AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 15, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE PLASTIC SURGERY COMPANY
(Exact Name of Registrant as Specified in its Charter)

GEORGIA 8741 58-2317410
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)

104 WEST ANAPAMU STREET, SUITE G
SANTA BARBARA, CALIFORNIA 93101
TELEPHONE: (805) 963-0400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

DENNIS E. CONDON
CHIEF EXECUTIVE OFFICER
104 WEST ANAPAMU STREET, SUITE G
SANTA BARBARA, CALIFORNIA 93101
TELEPHONE: (805) 963-0400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

COPIES TO:

PAUL A. QUIROS, ESQ.
LYNN S. SCOTT, ESQ.
KING & SPALDING
191 PEACHTREE STREET
ATLANTA, GEORGIA 30303
TELEPHONE: (404) 572-4600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of the Registration Statement.
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If any of the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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. [ ]

CALCULATION OF REGISTRATION FEE

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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
CLASS OF SECURITIES REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE(1)
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Common Stock, No Par Value 2,500,000 $5.19 $12,975,000 $3,425
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(1) Calculated in accordance with Rule 457(c) under the Securities Act of 1933,
as amended, based on the average of the high and low sale prices of the
Common Stock as reported on the American Stock Exchange on January 14, 2000.
This fee was previously paid in connection with the filing of a Registration
Statement on Form S-1 (Registration Number 333-94849) on January 18, 2000.

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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is
not an offer to sell these securities and it is not soliciting an offer to
buy these securities in any state where the offer or sale is not
permitted.

PROSPECTUS DATED FEBRUARY 15, 2000

2,500,000 SHARES

THE PLASTIC SURGERY COMPANY

COMMON STOCK

We may acquire operating assets or the stock of plastic surgery practices
or other assets, companies and businesses in the future. We may issue up to
2,500,000 shares of our common stock in these acquisitions.

We will negotiate the terms of our acquisitions with the owners of the
businesses or assets. We will issue the shares at the market price at the time
we sign an acquisition agreement or when we complete the acquisition. We will
pay all expenses of this offering but will not pay underwriting discounts or
commissions.

Shareholders who receive these shares may also sell their shares under this
prospectus. The shareholders may sell these shares through underwriters,
dealers, brokers, or agents, or directly for market price or a negotiated price.
We will not receive any proceeds from the sale of these shares.

If we close a large acquisition or series of acquisitions that have a
material effect on our financial condition, we will file an amendment to our
Registration Statement. This amendment will provide material information about
the acquisition that would be important to people who purchase our stock after
the acquisition or acquisitions.

We completed our initial public offering of 1,400,000 shares on December
15, 1999. At that time, we had 4,425,282 shares of stock issued and outstanding.
Our stock is traded on the American Stock Exchange under the symbol "PSU." On
February 11, 2000, the last reported sale price of our stock was $6.3125.

SEE RISK FACTORS BEGINNING ON PAGE 6 FOR RISKS THAT YOU SHOULD CONSIDER
BEFORE INVESTING IN SHARES OF OUR COMMON STOCK.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
3

YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE SALE OF COMMON
STOCK MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE
DATE OF THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION
OF AN OFFER TO BUY THESE SHARES OF COMMON STOCK IN ANY CIRCUMSTANCES UNDER WHICH
THE OFFER OR SOLICITATION IS UNLAWFUL.
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TABLE OF CONTENTS

PAGE
----

Prospectus Summary.......................................... 1
Risk Factors................................................ 6
Forward-Looking Statements.................................. 16
Use of Proceeds............................................. 17
Determination of Offering Price............................. 17
Dividend Policy............................................. 17
Capitalization.............................................. 18
Selected Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Business.................................................... 28
Management.................................................. 37
Principal Shareholders...................................... 44
Selling Shareholders........................................ 45
Certain Transactions........................................ 46
Description of Capital Stock................................ 47
Shares Eligible for Future Sale............................. 50
Plan of Distribution........................................ 51
Legal Matters............................................... 51
Experts..................................................... 51
Additional Information...................................... 51
Index to Financial Statements............................... F-1

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
Because this is only a summary, it does not contain all of the information that
may be important to you. You should read the entire prospectus carefully, and
you should consider the information set forth under "Risk Factors" and in our
financial statements and notes, before deciding to invest in shares of our
common stock.

THE PLASTIC SURGERY COMPANY

On December 15, 1999, we began to provide business development services and
Internet solutions to our alliance of 30 surgeons certified by the American
Board of Plastic Surgery, the Board, or Board eligible plastic surgeons, and one
surgeon certified by the Canadian Board of Plastic Surgery, located in 18
metropolitan markets throughout the United States. Our consumer website,
Idealme.com, allows consumers to research available procedures, submit inquiries
regarding cosmetic surgery procedures, view possible cosmetic changes through
online imaging technology, obtain financing for procedures and locate Board
certified cosmetic surgeons. We provide our web-based services free of charge to
consumers, except for a fee for online imaging. Our surgeon website,
ThePlasticSurgeryCo.com, will provide allied surgeons online access to our
national buying program and facilitate "best practices" study groups among our
allied surgeons. Our business development services include the implementation of
strategic business plans, practice-specific consumer awareness programs, patient
financing plans, patient education strategies and materials and related services
and products. We generate substantially all of our revenues from service fees
paid by each practice under our business services agreements which generally
provide for us to receive 15% of the net cash collected by the practice. We have
not conducted any significant operations to date. We began to earn revenues upon
the acquisition of our founding practices on December 15, 1999.

OUR MARKET

The market for plastic surgery, which includes both cosmetic and
reconstructive procedures, exceeds $15 billion per year according to Form and
Figure magazine. We estimate that cosmetic surgery procedures represent
approximately $10 billion of industry revenues and remain 100% private pay
without the expense containment pressures associated with third party
reimbursement. The market for cosmetic surgery procedures has grown rapidly over
the last several years. From 1992 to 1998, facelifts, liposuction and breast
augmentations have increased approximately 75%, 260% and 300%, respectively, and
approximately 2.8 million cosmetic surgery procedures were performed in 1998,
according to a survey by the American Society of Aesthetic Plastic Surgery.
During this period, the Internet has emerged as a global communications medium,
enabling millions of people worldwide to communicate, share information and
conduct business electronically. According to International Data Corporation,
the number of Internet users worldwide will grow from an estimated 97 million in
1998 to an estimated 319 million by 2002. We believe that cosmetic surgeons can
use the Internet to improve the quality of patient education and increase the
efficiency of their practices.

OUR SOLUTION

Our business development services and Internet solutions are designed to
increase the number of procedures performed by our allied surgeons, improve the
quality of patient education and increase practice efficiency. We have a
consumer website and are developing a surgeon website to facilitate the exchange
of information among surgeons and between surgeons and prospective or existing
patients via the Internet. Content on our consumer website, Idealme.com, is a
combination of informational and interactive pages that provides consumers with
information about procedures, outcomes and surgeon qualifications. Idealme.com
allows us to influence purchase decisions at the consumer level and leverage the
clinical expertise and reputation of our allied surgeons. Our surgeon website,
ThePlasticSurgeryCo.com, will provide our allied surgeons online access to our
national buying programs and will facilitate "best practices" study groups among
our allied surgeons, while highlighting the benefits of becoming affiliated with
us.

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We believe our solution provides the following benefits to our consumers
and surgeons:

BENEFITS TO CONSUMERS

- Informs consumers about cosmetic surgery procedures and related topics;

- Allows consumers to view possible cosmetic changes through online imaging
technology;

- Provides online financing plan application and approval;

- Links consumers with both allied surgeons and subscribing surgeons through
our online directory; and

- Offers our online magazines, health and beauty products and related
magazines and books.

BENEFITS TO SURGEONS

- Will offer access to our national buying program;

- Will facilitate "best practices" knowledge sharing and provide an online
forum for allied surgeons;

- Will describe our business to potential allied surgeons and highlight career
opportunities with allied practices;

- Will profile each practice and its surgeons for inclusion on our websites;

- Institutes patient financing plans;

- Implements practice-specific consumer awareness programs; and

- Designates and trains patient coordinators and develops patient education
programs and materials.

OUR STRATEGY

Our goal is to use our business development services and our consumer and
surgeon websites to affiliate with a large number of plastic surgeons and
improve their practices. To achieve this goal, we intend to provide high quality
business development services to our allied surgeons, increase consumer and
surgeon awareness of our websites, analyze each practice's operations and
develop a strategic plan for the practice, attract consumer inquiries regarding
cosmetic surgery information and services and continue to improve and enhance
our services. In addition, we may acquire companies, businesses, or assets that
complement our existing business and that expand our business into the
performance of nonsurgical, noninvasive cosmetic procedures.

OUR HISTORY

Simultaneously with the closing of our initial public offering, 25 separate
plastic surgery practices transferred to us operating assets, including
equipment, inventory, accounts receivable, furniture and other personal
property, in exchange for cash, notes and shares of our common stock, and
entered into long-term business services agreements with us. These founding
practices include 31 plastic surgeons operating 33 offices in 18 metropolitan
markets.

Our executive offices are located at 104 West Anapamu Street, Suite G,
Santa Barbara, California 93101, and our telephone number at that address is
(805) 963-0400. Effective May 13, 1999, we changed our name from Better Image,
Inc. to The Plastic Surgery Company. Our Internet addresses are www.Idealme.com
and www.ThePlasticSurgeryCo.com. While we believe information contained on our
websites is material to our allied surgeons and potential consumers of cosmetic
surgery procedures, such information is not necessarily material to potential
purchasers of our common stock. Investors should only rely on information
contained in this prospectus in making an investment decision.

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The term "allied practice" includes (a) the founding plastic surgery
practices that, upon the closing of our initial public offering, transferred to
us certain of their operating assets and entered into long-term business
services agreements with us and (b) practices that may enter into similar
agreements with us in the future. Allied practices also include plastic surgery
practices that may enter into management services agreements with us but do not
transfer their operating assets to us. The term "allied surgeon" includes each
plastic surgeon who has entered into an employment agreement with an allied
practice. Unless otherwise indicated, references in this prospectus to "business
services agreements" include consulting agreements that we have entered into
with practices in certain states in lieu of business services agreements due to
the regulations in those states.

Unless otherwise indicated, we derived the industry information referenced
in this prospectus from the Plastic Surgery Information Service and from the
National Clearinghouse of Plastic Surgery Statistics, both sponsored by the
American Society of Plastic and Reconstructive Surgeons. Approximately 97% of
all plastic surgeons certified by the American Board of Plastic Surgery are
members of this society.

FUTURE ACQUISITIONS

We plan to use the shares as full or partial consideration for future
acquisitions of the operating assets or stock of plastic surgery practices or
companies, businesses or assets complementary to our existing business. We have
entered into negotiations with five plastic surgery practices with five surgeons
operating five offices in five states. The aggregate consideration to be paid by
us for these pending transfers, if completed, will be approximately $10.3
million, payable up to $4.8 million in cash, $3.8 million in notes, and the
remainder with shares of common stock valued at $8.00 per share, the price to
the public in our initial public offering. The aggregate consideration to be
paid by us with respect to additional future acquisitions will generally be in
some combination of cash, notes, and/or shares of common stock valued at prices
reasonably related to market prices for the common stock prevailing either at
the time an acquisition agreement is executed or at the time the acquisition is
consummated. The future acquisitions will be accounted for as asset acquisitions
at fair market value and will result in subsequent annual noncash amortization
charges for intangible assets in our statement of operations.

RESALE OF SHARES BY SELLING STOCKHOLDERS

This prospectus also relates to the offer for sale or other distribution of
shares by the selling shareholders who will acquire shares in our acquisitions
of assets or stock of plastic surgery practices or of companies, businesses or
assets. The selling shareholders may sell or distribute some or all of their
shares from time to time through underwriters or dealers or brokers or other
agents or directly to one or more purchasers in transactions on any exchange on
which such shares are listed for trading, in privately negotiated transactions,
or in over the counter markets, or in brokerage transactions, or in a
combination of such transactions. Selling shareholders may sell shares at market
prices, at negotiated prices, or at fixed prices, which may change. Broker,
dealers, agents, or underwriters participating in sale transactions as agent may
receive compensation in the form of discounts, concessions from the selling
shareholders (and, if they act as agent for the purchaser of such shares, from
the purchaser.) The discounts, concessions or commissions to a particular
broker, dealer, agent or underwriter might be in excess of those customary in
the type of transaction involved. This prospectus also may be used, with our
consent, by donees of the selling shareholder, or by other persons acquiring
shares and who wish to offer and sell such shares under circumstances requiring
or making desirable its use. To the extent required, we will file, during any
period in which offers or sales are being made, one or more supplements to this
prospectus to set forth the names of selling shareholders and any other material
information with respect to the plan of distribution not previously disclosed.

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RISK FACTORS

Investment in our common stock involves a high degree of risk and could
result in a loss of your entire investment. See "Risk Factors" for a discussion
of various risks associated with an investment in our common stock.

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SUMMARY FINANCIAL DATA

The following financial information for the period from April 30, 1997
(inception) to December 31, 1997 and for the year ended December 31, 1998 is
derived from our audited financial statements. The following financial
information for the nine months ended September 30, 1998 and 1999 and at
September 30, 1999 is derived from our unaudited financial statements. We had no
significant operations until our initial public offering and acquisitions of 25
plastic surgery practices were closed on December 15, 1999.

PERIOD FROM
APRIL 30, 1997 NINE MONTHS ENDED SEPTEMBER 30,
(INCEPTION) TO YEAR ENDED -------------------------------------
DECEMBER 31, 1997 DECEMBER 31, 1998 1998 1999
----------------- ----------------- ----------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Revenue...................... $ -- $ -- $ -- $ --
-------- -------- ------- --------
Total expenses............... 1,888 3,211 1,608 3,207
Other income................. 8 8 5 6
-------- -------- ------- --------
Net loss..................... $ (1,880) $ (3,203) $(1,603) $ (3,201)
======== ======== ======= ========
Basic and diluted net loss
per share................. $(127.31) $(184.47) $(94.40) $(146.67)
======== ======== ======= ========
Shares used in computing
basic and diluted net loss
per share................. 15 17 17 22

SEPTEMBER 30, 1999
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
------- ------------ --------------
(IN THOUSANDS)

BALANCE SHEET DATA:
Cash and cash equivalents................................ $ 11 $ 11 $ 996
Working capital (deficit)................................ (2,814) (10,367) (2,137)
Total assets............................................. 3,467 11,915 12,901
Total long-term liabilities.............................. -- 4,373 4,373
Total shareholders' equity (deficit)..................... 642 (2,889) 5,341

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(1) The pro forma balance sheet data gives effect to our acquisitions of 25
founding practices as if they had occurred on September 30, 1999.

(2) Gives effect to the sale by us of 1,400,000 shares of common stock offered
at an initial public offering price of $8.00 per share, after deducting
underwriting discounts and commissions and offering expenses.

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RISK FACTORS

You should carefully consider the following risk factors, in addition to
the other information set forth in this prospectus, before purchasing shares of
our common stock. Each of these risk factors could adversely affect our
business, operating results and financial condition, as well as adversely affect
the value of an investment in our common stock.

BECAUSE WE HAVE A LIMITED COMBINED OPERATING HISTORY WITH THE FOUNDING
PRACTICES, THERE IS NO HISTORICAL INFORMATION UPON WHICH YOU CAN EVALUATE OUR
COMBINED BUSINESS

We did not conduct any operations or generate any revenues until the
initial public offering of our common stock and acquisitions of 25 founding
practices closed on December 15, 1999. Each of the founding practices operated
prior to that time as a separate, independent entity. The combined historical
financial results of the founding practices cover periods when each practice
operated separately and may not be indicative of our future financial or
operating results. We have never managed plastic surgery practices and have not
demonstrated an ability to do so.

Our lack of operating history resulted in our inability to obtain bridge
financing and required us to raise funds through the issuance of warrants. On
May 13, 1999, we sold 1,390,204 warrants to existing shareholders for $0.50 per
warrant. The warrants have an exercise price of $2.50 per share and were fully
vested on the date of issuance. We received cash proceeds of approximately
$304,000 and the release of liabilities associated with accrued compensation of
approximately $391,000 as payment for the $0.50 purchase price of the warrants.

IF OUR ALLIED SURGEONS WERE TO FAIL TO COMPLETE OR RENEW THEIR EMPLOYMENT
CONTRACTS WITH OUR ALLIED PRACTICES, OR WERE TO RETIRE FROM AN ALLIED PRACTICE
THAT DOES NOT HAVE AN ASSOCIATE SURGEON, OUR REVENUES WOULD DECLINE

We derive substantially all of our revenues from fees we receive for
services we provide to allied practices under our long-term business services
agreements. Our fees under these agreements increase if the revenues of our
allied practices increase, and decrease if the revenues of our allied practices
decrease. However, the success of the allied practices essentially depends upon
the efforts of our allied surgeons, and we do not employ the allied surgeons or
control or own their practices. We do not set the fee schedules for procedures
performed by our allied surgeons. Each individual practice sets its own fees.
Our business services agreements have 20 or 25 year terms, subject to earlier
termination if one party materially defaults in its performance or upon a change
of control. Termination of these agreements or failure by the allied surgeons to
maintain their practices or their medical licenses could reduce our revenues and
negatively affect our financial results. Furthermore, allied surgeons execute
employment agreements with allied practices. These agreements generally have
five year terms. We cannot guarantee that allied surgeons will complete the five
year term or renew their employment at the end of the term. If allied surgeons
do not complete their employment terms or do not renew their contracts, our
revenues will be adversely affected. Some of our allied surgeons are age 60 or
over and may or may not have associate surgeons. We believe 11.6% of our revenue
will be derived from practice revenue generated by allied surgeons age 60 or
over. The presence of associate surgeons at allied practices may provide
continuity to those practices in the event of the death or retirement of allied
surgeons; however, some of the allied surgeons have had associates in the past
and not retained them for a variety of reasons. There can be no assurance that
our allied surgeons will be able to attract and retain associate surgeons, and
the failure to do so may adversely affect our operations over the long-term and
reduce our revenues.

WE INCURRED, AND MAY INCUR IN THE FUTURE, SUBSTANTIAL DEBT TO THE ALLIED
PRACTICES IN CONNECTION WITH THE ACQUISITION OF THEIR OPERATING ASSETS AND DEBT
TO OUR CHAIRMAN AND WE MAY BE UNABLE TO MEET OUR WORKING CAPITAL REQUIREMENTS
AND DEBT SERVICE OBLIGATIONS

In connection with the acquisition of the operating assets of the allied
practices, we incurred a significant amount of indebtedness to the allied
practices. We may incur additional debt in the future to acquire operating
assets of additional practices. On a pro forma basis as of September 30, 1999,
our indebtedness to the allied practices would be approximately $5.3 million and
our working capital deficit, after giving effect to our initial public offering,
would be approximately $2.1 million. The acquisition and merger agreements with
the

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founding allied practices provide for ten to sixty percent of the purchase price
for the assets to be paid by us in five year promissory notes. The notes issued
to these allied practices bear interest at an annual rate of eight percent and
provide for equal payments of principal and interest to be paid monthly. If an
allied practice terminates the service agreement with us, we are not obligated
to make payments under the note to that practice after termination.

The amount of our indebtedness could have important consequences to
purchasers of our common stock, including:

- a substantial portion of our cash flow from operations must be used to
service our debt and will not be available for other purposes;

- our ability to obtain additional debt financing in the future for working
capital, capital expenditures or acquisitions may be limited; and

- our level of indebtedness could limit our flexibility in reacting to
changes in the industry and economic conditions generally.

Our ability to make scheduled payments of principal and interest on the
allied practice notes and to satisfy our other obligations will depend upon our
future operating performance. Our future operating performance will be affected
by general economic, financial, competitive, legislative, regulatory, business
and other factors beyond our control. In addition, we have incurred debt to our
chairman under a $1,050,000 promissory note. See "Certain Transactions." We
believe that the net proceeds of our initial public offering, expected cash flow
from operations and anticipated borrowings under a credit facility we expect to
be established during the first six months of 2000 will be sufficient to pay our
obligations and to fund our ongoing operations and our planned capital needs for
the next 12 months. If we do not generate sufficient cash flow to meet our
obligations we may need additional financing in order to service or extinguish
our indebtedness. We may not be able to obtain financing or refinancing on terms
that are acceptable to us or favorable to us or our shareholders. In the absence
of available financing or refinancing, we could be forced to dispose of assets
in order to make up for any shortfall in the payments due on our indebtedness
under circumstances that might not be favorable to realizing the highest price
for those assets. A substantial portion of our assets consists of intangible
assets, principally goodwill related to the founding practices. If we are not
able to service our indebtedness, we will be forced to adopt an alternative
strategy that may include actions such as reducing or delaying capital
expenditures, selling assets, restructuring or refinancing our indebtedness, or
seeking additional equity capital. We may not be able to effect any of these
strategies on satisfactory terms.

IF THE NON-COMPETITION AGREEMENTS WITH OUR ALLIED SURGEONS WERE FOUND BY A COURT
TO BE UNENFORCEABLE, OUR ALLIED PRACTICES COULD EXPERIENCE INCREASED
COMPETITION, RESULTING IN A DECREASE IN OUR REVENUES

We and each allied practice enter into an acquisition or merger agreement
that allows us to acquire certain operating assets of the allied practice. We
and each allied practice also enter into a long-term business services agreement
that requires us to provide certain business services and requires the practice
to pay us certain fees for those services. The value of the business services
agreements depends in part on the ability of each allied practice to maintain
its business. The allied practice enters into employment agreements with its
allied surgeons, who are owners of the allied practice, that contain non-compete
and other provisions. We are not a party to these employment agreements. The
laws of each state differ concerning the enforceability of covenants not to
compete, but generally states will enforce a covenant to the extent necessary to
protect a legitimate business interest if the covenant does not unreasonably
restrain the allied surgeon or conflict with public interest. The state courts
examine all of the facts and circumstances at the time a party seeks to enforce
a non-compete covenant. Although we have attempted to structure the employment
agreements to allow enforcement, we are not able to predict with certainty
whether or not a court will enforce a covenant in any given situation based on
the facts and circumstances at the time. Since we do not directly employ the
allied surgeons, a court may not allow us to protect our business interest in
preventing an allied surgeon from competing with his former allied practice. If
a former allied surgeon competes with his former allied practice and the courts
refuse to enforce the non-compete covenant, our allied practices would be
subject to increased competition, which could materially and adversely affect
our business, financial condition and results of
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operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- The Founding Practices -- Business Services
Agreements."

DIFFICULTIES IN IMPLEMENTING OUR EXPANSION STRATEGIES MAY ADVERSELY AFFECT OUR
BUSINESS AND PROSPECTS

We intend to acquire the operating assets of additional practices in the
future. Our ability to grow through acquisitions will depend upon:

- the availability of suitable candidates at acceptable acquisition prices;

- the market value of our common stock;

- the availability of capital to complete acquisitions;

- governmental regulation; and

- integration of the allied practices.

In pursuing acquisitions of allied practices, we may compete with other
companies with similar growth strategies. Some of these companies may be larger
and have greater financial and other resources than we have. Competition for
these targets likely would result in increased prices of, and a diminished pool
of, possible targets. If we are not able to consummate future allied practice
acquisitions or are required to pay higher prices, we may not be able to expand
our network of allied surgeons.

Future acquisitions could also have a significant impact on our financial
condition and capital needs and create fluctuations in our quarterly and annual
operating results. We assume certain liabilities in connection with acquisitions
that could have a material adverse effect on our revenues and financial results.
Although we are indemnified by the allied practices for assumed liabilities, any
payments of indemnification amounts could reduce practice revenues available to
pay operating expenses. Future acquisitions may require us to issue additional
stock and incur additional debt. In addition, some acquisitions completed with
the closing of our initial public offering and all acquisitions completed after
the closing of our initial public offering will require us to amortize the costs
of goodwill and intangible assets, which could have a material adverse effect on
our financial results. If our stock does not maintain a sufficient market value
or additional physician practices do not accept stock for part of the
acquisition price, we may be required to use our cash resources more rapidly
than intended. We do not currently have a line of credit or other financing to
fund acquisition costs, and we anticipate that we will need further acquisition
financing in the form of debt or equity. We cannot guarantee that we will be
able to obtain additional financing on favorable terms or at all. If we fail to
obtain additional financing we may not be able to effectively implement our
expansion strategy.

IF OUR AGREEMENTS REQUIRE US TO LOAN FUNDS TO ALLIED PRACTICES AT A TIME WHEN WE
DO NOT HAVE FUNDS AVAILABLE, WE MAY DEFAULT IN OUR OBLIGATIONS TO THE ALLIED
PRACTICES

Under our business services agreements, if a practice does not generate
funds sufficient to cover its operating expenses, we must fund the excess
operating expenses. The amount that we may have to fund is unlimited. Therefore,
we may become obligated to pay excess operating expenses, but we may not have
sufficient funds available to pay these expenses. In such an event, we would be
in breach of our business services agreement with the allied practice, which
would give the allied practice the right to terminate their business services
agreement with us.

If a practice does not generate sufficient funds to cover its operating
expenses and we fund these excess operating expenses on its behalf, we will
record the amount of these operating expenses as a receivable, which will bear
interest. The allied practice will be required to repay this receivable to us
out of its future resources. The obligation of the allied practices to repay
this receivable will not be securitized or prioritized and will not have a
definite maturity date. There is also no guarantee that a practice will generate
sufficient revenue to repay all or a part of any such receivable.

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COMPETITION COULD REDUCE OUR REVENUES

We have no experience in providing services to plastic surgeons, and our
competitors already have extensive experience in providing services. Our
competitors include national and regional providers of management services that
may already provide services to plastic surgeons or may decide to do so in the
future. Some of these competitors may have greater financial, development,
marketing and sales resources than we have. Competition may affect our ability
to attract additional practices and the ability of the allied practices to
compete in their local markets. Allied practices also compete in local markets
with surgeons who perform the procedures traditionally performed by plastic
surgeons for lower prices. Reductions in the numbers of procedures performed or
in the prices for procedures could materially and adversely affect our revenues
and financial results.

There are many companies that provide Internet and non-Internet based
information, marketing and advertising services to the healthcare industry.
These Internet healthcare companies will compete with us for consumer traffic.
We expect competition to increase because there are no substantial barriers to
entry into the market for Internet services. Increased competition could result
in reductions in the fees we receive for subscription services, reduced visitor
traffic to our websites and an inability to obtain content and links to other
sites. Any of these occurrences could materially and adversely affect our
business, financial condition and results of operations. Our principal
competitors in the Internet information area include websites that deliver
consumer healthcare information, either as their sole focus or as part of a more
broadly based site, such as Health Oasis, Intelihealth, iVillage, Onhealth,
Thrive Online, Mediconsult and WebMD, website development firms and general
purpose consumer online service providers. Our ability to compete with our
Internet website services depends on a number of factors, including quality of
content, ease of use, timing and market acceptance of new and enhanced services
and other factors outside our control.

IF WE DO NOT CONTINUALLY ENHANCE AND DEVELOP THE CONTENT AND SERVICES PROVIDED
THROUGH OUR WEBSITES, WE MAY NOT BE ABLE TO ATTRACT CONSUMERS AND SURGEONS AND
INCREASE OUR REVENUES

To remain competitive, we must continue to enhance and improve our
websites' content and services. We will produce only a portion of the editorial
content available on our websites. We rely on third parties for most of our
content. There can be no assurance that acceptable content will be available to
us on favorable terms or at all. Other websites may present the same or similar
content in a superior manner to our websites, which may adversely affect the
number of consumers and surgeons who visit our websites. In addition, we must
continually develop and improve the responsiveness, functionality and features
of our websites and create other products and services that will require the
development or licensing of increasingly complex technologies. We may not
succeed in developing, obtaining or introducing content, features, functions,
products and services that will attract consumers and surgeons.

FAILURE TO INTEGRATE OUR ALLIED PRACTICES AND OTHER ACQUISITIONS COULD STRAIN
OUR MANAGERIAL, OPERATIONAL AND FINANCIAL RESOURCES

We acquired 25 founding practices upon the closing of our initial public
offering, and we anticipate acquiring additional allied practices in the future.
We also anticipate acquiring companies, businesses or assets that complement or
expand our existing business. We must effectively integrate these allied
practices and acquisitions to be successful. This process is time consuming, and
we cannot guarantee that there will not be substantial unanticipated costs or
problems. Acquisitions require us to attract and retain competent and
experienced management personnel and require the integration of accounting
systems, management information systems and other operating systems. Upon our
acquisition of the founding practices, the founding practices will not be fully
integrated into our accounting and management information systems, and we cannot
guarantee that we will be able to successfully complete this integration in the
near future. There can also be no assurance that we will be able to attract
suitable management or other personnel or effectively expand our operating
systems. During the first few months after an acquisition, our expenses related
to an acquisition may exceed the revenue we realize from the acquisition and may
have a negative effect on our short-term operating results. Our financial
results in fiscal quarters immediately following a material acquisition or
series of acquisitions, including the acquisitions of the founding practices,
may decline while we attempt to integrate
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the acquisition or acquisitions. As we pursue our expansion strategy, we may not
be able to continue to successfully integrate acquisitions, and any failure or
inability to do so may cause our revenues to decline. The success of our
expansion strategy will depend on our ability to effectively manage an
increasing number of new acquisitions while continuing to manage our existing
business.

WE MAY BE SUBJECT TO MALPRACTICE LIABILITY BECAUSE OUR ALLIED SURGEONS HAVE
LIABILITY FOR PERFORMING PROCEDURES

Each allied surgeon may be exposed to professional liability and other
claims by providing plastic surgery procedures to the public. Each allied
practice is required to maintain general liability and malpractice insurance. As
a result of providing our business development services, we may be named as a
co-defendant in lawsuits against our allied surgeons. Because we do not practice
medicine, we cannot purchase medical malpractice insurance. We do not control
the practice of plastic surgery or the compliance of the allied surgeons and/or
allied practices with regulations or other requirements relating to the practice
of medicine. Successful claims could result in large damage awards that could
exceed insurance limits. The allied practices indemnify us for liability arising
from malpractice claims but the practices may not have funds available to
indemnify us. Successful claims may reduce our earnings and have a material and
adverse effect on our business, financial condition and results of operation. We
maintain insurance coverage for our directors and officers and general liability
insurance. We believe we have adequate coverage, but large damage awards may
exceed our coverage, require us to pay the expenses of our officers and
directors and reduce our earnings. Also, adequate coverage may not always be
available at acceptable costs and on favorable terms.

GOVERNMENT REGULATION MAY DETRIMENTALLY AFFECT US AND REDUCE OUR SERVICES FEES
AND EARNINGS

The medical industry and plastic surgery practices are regulated
extensively at the state and federal levels. We will not control the practice of
plastic surgery by our allied surgeons. However, review of our business
relationships by regulatory authorities or the courts or changes in the
regulatory environment may result in determinations that could adversely affect
the amount of service fees we receive from our allied practices and negatively
affect our earnings. Certain states prohibit non-medical entities from
practicing medicine, owning all or certain assets of a medical practice,
employing physicians or controlling the content of a physician's advertisements.
Certain states also prohibit physicians from paying any portion of fees received
for medical services in consideration for the referral of a patient or from
paying a percentage of revenue to nonphysicians. In addition, many states impose
limits on the procedures that may be delegated by a plastic surgeon to other
staff members. These laws and their interpretations vary from state to state and
are enforced by regulatory authorities with broad discretion. The legality of
our business services agreements may be successfully challenged and
enforceability of their provisions could be limited and prevent us from
receiving service fees. The laws and regulations of states in which we may seek
to expand may require changes in the form of relationships we enter into with
plastic surgeons. These types of changes could restrict our operations in those
states or prevent us from affiliating with plastic surgery practices in those
states. In addition, the laws and regulations of states in which allied
practices presently operate may change or be interpreted in the future to either
restrict or adversely affect our agreements with allied practices in those
states. Currently, the majority of our business services agreements with
founding practices provide for service fees based on 15% of net cash
collections. If changes in these laws require us to revise these agreements and
use consulting agreements with our fees based on a fixed dollar amount with a
fixed percentage increase, our revenues could be materially and adversely
affected.

The United States Congress has considered various healthcare reform
proposals, including comprehensive revisions to the current healthcare system.
It is uncertain what legislative proposals will be adopted in the future or what
actions federal or state legislatures or third-party payors may take in
anticipation of or in response to any healthcare reform proposals or
legislation. Changes in the healthcare industry, such as the growth of managed
care organizations or provider networks, may result in lower payment levels for
the services of the allied surgeons and lower revenues for us.

Generally, fees received from private pay patients are higher than those
from third party payors that have cost containment requirements. Although
approximately 80% of the founding practices' current revenues
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come from private pay patients, a decrease in the number of private pay patients
could occur due to federal or state legislative initiatives. Currently most
procedures reimbursed under Medicare, Medicaid or other third-party payment
programs (including commercial insurers, managed care organizations, health
maintenance organizations or preferred provider organizations) for plastic
surgery services are related to reconstructive procedures. The costs of most
cosmetic surgery procedures, which currently represent approximately 75% of the
procedures performed by the founding allied surgeons, are not reimbursed by
governmental or private payors and are not subject to cost containment
requirements. Comprehensive healthcare reform that includes reimbursement for
the costs of cosmetic surgery procedures could affect the payment for and
availability of services, including discounted reimbursement rates or more
procedures falling under third-party coverage. These changes could lower the
revenues of the allied practices.

Many states prohibit physicians from using advertising that includes any
name other than the physician's, or from advertising in any manner likely to
lead a person to believe that a non-physician is engaged in the delivery of
medical services. Our business services agreements require all advertising to
conform to these requirements. We have endeavored to structure our websites to
avoid violation of any state licensing requirements, but a state regulatory
authority may allege that some portion of our Internet business violates these
statutes. Any such allegation could result in a material adverse effect on our
business, results of operation and financial condition.

IF ANTITRUST AND MEDICARE/MEDICAID ANTI-KICKBACK LAWS ARE DETERMINED TO APPLY TO
US, WE COULD BE SUBJECT TO FINES AND OTHER PENALTIES AND OUR ALLIED PRACTICES
COULD BE EXCLUDED FROM PARTICIPATION IN FEDERAL HEALTHCARE PROGRAMS

Federal and state antitrust laws are designed to eliminate practices that
interfere with free competition. In particular, these laws prohibit:

- mergers, joint ventures, consolidations, and the acquisition of stock or
assets where the effect may be to substantially lessen competition or
tend to create a monopoly;

- contracts, combinations, and conspiracies that unreasonably restrain
trade;

- monopolization, attempts to monopolize and conspiracies to monopolize;
and

- unfair methods of competition and unfair or deceptive acts or practices,
referrals and kickbacks.

We may be subject to private or governmental investigations or claims.
Violations or alleged violations may result in imprisonment, criminal and civil
fines, treble damages, fees and costs. Federal and state enforcement agencies
have subjected the healthcare industry to increasing scrutiny in recent years
which is likely to continue in the future.

The Medicare/Medicaid anti-kickback statute prohibits the payment or
receipt of any remuneration in return for the referral of patients for services
covered under federal health care programs, including the Medicare and Medicaid
programs, or in return for purchasing, leasing, ordering, or arranging for or
recommending the purchase, lease or order of any item or service that is covered
under a federal health care program. A violation of the anti-kickback statute is
a felony, punishable by imprisonment, fines, or both and may also result in the
imposition of civil money penalties and exclusion from participation in any
federal health care program. The anti-kickback statute has been broadly
interpreted by the courts and enforcement agencies. In addition, many states
have laws that prohibit the payment or receipt of any remuneration in return for
the referral of patients or the purchase of items or services under both
government and private health care programs. Violations of these state laws may
result in payment not being made for the items or services rendered, loss of a
healthcare provider's license, fines, or criminal penalties. These statutes and
regulations vary widely from state to state, are often vague and, in many
states, have not been interpreted by courts or regulatory agencies. Although we
believe that our current business arrangements with allied practices do not
implicate the federal anti-kickback statute or state anti-kickback laws, there
can be no assurance that our business arrangements will not be subject to
scrutiny or an enforcement action or that these laws will not be interpreted in
such a way as to prohibit certain aspects of our current business service
arrangements.

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DUE TO LAWS AND REGULATIONS GOVERNING THE INTERNET, OUR REVENUES MAY DECLINE

There is, and will be, an increasing number of laws and regulations
pertaining to the Internet. These laws or regulations may relate to liability
for information received from or transmitted over the Internet, online content
regulation, user privacy and quality of products and services. In addition, the
applicability to the Internet of existing laws governing intellectual property
ownership and infringement, copyright, trademark, trade secret, obscenity,
libel, employment, personal privacy and other issues is uncertain and
developing.

Our websites retain personal information about our users which we obtain
with their consent. If unauthorized persons penetrate our network security and
gain access to, or otherwise misappropriate, our users' personal information, we
could be subject to liability. Such liability could include claims for the
misuse of personal information, such as for unauthorized marketing purposes or
unauthorized use of credit cards. These claims could result in litigation, our
involvement in which, regardless of the outcome, could require us to expend
significant time and financial resources. Moreover, to the extent any of the
data constitutes or is deemed to constitute patient health records, a breach of
privacy could violate federal law.

The Federal Trade Commission and state governmental bodies have recently
investigated the disclosure of personal identifying information obtained from
individuals by Internet companies. The federal government has also made
legislative proposals in this area. We could incur additional expenses if new
regulations regarding the use of personal information are introduced or if any
regulator chooses to investigate our privacy practices. Any new law or
regulation, or the adverse application or interpretation of existing laws, may
decrease the growth in the use of the Internet or our websites. This could
decrease the demand for our services, increase our cost of doing business and
reduce our earnings. The potential imposition of liability upon us for our
content or services resulting from changes in government regulations could
require us to implement measures to reduce our exposure to this liability, which
might require us to expend substantial resources or to discontinue Internet
service offerings.

IF OUR INTERNET ACTIVITIES BECOME SUBJECT TO TAXATION, OUR CASH FLOWS AND
RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED

A number of legislative proposals have been made at the federal, state and
local level and by certain foreign governments, that would impose additional
taxes on the sale of goods and services over the Internet or Internet related
activities. Such legislation or other attempts at regulating commerce or the
Internet may impair the growth of commerce on the Internet and, as a result,
adversely affect our opportunity to derive financial benefit from such
activities.

IF WE ARE SUBJECT TO CLAIMS BASED ON THE CONTENT WE PROVIDE ON THE INTERNET, WE
COULD INCUR UNANTICIPATED EXPENSES AND BE LIABLE FOR DAMAGES

We may be subject to claims for defamation, negligence, product liability,
copyright, or trademark infringement, or other matters based on content and
information on our websites supplied by us or third parties. These types of
claims have been brought, sometimes successfully, against other online service
companies in the past. We may also be subject to claims or incur liability for
the content on other websites that are linked to our websites or for content and
materials that may be posted by visitors in chat rooms or bulletin boards. Even
if any such claims do not result in liability to us, we could incur significant
costs investigating and defending against such claims and in implementing
measures to reduce our exposure to these types of claims.

BECAUSE OF OUR DEPENDENCE ON BOTH THE SUCCESSFUL LAUNCHING AND CONTINUED
FUNCTIONING OF OUR WEBSITES, OUR BUSINESS WOULD SUFFER IF EITHER WERE TO FAIL

Early stage companies such as ours frequently encounter risks and
difficulties in new and rapidly evolving markets, including the Internet market.
Some of the risks and uncertainties that we face relate to our ability to
design, develop and implement effective marketing and advertising programs for
our websites, build our technical infrastructure to manage our growth
effectively, respond effectively to actions taken by our competitors, attract
consumers to our websites, increase awareness of our brand name, develop visitor
loyalty
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and integrate technologies and services. Our Internet solutions are a key part
of our strategy, and difficulties with our websites could negatively affect our
business and prospects.

The functioning of our websites is important to our business, reputation
and ability to attract consumers and surgeons to our websites. We depend upon
the continuous, reliable and secure operation of Internet servers and related
hardware and software. To the extent that service is interrupted or delayed, we
could experience a decrease in traffic and revenue. We do not at present have
any back up systems or a formal disaster recovery plan. Substantially all of our
communications hardware and some of our other computer hardware operations are
located in northern California. Events such as power losses, telecommunication
failures, computer viruses, electronic break-ins or other similar disruptive
problems could also adversely affect our websites.

Our websites must accommodate a high volume of traffic and deliver
information that is updated frequently. Our websites may experience slower
response times or decreased traffic for a variety of reasons including
technological deficiencies. In addition, our visitors depend on Internet service
providers, online service providers and other website operators for access to
our websites. Many of them have experienced significant outages in the past and
could experience outages, delays and other difficulties due to system failures
unrelated to our systems in the future. Some of the services we expect to
provide, such as video imaging may require technologically advanced systems to
function seamlessly and quickly. We may not be able to develop, acquire and
maintain these services, which failure could have a material adverse effect on
our business, financial condition and results of operation.

The continuous enhancement of our websites is dependent upon the success of
development efforts that will be performed by our employees and by independent
contractors. To the extent that these development efforts are delayed or
unsuccessful, we will incur additional development expenses and may not remain
competitive in the design and use of our websites.

BECAUSE OUR BUSINESS REQUIRES THE SECURE TRANSMISSION OF DATA OVER THE INTERNET,
WE COULD BECOME SUBJECT TO CLAIMS AND OTHER LIABILITIES IF A BREACH OF SECURITY
OCCURS

A significant barrier to communications and commerce over the Internet has
been the need for secure transmission of confidential information. Internet
usage and access by consumers of our websites could decline if a compromise of
security occurs with respect to our websites. We may incur significant costs to
provide security and protect against the threat of security breaches or to
alleviate problems caused by such breaches. Experienced programmers could
attempt to penetrate our network security. Programmers who are able to penetrate
our network security could misappropriate proprietary information or cause
interruptions in our services, and we could be required to expend capital and
resources to protect against or alleviate problems caused. To the extent our
activities involve the storage or transmission of confidential information, such
as credit information, security breaches could expose us to claims, litigation
and other potential liabilities.

IF WE FACE A CLAIM OF INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY OR
FAIL TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, WE COULD BE LIABLE FOR
SIGNIFICANT DAMAGES OR LOSE OUR INTELLECTUAL PROPERTY RIGHTS

We rely on a combination of copyright, trademark and trade secret laws and
contractual provisions to establish and protect our proprietary rights. We have
registered the domain names "www.Idealme.com," "www.ThePlasticSurgeryCo.com,"
and approximately 25 other domain names. However, we have not yet applied for
federal registration of any trademarks, including trademarks for our corporate
name or our domain names, and, thus, we cannot guarantee that we will be able to
secure registration of these names. If we are required to change our corporate
name, current and potential customers could be confused and our business could
be disrupted. Any of these potential effects could seriously harm our business,
prospects, financial condition and operating results. In addition, any name
change effected after this offering could result in confusion to investors,
which could seriously harm the market price of our common stock.

There can be no assurance that the steps we may take to protect our
proprietary rights will be adequate, that we will be able to secure trademark or
service mark registrations for our marks in the United States or in foreign
countries or that third parties will not infringe upon or misappropriate our
copyrights, trademarks,
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service marks, domain names and similar proprietary rights. In addition,
effective copyright and trademark protection may be unenforceable or limited in
certain foreign countries, and the global nature of the Internet makes it
impossible to control the ultimate destination of our services. It is possible
that our competitors or others will adopt product or service names similar to
ours, thereby impeding our ability to build brand identity and possibly leading
to customer confusion. Moreover, because domain names derive value from an
individual's ability to remember such names, we cannot guarantee that our domain
names will not lose their value if, for example, users begin to rely on
mechanisms other than domain names to access online resources.

THE LOSS OF KEY PERSONNEL COULD HARM OUR BUSINESS

Our success depends, to a significant extent, upon the efforts and
abilities of Dennis Condon, David Challoner, Patricia Altavilla and other
members of senior management. The loss of the services of one or more of these
key employees could disrupt our business and expansion strategy and cause our
revenues to decline.

EXISTING SHAREHOLDERS HAVE SUBSTANTIAL CONTROL OVER THE COMPANY AND CAN MAKE
DECISIONS THAT COULD ADVERSELY AFFECT OUR STOCK PRICE

Following the initial public offering, members of management and the owners
of the founding practices beneficially owned approximately 75.4% of our
outstanding common stock (72.7% if the underwriters' over-allotment option is
exercised in full). If these persons acted together, they would have sufficient
voting power to control the outcome of corporate actions submitted to our
shareholders for approval and to control our management and affairs, including
the election of our board of directors.

OUR STOCK HAS A LIMITED TRADING HISTORY AND ITS MARKET PRICE MAY FLUCTUATE
WIDELY

Prior to our initial public offering, no public market existed for our
common stock. We do not know the extent to which investor interest in us will
lead to the development of an active trading market for our common stock or how
our common stock will trade in the future. The market price of our common stock
is likely to be subject to wide fluctuations. The market prices of the
securities of Internet-related companies have been especially volatile and these
securities may be overvalued. If analysts view us as an Internet-related company
and if the market for Internet-related stocks or the stock market in general
experiences a loss of investor confidence, the market price of our common stock
could be materially and adversely affected for reasons unrelated to our business
or results of operations. The initial public offering price was determined by
negotiations between us and the representatives of the underwriters.

The price at which our common stock will trade depends upon a number of
factors, including our historical and anticipated operating results and general
market and economic conditions, some of which are beyond our ability to control.
Factors such as fluctuations in our financial and operating results,
developments affecting us, the markets in which we compete or our industry could
also cause the market price of our common stock to fluctuate substantially. In
addition, the stock market has from time to time experienced extreme price and
volume fluctuations. These broad market fluctuations may adversely affect the
market price of our common stock.

SHARES ELIGIBLE FOR SALE IN THE FUTURE COULD NEGATIVELY AFFECT OUR STOCK PRICE

The market price of our common stock could decline due to sales of a large
number of shares of our common stock or the perception that such sales could
occur. These factors could also make it more difficult for us to raise funds
through future offerings of common stock.

This prospectus relates to the sale of up to 2,999,734 shares of our common
stock by the selling shareholders. We will not receive any proceeds from the
sale of these shares and have prepared this prospectus at our expense. As of
January 10, 2000, prior to the registration of the 2,999,734 shares subject to
this prospectus, approximately 1,400,000 shares of our common stock (1,610,000
shares if the underwriters exercise their over-allotment options in full) or
approximately 31% of the 4,553,708 issued and outstanding shares were freely
tradeable. Pursuant to the terms of the lock-up agreements entered into by the
officers,
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directors and shareholders holding at least one percent of the outstanding
shares and Cruttenden Roth, Incorporated, the managing underwriter in our
initial public offering, 2,918,397 of the shares of our common stock registered
under this prospectus will be eligible for sale on May 2, 2000. Five of the
selling shareholders are not subject to the lock-up agreements and will be
entitled to sell an aggregate of 81,337 shares upon the effective date of this
prospectus. In addition, we are registering 2,500,000 shares to be used in
acquisitions of certain operating assets, or the stock of entities holding
certain operating assets, of plastic surgery practices or of companies,
businesses or assets that complement or expand our existing business.
Additionally, up to 1,779,054 shares of common stock may be issued upon the
exercise of currently vested stock options and warrants and another 354,100
shares are available for grant pursuant to our 1999 Non-Employee Director Stock
Option Plan and our 1998 Employee Stock Option Plan. The sale of such
significant blocks of stock, or even the possibility of such sales, could
adversely affect the prevailing market price of and the trading market for our
shares and reduce the prices available in the market. However, there can be no
assurance that any or all of the shares will be offered for sale by the selling
shareholders.

PROBLEMS RELATING TO THE YEAR 2000 ISSUE COULD ADVERSELY AFFECT OUR BUSINESS

Some of our software programs may not recognize calendar dates beginning in
the Year 2000. As a result of this problem, some of these systems could fail to
operate or fail to produce correct results. Accordingly, we are reviewing our
internal computer programs and systems to determine if they will be Year 2000
compliant. We presently believe that our computer systems will be Year 2000
compliant in a timely manner, but undetected errors or defects may remain.
Furthermore, we depend on third parties for most of the services provided
through our websites. We are in the process of contacting these third party
suppliers regarding their Year 2000 readiness. If these parties are affected by
the Year 2000 problem, our ability to provide services to our subscribers may be
materially adversely affected. For further information, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Impact of Year 2000."

A THIRD PARTY COULD BE PREVENTED FROM ACQUIRING YOUR SHARES AT A PREMIUM TO THE
MARKET PRICE BECAUSE OF OUR ANTI-TAKEOVER PROVISIONS

Certain provisions of Georgia law and certain provisions of our Articles of
Incorporation and Bylaws could delay or impede the removal of incumbent
directors and could make it more difficult for a third-party to acquire, or
could discourage a third-party from attempting to acquire, control of us. Such
provisions could limit the price that investors might be willing to pay in the
future for shares of our common stock. Our Articles of Incorporation and Bylaws
impose various procedural and other requirements (including a staggered board of
directors, advance notice provisions and the issuance of preferred stock as
described below) that could make it more difficult for shareholders to effect
certain corporate actions. The Articles give our board of directors the
authority to issue up to 20,000,000 shares of preferred stock and to determine
the price, rights, preferences and restrictions, including voting rights of such
shares, without any further vote or action by our shareholders. The rights of
holders of common stock will be subject to, and may be adversely affected by,
the rights of the holders of any preferred stock issued in the future. The "fair
price" and "business combinations" statutes under Georgia law we adopted may
restrict certain business combinations by interested shareholders. Our business
services agreements contain change in control provisions which give allied
practices the right to terminate the business services agreements if any
"person" as defined in the Securities Exchange Act of 1934 through acquisition
or aggregation, becomes the beneficial owner directly or indirectly of 15% or
more of the combined voting power of our outstanding voting stock. These change
in control provisions may hinder, delay, deter or prevent a tender offer, proxy
contest or other attempted takeover because of the potential loss of revenue if
the business services agreements are terminated.

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FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. We have based these
forward-looking statements largely on our current expectations and projections
about future events and financial trends affecting the financial condition of
our business. These forward-looking statements are subject to a number of risks,
uncertainties and assumptions about us, including among other things:

- General economic and business conditions, both nationally and in our
markets;

- Our acquisition opportunities;

- Our expectations and estimates concerning future financial performance,
financing plans and the impact of competition;

- Successful implementation of our growth strategy;

- Anticipated trends in our business;

- Existing and future governmental regulations affecting our business; and

- Other risk factors set forth in the "Risk Factors" section of this
prospectus.

In addition, in this prospectus, the words "believe", "may", "will", "estimate",
"continue", "anticipate", "intend", "expect", "could", "should", "would" and
similar expressions, as they relate to us or our management, are intended to
identify forward-looking statements.

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CAPITALIZATION

The following table sets forth our historical, pro forma, and pro forma as
adjusted capitalization as of September 30, 1999, after deducting underwriting
discounts and commissions and estimated offering expenses. You should read the
following table in conjunction with the Unaudited Pro Forma Balance Sheet and
related notes and our audited financial statements and accompanying notes
included elsewhere in this prospectus.

SEPTEMBER 30, 1999
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(2)(3)
------- ------------ ------------------
(IN THOUSANDS)

Current portion of long-term debt and notes payable..... $ -- $ 7,607 $ 892
======= ======== ========
Total long-term debt.................................... $ -- $ 4,373 $ 4,373
Shareholders' (deficit) equity:
Preferred stock; 20,000,000 shares authorized; no
shares issued and outstanding...................... -- -- --
Common stock, no par value; 100,000,000 shares
authorized; 25,548 shares issued and outstanding,
actual; 3,050,282 shares issued and outstanding,
pro forma; 4,450,282 shares issued and outstanding,
pro forma as adjusted(4)........................... -- -- --
Additional paid-in capital............................ (2,437) (943) 7,287
Warrants.............................................. 11,363 11,363 11,363
Accumulated deficit................................... (8,284) (13,309) (13,309)
------- -------- --------
Total shareholders' (deficit) equity.......... 642 (2,889) 5,341
------- -------- --------
Total capitalization.......................... $ 642 $ 1,484 $ 9,714
======= ======== ========

- ---------------

(1) The pro forma balance sheet data gives effect to our acquisitions of 25
founding practices as if they had occurred on September 30, 1999.
(2) Gives effect to the sale by us of 1,400,000 shares of common stock in our
initial public offering at the initial public offering price of $8.00 per
share, after deducting underwriting discounts and commissions and estimated
offering expenses.
(3) Does not include up to 210,000 shares that the underwriters may purchase
from us if they exercise their over allotment option.
(4) Excludes an aggregate of (a) 1,552,104 shares issuable upon exercise of
stock options and warrants outstanding as of September 30, 1999, (b)
1,017,750 shares issuable upon exercise of stock options and warrants that
were issued upon the closing of our initial public offering and (c) an
aggregate of 140,000 shares issuable upon exercise of warrants that were
issued to the representatives of the underwriters upon completion of our
initial public offering.

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SELECTED FINANCIAL DATA

The following financial information for the period from April 30, 1997
(inception) to December 31, 1997 and for the year ended December 31, 1998 is
derived from our audited financial statements. The following financial
information for the nine months ended September 30, 1998 and 1999 and at
September 30, 1999 is derived from our unaudited financial statements. Except
where indicated, this information does not reflect the acquisition of the
founding practices or the closing of our initial public offering. We had no
significant operations until the initial public offering was closed on December
15, 1999.

AS OF DECEMBER 31, AS OF
------------------ SEPTEMBER 30,
1997 1998 1999
----- ------- -------------

BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 184 $ 403 $ 11
Working capital (deficit)............................. (176) (1,348) (2,814)
Total assets.......................................... 202 440 3,467
Total long-term liabilities........................... -- -- --
Total shareholders' (deficit) equity.................. (158) (1,311) 642

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with
our financial statements and related notes included elsewhere in this
prospectus.

OVERVIEW

We provide business development services and Internet solutions to our
alliance of 30 Board certified or Board eligible plastic surgeons and one
surgeon certified by the Canadian Board of Plastic Surgery located in 18
metropolitan markets throughout the United States. In the future we intend to
provide business services and acquire certain assets of, or to manage,
additional plastic surgery practices. In addition, we may acquire companies,
businesses or assets that complement or expand our existing business. We may
expand our business into the performance of nonsurgical, noninvasive procedures.
Our Internet strategy is important to our business. We have two proprietary
websites: Idealme.com, our consumer website; and ThePlasticSurgeryCo.com, our
surgeon website. Idealme.com allows consumers to research available procedures,
submit inquiries regarding cosmetic surgery procedures, view possible cosmetic
changes through online imaging technology, obtain financing for procedures and
locate Board certified cosmetic surgeons. ThePlasticSurgeryCo.com will provide
allied surgeons online access to our national buying programs and facilitate
"best practices" study groups among our allied surgeons. We acquired the
operating assets of the founding practices on December 15, 1999 and we have not
conducted any significant operations or earned any revenue to date. We believe
that we will generate substantially all of our future revenues from service fees
earned under our business services agreements with allied surgeons, which
generally provide for us to receive 15% of the net cash collected by each
practice.

THE FOUNDING PRACTICES

Upon the closing of our initial public offering, we become aligned with 31
plastic surgeons. Simultaneously with the closing of offering, we entered into
business services agreements with 16 founding practices, accounted for pursuant
to SAB 48, and 9 additional founding practices, accounted for based on the fair
value of the assets. The fair value acquisitions resulted in approximately $7.4
million of intangible assets which will be amortized over periods ranging from
10 to 15 years. SAB 48 is a Staff Accounting Bulletin which was issued by the
Securities and Exchange Commission. Our transactions with the 16 founding
practices that were accounted for under SAB 48 involved the transfer of
nonmonetary assets, primarily medical and surgical equipment, from the founding
practices in exchange for cash and common stock. The amount of cash and notes
payable received by each of these 16 founding practices did not exceed 25% of
the total value of the founding practice. The shareholders of these 16 founding
practices are considered promoters. SAB 48 requires the transfer of nonmonetary
assets by promoters for stock of a company prior to or at the time of an initial
public offering to be recorded at the historical cost basis of the assets
transferred. Therefore, we accounted for the transfer of nonmonetary assets from
these 16 founding practices under SAB 48 and recorded the nonmonetary assets
transferred at their historical costs.

The aggregate consideration paid by us to the founding practices was
approximately $35.7 million, including 2,999,734 shares of common stock based on
an initial public offering price of $8.00 per share, approximately $5.3 million
in promissory notes and approximately $6.4 million in cash, all of which was
payable at the closing of the transfer of assets of the founding practices,
which occurred simultaneously with the closing of the initial public offering.
Cash proceeds from the offering were be used to pay the cash portion of the
consideration. See "Use of Proceeds."

Nine of our founding practices resulted from our acquisition in May 1999 of
the right to negotiate business services agreements with plastic surgery
practices originally contacted by ISIS Cosmetic Surgery Partners, Inc. ISIS, a
company not affiliated with us, had entered into letters of intent, which
included an exclusive negotiations clause, with certain plastic surgery
practices. We began preliminary discussions with ISIS in February 1999. In May
1999, ISIS entered into an agreement with us when it was unable to obtain
financing necessary to execute its business plan. Under this agreement, we
purchased ISIS's exclusive

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negotiation rights with respect to these plastic surgery practices for 6,148
shares of common stock and cash of approximately $400,000. We accounted for the
purchase of these rights as an asset acquisition and will amortize the
intangible asset over 14 years. The amortization period for the contract rights
purchased from ISIS was determined by reference to the amortization periods for
the business services agreements with the founding practices resulting from the
transaction with ISIS. The 14-year period was calculated as a weighted average
of the amortization lives and resulting intangible assets for these business
services agreements. Upon the closing of our initial public offering, we entered
into business services agreements with these plastic surgery practices. As a
result of entering into these business services agreements, we will record
intangible assets that will be amortized over periods ranging from 10 to 15
years.

Intangible assets consist of the excess of the purchase price over the fair
value of the net assets acquired from the asset acquisitions at fair value and
the transaction with ISIS. For these allied practices, the business services
agreements have a term of 25 years. We have allocated these intangible assets to
the value obtained through entering into business services agreements. We
believe that no other identifiable intangible asset was generated by these
acquisitions. We will amortize the intangible assets over the estimated useful
lives taking into consideration various qualitative factors, including the terms
of the business services agreements. We consider the unique characteristics of
each practice being managed and uncertainties resulting from our inability or
the practice's inability to perform over the term of the business services
agreements. These factors take into consideration the probability that a
practice will be able to extend its existence indefinitely and thus enable us to
recover, through profitable operations, the carrying value of the intangible
assets. These factors include the following:

- The strength of the local market as evidenced by such factors as location
in the United States, market demographics, and the number of plastic
surgery procedures performed in the market;

- Market recognition of the practice name;

- The existence of business services agreements with other practices in the
same market that could provide continuity of the practice, if necessary;

- The number of surgeons in the practice;

- The ages of the surgeons in the practice;

- The historical operating experience of the practice;

- Past experience of the practice in attracting and retaining associates;
and

- The terms and conditions of the employment agreements with the surgeons.

We considered the above factors for each individual practice acquired to
determine the appropriate amortization life of between 10 and 15 years. The
primary factors we considered for practices that will be amortized over a 10
year period included the older age of the allied surgeon and the lack of an
associate surgeon or an affiliated practice in the market. The primary factors
we considered for practices that will be amortized over a 15 year period
included the relatively younger age of the allied surgeon, the larger size of
the market in which the allied surgeon is located, the favorable historical
operating results of the allied practice, and either the addition of an
associate in the practice, the active search by the allied surgeon for an
associate surgeon or the existence of an affiliated practice in the same market.

We review the carrying value of our long-lived assets and goodwill at least
quarterly on a practice by practice basis to determine if facts and
circumstances exist which would suggest that assets might be impaired or that
the amortization period needs to be modified. Among the factors we consider in
making the evaluation are changes in the practices' market position, reputation,
profitability, geographic penetration, the relationship with the physicians and
any changes in the legal or regulatory environment. If facts and circumstances
are present which may indicate that the carrying amount of the asset may not be
recoverable, we will prepare a projection of the undiscounted cash flows of the
specific practice and determine if the long-lived assets and/or goodwill are
recoverable based on these undiscounted cash flows. If the carrying value of the
assets exceeds the undiscounted cash flow, then we will adjust the carrying
amount of these assets to their estimated fair

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value. We will determine estimated fair value by reference to quoted market
prices, if available, or by considering the prices for similar assets or the
results of valuation techniques that include the present value of the estimated
future cash flows.

Each allied surgeon affiliated with the founding practices is Board
certified, except for two surgeons who are eligible for Board certification and
one surgeon who is certified by the Canadian Board of Plastic Surgery. Board
certification requires that the surgeon graduate from an accredited medical
school, complete at least five years of additional residency, practice plastic
surgery for two years and pass comprehensive written and oral examinations. Each
allied surgeon, in his sole discretion, determines the fees to be charged for
services provided to patients based on market conditions and other factors
deemed appropriate by the allied surgeon.

We recognize revenue from providing services to the practices pursuant to
the business services agreements on a monthly basis as each practice collects
its cash. The business services agreements provide that each practice will pay
our fees based on a percentage of the net cash collected by that practice. Our
revenue consists of the sum of the service fee and amounts equal to the
operating expenses of the practice assumed by us under the business services
agreements. We will separately disclose in our future financial statements the
revenue from service fees and operating expenses. The operating expenses of the
practice that are our responsibility and which we are legally obligated to pay
include the following:

- salaries, benefits, payroll taxes, workers compensation, health
insurance and other benefit plans, and other direct expenses of
non-medical employees that are our employees located at the practice;

- direct costs of all employees or consultants that provide services to
each practice's office;

- medical and office supplies;

- lease or rent payments, utilities, telephone and maintenance expenses
for practice facilities;

- property taxes on our assets located at the practice offices;

- property, casualty and liability insurance premiums, excluding
malpractice insurance which is the responsibility of the practice;

- surgeon recruiting expenses; and

- advertising and expenses attributable to the promotion of practice
offices.

We assume all of the above expenses and pay the third-party provider of the
goods and services. These expenses will be recorded in our financial statements
as expenses because we are legally obligated to pay them. In exchange for
assuming these expenses and providing business services, we will record revenue
in amounts equal to the assumed expenses plus the service fee described above.

The practice will retain the responsibility for payment of any and all
direct employment expenses, including benefits, for any surgeon or other
employee that we are prohibited from employing by applicable law. In addition,
the practice will retain responsibility for the payment of expenses for
continuing education, seminars, professional licenses, professional membership
dues and malpractice insurance and all other expenses of any surgeon. These
expenses that remain the responsibility of the practice will not be included in
reimbursed operating expenses which is a component of our revenue.

Acquisition Agreements. We have entered into acquisition agreements with
each of the founding practices or the allied surgeons. These acquisition
agreements may be in the form of an asset purchase and sale agreement, a stock
purchase and sale agreement or an agreement and plan of reorganization whereby
we merge with the allied practice. Based on applicable state laws and
regulations, the operating assets of each practice, which include equipment,
inventory, accounts receivable, furniture and other personal property, or some
combination, will be transferred to us pursuant to the acquisition agreements.
As consideration for entering into an acquisition agreement, we will pay
consideration consisting of a combination of common stock, notes and cash.

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Business Services Agreements. We have entered into business services
agreements with each of the founding practices. These agreements may be in the
form of a service agreement or consulting agreement as dictated by state law.
Each service agreement generally requires that we provide the following services
for the allied practices:

- acquisition and maintenance of specified furnishings and equipment;

- provision of suitable offices and facilities;

- payroll processing;

- employment of necessary personnel, excluding plastic surgeons and certain
medical personnel;

- development of business systems procedures and forms;

- procurement and inventory management;

- assistance in acquiring malpractice insurance;

- cash management;

- assisting with advertising, marketing and practice development;

- development of appropriate business systems;

- supervision, management and organization of files and records; and

- financial reporting and analysis.

If we enter into a lease on behalf of the allied practice, the allied practice
will sublease from us. Under the service agreements, we will recognize revenues
in amounts equal to the assumed expenses plus service fees based on the net cash
collected. In future agreements, we may recognize revenues in amounts equal to
the assumed expenses plus a fixed dollar amount with annual fixed percentage
increases.

If required by applicable state law or regulations, an allied practice may
enter into a consulting agreement with us that contains certain of the same
provisions as the service agreement, including: (a) provisions relating to the
obligation to loan funds to the allied practice in the event the allied practice
is unable to pay its current expenses, (b) repurchase of assets and assumption
of liabilities by the allied practice upon expiration or termination, (c)
covenant not to compete, and (d) indemnification. Under the consulting
agreement, we will provide the following services to allied practices in
exchange for a fixed dollar annual fee with annual fixed percentage increases:

- consulting with respect to equipment and office needs;

- preparing staffing models appropriate for the allied practice;

- advising and training with respect to business systems;

- purchasing and maintaining inventory;

- advising with respect to and providing or arranging accounting and
bookkeeping services;

- assisting with the acquisition of malpractice insurance;

- advising with respect to developing a marketing plan;

- assessing the financial feasibility of establishing new offices;

- providing billing and collection services; and

- assisting the allied practices in organizing and developing filing and
recording systems.

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The business services agreements have either 20 or 25 year terms for the
founding practices, beginning on the date of our initial public offering. We
anticipate executing business services agreements with 25 year terms for each
allied practice affiliated with us after our initial public offering. The
business services agreements are subject to termination by either party in the
event the non-terminating party becomes subject to voluntary or involuntary
bankruptcy proceedings or materially breaches the agreement, subject to a cure
period. The allied practices may also terminate the business services agreements
if we are subject to a change of control not approved by our board of directors.
Upon the termination of the business services agreements, except upon our
breach, the allied practice and its shareholders are subject to a two year
covenant not to compete which prohibits within a specified territory the
following (a) advertising in print and electronic media; (b) soliciting
patients, surgeons or staff associated with the allied practice; and (c)
soliciting any referrals from any physician who referred one or more patients to
the allied practice within three years prior to the date of such termination.

Pursuant to these business services agreements, we pay the operating
expenses of a practice. To the extent a practice's operating expenses exceed
revenues, we pay the excess but the allied practice will be obligated to repay
us, with interest, out of future revenues. The obligation of the allied practice
to repay these advances will not be securitized or prioritized and will not have
a definite maturity date. Under the business services agreements, the allied
surgeons maintain full control over and ownership of the allied practices,
determine which clinical personnel will be employed by the allied practices and
establish their own practice standards to promote quality plastic surgery care.
We do not engage in the practice of medicine. Each allied surgeon is responsible
for the compliance of his or her allied practice with state and local
regulations, licensing and certification requirements applicable to the practice
of plastic surgery.

Employment Agreements. Each allied surgeon who is an equity holder in an
allied practice or who provides plastic surgery services through an allied
practice an average of more than ten days a month either at the time of
execution of the business services agreement or any time thereafter is required
to execute an employment agreement with the allied practice. Each employment
agreement generally provides that the allied surgeon will perform professional
services for the allied practice over a period ranging from 5 to 25 years,
commencing on the date of the offering, with automatic renewal for additional
one year terms. After the expiration of the initial term, either the allied
practice or the allied surgeon may terminate the employment agreement at any
time without cause by giving ninety days' prior written notice. Each allied
surgeon's compensation will be a percentage of the net cash collected by the
allied practice after the payment of the service fee and all operating expenses
of the allied practice, with such percentage to be determined by the allied
practice. The allied surgeon agrees that upon termination or expiration of the
employment agreement, he or she will not compete for a period of two years in
the market in which the allied practice operates an office, will not solicit
former patients of the allied practice, will not solicit referrals from any
physician who referred one or more patients to the allied surgeon or the allied
practice within the two years prior to the termination, and will limit the
methods of advertising in the area in which any allied practice is located.

FINANCING PLANS

Third party financing companies will provide online financing for patients
of our allied practices and will be responsible for the approval and application
process. These companies will assume all of the risks related to financing. The
individual practice will receive a payment from these companies equal to 85% to
90% of the financed amount. These companies will not have any recourse against
the individual practices or us for any unpaid balances. Application and approval
procedures will be instituted by these companies and terms of payment will vary
based on the creditworthiness of the patient. Our employees located at the
allied practice will bill patients for services.

POSSIBLE SOURCES OF FUTURE REVENUES

After the closing of our initial public offering, we also intend to enter
into "management services agreements," rather than "business services
agreements," with select plastic surgery practices. Pursuant to management
services agreements, we will provide business development services and Internet
solutions and receive service fees. The expenses we expect to incur under the
management services agreements will be
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substantially the same as the expenses we expect to incur under the business
services agreements. We will recognize revenues from these agreements based on a
percentage of the net cash collected by the allied practice which is
commensurate with the level and timing of services being provided. We will not
acquire operating assets of allied practices entering into management services
agreements, and we will not assume the operating expenses of these practices.
Because we will not assume the operating expenses of the practices entering into
management services agreements, we will not record the operating expenses as
revenue or expense in our income statement.

We list on Idealme.com cosmetic surgeons who are not allied with us and are
located in areas where we are not affiliated with an allied practice. After a
few months, we will contact these surgeons to determine whether they want to
continue to be listed in our directory. If so, we intend to enter into
subscription agreements with these surgeons to allow them to continue to be
included in the directory of Board certified or Board eligible cosmetic surgeons
on Idealme.com. These subscribing surgeons listed on our website directory will
be listed for the convenience of potential consumers located in areas where we
are not affiliated with an allied practice. We do not and will not investigate
the qualifications of the surgeons who subscribe for this service. Our website
will advise consumers to independently investigate each surgeon's
qualifications. Subscribing surgeons will pay us a fee for the directory listing
which we will recognize as revenue as it is earned. We may generate future
revenues from the sale of products and services through our proprietary
websites. The revenue generated may include fees from banner and sponsorship
advertising, subscriptions to our online magazine and video imaging.

RESULTS OF OPERATIONS

Our initial public offering and the acquisition of the operating assets of
the founding practices closed on December 15, 1999. We have not conducted any
significant operations to date. We began to earn revenues upon the acquisition
of the founding practices on December 15, 1999.

From inception through September 30, 1999, we incurred start-up costs of
approximately $8.3 million, consisting primarily of operating expenses such as
salaries, consulting fees, rent and professional fees. The cumulative cash
outlay for our start-up expenses was approximately $2.3 million from inception
(April 30, 1997) to September 30, 1999.

For the period from inception (April 30, 1997) to December 31, 1997, the
year ended December 31, 1997 and the nine months ended September 30, 1998 and
1999, salaries, wages and benefits included salaries for all of our employees,
compensation expense related to the issuance of equity securities and related
employee benefits. For the period from inception to December 31, 1997, we
incurred approximately $1.2 million in compensation expense related to warrants
and stock that we issued to employees and non-employees. For the year ended
December 31, 1998, we incurred approximately $788,000 in compensation expense in
connection with our issuance of stock to employees and non-employees. For the
nine months ended September 30, 1999, we incurred approximately $1.1 million in
compensation expense in connection with the issuance of warrants to employees
and non-employees. The remaining salaries, wages and benefits differs between
the period from inception (April 30, 1997) to December 31, 1997, the year ended
December 31, 1998 and between the nine months ended September 30, 1998 and 1999,
due to the addition of several senior management members in 1998 and 1999.

General and administrative expenses primarily include professional fees,
office expenses and accrued relocation expenses. Professional fees have
increased since inception. Additionally, in 1998, we accrued approximately
$175,000 for relocation expenses for lease obligations that we cancelled upon
our corporate relocation to Santa Barbara, California.

Other income is from investments in money market funds of our proceeds from
the sale of our common stock. This income differs among periods primarily due to
the amount of cash invested.

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LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our start-up costs primarily through
private sales of our securities. Our lack of operating history resulted in our
inability to obtain bridge financing and required us to raise funds through the
issuance of warrants. On May 13, 1999, we sold 1,390,204 warrants to existing
shareholders for $0.50 per warrant. The warrants have an exercise price of $2.50
and were fully vested on the date of issuance. We recorded the excess of the
fair value of the warrants of approximately $9.3 million as a charge to
additional paid-in capital as the warrants were a cost of raising funds for our
operations. We received cash proceeds of approximately $304,000 and the release
of liabilities associated with accrued compensation of approximately $391,000 as
payment for the $0.50 purchase price of the warrants. The non-cash proceeds from
the offering were used to offset accrued compensation of approximately $391,000
and the cash proceeds of approximately $304,000 were used to fund our operating
expenses, primarily rent and related expenses, travel, advertising, development
and professional services. If the acquisitions of the founding practices had
occurred on September 30, 1999, we would have had a pro forma working capital
deficit of approximately $2.1 million, including the accrual of $5.3 million for
cash payable to the founding practices. We require capital for the following
purposes:

- to fund the cash portion of the acquisitions of the founding practices of
approximately $6.4 million;

- to pay accrued salaries and consulting fees of our employees or
consultants of approximately $529,000;

- to repay indebtedness of the founding practices of approximately
$485,000;

- to pay amounts owed to allied practices pursuant to notes issued in the
acquisitions of the founding practices;

- to pay amounts owed to our chairman pursuant to a $1,050,000 promissory
note;

- to pay, if necessary, operating expenses;

- to form additional affiliations with plastic surgery practices;

- to pay costs associated with the development and maintenance of our
websites; and

- to fund corporate costs for providing business services.

The notes issued in the acquisitions of the founding practices bear
interest at 8% per annum and provide for equal monthly payments of principal and
interest over the five year term of the note.

Each business services agreement obligates us, with no limitation, to pay
the operating expenses of an allied practice. These operating expenses will be
paid out of individual practice cash accounts that we control. To the extent a
practice's operating expenses exceed its revenues, we will be required to pay
any excess expense but the allied practice will be obligated to repay this
amount to us with interest. We will record this amount as a receivable from the
practice bearing interest at the prime rate as published in The Wall Street
Journal plus one percent. The allied practice will be required to repay any
receivable to us out of its future revenues. This receivable will be repaid
after the payment of the service fee and before the allied surgeon receives any
compensation. There is no defined payment date related to this receivable. We
intend to fund these excess operating expenses from working capital or
borrowings under a credit facility, which we anticipate establishing following
the closing of the offering. Since approximately 75% of the procedures performed
by our allied surgeons are cosmetic with fees generally paid no later than the
time the procedure is performed, we believe that our requirement to finance the
excess operating expenses of the allied practices can be funded through our
working capital. In addition, our allied practices must pay our service fees and
their operating expenses before the surgeons receive any funds from the
practice. We do not believe that a lag in collections of patient receivables
would occur or if occurred would significantly affect our liquidity.

We believe that the net proceeds of our initial public offering, expected
cash flow from operations and anticipated borrowings under a credit facility we
expect to be established in the first half of 2000 will be sufficient to fund
our ongoing operations and our planned capital needs for the next 12 months.
However, if the capital sources above are insufficient to satisfy our liquidity
requirements, we may need to sell additional

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equity or debt securities or increase our anticipated credit facility. To the
extent we are unable to obtain a credit facility after the offering, we may not
be able to fully implement our acquisition program.

INTEREST RATE RISK

We do not trade in derivative financial instruments nor do we engage in any
commodity trading activities. Our exposure to interest rates relates primarily
to our investments of cash and cash equivalents. We invest cash and cash
equivalents in financial instruments with original maturities of three months or
less. These investments are denominated in U.S. dollars. Any interest earned on
these investments is recorded as interest income in the statements of
operations. Because of the short maturity of our investments, a near term change
in interest rates would not materially affect our financial position, results of
operations or cash flows.

IMPACT OF YEAR 2000

Many computer systems and software products are coded to accept only
two-digit entries in date code fields. Beginning in the year 2000, these date
code fields will need to distinguish 21st century dates from 20th century dates.
As a result, computer systems and software used by many companies may need to be
upgraded to comply with "Year 2000" requirements. Although we believe that our
software is Year 2000 compliant, we may discover coding errors or other defects
in the future. We have appointed a Year 2000 task force to assess the scope of
our risks and bring our applications into compliance. This task force is
undertaking its assessment of our compliance and recently began testing our
corporate business and information systems. To date, we have discovered few
problems during our Year 2000 testing, and we have fixed those identified in our
day to day operating environment. To date, we have incurred minimal expenses
related to Year 2000 compliance and expect to incur immaterial expenses in 2000
related to Year 2000 compliance. We have not adopted a contingency plan to
address possible risks to our systems.

We rely on a number of software programs and systems provided by third
parties, any of which could contain coding which is not Year 2000 compliant.
These systems include server software to operate the network servers, software
controlled routers, switches and other components of the data network, firewall,
security, monitoring and back-up software used by us, as well as desktop PC
applications software. In each case, we employ widely available software
applications from leading third-party vendors and expect that these vendors will
provide any required upgrades or modifications in a timely fashion. However, if
any third party software suppliers fail to provide Year 2000 compliant versions
of the software, our operations could be disrupted.

Year 2000 compliance problems also could undermine the general
infrastructure necessary to support our operations. For instance, we depend on
third-party Internet service providers or hosting centers to provide connections
to the Internet and to customer information systems. Any interruption of service
from these Internet service providers or hosting centers could result in a
temporary interruption of our services. Any interruption in the security,
access, monitoring or power systems at the Internet service providers or hosting
centers could result in an interruption of services. Moreover, it is difficult
to predict what effects Year 2000 compliance problems will have on the integrity
and stability of the Internet. If businesses and consumers are not able to
reliably access the Internet, the demand for our Internet solutions could
decline, resulting in an adverse impact to our business, financial condition and
results of operations.

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BUSINESS

After the closing of our initial public offering and acquisition of
operating assets of the founding practices on December 15, 1999, we began to
provide business development services and Internet solutions to our alliance of
30 Board certified or Board eligible plastic surgeons and one surgeon certified
by the Canadian Board of Plastic Surgery located in 18 metropolitan markets
throughout the United States. Our consumer website, Idealme.com, allows
consumers to research available procedures, submit inquiries regarding cosmetic
surgery procedures, view possible cosmetic changes through online imaging
technology, obtain financing for procedures and locate Board certified plastic
surgeons. We expect our consumer website to increase the number of procedures
performed by our allied surgeons. We provide our web-based services free of
charge to consumers, except for a fee for online imaging. Our surgeon website,
ThePlasticSurgeryCo.com, will provide allied surgeons online access to our
national buying program and facilitate "best practices" study groups among our
allied surgeons. Our business development services include the implementation of
strategic business plans, practice-specific programs, patient financing plans,
patient education strategies and materials and related services and products. We
believe that we will generate substantially all of our revenues from service
fees paid by each practice under our business services agreements which
generally provide for us to receive 15% of the net cash collected by the
practice. We were incorporated in April 1997 and have not conducted significant
operations to date.

BACKGROUND

The market for plastic surgery, which includes both cosmetic and
reconstructive procedures, exceeds $15 billion per year according to Form and
Figure magazine. The market for cosmetic surgery procedures has grown rapidly
over the last several years. From 1992 to 1998, facelifts, liposuction and
breast augmentations have increased approximately 75%, 260% and 300%,
respectively. During this period, the Internet has emerged as a global
communications medium, enabling millions of people worldwide to communicate,
share information and conduct business electronically. According to
International Data Corporation, the number of Internet users worldwide will grow
from an estimated 97 million in 1998 to an estimated 319 million by 2002. We
believe that cosmetic plastic surgeons can use the Internet to improve quality
of patient education and increase practice efficiency.

Plastic Surgery Trends

Cosmetic surgery procedures reshape normal anatomical features to improve
the patient's appearance and self-esteem. These procedures include elective
aesthetic procedures such as facelifts, liposuction and breast augmentations. We
estimate that cosmetic surgery constitutes approximately $10 billion of the
plastic surgery industry and remains 100% private pay without government
reimbursement pressures. In contrast, reconstructive surgery procedures reshape
abnormal anatomical features caused by congenital defects, developmental
abnormalities, trauma, infection or disease, usually to improve function but
also to approximate normal appearance. We believe that revenue from
reconstructive procedures constitutes approximately 30%, or $5 billion, of the
industry and is primarily reimbursed by third party payors.

The primary market for cosmetic surgery procedures is women aged 19 to 50.
In 1997, nearly 85% of all cosmetic surgery procedures performed were for women
and approximately 70% were for adults aged 50 and under. Recent trends indicate
men are having more cosmetic surgery procedures, as evidenced by male
liposuction and facelift procedures tripling and doubling, respectively, since
1992. Approximately 2.8 million cosmetic surgery procedures were performed in
1998, according to a survey by the American Society of Aesthetic Plastic
Surgery. The market for cosmetic surgery procedures has grown rapidly over the
last several years, and we expect this market to continue to grow as a result of
various factors, including:

- aging of the baby boomer generation;

- increasing media attention to and cultural acceptance of cosmetic
surgery;

- continuing improvements in technology resulting in less invasive
procedures and shorter recovery times;

- growing awareness of available cosmetic surgery procedures through
consumer education; and

- increasing availability and access to healthcare information via the
Internet.

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The consumer market is served in part by approximately 5,000 Board
certified plastic surgeons in the United States. In recent years, fees for
reconstructive procedures have declined primarily due to cost containment
pressures from third party payors. As a result, many plastic surgeons have
attempted to shift the focus of their practices from reconstructive to cosmetic
surgery procedures. This has resulted in increased competition for private pay
cosmetic surgery procedures. Physicians practicing in other disciplines, such as
ophthalmologists and dermatologists, are also performing cosmetic surgery
procedures traditionally performed by plastic surgeons, such as eyelid surgery
and liposuction, to earn the higher fees associated with these procedures.
Consequently, plastic surgeons are attempting to emphasize the importance of
having plastic surgery procedures performed by Board certified plastic surgeons.

Internet-Based Healthcare Information Trends

The Internet is a comprehensive and inexpensive information source that has
dramatically improved information flow, enhanced communications and increased
business opportunities for healthcare providers. Cyber Dialogue, an on-line
survey company, estimates that 17 million adults in the U.S. searched online for
health information in 1998, an increase of 119% from July 1996, and that
approximately 50% of these individuals made purchases after seeking information
on the Internet. According to Cyber Dialogue, these users are better educated,
have higher household incomes and are most often female. The growing interest in
cosmetic surgery is creating increased demand for reliable, easy access to
cosmetic surgery information. Cosmetic surgery is an elective, private pay niche
that benefits by direct to consumer information. Consumers of cosmetic surgery
procedures are more involved than average healthcare consumers in choosing which
procedures are performed, the results they wish to achieve and the surgeons they
believe are most qualified to perform the procedure. In addition, the Internet
provides cosmetic surgery consumers privacy in researching their choices.

OUR SOLUTION

Our business development services and Internet solutions are designed to
increase the number of procedures performed by our allied surgeons, improve the
quality of patient education and increase practice efficiency. We have a
consumer website and are developing a surgeon website to facilitate the exchange
of information between surgeons and prospective and existing patients and the
exchange of information among surgeons, via the Internet. Content on our
consumer website, Idealme.com, is a combination of informational and interactive
pages that provide consumers with information about procedures, outcomes and
surgeon qualifications. Idealme.com allows us to influence purchase decisions at
the consumer level and leverage the clinical expertise and reputation of our
allied surgeons. Our surgeon website, ThePlasticSurgeryCo.com, will provide our
allied surgeons online access to our national buying programs and will
facilitate "best practices" study groups among our allied surgeons, while
highlighting the benefits of becoming affiliated with us.

BENEFITS TO CONSUMERS

Informs consumers about cosmetic surgery procedures and related
topics. Idealme.com contains regularly updated, comprehensive information about
cosmetic surgery procedures ranging from specific procedures to other
health-related topics such as wellness, skin care and diet. We believe the
quality of the information we provide about cosmetic surgery procedures and
related topics will help to establish our consumer website as a relevant and
trusted information source. On Idealme.com, a consumer is able to view a photo
gallery which contains several before and after pictures for each type of
procedure. Idealme.com also consolidates information on new technologies and
leading edge procedures.

Allows consumers to view possible cosmetic changes through online imaging
technology. On Idealme.com, we offer interactive, online computer imaging which
allows consumers to view possible cosmetic changes for a fee. Computer imaging
technology allows a potential consumer of cosmetic surgery procedures to submit
a digital photograph, have the image modified to reflect the potential
consumer's desired procedure and receive the modified image via e-mail. This
technology enhances the potential consumer's ability to more fully evaluate
cosmetic surgery alternatives.

Provides online financing plan application and approval. Potential
cosmetic surgery consumers can apply directly through our website for financing
of cosmetic surgery procedures through third party financing
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companies. A visitor to Idealme.com will be able to review options for financing
plans, access and submit online applications and receive approval, all from the
privacy of home.

Links consumers with both allied surgeons and subscribing surgeons through
our online directory. Each allied surgeon will have his own web page that may
be accessed by hyperlinks from Idealme.com. Potential consumers can enter their
zip code and access a list of allied surgeons' web pages in their local market.
Subscribing surgeons are listed on our website directory for the convenience of
potential consumers located in areas where we are not affiliated with an allied
practice. Prior to linking directly to an allied surgeon's website, a consumer
is able to view a short video introducing the allied surgeon, the surgeon's
patient coordinator, and the services provided by the surgeon. An allied
surgeon's website also highlights the surgeon's clinical expertise and cosmetic
procedure focus and gives information regarding any upcoming seminars offered by
the allied surgeon. Idealme.com also allows potential consumers to research the
background, credentials and professional qualifications of the surgeons listed
in the surgeon directory through hyperlinks to the websites of the American
Medical Association, the Administrators in Medicine and the American Board of
Medical Specialities.

Offers our online magazines, health and beauty products and related
magazines and books. We intend to reinforce our brand awareness through our
online magazine. This magazine will present various articles on cosmetic surgery
procedures and the latest technological developments and techniques. Our
articles will address key topics affecting the cosmetic surgery industry such as
the critical nature of choosing a Board certified plastic surgeon to perform
cosmetic surgery procedures. A consumer visiting Idealme.com may register for a
subscription to the Cosmetic Surgery Online Magazine and will be able to
purchase health and beauty products and related magazines. Our online magazine
will be produced quarterly and e-mailed to subscribers, and archived editions
will be stored and available on the website. We also intend to partner with
recognizable health and beauty product companies to provide related products
through our website. Through these partnerships, informational and clinical
products, such as skin care products, will be available for purchase through our
website.

BENEFITS TO SURGEONS

Will offer access to our national buying programs. Our network of allied
surgeons gives us collective buying power to negotiate favorable terms with key
suppliers and vendors. Our national buying program includes our negotiated
pricing discounts and quantities and types of products available. Allied
surgeons can choose, through our surgeon website, the products and services that
we can provide at a lower cost due to our collective buying power. We also
intend to negotiate favorable prices and terms with manufacturers and
distributors of equipment and technology such as lasers and photographic imaging
and ultrasonic liposuction machines.

Will facilitate "best practices" knowledge sharing and provide an online
forum for allied surgeons. By creating an alliance of plastic surgeons with
shared strategic and economic goals, we believe we can create an environment in
which each allied surgeon will share his "best practices" with other allied
surgeons to increase the overall success of the alliance. We will assist in the
sharing of this knowledge by researching and documenting methods and programs in
the most successful allied practices and by condensing and customizing the most
effective strategies into transferable templates to be implemented by other
allied practices. Only allied surgeons will be able to access these "best
practices" through our surgeon website, newsletters and quarterly allied surgeon
educational meetings. ThePlasticSurgeryCo.com will also provide an online forum,
for sharing the latest clinical techniques, specialized procedures that
affiliates have developed, questions and answers on clinical challenges and
comments on experiences with the latest equipment and instruments.

Will describe our business to potential allied surgeons and highlight
career opportunities with allied practices. Through ThePlasticSurgeryCo.com,
plastic surgeons will have access to information outlining the benefits of an
alliance with us and career opportunities for association with our allied
surgeons. The description of our business is designed to attract potential
allied surgeons and to assist us in the recruiting process. This information
will include testimonials from allied surgeons who have had success with our
various programs, links to Idealme.com and the opportunity to post questions and
receive an e-mail response from us and our
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allied surgeons. Our career placement information will include the practice
location, a description of the position and a profile of the allied surgeon and
practice.

Will profile each practice and its surgeons for inclusion on our
websites. We will collect information on each allied surgeon in order to
complete our standard template webpage. The template webpage will include items
such as credentials, specialized procedures, available related services and
representative before and after pictures. We will also highlight the staff and
the facility and provide a streaming video introducing the surgeon and the
patient coordinator. Each allied surgeon will have this template webpage as part
of Idealme.com. From these webpages, a consumer may either e-mail the surgeon
for an appointment or link directly to the various custom pages that our allied
surgeons have established.

Institutes patient financing plans. Elective cosmetic surgery is not
covered by third party payors and is not affordable for much of the potential
market. By instituting patient financing plans through third party financing
companies, we can assist our allied surgeons in providing cosmetic services to a
segment of the population that would not otherwise be able to afford cosmetic
surgery procedures. Patient financing plans increase consumer access to cosmetic
surgery procedures and allow allied surgeons to reach an expanded audience,
thereby increasing the overall potential patient population.

Implements practice-specific consumer awareness programs. Cosmetic surgery
remains a 100% private pay, retail oriented business. As such, reaching the
market with consumer awareness programs is key to growing a successful plastic
surgery practice. We assist our allied surgeons in developing consumer awareness
programs specific to each allied practice, which incorporate our website
capabilities, market demographics, various media vehicles such as seminars,
newspaper ads, direct mailings and radio, and available cosmetic surgery
procedures and related services.

Designates and trains patient coordinators and develops patient education
programs and materials. Generally, there is little consistency in the patient
management process in plastic surgery practices resulting in inefficient patient
flow and inhibiting effective patient education and counseling. In an effort to
maximize efficiency we assist our allied surgeons in designating and training
the appropriate person as a patient coordinator. The patient coordinator will
manage the initial patient consultation and educate the patient to increase the
patient's awareness of the various cosmetic surgery procedures. We intend to
create and develop patient education program manuals and materials for the
allied surgeons to complement the efforts of the patient coordinator, which will
also be available through ThePlasticSurgeryCo.com. The primary objective of the
patient education process will be to fully inform patients about their chosen
procedures, raise the patient's awareness of alternative or complementary
procedures or services and educate the patient about the allied surgeon's
background and clinical expertise. We believe that a better educated patient
will increase a practice's conversion rate and sales of related services, is
more likely to elect to have a procedure performed and is more likely to be
satisfied with the outcome and become a referral source for the surgeon.

OUR STRATEGY

Provide high quality business development services to our allied
surgeons. We will target Board certified and Board eligible surgeons and will
align with these surgeons through acquisitions or the establishment of a
management relationship. We have a dedicated development team that seeks to
identify surgeons who maintain a reputation for high quality care within their
community and peer group, are located in attractive metropolitan markets and
provide an opportunity for increased revenue growth. We believe Idealme.com and
ThePlasticSurgeryCo.com will also generate interest in and demand for our
business development and other services from Board certified and Board eligible
cosmetic surgeons.

Increase consumer and surgeon awareness of our websites. We intend to
increase awareness of our websites by advertising in various media such as
magazines and other print media. We believe that increasing awareness of our
websites is critical to attract new consumers and surgeons, raise awareness of
available cosmetic surgery procedures and increase the number of cosmetic
surgery procedures performed by our allied surgeons.
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Analyze each practice's operations and develop a strategic plan for the
practice. After a plastic surgeon aligns with us, we conduct an in depth
analysis of his practice's operations. We review existing consumer awareness
programs, revenues by cosmetic and reconstructive procedures, procurement
programs, information systems and patient flow. We then develop a strategic plan
for the practice for streamlining operations and improving consumer awareness
programs.

Attract consumer inquiries regarding cosmetic surgery information and
services. The Internet is increasingly the medium of choice for people seeking
healthcare information, and we believe that Idealme.com will position us to
attract consumer inquiries regarding cosmetic surgery procedures. We intend to
build a network of websites from our library of plastic surgery related
proprietary domain names in order to capture a broader number of plastic surgery
inquiries and information searches. Each website will have its own set of
relevant keywords intended to be within a broad topic inquiry search in plastic
surgery, ranging from procedures and products to services.

Continue to improve and enhance our services. We intend to assist our
allied surgeons in introducing new or additional services such as hair removal
and skin care. We expect these services to serve as a cross-selling opportunity
for our allied surgeons. We also intend to continue to develop programs to
enable our allied surgeons to increase the profitability of their practices. We
intend to update and expand the content on our consumer and surgeon websites and
implement new technologies to enhance the quality of services we provide for
surgeons and consumers.

THE FOUNDING ALLIED PRACTICES

The 25 founding allied practices include 30 Board certified or Board
eligible plastic surgeons and one surgeon certified by the Canadian Board of
Plastic Surgery operating 33 offices located in 18 metropolitan markets. The
founding practices generated combined revenue of approximately $33.3 million in
1998. Approximately 75% of the procedures performed by our allied surgeons are
cosmetic. We believe that each of the founding practices is a leading practice
in its market. We selected the founding practices based upon a variety of
factors, including:

- Board certification, licensing and good standing of allied surgeons;

- practice size, historical financial performance and potential for future
growth;

- geographic location; and

- reputation among local consumers and peers within the plastic surgery
industry.

The following table sets forth the number of surgeons and locations of our
founding allied surgeons.

NUMBER OF NUMBER OF
METROPOLITAN MARKET SURGEONS OFFICES
- ------------------- --------- ---------

California
Los Angeles............ 3 5
Colorado
Denver................. 4 3
Florida
Orlando................ 2 2
Miami.................. 1 2
Georgia
Atlanta................ 1 1
Hawaii
Honolulu............... 1 3
Kansas
Kansas City............ 1 1
Maryland
Baltimore.............. 2 2

NUMBER OF NUMBER OF
METROPOLITAN MARKET SURGEONS OFFICES
- ------------------- --------- ---------

Maine
Portland............... 1 1
New York
New York............... 3 5
North Carolina
Raleigh................ 1 1
Ohio
Cincinnati............. 1 1
Oklahoma
Oklahoma City.......... 1 1
Oregon
Portland............... 1 1
Pennsylvania
Philadelphia........... 4 1
Texas
Amarillo............... 1 1
Austin................. 2 1
Houston................ 1 1
---- ---
31 33
==== ===

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OPERATIONS

We make available support and services to the allied practices, including
administrative and back office functions, purchasing, marketing, training and
patient education programs. We intend to offer to the allied surgeons a variety
of operating procedures and systems designed to improve the productivity and
increase the revenue of each allied practice and to achieve economies of scale,
such as:

- national group purchasing contracts for medical and office supplies and
equipment, implants and pharmaceuticals;

- centralized payroll processing and employee benefits packages;

- appropriate credit and collection policies to accommodate specific needs
of the target market of each allied practice;

- patient flow and work flow enhancements from physical improvements in
design of facilities to increase the number of patients seen and the
productivity of the allied surgeons; and

- promotional programs to include newsletters, direct mail, seminars and
patient financing to expand the allied surgeon's patient base.

We intend to institute operating efficiencies and economies on a per market
or per allied practice basis after thorough analysis, including review of work
flow, patient flow, aged accounts receivable history, facilities, employee work
load and productivity, and employee and patient satisfaction.

GOVERNMENT REGULATION

Overview. The health care industry is highly regulated, and there can be
no assurance that the regulatory environment in which we operate will not change
significantly and adversely in the future. In general, regulation of health care
providers and companies is increasing.

Every state imposes licensing requirements on medical doctors and on their
facilities and services. In addition, many states require regulatory approval,
including certificates of need, before establishing certain types of health care
facilities, offering certain services or making expenditures in excess of
statutory thresholds for health care equipment, facilities, or programs. The
execution of a business services agreement with an allied practice currently
does not require any health care regulatory approval on our part or on the part
of the allied practice. However, in connection with the expansion of existing
operations and the entry into new markets, we and our allied practices may
become subject to additional regulation.

Health Care Regulations. Federal and state laws regulate the health care
industry, the relationships between practice management companies such as us and
physicians, and the relationships among physicians and other providers of health
care services.

Corporate Practice of Medicine. The laws of many states prohibit
corporations and other entities that are not owned entirely by medical doctors
from employing medical doctors, having control over clinical decisions, or
engaging in other activities deemed to constitute the practice of medicine. We
will contract with professional associations, which will be owned by one or more
medical doctors and which in turn will employ or contract with physicians and
other health care providers to provide professional services. We will perform
only non-professional services, will not represent to the public that we provide
medical services, and will not exercise influence or control over the practices
of the medical doctors employed by the professional associations. The business
services agreements and consulting agreements specifically provide that all
decisions required by law to be made by licensed physicians or other licensed
professionals shall be made by those individuals. While certain shareholders of
managed professional corporations that practice medicine may also be involved in
company management, they act independently when making decisions on behalf of
their professional corporations and we will have no right, and will not attempt
to exercise any right, to control those decisions.

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Fee-Splitting and Anti-kickback Laws

State Law. Many states prohibit "fee-splitting" by physicians with any
party except other physicians in the same professional practice association. In
most cases, these laws have been construed as applying to the payment of a
portion of a fee to another person for referring a patient or otherwise
generating business and not to prohibit payment of reasonable compensation for
facilities and services, other than the generation of referrals, even if the
payment is based on a percentage of the practice's revenues. In addition, most
states have laws prohibiting the payment or receipt of any remuneration that is
intended to induce referrals for health care products or services. For example,
the Florida fee-splitting law prohibits the payment or receipt of any
commission, bonus, kickback, or rebate, or engaging in any split-fee arrangement
in any form for patient referrals to providers of goods or services. According
to a Florida court of appeals decision interpreting this law, it does not
prohibit a management fee that is based on a percentage of gross income of a
professional practice if the manager does not refer patients to the practice.
Other states, such as New York, have fee-splitting statutes that have been
interpreted to prohibit any compensation arrangement that is based on a
percentage of physicians' revenue.

Federal Law. The fraud and abuse provisions of the Medicare and Medicaid
statutes prohibit the payment or receipt of any remuneration in return for the
referral of patients covered by federally funded health care programs such as
Medicare and Medicaid, or in return for purchasing, leasing, ordering, or
arranging for the purchase, lease or order of any product or service that is
covered by such programs, and impose significant penalties for false or improper
billings under such programs. In addition, under legislation known as the "Stark
Bill," physicians' referrals for certain designated health services to entities
with which they have a financial relationship are prohibited unless certain
exceptions apply. Violations of these laws may result in substantial civil or
criminal penalties, including exclusion from participation in the Medicare and
Medicaid programs, or recoveries of prior payment.

The several laws described above have civil and criminal penalties and have
been subject to judicial and regulatory interpretation. They are enforced by
regulatory agencies vested with broad discretion in interpreting them. Our
agreements and proposed activities have not been examined by federal or state
authorities under these laws and regulations. Currently, we are not a separate
provider of Medicare or state health program reimbursed services. Although we
believe that our operations and those of our allied practices will be conducted
so as to comply with all of the foregoing laws, there can be no assurance that
these operations will not be successfully challenged as violative of one or more
such laws. In addition, these laws and their interpretation vary from state to
state. The regulatory framework of certain jurisdictions may limit our expansion
into, or ability to continue operations within, such jurisdictions if we are
unable to modify our operational structure to conform with such regulatory
framework. Any limitation on our ability to expand could have an adverse effect
on us. See "Risk Factors -- Government regulation may detrimentally affect us
and reduce our services fees and earnings."

Impact of Healthcare Reform. The United States Congress has considered
various healthcare reform proposals, including comprehensive revisions to the
current healthcare system. It is uncertain what legislative proposals will be
adopted in the future or what actions federal or state legislatures or
third-party payors may take in anticipation of or in response to any healthcare
reform proposals or legislation. Changes in the healthcare industry, such as the
growth of managed care organizations or provider networks, may result in lower
payment levels for the services of the allied surgeons and lower revenues for
us.

Internet Regulation. There are an increasing number of laws and
regulations pertaining to the Internet. In addition, a number of legislative and
regulatory proposals are under consideration by federal, state, local and
foreign governments and agencies. Laws or regulations may be adopted with
respect to the Internet relating to liability for information retrieved from or
transmitted over the Internet, online content regulation, visitor privacy,
taxation and quality of products and services. Moreover, the applicability to
the Internet of existing laws governing issues such as intellectual property
ownership and infringement, copyright, trademark, trade secret, obscenity,
libel, employment and personal privacy is uncertain and developing. Any new
legislation or regulation, or the application or interpretation of existing laws
may have an adverse effect on our Internet business. In addition to Internet
regulation, our websites may be subject to numerous state and

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federal laws that govern the delivery of healthcare services and goods in the
United States. These laws range from laws prohibiting the offer, payment or
receipt of remuneration to induce referrals to entities providing healthcare
services and goods to licensure requirements as well as special protection for
healthcare data. These laws are complex and are under constant revision and
interpretation. These laws and their active enforcement, particularly in the
areas of healthcare fraud, affect the way all healthcare providers structure
their business relationships and deliver healthcare services and goods. New
developments in this area could affect the structure and operation of our
Internet business. In the event some state or federal regulatory agency
determined that our relationship with one or more of our advertisers that
deliver healthcare services or goods violate any such laws, then we could be
subjected to fines and other costs and could be required to revise or terminate
that portion of our business.

Liability for Information Retrieved from Our Websites and from the
Internet. Content may be accessed on our websites and this content may be
downloaded by visitors and subsequently transmitted over the Internet. This
could result in claims against us based on a variety of theories, including
defamation, practicing medicine without a license, malpractice, obscenity,
negligence, copyright or trademark infringement or other theories based on the
nature, publication and distribution of this content. Some of these types of
claims have been brought, sometimes successfully, against providers of Internet
services in the past. In addition, we may be subject to claims alleging that, by
directly or indirectly providing links to other websites, we are liable for
copyright or trademark infringement or the wrongful actions of third parties
through their respective websites. Any claims brought against us in this respect
may have a material and adverse effect on our business.

Domain Names. Domain names are Internet "addresses." The current system
for registering, allocating and managing domain names has been the subject of
litigation, including trademark litigation, and of proposed regulatory reform.
We have registered Idealme.com, ThePlasticSurgeryCo.com and approximately 25
additional domain names. There can be no assurance that our domain names will
not lose their value, or that we will not have to obtain entirely new domain
names in addition to or in lieu of our current domain names if reform efforts
result in a restructuring of the current system.

Jurisdiction. Due to the global nature of the Internet, it is possible
that, although transmissions by us over the Internet originate primarily in the
United States, the governments of states and foreign countries might attempt to
regulate our transmissions or prosecute us for violations of their laws. These
laws may be modified, or new laws enacted, in the future. Any of the foregoing
developments could have a material adverse effect on our business, results of
operations and financial condition. In addition, as our service is available
over the Internet in multiple states and foreign countries, these jurisdictions
may claim that we are required to qualify to do business as a foreign
corporation in each state or foreign country. We have not qualified to do
business as a foreign corporation in every jurisdiction. Our failure to qualify
as a foreign corporation in a jurisdiction where we are required to do so could
subject us to taxes and penalties and could result in our inability to enforce
contracts in such jurisdictions. Any new legislation or regulation, the
application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the Internet and other online services could have a material
adverse effect on our business, financial condition, and results of operations.

COMPETITION

There are several companies that affiliate with physicians in the area of
plastic surgery, and we realize that additional entities may enter this market.
We intend to capitalize on the reputations and relationships of the founding
practices and their allied surgeons to assist us in affiliating with additional
plastic surgery practices. Based on our preliminary review and analysis of, and
discussions with, the founding practices, we believe that our emphasis on high
quality patient care and our business, marketing, technological and practice-
growth support systems will encourage plastic surgeons to affiliate with us.

The business of providing plastic surgery services is highly competitive in
each market in which the allied surgeons operate. Allied surgeons compete with
plastic surgeons that maintain single offices or operate a single satellite
office, as well as with plastic surgeons that maintain group practices or
operate in multiple offices. Allied surgeons also compete with general surgeons
and dermatologists and ophthalmologists who provide

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certain plastic surgery services. The provision of plastic surgery services by
such general practitioners and dermatologists has increased in recent years. We
believe that with the operations and growth strategies outlined above, the
allied surgeons will continue to be leaders in their respective markets.

We are aware of several entities that provide healthcare information
through the Internet. These entities will compete with our efforts to provide
relevant healthcare information to the Internet consumer and establish brand
loyalty to their websites. All of these companies compete with us for visitor
traffic. We expect competition to continue to increase as there are no
substantial barriers to entry in our market. Increased competition could result
in reductions in fees we receive for subscription services, reduced visitor
traffic to our website, or loss of market share. Any of these occurrences could
materially and adversely affect our business, financial condition and results of
operations. Competition is also likely to increase significantly, not only as
new entities enter the market, but also as current competitors expand their
services. Our principal competitors in the Internet sector of our business are
Onhealth, HealthOasis, Intelihealth, iVillage, Thrive Online, Mediconsult and
WebMD.

SEASONALITY

The allied practices typically experience a significant decrease in demand
for and revenue from cosmetic surgery procedures during July and August.

EMPLOYEES

As of January 10, 2000, we had approximately 130 full-time and
approximately 85 part-time employees. None of our employees are covered by a
collective bargaining agreement. We consider our relationship with our employees
to be good.

INTELLECTUAL PROPERTY

We have not applied for federal registration of the service mark "The
Plastic Surgery Company." We intend to use this name in our marketing and
advertising campaigns in order to associate the name The Plastic Surgery Company
with a reputation for nationwide quality plastic surgery care.

LITIGATION AND INSURANCE

We are not a party to any pending litigation that if adversely determined
would have a material adverse effect on our operations. Many of the founding
practices have pending litigation arising in the ordinary course of business.
Each allied surgeon must disclose all pending material litigation relating to
his practice in his acquisition agreement. In a stock purchase or merger
transaction, we will assume the liabilities of the practice prior to the
transaction relating to litigation. We intend to vigorously defend any and all
litigation. We maintain general liability insurance for us and on behalf of our
allied practices. We believe that, where permitted by applicable law and
insurers, we will be named as an additional insured under the policies of the
allied practices. The allied surgeons maintain professional liability insurance
covering the delivery of health services. Also, we are indemnified under the
business services agreements for liabilities we incur as a result of the
performance of medical services by allied surgeons. Successful malpractice
claims against allied practices could have an adverse effect on our
profitability. While we believe we have adequate liability insurance coverage,
there can be no assurance that a pending or future claim or claims will not be
successful or, if successful, will not exceed the limits of available insurance
coverage. There can also be no assurance that coverage will continue to be
available at acceptable costs and on favorable terms.

FACILITIES

We lease approximately 2,900 square feet of office space in Santa Barbara,
California for our headquarters and approximately 2,600 square feet of office
space in Atlanta, Georgia.

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MANAGEMENT

The following table sets forth the age and position of each of our
executive officers and directors:

NAME AGE POSITION
- ---- --- --------

Jonathan E. Wilfong........................ 51 Chairman of the Board
Dennis E. Condon........................... 51 President, Chief Executive Officer and
Director
Gunnar Sundstrom........................... 53 Chief Financial Officer
David H. Challoner......................... 39 Chief Development Officer
Patricia A. Altavilla...................... 41 Executive Vice President of Marketing and
Business Planning
Robert A. Ersek, M.D., F.A.C.S............. 60 Director
John C. Schantz, M.D., F.A.C.S............. 56 Director
W. Grant Stevens, M.D., F.A.C.S............ 46 Director
Mark A. Kaiser............................. 42 Director

EXECUTIVE OFFICERS AND DIRECTORS

Jonathan E. Wilfong, Chairman of the Board. Mr. Wilfong is our founder and
served as our Chief Executive Officer until June 1998, and has served as
Chairman of the Board of Directors since 1997. From June 1996 to May 1997, Mr.
Wilfong served as a consultant for OrthAlliance, Inc., a public company which
provides business development services to orthodontic practices, and from May
1997 to May 1999 he served as Chairman of the Board of OrthAlliance, Inc. and
continues to serve as a director. In 1996, Mr. Wilfong founded Newfound Capital
Associates, an investment banking advisory firm. Mr. Wilfong is a Certified
Public Accountant, and from 1983 to 1996 was a partner with Price Waterhouse LLP
in Atlanta, Georgia and Greenville, South Carolina where he worked primarily
with high growth companies.

Dennis E. Condon, President, Chief Executive Officer and Director. Mr.
Condon has served as our President and Chief Executive Officer since June 1998
and was appointed a director immediately upon the closing of our initial public
offering. From 1984 until joining us, Mr. Condon was employed by Mentor
Corporation, an international supplier of medical products and technology,
serving from 1991 to 1998 as President of the Mentor's medical device division
specializing in aesthetic surgery implants and electromechanical medical
instrumentation.

Gunnar Sundstrom, Chief Financial Officer. Mr. Sundstrom has served as
Chief Financial Officer since May 1999. From 1992 to 1999, Mr. Sundstrom was
employed by Mentor's medical device division, serving as Vice President and
Controller since 1996.

David H. Challoner, Chief Development Officer. Mr. Challoner joined us as
Chief Development Officer in October 1997. From August 1994 to September 1997,
Mr. Challoner directed the start-up of Rejuve, Inc., a cosmetic laser center
company, and served as its Chief Development Officer. From 1993 to 1994, Mr.
Challoner founded and was President of Ocupro, Inc., an ophthalmology practice
management company. In December 1994, Ocupro merged with Equivision, Inc.
(subsequently Equimed, Inc.) and Mr. Challoner served in a development capacity
for Equimed, Inc., until July 1996.

Patricia A. Altavilla, Executive Vice President of Marketing and Business
Planning. Ms. Altavilla has served as our Vice President of Marketing and
Business Planning since August 1998. From 1984 to 1998, Ms. Altavilla was
employed by Mentor, serving as Vice President of Marketing since 1993.

Robert A. Ersek, M.D., F.A.C.S., Director. Dr. Ersek was appointed a
director immediately upon the closing of our initial public offering. Dr. Ersek
has been practicing plastic surgery in Austin, Texas since 1978. In 1996, he
formed Personique, Inc., a company focusing on patient orientation procedures.
Dr. Ersek is the former President of both the Austin Plastic Surgery Society and
the Lipoplasty Society of Board Certified Plastic Surgeons of North America.
Since 1970, he has served as the Medical Director and a member of the

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40

Board of Directors of Genetic Laboratories Wound Care, a wound care product
manufacturing company, now a wholly-owned subsidiary of Derma Science. Dr. Ersek
is a member of the American Medical Association, a fellow of the American
College of Surgeons and the American Board of Plastic Surgery, American Society
of Plastic and Reconstructive Surgeons, and American Aesthetic Surgery Society.
Dr. Ersek received his M.D. in 1966 from Hahnemann University Medical School,
performed an internship and general surgery residency at the University of
Minnesota, a residency in plastic surgery at Tulane University and a fellowship
in plastic surgery at the University of Mississippi.

John C. Schantz, M.D., F.A.C.S., Director. Dr. Schantz was appointed a
director immediately upon the closing of our initial public offering. Dr.
Schantz founded Plastic Surgery Associates, P.C., a founding practice, in
Lancaster, Pennsylvania in 1978. He currently serves as the Chief of the
Division of Plastic Surgery at Lancaster General Hospital and serves on the
active staff of HealthSouth Surgery Center of Lancaster. He is a member of the
Governing Board, Department of Surgery and serves as Chairman, Surgical Practice
Council at the Lancaster General Hospital. He is a member of the American
Society of Plastic and Reconstructive Surgeons and a fellow of the American
College of Surgeons. Dr. Schantz received his M.D. in 1971 from Hahnemann
Medical College and completed his residency training at the Hershey Medical
Center, Hershey, Pennsylvania.

W. Grant Stevens, M.D., F.A.C.S., Director. Dr. Stevens was appointed a
director immediately upon the closing of our initial public offering. Dr.
Stevens has served as President of W. Grant Stevens, M.D., Inc. (d/b/a/ Plastic
Surgery Associates), a founding practice in Marina Del Ray, California, since
1988. Dr. Stevens is a Board Certified Diplomate of the American Board of
Plastic Surgery and is a member of the American Society of Plastic and
Reconstructive Surgeons, The American Society of Aesthetic Plastic Surgery, the
California Society of Plastic Surgeons, as well as several other professional
societies. Dr. Stevens is also on the clinical faculty at U.C.L.A. Dr. Stevens
served as Chairman of the Department of Surgery and was on the Medical Executive
Committee at Daniel Freeman Marina Hospital from 1989 through 1996. Dr. Stevens
is an editorial advisory board member of Cosmetic Surgery Times, Plastic Surgery
Products, and Wounds: A Compendium of Current Research and Practice. Dr. Stevens
received his M.D. with honors in 1980 from the Washington University School of
Medicine in St. Louis, Missouri, where he also completed his plastic surgery
training. Dr. Stevens also received the Special Congressional Certificate of
Recognition and the Distinguished Service Citation from the Medical Board of
California.

Mark A. Kaiser, Director. Mr. Kaiser was appointed a director immediately
upon the closing of our initial public offering. Mr. Kaiser is Chairman of the
Board and Chief Executive Officer of Caredata.com, Inc., a healthcare Internet
content company. Prior to joining Caredata.com in 1991, Mr. Kaiser was Vice
President of Sales and Marketing for Charter Medical Corporation, a chain of
psychiatric hospitals. From 1987 to 1990 Mr. Kaiser served as Senior Vice
President of Marketing at Telecom USA, a publicly traded long distance company
acquired by MCI Communications Corporation. Mr. Kaiser is a member of the Board
of Directors of R.S. Andrews Enterprises, Inc., a national home services
contractor. Mr. Kaiser holds Bachelor of Science degrees in Computer Science and
Mathematics from Furman University.

BOARD OF DIRECTORS

Classification of Board of Directors. Our board of directors is divided
into three classes, which consist, as nearly as practicable, of one-third of the
total number of directors serving on the board. The board may have up to nine
members and is currently composed of six members divided into three classes. The
members of each class serve staggered three-year terms. The initial term of
class I expires at the annual shareholders' meeting in 2000, the initial term of
class II expires at the annual shareholders' meeting in 2001, and the initial
term of class III expires at the annual shareholders' meeting in 2002. Dr.
Schantz and Mr. Kaiser are members of class I, Drs. Ersek and Stevens are
members of class II; and Mr. Wilfong and Mr. Condon are members of class III.

Directors will serve until their respective successors are elected and
qualified. At each annual meeting of shareholders, or at a special meeting of
shareholders called for purposes that include the election of directors,

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directors will be appointed to succeed those in the class whose terms then
expire, with each director so appointed to serve for a term of three years.

Additional Directorships, Vacancies and Removal of Directors. The board is
authorized to create additional directorships and abolish any vacant
directorships. Newly created directorships and vacancies may be filled by a
majority vote of the remaining directors then in office, to hold office until
the next annual meeting of shareholders, and until their successors shall be
appointed and qualified. Our bylaws provide that directors may be removed with
or without cause by the shareholders only at a shareholders' meeting for which
notice of the removal action has been given. The directors elected by a
particular voting group may be removed only by the shareholders in that voting
group.

BOARD COMMITTEES

The board has an executive committee, a nominating committee, an audit
committee and a compensation committee. The executive committee is authorized to
take all action which may be delegated by the board under Georgia law. The
nominating committee recommends candidates for election to the board, examines
the performance of incumbent directors and makes recommendations concerning the
retention of directors. The audit committee recommends the annual appointment of
the company's auditors, with whom the audit committee reviews the scope of audit
and non-audit assignments and related fees, accounting principles used by the
company in financial reporting and the adequacy of the company's internal
control procedures. The compensation committee administers the Employee Stock
Plan. See "-- Stock Option Plans -- Administration of the Stock Option Plans."
The compensation committee also has the responsibility for reviewing and
approving salaries, bonuses and other compensation including benefits of
executive officers.

DIRECTOR COMPENSATION

Members of the board are reimbursed for their out-of-pocket expenses for
each meeting attended, but otherwise serve without cash compensation. We have
adopted the 1999 Non-Employee Director Stock Plan, pursuant to which each
non-employee director receives a nondiscretionary grant to purchase 10,000
shares of common stock upon his or her election or appointment to the board and,
if serving as a non-employee director following the annual meeting each year, an
additional non-discretionary grant for the purchase of 10,000 shares of common
stock. See "-- Stock Option Plans -- 1999 Non-Employee Director Stock Plan."

COMPENSATION COMMITTEE INTERLOCKS

We did not have a compensation committee prior to the completion of our
initial public offering. Prior to the initial public offering, the Board (Mr.
Wilfong) determined executive compensation. None of our executive officers serve
as a member of a compensation committee or as a director of any entity of which
our directors serve as an executive officer.

In June of 1997, we entered into a consulting agreement, which was amended
on September 30, 1998, with Mr. Wilfong, the Chairman of the Board of Directors.
Under his consulting agreement, Mr. Wilfong agreed to provide us with financial
and general business services, and we agreed to pay Mr. Wilfong a consulting fee
of $428,000 for such services. This consulting fee is payable in monthly
installments of $8,000, with the balance, net of payments made through September
30, 1998, payable at the effective date of our initial public offering. Mr.
Wilfong agreed to allow us to defer payment of the balance of $292,000 until
such time as we establish a credit facility. From September 30, 1998 to the
earlier of September 30, 1999 or 90 days after the effective date of our initial
public offering, Mr. Wilfong received monthly payments of $8,000. Mr. Wilfong
received a bonus accrued and earned in 1998 of $150,000 payable upon the closing
of our initial public offering.

On May 13, 1999, we sold to Mr. Wilfong warrants to purchase 700,000 shares
of common stock at an exercise price per share equal to $2.50. The purchase
price was $.50 per share. We received a note from Mr. Wilfong in the amount of
$350,000 for the $.50 purchase price of the warrants. The note was full recourse
and was to mature three years from the date of issuance and accrue interest at a
rate of 8% per annum. The note was paid off prior to June 30, 1999 by an offset
to accrued compensation. On December 29, 1999, the
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board of directors approved the purchase of the warrants from Mr. Wilfong for
the issuance (i) of a non-interest bearing promissory note in the principal
amount of $1,050,000 and (ii) warrants to purchase 700,000 shares of common
stock at $8.00 per share. The note provides for repayment in monthly
installments of $15,000 and prepayment without penalty at any time or from time
to time at the discretion of the board of directors. The warrants may be
exercised in whole or in part for a five year term beginning on the date of
issuance. We will record a compensation charge of approximately $4 million in
1999 related to these transactions.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

In accordance with Georgia law, our Articles of Incorporation provide that
no director will be personally liable for breach of fiduciary duty as a director
except for

- any appropriation, in violation of the director's duties, of any
business opportunity of the company;

- acts or omissions that involve intentional misconduct or a knowing
violation of the law;

- liabilities that relate to unlawful payments of dividends and
unlawful stock repurchases and redemptions; or

- any transaction from which the director derived an improper personal
benefit.

This provision does not eliminate a director's fiduciary duties; it merely
eliminates the possibility of damage awards against a director personally which
may be occasioned by certain unintentional breaches, including situations that
may involve grossly negligent business decisions, by the director of those
duties. The provision has no effect on the availability of equitable remedies,
such as injunctive relief or rescission, which might be necessitated by a
director's breach of his or her fiduciary duties. However, equitable remedies
may not be available as a practical matter where transactions, such as merger
transactions, have already been consummated. The inclusion of this provision in
our Articles of Incorporation may have the effect of reducing the likelihood of
derivative litigation against directors, and may discourage or deter
shareholders or management from bringing a lawsuit against directors for breach
of their duty of care, even though such an action, if successful, might
otherwise have benefitted us and our shareholders.

Our Bylaws provide that we shall indemnify and hold harmless each of our
directors, officers, employees and agents to the extent that he or she is or was
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 by reason of the fact that such person is or was our director,
officer, employee or agent, against any expenses, judgments, fines and amounts
paid in settlement in connection with such action, suit or proceeding; provided,
however, that no indemnification shall be made for:

- any appropriation, in violation of the director's duties, of any business
opportunity of the company;

- acts or omissions that involve intentional misconduct or a knowing
violation of the law;

- any liability that relates to unlawful payments of dividends and unlawful
stock repurchases and redemptions; or

- any transaction from which the director derived an improper personal
benefit.

Our Bylaws provide that we shall have the power to purchase and maintain
insurance on behalf of any of our directors, officers, employees or agents
against any liability asserted against and incurred by such person in any such
capacity, whether or not we have the power to indemnify such person against such
liability at that time under our Articles of Incorporation or Bylaws.

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EXECUTIVE COMPENSATION

The following table sets forth information with respect to all compensation
paid or accrued in the fiscal years ended December 31, 1997 and 1998, for
services rendered in all capacities to us by our Chief Executive Officer and
other officers earning in excess of $100,000. We were incorporated in April 1997
and did not conduct any operations prior to that time.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION
--------------------------------------
OTHER ANNUAL
YEAR SALARY(1) BONUS(2) COMPENSATION(3)
---- --------- -------- ---------------

Dennis E. Condon................................... 1998 $100,000 $ 30,000 $ --
President, Chief Executive Officer
and Director
Jonathan E. Wilfong................................ 1998 264,750 150,000 --
Chairman of the Board, former Chief Executive 1997 187,250 -- --
Officer
David H. Challoner................................. 1998 195,000 -- 900
Chief Development Officer 1997 52,500 -- --

- ---------------

(1) Includes total accrued and unpaid salary of $16,666 for Mr. Condon, $316,000
for Mr. Wilfong and $124,500 for Mr. Challoner and amounts paid under
consulting agreements. See "Certain Transactions" and "-- Compensation
Committee Interlocks."

(2) All bonus amounts are accrued and unpaid.

(3) Represents health insurance premium reimbursements.

OPTION GRANTS DURING LAST FISCAL YEAR

The following table sets forth certain information with respect to stock
options granted to each of the Named Executive Officers during 1998, including
the potential realizable value over the 5 year term of the options based on
assumed rates of stock appreciation of 5% and 10%, compounded annually. These
assumed rates of appreciation comply with the rules of the SEC and do not
represent the Company's estimate of future stock price. Actual gains, if any, on
stock option exercises will be dependent on the future performance of the common
stock. In 1998, the Company granted options to acquire up to an aggregate of 900
shares to employees, all under the Company's Stock Option Plan and all at an
exercise price equal to not less than the fair market value of the common stock
on the date of grant as determined in good faith by the board of directors.

POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
--------------------------------------------------- VALUE AT ASSUMED
NUMBER ANNUAL RATES OF
OF PERCENT OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTIONS TERMS
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ------------------
NAME GRANTED FISCAL 1998 SHARE DATE 5% 10%
- ---- ---------- ------------- --------- ---------- ------- --------

Dennis E. Condon(1)................. 600 67% $500.00 6-15-03 $ -- $ --

- ---------------------

(1) Does not reflect options to purchase 300,000 shares of common stock to be
granted upon the closing of the initial public offering with an exercise
price equal to the initial public offering price.

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No Named Executive Officer exercised any stock option during the fiscal
year ended December 31, 1998. The following table sets forth certain information
regarding stock options held as of December 31, 1998 by the Named Executive
Officers. The "Value of Unexercised In-the-Money Options at December 31, 1998"
is based upon a value of $8.00 per share, the initial offering price, minus the
per share exercise price, multiplied by the number of shares underlying the
option.

FISCAL YEAR-END OPTION VALUES
----------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1998 AT DECEMBER 31, 1998
---------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------

Dennis E. Condon............................... 600 -- -- --

EMPLOYMENT AGREEMENTS

We have entered into employment agreements with Mr. Condon, Mr. Challoner,
and Ms. Altavilla providing for annual base salaries of $200,000, $150,000 and
$150,000, respectively, with Mr. Condon, Mr. Challoner, and Ms. Altavilla each
being eligible for a cash bonus of up to 30% of his or her base salary if
certain annual financial performance targets are met. Pursuant to the
agreements, the company granted Mr. Condon and Ms. Altavilla options to purchase
600 and 300 shares of common stock, respectively, at an exercise price of
$500.00 per share with such options vesting on June 15, 1998 and August 1, 1998,
respectively. Additionally, the company granted at the closing of the initial
public offering options for the purchase of common stock to each of Mr. Condon,
Mr. Challoner, and Ms. Altavilla for 300,000, 150,000 and 150,000, shares
respectively at $8.00 per share, the price to the public in the initial public
offering with 20% of these options vesting upon the effective date of the
initial public offering and the remainder vesting 20% per year on each of the
first four anniversary dates of such date. Each of these employment agreements
is for an initial term of five years with an automatic renewal for successive
one year terms unless prior notice of termination is provided. The company may
terminate an employment agreement for cause, without cause upon 30 days prior
written notice, or upon death or disability of the employee. The employee may
terminate the employment agreement within 120 days after a constructive
termination (as defined therein). If the employee's employment is terminated by
the company without cause, by the employee within 120 days following a
constructive termination, or upon occurrence of a change in control, we will pay
the employee on the date of termination:

- severance pay in the amount of two times annual base salary;

- base salary accrued but unpaid from the last monthly payment date to the
date of termination;

- specified expense reimbursements;

- a pro-rata portion of the annual maximum bonus for the year in which the
termination occurs; and

- two times the amount of the bonus actually earned for the prior calendar
year, or if the termination occurs during the first year of employment,
two times the pro-rata portion of the annual maximum bonus for the first
year.

Each agreement prohibits the employee from competing with us for a period of two
years following termination of employment.

We entered into an employment agreement with Mr. Sundstrom providing for an
annual base salary of $130,000. Mr. Sundstrom received a bonus of $15,000 upon
the closing of the initial public offering. Under the agreement, Mr. Sundstrom
received 100,000 options for the purchase of the common stock at the price to
the public of $8.00 a share in the initial public offering. Twenty percent of
these options vested upon the closing of the initial public offering, with the
remainder vesting 20% per year on each anniversary date of the closing of the
initial public offering.

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STOCK OPTION PLANS

We have adopted the 1998 Employee Stock Option Plan and the 1999
Non-Employee Director Stock Plan. We intend to register the shares of common
stock issuable upon exercise of options granted under these plans. Upon
registration, such shares will be eligible for resale in the public market,
subject to applicable rules and regulations of the Securities Act.

1998 Employee Stock Option Plan. The board has adopted and the
shareholders have approved the 1998 Employee Stock Option Plan. Awards under the
employee plan are to be determined by the compensation committee and granted to
officers and employees as incentive or non-incentive stock options. The employee
plan may be terminated by the board at any time.

Eight hundred forty thousand shares of common stock are reserved for
issuance pursuant to the employee plan, subject to certain anti-dilution
provisions. Options for the purchase of 755,000 shares of common stock were
granted at the closing of the initial public offering to certain officers and
employees at an exercise price equal to the price to the public of $8.00 a share
in the initial public offering. These options vested 20% upon the closing of the
initial public offering, with the balance vesting 20% per year on the first
through fourth anniversary dates of the date of grant. The options expire five
years from the date of grant. Mr. Condon and Ms. Altavilla were granted
non-qualified options under the employee plan for the purchase of 600 and 300
shares of common stock, respectively, at an exercise price of $500.00 per share.
These options vest 100% upon the effective date of their respective employment
agreements. See "Management -- Employment Agreements."

1999 Non-Employee Director Stock Plan. The board has adopted and the
shareholders have approved the 1999 Non-Employee Director Stock Plan. Awards
under this plan are to be granted to non-employee directors to purchase shares
of our common stock.

Two hundred eighty thousand shares of common stock are reserved for
issuance to the non-employee directors under the director plan. Each person who
is elected or appointed a non-employee director will be granted a
nondiscretionary option to purchase 10,000 shares of common stock at the time of
his or her election or appointment. On December 15, 1999, one non-employee
director received a grant of options to purchase 10,000 shares of common stock.
Beginning in 2000, each person who continues to serve as a non-employee director
following the annual meeting each year will receive a nondiscretionary option to
purchase 10,000 shares of common stock. Options issued to non-employee directors
under this plan will be non-qualified stock options, and will expire ten years
from the date of the grant. The exercise price will be equal to the average
closing bid price for the five trading days before election or appointment of
the director. Options issued to non-employee directors become exercisable on the
first anniversary of the date of the grant.

Administration of the Stock Option Plans. The employee plan will be
administered by the compensation committee of the board. The director plan is
self-governing. Under the employee plan, the compensation committee will
determine who will receive, and the times at which, awards are granted, the
types of awards granted, and all other terms and conditions of the awards. Under
the employee plan, the compensation committee must consist of at least two
directors, and for grants of options or awards to any persons subject to Section
16 of the Exchange Act, the committee must consist of at least two directors who
are non-employee directors under Rule 16b-3.

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PRINCIPAL SHAREHOLDERS

The following table sets forth information concerning the beneficial
ownership of the common stock as of February 15, 2000, by:

- each named executive officer,

- each of the directors,

- all executive officers and directors as a group, and

- each person who beneficially owns more than 5% of the common stock

SHARES
BENEFICIALLY OWNED SHARES
BEFORE THE BENEFICIALLY OWNED
OFFERING(1) AFTER THE OFFERING
------------------- SHARES BEING -------------------
NAME AND ADDRESS(2) NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------- --------- ------- ------------ --------- -------

Jonathan E. Wilfong(3)........................ 722,150 13.7 -- 722,150 13.7
Dennis E. Condon(4)........................... 185,850 3.9 -- 185,850 3.9
Patricia A. Altavilla(5)...................... 57,975 1.3 -- 57,975 1.3
David H. Challoner(6)......................... 31,350 0.7 -- 31,350 *
Gunnar Sundstrom(7)........................... 20,000 0.4 -- 20,000 *
Mark A. Kaiser................................ -- -- -- -- --
Robert A. Ersek, M.D., F.A.C.S. .............. 452,914 10.1 452,914 -- --
John C. Schantz, M.D., F.A.C.S. .............. 51,273 1.1 51,273 -- --
W. Grant Stevens, M.D., F.A.C.S.(8)........... 572,001 12.4 441,601 130,400 2.8
William G. Armiger, M.D., F.A.C.S. ........... 409,949 9.0 409,949 -- --
S.L. Schlesinger, M.D., F.A.C.S.(9)........... 236,173 5.1 185,973 50,200 1.1
All directors and executive officers as a
group (9 persons)........................... 2,093,513 36.8 945,788 1,147,725 20.2

* Less than 1%.
(1) The offering referenced is a registered offering of up to 2,999,734 shares
of common stock. The chart assumes that each shareholder eligible to sell
shares will sell all of the eligible shares. All of the persons listed are
subject to lock-up agreements with Cruttenden Roth, Incorporated that
prohibit any sales until May 2, 2000. There can be no assurance that any of
these persons will sell any or all of their shares after the expiration of
the lock-up agreements.
(2) Unless otherwise indicated, the address of each of the beneficial owners
identified is c/o The Plastic Surgery Company, 104 West Anapamu, Suite G,
Santa Barbara, California 93101. Except as otherwise indicated, such
beneficial owners have sole voting and investment power with respect to all
shares of common stock owned by them, subject to community property laws
where applicable.
(3) Includes (i) 7,000 shares of common stock held of record; (ii) 700,000
shares subject to presently exercisable warrants; and (iii) 150 shares of
common stock and 15,000 shares subject to presently exercisable warrants
held of record by his wife. Mr. Wilfong disclaims beneficial ownership of
the shares held by his wife.
(4) Includes (i) 250 shares of common stock held of record; and (ii) 185,600
shares subject to presently exercisable warrants and options.
(5) Includes (i) 175 shares of common stock held of record; and (ii) 57,800
shares subject to presently exercisable warrants and options.
(6) Includes (i) 350 shares of common stock held of record; and (ii) 31,000
shares subject to presently exercisable warrants and options.
(7) Includes 20,000 shares subject to presently exercisable options.
(8) Includes (i) 442,001 shares of common stock held of record; (ii) 115,000
shares subject to presently exercisable warrants; and (iii) 15,000 shares
subject to presently exercisable warrants held by his wife. Dr. Stevens
disclaims beneficial ownership of the warrants held by his wife.
(9) Includes (i) 186,173 shares of common stock held of record; and (ii) 50,000
shares subject to presently exercisable warrants.

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SELLING SHAREHOLDERS

This prospectus relates to an aggregate of 2,500,000 shares of common stock
which we may offer from time to time to acquire certain operating assets, or the
stock of entities holding certain operating assets, of plastic surgery practices
or of one or more companies, businesses or assets complementary to our existing
business in negotiated transactions not involving any public offering, of which
no shares have been issued to date. This prospectus will be supplemented to
furnish the information necessary for any particular material negotiated
transaction and the Registration Statement of which this prospectus is a part
will be amended, where appropriate, to supply information concerning an
acquisition if required by Securities and Exchange Commission rules and
policies. This prospectus also relates to the offer for sale or other
distribution of shares by persons who will acquire such shares in connection
with the acquisitions. These selling shareholders will be identified from time
to time by filing supplements to this prospectus.

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48

CERTAIN TRANSACTIONS

Simultaneously with and as a condition to the closing of our initial public
offering, we acquired certain operating assets of, or the stock of 16 founding
practices in exchange for cash and shares of our common stock, which were
accounted for under SAB 48, and we entered into business services agreements
with these founding practices. In addition, we acquired 9 founding practices
which were accounted for at the fair value of the assets. Each of these
transactions was individually negotiated by us and each founding practice with
respect to all material terms including, without limitation, valuation. Our
executive officers and Mr. Wilfong negotiated the transactions with the founding
practices. The aggregate consideration paid by us to these founding practices
upon closing of the offering was approximately $35.7 million, consisting of
2,999,734 shares of our common stock and approximately $6.4 million in cash and
the delivery of approximately $5.3 million in promissory notes. The cash portion
of the consideration was paid from proceeds received by us in the offering. Drs.
Ersek, Schantz and Stevens, all of whom are our directors, received 452,914,
51,273 and 441,601 shares of our common stock, respectively, $452,914, $51,274
and $441,601 in cash, respectively, and $452,914, $51,274, and $441,601 in
promissory notes, respectively, as a result of the acquisition of their founding
practices. Drs. Armiger and Schlesinger received 409,949 and 185,973 shares of
our common stock, and $1,069,898 and $107,023 in cash, respectively, as a result
of the acquisition of their founding practices. Dr. Schlesinger received
$107,023 in a promissory note. The consideration that we agreed to pay each of
the founding practices of Drs. Armiger, Ersek, Schantz, Schlesinger and Stevens
was calculated in the same manner as the consideration for each of the other
founding practices.

Upon the closing of the acquisition of the founding practices, we entered
into a business services agreement with each of Drs. Armiger, Ersek, Schantz,
Schlesinger and Stevens, substantially on the terms described for such
agreements in "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- The Founding Practices -- Business Services
Agreements."

The following table provides certain information concerning the
stockholders of the Founding Practices (who are considered promoters) that were
accounted for under SAB 48.

CONSIDERATION TO BE RECEIVED
----------------------------------------------------
ASSETS TO BE LIABILITIES CASH PROMISSORY VALUE OF NUMBER OF
CONTRIBUTED(1) ASSUMED(1) DISTRIBUTION NOTE SHARES(2) SHARES(2)
-------------- -------------- ------------ ---------- ----------- ----------

William G. Armiger, M.D.,
F.A.C.S......................... $ 171,489 $ -- $1,069,898 $ -- $ 3,479,591 409,949
Kenneth R. Arthur, M.D.,
F.A.C.S......................... 3,973 -- 51,273 51,273 410,185 51,272
John L. Baeke, M.D................ 59,571 -- 153,574 153,574 1,228,594 153,574
Robert A. Ersek, M.D., F.A.C.S.... 225,764 -- 452,914 452,914 3,623,310 452,914
Michael S. Flood, M.D.,
F.A.C.S......................... 3,973 -- 51,273 51,273 410,186 51,273
Stanley P. Gulin, M.D.,
F.A.C.S......................... 224,599 53,661 148,572 148,572 1,188,573 148,572
Stiles T. Jewett, Jr., M.D.,
F.A.C.S......................... 56,723 -- 58,992 58,992 471,938 58,992
John C. Kelleher, Jr., M.D.,
F.A.C.S......................... 29,101 -- 340,242 -- 1,360,967 170,121
Graham M. Kemsley, M.D.,
F.R.C.S......................... 49,684 -- 123,166 123,166 985,324 123,166
John L. LeRoy, M.D., F.A.C.S...... 7,487 -- 30,449 30,449 243,594 30,449
Richard M. Nazareth, M.D.,
F.A.C.S......................... 41,443 -- 152,487 152,487 1,219,893 152,487
John C. Schantz, M.D., F.A.C.S.... 3,973 -- 51,274 51,274 410,186 51,273
S.L. Schlesinger, M.D.,
F.A.C.S......................... 24,207 211,412 107,023 107,023 1,487,783 185,973
Joel B. Singer, M.D., F.A.C.S..... 9,328 -- 100,560 100,560 804,478 100,560
Charles W. Spenler, M.D........... -- -- 66,049 66,049 528,390 66,049
W. Grant Stevens, M.D.,
F.A.C.S......................... 14,548 220,000 441,601 441,601 3,532,806 441,601
Gloria Thomas, M.D................ 46,870 -- 75,312 75,312 602,498 75,312
Verne M. Weisberg, M.D.,
F.A.C.S......................... 5,000 -- 178,856 -- 715,422 89,428
---------- -------- ---------- ---------- ----------- ----------
Total.................... $ 977,733 $485,073 $3,653,515 $2,064,519 $22,503,718 2,812,963
========== ======== ========== ========== =========== ==========

- ---------------

(1) Assets contributed reflect the historical book value of the assets of each
practice, as of September 30, 1999. Of the assets contributed, approximately
95% are property and equipment. Liabilities assumed are debts of the
practice.

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49

Under a consulting agreement that terminated on September 30, 1998, we paid
Mr. Challoner $110,500 and issued him a warrant to purchase 1,000 shares of
common stock at $250.00 per share, exercisable on or before October 1, 2002. Mr.
Challoner received an additional $99,500 upon the closing of the offering.

On May 13, 1999, we sold warrants to purchase 1,390,204 shares of common
stock at an exercise price per share equal to $2.50. The purchase price was $.50
per share. We received cash proceeds of $303,852 from the sale of these
warrants. We received notes from Mr. Wilfong (Chairman of the Board), Mr. Condon
(President and Chief Executive Officer), and Ms. Altavilla (Executive Vice
President of Marketing and Business Planning) in the amount of $350,000, $12,500
and $8,750, respectively, for the $.50 per share purchase price of the warrants.
The notes were full recourse notes that were to mature three years from the date
of issuance and accrue interest at a rate of 8% per annum. The notes were
subsequently paid off prior to June 30, 1999 by an offset to accrued
compensation owed to the holders. The warrants may be exercised in whole or in
part for a five year term commencing on the date of issuance. The warrants are
not subject to adjustment for stock splits, stock dividends or any other
reorganization of our outstanding stock. We recorded a charge to additional
paid-in capital related to the issuance of these warrants based on the fair
value of our common stock on the date of issuance of $8.93 per share. We
acquired Mr. Wilfong's warrants on December 29, 1999, for the issuance of a
$1,050,000 promissory note and the grant of warrants to purchase 700,000 shares
of common stock at $8.00 per share. We recorded a compensation charge of
approximately $4 million in 1999 related to these transactions. For additional
information regarding Mr. Wilfong, see "Management -- Compensation Committee
Interlocks."

We granted warrants to purchase an aggregate of 137,750 shares of common
stock with an exercise price per share equal to the initial public offering
price, exercisable for a five year term commencing on the closing of the
offering, to the following allied surgeons: 75,000 to Dr. Stevens, who is a
director, for referring allied surgeons to us for affiliation and assisting us
in recruiting of our officers; and 8,750 to Dr. Ellenby, 12,000 to Dr. Jewett,
30,000 to Dr. Schlesinger, and 12,000 to Dr. Singer for referring allied
surgeons to us for affiliation. We recorded expense related to these warrants at
the closing of the initial public offering.

We also issued warrants to individuals not affiliated with us to purchase
an aggregate of 125,000 shares of common stock with an exercise price per share
equal to the initial public offering price, exercisable for a five year term
commencing on the date of the offering, for referring allied surgeons to us. We
recorded expense related to these warrants at the closing of the initial public
offering.

On May 12, 1999, we issued warrants to purchase 100,000 shares of common
stock to Mr. Condon and warrants to purchase 10,000 shares of common stock to
Ms. Altavilla for an exercise price per share equal to $2.50. The warrants are
not subject to adjustment for stock splits, stock dividends or any other
reorganization of our outstanding stock. We recorded expense related to the
issuance of these warrants based on the fair value of our common stock on the
date of issuance of $8.93 per share.

In June 1999, we agreed to pay to Mr. Condon a cash bonus in the amount of
$75,000 for past services provided. This cash bonus is payable upon the
completion of the offering.

On December 15, 1999, Mr. Kaiser received options to purchase 10,000 shares
of common stock pursuant to the 1999 Non-Employee Director Stock Plan. These
options will become exercisable on the first anniversary of the date of the
grant.

DESCRIPTION OF CAPITAL STOCK

The following summary description of capital stock is not intended to be
complete and is subject to the provisions of the Articles of Incorporation and
Bylaws, copies of which have been included as exhibits to the registration
statement of which this prospectus forms a part, and the applicable provisions
of Georgia law. The following discussion is qualified in its entirety by
reference to such exhibits.

We have authority to issue up to 100,000,000 shares of common stock, no par
value per share. As of the completion of the acquisitions of the founding
practices and the offering, there were 4,425,282 shares of common stock issued
and outstanding.

46
50

COMMON STOCK

As of January 10, 2000, there were 4,553,708 shares of common stock
outstanding and held of record by 109 shareholders.

Each holder of common stock is entitled to one vote for each share held on
all matters submitted to a vote of shareholders. Holders of common stock are
entitled to such dividends as may be declared from time to time by the board out
of funds legally available therefore, subject to any contractual limitations.
Holders of common stock will participate as one class with respect to any
dividends declared and paid on the stock. There are no redemption, sinking fund,
conversion or preemptive rights with respect to the shares of common stock. The
holders of common stock will share ratably in all assets of the company
remaining after the payment of liabilities in the event of any dissolution,
liquidation, or winding up of the company. All presently issued and outstanding
shares of common stock are fully paid and nonassessable.

PREFERRED STOCK

The Articles of Incorporation authorize the Board of Directors, from time
to time and without any stockholder action or approval, to provide for the
issuance of up to 20,000,000 shares of preferred stock, in one or more series,
and to fix the relative rights and preferences of the shares, including voting
powers, dividend rights, liquidation preferences, redemption rights and
conversion privileges. As of the date hereof, the board has not provided for the
issuance of any series of preferred stock, and there are no agreements or
understandings for the issuance of any preferred stock. Because of its broad
discretion with respect to the creation and issuance of preferred stock without
stockholders approval, the board could adversely affect the voting power of the
holders of common stock and, by issuing shares of preferred stock with certain
voting, conversion and/or redemption rights, could discourage any attempt to
obtain control of us.

WARRANTS

Warrants for the purchase of 1,627,154 shares of common stock have been
issued and are currently outstanding. The exercise price per share of the
warrants is equal to (a) $250.00, (b) $2.50, or (c) $8.00 per share. For a more
detailed discussion of these warrants, see "Certain Transactions." In addition,
we granted warrants to purchase 140,000 shares of common stock to the
underwriters in our initial public offering at an exercise price equal to
$11.60.

GEORGIA ANTI-TAKEOVER STATUTES

Georgia law restricts certain business combinations with "interested
shareholders" and contains fair price requirements applicable to certain mergers
with certain "interested shareholders" that are summarized below. The
restrictions imposed by these statutes will not apply to a corporation unless it
elects to be covered by these statutes. We have elected to be covered by these
restrictions.

Georgia law regulates business combinations such as mergers,
consolidations, share exchanges and asset purchases where the acquired business
has at least 100 shareholders residing in Georgia and has its principal office
in Georgia, and where the acquiror became an "interested shareholder" of the
corporation, unless either

- prior to such time, the board approves either the business combination or
the transaction by which such shareholder became an interested
shareholder;

- in the transaction that resulted in the shareholder becoming an
interested shareholder, the interested shareholder became the beneficial
owner of at least 90% of the outstanding voting stock of the company
which was not held by directors, officers, affiliates thereof,
subsidiaries or certain employee stock option plans of the company; or

- subsequent to becoming an interested shareholder, such shareholder
acquired additional shares resulting in such shareholder owning at least
90% of the outstanding voting stock of the company and the business
combination is approved by a majority of the disinterested shareholders'
shares not held by directors, officers, affiliates thereof, subsidiaries
or certain employee stock option plans of the company.

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51

Under the relevant provisions of Georgia law, a "business combination" is
defined to include, among other things,

- any merger, consolidation, share exchange or any sale, transfer or other
disposition (or series of related sales or transfers) of assets of the
company having an aggregate book value of 10% or more of the company's
net assets (measured as of the end of the most recent fiscal quarter),
with an interested shareholder of the company or any other corporation
which is or, after giving effect to such business combination, becomes an
affiliate of any such interested shareholder;

- the liquidation or dissolution of the company;

- the receipt by an interested shareholder of any benefit from any loan,
advance, guarantee, pledge, tax credit or other financial benefit from
the company, other than in the ordinary course of business; and

- certain other transactions involving the issuance or reclassification of
securities of the company which produce the result that 5% or more of the
total equity shares of the company, or of any class or series thereof, is
owned by an interested shareholder.

An "interested shareholder" is defined by Georgia law to include any person
or entity that, together with its affiliates, beneficially owns or has the right
to own 10% or more of the outstanding voting shares of the company, or any
person that is an affiliate of the company and has, at any time within the
preceding two-year period, been the beneficial owner of 10% or more of the
outstanding voting shares of the company. The restrictions on business
combinations shall not apply to any person who was an interested shareholder
before the adoption of the Bylaws which made the provisions applicable to the
company nor to any persons who subsequently become interested shareholders
inadvertently, subsequently divest sufficient shares so that the shareholder
ceases to be an interested shareholder and would not, at any time within the
five-year period immediately before a business combination involving the
shareholder, have been an interested shareholder but for the inadvertent
acquisition. The statute restricting business combinations is broad in its scope
and is designed to inhibit unfriendly acquisitions.

Georgia law prohibits certain business combinations between a Georgia
corporation and an "interested shareholder" unless:

- certain "fair price" criteria are satisfied;

- the business combination is unanimously approved by the continuing
directors;

- the business combination is recommended by at least two-thirds of the
continuing directors of the company and approved by a majority of the
votes entitled to be cast by holders of common stock, other than the
common stock beneficially owned by the interested shareholder who is a
party to the business combination; or

- the interested shareholder has been such for at least three years and has
not increased his ownership position in such three-year period by more
than one percent in any twelve-month period. For these purposes,
"business combination" generally includes any merger, asset-sale, share
exchange, or other transaction resulting in a financial benefit to an
interested shareholder, defined to mean a person who is the beneficial
owner of 10% or more of the common stock. The fair price statute is
designed to inhibit unfriendly acquisitions that do not satisfy the
specified "fair price" requirements.

ANTI-TAKEOVER EFFECTS

The foregoing provisions of the Articles and Bylaws and Georgia law could
discourage potential acquisition proposals and could delay or prevent a change
in control. These provisions are intended to enhance the continuity and
stability of the board and the policies formulated by the board and to
discourage certain types of transactions that may involve an actual or
threatened change in control. These provisions are also designed to reduce our
vulnerability to an unsolicited acquisition proposal and to discourage certain
tactics that may be used in proxy fights. Such provisions, however, may
discourage third parties from making tender offers for our shares. As a result,
the market price of the common stock may not benefit from any premium

48
52

that might occur in anticipation of a potential or actual change in control.
Such provisions also may have the effect of preventing changes in our
management. The board is classified into three classes, consisting, as nearly as
practicable, of one-third of the total number of directors serving on the board,
which totaled seven directors immediately upon the closing of the initial public
offering. The members of each class will serve staggered one, two and three year
terms and, thereafter, for successive three year terms. This provision for
directors' terms could also discourage potential acquisition proposals and could
delay or prevent a change in control of the company.

TRANSFER AGENT

The transfer agent and registrar for the Common Stock is American Stock
Transfer Company.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to our initial public offering, there has been no public market for
our common stock. The market price of our common stock could drop due to sales
of a large number of shares of our common stock or the perception that such
sales could occur. These factors could also make it more difficult to raise
funds through future offerings of common stock.

As of January 10, 2000, 4,553,708 shares of common stock are outstanding
(4,763,708 shares if the underwriters exercise their over-allotment options) and
1,779,054 shares of common stock are issuable upon the exercise of currently
vested options and warrants. Shareholders have exercised 186,800 warrants and
128,426 shares of common stock have been issued as result of these exercises.
See "Capitalization." The 1,400,000 shares (1,610,000 shares if the underwriters
exercise their over-allotment options in full) sold in our initial public
offering are freely tradeable without restriction under the Securities Act
except for any shares purchased by "affiliates" of the company as defined in
Rule 144 under the Securities Act. An additional 2,999,734 are being registered
pursuant to this prospectus. The remaining 153,974 shares are "restricted
securities" within the meaning of Rule 144 under the Securities Act. The
restricted securities generally may not be sold unless they are registered under
the Securities Act or are sold pursuant to an exemption from registration, such
as the exemption provided by Rule 144 under the Securities Act.

Our officers and directors and our shareholders beneficially owning more
than 1% of our common stock have entered into lock-up agreements pursuant to
which they have agreed not to offer or sell any shares of common stock for an
initial period of 180 days ending on May 2, 2000 without the prior written
consent of Cruttenden Roth, Incorporated on behalf of the underwriters. These
individuals have also agreed, pursuant to the lock-up agreements, for an
additional period of 180 days commencing on the last day of the lock-up period,
not to offer or sell any shares of their common stock unless they effect the
transaction through Cruttenden. Also, Cruttenden may, at any time and without
notice, waive these lock-up agreements specified in the underwriting agreements
on some shares. Following the initial lock-up period, these shares will be
eligible for sale in the public market.

In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for a period of at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of 1% of
the then-outstanding shares of common stock and the average weekly trading
volume in the common stock during the four calendar weeks immediately preceding
the date on which the notice of such sale on Form 144 is filed with the SEC.
Sales under Rule 144 are also subject to certain provisions relating to notice
and manner of sale and the availability of current public information about the
company. In addition, a person (or persons whose shares are aggregated) who has
not been an affiliate of the company at any time during the 90 days immediately
preceding a sale, and who has beneficially owned the shares for at least two
years, would be entitled to sell such shares under Rule 144(k) without regard to
the volume limitation and other conditions described above. The foregoing
summary of Rule 144 is not intended to be a complete description.

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53

The underwriting agreement provides that we will indemnify the underwriters
and their controlling persons against liabilities under the Securities Act or
will contribute to payments the underwriters and their controlling persons may
be required to make in respect thereof.

PLAN OF DISTRIBUTION

ISSUANCE OF SHARES BY THE COMPANY

This prospectus covers the offer and sale of up to 2,500,000 shares of
common stock, which we may issue from time to time in connection with
acquisitions of certain operating assets of, or the stock of entities holding
certain operating assets of, plastic surgery practices or of companies,
businesses or assets complementary to our existing business, in accordance with
Rule 415(a)(1) (viii) of Regulation C under the Securities Act of 1933 or as
otherwise permitted by the Securities and Exchange Commission. If appropriate,
this prospectus also may be used, with our prior consent, by people who are
given shares by the selling shareholders or by others who receive these shares.

We expect that the terms upon which we issue the shares of common stock in
connection with future acquisitions will be determined through negotiations with
the owners of the acquired businesses or assets. We expect that the shares that
are issued in connection with the future acquisitions will be valued at prices
reasonably related to market prices for the common stock prevailing either at
the time an acquisition agreement is executed or at the time the acquisition is
closed.

As of the date of this prospectus, we have entered into agreements to issue
approximately 212,500 shares of common stock for acquisitions. We have not
definitively identified any other acquisition in which we may issue shares. At
such time as we identify a specific acquisition in which shares will be issued,
we will amend or supplement this prospectus to add information about the
acquisition and the companies, businesses or assets being acquired if and to the
extent required.

We will pay all expenses of this offering. We will not pay any underwriting
discounts or commissions in connection with the issuance of shares of common
stock in business combination transactions, although we may pay finder's fees
with respect to specific acquisitions. Any person receiving a finder's fee may
be deemed to be an underwriter within the meaning of the Securities Act of 1933.

LEGAL MATTERS

Certain legal matters in connection with the sale of the shares of common
stock offered in this offering will be passed upon for us by King & Spalding,
Atlanta, Georgia.

EXPERTS

The financial statements for The Plastic Surgery Company, formerly known as
Better Image, Inc., as of December 31, 1997 and 1998 and for the period from
inception (April 30, 1997) to December 31, 1997 and for the year ended December
31, 1998 included in this prospectus and elsewhere in the registration statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.

ADDITIONAL INFORMATION

We have filed with the Commission a registration statement on Form S-1
under the Securities Act with respect to the common stock offered hereby. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement.
Statements contained in this prospectus as to the contents of any contract or
other document referred to are not necessarily complete. In each such instance,
reference is made to the copy of such contract or other document filed as an

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54

exhibit to the registration statement. Prospective investors may read and copy
the registration statement and its exhibits and schedules without charge at the
Public Reference Room maintained by the Commission at 450 5th Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices in Chicago,
Illinois and New York, New York. Prospective investors may obtain information on
the operation of the Public Reference Rooms by calling the Commission at
1-800-SEC-0330. In addition, we are required to file electronic versions of
these documents with the Commission through the Commission's Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) system. The Commission maintains a
World Wide Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Also, the common stock has been approved for
listing on the American Stock Exchange, subject to notice of issuance. Reports
and other information concerning us also may be inspected at the offices of the
American Stock Exchange, 86 Trinity Place, New York, New York 10006.

We intend to furnish our shareholders with annual reports containing
financial statements audited by our independent public accountants. We also
intend to furnish our shareholders with quarterly reports containing unaudited
financial statements for the first three fiscal quarters of each fiscal year.

51
55

INDEX TO FINANCIAL STATEMENTS

The Plastic Surgery Company
Report of Independent Public Accountants.................. F-2
Balance Sheets at December 31, 1997 and 1998 and September
30, 1999 (Unaudited)................................... F-3
Statements of Operations for the Period from Inception
(April 30, 1997) to December 31, 1997, for the Year
Ended December 31, 1998, For the Period from Inception
(April 30, 1997) to December 31, 1998 and for the Nine
Months Ended September 30, 1998 and 1999 (Unaudited)... F-4
Statements of Shareholders' Equity (Deficit) For the
Period From Inception (April 30, 1997) to December 31,
1997, for the Year Ended December 31, 1998 and for the
Nine Months Ended September 30, 1999 (Unaudited)....... F-5
Statements of Cash Flows For the Period From Inception
(April 30, 1997) to December 31, 1997, for the Year
Ended December 31, 1998, For the Period from Inception
(April 30, 1997) to December 31, 1998 and for the Nine
Months Ended September 30, 1998 and 1999 (Unaudited)... F-6
Notes to Financial Statements............................. F-7
Unaudited Pro Forma Balance Sheet
Unaudited Pro Forma Combined Balance Sheet at September
30, 1999............................................... F-20
Notes to Unaudited Pro Forma Balance Sheet................ F-22

F-1
56

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Plastic Surgery Company:

We have audited the accompanying balance sheets of The Plastic Surgery
Company (a development stage enterprise, a Georgia corporation and formerly
known as Better Image, Inc.) as of December 31, 1997 and 1998 and the related
statements of operations, shareholders' deficit, and cash flows for the period
from inception (April 30, 1997) to December 31, 1997 and for the year ended
December 31, 1998. 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 audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Plastic Surgery Company
as of December 31, 1997 and 1998 and the results of its operations and its cash
flows for the period from inception (April 30, 1997) to December 31, 1997 and
for the year ended December 31, 1998 in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
May 13, 1999

F-2
57

THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

BALANCE SHEETS

DECEMBER 31,
------------------------- SEPTEMBER 30,
1997 1998 1999
----------- ----------- -------------
(UNAUDITED)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................. $ 184,151 $ 402,860 $ 10,761
EQUIPMENT, at cost...................................... 19,724 45,760 48,087
Less accumulated depreciation......................... (1,973) (8,521) (15,558)
----------- ----------- -----------
Equipment, net..................................... 17,751 37,239 32,529
----------- ----------- -----------
INTANGIBLE ASSETS....................................... -- -- 3,500,580
Less accumulated amortization......................... -- -- (77,096)
----------- ----------- -----------
Intangible assets, net............................. -- -- 3,423,484
----------- ----------- -----------
Total assets.................................. $ 201,902 $ 440,099 $ 3,466,774
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable...................................... $ 56,486 $ 571,142 $ 1,001,173
Accrued employee and consultant compensation.......... 303,895 1,179,812 1,823,318
----------- ----------- -----------
Total current liabilities..................... 360,381 1,750,954 2,824,491
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock; no par value; 100,000,000 shares
authorized, 16,400, 18,926 and 25,548 shares issued
and outstanding at December 31, 1997 and 1998 and
September 30, 1999................................. -- -- --
Paid-in capital....................................... 1,471,440 3,521,940 (2,437,160)
Warrants.............................................. 250,000 250,000 11,363,095
Deficit accumulated during the development stage...... (1,879,919) (5,082,795) (8,283,652)
----------- ----------- -----------
Total shareholders' equity (deficit).......... (158,479) (1,310,855) 642,283
----------- ----------- -----------
Total liabilities and shareholders' equity
(deficit)................................... $ 201,902 $ 440,099 $ 3,466,774
=========== =========== ===========

The accompanying notes are an integral part of these statements.

F-3
58

THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

STATEMENTS OF OPERATIONS

FOR THE PERIOD FOR THE PERIOD FOR THE NINE FOR THE NINE
FROM INCEPTION FOR THE FROM INCEPTION MONTHS MONTHS
(APRIL 30, 1997) YEAR ENDED (APRIL 30, 1997) ENDED ENDED
TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1998 1998 1999
---------------- ------------ ---------------- ------------- -------------
(UNAUDITED) (UNAUDITED)

REVENUE...................... $ -- $ -- $ -- $ -- $ --
EXPENSES
Salaries, wages, and
benefits................ 1,732,576 2,181,990 3,914,566 922,027 2,122,956
General and
administrative.......... 155,289 1,028,509 1,183,798 685,661 1,084,028
----------- ----------- ----------- ----------- -----------
Total expenses..... 1,887,865 3,210,499 5,098,364 1,607,688 3,206,984
OTHER INCOME................. 7,946 7,623 15,569 5,111 6,127
----------- ----------- ----------- ----------- -----------
NET LOSS..................... $(1,879,919) $(3,202,876) $(5,082,795) $(1,602,577) $(3,200,857)
=========== =========== =========== =========== ===========
Basic and diluted net loss
per share.................. $ (127.31) $ (184.47) $ (94.40) $ (146.67)
=========== =========== =========== ===========
Weighted average shares
outstanding................ 14,766 17,363 16,976 21,824
=========== =========== =========== ===========

The accompanying notes are an integral part of these statements.

F-4
59

THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

DEFICIT
ACCUMULATED TOTAL
COMMON STOCK DURING SHAREHOLDERS'
--------------- PAID-IN DEVELOPMENT EQUITY
SHARES AMOUNT CAPITAL STAGE WARRANTS (DEFICIT)
------ ------ ----------- ----------- ----------- -------------

BALANCE AT APRIL 30, 1997 -- $ -- $ -- $ -- $ -- $ --
Common stock issued to founders
and employees................ 14,400 -- 721,440 -- -- 721,440
Common stock issued to
investors.................... 2,000 -- 500,000 -- -- 500,000
Common stock sold to consultant
from shareholder............. -- -- 250,000 -- -- 250,000
Warrants granted to
consultant................... -- -- -- -- 250,000 250,000
Net loss....................... -- -- -- (1,879,919) -- (1,879,919)
------ ---- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1997..... 16,400 -- 1,471,440 (1,879,919) 250,000 (158,479)
Common stock issued to
investors.................... 2,526 -- 1,263,000 -- -- 1,263,000
Common stock sold to
consultants and employees
from shareholder............. -- -- 787,500 -- -- 787,500
Net loss....................... -- -- -- (3,202,876) -- (3,202,876)
------ ---- ----------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1998..... 18,926 -- 3,521,940 (5,082,795) 250,000 (1,310,855)
Common stock issued to
investors (unaudited)........ 474 -- 237,000 -- -- 237,000
Warrants issued to employees
and consultants
(unaudited).................. -- -- -- -- 1,148,112 1,148,112
Warrants issued to shareholders
(unaudited).................. -- -- (9,269,880) -- 9,964,983 695,103
Stock issued to ISIS
(unaudited).................. 6,148 -- 3,073,780 -- -- 3,073,780
Net loss (unaudited)........... -- -- -- (3,200,857) -- (3,200,857)
------ ---- ----------- ----------- ----------- -----------
BALANCE AT SEPTEMBER 30, 1999
(unaudited).................... 25,548 $ -- $(2,437,160) $(8,283,652) $11,363,095 $ 642,283
====== ==== =========== =========== =========== ===========

The accompanying notes are an integral part of these statements.

F-5
60

THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss......................... $(1,879,919) $(3,202,876) $(5,082,795) $(1,602,577) $(3,200,857)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and
amortization................. 1,973 6,548 8,521 3,300 84,133
Expense related to warrants.... 250,000 -- 250,000 -- --
Expense related to stock and
warrant issuances to founders
and employees................ 720,000 -- 720,000 -- 1,148,112
Expense related to stock sold
to employees and consultants
by shareholder............... 250,000 787,500 1,037,500 -- --
Changes in assets and
liabilities:
Accounts payable............. 56,486 514,656 571,142 291,637 430,031
Accrued employee and
consultant compensation... 303,895 875,917 1,179,812 541,672 1,034,756
----------- ----------- ----------- ----------- -----------
Total adjustments......... 1,582,354 2,184,621 3,766,975 836,609 2,697,032
----------- ----------- ----------- ----------- -----------
Net cash used in operating
activities.............. (297,565) (1,018,255) (1,315,820) (765,968) (503,825)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of equipment............ (19,724) (26,036) (45,760) (25,099) (2,327)
Purchase of contract rights from
ISIS........................... -- -- -- -- (426,800)
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities.............. (19,724) (26,036) (45,760) (25,099) (429,127)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Warrants issued to investors -- -- -- -- 303,853
Common stock issued to
founders....................... 1,440 -- 1,440 -- --
Common stock issued to
investors...................... 500,000 1,263,000 1,763,000 713,000 237,000
----------- ----------- ----------- ----------- -----------
Net cash provided by
financing activities.... 501,440 1,263,000 1,764,440 713,000 540,853
----------- ----------- ----------- ----------- -----------
NET CHANGE IN CASH AND CASH
EQUIVALENTS...................... 184,151 218,709 402,860 (78,067) (392,099)
CASH AND CASH EQUIVALENTS,
beginning of period.............. -- 184,151 -- 184,151 402,860
----------- ----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of
period........................... $ 184,151 $ 402,860 $ 402,860 $ 106,084 $ 10,761
=========== =========== =========== =========== ===========

The accompanying notes are an integral part of these statements.

F-6
61

THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1998
(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

1. BUSINESS AND ORGANIZATION

The Plastic Surgery Company (formerly known as Better Image, Inc.)(the
"Company") was incorporated as a Georgia corporation on April 30, 1997. Upon the
closing of an initial public offering (the "Offering"), the Company will provide
business development services and Internet solutions to plastic surgery
practices.

Upon the closing of the Offering, the Company will effect the transfer (the
"Transfer"), of certain operating assets and certain liabilities of, or the
stock of an entity holding certain assets and certain liabilities of, plastic
surgery practice entities (the "Founding Practices"). The Company will enter
into long-term business services agreements with these Founding Practices. The
Company will account for certain of the Founding Practices acquired in the
Transfers under Staff Accounting Bulletin No. 48, "Transfers of Nonmonetary
Assets by Promoters and Shareholders" ("SAB 48"). The shareholders of these
Founding Practices are considered promoters. The Company will account for the
remaining Founding Practices acquired in the Transfers at fair value which will
result in intangible assets being recorded. The Company will amortize these
intangible assets over periods ranging from 10 to 15 years. (See Note
2 -- Intangible Assets.)

The Company has had no significant operations to date, and the financial
statements have been prepared on the basis that the Transfers will occur,
although no assurance can be made that the Transfers will be completed or that
the Company will be successful in completing planned future acquisitions. The
accompanying financial statements are presented on a historical basis and do not
include any adjustments related to the Transfers. In order to expand in the
future, the Company will need further acquisition financing in the form of debt
or equity financing. There can be no assurance that such financing will be
available.

In the Transfers, the Company will acquire certain operating assets or the
stock of entities holding certain operating assets of the Founding Practices in
exchange for cash, notes and shares of common stock and will enter into
long-term business services agreements with each practice. The Company is unable
to hold certain assets of the practices under applicable state law. These assets
will not be acquired by the Company. Each Founding Practice transaction was
individually negotiated between the Company and the Founding Practice as to all
material terms. For the Transfers accounted for under SAB 48, the Founding
Practice will receive up to a maximum of 25% of the total consideration for each
transaction in cash and notes and the balance in shares of common stock. The
actual number of shares of common stock to be issued by the Company in the
Transfers shall be determined subtracting the cash and note portions from the
total consideration and dividing such remaining amount by the initial public
offering price. The Transfers accounted for under SAB 48 will result in the
assets and liabilities of the Founding Practices being recorded at their
historical costs. For the Transfers not accounted for under SAB 48, the Company
will record the Transfers at fair value as asset acquisitions and will record
intangible assets that will be amortized over periods ranging from 10 to 15
years. (See Note 2 -- Intangible Assets.) The assets to be transferred include
receivables, supplies inventory, prepaid expenses, net equipment and certain
other current and non-current assets. The liabilities to be transferred include
long-term debt. The cash paid to the Founding Practices accounted for under SAB
48 will be recorded as a dividend by the Company.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION

Revenue from managing the practices pursuant to the business services
agreements will be recognized on a monthly basis as cash is collected by the
practice. The revenue of the Company will consist of the sum of the service fees
and amounts equal to the operating expenses of the practice assumed by the
Company, which we

F-7
62
THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

will be legally obligated to pay under such business services agreements. See
Note 5 "Operating Expenses of the Founding Practices" for a discussion of those
expenses that will be the responsibility and legal obligation of the Company and
included as a component of the Company's revenue. In general, the business
services agreements provide for the payment of fees to the Company based on a
percentage of the net cash collected by the Founding Practices. Expenses not
required to be paid by the Company pursuant to the agreements primarily consist
of professional expenses of the surgeons. The Company will separately disclose
in future financial statements the revenue from service fees and operating
expenses.

The Emerging Issues Task Force of the Financial Accounting Standards Board
issued its consensus Opinion 97-2 ("EITF 97-2"), which addresses certain
specific matters pertaining to the practice management industry. EITF 97-2 will
be effective for the Company upon the Offering. EITF 97-2 addresses the ability
of certain practice management companies to consolidate the results of certain
practices with which it has an existing contractual relationship. The Company
currently will not consolidate the operations of the plastic surgery practices
that it manages as the agreements with the practices do not meet the
requirements for consolidation as set forth in EITF 97-2.

After the closing of the Offering, the Company also intends to enter into
"management services agreements" with select plastic surgery practices rather
than "business services agreements". Pursuant to the management services
agreements, the Company will provide business development services and Internet
solutions and receive service fees. The Company expects its incurred expenses
under the management services agreements will be substantially similar to those
incurred under the business services agreements. The Company will recognize
revenues from these agreements based on a percentage of the net cash collected
by the practice which is commensurate with the level and timing of services
being provided. The Company will not acquire operating assets of the practices
entering into management services agreements, and will not assume the operating
expenses of these practices. Because the Company will not assume the operating
expenses of these practices, the Company will not record the operating expenses
as revenue or expense in its income statement.

The Company will enter into subscription agreements with subscribing
surgeons which will allow these surgeons to be included in the directory of
Board certified or Board eligible cosmetic surgeons on the Company's consumer
website. Subscribing surgeons will pay the Company a fee for the directory
listing which will be recognized as revenue as it is earned.

The Company anticipates generating future revenues from the sale of
products and services through the Company's proprietary websites. The revenue
generated may include fees from banner and sponsorship advertising,
subscriptions to our online magazine and video imaging.

CASH AND CASH EQUIVALENTS

Cash equivalents consist of highly liquid investments purchased within 90
days or less of maturity. They are recorded at cost which approximates fair
value.

F-8
63
THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

EQUIPMENT

Equipment is stated at cost less accumulated depreciation. Depreciation is
provided using the straight-line method over the assets' estimated useful lives
of five to seven years.

DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------ ------------ -------------
(UNAUDITED)

Equipment consisted of the following:
Computer equipment..................................... $14,275 $21,914 $ 24,241
Furniture and fixtures................................. 5,449 23,846 23,846
------- ------- --------
19,724 45,760 48,087
Less accumulated depreciation....................... (1,973) (8,521) (15,558)
------- ------- --------
$17,751 $37,239 $ 32,529
======= ======= ========

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of cash and accounts payable approximate their fair
values principally because of the short-term maturities of these instruments.

USE OF ESTIMATES

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 and
assumptions.

STOCK OPTIONS AND WARRANTS

The Company accounts for the issuance of options and warrants to employees
in accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB No. 25"). Options and warrants issued to
employees at an exercise price at or above fair value at the date of grant would
require no compensation expense to be recorded under APB No. 25. Options and
warrants issued to non-employees are accounted for under Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS
No. 123"). Options and warrants issued to non-employees will require
compensation expense to be recorded for the fair value of the equity instrument
issued less any consideration received.

BASIC AND DILUTED NET LOSS PER SHARE

Basic and diluted net loss per share was computed in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share", using
the weighted average number of common shares outstanding. Diluted net loss per
share does not include the impact of common stock equivalents for options and
warrants of 1,000, 1,900, 1,000 and 1,552,104 for the period from inception
(April 30, 1997) to December 31, 1997, for the year ended December 31, 1998 and
for the nine months ended September 30, 1998 and 1999, respectively, as their
effect would be anti-dilutive.

F-9
64
THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

ACCRUED EXPENSES

During 1998, the Company decided to move its corporate headquarters from
Atlanta, Georgia to Santa Barbara, California. In connection with this decision,
the Company accrued approximately $138,000 in 1998 related to contractual lease
agreements that will not benefit future periods.

COMPREHENSIVE LOSS

Comprehensive loss for the period from Inception (April 30, 1997) to
December 31, 1997, for the year ended December 1998 and for the nine months
ended September 30, 1998 and 1999 is the same as net loss presented in the
accompanying statements of operations.

INTANGIBLE ASSETS

Intangible assets consist of the excess of the purchase price over the fair
value of the net assets acquired from the asset acquisitions at fair value and
the purchase of contract rights discussed in Note 8. For the acquired practices,
the business services agreements have a term of 25 years. The Company has
allocated these intangible assets to the value obtained through entering into
business services agreements. The Company believes that no other identifiable
intangible asset was generated by these acquisitions. The Company will amortize
the intangible assets over their estimated useful lives taking into
consideration various qualitative factors, including the terms of the business
services agreements. The Company will consider the unique characteristics of
each practice being managed and uncertainties resulting from the Company's
inability or the practices' inability to perform over the term of the applicable
business services agreement. These factors take into consideration the
probability that a practice will be able to extend its existence indefinitely
and thus enable the Company to recover through profitable operations the
carrying value of the intangible assets. These factors include the following:

- The strength of the local market as evidenced by such factors as location
in the country, market demographics, and the number of plastic surgery
procedures performed in the market;

- Market recognition of the practice name;

- The existence of business services agreements with other practices in the
same market that could provide continuity of the practice, if necessary;

- The number of surgeons in the practice;

- The ages of the surgeons in the practice;

- The historical operating experience of the practice;

- Past experience of the practice to attract and retain associates; and

- The terms and conditions of the employment agreement with the surgeons.

Based on the above factors, the Company is amortizing intangible assets
over periods ranging from 10 to 15 years.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews the carrying value of its long-lived assets and
goodwill at least quarterly on a practice by practice basis to determine if
facts and circumstances exist which would suggest that assets might

F-10
65
THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

be impaired or that the amortization period needs to be modified. Among the
factors the Company considers in making the evaluation are changes in the
practices' market position, reputation, profitability geographic penetration,
the relationship with the physicians and any changes in the legal or regulatory
environment. If facts and circumstances are present which may indicate that the
carrying amount of the asset may not be recoverable, the Company will prepare a
projection of the undiscounted cash flows of the specific practice and determine
if the long-lived assets and/or goodwill are recoverable based on these
undiscounted cash flows. If the carrying value of the assets exceeds the
undiscounted cash flow, the Company will adjust the carrying amount of these
assets to their estimated fair value. The Company will determine estimated fair
value by reference to quoted market prices, if available, or by considering the
prices for similar assets or the results of valuation techniques that include
the present value of the estimated future cash flows.

INTERIM UNAUDITED FINANCIAL INFORMATION

The financial statements as of September 30, 1999 and for the nine months
ended September 30, 1998 and 1999 are unaudited; however, in the opinion of
management, all adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation of the unaudited financial statements for
these interim periods have been included. The results of interim periods are not
necessarily indicative of the results to be obtained for a full year.

NEW ACCOUNTING PRONOUNCEMENT

In June of 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. SFAS No.
133 is effective for the Company beginning with fiscal 2000. Management does not
expect the adoption of SFAS No. 133 to have a significant impact on the
financial position or results of operations of the Company.

3. SHAREHOLDERS' DEFICIT

The Company was incorporated in the State of Georgia on April 30, 1997.
Shortly after the date of incorporation, 14,400 shares of common stock were
issued to the founders and certain employees for $.10 per share. The Company
recorded $720,000 in expense on these shares based on a fair value of
approximately $50.00 per share as determined by management.

In May 1997, the Company began selling 2,000 shares of common stock to
affiliates of anticipated Founding Practices and other unrelated investors
through a private placement memorandum ("PPM") at a price of approximately
$250.00 per share. As of December 31, 1997, all 2,000 shares were issued under
the PPM for net proceeds of $500,000.

In December 1997, a principal stockholder of the Company sold 1,000 shares
of his common stock to a consultant of the Company for $.20 per share. The
Company recorded expense of $250,000 on these shares in 1997 based on a fair
value of approximately $250.00 per share as determined by management.

In March 1998, the Company began selling 3,000 shares of common stock to
affiliates of anticipated Founding Practices and other unrelated investors
through a second private placement memorandum ("PPM2") at a price of
approximately $500.00 per share. As of December 31, 1998, 2,526 shares were
issued under the PPM2 for net proceeds of $1,263,000.

F-11
66
THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

In November 1998, a principal stockholder of the Company sold 1,575 shares
of his common stock to certain employees and consultants of the Company for
approximately $.20 per share. The Company recorded expense of $787,500 on these
shares in 1998 based on a fair value of approximately $500.00 per share as
determined by management.

In January and February of 1999, the Company sold the remaining 474 shares
of common stock under PPM2 for net proceeds of $237,000 at a price of
approximately $500.00 per share.

4. INCOME TAXES

As reflected in the accompanying statements of operations, the Company
incurred a loss from operations during the period from inception (April 30,
1997) to December 31, 1997, for the year ended December 31, 1998 and for the
nine months ended September 30, 1999. Due to the limited operations of the
Company since its inception and the pending offering, a valuation allowance has
been recorded to fully reserve for the deferred tax benefits. The components of
the deferred tax assets as of December 31, 1997 and 1998 are as follows:

DECEMBER 31, DECEMBER 31,
1997 1998
------------ ------------

Net operating loss carryforwards............................ $ 579,814 $ 646,368
Accrued liabilities and organizational expenses............. 133,213 569,691
--------- -----------
Total deferred tax assets......................... 713,027 1,216,059
Valuation allowance............................... (713,027) (1,216,059)
--------- -----------
Net deferred tax assets................. $ -- $ --
========= ===========

The net operating loss carryforwards begin expiring in 2012. A valuation
allowance has been provided on the deferred tax assets as management believes
that it is more likely than not that future operations, due to the limited
operating history of the Company, will not result in realization of the net
operating loss carryforwards or deferred tax assets. The Company will record the
benefits from the deferred tax assets when it is more likely than not that these
assets will be realized. There are no significant differences in the tax and
book bases of the Company's assets or liabilities that would give rise to
deferred tax balances.

5. TRANSACTIONS WITH FOUNDING PRACTICES

As discussed in Note 1, the Company plans to complete, through a series of
stock acquisitions and mergers and asset transfers, the acquisition of certain
assets and assumption of certain liabilities of the Founding Practices
concurrently with an initial public offering of shares of its common stock.

The Founding Practices will enter into 20 or 25 year business service
agreements with the Company. Additionally, the surgeons at the Founding
Practices will enter into employment agreements including noncompete provisions
with the Founding Practices.

AGREEMENTS WITH FOUNDING PRACTICES

As part of the business services arrangements, each Founding Practice has
entered into three agreements: (i) an acquisition agreement pursuant to which
the Company purchases certain operating assets of each practice; (ii) a business
services agreement whereby the Company agrees to provide management or
consulting services to the practice; and (iii) an employment agreement between
the practice and each surgeon who is an equity holder in the practice or who
provides services through such practice on an average of more

F-12
67
THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

than ten days each month. To the extent we enter into these agreements in future
acquisitions, the terms may differ materially from the terms described below.

Acquisition Agreements. The Founding Practices and the surgeons have
entered into an acquisition agreements with the Company which may be in the form
of (i) an asset purchase and sale agreement; (ii) a stock purchase and sale
agreement; or (iii) an agreement and plan of reorganization whereby the practice
merges with the Company (individually an "acquisition agreement" or collectively
"acquisition agreements"). Based on applicable state laws and regulations, the
operating assets of each practice, which include equipment, inventory, accounts
receivable, furniture and other personal property, or some combination thereof
will be transferred to the Company pursuant to the acquisition agreements. As
consideration for entering into an acquisition agreement, the Company will pay
consideration consisting of a combination of common stock, notes and cash.

Business Services Agreements. Each Founding Practice will enter into a
business services agreement, in the form of a service agreement or consulting
agreement as dictated by state law. Each service agreement generally requires
that the Company provide the following services for the practices: acquisition
and maintenance of specified furnishings and equipment; provision of suitable
offices and facilities; payroll processing; employment of necessary personnel
(excluding plastic surgeons and certain medical personnel); development of
business systems procedures and forms; procurement and inventory management;
assistance in acquiring malpractice insurance; cash management; advertising,
marketing and practice development; development of appropriate business systems;
supervision, management and organization of files and records; and financial
reporting and analysis. Any leases entered into by the Company on behalf of the
practice will be subleased by the practice from the Company. Under the service
agreements, the Company will receive a service fee of 15% of net cash collected.
If required by applicable state law or regulations, a practice may enter into
consulting agreements that contain certain of the same provisions as the
business services agreement, including: (i) provisions relating to the
obligation to loan funds to the practice in the event the practice is unable to
pay its current expenses, (ii) repurchase of assets and assumption of
liabilities by the practice upon expiration or termination, (iii) assignment,
(iv) covenant not to compete, (v) term and termination, and (vi)
indemnification. Under consulting agreements, the Company will provide the
following services to practices in exchange for a fixed dollar annual fee with
annual fixed percentage increase: consulting with respect to equipment and
office needs; preparing staffing models appropriate for the practice; advising
and training with respect to business systems; purchasing and maintaining
inventory; advising with respect to and providing or arranging accounting and
bookkeeping services; assisting with the acquisition of malpractice insurance;
advising with respect to developing a marketing plan; assessing the financial
feasibility of establishing new offices; providing billing and collection
services; and assisting the practices in organizing and developing filing and
recording systems. Pursuant to these business services agreements, the Company
must pay the operating expenses of a practice. To the extent a practice's
operating expenses exceed revenues, the practice will be responsible for the
difference.

The business services agreements have either 20 or 25 year terms for the
Founding Practices, beginning on the date of the Offering. The Company
anticipates executing business services agreements with 25 year terms for each
allied practice affiliated with the Company after the Offering. The business
services agreements are subject to termination by either party in the event the
non-terminating party becomes subject to voluntary or involuntary bankruptcy
proceedings or materially breaches the agreement, subject to a cure period. The
practices may also terminate the business services agreements if the Company is
subject to a change of control. Upon the termination of the business services
agreements (except upon a breach by the Company), the practice and its
shareholders are subject to a two year covenant not to compete which prohibits
the

F-13
68
THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

following within a specified territory the following: (i) advertising in print
and electronic media (ii) soliciting patients, surgeons or staff associated with
the practice and (iii) soliciting any referrals from any physician who referred
one or more patients to the practice within three years prior to the date of
such termination.

Under the business services agreements, the surgeons maintain full control
over and ownership of the practices, determine which personnel will be
affiliated with the practices and establish their own practice standards to
promote quality plastic surgery care. The Company does not engage in the
practice of medicine. Each surgeon is responsible for the compliance of his or
her practice with state and local regulations, licensing, and certification
requirements applicable to the practice of plastic surgery. Each practice, in
its sole discretion, determines the fees to be charged for services provided to
patients based upon market conditions in the service area and other factors
deemed appropriate by the practice.

Employment Agreements. Each surgeon who is an equity holder in a practice
or who provides plastic surgery services through a practice an average of more
than ten days a month either at the time of execution of the business services
agreement or any time thereafter is required to execute an employment agreement
with the practice. Each employment agreement generally provides that the surgeon
will perform professional services for the practice over periods ranging from 5
to 25 years, commencing on the date of the Offering, with automatic renewal for
additional one year terms. After the expiration of the initial term, either the
practice or the surgeon may terminate the employment agreement at any time
without cause by giving ninety days prior written notice. Each surgeon's
compensation will be a percentage of net cash collected by the practice after
the payment of the service fee and all operating expenses of the practice, with
such percentage to be determined by the practice. The surgeon agrees that upon
termination or expiration of the employment agreement, he or she will not
compete for a period of two years in the market in which the practice operates
an office, will not solicit former patients of the practice, will not solicit
referrals from any physician who referred one or more patients to the surgeon or
the practice within the two years prior to the termination, and will limit the
methods of advertising in the area in which a practice is located.

The employment agreement is between the surgeon and the practice and the
Company is not a party to the employment agreement. The parties to the
employment agreement can amend the employment agreement without the Company's
consent. The practice, however, enters into a business services agreement with
the Company that requires the practice to enter into the employment agreements,
in the form attached to the business services agreement, with all owners of the
practice or any surgeon who performs surgery for the practice for at least ten
days a month. If the practice or the surgeon modifies the employment agreement
in a way that causes the practice to breach any of the terms of the business
services agreement, the Company will be entitled to enforce the terms of the
business services agreement against the practice. The Company cannot guarantee
that the surgeon will complete the 5 or 25 year term or renew his or her
employment at the end of the term. If the surgeon does not complete his or her
employment terms or does not renew his or her contract, the Company's revenues
will be adversely affected.

F-14
69
THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

CALCULATION OF SERVICES FEES

Under the business services agreements, the Company will recognize revenue
in amounts equal to the assumed expenses plus service fees of 15% of the net
cash collected by the practice. In the future, the Company may recognize
revenues in amounts equal to the assumed expenses plus a fixed dollar amount
with annual fixed percentage increases. Net cash collected is defined as revenue
resulting from fees and charges for each month earned and collected by and on
behalf of the practice as a result of professional services provided by the
practice's surgeons and those under the surgeons' supervision and other fees or
income generated by the practice, less any adjustments for refunds or other
items that do not generate a fee.

OPERATING EXPENSES OF THE FOUNDING PRACTICES

Subsequent to the Transfers, the Company will be responsible and have a
legal obligation for the payment of certain operating expenses incurred by the
practice to the extent permitted by applicable law. These expenses include the
following:

- Salaries, benefits, payroll taxes, workers compensation, health insurance
and other benefit plans, and other direct expenses of non-medical
employees of the Company at each practice office,

- Direct costs of all employees or consultants that provide services to
each practice office,

- Medical and office supplies,

- Lease or rent payments, utilities, telephone and maintenance expenses for
practice facilities,

- Property taxes on the Company assets located at practice offices,

- Property, casualty and liability insurance premiums, excluding
malpractice insurance which will be the responsibility of the practice,

- Surgeon recruiting expenses, and

- Advertising and other expenses attributable to the promotion of practice
offices.

All of the above expenses will be assumed by the Company and be paid
directly to the third-party provider of the goods or services. These operating
expenses will be paid out of individual practice cash accounts that are
controlled by the Company. These expenses will be recorded in the Company's
financial statements because the Company is legally obligated to pay these
expenses. In exchange for assuming these expenses and providing management
services, the Company will record revenue in amounts equal to the assumed
expenses plus the management fee described above.

The Founding Practices will retain responsibility for the payment of any
and all direct employment expenses, including benefits, for any surgeon or other
employee that the Company is prohibited from employing by applicable state law.
In addition, the Founding Practices will retain responsibility for the payment
of expenses for continuing education, seminars, professional licenses,
professional membership dues and malpractice insurance and all other expenses of
any surgeon. These expenses will remain the responsibility of the Founding
Practices and will not be included in reimbursed operating expenses, which is a
component of the Company's revenue. See Note 2 "Revenue Recognition" for further
discussion of the revenue of the Company.

Each business services agreement obligates the Company, with no limitation,
to pay the operating expenses of a practice. To the extent a practice's
operating expenses exceed its revenues, the practice will be responsible for the
difference. The Company will record the difference (excess operating expenses)
as a receivable from the practice bearing interest at the prime rate as
published in The Wall Street Journal plus one percent. Any receivable created
will be repaid as an operating expense. This receivable will be repaid after

F-15
70
THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

the payment of the service fee and before the surgeon receives any compensation.
There is no defined payment date related to this receivable. The Company will
fund the excess operating expenses from working capital or borrowings under a
credit facility, which the Company anticipates establishing following the
closing of the Offering.

FINANCING PLANS

Third party financing companies will provide online financing for patients
of the Company's allied practices and will be responsible for the approval and
application process. These companies will assume all of the risks related to
financing. The practice will receive a payment from these companies equal to 85%
to 90% of the financed amount. These companies will not have any recourse
against the individual practices or the Company for any unpaid balances.
Application and approval procedures will be instituted by these companies and
terms of payment will vary upon the creditworthiness of the patient. The billing
of patients is the responsibility of the Company employees located at the
practice.

6. COMMITMENTS AND CONTINGENCIES

The Company will be subject to certain government regulations at the
federal and state levels. In compliance with certain regulatory requirements,
the Company will not control the practice of medicine. The business services
agreements may be challenged by certain states as to their legality. There also
can be no assurance that the laws and regulations of states in which the Company
will maintain operations will not change or be interpreted in the future to
restrict the Company's relationships with the Founding Practices.

Each surgeon may be exposed to professional liability and other claims by
providing plastic surgery procedures to the public. Each Founding Practice is
required to maintain general liability and malpractice insurance. As a result of
providing business services, the Company may be named as a co-defendant in
lawsuits against surgeons affiliated with the Founding Practices. The Company
does not control the practice of plastic surgery and cannot purchase malpractice
insurance. The Company does not control the compliance of the surgeons with
regulations or other requirements relating to the practice of medicine.
Successful claims could result in large damage awards that could exceed
insurance limits. Insurance coverage can be very expensive and vary from state
to state. The practices indemnify the Company for liability arising from
malpractice claims but any indemnification might reduce a practice's ability to
pay its expenses. Successful claims may have a material and adverse effect on
the Company's revenues and financial results. The Company maintains professional
liability coverage for its directors and officers and general liability
insurance.

7. STOCK OPTIONS AND WARRANTS

The Company has established the 1998 Employee Stock Option Plan. All
options issued under this plan will be accounted for in accordance with APB No.
25, and any required compensation expense on these options will be recorded at
the date of grant. The total number of shares to be granted under the plan may
not exceed 840,000 shares. The Company had 900 options outstanding and
exercisable under the plan at December 31, 1998 and had 839,100 shares available
for future grants.

The Company has adopted the 1999 Non-Employee Director Stock Plan. The
total number of shares to be granted under the plan may not exceed 280,000
shares. No options were outstanding under this director plan as of December 31,
1998.

In October 1997, the Company granted a consultant warrants to purchase
1,000 shares of common stock at an exercise price of approximately $250.00 per
share. These warrants were 100% vested at the date of grant.

F-16
71
THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

This individual subsequently became an employee of the Company in October 1998.
The Company recorded compensation expense in 1997 of $250,000 on these warrants
based on a fair value per share of approximately $250.00 as determined by
management.

A summary of changes in outstanding warrants and options during the period
from inception (April 30, 1997) to December 31, 1997 and for the year ended
December 31, 1998 is as follows:

WEIGHTED
AVERAGE
EXERCISE EXERCISE
WARRANTS OPTIONS PRICE PRICE
-------- ------- ----------------- --------

April 30, 1997.................................... -- -- $ -- $ --
Granted......................................... 1,000 -- 250.00 250.00
Exercised....................................... -- -- -- --
Cancelled....................................... -- -- -- --
----- ---
December 31, 1997................................. 1,000 --
Granted......................................... -- 900 $ 500.00 $500.00
Exercised....................................... -- -- -- --
Cancelled....................................... -- -- -- --
----- ---
December 31, 1998................................. 1,000 900 $250.00 - $500.00 $368.42
===== ===

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123

SFAS No. 123 requires the Company to disclose pro forma net loss and net
loss per share as if the Company had accounted for its employee stock option
grants under SFAS No. 123. The fair value of each option and warrant granted has
been estimated as of the date of grant using the Black-Scholes valuation model
with the following assumptions:

- - Dividend yield 0
- - Expected volatility 49%
- - Risk-free interest rate at the date of grant 5.38% - 5.47%
- - Expected life 5 years

Using these assumptions, the fair value of the employee stock options
granted during 1998 was $223,168, which would be expensed in 1998 as all options
granted were fully vested on the date of grant.

The weighted average fair market value of options at the date of grant for
1998 was $500.00.

The following pro forma information adjusts the net loss and net loss per
share of common stock for the impact of SFAS No. 123:

1998
-----------

Net loss:
As reported............................................... $(3,202,876)
Pro forma in accordance with SFAS No. 123................. $(3,426,044)
Net loss per share:
As reported............................................... $ (184.47)
Pro forma in accordance with SFAS No. 123................. $ (197.32)

F-17
72
THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

The following table summarizes the range of exercise price, weighted
average exercise price and weighted average remaining contractual lives for the
options and warrants outstanding as of December 31, 1998:

WEIGHTED
WEIGHTED WEIGHTED AVERAGE
AVERAGE AVERAGE REMAINING
NUMBER OF RANGE OF FAIR EXERCISE CONTRACTUAL
YEAR OF GRANT SHARES EXERCISE PRICE VALUE PRICE LIFE
- ------------- --------- -------------- -------- -------- -----------

1997............................... 1,000 $250.00 $250.00 $250.00 4 years
1998............................... 900 $500.00 $500.00 $500.00 5 years

At the closing of the Offering, the Company will grant options to purchase
755,000 shares of common stock at the Offering price. These options vest 20%
annually from the date of the Offering. The Company will account for these
options under APB No. 25. As the exercise price will equal the fair value of the
option on the date of grant, the Offering date, no compensation expense will be
recorded.

8. SUBSEQUENT EVENTS

STOCK SPLIT

The Company recently effected a .01 for 1 reverse stock split. Accordingly,
the accompanying financial statements reflect the reverse stock split as if it
occurred at the beginning of each period presented.

FOUNDING PRACTICE INFORMATION

The combined operating data of the Founding Practices for the year ended
December 31, 1998 was as follows:

YEAR ENDED
DECEMBER 31, 1998
-----------------

Patient Revenues............................................ $33,339,659
Operating Expenses (unaudited).............................. 21,647,916

The Company's service fee under business services agreements is based on
15% of the net cash collected by the practice. Patient revenues and operating
expenses above are presented on an accrual basis as required by generally
accepted accounting principles. The difference between the net cash collected
and the accrual basis net patient revenue for the Founding Practices in any
given period is not material. The payment of the service fee of 15% of net cash
collected would not differ materially from that calculated as 15% of accrual
basis revenues between reporting periods. The operating expenses of the Founding
Practices are presented as the accrual basis operating expenses will be recorded
as a component of net revenues in the statement of operations of the Company
beginning with the date of Transfers. The historical information for the
Founding Practices presented herein is not related to the financial position or
results of operations of the Company. This information is presented solely for
the purpose of providing disclosures to potential investors regarding the group
of entities with which the Company will enter into business services agreements.
The Founding Practices were not operated under common control or management
during the fiscal year ended December 31, 1998.

PURCHASE OF RIGHTS

Certain of the Founding Practices resulted from the Company's acquisition
in May 1999 of the right to negotiate business development agreements with
plastic surgery practices originally contacted by ISIS

F-18
73
THE PLASTIC SURGERY COMPANY
(A DEVELOPMENT-STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(INFORMATION AS OF SEPTEMBER 30, 1999 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)

Cosmetic Surgery Partners, Inc. ("ISIS"). With the closing of the Offering, the
Company will enter into business services agreements with these plastic surgery
practices. In connection with this acquisition, the Company paid aggregate
consideration of approximately $3,500,000, which consisted of 6,148 shares of
common stock valued at approximately $500.00 per share and cash of approximately
$400,000. ISIS had entered into letters of intent, which included an exclusive
negotiations clause, with certain practices to have those practices enter into
management services agreements with ISIS at a later date. ISIS was to provide
services similar to the Company. ISIS and the Company were unrelated entities at
the time of the purchase. The acquisition was accounted for as an asset
acquisition and the Company will amortize the intangible asset over 14 years.
The amortization period for the contract rights purchased from ISIS was
determined by reference to the amortization periods for the business services
agreements with the Founding Practices resulting from the transaction with ISIS.
The 14-year period was calculated as a weighted average of the amortization
lives and resulting intangible assets for these business services agreements.

ISSUANCE OF WARRANTS

On May 13, 1999, the Company sold warrants to purchase 1,390,204 shares of
common stock at an exercise price per share equal to $2.50. The purchase price
was $.50 per warrant. The Company received cash proceeds of $303,852 from the
sale of these warrants. The Company received notes from a consultant and certain
officers and employees in the amount of $391,250, for the $.50 per warrant
purchase price of the warrants. The notes were full recourse notes that were to
mature three years from the date of issuance and accrue interest at a rate of 8%
per annum. The notes were subsequently paid off prior to June 30, 1999 by an
offset to accrued compensation owed to the consultant and the employees. The
warrants may be exercised in whole or in part for a five year term commencing on
the date of issuance. The warrants are not subject to adjustment for split up,
stock dividends or any other reorganization of the Company's outstanding stock.
As the warrants were a cost of raising capital, the Company recorded a charge to
additional paid-in capital of $9,269,880 related to the issuance of these
warrants based on the fair value of the Company's common stock on the date of
issuance of $8.93 per share.

Certain Founding Practice surgeons will receive warrants to purchase an
aggregate of 137,750 shares of common stock with an exercise price per share
equal to the initial public offering price, exercisable for a five year term
commencing on the closing of the Offering, for referring surgeons for
affiliation with the Company and assistance in the recruitment of officers of
the Company. The Company will record expense related to these warrants at the
closing of the Offering.

The Company also issued warrants to individuals not affiliated with the
Company to purchase an aggregate of 125,000 shares of common stock with an
exercise price per share equal to the initial public offering price, exercisable
for a five year term commencing on the date of the Offering, for referring
surgeons to the Company. The Company will record expense related to these
warrants at the closing of the Offering.

On May 12, 1999, the Company issued warrants to purchase 160,000 shares of
common stock to certain employees and a consultant of the Company for an
exercise price per share equal to $2.50. The warrants are not subject to
adjustment for split up, stock dividends or any other reorganization of the
Company's outstanding stock. The Company recorded expense of $1,148,112 related
to the issuance of these warrants based on the fair value of the Company's
common stock on the date of issuance of $8.93 per share.

F-19
74

THE PLASTIC SURGERY COMPANY

UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1999

Simultaneously with and as a condition to the closing of the offering, the
Company will acquire certain operating assets and assume certain liabilities of
25 separate plastic surgery practices (collectively, the "Founding Practices")
in exchange for cash, shares of common stock and promissory notes and enter into
long-term business services agreements with the Founding Practices (the
"Transfers"). In May of 1999, the Company purchased, for common stock and cash,
the rights to negotiate business services agreements with certain Founding
Practices who signed letters of intent which contained an exclusive negotiations
clause with ISIS Cosmetic Surgery Partners, Inc. ("ISIS").

The unaudited pro forma balance sheet gives effect to the following as if
they occurred on September 30, 1999 (1) the Transfers, and (2) the sale by the
Company of 1,400,000 shares of common stock at an initial public offering price
of $8.00 per share. The proforma balance sheet is based upon the historical
financial statements of The Plastic Surgery Company and the Founding Practices
as a group. The unaudited pro forma balance sheet should be read in conjunction
with other financial information, including the financial statements of The
Plastic Surgery Company, included elsewhere in this Prospectus. Certain of the
Transfers are not deemed to be business combinations and will be accounted for
in accordance with SAB 48. The Transfers accounted for under SAB 48 will result
in assets and liabilities of the Founding Practices being recorded by the
Company at the historical cost to the Founding Practices. The consideration paid
to these Founders will be in cash and common stock of the Company. The remaining
Transfers will be accounted at fair value as asset acquisitions. The Transfers
accounted for as asset acquisitions will result in assets and liabilities being
recorded by the Company at fair value and intangible assets being recorded for
the excess value of consideration over the fair value of those assets. The
consideration paid to these Founding Practices will be in cash, promissory notes
and stock of the Company. The number of shares of common stock issued in the
Transfers will depend on the initial public offering price. The unaudited pro
forma balance sheet is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that would
have been achieved if the above transactions had been consummated on the date
indicated, nor is it necessarily indicative of our future operating results.

F-20
75

THE PLASTIC SURGERY COMPANY
PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1999

ASSET
SAB48 ACQUISITION POST
FOUNDING FOUNDING PRO FORMA PRO FORMA OFFERING
TPSC PRACTICES PRACTICES ADJUSTMENTS COMBINED ADJUSTMENTS
----------- ---------- ----------- ----------- ----------- -------------

ASSETS
CURRENT ASSETS
Cash and cash equivalents...... $ 10,761 $ 711,231 $ 655,017 $ (711,231)(1) $ 10,761 $ 8,230,000(5)
(655,017)(2) (6,229,879)(6)
(329,604)(6)
(199,709)(6)
(485,073)(7)
Patient receivables, net....... -- 1,752,115 254,921 (1,752,115)(1) -- --
(254,921)(2)
Other current assets........... 280,723 403,949 (227,062)(1) 53,661
(403,949)(2)
----------- ---------- ---------- ----------- ----------- ------------
Total current assets.... 10,761 2,744,069 1,313,887 (4,004,295) 64,422 985,735
Equipment, net................. 32,529 1,216,753 507,603 (292,681)(1) 1,009,514 --
(507,603)(2)
52,913(4)
Intangible assets, net......... 3,423,484 -- -- 7,417,924(4) 10,841,408 --
Other assets................... -- 35,309 101,280 (35,309)(1) -- --
(101,280)(2)
----------- ---------- ---------- ----------- ----------- ------------
Total assets............ $ 3,466,774 $3,996,131 $1,922,770 $ 2,529,669 $11,915,344 $ 985,735
=========== ========== ========== =========== =========== ============

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable............... $ 1,001,173 $ 283,652 $ 199,847 $ (283,652)(1) $ 1,001,173 $ (199,709)(6)
(199,847)(2)
Accrued liabilities............ 1,823,318 194,413 58,335 (194,413)(1) 1,823,318 (329,604)(6)
(58,335)(2)
Current portion of long-term
debt.......................... -- 669,674 330,231 (184,601)(1) 1,377,145 (485,073)(7)
(330,231)(2)
349,812(3)
542,260(4)
Payable to Founding
Practices..................... -- -- -- 3,453,515(3) 6,229,879 (6,229,879)(6)
2,776,364(4)
----------- ---------- ---------- ----------- ----------- ------------
Total current
liabilities........... 2,824,491 1,147,739 588,413 5,870,872 10,431,515 (7,244,265)
Long-term debt, less current
portion....................... -- 534,826 667,027 (534,826)(1) 4,372,751 --
(667,027)(2)
1,714,707(3)
2,658,044(4)
----------- ---------- ---------- ----------- ----------- ------------
Total liabilities....... 2,824,491 1,682,565 1,255,440 9,041,770 14,804,266 (7,244,265)
----------- ---------- ---------- ----------- ----------- ------------
SHAREHOLDERS' EQUITY (DEFICIT)
Capital stock................. -- -- -- -- -- --
Additional paid-in capital.... (2,437,160) -- -- 1,494,169(4) (942,991) 8,230,000(5)
Warrants...................... 11,363,095 -- -- 11,363,095
Accumulated deficit........... (8,283,652) -- -- (1,820,906)(1) (13,309,026)
(5,518,034)(3)
2,313,566(3)
Combined Founding Practices's
Equity...................... -- 2,313,566 667,330 (667,330)(2) --
(2,313,566)(3)
----------- ---------- ---------- ----------- ----------- ------------
Total shareholders' equity
(deficit)................... 642,283 2,313,566 667,330 (6,512,101) (2,888,922) 8,230,000
----------- ---------- ---------- ----------- ----------- ------------
Total liabilities and
shareholders' equity........ $ 3,466,774 $3,996,131 $1,922,770 $ 2,529,669 $11,915,344 $ 985,735
=========== ========== ========== =========== =========== ============

PRO FORMA
AS ADJUSTED
------------

ASSETS
CURRENT ASSETS
Cash and cash equivalents...... $ 996,496
Patient receivables, net....... --
Other current assets........... 53,661
------------
Total current assets.... 1,050,157
Equipment, net................. 1,009,514
Intangible assets, net......... 10,841,408
Other assets................... --
------------
Total assets............ $ 12,901,079
============
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable............... $ 801,464
Accrued liabilities............ 1,493,714
Current portion of long-term
debt.......................... 892,072
Payable to Founding
Practices..................... --
------------
Total current
liabilities........... 3,187,250
Long-term debt, less current
portion....................... 4,372,751
------------
Total liabilities....... 7,560,001
------------
SHAREHOLDERS' EQUITY (DEFICIT)
Capital stock................. --
Additional paid-in capital.... 7,287,009
Warrants...................... 11,363,095
Accumulated deficit........... (13,309,026)
Combined Founding Practices's
Equity......................
------------
Total shareholders' equity
(deficit)................... 5,341,078
------------
Total liabilities and
shareholders' equity........ $ 12,901,079
============

F-21
76

THE PLASTIC SURGERY COMPANY

NOTES TO UNAUDITED PRO FORMA BALANCE SHEET

1. Reflects the removal of certain assets not acquired and certain
liabilities not assumed in connection with the acquisition of the Founding
Practices accounted for in accordance with SAB 48. The Company is unable to
purchase certain assets pursuant to applicable state law and will not
assume certain personal liabilities of the Founding Practices. The
operating assets acquired and liabilities assumed are as follows:

Equipment, net.............................................. $924,072
Current portion of long-term debt........................... 485,073
Other assets................................................ 53,661

2. Reflects the removal of the historical basis of assets,
liabilities, and equity of the Founding Practices acquired and accounted at
fair value as asset acquisitions.

3. Reflects the issuance of 2,837,963 shares of common stock of the
Company and the issuance of promissory notes of $2,064,519 and the accrual
of cash owed of $3,453,515 reflected as a dividend for the acquisition of
the Founding Practices accounted for in accordance with SAB 48.

4. Reflects the issuance of 186,771 shares of common stock of the
Company valued at the assumed initial public offering price of $8.00 per
share, notes payable of $3,200,304, the accrual of cash owed of $2,776,364
and the establishment of the fair value of the assets acquired and
liabilities assumed for the acquisition of certain assets of the Founding
Practices acquired and accounted for at fair value as asset acquisitions.
The intangible assets will be amortized over periods ranging from 10 to 15
years. The operating assets acquired are as follows:

Equipment, net.............................................. $52,913

5. Reflects the issuance of 1,400,000 shares of common stock of the
Company valued at $8.00 per share and receipt of net proceeds of
$8,230,000.

6. Reflects the payment of $6,229,879 to owners of the Founding
Practices and $529,313 for accrued compensation and consulting fees.

7. Reflects the payment of the notes payable assumed from the Founding
Practices of $485,073.

F-22
77

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

THE PLASTIC SURGERY
COMPANY

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
78

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the expenses in connection with the offering
described in this Registration Statement, all of which shall be paid by the
company. All such amounts are estimated.

Securities and Exchange Commission Registration Fee......... $ 3,425
American Stock Exchange Additional Listing Fee.............. 8,500
Accountants' Fees and Expenses.............................. 5,000
Legal Fees and Expenses..................................... 15,000
Printing and Engraving Expenses............................. 7,500
Miscellaneous............................................... 2,188
----------
Total............................................. $ 41,613
==========

- ---------------

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Georgia Business Corporation Code permits a corporation to eliminate or
limit the personal liability of a director to the corporation or its
shareholders for monetary damages for breach of duty of care or other duty as a
director, provided that no provisions shall eliminate or limit the liability of
a director: (A) for any appropriation, in violation of his duties, of any
business opportunity of the corporation; (B) for acts or omissions which involve
intentional misconduct or a knowing violation of law; (C) for unlawful corporate
distributions; or (D) for any transaction from which the director received an
improper personal benefit. This provision pertains only to breaches of duty by
directors in their capacity as directors (and not in any other corporate
capacity, such as officers) and limits liability only for breaches of fiduciary
duties under Georgia corporate law (and not for violation of other laws, such as
the Federal securities laws).

Pursuant to the company's Amended and Restated Articles of Incorporation
and Bylaws, officers and directors shall be indemnified by the company to the
fullest extent allowed under Georgia law for claims brought against them in
their capacities as officers and directors. Indemnification is not allowed if
the officer or director does not act in good faith and in a manner reasonably
believed to be in the best interests of the company, or if the officer or
director had no reasonable cause to believe his conduct was lawful. Accordingly,
indemnification may occur for liabilities arising under the Securities Act.

The company and the underwriters have agreed to indemnify each other
(including officers and directors) against liabilities, including liabilities
under the Securities Act. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted for 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 Commission,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

The company has purchased insurance on behalf of its directors and officers
against certain liabilities that may be asserted against, or incurred by, such
persons in their capacities as directors and officers of the registrant, or that
may arise out of their status as directors or officers of the registrant,
including liabilities under federal and state securities laws.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

On May 15, 1997, in connection with the formation of the company, we issued
14,400 shares of common stock, no par value per share at $.10 per share to
approximately 14 founding individuals. This issuance was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.

From June 2, 1997 to October 30, 1997, we issued 2,000 shares of common
stock to 24 investors for $250.00 per share. These sales were exempt from
registration under Regulation D ("Regulation D") promulgated under Section 4(2)
of the Securities Act of 1933.
II-1
79

On October 1, 1997, we granted to a consultant of the company warrants to
purchase 1,000 shares of our common stock at $250.00 per share. The warrants are
exercisable for five years from the grant date. We relied on exemptions from
registration under the Securities Act.

From January 1, 1998 to April 30, 1999, we granted warrants to purchase an
aggregate of 137,750 shares of common stock with an exercise price per share
equal to the initial public offering price to certain of the allied surgeons for
referring allied surgeons to us for affiliation and assisting us in recruiting
our officers. The warrants are exercisable for 5 years from the closing of our
initial public offering. We relied on the exemption in Rule 701 promulgated
under the Securities Act of 1933, as amended, ("Rule 701") for the grants.

From March 2, 1998 to February 24, 1999, we issued 3,000 shares of common stock
to 24 investors for $500.00 per share. All of these sales were to accredited
investors and were exempt from registration under Regulation D.

On June 15, 1998 and August 1, 1998, we granted to employees an aggregate
of 900 options with an exercise price of $500.00 per share. We relied on the
exemption in Rule 701 for the grants.

On May 13, 1999, we issued to various employees warrants to purchase
160,000 shares of our common stock at $2.50 per share. The warrants are
exercisable for 5 years from date of grant. We relied on Rule 701 for exemption
from registration under the Securities Act.

On May 13, 1999, we sold to our existing shareholders for $.50 per share
warrants to purchase 1,390,204 shares of our common stock at $2.50 per share.
The warrants are exercisable for five years from the grant date. Four of the
purchasers purchased the warrants in exchange for notes issued to the company in
an aggregate principal amount of $391,250, which were subsequently offset
against accrued compensation owed to the holders. We relied on Regulation D for
exemption from registration under the Securities Act.

On May 13, 1999, we issued to Isis Cosmetic Surgery Partners, Inc. 6,148
shares of our common stock in exchange for rights to negotiate business
development agreements with certain plastic surgery practices. These shares will
be distributed to 24 shareholders. We relied on exemptions from registration
under the Securities Act.

The company used the proceeds from the above referenced sales to fund
working capital and operating expenses. No underwriter was engaged in connection
with these sales.

On December 15, 1999, we issued to the founding allied practices 2,999,734
shares of our common stock in the acquisitions. We relied on exemptions from
registration under the Securities Act.

In each issuance, we also relied on exemptions from registration under
state securities regulations.

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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits.

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

2.1** -- Form of Agreement and Plan of Reorganization between the
company and founding practices
2.2** -- Form of Amendment to the Form of Agreement and Plan of
Reorganization between the company and founding practices
2.3** -- Form of Purchase and Sale Agreement between the company and
founding practices
2.4** -- Form of Stock Purchase and Sale Agreement between the
company and the founding practices
2.5** -- Letter Agreement between the company and Isis Cosmetic
Surgery Partners, Inc. dated May 13, 1999
2.6** -- Form of Amendment to Agreement and Plan of Reorganization
dated as of November 11, 1999 between the company and
founding practices
2.7** -- Form of Amendment to Purchase and Sale Agreement dated as of
November 11, 1999 between the company and founding practices
2.8** -- Form of Amendment to Agreement and Plan of Reorganization
dated as of November 24, 1999 between the Company and
founding practices
2.9** -- Form of Amendment to Purchase and Sale Agreement dated as of
November 24, 1999 between the Company and founding practices
3.1** -- Form of Amended and Restated Articles of Incorporation
3.2** -- Form of Amended and Restated Bylaws
4.1** -- Specimen Common Stock Certificate
4.2** -- Form of Warrant Agreement between the company and the
representatives of the underwriters
4.3** -- Form of Referral Warrant
4.4** -- Form of Shareholder Warrant
5.1 -- Opinion of King & Spalding as to the legality of the common
stock being registered
10.1** -- Employment Agreement between the company and Dennis E.
Condon dated June 15, 1998
10.2** -- Employment Agreement between the company and David H.
Challoner dated November 1, 1998
10.3** -- Amendment to Employment Agreement between the company and
David Challoner dated February 25, 1999
10.4** -- Employment Agreement between the company and Patricia
Altavilla dated July 22, 1998
10.5** -- Amendment to Employment Agreement between the company and
Patricia A. Altavilla dated March 1, 1999.
10.6** -- Consulting Agreement between the company and Jonathan E.
Wilfong dated September 30, 1998
10.7** -- Form of Service Agreement between the company and the
founding practices
10.8** -- Form Amendment to Form of Service Agreement between the
company and the founding practices
10.9** -- Form of Consulting and Business Services Agreement between
the company and the founding practices
10.10** -- Form of Employment Agreement between the allied surgeons and
the allied practices
10.11** -- 1998 Employee Stock Option Plan
10.12** -- 1999 Non-Employee Director Stock Plan
10.13** -- Amendment to Employment Agreement between the company and
Dennis E. Condon dated June 30, 1999
10.14** -- Amendment to Employment Agreement between the company and
Patricia Altavilla dated June 30, 1999
10.15** -- Offer of Employment to Gunnar Sundstrom
23.1 -- Consent of Arthur Andersen LLP

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EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

23.2 -- Consent of King & Spalding (contained in Exhibit 5.1)
27.1** -- Financial Data Schedule (for SEC use only)
27.2** -- Financial Data Schedule (for SEC use only)
27.3** -- Financial Data Schedule (for SEC use only)

- ---------------

** Previously filed with Registration Statement on Form S-1, No. 333-78565.

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with securities
being registered, the registrant 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 of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. 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 prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;

(iv) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the
registration statement when it becomes effective.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

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82

(4) Prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.

(5) Every prospectus: (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

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83

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Barbara, State of
California on February 8, 2000.

THE PLASTIC SURGERY COMPANY

By: /s/ DENNIS E. CONDON
------------------------------------
Dennis E. Condon
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ JONATHAN WILFONG Chairman of the Board February 8, 2000
- -----------------------------------------------------
Jonathan Wilfong

/s/ DENNIS CONDON President and Chief February 8, 2000
- ----------------------------------------------------- Executive Officer
Dennis Condon (Principal Executive
Officer)

/s/ GUNNAR SUNDSTROM Chief Financial Officer February 8, 2000
- ----------------------------------------------------- (Principal Accounting
Gunnar Sundstrom Officer)

/s/ ROBERT ERSEK, M.D. Director February 8, 2000
- -----------------------------------------------------
Robert Ersek, M.D.

/s/ JOHN SCHANTZ, M.D. Director February 8, 2000
- -----------------------------------------------------
John Schantz, M.D.

/s/ W. GRANT STEVENS, M.D. Director February 8, 2000
- -----------------------------------------------------
W. Grant Stevens, M.D.

/s/ MARK A. KAISER Director February 8, 2000
- -----------------------------------------------------
Mark A. Kaiser

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EXHIBIT INDEX

SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------

2.1** -- Form of Agreement and Plan of Reorganization between the
company and the founding practices..........................
2.2** -- Form of Amendment to the Form of Agreement and Plan of
Reorganization between the company and the founding
practices...................................................
2.3** -- Form of Purchase and Sale Agreement between the company and
the founding practices......................................
2.4** -- Form of Stock Purchase and Sale Agreement between the
company and the founding practices..........................
2.5** -- Letter Agreement between the company and Isis Cosmetic
Surgery Partners, Inc. dated May 13, 1999...................
2.6** -- Form of Amendment to Agreement and Plan of Reorganization
dated as of November 11, 1999 between the company and
founding practices..........................................
2.7** -- Form of Amendment to Purchase and Sale Agreement dated as of
November 11, 1999 between the company and founding
practices...................................................
2.8** -- Form of Amendment to Agreement and Plan of Reorganization
dated as of November 24, 1999 between the company and
founding practices..........................................
2.9** -- Form of Amendment to Purchase and Sale Agreement dated as of
November 24, 1999 between the company and founding
practices...................................................
3.1** -- Form of Amended and Restated Articles of Incorporation......
3.2** -- Form of Amended and Restated Bylaws.........................
4.1** -- Specimen Common Stock Certificate...........................
4.2** -- Form of Warrant Agreement between the company and the
representatives of the underwriters.........................
4.3** -- Form of Referral Warrant....................................
4.4** -- Form of Shareholder Warrant.................................
5.1 -- Opinion of King & Spalding as to the legality of the common
stock being registered......................................
10.1** -- Employment Agreement between the company and Dennis E.
Condon dated June 15, 1998..................................
10.2** -- Employment Agreement between the company and David H.
Challoner dated November 1, 1998............................
10.3** -- Amendment to Employment Agreement between the company and
David Challoner dated February 25, 1999.....................
10.4** -- Employment Agreement between the company and Patricia
Altavilla dated July 22, 1998...............................
10.5** -- Amendment to Employment Agreement between the company and
Patricia A. Altavilla dated March 1, 1999...................
10.6** -- Consulting Agreement between the company and Jonathan E.
Wilfong dated September 30, 1998............................
10.7** -- Form of Service Agreement between the company and the
founding practices..........................................
10.8** -- Form of Amendment to Form of Service Agreement between the
company and the founding practices..........................
10.9** -- Form of Consulting and Business Services Agreement between
the company and the founding practices......................
10.10** -- Form of Employment Agreement between the allied surgeons and
the allied practices........................................
10.11** -- 1998 Employee Stock Option Plan.............................

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SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------

10.12** -- 1999 Non-Employee Director Stock Plan.......................
10.13** -- Amendment to Employment Agreement between the company and
Dennis E. Condon dated June 30, 1999........................
10.14** -- Amendment to Employment Agreement between the company and
Patricia Altavilla dated June 30, 1999......................
10.15** -- Offer of Employment to Gunnar Sundstrom.....................
23.1 -- Consent of Arthur Andersen LLP..............................
23.2 -- Consent of King & Spalding (contained in Exhibit 5.1).......
27.1** -- Financial Data Schedule (for SEC use only)..................
27.2** -- Financial Data Schedule (for SEC use only)..................
27.3** -- Financial Data Schedule (for SEC use only)..................

** Previously filed with Registration Statement on Form S-1, No. 333-78565.

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