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Business Description

We registered as a Delaware corporation on December 20, 2013, having previously incorporated in the State of Utah. Our principal place of business is at 154 East, Myrtle Avenue, Suite 304, Murray, Utah 84107, and our telephone number is (801) 533-5423. We conduct business under our own name and the name “Lice Clinics of America®,” and do not conduct business under any other name. Our agents for service of process are disclosed in Exhibit D. We have no parents, predecessors or affiliates that are required to be disclosed in this Item

Prior Experience

Our company was formed in 2006 to commercialize a new medical device (a heated-air “Device” now known as AirAllé that is used in lice-removal clinics) that was invented at the University of Utah Research Foundation (“UURF”). The UURF secured U.S. patents for the method of killing lice and eggs using heated air, which is what the Device does. As further described in Item 14, the UURF granted to us, for the life of the patents, an exclusive, worldwide license to use the patents and to sublicense to others the right to use the patents, provided we comply with the terms of the UURF license agreement. In addition, as further described in Item 14, we own several other U.S. patents, and have several other patents pending with the United States Patent and Trademark Office (“USPTO”), that relate to the eradication of lice. You will be granted a license to use some of these patents as part of the treatments you offer from your Clinic (as defined below) using the Device. In 2010 we began manufacturing and marketing the Device after successfully completing a clinical trial and getting U.S. Food and Drug Administration (“FDA”) clearance. From 2010 to 2013, we rented devices to business owners who operated lice-treatment businesses under their own brands. We began franchising lice-treatment businesses on December 31, 2013, when we changed from a rental model to a licensing model, where we licensed our intellectual property, including the devices, to independent business owners within an exclusive geographic territory for a fee. We created the Lice Clinics of America® brand in 2014. Other than offering franchises for lice-treatment businesses, LSI has never offered franchises for any other type of business

Business Offered

We offer to qualified applicants the right to operate a Lice Clinics of America® business (“Business”) using the “Marks” (as defined in Item 13), including the Mark “Lice Clinics of America,” and using the patented Device, within a specific geographic area (“Territory”) under the terms of our “Franchise Agreement” (a copy of which is attached as Exhibit B). Lice Clinics of America® Businesses offer lice screening and diagnosis, lice-treatment services using our Device, and other lice-treatment services and related products. A Business must include a physical clinic location and storefront (“Clinic”) within the Territory that is marketed as a Lice Clinics of America® clinic where Device treatments are provided. You may also open and operate secondary places of business within that Territory (“Satellites”). You will not need to sign an addendum or separate form of agreement to establish any Satellites in your Territory. Even though the Device you will use to provide lice treatment services to your customers is considered a medical device by the FDA, your Clinic and any Satellites you operate will not be medical clinics. Neither your Clinic or Satellites, nor your use of the Device, need to be overseen by any type of medical professional. Rather, the FDA just requires that the Device only be used by certified operators. As further described in Item 11, we will provide Device training and certification to you and your owners and employees.

Initial Fees

Franchise Payment If you sign a Franchise Agreement with us, you must pay us a one-time “Franchise Payment” of $42,000. The Franchise Payment is due to us when you sign the Franchise Agreement and is not refundable. If you buy multiple territories from us, you will pay us a discounted Franchise Payment of $39,000 for each subsequent territory. In fiscal year 2018, the Franchise Payments we charged ranged from $15,000 to $42,000. The franchisee that paid the $15,000 Franchise Payment purchased a territory that was deeply discounted because it was significantly smaller than a standard territory. Financing Your Franchise Payment We may, at our sole and absolute discretion, provide installment payment plans to qualified franchisees for the Franchise Payment. The terms of the installment payment plan will depend on the number of territories purchased, the timeframe to open the clinics of the designated territories purchased, and the creditworthiness of the franchisee. All Franchise Payments made under an installment plan are nonrefundable. Device Deposits You also must pay us a refundable deposit for each Device we license you to use under the Franchise Agreement. The refundable deposit for the current Device (the “1.0 Model”) is $800. The refundable deposit for the next generation of Device (the “3.0 Model”), which will be available sometime in the future, will be $2,000. We estimate that the total amount of deposits you will pay to us before you open your Clinic will range from $1,600 (two 1.0 Model Devices) to $3,200 (four 1.0 Model Devices). All deposits paid to us will be refunded to you upon your return of the Devices to us, less any outstanding amounts owed by you to us and/or repairs (including service and parts) required on the Devices. However, if any Device is lost or stolen, we will keep the deposit paid for that Device and you will have to pay to us a new deposit for any additional Device we provide to you. Costs Relating to Devices and Certain Products You must pay to us shipping and handling costs for all Devices, Professional Services Products, and Clinic Retail Products (as defined in Section 1 of your Franchise Agreement) we ship to you. In addition to paying shipping and handling, you must also pay for the actual products themselves, where applicable, based on the pricing in the Operations Manual. We estimate that the total amount of shipping and handling costs and product costs you will pay to us before you open your Clinic will range from $250 to $650, depending on how many Devices we license to you, where the Clinic is located and how many Clinic Retail Products and Professional Services Products you purchase from us. Shipping and handling fees are not refundable

Financing

We do not receive direct or indirect payments for placing financing. We do not guarantee your obligations to third parties or offer direct or indirect financing except as described below. We may, at our sole and absolute discretion, provide installment payment plans to qualified franchisees for the Franchise Payment. The terms of the installment payment plan will depend on the number of territories purchased, the timeframe to open the clinics of the designated territories purchased, and the creditworthiness of the franchisee. Any installment plan requires a minimum of a 5% down payment and a term not to exceed 48 months. We do not charge interest for financing. We don't have specific finance charges or penalties for nonpayment of the installment plan other than our standard Late-Payment Fee that applies to any amounts not paid on time. All Franchise Payments made under an installment plan are non-refundable.

Franchisee Revenue and Profit

The FTC's Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.