<PAGE>
FORM 6-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 1997
TLC The Laser Center, Inc.
(Commission File No. 0-29302)
5600 Explorer Drive, Suite 301, Mississauga, Ontario, Canada L4W 4Y2
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(Address of principal executive offices)
[Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.]
Form 20-F Form 40-F X
----- -----
[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.] Yes No X
----- -----
EXHIBITS ATTACHED:
1. Annual Report to Shareholders dated August 8, 1997 - mailed to shareholders
October 2, 1997
2. Proxy Statement dated September 26, 1997 - mailed to shareholders
October 2, 1997
3. Press Release dated October 14, 1997 announcing quarterly results
4. Annual Information Form filed with the Ontario Securities Commission on
October 17, 1997
5. Quarterly Report for Three Months Ended August 31, 1997.
NOTE: Exhibits 1-4 were previously filed with the Commission by hard copy with
Form 6-K filed on October 22, 1997, and are being filed now as a duplicate
filing on EDGAR.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TLC The Laser Center Inc.
Date: By: /s/ Elizabeth A. Karmin
-------------------- --------------------------------
Elizabeth A. Karmin,
Deputy General Counsel
<PAGE>
COVER
TLC The Laser Center Inc.
1997 Annual Report
[picture depiciting eyes]
INSIDE FRONT COVER
[picture depiciting geographical location of each TLC business]
TLC THE LASER CENTER: LOCATIONS
TLC CENTERS
Billings, MT
Boca Raton, FL
Boston, MA
Brea, CA
Charlotte, NC
Chicago Downtown, IL*
Chicago Westchester, IL*
Denver, CO
Fairfax, VA
Fairlawn, NJ
Garden City, NY
Greenville, SC*
Indianapolis, IN
Johnson City, TN
Lima, OH
London, ON
Lynnwood, WA
Madison, WI
Manhattan, NY
Miami, FL
Moncton, NB
Mount Laurel, NJ
Oklahoma City, OK
Plymouth Meeting, PA
Raleigh, NC
Rockville, MD
Toronto, ON
Tulsa, OK
Vancouver, BC
White Plains, NY
Windsor, ON
<PAGE>
Winston-Salem, NC
NETWORKS
Albuquerque, NM
Benton, KY
Bowling Green, KY
Chattanooga, TN
Hartford, CN
Kitchener, ON
Knoxville, TN
Las Vegas, NV
Memphis, TN
Nashville, TN
Seymour, IN
Southgate, KY
UNDER DEVELOPMENT
Atlanta, GA
Beverly Hills, CA
Brooklyn, NY
Cleveland, OH
Columbia/Charleston, SC
Columbus, OH
Detroit, MI
Fort Wayne, IN
San Diego, CA
Sioux City, IA
Toledo, OH
SECONDARY CARE
Chicago Palos Heights, IL
Seattle, WA
* Center also provides secondary care.
This listing is as of September 1, 1997.
WE'RE GROWING
[picture depicting various laser center physical buildings]
CORPORATE PROFILE:
<PAGE>
TLC The Laser Center is the No. 1 provider of laser vision correction in North
America. It also operates secondary care clinics; the Eye Care Network (an
internet-based information and transaction service); and Partner Provider Health
(a managed care company).
GROWTH HIGHLIGHTS
TLC has far exceeded its growth targets, clearly establishing itself through
expansion and acquisition as the leader in North America.
- - TLC raised $59 million from three public offerings in the last two years.
- - TLC introduced The Lifetime Commitment program to ensure patient satisfaction.
- - 20/20 Laser Centers Inc. was acquired, opening major U.S. markets to TLC.
- - There were a number of significant senior management appointments (see
page 14).
- - The Company expanded its network of affiliated doctors to more than 6,000.
- - The Company was recognized as one of the top performing 1996 IPOs on the
Toronto Stock Exchange.
- - TLC shares began trading on the Nasdaq National Market in July, 1997.
How we've grown 1997 1996
Laser centers 32 9
Network Centers 12 0
Secondary Care Clinics 2 1
- - Most of the new centers opened in fiscal 1997 were in the United States. 11
new centers are currently planned for fiscal 1998.
TLC THE LASER CENTER: BUSINESS STRATEGY
RELATIONSHIPS
Our strength relies on the relationships we build
[picture depicting TLC staff members at a clinic]
WE ARE LEADERS
At the center of TLC's strategy and its success are the relationships it has
developed with local eye care providers. It's called co-management: the company
along with local doctors jointly providing care for the patient. More than 6,000
doctors are affiliated with TLC. The illustrations on this page show how TLC
takes a comprehensive approach to developing these key relationships.
<PAGE>
SECONDARY CARE CLINICS [picture depicting individual undergoing eye exam]
TLC's secondary care clinics perform all types of eye surgery and provide
advanced levels of care. They offer TLC an existing network of doctors,
a solid revenue stream and can provide a cost effective way of opening a laser
vision center.
PARTNER PROVIDER HEALTH [picture depicting front of physical location]
The Company's managed care subsidiary, Partner Provider Health Inc., secures and
manages vision care contracts from health maintenance organizations (HMOs) and
other third party payers. As managed care is the fastest growing segment of
health care delivery, access to managed care patients for all TLC doctors will
ensure their long-term success.
LASER SURGERY [picture depicting a TLC doctor at laser computer controls]
At the core of TLC are its laser vision correction centers and the network of
more than 6,000 affiliated doctors who co-manage patients.
The clinics work hand-in-hand with local doctors in educating patients about
laser vision correction and in managing post-procedure care.
EYE CARE NETWORK [picture depicting eye doctor looking at computer screen]
WWW. LZR.COM
The Eye Care Network is a proprietary, internet-based network which provides eye
care professionals and clinics across North America with an effective way to
source information, communicate on-line and purchase supplies and equipment.
GROWING
FINANCIAL HIGHLIGHTS
"We've combined exceptional growth with a very strong balance sheet."
(in millions of canadian dollars, except per share amounts)
1997 1996
Gross revenues $ 47.9 $ 16.0
Net revenues $ 29.3 $ 9.4
Development and start-up expenses $ 6.3 $ 2.3
<PAGE>
Net loss $ (13.9) $ (2.9)
Loss per share $ (0.68) $ (0.23)
Shareholders' equity $ 74.9 $ 15.9
Revenues have grown dramatically due to an increase in procedures performed and
the effect of acquisitions.
Gross Revenues of all Managed Clinics by Quarter ($ millions) [bar chart]
showing gross revenue growth
Strong growth in procedures performed resulted from the success of both existing
and new clinics.
Total Procedures (by quarter) [bar chart] showing procedure growth
Rapid expansion has meant a dramatic increase in shareholders' equity.
Shareholders' Equity ($ millions) [bar chart] showing growth in Shareholder's
Equity
Assets have grown to position the company for future growth.
Total Assets ($ millions) [bar chart] showing growth in total assets.
MESSAGE TO THE SHAREHOLDERS
[picture] depicting Elias Vamvakas
Elias Vamvakas
President and Chief Executive Officer
WE HAVE THE RIGHT STRATEGY --
AND WE HAVE SHOWN WE HAVE THE ABILITY TO EXECUTE IT SUCCESSFULLY.
GROWTH AND LEADERSHIP
A year ago in this message, we outlined an ambitious growth strategy -- one that
would "enable us to maintain our leadership position...and enjoy the outstanding
growth opportunities available to us." We said we planned to open 14 new
locations in fiscal 1997, creating a network of 24 clinics across North America.
<PAGE>
How have we done? By our year end at May 31, 1997, 24 new locations had been
added to the TLC network, which now totals 32 centers, 12 networks and two
secondary care facilities in 26 states and provinces across North America.
We have not only maintained, but enhanced, our position as the No. 1 provider of
laser vision correction in Canada and the United States. The acquisition of
20/20 Laser Centers Inc. in February was a key development, adding eight clinics
to our network. Like TLC, 20/20 relies on a strong network of local doctors and
has allied itself with some of the most prestigious academic institutions in the
country. 20/20 has opened up major markets to TLC in New York, New Jersey,
Pennsylvania and the Washington, D.C. area.
TLC has been able to manage this and other smaller acquisitions, and absorb the
operating losses associated with rapid expansion, while maintaining a very
strong financial position. At May 31, 1997, TLC's cash and short-term deposits
had more than doubled to $21.0 million, while short and long-term debt was $20.2
million. The Company's debt/equity ratio was 0.27:1 and working capital stood at
$13.4 million. TLC raised $59 million from three public offerings in the last
two years.
TLC's net revenues climbed 213% to $29.3 million in fiscal 1997. The Company
reported a net loss of $13.9 million ($0.68 per share), compared to a loss of
$2.9 million ($0.23) in 1996. Our losses have been lower than expected and our
goal remains to be cash flow positive by the end of this fiscal year.
While we expect continued increases in the number of procedures performed,
growth will also come from new areas. At Partner Provider Health Inc. (PPH), the
managed care subsidiary of TLC, 1997 was a year of building infrastructure, such
as a new claims center in Boston. Fiscal 1998 will be a strong growth year for
PPH.
We also expect to see growth from the Eye Care Network, an internet-based
service which provides information, e-mail and the ability to facilitate
real-time transactions and purchasing for thousands of TLC-affiliated doctors
and clinics across North America.
The Eye Care Network is a vital part of TLC's innovative approach to providing
the highest level of service to both doctors and patients. Another
<PAGE>
TLC first is its Lifetime Vision Commitment, recently introduced to ensure
patient satisfaction.
In fiscal 1998, we are committed to managing our expenses as we grow our cash
flow. With that in mind, we plan to open 11 new centers, a slower pace than
1997. At the same time, TLC is investigating a number of exciting international
opportunities.
With an outstanding management team in place, our affiliation with the most
renowned doctors in this industry, the talents and motivation of our employees,
and the benefit of a strong financial position, we look forward to another
exciting year.
LEADERS
WE ARE MEETING AND SURPASSING OUR TARGETS. AT THE SAME TIME, WE ARE STILL ONLY
SCRATCHING THE SURFACE WHEN IT COMES TO THE POTENTIAL OF THE LASER VISION
MARKET.
TLC HAS MAINTAINED A VERY STRONG FINANCIAL POSITION
[signature, Elias Vamvakas]
Elias Vamvakas
President and Chief Executive Officer
August 8, 1997
A DAY IN THE LIFE OF A TLC LASER CENTER
TLC The Laser Center has changed the lives of many North Americans. Since the
company's founding in 1993, more than 20,000 patients have been treated in TLC
Centers across the continent. Studies show that 97% of participating PRK
patients achieve vision good enough to drive a car without glasses.
OUR GOAL
HAPPY PATIENTS
[picture depicting Derrick Adkins and Nancy Vamvakas]
1. Derrick Adkins, gold medal hurdler at the 1996 Olympics, had the procedure
performed at TLC. Shortly after, he placed first at the Chase Millrose Games.
Swimmer Amy Van Dyken, winner of four Olympic golds, also chose TLC to have her
vision corrected.
<PAGE>
2. Nancy Vamvakas, wife of TLC President Elias Vamvakas, had the procedure
performed in 1994. An avid athlete, Nancy has discovered new freedom with all
her favorite sports, although it hasn't helped her golf game!
STEP 1
PATIENT WITH OPTOMETRIST
[picture] depicting patient consultation
1.Beth Hahn (left) of London, Ontario, consults with optometrist
Dr. Cheryl Letheren. For Beth, who is active in sports and has two young
children, laser vision correction is a lifestyle issue.
2.Dr. Letheren talks to Beth about her eyesight history and determines her
prescription (including astigmatism) to see if she might be a candidate for
laser vision correction.
LEADERS
TLC's co-management approach: the company along with local doctors jointly
providing care for the patient, ensures the highest level of care. TLC is
affiliated with more than 6,000 eye doctors across North America.
STEP 2
PATIENT WITH TECHNICIAN
[picture] depicting patient undergoing corneal topography
1.TLC ophthalmic technician, Jenny Graham, uses a corneal topographer to
determine the exact shape of Beth's eyes. The topographer creates a detailed
"map" of the eye's surface.
[picture] depicting TLC technician at corneal topographer
2.The corneal topographer measures over 6,000 points on the eye. This
information is used to program the state-of-the-art computer software which
directs the laser beam during the procedure.
STEP 3
THE PROCEDURE
[2 pictures] depicting patient undergoing laser vision correction
<PAGE>
LEADERS
TLC places a strong emphasis on clinical expertise. National Medical Directors
Drs. Jeffery Machat and Stephen Slade have developed and pioneered many of the
concepts and software used by some of the largest laser system manufacturers.
[picture] depicting patient undergoing laser vision correction
1.TLC ophthalmic technician Niki Robson and Dr. Omar Hakim position Beth on the
excimer laser bed. The only medication Beth has received is anti-bacterial and
anesthetic eyedrops.
2.Dr. Hakim looks at an enhanced picture of Beth's eyes through the laser. The
procedure, which is painless, typically takes from five to ten minutes to
perform.
3.Guided by computer, the cool laser beam gently reshapes Beth's cornea to match
her prescription. Each laser pulse is so precise it can remove 39 millionths of
an inch of tissue in 12 billionths of a second.
STEP 4
THE DAY AFTER
[picture] depicting patient undergoing post-procedure eye examination
Beth is back for a checkup with optometrist Dr. Cheryl Letheren. Within two or
three days, patients usually can go back to work. While individual results may
vary, in Beth's case her eyesight was corrected to 20/20.
LEADERS
In July, 1997, TLC introduced a new, unprecedented vision care policy, the
lifetime Commitment. If a patient's level of vision correction is reduced in the
future, TLC will perform an enhancement procedure for free*, provided the
patient has visited a TLC doctor for annual eye exams.
* Some conditions apply.
The first laser vision correction procedure was performed 10 years ago. While
each case is unique, TLC's typical nearsighted patients are able to drive
legally, play sports (or join the police or fire departments), without depending
on glasses or contact lenses.
<PAGE>
OUR GOAL
HAPPY PATIENTS
[picture] depicting Esther Strongman
1. For Esther Strongman of Bethesda, Maryland, one of the main benefits of laser
vision correction is not having to carry around contacts, glasses, or her
prescription sunglasses.
[picture] depicting Alice Lundberg and her four children
2. Alice Lundberg of Anderson, South Carolina, was so impressed with the results
of her procedure that she paid to have it done for her four children.
ACHIEVING PROFITABLE GROWTH REQUIRES STRONG LEADERSHIP
FRANCES BROTHERHOOD,
Executive Vice President, International Development and Networks
Ms. Brotherhood was formerly Executive Vice President and Chief Operating
Officer of Beacon Eye Institute; Vice President, Excimer Laser Business and
President, Alcon Laboratories Inc.
DR. DAVID ELDRIDGE,
Executive Vice President, Clinical Affairs
Dr. Eldridge is a member of the Audit Committee and Chairman of the TLC Advisory
Council, and has served as President of the American Academy of Optometry and
President of the Oklahoma Optometric Association.
GARY JONAS,
Executive Vice President, Operations
A Harvard MBA, Mr. Jonas is the founder and former President of 20/20 Laser
Centers and the former President of Earl Palmer Brown, a national advertising
agency in the U.S.
PETER KASTELIC,
Chief Financial Officer
Mr. Kastelic has served in key financial roles for a number of major companies
including Potash Company of Canada as Vice President of Finance, and Vice
President and Controller of Curragh Inc.
<PAGE>
RONALD KELLY,
Legal Counsel and Vice President, Acquisitions
Mr. Kelly is a former adjunct professor in contract law at the University of
Western Ontario. He practices corporate/commercial and intellectual property
law, including computer software development and high technology.
DR. JEFFERY MACHAT,
National Medical Director
Dr. Machat, co-founder of TLC, has performed more than 15,000 excimer laser
procedures. He regularly lectures on excimer laser therapy and recently
published his second book on the subject.
DR. STEPHEN SLADE,
National Medical Director
Dr. Slade is on the clinical faculty of the University of Texas Medical School,
Department of Ophthalmology. The co-author of several textbooks, he regularly
travels internationally to teach and train surgeons in PRK and LASIK.
ELIAS VAMVAKAS,
President and Chief Executive Officer
A co-founder of TLC in 1993, Mr. Vamvakas has an extensive background in
management and finance. He is former President of the Creative Planning
Financial Group of Companies.
MADELINE WALKER,
Chief Operating Officer
Ms. Walker has held various positions at TLC since the company's founding. She
is also President of Mainstay Human Resources Corporation, a management
consulting company.
MISSION STATEMENT
<PAGE>
Our mission is to create an unprecedented partnership between eye care
practitioners to produce outstanding clinical results in the correction of
visual refractive problems.
[picture] depicting officers and executives
FROM LEFT TO RIGHT
Frances Brotherhood, Ronald Kelly, Elias Vamvakas, Dr. David Eldridge, Peter
Kastelic, Madeline Walker and Gary Jonas.
LEADERS
Employee ownership. TLC encourages its employees to think like owners through
its employee share option plan. TLC is also putting into place a share purchase
plan. As a group, senior management and directors hold a large portion of TLC's
outstanding common shares.
CORE PURPOSE
To enable people to enjoy life through advanced medical care and to promote the
success of all of our partners.
CORE VALUES
INTEGRITY.
Integrity builds respect and trust. We communicate openly and honestly with each
other, and to all with whom we do business. We can be counted on to keep our
promise and to use good judgement, and if we make a mistake we will accept
responsibility and do everything possible to correct it. We will conduct
business with impeccable ethics and a genuine desire to do the right thing. We
are reliable, honest and trustworthy in all our dealings.
WE DO WHAT IS RIGHT.
We are committed to the highest standards of patient care and excellence in
everything that we do on behalf of TLC's patients, affiliated doctors,
employees, shareholders and suppliers. We are proud to work for a health care
company whose products and services make a difference in people's lives and for
an organization whose primary objective is to provide the highest level of
patient care. We derive our greatest sense of accomplishment from doing what is
right -- not what is expedient.
<PAGE>
WE ALWAYS SEEK TO IMPROVE.
In all aspects of our business we continually accept change as a positive,
particularly when it's for the better. We study our progress and learn from
ourselves and others how to do things more effectively and efficiently. How we
do things is as important to us as what we do.
WE ACCEPT PERSONAL RESPONSIBILITY.
We consider individual involvement and accountability to be both a right and a
privilege and accept personal responsibility for everything we do. We treat the
Company's reputation as our own and try to make wise use of our time and the
Company's resources. While we support our associates and work as a team, we will
always take pride and accept personal responsibility in meeting or exceeding
desired objectives.
MANAGEMENT'S DISCUSSION AND ANALYSIS
TLC The Laser Center Inc., incorporated in 1993, is a provider of integrated eye
care in North America, specializing in excimer laser surgery to correct common
vision disorders such as nearsightedness, farsightedness and astigmatism.
Excimer laser surgery is an outpatient procedure which is designed to change the
curvature of the cornea to reduce or eliminate a patient's reliance on glasses
and contact lenses. TLC develops and manages refractive laser clinics and
secondary care clinics in conjunction with networks of local doctors. The
Company has established 34 (1996 - ten) clinics in North America and is the
largest provider of laser vision correction in North America.
The Company is pursuing a strategy of growth in its core refractive laser
surgery business. In February 1997, TLC issued common shares for the acquisition
of 20/20 Laser Centers Inc., a company that managed eight refractive clinics in
the northeast U.S. The focus of TLC's expansion strategy continues to be in the
U.S., where it is positioning itself to take advantage of the growing market for
excimer procedures. The Company expects to open 11 new clinics in the current
fiscal year. As part of its strategy to expand its core refractive laser surgery
business, the Company intends to acquire, and manage on behalf of doctors, high
quality secondary care clinics in U.S. cities where a TLC refractive clinic is
established or will be established. Secondary care clinics are expected to
create an extended patient base for TLC's core
<PAGE>
refractive laser surgery business and further improve the economies of scale of
the Company's operations.
RESULTS OF OPERATIONS
REVENUES
In fiscal 1997, gross revenues increased 200% to $47.9 million from $16.0
million in fiscal 1996. This includes the results of 32 refractive clinics,
three of which also perform secondary care, and two additional secondary care
clinics in North America. A year earlier only ten clinics had been established.
The increase in revenues is attributable to the increase in the number of
procedures being performed at established clinics, the opening of new refractive
clinics in the U.S. and the acquisition of the eight 20/20 clinics in the U.S.
TLC performed 14,170 paid procedures in North America in the year ended May 31,
1997. That number includes 12 months of procedures from the 20/20 clinics, which
were not acquired until February 10, 1997. The following are the four major
components of the growth in revenues during 1997:
[bar chart] showing growth in number of refractive and secondary care clinics
Net revenues from the refractive clinics in operation for the full fiscal year,
and for which results are included in the consolidated financial statements,
have increased to $15.5 million in 1997 from $8 million in 1996. The growth in
the number of procedures at these clinics to 7,700 from 3,700 was according to
plan and reflects increasing acceptance and market penetration of refractive
procedures to correct vision disorders. These clinics are expected to continue
to increase revenues as the potential in their markets has yet to be fully
realized. Results include the three Ontario clinics which have completed two
full years of operations and generated gross revenues of $11.3 million and
income of $2.8 million before allocation of corporate overhead costs.
[bar chart] showing annual growth in Net Revenues
The 15 refractive clinics that were established in fiscal 1997 performed 1,300
procedures and generated net revenue of $3.2 million. Generally these clinics
are incurring losses, as it takes about 18 months for a clinic to reach break
even levels.
The addition of the 20/20 clinics accounted for net revenues of $3.3 million and
1,600 procedures since the date of acquisition in February 1997. The 20/20
clinics performed 4,700 procedures in the year ended May 31, 1997. The 20/20
clinics have been established since 1996 and have not yet realized their
potential. They are being integrated into the TLC model.
<PAGE>
Net revenues from managed secondary care clinics increased to $7.3 million from
$1.4 million in 1996. The corresponding increase in gross revenues was to $20.8
million from $8 million in 1996. These increases are a result of a full year's
accounting of the TLC Northwest Eye acquisition and the addition of TLC Midwest
Eye clinic during the year. The Company believes that the acquisition of
additional secondary care clinics will create an extended patient base for TLC's
core refractive surgery business.
OPERATING EXPENSES
Fiscal 1997 operating expenses increased to $30.3 million from $8.5 million in
1996. This is due to the additional variable costs attributable to the increase
in procedures, higher fixed costs as new clinics opened and increases in
corporate overhead to support the additional centers. The major cost components
are wages, surgeon fees and facility leasing costs. Costs are expected to
decrease on a per procedure basis as higher procedure volumes help to absorb the
fixed costs.
INTEREST AND AMORTIZATION
Net interest expense increased to $1.3 million from $0.3 million in 1996 as debt
increased to $20.2 million from $5.8 million, reflecting the financing costs
incurred to acquire equipment for new clinics. Amortization expense increased to
$5.0 million from $0.9 million in 1996 as capital assets increased to $44.2
million from $17.1 million the previous year. Amortization expense also includes
$0.7 million of goodwill as a result of the 20/20 acquisition. Both interest and
amortization expenses are expected to increase as more clinics are added, a full
year of costs are incurred, and the number of procedures increases.
[bar chart showing annual growth in Capital Assets and Assets Under Capital
Lease]
DEVELOPMENT AND START-UP EXPENSES
Development and start-up expenses increased to $6.3 million in 1997 from $2.3
million in 1996. These expenses were incurred to establish 16 new TLC clinics in
North America. Development and start-up expenses are non-recurring costs
incurred to research potential markets and develop clinics in North America.
They include professional fees, salaries and benefits, advertising, promotion,
and travel costs incurred by clinic staff prior to the commencement of
commercial operations.
Included in the development and start-up expenses are $1.5 million in losses
attributable to Partner Provider Health Inc. (PPH). These costs were incurred
<PAGE>
to set up a new claims processing center and develop other infrastructure prior
to the commencement of commercial operations. PPH is a TLC subsidiary which, in
conjunction with local doctors, develops and manages Independent Practice
Associations as regional companies that serve health plans, other managed care
organizations and health care purchasers. PPH's activities will support TLC's
core refractive laser surgery business. PPH is expected to continue incurring
losses during fiscal 1998, as claims processing revenues are not expected to be
sufficient to cover operating costs.
INCOME TAXES -- CANADA AND UNITED STATES
In the United States, TLC paid minimal income taxes because it is allowed, under
U.S. tax law, to file a consolidated tax return. As a result, TLC was able to
file returns which combined the losses of its start-up laser clinics with the
earnings of other clinics and those of TLC Northwest Eye. In Canada, however,
each subsidiary operating a clinic is taxed separately. Consequently, some
clinics paid taxes, while others were able to use loss carry forwards.
NET LOSS FOR THE YEAR
The Company recorded a net loss of $13.9 million in fiscal 1997, compared to a
loss of $2.9 million in 1996. The loss from operations before amortization was
$2.5 million. Most clinics are still developing their markets and will continue
to increase their volumes in fiscal 1998. Experience has shown that it takes
about 18 months for a clinic to become profitable, and many new TLC clinics have
been operating for 12 months or less at May 31, 1997. Smaller operating losses
are expected in fiscal 1998 as many clinics begin to reach profitable operating
levels.
FINANCIAL CONDITION
CASH FLOW LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1997, the Company used $2.7 million of cash for operating activities
compared to $2.2 million in the prior year. Increases in amortization resulting
from substantial growth in capital assets and higher levels of current
obligations reduced the effect of earnings losses on cash used for operating
activities.
The Company issued common shares for $41.3 million in cash to finance clinic
development and acquisitions in fiscal 1997. In addition, shares with a value of
$31.6 million were issued to acquire 99.9% of the outstanding shares
<PAGE>
of 20/20 Laser Centers. Asset acquisitions in fiscal 1997 have been financed
through $10.4 million in capital lease obligations and $3.9 million in long-term
debt. The Company expects to continue to lease assets and incur other forms of
debt to finance future expansion.
[bar chart showing annual growth in Total Assets]
Capital expenditures were $31.5 million in 1997, compared to $15.9 million in
1996, which reflects the cost of new equipment and premises to support the
higher volume of procedures at the clinics. Goodwill of $35.1 million, which is
being amortized over 15 years, represents the excess purchase price over the
fair value of assets acquired from 20/20.
The Company has improved its liquidity and financial strength by issuing common
shares and financing asset acquisitions through long-term leases and debt. The
Company believes its cash position is sufficient to finance current expansion
plans and absorb operating losses in fiscal 1998.
FOREIGN EXCHANGE
The Company does not use any formal hedging techniques due to the natural hedge
which results from having operations in both Canada and the U.S. Certain
conditions in purchase and sale agreements also minimize exchange risks within
the country.
DIVIDENDS
The Company has never paid dividends. It is the policy of the Board of Directors
to retain earnings to finance growth and development of its business and,
therefore, the Company does not anticipate paying cash dividends on its shares
in the near future.
RISKS AND UNCERTAINTIES
COMPETITION
The Company competes with hospitals, individual ophthalmologists and other laser
clinics. A number of companies have been formed in the U.S. and Canada to
develop networks of excimer laser centers. TLC differentiates itself from its
competitors by providing a wide range of vision care services to patients;
creating networks of affiliated local doctors; and providing a high level of
knowledge and expertise to its affiliated doctors.
REGULATORY CHANGES
<PAGE>
TLC's business, financial condition and results of operations could be adversely
affected by changes in the interpretation and enforcement of existing regulatory
requirements or the adoption of new requirements. Currently, no regulatory
changes that would be significantly detrimental to TLC's business are foreseen.
NEW PRODUCTS AND TECHNOLOGICAL CHANGE
Modern medical technology is characterized by extensive research and rapid
technological change. Newer technologies may be developed with better
performance than the excimer laser equipment currently used by the Company.
Medical companies, academic and research institutions and others could develop
more effective and less expensive therapies, including new medical devices or
surgical procedures, for treatment of conditions targeted by the Company. TLC
intends to upgrade its equipment or adopt new procedures as any new technology
is developed. TLC recently patented a technique which was developed by National
Medical Director, Dr. Jeffery Machat and is currently used in excimer laser
surgery. Dr. Machat has developed many of the techniques and software used to
perform this procedure and continues to work with major manufacturers in the
design and improvement of this emerging technology.
FUTURE OUTLOOK
The Company expects the market for refractive laser procedures to expand
rapidly, and therefore continues to expand its core refractive laser surgery
business with an emphasis on the U.S. TLC believes that the acquisition of
additional secondary care clinics will create an extended patient base for the
Company's core refractive laser surgery business.
The Company also believes that it will be in a strong competitive position to
obtain managed care contracts with HMOs, insurance companies and other third
party payers because of the economies of scale that are being developed through
its network of refractive and secondary care clinics and the wide geographic
area that is covered by its network of more than 6,000 affiliated doctors.
Revenues are expected to increase, as the Company's existing 34 clinics mature,
additional clinics open in fiscal 1998 and market acceptance of excimer laser
procedures continues to grow.
FORWARD-LOOKING INFORMATION
<PAGE>
This annual report may contain forward-looking information within the meaning of
Section 27A of the U.S. Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, and is subject to the safe harbor created by those
sections. TLC's operating results can be impacted by a number of factors, any of
which could cause actual results to vary materially from current results or
TLC's anticipated future results. TLC's operating results can vary substantially
from period to period due to the timing of acquisitions and expansion
opportunities. This and other factors make the estimation of future operating
results uncertain. Risk factors are listed from time to time in TLC's reports
filed with the Toronto Stock Exchange and the U.S. Securities and Exchange
Commission. TLC assumes no obligation to update the information contained in
this annual report.
AUDITOR'S REPORT TO THE SHAREHOLDERS OF TLC THE LASER CENTER INC.
We have audited the consolidated balance sheet of TLC The Laser Center Inc. as
at May 31, 1997 and 1996 and the consolidated statement of income, deficit and
changes in financial position for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 an audit to obtain reasonable
assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at May 31, 1997 and
1996 and the results of its operations and the changes in its financial position
for the years then ended in accordance with generally accepted accounting
principles.
[signature, Horwath Orenstein]
CHARTERED ACCOUNTANTS
TORONTO, CANADA
AUGUST 8, 1997
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)
For the year ended May 31 1997 1996
Net revenues (note 11) $ 29,303 $ 9,363
Share of loss of affiliated companies (212) (241)
29,091 9,122
Expenses
Operating 30,251 8,531
Financial (note 12) 1,335 316
Amortization (note 12) 5,047 875
36,633 9,722
LOSS FROM OPERATIONS (7,542) (600)
Development and start-up expenses (6,253) (2,308)
LOSS BEFORE INCOME TAXES (13,795) (2,908)
Income taxes
Current (note 13) 140 105
Deferred 14 (129)
154 (24)
NET LOSS FOR THE YEAR $ (13,949) $ (2,884)
LOSS PER SHARE (0.68) (0.23)
Weighted average number of
common shares outstanding 20,617,104 12,796,579
See the accompanying notes
Chartered Accountants
<PAGE>
Toronto, Canada
August 8, 1997
CONSOLIDATED STATEMENT OF DEFICIT
(IN THOUSANDS OF CANADIAN DOLLARS)
For the year ended May 31 1997 1996
Balance, beginning of year $ (3,741) $ (857)
Net loss for the year (13,949) (2,884)
Balance, end of year $ (17,690) $ (3,741)
See the accompanying notes
CONSOLIDATED BALANCE SHEET (IN THOUSANDS OF CANADIAN DOLLARS)
May 31 1997 1996
Assets
Current
Cash and short-term deposits (note 2) $ 20,977 $ 4,143
Accounts receivable 4,056 1,715
Income taxes recoverable 46 --
Prepaids and sundry assets 2,316 529
27,395 6,387
Goodwill 34,401 --
Capital assets (note 3) 34,006 16,026
Assets under capital lease (note 4) 10,213 1,046
Investment in affiliated companies (note 5) 675 259
<PAGE>
Projects under development 168 595
Deferred income taxes 55 105
Other 588 88
$ 107,501 $ 24,506
Liabilities
Current
Accounts payable and accrued liabilities $ 9,725 $ 2,523
Current portion of long-term debt 1,810 900
Current portion of obligations
under capital lease 2,377 308
Current portion of term bank loan 40 40
Income taxes payable -- 107
Deferred income taxes 61 97
14,013 3,975
Long-term debt (note 6) 6,627 3,529
Obligations under capital lease (note 7) 9,283 931
Term bank loan (note 8) 23 63
Deferred rent and compensation (note 9) 2,230 88
32,176 8,586
Non-controlling interest 463 --
Shareholders' Equity
Capital stock (note 10) 92,552 19,661
Deficit (17,690) (3,741)
74,862 15,920
<PAGE>
$ 107,501 $ 24,506
See the accompanying notes
Approved on behalf of the Board:
[signatures, Elias Vamvakas & John Riegert]
Elias Vamvakas, Director
John Riegert, Director
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
(IN THOUSANDS OF CANADIAN DOLLARS)
For the year ended May 31 1997 1996
Operating activities
Net loss for the year $ (13,949) $ (2,884)
Items not affecting cash
Amortization 5,047 875
Amortization included in development
and start-up expenses
-- 155
Share of loss of affiliated companies 212 241
Deferred income taxes (net) 14 (129)
Deferred rent and compensation 245 --
(8,431) (1,742)
Changes in non-cash operating items
Accounts receivable (2,341) (1,641)
Prepaid expenses and sundry assets (1,787) (422)
Accounts payable and accrued liabilities 7,202 1,939
Income taxes (net) (153) 63
<PAGE>
Deferred rent and compensation 1,897 88
Non-controlling interest 463 --
Projects under development 427 (528)
Cash provided from (used for)
operating activities (2,723) (2,243)
Financing activities
Long-term debt 4,008 3,474
Term bank loan (40) (40)
Obligations under capital lease 10,421 571
Capital stock issued 72,891 18,201
Cash provided from (used for)
financing activities 87,280 22,206
Investing activities
Capital assets (21,470) (15,328)
Assets under capital lease (10,039) (569)
Investment in affiliated companies (628) (500)
Other (500) (2)
Goodwill (35,086) --
Cash provided from (used for)
investing activities (67,723) (16,399)
Increase in cash and short-term deposits 16,834 3,564
Cash and short-term deposits,
beginning of year 4,143 579
Cash and short-term deposits,
end of year $ 20,977 $ 4,143
See the accompanying notes
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
TABULAR AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS FOR THE YEAR ENDED MAY 31
TLC The Laser Center Inc. (the "Company") develops and manages refractive
clinics in North America that use excimer lasers to correct common refractive
disorders. Each clinic provides excimer laser equipment and related support
services to doctors who perform excimer laser procedures on the premises. The
Company also provides management services to secondary eye care clinics, which
offer treatment for a range of vision disorders.
The Company is traded publicly on the Toronto Stock Exchange under the symbol
LZR and on the NASDAQ National Market under the symbol LZRCF.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements, which have been prepared in accordance with
generally accepted accounting principles in Canada, conform in all material
respects with accounting principles generally accepted in the United States,
except as explained in note 20.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates. These estimates are reviewed
periodically, and, as adjustments become necessary, they are reported in
earnings in the period in which they become known.
BASIS OF PRESENTATION
<PAGE>
These consolidated financial statements include the accounts of the Company and
its subsidiaries. Intercompany transactions and balances have been eliminated.
The investment in affiliated companies is accounted for by the equity method,
whereby the investment is initially recorded at cost and adjusted thereafter to
recognize the Company's share of the affiliated companies' net income or loss
for its fiscal year. Dividends received from the affiliated companies are
accounted for as a reduction of the Company's investment.
For certain subsidiaries that are not wholly-owned, any losses are funded by the
Company and accordingly the full amount of the loss has been recorded. Future
profits will be fully recognized until all funding has been recovered.
CAPITAL ASSETS AND ASSETS UNDER CAPITAL LEASE
Capital assets and assets under capital lease are carried at cost less
accumulated amortization. Amortization is provided for at rates intended to
write off the assets over their productive lives as follows:
Computer equipment and software - straight line over 3 years
Furniture, fixtures and equipment - 20% diminishing balance
Laser equipment - 20% diminishing balance
Leasehold improvements - straight line over the initial term of
the lease
Practice management agreements - straight line over 15 years
Medical equipment - 20% diminishing balance
Vehicle - 30% diminishing balance
For assets acquired or brought into use during the year, amortization is
calculated at half the normal rate.
The practice management agreements represent the costs of obtaining the
exclusive right to manage secondary eye clinics in affiliation with the related
physician group.
GOODWILL
<PAGE>
Goodwill represents the excess of the purchase price over the fair value of the
net assets acquired, and is being amortized on a straight line basis over
fifteen years. On an ongoing basis, management reviews the valuation and
amortization of goodwill, taking into consideration any events and circumstances
which might have impaired the fair value. Goodwill is written down to fair value
when declines in value are considered to be other than temporary based upon
expected cash flows of the related acquired business.
DEVELOPMENT AND START-UP EXPENSES
Development and start-up expenses represent costs incurred by the administration
offices to research and develop potential centers in North America, including
salaries and benefits, professional fees, advertising, promotion and travel, and
costs incurred by centers during the period prior to commencement of commercial
operations.
PROJECTS UNDER DEVELOPMENT
Projects under development represent all initial expenditures on an identified
project prior to the appointment of a center director and the creation of a
subsidiary company. Once these have been established, the costs are charged to
the subsidiary and become part of development and start-up expenses.
REVENUES
The Company includes in income only those operating revenues pertaining to owned
laser clinics and management fees earned from managing refractive and secondary
care clinics. Under the terms of the practice management agreements, the Company
provides management, marketing and administrative services to refractive and
secondary care clinics in return for management fees.
FOREIGN CURRENCY TRANSLATION
For domestic companies and integrated foreign operations, assets and liabilities
are translated into Canadian dollars at exchange rates prevailing at the balance
sheet date for monetary items and at exchange rates prevailing at the
transaction dates for non-monetary items. Income and expenses are translated at
average exchange rates prevailing during the year with the exception of
amortization, which is translated at historical exchange rates. Exchange gains
and losses are included in earnings, except for unrealized
<PAGE>
gains and losses on translation of foreign long-term debt which are deferred and
amortized over the remaining term of the related obligation.
DEFERRED INCOME TAXES
The Company follows the tax allocation method of providing for income taxes.
Under this method, deferred income taxes result from the recording of certain
income or expenses for accounting purposes in periods other than those in which
they are reported for income tax purposes.
2. CASH
1997 1996
Cash and short-term deposits $ 5,977 $ 4,143
Funds held in escrow (note 10) 15,000 --
$ 20,977 $ 4,143
The Company has a banking facility of approximately $1,700,000 available for
posting letters of guarantee, under terms whereby the Company must maintain a
similar minimum amount in its bank accounts. The majority of this facility has
been utilized.
3. CAPITAL ASSETS
Accumulated Net book value
Cost amortization 1997 1996
Computer equipment and software $1,056 $187 $869 $147
Deposit on laser equipment 4,053 -- 4,053 658
Furniture, fixtures and equipment 3,692 809 2,883 1,150
Laser equipment 6,697 1,160 5,537 828
Leasehold improvements 6,949 950 5,999 2,279
Practice management agreements 10,255 745 9,510 8,928
Medical equipment 5,214 660 4,554 2,018
Other 624 23 601 18
<PAGE>
$38,540 $4,534 $34,006 $16,026
4. ASSETS UNDER CAPITAL LEASE
1997 1996
Computer equipment $ 36 $ 17
Furniture, fixtures and equipment 207 90
Laser equipment 10,412 1,278
Medical equipment 907 119
11,562 1,504
Accumulated amortization 1,349 458
$ 10,213 $ 1,046
5. INVESTMENT IN AFFILIATED COMPANIES
1997 1996
Advances $ 1,128 $ 500
Equity in undistributed loss since acquisition (453) (241)
$ 675 $ 259
6. LONG-TERM DEBT
1997 1996
Participating loans
Interest at 7% to 9.75%, due December 1999 to
February 2001, secured by equipment
(see below) $ 6,730 $ 2,387
Term bank loans
Interest at prime plus 0.25% to 0.85%,
due December 2000 to July 2002,
secured by equipment 1,707 1,948
<PAGE>
Other -- 94
8,437 4,429
Less current portion 1,810 900
$ 6,627 $ 3,529
The participating loan agreements provide for additional monthly payments on
principal in excess of minimum amounts based on a percentage of net revenues in
excess of the minimum monthly payments. The majority of long-term debt is
denominated in U.S. currency and converted at the year-end rate of exchange.
6. LONG-TERM DEBT (CONT'D)
Aggregate minimum repayments of principal for each of the next five years are as
follows:
1998 $ 1,810
1999 1,829
2000 2,019
2001 1,985
2002 793
7. OBLIGATIONS UNDER CAPITAL LEASE
The Company has entered into leases on capital assets which have been
capitalized. The leases expire between 1998 and 2003 and include imputed
interest at rates ranging from 9% to 16.5%. The majority of capital leases are
denominated in U.S. currency and converted at the year-end rate of exchange.
Many of the capital leases on lasers provide for additional monthly payments
based on numbers of procedures performed. The capitalized lease obligations
represent the present value of future minimum annual lease payments as follows:
1998 $ 3,657
1999 3,751
<PAGE>
2000 3,490
2001 2,560
2002 1,705
2003 381
15,544
Less interest portion 3,884
11,660
Less current portion 2,377
$ 9,283
8. TERM BANK LOAN
The loan bears interest at bank prime rate plus 1.75% and is secured by a
general security agreement, a $50,000 security deposit, personal guarantees and
a chattel mortgage belonging to a director of the Company. Although this loan is
due on demand, based on regular terms of repayment it is properly classified as
long-term and will be repaid in full in 1999.
9. DEFERRED RENT AND COMPENSATION
Deferred rent represents the benefit of lease inducements. Deferred compensation
represents a plan to compensate certain key managerial executives and was
included as part of the acquisition of 20/20 Laser Centers, Inc. (20/20) (note
18). The plan vests 100% on the earlier of February 15, 1999 or termination of
employment, as defined. At May 31, 1997, $840,000 is accrued on potential
deferred compensation of $1,139,000.
10. CAPITAL STOCK
1997 1996
Common - authorized, unlimited shares
- - issued: 25,189,707
(1996 - 16,589,053) shares $ 78,472 $ 19,661
<PAGE>
- - unissued special warrants
(see below) 14,080 --
$ 92,552 $ 19,661
During the year, the following additional shares were issued:
- - 157,973 shares at US$3.30 per share as compensation warrants to agents of the
initial public offering (IPO).
- - 3,500,000 shares at $7.25 per share in connection with a public offering.
- - 525,000 shares at $7.25 per share as over-allotment pursuant to the
underwriting agreement on the above public offering.
- - 20,000 shares at $1.50 per share as part of Option Agreement with an employee
of the Company.
- - 4,364,443 shares at $7.25 per share issued to acquire 20/20.
- - 23,238 shares at $4.11 (US$3.00) per share issued as part of Stock Option
Plan.
- - 10,000 shares at $8.20 per share in exchange for capital assets.
- - The Company reserved 1,818,182 shares pursuant to a Special Warrant Indenture,
dated March 27, 1997. The Special Warrants were issued at a price of $8.25 each,
with the aggregate consideration of $15,000,002, held in escrow pending final
approval by the securities commission (note 2). The Special Warrants were
converted to common shares and the escrow funds released in June, 1997. Issue
costs paid to date of $920,000 have been adjusted to the carrying value of the
warrants.
The Company has the following options outstanding:
- - an agreement with a director of TLC The Laser Center (Delaware) Inc. to
purchase 1,000,000 common shares at a price of $2.50 per share, expiring June
30, 2000. If this option is exercised, the Company has an option to purchase 50%
of the director's business for US$1,000,000.
- - options for various employees of the Company to purchase a total of 101,469
common shares at US$3.00 per share, expiring February 12, 2001.
<PAGE>
- - an option for the President and Chief Executive Officer to purchase 608,273
common shares at US$3.00 per share, expiring January 1, 2001 to January 1, 2004.
- - 137,981 non-assignable warrants to agents of the IPO to purchase shares at
US$3.30.
- - options for various employees of the Company to purchase a total of 303,375
common shares at $7.25 per share, expiring December 1, 2001.
- - options for various officers of 20/20 with outstanding options to acquire
20/20 shares. The Company has agreed that, immediately upon exercise of the
20/20 options, the Company will issue common shares in exchange for the 20/20
shares acquired on exercise, on the basis of 0.37517 common shares for every
20/20 share as follows:
- - 167,747 common shares at US$4.44 per share
- - 6,296 common shares at US$5.33 per share
- - 7,503 common shares at US$8.00 per share, all expiring on March 1, 1999.
- - 20/20 options were granted to third parties for services rendered to 20/20 at
US$0.01 per share expiring March 1, 1999. The Company will issue common shares
in exchange for the 20/20 shares acquired on exercise, on the basis of 0.37517
common shares for every 20/20 share for a total of 202,592 common shares.
Subsequent to the year end, an additional 421,804 common shares were issued on
the acquisition of Vision Source Inc. The company was acquired based on a
purchase price of $4,080,000. The acquisition price is subject to an earn out
formula to be calculated December 31, 1999. Until that date, the shares are held
in escrow whereby they will be released, after one year, in increments not to
exceed 50% of the total original stock.
11. NET REVENUES
Net revenues include revenues pertaining to owned and managed laser clinics and
revenues from managed secondary care clinics which are recorded at established
rates and reduced by contractual adjustments, allowances and amounts retained by
physician groups. Contractual adjustments arise due to the terms of certain
reimbursements and managed care contracts. Such adjustments represent the
difference between fees at established rates and
<PAGE>
estimated recoverable amounts and are recognized in the period the services are
rendered. Any differences between estimated contractual adjustments and actual
final settlements under reimbursement contracts are reported as contractual
adjustments in the year final settlements are made.
The following represents amounts included in the determination of net revenue:
1997 1996
Gross revenues of all managed clinics
Refractive clinics revenue $ 27,024 $ 7,976
Secondary care clinics
physician group revenue 20,827 8,030
Gross revenues 47,851 16,006
Less:
Provision for contractual
adjustments and allowances 11,222 3,282
Amounts retained by
physician group 7,326 3,361
18,548 6,643
Net revenues $ 29,303 $ 9,363
12. FINANCIAL AND AMORTIZATION EXPENSES
1997 1996
Financial
Interest on long-term debt $ 955 $ 108
Interest on capital leases 387 89
Interest and bank charges - net (7) 119
$ 1,335 $ 316
<PAGE>
Amortization
Capital assets $ 3,490 $ 680
Assets under capital lease 872 195
Goodwill 685 --
$ 5,047 $ 875
13. INCOME TAX LOSSES
The Company and its subsidiaries have non-capital losses carried forward for
income tax purposes of approximately $32,000,000, including current year's
losses of approximately $9,500,000, which are available to reduce taxable income
of future years.
The Canadian losses can only be utilized by the source Company whereas the
United States losses are utilized on a consolidated basis. The Canadian losses
of $5,600,000 expire between 2001 and 2004. The United States losses of
$26,400,000 expire between 2008 and 2012. Included in the United States losses
is $17,000,000 of losses from the acquisition of 20/20, of which the
availability and timing of utilization may be restricted. The current tax
provision represents an income tax liability of approximately $508,000 less
Canadian loss carry forwards utilized and United States loss consolidation
aggregating $368,000. The differences between losses for accounting and losses
for income taxes are due primarily to the following:
Loss for accounting purposes before
income taxes $ 13,795
Add (deduct)
- - non-deductible start-up costs
net of amortization (3,000)
- - non-deductible goodwill (1,300)
- - cash vs. accrual tax deductions (1,600)
- - amortization differences - net 1,000
<PAGE>
- - other 605
Loss for income tax purposes $ 9,500
14. CONTINGENT LIABILITY
The Company has been advised of potential liability for patent violations which
may be associated with its laser equipment. No litigation has been commenced
and, accordingly, no reserves have been provided in the accounts.
15. COMMITMENTS
Future operating lease payments
The Company has entered into operating leases for rental of office space and
equipment which require future minimum lease payments aggregating $23,000,000.
Future minimum lease payments over the next five years are as follows:
1998 $ 4,000
1999 3,800
2000 3,600
2001 3,200
2002 2,700
The Company has the option to acquire certain leased equipment in exchange for
common shares if a public offering is completed in the United States. Subsequent
to the year end, the Company purchased several of the leases on equipment for
total consideration of $1,742,000.
16. SEGMENTED INFORMATION
<TABLE>
<CAPTION>
Canada U.S. Eliminations 1997 Total 1996 Total
<S> <C> <C> <C> <C> <C>
Revenues from operations
Refractive clinics $11,286 $10,880 $(245) $21,921 $7,976
Management fees 3,966 8,438 (5,022) 7,382 1,387
<PAGE>
$15,252 $19,318 $(5,267) $29,303 $9,363
Net loss for the year $(1,684) $(12,265) $-- $(13,949) $(2,884)
Total assets $65,459 $82,718 $(40,676) $107,5 $24,506
Total amortization $699 $4,348 $-- $5,047 $1,030
Capital expenditures $1,292 $30,217 $-- $31,509 $15,897
</TABLE>
The Company is an integrated provider of refractive surgery and other eye care
related services which is its only line of business and dominant industry
segment.
17. FINANCIAL INSTRUMENTS
FAIR VALUE
The carrying amount of cash and short-term deposits, accounts receivable, income
taxes recoverable, and accounts payable and accrued liabilities approximates
their fair value because of the short-term maturities of these items.
The fair value of the Company's financial debts has been calculated using the
future cash flows of the actual outstanding debt instruments discounted at
current market rates available to the Company for the same or similar
instruments as follows:
Carrying Fair
amount value
Long-term debt $ 8,437 $ 9,139
Obligations under capital lease 11,660 11,999
Term bank loan 63 63
RISK MANAGEMENT
The Company is exposed to credit risk on accounts receivable from its customers.
In order to reduce its credit risk, the Company has adopted credit policies
which include the analysis of the financial position of its customers and the
regular review of credit limits. The Company does not have a significant
exposure to any individual customer, except for amounts due from
<PAGE>
those secondary eye clinics which it manages, for which collateral security
exists.
Cash accounts at the Canadian banks are insured by CDIC for up to $60,000. In
the United States, the FDIC insures cash balances up to $100,000. At May 31,
1997, bank deposits exceeded insured limits by $19,000,000.
The Company operates internationally and is therefore exposed to market risks
related to foreign currency fluctuations. As well, there is exposure to interest
rate fluctuation on debt carrying a floating rate of interest.
18. ACQUISITION OF 20/20
On February 10, 1997, the Company acquired 99.9% of the common shares of 20/20.
The acquisition was financed through the issuance of common shares (see note
10). The results of operations of 20/20 have been consolidated from the date of
acquisition.
The total cost of the acquisition, using the purchase method of accounting, was
allocated to the net assets acquired on the basis of their book values and then
adjusted for fair values as follows:
Book values
Current assets $ 2,423
Capital assets 2,847
Assets under capital lease 5,180
Other assets 391
Current liabilities (7,931)
Obligations under capital lease (3,469)
Other liabilities (880)
Non-controlling interest (320)
(1,759)
Fair value adjustments
<PAGE>
Assets under capital lease (1,669)
Goodwill 35,070
$ 31,642
19. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform with the current
year's presentation.
20. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (GAAP)
These consolidated financial statements are prepared in accordance with
accounting principles generally accepted in Canada. The most significant
difference between Canadian and United States practices, insofar as they affect
the Company's consolidated financial statements, relates to the accounting for
compensation for services in the form of capital stock.
The following table reconciles results as reported under Canadian practices with
those that would have been reported under United States practices:
1997 1996
Net loss for the period -
Cdn GAAP $ (13,950) $ (2,884)
Differences in accounting for
stock-based compensation
(APB 25) -- (1,967)
Net loss for the period -
US GAAP $ (13,950) $ (4,851)
Loss per share - US GAAP $ (0.68) $ (0.38)
<PAGE>
The above adjustment affects the balance sheet through a reclassification of the
stock-based compensation resulting in an increase in capital stock and an
increase in deficit.
DIRECTORY OF LOCATIONS
LASER CENTERS IN CANADA
BRITISH COLUMBIA
VANCOUVER
TLC Northwest-Vancouver
(604) 903-4000
Dr. Michael Melenchuk
NEW BRUNSWICK
MONCTON
TLC Moncton
(506) 863-1999
Dr. Josee Visockis
Dr. Serge Richard
ONTARIO
LONDON
TLC London
(519) 438-2020
Marion Baird
TORONTO
TLC Toronto
(416) 733-2020
Horace Chiu
WINDSOR
TLC Windsor
(519) 250-2020
Denis Hamelin
<PAGE>
LASER CENTERS IN THE UNITED STATES
CALIFORNIA
BREA
TLC Inland Empire
(909) 931-0044
Dr. Caroline Kauffman
COLORADO
DENVER
TLC Rocky Mountain
(303) 329-9141
Dr. Jimmy Jackson
FLORIDA
BOCA RATON
TLC Boca Raton
(561) 998-2020
Dr. Sal DeCantio Jr.
MIAMI
TLC MIAMI
(305) 949-2999
Dr. Jon Jacobs
ILLINOIS
CHICAGO
TLC Chicago
(312) 640-3400
Dr. Jim Ferguson
WESTCHESTER
TLC MEI/Westchester
(708) 562-4681
Dr. Jim Ferguson
INDIANA
<PAGE>
INDIANAPOLIS
TLC Indiana
(317) 845-2020
Dr. Brian Duvall
MARYLAND
ROCKVILLE
TLC Rockville
(301) 881-2020
Kelly Citrin
MASSACHUSETTS
BOSTON
TLC Massachusetts
(617) 544-0223
Dr. Kristen Brown
MONTANA
BILLINGS
TLC Big Sky
(406) 651-0202
Dr. Harvey Bonner
NEW JERSEY
MOUNT LAUREL
TLC Mount Laurel
(609) 778-8550
F. Lawrence Vernamonti
FAIR LAWN
TLC Fair Lawn
(201) 796-4466
Tina Robinson
NEW YORK
NEW YORK
TLC Manhattan
<PAGE>
(212) 588-0200
Bindu Thomas
GARDEN CITY
TLC Garden City
(516) 742-2020
Laura DiLorenzo
WHITE PLAINS
TLC White Plains
(914) 997-2222
Dayna Heit
NORTH CAROLINA
CHARLOTTE
TLC Charlotte
(704) 344-0800
Dr. Bill Rafferty
RALEIGH
TLC Raleigh/Durham
(919) 781-9400
Gloria Johnson
WINSTON-SALEM
TLC Winston-Salem
(910) 765-5600
Dr. Bill Rafferty
OHIO
ADA
TLC Lima
(419) 634-8155
Dr. Duane Wires
OKLAHOMA
Oklahoma City
TLC Oklahoma City
(405) 842-6060
Dr. Waymon Harrison
<PAGE>
TULSA
TLC TULSA
(918) 491-6009
Dr. Jeff Miller
PENNSYLVANIA
PLYMOUTH MEETING
TLC Plymouth Meeting
(610) 940-3937
David Gubman
SOUTH CAROLINA
GREENVILLE
TLC Piedmont
(864) 297-6299
Dr. Cynthia Wike
TENNESSEE
JOHNSON CITY
TLC Tri-Cities
(423) 282-0002
Dr. Richard Phillips
VIRGINIA
FAIRFAX
TLC Fairfax
(703) 560-2020
Janet Ward
WASHINGTON
LYNNWOOD
TLC Northwest Seattle
(425) 771-1200
Dr. Beth Kneib
WISCONSIN
<PAGE>
MADISON
TLC Wisconsin
(608) 249-6000
Dr. Charlotte Burns
SECONDARY EYE CARE FACILITIES IN THE UNITED STATES
ILLINOIS
CHICAGO*
TLC Chicago
(312) 640-3400
Dr. Jim Ferguson
PALOS HEIGHTS
TLC MEI/Palos Heights
(708) 361-7788
Dr. Jim Ferguson
WESTCHESTER*
TLC MEI/Westchester
(708) 562-4681
Dr. Jim Ferguson
SOUTH CAROLINA
GREENVILLE*
TLC Piedmont
(864) 297-6299
Dr. Cynthia Wike
WASHINGTON
SEATTLE
TLC Northwest Eye Inc.
(206) 528-6000
Rodger McCollum
TLC NETWORKS IN CANADA
<PAGE>
ONTARIO
KITCHENER
(University of Waterloo)
TLC NETWORKS IN THE UNITED STATES
CONNECTICUT
HARTFORD
Dr. Jerry Hardison, (860) 236-5831
INDIANA
SEYMOUR
Dr. Mike Frische, (812) 523-8756
KENTUCKY
BENTON
Dr. Joe Ellis, (502) 527-7421
BOWLING GREEN
Dr. John Breiwa, (502) 842-0383
COVINGTON
Dr. Richard Schuck, (606) 781-2000
NEVADA
LAS VEGAS
Dr. Tom Kroll, (702) 737-0321
NEW MEXICO
ALBUQUERQUE
Dr. Craig Clatanoff, (505) 896-4554
TENNESSEE
CHATTANOOGA
Dr. Daryl Mann, (423) 855-1666
KNOXVILLE
MEMPHIS
Dr. John Sharpe, (901) 722-3263
<PAGE>
NASHVILLE
Phil Christopherson, (615) 361-0339
UNDER DEVELOPMENT
CALIFORNIA
BEVERLY HILLS
SAN DIEGO
OHIO
CLEVELAND
COLUMBUS
TOLEDO
GEORGIA
ATLANTA
INDIANA
FORT WAYNE
IOWA
SIOUX CITY
MICHIGAN
DETROIT
NEW YORK
BROOKLYN
SOUTH CAROLINA
COLUMBIA/CHARLESTON
* Denotes a clinic that is also listed as a laser center
DIRECTORS
Elias Vamvakas,
BSc (Honours), CHFC
Chairman
<PAGE>
Jeffery J. Machat, MD, FRCSC, DABO
Howard J. Gourwitz, JD, LLM
David C. Eldridge, OD, FAAO
W. David Sullins Jr., RADM, OD, DOS, FAAO
John F. Riegert, CMC, CMA, CDP
Ronald J. Kelly, B.Comm (Honours), LLD, MBA
James R. Connacher
Barry J. Barresi, OD, PhD
OFFICERS AND EXECUTIVES
Elias Vamvakas,
President and Chief Executive Officer
Dr. Jeffery Machat,
National Medical Director
Frances Brotherhood,
Executive Vice President, International Development and Networks
Dr. David Eldridge,
Executive Vice President, Clinical Affairs
Gary Jonas,
Executive Vice President, Operations
Peter J. Kastelic,
Chief Financial Officer
Ronald Kelly,
Legal Counsel and Vice President, Acquisitions
John Riegert,
Secretary
A.F. (Anthony) Rzepka,
Director of Finance and Assistant Treasurer
<PAGE>
Madeline Walker,
Chief Operating Officer
ANNUAL MEETING
Date: October 30, 1997
Time: 10:00 a.m.
Location: Design Centre, Design Exchange, 234 Bay Street, Toronto, Ontario
CORPORATE OFFICE
TLC The Laser Center Inc.
5600 Explorer Drive, Suite 301, Mississauga, Ontario L4W 4Y2
Tel: (905) 602-2020
Fax: (905) 602-2025
INVESTOR RELATIONS CONTACT
Stephen Kilmer
Tel: 1-800-TLC-1033 or
Tel: (905) 602-2020
Fax: (905) 602-2025
Website: http://www.lzr.com
E-mail: investor.relations @ lzr.com
TRANSFER AGENT
The CIBC Mellon Trust Company
Tel: 1-800-387-0825
LEGAL COUNSEL
CANADA
Tory Tory Deslauriers & Binnington
Toronto, Ontario
LEGAL COUNSEL
U.S.
<PAGE>
Arent Fox Kintner
Plotkin & Kahn
Washington, D.C.
AUDITORS
CANADA
Horwath Orenstein
A member of Horwath International Toronto, Ontario
U.S.
Crowe Chizek and Company, LLP
Merrillville, Indiana
STOCK EXCHANGE LISTING
Shares of the Corporation are listed on the Toronto Stock Exchange and NASDAQ
National Market
TRADING SYMBOLS
TSE - LZR
NASDAQ - LZRCF
[graph showing Share Price Trading History of LZR on the TSE]
Inside back cover
WHAT IS LASER VISION CORRECTION?
It's a simple but sophisticated five to ten minute out-patient procedure that
uses an excimer laser to reshape the curvature of the cornea (the surface layer
of the eye). The procedure is performed for the correction of nearsightedness,
farsightedness and astigmatism. It allows many people who rely on corrective
lenses to reduce their dependence on glasses or contact lenses.
[illustration depicting PRK procedure]
Guided by a sophisticated computer, the cool laser beam gently reshapes the
cornea to match a patient's prescription, so that light can focus properly on
the retina at the back of the eye. The laser is so precise that each pulse can
remove 39 millionths of an inch of tissue in 12 billionths of a second. The
procedure itself is painless, and patients are typically back at work within
three days.
<PAGE>
The two primary laser vision correction methods are PRK (Photorefractive
Keratectomy) and LASIK (Laser In-Situ Keratomileusis). PRK is the procedure of
choice for mild and moderate prescriptions while LASIK allows for the most
effective treatment of more severe and extreme prescriptions.
[picture] showing LASIK procedure
More than one million procedures have been performed around the world in the
past ten years. TLC's typical nearsighted patients achieve vision of at least
20/40 after one or more procedures. That's good enough to get a driver's licence
in most states and provinces.
captions:
During the PRK procedure the cool laser beam gently reshapes the cornea to match
the patient's prescription.
LASIK allows for the most effective treatment of more severe prescriptions.
GLOSSARY OF TERMS
ASTIGMATISM is an irregularity in the curvature of the cornea causing a blurring
of vision because of the inability of the eye to focus an image to a single
point.
CORNEA is the outermost surface of the eye and serves as a "window" through
which light can pass.
DOCTOR refers to an optometrist or an ophthalmologist.
EXCIMER LASER is a particular type of computer-controlled laser whose active
medium is a high pressure mixture of noble gases and halogens. The output of
this laser typically has high peak powers (between 100 and 250 millejoules per
cm2) and short pulses (10-100 nanoseconds) with a wavelength in the ultraviolet
region of the spectrum (193 nm-308 nm).
LASIK (LASER-IN-SITU KERATOMILEUSIS), combining a manual procedure and an
excimer laser, is generally for the correction of severe and extreme
nearsightedness and astigmatism.
MANAGED CARE refers to health care arrangements typically involving a third
party, such as a Health Maintenance Organization (HMO), insurance company or
employer group, which is often the payer, assuming responsibility for ensuring
that health care is provided in a high quality, cost-effective manner.
<PAGE>
PRK (PHOTOREFRACTIVE KERATECTOMY), is a technique involving the use of
ultraviolet light emitted by excimer lasers to treat refractive disorders which
affect vision. This technique can be considered to be "optical reshaping" of the
cornea in which submicron layers of tissue are removed with each laser pulse.
REFRACTION is the passage of light through a medium, such as the cornea, which
bends its rays.
REFRACTIVE CLINIC is a clinic where refractive procedures are performed. These
procedures may include excimer laser procedures and manual surgical procedures.
SECONDARY CARE CLINIC is a clinic which receives referrals to perform eye
surgery, and provides advanced levels of care. A secondary care clinic does not,
as a general rule, dispense eyewear or contact lenses, perform refractions, or
provide eye examinations or general diagnostic services.
[picture] showing the human eye and its parts.
Back cover
ONLY ONE COMPANY CAN IMPROVE YOUR VISION
IN MINUTES AND STANDS BEHIND ITS RESULTS FOR LIFE.
INTRODUCING THE TLC LIFETIME COMMITMENT!
You may love the idea of life without wearing glasses or contacts for distance
vision. And you may have heard that laser vision correction can make that
possible. But how can you be sure your results will be excellent? And how long
will those results last?
Now you don't have to wonder. Or worry. Or wish. Because now there's the TLC
Lifetime Commitment. Our commitment means we'll help you achieve better distance
vision today. And help you maintain it for life.
TLC The Laser Center is the only company to make this extraordinary commitment.
We stand behind our results forever because we have confidence in the skills of
our highly trained surgeons, who collectively have performed more than 30,000
procedures.
All you have to do is see your TLC eye doctor for your regular annual eye exam
after you have had the procedure*. To see if you're a laser vision correction
candidate, and if you are eligible for the TLC Lifetime Commitment, call us
today at 1-888-CALL-TLC.
TLC--WE'RE YOURS FOR LIFE.
[logo]
TLC THE LASER CENTER INC.
WWW.LZR.COM
* Some conditions apply.
<PAGE>
[TLC CORPORATE LOGO OMITTED]
TLC THE LASER CENTER INC.
MANAGEMENT INFORMATION CIRCULAR
GENERAL PROXY INFORMATION
SOLICITATION OF PROXIES
The information contained in this management information circular
("Circular") is furnished in connection with the solicitation of proxies to be
used at the annual and special meeting of shareholders (the "Meeting") of TLC
The Laser Center Inc. (the "Corporation" or "TLC") to be held on October 30,
1997 at 10:00 a.m. (Toronto time) at the Design Exchange, 234 Bay Street,
Toronto, Ontario, and at all adjournments thereof, for the purposes set forth in
the accompanying notice of meeting. It is expected that the solicitation will
be made primarily by mail but proxies may also be solicited personally by
employees of the Corporation. THE SOLICITATION OF PROXIES BY THIS CIRCULAR IS
BEING MADE BY OR ON BEHALF OF THE MANAGEMENT OF THE CORPORATION and the total
cost of the solicitation will be borne by the Corporation. The information
contained herein is given as at September 2, 1997, except where otherwise noted.
APPOINTMENT OF PROXIES
The persons named in the enclosed form of proxy are representatives of
management of the Corporation and are directors or officers of the Corporation.
A shareholder who wishes to appoint some other person (who need not be a
shareholder of the Corporation) to represent such shareholder at the Meeting may
do so by inserting such person's name in the blank space provided in the form of
proxy. To be valid, proxies must be deposited with CIBC Mellon Trust Company,
Proxy Dept., 393 University Avenue, 5th Floor, Toronto, Ontario M5G 2M7 not
later than the close of business on October 28, 1997 or, if the Meeting is
adjourned, 48 hours (excluding Saturdays and holidays) before any adjourned
meeting.
NON-REGISTERED SHAREHOLDERS
Only registered shareholders or the persons they appoint as their
proxies are permitted to vote at the Meeting. However, in many cases, shares of
the Corporation beneficially owned by a person (a "Non-Registered Holder") are
registered either: (a) in the name of an intermediary (an "Intermediary") that
the Non-Registered Holder deals with in respect of the shares (Intermediaries
include, among others, banks, trust companies, securities dealers or brokers and
trustees or administrators of self-administered RRSPs, RRIFs, RESPs and similar
plans); or (b) in the name of a clearing agency (such as The Canadian Depository
for Securities Limited (or CDS)) of which the Intermediary is a participant. In
accordance with the requirements of National Policy Statement No. 41 of the
Canadian Securities Administrators, the
<PAGE>
-2-
Corporation has distributed copies of the Notice, this Circular and the form of
proxy (collectively, the "meeting materials") to the clearing agencies and
Intermediaries for onward distribution to Non-Registered Holders of common
shares.
Intermediaries are required to forward the meeting materials to
Non-Registered Holders unless a Non-Registered Holder has waived the right to
receive them. Very often, Intermediaries will use service companies to forward
the meeting materials to Non-Registered Holders. Generally, Non-Registered
Holders who have not waived the right to receive meeting materials will EITHER:
(a) be given a form of proxy which has already been signed by the
Intermediary (typically by a facsimile, stamped signature), which is
restricted as to the number of shares beneficially owned by the
Non-Registered Holder but which is otherwise not completed. Because
the Intermediary has already signed the form of proxy, this form of
proxy is NOT required to be signed by the Non-Registered Holder when
submitting the proxy. In this case, the Non-Registered Holder who
wishes to submit a proxy should otherwise properly complete the form
of proxy and deliver it to the secretary of the Corporation, as
applicable, as set out above under "General Proxy Information -
Appointment of Proxies"; or
(b) more typically, be given a form of proxy which is NOT signed by the
Intermediary, and which, when properly completed and signed by the
Non-Registered Holder and returned to the Intermediary or its service
company, will constitute voting instructions (often called a "proxy
authorization form") which the Intermediary must follow. Typically,
the Non-Registered Holder will also be given a page of instructions
which contains a removable label containing a bar-code and other
information. In order for the form of proxy to validly constitute a
proxy authorization form, the Non-Registered Holder must remove the
label from the instructions and affix it to the form of proxy,
properly complete and sign the form of proxy and submit it to the
Intermediary or its service company in accordance with the
instructions of the Intermediary or its service company.
In either case, the purpose of this procedure is to permit
Non-Registered Holders to direct the voting of the shares which they
beneficially own. Should a Non-Registered Holder who receives either form of
proxy wish to vote at the Meeting IN PERSON, the Non-Registered Holder should
strike out the persons named in the proxy and insert the Non-Registered Holder's
name in the blank space provided. IN EITHER CASE, NON-REGISTERED HOLDERS SHOULD
CAREFULLY FOLLOW THE INSTRUCTIONS OF THEIR INTERMEDIARY, INCLUDING THOSE
REGARDING WHEN AND WHERE THE PROXY OR PROXY AUTHORIZATION FORM IS TO BE
DELIVERED.
REVOCATION OF PROXIES
In addition to revocation in any other manner provided by law, a
shareholder who has given a proxy may revoke the proxy (a) by completing and
signing a proxy bearing a later date and depositing it as aforesaid; or (b) by
depositing an instrument in writing executed by the shareholder or the
shareholder's attorney authorized in writing (i) at the registered office of the
Corporation at any time up to and including the last business day preceding the
day of the Meeting, or any adjournment thereof, at which the proxy is to be
used, or (ii) with the chairman of the Meeting on the day of the Meeting or any
adjournment thereof.
<PAGE>
-3-
A Non-Registered Holder may revoke a proxy authorization form (voting
instructions) or a waiver of the right to receive meeting materials and to vote
given to an Intermediary at any time by written notice to the Intermediary,
except that an Intermediary is not required to act on a revocation of a proxy
authorization form (voting instructions) or of a waiver of the right to receive
materials and to vote that is not received by the Intermediary at least seven
days prior to the Meeting.
VOTING OF PROXIES
The management representatives designated in the enclosed form of
proxy will vote or withhold from voting the shares in respect of which they are
appointed by proxy on any ballot that may be called for in accordance with the
instructions of the shareholder as indicated on the proxy and, if the
shareholder specifies a choice with respect to any matter to be acted upon, the
shares will be voted accordingly. IN THE ABSENCE OF SUCH DIRECTION, SUCH SHARES
WILL BE VOTED BY THE MANAGEMENT REPRESENTATIVES AS INDICATED UNDER THE HEADINGS
IN THIS CIRCULAR.
The enclosed form of proxy confers discretionary authority upon the
management representatives designated therein with respect to amendments to or
variations of matters identified in the notice of meeting and with respect to
other matters which may properly come before the Meeting. At the date of this
Circular, the management of the Corporation knows of no such amendments,
variations or other matters.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
On September 2, 1997, the Corporation had outstanding 27,438,448
common shares (the "Common Shares"). Each registered holder of Common Shares of
record at the close of business on September 12, 1997, the record date
established for notice of the Meeting, will be entitled to one vote for each
Common Share held by such shareholder on all matters proposed to come before the
Meeting, except to the extent that such shareholder has transferred any Common
Shares after the record date and the transferee of such shares establishes
ownership thereof and demands, not later than 10 days before the Meeting, to be
included in the list of shareholders entitled to vote at the Meeting, in which
case the transferee will be entitled to vote such shares.
The following table shows, as at September 2, 1997, each person
(collectively, the "Principal Shareholders") who, to the knowledge of the
directors or officers of the Corporation, beneficially owns, directly or
indirectly, or exercises control or direction over Common Shares carrying more
than 10% of the voting rights attached to all outstanding Common Shares of the
Corporation:
NAME AND MUNICIPALITY NUMBER OF
OF RESIDENCE COMMON SHARES PERCENTAGE OF CLASS
- ------------------------ ------------- -------------------
Elias Vamvakas(1)(3) . . . . . 3,394,727 12.4%
Richmond Hill, Ontario
Dr. Jeffery J. Machat(2)(3) . . 4,522,293 16.5%
Richmond Hill, Ontario
- ------------------------------
(1) Shares owned by Mr. Vamvakas are held directly as to 1,144,727 and
indirectly as to 2,250,000 by 1111881 Ontario Limited, a corporation
wholly-owned by the Vamvakas Family Trust.
<PAGE>
-4-
(2) Shares owned by Dr. Machat are held directly as to 22,293 and indirectly as
to 4,500,000 by 1123562 Ontario Limited, a corporation wholly-owned by the
Machat Family Trust.
(3) Dr. Steven Slade holds options to acquire 250,000 of the Common Shares
currently owned by the Principal Shareholders and others, of which 45%
belong to Dr. Machat and 30% to Mr. Vamvakas. The options may be exercised
at a price of US$0.10 per share subject to compliance with applicable law.
No additional Common Shares will be issued by the Corporation to satisfy
the options, which have been granted by the Principal Shareholders and
others to induce Dr. Slade to participate in the Corporation and to serve
as Co-National Medical Director of the Corporation.
ELECTION OF DIRECTORS
The number of directors to be elected at the Meeting is seven. This
number represents a reduction in the size of the Board of Directors from its
current number of nine directors. The articles of the Corporation authorize the
Board of Directors to be comprised of a number of directors between one and ten
and the directors have been authorized by the shareholders to determine the
number from time to time between that minimum and maximum. The Board of
Directors resolved on September 25, 1997 that the number of directors to be
elected at the Meeting will be seven, having regard to the composition of the
Board and the "Guidelines for Improved Corporate Governance" contained in the
Final Report of The Toronto Stock Exchange Committee on Corporate Governance in
Canada.
It is the intention of the management representatives designated in
the enclosed form of proxy to vote the Common Shares in respect of which they
are appointed for the election as directors of the proposed nominees whose names
are set out below, unless the shareholder who has given such proxy has directed
that the Common Shares be withheld from voting. All such nominees have been
directors since the dates indicated below. Management does not contemplate that
any of the proposed nominees will be unable to serve as a director but, if that
should occur for any reason prior to the Meeting, the management representatives
designated in the enclosed form of proxy reserve the right to vote for another
nominee at their discretion. Each director elected will hold office until the
next annual meeting or until his successor is elected or appointed.
INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS
The following tables sets out the name and municipality of residence
of each person proposed by management of the Corporation to be nominated for
election as a director, the position with the Corporation which each nominee
presently holds, the principal occupation of each nominee, the date on which
each nominee was first elected or appointed director and the number of Common
Shares that are beneficially owned, directly or indirectly, or over which
control or direction is exercised by each nominee.
<PAGE>
-5-
<TABLE>
<CAPTION>
NAME AND MUNICIPALITY OF POSITION WITH CORPORATION PRINCIPAL OCCUPATION DIRECTOR SINCE COMMON SHARES
RESIDENCE ------------------------- -------------------- -------------- OWNED
- --------- -----
<S> <C> <C> <C> <C>
Elias Vamvakas . . . . . . . . . . President, Chief Executive Officer of the May 1993 (3)
Richmond Hill, Ontario Officer and Chairman of the Corporation
Board of Directors(1)(2)
Dr. Jeffery J. Machat . . . . . . . Director, Co-National Medical Ophthalmologist May 1993 (5)
Richmond Hill, Ontario Director(1)(4)
James R. Connacher . . . . . . . . Director(2)(4) Vice-Chairman, Gordon January 1996 130,000
Toronto, Ontario Capital Corporation
(investment bank)
John F. Riegert . . . . . . . . . . Secretary and Director(1) Officer of the June 1995 9,793
North York, Ontario Corporation
Howard J. Gourwitz . . . . . . . . Director(4)(6)(7) Attorney and Counsellor- June 1995 (8)
Bloomfield Hills, Michigan at-Law, shareholder of
Gourwitz and Barr, P.C.
Dr. William David Sullins, Jr. . . Director and Vice-Chairman of Optometrist June 1995 37,000
Athens, Tennessee TLC's National Advisory
Council(2)(6)
Warren S. Rustand . . . . . . . . . Nominee Director Chairman, Rural/Metro Nominee 47,271
Tucson, Arizona Corporation (merchant
bank and management
consultant)
</TABLE>
- ---------------------------------------
(1) Mr. Vamvakas, Dr. Machat and Mr. Riegert are members of the Corporation's
Executive Committee.
(2) Mr. Vamvakas, Dr. Sullins and Mr. Connacher are members of the
Corporation's Nominating Committee.
(3) Mr. Vamvakas' shareholdings are described under "Voting Shares and
Principal Holders Thereof". Family members of Mr. Vamvakas own 3,000
Common Shares.
(4) Dr. Machat, Mr. Gourwitz and Mr. Connacher are members of the Corporation's
Compensation Committee.
(5) Dr. Machat's shareholdings are described under "Voting Shares and Principal
Holders Thereof".
(6) Mr. Gourwitz and Dr. Sullins, Jr. are members of the Corporation's Audit
Committee.
(7) Mr. Gourwitz is a member of the Corporation's Corporate Governance
Committee.
(8) LNG Enterprises, Inc., an associate of Mr. Gourwitz, owns 2,400,000 Common
Shares.
Mr. Rustand has held his present principal occupation since 1997. For
more than five years prior to 1997, Mr. Rustand was Chairman and Chief Executive
Officer of The Cambridge Company Ltd., a merchant banking and management
consulting company. From 1994 to 1997, Mr. Rustand was also the Chairman of
20/20 Laser Centers, Inc., which was acquired by the Corporation in February
1997 and manages refractive clinics in the Northeast US.
<PAGE>
-6-
CHANGE OF AUDITORS
Horwath Orenstein are currently the auditors of the Corporation. The
Corporation wishes to change auditors from the present auditors Horwath
Orenstein, to Ernst & Young, Toronto, Ontario.
It is the intention of the management representatives designated in
the enclosed form of proxy to vote the shares in respect of which they are
appointed proxy in favour of a resolution appointing Ernst & Young, Toronto,
Ontario, as auditors of the Corporation, to hold office until the next annual
meeting of shareholders, and authorizing the directors to fix the remuneration
to be paid to the auditors, unless the shareholder who has given such proxy has
directed that the shares be withheld from voting.
Pursuant to National Policy Statement No. 31 of the Canadian
Securities Administrators, the Corporation has prepared a Notice of Change of
Auditors setting forth the circumstances relating to the proposal to change
auditors. Response letters commenting on this Notice of Change of Auditors have
been obtained from both Horwath Orenstein, the current auditors, and Ernst &
Young, the proposed auditors. Copies of the Notice of Change of Auditors, the
response letters and written confirmation of the review of the Board of
Directors of the Corporation are attached as Schedule A to this Circular.
AMENDMENT TO THE SHARE OPTION PLAN
At the Meeting, shareholders will be asked to pass a resolution (the
"Share Option Resolution") approving an amendment to the Corporation's share
option plan (the "Share Option Plan") to increase the number of shares which may
be issued thereunder from 2,534,611 to 4,116,000. The new number will represent
approximately 15% of the Corporation's currently issued and outstanding shares,
in keeping with the intent of the Share Option Plan established during TLC's
initial public offering, and an increase of approximately 62% in the number of
Common Shares issuable under the Share Option Plan. At September 2, 1997,
options to acquire 2,436,999 Common Shares remained outstanding and unexercised.
The purpose of this amendment is to ensure that there remains
available for issuance under the Share Option Plan a sufficient number of
options to allow the Corporation to maintain its current policy of rewarding
options as an alternative to cash compensation, and as bonus remuneration, for
all corporate office employees and directors of the Corporation.
It is the intention of the management representatives designated in
the enclosed form of proxy to vote the shares in respect of which they are
appointed proxy in favour of the Share Option Resolution, a copy of which is set
out on Schedule B to this Circular, unless the shareholder who has given such
proxy has directed that the shares be otherwise voted.
In order to be effective, the Share Option Resolution must be passed
by a majority of the votes cast at the Meeting, excluding votes attaching to
shares beneficially owned by insiders to whom options have been or may be
granted under the Share Option Plan and their associates. At September 2, 1997,
10,995,007 votes, being the votes attaching to Common Shares beneficially owned
by insiders and their associates, will not be counted for the purposes of
determining whether the level of shareholder approval required to amend the
Share Option Plan has been obtained.
<PAGE>
-7-
PROPOSED SHARE PURCHASE PLAN
The Board of Directors of the Corporation has adopted a share purchase
plan (the "Share Purchase Plan"), subject to receiving all necessary regulatory
and shareholder approvals. The Share Purchase Plan will become effective on or
about October 30, 1997. At the Meeting, shareholders will be asked to approve a
resolution (the "Share Purchase Resolution") approving the Share Purchase Plan
and authorizing 500,000 Common Shares to be reserved for issuance under the
Share Purchase Plan. This number will represent approximately 2% of the
Corporation's currently issued and outstanding shares.
The objective of the Share Purchase Plan is to advance the interests
of the Corporation by providing additional incentives to employees of the
Corporation and its subsidiaries; encouraging share ownership by such persons;
increasing their proprietary interest in the success of the Corporation;
encouraging them to remain with the Corporation; and attracting new employees.
The Share Purchase Plan will be offered to all employees of the
Corporation located in Canada and the United States who have been employed by
the Corporation for three months or more ("Share Purchase Participants"). The
Share Purchase Plan will be administered by CIBC Mellon Trust Company (the
"Administrator"). Under the plan, Share Purchase Participants may enrol to have
a percentage of their payroll (excluding bonuses and overtime) up to a maximum
of 10% deducted and remitted towards the purchase of Common Shares in the name
of the Share Purchase Participant (the "Employee Contribution"). The
Corporation will contribute an additional amount equal to 25% of the Employee
Contribution towards purchases of Common Shares in the name of the Share
Purchase Participant (the "Employer Contribution"). Purchases will be made from
treasury at the current market price or, at the Corporation's option and subject
to certain restrictions, purchases using the Employee Contribution may be made
on the open market. The "current market price" on any date will be equal to the
weighted average trading prices of the Common Shares on The Toronto Stock
Exchange for the five (5) trading days prior to that date. Subject to obtaining
regulatory approval, any cash dividends paid on Common Shares purchased under
the Share Purchase Plan will be reinvested in Common Shares of the Corporation
issued from treasury at the current market price (determined on the basis of the
weighted average trading prices of the Common Shares on The Toronto Stock
Exchange for the twenty (20) trading days prior to the date of reinvestment)
less a discount not to exceed 5%.
Common Shares will be purchased using the Employee Contribution every
quarter (a "Common Share Purchase Date"). Common Shares will be purchased using
the Employer Contribution one year after each Common Share Purchase Date. A
Share Purchase Participant who ceases to participate in the Share Purchase Plan
either voluntarily or by reason of disability, death or termination of
employment will be entitled to receive (i) all Common Shares purchased through
the Employee Contribution or Employer Contributions and (ii) all Common Shares
purchased through the reinvestment of dividends paid on Common Shares purchased
pursuant to (i). The Share Purchase Participant will not be entitled to amounts
accrued with respect to Employer Contributions that have not been applied
towards the purchase of Common Shares.
Share Purchase Participants are entitled to change their contribution
levels on a quarterly basis and are permitted to withdraw Common Shares
purchased under the Share Purchase Plan once every year. Administrative
expenses of the Share Purchase Plan will be paid by the Corporation. Share
Purchase Participants may be required to pay charges to process withdrawals and
other similar requests.
<PAGE>
-8-
It is the intention of the management representatives designated in
the enclosed form of proxy to vote the shares in respect of which they are
appointed proxy in favour of the Share Purchase Resolution, a copy of which is
set out on Schedule C to this Circular, unless the shareholder who has given
such proxy has directed that the shares be otherwise voted.
In order to be effective, the Share Purchase Resolution must be passed
by a majority of the votes cast at the Meeting, excluding votes attaching to
shares beneficially owned by insiders and their associates. At September 2,
1997, 10,995,007 votes, being the votes attaching to Common Shares beneficially
owned by insiders and their associates, will not be counted for the purposes of
determining whether the level of shareholder approval required to approve the
Share Purchase Plan has been obtained.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation earned during the last
two completed fiscal years by the Chief Executive Officer and the Corporation's
four highest paid executive officers who were serving as executive officers at
the end of the financial year ended May 31, 1997 ("Fiscal 1997") and whose
annual salary and bonus exceeded $100,000 in Fiscal 1997 (together, the "Named
Executive Officers"):
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- AWARDS PAYOUTS
------------------------------------------
OTHER COMMON SHARES RESTRICTED
NAME AND PRINCIPAL ANNUAL UNDER OPTION SHARES OR LTIP ALL OTHER
POSITION COMPEN- (#) RESTRICTED PAYOUTS COMPEN-
YEAR SALARY BONUS SATION SHARE UNITS ($) SATION
(US$) (US$) ($) ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Elias Vamvakas, Chief 1996 215,260 Nil Nil 1, 000,000 Nil Nil Nil
Executive Officer 1997 235,417 250,000(1) Nil Nil Nil Nil Nil
- ------------------------------------------------------------------------------------------------------------------------------------
Dr. Jeffery J. Machat, 1996 83,333(2) Nil Nil 25,000 Nil Nil Nil
Co-National Medical 1997 200,000 Nil Nil 25,000 Nil Nil Nil
Director
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald J. Kelly, 1996 Nil Nil Nil Nil Nil Nil Nil
Vice-President 1997 150,000(3) Nil Nil 25,000 Nil Nil Nil
Acquisitions and General
Counsel
- ------------------------------------------------------------------------------------------------------------------------------------
Dr. Barry Barresi, 1996 Nil Nil Nil Nil Nil Nil Nil
Chief Executive Officer 1997 128,365 Nil Nil 25,000 Nil Nil Nil
- - Partner Provider (4)
Health Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Gary Jonas, 1996 Nil Nil Nil Nil Nil Nil Nil
Senior Vice-President - 1997 67,045 Nil Nil Nil Nil Nil Nil
U.S. Operations (5)
</TABLE>
(1) This amount is payable to Mr. Vamvakas upon the Corporation having earned
two consecutive quarters of net income.
(2) Dr. Machat became an officer of the Corporation in January 1996.
(3) Mr. Kelly became an officer of the Corporation in September 1996. His
salary is presented in Canadian dollars.
(4) Dr. Barresi became the Chief Financial Officer of Partner Provider Health
Inc., a subsidiary of the Corporation, in September 1996.
(5) Mr. Jonas joined the Corporation in February 1997.
<PAGE>
-9-
OPTIONS GRANTED DURING FISCAL 1997
The following table sets forth the individual grants of stock options
for Fiscal 1997 to the Named Executive Officers:
<TABLE>
<CAPTION>
COMMON MARKET VALUE OF
SHARES % OF TOTAL OPTIONS COMMON SHARES
UNDER OPTIONS GRANTED TO UNDERLYING OPTIONS
GRANTED EMPLOYEES IN EXERCISE OR BASE ON THE DATE
NAME (#) FINANCIAL YEAR PRICE OF GRANT EXPIRATION DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dr. Jeffery J. Machat 25,000 7.81% $7.25 $7.25 December 1, 2001
Ronald J. Kelly 25,000 7.81% $7.25 $7.25 December 1, 2001
Dr. Barry Barresi 25,000 7.81% $7.25 $7.25 December 1, 2001
</TABLE>
AGGREGATE OPTION EXERCISES DURING FISCAL 1997 AND FINANCIAL YEAR-END OPTION
VALUES
The following table sets forth all stock options exercised by the
Named Executive Officers of the Corporation, the total number of securities
underlying unexercised options of the Named Executive Officers and their dollar
value during Fiscal 1997:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN THE
UNEXERCISED OPTIONS AT MONEY OPTIONS AT FINANCIAL
FINANCIAL YEAR-END YEAR-END ($)(1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON
SHARES ACQUIRED AGGREGATE
ON VALUE
EXERCISE REALIZED
(#) (US$) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Elias Vamvakas Nil Nil 304,137 304,136 2,399,641 2,399,633
Dr. Jeffery J. Machat Nil Nil 7,604 32,603 59,996 178,738
Ronald J. Kelly Nil Nil Nil 25,000 Nil 118,750
Dr. Barry Barresi Nil Nil Nil 25,000 Nil 118,750
</TABLE>
(1) The closing price of TLC's Common Shares on The Toronto Stock Exchange on
May 31, 1996 was $12.00.
<PAGE>
-10-
EMPLOYMENT CONTRACTS
MR. ELIAS VAMVAKAS
The Corporation has entered into an employment contract with Mr. Elias
Vamvakas who is the President, Chief Executive Officer and Chairman of the Board
of Directors of the Corporation. The term of the agreement is three years
commencing on January 1, 1996 with automatic one year renewals as agreed upon by
the parties. During the initial year of the agreement, the base salary was
US$225,000, which will increase by US$25,000 during each year of the initial
term. Thereafter, Mr. Vamvakas' base salary will be determined by the Board of
Directors but will never be less than the previous year's base salary plus
fifteen percent. Mr. Vamvakas' compensation also includes a discretionary
annual bonus as determined by the Board of Directors.
Mr. Vamvakas' employment may be terminated for cause. If terminated
other than for cause, Mr. Vamvakas will be entitled to receive 24 months' base
salary and bonus and shall be entitled to exercise all share options granted but
not otherwise exercisable.
The agreement also contains non-competition and confidentiality
covenants for the benefit of the Corporation.
DR. JEFFERY J. MACHAT
The Corporation has entered into a consulting agreement with Excimer
Management Corporation which corporation will make available to TLC the services
of Dr. Jeffery J. Machat as a consultant relating to the business of the
Corporation. Pursuant to such agreement, Dr. Machat is designated Co-National
Medical Director of TLC. The term of the agreement is three years commencing on
January 1, 1996. The agreement provides for an annual consulting fee in the
amount of US$200,000. Dr. Machat has also entered into a surgery agreement with
the Corporation pursuant to which he will perform excimer laser procedures at
one or more of the Corporation's clinics and will be entitled to receive a fee
of $150 per procedure performed by him payable in the same currency as paid by
the patient. Dr. Machat is also entitled to receive options under the Share
Option Plan as a director.
Dr. Machat's agreement may be terminated for cause. If terminated
other than for cause, Dr. Machat will be entitled to receive an amount equal to
two times the annual consulting fee.
Dr. Machat's consulting agreement contains non-competition and
confidentiality covenants for the benefit of the Corporation.
<PAGE>
-11-
RONALD J. KELLY
The Corporation has entered into a consulting agreement with Kelmar
Corporation, which corporation will make available to TLC the services of Ronald
J. Kelly as a consultant relating to the business of the Corporation. Mr. Kelly
has also been appointed the Vice-President Acquisitions and General Counsel of
the Corporation. The agreement, which expires on December 31, 1999, provides
for an annual consulting fee payable by the Corporation to Kelmar Corporation of
$200,000.
If the consulting agreement is terminated, other than for cause, Mr.
Kelly shall be entitled to a payment of $100,000.
The agreement also contains non-competition and confidentiality
covenants for the benefit of the Corporation.
COMPOSITION OF THE COMPENSATION COMMITTEE
Until February 1997, the entire Board of Directors of the Corporation
was responsible for determining compensation of executive officers of the
Corporation. In February 1997, the Board established a Compensation Committee,
composed of Dr. Machat, Mr. Gourwitz and Mr. Connacher. All of the nominees for
election as directors described under "Election of Directors" served as
directors during Fiscal 1997, except Dr. Barry J. Barresi, who was appointed in
September 1996, and Warren S. Rustand, who is a nominee for election as director
at this Meeting. In addition, Ronald J. Kelly and Dr. David Eldridge, served as
directors during Fiscal 1997.
Messrs. Vamvakas, Riegert, Kelly, Machat, Eldridge and Barresi are
members of the Board of Directors and officers of the Corporation or a
subsidiary. Except for Dr. Machat, none of the members of the Compensation
Committee is an officer, employee or former officer or employee of the
Corporation. Determination of the compensation of executive officers of each of
the subsidiaries of the Corporation is made by the entire Board of Directors of
each subsidiary. Messrs. Vamvakas, Riegert and Kelly and Drs. Machat, Eldridge
and Sullins, Jr. are the only members of the Board of Directors of the
Corporation who also serve as members of the boards of directors of one or more
subsidiaries of the Corporation. (See also "Interest of Insiders in Material
Transactions".)
REPORT ON EXECUTIVE COMPENSATION
The Corporation's corporate philosophy on compensation is that
compensation should be tied to an individual's performance and to the
performance of the Corporation as a whole. TLC believes that executive officers
who make a substantial contribution to the long-term success of the Corporation
and its subsidiaries are entitled to participate in that success.
The compensation of the Corporation's executive officers, including
its Named Executive Officers, is comprised of three components: (i) base
salary; (ii) cash bonuses; and (iii) long-term incentives in the form of stock
options. The Corporation does not have an executive pension plan.
TLC is an emerging corporation which was incorporated in 1993 and
consequently the Board of Directors has placed considerable emphasis upon the
incentive of stock options in determining
<PAGE>
-12-
executive compensation in order to align the interests of the executive officers
with the long-term interests of the Corporation's shareholders.
The Share Option Plan is administered by the Board of Directors. The
purpose of the Share Option Plan is to advance the interests of the Corporation
by (i) providing directors, officers, employees and other eligible persons with
additional incentive; (ii) encouraging stock ownership by eligible persons;
(iii) increasing the proprietary interests of eligible persons in the success of
the Corporation; (iv) encouraging eligible persons to remain with the
Corporation or its affiliates; and (v) attracting new employees, officers or
directors to the Corporation or its affiliates. In determining whether to grant
options and how many options to grant to eligible persons under the Share Option
Plan, the Board of Directors considers each individual's past performance and
contribution to the Corporation as well as that individual's expected ability to
contribute to the Corporation in the future.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
During Fiscal 1997, Mr. Vamvakas, the President, Chief Executive
Officer and Chairman of the Board of Directors of TLC, continued to provide the
leadership and strategic direction that has enabled the Corporation to continue
its expansion throughout Canada and the United States.
The compensation paid to Mr. Vamvakas during Fiscal 1997, and the
compensation reflected in his employment contract, are based upon comparisons
with comparable positions in other companies within the same industry, as well
as with the compensation levels of chief executive officers in start-up
companies in the industrial technology sector. See "Executive Compensation -
Summary Compensation Table" and "- Employment Contracts".
In addition, to reward Mr. Vamvakas for his contributions to the
Corporation's growth in Fiscal 1997, the Board of Directors, on the
recommendation of the Compensation Committee, has awarded Mr. Vamvakas a bonus
for Fiscal 1997 in the amount of US$250,000. The bonus is payable upon the
Corporation having earned two consecutive quarters of net income.
The foregoing report is submitted by the Board of Directors and the
Compensation Committee.
<TABLE>
<S> <C> <C>
Elias Vamvakas Dr. Jeffery J. Machat James R. Connacher
John F. Riegert Howard J. Gourwitz Dr. David C.Eldridge
Dr. William David Sullins, Jr. Ronald J. Kelly Dr. Barry J. Barresi
</TABLE>
<PAGE>
-13-
COMPENSATION OF DIRECTORS
Directors of the Corporation who are not executive officers of the
Corporation are entitled to receive an attendance fee of $350 in respect of each
meeting attended. In addition, directors are reimbursed for out-of-pocket
expenses incurred in connection with attending meetings of the Board of
Directors and are entitled to receive options under the Share Option Plan. On
December 1, 1996, non-executive members of the Board of Directors were each
issued options to acquire 5,000 Common Shares. (See also "Interests of Insiders
in Material Transactions".)
PERFORMANCE GRAPH
The following show the cumulative total shareholder return (assuming
reinvestment of dividends) over Fiscal 1997 in comparison with the cumulative
total return on the TSE 300 Index.
CUMULATIVE TOTAL RETURN ON $100 INVESTMENT ASSUMING DIVIDENDS ARE REIVINVESTED
MAY 31, 1996 - MAY 31, 1997
ERROR! NOT A VALID LINK.
STATEMENT OF CORPORATE GOVERNANCE POLICIES
The Board of Directors of TLC believes that strong corporate
governance practices are essential to the well-being of the Corporation and its
shareholders. Since March 1996, the Common Shares have been listed on The
Toronto Stock Exchange. The By-Laws of The Toronto Stock Exchange require that
this Statement of Corporate Governance Practices relate the corporate governance
practices of the Board of Directors to the "Guidelines for Improved Corporate
Governance" contained in the Final Report of The Toronto Stock Exchange
Committee on Corporate Governance in Canada (the "TSE Report"). A description
of the Corporation's corporate governance practices follows.
MANDATE OF THE BOARD OF DIRECTORS
The mandate of the Board of Directors is to supervise the management
of the business and affairs of the Corporation and to act with a view to the
best interests of the Corporation.
COMPOSITION OF THE BOARD OF DIRECTORS
The Board of Directors is currently comprised of nine members. The
size of the Board of Directors was increased from eight to nine members in
September 1996 and the number of directors to be elected at the Meeting has been
set at seven.
The Board of Directors believes that three directors are "unrelated"
directors and the remaining six are "related" directors, within the meaning of
the TSE Report. If the proposed nominees for election as director are elected
at the Meeting, the Board of Directors believes that four directors will be
"unrelated" directors and the remaining three will be "related" directors,
within the meaning of the TSE Report. An "unrelated" director is a director who
is independent of management and is free from any
<PAGE>
-14-
interest and any business or other relationship which could, or could reasonably
be perceived to, materially interfere with the director's ability to act with a
view to the best interests of the Corporation, other than interests and
relationships arising from shareholding. The Corporation does not have a
significant shareholder, since there is no person who has the ability to
exercise a majority of the votes attached to the outstanding shares of the
Corporation for the election of directors.
BOARD COMMITTEES
The Board of Directors has established five committees. The following
is a brief description of each committee and its composition.
The EXECUTIVE COMMITTEE consists of three directors: Messrs.
Vamvakas, Machat and Riegert, all of whom are related directors. The Executive
Committee may exercise all powers of the Board of Directors in respect of the
management and direction of the business and affairs of the Corporation between
meetings of the Board of Directors, subject to certain restrictions under
applicable laws.
The AUDIT COMMITTEE consists of three directors: Messrs. Gourwitz,
Sullins, Jr. and Eldridge. The Audit Committee is composed of a majority of
unrelated directors. The Audit Committee is responsible for the engagement of
the Corporation's independent auditors and reviews with them the scope and
timing of their audit services and any other services they are asked to perform,
their report on the Corporation's accounts following the completion of the audit
and the Corporation's policies and procedures with respect to internal
accounting and financial controls. There was one meeting of the Audit Committee
relating to Fiscal 1997.
The NOMINATING COMMITTEE consists of three directors: Messrs.
Vamvakas, Sullins, Jr. and Connacher, a majority of whom are unrelated
directors. The Nominating Committee is responsible for the selection of new
directors and their recommendation to the Corporate Governance Committee (see
below) as nominees to the Board of Directors.
The COMPENSATION COMMITTEE consists of three directors: Messrs.
Connacher, Machat and Gourwitz, a majority of whom are unrelated directors. The
Compensation Committee is responsible for the development of compensation
policies and makes recommendations on compensation of executive officers to the
Corporate Governance Committee (see below) for approval of the Board of
Directors.
The CORPORATE GOVERNANCE COMMITTEE consists of three directors:
Messrs. Gourwitz, Kelly and Eldridge, a majority of whom are related directors.
If the proposed nominees for election as directors are elected at the Meeting,
two directors will be appointed to replace Messrs. Kelly and Eldridge such that
the committee remains composed of a majority of unrelated directors. The
Corporate Governance Committee is responsible for delegating work to other
committees of the Board. It will be responsible to the Board of Directors with
respect to developments in the area of corporate governance and the practices of
the Board.
SHAREHOLDER COMMUNICATIONS
The Board of Directors places great emphasis on its communications
with shareholders. Shareholders receive timely dissemination of information and
the Corporation has procedures in place to
<PAGE>
-15-
permit and encourage feedback from its shareholders. TLC's senior officers are
available to shareholders and, through its investor relations department, TLC
seeks to provide clear and accessible information about the results of the
Corporation's business and its future plans. TLC has established an investor
web site on the Internet through which it makes available press releases,
financial statements, annual reports, trading information and other information
relevant to investors. Mr. Vamvakas may also be contacted directly by investors
through the Internet.
INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS
AND SENIOR OFFICERS
No officer, director, or employee, or former officer, director or
employee of the Corporation or any of its subsidiaries, or associate of any such
officer, director or employee is currently or has been indebted (other than
routine indebtedness) at any time during Fiscal 1997 to the Corporation or any
of its subsidiaries other than as disclosed below.
<TABLE>
<CAPTION>
LARGEST AMOUNT AMOUNT
INVOLVEMENT OF THE OUTSTANDING DURING YEAR ENDED OUTSTANDING AS AT
NAME AND PRINCIPAL POSITION CORPORATION MAY 31, 1997 SEPTEMBER 2, 1997
($) ($)(1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Elias Vamvakas, Car Loan $60,000 $48,583
Chief Executive Officer
- --------------------------------------------------------------------------------------------------------------------------
Madelaine Walker,
Chief Operating Officer Car Loan $37,875 $28,842
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The indebtedness is secured in each case by an automobile of the officer.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
The Corporation maintains directors' and officers' liability
insurance. Under this insurance coverage the insurer pays on behalf of the
Corporation for losses for which the Corporation indemnifies its directors and
officers, and on behalf of individual directors and officers for losses arising
during the performance of their duties for which they are not indemnified for
the Corporation. The policy limit is US$10,000,000 per policy term subject to a
deductible of US$100,000 per occurrence with respect to corporate indemnity
provisions and US$250,000 if the claim relates to securities law claims. In
addition to the deductible relating to securities laws claims, the insurance
policy contains a coinsurance clause whereby the Corporation is liable for 40%
of losses relating to such claims. The total premium in respect of the
directors' and officers' liability insurance for Fiscal 1997 was approximately
US$152,000. The insurance policy does not distinguish between directors and
officers as separate groups.
INTEREST OF INSIDERS IN MATERIAL TRANSACTIONS
The only material transactions since the commencement of Fiscal 1997
in which any director, senior officer, principal shareholder (as described under
"Principal Shareholders") or any associate or affiliate of the foregoing has or
had an interest are as follows:
1. Effective January 1, 1996, Dr. Machat commenced receiving remuneration in
accordance with the consulting agreement and surgery agreement referred to
under "Executive Compensation - Employment Contracts".
<PAGE>
-16-
2. Mr. Gourwitz, a director of the Corporation, receives fees for legal work
done on behalf of TLC.
OTHER BUSINESS
The Corporation knows of no other matter to come before the Meeting
other than the matters referred to in the notice of meeting.
DIRECTORS' APPROVAL
The contents and sending of this Circular have been approved by the
Board of Directors of the Corporation.
By Order of the Board of Directors
John F. Riegert
John F. Riegert
Secretary
Mississauga, Canada
September 26, 1997
<PAGE>
SCHEDULE A
PART I
NOTICE OF CHANGE OF AUDITORS
Horwath Orenstein are currently the auditors of TLC The Laser Center
Inc. (the "Corporation"). The Corporation has determined not to propose the
reappointment of Horwath Orenstein.
Approval of the shareholders of the Corporation will be sought at the
next annual and special meeting of the shareholders (the "Meeting") to be held
on October 30, 1997. Subject to the approval of the shareholders of the
Corporation being obtained at the Meeting, the auditors of the Corporation will
be changed to Ernst & Young.
In the opinion of the Corporation, as of the date hereof there have
NOT occurred between Horwath Orenstein and the Corporation any reportable events
within the meaning of National Policy Statement No. 31 of the Canadian
Securities Administrators, whether in the form of disagreement, unresolved
issues or consultations, in connection with the audit of the two most recently
completed fiscal years of the Corporation for any periods subsequent to
completion of the audits performed by Horwath Orenstein in connection with the
fiscal year of the Corporation ended May 31, 1997. In addition, there are no
reservations in the auditor's reports for such period. The Board of Directors
and the audit committee of the Corporation have considered and approved the
proposal that the auditors be changed from Horwath Orenstein to Ernst & Young.
The proposal was approved on September 25, 1997.
DATED at Mississauga, Ontario, September 25, 1997.
TLC THE LASER CENTER INC.
By: PETER KASTELIC
------------------------------------
Peter Kastelic
Chief Financial Officer and Treasurer
<PAGE>
SCHEDULE A
PART II
[LETTERHEAD OF HORWATH ORENSTEIN]
September 25, 1997
Ontario Securities Commission
The Manitoba Securities Commission
British Columbia Securities Commission
Alberta Securities Commission
Saskatchewan Securities Commission
Commission des valeurs mobilieres du Quebec
Office of the Administrator, Securities Act, New Brunswick
Nova Scotia Securities Commission
Registrar of Securities, Prince Edward Island
Government of Newfoundland and Labrador, Securities Division
Securities and Exchange Commission
To whom it may concern:
RE: TLC THE LASER CENTER INC. - NOTICE OF CHANGE OF AUDITOR
In accordance with the requirements of National Policy Statement No. 31, we have
read the Notice of Change of Auditors of the above company dated September 25,
1997 and are in agreement with the information contained in the Notice.
Yours truly,
HORWATH ORENSTEIN
Chartered Accountants
<PAGE>
SCHEDULE A
PART III
[LETTERHEAD OF ERNST & YOUNG]
September 25, 1997
Ontario Securities Commission
The Manitoba Securities Commission
British Columbia Securities Commission
Alberta Securities Commission
Saskatchewan Securities Commission
Commission des valeurs mobilieres du Quebec
Office of the Administrator, Securities Act, New Brunswick
Nova Scotia Securities Commission
Registrar of Securities, Prince Edward Island
Government of Newfoundland and Labrador, Securities Division
Securities and Exchange Commission
Dear Sirs:
RE: TLC THE LASER CENTER INC.
We have read the Notice of Change of Auditors of TLC The Laser Center Inc. dated
September 25, 1997 and are in agreement with the statements contained in such
Notice based on our knowledge of the information at this time.
Yours sincerely,
Ernst & Young
<PAGE>
SCHEDULE A
PART IV
CONFIRMATION OF REVIEW OF NOTICE OF CHANGE OF AUDITORS
TO: THE SHAREHOLDERS OF TLC THE LASER CENTER INC.
The undersigned confirms that the Notice of Change of Auditors dated
September 25, 1997 and the letters of Horwath Orenstein and Ernst & Young
addressed to the relevant securities regulators expressing their agreement with
the information contained in the Notice of Change of Auditors have been reviewed
by the Board of Directors and the Audit Committee of TLC The Laser Center Inc.
DATED: September 25, 1997
By: PETER KASTELIC
-------------------------------------
Peter Kastelic
Chief Financial Officer and Treasurer
<PAGE>
SCHEDULE B
SHARE OPTION RESOLUTION
BE IT RESOLVED THAT:
1. Section 1.5 of the Share Option Plan of the Corporation be and it is hereby
amended to increase the number of Common Shares which may be issued under
the Share Option Plan to 4,116,000; and
2. Any director or officer of the Corporation is hereby authorized and
directed for and in the name of and on behalf of the Corporation to do all
acts and things and execute, whether under the corporate seal of the
Corporation or otherwise and deliver or cause to be delivered all documents
and instruments as in the opinion of such director or officer may be
necessary or desirable to carry out the intent of this resolution.
<PAGE>
SCHEDULE C
SHARE PURCHASE RESOLUTION
BE IT RESOLVED THAT:
1. The Share Purchase Plan of the Corporation approved by the Board of
Directors on September 25, 1997, as described in the accompanying
management information circular for this meeting under the heading
"Proposed Share Purchase Plan", is hereby ratified, authorized and
approved; and
2. Any director or officer of the Corporation is hereby authorized and
directed for and in the name of and on behalf of the Corporation to do all
acts and things and execute, whether under the corporate seal of the
Corporation or otherwise and deliver or cause to be delivered all documents
and instruments as in the opinion of such director or officer may be
necessary or desirable to carry out the intent of this resolution.
<PAGE>
TLC THE LASER CENTER INC.
PROXY
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS OF
TLC THE LASER CENTER INC.
TO BE HELD ON OCTOBER 30, 1997
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT
OF TLC THE LASER CENTER INC.
The undersigned shareholder of TLC THE LASER CENTER INC. (the
"Corporation") hereby appoints Elias Vamvakas, President and a Director of the
Corporation, or, failing him, John F. Riegert, Secretary and a Director of the
Corporation, or, failing him, Ronald J. Kelly, General Counsel and a Director of
the Corporation or instead of any of the foregoing, ___________________________,
as proxy of the undersigned, to attend, vote and act for and on behalf of the
undersigned AT THE ANNUAL MEETING OF SHAREHOLDERS OF THE CORPORATION TO BE HELD
ON OCTOBER 30, 1997 AND AT ALL ADJOURNMENTS THEREOF, upon the following matters:
1. TO VOTE / / WITHHOLD VOTE / /
or, if no specification is made, VOTE, in the election of directors;
2. TO VOTE / / WITHHOLD VOTE / /
or if no specification is made, VOTE in the appointment of Ernst & Young as
auditors of the Corporation and in authorizing the directors to fix the
remuneration of the auditors;
3. TO VOTE FOR / / VOTE AGAINST / /
or if no specification is made, VOTE FOR the resolution approving the
amendment to the Share Option Plan to increase the number of shares that
may be issued thereunder;
4. TO VOTE FOR / / VOTE AGAINST / /
or if no specification is made, VOTE FOR the resolution approving the Share
Purchase Plan; and
5. TO VOTE at the discretion of the proxy nominee on any amendments to the
foregoing and on such other business as may properly come before the
meeting or any adjournments thereof.
EXECUTED on the ___________________ day of _____________________, 1997
- ------------------------------- ----------------------------------
Number of Common Shares Signature of Shareholder
----------------------------------
Name of Shareholder
(Please print clearly)
NOTES:
1. A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON TO REPRESENT THE
SHAREHOLDER AT THE MEETING OTHER THAN THE MANAGEMENT REPRESENTATIVES
DESIGNATED IN THIS PROXY. Such right may be exercised by inserting in the
space provided the name of the other person the shareholder wishes to
appoint. Such other person need not be a shareholder.
2. To be valid, this proxy must be signed and deposited with CIBC Mellon Trust
Company, Proxy Dept., 393 University Avenue, 5th Floor, Toronto, Ontario
M5G 2M7 not later than the close of business on October 28, 1997, or, if
the meeting is adjourned, 48 hours (excluding Saturdays and holidays)
before any adjourned meeting.
3. If an individual, please sign exactly as your shares are registered.
If the shareholder is a corporation, this proxy must be executed by a duly
authorized officer or attorney of the shareholder and, if the corporation
has a corporate seal, its corporate seal should be affixed.
If the shares are registered in the name of an executor, administrator or
trustee, please sign exactly as the shares are registered. If the shares
are registered in the name of the deceased or other shareholder, the
shareholder's name must be printed in the space provided, the proxy must be
signed by the legal representative with his name printed below his
signature and evidence of authority to sign on behalf of the shareholder
must be attached to this proxy.
4. Reference is made to the accompanying notice and management information
circular for further information regarding completion and use of this proxy
and other information pertaining to the meeting. Before completing this
proxy, non-registered holders should carefully review the section in the
accompanying management information circular entitled "General Proxy
Information - Non-Registered Shareholders" and should carefully follow the
instructions of the securities dealer or other intermediary who sent this
proxy.
5. If this proxy is not dated in the space provided, it is deemed to bear the
date on which it is mailed by management of the Corporation.
6. If a share is held by two or more persons, any one of them present or
represented by proxy at a meeting of shareholders may, in the absence of
the other or others, vote in respect thereof, but if more than one of them
are present or represented by proxy, they shall vote together in respect of
each share so held.
<PAGE>
NEWS RELEASE CONTACT:
FOR IMMEDIATE RELEASE STEPHEN KILMER
MANAGER, INVESTOR RELATIONS
(905) 602-2020 EXT. 235
1-800-TLC-1003
[email protected]
TLC POSTS RECORD NET REVENUES FOR 1998 FIRST QUARTER
TORONTO, OCTOBER 14, 1997: TLC The Laser Center Inc., the largest provider
of laser vision correction in North America, today announced its results for
the three months ended August 31, 1997. Results were characterized by an
increase in net revenue, driven primarily by strong growth in the number of
refractive laser procedures performed.
First quarter gross revenue was $20.6 million, an increase of 253% over the
1997 comparative quarter. First quarter net revenue was $13.8 million, an
increase of 281% over the first quarter of 1997, and the highest quarterly
net revenue ever reported by the Company. The increasing revenue reflects
continuing strong growth in the number of procedures at existing sites and
TLC's rapidly expanding activities in the U.S. market. TLC performed over
6,100 paid refractive laser procedures in the first quarter, compared to
1,600 from the same quarter a year ago.
TLC's net loss for the quarter was $3.7 million, or $0.14 per share, versus
$0.8 million, or $0.05 per share for the corresponding period a year ago.
The net loss includes $2.7 million in amortization and $1.6 million in
development and start-up costs. The net loss was much lower than expected
considering TLC's rapid expansion in the U.S. market, where most of TLC's
U.S. centers have been open for less than 1 year. Traditionally, it takes
18 months for TLC laser centers to show a profit.
<PAGE>
"We believe that our growth strategy is really starting to prove itself,"
said Elias Vamvakas, CEO of TLC. "TLC's balance sheet and cash position is
very strong." "This, combined with stronger than expected operating results,
will allow us to continue to grow our leadership position in the North
American laser vision correction market."
ABOUT TLC THE LASER CENTER INC.
TLC is the largest provider of excimer laser vision correction in North
America. TLC's core business strategy is providing excimer laser eye surgery
in partnership with its network of more than 6,000 affiliated doctors. TLC
has an integrated approach in providing eye care which includes secondary
care facilities, managed care, buying groups and information technologies.
TLC's common shares trade on the Toronto Stock Exchange under the symbol
'LZR' and on the NASDAQ National Market under the symbol 'LZRCF'. Visit our
web site at http://www.lzr.com
FORWARD LOOKING STATEMENTS
This press release may contain forward-looking information within the meaning
of Section 27A of the U.S. Securities Act of 1993 and Section 21E of the
Securities Exchange Act of 1934, and is subject to the safe harbor created by
those sections. TLC's operating results can be impacted by a number of
factors, any of which could cause actual results to vary materially from the
current results or TLC's anticipated future results. TLC's operating results
can vary substantially from period to period due to the timing of
acquisitions and expansion opportunities. This and other factors make the
estimation of future operating results uncertain. Risk factors are listed
from time to time in TLC's reports filed with the Toronto Stock Exchange and
the U.S. Securities and Exchange Commission. TLC assumes no obligation to
update information contained in this press release.
<PAGE>
TLC THE LASER CENTER INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended August 31
1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Net revenues $ 13,804 $ 4,912
Share of loss of affiliated companies (87) (28)
--------------------------
13,717 4,884
--------------------------
EXPENSES
Operating 12,608 4,032
Financial 481 136
Amortization 2,717 637
--------------------------
15,806 4,805
--------------------------
Income (Loss) from operations (2,089) 79
Development and start-up expenses 1,601 794
--------------------------
Loss before income taxes (3,690) (715)
--------------------------
Income taxes
Current 26 49
--------------------------
26 49
--------------------------
Net loss for the period $ (3,716) $ (764)
--------------------------
--------------------------
LOSS PER SHARE $ (0.14) $ (0.05)
Weighted average number of
common shares outstanding 26,914,000 16,712,283
REVENUE ANALYSIS
<CAPTION>
Three months ended August 31
($ thousands) 1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Gross revenues of all managed clinics: $ 20,560 $ 8,131
--------------------------
--------------------------
Represented by:
Refractive clinics revenue $ 14,100 $ 3,551
Secondary care clinics physician group revenue 6,460 4,580
--------------------------
20,560 8,131
--------------------------
Less:
Provision for contractual allowances and adjustments 3,802 2,060
Amounts retained by physician groups 3,632 1,159
--------------------------
7,434 3,219
--------------------------
Net revenues of all managed clinics 13,126 4,912
Other 678 -
--------------------------
Net revenues $ 13,804 $ 4,912
--------------------------
--------------------------
</TABLE>
CONSOLIDATED STATEMENT OF DEFICIT
<TABLE>
<CAPTION>
Three months ended August 31
($ THOUSANDS) 1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of period $ (17,690) $ (3,741)
Net loss for the period (3,716) (764)
--------------------------
Balance, end of period $ (21,406) $ (4,505)
--------------------------
--------------------------
</TABLE>
<PAGE>
TLC THE LASER CENTER INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
31-Aug 1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current
Cash and short-term deposits $ 11,855 $ 1,916
Accounts receivable 5,849 2,069
Income taxes recoverable 150 -
Prepaids and sundry 2,845 573
--------------------------
20,699 4,558
Capital assets 36,588 18,705
Assets under capital lease 9,787 1,699
Investment in affiliated companies 634 367
Projects under development 144 1,094
Deferred income taxes 26 141
Goodwill 35,850 -
Other 575 106
--------------------------
$ 104,303 $ 26,670
--------------------------
--------------------------
LIABILITIES
Current
Accounts payable and accrued liabilities $ 8,984 $ 2,219
Income taxes payable - 20
Current portion of long term debt 1,893 1,436
Current portion of obligations under capital lease 2,549 322
Current portion of term bank loan 40 40
Deferred income taxes 32 133
--------------------------
13,498 4,170
Long term debt 6,083 5,698
Obligations under capital lease 8,791 923
Term bank loan 13 53
Deferred rent and compensation 2,399 94
--------------------------
30,784 10,938
--------------------------
Non-controlling interest 465 -
--------------------------
SHAREHOLDERS' EQUITY
Capital stock 94,460 20,237
Deficit (21,406) (4,505)
--------------------------
73,054 15,732
--------------------------
$ 104,303 $ 26,670
--------------------------
--------------------------
</TABLE>
<PAGE>
TLC THE LASER CENTER INC.
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
Three months ended August 31
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss for the period $ (3,716) $ (764)
Amortization 2,717 637
Share of loss from affiliates 87 28
--------------------------
--------------------------
(912) (99)
Changes in non-cash operating items
Deferred income taxes (net) 169 -
Projects under development 24 (499)
Non-controlling interest 2 -
Income taxes payable (104) (87)
Prepaid and sundry assets (529) (44)
Accounts payable and accrued liabilities (741) (304)
Accounts receivable (1,793) (354)
Deferred rent - 6
--------------------------
Cash provided from (used for) operating activities (3,884) (1,381)
--------------------------
FINANCING ACTIVITIES
Capital stock issued 1,908 576
Term bank loan (10) (10)
Obligations under capital lease (320) 6
Long-term debt (461) 2,705
--------------------------
Cash provided from (used for) financing activities 1,117 3,277
--------------------------
INVESTING ACTIVITIES
Other 13 (18)
Investment in affiliated companies (46) (136)
Assets under capital lease (53) (681)
Goodwill (2,042) -
Capital assets (4,227) (3,288)
--------------------------
Cash provided from (used for) investing activities (6,355) (4,123)
--------------------------
Decrease in cash (9,122) (2,227)
Cash and short-term deposits, beginning of period 20,977 4,143
--------------------------
Cash and short-term deposits, end of period $ 11,855 $ 1,916
--------------------------
--------------------------
</TABLE>
<PAGE>
TLC THE LASER CENTER INC.
ANNUAL INFORMATION FORM
FOR THE YEAR ENDED MAY 31, 1997
SEPTEMBER 30, 1997
<PAGE>
TABLE OF CONTENTS
The Company....................................................................2
General Development Of The Business............................................3
Industry Background............................................................5
Business Of The Company........................................................8
Government Regulation.........................................................18
Selected Consolidated Financial Information...................................22
Dividends And Dividend Policy.................................................23
Management's Discussion And Analysis Of Financial Condition And
Results Of Operations.......................................................23
Stock Exchange Listings.......................................................24
Directors And Officers........................................................24
Additional Information........................................................25
Glossary......................................................................27
THE COMPANY
TLC The Laser Center Inc. (the "Company" or "TLC") was incorporated by
articles of incorporation under the BUSINESS CORPORATIONS ACT (Ontario) on
May 28, 1993. By articles of amendment dated October 1, 1993, the name of the
Company changed to its present form, and by articles of amendment dated
March 22, 1995, certain changes were effected in the issued and authorized
capital of the Company with the effect that the authorized capital of the
Company became an unlimited number of Common Shares. The head and principal
office of the Company is located at 5600 Explorer Drive, Suite 301, Mississauga,
Ontario; Telephone: (905) 602-2020; Facsimile: (905) 602-2025. TLC's Internet
address is www.lzr.com.
All references in this Annual Information Form ("AIF") to "$" and "dollars"
are to Canadian dollars, unless otherwise noted. The "Company" or "TLC" means
the Company and its subsidiaries, unless the context otherwise requires.
Certain terms used in this AIF are defined elsewhere in the AIF. (See
"Glossary".)
The following organizational chart illustrates the principal entities owned
by the Company as at May 31, 1997, their jurisdiction of incorporation and the
percentage of voting securities held by each company's parent company (100%
unless specified to the contrary).
-2-
<PAGE>
[GRAPHIC] depicting TLC organizational chart
(1) TLC Piedmont Laser Center Inc. and TLC Chicago Laser Center Inc. each
operate a refractive clinic and a secondary care clinic. TLC Midwest Eye
Laser Center Inc. operates two secondary care clinics, one of which is also
a refractive clinic.
(2) Opened September 1997.
(3) Acquired July 23, 1997.
(4) Dissolved effective May 31, 1997. The assets of the dissolved
subsidiaries were transferred to 20/20 Laser Centers, Inc. ("20/20")
(5) As of September 30, 1997, TLC acquired 96.25% of 20/20 Laser Services
(South Florida) Limited Partnership, LLP ( 62% is owned by 20/20 Laser
Centers, Inc. and 34.25% is owned by TLC The Laser Center (Delaware)
Inc.).
-3-
<PAGE>
GENERAL DEVELOPMENT OF THE BUSINESS
BACKGROUND
The Company is a provider of integrated eye care in North America,
specializing in excimer laser surgery to correct common refractive vision
disorders such as nearsightedness, farsightedness and astigmatism. The Company
develops and manages regional networks consisting of refractive laser clinics
and secondary care clinics in conjunction with a network of local doctors.
TLC began operation in 1994 when it opened the TLC Windsor clinic. Since
commencement of operations, TLC has opened or acquired 32 refractive clinics
(including three with secondary care operations) and two secondary care clinics.
Two clinics were opened in 1995, three clinics were opened or acquired in 1996
(two in the U.S.), and 24 clinics were opened in 1997, including eight U.S.
clinics managed by 20/20 Laser Centers, Inc. ("20/20") and one clinic in Canada.
On February 10, 1997, the Company acquired 99.9% of the shares of 20/20 to
become the largest provider of laser vision correction in North America.
The Company has developed a network, which as of September 30, 1997 totals
32 refractive clinics (three of which are also secondary care clinics), two
secondary care clinics and 12 network centers in 26 states and provinces across
North America. In Canada, the Company manages five refractive clinics in
Ontario, British Columbia, and New Brunswick. In the U.S., the Company manages
27 refractive clinics in Oklahoma, Indiana, South Carolina, Washington,
Colorado, California, Florida, Wisconsin, Illinois, Ohio, Tennessee, Maryland,
New York, New Jersey, Pennsylvania, Montana, North Carolina, Massachusetts and
Virginia. The Company manages five secondary care clinics in Washington, South
Carolina and Illinois (three of which are also refractive clinics).
Revenues earned by the Company in the U.S. amounted to approximately 60%,
while revenues earned in Canada amounted to approximately 40%. The preponderance
of the Company's business in future is expected to be in the U.S. as the Company
has opened 27 refractive clinics (including three with secondary care
operations) and two secondary care clinics in the United States and may in
future open more centers there.
TLC had approximately 350 employees at May 31, 1997.
REFRACTIVE CLINICS
The Company is pursuing a strategy of expansion of its core refractive
laser surgery business. The major focus of the Company's expansion strategy
continues to be the U.S., where the Company is seeking to position itself to
take advantage of the growing market for excimer laser procedures.
The table below illustrates the growth in the number of procedures
performed at the Company's refractive clinics since the Company began operations
in the second quarter of 1994:
GROWTH IN NUMBER OF PROCEDURES PERFORMED
[bar graph showing growth in number of refractive procedures performed]
(1) Includes 1,326 and 1,478 procedures performed at 20/20 clinics during
the quarters ended February 28, 1997 and May 31, 1997, respectively.
20/20 was acquired by TLC on February 10, 1997.
-4-
<PAGE>
The Company has 11 clinics under development. The Company opens refractive
clinics in cities where it has identified strong support from local doctors for
the TLC co-management strategy, and requires at least 50 local doctors to
indicate their intention to affiliate with the Company.
The Company estimates that the cost of opening each refractive clinic in
the U.S. will be $1.5 million. It is intended that such cost will be funded
through equipment financing which the Company currently has available to it and
funds available for general corporate purposes. Generally, it is expected that a
TLC refractive clinic will become profitable after it has completed
approximately eighteen months of operation.
SECONDARY CARE CLINICS
As part of its strategy to expand its core refractive laser surgery
business, the Company intends to acquire, and manage on behalf of doctors,
secondary care clinics in U.S. cities where it has established, or intends to
establish, a refractive clinic. The Company believes that the acquisition of
secondary care clinics in U.S. cities where it manages refractive clinics and
has established a network of affiliated doctors will place TLC in a strong
competitive position to obtain managed care contracts. The operation of both
refractive and secondary care clinics in a single geographical center may result
in operating efficiencies which each clinic might not be able to achieve
individually, including purchasing economies of scale and more efficient use of
equipment and personnel. If achieved, such operating efficiencies should enable
the clinics to provide a range of eye care services at a lower cost than
competing service providers. Acquisitions of existing clinics will also create
an extended patient base, allowing each clinic to increase awareness of its
services among clients of the other.
The Company's strategy is to acquire secondary care clinics for a purchase
price based upon a multiple of earnings satisfied through a combination of cash
and stock of the Company. The Company has entered into two letters of intent
to acquire secondary care clinics. The first letter of intent, with Eye Care
Physicians of Michigan, provides for the formation of a joint venture to
establish refractive clinics and secondary care clinics in Michigan. The second
letter of intent, with Britton Vision Associates, P.C., provides for the
formation of a joint venture to establish a secondary care clinic in Oklahoma.
MANAGED CARE
The Company believes that because of the economies of scale that will be
developed through the network of refractive and secondary care clinics, and the
geographic area that will be covered by the TLC network of affiliated doctors,
the Company will be in a strong competitive position to obtain managed care
contracts with Health Management Organizations ("HMOs"), insurance companies,
employer groups and other private third party payors.
The goal of TLC's managed care subsidiary, Partner Provider Health Inc.
("PPH"), is to implement a business model whereby eye care providers become true
partners in building successful managed care businesses. PPH develops local
partnerships in individual states through the creation of local practice
associations called VisionMeds. PPH has formed five such partnerships, with an
additional eleven expected to be formed within the next nine months. VisionMeds
are expected to expand the market share of affiliated eye care providers through
-5-
<PAGE>
successful contracting for the complete range of managed eye care products. TLC
secondary care clinics as well as TLC affiliated optometrists will be the
immediate beneficiaries of market share growth in managed care contracting by
PPH.
NETWORK CENTERS
The Company's network centers, located near TLC refractive clinics, provide
management services similar to those provided by refractive clinics, including
clinical training, patient education, marketing and network development.
Network centers support market development, without the need for large capital
expenditures. The network center is compensated by the affiliated clinic for the
management services it provides. Since June 1, 1996, the Company has opened 12
network centers with three additional centers under development.
INDUSTRY BACKGROUND
EXCIMER LASER PROCEDURES
The human eye, which is approximately 25 millimeters in diameter, functions
much like a camera. It incorporates a lens system that focuses light (the cornea
and the lens), a variable aperture system which regulates the amount of light
passing through the eye (the iris), and a film which records the image (the
retina). The excimer laser is designed to enable a doctor to treat two major
categories of vision disorders - refractive and pathological disorders.
Refractive disorders, such as nearsightedness, farsightedness and
astigmatism, result from an inability of the optic system to focus images on the
retina properly. The amount of refraction required to properly focus images
depends on the curvature of the cornea and the size of the eye. If the curvature
is not correct, the cornea cannot properly focus the light passing through it
onto the retina, and the viewer will perceive a blurred image. Refractive
disorders have historically been treated primarily by eyeglasses or contact
lenses. Increasingly, they are being treated by surgical techniques, the most
common of which in the U.S. is Refractive Keratectomy ("RK"). In the case of RK,
an ophthalmologist uses a scalpel to make a series of incisions around the
cornea in a radial pattern, resulting in a flattening of the corneal surface.
Unlike RK, excimer laser procedures are designed to reshape or sculpt the
outer layers of the cornea to correct vision disorders by changing its
curvature. For instance, in Photorefractive Keratectomy ("PRK"), the excimer
laser emits excimer laser pulses to remove submicron (a micron equals 0.001 of a
millimeter) layers of tissue from the surface of the cornea to reshape the front
surface of the cornea. PRK differs from RK in several respects. PRK depends
less on the surgical skill of the doctor and more on the accuracy of the excimer
laser. After one year, the appearance of an eye treated with PRK is typically
clear with no visible evidence of the PRK procedure. Because RK involves
incisions into the corneal tissue, it may weaken the structure of the cornea
which can have adverse consequences following traumatic injury. RK also produces
incisional scarring, and may cause fluctuation of vision and progressive
farsightedness. The Company believes that these considerations explain the
decrease in popularity of RK in markets in which PRK is available.
Laser-In-Situ Keratomileusis ("LASIK") is a procedure that came into
commercial use in Canada in 1994. LASIK combines a manual procedure that has
been performed for over ten years with the accuracy of a laser. In LASIK, a
surgical instrument called a microkeratome is used to
-6-
<PAGE>
create a thin flap on the surface of the cornea. Excimer laser energy is then
used to make a correction in the inner layers of the cornea, and the flap is
then replaced. The Company believes LASIK allows more precise correction than
PRK for higher levels of nearsightedness, farsightedness and astigmatism, with
greater predictability of results and decreased probability of regression.
In the case of PRK and LASIK, once the doctor makes an assessment of the
exact correction required, the software of the excimer laser system calculates
the optimal number of pulses needed to achieve the intended corneal correction
using a specially developed algorithm. The patient reclines in a chair, his or
her eye focuses on a fixation target, and the doctor positions the patient's
cornea for the excimer laser procedure. The doctor uses a foot pedal to deliver
the excimer laser beam, which emits a rapid succession of excimer laser pulses.
In the case of most excimer lasers, each excimer laser pulse removes
approximately 0.25 microns of corneal tissue, with each succeeding pulse
removing a slightly larger ring of tissue, up to 7.0 mm in diameter. The typical
procedure takes 10 to 15 minutes, from set-up to completion, with the length of
time of the actual excimer laser treatment running 15 - 90 seconds.
PRK and LASIK are done on an out-patient basis without general anesthesia,
and the progress of the eye is monitored in a series of follow-up visits.
Following PRK, a patient typically experiences blurred vision and discomfort
until the outer surface of the cornea heals, which usually occurs within 72 to
96 hours after the procedure has been performed. A patient usually experiences a
substantial improvement in clarity of vision within a few days following PRK,
normally seeing well enough to drive a car within one to two weeks. However, it
generally takes one month, but may take up to six months, for the full benefit
of the procedure to be realized. In the case of LASIK, the surface layer of the
cornea remains intact. Consequently, LASIK has the advantage of more rapid
visual recovery than PRK, with most typical patients seeing well enough to drive
a car the next day and healing completely within one to three months.
According to the two-year follow-up data accumulated by Summit Technology
Inc. ("Summit") during clinical trials performed in connection with FDA approval
of its excimer laser, all of the individuals undergoing PRK experienced an
improvement in visual acuity without corrective eyewear. Prior to PRK, 95% of
the eyes treated 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 or better.
REFRACTIVE CLINIC MARKET
While estimates of market size should not be taken as projections of
revenues or of the Company's ability to penetrate that market, the U.S.
Department of Health and Human Services estimates that approximately 90 million
people in the U.S. alone are nearsighted. Of those individuals, most
traditionally resort to non-surgical treatment. In 1993, industry sources
estimated that 60 million nearsighted persons used glasses or contact lenses to
correct their vision disorder, with approximately 90% of nearsighted persons
having low-level nearsightedness, which can be treated by excimer laser
procedures within the limitations imposed by the FDA on its approval for use of
an excimer laser in the U.S. It is also estimated that an additional 65 million
farsighted persons wear glasses or contact lenses to correct their vision
disorder. At present, the FDA has not
-7-
<PAGE>
approved the use of excimer lasers in the U.S. for treatment of farsightedness
but the Company is performing surgery to correct farsightedness at its TLC
Toronto clinic. (See "Government Regulation - Excimer Laser Regulation -
United States".) In 1994, industry sources estimated that U.S. consumers spent
approximately US$13 billion on eyeglasses and contact lenses. The Company
believes that with excimer laser procedures many of these people could reduce or
eliminate their reliance on corrective eyewear. In 1993, when PRK was not yet
available in the U.S., approximately 250,000 RK procedures were performed in the
U.S.
While the Company believes that many nearsighted and farsighted people are
potential candidates for excimer laser procedures, these procedures must compete
with corrective eyewear, RK and other surgical and non-surgical treatments for
nearsightedness and farsightedness. (See "Business of The Company -
Competition - Refractive Clinics - Consumer Market for Vision Correction".) The
decision to have an excimer laser procedure performed largely represents a
lifestyle choice dictated by an individual's desire to reduce or eliminate their
reliance on corrective eyewear, rather than a health decision. Nevertheless, the
Company believes that the market potential for excimer laser procedures is
commercially significant, and that many nearsighted and farsighted people will
perceive that excimer laser procedures have advantages over alternative
treatments.
SECONDARY CARE CLINIC MARKET
Secondary care clinic refers to a clinic which is equipped to enable
physicians to provide advanced levels of eye care, including eye surgery, for
the treatment of disorders such as glaucoma, cataracts and retinal disorders.
Generally, a secondary care clinic does not dispense eyewear or contact lenses,
perform refractions, or provide eye examinations or general diagnostic services.
Although it is difficult to estimate the size of the secondary care clinic
market, in 1994, industry sources estimated that ophthalmologists in the U.S.
performed in excess of 2.4 million major surgical procedures.
Sources of revenues for secondary care clinics are direct payments by
patients as well as reimbursement or payment by third party payors such as
Medicaid and Medicare. There have been recent reductions in the amounts
reimbursed by Medicaid and Medicare for eye care procedures. Future material
reductions in the amounts reimbursed by Medicaid and Medicare could affect the
profitability of secondary care clinics, including those managed by the Company.
The secondary care clinic market is in a period of consolidation as a
result of the recent focus on cost-containment by HMOs, insurance companies and
employer groups. To remain competitive in the changing medical service
environment, doctors are increasingly affiliating with larger organizations
which offer skilled and innovative management, negotiate contracts with payors
on behalf of their enrollees and provide sophisticated information systems,
greater capital resources and more efficient cost structures. Small to
mid-sized doctor groups and individual practices are at a relative disadvantage
in the changing eye care industry, as these smaller organizations typically lack
the capital to expand, develop information systems, purchase new technologies
and generate economies of scale. Additionally, small to mid-sized doctor groups
and individual practices often do not have formal ties with other providers nor
do they have the ability to offer a variety of medical services, thus reducing
their competitive position relative to larger organizations.
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MANAGED CARE MARKET
In the U.S., doctors have traditionally provided medical services to
individual patients on a fee-for-service basis, either through commercial
insurance or through Medicare or Medicaid. The fee-for-service model provides
few incentives for the efficient utilization of resources and has contributed to
increases in health care costs. Concerns over the accelerating cost of health
care have resulted in the increasing prominence of managed care and a decline in
fee-for-service medicine.
Under a typical managed care arrangement, a payor, such as an employer or
HMO, determines covered services and budgets funding for each area of clinical
service. Managed care organizations then bid for the opportunity to become the
supplier of the covered services for a fixed fee or rate. In 1995, according to
the U.S. Department of Labor, over 65% of employed Americans received health
insurance through a managed care organization, such as an HMO.
An HMO typically organizes the delivery of eye care by contracting with
organized groups of private practice optometrists and ophthalmologists. Eye
care procedures are typically a standard benefit provided by managed care
organizations. According to the American Association of Health Plans, in 1996,
over 91% of HMOs provided specific coverage for routine eye examinations.
However, the cost of excimer laser procedures has not been and is not expected
to be covered by the majority of HMOs or most other third party payors under
managed care contracts.
BUSINESS OF THE COMPANY
GENERAL
The Company is a provider of integrated eye care in North America,
specializing in excimer laser surgery to correct common refractive vision
disorders such as nearsightedness, farsightedness and astigmatism. The Company
develops and manages regional networks consisting of refractive laser clinics
and secondary care clinics in conjunction with a network of local doctors.
CO-MANAGEMENT STRATEGY
The Company believes that a true co-management model in which primary care
doctors work jointly with secondary care doctors results in optimal patient
care. TLC refractive clinics offer excimer laser procedures through co-operation
between the Company, the clinic and affiliated doctors. In most cases, excimer
laser procedures are performed by doctors under the terms of an agreement with
the TLC refractive clinic and the Company. (See "- Refractive Clinics" and "-
20/20 Acquisition".) The affiliated doctors assess candidates for excimer laser
procedures and provide pre- and post-operative care, including an initial eye
examination and a minimum of six follow-up visits. There are currently over
6,000 doctors affiliated with TLC in this manner.
In July, 1997, TLC acquired The Vision Source, Inc., a corporation that
provides marketing, management and buyer power to independently owned and
operated optometric franchises in the United States. The Vision Source, Inc.
maintains the goal of providing competitive purchasing power and marketing
opportunities to optometrists while allowing them to remain independent
practitioners. This retention of independence also makes The Vision Source,
Inc. an appealing concept for private practitioners when they begin to seek
affiliations in the managed care environment. The Vision Source, Inc. is
administered by practicing optometrists who have a clear view of the needs of
its members.
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The Company provides courses in co-management and practice management to
affiliated doctors and their staffs. Each TLC refractive clinic has a network of
affiliated doctors whose patients use the clinic, and it is intended that
doctors affiliated with each refractive clinic in the U.S. will have 50%
representation on the board of directors of the subsidiary that owns the clinic.
The Company intends to implement a co-management strategy for its secondary
care clinics. The Company believes that through its network of referring doctors
and its co-management strategy it will have a competitive advantage in both the
secondary care and managed care market in which affiliated service providers,
able to provide a range of eye care services at a lower cost than unaffiliated
providers, appear to be the most successful.
MARKETING RESOURCES
TLC provides marketing and practice management resources to assist
affiliated doctors with marketing their services to the general public. TLC's
marketing department designs advertising programs and templates that can be used
by clinics and affiliated doctors who are part of the TLC network.
INFORMATION TECHNOLOGY SYSTEMS
The TLC network of clinics and affiliated doctors are being linked by
information technology systems through (i) an on-line communication network;
(ii) practice management software; and (iii) the Internet.
On-line Communication System: The Company is implementing an on-line
communication system through Vision Corporation, which is owned 50.1% by the
Company, 39.8% by the ARM Group Inc., a software enterprise unaffiliated with
TLC, and 10.1% by Kelmar Corporation, a corporation controlled by Mr. Ronald J.
Kelly, a director and officer of the Company. It is intended that upon payment
of a modest on-line charge, affiliated doctors will be linked by computer with
the Company, suppliers and each other. The Company believes that the
communication system will become a key component of the TLC co-management
strategy by facilitating and reducing the cost of disseminating information
within TLC. The Company intends to allow its suppliers access to the
communication system in consideration for the payment of advertising fees and
anticipates that such suppliers will offer volume discounts to the affiliated
doctors linked to the communication system. The Company's clinics will also
benefit from any volume discounts that the affiliated doctors obtain from
on-line suppliers.
Practice Management Software: The emergence of managed care has increased
the need for information collection, analysis and management throughout the
entire health care industry so that providers can better quantify the revenues
and expenses associated with managed care contracting. Information management
systems are moving beyond traditional systems that focus primarily on billing,
insurance and simple financial management, and are moving towards computerized
cost management, medical charting, quality control issues and clinical outcomes
analysis, with a particular emphasis on evaluating the risks and profitability
of managed care contracts. The Company is implementing a software system
designed to facilitate the financial reporting process and the transfer of
information relating to practice management, cost analysis and patient outcomes.
The Company believes that the practice management software will enhance the
quality and efficiency of care provided by TLC because it will enable TLC to
assess the results of procedures through the use of medical charting and
clinical outcomes analysis, and thereby identify the need
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for adjustments to training or other practice management initiatives of TLC. The
Company also believes that its ability to attract managed care contracts in
respect of its secondary care clinics will be enhanced because this type of
practice management software will allow TLC to track the statistical information
required by managed care contract providers.
Internet: Doctors, prospective patients and other on-line users can access
TLC's Web sites on the Internet (www.lasercenter.com/tlc and www.lzr.com). In
addition to a directory of TLC care providers, the Web sites offer co-management
information for affiliated doctors as well as information for prospective
patients. The Web sites also have a doctor "sysop" - a doctor experienced in
excimer laser use who answers questions and sources information about refractive
procedures. The Company recently entered into an agreement with America Online
to enable doctors affiliated with TLC to have access to TLC's Web sites.
NATIONAL ADVISORY COUNCIL
The Company's National Advisory Council (the "Advisory Council") is
comprised of doctors that represent the geographic centers in which TLC
currently manages or intends to manage a clinic. By providing regional
representation, the Advisory Council serves as a channel of communication to
doctors in the cities in which TLC manages or intends to manage a clinic. The
Advisory Council advises the Company on a broad range of clinical and strategic
issues, and its feedback is incorporated in the Company's strategic development.
TRAINING
All doctors who perform excimer laser procedures at TLC refractive clinics
are given the opportunity to attend the Company's comprehensive training program
conducted under the supervision of Dr. Jeffery Machat or Dr. Steven Slade.
Dr. Machat and Dr. Slade are the Co-National Medical Directors of TLC, and both
are prominent ophthalmologists and experts in the field of excimer laser
procedures. Both have been working with excimer lasers since 1990, and have
lectured and trained doctors in North America, South America, Europe, South
Africa, Australia and Asia. Dr. Machat was the first surgeon proficient with the
excimer lasers of all three of the following manufacturers: Summit, VISX and
Technolas GmbH ("Technolas") (acquired by Chiron Vision Corporation ("Chiron")).
In addition, Dr. Machat and Dr. Slade are qualified by Chiron to certify doctors
to perform LASIK procedures.
EDUCATION
The Company believes that ophthalmologists, optometrists and other eye care
professionals who endorse excimer laser procedures are a valuable resource in
increasing general awareness and acceptance of the procedures among potential
candidates and in promoting the Company as a service provider. The Company seeks
to be perceived by eye care professionals as the leading provider of excimer
laser eye surgery. One way in which it hopes to achieve this objective is by
participating in the education and training of ophthalmologists and optometrists
in Canada and the U.S. In 1997, the Company devoted approximately $54,000
($100,000 in 1996 and US$200,000 in 1995) to educational initiatives. Most of
this expenditure is attributable to educational programs for eye care
professionals conducted through the TLC Continuing Education Foundation (the
"Foundation").
The Company established the Foundation in November 1994 to provide
educational programs to doctors in all aspects of clinical study, primarily in
conjunction with certain U.S.
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universities. The Foundation, a non-profit organization, has developed
co-management courses in conjunction with the optometry schools at Northeastern
State University in Oklahoma, the University of Alabama at Birmingham and the
Pacific University in Oregon. The Foundation was established with funding of
US$150,000 from the Company. The Company expects that the Foundation will be
able to operate without any significant additional funding from the Company in
future.
The TLC Windsor and TLC Tulsa clinics are state-of-the-art teaching
facilities. Each clinic occupies over 5,000 sq. ft., and is equipped with
advanced clinical equipment and audio-visual technology. The TLC Windsor clinic
was used by Chiron, a major manufacturer of excimer lasers, as one of its
teaching facilities for ophthalmologists learning to use the excimer laser.
Dr. Machat also teaches courses on PRK and LASIK for ophthalmologists at the TLC
Windsor clinic. The TLC Tulsa clinic is used by the Company to provide training
in the use of medication for eye care and diagnostic, therapeutic and excimer
laser procedures.
On April 7, 1997, the Company entered into a letter of intent with the
School of Optometry at the University of Waterloo to establish a joint venture
at the clinic located at the School of Optometry whereby TLC will provide
training to students. It is expected that the joint venture will enhance
general awareness of refractive procedures.
REFRACTIVE CLINICS
In Canada, the Company manages five refractive clinics in Ontario, New
Brunswick, and British Columbia. In the U.S., the Company manages 27 refractive
clinics (including three with secondary care operations), including 20/20
clinics, in Oklahoma, Indiana, South Carolina, Washington, Colorado, California,
Florida, Wisconsin, Illinois, Ohio, Tennessee, Maryland, New York, New Jersey,
Pennsylvania, Montana, North Carolina, Massachusetts, and Virginia. Schedule A
of this AIF contains a brief description of each TLC clinic. (See "- 20/20
Acquisition" for a description of 20/20 clinics.)
PRK and LASIK have been performed at TLC refractive clinics in Canada since
1993 and 1994 respectively. LASIK now accounts for a majority of procedures
performed at TLC refractive clinics, and Dr. Machat, the Co-National Medical
Director, has performed more LASIK procedures than any other doctor in North
America. The Company believes that LASIK procedures will continue to constitute
the major portion of the procedures performed at TLC clinics in Canada.
The charge per eye for the excimer laser procedures (including all
necessary enhancements) is approximately $2,000 to $2,250 for PRK and $2,400 to
$2,750 for LASIK (U.S. residents pay fees in US$). The cost of excimer laser
procedures is not covered by provincial health care plans in Canada or
reimbursable under Medicare or Medicaid in the U.S. and is not expected to be
covered by the majority of HMOs or most other third party payors under managed
care contracts.
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Most doctors performing excimer laser procedures at TLC refractive clinics
do so under one of three types of standard agreements (which have been modified
for use in the U.S. as required by State law): professional services/full
service management agreements ("Level I Agreements"), professional
service/partial service management agreements (Level II Agreements), or facility
use agreements ("Level III Agreements").
Under Level I Agreements, doctors ("Level I doctors") contract to carry out
excimer laser procedures at the clinic and to provide other management services
for co-managed patients and TLC agrees to provide certain management and
administrative services. The doctor typically retains a fee of approximately
$300 per procedure (approximately US$300 for U.S. residents) and TLC earns a fee
of approximately US$1,300 to US$1,600 for its facility and management services.
The terms of the Level I Agreements typically prohibit Level I doctors from
disclosing confidential information relating to the clinic, soliciting patients
or employees of the clinic, or participating in any other refractive clinic
within a specified area. Level I doctors are responsible for maintaining
appropriate malpractice insurance, and agree to indemnify the Company and its
affiliates for any losses incurred as a result of the doctor's negligence or
malpractice.
Level II Agreements are similar to Level I Agreements except that TLC
agrees to provide a more limited range of management services to the doctor, and
the doctor typically performs pre - and post-operative care on his/her own
patients, rather than co-managing patients. The doctor typically retains a fee
of approximately US$500 for PRK surgery and US$750 for LASIK surgery and an
additional approximately US$400 for pre - and post-operative care. TLC
typically earns a fee of approximately US$1,100 to US$1,300 for its facility and
management services.
Under Level III Agreements, the Company grants facility use rights to
doctors ("Level III doctors") to perform procedures on the doctor's own
patients. TLC does not provide management services under these agreements. The
Level III doctors pay the refractive clinic fees in the range of $750 to $1,000
for each of the first eight excimer laser procedures and in the range of $600 to
$800 for each additional excimer laser procedure performed by them in any one
month (US$750 to US$1,000 and US$600 to US$800, respectively, for U.S.
residents). Level III doctors are responsible for their patients' pre- and
post-operative care, and agree to indemnity, insurance and confidentiality
provisions similar to those in the Level I Agreements.
Doctors must meet the credentialing requirements of the FDA and the TLC
refractive clinic in which they perform procedures and, before performing
procedures, complete training provided by the Company unless the Company is
otherwise satisfied that the doctor has been properly trained.
Where permissible under applicable laws, the subsidiaries incorporated to
operate some refractive clinics may issue minority equity interests to
affiliated doctors. The shares of the relevant subsidiary through which
additional clinics are opened will generally be held pursuant to a shareholders'
agreement that may include, among other things, a buy-sell provision and other
buy-out rights in favor of doctors. In addition, the Company anticipates that at
most refractive clinics opened in the U.S., the affiliated doctors will
designate 50% of the directors of the subsidiary and the affiliated doctors who
are shareholders of the subsidiary will designate that portion of the directors
that corresponds to their percentage ownership in the subsidiary.
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20/20 ACQUISITION
On February 10, 1997, the Company acquired 99.9% of the shares of 20/20 for
a purchase price of $31,642,211, satisfied by the issuance of 4,364,443 Common
Shares of the Company at a price of $7.25 per share. An additional 385,000
Common Shares may be issued at a price of $7.25 per share as 20/20 stock options
are exercised. A majority of the Common Shares issued in connection with the
acquisition are being held in escrow by the Company for at least a one year
period from February 10, 1997, with Common Shares owned by insiders of 20/20
being held in escrow for up to a two year period from February 10, 1997, in each
case to indemnify the Company in the event of a breach of the representations
and warranties made by 20/20.
20/20 manages eight refractive clinics located in Maryland, New York,
Florida, New Jersey, Pennsylvania and Virginia.
Doctors in the 20/20 network provide excimer laser services under a Surgeon
Agreement or an Optometrist Agreement. Under Surgeon Agreements, doctors perform
excimer laser procedures on patients from the doctor's own practice (in which
case, the doctor may perform pre- and post-operative care), on patients referred
by 20/20 optometrists (in which case, the patient is co-managed with the
optometrist performing pre-and post-operative care), and on patients referred to
the doctor through 20/20's marketing efforts. A 20/20 doctor is paid US$500 per
eye for each excimer laser procedure and US$500 for pre- and post-operative care
for patients that are not co-managed with an optometrist. Under Optometrist
Agreements, a 20/20 optometrist performs pre- and post-operative care for
patients treated by 20/20 doctors and is paid a fee of US$500.
20/20's agreements with doctors typically prohibit doctors from disclosing
confidential information relating to the clinic or from soliciting patients or
employees from the clinic, or participating in other refractive clinics in
competition with the 20/20 clinic (except that a 20/20 doctor is not prohibited
from performing procedures at a hospital where the doctor has privileges). All
doctors are responsible for maintaining appropriate malpractice insurance, and
agree to indemnify the 20/20 clinic and its affiliates for any losses incurred
as a result of the doctor's negligence or malpractice.
SECONDARY CARE CLINICS
The Company manages secondary care clinics at which doctors offer treatment
for a range of vision disorders, including cataracts, glaucoma and retinal
disorders. In connection with each of its secondary care clinics, TLC has
entered into long term practice management agreements. Pursuant to these
agreements, TLC manages the doctors' practices at these clinics (including
providing administrative services and support staff) and receives a management
fee.
The Company manages five secondary care clinics in the U.S. (including
three that are also refractive clinics): one in Washington, one in South
Carolina and three in Illinois.
TLC Northwest Eye: On March 25, 1996, the Company acquired all of the
shares of TLC Northwest Eye, a corporation operating the Northwest Eye Center,
located in Seattle, Washington, the operations of which were managed by the
Company pursuant to a management agreement commencing January 1, 1996. TLC
Northwest Eye includes an ambulatory surgical center operated at the principal
practice location, at which ophthalmologic surgeries are performed, and three
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satellite practice locations. TLC Northwest Eye draws patients from Washington
and British Columbia. In connection with the acquisition, a professional service
corporation owned by doctors (who were the shareholders of TLC Northwest Eye and
currently perform surgical procedures at the clinic) entered into a practice
management agreement with TLC Northwest Eye for a period of 40 years.
TLC Piedmont: The Company's clinic in Greenville, South Carolina, which
opened in June 1996, includes secondary care operations which are directed by
Dr. Jonathan Woolfson.
TLC Chicago: In October, 1996, TLC Chicago acquired capital assets from
Horn Eye Centers Ltd. of Chicago, Illinois for a purchase price of US$92,400.
In connection with this acquisition, Horn Eye Centers, Inc. entered into a
practice management agreement with TLC Chicago whereby TLC Chicago manages the
practice at the clinic for a period of twenty years in return for management
fees at predetermined rates which vary according to the revenues of the
practice.
TLC Midwest Eye: On January 1, 1997, TLC Midwest Eye acquired all the
assets of Midwest Eye Institute, Inc., which operates two clinics located in
Palos Heights and Westchester, Illinois (suburban Chicago). The acquisition was
completed for a purchase price of US$1,506,000. TLC Midwest Eye draws on a
local network of over 300 co-managing doctors. In connection with this
acquisition, Midwest Eye Institute II, Inc., a professional services
corporation, entered into a practice management agreement with TLC Midwest Eye
for a period of 20 years.
MANAGED CARE
PPH, owned 90% by TLC The Laser Center (Delaware) Inc. ("TLC U.S.") and 10%
by Dr. Barry Barresi, a director of the Company, began operations in the second
quarter of 1996. PPH's management team is comprised of the following executives
who have held leadership positions in health care service facilities, academic
health centers and managed care companies:
Barry J. Barresi, OD, PhD President and Chief Executive Officer
Kathy L. Wood, MBA Chief Operating Officer
Arthur Roberts, MBA Chief Financial Officer
James Owen, OD, MBA Director, VisionMed Division
Richard A. Radin Director, Management Services
PPH, in conjunction with local doctors, develops and manages Independent
Practice Associations and Specialty Services Organizations as regional companies
that serve health plans, other managed care organizations and health care
purchasers. These local managed care companies are administered from the PPH
corporate office, which provides information technology, sales and marketing
assistance and professional relations.
PPH will receive a fee from payors for performing the following management
services: national sales and marketing; claims adjudication; provider network
administration support; capitation payment design and related product
development; utilization management; quality improvement systems; compliance
reporting; and member satisfaction survey research.
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PPH entered into a letter of intent with Northwest Health Partners, a
physician hospital organization in Seattle, Washington, which provides that PPH
will provide management services to Northwest Health Partners commencing in
January 1998. PPH is expected to incur net losses for 1997 as a result of
development expenses, including staff wages and benefits, professional fees, and
other administrative expenses, incurred in securing managed care agreements and
other revenue-generating management services relationships.
PPH has executed a letter of intent with Primary Eyecare Group, Inc.
("PEG"), an independent practice association, to form a new company called
VisionMed MidAtlantic. VisionMed MidAtlantic will arrange for the provision of
eye and vision care services and administer eye and vision care contracts in
Virginia, Maryland and Washington, D.C. The letter of intent provides that PPH
will assume the administration of PEG's routine vision contract with Aetna
Health Plans of the Mid-Atlantic and Aetna Health Management effective October
1, 1997.
COMPETITION
REFRACTIVE CLINICS
The Company competes in two principal markets: (i) the consumer market for
vision correction and (ii) the market for excimer laser service providers.
Consumer Market for Vision Correction: Within the consumer market, excimer
laser procedures performed by the Company's clinics compete with other surgical
and non-surgical treatments for refractive disorders, including eyeglasses,
contact lenses, other types of refractive surgery including RK, and technologies
currently under development such as corneal implants and intraocular implants
and surgery with different types of lasers. In the foreseeable future, the
Company believes that eyeglass and contact lens use will continue to be the most
popular alternative to PRK and LASIK. Advantages of corrective eyewear include
the comparatively low immediate cost (although the Company believes that
eyeglass and contact lens wearers may spend well in excess of the cost of PRK or
LASIK over their lifetimes) and the avoidance of surgery. It is likely that
eyeglass and contact lens manufacturers, many of whom have greater financial
resources than the Company, will continue to develop, enhance and market their
products to make them as attractive as possible to people with refractive vision
disorders. Other manual surgical and non-surgical techniques to treat vision
disorders are currently in use and under development and may prove to be more
attractive to consumers than PRK or LASIK.
Market for Excimer Laser Service Providers: Within the market for excimer
laser service providers, the Company faces competition from other service
providers. Other service providers include companies with operations similar to
the Company, optometrists (whether individually, in groups or as retail chains),
ophthalmologists, hospitals and managed-care entities which, in order to offer
refractive surgery to existing patients, may purchase excimer lasers directly
from a manufacturer. Suppliers of conventional corrective refractive mediums
(eyeglasses and contact lenses), such as optometric chains, may also compete
with the Company by purchasing excimer lasers and offering refractive surgery to
their customers. These service providers may have greater capital resources than
the Company and may be able to offer refractive surgery at lower rates.
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The Company's principal competitors include Laser Vision Centers, Inc.,
Sight Resource Corporation, BeaconEye Inc., LaserSight Centers, Sterling Vision,
Laser Centers of America Inc., LCA Vision Inc. and Physicians Resource Group
Inc.
SECONDARY CARE CLINICS
The secondary care clinic market is in a period of consolidation. The
Company believes that companies with established operating histories and greater
resources than the Company may be pursuing the acquisition of secondary care
clinics. The Company's principal competitors include Physician Resource
Group, Inc., PrimeVision and Omega Health Services Inc. Some hospitals, clinics,
health care companies, HMOs and insurance companies engage in activities similar
to the activities of the Company. There can be no assurance that the Company
will be able to compete effectively with such competitors, that additional
competitors will not enter the market, or that such competition will not make it
more difficult to acquire the assets of, and provide management services to,
secondary care clinics on terms beneficial to the Company.
TLC secondary care clinics will compete with local eye care service
providers as well as managed care organizations. The Company believes that
changes in government and private reimbursement policies and other factors have
resulted in increased competition for consumers of medical services. The Company
believes that the cost, accessibility and quality of services provided are the
principal factors that affect competition. There can be no assurance that the
TLC secondary care clinics will be able to compete effectively in the markets
that they serve, which inability to compete could adversely affect the Company's
business, financial condition and results of operations.
Further, the TLC secondary care clinics will compete with other providers
for managed care contracts. The Company believes that trends toward managed care
have resulted in increased competition for such contracts. There can be no
assurance that the Company and the TLC secondary care clinics will be able to
successfully acquire sufficient managed care contracts to compete effectively in
the markets they will serve, which inability to compete could adversely affect
the Company's business, financial condition and results of operations.
MANAGED CARE
In the market for managed eye and vision contracting the Company competes
with Vision Service Plan, a national eye care plan, and three regional market
managed care plans, Davis Optical, Block Managed Vision Care and Eye Health
Network of Omega Health Systems, Inc. In addition, physician practice
management companies, such as EyePA Inc. (a subsidiary of Physicians Resource
Group, Inc.), NovaMed, Inc., Prime Vision, Inc., MEC (a subsidiary of LaserSight
Inc.) and Vision21 Inc. have been formed to seek managed care contracts on
behalf of their acquired ophthalmic practices and may compete with PPH. There
can be no assurance that the Company will be able to compete effectively with
such competitors, that additional competitors will not enter into the market, or
that such competition will not make it more difficult for the Company to obtain
managed care contracts.
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MARKETING
The Company's marketing efforts are concentrated on joint marketing
programs with affiliated doctors with the goal of encouraging the use of TLC
clinics. The Company believes that the most effective way to market to doctors
is to be perceived as the leading provider of quality eye care. To this end the
Company actively participates in the education of doctors on excimer laser
procedures and strives to remain current with new procedures and techniques.
(See " - Co-Management Strategy".) The Company also promotes its services to
doctors in Canada and the U.S. through conferences, advertising in optometric
and ophthalmological journals and quarterly newsletters.
The Company provides a limited amount of marketing directly to members of
the public, who are informed of the Company's services through radio and print
advertisements, past patient referrals, videos, brochures and seminars.
PROPERTY LEASES, EQUIPMENT AND CAPITAL FINANCING
PROPERTY LEASES
The Company operates its business in leased premises. The leases are
negotiated on market terms and typically have a term of five to ten years.
EQUIPMENT AND CAPITAL FINANCING
VISX excimer lasers cost approximately US$525,000 per machine. The Company
expects to upgrade the excimer lasers at each of the existing Canadian
refractive clinics within five years. The Company acquires excimer lasers and
other equipment used at its clinics under capital lease arrangements.
The lasers require periodic servicing, generally after 300 procedures, and
the annual cost of servicing is dependent on the number of procedures performed.
For example, the Company pays on average $75 per procedure for servicing of the
laser in the TLC Windsor clinic. The VISX lasers used in the U.S. clinics are
currently covered under one or two-year warranties which include servicing but
the Company expects to incur equivalent servicing costs to those in Windsor in
connection with the VISX lasers once the warranties expire.
When excimer laser procedures are performed in the U.S., the Company is
required to pay a user fee to Pillar Point Partners ("Pillar Point") which is
currently in the amount of US$260 for each excimer laser procedure performed.
Pillar Point is a partnership formed by VISX and Summit to license U.S. patents
covering methods and apparatus for performing excimer laser procedures in return
for per procedure royalties and royalties on equipment sales. To the Company's
knowledge, Pillar Point is being investigated by the U.S. Federal Trade
Commission for potential anti-trust violations and has been challenged in two
civil actions as an illegal arrangement.
There can be no assurance that payments made to Pillar Point in the U.S.
will preclude a patent dispute with either VISX or Summit with respect to
technology not covered by the relevant patents or that the Company's activities
will not infringe patents held by other parties.
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GOVERNMENT REGULATION
EXCIMER LASER REGULATION
CANADA
The use of excimer lasers in Canada to perform refractive surgery is not
subject to regulatory approval, and excimer lasers have been used to treat
nearsightedness since June, 1990. However, the HPB regulates the sale of
devices, including excimer lasers used to perform procedures at the Company's
refractive clinics. Pursuant to the regulations prescribed under the Food and
Drugs Act, the HPB may permit manufacturers or importers to sell a certain
number of devices to perform procedures provided the devices are used in
compliance with specified requirements for investigational testing. Permission
to sell the device may be suspended or canceled where the HPB determines that
its use endangers the health of patients or users or where the regulations have
not been complied with. Devices may also be sold for use on a
non-investigational basis where evidence available in Canada to the manufacturer
or importer substantiates the benefits and performance characteristics claimed
for the device. The HPB has conditionally approved the sale of the VISX excimer
laser to perform procedures for mild to moderate nearsightedness and low level
astigmatism on a non-investigational basis. The Company believes that the sale
of the excimer lasers to its refractive clinics, and their use at the clinics,
complies with HPB requirements.
UNITED STATES
Medical devices, such as the excimer lasers used in the Company's clinics,
are subject to the most stringent form of regulation and oversight by the FDA
and cannot be marketed for commercial sale in the U.S. until the FDA grants
premarket approval ("PMA") for the device.
To obtain a PMA for a medical device, excimer laser manufacturers must file
a PMA application that includes clinical data and the results of pre-clinical
and other testing sufficient to show that there is a reasonable assurance of
safety and effectiveness of their excimer lasers. Human clinical trials must be
conducted pursuant to Investigational Device Exemptions issued by the FDA in
order to generate data necessary to support a PMA.
In the U.S., Summit and VISX are currently the only excimer laser
manufacturers to have obtained a PMA for their respective excimer lasers to
treat nearsightedness using PRK. The Summit PMA, which was granted in October
1995, limits the use of the excimer laser within a six millimeter ablation zone
to correct mild to moderate nearsightedness between -1.5 and -7.0 diopters with
astigmatism no greater than 1.5 diopters. As a result of the limits placed on
the approval, the Summit excimer laser is not authorized for use in the U.S. to
treat more severe cases of nearsightedness and astigmatism. In March, 1996, VISX
obtained FDA approval for PRK use of its excimer laser subject to similar use
limitations as those applicable to the Summit excimer laser. While the
performance of LASIK is currently the subject of a study by the FDA and while
excimer lasers are not yet approved for LASIK by the FDA, doctors in the U.S.,
including those affiliated with TLC refractive clinics, are performing LASIK on
an "off-label" basis, as permitted by applicable law.
Any excimer laser manufacturer which obtains PMA approval for use of its
excimer lasers will continue to be subject to regulation by the FDA. The FDA
actively enforces regulations prohibiting marketing of products for
non-indicated uses and conducts periodic inspections to
-19-
<PAGE>
determine compliance with good manufacturing practice regulations. Failure to
comply with applicable regulatory requirements can result in, among other
things, fines, suspensions or delays of approvals, seizures or recalls of
products, operating restrictions or criminal prosecutions.
In addition to the requirements described above, the regulatory
requirements that the Company must satisfy to conduct its business will vary
from state to state, and, accordingly, the manner of operation by the Company
and the degree of control over the delivery of refractive surgery by the Company
may differ among the states. The Company intends to comply with all regulatory
requirements that will be applicable.
The marketing and promotion of PRK in the U.S. is subject to regulation by
the FDA and the Federal Trade Commission ("FTC"). The FDA and FTC have released
a joint communique on the requirements for marketing PRK in compliance with the
laws administered by both agencies. The FTC staff also issued more detailed
staff guidance on the marketing and promotion of PRK and has been monitoring
marketing activities in this area through a non-public inquiry to identify areas
that may require further FTC attention.
On April 25, 1997, VISX announced that its laser treatment for astigmatism
received approval from the FDA. There can be no assurance if or when the FDA
will grant its approval with respect to the use of excimer lasers to treat
severe myopia or hyperopia, which could adversely affect the Company's ability
to achieve its business projections.
REGULATION OF OPTOMETRISTS AND OPHTHALMOLOGISTS
CANADA
Conflict of interest regulations in certain Canadian provinces prohibit
ophthalmologists or corporations owned or controlled by them from receiving
benefits from suppliers of medical goods or services to whom the ophthalmologist
refers his or her patients. In certain circumstances, these regulations deem it
a conflict of interest for an ophthalmologist to order a diagnostic or
therapeutic service to be performed by a facility in which the ophthalmologist
has any proprietary interest. This does not include a proprietary interest in a
publicly traded company. Optometrists are also subject to conflict of interest
regulations in Canada. TLC expects that ophthalmologists and optometrists
affiliated with TLC will comply with the applicable regulations.
The laws of certain Canadian provinces prohibit health care professionals
from splitting fees with non-health care professionals and prohibit non-licensed
entities (such as the Company) from practicing medicine or optometry and, in
certain circumstances, from employing physicians or optometrists directly. The
Company believes that its operations comply with such laws, and expects that
doctors affiliated with TLC clinics will comply with such laws, although it
cannot ensure such compliance by doctors.
Optometrists and ophthalmologists are subject to varying degrees and types
of provincial regulation governing professional misconduct, including
restrictions relating to advertising, and in the case of optometrists, a
prohibition against exceeding the lawful scope of practice. In Canada, excimer
laser surgery is not within the permitted scope of practice of optometrists.
Accordingly, TLC does not allow optometrists to perform the procedure at TLC
clinics in Canada.
-20-
<PAGE>
UNITED STATES
The health care industry in the U.S. is highly regulated. The Company's
business is subject to both federal and state laws.
Federal Law:
A federal law (known as the "anti-kickback law") prohibits the offer,
solicitation, payment or receipt of any remuneration which is intended to
induce, or is in return for, the referral of patients for, or the ordering of,
items or services reimbursable by Medicare or any other federally financed
health care program. This law also prohibits remuneration intended to induce
the purchasing of, or arranging for, or recommending the purchase or order of
any item, good, facility or service for which payment may be made under federal
health care programs. This law has been applied to otherwise legitimate
investment interests if one purpose of the offer to invest is to induce
referrals from the investor. Safe harbor regulations provide absolute protection
from prosecution for certain categories of relationships. In addition, a recent
law broadens the government's anti-fraud and abuse enforcement responsibilities
to include all health care delivery systems regardless of payor.
Subject to certain exceptions, federal law also prohibits a physician from
ordering or prescribing certain designated health services or items if the
service or item is reimbursable by Medicare or Medicaid and is provided by an
entity with which the physician has a financial relationship (including
investment interests and compensation arrangements). This law, known as the
"Stark law," does not restrict a physician from ordering an item or service not
reimbursable by Medicare or Medicaid or an item or service that does not fall
within the categories designated in the law.
PRK and LASIK are not reimbursable by Medicare, Medicaid or other federal
programs. As a result, neither the anti-kickback law nor the Stark law applies
to the Company's refractive clinics.
The Company's secondary care clinics provide services that are reimbursable
under Medicare and Medicaid. However, the Company believes that it has
structured its relationships to comply with the anti-kickback law and the Stark
law. Changes in the interpretation and enforcement of the existing regulatory
requirements or the adoption of new requirements could have a material adverse
effect on the Company's business, financial condition and results of operation.
State Law:
Laws in some states prohibit the offer or receipt of anything of value in
return for referring patients or in return for the ordering or prescribing of
health care items or services. Often, these laws are modeled on the federal
anti-kickback law, which applies only to Federal programs; however, the law may
apply to all payors in some states. Many states have self-referral laws which
generally restrict a doctor from referring a patient to or ordering certain
tests from a facility or entity in which the doctor has a financial interest.
These laws also apply to all payors, but the scope of the laws and the detailed
exceptions vary significantly from state to state. The Company believes that
its operations comply with the laws in the states in which they operate,
including anti-kickback and self-referral legislation.
-21-
<PAGE>
Some states have a corporate practice of medicine doctrine which prevents a
business corporation from providing medical services. In some states, this
restriction prohibits business corporations from employing physicians to provide
professional services. In other states, a business corporation is prohibited not
only from employing physicians, but also from exercising responsibility that may
influence how medical services are delivered. Optometrists and ophthalmologists
are also subject to varying degrees and types of professional regulation
governing unprofessional conduct with respect to certain matters including
professional fee-splitting, and in the case of optometrists, their ability to
perform excimer laser procedures, to advertise and to contract with
ophthalmologists to provide pre- and/or post-operative care. The Company
believes that its operations comply, and expects that doctors affiliated with
TLC clinics will comply, with such regulations, although it cannot assure such
compliance by doctors.
FACILITY LICENSURE AND CERTIFICATE OF NEED
The Company may be required to obtain licenses from the State Departments
of Health, or a division thereof in the various states in which it opens TLC
clinics. The Company has no reason to believe that in those states that require
such facility licensure, it will be not able to obtain such a license without
unreasonable expense or delay.
Some states require the permission of the State Department of Health or a
division thereof, such as a Health Planning Commission, in the form of a
Certificate of Need ("CON") prior to the construction or modification of an
ambulatory care facility, such as a laser center, or the purchase of certain
medical equipment in excess of an amount set by the state. While there can be no
assurance that the Company will be able to acquire a CON in all states where a
CON is required, the Company has no reason to believe that in those states that
require a CON, it will not be able to do so.
The Company is not aware of any Canadian health regulations which impose
licensing requirements on the operation of refractive clinics.
MANAGED CARE
Managed care contracting, provider network operations and related
management services are regulated in the U.S. by both federal and state
authorities. PPH has obtained or will obtain all required federal and state
permits, licenses and bonds it believes are necessary to operate its VisionMed
subsidiaries and to function as a managed care company in the markets in which
it is developing business. In states where an insurance license is required by
a provider relationship or payor contract, PPH or the local VisionMed subsidiary
or partnership will have such business underwritten by an appropriate licensed
insurer. Managed care is also impacted by the federal anti-kickback and
anti-self-referral legislation and by federal anti-trust laws. PPH intends to
structure its local partnerships with providers to comply with these laws in all
of the markets in which it intends to conduct business.
-22-
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
For the years ended May 31
(in thousands of Canadian dollars, except per share amounts)
(audited)
<TABLE>
<CAPTION>
1997 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net Revenues $29,303 $9,363 $4,592 $1,083
Expenses 36,633 9,722 3,877 859
Share of loss of affiliated companies 212 241 - -
------- ------ ------ ------
Income (loss) from operations (7,542) (600) 715 224
Development and start up expenses 6,253 2,308 1,506 205
------- ------ ------ ------
Income (loss) before income taxes (13,795) (2,908) (791) 19
Income taxes 154 (24) 45 40
------- ------ ------ ------
Net Income (loss)
(13,949) (2,884) (836) (21)
------- ------ ------ ------
------- ------ ------ ------
Net Income (loss) per share
(0.68) (0.23) (0.08) (0.00)
------- ------ ------ ------
------- ------ ------ ------
Weighted average number of Common
Shares outstanding 20,617,104 12,796,579 10,134,078 10,000,000
1997 1996 1995 1994
---- ---- ---- ----
BALANCE SHEET DATA:
Cash and short-term deposits $20,977 $4,143 $579 $135
Working capital 13,382 2,412 (292) (223)
Total assets 107,501 24,506 2,953 1,320
Total debt, net of current position 15,933 4,523 1,298 816
Shareholders' equity 74,862 15,920 603 (21)
Capital stock 92,552 19,661 1,460 (-)
------- ------ ----- -----
Retained earnings (deficit) (17,690) (3,741) (857) (21)
------- ------ ----- -----
------- ------ ----- -----
</TABLE>
-23-
<PAGE>
For the three month periods ended
(in thousands of Canadian dollars, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
1997 1996
-----------------------------------------------------------------------------------------------------
Aug. 31 Nov. 30 Feb. 28 May 31 Aug. 31 Nov. 30 Feb. 29 May 31
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Revenues $4,912 $5,428 $6,474 $12,489 $1,795 $1,679 $3,034 2,564
Expenses 4,805 6,385 8,306 17,136 1,765 1,204 3,273 2,488
Share of loss of
affiliated companies 28 122 4 58 - - - 241
Income (loss) from
operations 79 (1,079) (1,836) (4,705) 30 475 (239) (165)
Development and
start up expenses 794 1,535 1,582 2,342 159 1,066 413 1,370
Income (loss) before
income taxes (715) (2,614) (3,418) (7,047) (129) (591) (652) (1,535)
Income taxes 49 34 27 44 11 (11) 7 (31)
Net Income (loss) (764) (2,648) (3,445) (7,091) (140) (580) (659) (1,504)
Net Income (loss)
per share (0.05) (0.15) (0.16) (0.28) (0.01) (0.05) (0.06) (0.09)
Weighted average
number of common
shares outstanding 16,712,283 17,732,323 21,519,647 25,149,469 10,989,104 11,228,958 11,228,958 16,589,053
</TABLE>
DIVIDENDS AND DIVIDEND POLICY
The Company has never paid cash or other dividends. It is the policy of
the Board of Directors to retain earnings to finance the growth of the Company's
business. Payment of any dividends will depend on the financial condition,
results of operations and capital requirements of the Company as well as other
factors deemed relevant by the Board of Directors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Reference is made to management's discussion and analysis of financial
condition and results of operations on pages 17 to 22 of the Company's Annual
Report for the year ended May 31, 1997 which is incorporated herein by
reference.
-24-
<PAGE>
STOCK EXCHANGE LISTINGS
The common shares of the Company are listed for trading on The Toronto
Stock Exchange under the symbol "LZR" and the NASDAQ National Market under the
symbol "LZRCF" .
DIRECTORS AND OFFICERS
Directors of the Company hold office until the next annual meeting of
shareholders or until a successor is elected or appointed.
<TABLE>
<CAPTION>
NAME AND MUNICIPALITY OF POSITION WITH COMPANY PRINCIPAL OCCUPATION
------------------------ --------------------- --------------------
RESIDENCE
---------
DIRECTORS
---------
<S> <C> <C>
Elias Vamvakas . . . . . . . . Director (since May 1993)(1)(2) President, Chief Executive Officer of the Company
Richmond Hill, Ontario and Chairman of the Board of Directors
Dr. Jeffery J. Machat . . . . . Director (since May 1993)(1) Ophthalmologist and Co-National Medical Director
Richmond Hill, Ontario of the Company
James R. Connacher . . . . . . Director (since January 1996) Vice-Chairman, Gordon Capital Corporation
Toronto, Ontario (2)(3) (investment bank)
John F. Riegert . . . . . . . . Director (since June 1995)(1) Secretary of the Company
North York, Ontario
Howard J. Gourwitz . . . . . . Director (since June 1995) Attorney and Counselor-at-Law, shareholder of
Bloomfield Hills, Michigan (3)(4)(5) Gourwitz and Barr, P.C.
Dr. William David Sullins, Jr. Director (since June 1995)(2)(4) Optometrist and Vice-Chairman of TLC's National
Athens, Tennessee Advisory Council
Warren S. Rustand . . . . . . . Nominee Director Chairman, Rural/Metro Corporation (merchant
Tucson, Arizona bank and management consultant)
Ronald J. Kelly, . . . . . . . Director (since June 1995)(5) General Counsel and Vice-President Acquisitions
London, Ontario of the Company
Dr. David C. Eldridge, . . . . Director (since June 1995)(4)(5) Executive Vice-President, Clinical Affairs
Okmulgee, Oklahoma of the Company and Chairman of
TLC's National Advisory Council
Dr. Barry J. Barresi Director (since September 1996) President and Chief Executive Officer of PPH
OFFICERS
Madelaine Diane Walker, . . . Chief Operating Officer Officer of the Company
Mississauga, Ontario
Peter Kastelic, . . . . . . . Chief Financial Officer and Officer of the Company
Toronto, Ontario Treasurer
Frances K. Brotherhood, . . . Senior Vice-President - Officer of the Company
Fort Worth, Texas International
Gary F. Jonas, . . . . . . . . Senior Vice-President - Operations Officer of the Company
Bethesda, Maryland
-25-
<PAGE>
Anthony F. Rzepka, . . . . . . Director of Finance and Assistant Officer of the Company
Toronto, Ontario Treasurer
</TABLE>
- -------------------------------------------------------------------------------
(1) Mr. Vamvakas, Dr. Machat and Mr. Riegert are members of the
Corporation's Executive Committee.
(2) Mr. Vamvakas, Dr. Sullins and Mr. Connacher are members of the
Corporation's Nominating Committee.
(3) Dr. Machat, Mr. Gourwitz and Mr. Connacher are members of the
Corporation's Compensation Committee.
(4) Mr. Gourwitz , Dr. Sullins, Jr. and Dr. Eldridge are members of the
Corporation's Audit Committee.
(5) Mr. Gourwitz, Mr. Kelly and Dr. Eldridge are members of the
Corporation's Corporate Governance Committee.
Mr. Rustand has held his present principal occupation since 1997. For more
than five years prior to 1997, Mr. Rustand was Chairman and Chief Executive
Officer of The Cambridge Company Ltd., a merchant banking and management
consulting company. From 1994 to 1997, Mr. Rustand was also the Chairman of
20/20, which was acquired by the Company on February 10, 1997.
The articles of the Company authorize the Board of Directors to be
comprised of a number of directors between one and ten and the directors have
been authorized by the shareholders to determine the number from time to time
between that minimum and maximum. The Board of Directors resolved on September
25, 1997 that the number of directors to be elected at the annual and special
meeting of shareholders on October 30, 1997 will be seven, having regard to the
composition of the Board and the "Guidelines for Improved Corporate Governance"
contained in the Final Report of The Toronto Stock Exchange Committee on
Corporate Governance in Canada. Mr. Kelly, Dr. Eldridge and Dr. Barresi, all
officers of the Company, have not been nominated for re-election as directors.
ADDITIONAL INFORMATION
Additional information relating to the Company, including information
concerning remuneration of directors and executive officers, indebtedness of
directors and officers, the principal holders of the Company's shares, options
to purchase shares and the interests of insiders in material transactions, where
applicable, is contained the Company's Management Information Circular dated
September 26, 1997 for the annual and special meeting of shareholders to be held
on October 30, 1997, which is incorporated herein by reference. Additional
financial information with respect to the Company is provided in the
Consolidated Financial Statements for the year ended May 31, 1997 contained in
the Company's Annual Report for the year ended May 31, 1997 ("1997 Annual
Report"). The 1997 Annual Report also contains management's discussion and
analysis of the Company's financial condition and results of operations for the
year ended May 31, 1997. The information contained in the Company's
Consolidated Financial Statements for the year ended May 31, 1997 and in the
management's discussion and analysis is hereby incorporated by reference.
Additional information relating to the Company will be provided to any
person upon request to the Secretary of the Company as follows:
(a) when securities of the Company are in the course of a distribution pursuant
to a short form prospectus, or when a preliminary short form prospectus has
been filed in respect of a distribution of the Company's securities,
(i) one copy of this AIF, together with one copy of any document, or
the pertinent pages of any document, incorporated by reference in
the AIF,
-26-
<PAGE>
(ii) one copy of the Company's Consolidated Financial Statements for
the year ended May 31, 1997, together with the accompanying
report of the auditor and one copy of any interim financial
statements of the Company subsequent to the financial statements
for the year ended May 31, 1997,
(iii) one copy of the Company's Management Information Circular dated
September 26, 1997, and
(iv) one copy of any other documents that are incorporated by
reference into the preliminary short form prospectus or the short
form prospectus and are not required to be provided under (i) or
(iii) above; or
(b) at any other time, one copy of any document referred to in (a)(i), (ii) and
(iii) above, providing that the Company may require the payment of
reasonable charge if the request is made by a person who is not a security
holder of the Company.
-27-
<PAGE>
GLOSSARY
AS USED IN THIS AIF, THE FOLLOWING TERMS HAVE THE FOLLOWING MEANINGS:
1997, 1996, 1995 AND 1994 mean the Company's fiscal years ended May 31,
1997, 1996, 1995 and 1994, respectively, unless otherwise indicated.
ASTIGMATISM is an irregularity in the curvature of the cornea causing a
blurring of vision because of the inability of the eye to focus an image to a
single point.
COMPANY has the same meaning as TLC, unless the context otherwise requires.
CORNEA is the outermost surface of the eye and serves as a "window" through
which light can pass.
DIOPTER is a unit of measurement of the refractive (i.e. focusing) power of
the eye.
DOCTOR refers to an optometrist or an ophthalmologist.
EXCIMER LASER is a particular type of computer-controlled laser whose
active medium is a high pressure mixture of noble gases and halogens. The output
of this laser typically has high peak powers (between 100 and 250 millejoules
per cm) and short pulses (10-100 nanoseconds) with a wavelength in the
ultraviolet region of the spectrum (193 nm - 308 nm).
FDA is the Food and Drug Administration of the United States Department of
Health and Human Services.
FTC is the Federal Trade Commission of the United States Department of
Commerce.
HMO means a health maintenance organization, being an organization of
health care personnel and facilities that provides a comprehensive range of
health services to an enrolled population for a fixed sum of money paid in
advance for a specified period of time. These health services include a wide
variety of medical treatments and consults, inpatient and outpatient
hospitalization, home health service, ambulance service, and sometimes dental
and pharmacy services. The HMO may be organized as a group model, an individual
practice association, a network model or a staff model.
HPB means the Health Protection Branch of Health Canada.
LASIK is Laser-Assisted Intrastromal Keratomileusis, a procedure using a
manual procedure and an excimer laser, generally for the correction of higher
levels of nearsightedness and farsightedness.
MANAGED CARE refers to arrangements typically involving a third party, such
as an HMO, insurance company or employer group, which is frequently the payor,
assuming responsibility for ensuring that health care is provided through a
designated group of providers in a high quality, cost-effective manner.
-28-
<PAGE>
MEDICAID AND MEDICARE are U.S. government subsidized health programs for
eligible beneficiaries.
NETWORK CENTER refers to a facility which provides management services
including clinical training, patient education, marketing and network
development but does not perform excimer laser procedures. The laser procedure
itself is performed in a clinic affiliated with TLC which compensates the
network center for its management services.
PRK is Photorefractive Keratectomy, a technique involving the use of
ultraviolet light such as that emitted by excimer lasers to treat refractive
disorders which affect vision. This technique can be considered to be "optical
reshaping" of the cornea in which submicron layers of tissue are removed with
each laser pulse.
RK is Radial Keratotomy, a refractive surgical procedure utilizing diamond
knives in which "relaxation" incisions are cut through approximately 90% of the
thickness of the periphery of the cornea resulting in a reshaping of the eye due
to the stresses caused by intra-ocular pressure.
REFRACTION refers to the passage of light through a medium, such as the
cornea, which bends its rays.
REFRACTIVE CLINIC refers to a clinic performing refractive procedures which
may include excimer laser and manual surgical procedures.
SECONDARY CARE CLINIC refers to a clinic which is equipped to enable
physicians to provide advanced levels of care, including eye surgery, for the
treatment of disorders such as glaucoma, cataracts and retinal disorders.
Generally, a secondary care clinic does not dispense eyewear or contact lenses,
perform refractions, or provide eye examinations or general diagnostic services.
TLC means the TLC The Laser Center Inc., its subsidiaries and its 50% owned
affiliated companies, unless the context otherwise requires.
TLC U.S. means TLC The Laser Center (Delaware) Inc., a wholly-owned
subsidiary of the Company.
20/20 means 20/20 Laser Centers, Inc. and its subsidiaries, which were
acquired by the Company on February 10, 1997, unless the context otherwise
requires.
-29-
<PAGE>
COVER
TLC The Laser Center Inc.
First quarter report
Three Months Ended August 31, 1997
[picture] depicting eyes
INSIDE
MESSAGE TO SHAREHOLDERS
The fiscal quarter ending August 31, 1997 results were characterized by an
increase in net revenue, driven primarily by strong growth in the number of
refractive laser procedures performed.
First quarter gross revenue was $20.6 million, an increase of 253% over the
1997 comparative quarter. First quarter net revenue was $13.8 million, an
increase of 281% over the first quarter of 1997, and the highest quarterly
net revenue ever reported by the Company. The increasing revenue reflects
continuing strong growth in the number of procedures at existing sites and
TLC's rapidly expanding activities in the U.S. market. Over 6,100 paid
refractive laser procedures were performed at TLC centers in the first
quarter, compared to 1,600 from the same quarter a year ago.
TLC's net loss for the quarter was $3.7 million, or $0.14 per share, versus
$0.8 million, or $0.05 per share for the corresponding period a year ago. The
net loss includes $2.7 million in amortization and $1.6 million in
development and start-up costs. The net loss was much lower than expected
considering TLC's rapid expansion in the U.S. market, where most of TLC's
U.S. centers have been open for less than 1 year. Traditionally, it takes 18
months for TLC laser centers to show a profit.
TLC's balance sheet and cash position is very strong. This, combined with
stronger than expected operating results, will allow us to continue to grow
our leadership position in the North American laser vision correction market.
TLC INTRODUCES LIFETIME VISION COMMITMENT FOR ITS PATIENTS
High-quality patient care is our first priority, and patient satisfaction is
our only assurance of continued success. TLC's highly trained surgeons have
been performing laser vision correction in Canada for the past eight years,
and in the U.S. for more than a year. To date, our results have been
excellent. In fact, we are so confident in the long-term visual stability of
laser vision correction patients, TLC is willing to give patients a lifetime
commitment. While we can't guarantee our patients a lifetime of perfect
vision as a result of refractive surgery, we can reassure each patient of a
lifetime of care to help maintain the best possible vision. Both past and
future patients treated at a TLC center will be eligible to participate in
TLC's LIFETIME COMMITMENT program*.
TLC LISTS ITS SHARES ON THE NASDAQ NATIONAL MARKET
TLC's shares have begun trading on the NASDAQ National Market under the
symbol LZRCF. Of course, TLC also remains listed on the Toronto Stock
Exchange under the trading symbol LZR.
TLC has always seen itself as a North American company, with strong ties to
the U.S. Most of our doctors, employees and clinics are in the U.S. The
Company has a strong U.S. shareholder base and its Nasdaq listing will give
everyone the opportunity to participate in TLC's exciting future.
TLC ANNOUNCES NEW CHIEF FINANCIAL OFFICER
Peter Kastelic has been appointed as TLC's new Chief Financial Officer. Mr.
Kastelic, who received his C.A. designation in 1983, brings a broad base of
experience to TLC having served in key financial roles over the last 10
years. His experience includes, Potash Company of Canada Limited, Curragh
Inc. and Falconbridge Limited.
[bar graph] depicting refractive clinic procedures by quarter
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF CANADIAN DOLLARS)
THREE MONTHS ENDED AUGUST 31 1997 1996
<PAGE>
Assets
Current
Cash and short-term deposits $ 11,855 $ 1,916
Accounts receivable 5,849 2,069
Income taxes recoverable 150 --
Prepaids and sundry 2,845 573
20,699 4,558
Capital assets 36,588 18,705
Assets under capital lease 9,787 1,699
Investment in affiliated companies 634 367
Projects under development 144 1,094
Deferred income taxes 26 141
Goodwill 35,850 --
Other 575 106
$ 104,303 $ 26,670
Liabilities
Current
Accounts payable and
accrued liabilities $ 8,984 $ 2,219
Income taxes payable -- 20
Current portion of long-term debt 1,893 1,436
Current portion of obligations under
capital lease 2,549 322
Current portion of term bank loan 40 40
Deferred income taxes 32 133
13,498 4,170
Long-term debt 6,083 5,698
Obligations under capital lease 8,791 923
Term bank loan 13 53
Deferred rent and compensation 2,399 94
30,784 10,938
Non-controlling interest 465 --
Shareholders' equity
Capital stock 94,460 20,237
Deficit (21,406) (4,505)
73,054 15,732
$ 104,303 $ 26,670
CONSOLIDATED STATEMENT OF DEFICIT
(IN THOUSANDS OF CANADIAN DOLLARS)
THREE MONTHS ENDED AUGUST 31 1997 1996
Balance, beginning of period $ (17,690) $ (3,741)
Net loss for the period (3,716) (764)
Balance, end of period $ (21,406) $ (4,505)
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
(IN THOUSANDS OF CANADIAN DOLLARS)
THREE MONTHS ENDED AUGUST 31 1997 1996
Operating activities
Net loss for the period $ (3,716) $ (764)
Amortization 2,717 637
Share of loss from affiliates 87 28
(912) (99)
Changes in non-cash operating items
Deferred income taxes (net) 169 --
Projects under development 24 (499)
Non-controlling interest 2 --
Income taxes payable (104) (87)
<PAGE>
Prepaid and sundry assets (529) (44)
Accounts payable and accrued liabilities (741) (304)
Accounts receivable (1,793) (354)
Deferred rent -- 6
Cash provided from (used for)
operating activities (3,884) (1,381)
Financing activities
Capital stock issued 1,908 576
Term bank loan (10) (10)
Obligations under capital lease (320) 6
Long-term debt (461) 2,705
Cash provided from (used for)
financing activities 1,117 3,277
Investing activities
Other 13 (18)
Investment in affiliated companies (46) (136)
Assets under capital lease (53) (681)
Goodwill (2,042) --
Capital assets (4,227) (3,288)
Cash provided from (used for)
investing activities (6,355) (4,123)
Decrease in cash (9,122) (2,227)
Cash and short-term deposits,
beginning of period 20,977 4,143
Cash and short-term deposits,
end of period $ 11,855 $ 1,916
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED AUGUST 31 1997 1996
Net revenues $ 13,804 $ 4,912
Share of loss of affiliated companies (87) (28)
13,717 4,884
Expenses
Operating 12,608 4,032
Financial 481 136
Amortization 2,717 637
15,806 4,805
Income (Loss) from operations (2,089) 79
Development and start-up expenses 1,601 794
Loss before income taxes (3,690) (715)
Income taxes
Current 26 49
26 49
Net loss for the period $ (3,716) $ (764)
LOSS PER SHARE $ (0.14) $ (0.05)
Weighted average number of
common shares outstanding 26,914,000 16,712,283
Revenue Analysis
Gross revenues of
all managed clinics $ 20,560 $ 8,131
Represented by:
Refractive clinics revenue $ 14,100 $ 3,551
Secondary care clinics
physician group revenue 6,460 4,580
20,560 8,131
Less:
Provision for contractual allowances
<PAGE>
and adjustments 3,802 2,060
Amounts retained by physician groups 3,632 1,159
7,434 3,219
Net revenues of all managed clinics 13,126 4,912
Other 678 --
Net revenues $ 13,804 $ 4,912
CORPORATE OFFICE
TLC The Laser Center Inc.
5600 Explorer Drive,
Suite 301,
Mississauga, Ontario
L4W 4Y2
Tel: (905) 602-2020
Fax: (905) 602-2025
INVESTOR RELATIONS CONTACT
Stephen Kilmer
Tel: 1-800-TLC-1033 or
Tel: (905) 602-2020
Fax: (905) 602-2025
Website:
http://www.lzr.com
E-mail:
investor.relations @ lzr.com
TRANSFER AGENT
The CIBC Mellon Trust Company
Tel: 1-800-387-0825
Stock Exchange Listing
Shares of the Corporation are listed on the Toronto Stock Exchange and NASDAQ
National Market
TRADING SYMBOLS
TSE - LZR
NASDAQ - LZRCF
FORWARD LOOKING INFORMATION
This quarterly report may contain forward-looking information within the meaning
of Section 27A of the U.S. Securities Act of 1993 and Section 21E of the
Securities Exchange Act of 1934, and is subject to the safe harbor created by
those sections. TLC's operating results can be impacted by a number of factors,
any of which could cause actual results to vary materially from the current
results or TLC's anticipated future results. TLC's operating results can vary
substantially from period to period due to the timing of acquisitions and
expansion opportunities. This and other factors make the estimation of future
operating results uncertain. Risk factors are listed from time to time in TLC's
reports filed with the Toronto Stock Exchange and the U.S. Securities and
Exchange Commission. TLC assumes no obligation to update information contained
in this quarterly report.
LASER CENTERS IN CANADA
BRITISH COLUMBIA
VANCOUVER
TLC Northwest-Vancouver
(604) 903-4000
<PAGE>
Dr. Michael Melenchuk
NEW BRUNSWICK
MONCTON
TLC Moncton
(506) 863-1999
Dr. Josee Visockis
Dr. Serge Richard
ONTARIO
LONDON
TLC London
(519) 438-2020
Marion Baird
TORONTO
TLC Toronto
(416) 733-2020
Horace Chiu
WINDSOR
TLC Windsor
(519) 250-2020
Joseph Ferrari
LASER CENTERS IN THE UNITED STATES
CALIFORNIA
BREA
TLC Inland Empire
(909) 931-0044
Jerry Adams
COLORADO
DENVER
TLC Rocky Mountain
(303) 329-9141
Dr. Jimmy Jackson
FLORIDA
BOCA RATON
TLC Boca Raton
(561) 998-2020
Dr. Salvador DeCanio Jr.
MIAMI
TLC Miami
(305) 949-2999
Dr. Jonathon Jacobs
ILLINOIS
CHICAGO
TLC Chicago
(312) 640-3400
Janine Charland
WESTCHESTER
TLC MEI/Westchester
<PAGE>
(708) 562-4681
Janine Charland
INDIANA
INDIANAPOLIS
TLC Indiana
(317) 845-2020
Dr. Brian Duvall
MARYLAND
ROCKVILLE
TLC Rockville
(301) 881-2020
Kelly Citrin
MASSACHUSETTS
BOSTON
TLC Massachusetts
(617) 544-0223
Dr. Kristen Brown
MONTANA
BILLINGS
TLC Big Sky
(406) 651-0202
Dr. Harvey Bonner
NEW JERSEY
MOUNT LAUREL
TLC Mount Laurel
(609) 778-8550
Dr. F. Lawrence Vernamonti
FAIR LAWN
TLC Fair Lawn
(201) 796-4466
Tina Robinson
NEW YORK
NEW YORK
TLC Manhattan
(212) 588-0200
Bindu Thomas
GARDEN CITY
TLC Garden City
(516) 742-2020
Laura DiLorenzo
White Plains
TLC White Plains
(914) 997-2222
Dayna Heit
NORTH CAROLINA
CHARLOTTE
TLC Charlotte
(704) 344-0800
<PAGE>
Dr. William Rafferty
RALEIGH
TLC Raleigh/Durham
(919) 781-9400
Gloria Johnson
WINSTON-SALEM
TLC Winston-Salem
(910) 765-5600
Dr. Bill Rafferty
OHIO
ADA
TLC Lima
(419) 634-8155
Dr. Duane Wires
OKLAHOMA
OKLAHOMA CITY
TLC Oklahoma City
(405) 842-6060
Dr. Waymon Harrison
TULSA
TLC Tulsa
(918) 491-6009
Dr. Jeff Miller
PENNSYLVANIA
PLYMOUTH MEETING
TLC Plymouth Meeting
(610) 940-3937
Dr. David Gubman
SOUTH CAROLINA
GREENVILLE
TLC Piedmont
(864) 297-6299
Dr. Cynthia Wike
TENNESSEE
JOHNSON CITY
TLC Tri-Cities
(423) 282-0002
Dr. Richard Phillips
VIRGINIA
FAIRFAX
TLC Fairfax
(703) 560-2020
Janet Ward
WASHINGTON
LYNNWOOD
TLC Northwest Seattle
(425) 771-1200
Dr. Beth Kneib
<PAGE>
WISCONSIN
MADISON
TLC Wisconsin
(608) 249-6000
Dr. Charlotte Burns
SECONDARY EYE CARE FACILITIES IN THE UNITED STATES
ILLINOIS
CHICAGO*
TLC Chicago
(312) 640-3400
Janine Charland
PALOS HEIGHTS
TLC MEI/Palos Heights
(708) 361-7788
Janine Charland
WESTCHESTER*
TLC MEI/Westchester
(708) 562-4681
Janine Charland
SOUTH CAROLINA
GREENVILLE*
TLC Piedmont
(864) 297-6299
Dr. Cynthia Wike
WASHINGTON
SEATTLE
TLC Northwest Eye Inc.
(206) 528-6000
Rodger McCollum
TLC NETWORKS IN CANADA
ONTARIO
KITCHENER
(University of Waterloo)
TLC NETWORKS IN THE UNITED STATES
CONNECTICUT
HARTFORD
Dr. Jerry Hardison,
(860) 236-5831
INDIANA
SEYMOUR
Dr. Mike Frische,
(812) 523-8756
KENTUCKY
BENTON
Dr. Joe Ellis,
<PAGE>
(502) 527-7421
BOWLING GREEN
Dr. John Breiwa,
(502) 842-0383
COVINGTON
Dr. Richard Schuck,
(606) 781-2000
NEVADA
LAS VEGAS
Dr. Tom Kroll,
(702) 737-0321
NEW MEXICO
ALBUQUERQUE
Dr. Craig Clatanoff,
(505) 896-4554
TENNESSEE
CHATTANOOGA
Dr. Daryl Mann,
(423) 855-1666
KNOXVILLE
MEMPHIS
Dr. John Sharpe,
(901) 722-3263
NASHVILLE
Phil Christopherson,
(615) 361-0339
UNDER DEVELOPMENT
CALIFORNIA
BEVERLY HILLS
SAN DIEGO
OHIO
CLEVELAND
COLUMBUS
TOLEDO
GEORGIA
ATLANTA
INDIANA
FORT WAYNE
IOWA
SIOUX CITY
MICHIGAN
DETROIT
NEW YORK
<PAGE>
BROOKLYN
SOUTH CAROLINA
COLUMBIA/CHARLESTON
* Denotes a clinic that is also listed as a laser center
