<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
_____________
Date of Report (Date of Earliest Event Reported): March 21, 1996
PHARMA PATCH PUBLIC LIMITED COMPANY
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Ireland
- -------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
1-12836 Not Applicable
------------------------ ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
15/16 Fitzwilliam Place, Dublin 2, Ireland Not applicable
- ------------------------------------------ --------------
(Address of Principal Executive Offices) (Zip Code)
011-353-1-668-7144
- -------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- -------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
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1
<PAGE> 2
ITEM 5. OTHER EVENTS
On March 21, 1996, Registrant consummated the transactions with Vista
Technologies, Inc. ("Vista") described in Registrant's Form 8K dated March 12,
1996.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a)1. Vista's Audited Consolidated Financial Statements for the fiscal year
ended March 31, 1995.
(a)2. Vista's Unaudited Consolidated Financial Statement for the nine months
ended December 31, 1995.
(b)1. Introduction to Pro Forma financial Statements.
(b)2. Registrant's Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of November 30, 1995.
(b)3. Registrant's Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the nine month period ended November 30, 1995.
(b)4. Registrant's Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the twelve month period ended February 28, 1995.
(b)5. Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
(c)1. Consent of A. J. Robbins, PC.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
PHARMA PATCH PUBLIC LIMITED COMPANY
-----------------------------------
(Registrant)
Date: May 22, 1996 by: \s\ Murray D. Watson
-------------------------------------
Murray D. Watson
Chairman of the Board
and Chief Executive Officer
2
<PAGE> 4
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- ------ ----------- ------
<S> <C>
(a)1. Vista's Audited Consolidated Financial Statements for the fiscal year
ended March 31, 1995
(a)2. Vista's Unaudited Consolidated Financial Statement for the nine months
ended December 31, 1995
(b)1. Introduction to Pro Forma financial Statements.
(b)2. Registrant's Unaudited Pro Forma Condensed Consolidated Balance
Sheet as of November 30, 1995.
(b)3. Registrant's Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the nine month period ended November 30, 1995.
(b)4. Registrant's Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the twelve month period ended February 28, 1995.
(b)5. Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
(c)1. Consent of A. J. Robbins, PC.
</TABLE>
3
<PAGE> 1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report F-2
Consolidated Financial Statements:
Consolidated Balance Sheet F-3
Consolidated Statements of Operations F-5
Consolidated Statement of Changes in Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-8
Notes to Consolidated Financial Statements F-9
</TABLE>
F-1
<PAGE> 2
[A.J. ROBBINS, PC LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Vista Technologies, Inc. and Subsidiaries
New York, New York
We have audited the accompanying consolidated balance sheet of Vista
Technologies, Inc. and subsidiaries as of March 31, 1995, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year ended March 31, 1995, the three months ended March 31, 1994
and the year ended December 31, 1993. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Vista Technologies,
Inc. and subsidiaries as of March 31, 1995 and the results of its operations
and its cash flows for the year ended March 31, 1995, the three months ended
March 31, 1994 and the year ended December 31, 1993, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1(B)
of the consolidated financial statements, the Company has incurred significant
operating losses from inception totaling $11,432,110, has substantial
commitments and contingencies relating to the rescission of an uncompleted
acquisition, recognized a permanent impairment of goodwill incurred in the
acquisitions of subsidiaries in the amount of $3,825,990 and the Company is a
party in a lawsuit more fully discussed at Note 11. These conditions raise
substantial doubt about its ability to continue as a going concern.
Management's plans regarding those matters also are described in Note 1(B).
The consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
/s/ A.J. ROBBINS, PC
--------------------------
A.J. ROBBINS, PC
Denver, Colorado
May 24, 1995
(Except for Note 20 as to which
the date is December 16, 1995)
F-2
<PAGE> 3
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1995
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash $ 649,708
Trading securities 403,126
Accounts receivable:
Trade 70,841
VAT 140,576
Related party 99,293
Prepaid expenses 70,357
Other 13,338
----------
Total Current Assets 1,447,239
INVESTMENT SECURITIES, held to maturity (fair value of $146,613) 145,215
PROPERTY AND EQUIPMENT, at cost, net 1,472,606
OTHER ASSETS 182,077
----------
$3,247,137
==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE> 4
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONTINUED)
MARCH 31, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Bank overdraft protection $ 86,913
Accounts payable, trade 447,341
Accounts payable, officers 129,051
Accrued payroll and payroll taxes 178,063
Notes payable 175,000
Current portion of long-term debt 172,504
------------
Total Current Liabilities 1,188,872
LONG-TERM DEBT 535,584
MINORITY INTEREST 663,320
------------
Total Liabilities 2,387,776
------------
COMMITMENTS AND CONTINGENCIES:
REDEEMABLE COMMON STOCK:
$.005 par value, 25,640 shares
authorized, issued and outstanding 128
Additional paid-in capital 277,649
------------
Total Redeemable Common Stock 277,777
------------
STOCKHOLDERS' EQUITY:
Preferred stock, 15,000,000 shares $.001 par value authorized;
none issued --
Common stock, 15,000,000 shares $.005 par value authorized;
1,408,710 shares issued and outstanding 7,044
Additional paid-in capital 11,774,285
Accumulated (deficit) (11,432,110)
Foreign currency adjustment 232,365
------------
Total Stockholders' Equity 581,584
------------
$ 3,247,137
============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE> 5
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
FOR THE THREE MONTHS FOR THE
YEAR ENDED ENDED YEAR ENDED
MARCH 31, MARCH 31, DECEMBER 31,
1995 1994 1993
------------ --------- ---------
<S> <C> <C> <C>
REVENUES $ 1,209,673 $ -- $ --
------------ --------- ---------
COSTS AND EXPENSES:
General and administrative 2,773,390 7,189 3,067
Depreciation and amortization 580,870 25 112
------------ --------- ---------
Total Costs and Expenses 3,354,260 7,214 3,179
------------ --------- ---------
OTHER (INCOME) EXPENSE:
Foreign currency exchange loss 28,887 -- --
Unrealized gains on trading securities (116,707) -- --
Realized gains on trading securities (129,621) -- --
Legal settlement 186,055 -- --
Impairment of goodwill 3,825,990 -- --
Write off of note receivable, stockholder 125,000 -- --
Interest 9,781 -- --
Loss on sale of equipment 1,053 -- --
Other (75,758) -- --
------------ --------- ---------
Net Other (Income) Expense 3,854,680 -- --
------------ --------- ---------
(LOSS) FROM OPERATIONS (5,999,267) (7,214) (3,179)
EQUITY INVESTEES INCOME 28,132 -- --
------------ --------- ---------
(LOSS) BEFORE PROVISION FOR INCOME
TAXES, MINORITY INTEREST LOSSES AND
EXTRAORDINARY (LOSS) (5,971,135) (7,214) (3,179)
PROVISION FOR INCOME TAXES -- 729 729
------------ --------- ---------
(LOSS) BEFORE MINORITY INTEREST LOSSES
AND EXTRAORDINARY (LOSS) (5,971,135) (7,943) (3,908)
MINORITY INTEREST LOSSES 193,842 -- --
------------ --------- ---------
NET (LOSS) BEFORE EXTRAORDINARY (LOSS) (5,777,293) (7,943) (3,908)
EXTRAORDINARY (LOSS) FROM ADVANCED FUNDS
FOR INCOMPLETE ACQUISITION (5,642,887) -- --
------------ --------- ---------
NET (LOSS) $(11,420,180) $ (7,943) $ (3,908)
============ ========= =========
(LOSS) PER COMMON SHARE:
Before extraordinary (loss) $ (4.88) $ (.05) $ (.03)
Extraordinary (loss) (4.76) -- --
------------ --------- ---------
NET (LOSS) PER COMMON SHARE $ (9.64) $ (.05) $ (.03)
============ ========= =========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,184,976 144,501 133,467
============ ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE> 6
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK SUBSCRIBED STOCK ADDITIONAL FOREIGN
---------------- ---------------- PAID-IN CURRENCY ACCUMULATED
NUMBER AMOUNT NUMBER AMOUNT CAPITAL ADJUSTMENT (DEFICIT) TOTAL
------------------------------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 133,334 $ 667 -- $ -- $ 19,333 $ -- $ (79) $ 19,921
Sale of common stock to public
for $31.25 per share 1,600 8 -- -- 49,992 -- -- 50,000
Common stock offering costs -- -- -- -- (24,082) -- -- (24,082)
Net (loss) for year -- -- -- -- -- -- (3,908) (3,908)
--------- ------ ------- ---------- ---------- ------ ------- -----------
Balance, December 31, 1993 134,934 675 -- -- 45,243 -- (3,987) 41,931
February 25, 1994 stock dividend 4,800 24 -- -- (24) -- -- --
Regulation S private placement,
net of offering costs of $351,219,
common stock issued for
$10.00 per share 200,000 1,000 -- -- 1,647,781 -- -- 1,648,781
Regulation S stock subscribed,
net of offering costs of
$94,278, common stock
issued for $10.00 per share -- -- 100,000 905,722 -- -- -- 905,722
Common stock issued to
Storford, Ltd. in exchange for
Vista Vision International stock
for $10.00 per share 50,000 250 -- -- 499,750 -- -- 500,000
Regulation S stock issued in
exchange for Vista Vision SpA
stock for $10.00 per share 126,590 633 -- -- 1,265,263 -- -- 1,265,896
Regulation D stock issued in
exchange for Vista Vision SpA
(Vista-Italy) stock for $10.00
per share 133,789 669 -- -- 1,337,217 -- -- 1,337,886
Regulation D private placement,
net of offering costs of $109,756,
issued for $10.00 per share 62,500 313 -- -- 514,931 -- -- 515,244
Regulation D stock subscribed,
net of offering costs of $23,570,
issued for $10.00 per share -- -- 25,000 226,430 -- -- -- 226,430
Foreign currency adjustment -- -- -- -- -- (1,962) -- (1,962)
Net (loss) for period -- -- -- -- -- -- (7,943) (7,943)
--------- ------ ------- ---------- ---------- ------ ------- -----------
Balance, March 31, 1994 712,613 3,564 125,000 1,132,152 5,310,161 (1,962) (11,930) 6,431,985
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-6
<PAGE> 7
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
COMMON STOCK SUBSCRIBED STOCK
---------------- ----------------
NUMBER AMOUNT NUMBER AMOUNT
--------------------------------------
<S> <C> <C> <C> <C>
Regulation S private placement, net
of offering costs of $94,278 issued
for $10.00 per share 100,000 500 (100,000)
Regulation D private placement, net
offering costs of $23,570, issued
for $10.00 per share 25,000 125 (25,000) (226,430)
Common stock issued in exchange
for Medical Development Resources
Inc. (MDRI) stock and warrants for
$10.00 per share 200,000 1,000 -- --
Regulation S private placement
issued in exchange for the assets
of Klara Clinic for $2.78 per share 2,960 15 -- --
Regulation S private placement, net
of offering costs of $210,723, issued
for $10.00 per share 125,000 625 -- --
Regulation D private placement, net
of offering costs of $143,420, issued
for $10.00 per share 85,000 425 -- --
Common stock adjustment for
Vista-Italy acquisition 2,381 11 -- --
Common stock issued to acquire
MDRI stock from TNC Media, Inc.
for $10.00 per share 155,756 779 -- --
Foreign currency adjustment -- -- -- --
Net (loss) for the period -- -- -- --
--------- ------ -------- ---------
Balance, March 31, 1995 1,408,710 $7,044 -- $ --
========= ====== ======== =========
<CAPTION>
ADDITIONAL FOREIGN
PAID-IN CURRENCY ACCUMULATED
CAPITAL ADJUSTMENT (DEFICIT) TOTAL
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Regulation S private placement, net
of offering costs of $94,278 issued
for $10.00 per share (905,722) 905,222 -- --
Regulation D private placement, net
offering costs of $23,570, issued
for $10.00 per share 226,305 -- -- --
Common stock issued in exchange
for Medical Development Resources
Inc. (MDRI) stock and warrants for
$10.00 per share 1,999,000 -- -- 2,000,000
Regulation S private placement
issued in exchange for the assets
of Klara Clinic for $2.78 per share 8,208 -- -- 8,223
Regulation S private placement, net
of offering costs of $210,723, issued
for $10.00 per share 1,038,652 -- -- 1,039,277
Regulation D private placement, net
of offering costs of $143,420, issued
for $10.00 per share 706,155 -- -- 706,580
Common stock adjustment for
Vista-Italy acquisition 23,807 -- -- 23,818
Common stock issued to acquire
MDRI stock from TNC Media, Inc.
for $10.00 per share 1,556,775 -- -- 1,557,554
Foreign currency adjustment -- 234,327 -- 234,327
Net (loss) for the period -- -- (11,420,180) (11,420,180)
----------- -------- ------------ ------------
Balance, March 31, 1995 $11,774,285 $232,365 $(11,432,110) $ 581,584
=========== ======== ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-7
<PAGE> 8
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE THREE FOR THE YEAR
ENDED MONTHS ENDED ENDED
MARCH 31, MARCH 31, DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS TO OPERATING ACTIVITIES:
Net (loss) $(11,420,180) $ (7,943) $ (3,908)
Adjustments to reconcile net (loss) to net cash provided (used)
by operating activities:
Depreciation and amortization 580,870 25 112
Extraordinary loss from advanced funds for incomplete acquisition 5,642,887 -- --
Impairment of goodwill 3,825,990
Legal settlement 186,055 -- --
Write off of note receivable, stockholder 125,000 -- --
Loss on sale of equipment 1,053 -- --
Unrealized gain on trading securities (116,707) -- --
Realized gain on trading securities (129,621) -- --
Minority interest losses (193,842) -- --
Interest income received in common stock (50,000) -- --
Foreign currency translation (39,462) -- --
Equity investees income (28,132) -- --
Changes in:
Accounts receivable:
Trade (70,841) -- --
VAT (140,576) -- --
Related party (482,132) -- --
Prepaid expenses (5,401) -- --
Other current assets 70,800 -- --
Other assets 109,774 -- --
Bank overdraft protection 86,913 -- --
Accounts payable 371,560 -- --
Accounts payable, officers 129,051 -- --
Accrued payroll and payroll taxes (38,526) 3,000 --
------------ ----------- --------
Net Cash (Used) by Operating Activities (1,585,467) (4,918) (3,796)
------------ ----------- --------
CASH FLOWS TO INVESTING ACTIVITIES:
Proceeds from sales of trading securities 432,859 -- --
Repayment of notes receivable 753,526 -- --
Proceeds from sale of equipment 7,656 -- --
Redemption of equity investment in partnership 595,313 -- --
Purchase of trading securities (589,657) -- --
Issuance of notes receivable (254,870) -- --
Purchase of property and equipment (95,557) -- --
Purchase of investment-held to maturity (145,215) -- --
Purchase of investment, at cost (1,850,000) -- --
Purchase of equity investment (419,675) -- --
Foreign currency translation 11,749 -- --
Purchase of Klara Clinic assets (102,225) -- --
Purchase of ConVista (163,597) -- --
Purchase of Vista-UK -- (175,801) --
Purchase of Vista-Italy -- (566,697) --
------------ ----------- --------
Net Cash (Used) by Investing Activities (1,819,693) (742,498) --
------------ ----------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of note payable (90,876) -- --
Payment of long-term debt (190,410) -- --
Sale of common stock 3,350,000 2,625,000 50,000
Payment of offering costs (864,488) (69,679) (14,776)
------------ ----------- --------
Net Cash Provided by Financing Activities 2,204,226 2,555,321 35,224
------------ ----------- --------
NET INCREASE (DECREASE) IN CASH (1,200,934) 1,807,905 31,428
CASH, beginning of period 1,850,642 42,737 11,309
------------ ----------- --------
CASH, end of period $ 649,708 $ 1,850,642 $ 42,737
============ =========== ========
</TABLE>
- -------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: SEE NOTE 18
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-8
<PAGE> 9
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ACTIVITIES
(A) HISTORY
Vista Technologies, Inc. (Company), formerly Mercury Acquisitions, Inc., was
organized under the laws of the State of Nevada on June 15, 1992 (Inception).
The Company was formed to provide a vehicle to acquire or merge with a business
or company. On February 23, 1994 the Company changed its name from Mercury
Acquisitions, Inc. and amended certain provisions relating to its authorized and
unissued preferred stock. Until March 31, 1994 the Company was in the
development stage as defined by Financial Accounting Standards Board Statement
Number 7, at which date it acquired an operating subsidiary. As of April 1, 1994
the Company was no longer in the development stage. The Company's current
offices are located in New York City, New York. During March 1994 the Company
changed its year end from December 31 to March 31.
(B) GOING CONCERN AND MANAGEMENT'S PLANS
Since Inception, the Company has devoted its efforts to raising capital,
locating merger and acquisition candidates and establishing excimer laser
clinics throughout Europe to provide facilities and support services for
photorefractive keratectomy (PRK) and other laser surgical procedures.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue operations as a going concern which contemplates
the realization of assets, including $5,642,887 which has been written-off due
to its uncompletion (see Note 1(G)), recognized a permanent impairment of
goodwill incurred in the acquisition of subsidiaries in the amount of $3,825,990
and liquidation of liabilities in the normal course of business, including
long-term debt issued to acquire laser equipment for PRK procedures. As of March
31, 1995, the Company has an accumulated deficit of $11,432,110, and as
discussed throughout the notes to the consolidated financial statements, has
substantial commitments and contingencies related to the rescission of
agreements negotiated relating to the uncompleted acquisition (see Note 1(G))
and has incurred substantial debt and recurring losses. Management's plans to
alleviate the above conditions are as follows:
1) The Company abandoned its Vista-UK operations in June 1995 (see Notes
1(E) and 20(K));
2) The Company is currently generating revenues and cash flow from Vista-
Italy operations;
3) The Company completed a private placement for proceeds of $277,777
(see Note 20 (E)); and
4) The Company has acquired a 39% ownership interest in a development
stage enterprise to establish, own and manage laser vision correction
centers in Michigan and Ontario, Canada (see Note 20(F)).
F-9
<PAGE> 10
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ACTIVITIES (CONTINUED)
(C) STOCK ISSUANCES
In addition to stock issuances discussed throughout the notes to the
consolidated financial statements, the following stock issuances have occurred.
In December 1993 the Company completed a public offering of 1,600 shares of
common stock for $31.25 per share and paid approximately $28,000 in offering
costs.
Effective January 31, 1994 the Company's board of directors declared a 300%
common stock split effected in the form of a dividend to the public stockholders
of record and issued another 4,800 shares of common stock.
During February 1994 the Company authorized a new class of securities designated
redeemable Class A common stock purchase warrants (Class A Warrants). Each Class
A Warrant represents the right to purchase one share of the Company's common
stock with an exercise price of $15.00 per share at any time after June 30, 1994
through December 31, 1998 unless earlier called for redemption by the Company.
The Company has the optional right of calling the Class A Warrants for
redemption after June 30, 1994 if the Class A Warrants have been registered for
sale under the Securities Act of 1933 and if the Company's stock is trading in
the NASDAQ over the counter market or on a national securities exchange and the
closing sale price is $22.50 per share for at least 20 consecutive trading days
on the date the Class A Warrant are called for redemption. As of March 31, 1995
the Company has authorized an aggregate of 810,600 Class A Warrants and may
increase the total number of Class A Warrants without further action of the
stockholders. As of March 31, 1995 approximately 677,960 Class A Warrants were
issued and outstanding as a result of the private placement sale of securities
and/or acquisition of capital stock of operating subsidiaries.
During October 1994 the Company authorized a new class of securities designated
redeemable Class B common stock purchase warrants (Class B Warrants). Each Class
B Warrant represents the right to purchase one share of the Company's common
stock with an exercise price of $10.00 per share expiring October 11, 1999
unless earlier called for redemption by the Company. The Company has the
optional right of calling the Class B Warrants for redemption after October 11,
1995 if the Class B Warrants have been registered for sale under the Securities
Act of 1933 and if the Company's common stock is trading in the NASDAQ over the
counter market or on a national securities exchange and the closing sale price
is $22.50 per share for at least 20 consecutive trading days on the date the
Class B Warrants are called for redemption. As of March 31, 1995 the Company has
authorized an aggregate of 31,000 Class B Warrants and may increase the total
number of Class B Warrants without further action of the stockholders. As of
F-10
<PAGE> 11
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ACTIVITIES (CONTINUED)
March 31, 1995 approximately 31,000 Class B Warrants were issued and outstanding
as a result of the agreement to cancel obligations of the investment at cost to
an unrelated third party (see Note 1(G)).
No warrants have been exercised to date.
(D) VISTA VISION S.P.A.
On March 31, 1994 the Company acquired 61.83% of the common stock of Vista
Vision, S.p.A. (Vista-Italy) for cash of 1 billion Italian Lira (LIT)
(approximately $625,000) and 262,760 shares of the Company's common stock on a
one-for-one exchange basis for the Vista-Italy common stock.
As a result of the default judgment entered against the Company which terminates
and rescinds the provisions of the agreement between Vista-Italy and Laser
Vision Centers, Inc. (LVCI), the Company's ownership interest in Vista-Italy
increased to 69.87% as of March 31, 1995 (see Notes 11 and 20 (I)).
The acquisition of Vista-Italy was recorded using the purchase method of
accounting resulting in goodwill of $2,997,506 which was being amortized over 10
years using the straight-line method. At March 31, 1995, the Company's
management determined that the goodwill was impaired. As a result, the Company
wrote off goodwill of $2,761,506 (see Note 2). Vista-Italy's results of
operations from the date of acquisition are included in the statement of
operations for the year ended March 31, 1995. Vista-Italy's year end is December
31.
Vista-Italy was purchased from Global Funding Holding Ltd. (Global), Penguin
Investments Limited and Murren Investments Limited. At the time of the
acquisition, Global was indebted to Vista-Italy for LIT1 billion and accrued
interest at 13.5%. The note was collateralized by 300,000 shares of Quantech,
Inc. common stock. As part of the acquisition, Global transferred the shares of
Quantech, Inc. common stock to Vista-Italy as payment of accrued interest and
LIT1 billion as payment of principal on the note.
Vista-Italy operates three excimer laser clinics located in Italy which provide
PRK and other laser surgical procedures for correcting vision disorders.
The Milano surgical facilities are utilized under an agreement dated February
14, 1992 with the operator of a private clinic. Vista-Italy is obligated under
the agreement to provide a specialized technician for a maximum of three days
per month, to assume management responsibility for the excimer laser equipment
and supplies, to promote and pay for advertising and marketing, and to absorb
its prorata share of certain other expenses. Vista-Italy leases space and
personnel from the clinic (see Note 14).
F-11
<PAGE> 12
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ACTIVITIES (CONTINUED)
The Pisa Clinic was opened March 1993 and utilizes some of the personnel of the
Milano Center. The laser surgery procedures are performed at the Pisa Center
under a concessionaire contract with the owner and operator of the private
clinic under an agreement dated February 22, 1993. Vista-Italy leases space and
personnel from the clinic (see Note 14).
The Roma Clinic was opened November 1994 and utilizes some of the personnel from
the Milano Center. Under an agreement dated November 28, 1994, Vista-Italy
leases the facilities from a director of the Company (see Note 14).
(E) VISTA VISION INTERNATIONAL LTD.
On March 31, 1994 the Company acquired all of the outstanding common stock of
Vista Vision International Ltd. (Vista-UK) from Laser-Jersey for $134,000 in
cash and 50,000 shares of the Company's common stock.
The acquisition of Vista-UK was recorded using the purchase method of accounting
resulting in goodwill of $703,159 which was being amortized over 10 years using
the straight-line method. As of March 31, 1995, the Company's management
determined that the goodwill was impaired. As a result, the Company wrote off
goodwill of $633,159 (see Notes 2 and 20(K)). Vista-UK's results of operations
from the date of acquisition are included in the statement of operations for the
year ended March 31, 1995. Vista-UK's year end is March 31.
Vista-UK owned 50% of Precision Laser Eye Centers Limited (PLEC), a joint
venture that leased laser equipment, which was recorded using the equity method
of accounting. The Company's proportionate share of the loss from its equity
investment in the joint venture was $147,506 for the year ended March 31, 1995.
The joint venture operated one excimer laser clinic in London, England for the
purpose of correcting vision disorders using PRK surgical procedures. Optica
Holdings Limited (Optica) owned the remaining 50% of PLEC. PLEC used Optica's
facilities rent free until June 1995.
The Company abandoned its Vista-UK operation in June 1995 (see Note 20(K)).
(F) CONVISTA BV
During April 1994 the Company acquired 100% of Pawnee Finance B.V., an inactive
company in the Netherlands, since renamed ConVista Vision B.V. (ConVista), to
serve as a future vehicle for financing and management of its international
operations. Vista acquired ConVista for 40,000 Dutch Gilders(NLG) and
subsequently contributed NLG311,816 as additional capital to ConVista for a
total investment of NLG351,816 (approximately $184,583). The acquisition of
ConVista was recorded using the purchase method of accounting resulting in
goodwill of $163,597 which was being amortized using the straight-line method
over 10 years beginning May 1, 1994. At March 31, 1995, the Company's management
determined that the goodwill was impaired. As a result, the Company wrote off
goodwill of $149,597 (see Note 2).
F-12
<PAGE> 13
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ACTIVITIES (CONTINUED)
ConVista's results of operations from the date of acquisition are included in
the statement of operations for the year ended March 31, 1995. ConVista's year
end is March 31.
As part of agreements relating to the acquisition of Vista Vision Scandinavia
A.B. (Vista-Sweden) described below, the Company sold 20% of ConVista's capital
stock to a third party in June 1994 for $2,529, subject to a repurchase option
which gave ConVista the right of repurchasing that 20% interest for
approximately $167,000, and advanced a loan of 1,000,000 Swedish Krona (SEK), or
approximately $134,000, to the third party with an understanding the loan would
be repaid from proceeds of ConVista's election to exercise the repurchase
option. The repurchase option was exercised in December 1994 for $33,225 net of
the amount required to satisfy a discharge of the loan.
During June 1994 ConVista acquired 100% of Vista-Sweden for SEK50,000
(approximately $6,494). On June 1, 1994 Vista-Sweden acquired the assets of a
PRK surgical center in Sweden (Klara Clinic) for cash of SEK750,000 and a note
payable of SEK2,200,000 totaling SEK2,950,000 (approximately $383,000). During
June 1994 the Company issued 2,960 shares of its common stock in the amount of
$8,223 and 2,960 Class A Warrants; 25,640 shares of redeemable common stock in
the amount of $277,777; and 25,640 Class A Warrants to retire the note payable
(see Note 20(C)). The Company was obligated to redeem at the option of the
holder the 25,640 shares of redeemable common stock and 25,640 Class A Warrants
for SEK2,000,000 (approximately $277,777). The stock was redeemed during June
1995 (see Note 20 (L). The assets acquired are comprised of: 1) the right to use
the name of Klara Ogonklinik; 2) property and equipment; 3) medical supplies; 4)
patient registers; 5) assumption of the clinic lease agreement; 6) use of the
laser for 15 days without fee; and 7) noncompete agreements with the owners of
the seller.
Vista-Sweden's investment in the net assets of Klara Clinic acquired resulted in
goodwill of $324,211 which was being amortized over 3 years using the
straight-line method. At March 31, 1995, the Company's management determined
that goodwill was impaired. As a result, the Company wrote off goodwill of
$281,728 (see Note 2).
Vista-Sweden operates an excimer laser clinic in Malmo, Sweden which provides
PRK and other laser surgical procedures for correcting vision disorders. The
Malmo surgical facilities are utilized under an agreement dated February 23,
1995 with a group of doctors. Vista is obligated to acquire, install and
maintain the excimer laser and to provide training for the use of the excimer
laser. Vista-Sweden must also provide the group of doctors the first right of
refusal to joint venture any new clinics opened in Sweden. Vista-Sweden leases
space and personnel from the group of doctors ( see Note 14).
F-13
<PAGE> 14
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ACTIVITIES (CONTINUED)
(G) MEDICAL DEVELOPMENT RESOURCES, INC.
The following describes the Company's attempt to acquire a controlling interest
in Medical Development Resources, Inc. (MDRI) and its subsidiaries. The Company
was unsuccessful due to the failure of MDRI and its principal stockholders to
satisfy certain conditions of the acquisition. Therefore, the Company rescinded
and terminated acquisition agreements entered into with MDRI and its principal
stockholders (see Note 20(B)).
During April and May 1994, the Company purchased approximately 52.41% of the
outstanding capital stock of MDRI. On April 1, 1994 the Company entered into an
agreement with Obsidian Research NV, an unaffiliated partnership to acquire
715,563 shares of MDRI common stock and warrants to purchase up to 601,073
shares of MDRI common stock exercisable at $6.60 per share until December 31,
1996. The purchase price of $2,000,000 by the Company consisted of 200,000
shares ($10.00 per share) of the Company's common stock and 200,000 Class A
Warrants. On May 5, 1994, the Company entered into a stock purchase agreement
(MDRI Stock Agreement) with MDRI and MDRI's principal stockholders who are
officers and directors of MDRI or MDRI's subsidiary, KMI, Inc., whereby the
Company purchased 1,000,000 newly issued shares of MDRI common stock from MDRI
for $1,250,000 in cash. The Company purchased an additional 1,000,000 shares of
MDRI common stock from MDRI's principal stockholders for noninterest bearing
promissory notes totaling $2,000,000 due December 31, 1994.
In July 1994, the Company prepaid $600,000 of the principal balance of the
$2,000,000 promissory notes. As a result, the 1,000,000 shares purchased were
considered to consist of 300,000 shares purchased for $600,000 in cash and
700,000 shares purchased for $1,400,000 in promissory notes. The promissory
notes were secured by 1,000,000 shares of MDRI common stock and the maturity
date of the notes was to be accelerated if the Company realized proceeds from
the sale of 1,000,000 shares of its common stock which exceeded the original
principal amount of the notes.
Concurrent with the closing of the MDRI Stock Agreement, seven foreign investors
purchased an additional 1,000,000 shares of MDRI common stock from the principal
stockholders of MDRI and KMI for noninterest bearing promissory notes totaling
$2,000,000, collateralized by 1,000,000 shares of MDRI common stock which was
later substituted with 200,000 shares of the Company's common stock. Under
separate agreements, on May 24, 1994 the Company acquired the 1,000,000 shares
of MDRI common stock from the seven foreign investors in exchange for 200,000
shares of its common stock and 100,000 Class A Warrants. Three of the MDRI
management stockholders agreed to deposit 315,000 shares of MDRI common stock in
escrow. Those shares were to be transferred to the Company if MDRI consolidated
net income for the fiscal year ended December 31, 1994 did not equal or exceed
$900,000.
During December 1994, the Company acquired 778,777 shares of MDRI common stock
(representing approximately 11% of the outstanding shares of MDRI's common
stock) from an unrelated third party in exchange for 155,756 shares ($10.00 per
share) of the Company's common stock.
F-14
<PAGE> 15
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ACTIVITIES (CONTINUED)
As of December 31, 1994, the $1,400,000 in promissory notes, issued in exchange
for 700,000 shares of MDRI acquired by the Company in May 1994, became due to
certain stockholders of MDRI. During December 1994, the Company negotiated an
Agreement and Plan of Reorganization (MDRI Agreement) by and among the Company,
MDRI and certain stockholders of MDRI which was executed as of December 15, 1994
and amended as of March 31, 1995.
Pursuant to the MDRI Agreement, the Company issued 8% convertible promissory
notes (Vista Notes) totaling $537,500 and Class A warrants in exchange for the
outstanding 8% promissory notes (MDRI Notes) and $2.10 common stock purchase
warrants (MDRI Warrant) issued by MDRI (Exchange Offer). The Company has
cancelled the Vista Notes and warrants. The Exchange Offer was conditional upon
the closing of certain transactions required by the MDRI Agreement.
The Company issued $1,000 in principal amount of Vista Notes for each $1,000 in
principal amount of outstanding MDRI Notes. The Vista Notes required payment of
principal and accrued interest on March 31, 1996 or such earlier date upon which
the Company completed an underwritten public offering of its securities. The
Vista Notes bore interest at 8% per annum payable semi-annually on June 30 and
December 31 until paid in full and were collateralized by all of the issued and
outstanding shares of MDRI common stock owned by the Company. Interest on the
MDRI Notes was previously paid through December 31, 1994 by the Company,
therefore, interest on the Vista Notes began accruing from January 1, 1995. The
Vista Notes were convertible, at the option of the holder, at any time through
the second business day prior to the maturity date of March 31, 1996, or such
earlier date determined, to convert the principal amount and accrued interest on
the Vista Notes into shares of the Company's common stock at a conversion price
of $10.00 per share of the Company's common stock. The Company issued 1.2 Class
A Warrants for each MDRI Warrant held by the MDRI noteholders. Each Class A
Warrant represented the right to purchase one share of the Company's common
stock exercisable at $15.00 per share at any time until December 31, 1998 unless
earlier called for redemption by the Company.
Under the MDRI Agreement, the Company issued 67,800 shares of the its common
stock on December 31, 1994 as consideration for the termination of employment
and consulting agreements between MDRI and two of its principal stockholders.
Upon completion of the next exchange stage of the MDRI Agreement, the $1,400,000
note obligations were to be exchanged for 46,200 shares of the Company's common
stock, the Company agreed to issue 21,516 shares of its common stock to acquire
an additional 326,000 shares of MDRI common stock and the Company was also to
receive 315,000 shares of MDRI common stock (approximately 4.5% of the
outstanding) previously deposited into escrow . The exchange portion of the MDRI
Agreement was never consummated due to the failure of the terms and conditions
described in the MDRI Agreement and the Company rescinded and terminated its
obligation to MDRI and its principal stockholders.
F-15
<PAGE> 16
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ACTIVITIES (CONTINUED)
During December 1994, the Company received 315,000 shares of MDRI common stock
previously deposited in escrow under a side letter stipulating that the 315,000
shares held in escrow owned by the MDRI principal stockholders would be
transferred to the Company if MDRI's consolidated net income for the year ended
December 31, 1994 did not equal or exceed $900,000.
As a result of the above transactions, the Company's ownership of MDRI increased
to a cumulative 69.13% interest.
MDRI is engaged in the research and development of a proprietary production
process for the manufacture of scalpels and other cutting instruments made from
Obsidian. MDRI owns 100% of two operating subsidiaries. These include KMI, Inc.
(KMI) based in Pennsylvania and acquired by MDRI in March 1994, and Micra
Instruments Limited (MICRA), a United Kingdom company acquired in July 1993.
KMI designs, develops, manufactures and markets precision surgical instruments
and related products consisting primarily of diamond scalpels, stainless steel
and titanium microsurgical instruments, precision microscopes for use in the
operating room and other ancillary devices for specialized microsurgery.
MICRA designs, manufactures and markets titanium microsurgical instruments for
opthamalogy and neurosurgery. MICRA supplies these instruments to KIM and other
international customers.
The MDRI Agreement further contemplated that the Company would acquire the
remaining 26.3% of MDRI's outstanding equity interests in a subsequent merger
transaction. Subject to conditions set forth in the MDRI Agreement, the Company
proposed to issue an additional 201,891 shares of its common stock and 201,485
Class C Warrants in exchange for the remaining 26.3% minority interest in MDRI.
The merger portion of the MDRI Agreement was never consummated due to the
rescission and termination of the MDRI Agreement. (See note 20 (B))
(H) GOVERNMENT REGULATION
Medical devices such as refractive laser equipment are subject to government
regulation in the United States and many other countries. In the United States,
medical devices are subject to regulation by the United States Federal Food,
Drug & Cosmetic Act (FDC Act).
F-16
<PAGE> 17
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. Subsidiaries which have been
included and their year ends are as follows:
<TABLE>
<S> <C>
Vista-Italy December 31, 1994
Vista-UK March 31, 1995
ConVista March 31, 1995
Vista-Sweden March 31, 1995
</TABLE>
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign operations are translated into U.S. dollars at
year end exchange rates. Revenue and expense accounts are translated at weighted
average exchange rates during the period. Translation adjustments that arise
from translating a foreign subsidiary's financial statements from local currency
to U.S. dollars are accumulated in a separate component of stockholders' equity.
The balance sheet and income statement data for the foreign subsidiaries have
been translated from their respective foreign currency to U.S. dollars using the
following exchange rates:
<TABLE>
<CAPTION>
Average Rate
for the
Foreign March 31, 1995 Year Ended
Subsidiary Currency Spot Rate March 31, 1995
--------------- ----------------- -------------- --------------
<S> <C> <C> <C>
Vista-UK Pounds Sterling 1.622 1.565
Vista-Italy Lira .001 .001
ConVista Gilders .651 .577
Vista-Sweden Krona .136 .133
</TABLE>
REVERSE STOCK SPLIT
Effective September 12, 1995, the Company completed a one share for five shares
reverse stock split of its common stock. All shares and per share amounts have
been restated retroactively as a result of this reverse split (see Note 20(A)).
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and amortization are
calculated using the straight-line method over the estimated useful lives of
related assets ranging from three to 10 years. Depreciation and amortization
expense was $205,600 for the year ended March 31, 1995.
F-17
<PAGE> 18
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
The acquisitions of subsidiaries resulted in goodwill of $4,188,473 which was
amortized over 10 years using the straight-line method for Vista-Italy, Vista-UK
and ConVista and over 3 years using the straight-line method for Vista-Sweden.
On March 31, 1995, the Company's management determined that goodwill was
impaired. As a result, the Company wrote off goodwill of $3,825,990 (see Notes
1(D); 1(E) and 1(F)). Amortization expense was $374,901 for the year ended March
31, 1995.
MINORITY INTEREST
At March 31, 1995 the consolidated financial statements of the Company include
100% of the assets, liabilities and equity of Vista-Italy which is owned 69.87%
by the Company. Since the Company is the majority stockholder in Vista-Italy,
the remaining 30.13% ownership interests of the other stockholders have been
recorded as minority interests. At March 31, 1995, a minority interest in the
amount of $663,320 was recorded (see Note 1(D)).
OFFERING COSTS
Costs associated with public and private offerings by the Company of its stock
have been charged against the proceeds of the offerings.
ORGANIZATION COSTS
Organization costs have been capitalized and are being amortized over a 60-month
period using the straight-line method. Organization costs were fully amortized
as of March 31, 1995. Amortization expense was $369, $25 and $112 for the year
ended March 31, 1995, the three months ended March 31, 1994 and the year ended
December 31, 1993, respectively.
CONCENTRATIONS OF CREDIT RISK
The Company establishes and operates clinics in Europe which provide PRK
treatments and laser surgery to patients. The Company extends credit to its
patients. The Company has adjusted trade accounts receivable for all known
uncollectible accounts as of March 31, 1995.
At March 31, 1995 cash includes (pound)9,441; LIT429,041,000; SEK974,056 and
NLG14,414 (totaling approximately $410,139) held in demand deposit accounts in
banks located in the United Kingdom, Italy, Sweden and the Netherlands,
respectively, where deposits are not insured by the government. These balances
are subject to foreign currency fluctuations which in the past have not been
material.
LOSS PER COMMON SHARE
Loss per common share is computed based upon the weighted average number of
common and dilutive common equivalent shares outstanding during the period.
Fully diluted and primary earnings per common share are the same amounts for
each of the periods presented.
Dilutive common equivalent shares consist of stock options and warrants. In loss
periods, dilutive common equivalent shares are excluded as the effect would be
anti-dilutive.
F-18
<PAGE> 19
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109 (FAS
109), Accounting for Income Taxes on January 1, 1993. Under this method,
deferred income taxes are recorded to reflect the tax consequences in future
years of temporary differences between the tax basis of the assets and
liabilities and their financial statement amounts at the end of each reporting
period. Valuation allowances will be established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax payable for the current period and the change during the period in
deferred tax assets and liabilities.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE 3 - RELATED PARTY TRANSACTIONS
Certain conflicts of interest existed from inception of the Company through
March 31, 1995 between the Company's original management, their affiliates and
the Company. Original management had other interests including business
interests to which they devoted their primary attention.
Effective January 15, 1995 the Company hired a new chief executive officer and
president who was also made a member of the Company's board of directors (see
Note 8). The Company paid $84,000 to the new chief executive officer and
president of the Company for consulting services provided prior to his
employment with the Company.
The Company paid SEK100,000 (approximately $13,630) to the managing director of
Vista- Sweden for consulting services prior to his employment with Vista-Sweden.
NOTE 4 - NOTE RECEIVABLE
As of December 31, 1993, the Company had a note receivable from Global Funding
Holding Ltd. (Global) to Vista-Italy. The loan bore interest at 13 1/2% per year
and was due September 30, 1992. Global was in default on the loan, including
interest accumulated since October 1, 1991. The loan was collateralized by
300,000 shares of Quantech Ltd. (formerly Spectrum Diagnostics, S.p.A.) provided
by Global (120,000 shares) and Intersar S.p.A., a private Italian company
(180,000 shares).
F-19
<PAGE> 20
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - NOTE RECEIVABLE (CONTINUED)
On March 31, 1994 Vista-Italy entered into an agreement with the Company whereby
the Company paid Vista-Italy LIT1 billion (approximately $625,000) for the
acquisition of Vista-Italy stock (see Note 1) and Global transferred 300,000
shares of Quantech stock to Vista-Italy in full satisfaction of the note
receivable and unpaid interest, respectively. Accrued interest of LIT84,000,000
(approximately $50,000) at December 31, 1993 represents the approximate value of
the 300,000 shares of Quantech stock. As part of the agreement Global, and
several other entities affiliated with Global, transferred 46,399 shares of the
Company's common stock and 16,291 of the Company's Class A warrants to the
Company (see Note 1). During 1995, the provisions of the agreement were
satisfied.
During 1995, the Company advanced $125,000 to a stockholder subject to a
promissory note due December 31, 1995, bearing interest at 10% per annum,
payable upon maturity. The note was collateralized by not less than 100,000
shares of the Company's common stock issued to the stockholder as part of the
MDRI acquisition. As a result of the rescission of the MDRI Agreement, a
majority of the shares of the Company's common stock pledged as collateral have
been cancelled (see Note 1(G)). As of March 31, 1995 the note receivable has
been written off as collection is doubtful.
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at March 31, 1995:
<TABLE>
<S> <C>
Excimer Laser and other technical equipment $ 1,495,664
Office furniture and equipment 156,571
Vehicles 10,535
Leasehold improvements 15,436
-----------
1,678,206
Less accumulated depreciation and amortization (205,600)
-----------
$ 1,472,606
===========
</TABLE>
F-20
<PAGE> 21
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - INVESTMENT SECURITIES
TRADING SECURITIES
Securities that are bought and held principally for the purpose of selling them
in the near term are classified as trading securities and valued at fair market
value. Unrealized holding gains and losses are included in operations. Fair
value is determined from quoted market prices. All trading securities held at
March 31, 1995 are equity securities.
<TABLE>
<S> <C>
Cost $286,419
Gross unrealized gains 116,707
--------
Fair Market Value $403,126
========
</TABLE>
Proceeds from sales of trading securities were $432,859, resulting in gross
realized gains of $129,621, for the year ended March 31, 1995.
INVESTMENT SECURITIES HELD TO MATURITY
Debt securities that are purchased with the intent and ability to hold to
maturity are classified as investment securities held to maturity and are
reported at amortized cost. As of March 31, 1995, investment securities held to
maturity consist of 8.75% Italian bonds maturing September 1997.
<TABLE>
<S> <C>
Amortization cost $145,215
========
Approximate fair value $146,613
========
Gross unrealized gain $ 1,398
========
</TABLE>
NOTE 7 - EQUITY INVESTMENT IN PARTNERSHIP
During July 1994 the Company acquired a 36% ownership interest in Keech One
Partnership (Partnership) for $419,675. The Partnership was formed for the
purpose of acquiring shares of common stock in a New York Stock Exchange company
(NYS). The Partnership Agreement required that Partnership income or losses (any
gain or loss recognized on the sale of the shares of NYS common stock) were to
be shared proportionately by the partners. The Company's 36% investment in the
Partnership was accounted for using the equity method of accounting. As a
result, the Partnership acquired 786,200 shares of NYS common stock for
$1,381,213 (approximately $1.76 per share). During November 1994 the Partnership
recorded a gain of $494,641 from the sale of all the NYS common stock held by
the Partnership. During December 1994 the Partnership was liquidated. The
Company's proportionate share of the income from its equity investment in the
partnership was $175,638 for the year ended March 31, 1995.
F-21
<PAGE> 22
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS AND CONTINGENCIES
EMPLOYMENT AGREEMENTS:
PRESIDENT AND CHIEF EXECUTIVE OFFICER - L P The Company and several of
its subsidiaries had a service agreement with LP for a term of three
years expiring on March 31, 1997 for an annual salary of $130,000.
Under the agreement, LP served as president and chief executive officer
of the Company and managing director and chief executive officer of its
subsidiaries, Vista-UK, Vista-Italy, Vista-Sweden and ConVista.
LP was entitled to receive an annual incentive bonus for each year
according to a specified formula. In general, the bonus is related to:
1) the number of surgical procedures billed by the Company and its
subsidiaries and affiliated joint ventures; and 2) the consolidated
pretax operating income of the Company if the agreement is terminated
without cause. The Company is required to pay LP 12 months salary plus
the prorata bonus earned for the year. On July 5, 1995, the agreement
was terminated (see Note 20(H)).
CHIEF FINANCIAL OFFICER - RF
The Company entered into an employment agreement with RF for a term of
two years and one month expiring on December 31, 1996 for an annual
salary of $100,000. Under the terms of the agreement, RF served as
chief financial officer of the Company. RF was entitled to an annual
incentive bonus for the years ended December 31, 1995 and 1996, not to
exceed $30,000, based upon the Company's performance as compared to its
business plan for such year. On April 28, 1995, RF resigned his
position (see Note 20 (L)).
PRESIDENT AND CHIEF EXECUTIVE OFFICER - DC
The Company and several of its subsidiaries had an employment agreement
with DC for a term of three years expiring on January 15, 1998 for
total compensation of $120,000 per annum and LIT66,000,000
(approximately $38,000) per annum (see Note 3). Under the terms of the
agreement, DC replaced LP as president and chief executive officer of
the Company and managing director of Vista-Italy. DC also served as
managing director of U.S. operations and president of MDRI and KMI (see
Note 1). DC was entitled to receive an annual performance bonus for
each year according to a specified formula as determined by the
Company's board of directors. In addition, DC was entitled to an annual
incentive bonus for each year according to a specified formula. In
general, the incentive bonus is calculated using MDRI's audited
consolidated pre-tax earnings less DC aggregate compensation cost
multiplied by the applicable bonus percentage for that year. On June 7,
1995, the agreement was terminated (see Note 20 (H)).
F-22
<PAGE> 23
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
MANAGING DIRECTOR OF VISTA-SWEDEN OPERATIONS-LK
Vista-Sweden entered into an employment agreement with LK for a term of
three years expiring June 30, 1997, for an annual salary of SEK240,000
(approximately $32,712.). Under the terms of the agreement, LK will
serve as managing director of Vista-Sweden. LK is entitled to receive a
bonus of SEK100,000 for 250 PRK procedures performed, SEK150,000 for
350 PRK procedures performed, SEK250,000 for 500 PRK procedures
performed or SEK500,000 for 1,000 PRK procedures performed
(approximately $13,630, $20,445, $34,076 and $68,150, respectively)
during the two year period following each new clinic opened in Sweden.
After the two year period, the bonus terms will be renegotiated. The
bonus is conditional upon the Company receiving SEK12,300 per PRK
procedure. Therefore, the bonus will be reduced proportionately if the
Company receives less than SEK12,300 per PRK procedure.
MANAGING DIRECTOR OF VISTA-UK OPERATIONS - CS
Vista-UK had an employment agreement with CS for a term of two years
expiring June 6, 1996 for an annual salary of (pound)45,000
(approximately $73,000). Under the terms of the employment agreement,
CS served as managing director of the Vista-UK operations. On June 1,
1994 the Company entered into a guaranty agreement with CS under which
the Company guarantees the payment of all sums due and payable under
the employment agreement. As a result of the Company's abandonment of
the Vista-UK operations, CS was terminated. CS has asserted claims
against Vista-UK and the Company for unpaid compensation under the
terms of the employment agreement (see Note 20(M)).
NOTES PAYABLE TO MDRI PRINCIPAL STOCKHOLDERS
As discussed in Notes 1(G) and 20(B), the Company rescinded the MDRI Stock
Agreement under which it issued noninterest bearing promissory notes totaling
$1,400,000 to the MDRI principal stockholders due December 31, 1994. As a
result, the notes payable were not recorded as of March 31, 1995. However, a
contingent liability may exist relating to the notes payable as of March 31,
1995.
INSURANCE AND INDEMNIFICATION
Use of laser systems by health care professionals using laser equipment and
other LVC Services may give rise to claims against the Company by persons
alleging injury. The Company's subsidiaries generally do not currently have
malpractice liability insurance due to limited capital resources. The Company or
its subsidiaries may not be able to purchase medical malpractice insurance and
may not be able to purchase other insurance at reasonable rates to protect Vista
and its subsidiaries against claims arising from the medical practice of health
care providers using LVC equipment and services.
F-23
<PAGE> 24
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
INSURANCE AND INDEMNIFICATION (CONTINUED)
Vista believes that claims alleging defects in laser systems will be covered by
manufacturers' warranties and the manufacturer's product liability insurance,
and that the Company could take advantage of such insurance by adding such
suppliers to potential lawsuits against the Company. There can be no assurance
that laser suppliers will carry product liability insurance or that any such
insurance will be adequate to protect the Company.
NOTES PAYABLE TO A PRIOR AUDITOR
As discussed in Notes 1(G) and 20 (B), the Company rescinded the MDRI Agreement
under which it authorized the issuance of a $70,000 note payable (Vista Note) to
a prior auditor, which was to be guaranteed by two of MDRI's principal
stockholders and secured by 67,800 shares of the Company's common stock issued
to the two MDRI principal stockholders, and its guaranty of KMI's $70,000 note
payable (KMI Note) to the prior auditor. Under the terms of the MDRI Agreement,
the Vista Note and the KMI Note were conditioned upon the closing of the MDRI
Agreement. Because the closing never occurred and, as a result, the Company
rescinded the MDRI Agreement and asserts that it has no obligations to the prior
auditor. As of May 31, 1995 the KMI Note was in default and had a remaining
balance due of $30,000. On July 13, 1995 the prior auditor notified the Company
that the KMI Note and the Vista Note were immediately due and demanded delivery
of 67,800 shares of the Company's common stock issued to the two MDRI's
principal stockholders, which were cancelled as part of the rescission. As a
result, a contingent liability may exist relating to the Vista Note and the KMI
Note as of March 31, 1995.
EXCHANGE OFFER WITH MDRI 8% PROMISSORY NOTEHOLDERS
As discussed in Notes 1(G) and 20(B), the Company rescinded the MDRI Agreement
under which it authorized the Exchange Offer with the MDRI 8% promissory
noteholders for the Company's 8% convertible promissory notes and Class A
Warrants. Under the terms of the MDRI Agreement, the Exchange Offer was
conditional upon the closing of the MDRI Agreement. Because the closing never
occurred and, as a result, the Company rescinded the MDRI Agreement, the Company
asserts that the Exchange Offer was not consummated and it has no obligation to
the MDRI 8% promissory noteholders. However, a contingent liability may exist
relating to the Exchange Offer as of March 31, 1995.
NOTE 9 - COMMON STOCK
During February 1994 the Company's Board of Directors authorized an offering of
units (Foreign "A" Units) consisting of 5,000 shares of the Company's common
stock and 2,500 Class A Warrants for $50,000 per Foreign "A" Unit. As of March
31, 1994 the offering of Foreign "A" Units was completed and the Company
received and accepted subscriptions totaling $3,000,000 for 60 units to
qualified foreign investors representing 300,000 shares of the Company's common
stock and 150,000 Class A Warrants. As of March 31, 1995 the Company received
proceeds of $2,554,503 (net of offering costs of $445,497) for the sale of 60
Foreign "A" Units. The Company has agreed to register the Class A Warrants.
F-24
<PAGE> 25
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - COMMON STOCK (CONTINUED)
During February 1994 the Company's Board of Directors authorized an offering of
units (U.S. "A" Units) consisting of 5,000 shares of the Company's common stock
and 5,000 Class A Warrants for $50,000 per U.S. "A" Unit. As of April 30, 1994
the Company had received and accepted subscriptions totaling $875,000 for 17.5
U.S. "A" Units to accredited investors representing 87,500 shares of the
Company's common stock and 87,500 Class A Warrants. As of March 31, 1995 the
Company received proceeds of $741,674 (net of offering costs of $133,326) from
the sale of 17.5 U.S. "A" Units. The Company agreed to register the Class A
Warrants.
During May 1994 the Company's Board of Directors authorized an offering of units
(Foreign "B" Units) consisting of 5,000 shares of the Company's common stock and
2,500 Class A Warrants for $50,000 per Foreign "B" Unit. As of March 31, 1995
the offering of Foreign "B" Units was completed and the Company received and
accepted subscriptions totaling $1,250,000 for 25 units to qualified foreign
investors representing 125,000 shares of the Company's common stock and 62,500
Class A Warrants. As of March 31, 1995 the Company received proceeds of
$1,051,192 (net of offering costs of $198,808) for the sale of 25 Foreign "B"
Units. The Company has agreed to register the Class A Warrants.
During May 1994 the Company's Board of Directors authorized an offering of units
(U.S. "B" Units) consisting of 5,000 shares of the Company's common stock and
5,000 Class A Warrants for $50,000 per U.S. "B" Unit. As of March 31, 1995 the
Company had received and accepted subscriptions totaling $850,000 for 17 U.S.
"B" Units to accredited investors representing 85,000 shares of the Company's
common stock and 85,000 Class A Warrants. As of March 31, 1995 the Company
received proceeds of $714,690 (net of offering costs of $135,310) from the sale
of 17 U.S. "B" Units. The Company has agreed to register the Class A Warrants.
In connection with the above offerings, the Company issued 90,000 Class A
Warrants to the placement agent.
NOTE 10 - STOCK OPTIONS
THE 1994 STOCK OPTION PLAN
During February 1994 the Company's Board of Directors adopted and the
stockholders approved the 1994 stock option plan (the 1994 Plan) under which
80,000 shares of the Company's common stock were reserved for issuance. On
October 19, 1994 the Company's Board of Directors increased the number of shares
of the Company's common stock reserved for grant to 150,000 shares, which was
approved by the stockholders on December 22, 1994.
F-25
<PAGE> 26
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - STOCK OPTIONS (CONTINUED)
The 1994 Plan provides that options granted thereunder may be either incentive
stock options or nonqualified stock options. The 1994 Plan provides that
incentive stock options must be granted at a option price which is not less than
the fair market value of the common stock on the date of grant and that
nonqualified options must be granted at an option price which is not less than
50% of the fair market value of the common stock on the date of grant. The
options shall expire within 10 years from the date of the grant, except for
options granted to optionees owning more than 10% of the voting stock of the
Company for which the options shall expire within 5 years from the date of
grant, or to the extent exercisable within 3 months of termination.
For any optionee who owns more than 10% of the voting stock of the Company, the
exercise price of any incentive stock option must be not less than 100% of the
fair market value of the common stock on the date of grant.
A summary of stock option activity under the 1994 Plan is as follows:
<TABLE>
<CAPTION>
Outstanding Options
----------------------------
Price
Reserved Per
Shares Shares Share
------- ------- -------
<S> <C> <C> <C>
Reserved, February 3, 1994 80,000 -- $ --
Granted -- 56,000 10.00
------- ------- -------
Balance, March 31, 1994 80,000 56,000 $ 10.00
Reserved 70,000 -- --
Granted -- 44,000 $ 10.00
------- ------- -------
Balance, March 31, 1995 150,000 100,000 $ 10.00
======= ======= =======
</TABLE>
At March 31, 1995, options for 62,332 shares were exercisable and 50,000 shares
were available for future grants under the 1994 Plan. To date no options have
been exercised under the 1994 Plan.
F-26
<PAGE> 27
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - STOCK OPTIONS (CONTINUED)
THE RESTRICTED STOCK OPTION PLAN
During February 1994 the Company's Board of Directors adopted and the
stockholders approved the restricted stock option plan (the Restricted Plan)
under which 20,000 shares of the Company's common stock were reserved for
issuance to senior management at prices the lesser of $.10 per share or 10% or
the fair market value of the Company's common stock on the date of grant. On
October 19, 1994 the Company's Board of Directors increased the number of shares
of the Company's common stock reserved for grant to 50,000 shares, which was
approved by the stockholders on December 22, 1994. The options expire within 10
years from the date of grant or to the extent exercisable within 12 months of
termination. The options may not be exercised until the optionee has remained in
continuous employment as a senior executive officer or as a director of the
Company for a period of at least two years from the date of grant.
A summary of stock option activities under the Restricted Plan is as follows:
<TABLE>
<CAPTION>
Outstanding Options
-----------------------------
Price
Reserved Per
Shares Shares Share
------ ------ ------
<S> <C> <C> <C>
Reserved, February 3, 1994 20,000 -- $ --
Granted -- 20,000 .50
------ ------ ------
Balance, March 31, 1994 20,000 20,000 $ .50
Reserved 30,000 -- --
Granted -- 12,000 $ .50
------ ------ ------
Balance, March 31, 1995 50,000 32,000 $ .50
====== ====== ======
</TABLE>
As of March 31, 1995 no options were exercisable and 18,000 shares were
available for future grants under the Restricted Plan. To date no options have
been exercised under the Restricted Plan.
F-27
<PAGE> 28
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - INVESTMENT IN LASER VISION CENTERS, INC.
In May 1991 Vista-Italy agreed to sell 287,500 shares of its common stock to
LVCI, a United States public company. In consideration thereof, Vista-Italy
received $175,000 in cash and 200,000 unregistered shares of LVCI's common
stock, valued at $1,275,000 based on the market price of LVCI's common stock.
The agreement allowed Vista-Italy to license the use of the name Laser Vision
Centers and related trademarks and logos from LVCI. A territorial marketing
agreement was proposed whereby Vista-Italy would have the European Economic
Community countries, Scandinavian countries, Switzerland and Eastern European
countries as its exclusive market areas.
In March 1993 Vista-Italy entered into an agreement with LVCI to resolve certain
disputes between the two companies. The agreement provided for the termination
of the May 1991 territorial agreement between Vista-Italy and LVCI. Under the
terms of the agreement, Vista-Italy agreed to repurchase 287,500 shares of its
common stock originally issued to LVCI with a $1,100,000 (LIT1,874,400)
nonrecourse note due March 20, 1996 with interest at 4.5% per year payable on
maturity. Vista-Italy was to receive 75,000 shares of LVCI common stock (yet to
be received) and 100,000 warrants to purchase 100,000 shares of LVCI common
stock at an exercise price of $6.00 per share (yet to be exercised). The note
was to be collateralized by 137,500 shares of LVCI common stock currently held
by Vista-Italy and 100,000 warrants. Until the note was paid in full,
Vista-Italy agreed to vest all voting power for any LVCI shares it owns with
LVCI's Board of Directors. The agreement was to have resolved disputes over
territorial marketing rights and would allow both companies to compete on a
worldwide basis. The agreement further provided that Vista-Italy would cease
using the Laser Vision Center name by December 31, 1993, with the exception of
Italy and certain areas of England where it has 18 months to do so. In addition,
Vista-Italy agreed to issue an option to LVCI to purchase up to 20% of
Vista-Italy's outstanding common stock at a price of $4.00 per share through
December 31, 1993.
On October 8, 1993, LVCI filed suit against Vista-Italy in the Circuit Court of
St. Louis County, Missouri, requesting the termination of previous agreements
between Vista-Italy and LVCI, collectively referred to as "the Agreement". On
December 17, 1993, a default judgment was entered against Vista-Italy and made
final on January 18, 1994; (a) terminating the Agreement between the parties on
the basis of Vista-Italy's alleged breaches of its obligations; (b) awarding
damages to LVCI in the amount of $175,000 (LIT298,200,000); and (c) requiring
the return of the shares of LVCI common stock owned by Vista-Italy. The judgment
terminates and rescinds
F-28
<PAGE> 29
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the provisions of an agreement between Vista-Italy and LVCI. While management
believes that Vista-Italy will ultimately prevail in the matter, it was
determined during September 1994 that Vista-Italy could not be assured of a
favorable outcome. Under the provisions of Financial Accounting Standards Board
Statement No. 5, the Company was required to record the effects of the judgment
in its financial statements, and recorded the following: (1) the 287,500 shares
of Vista-Italy's common stock issued to LVCI were canceled (see Note 1(D)); (2)
the 200,000 shares of LVCI's common stock held by Vista-Italy were returned; and
(3) a liability in the amount of LIT298,200,000 (approximately $175,000) payable
to LVCI by Vista-Italy for damages awarded to LVCI was recorded (see Notes 12
and 18).
NOTE 12 - NOTES PAYABLE
As of December 31, 1993 the Vista-Italy owed $50,000, plus interest of $2,876,
to the underwriter. During 1995 the Company paid off the loan. Vista-Italy has
agreed to pay certain operating expenses of the Company totaling $50,000 as
repayment to the Company.
The Company owed approximately $175,000 (LIT298,200,000) to LVCI as a result of
the default judgment entered against the Company (see Note 11).
NOTE 13 - LONG-TERM DEBT
Long-term debt consists of the following as of March 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Note payable to unrelated third party;
interest accrued monthly at annual
rate of 10%; payments due quarterly of
LIT34,457,489; maturity date January
10, 1999; collateralized by laser
equipment. Company is required to
carry insurance to cover the laser in
the event of loss, damage, etc. $ 430,597
Note payable to an unrelated third
party; interest accrued monthly at an
annual rate of 10%; payments of $6,789
due monthly; maturity date June 30,
1999; collateralized by laser
equipment.
277,491
---------
708,088
Less current portion (172,504)
---------
$ 535,584
=========
</TABLE>
Future maturities of long-term debt are as follows for the years ended March 31:
<TABLE>
<CAPTION>
<S> <C>
1996 $172,504
1997 178,356
1998 184,820
1999 156,091
2000 16,317
--------
$708,088
========
</TABLE>
F-29
<PAGE> 30
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - LEASES
EQUIPMENT AND VEHICLES
The Company leases equipment and a vehicles under operating leases expiring from
September 1995 through October 1996. Total rent expense under these leases was
$47,916 (LIT76,794,000), $5,594 (LIT11,536,000) and $22,377 (LIT46,144,000) for
the year ended March 31, 1995, the three months ended March 31, 1994 and the
year ended December 31, 1993, respectively.
OFFICE
During the year ended March 31, 1995 the Company leased office space in New
York, New York on a month-to-month basis. Total rent expense was $3,440 for the
year ended March 31, 1995.
LASER CENTERS
During February 1992 the Company opened its first laser center at Casa di Cura
San Carlo, a private clinic located in Paderno Dugnano, Italy (the San Carlo
Center). The San Carlo Center operates one excimer laser system. The facility
includes preoperative preparation and postoperative recovery areas, a fully
equipped examining room, a waiting room and offices in which administrative
activities are performed. The private clinic supplies the San Carlo Center with
a nursing staff which devotes time as may be required for the performance of
refractive surgical procedures using the excimer laser system and also provides
other personnel as needed.
In accordance with the lease agreement dated March 6, 1992, pursuant to which
the private clinic leases space and provides personnel to the Malano Center, the
Company has agreed to pay the private clinic LIT12 million per year through
December 1994, LIT35 million per year from January 1995 through December 1997
and LIT20 million per year from January 1998 through December 2000
(approximately $7,487, $21,837 and $12,479, respectively) payable in equal
installments semi-annually, and an amount equal to 30% of the Malano Center's
annual billing in excess of LIT300 million (approximately $47,504 for the year
ended March 31, 1995). In addition, the Malano Center shall reimburse the
private clinic for the actual cost of the nursing staff assigned for its use and
any medical or office supplies it uses. The agreement is automatically renewed
every three years unless notification by either party is given at least six
months prior to the expiration. Rent expense under this lease was approximately
$54,991(LIT88,137,000), $1,909 (LIT3,000,000) and $7,637 (LIT12,000,000) for the
year ended March 31, 1995 the three months ended March 31, 1994 and the year
ended December 31, 1993, respectively.
During March 1993, the Company opened a second laser center in Pisa, Italy (the
Pisa Center). In accordance with the agreement dated February 22, 1993, pursuant
to which the Company leases space from a private clinic, the Company has agreed
to pay the clinic LIT30 million per year (approximately $18,717) plus 10% of the
Pisa Center's annual billings between LIT100-400 million (approximately $6,239
to $24,957 for the year ended March 31, 1995) and 20% of the Pisa Center's
annual billings in excess of LIT400 million, subject to adjustment after the
first year.
F-30
<PAGE> 31
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - LEASES (CONTINUED)
The agreement expires February 1996 and is automatically renewed every three
years unless notification by either party is given at least six months prior to
the expiration. Rent expense under this lease was approximately $35,910
(LIT57,555,000), $4,773 (LIT7,500,000) and $19,219 (LIT30,200,000) for the year
ended March 31, 1995, the three months ended March 31, 1994 and the year ended
December 31, 1993, respectively.
During November 1994 the Company opened a third laser center in Roma, Italy (the
Roma Center). In accordance with the agreement dated November 28, 1994, pursuant
to which the Company leases space from a director of the Company, the Company
has agreed to pay the director LIT48 million per year (approximately $45,166),
and an amount equal to 10% of the Roma Center's annual billings not to exceed
LIT40,000,000 in 1995, LIT50,000,000 in 1996, LIT60,000,000 in 1997 and for the
remaining three years of the lease an amount to be negotiated. The agreement
expires November 2000. Rent expense under this lease was approximately $2,496
(LIT4,000,000) for the year ended March 31, 1995.
During August 1995 the Company opened a fourth laser center in Malmo, Sweden
(the Malmo Center). In accordance with the agreement dated February 12, 1995,
pursuant to which the group of doctors provides facilities, personnel and
administration to operate the Malmo Center, the Company has agreed to pay the
group of doctors SEK4,900 for each PRK procedure up to 300 PRK procedures
performed per year; SEK6,800 for each PRK procedure in excess of 300 PRK
procedures up to 500 RPK procedures performed per year; and SEK7,500 for each
PRK procedure in excess of 500 RPK procedures performed per year. The term of
the agreement is three years, expiring May 15, 1998, which will automatically be
renewed for three years unless notification by either party is given at least
twelve months prior to expiration.
F-31
<PAGE> 32
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - LEASES (CONTINUED)
The Company is required to maintain insurance covering all risks associated with
the operation of the laser centers and has agreed to allow only medical and
paramedical personnel who carry insurance coverage for the practice of their
professions to have access to the laser centers and use of the excimer laser
equipment. The Company has agreed to release the private clinics from liability
for damages caused to patients by employees of the Company or physicians who use
the facility, as a result of surgical procedures performed with the excimer
laser equipment.
Commitments under these operating leases are as follows for the years ending
March 31:
<TABLE>
<CAPTION>
VEHICLES
AND LASER
EQUIPMENT CENTERS TOTAL
---------- -------- --------
<S> <C> <C> <C>
1996 $34,205 $ 70,504 $104,709
1997 9,988 54,906 64,894
1998 -- 51,786 51,786
1999 -- 42,427 42,427
2000 -- 42,427 42,427
Thereafter -- 42,427 42,427
------- -------- --------
$ 4,193 $304,477 $348,670
======= ======== ========
</TABLE>
The above amounts are translated from Italian Lira to U.S. Dollars and from
Swedish Krona to U.S. dollars using average rates in effect for the year ended
March 31, 1995.
NOTE 15 - LITIGATION
In addition to litigation previously discussed in Note 11, the following
litigation has occurred with LVCI.
On October 13, 1993 Vista-Italy filed suit against Green, Hoffman & Dankenbring
(GHD), the American Stock Transfer & Trust Company and LVCI in the Supreme Court
of the State of New
F-32
<PAGE> 33
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
York, alleging that LVCI wrongfully refused to transfer a portion of the 200,000
shares of LVCI common stock (LVCI shares) free of restrictive legend.
Vista-Italy is seeking an injunction against LVCI to remove the restriction on
the LVCI shares and $2,000,000 in damages from LVCI and GHD. In January 1994,
GHD and LVCI moved to dismiss the complaint. On April 22, 1994, Vista-Italy
responded to this motion and moved for summary judgment. The summary judgement
to dismiss the suit was granted and the matter has been dismissed.
On November 1, 1993 Vista-Italy filed suit in the Court of Chancery of the State
of Delaware against LVCI and its chairman and chief executive officer, alleging
that LVCI wasted assets in purchasing stock from a former stockholder of LVCI
and awarded five franchises at no cost to such person. LVCI has filed a motion
to dismiss the lawsuit which is now pending. Vista-Italy and its legal counsel
are unable to determine the outcome of this litigation.
NOTE 16 - INCOME TAXES
The Company files a separate U.S. federal income tax return for its domestic
operations and income tax returns in Italy, United Kingdom, Netherlands and
Sweden for its foreign operations. The subsidiaries located in Italy, United
Kingdom, Netherlands and Sweden compute taxes at rates in effect in those
countries and become payable when assessed. Deferred federal income taxes are
not provided on the undistributed earnings of its foreign subsidiaries to the
extent the Company intends to permanently reinvest such earnings in Italy, the
United Kingdom, Netherlands and Sweden.
The Company has recorded a deferred tax asset account and related valuation
allowance for the year ended March 31, 1995 as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax asset $ 969,800
Valuation allowance (969,800)
---------
Amount expected to be realized $ -
=========
</TABLE>
The deferred tax assets and liabilities have been netted to reflect the tax
impact of temporary differences. The Company has not recorded a deferred tax
asset at March 31, 1995 since it is more likely than not that the tax assets
will not be realized.
Prior to 1995, the Company has incurred only losses from its domestic operations
and has incurred no United States income taxes for the period reported. The
Company has available for United States federal income tax purposes
approximately $6,354,370 of net operating loss carryforwards expiring from 2007
through 2010.
Vista-Italy has net operating losses of approximately $1,784,000 expiring in
years 1994 through 1999. Vista-UK has net operating losses of approximately
$308,000 which have no expiration date. Vista-Sweden has net operating losses of
approximately $125,000 which have no expiration date. These losses will be
subject to separate return loss year rules.
NOTE 17 - FOREIGN SEGMENT OPERATIONS
The Company's operations are in a single industry, the subsidiaries provide PRK
treatments and laser surgical procedures to patients through the establishment
and operation of eye clinics.
The Company operates only in Europe. The Company is located in the United
States, however, all of the operating assets are located in Italy, United
Kingdom, Sweden and the Netherlands.
F-33
<PAGE> 34
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 - FOREIGN SEGMENT OPERATIONS (CONTINUED)
Included in the accompanying consolidated financial statements are the following
amounts for the European operations.
<TABLE>
<CAPTION>
MARCH 31, 1995
--------------------------------------------------
<S> <C>
Cash $ 410,139
Accounts receivable 211,417
Accounts receivable, related party 99,293
Prepaid expense 68,167
Other current assets 12,538
Investment in securities 145,216
Property and equipment, net 1,439,530
Other assets 182,077
----------
$2,568,377
==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1995
--------------
<S> <C>
Revenues $1,349,841
Expenses 2,383,748
---------------------------------------
(Loss) from operations (1,033,907)
Equity investee (loss) (147,506)
Net (loss) $(1,181,413)
======================================
</TABLE>
Balance sheet data for the European operations have been translated to U.S.
dollars using the applicable foreign currency exchange rate as of March 31, 1995
and the statement of operations data have been translated to U.S. dollars using
the applicable average exchange rate for the year ended March 31, 1995. The
Company began acquiring its European subsidiaries on March 31, 1994. The results
of operations of each subsidiary from the date of acquisition are included in
the statement of operations for the year ended March 31, 1995.
F-34
<PAGE> 35
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - SUPPLEMENTAL INFORMATION TO CONSOLIDATED STATEMENTS OF CASH
FLOWS FOR DISCLOSURES AND NONCASH INVESTING AND FINANCING ACTIVITIES
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE THREE FOR THE YEAR
ENDED MONTHS ENDED ENDED
MARCH 31, MARCH 31, DECEMBER 31,
1995 1994 1993
------------- ------------- -----------
<S> <C> <C> <C>
The Company issued stock for cash received after
March 31, 1994 $ -- $1,132,152 $ --
=========== ========== =========
Stock issued to acquire Vista-Italy in stock
exchange transaction $ -- $2,603,782 $ --
=========== ========== =========
Stock issued to acquire Vista-UK in stock
exchange transaction $ -- $ 500,000 $ --
=========== ========== =========
Deferred offering costs included in
accrued expenses $ -- $ 391,296 $ --
=========== ========== =========
Note payable acquired as part of acquisition
of Vista-UK $ -- $ 38,000 $ --
=========== ========== =========
Long-term debt issued to acquire
laser equipment $ 901,112 $ -- $ --
=========== ========== =========
Common stock issued to acquire MDRI $ 3,557,554 $ -- $ --
=========== ========== ==========
Note payable to acquire assets of Klara Clinic $ 286,000 $ -- $ --
=========== ========== ==========
Common stock issued to retire note payable
issued to acquire assets of Klara clinic $ 286,000 $ -- $ --
=========== ========== ==========
Rescission and cancellation of stock issued
to acquire investment in LVCI (Note 11) $ 968,907 $ -- $ --
=========== ========== ==========
Note payable issued to LVCI for legal
settlement (Note 11) $ 175,618 $ -- $ --
=========== ========== ==========
Cash paid during period for taxes $ -- $ 729 $ 729
=========== ========== ==========
Cash paid during the period for interest $ 9,781 $ -- $ --
=========== ========== ==========
</TABLE>
F-35
<PAGE> 36
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19 - FOURTH QUARTER ADJUSTMENTS
During the fourth quarter of 1995, the Company recorded the following year-end
adjustments which it believes are material to the results of that quarter:
<TABLE>
<CAPTION>
<S> <C>
Extraordinary loss from advanced funds
for incomplete acquisition $5,642,887
Impairment of goodwill 3,825,990
Accrual of payroll and payroll taxes 113,836
----------
$9,582,713
==========
</TABLE>
NOTE 20 - SUBSEQUENT EVENTS
In addition to the subsequent events discussed throughout the notes to the
consolidated financial statements, the following subsequent events have
occurred.
(A) AMENDMENT TO ARTICLES OF INCORPORATION
Effective September 12, 1995 the Company's Board of Directors amended the
Company's Articles of Incorporation, which was approved by the stockholders on
July 11, 1995, to reflect a decrease in the authorized number of shares of
common stock from 75,000,000, par value $.001, to 15,000,000, par value $.005,
and the completion of a one share for five shares reverse stock split of the
Company's common stock. As a result, any fractional shares will be rounded up to
the nearest full share (see Note 2).
(B) RESCISSION OF MDRI ACQUISITION
On July 7, 1995, the Company notified MDRI, the MDRI principal stockholders and
the MDRI 8% promissory noteholders that it rescinded all transactions
contemplated by the MDRI Stock Agreement and the MDRI Agreement among the
Company, MDRI and the MDRI principal stockholders (see Note 8). The Company's
reasons for rescinding the MDRI Stock Agreement and the MDRI Agreement include
alleged fraud, intentional misconduct, breach of fiduciary duties,
misrepresentation of material facts and failure of MDRI and its principal
stockholders to satisfy conditions to the obligations of the Company under the
MDRI Agreement. As a result, the Company cancelled 1) the 200,000 shares of its
common stock and the 100,000 Class A Warrants issued to the foreign investors;
2) the promissory notes totaling $1,400,000 issued to the MDRI stockholders; 3)
the 67,800 shares of its common stock issued to terminate employment and
consulting agreements; 4) the obligation to issue 67,617 share of its common
stock upon completion of the exchange stage of the MDRI agreement; 5) the
obligation to issue 60,000 shares of its common stock to secure certain MDRI
indebtedness; and 6) the Company's 8% convertible promissory notes and Class A
Warrants issued under the Exchange Offer.
F-36
<PAGE> 37
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 - SUBSEQUENT EVENTS (CONTINUED)
As a result of the rescission, the Company owns 2,794,340 shares of MDRI common
stock, or a 40.1% ownership interest, which was acquired for consideration
valued at $5,407,554, which was comprised of $1,850,000 in cash and $3,557,554
($10.00 per share) in the Company's common stock (see Notes 1(B) and 1(G)).
Because the Company never had the ability to influence the financial and
operating activities of MDRI, the Company's 40.1% investment in MDRI was
recorded using the cost method of accounting. In addition, the Company made
advances totaling $235,333 to fund the operations of MDRI and its subsidiaries
during 1995 (see Note 1(B)).
As of March 31, 1995, the Company's investment in MDRI of $5,407,554 and
advances made to MDRI and its subsidiaries of $235,333 have been written off to
reflect a permanent impairment due to the deterioration of MDRI's financial
condition. As a result, the Company recorded an extraordinary loss of $5,642,887
for the misappropriation of advances made to MDRI and the investment in MDRI for
the year ended March 31, 1995.
(C) REDEEMABLE COMMON STOCK
On June 30, 1995 the Company paid $277,777 (SEK2,000,000) to redeem 25,640
shares of the Company's redeemable common stock and 25,640 Class A Warrants from
an unrelated third party which were originally issued to acquire the assets of
the PRK surgical center in Sweden (see Note 1(F)). To date, there are no shares
of redeemable common stock outstanding.
(D) CONSULTING AGREEMENT
Effective May 8, 1995 the Company entered into a consulting agreement expiring
on or about July 7, 1995 with an unrelated third party to provide accounting
services for total compensation of $16,000.
(E) 1995 REGULATION S PRIVATE PLACEMENT FOR 12% CONVERTIBLE PROMISSORY NOTES
On June 15, 1995, the Company offered 12% convertible promissory notes (the
Notes) in an aggregate principal amount of $277,777 to a limited number of
foreign investors under a Regulation S private placement offering of securities.
The notes were acquired by the prior president and chief executive officer (LP)
and an affiliate of its acting chief executive officer (JL).
The Notes mature June 15, 1998 and bear interest at 12% per annum payable
semi-annually beginning December 31, 1995 until paid in full. The Company has
the option to redeem the Notes in whole or in part for prepayment after June 15,
1996. As of November 20, 1995 the Company received proceeds of $277,777 from the
offering which were used to redeem 25,640 shares of the Company's redeemable
common stock and 25,640 Class A Warrants as discussed at Note 20(C).
F-37
<PAGE> 38
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 - SUBSEQUENT EVENTS (CONTINUED)
The Notes are convertible, at the option of the holder, at any time through the
second business day prior to the maturity date of June 15, 1998, or the optional
redemption date of June 15, 1996, to convert the principal amount and accrued
interest on the Notes into shares of the Company's common stock at a conversion
price of $5.00 per share of the Company's common stock. The Company has the
option to elect to pay the accrued interest on the Notes in cash in lieu of
converting the accrued interest into shares of the Company's common stock.
The Notes are collateralized by 51% of the issued and outstanding shares of
Vista-Sweden common stock. The shares of Vista-Sweden common stock representing
the collateral will be held in escrow for the benefit of the noteholders.
In connection with these Notes, Vista-Sweden has 1) an obligation to repay each
noteholder, for the benefit of the Company, an amount equal to the original
proceeds of the Note plus accrued interest at 12% under the same terms as the
Notes and 2) a royalty agreement with each noteholder commencing on June 1, 1995
and expiring on May 31, 1998. Under the royalty agreements, Vista-Sweden will
pay royalties equal to $92 for each "incremental PRK procedure" performed by
Vista-Sweden PRK surgical centers during the three years ended May 31, 1996,
1997 and 1998. Incremental PRK procedures will be determined for each of the
three years ended May 31, 1996, 1997 and 1998 as follows:
A) The number of PRK and other laser surgical procedures (PRK procedures)
in excess of the first 800 PRK procedures performed during the year
ended May 31, 1996;
B) the number of PRK procedures performed during the year ended May 31,
1997 that exceed the number performed during the year ended May 31,
1996; and
C) the number of PRK procedures performed during the year ended May 31,
1998 that exceed the number performed during the year ended May 31,
1997.
Each noteholder will receive royalties equal to the percentage which the
original principal amount of his note bears to the aggregate original principal
amount of all the Notes. Royalties will be calculated and paid within 45 days
after the end of each of the three years ending May 31, 1996, 1997 and 1998.
Principal and interest on the Notes and any royalties under the royalty
agreements will be paid first from cash flows generated from the operations of
Vista-Sweden.
F-38
<PAGE> 39
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 - SUBSEQUENT EVENTS (CONTINUED)
(F) INVESTMENT IN VISTA LASER CENTERS OF MICHIGAN, INC.
In November 1995, the Company issued 200,000 shares of its common stock in
exchange for 200,000 shares of 5% Series B convertible preferred stock in Vista
Laser Centers of Michigan, Inc. ("VLC-MI"). VLC-MI is a development stage
enterprise organized on June 30, 1995 with initial cash capitalizations through
December 31, 1995 of $129,500 contributed by third parties to establish, own and
manage laser vision correction centers in Southern Ontario and Michigan. To
date, the activities of VLC-MI have consisted primarily of market research,
seeking affiliations and negotiating agreements with experienced vision care
professionals in the United States and Canada, and negotiating to acquire
equipment for establishing a laser vision correction center in Windsor, Ontario
after an initial public offering of its securities has been completed.
VLC-MI plans an initial public offering of its 10% Series A convertible
preferred stock in 1996 and will not be able to commence active business
operations until and unless funding from a planned initial public offering has
been obtained. The Company's equity interest in VLC-MI represents approximately
61% of VLC-MI's currently outstanding voting stock and is convertible into
200,000 shares of VLC-MI common stock, or approximately 31% of VLC-MI's existing
equity on a fully diluted basis. The Company has granted an irrevocable proxy to
vote 180,000 of the Company's Series B preferred shares of VLC-MI to the Chief
Executive Officer of VLC-MI for the term of his employment by VLC-MI, up to a
maximum of 5 years following an initial public offering by VLC-MI, and the
Company's President, has been elected to the VLC-MI board of directors. A
registration statement for a planned underwritten public offering by VLC-MI will
be filed with the Securities and Exchange Commission in January 1996. If the
planned public offering is successful, the company's interest in VLC-MI after a
public offering of approximately $3 million would be reduced to 21% of the
voting capital stock and approximately 16% of the common equity in VLC-MI on a
fully diluted basis. The Company has entered into a Consulting Services
Agreement to provide certain consulting services to VLC-MI relating to laser
vision developments in Europe, location of additional sites for VLC Centers,
financing, accounting and legal advice. In exchange for such services, the
Company will receive 5% of the VLC-MI's revenues attributable to charges to
health care professionals for the use of VLC-MI's equipment and support
services, less a credit to VLC-MI of $5,000 per month. The Consulting Services
Agreement is for a term of ten years from the date of an initial public offering
by VLC-MI, and is automatically renewed thereafter for periods of five years
unless either party provides six months' prior notice of an intent not to extend
the term. Rights to the service mark "Vista Laser centers" are owned by the
Company and have been licensed to VLC-MI in perpetuity for no additional
consideration on a non-exclusive basis.
F-39
<PAGE> 40
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 - SUBSEQUENT EVENTS (CONTINUED)
(F) INVESTMENT IN VISTA LASER CENTERS OF MICHIGAN, INC. (CONTINUED)
Should the planned public offering and initial business activities of VLC-MI
prove successful, the Company expects to expand its involvement in laser vision
correction services in the United States by participating with other investors
in organizing additional companies under the Vista Laser Centers name at other
regional locations in North America. The Company has filed trademark
applications in the United States and Canada to register the service mark "Vista
Laser Centers" (TM) and has organized a subsidiary for the purpose of holding
the Company's investments in VLC-MI and any other entities formed to develop
laser vision centers in North America.
(G) COMMON STOCK EXCHANGE AGREEMENT
In order to induce a stockholder to advance $100,000 under a deed of debenture
to MICRA, the Company entered into an exchange agreement on June 28, 1995 with
the stockholder. The exchange agreement provides the stockholder with the option
of exchanging the unpaid principal and interest of the debenture for fully paid
and nonassessable shares of the Company's common stock issued under Regulation S
at a conversion price of $1.25 per share at any time prior to repayment of the
debenture by MICRA.
(H) EMPLOYMENT TERMINATION AGREEMENTS:
PRESIDENT AND CHIEF EXECUTIVE OFFICER - LP
On July 5, 1995 the Company entered into a termination agreement with LP
which 1) acknowledges LP's resignation as an executive officer and member
of the Company's board of directors (see Note 20(J)); 2) acknowledges LP's
continuation as managing director and chief executive officer of the
Company's European operations; and 3) provides for a settlement of all
obligations between the Company and LP under previous employment agreements
(Note 8). Pursuant to this agreement, the Company issued 16,000 shares
($5.00 per share) of its common stock in payment of approximately $80,000
of unreimbursed expenses owed to LP at the time of his resignation. In
addition, the agreement stipulates that stock options previously granted to
LP were to expire according to their terms (see Note 20(L)).
PRESIDENT AND CHIEF EXECUTIVE OFFICER - DC
On June 7, 1995, the Company entered into a termination agreement with DC
which acknowledges DC's resignation as president and chief executive
officer and a member of the Company's board of directors effective June 1,
1995 (see Note 20(J)) provides for a settlement of all obligations between
the Company and DC under a previous employment agreement (Note 8).
F-40
<PAGE> 41
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 - SUBSEQUENT EVENTS (CONTINUED)
PRESIDENT AND CHIEF EXECUTIVE OFFICER - DC (CONTINUED)
Pursuant to this agreement, the Company issued 4,000 shares of its common
stock valued at $20,260 ($5.07 per share) and paid $8,740 in cash to
satisfy unreimbursed expenses owed to DC. The agreement provides that the
Company will repurchase the 4,000 shares, at DC's option, for a price equal
to the $20,260 plus simple interest accrued from June 1, 1995 after the
"option event" has occurred (Put Option). The "option event" is defined as
the date the Company has completed a private or public financing for cash
of at least $1,000,000 in gross proceeds or January 31, 1996 if a private
or public offering is not completed. The Put Option will expire if not
exercised within six months after notification that the option event has
occurred. The Company also issued 5,000 shares ($10.00 per share) of its
common stock in settlement of the $50,000 one-time hiring bonus provided by
the employment agreement. In addition, the agreement stipulated that stock
options previously granted to DC were to expire according to their terms
(see Note 20(L)).
(I) ACQUISITION OF VISTA-ITALY COMMON STOCK
During May 1995 and October 1995, the Company issued 8,000 and 8,396 shares of
its common stock valued at $4,000 and $4,198 respectively (each at $0.5 per
share) to acquire a total of 80,000 additional shares of Vista-Italy common
stock. Both transactions were executed pursuant to Regulation S exchange
agreements. At October 1995, the Company has a 73.48% ownership interest in
Vista Italy.
(J) RELATED PARTY TRANSACTIONS
Effective June 1, 1995 the new chief executive officer and president, DC,
resigned his position as an officer and a director of the Company (see Note 20
(H)). In addition, the chief executive officer of European operations resigned
his position as an officer of the Company effective June 1, 1995 and as a
director of the Company effective July 4, 1995 (see Note 20 (H)).
On June 9, 1995 the Board appointed an acting chief executive officer and
president of the Company (an affiliate (JL) of stockholders of the Company) and
an acting chief financial officer of the Company (TM).
F-41
<PAGE> 42
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 - SUBSEQUENT EVENTS (CONTINUED)
(K) CLOSURE OF VISTA-UK
Effective June 1, 1995, the Company abandoned its Vista-UK operations for the
following reasons: 1) the Company no longer had the ability to continue funding
the PLEC clinic; 2) the market for PRK procedures in the United Kingdom had
become prohibitively competitive; and 3) the Company would have had to incur
set-up costs to relocate the PLEC clinic and laser from facilities previously
provided by Optika rent free. The Company estimates that Vista-UK will incur
losses totaling approximately $200,000 (approximately (pound)123,000) for the
period from March 31, 1995 until Vista-UK is dissolved.
(L) STOCK OPTIONS
During June 1995 options to purchase 12,000 shares were granted at a option
price of $10.00 per share.
On July 28, 1995 options to purchase 6,000 shares, which had been granted to the
chief financial officer, expired as a result of his termination (see Note 8).
On September 1, 1995 options to purchase 26,000 shares, which had been granted
to the new president and chief executive officer expired as a result of his
termination (see Note 20(H)).
On September 30, 1995 options to purchase 9,000 shares, which had been granted
to officers of Vista-UK, expired as a result of their termination.
On October 4, 1995 options to purchase 24,000 shares, which had been granted to
the executive officer of European operations, expired as a result of his
termination (see Note 20(H)).
On June 1, 1995 options to purchase 12,000 shares, which had been granted to the
new president and chief executive officer, expired as a result of his
termination (see Note 20(H)).
On July 7, 1995 options to purchase 12,000 shares, which had been granted to the
chief executive officer of European operations, expired as a result of his
termination (see Note 20(H)).
(M) LITIGATION
On July 4, 1995 CS, the former managing director of Vista-UK, asserted claims
against Vista-UK and the Company for unpaid compensation totaling (pound)84,432
(approximately $136,900) under the terms of his employment agreement and the
guaranty agreement (see Note 8).
F-42
<PAGE> 43
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 - SUBSEQUENT EVENTS (CONTINUED)
(N) COMMON STOCK WARRANTS
On June 11, 1994 the Company issued 7,000 Class A Warrants to a chief executive
officer and president of the Company, DC. Under a contractual obligation, the
Company paid a cash payment of $35,000 on June 1, 1995 and cancelled the 7,000
Class A Warrants.
(O) TRADING SECURITIES
During May 1995, Vista-Parent received net proceeds of $161,000 from sales of
trading securities held on March 31, 1995 resulting in realized losses of
$81,000.
During June 1995 Vista-Parent received net proceeds of $90,000 from sales of
trading securities held on March 31, 1995 resulting in realized losses of
$72,000.
(P) ISSUANCE OF COMMON STOCK/RELATED PARTY TRANSACTIONS
During December 1995, the Company issued 925,000 shares of its common stock
valued at $1,470,000 ($1.59 per share) for advances from foreign investors and
corporate officers to sustain the Company's operations from June 1995 through
December 1995. In addition, the Company issued an additional 75,000 shares of
its common stock valued at $37,500 ($.50 per share) to compensate its three
corporate directors for their services during the last half of calender 1995.
(Q) RESERVATION OF COMMON STOCK
In December 1995, the Company decided to reserve shares of its common stock for
sale in future private placements as follows:
A) 1,000,000 shares reserved to finance the Company's operations in 1996.
B) 2,000,000 shares reserved to acquire equity interests in additional
Laser Vision Correction Centers sponsored by the Company.
F-43
<PAGE> 1
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Financial Statements:
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-4
Consolidated Statement of Changes in Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-7
Notes to Consolidated Financial Statements F-8
</TABLE>
F-1
<PAGE> 2
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
============================
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1995 MARCH 31, 1995
----------------- --------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 173,085 $ 649,708
Trading securities -- 403,126
Accounts receivable:
Trade 77,866 70,841
VAT 84,277 140,576
Related party -- 99,293
Prepaid expenses 15,122 70,357
Other 116,199 13,338
---------- ----------
Total Current Assets 466,549 1,447,239
INVESTMENT SECURITIES, held to maturity 113,904 145,215
PROPERTY AND EQUIPMENT, at cost, net 1,414,920 1,472,606
INVESTMENT IN VLC OF MICHIGAN, INC. 100,000 --
OTHER ASSETS 188,976 182,077
---------- ----------
$2,284,349 $3,247,137
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-2
<PAGE> 3
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
============================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
DECEMBER 31, 1995 MARCH 31, 1995
----------------- --------------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
Bank overdraft protection $ 67,759 $ 86,913
Accounts payable, trade 520,907 446,723
Accounts payable, officers 31,297 129,051
Accrued expenses 289,416 178,681
Note payable 175,000 175,000
Current portion of long-term debt 60,220 172,504
Other liabilities 91,320 --
------------ ------------
Total Current Liabilities 1,235,919 1,188,872
LONG-TERM DEBT, net of current portion 783,833 535,584
MINORITY INTEREST 603,914 663,320
------------ ------------
Total Liabilities 2,623,666 2,387,776
------------ ------------
COMMITMENTS AND CONTINGENCIES:
REDEEMABLE COMMON STOCK:
$.005 par value, 6,000 and 25,640 shares
authorized, issued and outstanding 20 128
Additional paid-in capital 20,240 277,649
------------ ------------
Total Redeemable Common Stock 20,260 277,777
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, 15,000,000 shares, $.001 par value,
authorized; none issued -- --
Common stock, 15,000,000 shares, $.005 par value
authorized; 2,646,106 and 1,408,710 issued
and outstanding 13,231 7,044
Additional paid-in capital 13,513,796 11,774,285
Accumulated (deficit) (14,160,572) (11,432,110)
Foreign currency adjustment 273,968 232,365
------------ ------------
Total Stockholders' (Deficit) Equity (359,577) 581,584
------------ ------------
$ 2,284,349 $ 3,247,137
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE> 4
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED
============================
<TABLE>
<CAPTION>
RESTATED RESTATED
THREE MONTHS ENDED NINE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1994
------------------ ----------------- ------------------ -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES $ 472,647 $ 1,405,975 $ 346,127 $ 866,050
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of revenues 245,220 680,075 104,978 337,827
General and administrative 1,030,264 3,108,726 587,638 1,367,379
Loss on sale of securities -- 152,496 -- --
Depreciation and amortization 66,648 167,367 188,498 517,781
----------- ----------- ----------- -----------
Total Costs and Expenses 1,342,132 4,108,664 881,114 2,222,987
----------- ----------- ----------- -----------
OTHER (INCOME) EXPENSE:
Unrealized (gain) loss on trading
securities -- -- (69,260) (48,981)
Legal settlement -- -- -- 189,418
Interest expense 36,485 80,511 5,648 10,238
Other 4,174 (22,316) (27,515) (27,515)
----------- ----------- ----------- -----------
40,659 58,195 (91,127) 123,160
----------- ----------- ----------- -----------
(LOSS) FROM OPERATIONS (910,144) (2,760,884) (443,860) (1,480,097)
EQUITY INVESTEE GAINS (LOSSES) -- -- 340,307 303,727
----------- ----------- ----------- -----------
(LOSS) BEFORE MINORITY INTEREST
LOSSES (910,144) (2,760,884) (103,553) (1,176,370)
MINORITY INTEREST LOSSES 24,271 32,422 (335,421) 137,876
----------- ----------- ----------- -----------
NET (LOSS) $ (885,873) $(2,728,462) $ (438,974) $(1,038,494)
=========== =========== =========== ===========
NET (LOSS) PER COMMON SHARE $ (.52) $ (1.81) $ (.06) $ (.16)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,713,472 1,508,814 7,455,801 6,598,255
=========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-4
<PAGE> 5
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
============================
<TABLE>
<CAPTION>
COMMON STOCK SUBSCRIBED STOCK ADDITIONAL FOREIGN
--------------- ------------------ PAID-IN CURRENCY ACCUMULATED
NUMBER AMOUNT NUMBER AMOUNT CAPITAL ADJUSTMENT (DEFICIT) TOTAL
------- ------ ------- --------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 134,934 $ 675 -- $ -- $ 45,243 $ -- $ (3,987) $ 41,931
February 25, 1994 stock
dividend 4,800 24 -- -- (24) -- -- --
Regulation S private placement
net of offering costs of
$351,219, common stock issued
for $10.00 per share 200,000 1,000 -- -- 1,647,781 -- -- 1,648,781
Regulation S stock subscribed,
net of offering costs of
$98,278, common stock
issued for $10.00 per share -- -- 100,000 905,722 -- -- -- 905,722
Common stock issued to
Storford, Ltd. in exchange for
Vista Vision International stock
for $10.00 per share 50,000 250 -- -- 499,750 -- -- 500,000
Regulation s stock issued in
exchange for Vista Vision SpA
stock for $10.00 per share 126,590 633 -- -- 1,265,263 -- -- 1,265,896
Regulation D stock issued in
exchange for Vista Vision SpA
(Vista-Italy) stock for $10.00
per share 133,789 669 -- -- 1,337,217 -- -- 1,337,886
Regulation d private placement,
net of offering costs of $109,756,
issued for $10.00 per share 62,500 313 -- -- 514,931 -- -- 515,244
Regulation D stock subscribed,
net of offering costs of $23,570,
issued for $10.00 per share -- -- 25,000 226,430 -- -- -- 226,430
Foreign currency adjustment -- -- -- -- -- (1,962) -- (1,962)
Net (loss) for period -- -- -- -- -- -- (7,943) (7,943)
------- ------ -------- ---------- ---------- ------- -------- ----------
Balance, March 31, 1994 712,613 3,564 125,000 1,132,152 5,310,161 (1,962) (11,930) 6,431,985
Regulation S private placement, net
of offering costs of $94,278 issues
for $10.00 per share 100,000 500 (100,000) (905,722) 905,222 -- -- --
Regulation D private placement, net
offering costs of $23,570, issued
for $10.00 per share 25,000 125 (25,000) (226,430) 226,305 -- -- --
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE> 6
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
============================
<TABLE>
<CAPTION>
COMMON STOCK SUBSCRIBED STOCK ADDITIONAL FOREIGN
----------------- ------------------- PAID-IN CURRENCY ACCUMULATED
NUMBER AMOUNT NUMBER AMOUNT CAPITAL ADJUSTMENT (DEFICIT) TOTAL
--------- ------ ------- --------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock issued in
exchange for Medical
Development Resources, Inc.
(MDRI) stock and warrants for
$10.00 per share 200,000 1,000 -- -- 1,999,000 -- -- 2,000,000
Regulation S private placement
issued in exchange for the
assets of Klara Clinic for
$2.78 per share 2,960 15 -- -- 8,208 -- -- 8,223
Regulation S private placement,
net of offering costs of
$210,723, issued for $10.00
per share 125,000 625 -- -- 1,038,652 -- -- 1,039,277
Regulation D private placement,
net of offering costs of $143,420,
issues for $10.00 per share 85,000 425 -- -- 706,155 -- -- 706,580
Common stock adjustment for
Vista-Italy acquisition 2,381 11 -- -- 23,807 -- -- 23,818
Common stock issued to acquire
MDRI stock from TNC Media,
Inc. for $10.00 per share 155,756 779 -- -- 1,556,775 -- -- 1,557,554
Foreign currency adjustment -- -- -- -- -- 234,327 -- 234,327
Net (loss) for the period -- -- -- -- -- -- (11,420,180) (11,420,180)
--------- ------ ------- --------- ---------- ------- ----------- -----------
Balance, March 31, 1995 1,408,710 7,044 -- -- 11,774,285 232,365 (11,432,110) 581,584
Regulation S stock issued
in exchange for Vista Vision
SpA stock for $0.50 per
share 8,000 40 -- -- 3,960 -- -- 4,000
Regulation S stock issued
in exchange for Vista Vision
SpA stock for $0.50 per share 8,396 42 -- -- 4,156 -- -- 4,198
Regulation D stock issued in
exchange for 200,000 shares
of 5% convertible preferred
stock of Laser Vision Centers
of Michigan, Inc., for
$0.50 per share 200,000 1,000 -- -- 99,000 -- -- 100,000
Common stock, issued for
services for $5.00 per share 16,000 80 -- -- 79,920 -- -- 80,000
Common stock, issued for
services, for $10.00 per share 5,000 25 -- -- 49,975 -- -- 50,000
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-6
<PAGE> 7
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
============================
<TABLE>
<CAPTION>
COMMON STOCK SUBSCRIBED STOCK ADDITIONAL FOREIGN
------------------ ---------------- PAID-IN CURRENCY ACCUMULATED
NUMBER AMOUNT NUMBER AMOUNT CAPITAL ADJUSTMENT (DEFICIT) TOTAL
--------- ------- ------ ------ ----------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Regulation S stock, issued for
services, for $1.59 per share 925,000 4,625 -- -- 1,465,375 -- -- 1,470,000
Regulation S stock, issued for
services, for $0.50 per share 75,000 375 -- -- 37,125 -- -- 37,500
Foreign currency adjustment -- -- -- -- -- 41,603 -- 41,603
Net (loss) for period -- -- -- -- -- -- (2,728,462) (2,728,462)
--------- ------- ------ ------ ----------- -------- ------------ -----------
Balance, December 31, 1995
(Unaudited) 2,646,106 $13,231 -- -- $13,513,796 $273,968 $(14,160,572) $ (359,577)
========= ======= ====== ====== =========== ======== ============ ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-7
<PAGE> 8
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED
============================
<TABLE>
<CAPTION>
RESTATED RESTATED
THREE MONTHS ENDED NINE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1994
------------------ ----------------- ------------------ -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS (TO) OPERATING ACTIVITIES:
Net (loss) $ (885,873) $(2,728,462) $ (438,573) $(1,038,493)
Adjustments to reconcile net (loss) to net cash
provided (used) by operating activities, net of
effects from companies acquired:
Depreciation and amortization 66,648 167,367 188,498 517,781
Unrealized (gain) loss on trading securities -- -- (69,260) (48,981)
Legal settlement -- -- -- (189,418)
Losses on sale of securities -- 152,496 -- --
Foreign currency translation loss 16,767 41,603 (590,168) 35,086
Equity investee (gains) losses -- -- (239,561) (303,727)
Minority interest losses (24,271) (32,422) 335,421 (137,876)
Interest income received in common stock -- -- 50,000 50,000
Common stock issued for securities 1,657,760 1,657,760 -- --
Changes in:
Accounts receivable (3,886) 148,567 37,672 (5,330)
Prepaid expense 51,558 54,617 45,298 64,379
Other current assets (23,803) (102,661) 14,077 --
Other assets (2,698) (6,899) 16,883 23,494
Bank overdraft 51,590 (19,154) -- --
Accounts payable (951,108) 55,198 (153,495) (166,312)
Accrued expenses (16,660) 104,919 13,011 29,815
----------- ----------- ----------- -----------
Net Cash (Used) by
Operating Activities (63,976) (507,071) (790,197) (1,169,582)
----------- ----------- ----------- -----------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Proceeds from sale of securities 370 251,000 250,235 250,235
Change in value of investment held to maturity (1,996) 30,941 -- --
Purchase of property and equipment 3,853 (109,681) (54,014) (208,573)
Purchase of investment in MDRI -- -- (99,313) (1,403,687)
Purchase of ConVista -- -- 37,980 (66,189)
Purchase of trading securities -- -- (47,871) (215,375)
Acquisition of Vista-Italy -- -- -- (110,075)
Proceeds from sale of equipment -- -- -- 13,000
Investment in equity investee -- -- 882,974 463,299
Distribution from equity investee -- -- (132,116) (182,116)
Advances to subsidiary -- -- (322,705) (322,705)
Advances on notes receivable, related party -- -- 236,490 236,490
Receipts from note receivable -- -- -- 620,625
----------- ----------- ----------- -----------
Net Cash Provided (Used)
by Investing Activities 2,227 172,260 751,660 (925,071)
----------- ----------- ----------- -----------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Issuance of notes payable 135,965 135,965 32,295 32,295
Payments on notes payable -- -- (104,914) (58,645)
Redemption of common stock -- (277,777) -- --
Payments on long-term debt (136,811) -- 33,888 (32,937)
Proceeds from long-term debt -- -- 13,974 13,974
Payments on note payable, stockholder -- -- -- (600,000)
Sale of common stock -- -- 167,142 3,186,320
Payment of offering costs -- -- (348) (749,816)
----------- ----------- ----------- -----------
Net Cash Provided (Used) by
Financing Activities (846) (141,812) 142,037 1,791,191
----------- ----------- ----------- -----------
NET (DECREASE) IN CASH (62,595) (476,623) 103,500 (303,462)
CASH, beginning of period 235,680 649,708 1,443,680 1,850,642
----------- ----------- ----------- -----------
CASH, end of period $ 173,085 $ 173,085 $ 1,547,180 $ 1,547,180
=========== =========== =========== ===========
</TABLE>
- -------------------
See Note 12
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-8
<PAGE> 9
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
============================
NOTE 1 - BASIS OF PRESENTATION
The unaudited interim consolidated financial statements of Vista Technologies,
Inc. and its subsidiaries (the Company) have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission (SEC). Accordingly,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These interim consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes included in the Company's March 31, 1995 Form 10-K filed with the SEC.
In the opinion of management, the interim consolidated financial statements
reflect all adjustments necessary for a fair presentation of the interim
periods. The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the full year.
The following subsidiaries were consolidated with the Company:
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1995 1995
------------- ---------
<S> <C> <C>
Vista-Italy 73.48% 69.87%
Vista-UK 100% 100%
ConVista 100% 100%
Vista-Sweden 100% 100%
</TABLE>
Effective September 12, 1995 the Company's board of directors amended the
Company's Articles of Incorporation, which was approved by the stockholders on
July 11, 1995, to reflect a decrease in the authorized number of shares of
common stock from 75,000,000, par value $.001, to 15,000,000, par value $.005,
and the completion of a one share for five shares reverse stock split of the
Company's common stock. As a result, any fractional shares will be rounded up to
the nearest full share. The financial statements have been restated
retroactively for all periods presented.
F-9
<PAGE> 10
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
============================
NOTE 2 - RECONCILIATION
The Company's previously filed December 31, 1994 Form 10-Q included consolidated
presentation for one of its subsidiaries, MDRI, (see Note 12). During the
quarter ended March 31, 1995, the Company determined that the appropriate
presentation for its investment in MDRI was the cost method. Therefore, the
December 31, 1994 presentation has been restated as follows:
<TABLE>
<CAPTION>
NINE MONTHS
NINE MONTHS DECEMBER 31,
ENDED ENDED
DECEMBER 31, NET 1994
1994 CHANGES AS RESTATED
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ 3,968,235 $(3,102,185) $ 866,050
Costs and expenses 6,453,423 (4,230,436) 2,222,987
Other expenses 455,737 (332,577) 123,160
----------- ----------- -----------
(Loss) from operations (2,940,925) 1,460,828 (1,480,097)
Equity investee income 284,613 19,114 303,727
----------- ----------- -----------
(Loss) before minority interest losses (2,656,312) 1,479,942 (1,176,370)
Minority interest losses 627,880 (490,004) 137,876
----------- ----------- -----------
Net loss before extraordinary item (2,028,432) 989,938 (1,038,494)
Extraordinary item 40,575 (40,575) --
----------- ----------- -----------
Net (Loss) $(1,987,857) $ 949,363 $(1,038,494)
=========== =========== ===========
</TABLE>
NOTE 3 - FOREIGN CURRENCY EXCHANGE
The balance sheet and income statement data for the foreign subsidiaries have
been translated from their respective foreign currencies to U.S. dollars using
the following exchange rates:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1995
SUBSIDIARY CURRENCY SPOT RATE AVERAGE RATE
---------- --------------- ------------ ------------
<S> <C> <C> <C>
Vista-UK Pounds Sterling 1.549 1.578
Vista-Italy Lira .001 .001
ConVista Gilders .621 .63
Vista-Sweden Krona .141 .15
</TABLE>
F-10
<PAGE> 11
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
============================
NOTE 4 - INVESTMENT SECURITIES
TRADING SECURITIES
Securities that are bought and held principally for the purpose of selling them
in the near term are classified as trading securities and valued at fair market
value. Unrealized holding gains and losses are included in operations. Fair
value is determined from quoted market prices. During May and June 1995, the
Company sold its trading securities and received net proceeds of $251,000,
resulting in gross realized losses of approximately $153,000. As of December 31,
1995, the Company no longer owned trading securities.
NOTE 5 - 1995 REGULATION S PRIVATE PLACEMENT FOR 12% CONVERTIBLE PROMISSORY
NOTES
On June 15, 1995, the Company offered 12% convertible promissory notes (the
Notes) in an aggregate principal amount of $277,777 to a limited number of
foreign investors under a Regulation S private placement offering of securities.
The Notes mature June 15, 1998 and bear interest at 12% per annum payable
semi-annually beginning December 31, 1995 until paid in full. The Company has
the option to redeem the Notes in whole or in part for prepayment after June 15,
1996. As of November 10, 1995 the Company received proceeds of $277,777 from the
offering which were used to redeem 25,640 shares of the Company's redeemable
common stock and 25,640 Class A Warrants as discussed at Note 6.
The Notes are convertible, at the option of the holder, at any time through the
second business day prior to the maturity date of June 15, 1998, or the optional
redemption date of June 15, 1996, to convert the principal amount and accrued
interest on the Notes into shares of the Company's common stock at a conversion
price of $5.00 per share of the Company's common stock. The Company has the
option to elect to pay the accrued interest on the Notes in cash in lieu of
converting the accrued interest into shares of the Company's common stock.
F-11
<PAGE> 12
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
============================
NOTE 5 - 1995 REGULATION S PRIVATE PLACEMENT FOR 12% CONVERTIBLE PROMISSORY
NOTES (CONTINUED)
The Notes are collateralized by 51% of the issued and outstanding shares of
Vista-Sweden common stock. The shares of Vista-Sweden common stock representing
the collateral will be held in escrow for the benefit of the noteholders.
In connection with these Notes, Vista-Sweden has 1) an obligation to repay each
noteholder, for the benefit of the Company, an amount equal to the original
proceeds of the Note plus accrued interest at 12% under the same terms as the
Notes and 2) a royalty agreement with each noteholder commencing on June 1, 1995
and expiring on May 31, 1998. Under the royalty agreements, Vista-Sweden will
pay royalties equal to $92 for each "incremental PRK procedure" performed by
Vista-Sweden PRK surgical centers during the three years ended May 31, 1996,
1997 and 1998. Incremental PRK procedures will be determined for each of the
three years ended May 31, 1996, 1997 and 1998 as follows:
A) The number of PRK and other laser surgical procedures (PRK procedures)
in excess of the first 800 PRK procedures performed during the year
ended May 31, 1996;
B) the number of PRK procedures performed during the year ended May 31,
1997 that exceed the number performed during the year ended May 31,
1996; and
C) the numnber of PRK procedures performed during the year ended May 31,
1998 that exceed the number performed during the year ended May 31,
1997.
Each noteholder will receive royalties equal to the percentage which the
original principal amount of his note bears to the aggregate original principal
amount of all the Notes. Royalties will be calculated and paid within 45 days
after the end of each of the three years ending May 31, 1996, 1997 and 1998.
Principal and interest on the Notes and any royalties under the royalty
agreements will be paid first from cash flows generated from the operations of
Vista-Sweden.
NOTE 6 - REDEEMABLE COMMON STOCK
On June 30, 1995 the Company paid $277,777 (SEK2,000,000) to redeem and
subsequently cancel 25,640 shares of the Company's redeemable common stock and
25,640 Class A Warrants from an unrelated third party which were originally
issued to acquire the assets of the PRK surgical center in Sweden (see Note 5).
On November 27, 1995, the Company issued 4,000 shares of its common stock to DC,
its former president and chief executive officer. The shares are redeemable in
accordance with an employment termination agreement with DC as described in Note
11.
F-12
<PAGE> 13
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
============================
NOTE 7 - COMMON STOCK WARRANTS
On June 11, 1994 the Company issued 7,000 Class A Warrants to a chief executive
officer and president of the Company, DC. Under a contractual obligation, the
Company paid a cash payment of $35,000 on June 1, 1995 and cancelled the 7,000
Class A Warrants.
NOTE 8 - RELATED PARTY TRANSACTIONS
Effective June 1, 1995 the new chief executive officer and president, DC,
resigned his position as an officer and director of the Company (see Note 10).
In addition, the chief executive officer of European operations, LP, resigned
his position as an officer of the Company effective June 1, 1995 and as a
director of the Company effective July 4, 1995 (see Note 11).
On June 9, 1995 the Board appointed an acting chief executive officer and
president of the Company (an affiliate (JL) of stockholders of the Company) and
an acting chief financial officer of the Company (TM).
During December 1995, the Company issued 925,000 shares of its common stock
valued at $1,470,000 ($1.59 per share) for advances from foreign investors and
corporate officers to sustain the Company's operations from June 1995 through
December 1995. Also during December 1995, the Company issued additional 75,000
shares of its common stock valued at $37,500 ($.50 per share) to compensate its
three corporate directors for their services for the fiscal year ending March
31, 1996.
NOTE 9 - CLOSURE OF VISTA-UK
Effective June 1, 1995, the company abandoned its Vista-UK operations for the
following reasons: 1) the Company no longer had the ability to continue funding
the PLEC clinic; 2) the market for PRK procedures in the United Kingdom had
become prohibitively competitive; and 3) the Company would have had to incur
set-up costs to relocate the PLEC clinic and laser from facilities previously
provided by Optika rent free. The Company estimates that Vista-UK will in incur
losses totaling approximately $200,000 (approximately (pound)123,000) for the
period from March 31, 1995 until Vista-UK is dissolved.
NOTE 10 - ACQUISITION OF VISTA ITALY COMMON STOCK
During May 1995 and October 1995, the Company issued 8,000 and 8,396 shares of
its common stock valued at $4,000 and $4,198 respectively (each $0.50 per share)
to acquire a total of 80,000 additional shares of Vista Italy common stock. Both
transactions were executed pursuant to Regulation S exchange agreements. At
October 1995, the Company has a 73.48% ownership interest in Vista Italy.
F-13
<PAGE> 14
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
============================
NOTE 11 - COMMITMENTS AND CONTINGENCIES
COMMON STOCK EXCHANGE AGREEMENT
In order to induce a stockholder to advance $100,000 under a deed of debenture
to MICRA, a wholly owned subsidiary of MDRI, the Company entered into an
exchange agreement on June 28, 1995 with the stockholder. The exchange agreement
provides the stockholder with the option of exchanging the unpaid principal and
interest of the debenture for fully paid and nonassessable shares of the
Company's common stock issued under Regulation S at a conversion price of $1.25
per share at any time prior to repayment of the debenture.
EMPLOYMENT TERMINATION AGREEMENT - PRESIDENT AND CHIEF EXECUTIVE OFFICER - LP
On July 5, 1995 the Company entered into a termination agreement with LP which
1) acknowledges LP's resignation as an executive officer and member of the
Company's board of directors (see Note 8); 2) acknowledges LP's continuation as
managing director and chief executive officer of the Company's European
operations; and 3) provides for a settlement of all obligations between the
Company and LP under previous employment agreements (note 8). Pursuant to this
agreement, the Company issued 16,000 shares ($5.00 per share) of its common
stock in payment of approximately $80,000 of unreimbursed expenses owed to LP at
the time of his resignation. In addition, the agreement stipulates that stock
options previously granted to LP were to expire according to their terms.
LITIGATION
On July 4, 1995 CS, the former managing directors of Vista-UK, asserted claims
against Vista-UK and the Company for unpaid compensation totaling (pound)84,432
(approximately $136,900) under the terms of his employment agreement and the
guaranty agreement.
CONSULTING AGREEMENT
Effective May 8, 1995 the Company entered into a consulting agreement expiring
on or about July 7, 1995 with an unrelated third party to provide accounting
services for total compensation of $16,000.
EMPLOYMENT TERMINATION AGREEMENT - PRESIDENT AND CHIEF EXECUTIVE OFFICER - DC
On June 7, 1995, the Company entered into a termination agreement with DC, which
acknowledges DC's resignation as president and chief executive officer and a
member of the Company's board of directors effective June 1, 1995 and provides
for a settlement of all obligations between the Company and DC under a previous
employment agreement (note 8).
F-14
<PAGE> 15
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
============================
NOTE 11 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Pursuant to this agreement, on November 20, 1995, the Company issued 4,000
shares of its common stock valued at $20,260 ($5.07 per share) and paid $8,740
in cash to satisfy unreimbursed expenses owed to DC. The agreement provides that
the Company will repurchase the 4,000 shares, at DC's option, for a price equal
to the $20,260 plus simple interest accrued from June 1, 1995 after the "option
event" has occurred (Put Option). The "option event" is defined as the date the
Company has completed a private or public financing for cash of at least
$1,000,000 in gross proceeds or January 31, 1996 if a private or public offering
is not completed. The Put Option will expire if not exercised within six months
after notification that the option event has occurred. On November 20, 1995 the
Company also issued 5,000 shares ($10.00 per share) of its common stock in
settlement of the $50,000 one-time hiring bonus provided by the employment
agreement. In addition, the agreement stipulated that stock options previously
granted to DC were to expire according to their terms.
NOTE 12 - SUPPLEMENTAL INFORMATION TO CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
DISCLOSURES AND NONCASH INVESTING AND FINANCING ACTIVITIES
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Stock issued to acquire VLC-Michigan stock in
a stock exchange transaction $ 100,000 $ --
========== ==========
Stock issued for services $1,637,500 $ --
========== ==========
Stock issued to acquire Vista-Italy stock
in a stock exchange transaction $ 8,198 $ --
========== ==========
Common stock subscribed for
cash received after period end $ -- $1,030,056
========== ==========
Cash paid during period for interest $ 80,511 $ 10,238
========== ==========
Cash paid during period for income taxes $ -- $ --
========== ==========
</TABLE>
F-15
<PAGE> 16
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
============================
NOTE 13 - RESCISSION OF MDRI ACQUISITION
On July 7, 1995, the Company notified Medical Development Resources, Inc., the
MDRI principal stockholders and the MDRI 8% promissory noteholders that it
rescinded all transactions contemplated by the MDRI Stock Agreement and the MDRI
Agreement among the Company, MDRI, and the MDRI principal stockholders. The
Company's reasons for rescinding the MDRI stock Agreement and the MDRI Agreement
include alleged fraud, intentional misconduct, breach of fiduciary duties,
misrepresentation of material facts and failure of MDRI and its principal
stockholders to satisfy conditions to the obligations of the Company under the
MDRI Agreement. As a result, the Company cancelled 1) the 200,000 shares of its
common stock and the 100,000 Class A Warrants issued to the foreign investors;
2) the promissory notes totaling $1,400,000 issued to the MDRI stockholders; 3)
the 67,800 shares of its common stock issued to terminate employment and
consulting agreements; 4) the obligation to issue 67,617 shares of its common
stock upon completion of the exchange stage of the MDRI agreement; 5) the
obligation to issue 60,000 shares of its common stock to secure certain MDRI
indebtedness; and 6) the Company's 8% convertible promissory notes and Class A
Warrants issued under the Exchange Offer.
As a result of the rescission, the Company owns 2,794,340 shares of MDRI common
stock, or a 40.1% ownership interest, which was acquired for consideration
valued at $5,407,554, which was comprised of $1,850,000 in cash and $3,557,554
($10.00 per share) in the Company's common stock.
Because the Company never had the ability to influence the financial and
operating activities of MDRI, the Company's 40.1% investment in MDRI was
recorded using the cost method of accounting. In addition, the Company made
advances totaling $235,333 to fund the operations of MDRI and its subsidiaries
during 1995.
As of March 31, 1995, the Company's investment in MDRI of $5,407,554 and
advances made to MDRI and its subsidiaries of $235,333 have been written off to
reflect a permanent impairment due to the deterioration of MDRI's financial
condition. As a result the Company recorded an extraordinary loss of $5,642,887
for the misappropriation of advances made to MDRI and the investment in MDRI for
the year ended March 31, 1995.
NOTE 14 - INVESTMENT IN VISTA LASER CENTERS OF MICHIGAN, INC.
In November 1995, the Company issued 200,000 shares of its common stock in
exchange for 200,000 shares of 5% Series B convertible preferred stock in Vista
Laser Centers of Michigan, Inc. ("VLC-MI"). VLC-MI is a development stage
enterprise organized on June 30, 1995 with initial cash capitalizations through
December 31, 1995 of $129,500 contributed by third parties to establish, own and
manage laser vision correction centers in Southern Ontario and Michigan. To
date, the activities of VLC-MI have consisted primarily of market research,
seeking affiliations and negotiating agreements with experienced vision care
professionals in the United States and Canada, and negotiating to acquire
equipment for establishing a laser vision correction center in Windsor, Ontario
after an initial public offering of its securities has been completed.
F-16
<PAGE> 17
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
============================
NOTE 14 - INVESTMENT IN VISTA LASER CENTERS OF MICHIGAN, INC. (CONTINUED)
VLC-MI plans an initial public offering of its 10% Series A convertible
preferred stock in 1996 and will not be able to commence active business
operations until and unless funding from a planned initial public offering has
been obtained. The Company's equity interest in VLC-MI represents approximately
61% of VLC-MI's currently outstanding voting stock and is convertible into
200,000 shares of VLC-MI common stock, or approximately 31% of VLC-MI's existing
equity on a fully diluted basis. The Company has granted an irrevocable proxy to
vote 180,000 of the Company's Series B preferred shares of VLC-MI to the Chief
Executive Officer of VLC-MI for the term of his employment by VLC-MI, up to a
maximum of 5 years following an initial public offering by VLC-MI, and the
Company's President, has been elected to the VLC-MI board of directors. A
registration statement for a planned underwritten public offering by VLC-MI will
be filed with the Securities and Exchange Commission in January 1996. If the
planned public offering is successful, the company's interest in VLC-MI after a
public offering of approximately $3 million would be reduced to 21.5% of the
voting capital stock and approximately 16% of the common equity in VLC-MI on a
fully diluted basis. The Company has entered into a Consulting Services
Agreement to provide certain consulting services to VLC-MI relating to laser
vision developments in Europe, location of additional sites for VLC Centers,
financing, accounting and legal advice. In exchange for such services, the
Company will receive 5% of the VLC-MI's revenues attributable to charges to
health care professionals for the use of VLC-MI's equipment and support
services, less a credit to VLC-MI of $5,000 per month. The Consulting Services
Agreement is for a term of ten years from the date of an initial public offering
by VLC-MI, and is automatically renewed thereafter for periods of five years
unless either party provides six months' prior notice of an intent not to extend
the term. Rights to the service mark "Vista Laser centers" are owned by the
Company and have been licensed to VLC-MI in perpetuity for no additional
consideration on a non-exclusive basis.
Should the planned public offering and initial business activities of VLC-MI
prove successful, the Company expects to expand its involvement in laser vision
correction services in the United States by participating with other investors
in organizing additional companies under the Vista Laser Centers name at other
regional locations in North America. The Company has filed trademark
applications in the United States and Canada to register the service mark "Vista
Laser Centers" (TM) and has organized a subsidiary for the purpose of holding
the Company's investments in VLC-MI and any other entities formed to develop
laser vision centers in North America.
F-17
<PAGE> 18
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
============================
NOTE 15 RESERVATION OF COMMON STOCK
In December 1995, the Company decided to reserve shares of its common stock for
sale in future private placements as follows:
A) 1,000,000 shares reserved to finance the Company's operations in 1996.
B) 2,000,000 shares reserved to acquire equity interests in additional
Laser Vision Correction Centers sponsored by the Company.
NOTE 16 - SUBSEQUENT EVENTS
AGREEMENTS IN NEGOTIATION WITH PHARMA PATCH PLC; PROSPECTIVE FINANCING
TRANSACTIONS AND CHANGE IN CONTROL
During February 1996, the Company and certain of its stockholders entered into
negotiations with Pharma Patch Plc ("Pharma Patch"), a publicly-traded company
with its principal office in Dublin, Ireland. Pharma Patch sold its operating
assets and proprietary transdermal patch and penetration enchancer business in
late 1995 in exchange for approximately 784,214 shares of common stock in
Technical & Chemical Products, Inc. On February 15, 1996, Pharma Patch publicly
announced that its board of directors had approved the acquisition of a
controlling interest in Vista subject to negotiations and execution of
definitive agreements.
Arrangements currently in negotiation between the Company and Pharma Patch
contemplate that the Company will receive additional equity financing from
Pharma in a series of transactions. As a result of those proposals and Pharma
Patch's intention to acquire other shares from certain Vista stockholders in
privately-negotiated transactions, it is expected Pharma Patch would acquire a
controlling equity interest in the Company if definitive agreements are
negotiated and finalized.
Murray D. Watson, a director of Vista since January 31, 1994, has served since
July 1993 as Chairman of the Board, Chief Executive Officer and director of
Pharma Patch. As discussed below, Mr. Watson has been elected Vista's Vice
Chairman of the Board and Kenneth G. Howling, Chief Financial Officer of Pharma
Patch, has been elected Vista's Treasurer and Chief Financial Officer subject to
the condition in each case that definitive agreements for the financing
transactions in negotiation between Vista and Pharma Patch are executed.
F-18
<PAGE> 19
VISTA TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
============================
NOTE 16 - SUBSEQUENT EVENTS (CONTINUED)
EMPLOYMENT AGREEMENT WITH TS
The Company has entered into employment agreement dated as of January 31, 1996
with its recently elected President and Chief Executive Officer (TS). The
employment agreement with TS is for a term of 36 months from January 15, 1996
and is renewable thereafter on a year-to-year basis unless either party provides
at least 60 days prior notice of termination before the expiration of its
original term or any renewal term. The agreement provides for an annual base
salary of $150,000, participation in group benefit programs, payment of his
existing insurance premiums for long-term disability and life insurance for the
initial 12 months of the agreement, and an amount not exceeding 7 1/2% of his
base salary for personal benefit expenses relating to TS and his family members
as he shall determine. TS is eligible to receive an annual performance bonus of
up to 100% of his annual base salary based upon achievement of Company goals to
be determined by the Board of Directors. In addition he is entitled to a cash
bonus of $75,000 upon the filing of the two registration statements for public
offerings by Vista (one of which may be an initial public offering proposed by
Vista Laser Centers of the Southwest, Inc., currently in preparation). TS's
employment agreement further provides he is entitled to severance benefits if
his employment is involuntarily terminated, other than for cause (as defined in
the agreement), death or disability, equal to (i) a lump-sum payment equal to
his annual base salary, (ii) continuation of insurance benefits for life,
health, dental and long-term disability for a period of 12 months after
employment termination, and (iii) continued vesting of his outstanding stock
options for a period of 12 months after employment termination. TS is required
to devote his full business time to the affairs of the Company except for such
investment, business, professional and continuing education activities that do
not interfere with the performance of his duties as the Company's President and
Chief Executive Officer. The employment agreement contains confidentiality and
non-competition provisions in favor of the Company.
GRANT OF STOCK OPTIONS
On February 6, 1996, the Company amended its 1994 Stock Option Plan (the "1994
Plan") to increase the number of shares covered by the 1994 Plan from 150,000
shares to a total of 1,900,000 shares of common stock. The amendment of the 1994
Plan is subject to approval by stockholders of the Company within one year from
the date of Board authorization for the amendment.
On February 15, 1996, the Company granted stock options under the 1994 Plan
covering an aggregate of 1,650,000 shares of its common stock to 11 persons. All
of these options are exercisable at a price of $2.50 per share, which in the
opinion of the Board was not less than the fair market value of the Company's
common stock on that date. A portion of these options covering 633,000 shares
will vest and may be exercised only after the 30th trading day (whether or not
consecutive) following the date of grant on which the closing price for the
Company's common stock price equals or exceeds $10.00 per share. The remaining
options will vest and may be exercised in 12 equal quarter-annual installments
commencing on May 15, 1996 subject to the optionee's continued employment by, or
active service as a director or consultant for, the Company at the time each
installment vests. Each option is for a term of five years subject to possible
earlier termination in accordance with provisions of the 1994 Plan.
F-19
<PAGE> 1
EXHIBIT 1.(B)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION
In March 1996, Pharma Patch Plc ("Pharma Patch" or, the "Company")
acquired 3,160,000 common shares or 61.3% ("Vista Acquisition") of the issued
and outstanding capital of Vista Technologies, Inc. ("Vista"). The Company
acquired 2,260,000 newly issued shares from Vista for $500,000, a
$750,000 promissory note and 200,000 shares of Technical Chemicals and
Products, Inc. common stock. In addition, the Company acquired 900,000 shares
of Vista from outside investors in exchange for 4,500,000 newly issued shares
of the Company. The pro forma financial information has been prepared with
respect to the pro forma condensed consolidated balance sheet, with the Vista
acquisition included in Pharma Patch consolidated balance sheet contained
within Pharma Patchs' November 30, 1995 interim report and with respect to the
pro forma condensed consolidated statement of Statement of Operations,
with the assumption that the Vista acquisition occurred on March 1, 1995.
The unaudited pro forma consolidated balance sheet has been prepared using
the unaudited historical consolidated balance sheet and accompanying notes of
Pharma Patch Plc for the period ended November 30, 1995 and the unaudited
historical consolidated balance sheet and accompanying notes of Vista for the
period ended December 31, 1995. The unaudited pro forma consolidated statement
of operations for the nine months ended November 30, 1995 has been
prepared using the unaudited historical consolidated statement of loss and
accompanying notes of Pharma Patch Plc for the nine months ended November 30,
1995 and the unaudited historical consolidated statement of operations and
accompanying notes of Vista for the nine months ended December 31, 1995. The
unaudited pro forma consolidated statement of operations for the twelve
months ended February 28, 1995 have been prepared using the audited historical
consolidated statement of loss and accompanying notes of Pharma Patch Plc for
the twelve months ended February 28, 1995 and the historical audited
consolidated statement of operations and accompanying notes of Vista for the
twelve months ended March 31, 1995. The unaudited pro forma consolidated
statement of operations for the nine months ended November 30, 1995 and the
consolidated statement of profit and loss for the twelve months ended February
29, 1996 have been adjusted to exclude the results of discontinued operations.
The unaudited pro forma financial information gives effect to the Vista
acquisition under the purchase method of accounting based on the assumptions and
adjustments described in the accompanying notes. It should be understood that
the unaudited pro forma condensed consolidated financial statements do no
reflect actual consolidated financial position or results of operations since
among other factors, actual expenses may be lower or higher than amounts
assumed or estimated. The unaudited pro forma condensed consolidated
financial statements may not be indicative of the results that actually would
have occurred if the transaction had taken place on the dates indicated nor do
they represent a basis for assessing future performance. The unaudited pro
forma consolidated financial statements should be read in conjunction with the
historical financial statements and the accompanying notes of
Pharma Patch Plc and Vista.
<PAGE> 1
EXHIBIT 2.(B)
PHARMA PATCH PLC
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
Pharma Vista Pro forma
Patch Plc Technologies, Inc. totals as of
as of as of ADJUSTMENTS November 30,
November 30, 1995 December 31, 1995 DEBIT CREDIT 1995
$ $ $ $
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash, accounts receivable, prepaid expenses,
investment securities, other assets 1,156,825 869,429 - - 2,026,254
Property and equipment - 1,414,920 - - 1,414,920
Investment in Technical Chemicals and
Products, Inc. 11,919,000 - - - 11,919,000
Cost in excess of net assets acquired - - 5,763,930(a) - 5,763,930
- -------------------------------------------------------------------------------------------------------------------------------
Total Assets 13,075,825 2,284,349 5,763,930 - 21,124,104
===============================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, note payable, current portion
of long term debt, redeemable common stock
accrued liabilities, deferred revenue,
other liabilities 1,068,286 1,256,179 - - 2,324,465
Long term debt - 783,833 - - 783,833
Minority interest - 603,914 - 2,047,394 2,651,308
SHAREHOLDERS' EQUITY (DEFICIENCY)
Capital stock @ par value 2,240,781 13,231 15,800(c) 911,300(c) 3,149,512
Premium in excess of par value 14,509,111 13,513,796 16,960,236(c) 5,620,700(c) 16,683,371
Deficit (4,742,353) (14,160,572) - 14,160,572(c) (4,742,353)
Foreign currency adjustment - 273,968 - - 273,968
- -------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity (deficiency) 12,007,539 (359,577) 16,976,036 22,739,966 15,364,498
- -------------------------------------------------------------------------------------------------------------------------------
13,075,825 2,284,349 22,739,966 22,739,966 21,124,104
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE> 1
EXHIBIT 3.(B)
PHARMA PATCH PLC
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
Pharma Vista Pro forma
Patch Plc Technologies, Inc. totals for the
for the nine for the nine nine month
month period ended month period ended period ended
November 30, 1995 December 31, 1995 ADJUSTMENTS November 30, 1995
$ $ $ $
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE - 1,405,975 - 1,405,975
EXPENSES
General & Administrative 1,120,154 1,401,295 - 2,521,449
Depreciation & amortization - 167,367 288,197(d) 455,564
Interest expense (income) (10,264) 80,511 - 70,247
Other 1,852 (22,316) - (20,464)
Loss from continuing operations
before minority interest (1,111,742) (220,882) (288,197) (1,620,821)
Minority Interest - 32,422 72,934(e) 105,356
- ---------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations (1,111,742) (188,460) (215,263) (1,515,465)
- ---------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations
per ordinary share (.14) (.12)
=================================================================================================================================
Weighted average number of
ordinary shares outstanding 7,905,493 4,500,000(c) 12,405,493
=================================================================================================================================
</TABLE>
See accompanying notes.
<PAGE> 1
EXHIBIT 4.(B)
PHARMA PATCH PLC
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
Pharma Vista Pro forma
Patch Plc Technologies, Inc. totals for the
for the twelve for the twelve twelve month
month period ended month period ended period ended
February 28, 1995 March 31, 1995 ADJUSTMENTS February 28, 1995
$ $ $ $
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE - 1,073,941 - 1,073,941
EXPENSES
General & Administrative 1,141,301 1,732,486 - 2,875,787
Depreciation and amortization - 260,870 384,262(d) 645,132
Interest expense (income) (42,800) 9,871 - (32,929)
Write-off of Cangene
Acquisition Costs 514,791 514,791
Loss on disposal of
Cangene Investment 478,052 478,052
Other (52,253) (75,758) - (128,011)
Loss from continuing operations
before minority interest (2,039,091) (853,528) (384,262) (3,278,881)
Minority Interest - 193,842 255,264(e) 449,106
- ---------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations (2,039,091) (659,686) (128,998) 2,829,775
- ---------------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations
per ordinary share (.38) (.29)
=================================================================================================================================
Weighted average number of
ordinary shares outstanding 5,368,298 4,500,000(c) 9,868,298
=================================================================================================================================
</TABLE>
See accompanying notes.
<PAGE> 1
EXHIBIT 5.(B)
PHARMA PATCH PLC
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
PRO FORMA ADJUSTMENTS
a) To record the cost in excess of net assets acquired related to the
Vista acquisition. Consideration for both components of the Vista
transaction include the following:
Cash $ 500,000
Note payable 750,000
TCPI investment (200,000 shares) 3,032,000
Pharma Patch plc
common stock (4,500,000 shares) 2,250,000
----------
$6,532,000
The cost in excess of net assets acquired was calculated utilizing
the original carrying value of the TCPI investment ($15.16 per share).
TCPI shares had a fair value of $22.00 per share on the date of the
Vista transaction and are currently trading at approximately
$14.00 per share.
b) To record the minority interest in the consideration paid by Pharma
Patch Plc for Vista (38.7%).
c) To record the issuance of 4,500,000 newly issued shares of the
Company at a fair market value of $.50 per share and to eliminate
prior ownership of Vista (including 2,260,000 newly issued shares
of Vista).
d) To record the amortization of the cost in excess of net assets
acquired (15 year life assumed for entire excess cost as final
allocation of purchase price is not yet complete).
e) To record the 38.7% minority interest of Vista's net loss not acquired
by Pharma Patch Plc.
<PAGE> 1
EXHIBIT 1.(C)
[A.J. ROBBINS, INC. LETTERHEAD]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of our
report dated May 24, 1995 (Except for Note 20 as to which the date is December
16, 1995) on the financial statements of Vista Technologies, Inc. and
Subsidiaries included in or made part of this form 8-K.
/s/ A.J. ROBBINS, PC
----------------------------
A.J. ROBBINS, PC
Denver, Colorado
May 21, 1996
