<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 1, 1996
REGISTRATION NO. 333-00448
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- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
VISTA LASER CENTERS OF MICHIGAN, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
NEVADA 8093 13-3847240
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
2224 WALKER ROAD
WINDSOR, ONTARIO, CANADA N8W 3P6
(519) 253-3396
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
(ADDRESS OF PRINCIPAL PLACE OF BUSINESS OR INTENDED PLACE OF BUSINESS)
THEODORE J. MAYER, SECRETARY
80 BROAD STREET, SUITE 605
NEW YORK, NEW YORK 10004
(212) 635-0838
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
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LAW OFFICE OF WILLIAM M. CURTIS GARRY S. O'RAFFERTY, ESQ.
25241 BUCKSKIN DRIVE TITUS, BRUECKNER & BERRY, P.C.
LAGUNA HILLS, CALIFORNIA 92653-5736 7373 NORTH SCOTTSDALE ROAD, SUITE B-252
SCOTTSDALE, ARIZONA 85253
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
as soon as practicable after this Registration Statement shall become effective.
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, 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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
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10% Series A Cumulative Convertible
Preferred Stock(2)................ 920,000 shares $5.00 $4,600,000 $ 1,586.21
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Underwriter's Warrants.............. 80,000 warrants $0.001 $ 80 .03
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10% Series A Cumulative Convertible
Preferred Stock issuable upon
exercise of Underwriter's
Warrants(4)....................... 80,000 shares $6.00 $ 480,000 165.52
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Common stock(3)(4).................. 1,000,000 shares -0- -0- --
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TOTAL $ 1,751.76
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 and based upon the proposed maximum offering price.
(2) Includes 120,000 shares subject to the Underwriter's over-allotment option.
See "Underwriting."
(3) Includes shares of Common Stock issuable upon conversion of 10% Series A
Cumulative Convertible Preferred Stock.
(4) Pursuant to Rule 416, there are also being registered hereunder such
additional securities as may become issuable upon conversion of 10% Series A
Cumulative Convertible Preferred Stock or upon exercise of the Underwriter's
Warrants pursuant to anti-dilution provisions.
------------------------
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
VISTA LASER CENTERS OF MICHIGAN, INC.
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM SB-2 ITEM NUMBER AND CAPTION LOCATION OR HEADING IN PROSPECTUS
- ------------------------------------------------------- -------------------------------------
<C> <S> <C>
1. Front of Registration Statement and Outside Front
Cover Page of Prospectus......................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front Cover Page; Outside Back
Cover Page
3. Summary Information and Risk Factors............. Prospectus Summary; Risk Factors
4. Use of Proceeds.................................. Prospectus Summary; Use of Proceeds
5. Determination of Offering Price.................. Risk Factors; Underwriting
6. Dilution......................................... Dilution
7. Selling Security Holders......................... (Not Applicable)
8. Plan of Distribution............................. Outside Front Cover Page;
Underwriting
9. Legal Proceedings................................ (Not Applicable)
10. Directors, Executive Officers, Promoters and
Control Persons.................................. Management; Certain Transactions;
Principal Stockholders
11. Security Ownership of Certain Beneficial Owners
and Management................................... Management; Certain Transactions;
Principal Stockholders
12. Description of Securities........................ Outside Front Cover Page; Prospectus
Summary; Description of Securities;
Federal Income Tax Considerations;
Underwriting
13. Interests of Named Experts and Counsel........... (Not Applicable)
14. Disclosure of Commission Position on on
Indemnification for Securities Act Liabilities... (Not Applicable)
15. Organization Within Last Five Years.............. Certain Transactions
16. Description of Business.......................... Prospectus Summary; Risk Factors; Use
of Proceeds; Capitalization; Selected
Financial Data; Management Discussion
and Analysis and Plan of Operation;
Proposed Business; Certain
Transactions; Dividend Policy;
Financial Statements
17. Management Discussion and Analysis or Plan of
Operation........................................ Management Discussion and Analysis
and Plan of Operation
18. Description of Property.......................... Proposed Business
19. Certain Relationships and Related Parties........ Management; Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters.......................................... (Not Applicable)
21. Executive Compensation........................... Management
22. Financial Statements............................. Summary Financial Data; Financial
Statements
23. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure.............. (Not Applicable)
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE
SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 1, 1996
PROSPECTUS
VISTA LASER CENTERS OF MICHIGAN, INC.
800,000 SHARES OF 10% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
The 800,000 shares of 10% Series A Cumulative Convertible Preferred Stock,
par value $.01 per share ("Series A Preferred") of Vista Laser Centers of
Michigan, Inc., a Nevada corporation (the "Company") are being offered by the
Company in a firm commitment underwriting at a price of $5.00 per share. Shares
of Series A Preferred are entitled to a $.50 cumulative dividend per annum,
payable annually in cash or, if cash dividends may not legally be paid or if
cash resources are insufficient, at the Company's option in Series A Preferred
or Common Stock. Commencing 30 days after the date of this Prospectus, each
share of Series A Preferred is convertible into one (1) share of the Company's
common stock, par value $.01 per share ("Common Stock"), subject to adjustment
in certain events to prevent dilution. Series A Preferred may be redeemed at the
option of the Company at any time upon not less than 30 days' prior written
notice at a redemption price of $7.50 per share. The liquidation preference of
Series A Preferred is $5.00 per share and each share is entitled to one vote on
all matters on which any stockholders are entitled to vote. See "Description of
Securities", "Principal Stockholders" and "Underwriting".
Prior to this offering, there has been no public market for any securities
of the Company and there can be no assurance that an active public market will
develop or, if developed, that it will be sustained. The initial offering price
of the Series A Preferred stock was determined by negotiations between the
Company and Dickinson & Co. (the "Representative"), as representative of the
several underwriters, and does not necessarily relate to the Company's book
value or other established criteria of value. See "Underwriting". The Company
has applied for listing of the Series A Preferred Stock on the Nasdaq Small Cap
Market under the trading symbol "IIMIP", but there can be no assurance that such
application will be approved. Even if approved for listing, the Company will be
required to maintain certain minimum criteria to maintain such listing, as to
which there can be no assurance.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD NOT BE PURCHASED
BY ANY PERSON WHO CANNOT AFFORD RISK OF LOSS OF THE INVESTMENT.
SEE "RISK FACTORS" AT PAGE 7 OF THIS PROSPECTUS.
THESE ARE SPECULATIVE SECURITIES. THE COMPANY IS IN THE DEVELOPMENT
STAGE AND CURRENTLY HAS NO OPERATIONS PRIOR TO THIS OFFERING.
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.
<TABLE>
<S> <C> <C> <C>
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PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
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Per Share........................... $5.00 $.50 $4.50
Total(3)............................ $4,000,000 $400,000 $3,600,000
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</TABLE>
(1) In addition, the Company has agreed to pay to the Representative a 3%
nonaccountable expense allowance and to sell to the Representative warrants
("Underwriter's Warrants") exercisable at $6.00 per share to purchase 80,000
shares of Series A Preferred stock. The Company has agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses of the offering, including the nonaccountable
expense allowance in the amount of $120,000 ($138,000 if the Underwriters'
over-allotment option is exercised in full), payable by the Company
estimated at $200,000.
(3) The Company has granted the Underwriters an option exercisable within 45
days after the date of this Prospectus, to purchase up to 120,000 additional
shares of Series A Preferred for the purpose of covering over-allotments, if
any. If the Underwriters exercise such option in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to Company will
be $4,600,000, $460,000 and $4,140,000, respectively. See "Underwriting."
The shares offered hereby are offered by the several Underwriters subject
to prior sale, when, as and if delivered to and accepted by them, including the
right of the Underwriters to withdraw, cancel or reject orders in whole or in
part and subject to certain other conditions. It is expected that the delivery
of certificates representing the shares will be made against payment on or about
, 1996 at the offices of the Representative.
DICKINSON & CO. REDSTONE SECURITIES, INC.
The date of this Prospectus is , 1996.
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A
PREFERRED STOCK AND THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission
("Commission") a Registration Statement on Form SB-2 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities covered
by this Prospectus. For the purposes hereof, the term "Registration Statement"
means the original Registration Statement and any and all amendments thereto,
including the schedules and exhibits to such original Registration Statement or
any such amendment. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, to which reference is hereby made. Each statement made in this
Prospectus concerning a document filed as an exhibit to the Registration
Statement is qualified in its entirety by reference to such exhibit for a
complete statement of its provisions.
Any interested party may inspect the Registration Statement, without
charge, at the public reference facilities of the Commission at its principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and at its regional offices in Chicago (Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661) and in New York (Seven World Trade
Center, Suite 1300, New York, New York 10048). Any interested party may obtain
copies of all or any portion of the Registration Statement at prescribed rates
from the Public Reference Section of the Commission at its principal office at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
U.S. DOLLAR PRESENTATION
The Company publishes its consolidated financial statements in U.S.
dollars. The Company's initial business operations will be located in Canada and
it is anticipated that a significant portion of its revenues and expenses may be
collected and paid in Canadian dollars. Income and expense items in Canadian
currency will be translated at the weighted average exchange rate prevailing
during the period, except that expenses related to nonmonetary assets and
liabilities will be translated at historical rates. Except as otherwise stated
herein, in this Prospectus all references to "$" are to United States currency
and all monetary amounts are presented in U.S. dollars.
The Company intends to furnish its stockholders each year with annual
reports containing audited financial statements and a report thereon expressed
by independent public accountants and such other reports as the Company deems
appropriate or as may be required by law.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements (including the notes thereto) appearing elsewhere in this Prospectus.
Each prospective investor is urged to read this Prospectus in its entirety. An
investment in the securities offered hereby involves a high degree of risk and
the securities should not be purchased except by those able to afford the loss
of their investment. See "Risk Factors."
Unless otherwise indicated, all per share data and information in this
Prospectus relating to the number of shares assumes that the Underwriter's
over-allotment option to purchase an additional 120,000 shares of Series A
Preferred stock is not exercised and that the Underwriter's Warrants to purchase
80,000 shares of Series A Preferred stock are not exercised.
A glossary of certain medical and other terms used in this Prospectus is
set forth under the caption "Glossary" at the end of this Prospectus.
THE COMPANY
Vista Laser Centers of Michigan, Inc. (the "Company") is a development
stage enterprise recently organized on June 30, 1995 to acquire advanced laser
medical equipment and to manage and administer laser vision correction ("LVC")
support services ("LVC Services") under contracts with independent
ophthalmologists ("MDs") and optometrists ("ODs"). The Company's activities to
date have consisted primarily of market research, seeking affiliations with
experienced LVC eye care professionals, and negotiating agreements to acquire
equipment and provide support services to vision care professionals in Ontario
and Michigan.
The Company will enter into nonexclusive service agreements with
independent MDs and ODs who desire to contract for use of the Company's
equipment and LVC Services. The Company will earn its fees for the fair market
value of the Company's LVC Services by billing health care professionals at the
time of use, with such fees typically based upon a negotiated percentage of the
gross procedure fees charged to patients by the professional; payment normally
will be received when the professional collects its gross procedure fee from the
patient. The gross procedure fee is established by the professional, except that
the Company's consent will be required for gross procedures fees at less than
$1,200 per eye. Generally speaking, gross procedure fees charged by
professionals for LVC treatment in most markets currently ranges from
approximately $1,500 to $2,000 per eye, although there can be no assurance these
levels will be maintained for the long term. Support services offered by the
Company will include, among others, access to the Company's equipment, supplies
and support personnel; administration of accounting, billing, collection and
other information processing functions; training and education in advanced LVC
procedures; and marketing support. There can be no assurance that MDs and ODs
will require and contract for the Company's LVC Services, and professionals that
do contract with the Company legally cannot be required to use exclusively the
Company's services for their LVC practice.
Advanced equipment planned to be acquired by the Company in the United
States. and Canada include excimer lasers for photorefractive keratectomy
("PRK") procedures recently approved for use in the U.S. and, in Canada, other
forms of laser procedures which are not yet approved for use in the U.S., such
as laser assisted in situ keratomileusis ("LASIK"). PRK laser treatment is
useful in correcting the vast majority of nearsighted (myopia) refractive
disorders as an alternative to eyeglasses, contact lens or surgical incision
procedures such as radial keratotomy ("RK"). LASIK, although a more delicate
procedure than PRK, offers advantages of quicker healing and may also be used to
treat farsightness (hyperopia), astigmatism and more extreme cases of myopia.
PRK, LASIK and other LVC procedures performed with excimer and holmium laser
systems improve visual acuity by removing submicron layers of tissue from the
surface of the cornea to reshape the eye. LVC procedures are administered on an
outpatient basis by the independent health care professional, typically
requiring from 15 to 30 minutes for the actual procedure in addition to
pre-operative diagnosis and subsequent post-operative care.
A key part of the Company's strategy is to offer professionals the benefit
of training, consulting and advisory services of certain ophthalmologists
experienced in a variety of LVC treatments, procedures and post-operative care.
In order to obtain access to this expertise, the Company has entered into
consulting agreements
3
<PAGE> 6
with Dr. Donald G. Johnson of British Columbia and Dr. J. Charles Casebeer of
Arizona, who are directors and stockholders of the Company. Dr. Casebeer's
professional corporation will receive compensation for his services as Chairman
of the Board and for assisting in management of the Company's training program
for MDs and ODs. To date, Dr. Johnson has successfully treated over 7,000 eyes
using LVC procedures and has developed an advanced proprietary method called the
Johnson transepilthelial multi-zone, multi-pass PRK procedure ("TMM PRK")
currently approved for use in Canada and covered by a patent application owned
by Dr. Johnson. Dr. Casebeer's experience includes more than 6,000
keratorefractive procedures (surgical incisions of the cornea), over 100 PRK
cases for treatment of myopia and approximately 40 LASIK procedures in the U.S.
under protocols established by the U.S. Food and Drug Administration ("FDA"), as
well as approximately 150 LASIK cases in France, Saudi Arabia and the Far East.
Dr. Casebeer has served as a course director for refractive surgical techniques
and developments at numerous courses and symposiums throughout the world. See
"Management" and "Certain Transactions".
To date, the Company has assumed a lease to acquire a Summit Technology
holmium laser system for intended use in Michigan and has contracted upon
completion of this offering to purchase from Dr. Fouad Tayfour of Windsor,
Ontario, a Summit excimer laser system, a Sunrise Technologies LTK holmium laser
system and related equipment for use at facilities in Windsor, Ontario to be
subleased by the Company from an affiliate of Dr. Tayfour. The Company has
entered into other agreements with Dr. Tayfour for him to render consulting
services to the Company, to train other MDs and ODs, and to define terms for use
by Dr. Tayfour of equipment and LVC Services to be offered by the Company upon
completion of this offering. Dr. Tayfour also has the right of designating the
Company's Chief Executive Officer and three of six members of its board of
directors. Since 1991, Dr. Tayfour has performed more than 2,000 LVC procedures
in Canada, principally by use of the LASIK technique.
Vista Technologies Inc. ("Vista Technologies") is a founder and principal
stockholder of the Company. The Company has entered into agreements with Vista
Technologies and Refractive Services 800 Corp. ("RS-800"), a wholly-owned
subsidiary of Vista Technologies. Vista Technologies currently operates five PRK
surgical centers in Europe and will provide certain consulting services to the
Company for a fee equal to 5% of the Company's revenues attributable to LVC
Services less a credit of $5,000 per month. RS-800 has agreed to license, at the
Company's option, use of certain 800 and 900 area code telephone numbers as part
of the Company's marketing and public education programs for a fee equal to
2 1/2% of LVC Services revenues directly attributable to use of those numbers,
if any. Vista Technologies and its corporate affiliates have formed, and intend
to form and sponsor in the future, additional LVC Service companies using the
Vista Laser Centers name in other North American geographic markets. Dr. Johnson
is Chairman of the Board of Vista Technologies and Drs. Johnson and Casebeer
were elected directors of Vista Technologies on February 16, 1996; it is
anticipated they will act as consultants for Vista Technologies in these other
enterprises. Investors in this offering will not acquire an interest in other
companies formed and sponsored by Vista Technologies.
The Company's principal executive offices are located at 2224 Walker Road,
Windsor, Ontario N8W 3P6, Canada, telephone number (519) 253-3396. It is
anticipated that the Company's Canadian operations will be conducted through a
recently-formed, wholly-owned Ontario subsidiary that has not previously engaged
in any business activities. All references in this Prospectus to the Company
includes both the Company and its subsidiaries unless otherwise indicated by the
context.
See "Use of Proceeds", "Management Discussion and Analysis and Plan of
Operation", "Proposed Business", "Management" and "Certain Transactions".
4
<PAGE> 7
THE OFFERING
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Securities Offered: 800,000 shares of Series A Preferred stock at a price of $5.00 per
share. See "Description of Securities" and "Underwriting".
Securities to be
outstanding after this 900,000 shares of Series A Preferred stock, 200,000 shares of
offering(1): Series B Preferred stock and 30,000 shares of Common Stock.
Summary terms of Series A
Preferred:
Dividends 10% ($.50 per share) cumulative dividend per annum, payable
annually commencing one year after this offering. Dividends will
be payable in cash or, at the Company's option, may be paid in
Series A Preferred or Common Stock subject to the prior
registration of such dividend shares under the Securities Act of
1933.
Conversion Rights Each share will be convertible into one (1) share of Common Stock
at any time commencing 30 days after the date of this Prospectus
until the second business day prior to redemption of Series A
Preferred, if called for redemption.
Optional Redemption Each share will be redeemable at the option of the Company upon
not less than 30 days' prior written notice at a redemption price
of $7.50 per share. There are no sinking fund or other mandatory
redemption provisions.
Voting One vote per share on all matters on which stockholders are
entitled to vote or consent.
Liquidation Preference $5.00 per share.
Use of Proceeds: Proceeds will be applied to equipment purchases and hiring
personnel to provide LVC Services and related working capital
requirements. At least $500,000 of such proceeds used for
equipment purchases will be paid to an affiliate of Dr. Fouad
Tayfour, who has entered into certain agreements with the Company
effective upon completion of this offering, and at least $155,000
of proceeds will be applied to the payment of compensation to
officers and directors within 12 months after the date of this
Prospectus. An affiliate of Dr. Tayfour will also receive a
$500,000 10% note payable due on the second anniversary of the
date of this Prospectus. See "Use of Proceeds", "Management
Discussion and Analysis and Plan of Operation", "Proposed
Business", "Management" and "Certain Transactions".
Risk Factors: The securities offered hereby are speculative, involve a high
degree of risk, and should not be purchased by investors who
cannot afford the loss of their investment. Investors should
review and carefully consider the information set forth under
"Risk Factors" and "Dilution".
</TABLE>
- ---------------
(1) Does not include the Underwriter's over-allotment option, shares of Series A
Preferred stock reserved for issuance upon exercise of the Underwriter's
Warrants, shares of Common Stock reserved for conversion of Series A
Preferred and Series B Preferred stock or shares reserved for issuance upon
exercise of outstanding Class A Warrants and stock options. See
"Management -- 1995 Stock Option Plan", "Description of Securities" and
"Underwriting".
5
<PAGE> 8
SUMMARY FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
(JUNE 30, 1995) THROUGH
MARCH 31, 1996
-----------------------
<S> <C>
Interest income......................................... $ 557
Net (loss) adjusted for dividends in arrears............ $ (50,689)
Net (loss) per common and common equivalent share....... $ (0.22)
Weighted average common and common equivalent shares
outstanding........................................... 226,269
Dividends in arrears.................................... $ 16,042
</TABLE>
CONSOLIDATED BALANCE SHEET DATA:
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------
ACTUAL AS ADJUSTED(1)
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<S> <C> <C>
Current assets..................................... $ 39,648 $2,322,353
Total assets....................................... $370,584 $4,856,142
Long-term debt..................................... -- $ 916,192
Stockholders' equity............................... $312,450 $3,939,950
</TABLE>
- ---------------
(1) Gives effect to (i) the sale of 800,000 shares of Series A Preferred stock
offered hereby, (ii) the anticipated application of estimated net proceeds
therefrom (after the deduction of underwriting discounts and commissions and
estimated expenses to be incurred by the Company in connection with such
offering), including cash outlays for equipment purchases totaling $550,000
and a $500,000 10% note payable due on the second anniversary of the date of
this Prospectus to Dr. Fouad Tayfour and certain other cash payments to
unaffiliated third parties for equipment totaling $700,000 and an investment
in a proposed joint venture totaling $150,000, and (iii) the assumed
exercise of 270,000 outstanding Class A Warrants and 50,000 outstanding
stock options. See "Use of Proceeds", "Management Discussion and Analysis
and Plan of Operation", "Management -- 1995 Stock Option Plan", "Certain
Transactions", "Description of Securities" and "Underwriting".
6
<PAGE> 9
RISK FACTORS
An investment in the securities offered hereby involves a high degree of
risk and should not be purchased by persons who cannot afford the loss of their
entire investment. The following factors, in addition to those discussed
elsewhere in this Prospectus, should be considered carefully in connection with
an investment in the securities of the Company offered hereby.
LIMITED OPERATING HISTORY AND DEVELOPMENT STAGE; ACCUMULATED DEFICIT. The
Company was organized on June 30, 1995 and is in the development stage. Since
its inception, the Company's activities have been devoted to development of its
plan of operations, negotiating agreements to acquire equipment and advisory
services for planned business activities that will commence immediately upon
completion of this offering, and raising capital to fund initial development
activities and the expenses of this public offering. Accordingly, the Company
has not generated any revenues and has no operating history from which to
forecast its future business and operations. As of March 31, 1996, the Company
has an accumulated deficit from operations since its inception of $34,647 and
deferred costs of this offering of $113,339.
The Company will be subject to numerous risks incident to the creation of
new businesses with no prior history of operations. Prospective investors should
consider the frequency with which newly developed businesses encounter
unforeseen expenses, difficulties, complications and delays, and other factors
such as the possibility of competition with larger companies. As examples, the
Company may experience unanticipated delays in the development of its LVC
Services, there can be no prediction as to the amount of revenues it will
generate and whether such revenues will be sufficient to provide positive cash
flows, and it may be difficult or impossible to obtain additional financing if
required for the Company's business. There can be no assurance that the Company
will achieve profitability in the future or that profitability, if achieved,
will be sustained. See "Use of Proceeds", "Management Discussion and Analysis
and Plan of Operation", "Proposed Business" and "Certain Transactions".
ABILITY TO CONTINUE AS A GOING CONCERN. The report of the Company's
independent certified public accountants contains an explanatory paragraph as to
the Company's ability to continue as a going concern. Among other factors cited
by the accountants as raising substantial doubt as to the Company's ability to
continue as a going concern is that the Company is dependent upon raising
additional financing through a public or private offering to meet its
obligations and commitments. See the Consolidated Financial Statements elsewhere
in this Prospectus.
DEPENDENCE ON MEDICAL PROFESSIONALS. Applicable laws in Canada and the
United States prevent a corporation (other than a professional medical
corporation) from providing medical and health care services to patients. The
Company will conduct its business by offering LVC equipment for use by licensed
professionals and providing billing, accounting, administrative, marketing and
management services to independent health care professionals who provide
refractive eye care. The Company's ability to realize revenues from independent
professionals, therefore, will be significantly dependent upon its ability to
attract the use of its equipment and LVC Services by ophthalmologists ("MDs")
and optometrists ("ODs") and on the performance of those professionals. In
addition, the amount of revenues to be received by the Company will be dependent
upon the amount of the gross procedure fee charged by professionals to their
patients, and the amount of such fees are established by the professionals and
not by the Company. To date the Company has entered into only one services
agreement with a licensed professional, Dr. Fouad Tayfour, although others are
in negotiation. There can be no assurance that professionals will require and
contract for the Company's LVC Services, and even those professionals that do
contract with the Company cannot be required to use the Company's services for
their LVC practice on an exclusive or any other basis. See "Proposed Business".
NO ASSURANCE OF MARKET ACCEPTANCE. The Company's proposed business of
offering LVC Services to support advanced laser procedures such as PRK, TMM PRK
and LASIK, involves recently developed technology and procedures and is a field
subject to technological innovation and governmental regulation. There can be no
assurance that health care professionals will require and contract for the
Company's LVC Services. The Company believes that its profitability and growth
will depend on broad market acceptance of LVC procedures in the United States
and Canada by health care professionals in the ophthalmic community and the
general public. Market acceptance of new methodology requires substantial time
and effort and is
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subject to various risks. The acceptance of LVC care may be adversely affected
by its cost, concerns relating to safety and efficacy, general resistance to
surgery, the effectiveness of alternative methods of correcting refractive
vision disorders, the lack of long-term follow-up data, the possibility of
unknown side effects and the lack of third-party reimbursement for the
procedures. Many consumers may choose not to have LVC due to the availability of
conventional nonsurgical and manually surgical methods of vision correction. Any
future reported adverse effects or other unfavorable publicity involving patient
outcomes from LVC could also adversely affect the Company's proposed business.
Market acceptance could also be affected by the ability of the Company's
consultants and other participants in the LVC market to train a broad population
of MDs in LVC procedures. There can be no assurance there will be significant
public acceptance of LVC technologies, and demand for the Company's equipment
and LVC Services would be adversely affected if broad market acceptance of such
procedures is not attained.
COMPETITION. The refractive eye care business generally, and the market for
corrective LVC procedures for which the Company intends to provide equipment and
support services, are characterized by intense competition and technological
innovation. Most of the companies engaged in these businesses have substantially
greater financial resources, personnel, marketing experience and other
capabilities than are currently available to the Company or will be available to
the Company upon the completion of this offering. With recent PMA approval or
conditional approval of PRK laser equipment systems by the FDA in late 1995, the
Company believes that competition for PRK service facilities within the United
States has and will continue to rapidly intensify. In addition, there are manual
surgical alternatives to LVC procedures for vision correction, such as radial
keratotomy ("RK"), that are generally less expensive than LVC procedures;
notwithstanding certain limitations, manual refractive surgical procedures as
well as eyeglasses and contact lenses are expected to remain competitive in the
market for refractive eye care due to cost considerations. See
"Business -- Competition".
DEPENDENCE ON MANAGEMENT. The success of the Company will be substantially
dependent on the services of its officers, directors and professional
consultants who have experience in the refractive eye care business and,
specifically, the management of surgical outpatient facilities. The Company is
dependent in particular upon the services of Ghassan Barazi, its President, who
has prior experience in managing a high volume ophthalmology outpatient clinic
specializing in refractive surgery. The Company has entered into an employment
agreement with Mr. Barazi. The Company has, or intends to, engage the services
of additional professional consultants and management personnel upon completion
of this offering. The Company's operations therefore will be dependent upon a
limited number of key employees and consultants. Loss of the services of these
or other key personnel could have a material adverse effect upon the Company.
The Company does not maintain key man insurance on the lives of its executive
officers and key professional consultants, although it may elect to apply for
such insurance after this offering has been completed. See "Management".
SUBSTANTIAL MANAGEMENT DISCRETION AS TO APPLICATION OF OFFERING
PROCEEDS. The Company has entered into contractual commitments to establish an
LVC Services site in Windsor, Ontario, immediately upon conclusion of this
offering by the Company and is currently negotiating to acquire a 50% interest
in a subsidiary to establish a second LVC Services site in Detroit, Michigan.
Due to various uncertainties, such as the extent of equipment financing which
may be available and the amount of future revenues that will affect operating
results and cash flow requirements, the Company is currently uncertain if it can
establish one or more additional sites offering LVC Services in either Michigan
or Southern Ontario. As a result of these uncertainties, the actual amount
expended to finance any category of expense may be increased or decreased by the
Company's Board of Directors, at its discretion, if a reapportionment or
redirection of funds is deemed to be in the best interests of the Company. See
"Use of Proceeds" and "Management's Discussion and Analysis and Plan of
Operation".
RISK OF LACK OF FUNDS TO PAY CASH DIVIDENDS ON SERIES A PREFERRED. Nevada
law prohibits the payment of dividends or other distributions to stockholders
if, after giving effect to such distribution, the Company's total assets would
be less than the sum of its total liabilities plus the amount that would be
needed to satisfy liquidation preferences of its Preferred Stock. Unless shares
of Preferred Stock are converted into Common Stock, after this offering the
aggregate liquidation preference of all series of Preferred Stock outstanding
will
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be $5,000,000 ($5,600,000 if the Underwriters' over-allotment option is
exercised), and the Company accordingly anticipates that its ability to pay cash
dividends on Preferred Stock will be dependent upon attaining profitable
operations, as to which there can be no assurance. The Company at its option,
however, has the right to pay accrued dividends in either Series A Preferred or
Common Stock if it would be legally prohibited from the payment of cash
dividends on its Preferred Stock or if its cash resources are insufficient for
the payment of dividends, subject to prior registration of such dividend shares
under the Securities Act of 1933. Prospective investors should consider the risk
that the Company may be unable to pay cash dividends on Series A Preferred as
such dividends accrue.
PROCEEDS BENEFITTING OFFICERS, DIRECTORS AND AFFILIATES. A portion of net
proceeds from this offering by the Company will be used immediately to pay the
$500,000 cash portion of approximately $1,050,000 in consideration to purchase
an existing laser system and related equipment, which approximates its fair
market value, from a corporation affiliated with Dr. Fouad Tayfour; the purchase
price balance of approximately $500,000 will be financed by a two-year 10% note.
The Company also will enter into an agreement to sublease certain facilities
from Dr. Tayfour's corporation at a rental of approximately $2,921 (Canadian
currency) per month and Dr. Tayfour has agreed to enter into a Consulting
Agreement and a Facilities Agreement with the Company effective upon the
completion of this offering. See "Use of Proceeds", "Management Discussion and
Analysis and Plan of Operation", "Proposed Business" and "Certain Transactions".
In addition, a minimum of $155,000 of the Company's proceeds from this
offering will be applied to payment of compensation to its executive officers
for the first 12 months of operations. The Company has agreed to engage the
advisory services of certain ophthalmologists upon completion of this offering,
two of whom (Drs. J. Charles Casebeer and Donald G. Johnson) are directors and
stockholders of the Company. The Consulting Agreement with Dr. Casebeer,
Chairman of the Board and a director, provides his professional corporation with
compensation at the rate of $60,000 per annum (of which $60,000 for the first
year will be paid upon completion of this offering) plus additional compensation
of $2,500 for management of training and credentialing each professional that
enters a credentialing program to be implemented by the Company. Ghassan Barazi,
President and a director, will receive an annual base salary of $75,000 under
his employment agreement (increasing to $100,000 per annum commencing with the
first month after the Company has attained a consolidated net profit for the
three immediately preceding months), a life insurance policy for his benefit in
the face amount of approximately $375,000, other employee benefits plus a
one-time hiring bonus of $20,000 (payable upon completion of this offering). In
the event Mr. Barazi's employment is terminated either voluntarily or
involuntarily at any time during its initial five year term or is not renewed
for at least one additional year at the end of its initial five year term, Mr.
Barazi will be entitled to receive a $200,000 additional severance payment under
certain circumstances. See "Use of Proceeds", "Management Discussion and
Analysis and Plan of Operation", "Management" and "Certain Transactions".
The Company has entered into agreements to license the use of 800 and 900
telephone numbers from Refractive Services 800 Corp. ("RS-800"), a wholly-owned
subsidiary of Vista Technologies, at the option of the Company and for certain
consulting services to be provided by Vista Technologies Inc. ("Vista
Technologies") over a period of ten years, including advice as to LVC
developments in Europe, corporate financing, facility leases, equipment
financing, coordinating activities of mutual interest with other LVC Services
companies sponsored by Vista Technologies, investor relations and certain
accounting and legal compliance matters. Vista Technologies is a founder and
principal stockholder of the Company. Under the Consulting Services Agreement
with Vista Technologies, Vista Technologies will receive 5% of the Company's
revenues attributable to use of facilities and support services, less a credit
to the Company of $5,000 per month. If the Company elects to use one or more of
the telephone numbers licensed by RS-800, this subsidiary of Vista Technologies
will receive 2 1/2% of revenues generated only as a direct result of responses
to telemarketing activities of the Company by use of the licensed 800 and 900
telephone numbers. See "Proposed Business" and "Certain Transactions".
POSSIBLE NEED FOR ADDITIONAL FINANCING. Due to the risks associated with
its business and lack of an operating history, the Company may require
additional financing at a future date to maintain or expand its business
operations. In addition to proceeds of this offering, the Company plans to rely
upon equipment leasing or other forms of installment purchase obligations to
finance a part of its equipment requirements, although no
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<PAGE> 12
commitments for such financing has been yet applied for or obtained except with
respect to its first location in Windsor. No assurance can be given that
additional financing would be available on reasonable terms or on any terms. See
"Use of Proceeds", "Management Discussion and Analysis and Plan of Operation"
and "Proposed Business".
CONFLICTS OF INTEREST AND POSSIBLE COMPETITION WITH FOUNDERS AND CERTAIN
AFFILIATES. Vista Technologies is a founder and principal stockholder of the
Company. Vista Technologies has filed trademark applications for U.S. and
Canadian service mark registration of the name "Vista Laser Centers", and Vista
Technologies has advised the Company that Vista Technologies and its corporate
affiliates intend to organize and sponsor additional entities in the near future
to acquire, manage and administer LVC equipment and LVC Services under the Vista
Laser Centers name in various geographic areas of North America outside of
Southern Ontario and Michigan. It is also anticipated that one or more of the
health care professionals serving as part-time consultants to, or directors of,
the Company (including Drs. Casebeer and Johnson) will be solicited to act as
consultants to, or directors and/or officers in, one or more of these other
enterprises. Dr. Casebeer and Dr. Johnson, directors of the Company, also are
each directors of Vista Technologies and may also serve as directors and/or
officers for other enterprises organized by Vista Technologies. Investors in
this offering will not acquire an interest in other companies formed and
sponsored by Vista Technologies and its affiliates. Although such other
enterprises formed and sponsored by Vista Technologies will not operate from
locations in Southern Ontario or Michigan, such other enterprises nevertheless
may compete with LVC Services to be offered by the Company. In addition, persons
serving as part-time consultants to, or directors of, the Company who agree to
serve as consultants, directors and/or officers for such other enterprises may
have a conflict of interest in that their time and resources may be devoted to
activities other than the business of the Company or because the compensation
payable to them from, or equity interests in, other business activities may be
greater than their compensation from and equity interests in the Company. See
"Management" and "Certain Transactions".
OTHER CONFLICTS OF INTEREST ARISING FROM TRANSACTIONS WITH
AFFILIATES. Refractive Services-800, Inc. invested $100,000 in the Company in
July 1995, for which it received 100,000 shares of Series A Preferred stock at
$1.00 per share, which is the same class of securities offered hereby at $5.00
per share. All of these 100,000 shares of Series A Preferred were purchased by
Vista Technologies effective July 18, 1996. Vista Technologies has received
200,000 shares of the Company's Series B Preferred stock in exchange for the
Company's acquisition of 200,000 shares of Vista Technologies common stock in
November 1995, and the Company has granted Vista Technologies' Board of
Directors an irrevocable proxy to vote such Vista Technologies shares for a term
of five years after this offering. Vista Technologies has agreed to cause its
shares of Series A and Series B Preferred stock in the Company to be voted in
favor of electing up to three nominees of Dr. Tayfour to the Company's Board of
Directors. See "Certain Transactions". Based upon a subsequent independent third
party valuation of the Company's Series B Preferred stock as of November 16,
1995, the Company has recorded a cost for its investment in 200,000 shares of
Vista Technologies common stock as of that date of $217,597. Drs. Casebeer and
Johnson, directors of the Company, serve as directors of Vista Technologies.
Thomas A. Schultz, President and a director of Vista Technologies, is a former
director of the parent of the Representative of the Underwriters. See
"Management", "Certain Transactions", "Description of Securities" and
"Underwriting".
As summarized above under the heading "Proceeds Benefitting Officers,
Directors and Affiliates" the Company has entered in other agreements with its
founders, officers, directors and affiliate. The Company may enter into other
related party transactions in the future. All such transactions in the past have
been approved or ratified by all of the Company's directors and in the future
will be approved by not less than a majority of the directors who do not have an
interest in the proposed transaction and will be on terms at least as favorable
to the Company as could be obtained from independent third parties. However,
these transactions involve inherent conflicts of interest between the interests
of the Company and the interests of such stockholders or other related parties.
See "Certain Transactions".
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ABSENCE OF INDEPENDENT OUTSIDE DIRECTORS. The Company's board of directors
does not include any independent outside directors. All directors were nominated
by affiliates of the Company. See "Management" and "Certain Transactions."
IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS. Purchasers of
securities offered hereunder will experience immediate and substantial dilution
of the net tangible book value of Common Stock into which their Series A
Preferred shares are convertible. The immediate dilution to new investors in
this offering, assuming the conversion of all Preferred Stock into Common Stock
and the exercise of outstanding Class A Warrants, would be equal to $2.28 per
share as of March 31, 1996 or 45.6% of the initial public offering price. In the
event the Company elects to pay Preferred Stock dividends in Series A Preferred
stock or Common Stock if cash dividends are prohibited by law or the Company has
insufficient cash resources, additional dilution to holders of Common Stock may
result. See "Dilution", "Capitalization" and "Description of Securities".
LIABILITY FOR PERSONAL INJURY AND INADEQUACY OF INSURANCE. Use of the
Company's equipment and facilities for LVC eye care may give rise to claims
against the Company by persons alleging injury as a result of the procedures
performed. The Company will endeavor, whenever possible, to seek recovery from
manufacturers of refractive laser systems for claims based on alleged defects in
the laser systems utilized by the Company. There can be no assurance that such
manufacturers will carry liability insurance adequate to protect against such
claims or that the Company would prevail if it were required to assert such
claims. The Company believes that health care providers using the Company's
equipment to perform refractive or other procedures will be covered by medical
malpractice or liability insurance and the Company's policy will be to require
that professionals contracting for the Company's LVC Services maintain such
insurance. The Company also intends to apply for liability insurance covering
these risks for its own account. However, there can be no assurance that the
Company would be successful in seeking recovery from third parties and there can
be no assurance that the Company will be able to obtain insurance at reasonable
rates against the risks of use of its LVC equipment and support services. To the
extent the Company becomes exposed to liability claims, if any, the Company may
be adversely affected. See "Proposed Business".
VOLATILITY OF SECURITIES PRICES. The market for equity securities,
particularly for securities of companies engaged in providing LVC equipment
and/or services, has been volatile. The price of the Company's securities in the
future may be subject to wide fluctuations in response to quarterly variations
in operating results, news, trading volume, general market trends and other
factors beyond the control of the Company.
RISKS OF FAILURE TO COMPLY WITH OR CHANGE IN GOVERNMENTAL REGULATION. The
Company and its operations will be subject to extensive regulation, both in
Canada and in the United States at the federal, provincial, state and local
level, affecting the health care industry and the delivery of health care. These
regulations include laws and regulations prohibiting the practice of medicine
and optometry by persons not licensed to practice medicine or optometry,
prohibiting the unlawful rebate or unlawful division of fees and limiting the
manner in which prospective patients may be solicited. Other regulatory
requirements, such as regulations concerning the use of excimer laser systems,
will also apply to the Company's business and plan of operation. In addition,
there can be no assurance that future changes in laws and regulations or the
interpretation thereof will not adversely affect the Company's operations. See
"Proposed Business -- Governmental Regulation".
ABSENCE OF GOVERNMENTAL APPROVAL IN THE UNITED STATES FOR USE OF CERTAIN
LVC EQUIPMENT. The Company is uncertain whether certain LVC procedures for which
it will purchase equipment in Canada may ever be utilized commercially in the
United States. In the United States, the Company's plan is to acquire equipment
that has recently received pre-market approval from the U.S. Food and Drug
Administration ("FDA") for commercial use of PRK procedures applicable to the
vast majority of myopia cases and PTK. Equipment for certain other LVC
procedures, such as LASIK or TMM PRK procedures to treat hyperopia, astigmatism
or extreme myopia, have not received FDA pre-market approval nor has the FDA
established standards for clinical testing of equipment for many of these other
LVC procedures. The Company has been advised that certain MDs in the United
States use excimer lasers for LASIK Procedures. The FDA advised U.S. eye care
professionals in May 1996 that LASIK and bilateral surgery (treatment of both
eyes at the same
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time) are outside the scope of currently FDA approved labeling for excimer
lasers; although the FDA noted that physician discussions with patients and
physician decisions to conduct either of those procedures are considered the
practice of medicine, the FDA cautioned that it expects health care
practitioners and others will advertise and promote the use of FDA approved
lasers in the U.S. only within the scope of their currently FDA approved use.
For these reasons, the Company will first offer its LVC Services in Canada,
where LASIK and TMM PRK procedures may be performed in accordance with
applicable regulations and in close proximity to the U.S. Midwestern market.
There can be no assurance that the use of excimer lasers to perform LVC
procedures other than PRK and PTK will ultimately be found to be effective or
safe by the FDA or that the FDA will not modify or withdraw its pre-market
approval of PRK equipment, in which event the Company's targeted markets in the
United States may be adversely affected. See "Proposed Business".
RISK OF FAILURE TO COMPLY WITH SAFE HARBORS AS TO MEDICAL SERVICES FRAUD
AND ABUSE LEGISLATION. Certain states in the United States and provinces in
Canada have adopted medical services fraud and abuse statutes, commonly referred
to as anti-kickback or anti-referral legislation, similar to U.S. federal
Medicare/Medicaid legislation that prohibits certain activities intended to
kickback, bribe or rebate fees received for referring an individual to a person
for medical treatment. Although existing U.S. federal legislation does not cover
the Company's planned activities since its physician clients will not be seeking
Medicare, Medicaid or other governmental reimbursement for LVC procedures, there
can be no assurance that federal, state or provincial regulatory programs will
not in the future place impediments upon the Company's plan of operation. Many
state fraud and abuse laws are interpreted by reference to corresponding federal
regulations establishing safe harbors for certain activities otherwise subject
to such fraud and abuse laws. Among other requirements to qualify for certain
safe harbor provisions under federal law, no more than 40% of the entity may be
controlled by investors who are in a position to control the flow of business to
the entity and no more than 40% of the entity's business can come from
investors. The Company does not believe that more than 40% of the Company's
capital stock initially will be held by persons in a position to refer business
to the Company. The application and interpretation of state laws and safe harbor
exemptions may involve significant uncertainty. The Company believes that its
planned operations are designed to comply with applicable state regulations.
NEVERTHELESS, POTENTIAL INVESTORS CONCERNED WITH SAFE HARBOR REGULATIONS SHOULD
SEEK ADVICE FROM INDEPENDENT COUNSEL CONCERNING THESE MATTERS BEFORE INVESTING.
See "Proposed Business -- Governmental Regulation".
POSSIBLE FUTURE CONCERNS AS TO SAFETY AND EFFICACY OF LVC
TREATMENT. Concerns with respect to the safety and efficacy of recently
developed refractive laser procedures such as PRK, LASIK and LTK include
predictability and stability of results and potential complications or side
effects, such as post-operative pain, corneal haze during healing, decreased
contrast sensitivity, unintended undercorrection or overcorrection, refractive
corneal scars or reversion or regression of effect. There can be no assurance
that additional complications will not be identified in the future that may
materially and adversely affect the safety and efficacy of these LVC procedures
for performing refractive surgery, and which would negatively affect market
acceptance of such procedures and/or lead to product liability or other claims
against the Company. See "Proposed Business".
RELIANCE ON SUPPLIERS OF LASER EQUIPMENT. The Company is not involved in
the research, development or manufacture of laser equipment and will be
dependent upon unrelated third-party manufacturers or distributors for supply
and service of LVC equipment required for its LVC Services. The Company believes
there are four companies in the U.S. that have conducted or are conducting
clinical trials with excimer lasers for refractive eye surgery. The Company
believes two of those companies, Summit and VISX, account for approximately 70%
of the excimer lasers for refractive surgery that have been installed to date
mostly in various countries outside of the U.S. At present, at least one of
these suppliers has indicated it plans to enter the market for providing excimer
laser service facilities and may compete with the Company, either directly or
indirectly. Such suppliers are also expected to seek license, royalty or other
fees for the purchase of excimer laser systems that could place the Company at a
competitive disadvantage. If the Company is unable to obtain agreements on
acceptable terms for the supply and/or service of laser systems, the Company
could incur delays and its planned business operations may be adversely
affected. The Company has not yet obtained
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commitments to acquire equipment for additional locations proposed in addition
to its first site at Windsor, and the Company's ability to offer LVC Services at
one or more additional locations and the timing thereof will be dependent upon
the availability of equipment from suppliers and the availability, if any, of
financing programs to acquire equipment on a lease or installment purchase
basis. See "Use of Proceeds" and "Proposed Business".
RISK OF FUTURE TECHNOLOGICAL CHANGE. Development of LVC procedures has
undergone and is expected to continue to experience technological change. There
can be no assurance that future technological innovations and developments will
not render the Company's equipment uneconomical or obsolete or that the Company
will not be adversely affected by competition or future technological
developments. See "Proposed Business -- Competition".
NO THIRD-PARTY REIMBURSEMENT. At present, third party insurance
reimbursement through health insurance or other third-party reimbursement
programs generally is not available for PRK, LASIK and other LVC refractive
surgical procedures. The Company does not anticipate that third-party
reimbursement for LVC procedures will be available in the foreseeable future,
and this factor may restrict the market for LVC Services. See "Proposed
Business."
LACK OF A PUBLIC MARKET AND ARBITRARY DETERMINATION OF OFFERING
PRICE. Prior to this offering by the Company, there has been no public market
for the securities of the Company, and there can be no assurance that a public
market will develop following this offering or, if developed, that a public
market will be sustained. The offering price of the Series A Preferred stock
offered by the Company was arbitrarily determined by negotiation between the
Company and the Underwriters without regard to generally recognized criteria of
value such as historical earnings, assets, working capital, book value,
financial condition or an active public market for the Common Stock. Such
offering price was determined in part upon the Company's and the Underwriters'
perception as to the price that purchasers of Series A Preferred stock would be
willing to pay considering the nature of the Company and the terms of the Series
A Preferred stock. Accordingly, the offering price should not be considered an
indication of the actual value of the Company or its securities. See
"Underwriting" and the Consolidated Financial Statements.
DILUTIVE EFFECT OF WARRANTS AND OPTIONS. For the life of the Underwriter's
Warrants, outstanding Class A Warrants and any options granted under the
Company's Stock Option Plan, the holders are given, at nominal cost, the
opportunity to profit from a rise in the market price for the Common Stock of
the Company without assuming the risk of ownership, with a resulting dilution in
the interest of other security holders. As long as the warrants and options
remain unexercised, the terms under which the Company could obtain additional
capital may be adversely affected. Moreover, the holders of the warrants and
options might be expected to exercise them at a time when the Company would, in
all likelihood, be able to obtain needed capital by a new offering of its
securities on terms more favorable than those provided by the warrants and
options. See "Management -- Stock Option Plan", "Description of Securities" and
"Underwriting".
UNDETERMINED EFFECT OF ADDITIONAL AUTHORIZED COMMON STOCK AND BLANK CHECK
PREFERRED STOCK. The Company's articles of incorporation authorize up to
20,000,000 shares of Common Stock and up to 5,000,000 shares of "blank check"
Preferred Stock with such rights, preferences, privileges and limitations as may
be determined from time to time by the Board of Directors of the Company. The
Board of Directors has the power without prior stockholder approval to issue
additional shares of previously authorized and unissued Common Stock and one or
more series of Preferred Stock with such rates of dividends, redemption
provisions, liquidation preferences, voting rights, conversion privileges and
any other characteristics as the Board may deem necessary. This power includes
the right to issue Preferred Stock following completion of this offering with
rights to receive dividends, liquidating distributions and other benefits which
may be superior to the rights of Series A Preferred stockholders. If any
subsequent issuance of Preferred Stock is approved, such blank check Preferred
Stock could adversely affect the holders of outstanding Series A Preferred stock
and/or Common Stock. In addition, the authority to issue additional shares of
Common Stock and blank check Preferred Stock could discourage, delay or prevent
a takeover of the Company. The Company currently has no intention to issue any
additional shares of Preferred Stock upon the completion of this offering.
However, even the existence of authorized and unissued Common Stock and
Preferred Stock with the potential of
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discouraging or preventing a takeover of the Company could have a depressive
effect on the market price for the Company's securities. See "Description of
Securities".
POSSIBLE ADVERSE EFFECT ON MARKET PRICE OF FUTURE SALES OF COMMON
STOCK. All of the 30,000 shares of outstanding Common Stock, 100,000 shares of
Series A Preferred stock and up to 570,000 shares of Common Stock issuable upon
conversion of Series A and Series B Preferred stock and exercise of Class A
Warrants outstanding prior to this offering will be "restricted securities" as
that term is defined in Rule 144 under the Securities Act, and under certain
circumstances may be sold without registration pursuant to that Rule. The
Company is unable to predict the effect that sales made under Rule 144, or
otherwise, will have on the then prevailing market price of the Company's
securities. Any substantial sale of restricted securities pursuant to Rule 144
may have an adverse effect on the market price of the Company's securities. See
"Principal Stockholders", "Shares Eligible for Future Sale" and "Underwriting".
UNDERWRITERS' INFLUENCE ON THE MARKET. A significant number of the shares
of Series A Preferred stock to be sold in this offering may be sold to customers
of the Underwriters. Such customers subsequently may engage in transactions for
the sale or purchase of the Company's securities through or with the
Underwriters. Although the Underwriters have no legal obligation to do so, an
Underwriter from time to time may become a market maker or otherwise effect
transactions in the Company's securities. Should an Underwriter participate as a
market maker, it may become a dominating influence in the market for the
Company's securities. Therefore, the price and liquidity for the Company's
securities may be significantly affected by the degree, if any, of an
Underwriter's participation in the market. Such market making activities, if
commenced, may be discontinued at any time or from time to time by that
Underwriter. See "Underwriting."
MAINTENANCE REQUIREMENTS; POSSIBLE DELISTING OF SECURITIES FROM NASDAQ
SYSTEM; RISKS OF LOW-PRICED STOCKS. In 1993, the Securities and Exchange
Commission ("SEC") approved rules imposing more stringent criteria for the
listing of securities on Nasdaq, including new standards for maintenance of such
listing. If the Company is unable to satisfy Nasdaq's maintenance criteria in
the future, its securities will be subject to being delisted, and trading, if
any, would thereafter be conducted or in the over-the-counter market in the
so-called "pink sheets" or the "Electronic Bulletin Board" of the National
Association of Securities Dealers, Inc. ("NASD"). As a consequence of such
delisting, an investor could find it more difficult to dispose of, or to obtain
accurate quotations as to the price of, the Company's securities.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for "penny stocks" as defined. SEC
regulations generally define a penny stock to be any equity security that has a
market price of less than $5.00 per share, subject to certain exceptions. Such
exceptions include any equity security listed on Nasdaq and any equity security
issued by an issuer that has (i) net tangible assets of at least $2,000,000, if
such issuer has been in continuous operation for three (3) years; (ii) net
tangible assets of at least $5,000,000 if such issuer has been in continuous
operation for less than three (3) years; or (iii) average annual revenue of at
least $6,000,000 if such issuer has been in continuous operation for less than
three years. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
In addition, if the Company's securities are not quoted on Nasdaq or the
Company does not have $2,000,000 in net tangible assets, trading in the Common
Stock would be covered by Rule 15c2-6 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") for non-Nasdaq and non-exchange
listed securities. Under such rule, broker/dealers who recommend such securities
to persons other than established customers and accredited investors must make a
special written suitability determination for the purchaser and receive each
purchaser's written agreement to a transaction prior to sale. Securities also
are exempt from this rule if the market price is at least $5.00 per share.
As of the date of this Prospectus, it is expected that the Company's Series
A Preferred stock will be outside the definitional scope of penny stock, as it
has an initial public offering price of at least $5.00 per share. In the event
the Common Stock were subsequently to become characterized as a penny stock, the
market liquidity for the Company's securities could be severely affected. In
such an event, the regulation of penny stocks could limit the ability of
broker/dealers to sell the Company's securities in the secondary market.
14
<PAGE> 17
FOREIGN CURRENCY FLUCTUATIONS. The Company's initial business operations
will be located in Canada and it is anticipated that a significant portion of
the Company's revenues and expenses may be collected and paid in Canadian
dollars. The Company publishes its consolidated financial statements in U.S.
dollars after translating transactions in Canadian currency to U.S. dollars.
Income and expense items in Canadian currency will be translated at the weighted
average exchange rate prevailing during the period, except that expenses related
to nonmonetary assets and liabilities will be translated at historical rates. In
periods when the U.S. dollar depreciates against the Canadian dollar, reported
earnings attributable to transactions in Canadian dollars may be materially
enhanced. In periods when the U.S. dollar appreciates against the Canadian
dollar, however, reported earnings attributable to transactions in Canadian
dollars may be materially reduced. Fluctuations in the exchange rate between the
Canadian dollar and the U.S. dollar may also affect the book value of the
Company's assets and the amount of its stockholders' equity. Except as otherwise
stated herein, all monetary amounts in this Prospectus have been presented in
U.S. dollars.
NO DIVIDENDS ON COMMON STOCK. The Company has not paid any cash dividends
on its Common Stock and does not expect to do so in the foreseeable future. See
"Dividend Policy."
DILUTION
This discussion and the table below assumes (i) the sale of all shares of
Series A Preferred stock offered by the Company hereunder (but does not assume
exercise of the Underwriter's over-allotment option or the exercise of the
Underwriter's Warrants) and full conversion of such shares of Series A Preferred
into 800,000 shares of Common Stock, (ii) the conversion of currently
outstanding shares of Series A Preferred (100,000 shares) and Series B Preferred
(200,000 shares) into 300,000 shares of Common Stock, (iii) the exercise at
$1.00 per share of 270,000 outstanding Class A Warrants and the receipt of
proceeds therefrom, and (iv) the exercise at $1.00 per share of 50,000
outstanding options granted under the Company's stock option plan. Based on
these assumptions, the 650,000 shares of Common Stock that would be outstanding
prior to this offering and the 800,000 shares of Common Stock that would be
outstanding if all Series A Preferred offered hereby were converted into Common
Stock are referred to below as "common and common equivalent shares".
As of March 31, 1996, the Company had a net tangible book value of
$199,111. Assuming the exercise of outstanding Class A Warrants and stock
options for $320,000 in proceeds, the receipt of $27,500 in subscriptions
receivable paid in April 1996 and conversion of currently outstanding Series A
Preferred and Series B Preferred, the Company's pro forma net tangible book
value at March 31, 1996 would have been $546,611, or $.84 per common and common
equivalent share based on a total of 650,000 shares. Net tangible book value per
common and common equivalent share represents the amount of the Company's
tangible assets, less the amount of its liabilities, divided by the number of
shares of common and common equivalent shares outstanding. Assuming the sale of
800,000 shares of Series A Preferred stock offered by the Company hereunder at
the offering price of $5.00 per share, the Company's receipt of net proceeds
therefrom and the conversion of all such shares of Series A Preferred stock into
Common Stock, the pro forma net tangible book value of the Company as so
adjusted at March 31, 1996 would be $3,939,950, or $2.72 per common and common
equivalent share, representing an immediate increase in net tangible book value
of $1.88 per common and common equivalent share to present holders of the
Company's capital stock and an immediate dilution of $2.28 per common and common
equivalent share to new investors.
15
<PAGE> 18
The following table illustrates such per share dilution:
<TABLE>
<CAPTION>
AMOUNT %
--------------- -----
<S> <C> <C> <C>
Offering Price per common and common equivalent share....... $5.00 100.0%
-----
Actual net tangible book value per common and common
equivalent share at March 31, 1996..................... $ .60 12.0%
Receipt of subscriptions receivable as of March 31,
1996................................................... .09 1.8%
Assumed exercise of Class A Warrants and stock options
outstanding at March 31, 1996.......................... .15 3.0%
----- -----
Subtotal: Pro forma net tangible book value per common and
common equivalent share at March 31, 1996.............. $ .84 16.8%
Increase per share attributable to 800,000 additional
common equivalent shares represented by sale of Series
A Preferred stock by the Company....................... 1.88 37.6%
----- -----
Pro forma net tangible book value per common and common
equivalent share.......................................... 2.72 54.4%
-----
Dilution per common and common equivalent share to new
investors purchasing Series A Preferred (1)............... $2.28 45.6%
=====
</TABLE>
- ---------------
(1) "Dilution" means the difference between the offering price per share and the
pro forma net tangible book value per common and common equivalent share
after giving effect to the assumed sale of all 800,000 shares of Series A
Preferred stock offered by the Company. The increase in the net tangible
book value of common and common equivalent shares held by present
stockholders would be solely attributable to the cash paid by new investors
upon their purchase of Series A Preferred offered by the Company.
Based on the above assumptions, the following table summarizes the number
of common and common equivalent shares purchased from the Company, the total
consideration and the average price per share to the Company by existing
stockholders and to be paid by purchasers in this offering (assuming in each
case the full conversion of all outstanding shares of Preferred Stock into
Common Stock and the exercise of 270,000 Class A Warrants and 50,000 outstanding
stock options):
<TABLE>
<CAPTION>
COMMON AND COMMON
EQUIVALENT SHARES TOTAL
PURCHASED CONSIDERATION PAID
------------------------ ------------------------- AVERAGE PRICE
NUMBER % OF TOTAL AMOUNT % OF TOTAL PER SHARE
--------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders.... 650,000 44.8% $ 694,597(a) 14.8% $1.07
New Investors............ 800,000 55.2% $4,000,000 85.2% $5.00
--------- ------ ---------- ------
Total.......... 1,450,000 100.0% $4,694,597 100.0% $3.24
========= ====== ========== ======
</TABLE>
- ---------------
(a) Assumes (i) $374,597 for outstanding securities, of which $157,000 has been
paid in cash and $217,597 has been recorded as the value of the Company's
investment in 200,000 shares of Vista Technologies common stock, plus (ii)
$320,000 from the assumed exercise of outstanding Class A Warrants and stock
options. See "Management -- 1995 Stock Option Plan" and "Certain
Transactions".
In the event the Company elects to pay Preferred Stock dividends in Series
A Preferred or Common Stock if cash dividends are prohibited by law or the
Company has insufficient cash resources for dividends, additional dilution to
holders of Common Stock may result. See "Description of Securities".
16
<PAGE> 19
USE OF PROCEEDS
The net proceeds to the Company from the sale of 800,000 shares of Series A
Preferred stock offered hereby will be approximately $3,280,000 ($3,982,000 if
the Underwriter's over-allotment option is exercised in full) after deducting
the underwriting discounts and the Underwriter's non-accountable expense
allowance and after other offering expenses payable by the Company estimated at
approximately $200,000.
The Company intends to use the net proceeds to purchase laser vision
correction equipment and to support working capital requirements for operating
and administering LVC Services. Of the net proceeds, $500,000 will be
immediately used to pay the cash portion of consideration to purchase an
existing laser system and related equipment from a corporation affiliated with
Dr. Fouad Tayfour. An agreement to sublease certain facilities from that
corporation is expected to enable the Company to commence operations immediately
after this offering. Management estimates that additional equipment, leasehold
improvements and supplies for its first site in Windsor initially will range
from $25,000 to $50,000. Monthly cash requirements for operating expenses at the
Windsor location are projected to range from approximately $90,000 to $110,000,
depending in part upon the amount management elects to commit to marketing,
advertising and training programs, before receipt of revenues under service
agreements with professionals. Although the Company anticipates that it will
generate revenues under its service agreement with Dr. Tayfour upon completion
of this offering, Dr. Tayfour is under no legal obligation to use the Company's
LVC Services on an exclusive basis or on any basis, and there can be no
assurance as to the revenues the Company will generate. See "Management
Discussion and Analysis and Plan of Operation" and "Proposed Business".
The Company has conducted market research through extensive discussions
with MDs and ODs in Michigan and is currently engaged in negotiations to acquire
at a cost of $150,000 a 50% interest in a newly-organized company to be formed
in association with a group of Michigan professionals to offer LVC Services in
the metropolitan Detroit area. There can be no assurance that such negotiations
will be successfully concluded. If such negotiations are concluded prior to the
date of this offering, Vista Technologies has committed to lend the Company
$150,000 at 8% interest per annum to make that investment, which would be repaid
from the proceeds of this offering by the Company. Either as a result of that
transaction or in association with other professionals at a future date, the
Company anticipates establishing a second site with equipment offering LVC
Services in Detroit, Michigan shortly after the first Windsor location has
become operational. The location and number of additional sites with LVC
equipment developed by the Company thereafter, if any, will be determined by
management depending upon a variety of factors, some of which are uncertain at
present, including the amount of capital equipment costs that the Company may be
able to finance through equipment leases or other installment purchase
obligations, potential competition and results of operations and working capital
requirements for LVC Service sites previously established by the Company. The
Company estimates the capital investment to establish an LVC Service site to
range from $300,000 to $700,000 depending upon the equipment required (i.e.,
whether the site will include full service equipment or will be a satellite
location supported by another site) and the extent of equipment lease or
installment purchase financing, if any, available to the Company.
Based on and subject to the above factors, management currently estimates
that the net proceeds of this offering will be applied generally as follows:
<TABLE>
<CAPTION>
AMOUNT %
---------- -----
<S> <C> <C>
Cash deposit for purchase of laser system and related equipment
to establish LVC Services in Windsor, Ontario................. $ 550,000(1) 16.8%
Investment or repayment of loan to acquire a 50% interest in a
newly-formed company to establish a second site in Michigan... 150,000 4.6%
Cash requirements for equipment and leasehold improvements to
establish a second LVC Services site in Michigan.............. 700,000(2) 21.4%
Estimated working capital requirements for first 12 months
of operations in Ontario...................................... 500,000(3) 15.2%
Estimated working capital requirements for first 12 months
of operations in Michigan..................................... 500,000 15.2%
Available for equipment required for planned expansion for
additional LVC Services sites................................. 880,000 26.8%
---------- -----
Total estimated net proceeds of this offering......... $3,280,000 100.0%
========== =====
</TABLE>
17
<PAGE> 20
- ---------------
(1) The $500,000 balance of this equipment purchase will be financed by the
Company's issuance of a 10% promissory note, interest only accruing from the
date of this offering and payable monthly commencing 90 days thereafter,
with all principal due on the second anniversary of the date of this
Prospectus and collateralized by all equipment at the Company's Windsor
location.
(2) Assumes that the Company is unable to obtain additional equipment financing
for this location. If equipment lease or installment purchase financing is
available on terms acceptable to the Company, the initial cash deposit
required for the equipment cost would be reduced.
(3) Includes a minimum of $155,000 in estimated compensation payments to
executive officers of the Company for the first 12 months of operations. Of
such minimum amount, $60,000 will be paid to an affiliate of Dr. J. Charles
Casebeer at the completion of this offering in consideration of base
consulting compensation for his services during the first 12 months of
operations and $20,000 will be paid to Mr. Ghassan Barazi upon completion of
this offering as a one-time hiring bonus for his services as the Company's
President and Chief Executive Officer. See "Management -- Employment
Agreement" and "Certain Transactions".
The allocation of the net proceeds of this offering set forth above
represents the Company's best estimates based upon its present plans and certain
assumptions regarding estimated costs and the Company's future revenues and
expenses. The actual amount expended to finance any category of expense may be
increased or decreased by the Company's Board of Directors, at its discretion,
if a reapportionment or redirection of funds is deemed to be in the best
interests of the Company. Any proceeds not applied to a purpose described above
will be added to the Company's working capital and used for general corporate
purposes.
Pending the application of proceeds from this offering, the net proceeds of
this offering will be temporarily invested in interest-bearing savings accounts,
bank certificates of deposit, money market accounts, government obligations or
other forms of liquid short-term interest-bearing investments.
The Company does not plan to pay dividends on its Common Stock (see
"Dividend Policy"). The estimated annual dividend requirements on its Preferred
Stock will be $450,000 for Series A Preferred ($510,000 if the Underwriters'
over-allotment option is exercised and $550,000 if the Underwriters' over-
allotment option and the Underwriter's Warrants are exercised) and $25,000 for
Series B Preferred shares. As of March 31, 1996, dividends in arrears on Series
A Preferred and Series B Preferred shares issued prior to this offering were
$6,667 and $9,375, respectively.
The Company does not intend to apply any of the proceeds from the sale of
Series A Preferred stock offered hereby to the payment of dividends on its
Preferred Stock. Prospective investors should note that the Nevada General
Corporation Law prohibits the payment of dividends or other distributions to
stockholders if, after giving effect to such distribution, (1) the Company would
be unable to pay its debts as they come due in the ordinary course, or (2) the
Company's total assets would be less than the sum of its total liabilities plus
the amount that would be needed to satisfy liquidation preferences of its
Preferred Stock were the Company to be dissolved at the time of such
distribution. Unless shares of Preferred Stock are converted into Common Stock,
after this offering the aggregate liquidation preference of all series of
Preferred Stock outstanding will be $5,000,000 ($5,600,000 if the Underwriters'
over-allotment option is exercised), and the Company accordingly anticipates
that its ability to pay cash dividends on Preferred Stock will be dependent upon
attaining profitable operations, as to which there can be no assurance. The
Company at its option, however, has the right to pay accrued dividends in Series
A Preferred or Common Stock (subject to the prior registration of such shares
under the Securities Act of 1933) if it would be legally prohibited from the
payment of cash dividends on its Preferred Stock or has insufficient cash
resources for cash dividend payments.
18
<PAGE> 21
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1996, and as adjusted to give effect to the sale by the Company of the
shares of Series A Preferred stock offered hereby, and the application of the
net proceeds and the purchase of certain equipment for the Windsor equipment
location as described under "Use of Proceeds" and "Certain Transactions". This
information should be read in conjunction with the Company's consolidated
financial statements and the notes thereto and "Management Discussion and
Analysis and Plan of Operations" presented elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
<S> <C> <C>
Long-term obligations.............................................. $ -0- $ 916,192(2)(3)
-------- ----------
Stockholders' equity:
Preferred stock, par value $0.01:
Authorized -- 5,000,000 shares;
1,100,000 shares designated 10% Series A(4)
Cumulative Convertible Preferred;
Issued and outstanding shares -- 100,000 actual and 900,000
pro forma.................................................... 1,000 9,000
200,000 shares designated 5% Series B Cumulative Convertible
Preferred;
Issued and outstanding shares -- 200,000 actual and pro
forma........................................................ 2,000(5) 2,000(5)
Common stock, par value $0.01:
Authorized -- 20,000,000 shares;
Issued and outstanding shares -- 30,000 actual and 350,000 pro
forma........................................................ 300 3,500
Additional paid-in capital....................................... 371,297 3,960,097
Subscriptions receivable......................................... (27,500) --
Accumulated (deficit)............................................ (34,647) (34,647)
-------- ----------
Total stockholders' equity....................................... 312,450 3,939,950
-------- ----------
Total capitalization..................................... $370,584 $4,856,142
======== ==========
</TABLE>
- ---------------
(1) Assumes sale of 800,000 shares of Series A Preferred offered hereunder by
the Company at $5.00 per share, the exercise of 270,000 outstanding Class A
Warrants, the exercise of 50,000 outstanding options granted under the
Company's stock option plan, the payment of $27,500 in stock and warrant
subscription receivables received in April 1996 and the anticipated
application of estimated net proceeds therefrom (after the deduction of
underwriting discounts and commissions and estimated expenses to be incurred
by the Company in connection with this offering).
(2) Concurrent with the completion of this offering, the Company will purchase
certain equipment for its first site in Windsor, Ontario at a cost of
$1,050,000, of which $500,000 will be paid in cash from proceeds of this
offering and $500,000 will be financed by the Company's issuance of a 10%
promissory note due on the second anniversary of the date of this
Prospectus. Such payments will be made to an affiliate of Dr. Fouad Tayfour,
who has the right to designate up to three members of the Company's Board of
Directors. See "Certain Transactions".
(3) In April of 1996, the Company entered into a commitment to lease a Summit
holmium laser system. The Company will record this lease as a capital lease
and the related obligation totals $416,192. See Note 7 of the Notes to the
Consolidated Financial Statements.
(4) The authorized number of Series A Preferred shares includes 120,000 shares
reserved for the Underwriters' over-allotment option and 80,000 shares
reserved for exercise of the Underwriter's Warrants. See "Underwriting".
(5) $217,597 has been recorded in the Company's financial statements for 200,000
shares of Vista Technologies common stock received in exchange for shares of
the Company's Series B Preferred stock, of which $2,000 has been allocated
to the par value of the Series B Preferred and the balance was allocated to
additional paid in capital. See Note 3 of the Notes to the Consolidated
Financial Statements.
19
<PAGE> 22
SELECTED FINANCIAL DATA
The following table presents selected financial data with respect to the
Company as of and for the period June 30, 1995 (date of inception) through March
31, 1996. The selected financial data as of the end of March 31, 1996 has been
derived from the consolidated financial statements of the Company audited by
KPMG Peat Marwick LLP. The information set forth below should be read in
conjunction with "Management Discussion and Analysis and Plan of Operation", the
consolidated financial statements and related notes thereto and independent
auditors' report appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JUNE 30, 1995
(DATE OF
INCEPTION)
TO MARCH 31, 1996
------------------
ACTUAL
------------------
<S> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Interest income.......................................... $ 557
Net (loss) adjusted for dividends in arrears............. $(50,689)
Net (loss) per common and common equivalent share........ $ (0.22)
Weighted average shares outstanding...................... 226,269
Dividends in arrears..................................... $ 16,042
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Current assets..................................... $ 39,648 $2,322,353
Current liabilities................................ 58,134 --
-------- ----------
Working capital.................................. $(18,486) $2,322,353
Total assets....................................... $370,584 $4,856,142
Long-term debt..................................... -- $ 916,192
Stockholders' equity............................... $312,450 $3,939,950
</TABLE>
- ---------------
(1) As adjusted to reflect the receipt and application of net proceeds to the
Company (after the deduction of underwriting discounts and commissions and
estimated expenses to be incurred by the Company in connection with this
offering) from the sale of securities offered hereby, the exercise of
270,000 outstanding Class A Warrants and 50,000 outstanding stock options
and receipt in April 1996 of $27,500 from the payment of stock and warrant
subscription receivables. See "Use of Proceeds".
The Company has not paid any dividends since its inception; preferred
dividends in arrears total $6,667 for the Series A Preferred stock and $9,375
for the Series B Preferred stock at March 31, 1996.
20
<PAGE> 23
MANAGEMENT DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The Company has received cash proceeds from the sale of securities in the
amount of $129,500 during the period from inception on June 30, 1995 through
March 31, 1996. An additional $27,500 in subscription receivables were collected
in April 1996. Since its inception, the Company's activities have been devoted
to development of its plan of operations, negotiating agreements to acquire
equipment and advisory services for planned business activities that will
commence immediately upon completion of this offering, and raising capital to
fund initial development activities and the expenses of this public offering.
Accordingly, the Company has not generated any revenues and has no operating
history from which to forecast its future business and operations. As of March
31, 1996, it had incurred $113,339 for deferred costs of this offering.
Of the cash investments received to date, $100,000 was paid by Refractive
Services-800, Inc. at the Company's inception, and prior to the Company's
entering into any agreements with health care professionals, in exchange for
100,000 shares of the Company's Series A Preferred stock. Substantially all of
those funds were intended for, and have been allocated by the Company to,
payment of costs and expenses for the organization of the Company, negotiation
of agreements to date, and deferred costs of this initial public offering of
Series A Preferred stock by the Company. Series A Preferred shares originally
issued to Refractive Services-800, Inc. were purchased by Vista Technologies in
July 1996.
In November 1995, the Company issued 200,000 shares of its Series B
Preferred stock to Vista Technologies in exchange for 200,000 shares of Vista
Technologies common stock. Although there was no quoted market for Vista
Technologies' common stock at the time of that transaction, primarily as a
result of Vista Technologies' then delinquency in filing periodic reports with
the Securities and Exchange Commission (the "Commission"), Vista Technologies
represented it would take such steps as were necessary to become current in
required filings with the Commission and seek to obtain an actively quoted
market for its common shares. The organization of the Company was sponsored and
promoted by Vista Technologies as a founder, and the Company's Board of
Directors believed the experience of Vista Technologies in management of PRK
businesses in Europe and services Vista Technologies proposed to make available
under its ten-year Consulting Services Agreement with the Company (see "Certain
Transactions") would be of valuable assistance to the Company's negotiation of
agreements prior to the date of this Prospectus and its planned future
operations. Due to Vista Technologies' shortage of cash resources, Vista
Technologies proposed that its investment in the Company would be in the form of
200,000 shares of Vista Technologies common stock in exchange for 200,000 shares
of the Company's Series B Preferred stock. In view of Vista Technologies' status
as a founder of the Company and its representation on the Company's Board of
Directors, such transaction should not be considered as having been negotiated
at arms-length. Based upon a subsequent independent third party valuation of the
Company's Series B Preferred stock as of November 16, 1995, the Company has
recorded a cost for its investment in 200,000 shares of Vista Technologies
common stock as of that date of $217,597. Public market quotations for Vista
Technologies common stock became available in March 1996 following Vista's
filings of previously delinquent reports with the Commission, and such
quotations in March 1996 and to date in July 1996 have ranged from approximately
$2.00 to $4.00 per share of Vista Technologies common stock.
The Company intends to hold shares of Vista Technologies common stock for
investment, which will enable the Company to have an indirect economic interest
in other LVC activities in which Vista Technologies has an interest. Subject to
the ability of the Company under Rule 144 of the Securities Act of 1933 to sell
shares of Vista Technologies common stock upon satisfaction of holding period
requirements under that rule (see "Shares Eligible for Future Sale"), management
of the Company reserves the right to sell shares of Vista Technologies from time
to time if required for the Company's working capital purposes or if management
believes then market price of Vista Technologies common stock are attractive in
light of market conditions, the status of Vista Technologies' operations, and
other relevant factors. There can be no assurances of the sale prices the
Company will be able to obtain should it elect to sell all or part of its
investment in Vista Technologies in the future.
The report of the Company's independent certified public accountants
contains an explanatory paragraph as to the Company's ability to continue as a
going concern. Among other factors cited by the
21
<PAGE> 24
accountants as raising substantial doubt as to the Company's ability to continue
as a going concern is that the Company is dependent upon raising additional
financing through a public or private offering to meet its obligations and
commitments. See the Consolidated Financial Statements elsewhere in this
Prospectus.
The Company's plan of operation for the next twelve months will involve the
development, management and operation of from two to four sites offering LVC
Services. LVC equipment will be offered for use by licensed ophthalmologists
("MDs") primarily for advanced refractive surgery, and other support services
will also be available for licensed MDs and optometrists ("ODs") for diagnostic,
pre-operative and postoperative refractive eye care. In addition to providing
equipment and qualified support personnel, the Company will make available a
variety of services to licensed and credentialed eye care professionals,
including training and education in advanced LVC procedures; marketing and
advertising support; billing, collection and accounting services; administrative
and management services; and development and maintenance of information systems.
The Company will earn fees for equipment use and other support services rendered
to licensed MDs and ODs that elect to use the Company's services and enter into
service agreements with the Company. See "Proposed Business".
The Company will initially apply proceeds from this offering to purchase
equipment and establish its first location in Windsor, Ontario at an estimated
cost of $1,050,000 (see "Use of Proceeds"), which approximates its fair market
value, of which $500,000 will be financed by a two-year note (see "Certain
Transactions"). Additional proceeds of the offering will be applied for
operating requirements during the first twelve months of operations including,
among other expenses, hiring and training staff, training and marketing programs
for health care professionals, and for working capital requirements as the
Company's LVC Services are developed. Monthly cash requirements for operating
expenses at the Windsor location are projected to range from approximately
$90,000 to $110,000, depending in part upon the amount management elects to
commit to marketing, advertising and training programs, before receipt of
revenues under service agreements with professionals. The Company has selected a
location for its Windsor site in a portion of premises to be subleased from an
affiliate of Dr. Tayfour upon completion of this offering for a term expiring on
March 30, 2004 at a rental rate of approximately $2,921 (Canadian funds) per
month subject to an increase of approximately 10% in April 1999.
The Company has entered into a Facilities Agreement with Dr. Fouad Tayfour
for the use of the Company's equipment and supports services at the Windsor
site. Under the terms of the Facilities Agreement, effective upon completion of
this offering the Company will receive approximately 50% of the Gross Procedure
Fee (as defined in the agreement) charged to patients by Dr. Tayfour as
compensation for use of the Company's Windsor equipment and providing support
services to Dr. Tayfour. In general, the Gross Procedure Fee includes all
charges to the patient by Dr. Tayfour for professional services and use of LVC
facilities and equipment and will be established from time to by Dr. Tayfour.
The Company and Dr. Tayfour have agreed that the Gross Procedure Fee will be not
less than $1,200 per procedure for each eye treated at the Windsor location
unless the parties agreed to a lower minimum fee. In view of the difficulty in
projecting the number of procedures to be performed and the total cost of the
Company's support services, the Company has agreed that its compensation from
Dr. Tayfour is subject to possible reduction during a 24 month period,
commencing after the end of the third month following the date of this
Prospectus, in the event less than an average of 150 LVC procedures per month
are performed at the Windsor site by Dr. Tayfour. The Facilities Agreement with
Dr. Tayfour is for a term of five years and will be renewed thereafter on a
year-to-year basis unless either party has provided the other with at least
three months' notice not to renew the agreement. and expects to enter into
similar arrangements with other local MDs and ODs. Although the Company
anticipates that it will generate revenues under its Facilities Agreement with
Dr. Tayfour upon completion of this offering, Dr. Tayfour is under no legal
obligation to use the Company's LVC Services on an exclusive basis or on any
basis, and there can be no assurance as to the revenues the Company will
generate.
The Company has also entered into a Consulting Agreement for Dr. Tayfour to
act as a professional consultant to the Company (see "Proposed Business" and
"Certain Transactions"). Compensation payable to Dr. Tayfour under the
Consulting Agreement will include a percentage of the Company's fees, after
deduction of certain operating expenses, attributable to the first 20 LVC
procedures performed in each month at its Windsor location by credentialed MDs
other than Dr. Tayfour. The percentage will equal 100% of the
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Company's compensation, after deduction of direct operating expenses and
overhead costs, for the first 10 such procedures in each month and 50% for the
next 10 procedures in each month. The Consulting Agreement with Dr. Tayfour is
for a term of five years and will be renewed thereafter on a year-to-year basis
unless either party has provided the other with at least three months' notice
not to renew the agreement.
The Company is currently engaged in negotiations to acquire at a cost of
$150,000 a 50% interest in a newly organized company to be formed in association
with a group of Michigan professionals to offer LVC Services in the metropolitan
Detroit area. There can be no assurance that such negotiations will be
successfully concluded. If such negotiations are concluded prior to the date of
this Prospectus, Vista Technologies has committed to lend the Company $150,000
at 8% interest per annum to make that investment, which would be repaid from the
proceeds of this offering by the Company. Either as a result of that transaction
or in association with other professionals at a future date, the Company
anticipates establishing a second site with equipment offering LVC Services in
Detroit, Michigan at an estimated cost ranging from $500,000 to $700,000 shortly
after the first Windsor location has become operational. A portion of the
proceeds of this offering by the Company is planned to be utilized for that
purpose, and management expects that part of the equipment requirements may be
financed by equipment lease or installment purchase obligations. However, at
present no such financing commitments have been obtained. Due to the status of
FDA pre-market approvals of LVC equipment at the present time, LVC equipment for
the first site in Michigan will be limited to PRK procedures to treat
nearsightedness, LS (laser sclerostomy) procedures to treat the symptoms of
glaucoma and possibly PTK (phototherapeutic keratectomy) procedures to treat
certain corneal pathologies. See "Proposed Business". The Company anticipates,
however, that U.S. patients who may request other forms of LVC procedures not
commercially available in the U.S. may be referred by professionals to MDs
associated with the Company's Canadian operations.
In March 1996, the Company received an assignment of, and assumed the
obligations under, a lease for a Summit holmium laser system from one of the MDs
with which it is currently negotiating to associate in Detroit, Michigan. Under
the terms of that lease assignment and assumption, this equipment will be
subleased by the Company, upon terms to be negotiated, to a newly-organized
company being formed in association with a group of Michigan professionals to
offer LVC Services in the metropolitan Detroit area. The Company's obligations
under the lease assignment and assumption are to make all equipment lease
payments remaining due of $10,850 per month until December 1999 (at which point
the Company will purchase the equipment for a nominal payment) plus an
obligation in the aggregate amount of $230,000, payable at the rate of $250 each
time the equipment is used by an MD, which amount will be deducted from sublease
obligations of the newly formed company.
If equipment financing can be obtained and adequate funds remain available
from the proceeds of this offering, the Company intends thereafter to develop
one or more additional site offering LVC Services in either Michigan or Southern
Ontario. In selecting the location of additional sites, management will take
into account the availability of equipment from prospective suppliers, the LVC
equipment to be made available at the location, and relevant market potential
factors such as the location of competitive facilities and regional
demographics.
The Company's management reserves the right to evaluate progress at its
Windsor location and its proposed association with a group of Michigan
professionals before making commitments at other equipment sites to insure that
net proceeds of this offering by the Company will be sufficient for its planned
operations for at least 12 months following completion of this offering.
No commitments for additional financing have been obtained by the Company
and there is no assurance that it will be able to obtain any such commitments
should additional financing be required.
See "Use of Proceeds", "Proposed Business" and "Certain Transactions".
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PROPOSED BUSINESS
GENERAL
The Company is a development stage enterprise organized as a Nevada
corporation on June 30, 1995. The Company's planned business activity is to
provide ophthalmic and optometric professionals with use of equipment and
support services ("LVC Services") by managing and administering fully equipped
outpatient services and advanced equipment to perform refractive laser
corrective eye surgery ("laser vision correction" or "LVC") in southern Ontario
and Michigan. The Company's activities to date have consisted primarily of
market research, seeking affiliations with experienced LVC eye care
professionals, negotiating to acquire equipment necessary for establishing its
first LVC Services location in Windsor, Ontario, and negotiating agreements to
provide facilities use and management services to eye care professionals. The
Company plans to earn revenues from fees for equipment use and support services
rendered to licensed ophthalmologists ("MDs") and optometrists ("ODs").
SOURCE OF REVENUES AND SERVICE AGREEMENTS WITH PROFESSIONALS
The Company expects to enter into nonexclusive service agreements with
independent MDs, ODs and professional group practices upon completion of this
offering who elect to contract for use of the Company's equipment and LVC
Services. The terms of these agreements may vary, depending upon the extent of
LVC Services and equipment provided by the Company, skills and experience of the
particular professional, negotiated terms in individual instances and market
conditions. The Company will earn its fees for the fair market value of the
Company's LVC Services by billing health care professionals at the time of use,
with such fees typically based upon a negotiated percentage of the gross
procedure fees charged to patients by the professional; payment normally will be
received when the professional collects its gross procedure fee from the
patient. For this purpose, the gross procedure fee is generally defined to
include all charges to the patient for services of one or more professionals to
perform an LVC procedure for one eye, which typically includes professional
services for the procedure, post-operative care and re-operative procedures, if
required, plus all charges to the patient for equipment use, medical supplies,
support staff and other administrative functions. The Company believes that in
most instances, it will seek to charge up to approximately 60% of the gross
procedure fee as a fair allocation for the market value of its LVC Services.
The gross procedure fee is required by law to be established by the
professional; however, the Company will require prior consent for gross
procedures fees using its LVC Services at less than $1,200 per eye in an effort
to recover at least the Company's estimated costs of operations. Since a
substantial portion of the Company's operating expenses are expected to be fixed
expenses for depreciation of equipment, facilities expense, support staff and
general and administrative expenses, the Company's prospects for profitability
will be dependent in large part upon the volume of LVC procedures performed by
use of its LVC Services in addition to the amount of the gross procedure fees
charged by professionals.
Generally speaking, gross procedure fees charged by professionals for LVC
treatment in most markets currently range from approximately $1,500 to $2,000
per eye, although there can be no assurance these levels will be maintained for
the long term. Support services offered by the Company will include, among
others, access to the Company's equipment, supplies and support personnel;
administration of accounting, billing, collection and other information
processing functions; training and education in advanced LVC procedures; and
marketing support. There can be no assurance that MDs and ODs will require and
contract for the Company's LVC Services, and professionals that do contract with
the Company cannot be required to use exclusively the Company's services for
their LVC practice.
TARGETED GEOGRAPHIC MARKETS
The Company's LVC Services are planned to be offered at locations in
southern Ontario, Canada and/or Michigan, focusing on laser vision correction of
common refractive disorders such as myopia (nearsightedness), hyperopia
(farsightedness) and astigmatism. Depending upon the extent of equipment lease
or other installment purchase financing that may available for its capital
equipment requirements, the Company
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anticipates that proceeds of this offering will enable it to establish from two
to four locations providing LVC Services in its targeted geographic markets of
Southern Ontario and Michigan servicing Central Canada and the Midwestern United
States. In addition, the Company intends to implement a comprehensive consumer
marketing program to explain and promote LVC generally to the public as well as
sponsoring training seminars and educational programs for MDs and ODs.
Since advanced laser-based procedures have been permitted in Canada for
several years while a pre-market approval ("PMA") process, described below, has
been pending with the U.S. Food and Drug Administration ("FDA"), the Company's
strategy has been to engage the consulting services of, and promote advisory
associations with, certain ophthalmologists who are experienced in a variety of
LVC treatments, procedures and post-operative care. These professionals have
been engaged by the Company to establish high medical and operational standards
for its LVC Services, to train other ophthalmologists in advanced LVC
procedures, and to establish a Board of Advisors consisting of credentialed and
prominent MDs and ODs with similar skills and experience. To attract these
professionals and encourage MDs and ODs to use Company facilities and services,
each Company site will be fully equipped with advanced equipment for laser-based
LVC procedures as well as providing equipment for diagnostic, pre-operative and
post-operative care and offering comprehensive support services.
BACKGROUND -- VISION DISORDERS
The human eye is a complex organ that functions much like a camera, with a
lens in front and a light sensitive screen, the retina, in the rear. Images
enter the human eye through the cornea, a transparent domed window at the front
of the eye. In a properly functioning eye, the cornea bends (refracts) incoming
images, causing the images to focus on the retina. The inability of the cornea
to properly refract incoming images results in blurred vision and is called a
refractive disorder.
Myopia (nearsightedness), hyperopia (farsightedness) and astigmatism are
three of the most common refractive disorders. In a nearsighted (or myopic) eye,
images are focused in front of the retina. In a farsighted (or hyperopic) eye,
images are focused behind the retina. In an astigmatic eye, images are not
focused at any one single point. Conventional methods of correcting refractive
disorders are by prescription of eyeglasses and contact lenses. Over the last 15
years, refractive vision disorders have also been treated by several surgical
techniques, such as radial keratotomy in which small incisions approximately 400
to 450 microns deep in a radial configuration are made around the periphery of
the cornea.
Corneal pathologies, which include certain diseases, injuries and
conditions of the cornea, also can result in impaired vision, discomfort or
blindness. Such pathologies include corneal opacities, irregular corneal
surfaces and abnormal tissue growths on the cornea. Another pathological
condition of the eye is glaucoma, a disease characterized by a sustained
elevation of intraocular pressure which, if untreated, may result in blindness.
LASER VISION CORRECTION ("LVC") SYSTEMS
To assist health care professionals in delivering refractive care to
persons with vision disorders, the Company intends to take advantage of
continuous technological advances developed in recent years in the field of
ophthalmic laser systems.
LASER TECHNOLOGY OVERVIEW
Lasers have been used routinely for a variety of medical purposes since the
1960s. Lasers emit photons of light into a highly intense beam of energy that is
delivered to targeted tissue by means of optical mirrors or fiber optics. The
degree of absorption by the tissue varies with the choice of wavelength and is
an important variable in the application of laser technology in treating various
tissues. Surgical lasers emit light in a continuous stream or in a series of
very short duration "pulses", thus interacting with tissue through heat or shock
waves, respectively. Several factors, including the wavelength of the laser and
the frequency and duration of the exposure or pulse, determine the amount of
energy which interacts with the targeted tissue and, thus, the amount of damage
to the tissue.
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Laser technology has been accepted in the ophthalmic community for the
treatment of certain eye disorders. In general, ophthalmic lasers are used to
coagulate, cut or ablate (remove) targeted tissue. As examples, the argon laser
is used for treatment of leaking blood vessels on the retina and retinal
detachments. Nd:YAG (Neodymium: Yttrium Alminum Garnet) pulsed lasers are used
to clear clouded posterior capsules and, to a lesser extent, for relief of
elevated pressure in the eye.
EXCIMER LVC SYSTEMS
More recently developed excimer (argon fluoride) lasers are incorporated in
a fully integrated ophthalmic surgical laser workstation for use by
ophthalmologists to perform procedures to treat refractive and other ophthalmic
disorders. The excimer laser system delivers pulses of ultraviolet laser light
to an eye to ablate submicron layers of tissue from the surface of the cornea in
a computer-assisted, predetermined pattern to reshape the cornea. Most of the
laser light generated by the excimer system is absorbed by the removed corneal
tissue during a procedure. As a result, the laser light does not penetrate
interior portions of the eye and does not create substantial amounts of heat in
the surrounding tissue. These attributes make the excimer laser system well
suited to corneal surgery.
PRK. Photorefractive keratectomy ("PRK") is procedure performed with a
excimer laser system to treat primarily nearsightedness, and also farsightedness
and astigmatism. When performing PRK with the excimer laser, the ophthalmologist
determines the exact correction required (which is measured by the same type of
examination used to prescribe eyeglasses or contact lenses) and programs the
correction into the system's computer. The ophthalmologist removes the thin
surface layer of the cornea (the epithelium) and positions the patient for the
laser procedure. The average PRK procedure consists of approximately 150 laser
pulses, each of which lasts several billionths of a second over a period ranging
for 15 to 40 seconds. Cumulative exposure to the laser light is less than one
second. The entire procedure, including patient preparation and post-operative
dressing, generally lasts no more than thirty minutes. The goal of PRK is to
eliminate or to reduce a person's reliance on corrective eyewear.
Following the PRK procedure, the ophthalmologist may prescribe topical
pharmaceuticals to promote corneal healing and to alleviate discomfort. A series
of patient follow up visits is scheduled with the ophthalmologist (MD) or an
optometrist (OD) to monitor the corneal healing process, to verify that there
are no complications and to test the correction achieved by the PRK procedure.
Patients undergoing PRK generally experience discomfort for approximately 24
hours, and blurred vision for approximately 48 to 72 hours after the procedure.
Although most patients experience improvement in uncorrected vision within a few
days of the procedure, it generally takes from two to six months for the
correction to stabilize and for the full benefit of the procedure to be
realized. An individual typically has one eye treated in a session, with the
second eye treated three to six months thereafter. In the Company's Windsor
location, however, it anticipates that a significant percentage of patients may
be eligible for bilateral treatment in which both eyes are treated
simultaneously based upon procedures that consultants to the Company have
developed.
Although a patient usually experiences a substantial improvement in clarity
of vision within a few days following the PRK procedure, it generally takes from
two to six months for the full benefit of the procedure to occur. The PRK
procedure is used today primarily to correct the vision of patients with myopia
(or nearsightedness) ranging from -1.5 to up to -7.00 diopters, although the PRK
procedure has also been performed in foreign countries on higher diopter
nearsighted and, occasionally, farsighted and astigmatic patients. Approximately
90% of all myopic patients are nearsighted up to -6.00 diopters and use of the
PRK procedure to correct the vision of nearsighted patients of up to -6.00
diopters therefore has received the greatest degree of testing. Prior to PMA
approval by the FDA for use in the United States of Summit's excimer laser
system in October 1995 and VISX's excimer laser system in March 1996, PRK
procedures to correct myopia have been performed in approximately 35 countries
outside the U.S., including Canada, the United Kingdom, Italy and Sweden.
LASIK. Laser assisted in situ keratomileusis ("LASIK") is a procedure
performed with an excimer laser system to treat extreme cases of myopia. LASIK,
although a more unusual and delicate surgical procedure than PRK, offers
advantages in that the epithelium is not touched by the laser and therefore
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promotes quicker healing. Glare and central islands are practically non-existent
after LASIK since ablation occurs in the stroma layer (under the epithelium); by
the creation of a corneal flap, subsequent retouches are facilitated with
minimal recovery time. To date, the FDA has not established standards for
clinical testing of LASIK systems, and the Company is uncertain whether LASIK
procedures can be utilized commercially in the United States. Summit, however,
has reported it is engaged in FDA clinical trials seeking approval to sell its
excimer system perform LASIK. In May 1996, the FDA advised U.S. eye care
professionals that LASIK and bilateral surgery (treatment of both eyes at the
same time) are outside the scope of currently FDA approved labeling for excimer
lasers. Although the FDA noted that physician discussions with patients and
physician decisions to conduct either of those procedures are considered the
practice of medicine, the FDA cautioned that it expects excimer laser equipment
manufacturers and health care practitioners will advertise and promote the use
of FDA approved lasers in the U.S. only within the scope of their currently FDA
approved use, i.e. for PRK and PTK.
PTK. Phototherapeutic keratectomy ("PTK") is a procedure performed with the
excimer system to treat corneal pathologies. In this procedure, submicron layers
of tissue are ablated from the surface of the cornea in order to remove
diseased, scarred or sight-inhibiting tissue. The goal of PTK is not necessarily
to cure the corneal pathology, but rather to alleviate the symptoms associated
with the pathology. The FDA in February 1995 granted PMA to an excimer laser
system developed by Summit Technology Inc. to perform PTK procedures and on
October 2, 1995, the FDA granted PMA to two excimer laser systems manufactured
by VISX Incorporated for PTK procedures, the VISX 20/20B and "Star" excimer
lasers.
OTHER. Excimer lasers may also be used to treat glaucoma. The procedure
pursuant to which glaucoma is treated is known as Partial Excimer Traheculectomy
("PET"). The PET procedure involves the use of the excimer laser to create a
penetrating filter through the scleral tissue (the tough, fibrous tissue
covering all of the eye except the cornea), which causes the permeation of
fluids from within the eye, thus reducing pressure levels.
HOLMIUM LVC SYSTEMS
LTK. Another recently developed LVC technology is the holmium laser system.
The holmium system delivers high intensity pulses of infrared light to an eye by
means of a fiber optic cable and a single-use, hand-held probe that directly
contacts the eye at the exact spots chosen by the ophthalmologist. The Company
is aware of two manufacturers that have developed holmium laser systems. Summit
has reported it is engaged in FDA clinical trials seeking approval to sell its
holmium system to perform laser thermal keratoplasty ("LTK"), a refractive
procedure performed to treat farsightedness and astigmatism in which peripheral
corneal tissue is thermally shrunk, causing the central portion of the cornea to
steepen.
LS. Laser Sclerostomy ("LS") is a surgical procedure performed with the
holmium system to treat the symptoms of glaucoma by making an opening in the
front chamber of the eye. Summit Technology, Inc. has received FDA pre-market
clearance to sell its holmium system in the U.S. for treatment of glaucoma.
Other LVC Systems. The Company is aware of three companies that have
reportedly developed solid state lasers, ophthalmic laser surgical systems that
apply a beam of high intensity light to remove tissue from the inside, as
opposed to the surface of, the cornea. These solid state lasers are designed to
ablate tissue inside the cornea without violating the cornea's surface by
computer guiding the laser beam to the inner corneal tissue and vaporizing the
targeted tissue.
BUSINESS STRATEGY
OVERVIEW
The Company's long-term business goal is to pursue a leadership position in
the potential market for LVC Services directed to refractive eye care in the
Midwestern United States and Central Canada. However, there can be no assurance
the Company will be successful in achieving this goal or that it will attain
profitable operations. To date, its activities have consisted primarily of
market research, seeking affiliations with experienced LVC eye care
professionals, negotiating to acquire equipment necessary to establish its first
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location for LVC Services in Windsor, Ontario, and negotiating agreements to
provide equipment use and support services to eye care professionals. The
Company's LVC Services are planned to be offered at locations in southern
Ontario, Canada and/or Michigan, focusing in particular on laser vision
correction of common refractive disorders such as myopia (nearsightedness),
hyperopia (farsightedness) and astigmatism. Depending upon the extent of
equipment lease or other installment purchase financing that may available for
its capital equipment requirements, the Company anticipates that proceeds of
this offering will enable it to establish from two to four LVC Service sites in
its targeted geographic markets of Southern Ontario and Michigan servicing
Central Canada and the Midwestern United States.
The first facility to be subleased and established by the Company
immediately upon completion of this offering will be located in Windsor,
Ontario, directly adjacent to Detroit, Michigan. The Company believes that
certain ophthalmologists in Canada have become technology leaders in employing
LVC equipment and techniques, including PRK procedures for treatment of
nearsightedness that have only recently become available for commercial use in
the U.S., as well as other laser procedures not commercially available in the
U.S. for treatment of hyperopia, astigmatism and extreme myopia cases. Due to
regulatory constraints in the U.S., the Company expects that some U.S. patients,
as well as Canadians, will seek treatment in Canada when the preferred method of
treatment requires an LVC procedure not commercially available in the U.S., such
as LASIK, LTK or bilateral procedures (concurrent treatment of both eyes). The
Company anticipates that LASIK and an advanced proprietary method of PRK
developed by Dr. Donald G. Johnson called the Johnson transepilthelial
multi-zone, multi-pass PRK procedure ("TMM PRK") will be the most significant
procedures performed at its first location in Windsor.
The Company also plans to offer LVC Services at one or more strategically
positioned locations in Michigan where licensed MDs and ODs who are expected to
become parties to facilities use and LVC Services agreements with the Company
bring their patients for LVC diagnosis, PRK laser procedures and post-operative
care. Based upon 1990 census data, Michigan has a population of approximately
9.3 million persons. Data compiled by the Michigan Optometric Licensing Board
indicates there are approximately 475 MDs and approximately 2,360 ODs in
Michigan.
RELATIONSHIPS AND AGREEMENTS WITH HEALTH CARE PROFESSIONALS
Dr. Fouad Tayfour
Dr. Fouad Tayfour has agreed to act as a consultant and to enter into a
Facilities Agreement with the Company effective upon the completion of this
offering. He has extensive experience in the use of LASIK procedures and
recently adapted the TMM PRK procedure to Summit equipment. Dr. Tayfour has
performed approximately 2,000 LASIK procedures through 1995 in Ontario. Under
the terms of a Facilities Agreement with Dr. Tayfour, effective upon completion
of this offering the Company will receive approximately 50% of the gross
procedure fee (as defined in the agreement) charged to patients by Dr. Tayfour
as compensation for use of the Company's facilities and for providing support
services to Dr. Tayfour. In general, the gross procedure fee includes all
charges to the patient by Dr. Tayfour for professional services and use of LVC
facilities, equipment, supplies and other administrative expenses and will be
established from time to by Dr. Tayfour. The Facilities Agreement provides that
the gross procedure fee related to Dr. Tayfour's use of the Company's LVC
Services will be not less than $1,200 (U.S. funds) per procedure for each eye
treated at the Windsor location unless both the Company and Dr. Tayfour mutually
agree that Dr. Tayfour may charge a lower minimum fee. In view of the difficulty
in projecting the number of procedures to be performed and the total cost of the
Company's support services, the Company has agreed that its compensation from
Dr. Tayfour is subject to possible reduction during a 24 month period,
commencing after the end of the third month following the date of this
Prospectus, in the event less than an average of 150 LVC procedures per month
are performed at the Windsor site by Dr. Tayfour. In such event, fees payable to
the Company by Dr. Tayfour will be reduced by any amount necessary to result in
additional compensation to Dr. Tayfour of not less than (i) 150 minus the actual
number of procedures performed by him in such month multiplied by (ii) the
professional fees realized by Dr. Tayfour for such period, net of the Company's
fee, divided by the actual number of procedures he performed in such month. The
Facilities Agreement with Dr. Tayfour is for a term of
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five years and will be renewed thereafter on a year-to-year basis unless either
party has provided the other with at least three months' notice not to renew the
agreement.
The Company is obligated under its Facilities Agreement with Dr. Tayfour to
provide equipment at facilities in Windsor meeting all ethical and professional
standards prescribed by the Company's Medical Advisory Board and equipped with
state-of-the-art equipment appropriate for LVC care, including equipment to be
acquired by the Company pursuant to an Agreement of Purchase of Assets with
Windsor Excimer Corporation, an affiliate of Dr. Tayfour (see "Certain
Transactions"). The Company's Windsor equipment and operations will be located
in a portion of facilities to be subleased from Windsor Excimer Corporation upon
completion of this offering (see "Company LVC Service Sites" below and "Certain
Transactions").
The Company has also entered into a Consulting Agreement with Dr. Tayfour
effective upon the completion of this offering. Under that agreement, Dr.
Tayfour will act as a professional consultant to the Company concerning the
establishment of ethical standards and procedures for LVC Services and care at
Company locations, will periodically conduct training and education seminars
sponsored by the Company, and Dr. Tayfour will agree to serve as an Executive
Committee member of the Company's Medical Advisory Board. Compensation payable
to Dr. Tayfour under the Consulting Agreement will include a percentage of the
Company's fees, after deduction of certain operating expenses, attributable to
the first 20 LVC procedures performed in each month at its Windsor location by
credentialed MDs other than Dr. Tayfour. The percentage will equal 100% of the
Company's compensation, after deduction of direct operating expenses and
overhead costs, for the first 10 such procedures in each month and 50% for the
next 10 procedures in each month. The Consulting Agreement with Dr. Tayfour is
for a term of five years and will be renewed thereafter on a year-to-year basis
unless either party has provided the other with at least three months' notice
not to renew the agreement.
The Company has also committed to Dr. Tayfour that it will establish and
maintain billing, collection and accounting procedures for the collection of
fees generated for the account of Dr. Tayfour and other licensed and
credentialed health care providers designated by him, and to establish and
maintain a public education and marketing program to promote LVC care to the
public in the geographic markets of Ontario and the Midwestern United States by
means of telemarketing, advertising and/or other programs conforming to ethical
and professional standards established by the Company's Board of Directors with
the advice and consent of the Company's Medical Advisory Group. In addition, the
Company has agreed to train and maintain an adequate support staff for the
management, administration and operation of its LVC Services and equipment, and
to promote general awareness of LVC care within the professional community by
sponsoring educational and training seminars for health care professionals.
Under the Consulting Agreement and Facilities Agreement with Dr. Tayfour,
the Company agreed to elect Ghassan Barazi as its President and Chief Executive
Officer and to cause Mr. Barazi and up to two other professionals to be
designated by Dr. Tayfour to be elected directors of the Company. Mr. Barazi has
acted as Administrative Director and Business Manager for the Windsor Laser Eye
Institute founded by Dr. Tayfour in 1991 (see "Management"). To date, Dr.
Tayfour has not nominated two other individuals for election to the Company's
Board of Directors, and he has advised the Company that he does not anticipate
such persons will be identified or designated until after the completion of this
offering.
Dr. Donald G. Johnson
The TMM PRK procedure was developed by Dr. Donald G. Johnson of Vancouver,
British Columbia, an experienced PRK surgeon. Dr. Johnson is a director and
stockholder of the Company (see "Management" and "Certain Transactions") and has
agreed to render part-time consulting services to the Company. Dr. Johnson
developed TMM PRK procedures with VISX equipment and as of December 31, 1995 has
successfully treated approximately 7,400 eyes with excimer laser procedures. TMM
PRK provides for a much smoother ablation zone, thus substantially reducing
glare and central islands, which are side effects sometimes encountered in
standard PRK procedures. The epithelium (a layer of cells comprising the outer
surface of the cornea) is removed in the TMM PRK procedure by use of the laser,
thus avoiding direct contact with the eye
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by the physician or instruments. The Company's believes that the TMM PRK method
promotes faster post-operation regrowth during the period when risk of pain and
infection risk is highest.
Dr. Johnson's consulting agreement provides he will advise the Company
concerning the establishment of ethical standards and procedures for LVC
procedures in general and the TMM PRK procedure in particular at the Company's
facilities so long as such services do not conflict with Dr. Johnson's
professional service obligations to his patients or other professional
commitments. There is no requirement under this agreement for continuing
compensation payments to Dr. Johnson.
Dr. J. Charles Casebeer
Dr. J. Charles Casebeer, Chairman of the Board, is a director and
stockholder of the Company (see "Management" and "Certain Transactions") and is
an educator and trainer in the LASIK procedure and has previously served other
companies as a consultant in the LASIK field. Dr. Casebeer also has conducted
studies on the TMM PRK method developed by Dr. Johnson. See also "Management".
Dr. Casebeer has entered into a Consulting Agreement with the Company. He
is expected to continue his efforts in LASIK procedures and to assist the
Company and Dr. Tayfour in managing the Company's program for training MDs and
ODs in the use and performance of LVC procedures and in recommending standards
to establish a program of credentialing and training MDs and ODs in various
aspects relating to LVC procedures and patient treatment. In consideration of
his services, Dr. Casebeer's professional corporation will receive from the
Company compensation at the rate of $60,000 per annum plus additional
compensation of $2,500 for each MD and OD that enters the credentialing program
(see "Certain Transactions"). The $60,000 annual payment to Dr. Casebeer's
professional corporation will be paid upon completion of this offering by the
Company for the first year of his consulting services and thereafter at the rate
of $5,000 per month. Compensation for each MD and OD that enters the
credentialing program will be payable at the rate of $500 per month over a
period of five months commencing in the first month following the date on which
each such MD and OD has started his or her accreditation program.
Dr. Casebeer is expected in the future to promote advanced LVC methods for
both the Company and for other Vista Laser Centers companies that may be formed
in the future by the Company's founder, Vista Technologies Inc., to service
other North American geographic markets. (The Company and investors in this
offering will not acquire an interest in other companies formed by Vista
Technologies Inc.)
Other Planned Relationships with Professionals
The Company intends to appoint a Medical Advisory Board of MDs and ODs,
including, among others, members of the local medical community, to make
recommendations concerning facilities and equipment, technological advances, and
medical, professional and ethical practices and standards at its LVC Service
locations and to monitor such practices. The Company's Medical Advisory Board is
expected to consist of up to approximately 20 MDs and up to approximately 40
ODs. An Executive Committee of the Medical Advisory Board will consist of
approximately five MDs and approximately five ODs who meet credential
requirements established by the Executive Committee. The Executive Committee
will establish credential requirements for MD and OD members of the Medical
Advisory Board, administer the Medical Advisory Board and provide consulting
services to the Company relating to its business, equipment and service
standards. The initial members of the Medical Advisory Board will be appointed
by joint decision of Dr. Tayfour and Ghassan Barazi, the Company's President,
and Medical Advisory Board members will be compensated for their services in
accordance with policies to be established from time to time by the Company's
Board of Directors. Such policies have yet to be determined and are expected to
be dependent in part upon the level of future revenues available to the Company,
its profitability and cash requirements for working capital and expansion. The
Company believes that both regional support of its LVC Services and its ability
to attract use of its LVC equipment and services will be enhanced by the
establishment of its Medical Advisory Board, and also as a result of the
reputation, experience and skills of MDs and ODs acting as consultants to the
Company. The Company plans to offer selected MDs and ODs the opportunity to
receive
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stock option grants under the Company's Stock Option Plan at exercise prices
equal to fair market value of its Common Stock on the date of grant to provide
MDs and ODs with an equity incentive in the Company's operations. The Company's
management believes that this program will encourage MDs and ODs to take an
active role in advising the Company and in recommending consideration of its LVC
Services to other MDs and ODs that are interested in evaluating available
alternatives when prescribing LVC treatment for their patients.
The Company does not plan to directly employ health care professionals.
Upon the completion of this offering, the Company will solicit additional MDs
and ODs to enter into services agreements with the Company and/or to serve as
members of its Medical Advisory Board. The terms of services agreements with
professionals may vary, depending upon the extent of LVC Services and equipment
provided by the Company, skills and experience of the particular professional,
negotiated terms in individual instances and market conditions. The Company
believes that in most instances, it will seek to charge up to approximately 60%
of the gross procedure fee as a fair allocation for the market value of its LVC
Services. The Company believes that two important factors relating to the
utilization of its LVC Services and equipment by MDs will be the number and
quality of qualified physicians providing patient care at Company locations and
the quality of its equipment and facilities. Other factors expected to impact
utilization of its LVC Services include public acceptance of LVC procedures,
competition, and demographic factors in its targeted market areas.
AGREEMENTS WITH RS-800 AND VISTA TECHNOLOGIES
The Company has entered into agreements to license the use of 800 and 900
telephone numbers from Refractive Services 800 Corp. ("RS-800") a wholly-owned
subsidiary of Vista Technologies, and for certain consulting services to be
provided by Vista Technologies. Vista Technologies is a founder and principal
stockholder of the Company. Vista Technologies currently operates five PRK
surgical centers in Europe. See "Certain Transactions".
Under a Consulting Services Agreement, Vista Technologies will provide
certain consulting services to the Company relating to LVC developments in
Europe, location of additional sites for Company equipment, financing,
accounting and legal requirements and investor relations. In exchange for such
services, Vista Technologies will receive 5% of the Company's revenues
attributable to charges for the use of its equipment and other LVC Services,
less a credit to the Company against such fees of $5,000 per month. In the event
any of such revenues are attributable to a subsidiary of the Company that is not
wholly-owned by the Company, Vista Technologies' 5% will be reduced in
proportion to the Company's percentage ownership in the subsidiary, but to not
less than 2 1/2% of such revenues. Rights to the service mark "Vista Laser
Centers" are owned by Vista Technologies and have been licensed to the Company
by Vista Technologies on a non-exclusive basis for the term of the Consulting
Services Agreement.
RS-800 has granted the Company the right to use certain 800 and 900 area
code telephone numbers, including among others 800-WE-DO-PRK, for its marketing
and public education programs. If the Company elects to use those telephone
numbers, RS-800 will receive 2 1/2% of the Company's revenues generated only as
a direct result of responses to telemarketing activities of the Company by use
of the licensed 800 and 900 telephone numbers. In such event, the determination
of revenues generated as a direct result of responses by use of the licensed
telephone numbers will be based upon responses from new patients using those
numbers to be maintained by the Company for MDs and ODs who are parties to
service agreements with the Company. The Company has not yet determined whether
it intends to use the 800 and 900 telephone numbers licensed by RS-800.
COMPANY LVC SERVICE SITES
The Company plans to select strategically located sites to be equipped with
state-of-the art laser equipment systems permitted for commercial use in the
country in which the equipment is located, as well as accommodating diagnostic,
pre-operative and post-operative facilities. The Company will own or lease and
maintain the LVC equipment at each site, and will offer MDs and ODs billing,
accounting, administrative,
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marketing and management services, as well as access to a trained support staff
and necessary LVC equipment and supplies, so that health care professionals may
concentrate their efforts on patient care. The Company believes that physician
groups and individual practices will typically lack the capital (approximately
$500,000 or more per laser system) to acquire LVC equipment and can benefit from
accounting, administrative, marketing and management services where the
Company's cost is spread over a larger base than would be available to small or
individual practices.
The Company's first LVC Services site will be established in Windsor,
Ontario, directly adjoining the United States border at Detroit, Michigan. The
Company has selected a location for its facility at 2224 Walker Road, Windsor,
Ontario N8W 3P6, Canada where it will sublease from an affiliate of Dr. Tayfour
a portion of premises currently used by Dr. Tayfour. These facilities include
approximately 2,228 square feet to be subleased for a term expiring on March 30,
2004 and approximately 400 square feet to be subleased for a term expiring on
December 30, 1996. The monthly rental rate for these facilities will be
approximately $2,921 (Canadian currency) per month subject to an increase of
approximately 10% in April 1999.
The Company has also entered into agreements effective upon completion of
this offering to purchase certain laser and related equipment from an affiliate
of Dr. Tayfour at a purchase price of $1,000,000, which approximates its fair
market value, to immediately establish its Windsor LVC Service operations. Of
such purchase price for equipment, $500,000 will be paid from proceeds of this
offering by this Company and the balance will be financed by the Company's
issuance of a 10% promissory note, interest only accruing from the date of this
offering and payable monthly commencing 90 days thereafter, with all principal
due on the second anniversary of the date of this Prospectus and collateralized
by all equipment at the Company's Windsor location. The equipment to be
purchased for the Windsor location will include a Summit OmniMed UV 200 excimer
laser, a Sunrise Technologies LTK holmium laser, a corneal automatic mapping
system and other medical and office equipment. See "Certain Transactions". The
Summit equipment is covered by an service maintenance agreement with Summit at a
cost of $35,500 per annum effective through December 15, 1996 or 600,000 laser
pulses, whichever first occurs.
The Company is currently engaged in negotiations to acquire at a cost of
$150,000 a 50% interest in a newlyorganized company to be formed in association
with a group of Michigan professionals to offer LVC Services in the metropolitan
Detroit area. There can be no assurance that such negotiations will be
successfully concluded. If such negotiations are concluded prior to the date of
this Prospectus, Vista Technologies has committed to lend the Company $150,000
at 8% interest per annum to make that investment, which would be repaid from the
proceeds of this offering by the Company. Either as a result of that transaction
or in association with other professionals at a future date, the Company
anticipates establishing a second site with equipment offering LVC Services in
Detroit, Michigan at an estimated cost ranging from $500,000 to $700,000 shortly
after the first Windsor location has become operational.
In March 1996, the Company received an assignment of, and assumed the
obligations under, a lease for a Summit holmium laser system from one of the MDs
with which it is currently negotiating to associate in Detroit, Michigan. Under
the terms of that lease assignment and assumption, this equipment will be
subleased by the Company, upon terms to be negotiated, to a newly-organized
company to be formed in association with a group of Michigan professionals to
offer LVC Services in the metropolitan Detroit area. The Company's obligations
under the lease assignment and assumption are to make all equipment lease
payments remaining due of $10,850 per month until December 1999 (at which point
the Company has the right to purchase the equipment for a nominal payment of $1)
plus an obligation in the aggregate amount of $230,000, payable at the rate of
$250 each time the equipment is used by an MD, which amount will be deducted
from sublease obligations of the newly formed company. The Company currently is
negotiating to enter into a modified lease for this equipment directly with the
original equipment lessor on substantially the same economic terms provided by
the lease assignment.
The location and equipment selected for additional LVC Service sites will
be determined in the future with reference to the status of regulatory approvals
for commercial use of LVC equipment in the United States, the proximity of the
site to a full-service Company equipment location, and other relevant factors
such as potential competition and market demographics. Due to the status of FDA
pre-market approvals of LVC
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equipment at the present time, LVC equipment for the first site in Michigan will
be limited to PRK procedures to treat nearsightedness, LS (laser sclerostomy)
procedures to treat the symptoms of glaucoma and possibly PTK (phototherapeutic
keratectomy) procedures to treat certain corneal pathologies. The Company
anticipates, however, that U.S. patients who may request other forms of LVC
procedures not commercially available in the U.S., such as LASIK or TMM PRK, may
be referred by professionals to MDs associated with the Company's Ontario
operations.
Each location administered by the Company will be fully equipped to offer
high quality service for LVC procedures to primarily correct myopia as well as
hyperopia and astigmatism. The Company's Windsor site will act as the flagship
facility for the Company's LVC Services. The Windsor facilities are designed for
high quality performance of laser-based vision correction, training and
education of medical professionals, and to conduct both professional and patient
seminars. The Company has completed a preliminary design concept for the Windsor
site and is in the process of designing a program for training MDs and ODs in
PRK, LASIK, TMM PRK and other alternative refractive care procedures at this
location.
MARKETING STRATEGY
The Company is developing marketing materials for health care providers to
assist them in educating potential patients as to PRK, LASIK and other LVC
procedures. The Company's marketing strategy may vary, depending upon the
particular geographic area, the current level of local knowledge about LVC
procedures, the acceptability of particular means of advertising and the type of
customer. The Company intends to promote marketing programs to health care
providers that will utilize newspaper, radio, television, magazine and other
media advertising, direct mail promotions and telemarketing to potential LVC
patients, brochures describing LVC for distribution by MDs and ODs, and video
cassettes discussing LVC procedures with professional health care provider and
patient testimonials. The Company's marketing program will be intended to comply
with ethical guidelines of the American Academy of Ophthalmology and other
applicable laws and regulations.
The Company is not involved in the research, development or manufacture of
refractive laser systems, and will be dependent on unrelated manufacturers for
its supply of refractive lasers. The Company believes that there are four U.S.
companies that have conducted or are conducting clinical trials with excimer
lasers for refractive surgery: Summit Technology, Inc, VISX Incorporated, Chiron
Corp. ("Chiron") and LaserSight Incorporated ("LaserSight"). As described below,
Summit and VISX have recently received PMA approval to commercially sell excimer
lasers for PRK procedures to treat low and mild myopia in the United States.
FDA REGULATORY APPROVAL PROCESS IN THE UNITED STATES
BACKGROUND AS TO THE PMA PROCESS
Excimer laser systems and related disposables are regulated as medical
devices by the United States Food and Drug Administration ("FDA") and require
pre-market clearance or pre-market approval (referred to as a "PMA") by the FDA
prior to commercial sale and use in the U.S. Medical devices in the U.S. are
classified into one of three classes on the basis of the controls deemed
necessary by the FDA to reasonably ensure safety and effectiveness. Class I
devices are subject to general controls such as labeling, premarket notification
to the FDA and adherence to good manufacturing practices; Class II devices are
subject to general and special controls such as performance standards,
postmarket surveillance, patient registries and FDA guidelines. Class III
devices generally are those which must receive PMA by the FDA to ensure their
safety and effectiveness and include, among other devices, new devices which
have been found not to be "substantially equivalent" to existing legally
marketed devices.
Before a new device can be introduced to the market, the manufacturer
generally must obtain FDA clearance through either a 510(k) pre-market
notification or approval of a PMA. A 510(k) clearance will be granted if the
submitted information establishes that the proposed device is "substantially
equivalent" to a legally marketed Class I or Class II medical device, or to a
Class III medical device for which the FDA has not called for PMAs. The FDA has
recently been requiring a more rigorous demonstration of substantial equivalence
than in the past. It generally takes from four to 12 months from submission to
obtain 510(k)
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pre-market clearance, but may take longer in certain cases. The FDA may
determine that a proposed device is not substantially equivalent to a legally
marketed device, or that additional information is needed before a substantial
equivalence determination can be made.
A PMA application must be filed if a proposed device is not substantially
equivalent to an existing legally marketed Class I or Class II device, or if it
is a Class III device for which the FDA has called for PMAs. A PMA application
must be supported by valid scientific evidence which typically includes
extensive preclinical and clinical trial data to demonstrate the safety and
effectiveness of the device. If human clinical trials of a device are required,
and the device presents a "significant risk," the sponsor of the trial (usually
the manufacturer or distributor of the device) will have to file an
Investigational Device Exemption ("IDE") application prior to commencing human
clinical trials. The IDE application must be supported by data, typically
including results of animal and laboratory testing. If the IDE application is
approved, human clinical trials may begin at a specific number of
investigational sites with a specific number of patients, as approved by the
FDA.
A PMA application must contain the results of clinical trials, the results
of all relevant bench tests, laboratory and animal studies, a complete
description of the device and its components, a detailed description of methods,
facilities and controls used to manufacture the device and certain other
information. Upon receipt of a PMA application, the FDA makes a threshold
determination as to whether the application is sufficiently complete to permit a
substantive review. If the FDA determines that the PMA application is
sufficiently complete to permit a substantive review, the FDA will accept the
application for filing. FDA review of a PMA generally takes one to two years
from the date the PMA is accepted for filing, but may take significantly longer.
The review time is often significantly extended by the FDA asking for more
information, including additional clinical trials for clarification of
information provided in the submission. There are devices for which FDA approval
has been sought which have never been approved for marketing in the U.S.
If the FDA's evaluation of both the PMA application and manufacturer's
facilities are favorable, the FDA will either issue an approval letter or an
Approvable Letter, which usually contains a number of conditions which must be
met in order to obtain final approval of the PMA. When conditions have been
fulfilled to the satisfaction of the FDA, it will issue a PMA approval letter,
authorizing commercial distribution of the device for certain applications. If
the FDA's evaluation is not favorable, the FDA will deny approval of the PMA
application or issue a "not approvable letter". The FDA may approve a device for
some procedures but not others, or for certain classes of patients and not
others. Modifications to a device that is an approved PMA also may require
approval by the FDA of PMA supplements or new PMAs.
PMA STATUS OF LVC SYSTEMS
In late October 1995, Summit received PMA from the FDA for use of Summit's
excimer laser system to treat low and moderate nearsightedness using PRK. The
Company has been advised that this PMA specifies a six millimeter ablation zone
for myopic corrections between -1.5 and -7.0 diopters. Summit has further
indicated that its PMA requires the initiation of postmarket studies and
surveillance. Data generated by the postmarket studies will be reviewed by the
FDA in determining whether future restrictions on device labeling or use are
warranted.
On March 28, 1996, VISX announced it had received PMA from the FDA for use
of VISX's excimer laser system to treat low and moderate nearsightedness using
PRK. The Company has been advised that this PMA specified a six millimeter
ablation zone for myopic corrections up to -6.0 diopters.
The Company believes that the FDA has not published guidelines for clinical
trials of excimer laser systems to perform procedures other than PRK and PTK,
and both Summit and VISX have indicated they are working with the FDA to design
appropriate trials for such procedures on a case by case basis. Because the FDA
has not published guidelines with respect clinical trials for other PRK
procedures, it is not known whether or to what extent the FDA may require
further clinical trials of TMM PRK or LASIK procedures or whether the use of TMM
PRK or LASIK will be permitted in the United States. TMM PRK and LASIK are
currently permitted in Canada and are expected to account for a majority of the
procedures performed at the first Windsor location to be established by the
Company.
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SAFETY AND EFFICACY
The first PRK procedure for the treatment of nearsightedness using an
excimer laser system was performed in 1989, and the first PTK procedure for the
treatment of a corneal pathology using an excimer system was performed in 1988.
A large majority of PRK and PTK procedures to date have been performed only
since 1990. Concerns with respect to the safety and efficacy of the excimer
laser system to perform procedures include predictability and stability of
results and potential complications, such as modest decreases in best corrected
vision and side effects from PRK, PTK, LASIK and LTK. Other possible effects
include postoperative pain; corneal haze during healing (an increase in the
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); unintended
over or under corrections; instability, reversal 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).
Summit has reported that two year follow-up data accumulated by Summit
during its Phase III PRK clinical trials indicate all of the individuals
undergoing PRK experienced an improvement in visual acuity without corrective
eyewear. Prior to PRK, 95% of the eyes in this group were 20/200 or worse. Of
the eyes treated, approximately 91% improved to 20/40 or better, the legal
requirement to obtain a driver's license in most states without corrective
eyewear, while the remaining 9% experienced improved vision without corrective
eyewear, but still required corrective eyewear to achieve 20/40 vision or
better. (Summit is not affiliated with the Company.)
In addition, it was reported in 1991 by the Steering Committee of the
Summit International Laser User Group (composed of academies and ophthalmic
physicians from approximately 27 countries) that, based on procedures performed
on over 6,150 nearsighted eyes of up to -6.00 diopters, the PRK procedure was
found to be safe and effective, with more than 90% of treated eyes being within
1.00 diopter of 20/20 vision in the first year following the procedure. PRK to
correct myopia is currently being performed in at least 35 countries outside the
U.S.
MARKET POTENTIAL FOR THE COMPANY'S LVC SERVICES
It is estimated that in excess of 100 million people in the U.S., and a
much larger number worldwide, use eyeglasses or contact lenses to correct common
vision disorders, with over 60 million of these individuals suffering from
nearsightedness. U.S. consumers spent an estimated $13.8 billion in eyeglass and
contact lens purchases in 1993. While excimer laser procedures can treat people
who are farsighted or are astigmatic, both the existing technology and
application for regulatory approvals for those uses are in an earlier stage than
for use of excimer lasers for treatment for nearsightedness.
Refractive disorders generally are corrected with conventional methods such
as eyeglasses and contact lenses. Today there exist alternative treatments for
permanently reshaping the cornea to relieve nearsightedness, farsightedness and
astigmatism. One technique for corneal reshaping involves manual scalpel
incisions on the surface of the cornea, known as radial keratotomy or "RK". RK
is used today primarily to correct nearsightedness, but is known to have
potential limitations. RK is known to (i) weaken the cornea, (ii) present the
potential for infection and (iii) produce inconsistent visual correction
results. However, RK procedures are generally substantially less expensive than
LVC procedures.
The Company believes that the market potential for alternative refractive
care utilizing excimer laser systems is commercially significant. Many eyeglass
or contact lens wearers are potential candidates for laser refractive surgery.
Generally speaking, the Company believes that younger persons are more apt to
elect refractive surgery than older people who have become accustomed to
eyeglasses or contact lenses over an extended period.
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GOVERNMENTAL REGULATION
The Company and its operations will be subject to extensive rules and
regulations, both in Canada and in the United States at the federal, provincial,
state and local level, affecting the health care industry and the delivery of
health care. These regulations in both the United States and Canada include laws
and regulations prohibiting the practice of medicine and optometry by persons
not licensed to practice medicine or optometry, prohibiting the unlawful rebate
or unlawful division of fees and limiting the manner in which prospective
patients may be solicited. Other regulatory requirements, such as regulations
concerning the use of excimer laser systems, may also apply to the Company's
business and plan of operation.
The Company believes its plan of operation will not violate regulatory
constraints on prohibitions against the corporate practice of medicine. None of
the Company's employees will provide medical diagnosis, advice or treatment. All
professional services rendered to patients, and use of the Company's equipment
to perform PRK, LASIK or other LVC procedures, will be provided and performed
only by health care professionals who have entered into LVC service agreements
with the Company. Such service agreements will be nonexclusive, leaving the
professional free to recommend and use equipment and services available from
other sources. Gross procedure fees will be determined exclusively by the
professional (except that the Company's consent will be required for gross
procedures fees at less than $1,200 per eye), and such fees will be billed for
the account of the professional. Fees earned by the Company for use of its
equipment and support services will be paid only by the professional; to the
extent such fees are based upon a negotiated percentage of the gross procedure
fee, the Company believes that such fees will represent no more than the fair
market value of the Company's LVC Services. The Company will neither pay nor
receive fees attributable to the referral of patients by one professional to
another professional, and it will not receive or pay rebates or other
compensation based upon such referrals.
Numerous state and provincial laws and regulations presently affect the
manner in which the Company may establish or administer the use of its equipment
and other LVC Services, which vary significantly from state to state in the U.S.
and from province to province in Canada. In some instances these laws and
regulations are ambiguous, and sometimes regulators fail to provide adequate
guidelines. The Company believes that its plan of operation will enable the
Company to offer and administer its LVC Services in compliance with all
applicable regulatory requirements. However, federal, state and provincial
regulatory attention may continue to be directed to the practice of medicine,
and any changes in applicable law or regulations, or in governmental agency and
judicial interpretations of such laws and regulations, could cause one of the
Company's strategies now in compliance with applicable laws to cease to comply.
Additionally, while U.S. and Canadian laws and regulations do not now clearly
affect the Company's planned LVC Services, there can be no assurance that the
regulatory scheme will not in the future place impediments upon the Company's
plan of operation.
Current state and provincial regulatory requirements and restrictions that
relate to corporate entities such as the Company involved in the ownership and
operation of health care facilities include prohibitions against: the corporate
practice of medicine except by an entity owned by health care professionals
and/or wherein the professionals exercise control over medical judgments;
patient referrals by health care 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 health care professionals and corporate entities. Other
laws in both the United States and Canada specifically regulate the nature and
compensation provisions of employment or management relationships that health
care 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 health
care professionals to the "fair market value" of their contributions, or affect
the manner of marketing the service performed at the health care facility.
Additional regulations in some states and provinces also now affect, or in the
future may affect, the administration and use of LVC Services, including
requirements for certificates of need and/or other licensing and registration of
medical equipment.
The Company believes that it has developed strategies for use in Michigan
and Ontario to offer and administer its LVC Services in compliance with
applicable law. In order to accommodate local regulations, it is possible that
the business terms and organizational structure of the Company's activities in
Michigan may
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vary from those in Ontario. There can be no assurance that future changes in
laws and regulations will not adversely affect the Company's operations.
The use of excimer lasers and other medical equipment is also subject to
numerous government laws and regulations relating to such matters as safe
working conditions, environmental protection, fire hazard control and disposal
of potentially hazardous substances. There can be no assurance that the Company
will not be required to incur significant costs to comply with such laws and
regulations in the future.
ANTI-KICKBACK MEDICAL FRAUD AND ABUSE STATUTES.
Certain states in the United States have adopted medical services fraud and
abuse statutes that incorporate by reference U.S. federal anti-fraud and abuse
legislation. Although existing federal legislation does not cover the Company's
activities since its physician clients will not be seeking Medicare or Medicaid
reimbursement for LVC procedures, such legislation is briefly discussed below to
illustrate the potential reach of applicable state regulation. In 1977, Congress
adopted the Medicare and Medicaid Anti-Fraud and Abuse Amendments of 1977, which
prohibit certain activities and which impose a criminal penalty on anyone who
"knowingly and willfully solicits or receives any remuneration (including any
kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash
or in kind in return for referring an individual to a person for the purpose of
arranging for the furnishing of any item or service for which payment may be
made in whole or in part under" the Medicare or Medicaid programs. This
provision is commonly referred to as the anti-kickback or anti-referral
provision. This anti-referral provision is extremely broad and, in several court
cases, its scope has been upheld. State statutes incorporating this provision
may provide separate criminal penalties, can apply regardless of whether third
party reimbursement is sought, and are enforceable at the discretion of the
enacting state rather than the federal Office of the Inspector General ("OIG")
or the applicable U.S. District Attorney.
Regulations establishing safe harbors for certain activities which would
otherwise be subject to the Medicare/Medicaid fraud and abuse statute (the "Safe
Harbor Regulations") have been promulgated by the OIG. Because many state
anti-referral laws have been interpreted by reference to corresponding federal
statutes and regulations, the Company has reviewed its expected activities in
light of the federal Safe Harbor Regulations. The Safe Harbor that most closely
covers investment in the Company is known as the Small Investment Safe Harbor.
In order to qualify for this exception to the fraud and abuse prohibitions, the
following conditions must be met:
1. No more than 40% of the entity may be controlled by investors who are in
a position to control the flow of business to the entity.
2. No more than 40% of the entity's business can come from investors.
3. The terms on which the investment interest is offered, such as the price
and quantity of shares, must be the same for an investor who is in a
position to generate business for the entity and one who is not.
4. The terms of the investment interest must not be related to the previous
or expected volume of referrals generated by an investor.
5. An investor cannot be required to make referrals to the entity as a
condition for remaining an investor.
6. The way the services are marketed and furnished cannot favor investors.
7. The entity must not loan funds to or guarantee a loan for an investor
who is in a position to generate business for the entity if any part of
the loan is used to obtain the investment interest.
8. The amount of dividends must be directly related to the capital
contributed.
The Company does not believe that more than 40% of the Company's stock
initially will be held by persons in a position to refer business to the
Company. However, in view of the Company's plan to grant additional stock
options or warrants exercisable at fair market value of the date of grant to
health care professionals, it is possible that persons in a position to refer
business to the Company could acquire more than 40% of the Company's stock at a
future date. In such event, it is possible that regulatory authorities could
interpret the referral structure expected to be utilized by the Company as
resulting in a more than 40% of the Company's business coming from investors in
a position to generate business.
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The Safe Harbor Regulations are extremely narrow in scope. Because of the
broad scope of the Medicare/Medicaid fraud and abuse statute and the narrow
scope of the Safe Harbor Regulations, many transactions involving physicians
will not fall within the Safe Harbor Regulations. Similarly, the Company's
activities are not expected to fall squarely within any of the existing Safe
Harbors. However, in the preamble to the Safe Harbor Regulations, the OIG noted
that activities which do not satisfy the Safe Harbor provisions are not
necessarily subject to prosecution. Failure to qualify for Safe Harbor
protection does not deem a payment arrangement per se illegal; instead, the
arrangement could be subject to increased scrutiny. The degree of risk of
prosecution for any activity which does not comply with the Safe Harbor
Regulations or with applicable state law will depend on an evaluation of the
many factors related to the specific business arrangement. Such decisions will
be within the prosecutorial discretion of the applicable state attorney.
POTENTIAL INVESTORS CONCERNED WITH THE SAFE HARBOR REGULATIONS SHOULD SEEK
ADVICE FROM INDEPENDENT COUNSEL CONCERNING THESE MATTERS BEFORE INVESTING.
INSURANCE AND INDEMNIFICATION
Use of laser systems by health care professionals using the Company's laser
equipment and other LVC Services may give rise to claims against the Company by
persons alleging injury. The Company currently has no insurance since it has not
yet actively administered LVC Services. The Company may not be able to purchase
medical malpractice insurance and may not be able to purchase other insurance at
reasonable rates to protect it against claims arising from the medical practice
of health care providers using the Company's equipment and services.
The Company believes that claims alleging defects in the laser systems will
be covered by the manufacturer's warranties and the manufacturer's product
liability insurance, and that the Company could take advantage of such insurance
by adding such suppliers to potential lawsuits against the Company. There can be
no assurance that the Company's laser suppliers will carry product liability
insurance or that any such insurance will be adequate to protect the Company.
The Company anticipates that its policy will be to require that
ophthalmologists who perform laser procedures by use of the Company's LVC
equipment maintain their own professional liability insurance. Upon completion
of this offering, the Company intends to explore the availability and cost of
obtaining umbrella coverage with respect to any malpractice claims relating to
procedures performed by use of its equipment and LVC Services and of obtaining
errors and omissions coverage with respect to the Company's staff. There can be
no assurance that the Company will be able to retain adequate liability
insurance at reasonable rates, or that insurance or indemnification provided by
health care providers will be adequate to cover claims asserted against the
Company, in which event the Company's business may be materially adversely
affected.
PROPRIETARY RIGHTS
The Company has no licenses, patents, registered trademarks or registered
copyrights except for its license with RS-800, a wholly-owned subsidiary of
Vista Technologies, to use certain 800 and 900 telephone numbers in its targeted
markets of Southern Ontario and Michigan. Rights to the service mark "Vista
Laser Centers" are owned by Vista Technologies and have been licensed to the
Company by Vista Technologies on a non-exclusive basis for the term of Vista
Technologies' ten-year Consulting Services Agreement with the Company and any
extensions of that agreement.
COMPETITION
The vision care industry is extremely competitive and includes numerous
companies that are substantially larger than the Company and have greater
financial, marketing and technical resources. Competitive factors which may
affect market acceptance or revenues include regulatory requirements,
performance, pricing, convenience and ease of use, success relative to
alternative treatments and patient and general market acceptance.
The Company's LVC Services will compete with other surgical and non
surgical forms of treatments for refractive disorders, including eyeglasses,
contact lenses, manual refractive surgery (such as RK), corneal
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transplants and possibly new technologies under development. Eyeglass and
contact lens use is expected to continue to be the most popular methods of
treating refractive vision disorders for the foreseeable future due to low
immediate cost and the avoidance of surgery. Notwithstanding certain limitations
and possible disadvantages, RK surgical procedures are generally less expensive
than LVC procedures and may remain competitive as an alternative to eyeglasses
and contact lenses as a result of cost considerations. The Company will also
compete with other businesses formed since 1990 offering LVC facilities and
support services in Canada and/or have prepared for providing LVC care
facilities in the U.S. These businesses are pursuing a variety of strategies
such as marketing directly to consumers through optical chains or affiliating
their LVC services with hospitals and physician group practices. The Company is
also likely to compete with hospitals, hospital affiliated group entities, group
practices and private ophthalmologists that may elect to purchase refractive
laser systems.
Manufacturers of excimer lasers may be primary competitors, either directly
through marketing subsidiaries or indirectly through strategic partnerships with
third parties. Summit is reportedly engaged in developing a network of
refractive laser surgery clinics through a marketing subsidiary named Refractive
Centers International, Inc. Other companies that have announced an intent to
compete in the U.S. market for laser vision correction include, among others,
Laser Vision Centers, Inc., the Beacon Eye Institute Inc. (a subsidiary of
Siddeley Canada Inc.), Vision International, Inc., LaserSight Centers, Inc. and
Sight Resource Corporation. Laser Vision Centers, Inc. operates PRK clinics in
Canada and Europe, has reported alliances with certain hospitals, and has
announced a franchising plan. Vision International operates PRK clinics in
Mexico, Finland and Argentina. LaserSight Centers, Inc. has announced it has
entered into service contracts with ophthalmologists to provide refractive laser
service. Other companies currently offering PRK services in Europe and other
foreign countries could also elect to entry the U.S. market.
EMPLOYEES
At the completion of this offering, the Company intends to hire personnel
it believes will be required for the Company's activities. See "Use of
Proceeds". Such personnel initially will include the Company's Chief Executive
Officer, Ghassan Barazi, one employee in charge of equipment maintenance and
from three to five employees for technical, administrative and clerical
functions. The success of the Company's future operations depends in large part
on the Company's ability to recruit, train and retain qualified personnel. There
can be no assurance, however, that the Company will be successful in retaining
or recruiting key personnel.
LITIGATION
The Company is not a party to any litigation.
SEC SUBPOENA RELATING TO TRADING IN U.S. SHOE CORP. SECURITIES
In June 1996, the Company received a subpoena duces tecum from the
Securities and Exchange Commission ("Commission") in connection with an
investigation by the Commission into trading in the securities of U.S. Shoe
Corp. Commission File Number HO-3018. Based on the subpoena, this investigation
is apparently focused on trading in U.S. Shoe Corp. securities during the period
from October 1, 1994 through March 3, 1995, which was prior to the incorporation
of the Company. The subpoena required the Company to furnish the Commission with
various documents relating, among other things, to the Company's bank accounts,
brokerage accounts, telephone records and documents referring or relating to 28
named individuals and entities. The Company has complied with the Commission's
subpoena for production of documents. The Company has never directly or
indirectly traded in the securities of U.S. Shoe Corp., and management therefore
believes that the Company itself is not a target of the Commission's
investigation. Counsel for Jac. J. Lam, a former director of the Company, has
advised the Company that Mr. Lam purchased call options covering securities of
U.S. Shoe Corp. during 1994 based solely on then publicly-available information.
To avoid any possible complications arising as a result of these proceedings,
Mr. Lam resigned as a director of the Company on July 18, 1996.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- --------------------------- --- -----------------------------------------
<S> <C> <C>
Ghassan Barazi 32 President and Chief Executive Officer;
Treasurer and Chief Financial Officer;
Director
Theodore J. Mayer 63 Secretary
J. Charles Casebeer, M.D. 57 Chairman of the Board; Director
Donald G. Johnson, M.D. 57 Director
</TABLE>
The following summarizes the principal employment history and relevant
professional experience of the Company's directors and executive officers:
GHASSAN BARAZI was elected President, Treasurer and a director of the
Company effective as of September 1, 1995. Mr. Barazi, a citizen of Canada,
founded CAD Venture Limited in 1989. CAD Venture Limited services manufacturing
industries by providing CAD/CAM solutions training and support for the
automotive industry. During the last five years since early 1991, Mr. Barazi has
acted on a part-time basis as Administrative Director and Business Manager for
the Windsor Laser Eye Institute in Windsor, Ontario. The Windsor Laser Eye
Institute was founded in 1991 by Dr. Fouad Tayfour to perform laser refractive
surgical procedures. Mr. Barazi participated in the selection and installation
of excimer laser equipment at Windsor Laser Eye Institute, developed marketing
programs, and assisted in the preparation of ophthalmologist conferences as part
of his duties as the Institute's Administrative Director and Business Manager.
He has attended courses in mechanical engineering at the Ryerson Polytechnical
Institute in Toronto, Ontario. Mr. Barazi will be employed on a full-time basis
by the Company effective upon the completion of this offering. See "Employment
Agreement" below.
THEODORE J. MAYER has served as Secretary of the Company since June 30,
1995. During the period from February 1991 to the present, he has been
self-employed providing accounting consulting services to several United States
and foreign manufacturing and service corporations and investor relations
services to various service companies. Prior thereto, Mr. Mayer was employed as
the Financial Operations Principal of Mayer Securities, Inc. from October 1987
to January 1991. He received his certified public accountant license from the
State of New Jersey in 1960 and an M.B.A. degree from New York University
Graduate School of Business Administration. Mr. Mayer served as the acting
Treasurer of Vista Technologies from June 1995 to February 16, 1996. Mr. Mayer's
services to the Company are rendered on a part-time basis and he is expected to
be replaced as the Company's Secretary when a full-time administrative or chief
financial officer is engaged after the completion of this offering.
DR. J. CHARLES CASEBEER was elected a director of the Company and its
Chairman of the Board on October 16, 1995. He has served as a director of Vista
Technologies, a publicly-traded company, since February 16, 1996. Dr. Casebeer
is an experienced ophthalmologist in the United States. He received his B.A.
degree from Harvard University, his Doctor of Medicine degree from the
University of Southern California School of Medicine, served his internship at
the Medical College of Virginia, his residency in ophthalmology at Stanford
University Medical Center, and currently holds professional licenses in the
States of Arizona, California and Utah. He received his Ophthalmology Board
Certification from the American Board of Ophthalmology in 1972 and was certified
for cataract/implant surgery by the American Board of Eye Surgery in 1990. He
has been engaged in private practice from 1971 to the present time, including
associations with the Northern Arizona Eye Clinic, Ltd. Outpatient Surgery
Center, Flagstaff, Arizona from 1971 to July 1994, where he served as President
and Medical Director; Northern Arizona Eye Clinic, Ltd., Scottsdale, Arizona
from 1992 to May 1994; the J. Charles Casebeer Laser/Refractive Surgery Center
Ltd., Scottsdale, Arizona from May 1994 to August 1994; and Casebeer Eye
Centers, Ltd., Scottsdale, Arizona from August 1994 to the present. Dr.
Casebeer's experience in keratorefractive surgery dates from 1983 to the
present, and includes more than 6,000 cases. From 1987 to the present, Dr.
Casebeer has served as a Course Director in RK technique and practice
development and in automated lamellar keratoplasty ("ALK") at numerous courses
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<PAGE> 43
and symposiums throughout the United States, Europe, Africa, South America,
Australia and Asia. Since 1992, he has been a Clinical Professor for the
University of Utah Department of Ophthalmology. Dr. Casebeer has lectured
extensively throughout the United States and the world since 1989 at over 150
seminars, courses and symposiums on various refractive surgery topics including,
among others, RK, ALK and LASIK procedures. He has authored four books or book
chapters on refractive surgery, has 16 articles published in peer-reviewed
medical journals, and since July 1993 has authored a monthly ocular surgery news
column entitled "The Comprehensive Refractive Surgeon" in Ocular Surgery News.
DR. DONALD G. JOHNSON, a citizen of Canada, was elected a director of the
Company on October 16, 1995. He has served as Chairman of the Board and a
director of Vista Technologies, a publicly-traded company, since February 16,
1996. Dr. Johnson received his M.D. degree from the University of Western
Ontario, served his internship at Toronto Western Hospital, his general surgery
residency at Shaughnessy Hospital, Vancouver, British Columbia, and his
ophthalmology residency at the University of British Columbia. His post graduate
accomplishments include certifications in the United States for radial
keratotomy (1984), epikeratophakia (1986), advanced corneal transplantation
(1987), small incision cataract and advanced phacoemulsification (1990) and
excimer laser PRK and PTK (1990) and certification in Germany for non freeze
B.S.K. method of lamellar keratoplasty (1988). Dr. Johnson has practiced in New
Westminster, British Columbia continuously since 1969, first participating in a
group practice for general ophthalmology from 1969 to 1981, then as a solo
practitioner from 1981 to 1985. He established the London Place Eye Centre in
New Westminster as an outpatient medical and surgical eye center in November
1985 where he still practices. From 1970 to the present, he has served as
Director and Chief Consultant of Ophthalmology Clinics for the Yukon Territory.
He has published 16 articles and conducted 11 clinical investigation studies in
the field of ophthalmology, including clinical investigations of the VISX 20/20
and Nidek EC-5000 excimer lasers and the Sunrise holmium laser. On more than 80
occasions, Dr. Johnson has appeared as a guest speaker on radio and television
or at hospitals and professional conventions, including presentations at
seminars, most of which have occurred since 1991 on subjects relating to excimer
lasers. Dr. Johnson has been affiliated with St. Mary's Hospital, Royal
Columbian Hospital and Surrey Memorial Hospital since 1969 and Whitehorse
General Hospital since 1970.
There is no family relationship between any of the Company's directors and
executive officers. All directors hold office until the next annual meeting of
stockholders and until their successors are elected and qualify. Officers serve
at the discretion of the Board of Directors. Mr. Barazi was nominated to serve
as the Company's President and a director by Dr. Fouad Tayfour, who is entitled
to designate two additional directors to the Board after the conclusion of this
offering (see "Certain Transactions"). There are no other arrangements or
understandings between any other director and any other person pursuant to which
any person was elected or nominated as a director except that Dr. Casebeer and
Dr. Johnson were each nominated for election as directors by Vista Technologies.
At present there are no committees of the Board of Directors.
The Company has agreed, for a period of five years from the date of this
Prospectus, if so requested by the Representative of the Underwriters, to
nominate and use its best efforts to appoint a designee of the Representative as
a non-voting advisor to the Company's Board of Directors. See "Underwriting".
The compensation arrangements of all officers are subject to review and
adjustment from time to time by the Board of Directors. The Company entered into
an employment agreement with Ghassan Barazi described below under "Employment
Agreement". Directors currently do not receive remuneration for their services
as directors, but may be reimbursed for expenses such as their cost of travel to
Board meetings. The Company has a consulting agreement with Dr. Casebeer,
Chairman and a director of the Company, which requires compensation for his
services as Chairman and training and consulting services. See "Certain
Transactions". The Company's Bylaws permit compensation of directors, and the
Company reserves the right to change its policies as to director compensation
from time to time based upon factors such as the Company's performance and the
amount of time required for participation by individual directors.
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<PAGE> 44
EXECUTIVE COMPENSATION
None of the Company's executive officers has previously received cash
compensation from the Company. No executive office or director of the Company is
currently to be compensated at a base rate in excess of $100,000 per annum
during the first 12 months of the Company's operations. The Company has entered
into an employment agreement with its President, Ghassan Barazi, requiring a
$20,000 one-time hiring bonus payable from proceeds of this offering by the
Company and a minimum base salary of $75,000 per annum plus an annual bonus
equal to 5% of the Company's pre-tax income (see "Employment Agreement" below)
and agreements with two of its directors for consulting services, Dr. J. Charles
Casebeer and Dr. Donald G. Johnson, which provide that Dr. Casebeer's
professional corporation will receive annual compensation in the amount of
$60,000, of which the first year's compensation is payable in advance upon
completion of this offering by the Company, plus $2,500 for each MD and OD that
enters a credentialing program to be established by the Company (see "Proposed
Business" and "Certain Transactions"). These agreements will become effective
only upon the completion of this offering.
The Company has also issued and sold securities to Mr. Barazi, Dr. Johnson
and Dr. Casebeer.
Pursuant to a contractual commitment made as of September 1, 1995, on
November 28, 1995 the Company issued and sold 20,000 shares of Common Stock to
Mr. Barazi at a cash price of $1.00 per share ($20,000 total). Under that
commitment, the Company also reserved and sold 180,000 Class A Warrants to
Ghassan Barazi at a cash price of $0.10 per warrant ($18,000) which was paid on
April 29, 1996. Class A Warrants are exercisable at $1.00 per share until the
fourth anniversary of the date of this Prospectus. See "Description of
Securities". Concurrent with that commitment, Mr. Barazi was elected a director
and President of the Company on September 1, 1995.
On December 1, 1995, the Company issued and sold to Dr. Johnson 5,000
shares of Common Stock at a cash price of $1.00 per share ($5,000) and 45,000
Class A Warrants at a cash price of $0.10 per warrant ($4,500) pursuant to a Dr.
Johnson's Consulting Agreement dated November 15, 1995. Dr. Johnson was elected
a director of the Company on October 16, 1995.
Pursuant to a Dr. Casebeer's Consulting Agreement dated November 15, 1995,
the Company reserved and sold to Dr. J. Charles Casebeer's professional
corporation 5,000 shares of Common Stock at a cash price of $1.00 per share
($5,000) and 45,000 Class A common stock purchase warrants stock at a cash price
of $0.10 per warrant ($4,500). Payment for these securities was received by the
Company on April 17, 1996. Dr. Casebeer was elected a director and Chairman of
the Board of the Company on October 16, 1995.
For further additional information as to transactions with Mr. Barazi, Dr.
Casebeer and Dr. Johnson, see "Proposed Business", "Certain Transactions" and
"Description of Securities".
EMPLOYMENT AGREEMENT
The Company has a written employment agreement with its President and Chief
Executive Officer, Ghassan Barazi. The employment agreement with Mr. Barazi
provides that he will serve as the Company's President and Chief Executive
Officer. Commencing upon the completion of this offering, the employment
agreement provides for a one-time hiring bonus of $20,000 payable upon
completion of this offering by the Company and an annual base salary of $75,000
(in U.S. or equivalent Canadian currency), use of an automobile, group health
insurance and a life insurance policy for Mr. Barazi's benefit in the face
amount of approximately $375,000. Mr. Barazi's base salary will increase to
$100,000 per annum commencing with the first month after the Company has
attained a consolidated net profit for the three immediately preceding months.
In addition, he is entitled to an annual bonus equal to 5% of the Company's
pre-tax income. It is expected that Mr. Barazi will devote substantially all of
his business time to the activities of the Company commencing upon the
completion of this offering.
The employment agreement with Mr. Barazi is for a term of five years
commencing on the date of this Prospectus, except that the Company may terminate
the agreement without cause prior to the expiration of its initial term upon 60
days' prior notice and payment of an amount equal to Mr. Barazi's annual
compensation and value of benefits for one year. For this purpose, termination
of employment without cause includes any
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<PAGE> 45
termination other than his voluntary resignation or termination as a result of
disability for a continuous period of six months (or for noncontinuous periods
aggregating six months in any period of one year), conviction of a criminal
offense or commission of an act of bankruptcy.
In addition, in the event Mr. Barazi's employment is terminated either
voluntarily or involuntarily at any time during the initial five year term or is
not renewed for at least one additional year at the end of its initial five year
term, Mr. Barazi will be entitled to receive a $200,000 additional severance
payment if he has not exercised any portion of his stock option covering 50,000
shares of Common Stock at an option exercise price of $1.00 per share (see "1995
Stock Option Plan" below). However, should such termination be the result of Mr.
Barazi's voluntary resignation, the Company has to right to issue 180,000 shares
of Common Stock to Mr. Barazi in lieu of the $200,000 cash payment and Mr.
Barazi's rights to exercise his stock options and his 180,000 Class A Warrants
(see "Certain Transaction") will terminate unexercised in such event.
Vista Technologies has granted Mr. Barazi an irrevocable proxy, so long as
he remains employed by the Company and expiring in any event after the initial
five year term of his employment agreement, to vote 200,000 shares of the
Company's Series B Preferred stock on any matter on which stockholders are
entitled to vote. This proxy is subject to an agreement with Dr. Tayfour that
the Series B Preferred shares owned by Vista Technologies will be voted in favor
of the election of three nominees of Dr. Tayfour to the Company's Board of
Directors for a term of five years after the date of this Prospectus, one of
whom will be Mr. Barazi's so long as he is employed as the Company's Chief
Executive Officer.
1995 STOCK OPTION PLAN
On September 1, 1995, the Board of Directors and stockholders of the
Company adopted a 1995 Stock Option Plan (the "Option Plan"). The Option Plan is
structured to allow the Board of Directors and a future Stock Option Committee
of the Board discretion in creating equity incentives to management, key
employees and professional consultants for the purpose of assisting the Company
in motivating and retaining appropriate talent. The Option Plan covers up to a
maximum of 200,000 shares of the Company's Common Stock. To date, options
covering 50,000 shares of Common Stock have been granted under the Option Plan
to one executive officer of the Company on January 12, 1996.
The Option Plan provides for the granting of stock options which, at the
discretion of the Board or its Stock Option Committee, may be either "incentive
stock options" within the meaning of Section 422A of the U.S. Internal Revenue
Code or non-qualified stock options which do not qualify as incentive stock
options. The Option Plan provides that both incentive stock options and
non-qualified options under the Option Plan must be granted at an option price
which is not less than the fair market value of the Common Stock on the date of
grant. With respect to any participant who owns stock possessing more than 10%
of the voting rights of the Company's outstanding capital stock, the exercise
price of any incentive stock option under the Option Plan to such a participant
must be not less than 110% of fair market value on the date of grant. Options
under the Option Plan may be granted to officers, directors, key employees of,
and professional consultants to, the Company and its subsidiaries. Under the
terms of the Option Plan, the aggregate fair market value (determined at the
time an option is granted, which will normally be equal to the option exercise
price per share) of Common Stock exercisable under an incentive stock option for
the first time in any calendar year may not exceed $100,000.
Under the Option Plan, the number of shares available for options and
subject to option, and the option exercise price of outstanding options, is to
be adjusted upward or downward, as the case may be, in the event of any stock
dividend, recapitalization, merger, consolidation, split up or similar
transaction affecting shares of the Company's Common Stock. If any option
granted under the Option Plan terminates or expires without having been
exercised in full, the shares not purchased under such option will again be
available for purposes of the Option Plan.
The Option Plan will be administered by a Stock Option Committee (the
"Committee") of two or more members of the Board of Directors of the Company
composed of only "disinterested directors" of the Company as defined in Rule
16-3(c)(2) promulgated under the Securities Exchange Act of 1934 ("Exchange
Act"). Disinterested directors are persons who have not, during their period of
service on the Committee and
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<PAGE> 46
during the period of 12 months prior to service on the Committee, received an
option to acquire or purchase equity securities of the Company or any of its
affiliates under the Option Plan or under any other stock option or stock
incentive plan of the Company and its affiliates except for participation in a
plan expressly permitted under the provisions of subsection (i) of Rule
16-3(c)(2) under the Exchange Act. The Committee will determine the persons to
receive options under the Option Plan in the future, the terms of options
granted, including the exercise price, the number of shares subject to the
option and the terms and conditions of exercise.
The maximum term for each option under the Option Plan is ten years. No
option granted may be transferred by the optionee other than by will, the laws
of descent and distribution, or by a qualified domestic relations order, and
each option is exercisable during the lifetime of the optionee only by such
optionee. Options under the Option Plan are exercisable in whole or in part at
such times after the date of grant as set forth in an option agreement as
determined by the Committee or the Board of Directors. Each option granted will
be for a term, and exercisable only in accordance with, option agreements
approved by the Board or the Committee. The Board intends to establish a policy
under the Option Plan of limiting the term of stock options to a period of no
more than five years from the date of grant. Although the Board of Directors
reserves the right to establish other terms and conditions as to any option
granted under the Option Plan, it is currently anticipated that the Board of
Directors and the Committee will continue to follow this policy as to options
granted under the Option Plan. Terms relating to the exercisability of an option
under the Option Plan may be determined upon an individual basis by the
Committee at the time of grant.
In the event of termination of employment or other termination of the
optionee's relationship with the Company, the optionee's option will terminate
and may be exercised during a three month period after termination to the extent
the option was exercisable on the date of termination. In the event such
termination was caused by death or permanent disability, however, the period of
exercisability is extended under the Option Plan to one year after the date of
termination, but in no event after the date the option would have expired in the
absence of termination. No shares acquired on exercise of an option granted
under the Option Plan may be sold or otherwise disposed of by an optionee until
the expiration of at least six months following the date on which the option was
originally granted by the Company.
The Option Plan contains provisions which authorize the Committee, in the
event of a sale or merger of all or substantially all of the Company's assets,
or a merger or consolidation in which the Company is not the surviving
corporation, to take certain action in its discretion. In the event of such a
transaction the Committee may accelerate the exercisability of any option to
permit its exercise in full during such period as the Committee may prescribe
following the public announcement of a sale of assets or merger, and may elect
to earlier grant that right at the time an individual option is granted. The
Committee may also require an optionee in the event of such a transaction to
surrender an option in return for a substitute option issued by a surviving
corporation which is determined by the Committee to have a value substantially
equal to the value of the surrendered option.
Shares of Common Stock acquired upon exercise of options under the Option
Plan will be paid for in cash or, in the sole discretion of the Committee,
through the delivery of shares of the Company's Common Stock with a market value
equal to the option exercise price. The ability to pay the option price in
shares would, if permitted by the Committee, enable an optionee to engage in a
series of successive stock for stock exercises of an option (sometimes referred
to as "pyramiding") and thereby fully exercise an option with little or no cash
investment by the optionee. The Board of Directors has not established any
policy as to whether it will permit exercises of options through payment with
shares.
The Board of Directors may amend the Option Plan without the approval of
stockholders, except that stockholder approval will be required for any
amendment which would (i) increase the total number of shares optionable under
the Option Plan, or (ii) reduce the option price of options granted under the
Option Plan below 100% of fair market value of the stock on the day the option
is granted, or (iii) change the class of persons eligible to participate in the
Option Plan, or (iv) extend the period during which options may be granted or
exercised. Adjustments in the total number of shares optionable under the Option
Plan and adjustments of the option price may be made, however, without
stockholder approval pursuant to the
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<PAGE> 47
adjustment provisions mentioned above for any stock dividend, recapitalization,
merger, consolidation, split up or similar transaction affecting shares of the
Company's Common Stock.
As of the date of this Prospectus, no options had been exercised under the
Option Plan, one unexercised option granted to Ghassan Barazi, the Company's
President, was outstanding to purchase 50,000 shares of Common Stock, and up to
150,000 shares were available for future grants of options under the Option
Plan. The option outstanding was granted to Mr. Barazi on January 12, 1996 at an
option exercise price of $1.00 per share for a term of five years expiring on
January 12, 2001, and is fully exercisable from the date of grant.
OTHER
The Company currently has no pension, retirement, annuity, savings or
similar benefit plan which provides compensation to its executive officers or
directors. Upon the completion of this offering, the Company anticipates it will
obtain a group health insurance plan in which all of its employees will be
eligible to participate.
CERTAIN TRANSACTIONS
ISSUANCE AND SALE OF SECURITIES
The Company was recently organized on June 30, 1995. On July 31, 1995,
Refractive Services-800, Inc. paid the Company $100,000 for the purchase of
100,000 shares of the Company's Series A Preferred stock, or a price equal to
$1.00 per share. The Company was advised that Refractive Services-800, Inc. is a
Panama corporation with offices in The Netherlands, controlled by Marcel Jouby,
a Dutch citizen, Kerry Lynne O'Rourke, a South African citizen residing in The
Netherlands, and Sukumal Chintagavongse, a Thailand citizen. Refractive
Services-800, Inc. was formed to invest in and promote the Vista Laser Centers
businesses sponsored by Vista Technologies and, via a wholly-owned subsidiary
Refractive Services 800 Corp. ("RS-800"), to own and license the use of 800 and
900 telephone numbers. On July 18, 1996, Vista Technologies agreed to purchase
all of the assets of Refractive Services-800, Inc. in exchange for 260,000
shares of Vista Technologies' common stock and 266,000 common stock purchase
warrants of Vista Technologies. Among other items, the assets purchased by Vista
Technologies include 100,000 shares of the Company's Series A Preferred stock
and all of the capital stock in RS-800. In order to limit cash dividends on its
investment to a 10% return per annum, Vista Technologies has agreed that
dividends on shares of Series A Preferred stock originally issued in July 1995
will be limited to $0.10 per share annually until such time as those shares are
resold by Vista Technologies to an unaffiliated third party. Thereafter, such
shares will bear dividends at the same rate of $0.50 per share annually that
will be applicable to shares of Series A Preferred sold in this offering. In the
opinion of the Board of Directors, taking into consideration the fact that the
Company had no assets or business prior to this investment, the fair market
value of 100,000 shares of Series A Preferred stock originally issued on July
31, 1995 was equal to its purchase price of $100,000.
On November 16, 1995, the Company issued 200,000 shares of its Series B
Preferred stock (see "Description of Securities -- Series B Preferred Stock") to
Vista Technologies Inc. in exchange for 200,000 shares of common stock in Vista
Technologies. Although there was no quoted market for Vista Technologies' common
stock at the time of that transaction, primarily as a result of Vista
Technologies' then delinquency in filing periodic reports with the Securities
and Exchange Commission (the "Commission"), Vista Technologies represented it
would take such steps as were necessary to become current in required filings
with the Commission and seek to obtain an actively quoted market for its common
shares. The organization of the Company was sponsored and promoted by Vista
Technologies as a founder, and the Company's Board of Directors believed the
experience of Vista Technologies in management of PRK businesses in Europe and
services Vista Technologies proposed to make available under its ten-year
Consulting Services Agreement with the Company would be of valuable assistance
to the Company's negotiation of agreements prior to the date of this Prospectus
and its planned future operations. Due to Vista Technologies' shortage of cash
resources, Vista Technologies proposed that its investment in the Company would
be in the form of 200,000 shares of Vista Technologies common stock in exchange
for 200,000 shares of the Company's Series B Preferred stock. In view of Vista
Technologies' status as a founder of the Company and its representation on
45
<PAGE> 48
the Company's Board of Directors, such transaction should not be considered as
having been negotiated at arms-length. Based upon a subsequent independent third
party valuation of the Company's Series B Preferred stock as of November 16,
1995, the Company has recorded a cost for its investment in 200,000 shares of
Vista Technologies common stock as of that date of $217,597. Public market
quotations for Vista Technologies common stock became available in March 1996
following Vista Technologies' filings of previously delinquent reports with the
Commission, and such quotations to date in 1996 have ranged from approximately
$2.00 to $4.00 per share of Vista Technologies common stock.
The liquidation preference of Series B Preferred stock is $2.50 per share
and cumulative dividends on Series B Preferred stock are $0.12 1/2 per annum
(see "Description of Securities -- Series B Preferred Stock"). Vista
Technologies has granted Ghassan Barazi an irrevocable proxy, so long as he
remains employed by the Company and expiring in any event after the initial five
year term of his employment agreement, to vote the 100,000 shares of the
Company's Series A Preferred stock and 200,000 shares of the Company's Series B
Preferred stock owned by Vista Technologies on any matter on which stockholders
are entitled to vote. This proxy is subject to an agreement by Vista
Technologies that the Series A and Series B Preferred shares owned by Vista
Technologies will be voted in favor of the election of three nominees of Dr.
Tayfour to the Company's Board of Directors for a term of five years after the
date of this Prospectus, one of whom will be Mr. Barazi's so long as he is
employed as the Company's Chief Executive Officer. The Company, in turn, has
granted Vista Technologies' Board of Directors an irrevocable proxy for a term
of five years following the date of this Prospectus to vote the 200,000 shares
of Vista Technologies owned by the Company on any matter on which Vista
Technologies stockholders are entitled to vote. Each of the above proxies
provides that it will expire as to any of the shares covered thereby that are
sold to an unaffiliated third party in a bona fide sale transaction.
On November 28, 1995, and pursuant to a commitment authorized by the Board
of Directors on September 1, 1995, the Registrant issued and sold 20,000 shares
of its Common Stock to Ghassan Barazi, the Company's President and Chief
Executive Officer, at a cash price of $20,000, or $1.00 per share. In the
opinion of the Company's Board of Directors, the fair market value of the
Company's Common Stock on November 28, 1995 was $1.00 per share. Under the
commitment made by the Company on September 1, 1995, the Company also reserved
and authorized the sale to Mr. Barazi of 180,000 Class A common stock purchase
warrants stock at a cash price of $18,000, or $0.10 per warrant. Each Class A
warrant represents the right to purchase one share of the Company's Common Stock
at an exercise price of $1.00 per share until the Class A warrants expire on the
fourth anniversary of the date of this Prospectus. See "Description of
Securities -- Common Stock Purchase Warrants". Payment for these warrants was
received from Mr. Barazi on April 29, 1996. In the opinion of the Company's
Board of Directors, the fair market value of the Company's Class A common stock
purchase warrants on the dates of these transactions was equal to the purchase
price paid of $0.10 per warrant.
On December 1, 1995, and pursuant to a commitment made under his Consulting
Agreement dated as of November 15, 1995, the Company sold to Dr. Donald G.
Johnson, a director of the Company, 5,000 shares of its Common Stock at a cash
price of $5,000, or $1.00 per share, and 45,000 Class A common stock purchase
warrants stock at a cash price of $4,500, or $0.10 per warrant. On November 15,
1995, the Company also reserved and authorized the sale to Dr. J. Charles
Casebeer, a director and Chairman of the Board of the Company, of 5,000 shares
of Common Stock at a cash price of $5,000, or $1.00 per share, and 45,000 Class
A common stock purchase warrants stock at a cash price of $4,500, or $0.10 per
warrant. Payment for these shares and warrants was received from Dr. Casebeer on
April 17, 1996. Each Class A warrant represents the right to purchase one share
of the Company's Common Stock at an exercise price of $1.00 per share until the
Class A warrants expire on the fourth anniversary of the date of this
Prospectus. See "Description of Securities -- Common Stock Purchase Warrants".
In the opinion of the Company's Board of Directors, the fair market value of the
Company's Class A common stock purchase warrants on the dates of these
transactions was equal to the purchase price paid of $0.10 per warrant and $1.00
per share of Common Stock.
Based upon a subsequent independent third party valuation of the Company's
Common Stock and Class A Warrants, the fair values of the Common Stock was
determined to be $1.08 per share as of November 28, 1995, and the fair value of
the Class A Warrants was determined to be $0.09 per warrant as of November 28,
1995. The Company has determined that the differences between these valuations
and the
46
<PAGE> 49
prices at which the Board of Directors authorized the issuance and sale of
Common Stock and Class A Warrants to Mr. Barazi, Dr. Johnson and Dr. Casebeer
were nominal.
AGREEMENTS WITH DR. TAYFOUR AND AFFILIATE
As described under the caption "Proposed Business", the Company has entered
into a Facilities Agreement and a Consulting Agreement, each dated as of October
16, 1995, with Dr. Fouad Tayfour effective upon completion of this offering.
Among other terms, the Company agreed to elect Ghassan Barazi as its President
and Chief Executive Officer and to cause Mr. Barazi and up to two other
professionals to be designated by Dr. Tayfour to be elected directors of the
Company. Vista Technologies and Refractive Services-800, Inc. have agreed to
cause all shares of the Company's capital stock that they are entitled to vote
in favor of the election of Mr. Barazi and two other nominees of Dr. Tayfour to
the Company's Board of Directors for the term of Mr. Barazi's employment
agreement (see "Management -- Employment Agreement" above). Mr. Barazi has acted
on a part-time basis as Administrative Director and Business Manager for the
Windsor Laser Eye Institute founded by Dr. Tayfour in 1991 (see "Management").
To date, Dr. Tayfour has not nominated two other individuals for election to the
Company's Board of Directors, and he has advised the Company that he does not
anticipate such persons will be identified or designated until after the
completion of this offering.
The Company has also entered into an Agreement of Purchase of Assets dated
December 1995 (the "Asset Agreement") with Windsor Excimer Corporation, an
affiliate of Dr. Tayfour. Under the Asset Agreement, the Company has agreed to
purchase two surgical lasers (see "Proposed Business -- Company LVC Service
Sites") and related medical and other office equipment from Windsor Excimer
Corporation concurrent upon the closing of this offering. The lasers are located
at facilities that will be subleased by the Company in Windsor as described
below. The price to be paid by the Company for the equipment will be $1,000,000,
of which $500,000 is to be paid in cash from proceeds of this offering and
$500,000 will be financed by a note. The purchase price approximates the fair
market value of the equipment and was determined by arms-length negotiation
between Dr. Tayfour and representatives of the Company after consultation with
its financial advisors. The note will bear interest at 10% per annum payable on
the last day of each month, and all principal is due and payable on the second
anniversary of the date of this Prospectus. The Company's obligations under the
note will be collateralized by a fixed and floating security interest in all
assets of the Company's Canadian subsidiary which will include, among other
assets, all assets purchased under the Asset Agreement. Under the terms of the
security instruments, the Company's Canadian subsidiary will be permitted to
incur purchase money security interests in additional equipment that may be
acquired in the future.
The Asset Agreement provides that the Company will enter into sublease
agreements with an affiliate of Dr. Tayfour upon completion of this offering for
the sublease by the Company of a portion of certain premises at a medical
building in Windsor, Ontario currently used by Dr. Tayfour. These facilities
will include approximately 2,228 square feet to be subleased for a term expiring
on March 30, 2004 and approximately 400 square feet to be subleased for a term
expiring on December 30, 1996. The monthly rental rate for these facilities will
be approximately $2,921 (Canadian funds) per month subject to an increase of
approximately 10% in April 1999.
AGREEMENTS WITH AFFILIATES AND RELATED PARTIES
LICENSE AGREEMENT WITH RS-800
RS-800 and the Company entered into a License Agreement dated October 16,
1995, under which RS-800 granted the Company the right to use certain 800 and
900 area code telephone numbers in its geographic markets of Michigan and
Southern Ontario, including among others 800-WE-DO-PRK, for the Company's
marketing and public education programs. If the Company elects to use one or
more of those telephone numbers, RS-800 will receive 2 1/2% of the Company's
revenues generated only as a direct result of responses to telemarketing
activities of the Company by use of the licensed 800 and 900 telephone numbers.
During the term of the License Agreement, RS-800 has agreed to maintain the
exclusive right to license 800
47
<PAGE> 50
and 900 telephone numbers covered by the License Agreement that are actively
used by the Company, and to offer the Company rights to license, at no
additional royalty, any other 800 and 900 telephone numbers that may be acquired
hereafter by RS-800 for use in the Company's geographic markets of Michigan and
Southern Ontario. The License Agreement is for a term of five years from the
date of this Prospectus, and is automatically renewed thereafter on a
year-to-year basis unless either party provides six months' prior notice of an
intent not to extend the term. The Company has not yet determined whether it
will elect to use the 800 and 900 telephone numbers covered by the RS-800
License Agreement.
All of the capital stock in RS-800 is owned by Vista Technologies, a
founder and principal stockholder of the Company.
CONSULTING SERVICES AGREEMENT WITH VISTA TECHNOLOGIES
Vista Technologies and the Company entered into a Consulting Services
Agreement dated as of October 16, 1995. Under the Consulting Services Agreement,
Vista Technologies will provide certain consulting services to the Company
relating to LVC developments in Europe, location of additional sites for LVC
Centers, financing, accounting and legal requirements and investor relations. In
exchange for such services, Vista Technologies will receive 5% of the Company's
revenues attributable to charges for the use of its facilities and support
services, less a credit to the Company of $5,000 per month. In the event any of
such revenues are attributable to a subsidiary of the Company that is not
wholly-owned by the Company, Vista Technologies' 5% will be reduced in
proportion to the Company's percentage ownership in the subsidiary, but to not
less than 2 1/2% of such revenues. The Consulting Services Agreement is for a
term of ten years from the date of this Prospectus, and is automatically renewed
thereafter for periods of five years unless either party provides six months'
prior notice of an intent not to extend the term. Rights to the service mark
"Vista Laser Centers" are owned by Vista Technologies and have been licensed to
the Company by Vista Technologies for no additional consideration on a
non-exclusive basis for the term of the Consulting Services Agreement and any
renewals of such term.
Vista Technologies has advised the Company of the following information
extracted from Vista Technologies' public filings with the Securities and
Exchange Commission:
Vista Technologies is primarily engaged in providing excimer laser
equipment for PRK treatment and related support services at Vista
Vision(TM) outpatient LVC surgical centers in Europe. Vista Technologies
commenced business operations in March 1994 and operates three PRK centers
in Italy though a majority-owned subsidiary named Vista Vision SpA and two
PRK centers in Sweden through a wholly-owned subsidiary named Vista Vision
Scandinavia AB. During May 1994, Vista Technologies also acquired an equity
interest in Medical Development Resources, Inc. ("MDRI"), which designs,
manufactures and markets precision surgical instruments and related
products, consisting primarily of diamond scalpels and stainless steel and
titanium surgical instruments. As a result of investigations following the
negotiation of an agreement to merge with MDRI, Vista Technologies
determined in July 1995 to not proceed with this proposed merger and the
value of its prior investments in MDRI was written down to zero.
The Vista Vision PRK centers in Italy each operates a VISX excimer
laser, and include a Milan center originally opened in February 1992, a
Pisa clinic established in March 1993 and a Rome center started in January
1995. The Vista Vision centers in Sweden operate two lasers, and include a
center in Stockholm purchased by Vista Technologies in June 1994 plus a
center in Malmoe opened in August 1995. Until June 1995, Vista Technologies
also owned a 50% joint venture interest in a PRK center in London, England,
which has been closed due to a change in business strategy of its joint
venture partner and extremely competitive market conditions in London.
48
<PAGE> 51
The following chart summarizes certain information as to the number of
PRK surgical procedures performed at Vista Technologies' existing PRK
centers for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
NINE MONTHS ENDED --------------
DECEMBER 31, 1995 1995 1994
----------------- ----- ----
<S> <C> <C> <C>
Milan, Italy(a)..................... 451 466 239
Pisa, Italy(b)...................... 339 404 213
Rome, Italy(c)...................... 227 41 (c)
Stockholm, Sweden(d)................ 341 524 420
Malmoe, Sweden(e)................... 51 (e) (e)
----- ----- ---
Total..................... 1,409 1,435 972
===== ===== ===
</TABLE>
- ---------------
(a) Opened in February 1992.
(b) Opened in March 1993.
(c) Opened in January 1995.
(d) Includes procedures performed for periods prior to June 1994 purchase
by Vista Technologies.
(e) Opened in August 1995.
Vista Technologies' common stock is publicly-traded in the
over-the-counter market and quoted on the NASD Electronic Bulletin Board
under the symbol "VIII". Vista Technologies is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission") which may be
inspected and copied at the public reference facilities maintained by the
Commission at its principal office in Washington D.C. and at its regional
offices in Chicago and New York. Until approximately the end of February
1996, Vista Technologies was delinquent in the filings of its Form 10-KSB
for its fiscal year ended March 31, 1995 and its Quarterly Reports on Form
10-QSB for the periods ended June 30, September 30 and December 31, 1995.
Vista Technologies has attributed that delinquency primarily to its
inability to obtain reliable finance information as to MDRI. By March 1,
1996, Vista Technologies had filed all of these reports with the
Commission.
OTHER CONSULTING AGREEMENTS
Dr. J. Charles Casebeer, a director and Chairman of the Board, entered into
a Consulting Agreement with the Company dated November 15, 1995 which will
become effective on the date of this Prospectus. Dr. Casebeer is an educator and
trainer in the LASIK procedure and has previously served other companies as a
consultant in the LASIK field. Dr. Casebeer also has conducted studies on the
TMM PRK method developed by Dr. Johnson. Since 1983, Dr. Casebeer's experience
includes over 10,000 refractive procedures and the education of more than 3,200
MDs worldwide in various refractive procedures ranging from RK to ALK and LASIK.
See also "Management".
Dr. Casebeer's Consulting Agreement provides he will assist the Company and
Dr. Tayfour in managing the Company's program for training MDs and ODs in the
use and performance of LVC procedures and in recommending standards to establish
a program of credentialing and training MDs and ODs in various aspects relating
to LVC procedures and patient treatment. In consideration of his services, Dr.
Casebeer's professional corporation will receive from the Company compensation
at the rate of $60,000 per annum plus additional compensation of $2,500 for
supervising the training of each MD and OD that enters the credentialing
program. The $60,000 annual payment to Dr. Casebeer's professional corporation
will be paid upon completion of this offering by the Company for the first year
of his consulting services and thereafter at the rate of $5,000 per month.
Compensation for each MD and OD that enters the credentialing program will be
payable at the rate of $500 per month over a period of five months commencing in
the first month following the date on which each such MD and OD has started his
or her accreditation program.
49
<PAGE> 52
Dr. Casebeer is expected in the future to promote advanced LVC methods for
both the Company and for other Vista Laser Centers companies that may be formed
in the future by the Company's founder, Vista Technologies, to service other
North American geographic markets. (The Company and investors in this offering
will not acquire an interest in other companies formed by Vista Technologies
Inc. and its affiliates.)
Dr. Donald G. Johnson, a director of the Company, entered into a Consulting
Agreement with the Company dated November 15, 1995 which will become effective
on the date of this Prospectus. No continuing compensation will be required to
be paid to Dr. Johnson under this agreement. Dr. Johnson has agreed to render
part-time consulting services to the Company. Dr. Johnson developed TMM PRK
procedures with VISX equipment and as of December 31, 1995 has successfully
treated approximately 7,400 eyes with excimer laser procedures. See also
"Management".
PRIOR AFFILIATION BETWEEN PRESIDENT OF VISTA TECHNOLOGIES AND PARENT OF THE
UNDERWRITERS' REPRESENTATIVE
Thomas A Schultz was hired as the President and Chief Executive Officer of
Vista Technologies and elected a director of Vista Technologies on February 16,
1996. Mr. Schultz has served from November 1995 until July 1, 1996 as a director
of Synergistic Holdings Corp. (formerly named Dickinson Holding Corp.), the
parent of Dickinson & Co., the Representative of the Underwriters.
FUTURE TRANSACTIONS
Any future transactions between the Company and any of its directors,
officers, principal stockholders or other affiliates will be on terms not less
favorable to the Company as could be obtained from independent parties and will
be approved by not less than a majority of the directors who do not have an
interest in the proposed transaction.
50
<PAGE> 53
PRINCIPAL STOCKHOLDERS
The following table sets forth information (except as otherwise indicated
by footnote) as to shares of the Company's Common Stock, Series A Preferred
stock and Series B Preferred stock owned at the date of this Prospectus by (i)
each person known by management to beneficially own more than 5% of each class
of the Company's outstanding securities, (ii) each of the Company's directors,
and (iii) all executive officers and directors as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(2)
---------------------------------------------------------------
PREFERRED STOCK
-----------------------------------------
COMMON % OF % OF % OF
NAME OR GROUP(1) STOCK CLASS(2) SERIES A CLASS SERIES B CLASS
- ----------------------------------------- ------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
DIRECTORS:
Ghassan Barazi(3)(6)..................... 250,000 96.2% 100,000* 100% 200,000* 100%
J. Charles Casebeer, M.D.(4)(6).......... 50,000 66.7% 100,000* 100% 200,000* 100%
Donald G. Johnson, M.D.(5)(6)............ 50,000 66.7% 100,000* 100% 200,000* 100%
All executive officers and directors as a
group [four in number](7).............. 350,000 100.0% 100,000* 100% 200,000* 100%
OTHER 5% STOCKHOLDERS:
Vista Technologies Inc.(6)(8).......... -- -- 100,000* 100.0% 200,000* 100.0%
</TABLE>
- ---------------
* These are the same securities deemed beneficially owned by more than one
person.
(1) The persons named in the table have sole voting and investment power with
respect to all shares shown to be beneficially owned by them, subject to
community property laws where applicable and the information contained in
the footnotes to this table.
(2) Includes securities beneficially owned plus, where applicable, Common Stock
issuable upon exercise of outstanding Class A Warrants and stock options
held only by the person or group indicated that are fully exercisable or
exercisable within 60 days after the date of this Prospectus.
(3) Includes 20,000 shares of Common Stock, 180,000 shares issuable upon
exercise of Class A Warrants and 50,000 shares issuable upon exercise of a
stock option directly owned by Mr. Barazi. The table also includes 100,000
Series A and 200,000 Series B Preferred shares owned by Vista Technologies
and included elsewhere in the table as indirectly beneficially owned by
Messrs. Casebeer and Johnson and directly owned by Vista Technologies (see
Notes 4, 5, 6 and 8 to this table). Mr. Barazi holds an irrevocable proxy
granting him the power to vote Series A and Series B Preferred shares owned
by Vista Technologies, but disclaims beneficial ownership of such shares.
The current business address for Mr. Barazi is 2224 Walker Road, Suite 30,
Windsor, Ontario, Canada N8W 3P6.
(4) Includes 5,000 shares of Common Stock and 45,000 shares issuable upon
exercise of Class A Warrants beneficially owned by Dr. Casebeer. The table
also includes 100,000 Series A Preferred shares and 200,000 Series B
Preferred shares owned by Vista Technologies and included elsewhere in the
table as beneficially owned by Messrs. Barazi and Johnson and by Vista
Technologies (see Notes 3, 5, 6 and 8 to this table). Dr. Casebeer is a
director of Vista Technologies and by virtue of such relationship may be
deemed to influence power of disposition as to Series A and Series B
Preferred shares owned by Vista Technologies; Dr. Casebeer disclaims
beneficial ownership of such shares. The business address for Dr. Casebeer
is 15100 North 78th Way, Suite 100, Scottsdale, Arizona 85260.
(5) Includes 5,000 shares of Common Stock and 45,000 shares issuable upon
exercise of Class A Warrants beneficially owned by Dr. Johnson. The table
also includes 100,000 Series A and 200,000 Series B Preferred shares owned
by Vista Technologies and included elsewhere in the table as beneficially
owned by Messrs. Barazi and Casebeer and by Vista Technologies (see Notes 3,
4, 6 and 8 to this table). Dr. Johnson is Chairman of the Board and a
director of Vista Technologies and by virtue of such relationships may be
deemed to influence power of disposition as to Series A and Series B
Preferred shares owned by Vista
51
<PAGE> 54
Technologies; Dr. Johnson disclaims beneficial ownership of such shares. The
business address for Dr. Johnson is 918 12th Street, New Westminster,
British Columbia, Canada V3M 6B1.
(6) 100,000 Series A Preferred shares and 200,000 Series B Preferred shares
listed in the table are owned by Vista Technologies and are included
elsewhere in the table as indirectly beneficially owned by Messrs. Barazi
(as to voting power for Series B Preferred), Casebeer and Johnson and
directly owned by Vista Technologies (see Notes 3, 4, 5 and 8 to this
table). Dr. Casebeer and Dr. Johnson are directors of Vista Technologies and
by virtue of such relationship may be deemed to influence power of
disposition as to Series A and Series B Preferred shares owned by Vista
Technologies; Dr. Casebeer and Dr. Johnson each disclaims beneficial
ownership of such shares.
(7) Includes shares described in Notes (3) through (6) above.
(8) Series A and Series B Preferred shares held by Vista Technologies are
subject to a proxy and voting agreement granted in favor of Ghassan Barazi
and Dr. Fouad Tayfour (see "Certain Transactions"). Such shares are included
elsewhere in the table as beneficially owned by Messrs. Barazi, Casebeer and
Johnson (see Notes 3, 4, 5 and 6 to this table). The business address for
Vista Technologies is 1250 Oakmead Parkway, Suite 210, Sunnyvale, California
92088-3599.
After giving effect to the sale of 800,000 shares of Series A Preferred
offered by the Company (and assuming the Underwriter's over-allotment option to
purchase an additional 120,000 shares of Series A Preferred stock is not
exercised and the Underwriter's Warrants to purchase 80,000 shares of Common
Stock are not exercised), the following table shows the number of shares, voting
power and percentage of each person and group shown in the foregoing table as
adjusted for this offering:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED, AS ADJUSTED(A)
---------------------------------------------------------------
VOTING POWER PREFERRED STOCK
--------------- -----------------------------------------
VOTES COMMON % OF % OF % OF
NAME OR GROUP (B) % STOCK CLASS(B) SERIES A CLASS SERIES B CLASS
- -------------------------------- -------- ---- ------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DIRECTORS:
Ghassan Barazi.................. 550,000 40.4% 250,000 96.2% 100,000* 11.1% 200,000* 100%
J. Charles Casebeer, M.D. ...... 50,000 4.3% 50,000 66.7% 100,000* 11.1% 200,000* 100%
Donald G. Johnson, M.D. ........ 50,000 4.3% 50,000 66.7% 100,000* 11.1% 200,000* 100%
All executive officers and
directors
as a group [four in number]... 650,000 44.8% 350,000 100.0% 100,000* 11.1% 200,000* 100%
OTHER 5% STOCKHOLDERS:
Vista Technologies Inc.(b).... -- -- -- -- 100,000* 11.1% 200,000* 100%
</TABLE>
- ---------------
* These are the same securities deemed beneficially owned by more than one
person.
(a) As adjusted for the sale of 800,000 shares of Series A Preferred stock
offered by the Company.
(b) Includes securities beneficially owned plus, where applicable, Common Stock
issuable upon exercise of outstanding Class A Warrants and stock options
held only by the person or group indicated that are fully exercisable or
exercisable within 60 days after the date of this Prospectus. Series A and
Series B Preferred shares held by Vista Technologies are subject to a proxy
and voting agreement granted in favor of Ghassan Barazi and Dr. Fouad
Tayfour (see "Certain Transactions").
52
<PAGE> 55
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, par value $0.01 per share, and 5,000,000 shares of Preferred
Stock, par value $0.01 per share. As of the date of this Prospectus, there were
30,000 shares of Common Stock, 100,000 shares of Series A Preferred stock and
200,000 shares of Series B Preferred stock issued and outstanding.
PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of preferred stock, par
value $.01 per share (the "Preferred Stock"). Under the Company's articles of
incorporation, the Company's Board of Directors is authorized, without further
stockholder action, to issue Preferred Stock in one or more series and to fix
the number of shares and the rights, preferences and limitations of each series.
Among the specific matters that may be determined by the Board of Directors are
the dividend rate, the redemption price, if any, conversion rights, if any, the
amount payable in the event of any voluntary liquidation or dissolution of the
Company and voting rights, if any.
No dividends or payments in liquidation may be made with respect to Common
Stock unless all accumulated dividends on the Preferred Stock of all series have
been paid in full and, in the event of liquidation, unless the liquidation
preference of all series of Preferred Stock has been satisfied. In case stated
dividends and amounts payable on liquidation on Preferred Stock of all series
are not payable in full, shares of all series of Preferred Stock are entitled to
share ratably in the payment of dividends and in any distribution of assets
otherwise than by way of dividends
SERIES A PREFERRED STOCK
The Company has designated 1,100,000 shares of Preferred Stock as "10%
Series A Cumulative Convertible Preferred Stock" (herein called the "Series A
Preferred"). Of such shares, 100,000 shares were issued and sold to Refractive
Services-800 Inc. in July 1995 for $100,000 in cash. In July 1996, all of the
assets of Refractive Services-800, Inc., including among other assets all of
such 100,000 Series A Preferred shares, were purchased by Vista Technologies. In
order to limit cash dividends on its investment to a 10% return per annum, Vista
Technologies agreed that dividends on shares of Series A Preferred stock
originally issued in July 1995 will be limited to $0.10 per share annually until
such time as those shares are resold by Vista Technologies to an unaffiliated
third party. Thereafter, such shares will bear dividends at the same rate of
$0.50 per share annually that will be applicable to shares of Series A Preferred
sold in this offering. The remaining 1,000,000 designated shares of Series A
Preferred include 800,000 shares reserved for issuance in this offering, 120,000
shares reserved for the Underwriters' over-allotment option and 80,000 shares
reserved for the Underwriter's Warrants.
Dividends. Series A Preferred will be entitled to cumulative dividends at
the rate of $0.50 per share per annum, payable annually commencing one year
after this offering. Dividends will commence to accrue from the date of initial
issuance. On the basis that 900,000 shares of Series A Preferred stock will be
outstanding after the offering hereunder (assuming the Underwriter's
over-allotment option is not exercised), the annual dividend requirement of the
Series A Preferred will be $450,000 per annum (assuming the eventual resale by
Vista Technologies of its 100,000 Series A Preferred shares). As of March 31,
1996, accrued and unpaid dividends on Series A Preferred shares issued prior to
this offering were $6,667.
Nevada law prohibits the payment of dividends or other distributions to
stockholders if, after giving effect to such distribution, the Company's total
assets would be less than the sum of its total liabilities plus the amount that
would be needed to satisfy liquidation preferences of its Preferred Stock.
Unless shares of Preferred Stock are converted into Common Stock, after this
offering the aggregate liquidation preference of all series of Preferred Stock
outstanding will be $5,000,000 ($5,600,000 if the Underwriters' over-allotment
option is exercised), and the Company accordingly anticipates that its ability
to pay cash dividends on Preferred Stock will be dependent upon attaining
profitable operations, as to which there can be no assurance.
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In the event the Company is prohibited by law from the payment of cash
dividends or has insufficient cash resources for dividend payments, the Company
at its option may elect to pay accrued dividends in shares of the Company's
Series A Preferred Stock or Common Stock. In the event of such an election by
the Company, each holder of record of Series A Preferred stock will be advised
in writing, not more than 30 days nor less than 10 days prior to the respective
dividend payment date, of the Company's election to make an interest payment in
additional capital stock. Prior to distributing shares of Series A Preferred or
Common Stock as a dividend, the Company will be obligated to register such
shares under the Securities Act of 1933. The number of shares issuable for any
such dividend payment will be determined by dividing the cumulative accrued
dividend payments due on the dividend payment date by the Fair Market Value,
defined as the unweighted average closing sale prices for the class of dividend
shares distributed during the ten days on which such shares are actually traded
in the Nasdaq System or on a national securities exchange immediately prior to
the record date for payment of the dividend. If for any reason closing sale
prices are not quoted by the Nasdaq System on any such day, then the closing
market price for such day will be deemed the closing bid price for such day as
reported by the National Quotation Bureau. Should market quotations for the
class of dividend shares distributed not be available, the market value will be
determined by the Company's Board of Directors based on a good faith
determination.
Conversion. Commencing 30 days after the date of this Prospectus, the
holders of Series A Preferred will have the right to convert their stock to
shares of the Company's Common Stock at any time prior to the second business
day before a date designated by the Company for the redemption of such shares.
The date of redemption must be designated by the Company at least 30 days prior
to the redemption date of such shares (see "Redemption" below). Each Series A
Preferred share may be converted into one (1) share of Common Stock. In the case
of such conversion, there will be no adjustment for accumulated dividends and
the Series A Preferred stockholders electing to convert will forfeit their
rights to payment of accrued and unpaid dividends. So long as there is any
Series A Preferred outstanding, the Company will reserve unissued, out of the
authorized shares of Common Stock, a sufficient number of shares to provide for
such conversion. The conversion ratio is subject to automatic proportionate
adjustment if the Common Stock is subdivided or combined, in case stock
dividends are paid on the Common Stock, or in the event of any other
reclassification or reorganization affecting the outstanding shares of Common
Stock. Upon conversion, no certificates for fractional shares will be issued,
and a cash adjustment will be made in lieu thereof.
Redemption. The Series A Preferred may be redeemed, as a whole at any time
or in part from time to time thereafter, at the option of the Company, upon at
least 30 days' prior notice, at a redemption price of $7.50 per share. If shares
are redeemed in part, those shares to be redeemed will be selected by lot in an
appropriate manner determined by the Company's Board of Directors. All dividends
accrued and unpaid to the date of redemption will be paid at the time of such
redemption. No shares of Series A Preferred stock may be redeemed unless all
dividends accrued and unpaid to the date of redemption have been paid or
provided for on all series of Preferred Stock. There are no sinking fund or
mandatory redemptions provisions relating to the Series A Preferred.
Liquidation Preference. The holders of Series A Preferred will be entitled
to receive out of the assets of the Company in the event of its liquidation, and
before any class of stock ranking junior to Preferred Stock, all dividends
accrued and unpaid to the date of liquidation plus $5.00 per share.
Voting Rights. Each share of Series A Preferred will be entitled to one
vote per share on all matters on which stockholders or the Company are entitled
to vote or act by consent.
Miscellaneous. Holders of Series A Preferred will not have any preemptive
or preferential rights to subscribe for or purchase any additional securities
issued by the Company. Shares of Series A Preferred offered hereunder will be,
upon payment of the offering price, duly and validly issued, fully paid and
nonassessable.
Transfer Agent. The transfer agent for the Series A Preferred will be
American Stock Transfer & Trust Company, 40 Wall Street, 46th Floor, New York,
New York 10005.
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SERIES B PREFERRED STOCK
The Company has designated 200,000 shares of Preferred Stock as "5% Series
B Cumulative Convertible Preferred Stock" (herein called the "Series B
Preferred"), all of which are issued and outstanding as of March 31, 1996.
Series B Preferred is entitled to cumulative dividends at the rate of
$0.12 1/2 per share per annum, payable annually on each anniversary of the
Company's initial public offering in the same manner as dividends on Series A
Preferred. The annual dividend requirement of the Series B Preferred is
currently $25,000 per annum; as of March 31, 1996, accrued and unpaid dividends
on Series B Preferred shares issued prior to this offering were $9,375. Holders
of Series B Preferred have the right to convert their stock to shares of the
Company's Common Stock at any time prior to the second business day before a
designated date for the optional redemption of such shares. Each Series B
Preferred share may be converted into one (1) share of Common Stock. In the case
of such conversion, there will be no adjustment for accumulated dividends. The
conversion ratio is subject to automatic proportionate adjustment if the Common
Stock is subdivided or combined, in case stock dividends are paid on the Common
Stock, or in the event of any other reclassification or reorganization affecting
the outstanding shares of Common Stock.
The Series B Preferred may be redeemed, as a whole at any time after the
first anniversary of the date of this Prospectus or in part from time to time
thereafter, at the option of the Company, upon at least 30 days' prior notice,
at a redemption price of $5.00 per share, except that the Company may not elect
to redeem Series B Preferred if any Series A Preferred would remain issued and
outstanding after the redemption of Series B Preferred. All dividends accrued
and unpaid to the date of redemption will be paid upon redemption of Series B
Preferred. No shares of shares of Series B Preferred stock may be redeemed
unless all dividends accrued and unpaid to the date of redemption have been paid
or provided for on all other series of Preferred Stock. There are no sinking
fund or mandatory redemptions provisions relating to the Series B Preferred.
Holders of Series B Preferred will be entitled to receive out of the assets
of the Company in the event of its liquidation, and before any class of stock
ranking junior to Preferred Stock, all dividends accrued and unpaid to the date
of liquidation plus $2.50 per share. Each share of Series B Preferred is
entitled to one vote per share on all matters on which stockholders or the
Company are entitled to vote or act by consent. Holders of Series B Preferred do
not have any preemptive or preferential rights to subscribe for or purchase any
additional securities issued by the Company. All outstanding shares of Series B
Preferred are fully paid and nonassessable.
COMMON STOCK
The Company is authorized to issue 20,000,000 shares of Common Stock, par
value $.01 per share, of which 30,000 shares were issued and outstanding at the
date of this Prospectus. Holders of Common Stock are entitled to one vote for
each share held on each matter to be acted upon by stockholders of the Company.
Stockholders do not have preemptive rights or the right to cumulate votes for
the election of directors. Shares are not subject to redemption nor to any
liability for further calls. All shares of Common Stock issued and outstanding
are, and all shares issuable upon conversion of Series A Preferred stock offered
by the Company hereby will be, validly issued, fully paid and non-assessable.
Subject to provisions relating to Preferred Stock discussed above, holders of
Common Stock are entitled to receive such dividends, if any, as may be declared
by the Board of Directors in its discretion out of funds legally available for
that purpose, and to participate pro rata in any distribution of the Company's
assets upon liquidation or dissolution.
In the event of liquidation or dissolution of the Company, all assets
available for distribution after satisfaction of all debts and other liabilities
and after payment or provision for the liquidation preference of Preferred Stock
are distributable among the holders of the Common Stock.
The Transfer Agent for the Company's Common Stock will be American Stock
Transfer & Trust Company, 40 Wall Street, 46th Floor, New York, New York 10005.
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COMMON STOCK PURCHASE WARRANTS
The Company at present has reserved for issuance up to 270,000 shares of
Common Stock for issuance in the event of the exercise of up to 270,000
outstanding Class A Common Stock Purchase Warrants (the "Class A Warrants").
Class A Warrants are exercisable at $1.00 per share until the Class A
warrants expire on the fourth anniversary of this Prospectus. Class A Warrants
are not subject to redemption by the Company. The holders of the Class A
Warrants do not have any of the rights or privileges of stockholders of the
Company, such as voting rights or the right to receive dividends, prior to
exercise of the Class A Warrants. The exercise price of the Class A Warrants and
the number of Class A Warrants are subject to automatic proportionate adjustment
in the event of any stock dividend, stock split or other recapitalization
affecting the outstanding Common Stock.
Investors in this offering should note that for the term of the Class A
Warrants, the holder or holders thereof are given, at nominal cost, the
opportunity to profit from a rise in the market price of the Common Stock
subject to the Class A Warrants with a resulting dilution in the interests of
other stockholders. At any time when the holders of the Class A Warrants might
be expected to exercise the same, the Company would in all likelihood be able to
obtain additional equity capital on terms more favorable than those provided in
the Class A Warrants. See "Certain Transactions".
CERTAIN CHARTER AND BYLAW PROVISIONS AND OTHER INDEMNIFICATION ARRANGEMENTS
Possible Additional Issuances of Common and/or Preferred Stock Without
Stockholder Action. The flexibility to issue additional shares of Common Stock
and/or shares of Preferred Stock in one or more series as permitted by the
Company's articles of incorporation (the "Charter") can enhance the Board of
Directors' bargaining capability on behalf of the Company's stockholders in a
takeover situation and could, under some circumstances, be used to render more
difficult or discourage a merger, tender offer or proxy contest, the assumption
of control by a holder of a large block of the Company's securities, or the
removal of incumbent management, even if such a transaction were favored by the
holders of the requisite number of shares. Under these circumstances, the
existence of a significant number of authorized and unissued Common shares
and/or one or more series of Preferred Stock may have the effect of limiting
stockholder participation in these types of transactions. The Company is not
aware of any present efforts to gain control of the Company or to organize a
proxy contest.
Number of Directors; Removal; Filling Vacancies. The By-Laws provide that
the Board will consist between three and not more than fifteen directors, with
the exact number to be fixed from time to time by resolution adopted by the
Board. The Board of Directors at the present time has fixed the number of
directors at six, with two vacancies to be filled after completion of this
offering (see "Certain Transactions"). Subject to the rights, if any, of the
holders of any series of Preferred Stock then outstanding, the By-Laws authorize
the Board to fill vacant directorships, including newly created directorships.
Accordingly, these provisions could prevent a stockholder from obtaining
majority representation on the Board by permitting the Board to enlarge the
Board and fill the new directorships with its own nominees. Each director so
elected by the Board or by stockholders hold office until the next election of
directors and until his successor is elected and qualified.
Limitation of Liability and Indemnification. Under the Nevada General
Corporation Law, a corporation may adopt a provision in its articles of
incorporation eliminating, with certain exceptions, the personal liability of a
director to the corporation or its shareholders for monetary damages for breach
of the director's fiduciary duty as a director. The Company's Charter eliminates
the liability of directors to the fullest extent permissible under Nevada law.
Under Nevada law, however, the Company is not allowed to eliminate or limit
director monetary liability for: (a) breaches of the director's duty of loyalty
to the corporation or its stockholders; (b) acts or omissions not in good faith
or involving intentional misconduct or a knowing violation of law; (c) unlawful
dividends, stock repurchases or redemptions; or (d) transactions from which the
director received an improper personal benefit.
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Under the Nevada General Corporation Law, a corporation may not indemnify
any director, officer, employee or agent made or threatened to be made party to
any threatened, pending, or completed proceeding unless such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal proceedings, had no reasonable cause to believe that his or her conduct
was unlawful.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of the material Federal income tax
aspects relating to the Series A Preferred stock. The Company has not received
an opinion of counsel as to the following income tax aspects. Purchasers of the
Series A Preferred stock offered hereby should consult their own advisors as to
the tax treatment of this issue in particular circumstances, including the
application of state and local laws.
DIVIDENDS ON PREFERRED STOCK
Dividends paid on the Series A Preferred stock, whether paid in cash or in
shares of the Company's Common Stock, are taxable as ordinary income to the
extent of the Company's current or accumulated earnings and profits, but may
qualify for the dividends received deduction allowable to corporations and for
the dividend exclusion available to individuals. However, under Section 246A of
the Internal Revenue Code of 1986, as amended (the "Code"), to the extent a
corporation incurs indebtedness for the purpose of making a portfolio stock
investment (which would include the Series A Preferred stock), the deduction for
dividends received on the leverage is generally disallowed. Corporate investors
should note that pending legislative proposals may reduce the corporate
dividends received deduction from the current deduction of 70% to 50%. Dividends
paid in Common Stock, if any, would be valued at fair market value on the date
of payment for income tax purposes.
REDEMPTION
Under Section 305(c) of the Code and Section 1,305-5(b) of the Treasury
Regulations, if the redemption price of redeemable preferred stock exceeds its
issue price, the portion of such excess which constitutes an unreasonable
redemption premium, if any, will be taxable as a dividend over the period during
which the preferred stock cannot be redeemed. A premium is considered to be
reasonable if it is in the nature of a penalty for a premature redemption and if
such premium does not exceed the amount which the issuer would be required to
pay for such redemption right under market conditions existing at the time of
issuance of the preferred stock. Although no assurance can be given, the Company
believes that the redemption premium of the Series A Preferred stock meets this
test. If this test is not met, the amount by which the redemption premium (based
on all or a portion of the excess of the $7.50 redemption price over the $5.00
issue price) exceeds a reasonable redemption premium will be considered to be a
dividend received by a shareholder ratably over any period during which the
Preferred Stock cannot be redeemed.
Any sale or exchange, other than by way of redemption or exchange with the
Company, will produce capital gain or loss if the Series A Preferred stock is
held as a capital asset. Generally, any redemption of the Series A Preferred
stock for cash would result in taxable gain or loss equal to the difference
between the amount of cash received and the shareholder's tax basis in the
Series A Preferred stock redeemed. Such gain or loss would be capital gain or
loss if the Series A Preferred stock were held as a capital asset, and would be
long-term capital gain or loss if the holding period for Series A Preferred
stock were to exceed one year. Under certain circumstances an exception to this
rule applies, which would cause the entire amount of the cash received upon
redemption of the Series A Preferred stock to be taxable as a dividend. However,
if a shareholder completely terminates his interest in the Company (taking into
account shares deemed owned by that shareholder by reason of the constructive
ownership rules applied by Section 302(c) of the Code) as a result of a
redemption of the Series A Preferred stock, such shareholder would be exempt
from such dividend treatment. Moreover, if, as a result of a cash redemption of
the Series A Preferred stock, a shareholder whose relative stock interest in the
Company is minimal (an interest of less than 1% should satisfy this requirement)
and who exercises no control over the Company's affairs experiences an actual
reduction in his proportionate
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interest in the Company (taking into account the constructive ownership rules
mentioned above), such shareholder should not be subject to dividend treatment,
because such distribution is "not essentially equivalent to a dividend" under
Section 302(b)(1) of the Code.
CONVERSION TO COMMON STOCK
No gain or loss will be recognized for Federal income tax purposes on
conversion of the Series A Preferred stock into shares of Common Stock, except
with respect to any cash received in exchange for a fractional interest, if any.
The tax basis for the shares of Common Stock received upon conversion will be
equal to the tax basis of the Series A Preferred stock converted, reduced by the
portion of such basis allocable to any fractional interest exchanged for cash.
Provided that the Series A Preferred stock was held as a capital asset, the
holding period of the shares of Common Stock will include the holding period of
the Series A Preferred stock converted.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of this offering, the Company will have outstanding
30,000 shares of Common Stock, 900,000 shares of Series A Preferred stock
(convertible into 900,000 shares of Common Stock), 200,000 shares of Series B
Preferred stock (convertible into 200,000 shares of Common Stock), 270,000 Class
A Warrants (exercisable at $1.00 per share into 270,000 shares of Common Stock)
and stock options exercisable at $1.00 per share into 50,000 shares of Common
Stock. Of these shares, 800,000 shares of Series A Preferred offered hereby
(920,000 shares if the Underwriter's over-allotment option is exercised in full)
will be freely tradeable without restriction or further registration under the
Securities Act of 1933 (the "Securities Act"), except for any shares purchased
by an "affiliate" of the Company (in general, a person who has a control
relationship with the Company) which would be subject to the resale limitations
of Rule 144 under the Securities Act other than holding period limitations.
The remaining 30,000 shares of Common Stock, 100,000 shares of Series A
Preferred and up to 620,000 shares of Common Stock issuable upon conversion of
Series A and Series B Preferred and exercise of Class A Warrants and stock
options are deemed to be "restricted securities" as that term is defined under
Rule 144 promulgated under the Securities Act, in that such shares were issued
and sold by the Company in private transactions not involving a public offering.
Under Rule 144 as currently in effect, none of such shares will become eligible
for sale prior to November 16, 1997. As discussed below, there are certain
amendments that may be proposed to Rule 144 which, if adopted, may enable a
portion of such shares to become eligible for sale before November 16, 1997.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or other persons whose shares are required to be aggregated), who
has owned restricted shares of the Company's Common Stock or Series B Preferred
stock beneficially for at least two years is entitled to sell, within any
three-month period, a number of shares of Common Stock that does not exceed the
greater of 1% of the total number of outstanding shares of the same class or, if
the shares are quoted on the Nasdaq system, the average weekly trading volume
during the four calendar weeks preceding the sale. A person who has not been an
affiliate of the Company for at least the three months immediately preceding the
sale and who has beneficially owned shares for at least three years is entitled
to sell such shares under Rule 144 without regard to any of the limitations
described above. The Securities and Exchange Commission has recently proposed
for comment the possibility of amendments to Rule 144 that would reduce the two
and three year periods referenced above to one and two years, respectively.
Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about the
Company. A person who has not been an affiliate of the Company at any time
during the three months preceding a sale, and who has beneficially owned his
Common Stock for at least three years, would be entitled to sell such Common
Stock under Rule 144(k) without regard to the other requirements of Rule 144.
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All of the Company's officers, directors and existing stockholders have
agreed not to sell or otherwise dispose of any of their shares of Common Stock
or Preferred stock for a period of 12 months from the date of this Prospectus
without the prior written consent of the Underwriter.
Prior to this offering, there has been no market for the Series A Preferred
stock or Common Stock. No predictions can be made of the effect, if any, that
sales of Series A Preferred stock or Common Stock under Rule 144, or the
availability of such shares for sale, will have on the market price for the
securities of the Company prevailing from time to time. Nevertheless, the
possibility that substantial amounts of Series A Preferred stock or Common Stock
may be sold in the public market may adversely affect prevailing market prices
for the Company's securities and could impair the Company's ability to raise
additional capital through the sale of its equity securities.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representative, Dickinson & Co. (the
"Representative") have severally agreed to purchase from the Company the
following respective number of shares of Series A Preferred stock at the initial
public offering price, less the underwriting discounts and commissions, set
forth on the cover page of this Prospectus.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
SERIES A PREFERRED
UNDERWRITER TO BE PURCHASED
----------------------------------------------------------- -------------------
<S> <C>
Dickinson & Co.............................................
Redstone Securities, Inc. .................................
-------
Total............................................ 800,000
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all Series A Preferred offered hereby of any of the
Series A Preferred shares offered hereby are purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Series A Preferred stock directly to the public
at the public offering price set forth on the cover page of this Prospectus. The
Underwriters may allow to certain securities dealers who are members of the
National Association of Securities Dealers, Inc. ("NASD") a concession, not in
excess of $ per share of Series A Preferred Stock, of which not in
excess of $ per share of Series A Preferred Stock may be reallowed to
other securities dealers who are members of the NASD. After the initial public
offering, the public offering price, concession and reallowance may be changed
by the Representatives.
The Company has granted to the Underwriter an option, exercisable within 45
days from the date of this Prospectus, to purchase from the Company up to
120,000 additional shares of Series A Preferred stock at the public offering
price set forth on the cover page of this Prospectus, less the underwriting
discounts and commissions. The Underwriter may exercise this option in whole or,
from time to time, in part, solely for the purpose of covering over-allotments,
if any, made in connection with the sale of the shares of Series A Preferred
stock offered hereby. The Company will be obligated, pursuant to the
over-allotment option, to sell shares to the Underwriter to the extent such
over-allotment option is exercised.
The Company has agreed to pay the Underwriter a nonaccountable expense
allowance of 3% of the gross proceeds of this offering. The Company has also
agreed to pay all expenses in connection with qualifying the shares of Series A
Preferred stock offered hereby and Common Stock issuable upon conversion thereof
for sale under the laws of such states as the Underwriter may designate,
including expenses of counsel retained for such purpose by the Underwriter.
The Company has agreed to sell to the Underwriter, for an aggregate of $80,
warrants (the "Underwriter's Warrants") to purchase up to 80,000 shares of
Series A Preferred stock at an exercise price of $6.00 per share. The
Underwriter's Warrants may not be sold, transferred, assigned or hypothecated
during the first year following issuance of the Underwriter's Warrants except to
the officers of the Representatives and to members of the selling group and
their officers, and will be exercisable for a four-year period commencing one
year after the date of this Prospectus (the "Warrant Exercise Term"). During the
Warrant Exercise Term, the holders of the Underwriter's Warrants are given, at
nominal cost, the opportunity to profit from a rise in the market price of the
Company's Series A Preferred stock. To the extent that the Underwriter's
Warrants are exercised or if Series A Preferred shares issued on such exercise
are converted into Common Stock, dilution to
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the interests of the Company's stockholders may occur. Further, the terms upon
which the Company will be able to obtain additional equity capital while the
Underwriter's Warrants are outstanding may be adversely affected since the
holders of the Underwriter's Warrants can be expected to exercise them at a time
when the Company would, in all likelihood, be able to obtain any needed capital
on terms more favorable to the Company than those provided in the Underwriter's
Warrants. Any profit realized by the Representative on the sale of the
Underwriter's Warrants or the underlying securities may be deemed additional
underwriting compensation. Subject to certain limitations and exclusions, the
Company has agreed to register the Underwriter's Warrants and the underlying
securities under the Securities Act on one occasion during the Warrant Exercise
Term and to include such Underwriter's Warrants and the underlying securities in
any appropriate registration statement that is filed by the Company during the
seven years following the date of this Prospectus.
The Company has agreed, for a period of five years from the date of this
Prospectus, if so requested by the Representative, to nominate and use its best
efforts to appoint a designee of the Representative as a non-voting advisor to
the Company's Board of Directors. Each person so designated may be a director,
officer, partner, employee or affiliate of the Representative. Such person will
receive reimbursement of actual expenses and no other compensation.
All of the Company's existing stockholders, officers and directors have
agreed, pursuant to lock-up agreements executed in connection with this
offering, that until 12 months after the date of this Prospectus, such parties
will not sell, make any short sale of, loan, grant any option for the purchase
or otherwise dispose of any shares of Preferred Stock or Common Stock or any
securities convertible into or exchangeable or exercisable for such shares
without the consent of the Representative.
The Underwriting Agreement requires other commitments on the part of the
Company during the five years following the date of the Prospectus, including
(i) providing the Representative on an annual basis with internal forecasts of
projected results of operations for the following two years, (ii) providing the
Representative with quarterly statements setting forth the Company's results of
operations and financial position as regularly prepared by management, (iii) a
requirement that the Company will cause its independent public accountants to
review the Company's interim financial statements for each of the first three
fiscal quarters in each fiscal year prior to announcement of quarterly financial
information, (iv) a requirement that KPMG Peat Marwick LLP or another nationally
recognized accounting firm reasonably acceptable to the Representative be
retained as the Company's independent public accountants, and (v) a requirement
that American Stock Transfer & Trust Company will be retained as the transfer
agent for the Series A Preferred unless otherwise agreed to by the
Representative.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act, and to contribute
to payments that the Underwriters may be required to make in respect thereof.
The Underwriter has agreed it will not confirm sales of the shares offered
hereby to any account over which the Underwriter exercises discretionary
authority.
Prior to this offering, there has been no public trading market for the
Series A Preferred stock or the Common Stock. Consequently, the initial public
offering price of the Series A Preferred stock and the one-for-one conversion
rate whereby Series A Preferred may by converted into shares of Common Stock
have been determined by negotiations between the Company and the Underwriter.
Among the factors considered in determining the offering price and conversion
rate were the Company's limited history of operations, financial condition and
prospects, market prices of similar securities of comparable publicly-traded
companies, certain financial and operating information of companies engaged in
activities similar to those of the Company and the general condition of the
securities market.
Thomas A. Schultz was hired as the President and Chief Executive Officer of
Vista Technologies and elected a director of Vista Technologies on February 16,
1996. Mr. Schultz served from November 1995 until July 1, 1996 as a director of
Synergistic Holdings Corp. (formerly named Dickinson Holding Corp.), the parent
of Dickinson & Co.
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DIVIDEND POLICY
No cash dividends have been declared or paid by the Company to date. The
Company intends to employ all available funds for development of its business
and accordingly, does not intend to pay cash dividends on its Common Stock in
the foreseeable future. The Board of Directors of the Company will review its
Common Stock dividend policy from time to time to determine the desirability and
feasibility of paying dividends after giving consideration to the Company's
earnings, financial condition, capital requirements, dividend obligations on
Preferred Stock, the advisability of redeeming outstanding Preferred Stock from
time to time, and such other factors as the Board of Directors deems relevant.
The estimated annual dividend requirements on the Company's Preferred Stock
will be $450,000 for Series A Preferred ($510,000 if the Underwriters'
over-allotment option is exercised and $550,000 if the Underwriters'
overallotment option and the Underwriter's Warrants are exercised) and $25,000
for Series B Preferred shares. As of March 31, 1996, dividends in arrears on
Series A Preferred and Series B Preferred shares issued prior to this offering
were $6,667 and $9,357, respectively.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by the Law Office of William M. Curtis, Laguna Hills, California.
Certain legal matters will be passed upon for the Underwriter by Titus,
Brueckner & Berry, P.C., Scottsdale, Arizona.
EXPERTS
The consolidated financial statements of Vista Laser Centers of Michigan,
Inc. (a development stage enterprise) and subsidiaries as of March 31, 1996 and
for the period from June 30, 1995 (date of inception) through March 31, 1996
have been included in this Prospectus and Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
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VISTA LASER CENTERS OF MICHIGAN, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Financial Statements:
Consolidated Balance Sheet as of March 31, 1996..................................... F-3
Consolidated Statement of Operations for the period from June 30, 1995
(date of inception) to March 31, 1996............................................ F-4
Consolidated Statement of Changes in Stockholders' Equity for the period
from June 30, 1995 (date of inception) to March 31, 1996......................... F-5
Consolidated Statement of Cash Flows for the period from June 30, 1995
(date of inception) to March 31, 1996............................................ F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 66
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Vista Laser Centers of
Michigan, Inc.:
We have audited the accompanying consolidated balance sheet of Vista Laser
Centers of Michigan, Inc. (a development stage enterprise) and subsidiaries as
of March 31, 1996, and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for the period from June 30, 1995
(date of inception) to March 31, 1996. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Vista Laser
Centers of Michigan, Inc. (a development stage enterprise) and subsidiaries as
of March 31, 1996, and the results of their operations and their cash flows for
the period from June 30, 1995 (date of inception) to March 31, 1996 in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in note
1 to the consolidated financial statements, the Company is currently a
development stage enterprise and dependent on raising additional financing
through a public offering or private placement to meet its obligations and
commitments. This dependency raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
KPMG Peat Marwick LLP
New York, New York
April 26, 1996
F-2
<PAGE> 67
VISTA LASER CENTERS OF MICHIGAN, INC,
(A DEVELOPMENT STAGE ENTERPRISE)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents....................................................... $ 39,648
Prepaid expenses................................................................ --
--------
Total current assets.................................................... 39,648
Deferred offering costs (note 6)................................................ 113,339
Marketable equity securities restricted as to sale (note 3)..................... 217,597
--------
Total assets............................................................ $370,584
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued liabilities............................................................. 58,134
--------
Total current liabilities............................................... 58,134
Stockholders' equity:
Preferred stock, $.01 par value. Authorized 5,000,000 shares;
1,100,000 shares designated 10% Series A Cumulative Convertible; issued and
outstanding 100,000 shares ($500,000 liquidation value) (note 4)............ 1,000
200,000 shares designated 5% Series B Cumulative Convertible; issued and
outstanding 200,000 shares ($500,000 liquidation value) (notes 3 and 4)..... 2,000
Common stock, $.01 par value, Authorized 20,000,000 shares; issued and
outstanding
30,000 shares................................................................ 300
Additional paid-in capital...................................................... 371,297
Stock subscription receivable (note 4).......................................... (5,000)
Warrant subscription receivable (note 4)........................................ (22,500)
Deficit accumulated during the development stage................................ (34,647)
--------
Total stockholders' equity.............................................. 312,450
Commitments and contingencies (note 7)
--------
Total liabilities and stockholders' equity.............................. $370,584
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 68
VISTA LASER CENTERS OF MICHIGAN, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD FROM JUNE 30, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996
<TABLE>
<S> <C>
Interest income................................................................... $ 557
Operating expenses:
General and administrative expenses............................................. 35,204
--------
Loss from operations.................................................... (34,647)
Provision for income taxes........................................................ --
--------
Net loss................................................................ (34,647)
--------
Dividends in arrears:
Series A preferred stock........................................................ (6,667)
Series B preferred stock........................................................ (9,375)
--------
(16,042)
--------
Net loss adjusted for dividends in arrears.............................. $(50,689)
========
Net loss per share................................................................ $ (.22)
========
Weighted average shares used in computing net loss per share (note 2) 226,269
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 69
VISTA LASER CENTERS OF MICHIGAN, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
PERIOD FROM JUNE 30, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL STOCK WARRANT DURING THE
---------------- --------------- PAID-IN SUBSCRIPTION SUBSCRIPTION DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE RECEIVABLE STAGE TOTAL
------- ------ ------ ------ ---------- ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30,
1995................... -- $ -- -- $ -- -- -- -- -- --
Issue of 10% Series A
cumulative
convertible preferred
stock................ 100,000 1,000 -- -- 99,000 -- -- -- 100,000
Issue of 5% Series B
cumulative
convertible preferred
stock in exchange for
Vista common stock
(note 4)............. 200,000 2,000 -- -- 215,597 -- -- -- 217,597
Issue of common
stock................ -- -- 30,000 300 29,700 -- -- -- 30,000
Issue of warrants...... -- -- -- -- 27,000 -- -- -- 27,000
Issuance of notes
receivable (note
4)................... -- -- -- -- -- (5,000) (22,500) -- (27,500)
Net loss............... -- -- -- -- -- -- -- (34,647) (34,647)
------- ------ ------ ---- ------- ------ ------- ------- -------
Balance (deficit) at
March 31, 1996......... 300,000 $3,000 30,000 $300 371,297 (5,000) (22,500) (34,647) 312,450
======= ====== ====== ==== ======= ====== ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 70
VISTA LASER CENTERS OF MICHIGAN, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM JUNE 30, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss....................................................................... $ (34,647)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in:
Deferred offering costs................................................... (113,339)
Accrued liabilities....................................................... 58,134
---------
Net cash used in operating activities.................................. (89,852)
---------
Cash flows from financing activities:
Proceeds from issuance of Series A preferred stock............................. 100,000
Proceeds from issuance of common stock and stock subscriptions................. 25,000
Proceeds from issuance of common stock purchase warrants....................... 4,500
---------
Net cash provided by financing activities.............................. 129,500
---------
Net increase in cash and cash equivalents.............................. 39,648
Cash and cash equivalents at beginning of period................................. --
---------
Cash and cash equivalents at end of period....................................... $ 39,648
=========
</TABLE>
Supplemental disclosures of noncash financing and investing information:
-- On November 16, 1995, the Company issued 200,000 shares of its 5% Series
B preferred stock to Vista Technologies, Inc. ("Vista") in exchange for
200,000 shares of common stock in Vista.
-- The Company has issued common stock subscription notes receivable
totaling $5,000 and Class A common stock purchase warrant subscription
notes receivable totaling $22,500.
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 71
VISTA LASER CENTERS OF MICHIGAN, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business
Vista Laser Centers of Michigan, Inc. (the "Company") is a development
stage enterprise recently organized on June 30, 1995 to establish, manage and
administer laser vision correction ("LVC") support services ("Services") and
related LVC equipment. The accompanying consolidated financial statements
include the Company's wholly owned subsidiary, Vista Laser Centers of Windsor,
Inc., a Canadian company. All significant intercompany balances have been
eliminated. Vista Laser Centers of Windsor, Inc. is a calendar year corporation.
The Company is considering a proposed initial public offering of its 10%
cumulative convertible preferred stock ("proposed offering") (see note 9).
The planned centers will employ advanced laser technology, which has been
commercially available for several years for use in foreign countries, including
Canada. In late 1995, the U.S. Food and Drug Administration ("FDA") granted
approval to Summit Technology Inc. ("Summit") for commercial use in the U.S. of
Summit's excimer laser systems for photorefractive keratectomy ("PRK") treatment
of myopia (nearsightedness) and conditional approval to VISX Incorporated
("VISX") for similar PRK equipment. Generally speaking, PRK is useful in
correcting the vast majority of myopia cases.
The first LVC Services site to be established by the Company immediately
upon completion of a proposed offering (see note 9) will be located in Windsor,
Ontario, directly adjacent to Detroit, Michigan. Due to regulatory constraints
in the U.S., the Company expects that some U.S. patients, as well as Canadians,
will seek treatment at the Company's Ontario location when the method of
treatment preferred by the physician requires an LVC procedure not commercially
available in the U.S. The Company anticipates that laser assisted in situ
keratomileusis ("LASIK") will be the most significant procedure performed in its
first site planned for Windsor, Ontario. The Company also plans to establish one
or more strategically positioned LVC Services locations in Michigan where
licensed ophthalmologists ("MDs") and optometrists ("ODs") who enter into
facilities use agreements with the Company may bring their patients for LVC
diagnosis, PRK laser procedures and postoperative care.
The Company's activities to date have consisted primarily of market
research, seeking affiliations with experienced LVC eye care professionals,
negotiating to acquire equipment necessary to establish its first LVC Service
site in Windsor, Ontario, and negotiating agreements to provide facilities use
and management services to eye care professionals.
(b) Cash Equivalents
Cash equivalents are temporarily invested in interest-bearing savings
accounts, bank certificates of deposit, money market accounts, government
obligations or other forms of liquid short-term interest-bearing investments
with maturities of three months or less.
(c) Income Taxes
Effective June 30, 1995, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes." Under the asset and liability method of SFAS 109, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary
F-7
<PAGE> 72
VISTA LASER CENTERS OF MICHIGAN, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
differences are expected to be recovered or settled. Under SFAS 109, the effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(d) Revenue Recognition
The Company plans to enter into Facilities Use and Support Services
Agreements with licensed MDs and ODs. Support services offered by the Company
are expected to include accounting and other administrative services. The
Company is also expected to provide billing and collection services on behalf of
MDs and ODs. In each instance there will be a licensed MD or OD who will perform
actual LVC procedures as part of an individual practice and in whose name
patients will be billed. It is anticipated that the Company will earn its
revenues by billing MDs and ODs for facilities use and support services at time
of use. Facilities use and support service revenues are expected to be a
contractually agreed-upon percentage of patient billings as defined in the
Facilities Use and Support Services Agreement.
The Company will recognize revenue when it has substantially completed its
obligations under the Facilities Use and Support Services Agreements.
(e) Foreign Currency Translation
The Company's initial business operations will be located in Canada and it
is anticipated that a significant portion of the Company's revenues and expenses
may be collected and paid in Canadian dollars. The Company publishes its
consolidated financial statements in U.S. dollars after translating transactions
in Canadian currency to U.S. dollars. Income and expense items in Canadian
currency will be translated at the weighted average exchange rate prevailing
during the period, except that expenses related to nonmonetary assets and
liabilities will be translated at historical rates.
(f) Marketable Equity Securities
Effective June 30, 1995, the Company adopted Statement of Financial
Accounting Standards No. 115 (SFAS 115), "Accounting for Certain Investments in
Debt and Equity Securities." Under SFAS 115, the Company's marketable equity
securities will be classified as available-for-sale securities and will be
carried at fair market value. Unrealized gains and losses will be reflected as a
separate component of stockholders' equity, net of income taxes. As discussed in
Note 3, the Company's marketable equity securities consist of securities issued
in a Regulation D transaction and are therefore considered restricted
securities. Accordingly, until the securities meet the conditions of existing
securities regulations, the securities will remain restricted (see note 3).
(g) Financial Instruments
Statement of Financial Accounting Standards No. 107 (SFAS 107),
"Disclosures about Fair Value of Financial Instruments," defines fair value of a
financial instrument as the amount at which the instrument could be exchanged in
a current transaction between willing parties.
Fair value of financial instruments approximates their carrying value in
the consolidated financial statements, except for investments for which fair
value information is provided in note 3.
F-8
<PAGE> 73
VISTA LASER CENTERS OF MICHIGAN, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(h) Liquidity and Going Concern
The Company is a development stage enterprise and, accordingly, has not
earned revenue to date. As discussed in notes 7 and 11, the Company has entered
into a lease commitment, subsequent to March 31, 1996, in the amount of
$416,192. As discussed in note 9, the Company's Board of Directors authorized a
filing of a registration statement with the Securities and Exchange Commission
for the sale of units of 10% Series A cumulative convertible preferred stock.
Management believes that the proceeds received from such offering will be
sufficient to allow the Company to operate and meet its current obligations and
commitments, although there are no assurances that this offering will take
place. The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of reported net asset amounts
or the amounts of liabilities that might result from the outcome of the
uncertainty.
(2) NET LOSS PER SHARE
Net loss per common and common equivalent share is computed based upon the
weighted average number of shares of common stock outstanding during the period.
Also pursuant to the requirements of the Securities and Exchange Commission, all
stock, warrants and options issued within the twelve months immediately
preceding the initial filing of the registration statement for the Company's
proposed offering at a price below the anticipated offering price, totaling
100,000 shares of Series A preferred stock, 200,000 shares of Series B preferred
stock, 30,000 shares of common stock, 270,000 common stock purchase warrants and
50,000 options to purchase common stock, have been included in the calculation
of primary loss per share for all periods presented utilizing the "treasury
stock method." The net loss per share calculation assumes the conversion of all
Series A cumulative convertible preferred stock and Series B cumulative
convertible preferred stock into 300,000 shares of common stock.
(3) MARKETABLE EQUITY SECURITIES
Marketable Investment Securities
Marketable investment securities at March 31, 1996 consist of equity
securities in Vista Technologies Inc. ("Vista"), an operator of five outpatient
PRK surgical clinics in Europe and a co-founder of the Company (see note 4).
Such equity securities were issued by Vista Technologies in a Regulation D
transaction. Rules under the Securities Act of 1933 (the 1933 Act) impose
limitations on resale of securities acquired in Regulation D transactions.
Securities issued in a Regulation D transaction are also considered to be
restricted securities as defined by the 1933 Act. Accordingly, these securities
will remain restricted until Vista registers such securities under the 1933 Act
or the Company and Vista cease to be affiliated entities. As a result,
management has classified the securities as restricted and recorded them at cost
in the accompanying financial statements.
(4) RELATED PARTY TRANSACTIONS
The Company was organized on June 30, 1995. On July 31, 1995, Refractive
Services-800, Inc. ("RS 800 Inc.") paid the Company $100,000 for the purchase of
100,000 shares of the Company's 10% Series A cumulative convertible preferred
stock, or a price equal to $1.00 per share (see note 11). The liquidation
preference of Series A preferred stock is $5.00 per share.
On November 16, 1995, the Company issued 200,000 shares of its 5% Series B
cumulative convertible preferred stock to Vista in exchange for 200,000 shares
of common stock in Vista. The liquidation preference
F-9
<PAGE> 74
VISTA LASER CENTERS OF MICHIGAN, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
of Series B preferred stock is $2.50 per share. The Company had an independent
appraisal performed on the value of the Series B stock as of the date of this
transaction. The stock was valued at $1.087 per share giving the total
consideration a value of $217,597.
On November 28, 1995, and pursuant to the terms of the Company's employment
agreement with Ghassan Barazi, the Company issued and sold 20,000 shares of its
common stock to Mr. Barazi, its President and Chief Executive Officer, at a cash
price of $20,000, or $1.00 per share. The Company had an independent appraisal
performed on the value of the common stock which was valued at $1.081 per share.
The Company also agreed to sell Mr. Barazi 180,000 Class A common stock purchase
warrants at a cash price of $18,000, or $0.10 per warrant. The Company had an
independent appraisal performed on the value of the warrants to purchase common
stock. The value of each warrant was determined to be $.09 per warrant. Each
Class A warrant represents the right to purchase one share of the Company's
common stock at an exercise price of $1.00 per share until the Class A warrants
expire on the fourth anniversary of the effective date of the proposed offering,
or June 30, 2000 if the proposed offering is not effective as of June 30, 1996.
As of March 31, 1996, the Company had not received any cash related to the sale
of the warrants. Accordingly, the sale has been recorded as warrant subscription
receivable in the accompanying consolidated financial statements.
On November 15, 1995, the Company agreed to sell to Dr. J. Charles
Casebeer, a director and Chairman of the Board of the Company, 5,000 shares of
its common stock at a cash price of $5,000, or $1.00 per share, and 45,000 Class
A common stock purchase warrants at a cash price of $4,500, or $0.10 per
warrant. An independent appraisal valued the common stock at $1.081 per share
and the warrants at $.09 per warrant. On November 15, 1995, the Company also
agreed to sell to Dr. Donald G. Johnson, a director of the Company, 5,000 shares
of its common stock at a cash price of $5,000, or $1.00 per share, and 45,000
Class A common stock purchase warrants at a cash price of $4,500, or $0.10 per
warrant. An independent appraisal valued the common stock at $1.081 per share
and the warrants at $.09 per warrant. Each Class A warrant represents the right
to purchase one share of the Company's common stock at an exercise price of
$1.00 per share until the Class A warrants expire on the fourth anniversary of
the effective date of the proposed offering. As of March 31, 1996, the Company
had not received any cash related to the sale of stock and warrants to Dr.
Casebeer. Accordingly, the sales have been recorded as stock subscriptions
receivable in the accompanying consolidated financial statements.
Vista and the Company entered into a consulting services agreement (the
"Vista Agreement") dated as of October 16, 1995. Under this agreement, Vista
will render advice and assistance to the Company in the areas of marketing,
financial planning, development of accounting systems and internal controls,
investor and public relations, compliance with applicable regulations in
relation to the operation of surgical centers and relationships with health care
professionals and compliance in periodic filings with the Securities and
Exchange Commission. Under the terms of this agreement, Vista is entitled to
receive monthly consulting fees equal to 5% of the Company's net revenues as
defined by the Vista Agreement less $5,000 per month. The term of the Vista
Agreement is for ten years from the effective date of the proposed offering, and
is automatically renewed thereafter for successive five-year terms unless either
party provides six months' prior notice of an intent not to extend the term.
The Company entered into a license agreement with Refractive Services 800
Corp. ("RS-800 Corp."), an affiliate of RS 800 Inc., as of October 16, 1995
which grants the Company the right to use, in its geographic markets of Michigan
and southern Ontario, certain 800 and 900 telephone numbers that are held by RS
800 Corp. (see note 11). Under the terms of this license agreement, RS 800 Corp.
is entitled to receive a monthly
F-10
<PAGE> 75
VISTA LASER CENTERS OF MICHIGAN, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
royalty equal to 2 1/2% of the Company's net revenues during the term of the
license agreement that are attributable to use of its facilities and support
services for patients referred to MDs and ODs by virtue of the Company's use of
the licensed 800 and 900 telephone numbers. The term of the license agreement is
for five years from the effective date of the proposed offering, and is
automatically renewed thereafter on a year-to-year basis unless either party
provides six months' prior notice of an intent not to extend the term. During
the term of the license agreement, RS 800 Corp. has agreed to maintain the
exclusive right to license 800 and 900 telephone numbers covered by the license
agreement that are actively used by the Company, and to offer the Company rights
to license, at no additional royalty, any other 800 and 900 telephone numbers
that may be acquired hereafter by RS 800 Corp. for use in the Company's
geographic markets of Michigan and southern Ontario.
Dr. J. Charles Casebeer, a director and Chairman of the Board, has entered
into a consulting agreement (the "Agreement") with the Company commencing on the
effective date of the proposed offering. Under this agreement, Dr. Casebeer will
provide consulting and training services to the Company and has agreed to serve
as the Chairman of its Board of Directors. Dr. Casebeer will receive
compensation for consulting services at the rate of $60,000 per annum payable
monthly (except that the first year's fees will be payable in advance upon
completion of the proposed offering), and additional compensation for training
services for each MD and OD in the credentialing program.
On December 11, 1995, the Company organized its wholly owned subsidiary,
Vista Laser Centers of Windsor, Inc.
(5) INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liability as of March 31,
1996 are presented below:
<TABLE>
<S> <C>
Deferred tax assets:
Deferred start-up costs................................................. $ 14,000
---------
Total gross deferred tax assets...................................... 14,000
Less valuation allowance.................................................. (14,000)
---------
Net deferred tax assets.............................................. $ --
=========
</TABLE>
(6) DEFERRED OFFERING COSTS
Costs associated with the Company's proposed offering of Series A preferred
stock, Series B preferred stock, common stock and warrants are deferred and will
be recorded as a reduction of the proceeds received upon consummation of the
proposed offering (see note 9). Deferred offering costs will be expensed if and
when it becomes evident that the proposed initial public offering will not be
completed.
(7) COMMITMENTS AND CONTINGENCIES
The Company may elect to establish and operate a telemarketing information
and advertising service in Michigan and southern Ontario using 800 and 900
telephone numbers (see note 11). The Company is licensed by RS-800 Corp., an
affiliate of a principal stockholder and co-founder of the Company, to use
certain 800 and 900 telephone numbers. The Company plans to use its 800/900
number telemarketing programs for marketing and educational purposes directed to
the public and to obtain referrals for ophthalmologists and optometrists
F-11
<PAGE> 76
VISTA LASER CENTERS OF MICHIGAN, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
that utilize the Company's facilities or services. In exchange for such
services, RS-800 Corp. will receive approximately 2 1/2% of the Company's net
revenues (see note 4) attributable only to charges for the use of its facilities
and support services by patients referred to MDs and ODs as a result of the
Company's direct use of licensed 800 and 900 telephone numbers.
The Company has entered into an agreement with Vista Technologies Inc., one
of its founders. Vista currently operates five outpatient PRK surgical clinics
in Europe (three in Italy and two in Sweden). Vista will provide management and
technical consulting services to the Company including a review of operating
strategies and manuals, personnel and professional training, advertising and
promotion information and technical assistance and advice. In exchange for such
services, Vista will receive approximately 5% of the Company's net revenues as
defined by the agreement attributable to charges for the use of its facilities
and support services less $5,000 per month (see note 4).
The Company has entered into an agreement (the "Facilities Agreement") with
Dr. Fouad Tayfour for facilities use effective upon the completion of the
proposed offering (see note 9). Under the terms of the Facilities Agreement, the
Company will receive 50% of the gross procedure fee, as defined by the
Facilities Agreement. Dr. Tayfour's minimum compensation is based on 150
procedures being performed in any month during the 24-month period beginning
with the third month after the effective date of the Facilities Agreement. The
Facilities Agreement with Dr. Tayfour is for a term of five years from the
effective date of the proposed offering and will be renewed thereafter on a
year-to-year basis unless either party has provided the other with at least
three months' notice not to renew the agreement.
The Company is obligated under its Facilities Agreement with Dr. Tayfour to
provide LVC Services and equipment at a site in Windsor, Ontario, meeting all
ethical and professional standards prescribed by the Company's Medical Advisory
Board and equipped with state-of-the-art equipment appropriate for LVC care
including equipment to be acquired by the Company pursuant to an agreement with
an affiliate of Dr. Tayfour. The Company is also committed to establish and
maintain billing, collection and accounting procedures for the collection of
fees and to establish a public education and marketing program to promote LVC
care to the public in the geographic markets of Ontario and the Midwestern
United States. In addition, the Company has agreed to train and maintain an
adequate support staff for the management, administration and operation of its
LVC Services, and to sponsor and promote general awareness of LVC care within
the professional community by sponsoring and promoting educational and training
seminars for health care professionals.
The Company has also entered into a consulting agreement ("Consulting
Agreement") with Dr. Tayfour effective upon the completion of a proposed
offering (see note 9). Under that agreement, Dr. Tayfour will act as a
professional consultant to the Company concerning the establishment of ethical
standards and procedures for LVC Services, periodically conduct training and
education seminars, and will agree to serve as an Executive Committee member of
the Company's Medical Advisory Board. In consideration of the consulting
services, Dr. Tayfour will receive 100% of the net support fees, as defined by
the Consulting Agreement, for the first 10 LVC procedures performed in each
month with use of the Company's LVC Services at its Windsor, Ontario location by
credentialed surgeons other than Dr. Tayfour. For the next 20 LVC procedures
performed, Dr. Tayfour will receive 50% of the net support fees as defined by
the Consulting Agreement. The Consulting Agreement with Dr. Tayfour is for a
term of five years from the effective date of the proposed offering and will be
renewed thereafter on a year-to-year basis unless either party has provided the
other with at least three months' notice not to renew the agreement.
The Company has entered into an agreement for purchase of assets ("Purchase
Agreement") upon the completion of a proposed offering whereby the Company has a
commitment with Windsor Excimer Corporation, an affiliate of Dr. Tayfour, to
purchase equipment for LVC Services at its Windsor, Ontario site.
F-12
<PAGE> 77
VISTA LASER CENTERS OF MICHIGAN, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
The price of this equipment, which approximates its fair value, will be
$1,000,000, of which $500,000 will be financed through the proposed offering and
the remainder will consist of a promissory note with 10% interest per annum,
payable monthly. The principal will be due and payable on the second anniversary
of the effective date of the proposed offering.
In addition, the Company will sublease facilities located at the Windsor
Excimer Corporation for a term until March 30, 2004 which will be effective upon
completion of the proposed offering.
The Company has entered into consulting agreements with Dr. Donald G.
Johnson and Dr. J. Charles Casebeer (see note 4) that will be effective from the
date of the proposed offering. Dr. Casebeer will be compensated in advance for
the first year at the completion of the proposed offering. He will receive
compensation for both consulting services and for training services. Dr. Johnson
will also assist in the training of MDs and ODs.
On January 12, 1996, the Board of Directors of the Company authorized
amendments to the employment agreement of Ghassan Barazi, its Chief Executive
Officer and Chief Financial Officer. Under the terms of the amendment, the
Company granted Mr. Barazi an option to purchase 50,000 shares of common stock
at $1.00 per share, pursuant to the terms and provisions of the 1995 stock
option plan (see note 8). The option expires January 12, 2001.
In addition, in the event Mr. Barazi's employment is terminated either
voluntarily or involuntarily at any time during the initial five-year term or is
not renewed for at least one additional year at the end of its initial five-year
term, Mr. Barazi will be entitled to receive a $200,000 additional severance
payment if he has not exercised any portion of the stock option described above.
However, should such termination be the result of Mr. Barazi's voluntary
resignation, the Company has the right to issue 180,000 shares of common stock
to Mr. Barazi in lieu of the $200,000 cash payment and Mr. Barazi's rights to
exercise the stock option and the 180,000 Class A warrants (see note 4) will
terminate unexercised in such events.
The amendment also provides for a one-time hiring bonus of $20,000 upon the
completion of the proposed offering.
In April 1996, Neptune Technology Leasing Corp. ("Neptune") agreed to
redocument an existing lease agreement between Neptune and Richard C. Mertz,
M.D., P.C., ("Dr. Mertz") to reflect the Company as the new lessee of a Summit
Holmium Laser System (the "Laser") and other equipment used in conjunction with
the Laser subject to Dr. Mertz's personal guaranty remaining in full force and
effect on the lease. Dr. Mertz has agreed to have his personal guaranty remain
in full force and effect on the lease as redocumented. The total lease
commitment is $416,192 and is for a term of 48 months at an interest rate of
14%.
The Company will record this lease as a capital lease in accordance with
SFAS No. 13, "Accounting for Leases".
(8) STOCK OPTION PLANS
On September 1, 1995, the Board of Directors and stockholders of the
Company adopted the 1995 Stock Option Plan (the "Option Plan"). As discussed in
note 7, the Company has created an option to purchase 50,000 shares of common
stock to its chief executive officer.
The Option Plan is structured to allow the Board of Directors and a future
Stock Option Committee of the Board discretion in creating equity incentives to
management, key employees and professional consultants
F-13
<PAGE> 78
VISTA LASER CENTERS OF MICHIGAN, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
for the purpose of assisting the Company in motivating and retaining appropriate
talent. The Option Plan covers up to a maximum of 200,000 shares of the
Company's common stock.
The Option Plan provides for the granting of stock options which, at the
discretion of the Board or its Stock Option Committee, may be either "incentive
stock options" within the meaning of Section 422A of the U.S. Internal Revenue
Code or nonqualified stock options which do not qualify as incentive stock
options. The Option Plan provides that both incentive stock options and
nonqualified options under the Option Plan must be granted at an option price
which is not less than the fair market value of the common stock on the date of
grant. With respect to any participant who owns stock possessing more than 10%
of the voting rights of the Company's outstanding capital stock, the exercise
price of any incentive stock option under the Option Plan to such a participant
must be not less than 110% of fair market value on the date of grant. Options
under the Option Plan may be granted to officers, directors, key employees of,
and professional consultants to, the Company and its subsidiaries. Under the
terms of the Option Plan, the aggregate fair market value (determined at the
time an option is granted, which will normally be equal to the option exercise
price per share) of common stock exercisable under an incentive stock option for
the first time in any calendar year may not exceed $100,000.
Under the Option Plan, the number of shares available for options and
subject to option, and the option exercise price of outstanding options, is to
be adjusted upward or downward, as the case may be, in the event of any stock
dividend, recapitalization, merger, consolidation, split up or similar
transaction affecting shares of the Company's common stock. If any option
granted under the Option Plan terminates or expires without having been
exercised in full, the shares not purchased under such option will again be
available for purposes of the Option Plan.
(9) INITIAL PUBLIC OFFERING
On November 15, 1995, the Board of Directors of the Company authorized the
filing of a registration statement with the Securities and Exchange Commission
for the sale of units of 10% Series A cumulative convertible preferred stock.
(10) NEW ACCOUNTING PRONOUNCEMENTS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation." SFAS 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans. Those plans
include all arrangements by which employees receive shares of stock or other
equity instruments of the employer or the employer incurs liabilities to
employees in amounts based on the price of the employer's stock. Examples are
stock purchase plans, stock options, restricted stock and stock appreciation
rights.
SFAS 123 also applies to transactions in which an entity issues its equity
instruments to acquire goods or services from nonemployees. Those transactions
must be accounted for based on the fair value of the consideration received or
the fair value of the equity instruments issued, whichever is more reliably
measurable.
SFAS 123 is effective for fiscal years that begin after December 15, 1995.
The Company will review the appropriate accounting and disclosure under SFAS 123
for its fiscal year ending March 31, 1997.
F-14
<PAGE> 79
VISTA LASER CENTERS OF MICHIGAN, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
(11) SUBSEQUENT EVENTS
In April 1996, the Company received $9,500 from Dr. J. Charles Casebeer in
payment of the subscription price for common stock and Class A common stock
warrants (see note 4).
In April 1996, the Company also received $18,000 from Ghassan Barazi, the
Company's Chief Executive Officer and Chief Financial Officer, in payment of the
Class A common stock purchase warrants (see note 4).
In April 1996, the Company entered into a commitment to lease a laser
system and other equipment from Neptune Technology Leasing Corp. for $416,192
(see note 4).
In July 1996, Vista Technologies agreed to purchase all of the assets of
Refractive Services-800, Inc. in exchange for a combination of common stock and
common stock purchase warrants of Vista Technologies (see notes 4 and 7).
F-15
<PAGE> 80
GLOSSARY
As used in this Prospectus, the following terms have the following meanings
unless the context clearly indicates otherwise.
ablation: the removal of corneal tissue by ultraviolet light generated by a
laser.
alternative refractive care: the treatment of refractive disorders other
than through the use of traditional means such as eyeglasses and contact lenses.
astigmatism: a common refractive disorder in which images transmitted
through the cornea fail to focus at any one point on the retina, resulting in
blurred vision.
cornea: the transparent front portion of the eye through which images are
transmitted and which is the principal focusing component of the eye.
corneal pathologies: diseases, injuries and conditions of the cornea
resulting in impaired vision, discomfort or blindness.
diopter: a unit of measurement of the refractive power of the eye; a
negative value indicates nearsightedness and a positive value indicates
farsightedness.
epithelium: a layer of cells comprising the outer surface of the cornea.
excimer laser: an ophthalmic laser surgical system which delivers pulses of
ultraviolet laser light to an eye for the purpose of correcting nearsightedness,
farsightedness, astigmatism and other ophthalmic disorders.
FDA: the United States Food and Drug Administration.
glaucoma: a disease of the eye characterized by a sustained elevation of
intraocular pressure.
holmium laser: an ophthalmic laser surgical system which delivers high
intensity pulses of infrared light to an eye for the purpose of treating the
symptoms of glaucoma and, in certain circumstances, correcting farsightedness
and astigmatism.
hyperopia: a common refractive disorder, also known as farsightedness, in
which images transmitted through the cornea focus behind the retina, resulting
in blurred vision.
laser assisted in situ keratomileusis ("LASIK"): a refractive procedure
performed with an excimer laser system to treat extreme cases of myopia
(nearsightedness) and also having applications for treatment of hyperopia and
astigmatism.
laser sclerostomy ("LS"): a surgical procedure performed with a holmium
laser to treat symptoms of glaucoma by making an opening in the front chamber of
the eye.
laser thermal keratoplasty ("LTK"): a refractive procedure performed with a
holmium laser to treat hyperopia (farsightedness) and astigmatism in which
peripheral corneal tissue is thermally shrunk, causing the central portion of
the cornea to steepen.
micron: a unit of length equal to one-thousandth of a millimeter.
myopia: a common refractive disorder, also known as nearsightedness, in
which images transmitted through the cornea focus in front of the retina,
resulting in blurred vision.
photorefractive keratectomy ("PRK"): an outpatient surgical procedure
performed with an excimer laser system for the purpose of correcting myopia
(nearsightedness), hyperopia (farsightedness) and astigmatism, whereby submicron
layers of tissue are ablated from the surface of the cornea in a predetermined
pattern to reshape the cornea.
phototherapeutic keratectomy (PTK): an outpatient surgical procedure
performed with an excimer laser system to alleviate symptoms of certain corneal
pathologies by ablating submicron layers of tissue in order to remove diseased,
scarred or sight-inhibiting tissue.
S-1
<PAGE> 81
premarket approval ("PMA"): a determination by the FDA, based on an
application supported by data (including preclinical trial results), that a
medical device is safe and efficacious and can be commercially marketed in the
United States.
radial keratotomy ("RK"): a manual surgical procedure to treat
nearsightedness, whereby incisions are made in the cornea to cause it to
flatten.
refractive care: the treatment of refractive disorders, through the use of
traditional means such as eyeglasses and contact lenses, or through the use of
alternative means, such as photorefractive keratectomy.
refractive disorder: the inability of the eye to properly focus images on
the retina; the most common refractive disorders are nearsightedness,
farsightedness and astigmatism.
retina: the lining of the insider of the eye that receives images entering
the eye and transmits them to the brain.
S-2
<PAGE> 82
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY OFFER, SOLICITATION OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THE PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Additional Information................ 2
U.S. Dollar Presentation.............. 2
Prospectus Summary.................... 3
Risk Factors.......................... 7
Dilution.............................. 15
Use of Proceeds....................... 17
Capitalization........................ 19
Selected Financial Data............... 20
Management Discussion and Analysis and
Plan of Operation................... 21
Proposed Business..................... 24
Management............................ 40
Certain Transactions.................. 45
Principal Stockholders................ 51
Description of Securities............. 53
Federal Income Tax Considerations..... 57
Shares Eligible for Future Sale....... 58
Underwriting.......................... 60
Dividend Policy....................... 62
Legal Matters......................... 62
Experts............................... 62
Index to Financial Statements......... F-1
Glossary.............................. S-1
</TABLE>
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES OF
THE COMPANY, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
VISTA LASER CENTERS
OF MICHIGAN, INC.
800,000 SHARES OF 10% SERIES A
CUMULATIVE CONVERTIBLE PREFERRED STOCK
--------------------
PROSPECTUS
--------------------
DICKINSON & CO.
REDSTONE SECURITIES, INC.
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 83
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Articles SEVENTH and EIGHTH of the Registrant's
articles of incorporation, which provide as follows:
"SEVENTH: The personal liability of the directors of the corporation
is hereby eliminated to the fullest extent permitted by the General
Corporation Law of the State of Nevada, as the same may be amended and
supplemented.
"EIGHTH: The corporation shall, to the fullest extent permitted by the
General Corporation Law of the State of Nevada, as the same may be amended
and supplemented. indemnify any and all persons whom it shall have power to
indemnify under said Law from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said Law, and
the indemnification provided for herein shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any
Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee, or agent and
shall inure to the benefit of the heirs, executors, and administrators of
such a person."
Reference is made to Article VI of the Registrant's bylaws dealing with
indemnification of directors and officers, which provide as follows:
"ARTICLE VI -- INDEMNIFICATION
"Section 1. DEFINITIONS. For the purposes of this Article, "agent"
means any person who is or was a director, officer, employee or other agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent or another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise, or was
a director, officer, employee or agent of a foreign or domestic corporation
which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation; "proceeding"
means any threatened, pending or completed action or proceeding, whether
civil, criminal, administrative or investigative; and "expenses" includes
without limitation attorneys' fees and any expenses of establishing a right
to indemnification under Sections 4 or 5(c) of this Article.
"Section 2. INDEMNIFICATION IN ACTIONS BY THIRD PARTIES. The
corporation shall have power to indemnify any person who was or is a party
or is threatened to be made a party to any proceeding (other than an action
by or in the right of the corporation to procure a judgment in its favor)
by reason of the fact that such person is or was an agent of the
corporation, against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with such proceeding
if such person acted in good faith and in a manner such persons reasonably
believed to be in the best interests of the corporation and, in the case of
a criminal proceeding, had no reasonable cause to believe the conduct of
such person was unlawful. The termination of any proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed
to be in the best interests of the corporation or that the person had
reasonable cause to believe that the person's conduct was unlawful.
"Section 3. INDEMNIFICATION IN ACTIONS BY OR IN THE RIGHT OF THE
CORPORATION. The corporation shall have the power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that
such person is or was an agent of the corporation, against expenses
actually and reasonably incurred by such person in connection with the
II-1
<PAGE> 84
defense or settlement of such action if such person acted in good faith, in
a manner such person believed to be in the best interests of the
corporation and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances.
"Section 4. INDEMNIFICATION AGAINST EXPENSES. To the extent that an
agent of the corporation has been successful on the merits in defense of
any proceeding referred to in Sections 2 or 3 of this Article or in defense
of any claim, issue or matter therein, and as otherwise provided by
authorization of the Board of Directors or stockholders of this
corporation, the agent shall be indemnified against expenses actually and
reasonably incurred by the agent in connection therewith.
"Section 5. REQUIRED DETERMINATIONS. Any indemnification under this
Article shall be made by the corporation only if authorized in the specific
case, upon a determination that indemnification of the agent is proper in
the circumstances because the agent has met the applicable standard of
conduct set forth in Sections 2 or 3 of this Article, by:
"(a) A majority vote of a quorum consisting of directors who are
not parties to such proceeding; or
"(b) Approval of the stockholders, with the shares owned by the
person to be indemnified not being entitled to vote thereon; or
"(c) The court in which such proceeding is or was pending upon
application made by the corporation or the agent or the attorney or
other person rendering services in connection with the defense, whether
or not such application by the agent, attorney or other person is
opposed by the corporation.
"Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by the corporation prior to the final
disposition of such proceeding upon receipt of an undertaking by or on
behalf of the agent to repay such amount unless it shall be determined
ultimately that the agent is entitled to be indemnified as authorized in
this Article.
"Section 7. OTHER INDEMNIFICATION. No provision made by the
corporation to indemnify it or its subsidiary's directors or officers for
the defense of any proceeding, whether contained in the Articles, By-laws,
a resolution of stockholders or directors, an agreement or otherwise, shall
be valid unless consistent with this Article and approved by a majority of
the Directors; provided, however, that any such agreement approved by a
majority of the shares of capital stock voted at any meeting called to
consider the same or by written consent of a majority of the shares
entitled to vote for the election of directors shall supercede the
provision of this Article to the extent of any inconsistencies. Nothing
contained in this Article shall affect any right to indemnification to
which persons other than such directors and officers may be entitled by
contract or otherwise.
"Section 8. FORMS OF INDEMNIFICATION NOT PERMITTED. No indemnification
or advance shall be made under this Article, except as provided in Sections
4 or 5(c), in any circumstances where it appears:
"(a) That it would be inconsistent with a provision of the
Articles, these By-laws, a resolution of the stockholders or an
agreement in effect at the time of the accrual of the alleged cause of
action asserted in the proceeding in which the expenses were incurred or
other amounts were paid, which prohibits or otherwise limits
indemnifications; or
"(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
"Section 9. INSURANCE. The corporation shall have power to purchase
and maintain insurance on behalf of any agent of the corporation against
any liability asserted against or incurred by the agent in such capacity or
arising out of the agent's status as such whether or not the corporation
would have the power to indemnify the agent against such liability under
the provisions of this Article.
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<PAGE> 85
"Section 10. NONAPPLICABILITY TO FIDUCIARIES OF EMPLOYEE BENEFIT
PLANS. This Article does not apply to any proceeding against any trustee,
investment manager or other fiduciary of an employee benefit plan in such
person's capacity as such, even though such person may also be an agent of
the corporation as defined in Section 1 of this Article. The corporation
shall have power to indemnify such trustee, investment manager or other
fiduciary to the extent permitted by applicable law."
Reference is also made to Sections 78.751 and 78.752 of the Nevada General
Corporation Law which provides for indemnification of directors and officers.
"78.751. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
ADVANCEMENT OF EXPENSES.
"1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation, by
reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action, suit
or proceeding if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, has no reasonable
cause to believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding,
he had reasonable cause to believe that his conduct was unlawful.
"2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually
and reasonably incurred by him in connection with the defense or settlement
of the action or suit if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter
as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to
the corporation or for amounts paid in settlement to the corporation,
unless and only to the extent that the court in which the action or suit
was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person
is fairly and reasonably entitled to indemnity for such expenses as the
court deems proper.
"3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections 1 and 2, or in
defense of any claim, issue or matter therein, he must be indemnified by
the corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense.
"4. Any indemnification under subsections 1 and 2, unless ordered by a
court or advanced pursuant to subsection 5, must be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances. The determination must be made: (a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the act, suit or proceeding; (c) If a
majority vote of a quorum consisting of directors who were not parties to
the act, suit or proceeding so orders, by independent legal counsel in a
written opinion; or (d) If a quorum consisting of directors who were not
parties to the act, suit or proceeding cannot be obtained, by independent
legal counsel in a written opinion.
II-3
<PAGE> 86
"5. The certificate or articles of incorporation, the bylaws or an
agreement made by the corporation may provide that the expenses of officers
and directors incurred in defending a civil or criminal action, suit or
proceeding must be paid by the corporation as they are incurred and in
advance of the final disposition of the action, suit or proceeding, upon
receipt of an undertaking by or on behalf of the director or officer to
repay the amount if it is ultimately determined by a court of competent
jurisdiction that he is not entitled to be indemnified by the corporation.
The provisions of this subsection do not affect any rights to advancement
of expenses to which corporate personnel other than directors or officers
may be entitled under any contract or otherwise by law.
"6. The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the
certificate or articles of incorporation or any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, for either an
action in his official capacity or an action in another capacity while
holding his office, except that indemnification, unless ordered by a
court pursuant to subsection 2 or for the advancement of expenses made
pursuant to subsection 5, may not be made to or on behalf of any
director or officer if a final adjudication establishes that his acts or
omissions involved intentional misconduct, fraud or a knowing violation
of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the heirs,
executors and administrators of such a person.
"78.752. INSURANCE AND OTHER FINANCIAL ARRANGEMENTS AGAINST LIABILITY OF
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
"1. A corporation may purchase and maintain insurance or make other
financial arrangements on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
for any liability asserted against him and liability and expenses incurred
by him in his capacity as a director, officer, employee or agent, or
arising out of his status as such, whether or not the corporation has the
authority to indemnify him against such liability and expenses.
"2. The other financial arrangements made by the corporation pursuant
to subsection 1 may include the following:
(a) The creation of a trust fund.
(b) The establishment of a program of self-insurance.
(c) The securing of its obligation of indemnification by granting a
security interest or other lien on any assets of the corporation.
(d) The establishment of a letter of credit, guaranty or surety. No
financial arrangement made pursuant to this subsection may provide
protection for a person adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable for intentional
misconduct, fraud or a knowing violation of law, except with respect to
the advancement of expenses or indemnification ordered by a court.
"3. Any insurance or other financial arrangement made on behalf of a
person pursuant to this section may be provided by the corporation or any
other person approved by the board of directors, even if all or part of the
other person's stock or other securities is owned by the corporation.
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<PAGE> 87
"4. In the absence of fraud:
(a) The decision of the board of directors as to the propriety of
the terms and conditions of any insurance or other financial arrangement
made pursuant to this section and the choice of the person to provide
the insurance or other financial arrangement is conclusive; and
(b) The insurance or other financial arrangement:
(1) Is not void or voidable; and
(2) Does not subject any director approving it to personal
liability for his action, even if a director approving the insurance
or other financial arrangement is a beneficiary of the insurance or
other financial arrangement.
"5. A corporation or its subsidiary which provides self-insurance for
itself or for another affiliated corporation pursuant to this section is
not subject to the provisions of Title 57 of Nevada Revised Statutes."
Reference is also made to Indemnification Agreements between the Registrant
and each of its directors and officers obligating the Registrant to indemnify
directors and officers to the maximum extent permitted by the laws of the State
of Nevada, copies of which have been filed as Exhibits 10.13.1 through 10.13.5
inclusive to this Registration Statement.
The Registrant's Board of Directors has authorized the Registrant to apply
for an errors and omissions liability insurance policy covering acts and
omissions of its officers and directors as soon as practicable after the filing
of this Registration Statement.
For indemnification agreements between the Registrant and the Underwriters,
reference is made to Section 8 of the Underwriting Agreement filed as Exhibit
1.1 to this Registration Statement.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses of this offering will be paid by the Registrant and are
estimated as follows:
<TABLE>
<S> <C>
Filing fees to Securities and Exchange Commission................. $ 1,924
Filing fees to National Association of Securities Dealers, Inc.... 1,058
Nasdaq SmallCap Market Listing Fee................................ 5,900*
Printing Expenses................................................. 50,000*
Legal Fees and Expenses........................................... 40,000*
Accounting Fees................................................... 35,000*
Valuation report.................................................. 20,000
Blue Sky Filing Fees and Legal Expenses........................... 40,200*
Transfer Agent and Registrar Fees and Expenses.................... 5,000*
Miscellaneous..................................................... 918*
--------
Total........................................................ $200,000*
========
</TABLE>
- ---------------
* Estimated amount.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the last three years, the Registrant has issued and sold the
following securities which were not registered at the time of sale under the
Securities Act of 1933, as amended (the "Securities Act"):
1. On July 31, 1995, the Registrant issued and sold 100,000 shares of
its 10% Series A Cumulative Convertible Preferred Stock to Refractive
Services-800, Inc., for a consideration of $100,000 in cash. (Effective
July 18, 1996, such shares were purchased from Refractive Services-800,
Inc. by Vista Technologies Inc.)
II-5
<PAGE> 88
2. On November 16, 1995, the Registrant issued and sold 200,000 shares
of its 5% Series B Cumulative Convertible Preferred Stock to Vista
Technologies Inc. in exchange for a consideration consisting of 200,000
shares of common stock in Vista Technologies Inc.
3. Pursuant to a contractual commitment made as of September 1, 1995,
on November 28, 1995 the Registrant issued and sold 20,000 shares of its
Common Stock to Ghassan Barazi, its President, at a cash price of $1.00 per
share ($20,000 total). Under the commitment, as of September 1, 1995 the
Registrant also reserved 180,000 Class A common stock purchase warrants
stock for sale to Ghassan Barazi at a cash price of $0.10 per warrant
($18,000) that was paid in cash on April 29, 1996. Each Class A warrant
represents the right to purchase one share of the Registrant's Common Stock
at an exercise price of $1.00 per share until the Class A warrants expire
on the fourth anniversary of the effective date of this Registration
Statement. Mr. Barazi was elected a director and executive officer of the
Registrant on September 1, 1995.
4. On December 1, 1995, the Registrant issued and sold to Dr. Donald
G. Johnson 5,000 shares of its Common Stock at a cash price of $1.00 per
share ($5,000) and 45,000 Class A common stock purchase warrants stock at a
cash price of $0.10 per warrant ($4,500) pursuant to a Consulting Agreement
dated November 15, 1995. Each Class A warrant represents the right to
purchase one share of the Registrant's Common Stock at an exercise price of
$1.00 per share until the Class A warrants expire on the fourth anniversary
of the effective date of this Registration Statement. Dr. Johnson was
elected a director of the Registrant on October 16, 1995.
5. Pursuant to a Consulting Agreement dated November 15, 1995, the
Registrant reserved for issuance and sale to Dr. J. Charles Casebeer 5,000
shares of its Common Stock at a cash price of $1.00 per share ($5,000) and
45,000 Class A common stock purchase warrants stock at a cash price of
$0.10 per warrant ($4,500). The total purchase price of $9,500 was paid in
cash on April 17, 1996. Each Class A warrant represents the right to
purchase one share of the Registrant's Common Stock at an exercise price of
$1.00 per share until the Class A warrants expire on the fourth anniversary
of the effective date of this Registration Statement. Dr. Casebeer was
elected a director and Chairman of the Board of the Registrant on October
16, 1995.
6. On January 12, 1996, the Registrant issued a stock option covering
50,000 shares of its common stock to one director and executive officer
under its 1995 Stock Option Plan, as follows:
<TABLE>
<CAPTION>
OPTION
DATE OF NUMBER OF OPTION PRICE EXPIRATION
NAME OF OPTIONEE GRANT SHARES PER SHARE (A) DATE
- ------------------------------------------ -------- --------- ------------- -----------
<S> <C> <C> <C> <C>
Ghassan Barazi (b)........................ 1/12/96 50,000 $1.00 1/12/2001
</TABLE>
- ---------------
(a) Represents not less than 100% of fair market value at date of grant as
determined by the Board of Directors.
(b) Executive officer and director of the Registrant.
Reference is made to "Management" and "Certain Transactions" in the
Prospectus. No underwriter was involved in the issuance or sale of the
above-referenced securities and no discounts or commission were paid. None of
the securities described in this Item 26 were registered under the Securities
Act at the time of original issuance in reliance upon the exemption from
registration in Section 4(2) of the Securities Act for transactions not
involving a public offering. All of the certificates evidencing the securities
described in this Item 26 were imprinted at the time of original issuance with a
restrictive legend indicating that they have not been registered under the
Securities Act and that resales thereof are restricted to comply with the
Securities Act.
II-6
<PAGE> 89
ITEM 27. EXHIBITS.
* Indicates exhibits filed herewith.
(M) Denotes management contract or compensation plan or arrangement.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------------ -----------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement between the Registrant and Dickinson & Co.
(incorporated by reference to exhibit of the same number filed with Amendment
No. 2 hereto on June 6, 1996).
3.1.1 Articles of Incorporation of the Registrant filed with the Secretary of State
of Nevada on June 30, 1995 (incorporated by reference to exhibit of the same
number filed with Amendment No. 2 hereto on June 6, 1996).
3.1.2 Certificate of Amendment to the Articles of Incorporation of the Registrant
filed with the Secretary of State of Nevada on November 2, 1995 (incorporated
by reference to exhibit of the same number filed with Amendment No. 2 hereto
on June 6, 1996).
3.1.3 Certificate of Amendment to the Articles of Incorporation of the Registrant
filed with the Secretary of State of Nevada on April 12, 1996 changing
corporate name to Vista Laser Centers of Michigan, Inc. (incorporated by
reference to exhibit of the same number filed with Amendment No. 2 hereto on
June 6, 1996).
3.2.1 Certificate of Designation of 10% Series A Cumulative Convertible Preferred
Stock of the Registrant filed with the Secretary of State of Nevada on
November 2, 1995 (incorporated by reference to exhibit of the same number
filed with Amendment No. 2 hereto on June 6, 1996).
3.2.2 Certificate of Amendment to Certificate of Designation of 10% Series A
Cumulative Convertible Preferred Stock of the Registrant filed with the
Secretary of State of Nevada on April 12, 1996 (incorporated by reference to
exhibit of the same number filed with Amendment No. 2 hereto on June 6,
1996).
3.2.3 Certificate of Amendment to Certificate of Designation of 10% Series A
Cumulative Convertible Preferred Stock of the Registrant filed with the
Secretary of State of Nevada on May 22, 1996 (incorporated by reference to
exhibit of the same number filed with Amendment No. 2 hereto on June 6,
1996).
* 3.2.4 Form of Certificate of Amendment to Certificate of Designation of 10% Series
A Cumulative Convertible Preferred Stock of the Registrant.
3.3.1 Certificate of Designation of 5% Series B Cumulative Convertible Preferred
Stock of the Registrant filed with the Secretary of State of Nevada on
November 2, 1995 (incorporated by reference to exhibit of the same number
filed with Amendment No. 2 hereto on June 6, 1996).
3.3.2 Certificate of Amendment to Certificate of Designation of 5% Series B
Cumulative Convertible Preferred Stock of the Registrant filed with the
Secretary of State of Nevada on January 8, 1996 (incorporated by reference to
exhibit of the same number filed with Amendment No. 2 hereto on June 6,
1996).
3.3.3 Certificate of Amendment to Certificate of Designation of 5% Series B
Cumulative Convertible Preferred Stock of the Registrant filed with the
Secretary of State of Nevada on May 22, 1996 (incorporated by reference to
exhibit of the same number filed with Amendment No. 2 hereto on June 6,
1996).
* 3.3.4 Form of Certificate of Amendment to Certificate of Resignation of 5% Series B
Cumulative Convertible Preferred Stock of the Registrant.
3.4 By-Laws of the Registrant (incorporated by reference to exhibit of the same
number filed with Amendment No. 2 hereto on June 6, 1996).
* 3.5 Amendment to Article I, Section 2 of Bylaws adopted July 18, 1996.
4.1 Specimen certificate representing Registrant's common stock (to be filed by
amendment).
</TABLE>
II-7
<PAGE> 90
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------------ -----------------------------------------------------------------------------
<C> <S>
4.2 Specimen certificate representing Registrant's Series A Cumulative
Convertible Preferred Stock (to be filed by amendment).
5.1 Opinion of counsel as to validity of securities (incorporated by reference to
exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996).
5.2 Opinion of counsel as to liquidation preference of preferred stock
(incorporated by reference to exhibit of the same number filed with Amendment
No. 1 hereto on May 6, 1996).
(M) 10.1.1 1995 Stock Option Plan of the Registrant (incorporated by reference to
Exhibit 10.1.1 to this Registration Statement on Form SB-2 filed with the
Commission on January 22, 1996).
(M) 10.1.2 Stock option agreement covering option for 50,000 shares granted January 12,
1996 by Registrant to Ghassan Barazi (incorporated by reference to Exhibit
10.1.2 to this Registration Statement on Form SB-2 filed with the Commission
on January 22, 1996).
10.2 License Agreement dated as of October 16, 1995 between the Registrant and
Refractive Services 800 Corp. for use of 800 and 900 telephone numbers
(incorporated by reference to Exhibit 10.2 to this Registration Statement on
Form SB-2 filed with the Commission on January 22, 1996).
10.3 Consulting Services Agreement dated as of October 16, 1995 between the
Registrant and Vista Technologies Inc. (incorporated by reference to Exhibit
10.3 to this Registration Statement on Form SB-2 filed with the Commission on
January 22, 1996).
10.3.1 Amendment dated April 15, 1996 to Consulting Services Agreement between the
Registrant and Vista Technologies Inc. (incorporated by reference to exhibit
of the same number filed with Amendment No. 1 hereto on May 6, 1996).
(M) 10.4 Class A Common Stock Purchase Warrants covering 180,000 shares reserved for
issuance by the Registrant to Ghassan Barazi (incorporated by reference to
exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996).
(M) 10.5 Class A Common Stock Purchase Warrants covering 45,000 shares reserved for
issuance by the Registrant to Casebeer Enterprises, Inc. (incorporated by
reference to exhibit of the same number filed with Amendment No. 1 hereto on
May 6, 1996).
(M) 10.6 Class A Common Stock Purchase Warrants covering 45,000 shares issued by the
Registrant to Dr. Donald G. Johnson (incorporated by reference to Exhibit
10.6 to this Registration Statement on Form SB-2 filed with the Commission on
January 22, 1996).
(M) 10.7 Consulting Agreement dated as of November 15, 1995 among the Registrant,
Casebeer Enterprises, Inc. and Dr. J. Charles Casebeer (incorporated by
reference to exhibit of the same number filed with Amendment No. 1 hereto on
May 6, 1996).
(M) 10.8 Consulting Agreement dated November 15, 1995 between the Registrant and Dr.
Donald G. Johnson (incorporated by reference to Exhibit 10.8 to this
Registration Statement on Form SB-2 filed with the Commission on January 22,
1996).
(M) 10.9.1 Executive Employment Agreement dated 1996 among the Registrant, The Laser Eye
Sites of Windsor, Inc. and Ghassan Barazi (incorporated by reference to
Exhibit 10.9.1 to this Registration Statement on Form SB-2 filed with the
Commission on January 22, 1996).
(M) 10.9.2 Amendment No. 1 dated January 12, 1996 to Executive Employment Agreement
among the Registrant, The Laser Eye Sites of Windsor, Inc. and Ghassan Barazi
(incorporated by reference to exhibit of the same number filed with Amendment
No. 1 hereto on May 6, 1996).
10.10 Agreement of Purchase of Assets dated December 1995 among the Registrant, The
Laser Eye Sites of Windsor, Inc., a subsidiary of the Registrant, and Windsor
Excimer Corporation for the purchase of certain equipment (incorporated by
reference to Exhibit 10.10 to this Registration Statement on Form SB-2 filed
with the Commission on January 22, 1996).
</TABLE>
II-8
<PAGE> 91
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------------ -----------------------------------------------------------------------------
<C> <S>
10.11 Facilities Agreement dated October 16, 1995 among the Registrant, The Laser
Eye Sites of Windsor, Inc., a subsidiary of the Registrant, and Dr. Fouad
Tayfour (incorporated by reference to Exhibit 10.11 to this Registration
Statement on Form SB-2 filed with the Commission on January 22, 1996).
10.12 Consulting Agreement dated October 16, 1995 among the Registrant, The Laser
Eye Sites of Windsor, Inc., a subsidiary of the Registrant, and Dr. Fouad
Tayfour (incorporated by reference to Exhibit 10.12 to this Registration
Statement on Form SB-2 filed with the Commission on January 22, 1996).
(M) 10.13.1 Indemnification Agreement between the Registrant and Ghassan Barazi
(incorporated by reference to Exhibit 10.13.1 to this Registration Statement
on Form SB-2 filed with the Commission on January 22, 1996).
(M) 10.13.2 Indemnification Agreement between the Registrant and Theodore J. Mayer
(incorporated by reference to Exhibit 10.13.2 to this Registration Statement
on Form SB-2 filed with the Commission on January 22, 1996).
(M) 10.13.3 Indemnification Agreement between the Registrant and Dr. J. Charles Casebeer
(incorporated by reference to Exhibit 10.13.3 to this Registration Statement
on Form SB-2 filed with the Commission on January 22, 1996).
(M) 10.13.4 Indemnification Agreement between the Registrant and Dr. Donald G. Johnson
(incorporated by reference to Exhibit 10.13.4 to this Registration Statement
on Form SB-2 filed with the Commission on January 22, 1996).
(M) 10.13.5 Indemnification Agreement between the Registrant and Jac. J. Lam
(incorporated by reference to Exhibit 10.13.5 to this Registration Statement
on Form SB-2 filed with the Commission on January 22, 1996).
10.14 Assignment of Lease dated March 29, 1996 between the Registrant and Richard
C. Mertz, M.D., P.C., with attached: equipment lease dated November 4, 1994
between Neptune Technology Leasing Corp. as lessor and Richard C. Mertz,
M.D., P.C., as lessee; Consent to assignment by Neptune Technology Leasing
Corp.; and Purchase Option between Richard C. Mertz, M.D., P.C. and Neptune
Technology Leasing Corp. granting option to purchase equipment for $1.00 at
lease expiration (incorporated by reference to exhibit of the same number
filed with Amendment No. 1 hereto on May 6, 1996).
10.15 Irrevocable Proxy and Voting Agreement in favor of Ghassan Barazi and Dr.
Fouad Tayfour executed by Vista Technologies Inc. as to shares of
Registrant's 5% Series B Cumulative Convertible Preferred Stock (incorporated
by reference to exhibit of the same number filed with Amendment No. 1 hereto
on May 6, 1996).
10.16 Irrevocable Proxy in favor of the Board of Directors of Vista Technologies
Inc. executed by the Registrant as to 200,000 shares of Vista Technologies
Inc. common stock (incorporated by reference to exhibit of the same number
filed with Amendment No. 1 hereto on May 6, 1996).
10.17 Form of Service Agreement between the Registrant and ophthalmologists that
agree to use the Registrant's equipment and support services (incorporated by
reference to exhibit of the same number filed with Amendment No. 1 hereto on
May 6, 1996).
* 10.18 Form of Underwriters' Warrant.
21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to
this Registration Statement on Form SB-2 filed with the Commission on January
22, 1996).
23.1 Consent of Counsel, incorporated by reference to Exhibits 5.1 and 5.2 filed
with Amendment No. 1 to the Registration Statement on May 6, 1996.
* 23.2 Consent of KPMG Peat Marwick LLP, independent public accountants.
25.1 Powers of Attorney (incorporated by reference to signature pages to this
Registration Statement on Form SB-2 filed with the Commission on January 22,
1996).
</TABLE>
II-9
<PAGE> 92
ITEM 28. UNDERTAKINGS.
Undertaking for Rule 415 Offering: The undersigned small business issuer
hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act").
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospects filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in the volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, to 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) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
Undertaking for equity offering of nonreporting small business issuer.
The undersigned small business issuer hereby undertakes that it will
provide to the underwriter at the closing specified in the underwriting
agreement certificates in such denominations and registered in such names as
required by the underwriter to permit prompt delivery to each purchaser.
Undertaking for request for acceleration of effective date.
Insofar as indemnification for liabilities arising under the Securities 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.
II-10
<PAGE> 93
SIGNATURES
In accordance with 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 of filing on Form SB-2 and authorized this Registration
Statement or Amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Windsor, Province of Ontario, Canada,
on the 31st day of July, 1996.
VISTA LASER CENTERS OF MICHIGAN, INC.
Registrant
By: /s/ GHASSAN BARAZI
-------------------------------
Ghassan Barazi
President and Treasurer
Chief Executive Officer and
Chief Financial Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement or Amendment was signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE AND CAPACITY DATE
- ------------------------------------------ ------------------------------------ --------------
<S> <C> <C>
/s/ GHASSAN BARAZI President and Treasurer; Director July 31, 1996
- ------------------------------------------ (principal executive officer
Ghassan Barazi and principal financial officer)
/s/ THEODORE J. MAYER Secretary July 31, 1996
- ------------------------------------------ (principal accounting officer)
Theodore J. Mayer
J. CHARLES CASEBEER* Director July 31, 1996
- ------------------------------------------
J. Charles Casebeer, M.D.
DONALD G. JOHNSON* Director July 31, 1996
- ------------------------------------------
Donald G. Johnson, M.D.
</TABLE>
* By: /s/ GHASSAN BARAZI July 31, 1996
- ------------------------------------------
Ghassan Barazi,
Attorney-in-Fact pursuant to powers of attorney
filed with this Registration Statement on
Form SB-2 on January 22, 1996
II-11
<PAGE> 94
INDEX TO EXHIBITS
* Indicates exhibits filed herewith.
(M) Denotes management contract or compensation plan or arrangement.
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGES
- ------------ -------------------------------------------------------------------- -------------
<C> <S> <C>
1.1 Form of Underwriting Agreement between the Registrant and Dickinson
& Co. (incorporated by reference to exhibit of the same number filed
with Amendment No. 2 hereto on June 6, 1996)........................
3.1.1 Articles of Incorporation of the Registrant filed with the Secretary
of State of Nevada on June 30, 1995 (incorporated by reference to
exhibit of the same number filed with Amendment No. 2 hereto on June
6, 1996)............................................................
3.1.2 Certificate of Amendment to the Articles of Incorporation of the
Registrant filed with the Secretary of State of Nevada on November
2, 1995 (incorporated by reference to exhibit of the same number
filed with Amendment No. 2 hereto on June 6, 1996)..................
3.1.3 Certificate of Amendment to the Articles of Incorporation of the
Registrant filed with the Secretary of State of Nevada on April 12,
1996 changing corporate name to Vista Laser Centers of Michigan,
Inc. (incorporated by reference to exhibit of the same number filed
with Amendment No. 2 hereto on June 6, 1996)........................
3.2.1 Certificate of Designation of 10% Series A Cumulative Convertible
Preferred Stock of the Registrant filed with the Secretary of State
of Nevada on November 2, 1995 (incorporated by reference to exhibit
of the same number filed with Amendment No. 2 hereto on June 6,
1996)...............................................................
3.2.2 Certificate of Amendment to Certificate of Designation of 10% Series
A Cumulative Convertible Preferred Stock of the Registrant filed
with the Secretary of State of Nevada on April 12, 1996
(incorporated by reference to exhibit of the same number filed with
Amendment No. 2 hereto on June 6, 1996).............................
3.2.3 Certificate of Amendment to Certificate of Designation of 10% Series
A Cumulative Convertible Preferred Stock of the Registrant filed
with the Secretary of State of Nevada on May 22, 1996 (incorporated
by reference to exhibit of the same number filed with Amendment No.
2 hereto on June 6, 1996)...........................................
*3.2.4 Form of Certificate of Amendment to Certificate of Designation of
10% Series A Cumulative Convertible Preferred Stock of the
Registrant..........................................................
3.3.1 Certificate of Designation of 5% Series B Cumulative Convertible
Preferred Stock of the Registrant filed with the Secretary of State
of Nevada on November 2, 1995 (incorporated by reference to exhibit
of the same number filed with Amendment No. 2 hereto on June 6,
1996)...............................................................
3.3.2 Certificate of Amendment to Certificate of Designation of 5% Series
B Cumulative Convertible Preferred Stock of the Registrant filed
with the Secretary of State of Nevada on January 8, 1996
(incorporated by reference to exhibit of the same number filed with
Amendment No. 2 hereto on June 6, 1996).............................
3.3.3 Certificate of Amendment to Certificate of Designation of 5% Series
B Cumulative Convertible Preferred Stock of the Registrant filed
with the Secretary of State of Nevada on May 22, 1996 (incorporated
by reference to exhibit of the same number filed with Amendment No.
2 hereto on June 6, 1996)...........................................
*3.3.4 Form of Certificate of Amendment to Certificate of Resignation of 5%
Series B Cumulative Convertible Preferred Stock of the Registrant...
3.4 By-Laws of the Registrant (incorporated by reference to exhibit of
the same number filed with Amendment No. 2 hereto on June 6,
1996)...............................................................
*3.5 Amendment to Article I, Section 2 of Bylaws adopted July 18, 1996...
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGES
- ------------ -------------------------------------------------------------------- -------------
<C> <S> <C>
4.1 Specimen certificate representing Registrant's common stock (to be
filed by amendment).................................................
4.2 Specimen certificate representing Registrant's Series A Cumulative
Convertible Preferred Stock (to be filed by amendment)..............
5.1 Opinion of counsel as to validity of securities (incorporated by
reference to exhibit of the same number filed with Amendment No. 1
hereto on May 6, 1996)..............................................
5.2 Opinion of counsel as to liquidation preference of preferred stock
(incorporated by reference to exhibit of the same number filed with
Amendment No. 1 hereto on May 6, 1996)..............................
(M) 10.1.1 1995 Stock Option Plan of the Registrant (incorporated by reference
to Exhibit 10.1.1 to this Registration Statement on Form SB-2 filed
with the Commission on January 22, 1996)............................
(M) 10.1.2 Stock option agreement covering option for 50,000 shares granted
January 12, 1996 by Registrant to Ghassan Barazi (incorporated by
reference to Exhibit 10.1.2 to this Registration Statement on Form
SB-2 filed with the Commission on January 22, 1996).................
10.2 License Agreement dated as of October 16, 1995 between the
Registrant and Refractive Services 800 Corp. for use of 800 and 900
telephone numbers (incorporated by reference to Exhibit 10.2 to this
Registration Statement on Form SB-2 filed with the Commission on
January 22, 1996)...................................................
10.3 Consulting Services Agreement dated as of October 16, 1995 between
the Registrant and Vista Technologies Inc. (incorporated by
reference to Exhibit 10.3 to this Registration Statement on Form
SB-2 filed with the Commission on January 22, 1996).................
10.3.1 Amendment dated April 15, 1996 to Consulting Services Agreement
between the Registrant and Vista Technologies Inc. (incorporated by
reference to exhibit of the same number filed with Amendment No. 1
hereto on May 6, 1996)..............................................
(M) 10.4 Class A Common Stock Purchase Warrants covering 180,000 shares
reserved for issuance by the Registrant to Ghassan Barazi
(incorporated by reference to exhibit of the same number filed with
Amendment No. 1 hereto on May 6, 1996)..............................
(M) 10.5 Class A Common Stock Purchase Warrants covering 45,000 shares
reserved for issuance by the Registrant to Casebeer Enterprises,
Inc. (incorporated by reference to exhibit of the same number filed
with Amendment No. 1 hereto on May 6, 1996).........................
(M) 10.6 Class A Common Stock Purchase Warrants covering 45,000 shares issued
by the Registrant to Dr. Donald G. Johnson (incorporated by
reference to Exhibit 10.6 to this Registration Statement on Form
SB-2 filed with the Commission on January 22, 1996).................
(M) 10.7 Consulting Agreement dated as of November 15, 1995 among the
Registrant, Casebeer Enterprises, Inc. and Dr. J. Charles Casebeer
(incorporated by reference to exhibit of the same number filed with
Amendment No. 1 hereto on May 6, 1996)..............................
(M) 10.8 Consulting Agreement dated November 15, 1995 between the Registrant
and Dr. Donald G. Johnson (incorporated by reference to Exhibit 10.8
to this Registration Statement on Form SB-2 filed with the
Commission on January 22, 1996).....................................
</TABLE>
<PAGE> 96
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGES
- ------------ -------------------------------------------------------------------- -------------
<C> <S> <C>
(M) 10.9.1 Executive Employment Agreement dated 1996 among the Registrant, The
Laser Eye Sites of Windsor, Inc. and Ghassan Barazi (incorporated by
reference to Exhibit 10.9.1 to this Registration Statement on Form
SB-2 filed with the Commission on January 22, 1996).................
(M) 10.9.2 Amendment No. 1 dated January 12, 1996 to Executive Employment
Agreement among the Registrant, The Laser Eye Sites of Windsor, Inc.
and Ghassan Barazi (incorporated by reference to exhibit of the same
number filed with Amendment No. 1 hereto on May 6, 1996)............
10.10 Agreement of Purchase of Assets dated December 1995 among the
Registrant, The Laser Eye Sites of Windsor, Inc., a subsidiary of
the Registrant, and Windsor Excimer Corporation for the purchase of
certain equipment (incorporated by reference to Exhibit 10.10 to
this Registration Statement on Form SB-2 filed with the Commission
on January 22, 1996)................................................
10.11 Facilities Agreement dated October 16, 1995 among the Registrant,
The Laser Eye Sites of Windsor, Inc., a subsidiary of the
Registrant, and Dr. Fouad Tayfour (incorporated by reference to
Exhibit 10.11 to this Registration Statement on Form SB-2 filed with
the Commission on January 22, 1996).................................
10.12 Consulting Agreement dated October 16, 1995 among the Registrant,
The Laser Eye Sites of Windsor, Inc., a subsidiary of the
Registrant, and Dr. Fouad Tayfour (incorporated by reference to
Exhibit 10.12 to this Registration Statement on Form SB-2 filed with
the Commission on January 22, 1996).................................
(M) 10.13.1 Indemnification Agreement between the Registrant and Ghassan Barazi
(incorporated by reference to Exhibit 10.13.1 to this Registration
Statement on Form SB-2 filed with the Commission on January 22,
1996)...............................................................
(M) 10.13.2 Indemnification Agreement between the Registrant and Theodore J.
Mayer (incorporated by reference to Exhibit 10.13.2 to this
Registration Statement on Form SB-2 filed with the Commission on
January 22, 1996)...................................................
(M) 10.13.3 Indemnification Agreement between the Registrant and Dr. J. Charles
Casebeer (incorporated by reference to Exhibit 10.13.3 to this
Registration Statement on Form SB-2 filed with the Commission on
January 22, 1996)...................................................
(M) 10.13.4 Indemnification Agreement between the Registrant and Dr. Donald G.
Johnson (incorporated by reference to Exhibit 10.13.4 to this
Registration Statement on Form SB-2 filed with the Commission on
January 22, 1996)...................................................
(M) 10.13.5 Indemnification Agreement between the Registrant and Jac. J. Lam
(incorporated by reference to Exhibit 10.13.5 to this Registration
Statement on Form SB-2 filed with the Commission on January 22,
1996)...............................................................
10.14 Assignment of Lease dated March 29, 1996 between the Registrant and
Richard C. Mertz, M.D., P.C., with attached: equipment lease dated
November 4, 1994 between Neptune Technology Leasing Corp. as lessor
and Richard C. Mertz, M.D., P.C., as lessee; Consent to assignment
by Neptune Technology Leasing Corp.; and Purchase Option between
Richard C. Mertz, M.D., P.C. and Neptune Technology Leasing Corp.
granting option to purchase equipment for $1.00 at lease expiration
(incorporated by reference to exhibit of the same number filed with
Amendment No. 1 hereto on May 6, 1996)..............................
</TABLE>
<PAGE> 97
<TABLE>
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SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGES
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<C> <S> <C>
10.15 Irrevocable Proxy and Voting Agreement in favor of Ghassan Barazi
and Dr. Fouad Tayfour executed by Vista Technologies Inc. as to
shares of Registrant's 5% Series B Cumulative Convertible Preferred
Stock (incorporated by reference to exhibit of the same number filed
with Amendment No. 1 hereto on May 6, 1996).........................
10.16 Irrevocable Proxy in favor of the Board of Directors of Vista
Technologies Inc. executed by the Registrant as to 200,000 shares of
Vista Technologies Inc. common stock (incorporated by reference to
exhibit of the same number filed with Amendment No. 1 hereto on May
6, 1996)............................................................
10.17 Form of Service Agreement between the Registrant and
ophthalmologists that agree to use the Registrant's equipment and
support services (incorporated by reference to exhibit of the same
number filed with Amendment No. 1 hereto on May 6, 1996)............
10.18 Form of Underwriters' Warrant.......................................
21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit
21.1 to this Registration Statement on Form SB-2 filed with the
Commission on January 22, 1996).....................................
23.1 Consent of Counsel, incorporated by reference to Exhibits 5.1 and
5.2 filed with Amendment No. 1 to the Registration Statement on May
6, 1996.............................................................
*23.2 Consent of KPMG Peat Marwick LLP, independent public accountants....
25.1 Powers of Attorney (incorporated by reference to signature pages to
this Registration Statement on Form SB-2 filed with the Commission
on January 22, 1996)................................................
</TABLE>
<PAGE> 1
EXHIBIT 3.2.4
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF DESIGNATION
ESTABLISHING THE RIGHTS AND PREFERENCES OF
10% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
VISTA LASER CENTERS OF MICHIGAN, INC.
a Nevada corporation
We the undersigned, GHASSAN BARAZI and THEODORE J. MAYER, do hereby
certify:
(1) They are the President and Secretary, respectively, of VISTA
LASER CENTERS OF MICHIGAN, INC., a Nevada corporation (the "Corporation").
(2) Pursuant to the authority granted under the Corporation's
Articles of Incorporation, the Board of Directors of said Corporation by
unanimous consent in writing effective as of July 18, 1996 adopted a resolution
to amend the Certificate of Designation Establishing the Rights and Preferences
of its 10% Series A Cumulative Convertible Preferred Stock, as follows:
"WHEREAS, this Corporation is authorized by its Articles of
Incorporation to issue 5,000,000 shares of preferred stock, par value
$0.01 per share (the "Preferred Stock"); and
"WHEREAS, this Corporation has previously designated 1,100,000
shares of its Preferred Stock as 10% Series A Cumulative Convertible
Preferred Stock by a Certificate of Designation filed with the Nevada
Secretary of State on November 2, 1995 as amended by Certificates of
Amendment filed on April 12, 1996 and May 22, 1996; and
"WHEREAS, the Board of Directors of this Corporation is
authorized, as to the Preferred Stock, within the limitations and
restrictions stated in the Articles of Incorporation, to fix by
resolution or resolutions the number and designation of each series of
Preferred Stock and the powers, preferences and relative participating,
optional or other special rights and qualifications, limitations or
restrictions thereof, including, without limitation, such provisions as
may be desired concerning dividends, redemption, voting, dissolution or
the distribution of assets, conversion or exchange, and such other
subjects or matters as may be fixed by resolution or resolutions of the
Board of Directors; and
"WHEREAS, the Board of Directors of this Corporation desires,
pursuant to its authority granted under the Articles of Incorporation, to
amend the provisions of subsection 5.5(a) of the Certificate of
Designation;
<PAGE> 2
"NOW, THEREFORE, BE IT RESOLVED, that subsection 5.5(a) of the
Certificate of Designation Establishing the Rights and Preferences of the
10% Series A Cumulative Convertible Preferred Stock is hereby amended in
its entirety to read as follows:
"5.5(a). In the event the Corporation shall accrue
the payment of dividends beyond a date on which dividends
would otherwise be declared hereunder due to circumstances
that the Corporation either is not legally permitted to pay
dividends in cash on all outstanding shares of Series A
Preferred stock under the laws of the State of Nevada and/or
the Corporation has insufficient cash resources to provide for
the payment of cash dividends on Preferred Stock, the
Corporation, at the election of its Board of Directors made at
any time thereafter, may elect to pay all cumulative accrued
dividends on Series A Preferred otherwise due and payable in
shares of Common Stock or additional shares of Series A
Preferred Stock in lieu of cash. In such event, the
Corporation shall advise each holder of record of Series A
Preferred Stock in writing on the Record Date, not more than
30 days nor less than 10 days prior to the respective dividend
payment date, of the Corporation's election to make such
interest payment in shares of the Corporation's Common Stock
or Series A Preferred Stock. For the purposes of this
Certificate, "Common Stock" shall mean the Corporation's
Common Stock as constituted on the Record Date."
(3) We further certify that the number of shares constituting the
series of 10% Series A Cumulative Convertible Preferred Stock, of which 100,000
shares have been issued, is 1,100,000 shares. The number of shares of the
corporation outstanding and entitled to vote on this amendment to the
Certificate of Designation Establishing the Rights and Preferences of the 10%
Series A Cumulative Convertible Preferred Stock is 100,000 shares of 10% Series
A Cumulative Convertible Preferred Stock, and the said amendments to the
Certificate of Designation have been consented to and approved by a majority
vote of the stockholders holding at least a majority of the 10% Series A
Cumulative Convertible Preferred Stock outstanding and entitled to vote
thereon.
IN WITNESS WHEREOF, we have executed this instrument as of the dates set
forth below.
_____________________________________________
Ghassan Barazi, President
_____________________________________________
Theodore J. Mayer, Secretary
<PAGE> 3
Province of __________ }
} s.
County of ___________ }
On _____________________, 1996, personally appeared before me, a Notary
Public in and for the jurisdiction named above, GHASSAN BARAZI, who
acknowledged that he executed the above instrument in his authorized capacity
as President of VISTA LASER CENTERS OF MICHIGAN, INC., and that by his
signature on the instrument, the entity upon behalf of which the person acted
executed the instrument.
(Notary Stamp or Seal) _________________________________
Signature of Notary
State of New York }
} s.
County of _________ }
On ______________________, 1996, personally appeared before me, a Notary
Public, THEODORE J. MAYER, who acknowledged that he executed the above
instrument in his authorized capacity as Secretary of VISTA LASER CENTERS OF
MICHIGAN, INC., and that by his signature on the instrument, the entity upon
behalf of which the person acted executed the instrument.
(Notary Stamp or Seal) _________________________________
Signature of Notary
<PAGE> 1
EXHIBIT 3.3.4
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF DESIGNATION
ESTABLISHING THE RIGHTS AND PREFERENCES OF
5% SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
VISTA LASER CENTERS OF MICHIGAN, INC.
a Nevada corporation
We the undersigned, GHASSAN BARAZI and THEODORE J. MAYER, do hereby
certify:
(1) They are the President and Secretary, respectively, of VISTA
LASER CENTERS OF MICHIGAN, INC., a Nevada corporation (the "Corporation").
(2) Pursuant to the authority granted under the Corporation's
Articles of Incorporation, the Board of Directors of said Corporation by
unanimous consent in writing effective as of July 18, 1996 adopted a resolution
to amend the Certificate of Designation Establishing the Rights and Preferences
of its 5% Series B Cumulative Convertible Preferred Stock, as follows:
"WHEREAS, this Corporation is authorized by its Articles of
Incorporation to issue 5,000,000 shares of preferred stock, par value
$0.01 per share (the "Preferred Stock"); and
"WHEREAS, this Corporation has previously designated 200,000
shares of its Preferred Stock as 5% Series B Cumulative Convertible
Preferred Stock by a Certificate of Designation filed with the Nevada
Secretary of State on November 2, 1995 as amended by Certificates of
Amendment filed on January 8, 1996 and May 22, 1996; and
"WHEREAS, the Board of Directors of this Corporation is
authorized, as to the Preferred Stock, within the limitations and
restrictions stated in the Articles of Incorporation, to fix by
resolution or resolutions the designation of each series of Preferred
Stock and the powers, preferences and relative participating, optional or
other special rights and qualifications, limitations or restrictions
thereof, including, without limitation, such provisions as may be desired
concerning dividends, redemption, voting, dissolution or the distribution
of assets, conversion or exchange, and such other subjects or matters as
may be fixed by resolution or resolutions of the Board of Directors; and
"WHEREAS, the Board of Directors of this Corporation desires,
pursuant to its authority granted under the Articles of Incorporation, to
amend the provisions of subsection 5.5(a) of the Certificate of
Designation;
<PAGE> 2
"NOW, THEREFORE, BE IT RESOLVED, that subsection 5.5(a) of the
Certificate of Designation Establishing the Rights and Preferences of the
5% Series B Cumulative Convertible Preferred Stock is hereby amended in
its entirety to read as follows:
"5.5(a). In the event the Corporation shall accrue
the payment of dividends beyond a date on which dividends
would otherwise be declared hereunder due to circumstances
that the Corporation either is not legally permitted to pay
dividends in cash on all outstanding shares of Series B
Preferred stock under the laws of the State of Nevada and/or
the Corporation has insufficient cash resources to provide for
the payment of cash dividends on Preferred Stock, the
Corporation, at the election of its Board of Directors made at
any time thereafter, may elect to pay all cumulative accrued
dividends on Series B Preferred otherwise due and payable in
shares of Common Stock or additional shares of Series B
Preferred Stock in lieu of cash. In such event, the
Corporation shall advise each holder of record of Series B
Preferred Stock in writing on the Record Date, not more than
30 days nor less than 10 days prior to the respective dividend
payment date, of the Corporation's election to make such
interest payment in shares of the Corporation's Common Stock
or Series B Preferred Stock. For the purposes of this
Certificate, "Common Stock" shall mean the Corporation's
Common Stock as constituted on the Record Date."
(3) We further certify that the number of shares constituting the
series of 5% Series B Cumulative Convertible Preferred Stock, of which 200,000
shares have been issued, is 200,000 shares. The number of shares of the
corporation outstanding and entitled to vote on this amendment to the
Certificate of Designation Establishing the Rights and Preferences of the 5%
Series B Cumulative Convertible Preferred Stock is 200,000 shares of 5% Series
B Cumulative Convertible Preferred Stock, and the said amendments to the
Certificate of Designation have been consented to and approved by a majority
vote of the stockholders holding at least a majority of the 5% Series B
Cumulative Convertible Preferred Stock outstanding and entitled to vote
thereon.
IN WITNESS WHEREOF, we have executed this instrument as of the dates set
forth below.
_____________________________________________
Ghassan Barazi, President
_____________________________________________
Theodore J. Mayer, Secretary
<PAGE> 3
Province of __________ }
} s.
County of ___________ }
On _____________________, 1996, personally appeared before me, a Notary
Public in and for the jurisdiction named above, GHASSAN BARAZI, who
acknowledged that he executed the above instrument in his authorized capacity
as President of VISTA LASER CENTERS OF MICHIGAN, INC., and that by his
signature on the instrument, the entity upon behalf of which the person acted
executed the instrument.
(Notary Stamp or Seal) _______________________________
Signature of Notary
State of New York }
} s.
County of _________ }
On ______________________, 1996, personally appeared before me, a Notary
Public, THEODORE J. MAYER, who acknowledged that he executed the above
instrument in his authorized capacity as Secretary of VISTA LASER CENTERS OF
MICHIGAN, INC., and that by his signature on the instrument, the entity upon
behalf of which the person acted executed the instrument.
(Notary Stamp or Seal) _______________________________
Signature of Notary
<PAGE> 1
EXHIBIT 3.5
AMENDMENT IN THE ENTIRETY OF
ARTICLE I, SECTION 2 of the ByLaws of
Vista Laser Centers of Michigan, Inc. adopted on July 18, 1996:
Section 2. SPECIAL MEETINGS. Special meetings of the stockholders
may be held at the principal office of the corporation, within or
without the State of Nevada, whenever called by the Board of
Directors, by the Chairman of the Board, by the President of the
corporation or by the registered holders of at least 10% of the issued
and outstanding shares entitled to vote, only for the purpose of
transacting such business as shall be specified in the notice of such
special meeting which may provide, however, for the transaction of
other matters as may be properly brought before the special meeting.
<PAGE> 1
EXHIBIT 10.18
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH
SECURITIES FILED UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
AND UPON COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. THE ISSUER MAY
REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER HEREOF THAT SUCH
REGISTRATION IS NOT REQUIRED AND CONFIRMING COMPLIANCE WITH SUCH LAWS. SEE
SECTION 7 HEREOF FOR ADDITIONAL RESTRICTIONS ON TRANSFERABILITY AND EXERCISE
UPON CERTAIN TRANSFERS.
VISTA LASER CENTERS OF MICHIGAN, INC.
WARRANT TO PURCHASE SHARES OF
10% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
Void after 12:00 p.m., Mountain Standard Time
on July __, 2001
80,000 Shares 10% Series A Cumulative Convertible Preferred Stock
FOR VALUE RECEIVED, VISTA LASER CENTERS OF MICHIGAN, INC. (the "Company"),
a Nevada corporation, hereby certifies that DICKINSON & CO. (the "Holder") or
its permitted assigns are entitled to purchase from the Company, at any time or
from time to time commencing July ___, 1997 (the first anniversary of the
effective date of the Registration Statement for the public offering of the
preferred stock referred to below pursuant to which this Warrant is issued)
(the "Initial Date"), and prior to 12:00 p.m., Mountain Standard Time, on July
__, 2001, up to and including Eighty Thousand (80,000) paid and nonassessable
shares of 10% Series A Cumulative Convertible Preferred stock, par value $0.01
per share, of the Company ("Preferred Stock") for a purchase price of $6.00 per
share. Hereinafter, (i) said Preferred Stock, together with any other equity
securities which may be issued by the Company in respect thereof or in
substitution therefor, are referred to as the "Preferred Stock," and (ii) the
price payable hereunder for each share of Preferred Stock is referred to as the
"Exercise Price." Unless the context otherwise requires, the term "Warrant" or
"Warrants" as used herein includes this Warrant and any other Warrant or
Warrants which may be issued pursuant to the provisions of this Warrant,
whether upon transfer, assignment, partial exercise, divisions, combinations
exchange or otherwise, and the term "Holder" includes any transferee or
transferees or assignee or assignees of the Holder named above, all of whom
shall be subject to the provisions of this Warrant, and, when used with
reference to the shares of the Company's $0.01 par value common stock (the
"Underlying Securities"), means the holder or holders of such Underlying
Securities. The term "Aggregate Purchase Price" shall mean the product of the
number of shares of Preferred Stock purchasable under this Warrant and the
purchase price per share of Preferred Stock both determined as of the date of
original issuance of this Warrant. The Aggregate Purchase Price is not subject
to adjustment except to reflect partial exercises of this Warrant. The Exercise
Price is subject to adjustment as hereinafter provided; in the event of any
such adjustment, the number of shares of Preferred Stock and Underlying
Securities shall be adjusted by dividing the Aggregate Purchase Price by the
Exercise Price in effect immediately after such adjustment.
1. EXERCISE OF WARRANT. This Warrant may be exercised, in whole at any
time or in part from time to time, commencing on the Initial Date, and prior to
12:00 p.m., Mountain Standard Time, on July __, 2001, by the Holder by the
surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the principal office of the Company, together with proper payment
of the Aggregate Purchase Price, or the proportionate part thereof if this
<PAGE> 2
Warrant is exercised in part. If this Warrant is transferred after the Initial
Date, it shall be exercised immediately upon transfer or else shall lapse.
Payment for Preferred Stock shall be made by certified or official bank check,
payable to the order of the Company. If this Warrant is exercised in part, this
Warrant must be exercised for a number of whole shares of Preferred Stock, and
the Holder is entitled to receive a new Warrant covering the number of shares
of Preferred Stock in respect of which this Warrant has not been exercised and
setting forth the proportionate part of the Aggregate Purchase Price applicable
to such Preferred Stock. Upon such surrender of this Warrant, the Company will
(a) issue a certificate or certificates in the name of the Holder for the
largest number of whole shares of Preferred Stock to which the Holder shall be
entitled and, if this Warrant is exercised in whole, in lieu of any fractional
shares of Preferred Stock to which the Holder shall be entitled, cash equal to
the fair value of such fractional share (determined in such reasonable manner
as the Board of Directors of the Company shall determine), and (b) deliver the
other securities and properties receivable upon the exercise of this Warrant,
or the proportionate part thereof if this Warrant is exercised in part,
pursuant to the provisions of this Warrant.
2. PRESERVATION OF AUTHORIZED SHARES. The Company agrees that, prior to
the expiration of this Warrant, the Company will at all times have authorized
and in reserve, and will keep available, solely for issuance or delivery upon
the exercise of this Warrant, the number of shares of Preferred Stock issuable
upon exercise of this Warrant the number of Underlying Securities into which
such Preferred Stock is convertible, and other securities and properties as
from time to time shall be receivable upon the exercise of this Warrant, free
and clear of all restrictions on sale or transfer and free and clear of all
preemptive rights.
3. PROTECTION AGAINST DILUTION.
(a) If, at any time or from time to time after the date of this Warrant,
the Company shall distribute to the holders of the Preferred Stock (i)
securities, other than shares of the Preferred Stock and other than Preferred
Stock or common stock issued in payment of annual dividends in lieu of cash, or
(ii) property, other than cash, without payment therefor, with respect to the
Preferred Stock, then, and in each such case, the Holder, upon the exercise of
this Warrant, shall be entitled to receive the securities and properties which
the Holder would hold on the date of such exercise if, on the date of this
Warrant, the Holder had been the holder of record of the number of shares of
the Preferred Stock subscribed for upon such exercise and, during the period
from the date of this Warrant to and including the date of such exercise, had
retained such shares of Preferred Stock and the securities and properties
receivable by the Holder during such period. Notice of each such distribution
shall be forthwith mailed to the Holder.
(b) In case the Company shall hereafter (i) pay a dividend or make a
distribution on its capital stock in shares of Preferred Stock, (ii) subdivide
its outstanding shares of Preferred Stock into a greater number of shares,
(iii) combine its outstanding shares of Preferred Stock into a smaller number
of shares or (iv) issue by reclassification of its Preferred Stock any shares
of capital stock of the Company, the Exercise Price in effect immediately prior
to such action shall be adjusted so that the Holder of any Warrant surrendered
for exercise immediately thereafter would be entitled to receive the number of
shares of Preferred Stock or other capital stock of the Company which he would
have owned immediately following such action had such Warrant been converted
immediately prior thereto. An adjustment made pursuant to this subsection (b)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, as a result of an adjustment made pursuant to this subsection (b), the
Holder of any Warrant thereafter surrendered for conversion shall become
entitled to receive shares of two or more classes of capital stock or shares of
Preferred Stock and other capital stock of the
<PAGE> 3
Company, the Board of Directors (whose determination shall be conclusive and
shall be described in a written notice to the Holder promptly after such
adjustment) shall determine the allocation of the adjusted Exercise Price
between or among shares of such classes or capital stock or shares of Preferred
Stock and other capital stock.
(c) In case of any consolidation or merger to which the Company is a party
other than a merger or consolidation in which the Company is the continuing
corporation, or in case of any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, or in
the case of any statutory exchange of securities with another corporation
(including any exchange effected in connection with a merger of a third
corporation into the Company), the Holder of this Warrant shall have the right
thereafter to exercise this Warrant into the kind and amount of securities,
cash or other property which he would have owned or have been entitled to
receive immediately after such consolidation, merger, statutory exchange, sale
or conveyance had this Warrant been converted immediately prior to the
effective date of such consolidation, merger, statutory exchange, sale or
conveyance, and in any such case, if necessary, appropriate adjustment shall be
made in the application of the provisions set forth in this Section 3 with
respect to the rights and interests thereafter of the Holder to the end that
the provisions set forth in this Section 3 shall thereafter correspondingly be
made applicable, as nearly as may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the conversion
of this Warrant. The above provisions of this subsection 3(c) shall similarly
apply to successive consolidations, mergers, statutory exchanges, sales or
conveyances. Notice of any such consolidation, merger, statutory exchange, sale
or conveyance and of said provisions so proposed to be made, shall be mailed to
the Holder not less than the earlier of (i) the date on which the transaction
is first publicly announced, or (ii) the date on which notice is made to the
Company's shareholders. A sale of all or substantially all of the assets of the
Company for a consideration consisting primarily of securities shall be deemed
a consolidation or merger for the foregoing purposes.
(d) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least $0.05 per share of
Preferred Stock; provided, however, that any adjustments which by reason of
this subsection (d) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment, and provided further, however,
that adjustments shall be required and made in accordance with the provisions
of this Section 3 (other than this subsection (d)) not later than such time as
may be required in order to preserve the tax-free nature of a distribution to
the Holders of Preferred Stock (if such distribution would be tax free but for
such adjustment). All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/100th of a share of Preferred Stock, as the
case may be. Anything in this Section 3 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Exercise Price, in
addition to those required by this Section 3, as it in its discretion shall
deem to be advisable in order that any stock dividend, subdivision of shares or
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its shareholders shall
not be taxable.
(e) Whenever the Exercise Price is adjusted as provided in this Section 3
and upon any modification of the rights of a Holder in accordance with this
Section 3, the Company's Chief Financial Officer shall provide a certificate
setting forth the Exercise Price and the number of shares of Preferred Stock
and Underlying Securities after such adjustment or the effect of such
modification, a brief statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause copies of such
certificate to be mailed to the Holder.
(f) If the Board of Directors of the Company shall declare any dividend
<PAGE> 4
or other distribution in cash with respect to the Preferred Stock, other than
out of earned surplus, the Company shall mail notice thereof to the Holder not
less than the earlier of (i) the date on which the transaction is first
publicly announced, or (ii) the date on which notice is made to the Company's
shareholders.
4. FULLY PAID STOCK, TAXES. The Company agrees that the shares of the
Preferred Stock represented by each and every certificate therefor delivered on
the exercise of this Warrant shall, at the time of such delivery, be validly
issued and outstanding, fully paid and non-assessable, and not subject to
preemptive rights. The Company further covenants and agrees that it will pay,
when due and payable, any and all federal and state stamp, original issue or
similar taxes which may be payable in respect of the issue of any shares of
Preferred Stock and Underlying Securities or certificates therefor.
5. REGISTRATION UNDER SECURITIES ACT OF 1933. The Company is under a
contractual obligation to register this Warrant, the Preferred Stock into which
it may be exercised and the Underlying Securities under applicable federal and
state securities laws as provided in the Underwriting Agreement between the
Company and Dickinson & Co. of even date herewith. This Warrant, the Preferred
Stock into which it may be exercised and the Underlying Securities may not be
offered, sold, transferred, pledged or hypothecated in the absence of any
effective registration statement as to such securities filed under the Act, or
an exemption from the requirement of such registration, and compliance with the
applicable state securities laws. The Company may require an opinion of counsel
satisfactory to the Company that such registration is not required and that any
transfer is in compliance with such laws.
6. TERMS OF PREFERRED STOCK AND UNDERLYING SECURITIES. The Preferred Stock
and the Underlying Securities are the same securities and carry the same
obligations, rights, privileges and terms as those offered and sold to the
public by Dickinson & Co. pursuant to the public offering contemplated by its
Underwriting Agreement of even date herewith, except that the exercise price
for purchase of Preferred Stock under this Warrant shall be $6.00 per share.
7. LIMITED TRANSFERABILITY. This Warrant is restricted from sale,
transfer, assignment, pledge or hypothecation (a) until the Initial Date except
(i) to any persons who are officers of Dickinson & Co. or of any such successor
firm, (ii) co-underwriters and members of the selling group and their
respective officers, and (iii) by operation of law or by reason of
reorganization of the Company, and is so transferable only upon the books of
the Company which it shall cause to be maintained for the purpose, and (b) the
Warrant may not be offered, sold, transferred, pledged or hypothecated in the
absence of any effective registration statement as to such Warrant filed under
the Act, or an exemption from the requirement of such registration, and
compliance with the applicable state securities laws. The Company may require
an opinion of counsel satisfactory to the Company that such registration is not
required and that any transfer is in compliance with such laws. In the event of
any transfer after the Initial Date, this Warrant must be immediately exercised
upon transfer. If not exercised immediately upon such transfer, this Warrant
shall lapse pursuant to California Regulations 260.140.21(e). The Company may
treat the registered holder of this Warrant as he or it appears on the
Company's books at any time as the Holder for all purposes. The Company shall
permit the Holder or his duly authorized attorney, upon written request during
ordinary business hours, to inspect and copy or make extracts from its books
showing the registered holders of Warrants.
8. LOSS, ETC. OF WARRANT. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of
indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, and upon
reimbursement of the Company's reasonable incidental expenses, the Company
shall execute and deliver to the Holder a new Warrant of like date,
<PAGE> 5
tenor and denomination.
9. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise thereof.
10. COMMUNICATION. No notice or other communication under this Warrant
shall be effective unless, but any notice or other communication shall be
effective and shall be deemed to have been given if, the same is in writing and
is mailed by first-class mail, postage prepaid, addressed to:
<TABLE>
<S> <C> <C>
(a) the Company at: Ghassan Barazi, President
Vista Laser Centers of Michigan, Inc.
2224 Walker Road
Winsor, Ontario
Canada N8W 3P6
</TABLE>
or such other address as the Company will hereafter designate in writing to the
Holder;
<TABLE>
<S> <C> <C>
(b) the Holder at: Glenn S. Cushman, Executive Vice President
Dickinson & Co.
2425 E. Camelback Road, Suite 530
Phoenix, AZ 85016
</TABLE>
or such other address as the Holder will hereafter designate in writing to the
Company.
11. HEADINGS. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof.
12. APPLICABLE LAW. This Warrant shall be governed by and construed in
accordance with the law of the State of Nevada without giving effect to the
principles of conflicts of law thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its President and its corporate seal to be hereunto affixed and attested by its
Secretary this ____ day of July, 1996.
ATTEST:
VISTA LASER CENTERS OF MICHIGAN, INC.
__________________________ By: _____________________________
Ghassan Barazi, President
Secretary
[Corporate Seal]
<PAGE> 6
SUBSCRIPTION
The undersigned, ____________________, pursuant to the provisions of the
foregoing Warrant, hereby agrees to subscribe for and purchase shares of
Preferred Stock of Vista Laser Centers of Michigan, Inc. covered by said
Warrant, and makes payment therefor in full at the Exercise Price provided by
said Warrant.
Dated: ________________________ Signature: ________________________________
Address:
ASSIGNMENT
FOR VALUE RECEIVED, ____________________________hereby sells, assigns and
transfers unto _____________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
______________________, attorney, to transfer said Warrant on the books of
Vista Laser Centers of Michigan, Inc.
Dated: ________________________ Signature: ________________________________
Address:
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED, hereby assigns and transfers unto the right to
purchase Underlying Securities of Vista Laser Centers of Michigan, Inc. by the
foregoing Warrant, and a proportionate part of said Warrant and the rights
evidenced hereby, and does irrevocably constitute and appoint________________,
attorney to transfer that part of said Warrant on the books of Vista Laser
Centers of Michigan, Inc.
Dated: ________________________ Signature: ________________________________
Address:
<PAGE> 1
EXHIBIT 23.2
The Board of Directors
Vista Laser Centers of Michigan, Inc.:
Our report dated April 26, 1996, contains an explanatory paragraph that states
that the Company is currently a development stage enterprise and dependent on
raising additional financing through a public offering or private placement to
meet its current obligations and commitments, which raises substantial doubt
about its ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of
that uncertainty.
We consent to the use of our report included herein and to the reference to our
firm under the headings "Selected Financial Data" and "Experts" in the
prospectus.
/s/ KPMG PEAT MARWICK LLP
- --------------------------
KPMG Peat Marwick LLP
New York, New York
July 31, 1996
