U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended December 31, 1999
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ____________ to ____________
Commission file number 1-8635
AMERICAN MEDICAL ALERT CORP.
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(Name of Small Business Issuer in Its Charter)
New York 11-2571221
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3265 Lawson Boulevard, Oceanside, New York 11572
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(Address of Principal Executive Offices) (Zip Code)
(516) 536-5850
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 per share
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(Title of Class)
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. __
The issuer's revenues for its most recent fiscal year: $ 9,225,240.
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The aggregate market value of the voting stock held by non-affiliates
of the registrant, as of MARCH 20, 2000, WAS $15,490,659 computed by reference
to the price at which such stock was sold, as reported on NASDAQ on that date.
Aggregate number of shares of Common Stock outstanding as of March 20,
2000: 6,414,241.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the definitive Proxy Statement of the registrant, to be
filed within 120 days after the end of the registrant's fiscal year ended
December 31, 1999, are incorporated by reference into Part III of this report.
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PART I
ITEM I. DESCRIPTION OF BUSINESS.
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A. GENERAL
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American Medical Alert Corp. ("AMAC" or the "Company"), a company incorporated
under the laws of the State of New York in 1981, is engaged in the business of
designing, engineering, marketing, installing and monitoring computerized
Personal Emergency Response Systems ("PERS"), stand-alone and PERS integrated
medication dispensers, utilizing proprietary and commercially available
technologies. As used herein, the term ""AMAC" or "Company" means, unless the
context requires otherwise, the Company and its wholly owned subsidiary, Safe
Com, Inc.
The Company is a leading provider of medical response and 24-hour
on-call-monitoring services to assist the health care community in providing
at-risk patients access to assistance from trained, caring professionals.
Through a diversified marketing and referral network, AMAC markets its products
to hospitals, homecare providers, physicians, medical transportation companies,
medical equipment suppliers, social services agencies, health maintenance
organizations, retirement facilities, and directly to consumers, amongst others.
A primary corporate goal is to enhance the use of homecare as opposed to
hospitalization by making available cost effective at-home patient monitoring
services.
In addition to its PERS business, the Company has entered into an exclusive
licensing agreement to market a medication dispenser in the United States,
Canada and Mexico. The device is being marketed in conjunction with the
Company's Personal Emergency Response Systems or as a stand-alone medication
compliance unit. Failure to comply with a medication regime contributes to the
re-admittance of a significant number of patients, increased lengths of
hospitalization and unnecessary emergency room and homecare visits.
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B. PRODUCTS AND SERVICES
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The Company's core business has been and will continue to be the generation of
recurring monthly revenues (RMR) through the development, marketing, sale and
lease of high-tech PERS, homecare monitoring devices and complementary services.
For the year ended December 31, 1999, and historically, most of the Company's
revenues have been generated from the sale and lease of the company's PERS, and
from the related monitoring services. The Company's PERS VOICECARE(R), enables a
medically at-risk, elderly, infirm or physically challenged person to remain
independent, enjoy the comforts of living at home, and reduces costly hours of
safety supervision while giving family and caregivers peace of mind.
The Health Care Financing Administration's (HCFA) list of approved homecare
monitored services is continuously increasing. AMAC believes that the use of
homecare as an alternative to institutionalization will continue to increase,
thereby making available the opportunity for broader use of the Company's
current and future products.
1. PERSONAL EMERGENCY RESPONSE SYSTEMS
-----------------------------------
VOICECARE(R) Systems are designed to permit two-way (talk/listen) voice
communications between an individual and monitoring personnel. VOICECARE(R)
Systems are packaged as a tabletop or wall mounted system. The tabletop systems
are primarily utilized by private-pay consumers, hospitals, home healthcare
providers and government agencies. The wall-mounted units are typically used in
new and refurbished senior multi-housing facilities (i.e., assisted living
retirement settings).
Through the use of the Company's VOICECARE(R) System, individuals, such as the
medically at-risk, elderly, infirm, physically challenged and home bound
populations, in need of assistance are able to signal for help at the touch of a
button, and engage in two-way voice communication to identify the appropriate
level of assistance required.
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When the subscriber initiates a call for help, the system transmits an audible
tone and flashes a light, indicating that the system is alerting AMAC's
Emergency Response Center (ERC). The Company's VOICECARE(R) System, utilizing
the subscriber's telephone, permits hands-free voice communication between the
subscriber and the ERC. The equipment includes a two-way voice communicator
connected to the telephone line in the subscriber's home and a personal help
activator, which is worn or carried by the subscriber. In addition, the
VOICECARE(R) System now features the Model 450 Smart Activator, which sends a
signal to the PERS when its battery power is low. When the system is activated,
the Company's proprietary software acknowledges the incoming signal and
automatically displays the subscriber's personal information in the monitoring
center. The subscriber and ERC personnel speak to each other, thus allowing the
ERC to determine the nature of the emergency and the type of help required.
Appropriate assistance is dispatched in accordance with predetermined protocols
and the assistance of the subscriber.
The Company's primary and back up ERCs are capable of handling multiple requests
for assistance simultaneously. The Company believes that subscriber signals are
routinely processed by the ERC in less than one minute from initiation. The
Company's backup monitoring center, located in Mt. Laurel, New Jersey provides
an additional safeguard to the reliability of AMAC's VOICECARE(R) Systems.
VOICECARE(R) systems can monitor a subscriber's physical condition, as well as
other conditions, including home intrusions and fire detection.
2. MEDICAL DISPENSING DEVICE
MEDTIME(R), the Company's newly licensed medication dispenser and reminder
system, is a compatible addition to the Company's products and services. The
Company believes that failure to comply with medication regime is a major
contributor to increased medical costs. AMAC believes that a significant
opportunity exists to reduce the costs associated with subscriber's failure to
comply with medication regimes, as well as to reduce the number of detrimental
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outcomes/ effects of such non-compliance. MEDTIME(R) is a valuable asset to
visually handicapped, medically or mentally challenged patients as well as
patients on daily medication regimes. The product can be utilized as a
stand-alone device or integrated with the Company's PERS to notify the ERC of a
non-compliant event. MEDTIME(R) contains a tray with twenty eight compartments,
and at pre-programmed times, one to four times a day, the dispenser reminds the
user to access and take their medication. The reminder signal remains active for
thirty minutes or until the medication is removed from MEDTIME(R). Compliance
with the medication regime automatically resets the device.
Several states now provide for Medicaid reimbursement for the use of MEDTIME(R).
MEDTIME(R) is used in retirement homes, assisted living facilities, clinical
trials, and by private pay consumers.
3. SILENT PARTNER(R)
-----------------
In July 1999 the Company formed Safe Com, Inc., a wholly owned
subsidiary, to design and market a multi-purpose, commercial, interactive
security system known as SILENT PARTNER(R). SILENT PARTNER(R) is a two way
interactive security system, which allows the user to activate a silent alarm
signal which is received by the Company's ERC. Once the alarm signal is sent,
SILENT PARTNER(R) provides two way voice communications between the ERC and the
user. Safe Com's SILENT PARTNER(R) device has been installed and is currently
being field evaluated in over 35 commercial applications. AMAC believes that
SILENT PARTNER(R) will expand the Company's core monitoring services, thus
providing potentially significant recurring monthly revenue.
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4. MONITORING SERVICES
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In addition to its voice communication systems, the Company makes available, as
an additional and integral part of the VOICECARE(R) System, a monitoring
service. Personnel located at the Company's ERCs utilize personal computers,
arranged in a local area network, to process all incoming signals. Each of the
Company's monitoring personnel is trained according to Emergency Medical
Dispatcher protocol. All signals for assistance are programmed to access the
ERC's subscriber database, thus enabling monitoring personnel to immediately
take pre-determined actions, such as alerting family members or healthcare
providers, or sending emergency medical help. Relevant subscriber information is
displayed on a monitor. The operator interacts with the subscriber and
appropriate action is initiated on behalf of the subscriber. The system utilizes
digital communicators, radio frequency devices and two-way voice technology.
System activation occurs from a host of ancillary contacts, switches or other
devices. In all applications, the Company provides toll-free telephone lines for
signal transmission. The Company's ERCs are capable of simultaneously
identifying and processing a variety of signals from a host of activating
devices. The Company's back up ERC is located at its engineering facility in Mt.
Laurel, NJ.
5. PRODUCTION/PURCHASING
---------------------
The Company outsources its manufacturing and final assembly of its core product
lines, with exception of limited production runs. Sources are selected through
competitive bids, past performance and accessibility to the engineering process.
The Company has adopted a policy of creating primary and back up manufacturing
contractors assuring continuous availability of finished product, parts and
materials. Although the Company currently maintains favorable relationships with
its subcontractors, the Company believes that in the event any such relationship
were to be terminated, the Company would be able to engage the services of
additional or different subcontractors as would be required to fulfill its needs
without any material adverse effect to the Company's operations. With the
exception of several proprietary components, which
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are manufactured to the Company's specifications, the manufacturing of the
Company's product lines requires the use of generally available electronic
components and hardware.
6. MARKETING/CUSTOMERS
-------------------
The Company markets its products and monitoring services to private pay
consumers, hospitals, home healthcare providers, government agencies,
third-party insurers, developers of retirement communities and limited
commercial applications, amongst others. The Company believes that these markets
offer the Company an opportunity to significantly increase its subscriber base.
The Company is focusing its efforts on the following methods in order to
facilitate the growth of its core PERS business:
A. Expansion of use of PERS in existing State Medicaid Programs.
B. Expansion of current distribution channels through:
1. the addition of new healthcare service providers who will
provide the Company's PERS as a complementary service;
2. the expansion of marketing efforts into new geographic markets
throughout the U.S.;
3. the acquisition of local or nationally based PERS providers
that are mutually accretive;
4. the growth of the existing distributor network programs by
providing increased marketing support, new products and
services; and
C. the promotion of the use of PERS in conjunction with MEDTIME(R), vital sign
monitoring, and other call center applications.
Sales, rentals and leases of the Company's products and monitoring services are
made through the efforts of its own sales personnel, service providers and
independent distributors. The Company
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is an approved Medicaid provider in the States of New York, Georgia, Illinois,
Ohio, South Carolina, Colorado and Nevada.
Since 1983, the Company has provided PERS services to the City of New York's
Human Resources Administration, Homecare Service Program (HCSP). During the
years ended December 31, 1999, 1998 and 1997, the Company had revenues from this
contract representing 41%, 47%, and 44%, respectively, of its total revenue. The
contract with HCSP expired on June 30, 1999 and the Company continues to service
HCSP under the terms and conditions of the expired contract.
In January 1999, AMAC and many other companies submitted proposals to provide
PERS services on behalf of the City of New York through June 30, 2003. On
October 22, 1999, the Company was advised by HCSP that another company had been
preliminarily recommended. The Company's management reviewed HCSP's preliminary
recommendation and assessed alternative options and courses of action. On
November 1, 1999, the Company submitted a formal protest pursuant to paragraph
4-04 of the Rules of the Procurement Policy Board of the City of New York to
contest the preliminary award. As of March 20, 2000 the contract had not been
awarded.
If the City of New York HCSP awards the contract to another vendor, a
significant amount of the Company's revenues would be lost, having a material
adverse effect on operating results. With the potential loss of approximately 40
% of the Company's revenues, cash flow from operations would be adversely
affected. In addition, it is possible that significant adjustments to inventory
and fixed assets associated with the contract would occur. It could be expected
that revenues from HCSP would continue on a diminishing scale until all units
are removed and management is prepared to eliminate significant personnel costs
and fixed overhead associated with servicing the contract. Even if the Company
does receive the renewal of the contract, management expects that the same level
of revenues will not be sustained due to the competitive nature of the bid
process, including factors such as pricing and number of subscribers to be
serviced.
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In light of the possibility that the Company's contract with HCSP may not
renewed, the Company's management has focused on, and will continue to build its
subscriber base through consumers, healthcare agencies, health maintenance
organizations, durable medical equipment providers, retirement communities,
hospitals and other governmental agencies. In addition, the Company is
continuing to invest in new products and services.
7. NEW PRODUCTS AND SERVICES:
--------------------------
The Company continues to develop new healthcare and commercial systems that it
plans to introduce during fiscal year 2000. The Company's subsidiary, Safe Com,
Inc., has installed and is currently field testing its SILENT PARTNER(R)
multi-purpose commercial security system in over 35 commercial applications.
A. VITAL SIGN MONITORING:
AMAC is currently developing a vital signs monitoring program
which will utilize existing telehealth technologies. Vital sign monitoring
will allow remote monitoring, through the Company's ERCs, of various
physical indications which healthcare professionals utilize to evaluate a
person's physical condition. The Company believes that through a
comprehensive and regularized vital signs monitoring program, vital sign
monitoring will be particularly useful in crisis prevention and reduction
of resultant hospital admissions. The Company believes that it is well
positioned to expand upon its core business through liaisons within its
existing referral network. The Company is currently evaluating strategic
technological partners to establish vital sign monitoring service with.
B. HEALTH ON-CALL LINK
Healthcare is a 24-hour business that requires practitioners
and providers to be on-call all the time. AMAC's ERCs offers synergies of
operation to health care providers seeking 24-hour coverage, and can offer
service bundling to its existing network of providers. The Company's
experienced personnel and infrastructure positioned to provide a foundation
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for expansion into health-realted on-call answering services and
communication networking services.
C. H-LINK(R):
H-LINK(R) is a marketing concept which the Company intends to
utilize to facilitate the continuum of care through managed care networks.
The Company will focus its efforts on making H-LINK(R) a strong,
identifiable brand that the health care community will come to know as a
trademark of health care at home. The Company's goal to become one of the
main conduits for communications between patients and providers will be
identified through the awareness of H-LINK(R).
D. E- COMMERCE:
Information technology is leading the way to a great
opportunity in health care management through the world wide web. Medical
information retrieval is becoming an internet- driven business. The Company
is currently developing a service whereby it will offer the health care
community the ability to retrieve patient/client medical information of
patients and clients stored by the Company via the internet, thus enhancing
AMAC's core business.
8. INSTALLATION AND SERVICES
-------------------------
The Company provides its own personnel, uses independent subcontractors or
provides training for customers' personnel for installation and service of its
VOICECARE(R) and SILENT PARTNER(R) systems.
9. SALES, LEASING, RENTAL AND MONITORING REVENUES
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The Company markets its products predominantly through rental agreements, making
available flexible terms for its distributors, subscribers and sub-contractors.
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Monthly monitoring service is available for the Company's PERS and MEDTIME(R),
as well as personal emergency response systems manufactured by others.
Healthcare providers have the option of using the Company's ERCs as primary or
back up monitoring services. Monitoring fees are charged to individuals and
entities who utilize the Company's monitoring services, whether on a primary
basis or on a back-up basis.
10. PATENTS AND TRADEMARKS
----------------------
The Company considers its proprietary trademarks with respect to the
development, manufacture and marketing of its product to be a valuable asset.
The Company believes that continued development of new services and products
with trademark protection is vital to maintaining a competitive advantage. The
Company's trademarks include "VOICECARE(R)", "VOICE OF HELP(R)", "THE VOICE OF
HELP(R)", "MEDTIME(R)", "H-LINK(R)", "ACCUTROL(R)", "MED PASS(R)", "ROOM
MATE(R)", "SYSTEM- one (R) " and "HELPING PEOPLE LIVE BETTER(R)", "SILENT
PARTNER(R)", "TELEFRIEND (R)", each of which is registered with the United
States Patent and Trademark Office.
11. RESEARCH AND DEVELOPMENT
------------------------
In a continuing effort by the Company to maintain state-of-the-art technology,
the Company conducts research and development through the ongoing efforts of its
employees and consulting groups. Expenditures for research and development for
the years ended December 31, 1999, 1998 and 1997 were $110,480, $14,586, and
$20,441, respectively, and are included in selling, general and administrative
expenses. In 1999 the Company refocused its research and development activities
towards the development of SILENT PARTNER(R), and the enhancement of its core
PERS products, as well as the development of new products and services.
12. IMPACT OF GOVERNMENT REGULATIONS.
---------------------------------
The Company derives over 50% of its revenues from Medicaid, and from other
third-party payors. Government legislative initiatives, if enacted, could impose
pressures on the pricing
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structures applicable to the Company's PERS services. Depending on the nature
and extent of any new laws and or regulations, or possible changes in the
interpretation of existing laws and/or regulations, any such changes could
affect revenue, operating margins, and profitability.
13. COMPETITION.
------------
The Company's competition includes manufacturers, distributors and providers of
personal emergency response equipment and services, and a number of burglar and
fire alarm companies. Some of the Company's competitors may have more extensive
manufacturing and marketing capabilities as well as greater financial,
technological and personnel resources. The Company's competition focuses its
marketing and sales efforts in the following areas: hospitals, Homecare
providers, physicians, ambulance companies, medical equipment suppliers, state
social services agencies, health maintenance organizations, and directly to
consumers. The Company believes that its customers' main considerations in
choosing a personal response service are the high quality of service and product
performance and reliability; customer support, pricing and service; and
reputation and experience in the industry.
14. EMPLOYEES
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As of March 20, 2000, the Company employed 115 persons who perform functions on
behalf of the Company in the areas of administration, marketing, sales,
engineering, finance, purchasing, operations, quality control and research. The
Company is not a party to any collective bargaining agreement with its
employees. The Company considers its relations with its employees to be good.
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ITEM 2. DESCRIPTION OF PROPERTIES.
--------------------------
The Company's executive offices and primary ERC are located in a 5,600 square
foot facility at 3265 Lawson Boulevard, Oceanside, New York. On January 1, 1995,
the Company entered into a five-year operating lease with Howard M. Siegel, CEO
and President. In February 1998 the lease for this space and the adjoining 8,000
square foot parking lot was extended until September 30, 2007 (the "1995
Lease"). The 1995 Lease provides for a base annual rent of $74,600, subject to a
5% annual increase plus reimbursements for real estate taxes and other operating
expenses. In October 1997, the Company entered into a separate ten-year
operating lease for an additional 2,200 square feet of office space located in
an adjacent building owned by Add on Properties, LLC, owned by Howard M. Siegel.
The lease calls for an initial minimum annual rental of $36,000, subject to a 5%
annual increase plus reimbursement for real estate taxes. In November 1999, an
Addendum to the lease was entered into for an additional 2,200 square feet under
the same terms and conditions stated in the original lease. The Company believes
that the terms of this lease are no less favorable than could be obtained from
an unaffiliated third party.
The Company houses its Engineering, Research and Development, Quality Control,
Testing and Back-up Monitoring Departments in a 5,400 square foot facility
located in Mt. Laurel, New Jersey. The Company occupies this space pursuant to a
lease with an unaffiliated party. The lease expires on December 31, 2000 and
provides for a current base annual rental of $40,500 plus charges for certain
operating expenses.
The Company maintains a marketing and administrative office in Decatur, Georgia.
The Company leases approximately 1,200 square feet of space from an unaffiliated
party at an annual rental, plus certain operating charges, of $18,879, pursuant
to a lease, which expires on April 30, 2001.
The Company leases approximately 1,500 square feet of space in Flushing, New
York pursuant to a three-year lease, which expires on August 31, 2001, for
office, warehouse, storage, shipping and
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receiving purposes. The lease provides for an annual rent of $15,281 during the
first year of the term, $16,045 during the second year of the term and $16,848
during the third year of the term.
The Company maintains a marketing and administrative office in Countryside,
Illinois. The Company leases approximately 1,200 square feet of space from an
unaffiliated party pursuant to a lease, which expires on July 1, 2000. The lease
provides for an annual rent of approximately $16,000.
The Company has recently opened a marketing and administrative office in the
Denver, Colorado area.
The Company believes that these properties are suitable for their intended uses
and are adequate to meet its current requirements. The Company does not own any
property.
ITEM 3. LEGAL PROCEEDINGS.
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Although the Company is a party to certain routine litigation incidental to its
business, the Company believes that there are no material pending legal
proceedings to which it is a party or to which any of its properties are
subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
----------------------------------------------------
No matters were submitted during the fourth quarter of the year covered
by this report to a vote of the security holders through the solicitation of
proxies or otherwise.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
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The Company's Common Stock is traded on NASDAQ (Symbol: AMAC). The high and low
bid prices for the Common Stock, as furnished by NASDAQ, are shown for the
fiscal years indicated. The quotations set forth below do not include retail
markups, markdowns or commissions and may not represent actual transactions.
High Low
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1998 First Quarter $ 3.0000 $ 2.1250
----
Second Quarter 4.1250 2.6250
Third Quarter 3.1250 2.3750
Fourth Quarter 4.2500 2.2500
1999 First Quarter $ 3.9375 $ 2.5000
----
Second Quarter 2.6250 2.1250
Third Quarter 2.6875 2.0625
Fourth Quarter 2.3125 1.2500
As of March 20, 2000, there were 397 record holders of the Company's Common
Stock.
The Company did not pay dividends on its Common Stock during the two years ended
December 31, 1999 and does not anticipate paying dividends in the foreseeable
future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. This discussion should
be read in conjunction with the financial statements and notes hereto.
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This discussion contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 that involve risks and
uncertainties which, in addition to assuming a continuation of the degree and
timing of customer utilization and rate of renewals of contracts with the
Company at historical levels, are subject to a number of known and unknown risks
that, in addition to general economic, competitive and other business
conditions, could cause actual results, performance and achievements to differ
materially from those described or implied in the forward-looking statements.
Unless otherwise required by applicable securities laws, the Company assumes no
obligation to update any such forward-looking statements, or to update the
reasons why actual results could differ from those projected in the
forward-looking statements.
A. RESULTS OF OPERATIONS.
----------------------
The Company's gross revenues increased from $8,297,208 in 1998 to $9,255,240 in
1999, an increase of 12%, and increased from $7,636,730 in 1997 to $8,297,208 in
1998, an increase of 9%. The increase in gross revenues from 1998 to 1999 and
1997 to 1998 resulted from management's emphasis on the continued growth of the
Company's recurring service revenue base.
In December 1998, 369,310 warrants to purchase shares of the Company's Common
Stock at $3.50 per share were exercised, increasing cash by $1,292,586. The
Company had sold units that contained warrants to purchase 850,000 shares of the
Company's Common Stock at $3.50 per share in December 1983. The remaining
480,690 units that contained warrants to purchase the Company's Common Stock
expired on December 26, 1998.
Revenues from services (recurring monthly revenues, RMR) increased from
$7,812,571 in 1998 to $8,789,882 in 1999, an increase of 13%, and increased from
$ 6,757,594 in 1997 to $7,812,571 in 1998, an increase of 16%. The Company
continues to see strong results in the growth of RMR resulting from refocusing
its sales and marketing efforts towards the growth of the subscriber base,
rental income and service revenues. Costs related to services, as a percentage
of revenue,
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for 1999, 1998 and 1997 were 39%, 36% and 38%, respectively. In 1999, costs as a
percentage of revenue increased due to increases in personnel costs in the
Company's monitoring center, amortization, and general operating costs. In 1998,
costs as a percentage of revenue decreased as a result of greater operational
efficiencies.
Revenues from product sales decreased from $484,637 in 1998 to $435,357 in 1999,
a decrease of 10%, and decreased from $879,136 in 1997 to $484,637 in 1998, a
decrease of 45%. Decreases in revenues from product sales from 1998 to 1999 and
1997 to 1998 were primarily a result of management's changing focus toward the
growth of its subscriber base, rental income and service revenues. Gross profit
on product sales in 1999, 1998 and 1997 was 18%, 5% and 6%, respectively. Gross
profit on product sales increased in 1999 as a result of the sale of the
Company's new Model 450 Smart Activator and sales of the Company's products to
retirement facilities, which are at higher profit margins.
Selling, general and administrative expenses increased from $3,268,739 in 1998
to $3,961,954 in 1999, an increase of 21%, and increased from $2,746,695 in 1997
to $3,268,739 in 1998, an increase of 19%. Additional expenses incurred in 1999
and 1998 were the result of increased sales and marketing expenses, expansion of
the sales department and hiring of additional management personnel. In addition,
developmental costs of approximately $70,000 associated with the start up of
Safe Com, Inc. contributed to increased costs in 1999.
Interest expense for 1999, 1998 and 1997 was $23,087, $21,802, and $46,705,
respectively. Interest expense increased in 1999 as a result of additional
capital equipment leases, net of reductions in average monthly borrowing.
Interest expense decreased in 1998 due to improved cash flow and reductions in
average monthly borrowing.
The Company's income before provision for income taxes in 1999 was $1,518,915, a
decrease of $ 206,588 from 1998, or 12%. The decrease in 1999 resulted from an
increase in the Company's operating and selling and administrative costs, offset
by an increase in service revenues. Income before provision for income taxes in
1998 was $1,725,503, an increase of $247,995 from 1997,
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or 17%. The increase in 1998 resulted from an increase in the Company's RMR and
greater operational efficiencies.
B. LIQUIDITY AND CAPITAL RESOURCES.
--------------------------------
During 1999, cash provided by operating activities was $ 2,539,654 as compared
to $1,511,320 in 1998. Cash paid for income taxes in 1999 was $765,569 as
compared to $695,809 in 1998. Expenditures for fixed assets and medical devices
held for lease aggregated $ 3,190,535 in 1999, an increase from $1,711,996, the
amount purchased in 1998. During 1999, cash decreased by $466,108, as compared
to an increase in cash of $1,115,103 in 1998.
The Company has a $2,000,000 Revolving Credit Facility (the "Credit Facility")
with a bank (based upon 75% of eligible accounts receivable and 25% of
inventory, as defined) which was scheduled to expire on May 31, 2000. The Credit
Facility was extended until May 31, 2001. Borrowings under the Facility bear
interest at the lower of prime rate or the LIBOR Rate plus 2.50% (as defined)
and is collateralized by the Company's assets. There is $ 300,000 outstanding
under the Credit Facility as of March 20, 2000. The agreement provides for
negative and affirmative covenants including those related to tangible net
worth, working capital and other borrowings. At December 31, 1999, there were no
amounts outstanding.
The Company's working capital on December 31, 1999 was $3,853,000 as compared to
$4,787,083 on December 31, 1998. During 2000, the Company anticipates that it
will make capital investments of approximately $ 2,500,000 for the enhancement
of its management information systems, and the production and purchase of
additional systems which the Company intends to rent. The Company believes that
its present cash and working capital position, its borrowing availability and
future anticipated income will be sufficient to meet its cash and working
capital needs for the foreseeable future.
The Company derives a significant portion of its revenue from one contract with
the City of New York's Medicaid Homecare Services Program (HCSP). During the
year ended December 31,
-19-
<PAGE>
1999 and 1998 and 1997, the Company had revenue from this contract , which
represented 41%, 47% and 44%, respectively, of total revenues for each period.
Leased medical devices in service relating to this contract represented 38% and
42%, respectively, of total leased medical devices at December 31, 1999 and
1998. Inventory relating to this contract represented approximately 20% and 25%
of total inventory on hand at December 31, 1999 and December 31, 1998,
respectively. The contract with HCSP expired on June 30, 1999 and the Company
continues to service New York City's Medicaid Homecare Services Program (HCSP)
under the terms and conditions of the contract that expired. In January 1999,
the Company submitted its proposal to the City of New York to renew and extend
the contract.
On October 22, 1999, the Company was advised by HCSP that another company had
been preliminarily recommended. The Company's management reviewed HCSP's
preliminary recommendation and assessed alternative options and courses of
action. On November 1, 1999, the Company submitted a formal protest pursuant to
paragraph 4-04 of the Rules of the Procurement Policy Board of the City of New
York to contest the preliminary award. As of March 20, 2000, the contract had
not been awarded.
If the City of New York HCSP awards the contract to another vendor, a
significant amount of the Company's revenues would be lost, having a material
adverse effect on operating results. With the potential loss of approximately 40
% of the Company's revenues, cash flow from operations would be adversely
affected. In addition, it is possible that significant adjustments to inventory
and fixed assets associated with the contract would occur. It could be expected
that revenues from HCSP would continue on a diminishing scale until all units
are removed and management is prepared to eliminate significant personnel costs
and fixed overhead associated with servicing the contract. Even if the Company
does receive the renewal of the contract, management expects that the same level
of revenues will not be sustained due to the competitive nature of the bid
process, including factors such as pricing and number of subscribers to be
serviced. The Company cannot assess the full financial impact at this time, as
no determination can be made on how the transition to another vendor would be
accomplished, and in what time frame the transition will be made.
-20-
<PAGE>
In light of the possibility that the Company's contract with HCSP may not be
renewed the Company's management has focused on, and will continue to build its
subscriber base through consumers, healthcare agencies, health maintenance
organizations, durable medical equipment providers, retirement communities,
hospitals and other governmental agencies. In addition, the Company is
continuing to invest in new products and services.
ITEM 7. FINANCIAL STATEMENTS.
---------------------
The financial statements required hereby are located on pages F-1 through F-16.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- -----------------------------------------------------------------------
FINANCIAL DISCLOSURE.
- ---------------------
None.
-21-
<PAGE>
PART III
The information called for by Part III (Items 9, 10, 11 and 12 of Form 10-KSB)
is incorporated herein by reference to the Company's definitive Proxy Statement
to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934
with respect to the Company's 2000 Annual Meeting of Shareholders.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
---------------------------------
(A) EXHIBITS
--------
Exhibit No. Identification of Exhibit
----------- -------------------------
3(a) Articles of Incorporation of Company, as amended.
(Incorporated by reference to Exhibit 3(a) to the
Company's Form S-1 Registration Statement under the
Securities Act of 1933, filed on September 30, 1983 -
File No. 2-86862).
3(b) Amended and Restated By-Laws of Company. (Incorporated
by reference to Exhibit 4(b) to the Company's Form S-3
Registration Statement under the Securities Act of 1933,
Commission File No. 333-6159).
3(c)* Articles of Incorporation of Safe Com, Inc.
4(a) Warrant Agreement between the Company and Continental
Stock Transfer & Trust Company, the Company's transfer
agent, with the Company's form of Warrant Certificate
attached thereto. (Incorporated by reference to Exhibit
4(a) to the Company's Form S-1 Registration Statement
under the Securities Act of 1933, filed on September 30,
1983 - File No. 2-86862).
4(b) Amendment, dated December 22, 1988, to the Warrant
Agreement between the Company and Continental Stock
Transfer & Trust Company. (Incorporated by reference to
Exhibit 4(c) to the Company's Form 10-K for the year
ended December 31, 1988).
4(c) Amendment, dated October 26, 1990, to the Warrant
Agreement between the Company and Continental Stock
Transfer & Trust Company. (Incorporated by reference to
Exhibit 4(c) to the Company's Form 10-K for the year
ended December 31, 1990).
4(d) Amendment, dated November 30, 1994, to the Warrant
Agreement between the Company and Continental Stock
Transfer & Trust Company.
<PAGE>
(Incorporated by reference to Exhibit 4(d) to the
Company's Form 10-KSB for the year ended December 31,
1994).
4(e) Amendment, dated November 20, 1995, to the Warrant
Agreement between the Company and Continental Stock
Transfer & Trust Company. (Incorporated by reference to
Exhibit 4(e) to the Company's Form 10-KSB for the year
ended December 31, 1995).
4(f) Amendment, dated December 20, 1996, to the Warrant
Agreement between the Company and Continental Stock
Transfer & Trust Company. (Incorporated by reference to
Exhibit 4(h) to the Company's Registration Statement on
Form S-3, Commission File No. 333-6159).
4(g) Amendment, dated November 5, 1997, to the Warrant
Agreement between the Company and Continental Stock
Transfer & Trust Company (Incorporated by reference to
Exhibit 4(g) to the Company's Form 10-KSB for the year
ended December 31, 1997).
10(a) Employment Agreement, dated January 1, 1997 between the
Company and Howard M. Siegel. (Incorporated by reference
to Exhibit 10(a) to the Company's Form 10-KSB for the
year ended December 31, 1996).
10(b) Employment Agreement, dated August 28, 1989 between the
Company and John Lesher. (Incorporated by reference to
Exhibit 10(c) to the Company's Form 10-K for the year
ended December 31, 1990).
10(c)(i) Amendment, dated March 4, 1992, to the Employment
Agreement between the Company and John Lesher.
(Incorporated by reference to Exhibit 10(d) to the
Company's Form 10-K for the year ended December 31,
1991).
10(c)(ii)* Employment Agreement, dated March 26, 1999 between the
Company and Corey M. Aronin.
10(d) Lease for the premises located at 520 Fellowship Road,
Suite C301, Mt. Laurel, New Jersey ("Mt. Laurel Lease").
(Incorporated by reference to Exhibit 10(e) to the
Company's Form 10-K for the year ended December 31,
1991).
10(e) First Amendment to the Mt. Laurel Lease. (Incorporated
by reference to Exhibit 10(f) to the Company's Form
10-KSB for the year ended December 31, 1993).
<PAGE>
10(f) Second Amendment to the Mt. Laurel Lease. (Incorporated
by reference to Exhibit 10(f) to the Company's Form
10-KSB for the year ended December 31, 1996).
10(g) Third Amendment to the Mt. Laurel Lease (Incorporated by
reference to Exhibit 10(g) to the Company's Form 10-KSB
for the year ended December 31, 1997).
10(h) Lease for the premises located at 3265 Lawson Boulevard,
Oceanside, New York. (Incorporated by reference to
Exhibit 10(h) to the Company's Form 10-KSB for the year
ended December 31, 1994).
10(i) Amendment to Lease for the premises located at 3265
Lawson Boulevard, Oceanside, New York (Incorporated by
reference to Exhibit 10(i) to the Company's Form 10-KSB
for the year ended December 31, 1997).
10(j)(i) Lease for the premises located at 3255 Lawson Boulevard,
Oceanside, New York (Incorporated by reference to
Exhibit 10(j) to the Company's Form 10-KSB for the year
ended December 31, 1997).
10(j)(ii)* Addendum to lease for premises located at 3255 Lawson
Boulevard, Oceanside, New York.
10(k) Lease for the premises located at 910 Church Street,
Decatur, Georgia (Incorporated by reference to Exhibit
10(k) to the Company's Form 10-KSB for the year ended
December 31, 1997).
10(l) Lease for the premises located at 169-10 Crocheron
Avenue, Flushing, New York dated September 1, 1998 by
and between the Company and Roseann and Charles Rojo.
(Incorporated by reference to Exhibit 10(l) of the
Company's form 10-KSB for the year ended December 31,
1998).
10(m) Lease for the premises located at 475 West 55th Street,
Countryside, Illinois. (Incorporated by reference to
Exhibit 10(k) to the Company's Form 10-KSB for the year
ended December 31, 1995.)
10(n) Amendment to Lease for the premises located at 475 West
55th Street, Countryside, Illinois (Incorporated by
reference to Exhibit 10(n) to the Company's Form 10-KSB
for the year ended December 31, 1997).
10(o) Amended 1991 Stock Option Plan. (Incorporated by
reference to Exhibit 10(l) to the Company's Form 10-KSB
for the year ended December 31, 1994).
10(p) 1997 Stock Option Plan (Incorporated by reference to
Exhibit 10(q) to the
<PAGE>
Company's Form 10-KSB for the year ended December 31,
1997).
10(q)(i) Agreement between the Company and the City of New York,
(Incorporated by reference to Exhibit 10(o) to the
Company's Form 10-KSB for the year ended December 31,
1996).
10(r)(i)* Purchase/Leaseback Agreement dated July 13, 1999 with
Celtic Leasing Corp.
10(r)(ii) Purchase/Leaseback Agreement dated January 13, 1998 with
Celtic Leasing Corp. (Incorporated by reference to
Exhibit 10(u)( to the Company's Form 10-KSB for the year
ended December 31, 1998.)
10(s) Financial Advisory and Investment Banking Agreement with
GKN Securities Corp. dated as of January 1, 1997
(Incorporated by reference to Exhibit 10(v) to the
Company's Form 10-KSB for the year ended December 31,
1997).
10(t)(i) Loan Agreement dated as of April 27, 1998 by and between
the Company and European American Bank. (Incorporated by
reference to exhibit 10(w) to the Company's Form 10-KSB
for the year ended December 31, 1998.)
10(t)(ii)* First Amendment to Loan Agreement between the Company
and European American Bank, extending such agreement to
May 31, 2001.
10(u) Assignment of Rents and Leases dated January 7, 1999
relating to the leased premises at 910 Church Street,
Decatur, Georgia (Incorporated by reference to exhibit
10(x) to the Company's Form 10-KSB for the year ended
December 31, 1998).
23(a)* Consent of Margolin, Winer & Evens LLP.
27* Financial Data Schedule.
- -------------------
* Filed herewith.
(B) REPORTS ON FORM 8-K
-------------------
The Company did not file any reports on Form 8-K during the last
quarter of the period covered by this report.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AMERICAN MEDICAL ALERT CORP.
By: /s/ Howard M. Siegel
---------------------------------------
Howard M. Siegel
Chairman of the Board and President
Dated: March 28, 2000
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
/s/ Howard M. Siegel Chairman of the Board, March 28, 2000
- --------------------------- President, Chief Executive
Howard M. Siegel Officer and Director
/s/ Corey M. Aronin Chief Financial Officer March 28, 2000
- ---------------------------
Corey M. Aronin
/s/ Peter Breitsone Director March 28, 2000
- ---------------------------
Peter Breitstone
/s/ Leonard Herz Director March 28, 2000
- ---------------------------
Leonard Herz
/s/ Theodore Simon Director March 28, 2000
- ---------------------------
Theodore Simon
/s/ Frederick Siegel Director March 28, 2000
- ---------------------------
Frederick Siegel
<PAGE>
AMERICAN MEDICAL ALERT CORP.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
CONTENTS
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS F-1
FINANCIAL STATEMENTS:
Consolidated Balance Sheets F-2
Consolidated Statements of Income F-3
Consolidated Statements of Shareholders' Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6 - F-16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
American Medical Alert Corp. and Subsidiary
Oceanside, New York
We have audited the accompanying consolidated balance sheets of American Medical
Alert Corp. and Subsidiary as of December 31, 1999 and 1998 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1999. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Medical
Alert Corp. and Subsidiary as of December 31, 1999 and 1998 and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
/s/ Margolin, Winer & Evens LLP
Margolin, Winer & Evens LLP
Garden City, New York
February 17, 2000
F-1
<PAGE>
<TABLE>
<CAPTION>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------------------------------------------------------------------------------
December 31, 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
ASSETS (NOTE 2)
CURRENT ASSETS:
<S> <C> <C>
Cash $ 953,734 $ 1,419,842
Accounts and notes receivable (net of allowance for
doubtful accounts of $75,000 in 1999 and $60,000 in 1998)
(Notes 1, 3 and 9) 2,255,640 2,170,498
Inventory (Note 1) 791,572 1,329,526
Prepaid expenses and taxes and other current assets
(Notes 1 and 4) 342,548 139,632
Deferred income taxes (Notes 1 and 4) 156,000 121,000
------------------ ------------------
TOTAL CURRENT ASSETS 4,499,494 5,180,498
------------------ ------------------
INVENTORY OF MEDICAL DEVICES HELD FOR LEASE - AT COST (NOTE 1) 988,000 -
------------------ ------------------
FIXED ASSETS - AT COST:
Leased medical devices 8,014,100 6,214,857
Monitoring equipment 863,632 561,033
Furniture and equipment 463,576 419,450
Leasehold improvements 217,600 214,638
Automobiles 45,468 44,792
------------------ ------------------
9,604,376 7,454,770
Less accumulated depreciation and amortization (Note 1) 4,101,029 2,913,424
------------------ ------------------
5,503,347 4,541,346
------------------ ------------------
OTHER ASSETS
Intangible assets (net of accumulated amortization
of $57,100 in 1999 and $24,150 in 1998) (Note 1) 250,605 167,350
Other assets and deferred costs (Note 9) 143,075 35,002
------------------ ------------------
393,680 202,352
------------------ ------------------
TOTAL ASSETS $ 11,384,521 $ 9,924,196
================== ==================
CONSOLIDATED BALANCE SHEETS
- -----------------------------------------------------------------------------------------------------------------------
December 31, 1999 1998
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 305,320 $ 185,394
Accrued expenses 242,373 142,342
Income taxes payable - 21,569
Current portion of capital lease obligations (Note 5) 98,801 44,110
------------------ ------------------
TOTAL CURRENT LIABILITIES 646,494 393,415
DEFERRED INCOME TAX LIABILITY (NOTES 1 AND 4) 423,000 332,000
DEFERRED GAIN ON SALE OF EQUIPMENT (NOTE 1) 17,166 22,766
LONG-TERM PORTION OF CAPITAL LEASE OBLIGATIONS (NOTE 5) 282,686 148,542
------------------ ------------------
TOTAL LIABILITIES 1,369,346 896,723
------------------ ------------------
COMMITMENTS (NOTES 5, 6 AND 8) - -
SHAREHOLDERS' EQUITY (NOTES 6 AND 8):
Preferred Stock, $.01 par value-
authorized, 1,000,000 shares;
none issued and outstanding
Common stock, $.01 par value -
authorized, 10,000,000 shares;
issued 6,446,832 shares in 1999 and
6,397,570 shares in 1998 64,468 63,976
Additional paid-in capital 6,200,701 6,089,050
Retained earnings 3,856,038 2,980,479
------------------ ------------------
10,121,207 9,133,505
Less treasury stock, at cost (43,910 shares in 1999
and 1998) (106,032) (106,032)
------------------ ------------------
TOTAL SHAREHOLDERS' EQUITY 10,015,175 9,027,473
------------------ ------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 11,384,521 $ 9,924,196
================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
REVENUE (NOTES 1 AND 9):
<S> <C> <C> <C>
Services $ 8,789,882 $ 7,812,571 $ 6,757,594
Product sales 435,358 484,637 879,136
------------------ ------------------ ------------------
9,225,240 8,297,208 7,636,730
------------------ ------------------ ------------------
COSTS AND EXPENSES (INCOME):
Costs related to services 3,386,606 2,828,094 2,542,840
Cost of products sold 357,046 461,641 824,290
Selling, general and
administrative expenses 3,961,954 3,268,739 2,746,695
Interest expense 23,087 21,802 46,705
Other income (22,012) (8,571) (1,308)
------------------ ------------------ ------------------
7,706,681 6,571,705 6,159,222
------------------ ------------------ ------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,518,559 1,725,503 1,477,508
PROVISION FOR INCOME TAXES (NOTES 1 AND 4) 643,000 739,000 673,000
------------------ ------------------ ------------------
NET INCOME $ 875,559 $ 986,503 $ 804,508
================== ================== ==================
BASIC EARNINGS PER SHARE (NOTE 1) $ .14 $ .17 $ .14
======= ======== =======
DILUTED EARNINGS PER SHARE (NOTE 1) $ .14 $ .16 $ .14
======= ======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1999, 1998 and 1997
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK
---------------------------
NUMBER ADDITIONAL
OF PAID-IN
SHARES AMOUNT CAPITAL
------ ------ -------
<S> <C> <C> <C>
BALANCE - JANUARY 1, 1997 5,843,276 $ 58,432 $ 4,391,990
COMMON STOCK ISSUED 2,500 25 3,803
EXERCISE OF STOCK OPTIONS (NOTE 6) 58,831 588 127,396
NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1997 - - -
--------------- --------------- ---------------
BALANCE - DECEMBER 31, 1997 5,904,607 59,045 4,523,189
EXERCISE OF STOCK OPTIONS (NOTE 6) 123,653 1,237 276,969
EXERCISE OF STOCK WARRANTS (NOTE 6) 369,310 3,694 1,288,892
NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1998 - - -
--------------- --------------- ---------------
BALANCE - DECEMBER 31, 1998 6,397,570 63,976 6,089,050
EXERCISE OF STOCK OPTIONS (NOTE 6) 24,262 242 61,901
EXERCISE OF NON-EMPLOYEE STOCK OPTIONS (NOTE 6) 25,000 250 49,750
NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1999 - - -
--------------- --------------- ---------------
BALANCE - DECEMBER 31, 1999 6,446,832 $ 64,468 $ 6,200,701
=============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
RETAINED TREASURY
EARNINGS STOCK TOTAL
-------- ----- -----
<S> <C> <C> <C>
BALANCE - JANUARY 1, 1997 $ 1,189,468 $ (106,032) $ 5,533,858
COMMON STOCK ISSUED - - 3,828
EXERCISE OF STOCK OPTIONS (NOTE 6) - - 127,984
NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1997 804,508 - 804,508
--------------- ------------ ----------------
BALANCE - DECEMBER 31, 1997 1,993,976 (106,032) 6,470,178
EXERCISE OF STOCK OPTIONS (NOTE 6) - - 278,206
EXERCISE OF STOCK WARRANTS (NOTE 6) - - 1,292,586
NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1998 986,503 - 986,503
--------------- ------------ ----------------
BALANCE - DECEMBER 31, 1998 2,980,479 (106,032) 9,027,473
EXERCISE OF STOCK OPTIONS (NOTE 6) - - 62,143
EXERCISE OF NON-EMPLOYEE STOCK OPTIONS (NOTE 6) - - 50,000
NET INCOME FOR THE YEAR ENDED DECEMBER 31, 1999 875,559 - 875,559
--------------- ------------ ----------------
BALANCE - DECEMBER 31, 1999 $ 3,856,038 $ (106,032) $ 10,015,175
=============== ============ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 875,559 $ 986,503 $ 804,508
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provision (credit) for
deferred income taxes 56,000 (10,000) 17,000
Provision for doubtful receivables 15,000 30,000 -
Gain on sale and leaseback of fixed assets (5,600) (5,600) -
Issuance of common stock in
consideration for consulting services - - 3,828
Depreciation and amortization 1,273,484 1,050,327 780,280
Decrease (increase) in:
Accounts receivable (100,142) (625,760) (230,983)
Inventory 537,954 (18,975) (139,530)
Prepaid expenses and taxes and
other current assets (202,916) 57,358 (59,743)
Other assets (108,073) (241) (9,893)
Increase (decrease) in:
Accounts payable 119,926 23,599 (30,912)
Accrued expenses 100,031 2,540 (172,152)
Income taxes payable (21,569) 21,569 (16,464)
--------------- --------------- ---------------
Net Cash Provided by Operating Activities 2,539,654 1,511,320 945,939
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for fixed assets including
inventory of medical devices held
for lease in 1999 (3,190,535) (1,711,996) (761,019)
Proceeds from sale of equipment 250,000 128,719 -
Payment for account acquisitions and
licensing agreement (116,205) (191,500) -
--------------- --------------- ---------------
Net Cash Used in Investing Activities (3,056,740) (1,774,777) (761,019)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments on bank borrowings - (150,000) (300,000)
Principal payments under capital
lease obligations (61,165) (42,232) (9,178)
Proceeds upon exercise of stock options 62,143 278,206 127,984
Proceeds upon exercise of non-employee
stock options and stock warrants 50,000 1,292,586 -
--------------- --------------- ---------------
Net Cash Provided by (Used in)
Financing Activities 50,978 1,378,560 (181,194)
--------------- --------------- ---------------
NET (DECREASE) INCREASE IN CASH $ (466,108) $ 1,115,103 $ 3,726
CASH - BEGINNING OF YEAR 1,419,842 304,739 301,013
-------------- --------------- ---------------
CASH - END OF YEAR $ 953,734 $ 1,419,842 $ 304,739
============== =============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -
Cash paid during the year for:
Interest $ 23,087 $ 21,802 $ 46,705
Income taxes 765,569 695,809 704,254
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Fixed assets recorded under
capital lease obligations $ 250,000 $ 223,030* $ -
During 1999 and 1998, the Company sold and
leased back various monitoring equipment
which was placed in service during prior
years. A deferred gain of $28,366 was
recorded on the 1998 transaction. There was
no gain or loss on the 1999 transaction.
(Note 1)
* Includes $128,719 from the sale/leaseback.
</TABLE>
F-5
The accompanying notes are an integral part of these financial statements.
<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SCOPE OF BUSINESS - The Company's business is
SIGNIFICANT to sell, rent, install, service and monitor
ACCOUNTING POLICIES remote communication systems with personal
security and smoke/fire detection capabilities,
linked to an emergency response monitoring
center. The Company markets its products
primarily to institutional customers, including
long-term care providers, retirement
communities, hospitals, and government agencies
across the United States and individual
consumers. (See Note 9.)
CONSOLIDATION POLICY - The accompanying
consolidated financial statements include the
accounts of American Medical Alert Corp. and its
wholly-owned subsidiary, Safe Com, Inc. All
material inter-company balances and transactions
have been eliminated.
INVENTORY VALUATION - Inventory, consisting of
medical alert devices and component parts, is
valued at the lower of cost (first-in,
first-out) or market. Finished goods, excluding
inventory of medical devices held for lease,
were approximately $631,000 and $1,263,000 at
December 31, 1999 and 1998, respectively, and
the remaining inventory consists of component
parts. Inventory of medical devices held for
lease are finished goods that the Company
intends to place in service as fixed assets
under its rental program.
FIXED ASSETS - Depreciation is computed by the
straight-line method at rates adequate to
allocate the cost of applicable assets over
their expected useful lives as follows:
Leased medical devices 5-7 years
Monitoring equipment 5 years
Furniture and equipment 5-7 years
Automobiles 3 years
Amortization of leasehold improvements is
provided on a straight-line basis over the
shorter of the useful life of the asset or the
term of the lease.
Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of", requires that long-lived
assets and certain identifiable intangibles be
reviewed for impairment whenever events or
changes in circumstances indicate that the
carrying amount of an asset may not be
recoverable. Measurement of the impairment loss,
if any, is based on the fair value of the asset.
The statement also requires that certain
long-lived assets and identifiable intangibles
that are to be disposed of be reported at the
lower of their carrying amount or fair value
less cost to sell. The application of SFAS No.
121 did not have a significant impact on the
Company's results of operations or financial
condition during the three year period ending
December 31, 1999. (See
F-6
<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note 9.)
INTANGIBLE ASSETS - Intangible assets,
consisting of purchased trade accounts, a
related trade name, and a licensing agreement,
are amortized using the straight-line method at
rates adequate to allocate the cost of the
assets over their expected useful lives. The
trade accounts and the licensing agreement are
amortized over five years and the trade name is
amortized over ten years. It has been Company
experience that trade accounts purchased would
have a life of at least five years and would
show growth even net of attrition. The
licensing agreement and trade name relate to
recognized names in the Company's industry and
thus have remaining useful lives of at least
five and ten years, respectively.
INCOME TAXES - The Company accounts for income
taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for
Income Taxes," pursuant to which deferred taxes
are determined based on the differences between
the financial statement and tax bases of assets
and liabilities, using enacted tax rates, as
well as any net operating loss or tax credit
carryforwards expected to reduce taxes payable
in future years.
DEFERRED GAIN ON SALE OF EQUIPMENT - Statement
of Financial Accounting Standards No. 28,
"Accounting for Sales with Leasebacks,"
generally requires profit or loss on the sale to
be deferred and amortized. In April 1998 and in
October 1999, the Company financed approximately
$128,000 and $250,000 of computer monitoring
equipment under sale-leaseback arrangements. The
April 1998 sale-leaseback arrangement resulted
in a gain of approximately $28,000 which is
being amortized over the five year lease term.
No gain or loss was recorded on the October 1999
arrangement. (See Note 5.)
REVENUE RECOGNITION - Revenue from the sale of
medical alert devices is recognized upon
delivery. Revenue from renting, installation and
monitoring services is recognized upon
performance of such services.
RESEARCH AND DEVELOPMENT COSTS - Research and
development costs, which are expensed and
included in selling, general and administrative
expenses, were $110,480, $14,586 and $20,441 for
the years ended December 31, 1999, 1998, and
1997, respectively.
INCOME PER SHARE - In February 1997, the
Financial Accounting Standards Board issued
SFAS No. 128, "Earnings per Share" which
changes the methodology of calculating earnings
per share. SFAS No. 128 requires the disclosure
of diluted earnings per share regardless of its
difference from basic earnings per share. The
Company adopted SFAS No. 128 in December 1997.
Earnings per share data for the years ended
December 31, 1999, 1998 and 1997 is presented
in
F-7
<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
conformity with this pronouncement.
The following table is a reconciliation of the
numerators and denominators in computing
earnings per share:
<TABLE>
<CAPTION>
Income Shares Per-Share
1999 (Numerator) (Denominator) Amounts
---- ------------- ------------- ------------
<S> <C> <C> <C>
BASIC EPS -
Income available to
common stockholders $ 875,559 6,375,803 $.14
====
EFFECT OF DILUTIVE SECURITIES -
Options and warrants - 73,430
------------- --------------
DILUTED EPS -
Income available to common
Stockholders and
assumed conversions $ 875,559 6,449,233 $.14
============= ============== ====
1998
BASIC EPS -
Income available to
common stockholders $ 986,503 5,938,900 $.17
====
EFFECT OF DILUTIVE SECURITIES -
Options and warrants - 122,993
------------- --------------
DILUTED EPS -
Income available to common
Stockholders and
assumed conversions $ 986,503 6,061,893 $.16
============= ============== ====
1997
BASIC EPS -
Income available to
common stockholders $ 804,508 5,839,450 $.14
====
EFFECT OF DILUTIVE SECURITIES -
Options and warrants - 92,168
------------- --------------
DILUTED EPS -
Income available to common
Stockholders and
assumed conversions $ 804,508 5,931,618 $. 14
============= ============== =====
</TABLE>
F-8
<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONCENTRATION OF CREDIT RISK - Financial
instruments which potentially subject the
Company to concentration of credit risk
principally consist of accounts receivable from
state and local government agencies. The risk is
mitigated by the Company's procedures for
extending credit, follow-up of disputes and
receivable collection procedures. In addition,
the Company maintains its cash in various bank
accounts which at times may exceed federally
insured limits. (See Note 9.)
RECLASSIFICATIONS - Certain amounts in the 1998
and 1997 consolidated financial statements have
been reclassified to conform with the 1999
presentation.
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 revenue and expenses during
the reporting period. Actual results could
differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Statement
of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial
Instruments," requires all entities to disclose
the fair value of certain financial instruments
in their financial statements. The Company
estimates that the fair value of its cash,
accounts and notes receivable, accounts payable,
accrued expenses and taxes payable, approximates
their carrying amounts due to the short maturity
of these instruments.
ACCOUNTING FOR STOCK-BASED COMPENSATION - As
permitted by SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company has
elected to continue to account for employee
stock options under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to
Employees." Accordingly, compensation cost for
stock options is measured as the excess, if any,
of the quoted market price of the Company's
stock at the date of grant over the amount an
employee must pay to acquire the stock.
2. BANK LINE OF The Company has a revolving credit line which
CREDIT permits maximum borrowings up to $2,000,000
(based upon 75% of eligible accounts receivable
and 25% of inventory, as defined). Borrowings
under the line bear interest at the lower of
the prime rate or LIBOR plus 2.50% (as defined)
and are collateralized by the Company's
F-9
<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
assets. The credit line is available until May
31, 2001. No amounts were outstanding at
December 31, 1999 and 1998.
The agreement provides for negative and
affirmative covenants including those related to
tangible net worth, working capital and other
borrowings.
3. RELATED PARTY A director of the Company has an ownership
TRANSACTIONS interest in an insurance agency that has
written policies for the Company with premiums
of $148,168, $147,924 and $165,094 in 1999,
1998 and 1997, respectively.
Included in accounts and notes receivable at
December 31, 1999 and 1998 is $110,787 and
$84,350, respectively, due from the president
and principal shareholder of the Company. (See
Notes 5 and 6.)
4. INCOME TAXES The provision for income taxes consists of the
following:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1999 1998 1997
--------- --------- ---------
Current:
<S> <C> <C> <C>
Federal $ 411,000 $ 542,000 $ 452,000
State 176,000 207,000 204,000
------------ ------------ ------------
587,000 749,000 656,000
------------ ------------ ------------
Deferred:
Federal 45,000 (8,000) 14,000
State 11,000 (2,000) 3,000
------------ ------------ ------------
56,000 (10,000) 17,000
------------ ------------ ------------
Total $ 643,000 $ 739,000 $ 673,000
============ =========== ===========
</TABLE>
The following is a reconciliation of the
statutory federal income tax rate and the
effective rate of the provision for income
taxes:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Statutory federal income tax rate 34% 34% 34%
State and local taxes 8 8 9
</TABLE>
F-10
<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Other - 1 2
------ ------ -----
Effective income tax rate 42% 43% 45%
====== ====== =====
</TABLE>
The tax effects of significant items comprising
the Company's deferred taxes at December 31,
1999 and 1998 are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Deferred tax liabilities:
Difference between book and tax bases
of property $ (423,000) $ (332,000)
------------- -------------
Deferred tax assets:
Reserves not currently deductible 95,000 75,000
Capitalization of inventory 54,000 46,000
Other 7,000 -
------------- ------------
Total 156,000 121,000
------------- -------------
Net deferred tax liabilities $ (267,000) $ (211,000)
============= =============
</TABLE>
5. COMMITMENTS CAPITAL LEASES - At December 31, 1999 and 1998,
the Company is obligated under certain capital
lease agreements for monitoring equipment and
an automobile that expire at various dates in
2000 through 2003. The amounts of monitoring
equipment and the automobile recorded under
capital leases and included in fixed assets at
December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1999 1998
-------------- -------------
<S> <C> <C>
Monitoring equipment $ 459,085 $ 209,085
Automobiles 14,336 14,336
Less accumulated depreciation (85,229) (23,008)
-------------- -------------
$ 388,192 $ 200,413
============== =============
</TABLE>
The following is a schedule by years of future
minimum lease payments under capital leases
together with the present value of the net
minimum lease payments as of December 31, 1999:
<TABLE>
<CAPTION>
Years ending December 31,
<S> <C>
2000 $ 123,797
2001 127,005
</TABLE>
F-11
<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
2002 124,320
2003 67,829
------------
Total minimum lease payments 442,951
Less amounts representing interest 61,464
------------
Present value of net minimum
lease payments $ 381,487
Less current portion 98,801
Obligation under capital leases,
less current portion $ 282,686
==============
</TABLE>
OPERATING LEASES - The Company leases office
facilities from its principal shareholder under
three separate agreements, all of which expire
in September 2007. The leases call for minimum
annual rentals, subject to a 5% annual increase
plus reimbursement for real estate taxes. The
Company has also entered into various other
operating leases for warehouse and office space
in Flushing, New York, Mt. Laurel, New Jersey,
Decatur, Georgia and Countryside, Illinois. Rent
expense was $271,010 in 1999, $260,645 in 1998
and $197,887 in 1997, which includes $167,613,
$147,357, $116,719, respectively, paid in
connection with the above noted leases with the
principal shareholder. The aggregate minimum
annual rental commitments under non-cancelable
operating leases are as follows:
Years ending December 31,
2000 $ 252,359
2001 195,066
2002 193,026
2003 202,677
2004 212,811
Thereafter 642,841
----------------
$ 1,698,780
================
Approximately 95% of the minimum annual rental
commitments relate to the above noted leases
with the principal shareholder.
EMPLOYMENT AGREEMENTS - On January 1, 1997 the
Company entered into a three year employment
agreement with its president (who is also the
principal shareholder). In addition to an annual
base salary starting at $200,000, the agreement,
among other things, provided for additional
compensation which was based on the Company's
pre-tax income, as defined. The employee could
elect to receive the additional compensation
either in cash or in the form of the Company's
common
F-12
<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
stock. For the three year period ending
December 31, 1999, no additional compensation
was earned. The agreement also provided for a
termination payment, under certain
circumstances, if a change in control (as
defined) occurred. The termination payment
would have been equal to 2.99 times the base
amount, as defined.
The Company is negotiating a new three year
employment agreement with its president, which
would be effective January 1, 2000. As of
February 17, 2000, the agreement has not yet
been finalized.
6. COMMON The Company has two Stock Option Plans, a 1991
STOCK, Stock Option Plan ("1991 Plan"), and a 1997
WARRANTS AND Stock Option Plan ("1997 Plan"). A maximum of
OPTIONS 750,000 options may be granted under each plan,
as amended, as either Incentive Stock Options
or Nonstatutory Stock Options. Stock options
granted under the plans vest immediately and
have a term not greater than ten years from the
date the option is granted or five years for a
holder of more than 10% of the Company's common
stock. Incentive Stock Options may be granted
at an exercise price not less than the fair
market value of the underlying shares at the
date of grant subject to certain other
limitations specified in Section 422 of the
Internal Revenue Code. The per share price of
Nonstatutory Stock Options granted to
Non-Insiders (as defined) shall be determined
by the Board of Directors or the Stock Option
Committee of the Board. All options under the
above plans have been granted at exercise
prices equal to the fair market value of the
underlying common shares at the date of the
grant.
The Company has adopted the disclosure-only
provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock
Based Compensation." Accordingly, no
compensation expense has been recognized for
stock options granted. Had compensation cost for
the Company's stock option plans been determined
based on the fair value at the grant date for
awards in 1999, 1998 and 1997 consistent with
the provisions of SFAS No. 123, the Company's
net income and earnings per share would have
been reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- ------------- -------------
<S> <C> <C> <C>
Pro forma net income $ 671,781 $ 854,573 $ 694,844
Pro forma basic earnings
per share $ .11 $ .14 $ .12
</TABLE>
F-13
<PAGE>
AMERICAN MEDICAL ALERT CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The weighted average grant date fair value of
options granted in 1999, 1998 and 1997 was
$203,778, $131,930 and $109,664, respectively.
The fair value of options at date of grant was
estimated using the Black-Scholes model with the
following weighted average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ------------ ----------
<S> <C> <C> <C>
Expected life (years) 2 2 2.24
Risk free interest rate 5.13% 5.31% 5.97%
Expected volatility 33.84% 27.66% 32.10%
Expected dividend yield - - -
</TABLE>
Information with respect to options under plans
is as follows:
<TABLE>
<CAPTION>
Weighted
Number Average
of Exercise
Shares Price
------ -----
<S> <C> <C>
Balance - January 1, 1997 574,357 $ 2.50
Granted during 1997 160,917 2.70
Forfeitures/expirations during 1997 (73,267) 2.38
Exercised during 1997 (58,831) 2.18
------------ -------
Balance - December 31, 1997 603,176 2.57
Granted during 1998 238,774 2.75
Forfeitures/expirations during 1998 (48,597) 2.78
Exercised during 1998 (123,653) 2.25
------------ -------
Balance - December 31, 1998 669,700 2.68
Granted during 1999 290,089 3.15
Forfeitures/expirations during 1999 (208,829) 2.55
Exercised during 1999 (24,262) 2.56
------------ -------
Balance - December 31, 1999 726,698 $ 2.89
============ =======
</TABLE>
At December 31, 1999 and 1998, 726,698 and
669,700 options were exercisable, respectively.
The following table summarizes information about
the stock options outstanding at December 31,
1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted-
Average Weighted- Weighted-
Range of Remaining Average Average
<S> <C> <C> <C>
</TABLE>
F-14
<PAGE>
<TABLE>
<CAPTION>
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------ ----------- ---- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
$2.1875 -
3.2500 584,504 3.06 $2.66 584,504 $2.66
$3.2501-
4.1938 142,194 3.94 3.87 142,194 3.87
------------ -------- ------- ------- ---------
726,698 3.23 $ 2.89 726,698 $2.89
============ ======== ======= ======= =========
</TABLE>
As of December 31, 1999, 192,296 options are
available for future grants under the 1997 Plan.
No future options will be granted under the 1991
Plan.
The Company has agreed to grant options to its
management and employees in January and July of
each year. The number of options to be granted
is equal to 5% of the dollar amount of
compensation during the two calendar quarters
preceding the grant date. Additional options may
be granted from time to time upon approval of
the stock option committee. To the extent
permitted by law, such options will be granted
as Incentive Stock Options. Each nonemployee
director will receive options for 10,000 shares
of common stock in July.
In December 1983, the Company sold units that
contained warrants to purchase 850,000 shares of
the Company's common stock at $3.50 per share.
In December 1997, the Company agreed to extend
the expiration date of the warrants from
December 27, 1997 to December 26, 1998. In
December 1998, prior to the December 26, 1998
expiration date, 369,310 warrants were
exercised. The remaining 480,690 warrants
expired on December 26, 1998.
In November 1994, the Company granted to legal
counsel options to purchase 25,000 shares of
common stock at $2.00 per share (the fair market
value at the date of grant), such options being
exercisable for a period of five years from the
date of grant. In November 1999, the options
were exercised.
7. EMPLOYEE Effective January 1997, the Company began to
SAVINGS PLAN sponsor a 401(k) savings plan which is
available to all eligible employees.
Participants may elect to defer from 1% to 15%
of their compensation, subject to an annual
limitation provided by the Internal Revenue
Service. The Company may make matching and/or
profit sharing contributions to the plan at its
discretion. The Company contributed $17,703 and
$15,282 for the years ended December 31, 1999
and 1998, respectively.
F-15
<PAGE>
8. CONSULTING In December 1994, the Company entered into a
AGREEMENT financial advisory and investment banking
agreement. In connection with the agreement,
the Company granted 150,000 warrants
exercisable for a period of four years
commencing one year from the date of the
agreement at an exercise price of $2.00 per
share (the fair market value at the date of
grant). On January 1, 1997, the agreement was
renewed for a term of twelve months and the
Company granted the consultant an additional
50,000 warrants exercisable for a period of
four years at an exercise price of $4.50. In
December 1999 the 150,000 warrants granted in
1994 expired.
In June 1999, the Company entered into a
consulting agreement whereby the consultant is
to render advice to the Company with respect to
investor relations. In connection with the
agreement, the Company granted the consultant
50,000 stock options exercisable for a period of
five years, at an exercise price of $2.75 per
share (the fair market value at the date of the
grant). At December 31, 1999, all of the options
were fully vested. The fair value of the options
granted was not material.
9. MAJOR The Company is an approved Medicaid Provider in
CUSTOMERS the states of New York and Georgia. During the
years ended December 31, 1999, 1998 and 1997,
the Company had revenue from one contract with a
municipality in New York State which
represented, respectively, 41%, 47% and 44% of
total revenue each year. The contract is
effective through June 30, 1999. In January
1999, the Company submitted its proposal to the
municipality to renew and extend the contract.
Since June 30, 1999, the Company has continued
to provide service to the municipality while
awaiting its selection of a provider. Even if
the Company does receive the renewal of the
contract, management expects that the same level
of revenues will not be sustained due to the
competitive nature of the bid process, including
such factors as pricing and number of
subscribers to be serviced. If the municipality
does not renew the contract, a significant
amount of the Company's revenue would be lost,
which would have a material adverse effect on
operating results, and in addition, there most
likely would be a significant write-down of the
Company's leased medical devices (and/or a
reduction in their remaining useful lives) and
medical devices held for lease. The extent of
the write down will be dependant upon the length
of the transition period to the new provider. As
of December 31, 1999 and 1998, accounts
receivable from the contract represented 62% and
67%, respectively, of accounts receivable and
leased medical devices in service under the
contract represented 38% and 42%, respectively,
of leased medical devices. In addition, a
substantial amount of the Company's medical
devices held for lease at December 31, 1999 are
intended primarily for this contract. At
December 31, 1999 the Company has incurred legal
and other fees of approximately $100,000
relating to the contract extension. Such costs
have been classified as deferred costs and will
be amortized over the new contract term or
written off if the contract is not renewed.
F-16
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Identification of Exhibit
----------- -------------------------
3(a) Articles of Incorporation of Company, as amended.
(Incorporated by reference to Exhibit 3(a) to the
Company's Form S-1 Registration Statement under the
Securities Act of 1933, filed on September 30, 1983 -
File No. 2-86862).
3(b) Amended and Restated By-Laws of Company. (Incorporated
by reference to Exhibit 4(b) to the Company's Form S-3
Registration Statement under the Securities Act of 1933,
Commission File No. 333-6159).
3(c)* Articles of Incorporation of Safe Com, Inc.
4(a) Warrant Agreement between the Company and Continental
Stock Transfer & Trust Company, the Company's transfer
agent, with the Company's form of Warrant Certificate
attached thereto. (Incorporated by reference to Exhibit
4(a) to the Company's Form S-1 Registration Statement
under the Securities Act of 1933, filed on September 30,
1983 - File No. 2-86862).
4(b) Amendment, dated December 22, 1988, to the Warrant
Agreement between the Company and Continental Stock
Transfer & Trust Company. (Incorporated by reference to
Exhibit 4(c) to the Company's Form 10-K for the year
ended December 31, 1988).
4(c) Amendment, dated October 26, 1990, to the Warrant
Agreement between the Company and Continental Stock
Transfer & Trust Company. (Incorporated by reference to
Exhibit 4(c) to the Company's Form 10-K for the year
ended December 31, 1990).
4(d) Amendment, dated November 30, 1994, to the Warrant
Agreement between the Company and Continental Stock
Transfer & Trust Company.
<PAGE>
(Incorporated by reference to Exhibit 4(d) to the
Company's Form 10-KSB for the year ended December 31,
1994).
4(e) Amendment, dated November 20, 1995, to the Warrant
Agreement between the Company and Continental Stock
Transfer & Trust Company. (Incorporated by reference to
Exhibit 4(e) to the Company's Form 10-KSB for the year
ended December 31, 1995).
4(f) Amendment, dated December 20, 1996, to the Warrant
Agreement between the Company and Continental Stock
Transfer & Trust Company. (Incorporated by reference to
Exhibit 4(h) to the Company's Registration Statement on
Form S-3, Commission File No. 333-6159).
4(g) Amendment, dated November 5, 1997, to the Warrant
Agreement between the Company and Continental Stock
Transfer & Trust Company (Incorporated by reference to
Exhibit 4(g) to the Company's Form 10-KSB for the year
ended December 31, 1997).
10(a) Employment Agreement, dated January 1, 1997 between the
Company and Howard M. Siegel. (Incorporated by reference
to Exhibit 10(a) to the Company's Form 10-KSB for the
year ended December 31, 1996).
10(b) Employment Agreement, dated August 28, 1989 between the
Company and John Lesher. (Incorporated by reference to
Exhibit 10(c) to the Company's Form 10-K for the year
ended December 31, 1990).
10(c)(i) Amendment, dated March 4, 1992, to the Employment
Agreement between the Company and John Lesher.
(Incorporated by reference to Exhibit 10(d) to the
Company's Form 10-K for the year ended December 31,
1991).
10(c)(ii)* Employment Agreement, dated March 26, 1999 between the
Company and Corey M. Aronin.
10(d) Lease for the premises located at 520 Fellowship Road,
Suite C301, Mt. Laurel, New Jersey ("Mt. Laurel Lease").
(Incorporated by reference to Exhibit 10(e) to the
Company's Form 10-K for the year ended December 31,
1991).
10(e) First Amendment to the Mt. Laurel Lease. (Incorporated
by reference to Exhibit 10(f) to the Company's Form
10-KSB for the year ended December 31, 1993).
<PAGE>
10(f) Second Amendment to the Mt. Laurel Lease. (Incorporated
by reference to Exhibit 10(f) to the Company's Form
10-KSB for the year ended December 31, 1996).
10(g) Third Amendment to the Mt. Laurel Lease (Incorporated by
reference to Exhibit 10(g) to the Company's Form 10-KSB
for the year ended December 31, 1997).
10(h) Lease for the premises located at 3265 Lawson Boulevard,
Oceanside, New York. (Incorporated by reference to
Exhibit 10(h) to the Company's Form 10-KSB for the year
ended December 31, 1994).
10(i) Amendment to Lease for the premises located at 3265
Lawson Boulevard, Oceanside, New York (Incorporated by
reference to Exhibit 10(i) to the Company's Form 10-KSB
for the year ended December 31, 1997).
10(j)(i) Lease for the premises located at 3255 Lawson Boulevard,
Oceanside, New York (Incorporated by reference to
Exhibit 10(j) to the Company's Form 10-KSB for the year
ended December 31, 1997).
10(j)(ii)* Addendum to lease for premises located at 3255 Lawson
Boulevard, Oceanside, New York.
10(k) Lease for the premises located at 910 Church Street,
Decatur, Georgia (Incorporated by reference to Exhibit
10(k) to the Company's Form 10-KSB for the year ended
December 31, 1997).
10(l) Lease for the premises located at 169-10 Crocheron
Avenue, Flushing, New York dated September 1, 1998 by
and between the Company and Roseann and Charles Rojo.
(Incorporated by reference to Exhibit 10(l) of the
Company's form 10-KSB for the year ended December 31,
1998).
10(m) Lease for the premises located at 475 West 55th Street,
Countryside, Illinois. (Incorporated by reference to
Exhibit 10(k) to the Company's Form 10-KSB for the year
ended December 31, 1995.)
10(n) Amendment to Lease for the premises located at 475 West
55th Street, Countryside, Illinois (Incorporated by
reference to Exhibit 10(n) to the Company's Form 10-KSB
for the year ended December 31, 1997).
10(o) Amended 1991 Stock Option Plan. (Incorporated by
reference to Exhibit 10(l) to the Company's Form 10-KSB
for the year ended December 31, 1994).
10(p) 1997 Stock Option Plan (Incorporated by reference to
Exhibit 10(q) to the
<PAGE>
Company's Form 10-KSB for the year ended December 31,
1997).
10(q)(i) Agreement between the Company and the City of New York,
(Incorporated by reference to Exhibit 10(o) to the
Company's Form 10-KSB for the year ended December 31,
1996).
10(r)(i)* Purchase/Leaseback Agreement dated July 13, 1999 with
Celtic Leasing Corp.
10(r)(ii) Purchase/Leaseback Agreement dated January 13, 1998 with
Celtic Leasing Corp. (Incorporated by reference to
Exhibit 10(u)( to the Company's Form 10-KSB for the year
ended December 31, 1998.)
10(s) Financial Advisory and Investment Banking Agreement with
GKN Securities Corp. dated as of January 1, 1997
(Incorporated by reference to Exhibit 10(v) to the
Company's Form 10-KSB for the year ended December 31,
1997).
10(t)(i) Loan Agreement dated as of April 27, 1998 by and between
the Company and European American Bank. (Incorporated by
reference to exhibit 10(w) to the Company's Form 10-KSB
for the year ended December 31, 1998.)
10(t)(ii)* First Amendment to Loan Agreement between the Company
and European American Bank, extending such agreement to
May 31, 2001.
10(u) Assignment of Rents and Leases dated January 7, 1999
relating to the leased premises at 910 Church Street,
Decatur, Georgia (Incorporated by reference to exhibit
10(x) to the Company's Form 10-KSB for the year ended
December 31, 1998).
23(a)* Consent of Margolin, Winer & Evens LLP.
27* Financial Data Schedule.
- -------------------
* Filed herewith.
Exhibit 3(c)
Certificate of Incorporation
of
SAFE COM INC.
Pursuant to Section 402 of the Business Corporation Law
It Is Hereby Certified That:
1. The name of the corporation is SAFE COM INC.
2. The purposes for which the corporation is formed are:
To do any act or activity for which corporations may be formed under the
business corporation law, provided that the corporation shall not engage in any
act or activity which requires the consent or approval of any state office,
agency, board, department or any other body without first obtaining such consent
or approval.
For the accomplishment of the aforesaid purposes, and in furtherance thereof,
the corporation shall have and may exercise all of the powers conferred by the
Business Corporation Law upon corporations formed thereunder, subject to any
limitations contained in Article 2 of said law or in accordance with the
provisions of any other statute of the State of New York.
3. The office of the corporation shall be located in the County of Nassau.
4. The aggregate number of shares which the corporation shall be authorized
to issue is 1000 with no par value.
5. The Secretary of State is hereby designated as agent of the corporation
upon whom process against the corporation may be served. The Post Office address
to which the Secretary of State shall mail a copy of any such process is:
C/O KORN & SPIRN, ESQ. 5O CLINTON STREET HEMPSTEAD, NY 11550
6. No Director of this corporation shall be personally liable to the
corporation or its shareholders for damages for any breach of duty in such
capacity, provided that this provision shall not limit the liability of any
director if a judgment or other final adjudication adverse to him establishes
that his act or omissions were in bad faith or involved intentional misconduct
or a knowing violation of law or that he personally gained in fact a financial
profit or other advantage to which he was not legally entitled or that his acts
violated Section 719 of the New York Business Corporation Law.
<PAGE>
In Witness Whereof, the undersigned incorporator affirms under the penalties of
perjury that the statements contained herein are true.
Dated: 7/14/99
/s/ Mirtha Mercedes
- ----------------------------------
Mirtha Mercedes
30 East 40th Street, Ste. 605
New York, NY 10016
Exhibit 10(c)(ii)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of March 26,1999, by and between
AMERICAN MEDICAL ALERT CORP., a New York corporation (the "Company"), with
offices at 3265 Lawson Boulevard, Oceanside, New York 11572, and Corey M.
Aronin, an individual having an address at 3375 Fairway Road, Oceanside, New
York 11572 ("Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Employee is currently employed by the Company; and
WHEREAS, the Company desires that Employee continue to be
employed by it and render services to it, and Employee is willing to be so
employed and to render such services to the Company, all upon the terms and
subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants,
conditions and promises contained herein, the parties hereby agree as follows:
1. Employment. The Company hereby employs Employee for the
period beginning as of the date hereof and ending on August 31, 2000 unless
earlier terminated pursuant hereto (the "Employment Period").
2. Duties. Subject to the authority of the Board of
Directors of the Company, Employee shall be employed as the Company's Chief
Financial Officer. Employee will perform such duties and services of an
executive nature, commensurate with such position, as may from time to time be
assigned to him by the Board of Directors.
3. Full Time. Employee agrees that he will devote his full
time and attention to the business and affairs of the Company. Employee further
agrees to use his best efforts to perform his duties hereunder.
4. Compensation. In consideration of the duties and
services to be performed by Employee hereunder, the Company agrees to pay, and
Employee agrees to accept the amounts set forth below:
(1) A base salary, to be paid in accordance with the
Company's normal payroll procedures, during the Employment Period.
a) $ 120,000 09/01/98 through 08/31/99
b) $ 130,000 09/01/99 through 08/31/00
-1-
<PAGE>
(2) Stock Options - As an inducement for the Company to
continue Employee=s employment with the Company, the
Company hereby grants to the Employee 15,000
Incentive Stock Stock Options pursuant to the terms
of the Company=s 1997 Stock Option Plan as of the
date of this agreement.
(3) Additional Compensation - as determined by the Board
of Directors.
(4) The compensation provided for herein shall be in
addition to any retirement, profit sharing,
insurance or similar benefit which may at any time
be payable to Employee pursuant to any plan or
policy of the Company relating to such benefits,
which additional benefits shall be made available to
Employee on the same basis as they are generally
made available to other executive officers of the
Company. Such compensation shall be in addition to
any options which may be granted under any stock
option plan of the Company.
(5) The Company shall reimburse Employee in accordance
with the Company's normal policies for all
reasonable travel, hotel, meal and other expenses
properly incurred by him in the performance of his
duties hereunder.
(6) The Company shall provide Employee with the use of
an automobile, selected by Employee with consent of
the Company and leased by the Company, with all
expenses of operation, such as insurance, gas, oil
and repair, paid for by the Company and having a
cost to the Company of up to $1,000.00 per month.
5. Vacation. Employee shall be entitled to three (3) weeks
vacation each fiscal year, to be taken at such time as is mutually convenient to
the Company and Employee.
6. Death. In the event of the death of Employee during the
Employment Period, this Agreement and the employment of Employee hereunder shall
terminate on the date of the death of Employee. The estate of Employee (or such
person(s) as Employee shall designate in writing) shall be entitled to receive,
and the Company agrees to continue to pay, in accordance with the normal pay
practice of the Company, the salary of Employee provided by Section 4, for a
period of one (1) year following the date of death of Employee.
-2-
<PAGE>
7. Disability. In the event that Employee shall be unable
to perform his duties hereunder as a result of physical or mental illness or
incapacity for a period of one hundred and eighty (180) consecutive days or an
aggregate period of more than one hundred and eighty (180) days in any 12-month
period, the Company may terminate this Agreement after the expiration of such
period. Upon such termination, Employee shall be entitled to receive the salary
in accordance with Section 4 hereof computed up to the date of termination.
8. Non-Competition and Non-Disclosure. (a) Employee
covenants and agrees that, throughout the Employment Period and for a period of
two (2) years thereafter, he will not, directly or indirectly, own, manage,
operate or control, or participate in the ownership, management, operation or
control of, any business competing directly in the United States of America with
the business conducted by the Company or any subsidiary of the Company on the
date of termination hereof; provided, however, that Employee may own not more
than 5% of the outstanding securities of any class of any corporation engaged in
any such business, if such securities are listed on a National Securities
Exchange or regularly traded in the over-the-counter market by a member of a
National Securities Association.
(b) Employee covenants and agrees that, throughout the
Employment Period and for a period of two (2) years thereafter, he will not
directly or indirectly solicit, entice or induce any person who on the date of
termination of employment of Employee is, or within the last three months of
Employee's employment by the Company was, associated with or employed by the
Company or any subsidiary of the Company to leave the employ of or terminate his
association with the Company, or any subsidiary of the Company, solicit the
employment of any such person on his own behalf or on behalf of any other
business enterprise.
(c) Employee covenants and agrees that, throughout the
Employment Period and at all times thereafter, he will not use, or disclose to
any third party, trade secrets or confidential information of the Company,
including, but not limited to, confidential information or trade secrets
belonging or relating to the Company, its subsidiaries, affiliates, customers
and clients or proprietary processes or procedures of the Company, its
subsidiaries, affiliates, customers and clients. Proprietary processes and
procedures shall include, but shall not be limited to, all information which is
known or intended to be known only to employees of the Company, its respective
subsidiaries and affiliates or others in a confidential relationship with the
Company or its respective subsidiaries and affiliates which relates to business
matters.
(d) If any term of this Section 8 is found by any court
having jurisdiction to be too broad, then and in that case, such term shall
nevertheless remain effective, but shall be considered amended (as to the time
or area or otherwise, as the case may be) to a point considered by said court as
reasonable, and as so amended shall be fully enforceable.
(e) In the event that Employee shall violate any provision
of this Agreement (including but not limited to the provisions of this Section
8), then Employee hereby consents to the granting of a temporary or permanent
injunction against him by a court of competent
-3-
2
<PAGE>
jurisdiction prohibiting him from violating any provision of this Agreement. In
any proceeding for an injunction and upon any motion for a temporary or
permanent injunction, Employee agrees that his ability to answer in damages
shall not be a bar or interposed as a defense to the granting of such temporary
or permanent injunction against Employee. Employee further agrees that the
Company will not have an adequate remedy at law in the event of any breach by
Employee hereunder and that the Company will suffer irreparable damage and
injury if Employee breaches any of the provisions of this Agreement.
9. Termination. (a) The Company may terminate this
Agreement without liability (other than for the base salary provided in Section
4 accrued to the date of termination) in the event of (i) a material breach by
Employee of the provisions of this Agreement, which breach shall not have been
cured by Employee within sixty (60) days following written notice thereof by the
Company to Employee, (ii) the commission of gross negligence or bad faith by
Employee in the course of his employment hereunder, which commission has a
material adverse effect on the Company, (iii) the commission by Employee of a
criminal act of fraud, theft or dishonesty causing material damages to the
Company or any of its subsidiaries or (iv) Employee shall be convicted of (or
plead nolo contendere to) any felony, or misdemeanor involving moral turpitude
if such misdemeanor results in material financial harm to or materially
adversely affects the goodwill of the Company.
(1) Employee may terminate this Agreement without liability
at any time upon at least three (3) months prior written notice.
(2) After a Change in Control (as hereinafter defined) has
occurred, Employee may terminate his employment at any time upon written notice
to the Company within six (6) months after he has obtained actual knowledge of
the occurrence of any of the following events:
(i) Failure to elect or appoint, or re-elect or
re-appoint, Employee to, or removal of Employee from, his office and/or position
with the Company as constituted prior to the Change in Control, except in
connection with the termination of Employee's employment pursuant to Section
9(a) hereof;
(ii) A reduction in Employee's overall compensation
(including any reduction in pension or other benefit programs or perquisites) or
a material adverse change in the nature or scope of the authorities, powers,
functions or duties normally attached to Employee's position with the Company as
referred to in Section 2 hereof;
(iii) A determination by Employee made in good faith
that, as a result of a Change in Control, he is unable effectively to carry out
the authorities, powers, functions or duties attached to his position with the
Company as referred to in Section 2 hereof, and the situation is not remedied
within thirty (30) days after receipt by the Company of written notice from
Employee of such determination;
-4-
<PAGE>
(iv) A breach by the Company of any provision of this
Agreement not covered by clauses (i), (ii) or (iii) of this Section 9(c), which
is not remedied within thirty (30) days after receipt by the Company of written
notice from Employee of such breach;
(v) A change in the location at which substantially all
of Employee's duties with the Company are to be performed to a location which is
not within a 50-mile radius of the address of the place where Employee is
performing services prior to the date of the Change in Control; or
(vi) failure by the Company to obtain the assumption
of, and the agreement to perform, this Agreement by any successor (pursuant to a
transfer described in Section 15).
An election by Employee to terminate his employment under
the provisions of this Section 9(c) shall not be deemed a voluntary termination
of employment by Employee for the purpose of interpreting the provisions of any
of the Company's employee benefit plans, programs or policies. Employee's right
to terminate his employment pursuant to this Section 9(c) shall not be affected
by his illness or incapacity, whether physical or mental, unless the Company
shall at the time be entitled to terminate his employment under Section 7 of
this Agreement. Employee's continued employment with the Company for any period
of time less than six (6) months after a Change in Control shall not be
considered a waiver of any right he may have to terminate his employment
pursuant to this Section 9(c).
(3) After a Change in Control has occurred, if Employee
terminates his employment with the Company pursuant to Section 9(c) hereof or if
Employee's employment is terminated by the Company for any reason other than
pursuant to Section 9(a) hereof, Employee (i) shall be entitled to his base
salary, the additional compensation determined in accordance with Section 4(b)
hereof, and any bonuses, awards, perquisites and benefits, including, without
limitation, benefits and awards under the Company's stock option plans and the
Company's pension and retirement plans and programs, through the date specified
in the notice of termination as the last day of Employee's employment by the
Company (the "Termination Date") and, in addition thereto, (ii) shall be
entitled to be paid in a lump-sum, on the Termination Date, an amount of cash
(to be computed, at the expense of the Company, by the independent certified
public accountants utilized by the Company immediately prior to the Change of
Control (the "Accountants"), whose computation shall be conclusive and binding
upon Employee and the Company) equal to [1] times Employee's "base amount" as
defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"). Such lump-sum payment is hereinafter referred to as the
"Termination Compensation."
(4) Notwithstanding anything in this Agreement to the
contrary, Employee shall have the right, prior to the receipt by him of any
amounts due hereunder, to waive the receipt thereof or, subsequent to the
receipt by him of any amounts due hereunder, to treat some
-5-
4
<PAGE>
or all of such amounts as a loan from the Company which Employee shall repay to
the Company, within ninety (90) days from the date of receipt, with interest at
the rate provided in Section 7872 of the Code. Notice of any such waiver or
treatment of amounts received as a loan shall be given by Employee to the
Company in writing and shall be binding upon the Company.
(5) It is intended that the "present value" of the payments
and benefits to Employee, whether under this Agreement or otherwise, which are
to be included in the computation of "parachute payments" shall not, in the
aggregate, exceed [1] times the "base amount" (the terms "present value",
"parachute payments" and "base amount" being determined in accordance with
Section 280G of the Code). Accordingly, if Employee receives payments or
benefits from the Company prior to payment of the Termination Compensation
which, when added to the Termination Compensation, would, in the opinion of the
Accountants, subject any of the payments or benefits to Employee to the excise
tax imposed by Section 4999 of the Code, the Termination Compensation shall be
reduced by the smallest amount necessary, in the opinion of the Accountants, to
avoid such tax. In addition, the Company shall have no obligation to make any
payment or provide any benefit to Employee subsequent to payment of the
Termination Compensation which, in the opinion of the Accountants, would subject
any of the payments or benefits to Employee to the excise tax imposed by Section
4999 of the Code. No reduction in Termination Compensation or release of the
Company from any payment or benefit obligation in reliance upon any aforesaid
opinion of the Accountants shall be permitted unless the Company shall have
provided to Employee a copy of any such opinion that specifically entitles
Employee to rely thereon, no later than the date otherwise required for payment
of the Termination Compensation or any such later payment or benefit.
(6) "Change of Control" as used in this Agreement shall
mean the occurrence of any of the following:
(i) any "person" or "group" (as such terms are used in
Section 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Act")), except for an employee stock ownership trust (or any of the
trustees thereof), becomes a "beneficial owner" (as such term in used in Rule
13d-3 promulgated under the Act), after the date hereof, directly or indirectly,
of securities of the Company representing 30% or more of the combined voting
power of the Company's then outstanding securities;
(ii) a change in "control" of the Company (as the term
"control" is defined in Rule 12b-2 or any successor rule promulgated under the
Act) shall have occurred;
(iii) the majority of the Board of Directors, as such
entire Board of Directors is composed at the date of this Agreement, no longer
serve as directors of the Company, except that there shall not be counted toward
such majority who no longer serve as directors any director who ceased to serve
prior to the date of a Change in Control, for any reason, or at any other time
due to his death, disability or termination for cause;
-6-
<PAGE>
(iv) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets; or
(v) the shareholders of the Company approve a merger or
consolidation of the Company with any other company, other than a merger or
consolidation which would result in the combined voting power of the Company's
voting securities outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 70% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation. Notwithstanding the foregoing, any transaction
involving a leveraged buyout or other acquisition of the Company which would
otherwise constitute a Change in Control, in which Employee participates in the
surviving or successor entity (other than solely as an employee or consultant),
shall not constitute a Change in Control.
10. No Impediments. Employee warrants and represents that
he is free to enter into this Agreement and to perform the services contemplated
thereby and that such actions will not constitute a breach of, or default under,
any existing agreement.
9. No Waiver. The failure of any of the parties hereto
to enforce any provision hereof on any occasion shall not be deemed to be a
waiver of any preceding or succeeding breach of such provision or of any other
provision.
10. Entire Agreement. This Agreement constitutes the
entire agreement and understanding of the parties hereto and no amendment,
modification or waiver of any provision herein shall be effective unless in
writing, executed by the party charged therewith.
11. Governing Law. This Agreement shall be construed,
interpreted and enforced in accordance with and shall be governed by the laws of
the State of New York applicable to agreements to be wholly performed therein
without giving effect to principles of conflict or choice of law thereof. . 12.
Binding Effect. This Agreement shall bind and inure to the benefit of the
parties, their successors and assigns.
13. Assignment and Delegation of Duties. This Agreement
may not be assigned by the parties hereto except that the Company shall have the
right to assign this Agreement to any successor in connection with a sale or
transfer of all or substantially all of its assets, a merger or consolidation.
This Agreement is in the nature of a personal services contract and the duties
imposed hereby are non-delegable.
-7-
<PAGE>
14. Section Headings. The section headings herein have
been inserted for convenience of reference only and shall in no way modify or
restrict any of the terms or provisions hereof.
15. Notices. Any notice under the provisions of this
Agreement shall be in writing, shall be sent by one of the following means,
directed to the address set forth on the first page of this Agreement or to such
other address as shall be designated hereunder by notice to the other party,
effective upon actual receipt and shall be deemed conclusively to have been
given: (i) on the first business day following the day timely deposited for
overnight delivery with Federal Express (or other equivalent national overnight
courier service) or United States Express Mail, with the cost of delivery
prepaid or for the account of the sender; (ii) on the fifth business day
following the day duly sent by certified or registered United States mail,
postage prepaid and return receipt requested; or (iii) when otherwise actually
received by the addressee on a business day (or on the next business day if
received after the close of normal business hours or on any non-business day).
16. Unenforceability; Severability. If any provision of
this Agreement is found to be void or unenforceable by a court of competent
jurisdiction, the remaining provisions of this Agreement shall, nevertheless, be
binding upon the parties with the same force and effect as though the
unenforceable part has been severed and deleted.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
AMERICAN MEDICAL ALERT CORP.
By: /s/Howard M. Siegel
---------------------------------
Howard M. Siegel
President
By /s/Corey A. Aronin
---------------------------------
Corey M. Aronin
Chief Financial Officer
Exhibit 10(j)(ii)
ADDENDUM TO LEASE DATED SEPTEMBER 30, 1997
------------------------------------------
BETWEEN
-------
ADD-ON PROPERTIES, LLC, as Landlord
-----------------------------------
and
---
AMERICAN MEDICAL ALERT CORP., as Tenant
---------------------------------------
1. The parties hereto hereby enter into this Addendum to the
Original Lease dated the 30th day of September, 1997 to include the following
described premises:
The entire first floor In the building known as 3255 Lawson Blvd.,
Oceanside, New York.
2. The rent herein shall be in the sum of $39,690.00 per annum,
payable $3,307.50 per month, commencing as of the date hereof through and
including September 30, 2007. Thereafter, the rent shall be as provided in the
Rider annexed to the original Lease.
3. All terms, covenants and conditions of the original Lease dated
the 30th day of September, 1997 are hereby incorporated and made a part hereof
so that the terms of the Addendum to Lease for the additional space as provided
herein are identical to the terms as provided in the original Lease for second
floor of building known as 3255 Lawson Blvd., Oceanside, New York.
4. The original Lease is dated the 30th day of September, 1997 by
and between Add-On Properties, LLC as Landlord and American Medical Alert Corp.,
as Tenant.
5. It is agreed that as of the date of this Addendum, the Tenant
shall occupy the entire first and second floor of the premises known as 3255
Lawson Blvd., Oceanside, New York.
Dated: November 1, 1999
Add-On Properties, LLC.
By: /s/ Howard M. Siegel
-----------------------
Howard M. Siegel
American Medical Alert Corp.,
By: /s/ Corey M. Aronin
-----------------------
Corey Aronin
Exhibit 10(r)(i)
[CELTIC]
PURCHASE/LEASEBACK AGREEMENT AND BILL OF SALE
RE: Lease No. CML-0572-A / Schedule No. 03
CELTIC LEASING CORP.--Lessor/Purchaser
2061 Business Center Drive, Suite 200 o Irvine, California 92612 o
(949) 263-3880 o FAX: (949) 263-1331
Lessee/Seller: AMERICAN MEDICAL ALERT CORP.
Corporate Address: 3265 Lawson Blvd., Oceanside, NY 11572
Contact: Corey M. Aronin Title: Chief Financial OfficerPhone No.: 516-536-5850
Equipment Location: Same
This Agreement is to acknowledge that it has been the intent of the above named
Lessee/Seller (herein referred to as "Lessee" or as "Seller")at all times since
prior to delivery of the below listed equipment (the "Equipment") to lease said
Equipment. However, out of convenience, the Equipment was billed to and paid for
by Lessee. Therefore, Seller agrees to sell and Celtic Leasing Corp. (herein
referred to as "Lessor" or as "Purchaser") agrees to purchase the following
Equipment which is subject to the above referenced lease and schedule (the
"Lease") by and between Seller and Purchaser as Lessee and Lessor, respectively:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Equipment:
ITEM QTY DESCRIPTION PRICE
<S> <C> <C> <C>
- --------------- ---------------- ----------------------------------------------------------- -------------------------
1. Various Miscellaneous computer equipment, the vendors and cost of
which are set forth in the attached three page summary. $250,000.00
=========================
NOTE: The item(s) described above represent(s) Equipment Item(s) 1. to said Lease.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Purchaser shall pay to Seller the aggregate price listed above on the closing
date. The closing date is expected to occur on or about July 22, 1999. Seller
represents and warrants that it has good and merchantable title to the Equipment
free and clear of all adverse liens and encumbrances and Seller covenants and
agrees to defend same against any and all adverse claims and demands. Lessee
further represents and warrants that it elected to remit up front all applicable
sales and use tax with respect to its initial purchase for convenience and
planned subsequent purchase/leaseback of the Equipment and has thus remitted
same to the applicable Equipment vendor(s)and/or directly to the appropriate
sales and use tax authorities and also represents and warrants that no further
sales and for use tax will be due pursuant to this Purchase Agreement or said
Lease. However, should any appropriate sales and/or use tax authority make a
sales fax assessment at any time relating to this Purchase Agreement or said
Lease, then Lessee agrees to assume all liability for any such assessment,
including penalties and interest, if any, and agrees at its own cost and
expense to indemnify Lessor.
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, Seller
hereby sells, transfers, grants, bargains. sets over, assigns, delivers and
conveys all of its right, title and interest in and to the Equipment (except
for those rights and interests granted under said Lease) to Purchaser.
<TABLE>
<CAPTION>
LESSEE/SELLER LESSOR/PURCHASER
- ------------- ----------------
<S> <C>
AMERICAN MEDICAL ALERT CORP. CELTIC LEASING CORP.
Signature: /s/ Corey M. Aronin Signature: /s/ Todd R. Meyer
------------------------- -------------------------
Name: Corey M. Aronin Name: Todd R. Meyer
------------------------- -------------------------
Title: Chief Financial Officer Title: Vice President
------------------------- -------------------------
Date: 2/13/99 Date: 7/13/99
------- -------
</TABLE>
Exhibit 10(t)(ii)
[EAB]
1 EAB Plaza
Uniondale, NY 11555
Phone (516) 296-5000
June 7, 1999
American Medical Alert Corp.
3265 Lawson Blvd.
Oceanside, NY 11572
RE: FIRST AMENDMENT TO LOAN AGREEMENT AND REVOLVING CREDIT NOTE
Dear Sirs:
We refer to the Loan Agreement dated as of April 27, 1998 (the "Agreement")
between American Medical Alert Corp. (the "Company") and European American Bank
(the "Bank") and the Revolving Credit Note of like date from the Company to the
Bank in the amount of $2,000,000.00 (the "Note"). Terms used in the Agreement
shall have their defined meanings when used herein.
The Company has requested that the Bank extend the Maturity Date of the Credit
Agreement and the Note and the Bank concurs with the Company's request for such
amendment and in accordance therewith, the Company and the Bank hereby agree as
follows:
1. The definition of "Maturity Date" set forth in Section 1.01 of the
Agreement is hereby amended to delete the date May 31, 2000 and to substitute,
in lieu thereof, the date "May 31, 2001."
2. The maturity date "May 31, 2000" set forth on the first line of the Note
is hereby deleted and the date "May 31, 2001" is substituted in lieu thereof.
3. The definition of "Facility Fee" set forth in Section 2.12 of the
Agreement is hereby amended to add the following sentence at the end thereof:
"The Borrower further agrees to pay to the Bank a Facility Fee in the amount of
$5,000.00 on May 31. 2000."
This First Amendment shall be limited precisely as drafted and shall not be
deemed to be a consent to any modification or amendment of any other term or
condition of the Agreement or of any term or condition of the instruments or
agreements referred to therein.
The Company confirms and reaffirms as of the date hereof each representation
and warranty made by the Company in the Agreement.
-1-
<PAGE>
This First Amendment shall be governed by the laws of the State of New York
and may be executed by the parties hereto in any number of separate counterparts
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument.
If this First Amendment accurately reflects your understanding of our
agreement, please so indicate by signing a copy of the letter and returning it
to the Bank by June 21, 1999.
EUROPEAN AMERICAN BANK
By: /s/ Douglas Schumacher
----------------------------
Douglas Schumacher
Vice President
Agreed:
AMERICAN MEDICAL ALERT CORP.
By: /s/ Corey M. Aronin
-----------------------------
Name: Corey M. Aronin
Title: CFO
-2-
Exhibit 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-48385, 33-91806, and 33-53029 on Form S-8 and Registration Statement No.
333-6159 on Form S-3 of American Medical Alert Corp. of our report dated
February 17, 2000 appearing in this Annual Report on Form 10-KSB of American
Medical Alert Corp. for the year ended December 31, 1999.
/s/ Margolin, Winer & Evens LLP
Margolin, Winer & Evens LLP
Garden City, New York
March 29, 2000
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