Filed pursuant to Rule 424(b)(2)
File No. 333-36655
PROSPECTUS
10,464,708 Shares
LASERSIGHT INCORPORATED
Common Stock ($.001 par value)
This Prospectus relates to an aggregate of up to 10,464,708 shares (the
"Shares") of common stock, $.001 par value ("Common Stock"), of LaserSight
Incorporated, a Delaware corporation (the "Company"), being offered for sale
from time to time by the selling shareholders named in this Prospectus (the
"Selling Shareholders") as follows:
(i) up to 9,674,708 shares issuable upon the conversion (such shares,
the "Conversion Shares") from time to time of the Company's Series B
Convertible Participating Preferred Stock, $.001 par value (the "Series B
Preferred Stock"), (see Note (1) below), and
(ii) up to 790,000 shares (the "Warrant Shares") issuable upon the
exercise of warrants issued in connection with the Company's private
placement of Series B Preferred Stock in August 1997 (the "Series B
Warrants").
If all of the Series B Warrants are exercised, the Company would realize
$4,668,900 in proceeds. See "Use of Proceeds." The Company will not receive any
proceeds from any sale of Conversion Shares or Warrant Shares by the Selling
Shareholders. The Company has been advised by the Selling Shareholders that
there are no underwriting arrangements with respect to the sale of Common Stock,
that the Resale Shares may be offered hereby from time to time for the account
of Selling Shareholders in transactions on The Nasdaq Stock Market, in
negotiated transactions or a combination of both at prices related to prevailing
market prices, or at negotiated prices. See "Selling Shareholders" and "Plan of
Distribution." The Company will pay the expenses in connection with the
registration of the Shares (other than any underwriting discounts and selling
commissions, and fees and expenses of counsel and other advisors, if any, to the
Selling Shareholders) estimated to be $90,000.
The Common Stock is traded on The Nasdaq Stock Market under the symbol
"LASE." On January 22, 1998, the closing sale price for the Common Stock was
$3.25 per share.
THE SHARES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE
5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is January 26, 1998.
(Cover page continued on next page)
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(Cover page continued from preceding page)
Note (1):
The number of Conversion Shares offered for sale by this Prospectus equals the
number of Conversion Shares that, based on the Conversion Price (as defined
below) of $2.677083 in effect on the date of this Prospectus, the Company's
agreements with the holders of the Series B Preferred Stock require it to cause
to be registered under the Securities Act of 1933 (the "Securities Act"). Such
number of Conversion Shares equals 200% of the 4,837,354 shares of Common Stock
that would have been issuable if the holders of all shares of outstanding Series
B Preferred Stock had elected to convert such shares as of January 23, 1998 and
if a required shareholder approval had been obtained prior to such date. Except
for the shareholder approval requirements described below, the number of
Conversion Shares that will be ultimately issued is not limited, however, and
could be more or less than the number offered by this Prospectus. If as of any
date the number of Shares then eligible for sale by this Prospectus becomes less
than 175% of the number of Shares issuable or outstanding as of such date, the
Company will be required to cause the registration of additional Shares under
the Securities Act.
The listing rules of the NASDAQ National Market and the terms governing the
Series B Preferred Stock require the Company to obtain the approval of its
shareholders of the issuance of more than 1,995,534 Shares. The terms of the
Series B Preferred Stock also require the Company to obtain the approval of its
shareholders of an amendment to the Company's certificate of incorporation to
increase the aggregate number of authorized shares of Common Stock so that the
Company can reserve for issuance a number of shares of Common Stock equal to at
least 200% of the number of Shares presently issuable (without giving effect to
any shareholder approval requirements). The Company is required to obtain both
such approvals on or before February 28, 1998. See "Risk Factors--Potential
Obligation to Redeem Preferred Stock if Stockholder Approvals Not Obtained."
The Series B Preferred Stock is convertible at the option of any holder
thereof at any time or from time to time until August 29, 2000, on which date
all shares of Series B Preferred Stock then outstanding will, subject to certain
conditions, automatically be converted into Common Stock. The number of
Conversion Shares issuable upon the conversion of each of the 1,295 shares of
Series B Preferred Stock outstanding as of the date of this Prospectus equals
$10,000 divided by the Conversion Price in effect as of the date of such
conversion. As of any conversion date, the Conversion Price equals the lesser of
(i) $6.68 per share or (ii) the average of the three lowest closing bid prices
of the Common Stock during the 20 (30 after February 25, 1998 under certain
conditions) consecutive trading days preceding such conversion date. See "The
Offering," "Selling Shareholders," "Plan of Distribution," "Risk
Factors--Potentially Unlimited Number of Shares Issuable Upon Conversion of
Preferred Stock" and "Description of Securities--Preferred Stock."
<PAGE>
TABLE OF CONTENTS
Documents Incorporated by Reference Description of Securities
The Company Plan of Distribution
The Offering Selling Shareholders
Risk Factors Legal Matters
Use of Proceeds Experts
Recent Developments Available Information
Capitalization
--------------------------
No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained or
incorporated by reference in this Prospectus in connection with the offering
described herein. If given or made, such information or representation must not
be relied upon as having been authorized by the Company or any Selling
Shareholder. Neither the delivery of this Prospectus nor any offer or sale made
hereunder shall, under any circumstances, imply that there has been no change in
the affairs or operations of the Company since the date of this Prospectus, or
that the information herein is correct as of any time subsequent to such date.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents of the Company filed with the Securities and
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934 (the
"Exchange Act") are incorporated by reference in this Prospectus:
A. Annual Report on Form 10-K for the year ended December 31, 1996, as
amended by a Form 10-K/A filed on December 12, 1997;
B. Quarterly Reports on Form 10-Q for the quarters ended March 31, and
June 30, 1997 (each as amended by a Form 10-Q/A filed on December 11,
1997);
C. Quarterly Report on Form 10-Q for the quarter ended September 30, 1997
(as amended by Form 10-Q/A's filed on December 11, 1997 and January 9,
1998);
D. Current Reports on Form 8-K filed on February 25, March 18, March 27,
April 8, April 25, July 1, July 31, August 13, September 2, September
11, September 15, September 29, November 7, and December 29, 1997, and
January 2, January 14 (as amended by Form 8-K/A filed on January 22,
1998) and January 20, 1998; and
E. The description of the Common Stock contained in the Company's Form
8-A/A (Amend. No. 3) filed on September 29, 1997.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the filing of
a post-effective amendment which indicates that all Shares offered hereby have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of the filing of such reports and documents.
<PAGE>
Any statement contained in a document incorporated or deemed to be
incorporated in this Prospectus by reference shall be modified or superseded for
the purpose of this Prospectus to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated in this Prospectus by reference modifies or replaces
such statement.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, on the
written or oral request of such person, a copy of any and all of the information
that has been or may be incorporated by reference in this Prospectus (not
including exhibits to the information that is incorporated by reference into the
information that this Prospectus incorporates). Written requests for such copies
should be directed to Secretary, LaserSight Incorporated, 12161 Lackland Road,
St. Louis, Missouri 63146; telephone: (314) 469-3220.
THE COMPANY
LaserSight Incorporated and its subsidiaries operate in two major operating
segments: technology and health care services.
The Company's technology segment includes LaserSight Technologies, Inc.
("LaserSight Technologies"), LaserSight Patents, Inc. ("LaserSight Patents") and
LaserSight Centers Incorporated ("LaserSight Centers"). LaserSight Technologies
develops, manufactures and markets ophthalmic lasers with a galvanometric
scanning system primarily for use in performing PRK (photorefractive
keratectomy) which utilizes a one millimeter scanning laser beam to ablate
microscopic layers of corneal tissue in order to reshape the cornea and to
correct the eye's point of focus in persons with myopia (nearsightedness),
hyperopia (farsightedness) and astigmatism. LaserSight Patents licenses various
patents related to the use of excimer lasers to ablate biological tissue and to
keratome design and usage. LaserSight Centers is a developmental-stage company
through which the Company may provide PRK, LASIK (Laser In Situ Keratomileusis)
and other eyecare surgical services.
Since December 31, 1997, the health care services segment has consisted of
MRF, Inc. ("MRF" or "The Farris Group"). The Farris Group provides health care
and vision care consulting services to hospitals, managed care companies and
physicians. Until that date, this segment had also included MEC Health Care,
Inc. ("MEC") and LSI Acquisition, Inc. ("LSIA"). See "Recent Developments--Sale
of MEC and LSIA." Under the Company's ownership, MEC was a vision managed care
company which managed vision care programs for health maintenance organizations
(HMOs) and other insured enrollees and LSIA was a physician practice management
company which managed the ophthalmic practice known as the "Northern New Jersey
Eye Institute" under a management services agreement.
The Company was incorporated in Delaware in 1987, but was inactive until
1991. In April 1993, the Company acquired LaserSight Centers in a
stock-for-stock exchange with additional shares issued in March 1997 pursuant to
an amended purchase agreement. In February 1994, the Company acquired MRF, Inc.
In July 1994, the Company was reorganized as a holding company. In October 1995,
the Company acquired MEC. In July 1996, the Company's LSIA subsidiary acquired
the assets of the Northern New Jersey Eye Institute. On December 30, 1997, the
Company sold MEC and LSIA, effective as of December 1, 1997. See "Recent
Developments--Sale of MEC and LSIA."
As used herein, the term the "Company" refers to LaserSight Incorporated
and its subsidiaries, unless the context otherwise requires. The Company's
principal office and mailing address are 12161 Lackland Road, St. Louis,
Missouri 63146, and its telephone number is (314) 469-3220.
<PAGE>
THE OFFERING
Common Stock outstanding as of January 22, 1998 9,984,672 shares
Shares Offered by Selling Shareholders:
Conversion Shares issued to date upon conversion
of Series B Preferred Stock None.
Conversion Shares issuable upon conversion of Minimum: 1,938,622 shares (1)
outstanding Series B Preferred Stock Maximum: 9,674,708 (2)
Warrant Shares issuable upon exercise of
Series B Warrants 790,000 shares
Other
Risk Factors The Shares involve a high
degree of risk. Investors
should carefully consider the
information set forth under
"Risk Factors."
Proceeds to the Company if the Series B
Warrants are exercised in full $4,668,900
Use of proceeds from exercise of Series B Working capital; general
Warrants corporate purposes.
Nasdaq Stock Market trading symbol LASE
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(1) Represents the number of shares that would be issuable if all 1,295
shares of Series B Preferred Stock outstanding on the date of this
Prospectus were converted into Common Stock at the maximum Conversion Price
of $6.68 per share. See "Description of Securities--Preferred Stock--Series
B Preferred Stock."
(2) Represents the number of Conversion Shares offered by this
Prospectus. This number could be less or more than the number of Conversion
Shares that are ultimately issued. The number of Conversion Shares
ultimately issued will depend on, among other things, when the holders of
Series B Preferred Stock elect to convert their shares and the closing bid
prices of the Common Stock prior to each such conversion election.
Specifically, the number of Conversion Shares issuable upon any conversion
date will equal (i) the original purchase price ($10,000 per share) of the
preferred shares being converted on such date divided by (ii) a Conversion
Price equal to the lesser of $6.68 per share or the average of the three
lowest closing bid prices of the Common Stock during the 20 consecutive
trading days (30 trading days after February 25, 1998 under certain
conditions) preceding such conversion date. Additional shares of Common
Stock may from time to time be issued as dividends on, or as payments of
amounts due to the holders of, the Series B Preferred Stock. The listing
rules of the NASDAQ National Market and the terms governing the Series B
Preferred Stock require the Company to obtain the approval of its
shareholders of the issuance of more than 1,995,534 Shares. The terms of
the Series B Preferred Stock also require the Company to obtain the
approval of its shareholders of an amendment to the Company's certificate
of incorporation to increase the aggregate number of authorized shares of
Common Stock so that the Company can reserve for issuance a number of
shares of Common Stock equal to at least 200% of the number of Shares
presently issuable (without giving effect to any shareholder approval
requirements). The Company is required to obtain both such approvals on or
before February 28, 1998. See "Risk Factors--Potential Obligation to Redeem
Preferred Stock if Stockholder Approvals Not Obtained." If, as of any date
after such approvals are obtained, the number of Conversion Shares then
eligible for sale pursuant to this Prospectus becomes less than 175% of the
number of Conversion Shares issuable or outstanding as of such date, the
Company will be required to cause the registration of additional Conversion
Shares under the Securities Act. See "Description of Securities--Preferred
Stock."
<PAGE>
RISK FACTORS
The Shares offered hereby involve a high degree of risk. In addition, this
Prospectus contains forward-looking statements (within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act) which involve
risks and uncertainties. The following risk factors could affect the Company's
actual results and could cause the Company's actual results to differ in
material respects from the results discussed in any forward-looking statements
made in this Prospectus and the documents incorporated by reference herein. In
addition to the other information contained elsewhere or incorporated by
reference in this Prospectus, purchasers of the Shares should carefully consider
the following risk factors:
Potential Obligation to Redeem Preferred Stock if Stockholder Approvals Not
Obtained. Effective after February 28, 1998, any holder of Series B Preferred
Stock can require the Company to redeem a portion of such holder's Series B
Preferred Stock for cash in an amount per share equal to the Special Redemption
Price if the Company's shareholders have not on or before such date approved
both (i) the possible issuance of an indefinite number of shares of Common Stock
upon the conversion of the Company's Series B Preferred Stock and (ii) the
amendment of the Company's certificate of incorporation to increase the number
of shares of Common Stock that the Company is authorized to issue. (The
shareholder approval deadline had originally been December 26, 1997, but was
extended by all of the holders of Series B Preferred Stock. There can be no
assurance as to whether or on what terms the Company could obtain another
extension of this deadline.) For this purpose, the Special Redemption Price
would equal the liquidation preference of $10,000 per share multiplied by the
greater of (i) 1.25 or (ii) a fraction, the numerator of which would equal the
highest closing bid price of the Common Stock during the period beginning 10
trading days before the redemption date and ending five business days after such
date, and the denominator of which would equal the Conversion Price that would
have been applicable if the preferred shares had been converted as of the
redemption date. See "Description of Securities--Preferred Stock--Series B
Preferred Stock." The fraction described in the preceding sentence will depend
on market prices of the Common Stock and could possibly significantly exceed
1.25.
If shares of the Series B Preferred Stock were to become redeemable because
the required shareholder approvals had not been obtained and the preferred
holders were to demand the redemption of such shares to the maximum extent
possible, the Company's estimated redemption obligation would equal at least
$15.5 million (including a premium of 25% or approximately $3.1 million), based
on the average of the three lowest closing bid prices of the Common Stock during
the 20-trading day period preceding January 23, 1998 ($2.677083).) The Special
Redemption Price would be greater to the extent that (x) the highest closing bid
price of the Common Stock during the period beginning 10 trading days before the
redemption date and ending five business days after such date is more than 25%
greater than the Conversion Price that would have been applicable if the
preferred shares had been converted instead of redeemed (in which case the
Special Redemption Price would be determined pursuant to clause (ii) of the next
to last sentence of the preceding paragraph), or (y) the required redemption
were to occur more than five business days after the Company's receipt of a
conversion demand (in which case interest would begin to accrue on the
redemption price at an annual rate equal to the prime rate plus 5%). The Company
does not have the financial resources to pay a redemption price of $15.5
million, even after giving effect to the anticipated closing of its patent
transaction with Nidek Co., Ltd. See "Recent Developments--Nidek Patent
Transactions". In addition, a required redemption of any shares of Series B
Preferred Stock would cause a default under the Company's credit facility with
Foothill Capital Corporation, the Company's secured lender ("Foothill"), that
would result entitle Foothill to accelerate the otherwise-applicable maturity
date (June 15, 1998) of the Company's indebtedness to Foothill.
<PAGE>
Obligation to Redeem Preferred Stock if Conversion Shares and Warrant
Shares Not Registered for Resale. Any holder of Series B Preferred Stock could
require the redemption of all or a portion of its Series B Preferred Stock for
cash at the Special Redemption Price under the following circumstances:
* Subject to certain limited exceptions, if the registration statement
which includes this Prospectus is declared effective but subsequently
becomes unavailable for the resale of Conversion Shares or Warrant
Shares by the holders thereof, or
* The Company becomes required to register additional Conversion Shares,
but for any reason fails to have a registration statement relating to
such shares declared effective by the SEC within 30 days after such
requirement first arises.
Potentially Unlimited Number of Shares Issuable Upon Conversion of
Preferred Stock. There is no limit on the number of shares of Common Stock
issuable in connection with the conversions of Series B Preferred Stock, subject
only to the satisfaction of certain shareholder approval requirements. The
number of shares so issuable will increase in the event of a decline in the
market price of the Common Stock. The table below illustrates how changes in the
market price of the Common Stock could effect the number of Conversion Shares
issuable:
Assumed Number of As % of Common Shares
Conversion Conversion Assumed Outstanding
Price (1) Shares Issuable After Conversion (2)
--------- --------------- --------------------
$0.50 25,900,000 72.2%
$1.00 12,950,000 56.5%
$2.00 6,475,000 39.3%
$2.68 (3) 4,837,354 32.6%
$3.00 4,316,666 30.2%
$4.00 3,237,500 24.5%
$5.00 2,590,000 20.6%
$6.00 2,158,333 17.8%
$6.68 (4) 1,938,622 16.3%
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(1) Equals the lesser of (A) $6.68 or (B) the average of the three lowest
closing bid prices of the Common Stock during the 20 trading days (30
trading days after February 25, 1998 under certain conditions)
immediately preceding the applicable conversion date. See "Description
of Securities--Preferred Stock."
(2) Assumes that the number of shares of Common Stock outstanding at the
time of conversion equals the 9,984,672 shares outstanding on January
22, 1998 plus the number of shares issued in connection with such
conversion. Also assumes that all Series Preferred Stock is converted
at the Conversion Price indicated.
(3) Equals the Conversion Price that would have been applicable if all
1,295 shares of the Series B Preferred Stock outstanding on the date of
this Prospectus had been converted as of January 23, 1998.
(4) The maximum Conversion Price. See "Summary of Transaction Terms-Series
B Preferred Placement."
Shares Eligible For Future Sale. Except as provided below, substantially
all of the Company's outstanding Common Stock (9,984,672 shares as of January
22, 1998) are freely tradeable without restriction or further registration under
the Securities Act, unless such shares are held by "affiliates" of the Company
<PAGE>
as that term is defined in Rule 144 under the Securities Act. The shares of
Common Stock listed below are "restricted securities." Restricted securities may
be sold in the public market only if they have been registered under the
Securities Act or if their sales qualify for Rule 144 or another available
exemption from the registration requirements of the Securities Act.
* Any of the Conversion Shares and Warrant Shares offered for sale by
this Prospectus are freely tradeable if sold pursuant to this
Prospectus.
* The Company expects that the 535,515 shares issued by the Company in an
unregistered acquisition transaction in July 1997 (the "Photomed
Shares") will become freely-tradeable, registered shares shortly after
the date of this Prospectus.
* The 625,000 shares issued in March 1997 to the former shareholders and
option holders of LaserSight Centers (the "Centers Shares") are
expected to become eligible for sale in the public market on or after
March 14, 1998 in accordance with the requirements of Rule 144.
* Other shares of Common Stock (the "Other Shares") which the Company may
be required to issue in the future may become eligible for resale
pursuant to Rule 144, the exercise of registration rights, or
otherwise. See "Possible Dilutive Issuance of Common Stock--NNJEI;
--LaserSight Centers; --Florida Laser Partners; --The Farris Group."
Sales, or the possibility of sales, of Conversion Shares, Warrant Shares,
Photomed Shares, Centers Shares, NNJEI Shares, or Other Shares, whether pursuant
to a prospectus, Rule 144 or otherwise, could depress the market price of the
Common Stock.
Past and Expected Future Losses and Operating Cash Flow Deficits; No
Assurance of Future Profits or Positive Operating Cash Flows. The Company
incurred losses of $4.1 million and $5.5 million during 1996 and the first nine
months of 1997, respectively. During such 1996 and 1997 periods, the Company had
a deficit in cash flow from operations of $4.2 million and $3.0 million,
respectively. Although the Company achieved profitability during 1995 and 1994,
it had a deficit in cash flow from operations of $1.9 million during 1995. In
addition, the Company incurred losses in 1991 through 1993. As of September 30,
1997, the Company had an accumulated deficit of $10.1 million. The Company
expects to report a loss and a deficit in cash flow from operations for the
fourth quarter of 1997. Under the terms of the Company's sale of its MEC and
LSIA subsidiaries on December 30, 1997, the operating income of such
subsidiaries ceased to be for the account of the Company effective after
November 30, 1997. As a result, the Company's loss and deficit in cash flow from
operations for the fourth quarter of 1997 have been, and its losses and deficits
in cash flow from operations in future periods may be, greater than if the
Company had not sold MEC and LSIA. There can be no assurance that the Company
can regain or sustain profitability or positive operating cash flow.
Uncollectible Receivables Could Exceed Reserves. At September 30, 1997, the
Company's trade accounts and notes receivable aggregated approximately
$11,090,000, net of total allowances for collection losses and returns of
approximately $1,650,500. Accrued commissions, the payment of which generally
depends on the collection of such net trade accounts and notes receivable,
aggregated approximately $1,551,000 at September 30, 1997. At December 31, 1996,
the Company had restructured laser customer accounts in the aggregate amount of
approximately $1,785,000 (14.5% of the gross receivables as of such date),
resulting in the extension of the original payment terms by periods ranging from
12 to 60 months. The Company's liquidity and operating cash flow will be
adversely affected if additional extensions become necessary in the future.
Exposure to collection losses on technology-related receivables is principally
dependent on the Company's customers ongoing financial condition and their
<PAGE>
ability to generate revenues from the Company's laser systems. Approximately 87%
of net receivables at September 30, 1997 relate to international accounts. The
Company expects this percentage to increase in future periods as a result of the
Company's recent sale of its MEC and LSIA subsidiaries (substantially all of
whose receivables related to U.S. accounts). See "Recent Developments--Sale of
MEC and LSIA." The Company's ability to evaluate the financial condition and
revenue generating ability of its prospective customers located outside of the
United States is generally more limited than for customers located in the United
States. Although the Company monitors the status of its receivables and
maintains a reserve for estimated losses, there can be no assurance that the
Company's reserves for estimated losses ($1,393,000 at September 30, 1997) will
be sufficient to cover actual write-offs over time. Actual write-offs that
materially exceed amounts reserved could have a material adverse effect on the
Company's consolidated financial condition and results of operations.
Potential Liquidity Problems. During the quarter ended September 30, 1997,
the Company experienced a $2.2 million deficit in cash flow from operations (73%
of the year-to-date deficit), largely resulting from the low level of laser
system sales and the increase in the Company's research, development and
regulatory expenses. During the quarter, the Company also experienced
significant decreases in the amount of working capital (from $6.4 million to
$4.5 million) and cash and cash equivalents (from $3.1 million to $1.2 million).
As of December 31, 1997, the Company's cash and cash equivalents amounted to
approximately $3.8 million. Although the Company believes, based on preliminary
estimates, that its cash flow from operations for the fourth quarter of 1997
improved somewhat relative to the level for the third quarter of 1997 and
expects such improvement to continue in the first quarter of 1998, the Company
expects to continue to incur deficits in operating cash flow during such
quarters. The Company expects that any such improvements in cash flow from
operations will depend on, among other things, the Company's ability to market,
produce and sell its new LaserScan LSX laser systems and its A.D.K (Automated
Disposable Keratome) product on a commercial basis. See "--New Products" and
"--Minimum Payments Under A.D.K License Agreement" below. As of December 31,
1997, the LSX laser system had not made any significant contribution to the
Company's revenue. Although the Company had targeted the first A.D.K shipments
by the end of January, the Company now expects to begin to ship the A.D.K on a
commercial basis in February, 1998. Subject to these factors, the Company
believes that its balances of cash and cash equivalents, together with expected
operating cash flows and the availability of up to $2.0 million under its
revolving credit facility with Foothill will be sufficient to fund its
anticipated working capital requirements for the next six months based on modest
growth and anticipated collection of receivables. However, if the Company does
not collect timely a material portion of current receivables, experiences
significant further delays in the shipment of its LaserScan LSX or A.D.K or
experiences less market demand for such products than it anticipates, the
Company's liquidity could be materially adversely affected.
Uncertainty Regarding Availability or Terms of Capital to Satisfy Possible
Additional Needs. The Company may need additional capital, including to fund the
following:
o Any future negative cash flow from operations or the repayment on or
before June 15, 1998 of any amounts borrowed under the Company's
revolving credit facility with Foothill to finance such negative cash
flow.
o The amount of approximately $388,000 paid or payable to the holders of
the Series B Preferred Stock as a result of the delay in the completion
of registration of the Shares under the Securities Act after the
November 27, 1997 deadline specified in an agreement between the
Company and such holders.
<PAGE>
o Certain cash payment obligations under the Company's LASIK Pre-Market
Approval ("PMA") application acquisition agreement of July 1997 with
Photomed, Inc. ("Photomed"). (Such cash payment obligations include (i)
$1.75 million payable if the FDA approves the LASIK PMA application for
commercial sale before July 29, 1998 and (ii) if the FDA approves the
Company's scanning laser for commercial sale in the U.S. before January
1, 1999, $3,663 for each day (or approximately $110,000 for each month)
between the date of such approval and January 1, 1999, subject to a
maximum of $1.0 million.)
o Additional working capital necessary to develop a production line a
LASIK laser system and to obtain the GMP (Good Manufacturing Practice)
clearance from the FDA that is required for the commercial sale of the
LASIK laser system.
o Additional working capital necessary to support the commercial
introduction of its laser systems into the U.S. market after receiving
FDA approval. (The Company believes the earliest these expenses might
occur is the second half of 1998.)
In addition, the Company may seek alternative sources of capital to fund its
product development activities and to consummate future strategic acquisitions.
Except for additional borrowing available (as of December 31, 1997, up to
$2.0 million) under its revolving credit facility with Foothill through June 15,
1998 and an aggregate of approximately $6.5 million (subject to certain
post-closing adjustments) scheduled to be received in increasing monthly
installments from February through May of 1998 from the sale or redemption of
shares of the common stock of Vision Twenty-One, Inc. ("Vision 21") received by
the Company in connection with its December 1997 sale of MEC and LSIA (see
"Recent Developments--Sale of MEC and LSIA"), the Company has no commitments or
proposals from third parties to supply additional capital, and there can be no
assurance as to whether or on what terms the Company could obtain additional
capital. On December 30, 1997, the Company and Foothill amended the Foothill
loan facility (i) to make the term loan ($2.0 million at December 31, 1997)
payable in full on June 15, 1998 (rather than in monthly installments of $1.33
million beginning on May 1, 1998) and (b) to make availability of all borrowings
under the revolving loan facility terminate on June 15, 1998 (rather than
declining by $1.33 million per month beginning on August 1, 1998).
To the extent that the Company satisfies its future financing requirements
through the sale of equity securities, holders of Common Stock may experience
significant dilution in earnings per share and in net book value per share. Such
dilution may be more significant if the Company were again to sell additional
preferred stock with a conversion price linked to the market price of the Common
Stock at the time of conversion (as is the case with the Series B Preferred
Stock). The Foothill financing or other debt financing could result in a
substantial portion of the Company's cash flow from operations being dedicated
to the payment of principal and interest on such indebtedness and may render the
Company more vulnerable to competitive pressures and economic downturns.
Adverse Consequences if Company Cannot Receive Agreed-Upon Value of Its
Vision 21 Shares. As described in more detail under "Recent Developments--Sale
of MEC and LSIA," Vision 21 has agreed to pay to the Company on May 29, 1998 an
amount equal to the amount (the "Shortfall Payment"), if any, by which the gross
proceeds of sales of shares of Vision 21 stock received by the Company in
connection with its sale of MEC and LSIA fall short of $6.5 million (subject to
certain post-closing adjustments). Both the value of the Vision 21 Shares and
the ability of Vision 21 to make the Shortfall Payment (if any is required) is
subject to risks, including without limitation the risks disclosed in Vision
21's filings with the SEC. Such filings are available from the sources described
<PAGE>
under "Available Information" below. The Company takes no responsibility for any
information included in or omitted from any SEC filing by Vision 21. Such
filings are not part of this Prospectus and are not incorporated by reference
herein. To the extent that the liquidation of the Company's Vision 21 stock does
not occur according to the schedule specified in the Company's agreement with
Vision 21, or any required Shortfall Payment is not paid when due, the Company's
liquidity and financial condition may be materially adversely affected.
Possible Dilutive Issuance of Common Stock--LaserSight Centers. The Company
has agreed, based on a previously-reported acquisition agreement (the "Centers
Agreement") entered into in 1993 and modified in July 1995 and March 1997, to
issue to the former shareholders and option holders (including two trusts
related to the Chairman of the Board of the Company and certain former officers
and directors of the Company) of LaserSight Centers, the Company's
development-stage subsidiary, up to 600,000 unregistered shares of Common Stock
(the "Centers Contingent Shares") based on the Company's future pre-tax
operating income through March 2002 from performing PRK, PTK or other refractive
laser surgical procedures. The Centers Contingent Shares are to be issued at the
rate of one share per $4.00 of such operating income. As of December 31, 1997,
the Company had not accrued any amount of such pre-tax operating income. There
can be no assurance that any issuance of Centers Contingent Shares will be
accompanied by an increase in the Company's per share operating results. The
Company is not obligated to pursue strategies that may result in the issuance of
Centers Contingent Shares. It may be in the interest of the Chairman of the
Board for the Company to pursue business strategies that maximize the issuance
of Centers Contingent Shares.
Possible Dilutive Issuance of Common Stock--Florida Laser Partners. Based
on a previously-reported royalty agreement entered into in 1993 and modified in
July 1995 and March 1997, the Company is obligated to pay to a partnership whose
partners include the Chairman of the Board of the Company and certain former
officers and directors of the Company a royalty of up to $43 (payable in cash or
shares of Common Stock based on its then-current market value (the "Royalty
Shares")), for each eye on which laser refractive optical surgical procedure is
conducted on an excimer laser system owned or operated by LaserSight Centers or
its affiliates. No such payment obligation had arisen as of December 31, 1997
because royalties do not begin to accrue until the earlier of March 2002 or the
delivery of an additional 600,000 Centers Contingent Shares (none of which had
accrued as of such date). There can be no assurance that any issuance of Royalty
Shares will be accompanied by an increase in the Company's per share operating
results. It may be in the interest of the Chairman of the Board for the Company
to pursue business strategies that maximize the issuance of Royalty Shares.
Possible Dilutive Issuance of Common Stock--The Farris Group. To the extent
that an earnout provision relating to the Company's acquisition of The Farris
Group in 1994 is satisfied based on certain annual pre-tax income targets
through December 31, 1998, the Company would be required to issue to the former
owner of such company (Mr. Michael R. Farris, the President and Chief Executive
Officer of the Company) up to 750,000 shares of Common Stock (collectively,
"Farris Contingent Shares"). To date, 406,700 Farris Contingent Shares have been
issued based on the operating results of the Farris Group through December 31,
1995. As a result of the losses The Farris Group incurred during 1996 and 1997,
no Farris Contingent Shares became issuable for 1996 or 1997. If additional
Farris Contingent Shares become issuable, goodwill and the resulting
amortization expense will increase. There can be no assurance that any issuance
of Farris Contingent Shares will be accompanied by an increase in the Company's
per share operating results.
Possible Dilutive Issuance of Common Stock--Photomed. In connection with
its acquisition in July 1997 of the rights to the PMA application filed with the
FDA for a LASIK laser, the Company issued 535,515 shares of Common Stock. The
Company also agreed that, if the FDA approves a LaserSight-manufactured laser
system for general commercial use in the treatment of hyperopia (farsightedness)
<PAGE>
after having approved the Company's LASIK PMA application for commercial sale,
then the Company would be required to issue additional shares of Common Stock
with a market value of $1.0 million (based on the average closing price of the
Common Stock during the preceding 10-day period). If such market value had been
computed as of January 23, 1998, the number of additional shares issuable would
have been approximately 350,000. Depending on whether and when such FDA approval
is received and on the market price of the Common Stock at the time of any such
approval, the actual number of additional shares issuable could be more (but not
more than permitted under the listing rules of The NASDAQ Stock Market) or less
than this number.
Possible Dilutive Issuance of Common Stock--NNJEI. In connection with the
acquisition of the assets of the Northern New Jersey Eye Institute ("NNJEI") by
the Company's LSIA subsidiary in July 1996, the Company agreed to issue up to
102,798 additional shares of Common Stock if average closing price of the Common
Stock during the 10-day period immediately preceding July 15, 1998 is less than
$15 per share. All 102,798 shares will be issuable unless such average closing
price is more than $10 per share. The Company's recent sale of LSIA (see "Recent
Developments--Sale of MEC and LSIA") does not affect this contingent obligation.
Acquisition- and Financing-Related Contingent Commitments to Issue
Additional Common Shares. The Company may from time to time include in future
acquisitions and financings provisions which would require the Company to issue
additional shares of its Common Stock a future date based on the market price of
the Common Stock at such date. Persons who are the beneficiaries of such
provisions effectively receive some protection from declines in the market price
of the Common Stock, but other shareholders of the Company will incur additional
dilution of their ownership interest in the event of a decline in the price of
the Common Stock. The factors to be considered by the Company in including such
provisions may include the Company's cash resources, the trading history of
Common Stock, the negotiating position of the selling party or the investors, as
applicable, and the extent to which the Company estimates that the expected
benefit from the acquisition or financing exceeds the expected dilutive effect
of the price-protection provision.
Dependence on Key Personnel. The Company is dependent on its executive
officers and other key employees, especially Michael R. Farris, its President
and Chief Executive Officer, and J. Richard Crowley, the President of its
LaserSight Technologies subsidiary. A loss of one or more such officers or key
employees, especially of Mr. Farris or Mr. Crowley, could have a material
adverse effect on the Company's business. The Company does not carry "key man"
insurance on Mr. Farris, Mr. Crowley or any other officers or key employees.
Risks Associated with Past and Possible Future Acquisitions. The Company
has made several significant acquisitions since 1994, including MRF in 1994,
Photomed in 1997, and its acquisition of certain laser patents (the "IBM
Patents") from International Business Machines Corporation ("IBM") in August
1997. These acquisitions, as well as any future acquisition, may not achieve
adequate levels of revenue, profitability or productivity or may not otherwise
perform as expected. Acquisitions involve special risks, including unanticipated
liabilities and contingencies, diversion of management attention and possible
adverse effects on operating results resulting from increased goodwill
amortization, increased interest costs, the issuance of additional securities
and difficulties related to the integration of the acquired businesses. Although
the Company is currently focusing on its existing operations, the future ability
of the Company to achieve growth through acquisitions will depend on a number of
factors, including the availability of attractive acquisition opportunities, the
availability of funds needed to complete acquisitions, the availability of
working capital needed to fund the operations of acquired businesses and the
effect of existing and emerging competition on operations. Should additional
<PAGE>
acquisitions be sought, there can be no assurance that the Company will be able
to successfully identify additional suitable acquisition candidates, complete
additional acquisitions or integrate acquired businesses into its operations.
Amortization of Significant Intangible Assets. Of the Company's total
assets at September 30, 1997, approximately $31.1 million (57%) were intangible
assets, of which approximately $14.8 million reflects goodwill (which is being
amortized using an estimated life ranging from 12 to 25 years), approximately
$11.5 million reflects the cost of patents (which is being amortized over a
period ranging from 8 to 17 years), and approximately $4.8 million reflects the
cost of licenses and technology acquired (which is being amortized over a period
ranging from 31 months to 12 years). The Company's sale of MEC and LSIA in
December 1997 (see "Recent Developments--Sale of MEC and LSIA") reduced such
intangible assets by approximately $7.5 million. Intangible assets will be
further decreased by approximately $6 million upon the closing of the Company's
recent patent agreement with Nidek. See "Recent Developments--Nidek Patent
Transactions." Goodwill is an intangible asset that represents the difference
between the total purchase price of the acquisitions and the amount of such
purchase price allocated to the fair value of the net assets acquired. Goodwill
and other intangibles are amortized over a period of time, with the amount
amortized in a particular period constituting a non-cash expense that reduces
the Company's net income (or increases the Company's net loss) in that period. A
reduction in net income resulting from the amortization of goodwill and other
intangibles may have an adverse impact upon the market price of the Company's
Common Stock. In addition, in the event of a sale or liquidation of the Company
or its assets, there can be no assurance that the value of such intangible
assets would be recovered.
In accordance with SFAS 121, the Company reviews intangible assets for
impairment whenever events or changes in circumstances, including a history of
operating or cash flow losses, indicate that the carrying amount of an asset may
not be recoverable. In such cases, the carrying amount of the asset is compared
to the estimated undiscounted future cash flows expected to result from the use
of the asset and its eventual disposition. If the sum of the expected
undiscounted future cash flows is less than the carrying amount of the asset, an
impairment loss will be computed and recognized in accordance with SFAS 121.
Expected cash flows are based on factors including historical results, current
operating budgets and projections, industry trends and expectations, and
competition.
Year 2000 Concerns. The Company believes that it has prepared its computer
systems and related applications to accommodate date-sensitive information
relating to the Year 2000. The Company expects that any additional costs related
to ensuring such systems to be Year 2000-compliant will not be material to the
financial condition or results of operations of the Company. Such costs will be
expensed as incurred. In addition, the Company is discussing with its vendors
the possibility of any interface difficulties which may affect the Company. To
date, no significant concerns have been identified. However, there can be no
assurance that no Year 2000-related operating problems or expenses will arise
with the Company's computer systems and software or in their interface with the
computer systems and software of the Company's vendors.
Government Regulation. The Company's laser products are subject to strict
governmental regulations which materially affect the Company's ability to
manufacture and market these products and directly impact the Company's overall
prospects. All laser devices to be marketed in interstate commerce are subject
to the laser regulations required by the Radiation Control for Health and Safety
Act, as administered by the U.S. Food and Drug Administration (the "FDA"). Such
Act imposes design and performance standards, labeling and reporting
requirements, and submission conditions in advance of marketing for all medical
laser products. The Company's laser systems produced for medical use require
pre-market approval (PMA) by the FDA before they can be marketed in the United
States. Each separate medical device requires a separate FDA submission, and
specific protocols have to be submitted to the FDA for each claim made for each
<PAGE>
medical device. In addition, laser products marketed in foreign countries are
often subject to local laws governing health product development processes which
may impose additional costs for overseas product development. The Company cannot
determine the costs or time it will take to complete the approval process and
the related clinical testing for its medical laser products. Future legislative
or administrative requirements in the United States, or elsewhere, may adversely
affect the Company's ability to obtain or retain regulatory approval for its
laser products. The failure to obtain required approvals on a timely basis could
have a material adverse effect on the Company's business, financial condition
and results of operations.
The Company has completed clinical studies in Phase 2a and 2b for PRK. Such
data were presented to the FDA and on September 17, 1997 the Company was granted
permission to expand into Phase 3 Myopic PRK studies. The Phase 3 PRK clinical
investigation is now under way. The Company is also conducting a Phase 2 trial
for PARK (Photo-Astigmatic Refractive Keratectomy). The FDA has informed the
Company that it may combine the results from all its studies in its PMA
application. That application is being prepared for submission in early 1998.
The Company also has an Investigational Device Exemption approved by the FDA for
the treatment of glaucoma by laser trabeculodissection. The Company has recently
completed a Phase 1 study in blind eyes and will submit the results to the FDA
to request expansion into a small population of sighted glaucoma patients.
The Company received a 510(k) clearance from the FDA for its
recently-announced A.D.K on January 19, 1998, thereby allowing the A.D.K to be
sold and used on a commercial basis in the U.S.
Uncertainty Concerning Patents--International. Should LaserSight
Technologies' lasers infringe upon any valid and enforceable patents in
international markets, then LaserSight Technologies may be required to obtain
licenses for such patents. Should such licenses not be obtained, LaserSight
Technologies might be prohibited from manufacturing or marketing its PRK-UV
lasers in those countries where patents are in effect. The Company's
international sales accounted for 47% and 42%, of the Company's total revenues
during 1996 and the nine months ended September 30, 1997, respectively. The
Company expects such percentages to increase in future periods as a result of
its recent sales of MEC and LSIA. See "Recent Developments--Sale of MEC and
LSIA."
Uncertainty Concerning Patents--U.S. Should LaserSight Technologies' lasers
infringe upon any valid and enforceable patents held by Pillar Point Partners (a
partnership of which the general partners are subsidiaries of Visx and Summit
Technologies) in the U.S., then LaserSight Technologies may be required to
obtain a license for such patents. In connection with its March 1996 settlement
of litigation with Pillar Point Partners, the Company agreed to notify Pillar
Point Partners before the Company begins manufacturing or selling its laser
systems in the United States. Should such licenses be required but not obtained,
LaserSight Technologies might be prohibited from manufacturing or marketing its
PRK-UV lasers in the U.S.
Competition. The vision correction industry is subject to intense,
increasing competition. The Company competes against both alternative and
traditional medical technologies (such as eyeglasses, contact lenses and radial
keratotomy ("RK")) and other laser manufacturers. Many of the Company's
competitors have existing products and distribution systems in the marketplace
and are substantially larger, better financed, and better known. A number of
lasers manufactured by other companies have either received, or are much further
advanced in the process of receiving, FDA approval for specific procedures, and,
accordingly, may have or develop a higher level of acceptance in some markets
than the Company's lasers. The entry of new competitors into the markets for the
Company's products could cause downward pressure on the prices of such products
and a material adverse effect on Company's business, financial condition and
results of operations.
<PAGE>
Technological Change. Technological developments in the medical and laser
industries are expected to continue at a rapid pace. Newer technologies and
surgical techniques could be developed which may offer better performance than
the Company's laser systems. The success of any competing alternatives to PRK
could have a material adverse effect on the Company's business, financial
condition and results of operations.
New Products. There can be no assurance that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction and marketing of its new LaserScan LSX excimer laser, its
recently-announced A.D.K, and other new products and enhancements, or that its
new products and enhancements will be accepted in the marketplace. As is typical
in the case of new and rapidly evolving industries, demand and market acceptance
for recently-introduced technology and products are subject to a high level of
uncertainty. In addition, announcements of new products (whether for sale in the
near future or at some later date) may cause customers to defer purchasing
existing Company products.
Minimum Payments Under A.D.K License Agreement. In addition to the risks
relating to the introduction of any new product (see "--New Products") above,
the Company's recently-announced A.D.K is subject to the risk that the Company
is required to make certain minimum payments to the licensors under its limited
exclusive license agreement relating to the A.D.K. Under that agreement, the
Company is required to pay a total of $300,000 in two installments due six and
12 months after the date of the Company's receipt of completed limited
production molds for the A.D.K. The Company expects to receive such molds in the
near future. In addition, commencing seven months after such date, the Company
royalty payments (50% of its gross profits from A.D.K sales) will become subject
to a minimum of $400,000 per quarter.
Uncertainty of Market Acceptance of Laser-Based Eye Treatment. The Company
believes that its achievement of profitability and growth will depend in part
upon broad acceptance of PRK or LASIK in the United States and other countries.
There can be no assurance that PRK or LASIK will be accepted by either the
ophthalmologists or the public as an alternative to existing methods of treating
refractive vision disorders. The acceptance of PRK and LASIK may be affected
adversely by their cost, possible concerns relating to safety and efficacy,
general resistance to surgery, the effectiveness and lower cost of alternative
methods of correcting refractive vision disorders, the lack of long-term
follow-up data, the possibility of unknown side effects, the lack of third-party
reimbursement for the procedures, any future unfavorable publicity involving
patient outcomes from use of PRK or LASIK systems, and the possible shortages of
ophthalmologists trained in the procedures. The failure of PRK or LASIK to
achieve broad market acceptance could have a material adverse effect on the
Company's business, financial condition and results of operations.
International Sales. International sales may be limited or disrupted by the
imposition of government controls, export license requirements, political
instability, trade restrictions, changes in tariffs, difficulties in staffing
and coordinating communications among and managing international operations.
Additionally, the Company's business, financial condition and international
results of operations may be adversely affected by increases in duty rates,
difficulties in obtaining export licenses, ability to maintain or increase
prices, and competition. To date, all sales made by the Company have been
denominated in U.S. dollars. Due to its export sales, however, the Company is
subject to currency exchange rate fluctuations in the U.S. dollar, which could
increase the price in local currencies of the Company's products. This could in
turn result in longer payment cycles and greater difficulty in collection of
receivables. See "--Receivables" above. Although the Company has not experienced
any material adverse effect on its operations as a result of such regulatory,
political and other factors, there can be no assurance that such factors will
<PAGE>
not have a material adverse effect on the Company's operations in the future or
require the Company to modify its business practices.
Potential Product Liability Claims; Limited Insurance. As a producer of
medical devices, the Company may face liability for damages to users of such
devices in the event of product failure. The testing and use of human care
products entails an inherent risk of negligence or other action. An award of
damages in excess of the Company's insurance coverage could have a material
adverse effect on the Company's business, financial condition and results of
operations. While the Company maintains product liability insurance, there can
be no assurance that any such liability of the Company will be included within
its insurance coverage or that damages will not exceed the limits of its
coverage. The Company's insurance coverage is limited to $6,000,000, including
up to $5,000,000 of coverage under an excess liability policy.
Supplier Risks. The Company contracts with third parties for certain
components used in its lasers. Several of these components are provided by a
single vendor. If any of these sole-source suppliers were to cease providing
components to the Company, the Company would have to locate and contract with a
substitute supplier, and there can be no assurances that such substitute
supplier could be located and qualified in a timely manner or could provide
required components on commercially reasonable terms. An interruption in the
supply of laser components could have a material adverse effect on the Company's
business, financial condition and results of operations.
No Backlog; Concentration of Sales at End of Quarter. The Company has
historically operated with little or no backlog because its products are
generally shipped as orders are received. Historically, the Company has received
and shipped a significant portion of its orders for a particular quarter near
the end of the quarter. As a result, the Company's operating results for any
quarter often depend on orders received and laser systems shipped late in that
quarter. Any delay in such orders or shipments may cause a significant
fluctuation in period-to-period operating results.
USE OF PROCEEDS
If all of the Series B Warrants (with an exercise price of $5.91 per share)
are exercised, the Company will realize proceeds in the amount of $4,668,900.
Such proceeds will be contributed to the working capital of the Company and used
for general corporate purposes. The Company will not receive any proceeds from
any sale of the Shares by the Selling Shareholders.
RECENT DEVELOPMENTS
Sale of MEC and LSIA. On December 30, 1997, the Company sold its MEC and
LSIA subsidiaries to Vision 21 in a transaction which was effective as of
December 1, 1997. The total consideration paid by Vision 21 to the Company
consisted of $6.5 million in cash paid at the closing and 820,085 unregistered
shares of Vision 21 common stock, subject to certain post-closing adjustments
described below (such shares, the "Vision 21 Shares") and excluding the
Company's estimated transaction costs of approximately $400,000. The Vision 21
Shares are to be liquidated pursuant to the following schedule (or sooner, at
Vision 21's option):
<PAGE>
Month Approximate
(1998) Percentage
------ ----------
February........ 21%
March........... 21%
April........... 28%
May............. 30%
---
Total........ 100%
====
Vision 21 has agreed to liquidate the Vision 21 Shares by a sale through a
market maker designated by Vision 21 pursuant to a shelf registration statement
or a private placement, or its repurchase of the Vision 21 Shares. The Company
is entitled to receive a minimum of $6,500,000 and a maximum of $7,475,000 from
the liquidation of the Vision 21 Shares. If the Company has not received at
least $6,500,000 (subject to certain post-closing adjustments described below)
from the liquidation of Vision 21 Shares by May 29, 1998, then on such date
Vision 21 is to pay the Company such shortfall in cash.
The Vision 21 Shares represent approximately 6.5% of Vision 21's
outstanding common stock (based on the number of shares that Vision 21
represented to the Company to be outstanding immediately after giving effect to
the issuance of the Vision 21 Shares). Vision 21's common stock has traded on
the Nasdaq Stock Market since August 18, 1997, the date of Vision 21's initial
public offering at a price of $10.00 per share. Since that date, the market
price of Vision 21's common stock has ranged from $7.00 to $15.00. On January
22, 1998, the closing price of Vision 21's common stock was $8.50.
Although the Company's agreement with Vision 21 contemplates that the
amount of post-closing adjustments could be as much as $1.5 million, the Company
estimates, as of the date of this Prospectus, that the amount of post-closing
adjustment will be approximately $300,000. This preliminary estimate is subject
to change and reflects the anticipated effect of the following adjustments: The
Company is required to reimburse Vision 21 for operating profits for the month
of December 1997 generated by MEC and LSIA, negative working capital as of
November 30, 1997 of MEC and LSIA less than negative $180,000, if any, and
negative net worth as of November 30, 1997 for MEC and LSIA, if any. In
addition, if prior to December 31, 1998 Vision 21 does not enter into certain
practice management agreements with NNJEI and an affiliated physician, or absent
such agreements, if the benefits Vision 21 derives from existing practice
management agreements for the period ending December 31, 1998 is less than
$133,000, then the Company is required to reimburse Vision 21 for such shortfall
on a dollar-for-dollar basis up to a maximum reimbursement of $500,000.
Reduction in Foothill Borrowings. On December 30, 1997, the Company used
$2.0 million of its cash proceeds from the sale of MEC and LSIA to reduce the
principal balance of the Company's term loan with Foothill from $4.0 million to
$2.0 million. The Company also used approximately $1.5 million of cash proceeds
from the sale to repay in full the balance under its revolving loan facility
with Foothill as of December 30, 1997.
Restructuring of Foothill Loan Facility. Effective as of December 30,
1997, the Company restructured the terms of its agreements with Foothill as
follows: The maximum amount available under its revolving loan facility has been
reduced to $2.0 million. In addition, the Company pledged its Vision 21 Shares
to Foothill as collateral. After the Company has received aggregate gross
proceeds of $2.5 million from the liquidation of the Vision 21 Shares, it must
first apply any additional proceeds to repay its term loan with Foothill, and
apply any balance of such proceeds to retire any then-outstanding advances under
its revolving loan with Foothill. In any event, the Company's term loan and
<PAGE>
revolving loan are to be paid in full by June 15, 1998. Until June 16, 1998,
Foothill has waived the Company's compliance with the financial covenants
contained in the agreements between the Company and Foothill.
Nidek Patent Transactions. In January 1998, the Company entered into
definitive agreements with Nidek Co., Ltd., a Japanese surgical and diagnostic
products company ("Nidek"), that provide for the Company to grant to Nidek
certain rights in the IBM Patents in exchange for Nidek's payment of $7.5
million in cash at the closing, subject to withholding of up to $200,000 for
Japanese taxes. The Company expects the transaction to close prior to the end of
January 1998, subject to the approval of both the holders of the Series B
Preferred Stock and Foothill. Under the agreements, the Company will transfer to
Nidek all rights in those IBM Patents which have been issued in countries
outside of the United States (the "Non-U.S. Patents"). The Company will receive
from Nidek an exclusive license to use and sublicense the Non-U.S. Patents in
all fields other than the ophthalmic, cardiovascular and vascular fields. In
addition, the Company will retain ownership of the IBM Patents issued in the
United States, and will grant Nidek a non-exclusive license to use such patents.
The Nidek transactions will not affect the rights of the Company or other
companies to use the IBM Patents in any country covered by existing license
agreements. The Nidek transactions are not expected to result in any current
gain or loss. They will, however, reduce the Company's amortization expense over
the remaining useful life of the Non-U.S. IBM Patents. The Nidek transactions
also will result in approximately $1.2 million of prepaid royalties that will be
amortized to income over time.
<PAGE>
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
at September 30, 1997, (ii) the capitalization of the Company at such date, as
adjusted to reflect the redemption of 305 shares of Series B Preferred Stock on
October 28, 1997 and (iii) the pro forma capitalization of the Company at
September 30, 1997, as adjusted to reflect the sale of the Company's MEC and
LSIA subsidiaries on December 30, 1997. See "Recent Developments--Sale of MEC
and LSIA."
<TABLE>
<CAPTION>
September 30, 1997
------------------------------------------------
Pro Forma(1)
Actual As Adjusted As Adjusted
------ ----------- -----------
<S> <C> <C> <C>
Current portion of capital lease obligation $ 224,549 $ 224,549 $ --
=========== =========== ===========
Long-term obligations $ 971,018 $ 971,018 $ 500,000
---------- ---------- -----------
Redeemable Convertible Preferred Stock, Series B,
par value $.001 per share; authorized 10,000,000
shares; actual 1,600 shares; as adjusted and pro
forma as adjusted 1,295 shares 14,374,027 11,633,978 11,633,978
---------- ---------- ----------
Stockholders' equity:
Common Stock, par value $.001 per share
authorized 20,000,000 shares; actual, as
adjusted, and pro forma as adjusted 10,149,872
shares 10,150 10,150 10,150
Additional paid-in capital 40,018,241 39,586,290 39,586,290
Paid-in capital-warrants 592,500 592,500 592,500
Stock subscription receivable (1,140,000) (1,140,000) (1,140,000)
Accumulated deficit (10,112,240) (10,112,240) (7,203,080)
Treasury stock, actual, as adjusted, and pro
forma as adjusted 170,200 shares (632,709) (632,709) (632,709)
------------- ------------- -------------
Stockholders' equity 28,735,942 28,303,991 31,213,151
------------- ------------- -------------
Total capitalization $ 44,080,987 $ 40,908,987 $ 43,347,129
============= ============= =============
<FN>
- ---------------------
(1) The pro forma adjustments are as follows:
(i) The liabilities included in the balance sheet of MEC and LSIA as of
September 30, 1997 have been eliminated.
(ii) The pro forma gain on the sale of MEC and LSIA assumes the transaction
occurred on September 30, 1997. Such gain reflects the $13.0 million sale price
less $0.7 million in estimated post-closing adjustments and transaction costs,
for a net selling price of $12.3 million. Deducted from such net selling price
are the net book value at September 30, 1997 of MEC (approximately $5.9 million)
and LSIA (approximately $2.3 million), and the pro forma income tax liabilities
at statutory rates of approximately $1.5 million, resulting in a pro forma gain
on the sale of MEC and LSIA of approximately $2.5 million. Such pro forma gain
will vary from the actual gain based on the actual effective income tax rates,
the change in net book value of MEC and LSIA from September 30, 1997 to November
30, 1997 and the actual post-closing adjustments and transaction costs. The
Company estimates its gain will approximate $1.5 million.
</FN>
</TABLE>
<PAGE>
DESCRIPTION OF SECURITIES
The following description of the Company's capital stock is not complete
and is subject in all respects to the Delaware General Corporation Law (the
"DGCL") and to the provisions of the Company's Certificate of Incorporation, as
amended (the "Charter"), and By-Laws.
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock and 10,000,000 shares of preferred stock, $.001 par value,
issuable in series. As of January 22, 1998, 9,984,672 shares of Common Stock
were outstanding (not including shares issuable upon the exercise of outstanding
stock options or upon the conversion of outstanding preferred stock). As of such
date, the only shares of preferred stock outstanding were 1,295 shares of the
Series B Preferred Stock.
Common Stock
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to share pro rata in
such dividends and other distributions, if any, as may be declared by the Board
of Directors out of funds legally available therefor, subject to any prior
rights accruing to any holders of preferred stock. Upon the liquidation or
dissolution of the Company, the holders of Common Stock are entitled to share
proportionally in all assets available for distribution to such holders. Holders
of Common Stock have no preemptive, redemption or conversion rights. The
outstanding shares of Common Stock issued are fully paid and nonassessable.
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
Preferred Stock
The Board of Directors is authorized, subject to certain limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 10,000,000 shares of preferred stock in one or more
series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each such series,
including the dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption (including sinking fund provisions), redemption price or
prices, liquidation preferences and the number of shares constituting any series
or designations of such series. The rights, preferences and privileges of
holders of Common Stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock which the
Company may designate and issue.
Series A Preferred Stock
On January 10, 1996, the Company issued 116 shares of Series A Convertible
Preferred Stock, par value $.001 per share (the "Series A Preferred Stock"). All
of such shares had been converted into Common Stock.
<PAGE>
Series B Preferred Stock
On August 29, 1997, the Company issued 1,600 shares of Series B Preferred
Stock. On October 28, 1997, the Company completed an optional redemption of 305
of such shares by paying $3,172,000 (including a 4% redemption premium). The
Company's option to redeem additional shares of Series B Preferred Stock has
expired.
The Series B Preferred Stock is convertible in whole or in part into Common
Stock at the option of any holder of Series B Preferred Stock on any date or
dates until August 29, 2000, on which date all Series B Preferred Stock
remaining outstanding will automatically be converted into Common Stock,
provided that all shares of Common Stock issuable upon conversion of all
outstanding shares of Preferred Stock are then (i) authorized and reserved for
issuance, (ii) registered under the Securities Act for resale and (iii) eligible
to be traded on either the Nasdaq National Market, the Nasdaq Small Cap Market,
the New York Stock Exchange or the American Stock Exchange. As of any applicable
conversion date, the Conversion Price will equal the lesser of $6.68 per share
of Common Stock or the average of the three lowest closing bid prices of the
Common Stock during the 20 trading days preceding such conversion date (during
the 30 trading days preceding the conversion date if the five-day average
closing bid price of the Common Stock on February 25, 1998 is less than $5.138
per share). If a conversion occurs when the Common Stock is not listed on the
Nasdaq National Market, the American Stock Exchange or the New York Stock
Exchange, the otherwise-applicable Conversion Price will be multiplied by 0.93.
Dividends on the Series B Preferred Stock are payable only to the extent
that dividends are payable on the Company's Common Stock. Each outstanding share
of Series B Preferred Stock entitles the holder thereof to a liquidation
preference equal to the sum of $10,000 plus the amount of unpaid dividends, if
any, accrued on such share.
In addition, the Series B Preferred Stock is subject to redemption at the
option of its holders should the Company default on certain of its obligations.
Under one of these provisions, if for any reason the Company's shareholders do
not approve by February 28, 1998 the possible issuance of an indefinite number
of shares of Common Stock upon conversion of the Series B Preferred Stock, the
Company will be obligated to redeem, at the Special Redemption Price (as defined
below), a number of shares of Series B Preferred Stock sufficient to cause the
number of Shares issuable after giving effect to such partial redemption to
equal no more than 50% of the number of common shares that could then be issued
without breaching the 1,995,534 share limitation resulting from a listing rule
of the Nasdaq National Market. Under another provision, any holder of Series B
Preferred Stock will have the right to require the Company to redeem all or a
portion of such holder's Series B Preferred Stock for cash, at the Special
Redemption Price (i) subject to limited exceptions, if for the registration
statement which includes this Prospectus becomes unavailable for the resale of
Conversion Shares or Warrant Shares, or (ii) if the Company becomes required to
register additional Conversion Shares, but for any reason fails to cause a
registration statement relating to such shares declared effective by the SEC
within 30 days after such obligation first arises. For this purpose, the
"Special Redemption Price" means a cash payment equal to the greater of (i) the
liquidation preference of $10,000 multiplied by 1.25 or (ii) a fraction, the
numerator of which would equal the highest closing bid price of the Common Stock
during the period beginning 10 trading days before the redemption date and
ending five business days after such date, and the denominator of which would
equal the Conversion Price (as herein defined) that would have been applicable
if the preferred shares had been converted as of the redemption date. Such
redemption must be completed within five business days of the event which
required such redemption. Any delay in payment beyond such five business days
will cause such redemption amount to accrue interest at the rate of 1% per month
during the first 30 days, pro rated daily (2% monthly, pro rated daily,
thereafter).
<PAGE>
Delaware Law and Certain Charter Provisions
The Company is subject to the provisions of Section 203 of the DGCL.
Subject to certain exceptions, Section 203 prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the interested
stockholder attained such status with the approval of the corporation's board of
directors or unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder which is not
shared pro rata with the other stockholders of the Company. Subject to certain
exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of a
corporation's voting stock.
The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or by-laws, unless a corporation's certificate of
incorporation or by-laws, as the case may be, requires a greater percentage. In
addition, the By-Laws of the Company may, subject to the provisions of DGCL, be
amended or repealed by a majority vote of the Company's Board of Directors.
The Charter contains certain provisions permitted under the DGCL relating
to the liability of directors. These provisions eliminate a director's liability
for monetary damages for a breach of fiduciary duty, except in certain
circumstances involving certain wrongful acts, such as the breach of a
director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. The Charter contains provisions
indemnifying the directors and officers of the Company to the fullest extent
permitted by the DGCL. The Company also has a directors' and officers' liability
insurance policy which provides for indemnification of its directors and
officers against certain liabilities incurred in their capacities as such. The
Company believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as directors.
Warrants
In connection with the private placement of Series A Preferred Stock on
January 10, 1996, the Company issued to its placement agent and to an assignee
of the placement agent, the 1996 Warrants to purchase a total of 17,509 shares
of Common Stock at an exercise price of $13.25 per share. The 1996 Warrants may
be exercised at any time through January 10, 1999.
In connection with the establishment of its Foothill credit facility in
April 1997, the Company issued to Foothill warrants (the "Foothill Warrants") to
purchase 500,000 shares of Common Stock at an exercise price of $6.0667 per
share. In addition, the Foothill Warrants have certain anti-dilution features
which provide for approximately 50,000 additional shares as a result of the
issuance of the Series B Preferred Stock and a corresponding reduction in the
exercise price to $5.52 per share. The Foothill Warrants may be exercised at any
time after March 31, 1998 but prior to April 1, 2002.
In connection with the 1997 Private Placement, the Company agreed to issue
to the holders and the Placement Agent the Series B Warrants to purchase 750,000
and 40,000 Warrant Shares at a price of $5.91 per share at any time before
August 29, 2002. The Company is obligated to maintain the effectiveness of the
registration of the Warrant Shares under the Securities Act.
<PAGE>
PLAN OF DISTRIBUTION
Conversion Shares. The Company will issue Conversion Shares upon the
conversion from time to time of the outstanding shares of Series B Preferred
Stock pursuant to the terms governing the Series B Preferred Stock.
Warrant Shares. The Company will issue Warrant Shares from time to time
upon the exercise of the Series B Warrants by the holders thereof. The Company
will receive from such holders the exercise price of the Series B Warrants upon
such exercise. The Series B Preferred Stock and Series B Warrants were issued by
the Company in a private placement in August 1997. See "Description of
Securities."
The Company will not receive any proceeds from the resale of the Shares.
All or a portion of the Shares may be sold from time to time pursuant to
this Prospectus by the Selling Shareholders or, subject to certain conditions,
their pledgees, donees, transferees or other successors-in-interest, including,
without limitation, Bear, Stearns International Limited. The Company has been
advised by the Selling Shareholders that there are no underwriting arrangements
with respect to the sale of Common Stock and that the Shares will be offered for
sale in transactions on The Nasdaq Stock Market, in negotiated transactions or
through a combination of both, at prices related to such prevailing market
prices at the time of sale, or at negotiated prices. The Selling Shareholders
may effect such transactions by selling the Shares to or through broker-dealers,
and such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders and/or the purchasers
of the Shares for which such broker-dealers may act as agent or to whom they
sell as principal, or both (which compensation may be in excess of customary
commissions). In addition, any securities covered by this Prospectus which
qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than
pursuant to this Prospectus.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers.
The Selling Shareholders and any broker-dealer who acts in connection with
the resale of the Shares hereunder, may be deemed to be an "underwriter" within
the meaning of Section 2(11) of the Securities Act, and any commissions received
by them and/or profit on any resale thereof as principal might be deemed to be
underwriting discounts and commissions under the Securities Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the shares may not simultaneously engage in
market making activities with respect to the Common Stock for a period of one
business day prior to the commencement of such distribution. In addition and
without limiting the foregoing, the Selling Shareholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Regulation M. These provisions may
limit the timing of purchases and sales of shares of Common Stock by the Selling
Shareholders.
A supplement to this Prospectus will be filed, if required, to disclose (i)
the name of the participating broker-dealer(s), (ii) the number of Shares
involved, (iii) the price at which such Shares were sold, (iv) the commissions
paid or discounts or concessions allowed to such broker-dealer(s), where
applicable, and (v) other facts material to the transaction, including the name
and other information regarding the Selling Shareholders.
<PAGE>
The Company is required to maintain the effectiveness of the Registration
Statement until such time as all of the Shares have been disposed of in
accordance with the intended methods of disposition set forth in the
Registration Statement or the Shares are no longer subject to volume or manner
of sale restrictions under the securities laws.
SELLING SHAREHOLDERS
The following table sets forth certain information with regard to the
beneficial ownership of Series B Preferred Stock by the Selling Shareholders,
the beneficial ownership of Common Stock by the Selling Shareholders (where
indicated by footnote, on a pro forma basis as if all 1,295 outstanding shares
of Series B Preferred Stock had been converted into Common Stock as of January
23, 1998), and the number of shares of Common Stock to be offered by the Selling
Shareholders (also on a pro forma basis where indicated). The actual number of
shares of Common Stock beneficially owned or offered may vary and will be
reflected in a supplement to this Prospectus. See "The Offering."
<TABLE>
<CAPTION>
Common Stock Beneficially Common Stock
Shares of Owned Beneficially Owned
Preferred Prior to the Offering Shares of After the Offering
Stock --------------------- Common ------------------
Presently Conversion Warrant Stock Number Percent of
Selling Shareholder Owned(1) Shares(1) Shares(2) to be Sold of Shares Outstanding*
- ------------------- -------- --------- --------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
CC Investments, LDC 404 1,509,105 234,375 1,743,480 -- --
Societe Generale 243 907,704 140,625 1,048,329 -- --
Shepherd Investments
International, Ltd. 324 1,210,272 187,500 1,397,772 -- --
Stark International 324 1,210,272 187,500 1,397,772 -- --
Harlan P. Kleiman N/A -- 26,516 26,516 -- --
Robert K. Schacter N/A -- 8,188 8,188 -- --
Thomas J. Griesel N/A -- 1,416 1,416 -- --
Steven Lamar N/A -- 3,880 3,880 -- --
<FN>
- --------------
* Without giving effect to any exercise of the Series B Warrants.
(1) As of the date of this Prospectus, no Selling Shareholder owned any shares
of Common Stock. The number of Conversion Shares indicated is the pro forma
number that would have been owned by a Selling Shareholder if it had
converted all of its shares of Series B Preferred Stock into Common Stock
as of January 23, 1998, without giving effect to the NASDAQ 20% Limit. The
actual number of Conversion Shares to be received by such Selling
Shareholder, which may be significantly more or less than the number
indicated, will be reflected in a supplement to (or amendment of) this
Prospectus following the conversion of such Series B Preferred Stock.
(2) Assumes the exercise in full by such Selling Shareholder its Series B
Warrants. See "Description of Securities--Warrants."
</FN>
</TABLE>
<PAGE>
LEGAL MATTERS
The legality of the Shares offered hereby has been passed upon for the
Company by Sonnenschein Nath & Rosenthal, Chicago, Illinois.
EXPERTS
The consolidated financial statements of LaserSight Incorporated and
subsidiaries as of December 31, 1996 and 1995 and for the years then ended have
been incorporated herein by reference and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein and in the Registration Statement
upon the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of LaserSight Incorporated and
subsidiaries for the year ended December 31, 1994 have been incorporated herein
and in the Registration Statement in reliance upon the report of Lovelace, Roby
& Company, P.A., independent certified public accountants, incorporated by
reference herein and in the Registration Statement upon the authority of said
firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the SEC a Registration Statement on Form S-3
(together with any amendments thereto, the "Registration Statement") under the
Securities Act with respect to the Shares offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which are
contained in schedules and exhibits to the Registration Statement as permitted
by the rules of the SEC. For further information with respect to the Company and
the Shares, reference is made to the Registration Statement and the exhibits
thereto. Statements contained in this Prospectus as to the contents of any
contract or any document referred to are not necessarily complete. With respect
to each such contract or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matters involved, and each such statement shall be deemed qualified in its
entirety by such reference.
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files periodic reports, proxy statements and
other information with the SEC. A copy of the Registration Statement, including
exhibits and schedules thereto, filed by the Company with the SEC, as well as
other reports, proxy statements and other information filed by the Company may
be inspected without charge at the office of the SEC, 450 Fifth Street, N.W.,
Washington, D.C., and at the following Regional Offices of the SEC: 7 World
Trade Center, Suite 1300, New York, New York, and 500 West Madison Street, Suite
1400, Chicago, Illinois. Copies of such material can be obtained, upon payment
of prescribed fees at the Public Reference Room of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549. The SEC maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC. The address of such site is
http://www.sec.gov. Such reports, proxy statements and other information
concerning the Company can also be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 "K" Street, N.W., Washington, D.C.
20006.
