SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section
14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a party other than the Registrant |_|
Check the appropriate box:
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|X| Preliminary Proxy Statement |
|_| Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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|_| Definitive Proxy Statement |
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|_| Definitive Additional Materials |
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|_| Soliciting Material Pursuant to Rule 14a-12 |
ANDERSEN GROUP, INC.
(Name
of Registrant as Specified in Its Charter)
Not Applicable
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check
the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials:
|_| Check box if any part of the
fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number or the Form or Schedule and the date of
its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
ANDERSEN GROUP, INC. To Our Stockholders: We cordially invite you
to attend a Special Meeting of the stockholders of Andersen Group, Inc. (the
"Company", "we" or "us") to be held at
___________ on _____________, 2003 at ________a.m., New York City time, or at
such other time and place to which the Special Meeting may be adjourned or
postponed. We have been actively
involved in the due diligence, funding and operation of ComCor-TV
("CCTV"), an early stage Moscow-based provider of cable television
and Internet access services. CCTV's operations are currently consuming cash
from operating losses during this early
start up phase and from the capital expenditures required to build out its
access network in central Moscow, and thus position CCTV for significant
subscriber growth. Our Board of
Directors believes it would be in our best interest and the best interest of
our stockholders, if our investment in CCTV was more direct and comprehensive
in nature. Accordingly, we have reached
agreement to acquire all the shares of CCTV through the acquisition of the
shares of Moscow Broadband Communication Ltd. ("MBC") that we do not
already own, and of the shares of CCTV presently held and to be acquired by OAO
Moskovskaya Telecommunikationnaya Korporatsiya ("COMCOR"). These two transactions
contemplate the issuance of approximately 6,470,879 new shares of our Common
Stock, plus up to an additional 477,994 shares of Common Stock by March 31,
2005. Of these shares, 4,220,879 will
be issued to COMCOR and up to 2,250,000 will be issued shares to current MBC
stockholders. Approximately 1,405,800
or 62.5% of the shares to be issued to MBC stockholders will be issued to our
officers, directors, their immediate families, or to entities that are
controlled by or have been formed for the benefit of our directors. In
addition, we have agreed to issue 33,879 shares of our Common Stock to a third
party at closing in settlement of a CCTV liability in the amount of $138,144.
These transactions and related other matters that are needed to complete the
transaction require the approval of our stockholders at the Special Meeting. Our current
stockholders will own approximately 24.4% of our Common Stock following the
closing of the transactions, but prior to the possible issuance of any
contingently issuable shares. At the Special Meeting,
you will be asked to vote on the following matters in connection with the CCTV
and MBC Share Acquisitions: (1)
the issuance of 4,220,879 shares of our Common Stock
at closing as the consideration for the
acquisition of the equity interest of CCTV held by COMCOR; (2)
the issuance of up to 2,250,000 shares of our Common
Stock to acquire the currently outstanding shares of MBC that we do not own; (3)
the approval of the increase in the number of
authorized shares of our Common Stock from 6,000,000 to 15,000,000 to allow us
to issue the shares of our Common Stock as described above, and for other
purposes, including pursuant to the Restricted Stock Plan and the Stock Option
Plan; (4)
the approval of cumulative voting rights for our
stockholders with respect to the elections of our Board of Directors; (5)
the approval of the change of our name to Moscow
CableCom Corp. to better reflect our purpose and operations; In addition, you will also be asked to vote on:
(6)
the approval of the Andersen Group, Inc. 2003
Restricted Stock Plan; (7)
the approval of the Andersen Group, Inc. 2003 Stock
Option Plan; and (8)
to vote on other business as properly raised. Our Board is recommending that you approve each of the
proposals. We encourage you to read the
proxy which explains each matter in greater detail. We hope you attend the meeting in person, and we encourage you to
vote your shares by proxy if you are not able to attend. Sincerely, Oliver R. Grace, Jr. Dated ______, 2003 New York, New York
ANDERSEN GROUP, INC. NOTICE OF SPECIAL MEETING This Proxy Statement relates to the Special
Meeting (the "Special Meeting") of stockholders of Andersen Group, Inc. (the
"Company", "we" or "us") to be held on [______], 2003 at [_____]
a.m., New York City time, at [_______________], or at such other time and
place to which the Special Meeting may be adjourned or postponed. The date of
this Proxy Statement is [_____], 2003. The proxy materials relating to
the Special Meeting are being mailed to our stockholders entitled to vote at
the Special Meeting on or about [_____], 2003. THE ENCLOSED PROXY IS SOLICITED BY THE
BOARD OF DIRECTORS OF THE COMPANY. At the Special Meeting
you will be asked to act on the following matters (collectively, the
"Proposals"): 1. Approval of the issuance of Common Stock
in the CCTV Share Acquisition. You will be asked to approve the
issuance of 4,220,879 shares of our par value $.01 per share Common Stock
("Common Stock") to be paid as consideration for the equity interests
of ZAO ComCor-TV ("CCTV"), a closed joint stock company organized
under the laws of the Russian Federation to be held by OAO Moskovskaya Telecommunikationnaya
Korporatsiya ("COMCOR"), a company organized under the laws of the
Russian Federation, pursuant to the terms of a Stock Subscription Agreement
(the "Stock Subscription Agreement") (the transaction herein referred
to as the "CCTV Share Acquisition"). We cannot complete the
CCTV Share Acquisition unless you approve this Proposal, and Proposals 2 and 3. 2. Approval of the issuance of Common
Stock in the MBC Share Acquisition. You will be asked to approve the
issuance of up to 2,250,000 shares of our Common Stock to be paid to the
holders of the 75% of the outstanding stock of ABC Moscow Broadband
Communication Limited ("MBC"), a limited liability company organized
under the laws of Cyprus, that we do not already own pursuant to the terms of
an Exchange Agreement. (The
transaction herein referred to as the "MBC Share Acquisition"). In addition to the foregoing vote, as a result of substantial ownership
or control of MBC shares on the part of our executive officers and directors,
we are also seeking the approval of the MBC Share Acquisition by the holders of
a majority of the shares of our Common Stock not controlled by our executive
officers or directors, as provided by Section 144 of the Delaware General
Corporation Law. We cannot complete the
MBC Share Acquisition unless you approve this Proposal and Proposals 1 and 3. 3. Approval of the Share Increase
Amendment. You will be asked to approve an amendment to our
Certificate of Incorporation that will increase the number of authorized shares
of our Common Stock from 6,000,000 to 15,000,000 shares. 4. The Cumulative Voting Amendment. You will be
asked to approve an amendment to our Certificate of Incorporation to provide
stockholders with cumulative voting rights with respect to elections of our
Board of Directors. i
5. Approval of the Name Change
Amendment. You will be asked to approve an amendment to our
Certificate of Incorporation to change our name from "Andersen Group, Inc." to
"Moscow CableCom Corp." 6. Approval of the 2003 Restricted Stock
Plan. You will be asked to
approve the Andersen Group, Inc. Restricted Stock Plan. 7. Approval of the 2003 Stock Option
Plan. You will be asked to
approve the Andersen Group, Inc. Incentive Stock Option Plan. 8. Other Business. If other
business is properly raised at the meeting or if we need to adjourn or postpone
the meeting, you will vote on these matters too. Your vote is important.
Only stockholders of record as of the close of business on [______], 2003 are entitled to
notice of, and to vote at, the Special Meeting or any postponement or
adjournment thereof. On July _______, 2003, we had 2,099,908 shares of Common
Stock issued and outstanding. Each share is entitled to one vote. Shares may not be voted
at the Special Meeting unless the holder thereof is present or represented by
proxy. Any stockholder executing the accompanying form of proxy has the power
to revoke it at any time prior to its exercise by: (i) attending the Special
Meeting and voting in person, (ii) duly executing and delivering a proxy bearing
a later date or (iii) sending written notice of revocation to Francis E. Baker,
the Secretary of the Company, at our executive offices, which are located at
405 Park Avenue, Suite 1202, New York, New York 10022. _______________ Dated: [_____],
2003 New York, New York ii
TABLE OF CONTENTS QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING................................................................................................ 1 COMCOR-TV............................................................................................................................................................................................. 5 SUMMARY OF THE PROPOSALS TO BE VOTED ON AT THE SPECIAL
MEETING........................................................... 10 The CCTV Share Acquisition and the MBC Share Acquisition................................................................................................... 10 The Share Increase Amendment......................................................................................................................................................... 12 The Cumulative Voting Amendment.................................................................................................................................................. 12 Name Change Amendment................................................................................................................................................................... 13 The Restricted Stock Plan .................................................................................................................................................................. 13 The Stock Option Plan.......................................................................................................................................................................... 13 APPROVAL OF THE ISSUANCE OF COMMON STOCK IN THE CCTV SHARE
ACQUISITION..................................... 14 General.................................................................................................................................................................................................... 14 NASDAQ Stockholder Approval Requirements.............................................................................................................................. 14 Parties to the CCTV Share Acquisition............................................................................................................................................ 14 Business of CCTV................................................................................................................................................................................. 15 Reasons for the CCTV Share Acquisition........................................................................................................................................ 15 Determination of the Purchase Price................................................................................................................................................ 17 The Stock Subscription Agreement................................................................................................................................................... 18 Other Agreements in Connection with the CCTV Share
Acquisition........................................................................................ 19 Certain Related Parties and Related Party Transactions.............................................................................................................. 20 Appraisal Rights.................................................................................................................................................................................... 20 Regulatory Approvals............................................................................................................................................................................ 20 Accounting Treatment.......................................................................................................................................................................... 20 Material U.S. Federal Income Tax Consequences............................................................................................................................ 21 APPROVAL OF THE ISSUANCE OF COMMON STOCK IN THE MBC SHARE
ACQUISITION....................................... 22 General.................................................................................................................................................................................................... 22 Stockholder Approval Requirements................................................................................................................................................. 22 Parties to the MBC Share Acquisition.............................................................................................................................................. 22 Reasons for the MBC Share Acquisition.......................................................................................................................................... 23 Determination of the Exchange Ratio................................................................................................................................................. 24 The Exchange Agreement.................................................................................................................................................................... 25 The Registration Rights Agreement................................................................................................................................................. 26 Participation of Certain Related Parties in the MBC Share
Acquisition................................................................................... 26 Appraisal Rights.................................................................................................................................................................................... 27 Regulatory Approvals............................................................................................................................................................................ 27 Accounting Treatment.......................................................................................................................................................................... 27 Material U.S. Federal Income Tax Consequences............................................................................................................................ 28 THE SHARE INCREASE AMENDMENT............................................................................................................................................ 29 Description of the Share Increase Amendment............................................................................................................................... 29 Reasons for the Share Increase Amendment................................................................................................................................... 29 Possible Effects of the Share Increase Amendment........................................................................................................................ 30 THE CUMULATIVE VOTING AMENDMENT.................................................................................................................................. 31 Summary of the Cumulative Board Amendment.............................................................................................................................. 31 Reasons for, and Effects of, the Cumulative Board Amendment................................................................................................... 31 Delaware Law.......................................................................................................................................................................................... 32 NAME CHANGE AMENDMENT.......................................................................................................................................................... 33 Summary of the Name Change Amendment................................................................................................................................ ..... 33 APPROVAL OF
THE 2003 RESTRICTED STOCK PLAN............................................................................................................ 34 Summary of
Andersen Group Restricted Stock Plan................................................................................................................... 34 Description of Restricted Stock Plan.............................................................................................................................................. 34 Eligibility to
Receive Restricted Stock............................................................................................................................................ 34 Administration..................................................................................................................................................................................... 34 Amendment or
Termination .............................................................................................................................................................. 34 Federal Income Tax
Consequences................................................................................................................................................... 35 APPROVAL OF
THE 2003 STOCK OPTION PLAN...................................................................................................................... 36 Summary of
Andersen Group Stock Option Plan.......................................................................................................................... 36 Description
of Awards......................................................................................................................................................................... 36 Eligibility
to Receive Awards.............................................................................................................................................................. 36 Administration....................................................................................................................................................................................... 37 Amendment or
Termination................................................................................................................................................................. 36
Federal
Income Tax Consequences..................................................................................................................................................... 37 FORWARD-LOOKING INFORMATION............................................................................................................................................. 39 OTHER MATTERS.................................................................................................................................................................................... 39 AVAILABLE INFORMATION................................................................................................................................................................ 39 SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA.............................................................................................. 40 INDEX TO PRO FORMA FINANCIAL STATEMENTS..................................................................................................................... F-1 Annex A - Subscription
Agreement between our Company and COMCOR Annex B - Form of
Registration Rights Agreement between our Company and COMCOR Annex C - Form of Voting
Agreement between our Company, COMCOR and certain stockholders Annex D - Form of Exchange
Agreement between our Company and the MBC Stockholders Annex E - Form of Registration Rights Agreement between our Company and
the MBC Stockholders Annex F - Form of Certificate
of Amendment to the Certificate of Incorporation of our Company Annex G - 2003 Restricted
Stock Plan of our Company Annex H - 2003 Stock Option
Plan of our Company
The Special Meeting and the Proposals Q. When and where will
the Special Meeting be held? A. The Special
Meeting will be held on [_____], 2003, beginning at [_____] a.m., New York City time,
at [_______________],or
at such other time and place to which the Special Meeting may be adjourned or
postponed. Q. What is the purpose
of the Special Meeting? A. At
the Special Meeting, you will be asked to consider and vote on the following
Proposals: Voting Your Shares Q. Who is entitled to
vote on each of the Proposals? A. Only
stockholders of record at the close of business on the record date, [_____],
2003, are entitled to receive notice of the Special Meeting and to vote the
shares that they held on that date at the Special Meeting, or any postponement
or adjournment of such meeting. At the close of business on _________, 2003,
there were 2,099,908 shares of our Common Stock issued and outstanding. Q. What
vote is required to approve each of the Proposals? A. The
Proposals will need to be approved in the following manner: 1
Q. Who
may attend the Special Meeting? A. All holders of our Common Stock on the record date, or their duly
appointed proxies, may attend the Special Meeting. Q. What
constitutes a quorum for the Special Meeting? A. The presence
at the Special Meeting, in person or by proxy, of the holders of a majority of
the issued and outstanding Common Stock on the record date will constitute a
quorum, permitting us to conduct our business at the Special Meeting. Proxies
received but marked as abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at the Special
Meeting. Q. How do I vote
my shares? A. You may vote on matters to come before the
Special Meeting in two ways: Q. How many
votes do I have for each share that I own? A. Each share of Common Stock that you own entitles you to one vote on
each Proposal. The proxy card indicates the number of shares that you own. Q. What happens
if I do not make choices on my signed proxy card? A. If you sign
the proxy card, but do not make specific choices, the proxy holders will vote
your shares in favor of each Proposal, as recommended by our Board of Directors. 2
Q. What
if I vote and then change my mind? A. You may revoke your proxy at any time before
it is voted by: Your last vote will be the vote that is
counted. Q. What are the effects of abstentions and broker
non-votes on the approval of the Proposals? A. Abstentions occur when a person with voting
power checks the abstention box on a proxy card for a particular Proposal or
otherwise indicates that he, she or it abstains from voting on a Proposal. A
broker non-vote occurs when a nominee holding shares for a beneficial owner
(i.e., your broker) returns an executed proxy but does not vote on a particular
proposal because the nominee does not have the discretion to vote with respect
to that particular Proposal and has not received instructions from you. Cost of the Proxy Solicitation Q. Who
will bear the cost of soliciting proxies? A. We will pay the costs associated with this
proxy solicitation. Our officers and other employees also may solicit proxies
by personal interview, by electronic means or by telephone or facsimile
equipment, in addition to the use of the mails. None of these individuals will
receive special compensation for such services, which will be performed in
addition to their regular duties, and some of them may not necessarily solicit
proxies. We also have made arrangements with brokerage firms, banks, nominees
and other fiduciaries to forward proxy solicitation materials for shares held
of record by them to the beneficial owners of such shares. Upon request, we
will reimburse these record holders for their reasonable out-of-pocket
expenses. 3
Other Matters Q. Will there be any other matters considered at
the Special Meeting? A. We
are unaware of any matters to be presented at the Special Meeting other than
the Proposals discussed in this Proxy Statement. If other matters are properly
presented at the Special Meeting, then the
proxy holders will have authority to vote all properly executed proxies
in accordance with their judgment on any such matter, including any proposal to
adjourn or postpone the meeting. If you vote against any of the Proposals, your
proxy will not vote in favor of any proposal to adjourn or postpone the Special
Meeting if such postponement or adjournment is for the purpose of soliciting
additional proxies to approve the Proposal that you voted against. Q. What do I need to do now? A. You should carefully read and
consider the information contained in this Proxy Statement, including its
appendices. This Proxy Statement
contains important information about the Proposals and about what our Board of
Directors considered in evaluating the CCTV and MBC Share Acquisitions and the
remaining Proposals. You should then
complete and sign your proxy card and return it in the enclosed postage-paid
return envelope as soon as possible, so that your shares will be represented at
the Special Meeting. Q. Where can I get more information about Andersen
Group and the Proposals? A. You may obtain more information
about our Company and the Proposals from various sources, as listed under
"Available Information" on page 39 of this Proxy Statement. Q. Whom should I call with questions about the
Special Meeting? A. You should contact: Andrew M. O'Shea, our Chief Financial
Officer at (860) 298-0444, or by e-mail at aoshea @ andersengrp.com.
CCTV Since the purpose of the CCTV Share Acquisition and MBC Share
Acquisition proposals is to obtain all of the shares of CCTV, we are providing
you the following information about CCTV. General Description of the Business CCTV's
operations commenced in April 2000 when it was capitalized by MBC with
$8,500,000 of cash and shares of the stock of the Institute for Automated
Systems ("IAS") which was recorded a value of $634,000, and by COMCOR
with licenses to provide cable TV services and Internet access to approximately
1,500,000 homes in Moscow, Russia with a value of $7,500,000 net of applicable
deferred income tax liabilities and shares of IAS with a recorded value of
$2,134,000. The combined shares of IAS contributed to CCTV total approximately
19% of IAS's outstanding shares. Under terms of an agreement signed by the
parties, MBC also contributed an additional $500,000 of cash to CCTV during
2000. During 2002, Andersen Group entered into agreements with Asinio
Commercial Ltd ("ACL"), under which we were to have acquired 100% of CCTV
through issuance of our common stock to ACL in exchange for the equity then
held by COMCOR but to be sold or transferred to ACL, and through the exchange
of Company common stock for the common stock of MBC not held by the Company.
Pursuant to such agreements, in May 2002, MBC invested an additional $5,000,000
of cash into CCTV, and COMCOR invested coaxial networks for 89,000 subscribers,
Internet equipment and inventory recorded at $13,755,000, and additional shares
of IAS with a recorded value of $3,618,000 to increase CCTV's equity interest
in IAS to approximately 42%. In May
2003, we terminated our agreement with ACL and entered into new agreements with
COMCOR, under which we will acquire 100% of the equity of CCTV. Pursuant to
these agreements, in May 2003, we invested $3,500,000 into CCTV. CCTV
has agreements with COMCOR which grant it exclusive access to the Moscow Fiber
Optic Network (MFON), which was built and is operated by COMCOR. This access
allows CCTV to build its "last mile" access. At its formation in April 2000,
CCTV started with a built-out network of approximately 89,000 homes and
businesses which it leased from COMCOR. As of June 30, 2003, approximately
42,000 additional homes have been passed and plans have been drawn and work
begun to build out approximately 65,000 additional homes in the Central Administrative
Region of Moscow. The build out of these additional homes is expected to cost
approximately $3.8 million. The build-out of the network in this region will
also involve CCTV's leasing from COMCOR of "secondary nodes", which represent
the switching point of the signal from the MFON to CCTV's coaxial link to the
homes and businesses. This buildout of
the access network to nearly 200,000 homes will involve the leasing of up to
302 secondary nodes, at a monthly lease cost of $350 per secondary node, which
will be paid for by CCTV at the maximum rate of 20% of CCTV's television
service revenues through 2005. Provisions of the agreements between CCTV and
COMCOR for these leasing services allow for settlement in our Common Stock of
up to $1,500,000 of any deficiency between the amount invoiced by COMCOR and
the amounts paid by CCTV by March 31, 2006 using a price of $6.25 per share of
our Common Stock as the basis for determining the number of shares that may be
issued. CCTV has plans to reduce up to 63 of the 191 secondary nodes leased in
certain areas to make the cost structure of the network more efficient to
reduce this element of operating costs. Through
this access network, CCTV delivers cable television and Internet access
services to its customers on a tiered-package basis, as follows: 5
As of June 30, 2003, CCTV had approximately 48,000 subscribers signed up
for its terrestrial cable television services, which gives the subscriber
access to channels generally available to residents using rooftop antennas, at a monthly approximate cost to active
subscribers of approximately $1. Approximately 4,000 of these subscribers are
signed up for premium cable services at an average monthly cost to active
subscribers of approximately $9.60. Approximately 6,800 of the subscribers have
signed up for high-speed Internet access services at an average monthly cost to
active subscribers of approximately $20. At any given time, approximately 4% of
terrestrial customers, 30% of premium television subscribers and 22% of
Internet subscribers have deactivated service that may or may not result in
eventual reactivation at the election of the customer. CCTV monitors
deactivations and deletes subscribers from its count of total contracts once it
confirms or it becomes apparent that the customer is not likely to reactivate
service. As
of June 30, 2003, CCTV remains financially dependent upon outside sources of
capital, primarily the scheduled investments that have been made and are
committed to be made by our Company, to meet its operating expenses and access
network construction plans. Without the
capital to be provided to CCTV pursuant to the COMCOR Agreement, and the
forecasted growth in revenues, CCTV may not be able to continue as a going
concern. Employees At June 30, 2003, CCTV had 204 employees and 33 independent contractors
for sales and 31 independent contractors for installation. CCTV also utilizes outside organizations to
accomplish nearly all of its access network buildout. Executive Officers The Executive Officers of CCTV are as follows: Name Age Position Officer Since Michael Silin 46 General Director 2001 Nina Plastinina 42 Finance Director 2000 Sergey Berezikov 48 Technical Director 2000 Dr. Silin joined CCTV
in April 2000 and was appointed General Director in July 2001. From 1995 until 2000, Dr. Silin was Deputy
General Director of COMCOR. He is a
graduate of the Moscow Aviation Institute and holds a PhD in digital
technology. Ms. Plastinina joined
CCTV in November 2000 as Finance Director.
Prior to joining CCTV, she was
Deputy Finance Director for TeleRoss (Golden Telecom), Finance Director for
Telecommunications of Moscow (Global Telesystems Group) and Chief Accountant
for Sprint Group (Global One). Ms.
Plastinina graduated from Moscow Chemical Engineering Institute, and received a
post graduate degree in Economics, Marketing and Management from Moscow
Technical University. Mr. Berezikov has
served as Technical Director of CCTV since April 2000. He is responsible for network development
and maintenance. Prior to joining CCTV
Mr. Berezikov was a Head of Department at COMCOR, and a professor at Moscow
Physical Engineering Institute. He is a
graduate of the Moscow Physical Engineering Institute and holds a PhD degree in
microelectronics. Properties CCTV leases approximately
1,858 square meters of office space and 199 square meters of warehouse and
storage space from IAS. In addition,
approximately 412 square meters of warehouse space and 70 meters of sales
offices space are leased from unaffiliated parties at other locations in
Moscow. CCTV believes these facilities
are adequate for its current and foreseeable operations. 6
Selected Financial Data Year ended December 31, 2002 2001 2000 Net sales $ 1,941 $ 1,200 $ 359 Cost of revenues 3,691 3,099 1,611 Net loss (4,858) (3,704) (3,599) Loss from
continuing operations per common share - - - Depreciation and
amortization 1,751 1,365 762 Total assets 34,510 17,780 19,893 Long-term
obligations - - - Stockholders'
equity 29,542 12,025 15,729 Management's Discussion and Analysis of Financial Condition and Results
of Operations CCTV
is an early stage venture in Moscow, Russia which is building a "last mile"
network from the Moscow Fiber Optic Network ("MFON") to provide broadband
services such as cable television, Internet access, high-speed data
transmission and IP telephony. 2002
Compared to 2001 During
the year ended December 31, 2002, CCTV reported a loss of $4,858,000 on
revenues of $1,941,000. This compares to it results for the year ended December
31, 2001 in which it reported a loss of $3,704,000 on revenues of $1,209,000. Revenues Revenues
for the year ended December 31, 2002 were 61.8% higher than the revenues of the
prior year primarily due to an increase in the number of subscribers for CCTV's
cable television and Internet access services. At the end of 2002, CCTV had
approximately 42,101 subscribers for the transmission through its network of
terrestrial television channels, and it had 4,869 subscribers for its Internet
access services. This compares to its subscriber base at the end of 2001 at
which time it had approximately 24,100 subscribers for the terrestrial
television transmission access services and 2,018 subscribers for its Internet
access services. Accordingly, revenues
from subscription services increased 105.9%, from $663,000 in 2001 to
$1,365,000 in 2002. Revenues
from connection fees and the sale or lease of equipment, which generally have
no significant gross margins, totaled $481,000, or 24.8%% of revenues during
2002, while such revenues totaled $472,000, or 39.3% of total revenues during
2001. Although
CCTV remains in the early stage of its subscriber growth, the change in mix of
its revenue base is reflective of the growth in recurring monthly revenues from
subscribers. Cost
of Revenue Cost
of revenue, including the amortization of intangible assets, during 2002
totaled $3,691,000, which resulted in negative gross margin of $1,750,000, or
90.2% of sales. Excluding the amortization of the intangibles, gross margin would
have been a negative $679,000 or 35.0% of sales. During 2001, cost of revenue
totaled $3,099,000, which resulted in negative gross margin of $1,899,000, or
158.3% of sales. Excluding the amortization of the intangibles, gross margin
would have been a negative $804,000, or 67.0% of sales. The decrease in the
negative gross margin was due primarily to the growth in subscription service
revenues against a high proportion of fixed operating costs. Offsetting
the improvements in the gross margins was an increase in charges from COMCOR
for the cost of signal delivery, data network services and Internet traffic by
$337,000 from $546,000 to $883,000. This increase was comprised of an increase
of $196,000 due to a change in the billing in August 2002 for the lease of
secondary nodes, which increased the monthly charges from approximately $24,000
to nearly $67,000. In addition, Internet traffic charges more than doubled from
$80,000 to $169,000, the MFON service charges increased from $23,000 to $50,000
based on the growth in subscribers, and lease of channels charges increased
approximately 18% from $138,000 to $163,000. 7
Operating
Expenses Operating
expenses totaled $3,210,000 during 2002, which is a 0.2% increase from the
$3,202,000 of such costs incurred during 2001, as CCTV tried to manage its
initial growth without a commensurate increase in administrative costs.
Depreciation expense increased by $409,000 from both purchased and contributed
fixed assets, but this increase was largely offset by the savings from reduced
employee headcount and the absence of a severance payments paid to a former
CCTV executive in 2001. Equity
in Losses of Unconsolidated Subsidiary In
2002, CCTV recorded its equity in the losses of IAS as a result of a
contribution of IAS shares to CCTV from COMCOR in July 2002 to increase its
ownership of IAS from 19.1% to 41.7%, and accordingly, CCTV switched from
accounting for this investment using the cost method to using the equity
method. For the five month period ended December 31, 2002, CCTV recorded a
$95,000 loss from its equity interest in IAS's results of operations for the
period. Income
Tax Benefit/Expense CCTV
recorded an income tax benefit of $283,000 during 2002, as compared to income
tax benefit of $1,367,000 for 2001. The income tax benefit for 2001 included an
adjustment to reflect a lower tax rate of 24% for deferred tax items, primarily
the amortization of the intangible assets. LIQUIDITY
AND CAPITAL RESOURCES At
December 31, 2002, CCTV had $91,000 of cash, which represented a decline of
91.9% from the $1,118,000 of cash which it had as of the prior year end.
Operating activities during 2002 consumed $2,792,000 of cash, primarily from
the net loss net of depreciation, and investing activities used $1,595,00
primarily from amounts expended to increase its access network. During 2002,
CCTV received a $5 million capital contribution from MBC to help meet its cash
needs and to repay loans made by MBC in the prior year. Additional loans
extended by MBC later in 2002 and deferrals of payments of amounts owed to
COMCOR allowed CCTV to continue its operations. In May 2003, we invested $3.5
million in CCTV pursuant to agreements under which, subject to the approval of
out stockholders, we will acquire 100% of the outstanding stock of CCTV through
the CCTV and MBC Share Acquisitions.
Pursuant to these agreements, we committed to making additional cash
contributions totaling $2.5 million through August 2004, and we also expect to
contribute all or part of an additional $5.8 million of capital through March
2005. These agreements also call for COMCOR to convert certain of CCTV's
liabilities to COMCOR into CCTV equity prior to the sale of that equity to us,
to reduce certain charges for CCTV's use of its MFON and to allow CCTV to limit
payments for the lease of secondary nodes to 20% of television service revenues
it generates through December 2005. While the provisions of these agreements
will greatly improve CCTV's cash flow and liquidity, CCTV remains dependent
upon outside sources of capital and on the growth of its revenues to be able to
continue the build-out of its network and to meet its operating expenses. Supplementary
Information (all amounts in thousands) 2003
Quarterly Financial Data March
31, Net sales $ 720 Gross profit (459) Net loss (1,255) 2002
Quarterly Financial Data March
31, June
30, September
30, December 31, Total Net sales $ 435 $ 430 $ 443 $ 633 $ 1,941 Gross profit (428) (432) (439) (451) (1,750) Net loss (1,113) (1,047) (1,252) (1,446) (4,858) 2001
Quarterly Financial Data March
31, June
30, September
30, December
31, Total Net sales $ 232 $ 262 $ 294 $ 412 $ 1,200 Gross profit (504) (498) (426) (471) (1,899) Net loss (1,253) (1,263) (773) (953) (4,242) 8
SELECTED FINANCIAL DATA Andersen Group, Inc. Years
Ended February 28/29 2003 2002 2001 2000 1999 Interest
income and other income (loss)1 $ 914 $ 590 $ 698 $ 1,262 $ (3,237) Loss
from continuing operations1 (2,050) (1,700) (1,860) (990) (4,173) Net
(loss) income (446) 528 (1,623) (987) (3,080) (Loss)
income applicable to common shareholders (728) 242 (1,927) (1,349) (3,465) Income
(loss) from continuing operations per (Loss)
income per common share, basic and diluted (0.35) 0.12 (0.94) (0.70) (1.80) Depreciation,
amortization and interest accretion 293 1,581 1,589 1,466 1,434 Total
assets 19,045 25,269 33,076 37,118 37,119 Total
debt 2,081 4,959 13,247 15,056 13,857 Stockholders'
equity 13,102 13,751 13,448 15,262 16,429 Book
value per common share $4.57 4.90 4.70 5.59 6.18 1 Interest income and other income/loss, and losses
from continuing operations exclude the results of operations of the Company's
Electronic segment as a result of its sale in March 2002. Years
Ended December 31, 2002 2001 2000 1999 1998 Net loss before equity in losses of Equity in losses of CCTV (2,429) (1,852) (1,814) - - Net loss (2,848) (2,685) (2,918) (809) (944) Total assets 9,460 12,393 15,210 248 Stockholders' equity (deficit) 9,408 12,256 14,391 (1,034) ComCor-TV Years
Ended December 31, 2002 2001 2000 Net sales $ 1,941 $ 1,200 $ 359 Cost of revenues 3,691 3,099 1,611 Net loss (4,848) (3,704) (3,599) Loss from continuing operations per common share - - - Depreciation and amortization 1,751 1,365 762 Total assets 34,510 17,780 19,893 Long-term obligations - - - Stockholders' equity 29,542 12,025 15,729 ANDERSEN GROUP - PRO FORMA INFORMATION Historical Pro Forma Sales - fiscal
year ended February 28, 2003 $ - $ 1,941 Cost of revenues - 3,691 Net loss from
continuing operations (728) (6,570) Net loss from
continuing operations per common share (1.11) (0.76) Depreciation and
amortization 293 2,044 Total assets -
May 31, 2003 18,410 - Long-term
obligations 2,081 2,081 Stockholders'
equity 12,618 38,656 Book value per
share 4.34 4.09 FINANCIAL INFORMATION See page 40 of this proxy for detailed pro
forma financial information as of May 31, 2003, for the three month period
ended May 31, 2003 and for the year ended February 28, 2003.
The CCTV
Share Acquisition (see page 14) and The MBC
Share Acquisition (see page 22) General The Company has entered
into agreements to acquire 100% control of CCTV through certain defined cash
and asset contributions and through the issuance of shares to COMCOR for its
equity ownership of CCTV and to the stockholders of MBC who own the 75% of MBC
that we do not presently own. MBC presently owns approximately 41.0% of the
outstanding equity interest of CCTV. In May 2003, we entered
into agreements with COMCOR to acquire its equity interest in CCTV, including
the additional equity interest it will acquire from the conversion of its
accounts receivable from CCTV as of December 31, 2002 and certain additional
receivables for services to be provided in 2003 into shares of CCTV's common
stock. In exchange for such equity in CCTV, we made a cash capital contribution
of $3.5 million in May 2003 and, upon the approval of our stockholders, at the
closing of the transaction we will issue 4,220,879 shares of our common stock
to COMCOR, and will also commit to making certain cash capital contributions
totaling $2.5 million into CCTV, including $1 million within 20 days of the
closing. We will also have the option of contributing additional cash or defined
assets totaling approximately $5,829,000 to CCTV before March 31, 2005. To the
extent that such additional contributions to CCTV's equity are not made, at
that time we will be obligated to issue up to an additional 477,994 shares of
our common stock ("make-up" shares) to COMCOR. The amount of such "make-up"
shares was negotiated based upon our and MBC's collective inability to make
equity contributions to CCTV in the amounts originally agreed to in January
2000, and as subsequently updated and revised in the agreements entered into
with COMCOR in May 2003. Concurrently with the
closing of the CCTV Share Acquisition with COMCOR, we will also issue up to
2,250,000 shares of our common stock to the MBC stockholders in exchange for
the 75% of MBC that we do not already own. In addition to its equity interests
in CCTV, MBC also has assets including loans and accrued interest receivable to
CCTV, advances to CCTV and shares of IAS, all of which we expect to contribute
to CCTV's equity capital after the acquisitions, and accordingly, reduce the
number of "make-up" shares that are
expected to be issued by approximately 103,000 shares. Further reductions in the number of
"make-up" shares that may be issued can be achieved from the issuance
of our common stock to COMCOR to settle amounts that may be owed to COMCOR by
CCTV from the deficiency in the amounts paid as compared to the amounts
invoiced for the lease of signal switching stations, or secondary nodes or from
the contribution of cash as further described on pages 16 and 23. Immediately after the
consummation of the CCTV and MBC Share Acquisitions, the approximate ownership
structure of the Company will be as follows, assuming no other transactions
occur that change the number of shares of our Common Stock outstanding
including, but not limited to, the conversion of our Class A Cumulative
Convertible Preferred Stock (the "Preferred Stock") and our 10 1/2%
Convertible Subordinated Debentures due 2007 (the "Debentures") into
shares of our Common Stock, grants of restricted stock or the exercise of stock
options which are presently outstanding: Current Andersen
stockholders 2,099,908 24.4% COMCOR 4,220,879 49.1% MBC stockholders 2,250,000 26.1% Other parties 33,879 0.4% 8,604,666 100.0% Our officers, directors
and related parties are expected to have beneficial ownership or voting control
over an estimated 2,005,015 shares of our Common Stock, which will represent
approximately 23.3% of the total shares expected to be outstanding immediately after
the consummation of the CCTV and MBC Share Acquisitions. 10
These estimated amounts exclude any shares
that may be issued or issuable upon conversion of Preferred Stock, from the
grant of shares of our Common Stock pursuant to the 2003 Restricted Stock Plan
or upon the exercise of existing stock options or stock options that may be
granted pursuant to the 2003 Stock Option Plan. CCTV provides a "last mile solution," based on hybrid fibre-coaxial
technology, for cable TV, high speed Internet access, data transmission and
voice services to residential and business customers in Moscow, Russia. CCTV is
licensed to provide these services to up to 1.5 million subscribers in Moscow
(44% of total estimated households). Under a 50-year Services Agreement with COMCOR,
CCTV has exclusive rights to utilize the Moscow Fibre Optic Network ("MFON")
backbone for the provision of its services in a defined area, with an
additional right of first refusal to utilize the MFON to access the remaining
approximately 1.8 million homes outside this area. Currently, CCTV is marketing
cable TV and Internet services to more than 130,000 homes it has accessed in
the districts of Chertanovo and Khamovniki and certain areas of the Central
Administrative Region of Moscow ("CAR"). It is also in the process of expanding the build-out of its
access network in the CAR and has specific plans to expand its access network
of homes to approximately 200,000 by March 2004. Reasons
for the CCTV and MBC Share Acquisitions (see page 15) Our Board of Directors
believes that it is in the best interest of our Company and our stockholders to
acquire and obtain control of CCTV through the CCTV and MBC Share Acquisitions.
In doing so, CCTV will be a wholly-owned subsidiary whose financial statements
will be consolidated into our consolidated financial statements. This will
improve the visibility of the results of operations and financial condition of
CCTV and also provide corporate governance advantages, with our Board of
Directors having sole influence over CCTV's operations. We also expect that
this improved corporate structure will be beneficial if we seek additional
sources of equity or debt capital to continue the planned expansion of CCTV's
operations. Our Board believes that
CCTV presents a unique and potentially rewarding investment opportunity. CCTV
is an early stage operator of a cable television and Internet access system in
Moscow, Russia. At present, with the capital provided to it by COMCOR and MBC,
CCTV has built its access network from COMCOR's Moscow Fiber Optic Network
("MFON") to approximately 130,000 homes and businesses, and to-date, it has
signed nearly 49,000 of them for its terrestrial (basic) level television
services, of which nearly 4,000 have signed for premium cable television services.
In addition, approximately 6,800 customers have signed for Internet access
services. We believe that, with the capital we provided to CCTV in May 2003,
and the defined amount of additional capital to be provided at the time of the
closing and thereafter, CCTV's access network can be expanded to nearly 200,000
homes and businesses by the first quarter of 2004, and significant subscriber
growth can follow. Our Board also believes that growth beyond that which can be
financed through identified sources of capital and through internally generated
funds can be achieved through the attraction of additional equity or debt
financing. We hope that the progress of CCTV's operations will enable us to
attract such additional capital on terms that will prove to be beneficial to
our current stockholders. The CCTV and MBC Share
Acquisitions also involve risks, including the risks associated with diluting
the ownership of current stockholders of our Company and of concentrating the
assets and operations of the Company in an early stage company that is located
in a foreign country. In addition, our
Board of Directors has not relied on an outside opinion as to the fairness of
the CCTV and MBC Share Acquisitions, so the overall transactions, including the
element of the MBC Share Acquisition which involves the issuance of shares of
our Common Stock to members of our Board of Directors and management, may be
considered as benefiting certain insiders to a greater degree than the other
stockholders of the Company. Related
Parties and Related Party Transactions (see pages 20 and 26) Each of the CCTV and MBC
Share Acquisitions involves the issuance of stock to related parties. In addition to being a
significant stockholder of CCTV, which will be converted into an approximately
49% equity interest in the Company, COMCOR is also a major vendor to CCTV in
providing access to its 6,000 km. MFON and leasing secondary nodes, at which
the signals being sent switch from the MFON to CCTV co-axial 11
fibre network. As
part of the agreements reached in May 2003, COMCOR agreed to discontinue an
MFON utilization fee to CCTV effective March 31, 2003, which had been charged
at the rate of 10% of CCTV's television service revenues, and to limit CCTV's
payment obligations for the lease of secondary nodes to 20% of television
service revenues. COMCOR will continue to invoice CCTV at the rate of $350 per
month per secondary node, but, to better manage CCTV's cash flow, will allow
payments to be limited as indicated, and it will allow up to $1,500,000 of the
cumulative shortfall between the amounts billed and the amounts paid to be
settled with shares of our Common Stock using a price of $6.25 per share to
determine the number of shares to be issued. Our management and
members of our Board of Directors currently own or control approximately 9,380
shares or 46.9% of MBC's outstanding stock. Accordingly, in the exchange of our
Common Stock for MBC Stock, these individuals will receive approximately
1,405,800 shares of our Common Stock, which will represent approximately 16.4%
of our issued and outstanding Common Stock immediately after the transactions
close. OUR BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE ISSUANCE OF COMMON
STOCK PURSUANT TO PROPOSAL 1: THE CCTV SHARE ACQUISITION AND PROPOSAL 2: THE
MBC SHARE ACQUISITION. Currently, we do not have a sufficient number of
authorized and unissued shares of Common Stock to effect both of the CCTV and
MBC Share Acquisitions. As of the date of this Proxy Statement, 3,337,038
shares of our Common Stock are authorized and remain available for issuance
after giving effect to the issuance of shares of Common Stock upon the exercise
or conversion of our currently outstanding stock options, convertible Preferred
Stock and Debentures. If both of the CCTV and MBC Share Acquisitions are
completed as proposed, excluding any contingent shares to be issued pursuant to
the CCTV Share Acquisition, we may be required to issue up to 6,470,879 shares
of our Common Stock to acquire the outstanding equity of CCTV. Accordingly, we
would like to amend our certificate of incorporation so as to increase the
number of authorized shares of our Common Stock from 6,000,000 to 15,000,000. This will also provide us with the ability
to issue additional shares pursuant to the Restricted Stock Plan and the
Incentive Stock Option Plan which you are also voting on, and to issue shares
for future equity offerings to raise additional capital for the Company to help
meet funding obligations and opportunities in CCTV and corporate level cash
flow requirements, in each case without seeking additional stockholder
approval. Pursuant to Delaware law, holders of at least a
majority of the outstanding shares of our Common Stock at the record date must
approve the amendment of our Certificate of Incorporation to effect the Share
Increase Amendment. OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF OUR COMMON STOCK. 12
Pursuant to Delaware law,
holders of at least a majority of the outstanding shares of our Common Stock at
the record date must approve the amendment of our Certificate of Incorporation
to effect the Cumulative Voting Amendment. OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
"FOR" THE APPROVAL OF THE AMENDMENT TO OUR CERTIFICATE OF
INCORPORATION ADOPTING THE CUMULATIVE VOTING RIGHTS FOR ELECTIONS OF OUR BOARD
OF DIRECTORS. Name Change Amendment (see page 33) Our
historical activities have been principally in the areas of manufacturing and
investments, which until March 22, 2002 had been represented by our investment
in The J.M. Ney Company ("JM Ney").
However, effective on that date, we sold substantially all of the
operating assets and certain liabilities of JM Ney. Currently, our primary
investments are a 25% equity interest in MBC which holds a 50% voting interest
in CCTV, and our recent $3.5 million direct investment in CCTV. As described in
Proposals 1 and 2 of this Proxy Statement, we are seeking to acquire control
over the remaining equity interest in CCTV that we do not currently directly or
indirectly own. We have determined that
our name no longer reflects the business in which we are presently engaged and
in which we are proposing to expand our focus.
The name Moscow CableCom Corp. more clearly identifies our Company as a
participant in the cable industry in Russia and improves our marketing and
capital fundraising efforts. If you approve the Name Change Amendment, we will
cause the trading symbol for our Common Stock to be changed from "ANDR" to a
symbol more readily associated with our new name. Pursuant to Delaware law, holders of at least a
majority of the outstanding shares of our Common Stock at the record date must
approve the amendment of our Certificate of Incorporation to effect the Name
Change Amendment. OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL OF THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO CHANGE THE
NAME OF THE COMPANY TO MOSCOW CABLECOM CORP. The Restricted Stock Plan (see page 34) The Stock Option Plan (see page 36) Our Board believes that
compensation in the form of our shares of Common Stock or options to purchase
shares of our Common Stock in an important element in attracting and retaining
key employees, directors and consultants who can contribute to our Company's
growth and success. Therefore, on July
14, 2003, our Board adopted the 2003 Restricted Stock Plan and the 2003 Stock
Option Plan (the "Plans"). We
are seeking approval of the adoption of the Plans by our stockholders. Our Company currently has no stock
compensation plans. The Restricted Stock Plan will permit our Compensation Committee to make
awards of restricted stock of up to 330,000 shares of our Common Stock. Restricted stock awards give the recipient
shares of our Common Stock, but the shares may be forfeited back to the Company
if the recipient does not remain an employee, director or consultant for the
period of time specified in the award or fails to meet other criteria specified
in the award. The Stock Option Plan will permit our Compensation Committee to grant
Incentive Stock Options and Non-Qualified Stock Options to purchase up to
670,000 shares of our Common Stock.
Options give the employee, director or consultant to whom they are
granted the right to purchase a certain number of shares of our Common Stock at
a set price for a specified period of time.
Incentive Stock Options may be granted only to employees and provide
certain tax advantages compared to Non-Qualified Options. Pursuant to Delaware law, the vote of the holders of a majority of the
shares of Common Stock present and voting at the Special Meeting is required to
approve the Plans. OUR BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF EACH OF THE RESTRICTED
STOCK PLAN AND THE STOCK OPTION PLAN.
DISCUSSION OF PROPOSALS PROPOSAL 1: General Our Board of Directors has approved a Stock
Subscription Agreement which provides for our acquisition from COMCOR of all
the issued and outstanding capital stock of CCTV to be owned by COMCOR. As of the date of this Proxy Statement,
COMCOR owns approximately 52.7% of CCTV's outstanding common stock, we own
approximately 6.3% of CCTV's outstanding common stock as a result of the $3.5
million cash investment we made in May 2003 pursuant to the Stock Subscription
Agreement, and MBC owns the remaining 41.0% of the outstanding equity of CCTV,
which we are also seeking to acquire through the acquisition of all of the
capital stock of MBC that we do not currently own. We have agreed to issue 4,220,879 shares of our
Common Stock to COMCOR and be contingently liable for the issuance of up to
477,994 additional shares of our Common Stock if certain defined capital
contributions to CCTV are not made by the Company by March 31, 2005, as
consideration for the acquisition of the CCTV shares owned or to be owned by
COMCOR. Pursuant to applicable NASD rules, described in more detail below, we
seek your approval to issue the shares of Common Stock as consideration in the
CCTV Share Acquisition. Our Common Stock is quoted on the NASDAQ National
Stock Market. NASD Rule 4350(i)(1)(C) requires stockholder approval of the
issuance of our Common Stock in connection with the CCTV Share Acquisition
because: The number of shares of our
Common Stock to be issued to COMCOR will be in excess of 20% of the number of
shares or of our Common Stock outstanding prior to the issuance. Parties to the CCTV Share Acquisition COMCOR COMCOR is a Russian company founded in 1992.
Since that time COMCOR built Moscow Fibre Optic Network ("MFON") to
offer a broad range of telecommunication services. MFON construction has the
status of a city target program and is backed up by several resolutions of the
Mayor and orders of the Government of Moscow. MFON is the backbone telecommunications
network providing communication services to Governmental bodies, municipal
authorities and state entities of Moscow (Moscow City Council, the Mayor's
Office, the Prefectures, Moscow State Property Committee, Moscow Land
Committee, Tax Ministry, Tax Police, the Prosecutor's office, etc.). COMCOR
also has banks, exchanges, news agencies, scientific and manufacturing
entities, TV/radio broadcasting companies and other commercial structures as
clients. Currently MFON is one of the largest
metropolitan type networks covering the entire City of Moscow and the Moscow
region. It has interfaces and gateway servers with networks of all other city
operators, including Moscow City Telephone Network, Electrosvyaz of Moscow
region, RTK-Internet, Rostelecom, Aerocom, Telmos, Comstar, Sovam Teleport,
Rosnet, Rospak, Infotel, Relcom, Demos, DirectNet and others. The technical basis of MFON is SDH (Synchronous
Digital Hierarchy) technology and equipment of STM-4 and STM-16 levels and ATM
(Asynchronous Transfer Mode) with the group speed of data transfer of up to 2.5
Gbit/s. The network has a radial-ring structure accounting for the topology of
Moscow and the flow matrix of projected 14
COMCOR has over 650 employees and for the year ended
December 31, 2002, it reported revenues of approximately $41 million. In
December 2002 the Moscow registration chamber issued a certificate of
registration to OAO Electronic Moscow.
The decision to found "Electronic Moscow" was made by the City
in the summer of 2002. According to the
Mayor's Order, the charter capital of the company is 4.9 billion rubles. City assets were also contributed including
100% of the shares of Mostelecom, a city owned antenna maintenance company; the
blocking stake in COMCOR and other related TV/media assets. Yuri Pripachkin, formerly General Director
of COMCOR, has been named General Director
of Electronic Moscow and Valentine Lazutkin, formerly Chairman of
COMCOR, has been named Chairman of Electronic Moscow. According
to the Moscow government decree of August 6, 2002, the Moscow government will
provide a budget for Electronic Moscow and establish conditions to encourage
foreign direct investment in Electronic Moscow. According to published information, Electronic Moscow itself will
encourage foreign direct investment in CCTV and other providers in order to provide
last mile access to the COMCOR network. Business of CCTV A description of CCTV's business and financial data, including
summarized pro forma financial information relating to the effects of the CCTV
and MBC Share Acquisitions is included in pages 9 through 14 and in the pro
forma financial information that begins on page 45. Reasons for the CCTV Share Acquisition Our
Board of Directors believes that it is in the best interest of our Company and
our stockholders to acquire full ownership control of CCTV. To accomplish this, we must acquire the
equity interest in CCTV currently held by and to be acquired by COMCOR, and
also complete the MBC Share Acquisition as discussed in Proposal 2 to gain
control of the CCTV equity presently owned by MBC. Our Board viewed pursuing full ownership of CCTV and investing in
its growth plans would represent a more focused business plan that would have a
greater chance of enhancing our stockholders' value than dividing our resources
between our existing investment in CCTV through our 25% ownership stake in MBC
and some other unidentified opportunity.
Each of the CCTV Share Acquisition and the MBC Share Acquisition is
dependent upon the other being completed. Our
Board of Directors has approved the terms of the Stock Subscription Agreement
which will result in the CCTV Share Acquisition. Our Board of Directors' decision to approve the Stock
Subscription Agreement was based on a number of factors including, but not
limited to, the following:
Further
dilution to our stockholders may occur if any of the up to 477,879
"make-up" shares are issued to COMCOR, or if prior to March 31, 2005
our Company chooses to settle any accrued but unpaid amounts due to COMCOR from
CCTV for secondary nodes services through the issuance of up to 240,000 shares of
our Common Stock. Further
dilution to the existing stockholders may also occur as a result of an increase
in the potential number of shares that may be issuable as a result of the
conversion of our Preferred Stock into our Common Stock. The terms of the
Preferred Stock provide the holders with certain anti-dilution rights. At
present, each share of Preferred Stock is convertible into 1.946 shares of our
Common Stock. The 16
issuance of our Common Stock to COMCOR and the MBC stockholders will
increase the conversion ratio to between an estimated $2.40 and $3.13, based on
the market price for our Common Stock on the closing date being between $4.00
and $6.00 per share. This would result in the issuance of between an
estimated 451,200 and 588,500 additional shares of our Common Stock if all of
the shares of our Preferred Stock were converted. Determination of the Purchase Price Pursuant to the terms of the Stock Subscription
Agreement, we agreed, subject to the conditions set forth therein, to acquire
the equity interest in CCTV to be held by COMCOR. In exchange for the CCTV
shares to be received from COMCOR, we will deliver at the closing of the CCTV
Share Acquisition (the "CCTV Closing") 4,220,879 shares of our Common Stock.
Based upon the price of our Common Stock at the time of the signing of the
Subscription Agreement with COMCOR, approximately $4.00 per share, the total
consideration we are paying for the CCTV shares at the CCTV Closing pursuant to
the CCTV Share Acquisition will equal approximately $16,884,000. The determination of the purchase price to be paid in
the CCTV Share Acquisition was based upon extensive negotiations conducted
primarily by Mr. Baker with representatives of COMCOR. In negotiating the pricing terms of the CCTV
Share Acquisition, we considered many factors including, but not limited to: 17
In view of the wide variety of factors considered,
our Board of Directors did not find it practicable to quantify or otherwise
assign relative weight to the specific factors considered. Our Board of
Directors believes that the risks associated with the CCTV Share Acquisition
are outweighed by the potential benefits of the transaction. As a result, our Board of Directors agrees
that the CCTV Share Acquisition and the consummation of the CCTV Share
Acquisition are fair to, and in the best interests of, our Company and our
stockholders. The Stock Subscription Agreement Although we have summarized the material terms of the
Stock Subscription Agreement, the summary does not purport to be complete and
is subject in all respects to the specific provisions of the Stock Subscription
Agreement. We encourage you to carefully read the entire Stock Subscription
Agreement, which we have included as Annex
A to this Proxy Statement and is incorporated herein by reference. Conditions to the CCTV Closing As
provided in the Stock Subscription Agreement, the obligation of the Company and
COMCOR to consummate the CCTV Share Acquisition is subject to (i) the approval
of our stockholders; (ii) the approval of the Russian Anti-Monopoly Committee;
(iii) the consummation of the MBC Share Acquisition; and (iv) the approval of
and 18
adoption of the Cumulative Voting Amendment. In addition, to enable us to be able to issue the number of
shares of our Common Stock to COMCOR and the MBC stockholders to consummate the CCTV Share Acquisition and the MBC Share Acquisition, we will need to increase
the number of shares of our Common Stock that we are authorized to issue, which
requires your approval as set forth in Proposal 3. Post-Closing Covenants We and COMCOR have agreed to
several post-closing covenants, including the following; Indemnification Pursuant
to the Stock Subscription Agreement, COMCOR agreed to indemnify us against
certain losses due to breaches of the representations, warranties, covenants or
other agreements made by COMCOR in the COMCOR Transaction Documents, as well as
certain losses arising out of our securities filings where such losses are
based on information provided to us by COMCOR for inclusion in our filings. Termination of the Stock Subscription Agreement Either
we or COMCOR may terminate the Stock Subscription Agreement prior to the
closing of the CCTV Share Acquisition (i) by mutual written consent; (ii) in
the event that the other party has breached any material representation,
warranty or covenant contained in the Stock Subscription Agreement in any
material respect, or (iii) if we have not obtained the approval of our
stockholders within 150 days of our having contributed $3.5 million into CCTV,
which based on our May 30, 2003 funding of such contribution, would be October
27, 2003. Other Agreements in Connection with the CCTV Share
Acquisition In addition to the Stock Subscription Agreement, we
entered into or will also enter into the following agreements in connection
with the CCTV Share Acquisition, including: 19
Certain Related Parties and Related Party Transactions Yuri Pripachkin is Chairman of the Board of Directors
of CCTV and COMCOR and is a former director of our Company. Mr. Pripachkin owns
directly and indirectly a controlling interest in COMCOR. COMCOR currently owns
approximately 50% of the equity interest of CCTV. As of the date of this Proxy
Statement, COMCOR is a party to the following agreements with CCTV: We anticipate continuing each of the foregoing
agreements following the consummation of the CCTV Share Acquisition. Accordingly, Mr. Pripachkin may indirectly
benefit economically from the proposed CCTV Share Acquisition. Appraisal Rights If you choose to vote against Proposal 1, Section 262
of the Delaware General Corporation Law does not afford you any appraisal
rights. Regulatory Approval The only regulatory approval required for our acquisition
of the CCTV shares from COMCOR of which we are aware will be from the Russian
Federation Ministry of Anti-monopoly Policy.
The Ministry's approval process generally takes thirty days to complete.
COMCOR does not expect that there will be difficulties in obtaining such
approval, and COMCOR has indicated to us that such approval is expected to be
granted prior to the Special Meeting, although there can be no assurance that
this will occur. Accounting Treatment In accordance with generally accepted accounting
principles, we expect that the CCTV Share Acquisition will be accounted for
using the purchase method of accounting. Accordingly, the purchase price will
be allocated based upon the estimated fair values of CCTV's net assets at the
date of the acquisition. Any excess of the purchase price over the fair value
of the net assets acquired will be recorded as goodwill. 20
Material U.S. Federal Income Tax
Consequences The consummation of the CCTV Share Acquisition will
not have any material U.S. Federal income tax consequences to us or our
stockholders. We have not evaluated the
U.S. Federal income tax consequences, if any, to COMCOR or its stockholders. OUR BOARD RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL OF PROPOSAL 1. 21
PROPOSAL 2: General We intend to enter into an Exchange Agreement with
the MBC Stockholders which provides for our acquisition of the remaining outstanding
capital stock of MBC that we currently do not own. Pursuant to the terms of the Exchange Agreement, we
have agreed to issue up to 2,250,000 shares of our Common Stock. The issuance of our Common Stock to the MBC
Stockholders as consideration for the acquisition of the MBC shares shall be
based upon the exchange ratio described below. Pursuant to applicable NASD
rules and in connection with applicable Delaware law, described in more detail
below, we seek specific approvals relating to the MBC Share Acquisition. Stockholder Approval Requirements NASDAQ Our Common Stock is quoted on the NASDAQ National
Stock Market. NASD Rule 4350(i)(1)(C) requires stockholder approval of the
issuance of Common Stock in connection with the MBC Share Acquisition because: Delaware Law Since (i) our executive officers and directors have
equity interests in MBC and (ii) certain of our executive officers and
directors owe a fiduciary duty to both companies, we are also seeking the
approval of the MBC Share Acquisition by the holders of a majority of the
shares of our Common Stock present and voting at the Special Meeting which are
not controlled by our directors or executive officers, as provided by Delaware
144. As of the date of this Proxy
Statement, our directors and executive officers held approximately 16.7% of our
issued and outstanding Common Stock. If
Delaware 144 is complied with by obtaining this approval, it will mean that
this transaction is not void or voidable by reason of, or solely because of,
the equity interests in MBC of our executive officers. Our Board has not determined what action it
will take if approval under Delaware 144 is not obtained. Parties to the MBC Share Acquisition The MBC Stockholders The
MBC Stockholders are all the persons or entities who collectively own the 75%
of MBC not held by the Company and who the Company expects will tender their
shares in the MBC Share Acquisition. Our officers, directors and their
affiliates taken as a whole are among the MBC Stockholders and presently have a
beneficial interest in, or voting control of, approximately 62.5% of MBC's
issued and outstanding stock that is not currently owned by us. The overlapping interests of certain of our
stockholders and the MBC Stockholders are described in greater detail under the
heading, "Participation of Certain Related Parties in the MBC Share Acquisition"
(see page 26). While our officers,
directors and their affiliates have stated that they intend to tender their
shares, there can be no assurance that all the other MBC stockholders will
tender their shares. 22
MBC MBC is a Cyprus limited liability company formed in
1995 to act as a holding company for investments in Russian companies. While MBC's registered office is located in
Cyprus, its executive offices are located at our corporate headquarters at 405
Park Avenue, Suite 1202, New York, New York. At present, MBC's primary
investment is its approximately 41.0% shareholding in CCTV. MBC was capitalized with
approximately $20 million, of which $18 million was raised in 2000, and the
remaining portion was contributed prior to 2000. MBC's shareholders include the Company, parties affiliated with
the Company and a small number of investment funds and private investors. Our Chairman, President and Chief Financial
Officer also serve as MBC's President, Chairman and Chief Financial Officer,
respectively. MBC also has a note
receivable from CCTV and advances to CCTV in the aggregate amount of
approximately $825,000, and an approximately 1.8% ownership interest in IAS, a
Russian telecommunications company of which CCTV currently holds approximately
a 42% equity interest. To reduce the
number of contingent shares that may be issuable to COMCOR by March 31, 2005,
the Company intends to contribute such loan, advances and IAS stock to CCTV
after the closing of the CCTV and MBC Share Acquisitions. A description of CCTV's business and financial data,
including summarized financial data of our Company, MBC and CCTV is included in
9 through 14, and in the pro forma financial information that begins on page
45. Reasons for the MBC Share Acquisition Our
Board of Directors believes that it is in the best interest of our Company and
our stockholders to acquire the remaining equity interest in MBC that we do not
currently own. The MBC Share
Acquisition is part of our larger goal to obtain full ownership of CCTV. We cannot achieve this goal, and the CCTV
Share Acquisition discussed in Proposal 1 cannot be completed, unless we
complete the MBC Share Acquisition. Our
Board of Directors has approved the MBC Share Acquisition and the terms of the
Exchange Agreement. Our reasons for
supporting the consummation of the MBC Share Acquisition are substantially
identical to those for the CCTV Share Acquisition. We believe that the MBC
Share Acquisition, in concert with the CCTV Share Acquisition, will allow us to
improve our control over the management of CCTV and the execution of CCTV's
business plan. Moreover, we believe that the acquisition of CCTV in its
entirety will improve our ability to negotiate appropriate debt financing for
CCTV and to attract future financing for us and CCTV by increasing our market
capitalization and liquidity for our stockholders, as well as increase our
potential return on our investment in CCTV. Our
Board of Directors also considered a number of additional factors unique to the
MBC Share Acquisition including, but not limited to, the following: In
addition to the factors set forth above, in the course of its deliberations
concerning the MBC Share Acquisition, our Board of Directors consulted with our
management team. Our Board of Directors also considered a number of other
factors relevant to the MBC Share Acquisition including: 23
In
addition, our Board of Directors considered the fact that as a result of the
MBC Share Acquisition our directors and officers will receive up to 1,405,800
shares of our Common Stock, or approximately 62.5% of the consideration
provided in the MBC Share Acquisition.
In making this consideration, our Board of Directors also realized that
it would not be able to have its Independent Committee review this transaction
in a truly independent manner because each of the members of the Independent
Committee, as well as each member of our Board of Directors, has a direct or
indirect financial interest in this transaction. However, the Board did negotiate with independent shareholders of
MBC acting on behalf of MBC stockholders who are not affiliated with us, and it
used its own best judgment to ensure that its fiduciary responsibilities to our
unaffiliated stockholders were considered.
We have disclosed each board member's interest in MBC and the MBC share
acquisition, and we will mitigate the potential effects of this conflict of
interest by seeking that this transaction be approved by the affirmative vote
of a majority of the outstanding shares of our Common Stock not controlled by
our executive officers or directors, as provided by Delaware 144. Determination
of the Exchange Ratio Pursuant
to the terms of the Exchange Agreement, we agreed, subject to the conditions
set forth therein, to exchange 150 shares of our Common Stock for each MBC
share tendered by the MBC Stockholders. If the MBC Stockholders tender all of
their shares in the MBC Share Acquisition, we will issue an aggregate of
2,250,000 shares of our Common Stock.
Following the acquisition of all of the MBC Stockholders' shares, MBC
will be wholly-owned by our Company. Based upon the price of the Common Stock
at the time of the signing of the Subscription Agreement with COMCOR,
approximately $4.00 per share, the total consideration we are paying for the
MBC shares pursuant to the MBC Share Acquisition will equal approximately
$9,000,000. This would value all of MBC at approximately $12 million, and our
current investment in MBC at $3 million.
Our current investment in MBC has a book value of $1,797,000 as of May
31, 2003. The determination of the exchange ratio
used in the MBC Share Acquisition was based upon: 24
The value of MBC's investment
in IAS as provided for under terms of the CCTV Share Acquisition which will
give us a credit of approximately $286,000 toward contributions to CCTV to
reduce the number of potential "make-up" shares that may be issued to
COMCOR. The Board did not make a comparison of its exchange
offer to the MBC shareholders to the terms of the CCTV Share Acquisition. The MBC Share Acquisition involves the
acquisition of the CCTV equity owned by MBC and also additional assets which
are anticipated to be used to reduce certain of the contingent obligations we
may have under terms of the CCTV Share Acquisition. In addition, in considering the CCTV Share Acquisition, our Board
also considered the terms of the services provided to CCTV by COMCOR as an
element of the overall transaction.
Accordingly, although both transactions involve the acquisition of CCTV
shares, the terms of each are not necessarily comparable. In view of the wide variety of factors considered by
our Board of Directors, our Board of Directors did not find it practicable to
quantify or otherwise assign relative weight to the specific factors
considered. Our Board of Directors believes that the risks associated with the
MBC Share Acquisition are outweighed by the potential benefits of the
transaction. As a result, our Board of
Directors agrees that the MBC Share Acquisition and the consummation of the MBC
Share Acquisition are fair to and in the best interests of our Company and our
stockholders. The Exchange Agreement Although we have summarized the material terms of the
Exchange Agreement, the summary does not purport to be complete and is subject
in all respects to the specific provisions of the Exchange Agreement. We
encourage you to carefully read the entire Exchange Agreement, which we have
included as Annex D to this Proxy Statement and which is incorporated herein by
reference. Conditions to the MBC Closing As
provided in the Exchange Agreement, our obligation and the MBC Stockholders'
obligation to consummate the MBC Share Acquisition is subject to the
satisfaction or waiver of certain customary closing conditions in addition to
the following: 25
Post
Closing Covenants In addition to certain customary obligations, our
Company is obligated to make the capital contributions to CCTV which we are
committed to make pursuant to the CCTV Share Acquisition. Indemnification Pursuant
to the Exchange Agreement, the MBC Stockholders severally agree to indemnify us
against certain losses due to breaches of the representations, warranties,
covenants or other agreements made by the MBC Stockholders in the MBC
Transaction Documents, as well as certain losses arising out of our securities
filings where such losses are based on information provided to us by the MBC
Stockholders for inclusion in our filings. Termination of the Exchange Agreement The
Exchange Agreement may be terminated prior to the closing of the MBC Share
Acquisition (i) by mutual written consent of our Company and the representative
for the MBC stockholders which are Oliver R. Grace, Jr. and Francis E. Baker;
(ii) by our Company in the event that any MBC Stockholder has breached any
material representation, warranty or covenant contained in the Exchange
Agreement; or (iii) by the representative for the MBC stockholders in the event
that we have breached any material representation, warranty or covenant
contained in the Exchange Agreement. The Registration Rights Agreement In connection with the MBC Closing, we will enter
into a Registration Rights Agreement with the MBC Stockholders, the form of
which is attached to this Proxy Statement as Annex E. Pursuant to the terms of
the Registration Rights Agreement, we will grant the MBC Stockholders the right
to participate, subject to customary exclusions, in future Company initiated
registrations of our Common Stock with the Securities and Exchange Commission. Participation of Certain Related Parties in the MBC Share
Acquisition Our
officers, directors and their affiliates, taken as a whole, presently have a
beneficial interest in, or voting control of, approximately 46.9%of
MBC's issued and outstanding stock. This figure excludes the 25% equity
interest in MBC that we own. Accordingly, such officers, directors and
affiliates will receive in the aggregate approximately 1,405,800 shares of our
Common Stock in which they will have a beneficial interest or voting
control, or approximately 16.4% of the shares estimated to be outstanding
immediately after the Closing, Under
the terms of the MBC Share Acquisition, these officers, directors and their
affiliates would benefit economically from the MBC Share Acquisition by
increasing their respective ownership of shares of our Common Stock and
receiving the enhanced liquidity associated with our Common Stock, as opposed
to the MBC shares, for which there is currently no public market. As of July 23, 2003, the following officers and
directors of the Company and their affiliates owned shares in MBC: MBC Beneficial Ownership Shares of Our Common Stock Oliver R. Grace, Jr. (1) 16.9% 508,526 Francis E. Baker (2) 2.5% 75,000 Peter N. Bennett (3) 1.0% 30,000 John S. Grace (4) 21.6% 646,884 Louis A. Lubrano (5) 0.5% 15,000 Thomas McPartland (3) 2.5% 75,000 James J. Pinto (3) 1.8% 53,890 Andrew M. O'Shea (6) 0.1% 1,500 46.9% 1,405,800 26
(1) Oliver R. Grace, Jr. is a Director and
President and Chief Executive Officer of our Company, and the Chairman of the
Board of MBC and a Director of CCTV. Of
the approximately 508,526 shares of our Common Stock which he will receive, 489,876
shares will be held by entities of which he is deemed to be a beneficial owner
and 18,650 shares will be held by trusts and other vehicles for the benefit of
relatives and other investors. Mr.
Grace Jr. is the brother of John S. Grace. (2)
Francis E. Baker is Chairman and
Secretary of our Company and is a Director and President of MBC and a Director
of CCTV. (3)
Messrs. Bennett, McPartland and Pinto are
Directors of our Company. (4)
John S. Grace is a Director and employee
of our Company. Of the approximately
646,884 shares of our Common Stock he will receive 465,331 shares will be held
by entities of which he is deemed to be a beneficial owner, and 181,653 shares
will be held by trusts and other entities for the benefit of certain of his
relations and other investors. Mr.
Grace is the brother of Oliver R Grace, Jr. (5)
Louis A. Lubrano is a Director of the
Company. His shares are held by his
daughter. (6)
Andrew M. O'Shea is our Chief Financial
Officer and the Chief Financial Officer of MBC. In
addition to the foregoing, we are informed that relatives of Oliver R. Grace,
Jr. and John S. Grace may be deemed to have beneficial ownership of
approximately 1.4% of the outstanding shares of MBC. As a result of the potential economic benefits to be
derived from the increased beneficial ownership of shares of our Common Stock,
the foregoing persons may have conflicts of interests with respect to their
fiduciary duties to our Company as they negotiate and carry out the terms of
the proposed MBC Share Acquisition. Moreover, certain of our executive officers
and directors who are also officers and directors of MBC may be deemed to have
a conflict of interest with respect to their fiduciary duties to each entity
that they serve as a result of the necessity of simultaneously acting in our
interests and on our behalf, on the one hand, and MBC, on the other hand. In recognition of these potential conflicts,
our Board of Directors has recommended that, in addition to the Nasdaq Vote, we
seek approval by a vote of a majority of the shares of our Common Stock present
and voting at the Special Meeting not controlled by our executive officers and
directors. Our Board has not determined
what action it will take if such approval is not obtained. Appraisal Rights If you choose to vote against Proposal 2, Section 262
of the Delaware General Corporation Law does not afford you any appraisal
rights. Regulatory Approvals We are not aware of any regulatory approvals required
to be obtained in connection with the consummation of the MBC Share
Acquisition. Accounting Treatment In accordance with generally accepted accounting
principles, we expect that the MBC Share Acquisition will be accounted for
using the purchase method of accounting. Accordingly, the purchase price will
be allocated based upon the estimated fair values of MBC's net assets at the
date of the acquisition. Any excess of the purchase price over the fair value
of the net assets acquired will be recorded as goodwill. Material U.S. Federal Income Tax
Consequences The consummation of the MBC
Share Acquisition will not have any material U.S. Federal income tax
consequences to us or our stockholders. The U.S. Federal income tax
consequences, if any, to the MBC Stockholders have not been evaluated by the
Company. OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL OF PROPOSAL 2. 27
PROPOSAL 3: Description of the Share Increase Amendment On July 14, 2003, our Board of Directors approved and
declared it to be advisable that you approve the Share Increase Amendment, and
has directed that the Share Increase Amendment be submitted to the requisite
stockholder vote at the Special Meeting for your approval. The Share Increase
Amendment must be approved by you before the CCTV and MBC Share Acquisitions
can be completed. We encourage you to carefully read the proposed Share
Increase Amendment, which is one of the amendments reflected in the form of
Certificate of Amendment to our Certificate of Incorporation attached as Annex
F to this Proxy Statement and incorporated by reference herein. Reasons for the Share Increase Amendment We do not have enough unissued authorized shares of
our Common Stock to effect both of the CCTV and MBC Share Acquisitions. We are currently authorized to issue
6,000,000 shares of our Common Stock.
As of July 14, 2003, there were 2,099,908 shares of our Common Stock and
188,006 shares of our Preferred Stock issued and outstanding. In addition, there was $2,081,000 of
principal value of our Debentures outstanding.
After giving effect to the issuance of shares of our Common Stock upon
the exercise of our currently existing stock options and the conversion of our
Preferred Stock at current conversion rates and of the Debentures, 3,337,038
shares of our Common Stock are authorized and remain available for
issuance. If both of the CCTV and MBC
Share Acquisitions are completed as proposed, and we issue 33,879 shares of our
Common Stock in settlement of a CCTV liability, we will be required to issue
6,504,758 shares of our Common Stock, which significantly exceeds our currently
available authorized but unissued shares of Common Stock. In addition, we will be contingently liable to issue
up to 477,994 "make-up" shares to COMCOR by March 2005, and we may
choose to settle up to $1,500,000 of unpaid billings from COMCOR to CCTV
through the issuance of up to 240,000 shares of our Common Stock by March 2006.
The terms of the Preferred Stock include antidilution provisions which increase
the number of shares of our Common Stock which may be received upon the conversion
of the Preferred Stock upon the event that we issue shares of our Common Stock
on terms that effectively dilute the equity interests of the holders of the
Preferred Stock. The issuances of Common Stock to COMCOR and the MBC
Stockholders may be potentially dilutive under the terms of the Preferred
Stock. If the issuance of our Common
Stock to COMCOR, the MBC Stockholders and for the settlement of the CCTV
liability are deemed to occur at $4.00 per share, the approximate market price
of our Common Stock at the filing date of this proxy statement, then the
conversion ratio for each share of Preferred Stock would increase from
approximately 1.946 shares of Common Stock to approximately 3.129 shares of our
Common Stock. Based upon 188,006
outstanding shares of Preferred Stock, this would increase the potentially
dilutive effects of the conversion of the Preferred Stock from 365,859 shares
to approximately 588,334 shares. This
excludes the potentially dilutive effects of issuing make-up shares to COMCOR,
or issuing COMCOR shares to settle potentially unpaid billings of CCTV or any
shares that may be issued pursuant to grants of restricted stock or the
exercise of stock options. Also, if you should approve proposals 6 and 7
approving the Restricted Stock Plan and the Qualified Stock Option Plan, we
will have to reserve up to 1,000,000 shares of our Common Stock to provide for
grants of our Common Stock or the exercise of stock options. In addition, the agreements we have entered into with
COMCOR also contemplate that we will raise additional capital through a rights
offering of our Common Stock to our stockholders and through a private
placement of our Common Stock or other capital raising event. Although the terms of such transactions, if
they should occur, have not been determined, we believe it is in our
stockholders' best interest to have a sufficient number of shares of our Common
Stock authorized to enable us to complete such critical financing activities. 28
If you approve the Share Increase Amendment, we will
have 15,000,000 authorized shares of Common Stock. If both of the CCTV and MBC
Share Acquisitions are completed as proposed, and the Restricted Stock Plan and
the Stock Option Plan are approved, immediately following the closings, an
estimated 4,609,805 shares of Common Stock would remain available for future
issuance, including for issuance of "make-up" shares, possible
payment of CCTV's future liabilities and for capital-raising transactions
contemplated as previously described. Risks
of the Share Increase Amendment If you approve the Share Increase Amendment, but you
do not approve, or we do not consummate, the CCTV Share Acquisition and the MBC
Share Acquisition, then we will have greatly increased our authorized shares
with no definitive plans for their use. Possible Effects of the Share
Increase Amendment Until issued, the increase in the number of
authorized shares of Common Stock will not have any immediate effect on your
rights as an existing stockholder. However, following the issuance of shares
pursuant to the CCTV and MBC Share Acquisitions, your percentage equity
ownership in the Company will decrease significantly. We anticipate issuing
approximately 6,470,879shares of Common Stock in these
transactions plus an additional 33,879 shares to settle a $133,884 liability of
CCTV. These share issuances will
increase the number of issued and outstanding shares of our Common Stock from
2,099,908 to 8,604,666 shares.
Therefore, your proportional ownership in the Company will be reduced
significantly. When issued, the additional shares authorized by this
proposed amendment will have the same rights and privileges as the shares of
our Common Stock currently authorized, issued and outstanding. Our Board of
Directors may authorize the issuance of such shares of our Common Stock without
further vote or action by you, except as contemplated hereby and as may be
required by applicable laws or the rules of any national securities exchange or
market on which shares of our Common Stock are then listed. Holders of our
Common Stock do not have any preemptive rights, and therefore no stockholders
have any preferential right to purchase any of the additional shares of our
Common Stock when such shares are issued. The additional authorized shares of our Common Stock
could also create impediments to a takeover or change in control of our
Company. Authorized and unissued shares
of our Common Stock could be issued in one or more transactions that would make
a change in control of our Company more difficult, and therefore less likely.
Any such issuance of additional stock could have the effect of diluting the
earnings per share and book value per share of outstanding shares of our Common
Stock, and such additional shares could be used to dilute the stock ownership
or voting rights of persons seeking to obtain control of our Company.
Accordingly, the increase in the number of authorized shares of our Common
Stock may deter a future takeover attempt which holders of our Common Stock may
deem to be in their best interest or in which holders of our Common Stock may
be offered a premium for their shares over the then current market price. The
Share Increase Amendment was not approved by our Board of Directors in response
to any threatened or perceived takeover threat, and we have no knowledge of
such a threat as of the date of this Proxy Statement. Our Board of Directors
has no current plans or intention to issue shares of our Common Stock, except
in connection with the exercise of outstanding options, conversion of our
Preferred Stock and Debentures, the CCTV and MBC Share Acquisitions, the
settlement of a CCTV liability and the possible grants of stock under the
Restricted Stock Plan and options under the Stock Option Plan. However, as discussed, the agreements entered
into with COMCOR contemplate a Rights Offering of our Common Stock and a
possible private placement of our Common Stock to raise additional capital to
support our business plans. Such
transactions would be expected to be undertaken without your additional
consent. OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL OF PROPOSAL 3. 29
PROPOSAL 4: Background The
May 23, 2003 Stock Subscription Agreement requires, as a condition precedent to
both our obligation and COMCOR's obligation to close the CCTV Share
Acquisition, that our Certificate of Incorporation be amended to require
cumulative voting in the election of our directors. The Cumulative Voting Amendment is one of the amendments
reflected in the form of Certificate of Amendment to our Certificate of
Incorporation attached as Annex F to this Proxy Statement and incorporated by
reference herein. If approved, the
first time that this cumulative voting will be in effect is the first annual
meeting of stockholders that is held following our closing of the CCTV Share
Acquisition at which directors are elected.
Reasons
for The Cumulative Voting Agreement Cumulative
voting is a method of electing the board of directors of a company that assures
that minority stockholders holding a sufficient number of shares can elect at
least one member or perhaps more than one member to the board of directors
depending upon the number of shares held if the minority stockholders use their
votes efficiently (see the discussion below regarding the efficient use of
cumulative voting). When cumulative
voting is used, the number of votes possessed by each stockholder in the
election of directors is equal to the number of shares held by each stockholder
multiplied by the number of directors that are being elected. Contrary to the regular method of voting for
directors (or non-cumulative voting), when cumulative voting is used, the
stockholder may allocate or pool these votes to vote for one, more than one, or
any number of the directors as each stockholder elects. Whether a given stockholder (or group of
stockholders acting together) has sufficient shares to elect a single director
or more than one director is a function of both the number of directors to be
elected and the number of shares held by the stockholder or stockholder
group. The greater the number of
directors being elected, the greater number of votes minority stockholder may
concentrate on a single candidate or on more than one candidate but less than
all of the candidates. Under
Delaware law, which is applicable to our Company, a company may have cumulative
voting only if its Certificate of Incorporation specifically authorizes
it. Our Board of Directors recommends
that our Certificate of Incorporation be amended to require cumulative voting
for our Board of Directors in order that minority stockholders will be able to
elect directors and have representation on the board. If our Certificate of Incorporation is not amended to require
cumulative voting, both COMCOR and our Company would have the right to
terminate the Stock Subscription Agreement. Upon
closing of the CCTV and MBC Share Acquisitions contemplated by this Proxy
Statement, 8,604,666 shares of our Common Stock will be issued and outstanding
absent any other issuance of our Common Stock.
Accordingly, absent the effects of the Voting Agreement, as discussed
below, without a cumulative voting provision, COMCOR, which will own
approximately 49.1% of the outstanding shares of our Common Stock, could control
the election of our Board of Directors with either (i) the acquisition in the
open market of 81,455 or more shares of our Common Stock, (ii) the cooperation
of the holders of 81,455 or more shares of our Common Stock or (iii) the
abstention from voting of 162,907 shares of our Common Stock. Our
Board of Directors is currently comprised of seven (7) members and, according
to the Voting Agreement (discussed below) which will be signed on the date of
the CCTV Closing, the size of the Company's Board of Directors will remain at
seven (7) indefinitely. Under
cumulative voting, the holders of 1,229,239 shares of our Common Stock, if they
were to concentrate their votes for one nominee of their choosing, could
guarantee the election of one member to our Board of Directors. However, due to the fact that usually not
all shares are voted, a smaller number of shares would probably be sufficient
to elect a director. Accordingly, absent
the Voting Agreement which commits COMCOR to voting its shares for four nominees
as discussed later, under cumulative voting COMCOR could guarantee the election
of three members to our Board of Directors and with the absence of shares being
voted, or with votes from other stockholders being directed to other nominees,
it could reasonably be expected to elect four members to our Board. The Voting Agreement will delay COMCOR's
ability to control the Board of Directors for eighteen 30
months from the closing
of the CCTV Share Acquisition, by which time we expect to have issued
additional shares of our Common Stock in a Rights Offering, a public or private
placement of our Common Stock, upon the issuance of our Common Stock through
the conversion of our Preferred Stock, or pursuant to grants of shares under
the Restricted Stock Plan, or the exercise of existing stock options, or
options that may be granted pursuant to the Stock Option Plan, if such plans
are approved pursuant to Proposals 5 and 6.
However, there can be no assurance that such share issuances will occur,
or if they do occur, will sufficiently dilute COMCOR's ability to control the
Board after the expiry of the Voting Agreement. Additionally, there is currently no cause to believe that if
COMCOR should exercise its rights after the termination of the Voting
Agreement, that its nominees to the Board would not be acceptable to the
Shareholders, as defined in the Voting Agreement, to the current members of the
Board, or to you as our current stockholders. The
Cumulative Voting Proposal will also provide that the cumulative voting
provision in our Certificate of Incorporation may be amended only by a vote of
the holders of two-thirds of our outstanding Common Stock. Under Delaware law, unless our Certificate
of Incorporation provides for this two-thirds requirement, the cumulative
voting provision could be rescinded by the vote of the holders of a majority of
our outstanding Common Stock. Because
it believes the cumulative voting requirement is important to the corporate
governance structure of our Company, our Board recommends that this higher
threshold to delete the cumulative voting provision be adopted by our
stockholders. Impact of The Voting Agreement on Cumulative Voting Pursuant
to the Stock Subscription Agreement, a Voting Agreement in the form of Annex C
to this Proxy Statement, will be signed at the CCTV Closing. The Voting Agreement requires COMCOR, Oliver
R. Grace, Jr., our President and Chief Executive Officer, and Francis E. Baker,
our Chairman and Secretary (Messrs. Grace and Baker being defined in the Voting
Agreement as the "Stockholders"), to vote their shares in favor of
causing and maintaining the size of the Company's Board of Directors at seven
(7) and to vote for the three (3) nominees for the Board of Directors of the
Company nominated by COMCOR and the four (4) nominees for the Board of
Directors of the Company nominated by Messrs. Grace and Baker, as the
"Stockholders" in the Voting Agreement. In
the case of the parties to this Voting Agreement (i.e., Messrs. Grace and Baker
and COMCOR, which as of the CCTV closing will together own an estimated 61% of
our Common Stock), the Voting Agreement will have the effect of negating
cumulative voting for the parties to the Voting Agreement for so long as it is
in effect, but the cumulative voting requirement will be effective for our
stockholders that are not parties to the Voting Agreement. The Voting Agreement terminates on the
earlier of: (a) the mutual agreement of COMCOR and Messrs. Grace and Baker to
terminate the Voting Agreement, (b) whenever COMCOR's percentage of Company
share ownership goes below 5% (such percentage of Company shares currently
projected to be held by COMCOR being 49.1%), (c) whenever Messrs. Grace's and
Baker's joint percentage voting control of Company shares goes below 5% (such percentage
of Company shares currently projected to be held by Messrs. Grace and Baker
being (11.9%), (d) the execution of a New Voting Agreement (defined as a new
Voting Agreement that may be signed when third party financing is arranged for
the Company after the CCTV Closing that calls for the issuance of at least 10%
of the Company's then issued and outstanding stock), or (e) 18 months following
the execution of the Voting Agreement on the date of the CCTV Closing. OUR BOARD OF DIRECTORS RECOMMENDS YOU VOTE
"FOR" THE APPROVAL OF PROPOSAL 4. 31
PROPOSAL 5: On July 14, 2003, our Board of Directors approved and
recommended that you approve the Name Change Amendment. The Name Change
Amendment is one of the amendments reflected in the form of Certificate of
Amendment to our Certificate of Incorporation attached as Annex F to this Proxy
Statement and incorporated herein by reference. Summary of
the Name Change Amendment Our
historical activities have principally been in the areas of manufacturing and
investments. From February 1991 to
March 2002, our primary activity was represented by our investment in JM Ney,
when we sold substantially all of the operating assets and certain liabilities
of JM Ney. Our current primary investments are a 6.3% equity investment in CCTV
as a result of a $3.5 million cash investment made in May 2003 pursuant to the
agreements with COMCOR and a 25% equity interest in MBC which holds an
approximately 41.7% equity interest in CCTV. As described in Proposals 1 and 2
of this Proxy Statement, we are seeking to acquire control over the remaining
equity interests in CCTV over which we do not currently have direct or indirect
control. Our Board of Directors has determined that the name
of our corporation no longer reflects the business in which we are presently
engaged and that the name "Moscow CableCom Corp." will more clearly
identify us as a participant in the cable industry and improve our marketing
and capital fundraising efforts. If you approve the Name Change Amendment but we do
not close on our proposed acquisition of CCTV as outlined in Proposals 1 and 2,
our Board will not adopt the approval of this name change. If you approve the Name Change Amendment, we will
cause the trading symbol for our Common Stock to be changed from "ANDR" to a
symbol more readily associated with our new name. The currently outstanding
stock certificates evidencing shares of our Common Stock bearing the name
"Andersen Group, Inc." will continue to be valid and represent shares of our
Common Stock following the name change. In the future, new certificates will be
issued bearing our new name, but this will in no way effect the validity of
your current stock certificates. OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL OF PROPOSAL 5. 32
PROPOSAL 6: On
July 14, 2003, our Board adopted the Andersen Group, Inc. 2003 Restricted Stock
Plan (the "Restricted Stock Plan"). Our Board believes that restricted stock
awards ("Restricted Stock Awards") will be an important element in attracting
and retaining key employees, directors and consultants who are expected to
contribute to our Company's growth and success. Our Company does not currently have a restricted stock plan. Summary Of
Andersen Group Restricted Stock Plan The following is a brief summary of the Restricted Stock Plan. The following summary is qualified in its
entirety by reference to the Restricted Stock Plan, a copy of which is attached
as Annex G to this Proxy Statement and incorporated herein by reference. Description
of Restricted Stock The Restricted Stock Plan provides for the grant of restricted shares of
our Common Stock (the "Restricted Stock"), which Restricted Stock will be
subject to forfeiture in the event that the conditions specified in the
applicable Restricted Stock Award are not satisfied prior to the end of the
applicable restriction period established for such Restricted Stock Award. Shares of our Common Stock which may be issued
under the Restricted Stock Plan may not exceed 330,000 shares. Eligibility
to Receive Restricted Stock Our executive officers and other key employees, directors and
consultants are eligible to be granted Restricted Stock under the Restricted
Stock Plan. The granting of Restricted
Stock under the Restricted Stock Plan is discretionary, and we cannot now
determine whether Restricted Stock will be granted in the future to any
particular person or group. On July 22, 2003, the last reported sale price of our Common Stock on
The Nasdaq National Market was $4.22. Administration The Restricted Stock Plan is administered by our Compensation Committee
appointed by our Board of Directors.
The Compensation Committee has the authority to adopt, amend and repeal
the administrative rules, guidelines and practices relating to the Restricted
Stock Plan and to interpret the provisions of the Restricted Stock Plan. Subject to any applicable limitations
contained in the Restricted Stock Plan, the Compensation Committee selects the
recipients of Restricted Stock and determines: In
the event of a reorganization, recapitalization, stock dividend or stock split,
or combination or other change in the Common Stock identified by the
Compensation Committee, the Board or the Compensation Committee, in their sole
discretion, may, make such adjustments, if any, in (i) the number and type of
shares authorized for issuance by the Restricted Stock Plan and (ii) the number
and type of shares specified in any applicable Restricted Stock Agreement. If any Restricted Stock Award is terminated,
surrendered, canceled or forfeited, the unused shares of our Common Stock
covered by such Restricted Stock Award will again be available for grant under
the Restricted Stock Plan. Amendment or
Termination No Restricted Stock Award may be made under the Restricted Stock Plan
after July 13, 2013. Our Board may at
any time amend, suspend or terminate the Restricted Stock Plan. 33
Federal
Income Tax Consequences The following is a summary of the United States federal income tax
consequences that generally will arise with respect to the sale of our Common
Stock acquired under the Restricted Stock Plan. Tax Consequences to the Holder A participant will not recognize taxable income upon the grant of a
Restricted Stock Award, unless the participant makes an election under Section
83(b) of the Internal Revenue Code (a Section 83(b) Election"). If the participant makes a Section 83(b)
Election within 30 days of the date of the grant, then the participant will
recognize ordinary compensation income, for the year in which the Restricted
Stock Award is granted, in an amount equal to the difference between the fair
market value of the Common Stock at the time the Restricted Stock Award in
granted and the purchase price paid for the Common Stock, if any. If a participant makes a Section 83(b)
Election and then forfeits the Common Stock, the participant will not be
permitted to reverse the amount of ordinary income recognized, but will have a
capital loss in such amount. If a
Section 83(b) Election is not made, the participant will recognize ordinary
compensation income, at the time that the forfeiture provisions or restrictions
on transfer lapse, in an amount equal to the difference between the fair market
value of the Common Stock at the time of such lapse and the original purchase
price paid for the Common Stock, if any.
The participant will have a basis in the Common Stock acquired equal to
the sum of the price paid, if any, and the amount of ordinary compensation
income recognized. Upon the disposition of the Common Stock acquired pursuant to a
Restricted Stock Award, the participant will recognize a capital gain or loss
equal to the difference between the sale price of the Common Stock and the
participant's tax basis in the Common Stock.
The gain or loss will be a long-term capital gain or loss if the shares
are held for more than one year. For
this purpose, the holding period shall begin just after the date on which the
forfeiture provisions or restrictions lapse if a Section 83(b) Election is not
made, or just after the Restricted Stock Award is granted if a Section 83(b)
Election is made. This description is only a summary of current law and does not reflect
any tax consequences in any other jurisdiction. Each participant is urged to seek advice from his or her personal
tax adviser. Tax
Consequences to the Company. The grant of a Restricted Stock Award under the Restricted Stock Plan
will have no tax consequences to the Company.
Moreover, in general, the sale of any Common Stock acquired under the
Restricted Stock Plan will have any tax consequences to the Company. The Company generally will be entitled to a
business-expense deduction, however, with respect to any ordinary compensation
income recognized by a participant under the Restricted Stock Plan at the same
time that the participant recognizes ordinary compensation income. Any such deduction will be subject to the
limitations of Section 162(m) of the Code. OUR BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF PROPOSAL 6. 34 PROPOSAL 7: On July 14, 2003, our Board
adopted the Andersen Group, Inc. 2003 Stock Option Plan (the "Stock Option
Plan"). Our Board believes that stock
option awards will be an important element in attracting and retaining key
employees, directors and consultants who are expected to contribute to our
Company's growth and success. Our Company
does not currently have a Stock Option Plan pursuant to which it may grant
options. Summary Of Andersen Group Stock Option Plan The following is a brief summary of the Stock Option Plan. The following summary is qualified in its
entirety by reference to the Stock Option Plan, a copy of which is attached as
Annex H to this Proxy Statement and incorporated herein by reference. Description
of Awards The Stock Option Plan provides for the grant of options intended to
qualify as incentive stock options under Section 422 of the Internal Revenue
Code and non-qualified stock options (collectively "Awards"). Shares of the our Common Stock which may be
issued and which is subject to outstanding but unexercised stock options under
the Stock Option Plan may not exceed 670,000 shares. Incentive
Stock Options and Non-Qualified Stock Options. Optionees receive the right to purchase a specified number of
shares of our Common Stock at some time in the future at a specified option
price and subject to such other terms and conditions as are specified in
connection with the option grant.
Options may be granted at an exercise price which may be equal to or
greater than the fair market value of the Common Stock on the date of grant. Under present law, however, incentive stock
options may not be granted at an exercise price less than the fair market value
of the Common Stock on the date of grant (or less than 110% of the fair market
value in the case of incentive stock options granted to optionees holding 10%
or more of the voting power of the Company).
Options may not be granted for a term in excess of ten years. The Stock Option Plan permits the Board to
determine the manner of payment of the exercise price of options, including
through payment by cash, check or by surrender to the Company of shares of our
Common Stock, or by any combination thereof. Eligibility
to Receive Awards Our employees, directors and consultants are eligible to be granted
Awards under the Stock Option Plan.
Under present law, however, incentive stock options may only be granted
to employees. The granting of Awards
under the Stock Option Plan is discretionary, and we cannot now determine the
number or type of Awards to be granted in the future to any particular person
or group. On July 22, 2003, the last reported sale price of the Company's Common
Stock on The Nasdaq National Market was $4.22. Administration The Stock Option Plan is administered by the
Compensation Committee appointed by our Board.
The Compensation Committee has the authority to adopt, amend and repeal
the administrative rules, guidelines and practices relating to the Stock Option
Plan and to interpret the provisions of the Stock Option Plan. Subject to any applicable limitations contained
in the Stock Option Plan, the Compensation Committee selects the recipients of
Awards and determines: (i) The number of shares of our Common Stock covered by options
and the dates upon which such options become exercisable; (ii) The exercise price of options; and (iii) The duration of options. 35
Our Board is required to make appropriate adjustments in connection with
the Stock Option Plan and any outstanding Awards to reflect stock dividends,
stock splits and certain other events.
In the event of a merger, liquidation or other change in the number or
kind of outstanding shares of the our Common Stock, the Compensation Committee
or our Board is authorized to make such adjustments as are equitable. If any Award expires or is terminated, surrendered,
canceled or forfeited, the unused shares of Common Stock covered by such Award
will again be available for grant under the Stock Option Plan. Amendment or
Termination No Award may be made under the Stock Option Plan after July 13, 2013,
but Awards previously granted may extend beyond that date. Our Board may at any time amend, suspend or
terminate the Stock Option Plan. Federal
Income Tax Consequences The following is a summary of the United States federal income tax
consequences that generally will arise with respect to Awards granted under the
Stock Option Plan and with respect to the sale of Common Stock acquired under
the Stock Option Plan. Incentive
Stock Options. In general,
a participant will not recognize taxable income upon the grant or exercise of
an incentive stock option. Instead, a
participant will recognize taxable income with respect to an incentive stock
option only upon the sale of the Common Stock acquired through the exercise of
the option ("ISO Stock"). The exercise
of an incentive stock option may, however, subject the participant to the
alternative minimum tax. Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO
Stock after having owned it for at least two years from the date the option was
granted (the "Grant Date") and one year from the date the option was exercised
(the "Exercise Date"), then the participant will recognize long-term capital grain
in an amount equal to the excess of the sale price of the ISO Stock over the
exercise price. If the participant sells ISO Stock for more than the exercise price
prior to having owned it for at least two years from the Grant Date and one
year from the Exercise Date (a "Disqualifying Disposition"), then all or a
portion of the gain recognized by the participant will be ordinary compensation
income and the remaining gain, if any, will be a capital gain. This capital gain will be a long-term
capital gain if the participant has held the ISO Stock for more than one year
prior to the date of sale. If a participant sells ISO Stock for less than the exercise price, then
the participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock.
This capital loss will be a long-term capital loss if the participant
has held the ISO Stock for more than one year prior to the date of sale. Non-Qualified
Stock Options. As in the
case of an incentive stock option, a participant will not recognize taxable
income upon the grant of a non-qualified stock option. Unlike the case of an incentive stock
option, however, a participant who exercises a non-qualified stock option
generally will recognize ordinary compensation income in an amount equal to the
excess of the fair market value of the Common Stock acquired through the
exercise of the option ("NSO Stock") on the Exercise Date over the exercise
price. With respect to any NSO Stock, a participant will have a tax basis equal
to the exercise price plus any income recognized upon the exercise of the
option. Upon selling NSO Stock, a
participant generally will recognize capital gain or loss in an amount equal to
the difference between the sale price of the NSO Stock and the participant's
tax basis in the NSO Stock. This
capital gain or loss will be a long-term gain or loss if the participant has
held the NSO stock for more than one year prior to the date of the sale. This description is only a summary of current law and does not reflect
any tax consequences in any other jurisdiction. Each participant is urged to seek advice from his or her personal
tax adviser. Tax
Consequences to the Company. The grant of an Award
under the Stock Option Plan will have no tax consequences to the Company.
Moreover, in general, neither the exercise of an incentive stock option nor the
sale of any Common Stock acquired under the Stock Option Plan will have any tax
consequences to the Company. The Company generally will 36
be entitled to a business-expense deduction, however, with
respect to any ordinary compensation income recognized by a participant under
the Stock Option Plan, including as a result of the exercise of a non-qualified
stock option or a Disqualifying Disposition, at the same time that the
participant recognizes ordinary compensation income. OUR BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF PROPOSAL 7. 37
FORWARD-LOOKING INFORMATION This Proxy Statement includes statements that
constitute "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), including statements
regarding our ability to consummate the MBC Share Acquisition and the CCTV
Share Acquisition and regarding the operations of CCTV. Forward-looking
statements also include statements that are predictive in nature, which depend
upon or refer to future events or conditions, which include words such as
"believes," "plans," "anticipates," "estimates," "expects" or similar
expressions. In addition, any
statements concerning future financial performance, ongoing business strategies
or prospects, and possible future actions, which may be provided by our
management, are also forward-looking statements. Forward-looking statements are based on current expectations and
projections about future events and are subject to risks, uncertainties, and
assumptions about our company, economic and market factors and the industry in
which we do business, among other things.
These statements are not guarantees of future performance and we
undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or otherwise. Certain factors that could cause actual
results to differ materially from those discussed in any forward-looking
statements include the risks described in our Annual Report on Form 10-K for
the year ended February 28, 2003 and other public filings made by us with the
Securities and Exchange Commission, which descriptions are incorporated herein
by reference. OTHER
MATTERS As of the date of this Proxy Statement, our Board of Directors does not
intend to present and has not been informed that any other person intends to present
any matter for action at the Special Meeting other than as discussed in this
Proxy Statement. If any other matters
properly come before the meeting, it is intended that the holders of the proxy
will act in accordance with their best judgment. The following sections, as applicable, of our Annual Report on Form 10-K
for the fiscal year ended February 28, 2003 and our Report on Form 10-Q for the
period ended May 31, 2003, are incorporated by reference into this Proxy
Statement: Risk Factors; Supplementary Financial Information; Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Quantitative and Qualitative Disclosures about Market Risk. AVAILABLE
INFORMATION The
Appendices are part of this Proxy Statement and are incorporated herein. We
are subject to the informational requirements of the Exchange Act and the rules
and regulations promulgated thereunder and in accordance therewith we file
reports, proxy statements and other information with the SEC. Reports, proxy
statements and other information that we file may be inspected and copied at
the Public Reference Room maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a
web site at www.sec.gov containing reports, proxy and information statements
and other information regarding registrants, including the Company, that file
electronically. ANDERSEN GROUP, INC. Francis E. Baker [_________], 2003
38
SELECTED HISTORICAL AND PRO FORMA
FINANCIAL DATA We are providing the
following financial information to assist you in your analysis of the financial
reporting aspects of the CCTV and MBC Share Acquisitions. The following tables
present the pro forma consolidated financial condition of Andersen as if the
transactions had taken place as of May 31, 2003, and the pro forma consolidated
results of operations of Andersen for the year ended February 28, 2003 and the three
months ended May 31, 2003 as if the transactions had occurred on March 1, 2002. These pro forma financial
schedules present the arithmetic combinations of the separate financial results
of Andersen, MBC and CCTV with certain intercompany eliminations and pro forma
adjustments. You should not assume that Andersen would have achieved the pro
forma results if the CCTV and MBC Share Acquisitions had actually been in for
the periods presented. The pro forma schedules
on pages F-2 through F-4 utilize Andersen's unaudited consolidated balance
sheet as of May 31, 2003, and our unaudited results of operations for the three
months then ended, as reported in our Form 10-Q for the period ended May 31,
2003. They also utilize the unaudited balance sheets of MBC and CCTV as of
March 31, 2003 and their unaudited results of operations for the three months
then ended, which were provided to us by these companies, and were presented in
summarized form in the footnote disclosures in our May 31, 2003 Form 10-Q. The
information for the year ended February 28, 2003 for Andersen, and for the year
ended December 31, 2002 for each of MBC and CCTV, was obtained from the audited
financial statements of each of these three entities, all of which were
included in our Form 10-K for the fiscal year ended February 28, 2003. The
financial statements for Andersen, MBC and CCTV were all audited by
PricewaterhouseCoopers, whose reports thereon are also included in our Form
10-K. We expect to incur
acquisition related expenses as a result of the CCTV and MBC Share
Acquisitions. We also anticipate that the merger may provide the resulting
company with financial benefits, such as the opportunity to generate additional
revenues and earnings, or to reduce expenses that have been incurred during the
period leading up to and through May 2003, at which time we entered into the
agreements with COMCOR to acquire its investment in CCTV. However, neither the
effects of the transaction expenses nor of the anticipated revenue or expense
benefits, have been factored into the pro forma combined statements of
operations. For that reason, the pro forma combined information, while helpful
in illustrating the financial reporting effects of the resulting company under
one set of assumptions, does not attempt to predict or suggest future results.
The pro forma adjustments are described in the accompanying notes and are based
on available information and certain assumptions that we believe to be
reasonable. The accompanying pro forma
information may not necessarily reflect the actual results that may occur upon
the closings of the CCTV and MBC Share Acquisitions, which will result in the
acquisition of 100% of CCTV. Among factors that could cause actual results to
differ from this pro forma information are the market price for our Common
Stock could differ from the underlying assumptions which could result in
different valuations for the acquisition of the CCTV and MBC shares. The
footnote disclosures to the pro forma financial information present certain
information based on prices for our Common Stock that are both higher and lower
than the approximate market value of $4.00 per share utilized in the
accompanying pro forma schedules. In addition, our operating results from May
31, 2003 through the closing of the transactions, and the operating results of
MBC and CCTV from March 31, 2003 through the closing of the transactions may
affect the balance sheets of those companies and their abilities to operate as
planned. We also may not be able to acquire all of the shares of MBC not
presently held by us, which would result in a minority interest in CCTV. 39 INDEX TO PRO
FORMA FINANCIAL STATEMENTS ANDERSEN
GROUP, INC. UNAUDITED
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL
INFORMATION As
of and For the Three Months Ended May 31, 2003 And
for the Year Ended February 28, 2003 Unaudited Pro Forma Consolidated Condensed Financial Statements: Unaudited Pro Forma Consolidated
Condensed Balance Sheet as of May 31, 2003, 2003 F-2 Unaudited Pro Forma Consolidated
Condensed Statements of Operations for the Three Months Ended May 31, 2003 F-3 Unaudited Pro Forma Consolidated
Condensed Statements of Operations for the Year Ended February 28, 2003 F-4 Unaudited Notes to Consolidated
Condensed Financial Statements F-5
ANDERSEN GROUP, INC. Pro Forma Adjustments Andersen Group Moscow COMCOR -TV COMCOR Invest-ment Invest-ment Elimi-nation Consoli-dating Pro Forma Consoli-dated Totals (Note A) (Note A) (Note A) (Note B) (Notes C and G) (Notes D and G) (Notes E and G) (Notes F and G) Cash
and cash $ 1,773 $ 477 $ 159 - - $ (138) $ 3,500 - $ 5,771 Marketable securities 2,265 - - - - - - - 2,265 Accounts
and other 35 823 76 - - 276 (1,099) - 111 Inventories - - 3,333 - - - - - 3,333 Taxes recoverable - - 1,151 - - - - - 1,151 Prepaid expenses and other 318 - 753 - - - - - 1,071 Total current assets 4,391 477 5,472 - - 138 2,401 - 13,702 Property,
plant and 3,345 - 11,506 - - - - - 14,851 Construction
in - - 3,241 - - - - - 3,241 Prepaid
pension 4,633 - - - - - - - 4,633 Intangible assets, net - - 7,589 - - - - (4,203) 3,386 Goodwill - - 59 - - - - (59) - Investment in Moscow 1,797 - - - 9,000 - - (10,797) - Investment
in 3,500 7,408 - - - 16,884 (3,500) (24,292) - Investment in IAS - 48 6,247 - - - - - 6,295 Other assets 744 - - - - - - - 744 Total assets $ 18,410 $ 8,756 $ 34,114 $ - $ 9,000 $ 17,022 $ (1,099) $ (39,351) $ 46,852 Current
maturities of $ 407 $ - $ - $ - $ - $ - $ - $ - $ 407 Accounts payable 286 26 2,884 (1,380) - - (1,099) - 717 Accrued liabilities 490 18 1,167 - - - - - 1,675 Deferred income taxes 305 - - - - - - 305 Total
current liabilities 1,488 44 4,051 (1,380) - - (1,099) - 3,104 Long-term
debt, less 1,674 - - - - - - - 1,674 Other liabilities 913 - 26 - - - - - 939 Deferred income taxes 1,701 - 1,745 - - - - (967) 2,479 5,776 44 5,822 (1,380) - - (1,099) (967) 8,196 Stockholders' equity Preferred Stock 3,497 - 3 - - - - (3) 3,497 Common stock 21 19,002 40 - 23 43 - (19,043) 86 Additional paid-in 6,653 1,409 42,307 1,380 8,977 16,979 - (45,095) 32,610 Retained earnings 2,463 (11,699) (14,058) - - - - 25,757 2,463 Total stockholders' 12,634 8,712 28,292 1,380 9,000 17,022 - (38,384) 38,656 $ 18,410 $ 8,756 $ 34,114 $ - $ 9,000 $ 17,022 $ (1,099) $ (39,351) $ 46,852 F-2
ANDERSEN GROUP, INC. Andersen Moscow COMCOR-TV Eliminations Pro Forma Pro Forma (Note
A) (Note
A) (Note
A) (Note
E) (Note F) Sales and
revenue: Subscription Fees - - $ 522 - - $ 522 Connection fees and equipment sales - - 122 - - 122 Other - - 76 - - 76 Total revenues - - 720 - - 720 Cost of sales 1,179 - (149) 1,130 Gross margin - - (459) - (149) (310) General and administrative expenses 885 74 797 - - 1,756 Operating income
(loss) (885) (74) (1,256) - (149) (2,066) Investment income
and other income 610 5 (3) - 612 Interest expense (57) - (3) 3 - (57) Foreign exchange loss - - (20) - - (20) Income before equity in losses of unconsolidated subsidiary and income
taxes (332) (69) (1,279) - (149) (1,531) Equity in losses of Moscow Broadband (174) - - 174 - - Equity in losses of COMCOR-TV - (612) - 612 - - Equity in income (loss) of IAS (Note I) - - (45) - (2) (47) Loss before income taxes (506) (681) (1,324) 786 147 (1,578) Income tax (benefit) (93) - (69) - 33 (129) Net loss (413) (681) (1,255) 786 114 (1,449) Minority interest - - - - - - Net income (413) (681) (1,255) 786 114 (1,449) Preferred dividends (71) - - - - (71) (Loss) applicable to common shareholders $
(484) $
(681) $
(1,255) $ 786 $ 114 $
(1,520) Loss per Common Share - Basic and Diluted: $
(0.23) $
(0.18) Weighted average shares outstanding - basic and diluted (Note H) 2,100 2,250 4,255 8,605 F-3
ANDERSEN GROUP, INC. Andersen Group Moscow COMCOR-TV Eliminations Pro Forma Pro Forma (Note
A) (Note
A) (Note
A) (Note
F) (Note
F) Sales and
revenue: Subscription fees - - $ 1,365 - - $ 1,365 Connection fees
and equipment sales - - 481 - - 481 Other - - 95 - - 95 - - 1,941 - 1,941 Cost of sales - - 3,691 - (597) 3,094 Gross margin - - (1,750) - 597 (1,153) General and
administrative expenses 2,531 487 3,210 - - 6,228 Operating (loss) income (2,531) (487) (4,960) - 597 (7,381) Investment income and other income 914 68 (27) 955 Interest expense (256) (27) 27 (256) Foreign exchange loss - - (56) - - (56) Income before
equity in losses of (1,873) (419) (5,043) - 597 (6,738) Equity in losses
of Moscow Broadband (712) - - 712 - - Equity in losses of
COMCOR-TV - (2,429) - 2,429 - - Equity in losses of IAS - - (95) - (139) (234) Loss before income taxes (2,585) (2,848) (5,138) 3,141 458 (6,972) Income tax
(benefit) (535) (283) 131 (687) Net income from continuing operations (2,050) (2,848) (4,855) 3,141 327 (6,285) Minority interest (3) (3) Net (loss) income (446) (2,848) (4,858) 3,141 327 (6,288) Preferred dividends (282) - - - - (282) (Loss) applicable to common shareholders $
(728) $
(2,848) $
(4,858) $ 3,141 $
327 $
(6,570) Loss per Common Share - Basic and Diluted: Net loss from
continuing operations $
(1.11) $
(0.76) Weighted average shares outstanding -basic and diluted (Note H) 2,097 2,250 4,255 8,602
ANDERSEN
GROUP, INC. Notes to Unaudited Pro
Forma Consolidated Condensed Financial Statements A)
The historical balance sheet information is as of May 31, 2003 for
Andersen Group, Inc., and as of March 31, 2003 for each of Moscow Broadband and
CCTV. The historical statement of
operations information for Andersen is for the three months ended May 31, 2003
and the year ended February 28, 2003.
The statement of operations information for each of MBC and CCTV is for
the three months ended March 31, 2003 and the year ended December 31,
2003. Such information has been derived
from Andersen's Form 10-Q for the period ended May 31, 2003, its Form 10-K for
the year ended February 28, 2003 and from information provided by MBC and CCTV. B)
COMCOR Investment in CCTV. Pursuant
to the agreements signed, COMCOR will make an additional capital contribution
to CCTV in the amount approximate of $1,380,000 through the settlement of
liabilities as of December 31, 2002, and as partial settlement of charges
incurred or to be incurred in 2003. C)
Investment in MBC. The
Company will issue 150 shares of its Common Stock for each of the 15,000 shares
of MBC presently outstanding and not owned by the Company. Such stock has been
valued at $4.00 per share (the approximate market value of the Company's common
stock at the time the agreements with COMCOR were signed) for total pro forma
consideration of $9.0 million. As further described in Note G, the difference
between the purchase price for this additional ownership in Moscow Broadband
and the reported value of the Company's current ownership in Moscow Broadband
over Moscow Broadband's net assets has
been allocated to MBC's investment in CCTV and further allocated to CCTV's
assets and liabilities. D)
Investment in CCTV. E)
Elimination Entries. F-5
Intercompany
receivables, advances and loans have been eliminated as follows (in thousands): Andersen 's purchases
of CCTV liabilities as discussed in Note D $ 276 MBC's advances and
loans to CCTV, including accrued interest 823 Total $ 1,099 F)
Consolidating Entries. Pro
Forma Balance Sheet Pro
Forma Statement of Operations G) Accounting for Issuance of Stock in
MBC and CCTV Share Acquisition The pro forma financial information
has been prepared based on valuing the consideration to be paid by Andersen
using an estimated market price of $4.00 per share for Andersen's common
stock. The following table outlines the
elements of the accounting and the valuation, and the impacts on such
accounting based upon both a $1.00 increase and a $1.00 decrease in the price
per share of Andersen common stock (in thousands):
$3.00 per share $4.00 per share $5.00 per share Value
of common stock to be issued to: MBC shareholders $ 6,750 $ 9,000 $ 11,250 COMCOR 12,663 16,884 21,104 Value
of investment in MBC 1,797 1,797 1,797 Value
of investment in CCTV 3,500 3,500 3,500 Total investment in CCTV/MBC 24,710 31,181 37,651 Book
value of net assets to be acquired: Book
value of MBC 8,712 8,712 8,712 Less:
MBC's investments in CCTV 7,408 7,408 7,408 Net
book value of MBC 1,304 1,304 1,304 Book
value of CCTV 28,292 28,292 28,292 Additional
investment in CCTV by: COMCOR 1,380 1,380 1,380 Andersen
Group 3,500 3,500 3,500 Total
book value acquired 34,476 34,476 34,476 (Short fall in) Excess of purchase price from
book value of net assets acquired The pro forma short fall of the purchase price from the book value
of the net assets acquired has been allocated as follows: Goodwill associated with CCTV's acquisition
of Persey in 2000 $ (59) Value of license (4,203) Deferred tax liability associated with
license 967 $ (3,295) The Company is retaining an independent firm to appraise the fair
value of the net assets to be acquired which may result in a different
allocation of the purchase price. H) Pro forma weighted average shares
outstanding: Pro forma weighted average shares outstanding as a result of the
proposed transactions are as follows (in thousands): Three Months Year Ended Weighted average shares outstanding Andersen Group 2,100 2,099 Pro forma adjustments: Issuance of shares to MBC stockholders 2,250 2,250 Issuance of shares to COMCOR 4,221 4,221 Issuance of shares to satisfy CCTV obligation 34 34 Total pro forma weighted average shares
outstanding 8,605 8,604 I) Institute for
Automated Systems On a pro forma basis,
the Company will own approximately 43.5% of the outstanding stock of Institute
for Automated System (IAS), a Russian telecommunications company that has a
data communication network in Russia.
The following presents the summarized financial condition of IAS as of
March 31, 2003, and the results of its operations for the three months ended
March 31, 2003 and the year ended December 31, 2002 (in thousands). F-7
Balance
Sheet March 31, 2003 Current
assets $
1,322 Non
current assets 9,700 Total
assets $
11,022 Current
liabilities $ 1,940 Non
current liabilities 1,090 Total
liabilities 3,030 Shareholders'
equity 7,992 $
11,002 Statement
of Operations Three Months Ended March 31, 2003 Year Ended December 31, 2002 Revenues $ 1,408 $
4,607 Cost
of revenues (1,035) (3,133) Operating
expenses (476) (2,139) Loss
from operations (103) (665) Non
operating income (1) 144 Income
tax expense (3) (17) Net
loss $ (107) $ (538)
ANDERSEN GROUP, INC. SPECIAL MEETING THIS PROXY IS SOLICITED ON BEHALF OF OUR BOARD OF
DIRECTORS The undersigned hereby appoints Francis E. Baker and Andrew M. O'Shea,
and each of them, proxies, with full power of substitution, acting unanimously
and voting or if only one is present and voting then that one, to vote the
shares of stock of Andersen Group, Inc., which the undersigned is entitled to
vote, at the Special Meeting of Stockholders to be held at [_____] on [_____], 2003, at [_____]
a.m. New York City time, and at any adjournment or adjournments thereof, with all
the powers the undersigned would possess if present. 1. APPROVAL OF THE ISSUANCE OF COMMON STOCK
PURSUANT TO THE CCTV SHARE ACQUISITION AS DESCRIBED IN THE PROXY STATEMENT. FOR o AGAINST o ABSTAIN o 2. APPROVAL OF THE ISSUANCE OF COMMON STOCK PURSUANT
TO THE MBC SHARE ACQUISITION AS DESCRIBED IN THE PROXY STATEMENT. FOR o AGAINST o ABSTAIN o 3. APPROVAL OF AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION INCREASING THE NUMBER OF AUTHORIZED SHARES AS DESCRIBED IN THE
PROXY STATEMENT. FOR o AGAINST
o ABSTAIN o 4. APPROVAL OF AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION ADOPTING CUMULATIVE VOTING THE ELECTION OF DIRECTORS AS
DESCRIBED IN THE PROXY STATEMENT. FOR o AGAINST
o ABSTAIN o 5. APPROVAL OF AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION ADOPTING A CHANGE IN THE NAME OF THE COMPANY AS DESCRIBED IN
THE PROXY STATEMENT. FOR o AGAINST
o ABSTAIN o 6. APPROVAL OF
THE ADOPTION OF THE ANDERSEN GROUP, INC. 2003 RESTRICTED STOCK PLAN AS
DESCRIBED IN THE PROXY STATEMENT.
FOR o AGAINST
o ABSTAIN o 7.
APPROVAL OF THE ADOPTION OF THE ANDERSEN
GROUP, INC. 2003 STOCK OPTION PLAN AS DESCRIBED IN THE PROXY STATEMENT. FOR o AGAINST o ABSTAIN o 8. IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THIS
MEETING. IF YOU
RETURN YOUR PROPERLY EXECUTED PROXY, WE WILL VOTE YOUR SHARES AS YOU DIRECT. IF
YOU DO NOT SPECIFY ON YOUR PROXY CARD HOW YOU WANT TO VOTE YOUR SHARES, WE WILL
VOTE THEM FOR PROPOSAL 1, PROPOSAL 2, PROPOSAL 3, PROPOSAL 4, PROPOSAL 5,
PROPOSAL 6 AND PROPOSAL 7 AND IN THE DISCRETION OF THE PROXIES ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF. PLEASE MARK, SIGN AND DATE THE REVERSE SIDE AND The undersigned hereby revokes any proxy or proxies
heretofore given to vote such shares at said meeting or at any adjournment
thereof. Please sign EXACTLY as your name appears hereon. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title as such. If there is more than one trustee, all
should sign. If shares are held jointly, both owners must sign. DATED: _________________, 2003 ________________________________________ SIGNATURE ________________________________________ SIGNATURE
IF HELD JOINTLY PLEASE VOTE, SIGN, DATE, AND
405
Park Avenue
Suite
1202
New
York, New York 10022
President and Chief Executive
Officer
405
Park Avenue
Suite
1202
New
York, New York 10022
(212)
826-8942
OF STOCKHOLDERS TO BE HELD ON
[_____], 2003
Francis
E. Baker
Chairman
and Secretary
QUESTIONS AND ANSWERS ABOUT
THE SPECIAL MEETING
4
common share, basic and diluted
(1.11)
0.93
(1.06)
(0.70)
($2.16)
unconsolidated subsidiary
$ (419)
$ (833)
$ (1,104)
$ (809)
$ (944)
9
SUMMARY OF THE PROPOSALS TO BE VOTED
ON AT THE SPECIAL MEETING
The Share Increase Amendment
(see page 29)
The Cumulative Voting Amendment (see page 31)
We have entered into a voting agreement with COMCOR and certain of our
stockholders (the "Voting Agreement"). We are required by the Voting Agreement to seek stockholder
approval of an amendment to our Certificate of Incorporation to provide for the
stockholders to have cumulative voting rights with respect to the elections of
our Directors. Under Cumulative Voting for the elections of Directors, each
stockholder will be entitled to that number of votes equal to the number of
shares of stock that the stockholder is entitled to vote multiplied by the
number of directors to be elected, and each stockholder may cast all of such
votes for a single director or may distribute them among any two or more
nominees as such stockholders may see fit. If the proposed Cumulative Voting
Amendment is adopted, the election of the Board of Directors at the Company's
next Annual Meeting would be conducted in accordance with the new provisions.
13
APPROVAL OF THE ISSUANCE OF COMMON
STOCK
IN THE CCTV SHARE ACQUISITIONNASDAQ Stockholder Approval Requirements
15
to participate, subject to customary exclusions, in future Company
initiated registrations of our Common Stock with the SEC.
APPROVAL OF THE ISSUANCE OF COMMON
STOCK
IN THE MBC SHARE ACQUISITION
or Control
to be Received
THE SHARE INCREASE AMENDMENT
CUMULATIVE VOTING AMENDMENT
NAME CHANGE AMENDMENT
2003 RESTRICTED STOCK PLAN
2003 STOCK OPTION PLAN
Secretary
F-1
Pro Forma Consolidated Condensed Balance Sheet
As of May 31, 2003
(In thousands, except per share data)
(Unaudited)
Broad-band
Investment in CCTV
in MBC
in CCTV
Entries
Entries
equivalents
receivables
current assets
equipment, net
process and advances
expense
Broadband
COMCOR-TV
(Note I)
long-term debt
current maturities
capital
equity
Pro Forma Consolidated Condensed
Statement of Operations
For the Three Months Ended May 31, 2003
(In thousands, except per share data)
(Unaudited)
Group
Broadband
Adjustments
Totals
Pro Forma Consolidated Condensed Statement of Operations
For the Year Ended February 28, 2003
(In thousands, except per share data)
(Unaudited)
Broadband
Adjustments
Totals
unconsolidated subsidiary and income
taxes
F-4
F-6
$
(9,766)
$
(3,295)
$
3,175
Ended May 31, 2003
February 28, 2003
F-8
OF STOCKHOLDERS [_____] [__], 2003
RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
RETURN THE PROXY CARD USING
THE ENCLOSED ENVELOPE