1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 0-28132
LANVISION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1455414
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10671 Techwoods Circle
Cincinnati, Ohio 45242-2846
(Address of principal executive offices) (Zip Code)
(513) 554-6900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Number of shares of Registrant's Common Stock ($.01 par value per share)
issued and outstanding, as of September 3, 1996: 8,896,500.
This report consists of 24 pages and the index to exhibits appears on page 16.
1
2
TABLE OF CONTENTS
Page
Part I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at July 31, 1996 and January 31, 1996. . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations for the three & six months ended
July 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows for the six months ended
July 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2
3
PART I. FINANCIAL INFORMATION
Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LANVISION SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Assets
(Unaudited) (Audited)
July 31, January 31,
1996 1996
------------------ -----------------
Current assets:
Cash $ 543,343 $ --
Short-term cash equivalents, at cost plus accrued interest
which approximates market 31,219,009 --
Accounts receivable 2,007,137 1,946,099
Unbilled receivables 1,677,738 677,620
Allowance for doubtful accounts (155,000) (75,000)
Other 806,492 164,182
--------------- ----------------
Total current assets 36,098,719 2,712,901
Property and equipment:
Equipment 731,841 356,914
Software 120,666 98,225
Furniture and fixtures 54,713 40,237
--------------- ----------------
907,220 495,376
Accumulated depreciation and amortization (364,755) (314,380)
--------------- ----------------
542,465 180,996
Capitalized software development, net of accumulated amortization of
$491,563 and $455,563, respectively 196,367 152,366
--------------- ----------------
$ 36,837,551 $ 3,046,263
=============== ================
See Notes to Condensed Consolidated Financial Statements.
3
4
LANVISION SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Liabilities, Convertible Redeemable Preferred Stock and Stockholders' Equity (Deficit)
(Unaudited) (Audited)
July 31, January 31,
1996 1996
------------------ -----------------
Current liabilities:
Notes payable $ -- $ 600,000
Accounts payable 1,317,488 1,185,157
Accrued compensation 500,845 194,436
Accrued other expenses 639,456 16,291
Deferred revenue 789,469 846,104
--------------- --------------
Total current liabilities 3,247,258 2,841,988
Convertible redeemable preferred stock, $.01 par value per share, 8,500 shares
authorized, issued and outstanding
(aggregate liquidation preference of $850,000) -- 850,000
Stockholders' equity (deficit):
Preferred stock $.01 par value per share, 5,000,000 shares authorized,
8,500 shares issued and outstanding
(see above) -- --
Common stock, $.01 par value per share, 25,000,000 shares
authorized, 8,896,500 shares issued and outstanding at
July 31, 1996; 4,488,000 shares of no par value issued
and outstanding at January 31, 1996 88,965 45,000
Capital in excess of par value 35,110,817 --
Accumulated deficit (1,609,489) (690,725)
--------------- --------------
Total stockholders' equity (deficit) 33,590,293 (645,725)
--------------- --------------
$ 36,837,551 $ 3,046,263
=============== ==============
See Notes to Condensed Consolidated Financial Statements.
4
5
LANVISION SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended July 31,
(Unaudited)
Three Months Ended Six Months Ended
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
Revenues:
Systems sales $ 2,769,442 $ 813,108 $ 4,443,759 $ 935,135
Service, maintenance and support 600,695 368,576 1,039,871 648,549
----------- ----------- ----------- -----------
Total revenues 3,370,137 1,181,684 5,483,630 1,583,684
Operating expenses:
Cost of systems sales 1,516,278 496,226 2,513,162 567,187
Cost of service, maintenance and support 767,851 382,316 1,249,048 570,017
Selling, general and administrative 1,397,457 255,615 2,453,670 568,825
Product research and development 297,445 165,277 577,181 351,518
----------- ----------- ----------- -----------
Total operating expenses 3,979,031 1,299,434 6,793,061 2,057,547
----------- ----------- ----------- -----------
Operating (loss) (608,894) (117,750) (1,309,431) (473,863)
Interest income 470,313 -- 470,351 6,930
Interest expense -- 11,282 79,684 18,841
----------- ----------- ----------- -----------
Net (loss) $ (138,581) $ (129,032) $ (918,764) $ (485,774)
=========== =========== =========== ===========
(Loss) per common share $ (.02) $ (.02) $ (.12) $ (.08)
=========== =========== =========== ===========
Number of shares used in per common share computation 8,896,500 6,190,325 7,664,288 6,190,325
=========== =========== =========== ===========
See Notes to Condensed Consolidated Financial Statements.
5
6
LANVISION SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended July 31,
(Unaudited)
1996 1995
------------------ ----------------
Operating activities:
Net (loss) $ (918,764) $ (485,774)
Adjustments to reconcile net (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization 86,376 81,034
Cash provided by (used for) current assets and liabilities:
Accounts and unbilled receivables (981,156) (287,845)
Other assets (642,310) 30,135
Accounts payable and accrued expenses 1,061,903 (83,240)
Deferred revenue (56,635) 152,908
------------- --------------
Net cash provided by (used for) operating activities (1,450,586) (592,782)
Investing activities:
Purchases of property and equipment (411,844) (33,416)
Capitalization of software development costs (80,000) (61,654)
------------- --------------
Net cash (used for) investing activities (491,844) (95,070)
Financing activities:
(Decrease) increase in notes payable, net (600,000) 120,000
Issuance of common stock 34,304,782 --
------------- --------------
Net cash provided by financing activities 33,704,782 120,000
------------- --------------
Increase (decrease) in cash 31,762,352 (567,852)
Cash at beginning of period -- 618,157
------------- --------------
Cash and short term cash equivalents at end of period $ 31,762,352 $ 50,305
============= ==============
Supplemental cash flow disclosures:
Income taxes paid $ -- $ --
Interest paid $ 79,684 $ 18,841
See Notes to Condensed Consolidated Financial Statements.
6
7
LANVISION SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements have been
prepared by the Company without audit in accordance with generally accepted
accounting principles for interim financial information pursuant to the rules
and regulations applicable to quarterly reports on Form 10-Q of the Securities
and Exchange Commission. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation of
the Condensed Consolidated Financial Statements have been included. These
Condensed Consolidated Financial Statements should be read in conjunction with
the financial statements and notes thereto included in the LanVision Systems,
Inc. Registration Statement on Form S-1, Registration Number 333-01494.
Operating results for the three and six months ended July 31, 1996, are not
necessarily indicative of the results that may be expected for the fiscal year
ending January 31, 1997.
Note 2 - CASH EQUIVALENTS
Short-term cash equivalents at July 31, 1996, consisted of investments in a
money market fund (which invests in U.S. Treasury Securities) and U.S. Treasury
Bills with initial terms of three months or less. For purposes of the Condensed
Consolidated Statements of Cash Flows, the Company considers all highly liquid
debt instruments with original maturities of three months or less to be cash
equivalents.
Note 3 - PUBLIC OFFERING OF COMMON STOCK
On April 18, 1996, the Company issued 2,912,500 Shares of Common Stock in an
Initial Public Offering. The net proceeds to the Company, before expenses, was
$35,211,147.
Note 4 - CHANGES IN ACCOUNT BALANCES
Interest income consists of interest on the cash accounts, primarily resulting
from the investment of the net proceeds of the Initial Public Offering - see
Note 3.
7
8
Interest expense consists primarily of interest on outstanding indebtedness
during the first quarter. The indebtedness was repaid after the April 18, 1996
Initial Public Offering - see Note 3.
Revenue recognized prior to progress billings to customers is recorded as
unbilled receivables. The increase in unbilled receivables reflects the
increased revenues recognized during the quarter.
Other current assets at January 31, 1996, consisted primarily of costs related
to the Company's Initial Public Offering, which were subsequently offset against
the net proceeds from the stock offering - See Note 3. At July 31, 1996, other
current assets consist primarily of prepaid insurance, and prepaid expenses
related to future revenues.
The increase in property and equipment reflects new equipment required for 38
additional employees hired since January 31, 1996.
The increase in accounts payable relates primarily to increased purchases of
hardware and third party software for installation at customer sites.
The increase in accrued compensation reflects increased levels of employment and
increased commissions on increased revenues.
The increase in accrued other expenses results primarily from increases in
warranty and other reserves, franchise taxes, professional fees, etc. as the
Company expands its operations.
Billings to customers recorded prior to the recognition of revenue are
classified as deferred revenue.
Note 5 - EARNINGS PER SHARE
On April 18, 1996, the Company issued 2,912,500 shares of Common Stock in an
Initial Public Offering and issued 1,496,000 common shares upon conversion of
the Company's Convertible Redeemable Preferred Stock - see Note 3.
The loss per common share for the three and six months ended July 31, 1996 is
calculated using the weighted average number of common shares outstanding during
the periods, assuming the conversion of the Convertible Redeemable Preferred
Stock to 1,496,000 shares of Common Stock, on an if converted basis as of the
beginning of the fiscal year, and the issuance of 2,912,500 common shares on
April 18, 1996, the date of the Initial Public Offering.
The loss per common share calculation, excludes the effect of the common stock
equivalents (stock options) as the inclusion thereof would be antidilutive.
8
9
In accordance with the Staff Accounting Bulletin (SAB) 83 of the Securities and
Exchange Commission, the weighted average number of shares used in the
computation of the loss per share for the three and six months ended July 31,
1995, was calculated assuming all common share equivalents issued at prices
below the Initial Public Offering price, during a one year period before the
filing of the Initial Public Offering, were outstanding, even though the effect
was antidilutive. Also, the computation of common and common equivalent shares
includes the 1,496,000 shares of common stock issued upon the automatic
conversion of the convertible redeemable preferred stock. Accordingly, the
weighted average shares outstanding for this calculation is 6,190,325 shares -
see Exhibit 11, page 22.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
In addition to historical information contained herein, this Discussion and
Analysis contains forward-looking statements. The forward-looking statements
contained herein are subject to certain risks and uncertainties that could cause
actual results to differ materially from those reflected in the forward-looking
statements, including those discussed below. Readers are cautioned not to place
undue reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. The Company undertakes no obligation to
publicly release the results of any revision to these forward-looking statements
which may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
RESULTS OF OPERATIONS:
GENERAL
LanVision is a leading provider of healthcare information access systems that
enable hospitals and integrated healthcare networks to capture, manage,
retrieve, process and store vast amounts of clinical and financial patient
information. The Company's systems deliver on-line enterprise-wide access to
fully-updated patient information which historically was maintained on a variety
of media, including paper, magnetic disk, optical disk, x-ray film, video, audio
and microfilm. LanVision's systems, which incorporate data management, document
imaging and workflow technologies, consolidate patient information into a single
repository and provide fast and efficient access to patient information from
universal workstations located throughout the enterprise, including the point of
patient care. The systems are specifically designed to meet the needs of
physicians and other medical and administrative personnel and can accommodate
multiple users requiring simultaneous access to patient information, thereby
eliminating file contention. By providing access to all forms of patient
information, the Company believes that its healthcare information access systems
are essential components of the computer-based patient record.
9
10
The Company's revenues are derived from: the licensing and sale of systems
comprised of internally developed software, third party software and hardware;
and from professional services, maintenance and support services. Professional
services include implementation, training, project management and custom
software development and currently are provided only to the company's customers
with installed systems or who are in the process of installing systems. Revenues
from professional services, maintenance and support services typically are
expected to increase as the number of installed systems increases, although the
margins on these revenues are expected to fluctuate based upon the negotiated
terms of the agreement with each customer and the Company's ability to fully
utilize its professional services, maintenance and support services staff. The
highest margin on systems sales is on proprietary software with lower margins on
third party hardware and software. Systems sales to any given customer may
include differing proportions of software and hardware, resulting in varying
margins among contracts.
The decision by a healthcare provider to replace, substantially modify or
upgrade its information systems is a strategic decision and often involves a
large capital commitment requiring an extended approval process. The sales cycle
for the Company's systems is typically six to eighteen months from initial
contact to the execution of a master sales agreement. As a result, the sales
cycle causes variations in quarter to quarter results. These master sales
agreements cover the entire implementation of the systems and specify the
implementation schedule, which typically takes place in one or more phases. The
agreements generally provide for the licensing of the Company's software and
third party software with a one-time perpetual license fee that is adjusted
depending on the number of workstations using the software. Third party hardware
is usually sold outright, with a one-time fee charged for installation and
training. Some specific customization, interfaces to existing customer systems
and other consulting services are sold on a fixed fee or a time and material
basis.
LanVision enters into master sales agreements with its customers to specify: the
scope of the systems to be installed and services to be provided by LanVision
,the agreed upon aggregate price, and the preliminary timetable for
implementation. The master sales agreements typically provides that the Company
will deliver the systems in phases pursuant to the customer's purchase orders,
thereby allowing the customer flexibility in the timing of its receipt of
systems and to make adjustments that may arise upon changes in technology or
changes in customer needs. The Company's master sales agreements generally
provide that the customer may terminate its agreement upon a material breach by
the Company, may delay certain aspects of the installation and may terminate the
agreement at the customer's discretion without penalty and without regard to the
Company's performance. The master sales agreements also allows the customer to
request additional components as the installation progresses, which additions
are then separately negotiated as to price and terms. Historically, customers
have ultimately purchased systems and services in addition to those originally
contemplated by the master sales agreements, although there can be no assurance
that this trend will continue in the future.
10
11
UNEVEN PATTERNS OF QUARTERLY OPERATING RESULTS
The Company's revenues from systems sales have varied, and may continue to vary,
significantly from quarter to quarter as a result of the volume and timing of
systems sales and delivery. Professional services revenues also fluctuate from
quarter to quarter as a result of the timing of the installation of software and
hardware, project management and customized programming. Revenues from
maintenance services do not fluctuate significantly from quarter to quarter, but
have been increasing as the number of customers increase. Because a significant
percentage of the Company's operating costs are expensed as incurred, a
variation in the timing of systems sales and installations and the resulting
revenue recognition can cause significant variations in operating results from
quarter to quarter. Accordingly, the Company believes that quarter-to-quarter
comparisons of its revenues and operating results from the above factors and the
significant expansion of operations discussed below, may not necessarily be
meaningful and should not be relied upon as indicators of future performance.
Revenue from systems sales is recognized when an agreement is signed and
products are shipped. Revenue recognition related to routine installation,
integration and other insignificant obligations is deferred until the work is
performed. If an agreement requires the Company to perform services and
modifications that are deemed significant to system acceptance, revenue related
to the delivered hardware and software components is deferred until such
obligations are deemed insignificant. Revenue from consulting, training and
implementation services is recognized as the services are performed. Revenue
from short-term support and maintenance agreements is recognized ratably over
the term of the agreements. Billings to customers recorded prior to the
recognition of the revenue are classified as deferred revenue. Revenue
recognized prior to progress billings to customers is recorded as unbilled
receivables.
The Company's revenues and operating results may vary significantly from quarter
to quarter as a result of a number of other factors, many of which are outside
the Company's control. These factors include the relatively large size of
customer agreements, unpredictability in the number and timing of systems sales,
length of the sales cycle, delays in the installation process and changes in the
customer's financial condition or budget. Also, because a significant percentage
of the company's operating costs are expensed as incurred, a variation in the
timing of systems sales and installations and the resulting revenue recognition
can cause significant variations in operating results. As a result, period to
period comparisons may not be meaningful with respect to the past operations of
the Company nor are they necessarily indicative of the future operations of the
Company.
REVENUES:
Revenues for the fiscal quarter ended July 31, 1996, were $3,370,137 compared
with $1,181,684 in the comparable quarter of 1995. Revenues for the six months
ended July 31, 1996, were $5,483,630 compared with $1,583,684 in the comparable
six month period of 1995. The increase in revenues is the result of installation
and/or expansion of systems within the current installed
11
12
base of customers and additional revenues related to one new master sales
agreement signed in the second quarter with ProMedica Health System, Inc. (The
Toledo and Flower Hospitals of Toledo, Ohio). The ProMedica agreement, when
fully implemented, will have a value of approximately $1,700,000. As previously
discussed, after a master sales agreement is executed, LanVision does not record
revenues until it ships the hardware and software or performs the agreed upon
services. The commencement of revenue recognition varies depending on the size
and complexity of the system and the scheduling of the implementation, training,
interface development and other services requested by the customer. Three
customers accounted for approximately 60% and 75% of revenues for the first six
months of 1996 and 1995, respectively.
OPERATING EXPENSES:
Cost of System Sales
The cost of systems sales includes amortization of capitalized software
development costs, royalties and the cost of third party software and hardware.
Cost of systems sales as a percentage of systems sales may vary from period to
period depending on the hardware and software system configuration of the
systems sold. The cost of systems sales as a percentage of systems sales for the
second quarter of 1996 and 1995 were 55% and 61% and for the first six months of
1996 and 1995 were 57% and 61%, respectively. The increase in gross margin is
due primarily to the mix of software revenues (with higher gross margins) to
total systems sales.
Cost of Service, Maintenance and Support
The cost of service, maintenance and support includes compensation and benefits
for support and professional services personnel and the cost of third party
maintenance contracts. As a percentage of service, maintenance and support
revenues, the cost of such service, maintenance and support was 128% and 104%
for the second quarter and 120% and 88% for the first six months of fiscal 1996
and 1995, respectively.
The professional services, maintenance and support staff was increased by four
persons in the first quarter and seven additional persons in the second quarter
of 1996. The negative margin on services in the second quarter and first six
months of 1996, was due to an increase in non-billable time associated with the
expansion of the professional services and support staff and various internal
consulting projects. The new personnel require training and product orientation,
leaving less time available for billable hours. The software support group was
increased in anticipation of expected revenue growth. Future increases in
maintenance revenue should not require a proportionate increase in support
expenses. Also, in the first and second quarters of 1996, the Company performed
several special projects for customers on a complimentary basis or at discounted
rates.
12
13
Selling, General and Administrative
Selling, General and Administrative expenses ("S,G&A") consist primarily of
salaries, commissions, benefits and reimbursable travel and living expenses
related to the Company's sales, marketing and administrative personnel as well
as general corporate expenses. During the second quarter, S,G&A expenses
increased to $1,397,457 compared with $255,615 in the comparable prior quarter.
For the six months, S,G&A was $2,453,670 compared with $568,825 in the prior
comparable period. The Company continued to expand operations, including the
infrastructure necessary to support its anticipated future operations, in order
to take advantage of the growth market opportunities in the healthcare
information systems market. During the first quarter of 1996, the selling,
general and administrative staff was increased by three persons and 15 persons
were added in the second quarter. During the next two quarters, the Company
intends to continue to expand its operations. Accordingly, management expects
operating expenses to continue to increase as the Company employs additional
personnel and expand its facilities.
Product Research and Development
Product research and development expenses consist primarily of compensation,
related benefits, and an allocated portion of general overhead costs. During the
first six months of 1996, the product research and development staff was
increased by nine persons. The majority of product research and development
expenses for the current quarter relate to the continued enhancement of
ChartVision(R) version 3.0 and the development of On-Line Chart Completion(TM),
and also includes other new software products under development. The Company
capitalized, in accordance with the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 86, $45,000 and $31,000 of
product research and development costs in the second quarter of fiscal 1996 and
1995, respectively. For the first six months of 1996 and 1995 the Company
capitalized $80,000, and $61,654, respectively.
Net loss
The net loss for the second fiscal quarter of 1996 was $138,581 ($0.02) compared
with a net loss of $129,032 ($0.02) in the second quarter of 1995. The net loss
for the six months ended July 31, 1996 was $918,764 ($0.12) compared with a net
loss of $485,774 ($0.08) in the comparable prior period of 1995.
Since commencing operations in 1989, the Company has, from time to time,
incurred operating losses. Although the Company achieved profitability in fiscal
years 1992 and 1993, the Company incurred a net loss in fiscal years 1994 and
1995. In view of the Company's prior operating history, there can be no
assurance that the Company will be able to achieve consistent profitability on a
quarterly or annual basis or that it will be able to sustain or increase its
revenue growth in future periods.
13
14
SIGNED AGREEMENTS - BACKLOG
At July 31, 1996, the Company's customers had entered into master sales
agreements for systems and services (excluding maintenance) which had not yet
been delivered, installed and accepted, and which, if fully performed, would
generate sales of approximately $8,750,000. The systems and services related to
the master sales agreements are expected to be delivered or performed over the
next two to three years. Of the backlog at July 31, 1996, the Company has
received purchase order for approximately $5,860,000 of systems and services
(excluding maintenance).
In addition, the Company's master sales agreements also generally provide for an
initial maintenance period and give the customer the right to subscribe for
maintenance services on a monthly, quarterly or annual basis.
LIQUIDITY AND CAPITAL RESOURCES
On April 18, 1996, the Company, in its Initial Public Offering, issued 2,912,500
Shares of Common Stock, with net proceeds to the Company, before expenses, of
$35,211,147. In 1996, the Company entered into a five year lease for office
facilities with annual rental of approximately $400,000. In addition, the
Company has placed purchase orders approximating $1,200,000 for furniture and
equipment for the new facility. The Company has no other significant obligations
for capital resources. It is expected that existing cash, cash equivalents, the
availability of borrowings under the credit line, as well as cash provided from
operations, will be sufficient to meet anticipated cash requirements, including
the planned expansion of staff, office facilities and furniture and equipment.
The Company's customers typically have been well-established hospitals or
medical facilities with good credit histories, and payments have been received
within normal time frames for the industry. Master sales agreements with
customers often involve significant amounts, and contract terms typically
require customers to make progress payments. At July 31, 1996, accounts
receivable, net were approximately $981,156 greater than accounts receivable at
January 31, 1996. This increase is primarily due to the increased revenues
recorded during the second quarter. At July 31, 1996, accounts payable, and
accrued current liabilities were approximately $1,061,905 greater than accounts
payable and accrued current liabilities at January 31, 1996. The increase is due
to the increase in purchases of hardware and third party software during the
first six months to support increased sales, and increases in accrued
compensation, warranty and other reserves, based on increased headcount and
expanding sales and maintenance agreements.
LanVision maintains a revolving line of credit with The Huntington National Bank
allowing the Company to borrow up to $1,300,000, bearing interest at the bank's
prime commercial rate plus three-quarters of one percent per annum. Under the
terms of the loan agreement, the Company is able to borrow money based on a
percentage of its eligible receivables. The Company currently has no outstanding
indebtedness under this line of credit. The line of credit declines $100,000
each month until it expires in February, 1997.
14
15
Part II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(10) First amendment to office lease with Duke Realty Limited
Partnership, dated July 12, 1996
(11) Computation of Earnings (Loss) Per Common Share
(12) Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements 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.
LANVISION SYSTEMS, INC.
DATE: September 4, 1996 By: /s/ J. BRIAN PATSY
------------------------------- ------------------------------------
J. Brian Patsy
Chief Executive Officer,
President and Treasurer
DATE: September 4, 1996 By: /s/ THOMAS E. PERAZZO
------------------------------- ------------------------------------
Thomas E. Perazzo
Chief Financial Officer
15
16
INDEX TO EXHIBITS
Sequential
Exhibit No. Exhibit description Page No.
----------- -------------------- --------------
10 First amendment to office lease with Duke Realty Limited
Partnership, dated July 12, 1996. . . . . . . . . . . . . . . . . . . . 17
11 Computation of Earnings (Loss) Per Common Share. . . . . . . . . . . . . 22
27 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . . . 23
16
1
Exhibit 10
LANVISION SYSTEMS, INC.
FIRST LEASE AMENDMENT
BETWEEN
LANVISION, INC.
AND
DUKE REALTY LIMITED PARTNERSHIP
THIS FIRST LEASE AMENDMENT (the "Amendment") is executed this 12th
day of July, 1996, by and between DUKE REALTY LIMITED PARTNERSHIP, an Indiana
limited partnership ("Landlord"), and LANVISION, INC., an Ohio corporation
("Tenant").
W I T N E S S E T H :
WHEREAS, Landlord and Tenant entered into a certain Lease dated May
7, 1996 ("Lease"), whereby Tenant leased from Landlord certain premises
consisting of approximately 20,501 rentable square feet of space (the
"Original Premises") located in Suite 400, One Financial Way, Cincinnati,
Ohio commonly known as the Ohio National Building; and
WHEREAS, Landlord and Tenant desire to expand the Original Premises
by 1344 square feet (the "Additional Space"). Collectively, the Original
Premises and Additional Space shall hereinafter be referred to as the "Leased
Premises"; and
WHEREAS, Landlord and Tenant desire to decrease the storage space by
273 usable; and
WHEREAS, Landlord and Tenant desire to amend certain provisions of
the Lease to reflect such expansion and contraction;
NOW, THEREFORE, in consideration of the foregoing premises, the
mutual covenants herein contained and each act performed hereunder by the
parties, Landlord and Tenant hereby enter into this Amendment.
1. AMENDMENT OF ARTICLE 1.
(a) SECTION 1.01 of ARTICLE 1 of the Lease is hereby amended
by substituting AMENDED EXHIBIT A, attached hereto and incorporated herein by
reference, on which the Original Premises are striped and the Additional Space
is cross-hatched, in lieu of EXHIBIT A attached to the Lease.
17
2
(b) Commencing on the date hereof, ARTICLE 1, SECTION 1.02 is
hereby amended as follows:
B. Rentable Area: approximately 21,845 rentable square feet;
C. Building Expense Percentage: 10.3%;
D. Minimum Annual Rent:
Year 1 (months 1-2) $0.00
Year 1 (months 3-12) $236,654.17
Year 2 $294,907.50
Year 3 $294,907.50
Year 4 $300,368.75
Year 5 $300,368.75
E. Monthly Rental Installments:
Months 1-2 $0.00
Months 3-12 $23,665.42
Months 13-36 $24,575.63
Months 37-60 $25,030.73
3. AMENDMENT OF SECTION 20.09 OF THE ADDENDUM, Section 20.09,
STORAGE SPACE of the Addendum is hereby amended by deleting the reference to
1,500 usable square feet and replacing it with 1,227 square feet.
4. TENANT'S REPRESENTATIONS AND WARRANTIES. The undersigned
represents and warrants to Landlord that (i) Tenant is duly organized, validly
existing and in good standing in accordance with the laws of the state under
which it was organized; (ii) all action necessary to authorize the execution of
this Amendment has been taken by Tenant; and (iii) the individual executing and
delivering this Amendment on behalf of Tenant has been authorized to do so, and
such execution and delivery shall bind Tenant. Tenant, at Landlord's request,
shall provide Landlord with evidence of such authority.
5. EXAMINATION OF AMENDMENT. Submission of this instrument for
examination or signature to Tenant does not constitute a reservation or option,
and it is not effective until execution by and delivery to both Landlord and
Tenant.
6. DEFINITIONS. Except as otherwise provided herein, the
capitalized terms used in this Amendment shall have the definitions set forth in
the Lease.
7. INCORPORATION. This Amendment shall be incorporated into and
made a part of the Lease, and all provisions of the Lease not expressly modified
or amended hereby shall remain in full force and effect.
18
3
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed on the day and year first written above.
LANDLORD:
DUKE REALTY LIMITED PARTNERSHIP,
an Indiana limited partnership
WITNESSES:
/s/ ALICE BATTAGLIA By: Duke Realty Investments, Inc.,
- - ----------------------------- its general partner
Alice Battaglia
- - -----------------------------
(Printed)
/s/ NICOLE C. STEVENS By: /s/ JEFFREY G. TULLOCH
- - ----------------------------- -----------------------------
Nicole C. Stevens Vice President
- - -----------------------------
(Printed)
TENANT:
WITNESSES: LANVISION, INC., an Ohio corporation
/s/ ALAN J. HARTMAN By: /s/ ERIC LOMBARDO
- - ------------------------------ ----------------------------
Alan J. Hartman Printed: Eric Lombardo
- - ----------------------------- ----------------------------
(Printed) Title: Exec. VP
/s/ CAROL R. DANIELS ----------------------------
Carol R. Daniels
(Printed)
19
4
STATE OF Ohio )
) SS:
COUNTY OF Hamilton )
Before me, a Notary Public in and for said County and State,
personally appeared Jeffrey G. Tulloch, by me known and by me known to be the
Vice President of Duke Realty Investments, Inc., an Indiana corporation, the
general partner of Duke Realty Limited Partnership, an Indiana limited
partnership, who acknowledged the execution of the foregoing "First Lease
Amendment" on behalf of said partnership.
WITNESS my hand and Notarial Seal this 22nd day of July, 1996.
/s/ NICOLE C. STEVENS
------------------------------------
Notary Public
[Notarial Seal]
Nicole C. Stevens
------------------------------------
(Printed Signature)
My Commission Expires: 10/31/00
----------------
My County of Residence: Hamilton
----------------
STATE OF Ohio )
) SS:
COUNTY OF Hamilton )
Before me, a Notary Public in and for said County and State,
personally appeared Eric S. Lombardo, by me known and by me known to be the
Executive Vice President of Lanvision Inc., who acknowledged the execution of
the foregoing "First Lease Amendment" on behalf of said corporation.
WITNESS my hand and Notarial Seal this 12th day of July, 1996.
/s/ CAROL R. DANIELS
------------------------------------
Notary Public
[Notarial Seal]
20
5
Carol R. Daniels
-------------------------------------
(Printed Signature)
My Commission Expires: 8/28/96
----------------
My County of Residence: Hamilton
----------------
CONSENT OF GUARANTOR
LANVISION SYSTEMS, INC. as guarantor of the above referenced Lease hereby
consents to the terms of the Amendment and agrees that its Guaranty shall
include the terms of the Amendment.
Dated: July 12, 1996
LANVISION SYSTEMS, INC.
a Delaware corporation.
By: /s/ ERIC LOMBARDO
---------------------------------
Eric Lombardo
E.V.P.
---------------------------------
(printed name, title)
21
1
Exhibit 11
LANVISION SYSTEMS, INC.
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
Three Months Ended Six Months Ended
July 31, July 31,
---------------------------------- ---------------------------------
1996 1995 1996 1995
--------------- --------------- -------------- --------------
Net (loss) $ (138,581) $ (129,032) $ (918,764) $ (485,774)
============= ============= ============ ============
Average shares outstanding 8,896,500 4,488,000 6,168,288 4,488,000
Stock options:
Total -- 586,858 -- 586,858
Assumed treasury stock buyback -- (380,533) -- (380,533)
Convertible redeemable preferred
stock assumed converted -- 1,496,000 1,496,000 1,496,000
------------- ------------- ------------ -----------
8,896,500 6,190,325 7,664,288 6,190,325
============= ============= ============ ===========
Net (loss) per share of common stock $ (.02) $ (.02) $ (.12) $ (.08)
============= ============= ============ ===========
22
5
6-MOS
JAN-31-1997
FEB-01-1996
JUL-31-1996
543,343
31,219,009
3,684,875
155,000
0
36,098,719
907,220
364,755
36,837,551
3,247,258
0
88,965
0
0
33,501,328
33,590,293
5,483,630
5,483,630
3,762,210
6,793,061
79,684
0
0
(918,764)
0
(918,764)
0
0
0
(918,764)
(0.12)
0
