STOCK-FOR-STOCK AGREEMENT
REORGANIZATION AGREEMENT between 21st Century Vision, Inc., a Nevada
corporation (hereinafter referred to as "21st"), and shareholders of Optical
Resource Management, Inc., a Texas corporation (hereinafter referred to as
"ORM").
For the Acquisition by 21st of all the outstanding stock of ORM, in
exchange for stock of 21st.
AGREEMENT, dated as of this 17th day of May, 1996, between 21st and all of
the Shareholders of ORM (hereinafter collectively referred to as the "ORM
Shareholders").
WHEREAS, the ORM Shareholders own 2,925,000 shares of common stock, $.001
par value per share, of ORM, and which constitutes all of the outstanding
common stock of ORM, for a total of 2,925,000 issued and outstanding shares of
common stock of ORM.
WHEREAS, the ORM Shareholders have options to purchase up to 2,729,501
shares of the common stock of ORM, at various prices as set forth in Schedule
I, attached hereto, which, if exercised, would result in a total of 5,654,501
issued and outstanding shares of ORM.
WHEREAS, the ORM Shareholders own and have the right to sell, transfer and
exchange all of the shares and options for the purchase of the capital stock of
ORM. 21st hereby offers 2,925,000 shares of its common stock and options to
purchase 2,729,501 shares of common stock to the ORM Shareholders, in the
amounts and with the same terms as set forth in Schedule I, hereto, for all of
the outstanding common stock and options of ORM. The ORM Shareholders wish to
make said exchange.
WHEREAS, the parties hereto intend that the securities exchange described
herein between 21st and the Shareholders of ORM will be tax free in accordance
with the provisions of Section 368(a)(1)(B) of the Internal Revenue Code.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the parties hereto have agreed and by these
present do hereby agree as follows:
1. Exchange of Securities. Subject to the terms and conditions herein-
after set forth, at the time of the closing referred to in Section 6 hereof
(the "Closing Date"), 21st will issue and deliver, or cause to be issued and
delivered to the ORM Shareholders, in exchange for all of the issued and
outstanding shares and options of ORM, 2,925,000 shares of its common stock and
options to purchase 2,729,501 shares of its common stock in the amounts and
with the same terms as set forth in Schedule I, attached hereto. The shares
and options of 21st will be allocated as set forth in Schedule I, attached
hereto. The shares and options of ORM Shareholders and option holders will
be exchanged for shares and options in 21st on a one-for-one basis, such that
the options of 21st shall contain the same terms and conditions as the options
of ORM.
2. Representations and Warranties by ORM and ORM Shareholders. ORM and
ORM Shareholders each represent and warrant to 21st, all of which represen-
tations and warranties shall be true at the time of closing, and shall survive
the closing for a period of six (6) months from the date of closing, except as
to the warranties and representations set forth in subsection (i) herein, which
shall survive for a period of three (3) years from the date of closing, and
those set forth in subsection (l) herein, which shall survive for a period of
six (6) months from the date of closing, or from the date when the accounts
receivable may become due and payable, whichever shall occur later, that:
(a) ORM is a corporation duly organized and validly existing and in
good standing under the laws of the State of Texas and has the corporate
powers to own its property and carry on its business as and where it is
now being conducted. Copies of the Certificate of Incorporation and the
By-Laws of ORM, which have heretofore been furnished by ORM Shareholders
to 21st, are true and correct copies of said Certificate of Incorporation
and By-Laws including all amendments to the date hereof.
(b) The authorized capital stock of ORM consists of 25,000,000
shares of common stock, $.001 par value ("Common Stock of ORM"), of which
2,925,000 shares have been validly issued and are now outstanding.
(c) ORM has options to purchase 2,729,501 shares of common stock
with terms of purchase as set forth in Schedule I, attached hereto.
(d) ORM Shareholders have full power to exchange the shares and
options to purchase the capital stock of ORM on behalf of themselves upon
the terms provided for in this Agreement, and said shares and options have
been duly and validly issued and are free and clear of any lien or other
encumbrance.
(e) From the date hereof, and until the date of closing, no
dividends or distributions of capital, surplus, or profits shall be paid
or declared by ORM in redemption of their outstanding shares or otherwise,
and except as described herein no additional shares or options shall be
issued by said corporations.
(f) Since the date hereof, ORM has not engaged in any transaction
other than transactions in the normal course of the operations of their
business, except as specifically authorized by 21st in writing.
(g) ORM is not involved in any pending or threatened litigation
which would materially affect its financial condition disclosed to 21st in
writing.
(h) ORM has and will have on the Closing Date, good and marketable
title to all of its property and assets shown on Schedule II, attached
hereto, free and clear of any and all liens or encumbrances or
restrictions, except as shown on Schedule II, attached hereto and except
for taxes and assessments due and payable after the Closing Date and
easements or minor restrictions with respect to its property which do not
materially affect the present use
2
of such property.
(i) (1) The inventories of ORM as reflected in Schedule II,
furnished by ORM Shareholders to 21st prior to the execution hereof, are
valued at book value.
(2) The inventory of ORM listed on the schedule referred to in
(i) (1) above is hereinafter collectively referred to as the "Inventory."
The Inventory is in good and usable condition.
(j) As of the date hereof, there are no accounts receivable of ORM
of a material nature, except for those accounts receivable set forth in
Schedule II, attached hereto.
(k) ORM does not now have, nor will it have on the Closing Date, any
long-term contracts ("long-term" being defined as more than one year)
except those set forth in Schedule II attached hereto.
(l) ORM does not now have, nor will it have on the Closing Date any
pension plan, profit-sharing plan, or stock purchase plan for any of its
employees except those set forth in Schedule II, attached hereto and
certain options to proposed executive officers.
(m) ORM does not now have, nor will it have on the Closing Date, any
known liabilities or contingent liabilities other than those disclosed in
their audited financial statements dated 12/31/95 and updated, unaudited
financial statements dated 3/31/96 attached hereto as Schedule IV except
in the ordinary course of business or in connection with its proposed
private offering.
3. Representations and Warranties by 21st. 21st represents and warrants
to the ORM Shareholders, all of which representations and warranties shall be
true at the time of closing, and shall survive the closing for a period of six
(6) months from the date of closing, as follows:
(a) 21st is a corporation duly organized and validly existing and in
good standing under the laws of the State of Nevada and has the corporate
power to own its properties and carry on its business as now being
conducted and has authorized capital stock consisting of 25,000,000 shares
of common stock, $.001 par value per share, of which there are 1,120,000
shares presently outstanding.
(b) 21st has the corporate power to execute and perform this
Agreement, and to deliver the stock required to be delivered to ORM
Shareholders hereunder.
(c) The execution and delivery of this Agreement, and the issuance
of the stock required to be delivered hereunder have been duly authorized
by all necessary corporate actions, and neither the execution nor delivery
of this Agreement, nor the issuance of the stock, nor the performance,
observance or compliance with the terms and provisions of this Agreement
will violate any provision of law, any order of any court or other
governmental
3
agency, the Certificate of Incorporation or By-Laws of 21st or any
indenture, agreement or other instrument to which 21st is a party, or by
which 21st is bound, or by which any of its property is bound.
(d) The shares of Common Stock and options of 21st deliverable
pursuant hereto will on delivery in accordance with the terms hereof, be
duly authorized, validly issued, and fully paid, and non-assessable.
4. Conditions to the Obligations of 21st. The obligations of 21st here-
under shall be subject to the conditions that:
(a) 21st shall not have discovered any material error or
misstatement in any of the representations and warranties by the ORM
Shareholders herein, and all the terms and conditions of this Agreement to
be performed and complied with shall have been performed and complied
with.
(b) There shall have been no substantial adverse changes in the
conditions, financial, business otherwise of ORM from the date of this
Agreement, and until the date of closing, except for changes resulting
from those operations in the usual and ordinary course of business, and
between such dates the business and assets of ORM shall not have been
materially adversely affected as the result of any fire, explosion,
earthquake, flood, accident, strike, lockout, combination of workmen,
taking over of any such assets by any governmental authorities, riot,
activities of armed forces, or acts of God or of the public enemies.
(c) 21st shall upon request and at the time of closing, receive an
opinion of counsel to the effect that: (1) ORM is duly organized and
validly existing under the laws of the State of Texas and has the power
and authority to own its properties and to carry on its respective
business wherever the same shall be located and operated as of the Closing
Date; and, (2) this Agreement has been duly executed and delivered by ORM
Shareholders and constitutes a legal, valid and binding obligation of the
ORM Shareholders enforceable in accordance with its terms.
(d) ORM does not now have, nor will it have on the date of closing,
any known or unknown liabilities or contingent liabilities, except as
specifically set forth on Schedule II, attached hereto.
(e) Counsel for 21st, Xxx X. Xxxxxx, Esquire, shall provide an
opinion to be delivered at the Closing Date to the effect that: (1) 21st
Century Vision, Inc. is a Nevada corporation, validly existing and in good
standing with respect to its corporate charter; (2) that 21st is not under
investigation by the SEC, the NASD or any state securities commission;
(3) that there are no known securities violations; (4) all shares issued
by 21st have been validly issued in accordance with Nevada or Federal law,
are fully paid, are non-assessable and are fully tradeable; and (5) there
are no outstanding options, rights, warrants, conversion privileges or
other agreements which would require issuance of additional shares.
4
5. Conditions to the Obligations of ORM Shareholders. The obligations
of the ORM Shareholders hereunder are subject to the conditions that:
(a) ORM Shareholders shall not have discovered any material error or
misstatement in any of the representations and warranties made by 21st
herein and all the terms and conditions of this Agreement to be performed
and complied with by 21st shall have been performed and complied with.
(b) The ORM Shareholders shall upon request, at the time of closing,
receive an opinion of counsel to the effect that: (1) 21st is a
corporation duly organized and validly existing under the laws of the
State of Nevada, and has the power to own and operate its properties
wherever the same shall be located as of the Closing Date; (2) the
execution, delivery and performance of this Agreement by 21st has been
duly authorized by all necessary corporate action and constitutes a legal,
valid and binding obligation of 21st, enforceable in accordance with its
terms; (3) the securities to be delivered to ORM Stockholders pursuant to
the terms of this Agreement has been validly issued, is fully paid and
non-assessable; and, (4) the exchange of the securities herein
contemplated does not require the registration of the 21st securities
pursuant to any Federal law dealing with the issuance, sale, transfer,
and/or exchange of corporate securities.
6. Closing Date. The closing shall take place on or before May 31,
1996, or as soon thereafter as is practicable, at the Law Offices of Xxx X.
Xxxxxx, 0000 Xxxx Xxxxxxxx Xxxx, Xxxxx X, Xxx Xxxxx, Xxxxxx 00000, or at such
other time and place as the parties hereto shall agree upon.
7. Actions at the Closing. At the closing, 21st and ORM Shareholders
will each deliver, or cause to be delivered to the other, the securities to be
exchanged in accordance with Section I of this Agreement and each party shall
pay any and all Federal and State taxes required to be paid in connection with
the issuance and the delivery of their own securities. All stock certificates
shall be in the name of the party to which the same are deliverable.
8. Conduct of Business, Board of Directors, etc. Between the date
hereof and the Closing Date, ORM will conduct its business in the same manner
in which it has heretofore been conducted and the ORM Shareholders will not
permit ORM to: (1) enter into any contract, etc., other than in the ordinary
course of business; or (2) declare or make any distribution of any kind to
the stockholders of ORM, without first obtaining the written consent of 21st.
Upon closing, the old officers and members of the board of directors of
21st will tender their resignations and a new Board of Directors will be
elected by the shareholders of 21st, which shall consist of the following
individuals.
Xxxxx Xxxxxxx
Xxxxxxx X. Xxxxxx
Xx. Xxxxxx Orm, III
Xxxxxxx Xxxxxx
Xxxx X. Xxxxx, Xx.
Xxxxxxx X. Xxxxxxxxx
5
Upon election of the above Board of Directors, and subject to the
authority of the Board of Directors as provided by law and the By-Laws of 21st,
the new officers of 21st, after the closing date of this Agreement shall be as
follows:
Xxxxx Xxxxxxx President and Chief Executive Officer
Xxxxxxx X. Xxxxxx Chief Operating Officer, Secretary & Treasurer
9. Access to the Properties and Books of ORM. The ORM Shareholders
hereby grant to 21st, through their duly authorized representatives and during
normal business hours between the date hereof and the Closing Date, the right
of full and complete access to the properties of ORM and full opportunity to
examine their books and records.
10. Miscellaneous
(a) This Agreement shall be controlled, construed and enforced in
accordance with the laws of the State of Nevada.
(b) Each of the Constituent Corporations shall bear and pay all
costs and expenses incurred by it or on its behalf in connection with the
consummation of this Agreement, including, without limiting the generality
of the foregoing, fees and expenses of financial consultants, accountants
and counsel and the cost of any documentary stamps, sales and excise taxes
which may be imposed upon or be payable in respect to the transaction.
(c) At any time before or after the approval and adoption by the
respective stockholders of the Constituent Corporations, if required, this
Reorganization Agreement may be amended or supplemented by additional
written agreements, as may be determined in the judgment of the respective
Boards of Directors of the Constituent Corporations to be necessary,
desirable or expedient to further the purpose of this Reorganization
Agreement, to clarify the intention of the parties, to add to or to modify
the covenants, terms or conditions contained herein, or otherwise to
effectuate or facilitate the consummation of the transaction contemplated
hereby. Any written agreement referred to in this paragraph shall be
validly and sufficiently authorized for the purposes of this
Reorganization Agreement if signed on behalf of ORM or 21st, as the case
may be, by its Chairman of the Board, or its President.
(d) This Reorganization Agreement may be executed in any number of
counterparts and each counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
Reorganization Agreement.
(e) This Agreement shall be binding upon and shall inure to the
benefit of the heirs, executors, administrators and assigns of the ORM
Shareholders and upon the successors and assigns of 21st.
6
(f) All notices, requests, instructions, or other documents to be
given hereunder shall be in writing and sent by registered mail:
If to ORM
Shareholders, then: 0000 XxXxxx, Xxxxx 000
Xxxxxx, XX 00000
If to 21st,
then: The Law Offices of Xxx X. Xxxxxx
0000 Xxxx Xxxxxxxx Xxxx
Xxxxx X
Xxx Xxxxx, XX 00000
The foregoing Reorganization Agreement, having been duly approved or
adopted by the Board of Directors, and duly approved or adopted by the
stockholders of the constituent corporation, as required, in the manner
provided by the laws of the States of Nevada and Texas, the Chairman of the
Board, the President and the Secretary of said corporations, and the
Shareholders of ORM do now execute this Reorganization Agreement under the
respective seals of said corporation by the authority of the directors and
stockholders of each, as required, as the act, deed and agreement of each of
said corporations. This Stock-For-Stock Agreement may be signed in two or more
counterparts.
21ST CENTURY VISION, INC.
By: /s/ XXXXXX XXXXXX
Xxxxxx Xxxxxx, President
OPTICAL RESOURCE MANAGEMENT, INC.
By: /s/ XXXXX XXXXXXX
Xxxxx Xxxxxxx, President
7
SHAREHOLDERS OF OPTICAL RESOURCE MANAGEMENT, INC.
Name Number of Shares
----------------------- -----------------
/s/ XXXXXX ORM III 1,900,000
Xxxxxx Orm, III
/s/ XXXXXX XXXXXXX 100,000
Xxxxxx Xxxxxxx
The Palmetto Group 175,000
By /s/ XXXX X. XXXXXX
Its President
The Strateia Group, Inc. 250,000
By /s/ XXX X. XXXXXX
Its President
Micro-Cap, LLC 350,000
By /s/ XXXXXX X. XXXXXX
Its Manager
Exit Strategy, Inc. 150,000
By /s/ X. XXXXXXXXX
Its President
SCHEDULE I
SCHEDULE I
A. OPTICAL RESOURCE MANAGEMENT, INC. Shareholders pre-merger, which shares
are to be exchanged for 21st Century Vision, Inc.'s shares on a one-for-
one basis.
NAME NUMBER OF SHARES
---------------------- --------------------
Xxxxxx Orm, III 1,900,000
Xxxxxx Xxxxxxx 100,000
The Palmetto Group 175,000
The Strateia Group, Inc. 250,000
Micro-Cap, LLC 350,000
Exit Strategy, Inc. 150,000
B. OPTICAL RESOURCE MANAGEMENT, INC. Option Holders pre-merger, which options
are to be exchanged for 21st Century Vision, Inc.'s options containing the
same terms and conditions as the ORM options.
OPTION HOLDERS EXERCISE NUMBER OF EXPIRATION
PRICE SHARES DATE
ENTITLED TO
PURCHASE
--------------------- ------------ -------------- --------------
Xxxxx Xxxxxxx $.10 100,000 12/15/99
$.25 100,000 12/15/99
$.50 50,000 12/15/99
$.50 50,000 12/15/97
$1.00 150,000 12/15/99
$1.50 16,667 12/15/97
Xxxxxxx Xxxxxx $.10 40,000 12/15/99
$.25 30,000 12/15/99
$.50 15,000 12/15/99
$.50 2,000 12/15/97
Schedule I - Page 1
OPTION HOLDERS EXERCISE NUMBER OF EXPIRATION
PRICE SHARES DATE
ENTITLED TO
PURCHASE
------------------------ ------------- ------------- -------------
Xxxxxxx Xxxxxx (cont'd) $1.00 40,000 12/15/99
$1.50 667 12/15/97
Xxxxxx Xxxxxx $.10 24,000 12/15/99
$.25 8,000 12/15/99
$.50 4,000 12/15/99
$1.00 8,000 12/15/99
Xxxxx Xxxxxxx $.10 2,500 12/15/99
$.25 5,000 12/15/99
$.50 2,500 12/15/99
$.50 40,000 12/15/97
$1.00 7,500 12/15/99
$1.50 13,334 12/15/97
Xxxx Xxxxx $.10 2,500 12/15/99
$.25 5,000 12/15/99
$.50 2,500 12/15/99
$1.00 3,500 12/15/99
Xxxxxxxxx Xxxxxxxxx $.50 3,000 12/15/99
Xxxxx Xxxxxxx $.50 4,000 12/15/99
Xxxxx Xxxxxx $.50 3,000 12/15/99
Xxxxxxxx Xxxxxx $.50 2,000 12/15/99
Xxxxx Xxxxxx $.50 2,000 12/15/99
Xxxx Xxxxxxxxxx $.50 4,000 12/15/99
Xxxx Xxxxx $.50 10,000 12/15/99
Xxxxxxxx Xxxxxx $.50 3,000 12/15/99
Schedule I - Page 2
OPTION HOLDERS EXERCISE NUMBER OF EXPIRATION
PRICE SHARES DATE
ENTITLED TO
PURCHASE
----------------------- ------------- -------------- -----------------
Xxxxxx Management $1.00 20,000 6/15/98
$3.00 10,000 6/15/98
Xxxx Xxxxxxxx $.50 10,000 12/15/97
$1.50 3,334 12/15/97
Xxxxxx Orm, III $1.50 250,000 6/15/98
Xxxxxx Xxxxxxx $.50 25,000 6/15/98
Xxxxx XxXxxx $.50 25,000 6/15/98
Marathon Capital $.50 200,000 6/15/98
$1.50 100,000 6/15/98
Micro-Cap, LLC $.50 200,000 6/15/98
$1.50 200,000 6/15/98
KRI Growth Stocks $.50 50,000 6/15/98
$1.50 75,000 6/15/98
Wellstar $.25 100,000 6/15/98
Xxx Xxxxxxx $.50 10,000 12/15/97
$1.50 3,334 12/15/97
Xxxxxxx Xxxxxx $.50 20,000 12/15/97
$1.50 6,667 12/15/97
Xxxxx Xxxxxx $.50 6,000 12/15/97
$1.50 2,000 12/15/97
Xxxxx Xxxxx $.50 7,000 12/15/97
$1.50 2,334 12/15/97
Xxxxx Xxxxxx $.50 3,000 12/15/97
$1.50 1,000 12/15/97
Schedule I - Page 3
OPTION HOLDERS EXERCISE NUMBER OF EXPIRATION
PRICE SHARES DATE
ENTITLED TO
PURCHASE
----------------------- ------------- ------------- --------------
Xxxx Xxxxxx $.50 6,000 12/15/97
$1.50 2,000 12/15/97
Xxxx Xxxxxx $.50 1,000 12/15/97
$1.50 333 12/15/97
Xxxxx Xxxxxx $.50 50,000 12/15/97
$1.50 16,667 12/15/97
Guerilla Management $.50 53,000 6/15/98
$1.50 35,332 6/15/98
Xxx Xxxx $1.00 12,500 6/15/98
$3.00 6,250 6/15/98
Xxxx Xxxxxx $.25 12,500 12/15/97
$.50 12,500 12/15/97
Xxx Xxxxxx $.25 12,500 12/15/97
$.50 12,500 12/15/97
Xxxxx Xxxxx $.25 12,500 12/15/97
$.50 12,500 12/15/97
Xxx Xxxxxx $.25 12,500 12/15/97
$.50 12,500 12/15/97
Xxxxx Xxxxxxx $1.00 25,000 6/15/98
$3.00 12,500 6/15/98
Synergy $1.00 60,000 6/15/98
$3.00 30,000 6/15/98
MFC Group $.50 136,000 6/15/98
$1.00 13,500 6/15/98
Schedule I - Page 4
OPTION HOLDERS EXERCISE NUMBER OF EXPIRATION
PRICE SHARES DATE
ENTITLED TO
PURCHASE
---------------------- --------------- -------------- ---------------
MFC Group (cont'd) $1.50 79,332 6/15/98
$3.00 6,750 6/15/98
Schedule I - Page 5
SCHEDULE II
OPTICAL RESOURCE MANAGEMENT, INC.
FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR'S REPORT
THE TWELVE MONTHS ENDED DECEMBER 31, 1995
AND
AUGUST 1 (INCEPTION OF OPERATIONS)
THROUGH DECEMBER 31, 1994
Eads, Hunter & Company
Certified Public Accountants
0000 Xxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
(000) 000-0000
Fax (000) 000-0000
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Optical Resource Management, Inc.
We have audited the accompanying balance sheets of OPTICAL RESOURCE MANAGEMENT,
INC. as of December 31, 1995 and 1994, and the related statements of income,
retained earnings, and cash flows for the twelve months ended December 31, 1995
and for the period from August 1, 1994 (inception of operations) through
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our Opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of OPTICAL RESOURCE MANAGEMENT,
INC. as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for the initial period then ended in conformity with generally
accepted accounting principles.
/s/ EADS, HUNTER & COMPANY, P.C.
April 1, 1996
OPTICAL RESOURCE MANAGEMENT, INC.
BALANCE SHEET
DECEMBER 31, 1995 AND 1994
ASSETS
1995 1994
CURRENT ASSETS
Cash $ 7,890 $ 0
Accounts receivable
Management fees 235,267 78,001
Other receivables 3,500 0
Development cost of future practice offices 0 16,559
Deferred tax asset 41,000 0
Prepaid assets 9,303 530
---------- --------
Total current assets 296,960 95,090
---------- --------
FIXED ASSETS
Equipment held under capital leases 185,389 62,746
Computer software 8,623 8,104
Office equipment 16,770 538
---------- --------
210,782 71,388
Less accumulated depreciation 45,905 3,598
---------- --------
Net fixed assets 164,877 67,790
---------- --------
OTHER ASSETS
Organization costs, net 3,010 3,850
Deposit 2,407 2,407
Notes receivable 1,595,000 0
---------- --------
Total other assets 1,600,417 6,257
---------- --------
$2,062,254 $169,137
=========== =========
See Notes to Financial Statements.
2
OPTICAL RESOURCE MANAGEMENT, INC.
BALANCE SHEET
DECEMBER 31, 1995 AND 1994
LIABILITIES AND STOCKHOLDER'S EQUITY
1995 1994
CURRENT LIABILITIES
Accounts payable $ 23,545 $ 19,074
Obligations under capital leases
current portion 22,405 18,722
Notes payable - short term 102,500 0
Accrued expenses 92,840 34,067
Interest payable 1,342 0
Deferred tax liability 82,000 0
Income tax payable 1,500 4,481
---------- ----------
Total current liabilities 326,132 76,344
---------- ----------
LONG TERM LIABILITIES
Obligations under capital leases 130,283 40,723
Deferred tax liability 518,000 4,157
---------- ----------
Total long-term liabilities 648,283 44,880
---------- ----------
Total liabilities 974,415 121,224
---------- ----------
STOCKHOLDER'S EQUITY
Common stock - $.001 par value, 25,000,000
shares authorized, 1,000,000 shares
issued and outstanding 1,000 1,000
Paid-in capital 1,000 1,000
Retained Earnings 1,085,839 45,913
--------- --------
Total stockholder's equity 1,087,839 47,913
--------- --------
$2,062,254 $169,137
========== =========
See Notes to Financial Statements.
3
OPTICAL RESOURCE MANAGEMENT, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995 AND
AUGUST 1, 1994 (INCEPTION OF OPERATIONS)
THROUGH DECEMBER 31, 1994
1995 1994
REVENUES
Sale of practice offices - net $ 1,491,115 $ 0
Management fees 388,041 125,102
Cost reimbursements - leased personnel 628,388 235,756
Cost reimbursements - marketing and other 260,311 9,491
------------- -----------
Total revenues 2,767,855 370,349
------------- -----------
OPERATING EXPENSES
Compensation - leased personnel 572,841 207,418
Compensation - administrative personnel 152,479 45,697
Payroll taxes 71,400 20,963
Employee benefits 0 6,751
Rents 60,451 2,654
Communications 5,726 1,192
Supplies 18,564 2,338
Marketing 136,456 8,729
Professional fees 13,758 7,668
Outside services 63,219 4,996
Depreciation 42,307 3,598
Amortization 840 350
Taxes - other 0 125
Interest 13,657 1,909
Miscellaneous 24,369 1,410
------------ ----------
Total operating expenses 1,176,067 315,798
------------ ----------
INCOME BEFORE TAX 1,591,788 54,551
Provision for income tax 551,862 8,638
------------ ----------
NET INCOME 1,039,926 45,913
RETAINED EARNINGS, beginning of year 45,913 0
------------ ----------
RETAINED EARNINGS, end of year $ 1,085,839 $ 45,913
============ ==========
See Notes to Financial Statements.
4
OPTICAL RESOURCE MANAGEMENT, INC.
STATEMENT OF CASH FLOWS
THE TWELVE MONTHS ENDED DECEMBER 31, 1995 AND
AUGUST 1, 1994 (INCEPTION OF OPERATIONS) THROUGH DECEMBER 31, 1994
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,039,926 $ 45,913
Adjustments to reconcile net income to cash
provided by operating activities
Depreciation and amortization 43,147 3,948
Deferred income tax provision 551,862 4,157
Changes in operating assets and liabilities
Accounts receivable ( 160,767) ( 78,001)
Notes receivable ( 1,595,000) 0
Development cost of practice offices 16,559 ( 16,559)
Prepaid assets ( 8,773) ( 530)
Accounts payable 3,141 20,404
Accrued expenses 61,446 32,737
Income tax payable 0 4,481
------------ ---------
Net cash used in operating activies ( 48,459) 16,550
------------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment ( 139,394) ( 71,388)
Expenditures for other assets 0 ( 6,607)
------------ ---------
Net cash used in investing activies ( 139,394) ( 77,995)
------------ ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 0 2,000
Proceeds from short-term debt 102,500 0
Proceeds from capital lease obligations 122,643 62,746
Payments on capital lease obligations ( 29,400) ( 3,301)
------------ ---------
Net cash provided by financing activities 195,743 61,445
------------ ---------
CHANGES IN CASH 7,890 0
CASH, beginning of year 0 0
------------ ---------
CASH, end of year $ 7,890 $ 0
============ =========
Interest paid $ 12,315 $ 1,909
============ =========
See Notes to Financial Statements
5
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. NATURE OF OPERATIONS
The Company's operations generate revenue from two major activities:
(1) selling "stores" to doctors of optometry to be operated under the
Eyemakers trade name. Stores are defined as the furniture, fixtures,
finish out, equipment, and telephone number. Activities which precede
the sale of stores include identifying locations, negotiating and
obtaining facility leases; contracting for and overseeing the tenant
finish-out activities which furnish and equip the location to be a
retail eye-care "store" (defined above) for a doctor of optometry; and
sub-leasing and maintaining the physical location to a doctor of
optometry where a retail eye-care "store" (defined above) has been
established.
During the twelve months ended December 31, 1995, the Company generated
gross revenues of $1,595,000 for this activity (see note 6), and none during
the five months ended December 31, 1994.
(2) executing practice management agreements with licensed doctors of
optometry wherein the Company, among other things, makes available the
following:
* Administrative Functions
computer equipment and software, training of personnel, management and
control systems for inventory, purchasing agent services, communications
concerning new developments in optometric testing, products and
services, and obtaining malpractice/general liability insurance.
* Personnel Management
recruitment, employment, termination, and training of all personnel
necessary for the operation of the store, maintenance of incentive
programs, preparation and maintenance of a personnel manual, and
development of a system to monitor productivity of personnel.
6
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. NATURE OF OPERATIONS (continued)
* Marketing and Advertising
develop plans to promote the location and the store, its services and
products; use of the Eyemakers trade name; develop and maintain a
public relations program; act as purchasing agent to obtain advertising
in mass media; conduct market surveys; design and implement a telephone
marketing, referral and patient call-back program.
* Information Management
maintain patient files; design and implement procedures to ensure
compliance with applicable laws and regulations which govern the
practice of optometry; establish and maintain a post office address;
retain legal counsel to handle matters affecting the practice of
optometry; preparation of accounting records and financial reports;
design and implement a cash management system.
The doctors of optometry who sign the practice management agreements agree
to pay the Company 11% of gross sales for these services.
Since inception, the Company has entered into practice management agreements
(which expire as shown below) with the following persons/entity who had
existing practices as licensed doctors of optometry -
Eyemakers, Inc.,
Xxxxxx X. Orm III, O.D., President July 31, 2004
Xxxxxx Xxxxxxx, O.D., Proprietor August 23, 0000
Xxxxxxxxx XxXxxx, O.D., Proprietor September 14, 2004
Xxxxxx X. ORM, Inc. Jr. [sic], O D., Proprietor November 27, 2005
7
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. NATURE OF OPERATIONS (continued)
During the twelve and five months ended December 31, 1995 and 1994, the
Company generated revenue of $388,041 and $125,102, respectively, which was
based on the unaudited gross sales at each of the Eyemakers stores served by
the Company under existing practice management agreements as shown below:
Unaudited
-----------------------
1994
Locations Owner 1995 (5 months)
--------------------------------------------------------------------------
Mesquite, Town East Mall Eyemakers, Inc. $ 1,827,752 $ 691,006
Dallas, Montfort Rd. Eyemakers, Inc. 643,201 235,581
Garland, Belt Line Rd. DeShaw 298,732 74,472
Bedford, Airport Frwy Xxxxxxx 258,789 70,293
Xxxxxx, Xxxxxx Mall Eyemakers, Inc. 368,508 65,947
Plano, Legacy Drive DeShaw 104,644 0
Richardson, Richardson Mall GE Orm, Jr. 26,017 0
----------- ----------
Total $ 3,527,643 $1,137,299
=========== ==========
Unaudited gross sales at these five locations for the twelve months ended
December 31 were as follows:
Unaudited
----------------------------------------
1995 1994 1993
----------- ------------ -----------
Mesquite, Town East Mall $1,827,752 $ 1,681,714 $1,539,424
Dallas, Montfort Rd. 643,201 432,714 587,695
Garland, Belt Line Rd 298,732 99,884 0
Xxxxxxx, Xxxxxxx Xxxx 258,789 73,158 0
Xxxxxx, Xxxxxx Mall 368,508 65,947 0
Plano, Legacy Drive 104,644 0 0
Richardson, Richardson Mall 26,017 0 0
----------- ------------ -----------
Total $3,527,643 $ 2,353,417 $2,127,119
The first four store locations were started by Eyemakers, Inc., prior to
the formation of the Company. (See Note 3) Eyemakers, Inc. sold Xx. Xxxxxxx
and Xx. XxXxxx their "stores" (as defined above) and received the proceeds
of those transactions. Consequently, the doctors own their locations and do
not pay rent to the Company.
8
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. NATURE OF OPERATIONS (continued)
In addition, the Company is reimbursed for the following costs -
* general and administrative expenses (e.g., supplies)
* salaries, bonuses, employment taxes, and benefit costs of the Company's
personnel which are leased to the doctor of optometry to manage the
store.
* specific marketing and advertising expenditures
2. SIGNIFICANT ACCOUNTING POLICIES
Income Tax - The provision for income tax is based on income recognition for
financial statement purposes and includes the effects of temporary
differences between book income and that recognized for tax return purposes.
Temporary differences at December 31, 1995 include note receivable from sale
of practice office, management receivable, trade payables and accrued
expenses.
Development Costs of Future Locations - All costs associated with
identifying, negotiating, and executing leases for future locations and
finish-out expenditures which become part of the real estate premises are
capitalized and amortized over the life of the leases. All costs associated
with the conversion of the empty lease space into a "store" are accumulated
and charged to cost of sales when the "store" is sold to the doctor.
Accounts Receivable - Receivables include unpaid fees for accounting,
marketing, purchasing and management information services provided to
doctors of optometry and for unpaid direct reimbursement of payroll,
marketing and other pass-through charges. Management of the Company believes
that no allowance for uncollectible accounts is necessary at year end.
Fixed Assets - Computer equipment and software under capital lease, as well
as other software, and office furniture are carried at cost. Book
depreciation is recorded on the straight-line basis over estimated useful
lives of three years.
Accounting Estimates - In preparing financial statement in conformity with
GAAP, management must make estimates based on future events that affect the
reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities as of the date of the financial statements, and
revenues and expenses during the reporting period. Actual results could
differ from these estimates.
9
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
3. RELATED PARTIES
The Company's President and Chief Executive Officer, Xx. Xxxxxx X. Orm III,
is also the sole shareholder of the company. Dr. Orm is also the sole
shareholder of Eyemakers, Inc., a Texas corporation which operates Dr. Orm's
three eye-care stores at the locations identified in note 1.
Total receivables from Eyemakers, Inc. at December 31, 1995 and 1994, were
$204,263 and $54,414, respectively. Total revenues from Eyemakers, Inc.
recorded by the Company for the twelve and five-month periods ended December
31, were as follows:
1995 (12 months)
-----------------------------------------------------
Management Cost Total
Location Fees Reimbursements Revenues
------------------------------------------------------------------------
Mesquite $ 201,052 $ 411,396 $ 612,448
Dallas 71,152 128,982 200,134
Irving 40,578 103,446 144,024
--------- --------- ---------
Total $ 312,782 $ 643,824 $ 956,606
========= ========= =========
1994 (5 months)
----------------------------------------------------
Management Cost Total
Location Fees Reimbursements Revenues
-----------------------------------------------------------------------
Mesquite $ 86,477 $ 155,745 $ 242,222
Dallas 20,185 40,168 60,353
Irving 5,963 14,577 20,540
-------- --------- ---------
Total $112,625 $ 210,490 $ 323,115
======== ========= =========
In August 1995, Xx. Xxxxxx X. ORM, III purchased the Irving Mall location
from the Company for $1,100,000 (see note 6), and the Company sold Orm III's
father the Xxxxxxxxxx location for $400,000.
10
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
4. LEASE COMMITMENTS
The Company has entered into capitalized lease obligations for computer and
medical equipment. Approximate future minimum lease payments for capitalized
lease obligations as of December 31, 1995 are as follows:
1996 $ 64,859
1997 57,450
1998 33,429
1999 28,644
2000 17,970
---------
Total 202,352
Less interest portion 49,664
---------
Total $ 152,688
=========
The Company has also entered into operating leases for the company's
corporate headquarters, the Plano location, and two new locations in Irving
and Xxxxxxxxxx. The Company will sub-lease the space at the two new
locations to the doctors who acquired the "stores."
Approximate future minimum lease payments on non-cancelable operating leases
with initial or remaining non-cancelable lease terms in excess of one year
as of December 31, 1995 are as follows:
1996 $ 183,641
1997 183,941
1998 186,006
1999 188,685
2000 149,104
Thereafter 615,254
-----------
Total $ 1,506,631
===========
11
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
5. INCOME TAX
The net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes are reflected in deferred income taxes. Significant
components of the Company's deferred tax assets and liabilities as of
December 31, 1995 and 1994, are as follows:
1995 1994
------------------------
Deferred tax assets $ 41,000 $ 0
========================
Deferred tax liabilities $600,000 $ 4,157
========================
Significant components of the provision for income taxes attributable to
continuing operations are as follows:
1995 1994
------------------------
Current $ 1,500 $ 4,481
Deferred 550,362 4,157
------------------------
Total income tax $551,862 $ 8,638
The reconciliation of income tax attributable to continuing operations
computed at the Federal statutory tax rate to income tax expense is:
1995 1994
------------------------
Tax at Federal statutory rate $ 557,126 $ 18,547
Surtax exemption (5,264) (9,909)
------------------------
Total $ 551,862 $ 8,638
========================
The deferred tax assets relate to accounts payable, while the tax
liabilities relate to accounts receivable and the gross profit in the
installment notes receivable.
12
OPTICAL RESOURCE MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
6. SALE OF PRACTICE OFFICES
During the twelve months ended December 31, 1995, the Company sold three
"stores" as defined in Note 1. Sales and costs of sales during the twelve
months were as follows:
Location Owner Sale Cost of Sale
-------------------------------------------------------------------------
May 27 Plano DeShaw $ 95,000 $ 49,053
Aug 3 Irving Eyemakers, Inc. 1,100,000 27,114
Nov 27 Xxxxxxxxxx XX ORM, Jr. 400,000 27,718
---------------------------
Total 1,595,000 103,885
---------------------------
Net Sales $ 1,491,115
===========
The sales are financed by the Company over ten (10) years with initial
payments deferred 10 months. Each note bears interest at the following
rates; Plano 10%, Irving 6%, and Xxxxxxxxxx 10%. The collateral by which
each note is secured includes all lease hold improvements, furniture and
equipment, and all business records.
7. COMMITMENTS AND CONTINGENCIES
As of the date of these financial statements, the Company determined that
its activities associated with identifying locations and sub-leasing them to
doctors of optometry constitute the sale of business opportunities (similar
to a franchise). However, no legal opinion has been obtained as to whether
the selling of "stores" constitutes the sale of a security. Management
intends to obtain legal opinions on these matters prior to the end of 1996.
8. SUBSEQUENT EVENTS
In January 1996, the Company reduced its management fee from 11% to 6% of
store gross sales, for all stores opened after January 1, 1996.
13
