SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K / A
(Amendment #1)
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) : April 2, 1997
MetroVision of North America, Inc.
(Exact name of registrant as specified in its charter)
New York 0-19685
16-1276525
(State or other jurisdiction (Commission
(I.R.S. Employee of incorporation) File Number)
Identification No.)
75 South Church Street, Suite 650
Pittsfield, MA
01201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (413) 448-2111
424 Madison Avenue, New York, NY 10017
Former name or former address,
if changed since last report
Those portions of Item 7 (Financial Statements, Pro Forma
Financial Data and Exhibits) of the Registrant's Current Report on
Form 8-K dated April 2, 1997 are amended and restated in their
entirety as follows:
(a) Financial Statements of Business Acquired in Reverse
Acquisition Number
(i) Audited balance sheets of York Hannover Pharmaceuticals,
Inc. as of December 31, 1996 and 1995 and the related statements of
income and stockholder's deficit and cash flows for the years then
ended. 6
(ii) Unaudited balance sheets of York Hannover Pharmaceuticals,
Inc. as of and for the three months ended March 31, 1997 and
1996 and the related statements of income and stockholder's deficit and
cash flows for the three months then ended. 20
(iii) Management's discussion and analysis of financial
condition and result of operations of York Hannover Pharmaceuticals, Inc. as
of March 31, 1997 and for the three months ended March 31, 1997
compared to the three months ended March 31, 1996. 25
(iv) Audited balance sheets of York Hannover Partnership as of
December 31, 1996 and December 31, 1995 and the related statements
of income, partners capital and cash flows for the year ended
December 31, 1996 and for the five months ended December 31, 1995 28
(b) Pro Forma Financial Information
(i) Introductory information. 42
(ii) Unaudited summary pro forma consolidated income statement
data for the year ended December 31, 1996.
(iii) Unaudited summary pro forma consolidated balance sheet
data as of March 31, 1997.
(iv) Unaudited summary pro forma consolidated income statement
data for the three months ended March 31, 1997.
Item 1. Changes in Control of Registrant;
Item 2. Acquisition or Disposition of Assets.
On April 1, 1997, MetroVision of North America, Inc.
("MetroVision" or the "Company") consummated a merger ( the
"Merger") as a result of which York Hannover Pharmaceuticals,
Inc., ("York Hannover") a Florida corporation, merged with and
into the Company, with the Company as the surviving
corporation, pursuant to an Agreement and Plan of Merger dated
as of May 10, 1996 among the Company and York Hannover (the
"Merger Agreement"). Pursuant to the Merger Agreement, among
other things (i) MetroVision changed its corporate name to York
Hannover Health Care, Inc. (subject to receipt of all necessary
regulatory consents which are still pending); and (ii) each
share of York Hannover Common Stock outstanding on April 1, 1997
was converted into 4,000 shares of the Company's Common Stock,
or an aggregate of 4,000,000 shares of Common Stock,
constituting approximately 71.8% of the shares of Common Stock
outstanding giving effect to the Merger.
The Merger was consummated upon receipt of approval of the
Merger Agreement and the Merger by the Company's shareholders
at a Special Meeting held on April 1, 1997. At the Special
Meeting, the Company's shareholders also elected Thomas M.
Clarke, Lawrence B. Cummings, Robert F. Hussey, Courtlandt G.
Miller and Peter Doelger directors to serve until the next
annual meeting of shareholders and until successors are duly
elected and qualified. Messrs, Clarke and Cummings, who also
have been appointed as Chairman and Chief Executive Officer,
respectively, of the Company, are principal stockholders of
Stockbridge Investment Partners, Inc. ("Stockbridge"), the sole
stockholders of York Hannover, which became the majority
shareholders of the Company as a result of the Merger. Robert
F. Hussey is the former Chairman of the Board, President and
Chief Executive Officer of the Company.
In addition to the shares of Common Stock issued to
Stockbridge in the Merger, each of Messrs. Clarke and Cummings
were issued warrants to purchase 750,000 shares of the Company's
Common Stock, exercisable in three cumulative equal annual
installments, at exercise-prices ranging from $.6728 to $1.0091
per share. If all of such warrants were exercised (and assuming
no other increases in the Company's capital stock), Messrs.
Clarke and Cummings would beneficially own, directly and though
Stockbridge, approximately 78.7% of the Company's outstanding
Common Stock.
Item 7: Financial Statements, Pro Forma Financial Data and
Exhibits
Page
(a) Financial Statements of Business Acquired in Reverse
Acquisition Number
(i) Audited balance sheets of York Hannover Pharmaceuticals,
Inc. as of December 31, 1996 and 1995 and the related statements of
income and stockholder's deficit and cash flows for the years then
ended. 6
(ii) Unaudited balance sheets of York Hannover Pharmaceuticals,
Inc. as of and for the three months ended March 31, 1997 and
1996 and the related statements of income and stockholder's deficit and
cash flows for the three months then ended. 20
(iii) Management's discussion and analysis of financial
condition and result of operations of York Hannover Pharmaceuticals, Inc. as
of March 31, 1997 and for the three months ended March 31, 1997
compared to the three months ended March 31, 1996. 25
(iv) Audited balance sheets of York Hannover Partnership as of
December 31, 1996 and December 31, 1995 and the related statements
of income, partners capital and cash flows for the year ended
December 31, 1996 and for the five months ended December 31, 1995 28
(b) Pro Forma Financial Information
(i) Introductory information. 42
(ii) Unaudited summary pro forma consolidated income statement
data for the year ended December 31, 1996.
(iii) Unaudited summary pro forma consolidated balance sheet
data as of March 31, 1997.
(iv) Unaudited summary pro forma consolidated income statement
data for the three months ended March 31, 1997.
(c) Exhibits
10.1 Agreement and Plan of Merger dated as of May 10, 1996
among MetroVision of North America, Inc. and York Hannover
Pharmaceuticals, Inc. (included as Annex "A" to Exhibit 99.1 filed
herewith).
99.1 The Company's definitive Proxy Statement/Prospectus dated
February 13, 1997 for its Special Meeting of Shareholders.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To York Hannover Pharmaceuticals, Inc.:
We have audited the accompanying balance sheets of YORK HANNOVER
PHARMACEUTICALS, INC. (a Florida corporation) as of December 31,
1996 and 1995, and the related statements of income and
stockholder's deficit and cash flows for the years then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of York Hannover Pharmaceuticals, Inc. as of December 31, 1996
and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
NASHVILLE, TENNESSEE
MARCH 25, 1997
YORK HANNOVER PHARMACEUTICALS, INC.
BALANCE SHEETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
ASSETS 1996 1995
CURRENT ASSETS:
Cash and cash equivalents $58,291 $15,916
Marketable securities 466,071 67,823
Accounts receivable,
less allowance for doubtful
accounts of $0 and $522,960,
respectively -- 111,538
Total current assets 524,362 195,277
OTHER ASSETS:
Investment in York Hannover Partnership 701,179 553,334
Due from York Hannover Partnership 160,747 105,468
Due from related partie 245,267 244,372
Non-current deferred tax asset -- 141,876
Total other assets 1,107,193 1,045,050
TOTAL ASSETS $1,631,555 $1,240,327
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE BALANCE SHEETS.
YORK HANNOVER
PHARMACEUTICALS, INC.
BALANCE SHEETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
LIABILITIES AND STOCKHOLDER'S DEFICIT 1996 1995
CURRENT LIABILITIES:
Due to affiliate $404,837 $ --
Current portion of long-term debt 2,070,833 173,878
Notes payable 275,573 --
Accrued expenses 370,835 213,863
Total current liabilities 3,122,042 387,741
LONG-TERM DEBT, less current portion - 2,179,877
DEFERRED REVENUE, net of accumulated
amortization of $188,619 and $55,476,
respectively 743,381 876,524
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S DEFICIT:
Common stock, $.10 par value, 10,000 shares
authorized, 1,000 shares issued and
outstanding 100 100
Unrealized loss on securities, net of taxes (32,040) --
Accumulated deficit (2,201,928) (2,203,915)
TOTAL STOCKHOLDER'S DEFICIT (2,233,868) (2,203,815)
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $1,631,555 $1,240,327
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE BALANCE SHEETS.
YORK HANNOVER PHARMACEUTICALS, INC.
STATEMENTS OF INCOME AND STOCKHOLDER'S DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
REVENUES:
Sales $ -- $2,672,878
Equity in earnings of York
Hannover Partnership 447,845 103,696
Gross margin 447,845 2,776,574
OPERATING EXPENSES:
Cost of sales -- (1,391,588)
Salaries, wages and benefits -- (502,152)
General and administrative (130,011) (314,994)
Management fees (261,000) (488,500)
Provision for uncollectible accounts -- (240,582)
Depreciation and amortization -- (45,075)
Total operating expenses (391,011) (2,982,891)
Operating income (loss) 56,834 (206,317)
OTHER INCOME (EXPENSE):
Interest expense (289,767) (289,830)
Amortization of non-compete 133,143 55,476
Other income, net 121,108 118,078
Total other income (expense) (35,516) (116,276)
NET INCOME (LOSS) BEFORE
INCOME TAXES 21,318 (322,593)
INCOME TAX PROVISION (19,331) --
NET INCOME (LOSS) 1,987 (322,593)
ACCUMULATED DEFICIT,
beginning of period (2,203,915) (1,699,430)
DISTRIBUTION TO STOCKHOLDER -- (181,892)
ACCUMULATED DEFICIT,
end of period $(2,201,928) $(2,203,915)
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
YORK HANNOVER PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(Increase (Decrease) in Cash and Cash Equivalents)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $1,987 $(322,593)
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Income tax provision 19,331 --
Dividends on marketable securities (20,953) --
Depreciation and amortization -- 45,075
Amortization of deferred revenue (133,143) (55,476)
Equity in earnings of York
Hannover Partnership (447,845) (103,696)
Changes in assets and liabilities:
Receivables, net 111,538 767,808
Noncurrent deferred tax asset 141,876 (141,876)
Inventory and other -- (62,674)
Accounts payable -- (220,717)
Accrued expenses 156,972 95,769
Net cash provided by (used in)
operating activities (170,237) 1,620
CASH FLOWS FROM INVESTING ACTIVITIES:
Non-compete agreement -- 932,000
Loans to York Hannover Partnership,
net of payments received (55,279) (105,468)
Loans to related parties,
net of payments received (895) (244,372)
Payments received on loans to affiliates -- 21,400
Purchases of marketable securities (30,642) (67,823)
Sales of marketable securities 6,813 --
Furniture and equipment, net -- (13,124)
Distributions received from York
Hannover Partnership 300,000 --
Net cash provided
by investing activities 219,997 522,613
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt
borrowings (282,922) (771,303)
Notes payable borrowings 275,537 --
Long-term debt borrowings -- 429,877
Distribution to stockholder -- (181,892)
Net cash used in financing activities (7,385) (523,318)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 42,375 915
CASH AND CASH EQUIVALENTS,
beginning of year 15,916 15,001
CASH AND CASH EQUIVALENTS, end of year $58,291 $15,916
SUPPLEMENTAL INFORMATION:
Cash payments of interest expense $41,649 $293,413
The accompanying notes to financial statements are an integral
part of these statements.
YORK HANNOVER PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The financial statements include the accounts of York Hannover
Pharmaceuticals, Inc. ("the Company"), a wholly-owned subsidiary
of Stockbridge Investment Partners, Inc. ("SIP"). The Company
was purchased by SIP from Progressive Investments International,
Inc. on December 17, 1993. Prior to August 1, 1995, the Company
provided institutional pharmacy services, infusion therapy,
urological, enteral and general medical supplies to licensed
nursing facilities, hospitals, correction facilities and
retirement facilities throughout the State of Florida. As
discussed in Note 3, effective August 1, 1995, the Company
formed a partnership ("York Hannover Partnership" or "the
Partnership") with United Professional Companies, Inc. ("UPC")
whereby the Company and UPC each contributed property and
equipment, inventory and existing contracts with nursing
facilities to provide services and products. The Company
accounts for its 40% interest in the Partnership under the
equity method of accounting. The Company provides certain
billing services to the Partnership for which the Company
receives 7.5% of amounts billed.
The accompanying financial statements have been prepared on
the accrual basis of accounting under the assumption that the
Company will continue as a going concern. The Company had
negative stockholder's equity as of December 31, 1996.
Management anticipates that it will be able to refinance the
Promissory note payable to National HealthCare L.P. ("NHCLP")
(see Note 4). While management believes it will be able to
accomplish such refinancing, there can be no assurance that this
refinancing will be completed. In the event that management's
refinancing efforts are not successful, management believes that
the Company will be able to generate sufficient cash to meet
debt requirements and to finance ongoing operations through
alternative sources of financing or through the sale of the
Company's interest in the Partnership.
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.
Operational Management
The operations of the Company are being managed by Lenox
Healthcare, Inc. ("Lenox"). During 1996 and 1995, the Company
paid management fees of $261,000 and $360,000, respectively, to
Lenox.
Revenues
Health care revenues represent revenues generated prior to
August 1, 1995 from the sale of institutional pharmacy services,
infusion therapy, urological, enteral and general medical
supplies to licensed nursing facilities, hospitals, correction
facilities and retirement facilities throughout the State of
Florida. Prior to August 1, 1995, the Company received payment
for the sale of certain supplies to patients covered by Medicare
and the Florida Medicaid programs. Revenues generated from
patients covered by Medicare and the Florida Medicaid programs
are based on reasonable charge reimbursement principles and are
not subject to "cost" limitations. In the opinion of
management, adequate provision has been made for any adjustments
that may result from reviews by the Medicare and Medicaid
programs.
Marketable Securities
Securities have been classified as available for sale and have
been recorded at fair value based on quoted market prices.
Unrealized gains or losses on available for sale securities have
been recorded in accordance with Statement of Financial
Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115").
Notes Payable
Notes payable represent amounts borrowed from securities
brokers. The Company's marketable securities are collateral
under the borrowing arrangements to the extent of the
outstanding balance under the notes payable. The notes payable
are due on demand and bear interest at the rate of 7.75%. The
fair value of the Company's notes payable approximates the
carrying amount due to the short-term nature of these
instruments.
Concentration of Credit Risks
The Company's credit risks primarily relate to cash and cash
equivalents and receivables. Cash and cash equivalents are
primarily held in bank accounts. Receivables consist primarily
of amounts due from patients in the State of Florida and from
the Medicare and Florida Medicaid programs. The Company
maintains allowances for uncollectible accounts on these
receivables.
Cash Equivalents
Cash equivalents include highly liquid investments with an
original maturity of less than three months.
2. RELATED PARTIES AND AFFILIATES
Lenox, Pinellas Healthcare Investors, Inc. ("Pinellas") and
Monterey Investments, Inc. ("Monterey") are related parties to
the Company as the majority stockholders of these entities are
also the majority stockholders of SIP. Net amounts due to or
from related parties as of December 31, 1996 and 1995 consist of
the following:
December 31, December 31,
1996 1995
Due from York Hannover Partnership $160,747 $105,468
Due from related parties - noncurrent:
Pinellas Healthcare Investors, Inc. $235,000 $235,000
Monterey Investments, Inc. 10,267 9,372
$245,267 $244,372
Due to affiliates $404,837 $ --
During 1996, SIP transferred certain marketable securities to
the Company. As a result, the Company recorded a liability due
to affiliates of $404,837 which is equal to the fair market
value of the marketable securities on the date of transfer.
Subsequent changes in the fair market value of the marketable
securities have been accounted for in accordance with SFAS 115.
In accordance with the partnership agreement, amounts due from
York Hannover Partnership did not bear interest during 1995 and
1996. Amounts due from related parties and due to affiliates
also did not bear interest during 1995 and 1996..
The Company's management believes that all amounts owed to the
Company by related parties will be paid in full and that related
receivables are realizable.
See Note 1 for discussion of management fees paid to Lenox
during 1996 and see Note 3 for discussion of the Company's
relationship with York Hannover Partnership.
3. INVESTMENT IN YORK HANNOVER PARTNERSHIP
Effective August 1, 1995, the Company formed a partnership with
UPC for the purpose of operating a business which provides
institutional pharmacy, infusion therapy, third-party billing,
medical equipment and supplies, respiratory therapy and other
services. Pursuant to the terms of the partnership agreement,
the Company contributed to the Partnership all of its furniture
and equipment, inventory and existing contracts with nursing
facilities to provide services and products. UPC also
contributed certain property and equipment, inventory, cash and
existing contracts to the Partnership. The total net book value
of assets contributed by the Company was $449,638 as of the date
of contribution. The Company's investment in the Partnership,
as determined using the equity method, has increased to $701,179
as of December 31, 1996. The Company received a 40% interest in
the Partnership and also received $932,000 for entering into a
covenant not to compete. Cash proceeds of $750,000 from the
covenant not to compete were used to reduce the promissory note
payable to NHCLP as discussed in Note 4. The covenant not to
compete is currently being amortized over the covenant life
which is seven years.
The Company and UPC will provide working capital funding to the
Partnership, as required, in proportion to their respective
ownership interests. As of December 31, 1996, the Company has
loaned $80,000 to the Partnership for working capital purposes.
Earnings and losses of the Partnership are allocated to the
Company and UPC based on each partners' general partnership
interest. Under the terms of the Partnership agreement, the
Company has a right to priority distributions of its share of
Partnership net income limited to $300,000. All $300,000 of the
maximum priority distributions were made to the Company by the
Partnership during 1996. After reaching the maximum priority
distribution to the Company, UPC will receive distributions up
to an amount representing an equality of the ownership
percentages. Then, additional distributions would be made to
the Company and UPC in proportion to each partners' respective
ownership interest. All distributions are subject to the
availability of Partnership cash. No distributions were made by
the Partnership to the Company during 1995. No distributions
were made by the Partnership to UPC during 1995 or 1996.
The Company and UPC each provide certain management services to
the Partnership. The Company provides certain billing services
to the Partnership for which the Company receives 7.5% of
amounts billed. The Company has an option to sell its interest
in the Partnership to UPC (the "Put Option") at fair market
value at the Put Option exercise date. The Put Option can be
exercised by the Company at any date subsequent to the
termination of the Partnership and upon 180 days written notice
to UPC. The Partnership has a minimum term of five years. The
Company pledged its interest in the Partnership as collateral
for the remaining balance due under the promissory note payable
to NHCLP.
The following unaudited pro forma income statement information
for the Company is presented as though the Partnership had been
entered into on January 1, 1995. The unaudited pro forma
information is presented for informational purposes only and is
not necessarily indicative of the operating results that would
have occurred had the Partnership been consummated on January 1,
1995, nor are they necessarily indicative of future operating
results.
Year Ended
December 31, 1995
Unaudited
Equity in earnings of York Hannover Partnership $266,012
Other revenues 207,337
Other expenses (649,830)
Net loss before income taxes (176,481)
Income tax provision --
Net loss $(176,481)
Other revenues in the above unaudited pro forma income
statement includes a full year of amortization revenue from the
covenant not to compete and a full year of revenue from billing
services provided to the Partnership. Other expenses include
management fees paid to Lenox and interest expense incurred by
the Company during 1995.
Summary financial statements of the Partnership as of and for
the year ended
December 31, 1996 and the five months ended December 31, 1995
are as follows:
Balance Sheet December 31, December 31,
1996 1995
Accounts receivable $2,273,810 $1,142,412
Inventory 587,940 495,350
Cash 122,796 109,086
Other current assets 59,094 19,069
Net property, plant and equipment 716,317 589,726
Total assets $3,759,957 $2,355,643
Working capital loans -
due to the Company and UPC $630,000 $200,000
Accounts payable 295,959 243,657
Due to the Company -- 25,468
Due to UPC 38,082 40,431
Accrued expenses 107,011 87,869
Current portion of capital lease 37,032 --
Current portion of
promissory note payable 15,580 14,625
Capital lease obligation 64,739 --
Promissory note payable 368,602 360,254
Partners' capital 2,202,952 1,383,339
Total liabilities and
partners' capital $3,759,957 $2,355,643
Income Statement
Revenues $9,383,651 $2,563,354
Cost of sales (4,899,122) (1,348,470)
Gross profit 4,484,529 1,214,884
Expenses (3,364,916) (955,643)
Net income $1,119,613 $259,241
4. LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995 was composed of
the following:
December 31,
1996 1995
Promissory note payable to NHCLP $1,950,371 $1,950,000
Line of credit promissory note payable
to NHCLP, repaid in 1996 -- 229,877
Other notes - interest at 9% and
principal due in equal monthly installments
with remaining balance due in 1997 120,462 173,878
2,070,833 2,353,755
Less current portion (2,070,833) (173,878)
$ -- $2,179,877
The Company has entered into a promissory note ("the Promissory
Note") with NHCLP which has a maturity date of September 30,
1997. Interest accrues at 12% and is payable monthly with the
entire principal due on September 30, 1997.
The Promissory Note is secured by all of the assets of the
Company, including the Company's interest in the Partnership,
the personal guarantees of two stockholders of SIP, and certain
assets of SIP and Monterey.
All of the assets of the Company are pledged as collateral on a
line of credit owed by SIP to NHCLP. The outstanding balance
owed by SIP to NHCLP under this line of credit was $1,635,350 as
of December 31, 1996.
5. INCOME TAXES
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS 109"). This statement requires that
the asset and liability method be used in calculating the
prepaid or deferred tax position of the Company. Accordingly,
deferred or prepaid taxes are based on the difference between
the financial statement and tax basis of assets and liabilities
using enacted tax rates in effect in the years the differences
are expected to reverse.
The net deferred tax assets, at 38% of the respective amount,
as of December 31, 1996 and 1995 are as follows:
December 31,
1996 1995
Current Deferred Asset:
Asset and Liability Accounts $ -- $196,790
Less Valuation Allowance -- (196,790)
$ -- $ --
Non-Current Deferred Asset:
Asset and Liability Accounts $299,065 $329,836
Net Operating Loss Carryforward 82,878 --
381,943 329,836
Less Valuation Allowance (381,943) (187,960)
$ $141,876
In estimating the future tax consequences under SFAS 109, the
Company considers expected future events and the existence of
sufficient taxable income. Sufficient taxable income is not
anticipated to utilize the deferred tax assets. Therefore, a
valuation allowance has been recorded to reserve for the tax
assets not anticipated to be utilized.
The current deferred asset primarily relates to accounts
receivable reserves not deducted for tax purposes. The
non-current deferred asset relates primarily to non-compete
agreement revenue which is not yet recognized for financial
reporting purposes.
The Company uses the separate return method in determining the
deferred and current tax benefit or expense and related
valuation allowance to be recorded. Under the separate return
method, the determination of the tax benefit or expense and
related valuation allowance is based on what the Company's tax
benefit or expense and related valuation allowance would have
been had the Company filed a separate tax return.
6. COMMITMENTS AND CONTINGENCIES
During 1994 and through February 1, 1995, the Company assumed
certain risks related to worker's compensation insurance claims
of its employees. The Company is still liable for any worker's
compensation claims which may have been incurred but not
reported prior to February 1, 1995. In the opinion of
management, no additional worker's compensation claims which
were incurred prior to February 1, 1995 are expected to be
filed. During March 1995, the Company obtained a bond which
will pay up to $250,000 of any future worker's compensation
claims.
7. PRIOR YEAR RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 financial
statements to conform to the 1996 presentation.
8. EVENT SUBSEQUENT TO YEAR END
Effective April 2, 1997, the Company was merged with
MetroVision of North America, Inc. ("MetroVision"). MetroVision
owns and operates a video cable network for the mass transit
industry, under contracts ranging from five to seven years, for
the purpose of providing information and selling advertising.
In addition, MetroVision installs, under contract, video
equipment in certain mass transit locations.
Under the terms of the merger agreement, the Company
distributed all of its assets and liabilities to SIP prior to
the merger except for the Company's 40% interest in the
Partnership and the Company's outstanding debt under the NHCLP
Promissory Note and related accrued interest. Pursuant to the
agreement, SIP exchanged all outstanding common stock of the
Company with MetroVision for 4,000,000 newly issued registered
shares of MetroVision. As a condition of the merger,
MetroVision completed a 4.6 to 1 reverse split of its common
stock, reducing the number of MetroVision shares outstanding on
a post merger basis. SIP was also granted warrants to purchase
1,500,000 shares of common stock in the post merger MetroVision.
The following unaudited pro forma balance sheet information for
the Company is presented as though the merger with MetroVision
had been consummated on
December 31, 1996. The unaudited pro forma information is
presented for informational purposes only.
BALANCE SHEET December 31,
Unaudited(In Thousands) 1996
ASSETS
Current assets $ 290,000
Operating equipment, net 400,000
Other noncurrent assets 1,068,000
Total assets $1,758,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities,
excluding short-term debt $ 924,000
Short-term debt 2,079,000
Preferred stock 1,000
Common stockholders' equity (1,246,000)
Total liabilities and
stockholders' equity $ 1,758,000
YORK HANNOVER PHARMACEUTICALS, INC.
UNAUDITED FINANCIAL STATEMENTS
CONDENSED BALANCE SHEET
March 31,
1997
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $10,489
Marketable Securities 21,790
TOTAL CURRENT ASSETS 32,279
OTHER ASSETS
Investment in York Hannover Partnership 889,750
Due from York Hannover Partnership 111,526
Due from related parties 235,265
TOTAL OTHER ASSETS 1,236,541
TOTAL ASSETS $1,268,820
LIABILITIES and STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES
Accrued expenses 369,187
Current portion of long-term debt 1,976,632
Due to Affiliates 382,109
TOTAL CURRENT LIABILITIES 2,727,928
DEFERRED REVENUE 710,096
STOCKHOLDER'S DEFICIT
Unrealized loss on securities (10,209)
Common Stock 100
Accumulated deficit (2,159,095)
TOTAL STOCKHOLDER'S DEFICIT (2,169,204)
$1,268,820
YORK HANNOVER PHARMACEUTICALS, INC.
CONDENSED STATMENT OF INCOME AND STOCKHOLDER'S DEFICIT
(Unaudited)
Three Months Ended
March 31
1996 1997
Other revenue, including equity in earnings
of York Hannover Partnership 158,890 254,424
NET REVENUES 158,890 254,424
OPERATING COSTS AND EXPENSES
Selling, general, and administrative 77,793 75,000
Realized loss on sale of securities -- 66,914
Interest expense 69,647 69,677
TOTAL EXPENSES 147,440 211,591
NET INCOME 11,450 42,833
ACCUMULATED DEFICIT,
BEGINNING OF PERIOD (2,203,915) (2,201,928)
ACCUMULATED DEFICIT, END
OF PERIOD $(2,192,465) $(2,159,095)
See notes to financial statements.
YORK HANNOVER PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
1996 1997
OPERATING ACTIVITIES
Net Loss $11,450 $42,833
Adjustments to reconcile net loss to
net cash used in operating activities:
Realized loss on sale of Marketable Securities -- 66,914
Amortization of deferred revenue (33,285) (33,285)
Equity in earnings of York Hannover
Partnership (68,963) (188,571)
Changes in operating assets and liabilities
Decrease in accounts receivable (net) (30,044) --
Increase/(decrease) in accounts payabled
and other accrued expenses 43,96 (1,648)
NET CASH PROVIDED BY OPERATING
ACTIVITIES (76,878) (113,757)
INVESTING ACTIVITIES
Loans to York Hannover Partnership,
net of amounts received -- 49,221
Proceeds from repayment of loans from
Affiliates 114,222 10,002
Loans to related parties (12,004) (22,728)
Purchases of Marketable Securities (737) --
Proceeds from sale of Marketable Securities -- 399,198
NET CASH PROVIDED BY INVESTING ACTIVITIES 101,481 435,693
FINANCING ACTIVITIES
Principal payments on Long-Term Debt
Borrowing (2,903) (94,201)
Principal repayment of notes payable -- (275,537)
NET CASH USED IN FINANCING ACTIVITIES (2,903) (369,738)
21,700 (47,802)
Cash and cash equivalents at beginning
of period 15,916 58,291
CASH AND CASH EQUIVALENTS AT END OF PERIOD $37,616 $10,489
SUPPLEMENTAL INFORMATION:
Cash paid for interest $2,489 $53,877
See notes to financial statements.
YORK HANNOVER PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1997
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three months
ended March 31, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31,
1997. For further information, refer to the York Hannover
Pharmaceuticals, Inc. ("York Hannover") financial statements for
the year ended December 31, 1996 and footnotes thereto included
in this form 8-K/A.
NOTE B--SHORT-TERM DEBT
Short-term debt at March 31, 1997 was composed of the
following:
March 31,
1997
Promissory note payable $1,950,371
Notes payable to former shareholders 26,261
Total short-term debt $1,976,632
York Hannover's promissory note payable and line of credit
promissory note payable to National HealthCare L.P. matures in
September, 1997.
NOTE C - INVESTMENT IN YORK HANNOVER PARTNERSHIP
Effective August 1, 1995, York Hannover formed a
partnership ("York Hannover Partnership" or "the Partnership")
with United Professional Companies, Inc. for the purpose of
operating a business which provides institutional pharmacy,
infusion therapy, third party billing, medical equipment and
supplies and other services. Pursuant to the terms of the
partnership agreement, York Hannover contributed to the
Partnership all of its furniture and equipment, inventory and
existing contracts with nursing facilities to provide services
and products. York Hannover's 40% interest in the Partnership
is recorded using the equity method of accounting.
YORK HANNOVER PHARMACEUTICALS, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended March 31, 1997 Compared to Three Months Ended
March 31, 1996
Other Revenues. Other revenues consisted primarily of deferred
revenue amortization from an agreement not to compete, equity in
earnings of York Hannover Partnership and accounts receivable
billing services. Other revenues for the three months ended
March 31, 1997 were $254,424 an increase of $201,181 or 378%
from $53,243 for the three months ended March 31, 1996. This
increase was primarily the result of an increase in revenues
generated from the 40% equity interest in the Partnership.
Selling, General and Administrative. Selling, general and
administrative expense consists of expenses related to
providing management services to York Hannover Partnership for
accounts receivable billing activity. Selling, general and
administrative expense for the three months ended March 31, 1997
were $75,000 a decrease of $2,793 or 3.7% from $77,793 for the
three months ended March 31, 1996.
Interest Expense. Interest expense is primarily related to a
promissary note York Hannover has with National Healthcare L.P.
This note was entered into in 1993 and restructured in 1995.
Interest expense for three monthe ended March 31, 1997 was
$69,677 an increase of $30 or .04% from $69,647 for the three
months ended March 31, 1996.
Liquidity and Sources of Capital
At March 31, 1997, the Company had negative working capital of
$2,695,649 and a ratio of current assets to current liabilities
of (.01) as compared to (.17) at December 31, 1996. Cash was
$10,489 at March 31, 1997. Marketable Securities decreased
$444,281 from $466,071 at December 31, 1996 to $21,790 at March
31, 1997. This decrease was the result of the sale of
Marketable Securities. Investment in York Hannover Partnership
increased $216,828 from $674,922 at December 31, 1996 to
$889,750 at March 31, 1997. This increase was the result of
earnings from York Hannover Partnership. Accrued expenses
decreased $1,648 from $370,835 at December 31, 1996 to $369,187
at March 31, 1997. This decrease was the result of the timing
of certain payments. Current portion of long-term debt
decreased $94,201 from $2,070,833 at December 31, 1996 to
$1,976,632 at March 31, 1997. This decrease was the result of
the repayment of notes payable due former shareholders Notes
Payable decreased from $275,537 at December 31, 1996 to $0 at
March 31, 1997. This decrease was the result of the repayment
of certain margin loans. Deferred revenue decreased $33,285
from $743,381 at December 31, 1996 from $710,096 at March 31,
1996. This decrease was the result of the amortization of a
non-compete agreement. The accummulated deficit decreased
$42,833 from $2,201,928 at December 31, 1996 to $2,159,095 at
March 31, 1997. This increase was the result of the net income
for the three months ended March 31, 1997.
In January and Febuary 1997 the Company received proceeds
aggregating to $399,198 from the sale of its Marketable
Securities. These funds were primarily used to repay margin
loans of $275,537, notes payable to former shareholders of
$94,199 and other operating expenses.
On April 1, 1997, York Hannover consummated a merger (the
"Merger") as a result of which York Hannover merged with and
into MetroVision, with MetroVision as the surviving corporation,
pursuant to an agreement and Plan of Merger dated as of May 10,
1996 among York Hannover and MetroVision (the "Merger
Agreement"). Pursuant to the Merger Agreement, among other
things: (i) MetroVision changed its corporate name to York
Hannover Health Care Inc. (subject to receipt of all necessary
regulatory consents which are still pending); and (ii) each
share of York Hannover Pharmaceuticals, Inc. Common Stock
outstanding on April 1, 1997 was converted into 4,000 shares of
MetroVision's Common Stock, or an aggregate of 4,000,000 shares
of Common Stock, constituting approximately 71.8% of the shares
of MetroVision Common Stock outstanding giving effect to the
Merger. As a result of the merger, MetroVision has shifted its
primary business to that conducted by York Hannover, the
provision of prescription and non prescription medications and
pharmacy related services to nursing homes and similar
facilities.
York Hannover had outstanding as of March 31, 1997 $1,976,632
of short-term debt that is due September 1997. This debt
includes a term loan of $1,950,371 due NHCLP and notes due
former shareholders of $26,261. Although the stated maturity
date of the indebtedness due NHCLP is January 1999, York
Hannover is currently not in compliance with certain covenants
under the loan agreement relating to the indebtedness,
principally relating to its failure to maintain positive working
capital. As a result of such noncompliance, the $1,950,371
principal amount, together with accrued interest thereon, will
be due September 1997. Neither York Hannover currently has, nor
is the Surviving Corporation expected to have, the financial
resources necessary to meet this payment obligation absent of
obtaining external financing, whether from an equity offering or
otherwise. In the event the Surviving Corporation is unable to
meet this payment obligation, or if the loan is not
renegotiated, NHCLP, as a secured creditor, has the right to
take possession of or otherwise sell the 40% partnership
interest in the York Hannover Partnership in satisfaction of the
indebtedness and may seek recourse against the Surviving
Corporation's other assets, if necessary.
As of March 31, 1997, York Hannover's primary asset was its
ownership of a 40% interest in York Hannover Partnership. For
the three months ended March 31, 1997, York Hannover's net
income from the Partnership totaled $188,521.
York Hannover does not have control over distributions made by
York Hannover Partnership. All Partnership distributions are
subject to the availability of York Hannover Partnership cash.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To York Hannover Partnership:
We have audited the accompanying balance sheets of YORK HANNOVER
PARTNERSHIP (a Wisconsin general partnership) as of December 31,
1996 and 1995, and the related statements of income, partners'
capital, and cash flows for the year ended December 31, 1996 and
the five month period ended December 31, 1995. These financial
statements are the responsibility of York Hannover Partnership's
Management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of York Hannover Partnership as of December 31, 1996 and 1995,
and the results of its operations and its cash flows for the
year ended December 31, 1996 and the five month period ended
December 31, 1995 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
March 31, 1997
YORK HANNOVER PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSET 1996 1995
CURRENT ASSETS:
Cash and cash equivalents $122,796 $109,086
Accounts receivable, less allowance
for doubtful accounts of
$260,057 and $60,070, respectively 2,273,810 1,142,412
Inventory 587,940 495,350
Due from York Hannover
Pharmaceuticals, Inc. 8,620 --
Other current assets 50,474 19,069
Total current assets 3,043,640 1,765,917
PROPERTY AND EQUIPMENT:
Building and improvements 431,837 --
Construction in progress -- 389,879
Furniture and equipment 437,297 231,203
869,134 621,082
Accumulated depreciation (152,817) (31,356)
Property and equipment, net 716,317 589,726
Total assets $3,759,957 $2,355,643
The accompanying notes to financial statements are an integral
part of these balance sheets.
YORK HANNOVER PARTNERSHIP
BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1996 AND 1995
LIABILITIES AND PARTNERS' CAPITAL 1996 1995
CURRENT LIABILITIES:
Working capital note payable to York
Hannover Pharmaceuticals,Inc. $ 80,000 $ 80,000
Working capital note payable to United
Professional Companies,Inc. 550,000 120,000
Accounts payable 295,959 243,657
Accrued expenses 107,011 87,869
Due to York Hannover Pharmaceuticals, Inc. -- 25,468
Due to United Professional Companies, Inc. 38,082 40,431
Current portion of promissory note payable
to United Health, Inc. 15,580 14,625
Current portion of capital lease obligation 37,032 --
Total current liabilities 1,123,664 612,050
NON-CURRENT LIABILITIES:
Promissory note payable to United Health, Inc. 368,602 360,254
Capital lease obligation 64,739 --
Total non-current liabilities 433,341 360,254
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL 2,202,952 1,383,339
Total liabilities and partners'capital $ 3,759,957 $ 2,355,643
The accompanying notes to financial statements are an integral
part of these balance sheets.
YORK HANNOVER PARTNERSHIP
STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE FIVE MONTHS ENDED
DECEMBER 31, 1995
1996 1995
REVENUES $9,383,651 $2,563,354
COST OF SALES (4,899,122) (1,348,470)
Gross margin 4,484,529 1,214,884
EXPENSES:
Salaries, wages and benefits 1,529,390 479,244
General and administrative 1,060,220 281,971
Management fees 375,066 102,535
Provision for uncollectible accounts 189,988 60,537
Depreciation 123,759 31,356
Interest 86,493 --
Total expenses 3,364,916 955,643
NET INCOME $1,119,613 $259,241
The accompanying notes to financial statements are an integral
part of these statements.
YORK HANNOVER PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE FIVE MONTHS ENDED
DECEMBER 31, 1995
York Hannover
Pharmaceuticals, United Professional
Inc. Companies, Inc. Total
BALANCE, August 1, 1995 $ -- $ -- $ --
Capital contributions 449,638 674,460 1,124,098
Net income 103,696 155,545 259,241
BALANCE, December 31, 1995 553,334 830,005 1,383,339
Capital contributions -- -- --
Partnership distributions (300,000) -- (300,000)
Net income 447,845 671,768 1,119,613
BALANCE, December 31, 1996 $701,179 $1,501,773 $ 2,202,952
The accompanying notes to financial statements are an integral
part of these statements.
YORK HANNOVER PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE FIVE MONTHS ENDED
DECEMBER 31, 1995
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,119,613 $259,241
Adjustments to reconcile net
income to net cash used in operating
activities:
Depreciation 123,759 31,356
Changes in assets and liabilities:
Accounts receivable, net (1,131,398) (1,142,412)
Inventory (92,590) (78,930)
Prepaids and other assets (40,025) 5,617
Accounts payable 52,302 243,657
Accrued expenses 19,142 87,869
Due to partners (27,817) 65,899
Net cash provided by (used in)
operating activities 22,986 (527,703)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (131,688) (446,987)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligation (16,891) --
Long-term debt borrowings 9,303 374,879
Short-term debt borrowings 530,000 200,000
Payments on short-term debt (100,000) --
Capital contributions -- 508,897
Distributions to partners (300,000) --
Net cash provided by financing
activities 122,412 1,083,776
NET INCREASE IN CASH AND CASH EQUIVALENTS 13,710 109,086
CASH AND CASH EQUIVALENTS,
beginning of period 109,086 --
CASH AND CASH EQUIVALENTS, end of period $122,796 $109,086
(Continued)
The accompanying notes to financial statements are an integral
part of these statements.
YORK HANNOVER PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE FIVE MONTHS ENDED
DECEMBER 31, 1995
(Continued)
1996 1995
SUPPLEMENTAL INFORMATION:
Non-cash capital contributions $ -- $615,201
Cash payments of interest expense $88,964 $ --
Capital lease obligation $101,771 $ --
The accompanying notes to financial statements are an integral
part of these statements.
YORK HANNOVER PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The financial statements include the accounts of York Hannover
Partnership ("the Partnership") formed for the purpose of
providing institutional pharmacy services, infusion therapy,
urological, enteral and general medical supplies to licensed
nursing facilities, hospitals, correction facilities and
retirement facilities throughout the State of Florida.
The Partnership commenced operations August 1, 1995, upon
formation of the Partnership by and between York Hannover
Pharmaceuticals, Inc. ("YHPI"), a wholly-owned subsidiary of
Stockbridge Investment Partners, Inc. ("SIP"), and United
Professional Companies, Inc. ("UPC"), a wholly-owned subsidiary
of United Health, Inc. ("UHI"). Pursuant to the terms of the
Partnership agreement, YHPI contributed to the Partnership
assets with a total net book value of $449,638 as of the date of
the contribution. Those assets included $302,424 of inventory.
Other assets contributed by YHPI consisted primarily of
furniture and equipment. UPC contributed assets with a total
net book value of $674,460 as of the date of the contribution.
Those assets included $508,897 of cash. The remainder of assets
contributed by UPC consisted primarily of inventory and property
and equipment. In exchange for these contributions, YHPI
received a 40% general partnership interest and UPC a 60%
general partnership interest in the Partnership. The
Partnership has a minimum term of five years.
Earnings and losses are allocated based on general partnership
interests. Under the terms of the Partnership agreement, YHPI
has a right to priority distributions of its share of
Partnership net income limited to $300,000. After reaching the
maximum priority distribution to YHPI, then UPC receives
distributions up to an amount representing an equality of the
ownership percentages. Then, additional distributions would be
made to YHPI and UPC in proportion to each partner's respective
ownership interest. All distributions are subject to the
availability of Partnership cash. No distributions were made by
the Partnership to UPC during 1996 or 1995. The Partnership
distributed $300,000 and $0 to YHPI during 1996 and 1995,
respectively.
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.
Operational Management
The operations of the Partnership are managed by UPC for a
maximum management fee of 4% of net revenues. YHPI and UPC also
provide certain billing services to the Partnership for which
they receive 7.5% of amounts billed.
Revenues
Revenues are generated from the sale of institutional pharmacy
services, infusion therapy, urological, enteral and general
medical supplies to licensed nursing facilities, hospitals,
correction facilities and retirement facilities throughout the
State of Florida. The Partnership receives payment for the sale
of certain supplies to patients covered by Medicare and the
Florida Medicaid programs. Revenues generated from patients
covered by Medicare and the Florida Medicaid programs are based
on reasonable charge reimbursement principles and are not
subject to "cost" limitations. In the opinion of management,
adequate provision has been made for any adjustments that may
result from reviews by the Medicare and Medicaid programs.
Inventory
All inventories as of December 31, 1996 were priced at the
lower of cost (on a first-in, first-out basis) or market.
Property and Equipment
The Partnership's buildings, furniture and equipment are
depreciated using the straight-line method over the estimated
useful lives of the assets. The estimated useful lives range
from 3 to 25 years.
Concentration of Credit Risks
The Partnership's credit risks primarily relate to cash and
cash equivalents and receivables. Cash and cash equivalents are
primarily held in bank accounts. Receivables consist primarily
of amounts due from patients and long-term health care centers
in the state of Florida and from the Medicare and Florida
Medicaid programs. The Company maintains allowances for
uncollectible accounts on these receivables.
Cash Equivalents
Cash equivalents include highly liquid investments with an
original maturity of less than three months.
Federal Income Taxes
The Partnership is a general partnership for purposes of
federal and state income taxation. As such, income or losses of
the Partnership are attributed to the partners and are reflected
on the partners' income tax returns. Accordingly, no income tax
provision or benefits are recorded in the financial statements.
Reclassifications
Certain reclassifications have been made to the 1995 financial
statements to conform to the presentation used in the 1996
financial statements.
2. RELATED PARTIES
Capital lease obligations and net amounts due to related
parties as of December 31, 1996 and 1995 consist of the
following:
December 31, December 31,
1996 1995
Working capital note payable - YHPI $80,000 $80,000
Working capital note payable - UPC 550,000 120,000
$630,000 $200,000
Due to (from) related parties - current:
YHPI $(8,620) $25,468
UPC 38,082 40,431
$29,462 $65,899
Promissory note payable to UHI 384,182 374,879
Less current portion (15,580) (14,625)
$368,602 $360,254
Pursuant to the terms of the Partnership agreement, YHPI and
UPC will provide working capital funding to the Partnership, as
required, in proportion to their respective ownership interests.
As of December 31, 1996, the Partnership had working capital
notes outstanding to YHPI and UPC, respectively, in the amounts
of $80,000 and $550,000. In the event that one of the partners
is unable to provide working capital funding in proportion to
its ownership interest, the other partner shall have the right
to provide the additional working capital and receive interest
at the prime rate plus 4%. In the event that both partners are
able to provide working capital funding in proportion to their
respective ownership interests, the working capital notes shall
not bear interest. The working capital notes have no stated
maturity date and have been classified as current as of December
31, 1996. The working capital notes are secured by the
Partnership's receivables.
During 1995, the Partnership entered into a promissory note
payable with UHI to finance the purchase and improvement of a
building in Brooksville, Florida. The promissory note payable
bears interest at the prime rate plus .5%. Equal monthly
payments of interest and principal are required based on a 15
year amortization with the remaining principal and accrued and
unpaid interest due on August 1, 2000. The maximum principal
outstanding under the promissory note is limited to $400,000.
The promissory note payable is secured by the related building
and improvements. The promissory note payable is guaranteed by
SIP and by the personal guarantees of the stockholders of SIP.
A schedule of the principal maturity of amounts owed to related
parties (excluding capital leases) for the five years subsequent
to December 31, 1996 is as follows:
1997 675,042
1998 17,000
1999 18,550
2000 334,239
2001 --
The Partnership leases certain equipment from UHI under capital
leases. Future minimum rental payments required on capital
leases for the next five years beginning January 1, 1997, less
amounts representing interest, are as follows:
1997 $47,466
1998 47,466
1999 23,733
2000 --
2001 --
118,665
Less amounts representing interest (16,894)
$101,771
The property and equipment under the capital lease as of
December 31, 1996 consists of the following:
Property and equipment under capital lease $ 118,662
Less accumulated depreciation (19,777)
$ 98,885
3. COMMITMENTS AND CONTINGENCIES
Healthcare Regulations
The healthcare industry is subject to numerous laws and
regulations of Federal, state and local governments. These laws
and regulations include, but are not necessarily limited to,
matters such as licensure, accreditation, government healthcare
program participation requirements, reimbursement for patient
services, and Medicare and Medicaid fraud and abuse. Recently,
government activity has increased with respect to investigations
and/or allegations concerning possible violations of fraud and
abuse statutes and/or regulations by healthcare providers.
Violations of these laws and regulations could result in
expulsion from government healthcare programs together with the
imposition of significant fines and penalties, as well as
significant repayments for patient services previously billed.
Management believes that the Company is in compliance with fraud
and abuse statutes, as well as other applicable government laws
and regulations. Compliance with such laws and regulations can
be subject to future government review and interpretations as
well as regulatory actions unknown or unasserted at this time.
Insurance
Health insurance and worker's compensation insurance for the
Partnership is maintained by UPC in accordance with UPC's
management of the Partnership. In management's opinion, there
are no outstanding claims that would result in losses that would
be material to the financial condition or results of operations
of the Partnership.
UNAUDITED SUMMARY PRO FORMA COMBINED CONDENSED
CONSOLIDATED FINANCIAL DATA
MetroVision and York Hannover have entered into a Merger
Agreement, whereby Stockbridge, the sole stockholder of York
Hannover, has exchanged all outstanding common stock of York
Hannover with MetroVision for 4,000,000 newly issued shares of
common stock. Under the terms of the Merger Agreement, York
Hannover has distributed all of its assets and liabilities to
Stockbridge prior to the Merger except for its 40% interest in
York Hannover Partnership and certain outstanding debt and
related accrued interest. As a condition of the Merger,
MetroVision has completed a 1 to 4.6 Reverse Stock Split of its
Common Stock, reducing the number of MetroVision shares
outstanding on a post-Merger basis.
The Merger will be accounted for as a reverse acquisition of
MetroVision by York Hannover in a transaction accounted for
using the purchase method of accounting as prescribed by
Accounting Principals Board Opinion No. 16. In the reverse
acquisition transaction, York Hannover will be treated as the
acquirer for financial reporting purposes. The purchase method
of accounting prescribes that the acquiring company allocate the
cost of an acquired company, including the expenses of the
acquisition, to the assets acquired and liabilities assumed as
of the date of the acquisition based upon their fair values.
Any excess of incurred over the values of assets acquired less
liabilities assumed is recorded as goodwill and amortized over
its expected benefit period. Therefore, any excess of the fair
value of MetroVision's assets less its liabilities over the
historical basis of MetroVision's assets less its liabilities
would be recorded as goodwill and amortized over its benefit
period. Any excess of the historical basis of MetroVision's
assets less its liabilities over the fair value of MetroVision's
assets less its liabilities would result in negative goodwill
which would be allocated to reduce the noncurrent assets of the
Surviving Corporation.
The following unaudited pro forma consolidated balance sheet as
of March 31, 1997 have been prepared based on the historical
balance sheets of MetroVision and York Hannover, as adjusted to
reflect the merger as if it had occurred on March 31, 1997. The
unaudited pro forma consolidated income statements for the year
ended December 31, 1996 and for the three months ended March 31,
1997 have been prepared based on the historical balance sheets
of MetroVision and York Hannover, as adjusted to reflect the
merger as if it had occurred on January 1 of each respective
period. The information is presented for informational purposes
only and therefore, is not necessarily indicative of the
financial position or operating results that would have occurred
of might be achieved if the Merger had occurred at an earlier
date, nor is it necessarily indicative of the financial position
or operating results the may occur in the future.
York Hannover Summary Pro Forma Consolidated Statement of Income Data
Year Ended December 31, 1996
(Unaudited, in thousands, except Per Share Data)
Pro forma
Adjustments
to reflect
MetroVision York Hannover Purchase of Pro forma
Historical Historical MetroVision Combined
Total revenues 836 702 (254) (c) 1,284
Cost of revenues 363 -- -- 363
Selling, general and
administrative 891 391 (261) (b) 1,021
Depreciation and
amortization 533 -- -- 533
Writedown of contract
rights and installation
assets 1,019 -- -- 1,019
Interest expense, net 10 290 (37) (a) 263
Income tax porvision -- 19 (19) (d) --
Net Loss (1,980) 2 63 (1,915)
Less--preferred stock
dividend requirements
181 181
Net loss applicable
to common stock (2,161) (2,096)
Weighted average
number of shares 7,027,324 5,527,679 (e)
Net loss per common
share (.31) (.38)
(a) To adjust interest expense for York Hannover debt not being
contributed in the Merger.
(b) To adjust selling, general and administrative expenses for
York Hannover management fees expenses not to be incurred by the
Surviving Corporation.
(c) To adjust revenues for amortization income and revenues
related to services not being contributed in the Merger.
(d) Weighted average shares based on 1,527,679 shares outstanding after
Reverse Stock Split and 4,000,000 shares to be issued to the York
Hannover shareholders.
(e) To adjust income tax provision for deferred tax assets and liabilities
not being contributed in the Merger.
York Hannover Summary Pro Forma Consolidated Balance Sheet
March 31, 1997
(Unaudited, in thousands, except Per Share Data)
Pro forma
Adjustments
to reflect
MetroVision York Hannover Purchase of Pro forma
Historical Historical MetroVision Combined
Assets
Current Assets 237 32 (32) (a) 237
Property and Equipment,
Net 370 -- -- 370
Other 4 1,237 (347) (a) 894
Goodwill -- -- (498) (b) (498)
Total Assets 611 1,269 119 1,999
Liabilities and Shareholders' Equity
Current liabilities, excluding
short term debt 757 751 (438) (a) 1,070
Short-term debt 51 1,977 (27) (a) 2,001
Other -- 710 (710) (a) --
Preferred Stock 1 -- -- 1
Shareholders' equity (198 (2,169) 1,294 (b) (1,073
Total Liabilities and
shareholders equity 611 1,269 119 1,999
(a) Elimination of York Hannover assets(consisting of cash-$10;
marketable securities-$22; due from York Hannover
Partnership-$112; and due from related parties $235) and liabilities
(consisting of accrued expenses-$56; short-term debt-$27; due to
affiliates-$382; and deferred revenue -$710) not being contributed
in the merger.
(b) Adjustment to reflect estimated fair value of MetroVision's assets and
liabilities which have been estimated to be $300, resulting in goodwill
of $498.
(c Reflects cumulative effect of the above adjustments.
York Hannover Summary Pro Forma Consolidated Statement of Income Data
Three Months Ended March 31, 1997
(Unaudited, in thousands, except Per Share Data)
Pro forma
Adjustments
to reflect
MetroVision York Hannover Purchase of Pro forma
Historical Historical MetroVision Combined
Total revenues 181 254 (65) (c) 370
Cost of revenues 73 -- -- 73
Selling, general and
administrative 211 75 (75) (b) 211
Realized loss on sale of
securities -- -- 67 67
Depreciation and
amortization 30 -- -- 30
Interest expense, net 2 69 (4) (a) 67
Net Income (Loss) (135) 43 14 (78)
Less - Preferred stock dividend
requirements 45 45
Net loss applicable to
common stock (180) (123)
Weighted average number
of shares 7,241,664 5,574,275 (d)
Net loss per common share (.02) (.02)
(a) To adjust interest expense for York Hannover debt not being contributed
in the Merger.
(b) To adjust selling general and administrative expenses for York Hannover
management fees expenses not being incurred by the Surviving Corporation.
(c) To adjust revenues for amortization income and revenues related to
services not being contributed in the Merger.
(d) Weighted average shares based on 1,574,275 shares outstanding after
Reverse Stock Split and 4,000,000
EXHIBIT INDEX
Exhibit Page
Number Description of Document
10.1 Agreement and Plan of Merger dated as of May 10, 1996 among
MetroVision of North America, Inc. and York Hannover
Pharmaceuticals, Inc. (included as Annex "A" to Exhibit 99.1
filed herewith).
99.1 The Company's definitive Proxy Statement/Prospectus dated
February 13, 1997 for its Special Meeting of Shareholders. 46
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused the report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: August 11, 1997 YORK HANNOVER HEALTH CARE, INC.
By: /s/ Thomas M. Clarke
Name: Thomas M. Clarke
Title: President & CEO
