<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A No. 1
[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, 1996
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 ________
Commission File Number: 0-12665
- --------------------------------
MICRO BIO-MEDICS, INC.
--------------------------------------------------
(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
- ---------------------------------------- --------
(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
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.03 par value
- -------------------------------------------------------------------------------
(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 / X /.
As of February 21, 1997 at 4:00 P.M., the aggregate market value of the
voting stock held by non-affiliates, approximately 4,700,000 shares of Common
Stock, $.03 par value, was approximately $76,375,000 based on the last sale
price of $16.25 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 21, 1997
was 5,070,248.
<PAGE>
Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
For fiscal 1996, net sales increased 25.3%. The increase in net sales
resulted from the Company's increased volume to hospitals, the acquisition of
Stone Medical Supply Corporation ("Stone") and our continuing effort to gain
market penetration and sales volume to its existing customer base and the
addition of new customers.
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 1996, 1995 and 1994, the introduction of new
products, changing prices and inflation had no material impact on MBM's
operations.
Net income for fiscal 1996 was 1.2% of net sales versus .9% of net sales in
fiscal 1995. The increase for fiscal 1996 versus fiscal 1995 was due to
increased sales volume to hospitals, the Company's acquisition of Stone, lower
interest expense as a result of using the proceeds from the conversion of
outstanding warrants to decrease long-term debt and decreases in the interest
rates charged by financial institutions.
Net income for fiscal 1995 was .9% of net sales versus 1.3% of net sales in
fiscal 1994. Net income before the cumulative effect of accounting change in
1994 was 1.4% of net sales. 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.
GROSS PROFIT/OPERATING EXPENSES
Gross profit for fiscal 1996 was 20.6% of net sales versus 21.3% of net
sales in fiscal 1995. The decrease in gross profit was a result of increased
sales to hospitals and changes in MBM's product mix. 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.
Selling, shipping and warehouse and general and administrative expenses
expressed as a percent of net sales decreased .6% for fiscal 1996 as compared to
fiscal 1995. 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.
2
<PAGE>
INTEREST AND FINANCING COSTS (NET OF INTEREST INCOME)
Interest expense net of interest income expressed as a percent of net sales
decreased .6% for fiscal 1996 when compared to the prior year as a result of
using the proceeds from the conversion of outstanding warrants to decrease
long-term debt and decreases in the interest rates charged by financial
institutions. 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.
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 1996, 1995 and
1994, MBM had an average of approximately $14,800,000, $10,500,000 and
$11,000,000 respectively, of unused credit lines available each month over its
normal operating requirements.
Management believes that its working capital of approximately $28,100,000
at November 30, 1996 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 1997.
For fiscal 1996, MBM had increased sales and profitability which generated
cash from operating activities. An increase in accounts payable of $5,785,344
and $710,872 in accrued expenses over and above an increase in accounts
receivable of $4,381,287, $1,198,068 in inventory and $159,254 in prepaid
expenses contributed to MBM's generation of cash. During fiscal 1996, MBM's
financing activities used cash as a result of net repayments of $7,000,000 of
the bank loan under its long-term credit agreement and $603,532 to repay other
long-term debt. Cash was provided from the exercise of warrants that were due
to expire on June 18, 1996 of $3,586,059 and an additional $371,122 was provided
from the proceeds of the exercising of employee stock options. For fiscal 1996,
MBM used cash in investing activities to make capital expenditures of $664,433
and payments of intangible assets of $1,058,485.
For fiscal 1995, MBM had profits which generated cash from operating
activities. A decrease in inventory of $3,130,709 and accounts receivable of
$1,098,227 over and above a decrease in accounts payable of $3,462,612 and a
net increase in prepaid expenses and prepaid income taxes of $358,452
contributed to MBM's generation of cash. During fiscal 1995, MBM's financing
activities used cash as a result of net repayments of $150,000 of the bank l
oan under its long-term credit agreement and $419,952 of other long-term debt.
Cash was provided from the exercise of warrants of $300,601 and an additional
$197,606 was provided from the exercise of employee stock options. For fiscal
1995, MBM used
3
<PAGE>
cash in investing activities of $931,466 for certain net assets of businesses
acquired, $788,330 for capital expenditures and $1,488,654 for payments of
intangible assets.
For fiscal 1994, MBM had increased sales and profitability which generated
cash flow from operating activities. An increase in accounts payable of
$8,441,961 over and above increases in inventory of $2,508,516, accounts
receivable of $1,055,450 and prepaid expenses of $265,042 contributed to MBM's
generation of cash. During fiscal 1994, MBM's financing activities used cash as
a result of net repayments of $3,224,695 of the bank loan under its long-term
credit agreement and $380,085 of other long-term debt. Cash was provided from
the exercise of warrants of $126,409 and an additional $125,503 was provided
from the exercise of employee stock options. For fiscal 1994, MBM used cash in
investing activities of $2,718,009 for certain net assets of businesses
acquired, $713,484 for capital expenditures and $1,027,851 for payments of
intangible assets. Cash of $1,000,000 was provided by the receipt of a note
receivable. During 1994, MBM acquired the business and certain assets of Clark
through an increase in MBM's line-of-credit and the use of same.
Reference is made to "Recent Developments" for a complete description of
the terms of the Merger Agreement pursuant to which MBM expects to be acquired
by Schein by way of a merger of Schein's wholly-owned subsidiary into MBM in a
stock-for-stock transaction.
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.
4
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
INDEX
FINANCIAL STATEMENTS
PAGE
Independent Auditors' Report F-2
Consolidated Balance Sheets
November 30, 1996 and 1995 F-3 - F-4
Consolidated Statements of Income
Years Ended November 30, 1996, 1995 and 1994 F-5
Consolidated Statements of Cash Flows
Years Ended November 30, 1996, 1995 and 1994 F-6 - F-7
Consolidated Statements of Changes in
Stockholders' Equity
Years Ended November 30, 1996, 1995 and 1994 F-8
Notes to Consolidated Financial Statements F-9 - F-21
FINANCIAL STATEMENT SCHEDULES:
Schedule II - Valuation and Qualifying Accounts F-22
Exhibit 11 - Earnings Per Share Calculation F-23
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, 1996 and 1995, 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, 1996. 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 audit 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 financial position of Micro Bio-Medics,
Inc. and Subsidiaries as of November 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
November 30, 1996, in conformity with generally accepted accounting principles.
We have also audited Schedule II and Exhibit 11 for the years ended November 30,
1996, 1995 and 1994 included in the 1996 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
February 12, 1997, except for
Notes 8 and 12 which are
dated March 7, 1997
F-2
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
NOVEMBER 30,
---------------------------
1996 1995
---------- ----------
CURRENT ASSETS:
Cash $1,513,750 $2,817,285
Accounts receivable, less allowance
for doubtful accounts of
$686,179 in 1996 and
$674,210 in 1995 (Note 5) 31,280,932 25,657,607
Inventory (Note 5) 13,488,244 12,318,756
Prepaid expenses and other current assets 875,451 657,768
Prepaid income taxes 329,918 471,710
Deferred income taxes (Note 6) 781,500 485,500
----------- -----------
Total current assets 48,269,795 42,408,626
PROPERTY, PLANT AND EQUIPMENT - at cost,
net of accumulated depreciation and
amortization of $3,433,070 in 1996 and
$3,616,134 in 1995 (Notes 2, 3 and 5) 3,758,348 3,477,807
INTANGIBLE ASSETS, net of accumulated
amortization of $1,155,260 in 1996 and
$1,061,323 in 1995 (Notes 2 and 4) 8,254,087 4,990,073
OTHER ASSETS 161,586 259,206
----------- -----------
$60,443,816 $51,135,712
=========== ===========
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
NOVEMBER 30,
----------------------------
1996 1995
----------- -----------
CURRENT LIABILITIES:
Current maturities of long-term
debt (Note 5) $ 432,755 $ 479,195
Accounts payable 17,182,644 10,297,403
Accrued expenses and sundry
liabilities (Note 7) 2,542,174 1,666,762
----------- -----------
Total current liabilities 20,157,573 12,443,360
LONG-TERM DEBT, net of current
maturities (Note 5) 8,714,567 17,270,062
DEFERRED INCOME TAXES (Note 6) 179,911 358,138
----------- -----------
Total liabilities 29,052,051 30,071,560
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY (Notes 5 and 9):
Preferred stock $1 par value:
Authorized - 1,000,000 shares,
no shares issued - -
Common stock $.03 par value:
Authorized - 20,000,000 shares
Issued - 5,062,115 shares in
1996 and 3,878,804
shares in 1995 151,863 116,364
Additional paid-in capital 20,954,536 12,407,257
Retained earnings 10,286,530 8,541,695
Less: Cost of 1,167 shares of common
stock in treasury (1,164) (1,164)
------------ ------------
Total stockholders' equity 31,391,765 21,064,152
------------ ------------
$ 60,443,816 $ 51,135,712
============ ============
The notes to consolidated financial statements are made a part hereof.
F-4
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED NOVEMBER 30,
--------------------------------------------
1996 1995 1994
------------- ------------- -------------
NET SALES $ 150,142,529 $ 119,873,764 $ 121,604,461
COST OF GOODS SOLD 119,205,502 94,307,143 94,923,689
------------- ------------- -------------
GROSS PROFIT 30,937,027 25,566,621 26,680,772
------------- ------------- -------------
OPERATING EXPENSES:
Selling, shipping and
warehouse 17,357,225 14,511,793 14,421,280
General and administrative 9,795,069 7,901,052 8,581,615
Interest and financing
costs (net of interest
income of approximately
$206,400 in 1996,
$172,600 in 1995 and
$173,000 in 1994) 719,198 1,238,887 1,044,257
------------- ------------- -------------
Total operating expenses 27,871,492 23,651,732 24,047,152
------------- ------------- -------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 3,065,535 1,914,889 2,633,620
PROVISION FOR INCOME
TAXES (Note 6) 1,320,700 806,000 952,000
------------- ------------- -------------
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 1,744,835 1,108,889 1,681,620
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE FOR INCOME TAXES
PRIOR TO 1994 - - (60,000)
------------- ------------- -------------
NET INCOME $ 1,744,835 $ 1,108,889 $ 1,621,620
------------- ------------- -------------
------------- ------------- -------------
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE BEFORE
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (Note 10) $ .31 $ .25 $ .37
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE FOR INCOME TAXES
PRIOR TO 1994 - - (.01)
------------- ------------- -------------
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $ .31 $ .25 $ .36
------------- ------------- -------------
------------- ------------- -------------
NUMBER OF SHARES USED IN COMPUTING
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE (Note 10) 5,816,469 5,121,634 4,896,518
------------- ------------- -------------
------------- ------------- -------------
DIVIDENDS PER COMMON SHARE NONE NONE NONE
------------- ------------- -------------
------------- ------------- -------------
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
YEARS ENDED NOVEMBER 30,
---------------------------------------
1996 1995 1994
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,744,835 $ 1,108,889 $ 1,621,620
----------- ----------- -----------
Adjustments to reconcile net
income to net cash
provided by operating activities:
Cumulative effect of
accounting change - - 60,000
Depreciation and
amortization 1,371,283 1,056,365 952,109
Provision for losses on
accounts receivable 44,000 24,210 268,551
Deferred income taxes (155,300) 89,000 (96,000)
Changes in assets and
liabilities, net of
effect of asset
acquisitions (Note 2):
Accounts receivable (4,381,287) 1,098,227 (1,055,450)
Inventory (1,198,068) 3,130,709 (2,506,516)
Prepaid expenses and other
current assets (159,254) 113,258 (265,042)
Prepaid income taxes 205,691 (471,710) -
Other assets 97,618 (7,622) (15,604)
Accounts payable 5,785,344 (3,462,612) 8,441,961
Accrued expenses and
sundry liabilities 710,872 85,421 255,913
----------- ----------- -----------
2,320,899 1,655,246 6,039,922
----------- ----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 4,065,734 2,764,135 7,661,542
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from exercise
of warrants 3,586,059 300,601 126,409
Net repayments under revolving
loan agreements (7,000,000) (150,000) (3,224,695)
Net repayments of long-term debt (603,532) (419,952) (380,085)
Exercise of employee stock options 371,122 197,606 125,503
----------- ----------- -----------
NET CASH USED IN FINANCING
ACTIVITIES (3,646,351) (71,745) (3,352,868)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for certain net
assets of businesses acquired - (931,466) (2,718,009)
Capital expenditures (664,433) (788,330) (713,484)
Payments for intangible assets (1,058,485) (1,488,654) (1,027,851)
Note receivable - - 1,000,000
----------- ----------- -----------
NET CASH USED IN INVESTING
ACTIVITIES (1,722,918) (3,208,450) (3,459,344)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (1,303,535) (516,060) 849,330
CASH - beginning of year 2,817,285 3,333,345 2,484,015
----------- ----------- -----------
CASH - end of year $ 1,513,750 $ 2,817,285 $ 3,333,345
----------- ----------- -----------
----------- ----------- -----------
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)
YEARS ENDED NOVEMBER 30,
-----------------------------------
1996 1995 1994
--------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 986,000 $ 1,424,000 $ 1,217,000
----------- ----------- -----------
----------- ----------- -----------
Income taxes $ 1,150,000 $ 948,000 $ 1,214,000
----------- ----------- -----------
----------- ----------- -----------
ASSETS ACQUIRED FOR DEBT - capital leases,
which are not reflected in
the above statements $ - $ - $ 202,658
----------- ----------- -----------
----------- ----------- -----------
NET ASSETS OF A BUSINESS ACQUIRED
FOR ISSUANCE OF COMMON STOCK
which is not reflected in the
above statements $ 3,228,004 $ - $ -
----------- ----------- -----------
----------- ----------- -----------
BUSINESS ACQUIRED FOR ISSUANCE OF
LONG-TERM DEBT which is not
reflected in the
above statements $ - $ - $ 4,217,981
----------- ----------- -----------
----------- ----------- -----------
DEBENTURES CONVERTED INTO COMMON
STOCK $ 1,400,000 $ 1,390,000 $ -
----------- ----------- -----------
----------- ----------- -----------
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, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON STOCK
$.03 PAR VALUE ADDITIONAL
----------------- PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK
------ ------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
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
Shares issued for conversion
of debentures (Note 5) 187,500 5,625 1,391,968 - -
Shares issued for stock options 56,049 1,681 369,441 - -
Shares issued for exercise
of warrants 659,066 19,772 3,566,287 - -
Shares issued in connection
with acquisition (Note 2) 280,696 8,421 3,219,583 - -
Net income - - - 1,744,835 -
---------- --------- ------------ ----------- --------
BALANCES AT
NOVEMBER 30, 1996 5,062,115 $ 151,863 $ 20,954,536 $ 10,286,530 $ 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, 1996, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Micro Bio-Medics, Inc. (the "Company") and its subsidiaries are a United
States based distributor. The Company's principal line of business is the
distribution, at wholesale, of medical supplies and related products. The
principal markets are the New York metropolitan area for physicians and
hospitals, and throughout the United States for health care professionals
in sports medicine, schools, emergency services, industrial safety and
government and laboratory markets. Included in their operations are the
assembly and distribution of first aid medical kits and school and athletic
medical supplies. The foregoing operations are all considered as one
business segment.
CONCENTRATIONS OF CREDIT RISK
CASH
The Company maintains various bank accounts and at times, balances may
be in excess of the FDIC insurance limit. At November 30, 1996 and
1995, the amounts in excess of FDIC insurance limits were
approximately $1,200,000 and $2,200,000, respectively.
ACCOUNTS RECEIVABLE
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.
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.
F-9
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
Certain 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 five 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.
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.
INTEREST RATE SWAP AGREEMENTS
The Company recognizes the differential to be paid or received as an
adjustment to interest expense in the statement of income. Gains or
losses will be recognized when the interest rate swap agreement
terminates, matures or is sold.
REVENUE RECOGNITION
The Company recognizes revenues when its products are shipped or
services rendered.
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.
F-10
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING STANDARDS
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 affect the Company's consolidated
financial statements since the Company was generally in conformance with
this standard.
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock Based Compensation", which is effective for
fiscal years beginning after December 15, 1995 and is effective for the
Company's fiscal year ended November 30, 1997. Under SFAS No. 123,
companies can elect but are not required to recognize compensation expense
for all stock based awards, using a fair value methodology. The Company
expects to implement in 1997 the disclosure only provisions, as permitted
by SFAS No. 123.
For the year ended November 30, 1996, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Post-retirement Benefits Other than Pensions." Such adoption did not
significantly affect the Company's consolidated financial statements.
NOTE 2 - ACQUISITIONS
Prior to fiscal year ended November 30, 1993, the Company made several
acquisitions.
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.
F-11
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 2 - ACQUISITIONS (CONTINUED)
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.
Effective January 18, 1996, the Company acquired 100% of Stone Medical
Supply Corporation's ("Stone's") $.01 par value common stock outstanding of
approximately 3,432,000 shares in exchange for the issuance of 280,696
shares of the Company's $.03 par value common stock (valued at $11.50 per
share). This tax-free merger was accounted for as a purchase. The
purchase price was approximately $3,200,000, and the excess of cost over
the fair values of assets acquired was approximately $2,300,000 which is
being amortized over a life of thirty years. In addition, the Company
entered into two fifteen year non-competition agreements with two former
executives of Stone in the anticipated amount of $1,750,000, of which
$916,666 was paid during 1996 with the remainder payable over five years
subject to a final determination.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
COST
---------------------------
NOVEMBER 30,
--------------------------- ESTIMATED
1996 1995 USEFUL LIFE
------------ ------------ -----------
(Years)
Land $ 93,552 $ -
Building and improvements 343,448 - 40
Furniture, fixtures and
equipment (*) 5,457,771 5,716,810 5 - 8
Transportation equipment 140,825 93,419 5
Leasehold improvements 1,155,822 1,283,712 Life of lease
----------- ----------
7,191,418 7,093,941
Less: Accumulated depreciation
and amortization 3,433,070 3,616,134
----------- ----------
$ 3,758,348 $ 3,477,807
----------- ----------
----------- ----------
(*) Equipment held under capital leases amounted to approximately
$2,400,000 and $2,249,000 as of November 30, 1996 and 1995,
respectively.
Depreciation expense totalled approximately $976,000, $764,000 and $717,000
for the years ended November 30, 1996, 1995 and 1994, respectively.
F-12
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 4 - INTANGIBLE ASSETS
Intangible assets consist of the following:
NOVEMBER 30,
--------------------------
1996 1995
----------- -----------
Excess cost of acquisitions over net
tangible assets acquired $ 6,668,876 $ 3,997,570
Agreements not to compete (Note 2) 2,455,680 1,607,183
Computer programming costs 284,791 446,643
----------- -----------
9,409,347 6,051,396
Less: Accumulated amortization 1,155,260 1,061,323
----------- -----------
$ 8,254,087 $ 4,990,073
----------- -----------
----------- -----------
Amortization expense amounted to approximately $395,000, $292,000 and
$235,000 for the years ended November 30, 1996, 1995 and 1994, respectively.
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
NOVEMBER 30,
--------------------------
1996 1995
----------- -----------
Capitalized leases (collateralized by equipment
with an aggregate cost of approximately
$2,400,000 and $2,249,000) payable in various
installments through fiscal 2001; interest
at 6.5% to 9.06% or varies with changes in
prime rate $ 1,194,240 $ 1,426,384
Bank loans (i) 7,500,000 14,500,000
7% convertible subordinated
debentures, due
October 30, 2003 (ii) - 1,500,000
Obligations related to acquisitions 453,082 322,873
----------- -----------
9,147,322 17,749,257
Less: Current maturities 432,755 479,195
----------- -----------
$ 8,714,567 $ 17,270,062
----------- -----------
----------- -----------
F-13
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 5 - LONG-TERM DEBT (CONTINUED)
The approximate non-current portion of long-term debt at November 30, 1996 is
payable as follows:
YEAR ENDING NOVEMBER 30,
------------------------
1998 $ 435,000
1999 7,865,000
2000 278,000
2001 71,000
2002 17,000
Subsequent 49,000
-----------
$ 8,715,000
-----------
-----------
(i) The Company has a $25 million secured revolving loan agreement with Chase
Manhattan Bank NA and Fleet Bank of New York. 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, 1996, $4,000,000 of the
$7,500,000 revolving loan outstanding was utilized for Eurodollar loans at
an average interest rate of 6.625%. 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. As of November 30, 1996, the agreement serves to limit
the net interest rate charged on the Company's first $10,000,000 of
revolving loans to 8.25%. However, the Company would receive no further
interest rate benefit once the applicable interest rate falls below 6.55%.
(ii) In November 1993, the Company completed the private sale and issuance of
its 7% convertible subordinated Debentures ("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 Debentures were
immediately convertible into shares of common stock at the rate of $8.00
per share until October 28, 2003.
On September 28, 1995, $1,500,000 of the Debentures were converted into
187,500 shares of the Company's common stock. As of May 10, 1996, the
remaining outstanding Debentures were converted into shares of the
Company's common stock.
F-14
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 6 - INCOME TAXES
The Company and its subsidiaries file consolidated income tax returns.
Provision for income taxes consists of the following:
YEARS ENDED NOVEMBER 30,
--------------------------------------
1996 1995 1994
------------ ----------- -----------
Currently payable:
Federal $ 1,055,000 $ 508,000 $ 745,000
State and local 421,000 209,000 303,000
----------- --------- ---------
1,476,000 717,000 1,048,000
----------- --------- ---------
Deferred:
Federal (124,300) 72,000 (77,000)
State and local (31,000) 17,000 (19,000)
----------- --------- ---------
(155,300) 89,000 (96,000)
----------- --------- ---------
$ 1,320,700 $ 806,000 $ 952,000
----------- --------- ---------
----------- --------- ---------
The difference between the statutory United States federal income tax rate
and the effective income tax rate is as follows:
YEARS ENDED NOVEMBER 30,
-------------------------------------
1996 1995 1994
----------- --------- ---------
Statutory federal income tax rate 34.0 34.0 34.0
Current year state and local taxes
(net of federal tax effect) 6.8 7.9 7.0
Other 2.3 .2 (4.9)
----- ------ ------
43.1% 42.1% 36.1%
----- ------ ------
----- ------ ------
The net current and non-current components of deferred income taxes
recognized in the balance sheets at November 30, are as follows:
1996 1995
--------- ---------
Net current assets $ 781,500 $ 485,500
Net non-current liabilities 179,911 358,138
--------- ---------
Net asset $ 601,589 $ 127,362
--------- ---------
--------- ---------
F-15
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 6 - INCOME TAXES (CONTINUED)
The components of the net deferred tax asset as of November 30, are as
follows:
1996 1995
--------- ---------
Deferred tax assets:
Accounts receivable allowances $ 248,274 $ 283,080
Inventory - uniform capitalization and
allowances 533,226 189,420
Net operating loss 262,360 -
Other 44,100 13,000
--------- ---------
1,087,960 485,500
Deferred tax liability:
Depreciation and amortization 486,371 358,138
--------- ---------
Net deferred tax asset $ 601,589 $ 127,362
--------- ---------
--------- ---------
In connection with its acquisition of Stone (Note 2), the Company has
recorded a deferred tax asset of $336,927 reflecting the benefit of
approximately $800,000 in loss carryforwards which expire in the year 2011.
Realization is dependent on generating sufficient taxable income prior to
expiration of the loss carryforwards. Although realization is not assured,
management believes it is more likely than not that all of the deferred tax
asset will be realized. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward period are reduced. However, no
valuation allowance has been provided. During the year ended November 30,
1996, $74,567 of this deferred tax asset was realized by the utilization of
net operating loss carryforwards.
NOTE 7 - ACCRUED EXPENSES
Accrued expenses and sundry liabilities consist of:
NOVEMBER 30,
------------------------
1996 1995
----------- -----------
Compensation $ 1,273,444 $ 660,638
Freight-out 194,222 356,795
Commissions 273,747 166,871
Other 800,761 482,458
----------- -----------
$ 2,542,174 $ 1,666,762
----------- -----------
----------- -----------
F-16
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
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, 1996, 1995 and
1994, the Company's matching contributions were approximately $78,000,
$62,000 and $30,000, respectively.
DIRECTORS' RETIREMENT PLAN
The 1996 Directors' Retirement Plan to provide certain retirement benefits
for the directors of the Company was approved by the stockholders in
June 1996. Under the plan, a director must render continuous service to
the Company for a period of seven years after the commencement of the plan
and shall receive a retirement benefit on the earlier of retirement date,
disability or death. The retirement benefit is an annual benefit equal to
the aggregate director's fees paid during the twelve month period preceding
the payment of benefits. The Plan also provides that in the event of a
"change in control" as defined, a director may elect to receive either an
actuarial equivalent lump sum of the product of the director's compensation
and the director's life expectancy or a lump sum equal to the product of
the director's compensation and the number of completed years of service.
The total of such payments in a "change in control" would amount to
approximately $1,400,000 (See Note 12).
For the year ended November 30, 1996, the adoption of SFAS No. 106,
"Employers' Accounting for Post-retirement Benefits Other than Pensions,"
resulted in a retirement expense which was immaterial to the Company's
consolidated financial statements and for which no provision has been made.
EMPLOYMENT/CONSULTING CONTRACTS
The Company has 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 base
compensation under these contracts is approximately $340,000. The Chief
Executive Officer's contract provides for annual increments plus a bonus
based on income before taxes. If the contract is terminated prior to
expiration, payments are to be made 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 (See Note 12).
For the years ended November 30, 1996, 1995 and 1994, bonuses of
approximately $299,000, $144,000 and $199,000, respectively, were paid
under the employment contract.
F-17
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
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, 1996, 1995 and 1994, the
liability for claims incurred but not submitted amounted to $50,000,
$75,000 and $75,000, respectively.
LEASES
The approximate aggregate minimum annual rental commitments under long-term
operating leases in effect at November 30, 1996 are as follows:
YEAR ENDING OFFICE, WAREHOUSE TRANSPORTATION
NOVEMBER 30, AND SALES EQUIPMENT TOTAL
------------ ------------------ --------------- -----------
1997 $ 1,234,000 $ 149,000 $ 1,383,000
1998 1,266,000 126,000 1,392,000
1999 1,320,000 103,000 1,423,000
2000 1,287,000 75,000 1,362,000
2001 927,000 35,000 962,000
Thereafter 4,647,000 3,000 4,650,000
----------- --------- -----------
$10,681,000 $ 491,000 $11,172,000
----------- --------- -----------
----------- --------- -----------
Certain leases contain escalation clauses which increase the rents for
various operating expenses and fluctuations in property taxes.
Rent expense consists of the following:
YEARS ENDED NOVEMBER 30,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
Office, warehouse and
sales $ 1,552,500 $ 1,141,700 $ 1,392,046
Transportation
equipment 111,216 117,417 85,555
----------- ----------- -----------
$ 1,663,716 $ 1,259,117 $ 1,477,601
----------- ----------- -----------
----------- ----------- -----------
F-18
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
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, 1996:
YEAR ENDING NOVEMBER 30,
------------------------
1997 $ 516,000
1998 274,000
1999 263,000
2000 255,000
2001 53,000
-----------
Total minimum lease payments 1,361,000
Less: Amount representing
interest at 6.5% to 9% 167,000
-----------
$ 1,194,000
-----------
-----------
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:
YEARS ENDED NOVEMBER 30,
------------------------------------------
1996 1995 1994
--------- ---------- -----------
Outstanding at
beginning of year 1,491,568 1,372,368 1,244,767
Add (deduct):
Granted 215,000 207,000 180,500
Terminated (15,100) (42,667) (22,000)
Exercised (56,049) (45,133) (30,899)
--------- ---------- -----------
Outstanding at
end of year 1,635,419 1,491,568 1,372,368
--------- ---------- -----------
--------- ---------- -----------
Remaining shares
reserved for issuance 687,732 387,632 51,965
--------- ---------- -----------
--------- ---------- -----------
Options outstanding at November 30, 1996, 1995 and 1994 ranged in price
from $2.25 to $16.50. Options exercised ranged in price from $2.25 to
$10.25 in 1996, 1995 and 1994.
F-19
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 9 - STOCK OPTIONS AND WARRANTS (CONTINUED)
WARRANTS
The Company's Series 1 warrants expired in June 1996 and almost all were
exercised at $6.00 per 1.047 shares. The total net proceeds from the
exercise of all warrants from 1992 (inception) through June 1996 were
approximately $7,900,000 with approximately 1,400,000 shares of common
stock being issued.
NOTE 10 - EARNINGS PER COMMON AND COMMON 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.
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 carrying amount of long-term
debt approximates its fair value determined based on discounted cash flow
using a market rate of interest at the balance sheet dates as applicable to
comparable debt.
NOTE 12 - SUBSEQUENT EVENT
On March 7, 1997, the Company entered into an agreement and plan of merger
whereby HSI Acquisition Corp., a wholly-owned subsidiary of Henry Schein,
Inc. ("Schein"), will merge into the Company. The Company will be the
surviving corporation as a subsidiary of Schein. Schein is a marketer of
healthcare products and services to office-based healthcare practitioners
including dental practices and laboratories, physician practices and
veterinary clinics in the North American and European markets. As a result
of the transaction, outstanding shares of the Company's common stock will
be exchanged at a rate of .62 shares of Schein's common stock for each
outstanding share of the Company. Existing options and warrants will be
exchanged for Schein's options and warrants at the same rate. It is
intended that the merger shall qualify as a tax free reorganization for
income tax purposes and accounted for as a pooling of interests for
financial reporting purposes.
F-20
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
NOTE 12 - SUBSEQUENT EVENT (CONTINUED)
The completion of the transaction is subject to approval by the Company's
shareholders and to termination of any waiting period under the
Hart-Scott-Rodino Act, and further, all dissenting shares shall not
constitute more than 9% of the Company's outstanding common stock
immediately prior to the effective date of the merger.
The agreement may be terminated based upon certain conditions as defined
in the Plan of Merger including if the merger is not consummated before
September 30, 1997. In the event that the merger is not completed due to
cause by either party, liquidated damages of $3,000,000 will be payable by
such party to the other party. If (i) the Company terminates the Plan of
Merger in order to effect an Acquisition Transaction (as defined) with
another person, (ii) Schein terminates the Plan of Merger due to the
Company's Board of Directors withdrawing or adversely modifying its
recommendation that the Company's shareholders approve the Plan of Merger,
or (iii) the Plan of Merger terminates under certain other circumstances
and the Company effects an Acquisition Transaction or enters into a
definitive agreement with respect thereto within six months of such
termination, the Company will pay Schein a termination fee of $5,000,000.
In connection with the Merger Agreement, the Chief Executive Officer of
the Company entered into an employment agreement, which becomes effective
when the merger is completed, to be employed as Executive Vice-President
of Schein and President of Schein's medical products group. The existing
employment agreement (see Note 8) will be terminated and Schein will cause
the Company to pay him $3,000,000 in five equal installments pursuant
thereto. The first payment is due on the effective date of the merger and
the remaining installments are payable on each January 1st thereafter.
If the merger becomes effective, the Board of Directors of the Company
will terminate the 1996 Directors' Retirement Plan (see Note 8) and the
directors will not seek to obtain the benefits payable under such plan.
F-21
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
--------- ----------- ---------- ----------- ----------
BALANCE ADDITIONS BALANCE
BEGINNING CHARGED TO END OF
OF YEAR OPERATIONS DEDUCTIONS* YEAR
----------- ---------- ----------- ---------
DESCRIPTION
-----------
Allowance for Doubtful Accounts
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
Year ended November 30, 1996 674,210 44,000 32,031 686,179
* Deductions represent accounts written off, net of recoveries of accounts
written off in prior years.
F-22
<PAGE>
MICRO BIO-MEDICS, INC. AND SUBSIDIARIES
EXHIBIT 11 - STATEMENT RE:
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
YEARS ENDED NOVEMBER 30,
------------------------------------
1996 1995 1994
----------- ----------- ----------
PRIMARY EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE
EARNINGS
Income before cumulative effect of
accounting change $ 1,744,835 $1,108,889 $1,681,620
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 reduction
of debt and the balance of funds invested
in U.S. government securities, net of
applicable income taxes 59,709 191,461 146,222
----------- ---------- -----------
Adjusted earnings $ 1,804,544 $1,300,350 $1,827,842
----------- ---------- -----------
----------- ---------- -----------
SHARES
Weighted average number of common shares
outstanding 4,554,046 3,690,092 3,551,732
Additional shares assuming conversion of:
Stock options and warrants utilizing the
modified treasury stock method 1,262,423 1,431,542 1,344,786
----------- ---------- -----------
Number of common and common
equivalent shares 5,816,469 5,121,634 4,896,518
----------- ---------- -----------
----------- ---------- -----------
Earnings per common and common equivalent
share before cumulative effect of
accounting change $.31 $.25 $.37
----------- ---------- -----------
----------- ---------- -----------
Fully diluted earnings per common and common equivalent share were the same.
F-23
<PAGE>
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)
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 (incorporated by reference to Exhibit 10(F.1)
included in the Company's Form 10-K for its fiscal year ended
November 30, 1995.
<PAGE>
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(N) 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(O) Agreement for Merger and Reorganization dated as of
November 2, 1995*
10(P) Noncompetition, Indemnification and Release Agreement of Andrew
D. Stone dated as of November 2, 1995 *
10(Q) Noncompetition Agreement of Lyudmila Stone dated as of
November 2, 1995*
10(R) Form of Escrow Agreement *
<PAGE>
10(S) Employment Agreement of Andrew D. Stone dated as of November 2,
1995*
10(T) Form of Put and Call Agreement *
10(U) Management Agreement dated as of November 2, 1995 *
10(V) Amendment to Bruce Haber Employment Agreement dated as of
December 23, 1993 *
10(W) Amendment to Bruce Haber Employment Agreement dated as of
April 1, 1995 *
10(X) Amendment to Bruce J. Haber's Employment Agreement dated as of
March 12, 1996 **
10(Y) Amendments to 1992 Incentive and Non-Statutory Stock Option
Plan *
10(Z) Consent of Chase Manhattan Bank dated as of November 2, 1995 *
10(a)(a) Further Amendment to 1992 Incentive and Non-Statutory Stock
Option Plan **
10(b)(b) Agreement and Plan of Merger dated March 7, 1997 by and among
Henry Schein, Inc., HSI Acquisition Corp. and the Registrant
together with exhibits which include Form of Affiliate Agreement,
Form of Option and Proxy Agreement and Form of counsel
opinions.**
10(c)(c) Employment Agreement dated March 7, 1997 between Bruce J. Haber
and Henry Schein, Inc.**
10(d)(d) Form of Agreement between Bruce J. Haber and Henry Schein, Inc.
relating to a change in control of Schein.**
10(e)(e) Termination of MBM Employment Agreement between Bruce J. Haber
and Henry Schein, Inc.**
10(f)(f) Form of Restricted Stock Agreement between Bruce J. Haber and
Henry Schein, Inc.**
10(g)(g) Agreement between the Registrant and Bangert, Dawes, Reade, Davis
& Thom Incorporated**
11 Statements re: computation of per share earnings (included in
Notes to Consolidated Financial Statements and Schedules thereto)
<PAGE>
21 Subsidiaries of Registrant (Caligor Physicians & Hospital Supply
Corp., a wholly-owned New York corporation does business under
the name "Caligor Pharmacy")
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.
** Previously filed with the original filing of the Registrant's Form 10-
K for the fiscal year ended November 30, 1996.
*** Filed herewith
(b) REPORTS ON FORM 8-K
During the three months ended November 30, 1996, a Form 8-K was not filed
or required to be filed.
<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.
June 25, 1997
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report dated February 12, 1997, except
for Notes 8 and 12, which are dated March 7, 1997, which is incorporated by
reference into the Form S-8 Registration Statement filed on behalf of Micro
Bio-Medics, Inc., file #33-46231, file #33-66726 and file #333-02019.
Miller, Ellin & Company
New York, New York
June25, 1997
