SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended March 31, 2000.
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: 0-19671
LASERSIGHT INCORPORATED
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 65-0273162
-------- ----------
(State of Incorporation) (IRS Employer Identification No.)
3300 University Blvd., Suite 140, Winter Park, Florida 32792
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(407) 678-9900
(Registrant's telephone number, including area code)
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
-----
The Number of shares of the registrant's Common Stock outstanding as of
May 11, 2000 is 20,303,663.
1
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LASERSIGHT INCORPORATED AND SUBSIDIARIES
Except for the historical information contained herein, the discussion in this
report contains forward-looking statements (within the meaning of Section 21E of
the Exchange Act) that involve risks and uncertainties. LaserSight's actual
results could differ materially from those discussed here. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in the sections entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Uncertainties and Other Issues"
in this report and in LaserSight's Annual Report on Form 10-K for the year ended
December 31, 1999. LaserSight undertakes no obligation to update any such
factors or to publicly announce the results of any revisions to any of the
forward-looking statements contained herein to reflect any future events or
developments.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of March 31,
2000 and December 31, 1999
Condensed Consolidated Statements of Operations for the
Three Month Periods Ended March 31, 2000 and 1999
Condensed Consolidated Statements of Cash Flows for the
Three Month Periods Ended March 31, 2000 and 1999
Notes to Condensed Consolidated Financial Statements
Independent Auditors' Review Report
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Management's Quantitative and Qualitative Disclosures
about Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
2
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
------------ ------------
Current assets: (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 16,937,310 11,247,801
Accounts receivable - trade, net 9,025,273 6,400,980
Notes receivable - current portion, net 4,518,333 4,110,428
Inventories 9,389,782 8,409,823
Deferred tax assets 68,208 68,208
Other current assets 498,838 394,543
------------ ------------
Total Current Assets 40,437,744 30,631,783
Notes receivable, less current portion, net 3,168,385 2,721,229
Property and equipment, net 1,923,950 1,934,618
Patents, net 7,839,221 3,886,448
Pre-market approval application, net 2,527,126 2,754,394
Goodwill, net 5,897,078 6,028,235
Other assets, net 1,830,044 1,422,226
------------ ------------
$ 63,623,548 49,378,933
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,145,254 2,694,494
Accrued expenses 5,682,984 3,757,458
Accrued commissions 1,803,014 1,511,653
Deferred revenue 1,104,082 1,020,044
------------ ------------
Total Current Liabilities 12,735,334 8,983,649
Accrued expenses, less current portion 652,867 615,942
Deferred royalty revenue, less current portion -- 33,333
Deferred income taxes 68,208 68,208
Long-term obligations 102,530 100,130
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, authorized 10,000,000 shares; par value $.001
per share
Series C - 2,000,000 issued and outstanding at March 31, 2000 and
December 31, 1999 2,000 2,000
Series D - 2,000,000 issued and outstanding at March 31, 2000 and
December 31, 1999 2,000 2,000
Common stock - par value $.001 per share; authorized 40,000,000 shares;
19,948,863 and 18,040,313 shares issued at March 31, 2000 and December
31, 1999, respectively 19,949 18,040
Additional paid-in capital 100,590,792 82,346,811
Issued shares held in escrow (7,936,250) (2,936,250)
Stock subscription receivable (1,140,000) (1,140,000)
Accumulated deficit (40,931,235) (38,172,283)
Less treasury stock, at cost; 145,200 common shares at March 31, 2000
and December 31, 1999 (542,647) (542,647)
------------ ------------
50,064,609 39,577,671
------------ ------------
$ 63,623,548 49,378,933
============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
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LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
2000 1999
----------- -----------
Revenues:
<S> <C> <C>
Products $ 7,832,478 4,401,215
Royalties 669,179 380,000
Services 193,345 107,083
----------- -----------
8,695,002 4,888,298
Cost of revenue:
Product cost 3,408,524 2,032,378
Cost of services 85,072 47,117
----------- -----------
Gross profit 5,201,406 2,808,803
Research, development and regulatory expenses 940,716 781,191
Other general and administrative expenses 5,028,035 3,666,221
Selling related expenses 1,618,077 1,103,435
Amortization of intangibles 635,465 634,071
----------- -----------
7,281,577 5,403,727
----------- -----------
Loss from operations (3,020,887) (3,376,115)
Other income and expenses
Interest and dividend income 264,335 101,521
Interest expense (2,400) (45,770)
----------- -----------
Net loss before income taxes (2,758,952) (3,320,364)
Income tax expense -- --
----------- -----------
Net loss $(2,758,952) (3,320,364)
=========== ===========
Loss per common share
Basic and diluted: $ (0.14) (0.25)
=========== ===========
Weighted average number of shares outstanding
Basic and diluted: 19,234,000 13,418,000
=========== ===========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
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LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
------------ -------------
Cash flow from operating activities
<S> <C> <C>
Net loss $ (2,758,952) (3,320,364)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 877,576 824,948
Warrants issued in conjunction with consulting agreement -- 68,793
Changes in assets and liabilities:
Accounts and notes receivable (3,479,354) 236,961
Inventories (979,959) (893,142)
Accounts payable 1,450,760 1,381,714
Decrease in accrued expenses 1,028,812 (178,234)
Deferred revenue 50,705 (171,305)
Other (689,526) (301,019)
------------ -------------
Net cash used in operating activities (4,499,938) (2,351,648)
Cash flows from investing activities
Purchases of property and equipment, net (231,443) (138,550)
Acquisition of intangible assets (2,825,000) --
------------ -------------
Net cash used in investing activities (3,056,443) (138,550)
Cash flows from financing activities
Proceeds from common stock financing 13,202,452 8,850,000
Proceeds from exercise of stock options and warrants 43,438 --
Repayment of capital lease obligation -- (5,233)
------------ -------------
Net cash provided by financing activities 13,245,890 8,844,767
------------ -------------
Increase in cash and cash equivalents 5,689,509 6,354,569
Cash and cash equivalents, beginning of period 11,247,801 4,437,718
------------ -------------
Cash and cash equivalents, end of period $ 16,937,310 10,792,287
============ =============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
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LASERSIGHT INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Month Periods Ended March 31, 2000 and 1999
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited, condensed consolidated financialsstatements
of LaserSight Incorporated and subsidiaries (LaserSight) as of
March 31, 2000, and for the three months ended March 31, 2000 and 1999
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and note disclosures required by
generally accepted accounting principles for complete financial
statements. These condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and
notes thereto included in LaserSight's annual report on Form 10-K for
the year ended December 31, 1999. In the opinion of management, the
condensed consolidated financial statements include all adjustments
necessary for a fair presentation of consolidated financial position
and the results of operations and cash flows for the periods presented.
The results of operations for the three month period ended March 31,
2000 are not necessarily indicative of the operating results for the
full year. The report of KPMG LLP, independent auditors, commenting
upon their review accompanies the condensed consolidated financial
statements included in Item 1 of Part I.
NOTE 2 PER SHARE INFORMATION
Basic loss per common share is computed using the weighted average
number of common shares and contingently issuable shares (to the extent
that all necessary contingencies have been satisfied). Diluted loss per
common share is computed using the weighted average number of common
shares, contingently issuable shares, and common share equivalents
outstanding during each period. Common share equivalents include
options, warrants to purchase Common Stock, and convertible Preferred
tock and are included in the computation using the treasury stock
method if they would have a dilutive effect.
NOTE 3 INVENTORIES
Inventories, which consist primarily of excimer and erbium laser
systems and related parts and components, are stated at the lower of
cost or market. Cost is determined using the standard cost method,
which approximates costs determined on the first-in first-out basis.
The components of inventories at March 31, 2000 and December 31, 1999
are summarized as follows:
March 31, 2000 December 31, 1999
-------------- -----------------
Raw materials $ 6,282,744 6,381,980
Work-in-process 620,401 630,342
Finished goods 2,006,851 958,387
Test equipment - clinical trials 479,786 439,114
----------- ----------
$ 9,389,782 8,409,823
=========== ==========
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NOTE 4 STOCKHOLDERS' EQUITY
Private Placement
On January 31, 2000, the Company closed a transaction for the sale of
1,269,841 shares of Common Stock to a total of three investors,
including TLC Laser Eye Centers Inc. (TLC), in exchange for the Company
receiving $12.5 million in cash. On February 21, 2000, the Company
closed a transaction for the sale of 76,189 shares of Common Stock to
two investors in exchange for the Company receiving $750,000 in cash.
NOTE 5 SEGMENT INFORMATION
The Company operates principally in three operating segments:
refractive products, patent services and health care services.
Refractive product operations primarily involve the development,
manufacture, and sale of ophthalmic lasers and related devices for use
in vision correction procedures. Patent services involve the revenues
and expenses generated from the ownership of certain refractive laser
procedure patents, and health care services provides health and vision
care consulting services to hospitals, managed care companies, and
physicians.
Operating profit is total revenue less operating expenses. In
determining operating profit for operating segments, the following
items have not been considered: general corporate expenses; expenses
attributable to LaserSight Centers Incorporated a developmental stage
company; non-operating income; and the income tax expense. Identifiable
assets by operating segment are those that are used by or applicable to
each operating segment. General corporate assets consist primarily of
cash, marketable equity securities and income tax accounts.
The table below summarizes information about reported segments
as of and for the three months ended March 31:
<TABLE>
<CAPTION> Depreciation
Operating Operating and Capital
Revenues Profit (Loss) Assets Amortization Expenditures
-------- ------------- ------ ------------ ------------
2000
----
Operating segments:
<S> <C> <C> <C> <C> <C>
Refractive products $ 7,832,478 (2,875,157) 37,386,392 603,535 227,700
Patent services 669,179 539,849 2,982,154 129,330 --
Health care services 193,345 (106,756) 3,539,121 71,679 3,743
General corporate -- (509,649) 17,015,050 3,858 --
Developmental
stage company -
LaserSight Centers -- (69,174) 2,700,831 69,174 --
----------- ----------- ----------- --------- ---------
Consolidated total $ 8,695,002 (3,020,887) 63,623,548 877,576 231,443
=========== =========== =========== ========= =========
1999
----
Operating segments:
Refractive products $ 4,401,215 (2,905,917) 29,597,655 553,916 138,550
Patent services 380,000 250,670 3,499,474 129,330 --
Health care services 107,083 (129,769) 3,836,860 70,731
General corporate -- (521,925) 10,897,919 1,797 --
Developmental stage
company - LaserSight
Centers -- (69,174) 2,972,210 69,174 --
----------- ----------- ----------- --------- ---------
Consolidated total $ 4,888,298 (3,376,115) 50,804,118 824,948 138,550
=========== =========== =========== ========= =========
</TABLE>
7
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NOTE 6 ACQUISITION
Intellectual Property
On March 8, 2000, LaserSight acquired all intellectual property related
to a development project designed to provide front-to-back analysis and
total refractive measurement of the eye from Premier Laser Systems,
Inc. Of the total consideration of $4,050,000 before transaction costs,
$2,825,000 was paid at closing, $500,000 was paid in April 2000 and
$725,000 was paid in May 2000. Assets purchased included two U.S.
patents, six foreign patents, a pending patent application and an
exclusive license to nine patents that are intended to be used to
complete development of an integrated refractive diagnostic work
station. The total cost is included in the net costs of Patents and
will be amortized over the life of the patents.
NOTE 7 LICENSE AGREEMENT
On January 18, 2000, the Company entered into a first amendment to a
keratome license and royalty agreement related to certain keratome
related products originally entered into in September 1997. Under the
terms of the amendment 555,552 shares of Common Stock issued to the
licensors were placed in escrow and are included in common shares
issued and outstanding on that date. If the Company raises equity
capital totaling $15 million or more by May 31, 2000, or otherwise
elects in its sole discretion to proceed with the amendment, the shares
will be released from escrow and the Company will be obligated to pay
$7.6 million in cash within the next six months. Otherwise, the shares
will be returned to the Company.To date, the Company has raised equity
capital totaling $13.25 million. In addition, the Company paid the
licensors $200,000 upon execution of the amendment and $200,000 on
April 1, 2000. The amendment eliminates the restriction on the Company
manufacturing, marketing and selling other keratomes, but the sale of
such other keratomes is included in the gross profit to be shared with
the licensors. The licensor's share of the gross profit, as defined in
the agreement, will be 50% if the amendment is not triggered or 10% if
the amendment is triggered.
8
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Independent Auditors' Review Report
The Board of Directors
LaserSight Incorporated:
We have reviewed the condensed consolidated balance sheet of LaserSight
Incorporated and subsidiaries as of March 31, 2000, and the related condensed
consolidated statements of operations and cash flows for the three-month periods
ended March 31, 2000 and 1999. These condensed consolidated financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of LaserSight Incorporated and
subsidiaries as of December 31, 1999, and the related consolidated statements of
operations, comprehensive loss, stockholders' equity, and cash flows for the
year then ended (not presented herein); and in our report dated February 11,
2000, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1999, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
/s/ KPMG LLP
St. Louis, Missouri
April 27, 2000
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LaserSight is principally engaged in the manufacture and supply of
narrow beam scanning excimer laser systems, keratomes, keratome blades and other
related products used to perform procedures that correct common refractive
vision disorders such as nearsightedness, farsightedness and astigmatism. Since
1994, we have marketed our laser systems commercially in over 30 countries
worldwide and currently have an installed base of over 300 laser systems,
including approximately 100 of our LaserScan LSX(TM) laser systems. In March
2000, we began commercial shipments of our LaserScan LSX laser system to
customers in the U.S.
New Accounting Pronouncement
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) No.
101, Revenue Recognition in Financial Statements. SAB No. 101 provides guidance
on applying generally accepted accounting principles to revenue recognition
issues in financial statements. We will adopt SAB No. 101 as required in the
second quarter of 2000 and are evaluating the effect, if any, that SAB No. 101
may have on our financial statements.
Results of Operations
The following table sets forth for the periods indicated information
derived from our statements of operations for those periods expressed as a
percentage of net sales, and the percentage change in such items from the
comparable prior year period. Any trends illustrated in the following table are
not necessarily indicative of future results.
<TABLE>
<CAPTION>
Percent Increase (Decrease)
As a Percentage of Net Sales Over Prior Periods
Three Months Ended March 31, Three Month Ended March 31,
---------------------------- ---------------------------
2000 1999 2000 vs.1999
---- ---- -------------
Statements of Operations Data:
Net revenues:
<S> <C> <C> <C>
Refractive products..................... 90.1% 90.0% 78.0%
Patent services......................... 7.7 7.8 76.1
Healthcare services..................... 2.2 2.2 80.6
----- -----
Net revenues......................... 100.0 100.0 77.9
Cost of revenue.......................... 40.2 42.5 68.0
----- -----
Gross profit(1).......................... 59.8 57.5 85.2
Research, development and
Regulatory expenses (2) ............. 10.8 16.0 20.4
Other general and administrative
Expenses............................. 57.8 75.0 37.1
Selling-related expenses (3)............. 18.6 22.6 46.7
Amortization of intangibles.............. 7.3 13.0 0.2
Loss from operations..................... (34.7) (69.1) (10.5)
- ---------------
</TABLE>
(1) As a percentage of net revenues, the gross profit for refractive
products only for the three months ended March 31, 2000 and 1999, were
56%, and 54%, respectively.
(2) As a percentage of refractive product net sales, research, development
and regulatory expenses for the three months ended March 31, 2000 and
1999, were 12%, and 18%, respectively.
(3) As a percentage of refractive product net sales, selling-related
expenses for the three months ended March 31, 2000 and 1999, were 21%,
and 25%, respectively.
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Three Months Ended March 31, 2000, Compared to Three Months Ended March 31, 1999
Revenues. Net revenues for the three months ended March 31, 2000
increased by $3.8 million, or 78%, to $8.7 million from $4.9 million for the
comparable period in 1999.
During the three months ended March 31, 2000, refractive products
revenues increased $3.4 million, or 78%, to $7.8 million from $4.4 million for
the comparable period in 1999. This revenue increase was primarily the result of
increased sales of the higher priced LaserScan LSX excimer laser system, an
increased level of laser system sales and the introduction of our blade and
keratome related products. During the three months ended March 31, 2000, excimer
laser system sales accounted for approximately $6.1 million in revenues compared
to $3.7 million in revenues over the same period in 1999. During the three
months ended March 31, 2000 and 1999, respectively, LaserScan LSX system sales
accounted for 100% and 76%, respectively, of total excimer laser system sales.
During the three months ended March 31, 2000, 19 laser systems were sold,
including six in the U.S., compared to 17 laser system sales over the comparable
period in 1999. Of the 17 laser systems sold in the first quarter of 1999, four
were discounted sales to existing customers.
Net revenues from patent services for the three months ended March 31,
2000 increased approximately $0.3 million, or 76%, to $0.7 million from $0.4
million for the comparable period in 1999, due to increased licensing fees.
Net revenues from health care services for the three months ended March
31, 2000 increased approximately $0.1 million, or 81%, to $0.2 million from $0.1
million for the comparable period in 1999. This increase primarily resulted from
additional consulting services provided, partially attributable to the two
senior level consultants added during the third quarter of 1999.
Cost of Revenue; Gross Profits. For the three months ended March 31,
2000 and 1999, gross profit margins were 60% and 57%, respectively. The gross
margin increase during the three months ended March 31, 2000 was primarily
attributable to increased sales of the LaserScan LSX excimer laser system. These
increased sales were slightly offset by higher raw material costs relating to
the LaserScan LSX excimer laser system of $1.1 million and an increase in our
inventory obsolescence reserve of $0.4 million.
Research, Development and Regulatory Expense. Research, development and
regulatory expenses for the three months ended March 31, 2000 increased by $0.1
million, or 20%, to $0.9 million from $0.8 million for the comparable period in
1999. We continued to develop our keratome systems, excimer laser systems and
continued to pursue protocols in our effort to attain and expand our FDA
approvals for our refractive products. As a result of a continuation of these
efforts plus the anticipated development of new technologies, we expect research
and development expenses during the remainder of 2000 to increase over levels
incurred during the first quarter of 2000. Regulatory expenses are expected to
increase as a result of our continued pursuit of FDA approval, protocols added
during 1999 related to the potential use of our laser systems for treatments
utilizing the LASIK procedure and the possible development of additional
pre-market approval supplements and future protocols for submission to the FDA.
Other General and Administrative Expenses. Other general and
administrative expenses for the three months ended March 31, 2000 increased $1.4
million, or 37%, to $5.0 million from $3.6 million for the comparable period in
1999. This increase was due to an increase in expenses incurred at our
refractive products subsidiary of approximately $1.3 million over the comparable
period in 1999. These included enhancements to the customer support and
training, quality assurance, marketing, software development, material control,
manufacturing and engineering departments of $0.6 million, higher depreciation
costs of $0.1 million, $0.3 million of legal fees related to patent issues and
litigation and $0.3 million of bad debt expense, which represented a general
11
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increase in reserves. See "Risk Factors--Financial and Liquidity Risks--If our
uncollectible receivables exceed our reserves we will incur additional
unanticipated expenses, and we may experience difficulty collecting restructured
receivables with extended payment terms."
Selling-Related Expenses. Selling-related expenses consist of those
items directly related to sales activities, including commissions on sales,
royalty or license fees, warranty expenses, and costs of shipping and
installation. Commissions and royalties, in particular, can vary significantly
from sale to sale or period to period depending on the location and terms of
each sale. Selling-related expenses for the three months ended March 31, 2000
increased $0.5 million, or 47%, to $1.6 million from $1.1 million during the
comparable period in 1999. This increase was primarily attributable to a $0.3
million increase in sales commissions resulting from higher sales, an increase
of $0.2 million in license fees primarily resulting from the introduction of our
keratome products and an increase of $0.1 million of warranty expense primarily
related to increased laser system sales.
Amortization of Intangibles. During the three months ended March 31,
2000, costs relating to the amortization of intangible assets was $0.6 million,
approximately the same as for the comparable period in 1999. Items directly
related to the amortization of intangible assets are acquired technologies,
patents, license agreements and goodwill.
Loss From Operations. The operating loss for the three months ended
March 31, 2000 was $3.0 million compared to the operating loss of $3.4 million
for the same period in 1999. This decrease in the loss from operations was
primarily due to the increase in sales of our LaserScan LSX excimer laser system
and an improvement in the operating gain generated by our patent services
subsidiary, partially offset by an increase in other general and administrative
expenses related to our refractive products operations.
Other Income and Expense. Interest and dividend income for the three
months ended March 31, 2000 was $0.3 million, an increase of $0.2 million over
the comparable period in 1999. Interest and dividend income was earned from the
investment of cash and cash equivalents and the collection of long-term
receivables related to laser system sales. Interest expense for the three months
ended March 31, 2000 and 1999 was not material.
Income Taxes. For the three months ended March 31, 2000 and 1999,
LaserSight had no income tax expense.
Net Loss. Net loss for the three months ended March 31, 2000, was $2.8
million compared to a net loss of $3.3 million for the comparable period in
1999. The decrease in net loss for the three months ended March 31, 2000 can be
attributed to the increase in sales of our LaserScan LSX excimer laser system
and an improvement in the operating gain generated by our patent services
subsidiary, partially offset by an increase in other general and administrative
expenses related to our refractive products operations.
Loss Per Share. The loss per basic and diluted share was $.14 for the
three months ended March 31, 2000 and $0.25 for the comparable period in 1999.
During the three months ended March 31, 2000, the weighted average shares of
common stock outstanding increased primarily due to the private placement of
common stock and the exercise of options and warrants.
Liquidity and Capital Resources
Our principal sources of funds have historically been from sales of
preferred stock and common stock, sales of subsidiaries and patent rights and,
to a lesser extent, our operating cash flows. We issued securities totaling
approximately $14.8 million in 1997, $15.8 million in 1998, $8.9 million in 1999
and $13.3 million to date in 2000, and received proceeds from the exercise of
stock options and warrants of approximately $98,000 in 1997, $0.5 million in
1998, $10.4 million in 1999 and $43,000 to date in 2000. In addition, we sold
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subsidiaries and various patent rights, resulting in proceeds to us of
approximately $10.5 million in 1997 and $12.7 million in 1998. We have
principally used these capital resources to fund operating losses, working
capital requirements, capital expenditures, acquisitions and retirement of debt.
At March 31, 2000, we had an accumulated deficit of $40.9 million.
We entered into a $2.5 million revolving credit facility with The
Huntington National Bank in June 1999. We may borrow amounts under this credit
facility at an annual rate equal to 0.5% above the prime rate for short-term
working capital needs or for such other purposes as may be approved by
Huntington. The credit agreement with Huntington expires on June 30, 2000 and
requires us to maintain a specified liquidity level and tangible net worth
levels. At March 31, 2000, we had no outstanding borrowings under this credit
facility.
Our working capital increased $6.1 million from $21.6 million at
December 31, 1999 to $27.7 million as of March 31, 2000. This increase in
working capital resulted primarily from the private placements of common stock
in January and February 2000, for gross proceeds of $13.3 million, offset
primarily by cash used in operating activities of $4.5 million.
Operating activities used net cash of $4.5 million during the first
quarter of 2000, compared to $2.4 million of net cash used during the same
period in 1999, and $11.7 million during the year ended December 31, 1999. We
expect to incur a loss and a deficit in cash flow from operations for the second
quarter of 2000. There can be no assurance that we can regain or sustain
profitability or positive operating cash flow in any subsequent fiscal period.
Net cash used in investing activities of $3.1 million during the first quarter
of 2000 can be attributed primarily to the purchase of patents. As of March 31,
2000, we had no material commitments for capital expenditures and a total
commitment of $1.2 million related to our March 2000 acquisition of intellectual
property. We paid this commitment during April and May 2000. Net cash provided
from financing activities during the first quarter of 2000 of $13.2 million
resulted from the issuance of 1,346,030 shares of common stock in private
placements to five investors for gross proceeds of $13.3 million (including
$10.0 million from TLC).
We believe that our existing balances of cash and cash equivalents,
together with our cash flows from operations, should be sufficient to fund our
anticipated working capital requirements for the next 12 months in accordance
with our current business plan. Our belief regarding future working capital
requirements is based on various factors and assumptions including the
commercial acceptance of our UltraEdge(TM) keratome blades, UniShaper(TM)
single-use keratomes, LaserScan LSX excimer laser system and UltraShaper(TM)
durable keratomes, the anticipated timely collection of receivables, and the
absence of unanticipated product development and marketing costs. These factors
and assumptions are subject to certain contingencies and uncertainties, some of
which are beyond our control. Similarly, our long-term liquidity will be
dependent on the successful entrance into the U.S. market with our laser
systems, the successful entrance into U.S. and international markets of our
keratome products, and our ability to collect our receivables on a timely basis.
We may seek additional debt or equity financing in the future to implement our
business plan or any changes thereto in response to future developments or
unanticipated contingencies. Other than the $2.5 million credit facility signed
in June 1999 with Huntington, we currently do not have any commitments for
additional financing.
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Risk Factors and Uncertainties
The business, results or operations and financial condition of LaserSight and
the market price of it's Common Stock may be adversely affected by a variety of
factors, including the factors listed below:
Industry and Competitive Risks
WE CANNOT ASSURE YOU THAT OUR LASERSCAN LSX LASER SYSTEM WILL ACHIEVE
MARKET ACCEPTANCE IN THE U.S., AND OUR BUSINESS MODEL FOR SELLING OUR LASER
SYSTEM IN THE U.S. IS NEW AND UNPROVEN.
We only recently received the Food & Drug Administration approval
necessary for the commercial marketing and sale of our LaserScan LSX excimer
laser system in the U.S. and commercial shipments to customers in the U.S. began
in March 2000. Our previous experience marketing and selling our LaserScan LSX
excimer laser system in the U.S. had been limited to cost-recovery sales to
refractive surgeons participating in our FDA clinical trials.
The required level of per procedure fees payable to us by refractive
surgeons may not be accepted by the marketplace or may exceed those charged by
our competitors. While we believe that gaining access to our recently-approved
scanning narrow beam laser technology justifies the required per procedure fee
levels, we cannot assure you that this business model will be accepted by a
large number of refractive surgeons. If our competitors reduce or do not charge
per procedure fees to users of their systems, we could be forced to reduce or
eliminate the fees charged under this business model, which could significantly
reduce our revenues. For example, Nidek Co., Ltd., one of our competitors, has
publicly stated that it does not intend to charge per procedure fees to users of
its laser systems in the U.S. and internationally.
Successful implementation of this business model is crucial to the
commercial launch of our LaserScan LSX laser system in the U.S. and may require
the expenditure of significant financial and other resources to create awareness
of the LaserScan LSX laser system and create demand by refractive surgeons. If
our laser system fails to achieve market acceptance in the U.S., we may not be
able to execute our business plan, which would have a material adverse effect on
our business, financial condition and results of operations.
WE CANNOT ASSURE YOU THAT OUR KERATOME PRODUCTS WILL ACHIEVE MARKET
ACCEPTANCE, AND WE ARE SIGNIFICANTLY DEPENDENT UPON OUR MARKETING ALLIANCE WITH
BECTON DICKINSON WITH RESPECT TO THE SALE OF OUR KERATOME PRODUCTS.
Keratomes are surgical devices used to create a corneal flap
immediately prior to LASIK laser vision correction procedures. We began to roll
out our MicroShape(TM) family of keratome products only recently with the
commercial launch of our UltraEdge keratome blades in July 1999 and of our
UniShaper single-use keratomes and control consoles in December 1999. We
anticipate the commercial launch of our UltraShaper durable keratomes during the
second quarter of 2000. We cannot assure you that there will not be
unanticipated delays in the launch of our UltraShaper durable keratome. Our
UniShaper single-use keratome is the first disposable keratome product to be
commercially marketed, and we cannot assure you that refractive surgeons,
including in particular refractive surgeons who perform a large volume of LASIK
procedures, will accept our UniShaper product as either a replacement for or a
supplement to the durable keratomes traditionally used to create corneal flaps.
Our UltraShaper durable keratome incorporates the features found in the
Automated Corneal Shaper keratome previously marketed by Bausch & Lomb with new
enhancements and features. However, Bausch & Lomb has not aggressively marketed
or serviced the ACS since 1997 when we licensed the rights to commercially
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market keratomes based on the same technology, and has successfully transitioned
a large number of refractive surgeons from the ACS to its Hansatome durable
keratome product. We believe that many refractive surgeons learned to perform
the LASIK procedure using the ACS and prefer the surgical technique required by
the ACS, which is also used to operate our UltraShaper durable keratome, to that
required to operate the Hansatome keratome product. However, we cannot assure
you that we will be successful in achieving broad market acceptance of our
UltraShaper durable keratome or our other keratome products.
Successful implementation of our keratome product sales strategy is
significantly dependent upon our marketing and distribution alliance with Becton
Dickinson. Pursuant to our October 1999 agreement, Becton Dickinson is, subject
to limited exceptions, the exclusive distributor of our keratomes and keratome
related products in the U.S., the U.K., Ireland and Japan, and has a
non-exclusive right to distribute kits including keratome products in other
countries. While our agreement with Becton Dickinson has a five-year term, it is
subject to early termination in certain circumstances, including the failure of
Becton Dickinson to achieve minimum sales levels. If we cannot successfully
market and sell our keratome products or if our marketing and distribution
alliance with Becton Dickinson fails to benefit us as expected, we may not be
able to execute our business plan, which would have a material adverse effect on
our business, financial condition and results of operations. See also "--Company
and Business Risks -- Required minimum payments under our keratome license
agreement may exceed our gross profits from sales of our keratome products."
THE VISION CORRECTION INDUSTRY CURRENTLY CONSISTS OF A FEW ESTABLISHED
PROVIDERS WITH SIGNIFICANT MARKET SHARES AND WE MAY ENCOUNTER DIFFICULTIES
COMPETING IN THIS HIGHLY COMPETITIVE ENVIRONMENT.
The vision correction industry is subject to intense, increasing
competition, and we do not know if we will be able to compete successfully
against our current and future competitors. Many of our competitors have
established products, distribution capabilities and customer service networks in
the U.S. marketplace, are substantially larger and have greater brand
recognition and greater financial and other resources than we do. Visx,
Incorporated, the current industry leader for excimer laser system sales in the
U.S., sold laser systems which performed a significant majority of the laser
vision correction procedures performed in the U.S. in 1998 and 1999. Similarly,
Bausch & Lomb sold a significant majority of the keratomes used by refractive
surgeons in the U.S. in 1998 and 1999. Two of our other competitors, Summit
Technology, Inc. and Autonomous Technology Corporation merged in April 1999. The
merger resulted in a combined entity with enhanced market presence, technology
base and distribution capabilities and provided Summit with a narrow beam laser
technology platform which will enable Summit to compete more directly with our
narrow beam LaserScan LSX excimer laser system. In addition, as a result of the
merger, the combined entity will be able to sell narrow beam laser systems under
a royalty-free license to certain Visx patents without incurring the expense and
uncertainty associated with intellectual property litigation with Visx.
MANY OF OUR COMPETITORS RECEIVED EARLIER REGULATORY APPROVALS THAN US
AND MAY HAVE A COMPETITIVE ADVANTAGE OVER US DUE TO THE SUBSEQUENT EXPANSION OF
THEIR REGULATORY APPROVALS AND THEIR SUBSTANTIAL EXPERIENCE IN THE U.S. MARKET.
We received the FDA approval necessary for the commercial sale of our
LaserScan LSX excimer laser system in the U.S. in November 1999, and commercial
shipments to customers in the U.S. began in March 2000. Our direct competitors
include large corporations such as Visx and Summit, each of whom received FDA
approval of excimer laser systems more than three years ago and has substantial
experience manufacturing, marketing and servicing laser systems in the U.S. In
addition to Visx, Summit, and Nidek, Bausch & Lomb recently received FDA
approval for their laser system.
In the U.S., a manufacturer of excimer laser vision correction systems
gains a competitive advantage by having its systems approved by the FDA for a
wider range of treatments. Initial FDA approvals of excimer laser vision
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correction systems historically have been limited to PRK treatment of low to
moderate nearsightedness, with additional approvals for other and broader
treatments granted only as a result of subsequent FDA applications and clinical
trials. Our LaserScan LSX is currently approved only for the PRK treatment of
low to moderate nearsightedness (up to -6.0 diopters) without astigmatism using
a pulse repetition rate of 100 Hz, and its use for the treatment of higher
levels of nearsightedness (up to -10.0 diopters) is allowed only if the
refractive surgeon deems it to be reasonable. Currently, excimer laser vision
correction systems manufactured by Visx, Summit and Nidek have been approved for
higher levels of nearsightedness than the LaserScan LSX and are also approved
for the treatment of nearsightedness with astigmatism for which the LaserScan
LSX currently does not have approval. The Visx and Summit excimer laser systems
are also approved for the treatment of moderate farsightedness. In March 2000,
the FDA Ophthalmic Advisory Panel recommended approval for Summit's Ladarvision
system for farsightedness of up to +6.0 diopters and an astigmatism range of up
to -6.0 diopters. Although we have submitted applications to the FDA for
approval for the treatment of nearsightedness with astigmatism and to permit our
laser systems sold to customers in the U.S. to operate at a 200 Hz pulse rate,
if the FDA does not approve our pending and expected applications in a timely
manner or at all, our ability to compete effectively in the U.S. may be severely
impaired.
Summit's Apex Plus and Ladarvision Excimer Laser Workstations, Visx's
Star S2 Excimer Laser System and Nidek's EC-5000 Excimer Laser System have
received FDA approval for the LASIK treatment of myopia (nearsightedness) with
or without astigmatism. The approvals for most of the systems are for the
correction of myopia in the range of 0 diopters to -14.0 diopters and myopia
with astigmatism generally in the range of -0.5 diopters to -5.0 diopters.
Bausch & Lomb's Technolas 217 excimer laser also recently received FDA approval
for the treatment of myopia up to -7.0 diopters with up to -3.0 diopters of
astigmatism. These laser systems are currently the only laser systems
commercially available in the U.S. with FDA approval for use in LASIK. Laser
systems manufactured by other companies approved by FDA for PRK, including
Bausch & Lomb and LaserSight, are routinely used off-label to perform
LASIK. A physician may decide, as part of the practice of medicine, to use a
medical device outside of its FDA-approved indications for an unapproved or
"off-label" use. Prior to these laser approvals, all LASIK procedures performed
in the U.S. with commercially available lasers were performed as the practice of
medicine. Competitors' receipt of LASIK-specific FDA regulatory approval could
be a significant competitive advantage which could impede our ability to
successfully introduce our LaserScan LSX system in the U.S. or discourage
physicians from using our or other manufacturers' lasers off-label. Our failure
to successfully effect our product introduction in a timely manner could have a
material adverse effect on our business, financial condition and results of
operations.
All of our principal competitors in the keratome business, including
current market leader Bausch & Lomb, received FDA clearance prior to the
commercialization of our keratome products and have substantial experience
marketing their keratome products. The established market presence in the U.S.
of previously-approved laser systems and keratome products, as well as the entry
of new competitors into the market upon receipt of new or expanded regulatory
approvals, could impede our ability to successfully introduce our LaserScan LSX
system in the U.S. and our keratome products worldwide and may have a material
adverse effect on our business, financial condition and results of operations.
WE DEPEND UPON OUR ABILITY TO ESTABLISH AND MAINTAIN STRATEGIC
RELATIONSHIPS.
We believe that our ability to establish and maintain strategic
relationships will have a significant impact on our ability to meet our business
objectives. These strategic relationships are critical to our future success
because we believe that these relationships will help us to:
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o extend the reach of our products to a larger number of
refractive surgeons;
o develop and deploy new products;
o further enhance the LaserSight brand; and
o generate additional revenue.
Entering into strategic relationships is complicated because some of
our current and future strategic partners may decide to compete with us in some
or all of our markets. In addition, we may not be able to establish
relationships with key participants in our industry if they have relationships
with our competitors, or if we have relationships with their competitors.
Moreover, some potential strategic partners have resisted, and may continue to
resist, working with us until our products and services have achieved widespread
market acceptance. Once we have established strategic relationships, we will
depend on our partners' ability to generate increased acceptance and use of our
products and services. To date, we have established only a limited number of
strategic relationships, and many of these relationships are in the early stages
of development. There can be no assurance as to the terms, timing or
consummation of any future strategic relationships. If we lose any of these
strategic relationships or fail to establish additional relationships, or if our
strategic relationships fail to benefit us as expected, we may not be able to
execute our business plan, and our business will suffer.
BECAUSE THE SALE OF OUR PRODUCTS IS DEPENDENT ON THE CONTINUED MARKET
ACCEPTANCE OF LASER-BASED REFRACTIVE EYE SURGERY USING THE LASIK PROCEDURE, THE
LACK OF BROAD MARKET ACCEPTANCE WOULD HURT OUR BUSINESS.
We believe that whether we achieve profitability and growth will
depend, in part, upon the continued acceptance of laser vision correction using
the LASIK procedure in the U.S. and other countries. We cannot be certain that
laser vision correction will continue to be accepted by either the refractive
surgeons or the public at large as an alternative to existing methods of
treating refractive vision disorders. The acceptance of laser vision correction
and, specifically, the LASIK procedure may be adversely affected by:
o possible concerns relating to safety and efficacy, including the
predictability and stability of results;
o the public's general resistance to surgery;
o the effectiveness and lower cost of alternative methods of
correcting refractive vision disorders;
o the lack of long-term follow-up data;
o the possibility of unknown side effects;
o the lack of third-party reimbursement for the procedures;
o the cost of the procedure; and
o possible future unfavorable publicity involving patient outcomes
from the use of laser vision correction.
Unfavorable side effects and potential complications which may result
from the use of laser vision correction systems manufactured by any manufacturer
may broadly affect market acceptance of laser-based vision correction surgery.
Potential patients may not distinguish between our narrow beam scanning
technology and the laser technology incorporated by our competitors in their
laser systems, and customers may not differentiate laser systems and procedures
that have not received FDA approval from FDA-approved systems and procedures.
Any adverse consequences resulting from procedures performed with a competitor's
systems or an unapproved laser system could adversely affect consumer acceptance
of laser vision correction in general. In addition, because laser vision
correction is an elective procedure which is not typically covered by insurance
and which involves more significant immediate expense than eyeglasses or contact
lenses, adverse changes in the U.S. or international economy may cause consumers
to reassess their spending choices and to select lower-cost alternatives for
their vision correction needs. Any such shift in spending patterns could reduce
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the volume of LASIK procedures performed which would, in turn, reduce our
revenues from per procedure fees and sales of single-use products such as our
UniShaper keratome and our UltraEdge keratome blades.
The failure of laser vision correction to achieve continued market
acceptance could have a material adverse effect on our business prospects. Even
if laser vision correction achieves and sustains market acceptance, sales of our
keratome products could be adversely impacted if a laser procedure which does
not require the creation of a corneal flap were to emerge as the procedure of
choice.
NEW PRODUCTS OR TECHNOLOGIES COULD ERODE DEMAND FOR OUR PRODUCTS OR
MAKE THEM OBSOLETE, AND OUR BUSINESS COULD BE HARMED IF WE CANNOT KEEP PACE WITH
ADVANCES IN TECHNOLOGY.
In addition to competing with eyeglasses and contact lenses, excimer
laser vision correction competes or may compete with newer technologies such as
intraocular lenses, corneal rings and surgical techniques using different or
more advanced types of lasers. Two products that may become competitive within
the near term are intraocular lenses, which are pending FDA approval, and
corneal rings, which were recently approved by the FDA. Both of these products
require procedures with lens implants, and their ultimate market acceptance is
unknown at this time. To the extent that any of these or other new technologies
are perceived to be clinically superior or economically more attractive than
currently marketed excimer laser vision correction procedures or techniques,
they could erode demand for our excimer laser and keratome products, cause a
reduction in selling prices of such products or render such products obsolete.
In addition, if one or more competing technologies achieves broader market
acceptance or render laser vision correction procedures obsolete, it would have
a material adverse effect on our business, financial condition and results of
operations.
As is typical in the case of new and rapidly evolving industries, the
demand and market for recently-introduced products and technologies is
uncertain, and we cannot be certain that our LaserScan LSX laser system,
UniShaper single-use keratome, UltraShaper durable keratome, UltraEdge keratome
blades or future new products and enhancements will be accepted in the
marketplace. In addition, announcements or the anticipation of announcements of
new products, whether for sale in the near future or at some later date, may
cause customers to defer purchasing our existing products.
If we cannot adapt to changing technologies, our products may become
obsolete, and our business could suffer. Our success will depend, in part, on
our ability to continue to enhance our existing products, develop new technology
that addresses the increasingly sophisticated needs of our customers, license
leading technologies and respond to technological advances and emerging industry
standards and practices on a timely and cost-effective basis. The development of
our proprietary technology entails significant technical and business risks. We
may not be successful in using new technologies effectively or adapting our
proprietary technology to evolving customer requirements or emerging industry
standards.
Company and Business Risks
WE ARE SUBJECT TO RISKS AND UNCERTAINTIES RELATING TO OUR PATENT
LITIGATION WITH VISX.
Visx Incorporated commenced a lawsuit in November 1999 in the United
States District Court, District of Delaware, against the Company alleging that
our LaserScan LSX laser system infringes one of Visx's U.S. patents for
equipment used in ophthalmic surgery. The LaserScan LSX is the only laser system
we are currently marketing and is the only laser system manufactured by us which
is approved for sale to U.S. customers. The suit requests, among other things,
injunctive relief, treble damages and attorneys' fees and expenses. Management
does not believe that our LaserScan LSX laser system infringes the asserted Visx
patent. However, we had agreed to a stay of such litigation to pursue license
negotiations with Visx in an effort to help facilitate commercialization of the
LaserScan LSX in the U.S. market. We withdrew from license negotiations with
Visx in February 2000, and after the stay of the litigation was lifted, we filed
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suit against Visx, claiming non-infringement and invalidity of the Visx patent
and asserting that Visx infringes our TLC Patent. We also began to sell and ship
our LaserScan LSX laser systems in the U.S. during March 2000.
We believe that the Visx lawsuit is without merit and intend to
vigorously contest it. However, if we are unsuccessful in defending this
lawsuit, we may be enjoined from manufacturing and selling our LaserScan LSX
laser system in the U.S. without a license from Visx. In addition, we may be
subject to damages for past infringement. No assurance can be given as to
whether we will be subject to such damages or, if so, the amount of damages
which we may be required to pay. In addition, such patent litigation could be
time-consuming, result in costly litigation, divert management's attention and
resources, cause product shipment delays or require us to develop non-infringing
technology or enter into license agreements in order to market our products.
Such license agreements, if required, may not be available on acceptable terms,
or at all. The outcome of patent litigation, particularly in jury trials, is
inherently uncertain, and an unfavorable outcome in the Visx litigation could
have a material adverse effect on our business, financial condition and results
of operations.
WE WILL BE REQUIRED TO SIGNIFICANTLY EXPAND OUR U.S. MANUFACTURING
OPERATIONS TO MEET OUR BUSINESS PLAN AND MUST COMPLY WITH STRINGENT REGULATION
OF OUR MANUFACTURING OPERATIONS.
We intend to manufacture our LaserScan LSX laser systems for sale in
the U.S. at our manufacturing facility in Winter Park, Florida, and to continue
to manufacture our laser systems for sale in international markets at our
manufacturing facility in Costa Rica. Our U.S. personnel have limited experience
manufacturing laser systems. We cannot, therefore, assure you that we will not
encounter difficulties in scaling up production of our laser systems at our
Florida facility, including problems involving production delays, quality
control or assurance, component supply and lack of qualified personnel. In
addition, we intend to move our U.S. manufacturing operations to another
location leased by us in Winter Park, Florida, which could result in
unanticipated problems and production delays. Any products manufactured or
distributed by us pursuant to FDA clearances or approvals are subject to
extensive regulation by the FDA, including recordkeeping requirements and
reporting of adverse experience with the use of the product. Our manufacturing
facilities are subject to periodic inspection by the FDA, certain state agencies
and international regulatory agencies. We require that our key suppliers comply
with recognized standards as well as our own quality standards, and we regularly
test the components and sub-assemblies supplied to us. Any failure by us or our
suppliers to comply with applicable regulatory requirements, including the FDA's
quality systems/good manufacturing practice (QSR/GMP) regulations, could cause
production and distribution of our products to be delayed or prohibited, either
of which could have a material adverse effect on our business, financial
condition and results of operations.
REQUIRED MINIMUM PAYMENTS UNDER OUR KERATOME LICENSE AGREEMENT MAY
EXCEED OUR GROSS PROFITS FROM SALES OF OUR KERATOME PRODUCTS.
In addition to the risk that the UniShaper single-use keratome or
UltraShaper durable keratome will not be accepted in the marketplace, we are
required to make certain minimum payments to the licensor under our keratome
limited exclusive license agreement, unless the January 2000 amendment, as
described below, is triggered by May 31, 2000. Under the original agreement, we
are required to provide an excimer laser system and pay a total of $300,000 to
the licensor in two equal installments due six and 12 months after the date of
our receipt of the production molds for the UniShaper product. We provided the
laser system to the licensor during the quarter ended June 30, 1998, and we
received the molds in October 1999. We shipped the first UniShaper single-use
keratome in December 1999. In addition, beginning seven months after the first
commercial shipment, we will be required to make royalty payments equal to 50%
of our defined gross profits from the sale of our UniShaper and UltraShaper
keratomes, with a minimum royalty of $400,000 per calendar quarter for a period
of eight quarters. As a result of our obligations under this license
arrangement, the minimum royalty payments we are required to make to the
licensor may exceed our gross profits from sales of our UniShaper and
UltraShaper keratome products. On January 18, 2000, the Company entered into a
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first amendment to a license and royalty agreement related to certain keratome
related products. Under the terms of the amendment 555,552 shares of Common
Stock were placed in escrow and are included in common shares issued and
outstanding on that date. If we raise equity capital totaling $15 million from
January 18, 2000 to May 31, 2000, or we otherwise elect in our sole discretion
to proceed with the amendment, the shares will be released from escrow and we
will be obligated to pay $7.6 million in cash within the next six months.
Otherwise, the shares will be returned to the Company. To date, we have raised
equity capital totaling $13.25 million. In addition, the Company paid the
licensors $200,000 upon execution of the amendment and $200,000 on April 1,
2000. The amendment eliminates the restriction on the Company manufacturing,
marketing and selling other keratomes, but the sale of such other keratomes is
included in the gross profit to be shared with the licensors. The licensor's
share of the gross profit, as defined in the agreement, will be 50% if the
amendment is not triggered or 10% if the amendment is triggered. The Company
agreed to pay the costs of the UniShaper final production molds.
OUR FAILURE TO TIMELY OBTAIN OR EXPAND REGULATORY APPROVALS FOR OUR
PRODUCTS AND TO COMPLY WITH REGULATORY REQUIREMENTS COULD ADVERSELY AFFECT OUR
BUSINESS.
Our excimer laser systems and keratome products are subject to strict
governmental regulations which materially affect our ability to manufacture and
market these products and directly impact our overall business prospects. FDA
regulations impose design and performance standards, labeling and reporting
requirements, and submission conditions in advance of marketing for all medical
laser products in the U.S. New product introductions, expanded treatment types
and levels for approved products, and significant design or manufacturing
modifications require a premarket clearance or approval by the FDA prior to
commercialization in the U.S. The FDA approval process, which is lengthy and
uncertain, requires supporting clinical studies and substantial commitments of
financial and management resources. Failure to obtain or maintain regulatory
approvals and clearances in the U.S. and other countries, or significant delays
in obtaining these approvals and clearances, could prevent us from marketing our
products for either approved or expanded indications or treatments, which could
substantially decrease our future revenues. Additionally, product and procedure
labeling and all forms of promotional activities are subject to examination by
the FDA, and current FDA enforcement policy prohibits the marketing by
manufacturers of approved medical devices for unapproved uses. Noncompliance
with these requirements may result in warning letters, fines, injunctions,
recall or seizure of products, suspension of manufacturing, denial or withdrawal
of PMAs, and criminal prosecution. 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. Future
legislative or administrative requirements, in the U.S. or elsewhere, may
adversely affect our ability to obtain or retain regulatory approval for our
products. The failure to obtain approvals for new or additional uses on a timely
basis could have a material adverse effect on our business, financial condition
and results of operations.
OUR BUSINESS DEPENDS ON OUR INTELLECTUAL PROPERTY RIGHTS, AND IF WE ARE
UNABLE TO PROTECT THEM, OUR COMPETITIVE POSITION MAY BE ADVERSELY AFFECTED.
Our business plan is predicated on our proprietary systems and
technology, including our narrow-beam scanning laser systems. We protect our
proprietary rights through a combination of patent, trademark, trade secret and
copyright law, confidentiality agreements and technical measures. We generally
enter into non-disclosure agreements with our employees and consultants and
limit access to our trade secrets and technology. We cannot assure you that the
steps we have taken will prevent misappropriation of our intellectual property.
Misappropriation of our intellectual property would have a material adverse
effect on our competitive position. In addition, we may have to engage in
litigation or other legal proceedings in the future to enforce or protect our
intellectual property rights or to defend against claims of invalidity. These
legal proceedings may consume considerable resources, including management time
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and attention, which would be diverted from the operation of our business, and
the outcome of any such legal proceeding is inherently uncertain.
We are aware that certain competitors are developing products that may
potentially infringe patents owned or licensed exclusively by us. In order to
protect our rights in these patents, we may find it necessary to assert and
pursue infringement claims against such third parties. We could incur
substantial costs and diversion of management resources litigating such
infringement claims and we cannot assure you that we will be successful in
resolving such claims or that the resolution of any such dispute will be on
terms that are favorable to us. See "--We are subject to risks and uncertainties
relating to our patent litigation with Visx."
PATENT INFRINGEMENT ALLEGATIONS MAY IMPAIR OUR ABILITY TO MANUFACTURE
AND MARKET OUR PRODUCTS.
There are a number of U.S. and foreign patents covering methods and
apparatus for performing corneal surgery that we do not own or have the right to
use. If we were found to infringe a patent in a particular market, we and our
customers may be enjoined from manufacturing, marketing, selling and using the
infringing product in the market and may be liable for damages for any past
infringement of such rights. In order to continue using such rights, we would be
required to obtain a license, which may require us to make royalty, per
procedure or other fee payments. We cannot be certain if we or our customers
will be successful in securing licenses, or that if we obtain licenses, such
licenses will be available on acceptable terms. Alternatively, we might be
required to redesign the infringing aspects of these products. Any redesign
efforts that we undertake could be expensive and might require regulatory
review. Furthermore, the redesign efforts could delay the reintroduction of
these products into certain markets, or may be so significant as to be
impractical. If redesign efforts were impractical, we could be prevented from
manufacturing and selling the infringing products, which would have a material
adverse effect on our business, financial condition and results of operations.
We are currently involved in patent litigation with Visx, and such
allegations are common in our industry. In 1992, Summit and Visx formed a U.S.
partnership, Pillar Point Partners, to pool certain of their patents related to
corneal sculpting technologies. As part of their agreement to dissolve Pillar
Point in June 1998, Summit and Visx granted each other a worldwide, royalty free
cross-license whereby each party has full rights to license for use with its own
systems all existing patents owned by either company relating to laser vision
correction. In connection with our March 1996 settlement of litigation with
Pillar Point regarding alleged infringement by our lasers of certain U.S. and
foreign patents, we entered into a license agreement with Visx covering various
foreign patents and patent applications pursuant to which we pay royalties to
Visx and agreed to notify Visx before we began manufacturing and selling our
laser systems in the U.S.
While we do not believe our laser systems or keratome products infringe
any valid and enforceable patents held by Visx, Summit or any other person, Visx
has asserted that we infringe their intellectual property, and we cannot assure
you that one or more of our other competitors or other persons will not assert
that our products infringe their intellectual property, or that we will not in
the future be deemed to infringe one or more patents owned by them or some other
party. We could incur substantial costs and diversion of management resources
defending any infringement claims. Furthermore, a party making a claim against
us could secure a judgment awarding substantial damages, as well as injunctive
or other equitable relief that could effectively block our ability to market one
or more of our products. In addition, we cannot assure you that licenses for any
intellectual property of third parties that might be required for our products
will be available on commercially reasonable terms, or at all. See "--We are
subject to risks and uncertainties relating to our patent litigation with Visx."
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<PAGE>
WE ARE SUBJECT TO CERTAIN RISKS ASSOCIATED WITH OUR INTERNATIONAL
SALES.
Our international sales accounted for 65% and 72% of our total revenues
during the three months and year ended March 31, 2000 and December 31, 1999,
respectively. In the future, we expect that sales to international accounts will
represent a lower percentage of our total sales as a result of our recent
regulatory approval to market our LaserScan LSX laser system in the U.S., the
anticipated commercial launch of our UltraShaper durable keratome in the second
quarter of 2000, and the recent commercial launch of our UltraEdge keratome
blades and our UniShaper single-use keratome. The majority of our international
revenues for the three months ended March 31, 2000 were from customers in Korea,
Italy, and Mexico, and for the year ended December 31, 1999 were from customers
in Canada, Mexico, Spain, Italy, Belgium and France.
International sales of our products may be limited or disrupted by:
o the imposition of government controls;
o export license requirements;
o economic or political instability;
o trade restrictions;
o difficulties in obtaining or maintaining export licenses;
o changes in tariffs; and
o difficulties in staffing and managing international operations.
Our sales have historically been and are expected to continue to be
denominated in U.S. dollars. The European Economic Union's conversion to a
common currency, the euro, is not expected to have a material impact on our
business. However, due to our significant export sales, we are subject to
exchange rate fluctuations in the U.S. dollar, which could increase the
effective price in local currencies of our products. This could result in
reduced sales, longer payment cycles and greater difficulty in collecting
receivables relating to our international sales.
OUR SUPPLY OF CERTAIN CRITICAL COMPONENTS AND SYSTEMS MAY BE
INTERRUPTED BECAUSE OF OUR RELIANCE ON A LIMITED NUMBER OF SUPPLIERS.
We currently purchase certain components used in the production,
operation and maintenance of our laser systems and keratome products from a
limited number of suppliers and certain key components are provided by a single
vendor. For example, all of our keratome blades are manufactured exclusively by
Becton Dickinson pursuant to our agreement with them, and all of our UniShaper
single-use keratome products are manufactured exclusively by Frantz Medical
Development Ltd. pursuant to our agreement with them. We do not have written
long-term contracts with providers of some key laser system components,
including TUI Lasertechnik und Laserintegration GmbH, which currently is a
single source supplier for the laser heads used in our LaserScan LSX excimer
laser system. Currently, SensoMotoric Instruments GmbH, Teltow, Germany, is a
single source supplier for the eye tracker boards used in the LaserScan LSX. Any
interruption in the supply of critical laser or keratome components could have a
material adverse effect on our business, financial condition and results of
operations. If any of our key suppliers ceases providing us with products of
acceptable quality and quantity at a competitive price in a timely fashion, we
would have to locate and contract with a substitute supplier and, in some cases,
such substitute supplier would need to be qualified by the FDA. If substitute
suppliers cannot be located and qualified in a timely manner or could not
provide required products on commercially reasonable terms, it would have a
material adverse effect on our business, financial condition and results of
operations.
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<PAGE>
UNLAWFUL TAMPERING OF OUR SYSTEM CONFIGURATIONS COULD RESULT IN REDUCED
REVENUES.
We include a procedure counting mechanism on LaserScan LSX lasers
manufactured for sale and use in the U.S. Users of our LaserScan LSX excimer
laser system could tamper with the software or hardware configuration of the
system so as to alter or eliminate the procedure counting mechanism that
facilitates the collection of per procedure fees. Unauthorized tampering with
our procedure counting mechanism by users could result in the loss of per
procedure fees.
THE LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS.
Our ability to maintain our competitive position depends in part upon
the continued contributions of our executive officers and other key employees,
especially Michael R. Farris, our president and chief executive officer. A loss
of one or more such officers or key employees could have a material adverse
effect on our business. We do not carry "key person" life insurance on any
officer or key employee.
As we commercially launch our laser system and keratome products in the
U.S., we will need to continue to implement and expand our operational, sales
and marketing, financial and management resources and controls. While to date we
have not experienced problems recruiting or retaining the personnel necessary to
expand our business, we cannot assure you that we will not have such problems in
the future. If we fail to attract and retain qualified individuals for necessary
positions, and if we are unable to effectively manage growth in our domestic or
international operations, it could have a material adverse effect on our
business, financial condition and results of operations.
INADEQUACY OR UNAVAILABILITY OF INSURANCE MAY EXPOSE US TO SUBSTANTIAL
PRODUCT LIABILITY CLAIMS.
Our business exposes us to potential product liability risks and
possible adverse publicity that are inherent in the development, testing,
manufacture, marketing and sale of medical devices for human use. These risks
increase with respect to our products that receive regulatory approval for
commercialization. We have agreed in the past, and we will likely agree in the
future, to indemnify certain medical institutions and personnel who conduct and
participate in our clinical studies. While we maintain product liability
insurance, we cannot be certain that any such liability will be covered by our
insurance or that damages will not exceed the limits of our coverage. Even if a
claim is covered by insurance, the costs of defending a product liability,
malpractice, negligence or other action, and the assessment of damages in excess
of insurance coverage in the event of a successful product liability claim,
could have a material adverse effect on our business, financial condition and
results of operations. Further, product liability insurance may not continue to
be available, either at existing or increased levels of coverage, on
commercially reasonable terms.
Financial and Liquidity Risks
WE HAVE EXPERIENCED SIGNIFICANT LOSSES AND OPERATING CASH FLOW DEFICITS
AND WE EXPECT THAT OPERATING CASH FLOW DEFICITS WILL CONTINUE THROUGH AT LEAST
THE SECOND QUARTER OF 2000.
We experienced significant net losses and deficits in cash flow from
operations for the years ended December 31, 1999 and 1998 and the three months
ended March 31, 2000, as set forth in the following table. We cannot be certain
that we will be able to achieve or sustain profitability or positive operating
cash flow in the future.
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<TABLE>
<CAPTION>
Year Ended December 31, Three Months Ended
----------------------- ------------------
1998 1999 March 31, 2000
---- ---- --------------
<S> <C> <C> <C>
Net Loss................... $ 11.9 million $ 14.4 million $2.8 million
Deficit in Cash Flow from
Operations.............. $ 14.3 million $ 11.7 million $4.5 million
</TABLE>
As of March 31, 2000, we had an accumulated deficit of $40.9 million.
IF OUR UNCOLLECTIBLE RECEIVABLES EXCEED OUR RESERVES WE WILL INCUR
ADDITIONAL UNANTICIPATED EXPENSES, AND WE MAY EXPERIENCE DIFFICULTY COLLECTING
RESTRUCTURED RECEIVABLES WITH EXTENDED PAYMENT TERMS.
Although we monitor the status of our receivables and maintain a
reserve for estimated losses, we cannot be certain that our reserves for
estimated losses, which were approximately $4.4 million at March 31, 2000, will
be sufficient to cover the amount of our actual write-offs over time. At March
31, 2000, our net trade accounts and notes receivable totaled approximately
$16.7 million, and accrued commissions, the payment of which generally depends
on the collection of such net trade accounts and notes receivable, totaled
approximately $2.3 million. Actual write-offs that exceed amounts reserved could
have a material adverse effect on our consolidated financial condition and
results of operations. The amount of any loss that we may have to recognize in
connection with our inability to collect receivables is principally dependent on
our customer's ongoing financial condition, their ability to generate revenues
from our laser systems, and our ability to obtain and enforce legal judgments
against delinquent customers.
Our ability to evaluate the financial condition and revenue generating
ability of our prospective customers located outside of the U.S., and our
ability to obtain and enforce legal judgments against customers located outside
of the U.S., is generally more limited than for our customers located in the
U.S. Our agreements with our international customers typically provide that the
contracts are governed by Florida law. We have not determined whether or to what
extent courts or administrative agencies located in foreign countries would
enforce our right to collect such receivables or to recover laser systems from
customers in the event of a customer's payment default. When a customer is not
paying according to established terms, we attempt to communicate and understand
the underlying causes and work with the customer to resolve any issues we can
control or influence. In most cases, we have been able to resolve the customer's
issues and continue to collect our receivable, either on the original schedule
or under restructured terms. If such issues are not resolved, we evaluate our
legal and other alternatives based on existing facts and circumstances. In most
such cases, we have concluded that the account should be written off as
uncollectible.
At March 31, 2000, we had extended the original payment terms of laser
customer accounts totaling approximately $1.4 million by periods ranging from 12
to 60 months. Such restructured receivables represent approximately 6% of our
gross receivables as of that date. Our liquidity and operating cash flow would
be adversely affected if additional extensions become necessary in the future.
In addition, it would be more difficult to collect laser system receivables if
the payment schedule extends beyond the expected or actual economic life of the
system, which we estimate to be approximately five to seven years. To date, we
do not believe any payment schedule extends beyond the economic life of the
applicable laser system.
WE COULD REQUIRE ADDITIONAL FINANCING WHICH MIGHT NOT BE AVAILABLE IF
WE NEED IT.
During the three months ended March 31, 2000 and the year ended
December 31, 1999, we experienced deficits in cash flow from operations of $4.5
million and $11.7 million, respectively. We believe that the proceeds from our
January 2000 private placement of common stock, together with our existing
balances of cash and cash equivalents and our cash flows from operations, should
be sufficient to fund our anticipated working capital requirements for the next
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12 months in accordance with our current business plan. Our belief regarding
future working capital requirements is based on various factors and assumptions
including the commercial acceptance of our LaserScan LSX excimer laser system,
our UltraEdge keratome blades and our UniShaper single-use keratomes, the
successful validity testing and subsequent commercial acceptance of our
UltraShaper durable keratome, the anticipated timely collection of receivables,
and the absence of unanticipated product development and marketing costs. These
factors and assumptions are subject to certain contingencies and uncertainties,
some of which are beyond our control. If we do not collect a material portion of
current receivables in a timely manner, or experience less market demand for our
products than we anticipate, our liquidity could be materially and adversely
affected.
We cannot be certain that we will not seek additional debt or equity
financing in the future to implement our business plan or any changes thereto in
response to future developments or unanticipated contingencies. Other than the
$2.5 million credit facility signed in June 1999 with Huntington, which expires
in June 2000, we currently do not have any commitments for additional financing.
We cannot be certain that additional financing will be available in the future
to the extent required or that, if available, it will be on commercially
acceptable terms. If we raise additional funds by issuing equity or convertible
debt securities, the terms of the new securities could have rights, preferences
and privileges senior to those of our common stock. If we raise additional funds
through debt financing, the terms of the debt could require a substantial
portion of our cash flow from operations to be dedicated to the payment of
principal and interest and may render us more vulnerable to competitive
pressures and economic downturns.
Common Stock Risks
VARIATIONS IN OUR SALES AND OPERATING RESULTS MAY CAUSE OUR STOCK PRICE
TO FLUCTUATE.
Our operating results have fluctuated in the past, and may continue to
fluctuate in the future, as a result of a variety of factors, many of which are
outside of our control. For example, historically a significant portion of our
laser system orders for a particular quarter have been received and shipped near
the end of the quarter. As a result, our operating results for any quarter often
depend on the timing of the receipt of orders and the subsequent shipment of our
laser systems. Other factors that may cause our operating results to fluctuate
include:
o timing of regulatory approvals and the introduction or delays in
shipment of new products;
o reductions, cancellations or fulfillment of major orders;
o the addition or loss of significant customers;
o the relative mix of our business;
o changes in pricing by us or our competitors;
o costs related to expansion of our business; and
o increased competition.
As a result of these fluctuations, we believe that period-to-period
comparisons of our operating results cannot be relied upon as indicators of
future performance. In some quarters our operating results may fall below the
expectations of securities analysts and investors due to any of the factors
described above or other uncertainties.
THE MARKET PRICE OF OUR COMMON STOCK MAY CONTINUE TO EXPERIENCE EXTREME
FLUCTUATIONS DUE TO MARKET CONDITIONS THAT ARE UNRELATED TO OUR OPERATING
PERFORMANCE.
The stock market, and in particular the securities of technology
companies like us, could experience extreme price and volume fluctuations
unrelated to our operating performance. Our stock price has historically been
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<PAGE>
volatile. Factors such as announcements of technological innovations or new
products by us or our competitors, changes in domestic or foreign governmental
regulations or regulatory approval processes, developments or disputes relating
to patent or proprietary rights, public concern as to the safety and efficacy of
refractive vision correction procedures, and changes in reports and
recommendations of securities analysts, have and may continue to have a
significant impact on the market price of our common stock.
THE SIGNIFICANT NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE AND DILUTIVE
STOCK ISSUANCES MAY ADVERSELY AFFECT OUR STOCK PRICE.
Sales, or the possibility of sales, of substantial amounts of our
common stock in the public market could adversely affect the market price of our
common stock. Substantially all of our 20,303,663 shares of common stock
outstanding at May 12, 2000 were freely tradable without restriction or further
registration under the Securities Act of 1933, except to the extent such shares
are held by "affiliates" as that term is defined in Rule 144 under the
Securities Act or subject only to the satisfaction of a prospectus delivery
requirement.
Shares of common stock which we may issue in the future in connection
with acquisitions or financings or pursuant to outstanding warrants or
agreements could also adversely affect the market price of our common stock and
cause significant dilution in our earnings per share and net book value per
share. We may be required to issue more than eight million additional shares of
common stock upon the conversion of outstanding preferred stock, the exercise of
outstanding warrants and stock options, and the satisfaction of certain
contingent contractual obligations.
The anti-dilution provisions of certain of our existing securities and
obligations require us to issue additional shares if we issue shares of common
stock below specified price levels. If a future share issuance triggers these
adjustments, the beneficiaries of such provisions effectively receive some
protection from declines in the market price of our common stock, while our
other stockholders incur additional dilution of their ownership interest. We may
include similar anti-dilution provisions in securities issued in connection with
future financings.
ANTI-TAKEOVER PROVISIONS UNDER DELAWARE LAW AND IN OUR CERTIFICATE OF
INCORPORATION, BY-LAWS AND STOCKHOLDER RIGHTS PLAN MAY MAKE AN ACQUISITION OF
LASERSIGHT MORE DIFFICULT AND COULD PREVENT YOU FROM RECEIVING A PREMIUM OVER
THE MARKET PRICE OF OUR STOCK.
Certain provisions of our certificate of incorporation, by-laws,
stockholder rights plan and Delaware law could delay or frustrate the removal of
incumbent directors, discourage potential acquisition proposals and delay, defer
or prevent a change in control of us, even if such events could be beneficial,
in the short term, to the economic interests of our stockholders. For example,
our certificate of incorporation allows us to issue preferred stock with rights
senior to those of the common stock without stockholder action, and our by-laws
require advance notice of director nominations or other proposals by
stockholders. We also are subject to provisions of Delaware corporation law that
prohibit a publicly-held Delaware corporation from engaging in a broad range of
business combinations with a person who, together with affiliates and
associates, owns 15% or more of the corporation's common stock (an interested
stockholder) for three years after the person became an interested stockholder,
unless the business combination is approved in a prescribed manner. We also have
adopted a stockholder rights agreement, or "poison pill," and declared a
dividend distribution of one preferred share purchase right for each share of
common stock. The rights would cause substantial dilution to a person or group
that attempts to acquire 15% or more of our common stock on terms not approved
by our board of directors.
26
<PAGE>
Acquisition Risks
PAST AND POSSIBLE FUTURE ACQUISITIONS THAT ARE NOT SUCCESSFULLY
INTEGRATED WITH OUR EXISTING OPERATIONS MAY ADVERSELY AFFECT OUR BUSINESS.
We have made several significant acquisitions since 1994, and we may in
the future selectively pursue strategic acquisitions of, investments in, or
enter into joint ventures or other strategic alliances with, companies whose
business or technology complement our business. We may not be able to identify
suitable candidates to acquire or enter into joint ventures or other
arrangements with entities, and we may not be able to obtain financing on
satisfactory terms for such activities. In addition, we could have difficulty
assimilating the personnel, technology and operations of any acquired companies,
which could prevent us from realizing expected synergies, and may incur
unanticipated liabilities and contingencies. This could disrupt our ongoing
business and distract our management and other resources.
AMORTIZATION AND CHARGES RELATING TO OUR SIGNIFICANT INTANGIBLE ASSETS
COULD ADVERSELY AFFECT OUR STOCK PRICE AND REPORTED NET INCOME OR LOSS.
Of our total assets at March 31, 2000, approximately $17.4 million, or
27%, were goodwill or other intangible assets. Any reduction in net income or
increase in net loss resulting from the amortization of goodwill and other
intangible assets resulting from future acquisitions by us may have an adverse
impact upon the market price of our common stock. In addition, in the event of a
sale of LaserSight or our assets, we cannot be certain that the value of such
intangible assets would be recovered.
In accordance with SFAS 121, we review 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. If we determine that an intangible asset is impaired, a non-cash
impairment charge would be recognized. We continue to assess the current results
and future prospects of MRF, Inc., d/b/a The Farris Group (TFG), our subsidiary
which provides health care and vision care consulting services, in view of the
substantial reduction in the subsidiary's operating results in 1997. Though
TFG's operating results improved in 1998 when compared to 1997, operating losses
similar to those incurred during the first half of 1998 continued during 1999.
In 1999, two senior consultants joined who are expected to develop new business
and help lead TFG towards financial improvement during 2000. The first quarter
of 2000 reflected financial improvement over 1999. If TFG is unsuccessful in
continuing to improve its financial performance, some or all of the carrying
amount of goodwill recorded, $3.4 million at March 31, 2000, may be subject to
an impairment adjustment.
OTHER RISKS
The risks described above are not the only risks facing LaserSight.
There may be additional risks and uncertainties not presently known to us or
that we have deemed immaterial which could also negatively impact our business
operations. If any of the foregoing risks actually occur, it could have a
material adverse effect on our business, financial condition and results of
operations. In that event, the trading price of our common stock could decline,
and you may lose all or part of your investment.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We believe that our exposure to market risk for changes in interest and
currency rates is not significant. Our investments are limited to highly liquid
instruments generally with maturities of three months or less. At March 31,
2000, we had approximately $16.1 million of short-term investments classified as
cash and equivalents. All of our transactions with international customers and
suppliers are denominated in U.S. dollars.
27
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Certain legal proceedings against LaserSight are described in Item 3
(Legal Proceedings) of LaserSight's Form 10-K for the year
ended December 31, 1999.
ITEM 2 CHANGES IN SECURITIES
a) Not applicable.
b) In connection with the January 2000 private placements of
Common Stock described below, LaserSight amended its
Stockholder Rights Agreement to provide, among other
things, that no person shall become an Acquiring Person
(as defined in the Rights Agreement) as the result of an
acquisition of LaserSight securities in such private
placement. Reference is made to the Form 8-K filed with
the SEC on February 8, 2000, for more detailed information
regarding the Amendment to the Rights Agreement.
c) During the first quarter ended March 31, 2000, the Company sold
the following unregistered securities:
1) In January 2000, LaserSight issued 555,552 shares of
Common Stock to Luis A. Ruiz, M.D. and Sergio Lenchig
as consideration for an amendment to a license
agreement. The shares will be returned to LaserSight
if the amendment is not triggered by May 31, 2000.
Reference is made to the First amendment to License
and Royalty Agreement dated as of January 18, 2000
filed as an exhibit to Form 10-K for the year ended
December 31, 1999, for more detailed information
regarding this amendment.
2) In January and February 2000, LaserSight closed
transactions for the sale of 1,346,030 shares of
Common Stock to a total of five investors, including
TLC, in exchange for the Company receiving $13.25
million in cash. Reference is made to the Securities
Purchase Agreements filed as exhibits to LaserSight's
Form 8-K filed with the SEC on February 8, 2000, and
Form 10-K for the year ended December 31, 1999, for
more detailed information regarding these private
placements.
The issuance and sale of all such shares was exempt from
the registration and prospectus delivery requirements of
the Securities Act of 1933 by virtue of Section 4(2)
thereof due to, among other things, (i) the limited number
of persons to whom the shares were issued, (ii) the
distribution of disclosure documents to all investors,
(iii) the fact that each such person represented and
warranted to LaserSight, among other things, that such
person was acquiring the shares for investment only and
not with a view to the resale or distribution thereof, and
(iv) the fact that certificates representing the shares
were issued with a legend to the effect that such shares
had not been registered under the Securities Act or any
state securities laws and could not be sold or transferred
in the absence of such registration or an exemption therefrom.
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ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 OTHER INFORMATION
Not applicable.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
2.1 See Exhibits 10.1, 10.2, 10.6, 10.7, 10.16, 10.22, 10.25, 10.26, 10.30
and 10.31 and 10.56.
3.1 Certificate of Incorporation, as amended (incorporated by reference
to Exhibit 1 of Form 8-A/A (Amendment No. 4) filed by the Company on
June 25, 1998*).
3.2 Bylaws, as amended (filed as Exhibit 3.2 to the Company's Form 8-K
filed on December 20, 1999*).
3.3 Rights Agreement, dated as of July 2, 1998, between LaserSight
Incorporated and American Stock Transfer & Trust Company, as Rights
Agent, which includes (i) as Exhibit A thereto the form of Certificate
of Designation of the Series E Junior Participating Preferred Stock,
(ii) as Exhibit B thereto the form of Right Certificate (separate
certificates for the Rights will not be issued until after the
Distribution Date) and (iii) as Exhibit C thereto the Summary of
Stockholder Rights Agreement (incorporated by reference to Exhibit
99.1 to the Form 8-K filed by the Company on July 8, 1998*).
3.4 First Amendment to Rights Agreement, dated as of March 22, 1999,
between LaserSight Incorporated and American Stock Transfer &
Trust Company, as Rights Agent (incorporated by reference to
Exhibit 2 to Form 8-A/A filed by the Company on March 29, 1999*).
3.5 Second Amendment to Rights Agreement, dated as of January 28, 2000,
between LaserSight Incorporated and American Stock Transfer &
Trust Company, as Rights Agent (incorporated by reference to
Exhibit 99.6 to Form 8-K filed by the Company on February 8, 2000*).
4.1 See Exhibits 3.1, 3.2, 3.3, 3.4, 3.5, 10.19, 10.23, 10.28, 10.29,
10.36, 10.37, 10.38, 10.39, 10.46, 10.48, 10.49, 10.50, 10.51, 10.52,
10.53, 10.54 and 10.55.
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<PAGE>
10.1 Agreement for Purchase and Sale of Stock by and among LaserSight
Centers Incorporated, its stockholders and LaserSight Incorporated
dated January 15, 1993 (filed as Exhibit 2 to the Company's Form 8-K/A
filed on January 25, 1993*).
10.2 Amendment to Agreement for Purchase and Sale of Stock by and among
LaserSight Centers Incorporated, its stockholders, and LaserSight
Incorporated dated April 5, 1993 (filed as Exhibit 2 to the Company's
Form 8-K/A filed on April 19, 1993*).
10.3 Royalty Agreement by and between LaserSight Centers Incorporated and
LaserSight Partners dated January 15, 1993 (filed as Exhibit 10.5 to
the Company's Form 10-K for the year ended December 31, 1995*).
10.4 Exchange Agreement dated January 25, 1993 between LaserSight Centers
Incorporated and Laser Partners (filed as Exhibit 10.6 to the Company's
Form 10-K for the year ended December 31, 1995*).
10.5 Stipulation and Agreement of Compromise, Settlement and Release dated
April 18, 1995 among James Gossin, Francis E. O'Donnell, Jr., J.T. Lin,
Wen S. Dai, Emanuela Dobrin-Charlton, C.H. Huang, W. Douglas Hajjar,
and LaserSight Incorporated (filed as Exhibit 10.7 to the Company's
Form 10-K for the year ended December 31, 1995*).
10.6 Agreement for Purchase and Sale of Stock dated December 31, 1993, among
LaserSight Incorporated, MRF, Inc., and Michael R. Farris (filed as
Exhibit 2 to the Company's Form 8-K filed on December 31, 1993*).
10.7 First Amendment to Agreement for Purchase and Sale of Stock by and
among MRF, Inc., Michael R. Farris and LaserSight Incorporated dated
December 28, 1995 (filed as Exhibit 10.9 to the Company's Form 10-K for
the year ended December 31, 1995*).
10.8 LaserSight Incorporated 1995 Stock Option Plan (filed as Exhibit 10.5
to the Company's Form 10-Q for the quarter ended September 30, 1995*).
10.9 Modified Promissory Note between LaserSight Incorporated,
EuroPacific Securities Services, GmbH and Co. KG and Wolf Wiese
(filed as Exhibit 10.6 to the Company's Form 10-Q for the quarter
ended September 30, 1995*).
10.10 Patent License Agreement dated December 21, 1995 by and between Francis
E. O'Donnell, Jr. and LaserSight Centers, Inc. (filed as Exhibit 10.21
to the Company's Form 10-K for the year ended December 31, 1995*).
10.11 LaserSight Incorporated Amended and Restated 1996 Equity Incentive Plan
(filed as Exhibit 10.12 to the Company's Form 10-Q/A for the quarter
ended June 30, 1998*).
10.12 LaserSight Incorporated Amended and Restated Non-Employee Directors
Stock Option Plan (filed as Exhibit B to the Company's definitive proxy
statement dated May 19, 1997*).
10.13 Agreement dated September 18, 1996 between David T. Pieroni and
LaserSight Incorporated (filed as Exhibit 10.35 to the Company's Form
10-K for the year ended December 31, 1996*).
10.14 Agreement dated January 1, 1997, between International Business
Machines Corporation and LaserSight Incorporated (filed as Exhibit
10.37 to the Company's Form 10-K for the year ended December 31,
1996*).
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10.15 Addendum dated March 7, 1997 to Agreement between
International Business Machines Corporation and LaserSight
Incorporated (filed as Exhibit 10.38 to the Company's Form 10-K for
the year ended December 31, 1996*).
10.16 Second Amendment to Agreement for Purchase and Sale of Stock by and
among LaserSight Centers Incorporated, its stockholders and LaserSight
Incorporated dated March 14, 1997 (filed as Exhibit 99.1 to the
Company's Form 8-K filed on March 27, 1997*).
10.17 Amendment to Royalty Agreement by and between LaserSight Centers
Incorporated, Laser Partners and LaserSight Incorporated dated
March 14, 1997 (filed as Exhibit 99.2 to the Company's Form 8-K filed
on March 27, 1997*).
10.18 Employment Agreement dated September 16, 1996 by and between LaserSight
Incorporated and Richard L. Stensrud (filed as Exhibit 10.41 to the
Company's Form 10-Q filed on May 9, 1997*).
10.19 Warrant to purchase 500,000 shares of Common Stock dated March 31, 1997
by and between LaserSight Incorporated and Foothill Capital
Corporation (filed as Exhibit 10.44 to the Company's Form 10-Q filed
on August 14, 1997*).
10.20 License Agreement dated May 20, 1997 by and between Visx Incorporated
and LaserSight Incorporated (filed as Exhibit 10.45 to the Company's
Form 10-Q filed on August 14, 1997*).
10.21 Patent Purchase Agreement dated July 15, 1997 by and between LaserSight
Incorporated and Frederic B. Kremer, M.D. (filed as Exhibit 2.(i) to
the Company's Form 8-K filed on August 13, 1997*).
10.22 Agreement and Plan of Merger dated July 15, 1997 by and among
LaserSight Incorporated, Photomed Acquisition, Inc., Photomed, Inc.,
Frederic B. Kremer, M.D., Linda Kremer, Robert Sataloff, Trustee for
Alan Stewart Kremer and Robert Sataloff, Trustee for Mark Adam Kremer
(filed as Exhibit 2.(ii) to the Company's Form 8-K filed on August 13,
1997*).
10.23 Warrant to purchase 750,000 shares of Common Stock dated August 29,
1997 by and between LaserSight Incorporated and purchasers of Series B
Convertible Participating Preferred Stock of LaserSight Incorporated
(filed as Exhibit 10.39 to the Company's Form 10-Q filed on November
14, 1997*).
10.24 Independent Contractor Agreement by and between Byron Santos, M.D. and
LaserSight Technologies, Inc. (filed as Exhibit 10.42 to the Company's
Form 10-Q filed on November 14, 1997*).
10.25 Stock Purchase Agreement, dated December 30, 1997, by and among
LaserSight Incorporated, LSI Acquisition, Inc., MEC Health Care, Inc.
and Vision Twenty-One, Inc. (filed as Exhibit 2.(i) to the Company's
Form 8-K filed on January 14, 1998*).
10.26 Stock Distribution Agreement, dated December 30, 1997, by and among
LaserSight Incorporated, LSI Acquisition, Inc., MEC Health Care, Inc.
and Vision Twenty-One, Inc. (filed as Exhibit 2.(ii) to the Company's
Form 8-K filed on January 14, 1998*).
31
<PAGE>
10.27 Agreement dated April 1, 1992 between International Business Machines
Corporation and LaserSight Incorporated (filed as Exhibit 10.1 on Form
10-K for the year ended December 31, 1995*).
10.28 Securities Purchase Agreement, dated June 5, 1998, by and between
LaserSight Incorporated and TLC The Laser Center, Inc. (filed as
Exhibit 99.1 to the Company's Form 8-K filed on June 25, 1998*).
10.29 Securities Purchase Agreement, dated June 12, 1998, by and
between LaserSight Incorporated and Pequot Funds (filed as Exhibit
99.5 to the Company's Form 8-K filed on June 25, 1998*).
10.30 Letter Agreement dated September 11, 1998, amending the
Agreement and Plan of Merger dated July 15, 1997, by and among
LaserSight Incorporated, Photomed Acquisition, Inc., Photomed, Inc.,
Frederic B. Kremer, M.D., Linda Kremer, Robert Sataloff, Trustee for
Alan Stewart Kremer and Robert Sataloff, Trustee for Mark Adam Kremer
(filed as Exhibit 10.31 to the Company's Form 10-Q filed on November
16, 1998*).
10.31 Exclusive License Agreement dated August 20, 1998, by and between
LaserSight Technologies, Inc. and TLC The Laser Center Patents Inc.
(filed as Exhibit 10.32 to the Company's Form 10-Q filed on November
16, 1998*).
10.32 Purchase Agreement, dated June 9, 1997, by and between LaserSight
Technologies, Inc. and TUI Lasertechnik Und Laserintegration GmbH
(filed as Exhibit 10.1 to the Company's Form S-3, Pre-Effective
Amendment No. 1 filed on February 1, 1999*).
10.33 License and Royalty Agreement, dated September 10, 1997, by and between
LaserSight Technologies, Inc. and Luis A. Ruiz, M.D. and Sergio Lenchig
(filed as Exhibit 10.2 to the Company's Form S-3, Pre-Effective
Amendment No. 1 filed on February 1, 1999*).
10.34 Manufacturing Agreement, dated September 10, 1997, by and between
LaserSight Technologies, Inc. and Frantz Medical Development Ltd.
(filed as Exhibit 10.3 to the Company's Form S-3, Pre-Effective
Amendment No. 1 filed on February 1, 1999*).
10.35 Employment Agreement by and between LaserSight Incorporated and Michael
R. Farris dated October 30, 1998 (filed as Exhibit 10.37 to the
Company's Form 10-K filed on March 31, 1999*).
10.36 Securities Purchase Agreement by and between LaserSight Incorporated
and purchasers of Common Stock dated March 22, 1999 (filed as Exhibit
10.38 to the Company's Form 10-K filed on March 31, 1999*).
10.37 Warrant to purchase 225,000 shares of Common Stock dated March 22, 1999
by and between LaserSight Incorporated and purchasers of Common Stock
of LaserSight Incorporated (filed as Exhibit 10.39 to the Company's
Form 10-K filed on March 31, 1999*).
10.38 Warrant to purchase 67,500 shares of Common Stock dated
February 22, 1999 by and between LaserSight Incorporated and Guy
Numann (filed as Exhibit 10.40 to the Company's Form 10-Q filed on
May 17, 1999*).
32
<PAGE>
10.39 Revolving Credit Agreement, dated June 29, 1999, by and between
LaserSight Incorporated and The Huntington National Bank (filed as
Exhibit 10.39 to the Company's Form 10-Q filed on August 11, 1999*).
10.40 Manufacturing and Marketing Agreement, and Addendum thereto, dated May
14, 1999, by and between LaserSight Technologies, Inc. and Becton,
Dickinson and Company (filed as Exhibit 10.40 to the Company's Form
10-Q filed on August 11, 1999*)**.
10.41 First Amendment to Manufacturing and Marketing Agreement, dated October
23, 1999, by and between LaserSight Technologies, Inc. and Becton,
Dickinson and Company (filed as Exhibit 10.1 to the Company's 8-K,
filed on October 27, 1999*)**.
10.42 Distribution Agreement, dated October 23, 1999, by and between
LaserSight Technologies, Inc. and Becton, Dickinson and Company (filed
as Exhibit 10.2 to the Company's 8-K, filed on October 27, 1999*)**.
10.43 Employment Agreement, by and between LaserSight Technologies, Inc. and
J. Richard Crowley, dated as of July 3, 1997 filed as Exhibit 10.43 to
the Company's Form 10-Q filed on November 15, 1999*).
10.44 Employment Agreement, by and between LaserSight Incorporated and
Michael P. Dayton, dated November 10, 1998 (filed as Exhibit 10.44 to
the Company's Form 10-Q filed on November 15, 1999*).
10.45 Relocation Agreement, by and between LaserSight Incorporated and
Gregory L. Wilson, dated October 13, 1999 (filed as Exhibit 10.45 to
the Company's Form 10-Q filed on November 15, 1999*).
10.46 Technology Development and License Agreement, dated October 23, 1999,
by and between LaserSight Technologies, Inc. and Quadrivium, L.L.C.
(filed as Exhibit 10.46 to the Company's Form 10-Q filed on November
15, 1999*).
10.47 Employment Agreement, by and between LaserSight Technologies, Inc. and
Jack T. Holladay, dated October 27, 1999 (filed as Exhibit 10.47 to the
Company's Form 10-Q filed on November 15, 1999*).
10.48 Securities Purchase Agreement by and between LaserSight
Incorporated and TLC Laser Eye Centers Inc. dated January 31, 2000
(filed as Exhibit 99.2 to the Company's Form 8-K filed on February 8,
2000*).
10.49 Registration Rights Agreement dated January 31, 2000 by and between
LaserSight Incorporated and TLC Laser Eye Centers Inc. (filed as
Exhibit 99.3 to the Company's Form 8-K filed on February 8, 2000*).
10.50 Securities Purchase Agreement by and between LaserSight Incorporated,
BayStar Capital, L.P. and BayStar International, Ltd.dated January 31,
2000 (filed as Exhibit 99.4 to the Company's Form 8-K filed on February
8, 2000*).
10.51 Registration Rights Agreement dated January 31, 2000 by and between
LaserSight Incorporated, BayStar Capital, L.P. and BayStar
International, Ltd. (filed as Exhibit 99.5 to the Company's Form 8-K
filed on February 8, 2000*).
33
<PAGE>
10.52 First Amendment to License and Royalty Agreement dated as of January
18, 2000 by and between LaserSight Technologies, Inc., Luis A. Ruiz,
M.D. and Sergio Lenchig (filed as Exhibit 10.52 to the Company's Form
10-K filed on March 30, 2000*).
10.53 Registration Rights Agreement dated as of January 18, 2000 by and
between LaserSight Incorporated, Luis A. Ruiz, M.D. and Sergio
Lenchig (filed as Exhibit 10.53 to the Company's Form 10-K filed on
March 30, 2000*).
10.54 Securities Purchase Agreement by and between LaserSight Incorporated,
Engmann Options, Inc. and MDNH Partners, L.P. dated February 18, 2000.
The Company undertakes to provide to the Commission upon its request
the schedules omitted from this exhibit (filed as Exhibit 10.54 to the
Company's Form 10-K filed on March 30, 2000*).
10.55 Registration Rights Agreement dated February 18, 2000 by and between
LaserSight Incorporated, Engmann Options, Inc. and MDNH Partners,
L.P (filed as Exhibit 10.55 to the Company's Form 10-K filed on
March 30, 2000*).
10.56 Technology Purchase Agreement dated as of March 8, 2000 by and between
LaserSight Technologies, Inc., Premier Laser Systems, Inc. and
Eyesys-Premier, Inc. The Company undertakes to provide to the
Commission upon its request the schedules omitted from this
exhibit (filed as Exhibit 10.56 to the Company's Form 10-K filed on
March 30, 2000*).
10.57 Employment Agreement, by and between LaserSight Technologies, Inc and
Donald M. Litscher dated February 23, 2000.
10.58 Employment Agreement, by and between LaserSight Technologies, Inc. and
L. Stephen Dalton dated March 6, 2000.
11 Statement of Computation of Loss Per Share
15 Copy of letter from independent accountants' regarding unaudited
interim financial information
27 Financial Data Schedule
b) Reports on Form 8-K
On February 8, 2000, we filed a Current Report on Form 8-K
including a press release describing our private placement on
January 31, 2000, and an update of patent - related litigation.
- ---------------------------
*Incorporated herein by reference. File No. 0-19671.
**Confidential treatment has been granted for portions of this document. The
redacted material has been filed separately with the commission.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the undersigned have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LaserSight Incorporated
Dated: May 12, 2000 By: /s/ Michael R. Farris
---------------------------
Michael R. Farris,
Chief Executive Officer
Dated: May 12, 2000 By: /s/ Gregory L. Wilson
--------------------------
Gregory L. Wilson,
Chief Financial Officer
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
effective as of February 23, 2000 (the "Effective Date"), by and between
LASERSIGHT TECHNOLOGIES, INC. a Delaware corporation (the "Company"), and D.
MICHAEL LITSCHER (the "Employee").
RECITALS
A. Employee desires to be employed as the Company's Vice
President of Operations.
B. The Company desires to employ the Employee upon the terms
and conditions herein set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment of the Employee. Subject to the terms and conditions of
--------------------------
this Agreement, the Company hereby employs the Employee, and the Employee hereby
accepts such employment and agrees to perform the services specified herein.
2. Duties. The Employee shall hold the title of and serve as Vice
------
President of Operations of the Company and have authority and responsibility in
accordance with policies and practices of the Company. The Employee shall report
to and be subject to the direction of the Company's Chief Executive Officer or
such person's designee. During the term of employment hereunder, the Employee
shall:
(a) Perform, to the best of the Employee's ability, those duties
reasonably assigned to Employee from time to time;
(b) Devote the Employee's full time and first priority
business efforts to the Company's business, provided that
nothing herein shall prohibit the Employee from spending reasonable
amounts of time for personal affairs, including, without limitation,
managing his personal investments; and
(c) Carry out Company policies and directives in a manner that
will promote and develop the Company's best interests.
3. Base Salary. In consideration of the Employee satisfying the
------------
Employee's obligation under this Agreement Employee will receive a base salary
(the "Base Salary") which will be calculated at an annual rate of $140,000. The
Base Salary shall be payable in equal installments in accordance with the
Company's customary mode of salary payments for employees of the Company and
shall be subject to the Company's standard withholdings for applicable taxes and
benefit contributions.
<PAGE>
4. Additional Compensation. On an annual basis the Employee will be
------------------------
eligible to receive a cash bonus (the "Performance Bonus") in an aggregate
amount of up to 20% of Base Salary if the Employee or the Company, as
appropriate meets all or a portion of the specific objectives (the "Performance
Objectives") which are established by the Company after consultation with the
Employee. The Performance Objectives for the initial year of this Agreement will
be established within 60 days after the Effective Date. The Company may award
all or the relevant portion of the Performance Bonus on an annual basis within
60 days after the end of the relevant year. The payment of the Performance Bonus
shall be subject to the Company's standard withholdings for applicable taxes and
benefit contributions, as applicable.
5. Stock Options.
-------------
(a) Employee will be granted options (the "Stock Options") to
purchase 100,000 shares of the common stock of LaserSight Incorporated
("LaserSight") on the last to occur of the following dates (such date
to be referred to as the "Approval Date"): (i) the date on which
LaserSight's Executive Compensation and Stock Option Committee (the
"Committee") approves the grant of the Stock Options, or (ii) the date
on which your employment with the Company commences. The Stock Options
shall be granted pursuant to and shall be governed by the terms of
LaserSight's 1996 Equity Incentive Plan, as amended and restated (the
"Equity Incentive Plan") and the award agreement to be delivered to the
Employee pursuant to the Equity Incentive Plan. The Stock Options shall
be granted at an option price per share equal to the Fair Market Value
per share (as defined in the Equity Incentive Plan) on the Approval
Date and will vest 33?% on the first anniversary of the Effective Date
and 33?% on each of the second and third anniversaries of the Effective
Date.
(b) In addition, the Company agrees that if from time to time
the Company recommends that the Committee approve option grants to
members of the Company's senior management team then the Employee shall
be included in such recommendation. Such option grants would be subject
to the approval of the Committee, the terms of the Equity Incentive
Plan and the terms of the award agreement delivered to the Employee
pursuant to the Equity Incentive Plan.
6. Fringe Benefits. During the term of employment hereunder, the
---------------
Employee shall be entitled to those fringe benefits and perquisites set
forth on Exhibit A hereto.
7. Expenses. The Company shall reimburse the Employee for reasonable
costs and expenses, including, but not limited to, expenses for travel, lodging
and meals, incurred in connection with the performance of the Employee's duties
hereunder. In order for the Employee to be eligible for reimbursement Employee
shall comply with the Company's relevant policies, procedures and guidelines
established and implemented from time to time by the Company.
8. Terms of Employment; Severance.
------------------------------
(a) The term of this Agreement shall begin on the date hereof
and shall continue for the three (3) year period immediately
<PAGE>
thereafter, unless sooner terminated as provided in this Section 8 (the
"Initial Term"). Unless either party shall give notice of intent not to
renew this Agreement to the other party at least 60 days prior to the
end of the Initial Term or any Renewal Term (as defined herein), the
term of this Agreement shall, on each such anniversary date, be
automatically extended for successive terms of one year (each a
"Renewal Term").
(b) Notwithstanding the foregoing, the Employee's employment
hereunder may be terminated by the Company at any time for Cause. Such
termination shall be effective upon the Company providing written
notice to the Employee as to the effective date of termination.
(c) Notwithstanding the foregoing, the Employee's employment
hereunder shall terminate in the event of Employee's death or
Disability (as defined in Section 11).
(d) Notwithstanding the foregoing, the Employee's employment
hereunder may be terminated by the Company at any time without Cause.
Such termination shall be effective upon the Company providing written
notice to the Employee as to the effective date of termination.
(e) Notwithstanding the foregoing, the Employee's employment
hereunder may be terminated by the Employee at any time for Good Reason
(as defined in Section 11) upon prior written notice to the Company
specifying therein the grounds for termination and the effective date
of termination.
(f) In addition to all other rights of Employee and
obligations of the Company described herein which arise or continue
upon termination of Employee's employment, the following shall apply:
(i) Upon termination of the Employee's employment
hereunder for any reason whatsoever, the Company shall pay to
the Employee all salary and benefits earned through the
effective date of termination.
(ii) If the Employee's employment hereunder is
terminated by the Company without Cause or by the Employee for
Good Reason, the Employee shall be entitled to receive, as
Employee's sole remedy for such termination, the Base Salary
through the end of the 12 month period immediately following
the effective date of such termination of Employee. If the
Employee's employment is terminated by the Company without
Cause, then all salary owed to the Employee shall be paid over
the relevant period of time in accordance with the Company's
normal payroll practices. Notwithstanding the foregoing, in
order to be eligible for the payments contemplated by this
Section 8(f)(ii), the Employee must not be in default of the
terms of Sections 9 and 10 and the Employee must deliver a
complete release of all claims in favor of the Company and in
a form satisfactory to the Company.
<PAGE>
9. Restriction Against Competition.
-------------------------------
(a) In consideration of the Compensation to be received
hereunder, the Employee agrees that while he is employed by the Company pursuant
to this Agreement, and during the two year period following the effective date
of termination of this Agreement, for any reason, the Employee shall not,
directly or indirectly, as a stockholder, partner, officer, director, agent,
consultant, employee, or otherwise:
(i) engage in any business that competes with the
business of the Company ("Company" defined in Sections 9, 10
and 11(b) herein to mean all Subsidiaries, Affiliates,
divisions, successors, and assigns of the Company and any of
their Subsidiaries or Affiliates) anywhere within the United
States and such other countries that the Company is then
conducting its business; provided, however, that the foregoing
shall not prohibit the Employee's ownership of up to 1% of the
outstanding shares of capital stock of any corporation whose
securities are publicly traded on a national or regional stock
exchange;
(ii) purposefully interfere or attempt to interfere
with any of the Company's contracts (regardless of whether
these contracts are in writing or verbal) or business
relationships or advantages existing and in effect as of the
effective date of termination of this Agreement;
(iii) solicit for employment, either directly or
indirectly, for himself or for another, any of the technical or
professional employees who are or were employed by the Company
during the two-year period following the termination of this
Agreement; and
(iv) purposefully interfere with the business
relationship of or solicit the business or orders of Persons
(a) who are Company customers on the effective date of
termination of this Agreement, or one year prior thereto, or
(b) a prospective or potential customer of the Company, except
that with respect to the two-year period following the
effective date of termination of this Agreement, such
restriction shall apply only to prospective or potential
customers (1) to whom the Company has submitted a formal
quotation within the one year prior to the effective date of
termination of this Agreement, or (2) that have been
previously listed or identified by the Company as a business
prospect at any time during the six months preceding the
effective date of termination.
(b) The parties agree that if the Employee commits or
threatens to commit a breach of the covenants of this Section 9, the
Company shall have the right to seek and obtain all appropriate
injunctive and other equitable remedies therefor, in addition to any
other rights and remedies that may be available at law, it being
acknowledged and agreed that any such breach would cause irreparable
injury to the parties and that money damages may not provide an
adequate remedy therefor.
<PAGE>
10. Protection of Confidential Information and Trade Secrets of the
---------------------------------------------------------------
Company.
- -------
(a) Confidentiality. During the term of this Agreement and for
a period of five years after any termination or expiration thereof, the
Employee agrees that the Employee will not use for the Employee or
others or divulge or convey to others any secret or confidential
information, knowledge or data of the Company obtained by the Employee
during his employment with the Company. Such information, knowledge or
data includes but is not limited to secret or confidential matters: (i)
of a technical nature such as, but not limited to, methods, know-how,
formulae, compositions, processes, discoveries, machines, inventions,
intellectual property, computer programs and similar items or research
projects; (ii) of a business nature such as, but not limited to,
information about the cost, purchasing, profits, markets, sales or
customers; and (iii) pertaining to future developments such as, but not
limited to, research and development, future marketing or merchandising
plans and future expansion plans. The term "secret or confidential
information, knowledge or data" shall not be deemed to include
information that is published, information that is generally known
throughout the industry, or which generally is available to the
industry without restriction through no fault of the Employee.
(b) Injunctive Relief. The Employee agrees that the Company's
remedies at law for any breach or threat of breach by him of the
provisions of paragraph (a) of this Section 10 will be inadequate, and
that the Company shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of paragraph (a) of this Section 10
and to enforce specifically the terms and provisions thereof, in
addition to any other remedy to which the Company may be entitled at
law or equity.
(c) Return of Documents and Other Property. Upon the
termination of the Employee's employment with the Company, or at any
time upon the request of the Company, the Employee shall deliver to the
Company (i) all documents and materials containing secret or
confidential information, knowledge or data relating to the Company's
business and affairs, and (ii) all documents, materials and other
property belonging to the Company, which in either case are in the
possession or under the control of the Employee.
(d) Intellectual Property Rights. Employee acknowledges and
agrees that in consideration for his employment with Company and in
exchange for the consideration to be paid to Employee in connection
with such employment, all creative works Employee produces in
connection with his employment by Company which relate to Company's
actual or demonstrably anticipated research or development, including,
without limitation, any invention, formula, pattern, compilation,
computer program (and related documentation and source code), device,
method, technique, drawing, process or other intellectual property or
property right (collectively, "Intellectual Property"), shall be
considered to have been prepared for Company as a part of and pursuant
to Employee's employment with Company. Employee shall disclose to
Company the existence of such Intellectual Property when he becomes
aware of its existence, and Employee agrees that any such Intellectual
Property shall be owned by Company regardless of whether it would
otherwise be considered a work made for hire. Employee agrees to
execute any documents which Company deems necessary to protect
<PAGE>
Company's interest, including assignments, and further agrees to give
evidence and testimony and take any other reasonable actions as may be
necessary, to secure and enforce Company's rights.
Notwithstanding anything set forth in this Section 10(d)
to the contrary, the parties acknowledge and agree that any
Intellectual Property that Employee (i) has developed or was in the
process of developing prior to the Effective Date or which he develops
during the Term, and (ii) has not used any of Company's resources
(whether materials, equipment, supplies, or other employees,
contractors or consultants of Company) in connection with such
development, shall be owned by Employee (the "Employee Intellectual
Property"); provided, however, Employee shall promptly notify (the
"Development Notice")Company of the existence of such Employee
Intellectual Property. The Development Notice shall completely describe
the Employee Intellectual Property and the applications for such
Employee Intellectual Property. If within 30 days after Company's
receipt of the Development Notice Company notifies Employee that
Company would like to purchase or license the item of Employee
Intellectual Property which is the subject of the Development Notice,
then Company and Employee shall negotiate in good faith for the
purchase or license of such item of Employee Intellectual Property.
Employee agrees that he will not directly or indirectly disclose the
existence of the Employee Intellectual Property to any third party
unless Company either notifies Employee in writing that Company does
not elect to purchase or license the Employee Intellectual Property or
Company fails to notify Employee of its intent with regard to the
purchase or license of the Employee Intellectual Property within 30
days after the date of Company's receipt of the Development Notice.
11. Certain Defined Terms. For purposes of this Agreement, the
---------------------
following definitions shall apply:
(a) "Affiliate" shall mean with respect to any Person, (i) any
Person which directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such Person or (ii) any Person who is a director or
Employee officer (A) of such Person, (B) of any Subsidiary of such
Person, or (C) of any Person described in the foregoing clause (i). For
purposes of this definition, "control" of a Person shall mean the
power, direct or indirect, (i) to vote or direct the voting of more
than 20% of the outstanding voting securities of such Person, or (ii)
to direct or cause the direction of the management and policies of such
Person, whether by contract or otherwise.
(b) "Cause" shall mean any of the following:
-----
(i) The Employee's conviction of or plea of no
contest to any crime involving moral turpitude, the theft or
willful destruction of money or other property of the Company
or his conviction of or plea of no contest to any felony
crime;
(ii) The Employee's inability to perform his
responsibilities due to his abuse or misuse of alcohol or
prescribed drugs or any use of illegal drugs;
<PAGE>
(iii) The Employee's commission of theft, embezzlement or
fraud against the Company;
(iv) The Employee has willfully damaged the Company's
property, business reputation, or good will;
(v) Unsatisfactory performance by Employee of his job or
duties hereunder that is not cured within 10 days after Employee is
notified of such unsatisfactory performance; or
(vi) Employee's insubordination or other misconduct as
determined by the Company in its sole and absolute discretion.
(c) "Change in Control" shall mean any one or more of the
------------------
following:
(i) the acquisition or holding by any person, entity
or "group" (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934) (the "1934 Act"), other
than by LaserSight or any employee benefit plan of LaserSight,
or beneficial ownership (within the meaning of Securities and
Exchange Commission ("SEC") Rule 13d-3 under the 1934 Act) of 25%
or more of LaserSight's then outstanding common stock; provided,
however, that no Change of Control shall occur solely by reason of
any such acquisition by a corporation with respect to which, after
such acquisition more than 60% of the then-outstanding common
shares of such corporation are then beneficially owned, directly or
indirectly, by the persons who were the beneficial owners of
LaserSight's common stock immediately before such acquisition
in substantially the same proportions as their respective
ownership, immediately before such acquisition, of LaserSight's
then-outstanding common stock; or
(ii) individuals who, as of the date of this
Agreement constitute LaserSight's Board of Directors (the
"Incumbent Board") cease for any reason to constitute at least
a majority of LaserSight's Board of Directors; provided that
any individual who becomes a director after the date of this
Agreement whose election or nomination for election by the
stockholders of LaserSight was approved by at least a majority
of the Incumbent Board (other than an election or nomination
of an individual whose initial assumption of office is in
connection with an actual or threatened election contest (as
such terms are used in SEC Rule 14a-11 under the 1934 Act)
relating to the election of the directors of the Company) shall be
deemed to be a member of the Incumbent Board; or
(iii) approval by the stockholders of LaserSight of
(A) a merger, reorganization or consolidation ("Transaction")
with respect to which persons who were the respective beneficial
owners of LaserSight's common stock immediately before the
Transaction do not, immediately thereafter, beneficially own,
directly or indirectly, more than 60% of the then-outstanding
common shares of the corporation resulting from the Transaction,
<PAGE>
(B) a liquidation or dissolution of LaserSight or (C) the sale or
other disposition of all or substantially all of the assets of
LaserSight.
Notwithstanding the foregoing, a Change of Control shall not be deemed
to have occurred if Employee is, by agreement or understanding (written
or otherwise), a participant on his own behalf in a transaction which
causes the Change of Control to occur.
(d) "Compensation" shall mean, with respect to any Person, all
------------
payments and accruals, if any, commonly considered to be compensation,
including, without limitation, all wages, salary, deferred payment
arrangements, bonus payments and accruals, profit sharing arrangements,
payments in respect of equity options or phantom equity options or
similar arrangements, equity appreciation rights or similar rights,
incentive payments, pension or employment benefit contributions or
similar payments, made to or accrued for the account of such Person or
otherwise for the direct or indirect benefit of such Person, plus auto
benefits provided to such Person, if any.
(e) "Disability" shall mean the inability, by reason of
----------
illness or other incapacity, of the Employee substantially to perform
the duties of his then regular employment with the Company, which
inability is reasonably determined by the Company and continues for at
least 90 consecutive days, or for shorter periods aggregating 120 days
during any consecutive twelve-month period.
(f) "Good Reason" shall mean:
-----------
(i) any material breach or default by the Company (and
failure to cure within any applicable grace or cure period) of any
material obligation of this Agreement;
(ii) any material change in the duties to be
performed or titles to be held by the Employee pursuant hereto
either (A) within the twelve (12) month period immediately
after a Change in Control, or (B) without the Employee's prior
written consent, which consent may be withheld for any reason
or for no reason;
(iii) any change in the metropolitan area where the
Employee is required to perform the duties set forth herein
which occurs either (A) within the twelve (12) month period
immediately after a Change in Control, or (B) without the
Employee's consent; which consent may be withheld for any reason
or for no reason;
(iv) any material reduction in the Employee's salary,
benefits, bonuses or other Compensation pursuant to this
Agreement, unless similar reductions are also made to the salary,
benefits, bonuses or other compensation, as applicable, payable to
other executive officers of the Company and such reductions are
made for justifiable business reasons; or
(v) Employee has not been named LaserSight's Chief
Operating Officer (or, if such title is then no longer utilized,
<PAGE>
the officer in charge of and responsible for all of LaserSight's
operational matters) on or before the second anniversary of the
Effective Date.
(g) "Person" shall mean an individual or a corporation,
------
association, partnership, joint venture, organization, business,
individual, trust, or any other entity or organization, including a
government or any subdivision or agency thereof.
(h) "Subsidiary" shall mean as to any Person a corporation,
partnership or other entity of which 25% or more of the outstanding
shares of voting stock or other equity ownership are at the time owned,
directly or indirectly through one or more intermediaries, or both, by
such Person and shall include any such entity which becomes a
Subsidiary of such Person after the date hereof. Consolidated
Subsidiary shall mean any Subsidiary of which 51% or more of the
outstanding shares or voting stock or other equity ownership are at the
time owned, directly or indirectly through one or more intermediaries,
or both, by such Person and shall include any such entity which becomes
a Subsidiary of such Person after the date hereof.
12. Payments. Except as specifically provided herein, all amounts
--------
payable pursuant to this Agreement shall be paid without reduction regardless of
any amounts of salary, compensation or other amounts which may be paid or
payable to the Employee from any source or which the Employee could have
obtained upon seeking other employment; provided that the Company shall be
permitted to make all payments pursuant to this Agreement net of any legally
required tax withholdings.
13. Expenses. In the event of any litigation between the parties
--------
relating to this Agreement and their rights hereunder, the prevailing party
shall be entitled to recover all litigation costs and reasonable attorneys' fees
and expenses from the non-prevailing party.
14. Entire Agreement. This Agreement comprises the entire agreement
----------------
between the parties hereto and as of the date of this contract, supersedes,
cancels and annuls any and all prior agreements between the parties hereto with
respect to the Employee's employment by the Company.
15. Severability. If all or any part of this Agreement is declared by
------------
any court or governmental authority to be unlawful or invalid, such unlawfulness
or invalidity shall not serve to invalidate any portion of this Agreement not
declared to be unlawful or invalid. Any portion so declared to be unlawful or
invalid shall, if possible, be construed in a manner that will give effect to
the terms of such portion to the fullest extent possible while remaining lawful
and valid.
16. Successors and Assigns. This Agreement shall be binding upon, and
----------------------
inure to the benefit of the parties hereto and their respective heirs,
successors, assigns and personal representatives. The Company may assign this
Agreement to any successor or assignee to its business without the written
consent of the Employee. The Employee may not assign, pledge, or encumber his
interest in this Agreement, or any part thereof, without the written consent of
the Company.
<PAGE>
17. Notices. Any notice required or permitted pursuant to the
-------
provisions of this Agreement shall be deemed to have been properly given if in
writing and when received by certified or registered United States mail, postage
prepaid, by overnight courier, telecopy or when personally delivered, addressed
as follows:
If to the Company:
LaserSight Incorporated
3300 University Boulevard
Suite 140
Orlando, Florida 32792
Attn: President
Fax No.: 407-668-9982
If to the Employee:
D. Michael Litscher
7457 Hermitage Road
Concord, Ohio 44077
Each party shall be entitled to specify a different address for the receipt of
subsequent notices by giving written notice thereof to the other party in
accordance with this Section. Telecopy notices must be followed up with the
original by certified mail, postmarked within one business day of the date of
the telecopy.
18. Amendments and Waivers. Any provision of this Agreement may be
-----------------------
amended or waived only with the prior written consent of the Company and the
Employee. No failure or delay on the part of either party to this Agreement in
the exercise of any power or right, and no course of dealing between the parties
hereto, shall operate as a waiver of such power or right, nor shall any single
or partial exercise of any power or right preclude any further or other exercise
thereof or the exercise of any other power or right. The remedies provided for
herein are cumulative and not exclusive of any remedies which may be available
to either party at law or in equity. Any waiver of any provision of this
Agreement, and any consent to any departure by either party from the terms of
any provision hereof, shall be effective only in the specific instance and for
the specific purpose for which given. Nothing contained in this Agreement and no
action or waiver by any party hereto shall be construed to permit any violation
of any other provision of this Agreement or any other document or operate as a
waiver by such party of any of his or its rights under any other provision of
this Agreement or any other document.
19. Controlling Law. This Agreement shall be construed in accordance
----------------
with the laws of the State of Florida, except for its choice of law provisions.
The parties do hereby irrevocably submit themselves to the personal jurisdiction
of the United States Federal Court for the Middle District of Florida and do
hereby irrevocably agree to service of such Court's process on them.
20. Headings. Section headings herein are for convenience only
--------
and shall not affect the meaning or interpretation of the contents hereof.
<PAGE>
21. Counterparts. This Agreement may be executed in counterparts, each
------------
of which is deemed to be an original and all of which taken together constitute
one and the same agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by a duly authorized officer and the Employee has executed this
Agreement, all as of the first day and year written above.
LASERSIGHT INCORPORATED
By: /s/Michael R. Farris
--------------------------------------
Michael R. Farris
President and Chief Executive Officer
"EMPLOYEE"
/s/D. Michael Litscher
-----------------------------------------
D. Michael Litscher
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
effective as of March 6, 2000 (the "Effective Date"), by and between LASERSIGHT
TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and L. STEPHEN
DALTON, an individual residing in the State of Texas the "Employee").
RECITALS
A. Employee desires to be employed by the Company with a title
to be conferred immediately upon assuming the duties of the position for which
Employee is employed.
B. The Company desires to employ the Employee upon the terms and
conditions herein set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment of the Employee. Subject to the terms and conditions of
--------------------------
this Agreement, the Company hereby employs the Employee, and the Employee hereby
accepts such employment and agrees to perform the services specified herein.
2. Duties. The Employee shall hold the title of and serve as Senior
------
Vice President of Scientific Affairs and Chief Scientific Officer of the Company
and have authority and responsibility in accordance with policies and practices
of the Company. The Employee shall report to and be subject to the direction of
the Company's Chief Executive Officer or such person's designee. During the term
of employment hereunder, the Employee shall:
(a) Perform, to the best of the Employee's ability, those duties
reasonably assigned to Employee from time to time;
(b) Devote the Employee's full time and first priority
business efforts to the Company's business, provided that nothing
herein shall prohibit the Employee from spending reasonable amounts of
time for personal affairs, including, without limitation, managing his
personal investments; and
(c) Carry out Company policies and directives in a manner that
will promote and develop the Company's best interests.
3. Base Salary. In consideration of the Employee satisfying the
-----------
Employee's obligation under this Agreement Employee will receive the following
compensation :
(a) during the period commencing on March 6, 2000 and
continuing through March 31, 2000, Employee will receive the sum of
$6,000, which shall be paid in two equal installments in accordance
with the Company's customary mode of salary payments for employees of
the Company and shall be subject to the Company's standard withholdings
for applicable taxes and benefit contributions; and
<PAGE>
(b) during the period commencing April 1, 2000 and continuing
through March 31, 2001, Employee will receive a base salary (the "Base
Salary") which will be calculated at an annual rate of $185,000, and
thereafter the Base Salary will be increased to an annual rate of
$200,000. The Base Salary shall be payable in equal installments in
accordance with the Company's customary mode of salary payments for
employees of the Company and shall be subject to the Company's standard
withholdings for applicable taxes and benefit contributions.
4. Additional Compensation. Employee will receive a signing bonus of
------------------------
$15,000. In addition, on an annual basis the Employee will be eligible to
receive a cash bonus (the "Performance Bonus") in an aggregate amount to be
determined by the Company from time to time if the Employee or the Company, as
appropriate meets all or a portion of the specific objectives (the "Performance
Objectives") which are established by the Company after consultation with the
Employee. The Company may award all or the relevant portion of the Performance
Bonus on an annual basis within 60 days after the end of the relevant year. The
payment of the Performance Bonus shall be subject to the Company's standard
withholdings for applicable taxes and benefit contributions, as applicable.
5. Stock Options. Employee will be granted options (the "Stock
--------------
Options") to purchase 100,000 shares of common stock of LaserSight Incorporated
("LaserSight") on the last to occur of the following dates (such date to be
referred to as the "Approval Date"): (i) the date on which LaserSight's
Executive Compensation and Stock Option Committee approves the grant of the
Stock Options, and (ii) the date on which your employment with the Company
commences. The Stock Options shall be granted pursuant to and shall be governed
by the terms of LaserSight's 1996 Equity Incentive Plan, as amended and restated
(the "Equity Incentive Plan") and the award agreement to be delivered to
Employee pursuant to the Equity Incentive Plan. The Stock Options shall be
granted at an option price per share equal to the Fair Market Value per share
(as defined in the Equity Incentive Plan) on the Approval Date and will vest 33
1/3% on the first anniversary of the Effective Date and 33 1/3% on each of the
second and third anniversaries of the Effective Date.
6. Fringe Benefits. During the term of employment hereunder, the
---------------
Employee shall be entitled to those fringe benefits and perquisites set forth on
Exhibit A hereto.
7. Expenses. The Company shall reimburse Employee for reasonable
--------
costs and expenses, including, but not limited to, expenses for travel,
lodging and meals, incurred in connection with the performance of
Employee's duties hereunder. In order for Employee to be eligible for
reimbursement Employee shall comply with the Company's relevant policies,
procedures and guidelines established and implemented from time to time by the
Company.
8. Terms of Employment; Severance.
------------------------------
(a) The term of this Agreement shall begin on the date hereof
and shall continue for the three (3) year period immediately
thereafter, unless sooner terminated as provided in this Section 8 (the
"Initial Term"). Unless either party shall give notice of intent not to
<PAGE>
renew this Agreement to the other party at least 60 days prior to the
end of the Initial Term or any Renewal Term (as defined herein), the
term of this Agreement shall, on each such anniversary date, be
automatically extended for successor terms of one year (each a "Renewal
Term").
(b) Notwithstanding the foregoing, the Employee's employment
hereunder may be terminated by the Company at any time for Cause. Such
termination shall be effective upon the Company providing written
notice to the Employee as to the effective date of termination.
(c) Notwithstanding the foregoing, the Employee's employment
hereunder shall terminate in the event of Employee's death or
Disability (as defined in Section 11).
(d) Notwithstanding the foregoing, the Employee's employment
hereunder may be terminated by the Company at any time without Cause.
Such termination shall be effective upon the Company providing written
notice to the Employee as to the effective date of termination.
(e) Notwithstanding the foregoing, the Employee's employment
hereunder may be terminated by the Employee at any time for Good Reason
(as defined in Section 11) upon prior written notice to the Company
specifying therein the grounds for termination and the effective date
of termination.
(f) In addition to all other rights of Employee and
obligations of the Company described herein which arise or continue
upon termination of Employee's employment, the following shall apply:
(i) Upon termination of the Employee's employment
hereunder for any reason whatsoever, the Company shall pay to
the Employee all salary and benefits earned through the
effective date of termination.
(ii) If the Employee's employment hereunder is
terminated by the Company without Cause or by the Employee for
Good Reason, the Employee shall be entitled to receive, as
Employee's sole remedy for such termination, the Base Salary
through the later of the through the later of the end of the
12 month period immediately following the effective date of
such termination of Employee. If the Employee's employment is
terminated by the Company without Cause, then all salary owed
to the Employee shall be paid over the relevant period of time
in accordance with the Company's normal payroll practices.
Notwithstanding the foregoing, in order to be eligible for the
payments contemplated by this Section 8(f)(ii), the Employee
shall deliver a complete release of all claims in favor of the
Company and in a form satisfactory to the Company.
9. Restriction Against Competition.
-------------------------------
<PAGE>
(a) In consideration of the Compensation to be received
hereunder, the Employee agrees that while he is employed by the Company
pursuant to this Agreement, and during the two year period following
the effective date of termination of this Agreement, for any reason,
the Employee shall not, directly or indirectly, as a stockholder,
partner, officer, director, agent, consultant, employee, or otherwise:
(i) engage in any business that competes with the
business of the Company ("Company" defined in Sections 9, 10
and 11(b) herein to mean all Subsidiaries, Affiliates,
divisions, successors, and assigns of the Company and any of
their Subsidiaries or Affiliates) anywhere within the United
States and such other countries that the Company is then
conducting its business; provided, however, that the foregoing
shall not prohibit the Employee's ownership of up to 1% of the
outstanding shares of capital stock of any corporation whose
securities are publicly traded on a national or regional stock
exchange;
(ii) purposefully interfere or attempt to interfere
with any of the Company's contracts (regardless of whether
these contracts are in writing or verbal) or business
relationships or advantages existing and in effect as of the
effective date of termination of this Agreement;
(iii) solicit for employment, either directly or
indirectly, for himself or for another, any of the technical
or professional employees who are or were employed by the
Company during the two-year period following the termination
of this Agreement; and
(iv) purposefully interfere with the business
relationship of or solicit the business or orders of Persons
(a) who are Company customers on the effective date of
termination of this Agreement, or one year prior thereto, or
(b) a prospective or potential customer of the Company, except
that with respect to the two-year period following the
effective date of termination of this Agreement, such
restriction shall apply only to prospective or potential
customers (1) to whom the Company has submitted a formal
quotation within the one year prior to the effective date of
termination of this Agreement, or (2) that have been
previously listed or identified by the Company as a business
prospect at any time during the six months preceding the
effective date of termination.
(b) The parties agree that if the Employee commits or
threatens to commit a breach of the covenants of this Section 9, the
Company shall have the right to seek and obtain all appropriate
injunctive and other equitable remedies therefor, in addition to any
other rights and remedies that may be available at law, it being
acknowledged and agreed that any such breach would cause irreparable
injury to the parties and that money damages may not provide an
adequate remedy therefor.
10. Protection of Confidential Information and Trade Secrets of the
---------------------------------------------------------------
Company.
- -------
<PAGE>
(a) Confidentiality. During the term of this Agreement and for
---------------
a period of five years after any termination or expiration thereof, the
Employee agrees that the Employee will not use for the Employee or
others or divulge or convey to others any secret or confidential
information, knowledge or data of the Company obtained by the Employee
during his employment with the Company. Such information, knowledge or
data includes but is not limited to secret or confidential matters: (i)
of a technical nature such as, but not limited to, methods, know-how,
formulae, compositions, processes, discoveries, machines, inventions,
intellectual property, computer programs and similar items or research
projects; (ii) of a business nature such as, but not limited to,
information about the cost, purchasing, profits, markets, sales or
customers; and (iii) pertaining to future developments such as, but not
limited to, research and development, future marketing or merchandising
plans and future expansion plans. The term "secret or confidential
information, knowledge or data" shall not be deemed to include
information that is published, information that is generally known
throughout the industry, or which generally is available to the
industry without restriction through no fault of the Employee.
(b) Injunctive Relief. The Employee agrees that the Company's
------------------
remedies at law for any breach or threat of breach by him of the
provisions of paragraph (a) of this Section 10 will be inadequate, and
that the Company shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of paragraph (a) of this Section 10
and to enforce specifically the terms and provisions thereof, in
addition to any other remedy to which the Company may be entitled at
law or equity.
(c) Return of Documents and Other Property. Upon the
--------------------------------------------
termination of the Employee's employment with the Company, or at any
time upon the request of the Company, the Employee shall deliver to the
Company (i) all documents and materials containing secret or
confidential information, knowledge or data relating to the Company's
business and affairs, and (ii) all documents, materials and other
property belonging to the Company, which in either case are in the
possession or under the control of the Employee.
(d) Intellectual Property Rights. Employee acknowledges and
-----------------------------
agrees that in consideration for his employment with Company and in
exchange for the consideration to be paid to Employee in connection
with such employment, all creative works Employee produces in
connection with his employment by Company which relate to Company's
actual or demonstrably anticipated research or development, including,
without limitation, any invention, formula, pattern, compilation,
computer program (and related documentation and source code), device,
method, technique, drawing, process or other intellectual property or
property right (collectively, "Intellectual Property"), shall be
considered to have been prepared for Company as a part of and pursuant
to Employee's employment with Company. Employee shall disclose to
Company the existence of such Intellectual Property when he becomes
aware of its existence, and Employee agrees that any such Intellectual
Property shall be owned by Company regardless of whether it would
otherwise be considered a work made for hire. Employee agrees to
execute any documents which Company deems necessary to protect
Company's interest, including assignments, and further agrees to give
evidence and testimony and take any other reasonable actions as may be
necessary, to secure and enforce Company's rights.
<PAGE>
Notwithstanding anything set forth in this Section 10(d) to
the contrary, the parties acknowledge and agree that any Intellectual
Property that Employee (i) has developed or was in the process of
developing prior to the Effective Date or which he develops during the
Term, and (ii) has not used any of Company's resources (whether
materials, equipment, supplies, or other employees, contractors or
consultants of Company) in connection with such development, shall be
owned by Employee (the "Employee Intellectual Property"); provided,
however, Employee shall promptly notify (the "Development Notice")
Company of the existence of such Employee Intellectual Property. The
Development Notice shall completely describe the Employee Intellectual
Property and the applications for such Employee Intellectual Property.
If within 30 days after Company's receipt of the Development Notice
Company notifies Employee that Company would like to purchase or
license the item of Employee Intellectual Property which is the subject
of the Development Notice, then Company and Employee shall negotiate in
good faith for the purchase or license of such item of Employee
Intellectual Property. Employee agrees that he will not directly or
indirectly disclose the existence of the Employee Intellectual Property
to any third party unless Company either notifies Employee in writing
that Company does not elect to purchase or license the Employee
Intellectual Property or Company fails to notify Employee of its intent
with regard to the purchase or license of the Employee Intellectual
Property within 30 days after the date of Company's receipt of the
Development Notice.
11. Certain Defined Terms. For purposes of this Agreement, the
---------------------
following definitions shall apply:
(a) "Affiliate" shall mean with respect to any Person, (i) any
---------
Person which directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such Person or (ii) any Person who is a director or
Employee officer (A) of such Person, (B) of any Subsidiary of such
Person, or (C) of any Person described in the foregoing clause (i). For
purposes of this definition, "control" of a Person shall mean the
power, direct or indirect, (i) to vote or direct the voting of more
than 20% of the outstanding voting securities of such Person, or (ii)
to direct or cause the direction of the management and policies of such
Person, whether by contract or otherwise.
(b) "Cause" shall mean any of the following:
-----
(i) The Employee's conviction of or plea of no
contest to any crime involving moral turpitude, the theft or
willful destruction of money or other property of the Company
or his conviction of or plea of no contest to any felony
crime;
(ii) The Employee's inability to perform his
responsibilities due to his abuse or misuse of alcohol or
prescribed drugs or any use of illegal drugs;
(iii) The Employee's commission of theft, embezzlement or
fraud against the Company;
<PAGE>
(iv) The Employee has willfully damaged the Company's
property, business reputation, or good will;
(v) Unsatisfactory performance by Employee of his job or
duties hereunder that is not cured within 10 days after Employee is
notified of such unsatisfactory performance; or
(vi) Employee's insubordination or other misconduct as
determined by the Company in its sole and absolute discretion.
(c) "Change in Control" shall mean any one or more of the
-----------------
following:
(i) the acquisition or holding by any person, entity
or "group" (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934) (the "1934 Act"),
other than by LaserSight or any employee benefit plan of
LaserSight, or beneficial ownership (within the meaning of
Securities and Exchange Commission ("SEC") Rule 13d-3 under
the 1934 Act) of 25% or more of LaserSight's then outstanding
common stock; provided, however, that no Change of Control
shall occur solely by reason of any such acquisition by a
corporation with respect to which, after such acquisition more
than 60% of the then-outstanding common shares of such
corporation are then beneficially owned, directly or
indirectly, by the persons who were the beneficial owners of
LaserSight's common stock immediately before such acquisition
in substantially the same proportions as their respective
ownership, immediately before such acquisition, of
LaserSight's then-outstanding common stock; or
(ii) individuals who, as of the date of this
Agreement constitute LaserSight's Board of Directors (the
"Incumbent Board") cease for any reason to constitute at least
a majority of LaserSight's Board of Directors; provided that
any individual who becomes a director after the date of this
Agreement whose election or nomination for election by the
stockholders of LaserSight was approved by at least a majority
of the Incumbent Board (other than an election or nomination
of an individual whose initial assumption of office is in
connection with an actual or threatened election contest (as
such terms are used in SEC Rule 14a-11 under the 1934 Act)
relating to the election of the directors of the Company)
shall be deemed to be a member of the Incumbent Board; or
(iii) approval by the stockholders of LaserSight of
(A) a merger, reorganization or consolidation ("Transaction")
with respect to which persons who were the respective
beneficial owners of LaserSight's common stock immediately
before the Transaction do not, immediately thereafter,
beneficially own, directly or indirectly, more than 60% of the
then-outstanding common shares of the corporation resulting
from the Transaction, (B) a liquidation or dissolution of
LaserSight or (C) the sale or other disposition of all or
substantially all of the assets of LaserSight.
<PAGE>
Notwithstanding the foregoing, a Change of Control shall not be deemed
to have occurred if Employee is, by agreement or understanding (written
or otherwise), a participant on his own behalf in a transaction which
causes the Change of Control to occur.
(d) "Compensation" shall mean, with respect to any Person, all
------------
payments and accruals, if any, commonly considered to be compensation,
including, without limitation, all wages, salary, deferred payment
arrangements, bonus payments and accruals, profit sharing arrangements,
payments in respect of equity options or phantom equity options or
similar arrangements, equity appreciation rights or similar rights,
incentive payments, pension or employment benefit contributions or
similar payments, made to or accrued for the account of such Person or
otherwise for the direct or indirect benefit of such Person, plus auto
benefits provided to such Person, if any.
(e) "Disability" shall mean the inability, by reason of
----------
illness or other incapacity, of the Employee substantially to perform
the duties of his then regular employment with the Company, which
inability is reasonably determined by the Company and continues for at
least 90 consecutive days, or for shorter periods aggregating 120 days
during any consecutive twelve-month period.
(f) "Good Reason" shall mean:
-----------
(i) any material breach or default by the Company (and
failure to cure within any applicable grace or cure period) of any
material obligation of this Agreement;
(ii) any material change in the duties to be
performed or titles to be held by the Employee pursuant hereto
either (A) within the twelve (12) month period immediately
after a Change in Control, or (B) without the Employee's prior
written consent, which consent may be withheld for any reason
or for no reason;
(iii) any change in the metropolitan area where the
Employee is required to perform the duties set forth herein
which occurs either (A) within the twelve (12) month period
immediately after a Change in Control, or (B) without the
Employee's consent; which consent may be withheld for any
reason or for no reason; or
(iv) any material reduction in the Employee's salary,
benefits, bonuses or other Compensation pursuant to this
Agreement, unless similar reductions are also made to the
salary, benefits, bonuses or other compensation, as
applicable, payable to other executive officers of the Company
and such reductions are made for justifiable business reasons.
(g) "Person" shall mean an individual or a corporation,
association, partnership, joint venture, organization, business,
individual, trust, or any other entity or organization, including a
government or any subdivision or agency thereof.
<PAGE>
(h) "Subsidiary" shall mean as to any Person a corporation,
partnership or other entity of which 25% or more of the outstanding
shares of voting stock or other equity ownership are at the time owned,
directly or indirectly through one or more intermediaries, or both, by
such Person and shall include any such entity which becomes a
Subsidiary of such Person after the date hereof. Consolidated
Subsidiary shall mean any Subsidiary of which 51% or more of the
outstanding shares or voting stock or other equity ownership are at the
time owned, directly or indirectly through one or more intermediaries,
or both, by such Person and shall include any such entity which becomes
a Subsidiary of such Person after the date hereof.
12. Payments. Except as specifically provided herein, all amounts
--------
payable pursuant to this Agreement shall be paid without reduction regardless of
any amounts of salary, compensation or other amounts which may be paid or
payable to the Employee from any source or which the Employee could have
obtained upon seeking other employment; provided that the Company shall be
permitted to make all payments pursuant to this Agreement net of any legally
required tax withholdings.
13. Expenses. In the event of any litigation between the parties
--------
relating to this Agreement and their rights hereunder, the prevailing party
shall be entitled to recover all litigation costs and reasonable attorneys' fees
and expenses from the non-prevailing party.
14. Entire Agreement. This Agreement comprises the entire agreement
----------------
between the parties hereto andas of the date of this contract, supersedes,
cancels and annuls any and all prior agreements between the parties hereto with
respect to the Employee's employment by the Company.
15. Severability. If all or any part of this Agreement is declared by
------------
any court or governmental authority to be unlawful or invalid, such unlawfulness
or invalidity shall not serve to invalidate any portion of this Agreement not
declared to be unlawful or invalid. Any portion so declared to be unlawful or
invalid shall, if possible, be construed in a manner that will give effect to
the terms of such portion to the fullest extent possible while remaining lawful
and valid.
16. Successors and Assigns. This Agreement shall be binding upon, and
----------------------
inure to the benefit of the parties hereto and their respective heirs,
successors, assigns and personal representatives. The Company may assign this
Agreement to any successor or assignee to its business without the written
consent of the Employee. The Employee may not assign, pledge, or encumber his
interest in this Agreement, or any part thereof, without the written consent of
the Company.
17. Notices. Any notice required or permitted pursuant to the
-------
provisions of this Agreement shall be deemed to have been properly given if in
writing and when received by certified or registered United States mail, postage
prepaid, by overnight courier, telecopy or when personally delivered, addressed
as follows:
<PAGE>
If to the Company:
LaserSight Technologies, Inc.
3300 University Boulevard
Suite 140
Winter Park, Florida 32792
Attn: President
Fax No.: (407) 668-9982
If to the Employee:
L. Stephen Dalton
1640 Oviedo Grove Circle
Oviedo, Florida 32767
Each party shall be entitled to specify a different address for the receipt of
subsequent notices by giving written notice thereof to the other party in
accordance with this Section. Telecopy notices must be followed up with the
original by certified mail, postmarked within one business day of the date of
the telecopy.
18. Amendments and Waivers. Any provision of this Agreement may be
-----------------------
amended or waived only with the prior written consent of the Company and the
Employee. No failure or delay on the part of either party to this Agreement in
the exercise of any power or right, and no course of dealing between the parties
hereto, shall operate as a waiver of such power or right, nor shall any single
or partial exercise of any power or right preclude any further or other exercise
thereof or the exercise of any other power or right. The remedies provided for
herein are cumulative and not exclusive of any remedies which may be available
to either party at law or in equity. Any waiver of any provision of this
Agreement, and any consent to any departure by either party from the terms of
any provision hereof, shall be effective only in the specific instance and for
the specific purpose for which given. Nothing contained in this Agreement and no
action or waiver by any party hereto shall be construed to permit any violation
of any other provision of this Agreement or any other document or operate as a
waiver by such party of any of his or its rights under any other provision of
this Agreement or any other document.
19. Controlling Law. This Agreement shall be construed in accordance
----------------
with the laws of the State of Florida, except for its choice of law provisions.
The parties do hereby irrevocably submit themselves to the personal jurisdiction
of the United States Federal Court for the Middle District of Florida and do
hereby irrevocably agree to service of such Court's process on them.
20. Headings. Section headings herein are for convenience only and
shall not affect the meaning or interpretation of the contents hereof.
21. Counterparts. This Agreement may be executed in counterparts, each
------------
of which is deemed to be an original and all of which taken together constitute
one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by a duly authorized officer and the Employee has executed this
Agreement, all as of the first day and year written above.
LASERSIGHT TECHNOLOGIES, INC.
By: /s/Michael R. Farris
----------------------------------------
Michael R. Farris
President and Chief Executive Officer
"EMPLOYEE"
/s/L. Stephen Dalton
---------------------------------------------
L. Stephen Dalton
EXHIBIT 11
LASERSIGHT INCORPORATED
COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Three Months Ended
March 31,
-----------------------------------
2000 1999
-----------------------------------
BASIC AND DILUTED
Weighted average shares outstanding 19,234,000 13,418,000
============= ============
Net loss $ (2,758,952) (3,320,364)
============= ============
Basic loss per share $ (0.14) (0.25)
============= ============
ADDITIONAL DILUTED CALCULATION
Net loss, above $ (2,758,952) (3,320,364)
============= =============
Additional adjustment to weighted
average number of shares:
Weighted average shares
outstanding, above 19,234,000 13,418,000
Dilutive effect of contingently
issuable shares, stock options
and convertible preferred stock 5,084,000 4,479,000
------------- ------------
Weighted average number of 24,318,000 17,897,000
shares, adjusted ============= ============
Diluted loss per share, adjusted $ (0.11) (A) (0.19)
============= ============
(A) This calculation is submitted in accordance with Regulation
S-K item 601(b)(11) although it is contrary to paragraph 13-14 of
SFAS 128 because it produces an anti-dilutive result.
ACKNOWLEDGMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
REGARDING INDEPENDENT AUDITORS' REVIEW REPORT
The Board of Directors
LaserSight Incorporated:
With respect to the registration statements on Form S-8 (nos. 33-96390,
33-52170, 333-16817, 333-16823, 333-62587, 333-62591, 333-84073 and
333-84075) and on Form S-3 (nos. 333-2198, 333-25237, 333-36655, 333-36837,
333-59369, 333-68495, 333-77825 and 333-35822) of LaserSight Incorporated,
we acknowledge our awareness of the use therein of our report dated April 27,
2000 related to our review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of sections 7 and 11 of the Act.
St. Louis, Missouri
May 12, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted
from the accompanying financial statements and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 16,937,310
<SECURITIES> 0
<RECEIVABLES> 17,324,509
<ALLOWANCES> 3,780,903
<INVENTORY> 9,389,782
<CURRENT-ASSETS> 40,437,744
<PP&E> 4,309,032
<DEPRECIATION> 2,385,082
<TOTAL-ASSETS> 63,623,548
<CURRENT-LIABILITIES> 12,735,334
<BONDS> 0
0
4,000
<COMMON> 19,949
<OTHER-SE> 50,040,660
<TOTAL-LIABILITY-AND-EQUITY> 63,623,548
<SALES> 7,832,478
<TOTAL-REVENUES> 8,695,002
<CGS> 3,408,524
<TOTAL-COSTS> 3,493,596
<OTHER-EXPENSES> 7,665,755
<LOSS-PROVISION> 556,538
<INTEREST-EXPENSE> 2,400
<INCOME-PRETAX> (2,758,952)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,758,952)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,758,952)
<EPS-BASIC> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
