UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g)
of the Securities Exchange Act of 1934
MID-ATLANTIC HOME HEALTH NETWORK, INC.
(Name of Small Business Issuer in its Charter)
Nevada 87-0355899
------ ----------
(State of other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
7504 Diplomat Drive, Suite 101, Manassas, VA 22110
-------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Issuer's Telephone number: (703) 335-1957
--------------
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.001 Per Share
----------------------------------------
(Title of Class)
<PAGE>
PART I
- --------------------------------------------------------------------------------
ITEM 1. DESCRIPTION OF BUSINESS
- --------------------------------------------------------------------------------
Historical Overview of the Company
Mid-Atlantic Home Health Network, Inc. was originally incorporated
under the laws of the State of Utah on December 28, 1979 as U-Can Resources,
Inc.
On January 31, 1980, the Company commenced a public offering to
residents of the State of Utah of 7,500,000 shares of its common stock for a
total of $75,000. The public offering was made pursuant to the provisions of the
exemption from registration contained in Section 3(a)(11) of the Securities Act
of 1933, as amended. The Company filed with the Utah Securities Commission of
the State of Utah a Registration Statement under the Utah Uniform Securities Act
with respect to the shares of common stock which were offered. An Offering
Circular was used in connection with the offering, which was an exhibit to the
Registration Statement. The offering was completely sold.
The Company changed its corporate domicile from Utah to Nevada by
merging with a Nevada corporation, which was effective as of February 24, 1993
in Utah and March 26, 1993 in Nevada. The provisions of the Merger Agreement
required a change of corporate name to Trinity Gas Corporation and a twenty-five
(25) for one (1) reverse split of the Company's common stock.
On July 8, 1993, the Company changed its name to Petro-Sers Corporation
in order to not be confused with another corporation with a similar name.
The Company did not conduct any business activities until December 9,
1994 when it executed an Exchange Agreement with Oak Springs Nursing Home
Limited Partnership for the acquisition of all of the outstanding stock of Hunt
Country Home Health, Inc., a Virginia corporation. As a result of this corporate
reorganization, Hunt Country Home Health, Inc. became a wholly owned subsidiary
of the Company.
The Company changed its name to Mid-Atlantic Home Health Network, Inc.
It authorized two (2) classes of stock. The present authorized capitalization is
200,000,000 shares of Class A common stock and 10,000 shares of Class B common
stock. The common stock of the Company was exchanged on a share-for-share basis
for a share of the Class A common stock, par value one mill ($0.001) per share.
The Class A common stock, voting as a class, elects one-third of the Board of
Directors and the Class B common stock, voting as a class, elects two-thirds of
<PAGE>
the Board. The consideration for the acquisition of all of the outstanding stock
of Hunt Country Home Health, Inc. was 20,474,628 shares of Class A common stock
and 10,000 shares of Class B common stock. This transaction was exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, pursuant to the exemption contained in Section 4(2) of that Act. The
stock certificates have a legend imprinted thereon, stop transfer instructions
have been placed against the stock and investment letter agreements have been
executed and received by the transfer agent.
Mid-Atlantic is a regionally based home health company established to
provide quality services and home medical products in a cost-competitive manner
to the Mid-Atlantic region. Since its acquisition of Hunt Country Nursing
Services and National Nurses Service in June of 1995 (See Business of the
Company), the majority of Mid-Atlantic's business has involved the provision of
nursing staff services to hospitals, nursing homes and other facilities such as
clinics, correctional facilities and schools, as well as certified home health
and private duty nursing services.
To management's knowledge, the Company has not been subject to
bankruptcy, receivership or any similar proceedings.
The Company currently employs approximately 450 full-time employees.
The Company's principal executive office is located at 7405 Diplomat Drive,
Suite 101, Manassas, Virginia 22110. The Company has administrative offices at
the following locations:
578 Waterloo Road 1807 Libbie Avenue
Warrenton, Virginia 22186 Richmond, Virginia 23226
607B Jefferson Davis Highway 2971 Valley Avenue
Fredericksburg, Virginia 22401 Winchester, Virginia 22601
2521 Leechburg Road, 2nd Floor 10760B Ambassador Drive
Lower Burrell, Pennsylvania 15068 Manassas, Virginia 20109
614 Hastings Lane Teakwood Office Park
Warrenton, Virginia 20186 1413 Tappahannock Blvd., #4
Tappahannock, Virgina 22560
10800 Midlothian Turnpike, Suite 152 8630 Fenton Street, Suite 222
Richmond, Virginia 23235 Silver Spring, Maryland 20910
Business of the Issuer:
The Home Health Care Business of the Company
Mid-Atlantic is a regionally based home health company established to
provide quality services and home medical products in a cost-competitive manner
to the Mid-Atlantic region. Mid-Atlantic delivers care to persons in a variety
<PAGE>
of settings, including private homes, hospitals and nursing homes. Since its
acquisition of Hunt Country Nursing Services and National Nurses Service (See
discussion below), the majority of Mid-Atlantic's business has involved
providing nursing staff for clinics, long-term care facilities, hospitals and
clinics, correctional facilities and schools. Services are provided to persons
of all ages and with all levels of health or health related needs, varying from
high technology interventions to companionship and services. Mid-Atlantic
carefully seeks and hires competent staff who participate in continuing
education programs. All of Mid-Atlantic's health care providers are licensed and
bonded. This assures the Company's dedication to quality, consistent delivery
state-of-the-art services with a caring approach.
Mid-Atlantic provides medical equipment, home infusion and
around-the-clock skilled nursing. Registered nurses, Licensed Practical Nurses
and Vocational Nurses, as well as Physical, Occupational, Speech and Respiratory
Therapists work under the direction of physicians in the setting of personal
homes.
Mid-Atlantic provides its services through four entities. These
entities are wholly-owned subsidiaries.
Hunt Country Home Health
In the Spring of 1995, the Company acquired Hunt Country Home Health,
Inc. from the Oak Springs Nursing Home Limited Partnership, the Company's
majority shareholder.
Hunt Country Home Health performs approximately 600 to 800 home health
visits per month. With this case load, a wide spectrum of services requiring
basic skills to high tech skills are performed. Generally, the services provided
fall into the following program priorities:
o Essential physical care which may require frequent visits
including weekends, in the absence of which the patient might
otherwise require hospitalization or nursing home care.
o Patients in need of intravenous therapy, hyperalimentation,
blood transfusions or other intensive skilled nursing
modalities.
o Patients with open wounds which require dressing changes or
irrigations, in addition to frequent skilled assessment for
significant infections.
o Patients in need of rehabilitation services which can be
provided in the home and which can maximize the level of
functioning.
<PAGE>
o In-home patients whose condition has deteriorated and who
would otherwise require hospitalization.
o Homebound patients in need of blood testing. The home care
nurse draws the blood, evaluates the patient and carries out
related teaching, which allows the physician to monitor the
patient's condition while he remains in the home.
The Company's home health program provides skilled nursing, physical
therapy, occupational therapy, clinical social work, speech pathology and home
health aide services. These services form the basic framework of the traditional
home health services and disciplines which include skilled nursing for the
assessment, teaching and provision of care, physical therapy for ambulation and
muscle strengthening, occupation therapy for assisting persons to restore
functions in order to perform Activities of Daily Living ("ADL"), home health
aid for personal care and assistance in ADL's, speech therapy for restoration of
communication, and social services for assessment of, and assistance with,
emotional social problems interfering with the plan of care. These services are
provided to any appropriate referral. Visit duration is usually two hours or
less, two to three times per week.
Most visits are made to patients experiencing heart disease, cancer,
diabetes, AIDS, fractures and strokes. Selected specialty programs are:
Wound Care Program
The primary goal of this program is the restitution of skin
integrity. The program's objectives are to provide skilled
assessments and intervention for the home bound patient with a
wound care problem. A secondary goal is to provide continuity
of care while decreasing hospital length of stay for selected
patients with wound care problems. This program is provided to
patients with severe wounds that require daily or twice-a-day
dressing changes.
Home Intravenous Therapy
The goal of this program is to provide a patient with
intravenous therapy in a well-monitored home environment. The
program is designed for patients in need of intravenous
antibiotic therapy, TPN therapy, pain management, hydration,
chemotherapy or other IV fluids proven safe for home use and
which will prevent hospitalization. Infusions visits will
include the care and maintenance for Groshong Catheters,
Hickman Catheters, Med-a-Ports, Port-a-Caths, subcutaneous
<PAGE>
infusions, PICC lines and Peripheral IV's and all related
clinical observations and teaching.
Rehabilitation Program
The goal of this program is to maximize the level of
functioning for selected home care patients with deficits in
functional ability. The program is restorative and
multi-disciplinary, often focusing on patients with
neurological or orthopaedic diagnoses. This program provides
therapy needs assessment and management care conducted by the
therapy team under the direction of the referring physician,
with the agreement of the patients and families.
Hunt Country Home Health has a home office located in Manassas,
Virginia and additional offices located in Fredricksburg and Warrenton. In 1997,
over 11,000 home visits provided skilled nursing care, physical therapy,
occupational therapy, speech therapy, home health aide and medical social work.
Visit duration was usually two hours or less, two to three times per week.
Western Pennsylvania Home Health Network, Inc.
On March 1, 1995, the Company created a subsidiary known as Western
Pennsylvania Home Health Network, Inc. ("WPHHN"). WPHHN is wholly owned by
Mid-Atlantic. WPHHN provides personal care/homemaker services to the Western
Pennsylvania area. WPHHN became operational with the acquisition of personal
care and home health contracts in Westmoreland County, Pennsylvania. A signed
contract was entered into for over $1.5 million in personal care services, home
health services and attendant care services over a three year period. There is
no assurance that the contracts will be renewed for July 1, 1998 or beyond.
National Nurses Service, Inc.
On June 30, 1995, the Company acquired ATLIS Health Services, Inc.,
which then was doing business under the name National Nurses Service.
Mid-Atlantic maintained the corporate entity, but changed its name to National
Nurses Service, Inc.
("NNS").
NNS has three offices in the Maryland-Washington, D.C. metropolitan
area, Tappahannock and Richmond, Virginia areas. NNS is a leading provider of
supplemental staffing, including nursing, rehabilitative therapy and certified
nursing assistant services to hospitals, nursing homes, medical clinics,
correctional facilities, schools, and other governmental facilities. It is also
<PAGE>
certified by the Medicare and Medicaid programs in Virginia as a provider of
both skilled and para-professional home health care services.
NNS currently has an active roster of more than 1,200 clinical
employees from which to fill its assignments. Revenues are currently operating
at $10.0 million per year. NNS's strength's are:
o Diversified referral sources and major contracts with
institutions and agencies, which generate a steady stream of
revenue.
o Revenues projected at $10.0 million in 1998.
o Leading provider of supplemental staffing services to
correctional facilities, a rapidly growing source of referrals
due to the ever increasing prison population and increased
acuity levels.
o Certification by the Medicare and Medicaid programs in the
State of Virginia to provide home health care services.
o An advanced on-line computerized scheduling and job matching
system supports NNS's supplemental staffing operations.
Hunt Country Nursing Services, Inc.
In connection with its acquisition of NNS, on June 30, 1995,
Mid-Atlantic acquired Hunt Country Nursing Services, Inc. ("HCNS") from its
majority shareholder, Oak Springs Nursing Home Limited Partnership. HCNS is a
private duty nursing company that provides professional nurses and nursing
assistants to patients in the home for 4 to 24 hours per day, 7 days per week.
HCNS is located in Northern Virginia and generates approximately $2 million in
revenues per year. With NNS, HCNS comprises the majority of services provided by
the Company and a majority of the Company's revenue is derived from the
operations of NNS and HCNS.
Competition
The Company faces well established and well funded competition. Home
care agencies face increasing competition. Since 1965 the Medicare Program has
greatly accelerated the industry's growth. Medicare made home health services,
primarily skilled nursing and therapy of a curative or restorative nature,
available to the elderly and, beginning in 1973, to certain disabled young
Americans. Between 1967 and 1980, the number of agencies certified to
participate in the Medicare program nearly doubled, from 1,753 to 2,924. Between
1980 and 1985, the number of agencies nearly doubled again to 5,983. The
<PAGE>
National Association for Home Care has identified a total of 20,215 home care
agencies in the United States as of December 31, 1996 (See Figure 1 below). As
the number in Figure 1 below indicates, the number of competitors is increasing.
Accordingly, the Company faces significant competition in its chosen area of
business.
Figure 1
Certified
Agencies
Year Total HHAs Hospices Other
- ---- ----- -------- -------- -----
1989 11,097 5,676 597 4,824
1990 11,765 5,695 774 5,296
1991 12,433 5,780 898 5,755
1992 12,497 6,004 1,039 5,454
1993 13,959 6,497 1,223 6,239
1994 15,027 7,521 1,459 6,047
1995 18,874 9,120 1,857 7,897
1996 20,215 10,027 2,154 8,034
Source: NAHC inventory of home care agencies
Governmental Regulation
The Company relies heavily on payments made by governmental entities
for the services provided. Medicare is the largest single payor of home care
services. In 1992, Medicare spending accounted for more than a third of total
home care expenditures. Other public funding sources for home care include
Medicaid, the Older Americans Act, Title XX Social Security Block Grants, the
Veteran's Administration, and CHAMPUS. Private insurance comprises only a small
proportion of home care payments. As a result, the Company must deal with
governmental entities and the regulations those entities impose upon their
respective payment mechanisms. The Company faces, and must deal with,
uncertainties associated with changes in the reimbursement systems imposed by
the entities, especially in the Medicare and Medicaid systems. There is no
assurance that such systems will not undergo radical change which could impact
upon the Company's profitability. Indeed, recent legislation is estimated to
reduce reimbursement of the Medicare Agency by 20%. This will impact Hunt
Country Home Health. It will not impact Hunt Country Nursing Services, Western
Pennsylvania Home Health Network, Inc. and will have minimal impact on National
Nurses Service.
<PAGE>
Risks Associated with Operations
The risks associated herewith include the following: no assurance of
profitability from its operations; a potential future need for funds;
significant government regulations; reliance on current management; increase in
competition; a lack of a current market for the securities; and the
uncertainties associated with changes in the health care system. All decisions
with respect to the management of the Company are made exclusively by the
Company.
Although the Company does not anticipate the accumulation of debts, in
the event of a dissolution and termination of the Company, the proceeds realized
from the liquidation of assets, if any, will be distributed to the shareholders
only after the satisfaction of claims of all creditors. Accordingly, the ability
of a shareholder to recover all or any portion of his investment under such
circumstances will depend on the amount of funds realized and the claims to be
satisfied.
Employees
As of March of 1998, the Company had approximately 450 full-time
equivalent employees. None of the Company employees are subject to a collective
bargaining agreement and the Company believes its relations with its employees
are good.
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION OR PLAN OF OPERATION
- --------------------------------------------------------------------------------
Overview
The Company's success is dependent on its ability to raise additional
capital to effect all aspects of its operations.
The discussion contained in this Item 2 is "forward looking", as that
term is identified in, or contemplated by, Section 27A of the Securities Act and
Section 21E of the Exchange Act. Accordingly, actual results may materially
differ from projections or anticipated trends or plans.
In the next twelve months, the Company has no plans to purchase or sell
any significant capital assets in the form of either plant or equipment, with
the exception of office equipment and furnishings to effect its administrative
activities.
<PAGE>
The Company's strategic plan is to finance an aggressive acquisitions
program by purchasing targeted home health, private duty nursing and health
staffing companies with stock and cash. Acquisitions will be targeted based on
several factors including: (1) location and proximity to areas covered by major
HMO's serving an elderly/retirement population; (2) quality of services
provided; (3) quality of management; and, (4) revenue history. Once significant
HMO market distribution has been accomplished, the Company will begin to develop
capitated rates and negotiate group service contracts with HMO's, large
insurance carriers and integrated delivery systems covering the service areas.
The Company's strategic plan includes acquiring home health agencies,
private duty nursing companies and nurse staffing companies, primarily in
Maryland, Washington, D.C., Virginia and Delaware through a selection process
based on site location, demographic overview and Medicare/Medicaid
certifications. The following is a list of criteria for the acquisitions
program:
o Locations should be in areas covered by Maryland, Virginia,
and Washington, D.C. HMO's with enrollment of no less than
50,000 lives.
o Locations should be in areas with a growing retirement and
elderly population.
o Locations should be in areas currently under served as defined
by demographics.
o Locations should be distributed geographically to provide a
broad base of access points for home health services.
o Home health agencies should be Medicare/Medicaid certified.
o Home health agencies should be JCAHO or JCAHO eligible.
o A valuation methodology will be determined based on accepted
industry standards.
o Standard management agreements will be developed for existing
administrators.
This list is a set guideline for the Company's management. These items
are not intended to be a restrictive list of requirements for the Company's
acquisition candidates. Management will have the sole authority and discretion
to base acquisition decisions on its independent judgment using above as
guidelines. Also, the Company's strategic plan may be limited by factors such as
<PAGE>
availability of entities for acquisition, changes in home health care costs
which are paid by insurance companies and the government, and availability of
capital from sources outside the Company, to name a few.
During 1998, the Company plans to focus on efforts to increase revenue.
The Company believes it will be able to raise the necessary funds to accomplish
its goals.
Review of Operations During 1996 and 1997
Trends, events or uncertainties, and short-term and long-term liquidity:
There are several factors that impact MAHN in terms of its short-term
and long-term liquidity. First, on the positive side, the Company has increased
demand for medical staffing services. The Company's ability to recruit nurses
and certified nursing assistants to meet this rising demand has been a primary
challenge. In short, there is a rising demand for the largest segment of the
Company's business--providing nursing personnel to hospitals, nursing homes,
clinics, schools, ambulatory care facilities and correctional facilities. At the
same time, the Company's focus is now on the recruitment and placement of these
personnel. The Company has been successful in the marketing side of its primary
business of providing temporary nurse staffing. As it improves on its
recruitment efforts, the Company anticipates that its revenues will grow.
Eighty-seven percent (87%) of the Company's billings are financed by National
Century. Accordingly, the Company has a ready source of liquidity to take on
additional business. This is especially important as it offers the Company the
opportunity to bid on contracts offered by governmental entities in the
Company's region.
Less than 15% of the Company's revenues are involved with providing
Medicare Certified home health services. MAHN owns Hunt Country Home Health
which operates in Northern Virginia. This agency, and two smaller agencies
located in Richmond and Tappahannock, Virginia are subject to new Medicare
regulations which the Company anticipates will both reduce reimbursement on a
per visit basis by 20- 30% and reduce the numbers of patients that can be
considered as eligible for home care. In addition, the home care industry has
been informed by HCFA that surety bonds must be obtained to assure HCFA that
they are protected on any over payments of Medicare funds. Only a small
percentage of independent Medicare agencies have been able to comply with this
requirement to date. This places the viability of the Company's Medicare home
health operations in question. Indeed the viability of small independent
agencies throughout the country is now in doubt. Either the failure to secure a
surety bond, (which the Company has been unable to obtain), or the reduced
reimbursement may cause a short-term liquidity problem for Hunt Country Home
Health.
<PAGE>
MAHN may be liable in July of 1998 for additional funds related to the
purchase of National Nurses Service. The precise amount of the liability is
uncertain at this time. However, management does believe that it can negotiate a
settlement with the sellers that will not have a material effect on the
Company's financial position although it may involve some distribution of funds
in 1998.
The Company's internal and external sources of liquidity:
MAHN owns four companies. Two of those companies have financing
arrangements with National Century in Ohio. National Century remits 87% of the
Company's billings on a current basis. This has allowed the major
company--National Nurses Service to bid on large governmental contracts and
finance its receivables quickly. Indeed in the past year, National Nurses
Service signed two five (5) year contracts with the Washington D.C.
government--one for staffing of its schools and one for staffing of its
correctional facilities.
Internal liquidity has been generated strictly by the profitability of
the enterprise. The Company has the capacity to raise additional funds by
financing the receivables of its private duty nursing company, Hunt Country
Nursing Services.
Material commitments for capital expenditures:
There are no material commitments for capital expenditures at this
time. As previously stated, the Company may be liable for additional amounts
related to a potential purchase price adjustment of the acquisition of National
Nurses Service. Management does believe that it can negotiate a settlement with
the sellers of that entity.
Trends, events or uncertainties that have impact on operations:
There are two major trends that are impacting MAHN at this time. On the
positive side, the demand for temporary nurse staffing is continuing unabated.
Management does not see a reduction in this demand at this time. The Company's
challenge is in the recruitment of able personnel to fill the demand for nursing
and certified nursing assistant positions. If the Company can meet that
challenge, it should see the revenues of its largest entity, National Nurses
Service, increase.
On the negative side, the Company is aware that recent Medicare
legislation significantly erodes reimbursement to Medicare Certified Home Health
Agencies and the requirements to have a surety bond in place could jeopardize
the very existence of that agency. The Company's Medicare home health business
is less than 15% of its revenues and virtually none of its profit.
<PAGE>
Significant elements of income or loss that do not arise from operations:
There are no significant elements of income or loss that do not arise
from the Company's continuing operations.
Changes from period to period in line items:
In 1997, there was a reduction in revenues of 3.7%. The reduction
occurred primarily due to a decrease in Medicare Certified Home Health revenues
in the last quarter of 1997, as well as a continuing reduction in nurse staffing
for correctional facilities. The reduction in revenues was matched by a
reduction in patient care costs. Specifically, revenues declined $528,000 and
patient care costs declined $557,000.
There was an increase in general and administrative expenses between
1996 and 1997 of $115,000. This was primarily due to an effort to centralize
in-take and scheduling for the Company's private duty and Medicare Certified
Home Health operations. In addition, difficulties were encountered in data
processing conversions in the Company's private duty nursing company. The
centralization of in-take and scheduling efforts has been discontinued. The
Company is continuing to resolve its automation issues.
Interest expense declined in 1997 versus 1996 by $97,000. This
reduction in net interest expense is partially due to improved cash management
as well as the collection of interest due to National Nurses Service from the
Washington D.C.
Government.
Income before income taxes declined $26,000 in 1997. This reflects an
obviously reasonably stable operation between these two years.
- --------------------------------------------------------------------------------
ITEM 3. DESCRIPTION OF PROPERTY
- --------------------------------------------------------------------------------
Hunt Country Home Health owns approximately 1,000 square feet of office
space located at 7504 Diplomat Drive, Suite 101, Manassas, Virginia 22110,
telephone number (703) 355-1957.
The Company is not engaged in the business of investing in real estate
or real estate mortgages, however it does own its office at 7504 Diplomat Drive
in Manassas, Virginia.
<PAGE>
- --------------------------------------------------------------------------------
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
- --------------------------------------------------------------------------------
(a) 5% Shareholders:
The following information sets forth certain information as of April
17, 1998 by each person who is known to the Company to be the beneficial owner
of more than five percent (5%) of the Company's Class A Common Stock: (100% of
the Company's Class B Common Stock is owned by Oak Springs Nursing Home Limited
Partnership.)
(2)
(1) Name and Address (3) (4)
Title of Beneficial Amount and Nature of Percent of
of Class Owner Beneficial Ownership Class
- -------- ------------------- -------------------- ----------
Common Oak Springs Nursing Home
Stock Limited Partnership 10,063,778(1) 80%
Class A c/o Philip V. Warman
7504 Diplomat Drive, Suite 101
Manassas, Virginia 22110
Nevada Agency and Trust Co. 697,498 6%
50 West Liberty Street, Suite 880
Reno, Nevada 89501
- -----------------------------
(1) Two of the Company's directors, Philip V. Warman and Jacob L. Mathews,
M.D. are General Partners of Oak Springs Nursing Home Limited Partnership.
<PAGE>
(b) Security Ownership of Management:
(2)
(1) Name and Address (3) (4)
Title of Beneficial Amount and Nature of Percent of
of Class Owner Beneficial Ownership Class
- -------- ---------------- -------------------- ----------
Common Philip V. Warman 10,092,9342 80%
Stock 7504 Diplomat Drive
Class A Manassas, Virginia 22110
Dennis Light 167,000 1%
7504 Diplomat Drive
Manassas, Virginia 22110
Ronald L. Messenheimer 9,500 Less than 1%
7504 Diplomat Drive
Manassas, Virginia 22110
All Directors and 10,269,434 81 %
Officers as a Group
(c) Changes in Control:
There is no arrangement which may result in a change in control.
- --------------------------------------------------------------------------------
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
- --------------------------------------------------------------------------------
(a) Directors and Executive Officers
As of April 1, 1998, the directors and executive officers of the
Company, their ages, positions in the Company, the dates of their initial
election or appointment as director or executive officer, and the expiration of
the terms as directors are as follows:
- --------
(2) Of this amount, 10,063,778 shares are owned by Oak Springs Nursing
Home Limited Partnership, of which Mr. Warman is a general partner.
<PAGE>
(3)*
(1) (2) Period Served As
Name Age Position Director
- ---- --- -------- ----------------
Philip V. Warman 54 Chairman of the Board, Dec. 9, 1994 to present
Treasurer and Director
Dennis S. Light 54 President and Dec. 9, 1994 to present
Director
J.L. Mathews, M.D. 64 Secretary, Medical Dec. 9, 1994 to present
Director and Director
Ronald L. Messenheimer 46 President of NNS July 1, 1995 to present
*The Company's directors are elected at the annual meeting of stockholders and
hold office until their successors are elected and qualified. The Company's
officers are appointed annually by the Board of Directors and serve at the
pleasure of the Board.
(4) Business Experience:
Philip V. Warman
- ----------------
Philip V. Warman is the Chairman of the Board and has over 26 years
experience in health venture development and health care financial management.
He also serves as the Company's Treasurer and is a director. He has a degree in
Business Administration from Wake Forest University. Mr. Warman served in
various positions at Prince William Hospital culminating as Senior Vice
President. During his 18 years at Prince William Hospital, he acquired Annaburg
Manor Nursing Home, initiated home health, DME, private duty, physician billing,
a collection agency, a child care enter and an alcoholic treatment center.
Since 1981, Mr. Warman has been Managing General Partner of Oak Springs
Nursing Home Limited Partnership, the Company's majority and controlling
shareholder.
Dennis S. Light, M.P.H.
- -----------------------
The President of the Company is Mr. Dennis S. Light. Mr. Light has more
than 25 years experience in health venture development and health care financial
management. He has an undergraduate degree in Business Administration and a
Masters Degree in Hospital Administration from UCLA. For nine years, he served
<PAGE>
as Chief Financial Officer of Arlington Hospital at Arlington, Virginia. Prior
to this position, he served as Chief Financial Administrator of Samuel Merritt
Hospital in Oakland, California. Mr. Light also is a director of the Company.
Jacob L. Mathews, M.D.
- ----------------------
Jacob L. Mathews, M.D., is Medical Director of the Company and
HealthCare Ventures, Inc., and is a General Partner and part owner of Oak
Springs Nursing Home Limited Partnership. Dr. Mathews also is a director of the
Company. Dr. Mathews supervises all protocols, policies and procedures from a
medical perspective.
Dr. Mathews received his Bachelors Degree from the University of
Virginia and his Medical Degree from the Medical College of Virginia in 1960.
Dr. Mathews practiced family medicine from 1961 to 1973. In 1973, he became
Chairman and Director of Emergency Medicine at Prince William Hospital. Since
1986, Dr. Mathews has been Medical Director of HealthCare Ventures, Inc.
Ronald L. Messenheimer
- ----------------------
Ronald L. Messenheimer is the President of National Nurses Service. Mr.
Messenheimer earned a Bachelor of Science degree in Business and Management with
a major in Accounting from the University of Maryland in 1974. From 1991 to the
present he has led the growth of ATLIS Health Services from $5.5 million in
revenues in 1991 to a projected revenue level of over $13.5 million for 1995.
During his tenure as president, NNS entered the home health market by obtaining
Medicaid certification in 1991 and Medicare certification in 1992. Mr.
Messenheimer negotiated the purchase of a small Medicare-certified home health
agency in June of 1993 established a specialized AIDS treatment program. He
created a rehabilitation service company in early 1994. Mr. Messenheimer has
direct responsibility for essentially all payroll, billing, financial (exclusive
of credit arrangements), human resources and administrative functions, as well
as day-to-day operating responsibility of NNS. NNS currently has 75 full time
employees and an additional 1,200 active employees of which approximately 600
work each week. Prior to 1991, Mr. Messenheimer was President of ATLIS Federal
Services and served in various capacities with UNC, Inc.
(5) Directors of Other Reporting Companies:
None of the directors are directors of other reporting companies.
<PAGE>
(b) Employees:
The officers and directors who are identified above are significant
employees of the Company.
(c) Family Relationships:
There are no family relationships between the directors, executive
officers or any other person who may be selected as a director or executive
officer of the Company.
(d) Involvement in Certain Legal Proceedings:
None of the officers and directors of the Company have been involved in
the past five (5) years in any of the following:
(1) Bankruptcy proceedings;
(2) Subject to criminal proceedings or convicted of a criminal act;
(3) Subject to any order, judgment or decree entered by any Court
for violating any laws relating to business, securities or
banking activities; or
(4) Subject to any order for violation of federal or state
securities laws or commodities laws.
<PAGE>
- --------------------------------------------------------------------------------
ITEM 6. EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
------------------------------------------
Annual Compensation Awards Payouts
----------------------- -------------- --------------
(e) (g)
Other (f) Securities (i)
(a) Annual Restricted Under- (h) Other
Name and (c) (d) Compen- Stock Lying LTIP Compen-
Principal (b) Salary Bonus sation Awards Options/ Payouts sation
Position Year $ ($) ($) ($) SARs(#) ($) ($)
- -------- ------ ------ ----- ------ ------ -------- ------ ------
Philip V. Warman
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chief Execu- 1997 $ None $ None $ None $ None None None $11,075****
tive Officer 1996 $ None $ None $ None $ None None None $11,075****
and Treasurer 1995 $ None $ None $ None $ None None None $11,075****
Dennis S. Light
President 1997 $13,629**$ None $ None $ None None None $14,000*****
1996 $ None $ None $ None 21,000 sh. None None None
1995 $ None $ None $ None 17,000 sh. None None None
J.L. Mathews, M.D.
Secretary,and 1997 $ None $ None $ None $ None None None $ 6,425****
Medical 1996 $ None $ None $ None $ None None None $ 6,425****
Director 1995 $ None $ None $ None $ None None None $ 6,425****
Kristine A. Birmingham
Assistant 1997 $ None $ None $ None 4,200 sh. None None None
Secretary 1996 $ None $ None $ None 3,000 sh. None None None
1995 $ None $ None $ None $ None None None None
Ronald L. Messenheimer
President of 1997 $83,036**$ None $ None 4,000 sh. None None None
NNS 1996 $95,864 $ None $ None 3,500 sh. None None None
1995 $41,500*** None $ None $ None None None None
</TABLE>
- ----------------------------------------------
This information is provided in regards to Mid-Atlantic Home Health Network
Agencies, Hunt Country Home Health, Hunt Country Nursing Services, National
Nurses Service and Western PA Home Health Network, Inc.
*Kristine A. Birmingham resigned her position in early 1998 and was replace by
Robert Evans
**In October of 1997, Ronald L. Messenheimer resigned as President of National
Nurses Service and was reinstated as President on April 27, 1998.
***Ronald L. Messenheimer was hired in July of 1995 as President of National
Nurses Service.
****This "other compensation" is representative of partnership draws at Hunt
Country Nursing Services.
*****This "other compensation" is representative of payments made by National
Nurses Service to Creative Health Ventures, a corporation owned 100% by Dennis
Light.
<PAGE>
- --------------------------------------------------------------------------------
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
Mid-Atlantic has entered into many of its lines of business since the
corporation's named was changed in December of 1994 by acquiring entities or
businesses from entities related to the Company's management. As evident from
the discussion in the preceding sections, various members of management maintain
their relationships with other entities from which the Company acquired its
businesses and with which the Company interacts as part of the Company's ongoing
business.
The Company acquired Hunt Country Home Health from Oak Springs Nursing
Home Limited Partnership ("OSNHLP") in the Spring of 1995 for 10,224,628 shares
of the Company's Class A Common Stock and 10,000 shares of the Company's Class B
Common Stock. OSNHLP thereby became the Company's majority stockholder, now
owning approximately 80% of the Company's Class A Common Stock and 100% of the
Company's Class B Common Stock. The Company's Chairman of the Board, Philip
Warman, and its Secretary, J.L. Mathews, M.D., are the general partners of
OSNHLP. Because this acquisition involved an entity related to the Company, the
Company has booked the acquisition of Hunt Country Home Health on a "processor
cost" basis. Also. OSNHLP has guaranteed a number of the Company's debt
obligations, as discussed in Note 4 of the Consolidated Financial Report
contained in Part F/S on this Form 10-SB.
In March of 1995, the Company establish a subsidiary corporation named
Western Pennsylvania Home Health Network, Inc. WPHHN is wholly owned by
Mid-Atlantic and its financial statements are consolidated with those of
Mid-Atlantic in the financial statements attached to this registration
statement.
On June 30, 1995, the Company acquired ATLIS Health Services, Inc.,
which then was doing business under the name National Nurses Service. The
Company changed the subsidiary's name to National Nurses Service, Inc. ("NNS").
All of the stock in NNS was acquired by the Company from Atlis Systems, Inc. in
exchange for 500,000 shares of the Company's Class A Common Stock. As a result,
Atlis Systems, Inc. owns approximately 4% of the issued and outstanding shares
of the Company's Class A Common Stock.
When the Company acquired NNS, it also acquired Hunt Country Nursing
Services, Inc. The Company acquired HCNS from Oak Springs Nursing Home Limited
Partnership, the Company's majority shareholder. The Company paid OSNHLP book
value for all the issued and outstanding shares of HCNS, an amount equal to
approximately $1,000.
<PAGE>
National Nurses Services, Inc. has a consult contract with Creative
Health Ventures, Inc. under the terms of which NNS pays CHV $2,000 per month.
CHV is owned by Dennis Light, the Company's president.
The Company's business efforts are coordinated with those of other
entities related to, or controlled by, Oak Springs Nursing Home Limited
Partnership. Periodically, Oak Springs and its affiliates provide the Company
with funds needed for various transactions. Oak Springs also enters into debt on
behalf of the Company. Rather than Oak Springs immediately transferring cash to
the Company at the time the debt is entered into, the Company records an amount
due from the affiliate. Amounts due from and due to affiliates as of December
31, 1997 and 1996 were as follows:
1997 1996
-------- --------
Due from affiliates:
Oak Springs $181,924 $132,433
Center for Ambulatory/Home
Infusion Services 9,783 16,240
Health Care Ventures, Inc. -- 29,700
Home Health Services of
Allegheny County, Inc. 31,881 --
Core Connection of Pennsylvania, Inc. 146
-------- --------
223,734 $178,373
======== ========
Due to affiliates:
Health Care Ventures, Inc. $ 44,551 $ --
Health Ventures Group 25,185 28,265
Home Health Services of
Allegheny County -- 2,605
-------- --------
69,736 30, 870
-------- --------
Net due (to) from affiliates $153,998 $147,503
======== ========
Throughout the year, the Company pays a management fee to various
affiliates of Oak Springs. The Company paid management fees of $151,267 and
$321,627 during the years ended December 31, 1997 and 1996, respectively.
<PAGE>
Oak Springs maintains a workers compensation policy which covers the
Company. The Company paid Oak Springs $292,697 and $245,218 during the years
ended December 31, 1997 and 1996, respectively, related to this policy.
- --------------------------------------------------------------------------------
ITEM 8. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE
REGISTERED
- --------------------------------------------------------------------------------
The Company is registering all of its authorized shares of capital
stock with a par value of One Mill ($0.001) per share. The Company has two
classes of common stock.
The Company's articles of incorporation, as amended, authorize
200,010,000 shares of common stock. The authorized shares of common stock are
divided into two classes, Class A Common Stock and Class B Common Stock. Two
hundred thousand (200,000,000) shares of Class A Common Stock are authorized and
10,000 shares of Class B Common Stock are authorized. The issued and outstanding
shares of the Company's Class B Common Stock are authorized to elected two
thirds (2/3) of the members of the Company's board of directors. Accordingly,
the issued and outstanding shares of the Company's Class A Common Stock are
authorized to elect one third of the members of the board.
All the shares of common stock issued are fully-paid and
non-assessable. The holders of the Company's common stock have no pre-emptive or
preferential rights and cumulative voting of the shares of common stock is not
permitted. Each share of common stock is entitled to one vote at stockholders
meetings, either in person or by proxy, subject to the provisions of the
Company's articles of incorporation, as amended, with regard to the election of
directors.
"Anti-Takeover" Provisions
Although the Board of Directors is not presently aware of any takeover
attempts, the Company's Certificate of Incorporation and By-laws contain certain
provisions which may be deemed to be "anti-takeover" in nature in that such
provisions may deter, discourage, or make more difficult the assumption of
control of the Company by another corporation or person through a tender offer,
merger, proxy contest or similar transaction or series of transactions. These
provisions were adopted unanimously by the Board of Directors and approved by
the stockholders of the Company.
<PAGE>
Authorized but Unissued Shares. The Company has authorized 200,010,000
shares of common stock. The authorized shares of common stock are divided into
two classes, Class A Common Stock and Class B Common Stock. Two hundred thousand
(200,000,000) shares of Class A Common Stock are authorized and 10,000 shares of
Class B Common Stock are authorized. These shares were authorized for the
purpose of providing the Board of Directors of the Company with as much
flexibility as possible to issue additional shares for proper corporate purposes
including equity financing, mergers, stock dividends, stock splits, stock
options and other purposes. The Company has no agreements, commitments or plans
at this time for the sale or use of the additional shares of capital stock
except as described herein. To date, the Company has issued 12,621,202 shares of
Class A Common Stock. All of the Company's 10,000 shares of its authorized Class
B Common Stock are issued and outstanding and owned by one (1) shareholder, Oak
Springs Nursing Home Limited Partnership. The owners of the issued and
outstanding shares of the Company's Class B Common Stock are entitled to elect
two-thirds (2/3rds) of the directors of the Company. Accordingly, the issued and
outstanding shares of the Company's Class A Common Stock are authorized to elect
one-third of the members of the board.
No Cumulative Voting. The Company's Certificate of Incorporation and
By-laws do not contain any provisions for cumulative voting. Cumulative voting
entitles stockholders to as many votes as equal the number of shares owned by
such holder multiplied by the number of directors to be elected. A stockholder
may cast all these votes for one candidate or distribute them among any two or
more candidates. Thus, cumulative voting for the election of directors allows a
stockholder or group of stockholders who hold less than fifty percent (50%) of
the outstanding shares voting to elect one or more members of a Board of
Directors. Without cumulative voting for the election of directors, the vote of
holders of plurality of the shares voting is required to elect any member of a
Board of Directors and would be sufficient to elect all the members of the Board
of Directors being elected.
General Effect of Anti-Takeover Provisions. The overall effect of these
provisions may be to deter a future tender offer or other takeover attempt that
some stockholders might view to be in their best interest as the offer might
include a premium over the market price of the Company's capital stock at that
time. In addition, these provisions may have the effect of assisting the
Company's current management in retaining its position and place it in a better
position to resist changes which some stockholders may want to make if
dissatisfied with the conduct of the Company's business.
<PAGE>
PART II
- --------------------------------------------------------------------------------
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANT'S
COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
- --------------------------------------------------------------------------------
Market Information:
The Company's Class A Common Stock is traded on the NASDAQ "Bulletin
Board" under the symbol MAHN. High and low bid prices for such shares during
each quarter for the last two (2) years follows:
Capital Stock
---------------------------------------------
Quarter Ended High Bid Low Bid
---------------------------------------------
December 31, 1997 $ 0.5625 $ 0.5625
September 30, 1997 $ 1.0 $ 0.5625
June 30, 1997 $ 0.7 $ 0.375
March 31, 1997 $ 1.0 $ 0.5
December 31, 1996 $ 1.0 $ 0.375
September 30, 1996 $ 0.75 $ 0.25
June 30, 1996 $ 0.875 $ 0.625
March 31, 1996 $ 1.375 $ 0.625
There is no market for the Company's Class B Common Stock.
Holders:
There were approximately 439 holders of record of the Company's Class A
Common Stock. All of the Company's 10,000 shares of its authorized Class B
Common Stock are issued and outstanding and owned by one (1) shareholder, Oak
Springs Nursing Home Limited Partnership.
Dividends:
The Company has never paid cash dividends on its stock and does not
intend to do so in the foreseeable future. The Company currently intends to
retain its earnings for the operation and expansion of its business. The
Company's continued need to retain earnings for operations and expansion are
likely to limit the Company's ability to pay dividends in the future.
<PAGE>
- --------------------------------------------------------------------------------
ITEM 2. LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
The Company is not party to, and none of the Company's property is
subject to, any pending or threatened legal, governmental, administrative or
judicial proceedings that will have a materially adverse effect upon the
Company's financial condition or operation.
- --------------------------------------------------------------------------------
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- --------------------------------------------------------------------------------
There have been no disagreements with the Company's independent
accountants over any item involving the Company's financial statements. The
Company's independent accountants are Eggleston Smith, P.C. located at 603 Pilot
House Drive, Suite 400, Newport News, Virginia 23606.
- --------------------------------------------------------------------------------
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
- --------------------------------------------------------------------------------
During the last three (3) years, the Company has issued shares to
individuals in return for services rendered to the Company. In each such
instance, the Company has relied upon the exemption from registration under
Section 4(2) of the Securities Act in issuing the shares. All of the stock
certificates issued in this regard contain a legend imprinted thereon setting
forth the exemption from registration claimed. The transfer agent has placed
"stop transfer" instructions on each stock certificate with orders that such
stock cannot be transferred except in accordance with applicable securities
laws. The following is a list of the shares of the Company's Class A Common
Stock issued during the last three (3) years:
<PAGE>
Date Registered Owner No. Shares
---- ---------------- ----------
7-05-95 Herbert M. Hurst 25,000
7-18-95 Kristine Birmingham 5,000
Thomas Garbark 5,000
Barbara Piskor 4,000
Marc Solibakke 2,000
Martin Trettel 1,000
8-30-95 Diana J. Hill 1,500
Philip Warman 5,156
Kristine A. Birmingham 6,481
Kathryn Warman 1,452
Dennis Light 2,000
Adroam Berru 6,165
Thomas Barbark 3,474
Various 635,620
9-18-95 James Ramser 5,000
Maximillian Tufts 5,000
David Snyder 15,000
G. E. Borst 7,000
10-6-95 Susan Coleman 10,000
Barbara Piskor 40,000
11-3-95 Judy Lambour 4,000
12-5-95 Karen Lovegren Smith 2,500
Hilda Laing 10,000
12-21-95 Martha Lee Browning 5,000
12-27-95 Lorrie Z. Roth 2,000
2-09-96 Hilda Laing 10,000
7-09-96 Christine Dux 12,040
9-12-96 Donna Dyak 1,730
4-14-97 Gary L. Paz 2,000
Florence Meyers 2,000
Barbara Piskor 3,800
Dennis Light 21,000
Kristine Birmingham 4,200
Ronald Messenheimer 4,000
Kristine Birmingham 25,000
Kristine Birmingham 25,000
Roby Cruz 7,000
<PAGE>
- --------------------------------------------------------------------------------
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- --------------------------------------------------------------------------------
Section 78.751 of the Nevada General Corporation Law allows the Company
to indemnify any person who was or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Company or is or was serving at the request of the Company as a director,
officer, employee or agent of any corporation, partnership, joint venture, trust
or other enterprise. The Company may advance expenses in connection with
defending any such proceeding, provided the indemnitee undertakes to pay any
such amounts if it is later determined that such person was not entitled to be
indemnified by the Company.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
<PAGE>
- --------------------------------------------------------------------------------
PART F/S
- --------------------------------------------------------------------------------
The following financial statements are filed with this Form 10-SB:
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1997
<PAGE>
C O N T E N T S
Pages
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Consolidated balance sheets 3 and 4
Consolidated statements of income 5
Consolidated statements of stockholders' equity 6
Consolidated statements of cash flows 7
Notes to consolidated financial statements 8 - 16
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Mid-Atlantic Home Health Network, Inc.
and Subsidiaries
We have audited the accompanying consolidated balance sheets of
Mid-Atlantic Home Health Network, Inc. and Subsidiaries (the Company), as of
December 31, 1997 and 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the 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 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Mid-Atlantic Home Health Network, Inc. and Subsidiaries as of
December 31, 1997 and 1996, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.
As discussed in Note 10, the Company may be liable for additional
amounts related to a potential purchase price adjustment of a previously
acquired subsidiary. The ultimate amount, if any, of the adjustment cannot be
determined; however, management is of the opinion that it will not have a
material effect on the Company's financial position.
March 13, 1998
15/1
<PAGE>
FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 1997 AND 1996
<PAGE>
<TABLE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
<CAPTION>
1997 1996
----------------- ------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 578,699 $ 235,136
Accounts receivable, net of allowances of
$44,071 in 1997 and $86,894 in 1996 468,543 492,170
Due from affiliates 153,998 147,503
Prepaid expenses and other current assets 70,911 101,002
Deferred tax asset 34,000 41,000
----------------- ------------------
Total current assets 1,306,151 1,016,811
----------------- ------------------
PROPERTY AND EQUIPMENT, net 260,103 278,917
----------------- ------------------
OTHER ASSETS
Deposits 410,617 413,594
Goodwill, net of accumulated amortization of
$181,663 in 1997 and $140,974 in 1996 712,048 752,737
Other assets, net of accumulated amortization
of $149,045 in 1997 and $100,186 in 1996 32,347 101,949
----------------- ------------------
Total other assets 1,155,012 1,268,280
----------------- ------------------
Total assets $ 2,721,266 $ 2,564,008
================= ==================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
<CAPTION>
1997 1996
----------------- ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 93,405 $ 96,457
Accounts payable 205,913 185,631
Accrued salaries and related employee benefits 323,266 291,563
Other current liabilities 124,702 186,564
Deferred revenue 29,700 30,300
Total current liabilities 776,986 790,515
LONG-TERM DEBT, net of current maturities 241,248 248,708
----------------- ------------------
Total liabilities 1,018,234 1,039,223
----------------- ------------------
STOCKHOLDERS; EQUITY
Common stock, Class A, $.001 par
value, 200,000,000 shares authorized
12,621,202 shares issued and outstanding
at December 31, 1997; 12,527,202
shares issued and outstanding at
December 31, 1996 12,621 12,534
Common stock, Class B, $.001 par value,
10,000 shares authorized, issued and
outstanding 10 10
Preferred stock, $1 par value, 5,000,000
shares authorized, 10,000 shares issued
and outstanding 10,000 10,000
Additional paid-in capital 1,103,485 1,074,832
Retained earnings 766,166 591,659
----------------- ------------------
1,892,282 1,689,035
Stock subscription receivable (189,250) (164,250)
----------------- ------------------
Total stockholders' equity 1,703,032 1,524,785
----------------- ------------------
Total liabilities and stockholders' equity $ 2,721,266 $ 2,564,008
================= ==================
</TABLE>
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
<TABLE>
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
December 31, 1997 and 1996
<CAPTION>
1997 1996
----------------- ------------------
<S> <C> <C>
REVENUES $ 13,740,390 $ 14,268,495
----------------- ------------------
EXPENSES
Patient care costs 10,071,783 10,628,741
General and administrative 3,020,441 2,905,917
Amortization 149,320 112,029
Interest expense, net 264,678 361,777
----------------- ------------------
Total expenses 13,506,222 14,008,464
----------------- ------------------
Income before income taxes 234,168 260,031
PROVISION FOR INCOME TAXES 58,461 51,566
----------------- ------------------
Net income $ 175,707 $ 208,465
================= ==================
EARNINGS PER COMMON SHARE $ . 01 $ . 02
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1997 and 1996
<CAPTION>
Additional
Common Stock Preferred Paid-In
Class A Class B Stock Capital
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 12,695 10 - $ 1,408,056
Sale of 10,000 shares of
preferred stock options - - 10,000 -
Exercise of stock options for
13,770 shares of Class A
common stock 14 - - 6,871
Payments on stock subscribed
net of subscriptions returned
or cancelled (175) - - (340,095)
Dividend on preferred stock - - - -
Net income - - - -
--------------- --------------- --------------- ----------------
Balance, December 31, 1996 12,534 10 10,000 1,074,832
Issuance of 44,000 shares
of stock as compensation 37 - - 3,703
Exercise of stock options for
50,000 shares of Class A
common stock 50 - - 24,950
Payments on stock subscribed
net of subscriptions returned
or cancelled
Dividend on preferred stock - - - -
Net income - - - -
--------------- --------------- --------------- ----------------
Balance, December 31, 1997 12,621 10 10,000 $ 1,103,485
=============== =============== =============== ================
<PAGE>
Stock
Retained Subscriptions
Earnings Receivable Total
--------------- --------------- ---------------
<S> <C> <C> <C>
Balance, December 31, 1995 $ 383,494 $ (524,400) $ 1,279,855
Sale of 10,000 shares of
preferred stock options - - 10,000
Exercise of stock options for
13,770 shares of Class A
common stock - - 6,885
Payments on stock subscribed
net of subscriptions returned
or cancelled - 360,150 19,880
Dividend on preferred stock (300) - (300)
Net income 208,465 - 208,465
--------------- --------------- ---------------
Balance, December 31, 1996 591,659 (164,250) 1,524,785
Issuance of 44,000 shares
of stock as compensation - - 3,740
Exercise of stock options for
50,000 shares of Class A
common stock - (25,000) -
Payments on stock subscribed
net of subscriptions returned
or cancelled
Dividend on preferred stock (1,200) - (1,200)
Net income 175,707 - 175,707
--------------- --------------- ---------------
Balance, December 31, 1997 $ 766,166 $ (189,250) $ 1,703,032
=============== =============== ===============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31, 1997 and 1996
<CAPTION>
1997 1996
----------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 175,707 $ 208,465
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 26,234 30,118
Amortization 149,320 112,029
Deferred taxes 7,000 29,475
Issuance of stock for services rendered 3,740 -
Proceeds from sale of accounts receivable 9,304,937 11,377,911
Changes in assets and liabilities:
Accounts receivable (9,281,310) (11,060,272)
Due from affiliates (6,495) 56,322
Prepaid expenses and other current assets - (40,875)
Due to affiliates 2,977 (248,183)
Deposits 20,279 -
Accounts payable - (9,935)
Accrued salaries and related employee benefits 31,703 (160,664)
Other current liabilities (61,862) (314,803)
Income taxes payable - (22,303)
Deferred revenue (600) 30,300
----------------- ------------------
Net cash provided by (used in)
operating activities 371,630 (12,415)
----------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (16,355) (14,794)
----------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of common and preferred stock - 16,885
Repayment of long-term debt (10,512) (18,175)
Exercise of stock options 19,880
Increase in other assets (33,493)
Dividend paid on preferred stock (1,200) (300)
----------------- ------------------
Net cash used in financing activities (11,712) (15,203)
----------------- ------------------
Net increase (decrease) in cash
and cash equivalents 343,563 (42,412)
CASH AND CASH EQUIVALENTS
Beginning 235,136 277,548
----------------- ------------------
Ending $ 578,699 $ 235,136
================= ==================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
Note 1. Organization and Significant Accounting Policies
Organization. The consolidated financial statements include the
accounts of Mid-Atlantic Home Health Network, Inc. (MAHN) and its
subsidiaries (collectively referred to herein as the Company).
The subsidiaries include Western Pennsylvania Home Health
Network, Inc. (Western Pennsylvania), Hunt Country Nursing
Services, Inc. (Hunt Country Nursing), Hunt Country Home Health,
Inc. (Home Health), and Altis Federal Services d/b/a National
Nurses Services, Inc. Approximately 80% of MAHN's outstanding
shares are owned by Oak Springs Nursing Home Limited Partnership
(Oak Springs).
The Company is engaged in the business of providing integrated
home health services with an emphasis in providing nursing staff
services to hospitals, nursing homes and other facilities. The
Company operates in Virginia, Maryland, the District of Columbia
and Pennsylvania.
Basis of consolidation. All significant intercompany accounts and
transactions have been eliminated.
Net revenues. Net revenues are reported at the estimated net
realizable amounts from patients, third party payors, and others
for services rendered, including estimated retroactive
adjustments under reimbursement agreements with third party
payors. Revenue received under third-party agreements is subject
to audit. Any adjustments as a result of these audits are
reflected in current operations. Approximately 12% and 12% of the
Company's net revenues for the years ended December 31, 1997 and
1996, respectively, were from participation in Medicare and state
Medicaid programs. In addition, approximately 35% and 43% of the
Company's net revenues for the year ended December 31, 1997 and
1996, was from contracts with state and local governmental
correctional facilities, including the Commonwealth of Virginia
and the District of Columbia.
At December 31, 1997 and 1996, 20% and 2%, respectively, of net
accounts receivable were due from Medicare and Medicaid. The
ability of payors to meet their obligations depends upon their
financial stability, future legislation and regulatory actions.
The Company does not believe there are any significant credit
risks associated with receivables from Medicare and Medicaid.
Property and equipment. Property and equipment are recorded at
cost. The cost and the related accumulated depreciation are
removed from the accounts in the year the related asset is sold
or retired. Depreciation is computed using the straight line
method over the estimated economic lives of the assets,
commencing at the time the assets are placed into service.
(Continued)
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
Note 1. Organization and Significant Accounting Policies (Concluded)
Cash and cash equivalents. Cash and cash equivalents include cash
on hand and in the bank as well as any investment purchased with
an original maturity of three months or less. The Company
maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced
any losses in such accounts. Cash equivalents are carried at cost
which approximates fair value.
Under the Company's cash management system, checks issued but not
yet presented to banks frequently result in overdraft balances
for accounting purposes. The overdraft balances have been netted
with positive balances and are classified as "cash and cash
equivalents" in the consolidated balance sheet.
Goodwill and other assets. Goodwill arises from acquisitions and
represents the excess of purchase price over identifiable
acquired net assets, and is amortized on a straight-line basis
over 20 years. Other assets principally consist of the estimated
value of the assembled workforce and capitalized fees related to
other long-term agreements and transactions. Other assets are
amortized on a straight-line basis over a period of 3 to 5 years.
Income taxes. The income tax provision includes federal and state
income taxes both currently payable and deferred because of
differences between financial reporting and tax bases of assets
and liabilities. Deferred tax assets and liabilities are measured
using the enacted tax rates and laws that will be in effect when
necessary to reduce deferred tax assets to the amounts expected
to be realized.
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.
Stockholders' equity. The Company has three classes of stock. Two
hundred million shares of Class A common stock have been
authorized. The Class A shareholders have the right to elect one
third of the directors of the Company. Ten thousand shares of
Class B common stock, with the right to elect two thirds of the
directors, have also been authorized. Additionally, five million
shares of Class C convertible preferred stock have been
authorized. The preferred stock is paid a dividend of 12%.
Earnings per share. Earnings per common share are computed by
dividing the weighted average number of shares outstanding into
net income. Diluted earnings per share are not presented because
the outstanding stock options are not dilutive.
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
Note 2. Accounts Receivable
Accounts receivable arise from the provision of home health
services to hospitals, nursing homes and other facilities in the
Virginia, Maryland, District of Columbia and Pennsylvania areas.
The principal payors for these services are the patients,
insurance companies, various state and local government agencies,
other institutional providers of healthcare, the Medicare
program, and certain Medicaid programs.
The provision for doubtful accounts for the years ended December
31, 1997 and 1996, was $44,071 and $86,894, respectively.
National Nurses Service and Home Health are parties to Sale and
Subservicing Agreements (the agreements) with an unrelated
organization (the Lender) collateralizing substantially all
accounts receivable balances. The National Nurses Service
agreement is dated July 6, 1995, and has a termination date of
May 31, 1998, while the Home Health agreement is dated September
29, 1994, and has a termination date of December 31, 1997. The
agreements specify that reserve deposits representing
approximately 17% of the accounts receivable collateral be
retained by the Lender. As of December 31, 1997 and 1996,
$410,517 and $413,594, respectively, classified as "deposits" on
the accompanying consolidated balance sheets, related to these
agreements. Under the terms of these agreements, National Nurses
Service and Home Health are required to refund any financed
accounts receivable balances not collected by the Lender within
180 days. Management does not anticipate having to refund any
financed amounts.
The proceeds from these transactions, net of fees and retained
reserve deposits were $9,304,937 and $11,377,911 during the years
ended December 31, 1997 and 1996, respectively, and were utilized
to fund operations.
Note 3. Property and Equipment
As of December 31, 1997 and 1996, property and equipment
consisted of the following:
<TABLE>
<CAPTION>
1997 1996
----------------- ------------------
<S> <C> <C>
Building and building improvements $ 320,818 $ 320,818
Furniture and equipment 371,491 355,135
----------------- ------------------
692,309 675,953
Less accumulated depreciation 432,206 397,036
----------------- ------------------
$ 260,103 $ 278,917
================= ==================
</TABLE>
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
Note 4. Long-Term Debt
Long-term debt as of December 31, 1997 and 1996, consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
----------------- ------------------
<S> <C> <C>
Note Payable, C.W. Cobb, collateralized
by first deed of trust on building and
guaranteed by the general partners
of Oak Springs. Payable in monthly
installments of $761, including
interest at 11%. Due April, 2021. $ 67,124 $ 67,658
Note Payable, C.W. Cobb, collateralized
by second deed of trust on building
and guaranteed by the general
partners of Oak Springs. Payable in
monthly installments of $221,
including interest at 13%. Due
April, 2021. 18,804 18,985
Note Payable, York Federal Savings and
Loan. Payable in monthly installments
of $796, including interest at 9.5%.
A balloon payment of $86,809 was due
July, 1997. The note is being
renegotiated. 84,961 86,255
Note Payable, Crestar Mortgage Corp.,
collateralized by building and
guaranteed by the managing general
partner of Oak Springs. Payable in
monthly installments of $772,
including interest at 8%. Due
December, 2024. 83,106 84,553
Note Payable, Manifest Group,
collateralized by computer equipment.
Payable in monthly installments of
$170, including interest at 17.62%.
Due September, 1997. - 2,522
</TABLE>
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
Note 4. Long-Term Debt (Concluded)
<TABLE>
<CAPTION>
1997 1996
----------------- ------------------
<S> <C> <C>
Note Payable, Central Fidelity Bank
guaranteed by the general partners
of Oak Springs, payable in monthly
installments of $1,668, including
interest at 11.21%. Due December 5,
2007. $ 80,658 85,192
----------------- ------------------
334,653 345,165
Less current maturities 93,405 96,457
----------------- ------------------
$ 241,248 $ 248,708
================= ==================
</TABLE>
The net book value of assets as of December 31, 1997,
collateralizing the aforementioned long-term debt was $240,153.
Annual maturities of long-term debt outstanding at December 31,
1997, are as follows:
1998 $ 93,405
1999 9,291
2000 10,224
2001 12,138
2002 13,351
Thereafter 196,244
-----------------
$ 334,653
=================
Note 5. Stock Option Plan and Stock Subscriptions
The Company has an Incentive Stock Option Plan that includes
virtually all officers and key employees. The Series B options,
which expired in 1997 and the Series C options which expire in
1998 originally had an exercise price of $1 per share. In 1996,
the Company reduced the option price to $.50 per share. Options
that have been exercised were financed by the Company through
notes bearing interest at 8%. The unpaid balances of outstanding
notes receivable for stock purchases are shown as a reduction of
stockholders' equity.
During 1996, certain stock subscriptions were canceled because of
non-payment.
During 1997, the Company did not receive any payments on
outstanding notes receivable for the purchase of shares. Because
the market value of the outstanding shares is below the option
price, the Company has suspended the required payments (including
interest) on these notes.
A summary of the status of the Company's incentive stock option
plans as of December 31, 1997 and 1996, and changes during the
years ending on those dates is presented below:
(Continued)
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
Note 5. Stock Option Plan and Stock Subscriptions (Concluded)
<TABLE>
<CAPTION>
Exercisable Stock Options
--------------------------------------------------------------------
Exercised
Outstanding Granted or Canceled Outstanding
Beginning During During At End
of Year the Year the Year of Year
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
1997
Shares
Series C $ 181,000 $ - $ 25,000 $ 156,000
Weighted average
exercise price .50 - .50 .50
1996
Shares
Series B 362,500 - 212,000 150,500
Series C 393,000 - 212,000 181,000
Weighted average
exercise price 1.00 - .50 .50
</TABLE>
The Company accounts for its stock option plans in accordance
with APB Opinion No. 25, Accounting for Stock Issued to
Employees, which does not allocate costs to stock options granted
at current market values. The Company could, as an alternative,
allocate costs to stock options using option pricing models, as
provided in Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation. Because of the limited
number of options granted and the limited amount of trading
activity in the Company's stock, management believes that the
Company's stock options are best accounted for in accordance with
APB Opinion No. 25. Had the Company accounted for its stock
options in accordance with SFAS No. 123, net earnings and
earnings per share would not have been materially different from
reported amounts.
Note 6. Lease Commitments
The Company leases certain office facilities and other equipment
under non- cancelable leases for terms ranging from one to five
years. Future minimum lease payments under these operating leases
are as follows:
1998 $ 20,781
1999 9,745
2000 3,163
2001 2,623
-----------------
Total future minimum lease payments $ 36,312
=================
During 1997 and 1996, rent expense for all operating leases
totaled $131,976 and $134,486, respectively.
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
Note 7. Income Taxes
The Company files a consolidated Federal income tax return which
includes Western Pennsylvania, Hunt Country Nursing, Home Health
and National Nursing Service. The Company and its subsidiaries
file separate returns for state purposes.
The provision for income taxes for the years ended December 31,
1997 and 1996, was comprised of the following:
<TABLE>
<CAPTION>
1997 1996
----------------- ------------------
<S> <C> <C>
Current provision $ 51,461 $ 81,041
Deferred provision (benefit) 7,000 (29,475)
----------------- ------------------
Total provision $ 58,461 $ 51,566
================= ==================
</TABLE>
The provision for income taxes differed from the amount of income
tax determined by applying the applicable federal statutory tax
rate to pre-tax income as a result of the following:
<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
<S> <C> <C>
Statutory federal tax rate 34% 34%
State taxes, net of federal benefit 3% 4%
Goodwill amortization (14)% (5)%
Other 2% (13)%
Effective tax rate 25% 20%
================= =================
</TABLE>
The deferred tax asset relates to the allowance for doubtful
accounts reflected on the balance sheet and incurred but not
reported claims recorded through current earnings. Realization of
the deferred tax asset is contingent on the occurrence of a
write-off of the accounts receivable for tax purposes and payment
of premiums to the insurer or payments of actual claims. No
valuation allowance was established since the Company believes it
is more likely than not that this asset will be realized.
Note 8. Related Party Transactions
Periodically, Oak Springs and its affiliates provide the Company
with funds needed for various transactions. Oak Springs also
enters into debt on behalf of the Company. Rather than Oak
Springs immediately transferring cash to the Company at the time
the debt is entered into, the Company records an amount due from
affiliate. Amounts due from and due to affiliates as of December
31, 1997 and 1996, were as follows:
(Continued)
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
Note 8. Related Party Transactions (Concluded)
<TABLE>
<CAPTION>
1997 1996
----------------- ------------------
<S> <C> <C>
Due from affiliates:
Oak Springs $ 181,924 $ 132,433
Center for Ambulatory/
Home Infusion Services 9,783 16,240
Health Care Ventures, Inc. 29,700
Home Health Services of
Allegheny County, Inc. 31,881 -
Core Connection of
Pennsylvania, Inc. 146 -
----------------- ------------------
$ 223,734 $ 178,373
================= ==================
Due to affiliates:
Health Care Ventures, Inc. $ 44,551 $ -
Health Ventures Group 25,185 28,265
Home Health Services of
Allegheny County - 2,605
----------------- ------------------
69,736 30,870
----------------- ------------------
Net due (to) from affiliates $ 153,998 $ 147,503
================= ==================
</TABLE>
Throughout the year, the Company pays a management fee to various
affiliates of Oak Springs. The Company paid management fees of
$151,267 and $321,627 during the years ended December 31, 1997
and 1996, respectively.
Oak Springs maintains a workers compensation policy which covers
the Company. The Company paid Oak Springs $292,697 and $245,218
during the years ended December 31, 1997 and 1996, respectively,
related to this policy.
Note 9. Supplementary Cash Flow Information
Interest paid during 1997 and 1996 was $265,949 and $358,533,
respectively. Income taxes paid during 1997 and 1996 were $37,252
and $92,583, respectively.
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
Note 10. Contingent Liability
As part of the acquisition of National Nurses Service, Inc. on
June 30, 1995, the Company issued 500,000 shares of common stock.
The stock purchase agreement calls for an adjustment of the
purchase price on June 30, 1998, if the market value of the stock
is less than $800,000 ($1.60 per share), during the ten-day
period immediately preceding June 30, 1998. The purchase price
adjustment, to be paid in cash, is the difference between the
market value and $800,000. The stock has had limited trading
activity and recent sales prices have been in the range of $.0625
to $.375. Based on those prices the purchase price adjustment
could be in the range of $612,500 to $768,750.
The holder of the 500,000 shares, Atlis Federal Services, Inc.,
is currently in bankruptcy. The Company has started negotiations
with the creditors committee to settle the potential purchase
price adjustment.
The Company is also considering listing its securities on a
national securities exchange to increase the level of trading
activity.
The acquisition of National Nurse's Service was accounted for as
a purchase and the Company recorded approximately $800,000 in
goodwill. The payment of any purchase price adjustment would not
change the underlying assets acquired. Accordingly, payments
would reduce the originally recorded value of stock issued and
reduce the amount of paid-in capital.
In the opinion of management, the amount of the purchase price
adjustment, if any, will not have a material effect on the
Company's financial position.
<PAGE>
<PAGE>
PART III
- --------------------------------------------------------------------------------
ITEM 1. INDEX TO EXHIBITS
- --------------------------------------------------------------------------------
The following exhibits are filed with this Form 10-SB:
Assigned
Number Description
- ------ -----------
3(ii) By-laws of the Company
10. Material Contracts:
(a) Exchange Agreement dated June 13, 1995 by and between the
stockholders of Mid-Atlantic Home Health Network, Inc. and Oak
Springs Nursing Home Limited Partnership.
21. List of Subsidiaries
27. Financial Data Schedule
<PAGE>
- --------------------------------------------------------------------------------
ITEM 2. DESCRIPTION OF EXHIBITS
- --------------------------------------------------------------------------------
The documents required to be filed under Item 2 are listed in Item 1 of
this Part III above.
<PAGE>
- --------------------------------------------------------------------------------
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: April 30, 1998.
MID-ATLANTIC HOME HEALTH NETWORK,
INC.
By: /s/ Dennis S. Light
--------------------------
Dennis S. Light
President
By: /s/ J. L. Mathews, M.D.
--------------------------
J.L. Mathews, M.D.
Secretary
BY-LAWS FOR THE REGULATION
EXCEPT AS OTHERWISE PROVIDED BY STATUTE
OR ITS ARTICLES OF INCORPORATION OF
PETRO-SERS CORPORATION
* * * * * * *
Now Known as
MID-ATLANTIC HOME HEALTH NETWORK, INC.
ARTICLE I.
Offices
Section 1. PRINCIPAL OFFICE. The principal office for the
transaction of the business of the corporation is hereby fixed and located at 50
West Liberty Street, Suite 880, Reno, Nevada 89501, being the offices of Nevada
Agency and Trust Company. The Board of Directors is hereby granted full power
and authority to change said principal office from one location to another in
the State of Nevada.
Section 2. OTHER OFFICES. Branch or subordinate offices may
at any time be established by the Board of Directors at any place or places
where the corporation is qualified to do business.
ARTICLE II.
Meetings of Shareholders
Section 1. MEETING PLACE. All annual meetings of shareholders
and all other meetings of shareholders shall be held either at the principal
office or at any other place within or without the State of Nevada which may be
designated either by the Board of Directors, pursuant to authority hereinafter
granted to said Board, or by the written consent of all shareholders entitled to
1
<PAGE>
vote thereat, given either before or after the meeting and filed with the
Secretary of the corporation.
Section 2. ANNUAL MEETINGS. The annual meetings of
shareholders shall be held on the fourth Wednesday of May each year, at the hour
of 2:00 o'clock p.m. of said day, commencing with the year 1993, provided,
however, that should said day fall upon a legal holiday, then any such annual
meeting of shareholders shall be held at the same time and place on the next day
thereafter ensuing which is not a legal holiday.
Written notice of each annual meeting signed by the President
or a Vice President, or the Secretary, or an Assistant Secretary, or by such
other person or persons as the directors shall designate, shall be given to each
shareholder entitled to vote thereat, either personally or by mail or other
means of written communication, charges prepaid, addressed to such shareholder
at his address appearing on the books of the corporation or given by him to the
corporation for the purpose of notice. If a shareholder gives no address, notice
shall be deemed to have been given to him, if sent by mail or other means of
written communication addressed to the place where the principal office of the
corporation is situated, or if published at least once in some newspaper of
general circulation in the county in which said office is located. All such
notices shall be sent to each shareholder entitled thereto not less than ten
(10) nor more than sixty (60) days before each annual meeting, and shall specify
2
<PAGE>
the place, the day and the hour of such meeting, and shall also state the
purpose or purposes for which the meeting is called.
Section 3. SPECIAL MEETINGS. Special meetings of the
shareholders, for any purpose or purposes whatsoever, may be called at any time
by the President or by the Board of Directors, or by one or more shareholders
holding not less than 10% of the voting power of the corporation. Except in
special cases where other express provision is made by statute, notice of such
special meetings shall be given in the same manner as for annual meetings of
shareholders. Notices of any special meeting shall specify in addition to the
place, day and hour of such meeting, the purpose or purposes for which the
meeting is called.
Section 4. ADJOURNED MEETINGS AND NOTICE THEREOF. Any
shareholders' meeting, annual or special, whether or not a quorum is present,
may be adjourned from time to time by the vote of a majority of the shares, the
holders of which are either present in person or represented by proxy thereat,
but in the absence of a quorum, no other business may be transacted at any such
meeting.
When any shareholders' meeting, either annual or special, is
adjourned for thirty (30) days or more, notice of the adjourned meeting shall be
given as in the case of an original meeting. Save as aforesaid, it shall not be
necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting, other than by announcement at the meeting at
which such adjournment is taken.
3
<PAGE>
Section 5. ENTRY OF NOTICE. Whenever any shareholder entitled
to vote has been absent from any meeting of shareholders, whether annual or
special, an entry in the minutes to the effect that notice has been duly given
shall be conclusive and incontrovertible evidence that due notice of such
meeting was given to such shareholders, as required by law and the By-laws of
the corporation.
Section 6. VOTING. At all annual and special meetings of
stockholders entitled to vote thereat, every holder of stock issued to a bona
fide purchaser of the same, represented by the holders thereof, either in person
or by proxy in writing, shall have one (1) vote for each share of stock so held
and represented at such meetings, unless the Articles of Incorporation of the
corporation shall otherwise provide, in which event the voting rights, powers
and privileges prescribed in the said Articles of Incorporation shall prevail.
Voting for directors and, upon demand of any stockholder, upon any question at
any meeting shall be by ballot.
Section 7. QUORUM. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at any meeting shall
constitute a quorum for the transaction of business. The shareholders present at
a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
4
<PAGE>
Section 8. CONSENT OF ABSENTEES. The transactions of any
meeting of shareholders, either annual or special, however called and noticed,
shall be as valid as though a meeting had been duly held after regular call and
notice, if a quorum be present, either in person or by proxy, and if, either
before or after the meeting, each of the shareholders entitled to vote, not
present in person or by proxy, sign a written Waiver of Notice, or a consent to
the holding of such meeting, or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or made
a part of the minutes of this meeting.
Section 9. PROXIES. Every person entitled to vote or execute
consents shall have the right to do so either in person or by an agent or agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the corporation; provided that no such
proxy shall be valid after the expiration of eleven (11) months from the date of
its execution, unless the shareholder executing it specifies therein the length
of time for which such proxy is to continue in force, which in no case shall
exceed seven (7) years from the date of its execution.
ARTICLE III.
Directors and Directors' Meetings
Section 1. POWERS. Subject to the limitations of the
Articles of Incorporation or the By-laws, and the provisions of the Nevada
5
<PAGE>
Revised Statutes as to action to be authorized or approved by the shareholders,
and subject to the duties of directors as prescribed by the By-laws, all
corporate powers shall be exercised by or under the authority of, and the
business and affairs of the corporation shall be controlled by the Board of
Directors. Without prejudice to such general powers, but subject to the same
limitations, it is hereby expressly declared that the Directors shall have the
following powers, to wit:
First - To select and remove all the other officers,
agents and employees of the corporation, prescribe such powers and duties for
them as may not be inconsistent with law, with the Articles of Incorporation or
the By-laws, fix their compensation and require from them security for faithful
service.
Second - To conduct, manage and control the affairs
and business of the corporation, and to make such rules and regulations therefor
not inconsistent with law, with the Articles of Incorporation or the By-laws, as
they may deem best.
Third - To change the principal office for the
transaction of the business of the corporation from one location to another
within the same county as provided in Article I, Section 1 hereof; to fix and
locate from time to time one or more subsidiary offices of the corporation
within or without the State of Nevada, as provided in Article I, Section 2
hereof; to designate any place within or without the State of Nevada for the
holding of any shareholders' meeting or meetings; and to adopt, make and use a
6
<PAGE>
corporate seal, and to prescribe the forms of certificates of stock, and to
alter the form of such seal and of such certificates from time to time, as in
their judgment they may deem best, provided such seal and such certificates
shall at all times comply with the provisions of law.
Fourth - To authorize the issuance of shares of
stock of the corporation from time to time, upon such terms as may be lawful, in
consideration of money paid, labor done or services actually rendered, debts or
securities cancelled, or tangible or intangible property actually received, or
in the case of shares issued as a dividend, against amounts transferred from
surplus to stated capital.
Fifth - To borrow money and incur indebtedness for
the purposes of the corporation, and to cause to be executed and delivered
therefor, in the corporate name, promissory notes, bonds, debentures, deeds of
trust, mortgages, pledges, hypothecations or other evidences of debt and
securities therefor.
Sixth - To appoint an executive committee and other
committees and to delegate to the executive committee any of the powers and
authority of the Board in management of the business and affairs of the
corporation, except the power to declare dividends and to adopt, amend or repeal
By-laws. The executive committee shall be composed of one or more Directors.
Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized
number of directors of the corporation shall be not less than Three (3) .
-----------------
7
<PAGE>
Section 3. ELECTION AND TERM OF OFFICE. The Directors shall be
elected at each annual meeting of shareholders, but if any such annual meeting
is not held or the Directors are not elected thereat, the Directors may be
elected at any special meeting of shareholders. All Directors shall hold office
until their respective successors are elected.
Section 4. VACANCIES. Vacancies in the Board of Directors may
be filled by a majority of the remaining Directors, though less than a quorum,
or by a sole remaining Director, and each Director so elected shall hold office
until his successor is elected at an annual or a special meeting of the
shareholders.
A vacancy or vacancies in the Board of Directors shall be
deemed to exist in case of the death, resignation or removal of any Director, or
if the authorized number of Directors be increased, or if the shareholders fail
at any annual or special meeting of shareholders, at which any Director of
Directors are elected, to elect the full authorized number of Directors to be
voted for at that meeting.
The shareholders may elect a Director or Directors at any time
to fill any vacancy or vacancies not filled by the Directors. If the Board of
Directors accepts the resignation of a Director tendered to take effect at a
future time, the Board, or the shareholders, shall have the power to elect a
successor to take office when the resignation is to become effective.
8
<PAGE>
No reduction of the authorized number of Directors shall have
the effect of removing any Director prior to the expiration of his term of
office.
Section 5. PLACE OF MEETING. Regular meetings of the Board of
Directors shall be held at any place within or without the state which has been
designated from time to time by resolution of the Board or by written consent of
all members of the Board. In the absence of such designation, regular meetings
shall be held at the principal office of the corporation. Special meetings of
the Board may be held either at a place so designated, or at the principal
office.
Section 6. ORGANIZATION MEETING. Immediately following each
annual meeting of shareholders, the Board of Directors shall hold a regular
meeting for the purpose of organization, election of officers and the
transaction of other business. Notice of such meeting is hereby dispensed with.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings of
the Board of Directors shall be held without call on the fourth Wednesday of
each month at the hour of 3:00 o'clock p.m. of said day; provided, however,
should said day fall upon a legal holiday, then said meeting shall be held at
the same time on the next day thereafter ensuing which is not a legal holiday.
Notice of all such regular meetings of the Board of Directors is hereby
dispensed with.
9
<PAGE>
Section 8. SPECIAL MEETINGS. Special meetings of the Board of
Directors for any purpose or purposes shall be called at any time by the
President, or, if absent or unable or refuses to act, by any Vice President or
by any two (2) Directors.
Written notice of the time and place of special meetings shall
be delivered personally to the Directors or sent to each Director by mail, or
other form of written communication, charges prepaid, addressed to him at his
address as it is shown upon the records of the corporation, or if it is not
shown on such records or is not readily ascertainable, at the place in which
meetings of the Directors are regularly held. In case such notice is mailed or
telegraphed, it shall be deposited in the United States mail or other
appropriate mail or facsimile facility, or delivered to the telegraph company in
the place in which the principal office of the corporation is located at least
forty-eight (48) hours prior to the time of the holding of the meeting. In case
such notice is delivered as above provided, it shall be so delivered at least
twenty-four (24) hours prior to the time of the holding of the meeting. Such
mailing, faxing, telegraphing or delivery as above provided shall be due, legal
and personal notice to such Director.
Section 9. NOTICE OF ADJOURNMENT. Notice of the time and place
of holding an adjourned meeting need not be given to absent Directors, if the
time and place be fixed at the meeting adjourned.
10
<PAGE>
Section 10. ENTRY OF NOTICE. Whenever any Director has been
absent from any special meeting of the Board of Directors, an entry in the
minutes to the effect that notice has bene duly given shall be conclusive and
incontrovertible evidence that due notice of such special meeting was given to
such Director, as required by law and the By-laws of the corporation.
Section 11. WAIVER OF NOTICE. The transactions of any meeting
of the Board of Directors, however called and noticed or wherever held, shall be
as valid as though a meeting had been duly held after regular call and notice,
if a quorum be present, and if, either before or after the meeting, each of the
Directors not present sign a written Waiver of Notice or a Consent to holding
such meeting, or an approval of the minutes thereof. All such waivers, consents
or approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 12. QUORUM. A majority of the authorized number of
Directors shall be necessary to constitute a quorum for the transaction of
business, except to adjourn as hereinafter provided. Every act or decision done
or made by a majority of the Directors present at a meeting duly held at which a
quorum is present, shall be regarded as the act of the Board of Directors,
unless a greater number be required by law or by the Articles of Incorporation.
Section 13. ADJOURNMENT. A quorum of the Directors may adjourn
any Directors' meeting to meet again at a stated day nd hour; provided, however,
11
<PAGE>
that a in the absence of a quorum, a majority of the Directors present at any
Directors' meeting, either regular or special, may adjourn from time to time
until the time fixed for the next regular meeting of the Board.
Section 14. FEES AND COMPENSATION. Directors shall not receive
any stated salary for their services as Directors, but by resolution of the
Board, a fixed fee, with or without expenses of attendance, may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any Director from serving the corporation in any other capacity as an
officer, agent, employee or otherwise, and receiving compensation therefor.
ARTICLE IV
Officers
Section 1. OFFICERS. The officers of the corporation shall be
a President, a Vice-President, a Secretary and a Treasurer. The corporation may
also have, at the discretion of the Board of Directors, a Chairman of the Board,
one or more Vice Presidents, one or more Assistant Secretaries, one or more
Assistant Treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 3 of this Article. Officers, other than President
and Chairman of the Board, need not be Directors. Any person may hold two (2) or
more offices.
Section 2. ELECTION. The officers of the corporation, except
such officers as may be appointed in accordance with the provisions of Section 3
12
<PAGE>
or Section 5 of this Article, shall be chosen annually by the Board of
Directors, and each shall hold his office until he shall resign or shall be
removed or otherwise disqualified to serve, or his successor shall be qualified
and elected.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors
may appoint such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority and perform
such duties as are provided in the By-laws or as the Board of Directors may from
time to time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be
removed, either with or without cause, by a majority of the Directors at the
time in office, at any regular or special meeting of the Board.
Any officer may resign at any time by giving written notice to
the Board of Directors or to the President, or to the Secretary of the
corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
13
<PAGE>
manner prescribed in the By-laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board,
if there shall be such an officer, shall, if present, preside at all meetings of
the Board of Directors, and exercise and perform such other powers and duties as
may be from time to time assigned to him by the Board of Directors or prescribed
by the Bylaws.
Section 7. PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the Board of Directors to the Chairman of the Board, the
President shall be the Chief Executive Officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. He shall
preside at all meetings of the shareholders and in the absence of the Chairman
of the Board, at all meetings of the Board of Directors. He shall be ex-officio
a member of all the standing committees, including the executive committee, if
any, and shall have the general powers and duties of management usually vested
in the office of President of a corporation, and shall have such other powers
and duties as may be prescribed by the Board of Directors or the By-laws.
Section 8. VICE PRESIDENT. In the absence or disability of
the President, the Vice Presidents, in order of their rank as fixed by the Board
of Directors, or if not ranked, the Vice President designated by the Board of
14
<PAGE>
Directors, shall perform all the duties of the President and when so acting
shall have all the powers of, and be subject to, all the restrictions upon the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or the By-laws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be
kept, a book of minutes at the principal office or such other place as the Board
of Directors may order, of all meetings of Directors and shareholders, with the
time and place of holding, whether regular or special, and if special, how
authorized, the notice thereof given, the names of those present at Directors'
meetings, the number of shares present or represented at shareholders' meetings
and the proceedings thereof.
The Secretary shall keep or cause to be kept, at the principal
office, a share register, or a duplicate share register, showing the names of
the shareholders and their addresses; the number and classes of shares held by
each; the number and date of certificates issued for the same, and the number
and date of cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all
the meetings of the shareholders and of the Board of Directors required by the
By-laws or by law to be given, and shall keep the seal of the corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or the By-laws.
15
<PAGE>
Section 10. TREASURER. The Treasurer shall keep and maintain,
or cause to be kept and maintained, adequate and correct accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
surplus and shares. Any surplus, including earned surplus, paid-in surplus and
surplus arising from a reduction of stated capital, shall be classified
according to source and shown in a separate account. The books of account shall
at all times be open to inspection by any Director.
The Treasurer shall deposit all monies and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the Board of Directors. He shall disburse the funds of the
corporation as may be ordered by the Board of Directors, shall render to the
President and Directors, whenever they request it, an account of all
transactions as Treasurer and of the financial condition of the corporation, and
shall have such other powers and perform such other duties as may be prescribed
by the Board of Directors or the By-laws.
ARTICLE V.
Miscellaneous
Section 1. RECORD DATE AND CLOSING OF STOCK BOOKS. The Board
of Directors may fix a time, in the future, not exceeding fifteen (15) days
preceding the date of any meeting of shareholders, and not exceeding thirty (30)
16
<PAGE>
days preceding the date fixed for the payment of any dividend or distribution,
or for the allotment of rights, or when any change or conversion or exchange of
shares shall go into effect, as a record date for the determination of the
shareholders entitled to notice of and to vote at any such meeting, or entitled
to receive any such dividend or distribution, or any such allotment of rights,
or to exercise the rights in respect to any such change, conversion or exchange
of shares, and in such case, only shareholders of record on the date so fixed
shall be entitled to notice of and to vote at such meetings, or to receive such
dividend, distribution or allotment of rights, or to exercise such rights, as
the case may be, notwithstanding any transfer of any shares on the books of the
corporation after any record date fixed as aforesaid. The Board of Directors may
close the books of the corporation against transfers of shares during the whole,
or any part of any such period.
Section 2. INSPECTION OF CORPORATE RECORDS. The share register or
duplicate share register, the books of account and minutes of proceedings of the
shareholders and Directors shall be open to inspection upon the written demand
of any shareholder or the holder of a voting trust certificate, at any
reasonable time, and for the purpose reasonably related to his interests as a
shareholder, or as the holder of a voting trust certificate, and shall be
exhibited at any time when required by the demand of ten percent (10%) of the
shares represented at any shareholders' meeting. Such inspection may be made in
17
<PAGE>
person or by an agent or attorney, and shall include the right to make extracts.
Demand of inspection other than at a shareholders' meeting shall be made in
writing upon the President, Secretary or Assistant Secretary of the corporation.
Section 3. CHECKS, DRAFTS, ETC. All checks, drafts or other
orders for payment of money, notes or other evidences of indebtedness, issued in
the name of or payable to the corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board of Directors.
Section 4. ANNUAL REPORT. The Board of Directors of the
corporation shall cause to be sent to the shareholders not later than one
hundred twenty (120) days after the close of the fiscal or calendar year an
annual report.
Section 5. CONTRACTS, ETC., HOW EXECUTED. The Board of
Directors, except as in the By-laws otherwise provided, may authorize any
officer or officers, agent or agents, to enter into any contract, deed or lease
or execute any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances; and unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit to render it liable for any purpose or to any amount.
18
<PAGE>
Section 6. CERTIFICATES OF STOCK. A certificate or
certificates for shares of the capital stock of the corporation shall be issued
to each shareholder when any such shares are fully paid up. All such
certificates shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary, or be authenticated by facsimiles of the
signature of the President and Secretary or by a facsimile of the signature of
the President and the written signature of the Secretary or an Assistant
Secretary. Every certificate authenticated by a facsimile of a signature must be
countersigned by a transfer agent or transfer clerk.
Certificates for shares may be issued prior to full payment
under such restrictions and for such purposes as the Board of Directors or the
By-laws may provide; provided, however, that any such certificate so issued
prior to full payment shall state the amount remaining unpaid and the terms of
payment thereof.
Section 7. REPRESENTATIONS OF SHARES OF OTHER CORPORATIONS.
The President or any Vice President and the Secretary or Assistant Secretary of
this corporation are authorized to vote, represent and exercise on behalf of
this corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this corporation. The
authority herein granted to said officers to vote or represent on behalf of this
corporation or corporations may be exercised either by such officers in person
or by any person authorized so to do by proxy or power of attorney duly executed
by said officers.
19
<PAGE>
Section 8. INSPECTION OF BY-LAWS. The corporation shall keep
in its principal office for the transaction of business the original or a copy
of the By-laws, as amended or otherwise altered to date, certified by the
Secretary, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
ARTICLE VI.
Amendments
Section 1. POWER OF SHAREHOLDERS. New By-laws may be adopted
or these By-laws may be amended or repealed by the vote of shareholders entitled
to exercise a majority of the voting power of the corporation or by the written
assent of such shareholders.
Section 2. POWER OF DIRECTORS. Subject to the right of the
shareholders as provided in Section 1 of this Article VI to adopt, amend or
repeal By-laws, By-laws other than a By-law or amendment thereof changing the
authorized number of Directors may be adopted, amended or repealed by the Board
of Directors.
Section 3. ACTION BY DIRECTORS THROUGH CONSENT IN LIEU OF
MEETING. Any action required or permitted to be taken at a meeting of the Board
of Directors or of any committee thereof, may be taken without a meeting, if a
written consent thereto is signed by all the members of the Board or of such
committee. Such written consent shall be filed with the minutes of proceedings
of the Board or committee.
/s/ Verl Hallmark
-----------------
Secretary
20
EXCHANGE AGREEMENT
------------------
This EXCHANGE AGREEMENT made this 9th day of December, 1994,
between OAK SPRINGS NURSING HOME LIMITED PARTNERSHIP, a Virginia Limited
Partnership, (hereinafter "Stockholder"), and PETRO-SERS CORPORATION, a Nevada
corporation, (hereinafter "Petro-
Sers").
WITNESSETH:
WHEREAS, Stockholder is the owner of all of the issued and
outstanding shares of Hunt Country Home Health, Inc., a Virginia corporation
(hereinafter "Hunt Country"); and
WHEREAS, Petro-Sers is a public company and is authorized to
issue 200,000,000 shares of Common Stock, par value $0.001 per share, of which
there are 1,077,612 shares issued and outstanding; and
WHEREAS, Stockholder and Petro-Sers agree that it would be to
their mutual benefit for Petro-Sers to acquire all of the outstanding stock of
Hunt Country from Stockholder in exchange for a Ninety-five percent (95%)
interest in Petro-Sers' Class A common stock and 10,000 shares of a newly
authorized Class B common stock.
NOW, THEREFORE, in consideration of the premises and of the
mutual promises, agreements and covenants herein contained, the parties hereto
hereby agree as follows:
1. [EXCHANGE OF STOCK] Subject to the terms and conditions and
in reliance on the representations and warranties contained in this Agreement,
at the Closing on December 9, 1994, Petro-Sers will issue and deliver, or cause
1
<PAGE>
to be issued and delivered, to Stockholder 20,474,628 shares of Class A common
stock and 10,000 shares of Class B common stock of Petro-Sers in exchange for
which Stockholder will deliver to Petro-Sers all of the issued and outstanding
stock of Hunt Country, a Virginia corporation, (the transaction to be referred
to hereinafter as the "Exchange").
2. [REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER] Stockholder
makes the following representations and warranties, each of which is material
and is being relied upon by Petro-Sers and shall be true at the Closing and
shall survive the Closing:
a. Stockholder owns free and clear of all liens, charges and
encumbrances, all of the issued and outstanding shares of capital stock
of Hunt Country Home Health, Inc., a Virginia corporation, consisting
of 1,000 shares.
b. Hunt Country is a corporation duly organized and validly
existing and in good standing under the laws of the Commonwealth of
Virginia; has all corporate power necessary to engage in the business
in which it is presently engaged; and has an authorized capitalization
of 5,000 shares of common stock, par value $1.00 per share, of which
there are issued and outstanding 1,000 shares, fully paid and
non-assessable.
3. [REPRESENTATIONS AND WARRANTIES OF PETRO-SERS] Petro-Sers
makes the following representations and warranties, each of which is material
and is being relied upon by Stockholder and shall be true at the Closing and
shall survive the Closing:
a. Petro-Sers is a corporation duly organized and validly
2
<PAGE>
existing and in good standing under the laws of the State of Nevada.
b. The authorized capital stock of Petro-Sers consists of
200,000,000 shares of common stock, par value $0.001 per share, of
which 1,077,612 shares issued and outstanding. There are no other
authorized or outstanding equity securities of Petro-Sers of any class,
kind or character, and there are no outstanding subscriptions, options,
warrants or other agreements or outstanding commitments obligating
Petro-Sers to issue any additional shares of its capital stock of any
class, or any options or rights with respect thereto, or any securities
convertible into any shares of stock of any class.
c. Petro-Sers currently has 415 stockholders.
d. Certified copies of the Articles of Incorporation and
By-laws of Petro-Sers, which have been heretofore furnished by
Petro-Sers to Stockholder, are true and correct copies, including all
amendments thereto.
e. Although neither Petro-Sers nor any corporation which has
been merged into Petro-Sers has conducted any business operations for
the past five (5) years, Petro-Sers agrees to deliver within two (2)
weeks from the date of Closing, audited financial statements for the
past two (2) years which will disclose that Petro-Sers has not
conducted business and that it is not subject to any liabilities
3
<PAGE>
whatsoever. These financial statements will accurately set forth the
financial condition of Petro-Sers as of the dates specified, and the
results of operations for the fiscal years involved, prepared in
conformity with generally accepted accounting principles consistently
applied. As a further assurance to Stockholder, Petro-Sers has
delivered to Stockholder an Indemnification Agreement of Sidney W.
Sers, President of Petro-Sers, which fully indemnifies Stockholder from
any liability, either known or unknown, to which Petro- Sers was
subject at the time of Closing. The Indemnification Agreement is
attached hereto and marked Exhibit "A".
f. As of the date hereof and at the Closing, Petro-Sers had no
obligations, liabilities, or commitments, contingent or otherwise, of a
material nature.
g. Petro-Sers is not a party to any employment contract with
any officer, director, or stockholder, or to any lease, agreement or
other commitment, nor to any pension, insurance, profit-sharing, stock
purchase or bonus plan.
h. Petro-Sers is not a defendant, nor a plaintiff against whom
a counterclaim has been asserted, in any litigation, pending or
threatened, nor has any claim or investigation been made or asserted
against Petro-Sers, nor are there any proceedings threatened or pending
before any federal, state or municipal government, or any department,
board, body or agency thereof, involving Petro-Sers.
i. This Agreement has been duly executed by Petro-Sers and the
4
<PAGE>
execution and performance of this Agreement have been duly authorized
by all necessary corporate action, including the giving or waiver of
effective notice thereof, and neither the execution nor performance of
this Agreement will violate, or result in a breach of, or constitute a
default in its Articles of Incorporation or By-laws, any agreement,
instrument, law, regulation, license, judgment, order or decree to
which Petro-Sers is a party, or to which Petro-Sers or any of its
properties are subject, nor will such execution and performance
constitute a violation of or conflict with any fiduciary obligation of
Petro-Sers.
j. Neither Petro-Sers nor any corporation which has merged
into Petro-Sers has conducted business operations for the past five (5)
years and, accordingly, has not been required to file either Federal,
State or Local tax returns. All material federal, state, local, county,
franchise, sales, use, excise and other taxes assessed or due, if any,
have been duly paid, and no reserves for unpaid taxes have been set up
or are required on the basis of the facts and in accordance with
generally accepted accounting principles.
k. Petro-Sers is not in default with respect to any order,
writ, injunction, or decree of any court or federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, and there are no actions, suits, claims, proceedings
or investigations pending, or to the knowledge of Petro-Sers,
5
<PAGE>
threatened against or affecting Petro-Sers, at law or in equity, or
before or by any federal, state, municipal, or other governmental
court, department, commission, board, bureau, agency or
instrumentality, domestic or foreign. Petro-Sers has complied in all
material respects with all laws, regulations and orders applicable to
its business.
l. Petro-Sers has the corporate power to execute and perform
this Agreement and to deliver the stock required to be delivered to
Stockholder hereunder.
m. The shares of stock of Petro-Sers deliverable pursuant to
this Agreement will, on delivery in accordance with the terms hereof,
be duly authorized, validly issued, fully paid and nonassessable, and
be admitted to trading in the over-the-counter market.
n. Prior to the time of Closing, the Board of Directors of
Petro-Sers shall have submitted their resignations as directors, such
resignations to be effective as of the time of Closing, and as their
last act and deed, shall have elected as directors the nominees of
Philip V. Warman II to take their place as directors following the
Closing.
o. Petro-Sers has not, in the past five (5) years, issued an
annual report to its stockholders.
p. Petro-Sers has never made any 1933 or 1934 Securities Act
filings, except for the following. On January 31, 1980, the company
6
<PAGE>
made an offering of 7,500,000 of its shares, par value $0.01, to bona
fide residents of the State of Utah only. It relied upon the exemption
provided by Section 3(a)(11) of the Securities Act of 1933 as amended,
which required that the shares purchased must not be sold, transferred
or assigned for value to any non-resident of the State of Utah for a
period of nine months following the date the offering was closed.
q. Petro-Sers has never been a party to or a provider of an
ERISA Qualified Plan.
r. Petro-Sers is not a party to any executory contracts, nor
does it possess any title documents to any assets.
s. No representation or warranty in this section, nor
statement in any document, certificate or schedule furnished or to be
furnished pursuant to this Agreement by Petro-Sers, or in connection
with the transactions contemplated hereby, contains or contained any
untrue statement of a material fact, nor does or will omit to state a
material fact necessary to make any statement of fact contained herein
or therein not misleading.
4. [CONDITIONS PRECEDENT TO STOCKHOLDER'S OBLIGATIONS]
Stockholder's obligation to consummate the transactions provided for in this
Exchange Agreement is subject to each of the following conditions precedent, any
one or more of which may be waived by Stockholder in writing:
a. All representations and warranties of Petro-Sers herein
7
<PAGE>
shall be true and correct, and Petro-Sers shall have complied with all
terms, covenants and conditions herein.
b. Alexander H. Walker, Jr., counsel to Petro-Sers, shall
deliver an opinion to Stockholder that Petro-Sers is duly incorporated,
validly existing and in good standing; that this Agreement and the
actions to be taken hereunder have been authorized by all appropriate
corporate action and that this Agreement is valid, binding and
enforceable upon Petro-Sers in accordance with its terms.
5. [DATE AND TIME OF CLOSING] The Closing shall be held on
Friday, December 9, 1994, at 12:00 Noon, at 50 West Liberty Street, Suite 880,
Reno, Nevada 89501, or at such other time and place a may be mutually agreed
upon between the parties in writing.
6. [BOARD OF DIRECTORS MEETING OF PETRO-SERS] The Board of
Petro-Sers shall meet at 8:00 a.m., Friday, December 9, 1994 and conduct the
following business:
a. Ratify the terms and conditions contained in the Agreement.
b. Following all appropriate notice procedures under the
corporation's By-laws, call a Special Stockholders Meeting for 9:00
o'clock a.m., Friday, December 9, 1994 for the purpose of approving the
Amendments to the Articles of Incorporation changing the corporate name
to Mid-Atlantic Home Health Network, Inc. and authorizing a
capitalization of 200,000,000 shares Class A common stock and 10,000
8
<PAGE>
shares Class B. common stock.
7. [SPECIAL STOCKHOLDERS MEETING OF PETRO-SERS] Petro- Sers will call
and convene a Special Stockholders Meeting on Friday, December 9, 1994, at 9:00
o'clock a.m., local time, to be held at the offices of Nevada Agency and Trust
Company at Suite 880, 50 West Liberty Street, Reno, Nevada 89501 for the
following purposes:
a. To consider and to vote to approve the terms and conditions
of this Exchange Agreement.
b. To approve the filing of the following amendments to the
Articles of Incorporation:
ARTICLE ONE: [NAME] The name of the corporation is:
MID-ATLANTIC HOME HEALTH NETWORK, INC.
ARTICLE FOUR: [CAPITAL STOCK] The corporation shall
have authority to issue 200,010,000 shares of stock divided into two
(2) classes of stock, namely: TWO HUNDRED MILLION (200,000,000) shares
of Class A Common Stock, par value ONE MILL ($0.001) per share, with
the right to elect one-third (1/3rd) of the directors; and TEN THOUSAND
(10,000) shares Class B Common Stock, with the right to elect
two-thirds (2/3rds) of the directors. All stock when issued shall be
fully paid and non-assessable. No holder of shares of Capital Stock of
the corporation shall be entitled as such to any pre-emptive or
preferential rights to subscribe to any unissued
9
<PAGE>
preferential rights to subscribe to any unissued stock, or any other
securities which the corporation may now or hereafter authorize to be
issued. Each share of Capital Stock shall be entitled to one (1) vote
at stockholders meetings, either in person or by Proxy. Cumulative
voting for the election of directors and all other matters brought
before stockholders' meetings, whether they be annual or special, shall
not be permitted.
c. Such other and further business as is deemed appropriate to
effectuate the Exchange in accordance with the corporate law of the
State of Nevada and the corporation's Articles of Incorporation and
By-laws.
8. [ORGANIZATIONAL MEETING OF BOARD OF DIRECTORS] The
Organizational Meeting of the Board of Directors shall be held on Friday,
December 9, 1994, at 10:00 o'clock a.m., local time, immediately following the
Special Stockholders Meeting, at which time the stock consideration will be
issued, new officers and directors will be elected and the former officers and
directors will resign.
9. [EXCHANGE OF SHARES OF STOCK] To carry into effect the Exchange
provided for in this Agreement, at the Closing, all the issued and outstanding
shares of Hunt Country shall be exchanged for 20,474,628 shares Class A common
stock and 10,000 shares of Class B common stock of Petro-Sers, such shares of
Petro-Sers to be registered in the name of Stockholder.
10. [FEES] Stockholder and Petro-Sers will not pay any fees in
stock to any person in connection with this corporate reorganization.
10
<PAGE>
11. [NOTICES] Any notice under this Agreement shall be deemed
to have been sufficiently given if sent by registered or certified mail, postage
prepaid, addressed as follows:
If to the Stockholder to:
Philip V. Warman II
7504 Diplomat Drive, Suite 101
Manassas, Virginia 22110
If to Petro-Sers to:
Alexander H. Walker, Jr.
50 West Liberty Street, Suite 880
Reno, NV 89501
or to any other address or addresses which may hereafter be designated by either
party by notice given in such manner. All notices will be deemed to have been
given as of the date of receipt.
12. [FURTHER ASSURANCES] Each party agrees to take any further
action necessary or desirable to carry out the provisions of this Agreement.
13. [COUNTERPARTS] This Agreement may be executed in any
number of counterparts, each of which when executed and delivered shall be an
original, but all such counterparts shall constitute one and the same
instrument.
14. [MERGER CLAUSE] This Agreement supersedes all prior
agreements and understandings between the parties and may not be changed or
11
<PAGE>
terminated orally, and no attempted change, termination or waiver of any of the
provisions hereof shall be binding unless in writing and signed by the parties
hereto.
15. [GOVERNING LAW] This Agreement shall be governed by and
construed according to the laws of the State of Nevada and the Commonwealth of
Virginia.
16. [BINDING EFFECT] This Agreement shall be binding upon the
respective parties' successors and assigns, and the obligations of the parties
hereto shall be construed to include those of any corporations who have merged
with or into any of the parties.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first above written.
STOCKHOLDER:
OAK SPRINGS NURSING HOME
LIMITED PARTNERSHIP
By /s/ Philip V. Warman II
------------------------------------
Philip V. Warman II, General Partner
PETRO-SERS CORPORATION
By /s/ Sidney W. Sers
-----------------------------------
Sidney W. Sers
President
12
LIST OF SUBSIDIARIES
Subsidiary Name State of Incorporation Date Incorporated
- --------------- ---------------------- -----------------
Hunt Country Home Health, Inc. Virginia 1984
Western Pennsylvania Home
Health Health Network, Inc. Pennsylvania 9-27-94
National Nurses Service, Inc. Delaware 2-15-91
Hunt Country Nursing Services, Inc. Virginia 4-11-85
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 578699
<SECURITIES> 0
<RECEIVABLES> 468543
<ALLOWANCES> 44071
<INVENTORY> 0
<CURRENT-ASSETS> 1306151
<PP&E> 692309
<DEPRECIATION> 432206
<TOTAL-ASSETS> 2721266
<CURRENT-LIABILITIES> 776986
<BONDS> 241248
0
10000
<COMMON> 12631
<OTHER-SE> 1869651
<TOTAL-LIABILITY-AND-EQUITY> 2721266
<SALES> 0
<TOTAL-REVENUES> 13740390
<CGS> 0
<TOTAL-COSTS> 10071783
<OTHER-EXPENSES> 3169761
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 264678
<INCOME-PRETAX> 234168
<INCOME-TAX> 58461
<INCOME-CONTINUING> 175707
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 175701
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
