<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (Per Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
MID-ATLANTIC HOME HEALTH NETWORK, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed.
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Mid-Atlantic Home Health Network
I N C O R P O R A T E D
7504 Diplomat Drive, Suite 101
Manassas, Virginia 20109-2631
703/335-1957 (Telephone)
703/335-8630 (Fax)
April 21, 2000
Dear Shareholder:
On behalf of your board of directors, I have the pleasure of inviting
you to attend our first Annual Meeting of shareholders. The meeting will be held
on Friday, May 5, 2000, 1:00 p.m. Eastern time in the Hampton Inn, 7295
Williamson Boulevard, Manassas, Virginia. I hope that you will participate in
the Annual Meeting. You can do so by attending the meeting and voting in person.
Alternatively, you may vote by completing the enclosed proxy card and returning
it as promptly as possible.
Included with this mailing, you will find our Annual Report to
Shareholders, which includes our Annual Report on Amended Form 10-KSB. The
Annual Report includes audited financial statements for our fiscal year, which
ended on December 31, 1999. You will also find our proxy statement. The proxy
statement outlines the items of business that will be discussed and voted upon
at the Annual Meeting. I urge you to read the Annual Report and the proxy
statement carefully as they contain information about us that you may find
important.
I hope to see you at the Annual Meeting. If you are unable to attend, I
again ask that you complete your proxy and return it by mail as soon as
possible.
Sincerely,
/s/ Dennis S. Light
Dennis S. Light
President
3
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of shareholders of
Mid-Atlantic Home Health Network, Inc., a Nevada Corporation, will be held at
the Hampton Inn, 7295 Williamson Boulevard, Manassas, Virginia on Friday, May 5,
2000 at 1:00 p.m. Eastern time for the following purposes.
1. To elect three directors to serve for one year or until their
successors have been elected and quantified;
2. To ratify the appointment of Eggleston Smith, P.C. as Mid-
Atlantic's independent auditors for the year 2000; and
3. To transact any other business that may properly come before
the Annual Meeting.
The close of business on Friday, April 21, 2000 has been fixed as the
record date for determination of shareholders entitled to notice of, and to vote
at the Annual Meeting.
Shareholders may vote by written proxy. If you attend the meeting and
intend to vote in person, notify our personnel of your intent as you sign in for
the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Dennis S. Light
Dennis S. Light
President
4
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement concerns the Annual Meeting of shareholders of
Mid-Atlantic Home Health Network Incorporated, a Nevada corporation, (The
Company) to be held on Friday May 5, 2000 ("Annual Meeting"). The Annual Meeting
will be held at 1:00 p.m. Eastern time, Hampton Inn, 7295 Williamson Boulevard,
Manassas, Virginia. As of the record date April 21, 2000 there were 12,621,202
shares of Class A common stock and 10,000 shares of Class B common stock
outstanding.
The Board of Directors is soliciting your proxy for use at the Annual
Meeting and at any adjournment of the meeting. You will be asked to vote upon
two items: Item 1. Election of Directors and Item 2. Approval of Eggleston Smith
PC as the independent auditors. Your proxy will also permit a vote on any other
matter that may legally come before the Annual Meeting. The Company is not
currently aware of any other item that will require a shareholder vote.
We have included in this packet a copy of the Amended Form 10-KSB
Annual Report accompanied by our letter to stockholders. You may wish to review
this Amended Form 10- KSB carefully. It contains detailed information about our
business and about us.
We are mailing this proxy statement and accompanying forms of proxy and
voting instructions on or about Monday, April 24, 2000 to holders of the Class A
common stock on the record date for the Annual Meeting.
VOTING RIGHTS
Each share of Class A common stock is entitled to one vote on each
proposal and with respect to each director position to be filled. The Class A
common voter as a class is entitled to elect one-third of the Board of
Directors. Cumulative voting does not apply. In order to be eligible to vote on
matters coming before the Annual Meeting, you must own one share of stock on the
record date. The Board of Directors has set the record date as of the close of
business on Friday April 21, 2000 ("Record Date").
On the Record Date, there were issued and outstanding 12,641,142 shares
of Class "A"Common Stock of the Company, par value $.001 per share (the "Common
Stock"). Each holder of Common Stock is entitled to one vote for each share
owned as of the Record Date on all matters presented at the meeting. The
presence at the Annual Meeting in person or by proxy of the holders of a
majority of the outstanding shares of Common Stock shall constitute a quorum.
The affirmative vote of a majority of the shares eligible to vote and actually
voted at the Annual Meeting, if a quorum is present, is required for the
election of directors and for action on all other matters proposed to be voted
on at the Annual Meeting or any adjournment thereof. The shareholders of the
Company have no minority shareholder dissenters rights under the
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Nevada Revised Statues (chapter 78) the governing law of Nevada, the Company's
state of incorporation, or any other applicable law with respect to the
proposals specified in the notice.
Shares represented by valid proxies will be voted in accordance with
instructions contained therein, or, in the absence of such instructions, will be
voted "FOR" the nominees for directors recommended by the Board of directors,
"FOR" the proposal regarding the Company's independent accountant submitted to
the meeting and in the discretion of the proxies on each other matter that
properly may come before the meeting. Any shareholder who is present at the
meeting but who abstains from voting shall be counted for purposes of
determining whether a quorum exists, but an abstention shall not be counted as
an affirmative vote with respect to any matter. With respect to all matters
other than the election of directors, an abstention would have the same effect
as a vote against the proposal. Any shareholder of the Company has the
unconditional right to revoke such shareholder's proxy at any time prior to the
voting thereof by written notice of revocation to Dennis S. Light, President,
Mid-Atlantic Home Health Network, Inc., 7504 Diplomat Drive, Suite 101,
Manassas, VA 20109, by executing a new proxy, or by attending the Annual Meeting
and casting a contrary vote; however, no revocation shall be effective until
such notice of revocation has been received by the Company at or prior to the
Annual Meeting.
The Company does not anticipate that any of its nominees will be
unavailable for election and does not know of any matters other than those
proposed above that may be brought before the Annual Meeting. In the event that
any other matter comes before the Annual Meeting or any nominee is not available
for election, the persons named in the enclosed Proxy will have discretionary
authority to vote all Proxies not marked to the contrary with respect to any
such matter in accordance with their best judgment.
A list of Stockholders entitled to vote at the Annual Meeting will be
open to examination by any Stockholder, for any purpose germane to the Annual
Meeting, at the Company's Executive Offices, at the address indicated on the
Notice of Annual Meeting, during ordinary business hours for ten (10) days prior
to the Annual Meeting. This list will also be available for review at the Annual
Meeting.
ACTIONS TO BE TAKEN AT THE ANNUAL MEETING
1. ELECTION OF THREE NOMINEES AS DIRECTORS
The Board of Directors has nominated the three incumbent Directors for
election. Proxies not marked to the contrary will be voted "FOR" the election of
the persons listed below:
<TABLE>
<CAPTION>
Period Served As
Name Age Position Director
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Philip V. Warman 56 Chairman of the Board, Dec. 9, 1994 to present
and Director
6
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Dennis S. Light 56 President and Dec. 9, 1994 to present
Director
Tom Waugh 32 Secretary & Treasurer, Dec., 1999 to present
Director
</TABLE>
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 and a director of the Company, 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
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.
RICHARD TOMLINSON WAUGH
- -----------------------
Tom Waugh is the Secretary and Treasurer and a director of the Company.
Mr. Waugh received his undergraduate degree from Colorado State and earned a
Masters of International Management from the American Graduate School of
International Management at Thunderbird. Mr. Waugh has worked for Bear Sterns in
the international securities division and is currently the Managing Director of
Cavallo Capital Corp., a New York based hedge fund that manages $120 million. In
the capacity, Mr. Waugh is responsible for the operational activities of the
managed accounts, including personnel, execution of trades, creating trade
models and analyzing prospective deals.
Management has no reason to believe that any of the nominees will not
be a candidate or will be unable to serve. In the event that any nominee should
become unable or unwilling serve as a Director, however, Proxies will be voted
for the election of any person substituted for such nominee designated by the
incumbent Directors. All Directors of the Company hold office until the next
annual meeting of Stockholders and until their successors are elected and
qualify.
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COMMITTEES OF THE BOARD OF DIRECTORS
At the present time, the Company does not have standing audit,
nominating or compensation committees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference to this section may be found in Item 11 "Security Ownership of
Certain Beneficial Owners and Management" of the Company's Annual Report on
Amended Form 10- KSB transmitted with this proxy statement.
EXECUTIVE COMPENSATION
Reference to this section may be found in Item 10 "Executive
Compensation" of the Company's Annual Report on Amended Form 10-KSB transmitted
with this proxy statement.
STOCK PERFORMANCE
Reference to stock performance may be found in Item 5 - "Market for
Common Equity and Related Stockholder Matters" of the Company's Annual Report on
Amended Form 10-KSB transmitted with this proxy statement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS INVOLVING
DIRECTORS, OFFICERS AND OTHERS
Reference to Certain Relationships and Related transactions may be
found in Item 12 "Certain Relationships and Related Transactions" of the
Company's Annual Report on Amended Form 10-KSB transmitted with this proxy
statement.
The Company may continue the practice of issuing shares of Common Stock
in lieu of cash payment in the future if it determines that such issuance is in
the best interests of the Company and is consistent with the Company's
agreements. The foregoing arrangements and relationships may give rise to
conflicts of interest with respect to future interpretation of the agreements
between the Company and its affiliates or with respect to future transaction
between the Company and its affiliates. There can be no assurance those future
transactions between the Company and any affiliates will be advantageous to the
Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ELECTION OF
EACH OF THE NOMINEES FOR THE BOARD OF DIRECTORS SET FORTH ABOVE.
2. RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has selected Eggleston Smith, P.C. located at
603 Pilot House Drive, Suite 400, Newport News, Virginia 23606 ("Eggleston,
Smith"), Certified Public
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Accountants to continue as the Company's principal accountants to audit the
Company's financial statements for the fiscal year ending December 31, 2000.
There have been no disagreements with Eggleston, Smith on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which, if not resolved to its satisfaction, would have caused
Eggleston, Smith to make reference to the subject matter of any such
disagreements in connection with its past reports.
Although it is not required to do so, the Board of Directors is
submitting its selection of the Company's auditors for ratification at the
Meeting, in order to ascertain the views of stockholders regarding such
selection. If the selection is not ratified, the Board of Directors will
reconsider its selection.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" RATIFICATION OF THE APPOINTMENT OF EGGLESTON, SMITH, P.C., AS THE
COMPANY'S AUDITORS.
OTHER MATTERS
The Board of Directors is not aware of any matters to be presented at
the 2000 Meeting except those matters described in this Proxy Statement. Unless
otherwise directed, all shares represented by Proxies will be voted for the
election of the Directors nominated by the Board of directors and in favor of
appointment of Eggleston, Smith, P.C. as the Company's auditors described in
this Proxy Statement and the Notice of the Annual Meeting. If any other matters
come before the Annual Meeting, the persons named in the accompanying Proxies
will vote on those matters according to their best judgment.
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE 16(A)
Section 16(a) of the Exchange Act requires the Company's officers and
Directors and persons who own beneficially more than ten percent of a registered
class of the Company's equity securities (10% Stockholders) to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, Directors and 10% Stockholders are required by regulation to furnish
the Company with copies of all forms filed by them pursuant to Section 16(a).
Reference to this section may be found in Part III Item 9 "Directors, Executive
Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act" of the Company's Annual Report on Amended Form 10-KSB, transmitted
with this proxy statement.
EXPENSES
The Company will bear the expense of preparing, assembling, printing
and mailing this Proxy Statement, the enclosed Notice, Proxy and Annual Report
and accompanying material to shareholders. Solicitation may be made by mail,
personal contact, telephone and facsimile by officers and other employees of the
Company, who will not receive additional compensation for such services. The
Company may also request brokerage houses, nominees, custodians,
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fiduciaries and other similar parties to forward soliciting material to the
Company's record shareholders and will reimburse such persons for their
reasonable associated charges and expenses.
STOCKHOLDER PROPOSALS
No person who intends to present a proposal for action at a forthcoming
Stockholders' meeting of the Company's Stockholders (a "Proponent") may seek to
have such Proponent's proposal included in the proxy statement or form of proxy
for such meeting unless the Proponent: (i) is a record or beneficial owner at
the time the proposal is submitted of at least 1% or $1,000 in market value of
the Company's securities entitled to vote on such proposal, has held such
securities for at least one year at the time the proposal is submitted and
continues to own such shares through the date of the meeting, (ii) provides the
Company in writing with (A) his name, address, the number of voting securities
held by such Proponent and the dates upon which such securities were acquired,
(B) documentary support of the Proponent's beneficial ownership in the form of
either (1) a written statement by a record owner of such securities or an
independent third party, or (2) a copy of (A) a Schedule 13D, Schedule 13G, Form
13F, Form 3 and/or Form 4 or amendments thereto, (B) a copy of all subsequent
amendments to such documents reporting a change in ownership level, (C) the
Proponent's affidavit, declaration, affirmation or other similar document
provided for under state law attesting that the Proponent continues to be the
beneficial owner of the required percent or market value of the Company's
shares, as provided in clause (i) above; (iii) the Proponent's written statement
that he intends to continue ownership of such shares through the date of the
next annual meeting of stockholders of the Company; (iv) notifies the Company of
his intention to appear personally at the meeting or by a representative
qualified under Nevada law to present his proposal for action, and (v) submits
this proposal and all supporting statements and documents in writing on a timely
basis. To be included in the proxy statement or proxy for the Company's next
annual meeting of Stockholders, a proposal must be received at the Company's
principal executive office no later than February 10, 2001. If the date of such
meeting is changed by more than 30 calendar days from the date such meeting is
scheduled to be held under the Company's By-laws, or if the proposal is to be
presented at any meeting other than the next annual meeting of stockholders, the
proposal must be received at the Company's principal executive offices at a
reasonable time before proxies are solicited for such meeting.
A person may submit only one proposal, along with a supporting
statement if the proponent requests inclusion of such a statement with the proxy
materials, aggregating not more than 500 words. Under specified circumstances
set forth in the rules of the Securities and Exchange Commission relating to the
solicitation of proxies, the Company may be entitled to omit the proposal and
any statement in support thereof from its proxy statement and form of proxy.
ANNUAL REPORT
A Copy of the Company's Consolidated Annual Report on Amended Form
10-KSB for the fiscal year ended December 31, 1999, as filed with the Securities
and Exchange Commission on April 21, 2000, including financial statements of the
Company for such year and for comparative periods, is transmitted herewith.
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By Order of the Board of Directors
/s/ Dennis S. Light
Dennis S. Light, President
Mid-Atlantic Home Health Network, Inc.
Manassas, Virginia
April 21, 2000
SUMMARY OF EXHIBITS
EXHIBIT A - Form Proxy
EXHIBIT B - Annual Report of Mid-Atlantic Home Health Network, Inc. (Including
1999 Annual Report on Amended Form 10-KSB)
11
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EXHIBIT A
MID-ATLANTIC HOME HEALTH NETWORK, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MID-
ATLANTIC HOME HEALTH NETWORK, INC.
The undersigned hereby appoints Dennis S. Light as proxy with power to
act and with power of substitution and hereby authorizes him to represent and
vote as designated all of the shares of Class A common stock of Mid-Atlantic
Home Health Network, Inc. held in the name of the undersigned with all powers
which the undersigned would possess if present at the Annual Meeting of
shareholders to be held on Friday, May 5, 2000 or at any adjournment thereof. If
this proxy is returned signed but without a clear voting designation, the proxy
will vote in accordance with the board's recommendations. The undersigned hereby
revokes any other proxy previously granted to vote at such Annual Meeting, and
hereby ratifies and confirms all that the above-named Proxies, and each of them,
may lawfully do by virtue hereof. With respect to matters not known at the time
of the solicitation hereof, said Proxies are authorized to vote in accordance
with their best judgment. The undersigned acknowledges receipt of copies of the
Annual Report for the period ended December 31, 1999, the Notice of Annual
Meeting, and the accompanying Proxy Statement of the Company dated April 21,
2000, relating to the Annual Meeting.
This proxy when properly executed will be voted by the proxy in the
manner designated below. If the proxy is returned signed but without a clear
voting designation, the proxy will vote for Items 1 and 2. The board of
directors recommends a vote for Items 1 and 2.
1. ELECTION OF DIRECTORS.
NOMINEES: FOR WITHHELD
Dennis S. Light ______ FOR ALL
Phillip V. Warman ______ _______
Tom Waugh ______
WITHHELD FOR: (Write that nominee's name
in the space provided below.)
- -----------------------------------------
2. RATIFICATION OF THE APPOINTMENT FOR AGAINST ABSTAIN
OF INDEPENDENT ACCOUNTANTS ___ _______ _______
Signature____________________Signature________________Date_______
NOTE: The signature(s) hereon should correspond exactly to the name(s) of the
Stockholder(s)
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appearing on the Stock Certificate. If stock is jointly held, all joint owners
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If signer is a corporation, please
indicate the full corporate name and indicate the title of signing officer.
THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS OF MID-ATLANTIC HOME HEALTH
NETWORK, INC.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
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EXHIBIT B
The Company Amended Form 10-KSB filed April 21, 2000 is incorporated
herein by this reference.
In accordance with the Exchange Act, this Schedule 14A has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
April 21, 2000 Mid-Atlantic Home Health Network, Inc.
/s/ Dennis S. Light
------------------------------
Dennis S. Light,
President
14
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDED FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the period ended December 31, 1999
Commission file number 0-24165
MID-ATLANTIC HOME HEALTH NETWORK, INC.
--------------------------------------------------------------------
(Name of Small Business Issuer in its Charter)
NEVADA 93-1108124
- ---------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
7504 DIPLOMAT DRIVE, SUITE 101, MANASSAS, VA 20109
- --------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's Telephone number: (703) 355-1957
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock NASDAQ Bulletin Board
------------------- -----------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.001 PER SHARE
----------------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filings requirements for the past 90 days.
Yes [X] No [ ]
<PAGE>
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to the Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $18,984,218
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days. There was no market
value for the common stock within the last 60 days.
PART I
- --------------------------------------------------------------------------------
ITEM 1. DESCRIPTION OF BUSINESS
- --------------------------------------------------------------------------------
(a) BUSINESS DEVELOPMENT
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.
1
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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
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.
Mid-Atlantic is a regionally based home health and nurse staffing
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
private duty nursing services.
The Company has not been subject to bankruptcy, receivership or any
similar proceedings.
The Company currently employs approximately 1800 employees, of which
800 are full-time employees. The Company's principal executive office is located
at 7504 Diplomat Drive, Suite 101, Manassas, Virginia 20109. The Company has
administrative offices at the following locations:
528 Waterloo Road, Suite A-2 1807 Libbie Avenue, Suite 206
Warrenton, Virginia 20186 Richmond, Virginia 23226
607B Jefferson Davis Highway 2971 Valley Avenue
Fredericksburg, Virginia 22401 Winchester, Virginia 22601
8630 Fenton Street, Suite 200 10760B Ambassador Drive
Silver Spring, MD 20910 Manassas, Virginia 20109
10800 Midlothian Turnpike Teakwood Office Park
Suites 152 & 154 1413 Teakwood Dr., Suite D
Richmond, Virginia 23225 Tappahannock, Virginia 22560
2731-C Prosperity Avenue, Suite C 4410 Ivy Commons
Fairfax, Virginia 22031 Charlottesville, Virginia 22903
101 Juliad Court
Fredericksburg, Virginia 33406
2
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(b) BUSINESS OF THE ISSUER:
(1) PRINCIPAL PRODUCTS AND SERVICES AND THEIR MARKETS
THE HOME HEALTH CARE BUSINESS OF THE COMPANY
Mid-Atlantic is a regionally based home health company established to
provide nurse staffing services and home health and medical products in a
cost-competitive manner to the Mid- Atlantic region. Mid-Atlantic delivers care
to persons in a variety 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 and supplies 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 1,150 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.
3
<PAGE>
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.
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 or who have wounds that are in need of
care.
Hunt Country Home Health has a home office located in Manassas,
Virginia and additional offices located in Fredricksburg and Warrenton. In 1999,
over 13,900 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.
CENTER FOR AMBULATORY AND HOME INFUSION SERVICES
On March 1, 1995, the Company created a subsidiary known as Western
Pennsylvania Home Health Network, Inc. ("WPHHN"). WPHHN operated as a wholly
owned subsidiary until June 30, 1998 when it was sold for book value to Care
Connections of Pennsylvania, a corporation controlled by Phillip Warman, the
Company's Chairman and a general partner of the Corporation's majority
4
<PAGE>
shareholder. On November 1, 1999, the Company acquired the Center for Ambulatory
and Home Infusion Services (CAHIS) from Care Connections or Pennsylvania in a
non-cash transaction in exchange for settlement of inter-company indebtedness.
The total purchase price of $98,804 exceeded the fair market value of the assets
acquired less the liabilities assumed by $155,670. The excess consideration,
recorded as goodwill, represents the goodwill associated with CAHIS's position
in the durable medical equipment market.
CAHIS provides durable medical equipment and supplies through its
offices in Frederichsburg and Charlotesville, Virginia. In addition, CAHIS has
established a web site, www.planetdiaper.com, for the sale of children's
diapers and adult briefs.
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, Fairfax 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
certified by the Medicare and Medicaid programs in Virginia as a provider of
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.
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 and Central Virginia and generates approximately
$5.3 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.
(4) COMPETITIVE BUSINESS CONDITIONS
The Company is part of a highly competitive market for nurse staffing
and private duty nursing services. In addition, the Company is faced with a
market with a shortage of nursing personnel. As a result, the Company faces
competition not in gaining and retaining clients, but gaining and retaining
nursing personnel.
5
<PAGE>
(5) GOVERNMENTAL APPROVAL, REGULATION AND ENVIRONMENTAL COMPLIANCE
The Company relies heavily on payments made by governmental entities
for the services provided by its certified home health entities. Medicare is the
largest single payer of home care services. Effective October 1, 2000, the two
certified Medicare Agencies owned and operated by the Company will be paid for
their services to Medicare beneficiaries by the Prospective Pay System (the
"PPS"). The PPS will replace the existing cost reimbursement system. Services
for designated home health care conditions will be paid a set amount
prospectively. Accordingly, it is unclear if the Company entities offering these
services will operate profitably under the amounts set for the services
provided. This line of business represents about 10% of the Company's revenues.
The PPS 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.
(6) 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.
(7) EMPLOYEES AND FACILITIES
As of March 31, 2000, the Company had approximately 1800 employees of
which 800 are 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.
(c) REPORTS TO SECURITY HOLDERS
Prior to filing its Form 10-SB, the Company had not been required to
deliver annual reports. To the extent that the Company is required to deliver
annual reports to security holders through its status as a reporting company,
the Company shall deliver annual reports. Also, to the extent the Company is
required to deliver annual reports by the rules or regulations of any exchange
upon which the Company's shares are traded, the Company shall deliver annual
reports. If the Company is not required to deliver annual reports, the Company
will not go the expense of producing and delivering such reports. If the Company
is required to deliver annual reports, they will contain audited financial
statements as required.
6
<PAGE>
Prior to the filing of its Form 10-SB, the Company had not filed
reports with the Securities and Exchange Commission. Now that the Company has
become a reporting company, it is required to file Forms 10K-SB, 10Q-SB, 8-K and
appropriate proxy materials as they come due. If the Company issues additional
shares, the Company may file additional registration statements for those
shares. The public may read and copy any materials the Company files with the
Securities and Exchange Commission at the Commission's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by call the Commission
at 1-800-SEC-0330. The Commission maintains an Internet site that contains
reports, proxy and information statements, and other information regarding
issuers that file electronically with the Commission. The Internet address of
the Commission's site is (http://www.sec.gov).
- --------------------------------------------------------------------------------
ITEM 2. 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 20109 and at
10760 Ambassador Drive, Manassas, Virginia.
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 and at 10760 Ambassador Drive, Manassas, Virginia.
- --------------------------------------------------------------------------------
ITEM 3. 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 proceeding except as described below:
On or about December 2, 1998 the Company filed a complaint in the
Circuit Court of Hanover County, State of Virginia against Home Care Connections
and Bonnie James. In that action the Company alleged that while defendant James
was employed by the Company, the defendants acted together and wrongly
transferred patients from services provided by the Company to services provided
by defendant Home Care Connections. The Company seeks monetary damages of
$900,000. The action is pending.
The Company is a defendant in a lawsuit for breach of contract that is
styled ATLIS SYSTEMS INC V. MID-ATLANTIC HOME HEALTH NETWORK, INC., No. 200383
filed in June of 1999 in the Circuit Court for Montgomery County, State of
Maryland. The plaintiff corporation purports to be the successor-in-interest to
Atlis Federal, Inc. On June 30, 1995, the Company acquired all of the stock
7
<PAGE>
of Atlis Health Services, Inc., a wholly-owned subsidiary of Atlis Federal. As
part of the consideration of the acquisition, the Company agreed to deliver
500,000 shares of the Company's Common Stock to Atlis Federal and, on the third
anniversary of closing of the acquisition (June 30, 1998), to pay Atlis Federal
the difference, if any, between the fair value of such stock $800,000. The Stock
Purchase Agreement between the parties establishes a multi-part formula for
determining the fair value of the stock as of that date. The parties disagree
not only about the proper interpretation of the contract language but also
whether, as a result of Altis Federal's alleged breach of various disclosures
provisions of the agreement, the Company is obligated to make any payment at
all. The Complaint seeks damages in the amount of $787,000 (representing
plaintiff's view of the Company's liability to pay an adjusted purchase price
under the contract formula) plus an unspecified amount of attorneys fees and
costs under an indemnification provision of the agreement. The Company has
asserted claim in recoupment to plaintiff's claims that would, if successful,
reduce the amount of any adverse judgment significantly. This action is pending.
- --------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
- --------------------------------------------------------------------------------
The Company did not submit any matter to a vote of the shareholders in
the past calendar year 1999.
PART II
- --------------------------------------------------------------------------------
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- --------------------------------------------------------------------------------
Market Information:
The Company's Class A Common Stock is traded on the Over The Counter
Bulletin Board system under the symbol "MAHN". The following table sets forth
the range of high and low bid prices for the Company's Common Stock for each
quarterly period indicated as reported by the NASDAQ's Historical Research
Department. Quotations reflect inter-dealer prices without retail markup,
markdown or commissions and may not represent actual trades.
8
<PAGE>
Quarter Ended High Bid Low Bid
------------- -------- -------
March 31, 2000 $ 0.37 $ 0.125
December 31, 1999 $ 0.25 $ 0.125
September 30, 1999 $ 0.18 $ 0.125
June 30, 1999 $ 0.25 $ 0.03125
March 31, 1999 $ 0.03 $ 0.03125
December 31, 1998 $ 0.03 $ 0.03125
September 30, 1998 $ 0.03 $ 0.03125
June 30, 1998 $ 0.06 $ 0.03125
March 31, 1998 $ 0.06 $ 0.0625
There is no market for the Company's Class B Common Stock.
HOLDERS:
As of March 31, 2000, there were approximately 447 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.
OPTIONS AND WARRANTS.
There are no outstanding options or warrants to purchase additional
stock. The Company had an incentive stock option plan that included
substantially all officers and key employees. The Series C options which expired
in 1998 originally had an exercise price of $1 per share. The Company
subsequently reduced the option price to $.50 per share. Certain of these
options were exercised and the amount due was financed by the Company through
notes bearing interest at 8%. The unpaid balance of outstanding notes receivable
for stock purchases is shown as a reduction of stockholders' equity in the
Company's financial statements.
RECENT SALES OF UNREGISTERED SECURITIES
On or about March 25, 1999, the Company issued 5,000 shares of its
capital stock to Dennis Light as a yearly bonus for his services in 1998. Such
shares were valued at $0.25 per share. Such shares were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended.
9
<PAGE>
On or about March 31, 2000, the Company issued 15,000 shares of its
capital stock to Dennis Light as a yearly bonus for his services in 1999. Such
shares were valued at $0.25 per share. Such shares were issued pursuant to the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended.
- ------------------------------------------------------------------------------
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- ------------------------------------------------------------------------------
Statements contained herein that are not historical facts are
forward-looking statements as that term is defined by the Private Securities
Litigation Reform Act of 1995. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, the
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ from those projected. The Company cautions
investors that any forward- looking statements made by the Company are not
guarantees of future performance and that actual results may differ materially
from those in the forward-looking statements. Such risks and uncertainties
include, without limitation: well established competitors who have substantially
greater financial resources and longer operating histories, regulatory delays or
denials, ability to compete as a start-up company in a highly competitive
market, and access to sources of capital.
Mid-Atlantic Home Health Network, Inc. (MAHN) is a holding company of
four corporate entities: National Nurses Service, Inc.; Hunt Country Home
Health, Inc.; Hunt Country Nursing Services, Inc., and The Center for Ambulatory
and Home Infusion Services. An analysis of consolidated operations as well as
each of these entities is depicted below.
MID-ATLANTIC HOME HEALTH NETWORK, INC. (MAHN)
CONSOLIDATED FINANCIAL POSITION
The Company's consolidated total assets were $6,451,159 at December 31,
1999 versus $5,165,676 at December 31, 1998. The 24.8% increase in total assets
was due principally to increases in accounts receivable as a result of the
Company's 29% increase in revenue.
Liquidity, as represented by working capital (current assets less
current liabilities), increased from approximately $1,089,000 to $1,388,000 at
December 31, 1999. The Company feels that its current and anticipated liquidity
will be sufficient to fund future operations.
The Company finances a portion of its account receivable with a lender
under terms of an agreement that advances up to 80% of qualified accounts
receivable. At December 31, 1999 advances secured by accounts receivable totaled
approximately $2,993,000
10
<PAGE>
Due to the nature of the Company's operations, property and equipment
are not a significant factor in planning future operational needs. At both
December 31, 1999 and 1998 the company's net investment in property and
equipment was less than 5% of total assets.
CONSOLIDATED RESULTS OF OPERATIONS
Revenues for the year ended December 31, 1999 were approximately
$18,984,000 a 29% increase over December 31, 1998 revenues of approximately
$14,698,000.
Costs related to patient care rose to approximately $14,404,000 an
increase of 32% over the previous year total of $10,783,000. These increases
were offset by controls over general and administrative expenses. General and
administrative expenses totaled approximately $3,494,000 for the year ended
December 31, 1999 an increase of 2.4% over the prior period.
Income before taxes increased to $609,017 in 1999 versus $7,839 in 1998
In addition, interest expenses increased $89,000 or 26 percent over
1998. The increase in this cost category was not equal to the increase in the
volume of business transacted.
Earnings per common share totalled .03 in 1999 versus .001 in 1998.
HEALTH CARE TRENDS
The following is a table of the Company's approximate operating
revenues for the years 1995 through 1999.
Percentage change
From the prior
Revenue year
1995 9,983,000
1996 14,269,000 42.9%
1997 13,740,000 -3.7%
1998 14,698,000 6.9%
1999 18,984,000 29.2%
The Company has, as described elsewhere in this annual report on Form
10-KSB, positioned itself to benefit from changing trends in the market for
health care services.
Management anticipates continued and increased demand for the Company's
staffing, private duty nursing services, durable medical equipment and supplies,
and home health services. MAHN does not face difficulties in the marketing of
its services. Its challenges are in the recruitment of sufficient nursing
personnel to meet the demands for its nursing care services.
11
<PAGE>
MAHN expanded its services in 1999 by opening up office locations in
Winchester and Manassas, Virginia. It also acquired the durable medical
equipment operations of The Center for Ambulatory and Home Infusion Services. In
early 2000, it furthered this expansion by opening up nurse staffing and private
duty outlets in Fairfax and Charlottesville, Virginia. In addition, it
established a pediatric durable medical equipment service in Charlottesville.
The additional outlets for nurse staffing and private duty nursing have
provided greater ease in recruitment. At the same time, continued centralization
of general and administrative functions have resulted in greater productivity.
This combination of increasing the numbers of distribution points in the
Mid-Atlantic while centralizing overhead functions will continue in the Year
2000.
NATIONAL NURSES SERVICE, INC. (NNS)
OPERATING REVENUES:
- -------------------
Operating revenues for the fiscal year 1999 totalled $12,478,000 versus
$10,809,000 in 1998 for our nurse staffing company. The revenue increase of
$1,669,000 represents a 15 percent increase. NNS continues to experience greater
demand for its nursing personnel from hospitals, clinics, nursing homes,
schools, and correctional facilities. As the age wave continues to impact the
population, and the shortage of nursing personnel persists, we anticipate
continued strong demand for nurse staffing. A new nurse staffing outlet was in
January, 2000, added in Vienna, Virginia to complement the outlet in Richmond,
Virginia and Silver Spring, Maryland.
OPERATING EXPENSES:
- -------------------
Total operating expenses for fiscal year 1999 was $11,812,000 versus
$10,279,000 in the prior year. This represents an increase of $1,533,000 or 14.9
percent. Operating expenses expressed as a percentage of operating revenues
remained reasonably stable at 94.7 percent in 1999 versus 95.1 in 1998.
The operating income before taxes of NNS improved for fiscal year 1999.
In 1999, NNS had $667,000 in operating income versus $529,000 in 1998---a 26
percent increase. The increased profitability is primarily due to increased
revenues with slight improvements in its overhead costs as a percentage of
sales.
HUNT COUNTRY NURSING SERVICES, INC. (HCNS)
OPERATING REVENUES:
- -------------------
Hunt Country Nursing Services, Inc., our private duty nursing company,
had significant revenue growth in fiscal year 1999. Operating revenues totaled
$5,297,000 versus $2,628,000 a year ago; the increase of $2,669,000 is slightly
in excess of double the prior year operating revenues (101.6% increase).
12
<PAGE>
The increase in revenues is substantially due to increased recruitment
and marketing efforts as well as the opening of additional outlets, which is
helpful for recruitment purposes. At this time, private duty nursing offices are
located in Richmond, Fredericksburg, Warrenton, Winchester, Tappahannock,
Manassas, and Vienna, Virginia. An office in Charlottesville is scheduled to
open in May, 2000.
OPERATING EXPENSES:
- -------------------
Operating expenses for HCNS increased to $5,173,000 in 1999 versus
$2,767,000 in 1998. The 87 percent increase in expenses is favorable as compared
to the 101.6 percent increase in operating revenues. Profit margins improved for
this company as total salaries, as a percentage of revenues, declined from 79.3
percent in 1998 to 75.3 percent in 1999.
INCOME/LOSS:
- ------------
HCNS generated a profit of $124,000 for fiscal year 1999 as compared to
a loss of $138,000 in 1998.
This company continues to expect revenue and income growth, and further
expansion through the Mid-Atlantic.
HUNT COUNTRY HOME HEALTH, INC. (HCHH)
OPERATING REVENUES:
- -------------------
The operating revenues for fiscal year 1999 for this Medicare Certified
home health agency totalled $1,184,000, which is a 59 percent increase over the
prior year. The increase of $441,000 is due to greater demand in our Warrenton
and Fredericksburg sites.
OPERATING EXPENSES:
- -------------------
Operating expenses increased from $950,000 in 1998 versus $1,164,000 in
1999.
13
<PAGE>
INCOME/LOSS:
- ------------
In fiscal year 1999, HCHH experienced income of $20,000 versus a loss
of $206,000 in 1998. This company made major improvements in its bottom line
through major adjustments to new Medicare regulations that impacted this company
in 1998. It is now planning to make adjustments to meet the requirements of the
Prospective Pay System scheduled to begin in October, 2000.
THE CENTER FOR AMBULATORY AND HOME INFUSION SERVICES (CAHIS)
MAHN acquired this entity from the main shareholder, Oak Springs
Nursing Home Limited Partnership (OSNHLP), November 1, 1999. The focus of the
acquisition is the durable medical equipment business which is complemented by
the vast amount of home health and private duty nursing services provided in the
State of Virginia.
This company earned $30,000 in 1999 prior to acquisition. It is
anticipated that MAHN will close the legal entity (The Center for Ambulatory and
Home Infusion Services) and provide durable medical equipment services from its
HCNS entity. Further, management anticipates expansion of durable medical
equipment sales in Virginia in 2000.
A new supply service, www.planetdiaper.com, will be available in the
second quarter of 2000. The service will offer it products, children's diapers
and adult briefs for sale of the internet.
OPERATING REVENUES:
- -------------------
The operating revenues for CAHIS for November through December 1999
totaled $50,845.
OPERATING EXPENSES
- ------------------
Total operating expense for CAHIS for November through December 1999
can to $65,569.
PROFIT /LOSS
- ------------
CAHIS operated at a loss for the two months period of operations in
1999. That loss can to approximately $15,000.
14
<PAGE>
- --------------------------------------------------------------------------------
ITEM 7. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1999
15
<PAGE>
C O N T E N T S
Pages
INDEPENDENT AUDITORS' REPORT 17
FINANCIAL STATEMENTS
Consolidated balance sheets 18 and 19
Consolidated statements of income 20
Consolidated statements of stockholders' equity 21
Consolidated statements of cash flows 22
Notes to consolidated financial statements 23 - 30
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, 1999 and 1998, 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, 1999
and 1998, 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 11, 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.
/s/ Eggleston Smith P.C.
March 24, 2000
17
<PAGE>
FINANCIAL STATEMENTS
YEARS ENDED
DECEMBER 31, 1999 AND 1998
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
1999 1998
--------------- ---------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 548,889 $ 816,294
Accounts receivable, net of allowances of
$106,240 in 1999 and $43,371 in 1998 4,278,363 2,998,489
Due from affiliates 273,343 228,805
Prepaid expenses and other current assets 187,760 157,449
Deferred tax asset 72,000 37,000
--------------- ---------------
Total current assets 5,360,355 4,238,037
--------------- ---------------
PROPERTY AND EQUIPMENT, net 278,779 253,221
--------------- ---------------
OTHER ASSETS
Goodwill, net of accumulated amortization of
$269,156 in 1999 and $222,351 in 1998 781,239 671,360
Other assets 30,786 3,058
--------------- ---------------
Total other assets 812,025 674,418
--------------- ---------------
Total assets $ 6,451,159 $ 5,165,676
=============== ===============
See Notes to Consolidated Financial Statements.
18
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
1999 1998
--------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 16,393 $ 15,988
Notes payable 2,993,081 2,606,175
Accounts payable 325,605 152,724
Accrued salaries and related employee benefits 397,881 255,220
Other current liabilities 164,270 119,162
Income taxes payable 125,090 -
--------------- ---------------
Total current liabilities 4,022,320 3,149,269
LONG-TERM DEBT, net of current maturities 294,123 306,739
--------------- ---------------
Total liabilities 4,316,443 3,456,008
--------------- ---------------
STOCKHOLDERS; EQUITY
Common stock, Class A, $.001 par value,
200,000,000 shares authorized
12,621,202 shares issued and
outstanding 12,621 12,621
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 1,103,485
Retained earnings 1,197,850 772,802
--------------- ---------------
2,323,966 1,898,918
Stock subscriptions receivable (189,250) (189,250)
--------------- ---------------
Total stockholders' equity 2,134,716 1,709,668
--------------- ---------------
Total liabilities and stockholders'
equity $ 6,451,159 $ 5,165,676
=============== ===============
19
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
December 31, 1999 and 1998
1999 1998
--------------- ---------------
REVENUES $ 18,984,218 $ 14,698,133
--------------- ---------------
EXPENSES
Patient care costs 14,403,802 10,873,185
General and administrative 3,494,086 3,411,951
Amortization 52,997 70,338
Interest expense, net 424,316 334,823
--------------- ---------------
Total expenses 18,375,201 14,690,297
--------------- ---------------
Income before income taxes 609,017 7,836
PROVISION FOR INCOME TAXES 182,769 -
--------------- ---------------
Net income $ 426,248 $ 7,836
=============== ===============
EARNINGS PER COMMON SHARE $ .03 $ -
=============== ===============
See Notes to Consolidated Financial Statements.
20
<PAGE>
<TABLE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1999 and 1998
<CAPTION>
Additional Stock
Common Stock Preferred Paid-In Retained Subscriptions
Class A Class B Stock Capital Earnings Receivable Total
------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1998 12,621 10 10,000 $ 1,103,485 $ 766,166 $ (189,250) $ 1,703,032
Dividend on preferred stock - - - - (1,200) - (1,200)
Net income - - - - 7,836 - 7,836
------------- ------------- ------------- ------------- ------------- ------------- -------------
Balance, December 31, 1998 12,621 10 10,000 1,103,485 772,802 (189,250) 1,709,668
Dividend on preferred stock - - - - (1,200) - (1,200)
Net income - - - - 426,248 - 426,248
------------- ------------- ------------- ------------- ------------- ------------- -------------
Balance, December 31, 1999 12,621 10 10,000 $ 1,103,485 $ 1,197,850 $ (189,250) $ 2,134,716
============= ============= ============= ============= ============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
21
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31, 1999 and 1998
1999 1998
--------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 426,248 $ 7,836
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation 21,365 17,307
Amortization 47,805 68,718
Deferred taxes (35,000) (3,000)
Changes in assets and liabilities:
Accounts receivable (1,279,874) (214,810)
Due from affiliates (200,298) (74,807)
Prepaid expenses and other current assets (30,311) (86,539)
Accounts payable 172,881 (53,190)
Accrued salaries and related employee
benefits 142,661 (68,045)
Income taxes payable 125,090 -
Other current liabilities 45,108 (35,241)
Other assets (29,652) 1,258
--------------- ---------------
Net cash used in operating activities (593,977) (440,513)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (46,923) (10,425)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Changes in notes payable 386,906 701,658
Repayment of long-term debt (12,211) (11,925)
Dividend paid on preferred stock (1,200) (1,200)
--------------- ---------------
Net cash provided by financing
activities 373,495 688,533
--------------- ---------------
Net increase (decrease) in cash
and cash equivalents (267,405) 237,595
CASH AND CASH EQUIVALENTS
Beginning 816,294 578,699
--------------- ---------------
Ending $ 548,889 $ 816,294
=============== ===============
See Notes to Consolidated Financial Statements.
22
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
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), Altis
Federal Services d/b/a National Nurses Services, Inc. and the Center
for Ambulatory and Home Infusion Services, Inc. (CAHIS).
The Company acquired the Center for Ambulatory and Home Infusion
Service as of November 1, 1999, in a non-cash transaction from an
affiliate. The results of operations for CAHIS are included in the
consolidated financial statements from that date.
Western Pennsylvania was sold for book value on June 30, 1998, and the
1998 financial statements include the results of its operation until
the date of sale. Revenues during the six-month period were
approximately $167,000 and losses from operations were approximately
$39,000.
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 payers, and others for services
rendered, including estimated retroactive adjustments under
reimbursement agreements with third party payers. Revenue received
under third-party agreements is subject to audit. Any adjustments as a
result of these audits are reflected in current operations.
Approximately 9% and 11% of the Company's net revenues for the years
ended December 31, 1999 and 1998, respectively, were from participation
in Medicare and state Medicaid programs. In addition, approximately 59%
and 33% of the Company's net revenues for the years ended December 31,
1999 and 1998, respectively, was from contracts with state and local
governmental correctional facilities, including the Commonwealth of
Virginia and the District of Columbia.
At December 31, 1999 and 1998, 3% and 8%, respectively, of net accounts
receivable were due from Medicare and Medicaid. The ability of payers
to meet their obligations depends upon their financial stability,
future legislation and regulatory actions.
(Continued)
23
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company does not believe there are any significant credit risks
associated with receivables from Medicare and Medicaid.
PROPERTY AND EQUIPMENT. Property and equipment is 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.
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.
(Continued)
24
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Concluded)
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.
NOTE 2. ACCOUNTS RECEIVABLE
Accounts receivable arise from the provision of staffing services to
hospitals, nursing homes and other facilities in the Virginia,
Maryland, District of Columbia and Pennsylvania areas. The principal
payers 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,
1999 and 1998, was $106,239 and $43,371, respectively.
NOTE 3. PROPERTY AND EQUIPMENT
As of December 31, 1999 and 1998, property and equipment consisted of
the following:
1999 1998
--------------- ---------------
Building and building improvements $ 320,818 $ 320,818
Furniture and equipment 348,842 382,116
--------------- ---------------
669,660 702,934
Less accumulated depreciation 390,881 449,713
--------------- ---------------
$ 278,779 $ 253,221
=============== ===============
25
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 4. NOTES PAYABLE
National Nurses Service, Home Health and Hunt Country Nursing borrow
funds under terms of agreements with a lender and secured by accounts
receivable. These agreements provide for advances on accounts
receivable of approximately 83% of the collateralized balances. The
Company is required to refund any borrowings for financial accounts
receivable balances not collected within 180 days.
1999 1998
--------------- ---------------
Amount of advances on accounts
receivable $ 3,711,303 $ 3,165,321
Less: Lender reserves 718,222 559,146
--------------- ---------------
Note payable $ 2,993,081 $ 2,606,175
=============== ===============
NOTE 5. LONG-TERM DEBT
Long-term debt as of December 31, 1999 and 1998, consisted of the
following:
1999 1998
------------ ------------
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. $ 65,689 $ 66,418
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. 18,304 18,561
Note payable, York Federal Savings and
Loan. Payable in monthly installments
of $1,116, including interest at 8.5%.
A balloon payment of $86,809 is due
September, 2008. 76,658 81,875
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. 79,800 81,526
(Continued)
26
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 5. LONG-TERM DEBT (Concluded)
1999 1998
------------ ------------
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. $ 70,065 $ 74,347
------------ ------------
310,516 322,727
Less current maturities 16,393 15,988
------------ ------------
$ 294,123 $ 306,739
============ ============
Annual maturities of long-term debt outstanding at December 31, 1999,
are as follows:
1999 $ 16,393
2000 18,854
2001 20,659
2002 22,640
2003 24,812
Thereafter 207,158
------------
$ 310,516
============
NOTE 6. STOCK OPTION PLAN AND STOCK SUBSCRIPTIONS
The Company had an incentive stock option plan that included
substantially all officers and key employees. The Series C options
which expired in 1998 originally had an exercise price of $1 per share.
The Company subsequently reduced the option price to $.50 per share.
Certain of these options were exercised and the amount due was financed
by the Company through notes bearing interest at 8%. The unpaid balance
of outstanding notes receivable for stock purchases is shown as a
reduction of stockholders' equity.
During 1999 and 1998, 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.
27
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 7. 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:
2000 $ 111,312
2001 83,558
2002 71,366
2003 17,610
2004 -
------------
Total future minimum lease payments $ 283,846
============
During 1999 and 1998, rent expense for all operating leases totaled
$203,025 and $131,976, respectively.
NOTE 8. INCOME TAXES
The Company files a consolidated federal income tax return which
includes the Center for Ambulatory and Home Infusion Service (1999
only), 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, 1999
and 1998, was comprised of the following:
1999 1998
--------------- ---------------
Current provision $ 217,769 $ 3,000
Deferred benefit (35,000) (3,000)
--------------- ---------------
Total provision $ 182,769 $ -
=============== ===============
The provision for income taxes in 1999 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:
1999
----------
Statutory federal tax rate 34%
State taxes, net of federal benefit 3%
Goodwill amortization (4)%
Other (3)%
----------
Effective tax rate 30%
==========
Taxable income for 1998 does not include the losses from operations for
Western Pennsylvania because it filed as part of the consolidated
return group of its new owners. Accordingly, the Company's taxable
income for 1998 was increased by approximately $40,000. As a result,
taxable income for tax purposes was approximately $16,000 due
principally to changes in deferred tax items.
(Continued)
28
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 8. INCOME TAXES (Concluded)
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 9. 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, 1999 and 1998, are as follows:
1999 1998
--------------- ---------------
Due from affiliates:
Oak Springs Nursing Home LP $ 126,500 $ 38,312
Oak Springs Nursing Home 77,371 41,237
Center for Ambulatory/
Home Infusion Services - 19,334
Health Care Ventures, Inc. 108,093 106,809
Home Health Services of
Allegheny County, Inc. 187 -
Health Ventures Group 4,086 4,086
All Stat Home Health, Inc. 195 -
Care Connections of
Pennsylvania, Inc. 328 83,565
--------------- ---------------
316,760 293,343
--------------- ---------------
Due to affiliates:
Western Pennsylvania Home
Health Network, Inc. 37 32,133
Health Care Ventures, Inc. - 5
Health Ventures Group 24,283 24,283
Center for Ambulatory/
Home Infusion Services 445
Oak Springs Nursing Home 19,097 7,672
--------------- ---------------
43,417 64,538
--------------- ---------------
Net due from affiliates $ 273,343 $ 228,805
=============== ===============
Oak Springs maintains a workers compensation policy which covers the
Company. The Company paid Oak Springs $160,190 and $129,320 during the
years ended December 31, 1999 and 1998, respectively, related to this
policy.
29
<PAGE>
MID-ATLANTIC HOME HEALTH NETWORK, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE 10. SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid during 1999 and 1998 was $423,952 and $334,432,
respectively. Income taxes paid during 1999 were $68,625.
The Company purchased all of the outstanding stock of CAHIS from an
affiliated Company on November 1, 1999, in exchange for settlement of
certain intercompany indebtedness. The total purchase price of $98,804
exceeded the fair market value of assets acquired less liabilities
assumed by $155,760. The excess consideration is recorded as goodwill.
NOTE 11. 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 sales prices close to June 30, 1998, were
in the range of $.625. Based on those prices the purchase price
adjustment could be approximately $487,500.
The Company is negotiating with the owners of the claim to settle the
potential purchase price adjustment.
The acquisition of National Nurses Service, Inc. 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 will not have a material effect on the Company's financial
position.
30
<PAGE>
- ------------------------------------------------------------------------------
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
- ------------------------------------------------------------------------------
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.
PART III
- -------------------------------------------------------------------------------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
- -------------------------------------------------------------------------------
(a) DIRECTORS AND EXECUTIVE OFFICERS
As of March 31, 1999, 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:
(3)*
(1) (2) Period Served As
Name Age Position Director
- ---- --- -------- ----------------
Philip V. Warman 56 Chairman of the Board, Dec. 9, 1994 to present
and Director
Dennis S. Light 56 President and Dec. 9, 1994 to present
Director
Tom Waugh 32 Secretary & Treasurer, Dec., 1999 to present
Director
Joanne B. Warman 49 Vice President Dec., 1999 to present
Ronald L. Messenheimer 48 President of NNS July 1, 1995 to present
Gary Paz 41 Vice President of NNS Dec. 1999 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.
31
<PAGE>
(b) 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 and a director of the Company, 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
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.
RICHARD TOMLINSON WAUGH
- -----------------------
Tom Waugh is the Secretary and Treasurer and a director of the Company.
Mr. Waugh received his undergraduate degree from Colorado State and earned a
Masters of International Management from the American Graduate School of
International Management at Thunderbird. Mr. Waugh has worked for Bear Sterns in
the international securities division and is currently the Managing director of
Cavallo Capital Corp., a New York based hedge fund that manages $120 million. In
the capacity, Mr. Waugh is responsible for the operational activities of the
managed accounts, including personnel, execution of trades, creating trade
models and analyzing prospective deals.
32
<PAGE>
JOANNE BROWNING WARMAN
- ----------------------
Joanne Browning Warman is the Vice President of the Company. She has
over 28 years of nursing experience in the health care industry. She has a
Bachelors of Science degree in nursing from the University of Virginia. In
December of 1983, Mrs. Warman opened Hunt Country Home Health ("HCHH"), a
medicare-certified home health agency servicing Warrenton and the surrounding
areas. She remained the Administrator of HCHH until November of 1984, at which
time she became a part-time employee of HCHH. Mrs. Warman continues to advise
the Company on its clinical management operations .
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 1991 to 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, 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.
GARY PAZ
- --------
Mr. Paz is the Vice President of NNS. During the past 5 years, Mr. Paz
has been responsible for the daily operations and overall performance of NNS's
Richmond, Virginia office. In the regard, Mr. Paz duties include recruitment of
nursing staff, maintaining nurse and client files, billing for services and
tracking accounts receivable and budgeting for the Richmond office. Mr. Paz also
handles the Company's marketing program and tracks quality assurance on the
Company's accounts. Prior to working with NNS, Mr. Paz was an Assistant Vice
President of Wheat First Securities.
(c) DIRECTORS OF OTHER REPORTING COMPANIES:
None of the officers or directors of the Company are directors of any
other reporting company.
(d) FAMILY RELATIONSHIPS:
Phillip V. Warman, the Chairman of the Board and a director of the
Company, and Jo Anne Warman, the Company's Vice President, are husband and wife.
33
<PAGE>
(e) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS:
Except as noted below, none of the officers, directors, promoters or
control persons of the Company have been involved in the past five (5) years in
any of the following:
(1) Any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of
the bankruptcy or within two years prior to that time;
(2) Any conviction in a criminal proceedings or being subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
(3) Being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, or any Court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) Being found by a court of competent jurisdiction (in a civil action),
the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities laws or commodities law, and the
judgment has not been reversed, suspended, or vacated.
Phillip Warman, an officer and director of the Company, served as a
director of Bayou State Home Health doing business as Care Connection Home
Health in the state of Louisiana. This Medicare certified home health agency
filed for bankruptcy in August of 1998. In addition, Oak Springs Nursing Home
Limited Partnership was an owner of Care Connections of Louisiana and Mr. Warman
is the managing general partner of Oak Springs Nursing Home Limited Partnership.
He also served as a director of Home Health Services of Allegheny County, a
non-profit home health agency in Pittsburgh, Pennsylvania, an entity which filed
for bankruptcy in December of 1998.
Dennis Light, an officer and director of the Company, was the president
of an entity which was a general partner of the Belle Retirement Residence, and
limited partner in the state of Virginia, which filed for bankruptcy under
Chapter 11 in or about January 1998. The bankruptcy court in that matter entered
a final decree closing the bankruptcy case on September 21, 1998. Mr. Light also
served as a director of Bayou State Home Health doing business as Care
Connection Home Health in the state of Louisiana. This Medicare certified home
health agency filed for bankruptcy in August of 1998. He also served as a
director of Home Health Services of Allegheny County, a non-profit home health
agency in Pittsburgh, Pennsylvania, an entity which filed for bankruptcy in
December of 1998.
Ron Messenheimer, an officer of the Company, was the Vice President of
Atlis Systems, Inc. and the chairman and CEO of Atlis Federal Services, Inc.,
entities which filed bankruptcy in May of 1996.
The officers and directors who are identified above are significant
employees of the Company.
34
<PAGE>
(g) SECTION 16a BENEFICIAL OWNERSHIP COMPLIANCE
The officers, directors and beneficial owners of more than 10% of the
Company's common stock have filed their initial statements of ownership on Form
3 and annual statements on Form 5, or will do so within a reasonable time
following the filing of this Amended Form 10-KSB.
- --------------------------------------------------------------------------------
ITEM 10. EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The following table sets forth information about compensation paid or
accrued during the years ended December 31, 1999, 1998 and 1997 to the Company's
officers and directors.
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
------------------------------------------------- ------------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities All
Annual Restricted Under- Other
Name and Compen- Stock Lying LTIP Compen-
Principal sation Awards Options/ Payouts sation
Position Year Salary ($) Bonus($) ($) ($) SARs(#) ($) ($)
- -------- ---- ---------- -------- ------- ---------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PHILIP V. WARMAN
Chief Execu- 1999 $54,000 $ 0.00 $ 0.00 $ 0.00 None $0.00 $21,306(1)
tive Officer 1998 $24,000 $ 0.00 $ 0.00 $ 0.00 None $0.00 $23,075(2)
and Treasurer 1997 $0.00 $ 0.00 $ 0.00 $ 0.00 None $0.00 $23,075(3)
DENNIS S. LIGHT
President 1999 $79,138 $3,750(4) $ 0.00 $ 0.00 None $0.00 $24,000(5)
1998 $76,313 $1,250 $ 0.00 $ 0.00 None $0.00 $27,500(6)
1997 $75,400 $0.00 $ 0.00 $ 0.00 None $0.00 $27,000(7)
RONALD L. MESSENHEIMER
President of 1999 $95,073 $2,000 $ 0.00 $ 0.00 None $ 0.00 $ 0.00
NNS 1998 $61,640 $ 350 $ 0.00 $ 0.00 None $ 0.00 $ 0.00
1997 $41,500 $ 0.00 $ 0.00 $ 0.00 None $ 0.00 $ 0.00
GARY PAZ
Vice Pres. NNS 1999 $60,000 $1,000 $0.00 $ 0.00 None $ 0.00 $41,024
1998 $60,000 $ 750 $0.00 $ 0.00 None $ 0.00 $38,258
1997 $60,000 $ 0.00 $0.00 $ 0.00 None $ 0.00 $ 3,445
</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.
35
<PAGE>
- ----------------------
(1) This "other compensation" is representative of board fees at Hunt
Country Nursing Services.
(2) This "other compensation" is representative of board fees at Hunt
Country Nursing Services.
(3) This "other compensation" is representative of board fees at Hunt
Country Nursing Services.
(4) This figure represents the 15,000 shares issued to Mr. Light in
March of 2000, valued at $0.25 per share.
(5) This "other compensation" is representative of payments made by
National Nurses Service to Creative Health Ventures, a corporation owned 100% by
Dennis Light.
(6) This "other compensation" is representative of payments made by
National Nurses Service to Creative Health Ventures, a corporation owned 100% by
Dennis Light.
(7) This "other compensation" is representative of payments made by
National Nurses Service to Creative Health Ventures, a corporation owned 100% by
Dennis Light.
36
<PAGE>
- --------------------------------------------------------------------------------
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
(a) 5% SHAREHOLDERS:
The following information sets forth certain information as of December
31, 1999 about each person who is known to the Company to be the beneficial
owner of more than five percent (5%) of the Company's Common Stock:
(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(8) 79.6%
Class A c/o Philip V. Warman
7504 Diplomat Drive, Suite 101
Manassas, Virginia 20109
Nevada Agency and Trust Co. 697,498 5.5%
50 West Liberty Street,
Suite 880
Reno, Nevada 89501
- ----------------------
(8) Philip V. Warman, an officer and director of the Company, is a
General Partners of Oak Springs Nursing Home Limited Partnership.
37
<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 10,092,934(9) 79.6%
Stock 7504 Diplomat Drive
Class A Manassas, Virginia 20109
Dennis Light 216,000(10) 1.7%
7504 Diplomat Drive
Manassas, Virginia 20109
Ronald L. Messenheimer 9,500 Less than 1%
7504 Diplomat Drive
Manassas, Virginia 20109
All Directors and 10,318,434 81.6%
Officers as a Group
- ----------------------
(9) Of this amount, 10,063,778 shares are owned by Oak Springs Nursing
Home Limited Partnership, of which Mr. Warman is a general partner.
(10) Of this amount, 2,600 shares are held in the name of Creative
Health Ventures, Inc., a company owned and controlled by Mr. Light, 1,400 shares
are registered in the name of Nevada Agency and Trust Company as the agent for
the Company's Employee Stock Purchase Plan, and 6,000 shares are registered in
the name of Michael Light, Mr. Light's son.
(c) CHANGES IN CONTROL:
There is no arrangement which may result in a change in control.
38
<PAGE>
- --------------------------------------------------------------------------------
ITEM 12. 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 the Estate of 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..
In March of 1995, the Company establish a subsidiary corporation named
Western Pennsylvania Home Health Network, Inc. WPHHN operated as a wholly owned
subsidiary until June 30, 1998 when it was sold for book value to Care
Connections of Pennsylvania, a corporation controlled by Phillip Warman, the
Company's Chairman and a general partner of the Corporation's majority
shareholder. On November 1, 1999, the Company acquired the Center for Ambulatory
and Home Infusion Sercvices (CAHIS) from Care Connections or Pennsylvania in a
non-cash transaction in exchange for settlement of inter-company indebtedness.
The total purchase price of $98,804 exceeded the fair market value of the assets
acquired less the liabilities assumed by $155,670. The excess consideration,
recorded as goodwill, represents the goodwill associated with CAHIS's position
in the durable medical equipment market.
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.
39
<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 affiliate. Amounts due from and due to affiliates as of December 31,
1999 and 1998, are as follows:
1999 1998
------------- ------------
Due from affiliates:
Oak Springs Nursing Home LP $ 126,500 $ 38,312
Oak Springs Nursing Home 77,371 41,237
Center for Ambulatory/
Home Infusion Services -- 19,334
Health Care Ventures, Inc. 108,093 106,809
Home Health Services of
Allegheny County, Inc. 187 --
Health Ventures Group 4,086 4,086
All Stat Home Health, Inc. 195 --
Care Connections of
Pennsylvania, Inc. 328 83,565
------------- ------------
316,760 293,343
------------- ------------
Due to affiliates:
Western Pennsylvania Home
Health Network, Inc. 37 32,133
Health Care Ventures, Inc. -- 5
Health Ventures Group 24,283 24,283
Center for Ambulatory/
Home Infusion Services 445
Oak Springs Nursing Home 19,097 7,672
------------- ------------
43,417 64,538
------------- ------------
Net due from affiliates $ 273,343 $ 228,805
============= ============
40
<PAGE>
Oak Springs maintains a workers compensation policy which covers the
Company. The Company paid Oak Springs $160,190 and $129,320 during the years
ended December 31, 1999 and 1998, respectively, related to this policy.
On March 1, 1995, the Company created a subsidiary known as Western
Pennsylvania Home Health Network, Inc. ("WPHHN"). WPHHN operated as a wholly
owned subsidiary until June 30, 1998 when it was sold for book value to Care
Connections of Pennsylvania, a corporation controlled by shareholders of the
Company. On November 1, 1999, the Company acquired the Center for Ambulatory and
Home Infusion Sercvices (CAHIS) from Care Connections or Pennsylvania in a
non-cash transaction in exchange for settlement of inter-company indebtedness.
The total purchase price of $98,804 exceeded the fair market value of the assets
acquired less the liabilities assumed by $155,670. The excess consideration,
recorded as goodwill, represents the goodwill associated with CAHIS's position
in the durable medical equipment market.
- --------------------------------------------------------------------------------
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
The company did not filed any reports on Form 8-K during the last year.
ASSIGNED
NUMBER DESCRIPTION
- -------- -----------
(2) Plan of acquisition, reorganization, arrangement, liquid, or
succession:
(3)(i) Articles of Incorporation
(3)(ii) By-laws of the Company: Previously included with the Company's Form
10-SB filed on April 30, 1998.
(4) Instruments defining the rights of holders including indentures: None
(9) Voting Trust Agreement: None
(10) Material Contracts:
(11) Statement regarding computation of per share earnings: Computations can
be determined from the financial statements.
(16) Letter on change in certifying accountant: None
41
<PAGE>
(21) Subsidiaries of the registrant: Previously included with the Company's
Form 10-SB filed on April 30, 1998.
(24) Power of Attorney: None
(27) Financial Data Schedule: Included
(99) Additional Exhibits: None
- --------------------------------------------------------------------------------
SIGNATURES
- --------------------------------------------------------------------------------
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DATED: April 20, 2000.
MID-ATLANTIC HOME HEALTH
NETWORK, INC.
By /S/ Dennis Light
--------------------------
DENNIS LIGHT
PRESIDENT
42
