-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DO245O72YhQj/KakQ5Asx3uIUYXMcHZ6W/9SzVdKZU/73QO7LYGf6kQFGufjxsAy 0gco0DfdDaeHa0ipUwtA8A== 0000906318-99-000045.txt : 19990507 0000906318-99-000045.hdr.sgml : 19990507 ACCESSION NUMBER: 0000906318-99-000045 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990506 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LCA VISION INC CENTRAL INDEX KEY: 0001003130 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 112882328 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-27610 FILM NUMBER: 99612612 BUSINESS ADDRESS: STREET 1: 7840 MONTGOMERY RD CITY: CINCINNATI STATE: OH ZIP: 45236 BUSINESS PHONE: 5137929292 MAIL ADDRESS: STREET 1: 7840 MONTGOMERY ROAD CITY: CINCINNATI STATE: OH ZIP: 45236 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-QSB (Mark One) [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 1999. [ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT. For the transition period from __________ to __________ Commission file number 0-27610 LCA-Vision Inc. ---------------------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 11-2882328 ------------------- ------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 7840 Montgomery Road, Cincinnati, Ohio 45236 ---------------------------------------------------- (Address of principal executive offices) (513) 792-9292 ---------------------------------------------------- (Issuer's telephone number) ---------------------------------------------------- (Former name, former address and formal fiscal year, if changes since last report.) Check whether then issuer (1) filed all reports required to be filed by Section 3 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes __X__ No _____ State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 45,355,022 shares as of April 30, 1999. Transitional Small Business Disclosure Format (check one): Yes _____ No __X__ LCA-VISION INC. INDEX Page No. Facing Sheet 1 Index 2 Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets at March 31, 1999 (unaudited)and at December 31, 1998 (audited) 3 Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 1999 and 1998 4 Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1999 and 1998 5 Notes to Unaudited Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Part II. Other Information 13 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 Signatures 15 LCA-VISION INC. Condensed Consolidated Balance Sheet March 31, 1999 (unaudited) and December 31, 1998 (audited) in thousands, except per share data March 31, December 31, 1999 1998 Assets Current assets: Cash and cash equivalents $ 7,199 $ 6,496 Accounts receivable, net 686 1,119 Prepaid expenses, inventory and other 1,638 1,416 ------ -------- Total current assets 9,523 9,031 Property and equipment, net 9,051 9,433 Goodwill, net 8,241 8,304 Obligations due from shareholders, net 343 471 Investment in unconsolidated businesses 886 520 Certificate of deposit 2,100 2,100 Other assets 1,696 1,518 ------ -------- Total assets $31,840 $ 31,377 ------ -------- ------ -------- Liabilities and Shareholders' Investment Current liabilities Accounts payable $ 1,810 $ 2,030 Accrued liabilities and other 3,022 2,637 Debt maturing in one year 649 787 ------ -------- Total current liabilities 5,481 5,454 Long-term debt 642 2,724 Commitments and contingencies Shareholders' investment Preferred stock 2,501 7,687 Common stock ($0.001 par value; 45,282 shares and 40,974 shares issued) 109 103 Contributed capital 47,485 41,701 Accumulated (deficit) (23,949) (25,664) Foreign currency translation adjustment 4 (14) ------ -------- 26,150 23,813 Less common stock in treasury at cost 30 30 Less accrued preferred stock dividend 403 584 ------ -------- 25,717 23,199 ------ -------- Total liabilities and shareholders' investment $ 31,840 $ 31,377 ------ -------- ------ -------- The Notes to Condensed Consolidated Financial Statements are an integral part of this statement. LCA-VISION INC. Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 1999 and 1998 (unaudited) in thousands, except per share data Three Months Ended March 31, 1999 1998 ---- ---- Revenues: Laser refractive surgery $ 13,389 $ 6,446 Other 478 763 ------- -------- Total revenues 13,867 7,209 Operating costs and expenses: Medical professional and license fees 6,015 2,656 Direct costs of services 2,556 2,819 General and administrative expenses 2,970 2,093 Depreciation and amortization 712 1,055 ------- -------- Operating income (loss) 1,614 (1,414) Equity in earnings from unconsolidated businesses 323 56 Interest expense (93) (344) Interest income 147 112 Other income (expense) (277) 25 Income (loss) before taxes on income 1,714 (1,565) Taxes on income (28) ------- -------- Net income (loss) 1,714 (1,593) Dividends to preferred shareholders (84) (43) ------- -------- Income (loss) available to common shareholders $ 1,630 $ (1,636) Income (loss) per common share Basic $ 0.04 $ (0.04) Diluted $ 0.04 $ (0.04) Weighted average shares used in computation Basic 43,779 36,665 Diluted 47,082 36,665 The Notes to Condensed Consolidated Financial Statements are an integral part of this statement LCA-VISION INC. Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1999 and 1998 (unaudited) in thousands Three Months Ended March 31, 1999 1998 ---- ---- Cash flows from operating activities: Net income (loss) $1,630 $(1,636) Adjustments to reconcile net income (loss)to net cash provided by (used in) operating activities: Depreciation and amortization 712 1,055 Equity in income of unconsolidated affiliates (323) (56) Compensation paid in common stock 325 Changes in working capital: Accounts receivable 433 (466) Prepaid expenses, inventory and other (222) 366 Accounts payable (220) 165 Accrued liabilities and other 385 (23) ----- ------ Net cash provided by (used in) operations 2,721 ( 595) ----- ------ Cash flows from investing activities: Purchase of property and equipment (23) (482) Other, net (54) (56) ----- ------ Net cash (used) by investing activities (77) (538) ----- ------ Cash flows from financing activities: Proceeds from bank borrowing 294 Principal payments of long-term notes, debt and capital lease obligations (2,220) (310) Exercise of stock options 279 ----- ------ Net cash provided (used) by financing activities (1,941) (16) ----- ------ Increase (decrease) in cash and cash equivalents 703 (1,149) Cash and cash equivalents at beginning of period 6,496 8,680 ----- ------ Cash and cash equivalents at end of period $ 7,199 $ 7,531 ----- ------ ----- ------ The Notes to Condensed Consolidated Financial Statements are an integral part of this statement. LCA-VISION INC. Notes to Condensed Consolidated Financial Statements for the Three Months Ended March 31, 1999 and 1998 (unaudited) 1. Summary of Significant Accounting Policies The March 31, 1999 and 1998 financial data are unaudited; however, in the opinion of the Company, such data include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the interim periods. Business We are a leading developer and operator of free-standing laser refractive surgery centers. Our laser refractive surgery centers provide the facilities, equipment and support services for performing various corrective eye surgeries that employ state-of-the-art laser technologies. The laser vision correction surgeries performed in our centers are primarily laser in situ keratomileusis ("LASIK") and photorefractive keratectomy ("PRK"). The VISX Star S2 laser, which we have in each of our U.S. centers, treats nearsightedness, myopic astigmatism, and hyperopia. We also manage multi-specialty laser surgery programs at medical facilities on a contract basis. Revenue by source is comprised of: - Laser refractive surgery - fees for surgeries performed at our wholly-owned centers. - Other - management fees for operating laser vision correction centers of investees; contractual fees for managing multi-specialty laser surgery programs at hospitals; marketing and education program fees; and miscellaneous sources. Operating costs and expenses are classified as follows: - Medical professional and license fees include fees collected by us for the physicians performing laser vision correction and the license fee of $260 per procedure paid to VISX. - Direct costs of services include center rent and utilities, equipment lease and maintenance costs, surgical supplies, center staff expense, and costs related to other revenue. - General and administrative include marketing and advertising, headquarters staff expense, and other overhead costs. - Depreciation and amortization include periodic charges to income for the costs of equipment and intangible assets recorded in the balance sheet. Consolidation Policy We use two different methods to report our investments in our subsidiaries and other companies - consolidation and the equity method. Consolidation We use consolidation when we own a majority of the voting stock of the subsidiary. This means the accounts of our subsidiaries are combined with our accounts. We eliminate intercompany balances and transactions when we consolidate these accounts. Equity Method We use the equity method to report investments in businesses where we hold a 20% to 50% voting interest, giving us the ability to exercise significant influence, but not control, over operating and financial policies. Under the equity method we report: - our interest in the entity as an investment in our Consolidated Balance Sheets, and - our percentage share of the earnings (losses) in our Consolidated Statements of Operations. We report our investments in The Baltimore Laser Sight Center, Ltd. and Silmalaseri Oy under the equity method. Use of Estimates Management makes estimates and assumptions when preparing financial statements under generally accepted accounting principles. These estimates and assumptions affect various matters including: - our reported amounts of assets and liabilities in our Consolidated Balance Sheets at the dates of the financial statements, - our disclosure of contingent assets and liabilities at the dates of the financial statements, and - our reported amounts of revenues and expenses in our Consolidated Statements of Operations during the reporting periods. Actual amounts could differ from those estimates. Reclassifications We have reclassified certain prior-year amounts for comparative purposes. These reclassifications did not affect consolidated financial position, net losses or cash flows for the years presented. Per Share Data Basic per share data is income (loss) applicable to common shareholders divided by the weighted average common shares outstanding. Diluted per share data is income (loss) applicable to common shareholders divided by the weighted average common shares outstanding plus the potential issuance of common shares if stock options were exercised or convertible preferred stock were converted into common stock. Following is a reconciliation of basic and diluted earnings per share for the three months ended March 31, 1999 (in thousands, except per share amounts): Income Shares Per-Share Numerator Denominator Amount --------- ----------- --------- Net income $1,714 Dividends to preferred shareholders (84) ----- Basic EPS Income available to common shareholders 1,630 43,779 $0.04 ---- ---- Effect of Dilutive Securities Convertible preferred stock 84 2,314 Stock options 989 ----- Diluted EPS Income available to common shareholders and assumed conversions $1,714 47,082 $0.04 ----- ------ ---- ----- ------ ---- The weighted average shares for the March 31, 1998 diluted calculation does not assume exercise of any stock options or conversion of other securities since they would result in a reduced loss per share. 2. Shareholders' Investment Common Stock During the three months ended March 31, 1999, 138,050 shares of common stock were issued to individuals who exercised stock options. The average exercise price was $2.02 per share. 6% Series B-1 Convertible Preferred Stock At December 31, 1998, 5,702 shares of the 6% Series B-1 convertible preferred stock were outstanding. During the three months ended March 31, 1999, these shares and dividends totaling $264,000 were converted into 3,994,642 shares of common stock. The terms of these shares gave the holders the right to purchase an additional $5 million of convertible preferred stock under the same terms and conditions as the 6% Series B-1 Convertible Preferred Stock until May 11, 1999. In March 1999 certain majority holders of these shares agreed to accept 165,076 shares of our common stock in exchange for their waiving their option to purchase the additional convertible preferred stock. This agreement resulted in a non-cash charge of $325,000 recorded as other expense in the Condensed Consolidated Statement of Operations for the quarter. 3. Debt At December 31, 1998 we had a term loan borrowing under our credit facility of $2,053,000. The loan had an interest of 7.45% and required monthly installments of $12,000 plus interest until June 30, 2000 when the remaining principal balance of $1,705,000 would become due. In March 1999 we repaid the loan balance of $2,030,000. This repayment resulted in increasing the amount of borrowing capability under the current credit facility to $7,000,000. 4. Obligations Due from Shareholders and Their Affiliates, Net The following table displays the details of net obligations due to us as reported in our March 31, 1999 Condensed Consolidated Balance Sheet: Due to us: Receivable from shareholder's affiliated company $635,000 Accrued interest 105,000 Note receivable shareholders 6,000 Due from us: Accrued Interim Series B preferred stock dividend 403,000 ------- Net due us $343,000 ------- ------- Our principal shareholder is the majority stockholder of an inactive ambulatory surgical center. We have no investment in this surgery center; however, we did lease a portion of our headquarters building and provided other administrative services. During this quarter we acquired computer equipment and software from the surgery center at their book value of $103,000. The account receivable was reduced by this amount. At December 31, 1998 we owed our principal shareholders notes in the principal amount of $1,500,000 and interest of $568,000. These shareholders owed us $2,100,000 which was collateralized by our obligation to them. In March 1999 we repaid the obligations due shareholders of $2,094,000 by netting the amount against the advance to shareholders. 5. Segment Information We operate in one segment - laser refractive surgery. Following is a table summarizing the results of our Canadian operations included in the Condensed Consolidated Statement of Operations for the three months ended March 31, 1999 and 1998 (in thousands): 1999 1998 ---- ---- Revenues $362 $520 Operating profit 16 91 6. Commitments and Contingencies We are a defendant and counter-claimant in a case entitled Cabrini Development Council, et al. v. LCA-Vision Inc., et al., which was commenced in October, 1997 in the Supreme Court of the State of New York, County of New York and subsequently removed to the United States District Court for the Southern District of New York. Also named as co-defendants are various current and former employees, officers and directors. The case arises out of the operations of a New York limited liability company (the "LLC") which had been formed by us, the plaintiffs and a New York professional corporation (the "PC") owned by certain physicians for the purpose of opening and operating a Laser Refractive Surgery center or centers in New York City. Business activities commenced in 1995, but were unprofitable. After the LLC's resources were exhausted, we paid its operating costs for a period of time. In August, 1997, after further losses and after the parties were unable to come to a final understanding as to their respective rights and obligations, the operations of the LLC ceased. In the complaint, the plaintiffs allege breaches of our obligations as a member of the LLC, and have demanded both substantial damages and equitable relief. We have filed an answer denying the allegations of the complaint, and asserting counterclaims against the plaintiffs seeking substantial damages, alleging that the plaintiffs wrongfully failed to match the capital contributions made by us to the LLC. We believe that the plaintiffs' claims are without merit and intend to vigorously defend the action and pursue our counterclaims. After commencement of the above action, we filed an action against the PC seeking damages for its failure to pay the capital contributions required of it to the LLC. The PC has counterclaimed alleging a right to be indemnified for its losses relating to the LLC's operations. The actions, which have been consolidated, are in the discovery stage. In the opinion of management neither action will have a material adverse effect on our financial position or results of operations. Item 2. Management's Discussion and Analysis or Plan of Operation. This quarterly report on Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of important factors. For a discussion of important factors that could affect our results, refer to the Overview and financial statement line item discussions set forth in Management's Discussion and Analysis or Plan of Operation. "Management's Discussion and Analysis or Plan of Operation" is an analysis of our operating results for the three months ended March 31, 1999. It explains why our revenues and costs changed, our overall financial condition, and other matters including the Year 2000 Issue. Overview (dollars in thousands, except where noted) We are a leading developer and operator of free-standing laser refractive surgery centers. Our laser refractive surgery centers provide the facilities, equipment and support services for performing various corrective eye surgeries that employ state-of-the-art laser technologies. The laser vision correction surgeries performed in our centers primarily include laser in situ keratomileusis ("LASIK") and photorefractive keratectomy ("PRK"). The VISX Star S2 laser, which we have in each of our U.S. centers, can be used for correcting nearsightedness, myopic astigmatism, and hyperopia. We also manage multi-specialty laser surgery programs at medical facilities on a contract basis. Our sources of revenue are: - Laser refractive surgery - fees for surgeries performed at our wholly-owned centers. - Other - management fees for operating laser vision correction centers of investees; contractual fees for managing multi-specialty laser surgery programs at hospitals; marketing and education program fees; and miscellaneous sources. Our operating costs and expenses are comprised of: - Medical professional and license fees include fees collected by us for the physicians performing laser vision correction and the license fee of $260 per procedure paid to VISX. - Direct costs of services include center rent and utilities, equipment lease and maintenance costs, surgical supplies, center staff expense, and costs related to other revenue. - General and administrative include marketing and advertising, headquarters staff expense, and other overhead costs. - Depreciation and amortization include periodic charges to income for the costs of equipment and intangible assets recorded in the balance sheet. Results of Operations - Revenues Laser refractive surgery Laser refractive surgery revenue generally includes three components: facility fee, royalty fee, and medical professional fees. Certain states prohibit us from practicing medicine, employing physicians to practice medicine on our behalf or employing optometrists to render optometry services on our behalf. Revenues and direct costs from centers in such states do not include the medical professionals fee component. The contribution from laser refractive surgery procedures for each of the three months ended March 31, 1999 and 1998 were (dollars in thousands): 1999 1998 Revenue $ 13,389 $ 6,446 Less: Medical professional and license fees 6,015 2,656 -------- ------- Contribution $ 7,374 $ 3,790 The following table illustrates the growth of laser vision correction procedures performed at our centers. Combined procedures include those performed at investee centers. We record the results of our investee centers using the equity method. Wholly-owned Combined 1999 1998 1997 1999 1998 1997 Q1 7,591 3,887 979 9,064 4,450 1,443 Q2 4,891 1,506 5,737 2,078 Q3 5,327 2,375 6,102 2,794 Q4 5,686 2,888 6,791 3,400 Our growth and profitability are predicated on increases in procedure volume. Industry sources estimate that over 800,000 procedures will be performed in the U.S. in 1999. As more people have the procedure performed the critical mass for word-of-mouth referrals is attained and, together with marketing and advertising, we expect an increase in procedure volume. Other Revenue declined because we reduced the extent to which we provide management services for multi-specialty surgery programs at hospitals due to the difficult business environment. The renewal of our contracts with the hospital providers became increasingly difficult due to price pressures and the lengthening of sales cycle. Hospital providers and other entities were being driven to reduce costs and scaleback their operations, sometimes including the programs that we managed. In addition, budget reductions at the facilities reduced the marketing and education programs, key elements to a successful surgery program. Operating costs and expenses Medical professional and license fees The increase of $3,359,000 is a direct result of the increase in procedures performed at our wholly-owned centers. These costs comprise a significant portion of the total costs of a laser vision correction procedure. Direct costs of services These costs decrease as a percentage of revenue because they represent, for the most part, the fixed costs of a laser vision correction center. These costs decreased in 1999 as compared to 1998 because 1998 includes the costs of the eight centers closed later in the year. General and administrative These costs increased $877,000 yet as a percentage of revenues decreased approximately seven percentage points to 22%. The increase is due in part to the increased costs associated with our patient financing options. Depreciation and amortization The decrease results primarily from the write-off of goodwill and leasehold improvements and the write-down of idled lasers to their net realizable values announced in the second quarter of 1998. Non-operating income and expenses Equity in earnings of unconsolidated affiliates is where our share of the profits of unconsolidated affiliates is recorded. The increase of $267,000 is due to this increased profitability of these affiliates. Interest expense decreased due to the significant reduction in debt. Interest income increased because we had cash to invest in overnight cash equivalents. Other expense in 1999 includes a $325,000 expense associated with the issuance of 165,076 shares of our common stock to certain majority holders of our 6% series B-1 convertible preferred stock in exchange for these holders waiving their option to purchase an additional $5,000,000 of convertible preferred stock. Liquidity and Capital Resources Our primary sources of liquidity for the next year are expected to be: - cash generated from operations - proceeds from the exercise of stock options - credit facility and lease financing, as necessary We generated positive cash flow from operations for the quarter ended March 31, 1999. This was sufficient to finance our capital expenditures and debt repayment in the quarter. Our operating income of $1,614,000 for the quarter, together with non-cash items appearing in the Statement of Operations, resulted in positive cash flow before working capital items of $2,344,000. Proceeds from option exercises were $279,000 for the quarter. Our $8 million credit facility has $7 million available for borrowing. $1,000,000 of the facility is being used to secure letters of credit and operating leases with an affiliate of our lender. We have a cash balance of $7,199,000 at March 31, 1999. We also have a $2,100,000 certificate of deposit recorded as a long- term asset that matures on June 30, 2000. It pays interest at a rate of 5.7% per annum. During the quarter all of the outstanding shares of our Series B-1 convertible preferred stock and accrued dividends thereon were converted into shares of our common stock. Beginning April 1, 1999, we shall no longer be accruing dividends for this stock. Our repayment of the term loan during March 1999 will result in interest savings approximating $40,000 and principal payments of $35,000 per quarter. At December 31, 1998 we had net operating loss carryforwards ("NOL's") for federal and state income tax purposes of $35.3 million which expire in varying amounts from 2012 through 2019. Approximately $15 million of this amount were acquired when we bought Refractive Centers International, Inc. in August 1997 and their use is subject to limitation under Section 382 of the Internal Revenue Code. These operating losses are available to offset future taxable income. Approximately $15 million of our NOL's consist of deferred tax assets which, because of our operating losses, we could not record this benefit in our statement of operations and a valuation allowance was necessary. If our profitability continues, we will be able to reduce the valuation allowance. A reduction of the valuation allowance is generally shown in the statement of operations as a reduction of income tax expense. Regardless of when the reduction in the valuation reserve is recognized in the statement of operations, the utilization of the NOL's will substantially reduce our cash obligation for payment of income taxes otherwise due over the next several years. Year 2000 Issue Generally, application programs have used two-digit fields to define the applicable year, rather than four-digit fields. Programs that are time-sensitive may recognize a date using "00" as the year 1900 rather than the year 2000. This misinterpretation of the year could result in an incorrect computation or computer shutdown. We have completed an assessment of our computer software and hardware for compliance with Year 2000 and have determined that all business critical systems are compliant. Business critical systems include financial reporting systems and all lasers utilized in our centers. Costs associated with the assessment were internal costs, were expensed as incurred and were immaterial. We have not verified or tested compliance with our telemarketing information system because we are in the process of purchasing a new telemarketing system that will be Year 2000 compliant and installed and operational by September 30, 1999. The cost of this new system will be included in our capital expenditures or leased. We expect the cost to exceed $200,000. We have also completed an assessment of external risks associated with Year 2000. Although management does not believe that such external risks are significant, the loss of power or other telecommunication link difficulties could disrupt our operations. Part II. Other Information Item 1. Legal Proceedings Commitments and Contingencies We are a defendant and counter-claimant in a case entitled Cabrini Development Council, et al. v. LCA- Vision Inc., et al., which was commenced in October, 1997 in the Supreme Court of the State of New York, County of New York and subsequently removed to the United States District Court for the Southern District of New York. Also named as co-defendants are various current and former employees, officers and directors. The case arises out of the operations of a New York limited liability company (the "LLC") which had been formed by us, the plaintiffs and a New York professional corporation (the "PC") owned by certain physicians for the purpose of opening and operating a Laser Refractive Surgery center or centers in New York City. Business activities commenced in 1995, but were unprofitable. After the LLC's resources were exhausted, we paid its operating costs for a period of time. In August, 1997, after further losses and after the parties were unable to come to a final understanding as to their respective rights and obligations, the operations of the LLC ceased. In the complaint, the plaintiffs allege breaches of our obligations as a member of the LLC, and have demanded both substantial damages and equitable relief. We have filed an answer denying the allegations of the complaint, and asserting counterclaims against the plaintiffs seeking substantial damages, alleging that the plaintiffs wrongfully failed to match the capital contributions made by us to the LLC. We believe that the plaintiffs' claims are without merit and intend to vigorously defend the action and pursue our counterclaims. After commencement of the above action, we filed an action against the PC seeking damages for its failure to pay the capital contributions required of it to the LLC. The PC has counterclaimed alleging a right to be indemnified for its losses relating to the LLC's operations. The actions, which have been consolidated, are in the discovery stage. In the opinion of management neither action will have a material adverse effect on our financial position or results of operations. 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 Part II. Other Information (continued) Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Number Description of Exhibit -------- ---------------------- 27 Financial Data Schedule (b) Reports on Form 8-K. 1) Form 8-K dated March 11, 1999, announcing a majority of Series B-1 Convertible Preferred Holders waive option to purchase additional shares. 2) Form 8-K dated March 26, 1999, announcing the completion of all conversions into common stock of its outstanding Series B-1 Convertible Preferred Stock, and further announcing its payment of certain debts. 3) Form 8-K dated April 6, 1999, announcing the first quarter laser eye procedures were performed at a record level and that the U.S. wholly owned same- center volume increased by 119%. 4) Form 8-K dated April 7, 1999, announcing an increase in the volume of laser vision correction procedures performed by its centers during the first fiscal quarter of 1999 over the same period in 1998. 5) Form 8-K dated April 30, 1999 announcing net income of $1,630,000 or $0.04 per basic and diluted share for the first quarter of 1999. Signatures In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereto duly authorized. LCA-VISION INC. Date May 4, 1999 /s/ Stephen N. Joffe -------------------- -------------------------------- Stephen N. Joffe President and Chief Executive Officer Date May 4, 1999 /s/ Larry P. Rapp -------------------- -------------------------------- Larry P. Rapp Chief Financial Officer EX-27 2
5 This schedule contains summary information extracted from the LCA-Vision Inc. condensed consolidated balance sheet at March 31, 1999, and the related condensed consolidated statement of operations for the three months ended March 31, 1999, and is qualified in its entirety by reference to such financial statement. 0001003130 LCA-VISION INC. 1,000 U.S. DOLLARS 3-MOS DEC-31-1999 JAN-1-1999 MAR-31-1999 0.00001 7199 0 1839 1153 63 9523 16933 7882 31840 5481 642 0 2501 109 23107 31840 0 13867 0 8571 3682 0 93 1714 0 1630 0 0 0 1630 0.04 0.04
-----END PRIVACY-ENHANCED MESSAGE-----