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Filed Pursuant to Rule 424(b)(3)
Commission File No.: 333-51365
PROSPECTUS
1,750,000 Shares
Autonomous Technologies Corporation
This Prospectus relates to the public offering, which is not being underwritten,
of 1,750,000 shares (the "Shares") of Common Stock, par value $0.01 per share
(the "Common Stock") of Autonomous Technologies Corporation (the "Company"). All
of the Shares may be offered by a certain stockholder of the Company or by
pledgees, donees, transferees or other successors in interest that receive such
Shares as a gift, partnership distribution or other non-sale related transfer
(the "Selling Stockholder"). The Company completed the sale of 500 shares of its
Series I Convertible Preferred Stock (the "Initial Shares") with an option to
purchase an additional 400 shares of Series I Convertible Preferred Stock along
with a stock purchase warrant for 300,000 shares of Common Stock (the "Warrant")
(collectively, the "Option") on April 16, 1998 to the Selling Stockholder in a
private placement, with the closing subject only to the registration statement
(the "Closing" on the "Initial Closing Date"), of which this prospectus is a
part, becoming effective. The Selling Stockholder will pay $5,000,000 at Closing
for the Initial Shares and the Option. See "Recent Developments." For the
pricing formula used in determining the conversion price of the Series I
Convertible Preferred Stock (the conversion price is equal to a 10% discount
from the average of the lowest trade prices for the five trading days prior to
conversion), see page 15, "Selling Stockholder" -footnote (4). The Series I
Convertible Preferred Stock and the Option have been issued pursuant to an
exemption from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), provided by Section 4(2) thereof. The Selling
Stockholder may receive up to a maximum of 1,750,000 Shares (the "Initial
Maximum Shares") upon the conversion of the Initial Shares. In the event the
Option is exercised, the Initial Shares and the Option Shares, together, may be
convertible into an aggregate maximum of 2,263,197 shares of Common Stock (the
"Total Maximum Shares") and the Selling Stockholder will receive 300,000 shares
of Common Stock if the Warrant is exercised. The Shares are being registered by
the Company as requested by the Convertible Preferred Stock Purchase Agreement
and Registration Rights Agreement between the Company and the Selling
Stockholder.
The Shares may be offered by the Selling Stockholder from time to time in
transactions on the Nasdaq National Market, in privately negotiated
transactions, or by a combination of such methods of sale, at such fixed prices
as may be negotiated from time to time, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at negotiated
prices. The Selling Stockholder may effect such transactions by selling the
Shares to or through broker-dealers and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholder or the purchasers of the Shares from whom such broker-
dealers may act as agent or to whom they sell as principal or both (which
compensation to a particular broker-dealer might be in excess of customary
commissions). See "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the Shares by
the Selling Stockholder. The Company has agreed to bear certain expenses in
connection with the registration and sale of the Shares being offered by the
Selling Stockholder. The Company has agreed to indemnify the Selling Stockholder
against certain liabilities, including liabilities under the Securities Act.
The Common Stock of the Company is traded on the Nasdaq National Market tier of
the Nasdaq Stock Market under the symbol "ATCI." On April 16, 1998, the date of
the execution of the Convertible Preferred Stock Purchase Agreement, the last
sale price for the Common Stock as reported by Nasdaq was $5.3125 per share. On
July 31, 1998, the last sale price for the Common Stock as reported by Nasdaq
was $5.375 per share.
The Selling Stockholder and any broker-dealers or agents that participate with
the Selling Stockholder in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. See "Plan of Distribution" herein for a description of
agreements by the Company to indemnify the Selling Stockholder against certain
liabilities.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE
THE DATE OF THIS PROSPECTUS IS AUGUST 7, 1998.
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AVAILABLE INFORMATION
This Prospectus, which constitutes a part of a Registration Statement on Form
S-3 (the "Registration Statement") filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the" Securities Act"), omits certain of the information set forth in
the Registration Statement. Reference is hereby made to the Registration
Statement and to the exhibits thereto for further information with respect to
the Company and the securities offered hereby. Copies of the Registration
Statement and the exhibits thereto are on file at the offices of the Commission
and may be obtained upon payment of the prescribed fee or may be examined
without charge at the public reference facilities of the Commission described
below.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facility maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional office located at 1401 Brickell Avenue, Suite 200,
Miami, FL, 33131. The Commission maintains a website that contains reports,
proxy statements and information statements and other information regarding
registrants that file electronically with the Commission. The address of such
web site is http://www.sec.gov. Copies of such material can be obtained from the
Public Reference Section of the Commission, located at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Company's Common Stock is
quoted on the Nasdaq National Market. Reports, proxy statements and other
information concerning the Company may be inspected at the National Association
of Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by the Company (File No.
0-28278) with the Commission are incorporated herein by reference: (a) Annual
Report on Form 10-K/A for the Fiscal Year ended December 31, 1997; (b)
Definitive Proxy Statement dated April 24, 1998, filed in connection with the
Company's 1998 Annual Meeting of Stockholders; (c) Form 8-K filed on April 27,
1998; (d) Form 10-Q for the quarter ended March 31, 1998; (e) Form 8-K filed on
June 12, 1998; (f) Form 8-K filed on July 22, 1998; and (g) the description of
the Company's Common Stock which is contained in its Form S-1 filed under the
Securities Act on March 8, 1996 (File No. 333-2068).
All reports and other documents filed after August 3, 1998 by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the
filing of a post-effective amendment which indicates that all securities offered
hereby have been sold or which deregisters all securities remaining unsold,
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of the filing of such reports and documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained or incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this Prospectus
is delivered a copy of any or all of such documents which are incorporated
herein by reference (other than exhibits to such documents unless such exhibits
are specifically incorporated by reference into the documents that this
Prospectus incorporates). Written or oral requests for copies should be directed
to Secretary, Autonomous Technologies Corporation, 2800 Discovery Drive,
Orlando, Florida 32826, (407) 384-1600.
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LADARVision and T-PRK are registered trademarks of the Company. T-LASIK and
CustomCornea are trademarks of the Company. Ciba Vision is a registered
trademark of Ciba Vision Corporation. Other trademarks used herein are the
property of their respective owners.
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In evaluating the Company's business, prospective investors should carefully
consider the following risk factors before purchasing the securities offered
hereby. This Prospectus contains certain forward-looking statements. Statements
of plans, intentions and objectives by the Company and statements of future
economic performance contained in this Prospectus should be deemed to be
forward-looking statements. Cautionary statements are made in certain sections
of this Prospectus. These cautionary statements should be read as being
applicable to all related forward-looking statements wherever they appear in
this Prospectus, the materials referred to in this Prospectus or the materials
incorporated by reference into this Prospectus.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial data appearing elsewhere and incorporated by reference
in this Prospectus. In evaluating the Company's business, prospective investors
should carefully consider the information set forth under the heading "Risk
Factors." This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Statements of plans, intentions and objectives
by the Company and statements of future economic performance contained in this
Prospectus should be deemed to be forward-looking statements. Statements
containing terms such as "believes," "does not believe," "no reason to believe,"
"expects," "plans," "intends," "estimates," "anticipated," "or "anticipates" are
considered to contain uncertainty and are forward-looking statements. Cautionary
statements are made in certain sections of this Prospectus. These cautionary
statements should be read as being applicable to all related forward-looking
statements wherever they appear in this Prospectus, the materials referred to in
this Prospectus or the materials incorporated by reference into this Prospectus.
For definitions of certain unique medical and regulatory terms used throughout
this prospectus, please see the Glossary at the end of this prospectus.
THE COMPANY
Autonomous Technologies Corporation ("Autonomous" or the "Company"), a Florida
corporation formed in 1985, has been engaged since 1993 in the design and
development of the next generation of excimer laser instruments for laser vision
correction ("LVC") to reduce or eliminate a person's dependence on eyeglasses or
contact lenses. The Company's technology combines eye tracking with a narrow
beam excimer laser to treat common refractive vision disorders such as myopia
(nearsightedness), hyperopia (farsightedness) and astigmatism (blurred vision).
The Company's objective has been to improve refractive surgical outcomes for
these conditions over those achieved by earlier LVC systems.
The Company's clinical results were reviewed by the Food and Drug
Administration's ("FDA") Ophthalmic Devices Advisory Panel in February 1998,
which unanimously recommended that the Company's PMA application be granted
approval by the FDA.
Vision correction is one of the largest medical markets, with approximately 136
million people in the United States using eyeglasses or contact lenses./1/
Within this group, approximately 60 million people are myopic./2/ Industry
sources/3/ estimate that Americans spend approximately $13 billion, at retail
prices, on eyeglasses, contact lenses and other vision correction products and
services each year.
The Company's marketing strategy is designed to broaden the penetration of the
LADARVision System in the refractive surgery market by offering better clinical
outcomes to surgeons and patients than is currently available and by
significantly reducing the up-front cost to the ophthalmologist of current LVC
systems. This marketing strategy would allow physicians to utilize the
LADARVision System by paying an advance procedure fee for the equipment and
paying a per procedure service fee thereafter. In 1997, the Company and CIBA
Vision Group Management ("CIBA") conducted a market research project that
buttresses those performed in 1995 and 1996 demonstrating that there is
_________________________
/1/ According to a private market study and publications of Market
Scope (www.mktsc.com).
/2/ Excerpted from a presentation by Dr. Richard Lindstrom, entitled
"Excimer Laser Photorefractive Keratectomy: Clinical Outline."
/3/ From an article published in the January 8, 1996 issue of Vision
Monday, a trade publication for the ophthalmic industry, entitled
"Tracking the Trends for '96 - Eyewear retailers look forward to
a successful year as they focus on what's hot."
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significant interest in both the technical features and benefits of the
LADARVision System and in the pricing strategy of lower up-front costs and
competitive procedure fees. The Company may, however, elect to change this
marketing strategy on a country-by-country and account-by-account basis
depending on applicable law and regulation, tax considerations, and competitive
conditions.
The Company's LADARVision System technology combines high speed, laser radar eye
tracking with narrow beam shaping to form its new and proprietary technology
platform. The LADARVision System is designed to address a need for sophisticated
eye tracking to compensate for saccadic eye movement during surgery. Saccadic
eye movements are very rapid, involuntary and random in amplitude and direction
and are not suppressed or reduced by medication used during LVC. These eye
movements degrade LVC predictability and visual quality. The Company believes
that the LADARVision System provides higher accuracy ablation by virtually
eliminating decentration and shaping error caused by eye movement. Additionally,
the narrow beam excimer provides a smooth ablation, and the Company's algorithms
and shaping apparatus offer high speed to minimize surgical duration while
retaining a high degree of pointing accuracy to achieve predictable shaping.
The Company believes the LADARVision System will yield more stable, predictable
results with less post-operative regression, potentially improving visual
quality and clinical outcomes for low to moderate myopia compared to first
generation excimer laser PRK systems manufactured and sold by its competitors.
The Company submitted its PMA application on September 5, 1997 for its initial
indications of myopia and astigmatism. On February 13, 1998, the FDA's
Ophthalmic Devices Advisory Panel reviewed the application and unanimously
recommended that the FDA grant the PMA approval for myopia up to -8 diopters and
astigmatism up to -4 diopters. Normally, the FDA takes several months after a
recommendation from a panel to complete its work on the file, conduct
inspections of the Company and its systems and records and grant a PMA.
In 1994, the Company entered into a strategic alliance with CIBA, a wholly-owned
subsidiary of Novartis AG. The strategic alliance with CIBA is for the worldwide
co-promotion of the LADARVision System. Through March 31, 1998, CIBA has
invested an aggregate of approximately $5 million in cash and $1.3 million in
services in the Company. As a result of this investment, CIBA owns approximately
15% of the Company's Common Stock at July 31, 1998, not including 171,713 shares
that may be issuable to CIBA in 1999 the issuance of which would raise its
ownership to approximately 16% of the Company's Common Stock, subject to certain
anti-dilution provisions. CIBA may, at its sole discretion, terminate the
strategic alliance upon 180 days notice to the Company. See "Risk Factors -
Possible Termination of Strategic Alliance with CIBA" herein, "Risk Factors -
Commission Obligation to CIBA; Future Dilution" herein and "Item 13. - Certain
Relationships and Related Transactions" in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 ("Form 10-K"). With experience
in physician and retail marketing and the second largest worldwide market share
for contact lenses, CIBA provides the Company with credibility and awareness in
both the ophthalmic and consumer markets. Under the strategic alliance, the
Company plans co-promotion strategies, such as product tie-ins, joint
advertising and shared exhibit space, on a project-by-project basis. The Company
retains the worldwide marketing rights for its LADARVision System.
POSSIBLE CREDIT FACILITY FOR COMMERCIAL SYSTEM PLACEMENTS. The Company and a
finance company (the "Lender") have entered into a letter of intent for secured
financing of LADARVision Systems placed in the U.S. This disclosure is being
made by the Company because the Company believes it is probable that the Company
and the Lender will enter into definitive agreements regarding this credit
facility before the commencement of commercial system placements in the U.S.
(end of summer or early fall 1998) and because the Company believes that
investors should know the general terms under which the Company believes it will
obtain this financing. The Lender has requested that its name not be disclosed
unless and until the Company and the Lender execute definitive agreements. It is
contemplated that the Lender will advance funds to the Company shortly after
each accepted commercial system placement. The Company would obtain agreements
from each of its customers to perform a certain minimum number of procedures on
each system over the course of three years with significant termination payments
to be made by the customer if the customer terminates the agreement before
performing the minimum number of procedures. The minimum number of procedures
currently contemplated is 600 procedures per year. Additionally, the Company is
required to obtain from each customer
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a user agreement that (i) provides for minimum payments equal to or exceeding
the monthly payments required under the related financing, (ii) requires a
termination payment equal to at least the amount that remains to be paid under
the financing arrangement if the user agreement is terminated, and (iii) on a
case-by-case basis as required by the Lender, contains one or more personal
guarantees of each user agreement if the user is a corporate entity. Under the
financing arrangement, the Company would receive from the Lender the approximate
amount directly invested by the Company in the manufacture of each system (up to
a maximum of $220,000 per system). The total amount of this financing is
contemplated to be $15,000,000 over a one-year period subject to renewal
thereafter. Under the financing arrangement, the Company will make monthly
payments of approximately $7,500 per system placed for a three year period. The
minimum payment per month, the termination payment and the personal guarantees,
if needed under the user agreements, could affect the ability of the Company to
place LADARVision Systems into use in the United States. The Lender continues to
conduct due diligence on the Company and there can be no assurances that the
Company and the Lender will enter into a definitive agreement regarding this
type of financing.
SINGLE MANUFACTURER FOR THE LASER COMPONENT. The laser component in the
LADARVision System has been custom designed for the Company for high performance
and small size. The Company owns the design of the laser component including all
drawings and trade secrets relating to the design and manufacture of the laser
component. The laser component is currently manufactured by a small manufacturer
in the Eastern U.S. that specializes in manufacturing excimer lasers. The
Company agreed to purchase 50 laser components from this small company before
purchasing laser components from other manufacturers or making the laser
component itself. As of the date of this prospectus, the Company has purchased
approximately 20 of the 50 laser components. Either the Company or this
manufacturer (as the non-breaching party) may terminate this relationship in the
event of an uncured breach of the manufacturing agreement. This agreement
continues until the Company has purchased 50 laser components. The Company
decided to use a single manufacturer for the laser component in order to achieve
economies of scale in the manufacture of the laser component and to assure
better control of the quality of the laser component. Achieving economies of
scale and controlling the quality of the laser component are and will continue
to be important factors regarding the laser component and will significantly
influence the Company's decision as to whether or not to engage another
manufacturer (or manufacture the laser component itself) after the Company has
met its obligation to purchase 50 laser components from this manufacturer. In
order to protect itself against this manufacturer being unable to manufacture
the laser component, the Company required this manufacturer to lease a separate
facility for the manufacture of the laser component and to assign to the Company
a security interest in all of the equipment, drawings and inventory relating to
the manufacturing of the laser component as well as the facility lease. The
Company also placed two of its engineers at this manufacturer, beginning
November 1997, for approximately six months in order for these engineers to
learn and document all of the details of manufacturing the laser component. The
Company does not currently have its engineers working at this manufacturer on a
full-time basis. However, the two engineers have returned to this manufacturer
for further documentation and the Company anticipates its personnel returning to
this manufacturer on occasion in the future. In the event that this manufacturer
is unable to supply the laser components as required by the Company, the Company
believes it has the ability to promptly step in and manufacture the laser
components on its own or have another qualified manufacturer make the laser
components at the current site where the laser components are manufactured. With
these protective measures in place, the Company does not believe there is a
significant risk that it will be unable to obtain laser components from a
qualified manufacturer or make such components itself in the event that this
manufacturer cannot manufacture the laser components.
RECENT DEVELOPMENTS
LASIK HYPEROPIC ASTIGMATISM TRIALS APPROVED BY THE FDA. On June 12, 1998, the
FDA granted permission for the Company to conduct LASIK Hyperopic Astigmatism
trials for up to +6 diopters of sphere and up to -6 diopters of cylinder. The
Company has scheduled these trials to begin immediately which will include up to
150 subjects and are subject to certain conditions required by the FDA. Laser
In-Situ Keratomileusis or "LASIK" is a technique which involves both a corneal
cut and excimer laser ablation. During the procedure, the ophthalmologist cuts a
thin flap on the cornea before using the laser. After the laser ablation is
completed, the flap is replaced. According to trade publications, LASIK
typically offers patients less pain and shorter recovery times after surgery.
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ISO 9001 CERTIFICATION. On June 10, 1998, the Company received ISO 9001/EN 46001
Certification. This Certification was awarded following inspections and audits
of the design, manufacturing, installation and servicing of the Company's laser
vision correction systems. ISO 9001 Certification is needed when applying for
the CE Mark, necessary for marketing in European Community countries.
PRIVATE PLACEMENT OF COMMON STOCK. On May 26, 1998, the Company completed a
private placement of 600,573 shares of unregistered Common Stock for $5.166 per
share to four European investors. The Common Stock was sold pursuant to an
exemption from the registration requirements of the Securities Act of 1933
provided by Section 4(2) thereof. EVEREN Securities, Inc. acted as placement
agent for this sale and was paid a commission of 6% of the gross proceeds. The
Company estimates the net proceeds of this sale to be $2,884,000. The Company
will use the proceeds from the sale of the Common Stock to fund operating
expenses and working capital. The Company expects to file a Registration
Statement on Form S-3 on behalf of the European investors covering the resale of
the shares of Common Stock within 10 days of the effectiveness of this
Registration Statement.
PRIVATE PLACEMENT OF SERIES I CONVERTIBLE PREFERRED STOCK. On April 16, 1998 the
Company completed a private placement with the Selling Stockholder of 500 shares
of the Company's Series I Convertible Preferred Stock (the "Initial Shares"),
with an option to purchase 400 shares of Series I Convertible Preferred Stock
and a stock purchase warrant for 300,000 shares of Common Stock (the "Warrant")
(collectively, the "Option"). The Initial Shares are convertible into a maximum
of 1,750,000 shares of the Company's Common Stock. In the event the Option is
exercised, the Initial Shares and the 400 shares of Series I Convertible
Preferred Stock (the "Option Shares"), together, may be converted into an
aggregate maximum of 2,263,197 shares of Common Stock. For the pricing formula
used in determining the conversion price of the Series I Convertible Preferred
Stock, see page 15, "Selling Stockholder" -footnote (4). The Company anticipates
using the proceeds from the sale of the Series I Convertible Preferred Stock to
fund operating expenses and working capital. The Series I Convertible Preferred
Stock and Option were sold to the Selling Stockholder pursuant to an exemption
from the registration requirements of the Securities Act provided by Section
4(2) thereof. The Company agreed to file a Registration Statement on Form S-3 on
behalf of the Selling Shareholder covering the resale of the Initial Maximum
Shares and a separate Form S-3 for the shares of Common Stock into which the
Option Shares are convertible and the shares of Common Stock underlying the
Warrant, if the Option is exercised. This Prospectus forms a part of the first
Form S-3, pursuant to which the Initial Shares may be offered from time to time
by the Selling Stockholder.
FOOD AND DRUG ADMINISTRATION PANEL APPROVAL. On February 13, 1998, the FDA's
Ophthalmic Devices Panel reviewed the Company's PMA application for its initial
indications of myopia and astigmatism and unanimously recommended that the FDA
grant the PMA approval for myopia up to -8 diopters and astigmatism up to -4
diopters for the Company's LADARVision System. Delays could occur in receiving
FDA approval of the LADARVision System resulting from possible delays in passing
FDA inspection of the Company's quality management system in order to
manufacture the Systems.
In March 1998, Mr. Bruce Hays joined the Company as Director of Quality and
Compliance. Mr. Hays had been employed by Beckman Coulter for 11 years where
most recently he was responsible for Quality Systems in the Research and
Development Division, with 30 years experience in building complex systems to
high-quality standards. Additionally, in May 1998, Dr. Steven Bott, Ph.D.,
joined the Company as Vice President of Engineering and Product Development.
Dr. Bott also joins the Company after being employed by Beckman Coulter for 15
years where most recently he was Director of Research and Development, with
experience in quality management positions and has significant experience in
developing a manufacturing process that complies with QSR.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH HEREIN
IN THE SECTION CAPTIONED "RISK FACTORS" WHICH IMMEDIATELY FOLLOWS THIS SECTION
ON PAGE 5.
The Company's executive offices are located at 2800 Discovery Drive, Orlando,
Florida 32826, where it also maintains its primary research and manufacturing
facilities. Its telephone number at that location is (407) 384-1600.
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RISK FACTORS
In evaluating the Company's business, prospective investors should carefully
consider the following risk factors. This Prospectus contains certain forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. Statements of
plans, intentions and objectives by the Company and statements of future
economic performance contained in this Prospectus should be deemed to be
forward-looking statements. Statements containing terms such as "believes,"
"does not believe," "no reason to believe," "expects," "plans," "intends,"
"estimates," "anticipated," "or "anticipates" are considered to contain
uncertainty and are forward-looking statements. Cautionary statements are made
in certain sections of this Prospectus. These cautionary statements should be
read as being applicable to all related forward-looking statements wherever they
appear in this Prospectus, the materials referred to in this Prospectus or the
materials incorporated by reference into this Prospectus.
For definitions of certain unique medical and regulatory terms used throughout
this prospectus, please see the Glossary at the end of this prospectus.
ABSENCE OF OPERATING HISTORY AND PROFITABILITY; EXPECTED FUTURE LOSSES. The
Company was founded in 1985 to develop laser tracking technology for the
Department of Defense under the Strategic Defense Initiative and did not pursue
development of the LADARVision System product until 1993. The Company has
generated limited revenues to date, of which very little so far relate to its
LADARVision System, and has incurred net losses since 1991 for an aggregate
accumulated total of approximately $32.7 million. The Company's net losses for
the fiscal years ended December 31, 1995, 1996 and 1997 were approximately $4.1
million, $9.0 million, and $11.6 million, respectively. The Company's
LADARVision System may require additional product development, will require
additional clinical studies for indications beyond low and moderate myopia and
astigmatism and will require marketing investment as well as its PMA from the
FDA as a Class III device prior to United States commercialization. There can
be no assurance that any of the Company's product, clinical or market
development efforts will be successfully completed, that regulatory approvals
will be obtained, or that the Company's products will be capable of being
produced in commercial quantities at reasonable cost and quality. Further, it
is expected that the Company will continue to incur substantial losses for some
time after it enters the United States market for laser vision correction, and
there can be no assurance that the Company will attain profitability at any time
in the future.
Management intends to seek funding from time-to-time to ensure adequate
liquidity to fund operations until profitability and positive cash flow is
achieved. As of the date of this prospectus, the Company has completed a sale
of Common Stock for net proceeds of $2.9 million and completed a private
placement of Series I Convertible Preferred Stock and an option to purchase
additional Series I Convertible Preferred Stock for initial net proceeds of
approximately $4.8 million (the Company will receive additional proceeds of
approximately $3.9 million if the Option is exercised). Additionally, the
Company and a financial institution have entered into a letter of intent whereby
the lender may provide up to $15 million of financing to the Company secured by
LADARVision Systems placed in the U.S. commercial marketplace. See "The
Company," page 1.
DEVELOPMENT STAGE COMPANY; GOING CONCERN ACCOUNTANTS' OPINION. The Company is
classified as a development stage company and its financial statements are
therefore presented in accordance with Statement of Financial Accounting
Standards (SFAS) No. 7. The Company must begin generating significant revenues
before SFAS No. 7 permits dropping the development stage company designation.
Additionally, the Company's independent certified public accounting firm has
modified its report on the Company's financial statements as of December 31,
1997, stating that factors discussed in Note 1 to the financial statements raise
a substantial doubt about the ability of the Company to continue as a going
concern. See "Absence of Operating History and Profitability; Expected Future
Losses" for a discussion of the Company's strategy to secure adequate liquidity.
GOVERNMENT REGULATION; FOOD AND DRUG ADMINISTRATION; POSSIBLE FAILURE TO OBTAIN
REGULATORY APPROVAL FOR PRODUCTS. Medical devices are subject, prior to
clearance for marketing, to rigorous pre-clinical and clinical testing mandated
by the FDA and comparable agencies in other countries and, to a lesser extent,
by state regulatory authorities.
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The Company filed a PMA application with the FDA for approval of its LADARVision
System as a Class III device for treating low myopia on September 5, 1997 and in
November 1997, amended the application to include myopia with astigmatism. The
Company must file an amendment or amendments to its original PMA application for
other vision disorders.
The process of obtaining approval of a PMA application is lengthy, typically
taking approximately one year, is expensive and there is no assurance that a PMA
will be granted at the end of this process. The PMA process requires the
submission of extensive clinical data and supporting information to the FDA.
The PMA process also typically requires a public hearing before an advisory
panel comprised of experts in the field (this hearing took place in February
1998). However, the FDA is not bound by the advisory panel's recommendations.
In late 1996, the FDA issued a definitive statement entitled "FDA Guidance for
Photorefractive Keratectomy Laser Systems: IDE Studies and PMA Applications"
(the "Guidance Document"). The Guidance Document offers companies pursuing FDA
approval of LVC systems substantially more defined filing paths, study design
and execution requirements, and safety and efficacy data levels that will have
to be achieved in order to be a candidate for issuance of a PMA. The Company
believes that the Guidance Document will make the process of obtaining PMA
approvals for LVC systems less uncertain and more predictable but will not
eliminate the risk that the Company will not be granted a PMA. The Company
believes that its engineering, clinical trials and data gathering and analysis,
including that which was accomplished before the existence of the Guidance
Document, are in substantial compliance with the Guidance Document.
Products manufactured and distributed by the Company pursuant to a PMA will be
subject to extensive, ongoing regulation by the FDA. The FDA enabling
legislation, the Food, Drug and Cosmetic Act (the "FDC Act") also requires the
Company to manufacture its products in accordance with its current Quality
System Regulations ("QSR"). The Company's facilities will be subject to
periodic, surprise QSR inspections by the FDA. These regulations impose certain
procedural and documentation requirements upon the Company with respect to
manufacturing and quality assurance activities. QSR regulations are consistent,
to the extent possible, with the requirements for quality systems contained in
applicable international standards, primarily, the International Standards
Organization (ISO) 9001. The Company has recently received its ISO 9001
certification.
The Company's manufacturing facilities must comply with FDA QSR guidelines
before the Company's PMA can be granted. The Company must still pass an FDA
inspection regarding compliance with QSR. Delays could occur in receiving FDA
approval of the LADARVision System resulting from possible delays in obtaining
FDA approval of the Company's quality management system in order to manufacture
the Systems. If any major noncompliances with the QSR guidelines are noted
during facility inspections, continued marketing of the Company's products may
be adversely affected.
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 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.
In September 1997, the Company filed a PMA application with the FDA for approval
of its LADARVision System as a Class III device. In October 1997, the Company's
PMA application was accepted for review by the FDA. In February 1998, the U.S.
Food and Drug Administration's (FDA) Ophthalmic Devices Advisory Panel
unanimously recommended approval of the PMA for the LADARVision System, within
certain parameters. The FDA typically follows a panel's recommendation and
grants the PMA after product labeling is established and after an inspection
finding that the manufacturer is in compliance with FDA Quality System
Regulations. See "Risk Factor - "Limited Manufacturing Experience; QSR and ISO
9001 Requirements," page 7.
The FDA Quality System Regulation and ISO 9001 require the Company to maintain a
supplier-quality program with major sub-contractors in order for the Company's
product to carry the claim of having been manufactured in a quality environment.
The Company must demonstrate that it is properly managing the quality of all of
its vendors. There is
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always the risk that existing sub-contractors who meet the requirements
currently will not meet them at some time in the future. As a result, it is
possible that the Company's commercial capability could be hindered at some time
in the future because it is unable to pass QSR inspections by the FDA, its
subcontractor's documented quality systems fail to be sufficient, or the Company
is unable to obtain the "CE" mark to enable the Company to distribute products
in Europe in 1998 and beyond. (See "Risks Associated with International
Commercial Activities" for a discussion of the "CE" mark.)
Requirements for regulatory approval relating to the LADARVision System may vary
widely from country to country, ranging from simple product registrations to
detailed submissions such as those required by the FDA. No regulatory clearances
have been obtained in any such countries, and there is no assurance that any
will be issued.
Changes in existing regulatory requirements or adoption of new requirements
could have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that the Company
will not be required to incur significant costs to comply with laws and
regulations in the future or that laws and regulations will not have a material
adverse effect on the Company's business, financial condition or results of
operations.
NEED FOR ADDITIONAL CAPITAL TO FUND PLACEMENT OF THE LADARVISION SYSTEMS AND FOR
OPERATIONS. The Company's business strategy calls for the placement of the
LADARVision Systems with ophthalmologists primarily under procedure fee
agreements. As a result, the Company will be required to fund the direct
manufacturing costs of each system, estimated to be $200,000 for each system.
Although the Company intends to receive prepaid fees for the placement of each
machine and to seek financing for additional balances of capital investment,
such prepaid fees and funding will not cover the initial manufacturing and
installation costs of each system. The Company will be required to obtain
financing prior to achieving high volume commercial use of its LADARVision
Systems. The Company has entered into a letter of intent with a financial
institution for financing of LADARVision Systems. See "The Company," page 1.
There can be no assurance that the Company will be able to obtain funds under
such financing arrangement or similar debt agreement or raise equity capital as
needed for the commercial placement of its LADARVision Systems or, if such
funding is obtained, that the terms of such funding will be favorable to the
Company. Until such time as the cash provided from the procedure fees derived
from LADARVision System placements is sufficient to cover the Company's
clinical, research, development and administrative expenses, the Company will
need additional capital for funding of its operations. These expenses are
currently running at approximately $1,000,000 per month. To the extent that such
additional capital is obtained via equity sales, the holdings of existing
shareholders may be materially diluted. Further, additional dilution will occur
to existing shareholders upon the exercise of outstanding warrants and stock
options, the potential issuance of shares to CIBA in 1999, the conversion of
Series I Convertible Preferred Stock and the exercise of the Warrant.
LIMITED MANUFACTURING EXPERIENCE; QSR AND ISO 9001 REQUIREMENTS. The Company's
manufacturing operations consist primarily of the final assembly of out-sourced
parts and components, followed by testing to assure field performance and
quality control. The Company must expand its manufacturing capabilities for
commercial production of the LADARVision System to have the capacity to address
the market. The Company has recently experienced delays in the production of
LADARVision Systems in order for it to finalize its QSR systems and complete
implementation of several engineering changes. The Company believes it will have
the engineering changes and QSR system completed by the end of summer 1998.
After an initial inspection by the FDA in January 1998, the Company addressed
deficiencies in QSR compliance to the FDA and believes it will have its QSR
system ready for FDA inspection by the end of summer 1998, including
manufacturing process validation, which was a deficiency noted in May 1998 by
the FDA. The Company believes it has cured all significant deficiencies. There
can be no assurance that the Company will not continue to experience such
production and FDA inspection difficulties as it converts from a research and
development operation into a commercial manufacturing operation. Any delay in
commercial production beyond the Fall of 1998 could have a material adverse
effect on the Company's operations. In addition, the Company must continue to
meet the FDA's QSR guidelines in order to ship systems for use in the United
States. In addition, if any of the Company's suppliers of significant components
or sub-assemblies cannot meet the quality requirements of the Company, the
Company could be delayed in producing commercial systems for the United States
market. The Company has received
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its ISO 9001 certification which is needed when applying for the CE Mark,
necessary for marketing in European Community countries.
RELIANCE ON THIRD PARTY AND SINGLE MANUFACTURER. The Company relies on third
party suppliers to provide the components necessary for the manufacture of the
LADARVision System. The Company-patented laser component of the LADARVision
System is currently manufactured by a small company according to Company-owned
design documentation and specifications. The Company has the right to make or
have made the laser component in the event this manufacturer is unable to
deliver the Company's requirements for the laser component. For a more detailed
discussion of the manufacturer of the laser component, see "The Company - Single
Manufacturer for the Laser Component," page 3. In addition to the laser
component, the most significant system component is the tracking hardware. Other
components of the LADARVision System such as the stereo microscope, computer
hardware and system casing are available from several sources. The Company may
be unable to obtain sufficient quantities of these components or it may be
unable to effect a change from the laser component manufacturer to another
manufacturer. In these instances, reductions in manufacturing capability could
occur that could cause delays in clinical trials, regulatory approvals and
commercialization which would have a material adverse effect on the business,
financial condition, and results of operations of the Company.
DEPENDENCE ON PATENTS AND PROPRIETARY TECHNOLOGY. The Company's success will
depend in part on its ability to obtain patents for its products and processes,
to preserve its trade secrets and to operate without infringing upon the
proprietary rights of third parties. In particular, whether the Company can
protect its proprietary tracking and narrow-beam shaping technology is critical
to its ability to differentiate it from existing LVC systems. The Company has
filed fourteen U.S. and foreign patent applications related to several features
of its eye tracking technology as well as to its narrow beam delivery, corneal
sculpting methods and advanced topographical analysis. Five of these
applications have resulted in the issuance of United States patents, which have
expiration dates ranging from 2012 to 2018, and multiple claims for two
additional U.S. patents have been allowed. It is uncertain as to whether any
other patents will be issued, whether the scope of any patent protection will
exclude competitors or provide meaningful competitive advantages to the Company,
whether any of the Company's patents will be held valid if subsequently
challenged, or whether others will not claim rights in or ownership of the
patents and other proprietary rights held by the Company.
In both the United States and overseas, there are a number of patents covering
methods, procedures and apparatus for performing corneal surgery with
ultraviolet laser ablation. Furthermore, there are existing patents in eye
tracking and narrow beam excimer shaping. The patent positions of medical
technology are generally uncertain and involve complex legal and factual
questions. Consequently, the Company does not know whether any of its pending
applications will result in the issuance of any patents or whether issued
patents will provide significant proprietary protection or will be circumvented
or invalidated. Since patent applications in the United States are maintained in
secret until patents are granted and since publication of inventions in
scientific or patent literature tend to lag behind patent grants by several
months, the Company cannot be certain that it was the first creator of
inventions covered by its pending patent applications or that it was the first
to file patent applications for such inventions.
PATENT LITIGATION. There has been significant patent litigation in the medical
device industry generally, and in LVC in particular. The defense and prosecution
of patent proceedings is costly and involves substantial commitments of
management time. Adverse determinations in litigation or other patent
proceedings to which the Company may become a party could subject the Company to
significant legal judgments or other liabilities to third parties and could
require the Company to seek licenses from third parties that may or may not be
obtainable and may or may not be economically viable. Patent and other
intellectual property disputes in the medical device industry often are settled
through licensing arrangements. The costs associated with such arrangements may
be substantial, and could include ongoing royalties. Furthermore, there can be
no assurances that a settlement through licensing can be reached, accordingly,
an adverse determination in a judicial or administrative proceeding, or the
Company's failure to obtain necessary licenses, could prevent the Company from
manufacturing and selling its products in one or more markets, which could have
a material adverse effect on the Company's business, financial condition and
results of operations.
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Two of the Company's competitors, Summit Technology, Inc. ("Summit") and VISX,
Inc. ("VISX") formed a United States partnership, Pillar Point Partners ("Pillar
Point"), in 1992 to pool certain of their respective patents related to corneal
sculpting technologies. In October 1996, the Company filed suit in the U.S.
against Pillar Point, Summit and VISX alleging non-infringement,
unenforceability and invalidity of certain of the patents of Pillar Point. There
can be no assurance that the Company will prevail in this lawsuit or that other
such suits will not arise. As of the date of this prospectus, this suit has
proceeded into the discovery phase. See "Item 3. - Legal Proceedings" in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997.
On June 9, 1998, Summit and VISX announced that they had reached agreement on
the dissolution of Pillar Point to be effected as soon as possible. As a part of
the dissolution of Pillar Point, Summit and VISX granted each other a worldwide,
royalty free cross-license whereby each party will have full rights to license
all existing patents owned by either company relating to LVC for use with their
systems. The dissolution of Pillar Point will not affect the Company's lawsuit
against Summit and VISX.
TECHNOLOGY LICENSES FROM VISX AND OTHERS. Depending upon whether the Company's
LADARVision System incorporates patented technology owned by VISX and as may be
required by any license agreement that the Company may enter into with VISX, the
Company or its LADARVision System users may be required to pay royalties and per
procedure fees to VISX for all revenues generated in the United States. The
Company has not obtained a license from VISX as of this date, and the actual per
procedure fee and other terms of any license, if such license is granted, have
yet to be determined. The Company has been informally advised by Summit, and the
Company believes, that the LADARVision System or its use does not infringe on
patents owned by Summit. However, there can be no assurances that the Company
will not be required to obtain a license from Summit with regard to patents
owned by Summit.
In addition, there may be other United States and foreign patents for which the
Company will need to negotiate licenses in order to sell, lease or use the
LADARVision System in certain markets.
There can be no assurance that the Company or its customers will be successful
in securing licenses, including any necessary licenses from Pillar Point, or
that if the Company does obtain licenses, such licenses will be on terms
acceptable to the Company. The failure to either obtain required licenses or to
obtain licenses on terms favorable to the Company could have a material adverse
effect on the business of the Company.
LIMITED HUMAN CLINICAL TRIAL DATA IN HYPEROPIA AND LASIK; LACK OF LONG-TERM
FOLLOW-UP. Substantial additional human clinical trials must be completed under
rigorous protocols at multiple sites in order to submit the required outcome
data for hyperopia/astigmatism and LASIK with the Company's PMA application(s).
The Company currently anticipates completing patient enrollment for these two
additional patient protocols by December 1998; however, there can be no
assurances that the Company will be able to complete the patient enrollment by
that date. The results of the Company's early clinical trials in
myopia/astigmatism appear satisfactory, but may not be indicative of results to
be expected in future clinical trials for expanded indications. If the Company's
clinical trials do not show consistently good outcomes, the Company may not be
able to secure a PMA for its products. Moreover, the results of clinical trials
are not within the Company's control, and the Company could experience delays in
completing its clinical trials for a variety of reasons. Any failure to obtain a
PMA or delay in clinical trials would have a material adverse effect on the
Company's business, financial condition and results of operations.
There have been concerns with respect to the safety and efficacy of LVC,
including the predictability and stability of results. Potential complications
and side effects in early LVC systems have included post-operative discomfort
due to re-epithelialization (eye membrane re-growth); corneal haze during
healing (an increase in the light scattering properties of the cornea);
glare/halos (undesirable visual sensations produced by bright lights); decreases
in contrast sensitivity; temporary increases in intraocular pressure in reaction
to topical medication administered during and after the procedure; fluctuations
in refractive capabilities during healing; occasional decreases or permanent
loss in best corrected vision post-operatively (i.e., with corrective eyewear);
unintended over-corrections or under-corrections; regression of operative
effect; disorders of corneal healing; corneal scars; corneal ulcers and
unintentionally induced astigmatism. It
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is entirely unpredictable as to whether long-term follow-up data on either
clinical or later commercial patients from any LVC system will reveal additional
complications that may have a material adverse effect on acceptance of LVC and
market size which in turn would have a material adverse effect on the Company's
business, financial condition and results of operations. Concern over the safety
of LVC in general could, in turn, result in adverse regulatory action which
could have a material adverse effect on the Company's business, financial
condition and results of operations.
UNCERTAIN MARKET ACCEPTANCE OF LVC. The Company believes that its long-term
growth and ultimate profitability will depend upon acceptance of LVC in the
United States and certain international markets and the Company's ability to
penetrate the LVC market successfully. LVC has only been marketed in the United
States for approximately 33 months and initial market growth has been slower
than anticipated (market estimates published by Market Scope (www.mktsc.com)
have shown approximately 100,000 and more than 200,000 U.S. procedures for the
calendar years 1996 and 1997, respectively). The degree of eventual acceptance
of LVC by ophthalmologists and persons needing refractive correction as an
alternative to existing methods of treating or correcting vision disorders is
still undeterminable. The acceptance of LVC by the general population may be
affected adversely by its retail price (which is not expected to be reimbursed
to the patient by medical insurance), concerns relating to its safety and
efficacy, and the accepted effectiveness of alternative methods of correcting
refractive vision disorders. Additionally, the current lack of long-term follow-
up data, the possibility of unknown side effects, and the expected lack of
third-party reimbursement for the procedure might also adversely affect demand.
Any future reported adverse events or other unfavorable publicity involving
patient outcomes from the use of legal or illegal LVC systems manufactured by
any participant in the LVC market could also adversely affect consumer
acceptance. Ophthalmologist and optometrist acceptance (the latter for
referrals) could also be affected by the high costs and expenses of excimer
laser systems, which might preclude access to such systems by some
professionals. In addition, the Company's marketing strategy relies, in part, on
ophthalmologists who are currently using an existing excimer laser system to
replace their equipment with the Company's LADARVision System. Emerging new
refractive surgery technologies and procedures may also have the potential to
compete with or materially limit the acceptance of LVC. Current ophthalmic
product suppliers whose products, including eyeglasses and contact lenses, are
alternatives to LVC also may adversely affect the market acceptance of LVC by
their retail marketing strategies, including aggressive pricing. The failure of
LVC to achieve broad market acceptance would have a material adverse effect on
the Company's business, financial condition and results of operations. There can
be no assurance that there will be demand for the Company's LADARVision System.
RAPIDLY CHANGING TECHNOLOGY; HIGHLY COMPETITIVE MARKETS. The refractive surgery
market is characterized by rapidly evolving technology and intense competition.
The Company is aware of two companies, Summit and VISX, that have been granted
their PMA's and are actively marketing LVC systems in the United States for
myopia and astigmatism. Several companies, including Bausch & Lomb's Surgical
Division (formerly Chiron/Technolas), Coherent/Schwind, Nidek, Meditek,
Lasersight and Novatec, have introduced LVC systems outside the United States,
where LVC has been commercialized for treating refractive disorders. Three of
these companies have made announcements of PMA filings with the FDA subsequent
to the Company's filing, indicating substantial completion of their U.S. Phase
III protocols. Other companies either have begun or may soon begin clinical
trials in the United States, including Phase III trials, the last stage before
approval. LVC providers who purchase equipment from Summit or VISX may be
reluctant to change to the new LADARVision System because of the significant
capital investment they have made or the familiarity with the equipment and the
inconvenience of changing to a new system. If other providers of LVC systems are
able to saturate the United States market with their equipment before the
Company obtains FDA approval to market the LADARVision System in the United
States, the Company could experience a significantly lower share of the market
than anticipated which would have a material adverse effect on the Company's
business, financial condition and results of operations.
Several of the Company's competitors have allied with or developed their own
vision care centers in Europe and the United States and have entered into
strategic alliances with prominent corporations in the worldwide ophthalmic
industry to promote their LVC excimer lasers. Many of these companies have
substantially greater capabilities than the Company in the areas of capital
resources, research and development resources and regulatory, manufacturing and
marketing experience. There can be no assurance that the Company's competitors
will not succeed in developing or
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marketing technologies and products that are more effective and less expensive
than those developed or marketed by the Company or that would render the
Company's technology and products obsolete or noncompetitive.
Non-laser corrective refractive procedures and technologies are under
development, and it is possible that these technologies and procedures will be
successfully developed as competition to the Company's technology.
RELIANCE ON A SINGLE POTENTIAL PRODUCT. Currently the Company's only significant
planned product is the LADARVision System for refractive correction. The
Company's existing plans assume that it will derive substantially all of its
revenues from the LADARVision System. If the Company is unable to make
significant commercial placements of the LADARVision System for vision
correction, the viability of the Company would be jeopardized. Furthermore, if
the Company is unable to successfully design, clinically test and gain FDA
approval on various indications, such as low and moderate myopia, astigmatism,
and hyperopia, the Company's future growth could be significantly limited.
DEPENDENCE ON AND NEED FOR KEY PERSONNEL; POTENTIAL FAILURE TO MANAGE GROWTH.
Prior to 1995, the Company relied on consultants and contractors to assist
senior management in certain financial, regulatory, marketing and manufacturing
functions. Since 1995, the Company has attracted senior personnel in marketing,
clinical trials management, finance, research, engineering and operations. As
the Company continues the clinical development of the LADARVision System and
prepares for regulatory approvals and other commercialization activities, it
will need to continue to implement and expand its operational, financial and
management resources and controls. Particularly important will be the need of
the Company to build a manufacturing and field service organization. The
failure of the Company to attract and retain experienced individuals for these
positions, as well as any inability of the Company to effectively manage growth
in its domestic and international operations as it transitions from a
development stage enterprise to a commercial entity, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company follows a policy of "at-will" employment and has no employment
contracts with any of its employees. The Company is in the process of obtaining
key-man life insurance for all of its officers. Not all of its officers are yet
covered under the key-man life insurance. There can be no assurance that the
Company will be able to obtain key-man life insurance on each of its officers.
NO SIGNIFICANT SALES AND MARKETING EXPERIENCE; RELIANCE TO DATE ON STRATEGIC
ALLIANCE PARTNER. The Company's efforts to date have focused on the development
and evaluation of the LADARVision System for treating refractive disorders. As
the Company continues clinical studies with the LADARVision System and prepares
for commercialization of the product internationally and in the United States,
it must build a sales and marketing infrastructure. The Company has limited
experience in the sales and marketing of capital equipment for laser vision
correction. In 1994 and 1995, the Company entered into agreements that form a
strategic alliance with CIBA for the worldwide co-promotion of the Company's
LADARVision System excimer laser. Although it has developed a strong reputation
in certain ophthalmic markets such as contact lenses, lens care and ophthalmic
pharmaceuticals, CIBA does not have considerable experience in the sale of
ophthalmic equipment or in the refractive surgery market. It is possible that
the Company will not be able to attract the personnel to develop the
infrastructure to effectively market the LADARVision System or that CIBA will
not be able to provide sufficient or effective co-marketing and business
support.
RISKS ASSOCIATED WITH INTERNATIONAL COMMERCIAL ACTIVITIES. International
commercial activities may be limited by or disrupted by the imposition of
government controls, unique license requirements, political instability, trade
restrictions, changes in tariffs or taxes, regional economic conditions, such as
currently in Asia, currency fluctuations and changes, and difficulties in
staffing and managing such complexities.
The Company has received its ISO 9001 certification, which is needed when
applying for a "CE" mark certification, an international symbol of quality and
compliance with applicable European medical device directives. Until the Company
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receives its CE Mark certification it is prohibited from placing the LADARVision
System in Europe which could have a material adverse effect on the business,
financial condition, and results of operations of the Company. The Company
expects to apply for the CE Mark in the fall of 1998.
COMMISSION OBLIGATION TO CIBA; FUTURE DILUTION. As part of the strategic
alliance with CIBA, the Company will pay a 6% commission on net revenue
worldwide from all equipment sales and patient procedure fees relating to
ophthalmic refractive surgery. The initial commission is limited to $10,000,000
in the aggregate. In the event the Company has not paid commissions to CIBA
totaling $10,000,000 or more by May 15, 1999, the Company must deliver to CIBA
171,713 shares Common Stock (the "Additional Shares"), and continue to pay
commissions until the $10,000,000 aggregate amount is reached. If the Additional
Shares are issued, the number of such shares must be adjusted so that the
Additional Shares have a market value of at least $675,000 on May 15, 1999. The
Company's current business plan contemplates that commissions to CIBA by May 15,
1999 will not total $10,000,000. Therefore, it should be assumed that the
Company will issue the Additional Shares on May 15, 1999. The 6% commission will
reduce the Company's income and margins from its business for the period it is
payable, and the potential future shares are prospectively dilutive to
stockholders in 1999.
POSSIBLE TERMINATION OF STRATEGIC ALLIANCE WITH CIBA. The strategic alliance
provides CIBA and the Company with certain termination rights. CIBA may, at its
sole discretion, terminate the strategic alliance upon 180 days notice to the
Company. In such event, the Company would be obligated to continue to pay to
CIBA for up to three years beyond termination the 6% commission on procedure fee
revenue derived from LADARVision Systems that were commercially placed at the
time of the termination. Additionally, CIBA has the right to terminate the
strategic alliance upon 30 days notice should there be a change of control of
the Company (defined as the transfer of greater than 50% of the voting stock or
substantially all of the assets of the Company in a single transaction or series
of related transactions, excluding a bona fide public offering). CIBA also has
the right to terminate the strategic alliance upon 30 days notice if it
determines, in its sole discretion, that the Company's core technology or the
commercial essence of the technology is not patentable, or that additional
licenses (other than that with VISX or Summit) are necessary, are not obtained
or would have a material adverse impact upon the commercial value of the
Company's technology. CIBA also has the right to terminate such agreement (i) if
the Company materially breaches such agreement and does not cure such breach
within the cure period, (ii) if the Company becomes insolvent, or (iii) if the
control of the Company falls into the hands of a competitor to CIBA. In the
event that CIBA terminates the strategic alliance, such termination would have a
material adverse effect on the operations, financial condition and the results
of operations of the Company, in that the Company would be unable to utilize the
CIBA name in connection with marketing the LADARVision System, or to utilize
other planned services as agreed to in the strategic alliance.
POTENTIAL PRODUCT LIABILITY CLAIMS AND UNINSURED RISKS. The Company's business
involves the risk of product liability claims. Any inability of the Company to
maintain adequate insurance coverage at any time could, in the event of product
liability or other claims in excess of the Company's insurance coverage, have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company currently has product liability insurance
coverage which it believes is adequate and which covers the Company's exposure
under both clinical and commercial surgeries. This is a "claims made" product
liability insurance policy with coverage limits of $5 million per occurrence and
$5 million in the aggregate annually. The Company has in the past agreed, and is
likely to in the future agree, to indemnify certain medical institutions and
personnel thereof conducting and participating in the Company's clinical
studies. The Company will indemnify its commercial customers for product
liability claims arising out of defects, if any, in the system.
VOLATILITY OF STOCK PRICE. The Company's Common Stock has experienced
substantial price volatility, and such volatility may occur in the future.
Additionally, the stock market has from time to time experienced significant
price and volume fluctuations that are unrelated to the operating performance of
particular companies. These broad market fluctuations may adversely affect the
market price of the Company's Common Stock. In addition, the market price of the
shares of Common Stock is likely to be highly volatile. Factors such as
fluctuations in the Company's operating results, announcements of technological
innovations or new products by the Company or its competitors, FDA and
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international regulatory actions, developments with respect to patents or
proprietary rights, including lawsuits, the perceived ability of the Company to
obtain any new financing necessary, public concern as to the safety of products
developed by the Company or its competitors, changes in health care policy in
the United States and internationally, changes in analysts' recommendations
regarding the Company, other LVC or medical device companies or the medical
device industry generally and general market conditions may have a significant
effect on the market price of the Common Stock.
CONTROL BY CERTAIN EXISTING STOCKHOLDERS. The directors, executive officers and
certain entities affiliated with directors of the Company beneficially own
approximately 23.0% of the Company's outstanding Common Stock. Accordingly,
these stockholders, individually and as a group, may be able to influence the
outcome of stockholder votes, including votes concerning the election of
directors, the adoption or amendment of provisions in the Company's Third
Amended and Restated Articles of Incorporation (the "Articles") and Bylaws and
the approval of certain mergers or other similar transactions. Such control by
existing stockholders could also have the effect of delaying, deferring or
preventing a change in control of the Company.
NO FORESEEABLE DIVIDENDS. The Company has never paid cash dividends on its
capital stock and does not anticipate paying cash dividends in the foreseeable
future. The Company intends to retain future earnings for reinvestment in its
business. Any future determination to pay cash dividends will be at the
discretion of the Board of Directors and will be dependent upon the Company's
financial condition, results of operations, capital requirements and such other
factors as the Board of Directors deems relevant.
ANTI-TAKEOVER MEASURES; POTENTIAL ADVERSE EFFECT ON COMMON STOCK PRICE. The
Company's Articles authorize the Company's Board of Directors to issue shares of
the Company's Preferred Stock and to determine the rights, preferences,
privileges and restrictions of such shares without any vote or action by the
stockholders. The issuance of Preferred Stock under such circumstances could
have the effect of delaying or preventing a change in control of the Company.
The rights of the holders of the Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any Preferred Stock that may
be created and issued in the future. In addition, the Company's Articles provide
that any action to be taken by written consent in lieu of an annual or special
meeting of the stockholders is prohibited unless the use of written consents is
approved in advance thereof by the Board of Directors and that an affirmative
vote of the holders of not less than two-thirds of the outstanding voting shares
is required to amend such prohibition of use of written consents by the
stockholders set forth above.
In addition, certain provisions of the Florida Business Corporation Act have
anti-takeover effects and may inhibit a non-negotiated merger or other business
combination. These statutory provisions are intended to encourage any person
interested in acquiring the Company to negotiate with and obtain the approval of
the Board of Directors in connection with such a transaction. One of the effects
of the provisions described above may be to discourage a future attempt to
acquire control of the Company that is not presented to and approved by the
Board of Directors, but which a substantial number, and perhaps even a majority
of the Company's stockholders, might believe to be in their best interests or in
which stockholders might receive a substantial premium for their shares over the
current market prices. As a result, stockholders who might desire to participate
in such a transaction may not have an opportunity to do so.
SHARES ELIGIBLE FOR RESALE. At July 31, 1998, the Company had 11,315,991 shares
of Common Stock outstanding. Of the shares of Common Stock currently
outstanding, the Company estimates that there are currently 1,710,000
unregistered shares of Common Stock outstanding of which 674,500 may be freely
traded or may be traded under certain volume and other restrictions set forth in
Rule 144 (as recently amended).
At July 31, 1998, the Company had reserved 1,995,822 shares of Common Stock for
issuance pursuant to the 1995 Stock Option Plan and the 1996 Employee Stock
Purchase Plan (collectively, the "Stock Plans"). Of this amount, 1,529,761
shares were subject to outstanding options at July 31, 1998, with a weighted
average exercise price of $4.20 per share. Since the Stock Plans have been
registered on Form S-8 with the SEC, Common Stock issued in conjunction with the
Stock Plans are generally eligible for resale in the open market.
13
<PAGE>
At July 31, 1998, the Company has reserved 925,350 shares of Common Stock for
issuance upon the exercise of warrants outstanding. At the current time, should
such warrants be exercised, they would generally result in unrestricted Common
Stock being issued. Of these 925,350 warrants, all are exercisable at July 31,
1998, with a weighted average exercise price of $4.02 per share, and 820,350
are "in the money."
Certain holders of the Company's Common Stock and stock purchase warrants
totaling 468,821 shares (together, the "Registrable Securities") have certain
rights to cause the Company to register the sale of such shares under the
Securities Act. If the Company proposes to register any of its securities under
the Securities Act for its own account, holders of the Registrable Securities
are entitled to notice of such registration and are entitled to include
Registrable Securities therein, provided, among other conditions, that the
underwriters, if any, of such offering have the right to limit the number of
shares included in such registration. Of the total number of Registrable
Securities, 438,821 shares of the 1,695,371 shares owned by CIBA are included in
the total of Registrable Securities. CIBA may require the Company to file
additional registration statements covering those shares of Common Stock it
owns, which are not otherwise registered, on Form S-3, subject to certain
conditions and limitations. Registration of such shares under the Securities Act
would result in such shares becoming freely transferrable under the Securities
Act (except for shares held by affiliates of the Company) immediately upon the
effectiveness of such registration. CIBA has waived its right to have shares
registered on this Form S-3.
No prediction can be made as to the effect, if any, that sales of shares of
Common Stock under Rule 144 or pursuant to the registration rights described
above, or the future availability of such shares for sale, will have on the
market price of the Common Stock. Sales of substantial amounts of Common Stock
in the public market, or the perception that such sales could occur, could
adversely affect prevailing market prices for the Common Stock.
POTENTIAL ADVERSE EFFECTS OF SERIES I CONVERTIBLE PREFERRED STOCK CONVERSIONS;
NEW SIGNIFICANT STOCKHOLDER; POTENTIAL DECLINE IN PRICE OF COMMON STOCK. The
Initial Shares sold (see Recent Developments, page 3) are convertible into a
maximum of 1,750,000 shares of Common Stock. In the event the Option is
exercised, the Initial Shares and the Option Shares, together, are convertible
into an aggregate maximum of 2,263,197 shares of Common Stock. Upon the exercise
of the Option the Selling Stockholder will receive the Warrant for 300,000
shares of Common Stock. In the event all such conversions occur for the Total
Maximum Shares, the Warrant is exercised and the Selling Stockholder retains
ownership of all such shares, the Selling Stockholder would own 2,563,197 shares
of Common Stock (see Recent Developments, page 3) which would be an 18.5%
interest in the Company's Common Stock. If this beneficial interest in the
Company's Common Stock is established by the Selling Stockholder, the Selling
Stockholder would be the largest beneficial owner of the Company's Common Stock.
The Selling Stockholder may convert the Series I Convertible Preferred Stock at
a maximum rate of 115 shares of Series I Convertible Preferred Stock per month.
Thus, the conversion of the Initial Shares may occur over a period of
approximately 5 months. As set forth in the section entitled "Selling
Stockholder - Footnote 6" as an example, based on an average trading price of
$4.50 per share, 115 shares of Series I Convertible Preferred Stock would be
convertible into 283,951 shares of Common Stock per month where the conversion
formula is based on 90% of the $4.50 per share trading price. The Selling
Stockholder will be able to convert into the Initial Maximum Shares if the
conversion price drops below $2.86 per share, which represents 90% of a trading
price of $3.18 per share. The limitation imposed on conversion of the Series I
Convertible Preferred Stock (shares each 30 days as described in the Company's
Articles of Incorporation) may not be waived or changed by the Company without
amending the Company's Articles of Incorporation with respect to this provision.
Such amendment could only occur upon adoption of such amendment by the vote or
consent by the holders of a majority of the shares of both Common Stock and
Series I Convertible Preferred Stock.
The conversion feature of the Series I Convertible Preferred Stock operates such
that the Selling Stockholder receives more shares of Common Stock upon
conversion when the market price of the Company's Common Stock is lower. In the
event the trading price of the Company's Common Stock decreases such that the
Selling Stockholder is able to
14
<PAGE>
convert less than the total number of Initial Shares into the Initial Maximum
Shares (1,750,000 shares); or in the event the Option is exercised and the
Selling Stockholder is able to convert less than the total of the Initial Shares
and the Option Shares into the Total Maximum Shares (2,263,197 SHARES), and as a
result, the Selling Stockholder has shares of Series I Convertible Preferred
Stock remaining in its possession following all such conversions, the Company is
obligated to redeem those remaining shares of Series I Convertible Preferred
Stock for an amount equal to 110% of the face value of the remaining shares of
Series I Convertible Preferred Stock. Thus, the Selling Stockholder will receive
$11,000 (110% of the Series I Convertible Preferred Stock face value of $10,000
per share) for every share of Series I Convertible Preferred Stock redeemed by
the Company. In this event, the Selling Stockholder will realize a gain on its
redeemed investment without being exposed to uncertain market and trading
conditions.
Further, in the event the price of the Common Stock declines during that time
within which the investor holds shares of Series I Convertible Preferred Stock,
the number of shares of Common Stock issuable upon conversion will increase
proportionately to no more than the aforementioned limits. There have been
instances of a stock price decline in other companies' shares of common stock
upon the sale of similar convertible securities, where such decline occurs in
anticipation of the conversion and sale of those companies' common stock into
the public market. The Company is unable to predict the effect that the
conversion of the Series I Convertible Preferred Stock into Common Stock and the
sale of the Common Stock into the public market will have on the price of the
Company's Common Stock. In the event the Selling Stockholder sells a large
number of shares of Common Stock into the public market over a short time
period, the market price of the Company's Common Stock could decline. Such a
decline in the price of the Company's Common Stock may make future financing
more difficult for the Company to obtain on a favorable basis, if at all.
There are hazards for small companies issuing shares of convertible preferred
stock which are convertible at a floating ratio based on the stock price. Short
selling by the purchaser of convertible preferred stock could result in large
profits to the purchaser by driving the market price down, then converting the
convertible preferred stock at a low price. In the event of a downturn in the
price of the Company's Common Stock, the Selling Stockholder could profit
through a low conversion price. Sales of shares of Common Stock by the Selling
Stockholder, whether through short or long selling, could have the effect of
driving the market price down after which the Selling Stockholder could convert
additional shares of Series I Convertible Preferred Stock at the lower price,
then sell those shares after the market price has risen to a higher level. There
is a limitation on the number of shares into which the Shares may be converted
and a limitation on the number of shares of Series I Convertible Preferred Stock
which may be converted during the next eight months. See the section entitled
"Selling Stockholder" on page 15 of this Prospectus, specifically Footnotes 6
and 8 therein on page 17.
"PENNY STOCK" TRADING RULES. In the event the Common Stock is delisted and no
longer quoted on Nasdaq, the Common Stock may become subject to the SEC's "penny
stock" trading rules. The penny stock trading rules impose additional duties and
responsibilities upon broker-dealers and salespersons effecting purchase and
sale transactions in common stock and other equity securities, including
determination of the purchaser's investment suitability, delivery of certain
information and disclosures to the purchaser, and receipt of a specific purchase
agreement from the purchaser prior to effecting the purchase transaction. In
addition, many broker-dealers will not effect transactions in penny stocks,
except on an unsolicited basis, in order to avoid compliance with the penny
stock trading rules. In the event the Common Stock becomes subject to the "penny
stock" trading rules, such rules may materially limit or restrict the ability of
a holder to resell such equity securities, and the liquidity typically
associated with listed publicly traded equity securities may not exist.
15
<PAGE>
SELLING STOCKHOLDER
The Initial Shares and the Option were acquired from the Company pursuant to a
Convertible Preferred Stock Purchase Agreement for an aggregate purchase price
of $5,000,000. The offer and sale by the Company of the Series I Convertible
Preferred Stock, the Option and the Warrant to the Selling Stockholder pursuant
to the Convertible Preferred Stock Purchase Agreement was made pursuant to an
exemption from the registration requirements of the Securities Act provided by
Section 4(2) thereof. The Convertible Preferred Stock Purchase Agreement
contains representations and warranties as to the Selling Stockholder's status
as an "accredited investor" as such term is defined in Rule 501 promulgated
under the Securities Act.
Pursuant to the Convertible Preferred Stock Purchase Agreement, the Selling
Stockholder has represented that it acquired the Series I Convertible Preferred
Stock for investment and with no present intention of distributing the Series I
Convertible Preferred Stock, or the shares into which the Series I Convertible
Preferred Stock is convertible. The Company agreed, in such Convertible
Preferred Stock Purchase Agreement, to prepare and file a registration statement
as soon as practicable and to bear all expenses other than underwriting
discounts and commissions and brokerage commissions and fees. In addition, and
in recognition of the fact that the Selling Stockholder, even though purchasing
the Initial Shares, without a view to distribution, may wish to be legally
permitted to sell the Shares when it deems appropriate, the Company filed with
the Commission a Registration Statement on Form S-3, of which this Prospectus
forms a part, with respect to, among other things, the resale of the Shares as
described below under "Plan of Distribution."
The Selling Stockholder has not had a material relationship with the Company
within the past three years except as a result of the ownership of the Series I
Convertible Preferred Stock and the Option.
The following table sets forth the name of the Selling Stockholder, the number
of shares beneficially of Common Stock which may be owned by the Selling
Stockholder as of July 17, 1998 upon full conversion of the Initial Shares and
the Option Shares and the Shares which may be offered pursuant to this
Prospectus. This information is based upon information provided by the Selling
Stockholder. Under the Convertible Preferred Stock Purchase Agreement, the
Selling Shareholder is entitled to convert 115 shares of Series I Convertible
Preferred Stock into Shares per month (which may cumulate). The Company may
waive the limit on the number of shares of Series I Convertible Preferred Stock
which may be converted per month. The Shares are being registered to permit
public secondary trading of the Shares, and the Selling Stockholder may offer
the Shares for resale from time to time.
<TABLE>
<CAPTION>
Maximum Number of Shares Which Maximum Ownership After
May be Owned Number of ---------------
Prior to Offering (1)(2) Shares Offering (2)
------------------------ Being ------------
Name of -----
Selling Stockholder Number of Offered Number of
- ------------------- Shares Percent (7) ------- Shares Percent
------------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
OZ Master Fund, 1,750,000 (4) 15.46484% 1,750,000 0 0%
Ltd. (3) 513,197 (5) 4.53514% 0 513,197 (5) 4.5%
TOTAL 2,263,197 (6) 19.999998%
</TABLE>
(1) The maximum number of shares which may be owned assuming full conversion of
the Initial Shares and the Option Shares.
(2) It is unknown if, when or in what amounts the Selling Stockholder may offer
Shares for sale. Because the Selling Stockholder may offer all or some of
the Shares pursuant to this offering, and because there are
16
<PAGE>
currently no agreements, arrangements or understandings with respect to the
sale of any of the Shares that will be held by the Selling Stockholder
after completion of the offering, no estimate can be given as to the amount
of Shares that will be held by the Selling Stockholder after completion of
the offering. However, for purposes of this table, the Company has assumed
that, after completion of the offering, none of the Shares covered hereby
will be held by the Selling Stockholder.
(3) OZ Management, L.L.C., a Delaware limited liability company, shares
investment and voting control over the shares owned by OZ Master Fund, Ltd.
Daniel S. Och, a U.S. citizen and resident, may be considered the
controlling person of OZ Management, L.L.C.
(4) Represents the Initial Maximum Shares into which the Initial Shares are
convertible.
(5) Represents the number of shares into which the Option Shares are
convertible. This number of shares is the Total Maximum Shares into which
the Initial Shares and the Option Shares, together, may be converted (20%
of the Common Stock outstanding on the Initial Closing Date minus one
share) minus the Initial Maximum Shares into which the Initial Shares may
be converted.
(6) Represents the Total Maximum Shares into which the Initial Shares and the
Option Shares, together may be converted (20% of the Common Stock
outstanding on the Initial Closing Date minus one share; as of the date of
this prospectus, 2,263,197 shares of Common Stock). (See Footnote 8). The
conversion formula is based on 90% of the average of the lowest trade price
for the five trading days prior to conversion. (See Footnote 9). As an
example, if the average of the lowest trade prices for the five trading
days prior to conversion is $4.50 per share, the conversion price for the
Initial Shares, based on the formula, would be $4.05 per share, and the
Initial Shares would be convertible into 1,234,568 shares of Common Stock.
The conversion price, based on this formula, would have to be below $2.86
per share before the Initial Maximum Shares will apply to the conversion of
the Initial Shares. The Selling Stockholder may only convert a maximum of
115 shares of Series I Convertible Preferred Stock per month commencing 15
days after the closing. Based on the above example using a conversion price
of $4.05 per share, the 115 shares of Series I Convertible Preferred Stock
would be convertible into 283,951 shares of Common Stock.
(7) Percent of total shares of Common Stock outstanding as of July 31, 1998,
11,315,991 shares.
(8) The Initial Maximum Shares is 1,750,000 shares of Common Stock. In the
event the Option is exercised, the Initial Shares and the Option Shares,
together, may be convertible into an aggregate maximum of 20% of the Common
Stock outstanding on the Initial Closing Date minus one share. As of the
date of this prospectus, the Total Maximum Shares to be issued if the
Initial Shares and Option Shares are converted is 2,263,197 shares of
Common Stock. In the event that the shares of Series I Convertible
Preferred Stock cannot be converted pursuant to the formula described above
because of the limitation on the maximum number of shares described
previously for either the Initial Shares (1,750,000 shares) or, in the
event the Option is exercised, for the Initial Shares and the Option Shares
together (2,263,197 shares), the Company will have an obligation to
purchase any such shares of Series I Convertible Preferred Stock that
cannot be converted on the same basis as if the Company is required to
redeem such shares due to a merger or consolidation. The Company has set
the limit on the total number of shares of Common Stock to be issued upon
the conversion of the Initial Shares and the Option Shares, together, in
order to comply with The Nasdaq Stock Market Marketplace Rule 4460(i).
(9) The lowest trade price used in the conversion formula in Footnote 6 above
is that price quoted on, in descending order of potential use: (a) the
Nasdaq National Market or other stock exchange or quotation system, (b) if
not so listed, the over-the-counter market as reported by Nasdaq, the
National Quotation Bureau, Inc., or similar organization, (c) if not so
reported, the "pink sheet" quotes as determined in good faith by the
holder, or (d) if not so quoted, the fair market value of a share of Common
Stock as determined by a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants selected
in good faith by the holder. In the latter case, and after the Company's
receipt of such determination of the value of a share of Common Stock, the
Company has the right to select an additional appraiser to determine the
value of a share of Common Stock, in which case the fair market value shall
be equal to the average of the two determinations.
17
<PAGE>
PLAN OF DISTRIBUTION
The Company will receive no proceeds from this offering. The Shares offered
hereby may be sold by the Selling Stockholder from time to time in transactions
on the Nasdaq National Market, in the over-the-counter market, in negotiated
transactions, through the writing of options on the Shares or a combination of
such methods of sale, at fixed prices which may be changed, at market prices
prevailing at the time of the sale, at prices related to prevailing market
prices or at negotiated prices. The Selling Stockholder may effect such
transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholder and/or the purchasers of the Shares for
whom such broker-dealers may act as agents or to whom they sell as principals,
or both (which compensation to a particular broker-dealer might be in excess of
customary commissions).
The Shares may be sold by one or a combination of the following: (a) a block
trade in which the broker or dealer so engaged will attempt to sell the Shares
as agent, but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as principal and
resale by such broker or dealer for its account pursuant to this Prospectus; (c)
an over-the-counter distribution in accordance with the rules of the Nasdaq
National Market; (d) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; and (e) in privately negotiated transactions. In
connection with distributions of the Shares or otherwise, any Selling
Stockholder may enter into hedging transactions with broker-dealers and the
broker-dealers may engage in short sales of the Shares in the course of hedging
the positions they assume with such Selling Stockholder. Any Selling Stockholder
also may sell Shares short and deliver Shares to close out such short positions.
Any Selling Stockholder also may enter into option or other transactions with
broker-dealers that involve the delivery of the Shares to the broker-dealers,
which may then resell or otherwise transfer such Shares. Any Selling Stockholder
also may loan or pledge the Shares to a broker-dealer or other financial
institution may sell the Shares so loaned or upon a default may sell or
otherwise transfer the pledged Shares.
In order to comply with the securities laws of certain states, if applicable,
the Shares will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain states the Shares may not
be sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
The Selling Stockholder and any broker-dealers or agents that participate with
the Selling Stockholder in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit on the resale of the Shares purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares may not simultaneously engage in
market making activities with respect to the Common Stock of the Company for a
period of two business days prior to the commencement of such distribution, in
addition and without limiting the foregoing, the Selling Stockholder will be
subject to the applicable provisions of the Exchange Act and the rules and
regulations thereunder, which provisions may limit the timing of purchases and
sales of Shares of the Company's Common Stock by the Selling Stockholder.
Any or all of the sales or other transactions involving the Shares described
above, whether effected by the Selling Stockholder, any broker-dealer or others,
may be made pursuant to this Prospectus. In addition, any Shares that qualify
for sale pursuant to Rule l44 under the Securities Act may be sold under Rule
144 rather than pursuant to this Prospectus.
The Shares will be issued to the Selling Stockholder upon the conversion of the
Initial Shares, which were issued to the Selling Stockholder pursuant to an
exemption from the registration requirements of the Securities Act provided by
Section 4(2) thereof. The Company agreed to register the Shares under the
Securities Act and to indemnify and hold the
18
<PAGE>
Selling Stockholder harmless against certain liabilities under the Securities
Act that could arise in connection with the sale by the Selling Stockholder of
the Shares. The Company has agreed to pay all reasonable fees and expenses
incident to the filing of this Registration Statement.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby and certain other
legal matters will be passed upon for the Company by Gray, Harris & Robinson,
P.A., Orlando, Florida.
EXPERTS
The financial statements incorporated by reference to the Annual Report on Form
10-K/A, in this Prospectus and elsewhere in the registration statement have been
audited by Arthur Andersen LLP, independent certified public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in auditing and accounting
in giving said report.
GLOSSARY
Ablation: Laser interaction with biological material whereby its
molecular bonds are agitated, released and the material is
removed in sub-micron amounts.
Astigmatism: Condition where surface of the cornea is not uniform, having
two different curvatures, that causes incoming light to be
focused at different points.
BSCVA: Best Spectacle Corrected Visual Acuity. The FDA's primary
measure of safety in LVC procedures. The FDA requires
gathering data and reporting on patients who lose more than
2 lines (on the standard ETDRS eye chart) of corrected (if
needed) visual acuity post-operatively, as compared to that
patient's best pre-operative corrected visual acuity.
CE Mark: Conformite Europeenne Mark. Required for all medical device
shipments into the European Union. It is a worldwide
standard for safety and quality assurance.
Class III Device: The FDA's device significance rating. The most difficult and
stringent trials and data requirements are placed on Class
III Devices, including implants such as pacemakers, heart
valves and artificial joints.
Cornea: Transparent, sturdy tissue at the front of the eye that is
the eye's primary focusing element.
Decentration: To effect accurate oblations, the laser treatment must be
accurately centered on the pupil. Decentration is when this
does not occur and the patient's outcome is sub-optimal.
Diopter: A measurement unit of refractive error.
Hyperopia: Farsightedness that occurs when the curvature of the cornea
is too flat. As a result, light rays are focused behind,
instead of on, the retina and the person cannot see close
objects clearly. (Not to be confused with presbyopia.)
19
<PAGE>
LASIK: Laser-In-situ Keratomileusis. A laser vision correction
procedure in which a flap is cut in the cornea and then
pulled back to allow a laser to remove a small amount
of tissue from the inner layers of the cornea.
LVC: Laser vision correction.
Myopia: Nearsightedness that occurs when the curvature of the
cornea is too steep. As a result, light rays are
focused in front of, instead of on, the retina and the
person can not see distant objects clearly.
Photorefractive
Keratectomy (PRK): Refractive surgery technique in which a laser is used
to remove or ablate submicron layers of the corneal
tissue to reshape the cornea.
Pillar Point Partners: A United States patent pooling agreement formed by VISX
and Summit to solve patent disputes between them. The
pooling arrangement required the physician to pay PPP a
certain royalty on every laser vision correction
procedure. The partnership was recently dissolved by
the forming parties.
PMA: Pre-market approval. The FDA's name for the approval to
begin commercial activities in the United States
market.
Presbyopia: Vision condition that occurs in older individuals in
which the eye loses its ability to focus on near
objects. The lens is the ineffective refractive median
in presbyopia.
QSR Guidelines: Quality System Regulation guidelines. The FDA's primary
set of rules that companies must follow in the design,
manufacture and modification of medical devices.
Refractive Surgery: Any surgery on the cornea or lens that changes the
focal point of light on the retina.
Saccadic Eye Movements: Very rapid, involuntary movements of the eye that are
random in amplitude and direction.
20
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company, the Selling Stockholder
or by any other person. This Prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any securities other than the shares of Common
Stock offered hereby, nor does it constitute an offer to sell or a solicitation
of an offer to buy any of the shares offered hereby to any person in any
jurisdiction in which such offer or solicitation would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create any implication that the information contained herein is
correct as of any date subsequent to the date hereof.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PROSPECTUS SUMMARY......................................................... 1
RECENT DEVELOPMENTS........................................................ 3
RISK FACTORS............................................................... 5
SELLING STOCKHOLDER........................................................ 15
PLAN OF DISTRIBUTION....................................................... 17
LEGAL MATTERS.............................................................. 18
EXPERTS.................................................................... 19
GLOSSARY................................................................... 20
</TABLE>
21
