<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A-1
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended JUNE 30, 1998
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ___________
COMMISSION FILE NUMBER 0-20127
ESCALON MEDICAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER.)
California 33-0272839
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
351 East Conestoga Road
Wayne, Pennsylvania 19087
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 610-688-6830
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class: Name of each exchange on which registered:
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, without par value
Class A Redeemable Common Stock Purchase Warrants, exercisable for the
purchase of one share of Common Stock, without par value
Class B Redeemable Common Stock Purchase Warrants, exercisable for the
purchase of one share of Common Stock, without par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days: YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant is approximately $3,464,727.00. Such aggregate market value was
computed by reference to the bid and asked price of the Common Stock in the
when-issued trading market on December 4, 1998. For purposes of making this
calculation only, the registrant has defined affiliates as including all
directors and beneficial owners of more than ten percent of the Common Stock of
the Company.
The number of shares of the registrant's Common Stock outstanding as of December
4, 1998 was 3,017,185.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE> 2
PART III
PRELIMINARY NOTE:
This Form 10-K/A-1 is being filed to report Part III information
in lieu of the incorporation of such information by reference to the Company's
definitive proxy material for its 1998 Annual Meeting of Stockholders.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS OF THE COMPANY
<TABLE>
<CAPTION>
YEAR FIRST BECAME DIRECTOR, PRINCIPAL OCCUPATIONS DURING
NAME OF DIRECTOR AGE PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
- ---------------- --- -----------------------------------------
<S> <C> <C>
Richard J. DePiano 57 Mr. DePiano has been a director of the Company since February 1996. Mr.
DePiano has been the Chief Executive Officer of the Sandhurst Company, L.P.
and Managing Director of the Sandhurst Venture Fund since 1986. Mr.
DePiano is Chairman of the Board of Directors of Surgical Laser Technologies,
Inc. Mr. DePiano has served as Chairman and Chief Executive Officer of the
Company since March 1997.
Jay L. Federman, MD 60 Dr. Federman served as the Chairman of the Board of Directors of the
Company from February 1996 to March 1997 and continues to serve on the
Board of Directors. Dr. Federman has served as the Chief of the Division of
Ophthalmology at the Medical College Pennsylvania and M.C.P. Hahnemann
School of Medicine and as Co-Director of the Retina Service at Wills Eye
Hospital in Philadelphia, Pennsylvania. Dr. Federman is a director of Surgical
Laser Technologies, Inc.
Jack M. Dodick, MD 59 Dr. Dodick has been a director of the Company since February 1996. Dr.
Dodick has served as the Chairman of the Department of Ophthalmology at
Manhattan Eye, Ear and Throat Hospital in New York.
Fred G. Choate 52 Mr. Choate has been a director of the Company since November 1998. Mr.
Choate has served as Manager of the Greater Philadelphia Venture Capital
Corp. since 1992.
</TABLE>
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Richard J. DePiano 57 Chairman and Chief Executive Officer
Ronald L. Hueneke 55 President and Chief Operating Officer
Doug McGonegal 47 Secretary and Vice President, Finance
Shawn Mullen 40 Vice President, Sales & Marketing
</TABLE>
Mr. DePiano has been a director of the Company since February
1996. Mr. DePiano has been the Chief Executive Officer of the Sandhurst Company,
L.P. and Managing Director of the Sandhurst Venture Fund since
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1986. Mr. DePiano is Chairman of the Board of Directors of Surgical Laser
Technologies, Inc. Mr. DePiano has served as Chairman and Chief Executive
Officer of the Company since March 1997.
Mr. Hueneke was appointed a President of the Company and Chief
Operating Officer in July, 1998. From 1991 until 1996, Mr. Hueneke held various
senior management positions with EOI. Mr. Hueneke co-founded Trek Medical
Products, Inc., a vitreoretinal instrument and equipment business, in 1983 and
served as its President until October 1991 when it was acquired by EOI.
Mr. McGonegal was appointed Secretary and Vice President,
Finance of the Company in July 1998.
Mr. Mullen was appointed Vice President, Sales & Marketing of
the Company in July 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's directors and executive officers, and persons who own more than
ten percent of the Company's Common Stock, to file with the Commission, by a
specified date, reports regarding their ownership of Common Stock. To the
Company's knowledge, based solely on its review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, the Company believes that all of its officers and directors and
greater than ten percent beneficial owners complied with all Section 16(a)
filing requirements applicable to them with respect to those transactions during
1997.
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ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth certain compensation paid by the
Company to its Chief Executive Officer and certain other highly compensated
executive officers of the Company for all services rendered in all capacities
for the periods shown. This table includes Sterling C. Johnson, who stepped down
from his positions with the Company effective April 30, 1997 and John T. Rich,
who stepped down from his positions with the Company effective June 30, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- OTHER AWARDS
ANNUAL ------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION(1)
- --------------------------- ---- ------ ----- ------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. DePiano(2) 1998 $240,000 -- -- -- $ 9,600
Chairman and Chief Executive 1997 $ 73,846 -- -- -- $ 3,200
Officer 1996 -- -- -- -- --
John T. Rich 1998 $119,000 $14,500 -- -- --
Former Vice President of Finance 1997 $119,000 $14,500 -- -- --
and Administration, and Secretary 1996 $ 43,858 -- -- -- --
Ronald L. Hueneke 1998 $105,000 $20,000 -- -- --
President and Chief Operating 1997 $105,000 $14,500 -- -- --
Officer 1996 $ 39,159 -- -- -- --
Doug McGonegal 1998 $ 35,446 $ 4,000 -- -- --
Vice President of Finance and 1997 -- -- -- -- --
Secretary 1996 -- -- -- -- --
Shawn Mullen 1998 $ 95,000 $20,000 -- -- --
Vice President Sales & Marketing 1997 -- -- -- -- --
1996 -- -- -- -- --
Sterling C. Johnson 1998 -- -- -- -- $146,875
Former President, Chief 1997 $118,088 -- -- -- $109,832
Executive Officer and Chief 1996 $ 55,677 -- -- -- $ 2,536
Operating Officer
</TABLE>
(1) Includes payment by the Company of (i) in the case of Mr. Johnson (a) an
automobiles allowance in the amount of $5,094; (b) $6,158 in insurance premiums
paid for life insurance; (c) severance payments in the amount of $129,123 and
(d) directors fees in the amount of $5,500; (ii) in the case of Mr. DePiano, an
automobile allowance in the amount of $9,600.
(2) Mr. DePiano became Chairman and Chief Executive Officer of the Company on
March 1, 1997.
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OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value At Assumed
% of Annual Rates of Stock
Total Options Price Appreciation For
Granted to Option Term(2)
Options Employees in Exercise Price Expiration -----------------------
Name Granted(1) Fiscal Year ($/share) Date 5% 10%
---- ---------- ----------- -------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Richard J. DePiano.... 112,500 0% $ 2.252 6/4/07 $159,330 $403,775
Doug McGonegal........ 1,000 2% $ 1.875 2/27/08 $ 1,179 $ 2,988
Ronald L. Hueneke..... 15,000 25% $ 1.875 2/27/08 $ 17,688 $ 44,824
Shawn Mullen.......... 7,500 12% $ 1.875 2/27/08 $ 8,844 $ 22,412
Roger Edens........... 3,000 5% $ 1.875 2/27/08 $ 3,538 $ 8,965
Mark Wallace.......... 3,000 5% $ 1.875 2/27/08 $ 3,538 $ 8,965
Jay Federman.......... 10,000 17% $ 1.875 2/27/08 $ 11,792 $ 29,883
Jack Dodick........... 10,000 17% $ 1.875 2/27/08 $ 11,792 $ 29,883
Robert Kunze.......... 10,000 17% $ 1.875 2/27/08 $ 11,792 $ 29,883
</TABLE>
(1) These options were granted under the Company's 1993 Stock Option Plan
and have a term of ten years, subject to earlier termination in certain
events. See "Employment Agreements." The options are fully vested.
(2) The potential realizable values are based on an assumption that the
stock price of the Common Stock starts equal to the exercise price
shown for the particular option grant and appreciates at the annual
rate shown (compounded annually) from the date of grant until the end
of the term of the option. These amounts are reported net of the option
exercise price, but before any taxes associated with exercise or
subsequent sale of the underlying stock. The actual value, if any, an
option holder may realize will be a function of the extent to which the
stock price exceeds the exercise price on the date the option is
exercised and also will depend on the option holder's continued
employment through the vesting period. The actual value to be realized
by the option holder may be greater or less than the values estimated
in this table.
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AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED IN-THE-
OPTIONS AT MONEY OPTIONS AT
JUNE 30, 1997 JUNE 30, 1997(1)
------------- ----------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. DePiano -- -- 112,500 -- $ 0.00 --
Doug McGonegal ... -- -- 1,000 -- $ 0.00 --
Ronald L. Hueneke -- -- 15,000 -- $ 0.00 --
Shawn Mullen ..... -- -- 7,500 -- $ 0.00 --
Roger Edens ...... -- -- 3,000 -- $ 0.00 --
Mark Wallace ..... -- -- 3,000 -- $ 0.00 --
Jay Federman ..... -- -- 10,000 -- $ 0.00 --
Jack Dodick ...... -- -- 10,000 -- $ 0.00 --
Robert Kunze ..... -- -- 10,000 -- $ 0.00 --
</TABLE>
(1) Potential unrealized value is (i) the fair market value at fiscal 1998
year-end less the option exercise price times (ii) the number of
options. Fair market value as of fiscal 1998 year-end was determined
based on a closing sale price on June 30, 1998 of $0.766.
NO AWARDS WERE MADE TO ANY NAMED EXECUTIVE OFFICER DURING SUCH
FISCAL YEAR UNDER ANY LONG-TERM INCENTIVE PLAN. THE COMPANY DOES NOT SPONSOR ANY
DEFINED BENEFIT OR ACTUARIAL PLANS AT THIS TIME.
EMPLOYMENT AGREEMENTS
On May 12, 1998, the Company entered into an employment agreement
with Richard J. DePiano as the Chairman and Chief Executive Officer of the
Company. The term of the employment agreement commenced on May 12, 1998 and
shall continue through June 30, 2001. The employment agreement renews on July 1
of each year for successive terms of three years unless either party notifies
the other party at least thirty (30) days prior to such date of the notifying
party's determination not to renew the agreement. The agreement provides for a
base salary of $240,000 per year plus incentive compensation in the form of a
cash bonus to be paid by the Company to Mr. DePiano at the discretion of the
Board of Directors. The agreement also provides for health and long term
disability insurance and other fringe benefits as well as an automobile
allowance of $800 per month.
Ronald L. Hueneke entered into an employment agreement with EOI
in October of 1991 that provides for annual salary at a rate established by the
Company's Board of Directors which is currently set as $105,000 per annum. Mr.
Hueneke's employment agreement was assumed by the Company in connection with the
Asset Sale and Purchase. The agreement also provides for health, life and
long-term disability insurance and other fringe benefits. In addition, the
agreement provided for incentive compensation equal to 3 1/3% of the gross sales
derived from the sale by Mr. Hueneke of certain products during the initial term
of the employment agreement. Under the agreement, Mr. Hueneke was also granted
options to purchase up to 75,000 shares of the EOI's Common Stock at an exercise
price per share of $1.00. The options are fully vested and currently
exercisable. The employment
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agreement, which had an initial term of five years, renews automatically from
year to year unless either party notifies the other in writing at least 90 days
prior to the expiration of the then current term of its determination not to
renew the agreement.
COMPENSATION OF DIRECTORS
Mr. Kunze was paid $48,000, Dr. Dodick $3,000, Dr. Federman
$6,500 and Mr. Johnson $5,500 as directors fees during the fiscal year ended
June 30, 1998. Currently directors receive stock options for each board meeting
and committee meeting attended. Messrs. Dodick, Federman and Kunze were issued
stock options for attendance at board meetings. In addition, directors are
reimbursed for expenses incurred in connection with attending meetings. See
"Executive Officers--Executive Compensation."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Messrs.
DePiano and Federman. Mr. DePiano is a Director and the Chief Executive Officer
of the Company. The approval of Mr. DePiano's employment agreement was by the
Compensation Committee comprised of Messrs. DePiano, Kunze and Federman. Mr.
DePiano abstained from all discussions and approvals of his employment
agreement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 4, 1998, certain
information regarding the beneficial ownership of the Common Stock by (i) each
shareholder known by the Company to be a beneficial owner of more than 5% of the
Common Stock, (ii) each director and nominee for election as director of the
Company, (iii) each of the Named Executive Officers as such term is defined in
Item 402(a)(3) of Regulation S-K and (iv) all directors and executive officers
of the Company as a group. Pursuant to the rules and regulations promulgated
under the Exchange Act the table sets forth the most recent information provided
in filings made with the SEC by the reporting persons.
The calculation of percentage ownership as shown for each person
in the following table assumes the exercise of all options and warrants held by
such person but not the exercise of any other person's options or warrants.
Additionally, certain of the reporting persons share beneficial ownership of
certain securities of the Company. Any securities as to which beneficial
ownership is shared are set forth on the table below as beneficially owned by
each person to whom beneficial ownership may be attributed. See the footnotes to
the table for information as to shared beneficial ownership of the Company's
securities.
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BENEFICIAL OWNERSHIP TABLE
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL
AMOUNT OF OWNERSHIP OF
BENEFICIAL SHARES AMOUNT OF
OWNERSHIP OF UNDERLYING AGGREGATE AGGREGATE
OUTSTANDING PERCENT OF OPTIONS/ BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES(1)** CLASS WARRANTS*** OWNERSHIP OF CLASS
------------------------------------ ----------- ----- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
EOI Corp. (2)......................................... 95,147 2.6 -- 95,147 2.6
351 E. Conestoga Road
Wayne, PA 19087
D. Blech and D. Blech & Company,
Incorporated (3)...................................... -- -- 790,000 790,000 20.7
599 Lexington Avenue
New York, NY 10022
R.A. Mackie & Co., L.P. (4)........................... -- -- 140,119 140,119 4.4
One Gorham Island
Westport, CT 06880
Combination, Inc. (6)................................ 584,703 16.2 40,000 624,703 17.2
c/o ISRC
310 Madison Ave.
Suite 503
New York, NY 10017
Sterling C. Johnson................................... -- -- -- -- --
Robert J. Kunze ...................................... 5,759 * -- 5,759 *
Fred G. Choate........................................ 816 * -- 816 *
Richard J. DePiano (5)................................ 7,692 * 112,500 120,192 3.8
Jack M. Dodick, M.D................................... 39,725 1.1 10,000 49,752 1.6
Ronald L. Hueneke..................................... 16,995 * 15,000 31,995 1.0
Sandhurst Venture Fund (5)........................... 88,250 2.5 -- 88,250 2.5
351 E. Conestoga Road
Wayne, PA 19087
Jay L. Federman, M.D.................................. 38,533 1.1 10,000 48,533 1.6
All directors and executive officers as a group
(6 persons) ........................................ 197,797 6.6 147,500 345,297 10.9
</TABLE>
* Less than 1%.
** Includes outstanding shares owned by the named person but does not
include shares as to which such person has the right to acquire.
*** Represents shares underlying (a) Class A Redeemable Common Stock
Purchase Warrants ("Class A Warrants") and Class B Redeemable Common
Stock Purchase Warrants ("Class B Warrants"), each of which (i)
entitles the holder thereof to purchase one share of Common Stock at a
price of $6.25 and $7.50, respectively, and (ii) was issued in
connection with a November 1993 offering; and (b) certain options,
which in each case are exercisable within 60 days from the date hereof.
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, where applicable, the persons named
in the table above have sole voting and investment power with respect
to all shares shown as beneficially owned by them.
(2) The outstanding share ownership set forth for EOI consists of shares
owned solely by EOI. Messrs. DePiano, Dodick, and Federman are
directors of EOI. Although not currently serving as an officer of EOI,
Ronald L. Hueneke, President of the Company and Chief Operating
Officer, served as Vice President and General Manager of the Trek
Division of EOI prior to the consummation of the Asset Acquisition.
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Each of the above named individuals are also shareholders of EOI.
(3) As reported on Amendment No. 3 to the Statement on Schedule 13D dated
October 5, 1995. The ownership of shares underlying options and
warrants, as set forth for Mr. Blech, consists entirely of shares
underlying 1,380,000 Class A Warrants and 880,000 Class B Warrants
owned by Blech, and 900,000 shares subject to a Unit Purchase Option
owned by Blech (see discussion under "Certain Relationships and Certain
Transactions").
(4) For R.A. Mackie & Co., L.P. such figures are as reported on Schedule
13G dated February 8, 1996 and represent ownership of shares underlying
43,575 Class A Warrants and 516,900 Class B Warrants.
(5) Includes 112,500 shares which Mr. DePiano has the right to acquire upon
the exercise of currently exercisable stock options, excludes 88,250
shares held by Sandhurst Venture Funds. Mr. DePiano has the right to
vote the Sandhurst Venture Funds shares.
(6) For Combination, Inc. such figures are reported as if the 818 shares of
Series A Preferred Stock was converted pursuant to the terms of such
stock on December 4, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 12, 1996, the Company acquired substantially all of
the assets and certain of the liabilities of EOI, pursuant to an Assets Sale and
Purchase Agreement, in exchange for 4,770,772 shares of the Company's Common
Stock. The total estimated cost of the acquisition was $8,900,000, including
liabilities assumed (which includes the assumption of costs associated with
certain litigation involving EOI) of $1,016,340 and estimated transaction costs
of approximately $928,000. The acquisition was accounted for using the purchase
method of accounting and included the acquisition of accounts receivable,
inventories, equipment and various other tangible and intangible assets. The
total purchase price over the fair value of net assets acquired approximates
$4,100,000. Another $1,000,000 of the purchase price was assigned to in-process
technology and was charged to operations immediately following the acquisition.
As disclosed elsewhere herein, Messrs. DePiano, Dodick and Federman were at the
time of the acquisition, and continue to be, members of the Board of Directors
of EOI. Mr. Rich, the Company's former Vice President, Finance and
Administration/Secretary, served in similar executive level management position
with EOI. Ronald L. Hueneke, President of the Company and Chief Operating
Officer, served as Vice President and General Manager of the Trek Division of
EOI prior to the consummation of the Asset Acquisition. EOI through August 1998
was the beneficial owner of 42.2% of the outstanding Common Stock of the Company
and after such date EOI has distributed to its individual shareholders all but
2.6% of the Outstanding Common Stock of the Company in accordance with its
winding up process. EOI is continuing to distribute the balance of the shares to
the individual EOI shareholders.
Jay L. Federman, M.D., a Director, together with two individuals
unaffiliated with the Company, entered into a Development, Assignment and
License Agreement with the Company dated September 11, 1992. Under this
agreement, the Company had agreed to pay royalties to Dr. Federman and the two
unaffiliated individuals on sales of the Company's Iris Expander and related
products. Generally, the agreement provided for quarterly royalty payments of
10% of net sales, for sales by the Company, and the greater of 5% of net sales
or 50% of royalty payments received by the Company, for sales by sublicensees of
the Company, in countries where a valid patent has issued. For sales in
countries where a valid patent has not issued, royalty payments equal to
one-half of the foregoing rates are required. As of the date hereof, the Company
has discontinued development and terminated the Development, Assignment and
License Agreement of the Iris Expander. Therefore, no royalty payments have been
made to Dr. Federman or the other individuals that are parties to the
Development, Assignment and License Agreement.
Commencing November 17, 1994, upon the exercise of any Class A
Redeemable Common Stock Purchase Warrant or Class B Redeemable Common Stock
Purchase Warrant (a "Warrant"), to the extent not inconsistent with the
guidelines of the NASD and the rules and regulations of the Securities and
Exchange Commission (the "Commission"), the Company has agreed to pay D. Blech &
Company, Incorporated ("Blech"), except in certain limited circumstances, a fee
of 5% of the exercise price of such Warrant if (i) the market price of the
Common
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Stock is greater than the exercise price of such Warrant on the date of
exercise; (ii) on the date of exercise Blech is a registered broker-dealer and
its registration has not been suspended; (iii) such Warrant is not held in a
discretionary account; and (iv) the solicitation of such Warrant was not in
violation of Rule 10b-6 promulgated under the Securities Exchange Act of 1934,
as amended. The Company has agreed not to solicit the exercise of any Warrant
other than through Blech unless Blech is legally unable to solicit such exercise
or is prohibited from doing so by the rules of the NASD or otherwise, in which
event the Company may solicit such exercise, either itself or with the
assistance of a third party.
In November 1993, the Company sold to Blech a transferable option
(the "Unit Purchase Option") to purchase up to 300,000 Units. The Unit Purchase
Option is exercisable for a period of four years, commencing November 17, 1994,
at an initial exercise price equal to $8.00 per Unit. The Units are identical in
all respects to Units issued in an underwritten public offering of Units made in
November and December of 1993, except that (i) while the Warrants comprising
such Units are held by Blech or certain transferees of Blech, they are not
redeemable by the Company and (ii) Warrants comprising such Units are
exercisable for the period commencing on November 17, 1993, and terminating at
the close of business on November 24, 1994. The Unit Purchase Option cannot be
transferred, assigned or hypothecated prior to November 24, 1994, except that it
may be assigned, in whole or in part, to any successor, officer or partner of
Blech. The Unit Purchase Option contains antidilution provisions providing for
appropriate adjustment of the exercise price and the number of Units which may
be purchased upon exercise upon the occurrence of certain events.
The Company has agreed that it will, at its expense on any one
occasion during the four-year period commencing November 17, 1994, and on any
one additional occasion at the expense of the holders thereof during such
period, register the securities underlying, or issuable upon the exercise of the
securities underlying, the Unit Purchase Option at the request of holders of a
majority of the Units issued or issuable upon exercise of the Unit Purchase
Option (including shares of Common Stock issuable upon exercise of the Warrants
included in those Units). The Company has also agreed, during the seven-year
period commencing November 17, 1994, to register on a "piggyback" basis, on an
unlimited number of occasions, such securities whenever the Company files a
registration statement.
For the life of Unit Purchase Option, the holders are given, at
nominal cost, the opportunity to profit from a rise in the market price for the
securities of the Company without assuming the risk of ownership, with a
resulting dilution in the interest of other security holders. As long as the
Unit Purchase Option remains unexercised, the terms under which the Company
could obtain additional capital may be adversely affected. Moreover, the holders
of the Unit Purchase Option may be expected to exercise such option at a time
when the Company would, in all likelihood, be able to obtain needed capital by
an offering of its securities on terms more favorable than those provided by the
Unit Purchase Option.
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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 by the undersigned, thereunto duly authorized.
ESCALON MEDICAL CORP.
(Registrant)
Dated: December 15, 1998
By: /s/DOUG MCGONEGAL
-------------------------------------
Doug McGonegal
Vice President, Finance
