Icon placed in receivership, trading halted

What was supposed to be a great merger for laser vision correction was brought to a halt as both Lasik Vision and Icon entered bankruptcy situations.

Issue: July 15, 2001

TORONTO — The Canadian Venture Exchange (CDNX) halted trading on Icon Laser Centers stocks on May 16 after the stocks fell below $0.04 a share. The CDNX is also reviewing the affairs of the company, including its compliance with the requirement for a minimum of three directors, the acceptability of a certain individual in the affairs of the company and the failure to file audited financial statements for the year ended December 2000.

According to Canadian news reports, the company, which operated 38 locations in North America, Italy, Sweden and Britain, was placed in receivership in June. Much like a bankruptcy case, Icon was placed in receivership so the company can avoid liquidation by reorganizing with the help of a court-appointed trustee.

Since its entry into the CDNX exchange on Oct. 11, 2000, Icon’s shares have steadily declined from a purchase price of $1.98 until they reached $0.04 in May.

At press time an Alberta Securities Commission hearing was set for June 22 regarding the Interim Cease Trade Orders that were issued against Icon.

The management of Icon could not be reached for comment.

Trying to stay afloat

On May 17, Icon sent out a press release updating recent corporate developments and changes in management and the board of directors.

The release announced that company insiders, consisting of John Porter, Asclepion-Meditec and Simone Mencaglia, have offered to acquire Icon’s European operations for $6 million, by the assumption of $3 million of Icon debt to Asclepion-Meditec and a $3 million cash investment, of which $1.75 million has already been received by Icon. The balance of the acquisition offer was to be paid over 21 days.

In addition, the European company will acquire 5 million Icon shares at $0.10 per share, subject to regulatory approval. The transaction has been approved by disinterested board members. Successful completion of this transaction would amend John Porter’s agreement to invest $5 million directly into Icon.

Asclepion-Meditec has said that it will maintain a strategic alliance with both Icon and the new European entity. The remaining $7.5 million Meditec debenture, which was to fund the purchase of lasers, will be allocated equally between the two entities based on the number of lasers purchased by each entity. The conversion rate on Icon’s portion of this debenture will be reduced from $2.10 to $0.60, subject to regulatory approval.

The press release states that “the directors have determined that Icon is in serious financial difficulty. This transaction will provide Icon with a necessary cash infusion and improves Icon’s balance sheet by the elimination of the Asclepion-Meditec debenture. In addition, it relieves Icon from the responsibility for financing the growth of the European operations and will allow it to focus on the continued development and improvement of the North American operations. Icon will still require additional capital.”

Icon also announced several changes in its management. Ernest Remo resigned as chairman and director. Simone Mencaglia agreed to resign as CEO in 30 days following a search for a new CEO. Ghassan Barazi resigned as president and director. John Porter resigned as director. Ken Wightman resigned as CFO. George Chajes has been engaged as a consultant. Pat Rooney has been engaged as a consultant pending completion of the CEO search.

Icon said the board of directors now consists of Robert Roy (chairman), Donald Johnson, MD, and Simone Mencaglia.

In a related event, Icon received notice from the British Columbia Director of Employment Standards that the company is liable for approximately $496,000 (Canadian $753,000) in unpaid wages and severance pay to former employees of Lasik Vision Canada.

History

Icon announced its unsolicited bid for Lasik Vision in January. Both companies’ boards of directors announced their agreement to the offer on Jan. 30. The $40 million takeover would enable investors to trade two shares of Lasik Vision stock for one share of Icon stock. The agreement was finalized in February.

However, the takeover was doomed nearly from the start. During a conference call to explain the merging operations, several Lasik Vision doctors called in to inquire when they would be getting paid. Lasik Vision had been withholding payment to doctors due to lack of money. Icon at the time promised to pay the doctors with several outside cash infusions. However, Lasik Vision proved to be too far in the hole.

In late March, Lasik Vision’s employees were informed that the company was unable to meet its payroll obligations, and, as a result, operations at all Lasik Vision locations were suspended. Icon announced in April that its subsidiaries, Lasik Vision Corporation and Lasik Vision Canada would be assigned into bankruptcy.

LVCI attempts to fill void

The similarly named, but unrelated, laser vision correction company Laser-Vision Centers of St. Louis (NASDAQ: LVCI) announced June 13 that it would attempt to help patients and surgeons who were disenfranchised due to Icon’s economic situation.

LaserVision said it has established a toll-free number for patients to call. The number is (800) 410-6244. LaserVision said that it would attempt to assist patients with follow-up or initial treatments by referring them to one of its 700-plus surgeons who currently work within the LaserVision network. LaserVision said it would deal with each patient on a case-by-case basis.

LaserVision also said it would assist any former Icon surgeons who are seeking laser access by providing the surgeons access to one of its fixed or transportable laser systems. Surgeons wishing to contact the company should call (888) 289-5824.

For Your Information:
Icon Laser Eye Centers can be reached at 1 Yonge Street, Suite 1014, Toronto, Ontario M5E 1E5 Canada; (416) 364-0012; fax: (416) 364-7636; Web site: www.iconlasik.com.
Laser Vision Centers can be reached at 540 Maryville Centre Drive, Suite 200, St. Louis, MO 63146; (314) 434-6900; Web site: www.laservision.com.