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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /_/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/_/ Preliminary Proxy Statement
/_/ Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
METROVISION OF NORTH AMERICA, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No Fee Required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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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):
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4. Proposed maximum aggregate value transaction:
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5. Total fee paid:
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/X/ 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 number, or the
Form or Schedule and the date of its filing.
1. Amount previously paid:
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2. Form, Schedule or Registration Statement No.:
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3. Filing Party:
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4. Date Filed:
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METROVISION OF NORTH AMERICA, INC.
75 SOUTH CHURCH STREET
PITTSFIELD, MASSACHUSETTS 01201
AUGUST 10, 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: 1) 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
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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 20, 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 20, 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 REST INTERESTS OF METROVISION AND ITS
SHAREHOLDERS. THE BOARD OF DIRECTORS RECOMMENDS THAT THE METROVISION
SHAREHOLDERS VOTE FOR THE PROPOSALS DESCRIBED IN THE PROXY STATEMENT.
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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 10, 1998
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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
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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 10, 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.
2
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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."
3
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TABLE OF CONTENTS
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Page
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AVAILABLE INFORMATION........................................................1
PROXY STATEMENT SUMMARY......................................................2
The Companies..........................................................2
The Sale...............................................................3
The Special Meeting....................................................5
The Other Proposals....................................................6
METROVISION SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA..................8
UNAUDITED SUMMARY PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL
INFORMATION...................................................9
METROVISION SHARE DATA......................................................13
CAPITALIZATION .............................................................14
THE SPECIAL MEETING.........................................................15
Introduction; Purpose of the Special Meeting..........................15
Solicitation of Proxies...............................................15
Revocation of Proxies.................................................16
Expenses..............................................................16
Voting Securities; Record Date; Quorum................................16
RISK FACTORS .............................................................17
PROPOSAL 1--THE SALE........................................................18
Purpose and Structure of the Sale.....................................18
Background of the Sale................................................18
Reasons for the Sale; Recommendation of the Board of Directors........19
Conditions to the Sale................................................22
Termination or Amendment of Sale Agreement............................22
Accounting Treatment of the Sale......................................22
Required Regulatory Approvals.........................................22
Dissenters' Rights of Appraisal.......................................23
Fees and Expenses.....................................................23
Federal Income Tax Consequences of the Sale to the MetroVision
Shareholders....................................................23
Interests of Certain Persons in the Sale..............................23
PROPOSAL 2--AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION TO CHANGE
PURPOSES CLAUSE..............................................24
PROPOSAL 3--RATIFICATION OF AMENDMENT TO AMENDED BY-LAWS REDUCING THE MAXIMUM
NUMBER OF DIRECTORS FROM SIX TO THREE........................26
PROPOSAL 4--ELECTION OF THREE DIRECTORS TO BOARD OF DIRECTORS...............28
MANAGEMENT..................................................................28
Directors.............................................................28
Committees of the Board of Directors and Meetings.....................29
Compensation of Directors.............................................30
Executive Officers....................................................30
EXECUTIVE COMPENSATION................................................31
Option Grants.........................................................31
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i
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TABLE OF CONTENTS
(continued)
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Page
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Option Exercises and Fiscal Year-End Values...........................31
Employment Contracts and Change of Control Arrangement................31
Certain Relationships and Related Transactions........................32
Section 16(a) Beneficial Ownership Reporting Compliance...............32
PROPOSAL 5--RATIFICATION OF APPOINTMENT OF ARTHUR ANDERSEN LLP AS COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS...............................33
PRICE RANGE OF METROVISION COMMON STOCK.....................................34
INFORMATION CONCERNING METROVISION..........................................35
Business..............................................................35
Termination of Commuter Channel Business..............................35
Trademarks, Proprietary Information and Patents.......................36
Employees.............................................................36
Properties and Facilities.............................................36
Legal Proceedings.....................................................37
BENEFICIAL OWNERSHIP OF METROVISION COMMON STOCK............................38
INFORMATION CONCERNING METROVISION'S YORK PARTNERSHIP BUSINESS..............40
Business..............................................................40
Relationship of UPC and United Health, Inc............................40
Pharmacy Services.....................................................40
Consultant Pharmacist Services........................................40
Ancillary Services....................................................41
Product and Market Development........................................41
Materials/Supply......................................................41
Patents, Trademarks and Licenses......................................42
Inventories...........................................................42
Competition...........................................................42
Government Regulation.................................................42
Environmental Matters.................................................45
Employees.............................................................45
Properties and Facilities.............................................45
Legal Proceedings.....................................................45
METROVISION'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS........................................46
Results of Operations.................................................46
Twelve Months Ended December 31, 1997 compared to Twelve Months Ended
December 31, 1996...............................................46
Three Months Ended March 31, 1998 Compared to Three Months Ended
March 31, 1997..................................................48
Liquidity and Sources of Capital......................................48
Recently Issued Accounting Standards..................................49
Year 2000 Compliance..................................................50
DESCRIPTION OF METROVISION CAPITAL STOCK....................................51
Common Stock..........................................................51
</TABLE>
ii
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TABLE OF CONTENTS
(continued)
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Page
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Preferred Stock.......................................................51
RELATIONSHIP WITH INDEPENDENT AUDITORS......................................52
PROPOSALS OF SECURITY HOLDERS...............................................52
OTHER MATTERS ..............................................................52
ANNUAL REPORT; INCORPORATION BY REFERENCE...................................53
APPENDICES
Appendix A Purchase and Assignment of Partnership Interest Agreement A-1
Appendix B Exhibit A ("Partnership Market") to the York Partnership
Agreement B-1
</TABLE>
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
iii
<PAGE>
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.
1
<PAGE>
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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").
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2
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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
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 ("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."
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
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."
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
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."
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
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 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."
- --------------------------------------------------------------------------------
7
<PAGE>
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)
<TABLE>
<CAPTION>
Summary Historical Condensed Financial Data Three Months Ended
Twelve Months Ended December 31, March 31,
1993(1) 1994 1995 1996 1997 1997 1998
------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
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
------ ------ ------ ----- ------- ----- -----
------ ------ ------ ----- ------- ----- -----
</TABLE>
(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.
<TABLE>
<CAPTION>
Summary Historical Financial Data
December 31, March 31,
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
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 -- -- --
</TABLE>
(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.
8
<PAGE>
- --------------------------------------------------------------------------------
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)
<TABLE>
<CAPTION>
Metro
Vision Pro forma Pro forma
Historical- Adjustments Combined
----------- ----------- --------
<S> <C> <C> <C>
Assets
Current assets $ 16 $ - - $ 16
Investment in York Hannover
Partnership 1,372 (1,372)(a) - -
----------- ----------- -----------
Total assets $ 1,388 $ (1,342) $ 16
----------- ----------- -----------
----------- ----------- -----------
Liabilities and Stockholders'
Deficit
Current liabilities including
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 $ (1,342) $ 16
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
(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.
- --------------------------------------------------------------------------------
9
<PAGE>
- --------------------------------------------------------------------------------
(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.
- --------------------------------------------------------------------------------
10
<PAGE>
- --------------------------------------------------------------------------------
MetroVision Summary Pro Forma Consolidated Statement of Income Data
Year Ended December 31, 1997
(Unaudited, in thousands, except Per Share Data)
<TABLE>
<CAPTION>
Metro
Vision Pro forma Pro forma
Historical- Adjustments Combined
----------- ----------- --------
<S> <C> <C> <C>
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 (loss) from continuing operations
before income taxes........................ 161 1,047 1,208
Income tax provision............................. (61) (451)(a) (512)
------------ ---------- ------------
Net income (loss) 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 loss applicable to common stock $ (1,518) $ 596 $ (922)
------------ ---------- ------------
------------ ---------- ------------
Weighted average number of shares 5,180,706 5,180,706
Net loss per common share $(0.30) $(0.18)
</TABLE>
(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.
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
MetroVision Summary Pro Forma Consolidated Statement of Income Data
Three Months Ended March 31, 1998
(Unaudited, in thousands, except Per Share Data)
<TABLE>
<CAPTION>
Metro
Vision Pro forma Pro forma
Historical- Adjustments Combined
----------- ----------- --------
<S> <C> <C> <C>
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 80 841 921
Income tax provision............................ - - (451)(a) (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
</TABLE>
(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 include 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.
- --------------------------------------------------------------------------------
12
<PAGE>
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.
<TABLE>
<CAPTION>
MetroVision Pro Forma
Historical Combined(1)
---------- -----------
<S> <C> <C>
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)
</TABLE>
- ----------
(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.
13
<PAGE>
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.
<TABLE>
<CAPTION>
March 31, 1998
--------------
(in thousands)
Pro
Actual Forma(1)
------ --------
<S> <C> <C>
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, 1997 - historical, and
5,574,275 - pro forma)....................... 6 6
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
--------- ---------
--------- ---------
</TABLE>
(1) Gives effect to the Sale and use of proceeds to retire debt as if both had
occurred on March 31, 1998.
14
<PAGE>
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
15
<PAGE>
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 20, 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.
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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 to Lenox Healthcare Inc., an affiliate of
Mr. Thomas M. Clarke, the Company's President. 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. 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.
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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.
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<PAGE>
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 assumption 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
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<PAGE>
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. 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.
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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.
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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.
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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:
<TABLE>
<S> <C>
Legal Fees and Expenses..................................... $ 75,000
Accounting Fees and Expenses................................ 15,000
Printing Fees............................................... 10,000
Brokerage/Solicitation Fees................................. 5,000
--------
Total....................................................... $105,000
--------
--------
</TABLE>
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.
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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
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PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A
STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
25
<PAGE>
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.
26
<PAGE>
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.
27
<PAGE>
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:
<TABLE>
<CAPTION>
Director
Name Age Position Presently Held Since
- ---- --- ----------------------- -----
<S> <C> <C> <C>
Thomas M. Clarke 42 President, CEO and Director 1997
Linda M. Clarke(1) 45 Executive Vice President, 1997
Treasurer, Secretary and Director
Lawrence B. Cummings(1) 42 Director 1997
</TABLE>
- --------------
(1) Member of the Audit, Compensation and Stock Option Plan Committees.
28
<PAGE>
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
29
<PAGE>
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 1993
MetroVision 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.
30
<PAGE>
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
<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation Awards
Securities
Underlying
Name and Principal Position Year Salary Options
- --------------------------- ---- ------ -------
<S> <C> <C> <C>
Thomas M. Clarke 1997 $ 0 750,000(1)
President and Chairman of the Board
Robert F. Hussey 1997 $ 0 0
President and Chairman of the Board 1996 $ 0 0
1995 $ 0 5,347(2)
</TABLE>
- ----------
(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.
31
<PAGE>
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, which was not repaid thus causing the loan to be in default. 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, except that each of
Thomas M. Clarke, Linda M. Clarke and Lawrence B. Cummings did not file a Form 3
in fiscal 1997 for one, one and two transactions, respectively.
32
<PAGE>
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 SHAREHOLDERS 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.
33
<PAGE>
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.
<TABLE>
<CAPTION>
Price Per Share
---------------
1998(1) High Low
---- ---
<S> <C> <C>
First Quarter 9/32 1/4
Second Quarter 3/16 1/8
Third Quarter (through July 7, 1998) 3/16 3/32
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
</TABLE>
- ----------
(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 143 holders. The Company believes that certain holders
of record hold for additional beneficial owners. The Company believes that there
are approximately 530 beneficial owners of the Common Stock. The closing bid
price for the Company's Common Stock on July 28, 1998 was $0.066
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.
34
<PAGE>
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
35
<PAGE>
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.
36
<PAGE>
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.
37
<PAGE>
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.
<TABLE>
<CAPTION>
Shares Beneficially
Owned
Name and Address Number Percent
- ---------------- ------ -------
<S> <C> <C>
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%
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),(6),(7) 4,046,229 70.8%
</TABLE>
* 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 July 7, 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.
38
<PAGE>
(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.
39
<PAGE>
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.
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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
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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
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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
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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.
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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.
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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, 000 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
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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.
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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
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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 accruing effective 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 and is currently in
default.
During the three months ended March 31, 1998 and is currently in default,
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
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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.
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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 non assessable.
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 accrual and 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.
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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 Mr. Thomas
M. Clarke as a member of Stockbridge Investment Partners Inc.'s management to
purchase an aggregate of 750,000 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 June 26, 1999 to be considered for
presentation at the Annual Meeting, although not included in the Proxy
Statement, proposals must be received, as noted above no later than July 11,
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.
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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.
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PURCHASE
AND
ASSIGNMENT
OF
PARTNERSHIP INTEREST
This agreement is made to be effective as of the first day of June, 1998
by and among UNITED PROFESSIONAL COMPANIES, INC., a Delaware corporation
("UPC"), BAY GERIATRIC PHARMACY, INC. ("BAY"), and METROVISION OF NORTH AMERICA,
INC., a New York corporation ("MetroVision").
1. UPC and MetroVision are the only partners in York Hannover Partnership,
a Wisconsin general partnership (the "Partnership") with UPC having a 60% equity
interest (the "UPC Interest") and MetroVision as successor in interest to the
other original partner, York Hannover Pharmaceuticals, Inc, having a 40% equity
interest (the " MetroVision Interest").
2. The original partnership agreement ( the "Partnership Agreement") which
was entered into as of July 13, 1995, has not been amended since that time and
is still in full force and effect.
3. MetroVision wishes to assign and sell the MetroVision Interest to Bay,
and Bay wishes to accept such assignment and to purchase the Metrovision
Interest, on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the recitals set forth herein and which are part of this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
ASSIGNMENT OF PARTNERSHIP INTEREST
1.1 Purchase of MetroVision Interest. MetroVision agrees to assign and
sell, and by execution of this Agreement, hereby assigns and sells, the
MetroVision Interest to Bay and Bay agrees to accept such assignment and to
purchase the MetroVision Interest, on the terms and conditions hereinafter
provided.
1.2 Consideration to be Paid by Bay. For the Metrovision Interest, Bay
shall pay to Metrovision Two Million Three Hundred Thousand dollars
($2,300,000.00) (the "Purchase Price").
1.2.1 Method of Payment. Bay will pay to Metrovision the Purchase
Price by wire transfer of immediately available funds as instructed by
Metrovision at the closing.
1.3 Partnership Liabilities. Bay shall not in any manner assume nor be
liable or responsible for any of the liabilities, debts, or obligations of
Metrovision of any nature
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whatsoever. Metrovision shall indemnify Bay against, defend and hold it harmless
from any and all non-partnership liabilities of Metrovision. Metrovision, shall
not in any manner assume nor be liable or responsible for any of the
liabilities, debts, or obligations of Bay of any nature whatsoever. Bay shall
indemnify Metrovision against, defend and hold in harmless from any and all
non-partnership liabilities of Bay. Bay shall assume all liabilities as a
Partner of the Partnership to the extent such liabilities arise after the date
of the Closing.
1.4 Closing. The consummation of this transaction and the execution and
delivery of all related agreements, documents and instruments (the "Closing")
shall occur on or before five (5) business days after the last remaining
contingency under Article Ill below is waived or satisfied. It is currently
contemplated that Closing shall occur on or before August 5, 1998, at such time
and place as the parties shall agree, but in no event later than August 31,
1998. Notwithstanding the actual closing date, all items of Partnership income
and expense incurred after December 31, 1997 through the date of Closing shall
be allocated one hundred percent (100%) to UPC.
1.5 Further Assurances. In addition to the obligations expressly set forth
herein, MetroVision, Bay, and UPC shall, for no additional consideration,
cooperate in the preparation of, execute, and deliver, any agreement,
instrument, application, form or document either of them reasonably determines
to be necessary to fully facilitate or consummate the transactions contemplated
herein.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Metrovision. Metrovision, hereby
represents and warrants to UPC and Bay as follows:
2.1.1 Corporate. Metrovision is a corporation, duly organized,
validly existing, and in good standing under the laws of the State of New York
and has full power and authority to execute this Agreement and perform it
according to its terms. The execution of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by Metrovision,
and do not violate or constitute a breach of or default under MetroVision's
Articles of Incorporation, Bylaws, or any agreement or instrument to which
Metrovision is a party or by which it is bound. When duly executed by the
parties, the agreement shall be legally binding upon Metrovision, and
enforceable in accordance with its terms.
2.1.2 Title. Except as set forth on Schedule 2.1.2, Metrovision has
good and marketable title to all of the Metrovision Interest, free and clear of
all liens, security interests, or other interests of any other persons
whatsoever, and has full right and authority to sell the same as herein
provided. The Metrovision Interest constitutes a forty percent (40%) interest in
the Partnership. The Metrovision Interest is MetroVision's entire interest in
the Partnership, and it has not entered into any option agreement or other
arrangement for the sale of any interest in the Partnership to a third party.
2.1.3 Regulatory Matters. MetroVision has no knowledge of any
violations or alleged violations by the Partnership of, or pending or threatened
investigations, complaints or proceedings or threatened investigations,
complaints or proceedings involving the Partnership under, any federal, state or
local laws or regulations.
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2.1.4 Litigation There is no litigation or arbitration pending, or
to MetroVision's knowledge threatened, related to the execution, delivery, or
performance of this Agreement by Metrovision.
2.1.5 No Brokers. Metrovision has not engaged a broker or other
intermediary in connection with this transaction, and has no agreement with any
third party obligating Metrovision to pay a fee or commission as a result of the
closing of this transaction.
2.1.6 Obligations to Partner. The partnership has no outstanding
obligations to Metrovision.
2.2 Representations and Warranties of Bay. Bay hereby represents and
warrants to MetroVision that Bay is a corporation, dully organized and validly
existing under the laws of the State of Florida, with full power and authority
to execute, deliver and perform this Agreement according to its terms. Bay
represents and warrants to Metrovision that when executed by the parties, the
agreement shall be legally binding upon Bay, and enforceable in accordance with
its terms. Bay represents and warrants that its execution and performance of
this agreement and the transactions contemplated hereby have been duly
authorized by Bay. Bay has no knowledge of any violations or alleged violations
by the Partnership of, or pending or threatened investigations, complaints, or
proceedings or threatened investigations, complaints or proceedings involving
the Partnership under, any federal, state, or local laws or regulations. There
is no litigation or arbitration pending, or to Bay's knowledge, threatened,
related to the execution, delivery, or performance of this Agreement by Bay.
2.3 Survival of Representations and Warranties. All of the representations
and warranties made herein shall survive the closing of the transaction
contemplated hereby for a period of eighteen (18) months.
Article III
Conditions to Closing
Conditions to Bay's Obligations. Bay's obligation to close the
transactions contemplated by this Agreement shall be contingent upon MetroVision
having satisfied each of the following conditions prior to or at Closing.
3.1.1 Debt Satisfaction. Metrovision shall have fully paid and
satisfied its outstanding debt to National Healthcare L.P. as well as any and
all obligations disclosed in schedule 2.1.2 and shall deliver to Bay a copy of a
written release from National Healthcare L.P. of any security interest National
Healthcare L.P. and all other persons having a claim in the Metrovision
Interest.
3.1.2 Billing Services. Metrovision shall confirm in writing that it
has terminated or will terminate its Part B billing functions under the
Management Services Agreement dated July 13, 1995. As further consideration the
for payment of the purchase Price, Metrovision will cooperate with Bay and UPC,
as reasonably requested, to accomplish the orderly transition of the Part B
Billing functions. Such cooperation shall include providing access to and copies
of records, as well as the cooperation of MetroVision personnal. In addition,
Metrovision shall deliver and transfer to UPC all billing files, documentation
and other
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records used or developed in the performance of its billing functions for the
Partnership, as well as any Partnership assets in MetroVision's control or
possession at its Pittsfield, MA location.
3.1.3 Legal Opinion. Metrovision shall have delivered to Bay the
opinion of MetroVision's legal counsel concerning such matters as are
customarily addressed in similar transactions, including the due authorization
and enforceability of this Agreement, in a form mutually agreeable to the
parties.
3.1.4 Closing Certificate. Metrovision shall certify to Bay that
each and every representation and warranty it has made herein continues to be
true and complete as of the date of closing.
3.1.5 Current Status. Metrovision and its affiliates shall be
current on all payment obligations to the Partnership and its affiliates, and
shall certify same to Bay.
3.1.6 Provider Pharmacy Agreement. Metrovision shall acknowledge the
existence and affirm the enforceability of each and every one of the Provider
Pharmacy Agreements attached hereto as Exhibit A.
3.1.7 Partnership Distribution. UPC shall have caused, and the
Partnership shall have made, a pre-closing distribution to UPC and to
Metrovision, in accordance with their interests, in the Aggregate amount of five
hundred thousand dollars ($500,000).
3.2 Conditions to MetroVision Obligations. MetroVision's obligation to
close the transactions contemplated by this Agreement shall be contingent upon
Bay having satisfied each of the following conditions prior to or at Closing:
3.2.1 Purchase Price. Bay shall have paid the Purchase Price as
Provided by Section 1.2.1.
3.2.2 Legal Opinion. Bay shall have delivered to Metrovision the
opinion of Bay's legal counsel in a form reasonably acceptable to MetroVision.
3.2.3 Closing Certificate. Bay shall certify to Metrovision that
each and every representation and warranty tat it has made herein continues to
be true and complete as of the date of Closing.
3.2.4 Shareholder Approval. Metrovision shall have obtained all
necessary shareholder approval of the execution of this Agreement and
consummation of the purchase and assignment transaction contemplated herein.
3.2.5 Partnership Distribution. MetroVision shall have caused, and
the Partnership shall have made, a pre-closing partnership distribution to UPC
and to MetroVision, in accordance with their interests, in the aggregate amount
of five hundred thousand dollars ($500,000).
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3.3 Good Faith. Metrovision and Bay shall use their respective best
efforts and good faith based on commercial reasonableness, to ensure they are
able to timely satisfy or waive the contingencies which are to their respective
benefit.
ARTICLE IV
COVENANTS
4.1 Professional Fees. Each party shall be responsible for its own legal,
accounting, investment banking, appraisal and other professional fees and costs
incurred related to the negotiation, execution and delivery of this Agreement.
4.2 Waiver of Section VII UPC and MetroVision each hereby waive compliance
with Section 7 of the Partnership Agreement concerning the Transfer of a
Partner's Interest.
4.3 Covenant Not to Compete. Metrovision, on behalf of itself and its
shareholders, officers, directors, agents, and affiliates, and facilities under
its control (collectively for purposes of these covenants, "MetroVision") hereby
agrees that for the period commencing on the date of closing and continuing
through July 31, 2000, ( the "Restricted Period") it and they shall not,
directly or indirectly, collectively or individually, or through any
corporation, joint venture, partnership, limited liability company or other
entity, own, manage, control or participate in the operation of a business
involved in any of the activities defined as Partnership Business pursuant to
Section 1.20 of the Partnership Agreement in the geographic territories set
forth on Exhibit B hereto.
Metrovision shall not binder or interfere with the performance of the
Pharmacy Provider Agreements referenced in Exhibit A.
MetroVision acknowledges and agrees that the Partnership's remedy at law
for a breach of this covenant will be inadequate, and that in addition to any
other legal or equitable remedies available to the Partnership, the Partnership
shall be entitled to injunctive relief and that the arbitrator or arbitrators
(See paragraph 6.7 below) are hereby authorized and empowered to award
injunctive relief.
The provisions of this covenant shall be regarded as divisible and if any
of such provisions are declared invalid, or unenforceable by an arbitrator, the
remainder of the provisions of this covenant shall not be affected thereby. The
parties agree and desire that such arbitrator or arbitrators reform or modify
this covenant to the extent necessary to render its provisions valid and
enforceable.
The parties agree that in the event of any action or proceeding concerning
the performance or alleged breach of these covenants, the substantially
prevailing party in such action shall be entitled to recover its reasonable
attorneys fees and costs from the other party.
4.4 Mutual Release In exchange for the benefits and payments described in
this Agreement each party on its behalf and on behalf of its past and current
officers, directors, employees, agents, successors, and assigns (the "Releasing
Parties"), hereby irrevocably and unconditionally releases, waives, and fully
and forever discharges the other party and its past and current officers,
directors, employees, agents, immediate family members, successors, and assigns
(the "Released Parties") from and against any and all claims, liabilities,
obligations,
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demands and damages of any nature whatsoever (collectively "Liabilities"),
whether known or unknown, anticipated or unanticipated, arising from, by reason
of or in any way related to any transaction, event, or circumstance which
occurred or existed prior to and including the date of Closing, relating to or
arising out of the Partnership Agreement. Notwithstanding the foregoing, it is
the intent of the Released Parties and the Releasing Parties that this release
apply only to Liabilities arising out of the duties owed by the released Party
to the Releasing Party by virtue of the Partnership Agreement, and does not
apply to claims, liabilities, obligations, demands, and damages arising out of
claims by a third party (or third parties) against the Partnership ("Third Party
Claims") incurred prior to the date of Closing. With respect to Third Party
Claims, UPC and MetroVision, respectively, shall each be responsible for its
proportionate share of the liability and expense (" Third Party Liability")
incurred by the Partnership in connection with such Third Party Claim. This
release does not affect the obligations of the parties to each other arising out
of this Agreement, including but not limited to the other Covenants set forth in
this Article IV and the indemnification obligations set forth in Article V.
4.5 Post Closing Payments With respect to all obligations for payment to
the Partnership incurred by MetroVision or its affiliates after the closing of
this transaction, MetroVision covenants and agrees that it will pay all of its
obligations as they become due, and in no event later than sixty (60) days after
invoice from the Partnership, and the covenants further that it will take all
actions within its control to cause its affiliates to pay their obligations as
they become due, and in no event later than (60) days after invoice from the
Partnership.
ARTICLE V
INDEMNIFICATION
5.1 Generally. Each party (the "Indemnifying Party") hereby agrees to
indemnify the other party (the "Indemnified Party") and hold it harmless from
and against any and all liabilities, demands, claims, suits, proceedings,
actions, assessments, penalties, costs, damages and expenses, including
reasonable attorney's and expert witness fees ( collectively "Damages")
sustained or incurred by the Indemnified Party as a result of, arising out of,
or incidental to:
(a) any breach or inaccuracy of any representation or warranty made by the
Indemnifying Party in this Agreement or in any other document delivered by the
Indemnifying Party in connection with the transaction contemplated hereby:
(b) any failure of the Indemnifying Party to comply with, or any breach or
nonfulfillment by the Indemnifying Party of any covenant or obligation of the
Indemnifying Party as set forth in this Agreement or any other document
delivered by the Indemnifying party in connection with the transactions
contemplated by this Agreement.
Notwithstanding the foregoing, no Indemnifying Party shall have any
liability to an Indemnified Party, pursuant to this Section 5.1 except to the
extent that the aggregate liability of all claims for which an Indemnified Party
is seeking indemnification exceeds twenty-five
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thousand dollars ($25,000) and then, the Indemnifying Party's obligation shall
extend only to the amount in excess of twenty-five thousand dollars ($25,000).
5.2 Claims for Indemnification Whenever any claim shall arise for
indemnification hereunder, Indemnified Party shall promptly notify the
Indemnifying Party of the claim and, when known, the facts constituting the
basis for such claim. In the event of any such claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice to the Indemnifying Party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent of the indemnifying Party, which shall not be unreasonably withheld,
unless suit shall have been instituted against it and the Indemnifying Party
shall not have taken control of such suit after notification thereof as provided
in Section 5.3 of this Agreement.
5.3 Defense by Indemnifying Party. In connection with any claim giving
rise to Indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the Indemnifying
Party at its sole cost and expense may, upon written notice to the Indemnified
Party assume the defense of any such claim or legal proceeding if it
acknowledges to the Indemnified Party in writing its obligations to indemnify
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such claim or litigation resulting therefrom within 30 days after
the date such claim is made, (a) the Indemnified Party may defend against such
claim or litigation, in such manner as it may deem appropriate, including, but
not limited to, settling such claim or litigation, after giving notice of the
same to the Indemnifying Party, on such terms as the Indemnified Party may deem
appropriate, and (b) the indemnifying Party shall be entitled to participate in
(but not control) the defense of such action, with its counsel and at its own
expense. If the Indemnifying Party thereafter seeks to question the manner in
which the indemnified party defended such third party claim or the amount or
nature of any such settlement, the Indemnifying party shall have the burden to
prove by a preponderance of the evidence that the Indemnified Party did not
defend or settle such third party claim in a reasonably prudent manner.
ARTICLE VI.
GENERAL PROVISIONS
6.1 Binding Agreement :Modification This Agreement shall be binding on and
inure to the benefit of the parties hereto and their respective successors and
assigns, and may not be modified or terminated except in a writing signed by
both parties.
6.2 Entire Agreement. This Agreement and any agreement expressly
identified herein embody the entire agreement of the parties with respect to the
transactions contemplated hereby, and there are no other agreements between the
parties, either oral or written, with respect thereto.
6.3 Assignment This Agreement is not assignable by any party without the
express written consent of all other parties. This Agreement shall inure to and
be binding upon the permitted assignees of the parties.
A-7
<PAGE>
6.4 Governing Law This Agreement has been made and executed in the State
of Wisconsin, and its validity, construction, interpretation, enforcement, and
effect shall be governed by the Laws thereof.
6.5 Notices. Any and all notices required or to be given hereunder shall
be in writing, and delivered in person or sent by certified or registered mail,
return receipt requested, postage prepaid, or by facsimile transmission to the
respective parties at the addresses or facsimile numbers shown below ( or at
such other addresses or facsimile numbers as may be designated by notice given
in the manner herein provided):
If to UPC or Bay, to:
James Cialdini, Sr. Vice President Operations
United Professional Companies, Inc.
3724 West Wisconsin Avenue
Milwaukee, WI 53208-3 192
Facsimile: (414) 342-8721
with a copy to:
Lisa A. Danielson, Esq.
Associate General Counsel
Extendicare Health Services, Inc
105 West Michigan Street
Milwaukee, WI 53202
Facsimile (414) 207-3663
If to MetroVision To:
Thomas M, Clarke, President
MetroVision of North America, Inc.
75 South Church Street
Pittsfield, Ma 01201
Facsimile: (413) 448-2120
with a copy to:
Henry A. Sullivan, Esq,
Mintz Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
Facsimile: (617) 542-2241
Notices so sent shall be deemed given when delivered in person, depostied
in the United States mails; or at the time indicated on the confirmation of
Facsimile transmission: provided
A-8
<PAGE>
that written notice given in any other manner shall nonetheless be effective
when actually received.
6.6 Alternative Dispute Resolution. Any controversy or dispute arising out
of or related to this Agreement, or the breach thereof shall be settled by
arbitration, which shall be conducted in Milwaukee, Wisconsin, in accordance
with the NHLA Alternative Dispute Resolution Service Rules of Procedure for
Arbitration. Any court having competent jurisdiction may enter judgment on any
award rendered in such arbitration proceeding.
6.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement shall be
deemed to be validly executed and delivered when signed by each and every party
hereto and transmitted by facsimile to each other party as the facsimile number
designated herein.
IN WITNESS WHEREOF, the parties have executed this Agreement, as of the
day and year first above written.
UNITED PROFESSIONAL COMPANIES, INC.
By:
Print Name
METROVISION OF NORTH AMERICA, INC.
By:
Print Name
BAY GERIATRIC PHARMACY, INC.
By:
Print Name
A-9
<PAGE>
YORK HANNOVER PARTNERSHIP
Partnership Market
Counties to be covered by York Hannover Partnership:
o Alachua o Levy
o Citrux o Manatee
o Dixie o Marion
o Gilebrist o Pasco
o Hardee o Pinellas
o Hemando o Sarasota
o Hillaborough o Sutnter
o Lake
The following Unicare facilities, not within the above counties will be served
by the partnership for pharmacy and third party:
o First Coast Health & Rehabilitation Center
Jacksonville, FL (Duval County)
o Sunny Pines Nursing & Rehabilitation Center
Rockledge, FL (Brevard County)
o 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:
o Heritage Nursing & Rehabilitation Center
North Miami Beach, FL (Dade County)
B-1
<PAGE>
o Jackson Heights Rehabilitation Center
Miami, FL (Dade County)
o Palm Court Nursing & Rehabilitation Center
Ft. Lauderdale, FL (Broward County)
The following facility will be excluded from the partnership:
o 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.
B-2
<PAGE>
Exhibit 1
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 (IRS Employer Identification No.)
incorporation or organization)
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.
<PAGE>
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
<PAGE>
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.
Business
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.
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
3
<PAGE>
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
4
<PAGE>
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
5
<PAGE>
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
6
<PAGE>
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.
7
<PAGE>
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
8
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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
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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
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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.
11
<PAGE>
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.
<TABLE>
<CAPTION>
Price Per Share
---------------
1998 High Low
---- ---
<S> <C> <C>
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
</TABLE>
12
<PAGE>
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,
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
1993(1) 1994 1995 1996 1997
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net patient revenues $3,466 $4,260 $2,673 $-- $--
Equity in earnings of
York Hannover Partnership -- -- 104 448 768
--------- --------- --------- --------- ---------
Total revenues 3,466 4,260 2,777 448 768
Cost of patient revenues (1,924) (2,396) (1,392) -- --
Selling, general and
administrative (950) (1,128) (1,546) (391) (329)
Depreciation and amortization
expense (476) (82) (45) -- --
Amortization of deferred
revenue -- -- 55 133 33
Other income (expense) -- -- 118 121 (19)
Interest expense, net (159) (319) (290) (290) (292)
Income tax provision -- -- -- (19) (61)
Discontinued operations,
net of tax -- -- -- -- (1,438)
--------- --------- --------- --------- ---------
Net income (loss) $(43) $335 $(323) $2 ($1,338)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
13
<PAGE>
(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.
<TABLE>
<CAPTION>
Summary Historical Financial Data
(In Thousands)
Year Ended December 31,
-------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital
(deficit) (1) $430 $34 $(192) $(3,341) $(3,726)
Total assets 842 1,335 1,240 1,632 1,269
Short-term debt -- 771 174 2,751 2,547
Long-term debt (excluding
current portion) 2,713 1,924 2,180 -- --
</TABLE>
(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.
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
14
<PAGE>
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.
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 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 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
1997.
15
<PAGE>
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 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.
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. 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.
16
<PAGE>
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
17
<PAGE>
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.
18
<PAGE>
The Stock Option Plan Committee, the Audit Committee and the Compensation
Committee did not meet during the fiscal year.
<TABLE>
<CAPTION>
Name Age Position Presently Held Director Since
---- --- ----------------------- --------------
<S> <C> <C> <C>
Thomas M. Clarke 42 President, CEO & Director 1997
Linda M. Clarke 45 Executive V.P., Treasurer & Director 1997
Lawrence B. Cummings 42 Director 1997
Robert F. Hussey 48 Director 1991
Courtlandt G. Miller 45 Director 1997
David M. Fancher 38 Chief Financial Officer & Director 1997
</TABLE>
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
19
<PAGE>
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
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name & Principal Year Annual Long-Term
Position Compensation(1) Compensation
Salary
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Thomas M. Clark 1997 $0 $0
President & Director(2)
- --------------------------------------------------------------------------------
Robert F. Hussey 1996 $0 $0
Director 1995 $0 $0
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(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.
20
<PAGE>
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
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Name Number of Shares Percent of Total Options Exercise Price per Share
Underlying Options Granted to Employees in
Granted Fiscal Year 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thomas M. Clarke 0 0% N/A
President & Director
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
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
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Name Shares Value Number of Unexercised Value of Unexercised In-
Acquired on Realized Options at Fiscal Year The-Money Options at
Exercise End Fiscal Year End
Exercisable & Exercisable &
Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas M. Clarke n/a n/a 0/0 0/0
President &
Director
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
21
<PAGE>
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
22
<PAGE>
named below has sole voting power and sole investment power with respect to the
shares set forth opposite his name, except as otherwise noted.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Amount and Nature Percentage of Outstanding
Name of Beneficial Owner Of Ownership(1) Shares Owned
- --------------------------------------------------------------------------------
<S> <C> <C>
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 421,628 7.6%
c/o Whale Securities
650 Fifth Avenue
New York NY 10019
- --------------------------------------------------------------------------------
All officers and 4,563,218(2)-(7) 81.2%
directors as a group
(seven persons)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
* 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
23
<PAGE>
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.
24
<PAGE>
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.
25
<PAGE>
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.
<TABLE>
<CAPTION>
Titles Date
------ ----
<S> <C> <C>
/s/ Thomas M. Clarke
- -----------------------------
Thomas M. Clarke President, CEO and Director April 14, 1998
/s/ Linda M. Clarke
- -----------------------------
Linda M. Clarke Treasurer, Secretary and Director April 14, 1998
/s/ Lawrence B. Cummings
- -----------------------------
Lawrence B. Cummings Director April 14, 1998
/s/ David M. Fancher
- -----------------------------
David M. Fancher CFO and Director April 14, 1998
</TABLE>
26
<PAGE>
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
TOGETHER WITH REPORT OF
INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
2
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
<PAGE>
3
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
<PAGE>
4
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
- -------------------------------------------------- ---------- ----------
- -------------------------------------------------- ---------- ----------
<S> <C> <C>
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
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
5
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(Continued)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT 1997 1996
- -------------------------------------------------- ---------- ----------
- -------------------------------------------------- ---------- ----------
<S> <C> <C>
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
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
6
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
----------- -----------
<S> <C> <C>
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
</TABLE>
(Continued)
<PAGE>
7
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
(Continued)
<TABLE>
<S> <C> <C>
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
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Capital in Unrealized
Preferred Common Excess of Par Loss on Accumulated
Stock Stock Value Securities Deficit Total
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
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)
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
----------- -----------
<S> <C> <C>
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
----------- -----------
</TABLE>
(Continued)
<PAGE>
2
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
(Continued)
<TABLE>
<S> <C> <C>
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
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
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.
<PAGE>
2
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.
<PAGE>
3
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.
<PAGE>
4
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
<PAGE>
5
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
<PAGE>
6
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.
<TABLE>
<CAPTION>
Year Ended
December 31,
1997
-----------
Unaudited
-----------
-----------
<S> <C>
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)
-----------
-----------
</TABLE>
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
<PAGE>
7
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:
<TABLE>
<S> <C>
Accounts receivable, net $ 33,348
Prepaid expenses and other current assets 10,621
---------
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)
---------
---------
</TABLE>
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.
<PAGE>
8
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:
<TABLE>
<CAPTION>
December 31, December 31,
Balance Sheet 1997 1996
------------ ------------
<S> <C> <C>
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
------------ ------------
------------ ------------
</TABLE>
<PAGE>
9
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:
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1996
---------- ----------
---------- ----------
<S> <C> <C>
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
---------- ----------
---------- ----------
</TABLE>
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.
<PAGE>
10
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:
<TABLE>
<CAPTION>
December 31,
1997 1996
--------- ---------
--------- ---------
<S> <C> <C>
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)
--------- ---------
$ -- $ --
--------- ---------
--------- ---------
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996
-------- --------
-------- --------
<S> <C> <C>
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
-------- --------
-------- --------
</TABLE>
The Company's 1997 income tax provision of $61,430 is offset by a benefit
from discontinued operations.
<PAGE>
11
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.
<PAGE>
12
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.
<PAGE>
13
Options outstanding under the above plans are as follows:
<TABLE>
<CAPTION>
Weighted
Average
Exercise Number of
Price Shares
------- ------
------- ------
<S> <C> <C>
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
------- ------
------- ------
</TABLE>
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:
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
--------- ---------
--------- ---------
<S> <C> <C>
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)
--------- ---------
--------- ---------
</TABLE>
<PAGE>
14
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.
<PAGE>
15
YORK HANNOVER PARTNERSHIP
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 AND 1996
TOGETHER WITH
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
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, 1998
<PAGE>
YORK HANNOVER PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
- ----------------------------------------------- ----------- -----------
- ----------------------------------------------- ----------- -----------
<S> <C> <C>
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
----------- -----------
----------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
<PAGE>
YORK HANNOVER PARTNERSHIP
BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL 1997 1996
- ----------------------------------------------- ----------- -----------
- ----------------------------------------------- ----------- -----------
<S> <C> <C>
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
---------- ----------
---------- ----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
<PAGE>
YORK HANNOVER PARTNERSHIP
STATEMENTS OF INCOME
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
------------ ------------
<S> <C> <C>
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
------------ ------------
------------ ------------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements
<PAGE>
YORK HANNOVER PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
MetroVision United
of North Professional
America,Inc. Companies, Total
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE, December 31, 1995 $ 553,334 $ 830,005 $ 1,383,339
Partnership distributions (300,000) -- (300,000)
Net income 447,845 671,768 1,119,613
----------- ----------- -----------
BALANCE, December 31, 1996 701,179 1,501,773 2,202,952
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
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements
<PAGE>
YORK HANNOVER PARTNERSHIP
STATEMENTS OF CASH FLOWS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
----------- -----------
<S> <C> <C>
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
----------- -----------
----------- -----------
</TABLE>
(Continued)
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
YORK HANNOVER PARTNERSHIP
STATEMENTS OF CASH FLOWS
DECEMBER 31, 1997 AND 1996
(Continued)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
----------- -----------
<S> <C> <C>
SUPPLEMENTAL INFORMATION:
Cash payments of interest expense $ 59,126 $ 88,964
----------- -----------
----------- -----------
Capital lease obligations $ 189,580 $ 101,771
----------- -----------
----------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
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.
<PAGE>
-2-
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.
<PAGE>
-3-
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:
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
--------- ---------
--------- ---------
<S> <C> <C>
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
--------- ---------
--------- ---------
</TABLE>
<PAGE>
-4-
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:
<TABLE>
<S> <C>
1998 17,000
1999 18,550
2000 332,934
2001 --
2002 --
</TABLE>
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:
<TABLE>
<S> <C>
1998 $ 47,466
1999 19,778
2000 --
2001 --
2002 --
----------
67,244
Less amounts representing interest (6,460)
----------
$ 60,784
----------
----------
</TABLE>
<PAGE>
-5-
The property and equipment under the capital lease as of December 31, 1997
consists of the following:
<TABLE>
<S> <C>
Property and equipment under capital lease $ 254,111
Less accumulated depreciation (68,361)
-----------
$ 185,750
-----------
-----------
</TABLE>
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.
<PAGE>
Exhibit 2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
|X| Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly Period Ended March 31, 1998
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 of other jurisdiction of (IRS Employer Identification No)
incorporation or organization)
75 South Church Street
Pittsfield, Massachusetts 01201
- ---------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
(413) 448-2111
------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
----------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
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 reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date.
Common Stock, $.001 Par Value - 5,574,275 shares as of May 15, 1998.
Transitional Small Business Issuer Format (Check one)
Yes |_| No |X|
<PAGE>
METROVISION OF NORTH AMERICA, INC.
INDEX
<TABLE>
<CAPTION>
Page #
<S> <C>
Part I. Financial Information
Item 1.Interim Condensed Consolidated Financial Statements
(Unaudited)
Interim condensed consolidated balance sheets:
December 31, 1997
March 31, 1998 3
Interim condensed consolidated statements of operations:
Three months ended March 31, 1997 and 1998 5
Interim condensed consolidated statements of cash flows:
Three months ended March 31, 1997 and 1998 6
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information
Item 6. 13
Signatures 14
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
METROVISION OF NORTH AMERICA, INC.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS December 31, March 31,
1997 1998
Unaudited)
---------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 11,956 $ 15,764
Total current assets 11,956 15,764
OTHER ASSETS:
Investment in York Hannover
Partnership 1,269,195 1,371,654
Total other assets 1,269,195 1,371,654
Total assets $1,281,151 $1,387,418
</TABLE>
The accompanying notes to the interim condensed consolidated financial
statements are an integral part of these consolidated financial statements.
3
<PAGE>
METROVISION OF NORTH AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT December 31, March 31,
1997 1998
Unaudited)
---------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Due to related parties $ 596,957 $ 571,957
Accrued expenses 297,765 388,567
Notes payable 1,950,000 1,950,000
Net liability of discontinued operations 893,231 853,539
Total current liabilities 3,737,953 3,764,063
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, Class A 5,574 5,574
Capital (deficit) in excess of par value 1,077,050 1,077,050
Accumulated deficit (3,540,075) (3,459,918)
Total stockholders' deficit (2,456,802) (2,376,645)
Total liabilities and stockholders'
deficit $ 1,281,151 $ 1,387,418
</TABLE>
The accompanying notes to the interim condensed consolidated financial
statements are an integral part of these consolidated financial statements.
4
<PAGE>
METROVISION OF NORTH AMERICA, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
March 31, March 31,
1997 1998
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
REVENUES:
Equity in earnings of York Hannover
Partnership $ 221,139 $ 202,459
Net revenues 221,139 202,459
OPERATING COSTS AND EXPENSES:
General and administrative -- 60,000
Management fees 75,000 --
Total operating expenses 75,000 60,000
Operating income 146,139 142,459
OTHER INCOME (EXPENSE):
Interest expense, net (69,677) (62,302)
Amortization of deferred revenue 33,285 --
Realized loss on sale of securities (66,914) --
Total other expense (103,306) (62,302)
NET INCOME BEFORE PREFERRED STOCKHOLDER
DIVIDEND REQUIREMENTS 42,833 80,157
LESS - PREFERRED STOCK DIVIDEND
REQUIREMENTS $ -- $ (45,041)
NET INCOME APPLICABLE TO COMMON STOCK $ 42,833 $ 35,116
NET INCOME PER COMMON SHARE $ .01 $ .01
WEIGHTED AVERAGE NUMBER OF SHARES 4,000,000 5,574,275
</TABLE>
The accompanying notes to the interim condensed consolidated financial
statements are an integral part of these consolidated financial statements.
5
<PAGE>
METROVISION OF NORTH AMERICA, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
March 31, March 31,
1997 1998
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 42,833 $ 80,157
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Realized loss on sale of marketable
securities 66,914 --
Amortization of non-compete
agreement (33,285) --
Equity in earnings in excess of
distributions of York Hannover
Partnership (188,571) (102,459)
Changes in operating assets and
liabilities:
Increase (decrease) in accounts
payable and other accrued expenses (1,648) 90,802
Net cash provided by (used in)
continuing operations (113,757) 68,500
Discontinued Operations:
Change in discontinued net
liabilities -- (39,692)
Net cash (used in)
discontinued operations -- (39,692)
Net cash provided by (used in)
operating activities (113,757) 28,808
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Loans to York Hannover Partnership, net
of payments received 49,221 --
Principal payments on notes to related
parties -- (25,000)
Loans to related parties, net of payments
received (22,728) --
Proceeds from repayment of loans from
Affiliates 10,002 --
Proceeds from sale of marketable
securities 399,198 --
Net cash provided by (used in)
investing activities 435,693 (25,000)
</TABLE>
(Continued)
6
<PAGE>
METROVISION OF NORTH AMERICA, INC.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
March 31, March 31,
1997 1998
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on Long-Term
Debt Borrowing (94,201) --
Principal repayments of notes payable (275,537) --
Net cash used in financing
activities (369,738) --
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (47,802) 3,808
CASH AND CASH EQUIVALENTS,
beginning of period 58,291 11,956
CASH AND CASH EQUIVALENTS, end of period 10,489 15,764
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the year for
interest $ 53,877 $ --
</TABLE>
The accompanying notes to the interim condensed consolidated financial
statements are an integral part of these consolidated financial statements.
7
<PAGE>
METROVISION OF NORTH AMERICA, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS - (UNAUDITED)
March 31, 1998
NOTE A - BASIS OF PRESENTATION
On April 1, 1997, MetroVision of North America, Inc. ("MetroVision") consummated
a merger with York Hannover Pharmaceuticals, Inc. ("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 three months
ended March 31, 1998 historical period represents the operations of the Company.
The three months ended March 31, 1997 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 has shut
down the operations and will not receive any proceeds related to the shut-down
as the remaining assets have been written off. 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.
The accompanying unaudited interim condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB and
Article 10 of regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 1998 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998.
8
<PAGE>
NOTE B - INVESTMENT IN YORK HANNOVER PARTNERSHIP
On August 1, 1995, York Hannover and Pharmaceuticals, Inc. 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.
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. 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. 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 date of closing. It is anticipated that the proceeds from the sale will be
used first to satisfy the note payable and related accrued interest to National
HealthCare Corporation.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Three months Ended March 31, 1998 Compared to Three months Ended March 31, 1997
On April 1, 1997, MetroVision of North America, Inc. ("MetroVision") consummated
a merger with York Hannover Pharmaceuticals, Inc. ("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 three months
ended March 31, 1998 historical period represents the operations of the Company.
The three months ended March 31, 1997 historical period represents the
operations of York Hannover.
9
<PAGE>
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.
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.
10
<PAGE>
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 January 1998, the Company received distributions of
$100,000. 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 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 Corporation ("NHC") and other liabilities owed to unrelated
third party creditors. 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 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. The Company also has
outstanding a $571,957 working capital note payable to Lenox Healthcare, Inc.
(an affiliate of the Company) that becomes due in May of 1998.
11
<PAGE>
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"). 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 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.
12
<PAGE>
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.
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 3. QUALITATIVE AND QUANTITATIVE INFORMATION ABOUT MARKET RISK
Not applicable.
13
<PAGE>
METROVISION OF NORTH AMERICA, INC.
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. None.
(b) No Reports on Form 8-K were filed during the three months ended March 31,
1998.
14
<PAGE>
METROVISION OF NORTH AMERICA, INC.
SIGNATURES
Pursuant to the requirements 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.
METROVISION OF NORTH AMERICA, INC.
(Registrant)
Date: May 15, 1998 /s/ Thomas M. Clarke
--------------------------------------------
Thomas M. Clarke, President
(Duly authorized Officer)
Date: May 15, 1998 /s/ David M. Fancher
--------------------------------------------
David M. Fancher
Chief Financial Officer
(Principal Financial & Accounting Officer)
15
<PAGE>
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 10,
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)
<PAGE>
|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.
