<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from to
--------------- ---------------
Commission file number 1-9167
------
MEDICORE, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-0941551
- ------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2337 West 76th Street, Hialeah, Florida 33016
- ---------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(305) 558-4000
----------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
---------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X or No
--- ---
Common Stock Outstanding
Common Stock, $.01 par value -- 5,454,940 shares as of October 31,
1995.
<PAGE> 2
MEDICORE, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION
The Consolidated Condensed Statements of Income (Unaudited) for the
three months and nine months ended September 30, 1995 and September 30, 1994
include the accounts of the Registrant and all its subsidiaries.
Item 1. Financial Statements
1) Consolidated Condensed Statements of Income for the three
months and nine months ended September 30, 1995 and September 30,
1994.
2) Consolidated Condensed Balance Sheets as of September 30, 1995 and
December 31, 1994.
3) Consolidated Condensed Statements of Cash Flows for the nine
months ended September 30, 1995 and September 30, 1994.
4) Notes to Consolidated Condensed Financial Statements as of
September 30, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Results of Votes of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MEDICORE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Sales $9,094,828 $5,977,897 $26,180,361 $16,880,093
Interest and other income 63,161 65,718 233,167 231,682
Realized gain on sale of
marketable securities 97,080 131,123 165,742 131,123
---------- ---------- ----------- -----------
9,255,069 6,174,738 26,579,270 17,242,898
COSTS AND EXPENSES
Cost of goods sold 7,487,805 4,692,978 21,356,287 13,353,999
Selling, general and
administrative expenses 1,106,264 1,062,181 3,227,458 3,074,835
Interest expense 60,838 59,371 185,098 146,420
---------- ---------- ----------- -----------
8,654,907 5,814,530 24,768,843 16,575,254
---------- ---------- ----------- -----------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 600,162 360,208 1,810,427 667,644
Income taxes 173,268 89,537 447,503 213,668
---------- ---------- ----------- -----------
INCOME BEFORE MINORITY
INTEREST 426,894 270,671 1,362,924 453,976
Minority interest in
income of consolidated
subsidiaries 56,952 3,941 43,716 4,728
---------- ---------- ----------- -----------
NET INCOME $ 369,942 $ 266,730 $ 1,319,208 $ 449,248
========== ========== =========== ===========
Earnings per share:
Primary $ .06 $ .05 $ .23 $ .09
========== ========== =========== ===========
Fully diluted $ .22
===========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 4
MEDICORE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994(A)
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,372,703 $ 1,450,260
Marketable securities 805,986 1,685,352
Short-term investments 188,954 181,230
Accounts receivable, less allowance
of $170,000 at September 30, 1995 and
$133,000 at December 31, 1994. 4,068,479 3,530,124
Inventories, less obsolescence reserve
of $293,000 at September 30, 1995 and
$255,000 at December 31, 1994. 3,573,914 2,910,735
Prepaid expenses and other current
assets 699,571 414,575
Note receivable from Viragen 151,612
----------- -----------
TOTAL CURRENT ASSETS 10,861,219 10,172,276
RECEIVABLE FROM VIRAGEN, INC. 167,715
PROPERTY AND EQUIPMENT
Land and improvements 1,008,855 1,006,455
Building and building improvements 2,713,068 2,558,195
Equipment and furniture 5,053,937 4,333,075
Leasehold improvements 354,561 195,388
----------- -----------
9,130,421 8,093,113
Less accumulated depreciation
and amortization 3,740,736 3,430,447
----------- -----------
5,389,685 4,662,666
DEFERRED EXPENSES AND OTHER RECEIVABLES 485,409 161,592
COSTS IN EXCESS OF NET TANGIBLE ASSETS
ACQUIRED, less accumulated amortization
of $300,000 at September 30, 1995 and
$267,000 at December 31, 1994. 757,577 791,075
----------- -----------
$17,493,890 $15,955,324
=========== ===========
</TABLE>
<PAGE> 5
MEDICORE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS- Continued
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994 (A)
--------- -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,873,627 $ 2,311,373
Accrued expenses and other current
liabilities 1,594,120 1,121,799
Current portion of long-term debt 1,314,000 951,000
Income taxes payable 385,991 276,768
Deferred income taxes 306,275 640,434
----------- -----------
TOTAL CURRENT LIABILITIES 6,474,013 5,301,374
LONG-TERM DEBT 1,205,576 1,667,129
DEFERRED INCOME TAXES 788,013 787,076
MINORITY INTEREST IN SUBSIDIARIES 201,429 172,713
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.01 par value
Authorized 12,000,000 shares;
5,454,940 shares issued and
outstanding 54,549 54,549
Capital in excess of par value 11,540,704 11,540,704
Deficit (2,739,786) (4,058,994)
Foreign currency translation adjustment (203,919) (227,745)
Notes receivables from options exercise (326,400) (326,400)
Unrealized gain on marketable securities
for sale 499,711 1,044,918
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 8,824,859 8,027,032
----------- -----------
$17,493,890 $15,955,324
=========== ===========
</TABLE>
(A) Reference is made to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 filed with the Securities and Exchange Commission in
March 1995.
See notes to consolidated condensed financial statements.
<PAGE> 6
MEDICORE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
September 30,
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $1,319,208 $ 449,248
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 384,000 336,864
Amortization 52,604 81,777
Bad debt expense 65,772 51,921
Provision for inventory
obsolescence 237,000 76,000
Gain on sale of securities (165,742) (131,123)
Stock compensation expense 115,313
Deferred income taxes 9,882
Minority interest 43,716 4,728
Increase (decrease) relating to
operating activities from:
Accounts receivable (590,495) (481,894)
Inventories (889,053) (1,812,449)
Prepaid expenses and other
current assets (318,200) (233,416)
Accounts payable 558,983 1,134,621
Accrued expenses and other
current liabilities 372,123 320,924
Income taxes payable 106,340 170,269
---------- ----------
Net cash provided by
operating activities 1,176,256 92,665
INVESTING ACTIVITIES:
Additions to property, plant
and equipment, net of minor
disposals (878,775) (351,722)
Increase in amounts due from
Viragen, Inc. (47,614)
Payments received on amounts due
from Viragen, Inc. 16,103 75,478
Proceeds from short-term investments 272,737 266,885
Short-term investments (280,461) (269,623)
Proceeds from sale of marketable securities 200,788 296,642
Purchase portion of minority interest
in subsidiary (15,000)
Organizational and other
deferred investing costs (237,329) (6,497)
---------- ----------
Net cash used in
investing activities (921,937) (36,451)
</TABLE>
<PAGE> 7
MEDICORE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS-Continued
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
September 30,
1995 1994
---- ----
<S> <C> <C>
FINANCING ACTIVITIES:
Proceeds from short-term borrowings $ 57,580
Payments on long-term debt $ (324,073) (275,044)
Deferred financing costs (9,950) (31,794)
Dividend payment to minority
shareholder in subsidiary (5,000)
Proceeds from exercise of stock
options 4,800
Net cash used in financing ---------- ----------
activities (334,023) (249,458)
Effect of exchange rate
fluctuations on cash 2,147 (7,273)
---------- ----------
Decrease in cash and
cash equivalents (77,557) (200,517)
Cash and cash equivalents at
beginning of period 1,450,260 1,102,787
---------- ----------
Cash and cash equivalents at
end of period $1,372,703 $ 902,270
========== ==========
</TABLE>
See notes to Consolidated Condensed Financial Statements.
<PAGE> 8
MEDICORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation: The Consolidated Financial Statements include the accounts of
Medicore, Inc., Medicore's 99% owned subsidiary, Dialysis Corporation of
America ("DCA"), DCA's subsidiaries, Medicore's 83.1% owned subsidiary,
Techdyne, Inc. (including its wholly-owned subsidiary Techdyne (Scotland) Ltd.
("Techdyne" (Scotland)") which is 62.5% owned by Medicore subsequent to the
completion of Techdyne, Inc.'s securities offering on October 2, 1995 (See Note
8), collectively the Company. All material intercompany accounts and
transactions have been eliminated in consolidation.
Sale of Stock by Subsidiaries: The Company follows an accounting policy of
income statement recognition for sales of stock by its subsidiaries. Techdyne,
Inc. completed a public offering on October 2, 1995, pursuant to which the
Company will recognize a gain in the fourth quarter of 1995. (See Note 8).
Marketable Securities: In 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities. Under this Statement, the Company is required to classify
its marketable equity securities as either trading or available-for-sale. The
Company does not purchase securities for the purpose of short-term sales;
accordingly, its securities are classified as available-for-sale. Marketable
securities are recorded at fair value. Unrealized gains and losses on
available-for-sale securities are included as a separate component of
shareholders' equity, net of income tax effect, until realized. Realized gains
and losses are computed based on the cost of securities sold using the specific
identification method.
Inventories: Inventories, are valued at the lower of cost (first in, first-out
method) or market value. The cost of finished goods and work-in-process
consists of direct materials, direct labor and an appropriate portion of fixed
and variable manufacturing overhead. Inventories are comprised of the
following:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
---------- ------------
<S> <C> <C>
Electronic and mechanical components, net:
Finished goods $ 441,767 $ 203,682
Work-in-process 801,784 572,077
Raw materials and supplies 2,028,286 1,889,729
---------- ----------
3,271,837 2,665,488
Medical supplies 302,077 245,247
---------- ----------
$3,573,914 $2,910,735
========== ==========
</TABLE>
Property and Equipment: Property and equipment is stated at cost.
Depreciation is computed by the straight-line method over the estimated useful
lives of the assets for financial reporting purposes and by accelerated methods
for income tax purposes.
<PAGE> 9
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- CONTINUED
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
Costs in Excess of Net Tangible Assets Acquired: The costs in excess of net
tangible assets acquired are being amortized over 25 years. If, in the opinion
of management, an impairment in value occurs, based on the undiscounted cash
flow method, any necessary writedowns will be charged to expense.
Deferred Expenses: Deferred expenses, except for deferred loan costs, are
amortized on the straight-line method, over their estimated benefit period
ranging to 60 months. Deferred loan costs are amortized over the lives of the
respective loans.
Income Taxes: Deferred income taxes at the end of each period are determined
by applying enacted tax rates applicable to future periods in which the taxes
are expected to be paid or recovered to differences between financial
accounting and tax basis of assets and liabilities.
The Company and its majority-owned domestic subsidiaries file consolidated
federal and state tax returns. Techdyne (Scotland) files a separate United
Kingdom income tax return. Subsequent to Techdyne, Inc.'s public offering,
which was completed on October 2, 1995, Techdyne, Inc. will file separate
federal and state income tax returns with the income tax liability reflected
on a separate return basis.
Foreign Currency Translation: The financial statements of Techdyne (Scotland),
the foreign subsidiary, have been translated into U.S. dollars in accordance
with Statement of Financial Accounting Standards No. 52. All balance sheet
accounts have been translated using the current exchange rates at the balance
sheet date. Income statement amounts have been translated using the average
exchange rate for the period. The translation adjustments resulting from the
change in exchange rates from period to period have been reported separately as
a component of stockholders' equity. Foreign currency transaction gains and
losses, which are not material, are included in results of operations. These
gains and losses result from exchange rate changes between the time
transactions are recorded and settled and, for unsettled transactions, exchange
rate changes between the time transactions are recorded and the balance sheet
date.
Earnings Per Share: Primary earnings per share is computed on the basis of the
weighted average shares outstanding plus common equivalent shares from dilutive
stock options, using the modified treasury stock method and average market
prices for 1995 and using the treasury stock method and average market prices
for 1995 and for 1994 includes shares approved in January 1994 and subsequently
issued to officers, directors and key employees of the Company and certain
subsidiaries. Fully diluted earnings per share for the nine months ended
September 30, 1995 is computed on the basis of weighted average shares
outstanding plus common equivalent shares from dilutive stock options using the
modified treasury stock method and ending market prices which is higher than
average market prices and has not been presented for the three months ended
September 30, 1995 or for 1994 as it is not dilutive for those periods.
<PAGE> 10
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- CONTINUED
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
Cash Equivalents: The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents. The
carrying amounts, reported in the balance sheet for cash and cash equivalents
approximate their fair values.
Prepaid Expenses and Other Current Assets: Prepaid expenses and other current
assets is comprised as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
---------- ----------
<S> <C> <C>
United Kingdom VAT tax receivable $ 284,165 $ 183,457
Other 415,406 231,118
--------- ---------
$ 699,571 $ 414,575
========= =========
</TABLE>
Accrued Expenses and Other Current Liabilities: Accrued expenses and other
current liabilities is comprised as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
United Kingdom VAT tax payable $ 567,452 $ 397,404
Other 1,026,668 724,395
---------- ----------
$1,594,120 $1,121,799
========== ==========
</TABLE>
Customer Payment Terms: The majority of the Company's sales are made at payment
terms of net amount due in 30-45 days, depending on the customer.
Reclassification: Certain reclassifications have been made to the 1994
financial statements to conform to the 1995 presentation.
NOTE 2--INTERIM ADJUSTMENTS
The financial summaries for the three months and nine months ended September
30, 1995 and September 30, 1994 are unaudited and include, in the opinion of
management of the Company, all adjustments (consisting of normal recurring
accruals) necessary to present fairly the earnings for such periods. Operating
results for the three months and nine months ended September 30, 1995 are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1995.
While the Company believes that the disclosures presented are adequate to make
the information not misleading, it is suggested that these Consolidated
Condensed Financial Statements be read in conjunction with the financial
statements and notes included in the Company's latest annual report on Form
10-K for the year ended December 31, 1994.
<PAGE> 11
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- CONTINUED
NOTE 3--TRANSACTIONS WITH VIRAGEN, INC.
The Company owns approximately 971,000 shares of Viragen, Inc. ("Viragen"
formerly a majority-owned subsidiary of the Company) common stock
(approximately 2.7% of the Viragen shares outstanding at September 30, 1995).
The carrying value of these securities was written off as of December 31, 1991.
During 1994, the Company sold approximately 375,000 shares of Viragen stock and
recognized a gain of approximately $524,000 with approximately $131,000 of the
gain recorded in the third quarter of 1994. During the third quarter of 1995,
the Company sold 100,000 shares of Viragen stock and recognized a gain of
approximately $97,000. For the nine months ended September 30, 1995, the
Company sold approximately 153,000 shares recognizing a gain of approximately
$166,000.
As a result of the implementation of FAS 115 (See Note 1), the Company has
recorded these securities at fair value with the unrealized gain credited to a
separate component of stockholders' equity, net of income tax effect. Fair
value was determined using quoted market prices published by the National
Quotation Bureau, Inc. as of September 30, 1995 and December 31, 1994; however,
the daily volume of Viragen shares traded would not support a market that would
allow the Company to sell its holdings of Viragen stock at one time and realize
the fair value recorded. In addition, the trading price of the Viragen stock
has fluctuated significantly.
The Company has a second mortgage and related note due from Viragen. Under the
terms of this note, the receivable is to be paid in monthly installments of
$1,789, with a final payment of $361,412 due August 1, 1996. The note bears
interest at 1% over prime. The note balance includes amounts due from Viragen
that were previously written off by Medicore. At September 30, 1995 and
December 31, 1994, the outstanding note balance was $379,000 and $395,000,
respectively, and is shown net of an allowance for the amounts previously
written off with the remaining net balance of approximately $152,000 reflected
as a current asset in the accompanying financial statements. Interest earned on
the note amounted to approximately $13,000 and $31,000 for three months and
nine months ended September 30, 1995 and $8,000 and $23,000 for the same
periods of the preceding year.
The Company has a royalty agreement with Viragen, pursuant to which it is
receiving royalty payments on Viragen's net sales of interferon and related
products. The terms of the agreement include an aggregate of $2.4 million to
be paid based on the following percentages of Viragen sales: 5% of the first $7
million, 4% of the next $10 million, and 3% of the remaining $55 million. The
effective date of the agreement was November 15, 1993, with royalty payments
due quarterly, commencing September 30, 1994. Under the agreement,
approximately $108,000 of royalties earned pursuant to a previous agreement
will comprise the final payment under the new agreement.
NOTE 4--LONG-TERM DEBT
Techdyne, Inc.'s term loan at September 30, 1995 and December 31, 1994
<PAGE> 12
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- CONTINUED
NOTE 4--LONG-TERM DEBT -- CONTINUED
amounted to approximately $601,000 and $807,000, respectively. The terms of
this loan were renegotiated in March of 1991 and again in September of 1992.
The balance is due in monthly installments of $10,000 plus interest through
September 1, 1993; thereafter, monthly principal payments increased to $17,300
plus interest. The unpaid balance is due on June 1, 1996. Interest under
the agreement is at a rate equal to 1% above the fluctuating base rate of the
Bank. On December 31, 1992, Medicore guaranteed this loan and gave the Bank a
mortgage on its properties in Florida presently under lease to Techdyne, Inc.
At December 31, 1994, Techdyne, Inc. was in violation of certain covenants
under the loan. On March 30, 1995, the lender waived these defaults as of
December 31, 1994, and waived compliance with these covenants through May 30,
1995.
The Company and Techdyne, Inc. have agreed to the following:
Techdyne, Inc. has agreed to remit to the bank 50% of any intercompany
repayments Techdyne (Scotland) makes to Techdyne, Inc.
In the event Techdyne (Scotland) Ltd. is sold, which is not currently
contemplated, 50% of the net proceeds would be applied to repay the
loan.
Techdyne, Inc. has agreed not to provide future funding to Techdyne
(Scotland) without prior permission from the bank.
The Company has agreed that $1,500,000 of Techdyne, Inc.'s
indebtedness to the Company will be subordinated to the bank debt and
has agreed to subordinate certain lease payments in the event of
default.
The loan is secured by Techdyne, Inc.'s receivables, inventory and
fixed assets with a carrying value of approximately $4,795,000 at
September 30, 1995, in addition to the mortgaged real properties.
Techdyne, Inc. has entered into a commitment letter with a Florida bank to
refinance its term loan. If completed the new financing will provide for a
$2,500,000 line of credit, due on demand, but in no event after June 30, 1996
secured by Techdyne, Inc.'s accounts receivable, inventory, furniture, fixtures
and intangible assets and would bear interest at the bank's prime rate plus
1.25%. The facility also provides for a five year $900,000 commercial term loan
at the bank's prime rate plus 1% secured by two buildings owned by the Company.
Both facilities require Techdyne, Inc. to maintain a debt service coverage
ratio of 1.25:1, maintenance of total debt to capital ratio of 1.5:1,
maintenance of minimum capital funds of $3,500,000. The Company will guarantee
both facilities and will subordinate $2,500,000 due from Techdyne, Inc., which
subordination will be reduced by future earnings or contributed capital earned
or received by Techdyne, Inc. Techdyne, Inc. has further agreed that in the
event that it should sell its interest in Techdyne (Scotland), which is not
anticipated, 50% of the selling price would be used to repay the term loan
facility.
<PAGE> 13
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- CONTINUED
NOTE 4--LONG-TERM DEBT -- CONTINUED
Techdyne, Inc. has a promissory note payable to a local bank of $145,000 at
September 30, 1995 and December 31, 1994, with interest payable monthly at
prime with the note maturing April 1997.
In July 1994, the Company obtained a $230,000 mortgage to refinance a mortgage
note and second mortgage note secured by land and building which represents a
non-cash financing activity and is a supplemental disclosure required by the
SFAS 95. The new first mortgage had a remaining principal balance of
approximately $216,000 and $226,000 at March 31,1995 and December 31, 1994,
respectively. This mortgage is payable commencing September 1, 1994 at $1,065
plus interest at 2% over prime through July 1, 1999 with the remaining
principal and accrued interest due August 1, 1999.
The prime rate was 8.75% and 8.5% as of September 30, 1995 and December 31,
1994, respectively.
Techdyne (Scotland) has established a line of credit with a Scottish bank with
a U.S. dollar equivalent of approximately $632,000 at September 30, 1995. This
line of credit, which operates as an overdraft facility, is secured by assets
of Techdyne (Scotland), with a carrying value of approximately $5,432,000 at
September 30, 1995, and is guaranteed by Techdyne, Inc. The interest rate is
2.50% above the bank base rate with an applicable rate of 9.25% and 9.0% as of
September 30, 1995 and December 31, 1994, respectively. No amounts were
outstanding under this line of credit as of September 30, 1995 or December 31,
1994.
In July 1994, Techdyne (Scotland) finalized the purchase of the facility which
houses its operations at a cost of approximately $730,000. In connection with
the purchase of this real property, Techdyne (Scotland) Ltd. made a $110,000
payment and obtained a 15-year mortgage of approximately $620,000 based on
exchange rates at that time, with a variable interest rate of 2% above the bank
base rate. The mortgage transaction represents a noncash financing activity
which is a supplemental disclosure required by the SFAS 95. The principal
balance outstanding under this mortgage had a U.S. dollar equivalency of
approximately $608,000 and $628,000 at September 30, 1995 and December 31,
1994, respectively, based on applicable exchange rates at the end of each
period. The first payment under this mortgage was due in October 1994 with
quarterly payments, including principal and interest, through October 2009,
with adjustable payments to reflect variations in interest rates. The interest
rate on this mortgage was 8.75% and 8.25% at September 30, 1995 and December
31, 1994, respectively.
The Company obtained a $130,000 mortgage in April 1993 in connection with the
purchase of a vacant lot for possible future expansion. This mortgage which
commenced May 1, 1993 is payable at $1,083 plus interest at 2% over prime
through March 1, 1998 with the remaining principal balance and accrued interest
due April 1, 1998. The principal balance outstanding under this mortgage
amounted to approximately $99,000 and $108,000 at September 30, 1995 and
December 31, 1994, respectively.
<PAGE> 14
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- CONTINUED
NOTE 4--LONG-TERM DEBT -- CONTINUED
In December 1988, the Company obtained a $480,000 fifteen-year mortgage through
November 2003 on its building in Lemoyne, Pennsylvania with interest at 1% over
the prime rate. The remaining principal balance under this mortgage amounted
to approximately $264,000 and $288,000 at September 30, 1995 and December 31,
1994, respectively. In December 1988, the Company also obtained a $600,000
fifteen-year mortgage though November 2003 on its building in Easton, Maryland
with interest at 1% over the prime rate. The remaining principal balance under
this mortgage amounted to approximately $330,000 and $360,000 at September 30,
1995 and December 31, 1994, respectively. Commencing November 30, 1993 the
bank has the right to demand repayment on the outstanding balance of the
borrowings under these mortgages which have accordingly been classified as
current liabilities. At December 31, 1994, the Company was in violation of
certain covenants under these loans. On March 31, 1995, the lender waived
these defaults as of December 31, 1994 and waived compliance with these
covenants through December 31, 1995.
The Company has various capital lease obligations on equipment. There were new
capital lease obligations of approximately $204,000 during the third quarter of
1995 and approximately $36,000 during the first nine months of the preceding
year. Such obligations represent a noncash financing activity which is a
supplemental disclosure as required by Statement on Financial Accounting
Standards No. 95, Statement of Cash Flows.
The carrying amounts of the Company's borrowings under its debt agreements
approximate their fair value.
Interest payments on debt amounted to approximately $60,000 and $184,000 for
the three months and nine months ended September 30, 1995 and $42,000 and
$124,000 for the same periods of the preceding year.
NOTE 5--INCOME TAXES
At December 31, 1994, the Company had net operating loss carryforwards of
approximately $6,000,000 that expire in years 2005 through 2008. Subsequent to
the completion of Techdyne, Inc.'s public offering on October 2, 1995,
Techdyne, Inc. will file separate U.S. and state income tax returns with the
income tax liabilities reflected on a separate return basis. Any remaining
Techdyne, Inc. net operating loss carryforwards as of that date will only be
available to offset future Techdyne taxable income.
A deferred tax liability of $714,000 at September 30, 1995 and December 31,
1994 resulted from income tax expense recorded on a gain recognized for
financial reporting purposes, but not for income tax purposes resulting in a
difference between book and tax basis of the Company's investment in Techdyne.
This temporary difference would reverse upon the occurrence of certain events
relating to the divestiture of Techdyne. Management of the Company currently
has no plans to effect a transaction that will result in such a divestiture.
Consequently, the Company has not recognized any benefit from its loss
carryforwards by offsetting them against this deferred tax liability. This
deferred tax liability has been classified as noncurrent along with the
remaining portion of noncurrent deferred tax liabilities resulting from
differences in book and tax depreciation of Techdyne (Scotland). A current
deferred tax liability of $306,000 has been recorded
<PAGE> 15
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- CONTINUED
NOTE 5--INCOME TAXES -- CONTINUED
for the unrealized gain on marketable securities. See Note 3 to "Notes to
Consolidated Condensed Financial Statements".
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Other deferred tax
liabilities, which total approximately $1,300,000, result from temporary
differences including tax over book depreciation and the unrealized gain on
marketable securities and are more than offset by deferred tax assets.
Deferred tax assets of approximately $2,300,000 result primarily from the net
operating loss carryforwards noted above which result in related deferred tax
assets of approximately $2,000,000 and from temporary differences in book and
tax bases of receivables and inventory which result in related deferred tax
assets of approximately $300,000. Deferred tax assets have not been reflected
in the financial statements as a result of their being offset by a valuation
allowance of approximately $2,100,000.
The Company had a domestic income tax expense of approximately $36,000 and
$177,000 for the three months and nine months ended September 30, 1995 and
$3,000 and $10,000 for the same periods of the preceding year, which includes
the tax benefit of net operating loss carryforwards of approximately
$90,000 and $260,000 for the three months and nine months ended September 30,
1995, and $43,000 and $30,000 for the three months and nine months ended
September 30, 1994. Techdyne (Scotland) had income tax expense of $137,000 and
$371,000 for the three months and nine months ended September 30, 1995 and
$87,000 and $204,000 for the same periods of the preceding year.
Income tax payments were approximately $294,000 and $337,000 for the three
months and nine months ended September 30, 1995 and $24,000 and $34,000 for the
same periods of the preceding year.
NOTE 6--STOCK OPTIONS
In September 1994, the Company granted options to purchase 400,000 shares of
common stock exercisable at $1.25 per share through September 30, 1997. The
options vest on the basis of 25% of the aggregate as of the end of each quarter
beginning with the quarter ended December 31, 1994.
In September 1994, options to purchase 480,000 shares of common stock at $.69
per share were exercised. The Company received cash payment of the par value
and the balance in three year promissory notes, presented in the Stockholders'
Equity section of the balance sheet, with interest at 5.36%. The notes are
secured by the 480,000 shares purchased, held in escrow by the Company, with
voting rights held by the shareholders until default, if any, under the notes.
The Company has 1,000,000 shares of common stock reserved for future issuance
pursuant to its 1989 Stock Option Plan. On April 18, 1995, the Company granted
non-qualified stock options for 808,000 shares of its common stock as a service
award to officers, directors, consultants and certain employees of
<PAGE> 16
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- CONTINUED
NOTE 6--STOCK OPTIONS -- CONTINUED
the Company and certain of its subsidiaries under its 1989 Stock Option Plan.
The options are exercisable at $3.00 per share for 10 years and are exercisable
50% on or after the first anniversary date of grant and in full on or after the
second anniversary date of grant.
In May 1994, Techdyne adopted a stock option plan for non-qualified options to
be exercisable for a period of five years at $1.00 per share vesting over a
two-year period. Pursuant to this plan, in May 1994, Techdyne granted 227,500
options to purchase shares of Techdyne's common stock to certain of its
officers, directors, employees and consultants. On February 27, 1995 Techdyne
granted non-qualified stock options, not part of the 1994 Plan, to directors of
Techdyne for 142,500 shares exercisable at $1.75 per share for five years.
These options may be exercised for cash or subject to Techdyne Board approval,
in part by cash (minimum par value for the shares purchased) and the balance by
a three-year recourse promissory note. Such notes would be secured by the
shares purchased (to be held in escrow with no transfer rights pending full
payment) with interest based on the coupon rate yield of a 52-week U.S.
Treasury Bill immediately preceding the execution and issuance of the
promissory note, with voting rights for the underlying shares remaining with
the shareholder until a default, if any, on the note. In April 1995, Techdyne
granted a non-qualified stock option, not part of the 1994 Plan, to its general
counsel at the same price and terms as the directors' options. The board of
directors of the Company determined that the fair value of the Company's common
stock was not in excess of the exercise price on the date of grant for the
stock options granted and, therefore, no amounts have been charged to
operations in connection with any grants of options.
NOTE 7--COMMON STOCK
In January 1994, the Company granted 410,000 shares of common stock, as
compensation, service and incentive awards, to officers, directors and key
employees of the Company and certain subsidiaries. The shares vested 1/12th
every month. In conjunction with the vesting provision, $38,000 and
$115,000 was charged to operations during the three months and nine months
ended September 30, 1994.
NOTE 8--SUBSIDIARY STOCK OFFERING
Techdyne, Inc. filed a registration statement on Form SB-2 with the Securities
and Exchange Commission on July 26, 1995 for an offering of 1,000,000 shares of
its common stock and 1,000,000 common stock purchase warrants. Techdyne, Inc.
intends to use the net proceeds from the offering to repay a portion of its
intercompany indebtedness to Medicore, establish new facilities, expand existing
products, upgrade plant and equipment, hire additional direct sales personnel
and for working capital. Upon completion of the offering which closed on
October 2, 1995 the Company which previously owned 83.1% of Techdyne, Inc. owns
62.5% of Techdyne, Inc. and has conversion rights to approximately 1,580,000
shares of Techdyne, Inc. after consideration of a $1,500,000 repayment of
intercompany indebtedness by Techdyne, Inc. after completion of its public
offering.
Techdyne, Inc. realized approximately $3,300,000 from the offering of which the
Company's portion amounts to approximately $2,000,000 for which the
<PAGE> 17
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- CONTINUED
NOTE 8--SUBSIDIARY STOCK OFFERING -- CONTINUED
Company will recognize a gain in the fourth quarter of 1995 of approximately
$1,200,000 which is net of applicable income taxes.
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
Techdyne, Inc. was plaintiff in litigation against its former President and
director alleging breach of his employment contract and fiduciary
responsibilities to the Company. This litigation was settled in November, 1995
pursuant to which settlement Techdyne, Inc. is to receive $160,000. A third
party complaint against Techdyne, Inc. in this matter was dismissed during 1995
without prejudice to renew.
Pursuant to completion of its recent offering, Techdyne, Inc. has entered into
a consulting agreement with the Underwriter for a term of 18 months at $3,000
per month fully paid on October 2, 1995 upon completion of the underwriting to
provide financial consulting services pertaining to Techdyne, Inc.'s business.
NOTE 10 -- SUBSEQUENT EVENTS
In early October 1995, a hurricane devastated certain areas of the Florida
Panhandle where the Company has a kidney dialysis center. Damage to the
permanent facility which the company leases forced the Company to relocate its
center to a temporary facility for a period estimated at three months during
which the structure in which the permanent facility is located will be
repaired. The Company estimates that it will incur a loss of approximately
$60,000 including damaged supplies and equipment, relocation and cleanup costs
and lost profits incurred as a result of being shutdown for almost two weeks
while relocating to the temporary facility. Also, the Company anticipates a
loss of several patients on a permanent basis as a result of the shutdown.
The Company has formed a new 80% owned subsidiary, All American Medical &
Surgical Supply Corp., which will provide durable medical equipment and
supplies to the home healthcare market. The new company entered into five year
employment agreements with two individuals to manage and develop its operation.
<PAGE> 18
Item 2. Management's Discussion And Analysis Of Financial
Condition And Results Of Operations
LIQUIDITY AND CAPITAL RESOURCES
Working capital totalled approximately $4,387,000 at September 30,
1995, a decrease of approximately $484,000 during the first nine months of
1995. The decrease in working capital included the net decrease of $545,000
resulting from the valuation of marketable securities and related deferred
taxes as required by Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", the
inclusion in current debt of the remaining balance of $601,000 of Techdyne,
Inc.'s term loan as a result of its June 1, 1996 maturity, and the
reclassification to current assets of the remaining recorded amount of $152,000
for the note receivable from Viragen, Inc. which has an August 1,1996 maturity.
Included in the changes in components of working capital was a
decrease in cash and cash equivalents of $78,000 which included net cash
provided by operating activities of $1,176,000, net cash used in investing
activities of $922,000 (including $879,000 from additions to property and
equipment, of which approximately $500,000 relates to two new dialysis centers
in Pennsylvania) and net cash used in financing activities of $334,000,
primarily from payments on long-term debt. The significant increases in
accounts receivable, inventories, other current assets, accounts payable and
accrued expenses are the result of net income of $1,319,000 for the nine months
ended September 30, 1995 and the 55% increase in sales levels compared to the
same period of the preceding year.
The increase in inventories, in addition to increases resulting from
higher sales revenues, included an increase in levels maintained by Techdyne
(Scotland) of approximately $400,000 related to the requirements of a system
implemented by its major customer, Compaq Computer Corp. ("Compaq"), which
requires Techdyne (Scotland) to have on hand inventories of finished goods to
meet on demand requirements of Compaq. Compaq has agreed to assume the
responsibility for the cost of any excess inventory not used under the system.
The Company is a guarantor under Techdyne, Inc.'s bank loan
agreement. This loan is secured by Techdyne, Inc.'s receivables, inventory and
fixed assets, and the bank has mortgages on various real properties owned by
the Company. The Company subordinated to the bank $1,500,000 of advances made
to Techdyne, Inc. and agreed to subordinate lease payments from Techdyne, Inc.
in the event of default. The remaining principal balance under this note
amounted to $601,000 and $807,000 at September 30, 1995 and December 31, 1994,
respectively. Since this loan matures June 1, 1996, the unpaid principal
balance has been reflected as a current liability. Techdyne, Inc. is in the
process of replacing this loan with a larger credit facility to secure
additional working capital. See Note 4 to "Notes to Consolidated Condensed
Financial Statements".
Techdyne, Inc. has outstanding borrowings of $145,000 from a local
bank with interest payable monthly and the notes maturing April 1997. See Note
4 to "Notes to Consolidated Condensed Financial Statements".
<PAGE> 19
Techdyne (Scotland) has a line of credit with a Scottish bank, with a
U.S. dollar equivalency of approximately $632,000 at September 30, 1995 which
is secured by the assets of Techdyne (Scotland) and guaranteed by Techdyne,
Inc. This line of credit operates as an overdraft facility. No amounts were
outstanding under this line of credit as of September 30, 1995. See Note 4 to
"Notes to Consolidated Condensed Financial Statements".
Techdyne, Inc. filed a registration statement with the Securities and
Exchange Commission on July 26, 1995, offering 1,000,000 shares of common stock
at $4.00 per share and 1,000,000 warrants at $.15 per warrant convertible at
$5.00 per share with the common stock offering, price having been negotiated
with the underwriter based upon certain factors including the market price of
the common stock immediately preceding the effective date of such registration
statement. As a result of the offering the Company's ownership in Techdyne,
Inc., decreased from 83.1% to 62.5%. Techdyne realized net proceeds of
approximately $3,300,000 which it intends to utilize to repay $1,500,000 of
intercompany indebtedness to Medicore, establish new facilities, expand
existing products, upgrade plant and equipment, hire additional direct sales
personnel and for working capital. See Note 8 to "Notes to Consolidated
Condensed Financial Statements".
During 1988, the Company, through DCA, its dialysis subsidiary,
obtained mortgages totalling $1,080,000 on two buildings which housed, until
the dialysis centers were sold in October 1989, two of its dialysis facilities
located in Maryland and Pennsylvania. The mortgages had a combined remaining
balance of $594,000 and $648,000 at September 30, 1995 and December 31, 1994,
respectively. The bank has liens on the real and personal property of the
Company's dialysis subsidiary, including a lien on all rents due and security
deposits from the rental of these properties. The loans contain a provision
allowing the bank mandatory repayment upon 90 days written notice after five
years. The five year period has elapsed; accordingly, while no notice has been
given, the unpaid principal is carried as a current liability. The unaffiliated
Maryland dialysis center continues to lease space from the Company in the
building; however, the Pennsylvania center recently relocated. The Company has
constructed at that property its own new dialysis center which commenced
treatments in June 1995. See Note 4 to "Notes to Consolidated Condensed
Financial Statements".
The Company owns approximately 971,000 shares of Viragen at September
30, 1995 for which the remaining carrying value was previously written-off.
The Company sold approximately 375,000 shares of Viragen stock during 1994,
realizing a gain and cash proceeds of $524,000 with approximately $131,000 of
the gain recorded on the third quarter of 1994. The Company has sold 153,000
shares during the first nine months of 1995 recognizing a gain of approximately
$166,000 and intends to sell additional shares as needed as source of working
capital. See Note 4 to "Notes to Consolidated Condensed Financial Statements".
Since the Company established Viragen in 1980, it had advanced
substantial sums to that former subsidiary. In August 1993, the Company and
Viragen executed a modified mortgage and promissory note, with interest at
prime plus 1%, effective as of June 1, 1993 in the amount of $429,400, which is
being amortized over a 20 year term in equal monthly installments with a
balloon payment of all remaining unpaid principal and interest due August 1,
1996. The remaining net balance of $152,000, which is net of an allowance for
<PAGE> 20
amounts previously written off, is reflected as a current asset at September
30, 1995. Interest is at prime plus 1%. See Note 3 to "Notes to Consolidated
Condensed Financial Statements".
In April 1993, the Company purchased a vacant lot across from
Techdyne, Inc.'s facility in Hialeah, Florida for possible future expansion.
In connection with this purchase, the Company obtained a $130,000 mortgage.
The principal balance outstanding under this mortgage amounted to $99,000 and
$108,000 at September 30, 1995 and December 31, 1994, respectively. See Note 4
to "Notes to Consolidated Condensed Financial Statements".
In July 1994, the Company obtained a replacement mortgage of $230,000
to refinance the first and second mortgages on a building it leases to
Techdyne, Inc. The principal balance under this mortgage amounted to $216,000
and $226,000 at September 30, 1995 and December 31, 1994, respectively. See
Note 4 to "Notes to Consolidated Condensed Financial Statements".
In July 1994, Techdyne (Scotland) purchased the facility housing its
operations for approximately $730,000 obtaining a 15-year mortgage which had a
U.S. dollar equivalency of approximately $608,000 and $628,000 at September 30,
1995 and December 31, 1994, respectively. The first quarterly payment under
this mortgage was due in October 1994. See Note 4 to "Notes to Consolidated
Condensed Financial Statements".
Techdyne (Scotland) commenced an addition of approximately 3,400
square feet to its existing building in early October 1995 with an estimated
cost of approximately $150,000.
In August 1992, one of Techdyne, Inc.'s major customers Wang
Laboratories, Inc. ("Wang") filed for protection under Chapter 11 of the United
States Bankruptcy Act. Techdyne, Inc.'s unsecured claim was resolved in the
Wang reorganization. Pursuant to the first distribution under Wang's Chapter 11
proceedings, Techdyne, Inc. received 9,512 shares of Wang's reorganized common
stock a portion of which it sold in December 1993, with the remainder sold in
February 1994, with Techdyne, Inc., realizing proceeds from these sales
totalling approximately $166,000 in March 1994. In February 1995, Techdyne
received and sold an additional 2,808 shares of Wang's reorganized common stock
pursuant to a second distribution under the Chapter 11 proceedings, realizing
proceeds of approximately $35,000 which was the amount Techdyne had recorded as
being due. Wang continues to be a customer but subject to stricter credit
terms.
As a result of a hurricane in early October 1995 which devastated
certain areas of the Florida Panhandle where the Company has a dialysis
facility, the Company will incur certain losses estimated at $60,000 and will
have to temporarily relocate its facility for approximately three months. The
Company anticipates a loss of several patients on a permanent basis as a result
of the shutdown. See Note 10 to "Notes to Consolidated Condensed Financial
Statements".
The bulk of the Company's cash balances are carried in
interest-yielding vehicles at various rates and mature at different intervals
depending upon the anticipated cash requirements of the Company.
<PAGE> 21
The Company intends to utilize the $1,500,000 intercompany
indebtedness repayment by Techdyne in the expansion its dialysis operations and
pursue other business compatible with its present operations.
The Company has formed and is in the process of organizing a new 80%
owned subsidiary, all American Medical & Surgical Supply Corp. The new company
will provide durable medical equipment and supplies to the home health care
market.
Given the current level of profitable operations and working capital,
and improved efficiencies, particularly in the area of domestic production,
management believes current levels of working capital are adequate to
successfully meet liquidity demands for at least the next twelve months.
Techdyne, Inc. anticipates establishing additional satellite
facilities, two of which are under consideration for Boulder, Colorado and
Raleigh, North Carolina, which would require approximately $300,000 each for
leasehold improvements, equipment and furniture and fixtures. The recently
established Austin, Texas facility will require approximately $80,000 in
additional capital expenditures. Upgrading the Company's existing plant and
equipment is estimated to cost approximately $250,000 over the next year. Most
of these costs will be provided from the proceeds of Techdyne's public
offering.
RESULTS OF OPERATIONS
Consolidated revenues increased approximately $3,080,000 (50%) and
$9,336,000 (54%) during the three and nine months ended September 30, 1995
compared to the same periods of the preceding year.
Revenues of the Company's electronic and electro-mechanical
subsidiary, Techdyne, increased approximately $2,898,000 (56%) and $9,060,000
(63%) for the three and nine months ended September 30, 1995 compared to the
same periods of the preceding year. Domestic revenues increased $1,675,000
(54%) and $6,104,000 (68%) and European-based revenues increased $1,223,000
(59%) and $2,956,000 (53%) for the three and nine months ended September 30,
1995 compared to the same periods of the preceding year.
The increase in domestic revenues of Techdyne compared to the
preceding year, in addition to an overall net increase in sales to existing
customers, reflects new customer development efforts in general and additional
revenues resulting from an increased level of customer service made possible
through Techdyne's Houston, Texas manufacturing facility and recently
established Austin, Texas facility.
The revenues of Techdyne's Scottish-based subsidiary, Techdyne
(Scotland) continue to be highly dependent on sales to Compaq which accounted
for approximately 87% and 83% of the sales of Techdyne (Scotland) for the three
months and nine months ended September 30, 1995, and 80% and 79% for the same
periods of the preceding year. Sales by Techdyne (Scotland) to Compaq
increased $1,197,000 (73%) and $2,673,000 (61%) for the three and nine months
ended September 30, 1995 compared to the same periods of the preceding year.
Approximately 79% of Techdyne's consolidated sales and 71% of the
<PAGE> 22
Company's consolidated sales for the first nine months of 1995 were made to
five customers. Compaq Computer Corp. accounted for 31% and 28%, and Avid
Technology accounted for 22% and 20% of Techdyne's and the Company's
consolidated sales, respectively. The other three customers each accounted for
less than 10% of Techdyne's and the Company's sales. The loss of any of these
customers would have an adverse effect on the Company's operations.
Medical supply sales revenues increased by $48,000 (13%) and $143,000
(13%) for the three months and nine months ended September 30, 1995 compared to
the same periods of the preceding year. The increase in sales compared to the
preceding year resulted mainly from increased sales of the Medi-Lance(R), the
principal product of this division.
Medical services sales revenues, which represents revenues of the
Company's dialysis division, increased by $210,000 (45%) and $150,000 (11%) for
the three and nine months ended September 30, 1995 compared to the same periods
of the preceding year. The company commenced treatments at a newly
constructed Pennsylvania dialysis center in Lemoyne, Pennsylvania effective
June 1995 and at another dialysis center in Wellsboro, Pennsylvania in October
1995. The increase in sales revenues compared to the preceding year has
resulted primarily from the opening of the new Lemoyne, Pennsylvania facility.
The Company recognized gains of $97,000 and $166,000 on the sale of
Viragen stock during the three months and nine months ended September 30, 1995
compared to $131,000 for the three months and nine months ended September 30,
1994.
Cost of goods sold as a percentage of consolidated sales revenues
amounted to 82% for the three and nine months ended September 30, 1995 compared
to 79% for the same periods of the preceding year.
Cost of goods sold for the Company's electronic and electro-mechanical
subsidiary, Techdyne, as a percentage of sales increased to 85% and 84% for the
three months and nine months ended September 30, 1995 compared to 83% for the
same periods of the preceding year as a result of customer and product mix.
Increased sales revenues of this subsidiary together with overall cost
reduction and cost containment efforts resulted in an increase in operating
profits for this subsidiary of $198,000 and $998,000 for the three months and
nine months ended September 30, 1995 compared to the same periods of the
preceding year.
Cost of goods sold for the medical supplies operation as a percentage
of sales amounted to 60% and 58% for the three months and nine months ended
September 30, 1995 and for the same periods of the preceding year. The
increased sales revenues of the medical supplies operation was largely
responsible for an increase in operating profits of $21,000 and $60,000 for the
three months and nine months ended September 30, 1995 compared to the same
periods of the preceding year.
Cost of goods sold related to medical services sales increased to 67%
and 66% for the three and nine months ended September 30, 1995 compared to 57%
and 62% for the same periods of the preceding year. Although medical services
operating profits increased slightly by $11,000 during the nine months ended
September 30, 1995 compared to the same periods of the preceding year, the
increase included increases in interest income on intercompany debt of $14,000
and $67,000, respectively, without which operating profits would have
decreased approximately $6,000 and $56,000. The decrease in margins was largely
attributable to higher costs associated with the low volume of
<PAGE> 23
treatments at the Lemoyne, Pennsylvania dialysis center which commenced
operations in June 1995 and includes relatively high salary and beneift costs
for the new facility due to the competition for healthcare workers in the area.
Selling, general and administrative expenses increased by $44,000 (4%)
and $153,000 (5%) for the three and nine months ended September 30, 1995
compared to the same period of the preceding year as a result of increased
level of activity generated by the 55% increase in sales revenues. Selling,
general and administrative expenses as a percentage of sales decreased 6% for
the three months and nine months ended September 30, 1995 compared to the same
periods of the preceding year as a result of increased sales, cost containment
efforts and associated economies of scale.
Interest expense, while increasing only slightly for the three months
ended September 30, 1995 compared to the same period of the preceding year,
increased approximately $39,000 for the nine months ended September 30, 1995
compared to the same period of the preceding year as a result of increases in
interest rates and higher overall levels of debt outstanding, including the
Techdyne (Scotland) mortgage. The prime rate was 8.75% and 8.5% at September
30, 1995 and December 31, 1994, respectively.
INFLATION
Inflationary factors have not had a significant effect on the
Company's operations. The Company attempts to pass on increased costs and
expenses by increasing selling prices when and where possible and by developing
different and improved products for its customers that can be sold at targeted
profit margins. Revenue per dialysis treatment for the Company's hemodialysis
operations is set by regulation and cannot be voluntarily increased to keep
pace with increases in supply costs and increases in nursing and other patient
care costs.
<PAGE> 24
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The litigation involving the Company's 63% owned public subsidiary,
Techdyne, Inc., against Techdyne's former president and director for breach of
his employment agreement and duties owed to the subsidiary for allegations of
diversion of corporate opportunities has been settled on November 3, 1995 for
$160,000 payable to Techdyne. See Note 9 to "Notes to Consolidated Condensed
Financial Statements".
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS
On September 13, 1995 the Company held its annual shareholders meeting
at which the proposal for a classified board of directors was approved by a
vote of 2,979,872 for, 235,840 against and 42,731 abstentions. Pursuant to
such approval, the shareholders elected the four directors to serve for their
respective classified terms by the following votes:
<TABLE>
<CAPTION>
Name of Director Votes
- ---------------- -----
For Against Abstain No-Votes
--------- ------- ------- --------
<S> <C> <C> <C> <C>
Peter D. Fischbein(1) 4,940,027 22,852 110,715 7,845
Anthony C. D'Amore(2) 4,933,050 29,829 110,715 7,845
Thomas K. Langbein(3) 4,939,837 23,042 110,715 7,845
Seymour Friend(3) 4,930,779 32,100 110,715 7,845
</TABLE>
- ---------------
(1) To serve until the 1996 annual meeting of shareholders.
(2) To serve until the 1997 annual meeting of shareholders.
(3) To serve until the 1998 annual meeting of shareholders.
Two other proposals were not approved, since each required a favorable vote of
66 2/3% of the outstanding shares and there were approximately 1,790,000
no-votes. One proposal was to add a provision relating to the manner in which
shareholders take action without a meeting, which received 3,099,419 favorable
votes which represented 55% of the outstanding shares (and 241,167 negative
votes); and the other proposal was to add a provision to the Company's Articles
of Incorporation to increase the shareholder vote to amend the Articles of
Incorporation, which proposal received 3,019,785 favorable votes, also
representing approximately 55% of the outstanding shares, and 237,591 votes
against this proposal.
<PAGE> 25
ITEM 5. OTHER INFORMATION
A recently formed 80% owned subsidiary, All American Medical &
Surgical Supply Corp. ("All American Supply") is initiating its operations in
the marketing of home health care products and services. That subsidiary
recently entered into five year employment agreements with Anthony Tepedino,
President and director of the subsidiary, and Lou Ghelli, Vice President of All
American Supply. Mr. Tepedino's agreement provides that he must transfer his
Medicare and Medicaid licenses to All American Supply for the Company's
$100,000 capital contribution to that subsidiary to be made. Mr. Tepedino's
compensation is the greater of 8% of pre-tax profits of the new subsidiary, up
to a maximum of $200,000, or 10% commission of Mr. Tepedino's marketing of home
health care products and services. Mr. Tepedino is receiving $1,000 weekly
draws against commissions earned, with adjustments for minimum commission
requirements.
Mr. Ghelli's agreement provides him with compensation based upon 10%
of his marketing of that subsidiary's products and services and a 3% override
commission on the subsidiary's sales exclusive of his or Mr. Tepedino's sales.
Mr. Ghelli also receives a $1,000 weekly draw against a minimum commission
base, which if not met provides the subsidiary to adjust the next quarter's
weekly draw payments.
Each agreement provides for a one year non-compete provision and
confidentiality restrictions and a resale to the All American Supply for $1.00
consideration of either of Messrs. Tepedino's 15% interest or Mr. Ghelli's 3%
interest in that subsidiary if either voluntarily leaves or terminates his
relationship with All American Supply prior to the end of the five year term,
or prior thereto, either dies, becomes disabled to the extent that he cannot
perform under the agreement or otherwise is subject to bankruptcy or similar
proceeding. See Note 10 to "Notes to Consolidated Condensed Financial
Statements".
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Part I Exhibits
(11) Statements re: computation of per share
earnings.
(27) Financial Data Schedule (for SEC use only)
Part II Exhibits
(10) Material Contracts
(i) Lease Purchase agreement between the
Company and B. Braun Medical, Inc. dated August 24, 1995.
(ii) Employment Agreement between All
American Medical & Surgical Supply Corp.(1) and Anthony Tepedino dated October
26, 1995.
(iii) Employment Agreement between All
American Medical & Surgical Supply Corp.(1) and Lou Ghelli dated October 26,
1995
- ---------------
(1) An 80% owned subsidiary.
<PAGE> 26
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended
September 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MEDICORE, INC.
By: /s/ DENNIS W. HEALEY
------------------------------
DENNIS W. HEALEY, Senior Vice
President, Principal Financial
Officer and Treasurer
By: /s/ DANIEL R. OUZTS
------------------------------
DANIEL R. OUZTS, Vice
President/ Finance,
Controller and Principal
Accounting Officer
Dated: November 10, 1995
<PAGE> 27
EXHIBIT INDEX
EXHIBIT NO.
Part I Exhibits
(11) Statement re: computation of per share earnings.
(27) Financial Data Schedule (for SEC use only).
Part II Exhibits
(10) Material Contracts
(i) Lease Purchase Agreement between the Company
and B. Braun Medical, Inc. dated August 24,
1995.
(ii) Employment Agreement between All American
Medical and Surgical Supply Corp. and Anthony
Tepedino dated October 26, 1995.
(iii) Employment Agreement between All American
Medical & Surgical Supply Corp. and Lou
Ghelli dated October 26,1995.
<PAGE> 1
(10) (i) Lease Purchase Agreement between the Company and B. Braun
Medical, Inc. dated August 24, 1995.
<PAGE> 2
LEASE AGREEMENT
1290895
Date: August 24, 1994
BETWEEN:
("LESSOR") and ("LESSEE")
B. BRAUN MEDICAL INC. Medicore Inc.
BLOOD TREATMENTS DIVISION 2337 W. 76th Street
824 TWELFTH AVENUE Hialeah, Florida 33016
BETHLEHEM, PA 18018
EQUIPMENT
QUANTITY DESCRIPTION ("COLLATERAL") S E R I A L
NUMBERS
10 New HD-SECURA DIALYSIS UNITS 288,289,290,618,619
600 BFR - HeB version with BP cuff 620,621,622,623,624
SINGLE BLOOD PUMP - 10/20 amplifiers
STANDARD ACCESSORIES PACKAGE
7 New HD-SECURA DIALYSIS UNITS 304,305,306,307,404,
600 BFR - HeB version with BP cuff 412,405
SINGLE BLOOD PUMP - 10/20 amplifiers
STANDARD ACCESSORIES PACKAGE
"EQUIPMENT LOCATION"
10 HD-securas Dialysis Services of PA (Lemoyne)
27 Miller Street
Lemoyne, PA 17043
7 HD-securas Dialysis Services of PA (Wellsboro)
14 Tioga Street
Wellsboro, PA 16901
HD-secura purchase price with BP cuff is $12,000 each. Total Lease amount is
$204,000.
TERM PAYMENT/MONTH TOTAL PAYMENTS
- ---- ------------- --------------
$1 Buy-out Option
60 months $4,435/month $266,100
ADVANCE PAYMENT
Last two monthly payments are due with and upon Execution and Return of Lease
Agreement.
<PAGE> 3
TERMS AND CONDITIONS
1.0-THE LEASE. Lessor leases to Lessee and the Lessee rents from Lessor the
equipment listed above or, if separately scheduled, in the schedule hereto
annexed, marked Schedule "All and made a part hereof,for the lease term
specified above and on the terms and conditions stated in this agreement. Said
equipment will be located at the above equipment location address and will not
be moved to a new location without written permission first given by Lessor.
1.1-If the Lessee is desirous of canceling this lease prior to the rental
period commencement date and the Lessor accepts said cancellation, the Lessor
can retain the Advance Payment to offset the expense incurred.
1.2-Lessee hereby acknowledges that he has received a copy of this lease.
1.3-Lessee hereby authorizes Lessor to insert in this lease the serial numbers,
and other identification data, of the equipment when determined by Lessor.
2.0-LEASE PAYMENTS. The obligation to make Lease Payments begins upon delivery
and acceptance. Lessee shall make Lease Payments, in advance, on the date or
dates specified by Lessor in a notice to Lessee. Lease Payments shall be paid
at the office of Lessor or at any other place specified by Lessor. Advance
Payment is due on signing of the lease specifying such amount. If any part of
a payment is more than ten days late, Lessee shall pay a late charge of 10% of
the payment, all or a portion of which is late(or such lesser rate as is the
maximun rate allowable under applicable law).
3.0-DELIVERY AND ACCEPTANCE. Lessor will ship the Equipment directly to
Lessee. Lessee shall take delivery and upon installation and acceptance of the
Equipment will sign and deliver to Lessor the Certificate of Delivery and
Acceptance submitted by Lessor. If Lessee has not, within 10 days after
delivery of the Equipment, delivered to Lessor written notice of any
non-acceptance of the Equipment, specifying the reasons therefore and fully
referencing the lease. Lessee shall be deemed to have irrevocably accepted the
Equipment under the lease. If Lessee properly rejects the Equipment in
accordance with the foregoing including reasonable time and efforts to cure
said defects(s), then Lessor and Lessee shall be relieved of all obligations or
liabilities under the lease. Lessor shall retain any Advance Lease Payment as
liquidated damages for loss of a bargain and not as a penalty, and Lessee shall
be responsible for paying for the safe return of the equipment and related
reasonable costs of freight, repair necessitated by Lessee negligence, and
standard restocking charges. The validity of the lease will not be affected by
any delay in Lessee's receipt of the Equipment.
4.0.-RIGHT OF INSPECTION: CONDITION. Lessor may inspect the equipment at any
time: and Lessee agrees to keep it in first class condition and repair at
Lessee's expense and house the same in suitable shelter, and not to sell or
otherwise dispose of this interest therein or any equipment or accessories
attached thereto. Lessee agrees to furnish Lessor upon request current
financial statements reflecting the Lessee's financial status during the term
of the contract.
5.0. TITLE to EQUIPMENT. No title or right in said equipment shall pass to
Lessee except the rights herein expressly granted under Rider I. - The Purchase
Option. Plates or other marking have
<PAGE> 4
been affixed to or placed on said equipment by Lessor. Lessee will not remove
the same. Upon the termination of the initial lease period, unless Purchase
Option is exercised, Lessee will immediately crate, insure and ship the
equipment and operating manuals to whatever destination Lessor shall direct,
all at Lessee's expense, in as good condition as received, less normal wear and
tear, said destination to be confirmed by Lessee prior to shipment. Lessee
agrees to pay Lessor monthly rent at the rate specified for the initial term
for any month or part thereof from the end of the initial term until the
equipment is received by Lessor. Said equipment shall always remain and be
deemed personal property even though attached to realty. All replacements,
accessories, or capital improvements made to or placed in or upon said
equipment shall become component parts thereof and title thereto shall be
immediately vested in Lessor and shall be included under the terms hereof. The
Lessee agrees that the Lessor is authorized, at its option, to file financing
statements or amendments thereto without the signature of the Lessee with
respect to any or all of the lease property and, if a signature is required by
law, then the Lessee appoints Lessor as Lessee's attorney-in-fact to execute
any such financing statements and further agrees to pay the Lessor a fee of
twenty-four dollars and fifty cents($24.50) to cover the expense of making such
filing(s).
6.0. RIGHT OF ASSIGNMENT. Lessor may assign the lease and its assignee may
assign the same. All rights of Lessor hereunder shall be succeeded by any
assignee hereof and said assignee's title to this lease to the rental herein
provided for to be paid, and in and to said equipment shall be free from all
defense, setoffs or counterclaims of any kind which Lessee may be entitled to
assert against Lessor, Lessee hereby waiving the same as against such assignee
it being understood and agreed that any assignee of Lessor does not assume
obligations of the Lessor herein named. It is further understood and agreed,
however, that Lessee may separately claim against Lessor as to any matters
which Lessee may be entitled to assert against Lessor. Lessee shall not assign
mortgage or hypothecate this lease or any interest herein or sublet said
equipment without the prior written consent of the Lessor. Any assignments,
mortgage, hypothecation or sublease by Lessee without such consent shall be
void.
7.0 RISK OF LOSS: INSURANCE COVERAGE. Lessee assumes the entire risk of
loss or damages to the equipment, whether or not covered insurance, and no such
loss shall relieve Lessee of its obligation hereunder. Lessee agrees to keep
the equipment insured and provide proof of insurance to Lessor, to protect all
interests of Lessor, at Lessee's expense, against all risks of loss or damage
from any cause whatsoever for not less than the unpaid balance of the lease
rentals due hereunder or eighty(80%)per cent of the then current value of said
equipment, whichever is higher; and to purchase insurance in an amount
reasonable under the circumstances to cover the liability of Lessor for public
liability and property damage. The proceeds from said insurance policy as they
relate to subject equipment and any unpaid lease payments related thereto shall
be the sole property of Lessor and Lessor shall be named as an insured in all
said policies and as sole loss payee in the policies insuring the equipment.
Each policy shall expressly provide that said insurance as to Lessor and its
assigns shall not be invalidated by any act, omission or neglect of Lessee and
cannot be canceled without ten(10)days prior written notice to Lessor. As to
each policy, Lessee shall furnish Lessor a Certificate of Insurance and copy of
policy from the insurer reflecting the coverage required by this paragraph on
or before Commencement date of Lease. The proceeds by such insurance whether
resulting from loss or damage or return of premium or otherwise, shall be
applied toward the replacement or repair of the said equipment or the payment
of obligations of Lessee hereunder at the option of Lessor. Lessee hereby
appoints Lessor as Lessee's attorney-in-fact to make claim for, receive payment
of and execute or endorse all documents, checks or drafts for loss or damage or
return premium under any insurance policy issued on said equipment. Lessee
agrees to pay Lessor
<PAGE> 5
an insurance fee monthly with the rental payment equal to one quarter of one
(.25%)per cent of equipment cost in lieu of, or until the provisions of this
paragraph are met.
8.0 INDEMNIFICATION. Lessee does hereby agree to indemnify and hold
Lessor free and harmless against all claims, loss, liability and expense
(including attorneys' fees)resulting from any loss or damage to the equipment
and for injuries to, or deaths of persons, and damage to property, howsoever
arising, directly or indirectly from or incident to the use, operation or
storage of the equipment and whether such injury or death to persons be to
agents or employees of the Lessee or to third parties; it being specifically
agreed to and acknowledged by the Lessee that the foregoing provision includes
but is not limited to all claim, loss, liability and expense(including
attorneys' fees)occurring by reason of any negligence(active or
passive),omission or other act or conduct of the Lessor or any third party
acting for or on behalf of the Lessor.
9.0 USE: TAXES AND FEES. Lessee agrees to use, operate and maintain said
equipment in accordance with all laws; to pay all licensing and registration
fees for said equipment; to keep the same free from levies,liens and
encumbrances; to pay all taxes, assessments, fees and penalties which may be
levied or assessed on or in respect to said equipment or its use or any
interest therein, or rental payments thereon including but not limited to all
federal, state and local taxes, however designated, levied or assessed upon the
Lessee and Lessor or either of them or said equipment, or upon the sale,
ownership, use or operation thereof. If not paid directly by Lessee, then
Lessee agrees to pay Lessor thirty-five hundredths of one (.35%) per cent of
equipment costs per month to be escrowed and applied to personal property tax
cost. Lessor may pay such taxes and other amounts and may file such returns on
behalf of Lessee if Lessee fails to do so as provided herein. Lessee agrees to
reimburse Lessor for reasonable costs incurred in collecting any charges,
taxes, assessments or fees for which Lessee is liable hereunder.
10.0 REIMBURSEMENT. All advances made and costs incurred by lessor to preserve
said equipment or to discharge and pay any taxes, assessments, fees, penalties,
liens or encumbrances thereon shall be added to the unpaid balance of rentals
due hereunder and shall be repayable by Lessee to Lessor immediately together
with interest thereon at the rate of one and three quarters(1-3/4%)per cent per
month until paid.
11.0 EVENT OF DEFAULT. In the event Lessee shall default in the payment of any
rent, additional rent or any other sums due hereunder or in the event of any
default or breach of the terms and conditions of this lease, or any other
agreement between the parties hereto, or if any execution or other writ or
process shall be issued in any action or proceeding, against the Lessee,
whereby the said equipment may be taken or distrained, or if a proceeding in
bankruptcy, receivership or insolvency shall be instituted by or against the
Lessee or its property, or if the Lessee shall enter into any agreement or
composition with its creditors, breach any of the terms of any loan or credit
agreement, or default thereunder, or if the condition of the Lessee's affairs
shall so change as to, in the Lessor's opinion, impair the Lessor's security or
increase the credit risk involved, or the Lessee shall merge, consolidate or
transfer all or substantially all of its assets, then and in the event the
Lessor shall have the right to: (1) retake immediate possession of its
equipment without any Court Order or other process of law and for such purpose,
the Lessor may enter upon any premises where said equipment may be and may
remove the same therefrom with or without notice of its intention to do same,
without being liable to any suit or action or other proceedings by the Lessee.
Lessor may, at its option, sell the equipment at public or private sale for
cash or on credit and may become the purchaser at such sale. Lessee shall be
liable for arrears of rent, if any, the expense of retaking possession and the
removal of the equipment, court costs, in addition to the balance of the
rentals
<PAGE> 6
provided for herein, or in any renewal hereof and a reasonable attorney's fees
not to be less than an amount equal to twenty-five(25%)per cent of the balance
due at the time it is placed with an attorney; and/or (2)accelerate the
balance of rentals and other sums payable hereunder, thereby requiring
prepayment of this lease, with all such sums due and payable forthwith upon
such notice of acceleration and demand for payment. Should Lessee fail to make
such payment after this notice and demand, Lessor shall be entitled to
institute appropriate legal proceedings against Lessee with the Lessee being
responsible for said sums, court costs, and a reasonable attorney's fee. The
dual rights granted the Lessor herein, shall be cumulative, and action upon one
shall not be deemed to constitute an election or waiver of the other right of
action, or any other right to which Lessor may be entitled. All sums due under
the calculations above shall become immediately due and payable an are to be
construed as liquidated damage rather than a penalty provision. The Lessee
shall remain and be liable for the return of the equipment and any loss of,
destruction of, or injury to the equipment in the same manner as herein
provided. Lessee hereby waives trial by jury in any actin or proceeding
arising hereunder. Whenever any payment is not made when due hereunder,
interest shall accrue and be payable on the amount due at the rate of one and
three quarters(1-3/4%)per cent per month or any portion thereof until paid.
12.0 LATE CHARGES. In the event a rent payment of personal property tax
payment is not made when due hereunder the Lessee promises to pay(l)a late
charge to the Lessor or his assigns not later than one month thereafter, in an
amount calculated at the rate of ten cents per one($1.00)dollar of each such
delayed payment or fifteen($15)dollars, whichever is greater(2)interest to the
Lessor upon each delayed payment calculate at the rate of one and three
quarters(1-3/4%)per cent-per month, or any part thereof, cornmencing one month
after the due date of the first delayed payment. In the event charges other
than rent and/or personal property tax are not paid when due, Lessee promises
to pay interest at the rate of one and three quarters(1-3/4%)per cent per month
on any part thereof commencing on the due date. The late charge and/or the
interest payments set forth in this contract shall apply only when permitted by
law and, if not permitted by law, the late charges and/or interest payments
shall be calculated at the maximum rate permissible by law. Lessee shall
reimburse Lessor for time and expense incurred by Lessor in collecting any
amounts due and owing and not timely paid under this Lease, such reimbursement
to be at Lessor's standard rates for collection procedures which are hereby
agreed to be not less than fifteen dollars and fifty cents($15.50)for each
telephone inquiry and fifty($50.00)dollars for each personal contact made by
any employee or agent of Lessor.
13.0 GENERAL PROVISIONS. The omission by the Lessor at any time to enforce
any default or right reserved to it, or to require performance of any of the
terms, covenants or provisions hereof by the Lessee at any time designated,
shall not be a waiver of any such default or right to which the Lessor is
entitled, nor shall it in any way affect the right of the Lessor to enforce
such provisions thereafter. The Lessor may exercise all remedies
simultaneously, pursuant to the terms hereof, and any such action shall not
operate to release the Lessee until the full amount of the rentals due and to
become due and all other sums to be paid hereunder have been paid.
13.1. The provisions of this agreement apply to and bind the
heirs,executors, administrators, successors and assigns of the respective
parties hereto.
13.2. IT IS SPECIFICALLY UNDERSTOOD AND AGREED THAT ALL UNDERSTANDINGS AND
AGREEMENTS HERETOFORE AND BETWEEN THE PARTIES HERETO RELATIVE TO THIS LEASE ARE
MERGED IN THIS AGREEMENT, WHICH CONTAINS THE ENTIRE AGREEMENT AND UNDERSTANDING
OF THE PARTIES
<PAGE> 7
HERETO, AND NEITHER PARTY RELIES UPON ANY OTHER STATEMENT OR REPRESENTATION.
THIS AGREEMENT MAY NOT BE MODIFIED OR CANCELED EXCEPT BY AN INSTRUMENT IN
WRITING SIGNED BY THE LESSEE AND A CORPORATE OFFICER OF THE LESSOR.
13.3. The parties hereto agree that the equipment subject to this lease
shall remain as personal property and shall not, in any case, become part of
the real property on which it is placed. The Lessee shall maintain each unit
of equipment so that it may be removed from the building in which it is placed
without damage to such building, and shall obtain a landlord waiver with
respect to any such property located in building not owned by Lessee.
13.4. Anything herein contained to the contrary notwithstanding, the title
to the equipment subject to this Lease is retained by the Lessor and the Lessee
covenants that it will not pledge or encumber the equipment in any manner
whatsoever, nor permit any liens to attach thereto. The Lessee further agrees
that it (a)will not permit its right or interests hereunder to be subject to
any lien, charge or encumbrance, and(b)will keep each unit of equipment free
and clear of any and all liens, charges and encumbrances which may be levied
against or imposed on such unit of equipment as a result of the failure of the
Lessee for any reason to perform or observe any of the covenants and agreements
required to be performed or observed by the Lessee hereunder.
13.5. This Agreement shall be governed and interpreted in accordance with
the laws of the State of Pennsylvania and, for the purpose of resolving
any-issue pertaining to conflict of laws, this Agreement shall be deemed to be
fully and solely executed, performed and/or observed in the State of
Pennsylvania. The parties hereto expressly consent to personal jurisdiction of
the State of Pennsylvania any action or proceeding brought in any court
therein, state or federal, arising from or alleging facts arising from the
transactions contemplated herein.
13.6. You agree that service of process for any such action or process shall
be valid if mailed by certified mail, return receipt requested with delivery
directed to either you, your registered' agent, or any agent you appoint in
writing to accept such process.
BY EXECUTING BELOW THE PARTIES AGREE TO BE BOUND BY THE ABOVE TERMS
AND CONDITIONS. THE PERSONS EXECUTING REPRESENT THAT THEY HAVE AUTHORITY TO
BIND THEIR RESPECTIVE PARTIES TO THIS AGREEMENT.
By: /s/ Hugh Morrison
-----------------
HUGH MORRISON,
GENERAL COUNSEL
FOR B. BRAUN MEDICAL INC.
(LESSOR)
By: /s/ Dennis Healey
-----------------
DENNIS HEALEY
SENIOR VICE PRESIDENT,
FINANCE MEDICORE, INC.
(LESSEE)
<PAGE> 8
CORPORATE LEASING RESOLUTION
I, Daniel R. Ouzts, do hereby certify that I am duly elected and qualify Asst.
Secretary of Medicore Inc., a Corporation, organized, existing, and in good
standing under the laws of the state of Florida; that the following is a true
and correct copy of resolution duly adopted by the Board of Directors of said
corporation at a meeting of said Board of Directors on the 23rd day of August
1995, and that said resolutions are now in full force and effect:
"RESOLVED: That the
Authorized Representative- Sr. Vice President - Dennis W. Healey
of this corporation be and hereby is authorized and directed to negotiate,
execute, and deliver on behalf of this corporation a lease agreement and all
schedules and documents thereto, with B. Braun Medical Inc., Blood Treatments
Division, as (Lessor), whereby this corporation will lease various items of
property to be used in the operation in the business of the corporation on
terms and conditions which shall be determined by said officers to be advisable
and in the best interests of this corporation and the execution of such lease
agreements by said officers shall be conclusive of their approvals thereof.
BE IT FURTHER RESOLVED: That the Secretary be and hereby is authorized to
furnish to Lessor a certified copy of this resolution which shall remain in
full force and effect until and unless withdrawn by vote at a meeting of
Directors only as to leases hereafter made and only after notification to
Lessor.
In witness whereof, I have affixed my name as Asst. Secretary of said
corporation and have caused the corporate seal of said corporation to be
hereunto affixed this 23rd day of August, 1995
By: /s/ Daniel R. Ouzts
------------------------
Assistant Secretary
Daniel R. Ouzts
Affix Corporate Seal Here
(if Available)
<PAGE> 9
SCHEDULE TO UCC-1
August 1995
LEASE # 1290895
LOCATION:
10 HD-securas Dialysis Services of PA (Lemoyne)
27 Miller Street
Lemoyne, PA 17043
7 HD-securas Dialysis Services of PA (Wellsboro)
14 Tioga Street
Wellsboro, PA 16901
QUANTITY DESCRIPTION ("COLLATERAL") S E R I A L
NUMBERS
10 New HD-SECURA DIALYSIS UNITS 288,289,290,618,619
600 BFR - HeB version with BP cuff 620,621,622,623,624
SINGLE BLOOD PUMP - 10/20 amplifiers
STANDARD ACCESSORIES PACKAGE
7 New HD-SECURA DIALYSIS UNITS 304,305,306,307,404,
600 BFR - HeB version with BP cuff 412,405
SINGLE BLOOD PUMP - 10/20 amplifiers
STANDARD ACCESSORIES PACKAGE
Customer Certification
I hereby certify that, on behalf of Medicore, Inc the equipment described above
has been delivered and received in proper working condition and accepted by the
undersigned as satisfactory on this 24th of August 1995.
Date: August 24, 1995
--------------------
By: /s/ Dennis W. Healey
--------------------
Dennis W. Healey
Senior Vice President
<PAGE> 10
OPTION TO PURCHASE
RIDER I
B. BRAUN MEDICAL INC., The Lessor named in a certain Equipment Lease dated
July 26, 1995 number 1290895 does hereby grant to Medicore Inc. the Lessee
named in said Lease, the option to Purchase the equipment leased thereby, as a
whole and not in part, and on an as-is where-is basis, at the end of the
original or any renewal term of said Lease. This option shall expire and
become null and void if Lessee shall be in default for a period of thirty (30)
days or longer. This option may be exercised by Lessee only upon giving not
less than thirty (30) days nor more than sixty (60) days, prior written notice
to Lessor, and accompanied by the purchase option price of $ 1 plus applicable
tax.
LESSOR: LESSEE:
B. BRAUN MEDICAL INC Medicore Inc.
BLOOD TREATMENTS DIVISION
By: /s/ Hugh Morrison By: /s/ Dennis Healey
----------------- ------------------
Date: Date:
---------------- ------------------
<PAGE> 1
(10) (ii) Employment Agreement between All American Medical and Surgical
Supply Corp. and Anthony Tepedino dated October 26, 1995.
<PAGE> 2
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into this 26th day of October, 1995 by
and between ALL AMERICAN MEDICAL & SURGICAL SUPPLY CORP. a New York corporation
with its offices at 1242 79th Street, Brooklyn, New York (the "Employer") which
term includes any subsidiaries to be formed) and ANTHONY TEPEDINO, residing at
1242 79th Street, Staten Island, New York (the "Employee").
W I T N E S S E T H
WHEREAS, Employer was recently incorporated in New York by its parent,
Medicore, Inc. ("Medicore") to engage in the home health care business, and the
providing and marketing of home health care products and services (collectively
"Services"), initially but not limited to the sales and rental or durable
medical equipment and supplies, such as hospital beds, wheelchairs, walkers,
canes, electronic monitoring equipment, surgical supplies, ostomy and
incontinence products, and other miscellaneous products and services
(collectively "Durable Medical Equipment"); and
WHEREAS, Employee has the experience in purchasing and marketing the
Services and Durable Medical Equipment and has the licenses to operate a home
health care business which licenses are being transferred to the Employer, and
Employee has the administrative skills and expertise to operate such home
health care business; and
WHEREAS, the parties wish to enter into this Agreement whereby
Employer shall employ Employee as its President and Employee so desires to be
employed under the terms and conditions herein contained.
NOW, THEREFORE, for good and valuable consideration receipt of which
is hereby acknowledged and in consideration of the convenants and promises
contained herein, the parties, intending to be legally bound hereby, each
mutually agree as follows:
1. EMPLOYMENT. Employer, in consideration of the transfers of
the licenses as provided in Section 3 hereof, and based upon the
representations of Employee as per Section 2 hereof, hereby employs Employee as
its President, his duties to be such as are customarily performed by persons
employed in such capacity; provided, in particular, since Employer was recently
organized, Employee shall be specifically responsible for all sales and
marketing of Services, initially the Durable Medical Equipment ("Marketing"),
and Employee shall further be responsible for all administrative aspects of
Employer's operations relating to the Services, including, but not limited to
purchasing, leasing, operations, hiring, bookkeeping, internal controls,
accounting, and other related administrative responsibilities (collectively
"Administration"). Employee shall perform his duties under the direction of
the Chief Executive Officer of Employer and in conformity with the standards
and policies established by the Board of Directors of Employer; and Employee
shall not engage in any other business, directly or indirectly, whether
competitive or not with the Services of the Employer; and Employee agrees to
devote substantially his entire time, attention and efforts to the business of
Employer. Employee shall perform such services as may from time to time
reasonably be required of him and Employee shall accept such
<PAGE> 3
offices, positions, directorships and/or other responsibilities as Employer may
determine, without being entitled to receive additional remuneration, except as
otherwise provided herein.
2. REPRESENTATIONS OF EMPLOYEE. Employee hereby represents and
warrants that (i) he has five years experience and know-how in the home health
care business both in Marketing and Administration; (ii) he has the expertise
to establish and develop the operations and business of the Employer; (iii) he
is not a party to or the subject of any order or directive of any court or
governmental agency, nor subject to any agreement or other arrangement that
would restrict or limit him in any manner from acting and performing under the
terms of this Agreement; (iv) he has the authority, right and power to enter
into and perform under the terms of this Agreement; (v) he, and/or any of his
affiliates or associates, are the true and lawful owners and/or have full and
complete right, title and interest in and to any and all licenses, permits and
similar rights (collectively "Licenses") necessary to operate the home health
care business as intended to be operated by and within the Employer and to
collect reimbursement, fees and remuneration and other consideration for
Marketing such Services from private and governmental payors, including but not
limited to Medicare, Medicaid and private insurance and other payors without
any restrictions, prohibitions, contingencies, conditions or limitations of any
kind.
3. TRANSFER OF LICENSES. As consideration for Medicore
establishing Employer and funding Employer's operations, which funding is to be
$100,000, in which material and substantial part was based upon the
representations of Employee as per Section 2 of this Agreement, and a
substantial part for the transfer of the Licenses, Employee hereby agrees to
and shall use its best efforts to immediately transfer all the Licenses
necessary for Employer to operate and engage in the home health business and be
reimbursed by and from third-party payors, including but not limited to
Medicare, Medicaid and private insurance companies, all of which must be
transferred into the name of Employer not later than November 30, 1995; and
Employer will assist Employee and file all necessary papers and documents and
pay appropriate fees to accomplish the transfer of the Licenses to Employer
forthwith.
4. TERM. The term of employment under the provisions of this
Agreement shall be for a period of five (5) years and two (2) months effective
November 1, 1995 ("Commencement Date") and ending December 31, 2000 (the
"Term"), unless terminated sooner pursuant to the express provisions hereof;
provided, in the absence of Employer obtaining full, unencumbered title to the
Licenses in its name as per Section 3, then this Agreement will be immediately
terminated, and null and void, without any obligation of either party to the
other.
5. REMUNERATION.
(a) During the Term Employer will compensate Employee for his
services based upon the greater of (i) eight (8%) percent of the pre-tax
profits (as defined below) of the Employer for each calendar year ending
December 31, during which this Agreement is in effect, less any compensation
paid to Employee pursuant to subparagraph (ii) of this Section 5(a), up to a
maximum per year compensation of $200,000, or (ii) ten (10%) percent commission
of Employee's Marketing (which term excludes sales and Marketing of any other
person, whether an employee, agent, officer, director, independent contractor
of Employer or otherwise). "Pre-tax profits" as used herein shall mean the
pre-tax income of Employer prior to deduction for income tax provision as
determined by Employer's independent auditor. The pre-tax profit computation
shall be made in accordance with generally accepted accounting practices
applied on a consistent basis. The pre-tax
2
<PAGE> 4
profits as so determined by the accountants shall be conclusive upon Employer
and Employee. Employee shall have the right to examine the Employee's books,
records and tax returns.
During the Term Employer shall provide Employee with a payment of
$1,000 per week, ("Weekly Draw") against the commissions to be earned based
upon a minimum of Employee generated Marketing of $520,000 per annum (measured
on a calendar year basis) ("Minimum Term Commission"). Commissions due
Employee shall be paid quarterly within 45 days from the close of the
immediately preceding quarter for which commissions are due. Each quarter
shall be measured on a calendar quarter basis, provided the first Quarter of
1996 shall include November and December, 1995 (the "1995 Period"). Employer
has the right in its sole discretion to adjust any such Employee commissions
downward in direct proportion to such quarterly Marketing generated by Employee
as such relates to the Minimum Term Commissions which are $130,000 per
quarter(1). Such adjustment shall be effected on a quarterly basis for the
immediately succeeding quarter, and, if necessary, continued to any subsequent
quarter(s) thereafter; and such adjustments shall be on a dollar for dollar
basis based upon the difference between Minimum Term Commissions as represented
by the Weekly Draw which Employee has already received for that quarter and the
Employee generated Marketing for that quarter. All adjustments shall be
effected on a pro-rata basis in equal weekly amount reductions against the
Employee's future Weekly Draw. Upward adjustments based on Employee generated
Commissions in excess of the Minimum Term Commissions for a particular quarter
shall likewise be paid by Employer to Employee on a pro-rata basis over the
term of the next immediately succeeding quarter.
(b) It is understood however, that for a period during the Term,
which shall be the earlier of one year from January 1, 1996, or up to and upon
the hiring of an individual responsible for Administration ("Initiation
Period"), the minimum per annum commission will be based on $400,000(2) per
annum or thirteen (13%) percent during the Initiation Period ("Minimum
Initiation Commission"); provided, however, that once the Minimum Initiation
Commission has been earned by the Employee, to wit, the $52,000 in commissions
during the Initiation Period, then notwithstanding that it is still the
Initiation Period any and all commissions over and above the Minimum Initiation
Commission shall be at the rate of 10% as otherwise provided in subparagraph
(a) above. All adjustments and payments shall be as provided for in
subparagraph (a) of this Section 5.
- ---------------
(1) For the fisrt Quarter, 1996 the Minimum Term Commission shall be
$173,334 due to inclusion of the 1995 Period, which results in the
1996 per Annum minimum Employee generated Marketing requirement of
$563,334.
(2) For the first Quarter, 1996 the Minimum Initiation Commission shall be
$133,334 due to the inclusion of the 1995 Period, which results in the
1996 per Annum minimum Employee generated Marketing requirement of
$433,334.
3
<PAGE> 5
EXAMPLE OF COMPENSATION:
Assumes 13 weeks per quarter; and assumes that the Initiation Period
was 12 months (rather than having personnel hired during that period thereby
otherwise earlier terminating the Initiation Period). Employee will have
received from Employer at the end of each quarter $13,000 in Weekly Draw.
<TABLE>
<CAPTION>
Employee Generated Marketing Commission(3) Weekly Draw
<S> <C> <C> <C>
Quarter 1* $120,000 $15,600 $1,000
-
Quarter 2 75,000 9,750 1,200(4)
-
Quarter 3 100,000 13,000 750(5)
-
Quarter 4 150,000 14,900(6) 1,000
-------- ------- -
$445,000 $53,250
</TABLE>
______________
* First Quarter of 1996 includes the 1995 Period.
(3) 13% commission until Minimum Initiation Commission of $52,000 earned
- during Initiation Period and thereafter, whether during the Initiation
Period or thereafter during the Term, the commission will be 10% of
Marketing generated by Employee. See Note (1) above.
(4) Subject to Notes (1) and (2) above, during Quarter 1 Employee received
- $13,000 Weekly Draw; the Minimum Initiation Commission for the quarter
being $13,000 (based on Employee generated Marketing of $100,000 per
quarter during the Initiation Period). Therefore, the excess of
$2,600 is to be paid pro-rata during Quarter 2 with the Weekly Draw
for Quarter 2 of $1,200. If this was not the Initiation Period, then
the minimum Marketing generated per quarter would be $130,000 with a
Minimum Term Commission of $13,000 per quarter (subject to Note (1)
above) and, therefore, the Company would have had the right to adjust
the Weekly Draw for the next Quarter downward by an aggregate of
$1,000 (10% of $10,000 shortfall) or $76.92 per week, for a pro-rata
quarterly reduced Weekly Draw of $923.08.
(5) Quarter 2 Employee generated Marketing is $25,000 short of the minimum
- Marketing, Employee having already received $13,000 in Weekly Draw
against commission, plus pro-rata additional commission from Quarter
1, and thereby was paid in excess of the Minimum Initiation Commission
by $3,250, which amount to be adjusted for the next immediately
succeeding quarter (Quarter 3), as indicated in subparagraph (a) of
this Section 5, by a pro-rata reduction of such sum from the Weekly
Draw during Quarter 3 of $250 per week for a Weekly Draw of $750 for
Quarter 3.
4
<PAGE> 6
Quarter 3 reflects minimum Employee generated Marketing satisfied;
therefore the $13,000 commission earned had already been received by
Employee in Weekly Draw which can be reduced, as indicated in Quarter
2 computations, by Employer's adjustment reducing $3,250 of
commissions overpaid in Quarter 2.
(6) Quarter 4 reflects Employee generated Marketing of $150,000.
- Commission is based upon 13% of the balance of the Minimum Marketing
Sales for the Initiation Period which is $105,000 ($295,000 of the
$400,000 minimum Marketing already having been met) with the balance
of $45,000 of Employee generated Marketing to be paid at 10%
commission yielding a commission of $18,150 for Quarter 4. The excess
of $5,150 over the Weekly Draw to be paid pro-rata in next quarter's
Weekly Draw by an additional $396.15 per week or $1,396.15 for Quarter
5 Weekly Draw.
(c) Compensation to Employee shall be payable in bi-weekly
installments in accordance with the Employer's normal payroll practices
including all appropriate and normal deductions for social security and
withholding taxes.
6. EXPENSES AND PERQUISITES.
(a) Employee will be entitled to reimbursement, upon presentation of
vouchers and/or receipts, for reasonable business expenses incurred by Employee
with respect to the performance of his duties in furtherance of Employer's
business as otherwise provided in this Agreement.
(b) Employee is further entitled to receive on an equal and
comparable basis, all other perquisites currently provided or to be provided in
the future to Employer's executive officers. Such perquisites include
executive health and medical insurance plans.
7. VACATION. Employee shall be entitled each year to three (3)
weeks vacation which cannot be carried over to any other period nor shall
Employee be compensated for vacation not taken. Employee may take a vacation
at his discretion, provided such time is compatible with the vacation, meeting
and work schedules of employees of Employer relevant to the responsibilities
and duties of Employee. Employee will not take three (3) consecutive weeks of
vacation without the approval of the Board of Directors. Employee shall
arrange for the continued operation of the business of the Employer and the
performances of Employee's duties and responsibilities by a qualified
replacement, if necessary, acceptable to Employer, during such times as
Employee is absent.
8. TERMINATION. The Term shall terminate prior to December 31,
2000 upon the happening of any of the following events:
(a) Automatically and without notice from Employer upon the death of
Employee.
(b) Upon written notice from Employer to Employee in the event that
Employee becomes physically or mentally disabled, either totally or partially.
(c) Upon written notice by Employer on grounds of Employee conviction
of a crime, failure to carry out the policies of Employer, persistent
absenteeism, felonious act or other dishonest practice, non-performance of his
responsibilities and obligations to Employer, breach of the provisions of this
Agreement, gross misconduct or neglect, whether by commission or omission,
5
<PAGE> 7
conduct prejudicing or tending to bring himself or the Employer into contempt
or disrepute, or any similar cause.
Upon such termination of employment, Employer shall not be required to
pay Employee any severance pay, or any other sum except Employee compensation
earned, if any, in accordance with Section 5 of this Agreement, to the date of
such termination.
9. NON-COMPETITION.
(a) Employee shall not at any time within a period of one year from
the date of termination of his employment hereunder ("Non-Compete Period") if
such termination is (i) by expiration of time, (ii) voluntary, or (iii) for
cause, which term includes but is not limited to those occurrences as set forth
in Section 8 (c) hereof:
(i) directly or indirectly, whether as principal, servant,
employee, agent or consultant, canvass, solicit or entice or endeavor to entice
away from Employer any director, officer or employee of Employer, or
(ii) directly or indirectly, whether as principal, servant,
employee or agent or in any other capacity whatsoever carry on or be engaged or
interested in any business within the states of New York and New Jersey
carrying on or engaged in, directly or indirectly, the Services in competition
with Employer, competition to mean those Services then provided and marketed to
and with customers as that term is used and defined herein, or
(iii) directly or indirectly, whether as principal, servant,
employee or agent, solicit or seek to obtain for himself or for any person,
firm or corporation by whom he is employed or with whom he is associated, the
business of, or act as principal, servant, employee or agent for, or directly
or indirectly accept any benefit, whether in money or otherwise from any
business in connection with the trade or business conducted for any person,
firm or corporation, who either at the date of termination of his employment or
at any time during the 12 months immediately preceding such termination, is or
was a customer of Employer, provided that such restriction applies only with
respect to Services provided and marketed within such 12 month period by the
Employer for that customer; and provided further
(A) for the purpose of this clause the expression "customer"
shall be deemed to include a prospective customer whose business was
the subject of negotiation with Employer at any time within a period
of 12 months prior to the termination of Employee, and
(B) in the event Employee, directly or indirectly, receives any
benefit, whether in money or otherwise as aforesaid, at or in respect
of any time during said Non-Compete Period he shall, without prejudice
to any other rights or remedies available to Employer, be bound
forthwith to account for and make payment to Employer in respect of
such benefit.
(b) Each of the foregoing obligations shall be deemed to be separate
and severable obligations and each of said obligations shall be construed
accordingly.
(c) While the foregoing restrictions are considered by the parties to
be reasonable in all the circumstances, it is agreed that if any of such
restrictions shall be held to be void or ineffective for whatever reason but
would be held to be valid and effective if part of the wording thereof were
6
<PAGE> 8
deleted or the periods thereof reduced or the area thereof reduced in scope,
the said restrictions shall apply with such modifications as may be necessary
to make them valid and effective.
10. CONFIDENTIALITY.
(a) Employee shall not during the Term, except in the proper course
of his duties, and shall not at any time and in any circumstances for a period
of three years after the termination hereof, divulge to any person whomsoever
and shall use his best efforts to prevent the publication or disclosure of any
secrets, trade secretes, confidential knowledge or information or any
information concerning the business, finances or affairs of Employer or of any
of its customers or clients (including without prejudice to the foregoing
generality the names and locations of customers, names of persons to contact
within customer organizations, specifications of customer needs, specification
of Services meeting customer needs, cost and pricing policies, sources of
supply of Services and other proprietary information) or any of their dealings
or transactions which may have come or may come to his knowledge during or in
the course of his employment.
(b) Employee shall immediately upon termination of his employment for
whatever reason deliver up to Employer all price lists, list of customers,
correspondence and other documents, papers and property belonging to Employer
which may have been prepared by him or may have come into his possession in the
course of his employment and shall not retain any copies thereof.
11. REMEDIES. Employee acknowledges that the remedy at law for
any breach of any of the provisions of this Agreement, particularly but not
limited to Sections 9 and 10, shall be inadequate; that any such breach will
cause irreparable injury to the Employer and/or its shareholders; that the
Employer, in addition to any other rights and remedies existing at law or
equity, or by statute, or under the terms of this Agreement, shall be entitled
to an injunction or restraining order or other equitable relief without the
need of posting any bonds with the court where such equitable relief is sought,
restraining Employee from doing or continuing to do any such acts or any other
violations or threatened violations or omitting to do such acts as are
otherwise required in and under this Agreement, particularly but not limited to
Sections 9 and 10. Employer shall be entitled to reasonable attorney's fees
and other costs it may incur in connection with protecting its rights in the
event of a breach of this Agreement, particularly but not limited to Sections 9
and 10.
12. RESALE OF EMPLOYEE OWNERSHIP. If Employee voluntarily leaves
or terminates his relationship with Employer prior to the expiration of the
Term, for any reason whatsoever, or prior to the expiration of the Term
Employee dies or becomes disabled to the extent that he is unable to perform
under this Agreement, or Employee has any bankruptcy, receivership, assignment
for the benefit of creditors, or similar proceeding initiated against or
involving Employee, whether voluntarily or involuntarily, which proceeding is
not dismissed within thirty (30) days of its initiation (collectively for
purposes of this Section 12 "Termination"), then Employee's 15% ownership in
Employer ("Employee's Shares") which Employee has obtained upon establishment
of Employer and in consideration for this Employment Agreement, shall be sold
by Employee, or Employee's legal representative as the case may be, to Employer
and Employer shall purchase Employee's Shares for One ($1.00) Dollar.
Employee, and if Employee's executor or administrator or other legal
representative is involved such person, shall execute and deliver all necessary
documents Employer may require to establish its absolute title to the
Employee's Shares to be sold to Employer as provided herein.
7
<PAGE> 9
Employee agrees that he shall not transfer, gift, pledge, sell,
hypothecate, loan, grant any option upon or for said Employee's Shares, nor
shall such Employee's Shares be placed or held in any other name alone or
jointly with or without Employee, which Employee's Shares shall be held solely
in the name of Employee, which shall not pass by descent or distribution or
will, and which Employee's Shares will in no way or manner, directly or
indirectly, be disposed of or transferred (collectively "Transferred"). Any
such act or omission of or by Employee attempting or otherwise causing the
Employee's Shares to be so Transferred shall be deemed a breach of this
Agreement and a Termination of Employee providing for the immediate and
automatic sale of Employee's Shares to Employer.
Any sale of Employee's Shares shall be promptly accomplished after the
event giving rise to such sale, but in no event more than seven (7) days
therefrom.
Employee's Shares are not liquid and there is no open market for such
Employee's Shares, and for that reason, among others, Employer will be
irreparably damaged if this sale provision is not specifically enforced. Any
injunction to so enforce this provision shall, however, be cumulative and not
exclusive, and shall be in addition to any other remedy which Employer may
have.
The certificate or certificates representing the Employee's Shares
shall be endorsed with the following legend:
"This share certificate is held subject to the terms of an Employment
Agreement dated October 26, 1995 made between All American Medical &
Surgical Supply Corp. and Anthony Tepedino, a copy of which is on
file with the Secretary of the Company."
Employee, to induce Employer to enter into this Agreement, hereby
waives to the extent permitted by law, all rights that he may have by operation
of law or otherwise to Transfer the Employee's Shares.
13. BINDING ON SUCCESSORS. The rights and obligations of the
parties hereto shall inure to the benefit and shall be binding upon their
successors and assigns.
14. WAIVER OF BREACH. The waiver by Employer or Employee of a
breach by either party of any provision hereof shall not operate or be
construed to operate as a waiver by either party of any subsequent breach of
any other provision hereof.
15. SURVIVAL OF PROVISIONS. The provisions of Sections 2, 3, 9
and 10 shall survive termination of employment of this Agreement. If any
provision of this Agreement is declared invalid by any court of other competent
authority the remaining provisions of this Agreement shall not be affected
thereby.
16. ENTIRE AGREEMENT. This instrument contains the entire
agreement of the parties and may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
17. ASSIGNABILITY. This Agreement and its rights and obligations
may not be assigned by Employee. Employer may assign any of its rights and
obligations hereunder to a successor or surviving corporation resulting from a
merger, consolidation, sale of assets or stock, or other corporate
reorganization.
8
<PAGE> 10
18. NOTICES. Any notice permitted or required to be given by this
Agreement shall be effected, if in writing, and delivered personally or by
registered or certified mail, postage pre-paid, return receipt requested, or by
overnight mail, Federal Express or similar delivery to each of the parties at:
Employer: All American Medical & Surgical Supply Corp.
1242 79th Street
Brooklyn, New York 11228
Copy to: Lawrence E. Jaffe, Esq.
777 Terrace Avenue
Hasbrouck Heights, New Jersey 07604
Employee: Anthony Tepedino
1242 79th Street
Brooklyn, New York 11228
Copy to: Ralph P. Casella, Esq.
14 First Street
Staten Island, New York 10306
with such other addresses as any party may specify by written notice to the
other party similarly given.
19. DISPUTE. In the event of a dispute concerning either the
interpretation or the enforcement of any provision of this Agreement and such
dispute is resolved by a court having jurisdiction thereof, then in such event,
the prevailing party shall be entitled to receive reimbursement of reasonably
attorney's fees and court costs from the non- prevailing party.
IN WITNESS WHEREOF, Employer has caused this Agreement to be executed
in its corporate name by an appropriate officer and its corporate seal to be
hereto affixed, and Employee has affixed his signature, all on the date and
year first above written.
ATTEST: ALL AMERICAN MEDICAL & SURGICAL
SUPPLY CORP.
/s/ Lawrence E. Jaffe By: /s/ Thomas K. Langbein
- ---------------------------- -----------------------
Lawrence E. Jaffe, Secretary THOMAS K. LANGBEIN,
Chairman of the Board
WITNESS: EMPLOYEE
/s/ Anthony Tepedino
- ----------------------- --------------------
ANTHONY TEPEDINO
9
<PAGE> 1
(10) (iii) Employment Agreement between All American Medical
& Surgical Supply Corp. and Lou Ghelli dated
October 26,1995.
<PAGE> 2
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into this 26th day of October, 1995
by and between ALL AMERICAN MEDICAL & SURGICAL SUPPLY CORP. a New York
corporation with its offices at 1242 79th Street, Brooklyn, New York 11228 (the
"Employer") which term includes any subsidiaries to be formed) and LOU GHELLI,
residing at 29 Colonial Village Drive, Hillsdale, New Jersey, 07642 (the
"Employee").
W I T N E S S E T H
WHEREAS, Employer was recently incorporated in New York by its parent,
Medicore, Inc. ("Medicore") to engage in the home health care business, and the
providing and marketing of home health care products and services (collectively
"Services"), initially but not limited to the sales and rental or durable
medical equipment and supplies, such as hospital beds, wheelchairs, walkers,
canes, electronic monitoring equipment, surgical supplies, ostomy and
incontinence products, and other miscellaneous products and services
(collectively "Durable Medical Equipment"); and
WHEREAS, Employee has the experience in purchasing and marketing the
Services and Durable Medical Equipment; and
WHEREAS, the parties wish to enter into this Agreement whereby
Employer shall employ Employee as its Vice President of Marketing, and Employee
so desires to be employed under the terms and conditions herein contained.
NOW, THEREFORE, for good and valuable consideration receipt of which
is hereby acknowledged and in consideration of the convenants and promises
contained herein, the parties, intending to be legally bound hereby, each
mutually agree as follows:
1. EMPLOYMENT. Employer, in consideration of the representations
of Employee as per Section 2 hereof, hereby employs Employee as its Vice
President of Marketing, his duties to be such as are customarily performed by
persons employed in such capacity; provided, in particular, since Employer was
recently organized, Employee shall be specifically responsible for sales and
marketing of Services, initially the Durable Medical Equipment ("Marketing")
and developing the Marketing of Employer. Employee shall perform his duties
under the direction of the Chief Executive Officer and President of Employer
and in conformity with the standards and policies established by the Board of
Directors of Employer; and Employee shall not engage in any other business,
directly or indirectly, whether competitive or not with the Services of the
Employer; and Employee agrees to devote substantially his entire time,
attention and efforts to the business of Employer. Employee shall perform such
services as may from time to time reasonably be required of him and Employee
shall accept such offices, positions, directorships and/or other
responsibilities as Employer may determine, without being entitled to receive
additional remuneration, except as otherwise provided herein.
2. REPRESENTATIONS OF EMPLOYEE. Employee hereby represents and
warrants that (i) he has 35 years experience and know-how in the home health
care business, particularly in Marketing; (ii) he has the expertise to
establish and develop the Marketing operations of the Employer; (iii) he is not
a party to or the subject of any order or directive of any court or
<PAGE> 3
governmental agency, nor subject to any agreement or other arrangement that
would restrict or limit him in any manner from acting and performing under the
terms of this Agreement; and (iv) he has the authority, right and power to
enter into and perform under the terms of this Agreement.
3. TERM. The term of employment under the provisions of this
Agreement shall be for a period of five (5) years and two (2) months effective
November 1, 1995 ("Commencement Date") and ending December 31, 2000 (the
"Term"), unless terminated sooner pursuant to the express provisions hereof;
provided, in the absence of Employer obtaining full, unencumbered title to the
Licenses from Anthony Tepedino ("Tepedino") in its name as per the Employment
Agreement with Mr. Tepedino, then this Agreement will be immediately
terminated, and null and void, without any obligation of either party to the
other.
4. REMUNERATION.
(a) During the Term Employer will compensate Employee for his
services based upon ten (10%) percent commission of Employee's Marketing (which
term excludes sales and Marketing of any other person, whether an employee,
agent, officer, director, independent contractor of Employer or otherwise) plus
additional compensation of three (3%) percent commission of all other
Marketing, exclusive of Employee's and Tepedino's Marketing ("Other
Marketing"). Employee shall have the right to examine the Employee's books,
records and tax returns.
During the Term Employer shall provide Employee with a payment of
$1,000 per week, ("Weekly Draw") against the 10% commissions to be earned based
upon a minimum of Employee generated Marketing of $520,000 per annum exclusive
of Other Marketing (measured on a calendar year basis) ("Minimum Term
Commission"). Commissions due Employee shall be paid quarterly within 45 days
from the close of the immediately preceding quarter for which commissions are
due. Each quarter shall be measured on a calendar quarter basis, provided the
first Quarter of 1996 shall include November and December, 1995 (the "1995
Period"). Employer has the right in its sole discretion to adjust any Employee
Marketing commissions downward in direct proportion to such quarterly Marketing
generated by Employee as such relates to the Minimum Term Commissions which are
$130,000 per quarter(1). Such adjustment shall be effected on a quarterly
basis for the immediately succeeding quarter, and, if necessary, continued to
any subsequent quarter(s) thereafter; and such adjustments shall be on a dollar
for dollar basis based upon the difference between Minimum Term Commissions as
represented by the Weekly Draw which Employee has already received for that
quarter and the Employee generated Marketing for that quarter, exclusive of
Other Marketing. All adjustments shall be effected on a pro-rata basis in
equal weekly amount reductions against the Employee's future Weekly Draw.
Upward adjustments based on Employee generated Commissions in excess of the
Minimum Term Commissions for a particular quarter shall likewise be paid by
Employer to Employee on a pro-rata basis over the term of the next immediately
succeeding quarter.
- ---------------
(1) For the first Quarter, 1996 the Minimum Term Commission shall be
$173,334 due to inclusion of the 1995 Period, which results in the 1996 per
annum minimum Employee generated Marketing requirements of $563,334.
2
<PAGE> 4
EXAMPLE OF COMPENSATION:
Assumes 13 weeks per quarter.
<TABLE>
<CAPTION>
Employee Generated Marketing Commission Weekly Draw
<S> <C> <C> <C>
Quarter 1* $120,000 $12,000 $ 1,000(2)
Quarter 2 75,000 7,500 923.08(3)
Quarter 3 100,000 10,000 576.92(4)
Quarter 4 150,000 15,000(5) 769.23
-------- -------
$445,000 $44,500
</TABLE>
- --------------
* First Quarter of 1996 includes the 1995 Period.
(2) A Minimum Term Commission of $13,000 per quarter required, subject to
Note (1) above. The Company has the right to adjust the Weekly Draw
for the next Quarter downward by an aggregate of $1,000 (10% of
$10,000 shortfall) or $76.92 per week, for a pro-rata quarterly
reduced Weekly Draw of $923.08.
(3) Quarter 2 Employee generated Marketing is $55,000 short of the minimum
Marketing. Employee was paid in excess of the Minimum Term Commission
by $5,500, which amount to be adjusted for the next immediately
succeeding quarter (Quarter 3), as indicated in subparagraph (a) of
this Section 5, by a pro-rata reduction of such sum from the Weekly
Draw during Quarter 3 of $423.08 per week for a Weekly Draw of $576.92
for Quarter 3.
(4) Quarter 3 reflects Employee generated Marketing short by $30,000;
therefore the Weekly Draw received by Employee exceeded commissions
earned requiring a pro-rata adjustment reducing the Quarter 4 Weekly
Draw by $230.77 for Weekly Draw of $769.23.
(5) Quarter 4 reflects Employee generated Marketing of $150,000 yielding a
commission of $15,000 for Quarter 4. The excess of $2,000 over the
Weekly Draw to be paid pro-rata in next quarter's Weekly Draw by an
additional $153.85 per week or $1,153.85 for Quarter 5 Weekly Draw.
(b) Compensation to Employee shall be payable in bi-weekly
installments in accordance with the Employer's normal payroll practices
including all appropriate and normal deductions for social security and
withholding taxes.
3
<PAGE> 5
5. EXPENSES AND PERQUISITES.
(a) Employee will be entitled to reimbursement, upon presentation of
vouchers and/or receipts, for reasonable business expenses incurred by Employee
with respect to the performance of his duties in furtherance of Employer's
business as otherwise provided in this Agreement.
(b) Employee is further entitled to receive on an equal and
comparable basis, all other perquisites currently provided or to be provided in
the future to Employer's executive officers. Such perquisites include
executive health and medical insurance plans.
6. VACATION. Employee shall be entitled each year to three (3)
weeks vacation which cannot be carried over to any other period nor shall
Employee be compensated for vacation not taken. Employee may take a vacation
at his discretion, provided such time is compatible with the vacation, meeting
and work schedules of employees of Employer relevant to the responsibilities
and duties of Employee. Employee will not take three (3) consecutive weeks of
vacation without the approval of the Board of Directors. Employee shall
arrange for the continued operation of the business of the Employer and the
performances of Employee's duties and responsibilities by a qualified
replacement, if necessary, acceptable to Employer, during such times as
Employee is absent.
7. TERMINATION. The Term shall terminate prior to December 31,
2000 upon the happening of any of the following events:
(a) Automatically and without notice from Employer upon the death of
Employee.
(b) Upon written notice from Employer to Employee in the event that
Employee becomes physically or mentally disabled, either totally or partially.
(c) Upon written notice by Employer on grounds of Employee conviction
of a crime, failure to carry out the policies of Employer, persistent
absenteeism, felonious act or other dishonest practice, non-performance of his
responsibilities and obligations to Employer, breach of the provisions of this
Agreement, gross misconduct or neglect, whether by commission or omission,
conduct prejudicing or tending to bring himself or the Employer into contempt
or disrepute, or any similar cause.
Upon such termination of employment, Employer shall not be required to
pay Employee any severance pay, or any other sum except Employee compensation
earned, if any, in accordance with Section 4 of this Agreement, to the date of
such termination.
8. NON-COMPETITION.
(a) Employee shall not at any time within a period of one year from
the date of termination of his employment hereunder ("Non-Compete Period") if
such termination is (i) by expiration of time, (ii) voluntary, or (iii) for
cause, which term includes but is not limited to those occurrences as set forth
in Section 7 (c) hereof;
(i) directly or indirectly, whether as principal, servant,
employee, agent or consultant, canvass, solicit or entice or endeavor to entice
away from Employer any director, officer or employee of Employer, or
4
<PAGE> 6
(ii) directly or indirectly, whether as principal, servant,
employee or agent or in any other capacity whatsoever carry on or be engaged or
interested in any business within the states of New York and New Jersey
carrying on or engaged in, directly or indirectly, the Services in competition
with Employer, competition to mean those Services then provided and marketed to
and with customers as that term is used and defined herein, or
(iii) directly or indirectly, whether as principal, servant,
employee or agent, solicit or seek to obtain for himself or for any person,
firm or corporation by whom he is employed or with whom he is associated, the
business of, or act as principal, servant, employee or agent for, or directly
or indirectly accept any benefit, whether in money or otherwise from any
business in connection with the trade or business conducted for any person,
firm or corporation, who either at the date of termination of his employment or
at any time during the 12 months immediately preceding such termination, is or
was a customer of Employer, provided that such restriction applies only with
respect to Services provided and marketed within such 12 month period by the
Employer for that customer; and provided further
(A) for the purpose of this clause the expression "customer"
shall be deemed to include a prospective customer whose business was
the subject of negotiation with Employer at any time within a period
of 12 months prior to the termination of Employee, and
(B) in the event Employee, directly or indirectly, receives any
benefit, whether in money or otherwise as aforesaid, at or in respect
of any time during said Non-Compete Period he shall, without prejudice
to any other rights or remedies available to Employer, be bound
forthwith to account for and make payment to Employer in respect of
such benefit.
(b) Each of the foregoing obligations shall be deemed to be separate
and severable obligations and each of said obligations shall be construed
accordingly.
(c) While the foregoing restrictions are considered by the parties to
be reasonable in all the circumstances, it is agreed that if any of such
restrictions shall be held to be void or ineffective for whatever reason but
would be held to be valid and effective if part of the wording thereof were
deleted or the periods thereof reduced or the area thereof reduced in scope,
the said restrictions shall apply with such modifications as may be necessary
to make them valid and effective.
9. CONFIDENTIALITY.
(a) Employee shall not during the Term, except in the proper course
of his duties, and shall not at any time and in any circumstances for a period
of three years after the termination hereof, divulge to any person whomsoever
and shall use his best efforts to prevent the publication or disclosure of any
secrets, trade secretes, confidential knowledge or information or any
information concerning the business, finances or affairs of Employer or of any
of its customers or clients (including without prejudice to the foregoing
generality the names and locations of customers, names of persons to contact
within customer organizations, specifications of customer needs, specification
of Services meeting customer needs, cost and pricing policies, sources of
supply of Services and other proprietary information) or any of their dealings
or transactions which may have come or may come to his knowledge during or in
the course of his employment.
5
<PAGE> 7
(b) Employee shall immediately upon termination of his employment for
whatever reason deliver up to Employer all price lists, list of customers,
correspondence and other documents, papers and property belonging to Employer
which may have been prepared by him or may have come into his possession in the
course of his employment and shall not retain any copies thereof.
10. REMEDIES. Employee acknowledges that the remedy at law for
any breach of any of the provisions of this Agreement, particularly but not
limited to Sections 8 and 9, shall be inadequate; that any such breach will
cause irreparable injury to the Employer and/or its shareholders; that the
Employer, in addition to any other rights and remedies existing at law or
equity, or by statute, or under the terms of this Agreement, shall be entitled
to an injunction or restraining order or other equitable relief without the
need of posting any bonds with the court where such equitable relief is sought,
restraining Employee from doing or continuing to do any such acts or any other
violations or threatened violations or omitting to do such acts as are
otherwise required in and under this Agreement, particularly but not limited to
Sections 8 and 9. Employer shall be entitled to reasonable attorney's fees and
other costs it may incur in connection with protecting its rights in the event
of a breach of this Agreement, particularly but not limited to Sections 8 and
9.
11. RESALE OF EMPLOYEE OWNERSHIP. If Employee voluntarily leaves
or terminates his relationship with Employer prior to the expiration of the
Term, for any reason whatsoever, or prior to the expiration of the Term
Employee dies or becomes disabled to the extent that he is unable to perform
under this Agreement, or Employee has any bankruptcy, receivership, assignment
for the benefit of creditors, or similar proceeding initiated against or
involving Employee, whether voluntarily or involuntarily, which proceeding is
not dismissed within thirty (30) days of its initiation (collectively for
purposes of this Section 11 "Termination"), then Employee's 3% ownership in
Employer ("Employee's Shares") which Employee has obtained upon establishment
of Employer and in consideration for this Employment Agreement, shall be sold
by Employee, or Employee's legal representative as the case may be, to Employer
and Employer shall purchase Employee's Shares for One ($1.00) Dollar.
Employee, and if Employee's executor or administrator or other legal
representative is involved such person, shall execute and deliver all necessary
documents Employer may require to establish its absolute title to the
Employee's Shares to be sold to Employer as provided herein.
Employee agrees that he shall not transfer, gift, pledge, sell,
hypothecate, loan, grant any option upon or for said Employee's Shares, nor
shall such Employee's Shares be placed or held in any other name alone or
jointly with or without Employee, which Employee's Shares shall be held solely
in the name of Employee, which shall not pass by descent or distribution or
will, and which Employee's Shares will in no way or manner, directly or
indirectly, be disposed of or transferred (collectively "Transferred"). Any
such act or omission of or by Employee attempting or otherwise causing the
Employee's Shares to be so Transferred shall be deemed a breach of this
Agreement and a Termination of Employee providing for the immediate and
automatic sale of Employee's Shares to Employer.
Any sale of Employee's Shares shall be promptly accomplished after the
event giving rise to such sale, but in no event more than seven (7) days
therefrom.
Employee's Shares are not liquid and there is no open market for such
Employee's Shares, and for that reason, among others, Employer will be
irreparably damaged if this sale provision is
6
<PAGE> 8
not specifically enforced. Any injunction to so enforce this provision shall,
however, be cumulative and not exclusive, and shall be in addition to any other
remedy which Employer may have.
The certificate or certificates representing the Employee's Shares
shall be endorsed with the following legend:
"This share certificate is held subject to the terms of an Employment
Agreement dated October 26, 1995 made between All American Medical &
Surgical Supply Corp. and Lou Ghelli, a copy of which is on file with
the Secretary of the Company."
Employee, to induce Employer to enter into this Agreement, hereby
waives to the extent permitted by law, all rights that he may have by operation
of law or otherwise to Transfer the Employee's Shares.
12. BINDING ON SUCCESSORS. The rights and obligations of the
parties hereto shall inure to the benefit and shall be binding upon their
successors and assigns.
13. WAIVER OF BREACH. The waiver by Employer or Employee of a
breach by either party of any provision hereof shall not operate or be
construed to operate as a waiver by either party of any subsequent breach of
any other provision hereof.
14. SURVIVAL OF PROVISIONS. The provisions of Sections 2, 8 and 9
shall survive termination of employment of this Agreement. If any provision of
this Agreement is declared invalid by any court of other competent authority
the remaining provisions of this Agreement shall not be affected thereby.
15. ENTIRE AGREEMENT. This instrument contains the entire
agreement of the parties and may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
16. ASSIGNABILITY. This Agreement and its rights and obligations
may not be assigned by Employee. Employer may assign any of its rights and
obligations hereunder to a successor or surviving corporation resulting from a
merger, consolidation, sale of assets or stock, or other corporate
reorganization.
17. NOTICES. Any notice permitted or required to be given by this
Agreement shall be effected, if in writing, and delivered personally or by
registered or certified mail, postage pre-paid, return receipt requested, or by
overnight mail, Federal Express or similar delivery to each of the parties at:
7
<PAGE> 9
Employer: All American Medical & Surgical Supply Corp.
1242 79th Street
Brooklyn, New York 11228
Copy to: Lawrence E. Jaffe, Esq.
777 Terrace Avenue
Hasbrouck Heights, New Jersey 07604
Employee: Lou Ghelli
29 Colonial Village Drive
Hillsdale, New Jersey 07642
Copy to:
with such other addresses as any party may specify by written notice to the
other party similarly given.
18. DISPUTE. In the event of a dispute concerning either the
interpretation or the enforcement of any provision of this Agreement and such
dispute is resolved by a court having jurisdiction thereof, then in such event,
the prevailing party shall be entitled to receive reimbursement of reasonably
attorney's fees and court costs from the non-prevailing party.
IN WITNESS WHEREOF, Employer has caused this Agreement to be executed
in its corporate name by an appropriate officer and its corporate seal to be
hereto affixed, and Employee has affixed his signature, all on the date and
year first above written.
ATTEST: ALL AMERICAN MEDICAL & SURGICAL
SUPPLY CORP.
/s/ Lawrence E. Jaffe By: /s/ Thomas K. Langbein
- ---------------------------------- ----------------------
Lawrence E. Jaffe, Secretary THOMAS K. LANGBEIN,
Chairman of the Board
WITNESS: EMPLOYEE
/s/ LOU GHELLI
- ----------------------- ---------------
LOU GHELLI
<PAGE> 1
(11) Statement re: Computation of per share earnings.
<PAGE> 2
MEDICORE, INC. AND SUBSIDIARIES
EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY
Weighted average shares
outstanding 5,454,940 5,074,070 5,454,940 5,080,347
Net effect of dilutive
stock options-based
on the modified treasury
stock method for 1995 and
the treasury stock method
for 1994 using average
market price 676,364 168,934 400,283 198,086
---------- ---------- ---------- ----------
6,131,304 5,243,004 5,855,223 5,278,433
========== ========== ========== ==========
Net income $ 369,941 $ 266,730 $1,319,208 $ 449,248
========== ========== ========== ==========
Net income per share $ .06 $ .05 $ .23 $ .09
========== ========== ========== ==========
FULLY DILUTED
Weighted average shares
outstanding 5,454,940 5,074,070 5,454,940 5,080,347
Net effect of dilutive
stock options-based
on the modified treasury
stock method for 1995 and
the treasury stock method
for 1994 using ending
prices of higher than
average 720,667 147,270 562,322 172,683
---------- ---------- ---------- ----------
6,175,607 5,221,340 6,017,262 5,253,030
========== ========== ========== ==========
Net income $ 369,941 $ 266,730 $1,319,208 $ 449,248
========== ========== ========== ==========
Net income per share $ .06 $ .05 $ .22 $ .09
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,372,703
<SECURITIES> 805,986
<RECEIVABLES> 4,068,479<F1>
<ALLOWANCES> 0
<INVENTORY> 3,573,914<F2>
<CURRENT-ASSETS> 10,861,219
<PP&E> 9,130,421
<DEPRECIATION> 3,740,736
<TOTAL-ASSETS> 17,493,890
<CURRENT-LIABILITIES> 6,474,013
<BONDS> 1,205,576
<COMMON> 54,549
0
0
<OTHER-SE> 8,770,310
<TOTAL-LIABILITY-AND-EQUITY> 17,493,890
<SALES> 26,180,361
<TOTAL-REVENUES> 26,579,270
<CGS> 21,356,287
<TOTAL-COSTS> 21,356,287
<OTHER-EXPENSES> 3,227,458
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 185,098
<INCOME-PRETAX> 1,766,711
<INCOME-TAX> 447,503
<INCOME-CONTINUING> 1,319,208
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,319,208
<EPS-PRIMARY> .23
<EPS-DILUTED> .22
<FN>
<F1>ACCOUNTS RECEIVABLE ARE NET OF ALLOWANCE OF $170,000 AT SEPTEMBER 30, 1995
<F2>INVENTORIES ARE NET OF RESERVE OF $293,000 AT SEPTEMBER 30, 1995
</FN>
</TABLE>
