-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kh1mficgpzzTg0VWjeCSYkmp7tOAkkQ+gZI5/YBsfcuOc12a/XVHyHBM0m3t3pJv +HevMmTgF++CMtvNh+XmAg== 0000892569-96-001363.txt : 19960802 0000892569-96-001363.hdr.sgml : 19960802 ACCESSION NUMBER: 0000892569-96-001363 CONFORMED SUBMISSION TYPE: SB-2/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19960801 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VISTA LASER CENTERS OF MICHIGAN INC CENTRAL INDEX KEY: 0001006186 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 133847240 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-00448 FILM NUMBER: 96602212 BUSINESS ADDRESS: STREET 1: 2224 WALKER RD STREET 2: SUITE 30 CITY: WINDSOR STATE: A1 ZIP: 10022 BUSINESS PHONE: 2128329292 MAIL ADDRESS: STREET 1: 126 E 56TH ST STREET 2: 2ND FL CITY: NEW YORK STATE: NY ZIP: 10022 SB-2/A 1 FORM SB-2 AMENDMENT #3 DATED 8-1-96 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 1, 1996 REGISTRATION NO. 333-00448 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 3 TO FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ VISTA LASER CENTERS OF MICHIGAN, INC. (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER) ------------------------ NEVADA 8093 13-3847240 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
2224 WALKER ROAD WINDSOR, ONTARIO, CANADA N8W 3P6 (519) 253-3396 (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES) (ADDRESS OF PRINCIPAL PLACE OF BUSINESS OR INTENDED PLACE OF BUSINESS) THEODORE J. MAYER, SECRETARY 80 BROAD STREET, SUITE 605 NEW YORK, NEW YORK 10004 (212) 635-0838 (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE) ------------------------ WITH COPIES TO: LAW OFFICE OF WILLIAM M. CURTIS GARRY S. O'RAFFERTY, ESQ. 25241 BUCKSKIN DRIVE TITUS, BRUECKNER & BERRY, P.C. LAGUNA HILLS, CALIFORNIA 92653-5736 7373 NORTH SCOTTSDALE ROAD, SUITE B-252 SCOTTSDALE, ARIZONA 85253
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: as soon as practicable after this Registration Statement shall become effective. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the Prospectus is expected to be made pursuant to Rule 434, please check the following box. / / CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------- 10% Series A Cumulative Convertible Preferred Stock(2)................ 920,000 shares $5.00 $4,600,000 $ 1,586.21 - ------------------------------------------------------------------------------------------------------------------- Underwriter's Warrants.............. 80,000 warrants $0.001 $ 80 .03 - ------------------------------------------------------------------------------------------------------------------- 10% Series A Cumulative Convertible Preferred Stock issuable upon exercise of Underwriter's Warrants(4)....................... 80,000 shares $6.00 $ 480,000 165.52 - ------------------------------------------------------------------------------------------------------------------- Common stock(3)(4).................. 1,000,000 shares -0- -0- -- - ------------------------------------------------------------------------------------------------------------------- TOTAL $ 1,751.76 - ------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457 and based upon the proposed maximum offering price. (2) Includes 120,000 shares subject to the Underwriter's over-allotment option. See "Underwriting." (3) Includes shares of Common Stock issuable upon conversion of 10% Series A Cumulative Convertible Preferred Stock. (4) Pursuant to Rule 416, there are also being registered hereunder such additional securities as may become issuable upon conversion of 10% Series A Cumulative Convertible Preferred Stock or upon exercise of the Underwriter's Warrants pursuant to anti-dilution provisions. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 VISTA LASER CENTERS OF MICHIGAN, INC. CROSS-REFERENCE SHEET
FORM SB-2 ITEM NUMBER AND CAPTION LOCATION OR HEADING IN PROSPECTUS - ------------------------------------------------------- ------------------------------------- 1. Front of Registration Statement and Outside Front Cover Page of Prospectus......................... Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus....................................... Inside Front Cover Page; Outside Back Cover Page 3. Summary Information and Risk Factors............. Prospectus Summary; Risk Factors 4. Use of Proceeds.................................. Prospectus Summary; Use of Proceeds 5. Determination of Offering Price.................. Risk Factors; Underwriting 6. Dilution......................................... Dilution 7. Selling Security Holders......................... (Not Applicable) 8. Plan of Distribution............................. Outside Front Cover Page; Underwriting 9. Legal Proceedings................................ (Not Applicable) 10. Directors, Executive Officers, Promoters and Control Persons.................................. Management; Certain Transactions; Principal Stockholders 11. Security Ownership of Certain Beneficial Owners and Management................................... Management; Certain Transactions; Principal Stockholders 12. Description of Securities........................ Outside Front Cover Page; Prospectus Summary; Description of Securities; Federal Income Tax Considerations; Underwriting 13. Interests of Named Experts and Counsel........... (Not Applicable) 14. Disclosure of Commission Position on on Indemnification for Securities Act Liabilities... (Not Applicable) 15. Organization Within Last Five Years.............. Certain Transactions 16. Description of Business.......................... Prospectus Summary; Risk Factors; Use of Proceeds; Capitalization; Selected Financial Data; Management Discussion and Analysis and Plan of Operation; Proposed Business; Certain Transactions; Dividend Policy; Financial Statements 17. Management Discussion and Analysis or Plan of Operation........................................ Management Discussion and Analysis and Plan of Operation 18. Description of Property.......................... Proposed Business 19. Certain Relationships and Related Parties........ Management; Certain Transactions 20. Market for Common Equity and Related Stockholder Matters.......................................... (Not Applicable) 21. Executive Compensation........................... Management 22. Financial Statements............................. Summary Financial Data; Financial Statements 23. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.............. (Not Applicable)
3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED AUGUST 1, 1996 PROSPECTUS VISTA LASER CENTERS OF MICHIGAN, INC. 800,000 SHARES OF 10% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK The 800,000 shares of 10% Series A Cumulative Convertible Preferred Stock, par value $.01 per share ("Series A Preferred") of Vista Laser Centers of Michigan, Inc., a Nevada corporation (the "Company") are being offered by the Company in a firm commitment underwriting at a price of $5.00 per share. Shares of Series A Preferred are entitled to a $.50 cumulative dividend per annum, payable annually in cash or, if cash dividends may not legally be paid or if cash resources are insufficient, at the Company's option in Series A Preferred or Common Stock. Commencing 30 days after the date of this Prospectus, each share of Series A Preferred is convertible into one (1) share of the Company's common stock, par value $.01 per share ("Common Stock"), subject to adjustment in certain events to prevent dilution. Series A Preferred may be redeemed at the option of the Company at any time upon not less than 30 days' prior written notice at a redemption price of $7.50 per share. The liquidation preference of Series A Preferred is $5.00 per share and each share is entitled to one vote on all matters on which any stockholders are entitled to vote. See "Description of Securities", "Principal Stockholders" and "Underwriting". Prior to this offering, there has been no public market for any securities of the Company and there can be no assurance that an active public market will develop or, if developed, that it will be sustained. The initial offering price of the Series A Preferred stock was determined by negotiations between the Company and Dickinson & Co. (the "Representative"), as representative of the several underwriters, and does not necessarily relate to the Company's book value or other established criteria of value. See "Underwriting". The Company has applied for listing of the Series A Preferred Stock on the Nasdaq Small Cap Market under the trading symbol "IIMIP", but there can be no assurance that such application will be approved. Even if approved for listing, the Company will be required to maintain certain minimum criteria to maintain such listing, as to which there can be no assurance. THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD NOT BE PURCHASED BY ANY PERSON WHO CANNOT AFFORD RISK OF LOSS OF THE INVESTMENT. SEE "RISK FACTORS" AT PAGE 7 OF THIS PROSPECTUS. THESE ARE SPECULATIVE SECURITIES. THE COMPANY IS IN THE DEVELOPMENT STAGE AND CURRENTLY HAS NO OPERATIONS PRIOR TO THIS OFFERING. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO PUBLIC AND COMMISSIONS(1) COMPANY(2) - ----------------------------------------------------------------------------------------------------- Per Share........................... $5.00 $.50 $4.50 Total(3)............................ $4,000,000 $400,000 $3,600,000 - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------
(1) In addition, the Company has agreed to pay to the Representative a 3% nonaccountable expense allowance and to sell to the Representative warrants ("Underwriter's Warrants") exercisable at $6.00 per share to purchase 80,000 shares of Series A Preferred stock. The Company has agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriting." (2) Before deducting expenses of the offering, including the nonaccountable expense allowance in the amount of $120,000 ($138,000 if the Underwriters' over-allotment option is exercised in full), payable by the Company estimated at $200,000. (3) The Company has granted the Underwriters an option exercisable within 45 days after the date of this Prospectus, to purchase up to 120,000 additional shares of Series A Preferred for the purpose of covering over-allotments, if any. If the Underwriters exercise such option in full, the total Price to Public, Underwriting Discounts and Commissions and Proceeds to Company will be $4,600,000, $460,000 and $4,140,000, respectively. See "Underwriting." The shares offered hereby are offered by the several Underwriters subject to prior sale, when, as and if delivered to and accepted by them, including the right of the Underwriters to withdraw, cancel or reject orders in whole or in part and subject to certain other conditions. It is expected that the delivery of certificates representing the shares will be made against payment on or about , 1996 at the offices of the Representative. DICKINSON & CO. REDSTONE SECURITIES, INC. The date of this Prospectus is , 1996. 4 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A PREFERRED STOCK AND THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. ADDITIONAL INFORMATION The Company has filed with the Securities and Exchange Commission ("Commission") a Registration Statement on Form SB-2 under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the securities covered by this Prospectus. For the purposes hereof, the term "Registration Statement" means the original Registration Statement and any and all amendments thereto, including the schedules and exhibits to such original Registration Statement or any such amendment. This Prospectus, which forms a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, to which reference is hereby made. Each statement made in this Prospectus concerning a document filed as an exhibit to the Registration Statement is qualified in its entirety by reference to such exhibit for a complete statement of its provisions. Any interested party may inspect the Registration Statement, without charge, at the public reference facilities of the Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional offices in Chicago (Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661) and in New York (Seven World Trade Center, Suite 1300, New York, New York 10048). Any interested party may obtain copies of all or any portion of the Registration Statement at prescribed rates from the Public Reference Section of the Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. U.S. DOLLAR PRESENTATION The Company publishes its consolidated financial statements in U.S. dollars. The Company's initial business operations will be located in Canada and it is anticipated that a significant portion of its revenues and expenses may be collected and paid in Canadian dollars. Income and expense items in Canadian currency will be translated at the weighted average exchange rate prevailing during the period, except that expenses related to nonmonetary assets and liabilities will be translated at historical rates. Except as otherwise stated herein, in this Prospectus all references to "$" are to United States currency and all monetary amounts are presented in U.S. dollars. The Company intends to furnish its stockholders each year with annual reports containing audited financial statements and a report thereon expressed by independent public accountants and such other reports as the Company deems appropriate or as may be required by law. 2 5 PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to, and should be read in conjunction with, the more detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Each prospective investor is urged to read this Prospectus in its entirety. An investment in the securities offered hereby involves a high degree of risk and the securities should not be purchased except by those able to afford the loss of their investment. See "Risk Factors." Unless otherwise indicated, all per share data and information in this Prospectus relating to the number of shares assumes that the Underwriter's over-allotment option to purchase an additional 120,000 shares of Series A Preferred stock is not exercised and that the Underwriter's Warrants to purchase 80,000 shares of Series A Preferred stock are not exercised. A glossary of certain medical and other terms used in this Prospectus is set forth under the caption "Glossary" at the end of this Prospectus. THE COMPANY Vista Laser Centers of Michigan, Inc. (the "Company") is a development stage enterprise recently organized on June 30, 1995 to acquire advanced laser medical equipment and to manage and administer laser vision correction ("LVC") support services ("LVC Services") under contracts with independent ophthalmologists ("MDs") and optometrists ("ODs"). The Company's activities to date have consisted primarily of market research, seeking affiliations with experienced LVC eye care professionals, and negotiating agreements to acquire equipment and provide support services to vision care professionals in Ontario and Michigan. The Company will enter into nonexclusive service agreements with independent MDs and ODs who desire to contract for use of the Company's equipment and LVC Services. The Company will earn its fees for the fair market value of the Company's LVC Services by billing health care professionals at the time of use, with such fees typically based upon a negotiated percentage of the gross procedure fees charged to patients by the professional; payment normally will be received when the professional collects its gross procedure fee from the patient. The gross procedure fee is established by the professional, except that the Company's consent will be required for gross procedures fees at less than $1,200 per eye. Generally speaking, gross procedure fees charged by professionals for LVC treatment in most markets currently ranges from approximately $1,500 to $2,000 per eye, although there can be no assurance these levels will be maintained for the long term. Support services offered by the Company will include, among others, access to the Company's equipment, supplies and support personnel; administration of accounting, billing, collection and other information processing functions; training and education in advanced LVC procedures; and marketing support. There can be no assurance that MDs and ODs will require and contract for the Company's LVC Services, and professionals that do contract with the Company legally cannot be required to use exclusively the Company's services for their LVC practice. Advanced equipment planned to be acquired by the Company in the United States. and Canada include excimer lasers for photorefractive keratectomy ("PRK") procedures recently approved for use in the U.S. and, in Canada, other forms of laser procedures which are not yet approved for use in the U.S., such as laser assisted in situ keratomileusis ("LASIK"). PRK laser treatment is useful in correcting the vast majority of nearsighted (myopia) refractive disorders as an alternative to eyeglasses, contact lens or surgical incision procedures such as radial keratotomy ("RK"). LASIK, although a more delicate procedure than PRK, offers advantages of quicker healing and may also be used to treat farsightness (hyperopia), astigmatism and more extreme cases of myopia. PRK, LASIK and other LVC procedures performed with excimer and holmium laser systems improve visual acuity by removing submicron layers of tissue from the surface of the cornea to reshape the eye. LVC procedures are administered on an outpatient basis by the independent health care professional, typically requiring from 15 to 30 minutes for the actual procedure in addition to pre-operative diagnosis and subsequent post-operative care. A key part of the Company's strategy is to offer professionals the benefit of training, consulting and advisory services of certain ophthalmologists experienced in a variety of LVC treatments, procedures and post-operative care. In order to obtain access to this expertise, the Company has entered into consulting agreements 3 6 with Dr. Donald G. Johnson of British Columbia and Dr. J. Charles Casebeer of Arizona, who are directors and stockholders of the Company. Dr. Casebeer's professional corporation will receive compensation for his services as Chairman of the Board and for assisting in management of the Company's training program for MDs and ODs. To date, Dr. Johnson has successfully treated over 7,000 eyes using LVC procedures and has developed an advanced proprietary method called the Johnson transepilthelial multi-zone, multi-pass PRK procedure ("TMM PRK") currently approved for use in Canada and covered by a patent application owned by Dr. Johnson. Dr. Casebeer's experience includes more than 6,000 keratorefractive procedures (surgical incisions of the cornea), over 100 PRK cases for treatment of myopia and approximately 40 LASIK procedures in the U.S. under protocols established by the U.S. Food and Drug Administration ("FDA"), as well as approximately 150 LASIK cases in France, Saudi Arabia and the Far East. Dr. Casebeer has served as a course director for refractive surgical techniques and developments at numerous courses and symposiums throughout the world. See "Management" and "Certain Transactions". To date, the Company has assumed a lease to acquire a Summit Technology holmium laser system for intended use in Michigan and has contracted upon completion of this offering to purchase from Dr. Fouad Tayfour of Windsor, Ontario, a Summit excimer laser system, a Sunrise Technologies LTK holmium laser system and related equipment for use at facilities in Windsor, Ontario to be subleased by the Company from an affiliate of Dr. Tayfour. The Company has entered into other agreements with Dr. Tayfour for him to render consulting services to the Company, to train other MDs and ODs, and to define terms for use by Dr. Tayfour of equipment and LVC Services to be offered by the Company upon completion of this offering. Dr. Tayfour also has the right of designating the Company's Chief Executive Officer and three of six members of its board of directors. Since 1991, Dr. Tayfour has performed more than 2,000 LVC procedures in Canada, principally by use of the LASIK technique. Vista Technologies Inc. ("Vista Technologies") is a founder and principal stockholder of the Company. The Company has entered into agreements with Vista Technologies and Refractive Services 800 Corp. ("RS-800"), a wholly-owned subsidiary of Vista Technologies. Vista Technologies currently operates five PRK surgical centers in Europe and will provide certain consulting services to the Company for a fee equal to 5% of the Company's revenues attributable to LVC Services less a credit of $5,000 per month. RS-800 has agreed to license, at the Company's option, use of certain 800 and 900 area code telephone numbers as part of the Company's marketing and public education programs for a fee equal to 2 1/2% of LVC Services revenues directly attributable to use of those numbers, if any. Vista Technologies and its corporate affiliates have formed, and intend to form and sponsor in the future, additional LVC Service companies using the Vista Laser Centers name in other North American geographic markets. Dr. Johnson is Chairman of the Board of Vista Technologies and Drs. Johnson and Casebeer were elected directors of Vista Technologies on February 16, 1996; it is anticipated they will act as consultants for Vista Technologies in these other enterprises. Investors in this offering will not acquire an interest in other companies formed and sponsored by Vista Technologies. The Company's principal executive offices are located at 2224 Walker Road, Windsor, Ontario N8W 3P6, Canada, telephone number (519) 253-3396. It is anticipated that the Company's Canadian operations will be conducted through a recently-formed, wholly-owned Ontario subsidiary that has not previously engaged in any business activities. All references in this Prospectus to the Company includes both the Company and its subsidiaries unless otherwise indicated by the context. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation", "Proposed Business", "Management" and "Certain Transactions". 4 7 THE OFFERING Securities Offered: 800,000 shares of Series A Preferred stock at a price of $5.00 per share. See "Description of Securities" and "Underwriting". Securities to be outstanding after this 900,000 shares of Series A Preferred stock, 200,000 shares of offering(1): Series B Preferred stock and 30,000 shares of Common Stock. Summary terms of Series A Preferred: Dividends 10% ($.50 per share) cumulative dividend per annum, payable annually commencing one year after this offering. Dividends will be payable in cash or, at the Company's option, may be paid in Series A Preferred or Common Stock subject to the prior registration of such dividend shares under the Securities Act of 1933. Conversion Rights Each share will be convertible into one (1) share of Common Stock at any time commencing 30 days after the date of this Prospectus until the second business day prior to redemption of Series A Preferred, if called for redemption. Optional Redemption Each share will be redeemable at the option of the Company upon not less than 30 days' prior written notice at a redemption price of $7.50 per share. There are no sinking fund or other mandatory redemption provisions. Voting One vote per share on all matters on which stockholders are entitled to vote or consent. Liquidation Preference $5.00 per share. Use of Proceeds: Proceeds will be applied to equipment purchases and hiring personnel to provide LVC Services and related working capital requirements. At least $500,000 of such proceeds used for equipment purchases will be paid to an affiliate of Dr. Fouad Tayfour, who has entered into certain agreements with the Company effective upon completion of this offering, and at least $155,000 of proceeds will be applied to the payment of compensation to officers and directors within 12 months after the date of this Prospectus. An affiliate of Dr. Tayfour will also receive a $500,000 10% note payable due on the second anniversary of the date of this Prospectus. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation", "Proposed Business", "Management" and "Certain Transactions". Risk Factors: The securities offered hereby are speculative, involve a high degree of risk, and should not be purchased by investors who cannot afford the loss of their investment. Investors should review and carefully consider the information set forth under "Risk Factors" and "Dilution".
- --------------- (1) Does not include the Underwriter's over-allotment option, shares of Series A Preferred stock reserved for issuance upon exercise of the Underwriter's Warrants, shares of Common Stock reserved for conversion of Series A Preferred and Series B Preferred stock or shares reserved for issuance upon exercise of outstanding Class A Warrants and stock options. See "Management -- 1995 Stock Option Plan", "Description of Securities" and "Underwriting". 5 8 SUMMARY FINANCIAL INFORMATION CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
PERIOD FROM INCEPTION (JUNE 30, 1995) THROUGH MARCH 31, 1996 ----------------------- Interest income......................................... $ 557 Net (loss) adjusted for dividends in arrears............ $ (50,689) Net (loss) per common and common equivalent share....... $ (0.22) Weighted average common and common equivalent shares outstanding........................................... 226,269 Dividends in arrears.................................... $ 16,042
CONSOLIDATED BALANCE SHEET DATA:
MARCH 31, 1996 --------------------------- ACTUAL AS ADJUSTED(1) -------- -------------- Current assets..................................... $ 39,648 $2,322,353 Total assets....................................... $370,584 $4,856,142 Long-term debt..................................... -- $ 916,192 Stockholders' equity............................... $312,450 $3,939,950
- --------------- (1) Gives effect to (i) the sale of 800,000 shares of Series A Preferred stock offered hereby, (ii) the anticipated application of estimated net proceeds therefrom (after the deduction of underwriting discounts and commissions and estimated expenses to be incurred by the Company in connection with such offering), including cash outlays for equipment purchases totaling $550,000 and a $500,000 10% note payable due on the second anniversary of the date of this Prospectus to Dr. Fouad Tayfour and certain other cash payments to unaffiliated third parties for equipment totaling $700,000 and an investment in a proposed joint venture totaling $150,000, and (iii) the assumed exercise of 270,000 outstanding Class A Warrants and 50,000 outstanding stock options. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation", "Management -- 1995 Stock Option Plan", "Certain Transactions", "Description of Securities" and "Underwriting". 6 9 RISK FACTORS An investment in the securities offered hereby involves a high degree of risk and should not be purchased by persons who cannot afford the loss of their entire investment. The following factors, in addition to those discussed elsewhere in this Prospectus, should be considered carefully in connection with an investment in the securities of the Company offered hereby. LIMITED OPERATING HISTORY AND DEVELOPMENT STAGE; ACCUMULATED DEFICIT. The Company was organized on June 30, 1995 and is in the development stage. Since its inception, the Company's activities have been devoted to development of its plan of operations, negotiating agreements to acquire equipment and advisory services for planned business activities that will commence immediately upon completion of this offering, and raising capital to fund initial development activities and the expenses of this public offering. Accordingly, the Company has not generated any revenues and has no operating history from which to forecast its future business and operations. As of March 31, 1996, the Company has an accumulated deficit from operations since its inception of $34,647 and deferred costs of this offering of $113,339. The Company will be subject to numerous risks incident to the creation of new businesses with no prior history of operations. Prospective investors should consider the frequency with which newly developed businesses encounter unforeseen expenses, difficulties, complications and delays, and other factors such as the possibility of competition with larger companies. As examples, the Company may experience unanticipated delays in the development of its LVC Services, there can be no prediction as to the amount of revenues it will generate and whether such revenues will be sufficient to provide positive cash flows, and it may be difficult or impossible to obtain additional financing if required for the Company's business. There can be no assurance that the Company will achieve profitability in the future or that profitability, if achieved, will be sustained. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation", "Proposed Business" and "Certain Transactions". ABILITY TO CONTINUE AS A GOING CONCERN. The report of the Company's independent certified public accountants contains an explanatory paragraph as to the Company's ability to continue as a going concern. Among other factors cited by the accountants as raising substantial doubt as to the Company's ability to continue as a going concern is that the Company is dependent upon raising additional financing through a public or private offering to meet its obligations and commitments. See the Consolidated Financial Statements elsewhere in this Prospectus. DEPENDENCE ON MEDICAL PROFESSIONALS. Applicable laws in Canada and the United States prevent a corporation (other than a professional medical corporation) from providing medical and health care services to patients. The Company will conduct its business by offering LVC equipment for use by licensed professionals and providing billing, accounting, administrative, marketing and management services to independent health care professionals who provide refractive eye care. The Company's ability to realize revenues from independent professionals, therefore, will be significantly dependent upon its ability to attract the use of its equipment and LVC Services by ophthalmologists ("MDs") and optometrists ("ODs") and on the performance of those professionals. In addition, the amount of revenues to be received by the Company will be dependent upon the amount of the gross procedure fee charged by professionals to their patients, and the amount of such fees are established by the professionals and not by the Company. To date the Company has entered into only one services agreement with a licensed professional, Dr. Fouad Tayfour, although others are in negotiation. There can be no assurance that professionals will require and contract for the Company's LVC Services, and even those professionals that do contract with the Company cannot be required to use the Company's services for their LVC practice on an exclusive or any other basis. See "Proposed Business". NO ASSURANCE OF MARKET ACCEPTANCE. The Company's proposed business of offering LVC Services to support advanced laser procedures such as PRK, TMM PRK and LASIK, involves recently developed technology and procedures and is a field subject to technological innovation and governmental regulation. There can be no assurance that health care professionals will require and contract for the Company's LVC Services. The Company believes that its profitability and growth will depend on broad market acceptance of LVC procedures in the United States and Canada by health care professionals in the ophthalmic community and the general public. Market acceptance of new methodology requires substantial time and effort and is 7 10 subject to various risks. The acceptance of LVC care may be adversely affected by its cost, concerns relating to safety and efficacy, general resistance to surgery, the effectiveness of alternative methods of correcting refractive vision disorders, the lack of long-term follow-up data, the possibility of unknown side effects and the lack of third-party reimbursement for the procedures. Many consumers may choose not to have LVC due to the availability of conventional nonsurgical and manually surgical methods of vision correction. Any future reported adverse effects or other unfavorable publicity involving patient outcomes from LVC could also adversely affect the Company's proposed business. Market acceptance could also be affected by the ability of the Company's consultants and other participants in the LVC market to train a broad population of MDs in LVC procedures. There can be no assurance there will be significant public acceptance of LVC technologies, and demand for the Company's equipment and LVC Services would be adversely affected if broad market acceptance of such procedures is not attained. COMPETITION. The refractive eye care business generally, and the market for corrective LVC procedures for which the Company intends to provide equipment and support services, are characterized by intense competition and technological innovation. Most of the companies engaged in these businesses have substantially greater financial resources, personnel, marketing experience and other capabilities than are currently available to the Company or will be available to the Company upon the completion of this offering. With recent PMA approval or conditional approval of PRK laser equipment systems by the FDA in late 1995, the Company believes that competition for PRK service facilities within the United States has and will continue to rapidly intensify. In addition, there are manual surgical alternatives to LVC procedures for vision correction, such as radial keratotomy ("RK"), that are generally less expensive than LVC procedures; notwithstanding certain limitations, manual refractive surgical procedures as well as eyeglasses and contact lenses are expected to remain competitive in the market for refractive eye care due to cost considerations. See "Business -- Competition". DEPENDENCE ON MANAGEMENT. The success of the Company will be substantially dependent on the services of its officers, directors and professional consultants who have experience in the refractive eye care business and, specifically, the management of surgical outpatient facilities. The Company is dependent in particular upon the services of Ghassan Barazi, its President, who has prior experience in managing a high volume ophthalmology outpatient clinic specializing in refractive surgery. The Company has entered into an employment agreement with Mr. Barazi. The Company has, or intends to, engage the services of additional professional consultants and management personnel upon completion of this offering. The Company's operations therefore will be dependent upon a limited number of key employees and consultants. Loss of the services of these or other key personnel could have a material adverse effect upon the Company. The Company does not maintain key man insurance on the lives of its executive officers and key professional consultants, although it may elect to apply for such insurance after this offering has been completed. See "Management". SUBSTANTIAL MANAGEMENT DISCRETION AS TO APPLICATION OF OFFERING PROCEEDS. The Company has entered into contractual commitments to establish an LVC Services site in Windsor, Ontario, immediately upon conclusion of this offering by the Company and is currently negotiating to acquire a 50% interest in a subsidiary to establish a second LVC Services site in Detroit, Michigan. Due to various uncertainties, such as the extent of equipment financing which may be available and the amount of future revenues that will affect operating results and cash flow requirements, the Company is currently uncertain if it can establish one or more additional sites offering LVC Services in either Michigan or Southern Ontario. As a result of these uncertainties, the actual amount expended to finance any category of expense may be increased or decreased by the Company's Board of Directors, at its discretion, if a reapportionment or redirection of funds is deemed to be in the best interests of the Company. See "Use of Proceeds" and "Management's Discussion and Analysis and Plan of Operation". RISK OF LACK OF FUNDS TO PAY CASH DIVIDENDS ON SERIES A PREFERRED. Nevada law prohibits the payment of dividends or other distributions to stockholders if, after giving effect to such distribution, the Company's total assets would be less than the sum of its total liabilities plus the amount that would be needed to satisfy liquidation preferences of its Preferred Stock. Unless shares of Preferred Stock are converted into Common Stock, after this offering the aggregate liquidation preference of all series of Preferred Stock outstanding will 8 11 be $5,000,000 ($5,600,000 if the Underwriters' over-allotment option is exercised), and the Company accordingly anticipates that its ability to pay cash dividends on Preferred Stock will be dependent upon attaining profitable operations, as to which there can be no assurance. The Company at its option, however, has the right to pay accrued dividends in either Series A Preferred or Common Stock if it would be legally prohibited from the payment of cash dividends on its Preferred Stock or if its cash resources are insufficient for the payment of dividends, subject to prior registration of such dividend shares under the Securities Act of 1933. Prospective investors should consider the risk that the Company may be unable to pay cash dividends on Series A Preferred as such dividends accrue. PROCEEDS BENEFITTING OFFICERS, DIRECTORS AND AFFILIATES. A portion of net proceeds from this offering by the Company will be used immediately to pay the $500,000 cash portion of approximately $1,050,000 in consideration to purchase an existing laser system and related equipment, which approximates its fair market value, from a corporation affiliated with Dr. Fouad Tayfour; the purchase price balance of approximately $500,000 will be financed by a two-year 10% note. The Company also will enter into an agreement to sublease certain facilities from Dr. Tayfour's corporation at a rental of approximately $2,921 (Canadian currency) per month and Dr. Tayfour has agreed to enter into a Consulting Agreement and a Facilities Agreement with the Company effective upon the completion of this offering. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation", "Proposed Business" and "Certain Transactions". In addition, a minimum of $155,000 of the Company's proceeds from this offering will be applied to payment of compensation to its executive officers for the first 12 months of operations. The Company has agreed to engage the advisory services of certain ophthalmologists upon completion of this offering, two of whom (Drs. J. Charles Casebeer and Donald G. Johnson) are directors and stockholders of the Company. The Consulting Agreement with Dr. Casebeer, Chairman of the Board and a director, provides his professional corporation with compensation at the rate of $60,000 per annum (of which $60,000 for the first year will be paid upon completion of this offering) plus additional compensation of $2,500 for management of training and credentialing each professional that enters a credentialing program to be implemented by the Company. Ghassan Barazi, President and a director, will receive an annual base salary of $75,000 under his employment agreement (increasing to $100,000 per annum commencing with the first month after the Company has attained a consolidated net profit for the three immediately preceding months), a life insurance policy for his benefit in the face amount of approximately $375,000, other employee benefits plus a one-time hiring bonus of $20,000 (payable upon completion of this offering). In the event Mr. Barazi's employment is terminated either voluntarily or involuntarily at any time during its initial five year term or is not renewed for at least one additional year at the end of its initial five year term, Mr. Barazi will be entitled to receive a $200,000 additional severance payment under certain circumstances. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation", "Management" and "Certain Transactions". The Company has entered into agreements to license the use of 800 and 900 telephone numbers from Refractive Services 800 Corp. ("RS-800"), a wholly-owned subsidiary of Vista Technologies, at the option of the Company and for certain consulting services to be provided by Vista Technologies Inc. ("Vista Technologies") over a period of ten years, including advice as to LVC developments in Europe, corporate financing, facility leases, equipment financing, coordinating activities of mutual interest with other LVC Services companies sponsored by Vista Technologies, investor relations and certain accounting and legal compliance matters. Vista Technologies is a founder and principal stockholder of the Company. Under the Consulting Services Agreement with Vista Technologies, Vista Technologies will receive 5% of the Company's revenues attributable to use of facilities and support services, less a credit to the Company of $5,000 per month. If the Company elects to use one or more of the telephone numbers licensed by RS-800, this subsidiary of Vista Technologies will receive 2 1/2% of revenues generated only as a direct result of responses to telemarketing activities of the Company by use of the licensed 800 and 900 telephone numbers. See "Proposed Business" and "Certain Transactions". POSSIBLE NEED FOR ADDITIONAL FINANCING. Due to the risks associated with its business and lack of an operating history, the Company may require additional financing at a future date to maintain or expand its business operations. In addition to proceeds of this offering, the Company plans to rely upon equipment leasing or other forms of installment purchase obligations to finance a part of its equipment requirements, although no 9 12 commitments for such financing has been yet applied for or obtained except with respect to its first location in Windsor. No assurance can be given that additional financing would be available on reasonable terms or on any terms. See "Use of Proceeds", "Management Discussion and Analysis and Plan of Operation" and "Proposed Business". CONFLICTS OF INTEREST AND POSSIBLE COMPETITION WITH FOUNDERS AND CERTAIN AFFILIATES. Vista Technologies is a founder and principal stockholder of the Company. Vista Technologies has filed trademark applications for U.S. and Canadian service mark registration of the name "Vista Laser Centers", and Vista Technologies has advised the Company that Vista Technologies and its corporate affiliates intend to organize and sponsor additional entities in the near future to acquire, manage and administer LVC equipment and LVC Services under the Vista Laser Centers name in various geographic areas of North America outside of Southern Ontario and Michigan. It is also anticipated that one or more of the health care professionals serving as part-time consultants to, or directors of, the Company (including Drs. Casebeer and Johnson) will be solicited to act as consultants to, or directors and/or officers in, one or more of these other enterprises. Dr. Casebeer and Dr. Johnson, directors of the Company, also are each directors of Vista Technologies and may also serve as directors and/or officers for other enterprises organized by Vista Technologies. Investors in this offering will not acquire an interest in other companies formed and sponsored by Vista Technologies and its affiliates. Although such other enterprises formed and sponsored by Vista Technologies will not operate from locations in Southern Ontario or Michigan, such other enterprises nevertheless may compete with LVC Services to be offered by the Company. In addition, persons serving as part-time consultants to, or directors of, the Company who agree to serve as consultants, directors and/or officers for such other enterprises may have a conflict of interest in that their time and resources may be devoted to activities other than the business of the Company or because the compensation payable to them from, or equity interests in, other business activities may be greater than their compensation from and equity interests in the Company. See "Management" and "Certain Transactions". OTHER CONFLICTS OF INTEREST ARISING FROM TRANSACTIONS WITH AFFILIATES. Refractive Services-800, Inc. invested $100,000 in the Company in July 1995, for which it received 100,000 shares of Series A Preferred stock at $1.00 per share, which is the same class of securities offered hereby at $5.00 per share. All of these 100,000 shares of Series A Preferred were purchased by Vista Technologies effective July 18, 1996. Vista Technologies has received 200,000 shares of the Company's Series B Preferred stock in exchange for the Company's acquisition of 200,000 shares of Vista Technologies common stock in November 1995, and the Company has granted Vista Technologies' Board of Directors an irrevocable proxy to vote such Vista Technologies shares for a term of five years after this offering. Vista Technologies has agreed to cause its shares of Series A and Series B Preferred stock in the Company to be voted in favor of electing up to three nominees of Dr. Tayfour to the Company's Board of Directors. See "Certain Transactions". Based upon a subsequent independent third party valuation of the Company's Series B Preferred stock as of November 16, 1995, the Company has recorded a cost for its investment in 200,000 shares of Vista Technologies common stock as of that date of $217,597. Drs. Casebeer and Johnson, directors of the Company, serve as directors of Vista Technologies. Thomas A. Schultz, President and a director of Vista Technologies, is a former director of the parent of the Representative of the Underwriters. See "Management", "Certain Transactions", "Description of Securities" and "Underwriting". As summarized above under the heading "Proceeds Benefitting Officers, Directors and Affiliates" the Company has entered in other agreements with its founders, officers, directors and affiliate. The Company may enter into other related party transactions in the future. All such transactions in the past have been approved or ratified by all of the Company's directors and in the future will be approved by not less than a majority of the directors who do not have an interest in the proposed transaction and will be on terms at least as favorable to the Company as could be obtained from independent third parties. However, these transactions involve inherent conflicts of interest between the interests of the Company and the interests of such stockholders or other related parties. See "Certain Transactions". 10 13 ABSENCE OF INDEPENDENT OUTSIDE DIRECTORS. The Company's board of directors does not include any independent outside directors. All directors were nominated by affiliates of the Company. See "Management" and "Certain Transactions." IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS. Purchasers of securities offered hereunder will experience immediate and substantial dilution of the net tangible book value of Common Stock into which their Series A Preferred shares are convertible. The immediate dilution to new investors in this offering, assuming the conversion of all Preferred Stock into Common Stock and the exercise of outstanding Class A Warrants, would be equal to $2.28 per share as of March 31, 1996 or 45.6% of the initial public offering price. In the event the Company elects to pay Preferred Stock dividends in Series A Preferred stock or Common Stock if cash dividends are prohibited by law or the Company has insufficient cash resources, additional dilution to holders of Common Stock may result. See "Dilution", "Capitalization" and "Description of Securities". LIABILITY FOR PERSONAL INJURY AND INADEQUACY OF INSURANCE. Use of the Company's equipment and facilities for LVC eye care may give rise to claims against the Company by persons alleging injury as a result of the procedures performed. The Company will endeavor, whenever possible, to seek recovery from manufacturers of refractive laser systems for claims based on alleged defects in the laser systems utilized by the Company. There can be no assurance that such manufacturers will carry liability insurance adequate to protect against such claims or that the Company would prevail if it were required to assert such claims. The Company believes that health care providers using the Company's equipment to perform refractive or other procedures will be covered by medical malpractice or liability insurance and the Company's policy will be to require that professionals contracting for the Company's LVC Services maintain such insurance. The Company also intends to apply for liability insurance covering these risks for its own account. However, there can be no assurance that the Company would be successful in seeking recovery from third parties and there can be no assurance that the Company will be able to obtain insurance at reasonable rates against the risks of use of its LVC equipment and support services. To the extent the Company becomes exposed to liability claims, if any, the Company may be adversely affected. See "Proposed Business". VOLATILITY OF SECURITIES PRICES. The market for equity securities, particularly for securities of companies engaged in providing LVC equipment and/or services, has been volatile. The price of the Company's securities in the future may be subject to wide fluctuations in response to quarterly variations in operating results, news, trading volume, general market trends and other factors beyond the control of the Company. RISKS OF FAILURE TO COMPLY WITH OR CHANGE IN GOVERNMENTAL REGULATION. The Company and its operations will be subject to extensive regulation, both in Canada and in the United States at the federal, provincial, state and local level, affecting the health care industry and the delivery of health care. These regulations include laws and regulations prohibiting the practice of medicine and optometry by persons not licensed to practice medicine or optometry, prohibiting the unlawful rebate or unlawful division of fees and limiting the manner in which prospective patients may be solicited. Other regulatory requirements, such as regulations concerning the use of excimer laser systems, will also apply to the Company's business and plan of operation. In addition, there can be no assurance that future changes in laws and regulations or the interpretation thereof will not adversely affect the Company's operations. See "Proposed Business -- Governmental Regulation". ABSENCE OF GOVERNMENTAL APPROVAL IN THE UNITED STATES FOR USE OF CERTAIN LVC EQUIPMENT. The Company is uncertain whether certain LVC procedures for which it will purchase equipment in Canada may ever be utilized commercially in the United States. In the United States, the Company's plan is to acquire equipment that has recently received pre-market approval from the U.S. Food and Drug Administration ("FDA") for commercial use of PRK procedures applicable to the vast majority of myopia cases and PTK. Equipment for certain other LVC procedures, such as LASIK or TMM PRK procedures to treat hyperopia, astigmatism or extreme myopia, have not received FDA pre-market approval nor has the FDA established standards for clinical testing of equipment for many of these other LVC procedures. The Company has been advised that certain MDs in the United States use excimer lasers for LASIK Procedures. The FDA advised U.S. eye care professionals in May 1996 that LASIK and bilateral surgery (treatment of both eyes at the same 11 14 time) are outside the scope of currently FDA approved labeling for excimer lasers; although the FDA noted that physician discussions with patients and physician decisions to conduct either of those procedures are considered the practice of medicine, the FDA cautioned that it expects health care practitioners and others will advertise and promote the use of FDA approved lasers in the U.S. only within the scope of their currently FDA approved use. For these reasons, the Company will first offer its LVC Services in Canada, where LASIK and TMM PRK procedures may be performed in accordance with applicable regulations and in close proximity to the U.S. Midwestern market. There can be no assurance that the use of excimer lasers to perform LVC procedures other than PRK and PTK will ultimately be found to be effective or safe by the FDA or that the FDA will not modify or withdraw its pre-market approval of PRK equipment, in which event the Company's targeted markets in the United States may be adversely affected. See "Proposed Business". RISK OF FAILURE TO COMPLY WITH SAFE HARBORS AS TO MEDICAL SERVICES FRAUD AND ABUSE LEGISLATION. Certain states in the United States and provinces in Canada have adopted medical services fraud and abuse statutes, commonly referred to as anti-kickback or anti-referral legislation, similar to U.S. federal Medicare/Medicaid legislation that prohibits certain activities intended to kickback, bribe or rebate fees received for referring an individual to a person for medical treatment. Although existing U.S. federal legislation does not cover the Company's planned activities since its physician clients will not be seeking Medicare, Medicaid or other governmental reimbursement for LVC procedures, there can be no assurance that federal, state or provincial regulatory programs will not in the future place impediments upon the Company's plan of operation. Many state fraud and abuse laws are interpreted by reference to corresponding federal regulations establishing safe harbors for certain activities otherwise subject to such fraud and abuse laws. Among other requirements to qualify for certain safe harbor provisions under federal law, no more than 40% of the entity may be controlled by investors who are in a position to control the flow of business to the entity and no more than 40% of the entity's business can come from investors. The Company does not believe that more than 40% of the Company's capital stock initially will be held by persons in a position to refer business to the Company. The application and interpretation of state laws and safe harbor exemptions may involve significant uncertainty. The Company believes that its planned operations are designed to comply with applicable state regulations. NEVERTHELESS, POTENTIAL INVESTORS CONCERNED WITH SAFE HARBOR REGULATIONS SHOULD SEEK ADVICE FROM INDEPENDENT COUNSEL CONCERNING THESE MATTERS BEFORE INVESTING. See "Proposed Business -- Governmental Regulation". POSSIBLE FUTURE CONCERNS AS TO SAFETY AND EFFICACY OF LVC TREATMENT. Concerns with respect to the safety and efficacy of recently developed refractive laser procedures such as PRK, LASIK and LTK include predictability and stability of results and potential complications or side effects, such as post-operative pain, corneal haze during healing, decreased contrast sensitivity, unintended undercorrection or overcorrection, refractive corneal scars or reversion or regression of effect. There can be no assurance that additional complications will not be identified in the future that may materially and adversely affect the safety and efficacy of these LVC procedures for performing refractive surgery, and which would negatively affect market acceptance of such procedures and/or lead to product liability or other claims against the Company. See "Proposed Business". RELIANCE ON SUPPLIERS OF LASER EQUIPMENT. The Company is not involved in the research, development or manufacture of laser equipment and will be dependent upon unrelated third-party manufacturers or distributors for supply and service of LVC equipment required for its LVC Services. The Company believes there are four companies in the U.S. that have conducted or are conducting clinical trials with excimer lasers for refractive eye surgery. The Company believes two of those companies, Summit and VISX, account for approximately 70% of the excimer lasers for refractive surgery that have been installed to date mostly in various countries outside of the U.S. At present, at least one of these suppliers has indicated it plans to enter the market for providing excimer laser service facilities and may compete with the Company, either directly or indirectly. Such suppliers are also expected to seek license, royalty or other fees for the purchase of excimer laser systems that could place the Company at a competitive disadvantage. If the Company is unable to obtain agreements on acceptable terms for the supply and/or service of laser systems, the Company could incur delays and its planned business operations may be adversely affected. The Company has not yet obtained 12 15 commitments to acquire equipment for additional locations proposed in addition to its first site at Windsor, and the Company's ability to offer LVC Services at one or more additional locations and the timing thereof will be dependent upon the availability of equipment from suppliers and the availability, if any, of financing programs to acquire equipment on a lease or installment purchase basis. See "Use of Proceeds" and "Proposed Business". RISK OF FUTURE TECHNOLOGICAL CHANGE. Development of LVC procedures has undergone and is expected to continue to experience technological change. There can be no assurance that future technological innovations and developments will not render the Company's equipment uneconomical or obsolete or that the Company will not be adversely affected by competition or future technological developments. See "Proposed Business -- Competition". NO THIRD-PARTY REIMBURSEMENT. At present, third party insurance reimbursement through health insurance or other third-party reimbursement programs generally is not available for PRK, LASIK and other LVC refractive surgical procedures. The Company does not anticipate that third-party reimbursement for LVC procedures will be available in the foreseeable future, and this factor may restrict the market for LVC Services. See "Proposed Business." LACK OF A PUBLIC MARKET AND ARBITRARY DETERMINATION OF OFFERING PRICE. Prior to this offering by the Company, there has been no public market for the securities of the Company, and there can be no assurance that a public market will develop following this offering or, if developed, that a public market will be sustained. The offering price of the Series A Preferred stock offered by the Company was arbitrarily determined by negotiation between the Company and the Underwriters without regard to generally recognized criteria of value such as historical earnings, assets, working capital, book value, financial condition or an active public market for the Common Stock. Such offering price was determined in part upon the Company's and the Underwriters' perception as to the price that purchasers of Series A Preferred stock would be willing to pay considering the nature of the Company and the terms of the Series A Preferred stock. Accordingly, the offering price should not be considered an indication of the actual value of the Company or its securities. See "Underwriting" and the Consolidated Financial Statements. DILUTIVE EFFECT OF WARRANTS AND OPTIONS. For the life of the Underwriter's Warrants, outstanding Class A Warrants and any options granted under the Company's Stock Option Plan, the holders are given, at nominal cost, the opportunity to profit from a rise in the market price for the Common Stock of the Company without assuming the risk of ownership, with a resulting dilution in the interest of other security holders. As long as the warrants and options remain unexercised, the terms under which the Company could obtain additional capital may be adversely affected. Moreover, the holders of the warrants and options might be expected to exercise them at a time when the Company would, in all likelihood, be able to obtain needed capital by a new offering of its securities on terms more favorable than those provided by the warrants and options. See "Management -- Stock Option Plan", "Description of Securities" and "Underwriting". UNDETERMINED EFFECT OF ADDITIONAL AUTHORIZED COMMON STOCK AND BLANK CHECK PREFERRED STOCK. The Company's articles of incorporation authorize up to 20,000,000 shares of Common Stock and up to 5,000,000 shares of "blank check" Preferred Stock with such rights, preferences, privileges and limitations as may be determined from time to time by the Board of Directors of the Company. The Board of Directors has the power without prior stockholder approval to issue additional shares of previously authorized and unissued Common Stock and one or more series of Preferred Stock with such rates of dividends, redemption provisions, liquidation preferences, voting rights, conversion privileges and any other characteristics as the Board may deem necessary. This power includes the right to issue Preferred Stock following completion of this offering with rights to receive dividends, liquidating distributions and other benefits which may be superior to the rights of Series A Preferred stockholders. If any subsequent issuance of Preferred Stock is approved, such blank check Preferred Stock could adversely affect the holders of outstanding Series A Preferred stock and/or Common Stock. In addition, the authority to issue additional shares of Common Stock and blank check Preferred Stock could discourage, delay or prevent a takeover of the Company. The Company currently has no intention to issue any additional shares of Preferred Stock upon the completion of this offering. However, even the existence of authorized and unissued Common Stock and Preferred Stock with the potential of 13 16 discouraging or preventing a takeover of the Company could have a depressive effect on the market price for the Company's securities. See "Description of Securities". POSSIBLE ADVERSE EFFECT ON MARKET PRICE OF FUTURE SALES OF COMMON STOCK. All of the 30,000 shares of outstanding Common Stock, 100,000 shares of Series A Preferred stock and up to 570,000 shares of Common Stock issuable upon conversion of Series A and Series B Preferred stock and exercise of Class A Warrants outstanding prior to this offering will be "restricted securities" as that term is defined in Rule 144 under the Securities Act, and under certain circumstances may be sold without registration pursuant to that Rule. The Company is unable to predict the effect that sales made under Rule 144, or otherwise, will have on the then prevailing market price of the Company's securities. Any substantial sale of restricted securities pursuant to Rule 144 may have an adverse effect on the market price of the Company's securities. See "Principal Stockholders", "Shares Eligible for Future Sale" and "Underwriting". UNDERWRITERS' INFLUENCE ON THE MARKET. A significant number of the shares of Series A Preferred stock to be sold in this offering may be sold to customers of the Underwriters. Such customers subsequently may engage in transactions for the sale or purchase of the Company's securities through or with the Underwriters. Although the Underwriters have no legal obligation to do so, an Underwriter from time to time may become a market maker or otherwise effect transactions in the Company's securities. Should an Underwriter participate as a market maker, it may become a dominating influence in the market for the Company's securities. Therefore, the price and liquidity for the Company's securities may be significantly affected by the degree, if any, of an Underwriter's participation in the market. Such market making activities, if commenced, may be discontinued at any time or from time to time by that Underwriter. See "Underwriting." MAINTENANCE REQUIREMENTS; POSSIBLE DELISTING OF SECURITIES FROM NASDAQ SYSTEM; RISKS OF LOW-PRICED STOCKS. In 1993, the Securities and Exchange Commission ("SEC") approved rules imposing more stringent criteria for the listing of securities on Nasdaq, including new standards for maintenance of such listing. If the Company is unable to satisfy Nasdaq's maintenance criteria in the future, its securities will be subject to being delisted, and trading, if any, would thereafter be conducted or in the over-the-counter market in the so-called "pink sheets" or the "Electronic Bulletin Board" of the National Association of Securities Dealers, Inc. ("NASD"). As a consequence of such delisting, an investor could find it more difficult to dispose of, or to obtain accurate quotations as to the price of, the Company's securities. The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for "penny stocks" as defined. SEC regulations generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such exceptions include any equity security listed on Nasdaq and any equity security issued by an issuer that has (i) net tangible assets of at least $2,000,000, if such issuer has been in continuous operation for three (3) years; (ii) net tangible assets of at least $5,000,000 if such issuer has been in continuous operation for less than three (3) years; or (iii) average annual revenue of at least $6,000,000 if such issuer has been in continuous operation for less than three years. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith. In addition, if the Company's securities are not quoted on Nasdaq or the Company does not have $2,000,000 in net tangible assets, trading in the Common Stock would be covered by Rule 15c2-6 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act") for non-Nasdaq and non-exchange listed securities. Under such rule, broker/dealers who recommend such securities to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser and receive each purchaser's written agreement to a transaction prior to sale. Securities also are exempt from this rule if the market price is at least $5.00 per share. As of the date of this Prospectus, it is expected that the Company's Series A Preferred stock will be outside the definitional scope of penny stock, as it has an initial public offering price of at least $5.00 per share. In the event the Common Stock were subsequently to become characterized as a penny stock, the market liquidity for the Company's securities could be severely affected. In such an event, the regulation of penny stocks could limit the ability of broker/dealers to sell the Company's securities in the secondary market. 14 17 FOREIGN CURRENCY FLUCTUATIONS. The Company's initial business operations will be located in Canada and it is anticipated that a significant portion of the Company's revenues and expenses may be collected and paid in Canadian dollars. The Company publishes its consolidated financial statements in U.S. dollars after translating transactions in Canadian currency to U.S. dollars. Income and expense items in Canadian currency will be translated at the weighted average exchange rate prevailing during the period, except that expenses related to nonmonetary assets and liabilities will be translated at historical rates. In periods when the U.S. dollar depreciates against the Canadian dollar, reported earnings attributable to transactions in Canadian dollars may be materially enhanced. In periods when the U.S. dollar appreciates against the Canadian dollar, however, reported earnings attributable to transactions in Canadian dollars may be materially reduced. Fluctuations in the exchange rate between the Canadian dollar and the U.S. dollar may also affect the book value of the Company's assets and the amount of its stockholders' equity. Except as otherwise stated herein, all monetary amounts in this Prospectus have been presented in U.S. dollars. NO DIVIDENDS ON COMMON STOCK. The Company has not paid any cash dividends on its Common Stock and does not expect to do so in the foreseeable future. See "Dividend Policy." DILUTION This discussion and the table below assumes (i) the sale of all shares of Series A Preferred stock offered by the Company hereunder (but does not assume exercise of the Underwriter's over-allotment option or the exercise of the Underwriter's Warrants) and full conversion of such shares of Series A Preferred into 800,000 shares of Common Stock, (ii) the conversion of currently outstanding shares of Series A Preferred (100,000 shares) and Series B Preferred (200,000 shares) into 300,000 shares of Common Stock, (iii) the exercise at $1.00 per share of 270,000 outstanding Class A Warrants and the receipt of proceeds therefrom, and (iv) the exercise at $1.00 per share of 50,000 outstanding options granted under the Company's stock option plan. Based on these assumptions, the 650,000 shares of Common Stock that would be outstanding prior to this offering and the 800,000 shares of Common Stock that would be outstanding if all Series A Preferred offered hereby were converted into Common Stock are referred to below as "common and common equivalent shares". As of March 31, 1996, the Company had a net tangible book value of $199,111. Assuming the exercise of outstanding Class A Warrants and stock options for $320,000 in proceeds, the receipt of $27,500 in subscriptions receivable paid in April 1996 and conversion of currently outstanding Series A Preferred and Series B Preferred, the Company's pro forma net tangible book value at March 31, 1996 would have been $546,611, or $.84 per common and common equivalent share based on a total of 650,000 shares. Net tangible book value per common and common equivalent share represents the amount of the Company's tangible assets, less the amount of its liabilities, divided by the number of shares of common and common equivalent shares outstanding. Assuming the sale of 800,000 shares of Series A Preferred stock offered by the Company hereunder at the offering price of $5.00 per share, the Company's receipt of net proceeds therefrom and the conversion of all such shares of Series A Preferred stock into Common Stock, the pro forma net tangible book value of the Company as so adjusted at March 31, 1996 would be $3,939,950, or $2.72 per common and common equivalent share, representing an immediate increase in net tangible book value of $1.88 per common and common equivalent share to present holders of the Company's capital stock and an immediate dilution of $2.28 per common and common equivalent share to new investors. 15 18 The following table illustrates such per share dilution:
AMOUNT % --------------- ----- Offering Price per common and common equivalent share....... $5.00 100.0% ----- Actual net tangible book value per common and common equivalent share at March 31, 1996..................... $ .60 12.0% Receipt of subscriptions receivable as of March 31, 1996................................................... .09 1.8% Assumed exercise of Class A Warrants and stock options outstanding at March 31, 1996.......................... .15 3.0% ----- ----- Subtotal: Pro forma net tangible book value per common and common equivalent share at March 31, 1996.............. $ .84 16.8% Increase per share attributable to 800,000 additional common equivalent shares represented by sale of Series A Preferred stock by the Company....................... 1.88 37.6% ----- ----- Pro forma net tangible book value per common and common equivalent share.......................................... 2.72 54.4% ----- Dilution per common and common equivalent share to new investors purchasing Series A Preferred (1)............... $2.28 45.6% =====
- --------------- (1) "Dilution" means the difference between the offering price per share and the pro forma net tangible book value per common and common equivalent share after giving effect to the assumed sale of all 800,000 shares of Series A Preferred stock offered by the Company. The increase in the net tangible book value of common and common equivalent shares held by present stockholders would be solely attributable to the cash paid by new investors upon their purchase of Series A Preferred offered by the Company. Based on the above assumptions, the following table summarizes the number of common and common equivalent shares purchased from the Company, the total consideration and the average price per share to the Company by existing stockholders and to be paid by purchasers in this offering (assuming in each case the full conversion of all outstanding shares of Preferred Stock into Common Stock and the exercise of 270,000 Class A Warrants and 50,000 outstanding stock options):
COMMON AND COMMON EQUIVALENT SHARES TOTAL PURCHASED CONSIDERATION PAID ------------------------ ------------------------- AVERAGE PRICE NUMBER % OF TOTAL AMOUNT % OF TOTAL PER SHARE --------- ---------- ---------- ---------- ------------- Existing Stockholders.... 650,000 44.8% $ 694,597(a) 14.8% $1.07 New Investors............ 800,000 55.2% $4,000,000 85.2% $5.00 --------- ------ ---------- ------ Total.......... 1,450,000 100.0% $4,694,597 100.0% $3.24 ========= ====== ========== ======
- --------------- (a) Assumes (i) $374,597 for outstanding securities, of which $157,000 has been paid in cash and $217,597 has been recorded as the value of the Company's investment in 200,000 shares of Vista Technologies common stock, plus (ii) $320,000 from the assumed exercise of outstanding Class A Warrants and stock options. See "Management -- 1995 Stock Option Plan" and "Certain Transactions". In the event the Company elects to pay Preferred Stock dividends in Series A Preferred or Common Stock if cash dividends are prohibited by law or the Company has insufficient cash resources for dividends, additional dilution to holders of Common Stock may result. See "Description of Securities". 16 19 USE OF PROCEEDS The net proceeds to the Company from the sale of 800,000 shares of Series A Preferred stock offered hereby will be approximately $3,280,000 ($3,982,000 if the Underwriter's over-allotment option is exercised in full) after deducting the underwriting discounts and the Underwriter's non-accountable expense allowance and after other offering expenses payable by the Company estimated at approximately $200,000. The Company intends to use the net proceeds to purchase laser vision correction equipment and to support working capital requirements for operating and administering LVC Services. Of the net proceeds, $500,000 will be immediately used to pay the cash portion of consideration to purchase an existing laser system and related equipment from a corporation affiliated with Dr. Fouad Tayfour. An agreement to sublease certain facilities from that corporation is expected to enable the Company to commence operations immediately after this offering. Management estimates that additional equipment, leasehold improvements and supplies for its first site in Windsor initially will range from $25,000 to $50,000. Monthly cash requirements for operating expenses at the Windsor location are projected to range from approximately $90,000 to $110,000, depending in part upon the amount management elects to commit to marketing, advertising and training programs, before receipt of revenues under service agreements with professionals. Although the Company anticipates that it will generate revenues under its service agreement with Dr. Tayfour upon completion of this offering, Dr. Tayfour is under no legal obligation to use the Company's LVC Services on an exclusive basis or on any basis, and there can be no assurance as to the revenues the Company will generate. See "Management Discussion and Analysis and Plan of Operation" and "Proposed Business". The Company has conducted market research through extensive discussions with MDs and ODs in Michigan and is currently engaged in negotiations to acquire at a cost of $150,000 a 50% interest in a newly-organized company to be formed in association with a group of Michigan professionals to offer LVC Services in the metropolitan Detroit area. There can be no assurance that such negotiations will be successfully concluded. If such negotiations are concluded prior to the date of this offering, Vista Technologies has committed to lend the Company $150,000 at 8% interest per annum to make that investment, which would be repaid from the proceeds of this offering by the Company. Either as a result of that transaction or in association with other professionals at a future date, the Company anticipates establishing a second site with equipment offering LVC Services in Detroit, Michigan shortly after the first Windsor location has become operational. The location and number of additional sites with LVC equipment developed by the Company thereafter, if any, will be determined by management depending upon a variety of factors, some of which are uncertain at present, including the amount of capital equipment costs that the Company may be able to finance through equipment leases or other installment purchase obligations, potential competition and results of operations and working capital requirements for LVC Service sites previously established by the Company. The Company estimates the capital investment to establish an LVC Service site to range from $300,000 to $700,000 depending upon the equipment required (i.e., whether the site will include full service equipment or will be a satellite location supported by another site) and the extent of equipment lease or installment purchase financing, if any, available to the Company. Based on and subject to the above factors, management currently estimates that the net proceeds of this offering will be applied generally as follows:
AMOUNT % ---------- ----- Cash deposit for purchase of laser system and related equipment to establish LVC Services in Windsor, Ontario................. $ 550,000(1) 16.8% Investment or repayment of loan to acquire a 50% interest in a newly-formed company to establish a second site in Michigan... 150,000 4.6% Cash requirements for equipment and leasehold improvements to establish a second LVC Services site in Michigan.............. 700,000(2) 21.4% Estimated working capital requirements for first 12 months of operations in Ontario...................................... 500,000(3) 15.2% Estimated working capital requirements for first 12 months of operations in Michigan..................................... 500,000 15.2% Available for equipment required for planned expansion for additional LVC Services sites................................. 880,000 26.8% ---------- ----- Total estimated net proceeds of this offering......... $3,280,000 100.0% ========== =====
17 20 - --------------- (1) The $500,000 balance of this equipment purchase will be financed by the Company's issuance of a 10% promissory note, interest only accruing from the date of this offering and payable monthly commencing 90 days thereafter, with all principal due on the second anniversary of the date of this Prospectus and collateralized by all equipment at the Company's Windsor location. (2) Assumes that the Company is unable to obtain additional equipment financing for this location. If equipment lease or installment purchase financing is available on terms acceptable to the Company, the initial cash deposit required for the equipment cost would be reduced. (3) Includes a minimum of $155,000 in estimated compensation payments to executive officers of the Company for the first 12 months of operations. Of such minimum amount, $60,000 will be paid to an affiliate of Dr. J. Charles Casebeer at the completion of this offering in consideration of base consulting compensation for his services during the first 12 months of operations and $20,000 will be paid to Mr. Ghassan Barazi upon completion of this offering as a one-time hiring bonus for his services as the Company's President and Chief Executive Officer. See "Management -- Employment Agreement" and "Certain Transactions". The allocation of the net proceeds of this offering set forth above represents the Company's best estimates based upon its present plans and certain assumptions regarding estimated costs and the Company's future revenues and expenses. The actual amount expended to finance any category of expense may be increased or decreased by the Company's Board of Directors, at its discretion, if a reapportionment or redirection of funds is deemed to be in the best interests of the Company. Any proceeds not applied to a purpose described above will be added to the Company's working capital and used for general corporate purposes. Pending the application of proceeds from this offering, the net proceeds of this offering will be temporarily invested in interest-bearing savings accounts, bank certificates of deposit, money market accounts, government obligations or other forms of liquid short-term interest-bearing investments. The Company does not plan to pay dividends on its Common Stock (see "Dividend Policy"). The estimated annual dividend requirements on its Preferred Stock will be $450,000 for Series A Preferred ($510,000 if the Underwriters' over-allotment option is exercised and $550,000 if the Underwriters' over- allotment option and the Underwriter's Warrants are exercised) and $25,000 for Series B Preferred shares. As of March 31, 1996, dividends in arrears on Series A Preferred and Series B Preferred shares issued prior to this offering were $6,667 and $9,375, respectively. The Company does not intend to apply any of the proceeds from the sale of Series A Preferred stock offered hereby to the payment of dividends on its Preferred Stock. Prospective investors should note that the Nevada General Corporation Law prohibits the payment of dividends or other distributions to stockholders if, after giving effect to such distribution, (1) the Company would be unable to pay its debts as they come due in the ordinary course, or (2) the Company's total assets would be less than the sum of its total liabilities plus the amount that would be needed to satisfy liquidation preferences of its Preferred Stock were the Company to be dissolved at the time of such distribution. Unless shares of Preferred Stock are converted into Common Stock, after this offering the aggregate liquidation preference of all series of Preferred Stock outstanding will be $5,000,000 ($5,600,000 if the Underwriters' over-allotment option is exercised), and the Company accordingly anticipates that its ability to pay cash dividends on Preferred Stock will be dependent upon attaining profitable operations, as to which there can be no assurance. The Company at its option, however, has the right to pay accrued dividends in Series A Preferred or Common Stock (subject to the prior registration of such shares under the Securities Act of 1933) if it would be legally prohibited from the payment of cash dividends on its Preferred Stock or has insufficient cash resources for cash dividend payments. 18 21 CAPITALIZATION The following table sets forth the capitalization of the Company at March 31, 1996, and as adjusted to give effect to the sale by the Company of the shares of Series A Preferred stock offered hereby, and the application of the net proceeds and the purchase of certain equipment for the Windsor equipment location as described under "Use of Proceeds" and "Certain Transactions". This information should be read in conjunction with the Company's consolidated financial statements and the notes thereto and "Management Discussion and Analysis and Plan of Operations" presented elsewhere in this Prospectus.
MARCH 31, 1996 --------------------------- ACTUAL AS ADJUSTED(1) -------- -------------- Long-term obligations.............................................. $ -0- $ 916,192(2)(3) -------- ---------- Stockholders' equity: Preferred stock, par value $0.01: Authorized -- 5,000,000 shares; 1,100,000 shares designated 10% Series A(4) Cumulative Convertible Preferred; Issued and outstanding shares -- 100,000 actual and 900,000 pro forma.................................................... 1,000 9,000 200,000 shares designated 5% Series B Cumulative Convertible Preferred; Issued and outstanding shares -- 200,000 actual and pro forma........................................................ 2,000(5) 2,000(5) Common stock, par value $0.01: Authorized -- 20,000,000 shares; Issued and outstanding shares -- 30,000 actual and 350,000 pro forma........................................................ 300 3,500 Additional paid-in capital....................................... 371,297 3,960,097 Subscriptions receivable......................................... (27,500) -- Accumulated (deficit)............................................ (34,647) (34,647) -------- ---------- Total stockholders' equity....................................... 312,450 3,939,950 -------- ---------- Total capitalization..................................... $370,584 $4,856,142 ======== ==========
- --------------- (1) Assumes sale of 800,000 shares of Series A Preferred offered hereunder by the Company at $5.00 per share, the exercise of 270,000 outstanding Class A Warrants, the exercise of 50,000 outstanding options granted under the Company's stock option plan, the payment of $27,500 in stock and warrant subscription receivables received in April 1996 and the anticipated application of estimated net proceeds therefrom (after the deduction of underwriting discounts and commissions and estimated expenses to be incurred by the Company in connection with this offering). (2) Concurrent with the completion of this offering, the Company will purchase certain equipment for its first site in Windsor, Ontario at a cost of $1,050,000, of which $500,000 will be paid in cash from proceeds of this offering and $500,000 will be financed by the Company's issuance of a 10% promissory note due on the second anniversary of the date of this Prospectus. Such payments will be made to an affiliate of Dr. Fouad Tayfour, who has the right to designate up to three members of the Company's Board of Directors. See "Certain Transactions". (3) In April of 1996, the Company entered into a commitment to lease a Summit holmium laser system. The Company will record this lease as a capital lease and the related obligation totals $416,192. See Note 7 of the Notes to the Consolidated Financial Statements. (4) The authorized number of Series A Preferred shares includes 120,000 shares reserved for the Underwriters' over-allotment option and 80,000 shares reserved for exercise of the Underwriter's Warrants. See "Underwriting". (5) $217,597 has been recorded in the Company's financial statements for 200,000 shares of Vista Technologies common stock received in exchange for shares of the Company's Series B Preferred stock, of which $2,000 has been allocated to the par value of the Series B Preferred and the balance was allocated to additional paid in capital. See Note 3 of the Notes to the Consolidated Financial Statements. 19 22 SELECTED FINANCIAL DATA The following table presents selected financial data with respect to the Company as of and for the period June 30, 1995 (date of inception) through March 31, 1996. The selected financial data as of the end of March 31, 1996 has been derived from the consolidated financial statements of the Company audited by KPMG Peat Marwick LLP. The information set forth below should be read in conjunction with "Management Discussion and Analysis and Plan of Operation", the consolidated financial statements and related notes thereto and independent auditors' report appearing elsewhere in this Prospectus.
FOR THE PERIOD FROM JUNE 30, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996 ------------------ ACTUAL ------------------ CONSOLIDATED STATEMENT OF OPERATIONS DATA: Interest income.......................................... $ 557 Net (loss) adjusted for dividends in arrears............. $(50,689) Net (loss) per common and common equivalent share........ $ (0.22) Weighted average shares outstanding...................... 226,269 Dividends in arrears..................................... $ 16,042
MARCH 31, 1996 --------------------------- ACTUAL AS ADJUSTED(1) -------- -------------- CONSOLIDATED BALANCE SHEET DATA: Current assets..................................... $ 39,648 $2,322,353 Current liabilities................................ 58,134 -- -------- ---------- Working capital.................................. $(18,486) $2,322,353 Total assets....................................... $370,584 $4,856,142 Long-term debt..................................... -- $ 916,192 Stockholders' equity............................... $312,450 $3,939,950
- --------------- (1) As adjusted to reflect the receipt and application of net proceeds to the Company (after the deduction of underwriting discounts and commissions and estimated expenses to be incurred by the Company in connection with this offering) from the sale of securities offered hereby, the exercise of 270,000 outstanding Class A Warrants and 50,000 outstanding stock options and receipt in April 1996 of $27,500 from the payment of stock and warrant subscription receivables. See "Use of Proceeds". The Company has not paid any dividends since its inception; preferred dividends in arrears total $6,667 for the Series A Preferred stock and $9,375 for the Series B Preferred stock at March 31, 1996. 20 23 MANAGEMENT DISCUSSION AND ANALYSIS AND PLAN OF OPERATION The Company has received cash proceeds from the sale of securities in the amount of $129,500 during the period from inception on June 30, 1995 through March 31, 1996. An additional $27,500 in subscription receivables were collected in April 1996. Since its inception, the Company's activities have been devoted to development of its plan of operations, negotiating agreements to acquire equipment and advisory services for planned business activities that will commence immediately upon completion of this offering, and raising capital to fund initial development activities and the expenses of this public offering. Accordingly, the Company has not generated any revenues and has no operating history from which to forecast its future business and operations. As of March 31, 1996, it had incurred $113,339 for deferred costs of this offering. Of the cash investments received to date, $100,000 was paid by Refractive Services-800, Inc. at the Company's inception, and prior to the Company's entering into any agreements with health care professionals, in exchange for 100,000 shares of the Company's Series A Preferred stock. Substantially all of those funds were intended for, and have been allocated by the Company to, payment of costs and expenses for the organization of the Company, negotiation of agreements to date, and deferred costs of this initial public offering of Series A Preferred stock by the Company. Series A Preferred shares originally issued to Refractive Services-800, Inc. were purchased by Vista Technologies in July 1996. In November 1995, the Company issued 200,000 shares of its Series B Preferred stock to Vista Technologies in exchange for 200,000 shares of Vista Technologies common stock. Although there was no quoted market for Vista Technologies' common stock at the time of that transaction, primarily as a result of Vista Technologies' then delinquency in filing periodic reports with the Securities and Exchange Commission (the "Commission"), Vista Technologies represented it would take such steps as were necessary to become current in required filings with the Commission and seek to obtain an actively quoted market for its common shares. The organization of the Company was sponsored and promoted by Vista Technologies as a founder, and the Company's Board of Directors believed the experience of Vista Technologies in management of PRK businesses in Europe and services Vista Technologies proposed to make available under its ten-year Consulting Services Agreement with the Company (see "Certain Transactions") would be of valuable assistance to the Company's negotiation of agreements prior to the date of this Prospectus and its planned future operations. Due to Vista Technologies' shortage of cash resources, Vista Technologies proposed that its investment in the Company would be in the form of 200,000 shares of Vista Technologies common stock in exchange for 200,000 shares of the Company's Series B Preferred stock. In view of Vista Technologies' status as a founder of the Company and its representation on the Company's Board of Directors, such transaction should not be considered as having been negotiated at arms-length. Based upon a subsequent independent third party valuation of the Company's Series B Preferred stock as of November 16, 1995, the Company has recorded a cost for its investment in 200,000 shares of Vista Technologies common stock as of that date of $217,597. Public market quotations for Vista Technologies common stock became available in March 1996 following Vista's filings of previously delinquent reports with the Commission, and such quotations in March 1996 and to date in July 1996 have ranged from approximately $2.00 to $4.00 per share of Vista Technologies common stock. The Company intends to hold shares of Vista Technologies common stock for investment, which will enable the Company to have an indirect economic interest in other LVC activities in which Vista Technologies has an interest. Subject to the ability of the Company under Rule 144 of the Securities Act of 1933 to sell shares of Vista Technologies common stock upon satisfaction of holding period requirements under that rule (see "Shares Eligible for Future Sale"), management of the Company reserves the right to sell shares of Vista Technologies from time to time if required for the Company's working capital purposes or if management believes then market price of Vista Technologies common stock are attractive in light of market conditions, the status of Vista Technologies' operations, and other relevant factors. There can be no assurances of the sale prices the Company will be able to obtain should it elect to sell all or part of its investment in Vista Technologies in the future. The report of the Company's independent certified public accountants contains an explanatory paragraph as to the Company's ability to continue as a going concern. Among other factors cited by the 21 24 accountants as raising substantial doubt as to the Company's ability to continue as a going concern is that the Company is dependent upon raising additional financing through a public or private offering to meet its obligations and commitments. See the Consolidated Financial Statements elsewhere in this Prospectus. The Company's plan of operation for the next twelve months will involve the development, management and operation of from two to four sites offering LVC Services. LVC equipment will be offered for use by licensed ophthalmologists ("MDs") primarily for advanced refractive surgery, and other support services will also be available for licensed MDs and optometrists ("ODs") for diagnostic, pre-operative and postoperative refractive eye care. In addition to providing equipment and qualified support personnel, the Company will make available a variety of services to licensed and credentialed eye care professionals, including training and education in advanced LVC procedures; marketing and advertising support; billing, collection and accounting services; administrative and management services; and development and maintenance of information systems. The Company will earn fees for equipment use and other support services rendered to licensed MDs and ODs that elect to use the Company's services and enter into service agreements with the Company. See "Proposed Business". The Company will initially apply proceeds from this offering to purchase equipment and establish its first location in Windsor, Ontario at an estimated cost of $1,050,000 (see "Use of Proceeds"), which approximates its fair market value, of which $500,000 will be financed by a two-year note (see "Certain Transactions"). Additional proceeds of the offering will be applied for operating requirements during the first twelve months of operations including, among other expenses, hiring and training staff, training and marketing programs for health care professionals, and for working capital requirements as the Company's LVC Services are developed. Monthly cash requirements for operating expenses at the Windsor location are projected to range from approximately $90,000 to $110,000, depending in part upon the amount management elects to commit to marketing, advertising and training programs, before receipt of revenues under service agreements with professionals. The Company has selected a location for its Windsor site in a portion of premises to be subleased from an affiliate of Dr. Tayfour upon completion of this offering for a term expiring on March 30, 2004 at a rental rate of approximately $2,921 (Canadian funds) per month subject to an increase of approximately 10% in April 1999. The Company has entered into a Facilities Agreement with Dr. Fouad Tayfour for the use of the Company's equipment and supports services at the Windsor site. Under the terms of the Facilities Agreement, effective upon completion of this offering the Company will receive approximately 50% of the Gross Procedure Fee (as defined in the agreement) charged to patients by Dr. Tayfour as compensation for use of the Company's Windsor equipment and providing support services to Dr. Tayfour. In general, the Gross Procedure Fee includes all charges to the patient by Dr. Tayfour for professional services and use of LVC facilities and equipment and will be established from time to by Dr. Tayfour. The Company and Dr. Tayfour have agreed that the Gross Procedure Fee will be not less than $1,200 per procedure for each eye treated at the Windsor location unless the parties agreed to a lower minimum fee. In view of the difficulty in projecting the number of procedures to be performed and the total cost of the Company's support services, the Company has agreed that its compensation from Dr. Tayfour is subject to possible reduction during a 24 month period, commencing after the end of the third month following the date of this Prospectus, in the event less than an average of 150 LVC procedures per month are performed at the Windsor site by Dr. Tayfour. The Facilities Agreement with Dr. Tayfour is for a term of five years and will be renewed thereafter on a year-to-year basis unless either party has provided the other with at least three months' notice not to renew the agreement. and expects to enter into similar arrangements with other local MDs and ODs. Although the Company anticipates that it will generate revenues under its Facilities Agreement with Dr. Tayfour upon completion of this offering, Dr. Tayfour is under no legal obligation to use the Company's LVC Services on an exclusive basis or on any basis, and there can be no assurance as to the revenues the Company will generate. The Company has also entered into a Consulting Agreement for Dr. Tayfour to act as a professional consultant to the Company (see "Proposed Business" and "Certain Transactions"). Compensation payable to Dr. Tayfour under the Consulting Agreement will include a percentage of the Company's fees, after deduction of certain operating expenses, attributable to the first 20 LVC procedures performed in each month at its Windsor location by credentialed MDs other than Dr. Tayfour. The percentage will equal 100% of the 22 25 Company's compensation, after deduction of direct operating expenses and overhead costs, for the first 10 such procedures in each month and 50% for the next 10 procedures in each month. The Consulting Agreement with Dr. Tayfour is for a term of five years and will be renewed thereafter on a year-to-year basis unless either party has provided the other with at least three months' notice not to renew the agreement. The Company is currently engaged in negotiations to acquire at a cost of $150,000 a 50% interest in a newly organized company to be formed in association with a group of Michigan professionals to offer LVC Services in the metropolitan Detroit area. There can be no assurance that such negotiations will be successfully concluded. If such negotiations are concluded prior to the date of this Prospectus, Vista Technologies has committed to lend the Company $150,000 at 8% interest per annum to make that investment, which would be repaid from the proceeds of this offering by the Company. Either as a result of that transaction or in association with other professionals at a future date, the Company anticipates establishing a second site with equipment offering LVC Services in Detroit, Michigan at an estimated cost ranging from $500,000 to $700,000 shortly after the first Windsor location has become operational. A portion of the proceeds of this offering by the Company is planned to be utilized for that purpose, and management expects that part of the equipment requirements may be financed by equipment lease or installment purchase obligations. However, at present no such financing commitments have been obtained. Due to the status of FDA pre-market approvals of LVC equipment at the present time, LVC equipment for the first site in Michigan will be limited to PRK procedures to treat nearsightedness, LS (laser sclerostomy) procedures to treat the symptoms of glaucoma and possibly PTK (phototherapeutic keratectomy) procedures to treat certain corneal pathologies. See "Proposed Business". The Company anticipates, however, that U.S. patients who may request other forms of LVC procedures not commercially available in the U.S. may be referred by professionals to MDs associated with the Company's Canadian operations. In March 1996, the Company received an assignment of, and assumed the obligations under, a lease for a Summit holmium laser system from one of the MDs with which it is currently negotiating to associate in Detroit, Michigan. Under the terms of that lease assignment and assumption, this equipment will be subleased by the Company, upon terms to be negotiated, to a newly-organized company being formed in association with a group of Michigan professionals to offer LVC Services in the metropolitan Detroit area. The Company's obligations under the lease assignment and assumption are to make all equipment lease payments remaining due of $10,850 per month until December 1999 (at which point the Company will purchase the equipment for a nominal payment) plus an obligation in the aggregate amount of $230,000, payable at the rate of $250 each time the equipment is used by an MD, which amount will be deducted from sublease obligations of the newly formed company. If equipment financing can be obtained and adequate funds remain available from the proceeds of this offering, the Company intends thereafter to develop one or more additional site offering LVC Services in either Michigan or Southern Ontario. In selecting the location of additional sites, management will take into account the availability of equipment from prospective suppliers, the LVC equipment to be made available at the location, and relevant market potential factors such as the location of competitive facilities and regional demographics. The Company's management reserves the right to evaluate progress at its Windsor location and its proposed association with a group of Michigan professionals before making commitments at other equipment sites to insure that net proceeds of this offering by the Company will be sufficient for its planned operations for at least 12 months following completion of this offering. No commitments for additional financing have been obtained by the Company and there is no assurance that it will be able to obtain any such commitments should additional financing be required. See "Use of Proceeds", "Proposed Business" and "Certain Transactions". 23 26 PROPOSED BUSINESS GENERAL The Company is a development stage enterprise organized as a Nevada corporation on June 30, 1995. The Company's planned business activity is to provide ophthalmic and optometric professionals with use of equipment and support services ("LVC Services") by managing and administering fully equipped outpatient services and advanced equipment to perform refractive laser corrective eye surgery ("laser vision correction" or "LVC") in southern Ontario and Michigan. The Company's activities to date have consisted primarily of market research, seeking affiliations with experienced LVC eye care professionals, negotiating to acquire equipment necessary for establishing its first LVC Services location in Windsor, Ontario, and negotiating agreements to provide facilities use and management services to eye care professionals. The Company plans to earn revenues from fees for equipment use and support services rendered to licensed ophthalmologists ("MDs") and optometrists ("ODs"). SOURCE OF REVENUES AND SERVICE AGREEMENTS WITH PROFESSIONALS The Company expects to enter into nonexclusive service agreements with independent MDs, ODs and professional group practices upon completion of this offering who elect to contract for use of the Company's equipment and LVC Services. The terms of these agreements may vary, depending upon the extent of LVC Services and equipment provided by the Company, skills and experience of the particular professional, negotiated terms in individual instances and market conditions. The Company will earn its fees for the fair market value of the Company's LVC Services by billing health care professionals at the time of use, with such fees typically based upon a negotiated percentage of the gross procedure fees charged to patients by the professional; payment normally will be received when the professional collects its gross procedure fee from the patient. For this purpose, the gross procedure fee is generally defined to include all charges to the patient for services of one or more professionals to perform an LVC procedure for one eye, which typically includes professional services for the procedure, post-operative care and re-operative procedures, if required, plus all charges to the patient for equipment use, medical supplies, support staff and other administrative functions. The Company believes that in most instances, it will seek to charge up to approximately 60% of the gross procedure fee as a fair allocation for the market value of its LVC Services. The gross procedure fee is required by law to be established by the professional; however, the Company will require prior consent for gross procedures fees using its LVC Services at less than $1,200 per eye in an effort to recover at least the Company's estimated costs of operations. Since a substantial portion of the Company's operating expenses are expected to be fixed expenses for depreciation of equipment, facilities expense, support staff and general and administrative expenses, the Company's prospects for profitability will be dependent in large part upon the volume of LVC procedures performed by use of its LVC Services in addition to the amount of the gross procedure fees charged by professionals. Generally speaking, gross procedure fees charged by professionals for LVC treatment in most markets currently range from approximately $1,500 to $2,000 per eye, although there can be no assurance these levels will be maintained for the long term. Support services offered by the Company will include, among others, access to the Company's equipment, supplies and support personnel; administration of accounting, billing, collection and other information processing functions; training and education in advanced LVC procedures; and marketing support. There can be no assurance that MDs and ODs will require and contract for the Company's LVC Services, and professionals that do contract with the Company cannot be required to use exclusively the Company's services for their LVC practice. TARGETED GEOGRAPHIC MARKETS The Company's LVC Services are planned to be offered at locations in southern Ontario, Canada and/or Michigan, focusing on laser vision correction of common refractive disorders such as myopia (nearsightedness), hyperopia (farsightedness) and astigmatism. Depending upon the extent of equipment lease or other installment purchase financing that may available for its capital equipment requirements, the Company 24 27 anticipates that proceeds of this offering will enable it to establish from two to four locations providing LVC Services in its targeted geographic markets of Southern Ontario and Michigan servicing Central Canada and the Midwestern United States. In addition, the Company intends to implement a comprehensive consumer marketing program to explain and promote LVC generally to the public as well as sponsoring training seminars and educational programs for MDs and ODs. Since advanced laser-based procedures have been permitted in Canada for several years while a pre-market approval ("PMA") process, described below, has been pending with the U.S. Food and Drug Administration ("FDA"), the Company's strategy has been to engage the consulting services of, and promote advisory associations with, certain ophthalmologists who are experienced in a variety of LVC treatments, procedures and post-operative care. These professionals have been engaged by the Company to establish high medical and operational standards for its LVC Services, to train other ophthalmologists in advanced LVC procedures, and to establish a Board of Advisors consisting of credentialed and prominent MDs and ODs with similar skills and experience. To attract these professionals and encourage MDs and ODs to use Company facilities and services, each Company site will be fully equipped with advanced equipment for laser-based LVC procedures as well as providing equipment for diagnostic, pre-operative and post-operative care and offering comprehensive support services. BACKGROUND -- VISION DISORDERS The human eye is a complex organ that functions much like a camera, with a lens in front and a light sensitive screen, the retina, in the rear. Images enter the human eye through the cornea, a transparent domed window at the front of the eye. In a properly functioning eye, the cornea bends (refracts) incoming images, causing the images to focus on the retina. The inability of the cornea to properly refract incoming images results in blurred vision and is called a refractive disorder. Myopia (nearsightedness), hyperopia (farsightedness) and astigmatism are three of the most common refractive disorders. In a nearsighted (or myopic) eye, images are focused in front of the retina. In a farsighted (or hyperopic) eye, images are focused behind the retina. In an astigmatic eye, images are not focused at any one single point. Conventional methods of correcting refractive disorders are by prescription of eyeglasses and contact lenses. Over the last 15 years, refractive vision disorders have also been treated by several surgical techniques, such as radial keratotomy in which small incisions approximately 400 to 450 microns deep in a radial configuration are made around the periphery of the cornea. Corneal pathologies, which include certain diseases, injuries and conditions of the cornea, also can result in impaired vision, discomfort or blindness. Such pathologies include corneal opacities, irregular corneal surfaces and abnormal tissue growths on the cornea. Another pathological condition of the eye is glaucoma, a disease characterized by a sustained elevation of intraocular pressure which, if untreated, may result in blindness. LASER VISION CORRECTION ("LVC") SYSTEMS To assist health care professionals in delivering refractive care to persons with vision disorders, the Company intends to take advantage of continuous technological advances developed in recent years in the field of ophthalmic laser systems. LASER TECHNOLOGY OVERVIEW Lasers have been used routinely for a variety of medical purposes since the 1960s. Lasers emit photons of light into a highly intense beam of energy that is delivered to targeted tissue by means of optical mirrors or fiber optics. The degree of absorption by the tissue varies with the choice of wavelength and is an important variable in the application of laser technology in treating various tissues. Surgical lasers emit light in a continuous stream or in a series of very short duration "pulses", thus interacting with tissue through heat or shock waves, respectively. Several factors, including the wavelength of the laser and the frequency and duration of the exposure or pulse, determine the amount of energy which interacts with the targeted tissue and, thus, the amount of damage to the tissue. 25 28 Laser technology has been accepted in the ophthalmic community for the treatment of certain eye disorders. In general, ophthalmic lasers are used to coagulate, cut or ablate (remove) targeted tissue. As examples, the argon laser is used for treatment of leaking blood vessels on the retina and retinal detachments. Nd:YAG (Neodymium: Yttrium Alminum Garnet) pulsed lasers are used to clear clouded posterior capsules and, to a lesser extent, for relief of elevated pressure in the eye. EXCIMER LVC SYSTEMS More recently developed excimer (argon fluoride) lasers are incorporated in a fully integrated ophthalmic surgical laser workstation for use by ophthalmologists to perform procedures to treat refractive and other ophthalmic disorders. The excimer laser system delivers pulses of ultraviolet laser light to an eye to ablate submicron layers of tissue from the surface of the cornea in a computer-assisted, predetermined pattern to reshape the cornea. Most of the laser light generated by the excimer system is absorbed by the removed corneal tissue during a procedure. As a result, the laser light does not penetrate interior portions of the eye and does not create substantial amounts of heat in the surrounding tissue. These attributes make the excimer laser system well suited to corneal surgery. PRK. Photorefractive keratectomy ("PRK") is procedure performed with a excimer laser system to treat primarily nearsightedness, and also farsightedness and astigmatism. When performing PRK with the excimer laser, the ophthalmologist determines the exact correction required (which is measured by the same type of examination used to prescribe eyeglasses or contact lenses) and programs the correction into the system's computer. The ophthalmologist removes the thin surface layer of the cornea (the epithelium) and positions the patient for the laser procedure. The average PRK procedure consists of approximately 150 laser pulses, each of which lasts several billionths of a second over a period ranging for 15 to 40 seconds. Cumulative exposure to the laser light is less than one second. The entire procedure, including patient preparation and post-operative dressing, generally lasts no more than thirty minutes. The goal of PRK is to eliminate or to reduce a person's reliance on corrective eyewear. Following the PRK procedure, the ophthalmologist may prescribe topical pharmaceuticals to promote corneal healing and to alleviate discomfort. A series of patient follow up visits is scheduled with the ophthalmologist (MD) or an optometrist (OD) to monitor the corneal healing process, to verify that there are no complications and to test the correction achieved by the PRK procedure. Patients undergoing PRK generally experience discomfort for approximately 24 hours, and blurred vision for approximately 48 to 72 hours after the procedure. Although most patients experience improvement in uncorrected vision within a few days of the procedure, it generally takes from two to six months for the correction to stabilize and for the full benefit of the procedure to be realized. An individual typically has one eye treated in a session, with the second eye treated three to six months thereafter. In the Company's Windsor location, however, it anticipates that a significant percentage of patients may be eligible for bilateral treatment in which both eyes are treated simultaneously based upon procedures that consultants to the Company have developed. Although a patient usually experiences a substantial improvement in clarity of vision within a few days following the PRK procedure, it generally takes from two to six months for the full benefit of the procedure to occur. The PRK procedure is used today primarily to correct the vision of patients with myopia (or nearsightedness) ranging from -1.5 to up to -7.00 diopters, although the PRK procedure has also been performed in foreign countries on higher diopter nearsighted and, occasionally, farsighted and astigmatic patients. Approximately 90% of all myopic patients are nearsighted up to -6.00 diopters and use of the PRK procedure to correct the vision of nearsighted patients of up to -6.00 diopters therefore has received the greatest degree of testing. Prior to PMA approval by the FDA for use in the United States of Summit's excimer laser system in October 1995 and VISX's excimer laser system in March 1996, PRK procedures to correct myopia have been performed in approximately 35 countries outside the U.S., including Canada, the United Kingdom, Italy and Sweden. LASIK. Laser assisted in situ keratomileusis ("LASIK") is a procedure performed with an excimer laser system to treat extreme cases of myopia. LASIK, although a more unusual and delicate surgical procedure than PRK, offers advantages in that the epithelium is not touched by the laser and therefore 26 29 promotes quicker healing. Glare and central islands are practically non-existent after LASIK since ablation occurs in the stroma layer (under the epithelium); by the creation of a corneal flap, subsequent retouches are facilitated with minimal recovery time. To date, the FDA has not established standards for clinical testing of LASIK systems, and the Company is uncertain whether LASIK procedures can be utilized commercially in the United States. Summit, however, has reported it is engaged in FDA clinical trials seeking approval to sell its excimer system perform LASIK. In May 1996, the FDA advised U.S. eye care professionals that LASIK and bilateral surgery (treatment of both eyes at the same time) are outside the scope of currently FDA approved labeling for excimer lasers. Although the FDA noted that physician discussions with patients and physician decisions to conduct either of those procedures are considered the practice of medicine, the FDA cautioned that it expects excimer laser equipment manufacturers and health care practitioners will advertise and promote the use of FDA approved lasers in the U.S. only within the scope of their currently FDA approved use, i.e. for PRK and PTK. PTK. Phototherapeutic keratectomy ("PTK") is a procedure performed with the excimer system to treat corneal pathologies. In this procedure, submicron layers of tissue are ablated from the surface of the cornea in order to remove diseased, scarred or sight-inhibiting tissue. The goal of PTK is not necessarily to cure the corneal pathology, but rather to alleviate the symptoms associated with the pathology. The FDA in February 1995 granted PMA to an excimer laser system developed by Summit Technology Inc. to perform PTK procedures and on October 2, 1995, the FDA granted PMA to two excimer laser systems manufactured by VISX Incorporated for PTK procedures, the VISX 20/20B and "Star" excimer lasers. OTHER. Excimer lasers may also be used to treat glaucoma. The procedure pursuant to which glaucoma is treated is known as Partial Excimer Traheculectomy ("PET"). The PET procedure involves the use of the excimer laser to create a penetrating filter through the scleral tissue (the tough, fibrous tissue covering all of the eye except the cornea), which causes the permeation of fluids from within the eye, thus reducing pressure levels. HOLMIUM LVC SYSTEMS LTK. Another recently developed LVC technology is the holmium laser system. The holmium system delivers high intensity pulses of infrared light to an eye by means of a fiber optic cable and a single-use, hand-held probe that directly contacts the eye at the exact spots chosen by the ophthalmologist. The Company is aware of two manufacturers that have developed holmium laser systems. Summit has reported it is engaged in FDA clinical trials seeking approval to sell its holmium system to perform laser thermal keratoplasty ("LTK"), a refractive procedure performed to treat farsightedness and astigmatism in which peripheral corneal tissue is thermally shrunk, causing the central portion of the cornea to steepen. LS. Laser Sclerostomy ("LS") is a surgical procedure performed with the holmium system to treat the symptoms of glaucoma by making an opening in the front chamber of the eye. Summit Technology, Inc. has received FDA pre-market clearance to sell its holmium system in the U.S. for treatment of glaucoma. Other LVC Systems. The Company is aware of three companies that have reportedly developed solid state lasers, ophthalmic laser surgical systems that apply a beam of high intensity light to remove tissue from the inside, as opposed to the surface of, the cornea. These solid state lasers are designed to ablate tissue inside the cornea without violating the cornea's surface by computer guiding the laser beam to the inner corneal tissue and vaporizing the targeted tissue. BUSINESS STRATEGY OVERVIEW The Company's long-term business goal is to pursue a leadership position in the potential market for LVC Services directed to refractive eye care in the Midwestern United States and Central Canada. However, there can be no assurance the Company will be successful in achieving this goal or that it will attain profitable operations. To date, its activities have consisted primarily of market research, seeking affiliations with experienced LVC eye care professionals, negotiating to acquire equipment necessary to establish its first 27 30 location for LVC Services in Windsor, Ontario, and negotiating agreements to provide equipment use and support services to eye care professionals. The Company's LVC Services are planned to be offered at locations in southern Ontario, Canada and/or Michigan, focusing in particular on laser vision correction of common refractive disorders such as myopia (nearsightedness), hyperopia (farsightedness) and astigmatism. Depending upon the extent of equipment lease or other installment purchase financing that may available for its capital equipment requirements, the Company anticipates that proceeds of this offering will enable it to establish from two to four LVC Service sites in its targeted geographic markets of Southern Ontario and Michigan servicing Central Canada and the Midwestern United States. The first facility to be subleased and established by the Company immediately upon completion of this offering will be located in Windsor, Ontario, directly adjacent to Detroit, Michigan. The Company believes that certain ophthalmologists in Canada have become technology leaders in employing LVC equipment and techniques, including PRK procedures for treatment of nearsightedness that have only recently become available for commercial use in the U.S., as well as other laser procedures not commercially available in the U.S. for treatment of hyperopia, astigmatism and extreme myopia cases. Due to regulatory constraints in the U.S., the Company expects that some U.S. patients, as well as Canadians, will seek treatment in Canada when the preferred method of treatment requires an LVC procedure not commercially available in the U.S., such as LASIK, LTK or bilateral procedures (concurrent treatment of both eyes). The Company anticipates that LASIK and an advanced proprietary method of PRK developed by Dr. Donald G. Johnson called the Johnson transepilthelial multi-zone, multi-pass PRK procedure ("TMM PRK") will be the most significant procedures performed at its first location in Windsor. The Company also plans to offer LVC Services at one or more strategically positioned locations in Michigan where licensed MDs and ODs who are expected to become parties to facilities use and LVC Services agreements with the Company bring their patients for LVC diagnosis, PRK laser procedures and post-operative care. Based upon 1990 census data, Michigan has a population of approximately 9.3 million persons. Data compiled by the Michigan Optometric Licensing Board indicates there are approximately 475 MDs and approximately 2,360 ODs in Michigan. RELATIONSHIPS AND AGREEMENTS WITH HEALTH CARE PROFESSIONALS Dr. Fouad Tayfour Dr. Fouad Tayfour has agreed to act as a consultant and to enter into a Facilities Agreement with the Company effective upon the completion of this offering. He has extensive experience in the use of LASIK procedures and recently adapted the TMM PRK procedure to Summit equipment. Dr. Tayfour has performed approximately 2,000 LASIK procedures through 1995 in Ontario. Under the terms of a Facilities Agreement with Dr. Tayfour, effective upon completion of this offering the Company will receive approximately 50% of the gross procedure fee (as defined in the agreement) charged to patients by Dr. Tayfour as compensation for use of the Company's facilities and for providing support services to Dr. Tayfour. In general, the gross procedure fee includes all charges to the patient by Dr. Tayfour for professional services and use of LVC facilities, equipment, supplies and other administrative expenses and will be established from time to by Dr. Tayfour. The Facilities Agreement provides that the gross procedure fee related to Dr. Tayfour's use of the Company's LVC Services will be not less than $1,200 (U.S. funds) per procedure for each eye treated at the Windsor location unless both the Company and Dr. Tayfour mutually agree that Dr. Tayfour may charge a lower minimum fee. In view of the difficulty in projecting the number of procedures to be performed and the total cost of the Company's support services, the Company has agreed that its compensation from Dr. Tayfour is subject to possible reduction during a 24 month period, commencing after the end of the third month following the date of this Prospectus, in the event less than an average of 150 LVC procedures per month are performed at the Windsor site by Dr. Tayfour. In such event, fees payable to the Company by Dr. Tayfour will be reduced by any amount necessary to result in additional compensation to Dr. Tayfour of not less than (i) 150 minus the actual number of procedures performed by him in such month multiplied by (ii) the professional fees realized by Dr. Tayfour for such period, net of the Company's fee, divided by the actual number of procedures he performed in such month. The Facilities Agreement with Dr. Tayfour is for a term of 28 31 five years and will be renewed thereafter on a year-to-year basis unless either party has provided the other with at least three months' notice not to renew the agreement. The Company is obligated under its Facilities Agreement with Dr. Tayfour to provide equipment at facilities in Windsor meeting all ethical and professional standards prescribed by the Company's Medical Advisory Board and equipped with state-of-the-art equipment appropriate for LVC care, including equipment to be acquired by the Company pursuant to an Agreement of Purchase of Assets with Windsor Excimer Corporation, an affiliate of Dr. Tayfour (see "Certain Transactions"). The Company's Windsor equipment and operations will be located in a portion of facilities to be subleased from Windsor Excimer Corporation upon completion of this offering (see "Company LVC Service Sites" below and "Certain Transactions"). The Company has also entered into a Consulting Agreement with Dr. Tayfour effective upon the completion of this offering. Under that agreement, Dr. Tayfour will act as a professional consultant to the Company concerning the establishment of ethical standards and procedures for LVC Services and care at Company locations, will periodically conduct training and education seminars sponsored by the Company, and Dr. Tayfour will agree to serve as an Executive Committee member of the Company's Medical Advisory Board. Compensation payable to Dr. Tayfour under the Consulting Agreement will include a percentage of the Company's fees, after deduction of certain operating expenses, attributable to the first 20 LVC procedures performed in each month at its Windsor location by credentialed MDs other than Dr. Tayfour. The percentage will equal 100% of the Company's compensation, after deduction of direct operating expenses and overhead costs, for the first 10 such procedures in each month and 50% for the next 10 procedures in each month. The Consulting Agreement with Dr. Tayfour is for a term of five years and will be renewed thereafter on a year-to-year basis unless either party has provided the other with at least three months' notice not to renew the agreement. The Company has also committed to Dr. Tayfour that it will establish and maintain billing, collection and accounting procedures for the collection of fees generated for the account of Dr. Tayfour and other licensed and credentialed health care providers designated by him, and to establish and maintain a public education and marketing program to promote LVC care to the public in the geographic markets of Ontario and the Midwestern United States by means of telemarketing, advertising and/or other programs conforming to ethical and professional standards established by the Company's Board of Directors with the advice and consent of the Company's Medical Advisory Group. In addition, the Company has agreed to train and maintain an adequate support staff for the management, administration and operation of its LVC Services and equipment, and to promote general awareness of LVC care within the professional community by sponsoring educational and training seminars for health care professionals. Under the Consulting Agreement and Facilities Agreement with Dr. Tayfour, the Company agreed to elect Ghassan Barazi as its President and Chief Executive Officer and to cause Mr. Barazi and up to two other professionals to be designated by Dr. Tayfour to be elected directors of the Company. Mr. Barazi has acted as Administrative Director and Business Manager for the Windsor Laser Eye Institute founded by Dr. Tayfour in 1991 (see "Management"). To date, Dr. Tayfour has not nominated two other individuals for election to the Company's Board of Directors, and he has advised the Company that he does not anticipate such persons will be identified or designated until after the completion of this offering. Dr. Donald G. Johnson The TMM PRK procedure was developed by Dr. Donald G. Johnson of Vancouver, British Columbia, an experienced PRK surgeon. Dr. Johnson is a director and stockholder of the Company (see "Management" and "Certain Transactions") and has agreed to render part-time consulting services to the Company. Dr. Johnson developed TMM PRK procedures with VISX equipment and as of December 31, 1995 has successfully treated approximately 7,400 eyes with excimer laser procedures. TMM PRK provides for a much smoother ablation zone, thus substantially reducing glare and central islands, which are side effects sometimes encountered in standard PRK procedures. The epithelium (a layer of cells comprising the outer surface of the cornea) is removed in the TMM PRK procedure by use of the laser, thus avoiding direct contact with the eye 29 32 by the physician or instruments. The Company's believes that the TMM PRK method promotes faster post-operation regrowth during the period when risk of pain and infection risk is highest. Dr. Johnson's consulting agreement provides he will advise the Company concerning the establishment of ethical standards and procedures for LVC procedures in general and the TMM PRK procedure in particular at the Company's facilities so long as such services do not conflict with Dr. Johnson's professional service obligations to his patients or other professional commitments. There is no requirement under this agreement for continuing compensation payments to Dr. Johnson. Dr. J. Charles Casebeer Dr. J. Charles Casebeer, Chairman of the Board, is a director and stockholder of the Company (see "Management" and "Certain Transactions") and is an educator and trainer in the LASIK procedure and has previously served other companies as a consultant in the LASIK field. Dr. Casebeer also has conducted studies on the TMM PRK method developed by Dr. Johnson. See also "Management". Dr. Casebeer has entered into a Consulting Agreement with the Company. He is expected to continue his efforts in LASIK procedures and to assist the Company and Dr. Tayfour in managing the Company's program for training MDs and ODs in the use and performance of LVC procedures and in recommending standards to establish a program of credentialing and training MDs and ODs in various aspects relating to LVC procedures and patient treatment. In consideration of his services, Dr. Casebeer's professional corporation will receive from the Company compensation at the rate of $60,000 per annum plus additional compensation of $2,500 for each MD and OD that enters the credentialing program (see "Certain Transactions"). The $60,000 annual payment to Dr. Casebeer's professional corporation will be paid upon completion of this offering by the Company for the first year of his consulting services and thereafter at the rate of $5,000 per month. Compensation for each MD and OD that enters the credentialing program will be payable at the rate of $500 per month over a period of five months commencing in the first month following the date on which each such MD and OD has started his or her accreditation program. Dr. Casebeer is expected in the future to promote advanced LVC methods for both the Company and for other Vista Laser Centers companies that may be formed in the future by the Company's founder, Vista Technologies Inc., to service other North American geographic markets. (The Company and investors in this offering will not acquire an interest in other companies formed by Vista Technologies Inc.) Other Planned Relationships with Professionals The Company intends to appoint a Medical Advisory Board of MDs and ODs, including, among others, members of the local medical community, to make recommendations concerning facilities and equipment, technological advances, and medical, professional and ethical practices and standards at its LVC Service locations and to monitor such practices. The Company's Medical Advisory Board is expected to consist of up to approximately 20 MDs and up to approximately 40 ODs. An Executive Committee of the Medical Advisory Board will consist of approximately five MDs and approximately five ODs who meet credential requirements established by the Executive Committee. The Executive Committee will establish credential requirements for MD and OD members of the Medical Advisory Board, administer the Medical Advisory Board and provide consulting services to the Company relating to its business, equipment and service standards. The initial members of the Medical Advisory Board will be appointed by joint decision of Dr. Tayfour and Ghassan Barazi, the Company's President, and Medical Advisory Board members will be compensated for their services in accordance with policies to be established from time to time by the Company's Board of Directors. Such policies have yet to be determined and are expected to be dependent in part upon the level of future revenues available to the Company, its profitability and cash requirements for working capital and expansion. The Company believes that both regional support of its LVC Services and its ability to attract use of its LVC equipment and services will be enhanced by the establishment of its Medical Advisory Board, and also as a result of the reputation, experience and skills of MDs and ODs acting as consultants to the Company. The Company plans to offer selected MDs and ODs the opportunity to receive 30 33 stock option grants under the Company's Stock Option Plan at exercise prices equal to fair market value of its Common Stock on the date of grant to provide MDs and ODs with an equity incentive in the Company's operations. The Company's management believes that this program will encourage MDs and ODs to take an active role in advising the Company and in recommending consideration of its LVC Services to other MDs and ODs that are interested in evaluating available alternatives when prescribing LVC treatment for their patients. The Company does not plan to directly employ health care professionals. Upon the completion of this offering, the Company will solicit additional MDs and ODs to enter into services agreements with the Company and/or to serve as members of its Medical Advisory Board. The terms of services agreements with professionals may vary, depending upon the extent of LVC Services and equipment provided by the Company, skills and experience of the particular professional, negotiated terms in individual instances and market conditions. The Company believes that in most instances, it will seek to charge up to approximately 60% of the gross procedure fee as a fair allocation for the market value of its LVC Services. The Company believes that two important factors relating to the utilization of its LVC Services and equipment by MDs will be the number and quality of qualified physicians providing patient care at Company locations and the quality of its equipment and facilities. Other factors expected to impact utilization of its LVC Services include public acceptance of LVC procedures, competition, and demographic factors in its targeted market areas. AGREEMENTS WITH RS-800 AND VISTA TECHNOLOGIES The Company has entered into agreements to license the use of 800 and 900 telephone numbers from Refractive Services 800 Corp. ("RS-800") a wholly-owned subsidiary of Vista Technologies, and for certain consulting services to be provided by Vista Technologies. Vista Technologies is a founder and principal stockholder of the Company. Vista Technologies currently operates five PRK surgical centers in Europe. See "Certain Transactions". Under a Consulting Services Agreement, Vista Technologies will provide certain consulting services to the Company relating to LVC developments in Europe, location of additional sites for Company equipment, financing, accounting and legal requirements and investor relations. In exchange for such services, Vista Technologies will receive 5% of the Company's revenues attributable to charges for the use of its equipment and other LVC Services, less a credit to the Company against such fees of $5,000 per month. In the event any of such revenues are attributable to a subsidiary of the Company that is not wholly-owned by the Company, Vista Technologies' 5% will be reduced in proportion to the Company's percentage ownership in the subsidiary, but to not less than 2 1/2% of such revenues. Rights to the service mark "Vista Laser Centers" are owned by Vista Technologies and have been licensed to the Company by Vista Technologies on a non-exclusive basis for the term of the Consulting Services Agreement. RS-800 has granted the Company the right to use certain 800 and 900 area code telephone numbers, including among others 800-WE-DO-PRK, for its marketing and public education programs. If the Company elects to use those telephone numbers, RS-800 will receive 2 1/2% of the Company's revenues generated only as a direct result of responses to telemarketing activities of the Company by use of the licensed 800 and 900 telephone numbers. In such event, the determination of revenues generated as a direct result of responses by use of the licensed telephone numbers will be based upon responses from new patients using those numbers to be maintained by the Company for MDs and ODs who are parties to service agreements with the Company. The Company has not yet determined whether it intends to use the 800 and 900 telephone numbers licensed by RS-800. COMPANY LVC SERVICE SITES The Company plans to select strategically located sites to be equipped with state-of-the art laser equipment systems permitted for commercial use in the country in which the equipment is located, as well as accommodating diagnostic, pre-operative and post-operative facilities. The Company will own or lease and maintain the LVC equipment at each site, and will offer MDs and ODs billing, accounting, administrative, 31 34 marketing and management services, as well as access to a trained support staff and necessary LVC equipment and supplies, so that health care professionals may concentrate their efforts on patient care. The Company believes that physician groups and individual practices will typically lack the capital (approximately $500,000 or more per laser system) to acquire LVC equipment and can benefit from accounting, administrative, marketing and management services where the Company's cost is spread over a larger base than would be available to small or individual practices. The Company's first LVC Services site will be established in Windsor, Ontario, directly adjoining the United States border at Detroit, Michigan. The Company has selected a location for its facility at 2224 Walker Road, Windsor, Ontario N8W 3P6, Canada where it will sublease from an affiliate of Dr. Tayfour a portion of premises currently used by Dr. Tayfour. These facilities include approximately 2,228 square feet to be subleased for a term expiring on March 30, 2004 and approximately 400 square feet to be subleased for a term expiring on December 30, 1996. The monthly rental rate for these facilities will be approximately $2,921 (Canadian currency) per month subject to an increase of approximately 10% in April 1999. The Company has also entered into agreements effective upon completion of this offering to purchase certain laser and related equipment from an affiliate of Dr. Tayfour at a purchase price of $1,000,000, which approximates its fair market value, to immediately establish its Windsor LVC Service operations. Of such purchase price for equipment, $500,000 will be paid from proceeds of this offering by this Company and the balance will be financed by the Company's issuance of a 10% promissory note, interest only accruing from the date of this offering and payable monthly commencing 90 days thereafter, with all principal due on the second anniversary of the date of this Prospectus and collateralized by all equipment at the Company's Windsor location. The equipment to be purchased for the Windsor location will include a Summit OmniMed UV 200 excimer laser, a Sunrise Technologies LTK holmium laser, a corneal automatic mapping system and other medical and office equipment. See "Certain Transactions". The Summit equipment is covered by an service maintenance agreement with Summit at a cost of $35,500 per annum effective through December 15, 1996 or 600,000 laser pulses, whichever first occurs. The Company is currently engaged in negotiations to acquire at a cost of $150,000 a 50% interest in a newlyorganized company to be formed in association with a group of Michigan professionals to offer LVC Services in the metropolitan Detroit area. There can be no assurance that such negotiations will be successfully concluded. If such negotiations are concluded prior to the date of this Prospectus, Vista Technologies has committed to lend the Company $150,000 at 8% interest per annum to make that investment, which would be repaid from the proceeds of this offering by the Company. Either as a result of that transaction or in association with other professionals at a future date, the Company anticipates establishing a second site with equipment offering LVC Services in Detroit, Michigan at an estimated cost ranging from $500,000 to $700,000 shortly after the first Windsor location has become operational. In March 1996, the Company received an assignment of, and assumed the obligations under, a lease for a Summit holmium laser system from one of the MDs with which it is currently negotiating to associate in Detroit, Michigan. Under the terms of that lease assignment and assumption, this equipment will be subleased by the Company, upon terms to be negotiated, to a newly-organized company to be formed in association with a group of Michigan professionals to offer LVC Services in the metropolitan Detroit area. The Company's obligations under the lease assignment and assumption are to make all equipment lease payments remaining due of $10,850 per month until December 1999 (at which point the Company has the right to purchase the equipment for a nominal payment of $1) plus an obligation in the aggregate amount of $230,000, payable at the rate of $250 each time the equipment is used by an MD, which amount will be deducted from sublease obligations of the newly formed company. The Company currently is negotiating to enter into a modified lease for this equipment directly with the original equipment lessor on substantially the same economic terms provided by the lease assignment. The location and equipment selected for additional LVC Service sites will be determined in the future with reference to the status of regulatory approvals for commercial use of LVC equipment in the United States, the proximity of the site to a full-service Company equipment location, and other relevant factors such as potential competition and market demographics. Due to the status of FDA pre-market approvals of LVC 32 35 equipment at the present time, LVC equipment for the first site in Michigan will be limited to PRK procedures to treat nearsightedness, LS (laser sclerostomy) procedures to treat the symptoms of glaucoma and possibly PTK (phototherapeutic keratectomy) procedures to treat certain corneal pathologies. The Company anticipates, however, that U.S. patients who may request other forms of LVC procedures not commercially available in the U.S., such as LASIK or TMM PRK, may be referred by professionals to MDs associated with the Company's Ontario operations. Each location administered by the Company will be fully equipped to offer high quality service for LVC procedures to primarily correct myopia as well as hyperopia and astigmatism. The Company's Windsor site will act as the flagship facility for the Company's LVC Services. The Windsor facilities are designed for high quality performance of laser-based vision correction, training and education of medical professionals, and to conduct both professional and patient seminars. The Company has completed a preliminary design concept for the Windsor site and is in the process of designing a program for training MDs and ODs in PRK, LASIK, TMM PRK and other alternative refractive care procedures at this location. MARKETING STRATEGY The Company is developing marketing materials for health care providers to assist them in educating potential patients as to PRK, LASIK and other LVC procedures. The Company's marketing strategy may vary, depending upon the particular geographic area, the current level of local knowledge about LVC procedures, the acceptability of particular means of advertising and the type of customer. The Company intends to promote marketing programs to health care providers that will utilize newspaper, radio, television, magazine and other media advertising, direct mail promotions and telemarketing to potential LVC patients, brochures describing LVC for distribution by MDs and ODs, and video cassettes discussing LVC procedures with professional health care provider and patient testimonials. The Company's marketing program will be intended to comply with ethical guidelines of the American Academy of Ophthalmology and other applicable laws and regulations. The Company is not involved in the research, development or manufacture of refractive laser systems, and will be dependent on unrelated manufacturers for its supply of refractive lasers. The Company believes that there are four U.S. companies that have conducted or are conducting clinical trials with excimer lasers for refractive surgery: Summit Technology, Inc, VISX Incorporated, Chiron Corp. ("Chiron") and LaserSight Incorporated ("LaserSight"). As described below, Summit and VISX have recently received PMA approval to commercially sell excimer lasers for PRK procedures to treat low and mild myopia in the United States. FDA REGULATORY APPROVAL PROCESS IN THE UNITED STATES BACKGROUND AS TO THE PMA PROCESS Excimer laser systems and related disposables are regulated as medical devices by the United States Food and Drug Administration ("FDA") and require pre-market clearance or pre-market approval (referred to as a "PMA") by the FDA prior to commercial sale and use in the U.S. Medical devices in the U.S. are classified into one of three classes on the basis of the controls deemed necessary by the FDA to reasonably ensure safety and effectiveness. Class I devices are subject to general controls such as labeling, premarket notification to the FDA and adherence to good manufacturing practices; Class II devices are subject to general and special controls such as performance standards, postmarket surveillance, patient registries and FDA guidelines. Class III devices generally are those which must receive PMA by the FDA to ensure their safety and effectiveness and include, among other devices, new devices which have been found not to be "substantially equivalent" to existing legally marketed devices. Before a new device can be introduced to the market, the manufacturer generally must obtain FDA clearance through either a 510(k) pre-market notification or approval of a PMA. A 510(k) clearance will be granted if the submitted information establishes that the proposed device is "substantially equivalent" to a legally marketed Class I or Class II medical device, or to a Class III medical device for which the FDA has not called for PMAs. The FDA has recently been requiring a more rigorous demonstration of substantial equivalence than in the past. It generally takes from four to 12 months from submission to obtain 510(k) 33 36 pre-market clearance, but may take longer in certain cases. The FDA may determine that a proposed device is not substantially equivalent to a legally marketed device, or that additional information is needed before a substantial equivalence determination can be made. A PMA application must be filed if a proposed device is not substantially equivalent to an existing legally marketed Class I or Class II device, or if it is a Class III device for which the FDA has called for PMAs. A PMA application must be supported by valid scientific evidence which typically includes extensive preclinical and clinical trial data to demonstrate the safety and effectiveness of the device. If human clinical trials of a device are required, and the device presents a "significant risk," the sponsor of the trial (usually the manufacturer or distributor of the device) will have to file an Investigational Device Exemption ("IDE") application prior to commencing human clinical trials. The IDE application must be supported by data, typically including results of animal and laboratory testing. If the IDE application is approved, human clinical trials may begin at a specific number of investigational sites with a specific number of patients, as approved by the FDA. A PMA application must contain the results of clinical trials, the results of all relevant bench tests, laboratory and animal studies, a complete description of the device and its components, a detailed description of methods, facilities and controls used to manufacture the device and certain other information. Upon receipt of a PMA application, the FDA makes a threshold determination as to whether the application is sufficiently complete to permit a substantive review. If the FDA determines that the PMA application is sufficiently complete to permit a substantive review, the FDA will accept the application for filing. FDA review of a PMA generally takes one to two years from the date the PMA is accepted for filing, but may take significantly longer. The review time is often significantly extended by the FDA asking for more information, including additional clinical trials for clarification of information provided in the submission. There are devices for which FDA approval has been sought which have never been approved for marketing in the U.S. If the FDA's evaluation of both the PMA application and manufacturer's facilities are favorable, the FDA will either issue an approval letter or an Approvable Letter, which usually contains a number of conditions which must be met in order to obtain final approval of the PMA. When conditions have been fulfilled to the satisfaction of the FDA, it will issue a PMA approval letter, authorizing commercial distribution of the device for certain applications. If the FDA's evaluation is not favorable, the FDA will deny approval of the PMA application or issue a "not approvable letter". The FDA may approve a device for some procedures but not others, or for certain classes of patients and not others. Modifications to a device that is an approved PMA also may require approval by the FDA of PMA supplements or new PMAs. PMA STATUS OF LVC SYSTEMS In late October 1995, Summit received PMA from the FDA for use of Summit's excimer laser system to treat low and moderate nearsightedness using PRK. The Company has been advised that this PMA specifies a six millimeter ablation zone for myopic corrections between -1.5 and -7.0 diopters. Summit has further indicated that its PMA requires the initiation of postmarket studies and surveillance. Data generated by the postmarket studies will be reviewed by the FDA in determining whether future restrictions on device labeling or use are warranted. On March 28, 1996, VISX announced it had received PMA from the FDA for use of VISX's excimer laser system to treat low and moderate nearsightedness using PRK. The Company has been advised that this PMA specified a six millimeter ablation zone for myopic corrections up to -6.0 diopters. The Company believes that the FDA has not published guidelines for clinical trials of excimer laser systems to perform procedures other than PRK and PTK, and both Summit and VISX have indicated they are working with the FDA to design appropriate trials for such procedures on a case by case basis. Because the FDA has not published guidelines with respect clinical trials for other PRK procedures, it is not known whether or to what extent the FDA may require further clinical trials of TMM PRK or LASIK procedures or whether the use of TMM PRK or LASIK will be permitted in the United States. TMM PRK and LASIK are currently permitted in Canada and are expected to account for a majority of the procedures performed at the first Windsor location to be established by the Company. 34 37 SAFETY AND EFFICACY The first PRK procedure for the treatment of nearsightedness using an excimer laser system was performed in 1989, and the first PTK procedure for the treatment of a corneal pathology using an excimer system was performed in 1988. A large majority of PRK and PTK procedures to date have been performed only since 1990. Concerns with respect to the safety and efficacy of the excimer laser system to perform procedures include predictability and stability of results and potential complications, such as modest decreases in best corrected vision and side effects from PRK, PTK, LASIK and LTK. Other possible effects include postoperative pain; corneal haze during healing (an increase in the light scattering properties of the cornea); glare/halos (undesirable visual sensations produced by bright lights); decrease in contrast sensitivity (diminished vision in low light); temporary increases in intraocular pressure in reaction to post procedure medication; modest fluctuations in astigmatism and modest decreases in best corrected vision (i.e., with eyeglasses); unintended over or under corrections; instability, reversal or regression of effect; corneal scars (blemishing marks left on the cornea); corneal ulcers (inflammatory lesions resulting in loss of corneal tissue); and corneal healing disorders (compromised or weakened immune system or connective tissue disease which causes poor healing). Summit has reported that two year follow-up data accumulated by Summit during its Phase III PRK clinical trials indicate all of the individuals undergoing PRK experienced an improvement in visual acuity without corrective eyewear. Prior to PRK, 95% of the eyes in this group were 20/200 or worse. Of the eyes treated, approximately 91% improved to 20/40 or better, the legal requirement to obtain a driver's license in most states without corrective eyewear, while the remaining 9% experienced improved vision without corrective eyewear, but still required corrective eyewear to achieve 20/40 vision or better. (Summit is not affiliated with the Company.) In addition, it was reported in 1991 by the Steering Committee of the Summit International Laser User Group (composed of academies and ophthalmic physicians from approximately 27 countries) that, based on procedures performed on over 6,150 nearsighted eyes of up to -6.00 diopters, the PRK procedure was found to be safe and effective, with more than 90% of treated eyes being within 1.00 diopter of 20/20 vision in the first year following the procedure. PRK to correct myopia is currently being performed in at least 35 countries outside the U.S. MARKET POTENTIAL FOR THE COMPANY'S LVC SERVICES It is estimated that in excess of 100 million people in the U.S., and a much larger number worldwide, use eyeglasses or contact lenses to correct common vision disorders, with over 60 million of these individuals suffering from nearsightedness. U.S. consumers spent an estimated $13.8 billion in eyeglass and contact lens purchases in 1993. While excimer laser procedures can treat people who are farsighted or are astigmatic, both the existing technology and application for regulatory approvals for those uses are in an earlier stage than for use of excimer lasers for treatment for nearsightedness. Refractive disorders generally are corrected with conventional methods such as eyeglasses and contact lenses. Today there exist alternative treatments for permanently reshaping the cornea to relieve nearsightedness, farsightedness and astigmatism. One technique for corneal reshaping involves manual scalpel incisions on the surface of the cornea, known as radial keratotomy or "RK". RK is used today primarily to correct nearsightedness, but is known to have potential limitations. RK is known to (i) weaken the cornea, (ii) present the potential for infection and (iii) produce inconsistent visual correction results. However, RK procedures are generally substantially less expensive than LVC procedures. The Company believes that the market potential for alternative refractive care utilizing excimer laser systems is commercially significant. Many eyeglass or contact lens wearers are potential candidates for laser refractive surgery. Generally speaking, the Company believes that younger persons are more apt to elect refractive surgery than older people who have become accustomed to eyeglasses or contact lenses over an extended period. 35 38 GOVERNMENTAL REGULATION The Company and its operations will be subject to extensive rules and regulations, both in Canada and in the United States at the federal, provincial, state and local level, affecting the health care industry and the delivery of health care. These regulations in both the United States and Canada include laws and regulations prohibiting the practice of medicine and optometry by persons not licensed to practice medicine or optometry, prohibiting the unlawful rebate or unlawful division of fees and limiting the manner in which prospective patients may be solicited. Other regulatory requirements, such as regulations concerning the use of excimer laser systems, may also apply to the Company's business and plan of operation. The Company believes its plan of operation will not violate regulatory constraints on prohibitions against the corporate practice of medicine. None of the Company's employees will provide medical diagnosis, advice or treatment. All professional services rendered to patients, and use of the Company's equipment to perform PRK, LASIK or other LVC procedures, will be provided and performed only by health care professionals who have entered into LVC service agreements with the Company. Such service agreements will be nonexclusive, leaving the professional free to recommend and use equipment and services available from other sources. Gross procedure fees will be determined exclusively by the professional (except that the Company's consent will be required for gross procedures fees at less than $1,200 per eye), and such fees will be billed for the account of the professional. Fees earned by the Company for use of its equipment and support services will be paid only by the professional; to the extent such fees are based upon a negotiated percentage of the gross procedure fee, the Company believes that such fees will represent no more than the fair market value of the Company's LVC Services. The Company will neither pay nor receive fees attributable to the referral of patients by one professional to another professional, and it will not receive or pay rebates or other compensation based upon such referrals. Numerous state and provincial laws and regulations presently affect the manner in which the Company may establish or administer the use of its equipment and other LVC Services, which vary significantly from state to state in the U.S. and from province to province in Canada. In some instances these laws and regulations are ambiguous, and sometimes regulators fail to provide adequate guidelines. The Company believes that its plan of operation will enable the Company to offer and administer its LVC Services in compliance with all applicable regulatory requirements. However, federal, state and provincial regulatory attention may continue to be directed to the practice of medicine, and any changes in applicable law or regulations, or in governmental agency and judicial interpretations of such laws and regulations, could cause one of the Company's strategies now in compliance with applicable laws to cease to comply. Additionally, while U.S. and Canadian laws and regulations do not now clearly affect the Company's planned LVC Services, there can be no assurance that the regulatory scheme will not in the future place impediments upon the Company's plan of operation. Current state and provincial regulatory requirements and restrictions that relate to corporate entities such as the Company involved in the ownership and operation of health care facilities include prohibitions against: the corporate practice of medicine except by an entity owned by health care professionals and/or wherein the professionals exercise control over medical judgments; patient referrals by health care professionals (including ophthalmologists and optometrists) to a facility owned or compensated by such referring professional (either generally, or sometimes by defining such payments as "kick backs"); and "fee splitting" between health care professionals and corporate entities. Other laws in both the United States and Canada specifically regulate the nature and compensation provisions of employment or management relationships that health care professionals may have with a corporate-owned facility, affect the form of business entity to be utilized, limit payments either to the entity or to health care professionals to the "fair market value" of their contributions, or affect the manner of marketing the service performed at the health care facility. Additional regulations in some states and provinces also now affect, or in the future may affect, the administration and use of LVC Services, including requirements for certificates of need and/or other licensing and registration of medical equipment. The Company believes that it has developed strategies for use in Michigan and Ontario to offer and administer its LVC Services in compliance with applicable law. In order to accommodate local regulations, it is possible that the business terms and organizational structure of the Company's activities in Michigan may 36 39 vary from those in Ontario. There can be no assurance that future changes in laws and regulations will not adversely affect the Company's operations. The use of excimer lasers and other medical equipment is also subject to numerous government laws and regulations relating to such matters as safe working conditions, environmental protection, fire hazard control and disposal of potentially hazardous substances. There can be no assurance that the Company will not be required to incur significant costs to comply with such laws and regulations in the future. ANTI-KICKBACK MEDICAL FRAUD AND ABUSE STATUTES. Certain states in the United States have adopted medical services fraud and abuse statutes that incorporate by reference U.S. federal anti-fraud and abuse legislation. Although existing federal legislation does not cover the Company's activities since its physician clients will not be seeking Medicare or Medicaid reimbursement for LVC procedures, such legislation is briefly discussed below to illustrate the potential reach of applicable state regulation. In 1977, Congress adopted the Medicare and Medicaid Anti-Fraud and Abuse Amendments of 1977, which prohibit certain activities and which impose a criminal penalty on anyone who "knowingly and willfully solicits or receives any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind in return for referring an individual to a person for the purpose of arranging for the furnishing of any item or service for which payment may be made in whole or in part under" the Medicare or Medicaid programs. This provision is commonly referred to as the anti-kickback or anti-referral provision. This anti-referral provision is extremely broad and, in several court cases, its scope has been upheld. State statutes incorporating this provision may provide separate criminal penalties, can apply regardless of whether third party reimbursement is sought, and are enforceable at the discretion of the enacting state rather than the federal Office of the Inspector General ("OIG") or the applicable U.S. District Attorney. Regulations establishing safe harbors for certain activities which would otherwise be subject to the Medicare/Medicaid fraud and abuse statute (the "Safe Harbor Regulations") have been promulgated by the OIG. Because many state anti-referral laws have been interpreted by reference to corresponding federal statutes and regulations, the Company has reviewed its expected activities in light of the federal Safe Harbor Regulations. The Safe Harbor that most closely covers investment in the Company is known as the Small Investment Safe Harbor. In order to qualify for this exception to the fraud and abuse prohibitions, the following conditions must be met: 1. No more than 40% of the entity may be controlled by investors who are in a position to control the flow of business to the entity. 2. No more than 40% of the entity's business can come from investors. 3. The terms on which the investment interest is offered, such as the price and quantity of shares, must be the same for an investor who is in a position to generate business for the entity and one who is not. 4. The terms of the investment interest must not be related to the previous or expected volume of referrals generated by an investor. 5. An investor cannot be required to make referrals to the entity as a condition for remaining an investor. 6. The way the services are marketed and furnished cannot favor investors. 7. The entity must not loan funds to or guarantee a loan for an investor who is in a position to generate business for the entity if any part of the loan is used to obtain the investment interest. 8. The amount of dividends must be directly related to the capital contributed. The Company does not believe that more than 40% of the Company's stock initially will be held by persons in a position to refer business to the Company. However, in view of the Company's plan to grant additional stock options or warrants exercisable at fair market value of the date of grant to health care professionals, it is possible that persons in a position to refer business to the Company could acquire more than 40% of the Company's stock at a future date. In such event, it is possible that regulatory authorities could interpret the referral structure expected to be utilized by the Company as resulting in a more than 40% of the Company's business coming from investors in a position to generate business. 37 40 The Safe Harbor Regulations are extremely narrow in scope. Because of the broad scope of the Medicare/Medicaid fraud and abuse statute and the narrow scope of the Safe Harbor Regulations, many transactions involving physicians will not fall within the Safe Harbor Regulations. Similarly, the Company's activities are not expected to fall squarely within any of the existing Safe Harbors. However, in the preamble to the Safe Harbor Regulations, the OIG noted that activities which do not satisfy the Safe Harbor provisions are not necessarily subject to prosecution. Failure to qualify for Safe Harbor protection does not deem a payment arrangement per se illegal; instead, the arrangement could be subject to increased scrutiny. The degree of risk of prosecution for any activity which does not comply with the Safe Harbor Regulations or with applicable state law will depend on an evaluation of the many factors related to the specific business arrangement. Such decisions will be within the prosecutorial discretion of the applicable state attorney. POTENTIAL INVESTORS CONCERNED WITH THE SAFE HARBOR REGULATIONS SHOULD SEEK ADVICE FROM INDEPENDENT COUNSEL CONCERNING THESE MATTERS BEFORE INVESTING. INSURANCE AND INDEMNIFICATION Use of laser systems by health care professionals using the Company's laser equipment and other LVC Services may give rise to claims against the Company by persons alleging injury. The Company currently has no insurance since it has not yet actively administered LVC Services. The Company may not be able to purchase medical malpractice insurance and may not be able to purchase other insurance at reasonable rates to protect it against claims arising from the medical practice of health care providers using the Company's equipment and services. The Company believes that claims alleging defects in the laser systems will be covered by the manufacturer's 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 the Company's laser suppliers will carry product liability insurance or that any such insurance will be adequate to protect the Company. The Company anticipates that its policy will be to require that ophthalmologists who perform laser procedures by use of the Company's LVC equipment maintain their own professional liability insurance. Upon completion of this offering, the Company intends to explore the availability and cost of obtaining umbrella coverage with respect to any malpractice claims relating to procedures performed by use of its equipment and LVC Services and of obtaining errors and omissions coverage with respect to the Company's staff. There can be no assurance that the Company will be able to retain adequate liability insurance at reasonable rates, or that insurance or indemnification provided by health care providers will be adequate to cover claims asserted against the Company, in which event the Company's business may be materially adversely affected. PROPRIETARY RIGHTS The Company has no licenses, patents, registered trademarks or registered copyrights except for its license with RS-800, a wholly-owned subsidiary of Vista Technologies, to use certain 800 and 900 telephone numbers in its targeted markets of Southern Ontario and Michigan. Rights to the service mark "Vista Laser Centers" are owned by Vista Technologies and have been licensed to the Company by Vista Technologies on a non-exclusive basis for the term of Vista Technologies' ten-year Consulting Services Agreement with the Company and any extensions of that agreement. COMPETITION The vision care industry is extremely competitive and includes numerous companies that are substantially larger than the Company and have greater financial, marketing and technical resources. Competitive factors which may affect market acceptance or revenues include regulatory requirements, performance, pricing, convenience and ease of use, success relative to alternative treatments and patient and general market acceptance. The Company's LVC Services will compete with other surgical and non surgical forms of treatments for refractive disorders, including eyeglasses, contact lenses, manual refractive surgery (such as RK), corneal 38 41 transplants and possibly new technologies under development. Eyeglass and contact lens use is expected to continue to be the most popular methods of treating refractive vision disorders for the foreseeable future due to low immediate cost and the avoidance of surgery. Notwithstanding certain limitations and possible disadvantages, RK surgical procedures are generally less expensive than LVC procedures and may remain competitive as an alternative to eyeglasses and contact lenses as a result of cost considerations. The Company will also compete with other businesses formed since 1990 offering LVC facilities and support services in Canada and/or have prepared for providing LVC care facilities in the U.S. These businesses are pursuing a variety of strategies such as marketing directly to consumers through optical chains or affiliating their LVC services with hospitals and physician group practices. The Company is also likely to compete with hospitals, hospital affiliated group entities, group practices and private ophthalmologists that may elect to purchase refractive laser systems. Manufacturers of excimer lasers may be primary competitors, either directly through marketing subsidiaries or indirectly through strategic partnerships with third parties. Summit is reportedly engaged in developing a network of refractive laser surgery clinics through a marketing subsidiary named Refractive Centers International, Inc. Other companies that have announced an intent to compete in the U.S. market for laser vision correction include, among others, Laser Vision Centers, Inc., the Beacon Eye Institute Inc. (a subsidiary of Siddeley Canada Inc.), Vision International, Inc., LaserSight Centers, Inc. and Sight Resource Corporation. Laser Vision Centers, Inc. operates PRK clinics in Canada and Europe, has reported alliances with certain hospitals, and has announced a franchising plan. Vision International operates PRK clinics in Mexico, Finland and Argentina. LaserSight Centers, Inc. has announced it has entered into service contracts with ophthalmologists to provide refractive laser service. Other companies currently offering PRK services in Europe and other foreign countries could also elect to entry the U.S. market. EMPLOYEES At the completion of this offering, the Company intends to hire personnel it believes will be required for the Company's activities. See "Use of Proceeds". Such personnel initially will include the Company's Chief Executive Officer, Ghassan Barazi, one employee in charge of equipment maintenance and from three to five employees for technical, administrative and clerical functions. The success of the Company's future operations depends in large part on the Company's ability to recruit, train and retain qualified personnel. There can be no assurance, however, that the Company will be successful in retaining or recruiting key personnel. LITIGATION The Company is not a party to any litigation. SEC SUBPOENA RELATING TO TRADING IN U.S. SHOE CORP. SECURITIES In June 1996, the Company received a subpoena duces tecum from the Securities and Exchange Commission ("Commission") in connection with an investigation by the Commission into trading in the securities of U.S. Shoe Corp. Commission File Number HO-3018. Based on the subpoena, this investigation is apparently focused on trading in U.S. Shoe Corp. securities during the period from October 1, 1994 through March 3, 1995, which was prior to the incorporation of the Company. The subpoena required the Company to furnish the Commission with various documents relating, among other things, to the Company's bank accounts, brokerage accounts, telephone records and documents referring or relating to 28 named individuals and entities. The Company has complied with the Commission's subpoena for production of documents. The Company has never directly or indirectly traded in the securities of U.S. Shoe Corp., and management therefore believes that the Company itself is not a target of the Commission's investigation. Counsel for Jac. J. Lam, a former director of the Company, has advised the Company that Mr. Lam purchased call options covering securities of U.S. Shoe Corp. during 1994 based solely on then publicly-available information. To avoid any possible complications arising as a result of these proceedings, Mr. Lam resigned as a director of the Company on July 18, 1996. 39 42 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The Company's directors and executive officers are as follows:
NAME AGE POSITIONS - --------------------------- --- ----------------------------------------- Ghassan Barazi 32 President and Chief Executive Officer; Treasurer and Chief Financial Officer; Director Theodore J. Mayer 63 Secretary J. Charles Casebeer, M.D. 57 Chairman of the Board; Director Donald G. Johnson, M.D. 57 Director
The following summarizes the principal employment history and relevant professional experience of the Company's directors and executive officers: GHASSAN BARAZI was elected President, Treasurer and a director of the Company effective as of September 1, 1995. Mr. Barazi, a citizen of Canada, founded CAD Venture Limited in 1989. CAD Venture Limited services manufacturing industries by providing CAD/CAM solutions training and support for the automotive industry. During the last five years since early 1991, Mr. Barazi has acted on a part-time basis as Administrative Director and Business Manager for the Windsor Laser Eye Institute in Windsor, Ontario. The Windsor Laser Eye Institute was founded in 1991 by Dr. Fouad Tayfour to perform laser refractive surgical procedures. Mr. Barazi participated in the selection and installation of excimer laser equipment at Windsor Laser Eye Institute, developed marketing programs, and assisted in the preparation of ophthalmologist conferences as part of his duties as the Institute's Administrative Director and Business Manager. He has attended courses in mechanical engineering at the Ryerson Polytechnical Institute in Toronto, Ontario. Mr. Barazi will be employed on a full-time basis by the Company effective upon the completion of this offering. See "Employment Agreement" below. THEODORE J. MAYER has served as Secretary of the Company since June 30, 1995. During the period from February 1991 to the present, he has been self-employed providing accounting consulting services to several United States and foreign manufacturing and service corporations and investor relations services to various service companies. Prior thereto, Mr. Mayer was employed as the Financial Operations Principal of Mayer Securities, Inc. from October 1987 to January 1991. He received his certified public accountant license from the State of New Jersey in 1960 and an M.B.A. degree from New York University Graduate School of Business Administration. Mr. Mayer served as the acting Treasurer of Vista Technologies from June 1995 to February 16, 1996. Mr. Mayer's services to the Company are rendered on a part-time basis and he is expected to be replaced as the Company's Secretary when a full-time administrative or chief financial officer is engaged after the completion of this offering. DR. J. CHARLES CASEBEER was elected a director of the Company and its Chairman of the Board on October 16, 1995. He has served as a director of Vista Technologies, a publicly-traded company, since February 16, 1996. Dr. Casebeer is an experienced ophthalmologist in the United States. He received his B.A. degree from Harvard University, his Doctor of Medicine degree from the University of Southern California School of Medicine, served his internship at the Medical College of Virginia, his residency in ophthalmology at Stanford University Medical Center, and currently holds professional licenses in the States of Arizona, California and Utah. He received his Ophthalmology Board Certification from the American Board of Ophthalmology in 1972 and was certified for cataract/implant surgery by the American Board of Eye Surgery in 1990. He has been engaged in private practice from 1971 to the present time, including associations with the Northern Arizona Eye Clinic, Ltd. Outpatient Surgery Center, Flagstaff, Arizona from 1971 to July 1994, where he served as President and Medical Director; Northern Arizona Eye Clinic, Ltd., Scottsdale, Arizona from 1992 to May 1994; the J. Charles Casebeer Laser/Refractive Surgery Center Ltd., Scottsdale, Arizona from May 1994 to August 1994; and Casebeer Eye Centers, Ltd., Scottsdale, Arizona from August 1994 to the present. Dr. Casebeer's experience in keratorefractive surgery dates from 1983 to the present, and includes more than 6,000 cases. From 1987 to the present, Dr. Casebeer has served as a Course Director in RK technique and practice development and in automated lamellar keratoplasty ("ALK") at numerous courses 40 43 and symposiums throughout the United States, Europe, Africa, South America, Australia and Asia. Since 1992, he has been a Clinical Professor for the University of Utah Department of Ophthalmology. Dr. Casebeer has lectured extensively throughout the United States and the world since 1989 at over 150 seminars, courses and symposiums on various refractive surgery topics including, among others, RK, ALK and LASIK procedures. He has authored four books or book chapters on refractive surgery, has 16 articles published in peer-reviewed medical journals, and since July 1993 has authored a monthly ocular surgery news column entitled "The Comprehensive Refractive Surgeon" in Ocular Surgery News. DR. DONALD G. JOHNSON, a citizen of Canada, was elected a director of the Company on October 16, 1995. He has served as Chairman of the Board and a director of Vista Technologies, a publicly-traded company, since February 16, 1996. Dr. Johnson received his M.D. degree from the University of Western Ontario, served his internship at Toronto Western Hospital, his general surgery residency at Shaughnessy Hospital, Vancouver, British Columbia, and his ophthalmology residency at the University of British Columbia. His post graduate accomplishments include certifications in the United States for radial keratotomy (1984), epikeratophakia (1986), advanced corneal transplantation (1987), small incision cataract and advanced phacoemulsification (1990) and excimer laser PRK and PTK (1990) and certification in Germany for non freeze B.S.K. method of lamellar keratoplasty (1988). Dr. Johnson has practiced in New Westminster, British Columbia continuously since 1969, first participating in a group practice for general ophthalmology from 1969 to 1981, then as a solo practitioner from 1981 to 1985. He established the London Place Eye Centre in New Westminster as an outpatient medical and surgical eye center in November 1985 where he still practices. From 1970 to the present, he has served as Director and Chief Consultant of Ophthalmology Clinics for the Yukon Territory. He has published 16 articles and conducted 11 clinical investigation studies in the field of ophthalmology, including clinical investigations of the VISX 20/20 and Nidek EC-5000 excimer lasers and the Sunrise holmium laser. On more than 80 occasions, Dr. Johnson has appeared as a guest speaker on radio and television or at hospitals and professional conventions, including presentations at seminars, most of which have occurred since 1991 on subjects relating to excimer lasers. Dr. Johnson has been affiliated with St. Mary's Hospital, Royal Columbian Hospital and Surrey Memorial Hospital since 1969 and Whitehorse General Hospital since 1970. There is no family relationship between any of the Company's directors and executive officers. All directors hold office until the next annual meeting of stockholders and until their successors are elected and qualify. Officers serve at the discretion of the Board of Directors. Mr. Barazi was nominated to serve as the Company's President and a director by Dr. Fouad Tayfour, who is entitled to designate two additional directors to the Board after the conclusion of this offering (see "Certain Transactions"). There are no other arrangements or understandings between any other director and any other person pursuant to which any person was elected or nominated as a director except that Dr. Casebeer and Dr. Johnson were each nominated for election as directors by Vista Technologies. At present there are no committees of the Board of Directors. The Company has agreed, for a period of five years from the date of this Prospectus, if so requested by the Representative of the Underwriters, to nominate and use its best efforts to appoint a designee of the Representative as a non-voting advisor to the Company's Board of Directors. See "Underwriting". The compensation arrangements of all officers are subject to review and adjustment from time to time by the Board of Directors. The Company entered into an employment agreement with Ghassan Barazi described below under "Employment Agreement". Directors currently do not receive remuneration for their services as directors, but may be reimbursed for expenses such as their cost of travel to Board meetings. The Company has a consulting agreement with Dr. Casebeer, Chairman and a director of the Company, which requires compensation for his services as Chairman and training and consulting services. See "Certain Transactions". The Company's Bylaws permit compensation of directors, and the Company reserves the right to change its policies as to director compensation from time to time based upon factors such as the Company's performance and the amount of time required for participation by individual directors. 41 44 EXECUTIVE COMPENSATION None of the Company's executive officers has previously received cash compensation from the Company. No executive office or director of the Company is currently to be compensated at a base rate in excess of $100,000 per annum during the first 12 months of the Company's operations. The Company has entered into an employment agreement with its President, Ghassan Barazi, requiring a $20,000 one-time hiring bonus payable from proceeds of this offering by the Company and a minimum base salary of $75,000 per annum plus an annual bonus equal to 5% of the Company's pre-tax income (see "Employment Agreement" below) and agreements with two of its directors for consulting services, Dr. J. Charles Casebeer and Dr. Donald G. Johnson, which provide that Dr. Casebeer's professional corporation will receive annual compensation in the amount of $60,000, of which the first year's compensation is payable in advance upon completion of this offering by the Company, plus $2,500 for each MD and OD that enters a credentialing program to be established by the Company (see "Proposed Business" and "Certain Transactions"). These agreements will become effective only upon the completion of this offering. The Company has also issued and sold securities to Mr. Barazi, Dr. Johnson and Dr. Casebeer. Pursuant to a contractual commitment made as of September 1, 1995, on November 28, 1995 the Company issued and sold 20,000 shares of Common Stock to Mr. Barazi at a cash price of $1.00 per share ($20,000 total). Under that commitment, the Company also reserved and sold 180,000 Class A Warrants to Ghassan Barazi at a cash price of $0.10 per warrant ($18,000) which was paid on April 29, 1996. Class A Warrants are exercisable at $1.00 per share until the fourth anniversary of the date of this Prospectus. See "Description of Securities". Concurrent with that commitment, Mr. Barazi was elected a director and President of the Company on September 1, 1995. On December 1, 1995, the Company issued and sold to Dr. Johnson 5,000 shares of Common Stock at a cash price of $1.00 per share ($5,000) and 45,000 Class A Warrants at a cash price of $0.10 per warrant ($4,500) pursuant to a Dr. Johnson's Consulting Agreement dated November 15, 1995. Dr. Johnson was elected a director of the Company on October 16, 1995. Pursuant to a Dr. Casebeer's Consulting Agreement dated November 15, 1995, the Company reserved and sold to Dr. J. Charles Casebeer's professional corporation 5,000 shares of Common Stock at a cash price of $1.00 per share ($5,000) and 45,000 Class A common stock purchase warrants stock at a cash price of $0.10 per warrant ($4,500). Payment for these securities was received by the Company on April 17, 1996. Dr. Casebeer was elected a director and Chairman of the Board of the Company on October 16, 1995. For further additional information as to transactions with Mr. Barazi, Dr. Casebeer and Dr. Johnson, see "Proposed Business", "Certain Transactions" and "Description of Securities". EMPLOYMENT AGREEMENT The Company has a written employment agreement with its President and Chief Executive Officer, Ghassan Barazi. The employment agreement with Mr. Barazi provides that he will serve as the Company's President and Chief Executive Officer. Commencing upon the completion of this offering, the employment agreement provides for a one-time hiring bonus of $20,000 payable upon completion of this offering by the Company and an annual base salary of $75,000 (in U.S. or equivalent Canadian currency), use of an automobile, group health insurance and a life insurance policy for Mr. Barazi's benefit in the face amount of approximately $375,000. Mr. Barazi's base salary will increase to $100,000 per annum commencing with the first month after the Company has attained a consolidated net profit for the three immediately preceding months. In addition, he is entitled to an annual bonus equal to 5% of the Company's pre-tax income. It is expected that Mr. Barazi will devote substantially all of his business time to the activities of the Company commencing upon the completion of this offering. The employment agreement with Mr. Barazi is for a term of five years commencing on the date of this Prospectus, except that the Company may terminate the agreement without cause prior to the expiration of its initial term upon 60 days' prior notice and payment of an amount equal to Mr. Barazi's annual compensation and value of benefits for one year. For this purpose, termination of employment without cause includes any 42 45 termination other than his voluntary resignation or termination as a result of disability for a continuous period of six months (or for noncontinuous periods aggregating six months in any period of one year), conviction of a criminal offense or commission of an act of bankruptcy. In addition, in the event Mr. Barazi's employment is terminated either voluntarily or involuntarily at any time during the initial five year term or is not renewed for at least one additional year at the end of its initial five year term, Mr. Barazi will be entitled to receive a $200,000 additional severance payment if he has not exercised any portion of his stock option covering 50,000 shares of Common Stock at an option exercise price of $1.00 per share (see "1995 Stock Option Plan" below). However, should such termination be the result of Mr. Barazi's voluntary resignation, the Company has to right to issue 180,000 shares of Common Stock to Mr. Barazi in lieu of the $200,000 cash payment and Mr. Barazi's rights to exercise his stock options and his 180,000 Class A Warrants (see "Certain Transaction") will terminate unexercised in such event. Vista Technologies has granted Mr. Barazi an irrevocable proxy, so long as he remains employed by the Company and expiring in any event after the initial five year term of his employment agreement, to vote 200,000 shares of the Company's Series B Preferred stock on any matter on which stockholders are entitled to vote. This proxy is subject to an agreement with Dr. Tayfour that the Series B Preferred shares owned by Vista Technologies will be voted in favor of the election of three nominees of Dr. Tayfour to the Company's Board of Directors for a term of five years after the date of this Prospectus, one of whom will be Mr. Barazi's so long as he is employed as the Company's Chief Executive Officer. 1995 STOCK OPTION PLAN On September 1, 1995, the Board of Directors and stockholders of the Company adopted a 1995 Stock Option Plan (the "Option Plan"). The Option Plan is structured to allow the Board of Directors and a future Stock Option Committee of the Board discretion in creating equity incentives to management, key employees and professional consultants for the purpose of assisting the Company in motivating and retaining appropriate talent. The Option Plan covers up to a maximum of 200,000 shares of the Company's Common Stock. To date, options covering 50,000 shares of Common Stock have been granted under the Option Plan to one executive officer of the Company on January 12, 1996. The Option Plan provides for the granting of stock options which, at the discretion of the Board or its Stock Option Committee, may be either "incentive stock options" within the meaning of Section 422A of the U.S. Internal Revenue Code or non-qualified stock options which do not qualify as incentive stock options. The Option Plan provides that both incentive stock options and non-qualified options under the Option Plan must be granted at an option price which is not less than the fair market value of the Common Stock on the date of grant. With respect to any participant who owns stock possessing more than 10% of the voting rights of the Company's outstanding capital stock, the exercise price of any incentive stock option under the Option Plan to such a participant must be not less than 110% of fair market value on the date of grant. Options under the Option Plan may be granted to officers, directors, key employees of, and professional consultants to, the Company and its subsidiaries. Under the terms of the Option Plan, the aggregate fair market value (determined at the time an option is granted, which will normally be equal to the option exercise price per share) of Common Stock exercisable under an incentive stock option for the first time in any calendar year may not exceed $100,000. Under the Option Plan, the number of shares available for options and subject to option, and the option exercise price of outstanding options, is to be adjusted upward or downward, as the case may be, in the event of any stock dividend, recapitalization, merger, consolidation, split up or similar transaction affecting shares of the Company's Common Stock. If any option granted under the Option Plan terminates or expires without having been exercised in full, the shares not purchased under such option will again be available for purposes of the Option Plan. The Option Plan will be administered by a Stock Option Committee (the "Committee") of two or more members of the Board of Directors of the Company composed of only "disinterested directors" of the Company as defined in Rule 16-3(c)(2) promulgated under the Securities Exchange Act of 1934 ("Exchange Act"). Disinterested directors are persons who have not, during their period of service on the Committee and 43 46 during the period of 12 months prior to service on the Committee, received an option to acquire or purchase equity securities of the Company or any of its affiliates under the Option Plan or under any other stock option or stock incentive plan of the Company and its affiliates except for participation in a plan expressly permitted under the provisions of subsection (i) of Rule 16-3(c)(2) under the Exchange Act. The Committee will determine the persons to receive options under the Option Plan in the future, the terms of options granted, including the exercise price, the number of shares subject to the option and the terms and conditions of exercise. The maximum term for each option under the Option Plan is ten years. No option granted may be transferred by the optionee other than by will, the laws of descent and distribution, or by a qualified domestic relations order, and each option is exercisable during the lifetime of the optionee only by such optionee. Options under the Option Plan are exercisable in whole or in part at such times after the date of grant as set forth in an option agreement as determined by the Committee or the Board of Directors. Each option granted will be for a term, and exercisable only in accordance with, option agreements approved by the Board or the Committee. The Board intends to establish a policy under the Option Plan of limiting the term of stock options to a period of no more than five years from the date of grant. Although the Board of Directors reserves the right to establish other terms and conditions as to any option granted under the Option Plan, it is currently anticipated that the Board of Directors and the Committee will continue to follow this policy as to options granted under the Option Plan. Terms relating to the exercisability of an option under the Option Plan may be determined upon an individual basis by the Committee at the time of grant. In the event of termination of employment or other termination of the optionee's relationship with the Company, the optionee's option will terminate and may be exercised during a three month period after termination to the extent the option was exercisable on the date of termination. In the event such termination was caused by death or permanent disability, however, the period of exercisability is extended under the Option Plan to one year after the date of termination, but in no event after the date the option would have expired in the absence of termination. No shares acquired on exercise of an option granted under the Option Plan may be sold or otherwise disposed of by an optionee until the expiration of at least six months following the date on which the option was originally granted by the Company. The Option Plan contains provisions which authorize the Committee, in the event of a sale or merger of all or substantially all of the Company's assets, or a merger or consolidation in which the Company is not the surviving corporation, to take certain action in its discretion. In the event of such a transaction the Committee may accelerate the exercisability of any option to permit its exercise in full during such period as the Committee may prescribe following the public announcement of a sale of assets or merger, and may elect to earlier grant that right at the time an individual option is granted. The Committee may also require an optionee in the event of such a transaction to surrender an option in return for a substitute option issued by a surviving corporation which is determined by the Committee to have a value substantially equal to the value of the surrendered option. Shares of Common Stock acquired upon exercise of options under the Option Plan will be paid for in cash or, in the sole discretion of the Committee, through the delivery of shares of the Company's Common Stock with a market value equal to the option exercise price. The ability to pay the option price in shares would, if permitted by the Committee, enable an optionee to engage in a series of successive stock for stock exercises of an option (sometimes referred to as "pyramiding") and thereby fully exercise an option with little or no cash investment by the optionee. The Board of Directors has not established any policy as to whether it will permit exercises of options through payment with shares. The Board of Directors may amend the Option Plan without the approval of stockholders, except that stockholder approval will be required for any amendment which would (i) increase the total number of shares optionable under the Option Plan, or (ii) reduce the option price of options granted under the Option Plan below 100% of fair market value of the stock on the day the option is granted, or (iii) change the class of persons eligible to participate in the Option Plan, or (iv) extend the period during which options may be granted or exercised. Adjustments in the total number of shares optionable under the Option Plan and adjustments of the option price may be made, however, without stockholder approval pursuant to the 44 47 adjustment provisions mentioned above for any stock dividend, recapitalization, merger, consolidation, split up or similar transaction affecting shares of the Company's Common Stock. As of the date of this Prospectus, no options had been exercised under the Option Plan, one unexercised option granted to Ghassan Barazi, the Company's President, was outstanding to purchase 50,000 shares of Common Stock, and up to 150,000 shares were available for future grants of options under the Option Plan. The option outstanding was granted to Mr. Barazi on January 12, 1996 at an option exercise price of $1.00 per share for a term of five years expiring on January 12, 2001, and is fully exercisable from the date of grant. OTHER The Company currently has no pension, retirement, annuity, savings or similar benefit plan which provides compensation to its executive officers or directors. Upon the completion of this offering, the Company anticipates it will obtain a group health insurance plan in which all of its employees will be eligible to participate. CERTAIN TRANSACTIONS ISSUANCE AND SALE OF SECURITIES The Company was recently organized on June 30, 1995. On July 31, 1995, Refractive Services-800, Inc. paid the Company $100,000 for the purchase of 100,000 shares of the Company's Series A Preferred stock, or a price equal to $1.00 per share. The Company was advised that Refractive Services-800, Inc. is a Panama corporation with offices in The Netherlands, controlled by Marcel Jouby, a Dutch citizen, Kerry Lynne O'Rourke, a South African citizen residing in The Netherlands, and Sukumal Chintagavongse, a Thailand citizen. Refractive Services-800, Inc. was formed to invest in and promote the Vista Laser Centers businesses sponsored by Vista Technologies and, via a wholly-owned subsidiary Refractive Services 800 Corp. ("RS-800"), to own and license the use of 800 and 900 telephone numbers. On July 18, 1996, Vista Technologies agreed to purchase all of the assets of Refractive Services-800, Inc. in exchange for 260,000 shares of Vista Technologies' common stock and 266,000 common stock purchase warrants of Vista Technologies. Among other items, the assets purchased by Vista Technologies include 100,000 shares of the Company's Series A Preferred stock and all of the capital stock in RS-800. In order to limit cash dividends on its investment to a 10% return per annum, Vista Technologies has agreed that dividends on shares of Series A Preferred stock originally issued in July 1995 will be limited to $0.10 per share annually until such time as those shares are resold by Vista Technologies to an unaffiliated third party. Thereafter, such shares will bear dividends at the same rate of $0.50 per share annually that will be applicable to shares of Series A Preferred sold in this offering. In the opinion of the Board of Directors, taking into consideration the fact that the Company had no assets or business prior to this investment, the fair market value of 100,000 shares of Series A Preferred stock originally issued on July 31, 1995 was equal to its purchase price of $100,000. On November 16, 1995, the Company issued 200,000 shares of its Series B Preferred stock (see "Description of Securities -- Series B Preferred Stock") to Vista Technologies Inc. in exchange for 200,000 shares of common stock in Vista Technologies. Although there was no quoted market for Vista Technologies' common stock at the time of that transaction, primarily as a result of Vista Technologies' then delinquency in filing periodic reports with the Securities and Exchange Commission (the "Commission"), Vista Technologies represented it would take such steps as were necessary to become current in required filings with the Commission and seek to obtain an actively quoted market for its common shares. The organization of the Company was sponsored and promoted by Vista Technologies as a founder, and the Company's Board of Directors believed the experience of Vista Technologies in management of PRK businesses in Europe and services Vista Technologies proposed to make available under its ten-year Consulting Services Agreement with the Company would be of valuable assistance to the Company's negotiation of agreements prior to the date of this Prospectus and its planned future operations. Due to Vista Technologies' shortage of cash resources, Vista Technologies proposed that its investment in the Company would be in the form of 200,000 shares of Vista Technologies common stock in exchange for 200,000 shares of the Company's Series B Preferred stock. In view of Vista Technologies' status as a founder of the Company and its representation on 45 48 the Company's Board of Directors, such transaction should not be considered as having been negotiated at arms-length. Based upon a subsequent independent third party valuation of the Company's Series B Preferred stock as of November 16, 1995, the Company has recorded a cost for its investment in 200,000 shares of Vista Technologies common stock as of that date of $217,597. Public market quotations for Vista Technologies common stock became available in March 1996 following Vista Technologies' filings of previously delinquent reports with the Commission, and such quotations to date in 1996 have ranged from approximately $2.00 to $4.00 per share of Vista Technologies common stock. The liquidation preference of Series B Preferred stock is $2.50 per share and cumulative dividends on Series B Preferred stock are $0.12 1/2 per annum (see "Description of Securities -- Series B Preferred Stock"). Vista Technologies has granted Ghassan Barazi an irrevocable proxy, so long as he remains employed by the Company and expiring in any event after the initial five year term of his employment agreement, to vote the 100,000 shares of the Company's Series A Preferred stock and 200,000 shares of the Company's Series B Preferred stock owned by Vista Technologies on any matter on which stockholders are entitled to vote. This proxy is subject to an agreement by Vista Technologies that the Series A and Series B Preferred shares owned by Vista Technologies will be voted in favor of the election of three nominees of Dr. Tayfour to the Company's Board of Directors for a term of five years after the date of this Prospectus, one of whom will be Mr. Barazi's so long as he is employed as the Company's Chief Executive Officer. The Company, in turn, has granted Vista Technologies' Board of Directors an irrevocable proxy for a term of five years following the date of this Prospectus to vote the 200,000 shares of Vista Technologies owned by the Company on any matter on which Vista Technologies stockholders are entitled to vote. Each of the above proxies provides that it will expire as to any of the shares covered thereby that are sold to an unaffiliated third party in a bona fide sale transaction. On November 28, 1995, and pursuant to a commitment authorized by the Board of Directors on September 1, 1995, the Registrant issued and sold 20,000 shares of its Common Stock to Ghassan Barazi, the Company's President and Chief Executive Officer, at a cash price of $20,000, or $1.00 per share. In the opinion of the Company's Board of Directors, the fair market value of the Company's Common Stock on November 28, 1995 was $1.00 per share. Under the commitment made by the Company on September 1, 1995, the Company also reserved and authorized the sale to Mr. Barazi of 180,000 Class A common stock purchase warrants stock at a cash price of $18,000, or $0.10 per warrant. Each Class A warrant represents the right to purchase one share of the Company's Common Stock at an exercise price of $1.00 per share until the Class A warrants expire on the fourth anniversary of the date of this Prospectus. See "Description of Securities -- Common Stock Purchase Warrants". Payment for these warrants was received from Mr. Barazi on April 29, 1996. In the opinion of the Company's Board of Directors, the fair market value of the Company's Class A common stock purchase warrants on the dates of these transactions was equal to the purchase price paid of $0.10 per warrant. On December 1, 1995, and pursuant to a commitment made under his Consulting Agreement dated as of November 15, 1995, the Company sold to Dr. Donald G. Johnson, a director of the Company, 5,000 shares of its Common Stock at a cash price of $5,000, or $1.00 per share, and 45,000 Class A common stock purchase warrants stock at a cash price of $4,500, or $0.10 per warrant. On November 15, 1995, the Company also reserved and authorized the sale to Dr. J. Charles Casebeer, a director and Chairman of the Board of the Company, of 5,000 shares of Common Stock at a cash price of $5,000, or $1.00 per share, and 45,000 Class A common stock purchase warrants stock at a cash price of $4,500, or $0.10 per warrant. Payment for these shares and warrants was received from Dr. Casebeer on April 17, 1996. Each Class A warrant represents the right to purchase one share of the Company's Common Stock at an exercise price of $1.00 per share until the Class A warrants expire on the fourth anniversary of the date of this Prospectus. See "Description of Securities -- Common Stock Purchase Warrants". In the opinion of the Company's Board of Directors, the fair market value of the Company's Class A common stock purchase warrants on the dates of these transactions was equal to the purchase price paid of $0.10 per warrant and $1.00 per share of Common Stock. Based upon a subsequent independent third party valuation of the Company's Common Stock and Class A Warrants, the fair values of the Common Stock was determined to be $1.08 per share as of November 28, 1995, and the fair value of the Class A Warrants was determined to be $0.09 per warrant as of November 28, 1995. The Company has determined that the differences between these valuations and the 46 49 prices at which the Board of Directors authorized the issuance and sale of Common Stock and Class A Warrants to Mr. Barazi, Dr. Johnson and Dr. Casebeer were nominal. AGREEMENTS WITH DR. TAYFOUR AND AFFILIATE As described under the caption "Proposed Business", the Company has entered into a Facilities Agreement and a Consulting Agreement, each dated as of October 16, 1995, with Dr. Fouad Tayfour effective upon completion of this offering. Among other terms, the Company agreed to elect Ghassan Barazi as its President and Chief Executive Officer and to cause Mr. Barazi and up to two other professionals to be designated by Dr. Tayfour to be elected directors of the Company. Vista Technologies and Refractive Services-800, Inc. have agreed to cause all shares of the Company's capital stock that they are entitled to vote in favor of the election of Mr. Barazi and two other nominees of Dr. Tayfour to the Company's Board of Directors for the term of Mr. Barazi's employment agreement (see "Management -- Employment Agreement" above). Mr. Barazi has acted on a part-time basis as Administrative Director and Business Manager for the Windsor Laser Eye Institute founded by Dr. Tayfour in 1991 (see "Management"). To date, Dr. Tayfour has not nominated two other individuals for election to the Company's Board of Directors, and he has advised the Company that he does not anticipate such persons will be identified or designated until after the completion of this offering. The Company has also entered into an Agreement of Purchase of Assets dated December 1995 (the "Asset Agreement") with Windsor Excimer Corporation, an affiliate of Dr. Tayfour. Under the Asset Agreement, the Company has agreed to purchase two surgical lasers (see "Proposed Business -- Company LVC Service Sites") and related medical and other office equipment from Windsor Excimer Corporation concurrent upon the closing of this offering. The lasers are located at facilities that will be subleased by the Company in Windsor as described below. The price to be paid by the Company for the equipment will be $1,000,000, of which $500,000 is to be paid in cash from proceeds of this offering and $500,000 will be financed by a note. The purchase price approximates the fair market value of the equipment and was determined by arms-length negotiation between Dr. Tayfour and representatives of the Company after consultation with its financial advisors. The note will bear interest at 10% per annum payable on the last day of each month, and all principal is due and payable on the second anniversary of the date of this Prospectus. The Company's obligations under the note will be collateralized by a fixed and floating security interest in all assets of the Company's Canadian subsidiary which will include, among other assets, all assets purchased under the Asset Agreement. Under the terms of the security instruments, the Company's Canadian subsidiary will be permitted to incur purchase money security interests in additional equipment that may be acquired in the future. The Asset Agreement provides that the Company will enter into sublease agreements with an affiliate of Dr. Tayfour upon completion of this offering for the sublease by the Company of a portion of certain premises at a medical building in Windsor, Ontario currently used by Dr. Tayfour. These facilities will include approximately 2,228 square feet to be subleased for a term expiring on March 30, 2004 and approximately 400 square feet to be subleased for a term expiring on December 30, 1996. The monthly rental rate for these facilities will be approximately $2,921 (Canadian funds) per month subject to an increase of approximately 10% in April 1999. AGREEMENTS WITH AFFILIATES AND RELATED PARTIES LICENSE AGREEMENT WITH RS-800 RS-800 and the Company entered into a License Agreement dated October 16, 1995, under which RS-800 granted the Company the right to use certain 800 and 900 area code telephone numbers in its geographic markets of Michigan and Southern Ontario, including among others 800-WE-DO-PRK, for the Company's marketing and public education programs. If the Company elects to use one or more of those telephone numbers, RS-800 will receive 2 1/2% of the Company's revenues generated only as a direct result of responses to telemarketing activities of the Company by use of the licensed 800 and 900 telephone numbers. During the term of the License Agreement, RS-800 has agreed to maintain the exclusive right to license 800 47 50 and 900 telephone numbers covered by the License Agreement that are actively used by the Company, and to offer the Company rights to license, at no additional royalty, any other 800 and 900 telephone numbers that may be acquired hereafter by RS-800 for use in the Company's geographic markets of Michigan and Southern Ontario. The License Agreement is for a term of five years from the date of this Prospectus, and is automatically renewed thereafter on a year-to-year basis unless either party provides six months' prior notice of an intent not to extend the term. The Company has not yet determined whether it will elect to use the 800 and 900 telephone numbers covered by the RS-800 License Agreement. All of the capital stock in RS-800 is owned by Vista Technologies, a founder and principal stockholder of the Company. CONSULTING SERVICES AGREEMENT WITH VISTA TECHNOLOGIES Vista Technologies and the Company entered into a Consulting Services Agreement dated as of October 16, 1995. Under the Consulting Services Agreement, Vista Technologies will provide certain consulting services to the Company relating to LVC developments in Europe, location of additional sites for LVC Centers, financing, accounting and legal requirements and investor relations. In exchange for such services, Vista Technologies will receive 5% of the Company's revenues attributable to charges for the use of its facilities and support services, less a credit to the Company of $5,000 per month. In the event any of such revenues are attributable to a subsidiary of the Company that is not wholly-owned by the Company, Vista Technologies' 5% will be reduced in proportion to the Company's percentage ownership in the subsidiary, but to not less than 2 1/2% of such revenues. The Consulting Services Agreement is for a term of ten years from the date of this Prospectus, 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 Vista Technologies and have been licensed to the Company by Vista Technologies for no additional consideration on a non-exclusive basis for the term of the Consulting Services Agreement and any renewals of such term. Vista Technologies has advised the Company of the following information extracted from Vista Technologies' public filings with the Securities and Exchange Commission: Vista Technologies is primarily engaged in providing excimer laser equipment for PRK treatment and related support services at Vista Vision(TM) outpatient LVC surgical centers in Europe. Vista Technologies commenced business operations in March 1994 and operates three PRK centers in Italy though a majority-owned subsidiary named Vista Vision SpA and two PRK centers in Sweden through a wholly-owned subsidiary named Vista Vision Scandinavia AB. During May 1994, Vista Technologies also acquired an equity interest in Medical Development Resources, Inc. ("MDRI"), which designs, manufactures and markets precision surgical instruments and related products, consisting primarily of diamond scalpels and stainless steel and titanium surgical instruments. As a result of investigations following the negotiation of an agreement to merge with MDRI, Vista Technologies determined in July 1995 to not proceed with this proposed merger and the value of its prior investments in MDRI was written down to zero. The Vista Vision PRK centers in Italy each operates a VISX excimer laser, and include a Milan center originally opened in February 1992, a Pisa clinic established in March 1993 and a Rome center started in January 1995. The Vista Vision centers in Sweden operate two lasers, and include a center in Stockholm purchased by Vista Technologies in June 1994 plus a center in Malmoe opened in August 1995. Until June 1995, Vista Technologies also owned a 50% joint venture interest in a PRK center in London, England, which has been closed due to a change in business strategy of its joint venture partner and extremely competitive market conditions in London. 48 51 The following chart summarizes certain information as to the number of PRK surgical procedures performed at Vista Technologies' existing PRK centers for the periods indicated.
YEAR ENDED MARCH 31, NINE MONTHS ENDED -------------- DECEMBER 31, 1995 1995 1994 ----------------- ----- ---- Milan, Italy(a)..................... 451 466 239 Pisa, Italy(b)...................... 339 404 213 Rome, Italy(c)...................... 227 41 (c) Stockholm, Sweden(d)................ 341 524 420 Malmoe, Sweden(e)................... 51 (e) (e) ----- ----- --- Total..................... 1,409 1,435 972 ===== ===== ===
- --------------- (a) Opened in February 1992. (b) Opened in March 1993. (c) Opened in January 1995. (d) Includes procedures performed for periods prior to June 1994 purchase by Vista Technologies. (e) Opened in August 1995. Vista Technologies' common stock is publicly-traded in the over-the-counter market and quoted on the NASD Electronic Bulletin Board under the symbol "VIII". Vista Technologies is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission") which may be inspected and copied at the public reference facilities maintained by the Commission at its principal office in Washington D.C. and at its regional offices in Chicago and New York. Until approximately the end of February 1996, Vista Technologies was delinquent in the filings of its Form 10-KSB for its fiscal year ended March 31, 1995 and its Quarterly Reports on Form 10-QSB for the periods ended June 30, September 30 and December 31, 1995. Vista Technologies has attributed that delinquency primarily to its inability to obtain reliable finance information as to MDRI. By March 1, 1996, Vista Technologies had filed all of these reports with the Commission. OTHER CONSULTING AGREEMENTS Dr. J. Charles Casebeer, a director and Chairman of the Board, entered into a Consulting Agreement with the Company dated November 15, 1995 which will become effective on the date of this Prospectus. Dr. Casebeer is an educator and trainer in the LASIK procedure and has previously served other companies as a consultant in the LASIK field. Dr. Casebeer also has conducted studies on the TMM PRK method developed by Dr. Johnson. Since 1983, Dr. Casebeer's experience includes over 10,000 refractive procedures and the education of more than 3,200 MDs worldwide in various refractive procedures ranging from RK to ALK and LASIK. See also "Management". Dr. Casebeer's Consulting Agreement provides he will assist the Company and Dr. Tayfour in managing the Company's program for training MDs and ODs in the use and performance of LVC procedures and in recommending standards to establish a program of credentialing and training MDs and ODs in various aspects relating to LVC procedures and patient treatment. In consideration of his services, Dr. Casebeer's professional corporation will receive from the Company compensation at the rate of $60,000 per annum plus additional compensation of $2,500 for supervising the training of each MD and OD that enters the credentialing program. The $60,000 annual payment to Dr. Casebeer's professional corporation will be paid upon completion of this offering by the Company for the first year of his consulting services and thereafter at the rate of $5,000 per month. Compensation for each MD and OD that enters the credentialing program will be payable at the rate of $500 per month over a period of five months commencing in the first month following the date on which each such MD and OD has started his or her accreditation program. 49 52 Dr. Casebeer is expected in the future to promote advanced LVC methods for both the Company and for other Vista Laser Centers companies that may be formed in the future by the Company's founder, Vista Technologies, to service other North American geographic markets. (The Company and investors in this offering will not acquire an interest in other companies formed by Vista Technologies Inc. and its affiliates.) Dr. Donald G. Johnson, a director of the Company, entered into a Consulting Agreement with the Company dated November 15, 1995 which will become effective on the date of this Prospectus. No continuing compensation will be required to be paid to Dr. Johnson under this agreement. Dr. Johnson has agreed to render part-time consulting services to the Company. Dr. Johnson developed TMM PRK procedures with VISX equipment and as of December 31, 1995 has successfully treated approximately 7,400 eyes with excimer laser procedures. See also "Management". PRIOR AFFILIATION BETWEEN PRESIDENT OF VISTA TECHNOLOGIES AND PARENT OF THE UNDERWRITERS' REPRESENTATIVE Thomas A Schultz was hired as the President and Chief Executive Officer of Vista Technologies and elected a director of Vista Technologies on February 16, 1996. Mr. Schultz has served from November 1995 until July 1, 1996 as a director of Synergistic Holdings Corp. (formerly named Dickinson Holding Corp.), the parent of Dickinson & Co., the Representative of the Underwriters. FUTURE TRANSACTIONS Any future transactions between the Company and any of its directors, officers, principal stockholders or other affiliates will be on terms not less favorable to the Company as could be obtained from independent parties and will be approved by not less than a majority of the directors who do not have an interest in the proposed transaction. 50 53 PRINCIPAL STOCKHOLDERS The following table sets forth information (except as otherwise indicated by footnote) as to shares of the Company's Common Stock, Series A Preferred stock and Series B Preferred stock owned at the date of this Prospectus by (i) each person known by management to beneficially own more than 5% of each class of the Company's outstanding securities, (ii) each of the Company's directors, and (iii) all executive officers and directors as a group:
SHARES BENEFICIALLY OWNED(2) --------------------------------------------------------------- PREFERRED STOCK ----------------------------------------- COMMON % OF % OF % OF NAME OR GROUP(1) STOCK CLASS(2) SERIES A CLASS SERIES B CLASS - ----------------------------------------- ------- --------- -------- -------- -------- -------- DIRECTORS: Ghassan Barazi(3)(6)..................... 250,000 96.2% 100,000* 100% 200,000* 100% J. Charles Casebeer, M.D.(4)(6).......... 50,000 66.7% 100,000* 100% 200,000* 100% Donald G. Johnson, M.D.(5)(6)............ 50,000 66.7% 100,000* 100% 200,000* 100% All executive officers and directors as a group [four in number](7).............. 350,000 100.0% 100,000* 100% 200,000* 100% OTHER 5% STOCKHOLDERS: Vista Technologies Inc.(6)(8).......... -- -- 100,000* 100.0% 200,000* 100.0%
- --------------- * These are the same securities deemed beneficially owned by more than one person. (1) The persons named in the table have sole voting and investment power with respect to all shares shown to be beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table. (2) Includes securities beneficially owned plus, where applicable, Common Stock issuable upon exercise of outstanding Class A Warrants and stock options held only by the person or group indicated that are fully exercisable or exercisable within 60 days after the date of this Prospectus. (3) Includes 20,000 shares of Common Stock, 180,000 shares issuable upon exercise of Class A Warrants and 50,000 shares issuable upon exercise of a stock option directly owned by Mr. Barazi. The table also includes 100,000 Series A and 200,000 Series B Preferred shares owned by Vista Technologies and included elsewhere in the table as indirectly beneficially owned by Messrs. Casebeer and Johnson and directly owned by Vista Technologies (see Notes 4, 5, 6 and 8 to this table). Mr. Barazi holds an irrevocable proxy granting him the power to vote Series A and Series B Preferred shares owned by Vista Technologies, but disclaims beneficial ownership of such shares. The current business address for Mr. Barazi is 2224 Walker Road, Suite 30, Windsor, Ontario, Canada N8W 3P6. (4) Includes 5,000 shares of Common Stock and 45,000 shares issuable upon exercise of Class A Warrants beneficially owned by Dr. Casebeer. The table also includes 100,000 Series A Preferred shares and 200,000 Series B Preferred shares owned by Vista Technologies and included elsewhere in the table as beneficially owned by Messrs. Barazi and Johnson and by Vista Technologies (see Notes 3, 5, 6 and 8 to this table). Dr. Casebeer is a director of Vista Technologies and by virtue of such relationship may be deemed to influence power of disposition as to Series A and Series B Preferred shares owned by Vista Technologies; Dr. Casebeer disclaims beneficial ownership of such shares. The business address for Dr. Casebeer is 15100 North 78th Way, Suite 100, Scottsdale, Arizona 85260. (5) Includes 5,000 shares of Common Stock and 45,000 shares issuable upon exercise of Class A Warrants beneficially owned by Dr. Johnson. The table also includes 100,000 Series A and 200,000 Series B Preferred shares owned by Vista Technologies and included elsewhere in the table as beneficially owned by Messrs. Barazi and Casebeer and by Vista Technologies (see Notes 3, 4, 6 and 8 to this table). Dr. Johnson is Chairman of the Board and a director of Vista Technologies and by virtue of such relationships may be deemed to influence power of disposition as to Series A and Series B Preferred shares owned by Vista 51 54 Technologies; Dr. Johnson disclaims beneficial ownership of such shares. The business address for Dr. Johnson is 918 12th Street, New Westminster, British Columbia, Canada V3M 6B1. (6) 100,000 Series A Preferred shares and 200,000 Series B Preferred shares listed in the table are owned by Vista Technologies and are included elsewhere in the table as indirectly beneficially owned by Messrs. Barazi (as to voting power for Series B Preferred), Casebeer and Johnson and directly owned by Vista Technologies (see Notes 3, 4, 5 and 8 to this table). Dr. Casebeer and Dr. Johnson are directors of Vista Technologies and by virtue of such relationship may be deemed to influence power of disposition as to Series A and Series B Preferred shares owned by Vista Technologies; Dr. Casebeer and Dr. Johnson each disclaims beneficial ownership of such shares. (7) Includes shares described in Notes (3) through (6) above. (8) Series A and Series B Preferred shares held by Vista Technologies are subject to a proxy and voting agreement granted in favor of Ghassan Barazi and Dr. Fouad Tayfour (see "Certain Transactions"). Such shares are included elsewhere in the table as beneficially owned by Messrs. Barazi, Casebeer and Johnson (see Notes 3, 4, 5 and 6 to this table). The business address for Vista Technologies is 1250 Oakmead Parkway, Suite 210, Sunnyvale, California 92088-3599. After giving effect to the sale of 800,000 shares of Series A Preferred offered by the Company (and assuming the Underwriter's over-allotment option to purchase an additional 120,000 shares of Series A Preferred stock is not exercised and the Underwriter's Warrants to purchase 80,000 shares of Common Stock are not exercised), the following table shows the number of shares, voting power and percentage of each person and group shown in the foregoing table as adjusted for this offering:
SHARES BENEFICIALLY OWNED, AS ADJUSTED(A) --------------------------------------------------------------- VOTING POWER PREFERRED STOCK --------------- ----------------------------------------- VOTES COMMON % OF % OF % OF NAME OR GROUP (B) % STOCK CLASS(B) SERIES A CLASS SERIES B CLASS - -------------------------------- -------- ---- ------- --------- -------- -------- -------- -------- DIRECTORS: Ghassan Barazi.................. 550,000 40.4% 250,000 96.2% 100,000* 11.1% 200,000* 100% J. Charles Casebeer, M.D. ...... 50,000 4.3% 50,000 66.7% 100,000* 11.1% 200,000* 100% Donald G. Johnson, M.D. ........ 50,000 4.3% 50,000 66.7% 100,000* 11.1% 200,000* 100% All executive officers and directors as a group [four in number]... 650,000 44.8% 350,000 100.0% 100,000* 11.1% 200,000* 100% OTHER 5% STOCKHOLDERS: Vista Technologies Inc.(b).... -- -- -- -- 100,000* 11.1% 200,000* 100%
- --------------- * These are the same securities deemed beneficially owned by more than one person. (a) As adjusted for the sale of 800,000 shares of Series A Preferred stock offered by the Company. (b) Includes securities beneficially owned plus, where applicable, Common Stock issuable upon exercise of outstanding Class A Warrants and stock options held only by the person or group indicated that are fully exercisable or exercisable within 60 days after the date of this Prospectus. Series A and Series B Preferred shares held by Vista Technologies are subject to a proxy and voting agreement granted in favor of Ghassan Barazi and Dr. Fouad Tayfour (see "Certain Transactions"). 52 55 DESCRIPTION OF SECURITIES The authorized capital stock of the Company consists of 20,000,000 shares of Common Stock, par value $0.01 per share, and 5,000,000 shares of Preferred Stock, par value $0.01 per share. As of the date of this Prospectus, there were 30,000 shares of Common Stock, 100,000 shares of Series A Preferred stock and 200,000 shares of Series B Preferred stock issued and outstanding. PREFERRED STOCK The Company is authorized to issue 5,000,000 shares of preferred stock, par value $.01 per share (the "Preferred Stock"). Under the Company's articles of incorporation, the Company's Board of Directors is authorized, without further stockholder action, to issue Preferred Stock in one or more series and to fix the number of shares and the rights, preferences and limitations of each series. Among the specific matters that may be determined by the Board of Directors are the dividend rate, the redemption price, if any, conversion rights, if any, the amount payable in the event of any voluntary liquidation or dissolution of the Company and voting rights, if any. No dividends or payments in liquidation may be made with respect to Common Stock unless all accumulated dividends on the Preferred Stock of all series have been paid in full and, in the event of liquidation, unless the liquidation preference of all series of Preferred Stock has been satisfied. In case stated dividends and amounts payable on liquidation on Preferred Stock of all series are not payable in full, shares of all series of Preferred Stock are entitled to share ratably in the payment of dividends and in any distribution of assets otherwise than by way of dividends SERIES A PREFERRED STOCK The Company has designated 1,100,000 shares of Preferred Stock as "10% Series A Cumulative Convertible Preferred Stock" (herein called the "Series A Preferred"). Of such shares, 100,000 shares were issued and sold to Refractive Services-800 Inc. in July 1995 for $100,000 in cash. In July 1996, all of the assets of Refractive Services-800, Inc., including among other assets all of such 100,000 Series A Preferred shares, were purchased by Vista Technologies. In order to limit cash dividends on its investment to a 10% return per annum, Vista Technologies agreed that dividends on shares of Series A Preferred stock originally issued in July 1995 will be limited to $0.10 per share annually until such time as those shares are resold by Vista Technologies to an unaffiliated third party. Thereafter, such shares will bear dividends at the same rate of $0.50 per share annually that will be applicable to shares of Series A Preferred sold in this offering. The remaining 1,000,000 designated shares of Series A Preferred include 800,000 shares reserved for issuance in this offering, 120,000 shares reserved for the Underwriters' over-allotment option and 80,000 shares reserved for the Underwriter's Warrants. Dividends. Series A Preferred will be entitled to cumulative dividends at the rate of $0.50 per share per annum, payable annually commencing one year after this offering. Dividends will commence to accrue from the date of initial issuance. On the basis that 900,000 shares of Series A Preferred stock will be outstanding after the offering hereunder (assuming the Underwriter's over-allotment option is not exercised), the annual dividend requirement of the Series A Preferred will be $450,000 per annum (assuming the eventual resale by Vista Technologies of its 100,000 Series A Preferred shares). As of March 31, 1996, accrued and unpaid dividends on Series A Preferred shares issued prior to this offering were $6,667. Nevada law prohibits the payment of dividends or other distributions to stockholders if, after giving effect to such distribution, the Company's total assets would be less than the sum of its total liabilities plus the amount that would be needed to satisfy liquidation preferences of its Preferred Stock. Unless shares of Preferred Stock are converted into Common Stock, after this offering the aggregate liquidation preference of all series of Preferred Stock outstanding will be $5,000,000 ($5,600,000 if the Underwriters' over-allotment option is exercised), and the Company accordingly anticipates that its ability to pay cash dividends on Preferred Stock will be dependent upon attaining profitable operations, as to which there can be no assurance. 53 56 In the event the Company is prohibited by law from the payment of cash dividends or has insufficient cash resources for dividend payments, the Company at its option may elect to pay accrued dividends in shares of the Company's Series A Preferred Stock or Common Stock. In the event of such an election by the Company, each holder of record of Series A Preferred stock will be advised in writing, not more than 30 days nor less than 10 days prior to the respective dividend payment date, of the Company's election to make an interest payment in additional capital stock. Prior to distributing shares of Series A Preferred or Common Stock as a dividend, the Company will be obligated to register such shares under the Securities Act of 1933. The number of shares issuable for any such dividend payment will be determined by dividing the cumulative accrued dividend payments due on the dividend payment date by the Fair Market Value, defined as the unweighted average closing sale prices for the class of dividend shares distributed during the ten days on which such shares are actually traded in the Nasdaq System or on a national securities exchange immediately prior to the record date for payment of the dividend. If for any reason closing sale prices are not quoted by the Nasdaq System on any such day, then the closing market price for such day will be deemed the closing bid price for such day as reported by the National Quotation Bureau. Should market quotations for the class of dividend shares distributed not be available, the market value will be determined by the Company's Board of Directors based on a good faith determination. Conversion. Commencing 30 days after the date of this Prospectus, the holders of Series A Preferred will have the right to convert their stock to shares of the Company's Common Stock at any time prior to the second business day before a date designated by the Company for the redemption of such shares. The date of redemption must be designated by the Company at least 30 days prior to the redemption date of such shares (see "Redemption" below). Each Series A Preferred share may be converted into one (1) share of Common Stock. In the case of such conversion, there will be no adjustment for accumulated dividends and the Series A Preferred stockholders electing to convert will forfeit their rights to payment of accrued and unpaid dividends. So long as there is any Series A Preferred outstanding, the Company will reserve unissued, out of the authorized shares of Common Stock, a sufficient number of shares to provide for such conversion. The conversion ratio is subject to automatic proportionate adjustment if the Common Stock is subdivided or combined, in case stock dividends are paid on the Common Stock, or in the event of any other reclassification or reorganization affecting the outstanding shares of Common Stock. Upon conversion, no certificates for fractional shares will be issued, and a cash adjustment will be made in lieu thereof. Redemption. The Series A Preferred may be redeemed, as a whole at any time or in part from time to time thereafter, at the option of the Company, upon at least 30 days' prior notice, at a redemption price of $7.50 per share. If shares are redeemed in part, those shares to be redeemed will be selected by lot in an appropriate manner determined by the Company's Board of Directors. All dividends accrued and unpaid to the date of redemption will be paid at the time of such redemption. No shares of Series A Preferred stock may be redeemed unless all dividends accrued and unpaid to the date of redemption have been paid or provided for on all series of Preferred Stock. There are no sinking fund or mandatory redemptions provisions relating to the Series A Preferred. Liquidation Preference. The holders of Series A Preferred will be entitled to receive out of the assets of the Company in the event of its liquidation, and before any class of stock ranking junior to Preferred Stock, all dividends accrued and unpaid to the date of liquidation plus $5.00 per share. Voting Rights. Each share of Series A Preferred will be entitled to one vote per share on all matters on which stockholders or the Company are entitled to vote or act by consent. Miscellaneous. Holders of Series A Preferred will not have any preemptive or preferential rights to subscribe for or purchase any additional securities issued by the Company. Shares of Series A Preferred offered hereunder will be, upon payment of the offering price, duly and validly issued, fully paid and nonassessable. Transfer Agent. The transfer agent for the Series A Preferred will be American Stock Transfer & Trust Company, 40 Wall Street, 46th Floor, New York, New York 10005. 54 57 SERIES B PREFERRED STOCK The Company has designated 200,000 shares of Preferred Stock as "5% Series B Cumulative Convertible Preferred Stock" (herein called the "Series B Preferred"), all of which are issued and outstanding as of March 31, 1996. Series B Preferred is entitled to cumulative dividends at the rate of $0.12 1/2 per share per annum, payable annually on each anniversary of the Company's initial public offering in the same manner as dividends on Series A Preferred. The annual dividend requirement of the Series B Preferred is currently $25,000 per annum; as of March 31, 1996, accrued and unpaid dividends on Series B Preferred shares issued prior to this offering were $9,375. Holders of Series B Preferred have the right to convert their stock to shares of the Company's Common Stock at any time prior to the second business day before a designated date for the optional redemption of such shares. Each Series B Preferred share may be converted into one (1) share of Common Stock. In the case of such conversion, there will be no adjustment for accumulated dividends. The conversion ratio is subject to automatic proportionate adjustment if the Common Stock is subdivided or combined, in case stock dividends are paid on the Common Stock, or in the event of any other reclassification or reorganization affecting the outstanding shares of Common Stock. The Series B Preferred may be redeemed, as a whole at any time after the first anniversary of the date of this Prospectus or in part from time to time thereafter, at the option of the Company, upon at least 30 days' prior notice, at a redemption price of $5.00 per share, except that the Company may not elect to redeem Series B Preferred if any Series A Preferred would remain issued and outstanding after the redemption of Series B Preferred. All dividends accrued and unpaid to the date of redemption will be paid upon redemption of Series B Preferred. No shares of shares of Series B Preferred stock may be redeemed unless all dividends accrued and unpaid to the date of redemption have been paid or provided for on all other series of Preferred Stock. There are no sinking fund or mandatory redemptions provisions relating to the Series B Preferred. Holders of Series B Preferred will be entitled to receive out of the assets of the Company in the event of its liquidation, and before any class of stock ranking junior to Preferred Stock, all dividends accrued and unpaid to the date of liquidation plus $2.50 per share. Each share of Series B Preferred is entitled to one vote per share on all matters on which stockholders or the Company are entitled to vote or act by consent. Holders of Series B Preferred do not have any preemptive or preferential rights to subscribe for or purchase any additional securities issued by the Company. All outstanding shares of Series B Preferred are fully paid and nonassessable. COMMON STOCK The Company is authorized to issue 20,000,000 shares of Common Stock, par value $.01 per share, of which 30,000 shares were issued and outstanding at the date of this Prospectus. Holders of Common Stock are entitled to one vote for each share held on each matter to be acted upon by stockholders of the Company. Stockholders do not have preemptive rights or the right to cumulate votes for the election of directors. Shares are not subject to redemption nor to any liability for further calls. All shares of Common Stock issued and outstanding are, and all shares issuable upon conversion of Series A Preferred stock offered by the Company hereby will be, validly issued, fully paid and non-assessable. Subject to provisions relating to Preferred Stock discussed above, holders of Common Stock are entitled to receive such dividends, if any, as may be declared by the Board of Directors in its discretion out of funds legally available for that purpose, and to participate pro rata in any distribution of the Company's assets upon liquidation or dissolution. In the event of liquidation or dissolution of the Company, all assets available for distribution after satisfaction of all debts and other liabilities and after payment or provision for the liquidation preference of Preferred Stock are distributable among the holders of the Common Stock. The Transfer Agent for the Company's Common Stock will be American Stock Transfer & Trust Company, 40 Wall Street, 46th Floor, New York, New York 10005. 55 58 COMMON STOCK PURCHASE WARRANTS The Company at present has reserved for issuance up to 270,000 shares of Common Stock for issuance in the event of the exercise of up to 270,000 outstanding Class A Common Stock Purchase Warrants (the "Class A Warrants"). Class A Warrants are exercisable at $1.00 per share until the Class A warrants expire on the fourth anniversary of this Prospectus. Class A Warrants are not subject to redemption by the Company. The holders of the Class A Warrants do not have any of the rights or privileges of stockholders of the Company, such as voting rights or the right to receive dividends, prior to exercise of the Class A Warrants. The exercise price of the Class A Warrants and the number of Class A Warrants are subject to automatic proportionate adjustment in the event of any stock dividend, stock split or other recapitalization affecting the outstanding Common Stock. Investors in this offering should note that for the term of the Class A Warrants, the holder or holders thereof are given, at nominal cost, the opportunity to profit from a rise in the market price of the Common Stock subject to the Class A Warrants with a resulting dilution in the interests of other stockholders. At any time when the holders of the Class A Warrants might be expected to exercise the same, the Company would in all likelihood be able to obtain additional equity capital on terms more favorable than those provided in the Class A Warrants. See "Certain Transactions". CERTAIN CHARTER AND BYLAW PROVISIONS AND OTHER INDEMNIFICATION ARRANGEMENTS Possible Additional Issuances of Common and/or Preferred Stock Without Stockholder Action. The flexibility to issue additional shares of Common Stock and/or shares of Preferred Stock in one or more series as permitted by the Company's articles of incorporation (the "Charter") can enhance the Board of Directors' bargaining capability on behalf of the Company's stockholders in a takeover situation and could, under some circumstances, be used to render more difficult or discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of the Company's securities, or the removal of incumbent management, even if such a transaction were favored by the holders of the requisite number of shares. Under these circumstances, the existence of a significant number of authorized and unissued Common shares and/or one or more series of Preferred Stock may have the effect of limiting stockholder participation in these types of transactions. The Company is not aware of any present efforts to gain control of the Company or to organize a proxy contest. Number of Directors; Removal; Filling Vacancies. The By-Laws provide that the Board will consist between three and not more than fifteen directors, with the exact number to be fixed from time to time by resolution adopted by the Board. The Board of Directors at the present time has fixed the number of directors at six, with two vacancies to be filled after completion of this offering (see "Certain Transactions"). Subject to the rights, if any, of the holders of any series of Preferred Stock then outstanding, the By-Laws authorize the Board to fill vacant directorships, including newly created directorships. Accordingly, these provisions could prevent a stockholder from obtaining majority representation on the Board by permitting the Board to enlarge the Board and fill the new directorships with its own nominees. Each director so elected by the Board or by stockholders hold office until the next election of directors and until his successor is elected and qualified. Limitation of Liability and Indemnification. Under the Nevada General Corporation Law, a corporation may adopt a provision in its articles of incorporation eliminating, with certain exceptions, the personal liability of a director to the corporation or its shareholders for monetary damages for breach of the director's fiduciary duty as a director. The Company's Charter eliminates the liability of directors to the fullest extent permissible under Nevada law. Under Nevada law, however, the Company is not allowed to eliminate or limit director monetary liability for: (a) breaches of the director's duty of loyalty to the corporation or its stockholders; (b) acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law; (c) unlawful dividends, stock repurchases or redemptions; or (d) transactions from which the director received an improper personal benefit. 56 59 Under the Nevada General Corporation Law, a corporation may not indemnify any director, officer, employee or agent made or threatened to be made party to any threatened, pending, or completed proceeding unless such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal proceedings, had no reasonable cause to believe that his or her conduct was unlawful. FEDERAL INCOME TAX CONSIDERATIONS The following is a general summary of the material Federal income tax aspects relating to the Series A Preferred stock. The Company has not received an opinion of counsel as to the following income tax aspects. Purchasers of the Series A Preferred stock offered hereby should consult their own advisors as to the tax treatment of this issue in particular circumstances, including the application of state and local laws. DIVIDENDS ON PREFERRED STOCK Dividends paid on the Series A Preferred stock, whether paid in cash or in shares of the Company's Common Stock, are taxable as ordinary income to the extent of the Company's current or accumulated earnings and profits, but may qualify for the dividends received deduction allowable to corporations and for the dividend exclusion available to individuals. However, under Section 246A of the Internal Revenue Code of 1986, as amended (the "Code"), to the extent a corporation incurs indebtedness for the purpose of making a portfolio stock investment (which would include the Series A Preferred stock), the deduction for dividends received on the leverage is generally disallowed. Corporate investors should note that pending legislative proposals may reduce the corporate dividends received deduction from the current deduction of 70% to 50%. Dividends paid in Common Stock, if any, would be valued at fair market value on the date of payment for income tax purposes. REDEMPTION Under Section 305(c) of the Code and Section 1,305-5(b) of the Treasury Regulations, if the redemption price of redeemable preferred stock exceeds its issue price, the portion of such excess which constitutes an unreasonable redemption premium, if any, will be taxable as a dividend over the period during which the preferred stock cannot be redeemed. A premium is considered to be reasonable if it is in the nature of a penalty for a premature redemption and if such premium does not exceed the amount which the issuer would be required to pay for such redemption right under market conditions existing at the time of issuance of the preferred stock. Although no assurance can be given, the Company believes that the redemption premium of the Series A Preferred stock meets this test. If this test is not met, the amount by which the redemption premium (based on all or a portion of the excess of the $7.50 redemption price over the $5.00 issue price) exceeds a reasonable redemption premium will be considered to be a dividend received by a shareholder ratably over any period during which the Preferred Stock cannot be redeemed. Any sale or exchange, other than by way of redemption or exchange with the Company, will produce capital gain or loss if the Series A Preferred stock is held as a capital asset. Generally, any redemption of the Series A Preferred stock for cash would result in taxable gain or loss equal to the difference between the amount of cash received and the shareholder's tax basis in the Series A Preferred stock redeemed. Such gain or loss would be capital gain or loss if the Series A Preferred stock were held as a capital asset, and would be long-term capital gain or loss if the holding period for Series A Preferred stock were to exceed one year. Under certain circumstances an exception to this rule applies, which would cause the entire amount of the cash received upon redemption of the Series A Preferred stock to be taxable as a dividend. However, if a shareholder completely terminates his interest in the Company (taking into account shares deemed owned by that shareholder by reason of the constructive ownership rules applied by Section 302(c) of the Code) as a result of a redemption of the Series A Preferred stock, such shareholder would be exempt from such dividend treatment. Moreover, if, as a result of a cash redemption of the Series A Preferred stock, a shareholder whose relative stock interest in the Company is minimal (an interest of less than 1% should satisfy this requirement) and who exercises no control over the Company's affairs experiences an actual reduction in his proportionate 57 60 interest in the Company (taking into account the constructive ownership rules mentioned above), such shareholder should not be subject to dividend treatment, because such distribution is "not essentially equivalent to a dividend" under Section 302(b)(1) of the Code. CONVERSION TO COMMON STOCK No gain or loss will be recognized for Federal income tax purposes on conversion of the Series A Preferred stock into shares of Common Stock, except with respect to any cash received in exchange for a fractional interest, if any. The tax basis for the shares of Common Stock received upon conversion will be equal to the tax basis of the Series A Preferred stock converted, reduced by the portion of such basis allocable to any fractional interest exchanged for cash. Provided that the Series A Preferred stock was held as a capital asset, the holding period of the shares of Common Stock will include the holding period of the Series A Preferred stock converted. SHARES ELIGIBLE FOR FUTURE SALE Upon the completion of this offering, the Company will have outstanding 30,000 shares of Common Stock, 900,000 shares of Series A Preferred stock (convertible into 900,000 shares of Common Stock), 200,000 shares of Series B Preferred stock (convertible into 200,000 shares of Common Stock), 270,000 Class A Warrants (exercisable at $1.00 per share into 270,000 shares of Common Stock) and stock options exercisable at $1.00 per share into 50,000 shares of Common Stock. Of these shares, 800,000 shares of Series A Preferred offered hereby (920,000 shares if the Underwriter's over-allotment option is exercised in full) will be freely tradeable without restriction or further registration under the Securities Act of 1933 (the "Securities Act"), except for any shares purchased by an "affiliate" of the Company (in general, a person who has a control relationship with the Company) which would be subject to the resale limitations of Rule 144 under the Securities Act other than holding period limitations. The remaining 30,000 shares of Common Stock, 100,000 shares of Series A Preferred and up to 620,000 shares of Common Stock issuable upon conversion of Series A and Series B Preferred and exercise of Class A Warrants and stock options are deemed to be "restricted securities" as that term is defined under Rule 144 promulgated under the Securities Act, in that such shares were issued and sold by the Company in private transactions not involving a public offering. Under Rule 144 as currently in effect, none of such shares will become eligible for sale prior to November 16, 1997. As discussed below, there are certain amendments that may be proposed to Rule 144 which, if adopted, may enable a portion of such shares to become eligible for sale before November 16, 1997. In general, under Rule 144 as currently in effect, subject to the satisfaction of certain other conditions, a person, including an affiliate of the Company (or other persons whose shares are required to be aggregated), who has owned restricted shares of the Company's Common Stock or Series B Preferred stock beneficially for at least two years is entitled to sell, within any three-month period, a number of shares of Common Stock that does not exceed the greater of 1% of the total number of outstanding shares of the same class or, if the shares are quoted on the Nasdaq system, the average weekly trading volume during the four calendar weeks preceding the sale. A person who has not been an affiliate of the Company for at least the three months immediately preceding the sale and who has beneficially owned shares for at least three years is entitled to sell such shares under Rule 144 without regard to any of the limitations described above. The Securities and Exchange Commission has recently proposed for comment the possibility of amendments to Rule 144 that would reduce the two and three year periods referenced above to one and two years, respectively. Sales under Rule 144 are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about the Company. A person who has not been an affiliate of the Company at any time during the three months preceding a sale, and who has beneficially owned his Common Stock for at least three years, would be entitled to sell such Common Stock under Rule 144(k) without regard to the other requirements of Rule 144. 58 61 All of the Company's officers, directors and existing stockholders have agreed not to sell or otherwise dispose of any of their shares of Common Stock or Preferred stock for a period of 12 months from the date of this Prospectus without the prior written consent of the Underwriter. Prior to this offering, there has been no market for the Series A Preferred stock or Common Stock. No predictions can be made of the effect, if any, that sales of Series A Preferred stock or Common Stock under Rule 144, or the availability of such shares for sale, will have on the market price for the securities of the Company prevailing from time to time. Nevertheless, the possibility that substantial amounts of Series A Preferred stock or Common Stock may be sold in the public market may adversely affect prevailing market prices for the Company's securities and could impair the Company's ability to raise additional capital through the sale of its equity securities. 59 62 UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, the Underwriters named below, through their Representative, Dickinson & Co. (the "Representative") have severally agreed to purchase from the Company the following respective number of shares of Series A Preferred stock at the initial public offering price, less the underwriting discounts and commissions, set forth on the cover page of this Prospectus.
NUMBER OF SHARES OF SERIES A PREFERRED UNDERWRITER TO BE PURCHASED ----------------------------------------------------------- ------------------- Dickinson & Co............................................. Redstone Securities, Inc. ................................. ------- Total............................................ 800,000 =======
The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will purchase all Series A Preferred offered hereby of any of the Series A Preferred shares offered hereby are purchased. The Company has been advised by the Representatives that the Underwriters propose to offer the shares of Series A Preferred stock directly to the public at the public offering price set forth on the cover page of this Prospectus. The Underwriters may allow to certain securities dealers who are members of the National Association of Securities Dealers, Inc. ("NASD") a concession, not in excess of $ per share of Series A Preferred Stock, of which not in excess of $ per share of Series A Preferred Stock may be reallowed to other securities dealers who are members of the NASD. After the initial public offering, the public offering price, concession and reallowance may be changed by the Representatives. The Company has granted to the Underwriter an option, exercisable within 45 days from the date of this Prospectus, to purchase from the Company up to 120,000 additional shares of Series A Preferred stock at the public offering price set forth on the cover page of this Prospectus, less the underwriting discounts and commissions. The Underwriter may exercise this option in whole or, from time to time, in part, solely for the purpose of covering over-allotments, if any, made in connection with the sale of the shares of Series A Preferred stock offered hereby. The Company will be obligated, pursuant to the over-allotment option, to sell shares to the Underwriter to the extent such over-allotment option is exercised. The Company has agreed to pay the Underwriter a nonaccountable expense allowance of 3% of the gross proceeds of this offering. The Company has also agreed to pay all expenses in connection with qualifying the shares of Series A Preferred stock offered hereby and Common Stock issuable upon conversion thereof for sale under the laws of such states as the Underwriter may designate, including expenses of counsel retained for such purpose by the Underwriter. The Company has agreed to sell to the Underwriter, for an aggregate of $80, warrants (the "Underwriter's Warrants") to purchase up to 80,000 shares of Series A Preferred stock at an exercise price of $6.00 per share. The Underwriter's Warrants may not be sold, transferred, assigned or hypothecated during the first year following issuance of the Underwriter's Warrants except to the officers of the Representatives and to members of the selling group and their officers, and will be exercisable for a four-year period commencing one year after the date of this Prospectus (the "Warrant Exercise Term"). During the Warrant Exercise Term, the holders of the Underwriter's Warrants are given, at nominal cost, the opportunity to profit from a rise in the market price of the Company's Series A Preferred stock. To the extent that the Underwriter's Warrants are exercised or if Series A Preferred shares issued on such exercise are converted into Common Stock, dilution to 60 63 the interests of the Company's stockholders may occur. Further, the terms upon which the Company will be able to obtain additional equity capital while the Underwriter's Warrants are outstanding may be adversely affected since the holders of the Underwriter's Warrants can be expected to exercise them at a time when the Company would, in all likelihood, be able to obtain any needed capital on terms more favorable to the Company than those provided in the Underwriter's Warrants. Any profit realized by the Representative on the sale of the Underwriter's Warrants or the underlying securities may be deemed additional underwriting compensation. Subject to certain limitations and exclusions, the Company has agreed to register the Underwriter's Warrants and the underlying securities under the Securities Act on one occasion during the Warrant Exercise Term and to include such Underwriter's Warrants and the underlying securities in any appropriate registration statement that is filed by the Company during the seven years following the date of this Prospectus. The Company has agreed, for a period of five years from the date of this Prospectus, if so requested by the Representative, to nominate and use its best efforts to appoint a designee of the Representative as a non-voting advisor to the Company's Board of Directors. Each person so designated may be a director, officer, partner, employee or affiliate of the Representative. Such person will receive reimbursement of actual expenses and no other compensation. All of the Company's existing stockholders, officers and directors have agreed, pursuant to lock-up agreements executed in connection with this offering, that until 12 months after the date of this Prospectus, such parties will not sell, make any short sale of, loan, grant any option for the purchase or otherwise dispose of any shares of Preferred Stock or Common Stock or any securities convertible into or exchangeable or exercisable for such shares without the consent of the Representative. The Underwriting Agreement requires other commitments on the part of the Company during the five years following the date of the Prospectus, including (i) providing the Representative on an annual basis with internal forecasts of projected results of operations for the following two years, (ii) providing the Representative with quarterly statements setting forth the Company's results of operations and financial position as regularly prepared by management, (iii) a requirement that the Company will cause its independent public accountants to review the Company's interim financial statements for each of the first three fiscal quarters in each fiscal year prior to announcement of quarterly financial information, (iv) a requirement that KPMG Peat Marwick LLP or another nationally recognized accounting firm reasonably acceptable to the Representative be retained as the Company's independent public accountants, and (v) a requirement that American Stock Transfer & Trust Company will be retained as the transfer agent for the Series A Preferred unless otherwise agreed to by the Representative. The Company has agreed to indemnify the Underwriters against certain civil liabilities, including liabilities under the Securities Act, and to contribute to payments that the Underwriters may be required to make in respect thereof. The Underwriter has agreed it will not confirm sales of the shares offered hereby to any account over which the Underwriter exercises discretionary authority. Prior to this offering, there has been no public trading market for the Series A Preferred stock or the Common Stock. Consequently, the initial public offering price of the Series A Preferred stock and the one-for-one conversion rate whereby Series A Preferred may by converted into shares of Common Stock have been determined by negotiations between the Company and the Underwriter. Among the factors considered in determining the offering price and conversion rate were the Company's limited history of operations, financial condition and prospects, market prices of similar securities of comparable publicly-traded companies, certain financial and operating information of companies engaged in activities similar to those of the Company and the general condition of the securities market. Thomas A. Schultz was hired as the President and Chief Executive Officer of Vista Technologies and elected a director of Vista Technologies on February 16, 1996. Mr. Schultz served from November 1995 until July 1, 1996 as a director of Synergistic Holdings Corp. (formerly named Dickinson Holding Corp.), the parent of Dickinson & Co. 61 64 DIVIDEND POLICY No cash dividends have been declared or paid by the Company to date. The Company intends to employ all available funds for development of its business and accordingly, does not intend to pay cash dividends on its Common Stock in the foreseeable future. The Board of Directors of the Company will review its Common Stock dividend policy from time to time to determine the desirability and feasibility of paying dividends after giving consideration to the Company's earnings, financial condition, capital requirements, dividend obligations on Preferred Stock, the advisability of redeeming outstanding Preferred Stock from time to time, and such other factors as the Board of Directors deems relevant. The estimated annual dividend requirements on the Company's Preferred Stock will be $450,000 for Series A Preferred ($510,000 if the Underwriters' over-allotment option is exercised and $550,000 if the Underwriters' overallotment option and the Underwriter's Warrants are exercised) and $25,000 for Series B Preferred shares. As of March 31, 1996, dividends in arrears on Series A Preferred and Series B Preferred shares issued prior to this offering were $6,667 and $9,357, respectively. LEGAL MATTERS The validity of the securities offered hereby will be passed upon for the Company by the Law Office of William M. Curtis, Laguna Hills, California. Certain legal matters will be passed upon for the Underwriter by Titus, Brueckner & Berry, P.C., Scottsdale, Arizona. EXPERTS The consolidated financial statements of Vista Laser Centers of Michigan, Inc. (a development stage enterprise) and subsidiaries as of March 31, 1996 and for the period from June 30, 1995 (date of inception) through March 31, 1996 have been included in this Prospectus and Registration Statement in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. 62 65 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES INDEX
PAGE ---- Independent Auditors' Report.......................................................... F-2 Consolidated Financial Statements: Consolidated Balance Sheet as of March 31, 1996..................................... F-3 Consolidated Statement of Operations for the period from June 30, 1995 (date of inception) to March 31, 1996............................................ F-4 Consolidated Statement of Changes in Stockholders' Equity for the period from June 30, 1995 (date of inception) to March 31, 1996......................... F-5 Consolidated Statement of Cash Flows for the period from June 30, 1995 (date of inception) to March 31, 1996............................................ F-6 Notes to Consolidated Financial Statements............................................ F-7
F-1 66 INDEPENDENT AUDITORS' REPORT The Board of Directors Vista Laser Centers of Michigan, Inc.: We have audited the accompanying consolidated balance sheet of Vista Laser Centers of Michigan, Inc. (a development stage enterprise) and subsidiaries as of March 31, 1996, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the period from June 30, 1995 (date of inception) to March 31, 1996. 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 audit. We conducted our audit 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 audit provides 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 Laser Centers of Michigan, Inc. (a development stage enterprise) and subsidiaries as of March 31, 1996, and the results of their operations and their cash flows for the period from June 30, 1995 (date of inception) to March 31, 1996 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 to the consolidated financial statements, the Company is currently a development stage enterprise and dependent on raising additional financing through a public offering or private placement to meet its obligations and commitments. This dependency raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. KPMG Peat Marwick LLP New York, New York April 26, 1996 F-2 67 VISTA LASER CENTERS OF MICHIGAN, INC, (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET MARCH 31, 1996 ASSETS Current assets: Cash and cash equivalents....................................................... $ 39,648 Prepaid expenses................................................................ -- -------- Total current assets.................................................... 39,648 Deferred offering costs (note 6)................................................ 113,339 Marketable equity securities restricted as to sale (note 3)..................... 217,597 -------- Total assets............................................................ $370,584 ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accrued liabilities............................................................. 58,134 -------- Total current liabilities............................................... 58,134 Stockholders' equity: Preferred stock, $.01 par value. Authorized 5,000,000 shares; 1,100,000 shares designated 10% Series A Cumulative Convertible; issued and outstanding 100,000 shares ($500,000 liquidation value) (note 4)............ 1,000 200,000 shares designated 5% Series B Cumulative Convertible; issued and outstanding 200,000 shares ($500,000 liquidation value) (notes 3 and 4)..... 2,000 Common stock, $.01 par value, Authorized 20,000,000 shares; issued and outstanding 30,000 shares................................................................ 300 Additional paid-in capital...................................................... 371,297 Stock subscription receivable (note 4).......................................... (5,000) Warrant subscription receivable (note 4)........................................ (22,500) Deficit accumulated during the development stage................................ (34,647) -------- Total stockholders' equity.............................................. 312,450 Commitments and contingencies (note 7) -------- Total liabilities and stockholders' equity.............................. $370,584 ========
See accompanying notes to consolidated financial statements. F-3 68 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS PERIOD FROM JUNE 30, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996 Interest income................................................................... $ 557 Operating expenses: General and administrative expenses............................................. 35,204 -------- Loss from operations.................................................... (34,647) Provision for income taxes........................................................ -- -------- Net loss................................................................ (34,647) -------- Dividends in arrears: Series A preferred stock........................................................ (6,667) Series B preferred stock........................................................ (9,375) -------- (16,042) -------- Net loss adjusted for dividends in arrears.............................. $(50,689) ======== Net loss per share................................................................ $ (.22) ======== Weighted average shares used in computing net loss per share (note 2) 226,269 ========
See accompanying notes to consolidated financial statements. F-4 69 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY PERIOD FROM JUNE 30, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996
DEFICIT ACCUMULATED PREFERRED STOCK COMMON STOCK ADDITIONAL STOCK WARRANT DURING THE ---------------- --------------- PAID-IN SUBSCRIPTION SUBSCRIPTION DEVELOPMENT SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE RECEIVABLE STAGE TOTAL ------- ------ ------ ------ ---------- ------------ ------------ ----------- -------- Balance at June 30, 1995................... -- $ -- -- $ -- -- -- -- -- -- Issue of 10% Series A cumulative convertible preferred stock................ 100,000 1,000 -- -- 99,000 -- -- -- 100,000 Issue of 5% Series B cumulative convertible preferred stock in exchange for Vista common stock (note 4)............. 200,000 2,000 -- -- 215,597 -- -- -- 217,597 Issue of common stock................ -- -- 30,000 300 29,700 -- -- -- 30,000 Issue of warrants...... -- -- -- -- 27,000 -- -- -- 27,000 Issuance of notes receivable (note 4)................... -- -- -- -- -- (5,000) (22,500) -- (27,500) Net loss............... -- -- -- -- -- -- -- (34,647) (34,647) ------- ------ ------ ---- ------- ------ ------- ------- ------- Balance (deficit) at March 31, 1996......... 300,000 $3,000 30,000 $300 371,297 (5,000) (22,500) (34,647) 312,450 ======= ====== ====== ==== ======= ====== ======= ======= =======
See accompanying notes to consolidated financial statements. F-5 70 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS PERIOD FROM JUNE 30, 1995 (DATE OF INCEPTION) TO MARCH 31, 1996 Cash flows from operating activities: Net loss....................................................................... $ (34,647) Adjustments to reconcile net loss to net cash used in operating activities: Changes in: Deferred offering costs................................................... (113,339) Accrued liabilities....................................................... 58,134 --------- Net cash used in operating activities.................................. (89,852) --------- Cash flows from financing activities: Proceeds from issuance of Series A preferred stock............................. 100,000 Proceeds from issuance of common stock and stock subscriptions................. 25,000 Proceeds from issuance of common stock purchase warrants....................... 4,500 --------- Net cash provided by financing activities.............................. 129,500 --------- Net increase in cash and cash equivalents.............................. 39,648 Cash and cash equivalents at beginning of period................................. -- --------- Cash and cash equivalents at end of period....................................... $ 39,648 =========
Supplemental disclosures of noncash financing and investing information: -- On November 16, 1995, the Company issued 200,000 shares of its 5% Series B preferred stock to Vista Technologies, Inc. ("Vista") in exchange for 200,000 shares of common stock in Vista. -- The Company has issued common stock subscription notes receivable totaling $5,000 and Class A common stock purchase warrant subscription notes receivable totaling $22,500. See accompanying notes to consolidated financial statements. F-6 71 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Description of Business Vista Laser Centers of Michigan, Inc. (the "Company") is a development stage enterprise recently organized on June 30, 1995 to establish, manage and administer laser vision correction ("LVC") support services ("Services") and related LVC equipment. The accompanying consolidated financial statements include the Company's wholly owned subsidiary, Vista Laser Centers of Windsor, Inc., a Canadian company. All significant intercompany balances have been eliminated. Vista Laser Centers of Windsor, Inc. is a calendar year corporation. The Company is considering a proposed initial public offering of its 10% cumulative convertible preferred stock ("proposed offering") (see note 9). The planned centers will employ advanced laser technology, which has been commercially available for several years for use in foreign countries, including Canada. In late 1995, the U.S. Food and Drug Administration ("FDA") granted approval to Summit Technology Inc. ("Summit") for commercial use in the U.S. of Summit's excimer laser systems for photorefractive keratectomy ("PRK") treatment of myopia (nearsightedness) and conditional approval to VISX Incorporated ("VISX") for similar PRK equipment. Generally speaking, PRK is useful in correcting the vast majority of myopia cases. The first LVC Services site to be established by the Company immediately upon completion of a proposed offering (see note 9) will be located in Windsor, Ontario, directly adjacent to Detroit, Michigan. Due to regulatory constraints in the U.S., the Company expects that some U.S. patients, as well as Canadians, will seek treatment at the Company's Ontario location when the method of treatment preferred by the physician requires an LVC procedure not commercially available in the U.S. The Company anticipates that laser assisted in situ keratomileusis ("LASIK") will be the most significant procedure performed in its first site planned for Windsor, Ontario. The Company also plans to establish one or more strategically positioned LVC Services locations in Michigan where licensed ophthalmologists ("MDs") and optometrists ("ODs") who enter into facilities use agreements with the Company may bring their patients for LVC diagnosis, PRK laser procedures and postoperative care. The Company's activities to date have consisted primarily of market research, seeking affiliations with experienced LVC eye care professionals, negotiating to acquire equipment necessary to establish its first LVC Service site in Windsor, Ontario, and negotiating agreements to provide facilities use and management services to eye care professionals. (b) Cash Equivalents Cash equivalents are temporarily invested in interest-bearing savings accounts, bank certificates of deposit, money market accounts, government obligations or other forms of liquid short-term interest-bearing investments with maturities of three months or less. (c) Income Taxes Effective June 30, 1995, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary F-7 72 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (d) Revenue Recognition The Company plans to enter into Facilities Use and Support Services Agreements with licensed MDs and ODs. Support services offered by the Company are expected to include accounting and other administrative services. The Company is also expected to provide billing and collection services on behalf of MDs and ODs. In each instance there will be a licensed MD or OD who will perform actual LVC procedures as part of an individual practice and in whose name patients will be billed. It is anticipated that the Company will earn its revenues by billing MDs and ODs for facilities use and support services at time of use. Facilities use and support service revenues are expected to be a contractually agreed-upon percentage of patient billings as defined in the Facilities Use and Support Services Agreement. The Company will recognize revenue when it has substantially completed its obligations under the Facilities Use and Support Services Agreements. (e) Foreign Currency Translation The Company's initial business operations will be located in Canada and it is anticipated that a significant portion of the Company's revenues and expenses may be collected and paid in Canadian dollars. The Company publishes its consolidated financial statements in U.S. dollars after translating transactions in Canadian currency to U.S. dollars. Income and expense items in Canadian currency will be translated at the weighted average exchange rate prevailing during the period, except that expenses related to nonmonetary assets and liabilities will be translated at historical rates. (f) Marketable Equity Securities Effective June 30, 1995, the Company adopted Statement of Financial Accounting Standards No. 115 (SFAS 115), "Accounting for Certain Investments in Debt and Equity Securities." Under SFAS 115, the Company's marketable equity securities will be classified as available-for-sale securities and will be carried at fair market value. Unrealized gains and losses will be reflected as a separate component of stockholders' equity, net of income taxes. As discussed in Note 3, the Company's marketable equity securities consist of securities issued in a Regulation D transaction and are therefore considered restricted securities. Accordingly, until the securities meet the conditions of existing securities regulations, the securities will remain restricted (see note 3). (g) Financial Instruments Statement of Financial Accounting Standards No. 107 (SFAS 107), "Disclosures about Fair Value of Financial Instruments," defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. Fair value of financial instruments approximates their carrying value in the consolidated financial statements, except for investments for which fair value information is provided in note 3. F-8 73 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 (h) Liquidity and Going Concern The Company is a development stage enterprise and, accordingly, has not earned revenue to date. As discussed in notes 7 and 11, the Company has entered into a lease commitment, subsequent to March 31, 1996, in the amount of $416,192. As discussed in note 9, the Company's Board of Directors authorized a filing of a registration statement with the Securities and Exchange Commission for the sale of units of 10% Series A cumulative convertible preferred stock. Management believes that the proceeds received from such offering will be sufficient to allow the Company to operate and meet its current obligations and commitments, although there are no assurances that this offering will take place. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of reported net asset amounts or the amounts of liabilities that might result from the outcome of the uncertainty. (2) NET LOSS PER SHARE Net loss per common and common equivalent share is computed based upon the weighted average number of shares of common stock outstanding during the period. Also pursuant to the requirements of the Securities and Exchange Commission, all stock, warrants and options issued within the twelve months immediately preceding the initial filing of the registration statement for the Company's proposed offering at a price below the anticipated offering price, totaling 100,000 shares of Series A preferred stock, 200,000 shares of Series B preferred stock, 30,000 shares of common stock, 270,000 common stock purchase warrants and 50,000 options to purchase common stock, have been included in the calculation of primary loss per share for all periods presented utilizing the "treasury stock method." The net loss per share calculation assumes the conversion of all Series A cumulative convertible preferred stock and Series B cumulative convertible preferred stock into 300,000 shares of common stock. (3) MARKETABLE EQUITY SECURITIES Marketable Investment Securities Marketable investment securities at March 31, 1996 consist of equity securities in Vista Technologies Inc. ("Vista"), an operator of five outpatient PRK surgical clinics in Europe and a co-founder of the Company (see note 4). Such equity securities were issued by Vista Technologies in a Regulation D transaction. Rules under the Securities Act of 1933 (the 1933 Act) impose limitations on resale of securities acquired in Regulation D transactions. Securities issued in a Regulation D transaction are also considered to be restricted securities as defined by the 1933 Act. Accordingly, these securities will remain restricted until Vista registers such securities under the 1933 Act or the Company and Vista cease to be affiliated entities. As a result, management has classified the securities as restricted and recorded them at cost in the accompanying financial statements. (4) RELATED PARTY TRANSACTIONS The Company was organized on June 30, 1995. On July 31, 1995, Refractive Services-800, Inc. ("RS 800 Inc.") paid the Company $100,000 for the purchase of 100,000 shares of the Company's 10% Series A cumulative convertible preferred stock, or a price equal to $1.00 per share (see note 11). The liquidation preference of Series A preferred stock is $5.00 per share. On November 16, 1995, the Company issued 200,000 shares of its 5% Series B cumulative convertible preferred stock to Vista in exchange for 200,000 shares of common stock in Vista. The liquidation preference F-9 74 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 of Series B preferred stock is $2.50 per share. The Company had an independent appraisal performed on the value of the Series B stock as of the date of this transaction. The stock was valued at $1.087 per share giving the total consideration a value of $217,597. On November 28, 1995, and pursuant to the terms of the Company's employment agreement with Ghassan Barazi, the Company issued and sold 20,000 shares of its common stock to Mr. Barazi, its President and Chief Executive Officer, at a cash price of $20,000, or $1.00 per share. The Company had an independent appraisal performed on the value of the common stock which was valued at $1.081 per share. The Company also agreed to sell Mr. Barazi 180,000 Class A common stock purchase warrants at a cash price of $18,000, or $0.10 per warrant. The Company had an independent appraisal performed on the value of the warrants to purchase common stock. The value of each warrant was determined to be $.09 per warrant. Each Class A warrant represents the right to purchase one share of the Company's common stock at an exercise price of $1.00 per share until the Class A warrants expire on the fourth anniversary of the effective date of the proposed offering, or June 30, 2000 if the proposed offering is not effective as of June 30, 1996. As of March 31, 1996, the Company had not received any cash related to the sale of the warrants. Accordingly, the sale has been recorded as warrant subscription receivable in the accompanying consolidated financial statements. On November 15, 1995, the Company agreed to sell to Dr. J. Charles Casebeer, a director and Chairman of the Board of the Company, 5,000 shares of its common stock at a cash price of $5,000, or $1.00 per share, and 45,000 Class A common stock purchase warrants at a cash price of $4,500, or $0.10 per warrant. An independent appraisal valued the common stock at $1.081 per share and the warrants at $.09 per warrant. On November 15, 1995, the Company also agreed to sell to Dr. Donald G. Johnson, a director of the Company, 5,000 shares of its common stock at a cash price of $5,000, or $1.00 per share, and 45,000 Class A common stock purchase warrants at a cash price of $4,500, or $0.10 per warrant. An independent appraisal valued the common stock at $1.081 per share and the warrants at $.09 per warrant. Each Class A warrant represents the right to purchase one share of the Company's common stock at an exercise price of $1.00 per share until the Class A warrants expire on the fourth anniversary of the effective date of the proposed offering. As of March 31, 1996, the Company had not received any cash related to the sale of stock and warrants to Dr. Casebeer. Accordingly, the sales have been recorded as stock subscriptions receivable in the accompanying consolidated financial statements. Vista and the Company entered into a consulting services agreement (the "Vista Agreement") dated as of October 16, 1995. Under this agreement, Vista will render advice and assistance to the Company in the areas of marketing, financial planning, development of accounting systems and internal controls, investor and public relations, compliance with applicable regulations in relation to the operation of surgical centers and relationships with health care professionals and compliance in periodic filings with the Securities and Exchange Commission. Under the terms of this agreement, Vista is entitled to receive monthly consulting fees equal to 5% of the Company's net revenues as defined by the Vista Agreement less $5,000 per month. The term of the Vista Agreement is for ten years from the effective date of the proposed offering, and is automatically renewed thereafter for successive five-year terms unless either party provides six months' prior notice of an intent not to extend the term. The Company entered into a license agreement with Refractive Services 800 Corp. ("RS-800 Corp."), an affiliate of RS 800 Inc., as of October 16, 1995 which grants the Company the right to use, in its geographic markets of Michigan and southern Ontario, certain 800 and 900 telephone numbers that are held by RS 800 Corp. (see note 11). Under the terms of this license agreement, RS 800 Corp. is entitled to receive a monthly F-10 75 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 royalty equal to 2 1/2% of the Company's net revenues during the term of the license agreement that are attributable to use of its facilities and support services for patients referred to MDs and ODs by virtue of the Company's use of the licensed 800 and 900 telephone numbers. The term of the license agreement is for five years from the effective date of the proposed offering, and is automatically renewed thereafter on a year-to-year basis unless either party provides six months' prior notice of an intent not to extend the term. During the term of the license agreement, RS 800 Corp. has agreed to maintain the exclusive right to license 800 and 900 telephone numbers covered by the license agreement that are actively used by the Company, and to offer the Company rights to license, at no additional royalty, any other 800 and 900 telephone numbers that may be acquired hereafter by RS 800 Corp. for use in the Company's geographic markets of Michigan and southern Ontario. Dr. J. Charles Casebeer, a director and Chairman of the Board, has entered into a consulting agreement (the "Agreement") with the Company commencing on the effective date of the proposed offering. Under this agreement, Dr. Casebeer will provide consulting and training services to the Company and has agreed to serve as the Chairman of its Board of Directors. Dr. Casebeer will receive compensation for consulting services at the rate of $60,000 per annum payable monthly (except that the first year's fees will be payable in advance upon completion of the proposed offering), and additional compensation for training services for each MD and OD in the credentialing program. On December 11, 1995, the Company organized its wholly owned subsidiary, Vista Laser Centers of Windsor, Inc. (5) INCOME TAXES The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liability as of March 31, 1996 are presented below: Deferred tax assets: Deferred start-up costs................................................. $ 14,000 --------- Total gross deferred tax assets...................................... 14,000 Less valuation allowance.................................................. (14,000) --------- Net deferred tax assets.............................................. $ -- =========
(6) DEFERRED OFFERING COSTS Costs associated with the Company's proposed offering of Series A preferred stock, Series B preferred stock, common stock and warrants are deferred and will be recorded as a reduction of the proceeds received upon consummation of the proposed offering (see note 9). Deferred offering costs will be expensed if and when it becomes evident that the proposed initial public offering will not be completed. (7) COMMITMENTS AND CONTINGENCIES The Company may elect to establish and operate a telemarketing information and advertising service in Michigan and southern Ontario using 800 and 900 telephone numbers (see note 11). The Company is licensed by RS-800 Corp., an affiliate of a principal stockholder and co-founder of the Company, to use certain 800 and 900 telephone numbers. The Company plans to use its 800/900 number telemarketing programs for marketing and educational purposes directed to the public and to obtain referrals for ophthalmologists and optometrists F-11 76 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 that utilize the Company's facilities or services. In exchange for such services, RS-800 Corp. will receive approximately 2 1/2% of the Company's net revenues (see note 4) attributable only to charges for the use of its facilities and support services by patients referred to MDs and ODs as a result of the Company's direct use of licensed 800 and 900 telephone numbers. The Company has entered into an agreement with Vista Technologies Inc., one of its founders. Vista currently operates five outpatient PRK surgical clinics in Europe (three in Italy and two in Sweden). Vista will provide management and technical consulting services to the Company including a review of operating strategies and manuals, personnel and professional training, advertising and promotion information and technical assistance and advice. In exchange for such services, Vista will receive approximately 5% of the Company's net revenues as defined by the agreement attributable to charges for the use of its facilities and support services less $5,000 per month (see note 4). The Company has entered into an agreement (the "Facilities Agreement") with Dr. Fouad Tayfour for facilities use effective upon the completion of the proposed offering (see note 9). Under the terms of the Facilities Agreement, the Company will receive 50% of the gross procedure fee, as defined by the Facilities Agreement. Dr. Tayfour's minimum compensation is based on 150 procedures being performed in any month during the 24-month period beginning with the third month after the effective date of the Facilities Agreement. The Facilities Agreement with Dr. Tayfour is for a term of five years from the effective date of the proposed offering and will be renewed thereafter on a year-to-year basis unless either party has provided the other with at least three months' notice not to renew the agreement. The Company is obligated under its Facilities Agreement with Dr. Tayfour to provide LVC Services and equipment at a site in Windsor, Ontario, meeting all ethical and professional standards prescribed by the Company's Medical Advisory Board and equipped with state-of-the-art equipment appropriate for LVC care including equipment to be acquired by the Company pursuant to an agreement with an affiliate of Dr. Tayfour. The Company is also committed to establish and maintain billing, collection and accounting procedures for the collection of fees and to establish a public education and marketing program to promote LVC care to the public in the geographic markets of Ontario and the Midwestern United States. In addition, the Company has agreed to train and maintain an adequate support staff for the management, administration and operation of its LVC Services, and to sponsor and promote general awareness of LVC care within the professional community by sponsoring and promoting educational and training seminars for health care professionals. The Company has also entered into a consulting agreement ("Consulting Agreement") with Dr. Tayfour effective upon the completion of a proposed offering (see note 9). Under that agreement, Dr. Tayfour will act as a professional consultant to the Company concerning the establishment of ethical standards and procedures for LVC Services, periodically conduct training and education seminars, and will agree to serve as an Executive Committee member of the Company's Medical Advisory Board. In consideration of the consulting services, Dr. Tayfour will receive 100% of the net support fees, as defined by the Consulting Agreement, for the first 10 LVC procedures performed in each month with use of the Company's LVC Services at its Windsor, Ontario location by credentialed surgeons other than Dr. Tayfour. For the next 20 LVC procedures performed, Dr. Tayfour will receive 50% of the net support fees as defined by the Consulting Agreement. The Consulting Agreement with Dr. Tayfour is for a term of five years from the effective date of the proposed offering and will be renewed thereafter on a year-to-year basis unless either party has provided the other with at least three months' notice not to renew the agreement. The Company has entered into an agreement for purchase of assets ("Purchase Agreement") upon the completion of a proposed offering whereby the Company has a commitment with Windsor Excimer Corporation, an affiliate of Dr. Tayfour, to purchase equipment for LVC Services at its Windsor, Ontario site. F-12 77 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 The price of this equipment, which approximates its fair value, will be $1,000,000, of which $500,000 will be financed through the proposed offering and the remainder will consist of a promissory note with 10% interest per annum, payable monthly. The principal will be due and payable on the second anniversary of the effective date of the proposed offering. In addition, the Company will sublease facilities located at the Windsor Excimer Corporation for a term until March 30, 2004 which will be effective upon completion of the proposed offering. The Company has entered into consulting agreements with Dr. Donald G. Johnson and Dr. J. Charles Casebeer (see note 4) that will be effective from the date of the proposed offering. Dr. Casebeer will be compensated in advance for the first year at the completion of the proposed offering. He will receive compensation for both consulting services and for training services. Dr. Johnson will also assist in the training of MDs and ODs. On January 12, 1996, the Board of Directors of the Company authorized amendments to the employment agreement of Ghassan Barazi, its Chief Executive Officer and Chief Financial Officer. Under the terms of the amendment, the Company granted Mr. Barazi an option to purchase 50,000 shares of common stock at $1.00 per share, pursuant to the terms and provisions of the 1995 stock option plan (see note 8). The option expires January 12, 2001. In addition, in the event Mr. Barazi's employment is terminated either voluntarily or involuntarily at any time during the initial five-year term or is not renewed for at least one additional year at the end of its initial five-year term, Mr. Barazi will be entitled to receive a $200,000 additional severance payment if he has not exercised any portion of the stock option described above. However, should such termination be the result of Mr. Barazi's voluntary resignation, the Company has the right to issue 180,000 shares of common stock to Mr. Barazi in lieu of the $200,000 cash payment and Mr. Barazi's rights to exercise the stock option and the 180,000 Class A warrants (see note 4) will terminate unexercised in such events. The amendment also provides for a one-time hiring bonus of $20,000 upon the completion of the proposed offering. In April 1996, Neptune Technology Leasing Corp. ("Neptune") agreed to redocument an existing lease agreement between Neptune and Richard C. Mertz, M.D., P.C., ("Dr. Mertz") to reflect the Company as the new lessee of a Summit Holmium Laser System (the "Laser") and other equipment used in conjunction with the Laser subject to Dr. Mertz's personal guaranty remaining in full force and effect on the lease. Dr. Mertz has agreed to have his personal guaranty remain in full force and effect on the lease as redocumented. The total lease commitment is $416,192 and is for a term of 48 months at an interest rate of 14%. The Company will record this lease as a capital lease in accordance with SFAS No. 13, "Accounting for Leases". (8) STOCK OPTION PLANS On September 1, 1995, the Board of Directors and stockholders of the Company adopted the 1995 Stock Option Plan (the "Option Plan"). As discussed in note 7, the Company has created an option to purchase 50,000 shares of common stock to its chief executive officer. The Option Plan is structured to allow the Board of Directors and a future Stock Option Committee of the Board discretion in creating equity incentives to management, key employees and professional consultants F-13 78 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 for the purpose of assisting the Company in motivating and retaining appropriate talent. The Option Plan covers up to a maximum of 200,000 shares of the Company's common stock. The Option Plan provides for the granting of stock options which, at the discretion of the Board or its Stock Option Committee, may be either "incentive stock options" within the meaning of Section 422A of the U.S. Internal Revenue Code or nonqualified stock options which do not qualify as incentive stock options. The Option Plan provides that both incentive stock options and nonqualified options under the Option Plan must be granted at an option price which is not less than the fair market value of the common stock on the date of grant. With respect to any participant who owns stock possessing more than 10% of the voting rights of the Company's outstanding capital stock, the exercise price of any incentive stock option under the Option Plan to such a participant must be not less than 110% of fair market value on the date of grant. Options under the Option Plan may be granted to officers, directors, key employees of, and professional consultants to, the Company and its subsidiaries. Under the terms of the Option Plan, the aggregate fair market value (determined at the time an option is granted, which will normally be equal to the option exercise price per share) of common stock exercisable under an incentive stock option for the first time in any calendar year may not exceed $100,000. Under the Option Plan, the number of shares available for options and subject to option, and the option exercise price of outstanding options, is to be adjusted upward or downward, as the case may be, in the event of any stock dividend, recapitalization, merger, consolidation, split up or similar transaction affecting shares of the Company's common stock. If any option granted under the Option Plan terminates or expires without having been exercised in full, the shares not purchased under such option will again be available for purposes of the Option Plan. (9) INITIAL PUBLIC OFFERING On November 15, 1995, the Board of Directors of the Company authorized the filing of a registration statement with the Securities and Exchange Commission for the sale of units of 10% Series A cumulative convertible preferred stock. (10) NEW ACCOUNTING PRONOUNCEMENTS In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation." SFAS 123 establishes financial accounting and reporting standards for stock-based employee compensation plans. Those plans include all arrangements by which employees receive shares of stock or other equity instruments of the employer or the employer incurs liabilities to employees in amounts based on the price of the employer's stock. Examples are stock purchase plans, stock options, restricted stock and stock appreciation rights. SFAS 123 also applies to transactions in which an entity issues its equity instruments to acquire goods or services from nonemployees. Those transactions must be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. SFAS 123 is effective for fiscal years that begin after December 15, 1995. The Company will review the appropriate accounting and disclosure under SFAS 123 for its fiscal year ending March 31, 1997. F-14 79 VISTA LASER CENTERS OF MICHIGAN, INC. (A DEVELOPMENT STAGE ENTERPRISE) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1996 (11) SUBSEQUENT EVENTS In April 1996, the Company received $9,500 from Dr. J. Charles Casebeer in payment of the subscription price for common stock and Class A common stock warrants (see note 4). In April 1996, the Company also received $18,000 from Ghassan Barazi, the Company's Chief Executive Officer and Chief Financial Officer, in payment of the Class A common stock purchase warrants (see note 4). In April 1996, the Company entered into a commitment to lease a laser system and other equipment from Neptune Technology Leasing Corp. for $416,192 (see note 4). In July 1996, Vista Technologies agreed to purchase all of the assets of Refractive Services-800, Inc. in exchange for a combination of common stock and common stock purchase warrants of Vista Technologies (see notes 4 and 7). F-15 80 GLOSSARY As used in this Prospectus, the following terms have the following meanings unless the context clearly indicates otherwise. ablation: the removal of corneal tissue by ultraviolet light generated by a laser. alternative refractive care: the treatment of refractive disorders other than through the use of traditional means such as eyeglasses and contact lenses. astigmatism: a common refractive disorder in which images transmitted through the cornea fail to focus at any one point on the retina, resulting in blurred vision. cornea: the transparent front portion of the eye through which images are transmitted and which is the principal focusing component of the eye. corneal pathologies: diseases, injuries and conditions of the cornea resulting in impaired vision, discomfort or blindness. diopter: a unit of measurement of the refractive power of the eye; a negative value indicates nearsightedness and a positive value indicates farsightedness. epithelium: a layer of cells comprising the outer surface of the cornea. excimer laser: an ophthalmic laser surgical system which delivers pulses of ultraviolet laser light to an eye for the purpose of correcting nearsightedness, farsightedness, astigmatism and other ophthalmic disorders. FDA: the United States Food and Drug Administration. glaucoma: a disease of the eye characterized by a sustained elevation of intraocular pressure. holmium laser: an ophthalmic laser surgical system which delivers high intensity pulses of infrared light to an eye for the purpose of treating the symptoms of glaucoma and, in certain circumstances, correcting farsightedness and astigmatism. hyperopia: a common refractive disorder, also known as farsightedness, in which images transmitted through the cornea focus behind the retina, resulting in blurred vision. laser assisted in situ keratomileusis ("LASIK"): a refractive procedure performed with an excimer laser system to treat extreme cases of myopia (nearsightedness) and also having applications for treatment of hyperopia and astigmatism. laser sclerostomy ("LS"): a surgical procedure performed with a holmium laser to treat symptoms of glaucoma by making an opening in the front chamber of the eye. laser thermal keratoplasty ("LTK"): a refractive procedure performed with a holmium laser to treat hyperopia (farsightedness) and astigmatism in which peripheral corneal tissue is thermally shrunk, causing the central portion of the cornea to steepen. micron: a unit of length equal to one-thousandth of a millimeter. myopia: a common refractive disorder, also known as nearsightedness, in which images transmitted through the cornea focus in front of the retina, resulting in blurred vision. photorefractive keratectomy ("PRK"): an outpatient surgical procedure performed with an excimer laser system for the purpose of correcting myopia (nearsightedness), hyperopia (farsightedness) and astigmatism, whereby submicron layers of tissue are ablated from the surface of the cornea in a predetermined pattern to reshape the cornea. phototherapeutic keratectomy (PTK): an outpatient surgical procedure performed with an excimer laser system to alleviate symptoms of certain corneal pathologies by ablating submicron layers of tissue in order to remove diseased, scarred or sight-inhibiting tissue. S-1 81 premarket approval ("PMA"): a determination by the FDA, based on an application supported by data (including preclinical trial results), that a medical device is safe and efficacious and can be commercially marketed in the United States. radial keratotomy ("RK"): a manual surgical procedure to treat nearsightedness, whereby incisions are made in the cornea to cause it to flatten. refractive care: the treatment of refractive disorders, through the use of traditional means such as eyeglasses and contact lenses, or through the use of alternative means, such as photorefractive keratectomy. refractive disorder: the inability of the eye to properly focus images on the retina; the most common refractive disorders are nearsightedness, farsightedness and astigmatism. retina: the lining of the insider of the eye that receives images entering the eye and transmits them to the brain. S-2 82 - ------------------------------------------------------ - ------------------------------------------------------ NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER, SOLICITATION OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS. ------------------------ TABLE OF CONTENTS
PAGE ---- Additional Information................ 2 U.S. Dollar Presentation.............. 2 Prospectus Summary.................... 3 Risk Factors.......................... 7 Dilution.............................. 15 Use of Proceeds....................... 17 Capitalization........................ 19 Selected Financial Data............... 20 Management Discussion and Analysis and Plan of Operation................... 21 Proposed Business..................... 24 Management............................ 40 Certain Transactions.................. 45 Principal Stockholders................ 51 Description of Securities............. 53 Federal Income Tax Considerations..... 57 Shares Eligible for Future Sale....... 58 Underwriting.......................... 60 Dividend Policy....................... 62 Legal Matters......................... 62 Experts............................... 62 Index to Financial Statements......... F-1 Glossary.............................. S-1
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES OF THE COMPANY, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ VISTA LASER CENTERS OF MICHIGAN, INC. 800,000 SHARES OF 10% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK -------------------- PROSPECTUS -------------------- DICKINSON & CO. REDSTONE SECURITIES, INC. , 1996 - ------------------------------------------------------ - ------------------------------------------------------ 83 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Reference is made to Articles SEVENTH and EIGHTH of the Registrant's articles of incorporation, which provide as follows: "SEVENTH: The personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by the General Corporation Law of the State of Nevada, as the same may be amended and supplemented. "EIGHTH: The corporation shall, to the fullest extent permitted by the General Corporation Law of the State of Nevada, as the same may be amended and supplemented. indemnify any and all persons whom it shall have power to indemnify under said Law from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said Law, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person." Reference is made to Article VI of the Registrant's bylaws dealing with indemnification of directors and officers, which provide as follows: "ARTICLE VI -- INDEMNIFICATION "Section 1. DEFINITIONS. For the purposes of this Article, "agent" means any person who is or was a director, officer, employee or other agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent or another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or was a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation; "proceeding" means any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative; and "expenses" includes without limitation attorneys' fees and any expenses of establishing a right to indemnification under Sections 4 or 5(c) of this Article. "Section 2. INDEMNIFICATION IN ACTIONS BY THIRD PARTIES. The corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of the corporation to procure a judgment in its favor) by reason of the fact that such person is or was an agent of the corporation, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with such proceeding if such person acted in good faith and in a manner such persons reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of such person was unlawful. The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in the best interests of the corporation or that the person had reasonable cause to believe that the person's conduct was unlawful. "Section 3. INDEMNIFICATION IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was an agent of the corporation, against expenses actually and reasonably incurred by such person in connection with the II-1 84 defense or settlement of such action if such person acted in good faith, in a manner such person believed to be in the best interests of the corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. "Section 4. INDEMNIFICATION AGAINST EXPENSES. To the extent that an agent of the corporation has been successful on the merits in defense of any proceeding referred to in Sections 2 or 3 of this Article or in defense of any claim, issue or matter therein, and as otherwise provided by authorization of the Board of Directors or stockholders of this corporation, the agent shall be indemnified against expenses actually and reasonably incurred by the agent in connection therewith. "Section 5. REQUIRED DETERMINATIONS. Any indemnification under this Article shall be made by the corporation only if authorized in the specific case, upon a determination that indemnification of the agent is proper in the circumstances because the agent has met the applicable standard of conduct set forth in Sections 2 or 3 of this Article, by: "(a) A majority vote of a quorum consisting of directors who are not parties to such proceeding; or "(b) Approval of the stockholders, with the shares owned by the person to be indemnified not being entitled to vote thereon; or "(c) The court in which such proceeding is or was pending upon application made by the corporation or the agent or the attorney or other person rendering services in connection with the defense, whether or not such application by the agent, attorney or other person is opposed by the corporation. "Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending any proceeding may be advanced by the corporation prior to the final disposition of such proceeding upon receipt of an undertaking by or on behalf of the agent to repay such amount unless it shall be determined ultimately that the agent is entitled to be indemnified as authorized in this Article. "Section 7. OTHER INDEMNIFICATION. No provision made by the corporation to indemnify it or its subsidiary's directors or officers for the defense of any proceeding, whether contained in the Articles, By-laws, a resolution of stockholders or directors, an agreement or otherwise, shall be valid unless consistent with this Article and approved by a majority of the Directors; provided, however, that any such agreement approved by a majority of the shares of capital stock voted at any meeting called to consider the same or by written consent of a majority of the shares entitled to vote for the election of directors shall supercede the provision of this Article to the extent of any inconsistencies. Nothing contained in this Article shall affect any right to indemnification to which persons other than such directors and officers may be entitled by contract or otherwise. "Section 8. FORMS OF INDEMNIFICATION NOT PERMITTED. No indemnification or advance shall be made under this Article, except as provided in Sections 4 or 5(c), in any circumstances where it appears: "(a) That it would be inconsistent with a provision of the Articles, these By-laws, a resolution of the stockholders or an agreement in effect at the time of the accrual of the alleged cause of action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnifications; or "(b) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement. "Section 9. INSURANCE. The corporation shall have power to purchase and maintain insurance on behalf of any agent of the corporation against any liability asserted against or incurred by the agent in such capacity or arising out of the agent's status as such whether or not the corporation would have the power to indemnify the agent against such liability under the provisions of this Article. II-2 85 "Section 10. NONAPPLICABILITY TO FIDUCIARIES OF EMPLOYEE BENEFIT PLANS. This Article does not apply to any proceeding against any trustee, investment manager or other fiduciary of an employee benefit plan in such person's capacity as such, even though such person may also be an agent of the corporation as defined in Section 1 of this Article. The corporation shall have power to indemnify such trustee, investment manager or other fiduciary to the extent permitted by applicable law." Reference is also made to Sections 78.751 and 78.752 of the Nevada General Corporation Law which provides for indemnification of directors and officers. "78.751. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS; ADVANCEMENT OF EXPENSES. "1. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, has no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful. "2. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. "3. To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter therein, he must be indemnified by the corporation against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense. "4. Any indemnification under subsections 1 and 2, unless ordered by a court or advanced pursuant to subsection 5, must be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made: (a) By the stockholders; (b) By the board of directors by majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding; (c) If a majority vote of a quorum consisting of directors who were not parties to the act, suit or proceeding so orders, by independent legal counsel in a written opinion; or (d) If a quorum consisting of directors who were not parties to the act, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion. II-3 86 "5. The certificate or articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law. "6. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this section: (a) Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may be entitled under the certificate or articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a court pursuant to subsection 2 or for the advancement of expenses made pursuant to subsection 5, may not be made to or on behalf of any director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action. (b) Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person. "78.752. INSURANCE AND OTHER FINANCIAL ARRANGEMENTS AGAINST LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS. "1. A corporation may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the corporation has the authority to indemnify him against such liability and expenses. "2. The other financial arrangements made by the corporation pursuant to subsection 1 may include the following: (a) The creation of a trust fund. (b) The establishment of a program of self-insurance. (c) The securing of its obligation of indemnification by granting a security interest or other lien on any assets of the corporation. (d) The establishment of a letter of credit, guaranty or surety. No financial arrangement made pursuant to this subsection may provide protection for a person adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for intentional misconduct, fraud or a knowing violation of law, except with respect to the advancement of expenses or indemnification ordered by a court. "3. Any insurance or other financial arrangement made on behalf of a person pursuant to this section may be provided by the corporation or any other person approved by the board of directors, even if all or part of the other person's stock or other securities is owned by the corporation. II-4 87 "4. In the absence of fraud: (a) The decision of the board of directors as to the propriety of the terms and conditions of any insurance or other financial arrangement made pursuant to this section and the choice of the person to provide the insurance or other financial arrangement is conclusive; and (b) The insurance or other financial arrangement: (1) Is not void or voidable; and (2) Does not subject any director approving it to personal liability for his action, even if a director approving the insurance or other financial arrangement is a beneficiary of the insurance or other financial arrangement. "5. A corporation or its subsidiary which provides self-insurance for itself or for another affiliated corporation pursuant to this section is not subject to the provisions of Title 57 of Nevada Revised Statutes." Reference is also made to Indemnification Agreements between the Registrant and each of its directors and officers obligating the Registrant to indemnify directors and officers to the maximum extent permitted by the laws of the State of Nevada, copies of which have been filed as Exhibits 10.13.1 through 10.13.5 inclusive to this Registration Statement. The Registrant's Board of Directors has authorized the Registrant to apply for an errors and omissions liability insurance policy covering acts and omissions of its officers and directors as soon as practicable after the filing of this Registration Statement. For indemnification agreements between the Registrant and the Underwriters, reference is made to Section 8 of the Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement. ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The expenses of this offering will be paid by the Registrant and are estimated as follows: Filing fees to Securities and Exchange Commission................. $ 1,924 Filing fees to National Association of Securities Dealers, Inc.... 1,058 Nasdaq SmallCap Market Listing Fee................................ 5,900* Printing Expenses................................................. 50,000* Legal Fees and Expenses........................................... 40,000* Accounting Fees................................................... 35,000* Valuation report.................................................. 20,000 Blue Sky Filing Fees and Legal Expenses........................... 40,200* Transfer Agent and Registrar Fees and Expenses.................... 5,000* Miscellaneous..................................................... 918* -------- Total........................................................ $200,000* ========
- --------------- * Estimated amount. ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES. During the last three years, the Registrant has issued and sold the following securities which were not registered at the time of sale under the Securities Act of 1933, as amended (the "Securities Act"): 1. On July 31, 1995, the Registrant issued and sold 100,000 shares of its 10% Series A Cumulative Convertible Preferred Stock to Refractive Services-800, Inc., for a consideration of $100,000 in cash. (Effective July 18, 1996, such shares were purchased from Refractive Services-800, Inc. by Vista Technologies Inc.) II-5 88 2. On November 16, 1995, the Registrant issued and sold 200,000 shares of its 5% Series B Cumulative Convertible Preferred Stock to Vista Technologies Inc. in exchange for a consideration consisting of 200,000 shares of common stock in Vista Technologies Inc. 3. Pursuant to a contractual commitment made as of September 1, 1995, on November 28, 1995 the Registrant issued and sold 20,000 shares of its Common Stock to Ghassan Barazi, its President, at a cash price of $1.00 per share ($20,000 total). Under the commitment, as of September 1, 1995 the Registrant also reserved 180,000 Class A common stock purchase warrants stock for sale to Ghassan Barazi at a cash price of $0.10 per warrant ($18,000) that was paid in cash on April 29, 1996. Each Class A warrant represents the right to purchase one share of the Registrant's Common Stock at an exercise price of $1.00 per share until the Class A warrants expire on the fourth anniversary of the effective date of this Registration Statement. Mr. Barazi was elected a director and executive officer of the Registrant on September 1, 1995. 4. On December 1, 1995, the Registrant issued and sold to Dr. Donald G. Johnson 5,000 shares of its Common Stock at a cash price of $1.00 per share ($5,000) and 45,000 Class A common stock purchase warrants stock at a cash price of $0.10 per warrant ($4,500) pursuant to a Consulting Agreement dated November 15, 1995. Each Class A warrant represents the right to purchase one share of the Registrant's Common Stock at an exercise price of $1.00 per share until the Class A warrants expire on the fourth anniversary of the effective date of this Registration Statement. Dr. Johnson was elected a director of the Registrant on October 16, 1995. 5. Pursuant to a Consulting Agreement dated November 15, 1995, the Registrant reserved for issuance and sale to Dr. J. Charles Casebeer 5,000 shares of its Common Stock at a cash price of $1.00 per share ($5,000) and 45,000 Class A common stock purchase warrants stock at a cash price of $0.10 per warrant ($4,500). The total purchase price of $9,500 was paid in cash on April 17, 1996. Each Class A warrant represents the right to purchase one share of the Registrant's Common Stock at an exercise price of $1.00 per share until the Class A warrants expire on the fourth anniversary of the effective date of this Registration Statement. Dr. Casebeer was elected a director and Chairman of the Board of the Registrant on October 16, 1995. 6. On January 12, 1996, the Registrant issued a stock option covering 50,000 shares of its common stock to one director and executive officer under its 1995 Stock Option Plan, as follows:
OPTION DATE OF NUMBER OF OPTION PRICE EXPIRATION NAME OF OPTIONEE GRANT SHARES PER SHARE (A) DATE - ------------------------------------------ -------- --------- ------------- ----------- Ghassan Barazi (b)........................ 1/12/96 50,000 $1.00 1/12/2001
- --------------- (a) Represents not less than 100% of fair market value at date of grant as determined by the Board of Directors. (b) Executive officer and director of the Registrant. Reference is made to "Management" and "Certain Transactions" in the Prospectus. No underwriter was involved in the issuance or sale of the above-referenced securities and no discounts or commission were paid. None of the securities described in this Item 26 were registered under the Securities Act at the time of original issuance in reliance upon the exemption from registration in Section 4(2) of the Securities Act for transactions not involving a public offering. All of the certificates evidencing the securities described in this Item 26 were imprinted at the time of original issuance with a restrictive legend indicating that they have not been registered under the Securities Act and that resales thereof are restricted to comply with the Securities Act. II-6 89 ITEM 27. EXHIBITS. * Indicates exhibits filed herewith. (M) Denotes management contract or compensation plan or arrangement.
EXHIBIT NO. DESCRIPTION - ------------ ----------------------------------------------------------------------------- 1.1 Form of Underwriting Agreement between the Registrant and Dickinson & Co. (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996). 3.1.1 Articles of Incorporation of the Registrant filed with the Secretary of State of Nevada on June 30, 1995 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996). 3.1.2 Certificate of Amendment to the Articles of Incorporation of the Registrant filed with the Secretary of State of Nevada on November 2, 1995 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996). 3.1.3 Certificate of Amendment to the Articles of Incorporation of the Registrant filed with the Secretary of State of Nevada on April 12, 1996 changing corporate name to Vista Laser Centers of Michigan, Inc. (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996). 3.2.1 Certificate of Designation of 10% Series A Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on November 2, 1995 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996). 3.2.2 Certificate of Amendment to Certificate of Designation of 10% Series A Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on April 12, 1996 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996). 3.2.3 Certificate of Amendment to Certificate of Designation of 10% Series A Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on May 22, 1996 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996). * 3.2.4 Form of Certificate of Amendment to Certificate of Designation of 10% Series A Cumulative Convertible Preferred Stock of the Registrant. 3.3.1 Certificate of Designation of 5% Series B Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on November 2, 1995 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996). 3.3.2 Certificate of Amendment to Certificate of Designation of 5% Series B Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on January 8, 1996 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996). 3.3.3 Certificate of Amendment to Certificate of Designation of 5% Series B Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on May 22, 1996 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996). * 3.3.4 Form of Certificate of Amendment to Certificate of Resignation of 5% Series B Cumulative Convertible Preferred Stock of the Registrant. 3.4 By-Laws of the Registrant (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996). * 3.5 Amendment to Article I, Section 2 of Bylaws adopted July 18, 1996. 4.1 Specimen certificate representing Registrant's common stock (to be filed by amendment).
II-7 90
EXHIBIT NO. DESCRIPTION - ------------ ----------------------------------------------------------------------------- 4.2 Specimen certificate representing Registrant's Series A Cumulative Convertible Preferred Stock (to be filed by amendment). 5.1 Opinion of counsel as to validity of securities (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). 5.2 Opinion of counsel as to liquidation preference of preferred stock (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). (M) 10.1.1 1995 Stock Option Plan of the Registrant (incorporated by reference to Exhibit 10.1.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.1.2 Stock option agreement covering option for 50,000 shares granted January 12, 1996 by Registrant to Ghassan Barazi (incorporated by reference to Exhibit 10.1.2 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). 10.2 License Agreement dated as of October 16, 1995 between the Registrant and Refractive Services 800 Corp. for use of 800 and 900 telephone numbers (incorporated by reference to Exhibit 10.2 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). 10.3 Consulting Services Agreement dated as of October 16, 1995 between the Registrant and Vista Technologies Inc. (incorporated by reference to Exhibit 10.3 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). 10.3.1 Amendment dated April 15, 1996 to Consulting Services Agreement between the Registrant and Vista Technologies Inc. (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). (M) 10.4 Class A Common Stock Purchase Warrants covering 180,000 shares reserved for issuance by the Registrant to Ghassan Barazi (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). (M) 10.5 Class A Common Stock Purchase Warrants covering 45,000 shares reserved for issuance by the Registrant to Casebeer Enterprises, Inc. (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). (M) 10.6 Class A Common Stock Purchase Warrants covering 45,000 shares issued by the Registrant to Dr. Donald G. Johnson (incorporated by reference to Exhibit 10.6 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.7 Consulting Agreement dated as of November 15, 1995 among the Registrant, Casebeer Enterprises, Inc. and Dr. J. Charles Casebeer (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). (M) 10.8 Consulting Agreement dated November 15, 1995 between the Registrant and Dr. Donald G. Johnson (incorporated by reference to Exhibit 10.8 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.9.1 Executive Employment Agreement dated 1996 among the Registrant, The Laser Eye Sites of Windsor, Inc. and Ghassan Barazi (incorporated by reference to Exhibit 10.9.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.9.2 Amendment No. 1 dated January 12, 1996 to Executive Employment Agreement among the Registrant, The Laser Eye Sites of Windsor, Inc. and Ghassan Barazi (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). 10.10 Agreement of Purchase of Assets dated December 1995 among the Registrant, The Laser Eye Sites of Windsor, Inc., a subsidiary of the Registrant, and Windsor Excimer Corporation for the purchase of certain equipment (incorporated by reference to Exhibit 10.10 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996).
II-8 91
EXHIBIT NO. DESCRIPTION - ------------ ----------------------------------------------------------------------------- 10.11 Facilities Agreement dated October 16, 1995 among the Registrant, The Laser Eye Sites of Windsor, Inc., a subsidiary of the Registrant, and Dr. Fouad Tayfour (incorporated by reference to Exhibit 10.11 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). 10.12 Consulting Agreement dated October 16, 1995 among the Registrant, The Laser Eye Sites of Windsor, Inc., a subsidiary of the Registrant, and Dr. Fouad Tayfour (incorporated by reference to Exhibit 10.12 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.13.1 Indemnification Agreement between the Registrant and Ghassan Barazi (incorporated by reference to Exhibit 10.13.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.13.2 Indemnification Agreement between the Registrant and Theodore J. Mayer (incorporated by reference to Exhibit 10.13.2 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.13.3 Indemnification Agreement between the Registrant and Dr. J. Charles Casebeer (incorporated by reference to Exhibit 10.13.3 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.13.4 Indemnification Agreement between the Registrant and Dr. Donald G. Johnson (incorporated by reference to Exhibit 10.13.4 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). (M) 10.13.5 Indemnification Agreement between the Registrant and Jac. J. Lam (incorporated by reference to Exhibit 10.13.5 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). 10.14 Assignment of Lease dated March 29, 1996 between the Registrant and Richard C. Mertz, M.D., P.C., with attached: equipment lease dated November 4, 1994 between Neptune Technology Leasing Corp. as lessor and Richard C. Mertz, M.D., P.C., as lessee; Consent to assignment by Neptune Technology Leasing Corp.; and Purchase Option between Richard C. Mertz, M.D., P.C. and Neptune Technology Leasing Corp. granting option to purchase equipment for $1.00 at lease expiration (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). 10.15 Irrevocable Proxy and Voting Agreement in favor of Ghassan Barazi and Dr. Fouad Tayfour executed by Vista Technologies Inc. as to shares of Registrant's 5% Series B Cumulative Convertible Preferred Stock (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). 10.16 Irrevocable Proxy in favor of the Board of Directors of Vista Technologies Inc. executed by the Registrant as to 200,000 shares of Vista Technologies Inc. common stock (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). 10.17 Form of Service Agreement between the Registrant and ophthalmologists that agree to use the Registrant's equipment and support services (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996). * 10.18 Form of Underwriters' Warrant. 21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996). 23.1 Consent of Counsel, incorporated by reference to Exhibits 5.1 and 5.2 filed with Amendment No. 1 to the Registration Statement on May 6, 1996. * 23.2 Consent of KPMG Peat Marwick LLP, independent public accountants. 25.1 Powers of Attorney (incorporated by reference to signature pages to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996).
II-9 92 ITEM 28. UNDERTAKINGS. Undertaking for Rule 415 Offering: The undersigned small business issuer hereby undertakes: (1) To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: (i) Include any prospectus required by section 10(a)(3) of the Securities Act of 1933 (the "Securities Act"). (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospects filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) Include any additional or changed material information on the plan of distribution. (2) For determining liability under the Securities Act, to treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) To file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. Undertaking for equity offering of nonreporting small business issuer. The undersigned small business issuer hereby undertakes that it will provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. Undertaking for request for acceleration of effective date. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-10 93 SIGNATURES In accordance with the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 and authorized this Registration Statement or Amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Windsor, Province of Ontario, Canada, on the 31st day of July, 1996. VISTA LASER CENTERS OF MICHIGAN, INC. Registrant By: /s/ GHASSAN BARAZI ------------------------------- Ghassan Barazi President and Treasurer Chief Executive Officer and Chief Financial Officer In accordance with the requirements of the Securities Act of 1933, this Registration Statement or Amendment was signed by the following persons in the capacities and on the dates stated.
SIGNATURE TITLE AND CAPACITY DATE - ------------------------------------------ ------------------------------------ -------------- /s/ GHASSAN BARAZI President and Treasurer; Director July 31, 1996 - ------------------------------------------ (principal executive officer Ghassan Barazi and principal financial officer) /s/ THEODORE J. MAYER Secretary July 31, 1996 - ------------------------------------------ (principal accounting officer) Theodore J. Mayer J. CHARLES CASEBEER* Director July 31, 1996 - ------------------------------------------ J. Charles Casebeer, M.D. DONALD G. JOHNSON* Director July 31, 1996 - ------------------------------------------ Donald G. Johnson, M.D.
* By: /s/ GHASSAN BARAZI July 31, 1996 - ------------------------------------------ Ghassan Barazi, Attorney-in-Fact pursuant to powers of attorney filed with this Registration Statement on Form SB-2 on January 22, 1996 II-11 94 INDEX TO EXHIBITS * Indicates exhibits filed herewith. (M) Denotes management contract or compensation plan or arrangement.
SEQUENTIALLY EXHIBIT NUMBERED NO. DESCRIPTION PAGES - ------------ -------------------------------------------------------------------- ------------- 1.1 Form of Underwriting Agreement between the Registrant and Dickinson & Co. (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996)........................ 3.1.1 Articles of Incorporation of the Registrant filed with the Secretary of State of Nevada on June 30, 1995 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996)............................................................ 3.1.2 Certificate of Amendment to the Articles of Incorporation of the Registrant filed with the Secretary of State of Nevada on November 2, 1995 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996).................. 3.1.3 Certificate of Amendment to the Articles of Incorporation of the Registrant filed with the Secretary of State of Nevada on April 12, 1996 changing corporate name to Vista Laser Centers of Michigan, Inc. (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996)........................ 3.2.1 Certificate of Designation of 10% Series A Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on November 2, 1995 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996)............................................................... 3.2.2 Certificate of Amendment to Certificate of Designation of 10% Series A Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on April 12, 1996 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996)............................. 3.2.3 Certificate of Amendment to Certificate of Designation of 10% Series A Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on May 22, 1996 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996)........................................... *3.2.4 Form of Certificate of Amendment to Certificate of Designation of 10% Series A Cumulative Convertible Preferred Stock of the Registrant.......................................................... 3.3.1 Certificate of Designation of 5% Series B Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on November 2, 1995 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996)............................................................... 3.3.2 Certificate of Amendment to Certificate of Designation of 5% Series B Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on January 8, 1996 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996)............................. 3.3.3 Certificate of Amendment to Certificate of Designation of 5% Series B Cumulative Convertible Preferred Stock of the Registrant filed with the Secretary of State of Nevada on May 22, 1996 (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996)........................................... *3.3.4 Form of Certificate of Amendment to Certificate of Resignation of 5% Series B Cumulative Convertible Preferred Stock of the Registrant... 3.4 By-Laws of the Registrant (incorporated by reference to exhibit of the same number filed with Amendment No. 2 hereto on June 6, 1996)............................................................... *3.5 Amendment to Article I, Section 2 of Bylaws adopted July 18, 1996...
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SEQUENTIALLY EXHIBIT NUMBERED NO. DESCRIPTION PAGES - ------------ -------------------------------------------------------------------- ------------- 4.1 Specimen certificate representing Registrant's common stock (to be filed by amendment)................................................. 4.2 Specimen certificate representing Registrant's Series A Cumulative Convertible Preferred Stock (to be filed by amendment).............. 5.1 Opinion of counsel as to validity of securities (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996).............................................. 5.2 Opinion of counsel as to liquidation preference of preferred stock (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996).............................. (M) 10.1.1 1995 Stock Option Plan of the Registrant (incorporated by reference to Exhibit 10.1.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)............................ (M) 10.1.2 Stock option agreement covering option for 50,000 shares granted January 12, 1996 by Registrant to Ghassan Barazi (incorporated by reference to Exhibit 10.1.2 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................. 10.2 License Agreement dated as of October 16, 1995 between the Registrant and Refractive Services 800 Corp. for use of 800 and 900 telephone numbers (incorporated by reference to Exhibit 10.2 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................................................... 10.3 Consulting Services Agreement dated as of October 16, 1995 between the Registrant and Vista Technologies Inc. (incorporated by reference to Exhibit 10.3 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................. 10.3.1 Amendment dated April 15, 1996 to Consulting Services Agreement between the Registrant and Vista Technologies Inc. (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996).............................................. (M) 10.4 Class A Common Stock Purchase Warrants covering 180,000 shares reserved for issuance by the Registrant to Ghassan Barazi (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996).............................. (M) 10.5 Class A Common Stock Purchase Warrants covering 45,000 shares reserved for issuance by the Registrant to Casebeer Enterprises, Inc. (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996)......................... (M) 10.6 Class A Common Stock Purchase Warrants covering 45,000 shares issued by the Registrant to Dr. Donald G. Johnson (incorporated by reference to Exhibit 10.6 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................. (M) 10.7 Consulting Agreement dated as of November 15, 1995 among the Registrant, Casebeer Enterprises, Inc. and Dr. J. Charles Casebeer (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996).............................. (M) 10.8 Consulting Agreement dated November 15, 1995 between the Registrant and Dr. Donald G. Johnson (incorporated by reference to Exhibit 10.8 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996).....................................
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SEQUENTIALLY EXHIBIT NUMBERED NO. DESCRIPTION PAGES - ------------ -------------------------------------------------------------------- ------------- (M) 10.9.1 Executive Employment Agreement dated 1996 among the Registrant, The Laser Eye Sites of Windsor, Inc. and Ghassan Barazi (incorporated by reference to Exhibit 10.9.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................. (M) 10.9.2 Amendment No. 1 dated January 12, 1996 to Executive Employment Agreement among the Registrant, The Laser Eye Sites of Windsor, Inc. and Ghassan Barazi (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996)............ 10.10 Agreement of Purchase of Assets dated December 1995 among the Registrant, The Laser Eye Sites of Windsor, Inc., a subsidiary of the Registrant, and Windsor Excimer Corporation for the purchase of certain equipment (incorporated by reference to Exhibit 10.10 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................................................ 10.11 Facilities Agreement dated October 16, 1995 among the Registrant, The Laser Eye Sites of Windsor, Inc., a subsidiary of the Registrant, and Dr. Fouad Tayfour (incorporated by reference to Exhibit 10.11 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................................. 10.12 Consulting Agreement dated October 16, 1995 among the Registrant, The Laser Eye Sites of Windsor, Inc., a subsidiary of the Registrant, and Dr. Fouad Tayfour (incorporated by reference to Exhibit 10.12 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................................. (M) 10.13.1 Indemnification Agreement between the Registrant and Ghassan Barazi (incorporated by reference to Exhibit 10.13.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)............................................................... (M) 10.13.2 Indemnification Agreement between the Registrant and Theodore J. Mayer (incorporated by reference to Exhibit 10.13.2 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................................................... (M) 10.13.3 Indemnification Agreement between the Registrant and Dr. J. Charles Casebeer (incorporated by reference to Exhibit 10.13.3 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................................................... (M) 10.13.4 Indemnification Agreement between the Registrant and Dr. Donald G. Johnson (incorporated by reference to Exhibit 10.13.4 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................................................... (M) 10.13.5 Indemnification Agreement between the Registrant and Jac. J. Lam (incorporated by reference to Exhibit 10.13.5 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)............................................................... 10.14 Assignment of Lease dated March 29, 1996 between the Registrant and Richard C. Mertz, M.D., P.C., with attached: equipment lease dated November 4, 1994 between Neptune Technology Leasing Corp. as lessor and Richard C. Mertz, M.D., P.C., as lessee; Consent to assignment by Neptune Technology Leasing Corp.; and Purchase Option between Richard C. Mertz, M.D., P.C. and Neptune Technology Leasing Corp. granting option to purchase equipment for $1.00 at lease expiration (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996)..............................
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SEQUENTIALLY EXHIBIT NUMBERED NO. DESCRIPTION PAGES - ------------ -------------------------------------------------------------------- ------------- 10.15 Irrevocable Proxy and Voting Agreement in favor of Ghassan Barazi and Dr. Fouad Tayfour executed by Vista Technologies Inc. as to shares of Registrant's 5% Series B Cumulative Convertible Preferred Stock (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996)......................... 10.16 Irrevocable Proxy in favor of the Board of Directors of Vista Technologies Inc. executed by the Registrant as to 200,000 shares of Vista Technologies Inc. common stock (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996)............................................................ 10.17 Form of Service Agreement between the Registrant and ophthalmologists that agree to use the Registrant's equipment and support services (incorporated by reference to exhibit of the same number filed with Amendment No. 1 hereto on May 6, 1996)............ 10.18 Form of Underwriters' Warrant....................................... 21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)..................................... 23.1 Consent of Counsel, incorporated by reference to Exhibits 5.1 and 5.2 filed with Amendment No. 1 to the Registration Statement on May 6, 1996............................................................. *23.2 Consent of KPMG Peat Marwick LLP, independent public accountants.... 25.1 Powers of Attorney (incorporated by reference to signature pages to this Registration Statement on Form SB-2 filed with the Commission on January 22, 1996)................................................
EX-3.2.4 2 CERTIFICATE OF AMEND. TO 10% SERIES CUM COMMON STK 1 EXHIBIT 3.2.4 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF DESIGNATION ESTABLISHING THE RIGHTS AND PREFERENCES OF 10% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK VISTA LASER CENTERS OF MICHIGAN, INC. a Nevada corporation We the undersigned, GHASSAN BARAZI and THEODORE J. MAYER, do hereby certify: (1) They are the President and Secretary, respectively, of VISTA LASER CENTERS OF MICHIGAN, INC., a Nevada corporation (the "Corporation"). (2) Pursuant to the authority granted under the Corporation's Articles of Incorporation, the Board of Directors of said Corporation by unanimous consent in writing effective as of July 18, 1996 adopted a resolution to amend the Certificate of Designation Establishing the Rights and Preferences of its 10% Series A Cumulative Convertible Preferred Stock, as follows: "WHEREAS, this Corporation is authorized by its Articles of Incorporation to issue 5,000,000 shares of preferred stock, par value $0.01 per share (the "Preferred Stock"); and "WHEREAS, this Corporation has previously designated 1,100,000 shares of its Preferred Stock as 10% Series A Cumulative Convertible Preferred Stock by a Certificate of Designation filed with the Nevada Secretary of State on November 2, 1995 as amended by Certificates of Amendment filed on April 12, 1996 and May 22, 1996; and "WHEREAS, the Board of Directors of this Corporation is authorized, as to the Preferred Stock, within the limitations and restrictions stated in the Articles of Incorporation, to fix by resolution or resolutions the number and designation of each series of Preferred Stock and the powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limitation, such provisions as may be desired concerning dividends, redemption, voting, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors; and "WHEREAS, the Board of Directors of this Corporation desires, pursuant to its authority granted under the Articles of Incorporation, to amend the provisions of subsection 5.5(a) of the Certificate of Designation; 2 "NOW, THEREFORE, BE IT RESOLVED, that subsection 5.5(a) of the Certificate of Designation Establishing the Rights and Preferences of the 10% Series A Cumulative Convertible Preferred Stock is hereby amended in its entirety to read as follows: "5.5(a). In the event the Corporation shall accrue the payment of dividends beyond a date on which dividends would otherwise be declared hereunder due to circumstances that the Corporation either is not legally permitted to pay dividends in cash on all outstanding shares of Series A Preferred stock under the laws of the State of Nevada and/or the Corporation has insufficient cash resources to provide for the payment of cash dividends on Preferred Stock, the Corporation, at the election of its Board of Directors made at any time thereafter, may elect to pay all cumulative accrued dividends on Series A Preferred otherwise due and payable in shares of Common Stock or additional shares of Series A Preferred Stock in lieu of cash. In such event, the Corporation shall advise each holder of record of Series A Preferred Stock in writing on the Record Date, not more than 30 days nor less than 10 days prior to the respective dividend payment date, of the Corporation's election to make such interest payment in shares of the Corporation's Common Stock or Series A Preferred Stock. For the purposes of this Certificate, "Common Stock" shall mean the Corporation's Common Stock as constituted on the Record Date." (3) We further certify that the number of shares constituting the series of 10% Series A Cumulative Convertible Preferred Stock, of which 100,000 shares have been issued, is 1,100,000 shares. The number of shares of the corporation outstanding and entitled to vote on this amendment to the Certificate of Designation Establishing the Rights and Preferences of the 10% Series A Cumulative Convertible Preferred Stock is 100,000 shares of 10% Series A Cumulative Convertible Preferred Stock, and the said amendments to the Certificate of Designation have been consented to and approved by a majority vote of the stockholders holding at least a majority of the 10% Series A Cumulative Convertible Preferred Stock outstanding and entitled to vote thereon. IN WITNESS WHEREOF, we have executed this instrument as of the dates set forth below. _____________________________________________ Ghassan Barazi, President _____________________________________________ Theodore J. Mayer, Secretary 3 Province of __________ } } s. County of ___________ } On _____________________, 1996, personally appeared before me, a Notary Public in and for the jurisdiction named above, GHASSAN BARAZI, who acknowledged that he executed the above instrument in his authorized capacity as President of VISTA LASER CENTERS OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. (Notary Stamp or Seal) _________________________________ Signature of Notary State of New York } } s. County of _________ } On ______________________, 1996, personally appeared before me, a Notary Public, THEODORE J. MAYER, who acknowledged that he executed the above instrument in his authorized capacity as Secretary of VISTA LASER CENTERS OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. (Notary Stamp or Seal) _________________________________ Signature of Notary EX-3.3.4 3 CERTIFICATE OF AMEND. 5% SERIES CUM COMMON STOCK 1 EXHIBIT 3.3.4 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF DESIGNATION ESTABLISHING THE RIGHTS AND PREFERENCES OF 5% SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK VISTA LASER CENTERS OF MICHIGAN, INC. a Nevada corporation We the undersigned, GHASSAN BARAZI and THEODORE J. MAYER, do hereby certify: (1) They are the President and Secretary, respectively, of VISTA LASER CENTERS OF MICHIGAN, INC., a Nevada corporation (the "Corporation"). (2) Pursuant to the authority granted under the Corporation's Articles of Incorporation, the Board of Directors of said Corporation by unanimous consent in writing effective as of July 18, 1996 adopted a resolution to amend the Certificate of Designation Establishing the Rights and Preferences of its 5% Series B Cumulative Convertible Preferred Stock, as follows: "WHEREAS, this Corporation is authorized by its Articles of Incorporation to issue 5,000,000 shares of preferred stock, par value $0.01 per share (the "Preferred Stock"); and "WHEREAS, this Corporation has previously designated 200,000 shares of its Preferred Stock as 5% Series B Cumulative Convertible Preferred Stock by a Certificate of Designation filed with the Nevada Secretary of State on November 2, 1995 as amended by Certificates of Amendment filed on January 8, 1996 and May 22, 1996; and "WHEREAS, the Board of Directors of this Corporation is authorized, as to the Preferred Stock, within the limitations and restrictions stated in the Articles of Incorporation, to fix by resolution or resolutions the designation of each series of Preferred Stock and the powers, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions thereof, including, without limitation, such provisions as may be desired concerning dividends, redemption, voting, dissolution or the distribution of assets, conversion or exchange, and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors; and "WHEREAS, the Board of Directors of this Corporation desires, pursuant to its authority granted under the Articles of Incorporation, to amend the provisions of subsection 5.5(a) of the Certificate of Designation; 2 "NOW, THEREFORE, BE IT RESOLVED, that subsection 5.5(a) of the Certificate of Designation Establishing the Rights and Preferences of the 5% Series B Cumulative Convertible Preferred Stock is hereby amended in its entirety to read as follows: "5.5(a). In the event the Corporation shall accrue the payment of dividends beyond a date on which dividends would otherwise be declared hereunder due to circumstances that the Corporation either is not legally permitted to pay dividends in cash on all outstanding shares of Series B Preferred stock under the laws of the State of Nevada and/or the Corporation has insufficient cash resources to provide for the payment of cash dividends on Preferred Stock, the Corporation, at the election of its Board of Directors made at any time thereafter, may elect to pay all cumulative accrued dividends on Series B Preferred otherwise due and payable in shares of Common Stock or additional shares of Series B Preferred Stock in lieu of cash. In such event, the Corporation shall advise each holder of record of Series B Preferred Stock in writing on the Record Date, not more than 30 days nor less than 10 days prior to the respective dividend payment date, of the Corporation's election to make such interest payment in shares of the Corporation's Common Stock or Series B Preferred Stock. For the purposes of this Certificate, "Common Stock" shall mean the Corporation's Common Stock as constituted on the Record Date." (3) We further certify that the number of shares constituting the series of 5% Series B Cumulative Convertible Preferred Stock, of which 200,000 shares have been issued, is 200,000 shares. The number of shares of the corporation outstanding and entitled to vote on this amendment to the Certificate of Designation Establishing the Rights and Preferences of the 5% Series B Cumulative Convertible Preferred Stock is 200,000 shares of 5% Series B Cumulative Convertible Preferred Stock, and the said amendments to the Certificate of Designation have been consented to and approved by a majority vote of the stockholders holding at least a majority of the 5% Series B Cumulative Convertible Preferred Stock outstanding and entitled to vote thereon. IN WITNESS WHEREOF, we have executed this instrument as of the dates set forth below. _____________________________________________ Ghassan Barazi, President _____________________________________________ Theodore J. Mayer, Secretary 3 Province of __________ } } s. County of ___________ } On _____________________, 1996, personally appeared before me, a Notary Public in and for the jurisdiction named above, GHASSAN BARAZI, who acknowledged that he executed the above instrument in his authorized capacity as President of VISTA LASER CENTERS OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. (Notary Stamp or Seal) _______________________________ Signature of Notary State of New York } } s. County of _________ } On ______________________, 1996, personally appeared before me, a Notary Public, THEODORE J. MAYER, who acknowledged that he executed the above instrument in his authorized capacity as Secretary of VISTA LASER CENTERS OF MICHIGAN, INC., and that by his signature on the instrument, the entity upon behalf of which the person acted executed the instrument. (Notary Stamp or Seal) _______________________________ Signature of Notary EX-3.5 4 AMEND. TO ARTICLE I, SECTION 2 OF BYLAW 1 EXHIBIT 3.5 AMENDMENT IN THE ENTIRETY OF ARTICLE I, SECTION 2 of the ByLaws of Vista Laser Centers of Michigan, Inc. adopted on July 18, 1996: Section 2. SPECIAL MEETINGS. Special meetings of the stockholders may be held at the principal office of the corporation, within or without the State of Nevada, whenever called by the Board of Directors, by the Chairman of the Board, by the President of the corporation or by the registered holders of at least 10% of the issued and outstanding shares entitled to vote, only for the purpose of transacting such business as shall be specified in the notice of such special meeting which may provide, however, for the transaction of other matters as may be properly brought before the special meeting. EX-10.18 5 FORM OF UNDERWRITERS' WARRANT 1 EXHIBIT 10.18 THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES FILED UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION AND UPON COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS. THE ISSUER MAY REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER HEREOF THAT SUCH REGISTRATION IS NOT REQUIRED AND CONFIRMING COMPLIANCE WITH SUCH LAWS. SEE SECTION 7 HEREOF FOR ADDITIONAL RESTRICTIONS ON TRANSFERABILITY AND EXERCISE UPON CERTAIN TRANSFERS. VISTA LASER CENTERS OF MICHIGAN, INC. WARRANT TO PURCHASE SHARES OF 10% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK Void after 12:00 p.m., Mountain Standard Time on July __, 2001 80,000 Shares 10% Series A Cumulative Convertible Preferred Stock FOR VALUE RECEIVED, VISTA LASER CENTERS OF MICHIGAN, INC. (the "Company"), a Nevada corporation, hereby certifies that DICKINSON & CO. (the "Holder") or its permitted assigns are entitled to purchase from the Company, at any time or from time to time commencing July ___, 1997 (the first anniversary of the effective date of the Registration Statement for the public offering of the preferred stock referred to below pursuant to which this Warrant is issued) (the "Initial Date"), and prior to 12:00 p.m., Mountain Standard Time, on July __, 2001, up to and including Eighty Thousand (80,000) paid and nonassessable shares of 10% Series A Cumulative Convertible Preferred stock, par value $0.01 per share, of the Company ("Preferred Stock") for a purchase price of $6.00 per share. Hereinafter, (i) said Preferred Stock, together with any other equity securities which may be issued by the Company in respect thereof or in substitution therefor, are referred to as the "Preferred Stock," and (ii) the price payable hereunder for each share of Preferred Stock is referred to as the "Exercise Price." Unless the context otherwise requires, the term "Warrant" or "Warrants" as used herein includes this Warrant and any other Warrant or Warrants which may be issued pursuant to the provisions of this Warrant, whether upon transfer, assignment, partial exercise, divisions, combinations exchange or otherwise, and the term "Holder" includes any transferee or transferees or assignee or assignees of the Holder named above, all of whom shall be subject to the provisions of this Warrant, and, when used with reference to the shares of the Company's $0.01 par value common stock (the "Underlying Securities"), means the holder or holders of such Underlying Securities. The term "Aggregate Purchase Price" shall mean the product of the number of shares of Preferred Stock purchasable under this Warrant and the purchase price per share of Preferred Stock both determined as of the date of original issuance of this Warrant. The Aggregate Purchase Price is not subject to adjustment except to reflect partial exercises of this Warrant. The Exercise Price is subject to adjustment as hereinafter provided; in the event of any such adjustment, the number of shares of Preferred Stock and Underlying Securities shall be adjusted by dividing the Aggregate Purchase Price by the Exercise Price in effect immediately after such adjustment. 1. EXERCISE OF WARRANT. This Warrant may be exercised, in whole at any time or in part from time to time, commencing on the Initial Date, and prior to 12:00 p.m., Mountain Standard Time, on July __, 2001, by the Holder by the surrender of this Warrant (with the subscription form at the end hereof duly executed) at the principal office of the Company, together with proper payment of the Aggregate Purchase Price, or the proportionate part thereof if this 2 Warrant is exercised in part. If this Warrant is transferred after the Initial Date, it shall be exercised immediately upon transfer or else shall lapse. Payment for Preferred Stock shall be made by certified or official bank check, payable to the order of the Company. If this Warrant is exercised in part, this Warrant must be exercised for a number of whole shares of Preferred Stock, and the Holder is entitled to receive a new Warrant covering the number of shares of Preferred Stock in respect of which this Warrant has not been exercised and setting forth the proportionate part of the Aggregate Purchase Price applicable to such Preferred Stock. Upon such surrender of this Warrant, the Company will (a) issue a certificate or certificates in the name of the Holder for the largest number of whole shares of Preferred Stock to which the Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of any fractional shares of Preferred Stock to which the Holder shall be entitled, cash equal to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine), and (b) deliver the other securities and properties receivable upon the exercise of this Warrant, or the proportionate part thereof if this Warrant is exercised in part, pursuant to the provisions of this Warrant. 2. PRESERVATION OF AUTHORIZED SHARES. The Company agrees that, prior to the expiration of this Warrant, the Company will at all times have authorized and in reserve, and will keep available, solely for issuance or delivery upon the exercise of this Warrant, the number of shares of Preferred Stock issuable upon exercise of this Warrant the number of Underlying Securities into which such Preferred Stock is convertible, and other securities and properties as from time to time shall be receivable upon the exercise of this Warrant, free and clear of all restrictions on sale or transfer and free and clear of all preemptive rights. 3. PROTECTION AGAINST DILUTION. (a) If, at any time or from time to time after the date of this Warrant, the Company shall distribute to the holders of the Preferred Stock (i) securities, other than shares of the Preferred Stock and other than Preferred Stock or common stock issued in payment of annual dividends in lieu of cash, or (ii) property, other than cash, without payment therefor, with respect to the Preferred Stock, then, and in each such case, the Holder, upon the exercise of this Warrant, shall be entitled to receive the securities and properties which the Holder would hold on the date of such exercise if, on the date of this Warrant, the Holder had been the holder of record of the number of shares of the Preferred Stock subscribed for upon such exercise and, during the period from the date of this Warrant to and including the date of such exercise, had retained such shares of Preferred Stock and the securities and properties receivable by the Holder during such period. Notice of each such distribution shall be forthwith mailed to the Holder. (b) In case the Company shall hereafter (i) pay a dividend or make a distribution on its capital stock in shares of Preferred Stock, (ii) subdivide its outstanding shares of Preferred Stock into a greater number of shares, (iii) combine its outstanding shares of Preferred Stock into a smaller number of shares or (iv) issue by reclassification of its Preferred Stock any shares of capital stock of the Company, the Exercise Price in effect immediately prior to such action shall be adjusted so that the Holder of any Warrant surrendered for exercise immediately thereafter would be entitled to receive the number of shares of Preferred Stock or other capital stock of the Company which he would have owned immediately following such action had such Warrant been converted immediately prior thereto. An adjustment made pursuant to this subsection (b) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this subsection (b), the Holder of any Warrant thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock or shares of Preferred Stock and other capital stock of the 3 Company, the Board of Directors (whose determination shall be conclusive and shall be described in a written notice to the Holder promptly after such adjustment) shall determine the allocation of the adjusted Exercise Price between or among shares of such classes or capital stock or shares of Preferred Stock and other capital stock. (c) In case of any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), the Holder of this Warrant shall have the right thereafter to exercise this Warrant into the kind and amount of securities, cash or other property which he would have owned or have been entitled to receive immediately after such consolidation, merger, statutory exchange, sale or conveyance had this Warrant been converted immediately prior to the effective date of such consolidation, merger, statutory exchange, sale or conveyance, and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Holder to the end that the provisions set forth in this Section 3 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the conversion of this Warrant. The above provisions of this subsection 3(c) shall similarly apply to successive consolidations, mergers, statutory exchanges, sales or conveyances. Notice of any such consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holder not less than the earlier of (i) the date on which the transaction is first publicly announced, or (ii) the date on which notice is made to the Company's shareholders. A sale of all or substantially all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes. (d) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least $0.05 per share of Preferred Stock; provided, however, that any adjustments which by reason of this subsection (d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment, and provided further, however, that adjustments shall be required and made in accordance with the provisions of this Section 3 (other than this subsection (d)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the Holders of Preferred Stock (if such distribution would be tax free but for such adjustment). All calculations under this Section 3 shall be made to the nearest cent or to the nearest 1/100th of a share of Preferred Stock, as the case may be. Anything in this Section 3 to the contrary notwithstanding, the Company shall be entitled to make such reductions in the Exercise Price, in addition to those required by this Section 3, as it in its discretion shall deem to be advisable in order that any stock dividend, subdivision of shares or distribution of rights to purchase stock or securities convertible or exchangeable for stock hereafter made by the Company to its shareholders shall not be taxable. (e) Whenever the Exercise Price is adjusted as provided in this Section 3 and upon any modification of the rights of a Holder in accordance with this Section 3, the Company's Chief Financial Officer shall provide a certificate setting forth the Exercise Price and the number of shares of Preferred Stock and Underlying Securities after such adjustment or the effect of such modification, a brief statement of the facts requiring such adjustment or modification and the manner of computing the same and cause copies of such certificate to be mailed to the Holder. (f) If the Board of Directors of the Company shall declare any dividend 4 or other distribution in cash with respect to the Preferred Stock, other than out of earned surplus, the Company shall mail notice thereof to the Holder not less than the earlier of (i) the date on which the transaction is first publicly announced, or (ii) the date on which notice is made to the Company's shareholders. 4. FULLY PAID STOCK, TAXES. The Company agrees that the shares of the Preferred Stock represented by each and every certificate therefor delivered on the exercise of this Warrant shall, at the time of such delivery, be validly issued and outstanding, fully paid and non-assessable, and not subject to preemptive rights. The Company further covenants and agrees that it will pay, when due and payable, any and all federal and state stamp, original issue or similar taxes which may be payable in respect of the issue of any shares of Preferred Stock and Underlying Securities or certificates therefor. 5. REGISTRATION UNDER SECURITIES ACT OF 1933. The Company is under a contractual obligation to register this Warrant, the Preferred Stock into which it may be exercised and the Underlying Securities under applicable federal and state securities laws as provided in the Underwriting Agreement between the Company and Dickinson & Co. of even date herewith. This Warrant, the Preferred Stock into which it may be exercised and the Underlying Securities may not be offered, sold, transferred, pledged or hypothecated in the absence of any effective registration statement as to such securities filed under the Act, or an exemption from the requirement of such registration, and compliance with the applicable state securities laws. The Company may require an opinion of counsel satisfactory to the Company that such registration is not required and that any transfer is in compliance with such laws. 6. TERMS OF PREFERRED STOCK AND UNDERLYING SECURITIES. The Preferred Stock and the Underlying Securities are the same securities and carry the same obligations, rights, privileges and terms as those offered and sold to the public by Dickinson & Co. pursuant to the public offering contemplated by its Underwriting Agreement of even date herewith, except that the exercise price for purchase of Preferred Stock under this Warrant shall be $6.00 per share. 7. LIMITED TRANSFERABILITY. This Warrant is restricted from sale, transfer, assignment, pledge or hypothecation (a) until the Initial Date except (i) to any persons who are officers of Dickinson & Co. or of any such successor firm, (ii) co-underwriters and members of the selling group and their respective officers, and (iii) by operation of law or by reason of reorganization of the Company, and is so transferable only upon the books of the Company which it shall cause to be maintained for the purpose, and (b) the Warrant may not be offered, sold, transferred, pledged or hypothecated in the absence of any effective registration statement as to such Warrant filed under the Act, or an exemption from the requirement of such registration, and compliance with the applicable state securities laws. The Company may require an opinion of counsel satisfactory to the Company that such registration is not required and that any transfer is in compliance with such laws. In the event of any transfer after the Initial Date, this Warrant must be immediately exercised upon transfer. If not exercised immediately upon such transfer, this Warrant shall lapse pursuant to California Regulations 260.140.21(e). The Company may treat the registered holder of this Warrant as he or it appears on the Company's books at any time as the Holder for all purposes. The Company shall permit the Holder or his duly authorized attorney, upon written request during ordinary business hours, to inspect and copy or make extracts from its books showing the registered holders of Warrants. 8. LOSS, ETC. OF WARRANT. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and of indemnity reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon surrender and cancellation of this Warrant, if mutilated, and upon reimbursement of the Company's reasonable incidental expenses, the Company shall execute and deliver to the Holder a new Warrant of like date, 5 tenor and denomination. 9. WARRANT HOLDER NOT SHAREHOLDER. Except as otherwise provided herein, this Warrant does not confer upon the Holder any right to vote or to consent to or receive notice as a shareholder of the Company, as such, in respect of any matters whatsoever, or any other rights or liabilities as a shareholder, prior to the exercise thereof. 10. COMMUNICATION. No notice or other communication under this Warrant shall be effective unless, but any notice or other communication shall be effective and shall be deemed to have been given if, the same is in writing and is mailed by first-class mail, postage prepaid, addressed to: (a) the Company at: Ghassan Barazi, President Vista Laser Centers of Michigan, Inc. 2224 Walker Road Winsor, Ontario Canada N8W 3P6
or such other address as the Company will hereafter designate in writing to the Holder; (b) the Holder at: Glenn S. Cushman, Executive Vice President Dickinson & Co. 2425 E. Camelback Road, Suite 530 Phoenix, AZ 85016
or such other address as the Holder will hereafter designate in writing to the Company. 11. HEADINGS. The headings of this Warrant have been inserted as a matter of convenience and shall not affect the construction hereof. 12. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the law of the State of Nevada without giving effect to the principles of conflicts of law thereof. IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its President and its corporate seal to be hereunto affixed and attested by its Secretary this ____ day of July, 1996. ATTEST: VISTA LASER CENTERS OF MICHIGAN, INC. __________________________ By: _____________________________ Ghassan Barazi, President Secretary [Corporate Seal] 6 SUBSCRIPTION The undersigned, ____________________, pursuant to the provisions of the foregoing Warrant, hereby agrees to subscribe for and purchase shares of Preferred Stock of Vista Laser Centers of Michigan, Inc. covered by said Warrant, and makes payment therefor in full at the Exercise Price provided by said Warrant. Dated: ________________________ Signature: ________________________________ Address: ASSIGNMENT FOR VALUE RECEIVED, ____________________________hereby sells, assigns and transfers unto _____________________ the foregoing Warrant and all rights evidenced thereby, and does irrevocably constitute and appoint ______________________, attorney, to transfer said Warrant on the books of Vista Laser Centers of Michigan, Inc. Dated: ________________________ Signature: ________________________________ Address: PARTIAL ASSIGNMENT FOR VALUE RECEIVED, hereby assigns and transfers unto the right to purchase Underlying Securities of Vista Laser Centers of Michigan, Inc. by the foregoing Warrant, and a proportionate part of said Warrant and the rights evidenced hereby, and does irrevocably constitute and appoint________________, attorney to transfer that part of said Warrant on the books of Vista Laser Centers of Michigan, Inc. Dated: ________________________ Signature: ________________________________ Address: EX-23.2 6 CONSENT OF KPMG PEAT MARWICK LLP 1 EXHIBIT 23.2 The Board of Directors Vista Laser Centers of Michigan, Inc.: Our report dated April 26, 1996, contains an explanatory paragraph that states that the Company is currently a development stage enterprise and dependent on raising additional financing through a public offering or private placement to meet its current obligations and commitments, which raises substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty. We consent to the use of our report included herein and to the reference to our firm under the headings "Selected Financial Data" and "Experts" in the prospectus. /s/ KPMG PEAT MARWICK LLP - -------------------------- KPMG Peat Marwick LLP New York, New York July 31, 1996 -----END PRIVACY-ENHANCED MESSAGE-----