As filed with the Securities and Exchange
Commission on December 4, 1997 .
Registration No. 333- 39179
__________________________________________________________________
____________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
PRE-EFFECTIVE
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
______________________
LCA-VISION INC.
(Exact name of registrant as specified in its charter)
Delaware 11-2882328
(State or other
jurisdiction of 7840 Montgomery Road (I.R.S. Employer
incorporation or Cincinnati, Ohio 45236 Identification
organization) (513) 792-9292 No.)
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
________________
Charles F. Hertlein, Jr., Esq.
Dinsmore & Shohl LLP
1900 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
(513) 977-8200
Fax: (513) 977-8141
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_________________
Approximate date of commencement of proposed sale to the
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 the 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, please check the following
box.
<PAGE>
CALCULATION OF REGISTRATION FEE
Title of Each Amount to be Proposed Proposed Amount Of
Class of Registered Maximum Maximum Registration
Securities Offering Aggregate Fee
to be Price Per Offering
Registered Share Price
Common Stock,
$.001 par value 9,901,218 $ 2.75 (1) $27,228,349 $8,251.01
(1) Estimated as of December 29, 1997 solely for the
purpose of calculating the amount of the registration fee.
_______________
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 or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
__________________________________________________________________
<PAGE>
PROSPECTUS
9,901,218 Shares
LCA-VISION INC.
Common Stock
_______________
This Prospectus relates to 9,901,218 shares (the "Shares") of
the common stock, $.001 par value per share ("Company Common
Stock") of LCA-Vision Inc. (the "Company"). The Shares were
issued by the Company to Summit Technology, Inc. ("Summit") and
other individuals (the "Selling Stockholders") pursuant to the
Company's August 18, 1997 acquisition of all of the issued and
outstanding shares of common stock of Summit's subsidiary,
Refractive Centers International, Inc. ("RCII"). Of the Shares
included in this Prospectus, 9,000,000 are to be distributed by
Summit as a pro rata dividend (the "Dividend") to the holders of
Summit common stock (the "Summit Stockholders"), and 901,218 are
to be offered by the Selling Stockholders. See "Acquisition of
RCII," "Plan of Distribution" and "Principal and Selling
Stockholders."
None of the proceeds from the sale of the Shares by the
Selling Stockholders will be received by the Company. The Company
has agreed to bear all expenses of Summit and the Selling
Stockholders in connection with the registration, distribution and
sale, as applicable, of the Shares included in this Prospectus.
The fees of counsel to Summit will be borne by Summit.
The Common Stock is traded and quoted on the Nasdaq SmallCap
Market under the symbol "LCAV." On October 29, 1997, the closing
price of the Company Common Stock was $2.75 per share.
Summit Stockholders and purchasers of Shares offered by the
Selling Stockholders should consider the matters set forth herein
under "Risk Factors."
__________
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 December __, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended ("Exchange Act"),
and in accordance therewith files reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other
information filed with the Commission by the Company can be
inspected and copied at the Public Reference Room of the
Commission, Room 1024, 450 Fifth Street, NW, Washington, D.C. and
at the Commission's regional offices at 500 West Madison Street,
14th Floor, Chicago, Illinois 60661 and 7 World Trade Center,
Suite 1300, New York, New York 10048 . Copies of this material
can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, NW, Washington, D.C. 20549, at
prescribed rates. Copies of documents electronically filed with
the Commission also may be obtained at "http://www.sec.gov." The
Company Common Stock trades on the Nasdaq SmallCap Market, and
reports and other information regarding the Company can be
inspected at such market.
The Company has filed with the Commission in Washington,
D.C., a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act, with respect to the Shares
offered by this Prospectus. This Prospectus, which constitutes a
part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement and the
exhibits thereto. For further information with respect to the
Company and the Shares, reference is made to the Registration
Statement and the exhibits incorporated therein by reference or
filed as a part thereof. Statements made in this Prospectus as to
the contents of any contract, agreement or other document referred
to are not necessarily complete; with respect to each such
contract, agreement or other document filed or incorporated by
reference as an exhibit to the Registration Statement, reference
is made to the exhibit for a complete description of the matter
involved, and each such statement shall be deemed qualified in its
entirety by such reference. Information contained in this
Prospectus with respect to the Company and its affiliates has been
supplied by the Company. Information contained in this Prospectus
with respect to RCII, the Selling Stockholders and Summit and
their affiliates has been supplied by Summit.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the
Commission are hereby incorporated by reference: (i) Annual
Report on Form 10-KSB for the year ended December 31, 1996; (ii)
Quarterly Reports on Form 10-QSB for the quarters ended March
31, June 30 and September 30, 1997 ; (iii) Proxy Statement
dated June 9, 1997; (iv) Current Report on Form 8-K filed August
28, 1997, as amended by a Form 8-K/A filed on October 27, 1997;
and (v) a separate Current Report on Form 8-K filed August 28,
1997.
All documents filed by the Company pursuant to Sections
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 covered by this Prospectus shall be deemed
to be incorporated by reference into this Prospectus and to be a
part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any such 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,
including any beneficial owner, to whom a Prospectus is delivered
upon written or oral request of such person, a copy of any or all
documents incorporated herein by reference (other than exhibits to
such documents unless such exhibits are specifically incorporated
by reference into such documents). Requests for copies should be
directed to Larry P. Rapp, Chief Financial Officer, LCA-Vision
Inc., 7840 Montgomery Road, Cincinnati, Ohio 45236, telephone
(513) 792-9292.
TABLE OF CONTENTS
AVAILABLE INFORMATION 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 2
THE COMPANY 4
RISK FACTORS 4
FORWARD-LOOKING STATEMENTS 9
UNAUDITED PRO FORMA FINANCIAL INFORMATION 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA FINANCIAL
INFORMATION 15
ACQUISITION OF RCII 18
BUSINESS 21
BOARD OF DIRECTORS 24
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 25
PRINCIPAL AND SELLING STOCKHOLDERS 26
PLAN OF DISTRIBUTION 28
DESCRIPTION OF SECURITIES 29
SHARES OF COMPANY COMMON STOCK ELIGIBLE FOR FUTURE SALE
POTENTIAL FOR DILUTION 29
TAX MATTERS 31
LEGAL MATTERS 32
EXPERTS 32
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS 32
No person is authorized to give any information or make any
representations other than those contained or incorporated by
reference in this Prospectus, in connection with the offering
referred to herein and, if given or made, such information or
representation must not be relied upon as having been authorized
by the Company or the Selling Stockholders. This Prospectus does
not constitute an offer to sell or a solicitation of any offer to
buy the securities registered hereby in any jurisdiction to any
person to whom it is unlawful to make such offer or solicitation
in such jurisdiction. 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 or
incorporated by reference herein is correct as of any time
subsequent to its date.<PAGE>
THE COMPANY
LCA-Vision Inc. (the "Company") is a leading developer and
operator of free-standing laser refractive eye surgery centers in
the U.S. The Company's centers (the "Centers") offer laser
refractive eye surgery procedures for treatment of nearsightedness
and other eye conditions. They include photorefractive
keratectomy ("PRK") and laser in situ keratomileusis ("LASIK")
(PRK and LASIK are referred to collectively as "Laser Refractive
Surgery"). In August 1997, the Company acquired RCII, also an
operator of Laser Refractive Surgery centers, from Summit and the
Selling Stockholders. RCII now operates as a wholly-owned
subsidiary of the Company. Unless otherwise indicated, references
to the Company include RCII.
RISK FACTORS
The following factors, any of which could have a material
adverse effect on the Company, should be carefully considered in
evaluating the Company and its business:
Lack of Operating Profit From Laser Refractive Surgery Operations
In October 1995, the United States Food and Drug
Administration (the "FDA") first approved the use of the excimer
laser for treatment of nearsightedness in the U.S. Consequently,
neither the Company nor any other entity has more than two years'
experience in the operation and management of Laser Refractive
Surgery centers or in the marketing of Laser Refractive Surgery
procedures to the general public in the U.S. The Company and RCII
first opened Laser Refractive Surgery Centers in the U.S. in 1996,
and since that time, neither the Company's nor RCII's Laser
Refractive Surgery operations have been profitable. There can be
no assurance that the addition of RCII, related management changes
or the market for the Company's services will cause the Company to
become profitable overall, or that, if achieved, profitability
will be sustained. To the extent the Company cannot achieve
profitable operations of its Centers, and to the extent the
Company's leveraged financial condition does not improve, the
Company could fail to timely meet its obligations when they come
due. In such event, if the Company's creditors sought to satisfy
amounts owed them, these actions could have a material adverse
effect on the Company's business, financial condition and results
of operations.
No Assurance of Consumer Acceptance
The commercial market for Laser Refractive Surgery in the
United States is relatively new, and there can be no assurance
that the populations, in the various geographical sites where the
Company operates or may in the future operate Laser Refractive
Surgery Centers, will choose to undergo such procedures in
sufficient quantities to ensure the profitability or long-term
viability of the Company. The cost of the procedures,
effectiveness of conventional eye correction methods such as
eyeglasses and contact lenses, general resistance to surgery,
availability of other surgical techniques, the relatively short
history of Laser Refractive Surgery in the U.S. and any possible
unknown long-term side effects, the resistance by the general
population to accept laser ophthalmic procedures and a low level
of third-party payor reimbursement for elective Laser Refractive
Surgery may all contribute to Laser Refractive Surgery not
achieving broad market acceptance which would have a material
adverse effect on the Company's business, financial condition and
results of operations.
Substantial Indebtedness and Risk of Leverage
The Company owes substantial debt to The Fifth Third Bank,
Cincinnati, Ohio ("Fifth Third") and $1.5 million to Dr. and Mrs.
Joffe. See "Acquisition of RCII - Financing Agreement with Fifth
Third" and "- Restrictions on the Payment of Company Debt to
Stephen N. Joffe, M.D. and Sandra F.W. Joffe." The Fifth Third
debt facility ("Facility") expires on September 30, 1998 and the
debt to Dr. and Mrs. Joffe is payable in full on September 26,
2005. Moreover, the terms of the Facility require that the
Company maintain at least $4 million of cash collateral with Fifth
Third. Such cash collateral is therefore not available to the
Company to support its operations.
There can be no assurance that the Company will be able to
obtain replacement financing upon expiration of the Facility, from
a financial institution, entity or individual, at the time needed,
on commercially-reasonable, or any, terms. Future financings also
may result in the issuance of senior securities or in dilution to
the holders of Company Common Stock. Failure to refinance the
Facility upon maturity or to achieve adequate funds from
operations could result in the inability of the Company to pay its
debts as they mature.
The Facility provides for an amount of interest over Fifth
Third's prime rate that increases over time. Consequently, the
Company expects the Facility's interest rate to increase and, as a
result, further increase the Company's required debt service
obligations. Principal and interest payments on Company debt,
however, must be made when due and payable regardless of whether
there is sufficient cash flow or income from the Company's
operations. If such payments are not made when due, and if
creditor(s) acted against the Company, these actions could have a
material adverse effect on the Company's business, financial
condition or results of operations. The Facility restricts the
payment of dividends, capital outlays and other acts the Company's
management may deem advantageous. Consequently, the Company's
ability to respond to changing market conditions and to expand has
been weakened. See "Acquisition of RCII - Financing Agreement with
The Fifth Third Bank."
Control
Summit and Stephen N. Joffe, M.D. beneficially own, or
control in the aggregate, shares of Company Common Stock
representing approximately 88.98% of such shares currently issued
and outstanding. After the Dividend, these parties will control
in the aggregate shares of Company Common Stock representing
approximately 64.42% of such shares. Such holdings include
8,527,358 shares owned outright by Stephen N. Joffe, M.D., the
President and a Director of the Company, and an additional
7,922,377 shares of which Stephen N. Joffe, M.D. could be deemed
to have beneficial ownership. Pursuant to the Shareholders'
Agreement, as defined and described in "Acquisition of RCII - The
Shareholders' Agreement," Summit and the Major Stockholders (as
such term is defined below) placed certain individuals on the
Board and agreed in the future to vote for certain designated
nominees as Directors of the Company and to a procedure for
selecting alternate nominees if any of the designated nominees are
unable or unwilling to serve as Director.
Volatility of Stock Price
The market price of the Company Common Stock historically has
been subject to substantial price volatility. Such volatility may
recur in the future due to overall market conditions or business-
specific factors such as the Company's ability to effectively
penetrate the market, new technological innovations and products,
changes in government regulations, public concerns with regard to
safety and efficacy of various medical procedures, the issuance of
new or changed stock market analyst reports and recommendations,
the Company's ability to meet analysts' projections, fluctuations
in the Company's financial results or other unforeseen factors.
In addition, the Company Common Stock could experience extreme
fluctuations in market price that are wholly unrelated to the
operating performance of the Company. Furthermore, because a
significant portion of the Company Common Stock will be held
initially by Summit Stockholders as a result of the Dividend, it
is unclear what impact the actions of such holders will have on
the market for the Company Common Stock.
Sale of Company Common Stock by Summit and Major Stockholders
Summit and the Company have entered into a Registration
Rights Agreement (further described in "Acquisition of RCII - The
Registration Rights Agreement") pursuant to which Summit has the
right, to demand that the Company register under the Securities
Act of 1933 the remaining 7,164,361 shares of Company Common Stock
owned by Summit, to enable Summit to sell such shares on any date
after May 17, 1998. Summit's sale of all or part of these shares,
and the timing and amount of such sale(s), may negatively affect
the trading price of the Company Common Stock. Further, the
Company has filed a separate registration statement covering
18,949,798 additional shares of Company Common Stock for
resale by Stephen N. Joffe, M.D., his wife, Sandra F.W. Joffe, and
his son, Craig P.R. Joffe (such three family members collectively,
the "Major Stockholders"). There is no restriction on the timing
of the disposition, or the amount of sales, of these shares once
the registration statement becomes effective . Consequently,
sales of Company Common Stock by Summit and the Major Stockholders
may have a similar negative effect. See "Acquisition of RCII -
The Registration Rights Agreement" and "Shares of Company Common
Stock Eligible for Future Sale; Potential for Dilution."
Potential Side Effects and Long-Term Results of Laser Refractive
Surgery
Concerns with respect to the safety and efficacy of the
performance of refractive procedures with excimer lasers include
predictability and stability of results and potential
complications or side effects including the following: post-operative
pain; corneal haze during healing (an increase in light
scattering properties of the cornea); glare/halos (undesirable
visual sensations produced by bright lights); decrease in contrast
sensitivity (diminished vision in low light); temporary increases
in intraocular pressure in reaction to post-procedure medication;
modest fluctuations in astigmatism and modest decreases in best
corrected vision (i.e. with eyeglasses); loss of fixation during
the procedure; unintended over- or under-corrections; instability,
reversion or regression of effect; corneal scars (blemishing marks
left on the cornea); corneal ulcers (inflammatory lesions
resulting in loss of corneal tissue); and corneal healing
disorders (compromised or weakened immune system or connective
tissue disease which causes poor healing). There can be no
assurance that additional complications will not hereafter be
identified which may materially and adversely affect the safety
and efficacy of excimer laser systems for performing refractive
procedures, which may negatively affect the FDA approval of the
excimer laser, the market acceptance of such procedures and/or
lead to product liability or other claims against the Company.
Technological Change
Newer technologies, techniques or products for the treatment
of refractive vision disorders could be developed with better
performance than the excimer lasers used by the Company. The
availability of new and better ophthalmic laser technology or
other surgical or non-surgical methods for correcting refractive
vision disorders could have a materially adverse impact on the
business of the Company's Laser Refractive Surgery centers that
utilize the excimer laser. If the Company wishes to utilize such
new ophthalmic laser or other technology in its Laser Refractive
Surgery centers, the Company may not have access to sufficient
funds to make the capital expenditures required to acquire such
technology.
Dependence on Key Personnel
The departure of any of the members of senior management,
especially Stephen N. Joffe, M.D., could materially adversely
affect the Company's ability to meet its strategic and financial
objectives. None of the Company's employees, except Dr. Ronald
Herskowitz, the former Chief Operating Officer and a former
Director of the Company, who resigned as an employee, officer and
Director effective October 22, 1997, has an employment contract.
Competition
Laser Refractive Surgery competes with other surgical and
non-surgical treatments for refractive disorders, including
eyeglasses, contact lenses, other types of refractive surgery
(such as radial keratotomy) and other technologies currently under
development. Among providers of Laser Refractive Surgery,
competition will come from entities similar to the Company and
from hospitals, hospital-affiliated group entities, physician
group practices and private ophthalmologists that, in order to
offer Laser Refractive Surgery to patients, purchase or rent
excimer lasers. Suppliers of conventional vision correction
alternatives (eyeglasses and contact lenses), such as optometry
chains, also may compete with the Company by purchasing laser
systems and offering Laser Refractive Surgery to their customers.
There can be no assurance that the Company's management, operation
and marketing plans are or will be successful in meeting this
variety of competition. If more providers offer Laser Refractive
Surgery in a given geographic market, the price the Company can
charge for procedures may decrease. There can be no assurance
that any reduction in per procedure fees that may result from
increased competition will be compensated for by an increase in
procedure volume. Further, there can be no assurance that the
Company's competitors' access to capital and/or financing will not
give these competitors an advantage against the Company. See
"Business - Competition."
Reliance on Suppliers of Laser Equipment
The Company is not directly involved in the research,
development or manufacture of ophthalmic laser systems, and is
dependent on unrelated manufacturers for its supply of ophthalmic
lasers. There are two companies, Summit and VISX, Inc. ("VISX")
whose excimer laser systems have been approved by the FDA for
commercial sale in the U.S. If Summit and/or VISX were for any
reason to discontinue commercial sale of ophthalmic lasers in the
U.S., the Company would be limited in its ability to operate new
and existing Laser Refractive Surgery centers.
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 heath care. These
include laws and regulations, which vary significantly from state
to state, prohibiting the practice of medicine and optometry by
persons not licensed to practice medicine and optometry,
prohibiting unlawful rebates and division of fees, and limiting
the manner in which prospective patients may be solicited.
Further, contractual arrangements with hospitals, surgery centers,
ophthalmologists and optometrists, among others, are extensively
regulated by state and federal law. See "Risk Factors -
Dependence on Health Care Providers."
Failure to comply with applicable FDA requirements could
subject excimer laser manufacturers and the Company to enforcement
action, including product seizures, recalls, withdrawal of
approvals and civil and criminal penalties, any one or more of
which could have a material adverse effect on the Company's
business, financial condition and results of operations. In
addition, clearances or approvals could be withdrawn in
appropriate circumstances. Failure of the Company or its
principal suppliers to comply with regulatory requirements, or any
adverse regulatory action, could result in a limitation on or
prohibition of the Company's use of excimer lasers which in turn
would have a material adverse effect on the Company's business,
financial condition and results of operations. Discovery of
problems, violations of current laws or future legislative or
administrative action in the United States or elsewhere may
adversely affect the manufacturers' ability to obtain regulatory
approval of laser equipment. Furthermore, the failure of VISX,
Summit or any other manufacturers that supply or may supply
excimer lasers to the Company to comply with applicable federal,
state, or foreign regulatory requirements, or any adverse
regulatory action against such manufacturers, could limit the
supply of lasers or limit the ability of the Company to use the
lasers.
Litigation
The Company is a defendant in a case entitled Cabrini
Development Council, et al. vs LCA-Vision Inc., et al., Supreme
Court of New York, County of New York. Various employees,
officers, directors and former directors of the Company are co-defendants.
The case was filed on October 1997 and arises out of
the operations and the termination of operations of New York
limited liability company (the "LLC") which had been formed by the
Company, the plaintiff in the action and a New York professional
corporation (the "PC") owned by certain physicians, for the
purpose of opening and operating a laser refractive surgery center
or centers in New York City. Business activities commenced in
1995, but were unprofitable. After the LLC's resources were
exhausted, the Company paid its operating costs for a period of
time. In August, 1997, after further losses and after the parties
were unable to come to a final understanding as to their
respective rights and obligations, the operations of the LLC
ceased.<R/>
In its complaint, the plaintiffs allege breaches of
various agreements entered into between them, the Company, and the
PC concerning the LLC and its operations, as well all alleged
fraud and alleged conversion of a business opportunity arising out
of the operation of a center in Mt. Kisco, New York, which the
plaintiffs claim constituted business of the LLC. The plaintiffs
have demanded on all of their causes of action compensatory
damages which total not less than $4.5 million and punitive
damages which total not less than $2 million, as well as the
creation of a constructive trust over the Company's operations for
the benefit of the LLC. The Company, which has not yet filed an
answer, believes that the plaintiffs' claims are without merit and
intends to vigorously defend the action.
Also, the Company's wholly-owned subsidiary Toronto
Laservision Centre (1992) Inc. ("Centre") is a named party in a
claim filed by Jolanda Witvliet filed March 27, 1997 in the
Ontario Court (General Division). The plaintiff is seeking CN $5
million plus attorney fees for damages to her right eye resulting
from a LASIK procedure performed at the Centre in March 1996. The
Company has filed a Statement of Defense and a Third Party Claim
against Chiron Vision Canada, Inc., the manufacturer or
distributor of the LASIK machinery utilized during the procedure.
The Company intends to vigorously defend this suit.
Good Relations with Physicians
The Company relies on good relationships with physicians who
perform Laser Refractive Surgery procedures at its Centers. The
inability of the Company to continue its relationships with these
physicians, or to find comparable replacements in the event of a
termination of any significant number of such relationships, could
have a material adverse effect on the Company's business,
financial condition and results of operation.
A Legislative Change for the Health Care Industry
Numerous legislative proposals have been introduced in
Congress and in various state legislatures over the past several
years that would, if enacted, effect major reforms of the U.S.
health care system. The Company cannot predict whether any of
these proposals will be adopted and, if adopted, what impact such
legislation would have on the Company's business.
Liability and Possible Insufficiency of Insurance
While the Company has secured medical malpractice insurance
and requires physicians using its facilities to provide evidence
of insurance, there can be no assurance that the amounts of such
coverage will be sufficient to satisfy claims against the Company
or that liability insurance will continue to be available to the
Company or practitioners performing procedures at the Company's
Laser Refractive Surgery centers. Performance of Laser Refractive
Surgery procedures could expose the Company to claims of
negligence, malpractice or other forms of liability. Further, use
of laser systems in the Company's Laser Refractive Surgery centers
may give rise to claims against the Company resulting from
laser-related injury. While the Company believes that any claims
alleging defects in the laser systems it purchases from its
suppliers would be covered by such suppliers' product liability
insurance there can be no assurance that the Company's laser
suppliers will continue to carry product liability insurance or
that any such insurance will be adequate to protect the Company.
Renewal of Contracts
There can be no assurance that any of the Company's contracts
for the management of multi-specialty surgery programs that expire
in the future will be renewed or, if they are renewed, that the
terms will be as favorable to the Company as the existing
contracts. The Company no longer actively seeks contracts for
this declining line of business. See "Business - Multi-Specialty
Surgery Program."
Dependence on Health Care Providers
Certain states including New York and California prohibit the
Company from practicing medicine, employing physicians to practice
medicine on the Company's behalf or employing optometrists to
render optometry services on the Company's behalf. Since the
Company does not intend to practice medicine or optometry, its
activities will be limited to establishing Laser Refractive
Surgery centers and other affiliations with health care providers
at which professionals may render eye care services, including
Laser Refractive Surgery. Accordingly, the success of the
Company's operations as an eye care provider in such states
depends upon its ability to enter into agreements with health care
providers, including institutions, independent physicians and
optometrists, to render surgical and other professional services
at facilities owned or managed by the Company. There can be no
assurance that the Company will be able to enter into such
agreements with health care providers on satisfactory terms or
that such agreements will be profitable to the Company. See "Risk
Factors - Government Regulation" and "Business - Government
Regulation."
FORWARD-LOOKING STATEMENTS
This Prospectus contains "forward-looking statements" that
include statements regarding the intent, belief or current
expectations of the Company, its directors or its executive
officers with respect to, among other things: (i) trends
affecting the Company's financial condition or results of
operations; (ii) the Company's business and growth potential;
(iii) various risk factors; and (iv) pro forma financial data.
Prospective investors and Summit Stockholders are cautioned that
any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual
results may differ materially from those projected in the
forward-looking statements as a result of various factors. Important
factors that could cause such differences are identified under
"Risk Factors" above.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the
"Unaudited Pro Forma Financial Information") is based on the
historical financial statements of LCA-Vision and RCII and has
been prepared to illustrate the effects of the acquisition of RCII
and the related financing transactions.
The unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 1996 and the six months
ended June 30, 1997 give effect to the acquisition of RCII as if
such transaction had been completed on January 1, 1996. The pro
forma condensed consolidated balance sheet as of June 30, 1997 has
been prepared as if the acquisition had occurred on such date.
The acquisition will be accounted for using the purchase
method of accounting in accordance with Accounting Principles
Board Opinion No. 16. The total purchase costs will be allocated
to the tangible and intangible assets based upon their respective
fair values. The allocation of the purchase price reflected in the
unaudited pro forma financial information is preliminary. The pro
forma adjustments are based on available information and certain
assumptions that management believes are reasonable in the
circumstances. The unaudited pro forma financial information is
not necessarily indicative of either future results of operations
or the results that might have occurred if the foregoing
transaction had been consummated on the indicated dates.
The unaudited pro forma financial information should be read
in conjunction with the Company's and RCII's financial statements
and notes thereto incorporated by reference in this Prospectus.
<PAGE>
<TABLE>
LCA-Vision Inc.
Unaudited Pro Forma Condensed Consolidated Income Statement
Six Months Ended June 30, 1997
(in thousands, except per share data)
<CAPTION>
Historical Historical Pro Forma LCA-Vision
LCA-Vision RCII Adjustments Combined Pro Forma
<S> <C> <C> <C> <C>
Net revenue $ 6,602 $ 3,452 $ 10,054 A
Direct operating expenses 4,412 5,071 9,483 A
Depreciation and
amortization 832 1,100 $ 300 B 2,232
Corporate general and
administrative expenses 3,408 1,902 (1,077) C 4,233
Center pre-opening costs 163 163
------ ----- -------- -------
Operating income (loss) (2,213) (4,621) 777 (6,057)
Equity in (loss) from
unconsolidated affiliates (31) (31)
Interest expense (508) (508)
Other income (expense), net 47 15 62
------- ------ ------- -------
Income (loss) before
income taxes (2,705) (4,606) 777 (6,534)
Income tax expense 61 - - 61
------- ------ ------- -------
Income (loss) from
continuing operations $(2,766) $(4,606) $ 0 (6,595)
Accrued dividend - Class B
preferred stock 94 94
Amount applicable to (loss)
per common share $(2,860) $(4,606) $ (6,689)
======== ====== ========
(Loss) per common share $( 0.15) $ (.19)
======== ========
Number of common shares
used in per share
computations 19,598 17,066 E 36,664
======== ======== ========
</TABLE>
<TABLE>
LCA-Vision Inc.
Unaudited Pro Forma Condensed Consolidated Income Statement
Year Ended December 31, 1996
(in thousands, except per share data)
<CAPTION>
Historical Historical Pro Forma LCA-Vision
LCA-Vision RCII Adjustments Combined Pro Forma
<S> <C> <C> <C> <C>
Net revenue $13,760 $ 3,018 $ 16,778 A
Direct operating expenses 7,732 5,632 13,364 A
Depreciation and amortization 1,597 1,156 $ 600 B 3,353
Corporate general and
administrative expenses 7,327 13,714 (9,280) C 11,761
Center pre-opening costs 220 220
------- ------ --------- -------
Operating income (loss) (3,116) (17,484) 8,680 (11,920)
Equity in (loss) from
unconsolidated affiliates (906) (906)
Interest expense (770) (1,273) 1,273 D (770)
Other income (expense), net 741 741
-------- ------ -------- ------
Income (loss) before
income taxes (4,051) (18,757) 9,953 (12,855)
Income tax expense - - - -
-------- -------- -------- --------
(Loss) from
continuing operations $(4,051) $(18,757) $ 9,953 $(12,855)
======== ========= ========= =========
(Loss) per common
share $ (0.21) $ (0.35)
======== =========
Number of common shares
used in per share
computations 19,610 17,066 E 36,676
======== ====== =========
/TABLE
<PAGE>
<TABLE>
LCA-Vision Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 1997
(dollars in thousands)
<CAPTION>
Historical
LCA-Vision RCII Pro Forma LCA-Vision
Adjustments Combined Pro Forma
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,209 $10,000 $(4,000) F $ 7,209
Accounts receivable 1,356 136 1,492
Surgical supplies, prepaid
expenses, other 1,207 242 1,449
----- ------ --------- ------
Total Current Assets 3,772 10,378 (4,000) 10,150
Restricted cash 4,000 F 4,000
Property and equipment, net 9,069 7,353 1,500 G 17,922
Intangible assets 15,377 H 15,377
Investment in unconsolidated
affiliates 238 238
Other assets 789 849 117 I 1,755
------- ----- ---------- ------
Total Assets $13,868 $18,580 $16,994 $49,442
------ ------- --------- -------
Current Liabilities:
Accounts payable, accrued
liabilities and
other current liabilities $ 1,562 $ 1,871 $ 1,017 J $ 4,450
Current portion of long-term debt 7,744 (6,902) L 842
Deferred revenue 210 210
------- ------- ---------- ------
Total Current Liabilities 9,516 1,871 (5,885) 5,502
Long-term debt, net of current
maturities 4,494 6,902 L 11,396
Notes payable to shareholders 1,500 1,500
Shareholders' Equity:
Preferred stock 2,522 2,522
Common stock 79 50 (33) K 96
Additional paid-in capital 3,234 32,669 K 35,903
Investment by parent 51,008 (51,008) K 0
Treasury stock (30) (30)
Translation adjustment 6 6
Retained deficit (7,453) (34,349) 34,349 K (7,453)
Total Shareholders' Equity (1,642) 16,709 15,977 38,497
-------- ------- ---------- ---------
Total Liabilities and
Shareholders' Equity $13,868 $ 18,580 $16,994 $ 49,442
======== ======== =========== =========
/TABLE
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(dollars in thousands)
(A) The combined pro forma amounts do not reflect the elimination
of revenues and direct operating expenses for RCII centers which
will be closed by the Company. Management expects that the four
centers located in West Palm Beach, Florida; Miami, Florida;
Towson, Maryland and Chicago, Illinois will be closed by December
31, 1997. The revenues and direct operating expenses for these
four centers for the periods presented are:
Year Ended Six Months
December 31, 1996 Ended June 30, 1997
Revenues $362 $967
Direct operating
expenses $553 $432
(B) The adjustment reflects additional depreciation and
amortization resulting from the allocation of the Company's
purchase price to the assets acquired, including an increase in
property and equipment and the recording of goodwill associated
with the Acquisition. Property and equipment acquired is amortized
over a weighted average of 7 years and goodwill is amortized over
40 years.
(C) The adjustments reflect cost savings for the year ended
December 31, 1996 and the six months ended June 30, 1997 resulting
from the elimination of redundant corporate general and
administrative expenses, RCII's parent company overhead allocation
and certain marketing costs that will not be recurring expenses of
the Company. Such pro forma cost savings are expected to be as
follows:
Year ended Six months ended
December 31, 1996 June 30, 1997
Salaries terminated $ 967 $ 425
Corporate costs 8,397 652
RCII parent company
allocation 1,042 -
$10,406 $1,077
(D) Adjustment represents the elimination of RCII interest expense
to reflect interest expense based on the capitalization of the
Company.
(E) The adjustment represents the shares issued in conjunction
with the acquisition of RCII.
(F) The adjustment represents the reclassification of cash
acquired in the acquisition to restricted cash. In conjunction
with the acquisition of RCII, the Company entered into a new debt
facility with its primary lender which requires the Company to
maintain $4 million on deposit with the bank.
(G) The adjustment represents the allocation of the purchase price
to the estimated fair value of property and equipment acquired.
<PAGE>
(H) The adjustment represents the recording of goodwill associated
with the acquisition. The purchase price is summarized as follows:
Issuance of 17,066 shares of Company Common stock valued at
$1.97 per share in exchange for all the outstanding shares of RCII
common stock:
$32,786
Acquisition costs 400
------
33,186
Net assets acquired at
fair market value (17,809)
---------
Goodwill recorded $ 15,377
=========
(I) Adjustment represents capitalized financing costs related to
renegotiation of the Company's credit facility.
(J) Adjustment represents accrued costs directly attributable to
the Acquisition, credit facility renegotiation and the issuance of
LCA-Vision common shares.
(K) Adjustment represents the net additional common stock issued
in connection with the acquisition of RCII after elimination of
historical common stock amounts for RCII, and the elimination of
the historical stockholders' equity of RCII as the acquisition
will be accounted for as a purchase.
(L) Adjustment represents effect of new credit facility.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA FINANCIAL
INFORMATION
Overview
The Company derives its revenue from three primary sources:
(i) fees for Laser Refractive Surgery performed at its Centers;
(ii) contractual fees for managing multi-specialty laser surgery
programs; and (iii) fees for marketing and education programs,
management fees for operating Laser Refraction Surgery centers of
investees, and miscellaneous sources. Miscellaneous sources
include product sales-lasers and laser surgery instruments - which
the Company began phasing out effective December 31, 1996.
Direct operating expenses include: (i) Laser Refractive
Surgery centers -- labor, physician fees, Pillar Point royalty
fees (a royalty fee to the manufacturers of the FDA-approved
lasers of $250 per procedure), Center rent and utilities, and
surgical supplies; (ii) multi-specialty laser surgery programs --
labor; and (iii) other services and products -- labor and cost of
products sold.
<PAGE>
Results of Operations
The Company's results of operations in any period are
significantly affected by the number of Laser Refractive Surgery
centers opened and operating, the number of hospitals under
management contract, and the level of services contracted by
hospitals and others during such period. Given the limited period
of time that the U.S. Laser Refractive Surgery centers have been
open, the earliest being January 1996, the Company's results of
operations may not be indicative of future results.
Revenues
Sources of revenue for the twelve months ended December 31,
1996 and the six months ended June 30, 1997 were:
(dollars in thousands) Twelve Months Six Months
December 31, 1996 June 30, 1997
Laser Refractive Surgery
Centers $ 6,733 $ 7,481
Multi-specialty laser
surgery programs 4,665 1,485
Others 5,380 1,088
Total $16,778 $10,054
Management anticipates that the composition of future revenue
will change as Laser Refractive Surgery becomes more widely known
and accepted by ophthalmic physicians and their patients.
Revenues from hospital-based multi-specialty centers are
anticipated to decline and will be less significant to the Company
while revenues from Laser Refractive Surgery Centers are expected
to increase. The extent and degree of the shift in the Company's
future revenues are subject to significant uncertainty.
Laser Refractive Surgery Centers
At December 31, 1995, the Company owned and operated one
Laser Refractive Surgery center in Toronto, Canada. Following FDA
approval of the commercial sale for an excimer laser for
performing Laser Refractive Surgery in the U.S. in December 1995,
the Company began opening Centers. During 1996 the Company opened
23 wholly-owned Centers and three Centers in which it shares
ownership with unaffiliated investors ("Investee Centers") in the
U.S. and one wholly-owned and one investee Center outside the U.S.
In the first six months of 1997, the Company slowed its expansion
and opened three wholly-owned Centers in the U.S. Laser
Refractive Surgery procedures performed at the Company's wholly-owned
and investee Centers for the twelve months ended December
31, 1996 and the six months ended June 30, 1997 were:
Twelve Months Six Months
December 31, 1996 June 30, 1997
U.S.
Wholly-owned 2,753 3,892
Investee 872 847
3,625 4,739
Non-U.S.
Wholly-owned 1,511 713
Investee 63 189
1,574 902
Total 5,199 5,641
A prime contributor to the Company's profitability and cash
flow is word-of-mouth referrals from individuals who have had
Laser Refractive Surgery. As Centers mature, the critical mass
necessary for word-of-mouth referrals is expected to be attained
and procedure volume generally increases. As of June 30, 1997,
one half of the Company's wholly-owned Centers have been open for
one year or longer.
Multi-Specialty Laser Surgery Programs
The decline in revenues from the Company's multi-specialty
laser surgery programs has been in direct proportion to the number
of programs under contract. The renewal of the Company's
contracts with the hospital providers has become increasingly
difficult due to price pressures and the lengthening of sales
cycle. Hospital providers and other entities are being driven to
reduce costs and scale back their operations, sometimes including
the programs that the Company manages. The Company's existing
contracts provide positive cash flow; however, the Company has
decided to reduce its provision of this service due to its
difficult economic environment. In addition, budget reductions at
the facilities have reduced the marketing and education programs,
key elements to a successful surgery program. Management does not
believe that the multi-specialty surgery programs will continue to
constitute a significant portion of its business on a long-term
basis.
Other
Due to fewer contracts and to budget reductions at hospitals
where the Company has multi-specialty laser surgery programs, the
marketing and education revenues from such programs has declined.
In addition, in 1996 the Company began to phase out its products
business which had revenues of $318,000 in 1996. Revenues from
product sales were $17,000 in 1997.
Direct Operating Expenses
Direct operating expenses increase as the Company expands
into the Laser Refractive Surgery business. Direct operating
expenses comprise the significant fixed costs of performing the
procedure as well as the costs of maintaining a Center. These
costs will become a lesser percentage of revenue as procedure
volume increases. Direct operating expenses related to the other
sources of revenue are more variable and fluctuate generally with
the level of revenue.
General and Administrative Expenses
As the Company expanded into the Laser Refractive Surgery
business, marketing and advertising campaigns were launched to
educate both consumers and refractive surgeons as to the
procedures and their benefits. The Company spent over $4,800,000
in 1996 for advertising and marketing campaigns primarily aimed at
education. Marketing and advertising expenses in 1997
approximated $700,000. In addition, general and administrative
expenses such as telephone, legal, insurance and repairs and
maintenance increases as new Centers are opened.
Other Expenses
Depreciation and amortization increased due to the increase
in property and equipment, primarily equipment for the Centers.
Interest expense increased primarily due to the increased
borrowings related to the capitalized leases for the lasers used
to perform Laser Refractive Surgery; and borrowings under the line
of credit to fund current operating needs and capital equipment,
offset by the reduction in loans from Dr. and Mrs. Joffe.
Liquidity and Capital Resources
The Company's principal capital requirements since late 1995
have been to fund its expansion into Laser Refractive Surgery --
the furnishing and equipment of centers, the development of
marketing and advertising programs, and the funding of operating
losses. Historically, the Company's principal sources of funds to
finance its capital requirements have been borrowings under its
bank line of credit, operating and capital leases, cash flow its
multi-specialty laser program contracts, and the sale of common
stock to and borrowings from its principal shareholders in the
third quarter 1995.
On August 18, 1997, the Company issued 17,065,579 shares of
its Common Stock for 100% of the issued and outstanding common
stock of RCII, a majority-owned subsidiary of Summit. At the time
of the acquisition, RCII owned and operated 19 Laser Refractive
Surgery Centers and had management service agreements with six
"centers of excellence" located at prestigious hospitals and
university medical centers. The acquisition agreement required
RCII to have a minimum cash balance of $10 million at closing.
Subsequent to the acquisition, the Company has closed four of
the RCII Laser Refractive Surgery Centers (see Notes to Unaudited
Pro Forma Financial Information). In addition, the Company closed
the RCII corporate office in Waltham, MA and terminated the
administrative staff. The responsibilities of the Waltham staff
have been re-assigned to field and company headquarters personnel.
The Company estimates this closure will result in significant cost
savings due to the elimination of redundant general and
administrative expenses and the consolidation of marketing and
advertising programs.
In connection with the acquisition of RCII, the Company
entered into a new debt facility with its primary lender, The
Fifth Third Bank ("Fifth Third"), to replace the Company's
previous facility with Fifth Third. The Facility consists of an
$8 million secured line of credit ("Revolver") and a secured term
loan ("Term Loan") in the amount of $3.053 million. The Revolver
and Term Loan bear interest as follows: (1) August 18, 1997 until
February 28, 1998, 1% above Fifth Third's prime rate in effect
from time to time ("Prime Rate"); (ii) February 28, 1998 until
August 31, 1998, 3% above the Prime Rate; and (iii) August 31,
1998 until September 30, 1998, 6% above the Prime Rate. September
30, 1998 is the maturity date of the Revolver and Term Loan. The
Term Loan is payable in 14 monthly installments, due on the first
day of each calendar month, commencing September 1, 1997 and
ending with a final payment on September 30, 1998.
The Facility requires, among other things, that the Company
maintain a minimum of tangible net worth and meet a debt coverage
ratio. The Facility also restricts and/or prohibits certain
transactions; including but not limited to, additional borrowing,
the issuance of additional shares of capital stock, the payment of
dividends and capital expenditures greater than $75,000. The
Facility is secured by a blanket lien in favor of Fifth Third on
all Company assets, including the Company's headquarters building,
and further requires the Company to maintain $4,000,000 in cash on
deposit with Fifth Third. Such cash collateral is therefore not
available to the Company to support its operations.
In addition to cash to fund operations, the Company's primary
on-going cash requirements are those necessary to service debt,
including capital and operating leases. The Company believes that
cash flow from Laser Refractive Surgery Centers as they mature,
the $10 million cash obtained via the acquisition of RCII, and the
availability of the Revolver will satisfy its operating cash and
debt service requirements for at least the next 12 months. The
Company believes that, with its improved liquidity and capital
position, it can obtain lease financing for significant capital
expenditures. However, there can be no assurance that the Company
will be able to replace its Facility, or on satisfactory terms, or
that the Company's Laser Refractive Surgery Centers can achieve a
positive cash flow.
ACQUISITION OF RCII
The Acquisition - On August 18, 1997 (the "Closing" or
"Closing Date"), pursuant to an Acquisition Agreement
("Acquisition Agreement") by and among the Company, Summit and
RCII dated July 23, 1997, the Company purchased all of the issued
and outstanding shares of RCII (the "Acquisition"). The Company
at Closing purchased from Summit 5,000,000 shares of RCII's common
stock, par value $.01 in exchange for 16,164,361 newly-issued
shares of Company Common Stock. Prior to the Closing, the 19
individual Selling Stockholders had held options for 312,500
shares of RCII common stock, 278,767 of which were exercisable at
Closing. All Selling Stockholders exercised their options prior
to Closing and the Company also purchased all 278,767 shares of
RCII common stock owned by them in exchange for 901,218 newly-issued
shares of Company Common Stock. As a result of these
transactions, the Company in the aggregate issued 17,065,579
shares of Company Common Stock and came to own 100% of the issued
and outstanding shares of RCII common stock.
Registration of Company Common Stock Received in the
Acquisition - The Acquisition Agreement, and the related
Registration Rights Agreement discussed below, require that the
Company prepare, file and cause to become effective registration
statements under the Securities Act of 1933 registering (i) the
9,000,000 shares of Company Common Stock to be distributed by
Summit as a Dividend, (ii) the 901,218 shares of Company Common
Stock held by the Selling Stockholders, and (iii) the 7,164,301
shares of Company Common Stock to be held by Summit following the
Dividend. See "Risk Factors - Sale of Company Common Stock by
Summit and Major Stockholders," and "Plan of Distribution." This
Prospectus, which is a part of one required registration
statement, relates to and accompanies the Shares distributed to
the Summit Stockholders by Dividend and the Shares offered for
sale by the Selling Stockholders. To satisfy its obligation with
respect to Summit, the Company intends to so register Summit's
Company Common Stock after this registration statement becomes
effective. See "Risk Factors - Sale of Company Common Stock by
Summit and Major Stockholders" and "Acquisition of RCII -
Registration Rights Agreement."
The Acquisition Agreement requires the Company to use its
best efforts to maintain the effectiveness of this registration
statement until the earlier of (i) completion of the sale of the
Selling Stockholders' Company Common Stock, or (ii) one year after
the effective date of the this registration statement. All
expenses of the registrations, including without limitation,
filing and registration fees and expenses of complying with state
securities laws, are the responsibility of the Company.
Non-Competition - The Acquisition Agreement restricts Summit
from owning or operating laser vision correction centers for a
period ending on the earlier of (i) July 22, 2000, or (ii) the
expiration of the Shareholders' Agreement described below.
Employment of Dr. Ronald Herskowitz - In connection with the
Acquisition, the Company entered into an Employment Agreement with
Dr. Ronald L. Herskowitz, the former Executive Vice President of
RCII, and appointed him Chief Operating Officer of the Company and
RCII. Dr. Herskowitz resigned as an employee, officer and
Director of the Company effective October 22, 1997. The
Employment Agreement had no specified term and contained customary
provisions on compensation, confidentiality, inventions and non-competition.
The Employment Agreement also provided that under
certain circumstances, Dr. Herskowitz would be entitled to a
severance benefit equal to one year's salary ($160,000) in the
event of his voluntary resignation for "good reason." Dr.
Herskowitz has asserted that he resigned with good reason and is
therefore entitled to the severance benefit. The Company does not
believe he is entitled to the benefit. The matter has not yet
been resolved. Dr. Herskowitz also was a Director of the Company.
See "Acquisition of RCII - the Shareholders' Agreement."
The Shareholders' Agreement - On or about the Closing Date of
the Acquisition, two of the Company's directors resigned, the
Company's Board of Directors was set at five directors, and the
vacancies were filled by the remaining directors with pre-selected
persons agreed to by Summit, the Company and the Major
Stockholders. One of these Directors, Dr. Ronald L. Herskowitz,
the former Executive Vice President of RCII, subsequently resigned
leaving one vacancy. These parties at the Closing signed a
Shareholders' Agreement ("Shareholders' Agreement") providing for
the above-described changes, the vote for certain designated
nominees as directors of the Company and a procedure for selecting
alternate nominees if any of the designated nominees is unable or
unwilling to serve as a director. See "Risk Factors - Control."
The term of the Shareholders' Agreement expires on the earlier of
(i) July 22, 2002, or (ii) the date on which Summit owns less than
5% of the issued and outstanding Company Common Stock. See "Board
of Directors."
The Registration Rights Agreement - Summit and the Company
have entered into a Registration Rights Agreement (the
"Registration Rights Agreement") pursuant to which Summit has the
right to demand that the Company register under the Securities Act
of 1933 the 7,164,361 shares of Company Common Stock owned by
Summit after giving effect to the Dividend (the "Remaining
Shares"), to enable Summit to sell such shares on any date after
May 17, 1998. All expenses of such registration, including
but not limited to, printing, legal and accounting expenses,
filing fees and expenses, state "blue sky" law-related fees and
expenses and, subject to certain exceptions, the reasonable
expenses of Summit, will be borne by the Company. See "Risk
Factors - Sale of Company Common Stock by Summit and Major
Stockholders."
The Registration Rights Agreement also contains a Right of
First Offer Upon Sale for Cash ("Right of First Offer") which
provides, among other things, that in the event Summit wishes to
sell for cash all or any part of the Remaining Shares, Summit must
first offer to sell the shares to the Company. The Registration
Rights Agreement also provides for the pricing, payment and
closing terms under the Right of First Offer as well as the
Company's obligation to indemnify Summit and the Selling
Stockholders and Summit's obligation to indemnify the Company
relating to specified liabilities arising from the registration
statements. The term of the Registration Rights Agreement ends
when all Remaining Shares have been sold under the Registration
Rights Agreement. See "Indemnification of Directors, Officers and
Others."
The Service Contracts - In connection with the Acquisition,
the Company signed service contracts with Summit for all Summit
lasers owned or leased by the Company. These contracts each have
a term of three years and require fees of $80,000 per laser system
for such three-year period. With respect to up to five service
contracts, if during the term of a service contract the Company
discontinues all use of the laser system under the contract
(except in connection with the closing of a Laser Refractive
Surgery center), and does not replace the laser system with any
Summit excimer laser system, then the Company may terminate the
contract.
Change in Terms of the Company's Interim Series Class B
Preferred Stock - As required by the Acquisition Agreement and
Shareholders' Agreement, at Closing, the Company amended (the
"Amendment") the Certificates of Designations, Preferences and
Rights governing the Company's Interim Series Class B Preferred
Stock, $.001 par value ("Preferred Stock"). Among other things,
the Amendment provided that the per share price at which the
Preferred Stock may convert into Company Common Stock would be
changed such that each share of Preferred Stock is now convertible
into the number of fully-paid and non-assessable shares of Company
Common Stock that results from dividing $3.50 into the sum of
$200,000 plus all accrued but unpaid dividends on each such share
at the time of conversion. See "Description of Securities" and
"Shares of Company Common Stock Eligible for Future Sale;
Potential For Dilution."
Stock Market Listing for Company Common Stock - The Company
Common Stock trades on the Nasdaq SmallCap Market. The
Acquisition Agreement requires the Company to apply for and use
its best efforts to obtain a listing for the trading of the
Company Common Stock on the Nasdaq National Market. The Company
filed an application requesting such a listing and also has
requested listing on the American Stock Exchange. To date
neither such application has been approved, and the Company does
not believe that either such listing is likely to be obtained in
the foreseeable future.
Restrictions on the Payment of Company Debt to Stephen N.
Joffe, M.D. and Sandra F.W. Joffe - In connection with the
Acquisition, the Company agreed that it would not make principal
payments under the Company's Promissory Notes to each of Stephen
N. Joffe, M.D. and Sandra F.W. Joffe (the "Notes") unless the
earnings of the Company for the prior fiscal year exceeded
$1,000,000, and then payment may be made only to the extent of 25%
of such excess. Earnings for this purpose are income before
taxes, amortization of goodwill and depreciation, net of capital
expenditures for such fiscal year. Dr. and Mrs. Joffe agreed to
such restrictions. See "Certain Relationships and Related
Transactions."
Financing Agreement with The Fifth Third Bank - On August 18,
1997, as required by the Acquisition Agreement, the Company
entered into a new debt Facility with Fifth Third to replace the
Company's previous facility with Fifth Third. The Facility
consists of an $8 million secured line of credit ("Revolver") and
a secured term loan ("Term Loan") in the amount of $3.053 million.
The Revolver and Term Loan bear interest as follows: (i) August
18, 1997 until February 28, 1998, 1% above Fifth Third's Prime
Rate in effect from time to time ("Prime Rate"); (ii) February 28,
1998 until August 31, 1998, 3% above the Prime Rate; and (iii)
August 31, 1998 until September 30, 1998, 6% above the Prime Rate.
September 30, 1998 is the maturity date of the Revolver and Term
Loan. The Term Loan is payable in 14 monthly installments, due on
the first day of each calendar month, commencing September 1, 1997
and ending with a final payment on September 30, 1998.
The Facility requires the Company to pay various closing and
facility fees and contains covenants that the Company must meet on
an ongoing basis. The Facility also restricts and/or prohibits
certain transactions, including but not limited to, additional
borrowing, the issuance of additional shares of capital stock, the
payment of dividends and capital expenditures greater than
$75,000. The Facility further requires the Company to maintain
$4,000,000 in cash on deposit with Fifth Third and is secured by a
blanket lien in favor of Fifth Third on all Company assets,
including the Company's headquarters building ("Headquarters")
located at 7840 Montgomery Road, Cincinnati, Ohio 45236.
In addition, the Company pledged to Fifth Third a $985,000
Certificate of Deposit ("CD") issued by Fifth Third as security
("Collateral") for a $985,000 loan ("Surgery Center Loan") made by
Fifth Third to The LCA Center for Surgery, Ltd. ("Surgery
Center"), an entity principally owned by Stephen N. Joffe, M.D.
The Company pledged the CD for up to 30 days while the Surgery
Center, or Stephen N. Joffe, M.D. personally, arranged to replace
the CD Collateral for the Surgery Center Loan. While Stephen N.
Joffe, M.D.'s personal guarantee of the prior Company facility
expired with the new Facility, he remained personally obligated to
the Company with respect to replacing the CD Collateral for the
Surgery Center Loan. Dr. Joffe has fulfilled his obligation to
the Company by pledging the required collateral and the Company is
no longer obligated to Fifth Third with respect to the CD. These
additional transactions related to the Facility were negotiated
and agreed because the Surgery Center, as a tenant in the
Company's Headquarters, could not timely provide Fifth Third
collateral for the Surgery Center Loan.
BUSINESS
The following is a general description of the Company's
business reflecting the Company's acquisition of RCII on August
18, 1997. This section should be read in conjunction with the
Company's Annual Report for the year ended December 31, 1996, the
Quarterly Reports for the quarters ended March 31 , June 30, and
September 30, 1997 , the Proxy Statement dated June 9, 1997 and
the Current Report concerning the Acquisition with pro forma
financial information, all of which are incorporated herein by
reference. See "Incorporation of Certain Documents By Reference."
Background
The Company is the corporate successor to Laser Centers of
America, Inc. ("LCA"), a Delaware corporation which was founded by
Stephen N. Joffe, M.D. in 1986 to manage laser and minimally-invasive
surgery programs for hospitals and medical centers.
In the mid-1980s, LCA pioneered the multi-specialty laser
surgery center business, and, during its 11-year operating
history, was involved in the implementation of over 80 hospital-based,
multi-specialty surgery programs. Based on this
experience, the Company has an expertise in managing and promoting
new laser surgery techniques and technologies. The Company
continues to manage a number of hospital laser surgery programs on
a contract basis, although this is a decreasingly important aspect
of its overall business.
Beginning in 1991, with the opening of a Laser Refractive
Surgery center in Toronto, LCA applied its laser operating
expertise to the field of Laser Refractive Surgery, which had not
then been approved by the FDA for use in the United States. In
1995, LCA merged into the Company, and the Company began opening
Laser Refractive Surgery Centers in the U.S. in 1996 shortly after
the FDA first approved laser devices for commercial sale in the
U.S. As of October 23, 1997, the Company, either directly or
through its wholly-owned subsidiary RCII, owned and operated 27
Centers in the U.S., two in Ontario, Canada and one in Helsinki,
Finland and has a working relationship with six additional U.S.
treatment sites at university medical centers/hospitals and other
locations. The Company has announced plans to close up to ten
Centers. The Company took a third-quarter charge of $1.1 million,
or $.03 per share of Company Common Stock, to cover the costs of
the initiative. The closures should be completed by December 31,
1997.
<PAGE>
Laser Refractive Surgery Centers
The Laser Refractive Surgery Centers operated by the Company
provide the facilities, equipment and support services necessary
for physicians to perform various corrective eye surgeries that
employ state-of-the-art laser technologies. Each Center is
equipped with one or more excimer laser systems in addition to
corneal topography instruments, ophthalmic examination equipment,
computer systems and standard office equipment. Physicians who
have completed extensive FDA-mandated training sessions and have
met the Company's qualification criteria, use the Company's
facilities to perform Refractive Laser Surgery on an out-patient
basis.
The most common procedures performed at the Centers are PRK
(photorefractive keratectomy) and LASIK (laser in situ
keratomileusis) to treat nearsightedness. PRK is an outpatient
procedure performed with an excimer laser to treat
nearsightedness, whereby submicron layers of tissue are ablated
(removed) from the surface of the cornea in a computer-assisted,
predetermined pattern to reshape the cornea. LASIK is an advanced
outpatient procedure to treat nearsightedness, also using an
excimer laser. As new laser-based surgical procedures are
approved by the FDA, the Company plans to accommodate the service
requirements for these procedures as well, to the extent feasible
at that time.
The results of a Company study of the initial 1,150
procedures performed at its U.S. centers indicated that, of those
procedures with at least six months of follow-up, 85% of the eyes
were corrected to between 20/20 and 20/25 and 97% were corrected
to at least 20/40.
Operation of Centers
The operations of the Company generally consist of providing
to credentialed physicians fully-equipped and staffed laser
surgery centers, which these physicians use to perform Laser
Refractive Surgery and other ophthalmic procedures. The Company
also provides management services, including billing and marketing
functions, and educational programs. The Company is compensated
for a physician's use of the Company's Centers and support
services. Summit and VISX lasers are subject to a royalty fee of
$250 per procedure performed in the U.S.
By using the Company's facilities, physicians are able to
concentrate on treating patients and are free from the financial
and management requirements associated with establishing and
operating a surgery center. Additionally, participating
physicians benefit from the Company's marketing skills and
programs (such as its toll-free 800 numbers) in terms of
identifying and capturing potential new patients. Finally, many
of the administrative and financial functions are performed more
efficiently and cost-effectively in a centralized operation.
Because Laser Refractive Surgery is not generally
reimbursable by third-party payors, the Company offers several
financing alternatives. Customers can pay for the procedure with
cash, bank check, money order or credit card. The Company also
offers information regarding installment plans, insurance
coverage, home equity loans and payment through employer flexible
benefit plans. The Company bears no credit risk for any of these
options.
Marketing
The Company's marketing program adopts a two-pronged approach
to promoting Laser Refractive Surgery. It is designed to
advertise Laser Refractive Surgery directly to consumers through
television, print, media and direct marketing. Further, Company
personnel work directly with ophthalmologists to increase the
number of credentialed physicians who are knowledgeable about and
use the Company's Centers to perform Laser Refractive Surgery.
The Company seeks to differentiate its centers in the
marketplace by providing locations and treatment environments that
meet patient and doctor preferences. Additionally, in keeping
with past practice, as the Company enters a market with an
existing laser system (produced by competitors Summit or VISX), it
typically will install the other system if that system better
satisfies the needs of local ophthalmologists. The Company
utilizes both Summit and VISX lasers at its U.S. Laser Refractive
Surgery centers and one each of Nidek, Chiron and Sunrise at its
non-U.S. Laser Refractive Surgery centers.
Competition
Laser Refractive Surgery, whether performed at a Company
Center or elsewhere, competes with several surgical and non-surgical
treatments to correct refractive disorders including
eyeglasses, contact lenses, other types of refractive surgery
(such as radial keratotomy) and corneal implants. In addition,
other technologies currently under development may ultimately
prove to be more attractive to consumers than Laser Refractive
Surgery.
The Company further faces competition from other providers of
Laser Refractive Surgery. Eye care services in the U.S.,
including Laser Refractive Surgery, are delivered through a
fragmented system of local providers, including individual or
small groups of opticians, optometrists and ophthalmologists and
chains of retail optical stores and multi-site eye care centers.
Laser Refractive Surgery chains, such as the Company, are a
specialized type of multi-site eye care center that primarily
provide Laser Refractive Surgery. Among the Laser Refractive
Surgery center chains, the Company believes it is the largest
provider in terms of number of facilities, followed by Laser
Vision Centers, Inc. Other competing refractive surgery center
chains include TLC The Laser Center, Sight Resources Corp. and
Beacon Eye.
In addition to competition from other chains of Laser
Refractive Surgery centers, the Company faces competition from
hospitals, clinics and private ophthalmologists who practice in
the same geographic area as one of the Centers. Furthermore,
retail optical chains could potentially provide Laser Refractive
Surgery. Certain chains have entered the Laser Refractive Surgery
market. Management believes they have had limited success and
have cut back their involvement in the industry. Other retail
optical chains are not currently focusing on providing Laser
Refractive Surgery. See "Risk Factors - Competition."
Government Regulation
Numerous state laws and regulations presently affect the
manner in which the Company may establish or operate its Centers,
which vary significantly from state to state. In some instances,
these laws and regulations are ambiguous, and sometimes state
regulators fail to provide adequate guidelines. The Company
believes that it has adopted a strategy that will enable it to
operate its network of Centers in compliance with all applicable
regulatory requirements. However, federal and state regulatory
attention may continue to be directed to the practice of medicine,
and any changes in state or federal law or regulations, or in
governmental agency and judicial interpretations of such laws and
regulations, could cause one of the Company's strategies that is
now in compliance with applicable laws to cease so to comply.
Additionally, there can be no assurance that the federal
regulatory scheme will not in the future place impediments upon
the Company's operations.
Current state regulatory requirements and restrictions that
relate to corporate entities such as the Company that are involved
in the ownership and operation of healthcare facilities include
prohibitions against the corporate practice of medicine except by
an entity owned by healthcare professionals and/or wherein the
professionals exercise control over medical judgments; patients
referrals by healthcare professionals (including ophthalmologists
and optometrists) to a facility owned or compensated by such
referring professional (either generally, or sometimes by defining
such payments as "kick backs"); and "fee splitting" between
healthcare professionals and corporate entities. Other state laws
specifically regulate the nature and compensation provisions of
employment or management relationships that healthcare
professionals may have with a corporate-owned facility, affect the
form of business entity to be utilized, limit payments either to
the entity or to healthcare professionals to the "fair market
value" of their contributions, or affect the manner of marketing
the service performed at the healthcare facility. Additional
regulations in some states also now affect, or in the future may
affect, the establishment of Centers, including requirements for
certificates of need and/or other licensing to open a Laser
Refractive Surgery center, and registration of medical laser
equipment. See "Risk Factors - Government Regulation."
Multi-Specialty Surgery Programs
The Company continues to manage multi-specialty surgery
programs at 13 medical facilities on a contract basis. However,
the renewal of the Company's contracts with the hospital providers
is becoming increasingly difficult due to increasing price
pressures and the lengthening of the sales cycle. Management does
not believe that the multi-specialty surgery programs will
continue to constitute a significant portion of its business. In
addition, most of the corporate resources previously engaged in
the contract management business have been reassigned to the
refractive surgery business, which the Company believes has better
long-term potential. See "Risk Factors - Renewal of Contracts."
Employees
As of October 23, 1997, the Company had 143 employees, of
whom 124 employees were full-time. The personnel who constitute
the Company's independent practitioners are doctors and other
healthcare professionals retained, when and as needed, as
independent contractors to assist with the education and training
provided by the Company to its clients. The Company retains its
faculty from a pool of doctors or other healthcare professionals
who have agreed to provide services to the Company on an
independent contractor basis.
The Company's principal executive offices are located at 7840
Montgomery Road, Cincinnati, Ohio 45236.
BOARD OF DIRECTORS
On or about the Closing Date of the Acquisition, two of the
Company's Directors resigned, the Company's Board of Directors was
set at five Directors, and, as provided in the Shareholders'
Agreement, the vacancies were filled by the remaining Directors
with pre-selected persons agreed to by Summit, the Company and the
Major Stockholders. See "Acquisition of RCII - The Shareholders'
Agreement" and "Risk Factors - Control." Effective October 22,
1997, Dr. Ronald L. Herskowitz resigned as a Director and the
vacancy has not been filled.
The following individuals now serve on the Company's Board of
Directors.
Stephen N. Joffe, M.D., age 54, is the President of the
Company. He was also the founder of LCA and served as its
Chairman of the Board and Chief Executive Officer since its
founding in 1985. He also founded Surgical Laser Technologies,
Inc. in 1983 and served as its Chairman until January 1990. In
addition, Dr. Joffe is an Esteemed Professor of Surgery at the
University of Cincinnati Medical Center, a position he has held
since 1990. He was a full-time Professor of Surgery at the
University of Cincinnati Medical Center for nine years prior to
1990. Dr. Joffe obtained his medical degree in 1967 from the
University of Witwatersand (South Africa), and was awarded a
post-doctorate degree in 1976. He has held faculty appointments at the
Universities of London, Glasgow and Cincinnati and holds
fellowships at the College of Surgeons of South Africa, the Royal
College of Surgeons in Edinburgh, The Royal College of Surgeons in
Glasgow, and the American College of Surgeons. Dr. Joffe led
development efforts in Nd:YAG laser surgical techniques,
established the International Nd:YAG Laser Society, and chaired
the first two meetings. He is senior editor of six textbooks on
lasers, co-author of Lasers in Medicine, author of over 180 papers
in scientific journals, contributor of chapters to 32 textbooks,
and presenter of over 200 papers before scientific societies in 20
countries throughout the world.
John C. Hassan, age 54, is and has been the President of
Champion Printing, Inc. for more than five years. Previously, he
was Vice President, Marketing of the Drackett Company, a division
of Bristol-Meyers Squibb. He currently serves as Treasurer of
Printing Industries of Southern Ohio, and is a board member of the
Ohio Graphics Arts Health Fund, the Camargo Club and serves on the
Greater Cincinnati United Way and Fine Arts campaigns. Mr. Hassan
received his undergraduate degree from Princeton University and
his M.B.A. from Dartmouth College.
William O. Coleman, age 68, formerly held positions at The
Procter & Gamble Company (1955 to 1989) that included General
Sales Manager, Vice President Food Products, Vice President
International/Latin America, and most recently, Vice President
Professional Affairs, Special Projects. Mr. Coleman continues to
serve as a Trustee of the Procter & Gamble Retirement Trusts. In
addition to his accomplishments professionally, Mr. Coleman also
has served as: General Chairman of the Greater Cincinnati United
Way Campaign; President of the Boys & Girl Clubs; Chairman of the
Dan Beard Council Boy Scouts; Vice Chairman, University of
Cincinnati Foundation; and Director of the Greater Cincinnati
Foundation. A graduate of the University of Oklahoma (B.B.A.,
Finance), Mr. Coleman served in the U.S. Navy in Korea.
John H. Gutfreund, age 67, is President of Gutfreund &
Company, Inc., a New York-based financial consulting firm that
specializes in advising select corporations and financial
institutions in the United States, Europe and Asia. Formerly, Mr.
Gutfreund was with Salomon Brothers from 1953 - 1991. He was:
Chairman of the Board and Chief Executive Officer, Salomon
Brothers Inc. (1981 - 1991); Co-Chairman, Phibro Corp. (1981 -
1983); Co-Chief Executive Officer, Phibro-Salomon Inc. (formerly
Phibro Corp.) 1983 - 1984; Chief Executive Officer, Phibro-Salomon
Inc. (1984 - 1986); Chairman, Chief Executive Officer, President,
Salomon Inc. (formerly Phibro-Salomon Inc.) 1986 - 1991. Mr.
Gutfreund is: Director, Montefiore Medical Center, New York City
and a Member of the Executive Committee of the Board of Trustees
and Finance and Real Estate Committees; Member, Council on Foreign
Relations; Member, the Board of Trustees, New York Public Library,
Astor, Lenox and Tilden Foundations; Honorary Trustee, Oberlin
(Ohio) College; and Trustee, Arperture Foundation. He is past
Vice Chairman of the New York Stock Exchange (1985 - 1987); past
Member, Board of Directors, Securities Industry Association; past
Chairman of the Downtown Lower Manhattan Association; past
President and Member of the Board of Governors of the Bond Club of
New York; and past Member, The Trilateral Commission. A graduate
of Oberlin College (B.A., 1951), Mr. Gutfreund served in the U.S.
Army in Korea in 1951 - 1953.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1995, the Company was a party, directly or
indirectly, to the following additional transactions with its
current directors, executive officers and principal stockholders
(including any of their associates or affiliates):
LCA previously was treated for federal income tax purposes as
an S corporation under Subchapter S of the Internal Revenue Code
of 1986, as amended (the "Code"). In 1995, prior to the merger
with and into the Company, LCA declared and paid to its two
stockholders distributions of $8,456,000, in cash, which
constituted payments to the stockholders of LCA's past earnings on
which those stockholders had already paid income taxes under
Subchapter S of the Code.
Prior to the merger of LCA into the Company, Dr. and Mrs.
Joffe, utilizing a portion of the proceeds of their S corporation
distributions from LCA, agreed to lend a total of $4,390,772 to
the Company, receiving in return, two promissory notes for the
principal amount plus interest at a rate of 6.91% per annum. All
sums due to Dr. and Mrs. Joffe under the promissory notes are due
and payable in full upon the maturity of the promissory notes,
September 26, 2005. Since 1995, the Company repaid $369,100. See
"Restrictions on the Payment of Company Debt to Dr. Joffe and
Sandra F.W. Joffe."
In November and December, 1996, Dr. Joffe entered into debt
conversion transactions with the Company pursuant to which he
converted a total of $2,200,000 of the debt owed to him by the
Company into 11 shares of Interim Series Class B Preferred Stock.
Similarly, Mrs. Joffe converted a total of $321,672 of debt owed
to her into 1.6 shares of Interim Series Class B Preferred Stock.
See "Acquisition of RCII - Change in Terms of the Company's Series
B Preferred Stock."
Dr. Joffe was the guarantor of approximately $11,080,000 in
bank loans to the Company, including a mortgage note in the amount
of $3,080,000, and a working capital credit line of up to
$8,000,000, all of which were replaced by the Facility. Dr. Joffe
was not compensated for these personal guarantees. See
"Acquisition of RCII- Replacement Financing Agreement with The
Fifth Third Bank, Cincinnati, Ohio."
In May 1995, the Company acquired a 45% interest in the
Surgery Center of Georgia, LLC, Atlanta, Georgia ("SCG"). The
transaction was funded entirely by borrowings by SCG. The Company
guaranteed a portion of SCG's debt. Dr. Joffe acquired another
35% interest in SCG in a similar fashion. In September 1995, the
Company's 45% interest in SCG was distributed to Dr. Joffe. The
Company remained as a guarantor on approximately $2,200,000 of
SCG's debt on a temporary basis after the distribution, until Dr.
Joffe arranged the elimination of the Company's guarantee prior to
the end of 1995.
Stephen N. Joffe, M.D. is the principal stockholder and
majority owner of The LCA Center for Surgery, Ltd. (the "Surgery
Center"), Cincinnati, Ohio, an Ohio limited liability company,
which was organized in September, 1995. The Company does not hold
an investment in the Surgery Center. The Company has leased to
the Surgery Center, for a period of 20 years at an annual rental
of $190,000, a portion of its headquarters building located at
7840 Montgomery Road. In February 1997, the Company agreed to
forego rent in return for the Surgery Center providing to the
Company certain systems and processes for research and
development, for providing additional staffing, and for giving the
Company unlimited use of the leased premises for research,
testing, educational and other agreed purposes. See "Acquisition
of RCII - Financing Agreement with The Fifth Third Bank,
Cincinnati, Ohio."
In addition, the Company pledged to Fifth Third a $985,000
Certificate of Deposit ("CD") issued by Fifth Third as security
("Collateral") for a $985,000 loan ("Surgery Center Loan") made by
Fifth Third to The LCA Center for Surgery, Ltd. ("Surgery
Center"), an entity principally owned by Stephen N. Joffe, M.D.
The Company pledged the CD for up to 30 days while the Surgery
Center, or Stephen N. Joffe, M.D. personally, arranged to replace
the CD Collateral for the Surgery Center Loan. While Stephen N.
Joffe, M.D.'s personal guarantee of the prior Company facility
expired with the new Facility, he remained personally obligated to
the Company with respect to replacing the CD Collateral for the
Surgery Center Loan. Dr. Joffe has fulfilled his obligation to
the Company by pledging the required collateral and the Company is
no longer obligated to Fifth Third with respect to the CD. These
additional transactions related to the Facility were negotiated
and agreed because the Surgery Center, as a tenant in the
Company's headquarters building, could not timely provide Fifth
Third collateral for the Surgery Center Loan.
LCA and Stephen N. Joffe, M.D. previously owned all of the
stock of LCA Canada, Inc. ("LCA Canada") which owned 67% of the
stock of the Toronto Laservision Centre, Inc. (the "Centre"). LCA
and Stephen N. Joffe, M.D. contributed their entire interest in
LCA Canada to the Company in exchange for nominal consideration.
The Company renamed the subsidiary LCA-Vision Canada, and on
August 31, 1995 acquired the remaining 33% of the stock of the
Centre from certain unaffiliated holders. Accordingly, the Centre
is now a wholly-owned subsidiary of the Company, through its
subsidiary LCA-Vision Canada.
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to
beneficial ownership of the Company's Common Stock as of October
23, 1997, and after giving effect to the Dividend and the sales of
Company Common Stock by the Selling Stockholders, by (i) all
persons known to the Company to be the beneficial owner of 5% or
more thereof, and (ii) the Selling Stockholders.
<PAGE>
<TABLE>
<CAPTION>
Prior to the Offering After the Offering7
Shares Shares to Shares
Beneficially be Sold or Beneficially
Name Owned 1 Percent Distributed 7 Owned 1 Percent
<S> <C> <C> <C> <C> <C>
Stephen N. Joffe, M.D.1 16,449,736 3 44.881% -- 16,449,736 44.881%
Summit Technology, Inc. 16,164,361 44.102% 9,000,000 4 7,164,361 19.540%
Sandra F.W. Joffe 2 4,007,098 5 10.933% -- 4,007,098 10.933%
Craig P.R. Joffe 6 2,500,063 6 6.821% -- 2,500,063 6.821%
David B. Applegate 47,416 0.129% 47,416 -- --
Rajiv P. Bhatt 129,315 0.353% 129,315 -- --
Thomas Deutsch 24,247 0.066% 24,247 -- --
Michael Gordon 80,822 0.221% 80,822 -- --
Peter Hersch 48,493 0.132% 48,493 -- --
Ronald L. Herskowitz 210,137 0.573% 210,137 -- --
Suzanne Jobin 647 0.002% 647 -- --
Paul Klein 1,616 0.004% 1,616 -- --
Peter J. Klopotek 3,879 0.011% 3,879 -- --
Peter E. Litman 96,986 0.265% 96,986 -- --
John Marshall 32,329 0.088% 32,329 -- --
Julian Maughan 3,879 0.011% 3,879 -- --
Joanna Natkaniec 1,616 0.004% 1,616 -- --
Carmen A. Puliafito 32,329 0.088% 32,329 -- --
Rajesh Rajpal 24,247 0.066% 24,247 -- --
D. Verne Sharma 32,329 0.088% 32,329 -- --
Ronald Snyder 1,616 0.004% 1,616 -- --
Roger F. Steinert 48,493 0.132% 48,493 -- --
Vance Thompson 80,822 0.221% 80,822 -- --
</TABLE>
___________________________
<PAGE>
1 Persons named in the table have sole voting and investment
power with respect to all shares of Company Common Stock shown as
beneficially owned by them, subject to community property laws,
where applicable, and the information contained in other footnotes
to this table. As of October 29, 1997, 36,651,906 shares of
Company Common Stock were issued and outstanding. An additional
12,909 shares of Company Common Stock have been issued, but are
currently held in treasury. All percentages noted herein are
calculated on the basis of the 36,651,906 shares issued and
outstanding.
2 Dr. and Mrs. Joffe's address is 8750 Red Fox Lane,
Cincinnati, Ohio 45243.
3 The total for Dr. Joffe consists of 8,527,358 shares of
Company Common Stock owned of record and beneficially by him,
2,850,000 shares of Company Common Stock held of record by CEDE &
Co. but owned beneficially by him, 1,065,279 shares of Company
Common Stock which Dr. Joffe currently has the right to acquire
upon conversion of 11 shares of convertible Class B Preferred
Stock he owns, 3,852,149 shares of Company Common Stock owned of
record by Sandra Joffe which Dr. Joffe is deemed to beneficially
own, and 154,949 shares of Company Common Stock which Sandra Joffe
currently has the right to acquire upon conversion of 1.6 shares
of Class B Preferred Stock she owns and which Dr. Joffe is deemed
to own. All such shares are the subject of a separate
registration statement filed by the Company which, when declared
effective, will permit their resale without restriction. See
"Shares Eligible for Future Sale."
4 Of the 16,164,361 shares owned by Summit Technology, Inc.,
9,000,000 shares will be distributed pursuant to the Dividend, and
these shares are to be covered by this registration statement.
Pursuant to the Registration Rights Agreement, the additional
7,164,361 shares owned by Summit may be sold only on or after May
17, 1998. Such additional shares are not covered by this
registration statement.
5 The total for Sandra Joffe includes 3,852,149 shares of
Company Common Stock owned of record and beneficially by her, and
154,949 shares of Company Common Stock she currently has the right
to acquire upon conversion of 1.6 shares of Class B Preferred
Stock she owns. All of the shares owned by Mrs. Joffe are also
deemed to be beneficially owned by Dr. Joffe. All such shares
are the subject of a separate registration statement filed by the
Company which, when declared effective, will permit their resale
without registration. See "Shares Eligible for Future Sale."
6 Craig P.R. Joffe's address is 21 Ladbroke Gardens, London
W11-2PT, United Kingdom. All shares owned by Craig Joffe are
the subject of a separate registration statement filed by the
Company which, when declared effective, will permit their resale
without restriction. See "Shares Eligible for Future Sale."
7 The information provided in this column assumes that the
Selling Shareholders will offer for sale all shares beneficially
owned by them.
Messrs. Applegate, Bhatt, Herskowitz, Klopotek, Litman and
Sharma, Ms. Jobin and Ms. Natkaniec are now, or during the past
three years have been, employed by Summit and were previously
involved in the operations of RCII. The remaining Selling
Stockholders provided consulting services to Summit with respect
to RCII prior to the Closing. While Dr. Herskowitz and Ms. Jobin
were employed by the Company for a short period of time following
the Acquisition, none of the Selling Stockholders has any current
employment with the Company. The Selling Stockholders will
receive all proceeds of the sales of their Company Common Stock.
Pursuant to the Acquisition Agreement and the Registration
Rights Agreement, the Company agreed to register, at its expense,
the Selling Stockholders' shares of Company Common Stock and
further agreed to indemnify the Selling Stockholders with respect
to such registration.
PLAN OF DISTRIBUTION
The Dividend
In accordance with the terms of the Acquisition Agreement,
Summit intends to distribute to the Summit Stockholders as a
Dividend a total of 9,000,000 of the 16,164,361 shares of Company
Common Stock that Summit received in the Acquisition. The
Dividend was declared by Summit's Board of Directors on
______________, 1997. The Board's declaration of the Dividend
provides that each Summit Stockholder of record on ____________,
1997 (the "Record Date") will receive _____ Shares for each
outstanding share of Summit common stock then owned by such
Summit Stockholder. Fractional shares of Company Common Stock
will not be issued as a result of the Dividend, and to the extent
the Dividend would otherwise result in a fractional share to a
Summit Stockholder, the number will be rounded up to the
nearest whole share. For a description of the tax implications of
the Dividend, see "Tax Matters." The Dividend will be distributed
to the Summit Stockholders as soon as practicable after the Record
Date. Neither the Company nor Summit will receive any proceeds
from the Dividend. All expenses of registration of the Shares
under the Securities Act of 1933 for purposes of the Dividend will
be borne by the Company. The fees of counsel to Summit and any
applicable taxes are payable by Summit.
The Selling Stockholders
The Shares owned by the Selling Stockholders, which are
included herein pursuant to the Registration Rights Agreement, may
be sold from time to time by the Selling Stockholders (or their
pledgees or donees) in one or more transactions (which may include
block transactions), in negotiated transactions or otherwise, at
prices then prevailing or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the Shares
directly to purchasers or to or through broker-dealers which may
act as agents or principals. Such broker-dealers may receive
compensation in the form of discounts, concessions or commissions
from the Selling Stockholders and/or the purchasers of the Shares
for whom such broker-dealers may act as agents or to whom they may
sell as principal, or both. In effecting sales, brokers or
dealers engaged by the Selling Stockholders may arrange for other
brokers or dealers to participate. Commissions or discounts which
may be received by brokers or dealers are not expected to exceed
those customary in the type of transactions involved. The Selling
Stockholders and any persons who act as broker-dealers in
connection with the sale of the Shares offered hereby might be
deemed to be "underwriters" within the meaning of Section 2(11) of
the Securities Act, and any commissions received by them, and any
profit on the resale of the Shares as principal, may under certain
circumstances be deemed to be underwriting discounts and
commissions under the Securities Act.
All expenses of registration of the Selling Stockholders'
Shares under the Securities Act of 1933 will be borne by the
Company. Any commission expenses and brokerage fees, the fees of
counsel to the Selling Stockholders and any applicable taxes are
payable individually by the Selling Stockholders.
There can be no assurance that the Selling Stockholders will
sell any or all of the Shares offered hereby. The Company is not
required to maintain the effectiveness under the Securities Act of
the Registration Statement of which this Prospectus is a part for
a period greater than one year after the Registration Statement is
declared effective by the Commission.
DESCRIPTION OF SECURITIES
The Amended and Restated Certificate of Incorporation of the
Company authorizes 110,000,000 shares of common stock, $.001 par
value ("Company Common Stock"), and 10,000,000 shares of Preferred
Stock, $.001 par value. The holders of shares of Company Common
Stock have one vote per share. The Company Common Stock does not
have any conversion rights. The average of the closing bid and
asking prices of the Company Common Stock on the Nasdaq SmallCap
Market at October 28, 1997 was $2.75 per share. The holders of
shares of Company Common Stock are entitled to dividends when and
as declared by the Board of Directors from funds legally available
therefor. The Company does not anticipate declaring or paying any
cash dividends for the foreseeable future.
The Preferred Stock is voting stock and the holders of
Preferred Stock have the same voting rights per share as the
Common Stockholders. Neither the Preferred Stock nor the Company
Common Stock has preemptive or cumulative voting rights, is
redeemable, or is liable for assessments or further calls. The
Company has issued 12.6 shares of two Series of Interim Class B
Preferred Stock. Each of the 12.6 shares of the Company's Interim
Series Class B Preferred Stock and Second Interim Series Class B
Preferred Stock is convertible into the number of fully paid and
nonassessable shares of the Company Common Stock that results from
dividing $3.50 into the sum of $200,000 plus all accrued but
unpaid dividends on each such share at the time of conversion.
The Company's Amended and Restated Certificate of
Incorporation provides holders of Preferred Stock with a
liquidation preference payable upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company of $10.00
per share, plus all accrued and unpaid dividends to be paid prior
to any distributions to the holders of Company Common Stock. In
the event the assets of the Company are insufficient to pay the
holders of the Preferred Stock their entire liquidation
preference, the assets will be distributed ratably among the
holders of the outstanding Preferred Stock. Subject to such
preferential rights, the holders of Company Common Stock are
entitled to receive, ratably, all the remaining assets of the
Company.
SHARES OF COMPANY COMMON STOCK ELIGIBLE FOR FUTURE SALE;
POTENTIAL FOR DILUTION
The Company may issue significant amounts of Company Common
Stock as a result of the exercise of options or the conversion of
Preferred Stock. Further, as described above, the Company has
filed a registration statement under the Securities Act of
1933 covering the possible resale of 18,949,798 shares by the
Major Stockholders and expects to file an additional registration
statement covering Summit's Remaining Shares in early
1998 . See "Risk Factors - Sale of Company Common Stock by
Summit and Major Stockholders" and "Acquisition of RCII -
Registration of Company Common Stock Received in the Acquisition."
In particular, as of September 30, 1997, options issued
pursuant to the Company's 1995 Long-Term Stock Incentive Plan and
the Directors' Non-Discretionary Stock Option Plan to purchase up
to 2,363,288 shares of Company Common Stock exercisable over the
next several years were outstanding at prices ranging from $2.25
to $8.00. The shares of Company Common Stock issuable upon
exercise of the foregoing options have been registered and will be
freely tradeable upon exercise.
On September 30, 1997, the 12.6 shares of the Company's
Interim Series Class B Preferred Stock issued and outstanding
would have been convertible into 1,220,228 shares of Company
Common Stock, which number shall increase over time in accordance
with the formula governing the conversion of such Preferred Stock.
See "Description of Securities," "Acquisition of RCII - Change in
Terms of the Company's Interim Series Class B Preferred Stock" and
"Certain Relationships and Related Transactions."
Further, under the Registration Rights Agreement, Summit has
the right to demand that the Company register under the Securities
Act of 1933 the Remaining Shares to enable Summit to sell such
shares on any date after May 17, 1998. The Company has filed a
registration statement covering 18,948,798 additional shares
of Company Common Stock for resale by the Major Stockholders.
There is no restriction on the timing of the disposition, or the
amount of sale, of these shares by Summit or the Major
Stockholders once the registration statement becomes
effective. See "Acquisition of RCII - Registration of Company
Common Stock Received in the Acquisition" and "-The Registration
Rights Agreement," "Risk Factors - Sale of Common Stock by Summit
and Major Stockholders" and "Plan of Distribution."
TAX MATTERS
Summit has been advised that the distribution of Shares to
the Summit Stockholders will not qualify as a tax-free
distribution for federal income tax purposes. A holder of Summit
common stock who receives shares of Company Common Stock pursuant
to the distribution will be treated under the Internal Revenue
Code of 1986, as amended (the "Code"), as receiving a distribution
equal to the aggregate of the fair market value of the Company
Common Stock received on the distribution date plus the amount of
cash, if any, received. The distribution will be treatable as a
dividend to the extent of Summit's current and accumulated
earnings and profits. In computing such earnings and profits, the
accumulated deficit in earnings and profits will not be available
to offset any current earnings and profits for the year of the
distribution. Any excess portion of the distribution first will
be treated as a reduction in the basis of the Summit common stock
held by such stockholder, and, thereafter, as gain from the sale
or exchange of such holder's Summit common stock (which gain would
be treated as "adjusted net capital gain" or "mid-term gain" if
(i) the Summit common stock is held as a capital asset and (ii)
the respective requisite holding period has been satisfied). The
determination of a corporation's earnings and profits entails
complex factual and legal analysis, and the current earnings and
profits cannot be determined until the close of such taxable year.
The distribution itself may result in Summit having such earnings
and/or profits.
A holder's basis in Company Common Stock will be equal to the
fair market value of such stock on the distribution date and the
holding period for such stock will be deemed to commence as of the
distribution date. A Summit Stockholder's holding period for
Summit common stock will be unaffected by the distribution.
THE FOREGOING IS A SUMMARY OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES ON THE DISTRIBUTION TO HOLDERS OF SUMMIT COMMON STOCK
UNDER CURRENT LAW. IT DOES NOT PURPORT TO ADDRESS ALL FEDERAL
INCOME TAX CONSEQUENCES, OR TAX CONSEQUENCES THAT MAY ARISE UNDER
THE TAX LAWS OR OTHER JURISDICTIONS OR THAT MAY APPLY TO
PARTICULAR CATEGORIES OR STOCKHOLDERS. EACH HOLDER OF SUMMIT
COMMON STOCK SHOULD CONSULT SUCH HOLDER'S TAX ADVISOR AS TO THE
PARTICULAR CONSEQUENCES OF THE DISTRIBUTION TO SUCH STOCKHOLDER,
INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX
LAWS, AND THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS THAT MAY
AFFECT TAX CONSEQUENCES DESCRIBED ABOVE.
LEGAL MATTERS
The validity of the Shares of Company Common Stock offered
hereby will be passed upon by Dinsmore & Shohl LLP, Cincinnati,
Ohio.
EXPERTS
The consolidated balance sheets of LCA-Vision Inc. and
subsidiaries as of December 31, 1996 and 1995 and the consolidated
statements of operations, shareholders' equity and cash flow for
each of the three years in the period ended December 31, 1996,
incorporated by reference in this registration statement, have
been incorporated herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The financial statements of RCII as of December 31, 1996 and
1995 and for each of the years in the three-year period ended
December 31, 1996, incorporated by reference in this Prospectus
from the Company's current Report on Form 8-K/A, filed October 23,
1997, have been incorporated by reference herein in reliance upon
the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
The Company's Amended Bylaws provide that each person who is
made a party or is otherwise involved in an action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
Company), by reason of the fact that he is or was a director,
officer, employee or agent of the Company, or is or was serving at
the request of the Company as a director, officer, employee or
agent of another entity, shall be indemnified and held harmless by
the Company to the fullest extent authorized by the Delaware
General Corporation Law (the "DGCL") against all expenses,
including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if the director or officer
acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company and with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The intent of the
Company's Amended Bylaws is to make indemnification for directors
and officers mandatory rather than permissive. In addition, the
Amended Bylaws provide that the Company may pay a director's or
officer's expenses incurred in defending any such proceeding, in
advance of the proceeding's final disposition, provided that the
director or officer delivers to the Company an undertaking to
repay all advanced amounts if it is ultimately determined that he
is not entitled to be indemnified under Delaware law. To the
extent that an officer or director is successful on the merits in
any proceeding, Delaware law mandates indemnification for
expenses, including attorneys' fees. The Company's Amended Bylaws
also provide that the Company may maintain insurance, at its
expense, to protect itself and any director, officer, employee or
agent of the Company against any expense, liability or loss,
whether or not the Company would have the power to indemnify such
person against such expense, liability or loss under the DGCL.
The Company has directors and officers liability insurance.
Further, in the Registration Rights Agreement, the Company
agreed to indemnify Summit (including its officers, directors,
affiliates and partners), each Selling Stockholder and each
person, if any, who controls Summit, from and against all losses,
claims, damages and expenses in connection with certain
liabilities arising under this registration statement.
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 foregoing
provisions, 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.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following is an itemized statement of the expenses (all
but the SEC fees are estimates) in connection with the issuance of
the securities being registered hereunder. All such expenses will
be borne by the Company.
SEC registration fees $ 8,251.01
Legal fees and expenses $25,000.00
Accounting fees and expenses $25,000.00
Miscellaneous $ 1,748.99
Total $60,000.00
Item 15. Indemnification of Directors and Officers
The Company's Amended Bylaws provide that each person who is
made a party or is otherwise involved in an action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
Company), by reason of the fact that he is or was a director,
officer, employee or agent of the Company, or is or was serving at
the request of the Company as a director, officer, employee or
agent of another entity, shall be indemnified and held harmless by
the Company to the fullest extent authorized by the Delaware
General Corporation Law (the "DGCL") against all expenses,
including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if the director or officer
acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company and with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The intent of the
Company's Amended Bylaws is to make indemnification for directors
and officers mandatory rather than permissive. In addition, the
Amended Bylaws provide that the Company may pay a director's or
officer's expenses incurred in defending any such proceeding, in
advance of the proceeding's final disposition, provided that the
director or officer delivers to the Company an undertaking to
repay all advanced amounts if it is ultimately determined that he
is not entitled to be indemnified under Delaware law. To the
extent that an officer or director is successful on the merits in
any proceeding, Delaware law mandates indemnification for
expenses, including attorneys' fees. The Company's Amended Bylaws
also provide that the Company may maintain insurance, at its
expense, to protect itself and any director, officer, employee or
agent of the Company against any expense, liability or loss,
whether or not the Company would have the power to indemnify such
person against such expense, liability or loss under the DGCL.
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 foregoing
provisions, 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.
<PAGE>
Item 16. Exhibits
Each of the following exhibits is filed or incorporated by
reference in this Registration Statement.
Exhibit
Number Description of Exhibit
(5) and
(23.1) Opinion and consent of Dinsmore & Shohl LLP, counsel
to the Registrant. (a)
(8) and (23.2) Opinion and Consent of Coopers & Lybrand
L.L.P.
(23.3) Consent of KPMG Peat Marwick LLP (a)
(23.4) Consent of Coopers & Lybrand L.L.P. (a)
(24) Powers of Attorney (a)
____________________
(a) Previously filed.
Item 17. Undertakings
(a) Rule 415 Offering. The undersigned small business
issuer hereby undertakes that it will:
(1) File, during any period in which it offers
or sells securities, a post-effective amendment to this
registration statement to include any additional or changed
material information on the plan of distribution.
(2) For determining liability under the
Securities Act, treat each post-effective amendment as a new
registration statement of the securities offered, and the offering
of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove
from registration any of the securities that remain unsold at the
end of the offering.
(e) Request for Acceleration of Effective Date. Insofar
as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the small business issuer pursuant to
the foregoing provisions, or otherwise, the small business issuer
has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the small business issuer
of expenses incurred or paid by a director, officer or controlling
person of the small business issuer in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the small business issuer 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 whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(f) Reliance on Rule 430A. The undersigned small
business issuer will:
(1) For determining any liability under the
Securities Act, treat the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the small business issuer under Rule 424(b)(1), or (4) or
497(h) under the Securities Act as part of this registration
statement as of the time the Commission declared it effective.
(2) For determining any liability under the
Securities Act, treat each post-effective amendment that contains
a form of prospectus as a new registration statement for the
securities offered in the registration statement, and that
offering of the securities at that time as the initial bona fide
offering of those securities.
<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 a Form S-3 and
has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Cincinnati, State of Ohio on the 4th day of
December , 1997.
LCA-VISION INC.
By: /S/ Stephen N. Joffe, M.D.
Stephen N. Joffe, M.D.,
President and Chief
Executive Officer
In accordance with the requirements of the Securities Act of
1933, this Registration Statement was signed by the following
persons in the capacities and on the dates indicated.
Signature Title Date
/S/ Stephen N. Joffe, M.D. President and December 4, 1997
Stephen N. Joffe, M.D. Chief Executive Officer
(Principal Executive Officer:)
/S/ Larry P. Rapp Chief Financial Officer December 4, 1997
Larry P. Rapp (Principal Financial and
Accounting Officer)
/S/ John C. Hassan* Director December 4, 1997
John C. Hassan
/S/ Stephen N. Joffe, M.D. Director December 4, 1997
Stephen N. Joffe, M.D.
/S/ John H. Gutfreund* Director December 4, 1997
John H. Gutfreund
/S/ William O. Coleman* Director December 4, 1997
William O. Coleman
___________________
* Signed by Stephen N. Joffe as attorney-in-fact for the named
individual.
Exhibit 8 and 23.2
December 4, 1997
Summit Technology, Inc.
21 Hickory Drive
Waltham, MA 02154
Gentlemen:
Pursuant to your request, we are providing our opinion as to
certain federal income tax consequences of the pro rata
distribution (the "Distribution") by Summit Technology, Inc.
("Summit") of 9,000,000 shares of common stock of LCA-Vision, Inc.
("LCA") to the holders of shares of Summit common stock.
In rendering our opinion, we have relied upon (i) LCA's
registration statement on Form S-3 filed with the Securities and
Exchange Commission on October 31, 1997 ("Registration
Statement"); (ii) the representations given by the parties, which
are annexed hereto; and (iii) such other documents as we have
deemed necessary or appropriate. We have assumed the genuineness
of all signatures, the legal capacity of all natural persons, the
authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us
as certified, conformed or photostatic copies, and the
authenticity of the originals of such copies. We have also
assumed that there is no material information relating to the
Distribution not reflected in the Registration Statement or in the
Acquisition Agreement between LCA, Summit and Refractive Centers
International, Inc., dated July 23, 1997. Our opinion is
expressly conditioned on, among other things, the accuracy as of
the date hereof, and the continuing accuracy, of all such facts
and representations. If any of the representations annexed hereto
are incorrect in whole or in part, or if the terms of the LCA
registration statement or any agreement referenced therein that
relate to the Distribution are altered before the Distribution,
such inaccuracies or alterations may have a material effect upon
our opinion expressed in this letter.
Our opinion is based on the relevant provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the regulations
thereunder, and the judicial and administrative interpretations
thereof. There are no assurances that the conclusions reached
herein will be accepted by the Internal Revenue Service or
judicial authorities if challenged. Any legislative, regulatory,
administrative, or judicial decisions subsequent to the date of
this opinion may have an impact on the validity of our
conclusions. Unless you specifically request otherwise, we will
not update our opinion for changes to the law, regulations, or the
judicial and administrative interpretations thereof. In addition,
pursuant to your request, we have not analyzed the specific state
or local income tax consequences associated with the Distribution.
Based upon and subject to the foregoing, it is the opinion of
Coopers & Lybrand, L.L.P. that the Distribution will constitute a
distribution of property by a corporation with respect to its
stock as described in Section 301(a) of the Code.
As such, the Distribution will have the following U.S. federal
income tax consequences for the Summit common shareholders:
1. The amount of the Distribution will be the fair market
value of the LCA stock received by Summit shareholders on the date
of the Distribution plus the amount of cash or other property
received.
2. The portion of the Distribution taxable to each
shareholder as ordinary income per share of Summit common stock
will be that share's pro-rata portion of the earnings and profits
of Summit, determined by looking first to the earnings and profits
accumulated during the taxable year of the distribution, and then
(to the extent that the distribution exceeds such current-year
earnings and profits) to the earnings and profits accumulated
prior to that taxable year. Thus, even if Summit carries a
deficit in earnings and profits accumulated during prior years, if
Summit's current-year earnings and profits for the year that
includes the Distribution date equal or exceed the amount of the
Distribution, the entire Distribution will constitute a taxable
dividend. Any gain under Section 311(b) resulting from the
Distribution may create current year earnings and profits in
Summit.
3. If the total amount of Summit's earnings and profits
accumulated during the taxable year of the Distribution (computed
as of the close of the year without diminution by reason of any
distributions made by Summit during the year and without regard to
the amount of earnings and profits at the time of the
Distribution) is less than the total amount of distributions made
during the year, then the amount of current year earnings and
profits associated with the Distribution will be the proportion of
the Distribution which the total of the earnings and profits of
the taxable year bears to the total distributions made during the
year. After such determination is made, Summit's accumulated
earnings and profits will be applied against each distribution
made by Summit during the tax year in question in order of
occurrence.
4. To the extent that the Distribution exceeds Summit's
current and accumulated earnings and profits, a ratable portion of
such excess will be applied against and reduce each Summit
shareholder's basis in his or her Summit common stock. This
determination must be made on a share-by-share and shareholder-by-
shareholder basis.
5. To the extent that the entire Distribution exceeds
Summit's current and accumulated earnings and profits, and the
pro-rata portion of the excess exceeds an individual shareholder's
basis in a share of Summit common stock, the excess of such
portion will constitute gain from the exchange of the Summit
common stock. If the Summit common stock is a capital asset in
the hands of a shareholder, such gain will be capital gain to such
shareholder. The period during which the shareholder has held
such share of stock will be used to determine whether such gain
constitutes short-, mid- or long-term capital gain.
6. A Summit shareholder's basis in LCA stock received in
the Distribution will be equal to the fair market value of such
LCA stock on the date of the Distribution.
7. A Summit shareholder's holding period for the LCA
stock received in the Distribution will begin on the date of the
Distribution.
Except as expressly set forth above, we express no other opinion.
Specifically, we express no opinion regarding any transfer of
stock by Summit to LCA, or the impact of the Distribution on such
transfer.
We hereby consent to the filing of this opinion as Exhibits 8 and
23.2 to the Registration Statement on Form S-3 of LCA-Vision,
Inc., filed with the Securities & Exchange Commission on October
31, 1997.
Except as provided above, this opinion is being furnished only to
you in connection with the Distribution and solely for your
benefit in connection therewith and may not be used or relied upon
for any other purpose and may not be circulated, quoted or
otherwise referred to for any other purpose without our express
written consent.
Very Truly Yours,
/s/ Coopers & Lybrand, L.L.P.
Coopers & Lybrand, L.L.P.
