FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter Ended June 30,1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES AND EXCHANGE COMMISSION ACT
OF 1934
For the transaction period from ______ to ______
Commission file number: 0-23184
UNITED VISION GROUP, INC.
(Exact Name of the Registrant as Specified in its Charter)
Delaware 65-0257498
State or other jurisdiction of (I.R.S Employer
incorporation or organization Identification No.)
2424 N. Federal Highway, Suite 362, Boca Raton, Florida 33431
(Address of Principle Executive Office) ( Zip Code)
(407) 395-5402
(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, $.001 par
value, issued as of August 13, 1996 was 22,664,793.
<PAGE>
UNITED VISION GROUP, INC.
INDEX
Page Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet-June 30, 1996 1
and December 31, 1995
Consolidated Statement of Operations -
Three Months Ended 2
June 30, 1996 and 1995 and Six Months Ended
June 30, 1996 and 1995
Consolidated Statement of Cash Flows - Six Months 3
Ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements 4 - 7
Item 2. Management's Discussion and Analysis of Financial 8 - 11
Condition and Results from Operations
Liquidity and Capital Resources 12 - 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 16
<PAGE>
<TABLE>
UNITED VISION GROUP, INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 203,130 $ 0
Restricted cash 50,000 50,000
Marketable securities 12,000 12,000
Accounts receivable 348,140 280,640
Inventory 477,656 401,894
Other current assets 258,253 80,553
Total current assets 1,349,179 825,087
Property and equipment, net 3,843,961 3,682,472
Intangible assets, net 680,960 764,381
Other assets 102,860 85,896
Total assets $5,976,960 $5,357,836
LIABILITIES AND EQUITY
Current liabilities:
Cash overdraft $ 0 $ 3,528
Current portion of
long-term debt 36,422 38,718
Current portion of
capital lease obligations 184,398 185,048
Accounts payable 849,273 951,445
Accrued liabilities 2,279,057 2,218,772
Deferred revenue 85,331 73,961
Total current liabilities 3,434,481 3,471,472
Notes payable to shareholder 4,050,000 800,000
Long-term debt, net of
current portion 115,338 132,137
Capital lease obligations,
net of current portion 212,614 324,226
Total liabilities 7,812,433 4,727,835
Equity:
Preferred stock 0 1,666
Common stock 22,665 5,957
Additional paid-in capital 5,813,469 5,803,511
Accumulated deficit and
fund balance (7,671,607) (5,181,133)
Total equity (1,835,473) 630,001
Total liabilities
and equity $5,976,960 $5,357,836
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
<TABLE>
UNITED VISION GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATION
Three Months Ended Six Months Ended
(Unaudited) (Unaudited)
<CAPTION>
June 30, June 30, June 30, June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Premium $ 945,762 $ 0 $ 1,935,719 $ 0
Practice 1,174,262 192,041 2,607,244 298,763
Other 61,417 55,253 149,542 134,615
Total revenue 2,181,441 247,294 4,692,505 433,378
Operating costs and
expenses:
Cost of goods and
services sold 819,121 38,180 1,468,355 53,368
Depreciation and
amortization 239,058 139,822 450,723 241,668
Selling general and
administrative
expenses 2,689,297 1,131,198 5,090,550 2,257,455
Total operating
costs and
expenses 3,747,476 1,309,200 7,009,628 2,552,491
Loss from
operations (1,566,035) (1,061,906) (2,317,123) (2,119,113)
Other income
(expenses):
Other income 4,945 (4,048) 4,945 2,879
Interest, net (105,601) (11,546) (170,642) 549
Other income
(expense), net (100,656) (15,594) (165,697) 3,428
Loss before provision
for taxes (1,666,691) (1,077,500) (2,482,820) (2,115,685)
Provision for income
taxes 7,654 0 7,654 0
Net loss $(1,674,345) $(1,077,500) (2,490,474) $(2,115,685)
Net loss per share $ (.07) $ (.15)
Weighted average number
of shares used in
computing per share
amount 22,620,837 16,760,071
<FN>
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
<TABLE>
UNITED VISION GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended (Unaudited)
<CAPTION>
June 30, June 30,
1996 1995
<S> <C> <C>
Cash flow from operating
activities:
Net loss $ (2,490,474) $ (2,115,685)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 450,723 241,668
Common stock issued for services 25,000
Bad debt expense 9,797 2,273
Loss on disposal of assets 1,713
Changes in operating asset and
liabilities exclusive of net
assets acquired:
Accounts receivable (77,297) (16,916)
Inventory (75,762) (82,408)
Other current assets (194,666) 13,951
Accounts payable and accrued
liabilities (41,889) 68,888
Deferred revenue 11,370 (7,805)
Net cash used in operating
activities (2,381,485) (1,896,034)
Cash flows from investing activities:
Purchase of property and equipment (546,581) (1,078,915)
Proceeds from maturity (purchases) of
marketable securities 0 736,365
Proceeds from sale of asset 18,900 0
Increase in intangibles (2,820) (22,471)
Disposal (acquisition) of other
assets 0 (13,787)
Loans to general partner 0 (71,294)
Net cash used in investing
activities (530,501) (450,102)
Cash flows from financing activities:
Cash overdraft (3,528) 0
Payments on long-term debt and
capital lease obligations (131,356) (91,728)
Proceeds from capital
contributions 0 4,010,907
Repayment of partner loan 0 (40,000)
Proceeds from notes payable
to shareholder 3,250,000 0
Net cash provided by financing
activities 3,115,116 3,879,179
Net increase in cash 203,130 1,533,043
Cash, beginning of period 0 5,037
Cash, end of period $ 203,130 $1,538,080
<FN>
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
UNITED VISION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-QSB and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting
principles for complete financial statements. These
consolidated financial statements include estimates and
assumptions that affect the reported amounts of assets and
liabilities and the amounts of revenues and expenses. Actual
results could differ from those estimates. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. The consolidated balance sheet amounts at December
31, 1995 have been derived from audited financial statements.
Operating results for the three and six month periods ended June
30, 1996 are not necessarily indicative of the results that may
be expected for United Vision Group, Inc.'s (the "Company" or
"UVG") fiscal year or any other interim period. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1995.
On August 7, 1995, Apollo Eye Associates, L.P. and Apollo Eye
Corporation, its general partner (the "Partnership"), were
merged into United Vision Group, Inc.'s (the "Company") wholly
owned subsidiary, Apollo Acquisition Corporation, which was
subsequently renamed Apollo Eye Associates, Inc. ("Apollo"). In
connection with the merger agreement, the former partners of the
Partnership received an aggregate of 166,579.5924 shares of the
Company's newly issued Series B Preferred Stock and options to
acquire 2,412,543 shares of the Company's common stock. Each
share of Series B Preferred Stock is convertible into 100 shares
of the Company's common stock. Prior to the merger, the
Company's previously outstanding Series A Preferred Stock was
converted into 3,060,120 shares of common stock. Also prior to
the merger, two of the Company's four members of the Board of
Directors resigned, and immediately following the merger, four
former partners of the Partnership were elected to the Board.
The series of transactions described above resulted in the
Apollo shareholders controlling the Company's Board of Directors
and having an approximate 75% ownership of the Company upon
conversion of the Series B Preferred Stock and the exercise of
the common stock options. Accordingly, the transactions have
been treated as a reverse acquisition for financial reporting
purposes as if Apollo recapitalized its ownership interest into
166,579.5924 shares of preferred stock and then acquired the
Company under the purchase method of accounting by the issuance
of 5,956,834 shares of common stock. Such stock was valued at
approximately $1,511,000 which represented the estimated market
value of the Company's net assets acquired. The purchase price
was allocated to the net assets acquired and liabilities assumed
based upon their estimated fair values, resulting in an excess
of purchase price over the estimated value of net assets
acquired, which is included in intangible assets in the
accompanying financial statements. The historical results of
the Partnership became the operating results of the Company.
The operations of the
<PAGE>
UNITED VISION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
1. BASIS OF PRESENTATION - continued
Company are included in the results of operations in the
accompanying financial statements from August 1, 1995, which was
the effective date of the merger.
On March 4, 1996, the Certificate of Incorporation of the
Company was amended to increase the number of authorized common
shares from 10 million to 30 million. Concurrently, the
166,579.5924 shares of Series B Preferred Stock were converted
to 16,657,959 shares of the Company's Common Stock.
The following unaudited pro forma summary presents the combined
results of operations as if the reverse acquisition had occurred
at the beginning of the period presented and does not purport to
be indicative of what would have occurred had the reverse
acquisition been made as of that date or of results which may
occur in the future.
Six Months Ended
June 30, 1995
Revenue $ 3,508,680
Net loss $ (2,422,205)
Net loss per share $ (.14)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries and the accounts
of Optiplan based on their related business activities and the
Company's unilateral and perpetual management control. The
consolidated financial statements for 1995 include the accounts
of the Partnership and Medricon, Inc. Material intercompany
balances and transactions have been eliminated.
REVENUE RECOGNITION
Revenue from professional services is recognized when the
service is performed. Revenue from optical sales is recognized
upon order by the customer. Consulting subscriptions are
deferred and recognized when the service is delivered. Revenue
from managed care plans is recognized ratably over the life of
the related contract.
<PAGE>
UNITED VISION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
INVENTORIES
Inventories, consisting primarily of eyeglass frames, contact
lenses, lens blanks and accessories are stated at the lower of
cost or market. Cost is determined using the FIFO (first-in,
first-out) method.
CASH AND CASH EQUIVALENTS
The Company considers all short-term investments with an
original maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. The cost of
equipment held under capital lease is equal to the lower of the
net present value of the minimum lease payments or the fair
value of the leased equipment at the inception of the lease.
Additions and improvements are capitalized while maintenance and
repairs are expensed when incurred. Asset and accumulated
depreciation accounts are relieved for dispositions with
resulting gains or losses recorded in the statement of
operations. Depreciation and amortization are computed on a
straight-line basis over the estimated useful lives of the
property and equipment or over the lesser of the lease term or
the asset's useful life for leasehold improvements.
INTANGIBLES
Goodwill related to the reverse acquisition of the Company is
amortized on the straight-line method over four years. Goodwill
related to the acquisition of Medricon is amortized on the
straight-line method over 15 years. The Company periodically
evaluates the carrying value of goodwill to measure and
recognize the possible impairment of this asset. Other
intangibles resulting from the acquisition of Medricon
consisting of research materials, subscription lists, and
customer lists are amortized on the straight-line method over
their estimated useful lives of 5 to 7 years. Other intangible
assets, consisting of computer software costs, licenses and
organization costs are recorded at cost and amortized on the
straight-line method over five years.
RESTRICTED CASH
Under Florida Statutory Law, the Company is required to maintain
a $50,000 certificate of deposit with the Treasurer and
Insurance Commissioner.
<PAGE>
UNITED VISION GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
INCOME TAXES
Prior to the merger date, the Partnership was not subject to
Federal and State income taxes; instead, the Partnership's
operations were the responsibility of the partners. Effective
on the merger date, the Partnership was terminated. Medricon
filed a separate return and utilized the liability method of
accounting for deferred income taxes.
Prior to the merger date, the Company filed a consolidated
return.
For the year ended December 31, 1995, the Company will file
consolidated Federal and State income tax returns which includes
all of the members of the group except Optiplan, which is a
non-profit entity required to file a separate return.
The Company utilizes the liability method for accounting for
deferred income taxes. Under this method, deferred tax assets
and liabilities are established based on the differences between
financial statement and tax bases of assets and liabilities
using the rates in effect for the year in which the differences
are expected to reverse.
PER SHARE DATA
Per share data is based on the weighted average number of shares
of common stock outstanding during the period. Per share
amounts for 1995 are not reflected as the business operated as a
partnership.
3. CONTINGENCIES
The Company is a party to various lawsuits arising in the
ordinary course of business. During the year ended December 31,
1995, estimated litigation settlements of $351,000 were charged
to operations based on review of such litigation with legal
counsel. In the quarter ended June 30, 1996, $71,000 was
charged to operations as estimated settlement for claims arising
in the quarter. In July 1996, two lawsuits were settled for
aggregate payments of $204,000 which previously had been
provided for in the estimated litigation settlements.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
On August 7, 1995, pursuant to a Merger Agreement dated August
4, 1995, United Vision Group, Inc. (the "Company") acquired
Apollo Eye Associates, L.P., a Delaware limited partnership, and
Apollo Eye Corporation, its General Partner (together, the
"Partnership"). The Partnership was merged (the "Merger") into
a wholly owned subsidiary of United Vision Group Inc., Apollo
Acquisition Corporation, which was renamed Apollo Eye
Associates, Inc. ("Apollo"). The Mergers were accounted for as
a "reverse acquisition" whereby the Partnership was deemed to
have acquired United Vision Group, Inc. for financial reporting
purposes. United Vision Group, Inc. remains the continuing
legal entity and registrant for Securities and Exchange
Commission filing purposes. Under the terms of the acquisition,
the former holders of the Partnership received preferred stock
and common stock options which were collectively convertible
into 75% of the total outstanding common stock of the Company on
a fully diluted basis.
The following discussion and analysis presents the significant
changes in the financial condition and results of operations of
the Company for the quarter and six months ended June 30, 1996.
Consistent with the reverse acquisition accounting treatment,
the historical financial statements of the Company used for this
discussion are the consolidated financial statements of the
Partnership for the quarter and six months ended June 30, 1995,
which differ from the consolidated financial statements of
United Vision Group, Inc. which were previously reported. The
financial statements for the three and six months ended June 30,
1996 includes the consolidated operations of the Company,
including both Apollo and United Vision Group, Inc. Prior
information may not be comparable to the Company's current
operations due to the reverse acquisition accounting. This
discussion should be read in conjunction with the financial
statements and related notes thereto of the Company and the
Partnership.
Quarter Ended June 30, 1996
General
As discussed above, in accordance with accounting for the
transaction as a reverse acquisition, financial reports reflect
the Partnership's operations during the quarter and six months
ended June 30, 1995 and the Company's operations for the quarter
and six months ended June 30, 1996. The Partnership was formed
on July 1, 1994. As a part of the startup, the Partnership
acquired Medricon Inc., a health care consulting firm
specializing in ophthalmic consulting, on July 1, 1994. During
1994 and 1995, the Partnership was in a startup phase and was
in the process of building and completing five ophthalmology
practices with expenditures being related to initial marketing
and facility opening, and accordingly during the period the
Partnership had limited revenue and significant operating
losses. The Partnership commenced providing medical services
with the opening of its first ophthalmology practice in Boca
Raton in October 1994 with a second practice opening in Boynton
Beach in December 1994. During the First Quarter of 1995, the
Partnership opened three additional practice locations; Coral
Springs in January 1995, Lake Worth in February 1995 and Pompano
Beach in April 1995, and promoted
<PAGE>
the services of these newly opened practices along with incurring
the associated expenses with the openings.
Results of Operations
Gross revenues for the three months ended June 30, 1996 were
$2,181,441 versus $247,294 in the three month period ending
June 30, 1995. This increase was due to the limited operations
of the Partnership in 1995 as compared with the Company's 1996
results that includes the merger with UVG. Revenue from
premiums (Capitation Payments) were $945,762 for the three
months ended June 30, 1996, up from $0 in 1995 representing the
inclusion of UVG's capitated revenue. Premium revenue decreased
in the second quarter of 1996 from $989,957 in the first quarter
due to an HMO membership decline of one plan sponsor. Practice
revenue increased to $1,174,262 from $192,041 for the three
month period ending June 30, 1995. The increase in practice
revenue was attributable to an increase in professional
services, increased optical sales due to the Merger and a full
quarter's operations and growth in the Apollo Eye Associates
practices. Other revenue, composed primarily of consulting
provided by the Company's Medricon subsidiary increased to
$61,417 from $55,253 due to expansion of its seminar related
activities.
In June 1996, the Company acquired certain net assets of two
practice locations in Broward County, Florida from Focus Fashion
Optical, Inc. The Apollo Eye Associates name was added to the
location and the Focus Fashion Optical name will be retained for
twelve months. Purchase accounting was used to record the
acquisition at cost.
Premium revenue is expected to increase in the next quarter as
the result of new managed care contracts in Puerto Rico.
Management expects that the practice revenue trends will
moderate over the next quarter. Management also believes that
increased benefit levels in two of its major plans continues to
result in increased utilization.
During the Merger it was noted that the Apollo Eye Associates
practice locations were in direct competition with certain
Optiplan participating outside provider (third party providers
not associated with the Company) locations. Consistent with
reducing the reliance on providers and increasing internal
revenue, the Company focused on eliminating outside providers in
close proximity to its practice locations. In January 1996
management reduced the number of outside Participating Providers
by 17% based on proximity to the Apollo practice locations and a
variety of other factors. These reductions resulted in reduced
outside provider payouts and increased utilization of the
Apollo practices resulting in increased service and optical
sales. The utilization of services by members in the first three
months of 1996 increased the optical revenue in the first
quarter of 1996. In the three months ended June 30, 1996,
utilization of benefits yielded lower optical sales resulting in
a decline in revenue. The trend is unclear and management will
monitor the situation during coming periods.
Costs of Goods and Services Sold (COGS) is computed as
including the costs of eyewear, including eyeglass frames,
lenses and contact lenses, along with the fees paid for services
to outside providers. The cost of services provided by internal
providers (employed or contracted by the Company) are reported
as part of Selling, General and Administrative (SG&A) expenses.
The Costs of Goods and Services Sold increased to $819,121
during the quarter ended June 30, 1996
<PAGE>
versus $38,180 during the 1995 period. This significant increase
is due to the reporting of a full quarter of COGS for the UVG
consolidated business compared with Apollo for the same period in
1995 in the start up phase. Increased costs include the increased
optical component with its associated costs in lenses and eyeglass
frames and HMO contracts with Sponsors creating the need for
external provider payments.
Management has focused its efforts in the eyewear product
area on inventory management including automating inventory
systems, consolidating purchasing and quarterly inventory
reviews to decrease obsolescence. Inventory (net of reserves)
increased from $401,894 at December 31, 1995 to $477,656 at June
30, 1996. The increase includes inventory purchased for two
practice locations acquired in June 1996, an increase in
laboratory inventories to facilitate the closing and
consolidation of the Texas laboratory, a change in the mix of
frames and an increase in contact lens inventories. The Company
is currently implementing inventory control processes to
maximize turnover. The Company expects to improve inventory
utilization with the consolidation of its laboratory operations
into a single location in the third quarter of 1996.
SG&A expenses increased from $1,131,198 during the quarter
ended June 30, 1995 to $2,689,297 for the quarter ended June 30,
1996, representing the period expenses for both the Partnership
and UVG. The increases in SG&A were primarily related to the
costs of operating the combined businesses of fourteen practices
of UVG and Apollo in the quarter ended June 30, 1996 compared to
the June 30, 1995 costs of Apollo while still in start up.
Contributing to the cost increases are payroll including
professional medical staff, increased rental expenses due to the
expanded number of facilities, legal settlements, and accounting
and legal costs. During the second quarter of 1996, the Company
initiated a cost control program to reduce operating expenses.
Management anticipates results will be evident in the third
quarter.
Depreciation and amortization expenses for the three months
ended June 30, 1996 increased to $239,058 from $139,822 in the
same period last year. The increased expense results from
depreciation of equipment acquired in the merger with UVG and a
full quarter of depreciation on Apollo equipment placed in
service in the first half of 1995. Amortization in the quarter
ended June 30, 1996 increased to $48,521 from $13,605 in the
quarter ended June 30, 1995. The increase results from
amortization of intangible assets and goodwill associated with
the UVG acquisition. Property and Equipment increased to
$5,249,489 at June 30, 1996 from $4,752,052 at December 31,
1995. The equipment purchased includes the assets of two
practice locations acquired in June 1996, medical equipment,
optical manufacturing equipment, computers and communications
equipment.
Net Loss
The Company's losses increased from $1,077,500 for the quarter
ended June 30, 1995 to $1,674,345 ($0.07 per share) for the
quarter ended June 30, 1996. For the six months ended June 30,
1996, the net loss increased to $2,490,474 ($0.15 per share)
from $2,115,685 for the same period in the prior year. Per
share data is based on the Company's weighted average of shares
outstanding in the period of 22,620,837 and 16,760,071
respectively for the three and six months ended June 30, 1996,
with the total shares outstanding at the end of the period being
<PAGE>
22,664,793. Per share amounts for 1995 are not reflected as the
business operated as a partnership.
Balance Sheet Dated June 30, 1996
The Company's cash increased to $203,130 at June 30, 1996 from
an overdraft of $3,258 at December 31, 1995.
The Company's Accounts Receivable increased from $280,640 at
December 31, 1995 to $348,140 at June 30, 1996. This increase is
due to the increased revenue of the Company. The total current
assets of the Company increased from $825,087 on December 31,
1995, to $1,349,179 at June 30, 1996.
The Company's Property and Equipment (net of accumulated
depreciation) increased from $3,682,472 at December 31, 1995 to
$3,843,961 at June 30, 1996. The growth reflects increased
capital expenditures including the acquisition of two practice
locations in June 1996, medical equipment, computers and
communications and office equipment. The total assets of the
Company expanded from $5,357,836 at December 31, 1995 to
$5,976,960 at June 30, 1996 due to increases in accounts
receivables, inventory, acquisition of two practices and the
continued investment in computers, communications, and medical
equipment.
The Company's Notes Payable and Capital Lease obligations
decreased by $131,357 from December 31, 1995 to June 30, 1996.
These decreases are associated with repayment of borrowing.
Accounts Payable and Accrued Liabilities decreased from
$3,170,217 to $3,128,330
Notes Payable to the major shareholder, James R. Cook, M.D.,
increased to $4,050,000 at June 30, 1996 as a result of
additional loans of $1,600,000 in the second quarter of 1996.
The Company's equity decreased in the period from $630,001 at
December 31, 1995 to a deficit of $1,835,473 at June 30, 1996.
This decrease is directly related to operating losses in the
period. The Company intends to restore equity through
conversion of $4,000,000 of its Notes Payable to Shareholder,
along with the sale of additional equity. (See Liquidity and
Capital Resources.)
Cash Flow Statement for Six Month Period Ending June 30, 1996
Net Cash Flows used in Operating Activities increased from
$1,896,034 for the six month period ending June 30, 1995 to
$2,381,485 for the six month period ending June 30, 1996. The
increased cash use was due to operating losses and expansion of
accounts receivable and inventory based on increased revenues
and by decreased accounts payables and accrued liabilities.
The Company continued to expand its capital base in 1996 with
the purchase of significant Property and Equipment using
$546,581 of cash which was raised through loans from its
principal shareholder. The net cash used in investing activities
totaled $530,501. In the six month period ended June 30, 1995,
the Company purchased $1,078,915 of Property and Equipment
substantially with proceeds of $736,365 of maturing marketable
securities.
<PAGE>
The Net Cash provided by financing activities totaled
$3,115,116 for the six month period ending June 30, 1996. The
cash was primarily provided through $3,250,000 of shareholder
loans. (See Liquidity and Capital Resources.)
Liquidity and Capital Resources
Apollo Eye Associates, L.P. was a start-up company established
in July 1994. The Partnership had revenue of $433,378 with a
net loss of $2,115,685 for the six month period ended June 30,
1995. During the six month period ended June 30, 1995, the
Partnership consumed $1,896,034 of cash for operating activities
and used $450,102 in investing activities.
For the six months ended June 30, 1996, the Company's net
revenues were $4,692,505 with a loss of $2,490,474. Net cash of
$2,381,485 was consumed by operating activities with $530,501
used by investing activities. With a total of $3,115,116 cash
provided by financing activities, the net increase in cash for
the six months ended June 30, 1996 was $203,130.
During the latter half of 1995, James R. Cook, M.D., the major
shareholder of the Company, provided short term loans in the
amount of $800,000 in an effort to improve liquidity. These
shareholder loans carried an interest rate of prime plus one and
one-half percent; a total of $13,437 of interest on these
shareholder loans was accrued during 1995.
Through June 30, 1996, total shareholder loans of $4,050,000
were provided by Dr. Cook with $1,650,000 and $1,600,000
provided respectively in the first and second quarters of 1996.
Interest on the loans of $45,402 was accrued in the first
quarter of 1996 at a rate of prime plus one and one-half
percent. Beginning April 1, 1996, the interest rate was reduced
to prime and an additional $63,220 of interest was accrued in
the second quarter of 1996. In the third quarter of 1996, Dr.
Cook made additional loans to the Company of $445,000 for a
total of $4,450,000.
The Company continued to lose money in the second quarter of
1996 and remains a net consumer of cash. It is unclear exactly
what magnitude of external cash will yet be required to fund
continuing operations. Additionally, close to $2,000,000 of
investment may be required to carry out leasehold improvements
and capital equipment purchases to remodel and expand the former
Family EyeCare Center practices. This may allow the Company to
capitalize on its opportunities to provide medical and surgical
eye care in addition to the routine examinations traditionally
provided in the Family EyeCare Center locations. Additional
practice location development or acquisition will require cash.
To greatly accelerate growth into additional markets, additional
financing in the $10 - 20 million range would be necessary. The
Company is exploring the raising of additional cash through a
possible registered offering or a private placement. If this
additional funding is not available, the Company's growth plans
will be reduced.
<PAGE>
In order to restore the equity base eroded in the Company's
start-up phase and by the large restructuring charge taken
during 1995, the Board of Directors believes that equity is
needed by the Company. Dr. Cook, the principal shareholder of
the Company, has agreed and the Board of Directors has approved,
subject to the appropriate amendments to the Company's
Certificate of Incorporation and either the receipt of a
fairness opinion from a qualified, independent third party or
approval by vote of the Company's disinterested shareholders,
that Dr. Cook would make a $4,000,000 equity investment in the
Company with the conversion of loans to equity. Subject to the
approvals outlined above, Dr. Cook has agreed to convert up to
$4,000,000 of shareholder loans to purchase 6,779,661 shares of
the Company's Common Stock at $0.59 per share. These shares
would be newly issued unregistered securities subject to the
usual holding periods for such securities. This purchase price
was established by calculating the average trading price of the
shares of United Vision Group, Inc. stock in over-the-counter
trading for the twenty (20) business days prior to March 27,
1996, the date Dr. Cook and the Company agreed to convert his
loan to equity. The average trading price of $0.7385 per share
was discounted by 20%, owing to the fact that the investment is
sizable and that the shares are to be unregistered and, as such,
illiquid. (See Item 12, Certain Relationships and Related
Transactions in the Company's 1995 10-KSB.)
The Board of Directors has also approved a five to one (5:1)
reverse split of the Common Stock outstanding and an amendment
to the Company's certificate of incorporation to provide for
twelve million (12,000,000) authorized shares of Common Stock
after giving affect to the reverse split. Such actions will be
subject to the approval of the Company's shareholders. If the
reverse split is carried out, the currently outstanding shares
of Common Stock would be reduced to 4,532,959.
In addition, the Board of Directors has approved 2,000,000
shares (before the 5:1 reverse split or 400,000 shares after the
split) for the United Vision Group, Inc. 1996 Stock Option
Plan, subject to shareholder approval. After the reverse split
and the Cook equity investment, a total of 5,888,891 Common
Stock shares would be outstanding with a total of 980,000 shares
committed to the Company's Employee Stock Option Plans (80,000
shares for the 1994 plan; 500,000 shares for the 1995 Stock
Option Plan A; and 400,000 shares for the newly formed 1996
Stock Option Plan). Of the projected 12,000,000 authorized
shares, approximately 5,111,109 Common Stock shares would remain
authorized but unissued for warrant coverage and potential
acquisitions. The Board believes that opportunities exist to
acquire additional businesses, particularly physician practices
or managed care networks, in stock transactions. (See
Subsequent Events.)
Management does not believe that inflation has had a material
effect on the results of the Company's operations.
The words "believe," "expect," "anticipate," "project," and
similar expressions signify forward looking statements. Readers
are cautioned not to place undue reliance on any forward looking
statements made by or on behalf of the Company. Any such
statement speaks only as of the date the statement is made, and
the Company undertakes no obligation to update or revise any
forward looking statements.
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
Except as noted below, the Company is not party to any material
litigation, nor, to the knowledge of the Company, is any
material litigation threatened.
In August 1994, an action entitled Barry A. Ginsberg, O.D.,
Vista Optical of Pompano, Inc. and Eynayim Investment
Corporation v. J. K. Enterprises of Deerfield Beach, Inc. and
Optiplan, Inc. was filed in the Broward County, Florida District
Court. Mr. Ginsberg, a former employee of the Company, alleges
that the Company, through its subsidiaries, breached an
employment agreement and a written and various oral contracts
concerning the transfer of assets to the Company. In July 1996,
the matter was settled for amounts which had previously been
provided for and the parties exchanged general releases.
In April 1995, an action entitled Dynex Sport Optics, Inc. v.
United Vision Group, Inc. ("Dynex") was filed against the
Company in the United States District Court for the District of
New Jersey in connection with an alleged agreement between the
Company and Dynex. According to Dynex, the Company promised to
issue 1,250,000 shares of its Common Stock in exchange for 100%
of the stock of Dynex and to provide $250,000 in working capital
to Dynex. The Company denies that the alleged agreement is
enforceable and believes that, in any event, Dynex deliberately
concealed or misrepresented the business, assets, rights and
prospects of Dynex. The Company is vigorously defending against
the claim. The Company moved to dismiss the action due to lack
of jurisdiction in New Jersey. In June 1996, the U.S. District
Court for the District of New Jersey ruled in favor of the
Company and dismissed the action. In July 1996, the Company
filed an action for Declaratory Judgment with respect to the
same claims in the United States Federal Court in Palm Beach
County, Florida. In July 1996, Dynex filed an action identical
to its New Jersey action in the United States District Court for
the Southern District of New York.
United Vision Group, Inc. is a defendant in certain other legal
actions in the normal course of business, none of which is
expected to result in a material adverse effect on the Company's
net worth, total cash flows, or results of operations.
Item 2. Changes in Securities
In connection with the August 7, 1995 Merger, the Company
issued 166,579.5924 shares of Series B Preferred Stock (the
"Series B Preferred"). On March 4, 1996, the Certificate of
Incorporation of the Company was amended to increase the number
of authorized common shares from 10 million to 30 million. As a
result, the 166,579.5924 shares of Series B Preferred Stock were
converted to 16,657,959 shares of the Company's Common Stock.
For a complete description of the Series B Preferred, see the
Company's Current Report on Form 8-K (Date of Report: August 7,
1995) dated August 17, 1995, which is incorporated by reference
in response to this Item.
<PAGE>
The Company issued 50,000 shares of Common Stock on June 19,
1996 to a consultant in connection with the acquisition of
practice locations in Broward County, Florida. Common stock was
valued at the closing price on the date of the transaction.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
UNITED VISION GROUP, INC.
Dated: August 13, 1996 By: J. Richard Damron, Jr.
J. Richard Damron, Jr.
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The accompanying supplemental data are to be used in conjunction with the
unaudited financial statements and associated notes to the financial
statements for the quarter ended June 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 253,130<F1>
<SECURITIES> 12,000
<RECEIVABLES> 348,140<F2>
<ALLOWANCES> 0
<INVENTORY> 477,656
<CURRENT-ASSETS> 1,349,179
<PP&E> 3,843,961<F3>
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,976,960
<CURRENT-LIABILITIES> 3,434,481
<BONDS> 0
0
0
<COMMON> 22,665
<OTHER-SE> 5,813,469<F4>
<TOTAL-LIABILITY-AND-EQUITY> 5,976,960
<SALES> 2,181,441
<TOTAL-REVENUES> 2,181,441
<CGS> 819,121
<TOTAL-COSTS> 3,747,476
<OTHER-EXPENSES> (4,945)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (105,601)
<INCOME-PRETAX> (1,666,691)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,666,691)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,666,691)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> 0
<FN>
<F1> Cash includes Restricted Cash of $50,000
<F2> Receivables are recorded net of allowances for doubtful accounts
<F3> PP&E is recorded Net of Depreciation
<F4> Other Stockholders Equity includes Additional Paid in Capital
</FN>
</TABLE>
