Registration of Securities by a Small-Business Issuer — Form SB-2
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SB-2 Form SB-2 of Coronado Industries, Inc. 64 304K
2: EX-1.1 Form of Participating Dealer Agreement 7 27K
3: EX-3.1 Articles of Incorporation 3 11K
4: EX-3.1.1 Articles of Amendment 1 7K
5: EX-3.2 Bylaws 15 49K
6: EX-3.3 Certificate of Merger 3 14K
7: EX-10.6 Form of Placement Agent Agreement 28 114K
8: EX-21.1 Subsidiaries 1 5K
9: EX-23.1 Consent of Semple & Cooper, LLP 1 6K
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 24, 1998
REGISTRATION NO. 333-______
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CORONADO INDUSTRIES, INC.
(Name of small business issuer in its charter)
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NEVADA 22-3161629
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
16929 E. ENTERPRISE DRIVE, SUITE 202
FOUNTAIN HILLS, ARIZONA 85628
(602) 837-6810
(Address and telephone number of principal executive offices)
16929 E. ENTERPRISE DRIVE, SUITE 202
FOUNTAIN HILLS, ARIZONA 85628
(Address of principal place of business or intended place of business)
G. RICHARD SMITH, SECRETARY
CORONADO INDUSTRIES, INC.
16929 E. ENTERPRISE DRIVE, SUITE 202
FOUNTAIN HILLS, ARIZONA85268
(602) 827-6810
(Name, address and telephone number of agent for service)
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WITH COPIES TO:
MICHAEL K. HAIR, P.C.
7407 E. IRONWOOD COURT
SCOTTSDALE, ARIZONA 85258
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]
(CONTINUED ON FOLLOWING PAGE)
(CONTINUATION OF COVER PAGE)
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. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum 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
--------------------------- ---------- ------------ --------- ----------------
Common Stock ............. 1,000,000 shares $.69 $ 690,000 $203.55
Common Stock (2).......... 3,033,767 shares $.69 $2,093,299 $617.52
TOTAL..................................................................... $821.07
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 and based upon the average of the bid and asked market
price.
(2) These shares are to be registered for the accounts of selling stockholders.
See "Selling Stockholders".
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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.
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SUBJECT TO COMPLETION, DATED AUGUST 24, 1998
PROSPECTUS
CORONADO INDUSTRIES, INC.
1,000,000 SHARES OF COMMON STOCK TO BE SOLD BY THE COMPANY
AND 3,033,767 SHARES OF COMMON STOCK TO BE SOLD BY SHAREHOLDERS
Coronado Industries, Inc., a Nevada corporation (the "Corporation"), is
offering for sale to the public up to 1,000,000 shares of its $.001 par value
common stock (the "Common Stock") at a price of $1.00 per share. The Common
Stock will be sold by the Company, without an underwriter. The Company may
engage an underwriter at a later date.
The Company has also registered for sale 3,033,767 shares of its Common
Stock for sale by 68 shareholders (the "Selling Shareholders"). These common
stock shares were previously sold to these shareholders by the Company in
underwritten private placements. In its last private placement the Company
committed to register these shares. The Company will receive no proceeds from
the sale of any of these 3,033,767 shares by the Selling Shareholders. See
"SELLING SHAREHOLDERS."
Prior to this offering the common stock of the Company was trading on
the Bulletin Board Market under the symbol CDIK.
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 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Price to Underwriting Discounts Proceeds to
Public and Commissions (1) Company (2)
--------------------------------------------------------------------------------
Per Share.................... $ 1.00 $ .10 $ .90
Total ...................... $1,000,000 $100,000 $900,000
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(1) The Company will not pay a commission upon any Common Stock sold by its
officers, Directors and employees. In the future the Company may enter into
an agreement with a securities broker-dealer to sell the Common Stock on
behalf of the Company on a best-efforts basis, and the Company may pay such
securities broker-dealer a cash commission of up to 10% of the gross
offering proceeds from the Common Stock sold by such broker-dealer. As of
the date of this Prospectus, the Company has no arrangement with or
commitment from any securities broker-dealer with respect to the sale of
any Common Stock. (See "Plan of Distribution.")
(2) Before deducting expenses of this registration, payable by the Company and
estimated at $50,000.
THE DATE OF THIS PROSPECTUS IS AUGUST ___, 1998.
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CONTINUED FROM COVER PAGE
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.
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.
THE COMPANY FILES ANNUAL, QUARTERLY AND CURRENT EVENT REPORTS WITH THE
SEC PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934.
i
[Inside Front Cover]
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."
THE COMPANY
The Company was incorporated under the name First Lloyd Funding, Inc.
pursuant to the laws of the State of New York on December 21, 1989. The
effective date of the Company's public offering was March 13, 1990. In January
1997, the New York corporation merged into a Nevada corporation of the same
name. After a series of acquisitions and spin-offs from May 1990 to September
1996, on November 5, 1996 the Company entered into an Asset Purchase Agreement
with Ophthalmic International, L.L.C. ("OI"), and American Glaucoma, a joint
venture ("AG"), which provided for the purchase of the assets of OI and AG in
exchange for 15,592,224 shares of the Company's common stock (85%) to be issued
to the Company's current three Directors. An additional 855,000 shares were
issued as finders fees to twelve entities and individuals.
The assets of OI transferred to the Company were a patent pending and
other proprietary information concerning equipment and a process for the
treatment of Open Angle Glaucoma and Pigmentary Glaucoma. The assets of AG
transferred to the Company were the concept and a business plan for forty
glaucoma treatment centers in the United States.
During the year ended December 31, 1997, the Company had a net loss of
$829,702 and for the first half of 1998 a net loss of $648,702.
The Company is a holding company and all business operations are
conducted through its two wholly-owned subsidiaries. The Company, through its
Ophthalmic International, Inc. subsidiary, manufactures and will market a
fixation device with a patented designed suction ring that treats Open Angle and
Pigmentary Glaucoma. American Glaucoma, Inc. ("AGI"), the Company's other
subsidiary, operates a glaucoma treatment center in Scottsdale, Arizona, will be
opening a second treatment center in Clearwater, Florida and intends to open up
to 8 similar treatment centers in the United States.
In the United States, glaucoma is the second leading cause of blindness
affecting approximately 7,500,000 persons. Of those, about 60,000 are legally
blind. Glaucoma affects approximately three percent of the world's population,
with certain ethnic populations having a higher occurrence rate. If detected and
treated early, glaucoma need not cause blindness or even severe vision loss.
While there is no cure for glaucoma, the Company believes that its patented
device and medical process provide an effective treatment for afflicted persons
and that a significant global market for its patented medical process, equipment
and rings currently exists.
Glaucoma is not a single disease but rather a group of diseases that
effect the eye. This group of diseases has a single feature of progressive
damage to the optic nerve due to increased pressure within the eyeball. As the
optic nerve deteriorates, blind spots and patterns develop. If left untreated,
the result may be total blindness.
1
After four years of ongoing studies, it was determined that a 2 minute
treatment with Ophthalmic International's "fixation device and patented design
suction ring" temporarily reduced inter-ocular pressure in the treatment of Open
Angle Glaucoma by approximately 6 Hg for an average of three (3) months at which
time the treatment could be repeated with no serious side effects. This
inter-ocular pressure lowering is achieved when the patented suction ring is
applied over the perilimbal area of the eye for a specified time. With this
treatment the Company believes that there are no harmful side effects, like
those associated with eye drop treatments. In addition, the patent entitled
"Open Angle Glaucoma Treatment Apparatus and Method" has been granted and is
believed to allow the Company to achieve a significant market advantage over
competitors.
The Company's subsidiary, Ophthalmic International, Inc., intends to
manufacture and sell the vacuum equipment, the patented rings and the process in
the United States and abroad, primarily through distributors who will be
assigned specific geographical territories, on the basis of continents or
countries. Ophthalmic International entered into a confidentiality agreement
with Alcon Co. in March, 1997 as the first step in negotiating for Alcon to
become a distributor. In 1997 Ophthalmic International has executed a second
confidentiality agreement with one additional potential distributor for
exclusive worldwide distribution rights. These negotiations concerning
distribution likely will not be completed and definitive agreements executed
until one or more independent studies are completed, PNT billing codes are
assigned, or the labeling of the product as a "device to lower inter-ocular
pressure" is approved by the FDA.
The Company's subsidiary, American Glaucoma, Inc., opened its first
glaucoma treatment center in Scottsdale, Arizona in September 1997. The Company
estimates that there are approximately 62,000 glaucoma patients in the Phoenix
area, based upon a three percent general population occurrence of the condition.
During the fourth quarter of 1997 the Company's Scottsdale Center generated
approximately $26,000 of gross revenues and an operating loss of $243,629.
During the first half of 1998 the Scottsdale center generated approximately
$179,767 of gross revenues and an operating loss of $77,023. The Company
believes that its advertising campaign and the resulting patient treatments at
the Scottsdale Center have indicated that the Company's products and glaucoma
treatment centers will be accepted by the general glaucoma public in the future.
On February 11, 1997 the U.S. Patents and Trademarks Office issued a
patent to Ophthalmic International, L.L.C., Patent Number 5,601,548, for the
Company's medical process, equipment and the procedure. The Company believes,
without assurance, that this patent provides the Company with a substantial
competitive advantage over current and future glaucoma treatment competitors.
The Company is not aware of any other patent being granted for glaucoma
treatment. The Company intends to follow a policy of aggressively pursuing
claims of infringement on its patent and the Company does not believe its
patent, or product or services infringe on the rights of any other person.
The executive offices of the Company are located at 16929 E. Enterprise
Drive, Suite 202, Fountain Hills, Arizona 85268, telephone number (602)
837-6810.
See "Risk Factors", "Business", "Management Discussion and Analysis Or
Plan of Operation", "Management" and "Certain Relationships and Related
Transactions".
2
THE OFFERING
Securities Offered: 1,000,000 shares of common stock offered by the
Company and
3,033,767 shares of common stock owned by the 68
Selling Shareholders. See "SELLING SHAREHOLDERS" and
"DESCRIPTION OF SECURITIES."
Securities Outstanding 21,583,842 shares of common stock and 0 shares of
Prior To Offering: Preferred Stock
Securities Outstanding 22,583,842 shares of common stock and 0 shares of
After Offering: Preferred Stock, assuming all Common Stock offered by
the Company is sold, of which there is no assurance.
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."
Trading Market: NASDAQ Bulletin Board: Symbol -- CDIK
3
SUMMARY FINANCIAL INFORMATION
The following table summarizes certain financial information and
unaudited data of the Company and is qualified in its entirety by the more
detailed financial statements contained elsewhere in this Prospectus. The
summary financial information contained in the following table is derived from
and should be read in conjunction with the financial statements of the Company
and the notes thereto appearing elsewhere in this Prospectus. The pro forma
consolidated statement of operations data and the pro forma consolidated balance
sheet give effect to the sale of the Common Stock being offered through this
Prospectus and the application of net proceeds from the Offering. The pro forma
consolidated statement of operations data give effect to such events as if they
had occurred as of the first day of the periods presented and the pro forma
consolidated balance sheet data are presented as if such events had occurred on
the balance sheet data. See "Business", "Use of Proceeds" and "Financial
Statements."
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STATEMENTS OF OPERATIONS DATA:
Six Months Ending June 30, Year Ending December 31,
(Unaudited)
---------------------------------------- --------------------------------------
1998 1997 1997 1996
------------------------- ---- ------------------------- ----
Actual Pro Forma Actual Pro Forma
------ --------- ------ ---------
Revenues $ 179,767 $ 179,767 $ -- $ 26,107 $ 26,107 $ --
Cost Of Revenues $ 256,790 $ 256,790 $ -- $ 269,736 $ 269,736 $ --
Gross Loss From Clinic Operations $ (77,023) $ (77,023) $ -- $ (243,629) $ (243,629) $ --
General and Administrative Expenses $ 559,573 $ 559,573 $ 237,493 $ 567,177 $ 567,177 $ 64,042
Loss From Operations $ (636,596) $ (636,596) $ (237,493) $ (810,806) $ (810,806) $ (64,042)
Total Loss $ (648,702) $ (648,702) $ (244,473) $ (829,702) $ (829,702) $ (65,131)
Net (loss) per common share $ (.03) $ (.03) $ (.01) $ (.04) $ (.04) $ --
Weighted average common and
common equivalent shares
outstanding(1) 19,979,061 20,979,061 18,344,253 18,504,392 19,504,392 18,344,253
BALANCE SHEET DATA:
June 30, 1998 December 31, 1997
(unaudited)
---------------------- -----------------
Actual Pro Forma(2)
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Current assets $ 706,587 $1,656,587 $ 224,970
Total assets $ 879,366 $1,829,366 $ 410,717
Current liabilities $ 231,731 $ 231,731 $ 516,591
Total liabilities $ 231,731 $ 231,731 $ 555,966
Stockholders' equity (deficit) $ 647,635 $1,597,635 $(145,249)
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(1) Pro Forma average shares outstanding are adjusted assuming the placement
of 1,000,000 shares of the Company's Comon Stock.
(2) The Pro Forma figures at June 30, 1998 are adjusted assuming the
placement of 1,000,000 shares of the Company's Common Stock at $1.00 per
share and total offering expenses of $50,000.
4
RISK FACTORS
THE SHARES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND THE OWNERSHIP OF THE SHARES
INVOLVES A HIGH DEGREE OF RISK AND UNCERTAINTY, INCLUDING, BUT NOT LIMITED TO,
THE RISK FACTORS SET FORTH BELOW. IN ADDITION TO THE OTHER INFORMATION IN THIS
MEMORANDUM INCLUDED HEREIN AND INCORPORATED BY REFERENCE, PROSPECTIVE INVESTORS
SHOULD CONSIDER CAREFULLY THE FOLLOWING INFORMATION BEFORE PURCHASING THE SHARES
OFFERED HEREBY.
LIMITED OPERATING HISTORY; RECENT LOSSES. The Company in its present
form has only been operating since November of 1996. Accordingly, the Company
has a limited operating history with respect to its business. The Company has
had negative cash flow and accumulated losses of $1,543,535 since inception and
expects to continue to have insufficient liquidity and cash resources until such
time as its revenues increase substantially. The Company's immediate strategy is
to stabilize the patient base of its Scottsdale glaucoma treatment center
through continued advertising and to open one additional glaucoma treatment
center in the Tampa-Clearwater, Florida area with the proceeds from its most
recent funding. The Company will require the capital provided by this Offering
and significant additional capital to expand its operations. There can be no
assurance that the Company will be able to achieve, or maintain, profitable
operations or positive cash flow at any time in the future. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS" and "FINANCIAL STATEMENTS."
NEED TO DEVELOP MARKET FOR SERVICES AND PRODUCTS. The Company has yet
to establish the market for its services and products, and no assurance can be
given that its glaucoma treatment centers in the United States, its Fixation
Device and Suction Rings will be accepted on a successful scale. While the
Company has opened its first glaucoma treatment center in Scottsdale, Arizona on
September 2, 1997, there is no assurance that this center or any additional
center will be profitable. See "BUSINESS -- THE TREATMENT CENTERS."
CAPITAL REQUIREMENTS. Additional funding will be required to fully
implement the Company's 1998 business plan of opening its third treatment
center. The Company may seek additional debt or equity financing through banks,
other financial institutions, companies or individuals. No assurance can be
given that the Company will be able to obtain any such additional equity or debt
financing on satisfactory terms or at all. No assurance can be given that any
such financing, if obtained, will be adequate to meet the Company's needs for
the foreseeable future. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS" and "FINANCIAL STATEMENTS."
RELIANCE ON MANAGEMENT; LIMITED PERSONNEL. The Company is highly
dependent on the services of its executive officers, G. Richard Smith and Gary
R. Smith, and the doctor in charge of the Scottsdale center, Dr. Leo Bores. The
services of the Smith brothers and Dr. Bores are particularly critical. The loss
of any of these individuals' services will have a materially adverse effect, and
the Company may not be able to recover from a loss of any of these services. The
Company is not presently able with its internal staff to fully comply with the
accounting and reporting requirements associated with being a public company,
and will need to continue to rely upon outside consultants and third parties to
provide critical accounting, administrative and support services for the
foreseeable future. No assurance can be given that these services will continue
to be adequately performed or available on terms the Company can afford. See
"MANAGEMENT."
LACK OF PRODUCT DIVERSIFICATION. The Company currently has only one
product, its patented glaucoma treatment process and equipment, from which to
derive revenues and profits, other than treatment center operations. The Company
is approaching the United States and foreign markets with two different
marketing strategies for its single product. Due to the lack of product
diversification, if the Company's single product does not ultimately achieve
market acceptance, the Company is unlikely to be profitable. See "BUSINESS."
5
TREATMENT CENTERS CONTROLLED BY PHYSICIANS. The physicians employed by
the Company at its glaucoma treatment centers will have substantial control over
the revenues produced and the costs incurred at the centers. In making judgments
on the merits of the patients' best interests, physicians may not be making
decisions which are the most profitable to the Company, on a short-term basis.
Management believes, however, that medical decisions made in the best interests
of the patients will be profitable to the Company on a continuing long-term
basis.
LIMITED PROPRIETARY PROTECTION. The Company uses certain proprietary
technology in its products and treatment centers and the Company believes that
this technology does not infringe upon the proprietary rights of others.
Although no claims of infringement have been asserted, it is possible that the
Company is infringing upon the proprietary and patent rights of others, and the
Company may in the future be required to modify its process or obtain a license,
and also could be exposed to substantial damages for any such infringement.
There can be no assurances that the Company would be able to modify its process
or obtain a license, and this occurrence would have a serious adverse effect on
the Company. Although the Company will attempt to obtain confidentiality
agreements from its employees, there can be no assurance that proprietary
information of the Company will not be used in competition in the future either
by one or more employees but also by consultants with which the Company is
working.
On February 11, 1997, the United States Patent Office issued Patent No.
5,601,548 entitled "Open Angle Glaucoma Treatment Apparatus and Method." The
Company is greatly relying upon said patent and the protection it believes that
patent protection laws will afford to generate revenues in the future. However,
the Company may be required to devote substantial financial and management
resources to enforce its patent rights against future infringement. In the near
future the Company will have alternative uses for the financial and management
resources it may be required to devote to any future patent enforcement
infringement of its patent occurs. Further, there is no assurance that any of
the Company's attempts at protecting its patent will ultimately prove
successful, even after devoting substantial resources thereto. See "BUSINESS --
PATENT."
MANAGEMENT OF GROWTH. The Company anticipates continued growth in the
future and this growth, if achieved, will place significant strains on the
Company's financial, technical, managerial and other resources which are
limited. Failure to effectively manage growth could have a materially adverse
effect on the Company's business and profitability.
COMPETITIVE FACTORS. The medical device and services industry is highly
competitive. There can be no assurance given that the Company will have the
ability and capital to compete effectively in this environment, notwithstanding
the perceived advantages of the Company's products and encouraging early test
results on the Company's products and services. As with any medical technology
company, change occurs rapidly and other devices, techniques and/or treatments
are likely being researched by others, including major international
corporations. It is likely that competitors will attempt to develop products and
services to compete with the Company's products and services, particularly if
the Company is profitable in the near future. Further, a cure for glaucoma may
be discovered which would eliminate the market need for the Company's products
and services. See "BUSINESS -- COMPETITION."
PRODUCT LIABILITY AND OTHER INSURANCE. Testing, manufacturing,
marketing and use of the Company's products and methods in the glaucoma
treatment centers will entail risk of product and perhaps professional liability
to the Company. The Company may be unable to obtain adequate levels of insurance
to protect itself from these potential liabilities. The Company does not have
officer and director errors and omissions insurance, and this could materially
adversely affect the Company, particularly since it has increased exposure in
this area being a reporting public company without internal staff experienced in
managing public companies. The Company's ability to attract qualified outside
directors and officers is limited without this insurance protection.
6
DEPENDENCE UPON SUPPLIERS AND MANUFACTURER. The Company does not have
long-term supply contracts and there is a risk that the Company would have
supply disruption or be unable to obtain needed supplies at competitive pricing.
The Company believes that many alternative suppliers are available on all
necessary components and the Company does not anticipate any supply problems at
this time. All of the Company's products are manufactured by third parties which
the Company does not control. No assurances can be given that these third
parties will be able to timely and competitively manufacturer, supply and
deliver required product to achieve the Company's financial objectives. See
"BUSINESS."
CONTROL BY EXISTING STOCKHOLDERS. The Company's officers and directors
own a substantial majority of the Company's outstanding Common Stock. As a
result, Company management will be able to effectively control matters requiring
approval by the stockholders of the Company, including the election of the
Company's Board of Directors. See "PRINCIPAL STOCKHOLDERS."
DILUTION. Investors in this offering will incur immediate and
substantial dilution in net tangible book value per share of approximately 93%
of the public offering price per share of the Common Stock, at an assumed public
offering price of $1.00 per share. See "DILUTION."
INTERNATIONAL SALES AND SUPPLY. The Company anticipates conducting
foreign sales of its products. If paid in foreign currencies, currency
fluctuation and other normal risks of conducting business internationally,
including regulatory changes and requirements, fluctuating exchange rates,
tariffs and other barriers, management difficulties, potentially adverse tax
consequences and potentially difficult legal enforcement and collection problems
could have a materially adverse impact on the financial condition of the
Company. See "BUSINESS -- THE FIXATION DEVICE."
LIABILITY FOR PERSONAL INJURY AND INADEQUACY OF INSURANCE. Use of the
Company's equipment and facilities for glaucoma treatment 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 equipment for claims based on alleged defects in
the equipment 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 has purchased medical and products 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 or
that the amount recovered would be adequate to cover all claims. To the extent
the Company becomes exposed to liability claims, if any, the Company may be
adversely affected.
FEDERAL REGULATION. The Company and its operations will be subject to
extensive federal regulation in the Untied States affecting the health care
industry and the delivery of health care services. The Company believes it may
sell its equipment in the Untied States as a "fixation device," because the
equipment was previously granted a 501(k) exemption by the Food and Drug
Administration (the "FDA"). However, the Company may only sell a limited amount
of its product as a "device to lower inter-ocular pressure" in the United States
until the FDA has approved such labeling. At this time there is no assurance
when, if ever, the FDA will approve the labeling of the Company's equipment as a
"device to lower inter-ocular pressure." See "BUSINESS -- GOVERNMENTAL
REGULATION."
7
THIRD-PARTY PAYORS. Since September 1997, the Company's Scottsdale
glaucoma treatment center has been receiving payments for rendering traditional
medical services to patients from both insurance companies and Medicare.
However, the Company anticipates and has planned for delays and rejections of
claims submitted to third-party payors of the payment related to performing the
Company's patented PNT treatment on patients during each treatment center's
first year of operation. In March 1998 the Company's Scottsdale treatment center
began receiving Medicare payments for the performance of the PNT procedure.
There is no assurance that these payments will continue to the Scottsdale center
and as to when, if ever, the Company will receive payment at its additional
centers from third-party payors for its patented PNT treatment. While the
Company may seek reimbursement of rejected claims directly from the patients,
there can be no assurance that any amounts may be collected from such patients.
If the Company is unable to receive payment from third-party payors for the
centers' performance of the patented treatment, the Company's profitability will
be adversely impacted. See "BUSINESS -- COMPETITION."
STATE REGULATION. The Company's Scottsdale glaucoma treatment center
has registered with the State of Arizona Department of Health Services as a
"health care treatment institution" and the Company anticipates that all of its
treatment centers, including its new Tampa-Clearwater center, will be required
to register with the states in which operations are conducted as a health care
or similar provider, depending on each State's laws. The Company is unable to
predict at this time the exact amount of time and expense which will be needed
to register as a health care provider in each state in the Company may wish to
open a glaucoma treatment center. There is no assurance that the Company will be
able to register as a health care provider in each state of the Company's
choice. Further, with the national attention on "health care reform" no
assurance can be given that the future operations of the Company may not be
adversely affected by changes to state or federal regulatory statutes or
policies. See "BUSINESS -- GOVERNMENTAL REGULATION."
POSSIBLE ISSUANCE OF OPTIONS OR STOCK MAY DILUTE INTEREST OF
STOCKHOLDERS. The Company's Board of Directors intend to reserve a total of
1,000,000 shares of Common Stock for issuance under its 1998 Stock Option Plan
("STOCK OPTION PLAN"). To the extent that any stock options are granted in the
future and exercised, dilution to the interests of the investors may occur.
Moreover, the terms upon which the Company will be able to obtain additional
equity capital may be adversely affected since any holders of the outstanding
options 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 by such outstanding options. See "MANAGEMENT -
Stock Option Plans."
COST OF SHARES. The price for the Shares paid by the Selling
Shareholders may be substantially less than the price to be paid by the
purchasers of the Shares pursuant to this Prospectus. See "SELLING
SHAREHOLDERS."
NUMBER OF SHARES REGISTERED. A total of 3,033,767 previously issued
shares have been registered and may be sold pursuant to this Prospectus. This
number of tradeable shares represents approximately 60% of the number of Company
shares which are presently held in broker-dealer trading accounts and are
otherwise freely tradeable. Therefore, the trading price for the Company's
common stock may be depressed in the future because of the number of Shares
"over-hanging" the market. See "SELLING SHAREHOLDERS."
ISSUANCE OF ADDITIONAL STOCK: WARRANTS. The Company's Articles of
Incorporation authorize the issuance of up to 25,000,000 shares of Common stock
of which 21,583,842 has been issued as of August 1, 1998. The Company may in the
future authorize the issuance of additional shares of Common Stock or preferred
stock. Future issuances of stock could have a dilutive effect on the Shares to
be sold pursuant to this Prospectus.
8
The Company has issued 1,681,123 Warrants to purchase 1,681,123 shares
of its common stock to individuals and entities which were associated with the
underwriter of the Company's private placements in 1997 and 1998. These Warrants
are exercisable at any time at an exercise price of $2.00 per share through
December 31, 1998 and at an exercise price of $2.50 per share through December
31, 2000 on which date the unexercised Warrants expire. The holders of the
outstanding Warrants may exercise them at a time when the Company would
otherwise be able to obtain additional equity capital on terms more favorable to
the Company. See "DESCRIPTION OF SECURITIES."
MARKET FOR COMMON STOCK. The Company's common stock currently trades on
the NASDAQ Bulletin Board. The quotations on the Bulletin Board reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
reflect actual transactions. On the Bulletin Board the Company's stock is
currently subject to certain rules adopted by the Securities and Exchange
Commission (the "SEC") that regulate broker-dealer practices in connection with
transactions in "Penny Stocks". Penny Stocks generally are securities with a
price of less than $5.00 (other than securities registered on certain national
exchanges or quoted on the NASDAQ Small Cap system). The "Penny Stock" rules
require broker-dealers, prior to a transaction in a Penny Stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document
prepared by the SEC that provides information about Penny Stocks and the nature
and levels of risks in the Penny Stock market. The broker-dealer must also
provide the customer with current bid and offer quotations for the Penny Stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each Penny Stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation. In addition, the
broker-dealer must approve a customer's account for transactions in Penny Stocks
except for established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income of $200,000 or $300,000 jointly with
their spouse). Consequently, if the Company's common stock shares remain subject
to the Penny Stock rules, these disclosure requirements may have an adverse
effect on the ability of broker-dealers to sell the Company's common stock
shares and may affect the ability of investors in this Offering to sell the
Company's common stock shares and otherwise affect the trading market of the
Company's common stock shares. Accordingly, prospective investors may be unable
to liquidate an investment in common stock shares and should be prepared to bear
the economic risk of their investment for an indefinite period and be able to
withstand a total loss of his investment. See "MARKET FOR COMPANY'S COMMON
STOCK."
9
SELLING SHAREHOLDERS
This Prospectus covers 3,033,767 outstanding shares of Company common
stock to be offered for the accounts of 68 individuals and entities (the
"Selling Shareholders"). The Selling Shareholders acquired their Shares from the
Company in three private placements conducted from June 1997 through June 1998.
The Company committed to register their common stock shares in its last private
placement. The Company will not receive any proceeds from the offering of
securities by the Selling Shareholders. The following table sets forth certain
information with respect to the beneficial ownership of securities offered
hereby by the Selling Shareholders.
BENEFICIAL OWNERSHIP OF COMMON STOCK
Prior to Sale After Sale (1)
Number of Percent of Number of Percent of
Name and Address Shares Class (2) Shares Class
---------------- ------ --------- ------ -----
Vexler, Ltd. 56,667 .3% 0 0
P.O. Box 200
Mesa, AZ 85211
Recker 80 L.L.C 320,000 1.5% 0 0
11811 N. Tatum
Suite 4050
Phoenix, AZ 85028
John & Irene Cifelli 8,000 * 0 0
Grandchildren's Trust
P.O. Box 13206
Scottsdale, AZ 85267
Surrety Bank & Trust Co. Ltd. 88,000 .4% 0 0
Suite 6 Hurricane Hole Plaza
Nassau, Bahamas
Joseph H. Poplow 10,000 * 0 0
5 Hollow Court
Westbury, NY 11590
Alexander Kale S.A 58,880 .3% 0 0
Hunkins Plaza, Main Street
Charlestown, Nevis, W.I
J.R. Fox & Company, Inc. 20,000 * 0 0
3530 Forest Lane, #50
Dallas, TX 75234
Harriet M. Long Revocable Trust 100,000 .5 0 0
5501 Dewey Hill Road
Edina, MN 55439
Phillip N. & Patricia A. Shupe 30,000 .1% 0 0
28 Sugar Creek Road
North Little Rock, AR 72116
Michael D. Wessels 50,000 .2% 0 0
63 Timbercreek Court
Lake Jackson, TX 77566
10
William & Loreta E. Philliber 20,000 * 0 0
930 Carla Circle
Sherwood, AR 72166
TAC Family Trust No. One 20,000 * 0 0
P.O. Box 13206
Scottsdale, AZ 85267
Genras, Inc. 20,000 * 0 0
15859 N. 77th Street
Scottsdale, AZ 85260
Scott E. Johnson 130,000 .6% 0 0
2307 Harrington Court
Euless, TX 76039
Gary Hornbrook 10,000 * 0 0
2365 W. Portobello
Mesa, AZ 85202
Eugene J. Friedman 50,000 .2% 0 0
4420 Bocaire Blvd
Boca Raton, FL 33487
Howard Talks & Carol Hall 20,000 * 0 0
249 Tradewind Drive
Palm Beach, FL 33480
Fred N. Seniw Trust 10,000 * 0 0
P.O. 5055
Lansing, IL 60435
Thomas M. Tobin 20,000 * 0 0
1013 Chippenham Road
Mechanicsburg, PA 17055
Richard T. Janicki 10,000 * 0 0
2703 Creek Edge Parkway
Austin, TX 78733
Azriel Nagar 20,000 * 0 0
342 Irving Avenue
South Orange, NJ 07079
James A. Moise II 10,000 * 0 0
22 Cutter Green Drive
San Antonio, TX 78248
Dale H. Domeyer Trust 10,000 * 0 0
2404 S. Buttercup
Mesa, AZ 85208
Arnold C. Ramberg Trust 20,000 * 0 0
2438 S. Buttercup
Mesa, AZ 85208
Joseph P. Schott 30,000 .1% 0 0
5702 N. 4th Street
Phoenix, AZ 85012
11
Anthony M. Kong 10,000 * 0 0
3024 W. Mescal
Phoenix, AZ 85029
Stephen C. and Jiletta J. Ryan 20,000 * 0 0
10040 E. Happy Valley Road, #442
Scottsdale, AZ 85255
Ruth Anne Lefcourt 24,000 .1% 0 0
7519 Via De La Campana
Scottsdale, AZ 85258
Jerry H. Walker 103,333 .5% 0 0
22639 N. 49th Place
Phoenix, AZ 85024
David R. Plone 50,000 .2% 0 0
10243 N. 99th Street
Scottsdale, AZ 85258
John R. Schaefer 40,000 .2% 0 0
4179 Elm Road
Potosi, Wisconsin 53820
Economic Concepts, Inc. 20,000 * 0 0
Defined Benefit Pension Plan
9904 N. 58th Street
Paradise Valley, AZ 85253
Poseidon Solutions, Inc. 80,000 .4% 0 0
2806 Garden Oak Place, Suite 100
Grand Prairie, TX 75052
Felix P. and Sheila F. Cisek 20,000 * 0 0
1435 E. Berridge Lane
Poenix, AZ 85014
Lawrence A. Underwood 160,000 .7% 0 0
6241 N. 31st Place
Phoenix, AZ 85016
Paul J. and Carol A. Robinson 16,888 * 0 0
4814 E. Earll Drive
Phoenix, AZ 85018
Harry Voulemenous Revocable Trust 40,000 .2% 0 0
25850 S. Fox Glenn Drive
Sun Lakes, AZ 85248
Paul and Sharon Carter Family Trust 200,000 .9% 0 0
P.O. Box 2506
Flagstaff, AZ 86003
Gary Peter Klahr 58,000 .3% 0 0
317 E. Berridge Lane
Phoenix, AZ 85012
David and Patricia Lebowitz 50,000 .2% 0 0
Family Trust
10555 N. Tatum Blvd. Suite 101
Paradise Valley, AZ 85253
12
Colonial Trust, Custodian FBO 16,000 * 0 0
James J. Morgan SD IRA
5336 N. 19th Avenue
Phoenix, AZ 85015
Leanne H. Frantz 227,666 1.1% 0 0
2854 Post Oak Road Circle
Moblie, Alabama 36693
John E. Shryack 20,000 * 0 0
13161 Pennystone Drive
Dallas, TX 75244
Ronald I. Gross 44,073 .2% 0 0
9105 N. Foothills Manor Drive
Paradise Valley, AZ 85253
Gerald B. Eckley 26,667 .1% 0 0
1421 Hamblen Road
Kingwood, TX 77339
Dr. Mark Walmer SEP-IRA 66,667 .3% 0 0
5336 N. 19th Avenue
Phoenix, AZ 85015
James W. Moldermaker SEP-IRA 37,861 .2% 0 0
8029 E. Via De Viva
Scottsdale, AZ 85253
Kevin Mulmed 66,667 .3% 0 0
7002 E. Loma Land Dr.
Scottsdale, AZ 85257
William C. and Adriana A. Hardy 33,333 .2% 0 0
8712 Lacrosse Drive
Dallas, TX 75231
Ralph H. and Sharon C. Graham 33,333 .2% 0 0
5053 Trail Lake Drive
Plano, TX 75093
Catherine Marsh and John Croft 66,667 .3% 0 0
18 Pheasants Ridge North
Greenville, DE 19807
Russell R. and Melody A. Berg 13,333 * 0 0
3442 E. Golden Vista
Phoenix, AZ 85028
Russell R. Berg, D.C., P.C. 13,333 * 0 0
13835 N. Tatum Blvd., Suite 3
Phoenix, AZ 85032
James A. Klein 20,000 * 0 0
1419 Chestnut Ridge
Kingwood, TX 77339
Robert H. and Lynda Jane Katz 9,333 * 0 0
7719 W. Villa Theresa Dr.
Glendale, AZ 85308
13
Mark S. Walmer 33,333 .2% 0 0
3200 S. Ambrosia Dr.
Chandler, AZ 85248
Stephen C. and Jiletta J. Ryan 13,333 * 0 0
10040 E. Happy Valley Road,
No.442
Scottsdale, AZ 85255
George and Sandra Erick 13,333 * 0 0
11432 E. De La O Road
Scottsdale, AZ 85255
Larray L Peery 26,667 .1% 0 0
5041 E. Lafayette
Phoenix, AZ 85018
Anthony A. and Laurie R. Pearson 6,667 * 0 0
3101 Stouenburch Dr.
Hilliard, OH 43026
Belinda Barclay - White 6,667 * 0 0
4035 E. Colter
Phoenix, AZ 85018
Rick Biernacki and Randy Biernacki 33,333 .2% 0 0
P.O. Box 292068
Lewisville, TX 75067
Bruce I. Galbraith 33,333 .2% 0 0
1401 Ramsgate
South Lake, TX 76092
Guarantee & Trust Co., Trustee 26,667 .1% 0 0
John Tull IRA
P.O. Box 1346
Baltimore, MD 21203
Mercantile Bank, Trustee 33,333 .2% 0 0
UCL Employee Saving Trust
FBO John Schaeffer
P.O. Box 148
Dubuque, IA 52004
Callaway, A General Partnership 14,400 * 0 0
3828 N. 28th Avenue
Phoenix, AZ 85017
Maxim Corparation, Ltd. 60,000 .3% 0 0
P.O. Box 1531
11 Old Parham Road
St. John's, Antigua
Dorothy M. Robinson 4,000 * 0 0
7919 E. Fountain Cove
Mesa, AZ 85208
----------
(*) Less than .1% of outstanding shares.
(1) Assumes all shares offered by the Selling Shareholders are sold.
(2) Percentage based upon the number of outstanding shares on July 1, 1998,
before any Warrants are exercised.
14
The securities offered hereby for the accounts of the Selling
Shareholders may be sold from time to time directly by the Selling Stockholders.
Alternatively, the Selling Shareholders may from time to time offer such
securities through underwriters, dealers or agents. The distribution of
securities by the Selling Shareholders may be effected in one or more
transactions that may take place on the over-the-counter market, including
ordinary broker's transactions, privately-negotiated transactions or through
sales to one or more broker-dealers for resale of such shares as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Shareholders in connection with such sales of securities. The Selling
Shareholders and intermediaries through whom such securities are sold may be
deemed "underwriters" within the meaning of the Securities Act of 1933 with
respect to the securities offered, and any profits realized or commissions
received may be deemed underwriting compensation.
USE OF PROCEEDS
Assuming the Common Stock offered by the Company is sold for $1.00 per
share, the following table represents the estimated use of $950,000 of net
offering proceeds. The Company currently estimates that each new glaucoma
treatment center will require $400,000 to $600,000 of working capital, depending
upon whether medical equipment and office furniture can be leased by the Company
on a long-term basis. Assuming the Company can obtain long-term leasing of the
equipment and furniture, the Company believes $950,000 is sufficient working
capital to open 2 additional treatment centers.
Purchase of medical equipment and
office furniture (1) 300,000
Advertising (2) 300,000
Rent and personnel expenses(3) 250,000
Contingency reserve (4) 100,000
--------
$950,000
----------
(1) Assumes the Company purchases $150,000 of used medical and office
furniture for each new treatment center. The Company will attempt to
lease this equipment and furniture to preserve working capital; however,
no leasing arrangement has been made as of the date of this Prospectus.
(2) Assumes average monthly advertising expense of $25,000 for six months at
each new treatment center. Advertising expenses will actually be greater
in the first months of operation. The second center will not commence
operations until the first additional center reaches a break-even point.
(3) Assumes rent and personnel expenses of approximately $20,000 per month
for six months at each new treatment center. The second center will not
commence operations until the first additional center reaches a
break-even point.
(4) Assumes the Company does not engage any securities broker-dealer to
solicit orders for the Common Stock. If a securities broker-dealer
solicits $1,000,000 of gross offering proceeds, the Company would pay up
to $100,000 of sales commission and have no contingency reserve from this
Offering.
15
DILUTION
As of June 30, 1998 the net tangible book value of the Company was
approximately $613,042 or $.03 per share, based upon the June 30, 1998 financial
statements. On June 30, 1998 the Company had 21,583,842 shares outstanding. Net
tangible book value per share represents the amount of the Company's total
assets (excluding its intangible assets) less its liabilities, divided by the
number of shares outstanding. After giving effect to the receipt of the net
proceeds of the Offering assuming no broker-dealer commissions (estimated to be
$950,000) and assuming no Warrants are exercised, the pro forma net tangible
book value of the Company as of June 30, 1998 would have been approximately
$1,563,042 or approximately $.07 per share. This would result in dilution to the
investors of approximately $.93 per share, and an increase in value to existing
shareholders of $.04 per share. The following table illustrates the per share
dilution for the Offering:
Offering price $1.00
Net tangible book value per share
before Offering $ .03
Increase per share attributable to Offering $ .04
Pro forma net tangible book value per share
after Offering $ .07
Dilution of net tangible book value per share
to Investors $ .93
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, this document
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the Company
intends that such forward-looking statements be subject to the safe harbors
created thereby. Such forward-looking statements involve risks and uncertainties
and include, but are not limited to, statements regarding future events and the
Company's plans and expectations. The Company's actual results may differ
materially from such statements. Although the Company believes that the
assumptions underlying the forward-looking statements herein are reasonable, any
of the assumptions could prove inaccurate and, therefore, there can be no
assurance that the results contemplated in such forward-looking statements will
be realized. In addition, the business and operations of the Company are subject
to substantial risks which increase the uncertainties inherent in the
forward-looking statements included in this document. The inclusion of such
forward-looking information should not be regarded as a representation by the
Company or any other person that the future events, plans or expectations
contemplated by the Company will be achieved.
QUARTER ENDING JUNE 30, 1998
OPERATIONS. Registrant was a development stage company through the
quarter ended September 30, 1997, with no revenues having been generated. Also,
prior to November 5, 1996 Registrant had been a dormant shell company with no
operations since 1994. Therefore, there is no comparable prior year's operations
to which to compare the six month operating results.
17
SIX MONTHS
For the six-month period ended June 30, 1998 Registrant experienced a net
loss from operations of $636,596, which was comprised of a net loss from
Registrant's Scottsdale treatment center of $77,023 and its general and
administrative expenses incurred at the corporate level of $559,573. 78.6% of
Registrant's corporate expenses consisted of officers salaries of $100,000
(17.9%), professional expenses of $95,945 (17.1%) and shareholder services and
media promotion of $243,876 (43.6%). Registrant expects its professional
expenses to remain at a high level as a result of its continued attempts to
obtain financing in 1998 for one additional treatment center, as well as
incurring the continuing costs of its FDA application. Registrant expects no
change in its officers salaries in the remainder of 1998. Since most of
Registrant's shareholder services expenses are paid with Registrant's stock and
not cash, Registrant's shareholder services expenses are likely to remain high
for the remainder of 1998.
During the first half of 1998 Registrant's Scottsdale treatment center
generated $179,767 of gross revenues. Included in these revenues are prior
quarters billings for PNT which were rebilled to Medicare in the first quarter,
because Medicare began to pay for the PNT procedure. It is not currently known
whether Medicare will continue to pay Registrant for the PNT procedure in the
future. Revenues were increasing at the Scottsdale treatment center until the
summer slow down occured in May and June 1998. At this time the Registrant does
not expect revenues at the Scottsdale treatment center to increase to the
break-even point again until September or October 1998. There is no assurance
that the Scottsdale treatment center will ever be profitable, and therefore, the
Registrant is considering alternatives for the Scottsdale treatment center.
87.8% of the center's expenses were represented by advertising costs of $61,360
(23.9%) and personnel salaries of $163,980 (63.9%). As a result of the summer
slow down, the Registrant reduced its personnel expense at the center in July
1998. Registrant may increase its personnel expenses at the center in the second
half of 1998, but only after the break-even point is achieved. Registrant
expects its 1998 advertising costs for the Scottsdale center to remain
comparable to that spent in the first half of 1998.
LIQUIDITY AND CAPITAL RESOURCES. On a short-term and long-term basis
Registrant requires only minimal capital to sustain its manufacturing of the
patented Fixation Device and the patented suction rings, because of Registrant's
current inventory levels. However, on a short-term basis Registrant requires
approximately $400,000 to $600,000 to adequately fund the first year's operation
of any additional glaucoma treatment centers. Registrant believes it currently
has sufficient capital to fund the commencement of its second treatment center
in Clearwater, Florida, including purchase or lease of approximately $200,000 of
medical equipment and furnishings. Registrant is presently planning to conduct
another private placement of its securities or secure debt financing in 1998 to
secure financing for one additional treatment center. However, at this time
Registrant has received no commitments from any source to provide such
financing. The Registrant is currently planning on selling a limited number of
units of its Fixation Device to ophthalmologists in the United States over the
next several months, pursuant to FDA investigational device exemption rules and
regulations. Such sales, if made, would have a favorable impact upon the
Registrant's liquidity.
18
On a long-term basis, Registrant anticipates, without assurances, that its
initial glaucoma treatment centers will be sufficiently profitable to permit
additional glaucoma treatment centers and product marketing to be funded during
subsequent years from a combination of internal and external sources.
During the first half of 1998 Registrant received a total of $1,238,675
from two private placement offerings of its securities. Registrant expects these
funds, along with the future profitably of the Scottsdale treatment center, will
provide financial stability for the Registrant's current operations in 1998.
In December 1996 through April 1997 Registrant issued a series of
promissory notes to a third party aggregating $220,000, all payable one year
after issuance and bearing 15% annual interest. These notes and accrued interest
were repaid in full in March 1998.
In February 1998 Registrant issued a $25,000 convertible promissory note
which bears 15% interest. The interest on this note ceased on March 30, 1998
when Registrant offered to repay this note and the holder indicated a
possibility of converting into equity. 5,000 shares of Registrant's common stock
were issued to the holder in February 1998 as additional interest on this note.
$20,000 of the principal of this note was repaid and the remaining principal and
interest was converted to Registrant's common stock in May 1998.
In July 1997 the Registrant issued a $75,000 promissory note bearing 10%
annual interest in partial consideration for the purchase of medical equipment
and office furnishings at the Scottsdale treatment center. This note requires a
$37,500 principal payment on July 18, 1998 (which has been made) and a $37,500
final principal payment on January 18, 1999.
19
YEAR ENDING DECEMBER 31, 1997
OPERATIONS. The Company was a development stage company at year-end
December 31, 1996, with no revenues having been generated during the year.
Therefore, there is no comparable prior year's operations to which to compare
the 1997 annual operating results.
For the year ended December 31, 1997 the Company experienced a net loss
from operations of $810,806, which was comprised of a net loss from the
Company's treatment center operation of $243,629 and its general and
administrative expenses incurred at the corporate level of $567,177. 68.7% of
the Company 's corporate expenses consisted of officers salaries of $200,000
(35.3%) and professional expenses of $189,228 (33.4%). The Company expects its
professional expenses to remain at a high level as a result of its continued
attempts to obtain financing in 1998 for two additional treatment centers, as
well as incurring the legal costs of acquiring and opening additional treatment
centers. See "Liquidity and Capital Resources" below.
During the four months in which the Company's Scottsdale treatment
center was receiving patients, the center generated $26,107 of revenues. During
the first quarter of 1998 the revenues of the center were substantially higher
on a monthly basis than in 1997. The Company currently expects the Scottsdale
treatment center to be profitable in the second half of 1998, if not sooner.
Since the Company incurred advertising and personnel expenses during the month
preceding the opening of its treatment center, the Company 's center expenses of
$269,736 represented five months of costs. 79.0% of the center's expenses were
represented by advertising costs of $120,300 (44.5%) and personnel salaries of
$93,072 (34.5%). The Company expects the treatment center's personnel costs to
remain fairly constant during 1998, and perhaps increase in the second half of
the year as increased patients require additional personnel. The Company expects
its advertising costs of the Scottsdale center to decrease substantially in
1998, because the initial advertising expenses will not be required in 1998 and
the Company has sufficient capital on hand in 1998 to pay for advertising in
advance, which should result in a substantial discount.
20
BUSINESS
BACKGROUND
The Company was incorporated under the name First Lloyd Funding, Inc.
pursuant to the laws of the State of New York on December 21, 1989. The
effective date of the Company's public offering was March 13, 1990. That
offering closed on May 1, 1990. For further information concerning the
Registration Statement, see File No. 33-33042-NY at the Securities and Exchange
Commission's Regional Office in New York City or at its principal office in
Washington, D.C. In January, 1997, the New York corporation named Coronado
Industries, Inc. merged into and became a Nevada corporation of the same name.
OPHTHALMIC INTERNATIONAL, L.L.C. AND AMERICAN GLAUCOMA, INC.
After a series of acquisitions and spin-offs from May 1990 to September
1996, on November 5, 1996 the Company entered into an Asset Purchase Agreement
with Ophthalmic International, L.L.C. ("OI"), and American Glaucoma, a joint
venture ("AG"), which provided for the purchase of the assets of OI and AG in
exchange for 15,592,224 shares of the Company's common stock (85%) to be issued
to the Company's current three Directors. An additional 855,000 shares were
issued as finders fees to twelve entities and individuals.
The assets of OI transferred to the Company were a patent pending and
other proprietary information concerning equipment and a process for the
treatment of Open Angle Glaucoma. The assets of AG transferred to the Company
were the concept and a business plan for forty glaucoma treatment centers in the
United States. However, a provision in the Asset Purchase Agreement allowed OI
to rescind the transaction and receive the patent rights and other proprietary
rights back from the Company in the event OI discovered within one year after
the date of the Asset Purchase Agreement that the Company breached one of its
representations or warranties in that agreement. OI waived this right of
rescission in July 1997.
OVERVIEW
The Company is a holding company and all business operations are
conducted through its two wholly-owned subsidiaries. The Company, through its
Ophthalmic International, Inc. subsidiary, manufactures and will market a
fixation device with a patented designed suction ring that treats Open Angle and
Pigmentary Glaucoma. American Glaucoma, Inc. ("AGI"), the Company's other
subsidiary, operates a glaucoma treatment center in Scottsdale, Arizona, and
will be opening a second treatment center in Clearwater, Florida and intends to
open up to 8 similar treatment centers in the United States.
In the United States, glaucoma is the second leading cause of blindness
affecting approximately 7,500,000 persons. Of those, about 60,000 are legally
blind. Glaucoma affects approximately three percent of the world's population,
with certain ethnic populations having a higher occurrence rate. If detected and
treated early, glaucoma need not cause blindness or even severe vision loss.
While there is no cure for glaucoma, the Company believes that its patented
device and process provide an effective treatment for afflicted persons and that
a significant global market for its patented process, equipment and rings
currently exists.
Glaucoma is not a single disease but rather a group of diseases that
effect the eye. This group of diseases has a single feature in that progressive
damage to the optic nerve due to increased pressure within the eyeball. As the
optic nerve deteriorates, blind spots and patterns develop. If left untreated,
the result may be total blindness. The space between the lens and the cornea in
the eye is filled with a fluid called the aqueous humor. This fluid circulates
21
from behind the colored portion of the eye (the iris) through the opening at the
center of the eye (pupil) and into the space between the iris and cornea. The
aqueous humor is produced constantly, so it must be drained constantly. The
drain is at the point where the iris and cornea meet, known as the drainage
angle, which directs fluid into a channel (Schlemm's canal) that then leads it
to a system of small veins outside the eye. When the drainage angle does not
function properly, the fluid cannot drain and pressure builds up within the eye.
Pressure also is exerted on another fluid in the eye, the vitreous humor behind
the lens, which in turn presses on the retina. This pressure affects the fibers
of the optic nerve, slowly damaging them. The result over time is a loss of
vision.
THE FIXATION DEVICE
After four years of ongoing studies involving Dr. John T. LiVecchi,
M.D., F.A.C.S., Assistant Clinical Professor of Ophthalmology, Allegheny
University and Dr. Guillermo Avolos, Professor of Ophthalmology, University of
Guadalajara, Mexico,it was determined that a 2 minute treatment with Ophthalmic
International's fixation device and patented design suction ring temporarily
reduced inter-ocular pressure ("I.O.P.") in the treatment of glaucoma by
approximately 6 Hg for an average of three (3) months at which time the
treatment can be repeated with no serious side effects. This I.O.P. lowering is
achieved when the patented suction ring is applied over the perilimbal area of
the eye for a specified time. With this treatment the Company believes that
there are no harmful side effects, like those associated with eye drop
treatments. In addition, the patent entitled "Open Angle Glaucoma Treatment
Apparatus and Method" has been granted and is believed to allow the Company to
achieve a significant market advantage over competitors.
Dr. John LiVecchi, a Company Director, and Dr. Leo Bores, the Medical
Director of the Company's Scottsdale treatment center, addressed two different
medical conventions of ophthalmologists in March and April 1998 concerning the
results of the studies of Company's procedure and equipment. These presentations
to the ultimate end-users of Company's products serve to educate the industry
about the Company's product and its efficacy.
The Company's subsidiary, Ophthalmic International, Inc., intends to
manufacture and sell the vacuum equipment, the patented rings and the process in
the United States and abroad, primarily through distributors who will be
assigned specific geographical territories, on the basis of continents or
countries. Ophthalmic International entered into a confidentiality agreement
with Alcon Co. in March, 1997 as the first step in negotiating for Alcon to
become a distributor. In 1997 Ophthalmic International has executed a second
confidentiality agreement with one additional potential distributor for
exclusive worldwide distribution rights. These negotiations concerning
distribution likely will not be completed and definitive agreements executed
until one or more independent studies are completed, PNT billing codes are
assigned, or the labeling of the product as a "device to lower inter-ocular
pressure" is approved by the FDA.
Until such time as the Company executes an exclusive worldwide
distribution agreement, the Company may enter into one or more non-exclusive
distribution agreements with medical equipment dealers in the Far East and/or
Europe. These short-term agreements will provide the Company with test-marketing
results for use in its negotiations for the exclusive worldwide rights and
provide the Company with interim cash flow.
The Company expects its distributors will purchase the vacuum equipment
for approximately $5,000-$10,000 per unit and purchase the patented ring which
is placed on the patient's eye, for approximately $10 to $15 each, depending
upon volume. In the Fall of 1998 the Company expects to commence limited sales
of its product at a price of approximately $15,000 per unit in the U.S. pursuant
to the FDA rules allowing recovery of its research and development costs. The
Company expects, without assurance, to have a gross profit margin on the
manufacture and sale of its product in excess of 60%.
22
The Company's vacuum equipment is composed of special order parts, such
as molded case, display board, circuit boards, and motors, all for which the
Company has established manufacturing relationships with manufacturers. The
Company's subsidiary, Ophthalmic International, Inc., assembles the vacuum
fixation device at its offices in Fountain Hills, Arizona. At such time as the
Company executes an agreement with a major worldwide distributor, the Company
may also sell the manufacturing rights to the same company. The Company has
contracted for the manufacture of the patented rings with a medical device
manufacturer located in California.
THE TREATMENT CENTERS
The Company's subsidiary, American Glaucoma, Inc., opened its first
glaucoma treatment center in Scottsdale, Arizona in September 1997. The Company
estimates that there are approximately 62,000 glaucoma patients in the Phoenix
area, based upon a three percent general population occurrence of the condition.
Based upon an estimated start-up cost and first year budget of $600,000 for the
Scottsdale Center, the Company estimates that it would have to treat
approximately 1,300 patients for an annual clinic fee of $920 to break-even on
these initial expenditures, assuming a 50% net income margin (of which there is
no assurance).
During the fourth quarter of 1997 the Company's Scottsdale Center
generated approximately $26,000 of gross revenues and an operating loss of
$243,629. During the first half of 1998 the Scottsdale center generated
approximately $179,769 of gross revenues and an operating loss of $77,023. The
Company's believes that its advertising campaign and the resulting patient
treatment at the Scottsdale Center have indicated that the Company's products
and glaucoma treatment centers will be accepted by the general glaucoma public
in the future.
The Company is hopeful of opening two additional treatment centers in
during 1998, subject to adequate funding. One of these additional centers is
currently planned for the Tampa-Clearwater, Florida area, which has been funded
by the Company's latest private placement of common stock. The Company has
initiated discussions with certain practicing ophthalmologists in these states,
concerning their possible participation in the Company's future treatment
centers. On the basis of these discussions, the Company believes it will be able
to recruit practicing ophthalmologists as the medical directors of its future
treatment centers. However, the Company has not entered into any agreement or
reached any arrangement with any physician at this time. The Company anticipates
that its advertising and telemarketing techniques initiated and refined at the
Company's Scottsdale Center will enable the Company's additional treatment
centers to reach profitability in a shorter time period than the Scottsdale
Center.
Dr. Leo Bores, currently the Medical Director of the Company's
Scottsdale Center, may become the Supervising Medical Director of all of the
Company's future treatment centers at such time as the Company has opened two or
more additional centers.
PATENT
On February 11, 1997 the U.S. Patents and Trademarks Office issued a
patent to Ophthalmic International, L.L.C., Patent Number 5,601,548, for the
process, equipment and the procedure which has been licensed to the Company. The
Company believes, without assurance, that this patent provides the Company with
a substantial competitive advantage over current and future glaucoma treatment
competitors. The Company is not aware of any other patent being granted for
glaucoma treatment. The Company intends to follow a policy of aggressively
pursuing claims of infringement on its patent and the Company does not believe
its patent, or product or services infringe on the rights of any other person.
23
COMPETITION
The medical device and service industries are highly competitive. The
Company's patented device and treatment process are and will be in competition
with established and future glaucoma treatment procedures and products. The
Company's treatment centers will compete directly with other medical care
providers. The future sale of the Company's products to ophthalmologists,
optometrists, medical clinics and hospitals may meet substantial resistance from
distributors and potential customers, particularly until the FDA product label
is changed and the insurance/Medicare billing codes are established. The Company
is presently unable to predict when such billing codes will be established on a
national basis. Ophthalmologists not employed by the Company are likely to
discount the benefits of the Company's products to their patients from fear of
losing patients to the Company's treatment centers, even though the clinical
results of the Company's products have been presented at ophthalmic conventions
in the United States for over three years. Further, the Company will need to
establish the economic benefit of its products to the satisfaction of health
maintenance organizations ("HMO") before the Company's glaucoma treatment
centers receive patient treatment referrals from HMOs. Today HMOs are
responsible for the medical treatment of a substantial percentage of the
population of the United States.
GOVERNMENTAL REGULATION
Presently the Company believes it may sell and distribute its "fixation
device" in the United States as part of its product pursuant to a Section 510(k)
exemption from the Untied States Food and Drug Administration (the "FDA"). The
Company registered with the FDA as the manufacturer and distributor of this
Section 510(k) product in April 1996. In August 1998, the Company submitted a
510(k) application to the FDA for the product to be labeled for the reduction of
inter-ocular pressure. If the 510(k) application is rejected by the FDA, the
re-labeling process would involve the completion of clinical studies of the
product's performance and safety and the submission of such studies to the FDA.
In 1994, 1996 and again in April 1998 the Company's product was approved for
"investigational device exemption" by an Investigational Review Board. The use
of the product at the Company's glaucoma treatment centers are part of these IDE
studies. The Company is currently in discussion with independent medical study
centers concerning the commencement of additional IDE studies on the Company's
product and process under its 1998 IDE study. There is no assurance as to when
any independent study will be completed or that the results of any such study
will be beneficial to the Company's FDA process. Likewise, there can be no
assurance when, if ever, the Company's equipment will be re-labeled as a "device
to lower inter-ocular pressure" by the FDA.
In July 1997 the Company's Scottsdale treatment center registered with
the State of Arizona Department of Health Services as a "health care treatment
institution" and the Company anticipates that all of its treatment centers will
be required to register in the various states in which they will be located. The
Company is unable to predict at this time the exact amount of time and expense
which will be needed to register as a health care provider in each state in
which the Company may wish to open a glaucoma treatment center. There is no
assurance that the Company will be able to register as a health care provider in
each state of the Company's choice.
EMPLOYEES
In addition to its two officers, the Company employs one person
full-time at the corporate headquarters. The Company presently employs its
Medical Director, Dr. Leo Bores, and 3 full-time medical and administrative
personnel at its Scottsdale glaucoma treatment center. The Company anticipates
hiring additional administrative and marketing personnel upon the opening of
additional treatment centers, in addition to medical personnel at the centers.
24
PROPERTY
During calendar year 1997, the Company's offices were located at 16929
E. Enterprise Drive, Suite 202, Fountain Hills, AZ 85268, where the Company is
currently leasing approximately 1,600 square feet of space from a third party
landlord. The Company is paying approximately $1,200 per month, including
utilities, in rent for this space on a five-year lease. The Company presently
believes this space is adequate to satisfy the Company's current needs. In June
1998, the Company entered into a month-to-month lease for 1,800 square feet of
space adjacent to its original space in Fountain Hills, Arizona, for
approximately $1,400 per month rent, including utilities. This combined space
will be adequate for the Company's needs throughout its initial manufacturing
stages, when commenced.
On July 28, 1997 the Company executed a lease with Dr. Leo Bores, the
Scottsdale center's Medical Director, for a 4,200 square foot medical facility
located at 8049 N. 85th Way, Scottsdale, Arizona. This facility is the site of
the Company's first treatment center. The monthly lease rate on this facility is
$3,500. The Company has a two-year option to purchase this building for the sum
of $400,000 cash. The Company believes this facility is adequate to serve up to
60 glaucoma patients per day.
The Company currently anticipates leasing space for its
Tampa-Clearwater treatment center in the range of 2,000 to 4,000 square feet at
a monthly lease rate of approximately $1.00 per square foot.
LEGAL PROCEEDINGS
There were no legal proceedings involving the Company which are pending
or threatened as of the date of this Prospectus.
25
MARKET FOR THE COMPANY'S COMMON STOCK
The principal U.S. market in which the Company's common shares (all of
which are one class, $.001 par value) were traded was the over-the-counter
market. The aforesaid securities are not traded or quoted on any automated
quotation system. Such over-the-counter market quotations reflect inter-dealer
prices without retail markup, markdown or commission and may not necessarily
represent actual transactions. The following table shows the low and the high
bid reported by the NASDAQ Bulletin Board System in 1996 and 1997, by fiscal
quarter, and for the first half of 1998.
LOW HIGH
--- ----
January 1, 1996 -- March 31, 1996 0 0
April 1, 1996 -- June 30, 1996 (reflecting 5:1 reverse split) 0 0
July 1, 1996 -- September 30, 1996 0 0
October 1, 1996 -- December 31, 1996 $1.50 $9.75
January 1, 1997 -- March 31, 1997 $3.00 $6.75
April 1, 1997 -- June 30, 1997 $2.50 $5.94
July 1, 1997 -- September 30, 1997 $1.94 $4.38
October 1, 1997 -- December 31, 1997 $1.00 $2.75
January 1, 1998 -- March 31, 1998 $0.63 $3.09
April 1, 1998 -- June 30, 1998 $0.66 $1.75
At July 1, 1998, the Company had approximately 383 stockholders of
record including nominee firms for securities dealers.
The Company has not paid or declared any dividends upon its common
shares since its inception and, by reason of its present financial status and
its contemplated financial requirements, does not intend to pay or declare any
dividends upon its common shares within the foreseeable future.
26
MANAGEMENT
The directors and executive officers of the Company as of December 31, 1997 were
as follows:
NAME AND ADDRESS POSITION
---------------- --------
G. Richard Smith Director, Chairman and Secretary
16929 E. Enterprise Drive Suite 202
Fountain Hills, AZ 85268
Gary R. Smith Director, President and Treasurer
16929 E. Enterprise Drive Suite 202
Fountain Hills, AZ 85268
John T. LiVecchi Director
16929 E. Enterprise Drive Suite 202
Fountain Hills, AZ 85268
The Company presently has two vacancies on its Board of Directors.
G. Richard Smith, age 50, has been a Director of the Company since
November 5, 1996 and Secretary of the Company since November 5, 1996. He became
Chairman in March, 1998. From July, 1995 to November 5, 1996 G. Richard Smith
was a member and President of Ophthalmic International, L.L.C., the company that
developed and patented the glaucoma treatment which was conditionally
transferred to the Company. From 1987 to June, 1995 G. Richard Smith was
Co-owner and President of Southern California Medical Distributors, Ltd.
("SCMD") which developed a turbine powered keratome for eye surgery. G. Richard
Smith attended Oakland University in Oakland County, Michigan from 1968 to 1970.
Gary R. Smith, age 54, has been a Director of the Company since
November 5, 1996, and President and Treasurer of the Company since November 5,
1996. From July, 1995 to November 5, 1996 Gary R. Smith was a member and Vice
President of Product Development and Manufacturing of Ophthalmic International,
L.L.C., the company that developed and patented the glaucoma treatment which was
conditionally transferred to the Company. From 1987 to June, 1995 Gary R. Smith
was Co-owner and Vice President of Product Development and Manufacturing for
Southern California Medical Distributors, Ltd. ("SCMD"), where he developed a
turbine powered keratome for eye surgery. Gary R. Smith attended Detroit
Institute of Technology in Detroit, Michigan from 1961 through 1963.
John T. LiVecchi, age 50, has been a Director of the Company since
December 16, 1996. Dr. LiVecchi received his medical degree in 1977 from the
University of Rome, Italy. From 1983 to present Dr. LiVecchi has been in private
medical practice in the field of ophthalmology in the Scranton, Pennsylvania
area. Dr. LiVecchi has been on the staff of several hospitals and universities.
Dr. LiVecchi is licensed to practice medicine in the States of New York,
Michigan and Pennsylvania. Dr. LiVecchi has authored numerous articles and
presentations. In 1994 Dr. LiVecchi undertook the project of developing
equipment and procedures for treating open angle glaucoma, along with the
Company's other Directors.
27
Messrs. Smith, Smith and LiVecchi were the three owners of SCMD which developed
a turbine powered keratome for eye surgery. They sold this company to its
Chinese distributor in 1995. During the last year before its sale, this company
had total revenues of approximately $1,050,000 and net income of approximately
$695,000. This company was sold for a multiple of its net income. Messrs. Smith,
Smith and LiVecchi sold SCMD to devote their efforts to the development of the
glaucoma treatment process and equipment, which they felt could be more
profitable than the turbine keratome.
Gary R. Smith and G. Richard Smith are brothers.
KEY EMPLOYEE
Dr. Leo Bores, as the Medical Director of the Company's Scottsdale
glaucoma treatment center and the Supervising Medical Director of the future
centers, is a key employee of the Company. Dr. Bores received a B.S. degree in
Biochemistry and Biology in 1958 from Wayne State University. Dr. Bores received
his degree from the Wayne State University College of Medicine in 1962 and he
served his internship at Harper Hospital in Detroit, Michigan in 1962 and 1963.
Dr. Bores was a resident in Ophthalmology from 1963 to 1968 and was certified by
the American Board of Ophthalmology in 1969. Dr. Bores is internationally known
for his contributions to the development of radial keratotomy ("RK"). In 1994,
Dr. Bores received the 1st Annual Award for outstanding scientific contributions
to eye microsurgery. In 1995 Dr. Bores became the 12th recipient of the
Innovators in Ophthalmology Award from the American Society for Cataract and
Refractive Surgery for outstanding contributions in ophthalmic surgery.
COMPENSATION
The following table sets forth the salaries of the Company's two
officers for the fiscal year ending December 31, 1997.
[Enlarge/Download Table]
Long Term Compensation
---------------------------------
Annual Compensation Awards Payouts
----------------------------- ----------------------- -------
Other Securities
Annual Restricted Under- All Other
Name and Compen- Stock lying LTIP Compen-
Principal sation Awards Options/ Payouts sation
Position Year Salary($) Bonus($) ($) ($) SARS(#) ($) ($)
-------- ---- --------- -------- ------- --------- --------- ------- ---------
G. Richard Smith,
Chairman 1997 $100,000 -- -- -- -- -- --
Gary R. Smith,
President 1997 $100,000 -- -- -- -- -- --
On July 18, 1997, the Company executed a two-year agreement with Dr.
Leo Bores, pursuant to which Dr. Bores will be paid a salary of $150,000 for the
first year and $200,000 for the second year. In addition to his base salary, Dr.
Bores shall receive an annual bonus equal to 5% of the net income from the
Scottsdale treatment center. It is presently expected that the Company will
execute an agreement with Dr. Bores as the Supervising Medical Director over all
the Company's future glaucoma treatment centers upon the completion of this
Offering.
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STOCK OPTION PLAN
The Company's Board of Directors is considering the adoption of a 1998
Stock Option Plan for the Company (the "Option Plan") and anticipates up to
1,000,000 shares will be reserved for issuance thereunder. The Option Plan is
structured to allow the Board of Directors and a future Stock Option Committee
of the Boards 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. To date, the Option Plan has not
been adopted and the Company has not granted any options under the Option Plan.
The Company currently has no pension, retirement, annuity, savings or
similar benefit plan which provides compensation to its executive officers or
directors.
PRINCIPAL STOCKHOLDERS
As of August 1, 1998 there were 21,583,842 outstanding shares and there
will be 22,583,842 shares outstanding after the completion of the Offering. The
following table sets forth the name, address, number of shares beneficially
owned, and the percentage of the Company's total outstanding common stock shares
before and after the Offering owned by: (i) each of the Company's Officers and
Directors; (ii) the Company's Officers and Directors as a group; and (iii) other
shareholders of 5% or more of the Company's total outstanding common stock
shares.
[Enlarge/Download Table]
PERCENT PERCENT
NAME AND ADDRESS AMOUNT AND NATURE OF OF CLASS OF CLASS
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) BEFORE OFFERING AFTER OFFERING
-------------- ---------------- ----------------------- --------------- --------------
Common Stock G. Richard Smith 6,508,112 30.2% 28.8%
16929 E. Enterprise Drive
Suite 202
Fountain Hills, AZ 85268
Common Stock Gary R. Smith 6,134,512 28.4% 27.2%
16929 E. Enterprise Drive
Suite 202
Fountain Hills, AZ 85268
Common Stock John T. LiVecchi 2,000,000 9.3% 8.9%
16929 E. Enterprise Drive
Suite 202
Fountain Hills, AZ 85268
Common Stock Officers and Directors, as 14,642,624 67.8% 64.8%
a Group (3 People)
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 5, 1996, the Company entered into the Asset Purchase
Agreement with Ophthalmic International, L.L.C., and American Glaucoma, whereby
6,796,112 restricted shares of the Company's common stock were issued to each of
Gary R. Smith and G. Richard Smith, and 2,000,000 restricted shares were issued
to John T. LiVecchi. Messrs. Smith, Smith and LiVecchi became the Company's sole
Directors as a result of this transaction. For accounting purposes, Messrs.
Smith, Smith and LiVecchi are deemed to have no cost in the assets transferred
to the Company.
29
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 25,000,000
shares of common stock, par value $0.001 per share, and 3,000,000 shares of
Preferred Stock, par value $0.0001 per share. As of the date of this Prospectus,
there were 21,583,842 shares of common stock and 0 shares of Preferred Stock
issued and outstanding.
COMMON STOCK
As of August 1, 1998, the Company is authorized to issue 25,000,000
shares of Common Stock, par value $.001 per share, of which 21,583,842 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 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 any liquidation preference on any issued
Preferred Stock are distributable among the holders of the common stock.
The Transfer Agent for the Company's common stock will be Olde Monmouth
Stock Transfer Co., Inc., 77 Memorial Parkway, Suite 101, Atlantic Highlands,
New Jersey 07716.
PREFERRED STOCK
The Company is authorized to issue 3,000,000 shares of Preferred Stock,
par value $.0001 per share, of which no shares were issued and outstanding at
the date of this Prospectus. The Preferred Stock shares shall have the rights,
limitations and obligations which the Board of Directors shall determine at the
time the Preferred Stock is issued. The Company has no present intention of
issuing any Preferred Stock in the foreseeable future.
COMMON STOCK PURCHASE WARRANTS
The Company has reserved for issuance 1,681,123 shares of common stock
for issuance in the event of the exercise of 1,681,123 outstanding Common Stock
Purchase Warrants (the "Warrants"). The Warrants themselves have not been and
will not be registered. The Warrants are exercisable at any time at an exercise
price of $2.00 per share through December 31, 1998 and at an exercise price of
$2.50 per share through December 31, 2000 on which date the unexercised Warrants
expire.
The Warrants are not subject to redemption by the Company. The holders
of the 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 Warrants. The exercise price of the Warrants and the number of
Warrants are subject to automatic proportionate adjustment in the event of any
stock dividend, stock split or other recapitalization affecting the outstanding
Company common stock.
Investors in the Shares should note that for the term of the Warrants,
the holders thereof are given the opportunity to profit from a rise in the
market price of the Company's common stock through the exercise of the Warrants
with a resulting dilution in the interests of other stockholders. At any time
when the holders of the 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 Warrants.
30
SHARES ELIGIBLE FOR FUTURE SALE
Upon the exercise of all of the Warrants (of which there is no
assurance), the Company will have outstanding 23,264,965 shares of common stock.
Of these shares, approximately 8,000,000 will be freely tradeable without
restriction or further registration under the Securities Act of 1933 (the
"Securities Act"). The remaining outstanding shares of common stock 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, all of such shares are presently eligible for sale.
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 beneficially for at
least one year 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 two years is entitled to sell such shares
under Rule 144 without regard to any of the limitations described above.
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 two years, would be entitled to
sell such common stock under Rule 144(k) without regard to the other
requirements of Rule 144.
Two of the Company's officers, directors and existing stockholders
(Gary R. Smith and G. Richard Smith) have agreed with the Underwriter not to
sell or otherwise dispose of any of their shares of Company common stock through
June 16, 1999 without the prior written consent of the Underwriter.
No predictions can be made of the effect, if any, that sales of common
stock under Rule 144, or the availability of such shares for sale, will have on
the market price for the common stock of the Company prevailing from time to
time. Nevertheless, the possibility that substantial amounts of common stock may
be sold in the public market may adversely affect prevailing market prices for
the Company's common stock and could impair the Company's ability to raise
additional capital through the sale of its equity securities.
PLAN OF DISTRIBUTION
The Company will be offering the Common Stock to the public through its
officers, Directors and employees. No commission will be paid by the Company
upon sales of the Common Stock solicited by its officers, Directors and
employees.
The Company may subsequently enter into an agreement (the
"Participating Dealer Agreement") with one or more securities broker-dealers
which provides for the securities broker-dealers to be paid a cash commission up
to 10% of the gross offering proceeds solicited by such securities
broker-dealers.
The Participating Dealer Agreement provides for reciprocal
indemnification between the Company and any participating broker-dealer against
certain liabilities, including liabilities under the Securities Act.
The offering price set forth on the cover page of this Prospectus
should not be considered an indication of the actual value of the Common Stock.
The trading market value of the Company's common stock as of the date of this
Prospectus was the primary consideration used by the Company to determine the
offering price of the Common Stock.
31
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, any dividend
obligations on outstanding Preferred Stock, and such other factors as the Board
of Directors deems relevant.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by the Law Office of Michael K. Hair, P.C., Scottsdale, Arizona.
EXPERTS
The consolidated balance sheet of Coronado Industries, Inc. and
subsidiaries as of December 31, 1997 and the related consolidated statements of
operations, changes in stockholders equity (deficit) and cash flows for the
years ended December 31, 1997 and 1996 have been included in this Prospectus and
Registration Statement in reliance upon the report of Semple & Cooper, LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
INDEMNIFICATION
The Company's Articles of Incorporation and the Nevada General
Corporation Act provide for indemnification of liability to the Company's
officers, Directors and employees under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company 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 Company of expenses incurred or paid by a
director, officer or controlling person of the Company 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
Company 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.
32
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 1998 and 1997................. F-2
For the Years Ended December 31, 1997 and 1996.................. F-7
F-1
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1998
June 30,
1998
(Unaudited)
-----------
ASSETS
Current Assets:
Cash $ 509,265
Accounts Receivable, net
-Trade 95,292
-Other 3,999
Inventory 43,031
Prepaid Expenses 55,000
----------
Total Current Assets 706,587
Property and Equipment, net 138,186
Other Assets:
Intangible Assets 34,593
----------
Total Assets $ 879,366
==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes Payable $ 0
Note Payable to Related Party -
Current Portion 75,000
Accounts Payable 14,906
Accrued Salaries 130,000
Accrued Payroll Taxes 11,825
----------
Total Current Liabilities $ 231,731
Long-term Debt 0
----------
Total Liabilities 231,731
----------
Stockholders' Equity (Deficit):
Preferred Stock 0
Common Stock - $.001 par value;
25,000,000 shares authorized, 21,583,842
shares outstanding at June 30, 1998;
18,962,653 outstanding at December 31, 1997 21,584
Additional Paid-in Capital 2,169,586
Accumulated Deficit (1,543,535)
----------
Total Stockholders' Equity (Deficit) 647,635
----------
Total Liabilities And Stockholders'
Equity (Deficit) $ 879,366
==========
F-2
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
Six Months
------------------------
1998 1997
---- ----
Revenues $ 179,767 $ --
Cost of Patient Revenues 256,790 --
----------- ----------
Gross Loss 77,023 --
General and Administrative
Expenses 559,573 237,493
----------- ----------
Loss from Operations (636,596) (237,493)
Interest Expense (12,172) (7,480)
Other Income 66 500
----------- -----------
Net Loss (648,702) (244,473)
=========== ===========
Basic Loss per Share $ (0.3) $ (.01)
=========== ===========
Weighted Average Shares
Outstanding 19,979,061 18,344,253
=========== ===========
F-3
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
June 30, June 30,
1998 1997
(Unaudited) (Unaudited)
----------- -----------
CASH FLOWS USED IN OPERATING ACTIVITIES:
Cash paid for operating expenses $ (580,652) $(187,826)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisition of property and equipment (13,919) (8,714)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 25,000 192,000
Repayment of debt (245,470) --
Proceeds from stock sales 1,258,675 --
---------- ---------
NET INCREASE (DECREASE) IN CASH 443,634 (4,540)
CASH, beginning of period 65,631 7,183
---------- ---------
CASH, end of period $ 509,265 $ 2,643
========== =========
RECONCILIATION OF NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Net loss $ (648,702) $(244,473)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization 1,752 1,302
Depreciation 25,135 1,962
Stock issued for services 175,000 --
Increase in:
Accounts receivable (87,483) --
Inventory -- (17,197)
Patents -- (26,841)
Professional retainers -- (5,000)
Prepaid expenses 49,500 --
Increase (decrease) in:
Accounts payable (61,784) 31,916
Accrued salaries (23,673) 55,000
Accrued expenses -- 7,480
Accrued payroll taxes (10,397) 8,025
---------- ---------
NET CASH USED IN OPERATING ACTIVITIES $ (580,652) $(187,826)
========== =========
F-4
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
For The Six Month Period Ended June 30, 1998
Total
Common Stock Stock-
------------------- Additional Retained Holders'
Shares Paid-in Earnings Treasury Equity
Outstanding Amount Capital (Deficit) Stock (Deficit)
----------- ------ ------- --------- ----- -------
Balance at
December
31, 1997 18,962,653 $18,962 $ 730,622 $ (894,833) $ -- $(145,249)
Stock issued
for services 145,000 145 197,355 -- -- 197,500
Proceeds
from sale
of stock, net 2,465,367 2,466 1,236,209 -- -- 1,238,675
Conversion of
debt 10,822 11 5,400 -- -- 5,411
Net loss -- -- -- (648,702) -- (648,702)
---------- ------- ---------- --------- ----- ---------
Balance at
June
30, 1998 21,583,842 21,584 2,169,586 (1,543,535) -- 647,635
========== ======= ========== =========== ===== =========
F-5
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION:
In the opinion of management, the accompanying financial statements reflect all
adjustments (consisting of only normal recurring accruals) necessary to present
fairly the financial position as of June 30, 1998 and the results of its
operations for the three and six months ended June 30, 1998. Although management
believes that the disclosures in these financial statements are adequate to make
the information presented not misleading, certain information and footnote
disclosures normally included in financial statements that have been prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities Exchange
Commission.
The results of operations for the six months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the full year
ending December 31, 1998. The accompanying consolidated financial statements
should be read in conjunction with the more detailed financial statements, and
the related footnotes thereto, filed with the Company's Annual Report on Form
10-KSB for the year ended December 31, 1997.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the financial position, results of
operations, cash flows and changes in stockholder's equity of Coronado
Industries, Inc., and its wholly-owned subsidiaries. All material intercompany
transactions, accounts and balances have been eliminated.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. NOTES PAYABLE:
At December 31, 1997, notes payable consist of the following:
Notes payable to Hayden Investment, with interest at 15%,
due April 30, 1998 through July 20, 1998; unsecured. $ 224,631
Less: current portion (224,631)
----------
$ --
==========
F-6
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
This debt was repaid in full in March 1998.
In February 1998 the Company issued a $25,000 convertible promissory note which
bore a 15% annual interest rate. This note was repaid in May 1998 with $20,000
in cash and $5,000 in principal and $411 accrued interest in common stock. 5,000
additional shares were issued in February 1998 as additional interest.
At June 30, 1998, notes payable to a related party consist of the following:
Notes payable to Dr. Leo Bores, with 10% annual interest,
$37,500 principal due on July 18, 1998 and remaining
principal on January 18, 1998; unsecured. $75,000
Less: current portion 75,000
-------
$ --
=======
3. STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK AND COMMON STOCK WARRANTS:
The Company issued 568,400 shares of common stock for $574,091, net of costs of
$138,659, through private offerings throughout the year ended December 31, 1997.
During the six-month period ended June 30, 1998 the Company issued 2,465,367
shares of common stock for net offering proceeds of $1,238,675. In relation to
those offerings, the Company issued a total of 1,681,123 common stock warrants
to the underwriter and its representatives. The warrants have an exercise price
of $2.00 per share through December 31, 1998, and then $2.50 per share through
December 31, 2000, when they expire.
F-7
INDEPENDENT AUDITORS' REPORT
To The Stockholders and Board of Directors of
Coronado Industries, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Coronado
Industries, Inc. and subsidiaries as of December 31, 1997, and the related
consolidated statements of operations, changes in stockholders' equity
(deficit), and cash flows for the years ended December 31, 1997 and 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial
statement presentation. We believe our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Coronado Industries,
Inc. and subsidiaries as of December 31, 1997, and the results of its
operations, changes in stockholders' equity (deficit), and its cash flows for
the years ended December 31, 1997 and 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 8 to the
consolidated financial statements, the Company's significant operating losses
raise 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 this uncertainty.
Semple & Cooper, LLP
Certified Public Accountants
Phoenix, Arizona
March 13, 1998
F-8
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
Current Assets:
Cash $ 65,631
Accounts receivable, net (Notes 1 and 5)
-- trade 7,809
-- other 3,999
Inventory (Note 1) 43,031
Prepaid expenses 104,500
---------
Total Current Assets 224,970
Property and Equipment, net (Notes 1 and 2) 149,402
Other Assets:
Intangible assets, net (Notes 1 and 3) 36,345
---------
Total Assets $ 410,717
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable (Note 4) $ 224,631
Note payable to related party -- current portion (Note 5) 39,375
Accounts payable 76,690
Accrued salaries 153,673
Accrued payroll taxes and other 22,222
---------
Total Current Liabilities 516,591
Note payable to related party - long-term portion (Note 5) 39,375
---------
Total Liabilities 555,966
---------
Commitments: (Notes 5 and 9) --
Stockholders' Equity (Deficit): (Note 6)
Preferred stock - $.0001 par value; 3,000,000
shares authorized, none issued or outstanding --
Common stock - $.001 par value; 25,000,000
shares authorized, 18,962,653 shares issued
and outstanding 18,962
Additional paid-in capital 730,622
Accumulated deficit (894,833)
---------
Total Stockholders' Equity (Deficit) (145,249)
---------
Total Liabilities and Stockholders' Equity (Deficit) $ 410,717
=========
The Accompanying Notes are an Integral Part of the
Consolidated Financial Statements
F-9
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
---- ----
Patient Revenues, Net (Note 1) $ 26,107 $ --
Cost of Patient Revenues 269,736 --
----------- -----------
Gross Loss (243,629) --
General and Administrative Expenses 567,177 64,042
----------- -----------
Loss from Operations (810,806) (64,042)
Interest Expense (26,381) (1,089)
Other Income 7,485 --
----------- -----------
Net Loss $ (829,702) $ (65,131)
=========== ===========
Basic Loss per Share (Note 1) $ (.04) $ --
=========== ===========
Weighted Average Shares Outstanding 18,504,392 18,344,253
=========== ===========
The Accompanying Notes are an Integral Part of the
Consolidated Financial Statements
F-10
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
[Enlarge/Download Table]
TOTAL
COMMON STOCK STOCK-
-------------------- ADDITIONAL RETAINED HOLDERS'
SHARES PAID-IN EARNINGS TREASURY EQUITY
OUTSTANDING AMOUNT CAPITAL (DEFICIT) STOCK (DEFICIT)
----------- ------ ------- --------- ----- ---------
Balance at
December
31, 1995 1,885,573 $ 2,755 $ 253,737 $(298,854) $(9,425) $ (51,787)
Stock issued
for services 40,000 40 1,160 -- -- 1,200
One for five
reverse stock
split (1,540,448) (1,540) 1,540 -- -- --
Proceeds
from sale
of stock, net 1,511,904 1,512 74,885 -- -- 76,397
Reverse merger
with American
Glaucoma and
Ophthalmic 15,592,224 15,592 (293,313) 298,854 -- 21,133
Retirement of
treasury stock -- (870) (8,555) -- 9,425 --
Stock issued
for finders fee 855,000 855 7,695 -- -- 8,550
Net loss -- -- -- (65,131) -- (65,131)
----------- -------- --------- --------- ------- ---------
Balance at
December
31, 1996 18,344,253 18,344 37,149 (65,131) -- (9,638)
Proceeds from
sale of stock,
net of costs
of $138,659 568,400 568 573,523 -- -- 574,091
Stock issued
for services 50,000 50 119,950 -- -- 120,000
Net loss -- -- -- (829,702) -- (829,702)
----------- -------- --------- --------- ------- ---------
Balance at
December
31, 1997 18,962,653 $ 18,962 $ 730,622 $(894,833) $ -- $(145,249)
=========== ======== ========= ========= ======= =========
The Accompanying Notes are an Integral Part of the
Consolidated Financial Statements
F-11
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
---- ----
Cash Flows from Operating Activities:
Cash received from customers $ 25,783 $ --
Cash paid to suppliers and employees (609,807) (75,528)
Interest paid -- (1,089)
--------- --------
Net cash used by operating activities (584,024) (76,617)
--------- --------
Cash Flows from Investing Activities:
Purchase of fixed assets (92,935) --
Cash disbursements for patents (30,684) --
--------- --------
Net cash used by investing activities (123,619) --
--------- --------
Cash Flows from Financing Activities:
Cash received from notes payable 192,000 10,000
Cash received from sale of stock 574,091 76,397
Repayment of notes payable to stockholders -- (4,000)
--------- --------
Net cash provided by financing activities 766,091 82,397
--------- --------
Net increase in cash 58,448 5,780
Cash at beginning of year 7,183 1,403
--------- --------
Cash at end of year $ 65,631 $ 7,183
========= ========
The Accompanying Notes are an Integral Part of the
Consolidated Financial Statements
F-12
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
---- ----
Reconciliation of Net Loss to Net Cash Used
by Operating Activities:
Net loss $(829,702) $(65,131)
--------- --------
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 27,332 1,766
Amortization 2,605 285
Stock issued for services 120,000 1,200
Interest added to principal of notes payable 26,381 --
Changes in Assets and Liabilities:
Accounts receivable
-- trade (7,809) --
-- other (3,999) --
Inventory (32,464) --
Prepaid expenses (104,500) --
Accounts payable 72,793 (44,265)
Accrued salaries 123,117 30,556
Accrued payroll taxes and other 22,222 (1,028)
--------- --------
245,678 (11,486)
--------- --------
Net Cash Used by Operating Activities $(584,024) $(76,617)
========= ========
The Accompanying Notes are an Integral Part of the
Consolidated Financial Statements
F-13
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF
ESTIMATES:
ORGANIZATION:
Coronado Industries, Inc. (the Company) was originally incorporated under the
laws of the State of New York in December 1989 as First Lloyd Funding, Inc.,
which subsequently changed its name to Logical Computer Services of New York,
Ltd. In September, 1996, the Company changed its name to Coronado Industries,
Inc. The Company had limited activity prior to its merger on November 5, 1996,
when the Company acquired one hundred percent (100%) of the assets of Ophthalmic
International, L.L.C. and American Glaucoma.
The stockholders of American Glaucoma and Ophthalmic International, L.L.C.,
which are the same for both corporations, obtained majority control of the
Company in the combination. Therefore, the transaction is accounted for as a
reverse merger. The accompanying financial statements have been presented on a
contiguous basis due to the inactivity of Logical Computer Services of New York,
Ltd.
The Company was in the development stage from its acquisition of Ophthalmic
International, L.L.C. and American Glaucoma in November, 1996 through September,
1997. In September, 1997, American Glaucoma opened their first glaucoma
treatment clinic in Scottsdale, Arizona. Ophthalmic International, L.L.C. has
received a patent on the method for treating Open Angle Glaucoma, as well as the
devices used in the treatment, including the Vacuum Fixation Device. The Company
intends to manufacture and market the patented Vacuum Fixation Device and the
patented suction rings to major medical supply companies and health care
providers throughout the world. However, Ophthalmic International, L.L.C. has
yet to generate any revenues.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the activity of Coronado
Industries, Inc., together with its wholly-owned subsidiaries, Ophthalmic
International, Inc., American Glaucoma, Inc. and Arizona Glaucoma Institute,
Inc. All significant intercompany accounts and transactions have been
eliminated.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVENTORIES:
Inventories consist primarily of raw materials and are stated at the lower of
cost, as determined on a first-in/first-out (FIFO) basis, or market.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Maintenance and repairs that neither
materially add to the value of the property nor appreciably prolong its life are
charged to operations as incurred. Betterments or renewals are capitalized when
incurred. Depreciation is provided using accelerated methods over the following
useful lives:
F-14
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF
ESTIMATES: (CONTINUED)
Office furniture and equipment 5-7 years; Machinery and equipment 5-7 years;
Leasehold improvements 7-39 years.
DEFERRED INCOME TAXES:
Deferred income taxes are provided on an asset and liability method, whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
basis. Deferred tax assets are reduced by a valuation allowance when in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The fair value of the Company's note payable to related party cannot be
determined due to its related party nature. The carrying value of the Company's
notes payable approximates fair value and is based on rates currently available
to the Company for debt with similar terms and maturities.
LOSS PER SHARE:
For the year ended December 31, 1996, the basic loss per share is based upon the
weighted average number of shares outstanding from the time of the reverse
merger, and giving retroactive effect to the one-for-five reverse stock split.
For the year ended December 31, 1997, basic loss per share include no dilution
and is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share are not presented, as their effect is anti-dilutive.
Subsequent to December 31, 1997, the Company sold 1,580,768 additional shares of
common stock through a private placement. The effect of these shares would also
be anti-dilutive on the earnings per share as of December 31, 1997.
INTANGIBLE ASSETS:
The Company reviews its intangible assets at least annually to evaluate
potential impairment by comparing the carrying value of the intangible assets
with expected future net operating cash flows from the related operations. If
the expected future net operating cash flows are less than the carrying value,
the Company recognizes an impairment loss equal to the amount by which the
carrying value exceeds the discounted expected future net operating cash flows
from the related operations.
ACCOUNTS RECEIVABLE -- TRADE:
Accounts receivable - trade represents amounts earned but not collected in
connection with the performance of medical procedures.
F-15
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF
ESTIMATES: (CONTINUED)
The Company follows the allowance method of recognizing uncollectible accounts
receivable. The allowance method recognizes bad debt expense as a percentage of
accounts receivable based on a review of individual accounts outstanding. At
December 31, 1997, no allowance has been provided for potentially uncollectible
accounts receivable. As of December 31, 1997, third party payors would not
reimburse the Company for its patented procedure. Subsequent to December 31,
1997, the Company began receiving reimbursement for current procedures
performed. In management's opinion, they will not receive reimbursement for
procedures performed prior to December 31, 1997, and therefore an allowance in
the amount of $39,155 has been accrued and offset against revenues.
ADVERTISING:
Advertising costs are charged to operations when incurred. Advertising costs for
the years ended December 31, 1997 and 1996 were $124,857 and $285, respectively.
NEW ACCOUNTING PRONOUNCEMENTS:
During the year ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128).
This pronouncement provides a different method of calculating earnings per share
than required by APB 15, Earnings per Share. SFAS No. 128 provides for the
calculation of Basic and Diluted earnings per share. Basic earnings per share
include no dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution of securities
that could share in the earnings of an entity similar to fully diluted earnings
per share. Due to the net losses for the years ended December 31, 1997 and 1996,
this statement has no effect on its reported loss per share.
During the year ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 129, "Disclosure of Information about Capital
Structure" (SFAS No. 129). The new standard reinstates various securities
disclosure requirements previously in effect under Accounting Principles Board
Opinion No. 15, which has been superseded by SFAS No. 128. For the years ended
December 31, 1997 and 1996, the adoption of SFAS No. 129 did not have a material
effect on the Company's financial position or results of operations.
Statement of Financial Accounting Standards No. 130,"Reporting Comprehensive
Income" (SFAS No. 130) is effective for financial statements with fiscal years
beginning after December 15, 1997. Earlier application is permitted. SFAS No.
130 establishes standards for reporting and display of comprehensive income and
its components in a full set of general-purpose financial statements. The
Company does not expect adoption of SFAS No. 130 to have a material effect, if
any, on its financial position or results of operations.
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information", (SFAS No. 131) is effective for
financial statements with fiscal years beginning after December 15, 1997.
Earlier application is permitted. SFAS No. 131 requires that public companies
F-16
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF
ESTIMATES: (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS: (CONTINUED)
report certain information about operating segments, products, services and
geographical areas in which they operate and their major customers. The Company
does not expect adoption of SFAS No. 131 to have a material effect, if any, on
its financial position or results of operations.
2. PROPERTY AND EQUIPMENT:
At December 31, 1997, property and equipment consists of the following:
Office furniture and equipment $ 58,433
Machinery and equipment 114,605
Leasehold improvements 5,462
---------
178,500
Less: accumulated depreciation (29,098)
---------
Net property and equipment $ 149,402
=========
Depreciation expense was $27,332 and $1,766, respectively, for the years ended
December 31, 1997 and 1996.
3. INTANGIBLE ASSETS:
Intangible assets consist of goodwill, which represents the excess of the cost
of the combined companies over the fair value of their net assets at the date of
combination, and legal costs incurred to secure patents. Goodwill and patents
are being amortized ratably over five (5) and fifteen (15) years, respectively.
Amortization expense charged to operations for the years ended December 31, 1997
and 1996 was $2,605 and $285, respectively.
4. NOTES PAYABLE:
At December 31, 1997, notes payable consist of the following:
Notes payable to Hayden Investment, with interest at 15%,
due April 30, 1998 through July 20, 1998; unsecured. $ 224,631
Less: current portion (224,631)
----------
$ --
==========
F-17
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. RELATED PARTY TRANSACTIONS:
ACCOUNTS RECEIVABLE -- OTHER:
Accounts receivable- other consists of advances to a corporate shareholder. The
advances are non-interest bearing and considered short-term in nature.
NOTE PAYABLE TO RELATED PARTY:
Note payable to Dr. Leo Bores, with interest at the rate
of 10% per annum in two annual installments, due
July 18, 1999; unsecured. $ 78,750
Less: current portion (39,375)
---------
$ 39,375
=========
Future minimum principal payments due on the above note payable, are as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
1998 $39,375
1999 39,375
-------
$78,750
=======
COMMITMENTS:
The Company currently leases office space for its glaucoma treatment center in
Scottsdale, Arizona from a related party under a non-cancellable operating lease
agreement, which expires in July, 1999. Under the terms of the lease, the
Company pays monthly rent of $3,500. The Company subleases space to lessor for
one day a week at $700 per month under a cancellable sublease agreement. For the
year ended December 31, 1997, rent expense, net of sublease, under the
aforementioned non-cancellable operating lease agreement was $14,000.
Future minimum payments due under the operating lease agreement, are as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
1998 $42,000
1999 24,500
-------
$66,500
=======
Total minimum future payments have not been reduced by payments which may be
received under a cancellable sublease.
F-18
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (DEFICIT):
COMMON STOCK AND COMMON STOCK WARRANTS:
The Company issued 568,400 shares of common stock for $574,091, net of costs of
$138,659, through private offerings throughout the year ended December 31, 1997.
In relation to those offerings, the Company issued a total of 568,400 common
stock warrants to the underwriter and its representatives. The warrants have an
exercise price of $2.00 per share through December 31, 1998, and then $2.50 per
share through December 31, 2000, when they expire.
7. INCOME TAXES:
The net operating losses of the Company prior to the reverse merger have been
substantially eliminated due to the change in ownership. As such, as of December
31, 1997, the Company has a net operating loss carryforward in the approximate
amount of $730,000, available to offset federal and state taxable income
primarily through December 31, 2012.
Differences between financial reporting and income tax losses to date relates
primarily to the Company's net operating loss carryforwards at December 31,
1997. SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance, if based on the weight of available evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Based on the weight of available evidence, the Company has provided a full
valuation allowance on its deferred tax asset at December 31, 1997 in the
approximate amount of $280,000.
8. GOING CONCERN:
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. However, the Company has sustained continuing
operating losses.
The primary business of the Company is to manufacture and market a patented
treatment for Open Angle Glaucoma, and to operate glaucoma treatment clinics
where the patented treatment procedures are performed. The first of these
clinics was opened in 1997, but is not yet profitable.
As shown in the accompanying statement of operations, the Company has incurred
net losses of $829,702 and $65,131 in 1997 and 1996, respectively. Unaudited
information subsequent to December 31, 1997, indicates that the losses are
continuing. As of December 31, 1997, the accompanying balance sheet reflects
$145,249 in net stockholders' deficit.
The above conditions indicate that the Company may be unable to continue in
existence. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts, or the amounts
and classification of liabilities that might be necessary should the Company be
unable to continue in existence.
Management has secured additional funding through the sale of common stock, and
is currently negotiating the marketing, distribution and manufacturing of the
Company's patented treatment with potential customers.
F-19
CORONADO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. COMMITMENTS:
The Company currently leases office space in Fountain Hills, Arizona under a
non- cancellable operating lease agreement which expires in June, 2001. Under
the terms of the lease, the Company pays monthly rent in the amount of $972. For
the year ended December 31, 1997, rent expense under the aforementioned
non-cancellable operating lease agreement was $10,411.
Future minimum payments due under the operating lease agreement, are as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ------
1998 $11,667
1999 11,667
2000 11,667
2001 5,833
-------
$40,834
=======
10. NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Company recognized investing, financing and operating activities that
affected assets, liabilities, and equity but did not result in cash receipts or
payments.
For the year ended December 31, 1997, these non-cash activities are as follows:
50,000 shares of common stock were issued for services valued at $120,000.
Purchased equipment through the issuance of a note in the amount of
$75,000.
For the year ended December 31, 1996, these non-cash activities were as follows:
Interest in the amount of $26,381 was added to the principal balance of the
outstanding notes.
The Company merged with Ophthalmic International, L.L.C. and American
Glaucoma. In this merger, the Company received inventory totaling $10,567,
office furniture and equipment of $10,300, machinery and equipment of $265
and patents valued at $1 in exchange for 15,592,224 shares of common stock.
Retired 869,977 shares of treasury stock recorded at a cost of $9,425,
reducing additional paid-in capital by $8,555, and common stock by $870.
Issuance of 40,000 shares of common stock for services valued at $1,200.
Issuance of 855,000 shares of common stock for a finders fee valued at
$8,550.
11. SUBSEQUENT EVENT:
Subsequent to December 31, 1997, the Company issued additional shares of common
stock for $701,888, net of costs. In addition, the Company issued 819,824
warrants to the offerings underwriter and its representatives.
F-20
================================================================================
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.
CORONADO INDUSTRIES, INC.
PROSPECTUS
, 1998
--------
TABLE OF CONTENTS
Additional Information ...................... i
Prospectus Summary .......................... 1
Risk Factors ................................ 5
Selling Shareholders......................... 10
Use of Proceeds.............................. 15
Dilution..................................... 16
Management Discussion and Analysis
or Plan of Operation ...................... 17
Business .................................... 21
Market for the Company's Common Stock........ 26
Management .................................. 27
Principal Stockholders ...................... 29
Certain Relationships and Related
Transactions .............................. 29
Description of Securities ................... 30
Shares Eligible for Future Sale.............. 31
Plan of Distribution......................... 31
Dividend Policy ............................. 32
Legal Matters ............................... 32
Experts ..................................... 32
Indemnification.............................. 32
Index to Consolidated Financial Statements .. F-1
UNTIL _______, 199__, 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
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Article V of the Registrant's articles of
incorporation, which provides as follows:
V. The Directors, Officers, and Stockholders of this corporation are
indemnified from any personal liability for damages including costs of
developing records, investigation fees and attorneys, if any, for breach of
fiduciary duty or civil suit as a Director or Officer, but does not eliminate or
limit the liability for: (a) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law or (b) the payment of dividends
in violation of NRS 78.300.
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.
II-1
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.
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.
II-2
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.
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."
The Registrant's Board of Directors has previously authorized the
Registrant to apply for an errors and omissions liability insurance policy
covering acts and omissions of its officers and directors.
II-3
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 $ 821
Filing fees to National Association of Securities Dealers, Inc. 778
Printing Expenses 1,000*
Legal Fees and Expenses 25,000*
Accounting Fees 15,000*
Blue Sky Filing Fees and Legal Expenses 1,000*
Transfer Agent and Registrar Fees and Expenses 500*
Miscellaneous 5,901*
-------
Total $50,000*
=======
----------
* Estimated amount -- subject to revision by amendment.
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 November 5, 1996 the Registrant issued a total of 15,592,224 of
its common stock shares to the three owners of Ophthalmic International, L.L.C.
and American Glaucoma, a joint venture, in return for the assets of these
entities being transferred to the Registrant. The three owners of these two
entities became the officers and Directors of the Registrant. A finder's fee in
the amount of 855,000 shares of Registrant's common stock was paid to twelve
entities and individuals, including the three then current officers and
Directors of the Registrant.
2. Between July 11, 1997 and February 20, 1998 the Registrant issued
627,280 shares to 19 Accredited Investors in consideration for $784,100 cash.
Fox & Company Investments, Inc. of Phoenix, Arizona acted as underwriter of this
private placement and received cash commission and fees equal to 15% of the
gross offering proceeds and 627,280 Warrants.
3. In February 1998 the Registrant issued 5,000 shares to an individual
in partial consideration for a $25,000 loan.
4. In March 1998 the Registrant issued 1,521,888 shares to 39
Accredited Investors in consideration for $760,944 cash. Fox & Company
Investments, Inc. of Phoenix, Arizona acted as underwriter of this private
placement and received cash commission and fees equal to 15% of the gross
offering proceeds and 760,944 Warrants.
5. On March 31, 1998 the Registrant issued 20,000 shares of its common
stock to Registrant's legal counsel in consideration of $10,000 of legal
services.
II-4
6. In June 1998 the Registrant issued 884,599 shares to 26 Accredited
Investors in consideration for $663,451 cash. Fox & Company Investments, Inc. of
Phoenix, Arizona acted as underwriter of this private placement and received
cash commission and fees equal to 15% of the gross offering proceeds and 442,299
Warrants.
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 paragraph 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.
ITEM 27. EXHIBITS.
* Indicates exhibits filed herewith.
# Denotes management contract or compensation plan or arrangement.
Exhibit
No. Description
------- -----------
*1.1 Form of Particiating Dealer Agreement.
*3.1 Articles of Incorporation of the Registrant.
*3.1.1 Certificate of Amendment to the Articles of Incorporation of the
Registrant.
*3.2 By-Laws of the Registrant.
3.3 Certificate of Merger between New York corporation and Nevada
corporation.
4.1 Specimen certificate representing Registrant's common stock (to be
filed by amendment).
5.1 Opinion of counsel (to be filed by amendment).
10.1 Bill of Sale for assets purchased. (Incorporated by reference to Exhibit
10.1 to Form 8-K filed on August 18, 1997.)
10.2 Promissory Note to Dr. Leo Bores. (Incorporated by reference to Exhibit
10.2 to Form 8-K filed on August 18, 1997.)
10.3 Lease with Purchase Option. (Incorporated by reference to Exhibit 10.3 to
Form 8-K filed on August 18, 1997.)
10.4 Employment Agreement with Dr. Leo Bores. (Incorporated by reference to
Exhibit 10.4 to Form 8-K filed on August 18, 1997.)
10.5 Asset Purchase Agreement with Opthalmic International and American
Glaucoma. (Incorporated by reference to Exhibit 2.1 to Form 8-K filed on
November 14, 1996.)
10.6 Form of Placement Agent Warrant Agreement.
*21.1 Subsidiaries of the Registrant.
23.1 Consent of Counsel, included in Exhibit 5.1 filed with this Registration
Statement.
*23.2 Consent of Semple & Cooper, LLP, independent public accountants.
27.1 Financial Data Schedule. (Incorporated by reference to Exhibit 27 to Form
10-QSB filed on August 12, 1998.)
II-5
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-6
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf on August ___, 1998 by the undersigned, thereunto authorized.
CORONADO INDUSTRIES, INC.
By: /s/ Gary R. Smith
-------------------------------
Gary R. Smith, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities on the date(s) indicated.
/s/ G. Richard Smith Chairman, Secretary, Director Dated: August __, 1998
------------------------ (Chief Executive Officer)
G. Richard Smith
/s/ Gary R. Smith President, Treasurer, Director Dated: August __, 1998
------------------------ (Chief Accounting Officer)
Gary R. Smith
------------------------- Director Dated:
John LiVecchi
II-7
Dates Referenced Herein and Documents Incorporated by Reference
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