<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Amendment No. 1)
[X] Quarterly Report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
[ ] Transition Report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended: SEPTEMBER 30, 1996
------------------
Commission File No. 0-23142
VISTA TECHNOLOGIES INC.
- ------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 13-3687830
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
167 S. San Antonio Road, Suite 9, Los Altos, California 94022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 947-1750
--------------------------
(Not applicable)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common Stock, without par
value, outstanding as of September 30, 1996: 7,626,105 shares.
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
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VISTA TECHNOLOGIES INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
Part I. FINANCIAL INFORMATION ........................................ 1
Item 1. Financial Statements:
Consolidated Balance Sheets at September 30, 1996
and March 31, 1996 ...................................... 1
Consolidated Statements of Operations for the Three Months
and Six Months ended September 30, 1996 and 1995 ........ 3
Consolidated Statements of Cash Flows for the
Six Months ended September 30, 1996 and 1995 ............ 4
Consolidated Statement of Changes in Stockholders'
Equity for the Six Months ended September 30, 1996 ...... 5
Notes to Unaudited Consolidated Financial Statements
at September 30, 1996 ................................... 6
Item 2. Management's Discussion and Analysis or Plan of Operation:
Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................... 12
Part II. Other Information:
Item 1. Legal Proceedings ................................. 17
Item 5. Other Events ...................................... 18
Item 6. Exhibits and Reports on Form 8-K .................. 20
Signatures ............................................................. 21
</TABLE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Report under the caption "Management's
Discussion and Analysis or Plan of Operation" and elsewhere constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results or performance of the Company to be materially different from future
results or performance expressed or implied by such forward-looking
statements. Such factors, include, among others: market acceptance of new
technologies and services, specifically laser vision correction procedures;
the sufficiency of financial resources available to the Company and its
corporate affiliates; economic, competitive, governmental and technological
factors affecting the Company's operations, markets, services and prices; and
other factors described in this Report and in prior filings by the Company
with the Securities and Exchange Commission. The Company's actual results
could differ materially from those suggested or implied by any forward-looking
statements as a result of such risks.
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<PAGE>
PART I. FINANCIAL INFORMATION
VISTA TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
1996 1996
------------- -------------
<S> <C> <C>
ASSETS:
Current assets:
Cash ...................................... $ 512,544 $ 288,312
Accounts receivable:
Trade .................................. 90,970 29,515
VAT .................................... 3,632 41,434
Related parties ........................ 1,290,944 214,454
Stock subscriptions receivable ............ -- 962,500
Prepaid expenses and other ................ 117,340 256,081
------------- -------------
Total current assets .................. 2,015,430 1,792,296
Investment securities:
Available for sale ........................ 2,125,000 2,475,000
Held to maturity .......................... 118,803 115,468
Long-term VAT receivables ................... 55,846 191,571
Property and equipment, net ................. 1,127,843 1,219,798
Investment in equity investees .............. 1,316,064 468,350
Other assets ................................ 228,567 7,299
------------- -------------
Total Assets ................................ $ 6,987,553 $ 6,269,782
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
VISTA TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
<TABLE>
<CAPTION>
September 30, March 31,
1996 1996
------------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable, trade ................... $ 518,974 $ 520,825
Accounts payable, related parties ......... 177,094 29,535
Accrued expenses .......................... 697,784 633,206
Current portion of notes payable .......... -- 296,591
Current portion of long-term debt ......... 148,465 137,351
Current portion of obligations under
capital leases ......................... 67,588 67,588
------------- -------------
Total current liabilities ............. 1,609,906 1,685,096
------------- -------------
Long-term liabilities:
Note payable to Pharma Patch, related party 800,000 --
Notes payable, net of current portion ..... 277,777 277,777
Long-term debt, net of current portion .... 446,211 463,240
Obligations under capital leases, net
of current portion ..................... 152,941 196,956
------------- -------------
Total long-term liabilities ........... 1,676,929 937,973
------------- -------------
Minority Interest ........................... 656,080 653,306
------------- -------------
Commitments and Contingencies
Total liabilities ..................... 3,942,915 3,276,375
------------- -------------
Stockholders' Equity:
Preferred stock, $.001 par value,
15,000,000 shares authorized,
none issued or outstanding ............ -- --
Common stock, $.005 par value;
15,000,000 shares authorized,
issued and outstanding,
7,626,105 shares at Sept 30, 1996 and
5,256,105 shares at March 31, 1996 .... 38,131 26,281
Additional paid-in capital ................ 20,848,146 18,026,096
Unrealized loss on securities
available for sale ...................... (537,500) (187,500)
Accumulated deficit ....................... (17,587,593) (15,247,045)
Adjustment for first quarter of European
operating subsidiaries to conform
reporting periods ..................... 42,003 --
Foreign currency translation adjustments .. 241,451 375,575
------------- -------------
Total stockholders' equity ............ 3,044,638 2,993,407
------------- -------------
Total Liabilities and Stockholders' Equity .. $ 6,987,553 $ 6,269,782
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
VISTA TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months ended Three Months ended
September 30, September 30,
-------------------------- -------------------------
1996 1995 1996 1995
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES......................... $ 1,463,390 $ 933,328 $ 687,675 $ 463,849
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
General and administrative..... 2,585,221 2,078,462 1,286,295 968,550
Depreciation and amortization.. 119,684 100,719 19,349 54,863
Foreign currency exchange loss. 1,069 -- 1,069 --
Realized loss (gains) on
trading securities........... -- 152,496 -- --
Interest....................... 35,776 44,026 34,339 20,478
Other.......................... (1,774) 408,365 (1,774) 187,177
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS......... (1,276,587) (1,850,740) (651,603) (767,219)
EQUITY INVESTEES INCOME (LOSS)... (1,061,186) -- (588,521) --
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAXES,
MINORITY INTEREST AND
EXTRAORDINARY LOSS......... (2,337,773) (1,850,740) (1,240,124) (767,219)
INCOME TAXES..................... -- -- -- --
----------- ----------- ----------- -----------
LOSS BEFORE MINORITY INTEREST
AND EXTRAORDINARY LOSS.... (2,337,773) (1,850,740) (1,240,124) (767,219)
MINORITY INTEREST................ 2,774 8,151 (20,948) 8,714
----------- ----------- ----------- -----------
NET LOSS BEFORE
EXTRAORDINARY LOSS......... (2,340,547) (1,842,589) (1,261,072) (758,505)
EXTRAORDINARY LOSS............... -- -- -- --
----------- ----------- ----------- -----------
NET LOSS................... $(2,340,547) $(1,842,589) $(1,261,072) $ (758,505)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE:
Before extraordinary loss...... $ (0.35) $ (1.30) $ (0.17) $ (0.54)
Extraordinary loss............. -- -- -- --
----------- ----------- ----------- -----------
Net loss per common share.... $ (0.35) $ (1.30) $ (0.17) $ (0.54)
=========== =========== =========== ===========
Weighted average number of
common shares outstanding...... 6,767,307 1,414,073 7,408,279 1,411,245
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
VISTA TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months ended September 30,
--------------------------------
1996 1995
-------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ............................................. $ (2,298,544) $ (1,842,589)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization ................... 217,470 100,719
Realized (gain) loss on trading securities ...... -- 152,496
Minority interest (gains) ....................... (2,774) (8,151)
Equity investees (income) loss, net ............. 1,061,186 --
Changes in operating assets and liabilities,
net of foreign currency translation:
Accounts receivable:
Trade ..................................... (61,455) 152,453
VAT ....................................... 37,802
Related parties ........................... (1,076,490)
Prepaid expenses ............................ 138,741 3,059
Other current assets ........................ -- (78,858)
Other assets ................................ (221,268) (4,201)
Bank overdraft protection ................... -- (70,744)
Accounts payable, trade ..................... (1,851) 1,006,306
Accounts payable, related parties ........... 96,591 --
Accounts payable, affiliates ................ 100,503 --
Accrued expenses ............................ 200,303 121,579
Other liabilities ........................... (288,811) --
------------ ------------
Net Cash Provided By (Used By) Operating Activities .. (2,093,048) (467,931)
------------ ------------
INVESTING ACTIVITIES:
Proceeds from sales of trading securities ............ -- 250,630
Purchase of property and equipment ................... (125,515) (113,534)
Change (loss) on investment -- held to maturity ...... -- 32,937
------------ ------------
Net Cash Provided By (Used By) Investing Activities .. (125,515) 170,033
------------ ------------
FINANCING ACTIVITIES:
Issuance of (payments on) notes payable .............. (46,564) 136,811
Issuance of (payments on) notes payable
related parties .................................... (20,000) --
Payment of long-term debt ............................ (44,015) --
Sale of common stock ................................. 925,000 --
Issuance of notes payable -- affiliate ............... 800,000 --
Redeemed stock of subsidiary ......................... -- (277,777)
Proceeds from stock subscription ..................... 962,500 --
------------ ------------
Net Cash Provided By (Used By) Financing Activities .. 2,576,921 (140,966)
------------ ------------
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH ...... (134,124) 24,836
------------ ------------
NET INCREASE (DECREASE) IN CASH ...................... 224,234 (414,028)
Cash at beginning of period .......................... 288,312 649,708
------------ ------------
CASH AT END OF PERIOD ................................ $ 512,546 $ 235,680
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ....................................... $ 35,776 $ --
Income taxes ................................... -- --
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
VISTA TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Common Stock Additional Foreign Total
--------------------- Paid-in Unrealized Accumulated currency Stockholders'
Shares Amount Capital Loss deficit adjustments Equity
---------- --------- ------------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
March 31, 1996... 5,256,105 $ 26,281 $ 18,026,096 $ (187,500) $(15,247,045) $ 375,575 $ 2,993,407
Common stock
issued for cash
in private
placements....... 200,000 1,000 424,000 -- -- -- 425,000
Common stock issued
to VLC-Pacific
in exchange for
500,000 shares of
series B
preferred stock
of VLC-Pacific... 500,000 2,500 485,350 -- -- -- 487,850
Common stock issued
to VLC-Northeast
in exchange for
675,000 shares of
series B
preferred stock
of VLC-Northeast. 450,000 2,250 443,250 -- -- -- 445,500
Common stock issued
to VLC-Northwest
in exchange for
500,000 shares of
series B
preferred stock
of VLC-Northwest 500,000 2,500 492,000 -- -- -- 494,500
Exercise of
stock option by
Pharma Patch.... 200,000 1,000 499,000 -- -- -- 500,000
Common stock issued
for purchase of
equity in
VLC-Michigan,
VLC-Northeast,
VLC-Northwest,
VLC-Pacific and
VLC-Southwest... 520,000 2,600 512,200 -- -- -- 514,800
Adjustments for
investment in
VLC-Southwest... -- -- (33,750) -- -- -- (33,750)
Unrealized loss
on securities
available
for sale........ -- -- -- (350,000) -- -- (350,000)
Foreign currency
adjustments..... -- -- -- -- -- (134,124) (134,124)
Adjustment for
European
operating
subsidiaries
to conform
reporting
periods......... -- -- -- -- 42,003 -- 42,003
Net loss for
the six
months ended
Sept 30, 1996... -- -- -- -- (2,340,547) -- (2,340,547)
---------- --------- ------------ ---------- ------------ ----------- -------------
Balance at
Sept 30, 1996... 7,626,105 $ 38,131 $ 20,848,146 $ (537,500) $(17,545,589) $ 241,451 $ 3,044,639
========== ========= ============ ========== ============ =========== =============
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
VISTA TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 -- INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements of Vista
Technologies Inc., a Nevada corporation (the "Company" or "Vista") at
September 30, 1996, and for the six months and three months periods ended
September 30, 1996 and 1995 have been prepared by the Company pursuant to the
rules of the Securities and Exchange Commission (the "Commission"). In the
opinion of the Company's management, such unaudited financial statements
include all adjustments necessary for a fair presentation of financial
position, results of operations and cash flows for the interim periods covered
by such statements. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
Commission's rules. Reference is made to Note 1 of the Notes to Consolidated
Financial Statements contained in the Company's Annual Report on Form 10-KSB
for the fiscal year ended March 31, 1996 for a summary of significant
accounting policies utilized by the Company. It is suggested that the
financial statements at September 30, 1996 be read in conjunction with the
audited consolidated financial statements and notes thereto included in the
Company's latest Annual Report on Form 10-KSB.
Results of operations for the six months and three months ended September 30,
1996 and 1995 may not necessarily be indicative of results for the full fiscal
year.
NOTE 2 -- PRINCIPLES OF CONSOLIDATION; FOREIGN CURRENCY TRANSLATION;
INTEREST IN CONSOLIDATED SUBSIDIARIES
(a) Principles of Consolidation
The consolidated financial statements include accounts of the Company, and all
wholly-owned and majority-owned subsidiaries. Investments in companies in
which the Company's ownership interests range from 20 to 50 percent, and in
which the Company exercises influence over operating and financial policies,
are accounted for using the equity method. Investments in companies in which
the Company's ownership interest is currently in excess of 50% but for which
majority interest is considered only temporary and investments in companies in
which the Company's financial interest exceeds 20% and in which the Company
has the ability to exercise significant influence but in which the Company may
have limited or no voting rights are accounted for using the equity method.
Other investments are accounted for using the cost method. All significant
intercompany accounts and transactions have been eliminated. The Company's
subsidiaries in Italy, Sweden and the Netherlands have been consolidated at
September 30, 1996 using the subsidiaries' respective fiscal quarters ended
September 30,1996 and have been consolidated at September 30, 1995 using their
respective fiscal quarters ended June 30, 1995.
(b) Foreign Currency Translation
Financial statements of international subsidiaries are translated into US
dollars using the exchange rate at each balance sheet date for assets and
liabilities and an average exchange rate for each period for revenues,
expenses, gains and losses. Where the local currency is the functional
currency, translation adjustments are recorded as a separate component of
stockholders' equity.
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<PAGE>
NOTE 2 -- PRINCIPLES OF CONSOLIDATION; FOREIGN CURRENCY TRANSLATION;
INTEREST IN CONSOLIDATED SUBSIDIARIES (continued)
The balance sheet and income statement data for the foreign subsidiaries have
been translated from their respective foreign currency to U.S. dollars using
the following exchange rates:
<TABLE>
<CAPTION>
Average Rate Average Rate
for the for the
Six Months Six Months
Foreign September 30, 1996 Ended Ended
Subsidiary Currency Spot Rate Sept 30, 1996 Sept 30, 1995
- ---------- -------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Vista-UK Pounds Sterling n/a n/a $ 1.586
Vista-Italy Lira $ 0.001 $ 0.001 0.001
ConVista Gilders 0.5845 0.5908 0.631
Vista-Sweden Krona 0.1510 0.1499 0.138
</TABLE>
(c) Minority Interest
Minority interest represents the minority stockholders' proportionate share of
the equity in Vista-Italy. At September 30, the Company owned 73.57% of the
capital stock of Vista-Italy.
NOTE 3 -- LOSS PER COMMON SHARE
Loss per common share is based on the weighted average number of common shares
outstanding. Common equivalent shares relating to stock options and warrants
are excluded from the computation as their effect is anti-dilutive.
NOTE 4 -- CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments with an original maturity
of three months or less to be cash equivalents.
NOTE 5 -- STOCK SUBSCRIPTIONS RECEIVABLE
The Company has recorded stock subscriptions receivable as a current asset as
of March 31, 1996, because all such receivables were paid before the issuance
of the Company's financial statements.
NOTE 6 -- INVESTMENT SECURITIES
The Company accounts for investment securities under the provisions of SFAS
No. 115. This standard requires that individual debt and equity securities be
classified into one of three categories: trading, held-to-maturity or
available-for-sale.
Trading securities are bought and held principally for the purpose of selling
them in the near term. Held-to-maturity securities are those securities in
which the Company has the ability and intent to hold the security until
maturity. All other securities not included in trading or held-to-maturity
are classified as available-for-sale.
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<PAGE>
NOTE 6 -- INVESTMENT SECURITIES (continued)
Trading securities and available-for-sale securities are recorded at fair
value. Held-to-maturity securities are recorded at amortized cost, adjusted
for the amortization or accretion of premiums or discounts. Unrealized
holding gains and losses on trading securities are included in earnings.
Unrealized holding gains and losses, net of the related tax effect, on
available-for-sale securities are excluded from earnings and are reported as a
separate component of stockholders' equity until realized. Realized gains and
losses from the sale of securities are determined on a specific identification
basis.
A decline in the market value of any available-for-sale or held-to-maturity
security below cost that is deemed other than temporary results in a reduction
in carrying amount to fair value. The impairment is charged to earnings and a
new cost basis for the security is established. Premiums and discounts are
amortized or accreted over the life of the related held-to-maturity security
as an adjustment to yield using the effective interest method. Dividend and
interest income are recognized when earned.
The amortized cost, gross unrealized holding gains, gross unrealized holding
losses and fair value for available-for-sale and held-to-maturity securities
by major security type and class of security at September 30, 1996, were as
follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Fair
Cost Gains Losses Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Available-for-sale:
Equity securities .... $ 2,662,500 $ -- $ (537,500) $ 2,125,000
Held-to-maturity:
8.75% Italian bonds .. 115,468 3,335 -- 118,803
</TABLE>
The 8.75% Italian bonds mature in 1997.
NOTE 7 -- RECLASSIFICATION
Certain 1995 amounts have been reclassified to conform to the 1996
presentation.
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<PAGE>
NOTE 8 -- PROPERTY AND EQUIPMENT
Property and equipment consist of the following at September 30, 1996 and
March 31, 1996:
<TABLE>
<CAPTION>
September 30, March 31,
1996 1996
------------ ------------
<S> <C> <C>
Excimer lasers and other technical equipment .. $ 1,896,394 $ 1,896,394
Office furniture and equipment ................ 192,900 67,385
----------- -----------
2,089,294 1,963,779
Less accumulated depreciation ................. (961,451) (743,981)
----------- -----------
$ 1,127,843 $ 1,219,798
=========== ===========
</TABLE>
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
(a) Employment Agreements
The Company has employment agreements with its executive officers, the terms
of which expire at various times through January 15, 1999. Such agreements
provide for minimum salary levels, as well as for incentive bonuses which are
payable if specified management and operational goals are attained.
(b) Exchange Agreement
In order to induce a stockholder to advance $100,000 under a deed of debenture
to MICRA Instruments Limited (a wholly owned subsidiary of Medical Development
and Research, Inc.), the Company entered into an exchange agreement on June
28, 1995 with the stockholder. The exchange agreement provides the
stockholder with the option of exchanging the unpaid principal and interest of
the debenture for fully paid and nonassessable shares of the Company's common
stock issued under Regulation S at a conversion price of $1.25 per share at
any time prior to repayment of the debenture by MICRA. As of September 30,
1996, the stockholder has not exercised this option.
(c) Legal Judgment
In 1991 and 1993, Vista-Italy and Laser Vision Centers, Inc. ("LVCI") entered
into agreements to license trademarks and develop territorial marketing
strategies. The companies exchanged shares of their respective common stock
as consideration under the agreements. In 1993, LVCI filed suit for
termination of these agreements and a default judgment was entered in LVCI's
favor rescinding all prior agreements among the parties. In connection with
this judgment, Vista-Italy recorded the cancellation of Vista-Italy shares of
common stock it had issued to LVCI, a return of LVCI shares previously
delivered to Vista-Italy and an accrued liability of $175,000. Vista-Italy's
motion to vacate the judgment was denied by the trial court and an appeal to
the Missouri Supreme Court also has been denied. The unfavorable
determination in these proceedings will not adversely affect the business
operations of the Company or Vista-Italy.
- 9 -
<PAGE>
NOTE 9 -- COMMITMENTS AND CONTINGENCIES (continued)
(d) Insurance and Indemnification
Use of laser systems by health care professionals using laser equipment and
other laser vision correction ("LVC") services may give rise to claims against
the Company or its affiliates by persons alleging injury. The Company's
subsidiaries generally do not currently have malpractice liability insurance.
The Company believes that claims alleging defects in laser systems will be
covered by manufacturers' warranties and the manufacturer's product liability
insurance, and that the Company and its affiliates could take advantage of
such insurance by adding such suppliers to potentially adverse lawsuits.
There can be no assurance that laser suppliers will carry product liability
insurance or that any such insurance will be adequate to protect the Company.
Generally speaking, the policy of the Company's operating subsidiaries and
regional joint ventures is to require that ophthalmologists who perform laser
procedures by use of LVC equipment maintain their own professional liability
insurance.
(e) Physician Commitments
Legal proceedings instituted by a third party in Hawaii contending that a
local physician breached obligations to the third party by the physician's
decision to associate with one of the Company's Regional Joint Ventures have
been dismissed.
NOTE 10 -- ESTABLISHMENT OF ADDITIONAL REGIONAL JOINT VENTURES
The Company's business strategy is to expand in North America by organizing
and sponsoring independently financed regional enterprises ("Regional Joint
Ventures") in which the Company will obtain a significant equity interest and
long-term fee-based consulting arrangements. As of March 31, 1996, two such
Regional Joint Ventures, Vista Laser Centers of Michigan, Inc. and Vista Laser
Centers of the Southwest, Inc. had been formed.
During the six months ended September 30, 1996, the Company made additional
investments in Regional Joint Ventures as follows:
In May 1996, the Company issued 450,000 shares of its common stock in
exchange for 500,000 shares of 5% Series B convertible preferred stock
in Vista Laser Centers of the Northeast, Inc. (VLC-Northeast).
In May 1996, the Company issued 500,000 shares of its common stock in
exchange for 500,000 shares of 5% Series B convertible preferred stock
in Vista Laser Centers of the Northwest, Inc. VLC-Northwest).
In May 1996, the Company issued 500,000 shares of its common stock in
exchange for 500,000 shares of 5% Series B convertible preferred stock
in Vista Laser Centers of the Pacific, Inc. (VLC-Pacific).
Effective July 18, 1996, the Company also acquired Series A preferred
shares from a third party in five of Regional Joint Ventures in exchange
for 520,000 shares of Vista common stock. The shares purchased
consisted of 100,000 Series A preferred shares in each of VLC-Michigan,
VLC-Northeast, VLC-Northwest, VLC-Pacific and VLC-Southwest with an
estimated value of approximately $0.99 a share issuance.
- 10 -
<PAGE>
NOTE 10 -- ESTABLISHMENT OF ADDITIONAL REGIONAL JOINT VENTURES (continued)
The Company has agreed to convert all shares of Series A and Series B
preferred stock held by the Company in each of these Regional Joint Ventures
into shares of common stock of the respective Regional Joint Venture, in each
instance at a one-for-one conversion ratio.
Each of VLC-Michigan, VLC-Northeast, VLC-Northwest, VLC-Pacific and VLC-
Southwest have been organized to establish, own and manage laser vision
correction centers.
The Company has granted or has committed to grant to one or more local
affiliates of each of the Regional Joint Ventures an irrevocable five year
proxy to vote the shares owned by the Company in the respective Regional Joint
Ventures. The Company will retain rights to a minimum of 20% representation
on each of the regions' joint venture Board of Directors.
NOTE 11 -- SECURED LOAN FROM RELATED PARTY
In August 1996, the Company borrowed $800,000 from Pharma Patch PLC, a
principal shareholder of the Company, in exchange for an 8% secured promissory
note (the "8% Secured Note"). Principal and interest on the 8% Secured Note
are payable on December 31, 1996, or earlier in the event the Company elects
to sell any portion of its interest in 200,000 shares of Technical Chemicals
and Products, Inc. common stock (the "TCPI Shares") registered for resale
under the federal securities laws. The TCPI Shares have been pledged as
collateral by the Company to secure its obligations under the 8% Secured Note.
The Company and Pharma Patch subsequently agreed to amend the terms of the 8%
Secured Note to provide that proceeds from the sale of TCPI Shares by the
Company will be allocated 50% to the Company and 50% to repayment of the 8%
Secured Note.
The original maturity date of the 8% Secured Note may be extended by the
Company up to two times, for an additional six months each, so long as all
accrued interest has been paid at the date of each renewal and the 8% Secured
Note is not otherwise in default. Pharma Patch PLC has the right to
accelerate the maturity date of the loan if the fair value market of TCPI
Shares pledged as collateral falls to less than 150% of the unpaid principal
of the 8% Secured Note unless the Company prepays a sufficient amount of the
note principal so that the fair market value of TCPI Shares then pledged as
collateral is not less than 150% of the remaining unpaid principal of the 8%
Secured Note.
NOTE 12 -- SUBSEQUENT EVENTS
On October 15, 1996, Pharma Patch PLC exercised its rights to purchase 50,000
shares of the Company's common stock at a total option exercise price of
$125,000 ($2.50 per share).
On October 1, 1996, the Company and Vista Laser Centers of the Southwest, Inc.
("VLC-Southwest") agreed that the Company's account receivable of $383,634 for
advances to VLC-Southwest would be extinguished in exchange for the surrender
of 250,000 shares of the Company's common stock held by VLC-Southwest that
were previously issued to VLC-Southwest in March 1996. The agreement further
provides that additional advances by the Company to VLC-Southwest after
October 1, 1996 will be made in exchange for the Company's investment in
additional common stock of VLC-Southwest based upon a share price value of
$3.00 per share of VLC-Southwest common stock. As of approximately November
- 11 -
<PAGE>
NOTE 12 -- SUBSEQUENT EVENTS (continued)
10, 1996, the Company had invested an additional $40,000 in VLC-Southwest
under this agreement. The agreement will remain in effect as to additional
advances until the earlier of May 31, 1997 or completion by VLC-Southwest of a
private placement offering of its securities.
During October 1996, Vista Laser Centers of the Northwest, Inc.
("VLC-Northwest") and an affiliate of Dr. Donald G. Johnson terminated
negotiations that contemplated the possible future acquisition by VLC-
Northwest of an existing laser vision correction services business from an
affiliate of Dr. Johnson. Dr. Johnson is the Chairman of the Board and a
director of the Company. VLC-Northwest refunded Dr. Johnson's original cash
investment in VLC-Northwest due to the termination of these negotiations. As
a result, the Company currently owns 100% of the outstanding capital stock in
VLC-Northwest, which in turn owns 500,000 shares of the Company's common
stock. The Company has agreed to cause the 500,000 shares of its common stock
held by VLC-Northwest to be surrendered in exchange for cancellation of the
Company's advances to VLC-Northwest in an amount to be determined.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and notes thereto appearing elsewhere in
this Report.
INTRODUCTION AND PLAN OF OPERATION
Vista commenced business operations in February 1994. The Company
acquired controlling equity interests in European subsidiaries during 1994.
Vista developed a strategic plan in mid-1995 to sponsor and invest in Regional
Joint Ventures to conduct additional businesses engaged in providing access to
laser vision correction ("LVC") equipment and related services ("LVC
Services") in regional markets of North America.
Since commencing operations, the Company has financed its business
operations, acquisition and expansion activities primarily from the issuance
or sale of equity securities. From February 1994 through March 31, 1996, the
Company received approximately $7,437,500 from the sale of 1,197,500 shares of
common stock and 1,225,000 warrants, approximately $278,000 from the sale of
convertible debt instruments, and had issued an additional 3,692,756 shares of
common stock and 259,000 warrants in connection with the acquisition of other
assets and investments. During the six months ended September 30, 1996, Vista
also received approximately $925,000 from the sale of 400,000 shares of common
stock and issued an additional 1,970,000 shares of common stock in connection
with the acquisition of other assets and investments.
At September 30, 1996, the Company had an accumulated deficit of
$17,588,000. The Company's net loss for the most recent six months ended
September 30, 1996 was $2,341,000 and its net loss for the fiscal year ended
March 31, 1996 was $3,815,000. Cash flow from the Company's European
operating subsidiaries for the most recent six months ended September 30, 1996
was approximately cash neutral, and there can be no assurance that European
operations will be profitable in the future.
- 12 -
<PAGE>
The Company's operating management anticipates Vista will continue to
incur losses for the immediate near term due to the Company's current level of
fixed expenses for general and administrative expenses and depreciation, but
at a lower rate than that experienced in the fiscal year ended March 31, 1996.
Losses are expected to continue until such time as revenues increase to a
level necessary to absorb fixed costs. No assurances can be given as to
whether or when revenue increases may be achieved. Revenue increases will be
dependent, among other things, in part upon expanding use of the Company's
services by physicians, general public acceptance of laser surgery to correct
refractive disorders and competitive factors.
Management's strategy developed in mid-1995 has been to expand its
participation in a developing market for LVC Services in the United States,
while at the same time minimizing Vista's short-term cash requirements for
such expansion. Since insurance reimbursement is not available, the Company's
management believes the skills and reputation of health care professionals
involved in recommending and performing refractive eye procedures are an
important and often critical element in the patient's decision to elect an LVC
refractive procedure. Vista has therefore designed and is implementing a
program to organize and sponsor U.S. and Canadian Regional Joint Ventures in
alliance with prominent physicians that are to be largely independently
financed and will offer advantages of equity incentives and management control
to skilled and prominent ophthalmologists experienced in a variety of LVC
treatments, procedures and post-operative care.
Vista plans to continue to seek additional capital through the private
placement and/or public sale of its equity securities, use of equipment lease
financing, and sale of marketable securities to finance the Company's
operations and expansion plans in North America.
The Company's business activities are subject to both predictable and
unforeseen risks incident to the creation of new businesses with a limited
history of operations. Prospective investors should consider the frequency
with which newly developed businesses encounter unforeseen expenses,
difficulties, complications and delays, and other factors such as the
Company's losses from its continuing operations.
RESULTS OF OPERATIONS: SIX MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO
SIX MONTHS ENDED SEPTEMBER 30, 1995
REVENUES: During the six months ended September 30, 1996 (the "1996
Period"), Vista's consolidated revenues from operations were $1,464,000, an
increase of 56.9% compared to $933,000 in consolidated revenues for the six
months ended September 30, 1995 (the "1995 Period"). Consolidated revenues in
the 1996 Period principally included $531,000 attributable to the operations
of Vista-Italy, approximately a 3% decrease compared to $549,000 in the 1995
Period, and $928,000 from the operations of Vista-Sweden, an increase of
approximately 144% over $380,000 in the 1995 Year. The decrease in Vista-
Italy's operations on a comparative period basis is directly attributable to a
change in reporting periods of European subsidiaries included in the Company's
consolidated financial statements. For the six month period ended September
30, 1995, the Company's consolidated operating results included the period
from January 1995 through June 1995 for its European subsidiaries to eliminate
a three month delay in obtaining European financial statements. A decision
was made by the Company's management in 1996 to bring the operating report
- 13 -
<PAGE>
periods for its European subsidiaries current with the parent corporation.
This resulted in a change in reporting periods for European subsidiaries
included in the consolidated financial statements so that their six month
period from April 1996 through September 1996 included in the 1996 Period is
being compared to European operations for the six month period from January
through June 1995 included in the Company's consolidated results for the 1995
Period. In Italy, all clinics are closed for the month of August which
results in no revenues to offset fixed expenses for that month. The extra
quarter's results of European operations from January through March 1996 is
accounted for on a separate line of the Company's consolidated balance sheet
at September 30, 1996 as an adjustment to equity. Notwithstanding that
European operations included August in the 1996 Period, but not the 1995
Period, as noted below the total number of European laser vision corrective
procedures performed in Europe increased by approximately 26% as indicated in
the chart below.
Consolidated revenues for the three months ended September 30, 1996 of
$688,000 represent a decrease of $98,000 compared to consolidated revenues of
$786,000 for the immediately preceding quarter ended June 30, 1996, and an
increase of $224,000 compared to consolidated revenues of $464,000 in the
quarter ended September 30, 1995 reported for the prior fiscal year.
The following chart summarizes certain information as to the number of
LVC surgical procedures performed at Vista's European centers for the periods
indicated.
<TABLE>
<CAPTION>
6 Months ended September 30,
----------------------------
1996 1995
------ ------
<S> <C> <C>
Italy (3 centers in 1995 period and
4 centers in most of 1996 period)......... 569 585
Sweden (2 centers in most of 1995 period
and all of 1996 period) .................. 468 177
------ ------
Totals ......................... 1,037 762
====== ======
</TABLE>
OPERATING EXPENSES: Costs and expenses of operations for the 1996
Period were $2,705,000 an increase of 19.4% compared to costs and expenses of
operations of $2,179,000 in the 1995 Period. Costs and expenses in the 1996
Period consisted of $2,585,000 in general and administrative expenses, an
18.6% increase compared to the 1995 Period of $2,078,000, and $120,000 in
depreciation and amortization, a $74,000 increase compared to the 1995 Period.
General and administrative expenses for the 1996 Year included $609,000 for
Vista-Italy and $875,000 for Vista-Sweden. Costs and expenses of operations
were reduced in part by the absence of costs of operations in England closed
in June 1995. Increases in operating expenses at the parent Company level are
attributable primarily to increases in marketing and travel expenses.
Marketing expenses were incurred primarily in connection the development of
advertising and other marketing materials relating to operations of the
Company's subsidiaries and affiliates and emphasizing development of Vista's
image and identity in the LVC field. Travel expenses increased primarily as a
result of additional Regional Joint Ventures developed in the South and the
Midwest. Additional negotiations are in progress for development of a
Regional Joint Venture in the Southeast.
- 14 -
<PAGE>
The Company's European subsidiaries sustained losses from operations in
the 1996 Period that were significantly reduced compared to the 1995 Period.
Vista-Sweden generated positive cash flow from operations in the 1996 Period
and Vista-Italy's cash flow from operations was cash neutral notwithstanding
the fact that all clinics in Italy are closed for the month of August.
Profitable operations from European operating subsidiaries in the future will
be dependent upon increasing revenues, as to which there can be no assurance.
Other major components of the Company's general and administrative expenses in
the 1996 Period included approximately $1,209,000 of general and
administrative expenses at the Vista parent corporate level which compares to
approximately $1,350,000 of general and administrative expenses at the Vista
parent corporate level in the prior 1995 Period.
OTHER EXPENSES AND INCOME: Other net expenses in the 1996 Period
totalled $36,000, a reduction of $569,000 compared to $605,000 in other net
expenses in the prior 1995 Period. Interest expense in the 1996 Period
remained approximately the same compared to the prior 1995 Period.
NET LOSS: Net loss for the 1996 Period was $2,341,000, representing a
net loss of $0.35 per common share, compared to a net loss in the 1995 Period
of $1,843,000, or $1.30 per common share.
LIQUIDITY AND CAPITAL RESOURCES
Vista's principal capital requirements include cash requirements to
finance programs to acquire additional LVC equipment and support activities of
Regional Joint Ventures sponsored by the Company since June 1995, working
capital for management and administration and, in the future, anticipated
requirements to finance sales and marketing. Subject to the availability of
adequate capital, as to which there can be no assurance, expenditures for
additional excimer laser equipment may be significant during the foreseeable
future to support the Company's program of expanding LVC Services and
supporting the activities of Regional Joint Ventures.
PRESENT STATUS
As of September 30, 1996, the Company had $513,000 in cash and a
consolidated working capital of $406,000. Consolidated working capital
improved by $299,000 from consolidated working capital of $107,000 at March
31, 1996. Consolidated working capital during the six months ended September
30, 1996 increased by $925,000 in cash received from the sale of common stock
and $800,000 from the sale of a promissory note, partially offset by
$1,077,000 advanced to equity investees. The Company's assets include
200,000 restricted shares of Technical Chemicals and Products, Inc. common
stock (the "TCPI Shares") which were registered under the Securities Act of
1933 on June 20, 1996 for resale by the Company after approximately October
23, 1996. See "Investment in Technical Chemicals and Products, Inc." in Item
1 of the Company's Report on Form 10-KSB for the fiscal year ended March 31,
1996. The TCPI Shares have been pledged as collateral by the Company to
secure an $800,000 promissory note to Pharma Patch due on December 31, 1996,
but that may be extended by Vista up to two times, for an additional six
months each, so long as Vista is not in default on its loan obligations.
Although the Company's European operating subsidiaries appear to have
achieved positive or neutral cash flow levels of operations, Vista's
management anticipates that its consolidated operations will incur negative
cash flows for the immediate future, primarily due to fixed expenses for
corporate general and administrative overhead. Management is actively
- 15 -
<PAGE>
pursuing strategies to increase the Company's revenues and reduce its negative
cash flow. Based on current operations, management believes that its cash and
marketable securities resources at September 30, 1996 are sufficient to fund
the Company's existing operations for at least the next 12 months. There can
be no assurance that the Company's consolidated revenues will increase to the
point that operating expenses will be fully absorbed by revenues from
operations.
EXPANSION PLANS
Vista plans to continue to seek additional capital through the private
placement and/or public sale of its equity securities, use of equipment lease
financing, and sale of marketable securities to finance the Company's
expansion plans in North America.
The Company's strategic plan is to expand its laser vision correction
center network and locations as quickly as possible within the limits of
available financial resources and prudent operating and financial policies.
This growth strategy includes: (i) rapidly increasing market penetration,
principally in the United States, through expansion of the number of locations
at which LVC equipment and services are offered by the Company's subsidiaries,
(ii) continuing to promote development of alliances with experienced
ophthalmologists and optometrists with the goal of maximizing excimer laser
usage; (iii) actively training additional physicians in advanced LVC
procedures; and (iv) developing marketing and advertising programs targeted to
specific regional markets and key demographic groups within those markets.
The Company is currently seeking additional private placement equity
capital in an amount of at least $5 million up to $10 million. Although it
has identified a source through which a financing may be sought, the Company
has not received any binding commitments to obtain such financing. Subject to
its ability to obtain additional private placement capital, as to which there
can be no assurance, Vista currently projects that additional capital
expenditures for investment in equipment and facilities of its Regional Joint
Ventures in North American during the six months ending June 30, 1997 will be
as much as $6,600,00. Additional projected requirements during that period
for the implementation of sales and marketing programs are approximately
$400,000 and Vista anticipates it will also seek to expand its administrative
and management personnel and systems at an projected expense of approximately
$600,000 for that period. The Company's management anticipates that
substantial additional public and/or private financings in excess of the above
amounts will be required after June 30, 1997, in amounts not yet determined,
to finance continued growth of its laser vision correction center network and
that purchase money equipment financing and/or leasing arrangements will be
utilized to the extent available, if any, to leverage the amount of additional
equipment available to expand the Company's operations. Vista's actual future
capital requirements will depend on numerous factors, including, but not
limited to, progress in acquiring additional laser equipment and facilities
for LVC centers, the ability of the Company and Regional Joint Ventures to
establish additional affiliations with vision care professionals, the
availability, amount and terms of additional equipment lease and/or
installment purchase financing, competing technological and market
developments, and the cost of marketing and advertising programs.
Because of the Company's potential long-term capital requirements, it
may undertake additional equity offerings whenever conditions are favorable,
even if it does not have an immediate need for additional capital at that
time. There can be no assurance that Vista will be able to obtain additional
funding when needed, or that such funding, if available, will be obtainable on
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<PAGE>
reasonable terms. Any such additional funding may result in significant
dilution to existing stockholders of Vista. If adequate funds are not
available, Vista may be required to accept unfavorable alternatives, including
(i) the delay, reduction or elimination of its planned expansion, capital
expenditures, marketing and advertising and other operating programs, or (ii)
arrangements with collaborative partners that may require Vista to relinquish
material interests in its operating subsidiaries that it would not otherwise
relinquish.
U.S. DOLLAR PRESENTATION AND FOREIGN CURRENCY FLUCTUATIONS
Except as otherwise stated in this Report, all monetary amounts have
been presented in U.S. dollars.
The Company's European operating subsidiaries in Italy and Sweden and
certain Regional Joint Ventures with operations in Canada currently represent
a significant portion of the Company's revenues and expenses that are
collected and paid in foreign currencies. The Company publishes its
consolidated financial statements in U.S. dollars after translating
transactions in foreign currencies into U.S. dollars. In periods when the
U.S. dollar depreciates against the relevant foreign currencies, reported
earnings attributable to transactions in foreign currencies may be materially
enhanced. In periods when the U.S. dollar appreciates against the relevant
foreign currencies, however, reported earnings attributable to transactions in
foreign currencies may be materially reduced. Fluctuations in the exchange
rate between foreign currencies and the U.S. dollar may also affect the book
value of Vista's assets and the amount of its stockholders' equity.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In 1991 and 1993, the Company's Italian subsidiary ("Vista-Italy") and
Laser Vision Centers, Inc. ("LVCI") entered into agreements to license
trademarks and develop territorial marketing strategies. These transactions
occurred prior to the Company's acquisition of a controlling interest in
Vista-Italy during 1994. Vista-Italy and LVCI exchanged shares of their
respective common stock as consideration under the agreements. LVCI filed
suit in 1993 for termination of these agreements and a default judgment was
entered in LVCI's favor rescinding all prior agreements among the parties. In
connection with this judgment, Vista-Italy recorded the cancellation of Vista-
Italy shares issued to LVCI, the cancellation of LVCI shares previously
delivered to Vista-Italy and an accrued liability of $175,000. Vista-Italy's
motion to vacate the judgment was denied, and an appeal to the Missouri
Supreme Court by Vista-Italy was recently denied on October 22, 1996. The
unfavorable determination in these proceedings will not adversely affect the
business operations of the Company or Vista-Italy.
Civil legal proceedings instituted in Hawaii during August 1996 by
TrueVision Laser Centers, Inc. ("TrueVision") against the Company and two
physicians contended that one of the physicians breached obligations to
TrueVision by that physician's decision to associate with one of the Company's
Regional Joint Ventures. This case has been recently dismissed without
prejudice after initial discovery proceedings conducted by the Company.
- 17 -
<PAGE>
ITEM 5. OTHER EVENTS
CHANGE IN NAMES OF REGIONAL JOINT VENTURES
During August 1996, the Company was notified that a third party with
business operations relating primarily to eyeglasses has alleged that use of
the name "Vista Laser Centers" by Vista Laser Centers of the Southwest, Inc.
infringes certain trademark rights held by the third party. Although the
Company does not believe that use of the Vista Laser Centers name by its
Regional Joint Ventures infringes upon the trademark rights of any third
party, the Company desires to avoid litigation of this issue and is currently
evaluating other names for its Regional Joint Ventures. It is anticipated
that a new common name for Vista Laser Centers of the Southwest and other
Regional Joint Ventures affiliated with the Company will be selected and
implemented within the next six months.
AGREEMENT TO INCREASE EQUITY INVESTMENT IN VLC-SOUTHWEST AND TO
REACQUIRE 250,000 SHARES OF THE COMPANY'S COMMON STOCK AS TREASURY SHARES
On October 1, 1996, the Company and Vista Laser Centers of the
Southwest, Inc. ("VLC-Southwest") agreed that the Company's account receivable
of $383,634 for advances to VLC-Southwest would be extinguished in exchange
for the surrender of 250,000 shares of the Company's common stock previously
issued to VLC-Southwest on March 1996. The agreement further provides that
additional advances by the Company to VLC-Southwest after October 1, 1996 will
be made in exchange for the Company's investment in additional common stock of
VLC-Southwest based upon a share price value of $3.00 per share of VLC-
Southwest common stock. As of approximately November 10, 1996, the Company
had invested an additional $40,000 in VLC-Southwest under this agreement. The
agreement will remain in effect as to additional advances until the earlier of
May 31, 1997 or completion by VLC-Southwest of a private placement offering of
its securities.
INCREASE IN PERCENTAGE OWNERSHIP OF VLC-NORTHWEST AND AGREEMENT TO
REACQUIRE 250,000 SHARES OF THE COMPANY'S COMMON STOCK AS TREASURY SHARES
As noted in the Company's Annual Report on Form 10-KSB for the fiscal
year ended March 31, 1996, Vista Laser Centers of the Northwest, Inc.
("VLC-Northwest"), it was contemplated that VLC-Northwest would seek to
negotiate the purchase of an existing laser vision correction services
business from an affiliate of Dr. Donald G. Johnson following the completion
of a proposed initial public offering of securities by VLC-Northwest. Dr.
Johnson is Chairman of the Board and a director of Vista and also served as
Chairman of the Board and a director of VLC-Northwest. In October 1996, VLC-
Northwest and Dr. Johnson's affiliate terminated negotiations for the proposed
acquisition of the laser vision correction services business. VLC-Northwest
refunded Dr. Johnson's original investment in VLC-Northwest and Dr. Johnson
resigned as an officer and director of VLC-Northwest (Dr. Johnson continues to
serve as Chairman of the Board and a director of the Company). As a result,
the Company currently owns 100% of the outstanding capital stock in VLC-
Northwest, which in turn owns 500,000 shares of the Company's common stock.
The Company has agreed to cause the 500,000 shares of its common stock held by
VLC-Northwest to be surrendered in exchange for cancellation of the Company's
advances to VLC-Northwest in an amount to be determined.
- 18 -
<PAGE>
$800,000 SECURED LOAN FROM PHARMA PATCH PLC
On August 26, 1996, the Company borrowed $800,000 from Pharma Patch PLC
in exchange for an 8% Secured Promissory Note (the "8% Secured Note"). The
Company's assets include 200,000 restricted shares of Technical Chemicals and
Products, Inc. common stock (the "TCPI Shares") which were registered under
the Securities Act of 1933 on June 20, 1996 for resale by the Company after
approximately October 23, 1996. See "Investment in Technical Chemicals and
Products, Inc." in Item 1 of the Company's Report on Form 10-KSB for the
fiscal year ended March 31, 1996. The TCPI Shares have been pledged as
collateral by the Company to secure its obligations under the 8% Secured Note.
Principal and interest on the 8% Secured Note are payable on December
31, 1996, or earlier in the event Vista elects to sell all or any portion of
its interest in the TCPI Shares. In the event net proceeds from a sale of a
portion of the TCPI Shares is insufficient to provide for full payment of the
8% Secured Note, the unpaid balance of the 8% Secured Note will remain due on
its original maturity date of December 31, 1996 or earlier in the event of a
subsequent sale of TCPI Shares for the account of the Company.
The Company and Pharma Patch subsequently agreed to amend the terms of
the 8% Secured Note to provide that proceeds from the sale of TCPI Shares by
Vista will be allocated 50% to the Company and 50% to repayment of the 8%
Secured Note.
The original maturity date of the 8% Secured Note may be extended by
Vista up to two times, for an additional six months each, so long as Vista
pays all accrued interest at the date of each renewal and is not otherwise in
default on its loan obligations. Pharma Patch PLC has the right to accelerate
the maturity date of the loan if the fair value market of TCPI Shares pledged
as collateral falls to less than 150% of the unpaid principal of the 8%
Secured Note unless Vista, within five business days after notice, prepays a
sufficient amount of the note principal so that the fair market value of TCPI
Shares then pledged as collateral is not less than 150% of the remaining
unpaid principal of the 8% Secured Note.
SALES OF COMMON STOCK SUBSEQUENT TO JUNE 30, 1996
As part of certain agreement and financing transactions between the
Company and Pharma Patch PLC in March 1996, Vista granted Pharma Patch PLC an
option exercisable at any time on or before September 30, 1996 (subsequently
extended by mutual agreement to October 15, 1996) to purchase up to an
additional 250,000 newly issued shares of the Company's common stock at an
option exercise price of $2.50 per share in cash (the "Six Month Option"). On
July 18, 1996, Pharma Patch PLC exercised 200,000 shares subject to the Six
Month Option at an exercise price of $500,000 paid to the Company in cash.
On October 15, 1996, Pharma Patch PLC exercised the remaining 50,000
shares subject to the Six Month Option at an exercise price of $125,000.
On June 13, 1996, the Company received $212,500 in proceeds from the
sale of 100,000 shares of the Company's common stock at $2.125 per share under
a Regulation S offshore private placement transaction with two foreign
investors, Solar Ventures Limited as to 50,000 shares and Armilla Holdings
Limited as to 50,000 shares. The quoted closing market price for the
Company's common stock on June 13, 1996 was $3.25 per share. No fees or
commissions to third parties were paid in connection with this offering.
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<PAGE>
On August 14, 1996, the Company received $212,500 in proceeds from the
sale of 100,000 shares of the Company's common stock at $2.125 per share under
a Regulation S offshore private placement transaction with one foreign
investor, Paget Trading Ltd. The quoted closing market price for the
Company's common stock on August 9, 1996, the date of the agreement, was
$2.875 per share. No fees or commissions to third parties were paid in
connection with this offering.
PURCHASE OF CERTAIN ASSETS FROM REFRACTIVE SERVICES-800, INC.
From July 1995 through June 1996 date, a foreign corporate investor
named Refractive Services-800, Inc. invested $520,000 in cash in five Regional
Joint Ventures sponsored by the Company. See "North American Regional Joint
Venture Investments and Affiliates" in Item 1 of the Company's Annual Report
on Form 10-KSB for the fiscal year ended March 31, 1996. In exchange for that
investment, and in view of the high risks associated with making the initial
investment in start-up enterprises that had yet to negotiate any agreements
for proposed business operations, Refractive Services-800, Inc. received
shares of a 10% Series A convertible preferred issue of the five Regional
Joint Ventures with a liquidation preference equal to five times its cash
investment (six times its cash investment in the case of VLC-Northeast).
Vista negotiated an agreement on July 18, 1996 to acquire all Series A
Preferred shares in five Regional Joint Ventures originally purchased by
Refractive Services-800, Inc. for $520,000. In exchange, Vista issued a total
of 520,000 shares of Vista common stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS: The following exhibits are filed with this Report.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ ---------------------------------------------------
<S> <C>
27 Financial Data Schedule at September 30, 1996. (Incorporated by
reference to Registrant's Quarterly Report on Form 10-QSB for the
Period ended September 30, 1996).
</TABLE>
(b) REPORTS ON FORM 8-K:
The Company did not file any Reports on Form 8-K during the fiscal
quarter ended September 30, 1996.
- 20 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Date: November 12, 1996
VISTA TECHNOLOGIES INC.
---------------------------------
(Registrant)
By: /s/ Thomas A. Schultz
-----------------------------
Thomas A. Schultz, President and
Chief Executive Officer
By: /s/ Kenneth G. Howling
-----------------------------
Kenneth G. Howling, Vice President of Finance,
Treasurer, Chief Financial Officer and
Chief Accounting Officer
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