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As filed with the Securities and Exchange Commission on February 11, 2000
Registration No. 333-95853
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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STERLING VISION, INC.
(Exact Name of Registrant as Specified in Its Charter)
New York 11-3096941
(State of Incorporation) (I.R.S. Employer 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)
--------------------
Copy to:
Robert S. Matlin, Esq.
David M. Englander, Esq.
Camhy Karlinsky & Stein LLP
1740 Broadway, New York, New York 10019-4315
(212) 977-6600
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Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are to be 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, as amended (the "Securities Act"), other than securities
offered only in connection with dividend or interest reinvestment plans, check
the following box: |x|
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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 earliest
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 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, please check the following box: |_|
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<CAPTION>
CALCULATION OF REGISTRATION FEE
================================================================================================
Title of Security Amount to be Offering Price Aggregate Offering Registration
to be Registered Registered (1) Per Share (2) Price (2) Fee
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value 5,302,500 shares $6.00 $31,815,000 $8,399(3)
=================================================================================================
</TABLE>
(1) Includes: (i) 2,802,500 additional shares issuable as a result of a
reduction, effective December 7, 1999, in the conversion price of issued and
outstanding shares of our senior convertible preferred stock, par value $.01 per
share, sold to investors as part of a private placement financing in 1998 and
(ii) 2,500,000 shares subject to warrants issued in December 1999 to an entity
which has orally agreed to serve as an adviser to our Board of Directors.
(2) 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 our common stock as reported on the NASDAQ National Market System
on January 28, 2000.
(3) Paid with the initial filing of this Registration Statement on
February 1, 2000.
(4) Pursuant to Rule 429 promulgated under the Securities Act of 1933,
as amended, this Registration Statement shall be deemed to amend the following
registration statements: (i) Registration Statement on Form S-3, Registration
No. 333-26851, with respect to a total of 80,000 shares; (ii) Registration
Statement on Form S-3, Registration No. 333-59827 with respect to 620,071 shares
and (ii) Registration Statement on Form S-3, Registration No. 333-81317 with
respect to 425,000 shares.
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 THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8 (A), MAY DETERMINE.
<PAGE>
The information contained in this Prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell nor does it seek to solicit an offer to buy these securities in any
state where the offer or sale is not permitted.
PROSPECTUS
Subject to completion, February 11, 2000
6,305,271 Shares
of Common Stock
STERLING VISION, INC.
Our common stock, par value $.01 per share, is listed on the Nasdaq
National Market System ("NASDAQ-NMS") under the symbol, "ISEE". On February 10,
2000, the closing price for the shares of our common stock as reported by the
NASDAQ-NMS was $8-1/8 per share.
This prospectus relates to the proposed sale by the selling
shareholders of our shares of common stock issued and/or issuable upon (i) the
conversion of our senior convertible preferred stock held by certain of such
selling shareholders and the (ii) the exercise the of our warrants held by
certain of such selling shareholders. As used herein, the term "selling
shareholder" also includes pledgees, donees, transferees or other
successors-in-interest to the selling shareholders who are selling shares
received after the date of this prospectus from a selling shareholder.
The selling shareholders may sell all or a portion of the shares of
common stock 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 any shares may be deemed to be underwriting discounts and commissions
under the Securities Act. In conjunction with the selling shareholders, we may
agree to indemnify such broker-dealers against certain liabilities, including
liabilities under the Securities Act. In addition, we have 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. 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 that
rule rather than pursuant to this prospectus.
<PAGE>
This investment involves a high degree of risk. . Please see "Risk
Factors" beginning on page 7 to read about certain factors you should consider
before buying any shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is February __, 2000
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and current reports, proxy statements, and
other information with the Securities and Exchange Commission ("SEC"). You may
read or copy any document we file at the Public Reference Room maintained by the
SEC at 450 Fifth Street, NW, Judiciary Plaza, Room 1024, Washington, DC 20549,
and at the following Regional Offices of the Commission: Northeast Regional
Office, Seven World Trade Center, Suite 1300, New York, New York 10048; and
Midwest Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further
information regarding its public reference rooms. Our SEC filings are also
available to the public from the SEC's web site at http://www.sec.gov. Our
common stock is listed on the Nasdaq-NMS. Information concerning us is also
available from NASDAQ's web site at http://www.nasdaq.com.
If you are a stockholder, you may request a copy of these filings, at
no cost, by contacting us at the following address or telephone number:
Sterling Vision, Inc.
1500 Hempstead Turnpike
East Meadow, New York 11554
Attention: William Young, Executive Vice President - Finance
Phone No.: (516) 390-2100
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we have
filed with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus. This prospectus is part of a
registration statement which we filed with the SEC. We incorporate by
reference the documents listed below.
1. Our Annual Report on Form 10-K/A for the year ended December 31,1998, dated
May 28, 1999;
2. Our definitive Proxy Statement, dated May 17, 1999;
3. Our Form 10-Q for the quarter ended March 31, 1999, dated May 24, 1999;
4. Our Form 10-Q for the quarter ended June 30, 1999, dated August 16, 1999;
5. Our Form 10-Q for the quarter ended September 30, 1999, dated November 22
1999;
6. Our Form 8-K, dated January 14, 1999;
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7. Our Form 8-K, dated March 5, 1999;
8. Our Form 8-K, dated August 26, 1999;
9. Our Form 8-K, dated December 13, 1999;
10. Our Form 8-K, dated December 23, 1999;
11. Our Form 8-K/A, dated January 10, 2000; and
12. All other reports and other documents filed by us pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), from and after the date hereof.
Any financial statements and schedules hereafter incorporated in this
prospectus that have been audited and are the subject of a report by independent
accountants will be incorporated in reliance on such reports and on the
authority of such firm as experts in accounting and auditing to the extent
covered by consents filed with the SEC.
ADDITIONAL INFORMATION
You should rely only on the information provided in this document or
other information that we have referred you to. We have not authorized anyone to
provide you with information that is different. This prospectus does not
constitute an offer or solicitation by anyone in any jurisdiction in which an
offer or solicitation would be unlawful.
Certain statements in this prospectus constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. We believe that the forward looking statements contained in this
prospectus are within the meaning of the safe harbor provisions afforded by
Section 27A of the Securities Act. Forward-looking statements contained in this
prospectus and the other documents incorporated herein by reference, involve
known and unknown risks, uncertainties, and other factors which could cause our
actual results, financial or operating performance, or achievements to differ
from the future results, financial or operating performance, or achievements
expressed or implied by such forward looking statements.
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PROSPECTUS SUMMARY
Because this is a summary of the terms of the offering of the
securities made hereby, it does not contain all the information that may be
important to you. This prospectus contains forward-looking statements. You
should read the following summary, and the "Risk Factors" section, along with
the more detailed information and the financial statements and the notes to the
financial statements incorporated by reference in this prospectus, before you
decide whether to participate in this offering.
ABOUT STERLING VISION, INC.
Existing Business
We, along with our franchisees, develop and operate retail optical
stores (collectively "Sterling Stores") principally under the trade names
"Sterling Optical" and "Site for Sore Eyes." We also operate VisionCare of
California, a specialized health care maintenance organization licensed by the
California Department of Corporations. VisionCare of California employs licensed
optometrists who render services in offices located immediately adjacent to, or
within, most Sterling Stores located in California.
Based upon domestic sales and number of locations of Company-owned and
franchised stores, we are one of the largest chains of retail optical stores and
the second largest chain of franchised optical stores in the United States. As
of February 4, 2000, there were 253 Sterling Stores in operation, of which 40
were Company-owned stores (including 12 stores managed by franchisees) and 213
were franchised stores (including six stores which we manage on behalf of
franchisees). Currently, we are located in 26 States, the District of Columbia,
Ontario, Canada, and the U.S. Virgin Islands.
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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 related items. To the
extent permitted by individual state regulations, most Sterling Stores employ or
affiliate with an optometrist to provide professional eye examinations to the
public, and fill the prescriptions written by these employed or affiliated
optometrists, as well as from unaffiliated optometrists and ophthalmologists.
Most Sterling Stores are able to offer same-day service because most 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.
In addition to our retail optical business, Insight Laser Centers, Inc.
("Insight"), which is a 66.67% owned subsidiary of ours, owns and operates two
laser vision correction centers located in New York City. These centers
specialize in the performance of the refractive laser surgical procedure known
as Laser Assisted In-Situ Keratomileusis ("LASIK"). This procedure, which
corrects certain degrees of myopia (near-sightedness), hyperopia
(far-sightedness) and astigmatisms with the use of excimer lasers, is performed
by licensed opthalmologists in exchange for their payment to Insight of a fee
for each LASIK procedure performed. Insight also is in the process of
constructing, and expects to open, in early 2000, two additional centers, one of
which will be located in Bayside, New York and has also finalized and/or is in
the process of finalizing agreements with other ophthalmologists who will
perform the LASIK procedure in offices to be located in the New York
metropolitan area that will be constructed and operated by Insight.
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In addition, we anticipate that Insight will seek to obtain new capital in order
to market and promote its refractive laser surgery business.
In 1998, we purchased (through a wholly owned subsidiary) substantially
all of the assets of a full service ambulatory surgery center located in Garden
City, New York, which contains three surgical operating rooms. However, we have
recently reached an agreement in principle to sell such assets to an unrelated
third party, the closing of which is anticipated to take place in the second
quarter of 2000.
Future e-commerce Initiatives
Market Opportunity
Business-to-business, e-commerce transactions are growing at a
staggering pace. Forrester Research estimates that, in the U.S. alone,
business-to-business, e-commerce transactions will grow from $109 billion in
1999 to $1.3 trillion in 2003, more than ten times the $108 billion estimate for
business-to-consumer transactions in 2003. This trend is also evident worldwide.
In Europe alone, research has suggested that the business-to-business market is
anticipated to grow to $176 billion by 2003, up from $7 billion in 1998, nearly
30 times the growth rate of the Gross Domestic Product of many European
countries.
Our Business Model
As our new business strategy, the Company will seek to capitalize on
this robust growth potential by providing comprehensive, e-commerce
solutions for the buyers and suppliers of business goods and services in
the optical industry. This, we believe, will lower the overall costs of
business-to-business transactions by reducing the inefficiencies
experienced by both buyers and suppliers of eye care goods and services
in traditional business transactions. We believe that this market is not
currently being adequately served by Internet companies, which tend to
focus on consumers and not on the business-to-business market.
In implementing this new business initiative, we have developed a
strategic alliance and are presently working together with Rare Medium, Inc.,
the Web consulting services arm of Rare Medium Group, Inc., to develop and
launch an extensive network of state-of-the-art web sites designed to provide
information, interaction and electronic business to business commerce. Rare
Medium, is one of the country's leading providers of Internet solutions and
e-commerce strategies that improve business processes and develop branding
strategies, marketing communications and interactive content to large and medium
sized companies in the financial, automotive, consumer servicing, retail and
consumer goods industries. Its clients include Microsoft, Merrill Lynch, Epson
and Hotel Reservations Network, among other leading companies.
General
We were organized under the laws of the state of New York in January
1992. Our executive offices are located at 1500 Hempstead Turnpike, East Meadow,
New York 11554, our telephone number is (516) 390-2100 and our fax number is
(516) 390-2150.
RISK FACTORS
I. Existing Business
1. We have incurred a substantial net loss for each of the years ended
December 31, 1997, 1998 and 1999.
The Company suffered a net loss for each of the years ended December 31,
1997 and 1998; and although we generated net income of approximatley $872,000
during the nine months ended September 30, 1999, our results of operations for
the year ended December 31, 1999 will also reflect a net loss. This is
principally attributable to several non-cash charges that were recorded during
the quarter ended December 31, 1999, including charges arising from (i) the
reduction, effected during this period, of the exercise price of certain of the
warrants issued to purchasers of our Senior Convertible Preferred Stock, and
(ii) the issuance, during this period, of warrants to a third party in exchange
for its oral agreement to render certain advisory services to our Board of
Directors. In addition there can be no assurance that we will operate profitably
or be commercially successful in the future.
2. We have not complied with all of the terms of our loan agreement.
On June 30, 1997, we entered into a loan agreement with STI Credit
Corporation that established a credit facility to finance a portion of our then
existing and future franchise promissory notes receivable. As of each of
December 31, 1997, 1998 and 1999, we were not in compliance with certain
financial covenants of the loan agreement; however, STI Credit Corporation
("STI") waived its right to act upon our non-comliance for the year 1997 and
1998. We cannot guarantee that we will be able to obtain appropriate waivers of,
or amendments to, the loan agreement for the year ended December 31, 1999, and
the failure to do so could have a material adverse effect on our business and
financial condition. However, in the event of STI's acceleration of such loan,
we believe that the Company could meet its needs through additional borrowing,
the sale of its franchise notes receivable and/or additional sales of equity,
although there can be no assurance that the Company would be successful in
obtaining such additional borrowings, selling any of its franchise notes
receivable and/or selling additional equity, or on what terms said transactions
could be effected.
3. Potential conflicts of interest may arise as certain of our principal
shareholders and directors are involved with other companies in the optical
industry.
Dr. Robert Cohen, Chairman of the Board of the Company, Dr. Alan Cohen,
President and Chief Executive Officer of the Company, and Dr. Edward Cohen, a
director of the Company, are three of our principal shareholders. Drs. Alan and
Robert Cohen are also the executive officers and directors of Cohen Fashion
Optical, Inc. and its affiliate, Real Optical, LLC and, together with certain
members of their families and the family of Dr. Edward Cohen, are the sole
shareholders of those entities. This corporation and limited liability company
operate and franchise retail optical stores that are similar to Sterling Stores.
Cohen Fashion Optical and Real Optical operate and/or have franchised 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 the date hereof, many Cohen Fashion Optical stores are located in
the same shopping center or mall as, or in close proximity to, certain Sterling
Stores. We cannot state that, in the future, Cohen Fashion Optical will not open
or franchise additional stores that are located in the same areas as Sterling
Stores. Furthermore, Sterling Stores and certain of the Cohen Fashion Optical
stores are joint providers under certain of our third party benefit plans and we
anticipate that such arrangements will continue in the future. Because of the
intersts that the Cohen family has in our suppliers and also in other companies
in the optical industry, we cannot state that conflicts of interest will not
arise that may cause the Cohen family shareholders to enter into business
relationships that are not favorable to us.
4. We significantly depend on the ability and experience of certain members of
our management.
We rely on the skills of certain members of our management team to guide our
operations (including, but not limited, to Drs. Robert and Alan Cohen, the
Chairman of the Company's Board of Directors and the President and Chief
Executive Officer of the Company, respectively), loss of any one of which could
have an adverse effect on our operations, (although the company maintains key
man life insurance on each of Drs. Robert and Alan Cohen's lives). Furthermore,
other than as to our Chief Financial Officer, we do not have employment
agrements with these individuals and cannot ensure that, in the future, they
will continue to work for us.
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5. We do not control the management of all of the retail optical stores
that operate under our name.
We rely, in part, on our franchisees for business development. Since
we do not control the management of our franchised stores, we cannot assure that
any franchisee/owner will have the business acumen or financial resources to
operate the franchise successfully. If a substantial number of franchises are
not successful, our financial condition and results of operations could be
affected adversely.
6. We compete with many types of eyewear providers.
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 that provide
professional services and, in connection therewith, dispense prescription
eyewear. We, as retailers of prescription eyewear, generally service local
markets, and thus our competition varies substantially from one location or
geographic area to another.
7. Potential for conflict with existing franchises.
The Company has recently been contacted by a group of franchises
regarding the Company's proposed e-commerce strategy and how such strategy may
relate to the obligations owed to such franchises. Although the Company believes
it has the right to implement its new strategy, it will be discussing such
issues with its franchises in the immediate future.
8. We offer incentives to our customers and experience lower profit
margins because of it.
At times when our major competitors offer significantly lower prices
for their products, we are forced to do the same. Certain of our major
competitors offer promotional incentives to their customers, including "50% Off"
on designer frames and "Buy One, Get One Free" eyecare promotions and, in
response thereto, we have, from time to time, offered the same or similar
incentives to our customers. This practice has resulted in lower profit margins,
and we cannot guarantee that these competitive promotional incentives will not
further adversely impact our results of operations. Although we believe that our
Sterling Stores provide quality service and products at competitive prices,
several of the large retail optical chains have greater financial resources than
us. Therefore, we cannot guarantee that we will be able to continue to deliver
cost-efficient products in the event of aggressive pricing by our competitors.
9. We have depended upon acquiring and reselling non-Sterling retail
optical stores and chains to improve our profitability.
In the past, a substantial portion of our profits came from our ability
to acquire non-Sterling retail optical stores and chains, operate them for a
time as Company-owned stores, and then strategically sell them as franchised
stores. Although we believe that many opportunities to acquire, operate, and
resell optical stores exist, we cannot guarantee that these opportunities will
continue to exist If we are unable to acquire non-Sterling stores and thereafter
resell them, this could have a material adverse effect on our financial
condition and results of operations.
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10. We often provide purchase money financing for a substantial portion of
the sales price of our store assets that are sold to franchisees, and
bear the risk of nonpayment of such financing.
In many instances, we provide purchase money financing for a
substantial portion of the sales price of store assets sold to franchisees. Upon
a sale of store assets in circumstances when we finance a portion of the
purchase price, we recognize all of the gain on such sale, if any, before we
receive all of the proceeds from such conveyance. In certain instances in which
franchisees have defaulted on their purchase money obligations, we have been
able to repossess the franchisee's assets and sell such assets to another
franchisee; however, we cannot assure that we will be able to continue, or be
successful, with this practice in the future and the failure to be able to do so
could have a material adverse effect.
11. In prior years, we experienced substantial losses from our operation of
laser vision correction centers.
An integral part of our business strategy of becoming a full-service
eyecare company has included developing and/or managing a chain of eyecare
centers that would perform refractive laser procedures, to be operated under the
tradename "Insight Laser". Until recently, our revenues from the Insight Laser
Center business grew only modestly and, as a result, we experienced significant
losses from the operation of this business in prior years, including an
approximate net loss of $1,100,000 for the year ended December 31, 1998, and an
approximate net loss of $1,400,000 for the year ended December 31, 1997.
Although management believes that our Insight Laser Center business operated
profitably for the year ended December 31, 1999, we cannot guarantee that such
business will continue to operate profitably or that our financial condition
and results of operations will not be adversely affected, in the future, as a
result of the continued operation of our Insight Laser Center business.
12. We face substantial competition in the laser vision correction
industry.
Many companies engaged in the refractive laser surgery business are
entering into fee agreements with ophthalmologists under conditions similar to
those we have entered into for our excimer lasers which we lease and operate.
Hospitals and other ophthamological offices have excimer lasers which are able
to perform the LASIK procedure; and a manufacturer of one such excimer laser has
developed, and is marketing, its own laser centers. Because of this competition,
the prices generally charged for the LASIK procedure have declined, and further
competition will only lead to further declines in the prices charged for this
procedure.
The LASIK procedure also competes with other present forms of treatment
for refractive disorders, including eyeglasses, contact lenses, other refractive
laser surgery procedures, corneal transplants, and other technologies under
development. Although we believe that we will be able to compete successfully in
this industry, an increase in competition or acceptance of other methods of
vision correction could adversely affect our financial condition and results of
operations.
13. Our success in the laser vision correction industry is dependent upon
market acceptance.
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Market acceptance of the LASIK procedure is affected by many factors
including:
o nonacceptance of laser refractive procedures as an alternative
to existing methods of treating refractive disorders;
o the relatively high cost of laser refractive procedures;
o general resistance to surgery;
o the effectiveness of alternative, less intrusive, or less
expensive methods of correcting refractive disorders; and
o the possibility of known or unknown side effects.
Additionally, our lasers are currently approved only for the correction
of certain degrees of myopia, hyperopia and/or astigmatisms. We cannot give any
assurance that market acceptance of our laser vision correction services will
increase by either the ophthalmological community or by the general population;
and the failure to achieve such acceptance could have a material adverse effect
on our business, financial condition, and results of operations.
14. We run the risk of not being able to remain current with 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 that
we have acquired. If new and better ophthalmic laser technologies or other
technologies are developed and used to treat the same conditions as the LASIK
procedure, the acceptance of such technologies could have a material adverse
effect on our refractive laser surgery business.
15. As refractive laser surgery gains market acceptance, we may lose
revenue from traditional eyewear customers.
As traditional eyewear users undergo the LASIK procedure or other
vision correction techniques, the demand for contact lenses and eyeglasses will
decrease. As part of our business, we service and market contact lenses and
eyeglasses. A decrease in customer demand for such products could have a
material adverse effect on our, and also our franchised Sterling Stores',
financial condition and results of operations.
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16. We are subject to a variety of state, local, and federal regulations
that affect the health care industry.
The regulatory requirements that we must satisfy to conduct our
business will vary from state to state. For example, some states have enacted
laws governing the ability of ophthalmologists and optometrists to enter into
contracts with business corporations or lay persons, and some states prohibit
companies from computing their royalty fees based upon a percentage of the gross
revenues generated by optometrists from exam fees. Various federal and state
regulations also limit the financial and non-financial terms of agreements with
health care providers and, therefore, our potential revenues may differ
depending upon the nature of our various health care provider affiliations.
Our excimer lasers are medical devices and are subject to regulation by
the U.S. Foods and Drug Administration ("FDA"). Summit Technology and VISX, the
manufacturers of the two excimer laser systems that we currently use, have
received approval from the FDA for their use to treat certain refractive
disorders. However, such approval contains restrictions on the use, labeling,
promotion, and advertising of the excimer laser. If the FDA and/or other
federal, state, or local governmental agencies change the rules and regulations
affecting the use of excimer lasers for the LASIK procedure, our business and
results of operations could be adversely effected.
We are also subject to regulations regarding our franchise business and
in-store laboratory operations, as well as the operation, in California, of
Vision Care of California. As a franchisor, we are subject to various
registrations and disclosure requirements imposed by the Federal Trade
Commission and by many of the states in which we conduct our franchising
operations. The Federal Occupational Safety and Health Act regulates our
in-store laboratory operations. Although we believe that we are in material
compliance with all such applicable laws and/or regulations, we cannot guarantee
that we will be able to sustain compliance if the laws and regulations change in
the future.
17. We are legally prohibited from inducing certain of our customers with
financial rewards in order to do business with us.
The Medicare and Medicaid anti-kickback statutes prohibit financial
relationships that aim to induce, arrange, or recommend the purchase of items or
services, or patient referrals to providers of services, for which payment may
be made under 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. If we are sanctioned under these federal and state
anti-remuneration laws, we may be subjected to civil monetary penalties, license
suspension or revocation, exclusion of providers or practitioners from
participation in Medicare and Medicaid, and criminal fines or imprisonment.
While we believe we are presently in compliance with
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<PAGE>
these laws, we cannot guarantee that some of our business practices would not be
subject to challenge under any of these laws. Currently, we are not aware of any
challenge or potential challenge to our business practices.
18. The prevailing market price of our common stock may be adversely
effected by sales of a substantial number of shares into the public
market.
As of the date of this prospectus, there were 16,676,630, shares of
our common stock outstanding, excluding the 9,790,791 shares that were reserved
for issuance under our outstanding warrants, options and senior convertible
preferred stock. Of the outstanding shares, we issued 10,168,879 shares in
private transactions not involving a public offering and of these shares,
5,698,293 are freely tradable under Rule 144 of the Securities Act and 4,470,586
are subject to the volume limitations on sale set forth in Rule 144. Sales of
the shares offered hereby may affect the market price of our common stock.
19. We have created provisions in our governing documents that will make it
difficult for our business to be acquired or our directors to be
removed.
Our amended and restated certificate of incorporation and amended and
restated by-laws contain certain provisions that are intended to discourage,
delay, or make it more difficult for a change of control over our business to
occur. There are also provisions designed to prevent the removal, by our
shareholders, of directors who serve on our classified Board of Directors, even
if some, or a majority, of them voted for the removal of a director. Currently,
we have authorized 5,000,000 shares of preferred stock, par value $.01 per
share, of which we have issued and outstanding approximately 21 shares of senior
convertible preferred stock, which is convertible into an aggregate of 2,802,500
shares of common stock. Our Board of Directors has the authority to fix the
rights, privileges, and preferences of the remaining authorized but unissued
shares of preferred stock without any further vote or action by the
shareholders. Therefore, the rights of the holders of our 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 convertible preferred stock, as well as the holders
of any additional preferred stock that may be issued in the future. In addition,
we are 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 over our business.
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<PAGE>
II. INTERNET INITIATIVES
1. Internet-based, business-to-business commerce is a newly emerging market.
Internet-based, business-to-business commerce is a newly emerging
market. Consequently, it is difficult to evaluate our prospects for our proposed
web-based, optical portal business based on the performance of other companies
operating within this market. In addition our historical financial information
is of limited value in projecting future operating results for this new business
due, in part, to the emerging nature of the electronic commerce market.
2. We have only recently begun efforts to expand our e-commerce capabilities,
and these efforts will entail significant risks and require substantial
additional capital.
We have only recently begun efforts to expand our e-commerce
capabilities. Development of these new capabilities entails substantial risks
and uncertainties including, but not limited to, our limited experience to date
in conducting business on the Internet, our ability to develop websites and
other proprietary technology and transaction processing systems needed to
support such capabilities, and uncertainty of market acceptance; and there can
be no assurance that we will not encounter substantial delays and/or unexpected
expenses related to such efforts. In addition, we will require substantial
additional capital in order to implement this web-based strategy; and there can
be no assurance that such additional capital will become available to us and,
even if available, that the terms thereof will be aceptable to us.
3. The success of our web-based, optical portal business will depend on
expanding market acceptance for Internet business-to-business electronic
commerce.
Our success in implementing our new, web-based, optical portal business
will depend upon the widespread acceptance and use of the Internet as an
effective medium for business-to-business electronic commerce, particularly as a
medium to perform goods procurement and fulfillment functions in the optical
markets. If the use of the Internet in electronic commerce in such markets does
no grow, or if it grows more slowly than expected, our Internet-based business
may suffer.
4. Security risks associated with electronic commerce may limit acceptance of
our web-based, optical portal business.
A fundamental requirement to conduct Internet-based,
business-to-business electronic commerce is the secure transmission of
confidential information over public networks. Failure to prevent security
breaches of our web-based, optical portal business, or well publicized security
breaches affecting the Internet in general, could significantly harm this
business and, as a result, our operating results and financial condition. There
can be no certainty that advances in computer capabilities, new discoveries in
the field of cryptography, or other developments will not result in an ability
to compromise or breach the systems which we will use to protect content and
transactions from unauthorized access. If these security measures are breached,
a person could misappropriate propriety or confidential information or cause
interruptions in operations. There are significant cost requirements to protect
against security breaches or to alleviate problems caused by breaches. Further,
a well publicized compromise of security could deter potential customers from
using the Internet to conduct financial transactions or to transmit confidential
information.
5. Additional governmental regulations may increase our costs of doing
business:
The laws governing Internet transactions remain largely unsettled. The
adoption or modification of laws or regulations relating to the Internet could
harm our web-based, optical portal business's operating results and financial
condition by increasing its costs and administrative burdens. It may take years
to determine whether and how existing laws, such as those governing intellectual
property, privacy, libel, consumer protection and taxation, apply to the
Internet. Laws and regulations directly applicable to communications or commerce
over the Internet are becoming more prevalent. The growth and development of
electronic commerce may prompt calls for more stringent consumer protection
laws, as well as new laws governing the taxation of Internet-based commerce. We
must comply with new regulations in the United States, as well as any
regulations adopted by other countries where we may do business. Compliance with
any newly adopted laws may prove difficult for us and may harm our business,
operating results and financial condition.
6. Failure to expand the Internet infrastructure could limit future growth.
The recent growth in Internet traffic has caused periods of decreased
performance. If Internet usage continues to grow rapidly, its infrastructure may
not be able to support these demands and its performance and reliability may
decline. If outages or delays on the Internet occur frequently, overall Internet
usage, including usage of our web sites, could grow more slowly or decline. Our
ability to increase the speed and scope of our services to our customers is
ultimately limited by, and depends upon the speed and reliability of, both the
Internet and the customers' internal networks. Consequently, the emergence and
growth of the market for our services will depend upon improvements being made
to the entire Internet, as well as to the individual customers' networking
infrastructures, to alleviate overloading and congestion. If these improvements
are not made, the ability of customers to utilize our Internet-based services
will be hindered, and our business, operating results and financial condition
may be materially adversely affected.
7. The Internet-based, business-to-business industry is highly competitive
and has low barriers to entry.
The market for Internet-based, business-to-business electronic commerce is
extremely competitive. Our competition is expected to intensify as current
competitors expand their service offerings and new competitors -- including
larger, more established companies with more resources -- enter the market.
There can be no assurance that we will be able to compete successfully against
current or future competitors, or that competitive pressures will not harm our
business, operating results or financial condition. Because there are relatively
low barriers to entry in the electronics commerce market, competition from other
established and emerging companies may develop in the future. Increased
competition is likely to result in lower average transaction prices, reduced
margins and a decrease or loss of market share, any of which could harm our
business, operating results or financial condition. In addition, competitors may
be able to develop services that are superior to, or that achieve greater
acceptance than, the services to be offered by us as part of our web-based,
optical portal business.
8. We must have the ability to quickly adapt our web-based, optical portal
business to technological changes and customer preferences.
The Internet and electronic commerce industries are characterized by: (i)
rapid technological change; (ii) changes in user and customer requirements and
preferences; (iii) frequent introductions of new products and services embodying
new technologies; and (iv) the emergence of new industry standards and
practices.
If we do not respond to these developments quickly and efficiently, we will
not be competitive within the industry. If we fail to determine accurately the
features our customers require, enhance our then existing services or develop
new services, we may lose potential customers. If we do not respond to the rapid
technological changes in the industry, our services could become obsolete and
our business would be severely harmed.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
common stock being offered hereby. All proceeds from the sale of such shares
will be for the account of the selling shareholders. See "Selling Shareholders"
and "Plan of Distribution." We may, however, receive an aggregate of $5,891,500
upon the exercise of warrants held by the selling shareholders for the purchase
of an aggregate of 2,780,000 shares that are covered by this prospectus. We
intend to use all of the proceeds we may receive, as a result of such exercise,
for general working capital purposes.
SELLING SHAREHOLDERS
The table below sets forth certain information, as of the date of this
prospectus, with respect to the amount and percentage ownership of each selling
shareholder before this offering, 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 this offering, assuming
that all of the shares covered by this prospectus are sold by the selling
shareholders. None of the selling shareholders has had any position, office, or
other material relationship with us within the past three years, other than as a
result of the ownership of the shares or other securities of ours.
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<TABLE>
<CAPTION>
Number of
Shares of
Common Stock Beneficially Offered Common Stock Beneficially
Name of Beneficial Owner Owned Prior to the Offering Hereunder Owned After Offering(7)
- ------------------------- --------------------------- ----------- --------------------------
Number Percent Number Percent
---------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Huberfeld/Bodner Family Foundation 860,833 (1) 4.9% 860,833 (6) - -
Huberfeld/Bodner Partnership 1,233,133 (2) 7.0% 1,233,133 (6) - -
Ace Foundation, Inc. 1,551,595 (3) 8.7% 1,551,595 (6) - -
Rita Folger 159,710 (4) * 159,710 (6) - -
MY 2000, LLC 2,500,000 (5) 13.0% 2,500,000 - -
</TABLE>
- ----------------------------
* Less than one percent.
(1) Includes the aggregate number of shares of common stock issuable upon (a)
conversion of issued and outstanding shares of senior convertible
preferred stock held by such selling shareholder at a conversion price of
$.75 per share, (b) the exercise of warrants, exercisable at $7.50 per
share, held by such selling shareholder.
(2) Includes shares issuable upon conversion of issued and outstanding shares
of senior convertible preferred stock held by such selling shareholder.
(3) Includes the aggregate number of shares of common stock issuable upon (a)
conversion of issued and outstanding shares of senior convertible preferred
stock held by such selling shareholder at a conversion price of $.75 per
share, (b) the exercise of warrants, exercisable at $2.00 per share and
$5.33 per share, held by such selling shareholder.
(4) Includes the aggregate number of shares of common stock issuable upon (a)
conversion of issued and outstanding shares of senior convertible preferred
stock held by such selling shareholder at a conversion price of $.75 per
share, (b) the exercise of warrants, exercisable at $7.50 per share, held
by such selling shareholder.
(5) Constitutes shares issuable upon exercise of warrants, exercisable at $2.00
per share, issued to an independent advisor to our Board of Directors.
(6) Includes shares of common stock previously registered for resale but which
remain unsold as of the date of this prospectus.
(7) It is unknown if, when, or in what amounts the selling shareholders may
offer shares pursuant to this prospectus. Because the selling shareholders
may offer all or some of the shares covered hereby, no estimate can be
given as to the amount of shares offered hereby that the selling
shareholders will continue to hold after this offering is declared
effective
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and thereafter considered complete. However, for purposes of this table, we
have assumed that, after completion of this offering, the selling
shareholders will have sold all of the shares covered hereby.
PLAN OF DISTRIBUTION
In February 1998, we entered into Convertible Debentures and Warrants
Subscription Agreements with Huberfeld/Bodner Family Foundation,
Huberfeld/Bodner Partnership, Ace Foundation, Inc., Rita Folger and Congregation
Ahavas Tzedoka V'Chesed in connection with our private placement of units
consisting of an aggregate of $3,500,000 principal amount of convertible
debentures and an aggregate of 700,000 warrants which entitled the holders
thereof to purchase up to 700,000 shares of our common stock at a price of $5.00
per share.
Subsequent to the date of our issuance and sale of the debentures and
warrants, we and the holders of the debentures and warrants determined that the
issuance and sale of the debentures and warrants should be rescinded based upon
a certain mutual mistake. Accordingly, on April 14, 1998, we and the selling
shareholders entered into an Exchange Agreement, effective as of February 17,
1998, whereby the debentures were rescinded and declared null and void from
inception and were exchanged for $3,500,000 stated value (approximately
$4,025,000 fair value) of a series of our preferred stock, par value $.01 per
share, denominated as senior convertible preferred stock, and the warrants were
exchanged for new warrants (the "new warrants"), entitling the selling
shareholders to purchase up to 700,000 shares of common stock at a price of
$5.00 per share until February 17, 2001.
The senior convertible preferred stock originally required us to pay
quarterly dividends (in cash or common stock) calculated at the rate of 10% per
annum, commencing May 17, 1998. Additionally we were required to redeem, either
in cash or common stock, all of the senior convertible preferred stock, at 105%
of the then outstanding stated value, based on a conversion price of $5.00, from
and after February 17, 1999. After February 18, 1999, we, however, were required
to pay dividends at the rate of 24% per annum. Finally, there was a
price-protection guarantee provision, whereby under certain circumstances, we
would be required to pay the holders the difference between the $5.00 conversion
price and the selling price (net of commissions) of any shares of common stock
issued upon conversion.
On January 14, 1999, we and the selling shareholders entered into an
amendment agreement to reduce the conversion price, from $5.00 to $4.00, of all
shares of senior convertible preferred stock actually converted on or prior to
February 10, 1999, and to eliminate the price protection guaranty provision
contained in the original Exchange Agreement with respect to any such shares so
converted prior to such date.
On March 4, 1999, effective as of February 11, 1999, we and each of the
four remaining holders of the senior convertible preferred stock entered into a
second amendment to the original Exchange Agreement to reduce the conversion
price of all outstanding shares of senior convertible preferred stock from $5.00
to $3.00, to extend the date by which we were required to redeem all outstanding
senior convertible preferred stock from February 17, 1999 to February
15
<PAGE>
20, 2000, to eliminate the requirement that we pay dividends on the senior
convertible preferred stock from and after February17, 1999, and to reduce the
exercise price of the outstanding new warrants from $5.00 to $4.00.
On December 7, 1999, we and each of the four remaining holders of the
senior convertible preferred stock entered into a third amendment to the
original Exchange Agreement to further reduce the conversion price of the senior
convertible preferred stock then remaining outstanding from $3.00 to $.75, to
reduce the exercise price of the new warrants from $4.00 to $2.00, to eliminate
the requirement that we redeem the senior convertible preferred stock at any
time in the future and to eliminate the price protection guaranty contained in
the Exchange Agreement with respect to all shares of common stock thereafter
issued upon conversion of the senior convertible preferred stock. In accordance
with that amendment, we are required to register for resale by each of the
holders the additional shares of common stock issuable upon conversion of the
senior convertible preferred stock resulting from the reduction in the
conversion price to $.75. This prospectus relates to such additional shares, as
well as shares issued and or issuable pursuant to the exercise of the new
warrants which have not been resold by the holders as of the date of this
prospectus. This prospectus also relates to the resale of shares issuable upon
the exercise of warrants issued to certain of the selling shareholders in
connection with a private financing by the Company conducted in 1997.
On December 3, 1999 we issued to MY 2000 LLC, in consideration of its
oral agreement to act as an independent advisor to our Board of Directors in
connection with our new Internet business and strategy, warrants to purchase an
aggregate of 2,500,000 shares of common stock at an exercise price of $2.00 per
share., which are exercisable until December 2, 2004. We also agreed to register
the resale of the shares subject to such warrants as part of this offering.
As used herein, the term "selling shareholder" also includes pledgees,
donees, transferees or other successors-in-interest to the selling shareholders
who are selling shares received after the date of this prospectus from a selling
shareholder. 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
over-the-counter market transactions at prices related to the prevailing prices
of the shares on the NASDAQ-NMS at the time of 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 their resale of
shares may be deemed to be underwriting discounts and commissions under the
Securities Act. We may agree with the selling shareholders to indemnify such
broker-dealers against certain liabilities, including liabilities under the
Securities Act. In addition, we have agreed to indemnify certain of the selling
shareholders, with respect to the shares of common stock being offered hereby,
against certain liabilities, including certain liabilities under the Securities
Act.
16
<PAGE>
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) whether or not such broker-dealers
conducted 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 our securities by the selling shareholders.
There is no assurance that any of the selling shareholders will sell
any of the shares.
We have agreed to pay all costs and expenses incurred in connection
with the registration of the shares offered hereby, except that the selling
shareholders will 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.
We have agreed with the holders of the senior convertible preferred
stock to keep the registration statement of which this prospectus forms a part
continuously effective until the earlier of (i) February 17, 2001; and (ii) the
date that all of the shares have been sold and the new warrants have been
exercised.
DESCRIPTION OF OUR CAPITAL STOCK
The following general summary of our capital stock is qualified in its
entirety by reference to our amended and restated certificate of incorporation,
a copy of which is on file with the SEC. See "Where You Can Find More
Information" for a description of the documents incorporated by reference in
this prospectus.
General
We are authorized to issue 28,000,000 shares of Common Stock, $.01 par
value, and 5,000,000 shares of Preferred Stock, $.01 par value. As of the date
of this prospectus, we had 16,686,630 shares of common stock issued and
outstanding and approximately 21 issued and outstanding shares of senior
convertible preferred stock. We have also authorized the issuance of up to
3,000,000 shares of Series B Convertable Preferred Stock, some or all of which
we may issue in a private placement which we are currently conducting.
Our Common Stock
As holders of shares of our common stock, you are entitled to dividends
when and as declared by the Board of Directors from legally available funds
therefore and, upon liquidation, you are entitled to share pro rata in any
stockholder distribution. However, we have no intention to pay dividends on
shares of our common stock in the foreseeable future as our Board of Directors
has decided to retain earnings to finance our operations and expansion. You have
one
17
<PAGE>
non-cumulative vote for each share held. There are no pre-emptive or
subscription rights to purchase our securities. We have reserved the shares
being registered hereby for issuance upon conversion of the senior convertible
preferred stock and upon exercise of the warrants.
Preferred Stock
We have designated 35 shares of our preferred stock as senior
convertible preferred stock, of which approximately 21 shares were issued and
outstanding as of December 31, 1999. The holders of the senior convertible
preferred stock were entitled to receive quarterly dividends at a rate of 10%
per annum from May 17, 1998 up until February 17, 1999. The holders of the
senior convertible preferred stock vote as a single class with the common stock,
on an as-converted basis, on all matters on which the holders of the common
stock are entitled to vote. Each outstanding share of senior convertible
preferred stock may currently be converted into common stock at the conversion
price of $.75 per share.
Until the senior convertible preferred stock has been converted into
common stock, we cannot consolidate, merge or transfer all or substantially all
of our assets to any person unless the terms of such consolidation, merger, or
transfer include the preservation of the senior convertible preferred stock.
There is a liquidation preference of $100,000 per share of senior convertible
preferred stock.
Warrants
As of the date of this prospectus, we had outstanding warrants
exercisable for an aggregate of 4,442,694 shares of common stock at a weighted
average exercise price of approximately $2.50 per share.
Transfer Agent
The transfer agent for the common stock is Chase Mellon Shareholder
Services.
LEGAL MATTERS
Our counsel, Camhy Karlinsky & Stein LLP, New York, New York, has
passed on the legality of the shares to which this prospectus relates.
EXPERTS
The financial statements incorporated by reference in this prospectus
and elsewhere in the registration statement, to the extent and for the periods
indicated in their reports, have been audited by Arthur Andersen LLP and
Deloitte & Touche LLP, independent public accountants, and are included herein
in reliance upon the authority of said firms as experts in accounting and
auditing.
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<PAGE>
CHANGES IN, AND DISAGREEMENT WITH, CERTIFYING ACCOUNTANTS
On or about April 15, 1998, our Executive and Audit Committees
considered the reappointment of Deloitte & Touche LLP as our principal
accountants. These Committees determined that it was in our best interest to
select another firm of independent public accountants as our auditors for the
1998 calendar year. In response to such determination, certain members of our
management team commenced their selection process by interviewing a number of
other firms of certified public accountants.
On April 24, 1998, the Audit Committee recommended to the Board of
Directors that it select Arthur Andersen LLP as such auditors. The Board of
Directors accepted this recommendation. Also on April 24, 1998, Deloitte &Touche
LLP notified us, in writing, of its decision to resign as our auditors,
effective immediately.
Deloitte & Touche's reports for the years ended December 31, 1997 and
1996 did not contain an adverse opinion or a disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope, or accounting
principles.
For the year ended December 31, 1997, our management disagreed with
Deloitte & Touche LLP on the treatment, for financial accounting purposes, of
our convertible debentures due August 25, 1998, which disagreement was
ultimately resolved to Deloitte's satisfaction; and Deloitte & Touche advised
management of a reportable condition regarding inventory controls. We are
addressing this issue through the installation, in the Sterling Stores we
operate, of a point-of-sale computer system. In addition, Deloitte &Touche LLP
previously advised us that it was in disagreement with our proposed 1998
accounting treatment of our senior convertible preferred stock.
Our Board of Directors and Audit Committee did not discuss these
disagreements with Deloitte & Touche LLP. We have authorized Deloitte & Touche
LLP to respond fully to the inquiries of Arthur Andersen LLP concerning each of
these disagreements.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our amended and restated certificate of incorporation provides that a
director shall not be liable to us or our shareholders for damages for any
breach of duty in such capacity as a director, except for liability in the event
that
20
<PAGE>
o a judgment or other final adjudication adverse to such
director establishes that his/her 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/she was not
legally entitled; or
o that such director's acts violated Section 719 of the Business
Corporation Law of the State of New York.
Our amended and restated bylaws provides for our indemnification of
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 our Company, if such director or officer acted in good
faith, for a purpose which he/she reasonably believed to be in the best
interests of our Company, and in criminal actions or proceedings, in addition,
had no reasonable cause to believe that his/her conduct was unlawful. We have
not entered into indemnification agreements with any of our directors.
Insofar as indemnification for liabilities arising under the Securities
Act may be available to directors, officers and controlling persons of our
Company pursuant to the foregoing provisions, or otherwise, we have been advised
that, in the opinion of the SEC, 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 our affairs 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.
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===============================================================================
===============================================================================
You may rely only on the information contained in this prospectus. We have not
authorized anyone to provide information different from that contained in this
prospectus. Neither the delivery of this prospectus nor the sale of common stock
means that information contained in this prospectus is correct after the date of
this prospectus. This prospectus is not an offer to sell or a solicitation of an
offer to buy these shares of common stock in any circumstances under which the
offer or solicitation is unlawful.
6,305,271 Shares
Sterling Vision, Inc.
Common Stock
---------------
Prospectus
---------------
February __, 2000
---------------
TABLE OF CONTENTS
Page
Where You Can Find More Information ....................................... 3
Incorporation of Certain Documents by Reference ........................... 3
Additional Information .................................................... 4
Prospectus Summary ........................................................ 5
Risk Factors .............................................................. 7
Use of Proceeds ........................................................... 13
Selling Shareholders ...................................................... 13
Plan of Distribution ...................................................... 15
Description of Our Capital Stock .......................................... 17
Legal Matters ............................................................. 19
Experts ................................................................... 19
Changes In, and Disagreement With, Certifying Accountants ................. 20
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities .............................................. 20
===============================================================================
22
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===============================================================================
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.................................... $ 8,399.00
Printing and engraving expenses......................... $ 1,500.00
Legal fees and expenses................................. $ 7 500.00
Auditors' accounting fees and expenses.................. $ 5,000.00
------------
Total................................................... $ 22,399.00
The holders of the shares being registered hereby 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.
Our amended and restated certificate of incorporation provides that a director
shall not be liable to us or our 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/her 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/she was not legally entitled or that such director's acts
violated Section 719 of the Business Corporation Law of the State of New York.
Our amended and restated bylaws provides for our indemnification of 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/she reasonably believed to be in the best
interests of our business, and in criminal actions or proceedings, in addition,
had no reasonable cause to believe that his/her conduct was unlawful. We have
not entered into indemnification agreements with any of our directors.
23
<PAGE>
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 Convertible Preferred Stock and
Warrant (2)
4.3 Form of Warrant issued to MY 2000 LLC (3)
5.1 Opinion of Camhy Karlinsky & Stein LLP(4)
23.1 Consent of Arthur Andersen LLP(4)
23.2 Consent of Deloitte & Touche LLP(4)
23.3 Consent of Camhy Karlinsky & Stein LLP(4)
- ------- ---------------
(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) Incorporated by reference to Registrant's Current Report on Form
8-K, dated December 23, 1999.
(4) Previously filed with this Registration Statement.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales of the shares
being registered hereby 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;
(ii) To reflect in such 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;
24
<PAGE>
provided, however, that sub-paragraphs 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
Exchange Act, 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 is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication, of such issue, by such court.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Amendment No. 1 to Registration Statement on
Form S-3 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Nassau, State of New York, on February 10, 2000.
STERLING VISION, INC.
By: /s/ ALAN COHEN
-------------------------------------
Alan Cohen,
President and Chief Executive Officer
By: /s/ WILLIAM J. YOUNG
-------------------------------------
William J. Young,
Chief Financial Officer
(chief financial and accounting officer)
26
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to 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 Board of Directors February 10, 2000
- -----------------------
Robert Cohen
/S/ ALAN COHEN Vice Chairman of the Board of February 10, 2000
- ----------------------- Directors,-President-and-Chief
Alan Cohen Executive Officer
/S/ EDWARD CELANO* Director February 10, 2000
- -----------------------
Edward Celano
/S/ WILLIAM J. YOUNG Executive Vice President--Finance, February 10, 2000
- ----------------------- Chief-Financial-Officer-and-Treasurer
William J. Young (Principal Accounting Officer)
/S/ JOEL GOLD* Director February 10, 2000
- -----------------------
Joel Gold
- ----------------------- Director , 2000
Edward Cohen
- ----------------------- Director , 2000
Jerry Lewis
*By: /s/ Alan Cohen
-----------------
Alan Cohen
Attorney-in-fact
</TABLE>
