,000)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Proceeds from private offering, preferred 6,000,000
Private placement offering costs, preferred (513,000)
Return of restricted cash 126,000
Proceeds from exercise of stock options 320,000 107,000
Proceeds from exercise of Class C, D and
E warrants 294,000
Proceeds from exercise of other warrants 705,000
Principal payments under capitalized
lease obligations and notes payable (1,379,000) (2,381,000)
Proceeds from loan financing 1,863,000 2,573,000
----------- ------------
Net cash provided by financing activities 7,416,000 299,000
----------- ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 3,409,000 (8,517,000)
Cash and cash equivalents at beginning of period 3,794,000 12,672,000
----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,203,000 $ 4,155,000
=========== ============
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
LASER VISION CENTERS, INC. AND SUBSIDIARIES Nine Month Period
CONSOLIDATED STATEMENT OF CASH FLOW Ended January 31,
- ------------------------------------------- 1998 1997
(Restated-Note 2)
Non-cash investing and financing:
- ---------------------------------
<S> <C> <C>
Conversion of preferred stock
(Restated-Note 2) $849,000 $14,665,000
Deemed preferred dividends (Restated-Note 2) 1,887,000 126,000
Capital lease obligations and notes payable
related to laser and equipment purchases 925,000 1,044,000
Adjustment of value of common stock and
stock options issued for contract rights 218,000
Equipment deposits and assets held for sale
exchanged for equipment 2,965,000
Restricted cash acquired through financing 1,650,000
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 ACCUMULATE 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 67,300 1,000 319,000 320,000
Exercise of non-qualified
warrants 140,700 1,000 704,000 705,000
Exercise of Class C, D and
E warrants 60,573 1,000 293,000 294,000
Deemed dividends on
convertible preferred stock (Restated-Note 2) (1,887,000) (1,887,000)
Conversion of preferred stock (Restated-Note 2) 234,464 2,000 847,000 849,000
Warrants and Options 205,000 205,000
Shares issued to 401(k) plan
for employees 5,964 44,000 44,000
Net loss for the nine month
period ended January 31, 1998 (3,623,000) (3,623,000)
--------- -------- ------------ -------- ------------ ------------
Balance - January 31, 1998 (Restated-Note 2) 9,326,058 $ 93,000 $ 42,650,000 $486,000 ($32,134,000) $11,095,000
========= ======== ============ ======== ============ ============
</TABLE>
See notes to interim consolidated financial statements
8
<PAGE> 9
LASER VISION CENTERS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1998
(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 January 31, 1998 and January 31,
1997, and for the quarterly and nine 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 net loss per share was computed using the weighted average number of common
shares outstanding during each period. The loss per common share for the nine
months ended January 31, 1998 and for the quarter ended January 31, 1998,
reflects $1,887,000 and $56,000, respectively, of deemed dividends on the Series
B Convertible Preferred Stock (See Note 2). The loss per common share for the
nine months ended January 31, 1997, reflects $126,000 of accrued dividends on
Convertible Preferred Stock with Mandatory Redemption in 2005.
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share" effective in the quarter ended January 31, 1998. Basic and
diluted earnings per share are the same due to the anti-dilutive effect of
common stock equivalents since the Company is in a loss position. Common stock
equivalents include options and warrants. These common stock equivalents would
be dilutive if the Company were reporting net income.
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 a 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 nine month periods ended January 31, 1998,
the Company recognized deemed dividends of $56,000 and $155,000, respectively,
which were determined based on the amount of the 5% adjustment feature
realizable by the Series B stockholder during the period.
9
<PAGE> 10
The Company has restated its financial statements at and for the nine month
period ended January 31, 1998, 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 nine-month period ended January 31, 1998, $1,887,000
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 though 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 $2,613,000 at January 31, 1998. In February 1998 an
additional 1,250 shares of Series B Convertible Preferred Stock were converted
to 210,837 shares of common stock.
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 January 31, 1998.
The restatements of the financial statements at January 31, 1998 and for the
nine-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 January 31, 1998 and net
loss per common share for the nine months ended January 31, 1998, 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 2,613,000
-----------
As restated $ 2,613,000
===========
Stockholders' Equity - previously reported $13,708,000
Adjustment related to the presentation
of the Series B shares as redeemable (2,613,000)
-----------
As restated $11,095,000
===========
Basic and Diluted Net Loss per Common Share -
previously reported $ (0.42)
Adjustment related to the recognition
of the beneficial conversion feature as
a deemed preferred dividend (0.19)
-----------
As restated $ (0.61)
===========
</TABLE>
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. 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. In January, 1998 the Company borrowed a total of
$925,000 at rates ranging from 5.8% to 9.5% and with terms ranging from two to
three years to finance the acquisition of lasers and medical equipment.
10
<PAGE> 11
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 laser access services and
marketing provided to ophthalmologists, equipment loans and equipment leases. At
January 31, 1998, the Company had $7,203,000 of cash and cash equivalents
compared with $3,794,000 at April 30, 1997. At January 31, 1998, the Company had
working capital of $5,207,000 compared with working capital of $1,654,000 at
April 30, 1997. The ratio of current assets to current liabilities at January
31, 1998 was 1.70 to one, compared to 1.32 to one at April 30, 1997.
Cash Flows from Operating Activities
Net cash used for operating activities was $1,029,000 for the nine months ended
January 31, 1998 compared to $5,150,000 for the nine months ended January 31,
1997. The cash flows used for operating activities during the nine months ended
January 31, 1998 primarily represents 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. The cash flows used for operating activities during the nine months
ended January 31, 1997 primarily represents the net loss incurred in this period
less depreciation and amortization plus a decrease in accounts payable and
accrued liabilities and increases in accounts receivable, and prepaid expenses
and other current assets.
During the quarter ended January 31, 1998, depreciation and amortization
represented 135% of the net loss for the quarter.
Cash Flows from Investing Activities
Net cash used for investing activities was $2,978,000 and $3,666,000 during the
nine months ended January 31, 1998 and 1997, respectively. Cash used for
investing during the nine months ended January 31, 1998 and 1997 was primarily
used to acquire equipment for the expanding U.S. market.
Cash Flows from Financing Activities
Net cash provided by financing activities was $7,416,000 and $299,000 during the
nine months ended January 31, 1998 and 1997, respectively. Cash provided by
financing during the nine months ended January 31, 1998 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, were the primary source of cash provided by
financing during the nine months ended January 31, 1997.
The Company expects to continue to fund future operations from existing cash and
cash equivalents, revenues received from providing laser access and marketing
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 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 JANUARY 31, 1998 COMPARED TO QUARTER ENDED JANUARY 31, 1997
The Company has continued to provide excimer laser access to additional sites
throughout the U.S.
Revenues
Total revenues of $6,345,000 for the quarter ended January 31, 1998 increased by
$4,336,000 from $2,009,000 for the quarter ended January 31, 1997, or an
increase of 216%.
Revenues for the LaserVision Centers division increased to $6,225,000 for the
quarter ended January 31, 1998 from $1,837,000 for the quarter ended January 31,
1997. The increase is attributable to higher revenues from U.S. operations of
$4.5 million partially offset by a decrease in Canadian and European revenues
totaling $89,000. 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 January 31, 1998 the
Company served over 100 U.S. markets.
Revenues for the MarketVision division declined from $172,000 to $120,000 due to
the shift of attention
11
<PAGE> 12
to providing practice development 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 $4,468,000 for the quarter ended January 31, 1998
from $1,891,000 for the quarter ended January 31, 1997. Depreciation in cost of
revenue increased to $1,102,000 from $932,000 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 $3,366,000 for the quarter ended January
31, 1998 from $959,000 for the quarter ended January 31, 1997 due to increased
costs, including Pillar Point royalties of $1,474,000, professional medical
services of $164,000, mobile laser operator salaries, travel and set-up related
costs of $622,000, and increased expenses related to physician training programs
of $121,000. The net increase, when combined with the revenue increase, resulted
in these other costs of revenues increasing from 48% of total revenues for the
quarter ended January 31, 1997 to 53% of total revenues for the quarter ended
January 31, 1998. 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 $118,000 for the quarter ended January 31, 1997
to $1,877,000 for the quarter ended January 31, 1998. The variable gross profit,
excluding depreciation, increased to $2,979,000 from $1,050,000, primarily due
to increased procedures in the U.S.
Operating Expenses
General and administrative expenses decreased from $1,052,000 to $1,009,000 for
the quarters ended January 31, 1997 and 1998, respectively. The decrease is
primarily attributable to a decrease of $62,000 in legal fees associated with
tradename issues.
Salaries and related expenses increased from $791,000 to $1,192,000 for the
quarters ended January 31, 1997 and 1998, 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 $113,000 to $126,000 for the
quarter ended January 31, 1997 and 1998, respectively. The increase was
primarily due to increased depreciation for the corporate office.
Selling and marketing expenses decreased from $365,000 to $311,000 for the
quarters ended January 31, 1997 and 1998, respectively. The decrease was
primarily due to decreased media advertising of $43,000.
12
<PAGE> 13
Other Income (Expenses)
Higher interest expense caused the decline to a net $152,000 in other expenses
during the quarter ended January 31, 1998 from a net $130,000 in other expenses
during the quarter ended January 31, 1997.
NINE MONTHS ENDED JANUARY 31, 1998 COMPARED TO NINE MONTHS ENDED JANUARY 31,
1997
Revenues
Total revenues of $15,666,000 for the nine months ended January 31, 1998
increased by $10,227,000 from $5,439,000 for the nine months ended January 31,
1997, or an increase of 188%.
Revenues for the LaserVision Centers division increased to $15,222,000 for the
nine months ended January 31, 1998 from $4,596,000 for the nine months ended
January 31, 1997. The increase is attributable to higher revenues from U.S.
operations of $10.7 million partially offset by a decrease in Canadian revenues
of $101,000. 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 $843,000 to $445,000 due to
the shift of attention to providing practice development 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 $11,732,000 for the nine months ended January 31,
1998 from $5,113,000 for the nine months ended January 31, 1997. Depreciation in
cost of revenue increased to $3,224,000 from $2,491,000 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 $8,508,000 for the nine months ended
January 31, 1998 from $2,622,000 for the nine months ended January 31, 1997 due
to increased costs, including Pillar Point royalties of $3,633,000, professional
medical services of $681,000, mobile laser operator salaries, travel and set-up
related costs of $1,676,000 and increased expenses related to physician training
programs of $215,000. These increases were partially offset by decreases in
costs of revenue for Market Vision of $194,000. The net increase, when combined
with the revenue increase, resulted in these other costs of revenues increasing
from 48% of total revenues for the nine months ended January 31, 1997 to 54% of
total revenues for the nine months ended January 31, 1998. 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 $326,000 for the nine months ended January 31,
1997 to $3,934,000 for the nine months ended January 31, 1998. The variable
gross profit, excluding depreciation, increased
13
<PAGE> 14
to $7,158,000 from $2,817,000, primarily due to increased laser procedures in
the U.S.
Operating Expenses
General and administrative expenses decreased from $2,944,000 to $2,542,000 for
the nine month periods ended January 31, 1997 and 1998, 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 and a decrease of $271,000 in
legal fees associated with tradename issues partially offset by increases in
professional fees of $83,000 and increases in rent of $39,000.
Salaries and related expenses increased from $2,413,000 to $3,133,000 for the
nine month periods ended January 31, 1997 and 1998, 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 $321,000 to $376,000 for the nine
month periods ended January 31, 1997 and 1998, respectively. The increase was
primarily due to an increase in amortization of goodwill associated with
acquisitions.
Selling and marketing expenses decreased from $1,356,000 to $1,027,000 for the
nine month periods ended January 31, 1997 and 1998, respectively. The decrease
was primarily due to decreased marketing programs of $227,000 and decreased
travel costs of $90,000.
Other Income (Expenses)
Higher interest expense caused the decline to a net $479,000 other expenses
during the nine months ended January 31, 1998, from a net $53,000 in other
expenses during the nine months ended January 31, 1997.
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
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, 1998
- ------------------------------------- --------------------
John J. Klobnak Date
Chairman of the Board and Chief Executive Officer
\s\B. Charles Bono III April 21, 1998
- ------------------------------------ -------------------
B. Charles Bono III Date
Chief Financial Officer
and Principal Accounting Officer
15
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