SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from January 1, 1998 to June 30, 1998
Commission file number 0-9040
METRO-TEL CORP.
(Name of small business issuer in its charter)
Delaware 11-2014231
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
290 N.E. 68th Street, Miami, Florida 33138 95035
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 305-754-4551
Securities registered under Section 12(b) of the Exchange Act: Common Stock,
$.025 par value
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
Steiner's - Atlantic Corp's revenues for the six months ended June 30,
1998 was $7,834,709 and for the year ended December 31, 1997 was $14,249,441.
The foregoing does not include the revenues of Metro-Tel Corp.
The aggregate market value as at January 21, 1999 of the Common Stock
of the issuer, its only class of voting stock, held by non-affiliates was
approximately $20,625,000 calculated on the basis of the closing price of such
stock on the Chicago Stock Exchange on that date. Such market value excludes
shares owned by all executive officers and directors (but includes shares owned
by their spouses); this should not be construed as indicating that all such
persons are affiliates.
The number of shares outstanding of the issuer's Common Stock as at
January 21, 1999 was 6,875,000.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
Transitional Small Business Disclosure Format Yes [ ] No [X]
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FORWARD LOOKING STATEMENTS
Certain statements in this Report under the captions "Item 1.
Business," "Item 2. Properties" and "Item 6. Management's Discussion and
Analysis of Financial Condition and Results of Operations," and elsewhere in
this Report constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward- looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual result, performance or achievements of
the Company, or industry trends and results, to be materially different from any
future results, trends, performance or achievements expressed or implied by such
forward-looking statements. Such risks, uncertainties and other factors include,
among others, the following: general economic and business conditions; industry
conditions and trends, including supply and demand; fluctuations in the prices
for telecommunication and dry- cleaning industry products; competition; changes
in business strategy or development plans; availability, terms and deployment of
debt and equity capital; relative values of the United States currency to
currencies in the countries in which the Company's customers and competitors are
located; availability of qualified personnel; changes in, or the failure to
comply with, government regulations; the ability of certain of the Company's
customers and suppliers and others to successfully and timely complete their
Year 2000 compliance programs. These and certain other factors are discussed
from time to time in this Report and from time to time in other Company reports
hereafter filed with the Securities and Exchange Commission. The Company does
not assume an obligation to update the factors discussed in this Report. and
other factors referenced in this Report.
When used in this Report, the words "may", "will, "expect,"
anticipate," "continue," "estimate," "project," "intend", "strategy" and "pro
forma" and similar expressions are intended to identify forward-looking
statements regarding events, conditions and financial trends that may affect the
Company's future plans of operations, business strategy, operating results and
financial position. Any forward looking statements are not guarantees of future
performance and are subject to risks and significant uncertainties and that
actual results may differ materially from those included within the
forward-looking statements as a result of various factors.
INTRODUCTION
On November 1, 1998, Steiner-Atlantic Corp. ("Steiner") was merged (the
"Merger") with and into, and became a wholly-owned subsidiary of, Metro-Tel
Corp. ("Metro-Tel" and collectively with Steiner, the "Company"). As a result of
the Merger, the Company has added Steiner's operations as a supplier of dry
cleaning, industrial laundry equipment and steam boilers to Metro-Tel's
operations as a manufacturer and seller of telephone test and customer premise
equipment.
All periodic reports heretofore filed by the Company with the
Securities and Exchange Commission have reflected only the operations and
financial statements of Metro-Tel Corp. on a stand-alone basis.
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For financial accounting (but not corporate law) purposes, the Merger
is treated as a "reverse acquisition" of Metro-Tel by Steiner utilizing the
"purchase" method of accounting. As a result, all financial statements of the
Company included in this and future periodic reports filed by the Company but
covering periods prior to November 1, 1998 will reflect only the results of
operations, financial position and cash flows of Steiner on a stand-alone basis.
All consolidated financial statements of the Company for periods commencing
November 1, 1998 will, in addition, include the results of operations, financial
position and cash flows of Metro-Tel from and after that date.
Subsequent to the Merger, the Company elected to adopt Metro-Tel's June
30 fiscal year rather than Steiner's December 31 fiscal year. Accordingly, this
Transition Report on Form 10-KSB is being filed pursuant to Rule 13a-10(b) of
the Securities Exchange Act of 1934 to file audited financial statements of
Steiner as of December 31, 1997 and June 30, 1998 and for the years ended
December 31, 1996, Decenber 31, 1997 and six months ended June 30, 1998.
PART 1
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Item 1. Business
- ----------------
General
Founded in 1960, Steiner is a supplier of dry cleaning equipment,
industrial laundry equipment and steam boilers, offering over 30 lines of
commercial systems to customers in South Florida, the Caribbean and Central and
South American markets ("Latin America"). Steiner's services include: (1)
designing and planning "turn-key" laundry and/or dry cleaning systems to meet
the layout, volume and budget needs of a variety of institutional and retail
customers, (2) supplying replacement equipment and parts to its customers, (3)
providing warranty and preventative maintenance through factory-trained
technicians and service managers, (4) selling its own line of dry cleaning
systems to customers in the United States, the Caribbean and Latin America; and
(5) selling process steam systems and boilers.
Founded in 1963, Metro-Tel has been engaged in the manufacture and sale
of telephone test and customer premise equipment utilized by telephone and
telephone interconnect companies in the
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installation and maintenance of telephone equipment. Through internal research
and development and through acquisition, Metro-Tel has added various product
lines to its telephone test and customer premise product lines.
Steiner's Operations
History. Steiner was founded in 1960 by William K. Steiner. Steiner
initially operated as a distributor of dry cleaning systems and boilers, and as
a rebuilder of laundry, dry cleaning and boiler equipment. Steiner expanded in
1972 when it began distributing institutional laundry equipment to hotels,
motels and hospitals. In 1980, Steiner began importing dry cleaning systems from
an English manufacturer, and four years later, Steiner developed a relationship
with an Italian manufacturer of dry cleaning systems. In 1990, Steiner
established its own branded product line with the introduction of an updated dry
cleaning system under the Aero-Tech label, substantially all of which is
currently manufactured exclusively for Steiner in Italy.
Steiner's laundry equipment includes washers and dryers, including
coin-operated machines, boilers, water reuse and heat reclamation systems,
flatwork ironers and automatic folders. Steiner's dry cleaning equipment
includes dry cleaning machines, garment presses, finishing equipment, and
sorting and distributing conveyors. Steiner's marketing staff sells to a
customer base that includes franchise and independent drycleaners, hotels,
motels, hospitals, cruise lines, nursing homes, governmental institutions and
distributors.
Product Lines. Steiner offers a broad line of over 30 laundry and dry
cleaning systems and boilers and over 1,000 accessory parts. Steiner's products
are manufactured by a number of suppliers. Steiner also markets a complete line
of dry cleaning equipment under its Aero-Tech trademark. Steiner's product lines
are positioned and priced to appeal to customers in the high-end, mid-range and
value priced markets. Suggested prices for most of Steiner's products range from
approximately $5,000 to $50,000. Steiner's product line offers its customers a
"one-stop shop" for laundry and dry cleaning systems, boilers and accessories.
In 1990, Steiner introduced its own line of dry cleaning equipment,
marketed under the Aero-Tech brand name, manufactured exclusively for Steiner in
Italy. Steiner does not have a formal contract with its Italian manufacturer,
but relies on its long-standing relationship with it. Steiner collaborates in
the design and closely monitors the quality of the manufactured product and
believes its Aero-Tech systems exceed the environmental regulations set by
safety and environmental regulatory agencies. Steiner must place its orders with
its Italian manufacturer prior to the time Steiner has received all of its
orders. However, because of Steiner's close working relationship with its
Italian manufacturer, Steiner can adjust orders rapidly and efficiently to
reflect a change in customer demands.
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According to its arrangement with its manufacturer, Steiner purchases
dry cleaning systems from its manufacturer in Italian lire. However, in the case
of a substantial decline in the value of the U.S. dollar against the Italian
lire or the implementation of custom duties, import controls or trade barriers
with Italy, Steiner has the ability to have its Aero-Tech line manufactured by
other international suppliers. Imports into the United States are affected by
the cost of transportation, the imposition of import duties and increased
competition from greater production demands abroad. The United States and Italy
may, from time to time, impose new quotas, duties, tariffs or other restrictions
or adjust prevailing quotas, duty or tariff levels, which could affect Steiner's
margins on its Aero-Tech systems. United States customs duties presently are
approximately 1% of invoice cost on dry cleaning systems.
Sales, Marketing and Customer Support. Steiner's laundry and dry
cleaning equipment products are marketed in the United States, the Caribbean,
Mexico and other Latin American countries. Steiner employs seven sales
executives to market its products in South Florida and the international
markets. Aero-Tech products are sold by the same seven sales executives. Steiner
supports its products by representative advertising in trade publications,
participating in trade shows and engaging in regional promotions and sales
incentive programs. A substantial portion of Steiner's equipment sales are
obtained by telephone and fax inquiries originated by the customer or by Steiner
and significant repeat sales are derived from existing customers.
Steiner seeks to become the single supplier of laundry and dry cleaning
equipment to each of its customers. Steiner currently offers over 30 lines of
commercial laundry, dry cleaning and boiler systems, along with a comprehensive
parts inventory consisting of over 1,000 parts and accessories. Steiner's
product lines are offered under a wide range of price points to address the
needs of a diverse customer base. By providing "one-stop" shopping, Steiner
believes it is better able to attract and support potential customers who can
choose from Steiner's broad product line.
Steiner seeks to establish customer satisfaction by offering (1) an
on-site training and preventive maintenance program performed by factory trained
technicians and service managers; (2) design and layout assistance; (3)
maintenance of a comprehensive parts and accessories inventory and same day or
overnight availability; and (4) competitive pricing. Steiner provides a
toll-free support line to resolve customer service problems and estimates that
it resolves approximately 75% of the service inquiries on the first call.
Steiner trains its sales and service employees to provide service and
customer support. Steiner uses specialized classroom training, instructional
videos and vendor sponsored seminars to educate employees about product
information. In addition, Steiner's technical staff has prepared comprehensive
training manuals, written in English and Spanish, relating to specific training
procedures. Steiner's technical personnel are continuously updated and retrained
as new technology is developed. Steiner monitors service technicians' continued
educational experience and fulfillment of requirements in order to evaluate
their competence. All of Steiner's service technicians receive service
bulletins, service technicians' tips and continued training seminars.
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Customers and Markets. Steiner's customer base consists of
approximately 350 customers in the United States, the Caribbean and Latin
America. Steiner's customers include dry cleaning chains and institutions,
cruise lines, and government agencies. No customer accounted for more than 10%
of Steiner's revenues on a stand-alone basis during Steiner's fiscal years ended
December 31, 1996 and 1997 or the six months ended June 30, 1998.
The following table sets forth the approximate geographic distribution
of Steiner's sales for the six months ended June 30, 1998:
Revenues % of Total
--------- ----------
United States $5,316,711 68.6%
Latin America $1,217,397 15.7%
Caribbean $1,147,918 14.8%
Other $ 65,295 .9%
---------- ------
Total $7,747,321 100%
========== =======
Sources of Supply. Steiner purchases laundry and dry cleaning systems,
boilers and other products from a number of manufacturers, none of which
accounted for more than 20% of its purchases for the years ended December 31,
1996 and 1997 and the six months ended June 30, 1998. Steiner has established
long-standing relationships with many of the leading laundry, dry cleaning and
boiler manufacturers. Steiner's management believes these supplier relationships
provide Steiner with a substantial competitive advantage, including exclusivity
in certain products and areas and favorable prices and terms. Therefore, the
loss of a major vendor relationship could affect Steiner's business.
Historically, Steiner has not experienced difficulty in purchasing desired
products from its suppliers and believes it has good working relationships with
its suppliers.
Competition. The laundry and dry cleaning equipment distribution
business is highly competitive and fragmented with over 100 full-line or
partial-line equipment distributors in the United States. Steiner's management
believes that no distributor supplies more than 6% of the market and that
substantially all such distributors are independently owned and, with the
exception of several regional distributors, operate primarily in local markets.
Competition is based on price, product quality, delivery and support services
provided by the distributor to the customer. In South Florida, Steiner's
principal domestic market, Steiner's primary competition is derived from two
full-line distributors which operate out of the Miami area. In the export
market, Steiner primarily competes with a wholesale distributor located in the
Northeast and anticipates increased competition from other distributors, as the
export market grows. As Steiner expands the sale of its Aero-Tech line to its
distributors on a national level, it competes with over a dozen manufacturers of
dry cleaning equipment whose products are distributed nationally. Steiner
competes by offering an extensive product selection, value-added services, such
as product inspection and quality assurance, toll-free
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customer support line, reliability, warehouse location, price and, with the
Aero-Tech line, competitive special features and exclusivity.
Metro-Tel's Operations.
History. The Metro-Tel was incorporated under the laws of the State of
Delaware on June 30, 1963. Since its inception, Metro-Tel has been engaged in
the manufacture and sale of telephone test and customer premise equipment
utilized by telephone and telephone interconnect companies in the installation
and maintenance of telephone equipment. Through internal research and
development and through acquisition, Metro-Tel has added various product lines
to its telephone test and customer premise product lines.
Product Lines. The following table sets forth the approximate net sales
of each of the Metro- Tel's two products lines and of its other products and
services, as a group, and the percentages which such sales bear to total net
sales of Metro-Tel on a stand-alone basis during each of the two years ended
June 30, 1998:
Year Ended June 30,
----------------------------------------------------
1998 1997
---- ----
Amount % Amount %
------ --- ------ --
(dollars in thousands)
Telephone Test
Equipment $3,582 93% $3,602 93%
Customer Premise
Equipment 83 2% 121 3%
Other Products and
Services 174 5% 160 4%
------ ---- ------ ----
$3,839 100% $3,883 100%
The downsizing of the Regional Bell Operating Companies ("RBOCs" during
the past several years has reduced the number of Telecom craft personnel who are
potential users of Metro-Tel's test equipment and, accordingly, Metro-Tel's
sales. To reduce the impact that has occurred as a result of the downsizing of
the RBOCs, through research and development, Metro-Tel has begun introducing new
products aimed at reducing its dependence on the RBOCs and is entering into new
markets, principally the public utility and data industry, for its existing and
new products.
Telephone Test Equipment. Metro-Tel manufactures and sells a line of
telephone test equipment which includes portable test sets, which are designed
for use in locating high resistance faults resulting from moisture in exchange
cables and by cable splicers on exchange and toll cables for identification of
cable wires and other tone-testing purposes; linemen's rotary and/or touch-tone
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testing handsets and portable line test sets for use by telephone installers,
repairmen and central office personnel; hand and pole exploring coils which are
used in cable fault finding; solid state conversion amplifier kits;
Volt-Ohmmeter test sets; and Cable Hound(R), a portable electronic unit that
locates and determines the depth of underground cable and metal pipes primarily
for the telephone, utility and construction industries.
In addition, Metro-Tel manufactures a line of transmission test
equipment used in telephone company central office installations by operating
companies, long distance telephone resellers and large companies who own their
own networks. Among these products are digital and analog rack-mounted test
systems, portable transmission test sets, remote test systems and fiber optic
test sets.
Customer Premise Equipment. Metro-Tel manufactures and markets a line
of telephone station and peripheral products, including telephone call
sequencers (which answer calls on up to 12 incoming unattended lines, provide
the caller with an appropriate message and place the calls in queue until
answered by an attendant) and a line of digital announcers (which provide a
pre-programmed message with the ability to ring through at the end of the
message if so desired by the caller). This product line also includes a series
of specialty telephone products, including call diverters (call forwarding
devices used both by end-users and in telephone company central offices), speed
dialers, specialty telephones and amplified handsets for the hearing impaired.
In addition, Metro-Tel has begun distributing a line of Channel Service
Units/Data Service Units (CSU/DSU) for the data industry. These devices are used
to terminate a digital channel on a customer's premises and enable computer data
to be transmitted and received at high speeds over the telephone line without
the use of a modem.
Other Products and Services. In addition, Metro-Tel sells a variety of
accessory products, primarily head sets and alligator clips. Metro-Tel also
sells spare parts for its product lines and provides repair services for its
products.
Methods of Distribution. Metro-Tel presently sells its products through
its own regional sales managers and sales representatives who assist Metro-Tel's
national telephone equipment distributors. Sales managers are presently based in
Georgia and California. In addition, Metro-Tel maintains an in-house sales staff
at its facilities in Milpitas, California.
Principal Customers. Metro-Tel is not dependent upon any single
customer. However, North Supply Company, a national distributor of telephone
products, accounted for approximately 15% and 19% of Metro-Tel's net sales for
the years ended June 30, 1998 and 1997, respectively, but less than 10% of the
consolidated revenues on a pro forma basis, assuming the Merger had been
completed at the beginning of the applicable year. Metro-Tel believes that,
should it for any reason lose this distributor, Metro-Tel would not be adversely
impacted since these sales would be absorbed by other distributors.
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Sources of Supply. The basic materials used in the manufacture of
Metro-Tel's telephone test equipment and telephone station and peripheral
telephone equipment consist of electronic components. Metro-Tel utilizes many
suppliers and is not dependent on any supplier. Its raw materials generally are
readily available from numerous suppliers.
Competition. Competition is high with respect to each of Metro-Tel's
product lines. However, as the products contained in such lines are varied and
similar products contain varying features, neither Metro-Tel nor any of its
competitors is a dominant factor in any product line market, except for
linemen's test sets for which Dracon, a division of Harris Corporation, is
dominant.
The principal method of competition for each of Metro-Tel's products is
price and product features, with service and warranty having a relatively less
significant impact. Metro-Tel believes its product lines are competitively
priced. Many of Metro-Tel's competitors have greater financial resources and
have more extensive research and development and marketing staffs than
Metro-Tel.
Research and Development. Metro-Tel is regularly engaged in the design
of new products and improvement of existing products for all of its
telecommunication equipment products lines amount specifically allocated and
research and development activities in fiscal 1998 and 1997, principally
salaries, was $228,755 and $238,061, respectively. All research and development
is Metro-Tel sponsored, except for products designed for Metro-Tel by
unaffiliated third parties compensated by either a lump-sum payment or on a
royalty basis.
Metro-Tel intends to continue its policy of reviewing potential
acquisitions of new product lines, additional products for its existing product
lines and the enhancement of its production and distribution capabilities. Such
acquisitions could lead to the issuance of notes, use of the general working
capital of Metro-Tel and/or issuance of shares of Metro-Tel's capital stock.
Patents and Trademarks
The Company is the owner of United States service mark registrations
for the names Aero- Tech, Logitrol, Petro-Star, Aqua Star and Enviro-Star which
are used in connection with its laundry and dry cleaning business lines. The
Company intends to use and protect these or related service marks, as necessary.
The Company believes its trademarks and service marks have significant value and
are an important factor in the marketing of its products.
The Company has obtained a number of patents and has a number of
trademarks which are used to identify its telephone test and customer premise
product lines. No patent or trademark is considered to be material to the
Company's telecommunication's product lines. The Company also pays royalties to
third parties under arrangements permitting the Company to manufacture various
items in its product lines.
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Compliance with Environmental and Other Government Laws and Regulations
Over the past several decades in the United States, federal, state and
local governments have enacted environmental protection laws in response to
public concerns about the environment. A number of industries, including the dry
cleaning and laundry equipment industry, are subject to these evolving laws and
implementing regulations. As a supplier to the industry, the Company serves
customers who are primarily responsible for compliance with environmental
regulations. Among the federal laws that the Company believes are applicable to
the industry, are the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), which provides for the investigation and
remediation of hazardous waste sites; The Resource Conservation and Recovery Act
of 1976, as amended ("RCRA"), which regulates generation and transportation of
hazardous waste as well as its treatment, storage and disposal; and the
Occupation Safety and Health Administration Act ("OSHA"), which regulates
exposure to toxic substances and other health and safety hazards in the
workplace. Most states and a number of localities have laws that regulate the
environment which are at least as stringent as the federal laws. In Florida,
environmental matters are regulated by the Florida Department of Environmental
Protection which generally follows the Environmental Protection Agency's ("EPA")
policy in the EPA's implementation of CERCLA and RCRA and closely adheres to
OSHA's standards.
Certain of the Company's customer premise equipment products that
connect to public telephone networks need Federal Communications Commission (or,
in the case of foreign sales, the equivalent agency in the foreign country in
which they will be sold) approval prior to their sale. The Company does not
believe that compliance with Federal, state and local environmental and other
laws and regulations which have been adopted have had, or will have, a material
effect on its capital expenditures, earnings or competitive position.
Employees
The Company currently employs 61 employees on a full-time basis, of
whom 3 are executive management, 15 are sales and marketing, 13 are
administrative and clerical, 7 are engineers and technicians, 19 are engaged in
production and 4 are in warehouse support. Of the Company's employees, 29 are
employed exclusively with respect to the Company's laundry and dry cleaning
equipment operations, 30 are employed exclusively with respect to the Company's
telecommunications equipment operations and the remainder currently divide their
time between the two operations. None of the Company's employees are subject to
a collective bargaining agreement, nor has the Company experienced any work
stoppages. The Company believes that its relations with employees are excellent.
Foreign and Government Sales
Steiner's export sales of the Company's laundry and dry cleaning
business were approximately $2,400,000 (or 31.4% of this Steiner's revenues for
the six month period ended June 30, 1998). Such export sales were made
principally to Latin America and the Caribbean. See "--Steiner's
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Operations-Customers and Markets". Most of Steiner's export sales require the
customer to make payment in United States Dollars.
Metro-Tel's export sales of the Company's telephone test and customer
premise equipment were approximately $252,000 (6.5% of this business line's
revenues) and $189,000 (4.9% of this Metro-Tel's line's revenues) in the years
ended June 30, 1997 and 1998, respectively. Such export sales were made
principally to Europe, Canada and South America. Some of Metro-Tel's export
sales are made through distributors and agents. All of Metro-Tel's sales also
require the Company to make payment in United States dollars. Accordingly,
foreign sales of Steiner and Metro-Tel may be affected by the strength of the
United States dollar relative to the currencies of the countries in which their
customers and competitors are located. Revenues from sales to the United States
government (none of the contracts relating thereto being subject to
renegotiation of profits or termination at the election of the government) are
immaterial.
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Item 2. Properties.
- ------- -----------
The Company's executive offices and the main distribution center for
its laundry and dry cleaning equipment products are housed in three leased
adjacent facilities totaling approximately 47,000 square feet in Miami, Florida.
The Company believes its facilities are adequate for its present needs and that
suitable space would be available to accommodate its future needs. The Company
currently has three separate leases on its facilities in Miami, Florida and a
lease for its facility in Milpitas, California. The following table sets forth
certain information concerning the leases at these facilities:
Approximate
Facility Sq. Ft. Expiration
- -------- ------- ----------
Miami, Florida (1) 27,000 October 2004
Miami, Florida 8,000 Month to Month
Miami, Florida (2) 12,000 December, 1999
Milpitas California 21,500 March, 2002
(1) Leased from William K. Steiner, a director of the Company. The lease
includes a right to renew for term at a rent to be agreed upon by the
parties.
(2) Lease contains one three-year lease extension with adjustments for
changes in the Consumer Price Index.
Item 3. Legal Proceedings.
- ------- -----------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
As reported in the Company's Quarterly Report or Form 10-QSB for the
quarter ended September 30, 1998, at the Company's 1998 Annual Meeting of
Stockholders held on October 29, 1998, the Company's stockholders:
(a) Approved and adopted an Agreement and Plan of Merger, dated as of
July 1, 1998 (the "Merger Agreement"), among Metro-Tel, Metro-Tel Acquisition
Corp. ("Subsidiary"), Steiner, William K. Steiner and Michael S. Steiner,
pursuant to which, subsequent to the Meeting, Subsidiary, a newly formed
wholly-owned subsidiary of Metro-Tel, was merged with and into Steiner, as a
result of which, among other things, Steiner became a wholly-owned subsidiary of
Metro-Tel, the stockholders of Steiner became owners of approximately 69% of the
outstanding shares of the
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Company's Common Stock and a majority of the members of the Company's Board of
Directors now consists of designees of Steiner, by a vote of 1,436,079 shares in
favor and 42,848 shares against, with 2,248 shares abstaining and 460,365 broker
non-votes;
(b) Approved and adopted a proposal to amend the Company's Certificate
of Incorporation to increase the number of shares of Common Stock which the
Company is authorized to issue from 6,000,000 shares to 15,000,000 shares, by a
vote of 1,434,111 shares in favor and 45,793 shares against, with 2,860 shares
abstaining and 458,776 broker non-votes;
(c) Approved and adopted a proposal to amend the Company's 1991 Stock
Option Plan to increase the number of shares of Common Stock which the Company
is authorized to issue thereunder from 250,000 shares to 850,000 shares, by a
vote of 1,401,367 shares in favor and 66,820 shares against, with 12,219 shares
abstaining and 461,134 broker non-votes; and
(d) Reelected the Company's then existing Board of Directors by the
following votes:
Votes
-----
For Withheld
--- --------
Michael Epstein 1,906,379 35,161
Lloyd Frank 1,906,379 35,161
Venerando J. Indelicato 1,905,657 35,883
Michael Michaelson 1,906,379 35,161
Pursuant to the Merger Agreement, in addition to William K. Steiner and
Michael S. Steiner, Stuart Wagner and David Blyer were designated by Steiner to
serve on the Company's Board of Directors. Venerando Indelicato and Lloyd Frank
continue to serve as directors of the Company and, in accordance with the Merger
Agreement, Michael Epstein and Michael Michaelson have resigned as directors of
the Company.
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PART II
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Item 5. Market for the Common
- ------- Equity and Related Stockholder Matters.
--------------------------------------
The Company's Common Stock has been traded on the Chicago Stock
Exchange under the symbol "MTF" since January 11, 1999 and has been quoted on
the Nasdaq Electronic Bulletin Board under the symbol MTRO since January 7,
1999. Prior thereto, the Company's Common Stock was quoted on the Nasdaq Stock
Market-Small Cap Market. The following table sets forth the high and low bid
prices for the Company's Common Stock for each quarterly period in the period
July 1, 1997 through January 8, 1998, as reported by Nasdaq, and thereafter the
high and low sales prices for the Company's Common Stock as reported by the
Chicago Stock Exchange. The Nasdaq quotations are without retail markups,
markdowns or commissions and may not represent actual transactions.
High Low
---- ---
Fiscal 1997
-----------
First Quarter 1 1/4 1
Second Quarter 1 1/4 1
Third Quarter 1 1/4 1 1/16
Fourth Quarter 1 1/8 5/8
Fiscal 1998
-----------
First Quarter 1 3/8 11/16
Second Quarter 11/2 7/8
Third Quarter 1 3/8 5/8
Fourth Quarter 1 3/4 25/32
Fiscal 1999
-----------
First Quarter 1 3/8 7/8
Second Quarter 3 9/16 5/8
Third Quarter (through 3 3/16 2 3/4
January 25, 1999)
No dividends have been paid on the Company's Common Stock during either
of the last two fiscal years. Steiner is a party to a Loan and Security
Agreement with a commercial bank, loans under which are guaranteed by the
Company and secured by substantially all of the assets of the Company. Among
other things, this agreement provides that the Company may not declare or pay
dividends if such payment would likely cause it to fail to maintain a specific
consolidated debt service ratio and ratio of consolidated liabilities to
tangible net worth.
As of January 25, 1999 there were approximately 959 holders of record
of the Company's Common Stock.
-14-
<PAGE>
Item 6. Management's Discussion and Analysis of Steiner's Financial
- ------- Condition and Results of Operations
-----------------------------------------------------------
General
On November 1, 1998 Steiner was merged with and into and became a
wholly-owned subsidiary of the Company. As set forth in Note 9 in the
accompanying financial statements of Steiner, for financial reporting purposes
the Merger is treated as the acquisition of the Company by Steiner and is
accounted for under the purchase method of accounting. Accordingly, the
Company's reported results of operations for all periods prior to November 1,
1998 reflect only the results of operations of Steiner.
Therefore, results of operations and financial position of Metro-Tel
(reflected in periodic reports filed by Metro-Tel covering periods ended prior
thereto) and of Steiner (reflected herein and in the Company's proxy statement
dated October 5, 1998) prior to November 1, 1998 are not comparable to the
consolidated results of operations of the Company subsequent to such date which
will reflect the results of Metro-Tel (only since such date) and Steiner (for
the entire period). Furthermore, the following discussions and analyses concerns
the results of operations and financial position of Steiner on a stand-alone
basis as of and for the six months ended June 30, 1997 and 1998. Accordingly, it
is not necessarily indicative of the Company's (including Steiner's and
Metro-Tel's) results on a consolidated basis that are to be expected for a full
year.
Results of Operations
Comparison of Six Months Ended June 30, 1998 and June 30, 1997
Net sales increased by $1,235,875 (19.0%) during the six month period
ending June 30, 1998 from the same period of 1997. Sales of dry cleaning
equipment decreased by 12.2% due to a decrease in the number of dry cleaning
plants being opened. This decrease was offset by increases in sales of laundry
equipment (65.6%), coin laundry equipment (16.9%) and spare parts (11.5%).
Commissions and other income increased by $14,674 (20.2%) during the
six month period of 1998 compared to the same period of 1997.
Steiner's gross profit margin, expressed as a percentage of net sales,
decreased during the first six months of 1998 to 26.3% from 28.9% for the same
period of 1997. The decrease is mostly attributable to the change in the mix of
product sales.
Selling, general and administrative expenses increased by $245,660
(15.4%) during the six month period of 1998, but as a percentage of net sales
revenues decreased to 23.8% from 24.5% during the same period of 1997. This
increase was primarily due to increases in salaries (10.3%), telephone expenses
(61.0%) professional fees (22.8%), conventions (64.4%), maintenance and repairs
(102.8%), commissions (127.6%) and bad debt expenses of $79,730. These increases
were mostly
-15-
<PAGE>
offset by reductions in insurance (3.6%) advertising (9.7%), travel and
promotion (12.8%) and computer (44.2%).
Other income increased by $144,030 (from $19,851 to $163,881), mostly
due to an increase in management fees from an affiliated company. Steiner
believes that interest expense will increase as a result of increased borrowings
to fund a cash distribution to shareholders prior to completion of the Merger
and its new and expanded and revolving credit and term loan agreement discussed
below.
Comparison of Years Ended December 31, 1997 and December 31, 1996.
Net sales increased by $235,815 (1.7%) in 1997 over 1996. Sales of dry
cleaning equipment decreased by 16.4% due to a decrease in the number of dry
cleaning plants being opened. This decrease in sales of dry cleaning equipment
was offset by increases in sales of laundry equipment (4.3%), coin laundry
equipment (32.6%) and spare parts (16.8%).
Steiner's gross profit margin, expressed as a percentage of net sales,
decreased to 26.6% in 1997 from 28.2% in 1996. The decrease in gross profit
margin is mainly attributable to the change in the mix of product sales.
Commissions and other income decreased by $2,091 (1.3%) in 1997 over
1996.
Selling, general and administrative expenses increased in 1997 by
$76,076 (2.2%) and as a percentage of net sales to 24.6% from 24.5% in 1996.
This increase was primarily due to increases in salaries (2.0%), payroll taxes
(23.4%), commissions (14.1%) and a one time loss associated with an
international transaction. These increases were largely offset by reductions in
telephone expense (17.4%), depreciation and amortization (13.5%), convention
expenses (55.7%), postage and freight (55.2%) and maintenance and repairs
(35.7%).
Other income decreased by $120,665 (60.4%) in 1997 over 1996, mainly
due to a reduction in management fee income associated with an affiliated
company.
Financial Position and Liquidity
For the six month period ending June 30, 1998, Steiner's cash increased
by $196,059. Of the cash generated by operating activities ($1,573,579),
$444,193 was derived from net income and $15,621 was derived from non-cash
expenses for depreciation and amortization along with $79,730 for bad debt
expense. Additional cash from operating activities was provided by a decrease in
inventories ($197,145), a decrease in accounts and lease receivables ($235,331)
and a decrease in other assets ($65,526). Steiner's cash also increased due to
an increase in accounts payable and accrued expenses ($450,940) and customer
deposits ($85,093). Cash of $15,043 was used by Steiner in investing activities
to purchase capital assets. Cash of $1,362,477 was used by Steiner in financing
activities for the repayment of debt ($100,000) and to fund a cash distribution
to shareholders ($1,937,477) which offset new borrowing of $500,000 from
Steiner's line of credit plus $175,000 borrowed from a related company.
On November 2, 1998, Steiner entered into a new loan agreement with the
same commercial bank used in its prior financing. (See Note 11 to the Financial
Statements of Steiner for the six months ended June 30, 1998 and 1997). Steiner
paid off the outstanding balances on its prior line of credit and term loan with
the proceeds from the new loan. The new loan includes a line of credit of
$2,250,000 (limited by a borrowing base related to eligible accounts receivable
and inventories of Steiner) and a term loan of $2,400,000. Borrowing under the
new agreement bear interest at the bank's prime rate of 2.75% per annum above
the one month LIBOR Market Index Rate. The line of credit is due on the earlier
of November 2, 1999 or demand. The term loan is due January 2002. The term loan
requires monthly payments of $40,000 plus interest, commencing January 1999,
with a $960,000 balloon payment in January 2002. Steiner's obligations under the
line of credit and term loan are guaranteed by Metro-Tel and secured by pledges
of substantially all of Steiner's and Metro-Tel's present and future assets and
property, excluding real estate. The agreement requires the maintenance of
certain financial ratios and contains other restrictive covenants.
-16-
<PAGE>
Year 2000 Compliance
The Company believes that its internal management information systems,
billing, payroll and other information services are Year 2000 compliant. The
Company has already upgraded its software programs and carried out certain tests
of its accounts payable and accounts receivable files which are date sensitive
and found all systems to operate properly. The Company is not linked by computer
with any of its customers or vendors. Orders are received and purchase orders
are sent by telecopy, telephone, in person or by mail. None of these methods are
date sensitive.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
which Steiner will adopt as required for all periods beginning after December
15, 1997. This statement requires the disclosure of certain information about
operating segments in the financial statements. It also requires that public
companies report certain information about their products and services, the
geographic areas in which they operate and their major customers.
The new standard is effective for financial statements for periods
beginning after December 15, 1997 and requires comparative financial information
for earlier years to be restated. Disclosure is not required for interim periods
during the first year. The adoption of this new standard is not expected to have
a significant impact on Steiner's financial statements.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," establishes accounting and reporting standards for derivative
instruments and hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The statement applies to
all entities and is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. The Company did not engage in derivative instruments or
hedging activities in any periods presented in the financial statements.
-17-
<PAGE>
Item 7. Financial Statements
- ------- --------------------
Steiner-Atlantic Corp.
Index to Financial Statements
Report of Independent Certified Public Accountants
Balance Sheets at December 31, 1997 and June 30, 1998
Statements of Income for the years ended December 31, 1996 and 1997
and for the six months ended June 30, 1997 (unaudited) and 1998
Statements of Shareholders' Equity for the years ended December 31, 1996
and 1997 and for the six months ended June 30, 1998
Statements of Cash Flows for the years ended December 31, 1996 and
1997 and the six months ended June 30, 1997 (unaudited) and 1998
Summary of Accounting Policies
Notes to Financial Statements
18
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors and Shareholders
Steiner-Atlantic Corp.
Miami, Florida
We have audited the accompanying balance sheets of Steiner-Atlantic Corp. as of
December 31, 1997 and June 30, 1998 and the related statements of income,
shareholders' equity and cash flows for each of the two years in the period
ended December 31, 1997 and for the six months ended June 30, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Steiner-Atlantic Corp. at
December 31, 1997 and June 30, 1998, and the results of its operations and its
cash flows for each of the two years in the period ended December 31, 1997 and
for the six months ended June 30, 1998, in conformity with generally accepted
accounting principles.
Miami, Florida BDO Seidman, LLP
November 13, 1998
19
<PAGE>
Steiner-Atlantic Corp.
Balance Sheets
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 632,331 $ 828,390
Accounts receivable (Note 7) 1,214,523 981,432
Current portion of lease receivables (Notes 2 and 7) 193,562 161,007
Inventories 3,108,303 2,911,158
Other current assets (Note 6) 116,653 67,238
- ---------------------------------------------------------------------------------------------------------------
Total current assets 5,265,372 4,949,225
Lease receivables - due after one year (Notes 2 and 7) 214,177 148,651
Property and equipment, at cost - net of accumulated
depreciation and amortization (Note 3) 147,039 146,461
- ---------------------------------------------------------------------------------------------------------------
$ 5,626,588 $ 5,244,337
===============================================================================================================
Liabilities and Shareholders' Equity
Current liabilities
Line of credit (Note 5) $ 500,000 $ 1,000,000
Accounts payable and accrued expenses (Note 6) 869,035 1,494,975
Customer deposits 304,278 389,371
Current portion of term loan (Note 5) 200,000 200,000
- ------------------------------------------------------------------------------------------------------------
Total current liabilities 1,873,313 3,084,346
Term loan, less current portion (Note 5) 316,613 216,613
- ------------------------------------------------------------------------------------------------------------
Total liabilities 2,189,926 3,300,959
- ------------------------------------------------------------------------------------------------------------
Commitments (Notes 6, 8 and 9)
- ------------------------------------------------------------------------------------------------------------
Shareholders' equity Common stock, $.50 par value:
Authorized shares - 600,000; issued and
outstanding 339,500 shares 169,750 169,750
Retained earnings 1,448,950 1,448,950
Undistributed shareholders' earnings 1,817,962 324,678
- ------------------------------------------------------------------------------------------------------------
Total shareholders' equity 3,436,662 1,943,378
- ------------------------------------------------------------------------------------------------------------
$ 5,626,588 $ 5,140,584
============================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
20
<PAGE>
Steiner-Atlantic Corp.
Statements of Income
<TABLE>
<CAPTION>
Year ended December 31 Six months ended June 30
------------------------ ------------------------------
1996 1997 1997 1998
(Unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
Revenues:
<S> <C> <C> <C> <C>
Net Sales $ 13,857,817 $ 14,093,632 $ 6,511,446 $ 7,747,321
Commissions and other income 157,900 155,809 72,714 87,388
- -------------------------------------------------------------------------------------------------------------------------------
Total 14,015,717 14,249,441 6,584,160 7,834,709
- -------------------------------------------------------------------------------------------------------------------------------
Cost of sales 9,953,041 10,344,113 4,628,985 5,712,805
Selling, general and administrative expenses (Note 6) 3,398,345 3,474,421 1,595,932 1,841,592
- -------------------------------------------------------------------------------------------------------------------------------
Total 13,351,386 13,818,534 6,224,917 7,554,397
- -------------------------------------------------------------------------------------------------------------------------------
Operating Income 664,331 430,907 359,243 280,312
- -------------------------------------------------------------------------------------------------------------------------------
Other Income (Expense):
Interest income 138,426 100,158 55,591 40,390
Management fee income (Note 6) 145,000 40,000 - 150,000
Interest expense (83,543) (60,940) (35,740) (26,509)
- -------------------------------------------------------------------------------------------------------------------------------
Total Other Income 199,883 79,218 19,851 163,881
- -------------------------------------------------------------------------------------------------------------------------------
Net Income $ 864,214 $ 510,125 $ 379,094 444,193
===============================================================================================================================
Net income per share $ 2.55 $ 1.50 $ 1.12 $ 1.31
Weighted average number of shares of
common stock outstanding 339,500 339,500 339,500 339,500
Pro forma amounts (unaudited):
Net income $ 864,214 $ 510,125 $ 379,094 444,193
Provision for income taxes (Note 4) 329,935 195,555 144,722 170,939
- -------------------------------------------------------------------------------------------------------------------------------
Pro forma net income (unaudited) $ 534,279 $ 314,570 $ 234,372 $ 273,254
===============================================================================================================================
Pro forma net income per share (unaudited) $ 1.57 $ .93 $ .69 $ .80
Weighted average number of shares of common stock
outstanding 339,500 339,500 339,500 339,500
===============================================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
21
<PAGE>
Steiner-Atlantic Corp.
Statements of Shareholders' Equity
For the years ended December 31, 1996 and 1997
and for the six months ended June 30, 1998
<TABLE>
<CAPTION>
Undistributed Total
Common Retained Shareholders' Stockholders'
Stock Earnings Earnings Equity
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 $ 169,750 $ 1,448,950 $ 1,813,623 $ 3,432,323
Distributions - - (770,000) (770,000)
Net income - - 864,214 864,214
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 169,750 1,448,950 1,907,837 3,526,537
Distributions - - (600,000) (600,000)
Net income - - 510,125 510,125
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 169,750 1,448,950 1,817,962 3,436,662
Distributions - - (1,937,477) (1,937,477)
Net income - - 444,193 444,193
- ---------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1998 $ 169,750 $ 1,448,950 $ 324,678 $ 1,943,378
===========================================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
22
<PAGE>
Steiner-Atlantic Corp.
Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31, Six months ended June 30,
1996 1997 1997 1998
(Unaudited)
<S> <C> <C> <C> <C>
Cash provided by operating activities:
Net income $ 864,214 $ 510,125 $ 379,094 $ 444,193
Adjustments to reconcile net income to net cash
provided by operating activities:
Bad debt expense 19,414 21,799 - 79,730
Depreciation and amortization 40,064 34,643 14,622 15,621
Net changes in operating assets and liabilities:
(Increase) decrease in:
Accounts and lease receivables 331,387 (373,356) (91,154) 235,331
Inventories (185,972) 73,249 69,903 197,145
Other assets 167,718 (14,845) (80,488) 65,526
Increase (decrease) in:
Accounts payable and accrued expenses (89,415) 70,597 131,436 450,940
Customer deposits (35,138) 124,406 243,442 85,093
- -------------------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities 1,112,272 446,618 666,855 1,573,579
- -------------------------------------------------------------------------------------------------------------------------------
Cash used for investing activities:
Loan to affiliate - (50,000) - -
Capital expenditures (23,850) (30,406) - (15,043)
- -------------------------------------------------------------------------------------------------------------------------------
Cash used for investing activities (23,850) (80,406) - (15,043)
- -------------------------------------------------------------------------------------------------------------------------------
Cash used for financing activities:
Borrowings (repayments) under line of credit (net) (300,000) 500,000 - 500,000
Payments on term loan (183,334) (216,720) (116,666) (100,000)
Cash distributions to shareholders (770,000) (600,000) (200,000) (1,937,477)
Borrowings from shareholder 250,000 - - -
Repayment of loan from shareholder (250,000) - - -
Borrowings from related company - - - 175,000
- -------------------------------------------------------------------------------------------------------------------------------
Cash used for financing activities (1,253,334) (316,720) (316,666) (1,362,477)
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (164,912) 49,492 350,189 196,059
Cash and cash equivalents at beginning of period 747,751 582,839 582,839 632,331
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 582,839 $ 632,331 $ 933,028 $ 828,390
Supplemental Information:
Cash paid for:
Interest $ 83,543 $ 60,940 $ 35,740 $ 26,509
===============================================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
23
<PAGE>
Steiner-Atlantic Corp.
Summary of Significant Accounting Policies
Unaudited with respect to the six months ended June 30, 1997
Nature of Business Steiner-Atlantic Corp. ("Steiner") sells
commercial and industrial laundry and dry
cleaning equipment, boilers and replacement
parts.
Steiner primarily sells to customers located
in the United States, the Caribbean and
Latin America.
Inventories Equipment inventories are valued at the
lower of cost (determined on the specific
identification basis) or market. Replacement
part inventories are valued at the lower of
cost or market determined on the first-in
first-out method.
Property, Property and equipment are stated at cost.
Equipment and Depreciation and amortization are calculated
Depreciation on the accelerated or straight-line methods
for financial reporting purposes and the
accelerated method for income tax purposes
over lives of five to seven years for
furniture and equipment and the life of the
lease for leasehold improvements.
Income Taxes Steiner has elected to be taxed as an S
Corporation under applicable provisions of
the Internal Revenue Code. Under such
election, shareholders include Steiner's
income in their own federal income tax
returns. Accordingly, Steiner is not subject
to income taxes.
The pro forma provisions for income taxes
and net income assume that Steiner was
subject to income tax.
For the purpose of the pro forma provision
for income taxes, Steiner has adopted the
provisions of Statement of Financial
Accounting Standards (SFAS) 109, Accounting
for Income Taxes for all periods presented.
Under the asset and liability method of SFAS
109, deferred taxes are recognized for
differences between financial statement and
income tax bases of assets and liabilities.
Statement of For purposes of this statement, cash
Cash Flows equivalents include all highly liquid
investments purchased with original
maturities of three months or less.
24
<PAGE>
Steiner-Atlantic Corp.
Summary of Significant Accounting Policies
Unaudited with respect to the six months ended June 30, 1997
Estimates The preparation of financial statements in
conformity with generally accepted
accounting principles requires management to
make estimates and assumptions that affect
the reported amounts of assets and
liabilities and disclosure of contingent
assets and liabilities at the date of the
financial statements and the reported
amounts of revenues and expenses during the
reporting period. Actual results could
differ from those estimates.
Earnings Per Share Net income and pro forma net
income per share are based on the weighted
average number of shares of common stock
outstanding during each period.
Fair Value of The Company's financial instruments consist
Financial principally of cash, accounts receivable,
Instruments leases receivables, accounts payable and
accrued expenses, line of credit and term
loan. The carrying amounts of such financial
instruments as reflected in the balance
sheet approximate their estimated fair value
as of December 31, 1997 and June 30, 1998.
The estimated fair value is not necessarily
indicative of the amounts the Company could
realize in a current market exchange or of
future earnings or cash flows.
New Accounting In June 1997, the Financial Accounting
Pronouncements Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise
and Related Information," which Steiner will
adopt as required for all periods beginning
after December 15, 1997. This statement
requires the disclosure of certain
information about operating segments in the
financial statements. It also requires that
public companies report certain information
about their products and services, the
geographic areas in which they operate and
their major customers.
The new standard is effective for financial
statements for periods beginning after
December 15, 1997 and requires comparative
financial information for earlier years to
be restated. Disclosure is not required for
interim periods during the first year. The
adoption of this new standard is not
expected to have a significant impact on
Steiner's financial statements.
25
<PAGE>
Steiner-Atlantic Corp.
Summary of Significant Accounting Policies
Unaudited with respect to the six months ended June 30, 1997
SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities,"
establishes accounting and reporting
standards for derivative instruments and
hedging activities. It requires that an
entity recognize all derivatives as either
assets or liabilities in the statement of
financial position and measure those
instruments at fair value. The statement
applies to all entities and is effective for
all fiscal quarters of fiscal years
beginning after June 15, 1999. The Company
did not engage in derivative instruments or
hedging activities in any periods presented
in the financial statements.
Interim Financial The financial statements for the six months
Statements ended June 30, 1997 are unaudited. In the
opinion of management, such financial
statements include all adjustments
(consisting only of normal recurring
accruals) necessary for a fair presentation
of financial position and the results of
operations. The results of operations for
interim periods are not necessarily
indicative of the results to be expected for
the full year.
26
<PAGE>
Steiner-Atlantic Corp.
Notes to Financial Statements
Unaudited with respect to the six months ended June 30, 1997
1. General On July 1, 1998, Metro-Tel Corp.
("Metro-Tel") and Steiner-Atlantic Corp.
("Steiner") entered into a merger agreement,
whereby Metro-Tel will acquire all the
issued and outstanding shares of capital
stock of Steiner in exchange for 4,720,954
shares of Metro-Tel. In addition, Metro-Tel
will issue up to 500,000 shares of its
common stock or grant options for the
purchase of up to 500,000 shares of its
common stock to shareholders and employees
of Steiner. On November 1, 1998, the
transaction was consummated.
For financial accounting purposes, this
transaction will be accounted for as a
reverse acquisition of Metro-Tel by Steiner.
2. Lease Receivables Lease receivables result from customer
leases of equipment under arrangements which
qualify as sales-type leases. At June 30,
1998, annual future lease payments, net of
deferred interest ($57,164 at June 30,
1998), due under these leases are as
follows:
Year ending June 30,
-------------------------------------------
1999 $ 161,007
2000 68,026
2001 41,659
2002 24,016
2003 12,628
Thereafter 2,322
-------------------------------------------
$ 309,658
===========================================
28
<PAGE>
Steiner-Atlantic Corp.
Notes to Financial Statements
Unaudited with respect to the six months ended June 30, 1997
3. Property and Major classes of property and equipment
Equipment consist of the following:
December 31, June 30,
1997 1998
--------------------------------------------
Furniture and equipment $ 433,535 $ 448,578
Leasehold improvements 237,682 237,682
Total cost 671,217 686,260
Less accumulated depreciation
and amortization 524,178 539,799
-------------------------------------------------
$ 147,039 $146,461
=================================================
4. Income Taxes The following are the components of pro
(Unaudited) forma income tax provision:
Year Ended Six Months Ended
December 31, June 30,
1996 1997 1997 1998
-----------------------------------------------------------
Current
Federal $ 279,616 $ 189,074 $ 131,487 $ 143,910
State 47,864 32,366 22,508 24,536
-----------------------------------------------------------
327,480 221,440 153,995 168,446
-----------------------------------------------------------
Deferred
Federal 2,096 (22,102 ) (7,918) 2,129
State 359 (3,783 ) (1,355) 364
-----------------------------------------------------------
2,455 (25,885 ) (9,273) 2,493
Total $ 329,935 $ 195,555 $ 144,722 $ 170,939
===========================================================
The pro forma provision for income taxes
represents the estimated income taxes that
would have been reported had Steiner not
been an S Corporation and had been subject
to Federal and state income taxes.
The reconciliation of pro forma income tax
computed at the United States federal
statutory tax rate of 34% to the proforma
provision for income taxes is as follows:
29
<PAGE>
Steiner-Atlantic Corp.
Notes to Financial Statements
Unaudited with respect to the six months ended June 30, 1997
Year Ended Six Months Ended
December 31, June 30,
1996 1997 1997 1998
---------------------------------------------------------------------
Tax at the United States
statutory rate $ 293,833 $ 173,443 $ 128,892 $ 153,826
State income taxes, net of
federal benefit 31,827 18,865 13,961 16,374
Other 4,275 3,247 1,869 739
---------------------------------------------------------------------
Total $ 329,935 $ 195,555 $ 144,722 $ 170,939
=====================================================================
If Steiner was subject to income taxes, a
deferred tax liability would be recorded,
through a charge to operations, for the tax
effect of cumulative temporary differences
between financial and tax reporting. Such
deferred tax liability results principally
from temporary differences relating to the
allowance for doubtful accounts and
depreciation and would have amounted to
approximately $20,000 at June 30, 1998 had
Steiner been subject to federal and state
taxes at such date.
30
<PAGE>
Steiner-Atlantic Corp.
Notes to Financial Statements
Unaudited with respect to the six months ended June 30, 1997
5. Credit Agreement The credit agreement with a commercial bank
includes a line of credit of $2,250,000 and
a term loan initially of $1,000,000. At
December 31, 1997 and June 30, 1998, Steiner
had available lines of credit (including
outstanding letters of credit)in the amount
of $1,750,000 and $1,250,000. respectively,
and owed $516,613 and $416,613,
respectively, under the term loan. The term
loan is due in 60 monthly payments of
$16,667, plus interest through August 2000.
The line of credit is due on demand and is
available for working capital purposes and
the issuance of import letters of credit and
bankers acceptances. Borrowings under the
agreement bear interest at the prime rate (8
1/2% at December 31, 1997 and June 30,
1998), are collateralized by all of
Steiner's assets, and are personally
guaranteed by the shareholders. The
agreement requires maintenance of certain
financial ratios and contains other
restrictive covenants. On November 2, 1998,
Steiner refinanced its line of credit and
term loan (see Note 11).
At December 31, 1997 and June 30, 1998,
Steiner had outstanding letters of credit
aggregating approximately $35,000 and $0,
respectively.
6. Related Party During the years ended December 31, 1996 and
Transactions 1997 and the six months ended June 30, 1997
and 1998, Steiner charged management fees of
$145,000, $40,000, $0 and $150,000,
respectively, to a company under common
ownership. At December 31, 1997, $50,000 is
due from such company and is included in
other current assets in the accompanying
balance sheet. During 1998, the related
company made a non-interest bearing advance
of $325,000, payable on demand, to Steiner.
At June 30, 1998, $175,000 is due to such
company and is included in accounts payable
and accrued expenses in the accompanying
balance sheet.
Steiner leases warehouse and office space
from a shareholder under an operating lease
which expires in October 2004, with an
option to renew for an additional 10 year
period. Minimum future rental commitments
under this lease approximate $90,000 per
annum through October 2004.
31
<PAGE>
Steiner-Atlantic Corp.
Notes to Financial Statements
Unaudited with respect to the six months ended June 30, 1997
7. Concentrations of Steiner places its excess cash in overnight
Credit Risk deposits with a large national bank.
Concentration of credit risk with respect to
trade and lease receivables is limited due
to a large customer base. Trade and lease
receivables are generally collateralized
with equipment sold.
8. Commitment Steiner leases additional warehouse space
under two operating leases. One lease is on
a monthly basis and the other lease expires
in December 1999, with an option to renew
for an additional three year period. Minimum
future rental commitments under these leases
approximate $50,000 a year. Rent expense,
including rentals paid to related parties,
aggregated $138,768 and $141,700 for the
years ended December 31, 1996 and 1997 and
$71,650 and $70,850 for six months ended
June 30, 1997 and 1998, respectively.
9. Deferred Steiner adopted a participatory deferred
Compensation compensation plan wherein it matches
Plan employee contributions up to 1% of an
eligible employee's yearly compensation. All
employees are eligible to participate in the
plan after one year of service. Steiner
provided for $7,368 and $10,792 for the
years ended December 31, 1996 and 1997 and
$5,260 and $5,735 for the six months ended
June 30, 1997 and 1998, respectively, in
contributions. The plan is tax exempt under
Section 401(k) of the Internal Revenue Code.
10. Export Sales Net sales includes export sales to
nonaffiliated customers as follows for the
years ended December 31, 1996 and 1997 and
for the six months ended June 30, 1997 and
1998:
Year Ended Six Months Ended
December 31, June 30,
1996 1997 1997 1998
(Unaudited)
--------------------------------------------------------------------
Caribbean $ 1,345,301 $ 1,793,076 $ 365,591 $ 1,147,918
Latin America 1,314,838 1,595,797 500,976 1,217,397
Other 381,528 560,639 245,256 65,295
--------------------------------------------------------------------
$ 3,041,667 $ 3,949,512 $ 1,111,823 $ 2,430,610
====================================================================
32
<PAGE>
Steiner-Atlantic Corp.
Notes to Financial Statements
Unaudited with respect to the six months ended June 30, 1997
11. Subsequent On November 2, 1998, Steiner entered into a
Events new loan agreement with the same commercial
bank used in its current financings. Steiner
paid off the outstanding balances on the
existing line of credit and term loan with
the proceeds from the new loan. The new loan
includes a line of credit of $2,250,000 and
a term loan of $2,400,000. Borrowings under
the agreement bear interest at 2.75% per
annum above the one month LIBOR Market Index
Rate. The line of credit is due on the
earlier of November 2, 1999 or demand. The
term loan is due January 2002. The term loan
requires monthly payments of $40,000 plus
interest, commencing January 1999 with a
$960,000 balloon payment in January 2002.
The agreement requires maintenance of
certain financial ratios and contains other
restrictive covenants.
33
<PAGE>
Item 8. Changes in and Disagreements with Accountants on
- ------- Accounting and Financial Disclosure.
------------------------------------------------
On January 4, 1999, the Company selected BDO Seidman, LLP ("BDO
Seidman") to replace Grant Thornton LLP ("Grant Thornton") as the Company's
independent public accountants. BDO Seidman has acted as independent accountants
for Steiner, which became a wholly-owned subsidiary of the Company pursuant to
the Merger. The Company believes that the change to BDO Seidman as the Company's
independent accountants will centralize the audit of the Company's and Steiner's
consolidated financial statements. The decision to change auditors was approved
by the Audit Committee of the Board of Directors.
-34-
<PAGE>
Grant Thornton's report on the financial statements of the Company for
each of the past two fiscal years did not contain any adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles.
During the Company's two most recent fiscal years, and the subsequent
interim period through January 4, 1999, there were no disagreements with Grant
Thornton on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Grant Thornton, would have caused Grant
Thornton to make reference to the subject matter of the disagreements in
connection with their audit report with respect to financial statements of the
Company either individually or consolidated with Steiner.
During the Company's two most recent fiscal years, and the subsequent
interim period through January 4, 1999, Grant Thornton did not advise the
Company of any of the items listed in Item 304(a)(1)(iv)(B) of Regulations S-K.
PART III
--------
Item 9. Directors, Executive Officers, Promoters and Control Persons;
- ------- Compliance with Section 16(a) of the Exchange Act.
-------------------------------------------------------------
The following information is presented with respect to the background
of each of the directors and executive officers of the Company:
Michael S. Steiner, 43, has been President and Chief Executive Officer
of the Company since the effectiveness of the Merger on November 1, 1998 and of
Steiner since 1988. Mr. Steiner has been a director of the Company since the
effectiveness of the Merger on November 1, 1998.
William K. Steiner, 68, has been Chairman of the Board of Steiner since
he founded Steiner in 1960. Mr. Steiner has been a director of the Company since
the effectiveness of the Merger on November 1, 1998.
Venerando J. Indelicato, 65, was President of the Company from December
1967 until October 31, 1998 and has been Treasurer and Chief Financial Officer
of the Company since December 1969.
Lloyd Frank, 73, has been a member of the law firm of Parker Chapin
Flattau & Klimpl since 1977. Mr. Frank has been a director of the Company since
1977. The Company retained Parker Chapin Flattau & Klimpl during the Company's
last fiscal year and is retaining that firm during the Company's current fiscal
year. Mr. Frank is also a director of Park Electrochemical Corp.
-35-
<PAGE>
David Blyer, 38, has served as a director of the Company since the
effectiveness of the Merger on November 1, 1998. Mr. Blyer has been Chief
Executive Officer and President of Vento Software, since he co-founded that
company in 1994. Vento Software develops software for specialized business
application. Before founding Vento Software, Mr. Blyer served as Senior Account
Manager of the South Florida and Caribbean regions for Tandem Computers.
Stuart Wagner, 67, has served as a director of the Company since the
effectiveness of the Merger on November 1, 1998 and has been retained as a
consultant for Diversitech Corp. since 1997. From 1975 to 1997, Mr. Wagner
served as President of Wagner Products Corp., a manufacturer and distributor of
products in the HVAC industry, a company which he founded.
Mr. Michael S. Steiner is the son of Mr. William K. Steiner. There are
no other family relationships among any of the directors and executive officers
of the Company. All directors serve until the next annual meeting of
stockholders and until the election and qualification of their respective
successors. All officers serve at the pleasure of the Board of Directors.
The following information is presented with respect to the
background of each person who is not an executive officer but who is expected to
make a significant contribution to the Company:
Osvalso Rubio, 36, serves as Vice President and Director of Sales for
the Export Department of Steiner since joining Steiner in May 1993.
Ronald London, 66, serves as Vice President and primarily overseas
sales of the retail Dry-cleaning Equipment Department of Steiner since joining
Steiner in September 1992.
Jerry Kotacka, 54, serves as Corporate Secretary and Director of Sales
of the Laundry Equipment Department of Steiner since joining Steiner in June
1983.
Howard Perera, 46, has served as the Company's Director of Engineering,
engaged in the design and development of new telecommunications products since
joining the Company in September 1993.
Jon D. Robinette, 41, has, since July 1995, served as General Manager
of the Company's telecommunications operations, responsible for managing and
coordinating operations in the Company's Milpitas, California facility. Prior
thereto, Mr. Robinette served as Operations Manager for the Company's
telecommunications operations from October 1984.
-36-
<PAGE>
Item 10. Executive Compensation.
- -------- -----------------------
The following table sets forth information concerning the compensation
of Venerando J. Indelicato, Metro-Tel's Chief Executive Officer and Richard
Wildman, Metro-Tel's Executive Vice President, Metro-Tel's only executive
officers prior to the Merger whose cash compensation exceeded $100,000 during
the Company's year ended June 30, 1998, for services in all capacities to
Metro-Tel during the years ended June 30, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------- -------------
All Other
Name and Principal Position Year Salary Options# Compensation
- --------------------------- ---- ------ -------- ------------
<S> <C> <C> <C> <C>
Venerando J. Indelicato 1998 $172,676(1) -- $9,000(2)
President and Chief 1997 $172,676 -- $9,000
Executive Officer 1996 $172,640 -- $9,000
Richard Wildman 1998 $152,423(3) -- $9,000(2)
Executive Vice President 1997 $ 94,711 50,000 $5,038
- --------------------------------
</TABLE>
(1) The Company is a party to an employment agreement with Mr. Indelicato
which, as amended in connection with the Merger, provides for a revised
annual salary of $175,000 commencing October 30, 1998, subject to
increase and bonuses in the discretion of the Company's Board of
Directors. Mr. Indelicato's employment agreement may be terminated by
him or by the Company at any time after December 31, 1999 on 90 days
notice.
(2) "All Other Compensation" for fiscal 1998 includes (i) $6,000,
representing the Company's contribution allocated to Messrs. Indelicato
and Wildman under the Company's Profit Sharing Plan in fiscal 1998 and
(ii) $3,000, which was the Company's matching contribution in fiscal
1998 to Messrs. Indelicato's and Wildman's deferred compensation under
the Company's Profit Sharing Plan pursuant to Section 401(k) of the
Internal Revenue Code of 1986, as amended.
(3) The Company is a party to a letter agreement with Mr. Wildman pursuant
to which Mr. Wildman has been serving as Executive Vice President of
the Company at an annual salary of $150,000. Mr. Wildman resigned as
Executive Vice President effective January 29, 1999.
Since November 1, 1998, the effective date of the Merger, Michael S.
Steiner has received an annual salary at the rate of $175,000 from the Company.
During the years ended December 31, 1995, 1996 and 1997 and for the six months
ended June 30, 1998, Michael Steiner received a salary from Steiner at the rate
of $150,000 per year. During those periods each of Michael Steiner (Steiner's
Chief Executive Officer) and William Steiner (Chairman of the Board of Directors
of Steiner) were paid bonuses of 400,000, 400,000, 400,000 and 200,000,
respectively, which were withheld for tax payments. As a result of the Merger,
these bonuses will no longer be paid.
-37-
<PAGE>
1998 Fiscal Year-End Option Values
No options were granted to Mr. Indelicato or Mr. Wildman during
Metro-Tel's year ended June 30, 1998 and neither Mr. Indelicato nor Mr. Wildman
acquired shares upon the exercise of stock options during Metro-Tel's year ended
June 30, 1998. The following table contains information concerning the number
and value, at June 30, 1998, of unexercised options held by Messrs. Indelicato
and Wildman:
Value of
Number of Unexercised
Unexercised In-the-Money
Options Held at Options Held at
Fiscal Year-End Fiscal Year-End
(Exercisable/ (Exercisable/
Name Unexercisable) Unexercisable)(1)
- ---- --------------- ----------------
Venerando J. Indelicato 50,000/0 $14,125/$0
Richard Wildman 12,500/37,500 $ 4,297/$12,891
- -------------------------------
(1) At fiscal year end, the market value of such shares (the mean between
the low bid and high asked quotations on the Nasdaq Stock Market)
exceeded the exercise price of the underlying shares.
Compensation of Directors
Each non-employee director receives a fee of $5,000 per annum.
Directors are also reimbursed for out-of-pocket expenses incurred in connection
with performing their duties. In the event that the Board of Directors holds
more than four meetings during a fiscal year in addition to its meeting held on
the date of the Annual Meeting of Stockholders, each director receives $750 for
each such additional meeting such director attends.
Pursuant to the Company's 1994 Non-Employee Director Stock Plan, each
non-employee director of the Company serving on August 24, 1994 was granted an
option to purchase 10,000 shares of the Company's Common Stock and each person
who subsequently becomes a non-employee director is also to be granted an option
to purchase 10,000 shares of the Company's Common Stock at an exercise price
equal to 100% of the fair market value of the Company's Common Stock on the date
of grant. Each option is for a term of ten years and vests over a four-year
period commencing one year after the date of grant (with vesting credit given
for any service on the Board of Directors prior to the date of grant). In
accordance with this Plan, Messrs. David Blyer and Stuart Wagner were each
granted options to purchase 10,000 shares of the Company's Common Stock upon
becoming directors on November 1, 1998, the effective date of the Merger.
-38-
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
The following table sets forth information, as at December 31, 1998,
with respect to the shares of Common Stock which are beneficially owned by (i)
any person (including any "group", as that term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934), who is known to the Company to be the
beneficial owner of more than five percent of the Company's outstanding Common
Stock, (ii) the executive officers of the Company named in the Summary
Compensation Table under the caption "Executive Compensation", below, (iii) each
director of the Company and (iv) all executive officers and directors of the
Company as a group:
Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (1) of Class (2)
- ---------------- ------------------------ -----------
Michael S. Steiner 2,360,477 34.3%
290 N.E. 68 Street
Miami, Florida 33138
William K. Steiner 2,360,477 34.3%
290 N.E. 68 Street
Miami, Florida 33138
Venerando J. Indelicato 259,150(3) 3.7%
12307 Marblehead Drive
Tampa, FL 33626
Richard Wildman 23,750(4) *
Lloyd Frank 32,625(5) *
David Blyer -0- *
Stuart Wagner -0-(6) *
Executive officers and 5,036,479(7) 72.2%
directors as a group
(7 persons)
- -----------------------------------
1. Except as noted in the following footnotes, all beneficially owned
shares are owned with sole voting and investment power.
2. Asterisk indicates less than one percent.
3. Includes 432 shares owned jointly with his wife, Madeline Indelicato,
and 50,000 shares which are not outstanding but which are subject to
issuance upon exercise of presently exercisable options granted to Mr.
Indelicato under the Company's 1991 Stock Option Plan. Excludes 136,219
shares (2.0% of the Company's
-39-
<PAGE>
outstanding Common Stock) owned beneficially by his wife, as to which
Mr. Indelicato disclaims beneficial ownership.
4. Includes 18,750 shares which are not outstanding but which are subject
to issuance upon exercise of the portion of options granted to Mr.
Wildman under the Company's 1991 Stock Option Plan which are presently
exercisable within 60 days.
5. Includes 20,000 shares which are not outstanding but which are subject
to issuance upon exercise of presently exercisable options granted
pursuant to stock option contracts between the Company and Mr. Frank as
non-employee director which were approved by stockholders and 10,000
shares which are not outstanding but which are subject to issuance upon
exercise of presently exercisable options granted pursuant to the
Company's 1994 Non-Employee Director Stock Option Plan. Excludes 21,494
shares owned by Mr. Frank's wife, as to which Mr. Frank disclaims
beneficial ownership.
6. Excludes 5,000 shares owned by Mr. Wagner's wife, as to which Mr.
Wagner disclaims beneficial ownership.
7. Includes 98,750 shares which are not outstanding but which are subject
to issuance upon exercise of the portion of options which are presently
exercisable or exercisable within 60 days after December 31, 1998.
Excludes 162,713 shares (2.4% of the Company's outstanding Common
Stock) owned by spouses of certain executive officers and directors, as
to which each such executive officer and director disclaims beneficial
ownership.
Item 12. Certain Relationships and Related Transactions.
- -------- -----------------------------------------------
During the years ended December 31, 1996 and 1997 and the six months
ended June 30, 1998, Steiner charged management fees of $145,000, $40,000 and
$175,000, respectively, to a company under common ownership. In addition, at
June 30, 1997, $75,000 was due to Steiner from that company. During the years
ended December 31, 1996 and 1997 and the six months ended June 30, 1998, the
related company made non-interest bearing advances of $17,423, $50,000 and
$325,000, payable on demand, to Steiner. At June 30, 1998, $175,000 was due to
that company. The advance has been subsequently repaid.
Steiner leases warehouse and office space from William K. Steiner under
a lease which expires in October 2004, with an option to renew the lease for a
ten year period. The lease provides for an annual rental of $83,200. In
addition, the Company is obligated to pay sales tax on the rent, real estate
taxes, utilities, insurance and certain other expenses for the facility. Steiner
and the Company believe the terms of this lease are at least as favorable as
could be obtained from unaffiliated third parties.
Prior to the Merger, Steiner was taxed under subchapter S under the
Internal Revenue Code of 1986, as amended, pursuant to which all of the profits
of Steiner have
-40-
<PAGE>
been recognized directly by Michael Steiner, President, Chief Executive Officer
and a stockholder of Steiner, and William Steiner, the other stockholder of
Steiner. During the years ended December 31, 1996 and 1997 and the six months
ended June 30, 1998, Steiner paid to each of Michael Steiner and William K.
Steiner $385,000, $300,000 and $968,739 as "subchapter S distributions", which
represented amounts needed to pay taxes on Steiner's current earnings, reimburse
them for taxes paid in prior years and other distributions of profits.
Item 13. Exhibits and Reports on Form 10-KSB.
(a) Exhibits
2(a) Agreement of Merger dated as of July 1, 1998 among the
Company, Metro-Tel Acquisition Corp., Steiner-Atlantic
Corp., William K. Steiner and Michael S. Steiner.
Incorporated by reference to Exhibit A of the definitive
Proxy Statement of the Company filed with the Commission on
October 5, 1998 (File No. 0-9040).
3(a)(1) Certificate of Incorporation of the Company, as filed with
the Secretary of State of the State of Delaware on June 30,
1963. (Incorporated by reference to Exhibit 4.1(a) to the
Company's Current Report on Form 8-K dated (date of earliest
event reported) October 29, 1998.)
3(a)(2) Certificate of Amendment to the Certificate of Incorporation
of the Company, as filed with the Secretary of State of the
State of Delaware on March 27, 1968. (Incorporated by
reference to Exhibit 4.1(b) to the Company's Current Report
on Form 8-K dated (date of earliest event reported) October
29, 1998.)
3(a)(3) Certificate of Amendment to the Certificate of Incorporation
of the Company, as filed with the Secretary of State of the
State of Delaware on November 4, 1983. (Incorporated by
reference to Exhibit 4.1(c) to the Company's Current Report
on Form 8-K dated (date of earliest event reported) October
29, 1998.)
3(a)(4) Certificate of Amendment to the Certificate of Incorporation
of the Company, as filed with the Secretary of State of the
State of Delaware on November 5, 1986. (Incorporated by
reference to Exhibit 4.1(d) to the Company's Current Report
on Form 8-K dated (date of earliest event reported) October
29, 1998.)
3(a)(5) Certificate of Change of Location of Registered Office and
of Agent, as filed with the Secretary of State of the State
of Delaware on December 31, 1986. (Incorporated by reference
to Exhibit 4.1(e) to the Company's Current Report on Form
8-K dated (date of earliest event reported) October 29,
1998.)
-41-
<PAGE>
3(a)(6) Certificate of Ownership and Merger of Design Development
Incorporated into the Company, as filed with the Secretary of
State of the State of Delaware on June 30, 1998. (Incorporated
by reference to Exhibit 4.1(f) to the Company's Current Report
on Form 8-K dated (date of earliest event reported) October
29, 1998.)
3(a)(7) Certificate of Amendment to the Company's Certificate of
Incorporation as filed with the Secretary of State of the
State of Delaware on October 30, 1998. (Incorporated by
reference to Exhibit 4.1(g) to the Company's Current Report on
Form 8-K dated (date of earliest event reported) October 29,
1998.)
4(a)(1) Loan and Security Agreement dated November 2, 1998 between
Steiner-Atlantic Corp. and First Union National Bank.
(Incorporated by reference to Exhibit 4.2(a) to the Company's
Current Report on Form 8-K dated (date of earliest event
reported) October 29, 1998.)
4(a)(2) Guaranty and Security Agreement dated November 2, 1998 by the
Company in favor of First Union National Bank. (Incorporated
by reference to Exhibit 4.2(b) to the Company's Current Report
on Form 8-K dated (date of earliest event reported) October
29, 1998.)
10(a)(1)(i) Lease dated April 1, 1991 between the Company and CB
Institutional Fund VII with respect to the Company's
facilities at 240 South Milpitas Boulevard, Milpitas,
California. (Exhibit 10(a)(2) to the Company's Annual Report
on Form 10-K for the year ended June 30, 1991, File No.
0-9040).
*10(a)(1)(ii) Second Amendment to Lease dated November 1, 1998 between the
Company and The Realty Associates Fund III, L.P.
(successor-in-interest to CB Institutional Fund VII) with
respect to the Company's facilities at 240 South Milpitas
Boulevard, Milpitas, California.
*10(a)(2) Lease dated October 6, 1995 between Steiner and William, K.
Steiner with respect to Steiner's facilities located 290 N.E.
68th Street, 297 N.E. 67st and 277 N.E. 67 St. Miami, Florida.
10(b)(1)(i+) Employment Agreement dated July 1, 1981 between the Company
and Venerando J. Indelicato. (Exhibit 10(b)(1)(i) to the
Company's Annual Report on Form 10-KSB for the year ended June
30, 1995, File No. 0- 9040).
10(b)(1)(ii)+ Amendment No. 1 dated July 1, 1983 to the Employment Agreement
dated July 1, 1981 between the Company and Venerando J.
Indelicato.
-42-
<PAGE>
(Exhibit 10(b)(1)(ii) to the Company's Annual Report on Form
10-KSB for the year ended June 30, 1995, File No. 0-9040).
*10(b)(1)(iii)+ Amendment No. 2 dated October 30, 1998 to the Employment
Agreement dated July 1, 1981 between the Company and Venerando
J. Indelicato.
10(b)(2)+ Letter agreement dated August 29, 1996 between the Company and
Richard A. Wildman, a former executive officer of the Company.
(Exhibit 10(b)(2) to the Company's Annual Report on Form
10-KSB for the year ended June 30, 1997, File No. 0-9040).
10(c)(1)+ The Company's 1991 Stock Option Plan, as amended.
(Incorporated by reference to Exhibit 99.3 to the Company's
Current Report on Form 8-K dated (date of earliest event
reported) October 29, 1998.)
10(c)(2)(a)+ The Company's 1984 Non-Employee Director Stock Option Plan, as
amended. (Exhibit 10(d)(2) to the Company's Annual Report on
Form 10-K for the year ended June 30, 1987, File No. 0-9040).
10(c)(2)(b)+ The Company's 1994 Non-Employee Director Stock Option Plan.
(Exhibit A to the Company's Proxy Statement dated October 14,
1994 used in connection with the Company's 1994 Annual Meeting
of Stockholders, File No. 0-9040).
10(c)(3)+ Form of Stock Option Agreement dated June 25, 1991 entered
into between the Company and each of Sheppard Beidler (option
has since expired), Lloyd Frank and Michael Michaelson,
together with a schedule identifying the details in which the
actual agreements differ from the exhibit filed herewith.
(Exhibit 10(c)(4) to the Company's Annual Report on Form 10-K
for the year ended June 30, 1991, File No. 0- 9040).
10(c)(4)+ Form of Stock Option Agreement dated May 4, 1993 entered into
between the Company and each of Sheppard Beidler, Lloyd Frank
and Michael Michaelson, together with a schedule identifying
the details in which the actual agreements differ from the
exhibit filed herewith. (Exhibit 10(c)(4) to the Company's
Annual Report on Form 10-KSB for the year ended June 30, 1993,
File No. 0-9040).
*27 Financial Data Schedule.
-43-
<PAGE>
- --------------------
* Filed herewith. All other exhibits are incorporated herein by
reference to the filing indicated in the parenthetical reference
following the exhibit description.
+ Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
None
-44-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
METRO-TEL CORP.
Dated: February 16, 1999
By: /s/ Michael S. Steiner
-----------------------------
Michael S. Steiner
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this Report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ Michael S. Steiner President, Chief Executive Officer February 16, 1999
- ------------------------ (Principal Executive Officer)
Michael S. Steiner and Director
/s/ William K. Steiner
- ------------------------ Director February 16, 1999
William K. Steiner
/s/ Venerando J. Indelicato
- ------------------------ Chief Financial Officer February 16, 1999
Venerando J. Indelicato (Principal Financial and Accounting
Officer) and Director
/s/ Lloyd Frank
- ------------------------ Director February 16, 1999
Lloyd Frank
- ------------------------ Director February 16, 1999
Stuart Wagner
- ------------------------ Director February 16, 1999
David Blyer
</TABLE>
-45-
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- -------- -----------
2(a)(1) Agreement of Merger dated as of July 1, 1998 between the
Company and Steiner- Atlantic Corp. (Exhibit 2.01 to the
Company's Current Report on Form 8-K dated July 6, 1998).
3(a)(1) Copy of Certificate of Incorporation of the Company, as filed
with the Secretary of State of the State of Delaware on June
30, 1963. (Exhibit 1.1 to the Company's Registration Statement
on Form 10, File No. 0-9040).
3(a)(2) Copy of Certificate of Amendment to the Certificate of
Incorporation of the Company, as filed with the Secretary of
State of the State of Delaware on March 27, 1968. (Exhibit 1.2
to the Company's Registration Statement on Form 10, File No.
0-9040).
3(a)(3) Copy of Certificate of Amendment to the Certificate of
Incorporation of the Company, as filed with the Secretary of
State of the State of Delaware on November 4, 1983. (Exhibit
3(a)(3) to the Company's Annual Report on Form 10- KSB for the
year ended June 30, 1995, File No. 0-9040).
3(a)(4) Copy of Certificate of Amendment to the Certificate of
Incorporation of the Company, as filed with the Secretary of
State of the State of Delaware on November 5, 1986. (Exhibit
3(a)(4) to the Company's Annual Report on Form 10- KSB for the
year ended June 30, 1995, File No. 0-9040).
3(a)(5) Copy of Certificate of Change of Location of Registered Office
and Agent, as filed with the Secretary of State of the State
of Delaware on December 31, 1986. (Exhibit 3(a)(5) to the
Company's Annual Report on Form 10-KSB for the year ended June
30, 1995, File No. 0-9040).
3(b)(1) Copy of By-Laws of the Company. (Exhibit 3(b)(1) to the
Company's Annual Report on Form 10-KSB for the year ended June
30, 1996, File No. 0-9040).
-46-
<PAGE>
10(a)(1)(i) Lease dated April 1, 1991 between the Company and CB
Institutional Fund VII with respect to the Company's
facilities at 240 South Milpitas Boulevard, Milpitas,
California. (Exhibit 10(a)(2) to the Company's Annual Report
on Form 10-K for the year ended June 30, 1991, File No.
0-9040).
*10(a)(1)(ii) Second Amendment to Lease dated November 1, 1998 between the
Company and the Realty Associates Fund III, L.P.
(Successor-in-Interest to CB Institutional VII) with respect
to the Company's facilities at 240 South Milpitas Boulevard,
Milpitas, California.
*10(a)(2) Lease dated October 6, 1995 between Steiner and William, K.
Steiner with respect to Steiner's facilities located 290 N.E.
68th Street, 297 N.E. 67st and 277 N.E. 67 St. Miami, Florida.
10(b)(1)(i)+ Employment Agreement dated July 1, 1981 between the Company
and Venerando J. Indelicato. (Exhibit 10(b)(1)(i) to the
Company's Annual Report on Form 10-KSB for the year ended June
30, 1995, File No. 0-9040).
10(b)(1)(ii)+ Amendment No. 1 dated July 1, 1983 to the Employment Agreement
dated July 1, 1981 between the Company and Venerando J.
Indelicato. (Exhibit 10(b)(1)(ii) to the Company's Annual
Report on Form 10-KSB for the year ended June 30, 1995, File
No. 0-9040).
*10(b)(1)(iii)+ Amendment No. 2 dated October 30, 1998 to the Employment
Agreement dated July 1, 1998 between the Company and Venerando
J. Indelicato.
10(b)(2)+ Letter agreement dated August 29, 1996 between the Company and
Richard A. Wildman. (Exhibit 10(b)(2) to the Company's Annual
Report on Form 10-KSB for the year ended June 30, 1997, File
No. 0-9040).
10(c)(1)+ The Company's 1991 Stock Option Plan. (Exhibit 10(c)(1) to the
Company's Annual Report on Form 10-KSB for the year ended June
30, 1996, File No. 0- 9040).
10(c)(2)(a)+ The Company's 1984 Non-Employee Director Stock Option Plan, as
amended. (Exhibit 10(d)(2) to the Company's Annual Report on
Form 10-K for the year ended June 30, 1987, File No. 0-9040).
10(c)(2)(b)+ The Company's 1994 Non-Employee Director Stock Option Plan.
(Exhibit A to the Company's Proxy Statement dated October 14,
1994 used in connection with the Company's 1994 Annual Meeting
of Stockholders, File No. 0-9040).
10(c)(3)+ Form of Stock Option Agreement dated June 25, 1991 entered
into between the Company and each of Sheppard Beidler (option
has since expired), Lloyd Frank and Michael Michaelson,
together with a schedule identifying the details in which
-47-
<PAGE>
the actual agreements differ from the exhibit filed herewith.
(Exhibit 10(c)(4) to the Company's Annual Report on Form 10-K
for the year ended June 30, 1991, File No. 0-9040).
10(c)(4)+ Form of Stock Option Agreement dated May 4, 1993 entered into
between the Company and each of Sheppard Beidler, Lloyd Frank
and Michael Michaelson, together with a schedule identifying
the details in which the actual agreements differ from the
exhibit filed herewith. (Exhibit 10(c)(4) to the Company's
Annual Report on Form 10-KSB for the year ended June 30, 1993,
File No. 0-9040).
*27 Financial Data Schedule.
- --------------------
* Filed herewith. All other exhibits are incorporated herein by
reference to the filing indicated in the parenthetical
reference following the exhibit description.
+ Management contract or compensatory plan or arrangement.
-48-
EX-10(a)(1)(ii)
SECOND AMENDMENT TO LEASE
-------------------------
This Second Amendment to Lease ("Amendment"), dated for reference
purposes only as November 1, 1998, is made and entered into by and between THE
REALTY ASSOCIATES FUND III, L.P. (successor-in-interest to CB Institutional Fund
VII) ("Landlord"), and METRO-TEL CORP., a Delaware corporation (collectively,
"Tenant").
RECITALS
--------
A. Landlord's predecessor-in-interest and Tenant entered into that
certain Industrial Real Estate lease dated April 1, 1991 ("Original Lease") for
certain Premises commonly known as 240 S. Milpitas Boulevard, Milpitas,
California, which Original Lease has been amended pursuant to the terms of that
certain first Amendment to Lease dated as of December 5, 1995 ("First
Amendment"). For purposes of this Amendment, the term "Lease" shall mean the
Original Lease as amended by the First Amendment. The capitalized terms used and
not otherwise defined herein shall have the same meanings and definitions as set
forth in the Lease.
B. The Lease Term is presently scheduled to expire on March 31, 1999.
Landlord and Tenant desire to extend the Lease Term pursuant to the terms and
conditions set forth below.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Landlord and Tenant hereby agree as follows:
1. Extension of Term. Landlord and Tenant acknowledge that the Lease
Term is presently scheduled to expire on March 31, 1999. The Term is hereby
extended for a period of three (3) years ("Extension Term"), commencing on April
1, 1999 and, unless sooner terminated pursuant to the terms of the Lease,
expiring on March 31, 2002. Such extension shall be on and subject to all the
terms and conditions of the Lease, as amended by this Amendment (and the term
"Lease Term" as used in the Lease shall be deemed to include the Extension
Term), and Landlord shall have no obligation to provide any Premises
improvements or any allowances therefor.
2. Base Rent. The Base Rent payable by Tenant under the Lease during
the Extension Term shall be as follows:
Months Base Rent
------ ---------
April 1, 1999 - September 30, 2000 $13,976.95 per month
October 1, 2000 - March 31, 2002 $15,052.10 per month
3. Option to Extend Term.
3.1 Grant of Option. Landlord hereby grants to Tenant one (1)
option (referred to hereinafter as the "Option") to extend the Lease Term for an
additional consecutive term of two
<PAGE>
(2) years (hereinafter called the "Extension") commencing on the day immediately
following the expiration of the Extension Term, on the same terms and conditions
as set forth in the Lease (as amended by this Amendment), except that the Base
Rent shall be the amount determined as set forth below. The Option shall be
exercised only by written notice delivered to Landlord not more than nine (9)
months and not less than six (6) months prior to the expiration of the Extension
Term. If Tenant fails to deliver to Landlord written notice of the exercise of
the Option within the time period prescribed above, the Option shall lapse and
there shall be no further right to extend the Term of the Lease. The Option
shall be exercisable by Tenant on the express conditions that (i) at the time of
the exercise of the Option, and thereafter at all times prior to the
commencement of the Extension, a default by Tenant shall not have occurred and
be continuing under the Lease, and (ii) Tenant has not been ten (10) or more
days late in the payment of any rent under the Lease more than a total of three
(3) times during the Lease Term. If Tenant properly exercises the Option, "Lease
Term", as used herein and in the Lease, shall be deemed to include the
Extension, unless specified otherwise herein or in the Lease.
3.2 Personal Option. The Option is personal to Metro-Tel
Corp., and shall not be assignable or transferable to any assignee of Tenant or
any sublessee of all or any portion of the Premises, whether voluntarily or
involuntarily or whether by operation of law or otherwise. If Tenant subleases
or assigns or otherwise transfers any interest under the Lease prior to the
exercise of the Option, the Option shall lapse. If Tenant subleases or assigns
or otherwise transfers any interest of Tenant under the Lease after the exercise
of the Option but prior to the commencement of the Extension, the Option shall
lapse and the Lease Term shall expire as if the Option was not exercised.
3.3 Calculation of Base Rent. The Base Rent payable by Tenant
under the Lease during the Extension shall be increased, as of the commencement
of the Extension (hereinafter called the "Extension Rental Adjustment Date") to
the "Fair Market Value" of the Premises, determined in the following manner: Not
later than one hundred (100) days prior to the Extension Rental Adjustment Date,
Landlord and Tenant shall meet in an effort to negotiate, in good faith, the
Fair Market Value of the Premises as of the Extension Rental Adjustment Date. If
Landlord and Tenant have not agreed upon the Fair Market Value of the Premises
at least ninety (90) days prior to the Extension Rental Adjustment Date, the
Fair Market Value shall be determined by the following appraisal method:
(i) If Landlord and Tenant are not able to agree upon
the Fair Market Value of the Premises within the time period described
above, then Landlord and Tenant shall attempt to agree in good faith
upon a single appraiser not later than seventy-five (75) days prior to
the Extension Rental Adjustment Date. If Landlord and Tenant are unable
to agree upon a single appraiser within such time period, then Landlord
and Tenant shall each appoint one appraiser not later than sixty-five
(65) days prior to the Extension Rental Adjustment Date, and Landlord
and Tenant shall each give written notice to the other of such
appointment at the time of such appointment. Within ten (10) days
thereafter, the two appointed appraisers shall appoint a third
appraiser. If either Landlord or Tenant fails to appoint its appraiser
and to give written notice thereof to the other party within the
prescribed
-2-
<PAGE>
time period, the single appraiser appointed shall determine the Fair
Market Value of the Premises. If both parties fail to appoint
appraisers within the prescribed time period, then the first appraiser
thereafter selected by a party (such selection to be by written notice
thereof to such appraiser and the other party) shall determine the Fair
Market Value of the Premises. Each party shall bear the cost of its own
appraiser and the parties shall share equally the cost of the single or
third appraiser if applicable. All appraisers shall have at least five
(5) years' experience in the appraisal of commercial/industrial real
property in the area in which the Premises are located and shall be
members of professional organizations such as MAI or its equivalent.
(ii) For the purposes of such appraisal, the term
"Fair Market Value" shall mean the price that a ready and willing
tenant would pay, as of the Extension Rental Adjustment Date, as
monthly rent, to a ready and willing landlord of property comparable to
the Premises if such property were exposed for lease on the open market
for a reasonable period of time and taking into account all of the
purposes for which such property may be used. If a single appraiser is
chosen, then such appraiser shall determine the Fair Market Value of
the Premises. Otherwise, the Fair Market Value of the Premises shall be
the arithmetic average of the two (2) of the three (3) appraisals which
are closest in amount, and the third appraisal shall be disregarded.
Landlord and Tenant shall instruct the appraiser(s) to complete their
determination of the Fair Market Value not later than thirty (30) days
prior to the Extension Rental Adjustment Date. If the Fair Market Value
is not determined prior to the Extension Rental Adjustment Date, then
Tenant shall continue to pay to Landlord the Base Rent applicable to
the Premises immediately prior to the Extension Rental Adjustment Date
until the Fair Market Value is determined. When the Fair Market Value
of the Premises is determined, Landlord shall deliver notice thereof to
Tenant, and Tenant shall pay to Landlord, within ten (10) days after
receipt of such notice, the difference between the Base Rent actually
paid by Tenant to Landlord for the period after the Extension Rental
Adjustment Date and the new Base Rent determined hereunder effective as
of the Extension Rental Adjustment Date. In no event shall the Base
Rent payable by Tenant during the Extension be reduced below the Base
Rent payable by Tenant under the Lease immediately prior to the
Extension Rental Adjustment Date.
4. Security Deposit. Landlord and Tenant acknowledge that Landlord is
currently holding the sum of $9,676.35 as the Security Deposit under the Lease.
The Security Deposit is hereby increased from $9,676.35 to $15,052.10.
Concurrently with Tenant's execution of this Amendment, Tenant shall pay to
Landlord the sum of $5,375.75, which amount shall be applied by Landlord toward
such increased Security Deposit.
5. Brokers. Tenant warrants and represents to Landlord that neither
Tenant nor any of its representatives have had any dealings with any real estate
broker, agent or finder in connection with the subject matter of this Agreement,
and that Tenant knows of no real estate broker, agent or finder who is or might
be entitled to a commission or fee in connection with the subject matter of this
Agreement. Tenant shall defend, indemnify and hold Landlord and its agents
harmless from and
-3-
<PAGE>
against any and all liabilities or expenses (including attorneys' fees and
costs) arising out of or in connection with claims made by any broker or
individual for commissions or fees related to the use or alleged use of the
services of such broker or individual by Tenant or its representatives in
connection with the subject matter of this Amendment. The foregoing defense,
indemnity and hold harmless obligation of Tenant shall survive the expiration or
sooner termination of the Lease.
6. General.
6.1 Effect of Amendment; Ratification. Except as otherwise
modified by this Amendment, the Lease shall remain unmodified and in full force
and effect. In the event of any conflict or inconsistency between the terms and
conditions of the Lease and the terms and conditions of this Amendment, the
terms and conditions of this Amendment shall prevail.
6.2 Attorneys' Fees. The provisions of the Lease respecting
payment of attorney's fees shall also apply to this Amendment.
6.3 Counterparts. If this Amendment is executed in
counterparts, each counterpart shall be deemed an original.
6.4 Authority to Execute Amendment. Each individual executing
this Amendment on behalf of a partnership or corporation represents that he or
she is duly authorized to execute and deliver this Amendment on behalf of the
partnership and/or corporation and that this Amendment is binding upon the
corporation or partnership in accordance with its terms.
6.5 Governing Laws. This Amendment and any enforcement of the
agreements and modifications set forth above shall be governed by and construed
in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date and year first above written.
LANDLORD:
THE REALTY ASSOCIATES FUND III, L.P.
By: Realty Associates Fund III GP, Limited
Partnership (its general partner)
By: Realty Fund III GP, Inc. (its general
partner)
By:
-4-
<PAGE>
TENANT:
METRO-TEL CORP. a Delaware corporation
By:
Name:
Its:
By:
Name:
Its:
-5-
EX-10(a)(2)
Business Lease
This Agreement, entered into this 6th day of October, 1995 between
William Steiner hereinafter called the lessor or landlord, party of the first
part, and Steiner-Atlantic Corp. of the County of Dade and State of Florida
hereinafter called the lessee or tenant, party of the second part:
Witnesseth, that the said lessor or landlord does this day lease unto
said lessee, and said lessee does hereby hire and take as tenant
__________________ under said lessor the following described premises: (Describe
type of property, address, etc.)
290 N.E. 68th St., 297 N.E. 67th St., 277 N.E. 67th St., Miami, Florida 33138
(Comprising 3 contiguous warehouses)
situate in Miami State of Florida, to be used and occupied by the lessee as
Warehouse and Offices for the term of Ten years, subject and conditioned on the
provisions of clause ten of this lease beginning the 1st day of November 1995,
and ending the 31 day of October, 2004, at and for the agreed total rental of
See below Dollars, payable as follows:
Monthly rental of $6,933.34, plus Sales Tax
all payments to be made to the lessor on the first day of each and every month
in advance without demand at the office of 3900 Island Blvd., PH 7, Aventura, FL
33160 in the City of ____________________ or at such other place and to such
other person, as the lessor may from time to time designate in writing.
The following express stipulations and conditions are made a part of
this lease and are hereby assented to by the lessee:
FIRST: The lessee shall not assign this lease, nor sublet the premises,
or any part thereof nor use the same, or any part thereof, nor permit the same,
or any part thereof, to be used for any other purpose than as above stipulated,
nor make any alterations therein, and all additions thereto, without the written
consent of the lessor, and all additions, fixtures or improvements which may be
made by lessee, except movable office furniture, shall become the property of
the lessor and remain upon the premises as a part thereof, and be surrendered
with the premises at the termination of this lease.
<PAGE>
SECOND: All personal property placed or moved in the premises above
described shall be at the risk of the lessee or owner thereof, and lessor shall
not be liable for any damage to said person property, or to the lessee arising
from the bursting or leaking of water pipes, or from any act of negligence of
any co-tenant or occupants of the building or of any other person whomsoever.
THIRD: That the tenant shall promptly execute and comply with all
statutes, ordinances, rules, orders, regulations and requirements of the
Federal, State and City Government and of any and all their Departments and
Bureaus applicable to said premises, for the correction, prevention, and
abatement of nuisances or other grievances, in, upon, or connected with said
premises during said term; and shall also promptly comply with and execute all
rules, orders and regulations of the applicable fire prevention codes for the
prevention of fires, at Lessee's own cost and expense.
FOURTH: In the event the premises shall be destroyed or so damaged or
injured by fire or other casualty during the Life of this agreement, whereby the
same shall be rendered untenantable, then the lessor shall have the right to
render said premises tenantable by repairs within ninety days therefrom. If said
premises are not rendered tenantable within said time, it shall be optional with
either party hereto to cancel this lease, and in the event of such cancellation,
the rent shall be paid only to the date of such fire or casualty. The
cancellation herein mentioned shall be evidenced in writing.
FIFTH: The prompt payment of the rent for said premises upon the dates
named, and the faithful observance of the rules and regulations printed upon
this lease, and which are hereby made apart of this covenant, and of such other
and further rules or regulations as may be hereafter made by the lessor, are the
conditions upon which the lease is made and accepted and any failure on the part
of the lessee to comply with the terms of said lease, or any of said rules and
regulations now in existence, or which may be hereafter prescribed by the
lessor, shall at the option of the lessor, work a forfeiture of this contract,
and all of the rights of the lessee hereunder.
SIXTH: If the lessee shall abandon or vacate said premises before the
end of the term of this lease, or shall suffer the rent to be in arrears, the
lessor may, at his option, forwith cancel this lease or he may enter said
premises as the agent of the lessee, without being liable in any way therefor,
and relet the premises with or without any furniture that may be, therein, as
the agent of the lessee, at such price and upon such terms and for such duration
of time as the lessor may determine, and receive the rent therefor, applying the
same to the payment of the rent due by these presents, and if the full rental
herein provided shall not be realized by lessor over and above the expenses to
lessor in such re-letting, the said lessee shall pay any deficiency, and if more
than the full rental is realized, lessor will pay over to said lessee the excess
of demand.
SEVENTH: Lessee agrees to pay the cost of collection and ten per cent
attorney's fee on any part of said rental that may be collected by suit or by
attorney, after the same is past due.
EIGHTH: The lessee agrees that he will pay all charges for rent, gas,
electricity or other illumination, and for all water used on said premises, and
should said charges for rent, light or water
-2-
<PAGE>
herein provided for at any time remain due and unpaid for the space of five days
after the same shall have become due, the lessor may at its option consider the
said lessee tenant at sufferance and the entire rent for the rental period then
next ensuing shall at once be due and payable and may forwith be collected by
distress or otherwise.
NINTH: The said lessee hereby pledges and assigns to the lessor all the
furniture, fixtures, goods and chattels of said lessee, which shall or may be
brought or put on said premises as security for the payment of the rent herein
reserved, and the lessee agrees that the said lien may be enforced by distress
foreclosure or otherwise at the election of the said lessor, and does hereby
agree to pay attorney's fees of ten percent of the amount so collected or found
to be due, together with all costs and charges therefore incurred or paid by the
lessor.
TENTH: The lessor, or any of his agents, shall have the right to enter
said premises during all reasonable hours, to examine the same to make such
repairs, additions or alterations as may be deemed necessary for the safety,
comfort or preservation thereof, or of said building, or to exhibit said
premises, and to put or keep upon the doors or windows thereof a notice "FOR
RENT" at any time within thirty (30) days before the expiration of the lease.
The right of entry shall likewise exist for the purpose of removing placards,
signs, fixtures, alterations, or additions, which do not conform to this
agreement, or to the rules and regulations of the building.
ELEVENTH: Lessee hereby accepts the premises in the condition they are
in at the beginning of this lease and agrees to maintain said premises in the
same condition, order and repair as they are at the commencement of said term,
excepting only reasonable wear and tear arising from the use thereof under this
agreement, and to make good to said lessor immediately upon demand, any damage
to water apparatus, or electric lights or any fixture, appliances or
appurtenances of said premises, or of the building, caused by any act or neglect
of lessee, or of any person or persons in the employ or under the control of the
lessee.
TWELFTH: It is expressly agreed and understood by and between the
parties to this agreement, that the landlord shall not be liable for any damage
or injury by water, which may be sustained by the said tenant or other person or
for any other damage or injury resulting from the carelessness, negligence, or
improper conduct on the part of any other tenant or agents, or employees, or by
reason of the breakage, leakage, or obstruction of the water, sewer or soil
pipes, or other leakage in or about the said building.
THIRTEENTH: If the lessee shall become insolvent or if bankruptcy
proceedings shall be begun by or against the lessee, before the end of said
term, the lessor is hereby irrevocably authorized at its option, to forwith
cancel this lease, as for a default. Lessor may elect to accept rent from such
receiver, trustee, or other judicial officer during the term of their occupancy
in their fiduciary capacity with affecting lessor's rights as contained in this
contract, but no receiver, trustee or other judicial officer shall ever have any
right, title or interest in or to the above-described property by virtue of this
contract.
-3-
<PAGE>
FOURTEENTH: Lessee hereby waives and renounces for himself and family
any and all homestead and exemption rights he may have now, or hereafter, under
or by virtue of the constitution and laws of this State, or of any other State,
or of the United States, as against the payment of said rental or any portion
hereof, or any other obligation or damage that may accrue under the terms of
this agreement.
FIFTEENTH: This contract shall bind the lessor and its assigns or
successors, and the heirs, assigns, personal representatives, or successors as
the case may be, of the lessee.
SIXTEENTH: It is understood and agreed between the parties hereto that
time is of the essence of this contract and this applies to all terms and
conditions contained herein.
SEVENTEENTH: It is understood and agreed between the parties hereto
that written notice mailed or delivered to the premises leased hereunder shall
constitute sufficient notice to the lessee and written notice mailed or
delivered to the office of the lessor shall constitute sufficient notice to the
lessor, to comply with the terms of this contact.
EIGHTEENTH: The rights of the lessor under the foregoing shall be
cumulative, and failure on the part of the lessor to exercise promptly any
rights given hereunder shall not operate to forfeit any of the said rights.
NINETEENTH: It is further understood and agreed between the parties
hereto that any charges against the lessee by the lessor for services or for
work done on the premises by order of the lessee or otherwise accruing under
this contract shall be considered as rent due and shall be included in any lien
for rent due and unpaid.
TWENTIETH: It is hereby understood and agreed that any signs or
advertising to be used, including awnings, in connection with the premises
leased hereunder shall be first submitted to the lessor for approval before
installation of same.
TWENTY-FIRST: RADON GAS NOTIFICATION (the following notification may be
required in some states): Radon is a naturally occurring radioactive gas that,
when it has accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of radon that
exceed federal and state guidelines have been found in buildings. Additional
information regarding radon and radon testing may be obtained from your county
public health unit.
TWENTY-SECOND: This is a Triple Net Lease. Lessee shall be responsible
for payment of all real estate taxes, insurance premiums and costs (property
damage at replacement cost and liability insurance of $1,000,000), and
maintenance and repair costs.
-4-
<PAGE>
In Witness Whereof, the parties hereto have executed this instrument
for the purpose herein expressed, the day and year above written.
Signed, sealed and delivered in the presence of:
- ---------------------------------- --------------------------------------
Witness Signature (as to Lessor) Lessor Signature
- ---------------------------------- --------------------------------------
Printed Name Printed name
- ---------------------------------- --------------------------------------
Witness Signature (as to Lessor) Post Office Address
- ----------------------------------
Printed Name By:----------------------------------
Lessee Signature
- ----------------------------------
Witness Signature (as to Lessee)
-------------------------------------
Printed Name
- ----------------------------------
Printed Name
------------------------------------
- ---------------------------------- Post Office Address
Witness Signature (as to Lessee)
- ----------------------------------
Printed Name
STATE OF )
COUNTY OF ) I hereby Certify on this day, before me,
----------------------- an officer duly authorized to administer
oaths and take acknowledgments,
personally appeared
known to me to be the person ______________ described in and who executed the
foregoing instrument, who acknowledged before me that _____________ executed the
same, and an oath was not taken. (Check one:) |_| Said person(s) is/are
personally known to me. |_| Said person(s) provided the following type of
identification:___________________________________________________.
-5-
<PAGE>
NOTARY RUBBER STAMP SEAL Witness my hand and official seal in
the County and State last aforesaid
this __________ day of ______, A.D. 19___
-----------------------------------------
Notary Signature
-----------------------------------------
Printed Name
-6
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000065312
<NAME> Metro-Tel
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1998
<CASH> 828,390
<SECURITIES> 0
<RECEIVABLES> 1,291,090
<ALLOWANCES> 0
<INVENTORY> 2,911,158
<CURRENT-ASSETS> 67,238
<PP&E> 686,260
<DEPRECIATION> 539,799
<TOTAL-ASSETS> 5,244,337
<CURRENT-LIABILITIES> 3,084,346
<BONDS> 0
0
0
<COMMON> 169,750
<OTHER-SE> 1,773,628
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 7,747,321
<TOTAL-REVENUES> 7,834,709
<CGS> 5,712,805
<TOTAL-COSTS> 7,554,397
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,509
<INCOME-PRETAX> 444,193
<INCOME-TAX> 0
<INCOME-CONTINUING> 444,193
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 444,193
<EPS-PRIMARY> .80
<EPS-DILUTED> .80
</TABLE>
