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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended November 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission File Number: 0-12665
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MICRO BIO-MEDICS, INC.
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(Exact name of Registrant as specified in its charter)
New York 13-2692560
- ----------------------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
846 Pelham Parkway
Pelham Manor, New York 10803
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (914) 738-8400
--------------
Securities registered pursuant to Section 12(b) of the Act:
None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.03 par value
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ . No .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in part III
of this Form 10-K or any amendment to this Form 10-K [ ].
As of February 14, 1996 at 4:00 P.M., the aggregate market value of the
voting stock held by non-affiliates, approximately 3,652,000 shares of Common
Stock, $.03 par value, was approximately $44,742,000 based on the last sale
price of 12.25 for one share of Common Stock on such date. The number of shares
issued and outstanding of the Registrant's Common Stock, as of February 14, 1996
was 4,171,383 after giving effect to the issuance of approximately 280,696
shares in connection with a recent acquisition.
The definitive Proxy Statement for the Annual Meeting of Stockholders to be
held in 1996 to be filed with the Commission not later than March 29, 1996 (i.e.
120 days after the close of the Registrant's fiscal year) has been incorporated
by reference in whole or in part for Part III, Items 11, 12 and 13, of the
November 30, 1995 Form 10-K.
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PART I
ITEM 1. BUSINESS
OVERVIEW
Micro Bio-Medics, Inc. (the "Company" or "MBM") is a New York company which
was incorporated in 1971. The Company distributes medical supplies to
physicians and hospitals in the New York metropolitan area, as well as to health
care professionals in the sports medicine, emergency medicine, school health,
industrial safety, government and laboratory markets nationwide. The Company
depends upon the continued supply of the products it distributes, however, it
does not depend upon any single source. The Company has neither encountered nor
does it anticipate any difficulty in obtaining the necessary products. No one
customer has accounted for more than 10% of the Company's revenues during the
fiscal years ended November 30, 1995, November 30, 1994 and November 30, 1993.
CALIGOR DIVISION
The Company's Caligor Division is a physician supplier in the New York
metropolitan area, serving over 12,000 physicians and laboratories. It also
serves local hospitals, nursing homes and industrial medical departments.
Caligor provides its physicians with a comprehensive selection of supplies
and related services. The division's estimated 50,000 supplies range from
bandages and pharmaceuticals to sophisticated diagnostic equipment, while the
services range from equipment repair to the complete design and installation of
new offices, waiting rooms, exam rooms and laboratories.
The Caligor division through Caligor Physicians & Hospital Supply Corp., a
wholly owned subsidiary of the Company, also operates a pharmacy in Manhattan
to serve local physicians and their patients. In addition, the Caligor Division
supplies independent clinical labs, hospital labs, and physician in-office labs
with diagnostic equipment, test kits, reagents and disposables.
Over the past few years, the Caligor Division has been able to acquire a
number of smaller distributors, resulting in significant economies of scale and
improved operating efficiencies. Caligor has increased its market share in
these new territories with the same combination of sales force support, direct
mail, catalogs and telemarketing sales that it uses in existing territories.
Caligor is the Company's largest division in terms of annual sales.
Revenues during fiscal 1995 were approximately $98,300,000 or 82% of the
Company's total revenues for the same period as compared to $101,000,000 or
83.1% of total revenues for the comparable period of fiscal 1994, as compared to
$55,100,000 or 74.6% of the total revenues for the comparable period of fiscal
1993. The Company's revenues since 1993 have dramatically increased as a
result of the Company's acquisition of the business and assets
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from Clark Surgical and sales and marketing efforts aimed at the acquired and
existing customer base.
MBM DIVISION
The MBM Division distributes sports medicine supplies, school nurse
supplies, medical equipment and rehabilitation equipment to over 10,000 schools,
colleges, municipalities, emergency medical units and professional sports teams
around the country, including many of the major and minor league baseball,
basketball, football and hockey teams. Revenues derived from municipalities and
school districts are derived from competitive bidding.
Like the Caligor Division, MBM Division serves its customers with a
comprehensive line of supplies and services, ranging from the delivery of
athletic tape to an NFL team on the road to the complete design, furnishing and
stocking of a training room, sports medicine clinic, or school nurse office.
MBM Division markets its product line primarily via three catalogs which it
distributes to customers and prospective customers each year. These catalogs
are supported by direct mail, telemarketing, professional journal advertising,
national and local trade show exhibitions, and an inside sales and customer
service staff.
The seasonal buying habits of the Company's school and athletic customers
is concentrated between the months of June and September of each year. Although
the Company's marketing expenses relating to such customers are incurred
throughout the year, the Company has experienced no problem in meeting its cash
requirements as a result of its working capital and extension of credit under
its Revolving Credit Agreement.
Revenues derived from the MBM Division during fiscal 1995 were
approximately $18,800,000 or 15.7% of the Company's total revenues for the same
period as compared with approximately $18,100,000 or 14.9% of total revenues for
fiscal 1993 and $16,500,000 or 22.3% total revenues for fiscal 1993. Revenues
increased as a result of greater market penetration.
HEALER PRODUCTS DIVISION
The Company's Healer Products Division is an assembler and wholesaler of
first aid kits and private label medical products. These products, in turn, are
marketed by the Company's other divisions, and sold to numerous outside markets
through a network of commissioned sales agents. The first aid and medical kits
are produced in a variety of forms and sizes, but are generally designed for use
in government, industry, schools, emergency medical organizations, hospitals,
homes and recreational facilities.
The Healer Products Division also produces specialized kits for volunteer
ambulance corps, emergency squads, corporate offices, construction operations,
restaurants, retail stores, boats,
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athletic activities, motor vehicles, and sales promotion purposes as well as
for specific medical problems such as burns, poisoning, insect stings, traumatic
accidents, obstetrical emergencies and eye injuries.
Many of the products contained in the kits are generic and are marketed
under the Company's private label. The use of private-label generic products
permits attractive pricing for the Company and its customers and creates a
consistent, positive brand image among customers.
Revenues derived from the Healer Products Division during fiscal year 1995
were approximately $2,700,000 representing 2.3% of the Company's total revenues
as compared with $2,459,000 representing 2.0% of total revenues for fiscal 1994
and as compared to $2,300,000 representing 3.1% of total revenues for fiscal
1993. Revenues increased as a result of increased market penetration and the
addition of more independent commission sales representatives.
ACQUISITION OF STONE MEDICAL SUPPLY CORPORATION
Pursuant to an Agreement for Merger and Reorganization dated November 2,
1995 among MBM, Diagnostic Leasing Corp. ("DLC"), Stone Medical Supply
Corporation ("Stone"), a distributor of physician and podiatry supplies and
equipment and Andrew D. Stone, Stone was merged into DLC with DLC as the
surviving corporation on January 18, 1996. The Company issued approximately
280,696 shares of its Common Stock in exchange for the outstanding shares of
Stone. Subsequent to the merger, DLC changed its name to Stone Medical Supply
Corporation.
ACQUISITION OF MID COUNTY MEDICAL SUPPLY CO., INC.
On March 27, 1995, MBM acquired certain assets and customer accounts of Mid
County Medical Supply Co., Inc., a distributor of physician and hospital
supplies, for approximately $500,000. The purchase price was allocated based
upon the fair market value of the assets at the date of acquisition. The
operations of Mid County Medical Supply Co., Inc., have been combined into the
Caligor Division.
ACQUISITION OF JOSEPH WEINTRAUB, INC.
On June 1, 1994, MBM acquired certain assets and customer accounts of
Joseph Weintraub, Inc., a distributor of physician and hospital supplies for
approximately $1,100,000. The purchase price was allocated based upon the fair
market value of the assets at the date of acquisition. The operations of Joseph
Weintraub Inc. have been combined into the Caligor Division.
ACQUISITION OF CLARK SURGICAL CORP.
On November 19, 1993, MBM Hospital Supply Corp., a wholly owned subsidiary
of MBM entered into an agreement with Clark Surgical Corp. ("Clark") to acquire
from Clark substantially all of the assets and customer accounts subject to
certain specific liabilities and obligations arising out of the contracts and
personal property leases acquired (the "Agreement"). This
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transaction closed on December 1, 1993 and was accounted for as a purchase.
The purchase price for all the assets was approximately $16,500,000. The
purchase price was based upon the book value of the inventory, accounts
receivable and fixed assets purchased by MBM Hospital plus $1 million for
Clark's goodwill as described in the Agreement. MBM also issued to certain
persons warrants to purchase an aggregate of 40,000 shares of MBM's Common Stock
at a purchase price of $8.00 per share, subject to MBM's right to terminate the
unvested portion of the Warrants upon certain conditions at the sole discretion
of the Board of Directors. The Warrants vested 20% at closing and the balance
was scheduled to vest in four equal annual amounts on the anniversary date of
the Closing Date. However, the unvested portion of the Warrants to purchase
32,000 shares have been terminated.
The Agreement also provided for the execution of agreements not to compete
with Alfred S. Bretan and Burt Wexler, the sole shareholders of Clark
(hereinafter referred to as the "Shareholders"). The agreements not to compete
provide for the payment of $2.725 million in cash over a seven year period.
The operations of MBM Hospital Supply Corp. have been combined into the
various divisions of MBM.
ACQUISITION OF HARRISBURG SURGICAL SUPPLY, INC.
On March 29, 1993, MBM acquired Harrisburg Surgical Supply, Inc., a
distributor of physician and nursing home supplies servicing the eastern
Pennsylvania, Philadelphia and Baltimore metropolitan markets. The
consideration paid consisted of a combination of $600,000 in cash and 71,229
shares of MBM's Common Stock for an aggregate purchase price of approximately
$1,200,000. The operations of Harrisburg Surgical Supply, Inc. have been
combined into the Caligor Division.
REVOLVING CREDIT AGREEMENT
MBM has entered into a Credit Agreement with Chase Manhattan Bank N.A.
("Chase") to act as agent of and as a participant in a $25 million secured
revolving credit facility for MBM. Fleet Bank of New York ("Fleet") also acted
as a participant in the Credit Agreement. Chase's and Fleet's commitment under
the Credit Agreement is limited to $15 million and $10 million, respectively.
All references to MBM include MBM and its subsidiaries.
The Credit Agreement, as amended, which expires on February 15, 1999,
provides for a three year secured revolving credit in an amount which shall not
exceed the lesser of (a) $25,000,000 or (b) the borrowing base as defined in the
Credit Agreement.
The Credit Agreement provides for MBM to pay interest on loans made under
the facility at the rate of 1/4 of 1% over the Banks periodic base rate unless
MBM elects to pay based upon an
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alternative formula at the time of each borrowing. MBM has been borrowing
primarily by utilizing LIBOR, at the prevailing rate plus 1.75%. The prevailing
rate varies based upon the term of the LIBOR. Upon request by MBM, the Banks
may, at their option, create banker acceptances under the facility. On June 7,
1995, MBM entered into a three year interest rate swap agreement with Chase for
$10,000,000. It is management's intent to match the agreement's terms as to
principal amounts and repricing maturities in order to reduce MBM's interest
rate risk on its revolving loans. Effectively, the agreement serves to limit
the net interest rate charged on MBM's first $10,000,000 of revolving loans to
8.75%. However, MBM would receive no further interest rate benefit once the
applicable interest rate falls below 7.05%.
The Credit Agreement is subject to several conditions and financial
covenants such as the following:
- WORKING CAPITAL: MBM shall maintain a Consolidated Working Capital of
no less than $10,500,000 as of the end of each fiscal quarter.
- INTEREST COVERAGE RATIO: MBM shall maintain a ratio of Consolidated
EBITA (earnings before interest, taxes and amortization) to
Consolidated Interest Expense, measured at the end of each fiscal
quarter for a period comprised of such fiscal quarter and the three
immediately preceding fiscal quarters, of not less than 2.50 to 1.00.
- CURRENT RATIO: MBM shall maintain a ratio of Consolidated Current
Assets to Consolidated Current Liabilities of not less than 1.20 to
1.0, calculated at each fiscal quarter end.
- LEVERAGE RATIO: MBM shall maintain a ratio of (a)(i) total
liabilities of MBM and its Consolidated Subsidiaries less (ii)
Approved Subordinated Debt divided by (b)(i) net worth of MBM and its
Consolidated Subsidiaries plus (ii) Approved Subordinated Debt less
(iii) intangible assets of MBM and its Consolidated Subsidiaries, as
of the end of each fiscal quarter of MBM of not more than 2.75 to
1.00.
- TANGIBLE NET WORTH: MBM shall maintain a Consolidated Tangible Net
Worth, calculated at the end of each fiscal year, of no less than
$400,000 more than the Consolidated Tangible Net Worth for the
respective immediately preceding fiscal year.
The Credit Agreement provides, among other things that, (1) MBM shall not
declare or pay any dividends or make any distribution of assets to stockholders,
except that MBM may declare dividends and make distributions solely in the
Common Stock of MBM, (2) MBM shall not purchase any of its capital stock now or
hereafter outstanding which purchase shall, when aggregated with all other such
purchases, exceed $250,000 (excluding certain purchases as set
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forth in the Credit Agreement relating to MBM's shares that were issued in
connection with MBM's purchase of Harrisburg Health Care, Inc.), (3) MBM shall
not lease, assign, transfer or dispose of assets other than in the ordinary
course of business, (4) MBM shall not change its fiscal year, (5) MBM shall not
incur any debt other than the following: debt owed to the Banks under the
facility; existing debt disclosed to and approved by the Banks; approved
subordinated debt; debt between MBM and a subsidiary; accounts payable to trade
creditors incurred in the ordinary course of business; commercial letters of
credit issued for the account of MBM by other than the Banks in amount not to
exceed in the aggregate at any time the principal sum of $500,000; and such
other debt as provided for in the Credit Agreement.
REGULATORY REQUIREMENTS
The manufacturers of many products sold by MBM are required to obtain U.S.
Food and Drug Administration ("FDA") approval for such products, failing such
approval, sales of such products cannot lawfully be made. MBM's assembly,
warehousing and distribution procedures are subject to the Good Manufacturing
Practices regulation of the FDA. MBM has registered itself with the FDA and has
renewed said registration annually. Such registration permits MBM to distribute
supplies and medical devices.
The Caligor Division, among its various activities, operates as a
wholesaler and retailer of prescription drugs and medical devices in the State
of New York. The practice of pharmacy at the wholesale and retail level is
regulated by federal, state and local statutes, rules and regulations. MBM is
duly licensed to permit its Caligor Division to operate as wholesalers and
retailers in prescription drugs and medical devices in the State of New York.
In the future, should MBM expand such activities, it will have to comply with
all applicable federal, state and local rules.
COMPETITION
MBM, in all phases of its activities, experiences competition from other
manufacturers and distributors of products in the same categories as those of
MBM, as well as from wholesale and retail pharmacies, selling to the same
general markets as those of MBM. Additionally, the Caligor Division's services
are subject to competition from similar service organizations. Many of MBM's
competitors have far greater resources than MBM and, in addition, many larger
and better financed firms not presently in MBM's lines of business may
conceivably enter these lines of business in the future. However, most of MBM's
markets are serviced by hospital and surgical supply dealers, athletic
retailers, pharmacies and equipment repair firms. MBM believes that its
purchasing power, quick service including next day delivery where possible,
competitive pricing and marketing expertise enable it to compete favorably with
such firms although it continues to experience significant competition from
other firms which are better established and have substantially greater
financial resources than MBM.
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EMPLOYEES
At November 30, 1995, MBM employed 297 full-time employees, including 118
sales and customer service persons, 92 warehouse and shipping workers, 59
clerical workers 7 delivery persons, 6 computer programmers, 2 pharmacists, 7
purchasing agents and 6 senior management officers. MBM usually employs
seasonal summer employees during peak sales volume periods. MBM's employees are
not covered under any collective bargaining agreements and there have been no
work stoppages. Management believes MBM has satisfactory employee relations at
all levels.
ITEM 2. DESCRIPTION OF PROPERTY.
In 1992, MBM consolidated its various Mount Vernon facilities described
below into one central location consisting of approximately 88,000 square feet
of assembly and storage space and 20,000 square feet of office space in a 31
year old industrial building at 846 Pelham Parkway, Pelham Manor, New York.
This location's facilities are leased from a non-affiliated entity and are in
good condition and sprinklered. MBM leased these premises pursuant to a lease
which expires on July 31, 2007. MBM pays an annual rent of approximately
$468,000, with certain additional sums based upon property tax costs.
The Pelham Manor, New York facilities are equipped to house the assembly
processing, customer service, warehousing and shipping requirements of all MBM's
divisions to the extent located at these facilities. It contains an order
picking conveyor system, fork lifts, large numbers of pallet racks and shelving,
manually operated material handling equipment, packaging equipment, assembly
equipment (tables, benches and conveyers), engraving machinery (for medical
equipment), and conventional office equipment, including an electronic data
processing system used to facilitate all areas of MBM's business.
MBM leases for its Caligor Division approximately 5,000 square feet of
space at 1226 Lexington Avenue, New York, New York, under a lease which expires
on April 30, 2000, for which it presently pays an annual rental of approximately
$49,000 per annum, together with additional sums for heat, utilities and
property tax costs. This location contains a store front facility fully
equipped to operate as a wholesale and retail pharmacy, and a basement storage
facility.
MBM leases for its MBM division approximately 4,290 square feet of space at
211 Harbor Way, South San Francisco, California under a lease which expires on
January 31, 2000 for which it pays an annual rental of approximately $30,000.
This location's facilities are in good condition with approximately 1,000 square
feet being devoted to office space and the balance to warehouse space.
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MBM also leases approximately 3,100 square feet of space in Jacksonville,
Florida, under a lease which expires June 30, 1997. The annual rental under the
lease is approximately $17,300.
MBM leases for its Caligor Division approximately 120,000 square feet of
warehouse space including offices and warehouse dock at 300 Michael Drive,
Syosset, New York. The building is fully sprinklered and alarmed. MBM leases
these facilities pursuant to a lease which expires on March 31, 1997, with an
option to renew until April 29, 2001. MBM pays an annual rent of $240,000 with
certain additional sums based upon property tax costs, insurance and utilities.
In February 1996, MBM leased for its Caligor Division approximately 82,000
square feet of space in the Bronx, New York, under a lease which expires in
January, 2001. The annual rent is approximately $200,000. The space will be
used by Caligor's Hospital Division for its stockless distribution operations.
The premises are in good condition, sprinklered and alarmed.
All of MBM's facilities are adequate for MBM's present needs. In the event
that additional facilities are needed, Management believes that such facilities
can be obtained at a reasonable cost.
Stone's executive and sales offices and its storage facilities were
located at 2487 North Jerusalem Road, East Meadow, New York 11550, containing
approximately 13,800 square feet. Stone purchased the aforesaid premises on
July 13, 1984, for the sum of $200,000. A first mortgage was obtained from
Citibank, N.A., in the principal amount of $175,000, payable over twenty years
at the monthly rate of $730, plus interest on the unpaid balance. On March 15,
1985, the Job Development Authority of the State of New York (the "JDA") made
an additional loan on the premises for alterations in the sum of $149,000,
replacing temporary financing. MBM is actively attempting to sell the
property.
None of MBM's leases are with related parties. Additionally, MBM now owns
1 automobile and 2 trucks and leases 2 station wagons, 5 trucks and 10
automobiles, all of which are utilized for business purposes.
Item 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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PART II
ITEM 5. MARKET INFORMATION
The Company's Common Stock is quoted on the National Association of
Securities Dealers' Automated Quotation System National Market System
("NASDAQ/NMS") under the symbol "MBMI." The Company's Series 1 Warrants may be
quoted in the "pink sheets" published by National Quotation Bureau, Inc. The
Company does not intend to qualify the Series 1 Warrants for trading on NASDAQ.
During the period December 1, 1993 to November 30, 1995, the Company's Series 1
Warrants were unpriced.
The following table reflects the high and low sales prices for the
Company's Common Stock for the periods indicated as reported by the National
Association of Securities Dealers, Inc. ("NASD") from its NASDAQ system:
COMMON STOCK
Quarter Ended
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February 28 May 31 August 31 November 30
High Low High Low High Low High Low
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Fiscal Year
Ended
November
30, 1995 10 9-7/16 12-5/8 9-5/16 13-7/8 11-1/4 14 12
Fiscal Year
Ended
November
30, 1994 13 8 10-3/4 9-1/8 10 9-1/2 10 9-1/2
The over-the-counter market quotations reported above reflects inter-dealer
prices, without retail markup, markdown or commission.
As of February 14, 1996 at 4:00 P.M. Eastern Standard Time, the last sale
price of the Common Stock in the over-the-counter market was $12.25.
Management has been advised by its transfer agent (American Stock Transfer
& Trust Company) that the approximate number of record holders of the Company's
Common Stock, as of February 14, 1996, the record date, was approximately 790.
No cash dividends have been paid by the Company on its Common Stock and no such
payment is anticipated in the foreseeable future.
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ITEM 6. SELECTED FINANCIAL DATA
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AS AT AND FOR THE YEARS ENDED NOVEMBER 30.
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1995 1994 1993 1992 1991
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<S> <C> <C> <C> <C> <C>
NET SALES $119,873,764 $121,604,461 $73,951,410 $61,629,435 $50,739,534
COST OF GOODS SOLD 94,307,143 94,923,689 56,347,353 47,287,409 38,561,458
------------ ------------ ----------- ----------- -----------
GROSS PROFIT 25,566,621 26,680,772 17,604,057 14,342,026 12,178,076
------------ ------------ ----------- ----------- -----------
EXPENSES:
Selling, shipping and warehouse 14,511,793 14,421,280 8,521,021 6,852,670 5,760,276
General and administrative 7,901,052 8,581,615 6,525,488 5,015,128 4,303,953
Interest and financing costs - net 1,238,887 1,044,257 502,329 289,355 425,694
Non-recurring items:
Provision for consolidation of facilities - - - - 483,000
------------ ------------ ----------- ----------- -----------
Total expenses 23,651,732 24,047,152 15,548,838 12,157,153 10,972,923
------------ ------------ ----------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,914,889 2,633,620 2,055,219 2,184,873 1,205,153
PROVISION FOR INCOME TAXES 806,000 952,000 853,000 962,000 537,000
------------ ------------ ----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 1,108,889 1,681,620 1,202,219 1,222,873 668,153
CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR
INCOME TAXES PRIOR TO 1994 - (60,000) - - -
------------ ------------ ----------- ----------- -----------
NET INCOME $ 1,108,889 $ 1,621,620 $ 1,202,219 $ 1,222,873 $ 668,153
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ .25 $ .37 $ .30 $ .41 $ .37
CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR
INCOME TAXES PRIOR TO 1994 - (.01) - - -
------------ ------------ ----------- ----------- -----------
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE $ .25 $ .36 $ .30 $ .41 $ .37
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
AVERAGE NUMBER OF SHARES USED TO COMPUTE EARNINGS
PER COMMON AND COMMON EQUIVALENT SHARE 5,121,634(*) 4,896,518(*) 4,734,746(*) 3,481,415(*) 1,784,986
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
DIVIDENDS PAID NONE NONE NONE NONE NONE
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
WORKING CAPITAL $29,965,266 $ 30,141,450 $ 20,965,370 $15,819,417 $11,793,261
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
LONG-TERM DEBT (net of current maturities) $17,270,062 $ 19,381,239 $ 9,584,684 $9,410,079 $8,022,054
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
TOTAL ASSETS $51,135,712 $ 54,461,087 $ 32,784,324 $27,934,060 $19,488,491
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
STOCKHOLDERS' EQUITY $21,064,152 $ 18,067,056 $ 16,193,524 $10,461,736 $5,822,407
------------ ------------ ----------- ----------- -----------
------------ ------------ ----------- ----------- -----------
STOCKHOLDERS' EQUITY PER SHARE $4.11(*) $3.69(*) $3.42(*) $3.01(*) $3.26
----- ----- ----- ----- -----
----- ----- ----- ----- -----
TANGIBLE BOOK VALUE PER SHARE $3.14(*) $2.92(*) $3.13(*) $2.72(*) $2.69
----- ----- ----- ----- -----
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</TABLE>
(*) Includes additional shares assuming conversion of stock options and
warrants utilizing the modified treasury stock method. For the other years,
outstanding stock options and warrants have not been included since their
effect would be antidilutive or immaterial.
All references to shares and per share data have been restated for 1991
due to a reverse stock split on June 28, 1991.
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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
For fiscal 1995, net sales decreased 1.4%. The decrease in net sales for
the fiscal 1995 resulted in MBM's downsizing of unprofitable divisions acquired
from Clark Surgical Corp. ("Clark") during the prior year. For fiscal 1994 net
sales increased 64.4% as compared with the prior year. This increase in sales
resulted from MBM's acquisition of Clark and its continuing effort to increase
market penetration and sales volume on the existing customer base and the
addition of new customers. During 1995, 1994 and 1993, the introduction of new
products, changing prices and inflation had no material impact on MBM's
operations.
Net income for fiscal 1995 was .9% of net sales versus 1.3% of net sales in
fiscal 1994 versus 1.6% of sales in fiscal 1993. Net income before the
cumulative effect of accounting change for fiscal 1994 was 1.4% of net sales
versus 1.6 % of net sales in fiscal 1993. The decrease for fiscal 1995 versus,
fiscal 1994 was due to increased interest rates charged by financial
institutions, the downsizing of unprofitable divisions acquired from Clark
Surgical Corp. during the prior year, a decrease in the overall consolidated
gross profit percentage and an increase in the effective income tax rate for
1995. The decrease for fiscal 1994 versus fiscal 1993 was due primarily to
costs associated with the acquisition of Clark, the expansion of MBM's hospital
and physician sales forces and increases in the interest rates charged by
financial institutions.
GROSS PROFIT/OPERATING EXPENSES
Gross profit for fiscal 1995 was 21.3% of net sales versus 21.9% of net
sales in fiscal 1994. The decrease in gross profit was a result of changes in
MBM's product mix. Gross profit for fiscal 1994 was 21.9% of net sales versus
23.8% of net sales in fiscal 1993. The decrease in gross profit was a result of
increased sales to hospitals and changes in MBM's product mix. Selling,
shipping and warehouse and general and administrative expenses expressed as a
percent of net sales decreased .2% for fiscal 1995 as compared to fiscal 1994.
Selling, shipping and warehouse and general and administrative expenses
expressed as a percent of net sales decreased 1.4% for fiscal 1994 as compared
to fiscal 1993.
12
<PAGE>
INTEREST AND FINANCING COSTS (NET OF INTEREST INCOME)
Interest expense net of interest income expressed as a percent of net sales
increased .1% for fiscal 1995 when compared to the prior year as a result of
increases in the interest rates charged by financial institutions. Interest
expense net of interest income expressed as a percent of net sales increased .2%
for fiscal 1994 as compared to the comparable period of the prior year, as a
result of increases in accounts receivable and increases in interest rates
charged by financial institutions.
LIQUIDITY AND CAPITAL RESOURCES
During the past three fiscal years, MBM continued to meet its cash needs
via cash flow from operations and borrowings. During fiscal 1995, 1994 and
1993, MBM had an average of approximately $10,500,000, $11,000,000 and
$4,000,000 respectively, of unused credit lines available each month over its
normal operating requirements.
Management believes that its working capital of approximately $30,000,000
at November 30, 1995 provides sufficient liquidity for its short and long-term
requirements and that MBM's long-term liquidity is not materially effected by
any restrictive covenants contained in MBM's Revolving Credit Agreement.
Further, Management believes that MBM should not experience a problem in
connection with the maintenance of such covenants and that its $25,000,000 line
of credit provides MBM with the resources it reasonably expects to require to
meet its cash commitments through fiscal 1996.
For fiscal 1995 MBM generated cash flow from operating activities. A
decrease in accounts payable and an increase in prepaid expenses over and above
decreases in accounts receivable and inventory contributed to MBM's generation
of cash. During fiscal 1995, MBM's financing activities used cash as a result
of repayments of the bank loan under its long-term credit agreement. For fiscal
1995, MBM used cash in investing activities to make capital expenditures and
payments of net assets.
For fiscal 1994, MBM generated cash flow from operating activities. An
increase in accounts payable over and above increases in inventory, accounts
receivable and prepaid expenses contributed to MBM's generation of cash. During
fiscal 1994, MBM's financing activities used cash as a result of repayments of
the bank loan under its long-term credit agreement. For fiscal 1994 MBM used
cash in investing activities to make capital expenditures and payments of net
assets. During fiscal 1994, MBM acquired the business and certain assets of
Clark through an increase in MBM's line-of-credit and the use of same.
For fiscal 1993, MBM used cash for operating activities. An increase in
accounts receivable, inventory, prepaid expenses and a decrease in accrued
expenses and accounts payable contributed to MBM's use of cash. During fiscal
1993, MBM's financing activities
13
<PAGE>
generated cash flow as a result of the net proceeds from the exercise of
Series 1 Warrants and the sale of Debentures. For fiscal 1993, MBM used cash in
investing activities to make capital expenditures.
Between August and September 1993, MBM received approximately $4,000,000 in
gross proceeds from the exercise of Warrants. In November 1993, MBM completed
the private sale and issuance of its 7% convertible subordinated Debentures due
October 30, 2003. Net proceeds from the issuance of the Debentures with a face
value of $3 million was approximately $2.7 million. These proceeds combined
with borrowings under MBM's line of credit were used on December 1, 1993 to
purchase the assets of Clark at a purchase price of approximately $16,500,000.
The Debentures are immediately convertible into shares of Common Stock at the
rate of $8.00 per share until October 28, 2003, subject to adjustment in certain
events. In September 1995, $1,500,000 of Debentures were converted into 187,500
shares of MBM's Common Stock.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by Item 8, and an index thereto commences on page
F-1, which pages follow this page.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
14
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
INDEX
FINANCIAL STATEMENTS
PAGE
----
Independent Auditors' Report F-2
Consolidated Balance Sheets
November 30, 1995 and 1994 F-3 - F-4
Consolidated Statements of Income
Years Ended November 30, 1995, 1994 and 1993 F-5
Consolidated Statements of Cash Flows
Years Ended November 30, 1995, 1994 and 1993 F-6 - F-7
Consolidated Statements of Changes in
Stockholders' Equity
Years Ended November 30, 1995, 1994 and 1993 F-8
Notes to Consolidated Financial Statements F-9 - F-19
FINANCIAL STATEMENT SCHEDULES:
Schedule II - Valuation and Qualifying Accounts F-20
Exhibit 11 - Earnings Per Share Calculation F-21
Schedules other than those referred to above have been
omitted as the conditions requiring their filing are not
presented or the information has been presented
elsewhere in the financial statements
Separate financial statements and schedules of
Micro Bio-Medics, Inc. (Parent) have been omitted
since the conditions for omission have been met
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Micro Bio-Medics, Inc.
Pelham Manor, New York
We have audited the accompanying consolidated balance sheets of Micro Bio-
Medics, Inc. and Subsidiaries as of November 30, 1995 and 1994, and the related
consolidated statements of income, cash flows, and changes in stockholders'
equity for each of the three years in the period ended November 30, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Micro
Bio-Medics, Inc. and Subsidiaries as of November 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended November 30, 1995, in conformity with generally
accepted accounting principles.
We have also audited Schedule II and Exhibit 11 for the years ended November 30,
1995, 1994 and 1993 included in the 1995 annual report of Micro Bio-Medics, Inc.
and Subsidiaries on Form 10-K. In our opinion, such schedules present fairly
the information required to be set forth therein.
MILLER, ELLIN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
January 31, 1996
F-2
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 2,817,285 $ 3,333,345
Accounts receivable, less allowance for
doubtful accounts of $674,210 in 1995
and $650,000 in 1994 (Note 5) 25,657,607 26,780,044
Inventory (Note 5) 12,318,756 15,449,465
Deferred income taxes (Note 6) 485,500 518,362
Prepaid expenses and other current assets 657,768 771,026
Prepaid income taxes 471,710 -
----------- -----------
Total current assets 42,408,626 46,852,242
PROPERTY, PLANT AND EQUIPMENT - at cost,
net of accumulated depreciation and amortization
of $3,616,134 in 1995 and $2,852,004 in 1994
(Notes 2, 3 and 5) 3,477,807 3,453,607
INTANGIBLE ASSETS, net of accumulated amortization
of $1,061,323 in 1995 and $769,088 in 1994
(Notes 2 and 4) 4,990,073 3,793,654
OTHER ASSETS 259,206 361,584
----------- -----------
$51,135,712 $54,461,087
----------- -----------
----------- -----------
</TABLE>
The notes to consolidated financial statements are made a part hereof.
F-3
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------
1995 1994
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 5) $479,195 $437,970
Accounts payable 10,297,403 13,760,015
Accrued expenses and sundry liabilities (Note 7) 1,666,762 1,581,341
Due to seller (Note 2) - 931,466
----------- -----------
Total current liabilities 12,443,360 16,710,792
LONG-TERM DEBT, net of current maturities (Note 5) 17,270,062 19,381,239
DEFERRED INCOME TAXES (Note 6) 358,138 302,000
----------- -----------
Total liabilities 30,071,560 36,394,031
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY (Notes 5 and 9):
Preferred stock $1.00 par value:
Authorized - 1,000,000 shares,
no shares issued -
Common stock $.03 par value:
Authorized - 7,000,000 shares
Issued - 3,878,804 shares in 1995
and 3,595,409 shares in 1994 116,364 107,862
Capital in excess of par value 12,407,257 10,527,552
Retained earnings 8,541,695 7,432,806
Less: Cost of 1,167 shares of common
stock in treasury (1,164) (1,164)
----------- -----------
Total stockholders' equity 21,064,152 18,067,056
----------- -----------
$51,135,712 $54,461,087
----------- -----------
----------- -----------
</TABLE>
The notes to consolidated financial statements are made a part hereof.
F-4
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
----------------------------------------------------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
NET SALES $119,873,764 $121,604,461 $73,951,410
COST OF GOODS SOLD 94,307,143 94,923,689 56,347,353
------------ ------------ -----------
GROSS PROFIT 25,566,621 26,680,772 17,604,057
------------ ------------ -----------
OPERATING EXPENSES:
Selling, shipping and warehouse 14,511,793 14,421,280 8,521,021
General and administrative 7,901,052 8,581,615 6,525,488
Interest and financing costs (net of interest
income of approximately $172,600 in 1995,
$173,000 in 1994 and $198,500 in 1993) 1,238,887 1,044,257 502,329
------------ ------------ -----------
Total operating expenses 23,651,732 24,047,152 15,548,838
------------ ------------ -----------
INCOME BEFORE PROVISION
FOR INCOME TAXES 1,914,889 2,633,620 2,055,219
PROVISION FOR INCOME TAXES (Note 6) 806,000 952,000 853,000
------------ ------------ -----------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 1,108,889 1,681,620 1,202,219
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE FOR INCOME TAXES PRIOR TO 1994 - (60,000) -
------------ ------------ -----------
NET INCOME $ 1,108,889 $ 1,621,620 $ 1,202,219
------------ ------------ -----------
------------ ------------ -----------
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (Note 10) $.25 $.37 $.30
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE FOR INCOME TAXES
PRIOR TO 1994 - (.01) -
---- ---- ----
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $.25 $.36 $.30
---- ---- ----
---- ---- ----
NUMBER OF SHARES USED IN COMPUTING
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE (Note 10) 5,121,634 4,896,518 4,734,746
------------ ------------ -----------
------------ ------------ -----------
DIVIDENDS PER COMMON SHARE NONE NONE NONE
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
The notes to consolidated financial statements are made a part hereof.
F-5
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
--------------------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,108,889 $1,621,620 $1,202,219
---------- ---------- ----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Cumulative effect of accounting change - 60,000 -
Depreciation and amortization 1,056,365 952,109 666,589
Provision for losses on accounts receivable 24,210 268,551 321,526
Deferred income taxes 89,000 (96,000) (59,930)
Changes in assets and liabilities, net of
effect of asset acquisitions (Note 2):
Accounts receivable 1,098,227 (1,055,450) (1,000,255)
Inventory 3,130,709 (2,506,516) (310,553)
Prepaid expenses and other current assets 113,258 (265,042) (75,031)
Prepaid income taxes (471,710) - -
Other assets (7,622) (15,604) 86,723
Accounts payable (3,462,612) 8,441,961 (651,390)
Accrued expenses and sundry liabilities 85,421 255,913 (25,286)
Income taxes payable - - (270,284)
---------- ---------- ----------
1,655,246 6,039,922 (1,317,891)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,764,135 7,661,542 (115,672)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from exercise of warrants 300,601 126,409 3,831,104
Net borrowings (repayments) under revolving loan agreements (150,000) (3,224,695) (3,350,000)
Net proceeds from issuance of debentures - - 2,725,000
Repayments of long-term debt (419,952) (380,085) (623,128)
Exercise of employee stock options 197,606 125,503 107,975
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (71,745) (3,352,868) 2,690,951
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for certain net assets of businesses acquired (931,466) (2,718,009) (590,490)
Capital expenditures (788,330) (713,484) (236,705)
Payments for intangible assets (1,488,654) (1,027,851) (204,173)
Proceeds from sale and leaseback of equipment - - 425,736
Note receivable - 1,000,000 (1,000,000)
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (3,208,450) (3,459,344) (1,605,632)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH (516,060) 849,330 969,647
CASH - beginning of year 3,333,345 2,484,015 1,514,368
---------- ---------- ----------
CASH - end of year $2,817,285 $3,333,345 $2,484,015
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The notes to consolidated financial statements are made a part hereof.
F-6
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
--------------------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $1,424,000 $1,217,000 $ 700,000
---------- ---------- ----------
---------- ---------- ----------
Income taxes $ 948,000 $1,214,000 $1,157,000
---------- ---------- ----------
---------- ---------- ----------
ASSETS ACQUIRED FOR DEBT - capital leases,
which are not reflected in the above statements $ - $ 202,658 $ 489,004
---------- ---------- ----------
---------- ---------- ----------
NET ASSETS OF A BUSINESS ACQUIRED
FOR ISSUANCE OF COMMON STOCK
which is not reflected in the above statements $ - $ - $ 590,490
---------- ---------- ----------
---------- ---------- ----------
BUSINESS ACQUIRED FOR ISSUANCE OF
LONG-TERM DEBT which is not
reflected in the above statements $ - $4,217,981 $ -
---------- ---------- ----------
---------- ---------- ----------
DEBENTURES CONVERTED INTO COMMON
STOCK $1,390,000 $ - $ -
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The notes to consolidated financial statements are made a part hereof.
F-7
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN
$.03 PAR VALUE EXCESS OF RETAINED TREASURY
------------------------
SHARES AMOUNT PAR VALUE EARNINGS STOCK
--------- -------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C>
BALANCES AT
NOVEMBER 30, 1992 2,763,959 $ 82,918 $5,771,015 $4,608,967 $1,164
Shares issued for stock options 25,967 779 107,196 - -
Shares issued for exercise
of warrants 674,297 20,229 3,810,875 - -
Shares issued for purchase
of net assets (Note 2) 71,229 2,137 588,353 - -
Net income - - - 1,202,219 -
--------- -------- ----------- ---------- -------
BALANCES AT
NOVEMBER 30, 1993 3,535,452 106,063 10,277,439 5,811,186 1,164
Shares issued for exercise
of warrants 29,057 872 125,537 - -
Shares issued for stock options 30,900 927 124,576 - -
Net income - - - 1,621,620 -
--------- -------- ----------- ---------- -------
BALANCES AT
NOVEMBER 30, 1994 3,595,409 107,862 10,527,552 7,432,806 1,164
Shares issued for conversion
of debentures (Note 5) 187,500 5,625 1,384,375 - -
Shares issued for stock options 45,133 1,354 196,252 - -
Shares issued for exercise
of warrants 50,762 1,523 299,078 - -
Net income - - - 1,108,889 -
--------- -------- ----------- ---------- -------
BALANCES AT
NOVEMBER 30, 1995 3,878,804 $116,364 $12,407,257 $8,541,695 $1,164
--------- -------- ----------- ---------- -------
--------- -------- ----------- ---------- -------
</TABLE>
The notes to consolidated financial statements are made a part hereof.
F-8
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONCENTRATION OF CREDIT RISK
Micro Bio-Medics, Inc. (the "Company") and its subsidiaries are engaged in
the distribution, at wholesale, of emergency medical service products and
the assembly and distribution of first-aid and medical kits and school and
athletic medical supplies. The Company distributes medical supplies to
physicians and hospitals in the New York metropolitan area, as well as to
health care professionals in sports medicine, industrial safety, and
government and laboratory markets nationwide. The foregoing operations are
all considered as one business segment. Historically, the Company has not
experienced significant losses related to receivables from any individual
customers or group of customers in any industry or geographic area.
CASH
The Company maintains various bank accounts and at times, balances may be
in excess of the FDIC insurance limit. At November 30, 1995 and 1994, the
amounts in excess of FDIC insurance limits were approximately $2,200,000
and $2,800,000, respectively.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, which are all wholly-owned. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
INVENTORY
Inventory is valued at the lower of cost (first-in, first-out method) or
market, and consists of finished goods.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION
Property, plant and equipment are being depreciated primarily on the
straight-line basis over the estimated useful lives of the individual
classes of assets.
INTANGIBLES
Computer programming costs are being amortized over five years using the
straight-line method.
The excess of the purchase price paid over the net assets of businesses
acquired is being amortized over fifteen to forty years using the straight-
line method.
The Company evaluates the recoverability of goodwill and other intangible
assets and if there is a decline in related profitability it will recognize
an impairment of value if appropriate.
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of" which will require the determination by the
Company of whether the carrying amount of an asset is recoverable and if an
impairment loss should be recognized. SFAS No. 121 is effective for fiscal
years beginning after December 15, 1995 and management believes that such
adoption will not significantly impact the Company's consolidated financial
statements.
F-9
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109
(SFAS No. 109), "Accounting for Income Taxes," which requires the use of
the liability method of accounting for income taxes. The liability method
measures deferred income taxes by applying enacted statutory rates in
effect at the balance sheet date to the differences between the tax bases
of assets and liabilities and their reported amounts in the financial
statements.
REVENUE RECOGNITION
The Company recognizes revenues when its products are shipped.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
NOTE 2 - ACQUISITIONS
Prior to fiscal year ended November 30, 1992, the Company entered into
several acquisitions.
Effective March 29, 1993, the Company acquired Harrisburg Surgical Supply,
Inc., a distributor of physician and nursing home supplies. The
consideration paid consisted of a combination of approximately $600,000 in
cash and 71,229 shares of the Company's common stock for an aggregate
purchase price of $1,180,900. The purchase price was allocated based upon
the fair market value of the assets at the date of acquisition.
F-10
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
NOTE 2 - ACQUISITIONS (CONTINUED)
On December 1, 1993, a subsidiary of the Company purchased certain net
assets and customer accounts of Clark Surgical Corp. ("Clark") subject to
certain specific liabilities and obligations under existing contracts and
leases. Clark was a major distributor of physician, hospital and
veterinary supplies in the New York Metropolitan area and Southern Florida.
The purchase price as adjusted was approximately $16,500,000 consisting of
inventory of approximately $5,000,000, accounts receivable of approximately
$10,200,000, property and equipment of approximately $300,000 and goodwill
of $1,000,000. The Company borrowed approximately $14,200,000 under its
existing bank line of credit to finance this acquisition and made payments
during the year ended November 30, 1994 of approximately $1,000,000. The
remaining balance of approximately $1,000,000 was paid in November 1995.
In addition, the Company agreed to pay the two former stockholders of Clark
an aggregate of $2,725,000 in cash, payable over a seven year period ending
December 31, 2000 for their agreement not to compete for a period of twenty
years. As part of the acquisition of Clark's assets, which is included
above, the Company issued 40,000 warrants at an exercise price of $8.00 to
these two stockholders with 20% exercisable immediately and the remainder
contingent upon certain conditions being met. Effective November 29, 1994,
these warrants were canceled.
Effective June 1, 1994, the Company acquired certain assets and customer
accounts of Joseph Weintraub, Inc., a distributor of physician and hospital
supplies for approximately $1,100,000. The purchase price was allocated
based upon the fair market value of the assets at the date of acquisition.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
COST
-----------------------
NOVEMBER 30,
------------------------ ESTIMATED
1995 1994 USEFUL LIFE
---------- ---------- -------------
(Years)
<S> <C> <C> <C>
Furniture, fixtures and
equipment (*) $5,716,810 $5,015,884 5 - 8
Transportation equipment 93,419 72,026 5
Leasehold improvements 1,283,712 1,217,701 Life of lease
---------- ----------
7,093,941 6,305,611
Less: Accumulated depreciation
and amortization 3,616,134 2,852,004
---------- ----------
$3,477,807 $3,453,607
---------- ----------
---------- ----------
</TABLE>
(*) Equipment held under capital leases amounted to approximately
$2,249,000 as of November 30, 1995 and 1994.
Depreciation expense totalled approximately $764,000, $717,000 and $584,000
for the years ended November 30, 1995, 1994 and 1993, respectively.
F-11
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
NOTE 4 - INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
Excess cost of acquisitions over net
tangible assets acquired $3,997,570 $3,743,840
Agreements not to compete (Notes 2 and 12) 1,607,183 467,857
Deferred computer programming costs 446,643 351,045
---------- ----------
6,051,396 4,562,742
Less: Accumulated amortization 1,061,323 769,088
---------- ----------
$4,990,073 $3,793,654
---------- ----------
---------- ----------
</TABLE>
Amortization expense amounted to approximately $292,000, $235,000 and
$82,000 for the years ended November 30, 1995, 1994 and 1993, respectively.
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
Capitalized leases (collateralized by
equipment with an aggregate cost of
approximately $2,249,000) payable in
various installments through fiscal
2001; interest at 6.5% to 11.75%
or varies with changes in prime rate $1,426,384 $1,788,511
Bank loans (i) 14,500,000 14,650,000
7% convertible subordinated debentures,
due October 30, 2003 (ii) 1,500,000 3,000,000
Obligation related to acquisition (Note 2):
Joseph Weintraub, Inc. - $24,660 payable
quarterly to June 1999; interest at 7% 322,873 380,698
----------- -----------
17,749,257 19,819,209
Less: Current maturities 479,195 437,970
----------- -----------
$17,270,062 $19,381,239
----------- -----------
----------- -----------
</TABLE>
F-12
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
NOTE 5 - LONG-TERM DEBT (CONTINUED)
The non-current portion of long-term debt at November 30, 1995 is payable
as follows:
YEAR ENDING NOVEMBER 30,
------------------------
1997 $ 464,180
1998 322,228
1999 14,792,180
2000 158,008
2001 33,466
Subsequent 1,500,000
-----------
$17,270,062
-----------
-----------
(i) On November 19, 1993, the Company refinanced its $12,500,000 revolving loan
agreement with Chase Manhattan Bank, N.A. and entered into a revolving loan
agreement with Chase Manhattan Bank, N.A. to act as agent of and as a
participant in a $25,000,000 secured credit facility. Fleet Bank of New
York also acted as a participant in the loan agreement. Chase's and
Fleet's commitment under the loan agreement is limited to $15,000,000 and
$10,000,000, respectively. The loan agreement expires on February 15,
1999. The loan bears interest at the bank's prime rate plus 1/4%, except
for Eurodollar loans. As of November 30, 1995, $12,300,000 of the
$14,500,000 revolving loan outstanding was utilized for Eurodollar loans at
an average interest rate of 7-1/2%. The debt is collateralized by accounts
receivable and inventory. In connection with the loan agreement, the
Company has agreed to certain restrictions relating to its indebtedness and
liens, and has agreed to maintain specified financial ratios and covenants.
The loan agreement prohibits the Company from paying any dividends and
restricts capital distributions or redemptions and purchases or retirements
of any of the Company's capital stock. There are also restrictions as to
investments, acquisitions, capital expenditures and payments to related
parties. A commitment fee equal to 1/8% per annum will be charged on the
unused portion of the loan. The loan may be repaid at any time.
On June 7, 1995, the Company entered into a zero cost three year interest
rate swap agreement with Chase for $10,000,000. It is management's intent
to match the agreement's terms as to principal amounts and repricing
maturities in order to reduce the Company's interest rate risk on its
revolving loans. Effectively, the agreement serves to limit the net
interest rate charged on the Company's first $10,000,000 of revolving loans
to 8-3/4%. However, the Company would receive no further interest rate
benefit once the applicable interest rate falls below 7.05%.
(ii) In November 1993, the Company completed the private sale and issuance of
its 7% convertible subordinated Debentures (the "Debentures") due
October 30, 2003. Net proceeds from the issuance of the Debentures with a
face value of $3,000,000 were approximately $2,700,000. The offering fees
are being amortized over a life of ten years.
The Debentures are immediately convertible into shares of common stock at
the rate of $8.00 per share until October 28, 2003, subject to adjustment
under certain circumstances. Interest is payable semi-annually on the 30th
day of April and October and commenced on April 30, 1994. Commencing in
November 1995, the Debentures are redeemable at the option of the Company,
in whole and not in part, at the redemption prices set forth below,
provided that the Company is current in filing all required reports
pursuant to Federal Securities Laws. The Debentures are subordinated to
all existing and future indebtedness of the Company for money borrowed from
institutional lenders.
The redemption prices of the Debentures for redemption at the option of the
Company (expressed in percentages of principal amount) are as follows for
the indicated twelve month periods commencing two years from the closing
date: year three - 105%, year four - 104%, year five - 103%, year six -
102%, year seven - 101%, and thereafter at 100% until the maturity date of
the Debentures.
On September 28, 1995, $1,500,000 of the Debentures were converted into
187,500 shares of the Company's common stock.
F-13
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
NOTE 6 - INCOME TAXES
The Company and its subsidiaries file consolidated income tax returns.
Provision for income taxes comprised the following:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Currently payable:
Federal $508,000 $745,000 $654,000
State and local 209,000 303,000 259,000
Deferred:
Federal 72,000 (77,000) (36,000)
State and local 17,000 (19,000) (24,000)
-------- -------- --------
$806,000 $952,000 $853,000
-------- -------- --------
-------- -------- --------
</TABLE>
The difference between the statutory United States federal income tax rate
and the effective income tax rate is as follows:
YEARS ENDED NOVEMBER 30,
----------------------------
1995 1994 1993
-------- -------- --------
Statutory federal income tax rate 34.0 34.0 34.0
Current year state and local taxes
(net of federal tax effect) 7.9 7.0 7.6
Other .2 (4.9) (.1)
---- ---- ----
42.1% 36.1% 41.5%
---- ---- ----
---- ---- ----
The net current and non-current components of deferred income taxes
recognized in the balance sheet at November 30, are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Net current assets $485,500 $518,362
Net non-current liabilities 358,138 302,000
-------- --------
Net asset $127,362 $216,362
-------- --------
-------- --------
</TABLE>
The components of the net deferred tax asset as of November 30, 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Accounts receivable allowances $283,080 $269,362
Inventory - uniform capitalization 189,420 232,000
Other 13,000 17,000
-------- --------
485,500 518,362
Deferred tax liability:
Depreciation and amortization 358,138 302,000
-------- --------
Net deferred tax asset $127,362 $216,362
-------- --------
-------- --------
</TABLE>
F-14
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
NOTE 7 - ACCRUED EXPENSES
Accrued expenses and sundry liabilities consist of:
<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
Compensation $660,638 $816,875
Freight-out 356,795 128,500
Interest 85,069 97,366
Consolidation of facilities - 7,336
Commissions 166,871 86,083
Insurance 110,250 31,069
Other 287,139 414,112
---------- ----------
$1,666,762 $1,581,341
---------- ----------
---------- ----------
</TABLE>
NOTE 8 - COMMITMENTS AND CONTINGENCIES
RETIREMENT PLAN
The Company's 401(k) deferred retirement plan is available to all eligible
employees and provides for matching contributions by the Company equal to
20% of the amount of the participants' contributions that are not in excess
of 5% of compensation. For the years ended November 30, 1995, 1994 and
1993, the Company's matching contributions were approximately $62,000,
$30,000 and $25,000, respectively.
EMPLOYMENT/CONSULTING CONTRACTS
The Company entered into an employment agreement with its Chief Executive
Officer and a consulting agreement with a director, terminating on March
31, 2000 and December 31, 1996, respectively. The current aggregate annual
compensation under these contracts is approximately $325,000. The Chief
Executive Officer's contract provides for annual increments of $5,000 and,
if terminated prior to expiration, payments equal to the greater of
$2,000,000 or the sum of five years' salary, based upon the rate of
compensation then in effect, plus five times the last annual bonus
received.
For the years ended November 30, 1995, 1994 and 1993, bonuses of $144,000,
$199,000 and $155,000, respectively, were paid under the employment
contract.
SELF-INSURANCE
The Company acts as a self-insurer for its employees' health insurance up
to a maximum of $50,000 per covered individual. The Company is liable up
to a maximum of $460,000 for the year. Claims, including estimates for
charges incurred but not reported, are charged to operations during the
year in which they occur. As of November 30, 1995, 1994 and 1993, the
liability for claims incurred but not submitted amounted to $75,000,
$75,000 and $112,000, respectively.
F-15
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
LEASES
The approximate aggregate minimum annual rental commitments under long-term
operating leases in effect at November 30, 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING OFFICE, WAREHOUSE TRANSPORTATION
NOVEMBER 30, AND SALES EQUIPMENT TOTAL
------------ ----------------- -------------- ----------
<S> <C> <C> <C>
1996 $954,000 $110,000 $1,064,000
1997 763,000 103,000 866,000
1998 710,000 65,000 775,000
1999 788,000 45,000 833,000
2000 741,000 31,000 772,000
Thereafter 5,362,000 - 5,362,000
---------- -------- ----------
$9,318,000 $354,000 $9,672,000
---------- -------- ----------
---------- -------- ----------
</TABLE>
Certain leases contain escalation clauses which increase the rents for
various operating expenses and fluctuations in property taxes.
Rent expense comprised the following:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Office, warehouse and sales $1,141,700 $1,392,046 $1,019,534
Transportation equipment 117,417 85,555 102,241
---------- ---------- ----------
$1,259,117 $1,477,601 $1,121,775
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The Company leases certain equipment under capital leases. The
following is a schedule by years of approximate future minimum lease
payments under the capitalized leases together with the present value
of the net minimum lease payments at November 30, 1995:
<TABLE>
<CAPTION>
YEAR ENDING NOVEMBER 30,
-----------------------
<S> <C>
1996 $ 445,000
1997 445,000
1998 254,000
1999 243,000
2000 231,000
----------
Total minimum lease payments 1,618,000
Less: Amount representing interest at 6.5% to 9% 227,000
----------
$1,391,000
----------
----------
</TABLE>
F-16
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
NOTE 9 - STOCK OPTIONS AND WARRANTS
OPTIONS
Under various plans, the Company may grant stock options to directors,
officers and employees. The options must be granted at exercise prices of
not less than fair market value and expire within ten years from the date
of grant. Transactions under the various stock option and incentive plans
for the periods indicated were as follows:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Outstanding at beginning of year 1,372,368 1,244,767 1,102,833
Add (deduct):
Granted 207,000 180,500 183,500
Terminated (42,667) (22,000) (15,600)
Exercised (45,133) (30,899) (25,966)
---------- ---------- ----------
Outstanding at end of year 1,491,568 1,372,368 1,244,767
---------- ---------- ----------
---------- ---------- ----------
Remaining shares reserved for
issuance 387,632 51,965 210,465
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
Options outstanding at November 30, 1995, 1994 and 1993 ranged in price
from $2.25 to $10.25. Options exercised ranged in price from $2.25 to
$6.75 in 1995, 1994 and 1993.
WARRANTS
The Company has approximately 630,000 Series 1 warrants which are
outstanding from its public offering of non-transferable rights in 1992.
The warrants are exercisable at $6.00 per 1.047 shares at any time until
June 18, 1996. The total net proceeds from the exercise of all warrants
from inception through November 30, 1995 were approximately $4,500,000.
NOTE 10 - EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
EQUIVALENT SHARE
Earnings per common and common equivalent share are based on the weighted
average number of common shares and common equivalent shares outstanding
during the period. The modified treasury stock method was utilized to
calculate the dilutive effect of the options and warrants upon the earnings
per share data. Fully diluted earnings per common and common equivalent
share were the same as for the primary calculation.
F-17
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
NOTE 11 - FINANCIAL INSTRUMENTS
The amounts at which cash, accounts receivable, accounts payable and other
current liabilities are presented in the balance sheets approximate their
fair value due to their short maturities. The following table presents the
carrying amount and fair value at November 30, 1995 and 1994 for long-term
debt:
<TABLE>
<CAPTION>
1995 1994
-----------------------------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Long-term debt $17,270,000 $17,762,000 $19,381,000 $19,841,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The fair value of long-term debt has been determined based on discounted
cash flow using a market rate of interest at the balance sheet date as
applicable to comparable debt.
NOTE 12 - SUBSEQUENT EVENT
On November 2, 1995, a wholly-owned subsidiary of the Company entered into
an agreement for merger and reorganization with Stone Medical Supply
Corporation ("Stone"), a distributor of physician and podiatry supplies and
equipment, and its chief executive. The Company will attempt to acquire by
merger all of Stone's $.01 par value common stock outstanding of
approximately 3,432,000 shares in exchange for the issuance of up to
280,697 shares of the Company's $.03 par value common stock (valued at
$11.50 per share) at a conversion ratio of .0818 to 1.00. It is
contemplated that a tax-free merger will result and this transaction will
be accounted for as a purchase. In addition, the Company entered into two
non-competition agreements with two former executives of Stone with a total
anticipated consideration of $1,750,000; $583,333 was paid in November
1995, $333,333 is to be paid nine months later, $100,000 per annum for five
years and the remaining $333,333 is subject to a final determination of the
executive's liability to the Company in connection with certain
indemnification obligations.
At a special meeting of shareholders of Stone held on January 18, 1996, the
agreement of merger and reorganization was ratified and approved.
The excess of the purchase price over the estimated fair value of the net
assets acquired of approximately $2,600,000 will be amortized on a
straight-line basis over fifteen years.
F-18
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1995, 1994 AND 1993
NOTE 12 - SUBSEQUENT EVENT (CONTINUED)
The following presents a condensed pro forma consolidated balance sheet of
the Company at November 30, 1995 (Unaudited), giving effect to the Stone
acquisition as if it had occurred on that date.
<TABLE>
<S> <C>
ASSETS
Current assets $45,485,195
Property, plant and equipment - net 4,137,861
Intangible assets - net 7,349,131
Other assets 533,206
-----------
$57,505,393
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $15,598,622
Long-term debt 17,436,465
Other long-term liabilities 376,138
Stockholders' equity 24,094,168
-----------
$57,505,393
-----------
-----------
</TABLE>
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisition had occurred at the beginning of the
periods presented and does not purport to be indicative of what would have
occurred had the acquisition actually been made as of such date or of
results which may occur in the future:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30.
----------------------------
1995 1994
------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net sales $132,138,966 $131,785,174
Net income $ 341,528 $ 1,115,292
Earnings per common and common
equivalent share $.09 $.23
</TABLE>
F-19
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
----------- ---------- ----------- --------
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED TO END OF
OF YEAR OPERATIONS DEDUCTIONS* YEAR
----------- ---------- ----------- --------
<S> <C> <C> <C> <C>
DESCRIPTION
Allowance for Doubtful Accounts
Year ended November 30, 1993 $300,000 $321,526 $21,526 $600,000
Year ended November 30, 1994 600,000 268,551 218,551 650,000
Year ended November 30, 1995 650,000 96,000 71,790 674,210
</TABLE>
*Deductions represent accounts written off, net of recoveries of accounts
written off in prior years.
F-20
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
EXHIBIT 11 - STATEMENT RE:
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
----------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
PRIMARY EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
EARNINGS
Income before cumulative effect of accounting change $1,108,889 $1,681,620 $1,202,219
MODIFIED TREASURY STOCK METHOD
Incremental income after the application of assumed
proceeds toward repurchase of 20% of the outstanding
common shares at the average market price, the reduc-
tion of debt and the balance of funds invested in US
government securities, net of applicable income taxes 191,461 146,222 223,048
---------- ---------- ----------
Adjusted earnings $1,300,350 $1,827,842 $1,425,267
---------- ---------- ----------
---------- ---------- ----------
SHARES
Weighted average number of common shares
outstanding 3,690,092 3,551,732 2,995,536
Additional shares assuming conversion of:
Stock options and warrants utilizing the
modified treasury stock method 1,431,542 1,344,786 1,739,210
---------- ---------- ----------
Number of common and common equivalent shares 5,121,634 4,896,518 4,734,746
---------- ---------- ----------
---------- ---------- ----------
Earnings per common and common equivalent share
before cumulative effect of accounting change $.25 $.37 $.30
---- ---- ----
---- ---- ----
</TABLE>
Fully diluted earnings per common and common equivalent share were the same.
F-21
<PAGE>
PART III
ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) IDENTIFICATION OF DIRECTORS
The names, ages and principal occupations of the Company's present
directors, and the date on which their term of office commenced and expires, are
as follows:
FIRST
TERM OF BECAME PRINCIPAL
NAME AGE OFFICE DIRECTOR OCCUPATION
- ---- --- ------- -------- --------------
Bruce J. Haber 43 (1) 1981 President of the
Company
Marvin S. Caligor 65 (1) 1982 Consultant
Renee Steinberg 73 (1) 1971 Secretary of the
Company
K. Deane Reade, Jr. 54 (1) 1987 Managing Director of
John Hancock Capital
Growth Management,
Inc.
_________________
(1) Directors are elected at the annual meeting of stockholders and hold office
until the following annual meeting.
(b) IDENTIFICATION OF EXECUTIVE OFFICERS.
Bruce J. Haber is President of the Company and its subsidiaries. Louis
Buther, Ernest W. Nelson and Michael Levy are each a Vice-President of the
Company. Stuart F. Fleischer is Vice President of Finance and the Principal
Financial and Accounting Officer and Gary Butler is Treasurer of the Company.
Renee Steinberg is Secretary of the Company.
The terms of all officers expire at the annual meeting of directors
following the annual stockholders meeting. Subject to their contract rights to
compensation, if any, officers may be removed, either with or without cause, by
the Board of Directors, and a successor elected by a majority vote of the Board
of Directors, at any time.
(c) BUSINESS EXPERIENCE
Bruce J. Haber is serving as President and a Director of MBM. Mr. Haber
was elected to the position of President in December, 1983; has served as a
Director of MBM since September, 1981; and, from that date, until his election
as President of MBM, served as Executive Vice-President of MBM. Prior to his
affiliation with MBM, Mr. Haber served from 1977 to August, 1981 as a Vice-
President
15
<PAGE>
of Commercial Credit Business Services, Inc., New York. Mr. Haber holds a
Bachelor of Science degree from the City College of New York and a Master of
Business Administration from Baruch College in New York. Mr. Haber is a full-
time employee of MBM.
Louis Buther has been a Vice-President of MBM since December, 1983. He has
served as Vice-President of MBM's wholly-owned subsidiary Caligor Physicians and
Hospital Supply Corp. since May, 1983 and from March 1, 1982 to April, 1983,
served as its Sales Manager. Mr. Buther also served as Sales Manager for the
Caligor business from 1980 until its acquisition and prior thereto served it in
the capacity of a licensed pharmacist and pharmacist intern. Mr. Buther holds
an Associate Arts Science degree in Chemistry from Bronx Community College and a
Bachelor of Science degree in Pharmacy from Long Island University. Mr. Buther
is a full-time employee of MBM.
Ernest W. Nelson has been a Vice-President of MBM since December, 1983.
From January, 1982 until his election as a Vice-President, he was employed by
MBM as a Sales Representative and then promoted to the position of National
Sales Manager for MBM's MBM division. Prior thereto, Mr. Nelson was employed
from June, 1981, to December, 1981, as a Sales Representative for United States
Lines and, from July, 1976, to June, 1981, as an Athletic Trainer and Associate
Professor at Columbia University, New York City. Mr. Nelson holds a Bachelor of
Science degree from Central Connecticut State University and a Master of Arts
degree from Columbia University. Mr. Nelson is a full-time employee of MBM.
Michael Levy joined MBM in 1990 as Vice President of the Healer Products
Division. Prior to joining MBM, Mr. Levy served as a Management Consultant in
the women's apparel industry from 1987 to 1990. He was Senior Vice President of
Rudco Industries, Inc., a financial forms manufacturer from 1975 to 1987 and
held two management positions in the hardware industry from 1960 to 1975. Mr.
Levy is a full-time employee of MBM.
Stuart F. Fleischer has been Vice President of Finance, Principal Financial
and Accounting Officer since April 1995. Stuart Fleischer joined the Company in
March 1995. From February 1986 through March 1995, Mr. Fleischer served as a
Senior Vice President and Chief Financial Officer of Communications Diversified,
a promotional marketing entity. From June 1974 through January 1986, he worked
on the audit staff at Price Waterhouse. Mr. Fleischer is a Certified Public
Accountant and holds a Bachelor of Science degree from Lehigh University. Mr.
Fleischer is a full-time employee of the Company.
Gary L. Butler has been Treasurer of MBM and has served at various times as
an executive officer in other capacities since December, 1983. From March 1,
1982 until December, 1983, Mr. Butler served as the Controller of MBM's wholly-
owned subsidiary, Caligor Physicians and Hospital Supply Corp., and, prior
thereto, served in such capacity with the Caligor business from May, 1975 until
its acquisition by MBM. From December, 1984 to the present,
16
<PAGE>
Mr. Butler has served as Treasurer of Caligor Physicians & Hospital Supply Corp.
Mr. Butler holds a Bachelor of Science degree from New York University. Mr.
Butler is a full-time employee of MBM.
Marvin S. Caligor, a Director of MBM since March 1, 1982, when Caligor
Physicians and Hospital Supply division of Health-Chem Corporation was acquired
by MBM. Mr. Caligor also served as Senior Vice-President of MBM from March,
1982 until December, 1987. Since December, 1987, Mr. Caligor has been employed
by MBM as a consultant on a part-time basis. From 1969 until its acquisition by
MBM, Mr. Caligor was President of the division and an officer and director of
Health-Chem Corporation. Mr. Caligor is a licensed pharmacist and holds a
Bachelor of Science in Pharmacy from Columbia University.
Renee Steinberg has served as Secretary and a Director of MBM for more than
the past 5 years and has not been associated with any firm other than MBM and
its subsidiaries during such period. Mrs. Steinberg received a Bachelor of
Science degree from Cornell University and is a founder of MBM.
K. Deane Reade, Jr. has been a Director of MBM since July, 1987. Mr. Reade
is Managing Director of John Hancock Capital Growth Management, Inc. and a
General Partner of Gramercy Hill Partners, L.P. In addition,
Mr. Reade is a director of Bangert, Dawes, Reade, Davis & Thom, Inc., a private
investment banking firm with offices in New York and San Francisco. As a
founder of Bangert, Dawes, Reade, Davis & Thom, Inc., he served as president
since its establishment in 1975. Mr. Reade is a graduate of Rutgers University.
He is a director of American/Elgen, Inc. (Irvington, New Jersey); Myers
Industries, Inc. (Lincoln, Illinois); Wundies Industries Inc. (New York, New
York), Zimpro Environmental, Inc. (Rothchild, Wisconsin), U. S. Souvenir, Inc.
(Honolulu, Hawaii) and Trail Blazers Camps, Inc. (New York, N.Y.) a 100 year
old social service organization with a year round educational program for
disadvantaged children from the Metropolitan New York - New Jersey area.
Directors are elected at the annual meeting of stockholders and hold office
until the following annual meeting. The terms of all officers expire at the
annual meeting of directors following the annual stockholders meeting. Subject
to their contract rights to compensation, if any, officers may be removed,
either with or without cause, by the Board of Directors, and a successor elected
by a majority vote of the Board of Directors, at any time.
In October, 1987, MBM established an Executive Compensation Committee with
Renee Steinberg as Chairman and Bruce Haber and K. Deane Reade as members and an
Audit Committee with K. Deane Reade as Chairman and Bruce Haber and Marvin
Caligor as members.
The Compensation Committee has the power to review compensation of MBM's
executive officers, including salaries, the
17
<PAGE>
granting of stock options and other forms of compensation for executive officers
whose salaries are within the purview of the Board of Directors. In some cases,
the Compensation Committee may make recommendations to the entire Board of
Directors for its approval or, itself exercise the powers and authority of the
Board of Directors to designate compensation.
The Audit Committee has the power to (i) select the independent certified
public accountant, (ii) satisfy itself on behalf of the Board that the external
and internal auditing procedures assure reliable and informative accounting and
financial reporting, (iii) have meetings with management, or with the auditors,
or with both management and auditors, to review the scope of the auditor's
examination, audit reports and the Corporation's internal auditing procedures
and reviews, (iv) monitor policies established to prohibit unethical,
questionable, or illegal activities by those associated with the Corporation;
and (v) review the compensation paid to the auditors through annual audit and
non-audit fees and the effect on the independence of the auditors in relation
thereto, and it may exercise the powers and authority of the Board of Directors
to implement changes in connection with the foregoing or, at its option, may
make recommendations to the entire Board of Directors for its approval.
ITEM 11. EXECUTIVE COMPENSATION
This information will be contained in the definitive proxy statement of the
Company for the 1996 Annual Meeting of Stockholders under the caption
"Compensation of Directors and Executive Officers" and is incorporated herein by
reference.
18
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
This information will be contained in the definitive proxy statement of the
Company for the 1996 Annual Meeting of Stockholders under the caption "Security
Ownership of Certain Beneficial Owners and Management" and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
This information will be contained in the definitive proxy statement of the
Company for the 1996 Annual Meeting of Stockholders under the caption "Certain
Relationships and Related Transactions" and is incorporated herein by reference.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1)(2) FINANCIAL STATEMENTS/SCHEDULES.
A list of the Financial Statements and Financial Statement Schedules
filed as a part of this Report is set forth in Item 8, and appears at Page F-1
of this Report; which list is incorporated herein by reference and follows Item
9.
(a)(3) EXHIBITS
3 Articles of Incorporation, as amended (incorporated by reference to
the Registrant's Form S-2 Registration Statement File No. 33-46319,
Exhibit 3)
3(A) By-Laws (incorporated by reference to the Registrant's Form S-2
Registration Statement File No. 33-46319, Exhibit 3(A))
10 Employment Agreement of Bruce Haber dated February 11, 1992
(incorporated by reference to Exhibit 10(C) included in the Company's
Form 10-K for the fiscal year ended November 30, 1991)
10(A) Contract with Marvin Caligor (incorporated by reference to Exhibit
10.2 included in the Company's Form S-18 Registration Statement, File
No. 2-89795-NY)
10(B) Amendments to Caligor's Agreement (incorporated by reference to
Exhibit 10(D) included in the Company's Form 10-K for the fiscal year
ended November 30, 1991)
10(C) New lease for Pelham Manor, New York (incorporated by reference to
Exhibit 10(B) included in the Company's Form 10-K for the fiscal year
ended November 30, 1991)
10(D) Credit Agreement dated November 18, 1993 among Micro Bio-Medics,
Inc., the Bank's signatory thereto, and the Chase Manhattan, N.A. as
agent (incorporated by reference to Exhibit 10.1 included in the
Company's Form 8-K dated November 19, 1993)
19
<PAGE>
10(E) First Amendment to Credit Agreement dated August 1, 1994
(incorporated by reference to Exhibit 10(a)(1) included in the
Company's Form 10-K for the fiscal year ended November 30, 1994)
10(F) Second Amendment to Credit Agreement dated December 1, 1994
(incorporated by reference to Exhibit 10(a)(2) included in the
Company's Form 10-K for the fiscal year ended November 30, 1994)
10(F.1) Form of Third Amendment to Credit Agreement dated as of December 1,
1995 **
10(G) Asset Purchase Agreement dated November 19, 1993 by and between MBM
Hospital supply Corp. and Clark Surgical Corp. (incorporated by
reference to Exhibit 10.2 included in the Company's Form 8-K dated
November 19, 1993)
10(H) Amendments 1-4 to Asset Purchase Agreement dated November 19, 1993 by
and between MBM Hospital Supply Corp. and Clark Surgical Corp.
(incorporated by reference to Exhibit 10(b)(1) included in the
Company's Form 10-K for the fiscal year ended November 30, 1993)
10(I) Lease for the Company's facilities located in Syosset, New York by and
between the Company and Lin Pac, Inc. dated December 8, 1994
(incorporated by reference to Exhibit 10(c)(2) included in the
Company's Form 10-K for the fiscal year ended November 30, 1994)
10(J) Amendment dated December 23, 1993 to Bruce Haber's Employment
Contract (incorporated by reference to Exhibit 10(e) included in the
Company's Form 10-K for the fiscal year ended November 30, 1993)
10(K) 1982 Incentive Stock Option Plan of Registrant (incorporated by
reference to Exhibit 10.4 included in the Company's Form S-18
Registration Statement, File No. 2-89795-NY)
10(L) 1989 Non-Qualified Stock Option Plan (incorporated by reference to
Exhibit 28 included in the Company's Form 10-K for the fiscal year
ended November 30, 1989)
10(M) 1992 Incentive and Non-Statutory Stock Option Plan (incorporated by
reference to Exhibit 28(A) included in the Company's Form 10-K for the
fiscal year ended November 30, 1991)
10(M)(i) Subscription Agent Agreement (incorporated by reference to Exhibit
10(m) included in the Registrant's Form S-2 Registration Statement
File No. 33-463191, Exhibit M)
10(N) Agreement for Merger and Reorganization dated as of November 2, 1995
(included in Prospectus)*
20
<PAGE>
10(O) Noncompetition, Indemnification and Release Agreement of Andrew D.
Stone dated as of November 2, 1995 *
10(P) Noncompetition Agreement of Lyudmila Stone dated as of November 2,
1995 *
10(Q) Form of Escrow Agreement *
10(R) Employment Agreement of Andrew D. Stone dated as of November 2, 1995 *
10(S) Form of Put and Call Agreement *
10(T) Management Agreement dated as of November 2, 1995 *
10(U) Amendment to Bruce Haber Employment Agreement dated as of December 23,
1993 *
10(V) Amendment to Bruce Haber Employment Agreement dated as of April 1,
1995 *
10(W) Amendments to 1992 Incentive and Non-Statutory Stock Option Plan *
10(X) Consent of Chase Manhattan Bank dated as of November 2, 1995 *
11 Statements re: computation of per share earnings (included in Notes to
Consolidated Financial Statements and Schedules thereto)
21 Subsidiaries of Registrant *
23 Consent of Accountants **
27 Financial Data Schedule **
________________
* Incorporated by reference to Exhibits 10(N) through 10(X) and Exhibit
21 filed as Exhibits to the Registrant's Form S-4 Registration
Statement, File No. 33-64399.
** Filed herewith
(b) REPORTS ON FORM 8-K
During the three months ended November 30, 1995, no Form 8-K was filed
or required to be filed.
21
<PAGE>
SIGNATURES
Pursuant to the requirements Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
MICRO BIO-MEDICS, INC.
By: /s/ Bruce J. Haber
---------------------------
Bruce J. Haber, President
Dated: Pelham Manor, N.Y.
February 27, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signatures Titles Date
---------- ------ ----
/s/ Bruce J. Haber
- --------------------------
Bruce J. Haber President, Principal
Executive Officer
and Director February 27, 1996
/s/ Marvin S. Caligor
- --------------------------
Marvin S. Caligor Director February 27, 1996
/s/ Stuart F. Fleischer
- --------------------------
Stuart F. Fleischer Vice President of Finance,
Principal Accounting
and Financial Officer February 27, 1996
/s/ Renee Steinberg
- --------------------------
Renee Steinberg Secretary and Director February 27, 1996
/s/ K. Deane Read, Jr.
- --------------------------
K. Deane Reade, Jr. Director February 27, 1996
SUPPLEMENTAL INFORMATION
At such time as an annual report is sent to the security holders of the
Registrant, copies will be forwarded to the Securities and Exchange Commission.
<PAGE>
THIRD AMENDMENT TO CREDIT AGREEMENT
This AMENDMENT TO CREDIT AGREEMENT dated as of December 1, 1995 (the "THIRD
AMENDMENT DATE") between MICRO BIO-MEDICS, INC., a corporation organized under
the laws of the State of New York (the "BORROWER"), and each of the Banks which
is a signatory hereto (individually a "BANK" and collectively the "BANKS") and
THE CHASE MANHATTAN BANK, N.A., a national banking association organized under
the laws of the United States of America, as agent for the Banks (in such
capacity, together with its successors in such capacity, the "AGENT").
PRELIMINARY STATEMENT. The Borrower, the Banks and the Agent entered into
a Credit Agreement dated as of November 18, 1993, as amended by amendments dated
as of August 1, 1994 and December 1, 1994 (as amended, the "CREDIT AGREEMENT";
the terms defined in the Credit Agreement are used in this Amendment as in the
Credit Agreement unless otherwise defined in this Amendment).
The Borrower and the Banks have agreed to amend the Credit Agreement as
hereinafter provided with respect to, among other things, the maturity date of
the Loans, certain financial covenants, and pricing for Eurodollar Loans.
SECTION 1. MODIFICATION OF CREDIT AGREEMENT TO EXTEND MATURITY DATE.
Subject to the satisfaction of the conditions precedent set forth in SECTION 3
hereof, the Credit Agreement is hereby amended as of November 29, 1995 by
deleting the definition of the term "Maturity Date" contained in SECTION 1.01 of
the Credit Agreement and substituting the following therefor:
"MATURITY DATE" means February 15, 1999, provided that if such date is
not a Banking Day, the Maturity Date shall be the next succeeding
Banking Day (or, if such next succeeding Banking Day falls in the next
calendar month, the next preceding Banking Day).
SECTION 2. OTHER MODIFICATIONS OF CREDIT AGREEMENT. The Credit
Agreement is, effective as of the Third Amendment Date and subject to the
satisfaction of the conditions precedent set forth in SECTION 3 hereof, hereby
amended as follows:
a. The following definitions set forth in SECTION 1.01 are hereby amended
to read as follows:
"GUARANTOR" means all present and future subsidiaries of the Borrower
including, but not limited to, Caligor Physicians & Hospital Supply Corp.,
Diagnostic Leasing Corp. (to be known as Stone Medical Supply Corporation),
Harrisburg Surgical Supply, Inc., Healer Products, Inc., MBM Hospital Supply
Corp., and Stone Medical Supply Corporation (originally known as Diagnostic
Leasing Corp.; the listing of both names, "Diagnostic Leasing Corp." and "Stone
Medical Supply Corporation," is in anticipation of a name change and is not
meant to imply two distinct Guarantors).
<PAGE>
"MARGIN" means (a) for a Variable Rate Loan, 1/4%; and (b) for a Eurodollar
Loan, as set forth in Subsection 2.06(b).
b. The terms "CONSOLIDATED EBIT" and "REDUCED EURODOLLAR MARGIN" set
forth in SECTION 1.01 are hereby deleted.
c. SECTION 1.01 is hereby amended by adding thereto the following
definitions in their appropriate alphabetical order:
"CONSOLIDATED EBITA" means, for any period, net sales, less cost of goods
sold, less Operating Expenses, plus gross interest expense and financing costs
and amortization, of the Borrower and its Consolidated Subsidiaries, as
determined on a consolidated basis in accordance with GAAP.
"LEVERAGE RATIO" has the meaning given to it in SECTION 9.04.
d. The term "OPERATING COSTS" contained in SECTION 1.01 is hereby changed
to "OPERATING EXPENSES."
e. SUBSECTION 2.06(b) is hereby deleted and the following substituted
therefor:
(b) The Margin that shall apply to Eurodollar Loans is set forth below
and is based on Borrower's Leverage Ratio as at the end of Borrower's most
recent financial quarter:
<TABLE>
<CAPTION>
-------------------------------------------------------------
LEVERAGE RATIO MARGIN
-------------------------------------------------------------
<S> <C>
Less than or equal to 1.00 to 1.00 100.00 basis points
-------------------------------------------------------------
Greater than 1.00 to 1.00 but less 112.50 basis points
than or equal to 1.25 to 1.00
-------------------------------------------------------------
Greater than 1.25 to 1.00 but less 125.00 basis points
than or equal to 1.50 to 1.00
-------------------------------------------------------------
Greater than 1.50 to 1.00 but less 137.50 basis points
than or equal to 1.75 to 1.00
-------------------------------------------------------------
Greater than 1.75 to 1.00 but less 150.00 basis points
than or equal to 2.00 to 1.00
-------------------------------------------------------------
Greater than 2.00 to 1.00 but less 175.0 basis points
than or equal to 2.50 to 1.00
-------------------------------------------------------------
Greater than 2.50 to 1.00 200.00 basis points
-------------------------------------------------------------
</TABLE>
For each Eurodollar Loan, Eurodollar Margin adjustments resulting from such
calculations shall become effective on the first day of the Interest Period
applicable to such Loan and shall be fixed for the entirety of such Interest
Period, except that, in the case of an Interest Period greater than three (3)
months, the Eurodollar Margin shall be subject to adjustment at three-month
intervals after the first day of such
2
<PAGE>
Interest Period and such adjusted Eurodollar Margin shall be effective for the
balance of such Interest Period, or three-month period, whichever is less. The
Agent shall notify each Bank whenever a Eurodollar Margin adjustment becomes
effective.
f. SUBSECTION 2.06(e) is hereby deleted and the following substituted
therefor:
(e) Accrued interest on each Loan shall be due and payable in arrears
upon any payment of principal or conversion and on the first day of each month,
commencing on the first such date after such Loan; provided that interest
accruing at the Default Rate shall be due and payable from time to time on
demand of the Agent.
g. SECTION 9.04 is hereby deleted and the following substituted therefor:
SECTION 9.04. LEVERAGE RATIO. The Borrower shall maintain at all
times a ratio of (a)(i) total liabilities of the Borrower and its Consolidated
Subsidiaries less (ii) Approved Subordinated Debt DIVIDED BY (b)(i) net worth of
the Borrower and its Consolidated Subsidiaries PLUS (ii) Approved Subordinated
Debt LESS (iii) intangible assets of the Borrower and its Consolidated
Subsidiaries, as of the end of each fiscal quarter of Borrower of not more than
2.75 to 1.00.
h. SECTION 9.05 is hereby deleted and the following substituted therefor:
SECTION 9.05. INTEREST COVERAGE RATIO. The Borrower shall maintain a
ratio of Consolidated EBITA to Consolidated Interest Expense, measured at the
end of each fiscal quarter for a period comprised of such fiscal quarter and the
three immediately preceding fiscal quarters, of not less than 2.50 to 1.00.
i. The schedule to EXHIBIT A-1 is hereby deleted and a new schedule to
EXHIBIT A-1, in the form of EXHIBIT A to this Amendment, is substituted
therefor.
SECTION 3. CONDITION OF EFFECTIVENESS. This Amendment shall become
effective as of the Third Amendment Date (except for SECTION 1, which shall
become effective as of November 29, 1995) on the date (the "AMENDMENT CLOSING
DATE") on which all of the following conditions have been fulfilled:
a. THIS AMENDMENT. The Borrower, the Banks and the Agent shall each have
executed and delivered this Amendment;
b. AMENDMENT TO NOTE. The Borrower, the Banks and the Agent shall each
have executed and delivered an amendment to the Note evidencing Variable Rate
and Eurodollar Loans, which amendment shall modify the schedule to such Note
consistent with the modification in Exhibit A to this Amendment.
3
<PAGE>
c. EVIDENCE OF CORPORATE ACTION BY BORROWER. The Agent shall have
received a certificate of the Secretary or Assistant Secretary of the Borrower
(dated the Amendment Closing Date) attesting to all corporate action taken by
the Borrower, including resolutions of its Board of Directors, authorizing the
execution, delivery, and performance of this Amendment, and each other document
to be delivered pursuant to or in connection with this Amendment, together with
a certificate of good standing from the state of its incorporation, dated no
more than ten (10) days prior to the Amendment Closing Date;
d. OFFICER'S CERTIFICATE. The following statements shall be true and the
Agent shall have received a certificate (dated the Amendment Closing Date)
signed by a duly authorized officer of the Borrower stating that to the best of
his knowledge:
i. The representations and warranties contained in Article VI of the
Credit Agreement and in each of the other Facility Documents are correct on and
as of November 29, 1995, the Third Amendment Date and the Amendment Closing Date
as though made on and as of such dates; and
ii. No Default or Event of Default has (after giving effect to this
Amendment) occurred and is continuing, or would result from the execution and
performance by the Borrower of this Amendment or the Credit Agreement (as
amended by this Amendment) or any of the other Facility Documents; and
iii. There has been no material adverse change in the business,
operations, assets or condition (financial or otherwise) of the Borrower since
the date of the most recent financial statements provided to the Agent.
e. GUARANTOR'S CONSENT. The Agent shall have received a Guarantor's
Consent in substantially the form of Exhibit B hereto duly executed by each
Guarantor.
f. EVIDENCE OF CORPORATE ACTION BY EACH GUARANTOR. The Agent shall have
received a certificate of the Secretary or Assistant Secretary of each Guarantor
(dated the Amendment Closing Date) attesting to all corporate action taken by
such Guarantor, including resolutions of its Board of Directors, authorizing the
execution, delivery, and performance of this Amendment, and each other document
to be delivered pursuant to or in connection with this Amendment, together with
a certificate of good standing from the state of its incorporation, dated no
more than ten (10) days prior to the Amendment Closing Date;
g. GUARANTORS' OFFICER'S CERTIFICATE. With respect to each Guarantor,
the following statements shall be true and the Agent shall have received a
certificate dated the Third Amendment Date) signed by a duly authorized officer
of each respective Guarantor stating that to the best of his knowledge:
i. The representations and warranties contained each of the Facility
Documents to which such Guarantor is a party are correct on and as of November
29, 1995, the Third Amendment Date and the Amendment Closing Date as though made
on and as of such
4
<PAGE>
dates; and
ii. No Default or Event of Default has (after giving effect to this
Amendment) occurred and is continuing, or would result from the execution and
performance by such Guarantor of the Guarantor's Consent or any of the other
Facility Documents to which such Guarantor is a party; and
iii. There has been no material adverse change in the business,
operations, assets or condition (financial or otherwise) of such Guarantor since
the date of the most recent financial statements provided to the Agent.
h. OPINION OF COUNSEL FOR BORROWER AND GUARANTORS. The Agent shall have
received a favorable opinion of counsel for the Borrower and each Guarantor
(dated the Amendment Closing Date), in substantially the form of Exhibit C
hereto and as to such other matters as the Agent may reasonably request.
i. ADVISORY FEE. The Agent shall have received from the Borrower an
Advisory Fee in the amount of $30,000.
j. EVIDENCE RE: STONE MEDICAL SUPPLY CORPORATION. The Agent shall have
received (i) evidence that Stone Medical Supply Corp. shall have merged into
Diagnostic Leasing Corp. pursuant to the terms of a letter between the Agent and
the Borrower dated as of November 2, 1995 and that Diagnostic Leasing Corp.
shall have changed its name to Stone Medical Supply Corporation, and (ii) fully
executed UCC-3's amending the UCC-1 filings against Diagnostic Leasing Corp. in
favor of the Agent so that the debtor thereon shall be Stone Medical Supply
Corporation.
k. ADDITIONAL DOCUMENTATION. Such other approvals, opinions, or
documents as the Agent may reasonably request.
SECTION 4. CONDITION SUBSEQUENT. The Borrower shall use its best
efforts to obtain a landlord's waiver, in substantially the form of EXHIBIT D
hereto, from the landlord of the premises leased by the Borrower at 846 Pelham
Parkway, Pelham, New York and, upon written request from the Agent, from such
other landlords of premises leased by the Borrower and/or any of the Guarantors
as the Agent may reasonably request.
SECTION 5. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS.
a. Upon the effectiveness of SECTION 1 and SECTION 2 hereof, each
reference in the Credit Agreement to "this Agreement," "hereunder," "hereof,"
"herein" or words of like import, and each reference in the other Facility
Documents to the Credit Agreement, shall mean and be a reference to the Credit
Agreement as amended hereby.
b. Except as specifically amended above, the Credit Agreement and the
Notes, and all other Facility Documents, shall remain in full force and effect
and are hereby ratified and
5
<PAGE>
confirmed.
c. The execution, delivery and effectiveness of this amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of the Banks under any of the Facility Documents, nor constitute a waiver
of any provision of any of the Facility Documents.
SECTION 6. COSTS AND EXPENSES. The Borrower agrees to reimburse the
Agent within ten (10) days following the Amendment Closing Date for all actual
costs, expenses and charges (including, without limitation, the legal fees (not
to exceed $4,000) and disbursements of legal counsel for the Agent) incurred by
the Agent in connection with the preparation, reproduction, execution and
delivery of this Amendment and any other instruments and documents to be
delivered hereunder. In addition, the Borrower shall pay any and all stamp and
other taxes and fees payable or determined to be payable in connection with the
execution and delivery, filing or recording of this Amendment and the other
instruments and documents to be delivered hereunder, and agrees to save the
Banks harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes or fees.
SECTION 7. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 8. HEADINGS. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
SECTION 9. COUNTERPARTS. This Amendment may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Amendment by signing any such
counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
MICRO BIO-MEDICS, INC.,
Borrower
By:
-------------------------------
Bruce Haber,
President
THE CHASE MANHATTAN BANK, N.A.,
Agent
6
<PAGE>
By:
-------------------------------
Thomas L. Lewis,
Second Vice President
THE CHASE MANHATTAN BANK, N.A.
By:
-------------------------------
Thomas L. Lewis,
Second Vice President
FLEET BANK
By:
-------------------------------
Michael DiSalvo
Vice President
7
<PAGE>
ACKNOWLEDGEMENTS
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the fifth day of February 1996, before me personally came Bruce Haber,
to me known, who, being by me duly sworn, did depose and say that he has an
address at 846 Pelham Parkway, Pelham, New York 10803; that he is the President
of MICRO BIO-MEDICS, INC., the corporation described in and which executed the
foregoing instrument; that it was so executed by order of the Board of Directors
of said corporation; and that he signed his name thereto by like authority.
---------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the fifth day of February 1996, before me personally came Thomas L.
Lewis, to me known, who, being by me duly sworn, did depose and say that he has
an address at 31 Mamaroneck Avenue, White Plains, New York 10601; that he is a
Second Vice President of THE CHASE MANHATTAN BANK, N.A., the corporation
described in and which executed the foregoing instrument; that it was so
executed by order of the Board of Directors of said corporation; and that he
signed his name thereto by like authority.
---------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
)ss.:
COUNTY OF WESTCHESTER )
On the fifth day of February 1996, before me personally came Michael
DiSalvo, to me known, who, being by me duly sworn, did depose and say that he
has an address at 1051 Union Avenue, Newburgh, New York 12550; that he is a Vice
President of FLEET BANK, the corporation described in and which executed the
foregoing instrument; that it was so executed by order of the Board of Directors
of said corporation; and that he signed his name thereto by like authority.
---------------------------------
NOTARY PUBLIC
8
<PAGE>
EXHIBIT A
TO
THIRD AMENDMENT TO CREDIT AGREEMENT
SCHEDULE TO EXHIBIT A-1 OF CREDIT AGREEMENT
SCHEDULE TO PROMISSORY NOTE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
DATE EURODOLLAR VARIABLE RATE AMOUNT OF BALANCE NOTATION
LOAN AMOUNT LOAN AMOUNT PAYMENT OUTSTANDING BY
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
EXHIBIT B
TO
THIRD AMENDMENT TO CREDIT AGREEMENT
GUARANTOR'S CONSENT
Reference is made to the Credit Agreement dated as of November 18, 1993
between Micro Bio-Medics, Inc., a New York corporation, and The Chase Manhattan
Bank, N.A. a national banking association, and Fleet Bank, a New York banking
corporation, as amended by amendments dated as of August 1, 1994 and December 1,
1994 (as amended, the "Credit Agreement"; the terms defined in the Credit
Agreement are used in this Amendment as in the Credit Agreement unless otherwise
defined in this Guarantor's Consent), and as further amended by the Third
Amendment to Credit Agreement dated as of December 1, 1995 (the "Third
Amendment").
Reference is also made to the Guaranty dated as of November 18, 1993 made
by the undersigned corporation for the benefit of the Banks (the "Guaranty")
with respect to the obligations of the Borrower to the Banks.
The undersigned hereby consents to the Third Amendment and hereby confirms
and agrees that the Guaranty, along with all security therefor, is, and shall
continue to be, in full force and effect.
GUARANTOR
By:
---------------------------------
Name:
Title:
10
<PAGE>
EXHIBIT C
TO
THIRD AMENDMENT TO CREDIT AGREEMENT
OPINION OF COUNSEL
11
<PAGE>
EXHIBIT D
TO
THIRD AMENDMENT TO CREDIT AGREEMENT
LANDLORD'S WAIVER
LANDLORD'S WAIVER dated as of _______________________, 1996 made by
__________________________________, a ____________________________, with an
address at _________________________________________ ("Landlord"), in favor of
THE CHASE MANHATTAN BANK, N.A., with an address at 31 Mamaroneck Avenue, White
Plains, New York 10601, as agent (the "Agent") for THE CHASE MANHATTAN BANK,
N.A. and FLEET BANK (the "Banks") under a Credit Agreement dated November 18,
1993 among MICRO BIO-MEDICS, INC. (the "Borrower") and the Banks (as amended
from time to time, the "Credit Agreement").
PRELIMINARY STATEMENT. Pursuant to the terms of the Credit Agreement,
Borrower has granted to the Agent for the benefit of the Banks a security
interest in, among other things, all of its equipment and inventory (the
"Collateral"), as security for financial accommodations under the Credit
Agreement. All or a portion of the Collateral is or shall be located at
____________________ (the "Premises"), premises owned by Landlord and leased to
Borrower. It is a condition to the making of loans to Borrower under the Credit
Agreement that Borrower obtain from Landlord this Agreement and Waiver with
respect to the Collateral.
AGREEMENT AND WAIVER. Subject to the terms hereof, Landlord by this
agreement does hereby waive and relinquish to the Agent, its successors and
assigns, all rights, claims and demands of every kind against the Collateral now
located or to be located on the Premises which Landlord now has or may hereafter
acquire on any of the Collateral. Landlord agrees that the Collateral shall at
all times be considered to be personal property and shall not constitute a
fixture or become part of the Premises. In the event of a default by Borrower
in the performance of its obligations under the Credit Agreement, the Agent may
enter and remain on the Premises for the purposes of repossessing, removing,
selling or otherwise dealing with the Collateral or any part thereof for a
period of up to 60 days after the Agent provides notice to Landlord without
objection, delay, hindrance or interference by Landlord, and in such case
Landlord will make no claim or demand whatsoever against the Collateral so long
as the Agent is in possession of the Premises. Landlord further agrees that it
shall give the Agent not less than 60 days written notice if the Agent shall be
required to remove the Collateral.
This Waiver shall be binding upon successors, transferees and assigns of
Landlord and shall inure to the benefit of the successors and assigns of the
Agent and the Banks.
In witness whereof, Landlord has executed this Agreement and Waiver this
_____ day of __________, 1996.
CORPORATE SEAL (LANDLORD)
Attest: By:
-------------------------
Name and Title:
- --------------------------
12
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report dated January 31, 1996 which is
incorporated by reference into the Form S-8 Registration Statement filed on
behalf of Micro Bio-Medics, Inc., file #33-46231 and file #33-66726.
MILLER, ELLIN & COMPANY
New York, New York
February 27, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 2,817,295
<SECURITIES> 0
<RECEIVABLES> 26,331,817
<ALLOWANCES> 674,210
<INVENTORY> 12,318,756
<CURRENT-ASSETS> 42,408,626
<PP&E> 7,093,941
<DEPRECIATION> 3,616,134
<TOTAL-ASSETS> 51,135,712
<CURRENT-LIABILITIES> 12,443,360
<BONDS> 17,270,062
0
0
<COMMON> 116,364
<OTHER-SE> 20,947,788
<TOTAL-LIABILITY-AND-EQUITY> 51,135,712
<SALES> 119,873,764
<TOTAL-REVENUES> 119,873,764
<CGS> 94,307,143
<TOTAL-COSTS> 94,307,143
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 96,000
<INTEREST-EXPENSE> 1,238,887
<INCOME-PRETAX> 1,914,889
<INCOME-TAX> 806,600
<INCOME-CONTINUING> 1,108,889
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,108,889
<EPS-PRIMARY> 0
<EPS-DILUTED> .25
</TABLE>
