8
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/X/ Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/_/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
MetroVision of North America, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/_/ No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction
applies: N/A
2) Aggregate number of securities to which transaction applies:
N/A
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): $2,300,000 x .01 x 1/50 = $460 (Proceeds received on
the Sale times one fiftieth of one percent)
4) Proposed maximum aggregate value of transaction:
5) Total fee paid: $460.
/_/ 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 No.:
______________________________________
3) Filing party:
___________________________________________________________
4) Date filed:
_____________________________________________________________
METROVISION OF NORTH AMERICA, INC.
75 SOUTH CHURCH STREET
PITTSFIELD, MASSACHUSETTS 01201
AUGUST [3], 1998
Dear Shareholder:
The Special Meeting of the Shareholders of MetroVision of North
America, Inc. ("MetroVision") will be held on Thursday, August 27,
1998 at 10:00 a.m., local time, at 75 South Church Street, Pittsfield,
Massachusetts 01201.
At the Special Meeting, you will be asked to consider and vote upon
the following proposals: i) a proposal to approve the Purchase and
Assignment of Partnership Interest Agreement, dated as of June 1,
1998, by and among United Professional Companies, Inc., Geriatric Bay
Pharmacy, Inc. ("Bay") and the Company, and the transactions
contemplated therein, which includes the sale of substantially all of
the assets of the Company to Bay (the "Sale"); (ii) an amendment to
the Restated Certificate of Incorporation changing the Purposes Clause
to authorize the activities in which the Company may now lawfully
engage; (iii) an amendment to the Restated Certificate of
Incorporation to permit action by written consent of shareholders by
less than unanimous vote; (iv) to ratify an amendment to the Amended
By-laws of the Company reducing the minimum number of directors from
six to three; (v) the election of three members of the Board of
Directors each to a one year term; (vi) to ratify the appointment of
Arthur Andersen LLP as the Company's independent public accountants
for the fiscal year ending December 31, 1998; and (vii) such other
business as may properly come before the Special Meeting and any
adjournment or postponement thereof.
THE BOARD OF DIRECTORS HAS APPROVED THE SALE AND THE OTHER PROPOSALS
DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT, AND HAS DETERMINED THAT
THE SALE AND THE OTHER PROPOSALS ARE FAIR TO AND IN THE BEST INTERESTS
OF METROVISION AND ITS SHAREHOLDERS. THE BOARD OF DIRECTORS RECOMMENDS
THAT THE METROVISION SHAREHOLDERS VOTE FOR THE PROPOSALS DESCRIBED IN
THE PROXY STATEMENT.
In the materials accompanying this letter, you will find a Notice
of Special Meeting of Shareholders and a Proxy Statement relating to,
among other things, the actions to be taken by MetroVision
shareholders at the Special Meeting and a proxy card. Shareholders are
urged to carefully review the accompanying Proxy Statement which
describes in detail the Sale and the other proposals which are being
submitted to the shareholders for their consideration and approval, as
well as the attendant risks associated with the foregoing.
All shareholders of MetroVision Common Stock and 5% Series A
Convertible Preferred Stock are cordially invited to attend the
Special Meeting in person. However, whether or not you plan to attend
the Special Meeting, please complete, sign, date and return your proxy
in the enclosed postage-paid envelope. If you attend the Special
Meeting, you may vote in person if you wish, even though you have
previously returned your proxy. It is important that your shares be
represented and voted at the Special Meeting.
Sincerely,
/s/ Thomas M. Clarke
Thomas M. Clarke
President and Chief Executive Officer
METROVISION OF NORTH AMERICA, INC.
75 SOUTH CHURCH STREET
PITTSFIELD, MASSACHUSETTS 01201
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 27. 1998
NOTICE IS HEREBY GIVEN that the Special Meeting of Shareholders (the
"Special Meeting") of MetroVision of North America, Inc., a New York
corporation ("MetroVision"), will be held on Thursday, August 27,
1998, at 10:00 a.m., local time, at 75 South Church Street,
Pittsfield, Massachusetts 021012, to consider and vote upon the
following matters:
1. To consider and vote upon a proposal to approve the Purchase
and Assignment of Partnership Interest Agreement (the "Sale
Agreement"), dated as of June 1, 1998, by and among United
Professional Companies, Inc. ("UPC"), Geriatric Bay Pharmacy,
Inc. ("Bay"), and the Company, a copy of which is attached hereto
as Appendix A, and the transactions contemplated therein, which
includes the sale of substantially all of the assets of the
Company to Bay (the "Sale").
2. To consider and vote upon a proposal to approve an amendment
to the Restated Certificate of Incorporation changing the
Purposes Clause to authorize the activities in which the Company
may now lawfully engage.
3. To consider and vote upon a proposal to approve an amendment
to the Restated Certificate of Incorporation to permit action by
written consent of shareholders by less than unanimous vote.
4. To consider and vote upon a proposal to ratify an amendment to
the Amended By-laws of the Company reducing the minimum number of
directors from six to three.
5. To consider and vote upon a proposal to elect three members of
the Board of Directors each to a one year term.
6. To consider and vote upon a proposal to ratify the appointment
of Arthur Andersen LLP as the Company's independent public
accountants for the fiscal year ending December 31, 1998.
7. To transact such other business as may properly come before
the Special Meeting or any adjournments or postponement thereof.
The Board of Directors has fixed the close of business on July
28, 1998 as the record date for the Special Meeting. Only shareholders
of record of Common Stock and of 5% Series A Convertible Preferred
Stock at the close of business on July 28, 1998 are entitled to notice
of, and to vote at, the Special Meeting, or at any adjournment or
postponement thereof.
Pursuant to Article VI, Section 6 of the Amended By-laws of the
Company, notice is hereby given that on June 12, 1998, the Board of
Directors adopted an amendment to the By-laws which resulted in
Article III, Section 2 of the By-laws reading as follows "The Board of
Directors shall be not less than three, as may be fixed from time to
time by vote of the majority of the entire Board of Director, or by
vote of the shareholders at any meeting thereof; provided, however,
whenever all of the shares of the Company are owned by less than three
shareholders, the number of Directors may be less than three, but not
less than the number of shareholders." The previous Section 2 had
provided that the minimum number of directors could not be less than
six and could be such greater number as set by the Board of Directors.
The shareholders of the Company are being asked to ratify such
amendment in Proposal 4 noted above.
The accompanying form of proxy is being solicited by the
MetroVision Board of Directors. Reference is made to the attached
Proxy Statement for further information with respect to the business
to be transacted at the Special Meeting. Duly executed but unmarked
proxies will be voted "FOR" the Sale and each of the other proposals
described above.
THE BOARD OF DIRECTORS HAS APPROVED THE SALE AND THE OTHER PROPOSALS
DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT, AND HAS DETERMINED THAT
THE SALE AND THE OTHER PROPOSALS ARE FAIR TO AND IN THE BEST INTERESTS
OF METROVISION AND ITS SHAREHOLDERS. THE BOARD OF DIRECTORS RECOMMENDS
THAT THE METROVISION SHAREHOLDERS VOTE FOR THE PROPOSALS DESCRIBED IN
THE PROXY STATEMENT.
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND
DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED
RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF
YOU WISH TO DO SO EVEN IF YOU PREVIOUSLY SENT IN YOUR PROXY.
By Order of the Board of Directors,
/s/ Linda M. Clarke
Linda M. Clarke
Secretary
Pittsfield, Massachusetts
August [3], 1998
METROVISION OF NORTH AMERICA, INC.
PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON
AUGUST 27, 1998
_______________________
This Proxy Statement is being furnished to holders of
MetroVision of North America, Inc. ("MetroVision" or the
"Company") common stock, par value $.001 per share ("Common
Stock"), and holders of MetroVision 5% Series A Convertible
Preferred Stock ("5% Preferred Stock") in connection with the
solicitation of proxies by MetroVision's Board of Directors for
use at the Special Meeting of MetroVision shareholders (the
"Special Meeting") to be held on Thursday, August 27, 1998 at 75
South Church St., Pittsfield, Massachusetts 01201, commencing at
10:00 a.m., local time, and at any adjournment or postponement
thereof.
At the Special Meeting, shareholders are being asked to vote
on the following proposals as stated in the Notice of Special
Meeting accompanying this Proxy Statement, including (i) to
consider and approve the Purchase and Assignment of Partnership
Interest Agreement (the "Sale Agreement"), dated as of June 1,
1998, by and among United Professional Companies, Inc. ("UPC"),
Bay Geriatric Pharmacy, Inc. ("Bay"), and the Company, a copy of
which is attached hereto as Appendix A, and the transactions
contemplated therein, which includes the sale of substantially
all of the assets of the Company to Bay (the "Sale"); (ii) to
consider and approve an amendment to the Restated Certificate of
Incorporation changing the Purposes Clause to authorize the
activities in which the Company may now lawfully engage; (iii) to
consider and approve an amendment to the Restated Certificate of
Incorporation to permit action by written consent of shareholders
by less than unanimous vote; (iv) to ratify an amendment to the
Amended By-laws of the Company reducing the minimum number of
directors from six to three; (v) to elect three members of the
Board of Directors each to a one year term; (vi) to ratify the
appointment of Arthur Andersen LLP as the Company's independent
public accountants for the fiscal year ending December 31, 1998;
and (vii) to transact such other business as may properly come
before the Special Meeting and any adjournment or postponement
thereof.
Included among the matters described in this Proxy Statement
are matters that relate to approval of the Sale by the Company's
stockholders. Upon the terms and subject to the conditions of
the Sale Agreement, and upon the satisfaction of the conditions
set forth therein (the "Closing Date"), Bay will purchase from
the Company all of the Company's 40% equity interest (the "York
Interest") in York Hannover Partnership, a Wisconsin partnership
("York"), for cash in an amount equal to $2.3 million. The
consummation of the Sale is subject to the satisfaction or waiver
of certain conditions. See "Proposal 1 - The Sale - Terms and
Conditions of the Sale Agreement." Thomas M. Clarke, Linda M.
Clarke and Lawrence B. Cummings have entered into an agreement
with UPC pursuant to which they have agreed to vote the 4,044,925
shares of Common Stock held beneficially, directly or indirectly,
by them in favor of the Sale, which number of shares constitutes
approximately 70.8% of the Company's capital stock (on an as-
converted basis) entitled to vote on the Sale. See "Proposal 1 -
The Sale - Use of Proceeds."
This Proxy Statement is being furnished to holders of Common
Stock and 5% Preferred Stock in connection with the solicitation
of proxies by the Board of Directors of the Company for use at
the Special Meeting, and any adjournments thereof. Each copy of
this Proxy Statement being mailed or delivered to Company
stockholders is accompanied by a proxy card and the Notice of
Special Meeting of Stockholders.
All properly executed proxy cards delivered pursuant to this
solicitation and not revoked will be voted at the Special Meeting
in accordance with the directions given. In voting by proxy with
regard to the election of directors, stockholders may vote in
favor of all nominees, withhold their votes as to all nominees or
withhold their votes as to specific nominees. With regard to
other proposals, stockholders may vote in favor of each proposal
or against each proposal, or in favor of some proposals and
against others, or may abstain from voting on any or all
proposals. Stockholders should specify their respective choices
on the accompanying proxy card. If no specific instructions are
given with regard to the matters to be voted upon, the shares of
Common Stock represented by a signed proxy card will be voted
"FOR" Proposal Nos. 1, 2, 3, 4, 5 and 6 listed on the proxy card.
If any other matters properly come before the Special Meeting,
the persons named as proxies will vote upon such matters
according to their judgment.
The presence, in person or by proxy, of a majority of the
outstanding shares of Common Stock and 5% Preferred Stock,
counted as a single class, is necessary to constitute a quorum at
the Special Meeting. Each of the proposals set forth in this
Proxy Statement will be voted upon separately at the Special
Meeting. Because the Sale constitutes a sale of substantially
all of the assets of the Company under New York law, which
requires the approval of two thirds of the outstanding shares of
the Common Stock and 5% Preferred Stock, voting as a single
class, before such a sale may be consummated, the Board of
Directors of the Company is seeking approval of the stockholders
to complete the Sale. The affirmative vote of the holders of a
plurality of shares of Common Stock and 5% Preferred Stock,
voting as a single class, present in person or represented by
proxy at the Special Meeting will be required to elect each of
the Directors to the Company's Board of Directors pursuant to
Proposal No. 5. The affirmative vote of a majority of the
outstanding shares of the Common Stock and the 5% Preferred
Stock, voting as a single class, will be required to approve and
adopt Proposals Nos. 2 and 3. The affirmative vote of the
holders of a majority of shares of Common Stock and 5% Preferred
Stock, voting as a single class, present in person or represented
by proxy at the Special Meeting will be required to approve and
adopt Proposals Nos. 4 and 6. For these reasons, it is important
that all shares are represented at the Special Meeting, either in
person or by proxy.
All proxy cards delivered pursuant to this solicitation are
revocable at any time prior to their use at the Special Meeting
at the option of the persons executing them by giving written
notice to the Secretary of the Company, by delivering a later-
dated proxy card or by voting in person at the Special Meeting.
All written notices of revocation and other communications with
respect to revocations of proxies should be addressed to:
MetroVision of North America, Inc., 75 South Church Street,
Pittsfield, MA 01201, Attention: Linda M. Clarke, Secretary.
Proxies will initially be solicited by the Company by mail,
but directors, officers and selected employees may solicit
proxies from stockholders personally or by telephone, facsimile
or other forms of communication. Such directors, officers and
employees will not receive any additional compensation for such
solicitation. MetroVision also will request brokerage houses,
nominees, fiduciaries and other custodians to forward soliciting
materials to beneficial owners, and the Company will reimburse
such persons for their reasonable expenses incurred in doing so.
All expenses incurred in connection with the solicitation of
proxies will be borne by the Company.
AT THE DIRECTORS' MEETING HELD TO CONSIDER THE SALE, THE
DIRECTORS OF METROVISION CAREFULLY CONSIDERED AND UNANIMOUSLY
APPROVED THE TERMS OF THE SALE AS BEING IN THE BEST INTERESTS OF
METROVISION AND ITS STOCKHOLDERS. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" PROPOSAL
1 TO APPROVE THE SALE.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" PROPOSAL NOS. 2, 3, 4, 5 and 6 TO BE
PRESENTED TO METROVISION STOCKHOLDERS AT METROVISION'S SPECIAL
MEETING.
Stockholders of the Company are not entitled to dissenters'
rights of appraisal or other dissenters' rights under New York
law with respect to the Sale or any other transactions
contemplated by the Sale Agreement.
METROVISION STOCKHOLDERS SHOULD
CONSIDER CAREFULLY THE FACTORS DESCRIBED UNDER
THE HEADING "RISK FACTORS" ON PAGE 16 IN THIS PROXY STATEMENT
The Company's Common Stock is traded on the National
Association of Securities Dealers, Inc. over-the-counter ("OTC")
Bulletin Board under the symbol "MVNA". On July 7, 1998, the
last bid price for the Common Stock was $0.09 per share.
This Proxy Statement and the accompanying proxy card are
being mailed to the stockholders of the Company on or about
August 3, 1998.
Information comprising the Annual Report to Stockholders for
the fiscal year ended December 31, 1997 is included herein, but
does not constitute a part of the Proxy Statement.
Shareholders are urged to review this Proxy Statement for further
information regarding the Sale Agreement being submitted to
shareholders for consideration at the Special Meeting, including,
but not limited to, the information set forth under "Risk
Factors" for a discussion of certain factors that should be
considered by the Company's shareholders before voting on the
matters more fully described herein.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in the Summary and elsewhere in this
Proxy Statement constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of
1995, as amended (the "Reform Act"). Such forward-looking
statements are based on management's current expectations,
involve known and unknown risks, and are subject to a number of
uncertainties and other factors which may cause the actual
results to differ materially from the performance or achievements
expressed or implied by such forward-looking statements. Such
factors include, among others, general economic and business
conditions, which will, among other things, impact demand for the
Company's products and services; industry capacity, which tends
to increase during strong years of the business cycle; changes in
public taste, industry trends and demographic changes;
competition from other communications and pharmaceutical services
companies, which may affect the Company's ability to generate
revenues: political, social and economic conditions and laws,
rules and regulations; timely completion of construction projects
for new systems for the joint ventures in which the Company has
invested; the loss of any significant customers; changes in
business strategy or development plans; the significant
indebtedness of the Company; quality of management; availability
of qualified personnel; changes in, or the failure to comply
with, government regulations; and other factors referenced in
this Proxy Statement, including the factors described in "Risk
Factors."
AVAILABLE INFORMATION 1
PROXY STATEMENT SUMMARY 2
The Companies 2
The Sale 2
The Special Meeting 4
The Other Proposals 4
METROVISION SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA 8
UNAUDITED SUMMARY PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL INFORMATION 10
METROVISION SHARE DATA 14
CAPITALIZATION 15
THE SPECIAL MEETING 16
Introduction; Purpose of the Special Meeting 16
Solicitation of Proxies 16
Revocation of Proxies 17
Expenses 17
Voting Securities; Record Date; Quorum 17
RISK FACTORS 18
PROPOSAL 1_THE SALE 19
Purpose and Structure of the Sale 19
Background of the Sale 19
Reasons for the Sale; Recommendation of the Board of
Directors 20
Conditions to the Sale 23
Termination or Amendment of Sale Agreement 23
Accounting Treatment of the Sale 23
Required Regulatory Approvals 23
Dissenters' Rights of Appraisal 24
Fees and Expenses 24
Federal Income Tax Consequences of the Sale to the
MetroVision Shareholders 24
Interests of Certain Persons in the Sale 24
PROPOSAL 2_AMENDMENT TO RESTATED CERTIFICATE OF
INCORPORATION TO CHANGE PURPOSES CLAUSE 25
PROPOSAL 3_RATIFICATION OF AMENDMENT TO AMENDED BY-LAWS
REDUCING THE MAXIMUM NUMBER OF DIRECTORS FROM
SIX TO THREE 28
PROPOSAL 4_ELECTION OF THREE DIRECTORS TO BOARD OF DIRECTORS 29
MANAGEMENT 29
Directors 29
Committees of the Board of Directors and Meetings 31
Compensation of Directors 31
Executive Officers 31
EXECUTIVE COMPENSATION 32
Option Grants 32
Option Exercises and Fiscal Year-End Values 32
Employment Contracts and Change of Control Arrangement 32
Certain Relationships and Related Transactions 33
Section 16(a) Beneficial Ownership Reporting Compliance 33
PROPOSAL 5_RATIFICATION OF APPOINTMENT OF ARTHUR ANDERSEN
LLP AS COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS 34
PRICE RANGE OF METROVISION COMMON STOCK 35
INFORMATION CONCERNING METROVISION 36
Business 36
Termination of Commuter Channel Business 36
Trademarks, Proprietary Information and Patents 37
Employees 37
Properties and Facilities 37
Legal Proceedings 38
BENEFICIAL OWNERSHIP OF METROVISION COMMON STOCK 39
INFORMATION CONCERNING METROVISION'S YORK PARTNERSHIP
BUSINESS 41
Business 41
Relationship of UPC and United Health, Inc. 41
Pharmacy Services 41
Consultant Pharmacist Services 41
Ancillary Services 42
Product and Market Development 42
Materials/Supply 42
Patents, Trademarks and Licenses 43
Inventories 43
Competition 43
Government Regulation 43
Environmental Matters 46
Employees 46
Properties and Facilities 46
Legal Proceedings 46
METROVISION'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 47
Results of Operations 47
Twelve Months Ended December 31, 1997 compared to
Twelve Months Ended December 31, 1996 47
Three Months Ended March 31, 1998 Compared to Three
Months Ended March 31, 1997 49
Liquidity and Sources of Capital 49
Recently Issued Accounting Standards 50
Year 2000 Compliance 51
DESCRIPTION OF METROVISION CAPITAL STOCK 52
Common Stock 52
Preferred Stock 52
RELATIONSHIP WITH INDEPENDENT AUDITORS 53
PROPOSALS OF SECURITY HOLDERS 53
OTHER MATTERS 53
ANNUAL REPORT; INCORPORATION BY REFERENCE 54
APPENDICES
Appendix APurchase and Assignment of Partnership Interest Agreement A-1
Appendix BExhibit A ("Partnership Market") to the York Partnership Agreement
B-1
EXHIBITS
Exhibit 1 MetroVision's Annual Report on Form 10-KSB for the year
ended December 31, 1997
Exhibit 2 MetroVision's Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1998
AVAILABLE INFORMATION
The Company is subject to certain informational reporting
requirements of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and in accordance therewith files reports and
other information with the Securities and Exchange Commission
(the "Commission"). These reports, proxy statements and other
information can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024 of the
Commission's office at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, DC 20549, and at its regional offices located at 7
World Trade Center, Suite 1300, New York, NY 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661.
Copies of such reports, proxy statements and other information
can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, DC 20549 at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. The address of the
Commission's Web site is http://www.sec.gov. Reports and proxy
statements and other information about the Company may also be
inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
PROXY STATEMENT SUMMARY
The following summary is qualified in its entirety by the
more detailed information and financial statements and notes
appearing elsewhere in this Proxy Statement. Shareholders of
MetroVision are urged to carefully review this Proxy Statement in
its entirety.
THE COMPANIES
MetroVision of North America, Inc. MetroVision of North
America, Inc., a New York corporation ("MetroVision" or "the
Company"), owns and, until February 28, 1998 as discussed below,
operated the Commuter Channel, a video cable network for the mass
transit industry. The Commuter Channel is currently installed in
the Port Authority Trans Hudson ("PATH") system in New York and
New Jersey, the Southeastern Pennsylvania Transit Authority
("SEPTA") system in Philadelphia, Pennsylvania, the Massachusetts
Bay Transit Authority ("MBTA") System in Boston, Massachusetts,
and the Bay Area Rapid Transit ("BART") system in the San
Francisco Bay area in California. On November 30, 1997, the
Company announced its plans to discontinue its MetroVision
Commuter Channel media operations, effective February 28, 1998.
The Company did proceed to shut down the operations of the
Commuter Channel as of February 28, 1998. Accordingly, the
Company is currently negotiating the termination of contractual
obligations and disposing of the assets as consideration for
settlements relating thereto. It is currently estimated that the
liquidation of the Commuter Channel will result in expenses of
approximately $380,000 for the Company, all of which are included
in the Company's December 31, 1997 financial statements.
MetroVision also holds a 40% interest in York Hannover
Partnership, a Wisconsin general partnership ("York") in which
United Professional Companies, Inc. ("UPC"), a subsidiary of
United Health, Inc. ("UHI"), owns the remaining 60% interest.
York purchases, repackages and dispenses prescription and non-
prescription medication in accordance with physician orders, and
delivers such prescriptions to a facility (typically a licensed
nursing home) for administration to individual patients by the
facility's nursing staff. York also provides consultant
pharmacist services to these facilities, including monitoring and
reporting of prescription drug therapies as well as other
pharmaceutical related functions for the facility, and provides
infusion therapy products and wholesale medical supplies and
Medicare Part B billing services.
MetroVision's executive offices are located at 75 South
Church Street, Suite 650, Pittsfield, MA 01201, and its telephone
number is (413) 448-2111.
Bay Pharmacy, Inc. Bay Geriatric Pharmacy, Inc., a Florida
corporation ("Bay").
United Professional Companies, Inc. United Professional
Companies, Inc., a Delaware corporation ("UPC").
THE SALE
The Sale Agreement Pursuant to the terms of the Sale
Agreement, the Company proposes to sell substantially all of its
assets (except for assets related to the Commuter Channel) to Bay
by selling the Company's 40% equity interest (the "York
Interest") in York for an aggregate purchase price of $2,300,000
(the "Purchase Price"). See "Proposal 1 - The Sale - The Sale
Agreement."
Wind Up of Business As a result of the Sale of the York
Interest, the Company's strategic focus will be to wind up its
business. The Company will wind up its business related to the
Commuter Channel; and will apply the proceeds of the Sale to pay
off principal, interest and penalties on its secured loan to
National HealthCare Corporation ("NHC") and the expenses of the
Company related to the preparation and distribution of this Proxy
Statement, conducting the Special Meeting and the negotiation and
closing of the Sale ("Administrative Expenses"). The loan to NHC
is currently in default. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources." The Company will use the
remaining proceeds of the Sale, if any, to pay other unsecured
liabilities of the Company, including federal and state tax
liabilities related to the Sale, accounts payable, liabilities
related to the winding up the Commuter Channel business, and a
working capital loan from Lenox Healthcare Inc., an affiliate of
Mr. Thomas M. Clarke, the Company's President (collectively, the
"Liabilities"). Because the Sale may constitute a "voluntary
liquidation" under the Company's Certificate of Incorporation,
upon completion of the Sale, holders of the Company's 5%
Preferred Stock would be entitled to payment of the liquidation
preference ("Liquidation Preference") on the Company's 5%
Preferred Stock which would be paid from the proceeds of the
Sale, if any, remaining after the payment of the Liabilities.
Any amounts remaining thereafter, which are not anticipated,
would be distributed to holders of the Company's Common Stock.
See "Risk Factors - Wind up of Business of the Company."
MetroVision believes that the sale of the York Interest will
allow the Company to maximize the value of its assets for the
benefit of creditors and shareholders.
Reasons for the Sale; Recommendation of the
Board of Directors In reaching their decision to approve
the Sale Agreement, the Board of Directors of the Company
consulted with its management team and advisors, and
independently considered the material factors described elsewhere
in this Proxy Statement. See "Proposal No. 1_The Sale_Reasons
for the Sale."
The Board of Directors of MetroVision has approved, by unanimous
vote, the Sale and recommends that all shareholders vote "FOR"
the Sale Agreement and the Sale. It is expected that all
directors and executive officers of MetroVision will vote in
favor of the Sale Agreement and the Sale. See "Proposal 1 - The
Sale - Reasons for the Sale; Recommendation of the Board of
Directors."
No Opinion of Financial Advisor The Board of Directors
concluded not to engage a financial advisor to render an opinion
as to the fairness to the MetroVision shareholders of the Sale.
See "Proposal 1 - The Sale - Reasons for the Sale; Recommendation
of the Board of Directors."
Interests of Certain Persons in the Sale If the proceeds
of the Sale are sufficient to pay all of the Liabilities of the
Company, the proceeds of the Sale may be used to repay a working
capital loan in the amount of $571,957 to Lenox Healthcare Inc.,
an affiliate of Mr. Thomas M. Clarke, President of the Company.
Effective Time of the Sale The Effective Time of the Sale
is the date and time at which all of the conditions to the Sale
Agreement are satisfied, which is expected to be promptly after
the Special Meeting if the Sale is approved by the shareholders
of MetroVision. See " Proposal 1 - The Sale Agreement."
Conditions to the Sale Pursuant to the Sale Agreement, the
obligation of each of MetroVision and Bay to consummate the Sale
are subject to certain conditions, including, but not limited to,
the approval of two-thirds of the Company's capital stock
entitled to vote thereon, and certain other specified conditions.
See "Proposal 1 - The Sale Agreement."
Regulatory Filings or Approvals MetroVision is not aware
of any governmental or regulatory requirements relating to
consummation of the Sale.
Appraisal Rights MetroVision shareholders are not
entitled to dissenters' rights of appraisal under New York law in
connection with the Sale.
Federal Income Tax Consequences MetroVision expects that
the Sale will not have specific federal or state income tax
consequences to the MetroVision shareholders. It is expected
that the Sale will result in federal and state tax liabilities to
the Company in an amount of approximately $451,000. See "The
Sale Agreement - Federal Income Tax Consequences of the Sale to
the MetroVision Shareholders."
Accounting Treatment The Sale will be accounted for as a
sale of the York Interest. See "The Sale Agreement - Accounting
Treatment of the Sale."
Risk Factors The Sale is subject to certain risks which
all shareholders should consider in evaluating the proposal to
approve and adopt the Sale Agreement and the Sale. See "Risk
Factors."
THE SPECIAL MEETING
Date, Time and Place of Special Meeting The Special Meeting
of Shareholders of MetroVision will be held at 10:00 a.m. local
time, at 75 South Church Street, Pittsfield, MA 01201 on
Thursday, August 27, 1998.
Record Date; Shares Entitled to Vote Holders of
MetroVision Common Stock and of 5% Preferred Stock at the close
of business on July 28, 1998 are entitled to notice of and to
vote at the Special Meeting (the "Record Date").
Purpose of the Special Meeting Holders of MetroVision
Common Stock and 5% Preferred Stock are being asked to vote upon
the following proposals: (i) to consider and approve the Purchase
and Assignment of Partnership Interest Agreement (the "Sale
Agreement"), dated as of June 1, 1998, by and among United
Professional Companies, Inc. ("UPC"), Bay Geriatric Pharmacy,
Inc. ("Bay"), and the Company, a copy of which is attached hereto
as Appendix A, and the transactions contemplated therein, which
include the sale of substantially all of the assets of the
Company to Bay (the "Sale"); (ii) to consider and approve an
amendment to the Restated Certificate of Incorporation changing
the Purposes Clause to authorize the activities in which
MetroVision may now lawfully engage; (iii) to consider and
approve an amendment to the Restated Certificate of Incorporation
to permit action by written consent of shareholders by less than
unanimous vote; (iv) to ratify an amendment to the Amended By-
laws of the Company reducing the minimum number of directors from
six to three; (v) to elect three members of the Board of
Directors to one year terms; (vi) to ratify the appointment of
Arthur Andersen LLP as the Company's independent public
accountants for the fiscal year ending December 31, 1998; and
(vii) to transact such other business as may properly come before
the Special Meeting and any adjournment or postponement thereof.
Vote Required;
Security Ownership of Management The affirmative vote of
the holders of two-thirds of the outstanding shares of
MetroVision Common Stock and 5% Preferred Stock, voting together
as a single class, in person or by proxy, is required to approve
and adopt Proposal 1. The affirmative vote of the holders of a
plurality of shares of Common Stock and 5% Common Stock, voting
together as a single class, present in person or represented by
proxy at the Special Meeting will be required to elect each of
the directors to the Company's Board of Directors pursuant to
Proposal No. 5. The affirmative vote of a majority of the
outstanding shares of the Common Stock and the 5% Preferred
Stock, voting as a single class, will be required to approve and
adopt Proposals Nos. 2 and 3. The affirmative vote of the
holders of a majority of the shares of MetroVision Common Stock
and 5% Preferred Stock, voting together as a single class, in
person or by proxy, is required to approve Proposal Nos. 4 and 6.
As of the Record Date, there were issued and outstanding
5,574,275 shares of Common Stock and 648,535 shares of 5%
Preferred Stock, of which 4,044,925 shares of Common Stock,
representing approximately 72.6% of the issued and outstanding
Common Stock, were beneficially owned by directors and executive
officers of MetroVision as a group. On an as - converted basis
(with 4.6 shares of 5% Preferred Stock being Convertible into one
share of Common Stock), the directors and executive officers hold
stock representing approximately 70.8% of the outstanding voting
capital stock of the Company. Thomas M. Clarke, President of the
Company, beneficially owns 4,044,925 shares of Common Stock,
representing approximately 65% of the issued and outstanding
Common Stock and Preferred Stock in the aggregate (and
approximately 70.8% on an as - converted basis). Each of
MetroVision's officers and directors has indicated his present
intention to vote for the Sale and each of the other proposals
being submitted to shareholders for their consideration at the
Special Meeting. Thomas M. Clarke, Linda M. Clarke and Lawrence
B. Cummings have entered into an agreement with UPC pursuant to
which they have agreed to vote the 4,044,925 shares of Common
Stock held beneficially, directly or indirectly, by them in favor
of the Sale, which number of shares constitutes approximately
70.8% of the Company's capital stock (Common Stock and 5%
Preferred Stock, on an as-converted basis) entitled to vote on
the Sale.
The Other Proposals
The Change to the Purposes Clause MetroVision is submitting
to its shareholders for approval the proposed amendment to the
Purposes Clause of the Company's Restated Certificate of
Incorporation, the terms of which would effectively place third
parties on notice that the Company may engage in any lawful
activity other than those activities specifically proscribed by
the Purposes Clause. Those proscribed activities would
principally constitute those subject to the jurisdiction of the
New York Department of Health. See "Proposal 2_Amendment to
Restated Certificate of Incorporation to Change Purposes Clause."
Permit action by Written Consent of Shareholders
by Less than Unanimous Vote MetroVision is submitting to
its shareholders for approval a proposal to amend the Restated
Certificate of Incorporation to permit action by written consent
of shareholders by less than unanimous vote. See "Proposal 3 -
Amendment to Restated Certificate of Incorporation to Permit
Action by Written Consent of Shareholders by Less than Unanimous
Vote."
Change the Minimum Number of Directors
From Six to Three MetroVision is submitting to its
shareholders a proposal to ratify an amendment to its Amended By-
laws, approved by the Board of Directors on June 12, 1998, which
would reduce the minimum number of directors from six to three.
See Proposal 4 - Ratification of Amendment to Amended By-laws to
Reduce Minimum Number of Directors From Six to Three.
Election of Directors The three current members of the
Board of Directors of the Company have been nominated for re-
election at the Special Meeting. The Board of Directors knows of
no reason why any of its nominees will be unable or will refuse
to accept election. If any nominee becomes unable or refuses to
accept election, the Board of Directors will either reduce the
number of directors to be elected or select a substitute nominee.
If a substitute nominee is selected, proxies will be voted in
favor of such nominee. The affirmative vote of the holders of a
plurality of shares of Common Stock and 5% Preferred Stock,
voting as a single class, will be required to elect each of the
Directors to the Company's Board. See "Proposal 5_ Election of
New Directors."
Appointment of Arthur Andersen LLP as Public
Accountants MetroVision's Board of Directors has
appointed the firm of Arthur Andersen LLP, independent auditors,
to audit the consolidated financial statements of MetroVision and
York for the fiscal year ending December 31, 1998, subject to
ratification by the Company's shareholders. If the Company's
shareholders do not ratify the appointment of Arthur Andersen LLP
as the Company's independent accountants for the forthcoming
fiscal year, such appointment will be reconsidered by the Audit
Committee and the Board of Directors. The affirmative vote of a
majority of the shares of Common Stock and 5% Preferred Stock,
voting as a single class, present in person or represented by
proxy at the Special Meeting will be required to approve and
adopt Proposal Number 5. See "Proposal 6_Appointment of Arthur
Andersen LLP as Public Accountants."
SELECTED FINANCIAL DATA
METROVISION SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected financial data is derived from the
Consolidated Financial Statements of the Company. On April 1,
1997, the Company consummated a merger with York Hannover that
has been accounted for as a reverse acquisition of the Company by
York Hannover under the purchase method of accounting as
prescribed by APB Opinion 16. Accordingly, the historical
financial statements of the Company prior to the merger have been
changed to reflect the historical financial statements of York
Hannover. The data should be read in conjunction with the
Consolidated Financial Statements, related Notes, and other
financial information included herein.
MetroVision Selected Historical Consolidated Financial Data
(In thousands, except per share data)
Summary Historical Condensed Financial Data
Three Months Ended
Twelve Months Ended December 31, March 31,
1993(1) 1994 1995 1996 1997 1997 1998
Statement of Operations Data
Net patient revenues $3,466 $4,260 $2,673 $ -- $ -- $-- $--
Equity in earnings of
York Hannover Partnership -- -- 104 448 768 221 202
Total revenues 3,466 4,260 2,777 448 768 221 202
Cost of patient revenues (1,924)(2,396)(1,392) -- -- -- --
Selling, general and
administrative (950)(1,128)(1,546) (391) (329) (75) (60)
Depreciation and amortization (476) (82) (45) -- -- -- --
Amortization of deferred
revenue -- -- 55 133 33 33 --
Other income (expense) -- -- 118 121 (19) (67) --
Interest expense, net (159) (319) (290) (290) (292) (70) (62)
Income tax provision -- -- -- (19) (61) -- --
Discontinued operations,
net of tax -- -- -- -- (1,438) -- --
Net income (loss) $(43) $335 $(323 ) $ 2$(1,338) 42 80
(1) Reflects operations of predecessor entity prior to purchase
by York Hannover in December 1993 and does not represent the
ongoing operations after the purchase.
Summary Historical Financial Data
December 31, March 31,
1993 1994 1995 1996 1997 1998
Balance Sheet Data
Working capital (deficit) $430 $34 $(192)$(3,341)$(3,726) $(3,748)
Total assets 842 1,335 1,240 1,632 1,269 1,387
Short-term debt -- 771 174 2,751 2,547 2,522(1)
Long-term debt
(excluding current portion) 2,713 1,924 2,180 -- -- --
(1)As of March 31, 1998, the Company had received loans from
affiliates totaling $571,957. These loans, including all accrued
and unpaid interest, were due no later than May 1, 1998.
UNAUDITED SUMMARY PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
MetroVision and Bay have entered into a Sale Agreement,
subject to approval by the shareholders of MetroVision, whereby
MetroVision will sell substantially all of its assets (except for
assets related to the Commuter Channel) to Bay by selling the
Company's 40% equity interest (the "York Interest") in York for
an aggregate purchase price of $2,300,000 (the "Purchase Price").
The Sale will be accounted for as a sale of the York
Interest.
The following unaudited pro forma consolidated balance sheet
as of March 31, 1998 has been prepared based on the historical
balance sheets of MetroVision, as adjusted to reflect the Sale as
if it had occurred on March 31, 1998. The unaudited pro forma
consolidated income statement for the year ended December 31,
1997 has been prepared based on the historical income statements
of MetroVision adjusted to reflect the Sale as if it had occurred
on January 1, 1997. The unaudited pro forma consolidated income
statement for the three months ended March 31, 1998 has been
prepared based on the historical income statements of
MetroVision, adjusted to reflect the Sale as if it had occurred
on January 1, 1998. This information is presented for
informational purposes only and, therefore, is not necessarily
indicative of the financial position or operating results that
would have occurred or might be achieved if the Sale had occurred
at an earlier date, nor is it necessarily indicative of the
financial position or operating results that may occur in the
future.
MetroVision Summary Pro Forma Consolidated Balance Sheet Data
March 31, 1998
(Unaudited, in thousands)
Metro Pro Forma Pro Forma
Vision Adjustments Combined
Historical
Current assets
$ 16 $ - - $ 16
Investment in York Hannover
Partnership 1,372 (1,372) (a) - -
Total Assets
$ 1,388 $ (1,372) 16
Liabilities and
Stockholders' Deficit
Current liabilities,
excluding short-term debt $ 1,242 $ 701 (a) $ 1,393
(224)(b)
(326)(c)
Short-term debt 2,522 (1,950)(b) 572
Preferred stock 1 1
Common Stockholders' deficit (2,377) (427)(a) (1,950)
Total Liabilities and
stockholders' deficit $ 1,388 $(1,372) $ (16)
(a) To record the Sale of the Company's York Interest as if it
had occurred on March 31, 1998 including a gain on the Sale
of $1,128, a tax liability of $451 and a liability of $250
for fees and expenses associated with the Sale and Proxy
Statement.
(b) To record the payment of principal and interest accrued on
MetroVision's secured loan payable to National
HealthCare Corporation from the proceeds of the Sale.
(c) To record the payment of fees and expenses associated with
the Sale and Proxy Statement and various other current
liabilities from the proceeds of the Sale.
MetroVision Summary Pro Forma Consolidated Statement of Income Data
Year Ended December 31, 1997
(Unaudited, in thousands, except Per Share Data)
Metro Pro Forma Pro Forma
Vision Adjustments Combined
Historical
Total revenues
$ 768 $ (768)(a) - -
Gain on Sale of
York Interest - - 1,799 (a) 1,799
Selling, general and
administrative 329 250 (a) 579
Amortization of
deferred revenue (33) - - (33)
Other expense, net 19 - - 19
Interest expense, net 292 (266)(a) 26
Net income from continuing
operations before
income taxes 161 1,047 (a) 1,208
Income tax provision (61) (451)(a) (512)
Net income from continuing
operations 100 596 696
Discontinued operations, net
of tax (1,438) - - (1,438)
Net loss (1,338) 596 (742)
Less - preferred stock
dividend requirements 180 - - 180
Net income applicable to
common stock $ (1,518) $ 596 $ (922)
Weighted average number of
shares 5,180,706 5,180,706
Net loss per common ($0.30) ($0.18)
share
(a) To adjust the MetroVision historical income statement to
reflect the sale of the York Interest and use of proceeds to
retire debt as if both had occurred on January 1, 1997. The
adjustments include recognition of a gain on the Sale of
$1,799, a tax provision of $451, fees and expenses of $250
related to the Sale and Proxy Statement, removal of revenues
from the York Interest of $768 and removal of interest
expense on retired debt of $266.
MetroVision Summary Pro Forma Consolidated Statement of Income Data
Three Months Ended March 31, 1998
(Unaudited, in thousands, except Per Share Data)
Metro Pro Forma Pro Forma
Vision Adjustments Combined
Historical
Total revenues $ 202 $ (202)(a) $ - -
Gain on Sale of York
Interest - - 1,231 (a) 1,231
Selling, general and
administrative 60 250 (a) 310
Interest expense, net 62 (62)(a) - -
Net income before income
taxes 80 841 (a) 921
Income tax provision - - (451) (451)
Net income 80 390 470
Less - preferred stock
dividend requirements 45 - - 45
Net income applicable to $
common stock $ 35 $ 390 $ 425
Weighted average number of
shares 5,574,275 5,574,275
Net income per common share $0.01 $0.08
(a) To adjust the MetroVision historical income statement to
reflect the sale of the York Interest and use of proceeds to
retire debt as if both had occurred on January 1, 1998. The
adjustments included recognition of a gain on the Sale of
$1,231, a tax provision of $451, fees and expenses of $250
related to the Sale and Proxy Statement, removal of revenues
from the York Interest of $202 and removal of interest
expense on retired debt of $62.
METROVISION SHARE DATA
The following table sets forth for the periods indicated (1)
the historical net loss per common share and the historical book
value per common share data of MetroVision Common Stock, and (2)
the unaudited pro forma net loss per common share of capital
stock and the unaudited pro forma book value data per share of
MetroVision Common Stock after giving effect to the Sale.
MetroVision has not declared or paid cash dividends for the
periods indicated. See "Price Range of MetroVision Common Stock."
The information presented in the following table should be read
in conjunction with the separate historical consolidated
financial statements, including the notes thereto, and the
interim unaudited consolidated condensed financial statements of
MetroVision and the notes thereto appearing elsewhere herein.
MetroVision Pro Forma
Historical Combined(1)
Net income (loss) per common share:
Three Months ended March 31, 1998 $ .01 $ .08
Twelve months ended December 31, 1997 (.30) (.18)
Book value per share(2):
March 31, 1998 $ (.42) $ (.35)
December 31, 1997 (.44) (.35)
______________________
(1)Gives effect to the Sale under "Unaudited Summary Pro Forma
Combined Condensed Consolidated Financial Information."
(2)Computed by dividing stockholders' deficit by shares
outstanding on the date indicated.
The Company's Common Stock is traded on the OTC Bulletin
Board under the symbol "MVNA". On May 29, 1998 (the trading day
preceding the date of the Sale Agreement), the last bid price for
the Common stock was $0.125 per share.
CAPITALIZATION
The following table sets forth as of March 31, 1998 the
capitalization of MetroVision on a historical basis and on a pro
forma basis as adjusted to give effect to the consummation of the
Sale.
March 31, 1998
(in thousands)
Pro
Actual Forma(1)
Short-Term Debt:
Notes Payable $ 2,522 $ 572
Long-Term Debt (less current portion): -- --
Preferred Stock 1 1
Common Stockholders' Deficit
Common Stock, $.001 Par Value;
(25,000,000 shares authorized;
5,574,275 shares issued at December 31, 6 6
1997 -
historical, and 5,574,275 - pro forma)
Additional Paid in Capital 1,077 1,077
Retained Deficit (3,460) (3,033)
Total Common Stockholder's Deficit (2,377) (1,950)
Total Capitalization $ 146 $(1,377)
(1) Gives effect to the Sale and use of proceeds to retire debt
as if both had occurred on March 31, 1998.
THE SPECIAL MEETING
Introduction; Purpose of the Special Meeting
This Proxy Statement is being furnished to holders of
MetroVision Common Stock and 5% Series A Convertible Preferred
Stock (the "5% Preferred Stock") in connection with the
solicitation of proxies by the Board of Directors of MetroVision
for use at the Special Meeting of Shareholders (the "Special
Meeting") to be held on Thursday, August 27, 1998 at 10:00 a.m.,
local time, at 75 South Church Street, Pittsfield, MA 01201. At
the Special Meeting, shareholders will be asked: 1) to consider
and approve the Sale Agreement and the Sale; 2) to consider and
approve an amendment to the Restated Certificate of Incorporation
changing the Purposes Clause to authorize the activities in which
the Company may now lawfully engage; 3) to consider and approve
an amendment to the Restated Certificate of Incorporation to
permit action by written consent of shareholders by less than
unanimous vote; 4) to ratify an amendment to the Amended By-laws
of the Company reducing the minimum number of directors from six
to three; 5) to elect three members of the Board of Directors
each for a one year term; 6) to ratify the appointment of Arthur
Andersen LLP as the Company's independent public accountants for
the fiscal year ending December 31, 1998; and 7) to transact such
other business as may properly come before the Special Meeting
and any adjournment or postponement thereof.
Solicitation of Proxies
The enclosed proxy is being solicited by the Board of
Directors for use in connection with the Special Meeting and any
postponement or adjournment thereof. All shares of Common Stock
and 5% Preferred Stock represented at the Special Meeting by
properly executed proxies received prior to or at the Special
Meeting or any postponement or adjournment thereof, and not
revoked in the manner described below, will be voted in
accordance with the instructions indicated on such proxies. If no
instructions are indicated, the proxies will be voted in favor of
the proposal to approve and adopt the Sale Agreement and the
Sale, for the nominees for election to the Board of Directors,
for each of the other proposals being submitted to shareholders
at the Special Meeting for their approval and, at the discretion
of the proxy holder, as to any other matter which may properly
come before the Special Meeting.
The Board knows of no matter which will be presented for
consideration at the Special Meeting other than those matters set
forth in the Notice of Special Meeting accompanying this Proxy
Statement. If any other matters are properly presented for action
at the Special Meeting or any postponement or adjournment
thereof, the persons named in the enclosed proxy will have
authority to vote on such matters in their sole discretion.
If a quorum for the Special Meeting is not obtained or, as
to any one or more proposals, if fewer shares are voted in favor
of the proposal then the number of shares required for such
approval, the Special Meeting may be adjourned for the purposes
of obtaining additional proxies or votes or for any other purpose
and, at any subsequent reconvening of the Special Meeting, all
proxies will be voted in the same manner as such proxies would
have been voted at the original convening of the Special Meeting
(except for any proxies which have theretofore effectively been
revoked or withdrawn), notwithstanding that they may have been
effectively voted on the same or any other matter at a previous
Special Meeting. Any proxies voted against the Sale may not be
voted at the Special Meeting in favor of adjournment of the
Special Meeting.
Abstentions are counted as present at the Special Meeting
and thus are included in determining a quorum. With respect to
the tabulation of votes, abstentions are not treated as votes
cast in the election of directors (and thus are not the
equivalent of votes against a nominee) but are treated as votes
present and outstanding on other matters (and therefore are the
equivalent of a vote against matters other than the election of
directors). Brokers non-votes (broker proxies which have not
voted on a particular proposal) are not included in determining a
quorum with respect to a particular proposal. With respect to
the tabulation of votes, broker non-votes are not treated as
votes cast in the election of directors (and thus are not the
equivalent of votes against a nominee), are not treated as votes
present in matters requiring the affirmative vote of a percentage
of the shares present at the Special Meeting (and therefore do
not affect the vote on such a proposal) but are votes outstanding
in matters requiring the vote of a certain percentage of the
outstanding shares of the Company (and therefore are the
equivalent of votes against such a proposal).
Revocation of Proxies
Proxies may be revoked by those persons executing proxies at
any time before the authority granted thereby is exercised by (a)
delivering to the Secretary of MetroVision at or before the
Special Meeting a written notice of revocation bearing a later
date than the proxy, (b) duly executing a subsequently dated
proxy relating to the same shares and delivering it to the
Secretary of MetroVision at or before the Special Meeting or (c)
attending the Special Meeting and voting in person (although
attendance at the Special Meeting will not in and of itself
constitute revocation of a proxy). Any written notice revoking a
proxy should be delivered at or prior to the Special Meeting to
the attention of the Corporate Secretary, MetroVision of North
America, Inc., 75 South Church Street, Pittsfield, MA 01201.
Expenses
MetroVision will bear the costs of the solicitation of its
proxies in connection with the Special Meeting, including the
costs of preparing, assembling and mailing proxy materials and
the handling and tabulations of proxies received. In addition to
solicitation of proxies by mail, proxies in connection with the
Special Meeting may be solicited by directors, officers and
selected employees of the Company, at no additional compensation,
by telephone, telegram, personal interviews or otherwise.
Arrangements also have been made with respect to brokerage firms,
custodians, nominees and fiduciaries to forward solicitation
materials to beneficial owners of shares held of record by such
persons or firms or their nominees, and in connection therewith,
such firms will be reimbursed for the reasonable out-of-pocket
expenses in forwarding such materials.
Neither the Company nor any person acting on its behalf has
retained any other person to make solicitations or
recommendations to shareholders with respect to the Sale, the
change in the Purposes Clause of the Restated Certificate of
Incorporation, the amendment to the Amended By-laws reducing the
minimum number of directors from six to three, the Election of
Directors, the Ratification of Appointment of the Public
Accountants or any other proposal submitted to the shareholders
for consideration at the Special Meeting.
Voting Securities; Record Date; Quorum
Only shareholders of record of Common Stock and 5% Preferred
Stock at the close of business on July 28, 1998 are entitled to
notice of and to vote at the Special Meeting and at any
adjournment or postponement thereof. At that date, there were
5,574,275 shares of Common Stock and 648,535 shares of 5%
Preferred Stock issued and outstanding (4.6 shares of 5%
Preferred Stock being convertible into one share of Common
Stock). Each share of Common Stock is entitled to one vote per
share, and each 4.6 shares of 5% Preferred Stock are entitled to
one vote, exercisable in person or by duly executed proxy, on all
matters which properly come before the Special Meeting or any
adjournment or postponement thereof. There is no cumulative
voting in the election of directors. The presence, in person or
by proxy, of shareholders entitled to vote of at least a majority
of the shares of Common Stock and 5% Preferred Stock, counted as
a single class, outstanding on the record date will constitute a
quorum for purposes of the Special Meeting. Approval of the Sale
requires the affirmative vote of the holders of two-thirds of the
outstanding shares of Common Stock and 5% Preferred Stock, voting
as a single class, in person or by proxy at the Special Meeting.
The affirmative vote of the holders of a plurality of shares of
Common Stock and 5% Preferred Stock, voting as a single class,
present in person or represented by proxy at the Special Meeting
will be required to elect each of the directors to the Company's
Board of Directors. Approval of the 2 Amendments to the Restated
Certificate of Incorporation requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock
and 5% Preferred Stock, voting together as a single class.
Approval of the Amendment to the Amended By-Laws to reduce the
minimum number of directors from six to three and the
ratification of the appointment of the public accountants
requires the affirmative vote of the holders of a majority of the
shares of Common Stock and 5% Preferred Stock, voting together as
a single class, present in person or by proxy at the Special
Meeting.
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROXY
STATEMENT, THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY
IN EVALUATING WHETHER TO APPROVE THE SALE AND THE SALE AGREEMENT.
CERTAIN STATEMENTS SET FORTH BELOW UNDER THIS CAPTION CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE REFORM
ACT. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS"
FOR ADDITIONAL FACTORS RELATING TO SUCH STATEMENTS.
TRANSACTION-RELATED CONSIDERATIONS
WINDING UP OF BUSINESS OF METROVISION
As a result of the Sale, the Company's strategic focus will be to
wind up its business. The Company will wind up its business
related to the Commuter Channel and will apply the proceeds of
the Sale to pay off principal, interest and penalties on its
secured loan to National HealthCare Corporation ("NHC") and the
expenses of the Company related to the preparation and
distribution of this Proxy Statement, conducting the Special
Meeting and the negotiation and closing of the Sale
("Administrative Expenses".) The loan to NHC is in default. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources." The
Company will use the remaining proceeds of the Sale, if any, to
pay other unsecured liabilities of the Company, including federal
and state tax liabilities related to the Sale, accounts payable,
liabilities relating to the winding up of the Commuter Channel
business, and a working capital loan from Lenox Healthcare Inc.,
an affiliate of Mr. Thomas M. Clarke, the Company's President
(collectively the "Liabilities"). Because the Sale may
constitute a "voluntary liquidation" under the Company's
Certificate of Incorporation, upon completion of the Sale,
holders of the Company's 5% Preferred Stock would be entitled to
payment of the liquidation preference ("Liquidation Preference")
on the Company's 5% Preferred Stock which would be paid from the
proceeds of the Sale remaining, if any, after the payment of the
Liabilities. Any amounts remaining thereafter, which are not
anticipated, would be distributed to holders of the Company's
Common Stock. It is not expected that any amounts will be paid
on the Liabilities or be available for distribution to
shareholders.
FAILURE OF SALE TO CLOSE
There can be no assurance that all of the conditions to the Sale
will be satisfied or that the Sale will be consummated. Failure
to consummate the Sale will result in material expenses to the
Company which will not be reimbursed. In this event, the assets
available to be used to wind up the business of the Company may
be materially reduced. See "Proposal No. 1 -- The Sale-- Terms
and Conditions of Stock Purchase Agreement."
FUTURE FINANCING NEEDS
Assuming that the Sale is consummated, and the Company
successfully winds up its business, the Company's remaining
strategic business will be significantly different. Any new
business of the Company, whether entered into directly or by
means of a business combination, will require the investment of
significant amounts of capital. See "The Sale-Change in Business
of MetroVision". In connection with the consummation of the Sale,
the Company anticipates that it will receive approximately
$2,300,000 of net cash proceeds. As a condition to closing under
the Sale Agreement, the Company will use approximately $2.1
million of such net proceeds to repay its secured loan (including
accrued interest and penalties) to NHC, leaving the Company with
approximately $200,000 of net cash proceeds (before taxes), which
will be applied to payment of the Administrative Expenses. No
proceeds from the Sale are expected to be available for the
payment of Liabilities, which total approximately $1,925,000. As
a result, although the Company will have no significant long-term
debt, the Company will require additional financing in order to
satisfy current unsecured creditors, any new business's on-going
capital requirements and to achieve any new business's long-term
business strategies. Such additional capital would most likely be
provided through the public or private sale of debt or equity
securities. If an alternative business or business combination
and related financing cannot be obtained, the Company will be
dissolved.
PROPOSAL 1_THE SALE
Purpose and Structure of the Sale
The purpose of the Sale is for the Company to sell
substantially all of its assets (except for assets related to the
Commuter Channel) to Bay by selling the Company's York Interest
for an aggregate purchase price of $2,300,000. As a result of
the Sale of the York Interest, the strategic focus of Company
will be to wind up its business.
Background of the Sale
The Board of Directors believes that the Sale represents the
most attractive financial alternative available to the Company's
shareholders. In the course of the last three fiscal years,
MetroVision has incurred net losses of $4,098,028 in the
operation of its video cable network for mass transit systems.
During the same period, the Company realized net revenues of only
$3,229,316 on a historical basis from the operation of its video
cable network. The substantial losses incurred by the Company
have to date been funded primarily from the sale of its Common
Stock, from the income generated by York, and from the Company's
working capital loan.
MetroVision believes that the inherent difficulty with the
Commuter Channel business strategy and, consequently, the
principal reason for the continuing losses from operations, is
that the current network of place-based media for mass transit
systems is not sufficiently large to attract national advertisers
willing to commit substantial sums from their advertising
budgets. At the same time, however, the high cost of operations
requires the Company to charge advertising rates which generally
preclude local and regional advertisers from purchasing
advertising on the Company's network. As a result, the Company
has been unable to generate meaningful revenues from operations,
and the substantial losses incurred by the Company to date have
been funded primarily from equity or debt financings.
Notwithstanding attempts by the Board of Directors to seek
external financing after the Company's secondary public offering
in December 1993, these efforts have proven largely unsuccessful.
Accordingly, the Board of Directors does not believe attempts at
continued expansion of the Company's network is appropriate,
given its very limited financial resources and its relative
inability to generate meaningful revenues from such network. At
the same time, the Board believes that it will likely not be able
to sustain its existing operations for the foreseeable future and
on November 30, 1997 the Company announced its plans to terminate
the Commuter Channel business, effective February 28, 1998.
As noted above, the operating losses of the Commuter Channel
business have been funded by revenues from the operation of York.
However, pursuant to the terms of the York Partnership Agreement
between York Hannover Pharmaceuticals, Inc., and UPC dated July
13, 1995 (the "Partnership Agreement"), the partnership will
terminate on August 1, 2000, unless both partners agree to
continue the partnership. UPC has indicated it will not vote to
continue the partnership. In addition, United Health Inc.
("UHI"), UPC's parent company, recently acquired Bay Geriatric
Pharmacies, Inc., a company which is a direct competitor of York,
in violation of the non-competition clause in the Partnership
Agreement. Upon learning of the acquisition of Bay Geriatric
Pharmacies, Inc. by UHI, management of MetroVision approached UPC
and UHI with respect to the violation of the non-competition
clause of the Partnership Agreement. As a result of discussions
concerning this issue, UPC offered to acquire MetroVision's York
Interest.
MetroVision then contracted with Centennial Valuation Group,
PLLC ("Centennial") to provide an appraisal (the "Appraisal") of
the Partnership Interest as of January 1, 1998. Centennial
completed the Appraisal on a present value cash flow basis (using
a discounted earnings method), which indicated a valuation of
$2.9 million. On the basis of such appraisal and an appraisal
obtained by UPC, the parties negotiated a purchase price of
$2,500,000 as adjusted by the $200,000 of pro rata net income
distributed by York to MetroVision subsequent to January 1, 1998.
After deliberation by the Board of Directors at meetings
held on April 3, 1998 and June 12, 1998, MetroVision's Board
determined that the Sale would represent the most attractive
alternative of maximizing the assets of the Company for the
benefit of creditors and stockholders.
On June 12, 1998, the Board of Directors discussed the terms
of the Sale Agreement and unanimously approved the Sale Agreement
and the proposed Sale, and authorized that the Sale Agreement and
Sale be submitted to shareholders for their approval.
Reasons for the Sale; Recommendation of the Board of Directors
The Company's Board of Directors has determined that the
Sale is fair to, and in the best interests of, the Company and
its shareholders, and has approved the Sale Agreement and the
Sale. The Board of Directors recommends that the MetroVision
shareholders vote FOR the Sale Agreement and the Sale.
In reaching its conclusion that the Sale is in the best
interests of MetroVision and its shareholders, the MetroVision
Board of Directors considered a variety of factors including,
among other things, the following:
1. The current financial condition and cash position
of MetroVision is such that, without the infusion of
additional cash, there is substantial doubt about
MetroVision's ability to continue as a going concern for a
sustained period, or generate meaningful, if any, profits.
MetroVision has been relatively unsuccessful in obtaining
external financing from any third parties other than from
certain of its officers and directors, and it is unlikely
that these persons or any other third parties are prepared
to make capital investments in MetroVision at this time.
2. The fact that given the acquisition of Bay
Geriatric Pharmacies, Inc. by UHI, it is probable that
York's market share will be significantly reduced through
competition with Bay Pharmacies, Inc.
3. The conclusion that any litigation with UHI and
UPC with respect to the violation of the non-competition
clause in the Partnership Agreement would most likely not
result in money damages in an amount and a time frame which
would maximize shareholder value more that the Sale.
4. Given the acquisition by UHI of Bay Geriatric
Pharmacies, Inc. and the terms of the Partnership Agreement,
it is unlikely that MetroVision will be able to identify
other potential purchaser candidates for the York Interest,
particularly ones with seasoned management and with a market
presence, financial condition or capital structure which
could potentially result in maximizing shareholder value
greater that than realized through the Sale.
5. Management's belief that strategic alternatives to
the Sale or a sale to another third party, including
allowing NHC to foreclose on the York Interest, are ones
which would not maximize the value of the York Interest.
6. The Appraisal, including the underlying
assumptions for the Appraisal, and the default status of and
outstanding balance of the NHC loan.
The MetroVision Board of Directors also considered certain
negative factors, in addition to those set forth herein under the
caption "Risk Factors," including that the Sale would result in
the loss of the Company's York Interest and related revenues,
requiring the winding up of the business of the Company
In view of the variety of factors considered by the
MetroVision Board in connection with its evaluation of the Sale,
the MetroVision Board did not find it practicable to, and did not
quantify or otherwise assign relative weights to, the specific
factors considered in reaching its conclusion.
In light of the specific circumstances surrounding the Sale,
including, but not limited to, the current financial condition
faced by MetroVision and the lack of any reasonable or
foreseeable near-term alternative to the Sale, the MetroVision
Board did not find it financially prudent to engage an
independent financial advisor to render an opinion for the
benefit of the Board and the MetroVision shareholders as to the
fairness from a financial point of view of the consideration to
be paid by Bay for the York Interest. The Board believed that the
expense which would have been incurred to engage a financial
advisor for this purpose would have been an inappropriate use of
MetroVision's extremely limited cash resources.
The directors of MetroVision unanimously approved the Sale
Agreement and the Sale.
Approval of the Sale Agreement and the Sale requires the
affirmative vote of two-thirds of the outstanding shares of
MetroVision Common Stock and 5% Preferred Stock, voting together
as a single class. As of the record date, the MetroVision
directors and executive officers beneficially owned 4,055,358
shares of Common Stock as a group, or an aggregate of
approximately 71% (on an as-converted basis) of the total number
of shares entitled to vote at the Special Meeting. Thomas M.
Clarke, President of the Company, beneficially owns 4,044,925
shares of Common Stock, representing approximately 70.8% (on an
as-converted basis) of the issued and outstanding Common Stock
and 5% Preferred Stock. Each of MetroVision's officers and
directors have indicated their present intention to vote for the
Sale Agreement and the Sale. Thomas M. Clarke, Linda M. Clarke
and Lawrence B. Cummings have entered into an agreement with UPC
pursuant to which they have agreed to vote the 4,044,925 shares
of Common Stock held beneficially, directly or indirectly, by
them in favor of the Sale, which number of shares constitutes
approximately 70.8% of the Company's capital stock entitled to
vote on the Sale.
Use of Proceeds, Wind Up of Business
As a result of the Sale of the York Interest, the Company's
strategic focus will be to wind up its business. The Company
will wind up its business related to the Commuter Channel; and
will apply the proceeds of the Sale to pay off principal,
interest and penalties on its secured loan to National HealthCare
Corporation and the expenses of the Company related to the
preparation and distribution of this Proxy Statement, conducting
the Special Meeting and the negotiation and closing of the Sale.
The loan to NHC is currently in default. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources." The Company will
use the remaining proceeds of the Sale, if any, to pay other
unsecured liabilities of the Company, including federal and state
tax liabilities related to the sale, accounts payable,
liabilities related to the winding up the Commuter Channel
business, and a working capital loan to Lenox Healthcare Inc., an
affiliate of Mr. Thomas M. Clarke, the Company's President
(collectively, the "Liabilities"). Because the Sale may
constitute a "voluntary liquidation" under the Company's
Certificate of Incorporation, upon completion of the Sale,
holders of the Company's 5% Preferred Stock would be entitled to
payment of the liquidation preference on the Company's 5%
Preferred Stock which would be paid from the proceeds of the
Sale, if any, remaining after the payment of the Liabilities.
Any amounts remaining thereafter, which are not anticipated,
would be distributed to holders of the Company's Common Stock.
See "Risk Factors - Wind up of Business of the Company."
MetroVision believes that the sale of the York Interest will
allow the Company to maximize the value of its assets for the
benefit of creditors and shareholders.
Change in Business of MetroVision
Assuming that the Sale is consummated, and the Company
successfully winds up its business, the Company's remaining
strategic business will be significantly different. Any new
business of the Company will require the investment of
significant amounts of capital. In connection with the
consummation of the Sale, the Company anticipates that it will
receive approximately $2,300,000 of net cash proceeds. As a
condition to closing under the Sale Agreement, the Company will
use approximately $2.1 million of such net proceeds to repay its
secured loan to NHC, leaving the Company with approximately
$200,000 of net cash proceeds (before taxes) which will be
applied to payment of the Administrative Expenses. No proceeds
of the Sale are expected to be available for the payment of the
Liabilities which total approximately $1,925,000. As a result,
although the Company will have no significant long-term debt, the
Company will require additional financing in order to satisfy
current unsecured creditors, any new business's on-going capital
requirements and to achieve any new business's long-term
business strategies. Such additional capital would most likely
be provided through the public or private sale of debt or equity
securities. If such an alternative business and related
financing cannot be obtained, the Company will be dissolved.
Bay's Conditions to Closing
Pursuant to the Sale Agreement, the obligation of Bay to
consummate the Sale is subject to the following conditions:
1. MetroVision shall have fully paid and satisfied its
outstanding debt to National HealthCare Corporation and any
security interest in the York Interest shall have been released;
2. MetroVision shall in writing confirm that Stockbridge
Investment Partners, Inc. has or will terminate its Part B
billing functions, under the Management Services Agreement dated
July 13, 1995 between York Hannover Pharmaceuticals, Inc. and
York Hannover Partnership, and that MetroVision will cooperate
with UPC and Bay to accomplish the orderly transition of such
billing functions;
3. MetroVision shall have received the opinion of Bay's legal
counsel;
4. MetroVision shall certify to Bay that each and every
representation and warranty that it made within the Sale
Agreement continues to be true and complete as of the date of
Closing;
5. MetroVision and its affiliates shall be current on all
payment obligations to York and its affiliates; and
6. The Partnership shall have made a distribution of net income
earned in 1998 to UPC and the Company, according to their
interests, of $500,000.
MetroVision's Conditions to Closing
Pursuant to the Sale Agreement, the obligation of
MetroVision to consummate the Sale is subject to the following
conditions:
1. Bay shall have paid the Purchase Price of $2,300,000;
2. Bay shall have received the opinion of MetroVision's legal
counsel;
3. Bay shall certify to MetroVision that each and every
representation and warranty that it made within the Sale
Agreement continues to be true and complete as of the date of
Closing;
4. MetroVision shall have obtained all necessary shareholder
approvals of the Sale Agreement and Sale; and
5. The Partnership shall have made a distribution of net income
earned in 1998 to UPC and the Company, according to their
interests, of $500,000.
THE SALE AGREEMENT
The following discussion of the Sale Agreement is only a
summary of the material terms and conditions thereof and is
qualified in its entirety by reference to the actual terms and
conditions of the Sale Agreement attached hereto as Appendix A.
General
Under the Sale Agreement, the Company will sell to Bay the
York Interest, including all assets of York owned by the Company,
for a purchase price of $2,300,000. The Company and Bay will
each indemnify the other against and hold each other harmless
from any and all non-York liabilities of the other. Bay will
assume all liabilities as a Partner of York to the extent such
liabilities arise after the Closing Date.
The closing of the Sale will occur no later than August 31,
1998.
Under the Sale Agreement, the Company has agreed not to
compete for a period beginning with the closing date and
extending through July 31, 2000, directly or indirectly with York
in York's business in the geographic areas listed on Exhibit A to
the York Partnership Agreement, a copy of which is attached
hereto as Appendix B. York's business is deemed to be the
provision of the following services and products: institutional
pharmacy, infusion therapy, third-party billing, medical
equipment and supplies, respiratory (except respiratory therapy
services and supplies to Part A Medicare eligible patients
(patients who have been hospitalized for three days or more
immediately prior to being placed in a skilled nursing facility),
which are not provided by York, although York does provide the
delivery services provided as part of the respiratory Part A
Program ("Part A Program" refers to a particular level of
Medicare coverage for a nursing home facility stay) of UPC at
July 13, 1995, the date of the signing of the York Partnership
Agreement, and such other services and products as were
specifically agreed upon by the York partners (enterals,
parenterals, urological, tracheostomy, and wound care), to long
term care and other facilities set forth on Exhibit A to the York
Partnership Agreement (with the exception of that certain
facility set forth on Exhibit A to the York Partnership Agreement
which continued to be served by York Hannover Pharmaceuticals,
Inc. or its affiliates and in those presently existing facilities
owned by United Health Facilities, Inc. and its affiliated
corporations outside the designated counties which facilities are
also described in Exhibit A to the York Agreement.) Exhibit A to
the York Partnership Agreement is attached hereto as Appendix B.
Conditions to the Sale
See "Proposal 1 - The Sale - MetroVision's Conditions to
Closing" and "- Bay Conditions to Closing".
Termination or Amendment of Sale Agreement
There is no provision for terminating or amending the Sale
Agreement.
Accounting Treatment of the Sale
The Sale will be accounted for as a sale of substantially
all of the assets of the Company.
Required Regulatory Approvals
MetroVision has represented to Bay in the Sale Agreement
that MetroVision has no knowledge of any violations or alleged
violations by York of, or pending or threatened investigations,
complaints, or proceedings or threatened investigations,
complaints or proceedings involving the York Interest under any
federal, state or local laws or regulations; nor are there any
regulatory approvals under any such laws that must be obtained
prior to consummation of the Sale.
Dissenters' Rights of Appraisal
Shareholders of MetroVision are not entitled to dissenters'
rights of appraisal under the New York Law in connection with the
Sale.
Fees and Expenses
In connection with the preparation of the Proxy Statement
and solicitation of proxies, MetroVision will incur the following
estimated expenses:
Legal Fees and Expenses $ 75,000
Accounting Fees and Expenses 15,000
Printing Fees 10,000
Brokerage/Solicitation Fees 5,000
Total $ 105,000
Federal Income Tax Consequences of the Sale to the MetroVision
Shareholders
MetroVision does not expect that the Sale will have any
specific Federal income tax consequences to MetroVision's
shareholders. After the Sale, the shareholders of MetroVision
will continue to own shares as before the Sale and the
acquisition by Bay of the York Interest through the Sale is not
expected to alter the income tax effect of owning or subsequently
transferring shares of MetroVision Common Stock. In view of the
individual nature of each shareholder's income tax situation,
stockholders are urged to consult their own tax advisors with
respect to the specific Federal, state and local tax consequences
associated with the Sale. It is expected that the Sale will
result in federal and state liabilities to the Company in the
amount of approximately $451,000.
Interests of Certain Persons in the Sale
If the proceeds of the Sale are sufficient to pay all of the
Liabilities of the Company, the proceeds of the Sale may be used
to repay a working capital loan in the amount of $571,957 to
Lenox Healthcare Inc., an affiliate of Mr. Thomas M. Clarke,
President of the Company.
The approval of the two-thirds of the outstanding shares of
the Common Stock and the 5% Preferred Stock, voting as a single
class, is required to approve the Sale.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE SALE, AND
PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF
UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
PROPOSAL 2--AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
TO CHANGE PURPOSES CLAUSE
At a Special Meeting of Shareholders of the Company held on
April 1, 1997, the Company's shareholders approved an amendment
to the Company's Restated Certificate of Incorporation to change
the Company's name to "York Health Care, Inc." The change in the
Company's name was made in connection with the merger of York
Pharmaceuticals, Inc. with and into the Company on April 2, 1997
and the resultant change in the principal business of the Company
to provide prescription and non-prescription medications and
related services to nursing homes. Because the new corporate
name of the Company contains the words "Health Care," the New
York Business Corporation Law, which applies to the Company
because it has been incorporated in the State of New York,
requires that the Company's name be approved by the New York
Department of Health ("DOH").
As a condition to issuing its consent to the use of the new
name by the Company, the DOH has required that the Company
acknowledge that, notwithstanding the potential implications
associated with employing the terms "health care" within the name
of a New York corporation, the Company is currently not licensed
to provide health care or health care related services within the
State of New York which would be subject to the jurisdiction of
DOH. To acknowledge this limitation, and particularly since the
Company does not currently conduct any business within the State
of New York, the Company has agreed to submit to its shareholders
for approval the proposed amendment to the Purposes Clause of the
Company's Restated Certificate of Incorporation, the terms of
which would effectively place third parties on notice that the
Company may engage in any lawful activity other than those
activities specifically proscribed by the Purposes Clause. Those
proscribed activities would principally constitute those subject
to the jurisdiction of the DOH and for which the Company
currently is not licensed. The full text of the proposed
Amendment to the Restated Certificate of Incorporation is set
forth below:
Paragraph SECOND, relating to the purposes for which the
Corporation is formed, is amended and restated in its entirety as
follows:
"SECOND: The purpose of the corporation is to engage in
any lawful act or activity for which corporations may
be organized pursuant to the Business Corporation Law
of the State of New York; provided, however, that
nothing contained herein shall authorize the
Corporation to establish, operate or maintain a
hospital or to provide hospital service or health-
related service or to operate a home care services
agency, a hospice, a health maintenance organization or
a comprehensive health services plan, as defined in and
covered by Articles 28, 36, 40 and 44, respectively, of
the Public Health Law or to solicit, collect or
otherwise raise or obtain any funds, contributions or
grants from any source for the benefit of any hospital.
The corporation is not to engage in any act or activity
requiring any consents or approvals by law without such
consent or approval first being obtained.
For the accomplishment of the aforesaid purposes, and
in furtherance thereof, the corporation shall have, and
may exercise, all of the powers conferred by the
Business Corporation Law upon corporations formed
thereunder, subject to any limitations in Article 2 of
said law or in accordance with the provisions of any
other statute of the State of New York."
The approval of a majority of the outstanding shares of the
Company's Common Stock and 5% Preferred Stock, voting together as
a single class, is required to adopt the amendment to the
Restated Certificate of Incorporation. The Board of Directors
has been advised that Stockbridge Investment Partners, Inc., the
holder of 4,000,000 shares of Common Stock, representing
approximately 70% of the combined issued and outstanding Common
Stock and 5% Preferred Stock (on an as-converted basis) , intends
to vote FOR the amendment. Consequently, the approval of the
amendment is assured notwithstanding the objection by any other
shareholder of the Company. The Board of Directors recommends
that the Company's shareholders vote FOR the amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT METROVISION
SHAREHOLDERS VOTE FOR THE AMENDMENT TO THE RESTATED CERTIFICATE
OF INCORPORATION PROPOSAL, AND PROXIES SOLICITED BY THE BOARD
WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED
OTHERWISE ON THE PROXY.
PROPOSAL 3 - AMENDMENT TO RESTATED CERTIFICATE OF
INCORPORATION TO PERMIT WRITTEN CONSENT OF SHAREHOLDERS BY LESS
THAN UNANIMOUS VOTE
On June 12, 1998, the Board of Directors of the Company
approved an amendment to the Company's Restated Certificate of
Incorporation to permit action by written consent of
shareholders, without a meeting, by less than a unanimous
consent. Under New York law, actions to be taken by shareholders
can be approved in three ways: (i) at a meeting of stockholders
by the required affirmative vote of holders of shares entitled to
vote on a matter, (ii) by written consent of the holders of all
outstanding shares entitled to vote on the matter (i.e. unanimous
consent), or (iii) if the Certificate of Incorporation so
permits, by written consent of the holders of the same number of
shares entitled to vote on such matter that would be required to
approve such matter if the action was approved by a vote taken at
a stockholders meeting. The Company's Restated Certificate of
Incorporation does not currently provide for action to be taken
pursuant to the method described in subsection (ii) above and
accordingly the board approved an amendment to provide for such
option.
The Board of Directors believes that given the anticipated
change in the strategic direction of the Company, the uncertain
nature of its future operations following the winding down of its
business subsequent to the Sale of the York Interest, and the
impossibility of obtaining consents of holders of all shares
entitled to vote on a given matter, stockholder action by less
than unanimous consent is necessary in order to allow the Company
to act more quickly and at less cost than would be required if a
vote at a stockholders meeting were necessary.
The full text of the proposed Amendment to the Restated
Certificate of Incorporation is set forth below:
Paragraph NINTH, relating to written consent of
shareholders, is hereby added as follows:
"NINTH: Whenever shareholders are required or
permitted to take any action by vote, such action may
be taken without a meeting on written consent, setting
forth the action so taken, signed by the holders of
outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or
take such action at a meeting at which all shares
entitled to vote thereon were present and voted."
Pursuant to New York law, if action is taken without a
meeting by less than unanimous written consent, the Company shall
give prompt notice of the taking of the corporate action to those
shareholders who have not consented in writing.
The approval of a majority of the outstanding shares of the
Company's Common Stock and 5% Preferred Stock, voting together as
a single class, is required to adopt the amendment to the
Restated Certificate of Incorporation. The Board of Directors
has been advised that Stockbridge Investment Partners, Inc., the
holder of 4,000,000 shares of Common Stock, representing
approximately 70% of the combined issued and outstanding Common
Stock and 5% Preferred Stock (on an as-converted basis), intends
to vote FOR the amendment. Consequently, the approval of the
amendment is assured notwithstanding the objection by any other
shareholder of the Company. The Board of Directors recommends
that the Company's shareholders vote FOR the amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT METROVISION
SHAREHOLDERS VOTE FOR THE AMENDMENT TO THE RESTATED CERTIFICATE
OF INCORPORATION PROPOSAL, AND PROXIES SOLICITED BY THE BOARD
WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED
OTHERWISE ON THE PROXY.
PROPOSAL 4_RATIFICATION OF AMENDMENT TO AMENDED BY-LAWS REDUCING
THE MAXIMUM NUMBER OF DIRECTORS FROM SIX TO THREE
On June 12, 1998, the Board of Directors of the Company
approved an amendment to Article III, Section 2 of the Company's
Amended By-laws to reduce the minimum number of Directors from
six to three. Prior to this amendment by the Board, the minimum
number of directors was six. The Board of Directors believes
that following the winding down of the business of MetroVision
subsequent to the Sale of the York Interest, a Board of Directors
consisting of six members will not be necessary to manage a
company with scaled-down operations. Therefore, the Board of
Directors believes that it is prudent and more practical to allow
for a smaller number of directors that the minimum of six
currently required.
Pursuant to Article VI, Section 6 of the Amended By-laws of
the Company, notice of the Board's amendment of was given in the
Notice of Special Meeting accompanying this Proxy Statement. The
full text of the proposed amendment to the Amended By-laws is set
forth below:
Article SIXTH, Section 6, relating to the number of
Directors of the Company, is amended and restated in its entirety
as follows:
"The Board of Directors shall be not less than three,
as may be fixed from time to time by vote of the majority of the
entire Board of Directors, or by vote of the shareholders at any
meeting thereof; provided, however, whenever all of the shares of
the Company are owned by less than three shareholders, the number
of Directors may be less than three, but not less than the number
of shareholders."
The affirmative vote of the holders of a majority of shares
of the Company's Common Stock and 5% Preferred Stock, voting
together as a single class in person or by proxy at the Special
Meeting, is required to approve and adopt Proposal Number 4. The
Board of Directors has been advised that Stockbridge Investment
Partners, Inc., the holder of 4,000,000 shares of Common Stock,
representing approximately 70% of the combined issued and
outstanding Common Stock and 5% Preferred Stock (on an as-
converted basis), intends to vote FOR the amendment.
Consequently, the approval of the amendment is assured
notwithstanding the objection by any other shareholder of the
Company. The Board of Directors recommends that the Company's
shareholders vote FOR the amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT METROVISION
SHAREHOLDERS VOTE FOR THE AMENDMENT TO THE AMENDED BY-LAWS
PROPOSAL, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN
FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE
PROXY.
PROPOSAL 5 ELECTION OF THREE DIRECTORS TO BOARD OF DIRECTORS
The Company's Restated Certificate of Incorporation and
Amended By-Laws provide for the Company's business to be managed
by or under the direction of the Board of Directors. Under the
Company's Restated Certificate of Incorporation and Amended By-
Laws, which by-laws were last amended June 12, 1998, the number
of directors is set at no less than three (3) unless the Board of
Directors or the stockholders set a higher number. Currently,
the Board of Directors is set at three (3).
Pursuant to the Company's Restated Certificate of
Incorporation and Amended By-Laws, the Board of Directors on June
12, 1998 voted (i) to set the size of the Board of Directors at
three and (ii) nominate Thomas M. Clarke, Linda M. Clarke and
Lawrence B. Cummings for election at the Special Meeting for a
term of one year to serve until the next Special Meeting of
stockholders, and until their respective successors have been
elected and qualified. All of the nominees have served as
directors of the Company as indicated below.
Unless authority to vote for any of the nominees named below
is withhold, the shares represented by the enclosed proxy will be
voted FOR the election as directors of such nominees. In the
event that any nominee shall become unable or unwilling to serve,
the shares represented by the enclosed proxy will be voted for
the election of such other person as the Board of Directors may
recommend in his place. The Board has no reason to believe that
any nominee will be unable or unwilling to serve.
A plurality of the shares voted affirmatively or negatively
at the Special Meeting is required to elect each nominee as a
director.
THE BOARD OF DIRECTORS RECOMMENDS THAT METROVISION
SHAREHOLDERS VOTE FOR THE ELECTION OF THE NOMINEES AS DIRECTORS,
AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF
UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE IN THE PROXY.
MANAGEMENT
Directors
The names of the Company's current directors who are
nominees for re-election and certain information about them are
set forth below:
Director
Name Age Position Presently Held Since
Thomas M. Clarke 42 President, CEO and 1997
Director
Linda M. Clarke(1) 45 Executive Vice 1997
President, Treasurer
and Director
Lawrence B. 42 Director 1997
Cummings(1)
______________
(1) Member of the Audit, Compensation and Stock Option Plan
Committees.
The following is a brief summary of the background of each
current director of the Company who is also a nominee for re-
election:
Lawrence B. Cummings: Mr. Cummings, age 42, has been a
Director of the Company since April 1997. He
is the Chief Executive Officer of Stockbridge
Investment Partners, Inc., the parent
corporation of MetroVision of North America.
Mr. Cummings has over ten years of health
care experience and is an active investor in
the health care industry. From 1989 to 1992,
Mr. Cummings was Chairman of the Board, Chief
Executive Officer and President of Providence
Health Care, Inc. ("Providence"), a
Cleveland, Ohio-based publicly-traded nursing
home management company which Mr. Cummings
founded and which was acquired by The
Multicare Companies, Inc. in 1992. Mr.
Cummings received his undergraduate degree
from Harvard University and a Masters in
Business Administration from Harvard Business
School. On May 23, 1996, a Final Judgment of
Dissolution of Marriage was entered
transferring certain assets to Mr. Cummings'
former spouse and ordering Mr. Cummings to
pay her over $6.0 million, which has been
appealed. As a result of this order and other
personal indebtedness, on August 20, 1996,
Mr. Cummings filed for personal
reorganization under Chapter 11, which case
is now pending in the U.S. Bankruptcy Court
for the Southern District of Florida.
Thomas M. Clarke: Mr. Clarke, age 42, has been the President
and Chief Executive Officer and a Director of
the Company since April 1997. He has been
the President and Chief Financial Officer of
Lenox Healthcare, Inc. since 1991. Mr. Clarke
has over 16 years of experience in the health
care industry and has held positions with
both public and private health care
organizations. From May 1987 until founding
Lenox in 1991, Mr. Clarke was the Treasurer
and Chief Financial Officer of Berkshire
Health Systems, Inc., a Pittsfield,
Massachusetts based diversified health care
company. Mr. Clarke is a Fellow in the Health
Care Financial Management Association. Mr.
Clarke is a graduate of the University of
Maine and completed his Masters in Science in
Business at Husson College.
Linda M. Clarke Mrs. Clarke, age 45, has been Treasurer of
Lenox Healthcare, Inc. since 1991. Mrs.
Clarke has over seven years experience in the
health care industry. In addition to her
position with Lenox, Mrs. Clarke was
previously employed by the Houlton Regional
Hospital Development Office and participated
in various fundraising activities. Mrs.
Clarke attended the University of Maine and
was previously employed by the Maine School
Administrative District #29 for 5 years. She
continues to be Treasurer of several
privately held health care companies.
Committees of the Board of Directors and Meetings
Meeting Attendance
The Board of Directors held 3 meetings during fiscal 1997.
All of the current directors who are also nominees for re-
election attended 100% of the total number of meetings of the
Board of Directors.
Board Committees
The Board of Directors has three committees: an audit
committee, a compensation committee and a stock option committee.
The Company does not have standing nominating committee. The
audit committee, which consists of Linda M. Clarke and Lawrence
B. Cummings, was established to review internal accounting
procedures of the Company and to consult with and review the
Company's independent auditors and the services provided. The
compensation committee, which consists of Linda M. Clark and
Lawrence B. Cummings, makes recommendations to the Board of
Directors regarding remuneration of executive officers and
directors. The stock option committee, which consists of Thomas
M. Clarke and Lawrence B. Cummings, administers the Employee
Stock Option Plan. None of the committees met during fiscal 1997.
Compensation Committee Interlocks and Insider Participation
During 1997, the compensation committee consisted of
Courtlandt Miller and Robert F. Hussey (who are not nominees for
re-election); the stock option committee was not established in
1997. No executive officer of the Company serves as a member of
the board of directors, compensation committee or stock option
committee of any entity that has one or more executive officers
serving as a member of the Company's Board of Directors,
compensation committee or stock option committee.
Compensation of Directors
Directors do not receive any cash compensation for their
services on the Board of Directors, but are reimbursed for
reasonable travel and lodging expenses incurred in attending
Board and committee meetings. Non-employee directors are eligible
to receive grants of stock options under the 1993MetroVision Non-
Employee Directors Stock Option Plan (the "Directors Stock Option
Plan") pursuant to a formula under which non-employee directors
are eligible to receive, in May of each year, non-qualified stock
options to purchase (i) 5,000 shares of Common Stock, plus (ii)
1,000 shares of Common Stock for each Board Meeting attended
during the preceding fiscal year. These options vest in full six
months after the date of grant and have an exercise price equal
to the fair market value of the Common Stock on the date of
grant. During fiscal 1997, no options were granted under the
Directors Stock Option Plan.
Executive Officers
The Company has one non-director executive officer - David
M. Fancher, age 38, Vice President and Chief Financial Officer.
Mr. Fancher joined MetroVision in November 1994 as Principal
Financial Officer. On January 1, 1995, Mr. Fancher was named
Secretary and Chief Financial Officer, and in October 1997 was
appointed a director (he is not a candidate for re-election at
this Special Meeting). Prior to joining MetroVision, Mr. Fancher
served as Controller for McMillan Publishing, Professional
Business Reference Division, between 1991 - 1994, and for
Chemical Waste Management, a wholly owned subsidiary of Waste
Management, Inc. between 1988-1991. Mr. Fancher is a graduate of
Monmouth University with a B.S. Degree in Business
Administration.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to or earned
by the following individuals for services rendered to the Company
in all capacities during the Company's last three fiscal years:
(i) the chief executive officer of the Company (in the Company's
case, the President) as of December 31, 1997, and (ii) the former
President of the Company (together, the "Named Executive
Officers"). No executive officer of the Company had salary and
bonus earned during fiscal 1997 which exceeded $100,000.
Summary Compensation Table
Annual Long Term
Compensation Compensation
Awards
Name and Principal Position Year Salary Securities
Underlying
Options
Thomas M. Clarke 1997 $ 0 750,000(1)
President and Chairman of
the Board
Robert F. Hussey 1997 $ 0 0
President and 1996 $ 0 0
Chairman of the Board
1995 $ 0 5,347 (2)
_________________
(1) In April 1997, Mr. Clarke was granted 10-year warrants to
purchase 750,000 shares of Common Stock in three tranches of
250,000 shares each: (i) tranche 1, exercisable beginning April
2, 1997 at $.63 per share; (ii) tranche 2, exercisable beginning
April 2, 1998 at $.7875 per share; and (iii) tranche 3,
exercisable beginning April 2, 1999 at $.945 per share. In
June,1998, Mr. Clarke elected to defer the right to exercise
these Warrants until April 1, 2000.
(2) The options granted to Mr. Hussey expired on June 30, 1997.
Option Grants
In April 1997, Mr. Clarke was granted 10-year warrants to
purchase 750,000 shares of Common Stock in three tranches of
250,000 shares each: (i) tranche 1, exercisable beginning April
2, 1997 at $.63 per share; (ii) tranche 2, exercisable beginning
April 2, 1998 at $.7875 per share; and (iii) tranche 3,
exercisable beginning April 2, 1999 at $.945 per share. In
[June], 1998, Mr. Clarke elected to defer the right to exercise
these Warrants until April 1, 2000.
Option Exercises and Fiscal Year-End Values
In April 1997, Mr. Clarke was granted 10-year warrants to
purchase 750,000 shares of Common Stock in three tranches of
250,000 shares each: (i) tranche 1, exercisable beginning April
2, 1997 at $.63 per share; (ii) tranche 2, exercisable beginning
April 2, 1998 at $.7875 per share; and (iii) tranche 3,
exercisable beginning April 2, 1999 at $.945 per share. In
[June], 1998, Mr. Clarke elected to defer the right to exercise
these Warrants until April 1, 2000.
Employment Contracts and Change of Control Arrangements
In April 1997, the Company entered into an employment
agreement with Mr. Clarke which expires on April 1, 2000. The
agreement provides that Mr. Clarke will not engage in a business
competitive with the Company's current and anticipated business
for the term of the agreement and for two years thereafter.
Certain Relationships and Related Transactions
In June 1997, the Board of Directors authorized the Company
to enter into a line-of-credit agreement with Lenox Healthcare,
Inc. to borrow amounts up to $200,000. Interest accrues at prime
plus 2% with principal and interest due on May 8, 1998. The
Company had $571,597 and $53,239 in principal and accrued
interest outstanding under the line-of-credit at June 30, 1998
and therefore had exceeded the maximum amount to be borrowed as
authorized by the Board of Directors. However, subsequent to
December 31, 1997, the Board of Directors of the Company approved
a maximum borrowing of $700,000 under the line-of-credit
agreement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
that MetroVision's officers and directors, and persons who own
more than ten percent (10%) of the Company's Common Stock
(collectively the "Reporting Persons"), file with the Securities
and Exchange Commission ("SEC") initial reports of beneficial
ownership and changes in beneficial ownership. Reporting Persons
are required by SEC regulations to furnish MetroVision with
copies of these reports. Based solely on MetroVision's review of
the copies of these reports received by it, MetroVision believes
that all filings required to be made by the Reporting Persons
during fiscal year 1997 were made on a timely basis. [COMPANY IS
CHECKING WHETHER ALL REPORTS WERE FILED.]
PROPOSAL 6 RATIFICATION OF APPOINTMENT OF ARTHUR ANDERSEN LLP AS
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of MetroVision has appointed the firm
of Arthur Andersen LLP, independent auditors, to audit the
consolidated financial statements of MetroVision and its
subsidiaries for the fiscal year ending December 31, 1998,
subject to ratification by the MetroVision Stockholders.
A representative of Arthur Andersen LLP is expected to be
present at the Special Meeting, with the opportunity to make a
statement if the representative so desires, and will be available
to respond to appropriate questions.
If the MetroVision Stockholders do not ratify the
appointment of Arthur Andersen, LLP as MetroVision's independent
auditors for the forthcoming fiscal year, such appointment will
be reconsidered by the Audit Committee and the Board of
Directors.
The affirmative vote of the holders of a majority of shares
of Common Stock and 5% Preferred Stock, voting as a single class,
present in person or represented by proxy at the Special Meeting
will be required to approve and adopt Proposal Number 6.
THE BOARD OF DIRECTORS RECOMMENDS THAT METROVISION SHARE
HOLDERS VOTE FOR RATIFICATION OF ARTHUR ANDERSEN LLP AS THE
INDEPENDENT PUBLIC ACCOUNTANTS OF METROVISION'S CONSOLIDATED
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDING DECEMBER 31,
1998.
PRICE RANGE OF METROVISION COMMON STOCK
MetroVision's Common Stock is traded on the OTC Bulletin
Board under the symbol "MVNA." Beginning on December 23, 1991,
and until May 22, 1996, the Common Stock was included for
quotation on the Nasdaq SmallCap Market. On that date, the
Common Stock was delisted from the Nasdaq SmallCap Market for
failing to meet certain listing criteria. Consequently, since
May 23, 1996, the Common Stock has traded on the OTC Bulletin
Board. The following table sets forth (for the periods
indicated) the range of high and low bid prices for the Common
Stock as reported by Nasdaq on the SmallCap Market prior to May
23, 1996 and as reported on the OTC Bulletin Board thereafter.
The quotations reflect interdealer prices, without retail mark-
up, mark-down or commission and may not necessarily reflect
actual transactions.
Price Per
Share
1998(1) High Low
First Quarter 9/32 1/4
Second Quarter 3/16 1/8
Third Quarter (through July 7, 3/16 3/32
1998)
1997
Fourth Quarter 3/8 1/4
Third Quarter 1/2 3/8
Second Quarter 1 1/4 5/8
First Quarter (1) 1 1/4 5/8
1996 (1)
Fourth Quarter 5/8 5/8
Third Quarter 1 5/8
Second Quarter 2 1/4 5/8
First Quarter 1 5/8
___________________
(1) Gives retroactive effect to the 1 for 4.6 reverse stock split
effective April 2, 1997.
Stockholders
As of July 20, 1998 there were 5,574,275 shares of Common
Stock, held of record by approximately 166 holders. The Company
believes that certain holders of record hold for significantly
more beneficial owners. The Company believes that there are
approximately 800 beneficial owners of the Common Stock. The
closing bid price for the Company's Common Stock on July 28, 1998
was [$______].
Dividends
To date, the Company has never declared or paid any
dividends on its Common Stock. The payment of dividends, if any,
in the future is within the discretion of the Board of Directors
and will depend on the Company's earnings, its capital
requirements and financial condition and other relevant factors.
The Company does not expect to declare or pay any dividends in
the foreseeable future. Further, payment of dividends on the
Common Stock will be subject to the prior payment of dividends on
the shares of 5% Preferred Stock, which dividends are payable
cumulatively in arrears.
INFORMATION CONCERNING METROVISION
Business
On November 30, 1997, the Company decided to terminate,
effective February 28, 1998, its business related to the Commuter
Channel. MetroVision owns and, until such date, operated the
Commuter Channel, a video cable network for the mass transit
industry. The Commuter Channel displayed a program cycle of
generally 10 to 12 minutes which was segmented into information
from transit authorities; news, weather, sports and entertainment
headlines, and advertising. Broadcasts on the Commuter Channel
were displayed 24 hours a day, seven days a week, on high-
resolution video display monitors and projection screens situated
on rail platforms and in passenger waiting areas.
At the time of its cessation of operations, the Commuter
Channel was installed in the Port Authority Trans Hudson ("PATH")
system in New York and New Jersey, the Southeastern Pennsylvania
Transportation Authority ("SEPTA") system in Philadelphia,
Pennsylvania, Boston's Massachusetts Bay Transportation Authority
("MBTA") subway and commuter rail system, and in the Bay Area
Rapid Transit ("BART") System in the San Francisco Bay Area in
California. The Commuter Channel was designed to be the primary
means by which transit authorities communicate information to
commuters using their systems. Transit information was input
directly by transit authorities and included schedule
information, route maps, delay information, and emergency
information.
MetroVision derived its revenues from the sale or barter of
advertising and news information segments on its networks, and
the sale of its complete video display network to transit
authorities. In addition, news, weather, sports and entertainment
headlines displayed on the Commuter Channel were obtained from
several information providers, certain of whom paid MetroVision
fees for access to the Commuter Channel.
Termination of Commuter Channel Business
In deciding to terminate the Company's business related to
the Commuter Channel, the Board considered the following:
During the past three fiscal years, losses from the
Company's Commuter Channel operations exceeded $4 million. The
Company's business was adversely affected by the broad
commercialization of competitive new media networks such as the
"Airport Channel" and television (national, local and cable),
radio, magazines and billboards located in transit systems and
airports. See "Proposal 1 - The Sale - Background of the Sale".
The Company does not currently have sufficient cash to
continue to support its media operations, nor is it able to
generate sufficient cash from operations or to attract sufficient
external debt or equity financing. The Company has been
unsuccessful in obtaining external financing other than from
certain officers or directors. Given the Company's current
financial condition, it is unlikely that the Company will be able
to obtain any additional financing at this time either from these
officers or directors or from any outside parties.
In addition, the Company has attempted to identify other
strategic, corporate or marketing alliances with companies which
would present opportunities for the Company to increase its
revenues and thus enhance shareholder value. The Company has not
been successful in identifying any such opportunities.
The following sets forth the status of the termination of
the Commuter Channel business in MetroVision's primary
installations:
The Port Authority Trans Hudson (PATH) System. The PATH
commuter rail line provides access to Manhattan's downtown and
midtown business districts for New Jersey residents. Installation
of the Commuter Channel in PATH commenced in 1989. The Company's
agreement with PATH was amended on December 31, 1996 for an
indefinite term, subject to earlier revocation or termination as
provided in the permit. PATH's Senior Management has indicated
that they are willing to terminate the existing contract and
forgive certain amounts owed to them by MetroVision in exchange
for installed equipment and a cash payment. Negotiations are
continuing.
The Southeastern Pennsylvania Transit Authority (SEPTA)
System. SEPTA operates a commuter rail line connecting
Philadelphia to its suburban areas, including the Main Line area
and Bucks County. The Commuter Channel at SEPTA commenced
operations in 1987. On July 5, 1995, MetroVision entered into a
revised operating agreement. MetroVision's agreement with SEPTA
expired July 5, 1998. SEPTA has expressed a willingness to enter
into a settlement in which they agree to forego any monies due in
exchange for the installed equipment.
The Bay Area Rapid Transit (BART) System. The BART commuter
rail network connects downtown San Francisco with the Bay Area's
other major cities and suburbs, including Oakland and Alameda and
Contra Costa counties. MetroVision's agreement with BART expires
in July 1999. BART and the Company have entered into an
agreement pursuant to which BART will act as the Company's agent
for a period of time. After such period, installed equipment
transfers to BART and all agreements between the parties
terminate.
The Massachusetts Bay Transit Authority (MBTA) System.
MetroVision has a contract to install the Commuter Channel in the
Boston commuter rail system, which transports passengers to
Boston from 78 cities and towns in a service district of 2.6
million people. Boston is the fifth largest mass transit market
in the nation. The agreement will expire five years from the
completion of installation and acceptance of the system. The
MBTA has not been contacted with respect to termination of
applicable contracts.
New Jersey Transit Authority (NJT). The Company and NJT
entered into a contract in 1995 to build out a media system.
NJT's Senior Management has indicated that they are willing to
terminate the existing installation contract and forgive certain
amounts owed to them by MetroVision in exchange for a cash
payment. Negotiations are continuing.
The Company currently estimates that liability incurred in
connection with the termination of the Commuter Channel business
will be approximately $380,000.
Trademarks, Proprietary Information and Patents
The Company has registered its trademark, Commuter Channel,
with the United States Patent and Trademark Office covering the
broadcast of video transmissions in the mass transit industry.
The term of this registration is 20 years (expiring in 2010) and
is renewable indefinitely if the mark is still in use at the time
of renewal. The Company's rights in the Commuter Channel mark are
a significant part of MetroVision's business. Accordingly,
MetroVision intends to maintain its mark and related
registration. MetroVision does not hold any patents.
Employees
As of July 7, 1998, MetroVision employed 3 persons in
executive positions, none of whom currently receive a cash
compensation.
Properties and Facilities
MetroVision's headquarters are located at 75 South Church
Street in Pittsfield, MA 01201, and its telephone number is (413)
448-2111.
The Company believes that its facilities are adequate for
its current operations and for the foreseeable future.
Legal Proceedings
On July 15, 1997, Paramount Metal Finishing Company, Inc.
(the "Plaintiff"), filed a complaint against MetroVision, and one
other defendant in the Superior Court of Union County, New Jersey
(Civil Action No. UNN-L-399297), alleging monies due by
MetroVision related to certain services and goods provided in the
amount of $16,912, which indebtedness is recorded on
MetroVision's consolidated balance sheet at December 31, 1997.
The Plaintiff sought damages in the aggregate amount of
$22,770.16, which included interest thereon, court costs and
counsel fees. On September 3, 1997, a Final Judgment was entered
against MetroVision in the amount of $22,770.16. On November 21,
1997, a Default Judgment was entered in the amount of $22,770.16
against the Company and Lenox Healthcare, Inc. ("Lenox"). As of
May 22, 1998, MetroVision has paid to the Plaintiff $17,000.
MetroVision is currently in default of this judgment.
Except as stated above, MetroVision is not a party to any
material legal proceedings.
BENEFICIAL OWNERSHIP OF
METROVISION COMMON STOCK
The following table sets forth certain information, as of July 7,
1998, based on information obtained from the persons named below
or from reports filed on Schedule 13G or 13D, with respect to the
beneficial ownership of the shares of Common Stock (including
Common Stock issuable upon conversion of the Company's 5%
Preferred Stock) by (i) each person known by the Company to be
the beneficial owner of more than five percent (5%) of the
outstanding shares of Common Stock, (ii) each current director,
(iii) each Named Executive Officer, and (iv) and all current
officers and directors as a group.
Shares Beneficially
Owned
Name and Address Number Percent
Robert F. Hussey (2) 128,296 2.2%
Thomas M. Clarke (3)(4) 4,044,925 70.8%
Linda M. Clarke (3)(5) 4,044,925 70.8%
Lawrence B. Cummings (6) 4,000,000 70.6%
David M. Fancher (7) 1,304 *
William G. Walters 7.4%
c/o Whale Securities
650 Fifth Avenue
New York NY 10019 421,628
All current officers and
directors as a group
(four persons)(3),(4),(5), 4,046,229 70.8%
(6), (7)
*Less than 1%.
** Address are given for beneficial owners of more than 5% of the
outstanding Common Stock.
(1) The number of shares of Common Stock issued and outstanding
on July 7, 1998 was 5,574,275. The calculation of
percentage ownership for each listed beneficial owner is
based upon (a) the number of shares of Common Stock issued
and outstanding at July 7, 1998, (b) 140,986 shares of
Common Stock issuable upon conversion of the 648,535 shares
of 5% Preferred Stock outstanding at July 7, 1998 (at a
conversion ratio of 4.6 to 1), and (c) shares of Common
Stock subject to options or warrants held by such persons or
group at April 10, 1998 and exercisable within 60 days
thereafter. Unless otherwise noted, the Company believes
that all persons named in the table have sole voting and
investment power with respect to all shares of Common Stock
beneficially owned by them.
(2) Includes 4,331 shares issuable upon conversion of shares of
5% Preferred Stock and 32,697 shares issuable upon the
exercise of currently exercisable warrants.
(3) The address of this individual is c/o the Company, 75 South
Church Street, Suite 650, Pittsfield, MA 01201.
(4) Includes 826 shares owned by Mr. Clarke's wife (as to which
Mr. Clarke disclaims beneficial ownership), 4,000,000 shares
owned by Stockbridge Investment Partners, Inc., of which Mr.
Clarke is a principal stockholder and director, 22,630
shares owned by Greylock Health Corporation, of which Mr.
Clarke is a controlling stockholder, 21,469 shares owned by
Lenox Healthcare, Inc., of which Mr. Clarke is a principal
shareholder. Excludes warrants to purchase 750,000 shares
of Common Stock which Mr. Clarke was granted in April 1997
but which he has deferred the right to exercise until April
1, 2000.
(5) Includes 4,000,000 shares owned by Stockbridge Investment
Partners, Inc., of which Ms. Clarke is a principal
stockholder and director, including 22,630 shares owned by
Greylock Health Corporation, of which Ms. Clarke is a
controlling stockholder, and 21,469 shares owned by Lenox
Healthcare, Inc., of which Ms. Clarke is a principal
shareholder.
(6) Represents 4,000,000 shares owned by Stockbridge Investment
Partners, Inc., of which Mr. Cummings is a principal
stockholder and director.
(7) Consists of shares issuable upon the exercise of currently
exercisable stock options.
INFORMATION CONCERNING METROVISION'S YORK PARTNERSHIP BUSINESS
The information set forth below has been provided by York
and the Company represents and warrants as to its accuracy.
Business
On August 1, 1995, York Pharmaceuticals, Inc., a predecessor
to MetroVision, and UPC formed York. York provides institutional
pharmacy service, infusion therapy, urological, enteral and
general medical supplies to licensed nursing facilities,
hospitals, correction facilities and retirement facilities
throughout the State of Florida.
Relationship of UPC and United Health, Inc.
United Health, Inc., one of the largest owners of nursing
homes in the United States, indirectly owns UPC. UPC owns 60% of
York while MetroVision currently owns 40% of York. The York
Partnership Agreement requires that neither partner can conduct
pharmacy related business in the State of Florida outside of
York.
Pharmacy Services
York purchases, repackages and dispenses prescription and
nonprescription medication in accordance with physician orders
and delivers such prescriptions at least daily to the nursing
facility for administration to individual patients by the
facility's nursing staff. York currently services 55 nursing
homes from its centralized pharmacy located in Brooksville,
Florida. York maintains a 24-hour, on-call pharmacist service 365
days per year for emergency dispensing and delivery or for
consultation with the facility's staff or attending physician.
Upon receipt of a prescription, the relevant patient
information is entered into York's computerized dispensing and
billing systems. At that time, the dispensing system checks the
prescription for any potentially adverse drug interactions or
patient sensitivity. When required and/or specifically requested
by the physician or patient, branded drugs are dispensed; generic
drugs are substituted in accordance with applicable state and
federal laws and as requested by the physician or patient.
York utilizes a "unit dose" distribution system. Most of its
prescriptions are filled utilizing specialized unit-of-use
packaging and delivery systems. Maintenance medications are
typically provided in 30-day supplies utilizing either a box unit
dose system or unit dose punch card system. The unit dose system,
preferred over the bulk delivery systems employed by retail
pharmacies, improves control over drugs in the nursing facility
and improves patient compliance with drug therapy by increasing
the accuracy and timeliness of drug administration.
Integral to York's drug distribution system is its
computerized medical records and documentation system. York
provides to the facility computerized medication administration
records and physician's order sheets and treatment records for
each patient. Data extracted from these computerized records are
also formulated into monthly management reports on patient care
and quality assurance. The computerized documentation system in
combination with the unit dose drug delivery system results in
greater efficiency in nursing time, improved control, reduced
drug waste in the facility and lower error rates in both
dispensing and administration. These benefits improve drug
efficacy and result in fewer drug-related hospitalizations.
Consultant Pharmacist Services
Federal and state regulations mandate that nursing
facilities, in addition to providing a source of pharmaceuticals,
retain consultant pharmacist services to monitor and report on
prescription drug therapy in order to maintain and improve the
quality of patient care. The Omnibus Budget Reconciliation Act
("OBRA") implemented in 1990 seeks to further upgrade and
standardize care by setting forth more stringent standards
relating to planning, monitoring and reporting on the progress of
prescription drug therapy as well as facility-wide drug usage.
York provides consultant pharmacist services which help
clients comply with such federal and state regulations applicable
to nursing homes. The services offered by York's consultant
pharmacists include: (i) comprehensive, monthly drug regimen
reviews for each patient in the facility to assess the
appropriateness and efficacy of drug therapies, including a
review of the patient's medical records, monitoring drug
reactions to other drugs or food, monitoring lab results and
recommending alternate therapies or discontinuing unnecessary
drugs; (ii) participation on the Pharmacy and Therapeutics,
Quality Assurance and other committees of client nursing
facilities as well as periodic involvement in staff meetings;
(iii) monthly inspection of medication carts and storage rooms;
(iv) monitoring and monthly reporting on facility-wide drug usage
and drug administration systems and practices; (v) development
and maintenance of pharmaceutical policy and procedures manuals;
and (vi) assistance to the nursing facility in complying with
state and federal regulations as they pertain to patient care.
Ancillary Services
York provides the following ancillary products and services
to nursing facilities:
Infusion Therapy Products and Services. York provides
infusion therapy support services for residents in its client
nursing facilities. Infusion therapy consists of the product (a
nutrient, antibiotic, chemotherapy or other drugs in solution)
and the intravenous administration of the product. York prepares
the product to be administered using proper equipment in a
sterile environment and then delivers the product to the nursing
home for administration by the nursing staff. Proper
administration of intravenous ("IV") drug therapy requires a
highly trained nursing staff. York's consultant pharmacists and
nurse consultants operate an education and certification program
on IV therapy to assure proper staff training and compliance with
regulatory requirements in client facilities offering an IV
program.
By providing an infusion therapy program, York enables its
client nursing facilities to admit and retain patients who
otherwise would need to be cared for in an acute-care facility.
York believes that by providing these high acuity pharmacy
services it has a competitive advantage over other pharmacy
providers. The most common infusion therapies York provides are
total prenatal nutrition, antibiotic therapy, chemotherapy, pain
management and hydration.
Wholesale Medical Supplies/Medicare Part B Billing. York
distributes disposable medical supplies, including urological,
ostomy, nutritional support and wound care products and other
disposables needed in the nursing home environment. In addition,
York provides direct Medicare billing services for certain of
these product lines for patients eligible under the Medicare Part
B program. As part of this service, York determines patient
eligibility, obtains certifications, orders products and
maintains inventory on behalf of the nursing facility. York also
contracts to act as billing agent for certain nursing homes that
supply these products directly to the patient.
Other Services. York's majority partner, UPC, also provides
respiratory therapy products and durable medical equipment for
its clients in certain of its market areas. York continues to
review the expansion of these as well as other products and
services that may further enhance the ability of its client
nursing facilities to care for their residents in a cost-
effective manner.
Product and Market Development
York's pharmacy business engages in a continuing program for
the development of new services and the marketing thereof. New
service and new market development are important factors for the
growth of this business. Any new service or marketing effort,
including those in the developmental stage, could require the
investment of a material portion of York's assets.
Materials/Supply
York purchases pharmaceuticals through a wholesale
distributor with whom it has a prime vendor contract and under
contracts negotiated directly with pharmaceutical manufacturers.
York also is a member of industry buying groups which contract
with manufacturers for discounted prices based on volume which
are passed through to York by its wholesale distributor. York has
numerous sources of supply available to it and has not
experienced any difficulty in obtaining pharmaceuticals or other
products and supplies used in the conduct of its business.
Patents, Trademarks and Licenses
York's business operations are not dependent upon any
material patents, trademarks or licenses.
Inventories
York's centralized pharmacy maintains adequate on-site
inventories of pharmaceuticals and supplies to ensure prompt
delivery service to its customers. Inventories on hand are not
considered to be high by industry standards. York's primary
wholesale distributor also maintains a local warehouse.
Competition
By its nature, the long-term care pharmacy business is
highly regionalized and, within a given geographic region of
operations, highly competitive. In the geographic region it
serves, York competes with numerous local retail pharmacies,
local and regional institutional pharmacies and pharmacies owned
by long-term care facilities. York competes in this market on the
basis of quality, cost-effectiveness and the increasingly
comprehensive and specialized nature of its services along with
the clinical expertise, pharmaceutical technology and
professional support it offers.
Government Regulation
Institutional pharmacies, as well as the long-term care
facilities they serve, are subject to extensive Federal, state
and local regulation. These regulations cover required
qualifications, day-today operations, reimbursement and the
documentation of activities. York continuously monitors the
effects of regulatory activity on its operations.
Licensure, Certification and Regulation. States generally
require that companies operating a pharmacy within the state be
licensed by the state board of pharmacy. York currently has a
pharmacy license in the State of Florida in which it operates a
pharmacy. In addition, York's pharmacy is registered with the
appropriate state and Federal authorities pursuant to statutes
governing the regulation of controlled substances.
Client nursing facilities are also separately required to be
licensed in the states in which they operate and, if serving
Medicare or Medicaid patients, must be certified to be in
compliance with applicable program participation requirements.
Client nursing facilities are also subject to the nursing home
reforms of the Omnibus Budget Reconciliation Act of 1987, which
imposed strict compliance standards relating to quality of care
for nursing home operations, including vastly increased
documentation and reporting requirements. In addition,
pharmacists, nurses and other health care professionals who
provide services on York's behalf are in most cases required to
obtain and maintain professional licenses and are subject to
state regulation regarding professional standards of conduct.
Federal and State Laws Affecting the Repacking, Labeling,
and Interstate Shipping of Drugs. Federal and state laws impose
certain repackaging, labeling, and package insert requirements on
pharmacies that repackage drugs for distribution beyond the
regular practice of dispensing or selling drugs directly to
patients at retail. A drug repackager must register with the Food
and Drug Administration. York holds all required registrations
and licenses, and its prepackaging operations are in compliance
with applicable state and Federal requirements.
Medicare and Medicaid. The nursing home pharmacy business
has long operated under regulatory and cost containment pressures
from state and Federal legislation primarily affecting Medicaid
and, to a lesser extent, Medicare.
As is the case for nursing home services generally, York
receives reimbursement from the Medicaid and Medicare programs,
directly from individual residents (private pay), and from other
payors such as third-party insurers. York believes that its
reimbursement mix is in line with nursing home expenditures
nationally. For the year ended December 31, 1997, York's payor
mix was approximately as follows: 7% private pay and nursing
homes, 73% Medicaid, 17% Medicare and 3% insurance and other
private sources.
For those patients who are not covered by government-
sponsored programs or private insurance, York generally directly
bills the patient or the patient's responsible party on a monthly
basis. York may alternatively bill private patients through the
nursing facility. Pricing for private pay patients is based on
prevailing regional market rates or "usual and customary"
charges.
The Medicaid program is a cooperative Federal-state program
designed to enable states to provide medical assistance to aged,
blind, or disabled individuals, or members of families with
dependent children whose income and resources are insufficient to
meet the costs of necessary medical services. State participation
in the Medicaid program is voluntary. To become eligible to
receive Federal funds, a state must submit a Medicaid "state
plan" to the Secretary of the Department of Health and Human
Services ("HHS") for approval. The Federal Medicaid statute
specifies a variety of requirements which the state plan must
meet, including requirements relating to eligibility, coverage of
services, payment and administration.
Federal law and regulations contain a variety of
requirements relating to the furnishing of prescription drugs
under Medicaid. First, states are given broad authority, subject
to certain standards, to limit or specify conditions to the
coverage of particular drugs. Second, Federal Medicaid law
establishes standards affecting pharmacy practice. These
standards include general requirements relating to patient
counseling and drug utilization review and more specific
requirements for nursing facilities relating to drug regimen
reviews for Medicaid patients in such facilities. Recent
regulations clarify that, under Federal law, a pharmacy is not
required to meet the general standards for drugs dispensed to
nursing facility residents if the nursing facility complies with
the drug regimen review requirements. However, the regulations
indicate that states may nevertheless require pharmacies to
comply with the general standards, regardless of whether the
nursing facility satisfies the drug regimen review requirement.
Florida, the state in which the York operates currently, requires
its pharmacies to comply therewith.
Third, Federal regulations impose certain requirements
relating to reimbursement for prescription drugs furnished to
Medicaid patients. In addition to requirements imposed by Federal
law, states have substantial discretion to determine
administrative, coverage, eligibility and payment policies under
their state Medicaid programs which may affect York's operations.
For example, some states have enacted "freedom of choice"
requirements which may prohibit a nursing facility from requiring
its residents to purchase pharmacy or other ancillary medical
services or supplies from particular providers that deal with the
nursing home. Such limitations may increase the competition which
York faces in providing services to nursing facility patients.
The Medicare program is a Federally funded and administered
health insurance program for individuals age 65 and over or who
are disabled. The Medicare program consists of two parts: Part A,
which covers, among other things, inpatient hospital, skilled
nursing facility, home health care and certain other types of
health care services; and Medicare Part B, which covers
physicians' services, outpatient services, and certain items and
services provided by medical suppliers. Medicare Part B also
covers a limited number of specifically designated prescription
drugs. The Medicare program establishes certain requirements for
participation of providers and suppliers in the Medicare program.
Pharmacies are not subject to such certification requirements.
Skilled nursing facilities and suppliers of medical equipment and
supplies, however, are subject to specified standards. Failure to
comply with these requirements and standards may adversely affect
an entity's ability to participate in the Medicare program and
receive reimbursement for services provided to Medicare
beneficiaries.
The Medicare and Medicaid programs are subject to statutory
and regulatory changes, retroactive and prospective rate
adjustments, administrative rulings, freezes and funding
reductions, all of which may adversely affect York's business.
There can be no assurance that payments for pharmaceutical
supplies and services under governmental reimbursement programs
will continue to be based on the current methodology or remain
comparable to present levels. In this regard, York may be subject
to rate reductions as a result of federal budgetary legislation
related to the Medicare and Medicaid programs. In addition,
various state Medicaid programs periodically experience budgetary
shortfalls which may result in Medicaid payment delays to York.
To date, York has not experienced any material adverse effect due
to any such budgetary shortfall. In addition, the failure, even
if inadvertent, of York and/or its client institutions to comply
with applicable reimbursement regulations could adversely affect
York's business. Additionally, changes in such reimbursement
programs or in regulations related thereto, such as reductions in
the allowable reimbursement levels, modifications in the timing
or processing of payments and other changes intended to limit or
decrease the growth of Medicaid and Medicare expenditures, could
adversely affect York's business.
Referral Restrictions. MetroVision is subject to Federal
and state laws which govern financial and other arrangements
between health care providers. These laws include the Federal
anti-kickback statute, which was originally enacted in 1977 and
amended in 1987, and which prohibits, among other things,
knowingly and willfully soliciting, receiving, offering or paying
any remuneration directly or indirectly in return for or to
induce the referral of an individual to a person for the
furnishing of any item or service for which payment may be made
in whole or in part under Medicare or Medicaid. Many states have
enacted similar statutes which are not necessarily limited to
items and services for which payment is made by Medicare or
Medicaid. Violations of these laws may result in fines,
imprisonment, and exclusion from the Medicare and Medicaid
programs or other state-funded programs. Federal and state court
decisions interpreting these statutes are limited, but have
generally construed the statutes to apply if "one purpose" of
remuneration is to induce referrals or other conduct within the
statute.
Federal regulations establish "safe harbors," which give
immunity from criminal or civil penalties to parties in good
faith compliance. While the failure to satisfy all criteria for a
safe harbor does not mean that an arrangement violates the
statute, it may subject the arrangement to review by the HHS
Office of Inspector General ("OIG"), which is charged with
administering the Federal anti-kickback statute. There are no
procedures for obtaining binding interpretations or advisory
opinions from the OIG on the application of the Federal anti-
kickback statute to an arrangement or its qualification for a
safe harbor upon which York can rely.
The OIG issues "Fraud Alerts" identifying certain
questionable arrangements and practices which it believes may
implicate the Federal anti-kickback statute. The OIG has issued a
Fraud Alert providing its views on certain joint venture and
contractual arrangements between health care providers. The OIG
also issued a Fraud Alert concerning prescription drug marketing
practices that could potentially violate the Federal statute.
Pharmaceutical marketing activities may implicate the Federal
anti-kickback statute because drugs are often reimbursed under
the Medicaid program. According to the Fraud Alert, examples of
practices that may implicate the statute include certain
arrangements under which remuneration is made to pharmacists to
recommend the use of a particular pharmaceutical product.
In addition, a number of states have recently undertaken
enforcement actions against pharmaceutical manufacturers
involving pharmaceutical marketing programs, including programs
containing incentives to pharmacists to dispense one particular
product rather than another. These enforcement actions arose
under state consumer protection laws which generally prohibit
false advertising, deceptive trade practices, and the like. York
believes its contract arrangements with other health care
providers, its pharmaceutical suppliers and its pharmacy
practices are in compliance with these laws. There can be no
assurance that such laws will not, however, be interpreted in the
future in a manner inconsistent with York's interpretation and
application.
Health Care Reform and Federal Budget Legislation. The
Clinton administration and members of Congress have proposed
plans to reform the health care system. Currently, Congress is
considering such reforms in the context of Federal budget
reconciliation legislation. This legislation could result in
significant reductions in payments to providers under the
Medicare program and a complete restructuring and reduced
payments to providers under the Medicaid program. With respect to
Medicare, proposals include establishment of a prospective
payment system for Skilled Nursing Facilities ("SNFs"); limits on
payments to Medicare SNFs for certain non-routine services,
including, among others, prescription drugs, diagnostic services,
and physical therapy and other rehabilitative services; requiring
consolidated billing by a SNF for all Part A and B claims for SNF
residents; and other limits on reimbursement of costs for
Medicare SNF services. If enacted, there can be no assurance that
such proposals could not have a material adverse effect on the
business of York. While budget negotiations are continuing, the
future of any reform proposals in Congress is unknown.
In addition, a number of states have enacted and are
considering various health care reforms, including reforms
through Medicaid demonstration projects. Federal law allows HHS
to authorize waivers of Federal Medicaid program requirements,
including requirements relating to coverage, free choice of
providers and payment for health care services, in connection
with state demonstration projects that promote Medicaid program
objectives. HHS published procedures and public notice
requirements designed to open the waiver approval process to
public comment and to expedite processing. Legal actions have
been initiated challenging the waiver process and the authority
of HHS to approve waivers for broad-based Medicaid managed care
programs. The Federal budget legislation restructuring the
Medicaid program would effectively eliminate Medicaid managed
care demonstration projects.
Several state Medicaid programs have established mandatory
statewide managed care programs for Medicaid beneficiaries to
control costs through negotiated or captivated rates, as opposed
to traditional cost-based reimbursement for Medicaid services,
and propose to use savings achieved through these programs to
expand coverage to those not previously eligible for Medicaid.
HHS has approved waivers for statewide managed care demonstration
projects in several states, and are pending for several other
states. These demonstration projects generally exempt
institutionalized care, including nursing facility services, from
the programs. York is unable to predict what impact, if any,
future projects might have on its operations. Because there are
currently various reform proposals under consideration at the
Federal and state levels, it is uncertain at this time what
health care reform initiatives, if any, will be implemented, or
whether there will be other changes in the administration of
governmental health care programs or interpretations of
governmental policies or other changes affecting the health care
system. There can be no assurance that future health care or
budget legislation or other changes will not have an adverse
effect on the business of York.
Environmental Matters
In operating its facility, York makes every effort to comply
with pollution control laws. No major difficulties have been
encountered in effecting compliance. No material capital
expenditures for environmental control facilities are expected.
While York cannot predict the effect which any future
legislation, regulations, or interpretations may have upon its
operations, it does not anticipate any changes that would have a
material adverse impact on its operations.
Employees
As of December 31, 1997, York employed 56 persons, including
one in an executive position, 20 pharmacists and pharmacy
technicians, three administrators and 32 other supporting
services. None of such individuals are covered by a collective
bargaining agreement. York believes that the relationship with
its employees is satisfactory.
Properties and Facilities
York owns an 18,000 square foot building in Brooksville,
Florida which is used as both headquarters and as a central
dispensing facility. York purchased the building in September
1995 and, following extensive renovations, occupied the space in
January 1996.
Legal Proceedings
There are no material pending lawsuits against York.
METROVISION'S MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Fiscal Year Ended December 31, 1997 compared to Fiscal Year Ended
December 31, 1996
On April 1, 1997, the Company consummated a merger with York
Hannover that has been accounted for as a reverse acquisition of
the Company by York Hannover under the purchase method of
accounting as prescribed by APB Opinion 16. Accordingly, the
historical financial statements of the Company prior to the
merger have been changed to reflect the historical financial
statements of York Hannover after giving effect to a
recapitalization of the historical stockholders' equity of York
Hannover. Therefore, the 1997 historical period includes twelve
months of operations of York Hannover and nine months of
operations of the Company. The 1996 historical period represents
the operations of York Hannover.
On November 30, 1997, the Company announced its plans to
discontinue its MetroVision media operations, effective February
28, 1998. The Company did shut down the operations as of
February 28, 1998 and will not receive any proceeds related to
the shut-down as the remaining assets have been written off as
discussed further below. As a result of the discontinuance, the
related assets, liabilities and results of operations are
segregated in the accompanying consolidated balance sheets,
statements of operations and cash flows. Net revenues and
operating expenses have been reclassified for amounts associated
with discontinued operations. Net revenues attributable to the
discontinued operations were $329,203 in 1997.
The Company is currently negotiating settlement agreements
with various customers due to the Company's decision to terminate
its media operations. In management's opinion, adequate
provision has been made for any material loss resulting from the
fulfillment of these service commitments. However, events
unknown at this time related to the termination of the media
operations may subsequently arise which could have a material
adverse impact on the Company.
Pursuant to the Company's decision to discontinue its media
operations, the Company wrote-off the remaining net book value of
its operating equipment and goodwill of $312,718 and $481,681,
respectively. These amounts are included in "Loss from
operations of the discontinued operations" in the income
statement for the period ended December 31, 1997. The Company
also recorded a $379,942 provision to reserve for potential
losses related to the shut-down of the media operations. This
additional reserve for potential losses is included in "Loss on
disposal of assets of discontinued operations" in the income
statement for the period ended December 31, 1997.
Net Revenues. Net Revenues for the twelve months ended
December 31, 1997, were $768,017 an increase of 71.5% or $320,172
from net revenues of $447,845 for the twelve months ended
December 31, 1996. This increase in net revenues for the twelve
months ended December 31, 1997 was attributable to an increase in
equity in earnings from York Hannover Partnership.
Selling, General and Administrative Expenses. Selling,
general and administrative expenses for the twelve months ended
December 31, 1997, were $254,197, an increase of 95.5% or
$124,186 from selling, general and administrative expenses of
$130,011 for the twelve months ended December 31, 1996. This
increase was primarily attributable to increases in costs
incurred in connection with the merger of the Company with York
Hannover Pharmaceuticals, Inc.
Management Fees. Management fees for the twelve months
ended December 31, 1997, were $75,000, a decrease of 71% or
$l86,00 from management fees of $261,000 for the twelve months
ended December 31, 1996. This decrease was attributable to the
reduction in management fees as a result of the merger.
Other Expenses. Other expenses primarily include interest
expense on a note payable to National HealthCare Corporation
partially offset by the amortization of a Non-Compete Agreement.
Other net expenses for the twelve months ended December 31, 1997,
were $277,162, an increase of 680.4% or $241,646 from other
expenses of $35,516 for the twelve months ended December 31,
1996. This increase was primarily the result of a reduction in
income from the amortization of deferred revenue and a $66,914
loss on the sale of marketable securities in 1997.
Fiscal Year Ended December 31, 1996 Compared to Year Ended
December 31, 1995
Gross Revenues. The Company derives its revenues from the
sale or barter of advertising and information provider spots on
the Commuter Channel, and the sale of complete systems to transit
authorities. Gross revenues for the year ended December 31, 1996
were $857,994, a decrease of $843,987 or 49.6% from gross
revenues of $1,701,981 for the year ended December 31, 1995. The
decrease in gross revenues was primarily the result of decreases
in sales of installed video systems to various transit
authorities and advertising revenues. System sales revenue
included in gross revenues was $287,998 and $700,184 for the
years ended December 31, 1996 and 1995 respectively.
Agency Commissions. Agency commissions consist of fees
charged by advertising agencies against the value of the
advertising contracts billed to their clients by the Company.
These commissions generally are 15% of gross revenues from
advertisers represented by agencies. The total number of the
Company's advertisers which are represented by agencies varies
each month. Agency commissions for the year ended December 31,
1996 were $21,583, a decrease of $55,510 or 72% from agency
commissions of $77,093 for the year ended December 31, 1995. The
decrease in agency commission was principally the result of the
decrease in advertising revenues.
Net Revenues. Net revenues are equal to gross revenues
after deducting advertising agency commissions. Net revenues for
the year ended December 31, 1996 were $836,411, a decrease of
$788,477 or 48.5% from net revenues of $1,624,888 for the year
ended December 31, 1995. The decrease is the result of lower
sales of installed video systems and advertising revenues in 1996
compared to 1995.
Cost of Sales. Cost of sales consists primarily of costs of
installed systems, commissions to installed transit systems,
maintenance costs, and software licensing fees. Commissions to
installed transit systems are based on a percentage of revenues.
Maintenance costs and software licensing fees are directly
related to increases in the number of installed television
monitors and computers. Cost of sales for the year ended
December 31, 1996 were $362,885, a decrease of $358,740 or 49.7%
from the year ended December 31, 1995. The decrease was
primarily attributed to the decrease in system sales revenues.
Cost of system sales included in the cost of sales were $137,103
and $415,143 for the years ended December 31, 1996 and 1995,
respectively.
Selling, General and Administrative Expenses. Selling,
general and administrative expenses for the year ended December
31, 1996 were $891,039 a decrease of $96,982 or 9.8% from
$988,021 for the year ended December 31, 1995. This decrease
resulted primarily from decreases in salaries and wages, sales
commissions and telephone expenses.
Depreciation and Amortization. Depreciation and
amortization expense for the year ended December 31, 1996 was
$533,247 an increase of $90,473 or 20.4% from $442,774 for the
year ended December 31, 1995. This increase in depreciation and
amortization expense is primarily the result of an increase in
the amortization of certain contract rights.
Write Down of Contract Rights and Installation Assets. The
Company recorded a charge of $1,018,666 to reduce the carrying
value of certain purchased contract rights, and equipment to
their net realizable value. The ultimate realization of the
operating assets is contingent upon the Company obtaining funds
to complete the MBTA project which was halted, or obtaining a
buyer for the related equipment.
Interest Income. For the year ended December 31, 1996,
interest income totaled $626 as compared to $5,901 for the year
ended December 31, 1995. The decrease is the result of a smaller
cash balance earning interest throughout most of 1996.
Three Months Ended March 31, 1998 Compared to Three Months Ended
March 31, 1997
Net Revenues. Net Revenues for the three months ended March
31, 1998, were $202,459 a decrease of 8.4% or $18,680 from net
revenues of $221,139 for the three months ended March 31, 1997.
This decrease in net revenues for the three months ended March
31, 1998 was attributable to a decrease in equity in earnings
from York Hannover Partnership.
Selling, General and Administrative Expenses. Selling,
general and administrative expenses for the three months ended
March 31, 1998 were $60,000, as compared to $0 for the three
months ended March 31, 1997. This increase was primarily
attributable to professional fees incurred in connection with the
operation of the Company.
Management Fees. Management fees for the three months ended
March 31, 1998, were $0 as compared to $75,000, for the three
months ended March 31, 1997. This decrease was attributable to
the reduction in management fees as a result of the merger.
Other Expenses. Other expenses primarily include interest
expense on a note payable to National HealthCare Corporation
partially offset by the amortization of a Non-Compete Agreement.
Other net expenses for the three months ended March 31, 1998,
were $62,302, a decrease of 39.7% or $41,004 from other expenses
of $103,306 for the three months ended March 31, 1997. This
decrease was primarily the result of a loss on the sale of
marketable securities in January and February 1997 of $66,914
offset by a reduction in income from the amortization of deferred
revenue as a result of the merger.
Liquidity and Sources of Capital
At March 31, 1998, the Company had negative working capital
of $3,748,299 and a ratio of current assets to current
liabilities of (.004). Cash was $15,764 at March 31, 1998 and
$11,956 at December 31, 1997. Accumulated deficit decreased
$80,157 from $3,540,075 at December 31, 1997 to $3,459,918 at
March 31, 1998. This decrease was the result of the net income
for the period ended March 31, 1998. The Company's primary asset
is its ownership of a 40% interest in York Hannover Partnership
(the "Partnership Interest"). For the three months ended March
31, 1998, the Company's equity in earnings from the Partnership
totaled $202,459. The proceeds of the proposed Sale are
anticipated to be reduced by the revenues of the Partnership
allocable to the Company for the period from January 1, 1998 to
the closing date. In June 1998, the Company received a
distribution of $200,000. The Company does not have control over
distributions made by York Hannover Partnership. All Partnership
distributions are subject to the availability of Partnership
cash.
The above discussion and the Company's financial statements
have been presented on the basis that it is a going concern,
which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company's
independent auditors have included an explanatory paragraph in
their report on the 1997 consolidated financial statements
stating that the factors discussed below raise a substantial
doubt about the Company's ability to continue as a going concern.
The Company is not currently generating sufficient cash flow
to fund its operations and is dependent on other financing in
order to sustain its operations. Although there can be no
assurance, the Company believes that, based on currently proposed
plans and assumptions relating to the proposed sale of its
Partnership Interest that proceeds will not be sufficient to
satisfy the Company's contemplated cash requirements for 1998. It
is anticipated that cash requirements will be sufficient for the
payment of principal and interest on the outstanding note payable
to National HealthCare Corporation ("NHC") and other liabilities
owed to unrelated third party creditors. Accordingly, there can
be no assurance that the Company will be to commence new business
endeavors or to generate revenues or ever achieve profitable
operations. The Company has outstanding a $1,950,000 promissory
note payable to NHC that became due on December 31, 1997 and is
currently in default and payable on demand. Accrued interest in
the promissory note is $223,642 as of March 31, 1998. The Company
currently does not have the financial resources necessary to meet
its payment obligation other than from Partnership distributions
or proceeds from the anticipated sale of the 40% interest in York
Hannover Partnership. In the event the Company is unable to meet
its payment obligation and the promissory note is not re-
negotiated, NHC, as a secured creditor, has the right to take
possession of or otherwise sell the interest in the Partnership
in satisfaction of the indebtedness and may seek recourse against
the Company's other assets, if necessary. [In addition, as a
result of the current default, it is anticipated that the Company
will be required to pay certain additional interest beginning
January 1, 1998. The Company also has outstanding a $571,957
working capital note payable to Lenox Healthcare, Inc. (an
affiliate of the Company) that was due in May 1998.
During the three months ended March 31, 1998, the Company
engaged in negotiations to sell its 40% interest in the
Partnership to an affiliate of United Professional Companies,
Inc. ("UPC"). It is not expected that the proceeds from the
proposed sale will be sufficient to satisfy all of the
outstanding obligations of the Company. UPC currently has a 60%
interest in the Partnership. It is anticipated that the closing
of the proposed sale will be conditioned upon the approval of the
Company's shareholders. The proceeds of the proposed sale are
anticipated to be reduced by the revenues of the Partnership
allocable to the Company for the period from January 1, 1998 to
the closing date. It is anticipated that the proceeds from the
sale will be used first to satisfy the note payable and related
accrued interest to NHC.
Additionally, during the three months ended March 31, 1998,
the majority holders of the 5% Series A Preferred Stock have
asserted certain claims against the Company which could have a
material adverse impact on the Company's financial position.
Although management does not believe these assertions represent
obligations of the Company as of March 31, 1998, management is
currently discussing these assertions with the preferred
shareholders in conjunction with the structuring of the proposed
sale of the Partnership. Management believes that these
assertions will be resolved during 1998 through ongoing
discussions with the preferred shareholders but is unable to
determine the ultimate outcome of the ongoing discussions.
Subsequent to the anticipated sale of the Partnership and
subject to shareholder approval, management intends to seek
business combination opportunities with other entities in 1998.
However, no such opportunities are currently known and there can
be no assurance that the Company will be able to locate such an
opportunity in 1998.
The Company has not identified any potential sources of debt
or equity financing and there can be no assurance that the
Company will be able to obtain additional financing if and when
needed or that, if available, financing will be on terms
acceptable to the Company. Furthermore, the results of these
matters cannot be predicted and there is no assurance that the
Company will continue in existence.
In the event the Company's plans change or its assumptions
change or prove inaccurate or proceeds of the sale of the
Partnership Interest prove to be insufficient to payoff the
Company's debt and operating liabilities, the Company may be
required to seek additional financing. The Company has no current
arrangements with respect to or sources of additional financing
other than the current working capital line of credit or the sale
of its Partnership Interest, and there can be no assurance that
financing will be available to the Company on commercially
reasonable terms, if at all. Any inability to obtain additional
financing could have a material adverse effect on the Company,
including possibly requiring the Company to cease its operations.
Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS 128"), has been issued effective for
fiscal periods ending after December 15, 1997. SFAS 128
establishes standards for computing and presenting earnings per
share. The Company is required to adopt the provisions of SPAS
128 in the fourth quarter of 1997. Under the standards
established by SFAS 128, basic earnings per share is computed by
dividing net income by the weighted average number of common
shares outstanding during the year. Due to the Company's option
and warrant prices compared to the respective market value of
those instruments, the effects of SFAS No. 128 have no impact to
the Company's reported earnings per share amounts.
Year 2000 Compliance
The Company is currently in the process of evaluating its
information technology infrastructure for Year 2000 Compliance.
The Company does not expect that the cost to modify its
information technology infrastructure to be Year 2000 compliant
will be material to its financial condition or results of
operations. The Company does not anticipate any material
disruption in its operations as a result of any failure to be in
compliance. However, the Company currently does not have any
information concerning Year 2000 Compliance status of York
Hannover Partnership's customers, suppliers and third party
payors. In the event that any of York Hannover Partnership's
significant suppliers, customers or third party payors do not
successfully and timely achieve Year 2000 Compliance, the
Company's business and operations could be adversely affected.
DESCRIPTION OF METROVISION CAPITAL STOCK
The statements made under this caption include summaries of
certain provisions contained in MetroVision's Restated
Certificate of Incorporation and in the New York Laws. These
statements do not purport to be complete and are qualified in
their entirety by reference to such Restated Certificate of
Incorporation, MetroVision's By-laws and the New York Law.
Common Stock
MetroVision is authorized to issue 25,000,000 shares of
Common Stock, par value $.00l per share. As of the record date,
there were 5,574,275 shares of Common Stock outstanding. The
holders of Common Stock are entitled to one vote for each share
held of record on all matters to be voted on by shareholders.
There is no cumulative voting with respect to the election of
directors. The holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors out
of funds legally available therefor. In the event of a
liquidation, dissolution of winding up of MetroVision, the
holders of Common Stock are entitled to share ratably in all
assets remaining which are available for distribution to them
after payment of liabilities and after provision has been made
for each class of stock, if any, having preference over the
Common Stock. Holders of shares of Common Stock, as such, have no
conversion, preemptive or other subscription rights, and there
are no redemption provisions applicable to the Common Stock. All
of the outstanding shares of Common Stock are fully paid and
nonassessable.
Preferred Stock
MetroVision is authorized to issue 2,000,000 shares of
preferred stock, par value $.00l per share, of which 720,000
shares have been designated as 5% Series A Convertible Preferred
Stock. The Board of Directors of MetroVision has the authority at
any time to establish and designate one or more series of
preferred stock, to fix the number of shares of any series (which
number may vary between series) and to fix the dividend rights
and preferences, the redemption price and terms, liquidation
rights, sinking fund provisions (if any), conversion provisions
(if any) and the voting powers (if any). The Board of Directors,
without shareholder approval, could issue preferred stock with
voting and conversion rights that could adversely affect the
voting power of holders of Common Stock and 5% Preferred Stock.
Certain companies have used the issuance of preferred stock as an
anti-takeover device and the Board of Directors of MetroVision
could, without shareholder approval, issue preferred stock with
certain voting, conversion and/or redemption rights that could
discourage any attempt to obtain control of MetroVision in a
transaction not approved by its Board of Directors.
Currently, there are 648,535 shares of 5% Preferred Stock
outstanding. The 5% Preferred Stock has a liquidation value of
approximately $5.556 per share. Holders of 5% Preferred Stock are
entitled to receive, when and as declared by MetroVision's Board
of Directors out of funds legally available therefor, cash
dividends at the annual rate of approximately $.2778 per share.
Dividends are payable quarterly on the first day of March, June,
September and December of each year and began accruing as of
December 17, 1992. Total unpaid dividends at March 31, 1998
aggregated approximately $947,000.
The 5% Preferred Stock is redeemable by MetroVision, at its
sole option, at any time; provided, however, that all of the
outstanding common stock purchase warrants issued in
MetroVision's initial public offering must be redeemed before any
redemption of the 5% Preferred Stock may occur, but in any event,
at any time after December 17, 1993, at a redemption price of
$5.556 per share plus accrued and unpaid dividends thereon. The
5% Preferred Stock may, at the option of the holder, be converted
at any time into shares of MetroVision Common Stock at an initial
rate of one share of Common Stock for each share of MetroVision
5% Preferred Stock which rate shall be subject to adjustment,
including, for example, by reason of the Reverse Stock Split.
The holders of 5% Preferred Stock are entitled to vote,
together with the holders of the Common Stock, on the basis of
number of whole shares of Common Stock into which their shares of
5% Preferred Stock are convertible, on all matters to be voted on
by the shareholders of MetroVision.
Warrants
In connection with the Company's November 1993 follow-up
public offering, the Company issued to the underwriter, Whale
Securities, warrants to purchase 17,391 units at $11.04 per unit.
Each unit consists of six (6) shares of Common Stock and a
warrant to purchase one (1) additional share of Common Stock for
$0.92. These warrants expire on November 2, 1998.
In connection with the issuance of bridge loans between
March and September 1993, the Company issued to certain
stockholders warrants to purchase an aggregate of 47,826 shares
of Common Stock at an exercise price of $9.20 per share (the
exercise price was later adjusted to $3.82 based on anti-dilution
adjustments triggered by the Company's 1993 follow-on public ).
These warrants expire in September 1998.
In connection with the issuance of bridge loans in July and
November 1996, the Company issued to certain stockholders
warrants to purchase an aggregate of 42,000 shares of Common
Stock at exercise prices ranging from $0.69 and $0.92. These
warrants expire in July and November 2001.
In connection with the Company's merger with York Hannover
Pharmaceuticals, Inc. in April 1997, the Company issued warrants
to certain members of Stockbridge Investment Partners Inc.'s
management to purchase an aggregate of 1,500,000 shares of the
Company's Common Stock at exercise prices ranging from $0.63 to
$0.945 per share. These warrants expire between April 2007 and
April 2009.
All of the above warrants are entitled to the benefit of
adjustments in the exercise price thereof in the event of certain
stock dividends, stock splits, reclassifications,
reorganizations, consolidations or mergers, as well as the right
to receive certain distributions of securities or property made
to existing holders of Common Stock as if the warrants had
already been exercised. The holders of the shares of Common
Stock issuable upon exercise of the warrants have the right to
request that the Company register any such shares in the event
proposes to register any of its securities under the Securities
Act of 1933, as amended.
RELATIONSHIP WITH INDEPENDENT AUDITORS
MetroVision has engaged Arthur Andersen LLP as its
independent auditors to audit MetroVision's financial statements
for the fiscal year ended December 31, 1997. A representative of
Arthur Andersen LLP is expected to be present at the Special
Meeting, with the opportunity to make a statement if the
representative so desires, and will be available to respond to
appropriate questions.
PROPOSALS OF SECURITY HOLDERS
To be considered for inclusion in the proxy statement and
form of proxy relating to the Annual Meeting of Stockholders to
be held in 1999, Stockholder proposals must be received in
writing marked for the attention of: Secretary, MetroVision of
North America, Inc., 75 South Church Street, Pittsfield,
Massachusetts 01201, not later than April 26, 1999.
OTHER MATTERS
The Board of Directors knows of no other business which will
be presented to the Special Meeting. If any other business is
properly brought before the Special Meeting, it is intended that
proxies in the enclosed form will be voted in respect thereof in
accordance with the judgment of the persons voting the proxies.
ANNUAL REPORT; INCORPORATION BY REFERENCE
The Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997 (which includes the Company's
audited financial statements), and the Company's Quarterly Report
on Form 10-QSB for the fiscal quarter ended March 31, 1998 are
provided as exhibits to this Proxy Statement but are not
incorporated herein.
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE SPECIAL MEETING,
YOU ARE URGED TO FILL OUT, SIGN, DATE AND RETURN THE ENCLOSED
PROXY AT YOUR EARLIEST CONVENIENCE.
By order of the Board of Directors:
Linda M. Clarke
Secretary
August [3], 1998
METROVISION OF NORTH AMERICA, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
AUGUST 27, 1998
THIS PROXY IS BEING SOLICITED BY METROVISION OF NORTH AMERICA,
INC.'S BOARD OF DIRECTORS
The undersigned, revoking any previous proxies relating to these
shares, hereby acknowledges receipt of the Notice and Proxy
Statement dated August [3], 1998 in connection with the Special
Meeting to be held at 10:00 a.m., local time, on Thursday, August
27, 1998, at the offices of MetroVision of North America, Inc.
(the "Company") at 75 South Church Street, Pittsfield,
Massachusetts 01201 and hereby appoints Thomas M. Clarke and
David Fancher, and each of them (with full power to act alone),
the attorneys and proxies of the undersigned, with power of
substitution, to vote all shares of stock of the Company
registered in the name provided herein which the undersigned is
entitled to vote at the 1998 Special Meeting of Stockholders, and
at any adjournment or postponement thereof, with all the powers
the undersigned would have if personally present. Without
limiting the general authorization hereby given, said proxies
are, and each of them is, instructed to vote or act as follows on
the proposals set forth in said Proxy.
This Proxy when executed will be voted in the manner directed
herein. If no direction is made this Proxy will be voted FOR the
election of directors and FOR proposals 1,2, 3, 4 and 6.
In their discretion the proxies are authorized to vote upon such
other matters as may property come before the meeting or any
adjournment or postponement thereof.
Election of Directors (or if any nominee is not available for
election, such substitute as the Board of Directors may
designate).
Nominees: Thomas M. Clarke, Linda M. Clarke, Lawrence B.
Cummings
SEE REVERSE SIDE FOR ALL SIX PROPOSALS. If you wish to vote in
accordance with the Board of Directors' recommendations, just
sign on the reverse side. You need not mark any boxes.
(SEE REVERSE SIDE)
/X/ Please mark votes as in this example.
The Board of Directors recommends a vote FOR Proposals 1,2,3, 4
and 6.
Proposal 1 - Adoption and approval of the Sale Agreement dated as
of June 1, 1998
FOR / / AGAINST / / ABSTAIN / /
Proposal 2 - To amend the Restated Certificate of Incorporation
to change the Purposes Clause to authorize the activities in
which the Company may now lawfully engage.
FOR / / AGAINST / / ABSTAIN / /
Proposal 3- To amend the Restated Certificate of Incorporation to
permit action by written consent of shareholders by less than
unanimous vote.
FOR / / AGAINST / / ABSTAIN / /
Proposal 4 - To ratify an amendment to the Amended By-laws of the
Company reducing the minimum number of directors from six to
three.
FOR / / AGAINST / / ABSTAIN / /
Proposal 5 - Election of three (3) Directors: Thomas M. Clarke,
Linda M. Clarke, Lawrence B. Cummings
FOR / / WITHHELD/ / For all nominees except as
noted______________________ / /
Proposal 6 - To ratify the appointment of Arthur Andersen LLP as
the Company's independent public accountants for the fiscal year
ending December 31, 1998.
FOR / / AGAINST / / ABSTAIN / /
Proposal 7 -- To transact such other business as may properly
come before the Special Meeting.
Dated: _____________________ ,
1998
Signature of Shareholder: ____________________________________
Note: When signing as attorney-in-
fact, executor, administrator,
trustee or guardian, please add
your title as such, and if signer
is a corporation, please sign
with full corporate name by duly
authorized officer or officers
and affix the corporate seal.
Where stock is issued in the name
of two or more persons, all such
persons should sign.
|TRADOCS: 1106432.6 (npq806!.doc)||
2
Exhibit A
YORK HANNOVER PARTNERSHIP
Partnership Market
Counties to be covered by York Hannover Partnership:
Alachua Levy
Citrux Manatee
Dixie Marion
Gilchrist Pasco
Hardee Pinellas
Hernando Sarasota
Hillsborough Sutnter
Lake
The following Unicare facilities, not within the above counties
will be served by the partnership for pharmacy and third party:
First Coast Health & Rehabilitation Center
Jacksonville, FL (Duval County)
Sunny Pines Nursing & Rehabilitation Center
Rockledge, FL (Brevard County)
Winter Haven Health & Rehabilitation Center
Winter Haven, FL (Polk County)
The following facilities, not within the above counties will be
served by the partnership for third party:
Heritage Nursing & Rehabilitation Center
North Miami Beach, FL (Dade County)
Jackson Heights Rehabilitation Center
Miami, FL (Dade County)
Palm Court Nursing & Rehabilitation Center
Ft. Lauderdale, FL (Broward County)
The following facility will be excluded from the partnership:
Park Lake Village Care Center
New Port Richey, FL (Pasco County)
The partnership will be allowed to provide third party oxygen
equipment and supplies within the states of Florida and Georgia.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to
______________
Commission file number 0-19685
METROVISION OF NORTH AMERICA, INC.
(Exact name of registrant as specified in its charter)
New York 16-1276525
(State or other jurisdiction of incorporation or
organization) (IRS Employer Identification No.)
75 South Church Street, Pittsfield, MA 01201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 413-448-
2111
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
(Title of Class)
Units consisting of six shares of Common Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was
required to file such report(s)), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No []
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not 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 this Form 10KSB [ X ]
As of April 10, 1998, 5,574,275 shares of common stock
were outstanding. The aggregate market value of the voting
stock held by persons who are not officers or directors (or
their affiliates) of the Registrant, including 646,535 shares
of 5% Series A Convertible Preferred Stock which is
convertible into 140,985 shares of common stock, based on the
average bid and asked prices of the common stock on April 10,
1998 as quoted on the electronic bulletin board commonly
referred to as the "pink sheets", held by non-affiliates of
the Registrant was approximately $459,326.
ITEM 1. BUSINESS
Recent Developments
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"). Under the terms of the Merger
Agreement, York Hannover distributed all of its assets and
liabilities to Stockbridge Investment Partners, Inc. prior to
the Merger except for York Hannover's 40% interest in York
Hannover Partnership and York Hannover's outstanding debt
under a National HealthCare Corporation Promissory Note and
related accrued interest. Pursuant to the Merger Agreement,
among other things: (i) the Company 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 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 after giving effect to the Merger.
On November 30, 1997, the Company announced its plans to
discontinue its MetroVision Commuter Channel media
operations, effective February 28, 1998. The Company will
shut-down the operations and will not receive any proceeds
related to the shut-down. The Company is currently
negotiating settlement agreements with various customers due
to the Company's decision to terminate its media operations.
In management's opinion, adequate provision has been made for
any material loss resulting from the fulfillment of these
service commitments. However, events unknown at this time
related to the termination of the media operations may
subsequently arise which could have a material adverse impact
on the Company.
The Company is seeking to sell substantially all of its
assets to Bay Pharmacies, Inc. by selling its 40% equity
interest in York Hannover Partnership ("York Interest").
If the sale of the York Interest (the "Sale") is
completed, the Company's strategic focus will be
significantly altered. The Company will apply the proceeds
of the Sale to pay off a secured loan to National HealthCare
Corporation ("NHC") and certain other unsecured liabilities
of the Company; and if the remaining proceeds of the Sale, if
any, are sufficient, to seek to maximize shareholder value of
the Company through entering into a business combination or
other transaction realizing the value of the Company's public
capital structure. If the proceeds of the Sale are not
sufficient to pay its current liabilities, the Company may be
forced to seek additional financing or sources of capital and
explore other strategic opportunities, including bankruptcy
protection. The Company's liabilities (the "Liabilities")
include a secured loan to NHC, accounts payable, legal,
accounting and printing expenses incurred in connection with
the Sale, liabilities related to the winding up of the
Commuter Channel business and a working capital loan to Lenox
Healthcare Inc., an affiliate of Mr. Thomas M. Clarke, the
Company's President. The Company believes that the sale of
the York Interest will allow the Company to maximize the
value of its assets for the benefit of creditors and
shareholders.
Because the Sale may constitute a "voluntary
liquidation" under the Company's Certificate of
Incorporation, upon completion of the Sale, holders of the
Company's 5% Preferred Stock could potentially be entitled to
payment of the liquidation preference ("Liquidation
Preference") on the Company's 5% Preferred Stock which would
be paid from the proceeds of the Sale remaining after the
payment of the Liabilities. Any amounts remaining
thereafter, which are not anticipated, would be distributed
to holders of the Company's Common Stock.
York Hannover Pharmaceuticals, Inc. ("York Hannover")
was incorporated under the laws of the State of Florida on
June 20, 1990. On July 24, 1990, York Hannover's shares were
transferred to York Hannover Leisure Properties, Inc.
("YHLPI"), a Florida corporation and a wholly owned
subsidiary of Progressive Investments International, Inc.
("Progressive"). On December 17, 1993, Stockbridge
Investment Partners, Inc. ("Stockbridge"), a Florida
corporation, purchased the stock of Progressive and
concurrent with the acquisition, merged with Progressive and
renamed it Stockbridge Investment Partners, Inc. Prior to
August 1, 1995, York Hannover provided institutional pharmacy
service, infusion therapy, urological, enteral and general
medical supplies to licensed nursing facilities, hospitals,
correction facilities and retirement facilities throughout
the State of Florida. On August 1, 1995, York Hannover
formed a partnership with United Professional Companies, Inc.
("UPC"), a Delaware corporation, named York Hannover
Partnership (the "Partnership") which now provides the above-
mentioned services.
Business
York Hannover Partnership purchases, repackages and
dispenses prescription and non prescription medication in
accordance with physician orders and delivers such
prescriptions at least daily to the nursing facility for
administration to individual patients by the facility's
nursing staff. York Hannover Partnership currently services
55 nursing homes from its centralized pharmacy located in
Brooksville, Florida. York Hannover Partnership maintains a
24-hour, on-call pharmacist service 365 days per year for
emergency dispensing and delivery or for consultation with
the facility's staff or attending physician.
Upon receipt of a prescription, the relevant patient
information is entered into York Hannover Partnership's
computerized dispensing and billing systems. At that time,
the dispensing system will check the prescription for any
potentially adverse drug interactions or patient sensitivity.
When required and/or specifically requested by the physician
or patient, branded drugs are dispensed; generic drugs are
substituted in accordance with applicable state and federal
laws and as requested by the physician or patient.
York Hannover Partnership utilizes a "unit dose"
distribution system. Most of its prescriptions are filled
utilizing specialized unit-of-use packaging and delivery
systems. Maintenance medications are typically provided in
30-day supplies utilizing either a box unit dose system or
unit dose punch card system. The unit dose system, preferred
over the bulk delivery systems employed by retail pharmacies,
improves control over drugs in the nursing facility and
improves patent compliance with drug therapy by increasing
the accuracy and timeliness of drug administration.
Integral to York Hannover Partnership's drug
distribution system is its computerized medical records and
documentation system. York Hannover Partnership provides to
the facility computerized medication administration records
and physician's order sheets and treatment records for each
patient. Data extracted from these computerized records are
also formulated into monthly management reports on patient
care and quality assurance. The computerized documentation
system in combination with the unit dose drug delivery system
results in greater efficiency in nursing time, improved
control, reduced drug waste in the facility and lower error
rates in both dispensing and administration. These benefits
improve drug efficacy and result in fewer drug-related
hospitalizations.
Consultant Pharmacist Services
Federal and state regulations mandate that nursing
facilities in addition to providing a source of
pharmaceuticals, retain consultant pharmacist services to
monitor and report on prescription drug therapy in order to
maintain and improve the quality of patient care. The
Omnibus Budget Reconciliation Act ("OBRA") implemented in
1990 seeks to further upgrade and standardize care by setting
forth more stringent standards relating to planning,
monitoring and reporting on the progress of prescription drug
therapy as well as facility-wide drug usage.
York Hannover Partnership provides consultant pharmacist
services which help clients comply with such federal and
state regulations applicable to nursing homes. The services
offered by York Hannover Partnership's consultant pharmacist
include: (i) comprehensive, monthly drug regimen reviews for
each patient in the facility to assess the appropriateness
and efficacy of drug therapies, including a review of the
patient's medical records, monitoring drug reactions to other
drugs or food, monitoring lab results and recommending
alternate therapies or discontinuing unnecessary drugs; (ii)
participation on the Pharmacy and Therapeutics, Quality
Assurance and other committees of client nursing facilities
as well as periodic involvement in staff meetings; (iii)
monthly inspection of medication carts and storage room; (iv)
monitoring and monthly reporting on facility-wide drug usage
and drug administration systems and practices; (v)
development and maintenance of pharmaceutical policy and
procedures manuals; and (vi) assistance to the nursing
facility in complying with state and federal regulations as
they pertain to patient care.
Ancillary Services
York Hannover Partnership provides the following
ancillary products and services to nursing facilities:
Infusion Therapy Products and Services. York Hannover
Partnership provides infusion therapy support services for
residents in its client nursing facilities. Infusion therapy
consists of the product (a nutrient, antibiotic, chemotherapy
or other drugs in solution) and the intravenous
administration of the product. York Hannover Partnership
prepares the product to be administered using proper
equipment in a sterile environment and then delivers the
product to the nursing home for administration by the nursing
staff. Proper administration of intravenous ("IV") drug
therapy requires a highly trained nursing staff. York
Hannover Partnership's consultant pharmacists and nurse
consultants operate an education and certification program on
IV therapy to assure proper staff training and compliance
with regulatory requirements in client facilities offering an
IV program.
By providing an infusion therapy program, York Hannover
Partnership enables its client nursing facilities to admit
and retain patients who otherwise would need to be cared for
in an acute-care facility. York Hannover Partnership
believes that by providing these high acuity pharmacy
services it has a competitive advantage over other pharmacy
providers. The most common infusion therapies York Hannover
Partnership provides are total prenatal nutrition, antibiotic
therapy, chemotherapy, pain management and hydration.
Wholesale Medical Supplies/Medicare Part B Billing.
York Hannover Partnership distributes disposable medical
supplies, including urological, ostomy, nutritional support
and wound care products and other disposables needed in the
nursing home environment. In addition, York Hannover
Partnership provides direct Medicare billing services for
certain of these product lines for patients eligible under
the Medicare Part B program. As part of this service, York
Hannover Partnership determines patient eligibility, obtains
certifications, orders products and maintains inventory on
behalf of the nursing facility. York Hannover Partnership
also contracts to act as billing agent for certain nursing
homes that supply these products directly to the patient.
Other Services. York Hannover Partnership's majority
partner, United Professional Companies, Inc. ("UPC"), also
provides respiratory therapy products and durable medical
equipment for its clients in certain of its market areas.
York Hannover Partnership continues to review the expansion
of these as well as other products and services that may
further enhance the ability of its client nursing facilities
to care for their residents in a cost effective manner.
Product and Market Development
York Hannover Partnership's pharmacy business engages in
a continuing program for the development of new services and
the marketing thereof. New service and new market
development are important factors for the growth of this
business. Any new service or marketing effort, including
those in the developmental stage, could require the
investment of a material portion of York Hannover
Partnership's assets.
Materials/Supply
York Hannover Partnership purchases pharmaceuticals
through a wholesale distributor with whom it has a prime
vendor contract and under contracts negotiated directly with
pharmaceutical manufacturers. York Hannover Partnership also
is a member of industry buying groups which contract with
manufacturers for discounted prices based on volume which are
passed through to York Hannover Partnership by its wholesale
distributor. York Hannover Partnership has numerous sources
of supply available to it and has not experienced any
difficulty in obtaining pharmaceuticals or other products and
supplies used in the conduct of its business.
Patents, Trademarks and Licenses
York Hannover Partnership's business operations are not
dependent upon any material patents, trademarks or licenses.
Inventories
York Hannover Partnership's centralized pharmacy
maintains adequate on-site inventories of pharmaceuticals and
supplies to ensure prompt delivery service to its customers.
Inventories on hand are not considered to be high by industry
standards. York Hannover Partnership's primary wholesale
distributor also maintains a local warehouse.
Competition
By its nature, the long-term care pharmacy business is
highly regionalized and, within a given geographic region of
operations, highly competitive. In the geographic region it
serves, York Hannover Partnership competes with numerous
local retail pharmacies, local and regional institutional
pharmacies and pharmacies owned by long-term care facilities.
York Hannover Partnership competes in this market on the
basis of quality, cost-effectiveness and the increasingly
comprehensive and specialized nature of its services along
with the clinical expertise, pharmaceutical technology and
professional support if offers.
Government Regulation
Institutional pharmacies, as well as the long-term care
facilities they serve, are subject to extensive Federal,
state and local regulation. These regulations cover required
qualifications, day-to-day operations, reimbursement and the
documentation of activities. York Hannover Partnership
continuously monitors the effect of regulatory activity on
its operations.
Licensure, Certification and Regulation. States
generally require that companies operating a pharmacy within
the state be licensed by the state board of pharmacy. York
Hannover Partnership currently has a pharmacy license in the
State of Florida in which it operates a pharmacy. In
addition, York Hannover Partnership's pharmacy is registered
with the appropriate state and Federal authorities pursuant
to statutes governing the regulation of controlled
substances.
Client nursing facilities are also separately required
to be licensed in the states in which they operate and, if
service Medicare of Medicaid patients, must be certified to
be in compliance with applicable program participation
requirements. Client nursing facilities are also subject to
the nursing home reforms of the Omnibus Budget Reconciliation
Act of 1987, which imposed strict compliance standards
relating to quality of care for nursing home operations,
including vastly increased documentation and reporting
requirements. In addition, pharmacists, nurses and other
health care professionals who provide services on York
Hannover Partnership's behalf are in most cases required to
obtain and maintain professional licenses and are subject to
state regulation regarding professional standards and
conduct.
Federal and State Laws Affecting the Repackaging.
Labeling, and Interstate Shipping of Drugs. Federal and
state laws impose certain repackaging, labeling, and package
insert requirements on pharmacies that repackage drugs for
distribution beyond the regular practice of dispensing or
selling drugs directly to patients at retail. A drug
repackager must register with the Food and Drug
Administration. York Hannover Partnership holds all required
registrations and licenses, and its prepackaging operations
are in compliance with applicable state and Federal
requirements.
Medicare and Medicaid. The nursing home pharmacy
business has long operated under regulatory and cost
containment pressures from state and Federal legislation
primarily affecting Medicaid and, to a lesser extent,
Medicare.
As is the case for nursing home services generally, York
Hannover Partnership receives reimbursement from Medicaid and
Medicare programs, directly from individual residents
(private pay), and from other payors such as third-party
insurers. York Hannover Partnership believes that its
reimbursement mix is in line with nursing home expenditures
nationally. For the year ended December 31, 1997, York
Hannover Partnership's payor mix was approximately as
follows: 39% private pay and nursing homes, 32% Medicaid,
26% Medicare and 3% insurance and other private sources.
For those patients who are not covered by government-
sponsored programs or private insurance, York Hannover
Partnership generally directly bills the patient or the
patient's responsible party on a monthly basis. York Hannover
Partnership may alternatively bill private patients through
the nursing facility. Pricing for private pay patients is
based on prevailing regional market rates of "usual and
customary" charges.
The Medicaid program is a cooperative Federal-state
program designed to enable states to provide medical
assistance to aged, blind, or disabled individuals, or
members of families with dependent children whose income and
resources are insufficient to meet the costs of necessary
medical services. State participation in the Medicaid
program is voluntary. To become eligible to receive Federal
funds, a state must submit a Medicaid "state plan" to the
Secretary of the Department of Health and Human Services
("HHS") for approval. The Federal Medicaid statute specifies
a variety of requirements which the state plan must meet,
including requirements relating to eligibility, coverage of
services, payment and administration.
Federal law and regulations contain a variety of
requirements relating to the furnishing of prescription drugs
under Medicaid. First, states are given broad authority,
subject to certain standards, to limit or specify conditions
to the coverage of particular drugs. Second, Federal
Medicaid law establishes standards affecting pharmacy
practice. These standards include general requirements
relating to patient counseling and drug utilization review
and more specific requirements for nursing facilities
relating to drug regimen reviews for Medicaid patients in
such facilities. Recent regulations clarify that, under
Federal law, a pharmacy is not required to meet the general
standards for drugs dispensed to nursing facility residents
if the nursing facility complies with the drug regimen review
requirements. However, the regulations indicate that states
may nevertheless require pharmacies to comply with the
general standards, regardless of whether the nursing facility
satisfies the drug regimen review requirement. Florida, the
state in which the York Hannover Partnership operates
currently, requires its pharmacy to comply therewith.
Third, Federal regulations impose certain requirements
relating to reimbursement for prescription drugs furnished to
Medicaid patients. In addition to requirements imposes by
Federal law, states have substantial discretion to determine
administrative, coverage, eligibility and payment policies
under their state Medicaid programs which may affect the
Partnership's operations. For example, some states have
enacted "freedom of choice" requirements which may prohibit a
nursing facility from requiring its residents to purchase
pharmacy or other ancillary medical services or supplies from
particular providers that deal with the nursing home. Such
limitations may increase the competition which York Hannover
Partnership faces in providing services to nursing facility
patients.
The Medicare program is a Federally funded and
administered health insurance program for individuals age 65
and over or who are disabled. The Medicare program consists
of two parts: Part A, which covers, among other things,
inpatient hospital, skilled nursing facility, home health
care and certain other types of health care services; and
Medicare Part B, which covers physicians' services,
outpatient services, and certain items and services provided
by medical suppliers. Medicare Part B also covers a limited
number of specifically designated prescription drugs, The
Medicare program establishes certain requirements for
participation of providers and suppliers in the Medicare
program. Pharmacies are not subject to such certification
requirements. Skilled nursing facilities and suppliers of
medical equipment and supplies, however, are subject to
specified standards. Failure to comply with these
requirements and standards may adversely affect an entity's
ability to participate in the Medicare program and receive
reimbursement for services provided to Medicare
beneficiaries.
The Medicare and Medicaid programs are subject to
statutory and regulatory changes, retroactive and prospective
rate adjustments, administrative rulings, freezes and funding
reductions, all of which may adversely affect York Hannover
Partnership's business. There can be no assurance that
payments for pharmaceutical supplies and services under
governmental reimbursement programs will continue to be based
on the current methodology or remain comparable to present
levels. In this regard, York Hannover Partnership may be
subject to rate reductions as a result of federal budgetary
legislation related to the Medicare and Medicaid programs.
In addition, various state Medicaid programs periodically
experience budgetary shortfalls which may result in Medicaid
payment delays to York Hannover Partnership. To date, York
Hannover Partnership has not experienced any material adverse
effect due to any such budgetary shortfall. In addition, the
failure, even if inadvertent, of York Hannover Partnership
and/or its client institutions to comply with applicable
reimbursement regulations could adversely affect York
Hannover Partnership's business. Additionally, changes in
such reimbursement programs or in regulations related
thereto, such as reductions in the allowable reimbursement
levels, modifications in the timing or processing of payments
and other changes intended to limit or decrease the growth of
Medicaid and Medicare expenditures, could adversely affect
York Hannover Partnership's business.
Referral Restrictions. The Company is subject to
Federal and state laws which govern financial and other
arrangements between health care providers. These laws
include the Federal anti-kickback statute, which was
originally enacted in 1977 and amended in 1987, and which
prohibits, among other things, knowingly and willfully
soliciting, receiving, offering or paying any remuneration
directly or indirectly in return for or to induce the
referral of an individual to a person for the furnishing of
any item or service for which payment may be made in whole or
in part under Medicare or Medicaid. Many states have enacted
similar statutes which are not necessarily limited to items
and services for which payment is made by Medicare of
Medicaid. Violations of these laws may result in fines,
imprisonment, and exclusion from the Medicare and Medicaid
programs or other state-funded programs. Federal and state
court decisions interpreting these statutes are limited, but
have generally construed the statutes to apply if "one
purpose" of remuneration is to induce referrals or other
conduct within the statute.
Federal regulations establish "safe harbors," which give
immunity from criminal or civil penalties to parties in good
faith compliance. While the failure to satisfy all criteria
for a safe harbor does not mean that an arrangement violates
the statute, it may subject the arrangement to review by the
HHS Office of Inspector General ("OIG"), which is charged
with administering the Federal anti-kickback statute. There
are no procedures for obtaining binding interpretations or
advisory opinions from the OIG on the application of the
Federal anti-kickback statute to an arrangement or its
qualification for a safe harbor upon which York Hannover
Partnership can rely.
The OIG issues "Fraud Alerts" identifying certain
questionable arrangements and practices which it believes may
implicate the Federal anti-kickback statute. The OIG has
issued a Fraud Alert providing its views on certain joint
venture and contractual arrangements between health care
providers. The OIG also issued a Fraud Alert concerning
prescription drug marketing practices that could potentially
violate the Federal statute. Pharmaceutical marketing
activities may implicate the Federal anti-kickback statute
because drugs are often reimbursed under the Medicaid
program. According to the Fraud Alert, examples of practices
that may implicate the statute include certain arrangements
under which remuneration is made to pharmacists to recommend
the use of a particular pharmaceutical product.
In addition, a number of states have recently undertaken
enforcement actions against pharmaceutical manufacturers
involving pharmaceutical marketing programs, including
programs containing incentives to pharmacists to dispense one
particular product rather than another. These enforcement
actions arose under state consumer protection laws which
generally prohibit false advertising, deceptive trade
practices, and the like. York Hannover Partnership believes
its contract arrangements with other health care providers,
its pharmaceutical suppliers and its pharmacy practices are
in compliance with these laws. There can be no assurance
that such laws will not, however, be interpreted in the
future in a manner inconsistent with York Hannover
Partnership's interpretation and application.
Health Care Reform and Federal Budget Legislation. The
Clinton administration and members of Congress have proposed
plans to reform the health care system. Currently, Congress
is considering such reforms in the context of Federal budget
reconciliation legislation. This legislation could result in
significant reductions in payments to providers under the
Medicare program and a complete restructuring and reduced
payments to providers under the Medicaid program. With
respect to Medicare, proposals include establishment of a
prospective payment system for Skilled Nursing Facilities
("SNFs"); limits on payments to Medicare SNFs for certain
non-routine services, including, among others, prescription
drugs, diagnostic services, and physical therapy and other
rehabilitative services; requiring consolidated billing by a
SNF and all Part A and B claims for SNF residents; and other
limits on reimbursement of costs for Medicare SNF services.
If enacted, there can be no assurance that such proposals
would not have a material adverse effect on the business of
York Hannover Partnership. While budget negotiations are
continuing, the future of any reform proposals in Congress is
unknown.
In addition, a number of states have enacted and are
considering various health care reforms, including reforms
through Medicaid demonstration projects. Federal law allows
HHS to authorize waivers of Federal Medicaid program
requirements, including requirements relating to coverage,
free choice of providers and payment for health care
services, in connection with state demonstration projects
that promote Medicaid program objectives. HHS published
procedures and public notice requirements designed to open
the waiver approval process to public comment and to expedite
processing. Legal actions have been initiated challenging
the waiver process and the authority of HHS to approve
waivers for broad-based Medicaid managed care programs. The
Federal budget legislation restructuring the Medicaid program
would effectively eliminate Medicaid managed care
demonstration projects.
Several state Medicaid programs have established
mandatory statewide managed care programs for Medicaid
beneficiaries to control costs through negotiated or
capitated rates, as opposed to traditional cost-based
reimbursement for Medicaid services, and propose to use
savings achieved through these programs to expand coverage to
those not previously eligible for Medicaid. HHS has approved
waivers for statewide managed care demonstration projects in
several states, and are pending for several other states.
These demonstration projects generally exempt
institutionalized care, including nursing facility services,
from the programs. York Hannover Partnership is unable to
predict what impact, if any, future projects might have on
its operations. Because there are currently various reform
proposals under consideration at the Federal and state
levels, it is uncertain at this time what health care reform
initiatives, if any, will be implemented, or whether there
will be other changes in the administration of governmental
health care programs or interpretations of governmental
policies or other changes affecting the health care system.
There can be no assurance that future health care of budget
legislation or other changes will not have an adverse effect
on the business of York Hannover Partnership.
Employees
As of December 31, 1997, York Hannover Partnership
employed 56 persons, including one in an executive position,
20 pharmacists and pharmacy technicians, three administrators
and 32 other supporting services. None of such individuals
are covered by a collective bargaining agreement. York
Hannover Partnership believes that the relationship with its
employees is satisfactory.
Environmental Matters
In operating it facility, York Hannover Partnership
makes every effort to comply with pollution control laws. No
major difficulties have been encountered in effecting
compliance. No material capital expenditures for
environmental control facilities are expected. While York
Hannover Partnership cannot predict the effect which any
future legislation, regulations, or interpretations may have
upon its operations, it does not anticipate any changes that
would have a material adverse impact on its operations.
Commuter Channel
The Company owns and operates the Commuter Channel, a
video cable network for the mass transit industry. The
Commuter Channel displays a program cycle of generally 10 to
12 minutes which is segmented into information from transit
authorities, news, weather, sports and entertainment
headlines and advertising. Broadcasts on the Commuter
Channel are displayed 24 hours a day, seven days a week, on
high-resolution video display monitors and projection screens
situated on rail platforms and in passenger waiting areas.
The Commuter Channel is currently installed in the Port
Authority Trans Hudson ("PATH") system in New York and New
Jersey, the Southeastern Pennsylvania Transit Authority
("SEPTA") system in Philadelphia, Pennsylvania, the
Massachusetts Bay Transit Authority ("MBTA") and the Bay
Area Rapid Transit ("BART") system in the San Francisco Bay
area in California. On November 30, 1997, The Board of
Directors voted to terminate the Company's ownership and
operation of the Commuter Channel. Accordingly, the Company
is currently ceasing operation of the Commuter Channel and
negotiating the termination of contractual obligations.
ITEM 2. PROPERTIES
The Company's headquarters are located at 75 South
Church Street, Suite 650, Pittsfield, Massachusetts, 01201.
ITEM 3. LEGAL PROCEEDINGS
On July 15, 1997, Paramount Metal Finishing Company,
Inc. (the "Plaintiff"), filed a complaint against
MetroVision, and one other defendant in the Superior Court of
Union County, New Jersey (Civil Action No. UNN-L-399297),
alleging monies due by MetroVision related to certain
services and goods provided in the amount $16,912, which
indebtedness is recorded on MetroVision's consolidated
balance sheet at December 31, 1997. The Plaintiff sought
damages in the aggregate amount of $22,770.16, which included
interest thereon, court costs and counsel fees. On September
3, 1997, a Final Judgment was entered against MetroVision in
the amount of $22,770.16. On November 21, 1997, a Default
Judgment was entered in the amount of $22,770.16 against the
Company and Lenox Healthcare, Inc. ("Lenox"). As of March
22, 1998, MetroVision has paid to the Plaintiff $17,000.
MetroVision is currently in default of this judgment. Except
as stated above, MetroVision is not party to any material
legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MetroVision's Common Stock is traded on the over-the-
counter market under the symbol "MVNA". Until May 22, 1996,
the Common Stock was included for quotation on the Nasdaq
SmallCap Market. On that date, the Common Stock was delisted
from the Small Cap Market for failing to meet certain listing
criteria. Consequently, since May 23, 1996, the Common Stock
has traded on an electronic bulletin board established for
securities that do not meet the Nasdaq SmallCap listing
requirements. The following table sets forth (for the
periods indicated) the range of high and low bid prices for
the Common Stock as reported by Nasdaq on the SmallCap Market
prior to May 23, 1996 and as reported on the electronic
bulletin board thereafter. The quotations reflect inter-
dealer prices, without retail mark-up, mark-down or
commission and may not necessarily reflect actual
transactions.
Price Per Share
1998 High Low
1st Quarter 9/32 1/4
1997
4th Quarter 3/8 1/4
3rd Quarter 1/2 3/8
2nd Quarter 1 1/4 5/8
1st Quarter 1 1/4 5/8
1996
4th Quarter 5/8 5/8
3rd Quarter 1 1/8 5/8
2nd Quarter 2 1/4 5/8
1st Quarter 1 5/8 5/8
As of April 10, 1998 there were 5,574,275 shares of
Common Stock, held of record by approximately 166 holders.
The Company believes that certain holders of record hold for
significantly more beneficial owners. The closing bid price
for the Company's Common Stock on April 10, 1998 was $0.25.
To date, the Company has not paid any dividends on its
Common Stock. The payment of dividends, if any, in the
future is within the discretion of the Board of Directors and
will depend on the Company's earnings, its capital
requirements and financial condition and other relevant
factors. The Company does not expect to declare or pay any
dividends in the foreseeable future. Further, payment of
dividends on the Common Stock will be subject to the prior
payment of dividends on the shares of 5% Preferred Stock,
which dividends are payable cumulatively in arrears.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data is derived from
the Consolidated Financial Statements of the Company. On
April 1, 1997, the Company consummated a merger with York
Hannover that has been accounted for as a reverse acquisition
of the Company by York Hannover under the purchase method of
accounting as prescribed by APB Opinion 16. Accordingly, the
historical financial statements of the Company prior to the
merger have been changed to reflect the historical financial
statements of York Hannover. The data should be read in
conjunction with the Consolidated Financial Statements,
related Notes, and other financial information included
herein.
Statement of Operations Data :
Summary Historical Condensed Financial Data
(In Thousands)
Year Ended December 31,
1993(1) 1994 1995
Statement of Operations Data:
Net patient revenues $3,466 $4,260 $2,673
Equity in earnings of
York Hannover Partnership -- -- 104
Total revenues 3,466 4,260 2,777
Cost of patient revenues (1,924) (2,396) (1,392)
Selling, general and
administrative (950) (1,128) (1,546)
Depreciation and amortization
expense (476) (82) (45)
Amortization of deferred
revenue -- -- 55
Other income (expense) -- -- 118
Interest expense, net (159) (319) (290)
Income tax provision -- -- --
Discontinued operations,
net of tax -- -- --
Net income (loss) $(43) $335 $(323)
(1) Reflects operations of predecessor entity prior to
purchase by York Hannover in December 1993 and does not
represent the ongoing operations after the purchase.
Year Ended December 31,
1996 1997
Statement of Operations Data:
Net patient revenues $-- $--
Equity in earnings of York
Hannover Partnership 448 768
Total revenues 448 768
Cost of patient revenues -- --
Selling, general and
administrative (391) (329)
Depreciation and
amortization expense -- --
Amortization of deferred
revenue 133 33
Other income (expense) 121 (19)
Interest expense, net (290) (292)
Income tax provision (19) (61)
Discontinued operations,
net of tax -- (1,438)
Net income (loss) $2 ($1,338)
Summary Historical Financial Data
(In Thousands)
Year Ended December 31,
1993 1994 1995
Balance Sheet Data:
Working capital
(deficit) (1) $430 $34 $(192)
Total assets 842 1,335 1,240
Short-term debt -- 771 174
Long-term debt (excluding
current portion) 2,713 1,924 2,180
(1)The Company has a history of operating losses and has a
working capital deficit and a deficit in common
stockholders' equity. These conditions raise substantial
doubt about the Company's ability to continue as a going
concern. See Note 2 of Notes to Financial Statements.
Year Ended December 31,
1996 1997
Balance Sheet Data:
Working capital
(deficit) (1) $(3,341) $(3,726)
Total assets 1,632 1,269
Short-term debt 2,751 2,547
Long-term debt (excluding
current portion) -- --
As of December 31, 1997 the Company has received loans
from affiliates totaling $596,957. These loans, including
all accrued and unpaid interest, are due no later than May 1,
1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
Results of Operations
Twelve Months Ended December 31, 1997 Compared to Twelve
Months Ended December 31, 1996
On April 1, 1997, MetroVision of North America, Inc.
consummated a merger with
York Hannover that has been accounted for as a reverse
acquisition of MetroVision by York Hannover under the
purchase method of accounting as prescribed by APB Opinion
16. Hereinafter the "Company" refers to York Hannover
and its acquired business MetroVision.
Accordingly, the historical financial statements of the
Company prior to the merger have been changed to reflect the
historical financial statements of York Hannover after giving
effect to a recapitalization of the historical stockholders'
equity of York Hannover. Therefore, the 1997 historical
period includes twelve months of operations of York Hannover
and nine months of operations of MetroVision. The 1996
historical period represents the operations of York Hannover.
On November 30, 1997 the Company announced its plans to discontinue
its MetroVision media operations, effective February 28, 1998. The
Company will shut-down the operations and will not receive any proceeds
related to the shutdown. As a result of the discontinuance, the related
assets, liabilities and results of operations are segregated in the
consolidated statement of operations and cash flows. Net revenue
and operating expenses have been reclassified for amounts associated
with the discontinued operations. net revenues attributable to the
discontinued operations were $329,203 in 1997.
Net Revenues. Net Revenues for the twelve months ended
December 31, 1997, were $768,017 an increase of 71.5% or
$320,172 from net revenues of $447,845 for the twelve months
ended December 31, 1996. This increase in net revenues for
the twelve months ended December 31, 1997 was attributable to
an increase in equity in earnings from York Hannover
Partnership.
Selling, General and Administrative Expenses. Selling,
general and administrative expenses for the twelve months
ended December 31, 1997, were $254,197, an increase of 95.5%
or $124,186 from selling, general and administrative expenses
of $130,011 for the twelve months ended December 31, 1996.
This increase was primarily attributable to increases in
costs incurred in connection with the merger of MetroVision
with York Hannover.
Management Fees. Management fees for the twelve months ended
December 31, 1997, were $75,000, a decrease of 71% or $186,00
from management fees of $261,000 for the twelve months ended
December 31, 1996. This decrease was attributable to the
reduction in management fees as a result of the merger.
Other Expenses. Other expenses primarily include interest
expense on a note payable to National HealthCare Corporation
partially offset by the amortization of a Non-Compete
Agreement. Other net expenses for the twelve months ended
December 31, 1997, were $277,162, an increase of 680.4% or
$241,646 from other expenses of $35,516 for the twelve months
ended December 31, 1996. This increase was primarily the
result of a reduction in income from the amortization of
deferred revenue and a $66,914 loss on the sale of marketable
securities in 19997.
Liquidity and Sources of Capital
At December 31, 1997, the Company had negative working
capital of $3,725,997 and a ratio of current assets to
current liabilities of (.01) as compared to (.14) at December
31, 1996. Cash was $58,291 at December 31, 1996 and $11,956
at December 31, 1997. Marketable securities decreased to $0
at December 31, 1997 from $446,041 at December 31, 1996. In
January and February 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. Accumulated deficit
increased $1,338,147 from $2,201,928 at December 31, 1996 to
$3,540,075 at December 31, 1997. This increase is the result
of the net loss for the period ended December 31, 1997.
As of December 31, 1997, the Company's primary asset was
its ownership of a 40% interest in York Hannover Partnership
(the "Partnership Interest"). For the twelve months ended
December 31, 1997, the Company's equity in earnings from the
Partnership totaled $768,016. The Company does not have
control over distributions made by the Partnership
(the "Partnership"). All Partnership distributions are
subject to the availability of York Hannover Partnership
cash.
The Company is not currently generating sufficient cash
flow to fund its operations and is dependent on other
financing in order to sustain its operations. Although there
can be no assurance, the Company believes that, based on
currently proposed plans and assumptions relating to the
proposed sale of its Partnership Interest that proceeds will
be sufficient to satisfy the Company's contemplated cash
requirements for 1998.
Such cash requirements primarily relate to the payment of principal and
interest on the outstanding note payable to National HealthCare ("NHC)
and other liabilities owed to unrelated third party creditors.
The above discussion and the Company's financial statements have been
presented on the basis that is is a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal
coarse of business. The factors discussed below raise a substantial
doubt about the Company's ability to continue as a going concern.
There can be no assurance, however,
that the Company will be successful in its new business
endeavors or able to generate revenues or ever achieve
profitable operations. The Company has outstanding a
$1,950,000 promissory note payable to National HealthCare
Corporation ("NHC") that became due on December 31, 1997 and
is currently in default and payable on demand. Accrued
interest in the promissory note is $161,340 as of December
31, 1997. The Company currently does not have the financial
resources necessary to meet its payment obligation other than
from proceeds from the anticipated sale of the interest in
York Hannover Partnership. In the event the Company is
unable to meet its payment obligation and the promissory note
is not re-negotiated, NHC, as a secured creditor, has the
right to take possession of or otherwise sell the interest in
the Partnership in satisfaction of the indebtedness and may
seek recourse against the Company's other assets, if
necessary. In addition, as a result of the current default,
it is anticipated that the Company will be required to pay
certain additional interest beginning January 1, 1998. The
Company also has outstanding a $596,957 working capital note
payable (including accrued interest) to Lenox Healthcare,
Inc. (an affiliate of the Company) that becomes due in May of
1998.
Subsequent to December 31, 1997, the Company engaged in
negotiations to sell its 40 % interest in the Partnership to
and affiliate of United Professional Companies, Inc. ("UPC").
There can be no assurance that the proceeds from the proposed
sale will be sufficient to satisfy all of the outstanding
obligations of the Company. UPC currently has a 60% interest
in the Partnership. It is anticipated that upon closing of
the proposed sale, the proceeds will be held in escrow
pending approval of the Company's shareholders. It is
anticipated that the proceeds from the sale will be used
first to satisfy the note payable and related accrued
interest to NHC.
Additionally, subsequent to December 31, 1997, the
majority holders of the 5% Series A Preferred Stock have
asserted certain claims against the Company which could have
a material adverse impact on the Company's financial
position. Although management does not believe these
assertions represent obligations of the Company as of
December 31, 997, management is currently discussing these
assertions with the preferred shareholders in conjunction
with the structuring of the proposed sale of the Partnership.
Management believes that these assertions will be resolved
during 1998 through ongoing discussions with the preferred
shareholders but is unable to determine the ultimate outcome
of the ongoing discussions.
Subsequent to the anticipated sale of the Partnership
and subject to shareholder approval, management intends to
seek merger opportunity with other entities in 1998.
However, no such merger opportunities are currently known and
there can be no assurance that the Company will be able to
locate such a merger opportunity in 1998.
The Company has not identified any potential sources of
debt or equity financing and there can be no assurance that
the Company will be able to obtain additional financing if
and when needed or that, if available, financing will be on
terms acceptable to the Company. Furthermore, the results of
these matters cannot be predicted and there is no assurance
that the Company will continue in existence.
In the event the Company's plans change or its
assumptions change or prove inaccurate or proceeds of the
sale of the Partnership Interest prove to be insufficient to
payoff the Company's debt and operating liabilities, the
Company may be required to seek additional financing. The
Company has no current arrangements with respect to or
sources of additional financing other than the current
working capital line of credit or the sale of its Partnership
Interest, and there can be no assurance that financing will
be available to the Company on commercially reasonable terms,
if at all. Any inability to obtain additional financing
could have a material adverse effect on the Company,
including possibly requiring the Company to significantly
curtail or cease its operations.
Recently Issued Accounting Standards
Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS 128"), has been issued effective
for fiscal periods ending after December 15, 1997. SFAS 128
establishes standards for computing and presenting earnings
per share. The Company is required to adopt the provisions
of SFAS 128 in the fourth quarter of 1997. Under the
standards established by SFAS 128, basic earnings per share
is computed by dividing net income by the weighted average
number of common shares outstanding during the year. Due to
the Company's option and warrant prices compared to the
respective market value of those instruments, the effects of
SFAS No. 128 have no impact to the Company's reported
earnings per share amounts.
Year 2000 Compliance
The Company is currently in the process of evaluating
its information technology infrastructure for Year 2000
Compliance. The Company does not expect that the cost to
modify its information technology infrastructure to be Year
2000 compliant will be material to its financial condition or
results of operations. The Company does not anticipate any
material disruption in its operations as a result of any
failure to be in compliance. However, the Company currently
does not have any information concerning the Year 2000 Compliance
status of York Hannover Partnership's customers, suppliers
and third party payors. In the event that any of York
Hannover Partnership's significant suppliers, customers or
third party payors do not successfully and timely achieve
Year 2000 Compliance, the Company's business and operations
could be adversely affected.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The response to this item is submitted in a separate
section of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Meetings of the Board
During the fiscal year ended December 31, 1997 the Board
of Directors of the Company held 3 meetings. During such
period, each of the current directors of the Company attended
75% or more of the aggregate of (1) the total number of
meetings of the Board of Directors and (2) the total number
of meetings held by all committees of the Board on which such
director served.
The Board of Directors has three committees - an Audit
Committee, a Compensation Committee and a Stock Option Plan
Committee.
The Compensation Committee makes recommendations to the
Board of Directors regarding remuneration of executive
officers and directors of the Company and the Stock Option
Plan Committee was established to review the internal
accounting procedures of the Company and to consult with and
review the Company's independent auditors and the services
provided by such auditors.
The Stock Option Plan Committee, the Audit Committee and
the Compensation Committee did not meet during the fiscal
year.
Name Age Position Held Director
Since
Thomas M. Clarke 42 Pres, CEO & Dir 1997
Linda M. Clarke 45 Exec VP, Treas & Dir 1997
Lawrence B. Cummings 42 Director 1997
Robert F. Hussey 48 Director 1991
Courtlandt G. Miller 45 Director 1997
David M. Fancher 38 CFO & Director 1997
Thomas M. Clarke, age 42, has been the President and CFO
of Lenox Healthcare, Inc. since 1991. Mr. Clarke has over 16
years of experience in the Healthcare industry and has held
positions with public and private Healthcare organizations.
Mr. Clarke is a Fellow in the Healthcare Financial Management
Association. Mr. Clarke is a graduate of the University of
Maine and completed his Masters in Science in Business at
Husson College.
Linda M. Clarke, age 45, has been Treasurer of Lenox
Healthcare, Inc. since 1991. Mrs. Clarke has over seven years
experience in the Healthcare industry. In addition to her
position with Stockbridge, Mrs. Clarke was previously employed
by the Houlton Regional Hospital Development Office and
participated in various fundraising activities. Mrs. Clarke
attended the University of Maine and was previously employed
by the Maine School Administrative District #29 for 5 years.
She continues to be Treasurer of Stockbridge Investment
Partners, Inc. as well as Treasurer of several other privately
held Healthcare companies.
Lawrence B. Cummings, age 42, is the Chief Executive
Officer of Stockbridge Investment partners, Inc. Mr.
Cummings has over ten years of health care experience and is
an active investor in the health care industry. From 1989 to
1992, Mr. Cummings was Chairman of the Board, Chief Executive
Officer and President of Providence Health Care, Inc.
("Providence"), a Cleveland, Ohio based publicly-traded
nursing home management company which Mr. Cummings founded
and which was acquired by the Multicare Companies, Inc. in
1992. Mr. Cummings received his undergraduate degree from
Harvard University and a Masters in Business Administration
from Harvard Business School. On May 23, 1996, a Final
Judgment of Dissolution of Marriage was entered transferring
certain assets to Mr. Cummings' former spouse and ordering
Mr. Cummings to pay her over $6.0 million, which has been
appealed. As a result of this order and other personal
indebtedness, on August 20, 1996, Mr. Cummings filed for
personal reorganization under Chapter 11, which case is now
pending in the U.S. Bankruptcy court for the Southern
District of Florida.
Robert F. Hussey, age 48, has served as a director of
MetroVision since February 1991. From July 1985 to May 1991,
Mr. Hussey was President and Chief Executive Officer of POP
Radio Corporation, an alternative media company which created
an in-store broadcasting network. POP Radio was purchased in
1991 by Heritage Media Corporation. From 1979 to 1985, Mr.
Hussey was Vice President of Grey Advertising. Mr. Hussey has
also held marketing positions at E.F. Hutton and American Home
Products. He is a director of Ivex Corporation, a private
company engaged in electronic hardware and software design and
manufacturing. Mr. Hussey is a graduate of Georgetown
University and received his Masters in Business Administration
from George Washington University.
Courtlandt G. Miller, age 45, is a private investor.
From 1988 until its purchase by Value Health Inc. in 1995, Mr.
Miller was Executive Vice President and general counsel of
Diagnostek, Inc., a New York Stock Exchange traded, pharmacy
benefit management company. He is also a director of
PowerBike, LLC, a privately held technology company. Mr.
Miller is a graduate of Fordham University and received his
law degree from the Tulane University School of Law.
David M. Fancher, age 38, joined MetroVision in November
1994 and is Vice President and Chief Financial Officer of the
Company. Prior to joining MetroVision, Mr. Fancher served as
Controller for McMillan Publishing, Professional Business
Reference Division, between 1991-1994, and for Chemical Waste
Management, a wholly owned subsidiary of Waste Management,
Inc. between 1988-1991. Mr. Fancher is a graduate of Monmouth
University with a B.S. Degree in Business Administration.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth all cash compensation
paid by the Company, as well as certain other compensation
paid or accrued, for the fiscal years ended December 31,
1995, 1996 and 1997 to the Company's President. None of the
Company's executive officers, including the Company's
President, had a total annual salary and bonus exceeding
$100,000 in the reported years.
SUMMARY COMPENSATION TABLE
Free type table - will be quicker
(1) The value of perquisites and other personal benefits,
securities and other property paid to or accrued for Mr.
Clarke and Mr. Hussy did not exceed the lesser of $50,000
or 10% of such officer's total reported annual salary and
bonus, and thus are not included in the table.
(2) Mr. Clarke served as Chairman of the Board of Directors
and Chief Executive Officer during fiscal year 1997 after
the effective date of the Merger on April 2, 1997.
Stock Options
The following table contains information concerning the
grant of stock options under the Company's 1991 Stock Option
Plan to the Company's President during the last fiscal year.
Option Grants in Last Fiscal Year
Free type table - will be quicker
The following table summarizes for the Company's
President the total number of unexercised options held at
December 31, 1997 and the aggregate dollar value of in-the-
money, unexercised options held at December 31, 1997. The
value of an unexercised, in-the-money option at fiscal year
end is the difference between its exercise or base price and
the fair market value of the underlying stock on December 31,
1997, which was $.28 per share. These values have not been
and may never be, exercised; and actual gains, if any, on
exercise will depend on the value of shares of Common Stock
on the date of exercise. There can be no assurance that
these values will be realized.
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year End Option Value
Annual
Compensation (1) Long-Term
Name & Principal Position Year Salary Compensation
Thomas M. Clarke 1997 $0 $0
Robert F. Hussey 1997 $0 $0
(1)The value of perquisites and other personal benefits, securities and other
property paid to or accrued for Mr. Clarke and Mr. Hussey did not exceed the
lesser of %50,000 or 10% of such officer's total reported annual salary and
bonus, and thus are not included in the table.
Stock Options
The following table contains information concerning the grant of stock
options under the Company's 1991 Stock Option Plan to the Company's President
during the last fiscal year.
Options Grants in Last Fiscal Year
Name Number of Shares Percent of total Options Exercise
Underlying Options Granted to Employees in Price Per
Granted Fiscal Year 1997 Share
Thomas M. Clarke 0 0% n/a
Employment Agreements
The Company entered into employment agreements with
Messrs. Clarke and Cummings which expire on April 1, 2000.
The agreement provided that Messrs. Clarke and Cummings will
not engage in a business competitive with the Company's
current and anticipated business for the term of the
agreement and for two years thereafter.
Option Plan
In June 1991, the Board of Directors approved the
Company's Stock Option Plan (the "Option Plan") which was
approved by the Company's shareholders on December 7, 1991.
The Option Plan is administered by the Board of Directors or
a committee appointed by the Board. Pursuant to the Option
Plan, options to acquire an aggregate of 900,000 shares of
Common Stock may be granted. The Option Plan provides for
grants to employees, consultants and director of the Company
or any parent or subsidiary (as defined in the Option Plan)
of the Company.
The Option Plan authorized the Board to issue incentive
stock options ("ISOs), as defined in Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code"), and
stock options that do not conform to the requirements of the
Code section ("Non-ISOs"). Consultants and directors who are
not also employees of the Company may only be granted Non-
ISOs. The exercise price of each ISO may not be less than
100% of the fair market value of the Common Stock at the time
of grant, except that in the case of a grant to an employee
who owns 10% or more of the outstanding stock of the Company
or a subsidiary or parent of the Company (a "10%
Stockholder"), the exercise price shall not be less than 110%
of the fair market value on the date of grant. The exercise
price of each Non-ISO granted under the Option Plan may not
be less that 85% of the fair market value of the Common Stock
at the time of grant or 110% of the fair market value in the
case of a Non-ISO granted to a 10% Stockholder. ISOs may not
be exercised after the tenth anniversary (fifth anniversary
in the case of any option granted to a 10% Stockholder) of
their grant. Options may not be transferred during the
lifetime of an optionholder. No stock options may be granted
under the Option Plan after May 31, 2001. Subject to the
provisions of the Option Plan, the Board has the authority to
determine the individuals to whom the stock options are to be
granted, the number of shares to be converted by each option,
the exercise of the option, the terms for the payment of the
option price and other terms and conditions. Payments by
optionholders upon the exercise of an option may be made (as
determined by the Board) in cash or such other form of
payment as may be permitted under the Option Plan, including,
without limitation, by promissory note of by shares of Common
Stock.
To date, 125,000 options have been granted under the
Option Plan, of which none have been exercised. All options
granted under the Option Plan have been granted with an
exercise price not less than 100% of the fair market value of
the Common Stock on the date of grant.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Principal Stockholders
The following table sets forth information, as of April
10, 1998, based on information obtained from the persons
named below or from reports filed on Schedule 13G or 13D,
with respect to the beneficial ownership of the shares of
Common Stock by each person known by the Company to be the
beneficial owner of more than five percent (5%) of the
outstanding shares of Common Stock, each director, and all
officers and directors as a group. Each of the persons named
below has sole voting power and sole investment power with
respect to the shares set forth opposite his name, except as
otherwise noted.
Name of Beneficial Amt. & Nature % of Outstanding
Owner Of Ownership (1) Shares Owned
Robert F. Hussey (3) 128,296 (2) 2.3%
Thomas M. Clarke (3) 4,294,925 (4)(5) 73.7%
Linda M. Clarke (3) 4,044,925 (6) 72.6%
David M. Fancher (3) 135,650 (7) 2.4%
Lawrence B. Cummings (3) 4,250,000 (5) 73.0%
Courtlandt G. Miller (3) 4,347 *
William G. Walters
c/o Whale Securities
650 Fifth Avenue
New York NY 10019 421,628 7.6%
All officers and
directors as a group
(seven persons) 4,563,218 (2)-(7) 81.2%
* Less than 1%.
(1)Unless otherwise noted, the Company believes that all
persons named in the table have sole voting and investment
power with respect to all shares of Common Stock
beneficially owned by them.
(2)Includes 4,331 shares issuable upon conversion of shares
of 5% Preferred Stock, 32,697 shares issuable upon the
exercise of immediately exercisable warrants.
(3)The address of this individual is c/o the Company, 75
South Church Street, Suite 650, Pittsfield, MA 01201.
(4)Includes 826 shares owned by Mr. Clarke's wife (as to
which Mr. Clarke disclaims beneficial ownership), 22,630
shares owned by Greylock Health Corporation, of which Mr.
Clarke is a controlling stockholder, and 21,469 shares
owned by Lenox Healthcare, Inc., of which Mr. Clarke is a
principal shareholder.
(5)Represents 4,000,000 shares owned by Stockbridge
Investment Partners, Inc., of which the named individual
is a principal stockholder and director, and immediately
exercisable warrants to purchase 250,000 shares granted to
the named individual.
(6)Represents 4,000,000 shares owned by Stockbridge
Investment Partners, Inc., of which the named individual
is a principal stockholder and director, including 22,630
shares owned by Greylock Health Corporation, of which Ms.
Clarke is a controlling stockholder, and 21,469 shares
owned by Lenox Healthcare, Inc., of which Ms. Clarke is a
principal shareholder.
(7)Includes 132,607 shares issuable upon the exercise of
immediately exercisable stock options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Transactions
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a)(1) Index of Financial Statements
The following consolidated financial statements of
MetroVision of North America, Inc. are included:
Report of independent public accountants - December 31
1997 and 1996.
Consolidated balance sheets - December 31, 1997 and
1996.
Consolidated statements of operations - years ended
December 31, 1997 and 1996
Consolidated statements of stockholders deficit - years
ended December 31, 1997 and 1996.
Consolidated statements of cash flows - years ended
December 31, 1997 and 1996.
Notes to consolidated financial statements - December
31, 1997
The following financial statements of York Hannover
Partnership are included:
Report of independent public accountants - December 31,
1997 and 1996.
Balance sheets - December 31, 1997 and 1996.
Statements of income - December 31, 1997 and 1996.
Statement of partners' capital - December 31, 1997 and
1996.
Statements of cash flows - December 31, 1997 and 1996.
Notes to financial statements - December 31, 1997 and
1996.
(a)(2) Index of Financial Statement Schedules
All other schedules for which provision are made in the
applicable accounting regulation of the Securities and
Exchange Commission are not required under the related
instructions or are not applicable and therefore, have been
omitted.
(a)(3) Exhibits
3.1(1) Restated Certificate of Incorporation, as amended.
3.2(1) Certificate of Amendment to Restated Certificate of
Incorporation.
3.3(1) By-laws.
4.1(1) Unit Purchase Option sold to Whale Securities., L.P.
in December, 1991.
4.2(4) Form of Underwriters Warrant Agreement between the
Company and Whale Securities., L.P.
4.3(1) Specimen Common Stock Certificate.
4.4(4) Form of Class B Warrant Agreement and Warrant
Certificate.
10.1(3)Agreement, dated November 1, 1992 between the Company
and TargetVision Inc. relating to the licensing of
software.
10.2(1)Agreement dated August 9, 1989 between the Company and
the Port Authority Trans Hudson.
10.3(1)Agreement dated July 29, 1987 between the Company and
the Chicago Transit Authority.
10.4(1)Agreement dated January 19, 1987 between the Company
and the Southeastern Pennsylvania Transit Authority.
10.5(1)Agreement dated August 30, 1992 between the Company
and the San Francisco Bay Area Rapid Transit District.
10.6(1)Agreement dated August 13, 1992 between the Company
and the Massachusetts Bay Transit Authority.
10.7(1)1991 Stock Option Plan of the Company and forms of
incentive stock option agreement and non-qualified
stock option agreement. *
10.8(4)1993 Non Employee Directors Stock Option Plan of the
Company. *
10.11(1)Agreement dated October 3, 1991 by and between the
City of Syracuse and the Company.
10.12(1)Financial Consulting Agreement entered into with
Whale Securities Co. L.P. in December 1991.
10.13(2)Stock Purchase Agreement, dated October 28, 1992 by
and among the Company, A. Leigh Baier, all of the
stockholders of record and warrant holders of
Touchtel, Inc., and certain persons who loaned money
to Touchtel, Inc.
10.14(3)Agreement dated October 28, 1991, between Touchtel
Inc. and the Port Authority of New York and New
Jersey.
10.16(4)Registration Rights Amendment, dated April 16, 1993
between the Company and Transportation Displays Inc.
("TDI")
10.17(4)Standstill and Non-Competition Agreement , dated
April 16 1993 between the Company and TDI.
10.24(4)Agreement dated May 1993 between the Company and
Robert F. Hussey.
10.25(4)Promissory Note dated May 24, 1993 by the Company to
Robert Hussey.
10.26(4)Warrant dated May 24, 1993 issued to Robert F.
Hussey.
10.27(4)Agreement dated March 8, 1993, between the Company
and Chiel Communication of America, Inc.
10.28(4)Form of Financial Consulting Agreement entered into
with Whale Securities Co. L.P.
10.29(4)Form of Agreement dated September 1993 by the Company
to Bridge Investor.
10.31(4)Form of Agreement dated September 1993 issued to
Bridge Investor.
10.32(4)Form of Agreement between the Company and certain
holders of options and warrants to purchase the
Company's Common Stock and 5% Preferred Stock.
10.33(4)Merger Agreement dated May 10, 1996 between the
Company and York Hannover Pharmaceuticals, Inc.
Exhibits to the Company's 1991 Registration Statement of
Form S-1 and its pre-effective amendments are incorporated
herein by reference.
Exhibits to the Company's Current Report of Form 8-K
dated December 10, 1992 are incorporated herein by reference.
Exhibits to the Company's Post Effective Amendment No. 2
to the Registration Statement of Form S-1 filed February 16,
1993 are incorporated herein by reference.
Exhibits to the Company's 1993 Registration Statement on
Form S-1 (File No. 33-67786) and its pre-effective amendments
are incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of
Pittsfield and State of Massachusetts on the 14th day of
April, 1998.
METROVISION OF NORTH AMERICA, INC.
By:
Thomas M. Clarke
President and CEO
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities, and on the dates indicated.
Titles Date
Thomas M. Clarke Pres., CEO and Director 4/14/98
Linda M. Clarke Treas., Sec. and Director 4/14/98
Lawrence B. Cummings Director 4/14/98
David M. Fancher CFO and Director 4/14/98
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of
Pittsfield and State of Massachusetts on the 14th day of
April, 1998.
METROVISION OF NORTH AMERICA, INC.
By:
Thomas M. Clarke
President and CEO
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities, and on the dates indicated.
Titles Date
/s/ Thomas M. Clarke
Thomas M. Clarke Pres., CEO and Director 4/14/98
/s/ Linda M. Clarke
Linda M. Clarke Treas., Sec. and Director 4/14/98
/s/ Lawrence B. Cummings
Lawrence B. Cummings Director 4/14/98
/s/ David M. Fancher
David M. Fancher CFO and Director 4/14/98
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To MetroVision of North America, Inc.:
We have audited the accompanying consolidated balance sheets of
METROVISION OF NORTH AMERICA, INC. (a New York corporation) as of
December 31, 1997 and 1996, and the related consolidated
statements of operations, common stockholders' deficit 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 financial
position of MetroVision of North America, Inc. as of December 31,
1997 and 1996, and the consolidated results of its operations and
its cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 2 to the financial statements, the
Company has suffered recurring losses from operations and has a
net capital deficiency and a net working capital deficiency at
December 31, 1997. The Company has an outstanding note payable
and related accrued interest in the total amount of $2,111,340
that was due on December 31, 1997. In the event the Company is
unable to meet its payment obligation and the promissory note is
not re-negotiated, the secured creditor has the right to take
possession of or otherwise sell the Company's interest in the
York Hannover Partnership in satisfaction of the indebtedness and
may seek recourse against the Company's other assets, if
necessary. The Company also has outstanding a $596,957 working
capital note payable to an affiliate of the Company that becomes
due in May of 1998. In addition, as discussed in Note 7, certain
holders of the Company's preferred stock currently assert that
total cumulative unpaid preferred stock dividends of $902,000 are
due and payable and that the Company's proposed sale of its
interest in York Hannover Partnership during 1998 would obligate
the Company to pay a liquidation preference to the Preferred
Stockholders of $3,605,855. Management believes that these
assertions will be resolved during 1998 through ongoing
discussions with the preferred shareholders but is unable to
determine the ultimate outcome of the ongoing discussions. These
matters raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to
these matters, including its intent to seek potential merger
opportunities in 1998 and its intent to sell its investment in
York Hannover Partnership during 1998 and utilize the proceeds to
satisfy the outstanding note payable, are described in Note 2.
The accompanying consolidated financial statements do not include
any adjustments relating to the recoverability and classification
of recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable
to continue as a going concern.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
April 9, 1998
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS 1997 1996
CURRENT ASSETS:
Cash and cash equivalents $11,956 $58,291
Marketable securities - 466,071
TOTAL CURRENT ASSETS 11,956 524,362
OTHER ASSETS:
Investment in York Hannover
Partnership 1,269,195 701,179
Due from York Hannover
Partnership - 160,747
Due from related parties - 245,267
TOTAL OTHER ASSETS 1,269,195 1,107,193
TOTAL ASSETS $1,281,151 $1,631,555
The accompanying notes are an integral part of these consolidated
financial statements.
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(Continued)
LIABILITIES AND STOCKHOLDERS' DEFICIT 1997 1996
CURRENT LIABILITIES:
Due to related parties $596,957 $-
Due to Stockbridge Investment
Partners, Inc. - 404,837
Accrued expenses 297,765 370,835
Deferred revenue - 743,381
Notes payable 1,950,000 2,346,370
Net liability of discontinued
operations 893,231 -
Total current liabilities 3,737,953 3,865,423
STOCKHOLDERS' DEFICIT:
Preferred stock, $.001
par value, 1,280,000
shares authorized,
no shares outstanding - -
Cumulative preferred stock,
5% series a $.001 par value,
720,000 shares authorized,
$5.56 per share redemption
value and liquidation value,
648,535 shares issued and
outstanding 649 649
Common stock, $.001 par value,
25,000,000 shares authorized,
5,574,275 and 1,574,275 shares
issued and outstanding in 1997
AND 1996, RESPECTIVELY 5,574 1,574
Unrealized loss on securities,
net of taxes - (32,040)
Capital (deficit) in excess of
par value 1,077,050 (2,123)
Accumulated deficit (3,540,075) (2,201,928)
Total stockholders' deficit (2,456,802) (2,233,868)
Total liabilities and stockholders'
deficit $1,281,151 $1,631,555
The accompanying notes are an integral part of these consolidated
financial statements.
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
REVENUES:
Equity in earnings of York
Hannover Partnership $768,017 $447,845
Net revenues 768,017 447,845
OPERATING COSTS AND EXPENSES:
General and administrative 254,197 130,011
Management fees 75,000 261,000
Total operating expenses 329,197 391,011
Operating income 438,820 56,834
OTHER INCOME (EXPENSE):
Interest expense, net (292,101) (289,767)
Amortization of deferred
revenue 33,285 133,143
Other income (expense), net (18,346) 121,108
Total other expense (277,162) (35,516)
NET INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES 161,658 21,318
INCOME TAX PROVISION (61,430) (19,331)
NET INCOME FROM CONTINUING
OPERATIONS 100,228 1,987
DISCONTINUED OPERATIONS
(NOTE 4 ):
Loss from operations of
discontinued operations (less
applicable income tax benefit
of $45,868) (1,073,995) -
Loss on disposal of assets of
discontinued operations,
including provision of
$379,942 for operating
losses during phase-out
period (less applicable
income tax benefit of
$15,562) (364,380) -
Total loss from discontinued
operations (1,438,375) -
NET INCOME (LOSS) BEFORE PREFERRED STOCKHOLDER DIVDEND
REQUIREMENTS $ (1,338,147) $ 1,987
LESS - PREFERRED STOCK DIVIDEND
REQUIREMENTS (180,293) $ (180,293)
NET LOSS APPLICABLE TO COMMON STOCK $ (1,518,440) $ (178,306)
BASIC NET LOSS PER COMMON SHARE FROM
CONTINUING OPERATIONS $ (.02) $ (.04)
BASIC NET LOSS PER COMMON SHARE FROM
DISCONTINUED OPERATIONS $ (.28) $ -
BASIC NET LOSS PER COMMON SHARE $ (.30) $ (.04)
WEIGHTED AVERAGE NUMBER OF SHARES 5,180,706 4,000,000
The accompanying notes are an integral part of these consolidated
financial statements.
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
Capital in Unrealized
Preferred Common Excess of Par Loss on Accumulated
Stock Stock Value Securities Deficit Total
BALANCE, at
December 31,
1995 $ 649 $ 1,518 $ (2,067) -$ (2,203,915) $(2,203,815)
Unrealized loss
on securities,
net of taxes - - - (32,040) - (32,040)
Conversion of
warrants - 56 (56)
Net income - - - - 1,987 1,987
BALANCE, at
December
31, 1996 649 1,574 (2,123) (32,040)(2,201,928) (2,233,868)
Common stock
issued in
reverse
acquisition - 4,000 300,000 - - 304,000
Capital
contribution
prior to
merger - - 779,173 - - 779,173
Sale of
securities - - - 32,040 - 32,040
Net loss - - - - (1,338,147)(1,338,147)
BALANCE, at
December
31, 1997 $ 649 $ 5,574$1,077,050 $-$ (3,540,075)$(2,456,802)
The accompanying notes are an integral part of these consolidated financial
statements.
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$ (1,338,147) $ 1,987
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Realized loss on sale of
marketable securities 66,914 -
Amortization of non-compete
agreement (33,285) (133,143)
Income tax provision 61,340 19,331
Noncash gain on settlement of
debt (16,000) -
Dividends on marketable
securities - (20,953)
Equity in earnings in excess of
distributions of York
Hannover Partnership (568,017) (147,845)
Discontinued operations, net of taxes 1,438,375 - -
Changes in operating assets and
liabilities:
Decrease in accounts receivable - 111,538
Decrease in non-current
deferred tax asset - 141,876
Increase (decrease) in accounts
payable and other accrued
expenses (10,458) 156,972
Net cash used in continuing
operations (399,278) (129,763)
Discontinued Operations:
Cash loss from discontinued operations (228,855) - -
Cash loss on disposal of discontinued
operations (18,720) -
Change in discontinued net
liabilities 11,324 -
Net cash used in
discontinued operations (236,251) -
Net cash used in operating
activities (635,529) -
CASH FLOWS USED FOR INVESTING
ACTIVITIES:
Loans to York Hannover Partnership,
net of payments received 49,221 (55,279)
Net proceeds from related party loans 533,231 (895)
Capital expenditures for operating
equipment (22,718) -
Purchases of marketable securities - (30,642)
Proceeds from sale of marketable
securities 399,198 6,813
Net cash provided by
investing activities 958,932 80,003
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable borrowings - 275,537
Principal repayments of notes payable (369,738) (282,922)
Net cash used in financing
activities (369,738) (7,385)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (46,335) 42,375
CASH AND CASH EQUIVALENTS, beginning of
year 58,291 15,916
CASH AND CASH EQUIVALENTS, end of year $11,956 $ 58,291
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the year for
interest $ 456,024 $ 41,649
The accompanying notes are an integral part of these consolidated
financial statements.
METROVISION OF NORTH AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presentation
On April 1, 1997, MetroVision of North America, Inc.
("MetroVision") consummated a merger with York Hannover
Pharmaceuticals, Inc. ("YHPI"), a Florida corporation, in
a tax-free reorganization as defined in the Internal
Revenue Code. The merger has been accounted for as a
reverse acquisition of MetroVision by YHPI under the
purchase method of accounting as prescribed by APB
Opinion 16. Hereinafter, "the Company" refers to YHPI
and its acquired business, MetroVision. Accordingly, the
historical financial statements of the Company prior to
the merger have been changed to reflect the historical
financial statements of YHPI after giving effect to a
recapitalization of the historical stockholders' equity
of YHPI. Therefore, the 1997 historical period includes
twelve months of operations of YHPI and nine months of
operations of MetroVision. The 1996 historical period
represents the operations of YHPI. In conjunction with
the merger on April 1, 1997, the Company effected a 1 for
4.6 reverse stock split. Accordingly, all historical per
share, options, warrants and exercise prices have been
restated to reflect the stock split. See Note 3 for
further discussion of the merger.
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. As
discussed in Note 2, the Company has suffered recurring
losses from operations and has a stockholders' deficit as
of December 31, 1997. See Note 2 for discussion of
management's plan to satisfy debt requirements and
finance on-going operations.
Description of Business
Historically, YHPI's only operations and only significant
asset has been its investment in York Hannover
Partnership, which is a provider of institutional
pharmacy services, infusion therapy, third-party billing,
medical equipment and supplies, respiratory therapy and
other institutional pharmacy services.
Historically, MetroVision owned and operated a video
cable network called the "Commuter Channel" for the
purpose of providing information (departure and arrival
times, news, sports, entertainment and advertising) via a
large screen video display monitor in certain mass
transit locations.
On November 30, 1997, the Company announced its plans to
discontinue its MetroVision media operations, effective
February 28, 1998. See Note 4 for further discussion of
the discontinued operations.
Principles of Consolidation
The consolidated financial statements as of December 31,
1997 include the accounts of the Company and a
wholly-owned subsidiary. All significant intercompany
accounts and transactions have been eliminated in
consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be
cash equivalents.
Marketable Securities
At December 31, 1996, the Company had marketable
securities classified as available for sale that were
recorded based on quoted market prices. Unrealized gains
and losses on available for sale securities were recorded
in accordance with Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS 115"). In 1997, the
Company sold these securities and recorded a realized
loss of $66,914 .
System Contracts
MetroVision has installed equipment in public mass
transit systems pursuant to contractual agreements with
applicable transit authorities. The contracts provide
for payment to transit authorities in the form of
commissions and certain of these contracts provide for
minimum guaranteed commissions. As discussed in Note 4,
the Company will cease its MetroVision media operations
effective February 28, 1998. Management believes
adequate provision has been made to fulfill its
obligations to customers.
Revenue Recognition
On August 1, 1995, YHPI and United Professional
Companies, Inc. ("UPC") formed York Hannover Partnership
(the "Partnership") for the purpose of providing
institutional pharmacy services, infusion therapy,
third-party billing, medical equipment and supplies,
respiratory therapy and other services. UPC and the
Company have a 60% and 40% interest in the Partnership,
respectively. The Company's investment in the
Partnership has been accounted for under the equity
method of accounting. The Partnership has a minimum term
of five years.
Advertising revenues have been recognized after the
related advertising has been broadcast over the network.
If merchandise or services are received prior to the
advertising being broadcast, a liability is recorded.
Revenue from installation contracts have been recognized
on the percentage-of-completion method based on costs
incurred to date to the total estimated cost at
completion. All revenues related to the media
operations are included in "Loss from operations of
discontinued operations."
Income Taxes
In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income
Taxes", the Company establishes deferred tax liabilities
and assets based on the difference between the financial
statement and income tax carrying amounts of assets and
liabilities using existing rates.
Basic Net Loss Per Common Share
In 1997, the Financial Accounting Standards Board
("FASB") issued SFAS No. 128, "Earnings per Share". The
Company adopted the provisions of SFAS 128 during the
fourth quarter of 1997. Basic net loss per common share
is computed based on the weighted average number of
common shares assumed to be outstanding which pertain to
the respective operations in each period as defined by
SFAS 128. Where anti-dilutive, cumulative convertible
preferred shares, options and warrants have been excluded
from the computations and net loss has been adjusted for
imputed dividends on the convertible preferred stock.
Fully diluted net loss per common share has not been
presented as the impact of the preferred shares, options
and warrants is anti-dilutive.
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. The
Company maintains allowances for uncollectible accounts.
Stock-Based Compensation
In October 1995, the FASB issued SFAS No. 123,
"Accounting for Stock-Based Compensation." The Statement
encourages, but does not require, companies to record
compensation expense for stock-based compensation at fair
value. The Company has adopted the disclosure
requirements of SFAS No. 123, but did not change its
method of accounting for stock-based compensation.
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 revenues and
expenses during the reporting period. Actual results
could differ from those estimates.
Reclassifications
Certain reclassifications of 1996 amounts have been made
to conform with the 1997 presentation.
2. LIQUIDITY
The Company's inability to generate significant revenues
to finance operations has resulted in significant net
losses and negative cash flows from operations as shown
in the accompanying financial statements. In addition,
the Company's current liabilities are significantly
greater than its current assets as shown in the
accompanying financial statements. These conditions have
significantly weakened the Company's liquidity and
financial position and raise substantial doubt about the
Company's ability to continue as a going concern.
The Company has outstanding a $1,950,000 promissory note
payable to National HealthCare Corporation ("NHC") that
became due on December 31, 1997 and is currently in
default and payable on demand. Accrued interest on the
promissory note payable to NHC is $161,340 as of December
31, 1997. The Company currently does not have the
financial resources necessary to meet its payment
obligation other than from proceeds from the anticipated
sale of the interest in York Hannover Partnership (the
"Partnership"). In the event the Company is unable to
meet its payment obligation and the promissory note is
not re-negotiated, NHC, as a secured creditor, has the
right to take possession of or otherwise sell the
interest in the Partnership in satisfaction of the
indebtedness and may seek recourse against the Company's
other assets, if necessary. In addition, as a result of
the current default, it is anticipated that the Company
will be required to pay certain additional interest
beginning January 1, 1998. The Company also has
outstanding a $596,957 working capital note payable
to Lenox Healthcare, Inc.
("Lenox", an affiliate of the Company) that becomes due
in May of 1998. See Note 6 for discussion of the note
payable to NHC and Note 10 for discussion of the working
capital note payable to Lenox.
Subsequent to December 31, 1997, the Company engaged in
negotiations to sell its 40% interest in the Partnership
to an affiliate of UPC. There can be no assurance that
the proceeds from the proposed sale will be sufficient to
satisfy all of the outstanding obligations of the
Company. UPC currently has a 60% interest in the
Partnership (see Note 5). It is anticipated that upon
closing of the proposed sale, the proceeds will be held
in escrow pending approval of the Company's shareholders.
It is anticipated that the proceeds from the sale will be
used first to satisfy the note payable and related
accrued interest to NHC.
Additionally, subsequent to December 31, 1997, the
majority holders of the 5% Series A Preferred Stock have
asserted certain claims against the Company which could
have a material adverse impact on the Company's financial
position. Although management does not believe that
these assertions represent obligations of the Company as
of December 31, 1997, management is currently discussing
these assertions with the preferred shareholders in
conjunction with the structuring of the proposed sale of
the Partnership. Management believes that these
assertions will be resolved during 1998 through ongoing
discussions with the preferred shareholders but is unable
to determine the ultimate outcome of the ongoing
discussions. See Note 7 for further discussion of this
contingency.
Subsequent to the anticipated sale of the Partnership and
subject to shareholder approval, management intends to
seek merger opportunities with other entities in 1998.
However, no such merger opportunities are currently known
and there can be no assurance that the Company will be
able to locate such a merger opportunity in 1998.
The Company has not identified any potential sources of
debt or equity financing and there can be no assurance
that the Company will be able to obtain additional
financing if and when needed or that, if available,
financing will be on terms acceptable to the Company.
Furthermore, the results of these matters cannot be
predicted and there is no assurance that the Company will
continue in existence. The financial statements do not
include any adjustments to reflect the possible future
effects of the recoverability and classification of
assets or amounts and classification of liabilities that
may result from the possible inability of the Company to
continue as a going concern.
3. MERGER OF YORK HANNOVER PHARMACEUTICALS, INC. AND
METROVISION OF NORTH AMERICA, INC.
On April 1, 1997, MetroVision merged with YHPI in a
transaction that has been accounted for as a reverse
acquisition of MetroVision by YHPI. The merger has been
accounted for under the purchase method of accounting as
prescribed by APB Opinion 16. Accordingly, the
historical financial statements of the Company prior to
the merger have been changed to reflect the historical
financial statements of YHPI. The statements of common
stockholders' equity have been converted from YHPI's
capital stock structure to the Company's capital stock
structure.
Under terms of the agreement, YHPI distributed (prior to
the merger) all of its assets and liabilities to
Stockbridge Investments Partners, Inc. ("SIP", an
affiliated entity owned by certain stockholders of the
Company) except for YHPI's 40% interest in the
Partnership and YHPI's note payable to NHC and related
accrued interest. The net liabilities distributed of
$770,173 have been reflected as a capital contribution in
the statements of common stockholders' equity. Each
share of YHPI common stock outstanding on April 1, 1997
(a total of 1,000 shares) 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 72% of the shares of common stock after the
merger. In addition, the Company issued certain warrants
to two members of SIP's management, as discussed in Note
9. If all of such warrants were exercised (and assuming
no other increases on the Company's capital stock), these
two members of SIP's management would beneficially own,
directly and through SIP, approximately 78% of the
Company's outstanding common stock. No warrants were
exercised in 1997. On April 1, 1997, simultaneous with
the merger and pursuant to shareholder approval at a
Special Meeting of Shareholders, the Company filed an
amendment to its Restated Certificate of Incorporation to
effect a 1 for 4.6 reverse stock split.
The acquisition of MetroVision was accounted for using
the purchase method of accounting. The shares
attributable to MetroVision's operations were valued at
an estimated fair market value of $300,000 on the date of
merger. The excess of the consideration paid over the
fair market value of the net assets was assigned to
goodwill.
The following unaudited pro forma results of the Company
for the year ended December 31, 1997 are presented as if
the merger had occurred on January 1, 1997. 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 merger been consummated on January 1,
1997, nor are they necessarily indicative of future
operating results.
Year Ended
December 31,
1997
Unaudited
Net income from continuing operations $ 100,228
Discontinued operations:
Loss from operations of discontinued
operations (1,209,301)
Loss on disposal of assets of
discontinued operations (364,380)
Total loss from discontinued operations (1,573,681)
Net loss (1,473,453)
Less - preferred stock dividends (180,293)
Net loss applicable to common stock $ (1,653,746)
Basic net loss per common share from
continuing operations $ (.02)
Basic net loss per common share from
discontinued operations $ (.28)
Basic net loss per common share
$ (.30)
Loss from operations of discontinued operations in the
above unaudited pro forma of operations includes a full
year of results of operations of MetroVision.
4. DISCONTINUED OPERATIONS
On November 30, 1997, the Company announced its plans to
discontinue its MetroVision media operations, effective
February 28, 1998. The Company will shut-down the
operations and will not receive any proceeds related to
the shut-down as the remaining assets have been written
off as discussed further below. As a result of the
discontinuance, the related assets, liabilities and
results of operations are segregated in the accompanying
consolidated balance sheets, statements of operations and
cash flows. Net revenues and operating expenses have
been reclassified for amounts associated with
discontinued operations. Net revenues attributable to
the discontinued operations were $329,203 in 1997.
The Company is currently negotiating settlement
agreements with various customers due to the Company's
decision to terminate its media operations. In
management's opinion, adequate provision has been made
for any material loss resulting from the fulfillment of
these service commitments. However, events unknown at
this time related to the termination of the media
operations may subsequently arise which could have a
material adverse impact on the Company.
Assets and liabilities as of December 31, 1997 have been
reclassified for amounts associated with discontinued
operations. Summarized balance sheet data for the
discontinued operations is as follows at December 31,
1997:
Accounts receivable, net $ 33,348
Prepaid expenses and other 10,621
current assets
Total assets 43,969
Shut-down accrual (379,942)
Accounts payable and accrued
expenses (557,258)
Total liabilities (937,200)
Net liability of discontinued
operations $ (893,231)
Pursuant to the Company's decision to discontinue its
MetroVision media operations, the Company wrote-off the
remaining net book value of its operating equipment and
goodwill of $312,718 and $481,681, respectively. These
amounts are included in "Loss from operations of
discontinued operations" in the income statement for the
period ended December 31, 1997. The Company also
recorded a $379,942 provision to reserve for potential
losses related to the shut-down of the media operations.
This additional reserve for potential losses is included
in "Loss on disposal of assets of discontinued
operations" in the income statement for the period ended
December 31, 1997.
5. INVESTMENT IN YORK HANNOVER PARTNERSHIP
Earnings and losses of the Partnership are allocated to
the Company and UPC based on each partners' general
partnership interest. Under terms of the agreement, the
Company had a right to priority distributions of its
share of Partnership net income limited to $300,000, all
of which was received by the Company during 1996. After
reaching the maximum priority distribution to the
Company, distributions were made to UPC up to an amount
representing an equality of the ownership percentages.
Subsequently, distributions have been made to the Company
and UPC in proportion to each partner's respective
ownership interest. All distributions are subject to the
availability of Partnership cash. Distributions made to
the Company were $200,000 and $300,000 in 1997 and 1996,
respectively. Distributions made to UPC were $750,000
and $0 in 1997 and 1996, respectively.
The Company is currently out of compliance with the
Partnership Agreement ('the Agreement") with UPC.
According to the Agreement, at no time during the term of
the Partnership shall the principal amount of indebtedness
secured by the Partnership Interest
be greater than $1,750,000. As discussed
in Note 2, the principal amount outstanding at December
31, 1997 was $1,950,000. The Company does not believe
that this violation will have a material impact on the
results of operations or financial position of the
Company.
See Note 2 for discussion of the Company's plans to sell
its 40% interest in the Partnership.
Summary financial statements of the Partnership as of and
for the years ended December 31, 1997 and 1996 are as follows:
December 31, December 31,
Balance Sheet 1997 1996
Accounts receivable $ 1,995,570 $ 2,273,810
Inventory 583,498 587,940
Cash 606,713 122,796
Other current assets 100,721 59,094
Net property, plant and equipment 806,613 716,317
Total assets $ 4,093,111 $ 3,759,957
Working capital loans - due to the
Company and UPC $ - $ 630,000
Accounts payable 237,853 295,959
Due to UPC - 38,082
Due to Stockbridge Investment
Partners, Inc. 4,770 -
Accrued expenses 119,436 107,011
Current portion of capital lease 63,527 37,032
Current portion of promissory
note payable 17,000 15,580
Capital lease obligation 126,053 64,739
Promissory note payable 351,484 368,602
Partners' capital 3,172,992 2,202,952
Total liabilities and partners'
capital $ 4,093,115 $ 3,759,957
Income Statement
Revenues $ 10,891,082 $ 9,383,651
Cost of sales (5,316,022) (4,899,122)
Gross profit 5,575,060 4,484,529
Expenses (3,655,020) (3,364,916)
Net income $ 1,920,040 $ 1,119,613
6. NOTES PAYABLE
At December 31, 1997, the Company was in default on its
outstanding borrowing arrangements. The Company's notes
payable are summarized as follows:
December 31,
1997 1996
Promissory note payable to NHC,
interest at 12% and principal
and interest due at December
31, 1997 $ 1,950,000 $ 1,950,371
Other notes - 120,462
$ 1,950,000 $ 2,070,833
As discussed in Note 2, the promissory note with NHC is
secured by the Company's interest in the Partnership, the
personal guarantees of the two stockholders of the
Company and certain assets of SIP and Monterey
Investments, Inc ("Monterey", a related party of the
Company as discussed in Note 10). Also as discussed in
Note 2, the NHC promissory note was due on December 31,
1997 and is currently in default.
7. COMMITMENTS AND CONTINGENCIES
The majority shareholders of the 5% Series A Convertible
Preferred Stock ("the preferred stock") have asserted
that the Company's merger with YHPI obligates the Company
to pay all holders of the preferred stock all cumulative
unpaid dividends which approximated $902,000 at December
31, 1997. In management's opinion, the Company is not
obligated to pay the cumulative dividends until approval
by the Company's Board of Directors and therefore has not
recorded a liability at December 31, 1997. In addition,
the preferred shareholders have asserted the Company's
proposed sale of its interest in the Partnership would
obligate the Company to pay a liquidation preference of
approximately $3,605,855 and that the Company may have
entered into certain corporate events without proper
approval from the Board of Directors, potentially to the
detriment of shareholders. Although management does not
believe that these assertions represent obligations of
the Company as of December 31, 1997, management is
currently discussing these assertions with the preferred
shareholders in conjunction with the structuring of the
proposed sale of the Partnership. Management believes
that these assertions will be resolved during 1998
through ongoing discussions with the preferred
shareholders but is unable to determine the ultimate
outcome of the ongoing potential settlement discussions.
These matters, in conjunction with other liquidity
matters as discussed in Note 2, raise substantial doubt
about the Company's ability to continue as a
going-concern.
8. INCOME TAXES
As of January 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes." Under the asset and
liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax
consequences attributable to
differences between the financial statement carrying
amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those
temporary differences are expected to be recovered or
settled.
Deferred tax assets and liabilities, at 38% of the
respective amounts, are comprised of the following:
December 31,
1997 1996
Deferred tax assets:
Net operating loss
carryforwards $ 128,000 $ 83,000
Deferred revenue - 280,000
Unrealized loss on marketable
securities - 19,000
Reserves and accruals deducted
for book purposes but not
yet available for tax
purposes 157,000 -
Depreciation and fixed asset
write-offs 157,000 -
Contract rights and
installations in process 347,000 -
789,000 382,000
Valuation allowance
(789,000) (382,000)
$ - $ -
Due to the Company's historical operating losses and
anticipated future losses, it is not likely that the
Company will generate sufficient taxable income in the
future to realize the deferred tax assets. Therefore, in
accordance with SFAS No. 109, the Company has provided a
valuation allowance at December 31, 1997 and 1996 to
offset the deferred tax assets not anticipated to be
utilized. The following summarizes the change in
valuation allowance for the year ended December 31, 1997
and 1996:
1997 1996
Valuation allowance at
January 1 $ 382,000 $ 385,000
Valuation allowance at
December 31 789,000 382,000
Increase (decrease) in valuation
allowance $ 407,000 $ 3,000
The Company's 1997 income tax provision of $61,430 is
offset by a benefit from discontinued operations.
9. STOCKHOLDERS' EQUITY
Preferred Stock
Each share of the Company's 5% Series A preferred stock
has a liquidation preference of $5.56 per share, plus
accrued but unpaid dividends. The dividends were
accumulated from the first anniversary of the Company's
initial public offering on December 17, 1992. At
December 31, 1997, dividends in arrears on the 5% Series
A preferred stock were approximately $902,000 or $1.39
per share. In management's opinion, the Company is not
obligated to pay the cumulative dividends until approval
by the Company's Board of Directors and, therefore, has
not recorded a liability at December 31, 1997. The stock
is senior to all preferred and common stock and is
convertible at the option of the holder at any time prior
to redemption by the Company, subject to certain
provisions at the rate of 4.6 shares of preferred for one
share of common stock. The holders are entitled to vote
on a converted basis, together with the holders of the
common stock in all matters in which holders of common
stock are entitled to vote. This security is a common
stock equivalent. See Note 7 for discussion of the
Company's dispute with the 5% Series A preferred
shareholders.
Stock Warrants
In connection with the Company's initial public offering
in November 1991, the Company issued warrants to the
underwriters (as adjusted for anti-dilution provisions)
to purchase up to 73,443 units (each unit consisting of
one share of common stock at an exercise price of $3.40
per unit and one warrant to purchase a share of stock at
$6.81). The exercise price of these warrants was equal
to or greater than the fair market value of the common
stock at the measurement date. On December 11, 1996, the
Company reset the exercise price for these warrants to
$1.84 and extended the expiration date from December 17,
1996 to December 12, 1998. None of these warrants have
been exercised.
Also in connection with the November 1993 offering, as
compensation for services, the underwriters were issued
warrants to purchase 17,391 units at $11.04 per unit.
Each unit consists of six shares of common stock and a
warrant to purchase an additional share of stock for
$.92. The warrants expire November 2, 1998. None of
these warrants have been exercised.
In connection with the issuance of bridge loans in 1993,
the Company granted certain stockholders additional
warrants to purchase 47,826 shares of common stock at an
exercise price of $9.20 (reset to $3.82 upon secondary
offering in November 1993) which was not less than the
fair market value of the common stock at the date the
warrants were issued. The remaining warrants expire
September 1998. None of these warrants have been
exercised.
As part of a secondary offering in November 1993, the
Company sold Class B Redeemable warrants to purchase
173,913 shares of $.001 par value common stock at a price
of $.92 with an exercise period from May 1994 until
November 1996. Prior to expiration, a total of 56,547 of
these warrants were exercised, including 55,210 warrants
exercised during 1996.
In connection with the issuance of bridge loans in 1996,
the Company granted certain stockholders additional
warrants to purchase 42,000 shares of common stock at
exercise prices ranging from $.69 to $.92 through 2001.
The exercise price of these warrants was equal to or
greater than the fair market value of the common stock at
the measurement date. None of these warrants have been
exercised.
In connection with the merger with YHPI on April 1, 1997,
the Company granted warrants to certain members of SIP's
management to purchase 1,500,000 shares of the Company's
common stock, exercisable in three cumulative equal
annual installments, at exercise prices ranging from $.63
to $.945 per share. None of these warrants have been
exercised.
Stock Option Plans
The Company's Stock Option Plan (the "Plan") provides for
the grant of qualified and non-qualified stock options to
employees, consultants, and directors of the Company to
purchase in the aggregate up to 900,000 shares of common
stock. Under the Plan, the Company's Stock Option
Committee has complete discretion
to establish the terms and conditions of each option,
subject to the plan provisions. The options may be
exercised over a specified period not in excess of ten
years from the date of grant. As of December 31, 1997,
non-qualified options have been granted to purchase
133,695 shares of common stock. None of these options
have been exercised.
The Board of Directors have also approved the Company's
Non-Employee Directors Stock Option Plan (the "Directors'
Plan"). The Directors' Plan provides for the grant of
non-qualified stock options to non-officer directors of
the Company to purchase in the aggregate up to 50,000
shares of common stock. Options are granted under the
Directors' Plan according to a formula based upon
attendance at Board of Directors meetings in addition to
a minimum of 5,000 options per year. Options will be
granted with an exercise price equal to the fair market
value on the date of grant and may be exercised over a
period not in excess of ten years from the date of grant.
No options have been granted under the Directors' Plan.
Based on the number of options outstanding and the
historical and expected future trends of factors
affecting valuation of those options, management believes
that no compensation cost exists under SFAS No. 123
attributable to options granted.
Options outstanding under the above plans are as follows:
Weighted
Average
Exercise Number of
Price Shares
Outstanding and exercisable at
December 31, 1995 $ 1.01 97,826
Canceled during 1996 .92 (5,870)
Granted during 1996 .87 16,739
Outstanding and exercisable at
December 31, 1996 1.01 108,695
Canceled during 1997 (100,000)
Granted during 1997 .60 125,000
Outstanding and exercisable at
December 31, 1997 $ .60 133,695
As of December 31, 1997, outstanding options for 133,695
shares were exercisable at prices ranging from $.58 to
$.92 with 125,000 options having a weighted average
remaining contractual life of five years and the
remaining options having no expiration date. All options
have been granted with an exercise price equal to or
greater than the fair market value of the common stock on
the date of the grant.
10. RELATED PARTY TRANSACTIONS
Lenox, Pinellas Healthcare Investors, Inc. and Monterey
are related parties of the Company because the majority
stockholders of these entities are also the majority
stockholders of SIP. SIP is the majority stockholder of
the Company. Net amounts due to or from related parties
as of December 31, 1997 and 1996 consist of the
following:
December 31, December 31,
1997 1996
Due from York Hannover Partnership $ - $ 160,747
Due from (to) related parties:
Lenox Healthcare, Inc. $ (596,597) $ -
Pinellas Healthcare Investors,
Inc. - 235,000
Monterey Investments, Inc. - 10,267
$ (596,597) $ 245,267
Due to Stockbridge Investment
Partners, Inc. $ - $(404,837)
In June 1997, the Board of Directors authorized the
Company to enter into a line-of-credit agreement with
Lenox to borrow amounts up to $200,000. Interest accrues
at prime plus 2% with principal and interest due on May
8, 1998. The Company had $596,597 and $22,516 in
principal and accrued interest outstanding under the
line-of-credit at December 31, 1997 and therefore had
exceeded the maximum amount to be borrowed as authorized
by the Board of Directors. However, subsequent to
December 31, 1997, the Board of Directors of the Company
approved a maximum borrowing of $700,000 under the
line-of-credit agreement.
The Company incurred management fee expense of
$75,000 and $261,000 to Lenox in 1997 and 1996, respectively.
YORK HANNOVER PARTNERSHIP
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996
TOGETHER WITH
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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,
1997 and 1996, and the related statements of income, partners'
capital, and cash flows for the years then ended. 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, 1997 and 1996,
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
February 13, 199
YORK HANNOVER PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS 1997 1996
CURRENT ASSETS:
Cash and cash equivalents $ 606,713 $ 122,796
Accounts receivable, less
allowance for doubtful accounts
of $278,453 and $260,057,
respectively 1,995,570 2,273,810
Inventory 583,498 587,940
Due from York Hannover
Pharmaceuticals, Inc. - 8,620
Due from United Professional
Companies, Inc. 65,836 -
Other current assets 34,885 50,474
Total current assets 3,286,502 3,043,640
PROPERTY AND EQUIPMENT:
Building and improvements 451,459 431,837
Furniture and equipment 699,798 437,297
1,151,257 869,134
Accumulated depreciation (344,644) (152,817)
Property and equipment,
net 806,613 716,317
Total assets $ 4,093,115 $ 3,759,957
The accompanying notes to financial statements are an
integral part of these balance sheets.
YORK HANNOVER PARTNERSHIP
BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1997 AND 1996
LIABILITIES AND PARTNERS' CAPITAL 1997 1996
CURRENT LIABILITIES:
Working capital note payable to York
Hannover Pharmaceuticals, Inc. $ - $ 80,000
Working capital note payable to
United Professional Companies,
Inc. - 550,000
Accounts payable 237,853 295,959
Accrued expenses 119,436 107,011
Due to Stockbridge Investment
Partners, Inc. 4,770 -
Due to United Professional
Companies, Inc. - 38,082
Current portion of promissory note
payable to Extendicare, Inc. 17,000 15,580
Current portion of capital lease
obligations 63,527 37,032
Total current liabilities 442,586 1,123,664
NON-CURRENT LIABILITIES:
Promissory note payable to
Extendicare, Inc. 351,484 368,602
Capital lease obligations 126,053 64,739
Total non-current liabilities 477,537 433,341
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL 3,172,992 2,202,952
Total liabilities and
partners' capital $ 4,093,115 $ 3,759,957
The accompanying notes to financial statements are an
integral part of these balance sheets.
YORK HANNOVER PARTNERSHIP
STATEMENTS OF INCOME
DECEMBER 31, 1997 AND 1996
1997 1996
REVENUES $ 10,891,082 $ 9,383,651
COST OF SALES (5,316,022) (4,899,122)
Gross margin 5,575,060 4,484,529
EXPENSES:
Salaries, wages and benefits 1,819,611 1,529,390
General and administrative 1,039,430 1,060,220
Management fee 434,832 375,066
Provision for uncollectible accounts 117,894 189,988
Depreciation 184,127 123,759
Interest 59,126 86,493
Total expenses 3,655,020 3,364,916
NET INCOME $ 1,920,040 $ 1,119,613
The accompanying notes to financial statements are an
integral part of these statements
YORK HANNOVER PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
DECEMBER 31, 1997 AND 1996
MetroVision United
of North Professional
America,Inc. Companies, Total
BALANCE, December 31,
1995 $ 553,334 $ 830,005 $ 1,383,339
Partnership
distributions (300,000) - (300,000)
Net incomen 447,845 671,768 1,119,613
BALANCE, December 31,
1996 701,179 1,501,773 2,202,952
Partnership
distributions (200,000) (750,000) (950,000)
Net income 768,016 1,152,024 1,920,040
BALANCE, December 31,
1997 $ 1,269,195 $ 1,903,797 $ 3,172,992
The accompanying notes to financial statements are an
integral part of these statements
YORK HANNOVER PARTNERSHIP
STATEMENTS OF CASH FLOWS
DECEMBER 31, 1997 AND 1996
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,920,040 $ 1,119,613
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 184,127 123,759
Gain on sale of property,
plant and equipment (282) -
Changes in assets and liabilities:
Accounts receivable, net 278,240 (1,131,398)
Inventory 4,443 (92,590)
Other assets 15,589 (40,025)
Accounts payable (58,106) 52,302
Accrued expenses 12,425 19,142
Due to partners (90,526) (27,817)
Net cash provided by operating
activities 2,265,950 22,986
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (138,773) (131,688)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations (47,640) (16,891)
Long-term debt borrowings - 9,303
Short-term debt borrowings - 530,000
Payments on long-term debt (15,620) -
Payments on short-term debt (630,000) (100,000)
Distributions to partners (950,000) (300,000)
Net cash provided by
(used in) financing
activities (1,643,260) 122,412
NET INCREASE IN CASH AND CASH EQUIVALENTS 483,917 13,710
CASH AND CASH EQUIVALENTS, beginning of
period 122,796 109,086
CASH AND CASH EQUIVALENTS, end of period $ 606,713 $ 122,796
SUPPLEMENTAL INFORMATION:
Cash payments of interest expense $ 59,126 $ 88,964
Capital lease obligations $ 189,580 $ 101,771
The accompanying notes to financial statements are an
integral part of these statements.
YORK HANNOVER PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
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"), formerly a wholly-owned
subsidiary of Stockbridge Investment Partners, Inc.
("SIP"), and United Professional Companies, Inc. ("UPC"),
a wholly-owned subsidiary of Extendicare, Inc. (formerly
"United Health, Inc."). 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. UPC
contributed assets with a total net book value of
$674,460 as of the date of the contribution. 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.
On April 1, 1997, YHPI merged with MetroVision of North
America Inc. ("MetroVision") with MetroVision the
surviving legal entity. Under terms of the merger
agreement, YHPI contributed its 40% interest in the
Partnership. Pursuant to the merger, SIP is the majority
stockholder of MetroVision. See Note 4 for discussion of
MetroVision's proposed sale of its interest in the
Partnership.
Earnings and losses are allocated based on general
partnership interests. All distributions are subject to
the availability of Partnership cash. Under the terms of
the Partnership agreement, YHPI had a right to priority
distributions of its share of Partnership net income
limited to $300,000, all of which was distributed in
1996. During 1997, UPC has received distributions up to
an amount representing an equality of the ownership
percentages with subsequent distributions made to
MetroVision and UPC in proportion to each partner's
respective ownership interest.
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. SIP 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 charges. In the opinion of
management, adequate provision has been made for any
adjustments that may result from reviews by the Medicare
and Medicaid programs.
Over 90% of the Partnership's revenues in 1997 and 1996
were to patients in nursing facilities owned by SIP and
Extendicare, Inc.
Inventory
All inventories as of December 31, 1997 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 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.
2. RELATED PARTIES
Capital lease obligations and net amounts due to related
parties as of December 31, 1997 and 1996 consist of the
following:
December 31, December 31,
1997 1996
Working capital note payable -
YHPI $ - $ 80,000
Working capital note payable -
UPC - 550,000
$ - $ 630,000
Due to (from) related parties
- current:
SIP $ 4,770 $ -
YHPI - (8,620)
UPC (65,836) 38,082
$ (61,066) $ 29,462
Promissory note payable to
Extendicare, Inc. $ 368,484 $ 384,182
Less current portion (17,000) (15,580)
$ 351,484 $ 368,602
Pursuant to the terms of the Partnership agreement,
MetroVision and UPC will provide working capital funding
to the Partnership, as required, in proportion to their
respective ownership interests.
During 1995, the Partnership entered into a promissory
note payable with Extendicare, Inc. 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
Extendicare, Inc. for the five years subsequent to
December 31, 1997 is as follows:
1998 17,000
1999 18,550
2000 332,934
2001 -
2002 -
The Partnership leases certain equipment from
Extendicare, Inc. under capital leases. Future minimum
rental payments required on capital leases for the next
five years beginning January 1, 1998, less amounts
representing interest, are as follows:
1998 $ 47,466
1999 19,778
2000 -
2001 -
2002 -
67,244
Less amounts representing
interest (6,460)
$ 60,784
The property and equipment under the capital lease as of
December 31, 1997 consists of the following:
Property and equipment under capital
lease $ 254,111
Less accumulated depreciation (68,361)
$ 185,750
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.
4. SUBSEQUENT EVENT
Subsequent to year-end, MetroVision engaged an affiliate
of Extendicare in negotiations about the possible sale of
its 40% interest in the Partnership.
41
14
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