SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) JUNE 8, 2000
LIGHTTOUCH VEIN & LASER, INC.
(Exact name of registrant as specified in its charter)
NEVADA 0-29301 87-0575118
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
10663 MONTGOMERY ROAD, CINCINNATI, OHIO 45242
(Address of principal executive offices) (Zip Code)
(513) 891-8346
Registrant's telephone number, including area code
NOT APPLICABLE
(Former name or former address, if changed since last report)
Exhibit index on consecutive page 3
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Not Applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 8, 2000, the registrant consummated the acquisition of
Bluegrass Dermatology and Skin Surgery Center, P.S.C. and Center for
Weight Control, PSC, pursuant to the terms of an Agreement of Merger.
Effective July 1, 2000, these businesses will be merged into LightTouch
Vein & Laser of Lexington, Inc. (LightTouch-Lexington), a Kentucky
corporation formed for the purpose of effecting the acquisition.
LightTouch-Lexington is a wholly-owned subsidiary of the registrant,
LightTouch Vein & Laser, Inc., a Nevada corporation.
The registrant is issuing 1,000,000 shares of its common stock to the
owners of the businesses, Dr. John L. Buker and his wife. In addition,
LightTouch-Lexington issued a promissory note to Dr. John L. Buker and
his wife in the amount of $1,000,000. The note is secured by a security
interest in all of the assets of LightTouch-Lexington and by a
leasehold mortgage. Liabilities were also assumed by
LightTouch-Lexington. The note and the assumed liabilities are expected
to be paid from cash flow generated by the operations of
LightTouch-Lexington.
Dr. John L. Buker will be responsible for the professional medical
services rendered at the LightTouch-Lexington center pursuant to the
terms of a Medical Director and Administrative Services Agreement.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not Applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not Applicable.
ITEM 5. OTHER EVENTS
Not Applicable.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS
Not Applicable.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired: Filed herewith
(b) Pro forma financial information: Filed herewith
(c) Exhibits
<TABLE>
<CAPTION>
REGULATION CONSECUTIVE
S-K NUMBER DOCUMENT NUMBER
<S> <C> <C>
2.1 Agreement of Merger dated June 8, 2000* N/A
10.1 Promissory Note dated June 8, 2000* N/A
10.2 Leasehold Mortgage and Security Agreement
dated June 8, 2000* N/A
10.3 Security Agreement dated June 8, 2000* N/A
10.4 Medical Director and Administrative Services N/A
Agreement dated June 8, 2000*
*Filed Previously
</TABLE>
3
<PAGE>
ITEM 8. CHANGE IN FISCAL YEAR
Not applicable.
SIGNATURES
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 hereunto duly authorized.
LIGHTTOUCH VEIN & LASER, INC.
August 22, 2000 By:/s/GREGORY F. MARTINI
--------------------------------------
Gregory F. Martini, President
4
<PAGE>
BLUEGRASS DERMATOLOGY & SKIN
SURGERY CENTER, PSC AND AFFILIATE
Combined Financial Statements
December 31, 1999
With Independent Auditors' Report
5
<PAGE>
BLUEGRASS DERMATOLOGY & SKIN
SURGERY CENTER, PSC & AFFILIATE
TABLE OF CONTENTS
PAGE
Independent Auditors' Report 7
Combined Financial Statements:
Balance Sheet 8 - 9
Statement of Operations and Retained Deficit 10
Statement of Cash Flows 11
Notes to Financial Statements 12 - 15
6
<PAGE>
INDEPENDENT AUDITORS' REPORT
Stockholders of
Bluegrass Dermatology & Skin Surgery Center, PSC & Affiliate:
We have audited the accompanying combined balance sheet of Bluegrass Dermatology
& Skin Surgery Center, PSC (an S-Corporation) and Affiliate as of December 31,
1999 and the related combined statements of operations and retained deficit and
cash flows for the year then ended. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Bluegrass
Dermatology & Skin Surgery Center, PSC and Affiliate as of December 31, 1999 and
the results of its operations and cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/CLARK, SCHAEFER, HACKETT & CO.
Cincinnati, Ohio
July 21, 2000
7
<PAGE>
BLUEGRASS DERMATOLOGY & SKIN
SURGERY CENTER, PSC AND AFFILIATE
Combined Balance Sheet
December 31, 1999
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current assets:
Cash $ 50,431
Accounts receivable - trade, less allowance
for doubtful accounts and insurance
adjustments of $60,000 89,423
Notes receivable -stockholder 106,239
----------
246,093
----------
Property and equipment:
Leasehold improvements 71,190
Medical equipment 156,003
Office furniture and equipment 208,750
----------
435,943
Less accumulated depreciation (256,908)
----------
179,035
----------
Other assets:
Deposits 4,812
Other 312
----------
5,124
----------
$ 430,252
==========
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
Current liabilities:
Current portion of long-term debt $ 49,313
Current portion of capital lease obligation 5,525
Accounts payable - trade 27,500
Accrued expenses 13,155
----------
95,493
----------
Long-term liabilities:
Long-term debt, less current maturities 414,032
Capital lease obligation, less current maturities 26,514
----------
440,546
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, 2,000 shares
authorized, 100 shares issued and outstanding -
Retained earnings (105,787)
----------
(105,787)
----------
$ 430,252
==========
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
BLUEGRASS DERMATOLOGY & SKIN
SURGERY CENTER, PSC AND AFFILIATE
Combined Statement of Operations and Retained Deficit
Year Ended December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Net sales:
Dermatology and surgery services $ 740,498
Weight control services 109,013
----------
849,511
----------
Operating expenses 561,343
General and administrative 291,846
----------
Loss from operations (3,678)
Other income (expense):
Interest expense (41,068)
Interest income 8,046
----------
(33,022)
----------
Net loss (36,700)
Retained deficit - beginning of year (69,087)
----------
Retained deficit - end of year $(105,787)
==========
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
BLUEGRASS DERMATOLOGY & SKIN
SURGERY CENTER, PSC AND AFFILIATE
Combined Statement of Cash Flows
Year Ended December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net loss $ (36,700)
Depreciation 96,372
Amortization 179
Provision for doubtful accounts
and insurance adjustments (30,000)
Effect of change in operating assets and liabilities:
Accounts receivable 70,809
Other assets 2,357
Accounts payable and accrued expenses (6,040)
----------
Net cash provided by operating activities 96,977
----------
Cash flows from investing activities:
Capital expenditures (33,626)
Increase in notes receivable - stockholder (14,500)
----------
Net cash used by investing activities (48,126)
----------
Cash flows from financing activities:
Payments of long-term debt (36,535)
Payments of capital lease obligations (2,491)
----------
Net cash used by financing activities (39,026)
----------
Net increase in cash 9,825
Cash - beginning of period 40,606
----------
Cash - end of period $ 50,431
==========
Supplemental disclosure of non-cash activities:
Cash paid during the period for:
Interest $ -
==========
Assets acquired under capital lease $ 34,530
==========
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
BLUEGRASS DERMATOLOGY & SKIN
SURGERY CENTER, PSC AND AFFILIATE
Notes to Combined Financial Statements
1. Summary of Significant Accounting Policies
The following principles and practices of the Company are set forth to
facilitate the understanding of data presented in the combined financial
statements.
DESCRIPTION OF BUSINESS
The combined financial statements of the Company include the
accounts of Bluegrass Dermatology & Skin Surgery Center, Inc.
(Bluegrass) and Center for Weight Control PSC (Center). Bluegrass
is an S-Corporation whose principal business is the performance
of aesthetic cosmetic laser and dermatology services in the
Greater Lexington, Kentucky area. Center provides weight control
services in the same geographic area.
PRINCIPLES OF COMBINATION
The combined financial statements include the financial
statements of Bluegrass Dermatology & Skin Surgery Center, PSC
and Center for Weight Control, PSC, which are related through
common ownership.
All significant intercompany accounts and transactions have been
eliminated.
ACCOUNTS RECEIVABLE
The Company routinely assesses the financial strength of its
customers and, as a consequence, believes that its trade accounts
receivable credit risk exposure is limited. An allowance for
doubtful accounts and insurance adjustments has been established
at December 31, 1999. There are no concentrations of credit risk
at December 31, 1999.
PROPERTY AND DEPRECIATION
Property and equipment is recorded at cost. Depreciation is
provided in amounts sufficient to allocate the cost of
depreciable assets to operations over their estimated service
lives, primarily 5-7 years, using accelerated methods.
REVENUES
Revenues for cosmetic surgery procedures are recognized when the
services are performed.
12
<PAGE>
INCOME TAXES
Bluegrass Dermatology, with the consent of its stockholder,
elected under the Internal Revenue Code to be an S Corporation.
In lieu of corporation income taxes, the stockholders of an S
Corporation are taxed on the Company's taxable income.
Accordingly, no provision or liability for income taxes has been
included in these financial statements.
Center for Weight Control has net operating losses of $18,000
available to offset future taxable income that begin to expire in
2011. The tax effect of the loss carryovers is offset by a
deferred tax valuation allowance.
USE OF ESTIMATES
The presentation 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 those estimates.
2. Notes Receivable - Stockholder's:
At December 31, 1999, the Company had notes receivable from stockholder's
totaling $106,239. These notes are due upon demand and bear interest at
prime.
3. Long-Term Debt:
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
<S> <C>
Note payable, stockholder, in monthly
installments of $4,414, including interest at
prime (8.5% at December 31, 1999), due and
payable in full at maturity February 28,
2004. The Company is the guarantor of a note
with identical terms payable by a stockholder
to PNC Bank. $ 352,118
Note payable, stockholder, in monthly
installments of $590, including interest at
7.75%, through maturity December 18, 2001.
The Company is the guarantor of a note with
identical terms payable by a stockholder to
PNC Bank. 12,944
13
<PAGE>
Note payable, PNC Bank, in monthly
installments of $2,223, including interest at
prime (8.5% at December 31, 1999), due and
payable in full at maturity February 26,
2004. Guaranteed by a stockholder of the
Company. 98,283
----------
463,345
Less current portion 49,313
----------
$ 414,032
==========
</TABLE>
Scheduled principal repayments for the years ending December 31 are as
follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 49,313
2001 53,453
2002 50,948
2003 55,452
2004 254,179
--------
$463,345
========
</TABLE>
4. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Company leases certain equipment and its office facility
under noncancelable operating leases. Estimated future minimum
lease payments as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 79,875
2001 79,875
2002 79,875
2003 16,904
2004 15,060
--------
$271,589
========
</TABLE>
In the regular course of business, the Company enters into
agreements whereby it leases equipment under month-to-month
leases or of similar short duration.
Approximately $175,000 of the total commitment as of December 31,
1999 is for the lease of real property.
14
<PAGE>
The office facility lease, which expires in December 2002,
contains two renewal terms of three years each. Renewal rental
rates are based upon the prevailing market rental rates at time
of renewal.
Lease expense charged against operations was approximately
$79,000 in 1999.
CAPITAL LEASE OBLIGATION
The Company leases certain equipment under an agreement accounted
for as a capital lease. At December 31, 1999, property and
equipment included capital lease equipment with a cost of $34,530
and accumulated depreciation of $6,906. Future minimum lease
payments due after one year are as follows at December 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 8,868
2001 8,868
2002 8,868
2003 8,868
2004 5,912
-------
41,384
Less amounts representing interest 9,345
-------
$32,039
Current portion 5,525
-------
Long-term portion $26,514
=======
</TABLE>
LEGAL PROCEEDINGS
From time to time, the company becomes involved in various claims
and lawsuits that are incidental to its business. In the opinion
of the Company's management, there are no material legal
proceedings pending against the Company at December 31, 1999.
5. RETIREMENT PLAN:
The Company maintains a SIMPLE IRA retirement plan covering substantially
all employees who meet certain age and eligibility requirements. Company
contributions are discretionary. Company contributions charged against
operations were $10,289 in 1999.
6. SALE OF BUSINESS:
In June 2000, the stockholders of the Company and its Affiliate agreed to
sell substantially all of the assets of the entities to LightTouch Vein &
Laser in exchange for a note receivable, shares of common stock, and the
assumption of certain liabilities.
15
<PAGE>
PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The accompanying unaudited pro forma combined balance sheet as of June 30, 2000
and the pro forma statements of operations of the Company for the year ended
December 31, 1999 and six-month period ended June 30, 2000 have been prepared to
illustrate the estimated effect of the Charleston and Bluegrass transactions.
The unaudited pro forma financial statements do not reflect any anticipated cost
savings from the Charleston or Bluegrass transactions, or any synergies that are
anticipated to result from the Charleston or Bluegrass transactions, and there
can be no assurance that any such cost savings or synergies will occur.
The unaudited pro forma balance sheet gives pro forma effect to the Charleston
and Bluegrass transactions as if they had occurred on June 30, 2000. The
unaudited pro forma statement of operations gives effect to the Charleston and
Bluegrass transactions as if they had occurred on January 1, 1999. The unaudited
pro forma financial statements do not purport to be indicative of the results of
operations or financial position of the Company that would have actually been
obtained had such transactions been completed as of the assumed dates and for
the period presented, or which may be obtained in the future. The pro forma
adjustments are described in the accompanying notes and are based upon available
information and certain assumptions that the Company believes are reasonable.
The unaudited pro forma financial statements should be read in conjunction with
the separate historical financial statements of LightTouch Vein & Laser and the
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere.
The preliminary allocations of the purchase price have been made to major
categories of assets and liabilities in the accompanying unaudited pro forma
financial statements based on available information. The actual allocation of
the purchase price and the resulting effect on income may differ significantly
from the pro forma amounts included herein. These pro forma adjustments
represent the Company's preliminary determination of purchase accounting
adjustments and are based upon available information and certain assumptions
that the Company believes to be reasonable. Consequently, the amounts reflected
in the unaudited pro forma financial statements are subject to change, and the
final amounts may differ substantially.
16
<PAGE>
LIGHTTOUCH VEIN & LASER, INC.
Unaudited Pro Forma Combined Balance Sheets
June 30, 2000
ASSETS
<TABLE>
<CAPTION>
LightTouch LightTouch
LightTouch Vein & Laser Vein
Vein of South & Laser of Pro Forma Pro Forma
& Laser, Inc. Carolina, Inc. Lexington, Inc. Eliminations Adjustments Combined
------------- -------------- --------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash $ 114,647 $ 3,947 $ 687 $ - $ - $ 119,281
Accounts receivable - trade 29,845 1,453 109,423 (2,100) - 138,621
Accounts receivable - other - 83,910 - - - 83,910
Notes receivable - officers - - 122,239 - (122,239)(a) -
Prepaid expenses 13,885 - - - - 13,885
------------ ------------ ------------ ------------ ------------ ------------
Total current assets 158,377 89,310 232,349 (2,100) (122,239) 355,697
Property and equipment - net 185,494 388,428 168,805 - 72,847 (a) 815,574
Other assets:
Intangible assets - net 17,350 215,861 - - 3,660,004 (a) 3,893,215
Deposits and other 6,387 9,656 5,035 - - 21,078
------------ ------------ ------------ ------------ ------------ ------------
23,737 225,517 5,035 - 3,660,004 3,914,293
------------ ------------ ------------ ------------ ------------ ------------
$ 367,608 $ 703,255 $ 406,189 $ (2,100) $ 3,610,612 $ 5,085,564
============ ============ ============ ============ ============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 126,640 $ 101,829 $ 27,500 $ - $ - $ 255,969
Other current liabilities 37,744 23,103 12,977 (2,000) - 71,824
Deferred compensation 575,000 - - - - 575,000
Current portion of long-term debt - - 49,313 - - 49,313
Capital lease obligation - current
portion 31,745 2,000 5,525 - - 39,270
------------ ------------ ------------ ------------ ------------ ------------
Total current liabilities 771,129 126,932 95,315 (2,000) - 991,376
------------ ------------ ------------ ------------ ------------ ------------
Long-term liabilities:
Long-term debt - 590,747 391,219 - 506,437 (b) 1,488,403
Capital lease obligation, less
current portion 57,944 15,752 23,830 - - 97,526
------------ ------------ ------------ ------------ ------------ ------------
Total long-term liabilities 57,944 606,499 415,049 - 506,437 1,585,929
------------ ------------ ------------ ------------ ------------ ------------
Shareholders' equity (deficit):
Common stock, $.001 par value,
100,000,000, share authorized;
7,500,000 shares issued and
outstanding 7,551 100 - (100) 1,000 (b) 8,551
Preferred stock, $.001 par value,
25,000,000 shares authorized;
13,940,017 shares issued and
no shares issued or outstanding - - - - - -
Additional paid-in capital 1,127,449 - - - 2,999,000 (b) 4,126,449
Note receivable exchanged for
common stock (92,966) - - - - (92,966)
Accumulated deficit (1,503,499) (30,276) (104,175) - 104,175 (c) (1,533,775)
------------ ------------ ------------ ------------ ------------ ------------
(461,465) (30,176) (104,175) (100) 3,104,175 2,508,259
------------ ------------ ------------ ------------ ------------ ------------
$ 367,608 $ 703,255 $ 406,189 $ (2,100) $ 3,610,612 $ 5,085,564
============ ============ ============ ============ ============ ============
</TABLE>
See summary of significant assumptions.
17
<PAGE>
LIGHTTOUCH VEIN & LASER, INC.
Unaudited Pro Forma Combined Statements of Operations
Six Months Ended June 30, 2000
<TABLE>
<CAPTION>
LightTouch LightTouch
LightTouch Vein & Laser Vein
Vein of South & Laser of Pro Forma Pro Forma
& Laser, Inc. Carolina, Inc. Lexington, Inc. Eliminations Adjustments Combined
------------- -------------- --------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales:
Cosmetic laser services $ 580,140 $ 198,670 $ - $ - $ - $ 778,810
Laser sales and service 77,329 - - - - 77,329
Dermatology and skin services - - 508,795 - - 508,795
Weight control services - - 66,561 - - 66,561
------------ ------------ ------------ ------------ ------------ -------------
657,469 198,670 575,356 - - 1,431,495
Cost of sales 316,956 92,806 357,119 - - 766,881
General and administrative 1,029,425 177,810 193,150 - 177,548 (a) 1,577,933
(c)
------------ ------------ ------------ ------------ ------------ -------------
Income (loss) from operations (688,912) (71,946) 25,087 - (177,548) (913,319)
Other income (expense) - net 4,067 57,719 (18) - - 61,768
Interest expense (2,603) (16,049) (23,457) - (29,526)(b) (71,635)
(d)
------------ ------------ ------------ ------------ ------------ -------------
Income (loss) before provision
for income tax (687,448) (30,276) 1,612 - (207,074) (923,186)
Provision for income tax - - - - - -
------------ ------------ ------------ ------------ ------------ -------------
Net income (loss) $ (687,448) $ (30,276) $ 1,612 $ - $ (207,074) (923,186)
============ ============ ============ ============ ============
Pro forma adjustment to compensation expense (South Carolina):
Officer/doctor salary (43,750)
Related income taxes -
-------------
Pro forma net loss after increase in salary $ (966,936)
=============
Earnings per common share - net income:
Basic $ (0.12)
=============
Diluted $ (0.12)
=============
Earnings per common share - after pro forma adjustment:
Basic $ (0.15)
=============
Diluted $ (0.15)
=============
</TABLE>
See summary of significant assumptions.
18
<PAGE>
LIGHTTOUCH VEIN & LASER, INC.
Unaudited Pro Forma Combined Statements of Operations
Year Ended December 31, 1999
<TABLE>
<CAPTION>
LightTouch LightTouch
LightTouch Vein & Laser Vein
Vein of South & Laser of Pro Forma Pro Forma
& Laser, Inc. Carolina, Inc. Lexington, Inc. Adjustments Combined
------------- -------------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales:
Cosmetic laser services $ 1,982,113 $ 1,269,673 $ - $ - $ 3,251,786
Laser sales and service 407,847 - - - 407,847
Dermatology and surgery service - - 740,498 - 740,498
Weight control services - - 109,013 - 109,013
------------ ------------ ------------ ------------ ------------
2,389,960 1,269,673 849,511 - 4,509,144
Cost of sales 1,644,122 243,852 561,343 - 2,449,317
General and administrative 1,023,599 685,437 291,846 363,708 (a)(c) 2,364,590
------------ ------------ ------------ ------------ ------------
Income (loss) from operations (277,761) 340,384 (3,678) (363,708) (304,763)
Other income (expense) - net 8,080 5,814 8,046 - 21,940
Interest expense (81,596) (17,949) (41,068) (97,212)(b)(d) (237,825)
------------ ------------ ------------ ------------ ------------
Income (loss) before provision
for income tax (351,277) 328,249 (36,700) (460,920) (520,648)
Provision for income tax - - - - (215,885)
------------ ------------ ------------ ------------ ------------
Net income (loss) $ (351,277) $ 328,249 $ (36,700) $ (460,920) (736,533)
============ ============ ============ ============
Pro forma adjustment to compensation expense (South Carolina):
Officer/doctor salary (175,000)
Related income taxes -
------------
Pro forma net loss after increase in salary $ (911,533)
============
Earnings per common share - net loss:
Basic $ (0.11)
============
Diluted $ (0.11)
============
Earnings (loss) per common share - after pro forma adjustment:
Basic $ (0.14)
============
Diluted $ (0.14)
============
</TABLE>
See summary of significant assumptions.
19
<PAGE>
LIGHTTOUCH VEIN & LASER, INC.
AND SUBSIDIARIES
Summary of Significant Assumptions
1. DESCRIPTION OF TRANSACTIONS
CHARLESTON
On March 29, 2000, LightTouch Vein & Laser, Inc. ("the Company"),
through its wholly-owned subsidiary LightTouch Vein & Laser of
South Carolina, Inc. ("LTVLSC"), acquired substantially all of the
assets, and assumed certain liabilities, of a cosmetic surgery
center known as Charleston Dermatology and Cosmetic Surgery
Center.
The aggregate purchase price of the assets is $700,000, which
consists of a promissory note payable to the seller in the sum of
$700,000, secured by said assets. The note is payable in two (2)
installments of principal, without interest. If the business
maintains a cash flow of not less than $400,000 for the period
beginning April 1, 2000 and ending March 31, 2001, the Company
shall pay the seller principal as follows: (i) the first
installment of principal in the amount of $200,000 on or before
twelve (12) months from the closing date; and (ii) the second
installment of principal in the amount of $500,000 on or before
the date which is twenty-four (24) months from the closing date.
If the cash flow for the above stated period is less than
$400,000, then the principal repayment dates under the note shall
automatically be extended for successive twelve (12) and
twenty-four (24) month periods, without interest, until the
required cash flow is attained with a fiscal year.
LTVLSC entered into an employment contract with Harley F.
Freiberger, M.D. ("Seller"), as Medical Director on March 29,
2000. Seller shall earn and is entitled to receive all of the
first $40,000 of the cash flow received by LTVLSC each and every
month for the first twenty-four (24) months, or for such longer
period if the promissory note has not been paid in full. All of
the cash flow received by LTVLSC above $40,000 per month up to
$55,000 per month during such period shall be retained by LTVLSC.
LTVLSC and the Seller on a 50/50 basis shall share cash flow in
excess of $55,000 per month. After the initial twenty-four (24)
month period, or such longer period as noted above, the Seller
shall be paid a guaranteed minimum annual salary of $175,000, plus
50% of all of the cash flow of LTVLSC for a term and with
additional benefits to be determined by LTVLSC and the Seller.
20
<PAGE>
The Pro Forma financial statements only reflect the guaranteed
minimum salary of $175,000 and do not reflect payments of any
contingent cash flow. If the operations of LTVLSC achieve certain
levels of cash flow, it is possible that compensation in excess of
$175,000 per year would be paid under the employment agreement.
Simultaneously, the Company entered into a National Medical
Director Agreement with the Seller to serve as the National
Medical Director on behalf of the Company and all of its Centers.
As compensation for the performance as Medical Director, the
Company transferred 447,205 shares of its common stock having a
value of $1,800,000 based upon the average closing price of the
Company's common shares for the five trading days immediately
prior to March 29, 2000. In addition, the Company transferred
124,224 shares of its common stock to the Seller, having a value
of $500,000, as a bonus for entering into this agreement and
agreeing to perform the duties of National Medical Director. Both
awards of stock vest over the year ended April 1, 2001.
The National Medical Agreement shall continue for a period of
twelve (12) months ending on April 1, 2001 unless sooner
terminated. Thereafter, the agreement automatically continues in
effect for additional terms of five (5) years each, unless either
party notifies the other, not less than six (6) months or more
than twelve (12) months, of its intent to terminate the agreement.
The Pro Forma financial statements for the year ended December 31,
1999 do not reflect the expense associated with the approximately
$2,300,000 of compensation noted above for the performance of
duties as a National Medical Director. These duties do not
directly relate to activities of historical operations, but
instead relate to future development activities of the Company.
Accordingly, the Pro Forma financial statements for the six months
ended June 30, 2000 includes $575,000 of expense recognized for
the quarter ended June 30, 2000.
Immediately upon consummation of the transaction, Charleston
Dermatology and Cosmetic Surgery Center began doing business as
LightTouch Vein & Laser of South Carolina, Inc.
BLUEGRASS
On June 8, 2000, LightTouch Vein & Laser, Inc. ("the Company"),
through its wholly-owned subsidiary LightTouch Vein & Laser of
Lexington, Inc. ("LTVLL"), acquired substantially all of the
assets, and assumed certain liabilities, of a dermatology and skin
surgery center known as Bluegrass Dermatology and Skin Surgery
Center PSC and a related company, Center for Weight Control, PSC.
21
<PAGE>
The aggregate purchase price of the assets is $3,559,468, which
consists of a promissory note payable by LTVLL to the seller, net
of the assumption of certain notes payable to PNC Bank, in the sum
of $559,468, without interest and secured by said assets, and 1
million shares of common stock in LTVL valued at $3 per share at
June 8, 2000.
The principal balance of the note is due and payable when LTVLL
has a achieved a positive cash flow (as defined in the promissory
note) of $600,000 for two (2) consecutive twelve (12) month
periods after the closing date of the transaction. In the event
cash flow of $600,000 is not achieved during the immediately
preceding twelve month period, then cash flow shall thereafter be
computed every third month thereafter until cash flow of $600,000
has been achieved for a second twelve consecutive month period, at
which time the note is due and payable in full.
In addition, the principal is reduced by principal payments made
by LTVLL, on behalf of the sellers, to PNC Bank under existing
notes payable assumed by LTVLL. The approximate aggregate amount
of these bank notes was $447,000 at June 8, 2000. Monthly
installments of principal and interest total $7,227 and the notes
mature at various times through February 2004.
The seller has the option of converting all or any portion of the
amount due into common stock of LTVL. The maximum number of shares
into which the note may be converted is equal to the amount due
divided by four (4) multiplied by 125%.
Simultaneously, LTVLL entered into a Medical Director and
Administrative Services agreement with John L. Buker, M.D.
("Seller"). For the services of Physician and Medical Director,
the seller will receive compensation of $600,000 each and every
twelve month period beginning June 8, 2000 and continuing until
the later of (i) June 8, 2002, or (ii) the $1 million promissory
note above has been paid in full. Seller is required to compensate
two other physicians presently employed at the Center using a
portion of the $600,000.
Additionally Seller and LTVLL will share all of the cash flow
received by LTVLL above $600,000, during each twelve-month period
this agreement is in effect, on a 50/50 basis. Upon the last to
occur of (i) payment of the promissory note in full, or (ii) June
8, 2002, the annual base compensation to Seller shall be reduced
to $300,000, plus 35% of all cash flow, with no minimum cash flow
requirement. Seller shall be required to continue to compensate
the other physicians out of the total payments.
22
<PAGE>
The Pro Forma financial statements and do not reflect payments of
any contingent cash flow. If the operations of LTVLL achieve
certain levels of cash flow, it is possible that compensation in
excess of historical amounts per year would be paid under the
employment agreement.
Immediately upon consummation of the transaction, Bluegrass
Dermatology and Skin Surgery Center and Center for Weight Control,
collectively, will do business as LightTouch Vein & Laser of
Lexington, Inc.
2. BASIS OF PRESENTATION
The accompanying pro forma combined statements of operations are
presented for the year ended December 31, 1999 and the interim
six-month period ended June 30, 2000. It is based upon historical
results of the combining entities, LightTouch Vein & Laser, Inc.,
Charleston Dermatology and Cosmetic Surgery Center and Bluegrass
Dermatology and Skin Surgery Center PSC and Center for Weight Control
PSC for the twelve months ending December 31, 1999 and the six months
ending June 30, 2000. It has been computed assuming the transaction was
consummated at the beginning of each period presented, and includes all
adjustments which give effect to events that are directly attributable
to the transaction, are factually supportable, and are expected to have
a continuing impact on the Company.
The pro forma combined balance sheet is presented as of June 30, 2000.
It is based upon the historical financial position of the combining
entities at the respective dates. It has been computed assuming the
transaction was consummated on June 30, 2000 and includes adjustments
that give effect to events that are directly attributable to the
transaction and are factually supportable.
3. BALANCE SHEET ADJUSTMENTS
BLUEGRASS
(a) The estimated purchase price and preliminary adjustments to
historical book value of LightTouch Vein & Laser of Lexington,
Inc. as a result of the Bluegrass Dermatology and Skin Surgery
Center and Center for Weight Control transactions is as follows:
<TABLE>
<CAPTION>
<S> <C>
Purchase price:
Estimated value of note payable issued, net $ 506,437
Fair value of common stock issued 3,000,000
Book value of assets acquired 226,414
-----------
Purchase price in excess of net assets acquired $ 3,732,851
===========
</TABLE>
23
<PAGE>
Preliminary allocation of purchase price in excess of net assets
acquired:
<TABLE>
<CAPTION>
<S> <C>
Increase in property and equipment to
estimated fair value $ 72,847
Estimated goodwill 3,324,504
Estimated value of patient lists 335,500
-----------
Purchase price in excess of net assets acquired $ 3,732,851
===========
</TABLE>
(b) Reflects the source of funds for the Bluegrass transaction as follows:
<TABLE>
<CAPTION>
<S> <C>
Note payable to Seller, without interest $ 559,468
Discount to present value @ 10% (53,031)
------------
506,437
Fair value of common stock issued 3,000,000
------------
$ 3,506,437
============
</TABLE>
(c) The adjustment to retained earnings as a result of the Bluegrass and
Weight Control transaction is as follows:
<TABLE>
<CAPTION>
<S> <C>
Retained earnings:
Elimination of pre-business
accumulated deficit $ 104,175
============
</TABLE>
The fair value of the common stock issued was based on the quoted
market value of LTVL stock at the date of the transaction. The stock is
a thinly traded security; therefore, the quoted market value is subject
to the limitations common to thinly traded securities.
4. STATEMENT OF OPERATIONS ADJUSTMENTS
CHARLESTON
(a) The acquisition of Charleston was accounted for by the
purchase method of accounting. Under purchase accounting, the
total purchase price was allocated to the tangible and intangible
assets and liabilities of Charleston based upon their respective
fair values as of the closing date based upon valuations and other
studies that are not yet finalized. The actual allocation of the
purchase price and the resulting effect on income from operations
may differ significantly from the pro forma amounts included
herein.
24
<PAGE>
The following presents the effect of the purchase adjustments and
adjustments to reflect adoption of the Company's accounting
policies on the Pro Forma Statement of Operations:
<TABLE>
<CAPTION>
Year Ended Six Months Ended
DECEMBER 31, 1999 JUNE 30, 2000
----------------- -------------
G & A G & A
<S> <C> <C>
Depreciation $ 18,591 $ 15,442
Amortization of intangibles
and goodwill 41,815 10,454
--------- ----------
$ 60,406 $ 25,896
========= ==========
</TABLE>
The adjustments for estimated pro forma depreciation and
amortization of intangible assets and goodwill are based on their
estimated fair values. Property, plant and equipment are being
depreciated over estimated useful lives, primarily 5-7 years.
Patient lists are being amortized over their estimated useful
lives, not to exceed 5 years, using the straight-line method.
Goodwill is being amortized over 15 years using the straight-line
method.
(b) Reflects interest expense on acquisition debt using an imputed
rate of 10% per annum.
BLUEGRASS
(c) The acquisition of Bluegrass and Weight Control was accounted
for by the purchase method of accounting. Under purchase
accounting, the total purchase price was allocated to the tangible
and intangible assets and liabilities of the target based upon
their respective fair values as of the closing date based upon
valuations and other studies that are not yet finalized. The
actual allocation of the purchase price and the resulting effect
on income from operations may differ significantly from the pro
forma amounts included herein. The following presents the effect
of the purchase adjustments and adjustments to reflect adoption of
the Company's accounting policies on the Pro Forma Statement of
Operations:
<TABLE>
<CAPTION>
Year Ended Six Months Ended
DECEMBER 31, 1999 JUNE 30, 2000
----------------- -------------
G & A G & A
<S> <C> <C>
Depreciation $ 14,569 $ 7,285
Amortization of intangibles
and goodwill 288,733 144,367
--------- ---------
$303,302 $151,652
========= =========
</TABLE>
25
<PAGE>
The adjustments for estimated pro forma depreciation and
amortization of intangible assets and goodwill are based on their
estimated fair values. Property, plant and equipment are being
depreciated over estimated useful lives, primarily 5-7 years.
Patient lists are being amortized over their estimated useful
lives, not to exceed 5 years. Goodwill is being amortized over 15
years.
(d) Reflects interest expense on acquisition debt using an imputed
rate of 10% per annum.
5. SUPPLEMENTAL PRO FORMA ADJUSTMENT
A supplemental pro forma adjustment has been made for the Charleston
transaction to reflect the minimum guaranteed salary to be paid to the
Seller, as a result of the employment agreement outlined in Note 1.
Historically, no compensation was recognized for similar services
provided by the Seller since the acquired entity was a proprietorship.
The duties and responsibilities of the seller, as an employee, will not
be diminished or cause other costs to be incurred relating to LTVLL.
6. INTANGIBLE ASSETS
The acquisition of Bluegrass resulted in a significant amount of
goodwill recorded on the financial statements. Management must
continually assess the carrying value of all assets, including
goodwill, for impairment. Should conditions in the future require an
impairment reserve, a charge to earnings would be required to reflect
this assessment.
26
