SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended March 31, 1997.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the Transition period from
to
------------------------------ ----------------------------------.
Commission File Number: 0-19671
LASERSIGHT INCORPORATED
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 65-0273162
-------- ----------
(State of Incorporation) (IRS Employer Identification No.)
12161 Lackland Road, St. Louis, Missouri 63146
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
(314) 469-3220
--------------------------------------------------
(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
--- ---
The Number of shares of the registrant's Common Stock outstanding as of
May 8, 1997 is 9,360,685.
<PAGE>
EXPLANATORY NOTE
This filing amends certain previously-filed information contained in Part I.,
Items 1 and 2. No other items have been amended.
LASERSIGHT INCORPORATED AND SUBSIDIARIES
Except for the historical information contained herein, the discussion in this
Report contains forward-looking statements (within the meaning of Section 21E of
the Exchange Act) that involve risks and uncertainties. The Company's actual
results could differ materially from those discussed here. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in the sections entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Uncertainties and Other Issues"
in this report and in the Company's annual report on Form 10-K for the year
ended December 31, 1996.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1997
and December 31, 1996
Condensed Consolidated Statements of Operations for the
Three Month Periods Ended March 31, 1997 and 1996
Condensed Consolidated Statements of Cash Flows for the
Three Month Periods Ended March 31, 1997 and 1996
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, December 31,
1997 1996
---------------- ---------------
CURRENT ASSETS ASSETS (Unaudited)
<S> <C> <C>
Cash and cash equivalents $1,762,430 $2,003,501
Accounts receivable - trade, net 4,368,785 5,458,153
Notes receivable - current portion, net 3,238,551 3,159,575
Inventories 3,189,394 3,328,903
Deferred tax assets 582,256 667,998
Income taxes recoverable 637,655 803,154
Other current assets 444,291 221,922
---------------- ---------------
TOTAL CURRENT ASSETS 14,223,362 15,643,206
NOTES RECEIVABLE, less current portion, net 3,058,699 2,620,375
PROPERTY AND EQUIPMENT, net 2,000,910 1,936,220
GOODWILL, net 15,245,854 12,099,032
OTHER ASSETS, net 1,981,319 1,951,380
---------------- ---------------
$36,510,144 $34,250,213
================ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $2,296,737 $2,216,792
Notes payable - related parties 1,000,000 1,000,000
Current portion of capital lease obligations 206,139 206,139
Accrued expenses 531,088 764,084
Accrued commissions 1,163,197 1,214,235
Dividends payable 48,863 39,000
Other current liabilities 59,989 182,155
---------------- ---------------
TOTAL CURRENT LIABILITIES 5,306,013 5,622,405
REFUNDABLE DEPOSITS 227,000 240,000
ACCRUED COMMISSIONS, less current portion 345,527 309,656
DEFERRED INCOME TAXES 582,256 667,998
CAPITAL LEASE OBLIGATIONS 592,449 641,623
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Convertible preferred stock - par value $.001 per share; authorized 10,000,000
shares; eight shares issued and outstanding at March 31, 1997 and
December 31, 1996 - -
Common stock - par value $.001 per share; authorized 20,000,000 shares;
9,084,882 and 8,454,266 shares issued and outstanding at March 31, 1997
and December 31, 1996, respectively 9,085 8,454
Additional paid-in capital 33,416,319 30,080,560
Obligation to issue common stock 3,065,056 3,065,056
Stock subscription receivable (1,140,000) (1,140,000)
Accumulated deficit (5,260,852) (4,612,830)
Less treasury stock, at cost; 170,200 common shares (632,709) (632,709)
---------------- ---------------
29,456,899 26,768,531
---------------- ---------------
$36,510,144 $34,250,213
================ ===============
See accompanying notes to the condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
<CAPTION>
1997 1996
---------------- ---------------
(Restated)
<S> <C> <C>
REVENUES, net $6,518,142 $4,583,638
COST OF SALES 1,043,798 634,047
PROVIDER PAYMENTS 1,404,896 934,958
---------------- ---------------
GROSS PROFIT 4,069,448 3,014,633
RESEARCH, DEVELOPMENT AND
REGULATORY EXPENSES 362,204 736,132
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 4,342,987 4,186,597
---------------- ---------------
LOSS FROM OPERATIONS (635,743) (1,908,096)
OTHER INCOME AND EXPENSES
Interest income 97,364 54,746
Interest expense (59,643) (26,364)
Other (50,000) -
---------------- ---------------
NET LOSS BEFORE INCOME TAXES (648,022) (1,879,714)
INCOME TAX BENEFIT - (647,950)
---------------- ---------------
NET LOSS (648,022) (1,231,764)
CONVERSION DISCOUNT ON PREFERRED STOCK - (909,500)
PREFERRED STOCK DIVIDEND REQUIREMENTS - (129,945)
---------------- ---------------
LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $(648,022) $(2,271,209)
================ ===============
LOSS PER COMMON SHARE
Primary: $(0.07) $(0.32)
================ ===============
Assuming full dilution: $(0.07) $(0.32)
================ ===============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING
Primary: 8,821,000 7,020,000
================ ===============
Assuming full dilution: 8,821,000 7,020,000
================ ===============
See accompanying notes to the condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
<CAPTION>
1997 1996
----------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(648,022) $(1,231,764)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 338,243 206,017
Provision for uncollectible accounts 59,000 237,500
Decrease in accounts receivable 1,030,368 894,449
Increase in notes receivable (517,300) (141,544)
Decrease (increase) in inventory 139,509 (1,057,949)
Increase in accounts payable 79,945 477,377
Decrease in accrued liabilities (248,163) (302,663)
Decrease (increase) in income tax assets 165,499 (882,911)
Other (425,184) 38,680
----------------- ---------------
NET CASH USED IN OPERATING ACTIVITIES (26,105) (1,762,808)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (191,780) (197,578)
----------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 25,988 31,232
Repayments of notes payable - (799,100)
Repayments of notes payable - officer - (465,000)
Repayments of capital lease obligation (49,174) -
Proceeds from issuance of preferred stock, net - 5,389,029
----------------- ---------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (23,186) 4,156,161
----------------- ---------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (241,071) 2,195,775
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,003,501 1,598,339
----------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $1,762,430 $3,794,114
================= ===============
See accompanying notes to the condensed consolidated financial statements.
</TABLE>
<PAGE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Month Periods Ended March 31, 1997 and 1996
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited, condensed consolidated financial
statements of LaserSight Incorporated and subsidiaries (the Company)
as of March 31, 1997, and for the three-month periods ended March 31,
1997 and 1996 have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and note
disclosures required by generally accepted accounting principles for
complete financial statements. These condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's
annual report on Form 10-K for the year ended December 31, 1996. In
the opinion of management, the condensed consolidated financial
statements include all adjustments necessary for a fair presentation
of consolidated financial position and the results of operations and
cash flows for the periods presented. The results of operations for
the period ended March 31, 1997 are not necessarily indicative of the
operating results for the full year.
NOTE 2 PER SHARE INFORMATION
Net loss per common share is computed using the weighted average
number of common shares, commitments to issue common shares and common
share equivalents outstanding during each period. Common share
equivalents include options and warrants to purchase Common Stock and
are included in the computation using the treasury stock method if
they would have a dilutive effect. Fully diluted loss per share for
the three months ended March 31, 1997 was anti-dilutive and therefore
is the same as primary loss per share.
Accounting Change - Loss Per Share
Pursuant to Emerging Issues Task Force (EITF) Announcement No. D-60,
the value of the conversion discount on the Series A Convertible
Preferred Stock has been reflected as an increase to the loss
attributable to common shareholders for the three months ended March
31, 1996. The value of the conversion discount, approximately
$900,000, and per share effect, ($0.13), has been reflected in the
condensed consolidated statement of operations. Primary loss per share
and fully diluted loss per share, as originally reported in the
Company's quarterly report, were both ($0.19) for the three months
ended March 31, 1996. This change did not affect any of the reported
amounts in the condensed consolidated balance sheet as of March 31,
1996 or the net loss for the three months ended March 31, 1996.
<PAGE>
In February 1997, Statement of Financial Accounting Standards No. 128
(SFAS 128), "Earnings Per Share," was issued establishing new
standards for computing and presenting earnings per share. The
historical measures of earnings per share (primary and fully diluted)
are replaced with two new computations of earnings per share (basic
and diluted). The Company will adopt SFAS 128 as of December 31, 1997.
Loss per share, on a pro forma basis, for the three month-periods
ended March 31, 1997 and 1996, computed pursuant to the provisions of
SFAS 128, would have been as follows:
1997 1996
---- ----
(Restated)
Basic loss per share ($ 0.07) ($ 0.31)
Diluted loss per share ($ 0.07) ($ 0.31)
NOTE 3 INVENTORIES
Inventories, which consist primarily of laser systems, parts and
components, is stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. The components of
inventories at March 31, 1997 and December 31, 1996 are summarized as
follows:
March 31, 1997 December 31, 1996
-------------- -----------------
Raw materials $2,173,818 $2,008,610
Work-in-process 214,655 448,906
Finished goods 582,523 664,646
Test equipment-clinical trials 218,398 206,741
---------- ----------
$3,189,394 $3,328,903
========== ==========
NOTE 4 BUSINESS COMBINATIONS
LaserSight Centers Incorporated (Centers)
-----------------------------------------
In March 1997, the Company amended the purchase and royalty agreements
related to the 1993 acquisition of Centers. The amended purchase
agreement provided for the Company to issue 625,000 unregistered
common shares (valued at $3,320,321) with 600,000 additional shares
contingently issuable based upon future operating profits. This
replaces the provision calling for 1,265,333 contingently issuable
shares based on cumulative revenues or other future events and the
uncertainties associated therewith. The amended royalty agreement
reduces the royalty from $86 to $43 per refractive procedure and
delays the obligation to pay such royalties until the sooner of five
years or the issuance of all contingently issuable shares as described
above.
<PAGE>
NOTE 5 COMMITMENTS AND CONTINGENCIES
Patent Agreement
----------------
In February 1997, the Company entered into an agreement with
International Business Machines Corporation (IBM) which provides for
LaserSight to acquire certain IBM patents relating to ultraviolet
light ophthalmic products and procedures for ultraviolet ablation for
$14,900,000 on or before July 1, 1997.
The agreement provides for IBM to transfer to the Company all of IBM's
rights under its patent license agreements with certain licensees.
Subject to the closing of the transaction by July 1, 1997, the Company
will be entitled to receive all royalties accrued on or after January
1, 1997, under such patent license agreements.
An escrow agreement between IBM and the Company was negotiated and
executed in March 1997, providing for the Company to place a $1
million deposit of its common stock into escrow. If the transaction
does not close by July 1, 1997, IBM may terminate the agreement. In
such event, the Company's sole obligation is to deliver from the
escrow or otherwise its common stock and/or cash with a value of $1
million on July 1, 1997. Among other things, the transaction is
subject to the Company's arrangements for payment of the purchase
price and regulatory clearances, if any.
NOTE 6 SUBSEQUENT EVENT
Financing
---------
On April 1, 1997, the Company entered into a loan agreement with
Foothill Capital Corporation for a loan of up to $8 million,
consisting of a term loan in the amount of $4 million and a revolving
loan in an amount of 80% of the eligible receivables of LaserSight
Technologies, but not in excess of $4 million. The term loan bears
interest at an annual rate of 12.50% and requires repayment of
principal in monthly installments of $1.33 million beginning on May 1,
1998. The revolving loan bears interest at a variable annual rate of
1.50% above the base rate of Norwest Bank Minnesota. The $4 million
maximum amount of the revolving loan declines by $1.33 million per
month beginning on August 1, 1998. In connection with the loan, the
Company paid an origination fee of $150,000 and issued warrants to
purchase 500,000 shares of Common Stock. The warrants are exercisable
at any time from April 1, 1998 through April 1, 2002 at an exercise
price per share of $6.0667. Subject to certain conditions based on the
market price of the Common Stock, up to half of the warrants are
eligible for repurchase by the Company. Any warrants that remain
outstanding and unexercised on April 1, 2002 are subject to mandatory
repurchase by the Company at a price of $1.50 per warrant. The loan is
secured by a pledge of substantially all of the Company's accounts
receivable and other assets. The terms of the financing agreement
contain financial covenants with respect to, among other things,
current ratio, laser system sales, revenue, earnings before interest,
taxes, depreciation and amortization (EBITDA), and capital
expenditures.
The Company used a portion of the net proceeds of the term loan to pay
in full the balance due under its note to the former owners of MEC
Health Care, Inc., a wholly owned subsidiary of the Company acquired
in October 1995.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Net Sales. The following tables present the Company's net sales by major
operating segments: technology products and services and health care services
for the three month periods ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
For the Three-Month For the Three-Month
Period Ended Period Ended
March 31, 1997 March 31, 1996
-------------- --------------
Percent
Net Sales % of Total Change Net Sales % of Total
--------- ---------- ------ --------- ----------
<S> <C> <C> <C> <C> <C>
Technology $ 3,553,844 55 % 79 % $ 1,984,350 43 %
Health care services 2,964,298 45 % 9 % 2,724,897 60 %
Intercompany revenues -- -- (125,609) (3 %)
----------- ----------- -------
Total net sales $ 6,518,142 100 % 42 % $ 4,583,638 100 %
=========== ====== =========== ======
</TABLE>
Net sales in the first quarter of 1997 were $6,518,142 compared to $4,583,638
(for an increase of $1,934,504) over the same period in 1996. The increase in
health care services revenue was attributed to increased revenues generated by
MEC Health Care, Inc. (MEC) and revenues generated by LSI Acquisition, Inc.,
which manages the ophthalmic practice known as Northern New Jersey Eye Institute
(NNJEI), the assets of which were acquired on July 3, 1996, partially offset by
a substantial reduction in revenues generated by The Farris Group. Net sales for
The Farris Group in the first quarter of 1997 were $231,878 compared to
$1,208,967 (for a decrease of $977,089) over the same period in 1996. This
decrease was due primarily to a reduction in consulting services provided and
was accompanied by a $645,229 reduction in expenses. The increase in technology
revenues was attributed to increased sales of the Company's LaserScan-2000 and
LS-300 excimer laser systems in overseas markets. Fifteen laser systems were
sold in the first quarter of 1997 compared to seven systems, net of returns,
sold over the same period in 1996. There were no system returns during the first
quarter of 1997. In addition, due to competitive pressures in certain markets
and the Company's sales, during 1997, of the lower priced LS 300 model, the
average sales price per system declined from average levels during the same
period in 1996.
<PAGE>
Cost of Goods Sold; Gross Profits. The following tables present a comparative
analysis of cost of goods sold, gross profit and gross profit margins for the
three month periods ended March 31, 1997 and 1996.
For the Three-Month For the Three-Month
Period Ended Percent Period Ended
March 31, 1997 Change March 31, 1996
-------------------- ------ -----------------
Cost of goods sold $ 1,043,798 65 % $ 634,047
Provider payments 1,404,896 50 % 934,958
Gross profit 4,069,448 35 % 3,014,633
Gross profit percentage 62 % 66 %
Technology related only:
Gross profit 2,510,046 86% 1,350,303
Gross profit percentage 71 % 68 %
Gross profit margins were 62% of net sales in the first quarter of 1997 compared
to 66% for the same period in 1996. The gross profit margin decrease was
primarily attributed to (i) the decrease in revenues generated by The Farris
Group, which has no associated cost of sales, (ii) a lower average sales price
for laser systems sold in 1997, and (iii) a decrease in the gross profit
percentage of MEC, which operated at a gross profit percentage of 27% during the
three month period ended March 31, 1997, compared to 33% over the same period in
1996. The decrease in revenues generated by The Farris Group was partially
offset by revenues generated by NNJEI.
Research, Development and Regulatory Expense. The following tables present a
comparative analysis of research, development and regulatory expenses for the
three month periods ended March 31, 1997 and 1996.
For the Three-Month For the Three-Month
Period Ended Percent Period Ended
March 31, 1997 Change March 31, 1996
--------------------- ------ ------------------
Research, development
and regulatory $ 362,204 (51 %) $ 736,132
As a percentage of
technology net sales 10% 37 %
Research, development and regulatory expenses for the three month period ended
March 31, 1997, were $362,204, a decrease of $373,928, or 51% from such
expenditures during the same period in 1996. This decrease was the result of
project prioritization which began in the second quarter of 1996 and due to a
large percentage of the total cost of developing the new "CeraLase" ceramic
laser head to be utilized in the Company's new LaserScan LSX laser system being
incurred during the first quarter of 1996. Continued research, development and
regulatory expenses can primarily be attributed to ongoing research and
development of new refractive laser systems, including development of the
LaserScan LSX and refinements to the LaserScan 2000, and continued software
development for the excimer lasers. Regulatory expenses have changed minimally
since 1996 but are expected to increase in 1997 as a result of the Company's
continuation of current FDA clinical trials and the development of additional
future protocols for submission to the FDA.
<PAGE>
Selling, General and Administrative Expenses. The following tables present a
comparative analysis of selling, general and administrative expenses for the
three month periods ended March 31, 1997 and 1996.
For the Three-Month For the Three-Month
Period Ended Percent Period Ended
March 31, 1997 Change March 31, 1996
-------------------- ------- ------------------
Selling, general and
administrative $ 4,342,987 4 % $ 4,186,597
Percentage of net sales 67% 91 %
Selling, general and administrative expenses increased by $156,390 for the first
quarter of 1997 compared to the same period in 1996. The primary reasons for
these increases include increased employment and other operating costs as a
result of the acquisition of NNJEI in July 1996, the growth of MEC, and a
general increase in personnel and costs necessary to fund the strategic
initiatives of the Company and the development of its products and services.
Additionally, certain significant expenses correlate directly with the increase
in revenues over the prior year period, including sales commissions and warranty
costs. These increases in operating costs were partially offset by a substantial
reduction in the operating costs of The Farris Group. Legal and accounting
expenditures continue to be incurred as a result of ongoing regulatory filings,
general corporate issues, litigation and patent issues.
Loss From Operations. There was an operating loss of $635,743 in the first
quarter of 1997 compared to an operating loss of $1,908,096 for the same period
in 1996. The improvement in operating results can be attributed primarily to
increased sales of the Company's laser systems and the profitability of MEC and
NNJEI, partially offset by the loss incurred by The Farris Group.
Other Income and Expense. Interest income was $97,364 in the first quarter of
1997 compared to $54,746 for the same period in 1996. Interest income was earned
from the Company's cash deposits, short-term investments and long-term
receivables related to laser system sales. Interest expense was $59,643 in the
first quarter of 1997 compared to $26,364 for the same period in 1996. Interest
expense incurred by the Company related primarily to the notes payable to the
former owner of The Farris Group (1996 only) and to the former owners of MEC,
and a capital lease related to the assets of NNJEI. During the first quarter of
1997, the Company incurred a charge to earnings of $50,000 related to the
settlement of litigation.
Income Taxes. For the three months ended March 31, 1997, the Company recorded no
income tax benefit or expense compared to an income tax benefit of $647,950 for
the same period in 1996. The lack of income tax benefit for the first quarter of
1997 has been based on the lack of availability of loss carrybacks.
Net Loss. Net loss for the first quarter of 1997 was $648,022 compared to a net
loss of $1,231,764 for the same period in 1996. The improvement can be
attributed primarily to increased sales of the Company's laser systems and the
continued profitability of the Company's subsidiaries MEC and NNJEI as
previously described for the first quarter of 1997, partially offset by a loss
at The Farris Group.
Loss per Share. The Company's loss per primary and fully diluted share decreased
to ($0.07) for the first three months of 1997 compared to ($0.32) in 1996. The
decrease is attributable to the decrease in the net loss for the quarter ended
March 31, 1997 over the same period in 1996 and the value of the conversion
discount on preferred stock of $909,500 in the first quarter of 1996. Weighted
average shares outstanding increased from the first quarter of 1996 as a result
of the conversion into Common Stock of 108 of the 116 shares of convertible
Preferred Stock issued in January 1996, the exercise of warrants and options,
the issuance of shares in conjunction with the acquisition of NNJEI and the
March 1997 amendment to the purchase agreement related to LaserSight Centers.
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Working capital decreased $1,103,452 from $10,020,801 at December 31, 1996 to
$8,917,349 as of March 31, 1997. This decrease in working capital resulted
primarily from the loss from operations and the purchase of property and
equipment.
Operating activities used net cash of $26,105 during the first three months of
1997, compared to $1,762,808 of net cash used during the same period in 1996.
This decrease in primarily attributable to a first quarter 1997 net loss of
$648,022 compared to a net loss of $1,231,764 for the same period in 1996. Other
factors resulting in this decrease include a decrease in net receivables and
income taxes recoverable, partially offset by an increase in notes receivable.
The Company used $191,780 in cash from investing activities during the first
quarter of 1997 compared to $197,578 over the same period in 1996. Net cash used
in investing activities during the first quarter of 1997 can be primarily
attributed to the purchase of office and computer equipment. Net cash used in
financing activities during the first quarter of 1997 was $23,186, consisting of
net proceeds from the exercise of stock options and costs relating to the
repayment of the capital lease obligation. That compares to cash provided by
financing activities in the first three months of 1996 of $4,156,161, consisting
of net proceeds from the sale of common and preferred stock totaling $5,420,261
net of a repayment of $1,264,100 in notes payable.
The Company believes that its balances of cash and cash equivalents along with
operating cash flows and the proceeds of the Foothill financing will be
sufficient to fund its anticipated working capital requirements for the next
twelve month period based on modest growth and anticipated collection of
receivables. A failure to collect timely a material portion of current
receivables could have a material adverse effect on the Company liquidity. The
Company, which implemented more stringent sales criteria during 1996, may from
time to time reassess its credit policy and the terms it will make available to
individual customers. As a result of a growing presence in a number of countries
and continued acceptance of the Company's laser systems, the Company intends to
internally finance a proportionately smaller number of sales over periods
exceeding eighteen months than in 1996 and preceding years. There can be no
assurance as to the terms or amount of third-party financing, if any, that the
Company's customers may obtain in the future. The Company is placing greater
emphasis on the terms and collection timing of future sales.
The Company expects to increase the level of manufacturing and distribution of
its medical lasers for international sales and to continue a variety of research
and development activities on its excimer and solid-state laser systems over the
next twelve months and it is anticipated that such research and development,
manufacturing and selling-related expenditures will be the most significant
technology-related expenses in the foreseeable future. In addition, the Company
expects to aggressively pursue vision managed care contracts with HMOs, insurers
and employer groups during the next 12 months. The Company anticipates that such
efforts will be the most significant health care service-related expenses in the
foreseeable future.
The Company is receptive to joint venture discussions with compatible companies
for the development and operation in international markets of surgical centers
that will utilize the Company's products or provide synergies to the development
of managed networks. In addition to cash contributions that may be available
from joint venture partners, the Company is also seeking complementary strengths
and other synergies that may provide strategic advantages. The Company has no
present commitments for joint venture relationships, and no assurance can be
given that any such relationship will be secured on terms satisfactory to the
Company.
<PAGE>
UNCERTAINTIES AND OTHER ISSUES
The Company's business, results of operations and financial conditions may also
be affected by a variety of factors, including the ones noted below and under
the same caption in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
Company-Related Uncertainties
- -----------------------------
Operating Results. The Company incurred losses of $4,074,369 and $648,022 during
1996 and the first quarter of 1997, respectively. In addition, although the
Company achieved profitability in 1995 and 1994, the Company incurred losses in
1991 through 1993. As of March 31, 1997, the Company had an accumulated deficit
of $5,260,852. There can be no assurance that the Company can regain or sustain
profitability.
Receivables. At March 31, 1997, the Company's trade accounts and notes
receivable aggregated approximately $10,666,000 net of total allowances for
collection losses and returns of approximately $1,566,000. Accrued commissions,
the payment of which generally depends on the collection of such net trade
accounts and notes receivable, aggregated approximately $1,509,000 at March 31,
1997. Exposure to collection losses on technology-related receivables is
principally dependent on its customers' ongoing financial condition and their
ability to generate revenues from the Company's laser systems. The Company's
ability to evaluate the financial condition of prospective customers located
outside of the United States is generally more limited than for customers
located in the United States. The Company monitors the status of its receivables
and maintains a reserve for estimated losses. The Company's operating history
has been relatively short. There can be no assurance that the current reserves
for estimated losses ($1,409,000 at March 31, 1997) will be sufficient to cover
actual write-offs over time. Actual write-offs that materially exceed amounts
reserved could have a material adverse effect on the Company's consolidated
financial condition and results of operations.
Possible Additional Capital. The Company is exploring alternative sources of
capital to fund its product development activities, to fund the $14.9 million
purchase price for its purchase of certain patents from IBM, to consummate
future strategic acquisitions, and to accelerate its implementation of managed
care strategies. Except for the asset-backed financing of up to $8 million from
Foothill, which closed on April 1, 1997, and allowed the Company to repay its
obligation to the former owners of MEC, the Company has no present commitments
to obtain such capital, and no assurance can be given that the Company will be
able to obtain additional capital on terms satisfactory to the Company. To the
extent that future financing requirements are satisfied through the sale of
equity securities, holders of Common Stock may experience significant dilution
in earnings per share and in net book value per share. The Foothill financing or
other debt financing could result in a substantial portion of the Company's cash
flow from operations being dedicated to the payment of principal and interest on
such indebtedness and may render the Company more vulnerable to competitive
pressures and economic downturns.
Technology-Related Uncertainties
- --------------------------------
New Products. There can be no assurance that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of its new LaserScan LSX excimer laser and other new
products and enhancements, or that its new products and enhancements will be
accepted in the marketplace. As is typical in the case of new and rapidly
evolving industries, demand and market acceptance for recently introduced
technology and products are subject to a high level or uncertainty. In addition,
announcements of currently planned or other new product offerings may cause
customers to defer purchasing existing Company products.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Pillar Point Partners
---------------------
On March 25, 1997, the Company entered into an agreement with Pillar
Point Partners and each co-plaintiff to resolve this litigation. Under
the agreement, Pillar Point Partners and each co-plaintiff granted a
release from liability under any of their patents for certain of the
Company's ultraviolet laser corneal surgery systems and any service or
procedure performed with such systems before the effective date of the
agreement. The Company paid a nominal fee in April 1997 and agreed to
notify Pilllar Point Partners and the co-plaintiffs before LaserSight
begins manufacturing or selling in the United States in the future.
The action was dismissed without prejudice in the United States
District Court for the District of Delaware on March 26, 1997.
Certain other legal proceedings against the Company are described in
Item 3 (Legal Proceedings) of the Company's Form 10-K for the year
ended December 31, 1996.
ITEM 2 CHANGES IN SECURITIES
a) Not applicable.
b) Not applicable.
c) During the first quarter ended March 31, 1997, the Company has sold
or issued the following unregistered securities:
In March 1997, the Company, pursuant to an amendment to a
previously-reported 1993 acquisition agreement, issued 624,991 shares
of Common Stock to the former shareholders and former optionholders of
LaserSight Centers Incorporated.
The shares were issued in reliance on Regulation D promulgated under
the Securities Act of 1933, as amended (the "Securities Act"). The 16
former LaserSight Centers shareholders and optionholders were either
accredited investors or represented by purchaser representatives as
defined in Regulation D. The Company has filed a Form D. The issuance
and sale of all of such shares was also intended to be exempt from
registration under the Securities Act by virtue of Section 4(2)
thereof due to, among other things, (i) the limited number of persons
to whom the shares were issued, (ii) the distribution of disclosure
documents to all investors, (iii) the sophistication of the investors
or their representatives, (iv) the fact that each such person
represented and warranted to the Company, among other things, that
such person was acquiring the shares for investment only and not with
a view to the resale or distribution thereof, and (v) the fact that
certificates representing the shares were issued with a legend to the
effect that such shares had not been registered under the Securities
Act or any state securities laws and could not be sold or transferred
in the absence of such registration or an exemption therefrom.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 OTHER INFORMATION
Not applicable.
<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
EXHIBIT INDEX
-------------
Exhibit 2 - Plans of Acquisition, Reorganization
2.1 See Exhibits 10.3, 10.8, 10.10, 10.19, 10.26, 10.29 and 10.30.
Exhibit 4 - Instruments Defining the Rights of Security Holders
4.1 Instruments defining the rights of security holders are set forth in
the Articles of Incorporation, as amended, and are incorporated herein
by reference from 8-A/A filed January 18, 1996.
Exhibit 10 - Material Contracts
10.1 Agreement dated April 1, 1992 between International Business Machines
Corporation and LaserSight Incorporated (filed as Exhibit 10.1 on Form
10-K for the year ended December 31, 1995*).
10.2 Covenant Not to Compete entered into between LaserSight Incorporated
and Dr. J.T. Lin (filed as Exhibit 10(c) to the Company's Registration
Statement on Form S-18 (File No. 33-42734 and incorporated herein by
reference).
10.3 Agreement for Purchase and Sale of Stock by and among LaserSight
Centers Incorporated, its stockholders and LaserSight Incorporated
dated January 15, 1993 (filed as Exhibit 2 to the Company's Form 8-K/A
filed on January 25, 1993*).
10.4 Amendment to Agreement for Purchase and Sale of Stock by and among
LaserSight Centers Incorporated, its stockholders, and LaserSight
Incorporated dated April 5, 1993 (filed as Exhibit 2 to the Company's
Form 8-K/A filed on April 19, 1993*).
10.5 Royalty Agreement by and between LaserSight Centers Incorporated and
LaserSight Partners dated January 15, 1993 (filed as Exhibit 10.5 to
the Company's Form 10-K for the year ended December 31, 1995*).
10.6 Exchange Agreement dated January 25, 1993 between LaserSight Centers
Incorporated and Laser Partners (filed as Exhibit 10.6 to the
Company's Form 10-K for the year ended December 31, 1995*).
10.7 Stipulation and Agreement of Compromise, Settlement and Release dated
April 18, 1995 among James Gossin, Francis E. O'Donnell, Jr., J.T.
Lin, Wen S. Dai, Emanuela Dobrin-Charlton, C.H. Huang, W. Douglas
Hajjar, and LaserSight Incorporated (filed as Exhibit 10.7 to the
Company's Form 10-K for the year ended December 31, 1995*).
10.8 Agreement for Purchase and Sale of Stock dated December 31, 1993,
among LaserSight Incorporated, MRF, Inc., and Michael R. Farris (filed
as Exhibit 2 to the Company's Form 8-K filed on December 31, 1993*).
10.9 First Amendment to Agreement for Purchase and Sale of Stock by and
among MRF, Inc., Michael R. Farris and LaserSight Incorporated dated
December 28, 1995 (filed as Exhibit 10.9 to the Company's Form 10-K
for the year ended December 31, 1995*).
- ---------------------
* Incorporated herein by reference. File No. 0-19671
<PAGE>
10.10 Contribution Agreement dated July 7, 1994, between LaserSight
Incorporated and LaserSight Technologies, Inc. (filed as Exhibit 2.6
to the Company's Form 10-K for the year ended December 31, 1994*).
10.11 Research and Development Consulting Agreement dated March 31, 1995
between LaserSight Technologies, Inc. and J.T. Lin, Ph.D. (filed as
Exhibit 10.3 to the Company's Form 10-Q for the quarter ended
September 30, 1995*).
10.12 Technology Transfer Agreement dated July 25, 1995 between LaserSight
Technologies, Inc., J.T. Lin, Ph.D. and Photon Data, Inc. (filed as
Exhibit 10.4 to the Company's Form 10-Q for the quarter ended
September 30, 1995*).
10.13 LaserSight Incorporated 1995 Stock Option Plan (filed as Exhibit 10.5
to the Company's Form 10-Q for the quarter ended September 30, 1995*).
10.14 Consulting Agreement dated November 1, 1996 by and between LaserSight
Technologies, Inc. and Emanuela Dobrin-Charlton (filed as Exhibit
10.14 to the Company's Form 10-K for the year ended December 31,
1996*).
10.15 Consulting Agreement dated June 7, 1995 by and between LaserSight
Incorporated and Richard C. Lutzy (filed as Exhibit 10.15 to the
Company's Form 10-K for the year ended December 31, 1995*).
10.16 Modified Promissory Note between LaserSight Incorporated, EuroPacific
Securities Services, GmbH and Co. KG and Wolf Wiese (filed as Exhibit
10.6 to the Company's Form 10-Q for the quarter ended September 30,
1995*).
10.17 Employment Agreement by and between LaserSight Incorporated and
Michael R. Farris dated December 28, 1995 (filed as Exhibit 10.17 to
the Company's Form 10-K for the year ended December 31, 1995*).
10.18 Employment Agreement dated December, 1995 by and between LaserSight
Incorporated and David Pieroni (filed as Exhibit 10.18 to the
Company's Form 10-K for the year ended December 31, 1995*).
10.19 Agreement and Plan of Merger by and among LaserSight Incorporated, MEC
Health Care, Inc., Dr. Mark B. Gordon, O.D. and Dr. Howard M. Levin,
O.D., dated August 28, 1995 as amended as of October 5, 1995 (filed as
Exhibit 2 to the Company's Form 8-K filed on October 19, 1995*).
10.20 Manufacturer's Representative Agreement by and between LaserSight
Technologies, Inc. and Natural Vision of Malta dated September 1, 1995
(filed as Exhibit 10.20 to the Company's Form 10-K for the year ended
December 31, 1995*).
10.21 Patent License Agreement dated December 21, 1995 by and between
Francis E. O'Donnell, Jr. and LaserSight Centers, Inc. (filed as
Exhibit 10.21 to the Company's Form 10-K for the year ended December
31, 1995*).
- -------------------
* Incorporated herein by reference. File No. 0-19671.
<PAGE>
10.22 Agreement dated April 4, 1996 to amend Agreement and Plan of Merger by
and among LaserSight Incorporated, Mark B. Gordon, O.D. and Howard M.
Levin, O.D. (filed as Exhibit 10.22 to the Company's Form 10-Q for the
2nd quarter ended June 30, 1996*).
10.23 Agreement dated June 27, 1996 to amend Agreement and Plan of Merger by
and among LaserSight Incorporated, Mark B. Gordon, O.D. and Howard M.
Levin, O.D. (filed as Exhibit 10.23 to the Company's Form 10-Q for the
2nd quarter ended June 30, 1996*).
10.24 LaserSight Incorporated 1996 Equity Incentive Plan (filed as Exhibit A
to the Company's definitive proxy statement dated April 30, 1996*).
10.25 LaserSight Incorporated Non-Employee Directors Stock Option Plan
(filed as Exhibit B to the Company's definitive proxy statement dated
April 30, 1996*).
10.26 Agreement and Plan of Merger dated April 18, 1996 among LaserSight
Incorporated, Eye Diagnostics & Surgery, P.A., LSI Acquisition, Inc.,
John W. Norris, M.D. and Bernard Spier, M.D. (filed as Exhibit 2 (i)
to the Company's Form 8-K dated July 18, 1996*).
10.27 Amendment to the Agreement and Plan of Merger dated June 17, 1996
(filed as Exhibit 2 (ii) to the Company's Form 8-K dated July 18,
1996*).
10.28 Second Amendment to the Agreement and Plan of Merger dated July 3,
1996 (filed as Exhibit 2 (iii) to the Company's Form 8-K dated July
18, 1996*).
10.29 Agreement and Plan of Merger dated June 17, 1996 among LaserSight
Incorporated, LaserSight Acquisition, Inc., Cataract Hotline, Inc. and
Michael R. Norris (filed as Exhibit 2 (iv) to the Company's Form 8-K
dated July 18, 1996*).
10.30 Asset Purchase Agreement dated April 18, 1996 between LaserSight
Incorporated and John W. Norris, M.D. (filed as Exhibit 2 (vi) to the
Company's Form 8-K dated July 18, 1996*).
10.31 Amendment to Asset Purchase Agreement dated June 17, 1996 (filed as
Exhibit 2 (vii) to the Company's Form 8-K dated July 18, 1996*).
10.32 Agreement dated August 12, 1996 to amend Agreement and Plan of Merger
by and among LaserSight Incorporated, Mark B. Gordon, O.D. and Howard
M. Levin, O.D. (filed as Exhibit 10.32 to the Company's Form 10-K for
the year ended December 31, 1996*).
10.33 Agreement dated October 30, 1996 to amend Agreement and Plan of Merger
by and among LaserSight Incorporated, Mark B. Gordon, O.D. and Howard
M. Levin, O.D. (filed as Exhibit 10.33 to the Company's Form 10-K for
the year ended December 31, 1996*).
10.34 Agreement dated January 8, 1997 to amend Agreement and Plan of Merger
by and among LaserSight Incorporated, Mark B. Gordon, O.D. and Howard
M. Levin, O.D. (filed as Exhibit 10.34 to the Company's Form 10-K for
the year ended December 31, 1996*).
- -------------------
* Incorporated herein by reference. File No. 0-19671.
<PAGE>
10.35 Agreement dated September 18, 1996 between David T. Pieroni and
LaserSight Incorporated (filed as Exhibit 10.35 to the Company's Form
10-K for the year ended December 31, 1996*).
10.36 Agreement dated December 17, 1996 between Public Company Publishing,
Inc., Samuel S. Duffey and LaserSight Incorporated (filed as Exhibit
10.36 to the Company's Form 10-K for the year ended December 31,
1996*).
10.37 Agreement dated January 1, 1997, between International Business
Machines Corporation and LaserSight Incorporated (filed as Exhibit
10.37 to the Company's Form 10-K for the year ended December 31,
1996*).
10.38 Addendum dated March 7, 1997 to Agreement between International
Business Machines Corporation and LaserSight Incorporated (filed as
Exhibit 10.38 to the Company's Form 10-K for the year ended December
31, 1996*).
10.39 Second Amendment to Agreement for Purchase and Sale of Stock by and
among LaserSight Centers Incorporated, its stockholders and LaserSight
Incorporated dated March 14, 1997 (filed as Exhibit 99.1 to the
Company's Form 8-K filed on March 27, 1997*).
10.40 Amendment to Royalty Agreement by and between LaserSight Centers
Incorporated, Laser Partners and LaserSight Incorporated dated March
14, 1997 (filed as Exhibit 99.2 to the Company's Form 8-K filed on
March 27, 1997*).
10.41 Employment Agreement dated September 16, 1996 by and between
LaserSight Incorporated and Richard L. Stensrud (filed as Exhibit
10.41 to the Company's Form 10-Q filed on May 9, 1997*).
11 Statement of Computation of Per Share Earnings.
27 Financial Data Schedule (filed as Exhibit 27 to the Company's Form
10-K for the year ended December 31, 1996*).
- -------------------
* Incorporated herein by reference. File No. 0-19671.
<PAGE>
b) Reports on Form 8-K
On February 25, 1997, the Company filed with the Commission a Current
Report on Form 8-K regarding the press release issued by the Company
dated February 20, 1997, reporting an agreement between LaserSight
Incorporated and International Business Machines Corporation.
On March 18, 1997, the Company filed with the Commission a Current
Report on Form 8-K regarding the press release dated March 18, 1997,
reporting 1996 year-end results.
On March 27, 1997, the Company filed with the Commission a Current
Report on Form 8-K regarding amendments to agreements between
LaserSight Incorporated and LaserSight Centers Incorporated and Laser
Partners.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the undersigned have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LaserSight Incorporated
Dated: December 11, 1997 By: /s/ Michael R. Farris
------------------------ --------------------------
Michael R. Farris,
Chief Executive Officer
Dated: December 11, 1997 By: /s/ Gregory L. Wilson
----------------------- --------------------------
Gregory L. Wilson,
Chief Financial Officer
<TABLE>
EXHIBIT 11
LASERSIGHT INCORPORATED
COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<CAPTION>
1997 1996
-------------- --------------
(Restated)
<S> <C> <C>
PRIMARY
Weighted average shares outstanding 8,414,300 7,019,908
Issuable shares, acquisition of The Farris Group 406,700 -
Net effect of dilutive stock options and warrants - -
--------------- --------------
8,821,000 7,019,908
=============== ==============
Net loss $(648,022) $(1,231,764)
Conversion discount on preferred stock - (909,500)
Dividends on preferred stock (9,863) (129,945)
--------------- --------------
Loss attributable to common shareholders $(657,885) $(2,271,209)
=============== ==============
Primary loss per share $(0.07) $(0.32)
=============== ==============
Additional Primary Calculation:
Loss attributable to common shareholders, above $(657,885) $(2,271,209)
=============== ==============
Additional adjustment to weighted average # of shares:
Weighted average # of shares as adjusted above 8,821,000 7,019,908
Dilutive effect of contingently issuable shares and stock
options and warrants 160,000 693,092
--------------- --------------
Weighted average # of shares, as adjusted 8,981,000 7,713,000
=============== ==============
Primary loss per share, as adjusted $(0.07) (A) (0.29) (A)
=============== ==============
<PAGE>
FULLY DILUTED
Weighted average shares outstanding 8,414,300 7,019,908
Issuable shares, acquisition of The Farris Group 406,700 -
Net effect of dilutive stock options and warrants - -
Convertible preferred stock and dividends payable - -
--------------- --------------
8,821,000 7,019,908
=============== ==============
Net loss $(648,022) $(1,231,764)
Conversion discount on preferred stock - (909,500)
Dividends on preferred stock (9,863) (129,945)
--------------- --------------
Loss attributable to common shareholders $(657,885) $(2,271,209)
=============== ==============
Fully diluted loss per share $(0.07) $(0.32)
=============== ==============
Additional Fully Diluted Calculation:
Loss attributable to common shareholders, above $(657,885) $(2,271,209)
=============== ==============
Additional adjustment to weighted average # of shares:
Weighted average # of shares as adjusted per above 8,821,000 7,019,908
Dilutive effect of contingently issuable shares, stock options
and warrants and convertible preferred stock 239,000 1,323,429
--------------- --------------
Weighted average # of shares, as adjusted 9,060,000 8,343,337
=============== ==============
Fully diluted loss per share, as adjusted $(0.07) (A) $(0.27) (A)
=============== ==============
<FN>
(A) - This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces an anti-dilutive result.
</FN>
</TABLE>
