-----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, R/ywNKzSyg7if0bkmx10/dR/P54aOpFXLbO7hGlJN6R1XRgOhCx/534idm1ACbO7 NORwBmd4UpuILIZURl2o5Q== 0000927016-98-001906.txt : 19980511 0000927016-98-001906.hdr.sgml : 19980511 ACCESSION NUMBER: 0000927016-98-001906 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980508 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIGHT RESOURCE CORP CENTRAL INDEX KEY: 0000895651 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HEALTH SERVICES [8000] IRS NUMBER: 043181524 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21068 FILM NUMBER: 98614042 BUSINESS ADDRESS: STREET 1: 100 JEFFREY AVENUE CITY: HOLLISTON STATE: MA ZIP: 01746 BUSINESS PHONE: 5084296916 MAIL ADDRESS: STREET 1: 100 JEFFREY AVENUE CITY: HOLLISTON STATE: MA ZIP: 01746 FORMER COMPANY: FORMER CONFORMED NAME: NEWVISION TECHNOLOGY INC DATE OF NAME CHANGE: 19940224 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended March 31, 1998 Commission File Number 0-21068 -------------- ------- SIGHT RESOURCE CORPORATION ------------------------------------------------------ (Exact name of Registrant as specified in its charter) Delaware 04-3181524 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 Jeffrey Avenue Holliston, MA 01746 ---------------------------------------- (Address of principal executive offices) 508-429-6916 --------------------------- (Issuer's telephone number) N/A ------------------------------------------------------------------------------ (Former name, former address and former fiscal year, if changed since the last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: On March 31, 1998, 8,797,790 shares of common stock, par value $0.01 per share, were outstanding. TOTAL PAGES 16 EXHIBIT INDEX AT PAGE 15 1 SIGHT RESOURCE CORPORATION INDEX PART 1. FINANCIAL INFORMATION PAGE ----
Item 1 Financial Statements Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997 3 Consolidated Statements of Operations for the Three Months Ended March 31, 1998 and 1997 4 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1998 and 1997 5 Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K 15 Signatures 16 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements SIGHT RESOURCE CORPORATION Consolidated Balance Sheets (In thousands, except share and per share data)
March 31, December 31, 1998 1997 --------------- ----------------- ASSETS Current assets: Cash and cash equivalents $ 4,359 $ 6,076 Accounts receivable, net of allowance of $483 and $478, respectively 2,225 1,781 Inventories 4,365 4,434 Prepaid expenses and other current assets 589 377 --------------- ----------------- Total current assets 11,538 12,668 --------------- ----------------- Property and equipment 10,163 10,070 Less accumulated depreciation (4,783) (4,406) --------------- ----------------- Net property and equipment 5,380 5,664 --------------- ----------------- Other assets: Intangible assets, net 14,708 14,898 Other assets 1,239 1,277 --------------- ----------------- Total other assets 15,947 16,175 --------------- ----------------- $ 32,865 $ 34,507 =============== ================= LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Current portion of long term debt --- 1,000 Accounts payable 2,091 1,797 Accrued expenses 4,565 5,628 --------------- ----------------- Total current liabilities 6,656 8,425 --------------- ----------------- Non-current liabilities: Other liabilities 94 101 --------------- ----------------- Total Non-current liabilities 94 101 --------------- ----------------- Redeemable, convertible preferred stock 1,452,119 shares issued 6,535 6,535 Stockholders' equity: Preferred Stock, $.01 par value. Authorized 5,000,000 shares; no shares issued and outstanding. --- --- Common Stock, $.01 par value. Authorized 20,000,000 shares; issued 8,797,790 at March 31, 1998 and 8,756,500 at December 31, 1997. 88 88 Additional paid-in capital 36,451 36,329 Common stock issuable, 71,181 shares at March 31, 1998 and December 31, 1997 432 432 Treasury stock at cost (30,600 shares in 1997 and 1998) (137) (137) Accumulated deficit (17,253) (17,266) --------------- ----------------- Total stockholders' equity 19,580 19,446 --------------- ----------------- $ 32,865 $ 34,507 =============== ================= See accompanying notes to consolidated financial statements.
3 SIGHT RESOURCE CORPORATION Consolidated Statements of Operations (In thousands, except per share data)
Three Months Ended March 31, March 31, 1998 1997 ------------------- ------------------ Net revenue $13,580 $10,440 Cost of revenue 4,752 3,849 ------------------- ------------------ Gross profit 8,828 6,591 Selling, general and administrative expenses 8,895 7,000 ------------------- ------------------ Loss from operations (67) (409) ------------------- ------------------ Other income (expense) Interest income 71 102 Interest expense (51) (80) Gain on sale of opohthalmic equipment 69 --- ------------------- ------------------ Total other income (expense) 89 22 ------------------- ------------------ Income (loss) before income tax expense 22 (387) Income tax expense 9 --- ------------------- ------------------ Net income (loss) $ 13 ($387) =================== ================== Basic and Diluted Earnings (Loss) per common share and potential common share 0.00 ($0.04) =================== ================== Weighted average number of common shares outstanding 8,785 8,638 =================== ================== See accompanying notes to consolidated financial statements.
4 SIGHT RESOURCE CORPORATION Consolidated Statements of Cash Flows (In thousands)
Three Months Ended March 31, 1998 March 31, 1997 ------------------- ----------------- Operating activities: Net income (loss) $ 13 ($387) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 613 483 Gain on sale of ophthalmic equipment (69) -- Changes in operating assets and liabilities: Accounts receivable (444) (470) Inventories 69 94 Prepaid expenses and other current assets (213) (681) Accounts payable and accrued expenses (756) 266 ------------------- ----------------- Net cash used in operating activities (787) (695) ------------------- ----------------- Investing activities: Purchases of property and equipment (148) (440) Payments for acquisitions (12) --- Proceeds from sale of assets 99 98 Other assets 17 (502) ------------------- ----------------- Net cash used in investing activities (44) (844) ------------------- ----------------- Financing activities: Principal payments on long term debt (1,000) --- Other liabilities (7) 4 Proceeds from issuance of stock 121 --- Purchase of common stock for treasury --- (137) ------------------- ----------------- Net cash used in financing activities (886) (133) ------------------- ----------------- Net decrease in cash and cash equivalents (1,717) (1,672) Cash and cash equivalents, beginning of period 6,076 9,924 ------------------- ----------------- Cash and cash equivalents, end of period $ 4,359 $ 8,252 =================== ================= Supplemental disclosure: Interest paid $ 77 $ 102 =================== ================= Equity issued associated with credit agreement --- $ 180 =================== =================
See accompanying notes to consolidated financial statements. 5 SIGHT RESOURCE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) (1) The Company (a) Nature of Business Sight Resource Corporation (the "Company") manufactures, distributes and sells eyewear and related products and services. (b) Acquisitions During 1995, the Company acquired two primary eye care chains, effective January 1, 1995 and July 1, 1995, respectively. The aggregate purchase price paid in connection with the acquisitions consisted of (i) $2,660 in cash, (ii) 555,525 shares of common stock, (iii) the assumption of approximately $1,600 of net liabilities, and (iv) $660 payable over a 3 year period and $250 payable over 18 months, contingent upon the occurrence of certain future events. The transactions were accounted for using the purchase method of accounting. Effective July 1, 1996, the Company purchased certain assets and assumed certain liabilities of The E.B. Brown Optical Company and Brown Optical Laboratories, Inc. as well as entered into a merger with E.B. Brown Opticians, Inc. (together "EB Brown") for approximately $7,733, consisting of: $4,000 in cash, 521,997 shares of common stock issued, 71,181 shares of common stock to be issued and $1,400 in notes payable over an eighteen month period. When the common stock to be issued is issued, the $432 of common stock issuable will be reclassed into common stock and additional paid in capital. As of July 1, 1996, EB Brown operated forty-two eye care centers located throughout Ohio and Western Pennsylvania which provide optometric and audiology goods and services to persons with vision and hearing disorders. The transaction was accounted for using the purchase method of accounting. Effective July 1, 1997, the Company acquired one hundred percent of the outstanding shares of stock of Vision Holdings, Ltd. (formerly known as Dr. Greenberg, an Optometry Corporation d/b/a Vision Plaza) ("Vision Plaza")). The purchase price paid in connection with this acquisition was $2,000 in cash and the assumption and repayment of notes payable outstanding as of July 1, 1997 of approximately $800. As of July 1, 1997, Vision Plaza operated 14 primary eye care centers and three specialty eyewear centers in southeast Louisiana and Mississippi. The acquisition was accounted for using the purchase method of accounting. The results of operations of the four acquisitions have been included in the consolidated financial statements from their respective dates of acquisition. The excess of the purchase price and expenses associated with each acquisition over the estimated fair value of the net assets acquired has been recorded as goodwill. As a result of the acquisition, the Company has also recorded adjustments to increase liabilities and establish reserves for the closing of stores and related restructuring costs, including lease commitments and severance costs. Total acquisition related reserves established during 1997 were $2,066. 6 SIGHT RESOURCE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) (2) Summary of Significant Accounting Policies (a) Basis of Presentation The accompanying consolidated financial statements have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, these consolidated financial statements contain all adjustments (consisting of only normal, recurring adjustments) necessary to present fairly the financial position of Sight Resource Corporation as of March 31, 1998 and the results of its operations and cash flows for the three months ended March 31, 1998 and 1997. The accompanying consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements which are contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. (b) Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and three professional corporations ("PC's") in which the Company's subsidiaries assume the financial risks and rewards of such entities through a management contract and a stock agreement. The Company has no direct equity ownership in the PC's. All significant intercompany balances and transactions have been eliminated. In preparation of these consolidated financial statements in conformity with generally accepted accounting principles, management of the Company has made estimates and assumptions that affect the reported amounts of assets and liabilities, such as accounts receivable, inventory impairment of property and equipment and intangibles. Actual results could differ from those estimates. (c) Revenue Recognition Revenue and the related costs from the sale of eyewear are recognized at the time an order is complete. Revenue from eye care services is recognized when the service is performed. The Company has fee for service arrangements with all of its third party payors. Revenue is reported net of contractual allowances. Under revenue sharing arrangements for refractive surgery where the Company is not responsible for patient billing, the Company receives a specified payment from the hospital or center for each refractive surgical procedure performed. Accordingly, the Company recognizes revenue on a per procedure basis at the time procedures are performed. Under existing revenue-sharing arrangements for refractive surgery where the Company is responsible for the collection from the patient and payment to the ophthalmologist and other operating costs, the total patient charge is recorded as revenue with the corresponding expenses recorded in cost of revenue. 7 Sight Resource Corporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) (d) Inventories Inventories primarily consist of the costs of eyeglass frames, contact lenses, ophthalmic lenses, sunglasses and other optical products and are valued at the lower of cost (using the first-in, first-out method) or market. (e) Property and Equipment Property and equipment is stated at cost. The Company provides for depreciation at the time the property and equipment is placed in service. The straight-line method is used over the estimated useful life of the assets. The Company assesses the recoverability of the undepreciated property and equipment on an ongoing basis by comparing anticipated profits and future, undiscounted cash flows to net book value. In performing this analysis, management considers such factors as current results, trends, and future prospects, in addition to other economic factors. (f) Intangible Assets Intangible assets resulting from the business acquisitions consist of customer lists, trademarks, non-compete agreements and the excess cost of the acquisition over the fair value of the net assets acquired (goodwill). Certain values assigned are based upon independent appraisals and are amortized on a straight line basis over a period of five to twenty-five years. The Company assesses the recoverability of unamortized intangible assets on an ongoing basis by comparing anticipated operating profits and future, undiscounted cash flows to net book value. In performing this analysis, management considers such factors as current results, trends, and future prospects, in addition to other economic factors. (g) Deferred Revenue The Company offers a contact lens purchasing program in which, for a set fee, customers may purchase contacts at discounted rates for a 12 month period. The Company recognizes revenue from the sales of its contact lens purchasing program on a monthly basis over the life of the program. (h) Net Earnings (Loss) Per Share Earnings per share are computed based on Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS 128"). SFAS 128 requires presentation of basic earnings per share ("Basic EPS") and diluted earnings per share ("Diluted EPS") by all entities that have publicly traded common stock or potential common stock (options, warrants, convertible securities or contingent stock arrangements). Basic EPS is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. The computation of Diluted EPS does not assume conversion, exercise or contingent exercise of securities that would have an antidilutive effect on earnings. 8 SIGHT RESOURCE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) The following table provides a reconciliation of the numerators and denominators of the basic and diluted earnings (loss) per share computations for the quarters ended March 31:
QUARTERS ENDED MARCH 31 1998 1997 --------------- -------------- (in thousands) BASIC INCOME (LOSS) PER SHARE Net Income (Loss) 13 (387) --------------- -------------- Net Income (Loss) available to common shareholders 13 (387) =============== ============== Weighted average common shares outstanding 8,785 8,638 Net Income (Loss) per share $ 0.00 ($0.04) =============== ============== DILUTED INCOME PER SHARE Net Income 13 --------------- Net Income available to common shareholders 13 =============== Weighted average common shares outstanding 8,785 Convertible preferred stock 1,452 Options 29 --------------- Weighted average common shares outstanding and potential shares 10,266 =============== Net Income per potential share $ 0.00 ===============
Outstanding warrants and certain options are not included in the calculation of diluted loss per share because the effect would be anti- dilutive.
(3) DEBT Debt consists of the following: MARCH 31, DECEMBER 31, 1998 1997 ------------- ----------- Bank term loan secured by all assets of one of the Company's subsidiaries $ - $ - Unsecured notes payable, 7% interest rate, $1,000 paid on March 18, 1998; due on demand if the Company's cash balance is less than $2,800 - 1,000 ------------- ----------- - 1,000 Less current maturities - 1,000 Long term debt, less current maturities $ - $ - ============= ===========
9 SIGHT RESOURCE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except share and per share data) On February 20, 1997, the Company entered into a Credit Agreement (the "Agreement") with a bank pursuant to which the Company can borrow $5,000 on a term loan basis and $5,000 on a revolving credit basis, subject to certain performance criteria. The performance criteria include, among others, financial condition covenants such as rolling EBITDA levels, indebtedness to EBITDA ratios, current ratio of 1:1 and minimum net worth requirements. The term loan facility bears interest at the bank's prime rate plus 1.5% or LIBOR plus 3% at the Company's election and the revolving credit facility bears interest at the bank's prime rate plus 1.25% or LIBOR plus 2.75% at the Company's election. These loans are secured by all assets of the Company and its wholly owned subsidiaries. As of March 31, 1998, the entire term loan and revolving note was unused. Amounts borrowed under the agreement will be used to finance future acquisitions, provide ongoing working capital and for other general corporate purposes. As part of the Agreement, the Company issued to the bank warrants to purchase 150,000 shares of the common stock at a purchase price of $4.625 per share. The warrants expire December 31, 2003. The warrants were accounted for as additional paid in capital based upon the fair value of the securities. Fair market value was determined by using the relationship of the interest rate charged with the warrants versus the rate to be charged without the warrants. This value approximated that obtained using the Black Scholes Method. (4) Subsequent Events Effective April 1, 1998, the Company acquired one hundred percent of the outstanding shares of stock of Eye Glass Emporium, Inc. ("Eyeglass Emporium"). The purchase price paid in connection with this acquisition was $2,309 in cash, $350 in notes payable in twelve equal installments commencing June 30, 1998, and 87,940 shares of common stock. Eyeglass Emporium operates nine eye care centers in Indiana. The acquisition was accounted for using the purchase method of accounting. 10 PART I: Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Statements contained in this document which are not historical fact are forward-looking statements based upon management's current expectations that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in the Company's Form 10K for the fiscal year ended December 31, 1997 filed with the Securities and Exchange Commission. OVERVIEW Sight Resource Corporation (the "Company") manufactures, distributes and sells eyewear and related products and services. The Company's operations currently consist of 84 eye care centers, with three regional optical laboratories and distribution centers, making it one of the seventeen largest providers in the United States' primary eye care industry. The Company's eye care centers operate primarily under the brand names Cambridge Eye Doctors, E.B. Brown Opticians, Vision Plaza and Vision World. The Company also provides, or where necessary to comply with applicable law administers the business functions of optometrists, ophthalmologists and professional corporations that provide, vision related professional services. In addition, as of March 31, 1998 the Company operated three laser vision correction ("LVC") centers. The Company operates three regional optical laboratories and distribution centers. The regional optical laboratories provide complete laboratory services to the Company's eye care centers, including polishing, cutting and edging, tempering, tinting and coating of ophthalmic lenses. The distribution centers provide and maintain an inventory of all accessories and supplies necessary to operate the primary eye care centers in their regions, as well as "ready made" eye care products, including contact lenses and related supplies. The inventory of eyeglass lenses, frames, contact lenses, accessories and supplies is acquired through a number of sources, domestic and foreign. Management believes that the regional optical laboratories and distribution centers have the capacity to accommodate additional multi-site eye care centers. Based on review to date, the Company does not believe that the impact of any Year 2000 issue will be material because its principal information systems appear to correctly define the year 2000 and only the Company's point of sale system needs to be made year 2000 compliant. The Company expects to complete such compliance as part of the installation of a new point of sale system which is scheduled to be completed during 1998. 11 RESULTS OF OPERATIONS Three Months Ended March 31, 1998 and 1997 NET REVENUE. The Company generated net revenue of approximately $13.6 million during the three months ended March 31, 1998, from the operation of its 84 eye care centers and three laser vision correction centers as compared to net revenue of approximately $10.4 million from its 72 eye care centers and ten laser vision correction centers for the same period in 1997. The $3.1 million, or 30.1%, increase in net revenue, primarily relates to the additional seventeen eye care centers acquired effective July 1, 1997. COST OF REVENUE. Cost of revenue increased from approximately $3.8 million for the three months ended March 31, 1997 to approximately $4.8 million for the three months ended March 31, 1998. Cost of revenue as a percent of net revenue decreased from 36.9% for the three months ended March 31, 1997 to 35.0% for the three months ended March 31, 1998. The decrease as a percentage of net revenue is primarily due to the margin impact of the additional seventeen eye care centers acquired July 1, 1997 and the reduced percentage of revenue derived from the LVC centers. Cost of revenue for the three months ended March 31, 1998 and 1997 principally consisted of (i) the cost of manufacturing, purchasing and distributing optical products to its customers and (ii) the cost of delivering laser vision correction services, including depreciation and maintenance on excimer lasers. SELLING, GENERAL AND ADMINISTRATION EXPENSES. Selling, general and administration expenses were approximately $8.9 million for the three months ended March 31, 1998 as compared to approximately $7.0 million for the three months ended March 31, 1997. The increase primarily relates to payroll and facility costs incurred in operating additional eye care centers in the first quarter of fiscal 1998 as compared to the first quarter of fiscal 1997. Selling, general and administrative expenses, as a percentage of net revenue, declined from 67.0% in 1997 to 65.5% in 1998. This decrease is primarily a result of operating efficiencies which the Company realized from the acquisition of multi-site eye care centers. OTHER INCOME AND EXPENSES. Interest income totaled $71,000 for the three months ended March 31, 1998 as compared to $102,000 for the three months ended March 31, 1997. This decrease resulted from the investment of a lower average cash balance during the first quarter of 1998 as compared to the same period in 1997. Interest expense totaled $51,000 for the three months ended March 31, 1998 as compared to $80,000 for the three months ended March 31, 1997. The decrease is associated with a higher average balance of debt outstanding in the first quarter of 1997 as compared to the same period in 1998. The sale of certain ophthalmic equipment during the three months ended March 31, 1998 generated a gain of approximately $69,000. NET INCOME (LOSS). The Company realized net income of $13,000, or $0.00 per share on a basic and fully diluted basis,for the three months ended March 31, 1998 as compared to a net loss of $387,000, or ($0.04) per share for the three months ended March 31, 1997. 12 LIQUIDITY AND CAPITAL RESOURCES At March 31, 1998, the Company had approximately $4.4 million in cash and cash equivalents and working capital of approximately $4.9 million, in comparison to approximately $6.0 million in cash and cash equivalents and working capital of approximately $4.2 million as of December 31, 1997. The increase in working capital is mainly due to the increase in Accounts Receivable during the three months ended March 31, 1998. As of March 31, 1998, the Company had securities outstanding which provide it with potential sources of financing as outlined below:
Securities Potential proceeds - ----------------------------------------------- -------------------- Warrants 2,472,100 $14,800,000 Class A Warrants 85,000 500,000 Class II Warrants 290,424 2,032,968 Unit Purchase Options 215,000 3,700,000 Creditanstalt Warrants 150,000 694,000 Representative Warrants 170,000 1,400,000 -------------------- $23,126,968 ====================
The Company also has 842,294 Class I Warrants. The Class I Warrants entitle the holder to purchase an amount of shares of the Company's common stock equal to an aggregate of up to 19.9% of the shares of common stock purchasable under the Company's outstanding warrants and options on the same terms and conditions of existing warrant and option holders. The purchaser is obligated to exercise these warrants at the same time the options and warrants of existing holders are exercised, subject to certain limitations. The amount of proceeds from the exercise of these warrants cannot be estimated at this time. There can be no assurance that the Company will obtain any such proceeds from the exercise of the above securities. On February 20, 1997, the Company entered into a Credit Agreement (the "Agreement") with a bank pursuant to which the Company can borrow up to $5.0 million on a term loan basis and up to $5.0 million on a revolving credit basis, subject to certain performance criteria. Such performance criteria include, among others, financial condition covenants such as rolling EBITDA levels, indebtedness to EBITDA ratios, current ratio of 1:1 and minimum net worth ratios. The term loan facility bears interest at the bank's prime rate plus 1.5% or LIBOR plus 3% at the Company's election, and the revolving credit facility bears interest at the bank's prime rate plus 1.25% or LIBOR plus 2.75% at the Company's election. These loans are secured by all assets of the Company and its wholly owned subsidiaries. Amounts borrowed under the Agreement have been and will continue to be used to refinance existing debt, finance future acquisitions, provide ongoing working capital and for other general corporate purposes. As part of the Agreement, the Company issued to the bank warrants to purchase 150,000 shares of the common stock at a purchase price of $4.625 per share. The warrants expire December 31, 2003. 13 Effective April 1, 1998, the Company acquired one hundred percent of the outstanding shares of stock of Eye Glass Emporium, Inc. ("Eyeglass Emporium"). The purchase price paid in connection with this acquisition was $2,309,157 of cash on hand, $350,000 in notes payable in twelve equal installments commencing June 30, 1998, and 87,940 shares of common stock. Eyeglass Emporium operates nine eye care centers in Indiana. The acquisition was accounted for using the purchase method of accounting. The Company anticipates that its working capital and sources of capital, such as the existing credit facility, will be adequate to fund the Company's currently proposed activities for at least the next twelve months. The Company anticipates using financing vehicles such as bank debt and other sources of funding, such as additional equity offerings, to achieve its business plan, including the acquisition of eye care centers. The Company has an acquisition strategy to acquire and integrate the assets of multi-site eye care centers and the practices of eye care professionals and to employ or enter into management services contracts with these professionals. This strategy includes both expanding existing regional markets and entering new regional markets. The Company will also target acquisitions in strategic markets that will serve as platforms from which the Company can consolidate a given service area by making and integrating additional "in-market" acquisitions. The Company is currently evaluating potential acquisition candidates. Without additional funding, the Company's rate of acquisition and size of acquisition could be limited. 14 PART II. OTHER INFORMATION Item 6 EXHIBITS AND REPORTS ON FORM 8-K None 15 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Sight Resource Corporation Date: May 1, 1998 /s/ WILLIAM T. SULLIVAN ----------- ------------------------ William T. Sullivan President and Chief Executive Officer (principal executive officer) Date: May 1, 1998 /s/ AMY FELDMAN ----------- ---------------------------- Amy Feldman Corporate Controller (principal financial and accounting officer) 16 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SIGHT RESOURCE CORPORATION'S BALANCE SHEET AND STATEMENT OF OPERATIONS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1998 AS REPORTED ON FORM 10Q FOR THE QUARTER ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 4,359 0 2,708 483 4,365 11,538 10,163 4,783 32,865 6,656 0 0 0 0 19,580 32,865 13,580 13,580 4,752 4,752 8,895 0 51 22 9 13 0 0 0 13 0.00 0.00
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