AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 24, 1998
REGISTRATION NO. 333-______
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------
CORONADO INDUSTRIES, INC.
(Name of small business issuer in its charter)
----------
NEVADA 22-3161629
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
16929 E. ENTERPRISE DRIVE, SUITE 202
FOUNTAIN HILLS, ARIZONA 85628
(602) 837-6810
(Address and telephone number of principal executive offices)
16929 E. ENTERPRISE DRIVE, SUITE 202
FOUNTAIN HILLS, ARIZONA 85628
(Address of principal place of business or intended place of business)
G. RICHARD SMITH, SECRETARY
CORONADO INDUSTRIES, INC.
16929 E. ENTERPRISE DRIVE, SUITE 202
FOUNTAIN HILLS, ARIZONA85268
(602) 827-6810
(Name, address and telephone number of agent for service)
----------
WITH COPIES TO:
MICHAEL K. HAIR, P.C.
7407 E. IRONWOOD COURT
SCOTTSDALE, ARIZONA 85258
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: as soon as
practicable after this Registration Statement shall become effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
(CONTINUED ON FOLLOWING PAGE)
<PAGE>
(CONTINUATION OF COVER PAGE)
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
==================================================================================================
CALCULATION OF REGISTRATION FEE
==================================================================================================
<S> <C> <C> <C> <C> <C>
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to be Offering Price Aggregate Offering Amount of
Securities to be Registered Registered per Unit (1) Price (1) Registration Fee
- --------------------------- ---------- ------------ --------- ----------------
Common Stock ............. 1,000,000 shares $.69 $ 690,000 $203.55
Common Stock (2).......... 3,033,767 shares $.69 $2,093,299 $617.52
TOTAL..................................................................... $821.07
==================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 and based upon the average of the bid and asked market
price.
(2) These shares are to be registered for the accounts of selling stockholders.
See "Selling Stockholders".
--------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 24, 1998
PROSPECTUS
CORONADO INDUSTRIES, INC.
1,000,000 SHARES OF COMMON STOCK TO BE SOLD BY THE COMPANY
AND 3,033,767 SHARES OF COMMON STOCK TO BE SOLD BY SHAREHOLDERS
Coronado Industries, Inc., a Nevada corporation (the "Corporation"), is
offering for sale to the public up to 1,000,000 shares of its $.001 par value
common stock (the "Common Stock") at a price of $1.00 per share. The Common
Stock will be sold by the Company, without an underwriter. The Company may
engage an underwriter at a later date.
The Company has also registered for sale 3,033,767 shares of its Common
Stock for sale by 68 shareholders (the "Selling Shareholders"). These common
stock shares were previously sold to these shareholders by the Company in
underwritten private placements. In its last private placement the Company
committed to register these shares. The Company will receive no proceeds from
the sale of any of these 3,033,767 shares by the Selling Shareholders. See
"SELLING SHAREHOLDERS."
Prior to this offering the common stock of the Company was trading on
the Bulletin Board Market under the symbol CDIK.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD NOT BE
PURCHASED BY ANY PERSON WHO CANNOT AFFORD RISK OF LOSS OF THE
INVESTMENT. SEE "RISK FACTORS" AT PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
Price to Underwriting Discounts Proceeds to
Public and Commissions (1) Company (2)
- --------------------------------------------------------------------------------
Per Share.................... $ 1.00 $ .10 $ .90
Total ...................... $1,000,000 $100,000 $900,000
================================================================================
(1) The Company will not pay a commission upon any Common Stock sold by its
officers, Directors and employees. In the future the Company may enter into
an agreement with a securities broker-dealer to sell the Common Stock on
behalf of the Company on a best-efforts basis, and the Company may pay such
securities broker-dealer a cash commission of up to 10% of the gross
offering proceeds from the Common Stock sold by such broker-dealer. As of
the date of this Prospectus, the Company has no arrangement with or
commitment from any securities broker-dealer with respect to the sale of
any Common Stock. (See "Plan of Distribution.")
(2) Before deducting expenses of this registration, payable by the Company and
estimated at $50,000.
THE DATE OF THIS PROSPECTUS IS AUGUST ___, 1998.
<PAGE>
- ---------------------
CONTINUED FROM COVER PAGE
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission
("Commission") a Registration Statement on Form SB-2 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities covered
by this Prospectus. For the purposes hereof, the term "Registration Statement"
means the original Registration Statement and any and all amendments thereto,
including the schedules and exhibits to such original Registration Statement or
any such amendment. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, to which reference is hereby made. Each statement made in this
Prospectus concerning a document filed as an exhibit to the Registration
Statement is qualified in its entirety by reference to such exhibit for a
complete statement of its provisions.
Any interested party may inspect the Registration Statement, without
charge, at the public reference facilities of the Commission at its principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and at its regional offices in Chicago (Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661) and in New York (Seven World Trade
Center, Suite 1300, New York, New York 10048). Any interested party may obtain
copies of all or any portion of the Registration Statement at prescribed rates
from the Public Reference Section of the Commission at its principal office at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
THE COMPANY INTENDS TO FURNISH ITS STOCKHOLDERS EACH YEAR WITH ANNUAL
REPORTS CONTAINING AUDITED FINANCIAL STATEMENTS AND A REPORT THEREON EXPRESSED
BY INDEPENDENT PUBLIC ACCOUNTANTS AND SUCH OTHER REPORTS AS THE COMPANY DEEMS
APPROPRIATE OR AS MAY BE REQUIRED BY LAW.
THE COMPANY FILES ANNUAL, QUARTERLY AND CURRENT EVENT REPORTS WITH THE
SEC PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934.
i
[Inside Front Cover]
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND SHOULD
BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS.
EACH PROSPECTIVE INVESTOR IS URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY. AN
INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK AND
THE SECURITIES SHOULD NOT BE PURCHASED EXCEPT BY THOSE ABLE TO AFFORD THE LOSS
OF THEIR INVESTMENT. SEE "RISK FACTORS."
THE COMPANY
The Company was incorporated under the name First Lloyd Funding, Inc.
pursuant to the laws of the State of New York on December 21, 1989. The
effective date of the Company's public offering was March 13, 1990. In January
1997, the New York corporation merged into a Nevada corporation of the same
name. After a series of acquisitions and spin-offs from May 1990 to September
1996, on November 5, 1996 the Company entered into an Asset Purchase Agreement
with Ophthalmic International, L.L.C. ("OI"), and American Glaucoma, a joint
venture ("AG"), which provided for the purchase of the assets of OI and AG in
exchange for 15,592,224 shares of the Company's common stock (85%) to be issued
to the Company's current three Directors. An additional 855,000 shares were
issued as finders fees to twelve entities and individuals.
The assets of OI transferred to the Company were a patent pending and
other proprietary information concerning equipment and a process for the
treatment of Open Angle Glaucoma and Pigmentary Glaucoma. The assets of AG
transferred to the Company were the concept and a business plan for forty
glaucoma treatment centers in the United States.
During the year ended December 31, 1997, the Company had a net loss of
$829,702 and for the first half of 1998 a net loss of $648,702.
The Company is a holding company and all business operations are
conducted through its two wholly-owned subsidiaries. The Company, through its
Ophthalmic International, Inc. subsidiary, manufactures and will market a
fixation device with a patented designed suction ring that treats Open Angle and
Pigmentary Glaucoma. American Glaucoma, Inc. ("AGI"), the Company's other
subsidiary, operates a glaucoma treatment center in Scottsdale, Arizona, will be
opening a second treatment center in Clearwater, Florida and intends to open up
to 8 similar treatment centers in the United States.
In the United States, glaucoma is the second leading cause of blindness
affecting approximately 7,500,000 persons. Of those, about 60,000 are legally
blind. Glaucoma affects approximately three percent of the world's population,
with certain ethnic populations having a higher occurrence rate. If detected and
treated early, glaucoma need not cause blindness or even severe vision loss.
While there is no cure for glaucoma, the Company believes that its patented
device and medical process provide an effective treatment for afflicted persons
and that a significant global market for its patented medical process, equipment
and rings currently exists.
Glaucoma is not a single disease but rather a group of diseases that
effect the eye. This group of diseases has a single feature of progressive
damage to the optic nerve due to increased pressure within the eyeball. As the
optic nerve deteriorates, blind spots and patterns develop. If left untreated,
the result may be total blindness.
1
<PAGE>
After four years of ongoing studies, it was determined that a 2 minute
treatment with Ophthalmic International's "fixation device and patented design
suction ring" temporarily reduced inter-ocular pressure in the treatment of Open
Angle Glaucoma by approximately 6 Hg for an average of three (3) months at which
time the treatment could be repeated with no serious side effects. This
inter-ocular pressure lowering is achieved when the patented suction ring is
applied over the perilimbal area of the eye for a specified time. With this
treatment the Company believes that there are no harmful side effects, like
those associated with eye drop treatments. In addition, the patent entitled
"Open Angle Glaucoma Treatment Apparatus and Method" has been granted and is
believed to allow the Company to achieve a significant market advantage over
competitors.
The Company's subsidiary, Ophthalmic International, Inc., intends to
manufacture and sell the vacuum equipment, the patented rings and the process in
the United States and abroad, primarily through distributors who will be
assigned specific geographical territories, on the basis of continents or
countries. Ophthalmic International entered into a confidentiality agreement
with Alcon Co. in March, 1997 as the first step in negotiating for Alcon to
become a distributor. In 1997 Ophthalmic International has executed a second
confidentiality agreement with one additional potential distributor for
exclusive worldwide distribution rights. These negotiations concerning
distribution likely will not be completed and definitive agreements executed
until one or more independent studies are completed, PNT billing codes are
assigned, or the labeling of the product as a "device to lower inter-ocular
pressure" is approved by the FDA.
The Company's subsidiary, American Glaucoma, Inc., opened its first
glaucoma treatment center in Scottsdale, Arizona in September 1997. The Company
estimates that there are approximately 62,000 glaucoma patients in the Phoenix
area, based upon a three percent general population occurrence of the condition.
During the fourth quarter of 1997 the Company's Scottsdale Center generated
approximately $26,000 of gross revenues and an operating loss of $243,629.
During the first half of 1998 the Scottsdale center generated approximately
$179,767 of gross revenues and an operating loss of $77,023. The Company
believes that its advertising campaign and the resulting patient treatments at
the Scottsdale Center have indicated that the Company's products and glaucoma
treatment centers will be accepted by the general glaucoma public in the future.
On February 11, 1997 the U.S. Patents and Trademarks Office issued a
patent to Ophthalmic International, L.L.C., Patent Number 5,601,548, for the
Company's medical process, equipment and the procedure. The Company believes,
without assurance, that this patent provides the Company with a substantial
competitive advantage over current and future glaucoma treatment competitors.
The Company is not aware of any other patent being granted for glaucoma
treatment. The Company intends to follow a policy of aggressively pursuing
claims of infringement on its patent and the Company does not believe its
patent, or product or services infringe on the rights of any other person.
The executive offices of the Company are located at 16929 E. Enterprise
Drive, Suite 202, Fountain Hills, Arizona 85268, telephone number (602)
837-6810.
See "Risk Factors", "Business", "Management Discussion and Analysis Or
Plan of Operation", "Management" and "Certain Relationships and Related
Transactions".
2
<PAGE>
THE OFFERING
Securities Offered: 1,000,000 shares of common stock offered by the
Company and
3,033,767 shares of common stock owned by the 68
Selling Shareholders. See "SELLING SHAREHOLDERS" and
"DESCRIPTION OF SECURITIES."
Securities Outstanding 21,583,842 shares of common stock and 0 shares of
Prior To Offering: Preferred Stock
Securities Outstanding 22,583,842 shares of common stock and 0 shares of
After Offering: Preferred Stock, assuming all Common Stock offered by
the Company is sold, of which there is no assurance.
Risk Factors: The securities offered hereby are speculative,
involve a high degree of risk, and should not be
purchased by investors who cannot afford the loss of
their investment. Investors should review and
carefully consider the information set forth under
"RISK FACTORS."
Trading Market: NASDAQ Bulletin Board: Symbol -- CDIK
3
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table summarizes certain financial information and
unaudited data of the Company and is qualified in its entirety by the more
detailed financial statements contained elsewhere in this Prospectus. The
summary financial information contained in the following table is derived from
and should be read in conjunction with the financial statements of the Company
and the notes thereto appearing elsewhere in this Prospectus. The pro forma
consolidated statement of operations data and the pro forma consolidated balance
sheet give effect to the sale of the Common Stock being offered through this
Prospectus and the application of net proceeds from the Offering. The pro forma
consolidated statement of operations data give effect to such events as if they
had occurred as of the first day of the periods presented and the pro forma
consolidated balance sheet data are presented as if such events had occurred on
the balance sheet data. See "Business", "Use of Proceeds" and "Financial
Statements."
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS DATA:
Six Months Ending June 30, Year Ending December 31,
(Unaudited)
---------------------------------------- --------------------------------------
1998 1997 1997 1996
------------------------- ---- ------------------------- ----
Actual Pro Forma Actual Pro Forma
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Revenues $ 179,767 $ 179,767 $ -- $ 26,107 $ 26,107 $ --
Cost Of Revenues $ 256,790 $ 256,790 $ -- $ 269,736 $ 269,736 $ --
Gross Loss From Clinic Operations $ (77,023) $ (77,023) $ -- $ (243,629) $ (243,629) $ --
General and Administrative Expenses $ 559,573 $ 559,573 $ 237,493 $ 567,177 $ 567,177 $ 64,042
Loss From Operations $ (636,596) $ (636,596) $ (237,493) $ (810,806) $ (810,806) $ (64,042)
Total Loss $ (648,702) $ (648,702) $ (244,473) $ (829,702) $ (829,702) $ (65,131)
Net (loss) per common share $ (.03) $ (.03) $ (.01) $ (.04) $ (.04) $ --
Weighted average common and
common equivalent shares
outstanding(1) 19,979,061 20,979,061 18,344,253 18,504,392 19,504,392 18,344,253
</TABLE>
BALANCE SHEET DATA:
June 30, 1998 December 31, 1997
(unaudited)
---------------------- -----------------
Actual Pro Forma(2)
------ ---------
Current assets $ 706,587 $1,656,587 $ 224,970
Total assets $ 879,366 $1,829,366 $ 410,717
Current liabilities $ 231,731 $ 231,731 $ 516,591
Total liabilities $ 231,731 $ 231,731 $ 555,966
Stockholders' equity (deficit) $ 647,635 $1,597,635 $(145,249)
- ----------
(1) Pro Forma average shares outstanding are adjusted assuming the placement
of 1,000,000 shares of the Company's Comon Stock.
(2) The Pro Forma figures at June 30, 1998 are adjusted assuming the
placement of 1,000,000 shares of the Company's Common Stock at $1.00 per
share and total offering expenses of $50,000.
4
<PAGE>
RISK FACTORS
THE SHARES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND THE OWNERSHIP OF THE SHARES
INVOLVES A HIGH DEGREE OF RISK AND UNCERTAINTY, INCLUDING, BUT NOT LIMITED TO,
THE RISK FACTORS SET FORTH BELOW. IN ADDITION TO THE OTHER INFORMATION IN THIS
MEMORANDUM INCLUDED HEREIN AND INCORPORATED BY REFERENCE, PROSPECTIVE INVESTORS
SHOULD CONSIDER CAREFULLY THE FOLLOWING INFORMATION BEFORE PURCHASING THE SHARES
OFFERED HEREBY.
LIMITED OPERATING HISTORY; RECENT LOSSES. The Company in its present
form has only been operating since November of 1996. Accordingly, the Company
has a limited operating history with respect to its business. The Company has
had negative cash flow and accumulated losses of $1,543,535 since inception and
expects to continue to have insufficient liquidity and cash resources until such
time as its revenues increase substantially. The Company's immediate strategy is
to stabilize the patient base of its Scottsdale glaucoma treatment center
through continued advertising and to open one additional glaucoma treatment
center in the Tampa-Clearwater, Florida area with the proceeds from its most
recent funding. The Company will require the capital provided by this Offering
and significant additional capital to expand its operations. There can be no
assurance that the Company will be able to achieve, or maintain, profitable
operations or positive cash flow at any time in the future. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS" and "FINANCIAL STATEMENTS."
NEED TO DEVELOP MARKET FOR SERVICES AND PRODUCTS. The Company has yet
to establish the market for its services and products, and no assurance can be
given that its glaucoma treatment centers in the United States, its Fixation
Device and Suction Rings will be accepted on a successful scale. While the
Company has opened its first glaucoma treatment center in Scottsdale, Arizona on
September 2, 1997, there is no assurance that this center or any additional
center will be profitable. See "BUSINESS -- THE TREATMENT CENTERS."
CAPITAL REQUIREMENTS. Additional funding will be required to fully
implement the Company's 1998 business plan of opening its third treatment
center. The Company may seek additional debt or equity financing through banks,
other financial institutions, companies or individuals. No assurance can be
given that the Company will be able to obtain any such additional equity or debt
financing on satisfactory terms or at all. No assurance can be given that any
such financing, if obtained, will be adequate to meet the Company's needs for
the foreseeable future. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS" and "FINANCIAL STATEMENTS."
RELIANCE ON MANAGEMENT; LIMITED PERSONNEL. The Company is highly
dependent on the services of its executive officers, G. Richard Smith and Gary
R. Smith, and the doctor in charge of the Scottsdale center, Dr. Leo Bores. The
services of the Smith brothers and Dr. Bores are particularly critical. The loss
of any of these individuals' services will have a materially adverse effect, and
the Company may not be able to recover from a loss of any of these services. The
Company is not presently able with its internal staff to fully comply with the
accounting and reporting requirements associated with being a public company,
and will need to continue to rely upon outside consultants and third parties to
provide critical accounting, administrative and support services for the
foreseeable future. No assurance can be given that these services will continue
to be adequately performed or available on terms the Company can afford. See
"MANAGEMENT."
LACK OF PRODUCT DIVERSIFICATION. The Company currently has only one
product, its patented glaucoma treatment process and equipment, from which to
derive revenues and profits, other than treatment center operations. The Company
is approaching the United States and foreign markets with two different
marketing strategies for its single product. Due to the lack of product
diversification, if the Company's single product does not ultimately achieve
market acceptance, the Company is unlikely to be profitable. See "BUSINESS."
5
<PAGE>
TREATMENT CENTERS CONTROLLED BY PHYSICIANS. The physicians employed by
the Company at its glaucoma treatment centers will have substantial control over
the revenues produced and the costs incurred at the centers. In making judgments
on the merits of the patients' best interests, physicians may not be making
decisions which are the most profitable to the Company, on a short-term basis.
Management believes, however, that medical decisions made in the best interests
of the patients will be profitable to the Company on a continuing long-term
basis.
LIMITED PROPRIETARY PROTECTION. The Company uses certain proprietary
technology in its products and treatment centers and the Company believes that
this technology does not infringe upon the proprietary rights of others.
Although no claims of infringement have been asserted, it is possible that the
Company is infringing upon the proprietary and patent rights of others, and the
Company may in the future be required to modify its process or obtain a license,
and also could be exposed to substantial damages for any such infringement.
There can be no assurances that the Company would be able to modify its process
or obtain a license, and this occurrence would have a serious adverse effect on
the Company. Although the Company will attempt to obtain confidentiality
agreements from its employees, there can be no assurance that proprietary
information of the Company will not be used in competition in the future either
by one or more employees but also by consultants with which the Company is
working.
On February 11, 1997, the United States Patent Office issued Patent No.
5,601,548 entitled "Open Angle Glaucoma Treatment Apparatus and Method." The
Company is greatly relying upon said patent and the protection it believes that
patent protection laws will afford to generate revenues in the future. However,
the Company may be required to devote substantial financial and management
resources to enforce its patent rights against future infringement. In the near
future the Company will have alternative uses for the financial and management
resources it may be required to devote to any future patent enforcement
infringement of its patent occurs. Further, there is no assurance that any of
the Company's attempts at protecting its patent will ultimately prove
successful, even after devoting substantial resources thereto. See "BUSINESS --
PATENT."
MANAGEMENT OF GROWTH. The Company anticipates continued growth in the
future and this growth, if achieved, will place significant strains on the
Company's financial, technical, managerial and other resources which are
limited. Failure to effectively manage growth could have a materially adverse
effect on the Company's business and profitability.
COMPETITIVE FACTORS. The medical device and services industry is highly
competitive. There can be no assurance given that the Company will have the
ability and capital to compete effectively in this environment, notwithstanding
the perceived advantages of the Company's products and encouraging early test
results on the Company's products and services. As with any medical technology
company, change occurs rapidly and other devices, techniques and/or treatments
are likely being researched by others, including major international
corporations. It is likely that competitors will attempt to develop products and
services to compete with the Company's products and services, particularly if
the Company is profitable in the near future. Further, a cure for glaucoma may
be discovered which would eliminate the market need for the Company's products
and services. See "BUSINESS -- COMPETITION."
PRODUCT LIABILITY AND OTHER INSURANCE. Testing, manufacturing,
marketing and use of the Company's products and methods in the glaucoma
treatment centers will entail risk of product and perhaps professional liability
to the Company. The Company may be unable to obtain adequate levels of insurance
to protect itself from these potential liabilities. The Company does not have
officer and director errors and omissions insurance, and this could materially
adversely affect the Company, particularly since it has increased exposure in
this area being a reporting public company without internal staff experienced in
managing public companies. The Company's ability to attract qualified outside
directors and officers is limited without this insurance protection.
6
<PAGE>
DEPENDENCE UPON SUPPLIERS AND MANUFACTURER. The Company does not have
long-term supply contracts and there is a risk that the Company would have
supply disruption or be unable to obtain needed supplies at competitive pricing.
The Company believes that many alternative suppliers are available on all
necessary components and the Company does not anticipate any supply problems at
this time. All of the Company's products are manufactured by third parties which
the Company does not control. No assurances can be given that these third
parties will be able to timely and competitively manufacturer, supply and
deliver required product to achieve the Company's financial objectives. See
"BUSINESS."
CONTROL BY EXISTING STOCKHOLDERS. The Company's officers and directors
own a substantial majority of the Company's outstanding Common Stock. As a
result, Company management will be able to effectively control matters requiring
approval by the stockholders of the Company, including the election of the
Company's Board of Directors. See "PRINCIPAL STOCKHOLDERS."
DILUTION. Investors in this offering will incur immediate and
substantial dilution in net tangible book value per share of approximately 93%
of the public offering price per share of the Common Stock, at an assumed public
offering price of $1.00 per share. See "DILUTION."
INTERNATIONAL SALES AND SUPPLY. The Company anticipates conducting
foreign sales of its products. If paid in foreign currencies, currency
fluctuation and other normal risks of conducting business internationally,
including regulatory changes and requirements, fluctuating exchange rates,
tariffs and other barriers, management difficulties, potentially adverse tax
consequences and potentially difficult legal enforcement and collection problems
could have a materially adverse impact on the financial condition of the
Company. See "BUSINESS -- THE FIXATION DEVICE."
LIABILITY FOR PERSONAL INJURY AND INADEQUACY OF INSURANCE. Use of the
Company's equipment and facilities for glaucoma treatment may give rise to
claims against the Company by persons alleging injury as a result of the
procedures performed. The Company will endeavor, whenever possible, to seek
recovery from manufacturers of equipment for claims based on alleged defects in
the equipment utilized by the Company. There can be no assurance that such
manufacturers will carry liability insurance adequate to protect against such
claims or that the Company would prevail if it were required to assert such
claims. The Company has purchased medical and products liability insurance
covering these risks for its own account. However, there can be no assurance
that the Company would be successful in seeking recovery from third parties or
that the amount recovered would be adequate to cover all claims. To the extent
the Company becomes exposed to liability claims, if any, the Company may be
adversely affected.
FEDERAL REGULATION. The Company and its operations will be subject to
extensive federal regulation in the Untied States affecting the health care
industry and the delivery of health care services. The Company believes it may
sell its equipment in the Untied States as a "fixation device," because the
equipment was previously granted a 501(k) exemption by the Food and Drug
Administration (the "FDA"). However, the Company may only sell a limited amount
of its product as a "device to lower inter-ocular pressure" in the United States
until the FDA has approved such labeling. At this time there is no assurance
when, if ever, the FDA will approve the labeling of the Company's equipment as a
"device to lower inter-ocular pressure." See "BUSINESS -- GOVERNMENTAL
REGULATION."
7
<PAGE>
THIRD-PARTY PAYORS. Since September 1997, the Company's Scottsdale
glaucoma treatment center has been receiving payments for rendering traditional
medical services to patients from both insurance companies and Medicare.
However, the Company anticipates and has planned for delays and rejections of
claims submitted to third-party payors of the payment related to performing the
Company's patented PNT treatment on patients during each treatment center's
first year of operation. In March 1998 the Company's Scottsdale treatment center
began receiving Medicare payments for the performance of the PNT procedure.
There is no assurance that these payments will continue to the Scottsdale center
and as to when, if ever, the Company will receive payment at its additional
centers from third-party payors for its patented PNT treatment. While the
Company may seek reimbursement of rejected claims directly from the patients,
there can be no assurance that any amounts may be collected from such patients.
If the Company is unable to receive payment from third-party payors for the
centers' performance of the patented treatment, the Company's profitability will
be adversely impacted. See "BUSINESS -- COMPETITION."
STATE REGULATION. The Company's Scottsdale glaucoma treatment center
has registered with the State of Arizona Department of Health Services as a
"health care treatment institution" and the Company anticipates that all of its
treatment centers, including its new Tampa-Clearwater center, will be required
to register with the states in which operations are conducted as a health care
or similar provider, depending on each State's laws. The Company is unable to
predict at this time the exact amount of time and expense which will be needed
to register as a health care provider in each state in the Company may wish to
open a glaucoma treatment center. There is no assurance that the Company will be
able to register as a health care provider in each state of the Company's
choice. Further, with the national attention on "health care reform" no
assurance can be given that the future operations of the Company may not be
adversely affected by changes to state or federal regulatory statutes or
policies. See "BUSINESS -- GOVERNMENTAL REGULATION."
POSSIBLE ISSUANCE OF OPTIONS OR STOCK MAY DILUTE INTEREST OF
STOCKHOLDERS. The Company's Board of Directors intend to reserve a total of
1,000,000 shares of Common Stock for issuance under its 1998 Stock Option Plan
("STOCK OPTION PLAN"). To the extent that any stock options are granted in the
future and exercised, dilution to the interests of the investors may occur.
Moreover, the terms upon which the Company will be able to obtain additional
equity capital may be adversely affected since any holders of the outstanding
options can be expected to exercise them at a time when the Company would, in
all likelihood, be able to obtain any needed capital on terms more favorable to
the Company than those provided by such outstanding options. See "MANAGEMENT -
Stock Option Plans."
COST OF SHARES. The price for the Shares paid by the Selling
Shareholders may be substantially less than the price to be paid by the
purchasers of the Shares pursuant to this Prospectus. See "SELLING
SHAREHOLDERS."
NUMBER OF SHARES REGISTERED. A total of 3,033,767 previously issued
shares have been registered and may be sold pursuant to this Prospectus. This
number of tradeable shares represents approximately 60% of the number of Company
shares which are presently held in broker-dealer trading accounts and are
otherwise freely tradeable. Therefore, the trading price for the Company's
common stock may be depressed in the future because of the number of Shares
"over-hanging" the market. See "SELLING SHAREHOLDERS."
ISSUANCE OF ADDITIONAL STOCK: WARRANTS. The Company's Articles of
Incorporation authorize the issuance of up to 25,000,000 shares of Common stock
of which 21,583,842 has been issued as of August 1, 1998. The Company may in the
future authorize the issuance of additional shares of Common Stock or preferred
stock. Future issuances of stock could have a dilutive effect on the Shares to
be sold pursuant to this Prospectus.
8
<PAGE>
The Company has issued 1,681,123 Warrants to purchase 1,681,123 shares
of its common stock to individuals and entities which were associated with the
underwriter of the Company's private placements in 1997 and 1998. These Warrants
are exercisable at any time at an exercise price of $2.00 per share through
December 31, 1998 and at an exercise price of $2.50 per share through December
31, 2000 on which date the unexercised Warrants expire. The holders of the
outstanding Warrants may exercise them at a time when the Company would
otherwise be able to obtain additional equity capital on terms more favorable to
the Company. See "DESCRIPTION OF SECURITIES."
MARKET FOR COMMON STOCK. The Company's common stock currently trades on
the NASDAQ Bulletin Board. The quotations on the Bulletin Board reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
reflect actual transactions. On the Bulletin Board the Company's stock is
currently subject to certain rules adopted by the Securities and Exchange
Commission (the "SEC") that regulate broker-dealer practices in connection with
transactions in "Penny Stocks". Penny Stocks generally are securities with a
price of less than $5.00 (other than securities registered on certain national
exchanges or quoted on the NASDAQ Small Cap system). The "Penny Stock" rules
require broker-dealers, prior to a transaction in a Penny Stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document
prepared by the SEC that provides information about Penny Stocks and the nature
and levels of risks in the Penny Stock market. The broker-dealer must also
provide the customer with current bid and offer quotations for the Penny Stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each Penny Stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the
broker-dealer must approve a customer's account for transactions in Penny Stocks
except for established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income of $200,000 or $300,000 jointly with
their spouse). Consequently, if the Company's common stock shares remain subject
to the Penny Stock rules, these disclosure requirements may have an adverse
effect on the ability of broker-dealers to sell the Company's common stock
shares and may affect the ability of investors in this Offering to sell the
Company's common stock shares and otherwise affect the trading market of the
Company's common stock shares. Accordingly, prospective investors may be unable
to liquidate an investment in common stock shares and should be prepared to bear
the economic risk of their investment for an indefinite period and be able to
withstand a total loss of his investment. See "MARKET FOR COMPANY'S COMMON
STOCK."
9
<PAGE>
SELLING SHAREHOLDERS
This Prospectus covers 3,033,767 outstanding shares of Company common
stock to be offered for the accounts of 68 individuals and entities (the
"Selling Shareholders"). The Selling Shareholders acquired their Shares from the
Company in three private placements conducted from June 1997 through June 1998.
The Company committed to register their common stock shares in its last private
placement. The Company will not receive any proceeds from the offering of
securities by the Selling Shareholders. The following table sets forth certain
information with respect to the beneficial ownership of securities offered
hereby by the Selling Shareholders.
BENEFICIAL OWNERSHIP OF COMMON STOCK
Prior to Sale After Sale (1)
Number of Percent of Number of Percent of
Name and Address Shares Class (2) Shares Class
- ---------------- ------ --------- ------ -----
Vexler, Ltd. 56,667 .3% 0 0
P.O. Box 200
Mesa, AZ 85211
Recker 80 L.L.C 320,000 1.5% 0 0
11811 N. Tatum
Suite 4050
Phoenix, AZ 85028
John & Irene Cifelli 8,000 * 0 0
Grandchildren's Trust
P.O. Box 13206
Scottsdale, AZ 85267
Surrety Bank & Trust Co. Ltd. 88,000 .4% 0 0
Suite 6 Hurricane Hole Plaza
Nassau, Bahamas
Joseph H. Poplow 10,000 * 0 0
5 Hollow Court
Westbury, NY 11590
Alexander Kale S.A 58,880 .3% 0 0
Hunkins Plaza, Main Street
Charlestown, Nevis, W.I
J.R. Fox & Company, Inc. 20,000 * 0 0
3530 Forest Lane, #50
Dallas, TX 75234
Harriet M. Long Revocable Trust 100,000 .5 0 0
5501 Dewey Hill Road
Edina, MN 55439
Phillip N. & Patricia A. Shupe 30,000 .1% 0 0
28 Sugar Creek Road
North Little Rock, AR 72116
Michael D. Wessels 50,000 .2% 0 0
63 Timbercreek Court
Lake Jackson, TX 77566
10
<PAGE>
William & Loreta E. Philliber 20,000 * 0 0
930 Carla Circle
Sherwood, AR 72166
TAC Family Trust No. One 20,000 * 0 0
P.O. Box 13206
Scottsdale, AZ 85267
Genras, Inc. 20,000 * 0 0
15859 N. 77th Street
Scottsdale, AZ 85260
Scott E. Johnson 130,000 .6% 0 0
2307 Harrington Court
Euless, TX 76039
Gary Hornbrook 10,000 * 0 0
2365 W. Portobello
Mesa, AZ 85202
Eugene J. Friedman 50,000 .2% 0 0
4420 Bocaire Blvd
Boca Raton, FL 33487
Howard Talks & Carol Hall 20,000 * 0 0
249 Tradewind Drive
Palm Beach, FL 33480
Fred N. Seniw Trust 10,000 * 0 0
P.O. 5055
Lansing, IL 60435
Thomas M. Tobin 20,000 * 0 0
1013 Chippenham Road
Mechanicsburg, PA 17055
Richard T. Janicki 10,000 * 0 0
2703 Creek Edge Parkway
Austin, TX 78733
Azriel Nagar 20,000 * 0 0
342 Irving Avenue
South Orange, NJ 07079
James A. Moise II 10,000 * 0 0
22 Cutter Green Drive
San Antonio, TX 78248
Dale H. Domeyer Trust 10,000 * 0 0
2404 S. Buttercup
Mesa, AZ 85208
Arnold C. Ramberg Trust 20,000 * 0 0
2438 S. Buttercup
Mesa, AZ 85208
Joseph P. Schott 30,000 .1% 0 0
5702 N. 4th Street
Phoenix, AZ 85012
11
<PAGE>
Anthony M. Kong 10,000 * 0 0
3024 W. Mescal
Phoenix, AZ 85029
Stephen C. and Jiletta J. Ryan 20,000 * 0 0
10040 E. Happy Valley Road, #442
Scottsdale, AZ 85255
Ruth Anne Lefcourt 24,000 .1% 0 0
7519 Via De La Campana
Scottsdale, AZ 85258
Jerry H. Walker 103,333 .5% 0 0
22639 N. 49th Place
Phoenix, AZ 85024
David R. Plone 50,000 .2% 0 0
10243 N. 99th Street
Scottsdale, AZ 85258
John R. Schaefer 40,000 .2% 0 0
4179 Elm Road
Potosi, Wisconsin 53820
Economic Concepts, Inc. 20,000 * 0 0
Defined Benefit Pension Plan
9904 N. 58th Street
Paradise Valley, AZ 85253
Poseidon Solutions, Inc. 80,000 .4% 0 0
2806 Garden Oak Place, Suite 100
Grand Prairie, TX 75052
Felix P. and Sheila F. Cisek 20,000 * 0 0
1435 E. Berridge Lane
Poenix, AZ 85014
Lawrence A. Underwood 160,000 .7% 0 0
6241 N. 31st Place
Phoenix, AZ 85016
Paul J. and Carol A. Robinson 16,888 * 0 0
4814 E. Earll Drive
Phoenix, AZ 85018
Harry Voulemenous Revocable Trust 40,000 .2% 0 0
25850 S. Fox Glenn Drive
Sun Lakes, AZ 85248
Paul and Sharon Carter Family Trust 200,000 .9% 0 0
P.O. Box 2506
Flagstaff, AZ 86003
Gary Peter Klahr 58,000 .3% 0 0
317 E. Berridge Lane
Phoenix, AZ 85012
David and Patricia Lebowitz 50,000 .2% 0 0
Family Trust
10555 N. Tatum Blvd. Suite 101
Paradise Valley, AZ 85253
12
<PAGE>
Colonial Trust, Custodian FBO 16,000 * 0 0
James J. Morgan SD IRA
5336 N. 19th Avenue
Phoenix, AZ 85015
Leanne H. Frantz 227,666 1.1% 0 0
2854 Post Oak Road Circle
Moblie, Alabama 36693
John E. Shryack 20,000 * 0 0
13161 Pennystone Drive
Dallas, TX 75244
Ronald I. Gross 44,073 .2% 0 0
9105 N. Foothills Manor Drive
Paradise Valley, AZ 85253
Gerald B. Eckley 26,667 .1% 0 0
1421 Hamblen Road
Kingwood, TX 77339
Dr. Mark Walmer SEP-IRA 66,667 .3% 0 0
5336 N. 19th Avenue
Phoenix, AZ 85015
James W. Moldermaker SEP-IRA 37,861 .2% 0 0
8029 E. Via De Viva
Scottsdale, AZ 85253
Kevin Mulmed 66,667 .3% 0 0
7002 E. Loma Land Dr.
Scottsdale, AZ 85257
William C. and Adriana A. Hardy 33,333 .2% 0 0
8712 Lacrosse Drive
Dallas, TX 75231
Ralph H. and Sharon C. Graham 33,333 .2% 0 0
5053 Trail Lake Drive
Plano, TX 75093
Catherine Marsh and John Croft 66,667 .3% 0 0
18 Pheasants Ridge North
Greenville, DE 19807
Russell R. and Melody A. Berg 13,333 * 0 0
3442 E. Golden Vista
Phoenix, AZ 85028
Russell R. Berg, D.C., P.C. 13,333 * 0 0
13835 N. Tatum Blvd., Suite 3
Phoenix, AZ 85032
James A. Klein 20,000 * 0 0
1419 Chestnut Ridge
Kingwood, TX 77339
Robert H. and Lynda Jane Katz 9,333 * 0 0
7719 W. Villa Theresa Dr.
Glendale, AZ 85308
13
<PAGE>
Mark S. Walmer 33,333 .2% 0 0
3200 S. Ambrosia Dr.
Chandler, AZ 85248
Stephen C. and Jiletta J. Ryan 13,333 * 0 0
10040 E. Happy Valley Road,
No.442
Scottsdale, AZ 85255
George and Sandra Erick 13,333 * 0 0
11432 E. De La O Road
Scottsdale, AZ 85255
Larray L Peery 26,667 .1% 0 0
5041 E. Lafayette
Phoenix, AZ 85018
Anthony A. and Laurie R. Pearson 6,667 * 0 0
3101 Stouenburch Dr.
Hilliard, OH 43026
Belinda Barclay - White 6,667 * 0 0
4035 E. Colter
Phoenix, AZ 85018
Rick Biernacki and Randy Biernacki 33,333 .2% 0 0
P.O. Box 292068
Lewisville, TX 75067
Bruce I. Galbraith 33,333 .2% 0 0
1401 Ramsgate
South Lake, TX 76092
Guarantee & Trust Co., Trustee 26,667 .1% 0 0
John Tull IRA
P.O. Box 1346
Baltimore, MD 21203
Mercantile Bank, Trustee 33,333 .2% 0 0
UCL Employee Saving Trust
FBO John Schaeffer
P.O. Box 148
Dubuque, IA 52004
Callaway, A General Partnership 14,400 * 0 0
3828 N. 28th Avenue
Phoenix, AZ 85017
Maxim Corparation, Ltd. 60,000 .3% 0 0
P.O. Box 1531
11 Old Parham Road
St. John's, Antigua
Dorothy M. Robinson 4,000 * 0 0
7919 E. Fountain Cove
Mesa, AZ 85208
- ----------
(*) Less than .1% of outstanding shares.
(1) Assumes all shares offered by the Selling Shareholders are sold.
(2) Percentage based upon the number of outstanding shares on July 1, 1998,
before any Warrants are exercised.
14
<PAGE>
The securities offered hereby for the accounts of the Selling
Shareholders may be sold from time to time directly by the Selling Stockholders.
Alternatively, the Selling Shareholders may from time to time offer such
securities through underwriters, dealers or agents. The distribution of
securities by the Selling Shareholders may be effected in one or more
transactions that may take place on the over-the-counter market, including
ordinary broker's transactions, privately-negotiated transactions or through
sales to one or more broker-dealers for resale of such shares as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Shareholders in connection with such sales of securities. The Selling
Shareholders and intermediaries through whom such securities are sold may be
deemed "underwriters" within the meaning of the Securities Act of 1933 with
respect to the securities offered, and any profits realized or commissions
received may be deemed underwriting compensation.
USE OF PROCEEDS
Assuming the Common Stock offered by the Company is sold for $1.00 per
share, the following table represents the estimated use of $950,000 of net
offering proceeds. The Company currently estimates that each new glaucoma
treatment center will require $400,000 to $600,000 of working capital, depending
upon whether medical equipment and office furniture can be leased by the Company
on a long-term basis. Assuming the Company can obtain long-term leasing of the
equipment and furniture, the Company believes $950,000 is sufficient working
capital to open 2 additional treatment centers.
Purchase of medical equipment and
office furniture (1) 300,000
Advertising (2) 300,000
Rent and personnel expenses(3) 250,000
Contingency reserve (4) 100,000
--------
$950,000
- ----------
(1) Assumes the Company purchases $150,000 of used medical and office
furniture for each new treatment center. The Company will attempt to
lease this equipment and furniture to preserve working capital; however,
no leasing arrangement has been made as of the date of this Prospectus.
(2) Assumes average monthly advertising expense of $25,000 for six months at
each new treatment center. Advertising expenses will actually be greater
in the first months of operation. The second center will not commence
operations until the first additional center reaches a break-even point.
(3) Assumes rent and personnel expenses of approximately $20,000 per month
for six months at each new treatment center. The second center will not
commence operations until the first additional center reaches a
break-even point.
(4) Assumes the Company does not engage any securities broker-dealer to
solicit orders for the Common Stock. If a securities broker-dealer
solicits $1,000,000 of gross offering proceeds, the Company would pay up
to $100,000 of sales commission and have no contingency reserve from this
Offering.
15
<PAGE>
DILUTION
As of June 30, 1998 the net tangible book value of the Company was
approximately $613,042 or $.03 per share, based upon the June 30, 1998 financial
statements. On June 30, 1998 the Company had 21,583,842 shares outstanding. Net
tangible book value per share represents the amount of the Company's total
assets (excluding its intangible assets) less its liabilities, divided by the
number of shares outstanding. After giving effect to the receipt of the net
proceeds of the Offering assuming no broker-dealer commissions (estimated to be
$950,000) and assuming no Warrants are exercised, the pro forma net tangible
book value of the Company as of June 30, 1998 would have been approximately
$1,563,042 or approximately $.07 per share. This would result in dilution to the
investors of approximately $.93 per share, and an increase in value to existing
shareholders of $.04 per share. The following table illustrates the per share
dilution for the Offering:
Offering price $1.00
Net tangible book value per share
before Offering $ .03
Increase per share attributable to Offering $ .04
Pro forma net tangible book value per share
after Offering $ .07
Dilution of net tangible book value per share
to Investors $ .93
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, this document
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the Company
intends that such forward-looking statements be subject to the safe harbors
created thereby. Such forward-looking statements involve risks and uncertainties
and include, but are not limited to, statements regarding future events and the
Company's plans and expectations. The Company's actual results may differ
materially from such statements. Although the Company believes that the
assumptions underlying the forward-looking statements herein are reasonable, any
of the assumptions could prove inaccurate and, therefore, there can be no
assurance that the results contemplated in such forward-looking statements will
be realized. In addition, the business and operations of the Company are subject
to substantial risks which increase the uncertainties inherent in the
forward-looking statements included in this document. The inclusion of such
forward-looking information should not be regarded as a representation by the
Company or any other person that the future events, plans or expectations
contemplated by the Company will be achieved.
QUARTER ENDING JUNE 30, 1998
OPERATIONS. Registrant was a development stage company through the
quarter ended September 30, 1997, with no revenues having been generated. Also,
prior to November 5, 1996 Registrant had been a dormant shell company with no
operations since 1994. Therefore, there is no comparable prior year's operations
to which to compare the six month operating results.
17
<PAGE>
SIX MONTHS
For the six-month period ended June 30, 1998 Registrant experienced a net
loss from operations of $636,596, which was comprised of a net loss from
Registrant's Scottsdale treatment center of $77,023 and its general and
administrative expenses incurred at the corporate level of $559,573. 78.6% of
Registrant's corporate expenses consisted of officers salaries of $100,000
(17.9%), professional expenses of $95,945 (17.1%) and shareholder services and
media promotion of $243,876 (43.6%). Registrant expects its professional
expenses to remain at a high level as a result of its continued attempts to
obtain financing in 1998 for one additional treatment center, as well as
incurring the continuing costs of its FDA application. Registrant expects no
change in its officers salaries in the remainder of 1998. Since most of
Registrant's shareholder services expenses are paid with Registrant's stock and
not cash, Registrant's shareholder services expenses are likely to remain high
for the remainder of 1998.
During the first half of 1998 Registrant's Scottsdale treatment center
generated $179,767 of gross revenues. Included in these revenues are prior
quarters billings for PNT which were rebilled to Medicare in the first quarter,
because Medicare began to pay for the PNT procedure. It is not currently known
whether Medicare will continue to pay Registrant for the PNT procedure in the
future. Revenues were increasing at the Scottsdale treatment center until the
summer slow down occured in May and June 1998. At this time the Registrant does
not expect revenues at the Scottsdale treatment center to increase to the
break-even point again until September or October 1998. There is no assurance
that the Scottsdale treatment center will ever be profitable, and therefore, the
Registrant is considering alternatives for the Scottsdale treatment center.
87.8% of the center's expenses were represented by advertising costs of $61,360
(23.9%) and personnel salaries of $163,980 (63.9%). As a result of the summer
slow down, the Registrant reduced its personnel expense at the center in July
1998. Registrant may increase its personnel expenses at the center in the second
half of 1998, but only after the break-even point is achieved. Registrant
expects its 1998 advertising costs for the Scottsdale center to remain
comparable to that spent in the first half of 1998.
LIQUIDITY AND CAPITAL RESOURCES. On a short-term and long-term basis
Registrant requires only minimal capital to sustain its manufacturing of the
patented Fixation Device and the patented suction rings, because of Registrant's
current inventory levels. However, on a short-term basis Registrant requires
approximately $400,000 to $600,000 to adequately fund the first year's operation
of any additional glaucoma treatment centers. Registrant believes it currently
has sufficient capital to fund the commencement of its second treatment center
in Clearwater, Florida, including purchase or lease of approximately $200,000 of
medical equipment and furnishings. Registrant is presently planning to conduct
another private placement of its securities or secure debt financing in 1998 to
secure financing for one additional treatment center. However, at this time
Registrant has received no commitments from any source to provide such
financing. The Registrant is currently planning on selling a limited number of
units of its Fixation Device to ophthalmologists in the United States over the
next several months, pursuant to FDA investigational device exemption rules and
regulations. Such sales, if made, would have a favorable impact upon the
Registrant's liquidity.
18
<PAGE>
On a long-term basis, Registrant anticipates, without assurances, that its
initial glaucoma treatment centers will be sufficiently profitable to permit
additional glaucoma treatment centers and product marketing to be funded during
subsequent years from a combination of internal and external sources.
During the first half of 1998 Registrant received a total of $1,238,675
from two private placement offerings of its securities. Registrant expects these
funds, along with the future profitably of the Scottsdale treatment center, will
provide financial stability for the Registrant's current operations in 1998.
In December 1996 through April 1997 Registrant issued a series of
promissory notes to a third party aggregating $220,000, all payable one year
after issuance and bearing 15% annual interest. These notes and accrued interest
were repaid in full in March 1998.
In February 1998 Registrant issued a $25,000 convertible promissory note
which bears 15% interest. The interest on this note ceased on March 30, 1998
when Registrant offered to repay this note and the holder indicated a
possibility of converting into equity. 5,000 shares of Registrant's common stock
were issued to the holder in February 1998 as additional interest on this note.
$20,000 of the principal of this note was repaid and the remaining principal and
interest was converted to Registrant's common stock in May 1998.
In July 1997 the Registrant issued a $75,000 promissory note bearing 10%
annual interest in partial consideration for the purchase of medical equipment
and office furnishings at the Scottsdale treatment center. This note requires a
$37,500 principal payment on July 18, 1998 (which has been made) and a $37,500
final principal payment on January 18, 1999.
19
<PAGE>
YEAR ENDING DECEMBER 31, 1997
OPERATIONS. The Company was a development stage company at year-end
December 31, 1996, with no revenues having been generated during the year.
Therefore, there is no comparable prior year's operations to which to compare
the 1997 annual operating results.
For the year ended December 31, 1997 the Company experienced a net loss
from operations of $810,806, which was comprised of a net loss from the
Company's treatment center operation of $243,629 and its general and
administrative expenses incurred at the corporate level of $567,177. 68.7% of
the Company 's corporate expenses consisted of officers salaries of $200,000
(35.3%) and professional expenses of $189,228 (33.4%). The Company expects its
professional expenses to remain at a high level as a result of its continued
attempts to obtain financing in 1998 for two additional treatment centers, as
well as incurring the legal costs of acquiring and opening additional treatment
centers. See "Liquidity and Capital Resources" below.
During the four months in which the Company's Scottsdale treatment
center was receiving patients, the center generated $26,107 of revenues. During
the first quarter of 1998 the revenues of the center were substantially higher
on a monthly basis than in 1997. The Company currently expects the Scottsdale
treatment center to be profitable in the second half of 1998, if not sooner.
Since the Company incurred advertising and personnel expenses during the month
preceding the opening of its treatment center, the Company 's center expenses of
$269,736 represented five months of costs. 79.0% of the center's expenses were
represented by advertising costs of $120,300 (44.5%) and personnel salaries of
$93,072 (34.5%). The Company expects the treatment center's personnel costs to
remain fairly constant during 1998, and perhaps increase in the second half of
the year as increased patients require additional personnel. The Company expects
its advertising costs of the Scottsdale center to decrease substantially in
1998, because the initial advertising expenses will not be required in 1998 and
the Company has sufficient capital on hand in 1998 to pay for advertising in
advance, which should result in a substantial discount.
20
<PAGE>
BUSINESS
BACKGROUND
The Company was incorporated under the name First Lloyd Funding, Inc.
pursuant to the laws of the State of New York on December 21, 1989. The
effective date of the Company's public offering was March 13, 1990. That
offering closed on May 1, 1990. For further information concerning the
Registration Statement, see File No. 33-33042-NY at the Securities and Exchange
Commission's Regional Office in New York City or at its principal office in
Washington, D.C. In January, 1997, the New York corporation named Coronado
Industries, Inc. merged into and became a Nevada corporation of the same name.
OPHTHALMIC INTERNATIONAL, L.L.C. AND AMERICAN GLAUCOMA, INC.
After a series of acquisitions and spin-offs from May 1990 to September
1996, on November 5, 1996 the Company entered into an Asset Purchase Agreement
with Ophthalmic International, L.L.C. ("OI"), and American Glaucoma, a joint
venture ("AG"), which provided for the purchase of the assets of OI and AG in
exchange for 15,592,224 shares of the Company's common stock (85%) to be issued
to the Company's current three Directors. An additional 855,000 shares were
issued as finders fees to twelve entities and individuals.
The assets of OI transferred to the Company were a patent pending and
other proprietary information concerning equipment and a process for the
treatment of Open Angle Glaucoma. The assets of AG transferred to the Company
were the concept and a business plan for forty glaucoma treatment centers in the
United States. However, a provision in the Asset Purchase Agreement allowed OI
to rescind the transaction and receive the patent rights and other proprietary
rights back from the Company in the event OI discovered within one year after
the date of the Asset Purchase Agreement that the Company breached one of its
representations or warranties in that agreement. OI waived this right of
rescission in July 1997.
OVERVIEW
The Company is a holding company and all business operations are
conducted through its two wholly-owned subsidiaries. The Company, through its
Ophthalmic International, Inc. subsidiary, manufactures and will market a
fixation device with a patented designed suction ring that treats Open Angle and
Pigmentary Glaucoma. American Glaucoma, Inc. ("AGI"), the Company's other
subsidiary, operates a glaucoma treatment center in Scottsdale, Arizona, and
will be opening a second treatment center in Clearwater, Florida and intends to
open up to 8 similar treatment centers in the United States.
In the United States, glaucoma is the second leading cause of blindness
affecting approximately 7,500,000 persons. Of those, about 60,000 are legally
blind. Glaucoma affects approximately three percent of the world's population,
with certain ethnic populations having a higher occurrence rate. If detected and
treated early, glaucoma need not cause blindness or even severe vision loss.
While there is no cure for glaucoma, the Company believes that its patented
device and process provide an effective treatment for afflicted persons and that
a significant global market for its patented process, equipment and rings
currently exists.
Glaucoma is not a single disease but rather a group of diseases that
effect the eye. This group of diseases has a single feature in that progressive
damage to the optic nerve due to increased pressure within the eyeball. As the
optic nerve deteriorates, blind spots and patterns develop. If left untreated,
the result may be total blindness. The space between the lens and the cornea in
the eye is filled with a fluid called the aqueous humor. This fluid circulates
21
<PAGE>
from behind the colored portion of the eye (the iris) through the opening at the
center of the eye (pupil) and into the space between the iris and cornea. The
aqueous humor is produced constantly, so it must be drained constantly. The
drain is at the point where the iris and cornea meet, known as the drainage
angle, which directs fluid into a channel (Schlemm's canal) that then leads it
to a system of small veins outside the eye. When the drainage angle does not
function properly, the fluid cannot drain and pressure builds up within the eye.
Pressure also is exerted on another fluid in the eye, the vitreous humor behind
the lens, which in turn presses on the retina. This pressure affects the fibers
of the optic nerve, slowly damaging them. The result over time is a loss of
vision.
THE FIXATION DEVICE
After four years of ongoing studies involving Dr. John T. LiVecchi,
M.D., F.A.C.S., Assistant Clinical Professor of Ophthalmology, Allegheny
University and Dr. Guillermo Avolos, Professor of Ophthalmology, University of
Guadalajara, Mexico,it was determined that a 2 minute treatment with Ophthalmic
International's fixation device and patented design suction ring temporarily
reduced inter-ocular pressure ("I.O.P.") in the treatment of glaucoma by
approximately 6 Hg for an average of three (3) months at which time the
treatment can be repeated with no serious side effects. This I.O.P. lowering is
achieved when the patented suction ring is applied over the perilimbal area of
the eye for a specified time. With this treatment the Company believes that
there are no harmful side effects, like those associated with eye drop
treatments. In addition, the patent entitled "Open Angle Glaucoma Treatment
Apparatus and Method" has been granted and is believed to allow the Company to
achieve a significant market advantage over competitors.
Dr. John LiVecchi, a Company Director, and Dr. Leo Bores, the Medical
Director of the Company's Scottsdale treatment center, addressed two different
medical conventions of ophthalmologists in March and April 1998 concerning the
results of the studies of Company's procedure and equipment. These presentations
to the ultimate end-users of Company's products serve to educate the industry
about the Company's product and its efficacy.
The Company's subsidiary, Ophthalmic International, Inc., intends to
manufacture and sell the vacuum equipment, the patented rings and the process in
the United States and abroad, primarily through distributors who will be
assigned specific geographical territories, on the basis of continents or
countries. Ophthalmic International entered into a confidentiality agreement
with Alcon Co. in March, 1997 as the first step in negotiating for Alcon to
become a distributor. In 1997 Ophthalmic International has executed a second
confidentiality agreement with one additional potential distributor for
exclusive worldwide distribution rights. These negotiations concerning
distribution likely will not be completed and definitive agreements executed
until one or more independent studies are completed, PNT billing codes are
assigned, or the labeling of the product as a "device to lower inter-ocular
pressure" is approved by the FDA.
Until such time as the Company executes an exclusive worldwide
distribution agreement, the Company may enter into one or more non-exclusive
distribution agreements with medical equipment dealers in the Far East and/or
Europe. These short-term agreements will provide the Company with test-marketing
results for use in its negotiations for the exclusive worldwide rights and
provide the Company with interim cash flow.
The Company expects its distributors will purchase the vacuum equipment
for approximately $5,000-$10,000 per unit and purchase the patented ring which
is placed on the patient's eye, for approximately $10 to $15 each, depending
upon volume. In the Fall of 1998 the Company expects to commence limited sales
of its product at a price of approximately $15,000 per unit in the U.S. pursuant
to the FDA rules allowing recovery of its research and development costs. The
Company expects, without assurance, to have a gross profit margin on the
manufacture and sale of its product in excess of 60%.
22
<PAGE>
The Company's vacuum equipment is composed of special order parts, such
as molded case, display board, circuit boards, and motors, all for which the
Company has established manufacturing relationships with manufacturers. The
Company's subsidiary, Ophthalmic International, Inc., assembles the vacuum
fixation device at its offices in Fountain Hills, Arizona. At such time as the
Company executes an agreement with a major worldwide distributor, the Company
may also sell the manufacturing rights to the same company. The Company has
contracted for the manufacture of the patented rings with a medical device
manufacturer located in California.
THE TREATMENT CENTERS
The Company's subsidiary, American Glaucoma, Inc., opened its first
glaucoma treatment center in Scottsdale, Arizona in September 1997. The Company
estimates that there are approximately 62,000 glaucoma patients in the Phoenix
area, based upon a three percent general population occurrence of the condition.
Based upon an estimated start-up cost and first year budget of $600,000 for the
Scottsdale Center, the Company estimates that it would have to treat
approximately 1,300 patients for an annual clinic fee of $920 to break-even on
these initial expenditures, assuming a 50% net income margin (of which there is
no assurance).
During the fourth quarter of 1997 the Company's Scottsdale Center
generated approximately $26,000 of gross revenues and an operating loss of
$243,629. During the first half of 1998 the Scottsdale center generated
approximately $179,769 of gross revenues and an operating loss of $77,023. The
Company's believes that its advertising campaign and the resulting patient
treatment at the Scottsdale Center have indicated that the Company's products
and glaucoma treatment centers will be accepted by the general glaucoma public
in the future.
The Company is hopeful of opening two additional treatment centers in
during 1998, subject to adequate funding. One of these additional centers is
currently planned for the Tampa-Clearwater, Florida area, which has been funded
by the Company's latest private placement of common stock. The Company has
initiated discussions with certain practicing ophthalmologists in these states,
concerning their possible participation in the Company's future treatment
centers. On the basis of these discussions, the Company believes it will be able
to recruit practicing ophthalmologists as the medical directors of its future
treatment centers. However, the Company has not entered into any agreement or
reached any arrangement with any physician at this time. The Company anticipates
that its advertising and telemarketing techniques initiated and refined at the
Company's Scottsdale Center will enable the Company's additional treatment
centers to reach profitability in a shorter time period than the Scottsdale
Center.
Dr. Leo Bores, currently the Medical Director of the Company's
Scottsdale Center, may become the Supervising Medical Director of all of the
Company's future treatment centers at such time as the Company has opened two or
more additional centers.
PATENT
On February 11, 1997 the U.S. Patents and Trademarks Office issued a
patent to Ophthalmic International, L.L.C., Patent Number 5,601,548, for the
process, equipment and the procedure which has been licensed to the Company. The
Company believes, without assurance, that this patent provides the Company with
a substantial competitive advantage over current and future glaucoma treatment
competitors. The Company is not aware of any other patent being granted for
glaucoma treatment. The Company intends to follow a policy of aggressively
pursuing claims of infringement on its patent and the Company does not believe
its patent, or product or services infringe on the rights of any other person.
23
<PAGE>
COMPETITION
The medical device and service industries are highly competitive. The
Company's patented device and treatment process are and will be in competition
with established and future glaucoma treatment procedures and products. The
Company's treatment centers will compete directly with other medical care
providers. The future sale of the Company's products to ophthalmologists,
optometrists, medical clinics and hospitals may meet substantial resistance from
distributors and potential customers, particularly until the FDA product label
is changed and the insurance/Medicare billing codes are established. The Company
is presently unable to predict when such billing codes will be established on a
national basis. Ophthalmologists not employed by the Company are likely to
discount the benefits of the Company's products to their patients from fear of
losing patients to the Company's treatment centers, even though the clinical
results of the Company's products have been presented at ophthalmic conventions
in the United States for over three years. Further, the Company will need to
establish the economic benefit of its products to the satisfaction of health
maintenance organizations ("HMO") before the Company's glaucoma treatment
centers receive patient treatment referrals from HMOs. Today HMOs are
responsible for the medical treatment of a substantial percentage of the
population of the United States.
GOVERNMENTAL REGULATION
Presently the Company believes it may sell and distribute its "fixation
device" in the United States as part of its product pursuant to a Section 510(k)
exemption from the Untied States Food and Drug Administration (the "FDA"). The
Company registered with the FDA as the manufacturer and distributor of this
Section 510(k) product in April 1996. In August 1998, the Company submitted a
510(k) application to the FDA for the product to be labeled for the reduction of
inter-ocular pressure. If the 510(k) application is rejected by the FDA, the
re-labeling process would involve the completion of clinical studies of the
product's performance and safety and the submission of such studies to the FDA.
In 1994, 1996 and again in April 1998 the Company's product was approved for
"investigational device exemption" by an Investigational Review Board. The use
of the product at the Company's glaucoma treatment centers are part of these IDE
studies. The Company is currently in discussion with independent medical study
centers concerning the commencement of additional IDE studies on the Company's
product and process under its 1998 IDE study. There is no assurance as to when
any independent study will be completed or that the results of any such study
will be beneficial to the Company's FDA process. Likewise, there can be no
assurance when, if ever, the Company's equipment will be re-labeled as a "device
to lower inter-ocular pressure" by the FDA.
In July 1997 the Company's Scottsdale treatment center registered with
the State of Arizona Department of Health Services as a "health care treatment
institution" and the Company anticipates that all of its treatment centers will
be required to register in the various states in which they will be located. The
Company is unable to predict at this time the exact amount of time and expense
which will be needed to register as a health care provider in each state in
which the Company may wish to open a glaucoma treatment center. There is no
assurance that the Company will be able to register as a health care provider in
each state of the Company's choice.
EMPLOYEES
In addition to its two officers, the Company employs one person
full-time at the corporate headquarters. The Company presently employs its
Medical Director, Dr. Leo Bores, and 3 full-time medical and administrative
personnel at its Scottsdale glaucoma treatment center. The Company anticipates
hiring additional administrative and marketing personnel upon the opening of
additional treatment centers, in addition to medical personnel at the centers.
24
<PAGE>
PROPERTY
During calendar year 1997, the Company's offices were located at 16929
E. Enterprise Drive, Suite 202, Fountain Hills, AZ 85268, where the Company is
currently leasing approximately 1,600 square feet of space from a third party
landlord. The Company is paying approximately $1,200 per month, including
utilities, in rent for this space on a five-year lease. The Company presently
believes this space is adequate to satisfy the Company's current needs. In June
1998, the Company entered into a month-to-month lease for 1,800 square feet of
space adjacent to its original space in Fountain Hills, Arizona, for
approximately $1,400 per month rent, including utilities. This combined space
will be adequate for the Company's needs throughout its initial manufacturing
stages, when commenced.
On July 28, 1997 the Company executed a lease with Dr. Leo Bores, the
Scottsdale center's Medical Director, for a 4,200 square foot medical facility
located at 8049 N. 85th Way, Scottsdale, Arizona. This facility is the site of
the Company's first treatment center. The monthly lease rate on this facility is
$3,500. The Company has a two-year option to purchase this building for the sum
of $400,000 cash. The Company believes this facility is adequate to serve up to
60 glaucoma patients per day.
The Company currently anticipates leasing space for its
Tampa-Clearwater treatment center in the range of 2,000 to 4,000 square feet at
a monthly lease rate of approximately $1.00 per square foot.
LEGAL PROCEEDINGS
There were no legal proceedings involving the Company which are pending
or threatened as of the date of this Prospectus.
25
<PAGE>
MARKET FOR THE COMPANY'S COMMON STOCK
The principal U.S. market in which the Company's common shares (all of
which are one class, $.001 par value) were traded was the over-the-counter
market. The aforesaid securities are not traded or quoted on any automated
quotation system. Such over-the-counter market quotations reflect inter-dealer
prices without retail markup, markdown or commission and may not necessarily
represent actual transactions. The following table shows the low and the high
bid reported by the NASDAQ Bulletin Board System in 1996 and 1997, by fiscal
quarter, and for the first half of 1998.
LOW HIGH
--- ----
January 1, 1996 -- March 31, 1996 0 0
April 1, 1996 -- June 30, 1996 (reflecting 5:1 reverse split) 0 0
July 1, 1996 -- September 30, 1996 0 0
October 1, 1996 -- December 31, 1996 $1.50 $9.75
January 1, 1997 -- March 31, 1997 $3.00 $6.75
April 1, 1997 -- June 30, 1997 $2.50 $5.94
July 1, 1997 -- September 30, 1997 $1.94 $4.38
October 1, 1997 -- December 31, 1997 $1.00 $2.75
January 1, 1998 -- March 31, 1998 $0.63 $3.09
April 1, 1998 -- June 30, 1998 $0.66 $1.75
At July 1, 1998, the Company had approximately 383 stockholders of
record including nominee firms for securities dealers.
The Company has not paid or declared any dividends upon its common
shares since its inception and, by reason of its present financial status and
its contemplated financial requirements, does not intend to pay or declare any
dividends upon its common shares within the foreseeable future.
26
<PAGE>
MANAGEMENT
The directors and executive officers of the Company as of December 31, 1997 were
as follows:
NAME AND ADDRESS POSITION
---------------- --------
G. Richard Smith Director, Chairman and Secretary
16929 E. Enterprise Drive Suite 202
Fountain Hills, AZ 85268
Gary R. Smith Director, President and Treasurer
16929 E. Enterprise Drive Suite 202
Fountain Hills, AZ 85268
John T. LiVecchi Director
16929 E. Enterprise Drive Suite 202
Fountain Hills, AZ 85268
The Company presently has two vacancies on its Board of Directors.
G. Richard Smith, age 50, has been a Director of the Company since
November 5, 1996 and Secretary of the Company since November 5, 1996. He became
Chairman in March, 1998. From July, 1995 to November 5, 1996 G. Richard Smith
was a member and President of Ophthalmic International, L.L.C., the company that
developed and patented the glaucoma treatment which was conditionally
transferred to the Company. From 1987 to June, 1995 G. Richard Smith was
Co-owner and President of Southern California Medical Distributors, Ltd.
("SCMD") which developed a turbine powered keratome for eye surgery. G. Richard
Smith attended Oakland University in Oakland County, Michigan from 1968 to 1970.
Gary R. Smith, age 54, has been a Director of the Company since
November 5, 1996, and President and Treasurer of the Company since November 5,
1996. From July, 1995 to November 5, 1996 Gary R. Smith was a member and Vice
President of Product Development and Manufacturing of Ophthalmic International,
L.L.C., the company that developed and patented the glaucoma treatment which was
conditionally transferred to the Company. From 1987 to June, 1995 Gary R. Smith
was Co-owner and Vice President of Product Development and Manufacturing for
Southern California Medical Distributors, Ltd. ("SCMD"), where he developed a
turbine powered keratome for eye surgery. Gary R. Smith attended Detroit
Institute of Technology in Detroit, Michigan from 1961 through 1963.
John T. LiVecchi, age 50, has been a Director of the Company since
December 16, 1996. Dr. LiVecchi received his medical degree in 1977 from the
University of Rome, Italy. From 1983 to present Dr. LiVecchi has been in private
medical practice in the field of ophthalmology in the Scranton, Pennsylvania
area. Dr. LiVecchi has been on the staff of several hospitals and universities.
Dr. LiVecchi is licensed to practice medicine in the States of New York,
Michigan and Pennsylvania. Dr. LiVecchi has authored numerous articles and
presentations. In 1994 Dr. LiVecchi undertook the project of developing
equipment and procedures for treating open angle glaucoma, along with the
Company's other Directors.
27
<PAGE>
Messrs. Smith, Smith and LiVecchi were the three owners of SCMD which developed
a turbine powered keratome for eye surgery. They sold this company to its
Chinese distributor in 1995. During the last year before its sale, this company
had total revenues of approximately $1,050,000 and net income of approximately
$695,000. This company was sold for a multiple of its net income. Messrs. Smith,
Smith and LiVecchi sold SCMD to devote their efforts to the development of the
glaucoma treatment process and equipment, which they felt could be more
profitable than the turbine keratome.
Gary R. Smith and G. Richard Smith are brothers.
KEY EMPLOYEE
Dr. Leo Bores, as the Medical Director of the Company's Scottsdale
glaucoma treatment center and the Supervising Medical Director of the future
centers, is a key employee of the Company. Dr. Bores received a B.S. degree in
Biochemistry and Biology in 1958 from Wayne State University. Dr. Bores received
his degree from the Wayne State University College of Medicine in 1962 and he
served his internship at Harper Hospital in Detroit, Michigan in 1962 and 1963.
Dr. Bores was a resident in Ophthalmology from 1963 to 1968 and was certified by
the American Board of Ophthalmology in 1969. Dr. Bores is internationally known
for his contributions to the development of radial keratotomy ("RK"). In 1994,
Dr. Bores received the 1st Annual Award for outstanding scientific contributions
to eye microsurgery. In 1995 Dr. Bores became the 12th recipient of the
Innovators in Ophthalmology Award from the American Society for Cataract and
Refractive Surgery for outstanding contributions in ophthalmic surgery.
COMPENSATION
The following table sets forth the salaries of the Company's two
officers for the fiscal year ending December 31, 1997.
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------------
Annual Compensation Awards Payouts
----------------------------- ----------------------- -------
Other Securities
Annual Restricted Under- All Other
Name and Compen- Stock lying LTIP Compen-
Principal sation Awards Options/ Payouts sation
Position Year Salary($) Bonus($) ($) ($) SARS(#) ($) ($)
- -------- ---- --------- -------- ------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
G. Richard Smith,
Chairman 1997 $100,000 -- -- -- -- -- --
Gary R. Smith,
President 1997 $100,000 -- -- -- -- -- --
</TABLE>
On July 18, 1997, the Company executed a two-year agreement with Dr.
Leo Bores, pursuant to which Dr. Bores will be paid a salary of $150,000 for the
first year and $200,000 for the second year. In addition to his base salary, Dr.
Bores shall receive an annual bonus equal to 5% of the net income from the
Scottsdale treatment center. It is presently expected that the Company will
execute an agreement with Dr. Bores as the Supervising Medical Director over all
the Company's future glaucoma treatment centers upon the completion of this
Offering.
28
<PAGE>
STOCK OPTION PLAN
The Company's Board of Directors is considering the adoption of a 1998
Stock Option Plan for the Company (the "Option Plan") and anticipates up to
1,000,000 shares will be reserved for issuance thereunder. The Option Plan is
structured to allow the Board of Directors and a future Stock Option Committee
of the Boards discretion in creating equity incentives to management, key
employees and professional consultants for the purpose of assisting the Company
in motivating and retaining appropriate talent. To date, the Option Plan has not
been adopted and the Company has not granted any options under the Option Plan.
The Company currently has no pension, retirement, annuity, savings or
similar benefit plan which provides compensation to its executive officers or
directors.
PRINCIPAL STOCKHOLDERS
As of August 1, 1998 there were 21,583,842 outstanding shares and there
will be 22,583,842 shares outstanding after the completion of the Offering. The
following table sets forth the name, address, number of shares beneficially
owned, and the percentage of the Company's total outstanding common stock shares
before and after the Offering owned by: (i) each of the Company's Officers and
Directors; (ii) the Company's Officers and Directors as a group; and (iii) other
shareholders of 5% or more of the Company's total outstanding common stock
shares.
<TABLE>
<CAPTION>
PERCENT PERCENT
NAME AND ADDRESS AMOUNT AND NATURE OF OF CLASS OF CLASS
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) BEFORE OFFERING AFTER OFFERING
- -------------- ---------------- ----------------------- --------------- --------------
<S> <C> <C> <C> <C>
Common Stock G. Richard Smith 6,508,112 30.2% 28.8%
16929 E. Enterprise Drive
Suite 202
Fountain Hills, AZ 85268
Common Stock Gary R. Smith 6,134,512 28.4% 27.2%
16929 E. Enterprise Drive
Suite 202
Fountain Hills, AZ 85268
Common Stock John T. LiVecchi 2,000,000 9.3% 8.9%
16929 E. Enterprise Drive
Suite 202
Fountain Hills, AZ 85268
Common Stock Officers and Directors, as 14,642,624 67.8% 64.8%
a Group (3 People)
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 5, 1996, the Company entered into the Asset Purchase
Agreement with Ophthalmic International, L.L.C., and American Glaucoma, whereby
6,796,112 restricted shares of the Company's common stock were issued to each of
Gary R. Smith and G. Richard Smith, and 2,000,000 restricted shares were issued
to John T. LiVecchi. Messrs. Smith, Smith and LiVecchi became the Company's sole
Directors as a result of this transaction. For accounting purposes, Messrs.
Smith, Smith and LiVecchi are deemed to have no cost in the assets transferred
to the Company.
29
<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 25,000,000
shares of common stock, par value $0.001 per share, and 3,000,000 shares of
Preferred Stock, par value $0.0001 per share. As of the date of this Prospectus,
there were 21,583,842 shares of common stock and 0 shares of Preferred Stock
issued and outstanding.
COMMON STOCK
As of August 1, 1998, the Company is authorized to issue 25,000,000
shares of Common Stock, par value $.001 per share, of which 21,583,842 shares
were issued and outstanding at the date of this Prospectus. Holders of common
stock are entitled to one vote for each share held on each matter to be acted
upon by stockholders of the Company. Stockholders do not have preemptive rights
or the right to cumulate votes for the election of directors. Shares are not
subject to redemption nor to any liability for further calls. All shares of
common stock issued and outstanding are entitled to receive such dividends, if
any, as may be declared by the Board of Directors in its discretion out of funds
legally available for that purpose, and to participate pro rata in any
distribution of the Company's assets upon liquidation or dissolution.
In the event of liquidation or dissolution of the Company, all assets
available for distribution after satisfaction of all debts and other liabilities
and after payment or provision for any liquidation preference on any issued
Preferred Stock are distributable among the holders of the common stock.
The Transfer Agent for the Company's common stock will be Olde Monmouth
Stock Transfer Co., Inc., 77 Memorial Parkway, Suite 101, Atlantic Highlands,
New Jersey 07716.
PREFERRED STOCK
The Company is authorized to issue 3,000,000 shares of Preferred Stock,
par value $.0001 per share, of which no shares were issued and outstanding at
the date of this Prospectus. The Preferred Stock shares shall have the rights,
limitations and obligations which the Board of Directors shall determine at the
time the Preferred Stock is issued. The Company has no present intention of
issuing any Preferred Stock in the foreseeable future.
COMMON STOCK PURCHASE WARRANTS
The Company has reserved for issuance 1,681,123 shares of common stock
for issuance in the event of the exercise of 1,681,123 outstanding Common Stock
Purchase Warrants (the "Warrants"). The Warrants themselves have not been and
will not be registered. The Warrants are exercisable at any time at an exercise
price of $2.00 per share through December 31, 1998 and at an exercise price of
$2.50 per share through December 31, 2000 on which date the unexercised Warrants
expire.
The Warrants are not subject to redemption by the Company. The holders
of the Warrants do not have any of the rights or privileges of stockholders of
the Company, such as voting rights or the right to receive dividends, prior to
exercise of the Warrants. The exercise price of the Warrants and the number of
Warrants are subject to automatic proportionate adjustment in the event of any
stock dividend, stock split or other recapitalization affecting the outstanding
Company common stock.
Investors in the Shares should note that for the term of the Warrants,
the holders thereof are given the opportunity to profit from a rise in the
market price of the Company's common stock through the exercise of the Warrants
with a resulting dilution in the interests of other stockholders. At any time
when the holders of the Warrants might be expected to exercise the same, the
Company would in all likelihood be able to obtain additional equity capital on
terms more favorable than those provided in the Warrants.
30
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the exercise of all of the Warrants (of which there is no
assurance), the Company will have outstanding 23,264,965 shares of common stock.
Of these shares, approximately 8,000,000 will be freely tradeable without
restriction or further registration under the Securities Act of 1933 (the
"Securities Act"). The remaining outstanding shares of common stock are deemed
to be "restricted securities" as that term is defined under Rule 144 promulgated
under the Securities Act, in that such shares were issued and sold by the
Company in private transactions not involving a public offering. Under Rule 144
as currently in effect, all of such shares are presently eligible for sale.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or other persons whose shares are required to be aggregated), who
has owned restricted shares of the Company's common stock beneficially for at
least one year is entitled to sell, within any three-month period, a number of
shares of common stock that does not exceed the greater of 1% of the total
number of outstanding shares of the same class or, if the shares are quoted on
the NASDAQ system, the average weekly trading volume during the four calendar
weeks preceding the sale. A person who has not been an affiliate of the Company
for at least the three months immediately preceding the sale and who has
beneficially owned shares for at least two years is entitled to sell such shares
under Rule 144 without regard to any of the limitations described above.
Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Company. A person who has not been an affiliate of the
Company at any time during the three months preceding a sale, and who has
beneficially owned his Common Stock for at least two years, would be entitled to
sell such common stock under Rule 144(k) without regard to the other
requirements of Rule 144.
Two of the Company's officers, directors and existing stockholders
(Gary R. Smith and G. Richard Smith) have agreed with the Underwriter not to
sell or otherwise dispose of any of their shares of Company common stock through
June 16, 1999 without the prior written consent of the Underwriter.
No predictions can be made of the effect, if any, that sales of common
stock under Rule 144, or the availability of such shares for sale, will have on
the market price for the common stock of the Company prevailing from time to
time. Nevertheless, the possibility that substantial amounts of common stock may
be sold in the public market may adversely affect prevailing market prices for
the Company's common stock and could impair the Company's ability to raise
additional capital through the sale of its equity securities.
PLAN OF DISTRIBUTION
The Company will be offering the Common Stock to the public through its
officers, Directors and employees. No commission will be paid by the Company
upon sales of the Common Stock solicited by its officers, Directors and
employees.
The Company may subsequently enter into an agreement (the
"Participating Dealer Agreement") with one or more securities broker-dealers
which provides for the securities broker-dealers to be paid a cash commission up
to 10% of the gross offering proceeds solicited by such securities
broker-dealers.
The Participating Dealer Agreement provides for reciprocal
indemnification between the Company and any participating broker-dealer against
certain liabilities, including liabilities under the Securities Act.
The offering price set forth on the cover page of this Prospectus
should not be considered an indication of the actual value of the Common Stock.
The trading market value of the Company's common stock as of the date of this
Prospectus was the primary consideration used by the Company to determine the
offering price of the Common Stock.
31
<PAGE>
DIVIDEND POLICY
No cash dividends have been declared or paid by the Company to date.
The Company intends to employ all available funds for development of its
business and accordingly, does not intend to pay cash dividends on its common
stock in the foreseeable future. The Board of Directors of the Company will
review its common stock dividend policy from time to time to determine the
desirability and feasibility of paying dividends after giving consideration to
the Company's earnings, financial condition, capital requirements, any dividend
obligations on outstanding Preferred Stock, and such other factors as the Board
of Directors deems relevant.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by the Law Office of Michael K. Hair, P.C., Scottsdale, Arizona.
EXPERTS
The consolidated balance sheet of Coronado Industries, Inc. and
subsidiaries as of December 31, 1997 and the related consolidated statements of
operations, changes in stockholders equity (deficit) and cash flows for the
years ended December 31, 1997 and 1996 have been included in this Prospectus and
Registration Statement in reliance upon the report of Semple & Cooper, LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
INDEMNIFICATION
The Company's Articles of Incorporation and the Nevada General
Corporation Act provide for indemnification of liability to the Company's
officers, Directors and employees under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
32
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 1998 and 1997................. F-2
For the Years Ended December 31, 1997 and 1996.................. F-7
F-1
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1998
June 30,
1998
(Unaudited)
-----------
ASSETS
Current Assets:
Cash $ 509,265
Accounts Receivable, net
-Trade 95,292
-Other 3,999
Inventory 43,031
Prepaid Expenses 55,000
----------
Total Current Assets 706,587
Property and Equipment, net 138,186
Other Assets:
Intangible Assets 34,593
----------
Total Assets $ 879,366
==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes Payable $ 0
Note Payable to Related Party -
Current Portion 75,000
Accounts Payable 14,906
Accrued Salaries 130,000
Accrued Payroll Taxes 11,825
----------
Total Current Liabilities $ 231,731
Long-term Debt 0
----------
Total Liabilities 231,731
----------
Stockholders' Equity (Deficit):
Preferred Stock 0
Common Stock - $.001 par value;
25,000,000 shares authorized, 21,583,842
shares outstanding at June 30, 1998;
18,962,653 outstanding at December 31, 1997 21,584
Additional Paid-in Capital 2,169,586
Accumulated Deficit (1,543,535)
----------
Total Stockholders' Equity (Deficit) 647,635
----------
Total Liabilities And Stockholders'
Equity (Deficit) $ 879,366
==========
F-2
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
Six Months
------------------------
1998 1997
---- ----
Revenues $ 179,767 $ --
Cost of Patient Revenues 256,790 --
----------- ----------
Gross Loss 77,023 --
General and Administrative
Expenses 559,573 237,493
----------- ----------
Loss from Operations (636,596) (237,493)
Interest Expense (12,172) (7,480)
Other Income 66 500
----------- -----------
Net Loss (648,702) (244,473)
=========== ===========
Basic Loss per Share $ (0.3) $ (.01)
=========== ===========
Weighted Average Shares
Outstanding 19,979,061 18,344,253
=========== ===========
F-3
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
June 30, June 30,
1998 1997
(Unaudited) (Unaudited)
----------- -----------
CASH FLOWS USED IN OPERATING ACTIVITIES:
Cash paid for operating expenses $ (580,652) $(187,826)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisition of property and equipment (13,919) (8,714)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 25,000 192,000
Repayment of debt (245,470) --
Proceeds from stock sales 1,258,675 --
---------- ---------
NET INCREASE (DECREASE) IN CASH 443,634 (4,540)
CASH, beginning of period 65,631 7,183
---------- ---------
CASH, end of period $ 509,265 $ 2,643
========== =========
RECONCILIATION OF NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Net loss $ (648,702) $(244,473)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization 1,752 1,302
Depreciation 25,135 1,962
Stock issued for services 175,000 --
Increase in:
Accounts receivable (87,483) --
Inventory -- (17,197)
Patents -- (26,841)
Professional retainers -- (5,000)
Prepaid expenses 49,500 --
Increase (decrease) in:
Accounts payable (61,784) 31,916
Accrued salaries (23,673) 55,000
Accrued expenses -- 7,480
Accrued payroll taxes (10,397) 8,025
---------- ---------
NET CASH USED IN OPERATING ACTIVITIES $ (580,652) $(187,826)
========== =========
F-4
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
For The Six Month Period Ended June 30, 1998
Total
Common Stock Stock-
------------------- Additional Retained Holders'
Shares Paid-in Earnings Treasury Equity
Outstanding Amount Capital (Deficit) Stock (Deficit)
----------- ------ ------- --------- ----- -------
Balance at
December
31, 1997 18,962,653 $18,962 $ 730,622 $ (894,833) $ -- $(145,249)
Stock issued
for services 145,000 145 197,355 -- -- 197,500
Proceeds
from sale
of stock, net 2,465,367 2,466 1,236,209 -- -- 1,238,675
Conversion of
debt 10,822 11 5,400 -- -- 5,411
Net loss -- -- -- (648,702) -- (648,702)
---------- ------- ---------- --------- ----- ---------
Balance at
June
30, 1998 21,583,842 21,584 2,169,586 (1,543,535) -- 647,635
========== ======= ========== =========== ===== =========
F-5
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION:
In the opinion of management, the accompanying financial statements reflect all
adjustments (consisting of only normal recurring accruals) necessary to present
fairly the financial position as of June 30, 1998 and the results of its
operations for the three and six months ended June 30, 1998. Although management
believes that the disclosures in these financial statements are adequate to make
the information presented not misleading, certain information and footnote
disclosures normally included in financial statements that have been prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities Exchange
Commission.
The results of operations for the six months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 1998. The accompanying consolidated financial statements
should be read in conjunction with the more detailed financial statements, and
the related footnotes thereto, filed with the Company's Annual Report on Form
10-KSB for the year ended December 31, 1997.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the financial position, results of
operations, cash flows and changes in stockholder's equity of Coronado
Industries, Inc., and its wholly-owned subsidiaries. All material intercompany
transactions, accounts and balances have been eliminated.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:
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 those estimates.
2. NOTES PAYABLE:
At December 31, 1997, notes payable consist of the following:
Notes payable to Hayden Investment, with interest at 15%,
due April 30, 1998 through July 20, 1998; unsecured. $ 224,631
Less: current portion (224,631)
----------
$ --
==========
F-6
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
This debt was repaid in full in March 1998.
In February 1998 the Company issued a $25,000 convertible promissory note which
bore a 15% annual interest rate. This note was repaid in May 1998 with $20,000
in cash and $5,000 in principal and $411 accrued interest in common stock. 5,000
additional shares were issued in February 1998 as additional interest.
At June 30, 1998, notes payable to a related party consist of the following:
Notes payable to Dr. Leo Bores, with 10% annual interest,
$37,500 principal due on July 18, 1998 and remaining
principal on January 18, 1998; unsecured. $75,000
Less: current portion 75,000
-------
$ --
=======
3. STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK AND COMMON STOCK WARRANTS:
The Company issued 568,400 shares of common stock for $574,091, net of costs of
$138,659, through private offerings throughout the year ended December 31, 1997.
During the six-month period ended June 30, 1998 the Company issued 2,465,367
shares of common stock for net offering proceeds of $1,238,675. In relation to
those offerings, the Company issued a total of 1,681,123 common stock warrants
to the underwriter and its representatives. The warrants have an exercise price
of $2.00 per share through December 31, 1998, and then $2.50 per share through
December 31, 2000, when they expire.
F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Stockholders and Board of Directors of
Coronado Industries, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Coronado
Industries, Inc. and subsidiaries as of December 31, 1997, and the related
consolidated statements of operations, changes in stockholders' equity
(deficit), and cash flows for the years ended December 31, 1997 and 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial
statement presentation. We believe our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Coronado Industries,
Inc. and subsidiaries as of December 31, 1997, and the results of its
operations, changes in stockholders' equity (deficit), and its cash flows for
the years ended December 31, 1997 and 1996 in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 8 to the
consolidated financial statements, the Company's significant operating losses
raise substantial doubt about its ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Semple & Cooper, LLP
Certified Public Accountants
Phoenix, Arizona
March 13, 1998
F-8
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
Current Assets:
Cash $ 65,631
Accounts receivable, net (Notes 1 and 5)
-- trade 7,809
-- other 3,999
Inventory (Note 1) 43,031
Prepaid expenses 104,500
---------
Total Current Assets 224,970
Property and Equipment, net (Notes 1 and 2) 149,402
Other Assets:
Intangible assets, net (Notes 1 and 3) 36,345
---------
Total Assets $ 410,717
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable (Note 4) $ 224,631
Note payable to related party -- current portion (Note 5) 39,375
Accounts payable 76,690
Accrued salaries 153,673
Accrued payroll taxes and other 22,222
---------
Total Current Liabilities 516,591
Note payable to related party - long-term portion (Note 5) 39,375
---------
Total Liabilities 555,966
---------
Commitments: (Notes 5 and 9) --
Stockholders' Equity (Deficit): (Note 6)
Preferred stock - $.0001 par value; 3,000,000
shares authorized, none issued or outstanding --
Common stock - $.001 par value; 25,000,000
shares authorized, 18,962,653 shares issued
and outstanding 18,962
Additional paid-in capital 730,622
Accumulated deficit (894,833)
---------
Total Stockholders' Equity (Deficit) (145,249)
---------
Total Liabilities and Stockholders' Equity (Deficit) $ 410,717
=========
The Accompanying Notes are an Integral Part of the
Consolidated Financial Statements
F-9
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
---- ----
Patient Revenues, Net (Note 1) $ 26,107 $ --
Cost of Patient Revenues 269,736 --
----------- -----------
Gross Loss (243,629) --
General and Administrative Expenses 567,177 64,042
----------- -----------
Loss from Operations (810,806) (64,042)
Interest Expense (26,381) (1,089)
Other Income 7,485 --
----------- -----------
Net Loss $ (829,702) $ (65,131)
=========== ===========
Basic Loss per Share (Note 1) $ (.04) $ --
=========== ===========
Weighted Average Shares Outstanding 18,504,392 18,344,253
=========== ===========
The Accompanying Notes are an Integral Part of the
Consolidated Financial Statements
F-10
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK STOCK-
-------------------- ADDITIONAL RETAINED HOLDERS'
SHARES PAID-IN EARNINGS TREASURY EQUITY
OUTSTANDING AMOUNT CAPITAL (DEFICIT) STOCK (DEFICIT)
----------- ------ ------- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December
31, 1995 1,885,573 $ 2,755 $ 253,737 $(298,854) $(9,425) $ (51,787)
Stock issued
for services 40,000 40 1,160 -- -- 1,200
One for five
reverse stock
split (1,540,448) (1,540) 1,540 -- -- --
Proceeds
from sale
of stock, net 1,511,904 1,512 74,885 -- -- 76,397
Reverse merger
with American
Glaucoma and
Ophthalmic 15,592,224 15,592 (293,313) 298,854 -- 21,133
Retirement of
treasury stock -- (870) (8,555) -- 9,425 --
Stock issued
for finders fee 855,000 855 7,695 -- -- 8,550
Net loss -- -- -- (65,131) -- (65,131)
----------- -------- --------- --------- ------- ---------
Balance at
December
31, 1996 18,344,253 18,344 37,149 (65,131) -- (9,638)
Proceeds from
sale of stock,
net of costs
of $138,659 568,400 568 573,523 -- -- 574,091
Stock issued
for services 50,000 50 119,950 -- -- 120,000
Net loss -- -- -- (829,702) -- (829,702)
----------- -------- --------- --------- ------- ---------
Balance at
December
31, 1997 18,962,653 $ 18,962 $ 730,622 $(894,833) $ -- $(145,249)
=========== ======== ========= ========= ======= =========
</TABLE>
The Accompanying Notes are an Integral Part of the
Consolidated Financial Statements
F-11
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
---- ----
Cash Flows from Operating Activities:
Cash received from customers $ 25,783 $ --
Cash paid to suppliers and employees (609,807) (75,528)
Interest paid -- (1,089)
--------- --------
Net cash used by operating activities (584,024) (76,617)
--------- --------
Cash Flows from Investing Activities:
Purchase of fixed assets (92,935) --
Cash disbursements for patents (30,684) --
--------- --------
Net cash used by investing activities (123,619) --
--------- --------
Cash Flows from Financing Activities:
Cash received from notes payable 192,000 10,000
Cash received from sale of stock 574,091 76,397
Repayment of notes payable to stockholders -- (4,000)
--------- --------
Net cash provided by financing activities 766,091 82,397
--------- --------
Net increase in cash 58,448 5,780
Cash at beginning of year 7,183 1,403
--------- --------
Cash at end of year $ 65,631 $ 7,183
========= ========
The Accompanying Notes are an Integral Part of the
Consolidated Financial Statements
F-12
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
---- ----
Reconciliation of Net Loss to Net Cash Used
by Operating Activities:
Net loss $(829,702) $(65,131)
--------- --------
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 27,332 1,766
Amortization 2,605 285
Stock issued for services 120,000 1,200
Interest added to principal of notes payable 26,381 --
Changes in Assets and Liabilities:
Accounts receivable
-- trade (7,809) --
-- other (3,999) --
Inventory (32,464) --
Prepaid expenses (104,500) --
Accounts payable 72,793 (44,265)
Accrued salaries 123,117 30,556
Accrued payroll taxes and other 22,222 (1,028)
--------- --------
245,678 (11,486)
--------- --------
Net Cash Used by Operating Activities $(584,024) $(76,617)
========= ========
The Accompanying Notes are an Integral Part of the
Consolidated Financial Statements
F-13
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF
ESTIMATES:
ORGANIZATION:
Coronado Industries, Inc. (the Company) was originally incorporated under the
laws of the State of New York in December 1989 as First Lloyd Funding, Inc.,
which subsequently changed its name to Logical Computer Services of New York,
Ltd. In September, 1996, the Company changed its name to Coronado Industries,
Inc. The Company had limited activity prior to its merger on November 5, 1996,
when the Company acquired one hundred percent (100%) of the assets of Ophthalmic
International, L.L.C. and American Glaucoma.
The stockholders of American Glaucoma and Ophthalmic International, L.L.C.,
which are the same for both corporations, obtained majority control of the
Company in the combination. Therefore, the transaction is accounted for as a
reverse merger. The accompanying financial statements have been presented on a
contiguous basis due to the inactivity of Logical Computer Services of New York,
Ltd.
The Company was in the development stage from its acquisition of Ophthalmic
International, L.L.C. and American Glaucoma in November, 1996 through September,
1997. In September, 1997, American Glaucoma opened their first glaucoma
treatment clinic in Scottsdale, Arizona. Ophthalmic International, L.L.C. has
received a patent on the method for treating Open Angle Glaucoma, as well as the
devices used in the treatment, including the Vacuum Fixation Device. The Company
intends to manufacture and market the patented Vacuum Fixation Device and the
patented suction rings to major medical supply companies and health care
providers throughout the world. However, Ophthalmic International, L.L.C. has
yet to generate any revenues.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the activity of Coronado
Industries, Inc., together with its wholly-owned subsidiaries, Ophthalmic
International, Inc., American Glaucoma, Inc. and Arizona Glaucoma Institute,
Inc. All significant intercompany accounts and transactions have been
eliminated.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:
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 those estimates.
INVENTORIES:
Inventories consist primarily of raw materials and are stated at the lower of
cost, as determined on a first-in/first-out (FIFO) basis, or market.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Maintenance and repairs that neither
materially add to the value of the property nor appreciably prolong its life are
charged to operations as incurred. Betterments or renewals are capitalized when
incurred. Depreciation is provided using accelerated methods over the following
useful lives:
F-14
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF
ESTIMATES: (CONTINUED)
Office furniture and equipment 5-7 years; Machinery and equipment 5-7 years;
Leasehold improvements 7-39 years.
DEFERRED INCOME TAXES:
Deferred income taxes are provided on an asset and liability method, whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
basis. Deferred tax assets are reduced by a valuation allowance when in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The fair value of the Company's note payable to related party cannot be
determined due to its related party nature. The carrying value of the Company's
notes payable approximates fair value and is based on rates currently available
to the Company for debt with similar terms and maturities.
LOSS PER SHARE:
For the year ended December 31, 1996, the basic loss per share is based upon the
weighted average number of shares outstanding from the time of the reverse
merger, and giving retroactive effect to the one-for-five reverse stock split.
For the year ended December 31, 1997, basic loss per share include no dilution
and is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share are not presented, as their effect is anti-dilutive.
Subsequent to December 31, 1997, the Company sold 1,580,768 additional shares of
common stock through a private placement. The effect of these shares would also
be anti-dilutive on the earnings per share as of December 31, 1997.
INTANGIBLE ASSETS:
The Company reviews its intangible assets at least annually to evaluate
potential impairment by comparing the carrying value of the intangible assets
with expected future net operating cash flows from the related operations. If
the expected future net operating cash flows are less than the carrying value,
the Company recognizes an impairment loss equal to the amount by which the
carrying value exceeds the discounted expected future net operating cash flows
from the related operations.
ACCOUNTS RECEIVABLE -- TRADE:
Accounts receivable - trade represents amounts earned but not collected in
connection with the performance of medical procedures.
F-15
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF
ESTIMATES: (CONTINUED)
The Company follows the allowance method of recognizing uncollectible accounts
receivable. The allowance method recognizes bad debt expense as a percentage of
accounts receivable based on a review of individual accounts outstanding. At
December 31, 1997, no allowance has been provided for potentially uncollectible
accounts receivable. As of December 31, 1997, third party payors would not
reimburse the Company for its patented procedure. Subsequent to December 31,
1997, the Company began receiving reimbursement for current procedures
performed. In management's opinion, they will not receive reimbursement for
procedures performed prior to December 31, 1997, and therefore an allowance in
the amount of $39,155 has been accrued and offset against revenues.
ADVERTISING:
Advertising costs are charged to operations when incurred. Advertising costs for
the years ended December 31, 1997 and 1996 were $124,857 and $285, respectively.
NEW ACCOUNTING PRONOUNCEMENTS:
During the year ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128).
This pronouncement provides a different method of calculating earnings per share
than required by APB 15, Earnings per Share. SFAS No. 128 provides for the
calculation of Basic and Diluted earnings per share. Basic earnings per share
include no dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution of securities
that could share in the earnings of an entity similar to fully diluted earnings
per share. Due to the net losses for the years ended December 31, 1997 and 1996,
this statement has no effect on its reported loss per share.
During the year ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 129, "Disclosure of Information about Capital
Structure" (SFAS No. 129). The new standard reinstates various securities
disclosure requirements previously in effect under Accounting Principles Board
Opinion No. 15, which has been superseded by SFAS No. 128. For the years ended
December 31, 1997 and 1996, the adoption of SFAS No. 129 did not have a material
effect on the Company's financial position or results of operations.
Statement of Financial Accounting Standards No. 130,"Reporting Comprehensive
Income" (SFAS No. 130) is effective for financial statements with fiscal years
beginning after December 15, 1997. Earlier application is permitted. SFAS No.
130 establishes standards for reporting and display of comprehensive income and
its components in a full set of general-purpose financial statements. The
Company does not expect adoption of SFAS No. 130 to have a material effect, if
any, on its financial position or results of operations.
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information", (SFAS No. 131) is effective for
financial statements with fiscal years beginning after December 15, 1997.
Earlier application is permitted. SFAS No. 131 requires that public companies
F-16
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF
ESTIMATES: (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS: (CONTINUED)
report certain information about operating segments, products, services and
geographical areas in which they operate and their major customers. The Company
does not expect adoption of SFAS No. 131 to have a material effect, if any, on
its financial position or results of operations.
2. PROPERTY AND EQUIPMENT:
At December 31, 1997, property and equipment consists of the following:
Office furniture and equipment $ 58,433
Machinery and equipment 114,605
Leasehold improvements 5,462
---------
178,500
Less: accumulated depreciation (29,098)
---------
Net property and equipment $ 149,402
=========
Depreciation expense was $27,332 and $1,766, respectively, for the years ended
December 31, 1997 and 1996.
3. INTANGIBLE ASSETS:
Intangible assets consist of goodwill, which represents the excess of the cost
of the combined companies over the fair value of their net assets at the date of
combination, and legal costs incurred to secure patents. Goodwill and patents
are being amortized ratably over five (5) and fifteen (15) years, respectively.
Amortization expense charged to operations for the years ended December 31, 1997
and 1996 was $2,605 and $285, respectively.
4. NOTES PAYABLE:
At December 31, 1997, notes payable consist of the following:
Notes payable to Hayden Investment, with interest at 15%,
due April 30, 1998 through July 20, 1998; unsecured. $ 224,631
Less: current portion (224,631)
----------
$ --
==========
F-17
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. RELATED PARTY TRANSACTIONS:
ACCOUNTS RECEIVABLE -- OTHER:
Accounts receivable- other consists of advances to a corporate shareholder. The
advances are non-interest bearing and considered short-term in nature.
NOTE PAYABLE TO RELATED PARTY:
Note payable to Dr. Leo Bores, with interest at the rate
of 10% per annum in two annual installments, due
July 18, 1999; unsecured. $ 78,750
Less: current portion (39,375)
---------
$ 39,375
=========
Future minimum principal payments due on the above note payable, are as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
1998 $39,375
1999 39,375
-------
$78,750
=======
COMMITMENTS:
The Company currently leases office space for its glaucoma treatment center in
Scottsdale, Arizona from a related party under a non-cancellable operating lease
agreement, which expires in July, 1999. Under the terms of the lease, the
Company pays monthly rent of $3,500. The Company subleases space to lessor for
one day a week at $700 per month under a cancellable sublease agreement. For the
year ended December 31, 1997, rent expense, net of sublease, under the
aforementioned non-cancellable operating lease agreement was $14,000.
Future minimum payments due under the operating lease agreement, are as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
1998 $42,000
1999 24,500
-------
$66,500
=======
Total minimum future payments have not been reduced by payments which may be
received under a cancellable sublease.
F-18
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (DEFICIT):
COMMON STOCK AND COMMON STOCK WARRANTS:
The Company issued 568,400 shares of common stock for $574,091, net of costs of
$138,659, through private offerings throughout the year ended December 31, 1997.
In relation to those offerings, the Company issued a total of 568,400 common
stock warrants to the underwriter and its representatives. The warrants have an
exercise price of $2.00 per share through December 31, 1998, and then $2.50 per
share through December 31, 2000, when they expire.
7. INCOME TAXES:
The net operating losses of the Company prior to the reverse merger have been
substantially eliminated due to the change in ownership. As such, as of December
31, 1997, the Company has a net operating loss carryforward in the approximate
amount of $730,000, available to offset federal and state taxable income
primarily through December 31, 2012.
Differences between financial reporting and income tax losses to date relates
primarily to the Company's net operating loss carryforwards at December 31,
1997. SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance, if based on the weight of available evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Based on the weight of available evidence, the Company has provided a full
valuation allowance on its deferred tax asset at December 31, 1997 in the
approximate amount of $280,000.
8. GOING CONCERN:
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, the Company has sustained continuing
operating losses.
The primary business of the Company is to manufacture and market a patented
treatment for Open Angle Glaucoma, and to operate glaucoma treatment clinics
where the patented treatment procedures are performed. The first of these
clinics was opened in 1997, but is not yet profitable.
As shown in the accompanying statement of operations, the Company has incurred
net losses of $829,702 and $65,131 in 1997 and 1996, respectively. Unaudited
information subsequent to December 31, 1997, indicates that the losses are
continuing. As of December 31, 1997, the accompanying balance sheet reflects
$145,249 in net stockholders' deficit.
The above conditions indicate that the Company may be unable to continue in
existence. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts, or the amounts
and classification of liabilities that might be necessary should the Company be
unable to continue in existence.
Management has secured additional funding through the sale of common stock, and
is currently negotiating the marketing, distribution and manufacturing of the
Company's patented treatment with potential customers.
F-19
<PAGE>
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS:
The Company currently leases office space in Fountain Hills, Arizona under a
non- cancellable operating lease agreement which expires in June, 2001. Under
the terms of the lease, the Company pays monthly rent in the amount of $972. For
the year ended December 31, 1997, rent expense under the aforementioned
non-cancellable operating lease agreement was $10,411.
Future minimum payments due under the operating lease agreement, are as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
1998 $11,667
1999 11,667
2000 11,667
2001 5,833
-------
$40,834
=======
10. NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Company recognized investing, financing and operating activities that
affected assets, liabilities, and equity but did not result in cash receipts or
payments.
For the year ended December 31, 1997, these non-cash activities are as follows:
50,000 shares of common stock were issued for services valued at $120,000.
Purchased equipment through the issuance of a note in the amount of
$75,000.
For the year ended December 31, 1996, these non-cash activities were as follows:
Interest in the amount of $26,381 was added to the principal balance of the
outstanding notes.
The Company merged with Ophthalmic International, L.L.C. and American
Glaucoma. In this merger, the Company received inventory totaling $10,567,
office furniture and equipment of $10,300, machinery and equipment of $265
and patents valued at $1 in exchange for 15,592,224 shares of common stock.
Retired 869,977 shares of treasury stock recorded at a cost of $9,425,
reducing additional paid-in capital by $8,555, and common stock by $870.
Issuance of 40,000 shares of common stock for services valued at $1,200.
Issuance of 855,000 shares of common stock for a finders fee valued at
$8,550.
11. SUBSEQUENT EVENT:
Subsequent to December 31, 1997, the Company issued additional shares of common
stock for $701,888, net of costs. In addition, the Company issued 819,824
warrants to the offerings underwriter and its representatives.
F-20
<PAGE>
================================================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY OFFER, SOLICITATION OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE OF THE PROSPECTUS.
CORONADO INDUSTRIES, INC.
PROSPECTUS
, 1998
--------
TABLE OF CONTENTS
Additional Information ...................... i
Prospectus Summary .......................... 1
Risk Factors ................................ 5
Selling Shareholders......................... 10
Use of Proceeds.............................. 15
Dilution..................................... 16
Management Discussion and Analysis
or Plan of Operation ...................... 17
Business .................................... 21
Market for the Company's Common Stock........ 26
Management .................................. 27
Principal Stockholders ...................... 29
Certain Relationships and Related
Transactions .............................. 29
Description of Securities ................... 30
Shares Eligible for Future Sale.............. 31
Plan of Distribution......................... 31
Dividend Policy ............................. 32
Legal Matters ............................... 32
Experts ..................................... 32
Indemnification.............................. 32
Index to Consolidated Financial Statements .. F-1
UNTIL _______, 199__, ALL DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES OF
THE COMPANY, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Article V of the Registrant's articles of
incorporation, which provides as follows:
V. The Directors, Officers, and Stockholders of this corporation are
indemnified from any personal liability for damages including costs of
developing records, investigation fees and attorneys, if any, for breach of
fiduciary duty or civil suit as a Director or Officer, but does not eliminate or
limit the liability for: (a) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law or (b) the payment of dividends
in violation of NRS 78.300.
Reference is also made to Sections 78.751 and 78.752 of the Nevada
General Corporation Law which provides for indemnification of directors and
officers.
"78.751. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
ADVANCEMENT OF EXPENSES.
1. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, has no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
II-1
<PAGE>
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections 1 and 2, or in defense of
any claim, issue or matter therein, he must be indemnified by the corporation
against expenses, including attorneys' fees, actually and reasonably incurred by
him in connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a
court or advanced pursuant to subsection 5, must be made by the corporation only
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances. The
determination must be made: (a) By the stockholders; (b) By the board of
directors by majority vote of a quorum consisting of directors who were not
parties to the act, suit or proceeding; (c) If a majority vote of a quorum
consisting of directors who were not parties to the act, suit or proceeding so
orders, by independent legal counsel in a written opinion; or (d) If a quorum
consisting of directors who were not parties to the act, suit or proceeding
cannot be obtained, by independent legal counsel in a written opinion.
5. The certificate or articles of incorporation, the bylaws or an
agreement made by the corporation may provide that the expenses of officers and
directors incurred in defending a civil or criminal action, suit or proceeding
must be paid by the corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an undertaking by
or on behalf of the director or officer to repay the amount if it is ultimately
determined by a court of competent jurisdiction that he is not entitled to be
indemnified by the corporation. The provisions of this subsection do not affect
any rights to advancement of expenses to which corporate personnel other than
directors or officers may be entitled under any contract or otherwise by law.
6. The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under the certificate
or articles of incorporation or any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, for either an action in his official
capacity or an action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to subsection 2 or for the
advancement of expenses made pursuant to subsection 5, may not be made to or on
behalf of any director or officer if a final adjudication establishes that his
acts or omissions involved intentional misconduct, fraud or a knowing violation
of the law and was material to the cause of action.
(b) Continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person."
"78.752. INSURANCE AND OTHER FINANCIAL ARRANGEMENTS AGAINST LIABILITY OF
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
1. A corporation may purchase and maintain insurance or make other
financial arrangements on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise for any
liability asserted against him and liability and expenses incurred by him in his
capacity as a director, officer, employee or agent, or arising out of his status
as such, whether or not the corporation has the authority to indemnify him
against such liability and expenses.
II-2
<PAGE>
2. The other financial arrangements made by the corporation pursuant to
subsection 1 may include the following:
(a) The creation of a trust fund.
(b) The establishment of a program of self-insurance.
(c) The securing of its obligation of indemnification by granting a
security interest or other lien on any assets of the corporation.
(d) The establishment of a letter of credit, guaranty or surety. No
financial arrangement made pursuant to this subsection may provide protection
for a person adjudged by a court of competent jurisdiction, after exhaustion of
all appeals therefrom, to be liable for intentional misconduct, fraud or a
knowing violation of law, except with respect to the advancement of expenses or
indemnification ordered by a court.
3. Any insurance or other financial arrangement made on behalf of a
person pursuant to this section may be provided by the corporation or any other
person approved by the board of directors, even if all or part of the other
person's stock or other securities is owned by the corporation.
4. In the absence of fraud:
(a) The decision of the board of directors as to the propriety of the
terms and conditions of any insurance or other financial arrangement made
pursuant to this section and the choice of the person to provide the insurance
or other financial arrangement is conclusive; and
` (b) The insurance or other financial arrangement:
(1) Is not void or voidable; and
(2) Does not subject any director approving it to personal
liability for his action, even if a director approving the insurance or other
financial arrangement is a beneficiary of the insurance or other financial
arrangement.
5. A corporation or its subsidiary which provides self-insurance for
itself or for another affiliated corporation pursuant to this section is not
subject to the provisions of Title 57 of Nevada Revised Statutes."
The Registrant's Board of Directors has previously authorized the
Registrant to apply for an errors and omissions liability insurance policy
covering acts and omissions of its officers and directors.
II-3
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses of this offering will be paid by the Registrant and are
estimated as follows:
Filing fees to Securities and Exchange Commission $ 821
Filing fees to National Association of Securities Dealers, Inc. 778
Printing Expenses 1,000*
Legal Fees and Expenses 25,000*
Accounting Fees 15,000*
Blue Sky Filing Fees and Legal Expenses 1,000*
Transfer Agent and Registrar Fees and Expenses 500*
Miscellaneous 5,901*
-------
Total $50,000*
=======
- ----------
* Estimated amount -- subject to revision by amendment.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the last three years, the Registrant has issued and sold the
following securities which were not registered at the time of sale under the
Securities Act of 1933, as amended (the "Securities Act"):
1. On November 5, 1996 the Registrant issued a total of 15,592,224 of
its common stock shares to the three owners of Ophthalmic International, L.L.C.
and American Glaucoma, a joint venture, in return for the assets of these
entities being transferred to the Registrant. The three owners of these two
entities became the officers and Directors of the Registrant. A finder's fee in
the amount of 855,000 shares of Registrant's common stock was paid to twelve
entities and individuals, including the three then current officers and
Directors of the Registrant.
2. Between July 11, 1997 and February 20, 1998 the Registrant issued
627,280 shares to 19 Accredited Investors in consideration for $784,100 cash.
Fox & Company Investments, Inc. of Phoenix, Arizona acted as underwriter of this
private placement and received cash commission and fees equal to 15% of the
gross offering proceeds and 627,280 Warrants.
3. In February 1998 the Registrant issued 5,000 shares to an individual
in partial consideration for a $25,000 loan.
4. In March 1998 the Registrant issued 1,521,888 shares to 39
Accredited Investors in consideration for $760,944 cash. Fox & Company
Investments, Inc. of Phoenix, Arizona acted as underwriter of this private
placement and received cash commission and fees equal to 15% of the gross
offering proceeds and 760,944 Warrants.
5. On March 31, 1998 the Registrant issued 20,000 shares of its common
stock to Registrant's legal counsel in consideration of $10,000 of legal
services.
II-4
<PAGE>
6. In June 1998 the Registrant issued 884,599 shares to 26 Accredited
Investors in consideration for $663,451 cash. Fox & Company Investments, Inc. of
Phoenix, Arizona acted as underwriter of this private placement and received
cash commission and fees equal to 15% of the gross offering proceeds and 442,299
Warrants.
None of the securities described in this Item 26 were registered under
the Securities Act at the time of original issuance in reliance upon the
exemption from registration in Section 4(2) of the Securities Act for
transactions not involving a public offering. All of the certificates evidencing
the securities described in this paragraph 26 were imprinted at the time of
original issuance with a restrictive legend indicating that they have not been
registered under the Securities Act and that resales thereof are restricted to
comply with the Securities Act.
ITEM 27. EXHIBITS.
* Indicates exhibits filed herewith.
# Denotes management contract or compensation plan or arrangement.
Exhibit
No. Description
- ------- -----------
*1.1 Form of Particiating Dealer Agreement.
*3.1 Articles of Incorporation of the Registrant.
*3.1.1 Certificate of Amendment to the Articles of Incorporation of the
Registrant.
*3.2 By-Laws of the Registrant.
3.3 Certificate of Merger between New York corporation and Nevada
corporation.
4.1 Specimen certificate representing Registrant's common stock (to be
filed by amendment).
5.1 Opinion of counsel (to be filed by amendment).
10.1 Bill of Sale for assets purchased. (Incorporated by reference to Exhibit
10.1 to Form 8-K filed on August 18, 1997.)
10.2 Promissory Note to Dr. Leo Bores. (Incorporated by reference to Exhibit
10.2 to Form 8-K filed on August 18, 1997.)
10.3 Lease with Purchase Option. (Incorporated by reference to Exhibit 10.3 to
Form 8-K filed on August 18, 1997.)
10.4 Employment Agreement with Dr. Leo Bores. (Incorporated by reference to
Exhibit 10.4 to Form 8-K filed on August 18, 1997.)
10.5 Asset Purchase Agreement with Opthalmic International and American
Glaucoma. (Incorporated by reference to Exhibit 2.1 to Form 8-K filed on
November 14, 1996.)
10.6 Form of Placement Agent Warrant Agreement.
*21.1 Subsidiaries of the Registrant.
23.1 Consent of Counsel, included in Exhibit 5.1 filed with this Registration
Statement.
*23.2 Consent of Semple & Cooper, LLP, independent public accountants.
27.1 Financial Data Schedule. (Incorporated by reference to Exhibit 27 to Form
10-QSB filed on August 12, 1998.)
II-5
<PAGE>
ITEM 28. UNDERTAKINGS.
UNDERTAKING FOR RULE 415 OFFERING: The undersigned small business issuer hereby
undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act").
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospects filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in the volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
UNDERTAKING FOR EQUITY OFFERING OF NONREPORTING SMALL BUSINESS ISSUER.
The undersigned small business issuer hereby undertakes that it will
provide to the underwriter at the closing specified in the underwriting
agreement certificates in such denominations and registered in such names as
required by the underwriter to permit prompt delivery to each purchaser.
UNDERTAKING FOR REQUEST FOR ACCELERATION OF EFFECTIVE DATE.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf on August ___, 1998 by the undersigned, thereunto authorized.
CORONADO INDUSTRIES, INC.
By: /s/ Gary R. Smith
-------------------------------
Gary R. Smith, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities on the date(s) indicated.
/s/ G. Richard Smith Chairman, Secretary, Director Dated: August __, 1998
- ------------------------ (Chief Executive Officer)
G. Richard Smith
/s/ Gary R. Smith President, Treasurer, Director Dated: August __, 1998
- ------------------------ (Chief Accounting Officer)
Gary R. Smith
- ------------------------- Director Dated:
John LiVecchi
II-7
PARTICIPATING DEALER AGREEMENT
[Name of Dealer]
[Address]
[City, State Zip]
Dear Sirs:
Coronado Industries, Inc., a Nevada corporation (the "Company"),
proposes to offer and sell in a public offering to persons acceptable to the
Company (the "Offering"), upon the terms and conditions set forth in the
attached Prospectus (the "Prospectus"), up to 50,000 shares of the Company's
Common Stock, at the price of $__.00 per share (the "Common Stock").
Subscriptions are payable in cash only.
These securities have been registered under the Securities Act Of 1933
(the "33 Act"), as amended, by Registration Statement 333- _______ on Form SB-2
and under the laws of the following states:_________________________________. In
the event no shares of the Common Stock are not sold on or before
______________, 1999, the Offering shall cease, unless the Company or you elect
to extend the offering for a period not to exceed three (3) months ("Sale
Termination Date"). The Company reserves the right to withdraw, cancel or modify
the Offering made hereby and the right to reject subscriptions for the Common
Stock in whole or in part.
This letter will confirm the understanding and agreement between the
Company and [Name of Broker] (the "Selling Agent"), with respect to your
participation in the Offering and sale of the Common Stock as Selling Agent on
the terms and conditions and subject to the representations and warranties
hereinafter set forth.
1. Solicitation. You are hereby appointed to act as the non-exclusive
agent of the Company to solicit subscriptions from qualified persons pursuant to
the terms of this Agreement and on the terms set forth in the Prospectus and in
accordance with the 33 Act, the Securities and Exchange Act of 1934 (the "34
Act"), the Rules of Fair Practice of the NASD ("NASD Rules"), and any applicable
state securities laws and regulations. Subject to the terms and conditions of
this Agreement, you agree to accept such agency and use your best efforts during
the term of this Agreement to obtain subscriptions for the Common Stock. You
agree to deliver a copy of the Prospectus only to prospective investors whom you
believe and have reasonable grounds to believe meet the suitability standards
set forth in the Prospectus, and you are not authorized to make use of any
Prospectus or any sales literature not so prepared or furnished, or to make any
representations or furnish
<PAGE>
any information other than that contained in the Prospectus. You agree not to
deliver any subscription or sale literature to any person unless accompanied or
preceded by the Prospectus. You are not obligated to obtain subscriptions for
the Common Stock and will have no liability to the Company to do so.
2. Compensation. Subject to the terms and conditions of this Agreement,
the Company agrees to compensate you as follows for participation in the
Offering:
a. Commissions. You will be entitled to receive in the
aggregate a cash commission equal to ten percent (10%) of the amount of
subscriptions sold by you and accepted by the Company. Commissions
payable on subscriptions to the Company will be payable when
subscriptions are received and accepted by the Company and at each
closing of the Offering. No commissions will be payable with respect to
sales determined by the Company to have been made in violation of the
securities laws of any jurisdiction.
3. Subscription Procedure. Solicitation and other activities by you
shall be undertaken only in accordance with applicable state, federal and NASD
rules and regulations and the terms hereof. Each person desiring to purchase
will be required to complete and execute a Subscription Agreement in connection
with the Common Stock being purchased. You shall ascertain that all such
documents sent in by a prospective purchaser meets the suitability standards set
forth in the Prospectus and shall then forward such documents and such check and
any other documents that may be required under state securities laws or by the
Company, to _________________________ (the "Escrow Agent").
4. Representations and Warranties of the Company. The Company hereby
represents and warrants to you as follows:
a. The Company has prepared the Prospectus and related
documents in conformity with the Registration Statement, in conformity
with the 33 Act and the applicable state laws in the states where the
Common Stock will be offered.
b. To the best of its knowledge, the Prospectus and related
documents furnished to you do not contain any untrue fact required to
be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
c. The consolidated balance sheet of the Company contained in
the Prospectus presents fairly the financial position of the Company
and the results of its operations as of the date or dates, or the
period or periods, shown in conformity with generally accepted
accounting principles.
2
<PAGE>
d. Semple & Cooper, LLP, who has audited the financial
statements of the Company, is an independent public accountant as
required by the 33 Act.
e. The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Nevada with corporate power and authority to conduct its business as
described in the Prospectus. The Company has obtained all necessary
authorizations, approvals and orders of and from all governmental
regulatory officials and bodies authorizing it to own its properties
and conduct its business as described in the Prospectus; provided,
however, that the foregoing representation is only to the best
knowledge of the Company to any material penalty or other material
liability.
f. The Common Stock will be validly authorized and will have
all the rights, privileges and limitations described in the Prospectus.
The holders thereof will not be subject to further liability for debts
and obligations of the Company.
g. This Agreement has been duly authorized, executed and
delivered on behalf of the Company and is a valid and binding agreement
enforceable against the Company. In accordance with its terms, except
as enforceability of the indemnification provisions may be limited by
federal securities laws.
h. The execution and delivery of this Agreement, the
incurrence of the obligations herein set forth and the consummation of
the transactions contemplated herein and in the Prospectus will not
constitute a breach of, or default under, the articles of incorporation
or bylaws of the Company, any instrument by which either the Company is
or will be bound or any order, rule or regulation of any court or any
governmental body or administrative agency having jurisdiction over it
or any of its properties. No consent, approval, authorization or order
of any court or governmental agency or body is required for the
consummation of the transactions herein contemplated, except such as
may be required under the 33 Act or any state securities or Blue Sky
Laws.
i. Except as set forth in the Prospectus, to the best of its
knowledge, there is not now, and on or prior to the closing date there
will not be, any pending or any threatened action, suit or proceeding
in which the Company is a party, or by which the Company is or will be
bound, before or by any court or governmental agency or board, which
might result in any material or adverse change in the condition,
financial or otherwise, business or prospectus of the Company.
3
<PAGE>
5. Representations and Warranties of the Selling Agent. You as Selling
Agent, hereby represent and warrant to the Company, with respect to yourself or
your own actions as follows:
a. You are a member in good standing of the National
Association of Securities Dealers, Inc., and you are duly registered as
a Broker/Dealer under the 34 Act and under the laws of each state in
which you propose to offer the Common Stock, except where such
registration would not be required by law.
b. You will require that all persons subscribing to the
Offering through you comply with the following:
(i) In soliciting subscriptions for the Common Stock,
you and your representatives will comply with all applicable
requirements of the 33 Act, including the delivery of a
current Prospectus to each prospective purchaser of the Common
Stock, the 34 Act and all applicable state securities laws
(providing that nothing herein will constitute a
representation by you or your representative that the
Prospectus and related documents comply with any statute or
regulation), and neither you nor anyone acting on your behalf
will give any information or make any representations other
than those contained in the Prospectus, or other materials
prepared by the Company and furnished for use in connection
with the Offering.
(ii) No offers will be made to any person in any state
until you have personally confirmed with the Company or its
counsel that the offer of the Common Stock in that state has
been qualified or exempted by the Company, except as stated
above.
(iii) Each investor will receive a copy of the Prospectus
be provided to you by the Company.
(iv) No sales material or other information in connection
with the Offering will be used unless such material has been
provided to you by the Company, and you will use such
materials or information in accordance with any written
instructions furnished by the Company.
(v) You will believe, and have reasonable grounds to
believe, that such person subscribing for the Common Stock
meets the suitability standards set forth in the Prospectus.
4
<PAGE>
6. Conditions of Closing. The Company will not have a closing of the
Offering unless on the date of such closing ("Closing Date"):
a. All registrations, qualifications, notifications or other
filings made in the several States (as will be described to you in a
written memorandum to be provided by the Company) will be effective;
b. No stop order, injunction or other legal prohibition
against the use of the Prospectus will be in effect and no proceeding
for any such stop order, injunction or their prohibition will be
pending or (to the knowledge of the Company) threatened; and
d. Any request by the SEC or any other regulatory authority
for additional information or for amendment of any item filed with such
authority will have been complied with.
7. Indemnification.
a. The Company agrees to indemnify and hold you harmless
against and from any losses, claims, damages or liabilities, joint or
several, to which you may become subject under the 33 Act, the 34 Act,
any rule thereunder, the various state securities acts or otherwise
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof), arise out of or are based upon (i) the Company's
violation of this Agreement or (ii) the omission or alleged omission of
any material fact required to be stated therein or necessary to make
the statement therein in light of the circumstances under which they
are made not misleading, or upon any untrue statement or alleged untrue
statement of a material fact contained in the Prospectus, or any other
materials prepared by the Company and furnished to you for use in
connection with the offer of the Common Stock; provided no person shall
be indemnified as to any such losses, claims, damages, liabilities or
actions arising out of, or based upon, any such omission or alleged
untrue statement to the extent that such omission or statement was made
in reliance upon, and in conformity with, information furnished in
writing to the Company by such person for use in the preparation of the
Prospectus or other such materials. The Company will reimburse you for
any legal or other expense reasonably incurred in connection with
investigating or defending any such loss, claim, damage, liability or
action. The foregoing indemnity agreement will inure to the benefit of
such person, if any, who controls you within the meaning of the 33 Act
and to your partners, officers, directors, stockholders.
b. You agree to indemnify and hold harmless the Company within
the meaning of the 33 Act, against any losses, claims,
5
<PAGE>
damages or liabilities (or actions in respect thereof) which arise out
of or are based upon (i) your violation of this Agreement or (ii) any
untrue statement or alleged fact in the Prospectus and/or any Blue Sky
application which was based upon or made in reliance upon and in
conformity with information furnished to the Company in writing by you
for use in connection with the preparation of the Prospectus and/or any
Blue Sky application.
c. Each indemnified party will, within ten (10) days after the
receipt of the notice of the commencement of any action against such
indemnified party in respect of which indemnity may be sought from an
indemnifying party under this Agreement, notify the indemnifying party
in writing of the commencement thereof. The omission by any indemnified
party to notify the indemnifying party of any such action shall relieve
the indemnifying party from any liability in respect of such action
which it may have to such indemnified party on account of this
indemnity agreement; but shall not relieve the indemnifying party from
any other liability which it may have to such indemnified party. In
case any such action shall be brought against any indemnified party and
it shall notify the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, assume the defense thereof, with counsel
satisfactory to such indemnified party and after notice from the
indemnifying party of its election so to assume the defense thereof,
other than reasonable costs of investigation.
8. Survival. The representations, warranties and agreements made
herein, including the indemnity provision in Section 7, will remain operative
and in full force and effect, regardless of any termination or cancellation of
this Agreement or any investigation made by or on behalf of you, or of any of
your controlling persons, directors, or officers, the Company, or any other
party, and shall survive the delivery of the Common Stock hereunder.
9. Effective Date and Termination. This Agreement will become effective
automatically upon execution by you at which time you shall return an executed
copy to the Company. This Agreement may be terminated at any time by either
party.
10. Notice. Any notice required hereunder is to be in writing, by
telegram, if promptly confirmed in writing, or by registered or certified mail
to the addresses set forth below.
11. Time. Time will be of the essence of each party of this Agreement.
6
<PAGE>
12. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of Arizona. This Agreement embodies the entire
agreement between the parties and cannot be amended or modified except in
writing agreed by both parties hereto.
If the foregoing is in accordance with your understanding, please sign
and return a counterpart hereof.
Very truly yours,
CORONADO INDUSTRIES, INC.
By: ___________________________
G. Richard Smith, Chairman
Confirmed and accepted in its entirety this __________ day of
_____________, 199_.
[ Name Of Dealer ]
By: _________________________
______________, Authorized Officer
7
ARTICLES OF INCORPORATION
OF
CORONADO INDUSTRIES INC.
I. The name of this corporation is CORONADO INDUSTRIES INC.
II. The Resident Agent of this corporation for the transaction of
business, until changed according to law, shall be the following address:
NEVADA BUSINESS SERVICES
675 Fairview Drive, #246
Carson City, NV 89701
III. This corporation may engage in any lawful activity or
activities in Nevada and throughout the world.
IV. The total authorized capital stock of this corporation is
TWENTY MILLION (20,000,000) Common Shares, each share having $.001 par value and
THREE MILLION (3,000,000) Preferred Shares having $.0001 par value. All of the
voting power of the capital stock of this corporation shall reside in the Common
Stock. No capital stock of this corporation shall be subject to assessment and
no holder of any share or shares shall have preemptive rights to subscribe to
any or all issues of shares of other securities of this corporation.
V. The Directors, Officers and Stockholders of this corporation
are indemnified from any personal liability for damaged including costs of
developing records, investigator fees and attorney fees, if any, for breach of
fiduciary duty or civil suit as a Director or Officer, but does not eliminate or
limit the liability for: (a) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law or (b) the payment of dividends
in violation of NRS 78.300.
<PAGE>
VI. The members of the governing Board of this corporation shall
be styled Directors, and they shall be one in number until changed either by (1)
an amendment to the Articles of Incorporation of this corporation, or (2) the
adoption of By-Laws and from time to time amendments thereto increasing or
decreasing the number of directors, but in no case shall the number of directors
be smaller than three or the number of stockholders, whichever shall be the
least. The name and address of the person who is appointed to act as the first
director of this corporation is as follows:
Edward Barth
4264 Strausser Street, N.W.
North Canton, OH 44720
VII. This corporation is to have perpetual existence.
VIII. The name and address of the first incorporator of this
corporation is as follows:
Mary Ann Dickens
675 Fairview Drive, #246
Carson City, NV 89701
The powers of the incorporator are to terminate upon filing of these
Articles of Incorporation.
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation of CORONADO INDUSTRIES INC. On the 5th day of
September, 1996.
/s/ Mary Ann Dickens
------------------------------------
Incorporator
<PAGE>
STATE OF NEVADA )
) ss.
CARSON CITY )
On this 5th day of September, 1996, before me, Frances C. Palmer, a
Notary Public in and for said County and State, personally appeared Mary Ann
Dickens, known to me to be the person whose name is subscribed to the foregoing
instrument, and who duly acknowledged to me that she executed the same for the
purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal in the County and State, the day and year in this Certificate first above
written.
/s/ Frances C. Palmer
------------------------------------
NOTARY PUBLIC
-------------------------------
FRANCES C. PALMER
NOTARY PUBLIC - NEVADA
Appt. Recorded in CARSON CITY
My Appt. Exp. Feb. 26, 2000
-------------------------------
EXHIBIT 3.1.1
ARTICLES OF AMENDMENT
OF
CORONADO INDUSTRIES, INC.
I
The name of the corporation is Coronado Industries, Inc.
II
The Articles of Incorporation of Coronado Industries, Inc. are amended
as follows:
Article IV shall be amended by deleting it in its entirety and
substituting the following in lieu thereof:
IV. The total authorized capital stock of this corporation is
TWENTY-FIVE MILLION (25,000,000) Common Shares, each share having $.001 par
value and THREE MILLION (3,000,000) Preferred Shares having $.0001 par value.
All of the voting power of the capital stock of this corporation shall reside in
the Common Stock. No capital stock of this corporation shall be subject to
assessment and no holder of any share or shares shall have preemptive rights to
subscribe to any or all issues of shares of other securities of this
corporation.
III
There are presently 18,596,253 shares of Coronado Industries, Inc.
outstanding or entitled to vote on the amendments set forth herein.
IV
Pursuant to Nevada statute section 78.332, effective September 15, 1997
shareholders owning a total of 13,149,224 shares (over 70% of the total
outstanding) executed a written consent to the adoption of the amendment set
forth herein.
EXECUTED THIS 30th day of September, 1997.
- ------------------------------ ------------------------------
Gary R. Smith, President G. Richard Smith, Secretary
Subscribed and sworn to before me by Gary R. Smith and G. Richard Smith
on this 30th day of September, 1997.
------------------------------
Notary Public
My commission expires:
- ----------------------
EXHIBIT 3.2
BYLAWS
OF
CORONADO INDUSTRIES, INC.
ARTICLE I
OFFICES
Section 1.01. Registered Office and Agent. The principal office and
resident agent of the Coronado Industries, Inc. (the "Corporation") in Nevada
shall be as designated by the Board of Directors from time to time.
Section 1.02. Other Offices. The Corporation may establish and maintain
such other offices at such other places of business both within and without the
State of Nevada as the Board of Directors may from time to time determine.
ARTICLE II
STOCKHOLDERS
Section 2.01. Annual Meetings. The annual stockholders' meeting for
electing Directors and transacting other business shall be held at such time and
place within or without the State of Nevada as may be designated by the Board of
Directors in a Resolution and set forth in the notice of the meeting. Failure to
hold any annual stockholders' meeting at the designated time shall not work a
forfeiture or dissolution of the Corporation.
Section 2.02. Special Meetings. Special meetings of the stockholders
may be called by the Board of Director or by the Chairman of the Board, if one
be elected, or by the President, and shall be called by the President or
Secretary at the request in writing of stockholders owning not less a majority
of all the shares entitled to vote at the proposed meeting. Such request shall
state the purpose or purposes of the proposed meeting. Business transacted at
any special meeting of stockholders shall be limited to the purposes stated in
the notice thereof.
Section 2.03. Place of Meeting. All stockholders' meetings shall be
held at such place, within or without the State of Nevada as shall be fixed from
time to time by resolution of the Board of Directors.
Section 2.04. Notice of Meetings. Written or printed notice stating the
place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten or more than fifty days before the date of the meeting, either
personally or by mail,
<PAGE>
by or at the direction of the President, the Secretary or the officer or persons
calling the meeting, to each stockholder of record entitled to vote at such
meeting, except that if the authorized shares are to be increased, at least
thirty days' notice shall be given. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed to the stockholder
at his address as it appears on the stock transfer books of the Corporation,
with postage thereon prepaid.
Section 2.05. Waiver of Notice. Whenever any notice is required to be
given to any stockholder of the Corporation under the provisions of any statute
or under the provisions of the Articles of Incorporation or these Bylaws, a
waiver thereof in writing signed by the person or persons entitled to such
notice, whether before, at or after the time stated therein, shall be equivalent
to the giving of such notice. Attendance of a stockholder at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when
such stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
Section 2.06. Organization. Meetings of the stockholders shall be
presided over by the Chairman of the Board, or if he is not present or one has
not been elected, by the President, or if neither the Chairman of the Board nor
the President is present, by a chairman pro tempore to be chosen by a majority
of the stockholders entitled to vote who are present in person or by proxy at
the meeting. The Secretary of the Corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, or if neither the Secretary
nor any Assistant Secretary is present, by a secretary pro tempore to be chosen
by a majority of the stockholders entitled to vote who are present in person or
by proxy at the meeting.
Section 2.07. Voting. Except as otherwise specifically provided by the
Articles of Incorporation or by these Bylaws or by statute, all matters coming
before any meeting of stockholders shall be decided by a vote of the majority of
the votes cast. The vote upon any question shall be by ballot whenever requested
by any person entitled to vote, but, unless such a request is made, voting may
be conducted in any way approved at the meeting.
Section 2.08. Stockholders Entitled to Vote. Each stockholder of the
Corporation shall be entitled to vote, in person or by proxy, each share of
stock standing in his name on the books of the Corporation on the record date
fixed or determined pursuant to Section 6.06 hereof.
Section 2.09. Proxies. The right to vote by proxy shall exist only if
the instrument authorizing such proxy to act shall have been executed in writing
by the stockholder himself or by his
2
<PAGE>
attorney-in-fact duly authorized in writing. Such proxy shall be filed with the
Secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.
Section 2.10. Quorum. The presence at any stockholders' meeting, in
person or by proxy, of the record holders of shares aggregating the number of
shares entitled to vote at the meeting as indicated in the Articles of
Incorporation shall be necessary and sufficient to constitute a quorum for the
transaction of business. The stockholders present at the stockholders meeting
for which a quorum exists, may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
Section 2.11. Absence of Quorum. In the absence of a quorum at any
stockholders' meeting, a majority of the total number of shares entitled to vote
at the meeting and present there at, in person or by proxy, may adjourn the
meeting for a period not to exceed sixty days at any one adjournment. Any
business that might have been transacted at the meeting originally called may be
transacted at any such adjourned meetings at which a quorum is present.
Section 2.12. List of Stockholders. The officer or agent having charge
of the stock transfer books for shares of the Corporation shall make, at least
ten days before each meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, which the address of and the number of shares
held by each, which list, for a period of ten days prior to such meeting, shall
be kept on file at the principal office of the Corporation, whether within or
without the State of Nevada, and shall be subject to the inspection of any
stockholder during the whole time of the meeting. The original stock transfer
books shall be prima facie evidence as to who are the stockholders entitled to
examine such list or transfer books or to vote at any meeting of stockholders.
Failure to comply with the requirements of this Section 2.12 shall not affect
the validity of any action taken at such meeting of stockholders.
Section 2.13. Action by Stockholders Without a Meeting. Any action
required to be taken at a meeting of the stockholders of the Corporation or any
action which may be taken at such a meeting, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by a
majority of the stockholders entitled to vote with respect to the subject matter
thereof, except that if a different proportion of voting power is required for
such action at a meeting, then that proportion of written consents is required.
Such consents shall have the same force and effect as a vote in person of the
stockholders of the Corporation. A consent shall be sufficient for this Section
3
<PAGE>
2.13 if it is executed in counterparts, in which event all of such counterparts,
when taken together, shall constitute one and the same consent. In no instance
where action is authorized by written consent need a meeting of stockholders be
called or notice given. The written consent must be filed with the minutes of
the proceedings of the stockholders.
ARTICLE III
BOARD OF DIRECTORS
Section 3.01. Number and Term of Office. The Board of Directors of the
Corporation shall consist of one or more Directors, as determined by the Board
of Directors of the Corporation. Each Director (whenever elected) shall hold
office until his successor shall have been elected and qualified unless he shall
resign or his office shall become vacant by his death or removal. Directors need
not be residents of the State of Nevada or stockholders of the Corporation.
Section 3.02. Election of Directors. Except as otherwise provided in
Sections 3.03 and 3.04 hereof and except as otherwise provided in the Articles
of Incorporation, the Directors shall be elected annually at the annual
stockholders' meeting for the election of Directors. The persons elected as
Directors shall be those nominees, equal to the number then constituting the
Board of Directors, who shall receive the largest number of affirmative votes
validly cast at such election by the holders of shares entitled to vote
therefor. Failure to annually re-elect Directors of the Corporation shall not
affect the validity of any action taken by a Director who shall have been duly
elected and qualified and who shall not, at the time of such action, have
resigned, died, or been removed from his position as a Director of the
Corporation.
Section 3.03. Removal of Directors. At a meeting called expressly for
that purpose, the entire Board of Directors or any lesser number may be removed,
with or without cause, by a vote of the holders of the majority of the shares
then entitled to vote at an election of Directors.
Section 3.04. Vacancies and Newly Created Directorships. Any vacancy
occurring in the Board of Directors may be filled by the affirmative vote of a
majority of the remaining Directors though less than a quorum of the Board of
Directors. A Director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office and until his successor shall have
been elected and qualified. Any number of Directors shall be filled by the
affirmative vote of a majority of the Directors then in office or by an election
at an annual meeting of a special meeting of the stockholders called for that
purpose. A Director chosen to fill a position resulting from an increase in the
number of directors
4
<PAGE>
shall hold such position until the next annual meeting of stockholders and until
his successor shall have been elected and qualified.
Section 3.05. Resignations. Any Director may resign at any time by
mailing or delivering or by transmitting by telegram or cable written notice of
his resignation to the Board of Directors of the Corporation at the
Corporation's principal office or its registered office in the State of Nevada
or to the President, the Secretary, or any Assistant Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein or if no time be specified, then at the time of receipt thereof.
Section 3.06. General Powers. The business of the Corporation shall be
managed by the Board of Directors, which may exercise all such powers of the
Corporation and do all such lawful acts and things are not by statute or by the
Articles of Incorporation or by these Bylaws directed or required to be
exercised or done by the stockholders.
Section 3.07. Annual Meetings. The annual meeting of the Board of
Directors for electing officers and transacting other business shall be held
immediately after the annual stockholders' meeting at the place of such meeting.
Failure to hold any annual meeting of the Board of Directors of the Corporation
at the designated time shall not work a forfeiture or dissolution of the
Corporation.
Section 3.08. Regular Meetings. The Board of Directors from time to
time may provide by resolution for the holding of regular meetings and fix the
time and place of such meetings. Regular meetings may be held within or without
the State of Nevada. Notice of regular meetings need not be given, provided that
notice of any change in the time or place of such meetings shall be sent
promptly to each Director not present at the meeting at which such change was
made.
Section 3.09. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board, if one be elected, or by
the President on two days' notice to each Director specifying the time and place
(within or without the State of Nevada) of the meeting, and shall be called by
the President or Secretary in like manner and on like notice on the written
request of two or more Directors.
Section 3.10. Notice. All notices to a Director required by Sections
3.07 or 3.09 hereof shall be addressed to him at his residence or usual place of
business and may be given by mail, telegram, radiogram, cable or by personal
delivery. No notice need be given of any adjourned meeting.
5
<PAGE>
Section 3.11. Waiver of Notice. Whenever any notice is required to be
given to any Director of the Corporation under the provisions of any statute or
under the provisions of the Articles of Incorporation or these Bylaws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before, at or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance of a Director at a meeting of the Board of
Directors shall constitute a waiver of notice of such meeting, except where a
Director attends such a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
annual, regular or special meeting of the Board of Directors need be specified
in the notice or waiver of notice of such meeting.
Section 3.12. Quorum. At all meetings of the Board of Directors a
majority of the whole Board of Directors shall constitute a quorum for the
transaction of business and, except as may be otherwise specifically provided by
statute or by the Articles of Incorporation or these Bylaws, the act of a
majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors. In the absence of a quorum the
Directors present there may adjourn the meeting from time to time without notice
other than announcement at the meeting, until a quorum be present.
Section 3.13. Action by Directors or Committee Without Meeting. Any
action required to be taken at a meeting of the Directors of the Corporation or
any committee thereof or any action which may be taken at such a meeting, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the Directors or members of the committee, as
the case may be, entitled to vote with respect to the subject matter thereof.
Such consent shall have the same force and effect as a unanimous vote of the
Board of Directors or of the committee, as the case may be, of the Corporation.
A consent shall be sufficient for this Section 3.13 if it is executed in
counterparts, in which event all of such counterparts, when taken together,
shall constitute one and the same consent.
Section 3.14. Meetings by Conference Telephone. Any Director or any
member of a committee may participate in a meeting of the Board of Directors or
a committee, as the case may be, by means of a conference telephone or similar
communications equipment by means of which all persons participating in such
meeting can hear each other, and such participation shall constitute the
presence of such person at such meeting.
Section 3.15. Compensation. By resolution of the Board of Directors,
any Director may be paid any one or more of the following: his expenses, if any,
of attendance at meetings; a fixed sum for attendance at meetings; or a stated
salary as
6
<PAGE>
Director. Nothing herein contained shall be construed to preclude any Director
from serving the Corporation in any capacity as an officer, employee, agent or
otherwise, and receiving compensation therefor.
Section 3.16. Reliance on Accounts and Reports, etc. A Director, or a
member of any committee designated by the Board of Directors, in the performance
of his duties, shall be fully protected in relying in good faith upon the books
of account or reports made to the Corporation by any of its officers, or by an
independent certified public accountant, or by an appraiser selected with
reasonable care by the Board of Directors or by any such committee, or in
relying in good faith upon other records of the Corporation.
Section 3.17. Presumption of Assent. A Director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as the
Secretary of the meeting before the adjournment thereof, or shall forward such
dissent by registered or certified mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a Director who voted in favor of such action.
ARTICLE IV
COMMITTEES
Section 4.01. How Constituted. By resolution adopted by a majority of
the whole Board of Directors, the Board may designate one or more committee,
including an Executive Committee, each consisting of two or more Directors. The
Board of Directors may designate one or more Directors as alternate members of
any such committee, who may replace any absent or disqualified member at any
meeting of such committee. Any such committee, to the extent provided in the
resolution and except as may otherwise be provided by statute, shall have and
may exercise the powers of the Board of Directors in the management of the
business and affairs of the Corporation and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but the
designation of such committee and the delegation thereto of the authority shall
not operate to relieve the Board of Directors, or any member thereof, of any
responsibility imposed upon it or him by law. In the absence or disqualification
of any member of any such committee, the member or members thereof present at
any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
7
<PAGE>
Section 4.02. Proceedings, Quorum and Manner of Acting. Except as
otherwise prescribed by the Board of Directors, each committee may adopt such
rules and regulations governing its proceedings, quorum, and manner of acting as
it shall deem proper and desirable, provided that the quorum shall not be less
than two members.
ARTICLE V
OFFICERS AND AGENTS
Section 5.01. Officers. The officers of the Corporation shall consist
of a President, one or more Vice-President, a Secretary and a Treasurer, each of
whom shall be elected by the Board of Directors. The Board of Directors may
elect and appoint a Chairman of the Board and may elect and appoint such other
officers, assistant officers, and agents as may be deemed necessary and may
delegate to one or more officers or agents the power to appoint such other
officers, assistant officers and agents and to prescribe their respective
rights, terms of office, authorities and duties. Any two or more offices of the
Corporation may be held by the same person. An officer of the Corporation need
not be a Director of the Corporation nor a resident of the State of Nevada.
Section 5.02. Term of Office. Except as provided in Sections 5.03, 5.04
and 5.05 hereof, each officer appointed by the Board of Directors shall hold
office until his successor shall have been appointed and qualified.
Section 5.03. Resignation. Any officer or agent of the Corporation may
resign at any time by mailing or delivering or by transmitting by telegram or
cable written notice of his resignation to the Board of Directors of the
Corporation at the Corporation's principal office or its registered office in
the State of Nevada or to the President, the Secretary or any Assistant
Secretary of the Corporation. Any such resignation shall take effect at the time
specified therein or if no time be specified, then at the time of receipt
thereof.
Section 5.04. Removal. Any officer or agent may be removed by the Board
of Directors, or by the Executive Committee, if any, either with or without
cause, whenever in its judgment, the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights. In addition, any other
officer, assistant officer or agent appointed in accordance with the delegation
provisions of Section 5.01 hereof may be removed, either with or without cause,
by any such officer or agent upon whom such power of delegation shall have been
conferred by the Board of Directors.
8
<PAGE>
Section 5.05. Vacancies and Newly Created Offices. If any vacancy shall
occur in any office by reason of death, resignation, removal, disqualification
or other cause, or if any new office shall be created, such vacancies or newly
created offices may be filled by the Board of Directors at any regular or
special meeting or may be filled by any officer or agent to whom the power is
delegated in accordance with the delegation provisions of Section 5.01 hereof.
Section 5.06. Chairman of the Board. The Chairman of the Board, if one
be elected, shall preside at all stockholders' meetings and at all meetings of
the Board of Directors. Subject to the supervision of the Board of Directors, he
shall have general charge of the business, affairs and property of the
Corporation. Except as the Board of Director may otherwise order, he may sign in
the name and on behalf of the Corporation all deeds, bonds, contracts and
agreements. He shall exercise such other powers and perform such other duties as
from time to time may be assigned to him by the Board of Directors.
Section 5.07. President. The President shall be the chief operating
officer of the Corporation and shall, in the absence of the Chairman of the
Board, preside at all stockholders' meetings and at all meetings of the Board of
Directors. Subject to the supervision of the Board of Directors and such
direction and control as the Chairman of the Board, if one be elected, may
exercise on matters of general policy, he shall have general supervision over
its operating officers, employees and agents. He shall sign (unless a
Vice-President shall have signed) certificates representing the stock of the
Corporation authorized for issuance by the Board of Directors, and except as the
Board of Directors may otherwise order, he may sign in the name and on behalf of
the Corporation all deeds, bonds, contracts or agreements. He shall exercise
such other powers and perform such other duties as from time to time may be
assigned to him by the Board of Directors.
Section 5.08. Executive Vice-President and Vice-Presidents. The
Executive Vice-President, if one be elected, and any Vice-Presidents, if one or
more be elected, shall have such powers and perform such duties as may be
assigned to them by the Board of Directors or by the President. At the request
of or in the absence or disability of the President, the Executive
Vice-President (or the Vice-President, if there is no duly appointed Executive
Vice-President, and if there are two or more Vice-Presidents, then the senior of
the Vice-Presidents present are able to act) may perform all the duties of the
President and, when so acting, shall have the powers of and be subject to all
the restrictions upon the President. The Executive Vice-President or any
Vice-President may sign (unless the President or another Vice-President shall
have signed) certificates representing stock of the Corporation authorized for
issuance by the Board of Directors.
9
<PAGE>
Section 5.09 Treasurer and Assistant Treasurers. The Treasurer shall
have general charge of, and general responsibility for, all funds, securities
and receipts of the Corporation, and shall deposit, or cause to be deposited, in
the name of the Corporation, all moneys or other valuable effects in such banks,
trust companies, or other depositories as shall from time to time be designed by
the Board of Directors. He shall have all powers and perform all duties incident
to the office of a treasurer of a corporation and as are provided for him in
these Bylaws, and shall exercise such other powers and perform such other duties
as may be assigned to him by the Board of Directors. Any Assistant Treasurer may
perform such duties of the Treasurer as the Treasurer or the Board of Directors
may assign, and, in the absence of the Treasurer, any Assistant Treasurer may
perform all the duties of the Treasurer.
Section 5.10. Secretary and Assistant Secretaries. The Secretary shall
attend to the giving and serving of all notice of the Corporation and shall
record all the proceedings of all meetings of the stockholders and of the Board
of Directors in a book to be kept for that purpose. He shall keep in safe
custody the seal of the Corporation, and shall have charge of the records of the
Corporation, including the stock books and such other books and papers as the
Board of Directors may direct and such books, reports, certificates and other
documents required by law to be kept, all of which shall at all reasonable times
be open to inspection by any Director. He shall sign (unless an Assistant
Secretary shall have signed) certificates representing stock of the Corporation
authorized for issuance by the Board of Directors. He shall perform such other
duties as pertain to his office or as may be required by the Board of Directors.
Any Assistant Secretary may perform such duties of the Secretary as the
Secretary or the Board of Directors may assign, and, in the absence of the
Secretary, Assistant Secretary may perform all the duties of the Secretary.
Section 5.11. Comptroller. The Comptroller, if one be elected, shall
have general charge and supervision of financial reports. He shall maintain
adequate records of all assets, liabilities and transactions of the Corporation
and shall keep the books and accounts and cause adequate audits thereof to be
made regularly and shall exercise a general check upon the disbursements of
funds of the Corporation. In general, he shall perform all duties incident to
the office of a comptroller of a corporation, and shall exercise such other
powers and perform such other duties as may be assigned to him by the Board of
Directors.
Section 5.12. Remuneration. The salaries or other compensation of the
officers of the Corporation shall be determined by the Board of Directors,
except that the Board of Directors may by resolution delegate to any officer or
agent the power to fix salaries or other compensation of any other officer,
assistant
10
<PAGE>
officer or agent appointed in accordance with the delegation provisions of
Section 5.01 hereof.
Section 5.13. Surety Bonds. The Board of Directors may require any
officer or agent of the Corporation to execute a bond to the Corporation in such
sum and with such surety or sureties as the Board of Directors may determine,
conditioned upon the faithful performance of his duties to the Corporation,
including responsibility for negligence and for the accounting of any of the
Corporation's property, funds or securities that may come into his hands.
ARTICLE VI
CAPITAL STOCK
Section 6.01. Signatures. The shares of the Corporation's capital stock
shall be represented by certificates signed by the president or a Vice-President
and the Secretary or an Assistant Secretary of the Corporation, any may be
sealed with the seal of the Corporation, or a facsimile thereof. The signatures
of the President or a Vice-President and of the Secretary or an Assistant
Secretary upon certificates may be facsimiles if the certificate is
countersigned by a transfer agent, or registered by a registrar, other than the
Corporation itself or an employee of the Corporation. In case any officer who
has signed or whose facsimile signature has been placed upon such certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer at
the date of its issue.
Section 6.02. Certificates. Each certificate representing shares of the
Corporation shall state upon the face thereof: (a) that the Corporation is
organized under the laws of the State of Nevada; (b) the name of the person to
whom such certificate is issue; (c) the number and class of shares which such
certificate represents; and (d) the par value of each share represented by such
certificate, or a statement that the shares are without par value. Each
certificate shall also set forth conspicuously on the face or back thereof such
restrictions upon transfer, or a reference thereto, as shall be adopted by the
Board of Directors and stockholders. No certificate shall be issued for any
shares until such share is fully paid.
Section 6.03. Classes of Stock. If the Corporation is or shall become
authorized to issue shares of more than one class, then, in addition to the
provisions of Section 6.02 hereof, every certificate representing shares issued
by the Corporation shall also set forth upon the face or back of the
certificate, or shall state that the Corporation will furnish to any stockholder
upon request and without charge, a full statement of the designations,
preferences, limitations, and relative rights of the shares of each
11
<PAGE>
class authorized to be issued and, if the Corporation is or shall become
authorized to issue any preferred or special class in series, the variations in
the relative rights and preferences between the shares of each such series so
far as the same have been fixed and determined and the authority of the Board of
Directors to fix and determine the relative rights and preferences of subsequent
series.
Section 6.04. Consideration for Shares. Shares having a par value may
be issued for such consideration expressed in dollars, not less than the par
value thereof, as shall be fixed from time to time by the Board of Directors.
Shares without par value may be issued for such consideration expressed in
dollars as may be fixed from time to time by the Board of Directors. Treasury
shares may be disposed of by the Corporation for such consideration expressed in
dollars as may be fixed from time to time by the Board of Directors. The
consideration for the issuance of shares may be paid, in whole or in part, in
money, in other property, tangible or intangible, or in labor or services
actually performed for the Corporation. Neither promissory notes nor future
services shall constitute payment or part payment for shares of the Corporation.
Section 6.05. Transfer of Capital Stock. Transfers of shares of stock
of the Corporation shall be made on the books of the Corporation upon surrender
of the certificate or certificates, properly endorsed or accompanied by proper
instruments of transfer, representing such shares, subject to the terms of any
agreements among the Corporation and shareholders.
Section 6.06. Registered Stockholders. Prior to due presentment for
registration or transfer of shares of stock, the Corporation may treat the
person registered on its books as the absolute owner of such shares of stock for
all purposes, and accordingly shall not be bound to recognize any legal,
equitable or other claim or interest in such shares on the part of any other
person, whether or not it shall have the express or other notice thereof, except
as otherwise expressly provided by statute; provided, however, that whenever any
transfer of shares shall be made for collateral security and not absolute, it
shall be so expressed in the entry of the transfer if, when the certificates are
presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
Section 6.07. Transfer Agents and Registrars. The Board of Directors
may, from time to time, appoint or remove one or more transfer agents or one or
more registrars of transfers of shares of stock of the Corporation, and it may
appoint the same person as both transfer agent and registrar. Upon any such
appointment being made all certificates representing shares of stock of the
Corporation, and it may appoint the same person as both transfer agent and
registrar. Upon any such appointment being made all certificates representing
shares of capital stock thereafter issued
12
<PAGE>
shall be countersigned by one of such transfer agents or one of such registrars
of transfers and shall not be valid unless so countersigned. If the same person
shall be both transfer agent and registrar, only one countersignature by such
person shall be required.
Section 6.08. Fixing or Determination of Record Date. The Board of
Directors may fix, in advance, a date as a record date for the determination of
the stockholders entitled to notice of, and to vote at, any meeting of
stockholders and any adjournment thereof, or entitled to receive payment of any
dividend or any other distribution, allotment of rights, or entitled to exercise
rights in respect of any change, conversion, or exchange of capital stock, or
entitled to give any consent for any purpose, or in order to make a
determination of stockholders for any other proper purpose; provided, however,
that such record date shall be a date not more than fifty days nor less than ten
days before the date of such meeting of stockholders or the date of such other
action. If no record date is so fixed, the record date for determining
stockholders entitled to notice of or to vote at any stockholders' meeting shall
be at the close of the business on the date next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held. The record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is expressed. The
record date for determining stockholders for any other purpose shall, unless
otherwise specified by the Board of Directors, be at the close of business on
the day on which the Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of such meeting,
provided, however that the Board of Directors may fix a new record date for the
adjourned meeting. Only such stockholders as shall be stockholders of record on
the record date so fixed shall be entitled to such notice of, and to vote at,
such meetings and any adjournments thereof, or to receive payment of such
dividend, or other distribution, or to receive such consent, as the case may be,
notwithstanding any transfer of any shares on the books of the Corporation after
any such record date.
Section 6.09. Lost or Destroyed Certificates. The Board of Directors
may direct that a new certificate or certificates of stock issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate or certificates to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, at its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or
13
<PAGE>
certificates, or his legal representative, to advertise the same in such manner
as it shall require and to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate or certificates alleged to have been lost,
stolen or destroyed.
ARTICLE VII
FINANCE
Section 7.01. Checks, Drafts, etc. All checks, drafts or order for the
payment of money shall be signed by one or more of officers or other persons as
may be designated by resolution of the Board of Directors.
Section 7.02. Fiscal Year. The fiscal year of the Corporation shall be
such as may from time to time be established by the Board of Directors.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 8.01. Exculpation. No Director or officer of the Corporation
shall be liable for the acts, defaults or neglects of any other Director of
officer, or for any loss sustained by the Corporation, unless the same has
resulted from his own willful misconduct, willful neglect or negligence.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Seal. The corporate seal of the Corporation shall be
circular in form and shall bear the name of the Corporation. The form of seal
shall be subject to alteration by the Board of Directors and the seal may be
used by causing it or a facsimile to be impressed or affixed or printed or
otherwise reproduced. Any Officer or Director of the Corporation shall have the
authority to affix the corporate seal of the Corporation to any document
requiring the same.
Section 9.02. Books and Records. The Board of Directors shall have
power from time to time to determine whether and to what extent, and at what
times and places and under what conditions and regulations, the accounts and
books of the Corporation (other than stock ledger), or any of them, shall be
open to the inspection of the stockholders. No stockholder shall have any right
to inspect any account, book or document of the Corporation except at a time
conferred by statute, unless authorized by a resolution of the stockholders or
the Board of Directors.
14
<PAGE>
Section 9.03. Waivers of Notice. Whenever any notice is required to be
given by law, or under the provisions of the Articles of Incorporation or of
these Bylaws, a waiver thereof in writing, signed by the person or person
entitled to such notice, whether before, at or after the time stated therein,
shall be deemed equivalent of notice.
Section 9.04. Amendments. The Board of Directors shall have the power
to make, alter or repeal these Bylaws, in whole or in part, at any time and from
time to time. These Bylaws may be altered or repealed, and new Bylaws made, by
the stockholders at any annual or special meeting if notice of the proposed
alteration or repeal or new Bylaws is included in the notice or waiver of notice
of such meeting.
15
CERTIFICATE OF MERGER
OF
CORONADO INDUSTRIES, INC. FKA FIRST LLOYD FUNDING, INC.
INTO
CORONADO INDUSTRIES, INC., A NEVADA CORPORATION
UNDER SECTION 907 OF THE BUSINESS CORPORATION LAW
We, the undersigned Edward A. Barth and Richard Hooper, being respectively
the President and Assistant Secretary of Coronado Industries, Inc. fka First
Lloyd Funding, Inc., and Edward A. Barth and Richard Hooper being respectively
the President and Assistant Secretary of Coronado Industries, Inc. (Nevada)
hereby certify:
1. (a) The name of each constituent corporation is as follows:
Coronado Industries, Inc. fka First Lloyd Funding, Inc., a New
York Corporation
Coronado Industries, Inc., a Nevada Corporation
(b) The name of the surviving corporation is Coronado Industries,
Inc.
2. As to each constituent corporation, the designation and number of
outstanding shares of each class and series and the voting rights thereof are as
follows:
<TABLE>
<CAPTION>
Name of Corporation Designation and Number Class or Series of Shares Shares Entitled to Vote as
------------------- ---------------------- ------------------------- --------------------------
of Shares in Each Class or Entitled to Vote a Class or Series
-------------------------- ---------------- -----------------
Series Outstanding
------------------
<S> <C> <C> <C>
Coronado Industries, Inc. 385,115* Common 385,115
fka First Lloyd Funding,
Inc.
Coronado Industries, Inc. -0- Common -0-**
</TABLE>
* Shares reflect a five-for-one consolidation pursuant to shareholder approval
at a special meeting of the shareholders held on August 30, 1996.
** Corporation incorporated September 6, 1996 and no subscription of shares has
been offered.
<PAGE>
3. The merger was adopted by each constituent New York domestic
corporation in the following manner:
(a) As to Coronado Industries, Inc. fka First Lloyd Funding, Inc. by
the affirmative vote of at least two-thirds of the issued and
outstanding shares entitled to vote thereon.
4. The merger is permitted by the laws of the jurisdiction of each
constituent foreign corporation and is in compliance therewith. Each constituent
foreign corporation has complied as follows:
Coronado Industries, Inc. (Nevada) has complied with the applicable
provisions of the law of the State of Nevada under which it is
incorporated, and this merger is permitted by such laws.
5. The surviving corporation is to be Coronado Industries, Inc., a
corporation of the State of Nevada, incorporated on the 9th day of September,
1996, said corporation is not authorized to do business in New York and shall
not do business in the State of New York unless or until such time as an
application for authority shall have been filed by the Department of State.
6. The date when the Certificate of Incorporation of First Lloyd Funding,
Inc. (nka Coronado Industries, Inc.) was filed by the Department of State was
the 22nd day of December, 1989.
7. Coronado Industries, Inc. (Nevada) agrees that it may be served with
process in the State of New York in any action or special proceeding for the
enforcement of any liability or obligation of any constituent corporation,
previously amenable to suit in the State of New York, and for the enforcement
under the Business Corporation Law, of the right of shareholders of any
constituent domestic corporation to receive payment for their shares against the
surviving corporation; and it designates the Secretary of State of New York as
its agent upon whom process may be served in the manner set forth in paragraph
(b) of section 306 of the Business Corporation Law, in any action or special
proceeding. The post office address to which the Secretary of State shall mail a
copy of any process against it serve upon him is 4264 Strausser Street, N.W.,
North Canton, Ohio 44720. Such
<PAGE>
post office address shall supersede any prior address designated as the address
to which process shall be mailed.
8. Coronado Industries, Inc. (Nevada) agrees that, subject to the
provision of Section 623 of the Business Corporation Law, it will promptly pay
to the shareholders of each constituent New York corporation the amount, if any,
to which they shall be entitled under the provisions of the Business Corporation
Law, relating to the right of shareholders to receive payment for their shares.
9. The merger shall be effective on the date upon which the Certificate
of Merger is filed by the Department of state.
IN WITNESS WHEREOF, we have signed this certificate on the 9th day of
October, 1996 and we affirm the statements contained therein as true under
penalties of perjury.
CORONADO INDUSTRIES, INC. FKA FIRST
LLOYD FUNDING, INC.
By: /s/ Edward A. Barth
-------------------------------------
Edward A. Barth, President
By: /s/ Richard Hooper
-------------------------------------
Richard Hooper, Assistant Secretary
CORONADO INDUSTRIES, INC. (NEVADA)
By: /s/ Edward A. Barth
-------------------------------------
Edward A. Barth, President
By: /s/ Richard Hooper
-------------------------------------
Richard Hooper, Assistant Secretary
- --------------------------------------------------------------------------------
CORONADO INDUSTRIES, INC.
PLACEMENT AGENT WARRANT AGREEMENT
For the Issuance of Up to
800,000 Common Stock Purchase Warrants
- --------------------------------------------------------------------------------
<PAGE>
PLACEMENT AGENT WARRANT AGREEMENT
THIS PLACEMENT AGENT WARRANT AGREEMENT (the "AGREEMENT") is made
effective as of the 18th day of March, 1998, among CORONADO INDUSTRIES, INC., a
Nevada corporation (the "COMPANY"), and Fox & COMPANY INVESTMENTS, INC.
(the "PLACEMENT AGENT").
RECITALS:
A. The Company has entered into a letter agreement dated effective
February 23, 1998 (the "PLACEMENT AGREEMENT") with the Placement Agent pursuant
to which the Placement Agent has agreed to assist the Company in the placement
of up to 1,600,000 shares of Company Common Stock subject to the terms of the
Placement Agreement (the "OFFERING").
B. Under the terms of the Placement Agreement, the Company has agreed
to issue the Placement Agent or its assignee up to 800,000 Placement Agent
Warrants (the "PLACEMENT AGENT WARRANTS") as additional compensation under the
Offering.
C. Each Placement Agent Warrant entitles the holder to purchase one
share of the Company's Common Stock at any time commencing six months after the
issuance thereof and through December 1, 2000.
D. The Company desires to provide for the form and provisions of the
Placement Agent Warrants, the terms upon which the Placement Agent Warrants
shall be issued and exercised, and the respective rights, limitation of rights,
privileges and immunities of the Company, and the registered holders of the
Placement Agent Warrants.
E. All acts and things necessary to make the Placement Agent Warrants,
when executed and delivered on behalf of the Company as provided in this
Agreement, the valid, binding and legal obligations of the Company, and to
authorize the execution and delivery of this Agreement, have been done and
performed.
AGREEMENT:
Now, THEREFORE, it is hereby agreed as follows:
SECTION 1
ISSUE OF PLACEMENT AGENT WARRANTS
1.1 ISSUANCE OF DEFINITIVE PLACEMENT AGENT WARRANTS. On the closing
under the Placement Agreement (the "WARRANT DATE"), the Company will issue
certificates, in substantially the form attached as Exhibit A hereto ("WARRANT
CERTIFICATES"), which are exchangeable for shares of the Company's common stock
("COMMON STOCK') only as provided in Article 2 hereof and not after December 1,
2000. Each Placement Agent Warrant evidences the right of the
<PAGE>
registered holder thereof, subject to the terms and conditions hereof, to
subscribe for one share of Common Stock of the Company.
1.2 EXECUTION AND DELIVERY OF PLACEMENT AGENT WARRANTS. Each Warrant
Certificate shall be dated as of the Warrant Date and shall be signed on behalf
of the Company by the facsimile or manual signature of the President and
Secretary. The Company may adopt and use the facsimile or manual signature of
any person who is such an officer of the Company at the time of the execution of
any Warrant Certificate, irrespective of the date as of which the same is
executed, or of any person now or hereafter holding such office, notwithstanding
the fact that at the time the Warrant Certificate is issued such person has
ceased to be an officer of the Company. No Placement Agent Warrant shall be
valid unless it shall have been signed and delivered as provided in this Section
1.2.
SECTION 2
DURATION, EXERCISE AND REDEMPTION OF PLACEMENT AGENT WARRANTS
2.1 DURATION OF PLACEMENT AGENT WARRANTS AND TERMS OF EXERCISE. Each
Placement Agent Warrant entitles the holder to purchase one share of Common
Stock or equivalent security of any successor to the Company at a price of $2.00
per share if exercised on or before December 1, 1998 and $2.50 per share
thereafter (the "PURCHASE PRICE"), subject to adjustment as provided herein, for
a term, commencing on the day following the one year anniversary of the Warrant
Date and ending December 1, 2000 (the "EXERCISE PERIOD"). The foregoing
notwithstanding, if notice has been given as provided in Section 4.1 in
connection with the liquidation, dissolution or winding up of the Company, the
right to exercise Placement Agent Warrants shall expire at the close of business
on the third full business day before the date specified in such notice as the
record date for determining registered holders entitled to receive any
distribution upon such liquidation, dissolution or winding up.
2.2 EXERCISE OF PLACEMENT AGENT WARRANTS. Placement Agent Warrants may
be exercised by surrendering, at the office of the Company, the Warrant
Certificate evidencing such Placement Agent Warrants, together with a
subscription in the form set forth on the reverse side of the Warrant
Certificate, duly executed, and accompanied by the tender, in U.S. dollars, of
either federal funds or a certified check or bank cashier's check, payable to
the order of the Company for the applicable Purchase Price. The Placement Agent
Warrants may be exercised from time to time and at any time during the Exercise
Period, in minimum denominations of 100. As soon as practicable after any
Placement Agent Warrants have been so exercised, the Company shall cause to be
issued and delivered to the holder, or upon the order of the registered holder
of such Placement Agent Warrants, in such name or names as may be directed by
the holder, a certificate or certificates for the number of full shares of
Common Stock to which the holder is entitled, and if such Warrant Certificate
shall not have been exercised in full, a new Warrant Certificate for the number
of Placement Agent Warrants as to which such Warrant Certificate shall not have
been exercised. All Warrant Certificates so surrendered shall be delivered to
and cancelled by the Company.
2
<PAGE>
2.3 COMMON STOCK ISSUED UPON EXERCISE OF PLACEMENT AGENT WARRANTS. All
shares of Common Stock issued upon the exercise of Placement Agent Warrants
shall be duly authorized, validly issued and outstanding, fully-paid and
nonassessable. Fractional shares of Common Stock will not be issued upon
exercise of a Placement Agent Warrant. With respect to any fraction of a share
called for upon any such exercise hereof, the Company shall pay to the holder an
amount in cash equal to such fraction multiplied by the "CURRENT MARKET PRICE
PER SHARE," which on any date shall be determined as follows:
(a) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on any such exchange, the
Current Market Price Per Share shall be the average of the daily closing prices
for the 30 consecutive trading days commencing 35 trading days before such date.
If no sale is made on any trading day, the closing price shall be deemed to be
the average of the closing bid and asked prices for such day on such exchange;
or
(b) If the Common Stock is not listed or admitted to unlisted
trading privileges on any exchange, the Current Market Price Per Share shall be
the avenge of the 30 consecutive reported sale price (or prices, if applicable)
or the mean of the last reported bid and asked prices reported by the National
Association of Securities Dealers Automated Quotations System ("NASDAQ") or, if
not so quoted on NASDAQ, as quoted by the National Quotations Bureau, Inc., for
the 30 consecutive trading days commencing 35 days before such date; or
(c) If the Common Stock is not so listed or admitted to
unlisted trading privileges and prices are not reported on NASDAQ or the
National Quotations Bureau, Inc., the Current Market Price Per Share shall be
the fair market value of the Common Stock as determined by the Board of
Directors of the Company in good faith, whose determination shall be conclusive.
2.4 RECORD DATE OF SHARES. Irrespective of the date of issue and
delivery of certificates for any Common Stock issuable upon the exercise of
Placement Agent Warrants, each person in whose name any such certificate is
issued shall be deemed to have become the holder of record of the shares
represented thereby on the date on which the Warrant Certificate surrendered in
connection with the subscription therefor was surrendered and payment of the
Purchase Price was tendered. No surrender of Warrant Certificates on any date
when the stock transfer books of the Company are closed, however, shall be
effective to constitute the person or persons entitled to receive shares upon
such surrender as the record holder of such shares on such date, but such person
or persons shall be constituted the record holder or holders of such shares at
the close of business on the next succeeding date on which the stock transfer
books are opened. Except as otherwise provided in Section 3.2, each person
holding any shares received upon exercise of Placement Agent Warrants shall be
entitled to receive only dividends or distributions payable to holders of record
on or after the date on which such person shall be deemed to have become the
holder of record of such shares.
2.5 REDEMPTION OF PLACEMENT AGENT WARRANTS. The Company may not redeem
the Warrants.
3
<PAGE>
SECTION 3
ADJUSTMENT OF PURCHASE PRICE,
NUMBER OF SHARES OR NUMBER OF PLACEMENT AGENT WARRANTS
3.1 GENERAL. The Purchase Price and the number of shares of Common
Stock covered by each Placement Agent Warrant and the number of Placement Agent
Warrants outstanding are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Article 3.
3.2 STOCK DIVIDENDS, STOCK SPLITS, COMBINATIONS, RECLASSIFICATION,
ETC. In case the Company shall at any time after the date of this Agreement (a)
declare a dividend on the Common Stock payable in shares of Common Stock, (b)
subdivide the outstanding Common Stock into a larger number of shares, (c)
combine the outstanding Common Stock into a smaller number of shares, or (d)
issue any shares of its capital stock in connection with a reclassification of
the Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation), the
Purchase Price in effect at the time of the record date for such dividend or the
effective date of such subdivision, combination or reclassification, and/or the
number and kind of shares of stock issuable on such date shall be
proportionately adjusted so that the holder of any Placement Agent Warrant
exercised after such time shall be entitled, at no additional expense, to
receive the aggregate number and kind of shares of stock and Placement Agent
Warrants which, if such Placement Agent Warrant had been exercised immediately
prior to such date, such holder would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur.
3.3 DISTRIBUTION OF ASSETS. If at any time after the date hereof the
Company shall make any distribution of its assets upon or with respect to its
Common Stock, as a liquidating or partial liquidating dividend (other than upon
a liquidation, dissolution or winding up of the Company as provided for in
Section 4.1, or other than as a dividend payable out of earnings or any surplus
legally available for dividends under the laws of Nevada), each registered
holder of any Placement Agent Warrant then outstanding shall, upon the exercise
of such Placement Agent Warrant after the record date for such distribution or,
in the absence of a record date, after the date of such distribution, receive in
addition to the shares of Common Stock to which the holder would otherwise be
entitled hereunder, such assets (or, at the option of the Company, a sum equal
to the value thereof at the time of the distribution as determined by its Board
of Directors in its sole discretion) which would have been distributed to such
registered holder if the holder had exercised its Placement Agent Warrants
immediately prior to the record date for such distribution or, in the absence of
a record date, immediately prior to the date of such distribution.
3.4 CONSOLIDATION, MERGER AND SALE OF ASSETS. If, prior to the end of
the Exercise Period, the Company shall at any time consolidate with or merge
into another corporation, the
4
<PAGE>
holder of any Placement Agent Warrant will thereafter receive, upon exercise
thereof, in lieu of the shares of Common Stock of the Company immediately
theretofore issuable upon exercise of the rights then represented by the
Placement Agent Warrants, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of the Common Stock of the Company equal to the number of shares of such
Common Stock immediately theretofore issuable upon exercise of the Placement
Agent Warrants, had such consolidation or merger not taken place. The Company
shall take such steps in connection with such consolidation or merger as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to any securities or property
thereafter deliverable upon the exercise of the Placement Agent Warrants. The
Company or the successor corporation, as the case may be, shall execute and
deliver to the Placement Agent a supplemental agreement so providing. The
provisions of this Section 3.4 shall similarly apply to successive mergers or
consolidations. A sale of all or substantially all of the assets of the Company
for a consideration (apart from the assumption of obligations) consisting
primarily of securities, shall be deemed a consolidation or merger for the
foregoing purposes.
3.5 DIVIDENDS IN CONVERTIBLE SECURITIES, OPTIONS, RIGHTS OR PLACEMENT
AGENT WARRANTS. In case the Company shall issue stock, securities, rights,
options, convertible securities or warrants to all holders of the Common Stock
entitling such holders to subscribe for or purchase Common Stock or securities
convertible into Common Stock, each registered holder of any Placement Agent
Warrant then outstanding shall, upon the exercise of such Placement Agent
Warrant after the record date for such distribution or, in the absence of a
record date, after the date of such distribution, receive in addition to the
shares of Common Stock to which the holder would otherwise be entitled
hereunder, such stock, securities, rights, options, convertible securities or
warrants which would have been distributed to such registered holder if the
holder had exercised its Placement Agent Warrants immediately prior to the
record date for such distribution or, in the absence of a record date,
immediately prior to the date of such distribution.
3.6 FORM OF PLACEMENT AGENT WARRANT. The form of Placement Agent
Warrant need not be changed because of any change in the Purchase Price or the
number of shares of Common Stock or Placement Agent Warrants issuable upon
exercise of the Placement Agent Warrants pursuant to this Article 3 and
Placement Agent Warrants issued after such change may state the same terms with
respect to the Purchase Price and number of shares of Common Stock and Placement
Agent Warrants issuable thereunder as stated in the Placement Agent Warrants
initially issued pursuant to this Agreement. The Company may at any time, in its
sole discretion, make any change in the form of Placement Agent Warrant that the
Company may deem appropriate and that does not affect the substance thereof in a
manner inconsistent with this Agreement. Any Placement Agent Warrant thereafter
issued or countersigned, whether in exchange or substitution for an outstanding
Placement Agent Warrant or otherwise, may be in the form so changed.
3.7 DIVIDENDS. No registered holder of any Placement Agent Warrant
shall, upon the exercise thereof, be entitled to any dividend that may have
accrued or which may previously
5
<PAGE>
have been paid with respect to shares of stock issuable upon exercise of the
Placement Agent Warrants except as specifically provided in this Section 3.
3.8 CERTIFICATION OF ADJUSTED PURCHASE PRICE AND NUMBER OF SHARES AND
PLACEMENT AGENT WARRANTS ISSUABLE. Whenever the Purchase Price and the number of
shares of Common Stock and Placement Agent Warrants issuable upon the exercise
of each Placement Agent Warrant are adjusted as provided in this Section 3, the
Company shall (a) promptly prepare an Officer's Certificate setting forth the
Purchase Price as so adjusted, the number of shares of Common Stock and
Placement Agent Warrants issuable upon the exercise of each Placement Agent
Warrant as so adjusted and/or the number of Placement Agent Warrants as so
adjusted and a brief statement of the facts accounting for such adjustment, (b)
promptly file with the Placement Agent and with each transfer agent for the
Common Stock a copy of such certificate and (c) mail a brief summary thereof to
each registered holder of Placement Agent Warrants in accordance with Section
8.1. The term "OFFICER'S CERTIFICATE" in this Agreement shall mean a certificate
or instrument signed by one of the following: the Chief Executive Officer, the
President, a Vice President, the Treasurer or the Secretary of the Company.
SECTION 4
OTHER PROVISIONS FOR PROTECTION OF PLACEMENT AGENT WARRANT HOLDERS
4.1 LIQUIDATION OF THE COMPANY. In the event of the liquidation,
dissolution or winding up of the Company, a notice thereof shall be filed by the
Company with the Placement Agent and each transfer agent for the Common Stock
(if the transfer agent is a person other than the Company) at least 30 days
before the record date (which date shall be specified in such notice) for
determining holders of the Common Stock entitled to receive any distribution
upon such liquidation, dissolution or winding up. Such notice shall also specify
the date on which the right to exercise Placement Agent Warrants shall expire,
as provided in Section 2.1. A copy of such notice shall be published once in an
Authorized Newspaper in Phoenix, Arizona, not more than 30 nor less than 20 days
from such record date. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of the liquidation, dissolution or winding
up, or of any distribution in connection therewith. The term "AUTHORIZED
NEWSPAPER" when used with reference to the publication of a notice provided for
in this Agreement shall mean a newspaper printed in the English language and
customarily published on each business day (whether or not published on
Saturdays, Sundays or legal holidays) and of general circulation.
4.2 RESERVATION OF SHARES. The Company shall reserve and keep available
out of its authorized but unissued Common Stock such number thereof as shall
from time to time be sufficient to permit the exercise of all outstanding
Placement Agent Warrants. If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient for such purposes, the Company
will take such corporate action as may, in the opinion of its counsel be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
6
<PAGE>
4.3 NO RIGHTS AS STOCKHOLDER CONFERRED BY PLACEMENT AGENT WARRANTS.
THE Placement Agent Warrants shall not entitle the registered holders thereof to
any of the rights, either at law or in equity, of a stockholder of the Company.
4.4 LOST, STOLEN, MUTILATED OR DESTROYED PLACEMENT AGENT WARRANTS. If
any Placement Agent Warrant becomes lost stolen, mutilated or destroyed, the
Company may, on such terms as to indemnify or otherwise as may be reasonably
required to save it harmless, issue a new Placement Agent Warrant of the
denomination, tenor and date as the Placement Agent Warrant so lost stolen
mutilated or destroyed. Any such new Placement Agent Warrant shall constitute an
original contractual obligation of the Company whether or not the allegedly
lost, stolen, mutilated or destroyed Placement Agent Warrant shall be at any
time enforceable by any person.
4.5 ENFORCEMENT OF PLACEMENT AGENT WARRANT RIGHTS. All rights of
action in respect of this Agreement are vested in the respective registered
holders of the Placement Agent Warrants. Any registered holder of any Placement
Agent Warrant may in its own behalf and for its own benefit enforce, and may
institute and maintain any suit action or proceeding against the Company
suitable to enforce, or otherwise in respect of, the holder's right to exercise
its Placement Agent Warrant for the purchase of stock in the manner provided in
the Placement Agent Warrant and in this Agreement.
SECTION 5
REGISTRATION OF PLACEMENT AGENT WARRANTS
5.1 PIGGYBACK REGISTRATION OF COMMON STOCK.
(a) If the Company proposes to register any of its Common
Stock under the Securities Act of 1933, as amended ("SECURITIES ACT"), on any
registration statement, whether OR not for its own account (other than by a
registration statement on Form 5-8 or other form which does not include
substantially the same information as would be required in a form for the
general registration of securities, would not be available for the Common Stock
or relates to any employee benefit plan or reorganization of the Company), it
shall as expeditiously as possible give written notice to all registered holders
of Placement Agent Warrants of such holders' "PIGGYBACK REGISTRATION RIGHTS" as
set forth in this Section 5.1. Upon the written request (which request shall, if
applicable, specify that a holder shall be required to exercise the Placement
Agent Warrants and the number of shares of Common Stock intended to be sold by
such holder after exercise) of any holder made within 20 days after receipt of
any such notice, the Company shall (subject to the additional terms of this
Agreement) include in the registration statement the Placement Agent Warrants
and/or the shares of Common Stock issuable upon exercise of such warrants (
"REGISTRABLE SECURITIES") which the Company has been so requested to register by
the holder thereof and the Company shall keep such registration statement in
effect and maintain compliance with each federal and state law or regulation for
the period necessary for such holder to effect the proposed sale or other
disposition (but in no event for a period greater than 120 days).
7
<PAGE>
(b) If, at any time after giving written notice of its
intention to register Registrable Securities in a Piggyback Registration but
prior to the effective date of the related registration statement, the Company
shall determine for any reason not to register any Common Stock, the Company
shall give notice of such determination to each holder and, thereupon, shall be
relieved of its obligation to register any Registrable Securities in connection
with such Piggyback Registration (and shall not convert any of the shares into
shares of Common Stock pursuant to Section 2, if applicable). All best efforts
obligations of the Company shall cease if the Company determines to terminate
prior to such effective date any registration pursuant to this Section 5.1.
(c) If a Piggyback Registration involves an offering by or
through underwriters, all holders requesting to have their Registrable
Securities included in the Company's registration statement must sell their
Registrable Securities to the underwriters selected by the Company on the same
terms and conditions as apply to other selling shareholders, and any holder
requesting to have its Registrable Securities included in such registration
statement may elect in writing, not later than three business days prior to the
effectiveness of the registration statement filed in connection with such
registration, not to have its Registrable Securities so included in connection
with such registration.
(d) If a Piggyback Registration involves an offering by or
through underwriters, the Company, except as otherwise provided herein, shall
not be required to include Registrable Securities therein if and to the extent
the underwriter managing the offering reasonably believes in good faith and
advises each holder requesting to have Registrable Securities included in the
Company's registration statement that such inclusion would materially adversely
affect such offering, PROVIDED that if other selling shareholders who are
employees, officers, directors or other affiliates of the Company have requested
registration of securities in the proposed offering, the Company will reduce or
eliminate such other selling shareholders' securities before any reduction or
elimination of Registrable Securities held by holders of Placement Agent
Warrants, and any such reduction or elimination (after taking into account the
effect of preceding clause) shall be PRO RATA to all other holders of the
securities of the Company exercising "PIGGYBACK REGISTRATION RIGHTS" similar to
those set forth herein in proportion to the respective number of shares of
Registrable Securities they have requested to be registered.
5.2 DEMAND REGISTRATION.
(a) At any time after the 12 month anniversary of the final
Warrant Date and provided the Registrable Securities, upon exercise, are not
otherwise qualified for sale under an exemption available under the Securities
Act, holders of an aggregate of 50% of all outstanding Placement Agent Warrants
may exercise their "DEMAND REGISTRATION RIGHTS" as described herein for
registration covering the public sale of Registrable Securities hereunder. As
soon as practicable thereafter, the Company shall use its best efforts to file a
registration statement with respect to the Registrable Securities which holders
have requested to be registered and obtain the effectiveness thereof, and to
take all other action necessary under any federal or state law or regulation to
permit such Registrable Securities to be sold or otherwise disposed of, and the
8
<PAGE>
Company shall maintain such compliance with each such federal and state law and
regulation for the period necessary for such holders to effect the proposed sale
or other disposition; PROVIDED THAT the Company shall have the right to delay
such registration under certain circumstances for up to 90 days during any 12
month period. The Company shall be required to effect one registration or
qualification pursuant to this Section 5.2, and shall not be obligated to effect
a registration during the six month period commencing with the date of any other
registration under the Securities Act in which Registrable Securities were
registered.
(b) The managing underwriter and the co-manager (if any), and
the independent price required under the rules of the NASD (if any), of the
offering pursuant to any registration under this Section 5.2 shall be selected
and obtained by the Company.
(c) The Company may delay any registration under this Section
5.2 for not more than 90 days if management determines in good faith that such
delay is necessary to consummate a pending transaction, If the registration is
delayed, management will notify the holders of Placement Agent Warrants within
three weeks after receipt of notice specified in Section 5.2(a) of the delay but
shall not be required to provide any information to any holder regarding the
existence or the nature of any pending transactions.
5.3 CONDITIONS RELATING TO REGISTRATION AND OFFER OF REGISTRABLE
SECURITIES
(a) Subject to paragraph (b) of this Section 5.3, the
registration rights of the holders pursuant to this Agreement and the ability to
offer and sell Registrable Securities pursuant to a registration statement are
subject to the following conditions and limitations, and each holder agrees with
the Company that:
(i) If the Company determines in its good faith judgment
that the filing of a registration statement under Section 5.1 or
Section 5.2 hereof or the use of any prospectus would require the
disclosure of important information which the Company has a bona fide
business purpose for preserving as confidential or the disclosure of
which would impede the Company's ability to consummate a significant
transaction, upon written notice of such determination by the Company,
the rights of the holders to offer, sell or distribute any securities
pursuant to the registration statement or to require the Company to
take action with respect to the registration or sale of any securities
pursuant to the registration statement (including any action
contemplated by Section 5.4 hereof) will for up to 60 days in any 12
month period be suspended until the date upon which the Company
notifies the holders in writing that suspension of such rights for the
grounds set forth in this Section 5.3(a)(i) is no longer necessary.
(ii) If all reports required to be filed by the Company
pursuant to the Securities Exchange Act of 1934, as amended ("EXCHANGE
ACT"), have not been filed by the required date without regard to any
extension, or if consummation of any business combination by the
Company has occurred or is probable for purposes of Rule 3-05 or
Article 11 of Regulation S-X under the Securities Act, upon written
notice thereof by the
9
<PAGE>
Company to the holders, the rights of the holders to offer, sell or
distribute any securities pursuant to the registration statement or to
require the Company to take action with respect to the registration or
sale of any securities pursuant to the registration statement
(including any action contemplated by Section 5.4 hereof) will for up
to 60 days in any 12 month period be suspended until the date upon
which the Company has filed such reports or obtained the financial
information required by Rule 3-05 or Article 11 of Regulation S-X to be
included in the registration statement.
(iii) In the case of the registration of any
underwritten primary equity offering initiated by the Company (other
than any registration by the Company on Form S-8, or a successor or
substantially similar form, of (A) an employee stock option, stock
purchase or compensation plan or of securities issued or issuable
pursuant to any such plan, or (B) a dividend reinvestment plan), each
holder agrees, if requested in writing by the managing underwriter or
underwriters administering such offering, not to effect any offer,
sale or distribution of securities (or any option or right to acquire
securities) during the period commencing on the 10th day prior to the
effective date of the registration statement covering such
underwritten primary equity offering and ending on the date specified
by such managing underwriter in such written request to such holder,
which period may be of a duration of 90 days or more.
(iv) In the event that the Company plans to repurchase
or bid for securities of the Company in the open market, on a private
solicited basis or otherwise, and the Company determines, in its
reasonable good faith judgment and based upon the advice of counsel to
the Company (which counsel shall be experienced in securities laws
matters), that any such repurchase or bid may not, under Rule lOb-6
under the Exchange Act, or any successor or similar rule ("RULE
10b-6"), be commenced or consummated due to the existence or the
possible commencement of a "DISTRIBUTION" (within the meaning of Rule
lOb-6) as a result of any offers or sales by holders of any
Registrable Securities, as the case may be, under any registration
statement filed pursuant to this Agreement, the Company shall be
entitled, for a period of 90 days or more, to request that holders of
Registrable Securities, to suspend or postpone such distribution
pursuant to such registration statement (a "10b-6 ELECTION"). The
Company shall, as promptly as practicable, give such holder or holders
written notice of such 10b-6 Election, stating the basis for the
Company's determination. As promptly as practicable following the
determination by the Company that the holders or holders may commence
or recommence their distribution pursuant to the registration
statement without causing the Company to be in violation of Rule
l0b-6, the Company shall give such holder or holders written notice of
such determination.
(b) Notwithstanding the provisions of Section 5.3(a) above,
the aggregate number of days (whether or not consecutive) during which the
Company may delay the effectiveness of a registration statement or prevent
offerings, sales or distribution by the holders thereunder pursuant to Section
5.3(a) shall in no event exceed 180 days during any 12-month period.
10
<PAGE>
(c) The Company may require each selling holder of
REGISTRABLE Securities, as a condition to the inclusion of the Registrable
Securities of such selling holder in the registration statement or in any
offering thereunder, as the case may be, to furnish to the Company such
information regarding the holder and the distribution of such securities as the
Company may from time to time reasonably request (which request shall be
confirmed in writing if requested by the Company) in order to comply with
applicable law and such other information as may be legally required in
connection with such registration or offering, and the holder shall promptly
provide such information and a written consent to the inclusion of such
information in the registration statement or any prospectus or supplement
thereto; PROVIDED that the failure of any holder to provide such information to
the Company shall not in any way affect the obligations of the Company hereunder
with respect to any other holder.
5.4 REGISTRATION PROCEDURES. In connection with the obligations of the
Company with respect to the registration statement pursuant to Section 5.1 or
Section 5.2, hereof and subject to Section 5.3 hereof, the Company shall:
(a) (i) prepare and file with the Commission a registration
statement on the appropriate form under the Securities Act, (A) which form shall
be selected by the Company and shall be available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distribution by the selling holders thereof (PROVIDED that the Company shall not
be required to use any form other than Form S-1, S-2 or S-3 or any successor
form and shall not be required to file more than one registration statement with
the Commission) and (B) which registration statement shall comply as to form in
all material respects with the requirements of the applicable form and include
or incorporate by reference all financial statements required by the Commission
to be so included or incorporated by reference, FURTHER PROVIDED that subject to
the registration statement and prospectus being in compliance with the
requirements of the Securities Act and the Exchange Act (including all rules and
regulations of the Commission thereunder), the Company has the sole discretion
to determine the form, substance and presentation of any financial or other
information included in any registration statement or prospectus, and whether
such information should be included in such registration statement or
prospectus; and (ii) use its reasonable best efforts to cause such registration
statement to become effective and remain effective in accordance with Section
5.1 and Section 5.2 hereof;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the registration statement as may be necessary to
keep such registration statement effective for the applicable period; and cause
each prospectus to be supplemented by any required prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the Securities Act;
(c) in the event that any federal law or regulation binding
on the Company and adopted after the date hereof so requires (and would also so
require if the Registrable Securities were being offered in a primary offering
by the Company rather than by the holders), use its reasonable best efforts to
cause such Registrable Securities to be registered with or approved by
11
<PAGE>
such other federal governmental agencies or authorities in the United States, if
any, as may be required by virtue of the business and operations of the Company
to enable the selling holders to consummate the disposition of such Registrable
Securities;
(d) furnish to each holder of Registrable Securities and to
each managing underwriter of an underwritten offering of Registrable Securities
pursuant to Section 4(1) of the Securities Act, if any, without charge, as many
copies of each prospectus, including each preliminary prospectus, and any
amendment or supplement thereto as such holder or underwriter may reasonably
request, in order to facilitate the public sale or other disposition of the
Registrable Securities;
(e) use its reasonable best efforts to register or qualify
the Registrable Securities under all applicable state securities or "BLUE SKY"
laws of such jurisdictions as any holder of Registrable Securities of such class
covered by the registration statement shall, on 20 days prior written notice,
reasonably request in writing. Such notice to be sent at any time prior to the
applicable registration statement being declared effective by the Commission.
The Company shall maintain such registration or qualification in effect during
the applicable period provided in Section 5.1 or Section 5.2 hereof; PROVIDED,
HOWEVER, that the Company shall not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 4(e); (ii) subject itself to taxation in any such
jurisdiction; (iii) make any change to its Articles or Incorporation or Bylaws;
or (iv) become subject to general service of process in any jurisdiction where
it is not then so subject;
(f) notify each holder of Registrable Securities as promptly
as practicable after becoming aware thereof and (if requested by any such
holder) confirm such notice in writing (i) when the registration statement has
become effective and when any post-effective amendments and supplements thereto
become effective; (ii) of any request by the Commission or any state securities
authority for amendments and supplements to the registration statement and any
prospectus or for additional information relating to the Registrable Securities
or the registration or qualification thereof after the registration statement
has become effective; (iii) of the issuance by the Commission or any state
securities authority of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that purpose;
(iv) if the representations and warranties of the Company contained in any
underwriting agreement, securities sales agreement or other similar agreement,
if any, relating to the Registrable Securities cease to be true and correct in
any material respect prior to the closing date specified in such agreement
(PROVIDED such notice shall be given only to holders which are parties to the
agreements pursuant to which such representations and warranties are made), or
if the Company receives any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose; and (v) of the happening of any
event during the period (other than any suspension period referred to in Section
5.3(a)) during which the registration statement is required hereunder to be
effective as a result of which the registration statement or any prospectus
would contain an untrue statement of material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the
circumstances in which they were made, not misleading;
12
<PAGE>
(g) use its reasonable best efforts to obtain the withdrawal
of any order suspending the effectiveness of the registration statement or the
qualification of the Registrable Securities for sale in any jurisdiction as
promptly as practicable;
(h) furnish to each holder of Registrable Securities, without
charge, at least one conformed copy of the registration statement and any
post-effective amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested in writing);
(i) cooperate with the holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to the registration statement and not
bearing any restrictive legends; and enable such Registrable Securities to be in
such denominations and registered in such names as the selling holders may
reasonably request (in each case, PROVIDED such certificates are requested in
writing at least three business days prior to any delivery thereof);
(j) upon the occurrence of any event contemplated by Section
5 .4(f)(v) hereof, use its reasonable best efforts as promptly as practicable to
prepare and file with the Commission a supplement or post-effective amendment to
the registration statement or the related prospects or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities, such prospects will
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(k) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 under
the Securities Act;
(l) use its reasonable best efforts to (i) cause all
Registrable Securities to be listed or quoted on any securities exchange or
quotation system on which the Company's outstanding Common Stock is then listed
or quoted; and
(m) obtain a CUSIP number for all Registrable Securities not
later than the effective date of the registration statement.
Each holder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 5.4(f)(v) hereof, such
holder will forthwith discontinue disposition of Registrable Securities pursuant
to the registration statement covering such Registrable Securities until such
holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 5.4(j) hereof, or until it is advised in writing by the
13
<PAGE>
Company that the use of such prospectus may be resumed and, if so directed by
the Company, such holder will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such holder's possession,
of the prospectus covering such Registrable Securities current at the time of
receipt of such notice; PROVIDED, HOWEVER, that the Company shall use its
reasonable best efforts to promptly prepare and provide to the holders a
supplemented or amended prospectus contemplated by such Section 5.4(j) hereof.
In the event the Company shall give any such notice, the period during which
such registration statement shall be maintained effective shall be extended by
the number of days during the period from and including the date of the giving
of such notice pursuant to Section 5.4(f)(v) hereof to including the date when
each holder of Registrable Securities covered by such registration statement
shall have received the copies of the supplemented or amended prospectus
contemplated by Section 5.4(j) hereof.
5.5 REGISTRATION EXPENSES.
(a) The Company will bear all reasonable expenses incident to
the performance of or compliance with its obligations under this Agreement,
including, without limitations, all registration and filing fees, all fees and
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of one firm of counsel for the holders and any
underwriters in connection with blue sky qualifications of the Registrable
Securities), printing expenses, messenger and delivery expenses, internal
expenses (including, without limitation, all salaries and expenses of the
officers and employees of the Company performing legal or accounting duties),
and reasonable fees and disbursement of counsel for the Company and its
independent certified public accountants (including the reasonable expenses of
any special audit or comfort letters required by or incident to such
performance), securities acts liability insurance (if the company elects to
obtain such insurance), the reasonable fees and expenses of any special experts
retained by the Company in connection with such registration, reasonable fees
and expenses of any other persons retained by the Company and the fees and
expenses associated with any required filing with the National Association of
Securities Dealers, Inc. ("NASD") (all such expenses being herein called
"REGISTRATION EXPENSES"). Notwithstanding the foregoing, the Company is not
required to pay any fees or expenses of holders, underwriters, the holder's or
any underwriter's counsel (other than the blue sky counsel referred to above) or
accountant or any other advisers, including any transfer taxes, underwriting,
brokerage and other discounts and commissions and finders' and similar fees
payable in the respect of Registrable Securities.
(b) Each holder shall pay all costs and expenses incurred by
such holder (including all transfer taxes, underwriting, brokerage and other
discounts and commissions and finders' and similar fees payable in respect of
Registrable Securities). To the extent that any Registration Expenses are
incurred, assumed or paid by any holder or any placement or sales agent therefor
or underwriter thereof with the Company's prior written consent, the Company
shall reimburse such person for the full amount of the Registration Expenses so
incurred, assumed or paid within a reasonable time after receipt of a written
request therefor. Any Registration Expenses submitted by any holder, placement
or sales agent or underwriter or on
14
<PAGE>
behalf of any such person for payment by the Company shall be itemized in detail
and contain clear and accurate receipts of all expenditures made by such
parties.
5.6 INDEMNIFICATION; CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
holder and each "PERSON," if any, that controls such holder within the meaning
of Section 15 of the Securities Act for, from and against any and all loss,
liability, claim, damage and expense (including attorneys' fees) to the extent
resulting from any untrue statement or alleged untrue statement of a material
fact contained in any registration statement pursuant to which Registrable
Securities were registered under the Securities Act (or any amendment thereto),
including all documents incorporated therein by reference, or from the omission
or alleged omission therefrom of a material fact required to be stated therein
or necessary to make the statement therein not misleading or arising out of any
untrue statement or alleged untrue statement of a material fact contained in any
prospectus (or any amendment or supplement thereto), including all documents
incorporated therein by reference, or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except
insofar as any such misstatement or omission or alleged misstatement or omission
is made therein in reliance upon and in conformity with information furnished to
the Company by such holder in writing expressly for use in a registration
statement (or any amendment thereto) or any prospectus (or any amendment or
supplement thereto) relating to the Registrable Securities. As used in this
Section 5.6(a), the term "HOLDER" shall include its officers, directors and
agents.
(b) Each holder agrees to indemnify and hold harmless the
Company, its directors and officers and each "PERSON," if any, who controls the
Company within the meaning of Section 15 of the Securities Act to the same
extent as the foregoing indemnity from the Company to such holder, but only with
respect to information furnished in writing by such holder or on such holder's
behalf expressly for use in any registration statement (or any amendment
thereto) or any prospectus (or any amendment or supplement thereto) relating to
the Registrable Securities, or any amendment or supplement thereto; PROVIDED
that the obligations or any holder to indemnify the Company and the other
persons referred to above shall be limited to the proceeds received by such
holder from the sale of such Registrable Securities pursuant to such
registration statement.
(c) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against any person entitled to
indemnification hereunder, the indemnified party shall give prompt written
notice to the indemnifying party, and the indemnifying party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
the indemnified party, and shall assume the payment of all expenses in
connection with such defense. The indemnified party or any controlling person of
such indemnified party shall have the right to employ separate counsel in any
such action and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of the indemnified party or such
controlling person unless (i) the indemnifying party shall have agreed to pay
such fees and
15
<PAGE>
expenses; or (ii) the indemnifying party shall have failed to assume the defense
for such action or proceeding and to employ counsel reasonably satisfactory to
the indemnified party in any such action or proceeding; or (iii) the named
parties to any such action or proceeding (including any impleaded parties)
include both the indemnified party or such controlling person and the
indemnifying party, and such indemnified party or such controlling person shall
have been advised by counsel that counsel employed by the indemnifying party
would, under applicable professional standards, have a conflict in representing
both the indemnifying party and the indemnified party or such controlling
person, in which case, if such indemnified person or such controlling person
notifies the indemnifying party in writing that it elects to employ separate
counsel at the expense of the indemnifying party, the indemnifying party shall
not have the right to assume the defense of such action or proceeding of
separate but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, and
shall not be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (together with appropriate local counsel) at any time
for such indemnified party and such controlling persons, which firm shall be
designated, if the holders (or their controlling persons) are the indemnified
parties, in writing by the holders of a majority of the outstanding Registrable
Securities owned by holders who are then entitled to such indemnity in
connection with such action or proceeding and if the Company is the indemnified
party, by the Company. No party shall be liable for any settlement of any such
action or proceeding effected without its written consent (which consent shall
not be unreasonably withheld), but if settled with its written consent, or if
there is a final judgment for the plaintiff in any such action or proceeding,
the indemnifying party agrees to indemnify and hold harmless such indemnified
party and such controlling person from and against any loss or liability (to the
extent stated above) by reason of such settlement or judgment.
(d) (i) If the indemnification provided for in this Section
5.6 is unavailable to an indemnified party hereunder in respect of any losses,
claims, damages, liabilities or expenses, then each such indemnifying party' in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and expenses in such proportion as is appropriate to
reflect the relative fault of the indemnified party and the indemnifying party
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the indemnified party and the
indemnifying party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5.6(d) were determined by PRO
RATA allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, expenses, liabilities, or judgements referred to in the
16
<PAGE>
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 5.6(d), no
holder shall be required to contribute any amount in excess of the amount by
which the total price at which the Registrable Securities of such selling holder
were offered to the public pursuant to such registration statement exceeds the
amount of any damages which such selling holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person found guilty by a court of competent jurisdiction of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
found guilty by a court of competent jurisdiction of such fraudulent
misrepresentation.
(e) Neither the Company nor the holders shall have any
obligation under this Agreement (other than as set forth in this Section 5.6) to
provide the other with indemnification or contribution in respect of any losses,
claims, damages, liabilities or expenses referred to in this Section 5.6;
PROVIDED, HOWEVER, that the provisions of this Section 5.6 shall not relieve an
indemnifying party from liability which it may have to an indemnified party
other than with respect to the matters referred to in this Section 5.6.
5.7 COMMISSION FILINGS.
The Company covenants that it will file the reports required
to be filed by it under the Exchange Act and the rules and regulations adopted
by the Commission thereunder in a timely manner as determined by applicable
rules and interpretations under the Exchange Act. Upon the written request of
any holder of Registrable Securities, the Company will deliver to such holder a
written statement as to whether it has complied with such requirements.
SECTION 6
TRANSFER AND OWNERSHIP OF PLACEMENT AGENT WARRANTS
6.1 NEGOTIABILITY AND OWNERSHIP. Placement Agent Warrants issued
hereunder shall be registered and transferable only by transfer on the books of
the Company. Presentations may be made and notices and demands may be served at
the office of the Company. The foregoing notwithstanding, Placement Agent
Warrants shall not be transferable, except by operation of law, until after the
one year anniversary of the Warrant Date of any such Placement Agent Warrant.
6.2 PLACEMENT AGENT WARRANT REGISTER. The Company shall, cause to be
kept a register or registers in which, subject to such reasonable regulations as
the Company may prescribe, the Company shall register transfer of Placement
Agent Warrants as herein provided. Upon surrender for transfer of any Placement
Agent Warrant, the Company shall sign, authenticate and deliver in the name of
the transferee or transferees a new Warrant Certificate for a like amount of
Placement Agent Warrants.
17
<PAGE>
6.3 EXCHANGE OF PLACEMENT AGENT WARRANTS. On and after the Placement
Agent Warrant Date and prior to the end of the Exercise Period, Warrant
Certificates may be surrendered at the office of the Company for exchange, and,
upon cancellation thereof, there shall be issued and delivered in exchange
therefor, one or more new Warrant Certificates, as requested by the registered
holder of the cancelled Warrant Certificate, for the same aggregate number of
shares of Placement Agent Warrants evidenced by the Warrant Certificate so
cancelled. In case of any exchange pursuant to this Section 6 or a transfer of a
Warrant Certificate, the Company may make a charge for reimbursement of any
stamp or other tax or governmental charge required to be paid in connection
therewith, but no other charge shall be made to the Placement Agent Warrant
holder for any transfer or issue of new Warrant Certificate in case of any such
exchange.
6.4 RESTRICTIONS ON TRANSFERABILITY.
(a) The Placement Agent Warrants and the Common Stock
issuable upon exercise of a Placement Agent Warrant (the "EXERCISE SHARES")
shall not be transferable except upon the conditions hereinafter specified,
which conditions are intended to ensure compliance with the provisions of the
Securities Act and any applicable state securities laws, in respect of the
transfer of any Placement Agent Warrants or Exercise Shares.
(b) Each Warrant Certificate initially issued under this
Agreement and each Warrant Certificate issued in exchange therefor shall bear on
the face thereof a legend substantially as follows:
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY BE OFFERED OR SOLD ONLY IF REGISTERED
UNDER APPLICABLE SECURITIES LAWS OR IF AN EXEMPTION THEREFROM IS
AVAILABLE. THIS WARRANT AND THE SHARESOF COMMON STOCK ISSUABLE
UPON EXERCISE HEREOF ARE TRANSFERABLE ONLY UPON THE CONDITIONS
SPECIFIED IN THE WARRANT AGREEMENT REFERRED TO HEREIN. A COPY OF
THE WARRANT AGREEMENT WILL BE PROVIDED TO THE REGISTERED HOLDER
THEREOF UPON REQUEST TO THE COMPANY.
(c) Each certificate for Exercise Shares initially issued
upon the exercise of any Placement Agent Warrant and each certificate for shares
of Exercise Shares issued to a subsequent transferee of such certificate shall,
unless otherwise permitted by the provisions of Section 6.4(d), bear on the fact
thereof a legend substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY BE OFFERED OR SOLD ONLY IF REGISTERED UNDER APPLICABLE
SECURITIES LAW OR PURSUANT TO AN OPINION OF COUNSEL
18
<PAGE>
SATISFACTORY TO THE COMPANY STATING THAT SUCH REGISTRATION IS NOT
REQUIRED. THE TRANSFER OF SUCH SHARES IS SUBJECT TO CERTAIN
CONDITIONS. THE PROVISIONS OF WHICH WILL BE PROVIDED TO THE
REGISTERED HOLDER HEREOF UPON REQUEST BY THE COMPANY, AND NO
TRANSFER OF SUCH SHARES SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED.
(d) In the event that a registration statement covering any
Placement Agent Warrant or Exercise Shares shall become effective under the
Securities Act and under any applicable state securities laws or in the event
tat the Company shall receive an opinion of its counsel tat, in the opinion or
such counsel, such legend is not, or is no longer, necessary or required with
respect to such shares (including, without limitation, because of the
availability of the exemption afforded by Rule 144 of the general rules and
regulations of the Commission), the Company shall or shall instruct its transfer
agents and registrars to, remove such legend from the certificates evidencing
such Placement Agent Warrant or Exercise Shares or issue new certificates
without such legend in lieu thereof. Upon the written request of the holder of
any Placement Agent Warrants or Exercise Shares, the Company covenants and
agrees forthwith to request its counsel to render an opinion wit respect to the
matters covered by this paragraph and to bear all expenses in connection wit
such opinion of its counsel.
(e) The holder of each Placement Agent Warrant or any
Exercise Shares, by acceptance thereof, agrees to give prior written notice to
the Company of such holders intention to transfer such Placement Agent Warrant
or such Exercise Shares (or any portion thereof), describing briefly the manner
and circumstances of the proposed transfer, together with an opinion of counsel
to the holder to the effect tat the proposed transfer may be effected without
registration or qualification under any federal or state law. Unless the Company
shall have received an opinion from counsel to the Company (which opinion shall
be obtained by the Company not more than ten days after notice of a proposed
transfer) that the proposed transfer may not be effected without registration or
qualification under federal or state law, such holder shall be entitled to
transfer such Placement Agent Warrant or such Exercise Shares, all in accordance
wit the terms of the notice delivered by such holder to the Company. All fees
and expenses of counsel for the Company in connection wit the rendition or the
opinion provided for in this Section 6.4(e) shall be paid by the Company.
(f) If in the opinion of either counsel referred to in
Section 6.4(e) a proposed transfer of a Placement Agent Warrant or Exercise
Shares requested by the holder thereof may not be effected without registration
or qualification under applicable federal or state law, the Company shall
promptly give written notice to the holder who proposed to transfer the
Placement Agent Warrant or Exercise Shares (or any portion thereof) that the
holder shall not consummate the proposed transfer and the reasons therefor. No
Placement Agent Warrant or Exercise Shares (or any portion thereof) for which a
transfer has been proposed pursuant to Section 6.4(e) may be transferred in the
manner proposed if registration thereof under the Securities Act would be
required in the opinion of either counsel mentioned above.
19
<PAGE>
6.5 AGREEMENT OF PLACEMENT AGENT WARRANT HOLDERS. Every holder of a
Warrant Certificate, by accepting the same, consents and agrees with the Company
and wit all other Placement Agent Warrant holders that: (a) the Placement Agent
Warrants are transferrable only as permitted by Section 6. 1 above; (b) the
Placement Agent Warrants are transferable only on the registry books of the
Company as herein provided; and (c) the Company may deem and treat the person in
whose name the Warrant Certificate is registered as the absolute owner thereof
and of the Placement Agent Warrants evidenced thereby for all purposes
whatsoever, and the Company shall not be affected by any notice to the contrary,
whether such notice be in the form of notations on the Warrant Certificates or
otherwise.
SECTION 7
MODIFICATION
7.1 MODIFICATION OF AGREEMENT. The Placement Agent may, without the
consent or concurrence of the registered holders of the Placement Agent Warrants
by supplemental agreement or otherwise, concur with the Company in making any
changes or corrections in these presents. as to which it shall have been advised
by counsel (who may but need not also be counsel for the Company) that the same
are not prejudicial to the rights of the Placement Agent Warrant holders as
indicated by the general sense or intent of the original language and are
required for the purpose of curing or correcting the inconsistent provision or
clerical omission or mistake or manifest error herein or as otherwise provided
in Section 7.2 below.
7.2 CONSOLIDATION OF PLACEMENT AGENT WARRANT CLASSES.
(a) At any time and from time to time after the final Warrant
Date, the Company may consolidate the Placement Agent Warrants with any other
class of warrants of the Company outstanding provided at the time of such
consolidation the right, limitation of rights, privilege and immunities of the
holders of Placement Agent Warrants or set forth in this Agreement are not
altered and the rights, limitations of rights, privileges and immunities of the
class or classes of Placement Agent Warrants which the Placement Agent Warrants
may be consolidated with are substantially similar to the rights, limitations or
rights, privileges and immunities of the Placement Agent Warrants.
(b) Upon determination by the Company to consolidate any other
class of Placement Agent Warrants and as provided in Section 7.2(a), the Company
shall give notice thereof to the Placement Agent and provide the modification to
this Agreement as necessary to effectuate the consolidation and the Placement
Agent may enter into and execute such agreements to so modify this Agreement as
provided in Section 7.1 above.
20
<PAGE>
SECTION 8
CERTAIN DEFINITIONS AND OTHER MATTERS
8.1 NOTICE OF PROPOSED ACTIONS. In case the Company shall propose (a)
to pay any dividend payable in stock of any class, or to make any other
distribution, to the holders of its Common Stock (other than a cash dividend),
or (b) to offer to the holders of its Common Stock rights or warrants to
subscribe for or to purchase any additional shares of Common Stock, or (c) to
effect any stock dividend, stock split, combination or reclassification of its
Common Stock, or (d) to effect any distribution of assets to holders of its
Common Stock or capital reorganization, merger, consolidation or sale, transfer
or other disposition of all or substantially all of its assets or business, or
(e) to effect the liquidation, dissolution or winding-up of the Company, or (f)
to effect any other transaction which would, upon consummation, result in a
change in the Purchase Price of the Placement Agent Warrants or the number of
shares of Common Stock and Placement Agent Warrants issuable upon exercise of
the Placement Agent Warrants pursuant to Section 2 and 3 hereof, the Company
shall give notice to each holder of a Placement Agent Warrant in accordance with
Section 8.02 of such proposed action, which shall specify the date on which a
record is to be taken for purposes of such proposed transaction. Such notice
shall be given not later than 1 5 days prior to the record date for determining
the holders of Common Stock for purposes of such action or, if no record date is
required, not. later than 15 days prior to the date of the taking of such
proposed action.
8.2 NOTICES. Any notice or demand authorized by this Agreement to be
given or made by the Placement Agent or by the holder of any Warrant Certificate
to or upon the Company shall be sent by first class mail, postage prepaid,
addressed (until another address or notice of address change is filed in writing
by the Company with the Placement Agent) and received by the noticed party as
follows:
Coronado Industries, Inc.
16929 East Enterprise Drive
Suite 202
Fountain Hills, Arizona 85268
Facsimile: (602) 837-6870
Any notice or demand authorized by this Agreement to be given or made by the
Company or by the holder of any Warrant Certificate to or on the Placement Agent
shall be deemed given or made if sent by first class mail, postage prepaid,
addressed (until another address is filed in writing by the Placement Agent with
the Company) and received by the noticed party as follows:
Fox & Company Investments, Inc.
6232 North 32nd Street
Phoenix, Arizona 85018
Facsimile: (602) 224-2499
Notices or demands authorized by this Agreement to be given or made by the
Company or the Placement Agent to the holder of any Warrant Certificate shall be
deemed given or made if sent
21
<PAGE>
first class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
8.3 PAYMENT OF TAXES. The Company will from time to time promptly pay
or make provision for the payment of any and all taxes and charges which may
hereafter be imposed by the laws of the United States or of any state or any
local governmental unit thereof and which shall be payable with respect to the
issuance or delivery to or upon the order of the registered holders of the
Placement Agent Warrants (upon the exercise of the right to subscribe) of Common
Stock of the Company pursuant to the terms of such Placement Agent Warrants and
of this Agreement, but the Company shall not be obligated to pay any transfer
taxes in respect of the Placement Agent Warrants or such shares.
8.4 APPLICABLE LAW. The validity, interpretation and performance of
this Agreement and the validity and interpretation of the Placement Agent
Warrants shall be governed by the laws of the State of Arizona.
8.5 COPIES OF AGREEMENT. A copy of this Agreement shall be provided to
any registered holder of a Placement Agent Warrant or Exercise Shares upon
written request thereof to the Company. A copy of this Agreement shall also be
available at all reasonable times at the office of the Company for examination
by the registered holder of any Placement Agent Warrant. Any such registered
holder may be required to submit his Placement Agent Warrant for inspection
before being entitled to receive a copy of this Agreement or to make such
examination.
IN WITNESS WHEREOF, this Agreement shall been duly executed by the
parties hereto under theft respective corporate seals, as of the date first
above written.
CORONADO INDUSTRIES, INC.,
a Nevada corporation
By /s/
-------------------------------
Its President
-----------------------------
Fox & COMPANY INVESTMENTS, INC.,
an Arizona corporation
By /s/
-------------------------------
Its Executive Vice President
-----------------------------
22
<PAGE>
EXHIBIT A
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
BE OFFERED OR SOLD ONLY IF REGISTERED UNDER APPLICABLE SECURITIES LAWS OR IF AN
EXEMPTION THEREFROM IS AVAILABLE. THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE HEREOF ARE TRANSFERABLE ONLY UPON THE CONDITIONS
SPECIFIED IN THE WARRANT AGREEMENT REFERRED TO HEREIN. A COPY OF THE WARRANT
AGREEMENT WILL BE PROVIDED TO THE REGISTERED HOLDER THEREOF UPON REQUEST TO THE
COMPANY.
CORONADO INDUSTRIES, INC.
PLACEMENT AGENT WARRANT CERTIFICATE
No. Warrants to Purchase
Shares
THIS IS TO CERTIFY that, ____________________ or registered assigns, is
the registered holder ("HOLDER") of the number of Placement Agent Warrants
("PLACEMENT AGENT WARRANTS") set forth above, each of which entitles the holder
to purchase, subject to the terms and conditions set forth in the Placement
Agent Warrant Agreement, dated March __ , 1998, which is hereby incorporated
herein and made a part hereof, and as hereinafter set forth, fully paid and
non-assessable shares of the common stock ("COMMON STOCK"), of Coronado
Industries, Inc., a Nevada corporation (the "COMPANY"), or equivalent security
of any successor thereto at a purchase price of $2.00 per share if exercised on
or before December 1, 1998 and $2.50 per share if exercised thereafter, as
adjusted, for a term commencing on the one year anniversary hereof and ending
December 1, 2000, and to receive one or more certificates for the Common Stock
or equivalent securities so purchased, upon satisfaction of one or more
conditions precedent set forth herein and presentation and surrender to the
Company at 16929 East Enterprise Drive, Suite 202, Fountain Hills, Arizona 85268
with the form of subscription duly executed, and accompanied by payment of the
purchase price of each share purchased, in U.S. dollars, either in cash or by
certified check or bank cashier's check, payable to the order of the Company.
Placement Agent Warrants are exercisable in minimum denominations of 100.
Fractional shares of the Company's Common Stock will not be issued upon the
exercise of the Placement Agent Warrants.
The Company covenants and agrees that all shares of Common Stock
delivered upon the exercise of these Placement Agent Warrants will, upon
delivery, be fully paid and non-assessable. The Placement Agent Warrants shall
not be exercisable in any jurisdiction where exercise would be unlawful. The
Company will use its best efforts to qualify the shares that
A-1
<PAGE>
may be purchased upon exercise of these Placement Agent Warrants for sale in all
jurisdictions where holders of the Placement Agent Warrants reside. However, the
Company shall not be required to honor the exercise of the Placement Agent
Warrants if, in the opinion of the Board of Directors, upon advice of counsel,
the sale of securities upon exercise of the Placement Agent Warrants would be
unlawful.
The number of shares of Common Stock, or other equivalent equity
security, issuable upon the exercise of these Placement Agent Warrants and the
purchase price shall be subject to adjustment from time to time, in certain
events, as set forth in the Placement Agent Warrant Agreement, including certain
sales of additional stock, stock options, convertible securities, distribution
of stock dividends, stock splits, reclassifications or mergers.
The Company agrees at all times to reserve or hold available, or cause
to reserve or hold available, a sufficient number or shares of its Common Stock,
or other equivalent equity security, to cover the number of shares, or other
equivalent equity security, issuable upon the exercise of these and all other
Placement Agent Warrants of like tenor then outstanding.
This Warrant Certificate does not entitle the holder hereof, either at
law or in equity, to and voting rights or other rights as a shareholder of the
Company, or to any other rights whatsoever except the rights expressly herein
set forth, and no dividend shall be payable or accrue in respect of these
Placement Agent Warrants or the interest represented hereby, or the shares that
may be purchased upon exercise hereof until or unless, and except to the extent
that, these Placement Agent Warrants shall be duly exercised.
This Warrant Certificate is exchangeable at any time prior to
expiration upon the surrender hereof by the registered holder to the Company for
one or more new Warrant Certificates of like tenor and date representing in the
aggregate the right to purchase the number of shares that may be purchased upon
exercise hereof, each of such new Warrant Certificates to represent the right to
purchase such number of shares as may be designated by the registered holder at
the time of such surrender. The Placement Agent Warrants and the shares of
Common Stock issuable upon exercise of the Placement Agent Warrants are subject
to restriction on transferability as described in the Warrant Agreement.
The Company may deem and treat the registered holder of this Warrant
Certificate at any time as the absolute owner hereof and of the Placement Agent
Warrants covered hereby for all purposes and shall not be affected by any notice
to the contrary.
The Placement Agent Warrants evidenced by this Warrant Certificate are
subject to the terms of the Warrant Agreement which is available upon request by
the registered holder of this Certificate or Company or at the office of the
Company. The Warrant Agreement is incorporated herein by reference and made a
part hereof and reference is hereby made to the Warrant Agreement for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Company and the holders of the Placement Agent
Warrants.
A-2
<PAGE>
This Warrant Certificate shall not be valid or obligatory for any
purpose unless signed by the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be executed by its duly authorized officers, and the corporate seal hereunto
affixed
Dated:
--------------
CORONADO INDUSTRIES, INC.
By
-------------------------------
President
ATTEST:
By
-------------------------------
Secretary
A-3
<PAGE>
[FORM OF REVERSE SIDE OF CERTIFICATE]
ASSIGNMENT FORM
To assign this Placement Agent Warrant, fill in the form below:
I or we assign and transfer this Placement Agent Warrant to: (Insert Assignee's
Social Security OR Tax Identification No.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Pen or type assignee's name, address and zip code)
and irrevocably appoint as agent to transfer this Placement Agent Warrant on the
books of the Company. The agent may substitute another to act for him.
Date: Your Signature:
------------ -------------------------------
(Sign exactly as your name appears on the
other side of this Warrant Certificate)
Signature Guarantee:
------------------------------------------------------------
By
------------------------------
The signature should be guaranteed by an eligible guarantor institution (a bank,
stockbroker, savings and loan association or credit union wit membership in an
approved signature guarantee medallion program) pursuant to Rule l7Ad-15 of the
Securities Exchange Act of 1934.
A-4
<PAGE>
SUBSCRIPTION
(To be completed and signed only upon an exercise
of the Placement Agent Warrants in whole or in part)
TO: Coronado Industries, Inc.
The undersigned, the holder of the attached Placement Agent Warrants,
hereby irrevocably elects to exercise the purchase right represented by the
Placement Agent Warrants for, and to purchase thereunder, shares of Commons
Stock (as such terms are defined in the Warrant Agreement dated March , 1998,
from Coronado Industries, Inc. (or other securities or property), and herewith
makes payment of $ therefor in cash or by certified or official bank check. The
undersigned hereby requests that the Certificate(s) for such securities be
issued in the name(s) and delivered to the address(es) as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
-----------------------------------------------------------
If the foregoing Subscription evidences an exercise of the Placement
Agent Warrants to purchase fewer than all of the shares of Common Stock (or
other securities or property) to which the undersigned is entitled, please issue
a new Placement Agent Warrant Certificate, of like tenor, for the remaining
Placement Agent Warrants (or other securities or property) in the name(s), and
deliver the same to the address(es), as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
DATED: ,19 .
----------
---------------------------------------------
(Name of Holder)
---------------------------------------------
(Signature of Holder or Authorized Signatory)
---------------------------------------------
(Social Security or Taxpayer Identification
Number of Holder)
A-5
LIST OF SUBSIDIARIES
Name State of Incorporation Headquarters
- ---- ---------------------- ------------
Opthalmic Nevada Fountain Hills, Arizona
International, Inc.
American Glaucoma, Inc. Nevada Fountain Hills, Arizona
Arizona Glaucoma Arizona Scottsdale, Arizona
Institute, Inc.
American Glaucoma Florida Largo, Florida
Institute of Florida-
Clearwater, Inc.
[LETTERHEAD OF SEMPLE & COOPER, LLP]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use in the
Form SB-2 Registration Statement of Coronado Industries, Inc. of our report
dated March 13, 1998, appearing in the Prospectus which is part of this
Registration Statement, and to the reference to us under the heading "Experts"
in such document.
/s/ Semple & Cooper, LLP
- ------------------------
Semple & Cooper, LLP
Phoenix, Arizona
August 24, 1998
