<PAGE>
As filed with the Securities and Exchange Commission on August 11, 1998
Registration No. 333-59827
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
Sterling Vision, Inc.
(Exact name of Registrant as specified in its charter)
New York 11-3096941
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 Hempstead Turnpike
East Meadow, New York 11554
(516) 390-2100
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
------------------------
Joseph Silver, Esq.
Executive Vice President, Secretary and General Counsel
1500 Hempstead Turnpike
East Meadow, New York 11554
(516) 390-2100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
Copies to:
Robert S. Matlin, Esq.
Joseph Ventimiglia, Esq.
Camhy Karlinsky & Stein LLP
1740 Broadway, 16th Floor
New York, New York 10019-4315
(212) 977-6600
------------------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434 under
the Securities Act, please check the following box. / /
<PAGE>
================================================================================
CALCULATION OF REGISTRATION FEE
================================================================================
Title of Proposed
each class Proposed maximum
of securities Amount maximum aggregate Amount of
to be to be offering price offering registration
registered registered(2) Per share(1) price(1) fee
- --------------------------------------------------------------------------------
Common Stock, 1,470,000
$0.01 par value shares $ 6.3125 $ 9,279,375 $2,737.42(3)
================================================================================
(1) Estimated solely for purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average of the high and
low prices per share of the common stock of Sterling Vision, Inc.
(the "Common Stock") reported on the NASDAQ National Market System
on July 22, 1998.
(2) Represents shares being registered on behalf of the investors in a
$3.5 million private placement financing (which Sterling Vision,
Inc. [the "Company"] completed as of February 17, 1998) pursuant to
which the Company issued 35 shares of its Senior Convertible
Preferred Stock, par value $.01 per share (the "Preferred Stock")
having a stated value of $100,000 per share, and an aggregate of
700,000 warrants (the "Warrants"), each Warrant entitling the
holder thereof to purchase one share of the Registrant's Common
Stock, par value $.01 per share (the "Common Stock").
(3) Previously paid
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933, as amended,
or until the Registration Statement shall become effective on such date
as the Commission, acting pursuant to such Section 8(a), may determine.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD, NOR MAY
OFFERS TO BUY BE ACCEPTED, PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION: AUGUST 11, 1998
PROSPECTUS
STERLING VISION, INC.
Common Stock
1,470,000 shares
------------------------
This Prospectus relates to 1,470,000 shares (collectively, the
"Shares") of the common stock, par value $.01 per share (the "Common Stock"), of
Sterling Vision, Inc. ("Sterling" or the "Company"), which may be offered, from
time to time, by one or all of the selling shareholders named herein
(collectively, the "Selling Shareholders"). The Company will receive no part of
the proceeds of such sales, although the Company will receive proceeds upon the
exercise of certain warrants previously issued by the Company, the underlying
shares of which are being registered hereby. The Company has agreed to pay all
costs and expenses incurred in connection with the registration of the Shares
offered hereby, except that the Selling Shareholders shall be responsible for
all selling commissions, transfer taxes, fees of counsel to the Selling
Shareholders and related charges in connection with the offer and sale of the
Shares. See "Plan of Distribution."
The Common Stock of the Company is traded on the NASDAQ National Market
System ("NASDAQ-NMS") under the symbol "ISEE". On August 7, 1998, the closing
sale price of the Company's Common Stock on the NASDAQ-NMS was $4.688 per
share. The Selling Shareholders may sell all or a portion of the Shares offered
hereby in private transactions or in the over-the-counter market at prices
related to the prevailing prices of the Common Stock on the NASDAQ-NMS at the
time of sale. The Selling Shareholders may effect such transactions by selling
to or through one or more broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Selling Shareholders. The Selling Shareholders and any broker-dealers
that participate in the distribution may, under certain circumstances, be deemed
to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any commissions received by such
broker-dealers and any profits realized on their resale of Shares may be deemed
to be underwriting discounts and commissions under the Securities Act. The
Company and the Selling Shareholders may agree to indemnify such broker-dealers
against certain liabilities, including liabilities under the Securities Act. In
addition, the Company has agreed to indemnify the Selling Shareholders, with
respect to the registration of the Shares, against certain liabilities,
including certain liabilities under the Securities Act. To the extent required,
the specified number of Shares to be sold, the names of the Selling
Shareholders, the public offering price, the names of any such broker-dealers,
and any applicable commissions or discounts with respect to any particular offer
will be set forth in a supplement to this Prospectus. Each of the Selling
Shareholders reserves the right to accept or reject, in whole or in part, any
proposed purchase of the Shares. See "Plan of Distribution." Any securities
covered by this Prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than pursuant to this
Prospectus.
------------------------
AN INVESTMENT IN THE SHARES INVOLVES A
HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is August __, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission" or "SEC"). Such
reports, proxy statements and other information filed by the Company can be
inspected and copied, at the prescribed rates, at the public reference
facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at the Northeast Regional Office of the Commission
located at Seven World Trade Center, Suite 1300, New York, New York 10048 and at
the Midwest Regional Office of the Commission located at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies may be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the Commission. The
address of the Commission's Web Site is http://www.sec.gov.
The Company has filed with the Commission, in Washington, D.C., a
Registration Statement on Form S-3 (together with all amendments thereto, the
"Registration Statement"), under the Securities Act, with respect to the Shares
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules filed
therewith, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company and the Shares offered hereby, reference is hereby made to the
Registration Statement and to the exhibits and schedules filed therewith.
Statements contained in this Prospectus regarding the contents of any contract
or other document are not necessarily complete and, in each instance, reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being deemed to be qualified in
its entirety by such reference. The Registration Statement, including all
exhibits and schedules thereto, may be inspected, without charge, at the
principal office of the Commission located at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at the Midwest Regional Office
of the Commission located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511, and at the Northeast Regional Office of the
Commission located at Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material may be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
upon the payment of the prescribed fees therefor.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the
Commission and are hereby incorporated by reference in this Prospectus: (a)
Annual Report on Form 10-K for the Fiscal Year ended December 31, 1997; (b)
Current Report on Form 8-K, dated February 17, 1998; (c) Current Report on Form
8-K, dated April 14, 1998; (d) Current Report on Form 8-K, dated May 1, 1998;
(e) Quarterly Report on Form 10-Q/A for the quarterly period ended March 31,
1998; (f) Current Report on Form 8-K, dated May 6, 1998; (g) Current Report on
Form 8-K, dated May 13, 1998 (g) Proxy Statement with respect to the Annual
Meeting of Shareholders held on June 26, 1998; and (i) Current Report on Form
8-K, dated July 31, 1998.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Shares offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the respective dates of the filing of such documents. Any statement contained in
a document incorporated by reference herein shall be deemed to be modified or
superseded, for purposes of this Prospectus, to the extent that a statement in
this Prospectus or in any subsequently filed document which also is, or is
deemed to be, incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person who receives
this Prospectus, upon written or oral request of such person, a copy of any of
the information that was incorporated by reference in this Prospectus (not
including exhibits to the information that is incorporated herein by reference,
unless such exhibits are themselves specifically incorporated by reference
herein). Such requests should be made to William Young, Executive Vice
President-Finance, Sterling Vision, Inc., 1500 Hempstead Turnpike, East Meadow,
New York 11554, (516) 390-2100.
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<PAGE>
THE COMPANY
Sterling is one of the largest chains of retail optical stores and the
second largest chain of franchised optical stores in the United States based
upon domestic sales and number of locations of Company-owned and franchised
stores (collectively referred to herein as the "Sterling Stores"). As of
December 31, 1997, there were 313 Sterling Stores, consisting of 50 Company
owned stores and 263 franchised stores. The Company continually seeks to expand
both its Company-owned and franchised store operations. Sterling Stores are
currently located in 27 States, the District of Columbia, Ontario, Canada and
the U.S. Virgin Islands.
Most Sterling Stores offer eyecare products and services such as
prescription and non-prescription eyeglasses, eyeglass frames, ophthalmic
lenses, contact lenses, sunglasses and a broad range of ancillary items. To the
extent permitted by individual state regulations, an optometrist is employed by,
or affiliated with, most Sterling Stores, which optometrist provides
professional eye examinations to the public. The Company fills prescriptions
from these employed or affiliated optometrists, as well as from unaffiliated
optometrists and ophthalmologists. Most Sterling Stores have an inventory of
ophthalmic and contact lenses, as well as on-site lab equipment for cutting and
edging ophthalmic lenses to fit into eyeglass frames, which allows Sterling
Stores to offer same-day service in many cases.
Sterling views its Company-owned stores as "inventory" to be
strategically sold to qualified franchisees. By selling Company-owned Sterling
Stores to franchisees, the Company hopes to achieve two goals: to recognize a
gain on the conveyance of the assets of such stores, and to create a stream of
royalty payments based upon a percentage of the gross revenues of the franchised
locations. Sterling currently derives its revenues principally from the sale of
eyecare products and services at Company-owned stores; on-going royalties based
upon a percentage of the gross revenues of franchised stores; and the conveyance
of Company-owned store assets to existing and new franchisees.
While most Sterling Stores presently operate under one of the
tradenames "Sterling Optical," "IPCO Optical," "Site For Sore Eyes," "Singer
Specs," "Benson Optical," "Superior Optical," " Nevada Optical," "Duling
Optical," "Monfried Optical", or "Kindly Optical," the Company is presently
developing plans to change the tradename of most Sterling Stores (other than
those located in the San Francisco Bay area of California) to "Sterling
Optical." In connection therewith, the Company intends to formulate and
implement additional advertising and marketing programs to create increased
recognition of the name and mark, "Sterling Optical," throughout those areas of
the United States where the Company is currently operating under a tradename
other than "Sterling Optical." The Company also operates VisionCare of
California ("VCC"), a specialized healthcare maintenance organization licensed
by the California Department of Corporations. VCC employs licensed optometrists
who render services in offices located immediately adjacent to, or within, most
Sterling Stores located in California.
The Company, through its wholly-owned subsidiary, Insight Laser
Centers, Inc. ("Insight"), also owns and operates an eyecare center, located in
New York City, at which it has installed an excimer laser and at which it offers
Photo-Refractive Keractectomy ("PRK"), a procedure performed by licensed
ophthalmologists for the correction of certain degrees of myopia
(near-sightedness). In addition, the Company also has entered into arrangements
with other ophthalmologists who perform the PRK procedure utilizing excimer
lasers installed in their offices by Insight, in exchange for their payment, to
Insight, of a fee for each PRK procedure performed with such lasers. As of April
1, 1998, Insight had leased six (6) excimer lasers, each with a purchase option
for nominal consideration, and had deposits for the purchase of two additional
excimer lasers; and, as of the date hereof, Insight had placed five of such
excimer lasers in ophthalmological offices located in New York, California,
Pennsylvania, Delaware and New Jersey.
In addition to the foregoing, on May 6, 1998 the Company, through its
wholly owned subsidiary Insight Laser Centers N.Y.I., Inc., purchased
substantially all of the assets of an ambulatory surgery center located in
Garden City, New York (the "Center") and, in connection therewith: (i) settled
its legal action against the estate of the former owner of such Center; (ii)
entered into a long term lease of the premises in which such Center is located;
and (iii) entered into an agreement pursuant to which it will manage the
operations of the Center pending the approval, from the New York State
Department of Health, of the transfer of the license and certificate of need
therefor to the Company.
The Company was incorporated under the laws of the State of New York in
January 1992. The Company's executive offices are located at 1500 Hempstead
Turnpike, East Meadow, New York 11554, and its telephone number is (516)
390-2100.
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<PAGE>
RISK FACTORS
Each prospective investor should carefully consider, in addition to the
other information contained in this Prospectus, the following information in
evaluating the Company and its business before making an investment decision.
This Prospectus contains certain forward-looking statements or statements which
may be deemed or construed to be forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1996 with respect to the
financial condition and business of the Company. The words "estimate," "plan,"
"intend," "expect" and similar expressions are intended to identify
forward-looking statements. These forward-looking statements involve, and are
subject to, known and unknown risks (including the ones set forth below),
uncertainties and other factors which could cause the Company's actual results,
performance (financial or operating) or achievements to differ from the future
results, performance (financial or operating) or achievements expressed or
implied by such forward-looking statements. Investors are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof. The Company undertakes no obligation to publicly release any
revisions to these forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Operating Results; Operating Losses
Sterling was formed in January, 1992 to purchase substantially all of
the assets then comprising the retail optical store business of Sterling Optical
Corp. (f/k/a IPCO Corporation), a New York corporation which, in December 1991,
filed for protection under Chapter 11 of the U.S. Bankruptcy Code, and had
limited operations until July 15, 1992. The Company's future operating results
will depend, in part, on matters over which the Company has no control,
including, without limitation, general economic conditions, competition,
including competition in the managed, vision care, PRK and ambulatory surgery
center markets, the ability of the Company to acquire additional retail optical
chains at attractive prices, and the ability of the Company to develop, operate
and/or manage successfully PRK centers or to affiliate with ophthalmologists
with regard to PRK. Therefore, it is not possible to estimate operating
expenses, revenues or working capital requirements based upon historical
operating performance.
For the fiscal year ended December 31, 1997, the Company experienced a
net loss of $14,162,000. In addition, the Company experienced negative cash flow
during the fiscal year ended December 31, 1997 resulting primarily from the
operations of Insight and a substantial reduction in the Company's accounts
payable earlier in the year. By the end of 1997, the following measures were
taken by the Company, which management believes will reduce, in the future, the
magnitude of the losses it sustained for the calendar year ended December 31,
1997, as well as improve the Company's operations and cash flow: (i) closed or
did not renew the leases for 11 of its Company-owned stores; and (ii) reduced a
substantial amount of administrative overhead expenses. Based, in part, upon the
anticipated financial impact of such measures on the Company's results of
operations for the twelve months ending December 31, 1998, the Company
anticipates a positive cash flow for such period, although there can be no
assurance that such positive cash flow will be obtained.
Franchising
The Company relies, in part, upon its franchisees and the manner in
which they operate their respective Sterling Stores to develop and promote the
Company's business. Although the Company has established criteria to evaluate
and screen prospective franchisees, and has attracted numerous, new franchisees,
there can be no assurance that such franchisees will have the business acumen or
financial resources necessary to operate successfully their Sterling Stores. The
failure, by a substantial number of the franchisees of the Company's Sterling
Stores, to operate their respective Sterling Stores successfully could have a
material adverse effect upon the Company.
Competition in the Franchise Industry
The Company also faces competition from franchisors in other industries
for the sale of franchises to prospective franchisees. Many of these
competitors have substantially greater financial and technical resources and
marketing capabilities than the Company; and many of these competitors also have
significantly greater experience than the Company in marketing and servicing
franchises. There can be no assurance that the Company will be able to compete
successfully against these competitors in securing additional franchisees.
Dependence on New Franchises
The Company's growth and ability to increase revenues and
generate higher levels of profitability depend on increasing the number
of Sterling Stores in operation. Although there are many major metropolitan
markets and major urban areas that have no Sterling Stores, areas that the
Company believes could support additional Sterling Stores, there can be no
assurance that the Company will sustain either the current or an increased level
of new franchised stores in the future.
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<PAGE>
Competition in the Retail Optical Industry
The retail optical business is highly competitive and includes
chains of retail optical stores, superstores, individual retail outlets,
and a large number of individual opticians, optometrists and
ophthalmologists who provide professional services and, in connection
therewith, dispense prescription eyewear. As retailers of prescription
eyewear generally service local markets, competition varies substantially
from one location or geographic area to another.
The Company believes that the principal competitive factors in
its retail optical business are convenience of location, the on-site
availability of professional eye examinations, quality and consistency of
product and service, price, product warranties and a broad selection of
merchandise, and it believes that it competes favorably in each of these
respects.
Dependence on Availability of Attractive Acquisitions
Historically, a large portion of the Company's profitability has
resulted from the Company's ability to acquire non-Sterling retail
optical stores and chains, at attractive prices, for initial operation by
the Company and, possibly, the later strategic sale of such stores to
franchisees who continue operating such stores, generally under the
tradename "Sterling Optical", in exchange for the payment to the Company
of the purchase price for the assets and goodwill therefor, initial
franchise fees and ongoing royalties. Although the Company believes that
there currently are many opportunities to acquire small to mid-sized
regional optical chains that have lost market share, there can be no
assurance that any such opportunities will continue to exist or that any
such acquisitions will be consummated. The failure to consummate
acquisitions at attractive prices or effect resales of such acquired
stores to franchisees on favorable terms would have a material adverse
effect on the Company.
Negative Operating Results Resulting from Certain Promotional Incentives Offered
By the Company
From time to time, certain major competitors of the Company
offer promotional incentives to their customers, including "50% Off" on
designer frames and "Buy One-Get One Free" eyecare promotions and, in
response thereto, the Company has, from time to time, offered the same or
similar incentives to its customers. Such action by the Company has
resulted in lower profit margins, and there can be no assurance that
these competitive promotional incentives will not further adversely
impact the Company's results of operations. Although the Company believes
that its Sterling Stores provide quality service and products at
competitive prices, several of the larger retail optical chains have
greater financial resources; and there can be no assurance that the
Company will be able to continue to deliver cost-efficient products in
the event of aggressive pricing by its competitors.
Income Recognition on Conveyance of Company-Owned Store Assets
A substantial portion of the Company's net income historically
has been derived from the conveyance of Company-owned store assets to
franchisees for which, in most cases, the Company provides purchase money
financing for a substantial portion of the purchase price thereof. The
foregoing has two important consequences to investors. First, because the
Company's conveyance of Company-owned store assets occurs on an irregular
basis, the Company's earnings may fluctuate significantly from fiscal
period to fiscal period, depending, among other things, on the quantity
and nature of the store assets conveyed. Second, because the Company
generally finances the majority of the purchase price upon a conveyance
of Company-owned store assets, it will recognize all of the gain before
it receives all of the proceeds from such conveyance. Historically, the
purchasers of these Company-owned store assets have only occasionally
defaulted on their purchase money obligations; and although the Company,
in many instances, has been able to repossess the conveyed assets and
reconvey such assets to another franchisee, there can be no assurance
that it will be able to do so in the future. In addition, although the
Company could and would operate such repossessed stores, the failure to
reconvey such assets to other franchisees would, in all likelihood, have
a material adverse effect upon the Company.
Losses Associated with PRK Centers
An integral part of the Company's business strategy of becoming
a full-service eyecare company originally included developing and/or
managing a chain of eyecare centers, to be operated under the tradename
"Insight Laser," primarily offering PRK. In furtherance of such strategy,
Insight, from 1996 through 1997: (i) leased six (6) excimer lasers to
perform the PRK procedure; (ii) constructed and opened an Insight Laser
Center in New York City; (iii) installed its remaining excimer lasers in
five ophthalmological offices and, in connection therewith, entered into
agreements with such ophthalmologists pursuant to which they pay to Insight
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<PAGE>
a fee for each PRK procedure performed with such excimer lasers; (iv) created an
internal organization and staff to administer, market and expand its Insight
Laser Center business; and (v) developed and initiated an advertising campaign
to attract additional customers to its Insight Laser Centers. Notwithstanding
these efforts, the Company's revenues from its Insight Laser Center business
grew only modestly; and, during the latter part of 1996, published reports
concluded that consumer acceptance of PRK, as a vision correction alternative,
was below industry expectations, despite the aggressive marketing and
advertising programs conducted by laser surgery companies, including Insight.
As a result of the limited revenues generated in 1997 by
Insight, the Company, for the year ended December 31, 1997, incurred a net
loss from the operations of Insight, in the approximate amount of
$1,400,000; and although the Company believes that such loss for the year
ending December 31, 1998 will be substantially reduced, there can be no
assurance thereof.
Competition in the PRK Market
The Company faces substantial competition in the PRK industry.
Currently, there are other companies who have, or are in the process of,
entering into arrangements with ophthalmologists similar to those entered
into by Insight, as described above. In addition, other existing
ophthalmological offices and hospitals are equipped with excimer lasers
which can perform the PRK procedure; and one manufacturer of excimer
lasers has developed and is currently marketing its own laser centers. As
a result of the foregoing, the prices generally charged for the PRK
procedure have declined; and it is anticipated that future competition
will lead to the further decline in such prices. The excimer lasers
approved by the United States Food and Drug Administration ("FDA") have
been approved initially only for the correction of certain degrees of
approval for use of the excimer laser in correcting astigmatisms. In
addition, it is anticipated that, in the future, such lasers will be
approved by the FDA for use in treating other ophthalmic conditions. The
PRK procedure also competes with other present forms of treatment for
refractive disorders, including eyeglasses, contact lenses, refractive
surgery (such as radial keratotomy), corneal transplants, and other
technologies under development. Accordingly, there can be no assurance
that the Company will be able to compete successfully in the PRK
industry.
Uncertainty of PRK Laser Market Acceptance
The PRK laser procedure has only been tested, from a commercial
perspective, in the United States since October 1995, the date of the
FDA's first approval thereof. Factors that are likely to adversely affect
market acceptance of the PRK procedure include: nonacceptance of laser
refractive procedures as an alternative to existing methods of treating
refractive disorders; the relatively high cost of laser refractive
procedures; general resistance to surgery; the effectiveness of
alternative, less intrusive or less expensive methods of correcting
refractive disorders; and the possibility of known or unknown side
effects. In addition, PRK laser surgery is currently approved only for
the correction of certain degrees of myopia. Accordingly, there can be no
assurance that the Company will be able to achieve market acceptance of
the PRK procedure to be offered through its affiliated health care
providers, by the ophthalmological community or by the general
population, and the failure to achieve such acceptance would, in all
likelihood, have a material adverse effect on the Company.
Rapid Technological Changes
The market for ophthalmic lasers is characterized by rapid
technological changes, including advances in laser and other technologies
and the potential new development of alternative surgical techniques or
new pharmaceutical products. It is possible that newer technologies,
techniques or products could be developed with better performance than
the excimer lasers acquired by the Company, although such new
technologies would be subject to the FDA approval process. The
availability of new and better ophthalmic laser technologies or other
technologies that serve the same purpose as PRK would, in all likelihood,
have a material adverse effect on the Company's PRK business.
Possible Long-Term Attrition of Existing Customers from Introduction of
PRK Laser Surgery
If existing vision correction users undergo the PRK procedure or
other vision correction techniques (see "--Rapid Technological
Changes"), the demand for contact lenses and eyeglasses may decrease. A
decrease in customer demand for such products could have a material
adverse effect on the operations of the Company's owned and franchised
Sterling Stores.
Recent Acquisition; New Services
On May 6, 1998 the Company, through its wholly owned subsidiary Insight
Laser Centers N.Y. I., Inc., purchased substantially all of the tangible assets
of an ambulatory surgery center located in Garden City, New York (the "Center").
In connection therewith, the Company entered into an agreement to manage the
operations of the Center pending its receipt, from the New York State Department
of Health, of the approval of the transfer of the New York State licence
(certificate of need). While the Company believes that it has taken all of the
necessary steps to facilitate such transfer, there can be no assurance that such
transfer will be approved. In addition, to date, the Company has never managed
or operated an ambulatory surgery center; accordingly, there can be no assurance
that the Company will be able to compete successfully in the ambulatory surgery
center industry.
Government Regulation
The Company and its operations are subject to extensive federal,
state and local laws, rules and regulations affecting the health care
industry and the delivery of health care, including, laws and regulations
prohibiting the practice of medicine or optometry, prohibiting the
unlawful rebate or unlawful division of fees, and limiting the manner in
which prospective patients may be solicited. The regulatory requirements
that the Company must satisfy to conduct its business will vary from
state to state. In particular, some states have enacted laws governing
the ability of ophthalmologists and optometrists to enter into contracts
-7-
<PAGE>
to provide professional services with business corporations or lay persons, and
some states prohibit companies from computing their fee for management services
based upon a percentage of the gross revenues of the ophthalmological practice
being managed. Various federal and state regulations limit the financial and
non-financial terms of agreements with these health care providers, and the
revenues potentially generated by the Company may therefore differ depending
upon the nature of the Company's various health care provider affiliations.
Ophthalmic excimer lasers are considered medical devices and are
subject to regulation by the FDA. The Company understands that the
manufacturers of the excimer laser systems that the Company leases have
received approval from the FDA for their use to treat certain degrees of
near-sightedness and, in the case of one such laser, to treat
astigmatisms. These approvals, however, contain restrictions on the use,
labeling, promotion and advertising of the excimer laser.
The FDA and other federal, state or local governmental agencies
may amend current, or adopt new, rules and regulations that could affect
the use of excimer lasers for PRK and the Company's operations, thereby
adversely affecting this aspect of the Company's business.
As a franchisor, the Company is subject to various registration
and disclosure requirements imposed by the Federal Trade Commission and
by many of the states in which the Company conducts its franchising
operations, although the Company believes that it is in compliance with all such
applicable laws and regulations.
The Company is also subject to certain regulations adopted under
the Federal Occupational Safety and Health Act with respect to its
in-store laboratory operations. The Company believes that it is in
material compliance with all such applicable laws and regulations.
Anti-Remuneration Laws
The Medicare and Medicaid anti-kickback statutes prohibit
financial relationships designed to induce the purchase (or arranging for
or recommending the purchase) of items or services, or patient referrals
to providers of services, for which payment may be made under Medicare,
Medicaid, or other federally funded health care programs. The
anti-kickback statutes contain exceptions for, among other things,
properly reported discounts and compensation for bona fide employees. In
addition, federal regulations establish certain "safe harbors" from
liability under the anti-kickback statutes, including further refinements
of the exceptions for discounts and employee compensation, and a safe
harbor for personal service contracts. Several states also have statutes or
regulations prohibiting financial relationships with referral sources
that are not limited to services for which Medicare and Medicaid payment
may be made. Sanctions under these federal and state anti-remuneration
laws may include civil monetary penalties, license suspension or
revocation, exclusion of providers or practitioners (but, under current
law, not manufacturers) from participation in Medicare and Medicaid, and
criminal fines or imprisonment. While the Company believes it is
presently in compliance with these laws, because of the breadth of such
statutory provisions and the scope of the possible interpretations
thereof, it is possible that some of the Company's business practices
could be subject to challenge under one or more such laws. However, the
Company is not aware of any challenge or potential challenge to its
business practices at this time.
Potential Conflicts of Interest
Drs. Robert Cohen, Alan Cohen and Edward Cohen are directors
and, together with certain members of their immediate families
(collectively, the "Cohen Family"), are the principal shareholders of the
Company. They are also the executive officers and directors and, together
with certain members of the Cohen Family, are the sole shareholders of
Cohen Fashion Optical, Inc. and its affiliate, Real Optical Purchasing
Corp. (collectively, "CFO"), which operates retail optical stores similar
to Sterling Stores. CFO operates stores in the states of Connecticut,
Florida, New Hampshire, Massachusetts, New Jersey, New York and
Pennsylvania and may, in the future, operate in other states as well. As
of April 1, 1998, many CFO stores were located in the same shopping
center or mall as, or in close proximity to, Sterling Stores and, in the
future, CFO may open or franchise additional stores which are located in
the same areas as Sterling Stores. Furthermore, certain members of the Cohen
Family own minority equity interests in, and have substantial management
positions or consulting agreements with, two of the Company's suppliers: Rapid
Cast, Inc. ("Rapid Cast"); and Dura-Lens, Inc. ("DuraLab"). While the Company
currently receives products from Rapid Cast and DuraLab on a preferred vendor
basis, there can be no assurance that, in the future, the Company will continue
to receive products from these companies on such favorable terms. Furthermore,
Sterling Stores and certain of CFO's stores jointly participate as providers
under certain third party benefit plans obtained by Sterling, which arrangement
is anticipated to continue in the future.
Control by Principal Shareholders
-8-
<PAGE>
As of April 1, 1998, the Cohen Family, in the aggregate,
beneficially owned approximately 48% of the Company's outstanding shares of
Common Stock, exclusive of shares of Common Stock held by the members of Dr.
Edward Cohen's immediate family and exclusive of outstanding options to purchase
500,001 shares of Common Stock. As a result, the Cohen Family is able to direct
the Company's affairs and exercise significant influence over all matters
requiring shareholder approval, including the election of directors and the
approval of significant corporate transactions. Future sales by the Cohen Family
of substantial amounts of Common Stock, or the potential for such sales, could
adversely affect the prevailing market price of the Common Stock.
Dependence on Key Personnel
The Company is currently dependent upon the ability and
experience of certain members of its management, in particular, Mr. Jerry
Lewis, the Company's Chief Executive Officer, Chief Operating Officer and
President, Mr. Jerry Darnell, the Company's Executive Vice
President-Franchising, Mr. Joseph Silver, the Company's Executive Vice
President and General Counsel, and Mr. William Young, the Company's newly
appointed Chief Financial Officer, and there can be no assurance that the
Company will be able to retain such persons. The loss of one or more of
such members of management could have a material adverse effect on the
Company's operations.
Shares Eligible for Future Sale
Sales of a substantial number of shares of Common Stock into the
public market following the date of this Prospectus could materially and
adversely affect the prevailing market price for the Common Stock. As of April
30, 1998, in addition to the 1,470,000 shares of Common Stock offered hereby,
there were 14,322,863 shares of Common Stock outstanding, excluding the shares
reserved for issuance under the Company's 1995 Stock Option Plan (which amount
has been increased from 2,000,000 shares to 3,500,000 shares ), 10,106,879 of
which were issued by the Company in private transactions not involving a public
offering (the "Private Shares"). Of the total number of Private Shares,
5,556,243 are freely tradeable under Rule 144 of the Securities Act and
4,550,636 are subject to the volume limitations on sale set forth in Rule 144.
Anti-takeover Provisions
Sterling's Amended and Restated Certificate of Incorporation
(the "Amended Certificate") and Amended and Restated By-Laws (the
"Amended By-Laws") contain certain provisions that may have the effect of
discouraging, delaying or making more difficult a change of control of
Sterling or preventing the removal of incumbent directors even if some,
or even a majority, of Sterling's shareholders were to deem such an event
to be in the best interest of the Company. The Amended Certificate, among
other things, provides for a classified Board of Directors, authorizes
the issuance of 5,000,000 shares of Preferred Stock, par value $.01 per share
(the "Preferred Stock"), including the 35 shares of Senior Convertible Preferred
Stock issued by the Company on February 17, 1998 (the "Senior Preferred Stock")
and permits the Board of Directors to fix the rights, privileges and preferences
of such shares of Preferred Stock without any further vote or action by the
shareholders. The rights of the holders of Common Stock are and may, in the
future, be subject to, and may be adversely affected by, the rights of the
holders of the Senior Preferred Stock, as well as the holders of any additional
Preferred Stock that may be issued in the future. In addition, Sterling is
subject to the anti-takeover provisions of Section 912 of the Business
Corporation Law of the State of New York, which could have the effect of
delaying or preventing a change of control of the Company. See "Description of
Capital Stock."
Compliance with Credit Agreement
On June 30, 1997, the Company entered into a loan agreement (as
amended the "Loan Agreement") with STI Credit Corporation ("STI") that
established, in favor of the Company, a credit facility to finance a
portion of the Company's then existing and future franchise promissory
notes receivable. As of December 31, 1997, the Company was not in
compliance with certain financial covenants of the Loan Agreement,
although STI subsequently waived such non-compliance by the Company.
If the Company is unable to comply with the Loan Agreement in the future,
there can be no assurance that the Company will be able to obtain
appropriate waivers of, or amendments to, the Loan Agreement, and the
failure to do so would have a material adverse effect on the Company.
-9-
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale
of the shares of Common Stock offered hereby. The Company, however, may
receive an aggregate of $3,500,000 in the event of the exercise of all of
the 700,000 warrants (the "Warrants") issued to the holders of the Senior
Preferred Stock, all of the proceeds of which the Company believes it will use
for general working capital purposes.
-10-
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned by each of the Selling Shareholders as of July 1, 1998, the
number of Shares covered by this Prospectus with respect to each Selling
Shareholder, and the amount and percentage ownership of each Selling Shareholder
after the offering of the Shares offered hereby, assuming all of the Shares
covered by this Prospectus are sold by the Selling Shareholders. Except as
otherwise indicated by the footnotes below, none of the Selling Shareholders has
had any position, office or other material relationship with the Company within
the past three years, other than as a result of the ownership of the Shares or
other securities of the Company.
<TABLE>
<CAPTION>
Common Stock Number of Common Stock
Beneficially Owned Shares Beneficially Owned
Prior to the Offering Registered After the Offering
--------------------- ----------- -------------------
Number Percent Hereunder Number Percent
------- ------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Huberfeld/Bodner Family Foundation,
Inc. 495,000(1)(2) 3.3% 420,000 75,000 *
Huberfeld/Bodner Partnership 378,000(1) 2.6% 378,000 0 *
Ace Foundation, Inc.. 495,000(1)(2) 3.3% 420,000 75,000 *
Rita Folger 57,000(1)(2) * 42,000 15,000 *
Congregation Ahaves Tredoka V' Chesao 210,000(1) 1.4% 210,000 0 *
</TABLE>
- ----------------------------
* Less than one percent (1%).
(1) This number represents the aggregate number of shares of Common
Stock to be issued to such person (a) upon the conversion of the
Company's Senior Preferred Stock held by such Selling Shareholder
at the conversion price of $5.00 per share, (b) upon the exercise
of the Warrants held by such Selling Shareholder, and (c) upon the
payment, to such Selling Shareholder, of the dividends payable on
such Senior Preferred Stock for the period February 18, 1998 through
and including February 17, 1999.
(2) Includes warrants that were issued in connection with a prior
private placement of the Company's securities and are immediately
exercisable.
-11-
<PAGE>
PLAN OF DISTRIBUTION
The sale of all or a portion of the Shares by the Selling
Shareholders may be effected, from time to time, in private transactions
or in the over-the-counter market at prices related to the prevailing
prices of the Shares on the NASDAQ-NMS at the time of the sale, or at
negotiated prices. The Selling Shareholders may effect such transactions
by selling to or through one or more broker-dealers, and such
broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Shareholders. The
Selling Shareholders and any broker-dealers that participate in the
distribution of the Shares may, under certain circumstances, be deemed to
be "underwriters" within the meaning of the Securities Act, and any
commissions received by such broker-dealers and any profits realized on
the resale of Shares by them may be deemed to be underwriting discounts
and commissions under the Securities Act. The Company and the Selling
Shareholders may agree to indemnify such broker-dealers against certain
liabilities, including liabilities under the Securities Act. In addition,
the Company has agreed to indemnify certain of the Selling Shareholders,
with respect to the Shares of Common Stock offered hereby, against
certain liabilities, including certain liabilities under the Securities
Act.
To the extent required under the Securities Act, a supplemental
prospectus will be filed, disclosing (a) the name of any such
broker-dealers, (b) the number of Shares involved, (c) the price at which
such Shares are to be sold, (d) the commissions paid or discounts or
concessions allowed to such broker-dealers, where applicable, (e) that
such broker-dealers did not conduct any investigation to verify the
information set out or incorporated by reference in this Prospectus, as
supplemented, and (f) other facts material to the transaction.
Each Selling Shareholder may be subject to applicable provisions
of the Exchange Act and the rules and regulations promulgated thereunder,
including, without limitation, Regulation M, which provisions may limit
the timing of purchases and sales of any of the Company's securities by
the Selling Shareholders.
There is no assurance that any of the Selling Shareholders will
sell any of the Shares.
The Company has agreed to pay all costs and expenses incurred in
connection with the registration of the Shares offered hereby, except
that the Selling Shareholders shall be responsible for all selling
commissions, transfer taxes and related charges in connection with the
offer and sale of such Shares and the fees of the Selling Shareholders'
counsel.
The Company has agreed to keep the Registration Statement
relating to the offering and sale, by the Selling Shareholders, of the
Shares, continuously effective until the earlier of (i) February 17,
2001; and (ii) the date that all of the Shares have been sold and the
Warrants have been exercised.
-12-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of
28,000,000 shares of Common Stock, $0.01 par value, and 5,000,000 shares
of Preferred Stock, $0.01 par value. As of July 1, 1998, 14,322,863
shares of Common Stock were outstanding and 35 shares of Senior Preferred
Stock were outstanding.
Common Stock
Subject to the rights of the holders of the Preferred Stock, the
holders of outstanding shares of Common Stock are entitled to receive
dividends out of assets legally available therefor at such times and in
such amounts as the Board of Directors may, from time to time, determine.
The shares of Common Stock are neither redeemable nor convertible, and
the holders thereof have no preemptive or subscription rights to purchase
any securities of the Company. Upon liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to receive,
pro rata, the assets of the Company which are legally available for
distribution after payment of all debts and other liabilities and subject
to the prior rights of any holders of Preferred Stock then outstanding.
Each outstanding share of Common Stock is entitled to one vote on all
matters submitted to a vote of shareholders. There is no cumulative
voting in the election of directors.
The Company has reserved the Shares being registered pursuant to
this Registration Statement for issuance upon conversion of the Senior
Preferred Stock and Warrants.
Preferred Stock
The Company's Amended Certificate authorizes the Board of Directors
to issue the Preferred Stock in classes or series and to establish the
designations, preferences, qualifications, limitations and restrictions
of any class or series with respect to the rate and nature of dividends, the
price and terms and conditions on which such shares may be redeemed, the terms
and conditions for conversion or exchange into any other class or series
of such stock, voting rights and other terms. The Company may, without approval
of the holders of Common Stock, issue Preferred Stock which has voting,
dividend or liquidation rights superior to those of the Common Stock and
which may adversely affect the rights of holders of Common Stock. The issuance
of Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting power of the holders of Common Stock and could have the effect
of delaying, deferring or preventing a change in control of the Company.
Senior Preferred Stock
The Senior Preferred Stock: (i) requires the Company to pay
quarterly dividends thereon, commencing May 17, 1998, calculated at the
rate of ten (10%) percent per annum; (ii) permits the Company to pay such
dividends in registered shares of its Common Stock; (iii) permits the
holders thereof, at any time prior to redemption by the Company, to
convert all or a portion of the same into shares of Common Stock based
upon a conversion price of $5.00 per share of Common Stock (subject to
adjustment for any recapitalization of the Company); (iv) requires the
Company to redeem in either cash or registered shares of its Common
Stock, at the Company's option, all (but not less than all) of the
Debentures (at 105% of the then, outstanding Stated Value thereof, based
upon the Conversion Price; hereinafter, the "Redemption Amount") at any
time from and after February 17, 1999 that a registration statement
(pursuant to which the Common Stock into which the Senior Preferred Stock
may be converted has been registered) is effective; (v) permits the
Company to redeem all (but not less than all) of the Senior Preferred
Stock, in cash and at the Redemption amount, at any time from and after
February 17, 1999; and (vi) provides that from and after February 18,
1999, the Company will be required to pay dividends thereon, until the
same are redeemed by the Company, at the rate of twenty-four (24%)
percent per annum.
Until the Senior Preferred Stock is redeemed or has been
converted into Common Stock, the Company cannot consolidate or merge or
transfer all or substantially all of its assets to any person unless the
terms of such consolidation, merger or transfer include the preservation
of the Senior Preferred Stock. There is a liquidation preference of
$100,000 per share of the Senior Preferred Stock.
Warrants
As of July 1, 1998, the Company had outstanding warrants
exercisable for an aggregate of 1,020,000 shares of Common Stock at a
weighted average exercise price of $7.04 per share.
Transfer Agent
-13-
<PAGE>
The transfer agent for the Common Stock is Chase Mellon Shareholder
Services.
LEGAL MATTERS
Certain legal matters in connection with the sale of the Shares
offered hereby will be passed upon for the Company by Camhy Karlinsky &
Stein LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of
December 31, 1997 and December 31, 1996 and for each of the three years
in the period ended December 31, 1997 incorporated in this Prospectus by
reference to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, have been audited by Deloitte & Touche LLP
("Deloitte"), independent public accountants, as indicated in their report with
respect thereto, and are incorporated herein in reliance upon the authority of
said firm as experts in accounting and auditing in giving said report.
CHANGES IN AND DISAGREEMENT WITH CERTIFYING ACCOUNTANTS
On or about April 15, 1998, the members of the Company's
Executive and Audit Committees considered the reappointment of Deloitte, the
Company's principal accountants which audited its financial statement for the
fiscal years ended December 31, 1995 through December 31, 1997, and determined
it was in the best interest of the Company to select another firm of independent
public accountants, as the auditors of the Company for the 1998 fiscal year. In
response to such determination, certain of the Company's management team
commenced their selection process by interviewing a number of other firms of
certified public accounts.
On April 24, 1998, the Audit Committee recommended to the Board of
Directors that it select Arthur Andersen LLP ("Andersen") as such auditors,
which recommendation was so accepted by the Board. Also on April 24, 1998,
Deloitte notified the Company, in writing, of its decision to resign as the
Company's auditors, effective immediately.
Deloitte's report for fiscal years ended December 31, 1996 and 1997 did
not contain an adverse opinion or a disclaimer of opinion, or was qualified or
modified as to uncertainty, audit scope, or accounting principles.
For the year ended December 31, 1997: (i) management and Deloitte
disagreed on the treatment, for financial accounting purposes, of the Company's
Convertible Debentures Due August 25, 1998, which was ultimately resolved to
Deloitte's satisfaction; and (ii) Deloitte advised management of a reportable
condition regarding inventory controls. The Company is addressing this issue
through the installation, in its Company operated stores, of a point-of-sale
computer system. In addition, Deloitte has advised the Company that it is in
disagreement with the Company's proposed 1998 accounting treatment of its Senior
Preferred Stock.
Neither the Board of Directors nor the Audit Committee discussed these
disagreements with Deloitte. The Company has authorized Deloitte to respond
fully to the inquiries of Andersen concerning each of these disagreements.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Registrant's Amended Certificate provides that a director shall
not be liable to the Company or its shareholders for damages for any breach
of duty in such capacity except for liability in the event a judgment or
other final adjudication adverse to such director establishes that his acts
or omissions were in bad faith or involved intentional misconduct or a
knowing violation of law or that such director personally gained a
financial profit or other advantage to which he was not legally entitled or
that such director's acts violated Section 719 of the Business Corporation
Law of the State of New York. The Registrant's Amended Bylaws provide that
the Company shall indemnify directors and officers, to the fullest extent
permitted by applicable law, for all costs reasonably incurred in
connection with any action, suit or proceeding in which such director or
officer is made a party by virtue of his or her being an officer or
director of the Company, if such director or officer acted in good faith,
for a purpose which he reasonable believed to be in the best interests of
the Company, and in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful. The Company has
not entered into indemnification agreements with any of its directors.
Insofar as indemnification for liabilities arising under the
Securities Act may be available to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that, in the opinion of the
Commission, such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable.
No dealer, salesperson or other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized.
Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof or
that the information contained herein is correct as of any date
subsequent to the date hereof. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any securities offered
hereby by anyone in any jurisdiction in which such offer or solicitation
is not authorized or in which the person making the offer is not
qualified to do so or to anyone to whom it is unlawful to make such offer
or solicitation.
-14-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses payable in
connection with the sale of the Common Stock being registered hereby.
Except for the SEC registration fee, all expenses are estimated.
Item Amount
- ------------------------------------------------------------- ------------
SEC registration fee......................................... $ 2,737.42
Printing and engraving expenses.............................. 1,500.00
Legal fees and expenses...................................... 10,000.00
Auditors' accounting fees and expenses....................... 5,000.00
Total........................................................ $ 19,237.42
In addition, the holders of the shares of Common Stock being
registered hereby (the "Shares") will be responsible for all selling
commissions, transfer taxes and related charges in connection with the
offer and sale of the Shares offered hereby.
Item 15. Indemnification of Directors and Officers.
The Registrant's Amended Certificate so provides that a director shall
not be liable to the Company or its shareholders for damages for any breach of
duty in such capacity except for liability in the event a judgment or other
final adjudication adverse to such director establishes that his acts or
omissions were in bad faith or involved intentional misconduct or a knowing
violation of law or that such director personally gained a financial profit or
other advantage to which he was not legally entitled or that such director's
acts violated Section 719 of the Business Corporation Law of the State of New
York. The Registrant's Bylaws provide that the Company shall indemnify directors
and officers, to the fullest extent permitted by applicable law, for all costs
reasonably incurred in connection with any action, suit or proceeding in which
such director or officer is made a party by virtue of his or her being an
officer or director of the Company if such director or officer acted in good
faith, for a purpose which he reasonable believed to be in the best interests of
the Company, and in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful. The Company has not
entered into indemnification agreements with any of its directors.
Item 16. Exhibits.
Exhibit
Number Description of Document
- ------ -----------------------
4.1 Specimen Common Stock Certificate of Registrant(1)
4.2 Form of Exchange Agreement, with Exhibits attached thereto,
representing the form of Senior Preferred Stock, and Warrant(2)
5.1 Form of Opinion of Camhy Karlinsky & Stein LLP(3)
23.1 Consent of Deloitte & Touche LLP
ii-1
<PAGE>
Exhibit
Number Description of Document
- ------ -----------------------
23.2 Consent of Camhy Karlinsky & Stein LLP
- --------------------
(1) Incorporated by reference to Registrant's Registration Statement on Form
S-1 (Commission File No. 33-98368).
(2) Incorporated by reference to Registrant's Current Report on Form 8-K, dated
April 14, 1998.
(3) Filed herewith.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales of the Shares are
being made, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events
which, individually or together, represent a fundamental change in the
information in this Registration Statement;
(iii) To include any additional or changed material
information on the plan of distribution;
provided, however, that paragraph 1(i) and 1(ii) do not apply if the
information required in a post-effective amendment is contained in a
periodic report filed by the Company pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934, as amended, and
incorporated by reference in this Registration Statement.
2. That, for the purpose of determining liability under the
Securities Act, it shall treat each post-effective amendment as a new
registration statement of the securities offered, and treat the offering
of the securities at that time as an initial bona fide offering.
3. To remove from registration, by means of a post-effective
amendment, any of the securities being registered which remains unsold at
the termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the provisions described in Item 15,
or otherwise, the Company has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
In the event a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer of controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the Shares being
registered hereby, the Company will, unless, in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question as to whether such
indemnification by the Company against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
ii-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the County of Nassau, State of New York, on the
11th day of August, 1998.
STERLING VISION, INC.
By: /S/ JERRY LEWIS
---------------------------
Jerry Lewis
Chief Executive Officer
By: /S/ WILLIAM YOUNG
---------------------------
William Young
Chief Financial Officer
ii-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Jerry Lewis and William
Young, singly, as his true and lawful attorney-in-fact and agent, with
full power of substitution for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments and post-effective
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or
could do in person, thereby ratifying and confirming all that each said
attorney-in-fact and agent, or his substitutes, may lawfully do or cause
to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/ ROBERT COHEN* Chairman of the August 11, 1998
- --------------------------- Board of Directors
Robert Cohen
/S/ ALAN COHEN* Vice-Chairman of August 11, 1998
- --------------------------- the Board of Directors
Alan Cohen
/S/ JERRY LEWIS Chief Executive Officer August 11, 1998
- --------------------------- and Director
Jerry Lewis (Principal Executive Officer)
/S/ WILLIAM YOUNG Executive Vice President--Finance, August 11, 1998
- --------------------------- Chief Financial Officer
William Young and Treasurer,
(Principal Accounting Officer)
/S/ JOEL GOLD Director August 11, 1998
- -----------------------------
Joel Gold
* By power-of-attorney
</TABLE>
ii-4
<PAGE>
EXHIBIT 5.1
FORM OF LEGAL OPINION
[LETTERHEAD OF CAMHY KARLINSKY & STEIN LLP]
August 11, 1998
Board of Directors
Sterling Vision, Inc.
1500 Hempstead Turnpike
East Meadow, New York 11554
Re: Sterling Vision, Inc. - Registration Statement on Form S-3
Gentlemen:
You have requested our opinion in connection with the above-captioned
Registration Statement on Form S-3 (the "Registration Statement") to be filed by
Sterling Vision, Inc., a Delaware corporation ("the Company"), with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations promulgated thereunder (the
"Rules"). The Registration Statement relates to the issuance by the Company of
1,470,000 shares of common stock, par value $.01 per share: (i) to be issued to
the holders of the Company's Senior Convertible Preferred Stock, par value $.01
per share (the "Senior Preferred"), upon the conversion thereof (the "Preferred
Shares"); (ii) in payment of dividends on the Senior Preferred (the "Dividend
Shares"); and, (iii) upon the exercise of 700,000 warrants (the "Warrants")
issued by the Company in connection with the issuance of the Senior Preferred by
the Company (the "Warrant Shares").
We have examined such records and documents and have made such
examination of law as we considered necessary to form a basis for the opinions
set forth herein. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity with the originals of all documents submitted to us as copies
thereof.
Based upon such examination, it is our opinion that when there has been
compliance with the Act and applicable state securities laws that:
1. The Preferred Shares when issued and delivered in accordance with
the terms of the Senior Preferred will be validly issued, fully paid and
non-assessable.
2. The Dividend Shares when issued and delivered in accordance with the
terms of the Senior Preferred will be validly issued, fully paid and
non-assessable.
3. The Warrant Shares when issued, delivered and paid for in accordance
with the terms
<PAGE>
Board of Directors
Sterling Vision, Inc.
August 11, 1998
Page 2
of the Warrants, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Registration Statement. In giving this consent, we do not admit
that we are in the category of persons whose consent is required pursuant to
Section 7 of the Act or under the Rules.
Very truly yours,
CAMHY KARLINSKY & STEIN LLP
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Registration Statement of Sterling
Vision, Inc. on Form S-3 of our report dated April 15, 1998, appearing in the
Prospectus, which is part of this Registration Statement. We also consent to
the reference to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
New York, New York
July 22, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF CAMHY KARLINSKY & STEIN LLP
We hereby consent to being named in this Form S-3 Registration
Statement under the caption "Legal Matters" and to all references to our
Firm included in this Form S-3 Registration Statement.
New York, New York CAMHY KARLINSKY & STEIN LLP
August 11, 1998
