UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 31, 1999
Commission file Number 000-28976
Acadia Group, Inc.
(Exact name of registrant as specified in its charter.)
Colorado 10509781
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
415 Rodman Road, Auburn , ME U.S.A. 04210
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(207) 777-3423
(800) 479-3066
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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Common Stock, $0 Par Value - 11,585,125 shares as of December 31, 1999.
1
PART I - FINANCIAL INFORMATION
ITEM 1
ACADIA GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
.......................................................................................
December 31, December 31,
1999 1998
----------- -----------
Current Assets:
Cash-Operating .......................................................................... $ 169,494 $ 8,071
Accounts Receivable ..................................................................... 488,708 779,943
Unbilled Work at Estimated
Realizable Value ...................................................................... 405,162 275,811
Inventories ............................................................................. 48,914 41,007
Other Current Assets .................................................................... 134,582 40,920
----------- -----------
Total Current Assets .................................................................... $ 1,246,860 $ 1,145,752
Prop., Plant & Equip.:
Cost .................................................................................... 1,464,195 497,775
Less Accum. Depr ........................................................................ (227,421) (115,263)
----------- -----------
$ 1,236,774 $ 382,512
Other Assets:
Other ................................................................................... 739,575 5,960
Organization Cost ....................................................................... 0 127,041
Less Accum. Amort ....................................................................... (78,273) (19,816)
Notes Receivable ........................................................................ 0 182,803
----------- -----------
Total Assets
Subtotal .................................................................................. $ 661,303 $ 295,988
TOTAL ..................................................................................... $ 3,144,937 $ 1,824,252
=========== ===========
Current Liabilities:
Accounts Payable ........................................................................ $ 545,843 $ 62,559
Line of Credit .......................................................................... 1,291,853 476,193
Accrued Expense ......................................................................... 120,371 69,887
Current Portion of
Long Term Notes ......................................................................... 118,400
----------- -----------
Total Current Liabilities ................................................................. $ 1,958,067 $ 727,039
Long Term Liabilities:
Long Term Debt .......................................................................... 600,590 343,888
----------- -----------
Total Liabilities ......................................................................... $ 2,558,657 $ 1,070,927
2
December 31, December 31,
1999 1998
----------- -----------
Stockholders' Equity:
Common Stock ............................................................................ 3,903,394 644,640
Paid In Capital & Treas ................................................................. 41,992 41,993
Unearned Stock Bonus Compensation ....................................................... (2,155,901)
Retained Earnings ....................................................................... (1,203,205) 66,692
----------- -----------
Total Equity .............................................................................. $ 586,280 $ 753,325
----------- -----------
Total Liabilities &
Equity .................................................................................... $ 3,144,937 $ 1,824,252
=========== ===========
See Accompanying
Notes to Financial
Statements
ACADIA GROUP, INC
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS
ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
(Unaudited)
....................................................................................
Three months ended Three months ended
December 31 1999 December 31 1998
----------- -----------
Sales .................................................................................. $ 394,694 $ 523,107
Operating Expenses ..................................................................... $ 1,155,176 $ 511,930
----------- -----------
Net Operating Income ................................................................... (760,482) 11,177
Other Income/(Expense), Net ............................................................ (11,000) 0
----------- -----------
Net Income Before Taxes ................................................................ (749,482) 11,177
(Provision for)
Benefit From Income Taxes ............................................................. 187,500 0
----------- -----------
Net Income (Loss) ...................................................................... $ (561,982) $ 11,177
=========== ===========
Net Income Per
Common Share ........................................................................... $ (.068) $ (0.003)
Weighted Average Number
of Common Shares
Outstanding ............................................................................ 8,251,948 4,004,654
See Accompanying
Notes to Financial Statements
3
ACADIA GROUP, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
AND DECEMBER 31, 1998
(Unaudited)
Quarter Ending Quarter Ending
December 31, December 31,
1999 1998
--------- ---------
Net Income (Loss) .................................................................. $(561,982) $ 11,177
Adjustments to reconcile net income
(loss) to net cash
Depreciation & Amortization ........................................................ $ 40,911 $ 28,251
Stock issued as compensation ....................................................... $ 97,224
Decrease (increase) in
Accounts Receivable ............................................................. $ 169,595 $ 54,644
Other Current Assets ............................................................ (45,743) 7,590
Other Non-current Assets ........................................................ (155,737) (119,316)
Increase (decrease) in
Accounts Payable ................................................................ 418,508 (10,074)
Other Liabilities ............................................................... 875 (56,267)
--------- ---------
Net Cash (Used for) Provided
By Operating Activities .......................................................... $ (36,349) $(193,283)
Investing Activities
Additions: Property Plant and Equipment ............................................ (694,704) (33,621)
Financing Activities
Issuance of Common Stock ........................................................... 600,000 232,446
Net Increase (repayments notes
and Leases) ................................................................... 281,510
Other Investment Activities ...................................................... (4,712)
--------- ---------
Net Cash provided by (used for) .................................................... 881,510 198,825
Financing activities
Net Increase (Decrease) in ......................................................... $ 150,457 $ 5,542
Cash or Cash Equivalents
Cash & Cash Equivalents:
Beginning of Period .............................................................. 19,037 2,524
End of Period .................................................................... $ 169,494 $ 8,071
========= =========
See Accompanying
Notes to Financial
Statements
4
ACADIA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
Note 1. Summary of Significant Accounting Policies
The accompanying consolidated financial statements have been prepared by Acadia
Group, Inc. ("Acadia" or "the Company") in accordance with Generally Accepted
Accounting Principles for interim financial information and Securities Exchange
Commission instructions to Form 10QSB and Rule 310 of Regulation S-B. In the
opinion of management, the accompanying consolidated financial statements
contain all adjustments (consisting of normal recurring accruals), considered
necessary for a fair presentation of the Company's financial position, results
of operations and cash flows at the dates and for the periods indicated. While
the Company believes that the disclosures presented are adequate to make the
information not misleading, these consolidated financial statements should be
read in conjunction with the audited financial statements and related notes for
the year ended September 30, 1999 which are contained in the Company's Annual
Report on Form 10-KSB. The results for the three month period ending December
31, 1999 is not necessarily indicative of the results to be expected for the
full fiscal year.
Note 2. Pooling-Of-Interests.
On November 19, 1999, Acadia (d/b/a Acadia Business Group, Inc.) (f/k/a
Acadia National Health Systems, Inc.) completed a merger with WorldLecture.com,
Inc. (d/b/a MedLecture.com), and Acadia Merger Holding Company, which changed
its name to Acadia National Health Systems, Inc. The merger was accounted for as
a pooling-of-interests. As a result of the merger, Acadia was formed as a parent
company and established two wholly owned subsidiaries; WorldLecture.com, Inc. an
Internet e-Commerce company and Acadia National Health Systems, Inc., a medical
billing and management services organization. Under the reorganization, Acadia
operates as a venture capital incubator company to provide capital and
management services to prospective emerging growth entities.
In exchange for one hundred percent the outstanding shares of MedLecture.com,
Inc., Acadia issued 5,363,987 shares of common stock. The transaction did not
result in a significant change to the Company's financial position and results
of operations. Cumulative losses for MedLecture.com, Inc. of $20,000 were
recorded as a result of the pooling.
WorldLecture.com, Inc. is a newly formed Internet subsidiary in the business of
delivering continuing education on the Internet through the use of video
streaming to professional persons who are obligated to maintain competency in
their respective expertise to the satisfaction of governmental or trade
regulatory agencies. WorldLecture.com, Inc., launched its first web site product
in the medical education market at the National Conference of the Alliance for
Continuing Medical Education on January 19, 2000 in New Orleans under the trade
style of MedLecture.com.
Note 3. Commitments to Management
As part of the merger with MedLexture.com , stock was issued to senior
management to satisfy prior commitments and to retain key senior executives. A
non-cash expense of $97,224 was recorded as part of the Company's Stock Bonus
plan. See related note below, Stock-based Compensation Plans and Other
Compensation.
Note 4. Convertible Debentures
On November 1, 1999, Acadia issued $600,000 convertible debentures as an equity
raise to subscription investors pursuant to Rule 504 of the Securities Act of
1933, as amended (the "Act") which were contingent upon the merger of
MedLecture.com, Inc., a Maine Corporation, with and into WorldLecture.com, Inc.,
a subsidiary of Acadia closing on or before April 1, 2000. The holder of the
debenture had the privilege to convert the debentures into common voting shares
of Acadia at a purchase price of eighty percent (80%) of the offering price for
the shares of Acadia as of October 7, 1999 (i.e. 80% of $.875 = $.70 exercise
price). Notwithstanding the foregoing, in the event that the merger was not
5
consummated and/or Acadia did not approve the conversion and/or the conversion
privilege was not exercised on the effective date of the merger (i.e. November
19, 1999), the holders privilege to convert was deemed null and void ab initio.
On November 19, 1999, the merger was consummated, Acadia approved the conversion
and all subscription investors exercised their conversion privilege with
Company. In connection with the conversion of such debentures, the Company
issued 857,151 shares of common voting stock. All shares of stock issued upon
conversion are subject to Rule 144 restrictions.
Note 5. Future issuance of Common Stock
The firm has engaged Advest, Inc., an investing bank, as placement agent to
offer a minimum of 1,052,632 shares of Common Stock of the Company to a maximum
of 2,105,263 at $4.75 per share to prospective investors who are accredited
under Regulation D of the Securities Act. Common Stock. The offering is a best
efforts offering by the placement agent. The use of those funds will be used to
facilitate the business of the Company.
Note 6. Net Income Per Common Share
Computation of net income per common share was based on the weighted average
number of shares outstanding during such periods. These amounted to 8,251,948
shares for the three months ending December 31, 1999 and 4,004,654 shares for
the three months ending December 31, 1998.
Note 7. Long Term Debt - Short Term Financing
The total of lines of credit drawn upon (outstanding) as of December 31, 1999
was $1,250,000 as compared to $476,193 on a $650,000 demand line limit as of
December 31, 1998.
A total of $16,625 of equipment was acquired at various times from October 1999
to December 31, 1999 during the under capital leases. Capital lease obligations
at December 31, 1999 total $151,169.
All other loans and repayment of lines of credit payable to Bank and future
borrowings under any such credit facilities have been collateralized by accounts
receivable and equipment of the Company.
Note 8. Majority Stockholders
The following table sets forth certain information regarding beneficial
ownership of common stock as of December 31, 1999 (i) all executive officers and
directors, and (ii) each person known by the Company to own beneficially more
than 5% of the outstanding common stock. Each person has sole voting and sole
investment or dispositive power with respect to the shares shown except as
noted.
6
Name Position Shares % Owned
Emile L. Clavet Chairman of the Board 1,278,326(i) 11.0%
79 Shepley Street
Auburn, ME 04210
Kevin B. Dean Director, Executive VP 1,278,326(i) 11.0%
98 Davis Avenue Business Development and
Auburn, ME 04210 Treasurer
Douglas Farrago Director, Member Officer 2,478,080 21.3%
94 Shepley Street Executive VP Medical
Auburn, ME 04210 Informatics
Paul W. Chute Beneficial Owner 1,081,340 9.3%
76 N. Withman Road
Buckfield, ME 04220
John W. Holt, Jr. Chief Executive Officer 190,000 1.6%
15 Birchwood Road and President
Cape Elizabeth, ME
04107
John F. Raden Executive Vice 216,000 1.8%
RR 1 Box 2309C President Mergers
Kingfield, ME 04947 and Acquisitions
Judith M. Brown Director 40,000 .3%
1853 Mar West
Tiburon, CA 94920
John L. Crispin Director 68,000 .5%
3 Pond Ridge Road
Lewiston, ME 04240
Richard H. Hooper Executive Vice President 178,000 1.5%
212 Hooper Ledge Road Internal Affairs
South Paris, ME 04281
Margaret M. Heath Secretary 205,493 1.7%
357 Harris Hill Road
Poland, ME 04274
Jacquelyn J. Magno Beneficial Owner 785,350 6.7%
124 Fairway Drive __________
Auburn, ME 04210 7,798,915
<FN>
Includes 142,858 shares of the Company's stock beneficially owned by Diamond Properties, Inc. a Maine
Corporation. Messrs. Clavet and Dean are officers and controlling shareholders of Diamond Properties, Inc.
</FN>
7
Note 9. Accounts Receivable Financing
The Company offers waivered billing transaction processing services under
contractual agreements with healthcare providers. The accounts receivable are
collateralized by the healthcare provider's balance due from health insurance
entities. This service affords the healthcare provider expedited payment on
their reimbursement by approximately two weeks. The Company assumes the
responsibility for billing and collecting such receivables.
Note 10. Retirement Plan
During 1999 the Company adopted a defined contribution plan under Section 401(k)
of the Internal Revenue Code. The 401(k) savings plan covers substantially all
employees who meet certain minimum service and age requirements. Participant may
contribute up to 15% of their annual compensation to the plan, not to exceed
$7,000. At its discretion, the Company may make matching contributions, subject
to certain limitations. The Company made no contribution for the period ending
December 31, 1999.
Note 11. Stock-based Compensation Plans and Other Compensation
During fiscal year 1999, the Company adopted two stock-based compensation plans
that were adopted by the Board of Directors on March 5, 1999 and approved by the
stockholders on November 19, 1999. The plan reserves of restricted common voting
stock at no par value are 700,000 Restricted Stock Bonus Plan and 500,000 Simple
Restricted Stock Option and are available to key employees of the Company under
the Act. The plans are administered by the Audit and Compensation Committee of
the Board of Directors.
Prior to the current fiscal year, 197,000 shares of restricted common voting
stock of the Stock Bonus Plan had been issued and were fully vested. During the
first quarter ending December 31, 1999 there were 350,000 shares issued from the
Company's plan pursuant to a November 19, 1999 Board of Directors vote. The
Company applies APB Opinion 25 and related interpretations in accounting for the
plan. The stock-based compensation is accrued over a two year vesting period,
beginning upon the date shares are granted. The Board of Directors may curtail
an employee's vesting period under certain significant circumstances as outlined
in the plan. Stock bonus compensation charged against income for the period was
$97,224 and includes estimates made my management concerning an employee
completing the two year vesting period.
No options have been granted as of December 31, 1999 under the Simple Restricted
Stock Option Plan. Options under the plan are exercisable in installments;
however, no options are exercisable within one year or later than ten years from
the date of grant.
Note 12 Severance and Non-compete Agreement
The Company entered into an agreement with an officer and major stockholder upon
termination of the individual's employment with the Company. The individual has
agreed not to compete with the Company for a term of five years beginning May 1,
1999 and ending April 30, 2004. In return, the Company will provide weekly
compensation and continuation of certain benefits through April 30, 2004. The
liability recorded represents the present value of the remaining compensation
discounted at 9.25%, the Company's borrowing rate at September 30, 1999.
8
ITEM 2.
ACADIA GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
December 31, 1999
RESULTS OF OPERATIONS:
=====================================
THREE MONTHS ENDING DECEMBER 31, 1999
=====================================
The Company's financial statements and notes thereto for the current period and
the audited financial statements and notes thereto for the fiscal year ending
September 30, l999, should be read in conjunction with this Management's
Discussion.
FORWARD-LOOKING INFORMATION
THIS FORM 10QSB AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY ACADIA
GROUP, INC. OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH MAY CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BY THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. FIFTEEN U.S.C.A. SECTIONS 77Z-2 AND 78U-5 (SUPP.
1996). THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR
CURRENT EXPECTATIONS OF ACADIA GROUP, INC. AND MEMBERS OF ITS MANAGEMENT TEAM AS
WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED. PROSPECTIVE
INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH
FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING
STATEMENTS ARE SET FORTH IN THE SAFE HARBOR COMPLIANCE STATEMENT FOR
FORWARD-LOOKING STATEMENTS INCLUDED AS EXHIBIT 99.1 TO THIS FORM 10QSB AND ARE
HEREBY INCORPORATED HEREIN BY REFERENCE. THE COMPANY UNDERTAKES NO OBLIGATION TO
UPDATE OR REVISE FORWARD-LOOKING STATEMENTS TO REFLECT CHANGED ASSUMPTIONS, THE
OCCURRENCE OF UNANTICIPATED EVENTS OR CHANGES TO FUTURE OPERATING RESULTS OVER
TIME.
RISK FACTORS
In addition to the other information contained in this report, individuals
should carefully consider the following risk factors:
1. The Company believes that its assumptions are based upon reasonable data
derived from and known about its business and operations. No assurances are made
that actual results of operations or the results of the Company's future
activities will not differ materially from its assumptions;
2. Additional risks factors such as the uncertainty of the Company's
marketing activities, and the results of bringing additional aquisitions and
affiliations into a smooth operation with Company are unknown;
3. Additional uncertainties regarding the ability for operating cash to
meet the current and projected cash flow needs of the organization;
4. Readers are cautioned not to place undue reliance on these
forward-looking statements, as they attempt to speak only of activities known or
anticipated as of this date.
The Company was originally organized in 1972 and re-organized in 1996 under
the laws of the State of Colorado. In November 1999, the Company again
reorganized to form a venture capital corporation. As part of the
reorganization, the Company formed two wholly owned subsidiaries, Acadia
National Health System, Inc. (National Health Systems") and WorlLecture.com,
Inc. ("WorldLecture.com") The Company transferred its healthcare billing and
management services to National Health Systems and operates e-commerce
initiatives under the subsidiary, WorldLecture.com. The parent company, Acadia
Group, Inc. ("Acadia") serves as a management and consulting resource to its
9
subsidiaries. During the last six months Acadia has successfully recruited a
management team with extensive experience in mergers and acquisitions, finance,
real estate, business strategy and development, sales - marketing and branding,
health services, human resources, funding, and legal.
The Company explores opportunities and is sought out by businesses for
possible transactions, including but not limited to, mergers, acquisitions,
joint ventures, and strategic alliances. The Company intends to grow and develop
National Health Systems and MedLecture.com and position each of them as vehicles
with which the Company may effect future acquisitions and business development.
WorldLecture.com is a newly formed Internet subsidiary of the Company engaged in
the business of delivering continuing education on the Internet through the use
of video streaming to professional persons who are obligated to maintain
competency in their respective field expertise to the satisfaction of
governmental or trade regulatory agencies.
WorldLecture.com developed and executed a business model through
MedLecture.com to facilitate continuing medical education by physicians through
the Internet using video streaming technology. The model also utilizes exclusive
contracts with content providers and strategic alliances with similar service
providers and businesses in the healthcare industry. Management has identified
other professions which also require continuing education and has initiated the
replication of the MedLecture.com model to develop future Internet sites. Acadia
National Health has completed a systems conversion designed to facilitate
medical billing and management services. Acadia has spent the last two months of
operation preparing for rapid sales growth and expansion We have completely
revised our operating policies, installed a new financial management system and
recruited experienced, operation and management personnel.
From October 1999 to December 1999, Acadia National Health developed and
adopted a medical reporting compliance program. Acadia takes very seriously the
need for correct verification, reporting and billing of medical services to all
payors. Education of our employees and providers is constant and critical to
remain abreast in this very complex and rapidly changing medical billing and
regulated arena.
SALES
Sales for the period were $394,694 as compared to $523,107 for the
corresponding period in 1998. The decrease in sales is primarily due to the loss
of two clients with total annual revenues of approximately of $250,000. During
December 1999, a management contract was signed with a new client with estimated
annual revenues of $275,000.
OPERATING EXPENSES
Increases in operating expenses during the period were principally due to
increased costs incurred in servicing the expanded client base, in addition to
increases in depreciation, occupancy and administrative costs related to the
acquisition of Northeast Medical Billing.
OPERATING INCOME
NET INCOME
LIQUIDITY AND CAPITAL RESOURCES
The Company's non-trade accounts receivable increased due to the growth of
Waiver Foster Home and non-medical billing programs. These are clean, secured
receivables with the majority due from the State of Maine. The Company has begun
discussions with financial institutions as related to replacing a $1,250,000
line of credit, which expires in April 2000. Notes payable includes a term loan,
which requires monthly installments of $5,200, including interest, through June
2004. Additionally see Note 5, Future Issuance of Common Stock.
SALES TRENDS
10
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
No material legal proceedings to which the Company (or any of its directors and
officers in their capacities as such) is party or to which property of the
Company is subject is pending and no such material proceeding is known by
management of the Company to be contemplated.
ITEM 2. Changes in Securities
On November 1, 1999, Acadia issued $600,000 convertible debentures pursuant
to Rule 504 of the Act which were contingent upon the merger of MedLecture.com,
Inc., a Maine Corporation, with and into WorldLecture.com, Inc., a subsidiary of
Acadia Group, Inc. closing on or before April 1, 2000. The holder of the
debenture had the privilege to convert the debentures into common voting shares
of the Corporation at a purchase price of eighty percent (80%)of the offering
price for the shares of the Corporation as of October 7, 1999 (i.e. 80% of $.875
= $.70 exercise price). Notwithstanding the foregoing, in the event that the
merger was not consummated and/or Acadia did not approve of the conversion
and/or the conversion privilege was not exercised on the effective date of the
merger (i.e. November 19, 1999), the holders' privilege to convert was deemed
null and void ab initio. On November 19, 1999, the merger was consummated,
Acadia approved the conversion, and all subscription investors exercised their
conversion privilege with Company. In connection with conversion of such
debentures, the Company issued 857,151 shares of common voting stock. All shares
of stock issued upon conversion are subject to Rule 144 restrictions.
During the current period ending December 31, 1999 the Company issued
5,363,987 shares of restricted common stock at no par value under a exchange of
shares merger dated November 19, 1999 between Acadia, Acadia Merger Holding
Company, Inc., in which changed its name to Acadia National Health Systems, Inc.
and WorldLecture.com, Inc. The shares were issued to shareholders of
MedLecture.com, Inc. and registered under the Securities Exchange Act of 1934
and are subject to restrictions as prescribed under Rule 144 of the Act.
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
At an Annual and Special Meeting of Stockholders of Acadia on November 19,
1999, the Stockholders approved the following matter: (i) a change from Acadia
National Health Systems, Inc,. to "Acadia Group, Inc." ("Name Change"); (ii) the
Plan of Merger (the "Merger"), pursuant to Section 7-111-101 through 7-111-108
of the Colorado Business Corporation Act ("CBCA") and Section 901 & 906 of Title
13-A of the Maine Revised Statutes Annotated, whereby MedLecture.com, Inc., a
Maine corporation (hereinafter referred to as "Disappearing Corporation" or
"MED"), merged into WorldLecture.com, Inc., a wholly-owned subsidiary of Acadia
(hereinafter referred to as "Surviving Corporation" or "WORLD"); and whereby
Acadia issued shares of its common stock, on a pro rata basis, to the
shareholders of MED, equal in the number to the number of shares of common stock
outstanding immediately prior to the Merger, plus un-issued shares designated
for use under employment agreements, or other similar contractual agreements,
whether verbal or written, or designated for issuance to the Company's
employees, agents, or third parties; (iii) the election of eight (8) members to
the Company's Board of Directors for a three-year term; (iv) a Simple Incentive
Stock Bonus Plan for officers, managers and key employees; (iv) a Restricted
Stock Option Plan for employees, officers, consultants and directors; (vi) the
Restated and Amended Articles of Incorporation and Bylaws reflecting the Name
Change and eradication of "Shark Repellant" provisions set forth at Article VII;
and (vii) the transfer of assets of Acadia National Health Systems, Inc., which
are used or useful in the operation of its business management services business
to a wholly-owned subsidiary; to approve of the name change of the subsidiary to
Acadia National Health Systems, Inc..
Only stockholders of record at the close of business on October 15, 1999
(the "Record Date") were entitled to notice of and to vote at the Meeting.
11
ITEM 5. Other Information
The Company has engaged an investment banking firm to facilitate the
issuance of equity securities for the use of the continued development of Acadia
National Health System, MedLecture.com, and other prospective opportunities that
the Company is currently evaluating.
ITEM 6. Exhibits and Reports on Form 8-K
1. Exhibits
3
3(i) Articles of Incorporation. Incorporated by reference to the Form 8-K filed
by Registrant on December 7, 1999 (Exhibit 1.1) 3(ii) By-laws. Incorporated by
reference to the Form 8-K filed by Registrant on December 7, 1999 (Exhibit 1.2)
4.1 Form of Convertible Debenture dated November 1, 1999 10.1 Agreement of
Merger dated November 19, 1999. Incorporated by reference to the Form 8-K filed
by Registrant on December 7, 1999 (Exhibit 2.1) 10.2 Articles of Merger dated
November 19, 1999. Incorporated by reference to the Form 8-K filed by Registrant
on December 7, 1999 (Exhibit 2.2) 27 Financial Data Schedule 99 Safe Harbor
under the Private Securities Litigation Reform Act of 1995. 2. Reports on Form
8-K. The Registrant filed electronically the Forms 8-K listed below. Such
filings are incorporated herein by reference: a. Form 8-K filed as of December
7, 1999 which attached the following exhibits: Exhibit 1.1 Restated Articles of
Incorporation of Acadia Group, Inc. as of November 19, 1999; 1.2 Amended Bylaws
of Acadia Group, Inc. as of November 19, 1999; 2.1 Agreement of Merger dated
November 19, 1999; 2.2 Articles of Merger dated November 19, 1999; 5.1 Opinion
on Legality of Securities Being Issued to shareholders of MedLecture.com 10.2
Opinion of Counsel with respect to issuance of 5,363,987 shares of common stock
of Acadia National Health Systems, Inc. to the shareholders of MedLecture.com
99.1 Text of press release dated November 19, 1999. 99.2 Text of press release
dated November 22, 1999 99.3 Promote Securities Litigation Reform Act of 1995
Safe Harbor Compliance Statement for Forward-Looking Statements.
b. Form 8-K filed as October 20, 1999 which attached the following exhibits:
Exhibit
99.1 Text of press releases dated October 4, 1999.
99.2 Text of press releases dated October 4, 1999
ACADIA GROUP, INC.
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly cause this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ACADIA GROUP, INC.
Registrant
February 19, 2000 /s/ William St. Lawrence
William St. Lawrence
Filing Agent
February 19, 2000 /s/ John W. Holt, Jr.
Chief Executive Officer, President
12
Exhibit 4.1
ACADIA NATIONAL HEALTH SYSTEMS, INC.
Convertible Debenture
THE SECURITIES REPRESENTED BY THIS DEBENTURE HAVE NOT BEEN REGISTERED UNDER THE
SECURlTIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS (THE
"STATE ACTS"), AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED, OR
OTHERWISE TRANSFERRED (WHETHER OR NOT FOR CONSIDERATION) BY THE HOLDER EXCEPT
UPON THE ISSUANCE TO THE CORPORATION OF A FAVORABLE OPINION OF ITS COUNSEL OR
SUBMISSION TO THE CORPORATION OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO
COUNSEL FOR THE CORPORATION, TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE
IN VIOLATIONON OF THE ACT AND THE STATE ACTS.
ACADIA NATIONAL HEALTH SYSTEMS, INC.
A Colorado Corporation
November 1,1999
NO.__
ACADIA NATIONAL HEALTH SYSTEMS, INC., a Colorado corporation (the
"Corporation"), is indebted and, for value received, promises to pay to the
order of------------------------- on ------------ (the "Due Date"), (unless this
Debenture shall have been sooner called for redemption as herein provided), upon
presentation of this Debenture, ----------------------- ($--------.--) (the
"Principal Amount") and to pay interest on the Principal Amount at the rate of
fourteen percent (14%) per annum as provided herein.
The Corporation covenants, promises and agrees as follows:
1. Interest. Interest shall accrue on the Principal Amount and shall be
payable on the Due Date except as provided below.
2. Conversion
2.1. Subject to the provisions below, the holder of this Debenture shall have
the right, at such holder's option, to convert all, but not less than all, of
this Debenture into such number of fully paid and nonassessable Common Shares of
the Corporation as shall be provided as follows.
Provided the merger of MedLecture.com, Inc., a Maine corporation
("Disappearing Corporation"), with and into WorldLecture.com, Inc., a subsidiary
of the Corporation (the "Surviving Corporation"), as more fully described in a
Binding Letter of Intent dated September 29, 1999 by and between the
Disappearing Corporation, the Surviving Corporation and the Corporation, as the
same may be amended or extended from time to time, receipt of a copy of which is
hereby acknowledged by the holder, is consummated on or before the Due Date, the
holder of this Debenture shall have the privilege to convert this Debenture into
Common Voting shares of the Corporation at a purchase price of eighty percent
(80%) of the offering price for the shares of the corporation as of October
7,1999; provided, however, that the conversion privilege set forth above shall
only arise in the event that the Corporation authorizes and approves of such
conversion. If the above-described merger is consummated, the conversion is
approved by the Corporation, and if the conversion privilege is exercised by the
holder on the effective date of the merger between MedLecture.com, Inc and
WorldLecture.com, Inc. (said date being the date that the merger is approved by
both the states of Maine and Colorado), the principal and all accrued interest
under the Debenture shall be used to purchase the Corporation's Common Voting
Stock, and all balances due under this Debenture shall be deemed to be paid in
full upon the issuance to the holder of the appropriate denomination of the
Corporation's Common Voting Stock. Notwithstanding the foregoing, in the event
that the merger is not consummated, and/or the Corporation does not approve of
13
the conversion, and/or the conversion privilege is not exercised on the
effective date of the merger between MedLecture.com, Inc and WorldLecture.com,
Inc. (said date being the date that the merger is approved by both the states of
Maine and Colorado), the holder's conversion privilege shall be null and void ab
initio, and the holder shall receive the principal balance due under the
Debenture, plus all accrued interest, up to the date of payment.
2.2. The holder of this Debenture may exercise the conversion right provided in
this Section 2 by giving written notice (the "Conversion Notice") to the
Corporation of the exercise of such right and stating the name or names in which
the stock certificate or stock certificates for the Common Shares are to be
issued and the address to which such certificates shall be delivered. The
Conversion Notice shall be accompanied by the Debenture. The number of Common
Shares that shall be issuable upon conversion of the Debenture is set forth
above at Section 2.1 and determined in accordance with Section 3 in effect on
the date the Conversion Notice is given; provided, however, that in the event
that this Debenture shall have been partially rendered, Common Shares shall be
issued pro rata, rounded to the nearest whole share.
2.3. Conversion shall be deemed to have been effected on the date the Conversion
Notice is given (the "Conversion Date"). Within ten (10) business days after
receipt of the Conversion Notice, the Corporation shall issue and deliver by
hand against a signed receipt therefor or by U.S. registered mail, return
receipt requested, to the address designated by the holder of this Debenture in
the Conversion Notice, a stock certificate or stock certificates of the
Corporation representing the number of Common Shares to which such holder is
entitled, which shall be equivalent to the principal and accrued interest up to
and including the Conversion Date, rounded to the next whole share.
3. Conversion Ratio.
3.1. On the date hereof, the Conversion Ratio shall be set forth as more
particularly described at Section 2.1, provided, however, that the Conversion
Ratio shall be subject to adjustment in accordance with and at the times
provided in this Section 3.
3.2. If the Corporation shall pay a dividend in share of its Common Shares,
subdivide (split) its outstanding Common Shares, combine (reverse split) its
outstanding Common Shares, issue by reclassification of its Common Shares any
shares or other securities of the Corporation, or distribute to holders of its
Common Shares any securities of the Corporation or of another entity, the number
of Common Shares or other securities the holder hereof is entitled to receive
through conversion pursuant to this Debenture immediately prior thereto shall be
adjusted so that the holder shall be entitled to receive upon or subsequent to
conversion the number of Common Shares or other securities which he or she would
have been entitled to receive after the happening of any of the events described
above had this Debenture been converted immediately prior to the happening of
such event, and the conversion price per share shall be correspondingly
adjusted; provided however, that no adjustment in the number of shares and/or
the conversion price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in such number and/or price;
and provided further, however, that any adjustments which by reason of this
Section 3.2 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment An adjustment made pursuant to this Section
3.2 shall become effective immediately after the record date in the case of the
stock dividend or other distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification. If the Corporation is consolidated or merged with or into
another corporation or if all or substantially all of its assets are conveyed to
another corporation, this Debenture shall thereafter be convertible for the kind
and number of shares of stock or other securities or property, if any,
receivable upon such consolidation, merger or conveyance by a holder of the
number of Common Shares of the which could have been subscribed on the
conversion of this Debenture immediately prior to such consolidation, merger or
conveyance; and, in any such case, appropriate adjustment (as determined by the
Board of Directors) shall be made in the application of the provisions herein
set forth with respect to the rights and interest: thereafter of the holder of
14
this Debenture to the end that the provisions set forth herein (including
provisions with respect to changes in and other adjustments of the number of
Common Shares the holder of this Debenture is entitled to through conversion)
shall thereafter be applicable, as nearly as possible, in relation to any Common
Shares or other securities or other property thereafter deliverable upon the
conversion of this Debenture.
3.3. Notice of Adjustment. Whenever the Conversion Ratio shall be adjusted
as provided in Section 3 hereof, the Corporation shall prepare and send to the
holder of this Debenture a statement, signed by the chief financial officer of
the Corporation, showing in detail the facts requiring such adjustment and the
Conversion Ratio that shall be in effect after such adjustment.
3.4. Notice of Adjustment Events:. In the event the Corporation shall propose to
take any action of the types described in Section 3 hereof Corporation shall
give notice to the holder of this Debenture, which notice shall specify the
record date, if any, with respect to any such action and the date on which such
action is to take place. Such notice shall be given on or prior to the earlier
of five (5) business days prior to the record date or the date which such action
shall be taken. Such notice shall also set forth such facts with respect thereto
as shall be reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the Conversion
Ratio and the number, kind or class of shares or other securities or property
which shall be deliverable or purchasable upon the occurrence of such action or
deliverable upon conversion of this Debenture. Failure to give notice in
accordance with this Section 3.4 shall not render such action ultra vires,
illegal or invalid.
3.5. Taxes. The Corporation shall pay all documentary, stamp or other
transactional taxes and charges attributable to the issuance or delivery of
Common Shares of the Corporation upon conversion; provided, however, that the
Corporation shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such shares.
3.6. Reservation of Shares. The Corporation shall at all times reserve and
keep available, free from preemptive rights, unissued or treasury Common Shares
sufficient to effect the conversion of this Debenture.
4. Redemption
4.1. This Debenture is subject to redemption at the option of the
Corporation in whole or in part prior to the Due Date at any time and from time
to time without penalty or premium. The Corporation may exercise its right to
redeem this Debenture prior to maturity by giving notice (the "Redemption
Notice") thereof to the holder of this Debenture as it appears on the books of
the Corporation, which notice shall specify the terms of redemption (including
the place at which the holder of the Debenture may obtain payment), the
principal amount of the Debenture to be redeemed (the "Redemption Amount") and
shall fix a date for redemption (the "Redemption Date"), which date shall not be
less than 30 days nor more than 45 days after the date of the Redemption Notice.
4.2. On the Redemption Date, the Corporation shall pay all accrued and
unpaid interest on the Debenture up to and including the Redemption Date and
shall pay to the holder hereof a dollar amount equal to the Redemption Amount
5.1. The entire unpaid and unredeemed balance of the Principal Amount and
all Interest accrued and unpaid on this Debenture shall, at the election of the
holder, be and become immediately due and payable upon the occurrence of any of
the following events (a "Default Event"):
(a) The non-payment by the Corporation when due of principal and interest
or of any other payment as provided in this Debenture or with respect to any
other Debenture issued by the Corporation.
(b) If the Corporation (i) applies for or
consents to the appointment of, or if there shall be a taking of possession by,
a receiver, custodian, trustee or liquidator for the Corporation or any of its
property; (ii) becomes generally unable to pay its debts as they become due;
(iii) makes a general assignment for the benefit of creditors or becomes
insolvent; (iv) files or is served with any petition for relief under the
Bankruptcy Code or any similar federal or state statute, or (v) defaults with
respect to any evidence of indebtedness or liability for borrowed money, or any
such indebtedness shall not be paid as and when due and payable.
15
(c) Any failure by the Corporation to issue and deliver shares of Common
Stock as provided herein upon conversion of this Debenture.
5.2. Each right, power or remedy of the holder hereof upon the occurrence
of any Default Event as provided for in this Debenture or now or hereafter
existing at law or in equity or by statute shall be cumulative and concurrent
and shall be in addition to every other right, power or remedy provided for in
this Debenture or now or hereafter existing at law or in equity or by statute,
and the exercise or beginning of the exercise by the holder or transferee hereof
of any one or more of such rights, powers or remedies shall not preclude the
simultaneous or later exercise by the holder hereof of any or all such other
rights, powers or remedies.
6. Fair Market Value. The term Fair Market Value used in this Debenture
with respect to assets or property received by the Corporation shall be the fair
market value, regardless of any prior accounting treatment, of such assets or
property, determined by the Board of Directors of the Corporation, which
determination shall be final, conclusive and binding. If the Board of Directors
shall be unable to agree as to such fair market value, the fair market value
shall be determined by the independent certified public accountant at that time
retained by the Corporation to audit its books and records, and a determination
by such independent certified public accountant shall be final, conclusive and
binding or, if there be none, or if such accountant shall refuse or be unable to
make such a determination then the sole issue of fair market value shall be
submitted to and settled by binding arbitration under and pursuant to the rules
and regulations of the American Arbitration Association, and the decision or
award of the arbitrator or arbitrators in such arbitration shall be final,
conclusive and binding and a final judgement may be entered thereon by any court
of competent jurisdiction.
7. Failure to Act and Waiver. No failure or delay by the holder hereof to
insist upon the strict performance of any term of this Debenture or to exercise
any right, power or remedy consequent upon a default hereunder shall constitute
a waiver of any such term or of any such breach, or preclude the holder hereof
from exercising any such right, power or remedy at any later time or times. By
accepting payment after the due date of any amount payable under this Debenture;
the holder hereof shall not be deemed to waive the right either to require
payment when due of all other amounts payable under this Debenture or to declare
a default for failure to effect such payment of any such other amount.
The failure of the holder of this Debenture to give notice of any failure
or breach of the Corporation under this Debenture shall not constitute a waiver
of any right or remedy in respect of such continuing failure or breach or any
subsequent failure or breach.
8. Consent to Jurisdiction. The Corporation hereby agrees and consents that
any action, suit or proceeding arising out of this Debenture may be brought in
any appropriate court in the State of Maine, including the United States
District Court for the District of Maine, or in any other court having
jurisdiction over the subject matter, all at the sole election of the holder
hereof, and by the issuance and execution of this Debenture the Corporation
irrevocably consents to the jurisdiction of each such court.
9. Transfer. This Debenture shall be transferred on the books of the
Corporation only by the registered holder hereof or by his/her attorney duly
authorized in writing or by delivery to the Corporation of a duly executed
Assignment substantially in the form attached hereto as Exhibit A. The
Corporation shall be entitled to treat any holder of record of the Debenture as
the holder in fact thereof and shall not be bound to recognize any equitable or
other claim to or interest in this Debenture in the name of any other person,
whether or not it shall have express or other notice thereof, save as expressly
provided by the Laws of Maine.
10. Notices. All notices and communications under this Debenture shall be
in writing and shall be either delivered in person or accompanied by a signed
receipt therefor or mailed first-class United States certified mail, return
receipt requested, postage prepaid, and addressed as follows: if to the
Corporation, to:
Acadia National Health Systems, Inc..
415 Rodman Road
Auburn, Maine 04211
and, if to the holder of this Debenture, to the address of such holder as it
appears in the books of the Corporation Any notice of communication shall be
deemed given and received as of the date of such delivery or mailing.
16
11. Governing Law. This Debenture shall be governed by and construed and
enforced in accordance with the laws of the State of Maine or, where applicable,
the laws of the United States.
IN WITNESS WHEREOF, the Corporation has caused this Debenture to be duly
executed under its corporate seal.
ATTEST: ACADIA NATIONAL HEALTH SYSTEMS, INC.
- --------------------------------- By:----------------------------------
MARGARET M. HEATH, Secretary JOHN RADEN, President
Exhibit A
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby assigns to . the
- ---------------------- - year 14% Convertible Debenture of ACADIA NATIONAL
HEALTH SYSTEMS, INC., NO.------- and hereby irrevocably appoints American
Securities Transfer, Inc., Attorney, to transfer said debenture on the books of
the within named corporation, with full power of substitution in the premises.
WITNESS my hand and seal this ---------- day of , 19-------.
-------------------
(SEAL)
-------------------
(SEAL)
WITNESS:
- ----------------------
CONVERSION NOTICE
Pursuant to Item 2, Section 2.2 of the Acadia National Health Systems, Inc.
Convertible Debenture dated --------------, 1999 (the "Debenture") payable to
the undersigned, the undersigned hereby exercises his/her conversion right
effective as of the effective date of the merger of MedLecture.com LLC with and
into WorldLecture.com,.Inc., provided that all other preconditions to the
conversion as specified in the Debenture take place. The undersigned hereby
gives written notice to Acadia National Health Systems, Inc. (the "Company") of
the exercise of the undersigned's conversion right and directs the Company to
issue a Stock Certificate(s) for the Common Shares of the Company as provided in
the above-described Debenture to the undersigned. The Stock Certificate(s) shall
be delivered to the undersigned at
- -------------------------------------------------------- [fill in address]. The
above-described Debenture is attached to this Conversion Notice.
In Witness Whereof, the undersigned has hereunto set his/her hand and seal
effective this ------ day of ----------------------------, 1999.
---------------------------------------------
Print Name: -----------------------------
Subscription Agreement
The undersigned,
- -------------------------------------------------------------------------------
hereby subscribes to a
- --------------------------------------------------------------- and 00/100
Dollars ($--------------), Fourteen Percent (14%) Convertible Debenture from
Acadia National Health Systems, Inc., a Colorado Corporation with a place of
business in Auburn, Maine, its successors and assigns (the "Company"), in
accordance with the terms and conditions of the offering made by the Company
pursuant to the exemptions from registration afforded by Rule 504 of the
Securities Act of 1933 (the "Act"). This Subscription Agreement (the
"Agreement") may be rejected in whole or in part by the Company. The undersigned
hereby tenders his or her personal, certified, bank cashier's or treasurer's
- -check made payable to the order of Acadia National Health Systems, Inc. in the
amount of ----------------------------------------------------------------------
and 00/100 Dollars ($------------------------) will be delivered to the
17
undersigned promptly after the successful completion of the Offering. A Form
Debenture is attached hereto. To the extent that the attached Debenture differs
from any previous Debenture disclosed to the undersigned, the undersigned
acknowledges that the attached Debenture supersedes the previous Debenture and
represents the form of Debenture that the undersigned will receive from the
Company.
1. Purpose of Company. The purpose of the Company is to provide practice
management for doctors' offices, foster homes, and hospital-based practices. The
Company also seeks to diversify its business by having one of its subsidiaries
merge with MedLecture.com, Inc., a Maine Corporation, with the Company
subsidiary being the surviving company.
2. Representations and Warranties. The undersigned hereby represents and
warrants to the Company, as follows: (i) The undersigned is a United States
citizen and is at least twenty-one (21) years of age; (ii) The residence of the
undersigned is -----------------------------------------
- ---------------------------------------------------------, and the undersigned
has no present intention of becoming a resident or domiciliary of any other
state, country, or jurisdiction; (iii) The undersigned has read and received and
is familiar with the contents of all of the exhibits attached hereto; (iv) The
Debenture will be acquired by the undersigned for investment only, for the
undersigned's own account, and not with a view to, or offer for sale or for sale
in connection with the distribution or transfer thereof The undersigned has no
contract, undertaking, agreement, or arrangement with any person or entity to
sell, hypothecate, pledge, donate, or otherwise transfer (with or without
consideration) to any such person or entity the securities to which the
undersigned hereby subscribes, and the undersigned has no present plan or
intention to enter into any such contracts, undertakings, agreements, or
arrangements; (v) The present financial condition of the undersigned is such
that he or she is under no present or contemplated future need to dispose of any
portion of the securities for which the undersigned hereby subscribes to satisfy
any existing or contemplated undertakings, need, or indebtedness.
3. Acknowledgment of Certain Facts. The undersigned acknowledges his or her
awareness and understanding of the following: (i) This Agreement may be rejected
in whole or in part by the Company, in its sole and absolute discretion; (ii) No
federal or state agency has made any finding or determination as to the fairness
for public investment, nor any recommendation or endorsement, of the securities
subscribed for; (iii) All instruments, documents, records, and books pertaining
to the securities subscribed for have been made available for inspection by the
undersigned's attorneys and accountants and by the undersigned.
4. Acknowledgement of Risks Attendant Upon Investments of this Kind, THE
UNDERSIGNED ACKNOWLEDGES THAT HIS/HER/ITS INVESTMENT IN THE COMPANY IS AN
INVESTMENT IN A BUSINESS BNDEAVOR AND IS SUBJECT TO THE GENERAL RISKS OF
BUSINESS ENDEAVORS; THESE RISKS INCLUDE VARIOUS FACTORS AFFECTING THE INCOME
PRODUCING POTENTIAL OF THE ENDEAVOR INCLUDING (A) CHANGES IN GENERAL OR LOCAL
ECONOMIC CONDITIONS; (B) OPERATING EXPENSES OF THE BUSINESS; (C) THE POSSIBILITY
OF COMPETITION; (D) GOVERNMENTAL RULES AND FISCAL POLICIES; AND (E) ACTS OF GOD
AND OTHER FACTORS WHICH ARE BEYOND THE CONTROL OF THE COMPANY AND ITS OWNERS.
THE COST OF OPERATING THE BUSINESS COULD IN FUTURE YEARS EXCEED ITS OPERATING
INCOME. IN SUCH EVENT, THE COMPANY WOULD HAVE TO OBTAIN ADDITIONAL FUNDS TO
CONTINUE THE OPERATION OF THE BUSINESS AND TO PREVENT DEFAULT IN THE COMPANY'S
OBLIGATIONS TO CREDITORS.
5. Notice to Purchasers; Non-Registration of Securities. THE UNDERSIGNED
ACKNOWLEDGES THAT THE SECURITIES WHICH ARE THE SUBJECT OF THIS SUBSCRIPTION ARE
NOT CURRENTLY REGISTERED, THAT THE ISSUER HAS NO INTENTION OF REGISTERING THEM
UNDER FEDERAL LAW (THE SECURIES ACT OF 1933) OR UNDER THE LAW OF ANY STATE,
INCLUDING BUT NOT LIMITED TO REGISTERING THE SAME WITH THE SUPERINTENDENT OF
BANKING PURSUANT TO THE REVISED MAINE SECURITES ACT OF THE STATE OF MAINE, AND
THAT THIS TRANSACTION OFFERS THE UNDERSIGNED NO MECHANISM BY WHICH TO COMPEL
THEIR REGISTRATION, THE SECURITIES HAVING BEEN ISSUED PURSUANT TO THE PROVISIONS
OF CERTAIN EXEMPTIONS PROM FEDERAL STATUTORY AND REGULATORY REGISTRATION
REQUIREMENTS, AND FROM THE STATE OF MAINE REGISTRATION REQUIREMENTS AND THE
REGULATIONS RELATING THERETO. AS SUCH, THIS SECURITY MAY NOT BE TRANSFERRED
UNLESS PURSUANT TO REGISTRATION UNDER STATE OR FEDERAL SECURITY LAWS OR UNLESS
AN EXEMPTION EXSISTS UNDER SUCH LAWS. THE UNDERSIGNED RECOGNIZES THE SPECULATIVE
ASPECTS AND THE RISKS OF LOSS ASSOCIATED WITH THIS INVESTMENT, AND REPRESENTS
18
THAT THE SECURITIES SUBSCRIBED FOR HEREIN CONSTITUTE AN INVESTMENT WHICH IS
SUITABLE FOR AND CONSISTENT WITH HIS/HER/ITS INVESTMENT PROGRAM, THAT
HIS/HER/ITS FINANCIAL POSITION ENABLES HIMIHER/IT TO BEAR THE RISKS OF THIS
INVESTMENT, AND THAT HIS/HER/ITS FORESEEABLE INCOME IS SUFFICIENT TO MEET
HIS/HER/ITS NEEDS RECOGNIZING THE LACK OF LIQUIDITY IN THIS INVESTMENT.
6. Business Sophistication. The undersigned hereby warrants and represents
that he/she/it has such knowledge and experience in financial matters and
business matters to be capable of evaluating the merits and risks of an
investment in the Company.
7. Company's Reliance. The undersigned understands the significance to the
Company of the acknowledgments, representations, and warranties of the
undersigned in this Agreement, and the undersigned makes such acknowledgments,
representations and warranties with the intention that the Company will rely
upon them.
8. Representations Survive Issuance. The acknowledgments, representations,
warranties and agreements in this Agreement shall remain operative and in full
force and effect and shall survive the payment for and delivery of the
securities subscribed for herein.
9. No Public Market for Securities. The undersigned is aware that there is no
public market for the securities, that it may not be possible to liquidate
his/her/its investment in the Company, and that the undersigned may be required
to bear the financial risks of this investment for an indefinite period of time.
10. Opportunity to Pose Questions. The undersigned acknowledges that the
Company has made available to him/her/it an opportunity to ask questions of and
receive answers from the Company concerning the terms and conditions of the
offering and to obtain additional information. 11. Important Notices. The
undersigned hereby acknowledges receipt of the following notices:
A. The undersigned is not to construe the contents of this Subscription as legal
or investment advice. THE UNDERSIGNED SHOULD CONSULT HIS/HER/ITS OWN LEGAL
COUNSEL, ACCOUNTANT, OR BUSINESS ADVISOR AS TO THE LEGAL, TAX AND RELATED
MATTERS CONCERNING HIS/HER/ITS POSSIBLE INVESTMENT IN THE SECURITIES OFFERED
HEREBY. THE DELIVERY OF THIS MEMORANDUM AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
B. The undersigned is free to request from the Company copies of any
documents or instruments which the undersigned deems material to his/her/its
investment decision.
C. The undersigned acknowledges that it is his/her/its responsibility to satisfy
himself/herself/itself as to the Federal (as well as State and local) tax
consequences of purchasing securities by obtaining advice from his/her/its own
tax counsel.
12. Governing Law. This Agreement shall be subject to and be governed by
the laws of the State of Maine, and all questions and issues concerning the
meaning and intention of the terms of this Agreement, and the validity and
performance thereof, shall be adjusted and resolved in accordance with the laws
of the State of Maine. All disputes shall be resolved in courts of the State of
Maine and in federal courts located in the State of Maine.
13. Amendment. This Amendment may not be and shall not be deemed or
construed to have been modified, amended, rescinded, canceled or waived, in
whole or in part, except by written instrument signed by the parties hereto
which expressly refers to this Agreement
19
14. Accredited Status. The undersigned represents and warrants as follows
[check all applicable entries]:
(a) The undersigned is an individual with a net worth, or a joint net worth
together with his or her spouse, in excess of $1,000,000. (In calculating net
worth, you may include equity in personal property and real estate, including
your personal residence, cash, short-term investments, stock and securities.
Equity in personal property and real estate should be based on the fair market
value of such property minus debt secured by such property).
(b) The undersigned is an individual with income in excess of $200,000 in
each of the prior two years and reasonably expects income in excess of $200,000
in the current year.
(c) The undersigned is an individual who, with his or her spouse, had joint
income in excess of $300,000 in each of the prior two years and reasonably
expects joint income in excess of $300,000 in the current year.
(d) The undersigned is a director or executive officer of the
Company.
15. NASD Affiliation. The undersigned is not affiliated or associated,
directly or indirectly, with a National Association of Securities Dealers, Inc.
('NASD") member firm or person.
16. Miscellaneous
(a) Manner in which title is to be held: (check one)
___ Individual Ownership
___ Joint Tenants with Right of Survivorship
___ Tenants in Common
___ Other ------------------------------------------------
(describe)
(b) The undersigned agrees that the undersigned understands the meaning and
legal consequences of the agreements, representations and warranties contained
herein, agrees that such agreements, representations and warranties shall
survive and remain in full force and effect after the execution hereof, and
further agrees to indemnify and hold harmless the Company, each current and
future officer, director, employee, agent, and Manager from and against any and
all loss, damage or liability due to, or arising out of, a breach of any
agreement, representation or warranty of the undersigned contained herein.
(c) The undersigned agrees to furnish to the Company or the Agent, if
applicable, upon request, such additional information as may be deemed necessary
to determine the undersigned's suitability as an investor.
17. Accuracy. The undersigned hereby affirms, represents, and warrants to
the Company and its Officers, Directors, employees, agents, and Managers that
the information contained herein is true, correct, accurate and complete and may
be relied upon for purposes of determining the availability of an exemption from
registration for the offer and sale of the Debentures. Dated this ------- day of
- ----------, 1999.
Subscriber
---------------------------------------------
Print Name: ------------------------------
Acceptance of Subscription
The Company accepts the subscription of the above-named Subscriber.
Acadia National Health Systems, Inc.
By: -----------------------------------------
Print Name: ----------------------------
Its:----------------------------------------
20
Exhibit 99 PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 SAFE HARBOR
COMPLIANCE STATEMENT FOR FORWARD LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"), 15 U.S.C.A. Sections 77z 2 and 78u 5 (Supp. 1996), Congress encouraged
public companies to make "forward looking statements" by creating a safe harbor
to protect companies from securities law liability in connection with forward
looking statements. Acadia Group Inc. ("Acadia" or the "Company") intends to
qualify both its written and oral forward looking statements for protection
under the Reform Act and any other similar safe harbor provisions. "Forward
looking statements" are defined by the Reform Act. Generally, forward looking
statements include expressed expectations of future events and the assumptions
on which the expressed expectations are based. All forward looking statements
are inherently uncertain as they are based on various expectations and
assumptions concerning future events and they are subject to numerous known and
unknown risks and uncertainties which could cause actual events or results to
differ materially from those projected. Due to those uncertainties and risks,
the investment community is urged not to place undue reliance on written or oral
forward looking statements of Acadia. The Company undertakes no obligation to
update or revise this Safe Harbor Compliance Statement for Forward Looking
Statements (the "Safe Harbor Statement") to reflect future developments. In
addition, Acadia undertakes no obligation to update or revise forward looking
statements to reflect changed assumptions, the occurrence of unanticipated
events or changes to future operating results over time. Acadia provides the
following risk factor disclosure in connection with its continuing effort to
qualify its written and oral forward looking statements for the safe harbor
protection of the Reform Act and any other similar safe harbor provisions.
Important factors currently known to management that could cause actual results
to differ materially from those in forward looking statements include the
disclosures contained in the Quarterly Report on Form 10-QSB to which this
statement is appended as an exhibit and also include the following:
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
Acacia has substantial indebtedness and, as a result, significant debt service
obligations. Acacia's ability to make payments on its debt obligations will
depend on its future operating performance, which will be affected by prevailing
economic conditions and financial, business and other factors, certain of which
are beyond the Acacia's control. If Acacia is unable to service its
indebtedness, it will be required to adopt alternative strategies, which may
include actions such as reducing or delaying capital expenditures, selling
assets, restructuring or refinancing its indebtedness or seeking additional
equity capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms. The degree to which the Company is leveraged
could have important consequences, including: (i) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions or other general corporate purposes may be impaired;
(ii) a substantial portion of the Company's cash flow from operations may be
dedicated to the payment of principal and interest on its indebtedness, thereby
reducing the funds available to the Company for its operations; (iii) the
Company's existing indebtedness contains, and future financings are expected to
contain, financial and other restrictive covenants, including without limitation
those restricting the incurrence of additional indebtedness, the creation of
liens, the payment of dividends, sales of assets, capital expenditures, and
prepayment of indebtedness and those requiring maintenance of minimum net worth,
minimum EBITDA and minimum interest coverage and limiting leverage; (iv) certain
of the Company's borrowings are and will continue to be at variable rates of
interest which expose the Company to the risk of increases in interest rates;
and (v) the Company may be more leveraged than certain of its competitors, which
may place the Company at a relative competitive disadvantage and make the
Company more vulnerable to changes in its industry and changing economic
conditions. As a result of the Company's level of indebtedness, its financial
capacity to respond to market conditions, extraordinary capital needs and other
factors may be limited.
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ACADIA HAS SIGNIFICANTLY CHANGED ITS BUSINESS MODEL
In late 1999, Acadia formed a newly formed an Internet subsidiary
WorldLecture.com and transferred its business management services operation to
another wholly owned subsidiary, Acadia National Health Systems. Acadia
implemented its change in corporate structure to reposition Acadia as an
incubator for entrepreneurs and start-up companies. Due to these recent
significant changes, Acadia is subject to the risk that Acadia will fail to
implement its business model and strategy. This risk is heightened because
Acadia's WorldLecture.com subsidiary is operating in the new and rapidly
evolving e-commerce market. Acadia's historical results of operations do not
reflect our e-commerce offerings. Consequently, Acadia's historical operating
results and pro forma financial information may be an accurate indication of how
Acadia will perform in the future.
LITIGATION AND GOVERNMENT INVESTIGATIONS
Numerous federal and state civil and criminal laws govern medical billing
activities. In general, these laws provide for various fines, penalties,
multiple damages, assessments and sanctions for violations, including possible
exclusion from Medicare, Medicaid and certain other federal and state healthcare
programs. The Company and its clients from time to time anticipate that they
will receive in the future, official inquiries (including subpoenas, search
warrants, as well as informal requests) concerning particular billing practices
related to the Company and its many clients.
EVOLVING INDUSTRY STANDARDS; RAPID TECHNOLOGICAL CHANGES
The market for the purchase of products and services over the Internet is a new
and emerging market. As an Internet commerce business, Acadia's future revenues
and profits are substantially dependent upon the widespread acceptance and use
of the Internet and other online services as a medium for commerce by consumers
and sellers. If acceptance and growth of Internet use does not occur, Acadia's
business and financial performance will suffer. Rapid growth in the use of and
interest in the Internet and other online services is a recent phenomenon. This
growth may not continue. A sufficiently broad base of consumers may not adopt or
continue to use, the Internet as a medium of commerce. Demand for and market
acceptance of recently introduced products and services over the Internet are
subject to a high level of uncertainty, and there are few proven products and
services. For Acadia's WorldLecture.com to grow, professionals who historically
satisfied their continuing education requirements through traditional means,
such as attending classroom lectures or conferences, must embrace the delivery
of such services via the Internet.
The Internet has experienced, and is expected to continue to experience,
significant growth in the number of users and amount of traffic. Acadia's
success will depend upon the development and maintenance of the Internet's
infrastructure to cope with this increased traffic. This will require a reliable
network backbone with the necessary speed, data capacity and security, and the
timely development of complementary products, such as high-speed modems, for
providing reliable Internet access and services. The Internet has experienced a
variety of outages and other delays as a result of damage to portions of its
infrastructure and could face such outages and delays in the future. Outages and
delays are likely to affect the level of Internet usage generally, as well as
our ability to provide services to Acadia's WorldLecture.com and Acadia National
Health Systems customers. In addition, the Internet could lose its viability due
to delays in the development or adoption of new standards to handle increased
levels of activity or due to increased government regulation. The adoption of
new standards or government regulation may, however, require Acadia to incur
substantial compliance costs.
The success of Acadia's subsidiary Acadia National Health Systems will depend in
part upon Acadia National Health Systems' continued ability to enhance its
existing products and services, to introduce new products and services quickly
and cost effectively to meet evolving customer needs, to achieve market
acceptance for new product and service offerings and to respond to emerging
industry standards and other technological changes. There can be no assurance
that Acadia, through Acadia National Health Systems, will be able to respond
effectively to technological changes or new industry standards. Moreover, there
can be no assurance that competitors of Acadia will not develop competitive
products, or that any such competitive products will not have an adverse effect
upon Acadia's operating results. Acadia National Health Systems' intends further
to refine, enhance and develop certain of its existing software and billing
systems and to change all of the its billing and accounts receivable management
services operations over to its most proven software systems and technology to
reduce the number of systems and technologies that must be maintained and
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supported. Moreover, management intends to continue to implement "best
practices" and other established process improvements in its operations going
forward. There can be no assurance that Acadia National Health Systems will be
successful in refining, enhancing and developing its software and billing
systems going forward, that the costs associated with refining, enhancing and
developing such software and systems will not increase significantly in future
periods, that Acadia National Health Systems will be able successfully to
migrate Acadia National Health Systems' billing and accounts receivable
management services operations to its most proven software systems and
technology or that its existing software and technology will not become obsolete
as a result of ongoing technological developments in the marketplace.
YEAR 2000
It is possible that the Company's currently installed computer systems, software
products or other business systems, or those of the Company's customers, vendors
or resellers, working either alone or in conjunction with other software or
systems, will not accept input of, store, manipulate and output dates for the
year 2000 or thereafter without error or interruption (commonly known as the
"Year 2000" problem). The Company has conducted a review of its business
systems, including its computer systems, and is querying its customers, vendors
and resellers as to their progress in identifying and addressing problems that
their computer systems may face in correctly interrelating and processing date
information as the year 2000 approaches and is reached. Through its review, the
Company has identified a number of older legacy systems that will be abandoned
in favor of a limited number of more efficient processing systems, rather than
make all the systems Year 2000 compatible. Customers, vendors and resellers have
been identified and requests for information distributed regarding the Year 2000
readiness of such parties. The estimated cost of the Company's Year 2000 efforts
is $25,000 to $30,000 over 1998 and 1999, the majority of which represents
redirection of internal resources. However, there can be no assurance that the
Company will identify all such Year 2000 problems in its computer systems or
those of its customers, vendors or resellers in advance of their occurrence or
that the Company will be able to successfully remedy any problems that are
discovered. The expenses of the Company's efforts to identify and address such
problems, or the expenses or liabilities to which the Company may become subject
as a result of such problems, could have a material adverse effect on the
Company's business, financial condition and results of operations. The revenue
stream and financial stability of existing customers may be adversely impacted
by Year 2000 problems, which could cause fluctuations in the Company's revenue.
In addition, failure of the Company to identify and remedy Year 2000 problems
could put the Company at a competitive disadvantage relative to companies that
have corrected such problems.
COMPETITION; INDUSTRY AND MARKET CHANGES
The business of providing billing and management services to physicians and
hospitals is highly competitive. Acadia competes with certain national and
regional physician and hospital reimbursement organizations and billing
businesses (including local independent operating companies), certain national
information and data processing organizations and certain physician groups and
hospitals that provide their own business management services. Potential
industry and market changes that could adversely affect the billing aspects of
Acadia's business include (i) a significant increase in managed care providers
relative to conventional fee for service providers, potentially resulting in
substantial changes in the medical reimbursement process, or the Company's
failure to respond to such changes and (ii) new alliances between healthcare
providers and third party payors in which healthcare providers are employed by
such third party payors. The business of providing application software,
information technology and consulting services is also highly competitive and
Acadia faces competition from certain national and regional companies in
connection with its technology operations. Certain of Acadia's competitors have
longer operating histories and greater financial, technical and marketing
resources than Acadia. There can be no assurance that competition from current
or future competitors will not have a material adverse effect upon Acadia. The
Company's business is affected by, among other things, trends in the U.S.
healthcare industry. As healthcare expenditures have grown as a percentage of
the U.S. Gross National Product, public and private healthcare cost containment
measures have applied pressure to the margins of healthcare providers.
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Historically, some healthcare payors have paid the prices established by
providers while other healthcare payors, notably government agencies and managed
care companies, have paid less than established prices (in many cases less than
the average cost of providing the services). As a consequence, prices charged to
healthcare payors willing to pay established prices have increased in order to
recover the cost of services purchased by government agencies and others but not
paid for by them (i.e., "cost shifting"). The increasing complexity in the
reimbursement system and assumption of greater payment responsibility by
individuals have caused healthcare providers to experience increase accounts
receivable and bad debt levels and higher business office costs. Healthcare
providers historically have addressed these pressures on profitability by
increasing their prices, by relying on demographic changes to support increases
in the volume and intensity of medical procedures and by cost shifting.
Notwithstanding the providers' responses to these pressures, management believes
that the revenue growth rate experienced by certain of the Company's clients
continues to be adversely affected by increased managed care and other industry
factors affecting healthcare providers in the United States. At the same time,
the process of submitting healthcare claims for reimbursement to third party
payors in accordance with applicable industry and regulatory standards continues
to grow in complexity and to become more costly. Management believes that these
trends have adversely affected and could continue to adversely affect the
revenues and profit margins of the Company's operations.
GOVERNMENTAL INVESTIGATORY RESOURCES AND HEALTHCARE REFORM
The federal government in recent years has placed increased scrutiny on the
billing practices of healthcare providers and related entities, and particularly
on possibly fraudulent billing practices. This heightened scrutiny has resulted
in a number of high profile civil and criminal investigations, lawsuits and
settlements. In 1996, Congress enacted the Health Insurance Portability and
Accounting Act of 1996, Pub. L. No. 104 191, 1996 U.S.C.C.A.N. (110 Sat. 1936)
(codified in scattered sections of the United States Code, including 18, 26, 29
and 42 U.S.C.), which includes an expansion of provisions relating to fraud and
abuse, creates additional criminal offenses relating to healthcare benefit
programs, provides for forfeitures and asset freezing orders in connection with
such healthcare offenses and contains provisions for instituting greater
coordination of federal, state and local enforcement agency resources and
actions. In recent years, the focus of healthcare legislation has been on
budgetary and related funding mechanism issues. Both the Congress and the
Clinton Administration have made proposals to reduce the rate of increase in
projected Medicare and Medicaid expenditures and to change funding mechanisms
and other aspects of both programs. In late 1995, Congress passed legislation
that would substantially reduce projected expenditure increases and would make
significant changes in the Medicare and Medicaid programs. Acadia cannot predict
the effect of pending legislation, if adopted, on its operations. A number of
states in which Acadia has operations either have adopted or are considering the
adoption of healthcare reform proposals at the state level. Acadia cannot
predict the effect of proposed state healthcare reform laws on its operations.
Additionally, certain reforms are occurring in the healthcare market, including
certain employer initiatives such as creating purchasing cooperatives and
contracting for healthcare services for employees through managed care companies
(including health maintenance organizations), and certain provider initiatives
such as risk sharing among healthcare providers and managed care companies
through capitated contracts and integration among hospitals and physicians into
comprehensive delivery systems. Consolidation of management and billing services
through integrated delivery systems may result in a decrease in demand for
Acadia National Health Systems billing services for particular physician
practices.
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EXISTING GOVERNMENT REGULATION
Existing government regulation can adversely affect the business of Acadia's
subsidy through, among other things, its potential to reduce the amount of
reimbursement received by Acadia National Health System's clients for healthcare
services. Acadia's medical billing activities are also governed by numerous
federal and state civil and criminal laws. In general, these laws provide for
various fines, penalties, multiple damages, assessments and sanctions for
violations, including possible exclusion from Medicare, Medicaid and certain
other federal and state healthcare programs. Submission of claims for services
or procedures that are not provided as claimed, or which otherwise violate the
regulations, may lead to civil monetary penalties, criminal fines, imprisonment
and/or exclusion from participation in Medicare, Medicaid and other federally
funded healthcare programs. Specifically, the Federal False Claims Act allows a
private person to bring suit alleging false or fraudulent Medicare or Medicaid
claims or other violations of the statute and for such person to share in any
amounts paid to the government in damages and civil penalties. Successful
plaintiffs can receive up to 25 30% of the total recovery from the defendant.
Such qui tam actions or "whistle blower" lawsuits have increased significantly
in recent years and have increased the risk that a company engaged in the
healthcare industry, such as Acadia and many of its customers, may become the
subject of a federal or state investigation, may ultimately be required to
defend a false claims action, may be subjected to government investigation and
possible criminal fines, may be sued by private payors and may be excluded from
Medicare, Medicaid and/or other federally funded healthcare programs as a result
of such an action. Some state laws also provide for false claims actions,
including actions initiated by a qui tam plaintiff. Any such proceeding or
investigation could have a material adverse effect upon the Company. There can
be no assurance that current or future government regulations or healthcare
reform measures will not have a material adverse effect upon Acadia's business.
VOLATILITY OF STOCK PRICE
Acadia believes factors such as the Company's liquidity and financial resources,
the general volatility of Internet related stocks, healthcare reform measures
and quarter to quarter and year to year variations in financial results could
cause the market price of Acadia Common Stock to fluctuate substantially. Any
adverse announcement with respect to such matters or any shortfall in revenue or
earnings from levels expected by Management could have an immediate and material
adverse effect on the trading price of Acadia Common Stock in any given period.
As a result, the market for Acadia Common Stock may experience material adverse
price and volume fluctuations and an investment in the Company's Common Stock is
not suitable for any investor who is unwilling to assume the risk associated
with any such price and volume fluctuations.
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